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Filed Pursuant to Rule 424(b)(1)
Registration No.: 333-47428
OTTAWA FINANCIAL CORPORATION
245 CENTRAL AVENUE
HOLLAND, MICHIGAN 49423
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NOTICE OF SPECIAL MEETING
TO BE HELD ON NOVEMBER 21, 2000
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NOTICE IS HEREBY GIVEN that Ottawa Financial Corporation will hold a
special meeting of its shareholders, on November 21, 2000 at 3:00 p.m., local
time, at the Holiday Inn and Conference Center, 650 East 24th Street, Holland,
Michigan. The purpose of the meeting is:
1. to consider and vote on a proposal to adopt the affiliation agreement,
dated as of August 31, 2000, by and between Fifth Third Bancorp and
Ottawa Financial Corporation relating to, among other matters, the
merger of Ottawa with and into Fifth Third. A copy of the affiliation
agreement is attached as Annex A to the proxy statement/prospectus
accompanying this notice; and
2. to consider and vote upon such other matters as may properly come before
the meeting.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AFFILIATION AGREEMENT
AND RECOMMENDS YOU VOTE "FOR" THE PROPOSAL.
Only shareholders of record at the close of business on October 2, 2000 are
entitled to notice of and to vote at the special meeting or any adjournments or
postponements of that meeting. A list of Ottawa shareholders entitled to vote at
the special meeting will be available for examination by any shareholder at the
main office of Ottawa during ordinary business hours for at least ten days prior
to the special meeting, as well as at the special meeting.
It is important that your shares be represented and voted at the special
meeting. The affirmative vote of at least a majority of the issued and
outstanding shares of Ottawa common stock entitled to vote is required to adopt
the affiliation agreement. You can vote your shares by completing and returning
the enclosed proxy card. Registered shareholders, that is, shareholders who hold
their stock in their own name, can also vote their shares over the Internet or
by telephone. If Internet or telephone voting is available to you, voting
instructions are printed on the proxy card sent to you. If your shares are held
in "street name" by a broker or other nominee, you should check the voting form
used by that firm to determine whether you will be able to vote by telephone or
on the Internet. REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS VERY
IMPORTANT. PLEASE ACT TODAY.
Please review the proxy statement/prospectus accompanying this notice for
more complete information regarding the matter proposed for your consideration
at the special meeting. Should you have any questions or require assistance,
please call Regan & Associates, Inc., who is assisting us, at 1-800-737-3426.
By Order of the Board of Directors
Ronald L. Haan
President, Chief Operating Officer and
Secretary
October 20, 2000
THE BOARD OF DIRECTORS OF OTTAWA UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THE ADOPTION OF THE AFFILIATION AGREEMENT. YOUR SUPPORT IS APPRECIATED.
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PROXY STATEMENT FOR OTTAWA FINANCIAL CORPORATION
SPECIAL MEETING
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PROSPECTUS OF FIFTH THIRD BANCORP
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The boards of directors of Ottawa Financial Corporation and Fifth Third
Bancorp have agreed that Fifth Third will acquire Ottawa in a merger. If the
merger is completed, each outstanding share of Ottawa common stock will be
exchanged for .54 of a share of Fifth Third common stock if the average closing
price of a share of Fifth Third common stock for the 20 consecutive trading days
ending on the fifth day before the effective time of the merger is at least
$40.75. If the average closing price is less than $40.75, then each outstanding
share of Ottawa common stock will be exchanged for that number of shares or
fraction of a share of Fifth Third common stock as is determined by dividing
$22.01 by the average closing price. In either case, cash will be paid in lieu
of issuing fractional shares. The board of directors of Ottawa believes that the
merger is in Ottawa's and your best interests.
The merger cannot be completed unless the shareholders of Ottawa adopt the
affiliation agreement. Ottawa has scheduled a special meeting for its
shareholders to vote on the affiliation agreement. The date, time and place of
the special meeting are as follows:
3:00 p.m., Eastern Standard Time
November 21, 2000
Holiday Inn and Conference Center
650 East 24th Street
Holland, Michigan
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. Alternatively,
if you are a registered holder, you may vote over the Internet or by telephone
by following the instructions set forth on the proxy card. YOUR VOTE IS VERY
IMPORTANT.
Ottawa common stock is traded on the Nasdaq National Market under the
symbol "OFCP."
Fifth Third common stock is traded on the Nasdaq National Market under the
symbol "FITB."
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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 9.
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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 October 20, 2000
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TABLE OF CONTENTS
<TABLE>
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 3
RISK FACTORS................................................ 9
FORWARD-LOOKING STATEMENTS.................................. 10
THE SPECIAL MEETING......................................... 11
Purpose of the Meeting.................................... 11
Voting and Revocability of Proxies........................ 11
Vote Required............................................. 12
Solicitation of Proxies................................... 12
PROPOSAL -- MERGER OF OTTAWA INTO FIFTH THIRD............... 13
Structure of the Merger................................... 13
Corporate Governance...................................... 13
Merger Consideration...................................... 13
No Fractional Shares...................................... 13
Effective Time of the Merger.............................. 13
Exchange of Certificates.................................. 14
Background of the Merger.................................. 14
Recommendation of the Ottawa Board of Directors and
Reasons for the Merger................................. 16
Opinion of Ottawa's Financial Advisor..................... 17
Federal Income Tax Consequences........................... 19
Accounting Treatment...................................... 21
Resale of Fifth Third Common Stock by Affiliates.......... 21
No Appraisal Rights....................................... 22
TERMS OF THE AFFILIATION AGREEMENT.......................... 22
Representations and Warranties............................ 22
Conduct Pending Merger.................................... 23
Conditions to Closing..................................... 24
Termination; Amendment; Waiver............................ 24
Interests of Certain Persons in the Merger................ 25
Effect on Ottawa Employees................................ 27
FIFTH THIRD BANCORP......................................... 28
Description of Business................................... 28
Additional Information.................................... 28
OTTAWA FINANCIAL CORPORATION................................ 29
Description of Business................................... 29
Additional Information.................................... 29
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION......... 30
SELECTED HISTORICAL FINANCIAL DATA OF FIFTH THIRD........... 36
SELECTED HISTORICAL FINANCIAL DATA OF OTTAWA................ 38
DESCRIPTION OF CAPITAL STOCK AND COMPARATIVE RIGHTS OF
SHAREHOLDERS.............................................. 40
Voting Rights............................................. 40
Dividends................................................. 41
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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Preemptive Rights......................................... 42
Rights Upon Liquidation................................... 42
Indemnification and Personal Liability of Directors and
Officers............................................... 42
Shareholders' Meetings; Quorum............................ 42
Qualification of Directors................................ 43
Removal of Directors...................................... 43
Amendment to Charter Documents............................ 43
Vacancies on the Board of Directors....................... 44
Advance Notice Requirements for New Business and
Nominations of Directors at Meetings of Shareholders... 45
Subscription, Conversion, Redemption Rights; Stock
Nonassessable.......................................... 46
Approval of Mergers, Consolidations or Sale of Assets..... 46
Change-of-Control Provisions.............................. 46
Consideration of Non-Shareholder Interests................ 49
REGULATION OF FINANCIAL INSTITUTIONS........................ 49
Holding Company Regulation................................ 50
Capital Requirements...................................... 51
Regulation of Depository Institutions..................... 52
LEGAL MATTERS............................................... 52
EXPERTS..................................................... 52
WHERE YOU CAN FIND MORE INFORMATION......................... 53
ANNEXES:
</TABLE>
<TABLE>
<S> <C>
Annex A: Affiliation Agreement dated as of August 31, 2000 by and
between Fifth Third Bancorp and Ottawa Financial Corporation
(excluding exhibits)
Annex B: Fairness Opinion of Keefe, Bruyette & Woods, Inc.
</TABLE>
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY DO OTTAWA AND FIFTH THIRD WANT TO MERGE?
A: The Ottawa board of directors believes that you will benefit by becoming a
shareholder of Fifth Third, which has a strong financial performance record.
The Ottawa board also believes that you will benefit from the opportunity for
potential future appreciation of Fifth Third common stock. Fifth Third wants
to better serve its customers in Ottawa's service areas and to expand Fifth
Third's presence in those markets.
Q: WHAT WILL I RECEIVE FOR MY OTTAWA SHARES?
A: You will receive .54 of a share of Fifth Third common stock for each share of
Ottawa common stock that you own at the effective time of the merger if the
average closing price of a share of Fifth Third common stock for the 20
consecutive trading days ending on the fifth day before the effective time of
the merger is at least $40.75. If the average closing price is less than
$40.75, you will receive for each share of Ottawa common stock that you own
at the effective time of the merger that number of shares or fraction of a
share of Fifth Third common stock as is determined by dividing $22.01 by the
average closing price. Fifth Third will not issue any fractional shares.
Instead, you will receive cash in lieu of any fractional share owed to you in
an amount based on the average closing price of Fifth Third common stock
before the effective date of the merger. As of the close of business on
October 18, 2000, the market value of .54 of a share of Fifth Third common
stock was $28.08. The market value of the shares of Fifth Third common stock
that you will receive in the merger will fluctuate both before and after the
merger.
Q: WILL I RECEIVE DIVIDENDS ON MY OTTAWA SHARES BEFORE THE MERGER AND WHAT
HAPPENS TO MY FUTURE DIVIDENDS?
A: The affiliation agreement permits Ottawa to pay, prior to completion of the
merger, regular quarterly cash dividends to its shareholders not to exceed
$0.12 per share. Fifth Third and Ottawa have agreed in the affiliation
agreement to coordinate declaring dividends and the related record dates and
payment dates so that Ottawa shareholders do not receive two dividends, or
fail to receive one dividend, for any single calendar quarter with respect to
their Ottawa shares and the Fifth Third shares to be received in the merger.
Fifth Third has paid regular quarterly cash dividends on Fifth Third common
stock. For the third quarter of 2000, Fifth Third paid a cash dividend of
$0.18 per share. Based on an exchange ratio of .54 shares of Fifth Third
common stock for each share of Ottawa common stock, this would have equated
to a cash dividend of $0.0972 per share of Ottawa common stock. The payment
of dividends by Fifth Third in the future must be approved and declared by
Fifth Third's board of directors and will depend on Fifth Third's business
conditions, financial condition and earnings, and other factors. For
information on recent cash dividends paid by Fifth Third and Ottawa, see page
7 of this document.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We hope to complete the merger as soon as possible after the shareholders'
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.
Q: WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
A: The special meeting will be held at 3:00 p.m., Eastern Standard Time, on
November 21, 2000, at Holiday Inn and Conference Center, 650 East 24th
Street, Holland, Michigan.
Q: WHO MUST ADOPT THE AFFILIATION AGREEMENT?
A: Holders of a majority of the outstanding shares of Ottawa common stock as of
the close of business on October 2, 2000 must adopt the affiliation
agreement.
Q: WHAT DO I NEED TO DO NOW?
A: After reviewing this document, submit your proxy, either by executing and
returning the enclosed proxy card or, if you are a registered holder, by
voting electronically via the Internet or by telephone. By submitting your
proxy, you authorize the individuals named in the proxy to
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represent you and vote your shares at the meeting in accordance with your
instructions. These persons also may vote your shares to adjourn the meeting
from time to time and will be authorized to vote your shares at any
adjournments of the meeting. YOUR PROXY VOTE IS IMPORTANT. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE SUBMIT YOUR PROXY PROMPTLY EITHER IN THE
ENCLOSED ENVELOPE, VIA THE INTERNET OR BY TELEPHONE.
Q: CAN I VOTE BY TELEPHONE OR ON THE INTERNET IF I AM NOT A REGISTERED
SHAREHOLDER?
A: If your shares are held in "street name" by a broker or other nominee, you
should check the voting form used by that firm to determine whether you will
be able to vote by telephone or on the Internet.
Q: HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A: If you sign, date and send in your proxy card and do not indicate how you
want to vote, your proxies will be counted as a vote in favor of adoption of
the affiliation agreement.
Q: WHAT WILL BE THE EFFECT IF I DO NOT VOTE?
A: Your failure to vote will have the same effect as if you voted against the
affiliation agreement.
Q: CAN I VOTE MY SHARES IN PERSON?
A: Yes, if you own your shares in certificate form. You may attend the special
meeting and vote your shares in person rather than signing and mailing your
proxy card. However, in order to ensure that your vote is counted at the
special meeting we recommend that you sign, date and promptly mail the
enclosed proxy card.
Q: CAN I CHANGE MY MIND AND REVOKE MY PROXY?
A: Yes, you may revoke your proxy and change your vote at any time before the
polls close at the meeting by:
- signing another proxy with a later date;
- voting by telephone or on the Internet - your latest telephone or
Internet vote will be counted;
- giving written notice of the revocation of your proxy to the Secretary of
Ottawa prior to the meeting; or
- voting in person at the special meeting.
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. If 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 contact Ottawa's proxy
solicitor, Regan & Associates, Inc., at 1-800-737-3426.
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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 other documents we refer to. For more information about Fifth Third and
Ottawa, see "Where You Can Find More Information" (page 53).
THE COMPANIES
FIFTH THIRD BANCORP
38 FOUNTAIN SQUARE PLAZA
CINCINNATI, OHIO 45263
(513) 579-5300
Fifth Third is a registered financial holding company, incorporated under
Ohio law, which conducts its principal activities through its banking and
non-banking subsidiaries. Fifth Third's ten subsidiary depository institutions
operate a general banking business from 639 offices located throughout Ohio,
Indiana, Kentucky, Illinois, Michigan, Florida and Arizona. At June 30, 2000, on
a consolidated basis, Fifth Third had assets of approximately $44.7 billion,
deposits of approximately $27.5 billion and shareholders' equity of
approximately $4.3 billion. Fifth Third common stock is traded on the Nasdaq
National Market under the symbol "FITB."
OTTAWA FINANCIAL CORPORATION
245 CENTRAL AVENUE
HOLLAND, MICHIGAN 49423
(616) 393-7002
Ottawa is a unitary savings and loan holding company incorporated under
Delaware law. Ottawa owns all of the stock of AmeriBank, a Michigan chartered
savings bank, which is headquartered in Holland, Michigan. AmeriBank operates
its 27 banking offices located in the Western Michigan counties of Allegan,
Kent, Muskegon, Newaygo, Oceana and Ottawa. At June 30, 2000, Ottawa, on a
consolidated basis, had assets of approximately $1.1 billion, deposits of
approximately $738.1 million and shareholders' equity of approximately $79.9
million. Ottawa common stock is traded on the Nasdaq National Market under the
symbol "OFCP."
THE MERGER
Pursuant to the affiliation agreement between Ottawa and Fifth Third dated
as of August 31, 2000, at the effective time of the merger, Ottawa will merge
with and into Fifth Third. Fifth Third will issue shares of its common stock to
the existing shareholders of Ottawa in exchange for their shares of Ottawa
common stock. Simultaneously with the merger, we anticipate that AmeriBank will
merge with and into Fifth Third Bank, Indiana.
OTTAWA SHAREHOLDERS WILL RECEIVE
FIFTH THIRD STOCK IN THE MERGER
If the merger is completed, you will have the right to receive .54 of a
share of Fifth Third common stock for each share of Ottawa common stock that you
own as of the effective time of the merger if the average closing price of a
share of Fifth Third common stock for the 20 consecutive trading days ending on
the fifth day before the effective time of the merger is at least $40.75. If the
average closing price is less than $40.75, you will receive for each share of
Ottawa common stock that you own at the effective time of the merger that number
of shares or fraction of a share of Fifth Third common stock as is determined by
dividing $22.01 by the average closing price calculated as described above.
Based on the $53.03 average closing price per share of Fifth Third common stock
on the Nasdaq National Market for the 20 trading days prior to and including
October 18, 2000, the exchange ratio would be .54 of a share of Fifth Third
common stock for each share of Ottawa common stock. Based on the $52.00 closing
price per share of the Fifth Third common stock on October 18, 2000, the value
of .54 of a share of Fifth Third common stock was $28.08.
The number of shares of Fifth Third common stock you will receive in the
merger is also subject to adjustments for stock dividends and similar events
before the merger is completed. Such adjustments will not alter the value of the
exchange ratio, but the value of the shares of Fifth Third common stock to be
issued in the merger will fluctuate from time to time.
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NO FRACTIONAL SHARES WILL BE ISSUED
Fifth Third will not issue any fractional shares. Instead, you will receive
cash in lieu of any fractional share of Fifth Third common stock owed to you in
an amount based on the average closing price of Fifth Third common stock for a
specified number of days before the date on which the merger occurs.
TAX CONSEQUENCES OF THE MERGER
The exchange of shares is expected to be tax-free to you for federal income
tax purposes, except for taxes payable on any cash you receive in lieu of
fractional shares. The expected material federal income tax consequences are set
out in greater detail on page 19.
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 Ottawa board believes that in the rapidly changing environment of the
banking industry, Ottawa's long-term goal of enhancing shareholder value will be
reached by merging with Fifth Third. In addition, the Ottawa board believes that
the customers and community served by Ottawa will benefit from the merger.
You can find a more detailed discussion of the background to the
affiliation agreement and Ottawa's and Fifth Third's reasons for the merger in
this document under "Proposal-Merger of Ottawa into Fifth Third- Background of
the Merger" beginning on page 14 and "-Recommendation of the Ottawa Board of
Directors and Reasons for the Merger" beginning on page 16.
OPINION OF FINANCIAL ADVISOR
Among other factors considered in deciding to approve the merger, the
Ottawa board of directors received the opinion of its financial advisor, Keefe,
Bruyette & Woods, Inc. that, as of August 31, 2000 (the date of the Ottawa
board's vote on the merger), the merger consideration was fair to the holders of
Ottawa common stock from a financial point of view. We have attached a copy of
this opinion to this proxy statement/ prospectus as Annex B. You should read
this opinion completely to understand the assumptions made, matters considered
and limitations of the review undertaken by Keefe, Bruyette & Woods in providing
its opinion.
RECOMMENDATION TO OTTAWA SHAREHOLDERS
The Ottawa board unanimously recommends that you vote FOR adoption of the
affiliation agreement.
THE SPECIAL MEETING
A special meeting of the Ottawa shareholders will be held at 3:00 p.m.,
Eastern Standard Time, on November 21, 2000, at the Holiday Inn and Conference
Center, 650 East 24th Street, Holland, Michigan. Holders of Ottawa common stock
outstanding as of the close of business on October 2, 2000 are entitled to vote
at the special meeting and will be asked to consider and vote upon:
- the adoption of the affiliation agreement; and
- any other matters as are properly presented at the special meeting.
As of the date of this document, the Ottawa board does not know of any
other matters that will be presented at the special meeting.
VOTE REQUIRED
At the special meeting, the affiliation agreement must be adopted by the
affirmative vote of at least a majority of the shares of Ottawa common stock
outstanding at the close of business on October 2, 2000.
Adoption of the affiliation agreement will also authorize the Ottawa board
to exercise its discretion on whether to proceed with the merger in the event
Ottawa has the right to terminate the affiliation agreement. This determination
may be made without notice to, or the resolicitation of proxies from, the Ottawa
shareholders.
SHARE OWNERSHIP OF OTTAWA'S
MANAGEMENT AND DIRECTORS
On October 2, 2000, the record date for the special meeting, directors and
executive officers of Ottawa and their affiliates beneficially owned and were
entitled to vote 810,971 shares of Ottawa common stock, or 12.06% of the Ottawa
shares outstanding on that date. The Ottawa directors have indicated that they
intend to vote all 547,687
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shares of Ottawa common stock owned of record
by them in favor of the proposal to adopt the affiliation agreement. Ottawa
believes its executive officers intend to vote in favor of the proposal to adopt
the affiliation agreement.
OWNERSHIP OF FIFTH THIRD FOLLOWING THE MERGER
Based on the number of shares of Fifth Third common stock and Ottawa common
stock and options to purchase Ottawa common stock outstanding on the record
date, Fifth Third would issue approximately 4.04 million shares of its common
stock to Ottawa shareholders in the merger. This would constitute less than 1%
of the outstanding stock of Fifth Third immediately after the merger.
CONDITIONS TO THE MERGER
Fifth Third and Ottawa will complete the merger only if certain conditions
are satisfied. Some of these conditions include:
- the adoption of the affiliation agreement by Ottawa shareholders; and
- the receipt of certain regulatory approvals under federal and state
banking laws and the expiration of any waiting periods.
Some 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 Ottawa may jointly agree in
writing to terminate the affiliation agreement without completing the merger. In
addition, either company can individually terminate the affiliation agreement
prior to the completion of the merger if:
- the other party materially breaches any of the representations or
warranties it made or materially fails to comply with any of its
obligations under the affiliation agreement;
- the merger is not completed by February 28, 2001;
- the parties do not obtain the required regulatory approvals;
- Ottawa's shareholders do not adopt the affiliation agreement; or
- other conditions to closing the merger have not been satisfied.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
When considering the Ottawa board's recommendation that Ottawa shareholders
vote to adopt the affiliation agreement you should be aware that certain Ottawa
directors and officers may have interests in the merger that are different from,
or in addition to, yours. These interests exist because of the rights that these
directors and executive officers have under the terms of their Ottawa benefit
and compensation plans and also, in the case of the executive officers, under
the terms of various agreements with Ottawa and under the terms of the
affiliation agreement. These agreements provide some executive officers with
severance benefits under specified circumstances following the merger. Some
plans provide for accelerated vesting of stock options. These interests also
arise from provisions of the affiliation agreement relating to director and
officer indemnification and insurance, and employment arrangements and employee
benefits after the merger.
The members of Ottawa's board of directors knew about and considered these
additional interests when they approved the affiliation agreement.
OTTAWA EMPLOYMENT AND SEVERANCE AGREEMENT PAYMENTS.
In lieu of any other severance benefits provided in employment or severance
agreements with Ottawa or in the affiliation agreement, Fifth Third will pay
Douglas J. Iverson, Ronald L. Haan and Jon W. Swets an aggregate of $1.9
million.
FIFTH THIRD EMPLOYMENT ARRANGEMENTS.
Fifth Third has indicated that it will employ each of Mr. Iverson and Mr.
Haan as an executive vice president of Fifth Third Bank, Indiana (Northern).
Both Mr. Iverson and Mr. Haan will be at-will employees. Although neither Mr.
Iverson nor Mr. Haan will be signing an employment agreement with Fifth Third,
it is currently anticipated that each one of them will sign a compensation
agreement with Fifth Third on completion of the merger. Each compensation
agreement is currently contemplated to contain various competition restrictions
and will provide for a signing bonus, stock options and a noncompetition
payment.
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BOARD MEMBER COMPENSATION.
Fifth Third has indicated that all of the members of the Ottawa board of
directors will be appointed to the affiliate board of Fifth Third Bank, Indiana
(Northern). The non-employee members of this affiliate board will receive the
same remuneration as the other non-employee members for their service, which
includes fees for meeting attendance and stock options.
STOCK OPTIONS.
Upon adoption of the affiliation agreement by Ottawa's shareholders, all
outstanding awards, options or other rights to purchase Ottawa common stock
under Ottawa's stock option plan will vest, become immediately exercisable and,
upon completion of the merger, will become options to purchase Fifth Third
common stock.
INDEMNIFICATION AND LIABILITY INSURANCE.
Fifth Third will assume all provisions for indemnification now existing in
favor of the directors and officers of Ottawa and its subsidiaries. Fifth Third
also will purchase and keep in effect for a two-year period, a policy of
directors' and officers' liability insurance providing coverage for acts or
omissions of the type currently covered by Ottawa'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 OTTAWA EMPLOYEES
Fifth Third shall consider employing as many of the employees of Ottawa 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.
Fifth Third shall provide each of the full-time employees of Ottawa who
become employees of Fifth Third at or immediately subsequent to the merger with
an opportunity to participate in all employee benefit plans sponsored by Fifth
Third on the same terms and to the same extent as similarly situated employees
of Fifth Third. Under each employee benefit plan sponsored or maintained by
Fifth Third in which these employees participate, prior service with Ottawa
shall be taken into account for purposes of eligibility, vesting and the accrual
of benefits.
NO APPRAISAL RIGHTS
Ottawa is a Delaware corporation. Under Delaware law, shareholders of
Ottawa will not have any right to an appraisal of the "fair value" of their
shares as a result of, or in connection with, the merger.
ACCOUNTING
The merger will be accounted for as a "purchase" as such term is used under
generally accepted accounting principles.
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COMPARATIVE MARKET PRICES AND DIVIDENDS
Fifth Third and Ottawa common stock are both traded on the Nasdaq National
Market under the symbols "FITB" and "OFCP," respectively. On August 30, 2000,
the business day immediately preceding the public announcement of the execution
of the affiliation agreement setting forth the terms of the merger, and on
October 18, 2000, the most recent practicable date prior to the printing of this
document, the market prices of Fifth Third common stock and Ottawa common stock
and the equivalent price per share of Ottawa common stock giving effect to the
merger were as follows:
<TABLE>
<CAPTION>
AUGUST 30, 2000 OCTOBER 18, 2000
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Fifth Third
Common Stock.............................................. $44.38 $52.00
(Closing sales price)
Ottawa
Common Stock.............................................. $20.50 $27.31
(Closing sales price)
Equivalent Price Per Share of Ottawa Common Stock........... $23.96 $28.08
</TABLE>
The "Equivalent Price Per Share of Ottawa Common Stock" at each specified
date in the immediately preceding table represents the closing sales price of a
share of Fifth Third common stock on that date multiplied by the exchange ratio
of .54, which is the number of shares of Fifth Third common stock that an Ottawa
shareholder would receive for each share of Ottawa common stock owned. See
"Proposal -- Merger of Ottawa into Fifth Third -- Merger Consideration" on page
13 for details regarding adjustments to this exchange ratio. Shareholders should
obtain current market quotations for shares of Fifth Third common stock and
Ottawa common stock prior to making any decisions with respect to the merger.
The following table sets forth (in per share amounts), for the calendar
quarters indicated, the high and low sales prices and the cash dividends
declared during each quarterly period. These amounts have been retroactively
adjusted to reflect, in the case of Fifth Third, the 3-for-2 stock split
effected in the form of a stock dividend paid July 14, 2000 and, in the case of
Ottawa, the 10% stock dividend paid on June 30, 2000:
<TABLE>
<CAPTION>
FIFTH THIRD COMMON STOCK OTTAWA COMMON STOCK
----------------------------- -----------------------------
DIVIDENDS DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1998:
First Quarter................... $39.22 $33.00 $0.113 $25.73 $20.85 $0.073
Second Quarter.................. 42.08 31.67 0.113 22.54 21.41 0.073
Third Quarter................... 44.83 32.83 0.113 21.79 17.77 0.082
Fourth Quarter.................. 49.42 33.54 0.133 19.83 15.29 0.091
1999:
First Quarter................... 50.29 41.58 0.133 20.04 17.05 0.091
Second Quarter.................. 49.50 41.08 0.133 20.11 16.74 0.100
Third Quarter................... 46.58 39.08 0.160 21.36 18.07 0.109
Fourth Quarter.................. 50.29 38.58 0.160 18.98 15.80 0.109
2000:
First Quarter................... 48.50 29.33 0.160 16.70 12.95 0.109
Second Quarter.................. 48.00 37.75 0.180 19.60 15.46 0.120
Third Quarter................... 54.75 40.94 0.180 28.94 15.25 0.120
Fourth Quarter
(through October 18, 2000)... 57.88 48.63 -- 30.88 25.31 --
</TABLE>
7
<PAGE> 12
COMPARATIVE PER SHARE DATA
The following table sets forth certain per share information for both Fifth
Third and Ottawa at the dates indicated and for the periods then ended. The
equivalent per share information is based on an exchange ratio of .54 of a share
of Fifth Third common stock for each share of Ottawa common stock. See
"Proposal -- Merger of Ottawa into Fifth Third -- Merger Consideration" on page
13 for details regarding adjustments to this exchange ratio. Neither Ottawa nor
Fifth Third can give any assurances that the following table will accurately
reflect figures and values applicable at the date of completion of the merger.
<TABLE>
<CAPTION>
EQUIVALENT SHARES
BASIS -- .54 OF A
SHARE OF
FIFTH THIRD OTTAWA FIFTH THIRD
------------------------------------- ----------------- COMMON STOCK
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
----------------- ----------------- ----------------- -----------------
BASIC DILUTED BASIC DILUTED BASIC DILUTED BASIC DILUTED
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS PER SHARE
Six Months Ended June
30, 2000: $ 0.86 $ 0.85 $ 0.86 $ 0.84 $ 0.70 $ 0.67 $ 0.46 $ 0.45
Twelve Months Ended
December 31, 1999: $ 1.46 $ 1.43 $ 1.45 $ 1.42 $ 1.45 $ 1.37 $ 0.78 $ 0.77
CASH DIVIDENDS
DECLARED PER SHARE
Six Months Ended June
30, 2000: $ 0.340 -- $ 0.340 -- $ 0.229 -- $ 0.184 --
Twelve Months Ended
December 31, 1999: $ 0.586 -- $ 0.586 -- $ 0.409 -- $ 0.316 --
BOOK VALUE PER SHARE
At June 30, 2000: $ 9.30 -- $ 9.27 -- $ 12.10 -- $ 5.01 --
At December 31, 1999: $ 8.80 -- $ 8.77 -- $ 11.61 -- $ 4.74 --
</TABLE>
8
<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 MERGER CONSIDERATION IS NOT FIXED AND MAY FLUCTUATE OVER TIME.
The number of shares and value of the Fifth Third common stock to be
received by you in the merger will depend on the market price of shares of Fifth
Third common stock prior to and 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 August 30, 2000, the business day immediately
preceding public announcement of the merger, Fifth Third's common stock closed
at $44.38. On October 18, 2000, Fifth Third's common stock closed at $52.00. The
market price of Fifth Third common stock at and after 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.
OTTAWA'S SHAREHOLDERS WILL NOT CONTROL FIFTH THIRD'S FUTURE OPERATIONS.
Ottawa's shareholders collectively own 100% of Ottawa and, in the
aggregate, have the absolute power to approve or reject any matters requiring
the adoption or approval of shareholders under Delaware law and Ottawa's
certificate of incorporation. After the merger, Ottawa's shareholders in the
aggregate will hold less than 1% of the outstanding shares of Fifth Third common
stock. Accordingly, even if all of the former Ottawa shareholders voted in
concert on all matters presented to Fifth Third's shareholders from time to
time, the former Ottawa shareholders will not likely have a significant impact
on whether future Fifth Third proposals are approved or rejected.
