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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ______________)*
Mid-Am, Inc.
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(Name of Issuer)
Mid-Am, Inc. Common Stock
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(Title of Class of Securities)
594930109
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(CUSIP Number)
M. Patricia Oliver, Esq.
Squire, Sanders & Dempsey
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
(216) 479-8500
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
May 21, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7).
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
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CUSIP NO. 594930109 PAGE 2 OF 17 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Citizens Bancshares, Inc.
IRS #34-1372535
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC*
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 4,648,726 shares of Common Stock*
OWNED BY ------------------------------------------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON 0
WITH ------------------------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
4,648,726 shares of Common Stock*
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10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,648,726 shares of Common Stock *
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.6%
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14 TYPE OF REPORTING PERSON
CO
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</TABLE>
*BENEFICIAL OWNERSHIP OF 4,648,726 SHARES OF COMMON STOCK
REPORTED HEREUNDER IS SO BEING REPORTED SOLELY AS A RESULT OF THE
STOCK OPTION AGREEMENT DESCRIBED IN ITEM 4 HEREOF. THE OPTION
GRANTED PURSUANT TO SUCH STOCK OPTION AGREEMENT HAS NOT YET
BECOME EXERCISABLE. CITIZENS BANCSHARES, INC.
EXPRESSLY DISCLAIMS BENEFICIAL OWNERSHIP OF SUCH SHARES.
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ITEM 1. SECURITY AND ISSUER.
This statement relates to the Common Stock, without par value
("Common Stock"), of Mid-Am, Inc., an Ohio corporation (the "Issuer"), the
principal executive offices of which are located at 221 South Church Street,
Bowling Green, Ohio 43402.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c) and (f) This statement is being filed by Citizens
Bancshares, Inc., an Ohio corporation registered as a bank holding company under
the Bank Holding Company Act of 1956, as amended ("Bancshares"). The principal
business offices of Bancshares are located at 10 East Main Street, P.O. Box 247,
Salineville, Ohio 43945. As of the date hereof, Bancshares' primary business is
commercial and retail banking. Bancshares is a holding company for two wholly
owned subsidiary banks, a wholly owned reinsurance company and a wholly owned
courier company. The names of the directors and executive officers of Bancshares
and their respective business addresses, citizenship and present principal
occupations or employment, as well as the names, principal businesses and
addresses of any corporations and other organizations in which such employment
is conducted, are set forth on Schedule I hereto, which Schedule is incorporated
herein by reference.
(d)-(e) Neither Bancshares, nor, to the best of its knowledge,
any of the persons listed in Schedule I hereto has during the last five years
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors). Neither Bancshares nor, to the best of its knowledge, any of the
persons listed in Schedule I hereto has during the last five years been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
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ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
As more fully described in Item 4, the Issuer has granted to
Bancshares an option pursuant to which Bancshares has the right, upon the
occurrence of certain events (none of which has occurred), to purchase up to
4,648,726 shares of Common Stock (subject to adjustment in certain
circumstances) at a price per share equal to $27.00 per share (the "Option").
Certain terms of the Option are summarized in Item 4.
If the Option were exercisable and Bancshares were to exercise
the Option on the date hereof, the funds required to purchase the shares of
Common Stock issuable upon such exercise would be $125,515,602. It is currently
anticipated that such funds would be derived from working capital.
ITEM 4. PURPOSE OF THE TRANSACTION.
(a)-(j) Bancshares is seeking to merge with the Issuer. The
transaction reported hereunder is intended to assist in the achievement of that
purpose.
THE MERGER AGREEMENT. The Issuer and Bancshares have entered
into an Agreement and Plan of Merger, dated as of May 20, 1998 (the "Merger
Agreement"), pursuant to which the Issuer will be merged with and into
Bancshares (the "Merger"), with Bancshares being the surviving corporation (the
"Surviving Company"). At the effective time of the Merger (the "Effective
Time"), each outstanding share of Issuer common stock ("Common Stock") will be
converted into the right to receive 0.385 of a share of common stock of
Bancshares (the "Exchange Ratio").
As a result of a previously announced stock split by
Bancshares, on and after June 1, 1998, the Exchange Ratio shall be adjusted so
that each outstanding share of Issuer Common Stock will be converted into the
right to receive .770 of a share of common stock of Bancshares. In the event
Bancshares further changes (or establishes a record date for changing) the
number of shares of common stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend, recapitalization or similar
transaction with respect to the outstanding common stock and the record date
therefor shall be prior to the Effective Date, the Exchange Ratio shall be
proportionately adjusted. As of the Effective Time, each share of Common Stock
held directly or indirectly by the Issuer, other than shares held
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in a fiduciary capacity or in satisfaction of a debt previously contracted, will
be canceled, and no exchange or payment will be made with respect thereto.
As a result of the Merger, Bancshares' Board of Directors will
be increased from 14 to 22 directors, 11 of whom will be persons who were
members of the Bancshares Board of Directors immediately prior to the Effective
Time. Marty E. Adams, the present Chief Executive Officer and President of
Bancshares, will become the President and Chief Operating Officer of the
Surviving Company. In addition, David R. Francisco will become the Chairman and
Chief Executive Officer of the Surviving Company and Edward J. Reiter will
become the Senior Chairman of the Surviving Company. Mr. Reiter is presently the
Chairman and Chief Executive Officer of the Issuer and Mr. Francisco is
President and Chief Operating Officer of the Issuer.
The Merger is subject to various regulatory approvals, the
approval of the shareholders of Bancshares and the Issuer and the satisfaction
of certain other terms and conditions set forth in the Merger Agreement.
As a result of the Merger, the Issuer's Common Stock will be
eligible for termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition,
the Common Stock will be eligible for delisting from the NASDAQ Stock Market's
National Market System, where it has been traded under the symbol "MIAM".
THE OPTION AGREEMENT. In connection with the Merger Agreement,
Bancshares and the Issuer entered into a Stock Option Agreement, dated as of May
21, 1998 (the "Option Agreement"). The Option Agreement is designed to enhance
the likelihood that the Merger will be successfully consummated in accordance
with the terms contemplated by the Merger Agreement. Pursuant to the Option
Agreement, the Issuer granted Bancshares an Option to purchase, subject to
adjustments in certain circumstances, up to 4,648,726 fully paid and
non-assessable shares of Common Stock (the "Option Shares") at a price per share
equal to $27.00 per share.
Subject to applicable law and regulatory restrictions,
Bancshares may exercise the Option, in whole or in part, if, but only if, both
an Initial Triggering Event (as defined below) and a Subsequent Triggering Event
(as defined below) have occurred prior to the occurrence of an Exercise
Termination Event (as defined below), PROVIDED
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that written notice of such exercise as required by the Option Agreement is
provided within six months following such Subsequent Triggering Event (or such
later period as provided in the Option Agreement).
As defined in the Option Agreement, "Initial Triggering Event"
means any of the following events or transactions occurring on or after the date
of signing the Option Agreement:
(i) The Issuer or any of its Subsidiaries (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) (each an "Issuer Subsidiary"), without having
received Bancshares' prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of the Option
Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the rules and regulations thereunder) other than Bancshares
or any of its Subsidiaries (each, a "Bancshares Subsidiary") or the
Board of Directors of the Issuer (the "Issuer Board") shall have
recommended that the shareholders of the Issuer approve or accept any
Acquisition Transaction other than as contemplated by the Merger
Agreement. For purposes of the Merger Agreement, (a) "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving the Issuer or any Issuer Subsidiary or group
of Issuer Subsidiaries (other than mergers, consolidations or similar
transactions (i) involving solely the Issuer and/or one or more
wholly-owned Subsidiaries of the Issuer or (ii) which the common
shareholders of the Issuer immediately prior thereto in the aggregate
own or continue to own at least 65% of the common stock of the
publicly held surviving or successor corporation immediately following
consummation thereof, PROVIDED, that any such transaction is not
entered into in violation of the terms of the Merger Agreement), (y) a
purchase, lease or other acquisition of all or any substantial part of
the assets or deposits of the Issuer or any Issuer
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Subsidiary or group of Issuer Subsidiaries that is, or would on an
aggregate basis constitute, a Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X), or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power
of the Issuer or any Issuer Subsidiary or group of Issuer Subsidiaries
that is, or would on an aggregate basis constitute, a Significant
Subsidiary, PROVIDED, that Acquisition Transaction shall not include
any transaction specifically disclosed in the Issuer's Reports filed
prior to the date of the Option Agreement, and (b) "Subsidiary" shall
have the meaning set forth in Rule 12b-2 under the 1934 Act;
(ii) Any person other than Bancshares or any Bancshares
Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity in
the ordinary course of business shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10% or more
of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of the Merger Agreement having the meaning
assigned thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iii) The shareholders of the Issuer shall have voted and
failed to approve the Merger Agreement and the Merger at a meeting
which has been held for that purpose or any adjournment or postponement
thereof, or such meeting shall not have been held in violation of the
Merger Agreement or shall have been canceled prior to termination of
the Merger Agreement if, prior to such meeting (or if such meeting
shall not have been held or shall have been canceled, prior to such
termination), it shall have been publicly announced that any person
(other than Bancshares or any of its Subsidiaries) shall have made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or
publicly announced its intention to withdraw or modify) in any manner
adverse in any respect to Bancshares, its recommendation that the
shareholders of the Issuer approve the transactions contemplated by the
Merger Agreement, or the Issuer or any Issuer Subsidiary or group of
Issuer Subsidiaries that is, or would in an aggregate basis constitute,
a Significant Subsidiary shall have authorized, recommended, proposed
(or publicly announced its intention to authorize, recommend or
propose) an agreement to engage in an Acquisition Transaction with any
person other than Bancshares or a Bancshares Subsidiary;
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(v) Any person other than Bancshares or any Bancshares
Subsidiary shall have filed with the SEC a registration statement or
tender offer materials with respect to a potential exchange or tender
offer that would constitute an Acquisition Transaction (or filed a
preliminary proxy statement with the SEC with respect to a potential
vote by its shareholders to approve the issuance of shares to be
offered in such an exchange offer);
(vi) The Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of
engaging in an Acquisition Transaction, and following such breach
Bancshares would be entitled to terminate the Merger Agreement (whether
immediately or after the giving of notice or passage of time or both);
or
(vii) Any person other than Bancshares or any Bancshares
Subsidiary shall have filed an application or notice with the Board of
Governors of the Federal Reserve System (the "Federal Reserve
Board") or other federal or state bank regulatory or antitrust
authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
As defined in the Option Agreement, "Subsequent Triggering
Event" means any of the following events or transactions occurring after the
date of signing the Option Agreement:
(i) The acquisition by any person (other than Bancshares or
any Bancshares Subsidiary) of beneficial ownership of 20% or more of
the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
above, except that the percentage referred to in clause (z) of the
second sentence thereof shall be 20%.
As defined in the Option Agreement, "Exercise Termination
Event" means each of the following: (i) the
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Effective Time of the Merger; (ii) termination of the Merger Agreement in
accordance with the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event except a termination by Bancshares
pursuant to Section 8.4(b) due to a willful breach by the Issuer (a "Listed
Termination"); or (iii) the passage of eighteen (18) months (or such longer
period as provided in the Option Agreement) after termination of the Merger
Agreement if such termination follows the occurrence of an Initial Triggering
Event or is a Listed Termination. Notwithstanding anything to the contrary
contained in the Option Agreement, (i) the Option may not be exercised at any
time when Bancshares shall be in material breach of any of its covenants or
agreements contained in the Merger Agreement such that the Issuer shall be
entitled to terminate the Merger Agreement pursuant to Section 8.4(b) thereof
and (ii) the Option Agreement shall automatically terminate upon the proper
termination of the Merger Agreement by the Issuer (A) pursuant to Section
8.4(b) thereof as a result of the material breach by Bancshares of its
covenants or agreements contained in the Merger Agreement or (B) pursuant to
Section 8.3(a) or Section 8.4(a) unless the Issuer is in willful and material
breach of the Merger Agreement.
As provided in the Option Agreement, in the event that
Bancshares is entitled to and wishes to exercise the Option, it is obligated to
send to the Issuer a written notice (the "Option Notice" and the date of which
being hereinafter referred to as the "Notice Date") specifying (i) the total
number of shares of Common Stock it will purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days nor later than 60
business days from the Notice Date for the closing of such purchase (the
"Closing Date"); PROVIDED, that if prior notification to or approval of the
Federal Reserve Board or any other regulatory or antitrust agency is required
in connection with such purchase, Bancshares must promptly file the required
notice or application for approval, promptly notify the Issuer of such filing,
and expeditiously process the same and the period of time that otherwise would
run pursuant to this sentence will run instead from the date on which any
required notification periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option will be deemed to occur on the Notice Date
relating thereto.
Under applicable law, Bancshares may be required to obtain the
prior approval of the Federal Reserve Board prior to acquiring 5% or more of the
issued and outstanding shares of Common Stock. Certain other regulatory
approvals may also be required before such an acquisition could be completed.
Neither of the parties to the Option Agreement may assign any
of its rights or obligations under the Merger Agreement or the Option created
thereunder to any other person, without the express written consent of the other
party, except that in the event a Subsequent Triggering Event shall have
occurred prior to an Exercise Termination Event, Bancshares, may assign in
whole or in part its rights and obligations
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thereunder; PROVIDED, HOWEVER, that until the date 15 days following the date on
which the Federal Reserve Board has approved an application by Bancshares to
acquire the shares of Common Stock subject to the Option, Bancshares may not
assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of the Issuer, (iii) an
assignment to a single party (E.G., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on Bancshares'
behalf or (iv) any other manner approved by the Federal Reserve Board.
In addition, any shares of Common Stock purchased upon the
exercise of the Option may be resold by Bancshares pursuant to registration
rights under the Option Agreement.
At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder (as defined in the Option
Agreement), delivered prior to an Exercise Termination Event (or such later
period as provided in Section 10 of the Option
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Agreement), the Issuer (or any successor thereto) must repurchase the Option
from the Holder at a price (the "Option Repurchase Price") equal to the amount
by which (A) the market/offer price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which the Option may then be
exercised and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered prior to an Exercise Termination Event (or such
later period as provided in Section 10 of the Option Agreement), the Issuer (or
any successor thereto) must repurchase such number of the Option Shares from the
Owner as the Owner designates at a price (the "Option Share Repurchase Price")
equal to the market/offer price multiplied by the number of Option Shares so
designated.
A "Repurchase Event" will be deemed to have occurred upon the
occurrence of any of the following events or transactions after the date hereof:
(i) the acquisition by any person (other than Bancshares or
any Bancshares Subsidiary) of beneficial ownership of 50% or more of
the then outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction described
in subparagraph (i) under the definition of Initial Triggering Event,
except that the percentage referred to in clause (z) shall be 50%.
In the event that prior to an Exercise Termination Event, the
Issuer enters into an agreement (i) to consolidate with or merge into any
person, other than Bancshares or a Bancshares Subsidiary, or engage in a plan of
exchange with any person, other than Bancshares or a Bancshares Subsidiary, and
the Issuer is not the continuing or surviving corporation of such consolidation
or merger or the acquirer in such plan of exchange, (ii) to permit any person,
other than Bancshares or a Bancshares Subsidiary, to merge into the Issuer or be
acquired by the Issuer in a plan of exchange and the Issuer is the continuing or
surviving or acquiring corporation, but, in connection with such merger or plan
of exchange, the then outstanding shares of Common Stock are changed into or
exchanged for stock or other securities of any other person or cash or any other
property or the then outstanding shares of Common Stock after such merger or
plan of exchange represent less than 50% of the outstanding shares and share
equivalents of the merged or acquiring company, or (iii) to sell or otherwise
transfer all or a substantial part of its or the Issuer Subsidiary's
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assets or deposits to any person, other than Bancshares or a Bancshares
Subsidiary, then, and in each such case, the agreement governing such
transaction must make proper provision so that the Option will, upon the
consummation of any such transaction and upon the terms and conditions set forth
in the Option Agreement, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of the Holder, of either (x) the Acquiring
Corporation (as defined in the Option Agreement) or (y) any person that controls
the Acquiring Corporation.