CERTAIN DIRECTORS AND EXECUTIVE OFFICERS OF OTTAWA WILL RECEIVE BENEFITS IN
THE MERGER IN ADDITION TO THE MERGER CONSIDERATION RECEIVED BY ALL OTHER
OTTAWA SHAREHOLDERS.
Certain officers and directors of Ottawa will receive severance payments,
employment arrangements, signing bonuses, noncompetition payments and stock
options in connection with the merger. In addition, Ottawa's directors will have
an opportunity to serve on the affiliate board of Fifth Third Bank, Indiana
(Northern) and receive payments and stock options for their service. See "Terms
of the Affiliation Agreement -- Interests of Certain Persons in the Merger."
Accordingly, Ottawa's directors and certain executive officers may have
interests in the merger that are different from, or in addition to, yours.
THE VALUE OF OTTAWA COMMON STOCK MAY VARY IN THE FUTURE.
If the merger is not completed, the value of Ottawa common stock could
increase or decrease in the future. Such value could be either higher or lower
than the merger consideration being offered by Fifth Third in the merger.
POST MERGER RISKS
FIFTH THIRD'S FUTURE ACQUISITIONS WILL DILUTE YOUR OWNERSHIP OF FIFTH THIRD
AND MAY CAUSE FIFTH THIRD TO BECOME MORE SUSCEPTIBLE TO ADVERSE ECONOMIC
EVENTS.
Future business acquisitions could be material to Fifth Third. Fifth Third
may issue additional shares of common stock to pay for those acquisitions, which
would dilute your ownership interest. 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.
9
<PAGE> 14
IF FIFTH THIRD DOES NOT ADJUST TO RAPID CHANGES IN THE FINANCIAL SERVICES
INDUSTRY, ITS FINANCIAL PERFORMANCE MAY SUFFER.
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. 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 service providers.
DIFFICULTIES IN COMBINING THE OPERATIONS OF ACQUIRED ENTITIES WITH FIFTH
THIRD'S OWN OPERATIONS MAY PREVENT FIFTH THIRD FROM ACHIEVING THE EXPECTED
BENEFITS FROM ITS ACQUISITIONS.
Fifth Third may not be able to achieve fully the strategic objectives and
operating efficiencies in all of its acquisitions, including Ottawa. Inherent
uncertainties exist in integrating the operations of an acquired company into
Fifth Third. In addition, the markets and industries in which Fifth Third
operates are highly competitive. Fifth Third also may lose key personnel, either
from the acquired entities or from itself, as a result of acquisitions. These
factors could contribute to Fifth Third not achieving the expected benefits from
its acquisitions within the desired time frames, if at all.
FUTURE 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 that govern almost all aspects of the
operations of Fifth Third and its subsidiaries. These 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 changes to these laws may
negatively impact Fifth Third's ability to expand its services and to increase
the value of its business. While we cannot predict what effect any presently
contemplated or future changes in the laws or regulations or their
interpretations would have on Fifth Third, these 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 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.
FORWARD-LOOKING STATEMENTS
This document, including information incorporated by reference into this
document, contains or may contain forward-looking statements about Fifth Third,
Ottawa and the combined company which we believe are within the meaning of the
Private Securities Litigation Reform Act of 1995. This document contains certain
forward-looking statements with respect to the financial condition, results of
operations, plans, objectives, future performance and business of Fifth Third,
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.
Further information on other factors which could effect the financial results of
Fifth Third after the merger are included in the SEC filings incorporated by
reference into this document. See "Where You Can Find More Information" on page
53.
10
<PAGE> 15
THE SPECIAL MEETING
This document and the accompanying proxy card are being furnished to you in
connection with the solicitation by the board of directors of Ottawa of proxies
to be used at the special meeting to be held at 3:00 p.m., Eastern Standard
Time, on November 21, 2000, at the Holiday Inn and Conference Center, 650 East
24th Street, Holland, Michigan, and at any adjournments thereof. This document,
the enclosed notice of Ottawa's special meeting and proxy card are first being
sent to you on or about October 23, 2000.
PURPOSE OF THE MEETING
The purpose of the special meeting of Ottawa's shareholders is to approve
the proposal to adopt the affiliation agreement relating to the merger of Ottawa
with and into Fifth Third and other transactions contemplated thereby. Ottawa
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 Ottawa board in the
event that there are not sufficient votes to approve the proposal to adopt the
affiliation agreement at the time of the special meeting. However, no proxy
which is voted against the adoption of the affiliation agreement will be voted
in favor of adjournment to solicit further proxies for such proposal. As of the
date of this document, the Ottawa 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
The Ottawa board of directors has fixed the close of business on October 2,
2000 as the record date for shareholders entitled to notice of and to vote at
the special meeting. Only holders of record of Ottawa common stock on that
record date are entitled to notice of and to vote at the special meeting. Each
share of Ottawa common stock you own entitles you to one vote. On the record
date, 6,724,105 shares of Ottawa common stock were outstanding and entitled to
vote at the special meeting, held by approximately 1,803 shareholders of record.
You may vote at the special meeting using any one of the following methods:
- You May Vote by Mail. If you properly complete and sign the accompanying
proxy card and return it in the enclosed envelope, it will be voted in
accordance with your instructions. The enclosed envelope requires no
additional postage if mailed in the United States.
- You May Vote by Telephone. If you are a registered shareholder, that is,
if you hold your stock in your own name, you may vote by telephone by
following the instructions included on the proxy card. If you vote by
telephone, you do not have to mail in your proxy card.
- You May Vote on the Internet. If you are a registered shareholder, that
is, if you hold your stock in your own name, you may vote on the Internet
by following the instructions included on the proxy card. If you vote on
the Internet, you do not have to mail in your proxy card.
- You May Vote in Person at the Meeting. If you plan to attend the special
meeting and wish to vote in person, we will give you a ballot at the
special meeting. However, if your shares are held in the name of your
broker, bank or other nominee, you will need to obtain a proxy form from
the institution that holds your shares indicating that you were the
beneficial owner of Ottawa common stock on October 2, 2000, the record
date for voting at the special meeting.
Delaware law allows proxy voting by electronic means.
If you hold shares of Ottawa common stock in "street name," you must
instruct your broker to vote your shares on the proposal to adopt the
affiliation agreement, following the directions provided to you by your broker.
Your failure to instruct your broker to vote on the proposal to adopt the
affiliation agreement will be the equivalent of voting against the proposal.
Each participant in the Ottawa Employee Stock Ownership Plan instructs the
trustee of the plan how to vote the shares allocated to his or her account under
the plan. If a participant properly executes the voting instruction card
distributed by the trustee, the trustee will vote such plan participant's shares
in accordance with the shareholder's instructions. Where properly executed
voting instruction cards are returned to the
11
<PAGE> 16
trustee with no specific instruction as how to vote at the meeting, the trustee
will vote the shares "FOR" adoption of the affiliation agreement. As to shares
for which the trustee receive no timely voting instructions, the trustee will
not vote any such shares. The trustee will vote the shares of Ottawa common
stock held in the plan but not allocated to any participant's account in the
same proportion as directed by the plan participants who directed the trustee as
to the manner of voting their allocated shares with respect to the proposal.
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: (1) written notice to the Secretary of Ottawa Financial
Corporation, 245 Central Avenue, Holland, Michigan, 49423, (2) filing a later
dated proxy prior to a vote being taken on a particular proposal at the special
meeting, (3) voting by telephone or on the internet -- your latest telephone or
internet vote will be counted, or (4) attending the special meeting and voting
in person.
Proxies solicited by the Ottawa board will be voted in accordance with the
directions given on the proxy cards. IF YOU SIGN AND DATE YOUR PROXY CARD BUT DO
NOT INDICATE YOUR VOTE ON THE PROXY CARD, YOUR PROXY WILL BE VOTED TO ADOPT THE
AFFILIATION AGREEMENT AT THE SPECIAL MEETING. The proxies confer discretionary
authority on the persons named on the proxy cards to vote Ottawa 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 have the same effect as a vote against the proposal to adopt
the affiliation agreement at the special meeting. If you do not return your
proxy card, vote over the Internet, vote by telephone or otherwise vote at the
special meeting, it will have the same effect as if you voted against the
affiliation agreement at the special meeting.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the Ottawa common
stock outstanding is required to adopt the affiliation agreement. THE OTTAWA
BOARD UNANIMOUSLY RECOMMENDS THAT OTTAWA SHAREHOLDERS VOTE "FOR" THE ADOPTION OF
THE AFFILIATION AGREEMENT.
Because approval of the Ottawa proposal to adopt the affiliation agreement
requires the affirmative vote of the holders of a majority of the Ottawa common
stock outstanding, abstentions and failures to vote will have the same effect as
votes against the proposal. Under The Nasdaq Stock Market rules, your broker may
not vote your shares on the Ottawa proposal to adopt the affiliation agreement
without instructions from you. Without your voting instructions, a broker
non-vote will occur. Broker non-votes have the same effect as votes against the
Ottawa proposal.
The affirmative vote of the holders of a majority of the shares of Ottawa
common stock present and voting on the matter may authorize the adjournment of
the special meeting. No proxy that is voted against the proposal to adopt the
affiliation agreement will be voted in favor of adjournment to solicit further
proxies for such proposal.
SOLICITATION OF PROXIES
Ottawa will pay all the costs of soliciting proxies, except that Fifth
Third will pay the expenses of printing and mailing this document. Ottawa 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 employees of Ottawa may solicit proxies personally or by
telephone without additional compensation.
Ottawa has also retained Regan & Associates, Inc., a proxy solicitation
firm, to assist Ottawa in soliciting its shareholders. Ottawa anticipates that
the costs of these services will be approximately $6,500.
DO NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARDS. AS SOON AS
PRACTICABLE AFTER THE COMPLETION OF THE MERGER, THE EXCHANGE AGENT WILL MAIL
TRANSMITTAL FORMS WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK CERTIFICATES FOR
OTTAWA COMMON STOCK TO FORMER OTTAWA SHAREHOLDERS.
12
<PAGE> 17
PROPOSAL -- MERGER OF OTTAWA 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, Ottawa will merge with and into Fifth Third
and Ottawa will cease to exist as a separate entity. In a related simultaneous
transaction, AmeriBank will merge with and into Fifth Third Bank, Indiana.
CORPORATE GOVERNANCE
After the merger is completed, the directors and officers of Fifth Third
who were in office prior to the effective time of the merger will continue to
serve as the directors and officers, respectively, of Fifth Third for the term
for which they were elected, subject to Fifth Third's code of regulations and in
accordance with law.
MERGER CONSIDERATION
Each share of Ottawa common stock (excluding treasury shares) 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 any further
action, into the right to receive:
- .54 of a share of Fifth Third common stock if the average closing price
is equal to or greater than $40.75; or
- that number of shares or fraction of a share of Fifth Third common stock
obtained by dividing $22.01 by the average closing price if the average
closing price is less than $40.75.
For purposes of determining the exchange ratio, the average closing price
will be calculated using the average of the closing prices for a share of Fifth
Third common stock on the Nasdaq National Market for the 20 consecutive trading
days ending on the fifth trading day before the effective time of the merger.
This exchange ratio is also subject to change so as to give Ottawa's
shareholders the economic benefit of any stock dividends, reclassifications,
recapitalizations, split-ups, exchanges of shares or combinations or
subdivisions of Fifth Third common stock effected before the effective time of
the merger.
If, prior to the effective time of the merger, Fifth Third engages in the
distribution of any of its assets (other than a cash dividend), or causes the
distribution of capital stock of any company which holds any assets previously
held by Fifth Third or one of its affiliates to the Fifth Third shareholders,
then the exchange ratio determined above shall be increased in such amount so
that the equivalent fair market value of such transaction shall also be
distributed to the Ottawa shareholders, as of the effective time of the merger.
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 Ottawa common
stock otherwise entitled to a fractional share of Fifth Third common stock will
be paid, without interest, an amount of cash equal to the amount of this
fraction multiplied by the average closing price used to determine the merger
consideration. No shareholder will be entitled to interest, dividends, voting
rights or other rights in respect of any fractional share.
EFFECTIVE TIME OF THE MERGER
Unless we agree otherwise, the effective time of the merger will occur on a
Friday selected by Fifth Third which is as soon as is reasonably possible after
all conditions contained in the affiliation agreement have been met or waived,
including the expiration of all applicable waiting periods. It is anticipated
that the
13
<PAGE> 18
effective time of the merger will occur in the fourth quarter of 2000, although
no assurance can be given in this regard. Ottawa 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 February 28, 2001,
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.
EXCHANGE OF CERTIFICATES
After the effective time of the merger, you will cease to have any rights
as a shareholder of Ottawa, and your sole rights will pertain to the rights to
receive shares of Fifth Third common stock and cash in lieu of fractional
shares, if any, into which your shares of Ottawa common stock will have been
converted by virtue of the merger.
Within 10 business days after the effective time of the merger, Fifth Third
will send to you a letter of transmittal for use in submitting to Fifth Third
Trust Department, acting as exchange agent, certificates formerly representing
shares of Ottawa common stock to be exchanged for certificates representing
shares of 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 share certificates which have been lost, stolen, destroyed or mislaid.
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 (or, in the case of lost, stolen, destroyed or mislaid share
certificates, such documentation as is required by Fifth Third) evidencing
ownership of Ottawa common stock. Any dividends payable on Fifth Third common
stock after the effective time of the merger will be paid to the exchange agent
and, upon receipt of the certificates (or, in the case of lost, stolen,
destroyed or mislaid share certificates, such documentation as is required by
Fifth Third) representing Ottawa common stock, subject to any applicable escheat
or similar laws relating to unclaimed funds, 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 Ottawa
will be closed and no transfer of Ottawa common stock will thereafter be made on
Ottawa's stock transfer books. If a certificate formerly representing Ottawa
common stock is presented to Ottawa 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
Ottawa was organized in 1994 as the holding company for Ottawa Savings
Bank, FSB of Holland, Michigan which had converted from a mutual savings and
loan to a stock savings and loan. In February 1996, Ottawa completed an
acquisition of AmeriBank Federal Savings Bank located in Muskegon, Michigan.
Shortly after the acquisition, Ottawa Savings Bank, FSB converted from a
federal-chartered savings bank to a Michigan chartered savings bank, and changed
its name to AmeriBank. AmeriBank continues to operate as a wholly-owned
subsidiary of Ottawa.
Ottawa's acquisition of AmeriBank Federal Savings Bank created a 25 branch
franchise with a significant presence in Western Michigan. The transaction also
enabled Ottawa to deploy its excess capital and enhance its presence in the
Grand Rapids, Michigan market.
In July 1999, the Ottawa board of directors requested that Keefe, Bruyette
& Woods meet with them to review the current operations of Ottawa, with a focus
on the strategic opportunities available to enhance shareholder value in the
long term, and an analysis of the risks and rewards of these opportunities
compared to what might be available in the current merger and acquisition
environment. The board of directors and management of Ottawa considered the
significant progress Ottawa has made since becoming a public company in 1994.
They recognized that Ottawa's principal operating subsidiary, AmeriBank,
operates in a
14
<PAGE> 19
high growth, economically diverse market. It was also noted that AmeriBank has
built a strong, positive community reputation that should allow it to continue
as an independent bank for the then foreseeable future. These factors were
viewed within the context of a rapidly changing technologically driven financial
services market. The board and management acknowledged that consolidation was
likely to continue in the financial institution sector with deposits becoming an
increasingly difficult source of funding. Many traditional banking products are
becoming commoditized, adding pressure on the bank's net interest margin and
profitability.
Considering these challenges, combined with its objective of increasing
shareholder value, the Ottawa board of directors decided to explore
opportunities for a strategic alliance with a potential partner having a broad
and diversified business strategy and a strong currency. The board believed that
an appropriate partner should be able to add new financial products and services
to Ottawa's existing product line, be an innovator in e-commerce, and have a
successful track record for smooth integrations of other banks. Keefe, Bruyette
& Woods was authorized by the Ottawa board of directors at the July 1999 board
meeting to begin the process of identifying potential strategic partners with
these attributes and to facilitate discussions in the future regarding common
interests. Keefe, Bruyette & Woods subsequently identified nine possible
strategic partners that could potentially enhance the shareholder value of
Ottawa. Additionally, Keefe, Bruyette & Woods reviewed with the Ottawa board of
directors the relative value of the currencies of each of the potential
strategic partners.
After a review of the potential strategic partners and an evaluation of the
currency strength of each potential partner, in August 1999, the Ottawa Board of
directors conducted through Keefe, Bruyette & Woods a confidential inquiry
regarding the possible interest of Fifth Third in pursuing a merger with Ottawa.
Fifth Third expressed an interest and after signing a confidentiality agreement
was provided certain information on Ottawa, including financial statements, loan
and deposit summaries and other data. In November 1999, Fifth Third indicated
that it was interested in Ottawa but was constrained by the timing of any
transaction. At the time, Fifth Third was in the process of integrating two
other large acquisitions and did not desire to proceed with Ottawa at that time.
During the first quarter of 2000, Keefe, Bruyette & Woods continued to
provide an update of merger and acquisition trends and pricing to the Ottawa
board of directors. Additionally, Keefe, Bruyette & Woods provided an ongoing
evaluation of the currency strength of potential strategic partners. During
January and February of 2000, Fifth Third continued to consider a possible
transaction with Ottawa. However, Fifth Third renewed its decision to not
proceed at that time.
In March 2000, Ottawa was provided the opportunity to acquire a smaller
financial institution within its market area. After an evaluation of merger and
acquisition pricing trends for similar sized financial institutions, Ottawa
proposed a non-binding indication of interest that was subsequently rejected by
the target.
In April 2000, the Ottawa board of directors conducted through Keefe,
Bruyette & Woods a confidential inquiry regarding the possible interest of an
additional entity in pursuing a merger with Ottawa. The entity expressed an
interest and, after signing a confidentiality agreement, was provided with
certain information on Ottawa, including financial statements, loan and deposit
summaries and other data. Subsequent discussions with the party did not result
in a firm indication of interest.
Fifth Third completed the integration of its two other acquisitions in May
2000. In June 2000, Fifth Third and Ottawa resumed discussions for a potential
transaction.
In July 2000, Fifth Third submitted a preliminary, non-binding indication
of interest to Ottawa. The Fifth Third indication of interest was discussed at
the July board of directors meeting with Ottawa's financial advisor in
attendance. Based on Ottawa's strategic objectives, it was determined that the
Fifth Third proposal was a very attractive alternative considering price, Fifth
Third's superior business formula and other relevant factors. Based on the
foregoing, the Ottawa board of directors elected to begin discussions with Fifth
Third. Off-site due diligence and discussion of the definitive agreement
commenced immediately. Upon completion of due diligence and negotiation of the
affiliation agreement, the pricing, as detailed in the July indication of
interest, was agreed to among the parties with an exchange ratio of .54 shares
of Fifth Third common stock
15
<PAGE> 20
for each share of Ottawa common stock, subject to adjustment to obtain a minimum
value of $22.01 per share.
On August 22, 2000 and August 31, 2000, the board of directors of Ottawa
met with Keefe, Bruyette & Woods and Ottawa's legal counsel. At these meetings
Ottawa's legal counsel reviewed the terms of the affiliation agreement and the
contemplated transaction. Keefe, Bruyette & Woods delivered its opinion that the
consideration to be paid by Fifth Third to the Ottawa shareholders in the merger
was fair, from a financial point of view, to the holders of Ottawa common stock.
After a thorough discussion of the transaction, the board of directors of Ottawa
voted unanimously to approve the affiliation agreement, recommended the adoption
of the affiliation agreement by its shareholders, and authorized the execution
of the affiliation agreement. The terms of the affiliation agreement, including
the merger consideration to be paid to the Ottawa shareholders, were the result
of arm's length negotiations between the representatives of Fifth Third and
Ottawa.
RECOMMENDATION OF THE OTTAWA BOARD OF DIRECTORS AND REASONS FOR THE MERGER
At its meetings on August 22, 2000 and August 31, 2000, after due
consideration, the Ottawa board of directors:
- determined that the merger and the other transactions contemplated by the
affiliation agreement are advisable and consistent with, and in
furtherance of, the best interests of Ottawa and its shareholders;
- approved and adopted the affiliation agreement, the merger and the other
transactions contemplated by the affiliation agreement; and
- recommended that Ottawa shareholders vote for the adoption of the
affiliation agreement.
The Ottawa board of directors believes that the vision of Fifth Third and
its strategies, in combination with its management, personnel, technical
expertise and financial strength, will provide Ottawa shareholders with an
ownership interest in a company with capabilities and resources better
positioned to succeed and grow in the competitive banking marketplace. Ottawa
believes the affiliation with Fifth Third provides substantial strategic and
financial benefits to Ottawa shareholders, employees and customers.
In approving the merger and making these determinations and
recommendations, the Ottawa board of directors consulted with Ottawa management
as well as its outside legal counsel and financial advisors, and considered a
number of factors, including the following:
- the benefits of the merger described above;
- the review and analysis of each of Fifth Third's and Ottawa's business,
financial condition, earnings, risks and prospects;
- historical market prices and trading information with respect to Firth
Third common stock and Ottawa common stock;
- comparison of historical financial and operational measures for Fifth
Third and Ottawa, including earnings, return on capital, capital levels
and asset quality;
- current industry, economic and market conditions;
- the ability of the combined entity to compete in relevant banking and
non-banking markets;
- the likelihood of receiving the required regulatory approvals in a timely
manner;
- the impact of the merger on the depositors, employees, customers and
communities served by Ottawa, including the potential benefits resulting
from the expanded services and opportunities available as part of a
larger organization;
- the ability to complete the merger as a tax-free transaction for Federal
income tax purposes and to have the conversion of Ottawa common stock be
tax-free to shareholders;
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- the terms and conditions of the affiliation agreement, including the
conditions to closing and the form and amount of merger consideration;
- the interests that certain executive officers and directors of Ottawa may
have with respect to the merger in addition to their interests as
shareholders of Ottawa; and
- the analysis, presentations and opinion of Keefe, Bruyette & Woods to the
effect that, as of August 31, 2000, and based upon and subject to the
various assumptions and limitations set forth therein, the consideration
to be paid by Fifth Third to the Ottawa shareholders in the merger was
fair, from a financial point of view, to the holders of Ottawa common
stock (the written opinion of Keefe, Bruyette & Woods is attached as
Annex B to this document).
This discussion of the information and factors considered by the Ottawa
board of directors in making its decision is not intended to be exhaustive but
includes all material factors considered by the Ottawa board of directors. Due
to the wide array of factors considered in connection with its evaluation of the
merger and the complexity of these matters, the board of directors of Ottawa did
not believe it was beneficial and did not seek to quantify, rank or otherwise
assign relative weights to these factors. The Ottawa board of directors did not
undertake to make any specific determination as to whether any particular
factor, or any aspect of any particular factor, was favorable or unfavorable to
its ultimate determination, but rather the Ottawa board of directors conducted
an overall analysis of the factors described above, including thorough
discussions with and questioning of Ottawa's management, legal and financial
advisors. In addition, the individual members of the Ottawa board of directors
may have given different weight to different factors.
THE BOARD OF DIRECTORS OF OTTAWA UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF
OTTAWA COMMON STOCK VOTE FOR THE ADOPTION OF THE AFFILIATION AGREEMENT.
Fifth Third's primary reason for entering into 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 Ottawa's service
area. Fifth Third's acquisition strategy has generally been to fill in its
markets along the interstate highways in Ohio, Kentucky, Indiana and Michigan.
These acquisitions are designed to strengthen Fifth Third's ability to compete
in these markets by increasing its presence, consumer access and sales force.
OPINION OF OTTAWA'S FINANCIAL ADVISOR
In November 1999, Keefe, Bruyette & Woods was formally retained by Ottawa
to evaluate Ottawa's strategic alternatives as part of a shareholder enhancement
program and to evaluate any specific proposals that might be received regarding
an acquisition of Ottawa. Keefe, Bruyette & Woods, as part of its investment
banking business, is regularly engaged in the evaluation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, and distributions of listed and unlisted securities. Keefe,
Bruyette & Woods is familiar with the market for common stocks of publicly
traded banks, thrifts and bank and thrift holding companies. The Ottawa board of
directors selected Keefe, Bruyette & Woods on the basis of the firm's reputation
and its experience and expertise in transactions similar to the merger and its
prior work for and relationship with Ottawa.
Pursuant to its engagement, Keefe, Bruyette & Woods was asked to render an
opinion as to the fairness, from a financial point of view, of the merger
consideration to be paid to the shareholders of Ottawa in connection with the
merger. Keefe, Bruyette & Woods delivered its opinion to the Ottawa board of
directors that, as of August 31, 2000, the merger consideration is fair, from a
financial point of view, to the shareholders of Ottawa. Although Keefe, Bruyette
& Woods evaluated the fairness, from a financial point of view, of the merger
consideration, Keefe, Bruyette & Woods was not requested to, and did not,
recommend the specific consideration payable in the merger, which consideration
was determined through the negotiations between Fifth Third and Ottawa and
approved by the Ottawa board of directors. No limitations were imposed by the
Ottawa Board upon Keefe, Bruyette & Woods with respect to the investigations
made or procedures followed by it in rendering its opinion. Keefe, Bruyette &
Woods has consented to the inclusion herein of the
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summary of its opinion to the Ottawa board of directors and to the reference to
the entire opinion attached hereto as Annex B.
THE FULL TEXT OF THE KEEFE, BRUYETTE & WOODS OPINION, WHICH DESCRIBES,
AMONG OTHER THINGS, THE ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS
AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY KEEFE, BRUYETTE & WOODS IS ATTACHED
AS ANNEX B TO THIS DOCUMENT AND IS INCORPORATED IN THIS DOCUMENT BY REFERENCE.
OTTAWA SHAREHOLDERS ARE URGED TO, AND SHOULD, READ KEEFE, BRUYETTE & WOODS'
OPINION CAREFULLY AND IN ITS ENTIRETY. KEEFE, BRUYETTE & WOODS' OPINION IS
DIRECTED TO THE OTTAWA BOARD AND ADDRESSES ONLY THE FAIRNESS, FROM A FINANCIAL
POINT OF VIEW, OF THE MERGER CONSIDERATION TO BE RECEIVED BY THE OTTAWA
SHAREHOLDERS IN THE MERGER. THE OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE
MERGER OR ANY RELATED TRANSACTION, NOR DOES IT CONSTITUTE A RECOMMENDATION TO
ANY SHAREHOLDER AS TO HOW TO VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE
FAIRNESS OPINION SET FORTH IN THIS DOCUMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE OPINION.
In arriving at its opinion, Keefe, Bruyette & Woods, among other things:
- reviewed the affiliation agreement between Fifth Third and Ottawa;
- reviewed Ottawa's and Fifth Third's annual reports to shareholders, proxy
statements and annual reports on Form 10-K for the fiscal years ended
December 31, 1999, 1998 and 1997 and quarterly reports on Form 10-Q for
the quarters ended March 31, 2000 and June 30, 2000, and certain other
internal financial analysis considered relevant;
- discussed with senior management and the board of directors of Ottawa and
its wholly-owned subsidiary, AmeriBank, the current position and
prospective outlook for Ottawa;
- discussed with senior management of Fifth Third their operations and
financial performance;
- considered historical quotations, levels of activity and prices of
recorded transactions in Ottawa's and Fifth Third's common stock;
- reviewed financial and stock market data of other thrifts in a comparable
asset range to Ottawa;
- reviewed financial and stock market data of other banks in a comparable
asset range to Fifth Third;
- reviewed certain recent business combinations with thrifts as the
acquired company, which Keefe, Bruyette & Woods deemed comparable in
whole or in part; and
- performed other analyses which Keefe, Bruyette & Woods considered
appropriate.
In rendering its opinion, Keefe, Bruyette & Woods assumed and relied upon
the accuracy and completeness of the financial information provided to it by
Ottawa and Fifth Third. In its review, with the consent of the Ottawa board,
Keefe, Bruyette & Woods did not undertake any independent verification of the
information provided to it, nor did it make any independent appraisal or
evaluation of the assets or liabilities and potential or contingent liabilities
of Ottawa or Fifth Third.
Keefe, Bruyette & Woods' opinion is not an expression of an opinion as to
the prices at which shares of Ottawa common stock or shares of Fifth Third
common stock will trade following the announcement of the merger or the actual
value of the shares of common stock of the combined company when issued pursuant
to the merger, or the prices at which the shares of common stock of the combined
company will trade following the completion of the merger.
ANALYSIS OF RECENT COMPARABLE ACQUISITION TRANSACTIONS.
In rendering its opinion, Keefe, Bruyette & Woods analyzed certain
comparable merger and acquisition transactions of both pending and completed
thrift deals, comparing the acquisition price relative to tangible book value,
last twelve months earnings, and premium to core deposits. The analysis included
a comparison of the median of the above ratios for pending acquisitions with
seller's assets between $500 million and $2 billion, based on the following four
comparable groups: (i) all pending midwest thrift acquisitions announced since
June 30, 1999; (ii) all pending midwest bank and thrift acquisitions announced
since
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June 30, 1999; (iii) all pending thrift acquisitions nationwide announced since
September 30, 1999; and (iv) all pending bank and thrift acquisitions nationwide
announced since September 30, 1999.
<TABLE>
<CAPTION>
PRICE LAST 12 CORE
TO TANGIBLE MONTHS DEPOSIT
BOOK BOOK EPS PREMIUM
----- -------- ------- -------
<S> <C> <C> <C> <C>
Median Midwest Thrift Deals...................... 197% 190% 29.9x 15.5%
Median Midwest Bank and Thrift Deals............. 217% 225% 19.9x 19.6%
Median Thrift Deals Nationwide................... 192% 168% 18.8x 11.7%
Median Bank and Thrift Deals..................... 243% 251% 19.5x 18.3%
Nationwide Consideration -- $23.96 per share
based on August 30, 2000 Fifth Third closing
price of $44.375............................... 198% 229% 16.9x 13.1%
</TABLE>
Based on the above information Keefe, Bruyette & Woods concluded that the
merger consideration, based on the multiples implied by the .54 exchange ratio
and the implied per share price of $23.96, based on Fifth Third's closing price
of $44.375 on August 30, 2000, was fair, from a financial point of view, to
shareholders. The summary does not purport to be a complete description of the
analysis performed by Keefe, Bruyette & Woods and should not be construed
independently of the other information considered by Keefe, Bruyette & Woods in
rendering its opinion. Selecting portions of Keefe, Bruyette & Woods's analysis
or isolating certain aspects of the comparable transactions without considering
all analysis and factors, could create an incomplete or potentially misleading
view of the evaluation process.