Bancshares may, at any time following a Repurchase Event and
prior to the occurrence of an Exercise Termination Event (or such later period
as provided in Section 10 of the Option Agreement), relinquish the Option
(together with any Option Shares issued to and then owned by Bancshares) to the
Issuer in exchange for a cash fee equal to the Surrender Price; PROVIDED,
HOWEVER, that Bancshares may not exercise its rights pursuant to Section 14 of
the Option Agreement if the Issuer has repurchased the Option (or any portion
thereof) or any Option Shares pursuant to Section 7 of the Option Agreement.
The "Surrender Price" will be equal to $25.0 million (i) plus, if applicable,
Bancshares' purchase price with respect to any Option Shares being so
relinquished and (ii) minus, if applicable, the sum of (1) the excess of (A)
the net cash amounts, if any, received by Bancshares pursuant to the arms'
length sale of Option Shares (or any other securities into which such Option
Shares were converted or exchanged) to any unaffiliated party, over (B)
Bancshares' purchase price of such Option Shares, and (2) the net cash amounts,
if any, received by Bancshares pursuant to an arms' length sale of any portion
of the Option sold.
In the event that any Person who has participated in a
Subsequent Triggering Event enters into any agreement or understanding with
Bancshares with respect to Bancshares' exercise of, or its election not to
exercise, Bancshares' rights under Sections 2, 7 or 14 of the Option Agreement,
the Issuer may, by written notice to Bancshares, require that Bancshares sell
to the Issuer, and Bancshares shall sell to the Issuer, (i) the Option and (ii)
all (but not less than all) Option Shares purchased by Bancshares pursuant to
the Option Agreement and with respect to which Bancshares then has beneficial
ownership. The date of Bancshares' written notice referred to above is referred
to as the "Section 15 Notice Date." Such repurchase shall be at an aggregate
price (the "Section 15 Repurchase Consideration") determined in accordance with
Section 15(a) of the Option Agreement.
Simultaneously with the Option Agreement, the Issuer and
Bancshares entered into a corresponding Option Agreement (the "Issuer Option
Agreement") providing for the issuance to the Issuer of up to 19.9% of the
common stock of Bancshares outstanding prior to the exercise of such option.
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Copies of the Option Agreement and the Merger Agreement are
filed as exhibits to this Schedule 13D and are incorporated herein by reference.
In addition, a copy of the Issuer Option Agreement is filed as an exhibit to
this Schedule 13D. The foregoing summary is not intended to be complete and is
qualified in its entirety by reference to such exhibits.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Bancshares may be deemed to be the beneficial owner of the
Option Shares. As provided in the Option Agreement, Bancshares may exercise the
Option only upon the happening of one or more events, none of which has
occurred. See Item 4 hereof. If the Option were exercised in full, the Option
Shares would represent approximately 16.6% of the currently outstanding Common
Stock (after giving effect to the issuance of such Option Shares). Bancshares
has no right to vote or dispose of the shares of Common Stock subject to the
Option and expressly disclaims beneficial ownership of such shares. To the best
knowledge of Bancshares, none of the persons listed in Schedule I hereto
beneficially owns any shares of Common Stock.
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(b) If Bancshares were to exercise the Option, it would have
sole power to vote and, subject to the terms of the Option Agreement, sole power
to direct the disposition of the shares of Common Stock covered thereby.
(c) Bancshares acquired the Option in connection with the
Merger Agreement. See Item 4 hereof.
To the best knowledge of Bancshares, none of the persons
listed in Schedule I hereto has effected any transactions in Common Stock during
the past 60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Except as described in Item 4 and Item 5 hereof, neither
Bancshares nor, to the best of its knowledge, any of the persons listed on
Schedule I hereto, has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Issuer, including
the transfer or voting of any of the securities, finder's fees, joint ventures,
loan or option arrangements, puts or calls, guarantees of profits, division of
profits or losses, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
2 Agreement and Plan of Merger, dated as of May 20, 1998, by
and among Mid Am, Inc. and Citizens Bancshares, Inc.
99 Stock Option Agreement, dated as of May 21, 1998, between Mid
Am, Inc. and Citizens Bancshares, Inc.
99 Stock Option Agreement, dated as of May 21, 1998, between
Citizens Bancshares, Inc. and Mid Am, Inc.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I hereby certify that the information set forth in this statement is
true, complete and correct.
Dated: May 29, 1998
CITIZENS BANCSHARES, INC.
By: /s/ Marty E. Adams
---------------------------------
Marty E. Adams
President
and Chief Executive Officer
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
CITIZENS BANCSHARES, INC.
The names, business addresses and present principal
occupations of the directors and executive officers of Citizens Bancshares, Inc.
are set forth below. If no business address is given, the director's or
executive officer's business address is 10 East Main Street, P.O. Box 247,
Salineville, Ohio 43945. The business address of each of the directors of
Citizens Bancshares, Inc. is also the business address of such director's
employer, if any. Directors of Citizens Bancshares, Inc. are identified by an
asterisk. Unless otherwise indicated, all directors and officers listed below
are citizens of the United States.
<TABLE>
<CAPTION>
NAME PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND ADDRESS
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*Marty E. Adams Vice Chairman of the Board, President, and Chief
Executive Officer of Bancshares and The Citizens
Banking Company ("Citizens"), director and Chairman of
the Board of First National Bank of Chester ("FNB")
- ----------------------------------------------------------- ---------------------------------------------------------
*Keith D. Burgett, D.V.M. Veterinarian, owner of Carrollton Animal Hospital, and
owner of Burgett Angus Farm. Address: 1246 Antiqua
Road S.W., Carrollton, OH 44615
- ----------------------------------------------------------- ---------------------------------------------------------
*Willard L. Davis President of SPM Fleet Services, Inc., Vice President
of State Park Motors, Inc., and co-owner of Cardinal
Motors, Inc. Address: 759 County Hwy 59, Richmond,
OH 43944
- ----------------------------------------------------------- ---------------------------------------------------------
*Del Goedeker Retired. Address: 200 Geneva Drive, Aliquippa, PA
15001
- ----------------------------------------------------------- ---------------------------------------------------------
*Charles I. Homan Director, President and Chief Executive Officer of
Michael Baker Corporation. Address: 130 Glenfield
Drive, Beaver, PA 15009
- ----------------------------------------------------------- ---------------------------------------------------------
*Fred H. Johnson Retired. Address: Box 61, Summitville, OH 43962
- ----------------------------------------------------------- ---------------------------------------------------------
*Fred H. Johnson III Corporate Secretary of Bancshares and Citizens,
Director and President of Summitcrest, Inc. Address:
Box 5, Summitville, OH 43962
- ----------------------------------------------------------- ---------------------------------------------------------
*H. Lee Kinney Senior Vice President, Community and Customer Relations
of The Citizens Banking Company. Address: 127 South
Fourth Street, Steubenville, OH 43952
- ----------------------------------------------------------- ---------------------------------------------------------
*Gerard P. Mastroianni President of Buckeye Village Market, Inc. and President
of Alliance Ventures. Address: 1800 West State
Street, Alliance, OH 44601
- ----------------------------------------------------------- ---------------------------------------------------------
James C. McBane Chairman of the Board of Bancshares and Citizens,
Director of FNB, and Principal and Chief Executive
Officer of McBane Insurance Agency, Inc. Address:
School Street - Box 340, Bergholz, OH 43908
- ----------------------------------------------------------- ---------------------------------------------------------
*Kenneth E. McConnell Owner and operator of McConnell's Farm and a Partner in
McConnell's Farm Market. Address: 2189 State Route 43,
Richmond, OH 43944
- ----------------------------------------------------------- ---------------------------------------------------------
*Elden L. Surbey Retired. Address: 6149 Brinker S.W., Navarre, OH
44662
- ----------------------------------------------------------- ---------------------------------------------------------
*Glenn F. Thorne President and Chief Executive Officer of Thorne
Management, Inc., Manager of Bias Realty, Ltd., and
General Partner of CPW Properties, Ltd. Address: 1327
Highland Avenue, Salem, OH 44460
- ----------------------------------------------------------- ---------------------------------------------------------
*Joseph N. Tosh II President and Chief Executive Officer of Century
National Bank & Trust Company. Address: One Century
Place, Rochester, PA 15074-9901
- ----------------------------------------------------------- ---------------------------------------------------------
Frank J. Koch Executive Vice President, Citizens. Address: 10 East
Main Street, Salineville, OH 43945
- ----------------------------------------------------------- ---------------------------------------------------------
Lawrence P. Crow Senior Vice President and Branch Administrator,
Citizens. Address: 10 East Main Street, Salineville,
OH 43945
- ----------------------------------------------------------- ---------------------------------------------------------
Thomas G. Leek Senior Vice President, Bank Operations, Citizens.
Address: 10 East Main Street, Salineville, OH 43945
- ----------------------------------------------------------- ---------------------------------------------------------
Patrick A. Sebastiano Senior Vice President and Trust Officer of FNB.
Address: 80 Boardman-Poland Road, Boardman, OH 44512
- ----------------------------------------------------------- ---------------------------------------------------------
William L. White III Senior Vice President and Chief Financial Officer,
Citizens. Address: 10 East Main Street,
Salineville,OH 43945
- ----------------------------------------------------------- ---------------------------------------------------------
Jayson M. Zatta Senior Vice President and Manager, Commercial Banking
Department, Citizens. Address: 10 East Main Street,
Salineville, OH 43945
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
-16-
<PAGE> 17
Exhibit Index
1 Agreement and Plan of Merger, dated as of May 20, 1998, by and
between Mid Am, Inc. and Citizens Bancshares, Inc.
2 Stock Option Agreement, dated as of May 21, 1998, between
Citizens Bancshares, Inc. and Mid-Am, Inc.
3 Stock Option Agreement, dated as of May 21, 1998, between Mid
Am, Inc. and Citizens Bancshares, Inc.
-17-
<PAGE> 1
Exhibit 1
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
dated as of May 20, 1998
by and between
Mid Am, Inc.
and
Citizens Bancshares, Inc.
================================================================================
<PAGE> 2
Page
TABLE OF CONTENTS
RECITALS
A. Mid Am....................................................................1
B. Citizens..................................................................1
C. The Stock Option Agreements...............................................1
D. Intention of the Parties..................................................1
E. Approvals.................................................................1
ARTICLE I
THE MERGER
1.1 The Merger...............................................................2
1.2 Effective Time...........................................................2
1.3 Closing..................................................................3
ARTICLE II
GOVERNING DOCUMENTS OF THE
SURVIVING CORPORATION
2.1 Articles of Incorporation of the Surviving Corporation...................3
2.2 Code of Regulations of the Surviving Corporation.........................3
2.3 Headquarters of the Surviving Corporation................................3
2.4 Name of the Surviving Corporation........................................3
2.5 Articles Amendments.......................................................3
2.6 Amendments to the Code of Regulations.....................................3
ARTICLE III
DIRECTORS AND OFFICERS
3.1 Directors of the Surviving Corporation...................................4
3.2 Executive Committee......................................................4
3.3 Officers of the Surviving Corporation....................................5
ARTICLE IV
CONVERSION OR CANCELLATION OF SHARES
4.1 Conversion or Cancellation of Shares.....................................5
(a) Mid Am Common Stock....................................5
(b) Citizens Common Stock..................................5
-i-
<PAGE> 3
Page
----
(c) Cancellation of Old Shares.............................5
4.2 Fractional Shares........................................................6
4.3 Exchange of Old Certificates for New Certificates........................6
(a) Appointment of Exchange Agent..........................6
(b) Exchange Procedures....................................6
(c) Distributions with Respect to Unexchanged Shares.......7
(d) Transfers..............................................7
(e) Lost, Stolen or Destroyed Certificates.................7
4.4 Adjustment of Exchange Ratio.............................................8
4.5 Dissenting Shareholders..................................................8
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Disclosure Letters.......................................................9
5.2 Standards...............................................................10
5.3 Representations and Warranties of Mid Am and Citizens...................10
(a) Corporate Organization and Qualification..............10
(b) Subsidiaries..........................................10
(c) Capital Stock.........................................11
(d) Corporate Authority and Action........................12
(e) Governmental Filings; No Violations...................13
(f) Reports and Financial Statements......................13
(g) Absence of Certain Events and Changes.................14
(h) Compliance with Laws..................................15
(i) Litigation............................................15
(j) Taxes.................................................16
(k) Insurance.............................................16
(l) Labor Matters.........................................16
(m) Employee Benefits.....................................17
(n) Environmental Matters.................................18
(o) Community Reinvestment Act............................19
(p) Agreements............................................19
(q) Knowledge as to Conditions............................19
(r) Fairness Opinions.....................................19
(s) Brokers and Finders...................................20
(t) Risk Management Instruments...........................20
-ii-
<PAGE> 4
Page
----
(u) Year 2000.............................................20
(v) Employment Agreements.................................20
ARTICLE VI
COVENANTS
6.1 Conduct of Business Pending the Effective Time..........................21
6.2 Dividends...............................................................23
6.3 Acquisition Proposals...................................................23
6.4 Shareholder Approval....................................................24
6.5 Filings; Other Actions..................................................24
6.6 Information Supplied....................................................25
6.7 Access and Investigations...............................................26
6.8 Certain Modifications; Restructuring Charges............................26
6.9 Takeover Laws...........................................................27
6.10 Options................................................................27
(a) Conversion of Options.................................27
(b) Assumption by Citizens................................27
6.11 Benefit Plans..........................................................28
6.12 Indemnification and Insurance..........................................28
6.13 Affiliate Agreements...................................................29
6.14 Publicity..............................................................30
6.15 Reasonable Best Efforts. .............................................30
6.16 Notification of Certain Matters........................................30
6.17 Expenses...............................................................30
ARTICLE VII
CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect the Merger..............31
(a) Shareholder Approval..................................31
(b) Governmental and Regulatory Consents..................31
(c) Third Party Consents..................................31
(d) No Prohibitions.......................................31
(e) Registration Statement................................31
(f) Blue Sky Approvals....................................32
(g) Accountants' Pooling Letters..........................32
(h) Nasdaq Listing........................................32
-iii-
<PAGE> 5
Page
----
7.2 Conditions to Obligation of Mid Am......................................32
(a) Representations and Warranties........................32
(b) Performance of Obligations of Citizens................32
(c) Opinion of Tax Counsel................................32
7.3 Conditions to Obligation of Citizens....................................33
(a) Representations and Warranties........................33
(b) Performance of Obligations of Mid Am..................33
(c) Opinion of Tax Counsel................................33
ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent...........................................34
8.2 Termination by Either Mid Am or Citizens................................34
8.3 Termination by Citizens.................................................34
8.4 Termination by Mid Am...................................................35
8.5 Effect of Termination and Abandonment...................................36
ARTICLE IX
MISCELLANEOUS
9.1 Survival................................................................36
9.2 Modification or Amendment...............................................36
9.3 Waiver of Conditions....................................................36
9.4 Counterparts............................................................36
9.5 Governing Law...........................................................36
9.6 Notices.................................................................37
9.7 Entire Agreement, Etc...................................................38
9.8 Definition of "subsidiary"; Covenants with Respect to Subsidiaries......38
9.9 Interpretation; Effect..................................................38
9.10 Severability...........................................................38
9.11 No Third Party Beneficiaries...........................................38
ANNEXES
-iv-
<PAGE> 6
1. Form of Stock Option Agreement (Recital C)
2. Amendment to Citizens Articles of Incorporation (Section 2.5)
3. Amendment to Citizens Regulations (Section 2.6)
4. Form of Mid Am Affiliate Agreement (Section 6.13)
5. Form of Citizens Affiliate Agreement (Section 6.13)
-v-
<PAGE> 7
INDEX OF DEFINED TERMS
Location of
Term Definition
- -------------------- -----------
Acquisition Proposal........................................................6.3
Affiliates.............................................................6.13 (a)
Amendments to the Code of Regulations.......................................2.6
Articles Amendments.........................................................2.5
Articles of Incorporation...................................................2.1
BHC Act...............................................................5.3(e)(i)
Certificate of Merger...................................................1.2 (a)