In preparing its analysis, Keefe, Bruyette & Woods made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters, many of which are beyond the control of Keefe,
Bruyette & Woods and Ottawa. The analyses performed by Keefe, Bruyette & Woods
are not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses and do not
purport to be appraisals or reflect the prices at which a business may be sold.
In addition, in the ordinary course of its business, Keefe, Bruyette &
Woods and its affiliates may actively trade the equity securities of Ottawa and
Fifth Third for their own account and/or the accounts of their respective
customers, and, accordingly, may at any time hold long or short positions in
these securities. In the past two years, Keefe, Bruyette & Woods has provided to
Ottawa financial advisory, investment banking and other services unrelated to
the proposed merger.
Ottawa has agreed to pay Keefe, Bruyette & Woods for financial advisory
services rendered through the completion of the merger and the issuance and
delivery of the fairness opinion (1) a fee of $75,000 for the issuance and
delivery of the fairness opinion which is payable regardless of whether the
merger is completed, and (2) a transaction success fee equal to 1.0.% of
aggregate fair market value of any securities issued and any non-cash and cash
consideration received by the Ottawa shareholders pursuant to the merger if and
when the merger with Fifth Third is completed. As of the date of this document,
Keefe, Bruyette & Woods has received $75,000 for the issuance and delivery of
its fairness opinion, which amount will be credited against any success fee paid
to Keefe, Bruyette & Woods upon completion of the merger. Ottawa also agreed,
among other things, to reimburse Keefe, Bruyette & Woods for certain expenses
incurred in connection with the services provided by Keefe, Bruyette & Woods,
and to indemnify Keefe, Bruyette & Woods and its affiliates from and against
certain liabilities and expenses, which may include certain liabilities under
federal securities laws, in connection with its engagement.
FEDERAL INCOME TAX CONSEQUENCES
Fifth Third and Ottawa believe that the merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. If so, the federal income tax consequences will be:
- no gain or loss will be recognized by Ottawa as a result of the merger;
- no gain or loss will be recognized by Fifth Third as a result of the
merger;
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- no gain or loss will be recognized by a shareholder of Ottawa who
receives solely Fifth Third common stock in exchange for Ottawa common
stock pursuant to the terms of the affiliation agreement, except to the
extent of any cash received for any fractional share interest in Fifth
Third common stock to which the shareholder may be entitled;
- the aggregate federal income tax basis of the Fifth Third common stock
received by an Ottawa shareholder who receives solely Fifth Third common
stock in exchange for Ottawa 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 Ottawa common stock surrendered
in exchange therefore, reduced by any amount allocated to a fractional
share of Fifth Third common stock with respect to which cash is received;
- the holding period of the Fifth Third common stock received (including
any fractional share deemed received and redeemed for cash) by an Ottawa
shareholder will include, in each case, the period during which the
Ottawa common stock surrendered in exchange therefor was held, provided
that the Ottawa common stock was held as a capital asset by such
shareholder on the date of the exchange; and
- a holder of Ottawa 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.
Although not required in the affiliation agreement, Fifth Third has
requested an opinion from its counsel, Graydon, Head & Ritchey LLP, that, for
federal income tax purposes: (1) the merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code, and (2) that
no gain or loss will be recognized by Fifth Third as a result of the merger.
In rendering its opinion, Graydon Head & Ritchey LLP will rely upon
representations contained in letters that it will seek from Fifth Third and
Ottawa to be delivered for purposes of the opinion. The opinion will also be
based on the assumption that the merger will be completed 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 Ottawa in the affiliation agreement are accurate. An opinion of
counsel represents only 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
Ottawa 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.
The foregoing discussion is intended only as 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 Ottawa 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 of this document.
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.
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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.
ACCOUNTING TREATMENT
The merger will be accounted for as a "purchase" as such term is used under
generally accepted accounting principles. After the effective time of the
merger, Ottawa's consolidated results of operations will be included in Fifth
Third's consolidated results of operations. For purposes of preparing Fifth
Third's consolidated financial statements, Fifth Third will establish a new
accounting basis for Ottawa's assets and liabilities based upon the fair market
values thereof and Fifth Third's purchase price, including the costs of
acquisitions. Accordingly, data regarding the financial condition and results of
operations of Ottawa will be included in Fifth Third's consolidated financial
statements on and after the effective time of the merger.
RESALE OF FIFTH THIRD COMMON STOCK BY AFFILIATES
The shares of Fifth Third common stock to be issued to shareholders of
Ottawa in connection with the merger have been registered under the Securities
Act of 1933 and will be freely transferable under the Securities Act, except for
shares issued to any shareholder who may be deemed to be an "affiliate" of
Ottawa or Fifth Third at the time of the special meeting. Generally, an
affiliate includes a director, an executive officer or a 10% or more shareholder
of Ottawa or Fifth Third at the time of the special meeting.
Rule 145 under the Securities Act restricts the public 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 Ottawa who do not
become affiliates of Fifth Third may publicly resell the Fifth Third common
stock received by them in connection with the merger upon compliance with the
following conditions of Rule 144:
- Fifth Third must have satisfied its reporting requirements under the
Exchange Act for the 12 months preceding the proposed sale;
- the number of shares sold in any three-month period is limited to the
greater of (1) one percent of Fifth Third's shares outstanding, or (2)
the average weekly trading volume during the four calendar weeks
preceding the first 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, (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 of these persons serves as trustee or
executor, (3) any corporation in which the affiliate or any person specified in
(1) beneficially owns at least 10% of an equity interest, (4) any person to whom
the affiliate donated shares, or (5) any person who acquired the shares from the
affiliate as a result of the affiliate defaulting on an obligation secured by a
pledge of the shares, 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 first year following the completion of the merger, affiliates of
Ottawa who are not affiliates of Fifth Third may resell their shares publicly
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 publicly resell their shares of Fifth
Third common stock received in the merger until two years have elapsed since
completion of the merger. At that time, the shares may be sold without any
restriction.
Sales and other dispositions of Fifth Third common stock by any affiliate
of Ottawa 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.
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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 Ottawa will use its best efforts to
cause each person who is deemed by Ottawa to be an affiliate (for purposes of
Rule 145) of Ottawa to execute and deliver to Fifth Third a written agreement
intended to ensure compliance with the Securities Act.
Fifth Third has also agreed, subject to certain conditions, to cause the
Fifth Third board of directors to adopt a resolution providing that, to the
extent that any directors and executive officers of Ottawa who will become
affiliates of Fifth Third would be deemed, for purposes of Section 16(b) of the
Securities Exchange Act of 1934, as amended, to have "acquired" shares and/or
options to purchase shares of Fifth Third common stock as a result of the
merger, such "acquisitions" are intended to be exempt from liability under
Section 16(b) of the Exchange Act. The Ottawa board of directors likewise has
adopted a resolution providing that, to the extent that any directors and
executive officers of Ottawa would be deemed, for purposes of Section 16(b) of
the Exchange Act, to have "sold" their Ottawa common stock and options to
purchase Ottawa common stock as a result of the merger, such "sales" are
intended to be exempt from liability under Section 16(b) of the Exchange Act.
NO APPRAISAL RIGHTS
Shareholders of a corporation that is proposing to merge or consolidate
with another entity are sometimes entitled under relevant state laws to
appraisal or dissenters' rights in connection with the proposed transaction
depending on the circumstances. These rights generally confer on shareholders
who oppose a merger or the consideration to be received in a merger the right to
receive, in lieu of the consideration being offered in the merger, the fair
value for their shares as determined in a judicial appraisal proceeding.
Ottawa shareholders are not entitled to appraisal or dissenters' rights
under Delaware law in connection with the merger. No such rights will arise
because the Ottawa common stock was listed on the Nasdaq National Market on the
record date for its special meeting of shareholders, and the Fifth Third common
stock that Ottawa shareholders will be entitled to receive in the merger will be
listed on the Nasdaq National Market upon completion of the merger.
TERMS OF THE AFFILIATION AGREEMENT
REPRESENTATIONS AND WARRANTIES
Fifth Third and Ottawa 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;
- tax treatment;
- compliance with laws and regulations;
- the absence of material changes since June 30, 2000;
- their SEC and other regulatory filings; and
- their financial statements.
The affiliation agreement also contains, among other things,
representations and warranties of Ottawa relating to employee benefit matters,
the non-applicability of anti-takeover provisions and certain material
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<PAGE> 27
contracts of Ottawa and a representation and warranty by Fifth Third that the
shares of Fifth Third common stock issued in the merger will be duly and validly
issued, fully-paid and non-assessable.
No representations or warranties made by either Ottawa or Fifth Third will
survive beyond the effective time of the merger.
CONDUCT PENDING MERGER
The affiliation agreement provides that, except with the prior approval of
Fifth Third, Ottawa shall not, and shall not permit its representatives to,
initiate, negotiate with, provide information to, or agree to a transaction
with, any other third party concerning any merger of Ottawa or its subsidiaries
or any sale of substantial assets or shares of capital stock (including
securities convertible or exchangeable into capital stock) or any similar
transaction involving Ottawa or its subsidiaries. Ottawa must communicate to
Fifth Third the terms of any proposal which it may receive in respect of any of
these transactions and any request by or indication of interest on the part of
any third party with respect to initiation of any of these transactions or
discussions with respect thereto. These restrictions on Ottawa are subject to
the exercise of Ottawa's directors' fiduciary duties.
In addition, Ottawa has agreed that, prior to the effective time of the
merger, Ottawa and its subsidiaries will be operated in the ordinary course of
business and will give Fifth Third and Fifth Third's representatives reasonable
access during business hours to its books, records and properties. In addition,
without Fifth Third's prior written consent, neither Ottawa nor its subsidiaries
will, among other things:
- make any changes in its capital or corporate structures;
- issue any additional shares of common stock or 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, enter into any agreement to make, or become obligated to make, any
capital expenditures in excess of $100,000;
- make, or enter into or renew any agreement for services to be provided to
Ottawa or its subsidiaries, or permit the automatic renewal of any such
agreement, other than certain scheduled agreements, except any agreement
for services in the ordinary course of business consistent with past
practice and requiring the expenditure of not more than $100,000;
- make, declare, pay or set aside for payment any cash dividends on its own
stock other than normal and customary cash dividends which shall not be
in excess of $0.12 per share per quarter, provided this covenant shall
only apply to Ottawa;
- make, declare, pay or set aside for payment, any stock dividends or make
any other distributions on its stock, other than cash dividends as
described in the immediately preceding clause;
- change or otherwise amend any benefit plans other than as required by law
or as contemplated in the affiliation agreement;
- provide any increases in employee salaries or benefits other than in the
ordinary course of business;
- 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 agreements existing on the date of the
affiliation agreement and previously scheduled); and
- sell, transfer, mortgage or otherwise dispose of or encumber any of the
shares of the capital stock of the subsidiaries of Ottawa which were
owned by it at the date of the affiliation agreement.
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Ottawa has agreed to terminate its dividend reinvestment plan on or before
the effective time of the merger. All purchases under this plan must be
consummated before the effective time of the merger. Shares of Ottawa common
stock held in this plan shall be converted into shares of Fifth Third common
stock as described in "Proposal -- Merger of Ottawa into Fifth Third -- Merger
Consideration" and " -- No Fractional Shares."
The affiliation agreement also provides that Ottawa and Fifth Third will
coordinate the timing of the declaration and payment of dividends to ensure that
each company's shareholders will receive fair dividends prior to the merger and
will not receive more than one fair dividend in any quarter prior to, or the
first quarter after, the merger.
CONDITIONS TO CLOSING
The affiliation agreement must be adopted by the affirmative vote of
holders of at least a majority of the outstanding shares of Ottawa common stock.
The merger also must be approved in writing by the Federal Reserve Board and the
Michigan Office of Financial and Insurance Services. Fifth Third and Ottawa
filed these applications in September 2000. No assurance can be given that the
required governmental approvals will be forthcoming in a timely manner, if at
all.
Fifth Third's and Ottawa's obligations to complete the merger are subject
to additional conditions set forth in the affiliation agreement. These include:
(1) the absence at the effective time of the merger of any waiting period
mandated by law or any material investigations, orders or injunction of any
federal or state agency or court preventing, prohibiting or enjoining the
transactions contemplated by the affiliation agreement; (2) both institutions
having performed in all material respects all of the obligations required of
them under the affiliation agreement; and (3) Ottawa's shareholders having
approved the proposal to adopt the affiliation agreement.
Fifth Third's obligation to complete the merger is further subject to
conditions set forth in the affiliation agreement, including:
- the continuing truth and accuracy in all material respects of the
representations and warranties of Ottawa; and
- Ottawa's consolidated shareholders' equity being at least $75.0 million.
Ottawa's obligation to complete 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; and
- Douglas Iverson, Ottawa's Vice Chairman and Chief Executive Officer,
Ronald L. Haan, Ottawa's President, Chief Operating Officer and
Secretary, and Jon W. Swets, Ottawa's Senior Vice President and Chief
Financial Officer, each having executed a release and termination
agreement with Fifth Third. See "-- Interests of Certain Persons in the
Merger."
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 Ottawa or by Ottawa to Fifth Third in the following instances:
- if there has been a material breach of a representation or warranty or a
material failure of any covenant on the part of the other party with
respect to the representations, warranties and covenants set forth in the
affiliation agreement and that misrepresentation, breach or failure to
comply has not been cured within 30 days after receipt of written notice
or is not capable of being cured, provided the party in default has no
right to terminate for its own default;
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- if the merger has not been completed by February 28, 2001, 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 the termination;
- by the mutual written consent of Fifth Third and Ottawa;
- if Ottawa's shareholders do not adopt the affiliation agreement;
- if any event occurs which renders impossible satisfaction of one or more
of the conditions to the obligations of the other party to effect the
merger in any material respect, and such non-compliance is not waived by
the unaffected party; or
- if the business, assets or financial condition of the other party has
materially and adversely changed since June 30, 2000.
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 adoption of
the affiliation agreement by Ottawa's shareholders. Approval of any amendment,
modification or supplement by Ottawa's shareholders is not required unless this
action would adversely change the consideration to be provided to Ottawa's
shareholders pursuant to the affiliation agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Shares of Ottawa common stock held by or for the benefit of directors and
executive officers of Ottawa will be canceled and converted into the right to
receive shares of Fifth Third common stock on the same basis as shares held by
you and the other shareholders of Ottawa. In addition, directors and executive
officers of Ottawa may be deemed to have the following interests in the merger
that are different from, or in addition to, those of you and the other
shareholders of Ottawa.
OTTAWA EMPLOYMENT AND SEVERANCE AGREEMENT PAYMENTS. Ottawa has employment
agreements with Douglas J. Iverson and Ronald L. Haan and a severance agreement
with Jon W. Swets. In lieu of any other severance benefits provided under these
agreements or in the affiliation agreement, Fifth Third will enter into release
and termination agreements with these individuals that will provide payments to
these individuals. Pursuant to their respective release and termination
agreements, Mr. Iverson will receive $1,100,000, Mr. Haan will receive $650,000,
and Mr. Swets will receive $200,000. In no event shall any of these individuals
receive any payment that would be considered an "Excess Parachute Payment"
pursuant to Section 280(G) of the Internal Revenue Code.
FIFTH THIRD EMPLOYMENT ARRANGEMENTS. Fifth Third has indicated that it will
employ each of Mr. Iverson and Mr. Haan as an executive vice president of Fifth
Third Bank, Indiana (Northern). Both Mr. Iverson and Mr. Haan will be at-will
employees and are currently expected to each receive an annual salary of
approximately $185,000. Although neither Mr. Iverson nor Mr. Haan will be
signing an employment agreement with Fifth Third, it is currently anticipated
that each one of them will sign a compensation agreement with Fifth Third on
completion of the merger.
Each compensation agreement is currently contemplated to contain various
competition restrictions and will provide for a signing bonus, stock options and
a noncompetition payment. Mr. Iverson's currently anticipated compensation
agreement would provide for a $360,000 signing bonus, a noncompetition payment
of $140,000 and options to acquire 15,000 shares of Fifth Third common stock
under Fifth Third's 1998 Long-Term Incentive Plan. Mr. Haan's currently
anticipated compensation agreement would provide for a $210,000 signing bonus, a
noncompetition payment of $140,000 and options to acquire 15,000 shares of Fifth
Third common stock under Fifth Third's 1998 Long-Term Incentive Plan.
BOARD MEMBER COMPENSATION. Fifth Third has indicated that all of the
members of the Ottawa board of directors will be appointed to the affiliate
board of Fifth Third Bank, Indiana (Northern). The members of this board who are
not employees of Fifth Third will receive fees for meeting attendance and stock
options in the same amounts as received by the existing non-employee board
members.
25
<PAGE> 30
STOCK OPTIONS. Ottawa has granted stock options to certain directors,
executive officers and key employees under its 1995 Stock Option and Incentive
Plan, as amended.
Upon adoption of the affiliation agreement by Ottawa's shareholders, all
outstanding awards, options or other rights to purchase or acquire Ottawa common
stock under the 1995 Stock Option and Incentive Plan, as amended, will vest,
become immediately exerciseable and, after completion of the merger, will be
converted into options to purchase Fifth Third common stock. The number of
shares subject to these options will be adjusted to allow the holder, upon
exercise, to receive shares of Fifth Third common stock calculated by
multiplying the exchange ratio by the number of shares of Ottawa common stock
subject to the options, and the exercise price of the Ottawa stock options will
be adjusted by dividing the exercise price per share by the exchange ratio.
The effect of the adoption of the affiliation agreement by Ottawa's
shareholders on the Ottawa options held by the four most highly paid executive
officers of Ottawa and by all executive officers as a group will be as follows:
<TABLE>
<CAPTION>
OPTIONS VESTING
OPTIONS AS A RESULT OF ADOPTION
EXERCISABLE AS OF THE OF THE AFFILIATION
NAME OPTIONS HELD SPECIAL MEETING AGREEMENT
---- ------------ --------------------- -----------------------
<S> <C> <C> <C>
Douglas J. Iverson............... 101,934 101,934 --
Ronald L. Haan................... 102,790 56,666 46,124
Lee J. Pankratz.................. 38,470 24,208 14,262
Jon W. Swets..................... 38,470 26,664 11,806
Other executive officers......... 22,406 9,958 12,448
------- ------- -------
All executive officers........... 304,070 219,430 84,640
Non-employee directors........... 227,495 192,348 35,147
------- ------- -------
Total............................ 531,565 411,778 119,787
======= ======= =======
</TABLE>
Within 60 days after the effective time of the merger, Fifth Third will
file a registration statement with the SEC to register the shares of Fifth Third
common stock issuable pursuant to these options. Holders of these options may
not exercise the options until this registration statement has become effective.
INDEMNIFICATION AND LIABILITY INSURANCE. Fifth Third will assume the
obligations of Ottawa or any of its subsidiaries arising under applicable Ohio,
Michigan, Delaware and federal law and under Ottawa's or any subsidiary's
certificate of incorporation or bylaws, to indemnify each officer or director of
Ottawa or any of its subsidiaries or predecessors against liabilities in
connection with any claim arising out of the fact that such person is or was a
director or officer of Ottawa or any of its subsidiaries, if such claim pertains
to any matter occurring prior to the effective time of the merger, regardless of
whether such claim is asserted prior to, at or after the effective time of the
merger. Fifth Third's assumption of these indemnification obligations will
continue for a period of five years after the effective time of the merger or,
in the case of claims asserted prior to the fifth anniversary of the effective
time of the merger, until such matters are finally resolved. Fifth Third also
shall purchase and keep in force for a two-year period, a policy of directors'
and officers' liability insurance providing coverage for acts or omissions of
the type currently covered by Ottawa's existing directors' and officers'
liability insurance for acts or omissions occurring on or prior to the effective
time of the merger, but only to the extent that this insurance may be purchased
or kept in full force on commercially reasonable terms. Fifth Third and Ottawa
have agreed that these costs shall be commercially reasonable so long as they do
not exceed 125% of the annual costs currently paid for such coverage by Ottawa.
Fifth Third has agreed that all rights to indemnification existing in favor of
officers and directors of Fifth Third affiliates shall be accorded to officers
and directors of Ottawa 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 this indemnification will relate to covered actions or inactions
only after the effective time of the merger.
26
<PAGE> 31
EFFECT ON OTTAWA EMPLOYEES
EMPLOYMENT. Fifth Third shall consider employing as many of the employees
of Ottawa and its subsidiaries who desire employment within the Fifth Third
holding company system as possible, to the extent of available positions and
consistent with Fifth Third's standard staffing levels and personnel policies.
FIFTH THIRD EMPLOYEE BENEFIT PLANS. Fifth Third shall provide each of the
full-time employees of Ottawa and its subsidiaries who become employees of Fifth
Third the opportunity to participate in each benefit plan maintained by Fifth
Third for similarly-situated employees, or a plan of comparable value. Former
Ottawa employees shall be given credit for service with Ottawa and its
subsidiaries in determining participation in, eligibility for, and vesting in,
benefits thereunder with respect to severance, sick pay, vacation plans, and
accrual of benefits. No former Ottawa employee shall be entitled to participate
in the Fifth Third Bancorp Master Retirement Plan (which has been frozen to new
participants). Such employees will not be subject to any exclusion or penalty
for pre-existing conditions that were covered under the medical plans of Ottawa,
or its subsidiaries immediately prior to the Effective Time or any waiting
period relating to coverage under Fifth Third's medical plan.
SEVERANCE. The affiliation agreement provides for the payment of severance
amounts to employees of Ottawa who do not have an employment or severance
agreement under certain conditions upon termination of employment. Those amounts
will be equal to two weeks of pay for each year of service, with a maximum of up
to 26 weeks of pay. Four of Ottawa's vice presidents, however, will receive 26
weeks of pay regardless of their years of service.
27
<PAGE> 32
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. In 2000, Fifth Third elected to become a financial
holding company under that act. Fifth Third, with its principal office located
in Cincinnati, owns all of the outstanding stock of nine commercial banks and
one federal savings bank with 639 offices in Ohio, Kentucky, Indiana, Illinois,
Michigan, 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 June 30, 2000, Fifth Third, its affiliated banks and other subsidiaries
had consolidated total assets of approximately $44.7 billion, consolidated total
deposits of approximately $27.5 billion and consolidated total shareholders'
equity of approximately $4.3 billion.
Fifth Third, through its subsidiaries, engages primarily in commercial,
retail and trust banking, investment services and leasing activities and also
provides credit life, accident and health insurance, discount brokerage services
and property management for its properties. Those subsidiaries consist of The
Fifth Third Company, Fifth Third Securities, Inc., The Fifth Third Leasing
Company, Fifth Third Insurance Services, Inc., Fifth Third Mortgage Company,
Fifth Third Mortgage Insurance Reinsurance Company, Midwest Payment Systems,
Inc., Fifth Third International Company, Fifth Third Investment Company, Fifth
Third Community Development Corporation, Fifth Third Trade Services Limited,
Fifth Third Real Estate Capital Markets Co., and Heartland Capital Management,
Inc. Fifth Third's affiliates provide a full range of financial products and
services to the retail, commercial, financial, governmental, educational and
medical sectors, including a wide variety of checking, savings and money market
accounts, and credit products such as credit cards, installment loans, mortgage
loans and leasing. Each of the banking affiliates has deposit insurance provided
by the Federal Deposit Insurance Corporation through either the Bank Insurance
Fund or the Savings Association Insurance Fund.
Fifth Third, through its banking subsidiaries, also participates in several
regional shared ATM networks, including "Money Station," "Honor" and "Star."
These networks include approximately 6,500, 42,000 and 70,000 ATMs,
respectively. All Fifth Third banking subsidiaries also participate in the "PLUS
System(R)" network, which is an international ATM network with approximately
490,000 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."
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, 1999,
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000 and June
30, 2000, and Current Reports on Form 8-K filed with the SEC on June 21, 2000
and July 17, 2000, which are incorporated into this document by reference. See
"Where You Can Find More Information." More information about Fifth Third is
also contained in its 1999 Annual Report to Shareholders which is available
through Fifth Third's website at http://www.53.com/investor/annual-report/
index.htm.
28
<PAGE> 33
OTTAWA FINANCIAL CORPORATION
DESCRIPTION OF BUSINESS
Ottawa Financial Corporation is a unitary savings and loan holding company
and the sole shareholder of AmeriBank. In March 1994, AmeriBank (then known as
Ottawa Savings Bank, FSB) converted from a mutual form to a stock form of
ownership. Ottawa's common stock is traded on the Nasdaq National Market under
the symbol "OFCP."
On February 13, 1996, Ottawa acquired AmeriBank Federal Savings Bank, a
federally chartered savings bank headquartered in Muskegon, Michigan, pursuant
to which Ottawa acquired all of the outstanding shares of common stock of
AmeriBank Federal Savings Bank for approximately $32.7 million in cash,
converted options and warrants. AmeriBank Federal Savings Bank was then merged
into AmeriBank.
AmeriBank is the only direct operating subsidiary of Ottawa. AmeriBank is a
Michigan chartered savings bank headquartered in Holland, Michigan. AmeriBank's
deposits are insured up to the applicable limits by the FDIC. AmeriBank
currently serves Allegan, Kent, Muskegon, Newaygo, Oceana and Ottawa Counties in
Western Michigan through 27 retail banking offices. At June 30, 2000, AmeriBank
had total assets of approximately $1.1 billion, deposits of approximately $738.1
million and shareholders' equity of approximately $79.9 million.
AmeriBank is a community-oriented financial institution offering a variety
of financial services to meet the needs of the communities it serves. AmeriBank
attracts retail deposits from the general public and supplements those deposits
with wholesale funds, primarily advances from the Federal Home Loan Bank.
AmeriBank invests these retail and wholesale funds in owner-occupied, one- to
four-family residential mortgage loans, nonowner-occupied one- to four-family
residential, construction, commercial and multi-family real estate loans,
commercial business loans, as well as a variety of consumer loans.
AmeriBank's revenues are derived principally from interest on loans and
investment securities.
AmeriBank offers a variety of individual and commercial deposit accounts
having a wide range of interest rates and terms. AmeriBank's deposits consist of
passbook and statement savings accounts, interest and non-interest-bearing
checking accounts, and money market and certificate accounts. AmeriBank also
offers debit and credit cards as well as ATM services. AmeriBank solicits
deposits from its market area only, and has never used brokers to obtain
deposits. AmeriBank's advances from the Federal Home Loan Bank also have a
variety of interest rates and terms including fixed rate, daily and quarterly
adjusting variable rate and putable advances.
Ottawa's executive offices are located at 245 Central Avenue, Holland,
Michigan 49423 and its telephone number at that address is (616) 393-7002.
ADDITIONAL INFORMATION
For more detailed information about Ottawa, reference is made to the Ottawa
Annual Report on Form 10-K for the year ended December 31, 1999, Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2000 and June 30, 2000,
and Current Reports on Form 8-K filed with the SEC on February 1, 2000, June 15,
2000 and September 1, 2000, which are incorporated into this document by
reference. See "Where You Can Find More Information."
29
<PAGE> 34
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Financial Information is based
on the historical financial statements of Fifth Third and Ottawa and has been
prepared to illustrate the effects of the acquisition described below.
The Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30,
2000 assumes the merger of Ottawa into Fifth Third, accounted for as a purchase,
was consummated on June 30, 2000. The Unaudited Pro Forma Condensed Combined
Statements of Income for the six months ended June 30, 2000 and for the year
ended December 31, 1999 give effect to the merger of Ottawa into Fifth Third as
if such transaction had been effective during the periods shown.
The Unaudited Pro Forma Condensed Financial Information reflects the merger
based upon preliminary purchase accounting adjustments. Actual adjustments,
which may include adjustments to certain assets, liabilities and other items
including identifiable intangibles, will be made on the basis of evaluations as
of the effective time of the merger and, therefore, may differ from those
reflected in the Unaudited Pro Forma Condensed Financial Information.
You should read the Unaudited Pro Forma Condensed Financial Information in
conjunction with Fifth Third's Consolidated Financial Statements and notes
thereto incorporated by reference in this document and Ottawa's Consolidated
Financial Statements and notes thereto incorporated by reference in this
document. We have listed the documents that we incorporate by reference under
the heading "Where You Can Find More Information" on page 53.
30
<PAGE> 35
FIFTH THIRD BANCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2000
($000'S)
<TABLE>
<CAPTION>
FIFTH THIRD OTTAWA
BANCORP AND FINANCIAL PRO FORMA PRO FORMA
SUBSIDIARIES CORPORATION ADJUSTMENTS COMBINED
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and Due from Banks.............. $ 750,986 $ 20,348 $ -- $ 771,334
Securities Available for Sale........ 15,152,145 81,361 15,233,506
Securities Held to Maturity.......... 45,967 -- 45,967
Other Short-Term Investments......... 109,526 -- 109,526
Loans Held for Sale.................. 349,829 713 350,542
Loans and Leases..................... 26,078,254 947,128 27,025,382
Reserve for Credit Losses............ (382,524) (5,193) (387,717)
----------- ---------- -------- -----------
Net Loans and Leases.............. 25,695,730 941,935 -- 26,637,665
Bank Premises and Equipment.......... 495,951 16,469 512,420
Accrued Income Receivable............ 343,804 5,146 348,950
Goodwill............................. 300,425 9,976 78,348(1)(3) 388,749
Mortgage Servicing Rights............ 114,088 2,410 116,498
Other Assets......................... 1,365,481 6,266 1,371,747
----------- ---------- -------- -----------
Total Assets........................... $44,723,932 $1,084,624 $ 78,348 $45,886,904
=========== ========== ======== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total Deposits....................... $27,459,776 $ 738,089 $ -- $28,197,865
Federal Funds Borrowed............... 3,252,303 14,159 3,266,462
Short-Term Bank Notes................ 2,740,000 -- 2,740,000
Other Short-Term Borrowings.......... 3,071,321 60,000 172,059(2) 3,303,380
Accrued Taxes, Interest and
Expenses.......................... 980,426 6,451 986,877
Other Liabilities.................... 435,654 7,907 443,561
Long-Term Debt....................... 2,287,003 178,125 2,465,128
Guaranteed Preferred Beneficial
Interests in Convertible Preferred
Debentures........................ 172,500 -- 172,500
----------- ---------- -------- -----------
Total Liabilities...................... 40,398,983 1,004,731 172,059 41,575,773
SHAREHOLDERS' EQUITY
Common Stock......................... 1,032,177 66 (66)(4) 1,032,177
Capital Surplus...................... 499,038 78,696 (92,514)(4) 485,220
Retained Earnings.................... 3,056,430 1,998 (1,998)(4) 3,056,430
Net Unrealized Losses on Securities
Available for Sale................ (262,696) (867) 867(4) (262,696)
----------- ---------- -------- -----------
Total Shareholders' Equity............. 4,324,949 79,893 (93,711) 4,311,131
----------- ---------- -------- -----------
Total Liabilities and Shareholders'
Equity............................... $44,723,932 $1,084,624 $ 78,348 $45,886,904
=========== ========== ======== ===========
</TABLE>
See accompanying notes to the unaudited pro forma condensed financial
information.