Citizens...............................................................Preamble
Citizens Common Stock.................................................Recital B
Citizens Directors..........................................................3.1
Citizens Dissenting Shares..............................................4.5 (b)
Citizens Executive Committee Members........................................3.2
Citizens Meeting........................................................6.4 (b)
Citizens Preferred Stock..............................................Recital B
Citizens Stock Option Agreement.......................................Recital C
Closing.....................................................................1.3
Closing Date................................................................1.3
Code of Regulations.........................................................2.2
Compensation Plans..................................................5.3 (m) (i)
Contracts...........................................................5.3 (e)(ii)
Disclosure Letter...........................................................5.1
Effective Time..........................................................1.2 (a)
Employees...........................................................5.3 (m) (i)
Environmental Laws......................................................5.3 (n)
ERISA...............................................................5.3 (m) (i)
ERISA Affiliate ..................................................5.3 (m) (iii)
ERISA Affiliate Plan..............................................5.3 (m) (iii)
Exception Shares.........................................................4.1(a)
Exchange Act.........................................................5.3 (e)(i)
Exchange Agent..........................................................4.3 (a)
Exchange Ratio..........................................................4.1 (a)
Federal Reserve Board.................................................5.3(e)(i)
Financial Statements..............................................5.3 (f) (iii)
Former Citizens Employees...............................................6.11(a)
Former Mid Am Employees.................................................6.11(a)
Governmental Entity..................................................5.3 (e)(i)
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<PAGE> 8
Internal Revenue Code.................................................Recital D
Joint Proxy Statement/Prospectus........................................6.5 (a)
Liens...............................................................5.3 (c) (E)
Material Adverse Effect.................................................5.2 (b)
Maximum Amount.........................................................6.12 (b)
Merger..................................................................1.1 (a)
Mid Am.................................................................Preamble
Mid Am Common Stock...................................................Recital A
Mid Am Directors............................................................3.1
Mid Am Dissenting Shares................................................4.5 (a)
Mid Am Executive Committee Members..........................................3.2
Mid Am Meeting..........................................................6.4 (a)
Mid Am Option..........................................................6.10 (a)
Mid Am Preferred Stock................................................Recital A
Mid Am Stock Option Agreement.........................................Recital C
Nasdaq......................................................................4.2
New Certificate ........................................................4.1 (c)
New Option.............................................................6.10 (a)
New Shares..............................................................4.1 (c)
OGCL....................................................................1.1 (b)
Old Certificate.........................................................4.1 (c)
Old Share...............................................................4.1 (c)
Pension Plan.......................................................5.3 (m) (ii)
Person .................................................................6.1 (c)
Plan...................................................................Preamble
Registration Statement..................................................6.5 (a)
Regulatory Approvals ................................................5.3 (e)(i)
Reports.............................................................5.3 (f) (i)
Representatives.............................................................6.3
Rights..............................................................5.3 (c) (D)
Risk Management Instruments..............................................5.3(t)
SEC.................................................................5.3 (f) (i)
Securities Act......................................................5.3 (e)(i)
Securities Laws......................................................5.3 (e)(i)
Stock Option Agreements...............................................Recital C
Surviving Corporation...................................................1.1 (a)
Takeover Laws......................................................5.3 (d) (ii)
Tax.....................................................................5.3 (j)
Termination Date............................................................8.2
-vii-
<PAGE> 9
AGREEMENT AND PLAN OF MERGER, dated as of May 20, 1998 (this
"Plan"), by and between Mid Am, Inc. ("Mid Am") and Citizens Bancshares, Inc.
("Citizens").
RECITALS
A. MID AM. Mid Am is an Ohio corporation with its principal
executive offices located in Bowling Green, Ohio. As of the date hereof, Mid Am
has (i) 100,000,000 authorized shares of common stock, without par value ("Mid
Am Common Stock"), of which not more than 23,360,430 shares are outstanding, and
(ii) 2,000,000 authorized shares of preferred stock, without par value ("Mid Am
Preferred Stock"), of which no shares are designated or outstanding.
B. CITIZENS. Citizens is an Ohio corporation with its
principal executive offices located in Salineville, Ohio. As of the date hereof,
Citizens has (i) 36,000,000 authorized shares of common stock, without par value
("Citizens Common Stock"), of which not more than 8,850,796 shares are
outstanding, and (ii) 200,000 authorized shares of preferred stock, par value
$10.00 per share ("Citizens Preferred Stock"), of which no shares are designated
or outstanding.
C. THE STOCK OPTION AGREEMENTS. As an inducement to the
willingness of Citizens to continue to pursue the transactions contemplated by
this Plan, Mid Am expects (but is not obligated) to grant to Citizens an option
pursuant to a stock option agreement in substantially the form of Annex 1 to
this Plan (the "Mid Am Stock Option Agreement"). As an inducement to the
willingness of Mid Am to continue to pursue the transactions contemplated by
this Plan, Citizens expects (but is not obligated) to grant to Mid Am an option
pursuant to a stock option agreement in substantially the form of Annex 1 to
this Plan (the "Citizens Stock Option Agreement" and, together with the Mid Am
Stock Option Agreement, the "Stock Option Agreements").
D. INTENTION OF THE PARTIES. It is the intention of the
parties to this Plan that the Merger (as hereinafter defined) (i) shall be
accounted for as a "pooling of interests" under generally accepted accounting
principles and (ii) shall qualify as a tax free reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code") and that this Plan shall constitute a "plan of reorganization" for
purposes of Section 368 of the Internal Revenue Code.
E. APPROVALS. The Board of Directors of each of Mid Am and
Citizens has (i) determined that this Plan and the transactions contemplated
hereby are in the best interests of Mid Am and Citizens, respectively, and in
the best long-term interests of their respective shareholders, (ii) determined
that this Plan and the transactions contemplated hereby are consistent with, and
in furtherance of, its respective business strategies and (iii) approved, at
meetings of each of such Boards of Directors, this Plan.
<PAGE> 10
NOW, THEREFORE, in consideration of their mutual promises and
obligations, the parties hereto approve, adopt and make this Plan and prescribe
the terms and conditions hereof and the manner and basis of carrying it into
effect, which shall be as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. (a) Subject to the terms and conditions of
this Plan, at the Effective Time (as hereinafter defined), Mid Am shall merge
with and into Citizens (the "Merger"), and the separate corporate existence of
Mid Am shall thereupon cease. Citizens shall be the surviving corporation in the
Merger (sometimes hereinafter referred to as the "Surviving Corporation") and
shall continue to be governed by the laws of the State of Ohio. Upon their
mutual agreement, Citizens and Mid Am may at any time prior to the Effective
Time change the method of effecting the combination of Citizens and Mid Am
(including, without limitation, the provisions of this Article I) if and to the
extent they both deem such change to be necessary, appropriate or desirable;
provided, however, that no such change shall (i) alter or change the Exchange
Ratio (as hereinafter defined), (ii) adversely affect the tax treatment of Mid
Am's shareholders as a result of receiving shares of Citizens pursuant to this
Plan, (iii) adversely affect the tax treatment of Citizens, Mid Am or any
affiliate of Citizens or Mid Am or (iv) materially impede or delay consummation
of the transactions contemplated by this Plan.
(b) The Merger shall have the effects specified in this Plan
and the Ohio General Corporation Law (the "OGCL").
1.2 EFFECTIVE TIME. (a) Subject to the terms and conditions of
this Plan, the parties to this Plan will cause a certificate of merger to be
filed with the Office of the Secretary of State of the State of Ohio as provided
in Section 1701.78 of the OGCL (the "Certificate of Merger"). The Merger shall
become effective at such time as the Certificate of Merger has been filed, or at
such other time as may be specified therein. The date and time when the Merger
shall become effective is herein referred to as the "Effective Time".