31
<PAGE> 36
FIFTH THIRD BANCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2000
($000'S, EXCEPT SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
FIFTH THIRD OTTAWA
BANCORP AND FINANCIAL PRO FORMA PRO FORMA
SUBSIDIARIES CORPORATION ADJUSTMENTS COMBINED
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Interest Income....................... $ 1,585,096 $ 38,444 $ -- $ 1,623,540
Interest Expense...................... 856,932 23,560 5,592(2) 886,084
------------ ---------- ---------- ------------
Net Interest Income................... 728,164 14,884 (5,592) 737,456
Provision for Credit Losses........... 47,691 675 -- 48,366
------------ ---------- ---------- ------------
Net Interest Differential............. 680,473 14,209 (5,592) 689,090
------------ ---------- ---------- ------------
Other Operating Income:
Service Charges on Deposits......... 102,998 1,739 104,737
Other Operating Income.............. 385,226 1,481 386,707
------------ ---------- ---------- ------------
Total Other Income.................... 488,224 3,220 -- 491,444
------------ ---------- ---------- ------------
Operating Expenses:
Salaries, Wages and Benefits........ 268,240 5,841 274,081
Equipment and Occupancy Expenses.... 63,513 1,334 64,847
Other Operating Expenses............ 245,398 3,272 1,959(3) 250,629
------------ ---------- ---------- ------------
Total Operating Expenses.............. 577,151 10,447 1,959 589,557
------------ ---------- ---------- ------------
Earnings Before Income Taxes.......... 591,546 6,982 (7,551) 590,977
Applicable Income Taxes............... 193,089 2,484 (1,957)(5) 193,616
------------ ---------- ---------- ------------
Net Income............................ $ 398,457 $ 4,498 $ (5,594) $ 397,361
============ ========== ========== ============
Average Shares Outstanding:
Basic............................... 464,259,980 6,459,594 464,259,980
Diluted............................. 475,406,441 6,731,192 475,406,441
Earnings Per Share:
Basic............................... $ 0.86 $ 0.70 $ 0.86
Diluted............................. $ 0.85 $ 0.67 $ 0.84
</TABLE>
See accompanying notes to the unaudited pro forma condensed financial
information.
32
<PAGE> 37
FIFTH THIRD BANCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
($000'S, EXCEPT SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
FIFTH THIRD OTTAWA
BANCORP AND FINANCIAL PRO FORMA PRO FORMA
SUBSIDIARIES CORPORATION ADJUSTMENTS COMBINED
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Interest Income....................... $ 2,738,082 $ 68,978 $ -- $ 2,807,060
Interest Expense...................... 1,333,491 38,882 11,184(2) 1,383,557
------------ ---------- ---------- ------------
Net Interest Income................... 1,404,591 30,096 (11,184) 1,423,503
Provision for Credit Losses........... 134,057 1,170 135,227
------------ ---------- ---------- ------------
Net Interest Differential............. 1,270,534 28,926 (11,184) 1,288,276
------------ ---------- ---------- ------------
Other Operating Income:
Service Charges on Deposits......... 174,257 3,502 177,759
Other Operating Income.............. 703,429 3,181 706,610
------------ ---------- ---------- ------------
Total Other Income.................... 877,686 6,683 -- 884,369
------------ ---------- ---------- ------------
Operating Expenses:
Salaries, Wages and Benefits........ 505,075 11,213 516,288
Equipment and Occupancy Expenses.... 122,072 2,879 124,951
Other Operating Expenses............ 494,809 6,871 3,917(3) 505,597
------------ ---------- ---------- ------------
Total Operating Expenses.............. 1,121,956 20,963 3,917 1,146,836
------------ ---------- ---------- ------------
Earnings Before Income Taxes.......... 1,026,264 14,646 (15,101) 1,025,809
Applicable Income Taxes............... 358,035 5,138 (3,915)(5) 359,258
------------ ---------- ---------- ------------
Net Income............................ $ 668,229 $ 9,508 $ (11,186) $ 666,551
============ ========== ========== ============
Average Shares Outstanding: (6)
Basic............................... 459,178,812 6,557,416 459,178,812
Diluted............................. 471,855,758 6,924,548 471,855,758
Earnings Per Share: (6)
Basic............................... $ 1.46 $ 1.45 $ 1.45
Diluted............................. $ 1.43 $ 1.37 $ 1.42
</TABLE>
See accompanying notes to the unaudited pro forma condensed financial
information.
33
<PAGE> 38
FIFTH THIRD BANCORP AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
($000'S, EXCEPT SHARES AND PER SHARE DATA)
The Unaudited Pro Forma Condensed Financial Information is based on the
following adjustments and related assumptions; the actual purchase price
accounting adjustments will be made on the basis of evaluations as of the
effective time of the merger and, therefore, may differ from those reflected in
the Unaudited Pro Forma Condensed Financial Information.
NOTE 1
The purchase accounting adjustments to record this merger used in the
preparation of the Unaudited Pro Forma Condensed Combined Balance Sheet are
summarized below:
<TABLE>
<S> <C>
Shares of Ottawa Financial Corporation as of June 30,
2000...................................................... 6,603,687
Exchange ratio of Fifth Third shares for Ottawa shares...... .54
----------
Shares to be issued from Treasury (acquired under a share
repurchase program commenced September 5, 2000 at an
estimated average cost of $48.25 per share)............... 3,565,991
==========
Shares issued at market value of $44.375 per share (closing
price preceding date of affiliation agreement)............ $ 158,241
Historical net assets acquired.............................. (79,893)
----------
Excess of purchase price over historical net assets
acquired.................................................. $ 78,348
==========
</TABLE>
Each share of Ottawa common stock (excluding treasury shares) 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 any further
action, into the right to receive:
- .54 of a share of Fifth Third common stock if the average closing price
is equal to or greater than $40.75; or
- that number of shares or fraction of a share of Fifth Third common stock
obtained by dividing $22.01 by the average closing price if the average
closing price is less than $40.75.
For purposes of determining the exchange ratio, the average closing price
will be calculated using the average of the closing prices for a share of Fifth
Third common stock on the Nasdaq National Market for the 20 consecutive trading
days ending on the fifth trading day before the effective time of the merger.
The adjustment to capital surplus for the difference in the estimated cost
of the treasury shares and their market value at the date of the affiliation
agreement is $13.8 million.
NOTE 2
The Unaudited Pro Forma Condensed Combined Balance Sheet reflects
additional short-term borrowings of $172.1 million to repurchase the treasury
shares for issuance in this merger transaction, and the Unaudited Pro Forma
Condensed Combined Income Statements reflect the additional interest expense
incurred thereon.
NOTE 3
Since the final determination of adjustments to assets and liabilities will
be made based on the fair values as of the effective time of the merger and
after evaluations of the values are complete, the final amounts may differ from
the estimates provided herein. Goodwill is amortized on a straight-line basis
over 20 years.
34
<PAGE> 39
FIFTH THIRD BANCORP AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION (CONTINUED)
($000'S, EXCEPT SHARES AND PER SHARE DATA)
NOTE 4
The pro forma adjustments impacting shareholders' equity are as follows:
<TABLE>
<S> <C>
Elimination of Ottawa equity................................ $(79,893)
Purchase of 3,565,991 treasury shares for issuance in
connection with merger transaction at an estimated average
cost of $48.25............................................ (172,059)
Issuance of 3,565,991 Fifth Third common shares at a market
value of $44.375.......................................... 158,241
--------
$(93,711)
========
</TABLE>
NOTE 5
Income tax expense on pro forma adjustments is reflected using a 35% tax
rate.
NOTE 6
Share and per share amounts for the year ended December 31, 1999 have been
adjusted to reflect Fifth Third's 3-for-2 stock split effected in the form of a
stock dividend paid July 14, 2000 and Ottawa's 10% stock dividend paid on June
30, 2000.
35
<PAGE> 40
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, 1999 and the six months ended
June 30, 2000 and 1999. This information is based on information contained in
Fifth Third's 1999 Annual Report on Form 10-K for the fiscal year ended December
31, 1999, as well as Fifth Third's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000, which are incorporated by reference into this document.
Financial data for all periods has been restated to reflect the second quarter
1998 mergers with CitFed Bancorp, Inc. and State Savings Company and the fourth
quarter 1999 mergers with CNB Bancshares, Inc. and Peoples Bank Corporation of
Indianapolis. These mergers were accounted for as poolings-of-interest. All
share and per share information has been retroactively adjusted to reflect the
3-for-2 stock splits effected in the form of stock dividends paid on July 14,
2000, April 15, 1998, July 15, 1997 and January 12, 1996.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
------------------------ ------------------------------------------------------------------
2000(1) 1999 1999(2) 1998(3) 1997 1996(4) 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income.......... $1,585,096 $1,309,402 $2,738,082 $2,585,927 $2,477,612 $2,272,049 $1,949,924
Interest expense......... 856,932 617,986 1,333,491 1,315,947 1,304,077 1,189,309 1,045,392
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income...... 728,164 691,416 1,404,591 1,269,980 1,173,535 1,082,740 904,532
Provision for credit
losses................. 47,691 60,662 134,057 123,489 116,946 82,880 54,819
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for credit
losses................. 680,473 630,754 1,270,534 1,146,491 1,056,589 999,860 849,713
Other operating income... 488,224 427,806 877,686 753,544 590,428 494,024 407,160
Operating expenses....... 577,151 520,553 1,121,956 1,066,207 849,902 833,361 675,398
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 591,546 538,007 1,026,264 833,828 797,115 660,523 581,475
Applicable income
taxes.................. 193,089 181,493 358,035 287,316 267,736 217,647 192,458
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income............... $ 398,457 $ 356,514 $ 668,229 $ 546,512 $ 529,379 $ 442,876 $ 389,017
========== ========== ========== ========== ========== ========== ==========
COMMON SHARE DATA:
Earnings per share....... $ 0.86 $ 0.78 $ 1.46 $ 1.21 $ 1.18 $ 0.99 $ 0.91
Earnings per diluted
share.................. 0.85 0.77 1.43 1.19 1.17 0.97 0.88
Cash dividends declared
per share.............. 0.34 0.26 0.59 0.47 0.38 0.33 0.28
Book value at period
end.................... 9.30 8.45 8.80 8.38 7.52 7.02 6.10
Average shares
outstanding (000's).... 464,260 455,515 459,179 452,002 446,796 448,762 428,251
Average diluted shares
outstanding (000's).... 475,406 468,876 471,856 463,127 454,241 458,640 442,878
</TABLE>
---------------
(1) Operating expenses for the first six months of 2000 include $33.5 million of
pretax merger-related and special charges ($23.1 million after tax, or $.05
per diluted share). For comparability, excluding the impact of these
charges, net income, earnings per share and earnings per diluted share would
have been $421.5 million, $.90 and $.89, respectively.
(2) Provision for credit losses and operating expenses for 1999 include $26.2
million and $82.1 million of pretax merger-related charges ($83.8 million
after tax, or $.18 per diluted share). For comparability, excluding the
impact of these charges, net income, earnings per share and earnings per
diluted share would have been $752.0 million, $1.64 and $1.61, respectively.
(3) Provision for credit losses and operating expenses for 1998 include $16.7
million and $121.3 million of pretax merger-related charges ($98.7 million
after tax, or $.21 per diluted share). For comparability, excluding the
impact of these charges, net income, earnings per share and earnings per
diluted share would have been $645.2 million, $1.42 and $1.40, respectively.
(4) Operating expenses for 1996 include the impact of the special SAIF
assessment of $49.6 million pretax ($31.3 million after tax, or $.07 per
diluted share). For comparability, excluding the impact of this assessment,
net income, earnings per share and earnings per diluted share would have
been $474.1 million, $1.05 and $1.03, respectively.
36
<PAGE> 41
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
2000(1) 1999 1999(2) 1998(3) 1997 1996(4) 1995
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION AT PERIOD
END:
Securities................... $15,198,112 $12,740,248 $12,816,671 $11,305,815 $10,530,928 $10,145,613 $ 7,476,140
Loans and leases............. 26,078,254 23,700,856 24,963,620 22,356,524 21,898,954 20,207,880 18,422,675
Assets....................... 44,723,932 39,987,015 41,589,512 37,092,266 35,180,173 33,135,051 28,301,971
Deposits..................... 27,459,776 25,601,981 26,083,560 24,495,784 24,289,566 23,306,020 20,825,573
Short-term borrowings........ 9,063,624 6,717,762 8,374,133 4,514,636 4,391,386 4,263,311 2,474,043
Long-term debt and
convertible subordinated
notes...................... 2,459,503 2,782,464 1,976,272 3,236,090 2,305,341 1,795,069 1,781,708
Shareholders' equity......... 4,324,949 3,865,742 4,077,031 3,795,054 3,358,540 3,135,413 2,658,637
RATIOS:
PROFITABILITY RATIOS:
Return on average assets..... 1.92% 1.88% 1.89% 1.78% 1.57% 1.52% 1.47%
Return on average
shareholders' equity....... 20.1% 18.8% 19.0% 18.2% 17.2% 16.3% 15.9%
Net interest margin.......... 3.78% 4.12% 3.99% 3.93% 3.86% 3.83% 3.76%
Overhead ratio(5)............ 43.1% 45.2% 44.1% 45.3% 46.8% 48.3% 50.1%
Other operating income to
total income(6)............ 40.1% 38.1% 38.4% 36.9% 33.2% 30.9% 30.6%
Dividend payout.............. 40.0% 34.6% 41.0% 39.8% 32.4% 33.6% 32.3%
CAPITAL RATIOS:
Average shareholders' equity
to average assets.......... 9.57% 10.00% 9.95% 9.80% 9.16% 9.28% 9.24%
Tier 1 risk-adjusted
capital.................... 12.63% 11.98% 12.16% 12.47% 11.28% 11.84% 11.75%
Total risk-adjusted
capital.................... 14.43% 14.35% 14.00% 14.44% 13.44% 14.31% 14.67%
Tier 1 leverage.............. 10.06% 9.86% 9.81% 10.09% 9.15% 8.84% 9.28%
RATIO OF EARNINGS TO FIXED
CHARGES:(7)
Including deposit interest... 1.69x 1.86x 1.76x 1.63x 1.61x 1.55x 1.55x
Excluding deposit interest... 2.87x 3.46x 3.12x 3.00x 3.12x 3.23x 3.20x
CREDIT QUALITY RATIOS:
Reserve for credit losses to
nonperforming assets....... 483.00% 394.87% 474.06% 364.44% 265.41% 228.08% 206.69%
Reserve for credit losses to
loans and leases
outstanding................ 1.47% 1.48% 1.47% 1.48% 1.43% 1.41% 1.47%
Net charge-offs to average
loans and leases
outstanding................ 0.25% 0.38% 0.36% 0.47% 0.43% 0.40% 0.23%
Nonperforming assets to
loans, leases and other
real estate owned.......... 0.30% 0.37% 0.31% 0.41% 0.54% 0.62% 0.71%
</TABLE>
---------------
(1) Operating expenses for the first six months of 2000 exclude merger-related
and special charges totaling $33.5 million pretax ($23.1 million after tax,
or $.05 per diluted share). For comparability, including the impact of these
charges, return on average assets, return on average equity and the overhead
ratio were 1.82%, 19.0% and 45.8%, respectively.
(2) Provision for credit losses and operating expenses exclude $26.2 million and
$82.1 million of pretax merger-related charges ($83.8 million after tax, or
$.18 per diluted share). For comparability, including the impact of these
charges, return on average assets, return on average equity and the overhead
ratio were 1.68%, 16.9% and 47.6%, respectively.
(3) Provision for credit losses and operating expenses exclude $16.7 million and
$121.3 million of pretax merger-related charges ($98.7 million after tax, or
$.21 per diluted share). For comparability, including the impact of these
charges, return on average assets, return on average equity and the overhead
ratio were 1.51%, 15.4% and 51.1%, respectively.
(4) Operating expenses for 1996 exclude the impact of the special SAIF
assessment of $49.6 million pretax ($31.3 million after tax, or $.07 per
diluted share). For comparability, including the impact of this assessment,
return on average assets, return on average equity and the overhead ratio
were 1.42%, 15.3% and 51.4%, respectively.
(5) Operating expenses divided by the sum of taxable-equivalent net interest
income and other operating income.
(6) Other operating income excluding securities gains and losses as a percent of
net interest income and other operating income excluding securities gains
and losses.
(7) 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.
37
<PAGE> 42
SELECTED HISTORICAL FINANCIAL DATA OF OTTAWA
The following table sets forth certain historical financial data concerning
Ottawa for the five years ended December 31, 1999 and the six months ended June
30, 2000 and 1999. This information is based on information contained in
Ottawa's 1999 Annual Report on Form 10-K for the fiscal year ended December 31,
1999, as well as Ottawa's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000, which are incorporated by reference in this document. All share
and per share information has been retroactively adjusted to reflect the 10%
stock dividends paid on June 30, 2000, June 30, 1999, August 31, 1998 and
September 30, 1997.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
------------------------ ------------------------------------------------------------------
2000 1999 1999 1998 1997 1996(1) 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income.......... $ 38,444 $ 33,481 $ 68,978 $ 67,904 $ 64,726 $ 54,669 $ 25,579
Interest expense......... 23,560 18,851 38,882 40,012 37,704 30,531 11,321
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income...... 14,884 14,630 30,096 27,892 27,022 24,138 14,258
Provision for credit
losses................. 675 555 1,170 930 660 564 160
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for credit
losses................. 14,209 14,075 28,926 26,962 26,362 23,574 14,098
Other operating income... 3,220 3,470 6,683 7,811 4,146 3,328 2,093
Operating expenses (2)... 10,447 10,675 20,963 21,092 18,708 21,844 10,651
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 6,982 6,870 14,646 13,681 11,800 5,058 5,540
Applicable income
taxes.................. 2,484 2,495 5,138 5,013 4,273 1,964 1,911
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income............... $ 4,498 $ 4,375 $ 9,508 $ 8,668 $ 7,527 $ 3,094 $ 3,629
========== ========== ========== ========== ========== ========== ==========
COMMON SHARE DATA:
Earnings per share....... $ 0.70 $ 0.67 $ 1.45 $ 1.32 $ 1.10 $ 0.42 $ 0.47
Earnings per diluted
share.................. 0.67 0.63 1.37 1.19 1.01 0.41 0.47
Cash dividends declared
per share.............. 0.23 0.19 0.41 0.32 0.27 0.23 0.21
Book value at period
end.................... 12.10 11.32 11.61 11.14 10.79 10.14 9.85
Average shares
outstanding (000's).... 6,459,594 6,572,096 6,557,416 6,578,215 6,855,184 7,390,924 7,648,529
Average diluted shares
outstanding (000's).... 6,731,192 6,958,815 6,924,548 7,293,697 7,465,659 7,567,490 7,694,852
</TABLE>
---------------
(1) Significant variation from prior years due primarily to the acquisition of
AmeriBank Federal Savings Bank in February 1996, which was accounted for as
a purchase.
(2) Operating expenses for 1996 include the impact of the special SAIF
assessment of $3.5 million pretax ($2.3 million after tax, or $.31 per
diluted share). For comparability, excluding the impact of this assessment,
net income, earnings per share and earnings per diluted share would have
been $5.4 million, $0.73 and $0.71, respectively.
38
<PAGE> 43
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------------- ------------------------------------------------------
2000 1999 1999 1998 1997 1996(1) 1995
---------- -------- ---------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION AT PERIOD END:
Securities............................ $ 81,361 $ 91,903 $ 92,838 $ 83,428 $ 64,616 $ 69,864 $ 66,926
Loans and leases...................... 947,128 782,957 861,473 773,593 750,716 718,680 277,708
Assets................................ 1,084,624 928,856 1,017,168 938,030 885,817 848,306 370,305
Deposits.............................. 738,089 677,859 711,954 693,632 654,560 622,492 243,220
Short-term borrowings................. 74,159 32,828 102,828 61,405 70,500 62,712 7,571
Long-term debt and convertible
subordinated notes.................. 178,125 128,125 115,125 98,863 74,958 78,458 35,670
Shareholders' equity.................. 79,893 77,969 77,832 73,407 76,363 76,917 79,560
RATIOS:
PROFITABILITY RATIOS:
Return on average assets.............. 0.86% 0.93% 1.00% 0.94% 0.87% 0.72% 1.08%
Return on average shareholders'
equity.............................. 11.54% 11.56% 12.41% 11.49% 9.93% 6.83% 4.62%
Net interest margin................... 3.01% 3.36% 3.37% 3.26% 3.37% 3.50% 4.44%
Overhead ratio (2).................... 57.75% 59.08% 56.95% 60.20% 60.66% 66.75% 65.14%
Other operating income to total income
(3)................................. 17.8% 19.2% 18.2% 21.9% 12.9% 12.1% 14.9%
Dividend payout....................... 34.3% 30.2% 29.9% 26.9% 26.7% 56.1% 44.7%
CAPITAL RATIOS:
Average shareholders' equity to
average assets...................... 7.48% 8.08% 8.02% 8.15% 8.73% 9.09% 22.62%
Tier 1 risk-adjusted capital (4)...... 9.35% 9.91% 9.50% 9.60% 10.70% 9.80% 14.40%
Total risk-adjusted capital (4)....... 10.04% 10.61% 10.20% 10.30% 11.30% 10.40% 15.00%
Tier 1 leverage (4)................... 6.67% 6.71% 6.70% 6.30% 6.80% 6.20% 9.82%
RATIO OF EARNINGS TO FIXED CHARGES
(5):
Including deposit interest............ 1.30x 1.36x 1.38x 1.34x 1.31x 1.17x 1.49x
Excluding deposit interest............ 1.99x 2.51x 2.43x 2.42x 2.42x 1.92x 5.32x
CREDIT QUALITY RATIOS:
Reserve for credit losses to
nonperforming loans................. 168.08% 240.12% 359.21% 119.51% 118.62% 109.89% 51.38%
Reserve for credit losses to loans and
leases outstanding.................. 0.55% 0.55% 0.55% 0.49% 0.44% 0.44% 0.45%
Net charge-offs to average loans and
leases outstanding.................. * * * * * * *
Nonperforming assets to total
assets.............................. 0.33% 0.27% 0.21% 0.43% 0.36% 0.36% 0.76%
</TABLE>
---------------
* Less than 0.10%
(1) Operating expenses for 1996 exclude the impact of the special SAIF
assessment of $3.5 million pretax ($2.3 million after tax, or $.31 per
diluted share). For comparability, including the impact of this assessment,
return on average assets, return on average equity and the overhead ratio
were .41%, 3.93% and 79.56%, respectively.
(2) Operating expenses divided by the sum of net interest income and other
operating income (excluding loan and securities gains and losses).
(3) Other operating income excluding securities gains and losses as a percent of
net interest income and other operating income excluding securities gains
and losses.
(4) Regulatory capital ratios relate to AmeriBank only and do not reflect the
consolidated capital ratios of Ottawa.
(5) Earnings represent income before income taxes plus fixed charges. Fixed
charges include interest expense.
39
<PAGE> 44
DESCRIPTION OF CAPITAL STOCK AND COMPARATIVE
RIGHTS OF SHAREHOLDERS
Fifth Third is a corporation organized under the laws of the State of Ohio.
Ottawa is a corporation organized under the laws of the State of Delaware.
Fifth Third is authorized to issue 650,000,000 shares of Fifth Third common
stock, no par value, and 500,000 shares of preferred stock, no par value. As of
June 30, 2000, Fifth Third had outstanding 464,944,695 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 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.
Ottawa is authorized to issue 8,000,000 shares of Ottawa common stock, $.01
par value per share, and 4,000,000 shares of Ottawa preferred stock, $.01 par
value per share. As of October 2, 2000, Ottawa had outstanding 6,724,105 shares
of Ottawa common stock and no shares of Ottawa preferred stock. Pursuant to
Ottawa's certificate of incorporation, the board of directors of Ottawa may,
without further action of the shareholders, divide the Ottawa preferred stock
into one or more series and fix the voting powers and the designations,
preferences, rights, and the qualification, limitations and restrictions of such
series.
Set forth below is a description of Fifth Third common stock and Ottawa
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 Ohio law and of the certificate of incorporation and bylaws of Ottawa
and Delaware law and are qualified in their entirety by reference to these
documents.
VOTING RIGHTS
Holders of both Fifth Third common stock and Ottawa common stock are
generally entitled to one vote per share on all matters submitted to a vote of
shareholders.
Ottawa's certificate of incorporation, however, provides that a shareholder
who beneficially owns more than 10% of the outstanding shares of common stock of
Ottawa may not vote those shares which exceed 10% of the outstanding shares of
common stock of Ottawa.
Fifth Third's code of regulations 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.
The Ottawa board is also classified. The Ottawa board is divided into three
classes, with the current board consisting of two classes containing three
directors each and one class containing four directors; and the election of each
class of directors constitutes a separate election. Directors serve for terms of
three years and until their respective successors are duly elected and
qualified. As a result of the classification of the Ottawa board, a minimum of
two annual meetings of shareholders would be necessary for a majority of the
members of the Ottawa board to stand for election.
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 Fifth Third preferred stock, including conversion
rights. Accordingly, Fifth Third's board of directors may authorize the
conversion of shares of
40
<PAGE> 45
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.
Subject to the board's fiduciary duties, Fifth Third could issue convertible
preferred stock with the purpose or effect of deterring or preventing a takeover
of Fifth Third.
Ottawa's certificate of incorporation contains a similar provision that
could be utilized with a similar purpose or effect. As stated above, Ottawa is
authorized to issue 4,000,000 shares of Ottawa preferred stock, and its board of
directors may designate various characteristics and rights of Ottawa preferred
stock, including conversion rights. Accordingly, Ottawa's board of directors may
authorize the conversion of shares of Ottawa preferred stock into any number of
shares of Ottawa common stock and thus dilute the outstanding shares of Ottawa
common stock. Pursuant to the affiliation agreement, Ottawa has agreed not to
issue any shares of Ottawa preferred 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 the corporation if (1)
written notice is given by any shareholder of the 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 the shareholder desires that voting for the election of
directors be cumulative, and (2) announcement of the giving of this notice is
made upon the convening of the meeting by the chairman or the secretary or by or
on behalf of the shareholder giving the notice. In this event, each shareholder
will be entitled to cumulate the 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 these 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.
Ottawa shareholders do not have a right to vote cumulatively in the
election of directors. Therefore, each share of Ottawa common stock is entitled
to one vote in the election of any director.
DIVIDENDS
Holders of Fifth Third common stock and Ottawa common stock are each
entitled to dividends as and when declared by the respective boards of directors
of each institution out of funds legally available for the payment of dividends.
Fifth Third and Ottawa have, in the past, declared and paid dividends on a
quarterly basis, and intend to continue to do so in the immediate future in such
amounts as their respective boards of directors shall determine.
Most of the revenues of Fifth Third and Ottawa available for payment of
dividends derive from amounts paid to each corporation by its respective
subsidiaries. Under applicable banking law, the total 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 the bank's net profits and
retained net profits for the preceding two years. Neither any affiliate of
Ottawa nor any affiliate of Fifth Third has ever been prohibited from declaring
dividends or restricted in paying any dividends declared.
If, in the opinion of the applicable regulatory authority, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), the authority
may require, after notice and hearing, that the 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 Federal Deposit Insurance Corporation 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 or
savings association under
41
<PAGE> 46
their jurisdiction. Compliance with the standards set forth in these guidelines
could limit the amount of dividends which Fifth Third and Ottawa, and their
respective affiliates, may pay in the future.
PREEMPTIVE RIGHTS
Neither shareholders of Fifth Third nor shareholders of Ottawa have
preemptive rights.
RIGHTS UPON LIQUIDATION
In the event of any liquidation, dissolution or winding up of Fifth Third
or Ottawa, so long as neither corporation has issued preferred stock, the
holders of Fifth Third common stock and Ottawa common stock would be entitled to
receive, after payment or provision for payment of all debts and liabilities of
Fifth Third or Ottawa (including the payment of all fees, taxes and other
expenses incidental thereto), the remaining assets of Fifth Third or Ottawa
available for distribution. If Fifth Third preferred stock or Ottawa preferred
stock is issued, the holders of such preferred stock may have priority over the
holders of common stock in the event of liquidation or dissolution.
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.
Ottawa's certificate of incorporation provides for the indemnification of
each director and officer of the corporation, to the fullest extent permitted by
Delaware 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 of Ottawa or serving at the request of Ottawa as a
director or officer of another corporation.
Under Delaware law, subject to certain exceptions, a director is protected
from monetary liability for breaches of his or her duty of care. Delaware law
provides for such a limitation on director liability if the certificate of
incorporation contains a provision to that effect. The Ottawa certificate of
incorporation contains such a provision. Such a provision does not, however,
eliminate or limit director liability for a breach of the director's duty of
loyalty to the corporation or its shareholders or for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, for willful or negligent conduct in paying dividends or repurchasing stock
out of other than legally available funds, or for any transaction from which the
director derived an improper personal benefit. The grant of indemnification in
the context of a derivative or other comparable suit may have a circular effect,
inasmuch as any damages recovered in such action will be offset by the cost of
indemnification. If the merger is consummated, Fifth Third will assume all such
obligations of Ottawa for the indemnification of its officers and directors. See
"Proposal -- Merger of Ottawa Into Fifth Third -- Interests of Certain Persons
in the Merger."