(b) Mid Am and Citizens each will use reasonable best efforts
to cause the Effective Time to occur on or prior to the third business day
immediately following the date on which the satisfaction or waiver of the last
of the conditions specified in Sections 7.1(a), (b), (c), (e) and (g) of this
Plan has occurred. Notwithstanding anything to the contrary in this Section
1.2(b), Mid Am and Citizens may cause the Effective Time to occur on such
earlier or later day following the satisfaction or waiver of such conditions as
they may agree in writing, consistent with the provisions of the OGCL.
-2-
<PAGE> 11
1.3 CLOSING. The closing of the Merger (the "Closing") shall
take place at such time and place as Mid Am and Citizens shall agree, on the
date when the Effective Time is to occur (the "Closing Date").
ARTICLE II
GOVERNING DOCUMENTS OF THE
SURVIVING CORPORATION
2.1 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION. At
the Effective Time, the amended articles of incorporation of Citizens, as in
effect on the date hereof and as amended in accordance with Section 2.5, shall
be the articles of incorporation of the Surviving Corporation (the "Articles of
Incorporation").
2.2 CODE OF REGULATIONS OF THE SURVIVING CORPORATION. At the
Effective Time, the Code of Regulations of Citizens, as in effect on the date
hereof and as amended in accordance with Section 2.6, shall be the Code of
Regulations of the Surviving Corporation (the "Code of Regulations").
2.3 HEADQUARTERS OF THE SURVIVING CORPORATION. At the
Effective Time, the headquarters of the Surviving Corporation shall be the
headquarters on the date hereof of Mid Am.
2.4 NAME OF THE SURVIVING CORPORATION. The name of the
Surviving Corporation shall be mutually agreed upon by Citizens and Mid Am by
amendment to this Plan in accordance with Section 9.2 hereof prior to the
mailing of the Joint Proxy Statement/Prospectus (as hereinafter defined).
2.5 ARTICLES AMENDMENTS. Prior to the Effective Time, Citizens
shall duly execute and deliver for filing and file, in accordance with the OGCL,
with the Secretary of State of the State of Ohio, a certificate of amendment
reflecting the amendments set forth in Annex 2 and such other amendments as
Citizens and Mid Am may mutually agree prior to the mailing of the Joint Proxy
Statement/Prospectus (the "Articles Amendments").
2.6 AMENDMENTS TO THE CODE OF REGULATIONS. At the Effective
Time, the Code of Regulations shall be amended as set forth in Annex 3 and to
the extent necessary to effect the provisions of Article III and in such other
manner as Citizens and Mid Am may mutually agree prior to the mailing of the
Joint Proxy Statement/Prospectus (the "Amendments to the Code of Regulations").
-3-
<PAGE> 12
ARTICLE III
DIRECTORS AND OFFICERS
3.1 DIRECTORS OF THE SURVIVING CORPORATION. At the Effective
Time, the directors of the Surviving Corporation shall consist of 22 members, 11
of whom shall be selected by the Chairman of the Board and Chief Executive
Officer of Mid Am (the "Mid Am Directors") and 11 of whom shall be selected by
the Chief Executive Officer of Citizens (the "Citizens Directors") and which
shall be allocated among the three classes of directors of Citizens by the
agreement of the Chairman of the Board and Chief Executive Officer of Mid Am and
the Chief Executive Officer of Citizens so that each class shall (to the extent
practicable) have an equal number of Mid Am Directors and Citizens Directors.
For a period of three years after the Effective Time, in the event that a Mid Am
Director or a Citizens Director or a director otherwise elected or nominated as
set forth herein or by the Mid Am Directors or Citizens Directors as set forth
herein shall resign, no longer be able to serve or not stand for reelection, (i)
if such director shall be a Mid Am Director or a nominee of the Mid Am
Directors, then the Mid Am Directors and nominees of the Mid Am Directors
serving as directors shall have the exclusive right to nominate an individual to
fill such vacancy and the entire Board of Directors shall either elect such
person a director or nominate such person for election as a director and (ii) if
such director shall be a Citizens Director or a nominee of the Citizens
Directors, then the Citizens Directors and nominees of the Citizens Directors
serving as directors shall have the exclusive right to nominate an individual to
fill such vacancy and the entire Board of Directors shall either elect such
person a director or nominate such person for election as a director. Each
director will hold office in accordance with the Articles of Incorporation and
Code of Regulations until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.
3.2 EXECUTIVE COMMITTEE. At the Effective Time, the executive
committee of the Surviving Corporation shall consist of eight members, four of
whom shall be selected by the Chairman of the Board and Chief Executive Officer
of Mid Am (the "Mid Am Executive Committee Members") and four of whom shall be
selected by the Chief Executive Officer of Citizens (the "Citizens Executive
Committee Members"). For a period of three years after the Effective Time, in
the event that a Mid Am Executive Committee Member or a Citizens Executive
Committee Member or a member of the executive committee otherwise elected or
nominated as set forth herein or by the Mid Am Directors or Citizens Directors
set forth herein shall resign, no longer be able to serve or not stand for
reelection, (i) if such member shall be a Mid Am Executive Committee Member or a
nominee of the Mid Am Directors, then the Mid Am Directors and nominees of the
Mid Am Directors serving as directors shall have the exclusive right to nominate
an individual to fill such vacancy and the entire Board of Directors shall elect
such person a member of the executive committee and (ii) if such member shall be
a Citizens Executive Committee Member or a nominee of the Citizens Directors,
then the Citizens Directors and nominees of the Citizens Directors serving as
-4-
<PAGE> 13
directors shall have the exclusive right to nominate an individual to fill such
vacancy and the entire Board of Directors shall elect such person a member of
the executive committee. Each member of the executive committee will hold office
in accordance with the Code of Regulations until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
3.3 OFFICERS OF THE SURVIVING CORPORATION. At the Effective
Time, Edward J. Reiter shall become the Senior Chairman of the Board of
Directors of the Surviving Corporation, David R. Francisco shall become the
Chairman of the Board of Directors and Chief Executive Officer of the Surviving
Corporation and Marty E. Adams shall become President and Chief Operating
Officer of the Surviving Corporation.
ARTICLE IV
CONVERSION OR CANCELLATION OF SHARES
4.1 CONVERSION OR CANCELLATION OF SHARES. At the Effective
Time, by virtue of the Merger and without any action on the part of any
shareholder:
(a) Mid Am Common Stock. Each share of Mid Am Common Stock
issued and outstanding immediately prior to the Effective Time, other than
Exception Shares (as hereinafter defined) and Mid Am Dissenting Shares (as
hereinafter defined), shall be converted into 0.385 of a share of Citizens
Common Stock (subject to Section 4.4, the "Exchange Ratio"). "Exception Shares"
means shares of Mid Am Common Stock owned or held, other than in a bona fide
fiduciary capacity or in satisfaction of a debt previously contracted in good
faith, by Mid Am or a subsidiary (as hereinafter defined) of Mid Am or held by
Citizens in treasury or by a subsidiary of Citizens.
(b) Citizens Common Stock. Each share of Citizens Common Stock
outstanding immediately prior to the Effective Time, other than Citizens
Dissenting Shares (as hereinafter defined), shall remain outstanding.
(c) Cancellation of Old Shares. Each Exception Share shall
cease to be outstanding, shall be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor. Each share of Mid
Am Common Stock issued and outstanding immediately prior to the Effective Time,
other than Exception Shares and Dissenting Shares, is hereinafter defined as an
"Old Share". Old Shares shall cease to be outstanding, shall be canceled and
retired and shall cease to exist, and each holder of a certificate (an "Old
Certificate") formerly representing Old Shares shall thereafter cease to have
any rights with respect to such shares, except the right to receive, without
interest, upon exchange of such Old Certificate in accordance with Section 4.3,
a certificate (a "New Certificate")
-5-
<PAGE> 14
representing the shares of Citizens Common Stock ("New Shares") and any payment
to which such holder is entitled pursuant to this Article IV.
4.2 FRACTIONAL SHARES. Notwithstanding any other provision of
this Article IV, no fractional shares of Citizens Common Stock will be issued in
exchange for shares of Mid Am Common Stock hereunder and any former holder of
Mid Am Common Stock that would be entitled hereunder to receive fractional
interests in shares of Citizens Common Stock but for this Section 4.2 will be
entitled hereunder to receive instead a cash payment, without interest, in an
amount equal to the product of (i) the fraction of a share to which such holder
would otherwise have been entitled and (ii) the last reported sale price per
share of Citizens Common Stock on the trading day most recently preceding the
Closing Date as reported on the Nasdaq National Market System (the "Nasdaq") (as
published in The Wall Street Journal or, if not therein, in another
authoritative source).