Neither Fifth Third nor Ottawa have any additional indemnification
agreements with their directors or executive officers.
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. These
applications must set forth the purpose or purposes of the meeting. Special
meetings of Ottawa's shareholders may be called at any time by a majority of the
entire board of directors of Ottawa.
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 Fifth Third's code of regulations.
42
<PAGE> 47
Ottawa's bylaws provide that the holders of at least one-third of all shares
entitled to vote at the meeting shall constitute a quorum, except where a larger
number is required by law.
QUALIFICATION OF DIRECTORS
Ottawa's bylaws provide that any person who has reached the age of 75 years
is not eligible for election to the Ottawa board of directors and that no
director shall serve beyond the annual meeting of Ottawa in the year in which
the director becomes 75. A director's term will be adjusted, if necessary, to
expire in the year the director turns 75. This limitation does not apply to
directors who have served on the board of AmeriBank (then known as Ottawa
Savings Bank, FSB) since 1990 or to an emeritus director. Fifth Third does not
have any similar provisions.
REMOVAL OF DIRECTORS
Ohio law provides that the directors may remove any director: (1) if by
order of court he has been found to be of unsound mind, or if he is adjudicated
a bankrupt; or (2) if within sixty days, or within such other period of time as
is prescribed in the articles or the regulations, from the date of his election
he does not qualify by accepting in writing his election to the office or by
acting at a meeting of the directors, and by acquiring the qualifications
specified in the articles or the regulations; or if, for such period as is
prescribed in the articles or the regulations, he ceases to hold the required
qualifications.
Where, as in the case of Fifth Third, the shareholders have a right to vote
cumulatively in the election of directors, then, unless the articles or the
regulations expressly provide that no director may be removed from office or
that removal of directors requires a greater vote than that specified in this
division, all the directors, all the directors of a particular class, or any
individual director may be removed from office, without assigning any cause, by
the vote of the holders of a majority of the voting power entitling them to
elect directors in place of those to be removed, except that, unless all the
directors, or all the directors of a particular class, are removed, no
individual director shall be removed if the votes of a sufficient number of
shares are cast against his removal that, if cumulatively voted at an election
of all the directors, or all the directors of a particular class, as the case
may be, would be sufficient to elect at least one director.
Fifth Third's code of regulations provide that no director shall be removed
without cause during his term of office and that any director may be removed for
cause at any time by the action of the holders of record of a majority of the
outstanding shares of Fifth Third common stock entitled to vote thereon at a
meeting of the shareholders, and the vacancy in the board of directors caused by
such removal may be filled by action of the shareholders at such meeting or any
subsequent meeting.
The Delaware General Corporation Law provides that directors serving on a
classified board may be removed only for cause unless the corporation's charter
provides otherwise. Under the Ottawa certificate of incorporation, subject to
the rights of the holders of any series of preferred stock then outstanding, any
directors, or the entire board of directors, may be removed from office at any
time, but only for cause and only by affirmative vote of the holders of at least
80% of the voting power of all of the then-outstanding shares of capital stock
of Ottawa entitled to vote generally in the election of directors, voting
together as a single class.
AMENDMENT TO CHARTER DOCUMENTS
Ohio law provides that except in certain circumstances, amendments to a
corporation's articles of incorporation must be adopted by the affirmative vote
of the holders of shares entitling them to exercise two-thirds of the voting
power of the corporation on the proposal or, if the articles provide or permit,
by the affirmative vote of a greater or lesser proportion, but not less than a
majority, of this voting power, and by such affirmative vote of the holders of
shares of any particular class as is required by the articles.
Except for amendments by the Fifth Third board of directors concerning the
fixing of the terms of any series of Fifth Third preferred stock, Fifth Third's
articles of incorporation contain no other provisions concerning amendments.
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Amendments to Ottawa's certificate of incorporation must be approved by a
majority of its board of directors present at a meeting and also by a majority
of the outstanding shares of Ottawa's voting stock, provided, however, that
approval by at least 80% of the outstanding voting stock is generally required
for certain provisions (i.e., provisions relating to amendment of the
certificate of incorporation; actions with interested shareholders; issuance or
designation of preferred stock; voting by 10% shareholders; number,
classification, election and removal of directors; amendment of bylaws; call of
special shareholder meetings; advance notice for shareholder proposals; offers
to acquire and acquisitions of control; director liability; certain business
combinations; a liquidation or dissolution of Ottawa; power of indemnification;
and amendments to provisions relating to the foregoing).
Ohio law provides that the code of regulations of a corporation may be
amended, or new regulations may be adopted, by the shareholders at a meeting
held for that purpose, by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of the corporation on
the proposal, or may be amended, or new regulations may be adopted, without a
meeting by the written consent of the holders of shares entitling them to
exercise two-thirds of the voting power on the proposal, or if the articles or
regulations so provide or permit, by the affirmative vote or written consent of
the holders of shares entitling them to exercise a greater or lesser proportion
but not less than a majority of the voting power.
Fifth Third's code of regulations provide that, except for certain
provisions regarding the election and removal of directors (which may only be
amended by the vote or consent of two-thirds of the voting power of Fifth
Third), the Fifth Third code of regulations may be altered, amended or repealed
at a meeting held for this purpose by the affirmative vote of the holders of
shares of Fifth Third common stock entitling them to exercise a majority of the
voting power or may be adopted without a meeting by the written consent of the
holders of shares of Fifth Third common stock entitling them to exercise
two-thirds of the voting power.
The Ottawa bylaws may be amended by a majority vote of its board of
directors or the affirmative vote of at least 80% of the total votes eligible to
be voted at a duly constituted meeting of its shareholders.
VACANCIES ON THE BOARD OF DIRECTORS
Ohio law provides that, unless the articles or the regulations otherwise
provide, the remaining directors, though less than a majority of the whole
authorized number of directors, may, by the vote of a majority of their number,
fill any vacancy in the board for the unexpired term. A vacancy exists if the
shareholders increase the authorized number of directors but fail at the meeting
at which the increase is authorized, or an adjournment of that meeting, to elect
the additional directors provided for, or if the shareholders fail at any time
to elect the whole authorized number of directors. In case of any removal of a
director pursuant to clause (3) in "-- Removal of Directors" above, a new
director may be elected at the same meeting for the unexpired term of each
director removed. Failure to elect a director to fill the unexpired term of any
director removed is deemed to create a vacancy in the board.
Fifth Third's code of regulations provide that, except for vacancies
created by the removal of a director (which is filled as stated above in "--
Removal of Directors"), in the case of any increase in the number of directors,
or any vacancy created by the death, resignation or otherwise of a director, the
additional director or directors may be elected, or, as the case may be, the
vacancy or vacancies may be filled either: (1) by the Fifth Third board of
directors at any meeting by the affirmative vote of a majority of the remaining
directors (though less than a quorum), or (2) by the holders of Fifth Third
common stock entitled to vote thereon, either at an annual meeting of
shareholders or at a special meeting called for that purpose.
Ottawa's certificate of incorporation and bylaws provide that, subject to
the rights of the holders of any class or series of preferred stock then
outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the board of directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office, even though less than a quorum, and directors so chosen shall
hold office for a term expiring at the annual meeting of shareholders at which
the term of office of the class to which they have been elected expires, and
until such director's successor has been duly elected and qualified. No
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decrease in the number of authorized directors constituting the Ottawa board
will shorten the term of any incumbent director.
ADVANCE NOTICE REQUIREMENTS FOR NEW BUSINESS AND NOMINATIONS OF DIRECTORS AT
MEETINGS OF SHAREHOLDERS
Ottawa's bylaws contain special procedures for shareholders to bring
business before an annual meeting of shareholders, for any business to be
brought before a special meeting of shareholders and for the election of
directors.
Under Ottawa's bylaws, the only business which may be conducted at an
annual meeting of shareholders is that business brought before the meeting by
the board of directors or by any shareholder who is entitled to vote and who
complied with the notice procedures set forth in Ottawa's bylaws. For business
to be brought before an annual meeting by a shareholder, the shareholder must
have given timely notice in writing to the Secretary of Ottawa. To be timely, a
shareholder's notice must be delivered or mailed to and received at the
principal executive offices of Ottawa not less than 90 days prior to the
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than twenty
days, or delayed by more than sixty days from such anniversary date, notice by
the shareholder to be timely must be so delivered not later than the close of
business on the later of the 90th day prior to such annual meeting or the 10th
day following the day on which notice of the date of the annual meeting was
mailed or public announcement of the date of such meeting is first made.
A shareholder's notice to the Secretary must set forth as to each matter
the shareholder proposes to bring before the annual meeting:
- a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting,
- the name and address, as they appear on Ottawa's books, of the
shareholder who proposed such business,
- the class and number of shares of Ottawa's capital stock that are
beneficially owned by the shareholder, and
- any material interest of such shareholder in such business.
At any special meeting of the shareholders, the only business that may be
conducted is business brought before the meeting by or at the direction of the
board of directors.
Ottawa's bylaws also provide that nominations for election to the Ottawa
board of directors may be made only by the board of directors or by any
shareholder entitled to vote for the election of directors who complies with the
notice procedures set forth in Ottawa's bylaws. Such nominations, other than
those made by the board of directors, must be made by timely notice in writing
to the Secretary of Ottawa. To be timely, a shareholder's notice must be
delivered or mailed to and received at the principal executive offices of Ottawa
not less than 90 days prior to the date of the meeting; provided, however, that
in the event that less than 100 days' notice of the date of the meeting is first
given or made to shareholders, notice by the shareholder must be received no
later than the close of business on the 10th day following the day on which the
notice of the date of the meeting was mailed or public announcement was first
made.
The shareholder's notice must set forth, as to each person the shareholder
proposes to nominate for election or re-election as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including
the nominee's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); as well as the name and address of the
shareholder, as they appear on Ottawa's books, and the class and number of
shares Ottawa's capital stock that are beneficially owned by the shareholder.
Fifth Third does not have any similar provisions.
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SUBSCRIPTION, CONVERSION, REDEMPTION RIGHTS; STOCK NONASSESSABLE
Neither Fifth Third common stock nor Ottawa 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
Ottawa 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.
APPROVAL OF MERGERS, CONSOLIDATIONS OR SALE OF ASSETS
A merger, consolidation or disposition of all or substantially all of Fifth
Third's assets requires approval by a two-thirds vote of the outstanding voting
shares of Fifth Third common stock. A merger, consolidation or disposition of
all or substantially all of Ottawa's assets requires approval of only a majority
of the outstanding voting shares of Ottawa common stock.
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-of-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 preferred stock
may have the effect of delaying, deferring or preventing a change-of-control of
Fifth Third. Fifth Third's classified board of directors may also make it more
difficult for a shareholder to acquire immediate control of Fifth Third.
Additionally, Ohio law contains provisions which would also make more difficult
a change-of-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% 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.
"Interested shares" are defined under the Ohio Control Share Acquisition
Act to mean shares in respect of which the voting power is controlled by any of
the following persons: (1) an acquiring person; (2) any officer of the Ohio
issuing public corporation; or (3) any employee who is also a director of the
Ohio issuing public corporation. "Interested shares" also include shares of the
Ohio issuing public corporation common stock that are acquired by any person
after the date of the first public disclosure of the proposed merger and
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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 (1) increase the proportionate share ownership
of an interested shareholder, (2) 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 (3) 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: (1) 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, (2) 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 (3) 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 10% 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 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.
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The certificates of incorporation and bylaws of Ottawa also contain various
provisions which could make more difficult a change-in-control of Ottawa or
discourage a tender offer or other plan to restructure Ottawa. The ability of
Ottawa to issue shares of Ottawa preferred stock may have the effect of
delaying, deferring or preventing a change-in-control of Ottawa. Ottawa's
classified board of directors and voting prohibition on 10% shareholders may
also make it more difficult for a shareholder to acquire immediate control of
Ottawa. Additionally, Delaware law contains provisions which would also make
more difficult a change-in-control of Ottawa or discourage a tender offer or
other plan to restructure Ottawa. The following discussion of some of these
provisions is qualified in its entirety by reference to those particular
statutory and regulatory provisions.
DELAWARE PROVISIONS REGARDING BUSINESS COMBINATIONS. In connection with
certain "Business Combinations" (as defined below) and related transactions
between Ottawa and an "Interested Shareholder" (which generally includes any
person or entity owning or controlling more than 10% of the outstanding voting
stock of Ottawa), the Ottawa certificate of incorporation provides that any
Business Combination involving any Interested Shareholder must be approved by at
least 80% of the voting power of all outstanding shares of voting stock, voting
together as a single class, unless the transaction is either authorized by a
majority of the directors of Ottawa who are unaffiliated with the Interested
Shareholder and who were directors prior to the time that the Interested
Shareholder became an Interested Shareholder, or meets certain fair price
requirements. If the Ottawa board gives such approval or such fair price
requirements are met, only the affirmative vote of the majority of the
outstanding stock voting as a single class (or such other vote as may be
required by law or Ottawa's certificate of incorporation) would be required.
The Ottawa certificate of incorporation generally defines Business
Combination as:
- any merger or consolidation of Ottawa or any of its subsidiaries with any
Interested Shareholder;
- any sale, lease, exchange, mortgage, pledge, transfer, or other
disposition to or with an Interested Shareholder of any assets of Ottawa
having an aggregate fair market value equal to or exceeding 25% or more
of the combined assets of Ottawa and its subsidiaries;
- the issuance or transfer by Ottawa or any subsidiary of any securities to
any Interested Shareholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair market value
equal to or exceeding 25% of the combined assets of Ottawa and its
subsidiaries, except pursuant to an employee benefit plan of Ottawa or
any subsidiary;
- the adoption of any plan or proposal for the liquidation or dissolution
of Ottawa proposed by, or on behalf of, an Interested Shareholder; or
- any reclassification, recapitalization, merger or consolidation of Ottawa
with any of its subsidiaries or any other transaction that would have the
effect of increasing the voting power of an Interested Shareholder.
Under Delaware law, absent such a super majority voting provision, Business
Combinations, including mergers, consolidations and sales of substantially all
of the assets of Ottawa must be approved by the vote of the holders of a
majority of the outstanding shares of Ottawa common stock, subject to certain
exceptions. The increased shareholder vote required to approve a Business
Combination may have the effect of foreclosing mergers and other business
combinations which a majority of shareholders deem desirable and may place the
power to prevent such a merger or combination in the hands of a minority of
shareholders.
Delaware's anti-takeover provisions are embodied in Section 203 of the
Delaware General Corporation Law. Section 203 provides that certain "business
combinations" between a Delaware corporation whose stock generally is publicly
traded or held of record by more than 2,000 shareholders and an "interested
shareholder" are prohibited for a three-year period following the date that such
shareholder became an interested shareholder, unless:
- the corporation has elected in its certificate of incorporation not to be
governed by Section 203,
- the business combination was approved by the board of directors of the
corporation before the other party to the business combination became an
interested shareholder,
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- upon consummation of the transaction that made it an interested
shareholder, the interested shareholder owned at least 85% of the voting
stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also
officers or held in employee benefit plans in which the employees do not
have a confidential right to tender or vote stock held by the plan) or
- the business combination was approved by the board of directors of the
corporation and ratified by two-thirds of the voting stock which the
interested shareholder did not own.
The three-year prohibition also does not apply to certain business
combinations proposed by an interested shareholder following the announcement or
notification of certain extraordinary transactions involving the corporation and
a person who had not been an interested shareholder during the previous three
years or who became an interested shareholder with the approval of the majority
of the corporation's directors.
The term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an interested shareholder,
transactions with an interested shareholder involving the assets or stock of the
corporation or its majority-owned subsidiaries and transaction which increase an
interested shareholder's percentage ownership of stock. The term "interested
shareholder" is defined generally as a shareholder who, together with affiliates
and associates, owns (or, within three years prior, did own) 15% or more of a
Delaware corporation's voting stock. Section 203 could prohibit or delay a
merger, takeover or other change in control of the Company and therefore could
discourage attempts to acquire the Company. The Ottawa certificate of
incorporation does not contain a provision electing not to be governed by
Section 203.
CONSIDERATION OF NON-SHAREHOLDER INTERESTS
Ohio law provides that a director, in determining what he reasonably
believes to be in the best interests of the corporation, shall consider the
interests of the corporation's shareholders and, in his discretion, may consider
any of the following: (1) the interests of the corporation's employees,
suppliers, creditors, and customers; (2) the economy of the state and nation;
(3) community and societal considerations; and (4) the long-term as well as
short-term interests of the corporation and its shareholders, including the
possibility that these interests may be best served by the continued
independence of the corporation.
Ottawa's certificate of incorporation provides that, when evaluating an
offer from another person such as a tender offer, merger or acquisition, the
board of directors may consider all relevant factors including, without
limitation, the social and economic effect of acceptance of such offer on:
- Ottawa's customers, employees and those of its subsidiaries;
- the communities in which Ottawa and its subsidiaries operate or are
located;
- the ability of Ottawa to fulfill its corporate objectives as a financial
institution holding company; and
- the ability of AmeriBank to fulfill the objectives of a federally insured
financial institution under applicable statutes and regulations.
REGULATION OF FINANCIAL INSTITUTIONS
Ottawa is a unitary savings and loan holding company and AmeriBank is a
Michigan chartered savings bank. Fifth Third is a financial holding company
registered under the Bank Holding Company Act and Fifth Third Bank, Indiana is a
Michigan chartered banking corporation. In the merger, Fifth Third will acquire
the assets of Ottawa and Fifth Third Bank, Indiana will acquire the assets of
AmeriBank. The following is a discussion of some of the regulatory requirements
applicable to bank holding companies, financial holding companies, banks and
savings banks. To the extent that the following information describes statutory
and regulatory provisions, it is qualified in its entirety by reference to the
particular statutory and regulatory provisions. In addition to being governed by
federal and state laws specifically governing bank holding
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companies, financial holding companies, banks and savings banks, Fifth Third and
each of its depository subsidiaries that are chartered under state law are also
governed by the corporate law of their state of incorporation to the extent
these laws do not conflict with the laws specifically governing bank holding
companies, financial holding companies, banks and savings banks.
HOLDING COMPANY REGULATION
BANK HOLDING COMPANIES IN GENERAL. As a bank holding company, Fifth Third
is registered with and subject to regulation by the Federal Reserve Board. A
bank holding company is required to file with the Federal Reserve Board an
annual report and such additional information as the Federal Reserve Board may
require pursuant to the Bank Holding Company Act. The Federal Reserve Board also
may make examinations of a holding company and each of its subsidiaries.
The Bank Holding Company Act 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.
FINANCIAL HOLDING COMPANIES. The Gramm-Leach-Bliley Act, which became law
on November 12, 1999, establishes a comprehensive framework to permit
affiliations among commercial banks, insurance companies, securities firms and
other financial service providers by revising and expanding the Act framework to
permit a holding company system, such as Fifth Third, to engage in a full range
of financial activities through a new entity known as a financial holding
company. Fifth Third has elected to be treated as a financial holding company.
"Financial activities" are broadly defined to include not only banking,
insurance, and securities activities, but also merchant banking and additional
activities that the Federal Reserve Board, in consultation with the Secretary of
the Treasury, determines to be financial in nature. These activities are
incidental to such financial activities or complementary activities that do not
pose a substantial risk to the safety and soundness of depository institutions
or the financial system in general. In sum, the Gramm-Leach-Bliley Act is
intended to permit bank holding companies that qualify and elect to be treated
as a financial holding company to engage in a significantly broader range of
activities described above that are not so treated.
In order to elect to become a financial holding company and engage in the
new activities, a bank holding company must meet certain tests and file an
election form with the Federal Reserve Board, which generally is acted on within
thirty days. To qualify, all of a bank holding company's subsidiary banks must
be well-capitalized and well-managed, as measured by regulatory guidelines. In
addition, to engage in the new activities each of the bank holding company's
banks must have been rated "satisfactory" or better in its most recent Federal
Community Reinvestment Act evaluation. Furthermore a bank holding company that
elects to be treated as a financial holding company may face significant
consequences if its banks fail to maintain the required capital and management
ratings including entering into an agreement with the Federal Reserve Board
which imposes limitations on its operations and may even require divestitures.
Such possible ramifications may limit the ability of a bank subsidiary to
significantly expand or acquire less than well-capitalized and well-managed
institutions.
ACQUISITIONS BY BANK HOLDING COMPANIES; BANK MERGERS. Section 4 of the Bank
Holding Company Act permits bank holding companies to conduct activities and
acquire companies engaged solely in activities the Federal Reserve Board has
determined by regulation to be closely related to banking and a proper incident
thereto, including savings associations. Section 4 also permits financial
institution holding companies to engage in financial activities and acquire
companies engaged in financial activities. A bank holding company or financial
holding company must file notice with the Federal Reserve Board in connection
with any activity or acquisition that is permissible under Section 4.
Section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 1828(c))
authorizes the Federal Reserve Board to approve the application of a bank to
effect a merger, consolidation, acquisition of assets or assumption of deposit
liabilities, and, incident thereto, to establish a branch or branches pursuant
to Section 9 of the Federal Reserve Act (12 U.S.C. 321) and Section 5(d)(3) of
the Federal Deposit Insurance Act (12
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U.S.C. 1815(d)(3)) authorizes the Federal Reserve Board to approve the
application of a bank to effect a merger, consolidation or acquisition of assets
or assumption of deposit liabilities of a savings association by a bank that is
insured by the Bank Insurance Fund.
CAPITAL REQUIREMENTS
The Federal Reserve Board, the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation and the Office of Thrift Supervision
maintain guidelines to implement risk-based capital requirements for bank
holding companies, state member banks, national banks, state non-member banks
and federal savings banks, respectively. 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, "well capitalized" bank holding companies are
required to have total capital equivalent to 10% of assets, weighted by risk.
One half of this capital must be 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. The banking regulatory authorities also require "well capitalized" bank
holding companies to have a Tier 1 capital to risk-based assets ratio of 6%.
"Well capitalized" state member banks are required to have a total capital to
risk-based assets ratio of 10%, a Tier 1 capital to risk-based assets ratio of
6% and a leverage ratio of 5%.
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
the holding company may not find itself able to provide it.
Fifth Third and each of its subsidiary depository institutions are in
compliance with all applicable standards for well capitalized banking
organizations. As of June 30, 2000, Fifth Third had a leverage ratio of 10.06%,
its Tier 1 risk-based capital ratio was 12.63% and its total risk-based capital
ratio was 14.43%.
Federal bank regulatory agencies have adopted regulations governing prompt
corrective action to resolve the problems of capital deficient and otherwise
troubled savings associations and banking organizations. At each successively
lower defined capital category, an institution is subject to more restrictive
and numerous mandatory or discretionary regulatory actions or limits, and the
applicable agency has less flexibility in determining how to resolve the
problems of the institution. The agencies have defined these capital levels as
follows: (1) well-capitalized institutions must have total risk-based capital of
at least 10%, core or Tier 1 risk-based capital (consisting only of items that
qualify for inclusion in core or Tier 1 capital) of at least 6% and core or Tier
1 capital of at least 5%; (2) adequately capitalized institutions are those that
meet the regulatory minimum of total risk-based capital of at least 8%, core or
Tier 1 risk-based capital (consisting only of items that qualify for inclusion
in core or Tier 1 capital) of at least 4% and core or Tier 1 capital of at least
4% (except for institutions receiving the highest examination rating and with an
acceptable level of risk, in which case the core or Tier 1 capital level is at
least 3%); (3) undercapitalized institutions are those that do not meet
regulatory limits, but that are not significantly undercapitalized; (4)
significantly undercapitalized institutions have total risk-based capital of
less than 6%, core or Tier 1 risk-based capital (consisting only of items that
qualify for inclusion in core or Tier 1 capital) of less than 3% and core or
Tier 1 capital of less than 3%; and (5) critically undercapitalized institutions
are those with core or Tier 1 capital of less than 2% of total assets. In
addition, the agency generally can downgrade an institution's capital category,
notwithstanding its capital level, if, after notice and opportunity for hearing,
the institution is deemed to be engaging in an unsafe or unsound practice,
because the institution has not corrected deficiencies that resulted in the
institution receiving a less than satisfactory examination rating on matters
other than capital or the institution is deemed to be in an unsafe or unsound
condition.
An undercapitalized institution must submit a capital restoration plan to
the applicable agency within 45 days after it becomes undercapitalized. Such
institution will be subject to increased monitoring and asset
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growth restrictions and will be required to obtain prior approval for
acquisitions, branching and engaging in new lines of business. Furthermore,
critically undercapitalized institutions must be placed in conservatorship or
receivership within 90 days of reaching that capitalization level, except under
limited circumstances.
Federal law prohibits a financial institution from making a capital
distribution to anyone or paying management fees to any person having control of
the institution if, after such distribution or payment, the institution would be
undercapitalized. In addition, each company controlling an undercapitalized
institution must guarantee that the institution will comply with its capital
restoration plan until the institution has been adequately capitalized on an
average during each of the four preceding calendar quarters and must provide
adequate assurances of performance. The aggregate liability pursuant to such
guarantee is limited to the lesser of (a) an amount equal to 5% of the
institution's total assets at the time it became undercapitalized or (b) the
amount necessary to bring the institution into compliance with all capital
standards applicable to such institution at the time the institution fails to
comply with its capital restoration plan.
REGULATION OF DEPOSITORY INSTITUTIONS
The operations of the subsidiary depository institutions of Fifth Third are
subject to requirements and restrictions under federal and state law, including
requirements to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged
thereon, and limitations on the types of investments that may be made and the
types of services which may be offered. Various consumer laws and regulations
also affect the operations of these subsidiary depository institutions.
National banks are subject to the supervision of and are regularly examined
by the Comptroller of the Currency. In addition, national banks must be members
of the Federal Reserve System and their deposits are insured by the Federal
Deposit Insurance Corporation and, as such, are 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 the Federal Reserve Board and: 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 Michigan, by the Michigan Office
of Financial and Insurance Services and in the case of banks chartered in
Florida, the Florida Department of Banking and Finance.
LEGAL MATTERS
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 Ottawa 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 LLP,
Cincinnati, Ohio, will render its opinion to Fifth Third with respect to certain
federal income tax consequences of the merger.
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, 1999, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of Ottawa incorporated in this
document by reference from Ottawa's Annual Report on Form 10-K for the year
ended December 31, 1999, have been audited by Crowe, Chizek & Company 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.
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WHERE YOU CAN FIND MORE INFORMATION
Fifth Third and Ottawa file annual, quarterly and current reports, proxy
statements and other information with the SEC. Shareholders may read and copy
reports, proxy statements and other information filed by Fifth Third and Ottawa
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 Ottawa'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 Ottawa 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 Ottawa for the special
meeting.
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 Ottawa to "incorporate by reference"
information into this document, which means that they can disclose important
information to shareholders by referring them to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this document, except for any information superseded by information
contained directly in the other 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,
1999;
- Fifth Third's Quarterly Reports on Form 10-Q for the quarters ended March
31, 2000 and June 30, 2000;
- Fifth Third's Current Reports on Form 8-K filed with the SEC on June 21,
2000 and July 17, 2000; and
- Fifth Third's Proxy Statement dated February 9, 2000.
Ottawa SEC Filings:
- Ottawa's Annual Report on Form 10-K for the year ended December 31, 1999;
- Ottawa's Quarterly Reports on Form 10-Q for the quarters ended March 31,
2000 and June 30, 2000;
- Ottawa's Current Reports on Form 8-K filed with the SEC on February 1,
2000, June 15, 2000 and September 1, 2000; and
- Ottawa's Proxy Statement dated March 31, 2000.
Additional documents that Fifth Third and Ottawa may file with the SEC
between the date of this document and the date of the special meeting of
Ottawa'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 into this document
(excluding exhibits unless the exhibits are specifically incorporated into this
document) 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 Douglas J. Iverson, Chief Executive Officer of Ottawa, 245
Central Avenue, Holland, Michigan 49423 (telephone number: (616) 393-
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7002), as relates to Ottawa. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY NOVEMBER 14, 2000.
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 OCTOBER 20, 2000.
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 August 31, 2000 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 OTTAWA
FINANCIAL CORPORATION, a corporation organized and existing under the
corporation laws of the State of Delaware, with its principal office located in
Holland, Michigan ("Ottawa").
W I T N E S S E T H :
WHEREAS, Fifth Third is a registered financial services holding company
under the Bank Holding Company Act of 1956, as amended, and Ottawa is a unitary
savings and loan holding company under Section 10 of the Home Owners Loan Act,
as amended ("HOLA"), and Fifth Third and Ottawa desire to effect a merger under
the authority and provisions of the corporation laws of the State of Ohio and
the State of Delaware pursuant to which at the Effective Time (as herein defined
in Section IX) Ottawa will be merged into Fifth Third, with Fifth Third to be
and become the surviving corporation (the "Merger");
WHEREAS, Ottawa owns all of the outstanding stock of AmeriBank, a Michigan
state chartered savings bank ("AmeriBank") which, at the Effective Time, will be
merged with and into Fifth Third's wholly-owned subsidiary The Fifth Third Bank,
Indiana, a Michigan banking corporation ("Fifth Third Bank, Indiana") with Fifth
Third Bank, Indiana 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 Ottawa
("Ottawa Common Stock") which are issued and outstanding (excluding treasury
shares) immediately prior to the Effective Time will at the Effective Time be
canceled and extinguished and in substitution therefor such Ottawa shares will,
at the Effective Time, be converted into shares of the Common Stock, without par
value, of Fifth Third ("Fifth Third Common Stock"), plus cash in lieu of
fractional shares, 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 Ottawa, agree together as follows:
I. MODE OF EFFECTUATING CONVERSION OF SHARES
A. Upon the terms and conditions set forth in this Agreement, Ottawa shall
be merged into Fifth Third.
B. At the Effective Time all of the shares of Fifth Third Common Stock that
are issued and outstanding or held by Fifth Third as treasury shares immediately
prior to the Effective Time will remain unchanged and will remain outstanding or
as treasury shares, as the case may be, of the Surviving Corporation. Any stock
options, subscription rights, warrants or other securities outstanding
immediately prior to the Effective Time, entitling the holders to subscribe for
the purchase of any shares of the capital stock of any class of Fifth Third, and
any securities outstanding at such time that are convertible into shares of the
capital stock of any class of Fifth Third will remain unchanged and will remain
outstanding, with the holders thereof entitled to subscribe for, purchase or
convert their securities into the number of shares of the class of capital stock
of Fifth Third to which they are entitled under the terms of the governing
documents.
C. 1. (a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder of any shares of Ottawa Common Stock, subject
to this Section I.C.1. and Section I.E., each share of Ottawa Common Stock
issued and outstanding immediately prior to the Effective Time (excluding
treasury
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shares) shall be converted into a number (the "Exchange Ratio") of duly
authorized, validly issued and non-assessable shares of Fifth Third Common Stock
in accordance with the following:
(i) If the Average Closing Price (as defined in Section I.C.1.(b)
hereof) is less than $40.75, the Exchange Ratio will be the quotient
obtained by dividing $22.01 by the Average Closing Price, and
(ii) If the Average Closing Price is equal to or greater than $40.75
the Exchange Ratio will be .5400.
As of the Effective Time, all such shares of Ottawa Common Stock shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate which immediately prior to the
Effective Time represented outstanding shares of Ottawa Common stock shall cease
to have any rights with respect thereto, except the right to receive that number
of whole shares of Fifth Third Common Stock into which such shares of Ottawa
Common Stock shall have been converted by the Merger pursuant to the Exchange
Ratio, plus cash for fractional shares pursuant to Section I.D. All issued and
outstanding shares of the Preferred Stock of Ottawa, if any, shall be canceled
at the Effective Time. At the Effective Time, all shares of Ottawa Common Stock
held in treasury will be canceled and terminated and will not be converted into
shares of Fifth Third Common Stock.
(b) "Average Closing Price" means the average of the closing prices for a
share of Fifth Third Common Stock on the Nasdaq National Market (as reported in
The Wall Street Journal, or, if not reported thereby, any other authoritative
source) for the twenty (20) consecutive trading days ending on the fifth trading
day prior to the Effective Time.
2. At the Effective Time, each award, option, or other right to purchase or
acquire shares of Ottawa Common Stock pursuant to stock options ("Ottawa
Rights") granted by Ottawa under the Ottawa 1995 Stock Option and Incentive
Plan, as amended ("Stock Plan"), which are outstanding at the Effective Time,
whether or not exercisable, shall be converted into and become options with
respect to Fifth Third Common Stock, and Fifth Third shall assume each Ottawa
Right, in accordance with the terms of the Stock Plan and stock option agreement
by which it is evidenced, except from and after the Effective Time, (i) Fifth
Third and its Compensation Committee shall be substituted for the Committee of
Ottawa's Board of Directors (including, if applicable, the entire Board of
Directors of Ottawa) administering such Stock Plan, (ii) each Ottawa Right
assumed by Fifth Third may be exercised solely for shares of Fifth Third Common
Stock, (iii) the number of shares of Fifth Third Common Stock subject to such
Ottawa Right shall be equal to the number of shares of Ottawa Common Stock
subject to such Ottawa Right immediately prior to the Effective Time multiplied
by the Exchange Ratio, however, such number of Ottawa Rights shall not exceed
793,276 shares in the aggregate, which amount equals the number of Ottawa Rights
in existence prior to August 1, 2000, and (iv) the per share exercise price
under each such Ottawa Right shall be adjusted by dividing the per share
exercise price under each such Ottawa Right by the Exchange Ratio and rounding
up to the nearest four decimal places. Notwithstanding the provisions of clause
(iii) of the preceding sentence, Fifth Third shall not be obligated to issue any
fraction of a share of Fifth Third Common Stock upon exercise of Ottawa Rights
but rather shall round up the number of shares of Fifth Third Common Stock
issuable upon any exercise of an Ottawa Right to the next whole number. In
addition, notwithstanding the foregoing, each Ottawa Right which is an
"incentive stock option" shall be adjusted as required by Section 424 of the
Code so as not to constitute a modification, extension, or renewal of the
option, within the meaning of Section 424(h) of the Code. Fifth Third agrees to
take all reasonable steps which are necessary to effectuate the foregoing
provisions of this Section.
3. The grants pursuant to the Stock Plan shall continue in effect on the
terms and conditions (subject to the adjustments required by Section I.C.2 after
giving effect to the Merger), and Fifth Third shall take all reasonable steps to
comply with the terms of the Stock Plan to ensure, to the extent reasonably
required by, and subject to the provisions of, the Stock Plan, the Ottawa Rights
which qualified as incentive stock options prior to the Effective Time continue
to qualify as incentive stock options after the Effective Time. At or prior to
the Effective Time, Fifth Third shall take all corporate action necessary to
reserve for issuance sufficient shares of Fifth Third Common Stock for delivery
upon exercise of Ottawa Rights assumed by it in accordance with this Section.
Within 60 days after the Effective Time, Fifth Third shall file a registration
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statement on Form S-3 or Form S-8, as the case may be (or any successor or
appropriate forms), with respect to shares of Fifth Third Common Stock subject
to the Ottawa Rights assumed by Fifth Third in accordance with this Section and
shall use its reasonable efforts to maintain the effectiveness of such
registration statement and maintain the current status of the prospectus or
prospectuses contained therein), as well as comply with any applicable state
securities or "blue sky" laws, for so long as such options remain outstanding.
D. After the Effective Time, each holder of a certificate or certificates
for shares of Ottawa 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 Ottawa 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, without interest thereon, equal in amount to the Average
Closing Price. Within ten (10) business days after the Effective Time, the
Exchange Agent will send a notice and transmittal form to each Ottawa
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 Ottawa 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 Ottawa 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 Ottawa Common Stock shall have been so converted shall be paid
with respect to such shares only when the certificate or certificates evidencing
shares of Ottawa Common Stock shall have been so surrendered (or in lieu of
surrendering such certificates in the case of lost, stolen, destroyed or mislaid
certificates, upon execution of such documentation as may be reasonably required
by Fifth Third) and thereupon any such dividends and distributions shall be
paid, without interest, to the holder entitled thereto subject, however, to the
operation of any applicable escheat or similar laws relating to unclaimed funds.
E. The Exchange Ratio referred to in Paragraph C of this Article I shall be
adjusted so as to give the Ottawa shareholders the economic benefit of any stock
dividends, reclassifications, recapitalizations, split-ups, exchanges of shares,
distributions or combinations or subdivisions of Fifth Third Common Stock
effected between the date of this Agreement and the Effective Time. In the event
between the date of this Agreement and the Effective Time, Fifth Third has
engaged in either the distribution of any of its assets (other than a cash
dividend), or caused the distribution of capital stock in a company which holds
any asset(s) previously held by Fifth Third or in any affiliate thereof, to the
Fifth Third shareholders, then the Exchange Ratio shall be increased in such
amount so that the equivalent fair market value of such transaction shall also
be distributed to the Ottawa shareholders, as of the Effective Time.
F. When all necessary documents have been filed and recorded in accordance
with the laws of the States of Ohio, Delaware and Michigan, and the Merger
becomes effective, the separate existence of Ottawa shall cease and Ottawa shall
be merged into Fifth Third (which will be the "Surviving Corporation"), and
which shall continue its corporate existence under the laws of the State of Ohio
under the name "Fifth Third Bancorp".
G. The Second Amended Articles of Incorporation, as amended, of Fifth Third
of record with the Secretary of State of Ohio as of the Effective Time shall be
the Articles of Incorporation of the Surviving Corporation, until further
amended as provided by law.
H. The Directors of Fifth Third who are in office at the Effective Time
shall be the directors of the Surviving Corporation, each of whom shall continue
to serve as a Director for the term for which he was elected, subject to the
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.
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I. 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.
J. At the Effective Time, the effect of the Merger shall be as provided by
the applicable provisions of the Ohio General Corporation Law ("OGCL") and the
Delaware General Corporation Law (the "DGCL"). Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time: the separate
existence of Ottawa 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 Ottawa, and all
obligations owing by or due each of Fifth Third and Ottawa shall be vested in,
and become the obligations of, Fifth Third, without further act or deed; and all
rights of creditors of each of Fifth Third and Ottawa shall be preserved
unimpaired, and all liens upon the property of each of Fifth Third and Ottawa
shall be preserved unimpaired, on only the property affected by such liens
immediately prior to the Effective Time.
K. From time to time as and when requested by the Surviving Corporation, or
by its successors or assigns, the officers and Directors of Ottawa in office at
the Effective Time shall execute and deliver such instruments and shall take or
cause to be taken such further or other action as shall be necessary in order to
vest or perfect in the Surviving Corporation or to confirm of record or
otherwise, title to, and possession of, all the assets, property, interests,
rights, privileges, immunities, powers, franchises and authority of Ottawa and
otherwise to carry out the purposes of this Agreement.
L. This Agreement shall be filed (only if necessary) and recorded along
with Articles or a Certificate of Merger in accordance with the requirements of
the OGCL and the DGCL. If necessary, this Agreement shall not be filed with the
Secretary of the State of Ohio until, but shall be filed promptly after, all of
the conditions precedent to consummating the Merger as contained in Article VI
of this Agreement shall have been fully met or effectively waived.
M. The Merger is intended to be a reorganization within the meaning of
Section 368(a) of the Code, and the Agreement is intended to be a "plan of
reorganization" within the meaning of the regulations promulgated under the Code
and for purposes of Section 354 and 361 of the Code.
N. 1. No holder of Ottawa Common Stock shall be entitled to relief as a
dissenting shareholder pursuant to the DGCL.
2. No holder of Fifth Third Common Stock shall be entitled to relief as
dissenting shareholder pursuant to Section 1701.85 of the OGCL or otherwise.
II. REPRESENTATIONS AND WARRANTIES OF OTTAWA.
Ottawa 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 Ottawa to Fifth Third in connection with the
execution of this Agreement by Fifth Third:
A. Ottawa (i) is duly incorporated, validly existing and in good standing
as a corporation under the corporation laws of the State of Delaware and is a
registered unitary savings and loan holding company under the HOLA; (ii) is duly
authorized to conduct the business in which it is engaged; (iii) has 10,000,000
shares, $.01 par value per share, of Ottawa Common Stock and 5,000,000 shares,
no par value per share, of Preferred Stock ("Ottawa Preferred Stock") authorized
pursuant to its Certificate of Incorporation, which are the total number of
shares Ottawa 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 Ottawa of any kind, other
than (a) 6,684,565 shares of Ottawa Common Stock, which presently are
authorized, duly issued and outstanding and fully paid and non-assessable, and
(b) options to purchase a total of 793,276 shares of Ottawa Common Stock which
were granted to and are currently held by the employees, officers and Directors
of Ottawa and/or AmeriBank; (v) has no direct or indirect active subsidiaries
other than AmeriBank, OS Services, Inc., a Michigan corporation ("OS Services"),
AmeriPlan Financial Services, Inc., a Michigan corporation ("AmeriPlan"), and
AmeriBank Mortgage Company, a Michigan corporation ("Mortgage
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Subsidiary"); and (vi) owns of record and beneficially free and clear of all
liens and encumbrances all of the 5,620,625 outstanding shares of the capital
stock $.01 par value per share of AmeriBank;
B. AmeriBank is duly incorporated, validly existing and in good standing as
a state chartered savings bank under the laws of the State of Michigan, and has
all the requisite power and authority to conduct the banking business as now
conducted by it; and AmeriBank 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 AmeriBank of any kind, other than 5,620,625
shares of the capital stock, $.01 par value per share, of AmeriBank owned of
record and beneficially by Ottawa; and owns of record and beneficially free and
clear of all liens and encumbrances (i) all of the 15,024 outstanding shares of
the capital stock $1.00 par value per share of OS Services, (ii) all of the
1,000 outstanding shares of the capital stock $1.00 par value per share of
AmeriPlan, and (iii) all of the 1,000 shares of no par value of AmeriBank
Mortgage Company, a Michigan corporation ("Mortgage Subsidiary")(AmeriPlan,
Mortgage Subsidiary and OS Services shall be collectively referred to herein as
the "Non-Bank Subsidiaries");
C. OS Services is duly incorporated, validly existing and in good standing
as a corporation under the laws of the State of Michigan, and has all the
requisite power and authority to conduct the business as now conducted by it;
and OS Services 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 OS Services of any kind, other than 15,024 shares of
the capital stock, $1.00 par value per share, of OS Services owned of record and
beneficially by AmeriBank.
D. AmeriPlan is duly incorporated, validly existing and in good standing as
a corporation under the laws of the State of Michigan, and has all the requisite
power and authority to conduct the business as now conducted by it; and
AmeriPlan 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 AmeriPlan of any kind, other than 1,000 shares of the
capital stock, $1.00 par value per share, of AmeriPlan owned of record and
beneficially by AmeriBank.
E. Mortgage Subsidiary is duly incorporated, validly existing and in good
standing as a corporation under the laws of the State of Michigan, and has all
the requisite power and authority to conduct the business as now conducted by
it; and Mortgage 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 Mortgage Subsidiary of any kind, other than
1,000 shares of the capital stock, no par value per share, of Mortgage
Subsidiary owned of record and beneficially by Ameribank.
F. Ottawa 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, 1999, and for the year then ended, together with
the opinions of its independent certified public accountants associated
therewith ("consolidated financial statements"). Ottawa also has previously
furnished to Fifth Third the Call Reports as filed with the FDIC for AmeriBank
as at December 31, 1997, 1998 and 1999, for the years then ended. Ottawa also
has furnished to Fifth Third (i) its unaudited, consolidated financial
statements of AmeriBank and the Non-Bank Subsidiaries as at June 30, 2000, and
for the three months and six months then ended, and (ii) the Call Report of
AmeriBank as filed with the FDIC for the quarter ended June 30, 2000. Such
consolidated financial statements of Ottawa and AmeriBank fairly present the
consolidated financial condition of Ottawa, AmeriBank and the Non-Bank
Subsidiaries as of the date thereof, and for the years or periods covered
thereby in conformity with generally accepted accounting principles ("GAAP"),
consistently applied (except as stated therein and except for the omission of
notes to unaudited statements and year-end adjustments to interim results).
There are no material liabilities, obligations or indebtedness of Ottawa,
AmeriBank or the Non-Bank Subsidiaries required to be disclosed in the financial
statements so furnished other than the liabilities, obligations or indebtedness
disclosed in such financial statements (including footnotes). Ottawa 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 December 31, 2000,
Ottawa shall furnish Fifth Third with its audited or unaudited,
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consolidated financial statements as at September 30, 2000 and December 31, 2000
for the periods then ended as soon as they are reasonably available.
G. Ottawa, AmeriBank and the Non-Bank Subsidiaries have good and marketable
title to all of the material properties and assets reflected in their separate
statements of financial condition as at June 30, 2000, and which are still owned
by each and each has good and marketable title to all material properties and
assets acquired by each of them after such date and still owned by each of them,
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.
H. Except as disclosed in Schedule 1: (i) since June 30, 2000, to the date
hereof there have been no material adverse changes in the financial condition,
operations or business of Ottawa, AmeriBank or any of the Non-Bank Subsidiaries;
(ii) Ottawa is not aware of any events which have occurred since June 30, 2000
to the date hereof or which as of the date hereof are reasonably certain to
occur in the future and which reasonably can be expected to result in any
material adverse change in the financial condition, operations or business of
Ottawa, AmeriBank or any of the Non-Bank Subsidiaries, excluding in each
instance matters (which shall include but not be limited to changes in general
economic conditions, changes in interest rates, changes in laws or regulations
or changes in GAAP) of general application to the thrift or banking industry;
and (iii) since June 30, 2000, to the date hereof there have been no material
changes in the methods of business operations of Ottawa, AmeriBank or any of the
Non-Bank Subsidiaries.
I. 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 Ottawa, threatened against Ottawa, AmeriBank or any of the Non-Bank
Subsidiaries which reasonably can be expected to result in any material adverse
change in the financial condition, operations or business of Ottawa, AmeriBank
or any of the Non-Bank Subsidiaries on a separate basis.
J. Except as disclosed in Schedule 1, since June 30, 2000, to the date
hereof Ottawa, AmeriBank and the Non-Bank Subsidiaries 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, 2000, to the date hereof Ottawa has not declared or
paid any dividends nor made any distributions of any other kind to its
shareholders.
K. Except as disclosed in Schedule 1, Ottawa, AmeriBank and the Non-Bank
Subsidiaries have timely filed all federal, state and local tax returns required
to be filed (after giving effect to all extensions) by them, respectively, and
have paid or provided for all tax liabilities shown to be due thereon or which
have been assessed against them, respectively. All tax returns filed by Ottawa,
AmeriBank and the Non-Bank Subsidiaries through the date hereof constitute
complete and accurate representations of the tax liabilities of Ottawa,
AmeriBank and the Non-Bank Subsidiaries for such years and accurately set forth
all items (to the extent required to be included or reflected in such returns)
relevant to its future tax liabilities, including the tax basis of its
properties and assets in all material respects. Neither Ottawa, AmeriBank nor
any of the Non-Bank Subsidiaries is currently under audit nor have either of
them been contacted for an audit. Neither Ottawa, AmeriBank nor any of the
Non-Bank Subsidiaries is engaged in any appeal proceeding in connection with any
return.
L. Except as disclosed in Schedule 1, neither Ottawa, AmeriBank nor any of
the Non-Bank Subsidiaries is a party to (i) any written employment contracts or
written contracts of any other kind with any of its officers, directors or
employees or (ii) any material contract, lease or agreement of any other kind
which is not assignable as a result of the merger provided for herein without
the consent of another party, except for contracts, leases or agreements which
do not have terms extending beyond six months from the date of this Agreement or
contracts, leases or agreements (excluding contracts, leases and agreements
pursuant to which credit has been extended by AmeriBank) which do not require
the annual expenditure of more than $100,000 thereunder.
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M. Except as disclosed in Schedule 1, since June 30, 2000, to the date
hereof neither AmeriBank nor any of the Non-Bank Subsidiaries has incurred any
unusual or extraordinary loan losses which are material to Ottawa, AmeriBank or
any of the Non-Bank Subsidiaries; and to the best knowledge of Ottawa, in light
of historical loan loss experience of AmeriBank and the Non-Bank Subsidiaries
and Ottawa's management's analysis of the quality and performance of their loan
portfolios, as of June 30, 2000, the reserves for loan losses was, in the
opinion of Ottawa, adequate to absorb all known and reasonably anticipated
losses as of the date hereof.
N. Except as disclosed in Schedule 1, neither Ottawa, AmeriBank nor any of
the Non-Bank Subsidiaries 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.
O. 1. The Directors of Ottawa, 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 Ottawa's shareholders at the annual or a
special meeting of the shareholders to be called for that purpose, all in
accordance with and as required by law and in accordance with the Certificate of
Incorporation and Bylaws of Ottawa.
2. Ottawa has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder subject to required
regulatory and shareholder approvals. The Agreement, when executed and
delivered, will have been duly authorized and will constitute a valid and
binding obligation of Ottawa, enforceable in accordance with its terms, except
to the extent that (i) enforceability thereof may be limited by insolvency,
reorganization, liquidation, bankruptcy, readjustment of debt or other laws of
general application relating to or affecting the enforcement of creditors'
rights generally and (ii) the availability of certain remedies may be precluded
by general principles of equity, subject, however, to the receipt of requisite
regulatory approvals and the approval of Ottawa's shareholders.
3. Except as disclosed in Schedule 1, neither the execution of the
Agreement, nor the consummation of the transactions contemplated hereby, (i)
conflicts with, results in a breach of, violates or constitutes a default under,
Ottawa's Certificate of Incorporation or Bylaws or, to the best knowledge of
Ottawa, any federal, state or local law, statute, ordinance, rule, regulation or
court or administrative order, or any agreement, arrangement, or commitment, to
which Ottawa, AmeriBank or any of the Non-Bank Subsidiaries is subject or bound;
(ii) to the best knowledge of Ottawa, 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 Ottawa,
AmeriBank or any of the Non-Bank Subsidiaries; (iii) conflicts with, results in
a breach of, violates or constitutes a default under, terminates or gives any
person the right to terminate, amend, abandon, or refuse to perform any material
agreement, arrangement or commitment to which Ottawa, AmeriBank or any of the
Non-Bank Subsidiaries is a party or by which the rights, properties or assets of
Ottawa, AmeriBank or any of the Non-Bank Subsidiaries is subject or bound; or
(iv) to the best knowledge of Ottawa, accelerates or modifies, or gives any
party thereto the right to accelerate or modify, the time within which, or the
terms according to which, Ottawa, AmeriBank or any of the Non-Bank Subsidiaries
is to perform any duties or obligations or receive any rights or benefits under
any material agreements, arrangements or commitments. For purposes of
subparagraphs (iii) and (iv) immediately preceding, material agreements,
arrangements or commitments exclude agreements, arrangements or commitments
having a term expiring less than six months from the date of this Agreement or
which do not require the expenditure of more than $100,000 (but shall include
all agreements, arrangements or commitments pursuant to which credit has been
extended by AmeriBank or any of the Non-Bank Subsidiaries).
4. Neither this Agreement nor any report, statement, list, certificate or
other information furnished or to be furnished by Ottawa to Fifth Third or its
agents in connection with this Agreement or any of the transactions contemplated
hereby (including, without limitation, any information which has been or shall
be supplied with respect to 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
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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
shareholder's of Ottawa 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.
5. Ottawa has furnished to Fifth Third or its agents true and complete
copies (including all exhibits and all documents incorporated by reference) of
the following documents as filed by Ottawa with the SEC:
a. Ottawa's Annual Report on Form 10-K for the year ended December 31,
1999, and reports on Form 10-Q for the quarters ended March 31 and June 30,
2000;
b. any Current Report on Form 8-K with respect to any event occurring
after June 30, 2000 and prior to the date of this Agreement;
c. any report filed by Ottawa to amend or modify any of the reports
described above; and
d. all proxy statements prepared in connection with meetings of
Ottawa's shareholders held or to be held subsequent to June 30, 2000.
The information set forth in the documents described in this subsection 5
(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, 2000 which
Ottawa is required to describe in a Current Report on Form 8-K other than the
Current Reports heretofore furnished by Ottawa to Fifth Third.
P. Complete and accurate copies of the (i) Certificate of Incorporation and
Bylaws of Ottawa and (ii) the Charter and Bylaws of AmeriBank, and (iii)
Articles and Bylaws of each of the Non-Bank Subsidiaries, in force as of the
date hereof have been delivered to Fifth Third.
Q. To the best knowledge of Ottawa, except as disclosed in Schedule 1,
neither Ottawa, AmeriBank nor any of the Non-Bank Subsidiaries, nor any officer,
employee or director of any of them, has knowingly engaged in any activity or
omitted to take any action which has resulted or could result in the violation
of (i) any local, state or federal law (including without limitation the Bank
Secrecy Act, the Community Reinvestment Act, applicable consumer protection and
disclosure laws and regulations, including without limitation, Truth in Lending,
Truth in Savings and similar disclosure laws and regulations, and equal
employment and employment discrimination laws and regulations) or (ii) any
regulation, order, injunction or decree of any court or governmental body, the
violation of either of which could reasonably be expected to have a material
adverse effect on the financial condition of Ottawa, AmeriBank or any of the
Non-Bank Subsidiaries. Except as disclosed in Schedule 1, Ottawa, AmeriBank and
each of the Non-Bank Subsidiaries possess all licenses, franchises, permits and
other governmental authorizations necessary for the continued conduct of its
business without material interference or interruption.
R. To the best knowledge of Ottawa, neither this Agreement nor the
Agreement of Merger between Fifth Third and Ottawa (the "Agreement of Merger")
nor any report, statement, list, certificate or other information furnished by
Ottawa, AmeriBank or any of the Non-Bank Subsidiaries to Fifth Third or its
agents in connection with this Agreement or any of the transactions contemplated
hereby (including, without limitation, any information which has been or shall
be supplied with respect to their business operations and financial condition
for inclusion in the proxy statement/prospectus and registration statement
relating to the merger) contains or shall contain (or, in the case of
information relating to the proxy statement/prospectus, at the time it is
mailed, in the case of the registration statement, at the time it becomes
effective and in the case of the proxy statement/prospectus and the registration
statement, at the time the annual or special meeting of shareholders of Ottawa
is held to consider the adoption of this Agreement) an untrue statement of
material
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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.
S. Except as disclosed in Schedule 1, there are no actions, proceedings or
investigations pending before any environmental regulatory body, with respect to
or, to the best knowledge of Ottawa, threatened against or affecting Ottawa,
AmeriBank or any of the Non-Bank Subsidiaries in respect to any "facility"
owned, leased or operated by either of them (but EXCLUDING any "facility" as to
which the sole interest of Ottawa, AmeriBank or any of the Non-Bank Subsidiaries
is that of a lienholder or mortgagee, but INCLUDING any "facility" to which
title has been taken pursuant to mortgage foreclosure or similar proceedings and
INCLUDING any "facility" in which Ottawa, AmeriBank or any of the Non-Bank
Subsidiaries ever participated in the financial management of such facility to a
degree sufficient to influence, or have the ability to influence, the facility's
treatment of hazardous waste) under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or under any
Federal, state, local or municipal statute, ordinance or regulation in respect
thereof, in connection with any release of any toxic or "hazardous substance",
pollutant or contaminant into the "environment" which, if adversely determined,
(a) would require the payment by Ottawa, AmeriBank or any of the Non-Bank
Subsidiaries and/or require Ottawa, AmeriBank or any of the Non-Bank
Subsidiaries to incur expenses of more than $200,000 (whether or not covered by
insurance) or (b) would otherwise have a material adverse effect on Ottawa,
AmeriBank or any of the Non-Bank Subsidiaries, nor are there any such actions or
proceedings or investigations in which Ottawa, AmeriBank or any of the Non-Bank
Subsidiaries is a plaintiff or complainant. Neither Ottawa, AmeriBank nor any of
the Non-Bank Subsidiaries 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 Ottawa, AmeriBank nor any of the
Non-Bank Subsidiaries liable for any material costs (as a result of the acts or
omissions of Ottawa, AmeriBank or any of the Non-Bank Subsidiaries or, to the
best knowledge of Ottawa, 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 Ottawa, AmeriBank or any of the
Non-Bank Subsidiaries to prevent or minimize any actual or threatened release by
Ottawa, AmeriBank or any of the Non-Bank Subsidiaries of any hazardous wastes or
other chemical substances, pollutants and contaminants into the environment
which would endanger the public health or the environment. All terms contained
in quotation marks in this paragraph and the paragraph immediately following
shall have the meaning ascribed to such terms, and defined in, CERCLA, taken as
a whole.
To the best knowledge of Ottawa, except as disclosed in Schedule 1, each
"facility" owned, leased or operated by Ottawa, AmeriBank or any of the Non-Bank
Subsidiaries (but EXCLUDING any "facility" as to which the sole interest of
Ottawa, AmeriBank or any of the Non-Bank Subsidiaries is that of a lienholder or
mortgagee, but INCLUDING any "facility" to which title has been taken pursuant
to mortgage foreclosure or similar proceedings and INCLUDING any "facility" in
which Ottawa, AmeriBank or any of the Non-Bank Subsidiaries ever participated in
the financial management of such facility to a degree sufficient to influence,
or have the ability to influence, the facility's treatment of hazardous waste)
is, in all material respects, in compliance with all applicable Federal, state,
local or municipal statutes, ordinances, laws and regulations and all orders,
rulings or other decisions of any court, administrative agency or other
governmental authority relating to the protection of the environment, except to
the extent a failure to comply would not have a material adverse effect on the
business, operations and financial condition of Ottawa, AmeriBank or any of the
Non-Bank Subsidiaries.
T. 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 which is or was contributed to or
maintained presently or at any time in the last four (4) years by Ottawa,
AmeriBank or any of the Non-Bank Subsidiaries for the benefit of employees,
former
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employees or directors of Ottawa, AmeriBank or any of the Non-Bank Subsidiaries
and shall include (a) any qualified retirement plan such as a pension, profit
sharing, stock bonus plan or employee stock ownership plan ("ESOP"), (b) any
plan, program or arrangement providing deferred compensation, bonus deferral or
incentive benefits, whether funded through trust or otherwise, and (c) any
welfare plan, program or policy providing vacation, severance, salary
continuation, supplemental unemployment, disability, life, health coverage,
retiree health, Voluntary Employees' Beneficiary Association, medical expense
reimbursement or dependent care assistance benefits, in any such foregoing case
without regard to whether the Benefit Plan constitutes an employee benefit plan
under Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the number of employees covered under such Benefit Plan.
Through the date of this Agreement, neither Ottawa, AmeriBank nor any of the
Non-Bank Subsidiaries has made or has committed to make any contributions to any
Benefit Plan outside the ordinary course of business and inconsistent with past
practice with regard to amounts, taken as a whole.
2. Predecessor Plan. The term "Benefit Plan" for all purposes of this
Agreement shall include each Predecessor Plan (as herein defined). For purposes
hereof, "Predecessor Plan" shall mean any plan, program, policy, practice,
arrangement or system as otherwise described in Section II.T.1. but was
maintained, contributed to or resulted in liability to any predecessor employer
of Ottawa, AmeriBank or any of the Non-Bank Subsidiaries since March 1, 1996.
For purposes hereof, "predecessor employer" shall mean any employer, entity or
business operation acquired by Ottawa, AmeriBank or any of the Non-Bank
Subsidiaries in any type of acquisition (including, without limitation, mergers,
stock acquisitions and asset acquisitions).
3. Plan Documents, Reports and Filings. Except as disclosed on Schedule 1,
Ottawa, AmeriBank and each of the Non-Bank Subsidiaries have 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.
4. 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 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; (e) any previously
terminated Qualified Benefit Plan was terminated in material compliance with the
requirements of ERISA and the Code, has received a favorable determination
letter therefor, and the liabilities of such Qualified Benefit Plan and the
requirements of the Pension Benefit Guaranty Corporation ("PBGC") were fully
satisfied; and (f) any and all amendments to the Qualified Benefit Plans not
covered by an IRS determination letter do not adversely affect the qualified and
tax exempt status of such plans.
5. General Plan Compliance. With respect to each Benefit Plan, except as
noted on the Disclosure Schedule: (a) such Benefit Plan, if it is intended to
provide favorable tax benefits to plan participants, has been in material
compliance with applicable Code provisions; and (b) such Benefit Plan has been,
to the best knowledge of Ottawa, operated in substantial compliance with its
terms and all applicable laws, including, without limitation, ERISA and the
Code, and to the extent such Benefit Plan is a group health plan subject to the
requirements of Section 4980B of the Code ("COBRA") and/or the Health Insurance
Portability and Accountability Act of 1996, as amended ("HIPAA"), has been, to
the best knowledge of Ottawa, operated in substantial compliance with such COBRA
and HIPAA requirements.