4.3 EXCHANGE OF OLD CERTIFICATES FOR NEW CERTIFICATES. (a)
Appointment of Exchange Agent. Until the first anniversary of the Effective
Time, Citizens shall make available or cause to be made available to an exchange
agent agreed upon by Citizens and Mid Am (the "Exchange Agent"), New
Certificates and cash in amounts sufficient to allow the Exchange Agent to make
all deliveries of New Certificates and payments that may be required in exchange
for Old Certificates pursuant to this Article IV. Upon such anniversary, any
such New Certificates and cash remaining in the possession of the Exchange Agent
(together with any dividends or earnings in respect thereof) shall be delivered
to Citizens. Any former holder of Old Shares who has not theretofore exchanged
his or her Old Certificates for New Certificates and cash pursuant to this
Article IV shall thereafter be entitled to look exclusively to Citizens, and
only as a general creditor thereof, for the New Shares and/or cash to which he
or she may be entitled upon exchange of such Old Certificates pursuant to this
Article IV. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto, shall be liable to any former holder of Old Shares for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(b) Exchange Procedures. Promptly after the Effective Time,
Citizens shall cause the Exchange Agent to mail or deliver to each Person (as
hereinafter defined) who was, immediately prior to the Effective Time, a holder
of record of Old Shares a form of letter of transmittal containing instructions
for use in effecting the surrender of Old Certificates in exchange for New
Certificates and any payments pursuant to this Article IV. Upon surrender to the
Exchange Agent of an Old Certificate for cancellation together with such letter
of transmittal, duly executed and completed in accordance with the instructions
thereto, the holder of such Old Certificate shall be entitled to receive in
exchange therefor a New Certificate representing the New Shares and a check in
the amount, if any, to which such holder is entitled pursuant to this Article
IV, and the Old Certificate so surrendered shall forthwith be canceled. No
interest will accrue or be paid with respect to any property to be delivered
upon
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<PAGE> 15
surrender of Old Certificates. If any New Certificate is to be issued, or cash
payment made, in a name other than that in which the Old Certificate surrendered
in exchange therefor is registered, it shall be a condition of such exchange
that the Person requesting such exchange shall pay any transfer or other taxes
required by reason of the issuance of such New Certificate or the making of
such cash payment in a name other than that of the registered holder of the Old
Certificate surrendered, or shall establish to the satisfaction of Citizens that
any such taxes have been paid or are not applicable. An Affiliate (as
hereinafter defined) of Mid Am or Citizens shall not be entitled to receive any
New Certificate or payment pursuant to this Article IV until such Affiliate
shall have duly executed and delivered an appropriate agreement described in
Section 6.13.
(c) Distributions with Respect to Unexchanged Shares.
Notwithstanding any other provision of this Plan, in the absence of an election
to the contrary by Citizens, no dividends or other distributions with a record
date following the 90th day after the Effective Time shall be paid, to any
Person holding an Old Certificate with respect to the New Shares until such Old
Certificate has been surrendered for exchange as provided herein. Subject to the
effect of applicable laws, (i) there shall be paid, to each former holder of Old
Shares, the amount of dividends or other distributions with a record date after
the Effective Time but on or before the 90th day following the Effective Time
payable with respect to the New Shares, into which such Old Shares have been
converted pursuant to Section 4.1 and (ii) following surrender of any such Old
Certificates, there shall be paid to the holder of the New Certificates issued
in exchange therefor, without interest, at the time of such surrender, the
amount of dividends or other distributions with a record date after such 90-day
period theretofore payable with respect to the New Shares represented thereby.
(d) Transfers. At or after the Effective Time, there shall be
no transfers on the stock transfer books of the Surviving Corporation of Old
Shares.
(e) Lost, Stolen or Destroyed Certificates. If any Old
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Old Certificate to be lost,
stolen or destroyed and, if required by Citizens, the posting by such Person of
a bond in such reasonable amount as Citizens may direct as indemnity against any
claim that may be made against it with respect to such Old Certificate, Citizens
shall, in exchange for such lost, stolen or destroyed Old Certificate, issue or
cause to be issued a New Certificate and pay or cause to be paid the amounts, if
any, deliverable in respect to the Old Shares formerly represented by such Old
Certificate pursuant to this Article IV.
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<PAGE> 16
4.4 ADJUSTMENT OF EXCHANGE RATIO. In the event that,
subsequent to the date of this Plan but prior to the Effective Time, the shares
of Citizens Common Stock issued and outstanding shall, through a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the capitalization of Citizens, increase or
decrease in number or be changed into or exchanged for a different kind or
number of securities, then an appropriate and proportionate adjustment shall be
made to the Exchange Ratio including, in the case of the previously announced
stock split or stock dividend by Citizens of one share for each existing share,
an adjustment in the Exchange Ratio of an additional 0.385 shares of Citizens
Common Stock for each share of Mid Am Common Stock.
4.5 DISSENTING SHAREHOLDERS. (a) Notwithstanding anything in
this Plan to the contrary, shares of Mid Am Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by
shareholders who did not vote in favor of the adoption of this Plan, who are
entitled to demand the fair cash value of such shares of Mid Am Common Stock
under Section 1701.84 of the OGCL, and who comply with all of the relevant
provisions of such Section (the "Mid Am Dissenting Shares") shall be converted
into the right to receive payment for the fair cash value of such shares upon
strict compliance with the applicable provisions the OGCL (unless and until such
holders shall have failed to perfect or shall have effectively withdrawn or lost
their dissenters' rights under the OGCL). If any such holder shall have failed
to perfect or shall have effectively withdrawn or lost such dissenters' rights,
such holder's shares of Mid Am Common Stock shall thereupon cease to be
outstanding, shall be canceled and retired, shall cease to exist and shall
otherwise be treated as Old Shares and each holder of a certificate formerly
representing such Old Shares shall have the right to receive, without interest,
upon exchange of such holder's Old Certificate in accordance with Section 4.3, a
New Certificate representing the New Shares and any payment to which such holder
is entitled pursuant to this Article IV. Mid Am shall give Citizens (i) prompt
notice of any written demands for payment for any Mid Am Common Stock under
Section 1701.85 of the OGCL, attempted withdrawals of such demands, and any
other instruments served pursuant to the OGCL and received by Mid Am relating to
dissenters' rights, and (ii) the opportunity to participate in all negotiations
and proceedings with respect to the exercise of dissenters' rights under the
OGCL. Mid Am shall not, except with the prior written consent of Citizens,
voluntarily make any payment with respect to any demands for payments for Mid Am
Common Stock under Section 1701.84 of the OGCL, offer to settle or settle any
such demands or approve any withdrawal of any such demands.