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6. 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.
7. Lawsuits or Claims. Except as disclosed in Schedule 1, no material
actions, suits or claims (other than routine claims of benefits) are pending or,
to the best knowledge of Ottawa, threatened against any Benefit Plan or against
Ottawa, AmeriBank or any of the Non-Bank Subsidiaries with respect to any
Benefit Plan.
8. Disclosure of Unfunded Liabilities. All material Unfunded Liabilities
with respect to each Benefit Plan have been recorded and disclosed on the most
recent financial statements of Ottawa, AmeriBank and the Non-Bank Subsidiaries
or, if not, in Schedule 1. For purposes hereof, the term "Unfunded Liabilities"
shall mean any amounts properly accrued to date under generally accepted
accounting principles in effect as of the date of this Agreement (GAAP), or
amounts not yet accrued for GAAP purposes but for which an obligation (which has
legally accrued and cannot legally be eliminated and which is subject to
reasonable estimate) exists for payment in the future which is attributable to
any Benefit Plan, including but not limited to (a) severance pay benefits, (b)
deferred compensation or unpaid bonuses, (c) any liabilities on account of the
change in control which will result from this Agreement, including any potential
20% excise tax under Section 4999 of the Code relating to excess parachute
payments under Section 280G of the Code, (d) any unpaid pension contributions
for the current plan year or any accumulated funding deficiency under Section
412 of the Code and related penalties under Section 4971 of the Code, including
unpaid pension contributions or funding deficiencies owed by members of a
controlled group of corporations which includes Ottawa, AmeriBank and the
Non-Bank Subsidiaries and for which Ottawa, AmeriBank or any of the Non-Bank
Subsidiaries is liable under applicable law, (e) any authorized but unpaid
profit sharing contributions or contributions under Section 401(k) and Section
401(m) of the Code, (f) retiree health benefit coverage and (g) unpaid premiums
for contributions required under any group health plan to maintain such plan's
coverage through the Effective Time.
9. Defined Benefit Pension Plan Liabilities. Neither Ottawa, AmeriBank nor
any of the Non-Bank Subsidiaries (or any pension plan maintained by any of them)
have 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 Ottawa, AmeriBank, the Non-Bank Subsidiaries nor
any controlled group member of Ottawa, AmeriBank or any of the Non-Bank
Subsidiaries participates in, or has incurred any liability under Sections 4201,
4063 or 4064 of ERISA for a complete or partial withdrawal from a multiple
employer plan or a multi-employer plan (as defined in Section 3(37) of ERISA).
10. Independent Trustee. Ottawa, AmeriBank and the Non-Bank Subsidiaries
(a) have not incurred any asserted or unasserted material liability for breach
of duties assumed in connection with acting as an independent trustee of any
employee pension plan (as defined in Section 3(2) of ERISA) which is intended to
be qualified under Section 401(a) of the Code and which is maintained by an
employer unrelated in ownership to Ottawa, AmeriBank or any of the Non-Bank
Subsidiaries, (b) have not authorized nor knowingly participated in a material
prohibited transaction under Section 406 of ERISA and not exempt under Section
408 of ERISA and (c) have not received notice of any material actions, suits or
claims (other than routine claims for benefits) pending or threatened against
the unrelated employer or against them.
11. Retiree Benefits. Except as listed on Schedule 1 and identified as
"Retiree Liability", neither Ottawa, AmeriBank nor any of the Non-Bank
Subsidiaries have any obligation to provide medical benefits, or life insurance
benefits to or with respect to retirees, former employees or any of their
relatives.
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12. Right to Amend and Terminate. Except as listed on Schedule 1, Ottawa,
AmeriBank and each of the Non-Bank Subsidiaries have all power and authority
necessary to amend or terminate each Benefit Plan without incurring any material
penalty or liability provided that, in the case of an employee pension benefit
plan (as defined in section 3(2) of ERISA), benefits accrued as of the date of
amendment or termination are not reduced.
13. Material. For purposes of this Paragraph T 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 $100,000 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.
U. The investment portfolios of Ottawa, AmeriBank and the Non-Bank
Subsidiaries consist of securities in marketable form. Except as disclosed in
Schedule 1, since June 30, 2000 to the date hereof neither Ottawa, AmeriBank nor
any of the Non-Bank Subsidiaries has incurred any unusual or extraordinary
losses in its investment portfolio, and, except for matters of general
application to the thrift or banking industry (including, but not limited to,
changes in laws or regulations or generally accepted accounting principles) or
for events relating to the business environment in general, including market
fluctuations and changes in interest rates, Ottawa is not aware of any events
which may be expected to result in any material adverse change in the quality or
performance of the investment portfolios of Ottawa, AmeriBank or any of the Non-
Bank Subsidiaries.
V. 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 Ottawa, threatened against any of the Directors or officers of
Ottawa, AmeriBank or any of the Non-Bank Subsidiaries in their capacities as
such, and no Director or officer of Ottawa, AmeriBank or any of the Non-Bank
Subsidiaries currently is being indemnified or seeking to be indemnified by
Ottawa, AmeriBank or any of the Non-Bank Subsidiaries pursuant to applicable law
or the Certificate of Incorporation, Charter or Bylaws of Ottawa, AmeriBank or
any of the Non-Bank Subsidiaries.
W. There is no "business combination," "moratorium," "control share," or
other state anti-takeover statute or regulation or any agreement to which Ottawa
is a party which (i) prohibits or restricts Ottawa's ability to perform its
obligations under this Agreement, or its ability to consummate the transactions
contemplated hereby, (ii) would have the effect of invalidating or voiding this
Agreement, or any provisions hereof, or (iii) would subject Fifth Third to any
impediment or condition in connection with the exercise of any of its rights
under this Agreement.
X. All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements, whether entered into for Ottawa'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
Ottawa. Neither Ottawa, AmeriBank nor any of the Non-Bank Subsidiaries, nor, to
the best knowledge of Ottawa, any other party thereto is in breach of any of its
obligations under any such agreement or arrangement.
Y. 1. Neither Ottawa, AmeriBank nor any of the Non-Bank Subsidiaries has
any reason to believe that any conditions exist that might prevent or impede the
Merger from qualifying as a "reorganization" within the meaning of Section
368(a) of the Code.
2. Since December 31, 1999, except insofar as required by a change in GAAP,
there has been no change in accounting methods, principles or practices of
Ottawa, AmeriBank and the Non-Bank Subsidiaries.
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Z. Schedule 1 lists all options to acquire Ottawa Common Stock, the holders
thereof, the dates of issuance, the vesting schedules and the price per share of
such options.
III. REPRESENTATIONS AND WARRANTIES OF FIFTH THIRD
Fifth Third represents and warrants to Ottawa 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 financial services holding company under the Bank Holding Company Act
of 1956, as amended, and is duly authorized to conduct the business in which it
is engaged, and Fifth Third Bank, Indiana is duly incorporated, validly existing
and in good standing as a corporation under the laws of the State of Michigan
and is duly authorized to conduct the business in which it is engaged. The
outstanding shares of capital stock or other ownership interests of each direct
subsidiary have been duly authorized and validly issued, are fully paid and
non-assessable, and are directly owned by Fifth Third free and clear of all
liens and encumbrances. All of such subsidiaries are duly authorized to conduct
the business in which they are engaged, unless such failure to obtain or
maintain such authorization will not have a material adverse effect on Fifth
Third, as a whole.
B. Pursuant to Fifth Third's Second Amended Articles of Incorporation, as
amended, the total number of shares of capital stock it is authorized to have
outstanding is 650,500,000 of which 650,000,000 shares are Fifth Third Common
Stock and 500,000 shares are classified as Preferred Stock without par value. As
of the close of business on June 30, 2000, 465,002,511 shares of Fifth Third
Common Stock were issued and outstanding and zero (0) 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 June 30, 2000, 29,347,033 shares of Fifth Third Common Stock were
reserved for issuance in connection with outstanding options granted under its
stock option plans and 5,567,449 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 Ottawa 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 Ottawa its audited consolidated financial
statements as at December 31, 1999, December 31, 1998 and December 31, 1997 and
for the respective years then ended together with the opinions of its
independent public accountants associated therewith. Fifth Third has also
furnished to Ottawa its unaudited, consolidated financial statements as at June
30, 2000 and for the three and six month periods then ended. Such consolidated
financial statements fairly present the consolidated financial condition of
Fifth Third as of their respective dates and for the respective periods covered
thereby in conformity with GAAP consistently followed throughout the periods
covered thereby. Neither Fifth Third nor any 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 Ottawa its unaudited consolidated financial statements as
at September 30, 2000 and for the nine (9) months then ended as soon as such
statements are publicly available, and shall continue to furnish information for
subsequent calendar quarter periods to Ottawa as soon as such becomes publicly
available until the Effective Time.
E. Except for events relating to the business environment in general: (i)
since June 30, 2000 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, 2000, 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
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financial condition, operations or business of Fifth Third; and (iii) since June
30, 2000 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 Ottawa shareholders in accordance
with this Agreement, a sufficient number of shares of Fifth Third Common Stock.
Approval and adoption of this Agreement by the shareholders of Fifth Third is
not required under Ohio law, the regulations of the Nasdaq Stock Market 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 constitute a valid and binding obligation of Fifth
Third, enforceable in accordance with its terms, except to the extent that (i)
enforceability thereof may be limited by insolvency, reorganization,
liquidation, bankruptcy, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the availability of certain remedies may be precluded by
general principles of equity, subject, however, to the receipt of requisite
regulatory approvals.
3. Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby, does or will: (i) conflict with, result in a
breach of, violate or constitute a default, under Fifth Third's Second Amended
Articles of Incorporation, as amended, or Code of Regulations or, to the best
knowledge of its chief executive officer and chief financial officer, any
federal, foreign, state or local law, statute, ordinance, 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 Ottawa pursuant to the provisions of Sections 1701.84 and
1701.85 of the Ohio Revised Code; (iii) terminate or give any person the right
to terminate, amend, abandon, or refuse to perform any material agreement,
arrangement or commitment to which Fifth Third is a party or by which Fifth
Third's rights, properties or assets are subject or bound; or (iv) accelerate or
modify, or give any party thereto the right to accelerate or modify, the time
within which, or the terms according to which, Fifth Third is to perform any
duties or obligations or receive any rights or benefits under any material
agreement, arrangements or commitments.
G. Complete and accurate copies of (i) the Second Amended Articles of
Incorporation, as amended, and (ii) the Code of Regulations of Fifth Third in
force as of the date hereof have been delivered to Ottawa.
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 Ottawa 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
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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 Ottawa 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 Ottawa 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, 1999, and reports on Form 10-Q for the quarters ended March 31
and June 30, 2000;
b. any Current Report on Form 8-K with respect to any event occurring
after June 30, 2000 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, 2000.
The information set forth in the documents described in this subsection 2
(including all exhibits thereto and all documents incorporated therein by
reference) did not, as of the dates on which such reports were filed with the
SEC, (a) contain any untrue statement of a material fact, (b) omit any material
fact required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading, or (c) omit any material exhibit required to be filed therewith.
Prior to the date hereof no event has occurred subsequent to June 30, 2000 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 Ottawa.
J. There are no actions, suits, proceedings, investigations or assessments
of any kind pending or, to the best knowledge of the chief executive officer and
chief financial officer of Fifth Third, threatened against Fifth Third or any
Fifth Third subsidiary, which reasonably can be expected to result in any
material adverse change in the consolidated financial condition, operations or
business of Fifth Third.
K. Since June 30, 2000 to the date hereof, none of Fifth Third's banking
subsidiaries and thrift subsidiaries has incurred any unusual or extraordinary
loan losses which would be material to Fifth Third on a consolidated basis; and
to the best knowledge of the chief executive officer and chief financial officer
of Fifth Third, and in the light of any banking or AmeriBank's historical loan
loss experience and their managements' analysis of the quality and performance
of their respective loan portfolios, as of June 30, 2000, 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 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 Fifth Third and its subsidiaries through
the date hereof constitute complete and accurate representations of the tax
liabilities of Fifth Third and its subsidiaries for such years and accurately
set forth all items (to the extent required to be included or reflected in such
returns) relevant to its future tax liabilities, including the tax basis of its
properties and assets in all material respects. Neither Fifth Third nor any of
its subsidiaries is currently under audit nor have any of them been contacted
for an audit. Neither Fifth Third nor any of its subsidiaries is engaged in any
appeal proceeding in connection with any return.
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.
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N. Fifth Third has no unfunded liabilities with respect to any Benefit Plan
(as such term is defined in subparagraph T.1. of Section II hereof, but applied
to Fifth Third, its subsidiaries and affiliates) that are material, either
individually or in the aggregate, to Fifth Third on a consolidated basis and
that have not been recorded and disclosed as required by GAAP in the most recent
year-end, audited financial statements of Fifth Third supplied to Ottawa
pursuant to Paragraph D of Section III hereof.
O. The investment portfolios of Fifth Third and its subsidiaries and
affiliates consist of securities in marketable form. Since June 30, 2000, to the
date hereof Fifth Third and its affiliates, on a consolidated basis, have not
incurred any unusual or extraordinary losses in their respective investment
portfolios, and, except for events relating to the business environment in
general, including market fluctuations, the management of Fifth third is not
aware of any events which are reasonably certain to occur in the future and
which reasonably can be expected to result in any material adverse change in the
quality or performance of the investment portfolios of Fifth Third and its
affiliates on a consolidated basis.
P. As of the date hereof, Fifth Third is not aware of the existence of any
factor that would materially delay or materially hinder issuance of any of the
required regulatory approvals necessary to consummate the Merger or the other
transactions contemplated hereby.
Q. All representations and warranties contained in this Section III shall
expire at the Effective Time, and thereafter, neither Fifth Third nor any
officer or Director of Fifth Third shall have any further liability or
obligation with respect thereto, except for any misrepresentations, breaches of
warranties or violations of covenants that were made with intent to defraud.
R. Neither Fifth Third nor any of its subsidiaries has any reason to
believe that any conditions exist that might prevent or impede the Merger from
qualifying as a "reorganization" within the meaning of Section 368(a) of the
Code.
S. There are no actions, proceedings or investigations pending before any
environmental regulatory body, with respect to or threatened against or
affecting Fifth Third or any of its subsidiaries in respect to any "facility"
owned, leased or operated by any of them (but EXCLUDING any "facility" as to
which sole interest of Fifth Third or any of its subsidiaries is that of a
lienholder or mortgagee, but INCLUDING any "facility" to which title has been
taken pursuant to mortgage foreclosure or similar proceedings and INCLUDING any
"facility" in which Fifth Third or any of its subsidiaries ever participated in
the financial management of such facility to a degree sufficient to influence,
or have the ability to influence, the facility's treatment of hazardous waste)
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"), or under any Federal, state, local or municipal
statute, ordinance or regulation in respect thereof, in connection with any
release of any toxic or "hazardous substance", pollutant or contaminant into the
"environment" which, if adversely determined, (a) would require the payment by
Fifth Third or any of its Subsidiaries and/or require Fifth Third or any of its
subsidiaries to incur expenses of more than $250,000 (whether or not covered by
insurance) or (b) would otherwise have a material adverse effect on Fifth Third
or any of its Subsidiaries, nor, to the best knowledge of Fifth Third after
reasonable inquiry, is there any reasonable basis for the institution of any
such actions or proceedings or investigations which is probable of assertion,
nor are there any such actions or proceedings or investigations in which Fifth
Third or any of its subsidiaries is a plaintiff or complainant. Neither Fifth
Third nor any of its subsidiaries is liable in any material respect under any
applicable law for any release by any of them or for any release by any other
"person" of a hazardous substance caused by the spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing of hazardous wastes or other chemical substances, pollutants or
contaminants into the environment, nor is Fifth Third or any of its subsidiaries
liable for any material costs (as a result of the acts or omissions of Fifth
Third or any of its subsidiaries or, to the best knowledge of Fifth Third, as a
result of the acts or omissions of any other "person") of any remedial action
including, without limitation, costs arising out of security fencing,
alternative water supplies, temporary evacuation and housing and other emergency
assistance undertaken by any environmental regulatory body having jurisdiction
over Fifth Third or any of its subsidiaries to prevent or minimize any actual or
threatened release by Fifth Third or any of its subsidiaries of any hazardous
wastes or other chemical substances, pollutants and contaminants into the
environment which would endanger the public
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health or the environment. To the best knowledge of Fifth Third, no underground
storage tank presently is located on, nor has any such tank ever been located
on, any property owned by Fifth Third or any of its subsidiaries or any
"facility" where Fifth Third or any of its subsidiaries has exercised any
significant management role. All terms contained in quotation marks in this
paragraph and the paragraph immediately following shall have the meaning
ascribed to such terms, and defined in, CERCLA; in addition, toxic or hazardous
substances, as used in this paragraph and all paragraphs of this Section III.S.,
shall mean any material or substance that is defined or classified as a
"hazardous substance" pursuant to section 101 of CERCLA or Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. sec.1321); a "hazardous waste"
pursuant to Section 1004 or Section 3001 of the Resource Conservation and
Recovery Act (42 U.S.C. sec.sec.6803, 6921); a "toxic pollutant" under Section
307(a)(1) of the Federal Water Pollution Control Act (33 U.S.C. sec.1317(a)(1));
a "hazardous air pollutant" under Section 112 of the Clean Air Act (42 U.S.C.
sec.7412); a "pesticide" under Section 1 of the Federal Insecticide, Fungicide,
and Rodenticide Act (7 U.S.C. sec.136); or a "hazardous material" under the
Hazardous Materials Transportation Uniform Safety Act of 1990 (49 U.S.C. App.
sec.1802(4)).
To the best knowledge of Fifth Third each "facility" owned, leased or
operated by Fifth Third or any of its subsidiaries (but excluding any "facility"
as to which the sole interest of Fifth Third or any of its subsidiaries is that
of a lienholder or mortgagee, but including any "facility" to which title has
been taken pursuant to mortgage foreclosure or similar proceedings and including
any "facility" in which Fifth Third or any of its subsidiaries ever participated
in the financial management of such facility to a degree sufficient to
influence, or have the ability to influence, the facility's treatment of
hazardous waste) is, in all material respects, in compliance with all applicable
Federal, state, local or municipal statutes, ordinances, laws and regulations
and all orders, rulings or other decisions of any court, administrative agency
or other governmental authority relating to the protection of the environment,
except to the extent a failure to comply would not have a material adverse
effect on the business, operations and financial condition of Fifth Third and
its subsidiaries taken as a whole.
IV. OBLIGATIONS OF OTTAWA BETWEEN THE DATE OF THIS AGREEMENT AND THE EFFECTIVE
TIME.
A. Ottawa, 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 adopting this Agreement and any other documents or actions necessary
to the consummation of the Merger provided for herein pursuant to law. Ottawa
agrees to mail the proxy statement/prospectus to its shareholders in accordance
with the directions and under the supervision of Fifth Third as promptly as
possible after the registration statement is declared effective. The Board of
Directors of Ottawa intends to inform the shareholders of Ottawa in the proxy
materials relating to the annual or special meeting that all directors of Ottawa
intend to vote all shares of Ottawa Common Stock which they own of record in
favor of adopting this Agreement and any such other necessary documents or
actions, and all directors will recommend approval of this Agreement to the
other shareholders of Ottawa, subject only to such board's fiduciary
obligations.
B. 1. Consistent with GAAP, Ottawa agrees that on or before the Effective
Time based on a review of the loan losses, current classified assets and
commercial, multi-family and residential mortgage loans and investment
portfolios of AmeriBank and the Non-Bank Subsidiaries, Ottawa 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 Ottawa as is necessary in
conforming to such policies, practices, procedures and asset dispositions which
are mutually agreeable between the date of this Agreement until the Effective
Time; and
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2. From the date of this Agreement until the Effective Time, Ottawa,
AmeriBank and the Non-Bank Subsidiaries each will be operated in the ordinary
course of business, and none of them will, without the prior written consent of
Fifth Third, which consent shall not be unreasonably withheld: make any changes
in its capital or corporate structures; issue any additional shares of their
Common Stock other than pursuant to the exercise of options granted prior to the
date hereof; issue any other equity securities, other than pursuant to the
exercise of options granted prior to the date hereof; or, issue as borrower any
long term debt (other than FHLB advances having maturities not exceeding one (1)
year) or convertible or other securities of any kind, or right to acquire any of
its securities; make any material changes in its method of business operations;
make, enter into any agreement to make, or become obligated to make, any capital
expenditures in excess of $100,000; make, enter into or renew any agreement for
services to be provided to Ottawa, AmeriBank or any of the Non-Bank Subsidiaries
or permit the automatic renewal of any such agreement, except any agreement for
services in the ordinary course of business consistent with past practice
provided that Ottawa will consult with Fifth Third prior to renewal of any such
agreement providing for capital expenditures of more than $100,000 (for this
purpose the phrase "permit the automatic renewal" includes the failure to send a
notice of termination of such contract if such failure would constitute a
renewal), and, except as disclosed in Schedule 1; open for business any branch
office which has been approved by the appropriate regulatory authorities but not
yet opened or apply to the appropriate regulatory authorities to establish a new
branch office or expand any existing branch office; acquire, become obligated to
acquire, or enter into any agreement to acquire, any banking or non-banking
company or any branch offices of any such companies, other than such agreements
existing on the date hereof and disclosed to Fifth Third; make, declare, pay or
set aside for payment any cash dividends on its own stock other than normal and
customary cash dividends not to exceed $.12 per share per quarter through
December 31, 2000, paid in such amounts and at such times as Ottawa historically
has done on its common stock, provided this covenant shall only apply to Ottawa
and provided further that notwithstanding anything to the contrary herein, Fifth
Third and Ottawa shall cooperate in selecting the Effective Time to ensure that
the holders of Ottawa Common Stock do not become entitled to receive both a
dividend in respect of their Ottawa Common Stock and a dividend in respect of
the Fifth Third Common Stock or fail to be entitled to receive any dividend with
respect to any quarterly period or portion thereof in which the Effective Time
occurs; make, declare, pay or set aside for payment any stock dividends or make
any other distributions on its stock other than cash dividends as described in
the immediately preceding clause; change or otherwise amend any Benefit Plans
other than as required by law or as contemplated herein; and provide any
increases in employee salaries or benefits other than in the ordinary course of
business. Ottawa agrees that it will not sell or otherwise dispose of or
encumber any of the shares of the capital stock of AmeriBank or any of the
Non-Bank Subsidiaries which are now owned by it.
C. Except as required by applicable law or regulation, except for actions
taken with the consent of Fifth Third, neither Ottawa, AmeriBank nor any of the
Non-Bank Subsidiaries shall (a) implement or adopt any material change in their
interest rate risk management policies, procedures, or practices; (b) fail to
follow its existing policies or practices with respect to managing their
exposure to interest rate risk; or (c) fail to use commercially reasonable means
to avoid any material increase in their aggregate exposure to interest rate
risk.
D. Not later than the 15th day prior to the mailing of Ottawa's proxy
statement with respect to the Merger, Ottawa 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 "Ottawa Affiliates"). Ottawa shall use its best efforts to cause each
Ottawa 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.
E. Ottawa timely shall furnish Fifth Third with copies of all reports filed
by Ottawa with the SEC subsequent to the date of this Agreement and until the
Closing Date.
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
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Department of the Treasury, the Ohio Division of Financial Institutions, the
Michigan Division of Financial Institutions, the Office of Thrift Supervision,
and any other governmental agencies as are required to secure the requisite
approval of such agencies to the consummation of the transactions provided for
in this Agreement, and the parties shall cooperate in the preparation of an
appropriate registration statement, including the prospectus, proxy statement,
and such other documents necessary to comply with all federal and state
securities laws relating to the registration and issuance of the shares of Fifth
Third Common Stock to be issued to the shareholders of Ottawa in this
transaction (the expenses thereof, other than accounting, legal, investment
banking, financial consulting and associated expenses of Ottawa 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. Ottawa agrees that it
will, as promptly as practicable after request and at its own expense, provide
Fifth Third with all information and documents concerning Ottawa, AmeriBank and
the Non-Bank Subsidiaries, as shall be required in connection with preparing
such applications, registration statements and other documents and in connection
with securing such approvals. Prior to filing any such applications or other
documents with the applicable governmental agencies, Fifth Third shall provide
copies thereof to Ottawa. Fifth Third agrees that it will, as promptly as
practicable after request and at its own expense, provide Ottawa 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 Ottawa and
in connection with approvals required to be obtained by Ottawa hereunder. Prior
to filing any such applications, statements or other documents with the
applicable governmental agency, Ottawa shall provide 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. Ottawa agrees to permit Fifth Third, its officers, employees,
accountants, agents and attorneys, and Fifth Third agrees to permit Ottawa, its
officers, employees, accountants, agents and attorneys, to have reasonable
access during business hours to their respective books, records and properties,
and those of AmeriBank, the Non-Bank Subsidiaries and Fifth Third Bank, Indiana
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 Ottawa, AmeriBank
and the Non-Bank Subsidiaries or Fifth Third or Fifth Third Bank, Indiana, as
the case may be, prior to the Effective Time, and also to permit the monitoring
of the foregoing on an ongoing basis (such rights of examination and monitoring
to be subject to the confidentiality obligations set forth in such Paragraph
VII.D. hereof); provided, however, that any such examination by Fifth Third or
Ottawa shall not relieve Fifth Third or Ottawa 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. 1. Ottawa, AmeriBank and the Non-Bank Subsidiaries, without the advance
written consent of Fifth Third, shall not take any action which would reduce or
restrict the availability of surplus (excess of plan assets over plan
liabilities) under any defined benefit plan as defined in Section 414(j) of the
Code.
2. Ottawa, AmeriBank and the Non-Bank Subsidiaries, without the advance
written consent of Fifth Third, shall not (a) take any action which would cause
or result in the allocation of any shares held in the ESOP suspense account,
forfeiture account or excess 415 suspense account to participant accounts other
than ESOP loan repayments that are regularly scheduled prior to the Closing Date
under the terms of the original ESOP loan agreement and note, (b) take any
action that would accelerate the allocation of the ESOP suspense shares to
participant accounts, or (c) take any action that would otherwise give ESOP plan
participants any claim or right to shares held in the ESOP suspense account.
3. If Fifth Third so requests, Ottawa, AmeriBank or any Non-Bank Subsidiary
shall develop a plan and timetable for amending or terminating any or all of the
Qualified Benefit Plans, and, with the advance written
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approval of Fifth Third, shall proceed with the implementation of said amendment
or termination plan and timetable.
4. Ottawa, AmeriBank and the Non-Bank Subsidiaries shall provide to Fifth
Third at least sixty (60) days prior to the Effective Time, documentation
reasonably satisfactory to Fifth Third demonstrating that the requirements of
Sections 401(a)(4), 404, 410(b), 412, 415, 416, 401(k) and (m) of the Code have
been satisfied by all of its Qualified Benefit Plans for the 1997, 1998 and 1999
plan years.
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
Ottawa shall not be deemed to involve a discretionary acceleration of vesting
and vesting thereunder shall accelerate as of the Effective Time or any date as
provided therein.
6. If requested by Fifth Third, Ottawa, AmeriBank and the Non-Bank
Subsidiaries shall take all actions necessary to freeze any Qualified Benefit
Plan as of the Effective Time such that no further contributions (including
employee 401(k) contributions) shall be made under the Qualified Benefit Plan
after the Effective Time.
7. Ottawa, AmeriBank and the Non-Bank Subsidiaries, without the advance
written consent of Fifth Third, which shall not be unreasonably withheld or
delayed, 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, except as required by the
Qualified Benefit Plan or applicable law; or (c) make any contributions to the
Qualified Benefit Plans (except 401(k) employee contributions) after the date of
this Agreement. After Ottawa has satisfied the requirements of Section E (4)
above, consent of Fifth Third shall not be required for distributions permitted
pursuant to the terms of the Qualified Benefit Plans as currently in effect.
8. Ottawa, AmeriBank and the Non-Bank Subsidiaries shall provide to Fifth
Third at least sixty (60) days prior to the Effective Time, documentation
reasonably satisfactory to Fifth Third demonstrating that they have all power
and authority necessary to amend and/or terminate any plan providing retiree
medical coverage, thereby reducing or eliminating future liability.
E. Assuming that Ottawa delivers to Fifth Third the Section 16 Information
in a timely fashion prior to the Effective Time, the Board of Directors of Fifth
Third, or a committee of Non-Employee Directors thereof (as such term is defined
for purposes of Rule 16b-3(d) under the Exchange Act), shall reasonably promptly
thereafter and in any event prior to the Effective time adopt a resolution,
expressly relying on Ottawa's representation that any such options or other
grants were upon their issuance exempt from liability pursuant to Section 16(b)
under the Exchange Act, providing that the receipt by the Ottawa Insiders of
Fifth Third Common Stock in exchange for shares of Ottawa Common Stock, and of
options to purchase shares of Fifth Third Common Stock upon conversion of
options to purchase shares of Ottawa Common Stock, in each case pursuant to the
transactions contemplated hereby and to the extent such securities are listed in
the Section 16 Information, are intended to be exempt from liability pursuant to
Section 16(b) under the Exchange Act; provided, however, that the Board of
Directors of Fifth Third will be under no obligation to adopt such a resolution
unless it may expressly rely on a written representation by Ottawa that any such
options or other grants were, upon their issuance, exempt from liability
pursuant to Section 16(b) under the Exchange Act. "Section 16 Information" shall
mean information accurate in all respects regarding the Ottawa Insiders, the
number of shares of Ottawa Common Stock held by each such Ottawa Insider and
expected to be exchanged for Fifth Third Common Stock in the Merger, and the
number and description of the options to purchase shares of Ottawa Common Stock
held by each such Ottawa Insider and expected to be converted into options to
purchase shares of Fifth Third Common Stock in connection with the Merger.
"Ottawa Insiders" shall mean those officers and directors of Ottawa who are
subject to the reporting requirements of Section 16(a) of the Exchange Act and
who are listed in the Section 16 Information.
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F. A certified copy of the resolution of the Board of Directors of Ottawa
approving the execution of this Agreement, specifically referring to the oral
fairness opinion rendered by Keefe, Bruyette & Woods, Inc. ("KBW") shall be
delivered to Fifth Third on the date of execution of this Agreement. A copy of
the executed written opinion of KBW dated effective as of the date of the board
action will be delivered to Fifth Third as soon as practicable after the date of
this Agreement.
G. Fifth Third timely shall furnish Ottawa with copies of all reports filed
by Fifth Third with the SEC subsequent to the date of this Agreement and until
the Closing Date.
H. Fifth Third shall register its shares of Common Stock to be issued to
the Ottawa shareholders hereunder with the SEC pursuant to the Securities Act of
1933, as amended, and with all applicable state securities authorities and
Nasdaq.
I. Ottawa shall terminate its dividend reinvestment plan on or prior to the
Effective Time. Ottawa agrees to take all necessary action to properly terminate
such plan, including without limitation to provide any required notices of such
termination to the plan participants prior to the Effective Time. Ottawa further
agrees that any and all purchases to be made under its dividend reinvestment
plan shall be consummated prior to the Effective Time, that Ottawa shall hold no
monies on behalf of any person for future purchases of Ottawa Common Stock at
the Effective Time and that all shares of Ottawa Common Stock issued and
outstanding pursuant to the plan shall be converted into shares of Fifth Third
Common Stock in accordance with Article I hereof. Subsequent to the Effective
Time, any and all participants in the Ottawa dividend reinvestment plan shall be
eligible to participate in Fifth Third Direct upon their proper enrollment in
Fifth Third Direct.
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 Ottawa shall have duly adopted this Agreement
in accordance with and as required by law and in accordance with its
Certificate of Incorporation and Bylaws.
2. All necessary governmental and regulatory orders, consents,
clearances and approvals and requirements shall have been secured and
satisfied for the consummation of such transactions, including without
limitation, those of the Federal Reserve System, the Michigan Division of
Financial Institutions, the Department of the Treasury, the Office of
Thrift Supervision and the Federal Deposit Insurance Corporation to the
extent required.
3. Prior to or at the Effective Time, no material investigation by any
state or federal agency shall have been threatened or instituted seeking to
enjoin or prohibit, or enjoining or prohibiting, the transactions
contemplated hereby and no material governmental action or proceeding shall
have been threatened or instituted before any court or government body or
authority, seeking to enjoin or prohibit, or enjoining or prohibiting, the
transactions contemplated hereby other than investigations, actions and
proceedings which have been withdrawn prior to or at the Effective Time
without material adverse effect to Fifth Third or Ottawa and other than
regularly-scheduled regulatory examinations.
4. Any waiting period mandated by law in respect of the final approval
by any applicable Federal or State regulator(s) of the transaction
contemplated herein shall have expired.
5. Fifth Third shall have registered its shares of Common Stock to be
issued to the Ottawa 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 Ottawa shareholders
hereunder shall have been authorized for trading on the Nasdaq Stock Market
upon official notice of issuance.
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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 Ottawa which specifically refers to the condition or conditions being waived:
1. All of the representations and warranties of Ottawa set forth in
Section II of this Agreement shall be true and correct in all material
respects as of the date of this Agreement and at and as of the Closing Date
(as hereinafter defined) as if each such representation and warranty was
given on and as of the Closing Date, except for (i) 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)
inaccuracies of representations and warranties which would not have, or
would not reasonably be expected to have, a material adverse effect on the
financial condition, business or operations of Ottawa, AmeriBank and the
Non-Bank Subsidiaries taken as a whole.
2. Ottawa shall have performed all of the obligations required of it
under the terms of this Agreement in all material respects.
3. Silver, Freedman & Taff, L.L.P., counsel for Ottawa, 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 Ottawa immediately prior to the Effective
Time, as shown by and reflected in its books and records of accounts on a
consolidated basis in accordance with GAAP, consistently applied, shall not
be less than $75,000,000. For purposes of this subparagraph 4 to Section
VI.B., (A) any expenses or accruals after the date hereof relating to (i)
the adjustments contemplated by Section IV.B.(i) herein, (ii) termination
or funding of any of Benefit Plans of Ottawa, AmeriBank and the Non-Bank
Subsidiaries as contemplated herein, (iii) expenses associated with this
Agreement and the transactions contemplated herein, and (iv) expenses and
losses associated with valuing of Ottawa's or AmeriBank's investments at
current market value as required by GAAP (including SFAS 115) shall be
excluded for purposes of calculation of Ottawa'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 Ottawa as at
the end of the month immediately preceding the Effective Time, as well as
the unaudited separate financial statements of AmeriBank and the Non-Bank
Subsidiaries as of the same date, performed such other auditing procedures
as may be requested by Fifth Third and reported in good faith that they are
not aware of any material modifications which would have a material adverse
effect on the financial condition of Ottawa, AmeriBank or any of the
Non-Bank Subsidiaries taken as a whole that should be made in order for
such financial statements to (i) be in conformity with GAAP, consistently
applied, excluding the presentation of footnotes, and (ii) accurately state
the financial condition and results of operations of Ottawa, AmeriBank and
the Non-Bank Subsidiaries.
6. The receipt of a certificate from Ottawa, AmeriBank and the
Non-Bank Subsidiaries, executed by the chief executive officer and chief
financial officer of each, dated the Closing Date, certifying to their best
knowledge and belief that: (i) all of the representations and warranties
set forth in Section II hereof were true and correct as of the date of this
Agreement and as of the Effective Time in all material respects, except for
(y) any such representations and warranties made as of a specified date,
which shall be true and correct in all material respects as of such date,
and (z) inaccuracies of representations and warranties which would not
have, or would not reasonably be expected to have, a material adverse
effect on the financial condition, business or operations of Ottawa,
AmeriBank, and the Non-Bank Subsidiaries taken as a whole; and (ii) it has
met and fully complied in all material respects with all of the obligations
required of it under the terms of this Agreement, except for breaches of
obligations which would not have, or would not reasonably be expected to
have, any material adverse effect on the
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financial condition, business or operations of Ottawa, AmeriBank and the
Non-Bank Subsidiaries, taken as a whole.
7. The total issued and outstanding shares of Ottawa Common Stock
shall not exceed 7,477,841 shares including all options to purchase Ottawa
Common Stock, plus shares issued in connection with Ottawa's Dividend
Reinvestment Program as permitted herein.
8. (a) In consideration of the consummation of this transaction, the
Directors of Ottawa shall execute and deliver to Fifth Third an agreement
by which the Directors shall agree for a period of two (2) years after the
Effective Time to refrain from directly or indirectly, whether for their
own account or for the account of any other person, firm, corporation, or
other business organization, (i) in the states of Michigan, Ohio, Kentucky,
Indiana, Florida or Arizona, engage in providing Banking Services (as
defined below) as an employee, officer, director, or consultant on behalf
of any other business organization who is a competitor of Fifth Third, (ii)
provide Banking Services to any Client (as defined below), (iii) make any
statement or take any actions that may interfere with Fifth Third's or any
Affiliate's business relationships with any Client, (iv) contact either
directly or indirectly any Client or otherwise induce or attempt to induce
any Client to enter into any business relationship with any person or firm
other than Fifth Third or an Affiliate relating to Banking Services of any
type, (v) endeavor or entice away from Fifth Third any person who the
Director has actual knowledge that such person is, or was at any time
during the period the Director was employed by Fifth Third or during the
Restricted Period, employed by or associated with Fifth Third as an
executive, officer, employee, manager, salesperson, consultant, independent
contractor, representative or other agent, or (vi) take any actions that
may interfere with Fifth Third's property rights in lists of Clients or
otherwise diminish the value of such lists to Fifth Third. Notwithstanding
any provision contained in this Section 8, the restrictions contained
herein shall not be applicable to any activity of the Director or any
activity of his or her spouse which existed at the time of this Agreement
and which was disclosed by the Director to Fifth Third, and may be waived
by Fifth Third with respect to one or more Directors in writing at any time
and from time to time in Fifth Third's sole discretion after receipt of a
written request from any Director.
(b) The term "Restricted Period" shall mean the period beginning on
the Effective Time and ending two (2) years thereafter.
(c) The term "Banking Services" shall mean retail or commercial
deposit or lending business, including mortgage lending, trust services,
securities brokerage, 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 three (3) 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 Ottawa:
The obligation of Ottawa to consummate the transactions provided for herein
and in the Agreement of Merger is subject to the fulfillment at or prior to the
Effective Time of each of the following conditions unless waived by Ottawa in a
writing delivered to Fifth Third which specifically refers to the condition or
conditions being waived:
1. All of the representations and warranties of Fifth Third set forth
in Section III of this Agreement shall be true and correct in all material
respects as of the date of this Agreement and at and as of the Closing Date
as if each such representation and warranty was given on and as of the
Closing Date,
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except for (i) 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) inaccuracies of representations and warranties which
would not have, or would not reasonably be expected to have, a material
adverse effect on the financial condition, business or operations of Fifth
Third and its subsidiaries taken as a whole.
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 Ottawa in substantially the form appended hereto as
Appendix B.
4. The receipt of a certificate from Fifth Third, executed by its
chief executive officer and chief financial officer, dated the Closing
Date, certifying to their best knowledge and belief that: (i) all of the
representations and warranties set forth in Section III were true and
correct as of the date of this Agreement and as of the Closing Date in all
material respects, except for (y) any such representations and warranties
made as of a specified date, which shall be true and correct in all
material respects as of such date, and (z) inaccuracies of representations
and warranties which would not have, or would not reasonably be expected to
have, a material adverse effect on the financial condition, business or
operations of Fifth Third and its subsidiaries taken as a whole; and, (ii)
Fifth Third has met and fully complied in all material respects with all of
the obligations required of it under the terms of this Agreement, except
for breaches of obligations which would not have, or would not reasonably
be expected to have, any material adverse effect on the financial
condition, business or operations of Fifth Third and its subsidiaries,
taken as a whole.
5. Fifth Third Bank's Trust Department (Fifth Third's Cincinnati, Ohio
affiliate), as the Exchange Agent, will acknowledge in writing to Ottawa
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
Ottawa pursuant to this Agreement, and (ii) sufficient cash to be paid to
the Ottawa shareholders for fractional shares.
6. Douglas Iverson, Vice Chairman and CEO of Ottawa and Ronald Haan,
President and COO of Ottawa shall have executed and delivered to Fifth
Third a release and termination agreement in form and substance reasonably
acceptable to Fifth Third and each of those officers releasing Ottawa and
Fifth Third of and from any and all liability arising from employment
agreements executed by such officers and Ottawa in exchange for the payment
of the consideration set forth therein. Jon Swets shall have executed and
delivered to Fifth Third a release and termination agreement in form and
substance reasonably acceptable to Fifth Third and Jon Swets releasing
Ottawa and Fifth Third of and from any and all liability arising from a
severance agreement with Ottawa in exchange for the payment of the
consideration set forth therein.
VII. ADDITIONAL COVENANTS
A. AmeriBank shall be merged with and into Fifth Third Bank, Indiana, to be
effective on the Effective Time. The parties hereto agree to cooperate with one
another to effect such merger. Upon consummation of any merger of AmeriBank, the
separate corporate existence of AmeriBank 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 employees of Ottawa, AmeriBank
and the Non-Bank Subsidiaries who desire employment within the Fifth Third
holding company system as possible, to the extent of available positions and
consistent with Fifth Third's standard staffing levels and personnel policies;
at or as promptly as practicable after the Effective Time as Fifth Third shall
reasonably determine, Fifth Third shall provide to each full-time employee of
Ottawa, AmeriBank and the Non-Bank Subsidiaries that is employed by Fifth third
("Former Ottawa Employees") the opportunity to participate in each Benefit Plan
maintained by Fifth Third for similarly-situated employees, or a plan of
comparable value, provided that with respect to such plans maintained by Fifth
Third, Former Ottawa Employees shall be given credit for service with Ottawa,
AmeriBank and the Non-Bank Subsidiaries in determining participation in,
eligibility for, and vesting in, benefits thereunder, and only with respect to
severance, sick pay and vacation plans, accrual of benefits; provided further
that no
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Former Ottawa Employees shall be entitled to participate in the Fifth Third
Bancorp Master Retirement Plan which has been frozen to new participants; and
provided further that such continuing employees will not be subject to any
exclusion or penalty for pre-existing conditions that were covered under the
medical plans of Ottawa, AmeriBank and the Non-Bank Subsidiaries immediately
prior to the Effective Time or any waiting period relating to coverage under
Fifth Third's medical plan; and provided further that to the extent that the
initial period of coverage for employees of Ottawa, AmeriBank or of the Non-Bank
Subsidiaries under any plan of Ottawa, AmeriBank or of the Non-Bank
Subsidiaries, whichever is applicable, that is an "employee welfare benefit
plan" as defined in Section 3(1) of ERISA is not a full 12 month period of
coverage, employees of Ottawa, AmeriBank or of the Non-Bank Subsidiaries shall
be given credit under the applicable welfare plan for any deductibles and
co-insurance payments made by such employees of Ottawa, AmeriBank or of the
Non-Bank Subsidiaries under the corresponding welfare plan during the balance of
such twelve (12) month period of coverage.
2. Those employees (other than temporary and/or co-operative employees) of
Ottawa, AmeriBank and the Non-Bank Subsidiaries 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-five (35)
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 one hundred
twenty (120) 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 (a) with respect to the four (4)
officers of AmeriBank who held the title of Vice President as of July 1, 2000,
twenty-six (26) weeks of pay, and (b) with respect to all other employees, two
(2) weeks of pay for each year of service up to a maximum of twenty-six (26)
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. Any
employee employed by more than one corporation shall be entitled to payment
under only one severance plan. Fifth Third shall provide notification to Ottawa
of those employees it will or will not be hiring at least 30 days prior to the
Effective Time in order that such employees terminated by Ottawa 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 Ottawa, AmeriBank or any Non-Bank Subsidiary who has an
employment or severance agreement with Ottawa or AmeriBank as of June 30, 2000
(each a "Contract Officer") shall receive as of the Effective Time, the
severance or termination payments agreed to pursuant to Section VI. C. 6.
("Contract Payments") and shall not receive any severance payments from Ottawa
and Fifth Third in connection with the Merger, pursuant to Section VII. B.2. As
a condition to receiving their Contract Payments each Contract Officer shall
sign and deliver to Fifth Third a termination and release agreement. All such
agreements shall be in the form attached hereto as Appendix C. Notwithstanding
the foregoing or any other provision of this Agreement, in no event shall any
Contract Officer receive any payment that would be considered an "Excess
Parachute Payment" pursuant to Section 280(G) of the Code.
C. (i) From and after the Effective Time, Fifth Third shall assume the
obligations of Ottawa, AmeriBank and the Non-Bank Subsidiaries arising under
applicable Delaware, Michigan, Ohio and Federal law in existence as of the date
hereof or as amended prior to the Effective Time and under the Certificate of
Incorporation, Charter and Bylaws, as applicable, of Ottawa, AmeriBank or the
Non-Bank Subsidiaries as in effect on the date hereof to indemnify, defend and
hold harmless each person who is now, or has been at any time prior to the date
hereof or who becomes, prior to the Effective Time, an officer or director of
Ottawa, AmeriBank, or any of the Non-Bank 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
Ottawa, AmeriBank or any of the Non-Bank Subsidiaries if such Claim pertains to
any matter or fact arising, existing or occurring prior to the Effective
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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 Certificate
of Incorporation, Charter or Bylaws, as applicable, of Ottawa, AmeriBank or any
of the Non-Bank Subsidiaries. Fifth Third's assumption of the indemnification
obligations of Ottawa, AmeriBank and the Non-Bank Subsidiaries as provided
herein shall continue for a period of Five (5) years after the Effective Time
or, in the case of claims asserted prior to the fifth (5th) 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 Ottawa and its subsidiaries who become directors, officers or
employees of Fifth Third or any of its subsidiaries, except for the
indemnification rights set forth in subparagraph (i) above, shall have
indemnification rights with prospective application only. The prospective
indemnification rights shall consist of such rights to which directors, officers
or employees of Fifth Third or the subsidiary by which such person is employed
are entitled under the provisions of the Articles of Incorporation of Fifth
Third or similar governing documents of Fifth Third or its applicable
subsidiaries, as in effect from time to time after the Effective Time, as
applicable, and provisions of applicable law as in effect from time to time
after the Effective Time.
(iii) The obligations of Fifth Third provided under this Section VII.C. are
intended to benefit, and be enforceable against Fifth Third directly by, the
Indemnified Parties, and shall be binding on all respective successors of Fifth
Third.
(iv) Fifth Third shall also purchase and keep in force for a two (2) year
period, a policy of directors' and officers' liability insurance to provide
coverage for acts or omissions of the type currently covered by Ottawa'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 125% of the annual costs currently paid for such coverage by Ottawa.
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 Ottawa concerning
Ottawa, AmeriBank and the Non-Bank Subsidiaries. Ottawa 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 Ottawa or Fifth Third,
as the case may be, and shall not be used by Fifth Third or Ottawa, as the case
may be, in any way detrimental to Ottawa or Fifth Third.
E. All notices under this Agreement or under the Agreement of Merger shall
be in writing and shall be sufficient in all respects if delivered in person or
mailed by certified mail, return receipt requested, with postage prepaid and
addressed, if to Ottawa to: Mr. Gordon H. Cunningham, Chairman, Ottawa Financial
Corporation, 245 Central Avenue, Holland, Michigan 49423 with a copy to: James
Fleischer, Esq., Silver, Freedman & Taff, L.L.P., 1100 New York, N.W.,
Washington, D.C. 20005; if to Fifth Third, to Mr. George A. Schaefer, Jr.,
President and Chief Executive Officer, Fifth Third Bancorp, 38 Fountain Square
Plaza, Cincinnati, Ohio 45263, with a copy to Paul L. Reynolds, Esq., Executive
Vice President and General Counsel, Fifth Third Bank, Legal Department, 38
Fountain Square Plaza, M.D. 10AT76, 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.
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F. This Agreement, together with the written instruments specifically
referred to herein and such other written agreements delivered by Fifth Third or
Ottawa to each other pursuant hereto constitute the entire agreement between the
parties with regard to the transactions contemplated herein and supersede any
prior agreements, whether oral or in writing. This Agreement may be hereafter
amended only by a written instrument executed by each of the parties pursuant to
Section X hereof.
G. During the period from the date of this Agreement to the Effective Time,
except with the prior approval of Fifth Third, Ottawa shall not, and shall not
permit its representatives to, directly or indirectly, subject to the exercise
by the Directors of Ottawa of their fiduciary duties, initiate, solicit,
negotiate with, encourage discussions with, provide information to, or agree to
a transaction with, any corporation, partnership, person or other entity or
group concerning any merger of either Ottawa or AmeriBank 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
Ottawa, AmeriBank or any of the Non Bank Subsidiaries (any such transaction
being referred to herein as an "Acquisition Transaction"). Subject to the
exercise by the Directors of Ottawa of their fiduciary duties, Ottawa promptly
shall communicate to Fifth Third the terms of any proposal which it may receive
in respect of an Acquisition Transaction and any request by or indication of
interest on the part of any third party with respect to initiation of any
Acquisition Transaction or discussions with respect thereto.
H. Fifth Third and Ottawa shall each indemnify and hold the other harmless
for any claim, liability or expense (including reasonable attorneys' fees)
arising from a misstatement or omission in the applications submitted to
regulatory agencies for approval of the transaction contemplated by this
Agreement relating to the indemnifying party which is based or made in reliance
upon any representation, warranty, or covenant of such party in this Agreement
or any certification, document, or other information furnished or to be
furnished by such party pursuant to this Agreement. From and after Closing Date,
this subsection shall be of no further force or effect.
I. Following the satisfaction of all conditions to closing the Merger,
other than the expiration of any waiting period required by any regulatory
agency after its approval of the Merger is issued and conditions which are only
capable of being satisfied at closing, upon the request of Fifth Third and at
the sole option of Fifth Third, Ottawa and AmeriBank shall execute and deliver
to Midwest Payment Systems, Inc. ("MPS") an agreement to convert all electronic
funds transfer ("EFT") related services to MPS and the Jeanie(R) system. Such
Agreement shall provide that MPS will be the exclusive provider of such services
to Ottawa and AmeriBank for a period of five (5) years from the date such
agreements are executed. Fifth Third agrees that the cost of the conversion of
Ottawa and AmeriBank 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 Ottawa and
the Thrift Subsidiaries for the Jeanie(R) service shall not exceed those charged
by the current EFT service provider of Ottawa and AmeriBank, 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 Section VIII hereof for any reason except a material breach or
default by Ottawa, and if, in such instance, Ottawa 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 Ottawa or AmeriBank 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
Ottawa or AmeriBank.
J. Fifth Third and Ottawa 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
Ottawa into such releases or public filings unless determined to be appropriate
by Fifth Third in good faith.
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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, Ottawa 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 Ottawa, AmeriBank and the Non-Bank 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
Ottawa 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 Ottawa 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 Ottawa and its subsidiaries, taken as a whole, provided,
however, that no such information so disclosed to Ottawa shall be deemed an
exception to any representation, warranty or covenant made by Fifth Third unless
Ottawa, in its sole discretion, agrees in writing to accept such exception.
VIII. TERMINATION
A. This Agreement may be terminated at any time prior to the Effective Time
by written notice delivered by Fifth Third to Ottawa or by Ottawa to Fifth Third
in the following instances:
1. By Fifth Third or Ottawa, if there has been to the extent
contemplated in Section VI.B.1. and 2. and Section VI.C.1. and 2. herein, a
material misrepresentation, a material breach of warranty or a material
failure to comply with any covenant on the part of the other party with
respect to the representations, warranties, and covenants set forth herein
and such misrepresentations, breach or failure to comply has not been cured
(if capable of cure) within thirty (30) days after receipt of written
notice, provided, the party in default shall have no right to terminate for
its own default.
2. By Fifth Third or Ottawa, 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, 2000,
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, including
without limitation, the payment by either party of its transaction expenses
related to the actions contemplated by the Agreement and the expenses or
losses associated with valuing of Ottawa's or AmeriBank's investments at
current market value as required by GAAP.
3. By Fifth Third or Ottawa, if the merger transaction contemplated
herein has not been consummated by February 28, 2001, 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 Ottawa.
5. By Fifth Third if any event occurs which renders impossible of
satisfaction in any material respect one or more of the conditions to the
obligations of Fifth Third to effect the Merger set forth in Sections VI.A.
and B. herein and non-compliance is not waived by Fifth Third.
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6. By Ottawa if any event occurs which renders impossible of
satisfaction in any material respect one or more of the conditions to the
obligations of Ottawa to effect the Merger as set forth in Sections VI.A.
and C. herein and non-compliance is not waived by Ottawa.
B. If Ottawa 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 Ottawa
must be in compliance with Section IV, Paragraph A hereof.
C. Upon termination as provided in this Section, this Agreement and the
Agreement of Merger, except for the provisions of Paragraphs D, H, J and K of
Section VII hereof shall be void and of no further force or effect, and, except
as provided in Paragraph H of Section VII hereof, neither party hereto not in
material breach or default of its representations, warranties and covenants
hereunder shall have any liability of any kind to the other party including but
not limited to liability for expenses incurred by the other party in connection
with this transaction; provided that no such termination shall relieve a
breaching party from liability for any uncured willful breach of a covenant,
undertaking, representation or warranty giving rise to such termination.
D. Fifth Third and Ottawa agree that irreparable damage would occur and
that neither Fifth Third nor Ottawa would have any adequate remedy at law in the
event that any of the provisions of this Agreement are not performed in
accordance with their specific terms or were otherwise breached. If any action
is brought by either party to enforce this Agreement, the other party shall
waive the defense that there is an adequate remedy at law. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any federal court located in the State of Ohio
or an Ohio state court, this being in addition to any other remedy to which they
are entitled at law or in equity.
IX. CLOSING AND EFFECTIVE TIME
The consummation of the transactions contemplated by this Agreement shall
take place at a closing to be held at the offices of Fifth Third in Cincinnati,
Ohio on a Friday which is as soon as is reasonably possible following the date
that all of the conditions precedent to closing set forth in Section VI hereof,
including the waiting period required by any banking or financial services
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 Ottawa and Fifth Third) with the
Secretary of the State of Ohio in accordance with law and this Agreement, the
Merger provided for herein shall become effective at the close of business on
said day (the "Effective Time"). By mutual agreement of the parties, the closing
may be held at any other time or place or on any other date and the
effectiveness of the Merger (and the Effective Time) may be changed by such
mutual agreement. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for agreements of the parties which by their
terms are intended to be performed after the Effective Time.
X. AMENDMENT
This Agreement may be amended, modified or supplemented by the written
agreement of Ottawa 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 Ottawa, but after any such approval by
the shareholders of Ottawa 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
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to the benefit of the parties hereto and their respective successors and
permitted assigns but except as specifically set forth herein none of the
provisions hereof shall be binding upon and inure to the benefit of any other
person, firm or corporation whomsoever. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned or transferred by
operation of law or otherwise by any party hereto without the prior written
consent of the other party hereto; provided, however, that the merger or
consolidation of Fifth Third shall not be deemed an assignment hereunder if
Fifth Third is the surviving corporation in such merger or consolidation and
Fifth Third Common Stock shall thereafter continue to be publicly traded and
issuable to Ottawa shareholders pursuant to the terms of this Agreement.
XII. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original for all purposes but such counterparts taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date hereinabove set forth.
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
OTTAWA FINANCIAL CORPORATION
(SEAL) By: /s/ DOUGLAS J. IVERSON
----------------------------------
Douglas J. Iverson
Chief Executive Officer
Attest: /s/ RONALD L. HANN
----------------------------------
Ronald L. Hann
President, Chief Operating Officer
and Secretary
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ANNEX B
August 31, 2000
Board of Directors
Ottawa Financial Corporation
245 Central Avenue
Holland, Michigan 49423
Dear Gentlemen:
You have requested our opinion as an independent investment banking firm
regarding the fairness, from a financial point of view, to the stockholders of
Ottawa Financial Corporation ("OFCP"), of the consideration to be paid by Fifth
Third Bancorp ("FITB") in the merger (the "Merger") between OFCP and FITB. We
have not been requested to opine as to, and our opinion does not in any manner
address, OFCP's underlying business decision to proceed with or effect the
Merger.
Pursuant to the Agreement and Plan of Merger, dated August 31, 2000, by and
among OFCP and FITB (the "Agreement"), at the effective time of the Merger, FITB
will acquire all of OFCP's issued and outstanding shares of common stock. FITB
will issue to the holders of OFCP's common stock .5400 shares of FITB common
stock if the Average Closing Price (as defined in the "Agreement") is equal to
or greater than $40.75; or that number of shares or percentage of a share of
Fifth Third common stock obtained by dividing $22.01 by the Average Closing
Price if the Average Closing Price is less than $40.75 . The complete terms of
the proposed transaction are described in the Agreement, and this summary is
qualified in its entirety by reference thereto.
Keefe, Bruyette & Woods, Inc., as part of its investment banking business,
is regularly engaged in the evaluation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, and
distributions of listed and unlisted securities. We are familiar with the market
for common stocks of publicly traded banks, savings institutions and bank and
savings institution holding companies.
In connection with this opinion we reviewed certain financial and other
business data supplied to us by OFCP including (i) the Agreement and Plan of
Merger by and among OFCP and FITB, (ii) Annual Report, Proxy Statement and Form
10-K for the years ended December 31, 1997, 1998 and 1999, (iii) Form 10-Q for
the quarters ended March 31, 2000 and June 30, 2000 and other information we
deemed relevant. We discussed with management and the boards of directors of
OFCP and its wholly owned subsidiary, AmeriBank, the current position and
prospective outlook for OFCP. We considered historical quotations and the prices
of recorded transactions in OFCP's common stock over the last three years. We
reviewed financial and stock market data of other savings institutions,
particularly in the Midwestern region of the United States, and the financial
and structural terms of several other recent transactions involving mergers and
acquisitions of savings institutions or proposed changes of control of
comparably situated companies.
For FITB, we reviewed the audited financial statements, 10-K's, and Proxy
Statements for the years ended December 31, 1997, 1998, and 1999, and Form 10-Q
for the quarters ended March 31, 2000 and June 30, 2000 and certain other
information deemed relevant. We also discussed with management of FITB, the
current position and prospective outlook for FITB.
For purposes of this opinion we have relied, without independent
verification, on the accuracy and completeness of the material furnished to us
by OFCP and FITB and the material otherwise made available to us, including
information from published sources, and we have not made any independent effort
to verify such data. With respect to the financial information, including
forecasts and asset valuations we received from OFCP, we assumed (with your
consent) that they had been reasonably prepared reflecting the best currently
available estimates and judgment of OFCP's management. In addition, we have not
made or obtained any independent appraisals or evaluations of the assets or
liabilities, and potential and/or contingent liabilities of OFCP or FITB. We
have further relied on the assurances of management of OFCP and FITB that they
are not aware of any facts that would make such information inaccurate or
misleading. We express no opinion on
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Board of Directors
Ottawa Financial Corporation
August 31, 2000
Page 2
matters of a legal, regulatory, tax or accounting nature or the ability of the
Merger, as set forth in the Agreement, to be consummated.
In rendering our opinion, we have assumed that in the course of obtaining
the necessary approvals for the Merger, no restrictions or conditions will be
imposed that would have a material adverse effect on the contemplated benefits
of the Merger to OFCP or the ability to consummate the Merger. Our opinion is
based on the market, economic and other relevant considerations as they exist
and can be evaluated on the date hereof.
Consistent with the engagement letter with you, we have acted as financial
advisor to OFCP in connection with the Merger and will receive a fee for such
services. In addition, OFCP has agreed to indemnify us for certain liabilities
arising out of our engagement by OFCP in connection with the Merger.
Based upon and subject to the foregoing, as outlined in the foregoing
paragraphs and based on such other matters as we considered relevant, it is our
opinion that as of the date hereof, the consideration to be paid by FITB in the
Merger is fair, from a financial point of view, to the stockholders of OFCP.
This opinion may not, however, be summarized, excerpted from or otherwise
publicly referred to without our prior written consent, although this opinion
may be included in its entirety in the proxy statement of OFCP used to solicit
stockholder approval of the Merger. It is understood that this letter is
directed to the Board of Directors of OFCP in its consideration of the
Agreement, and is not intended to be and does not constitute a recommendation to
any stockholder as to how such stockholder should vote with respect to the
Merger.
Very truly yours,
Keefe, Bruyette, & Woods, Inc.
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