(b) Notwithstanding anything in this Plan to the contrary,
shares of Citizens Common Stock which are issued and outstanding immediately
prior to the Effective Time and which are held by shareholders who did not vote
in favor of the adoption of this Plan, who are entitled to demand the fair cash
value of such shares of Citizens Common Stock under Section 1701.84 of the OGCL,
and who comply with all of the relevant provisions of
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<PAGE> 17
such Section (the "Citizens Dissenting Shares") shall be converted into the
right to receive payment for the fair cash value of such shares upon strict
compliance with the applicable provisions of the OGCL (unless and until such
holders shall have failed to perfect or shall have effectively withdrawn or lost
their dissenters' rights under the OGCL). If any such holder shall have failed
to perfect or shall have effectively withdrawn or lost such dissenters' rights,
all rights of such holder with respect to such holder's shares of Citizens
Common Stock in question shall be restored, all distributions which, but for the
suspension of rights with respect to such holder's shares of Citizens Common
Stock in question, would have been made shall be made to the holder of record of
the shares of Citizens Common Stock in question at the time of termination, and
the effect of any recapitalization contemplated by the Articles Amendments
which, but for the suspension of rights with respect to such holder's shares of
Citizens Common Stock in question, would have been effected shall be effected as
to such shares. Prior to the Effective Time, Citizens shall give Mid Am (i)
prompt notice of any written demands for payment for any Citizens Common Stock
under Section 1701.84 of the OGCL, attempted withdrawals of such demands, and
any other instruments served pursuant to the OGCL and received by Citizens
relating to dissenters' rights, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to the exercise of dissenters' rights
under the OGCL. Prior to the Effective Time, Citizens shall not, except with the
prior written consent of Mid Am, voluntarily make any payment with respect to
any demands for payments for Citizens Common Stock under Section 1701.84 of the
OGCL, offer to settle or settle any such demands or approve any withdrawal of
any such demands.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 DISCLOSURE LETTERS. Prior to the execution and delivery
hereof, Citizens has delivered to Mid Am, and Mid Am has delivered to Citizens,
a letter (as the case may be, its "Disclosure Letter") setting forth, among
other things, items the disclosure of which is necessary or appropriate either
in response to an express disclosure requirement contained in a provision hereof
or as an exception to one or more of such party's representations or warranties
contained in Section 5.3 or to one or more of its covenants contained in Article
VI; provided, that (a) no such item is required to be set forth in the
Disclosure Letter as an exception to a representation or warranty if its absence
would not result in the related representation or warranty being deemed untrue
or incorrect under the standard established by Section 5.2, and (b) the mere
inclusion of an item in a Disclosure Letter as an exception to a representation
or warranty shall not be deemed an admission by a party that such item
represents a material exception or fact, event or circumstance or that such item
is reasonably likely to result in a Material Adverse Effect (as hereinafter
defined) with respect to either Citizens or to Mid Am, respectively.
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<PAGE> 18
5.2 STANDARDS. (a) No representation or warranty of Citizens
or Mid Am contained in Section 5.3 (other than the representations and
warranties in Sections 5.3(c), 5.3(d), 5.3(f)(ii) and 5.3(o) which shall be true
and correct in all material respects) shall be deemed untrue or incorrect, and
no party hereto shall be deemed to have breached a representation or warranty,
as a consequence of the existence or absence of any fact, circumstance or event
unless such fact, circumstance or event, individually or taken together with all
other facts, circumstances or events inconsistent with any representation or
warranty contained in Section 5.3, has had or is reasonably likely to have a
Material Adverse Effect.
(b) The term "Material Adverse Effect" means an effect which
(A) is materially adverse to the business, properties, financial condition or
results of operations of Mid Am or Citizens, as the context may dictate, and its
subsidiaries taken as a whole, (B) materially impairs the ability of Mid Am or
Citizens, as the context may dictate, to consummate the Merger or (C) enables
any Person to prevent the consummation by Mid Am or Citizens of the Merger;
provided, however, that in determining whether a Material Adverse Effect has
occurred there shall be excluded any effect the proximate cause of which is (i)
any change in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, (ii) any change
in generally accepted accounting principles or regulatory accounting
requirements applicable to banks and bank holding companies generally and (iii)
the effects of the actions contemplated by Section 6.8.
5.3 REPRESENTATIONS AND WARRANTIES OF MID AM AND CITIZENS.
Subject to and giving effect to Sections 5.1 and 5.2 and except as set forth in
the relevant Disclosure Letter referred to therein, Mid Am hereby represents and
warrants to Citizens, and Citizens hereby represents and warrants to Mid Am,
that:
(a) Corporate Organization and Qualification. It is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio and is duly qualified to do business in each jurisdiction
where the properties owned, leased or operated or the business conducted by it
require such qualification. It has the requisite corporate power and authority
to carry on its businesses as they are now being conducted. It has made
available to the other party hereto a complete and correct copy of its articles
of incorporation and code of regulations, each as amended to date and currently
in full force and effect.
(b) Subsidiaries. Each of its subsidiaries is duly organized,
and (to the extent applicable) validly existing, and in good standing under the
laws of the jurisdiction of incorporation or organization of such subsidiary,
and is duly qualified to do business in each jurisdiction where the property
owned, leased or operated, or the business conducted, by such subsidiary
requires such qualification. Each of its subsidiaries has the requisite
corporate power and authority to own or lease its properties and assets and to
carry on its business as it is now being conducted.
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<PAGE> 19
(c) Capital Stock. (i) In the case of the representations and
warranties made by Citizens:
(A) The information in Recital A is true and correct.
(B) As of the date hereof, 82,690 shares of Citizens
Common Stock were held in treasury by Citizens or otherwise
owned by Citizens or its subsidiaries for its own account. No
shares of Citizens Preferred Stock were held in treasury by
Citizens or otherwise owned by Citizens or its subsidiaries
for its own account.
(C) All the outstanding shares of Citizens Common
Stock have been duly authorized and validly issued and are
fully paid and nonassessable and were not issued in violation
of any preemptive or similar rights.
(D) As of the date hereof, except as set forth in
this Plan or the Citizens Stock Option Agreement, Citizens
does not have any Rights issued or outstanding with respect to
any of its capital stock and Citizens does not have any
commitment to authorize, issue or sell any shares of its
capital stock or Rights. As used herein, "Rights" means, with
respect to any Person, securities or obligations convertible
into or exercisable or exchangeable for, or giving any person
any right to subscribe for or acquire, or any options, calls
or commitments relating to, or any stock appreciation right or
other instrument the value of which is determined in whole or
in part by reference to the market price or value of, shares
of capital stock of such Person.
(E) All the outstanding shares of capital stock of
each of Citizens' subsidiaries owned by Citizens or a
subsidiary of Citizens have been duly authorized and validly
issued and are fully paid and (except, with respect to bank
subsidiaries, as provided in 12 U.S.C. ss. 55 and comparable
state laws) nonassessable, and are owned by Citizens or a
subsidiary of Citizens free and clear of all liens, pledges,
security interests, claims, proxies, preemptive or
subscriptive rights or other encumbrances or restrictions of
any kind or Rights ("Liens").
(F) The shares of Citizens Common Stock to be issued
in the Merger, when so issued in accordance with this Plan,
will have been duly authorized and validly issued and will be
fully paid and nonassessable and not subject to any preemptive
rights or other Liens established by Citizens.
(ii) In the case of the representations and warranties made by
Mid Am:
(A) The information in Recital B is true and correct.
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<PAGE> 20
(B) As of the date hereof, 1,103,720 shares of Mid Am
Common Stock were held in treasury by Mid Am or otherwise
owned by Mid Am or its subsidiaries for its own account. No
shares of Mid Am Preferred Stock were held in treasury by Mid
Am or otherwise owned by Mid Am or its subsidiaries for its
own account.
(C) All the outstanding shares of Mid Am Common Stock
have been duly authorized and validly issued and are fully
paid and nonassessable and were not issued in violation of any
preemptive or similar rights.
(D) As of the date hereof, except as set forth in
this Plan or the Mid Am Stock Option Agreement, Mid Am does
not have any Rights issued or outstanding with respect to any
of its capital stock and Mid Am does not have any commitment
to authorize, issue or sell any shares of its capital stock or
Rights.
(E) All the outstanding shares of capital stock of
each of Mid Am's subsidiaries owned by Mid Am or a subsidiary
of Mid Am have been duly authorized and validly issued and are
fully paid and (except, with respect to bank subsidiaries, as
provided in 12 U.S.C. ss. 55 and comparable state laws)
nonassessable, and are owned by Mid Am or a subsidiary of Mid
Am free and clear of all Liens.
(d) Corporate Authority and Action. (i) It has the requisite
corporate power and authority and has taken all corporate action necessary
(including in the case of Mid Am, the approval of this Plan and the transactions
contemplated herein by the affirmative vote of at least two-thirds of the Board
of Directors of Mid Am) in order to authorize the execution and delivery of and
performance of its obligations under, this Plan and, subject only to receipt of
the requisite approval of (A) in the case of Citizens, at least two-thirds of
the votes entitled to be cast by the holders of the outstanding shares of
Citizens Common Stock and (B) in the case of Mid Am, a majority of the votes
entitled to be cast by the holders of the outstanding shares of Mid Am Common
Stock, to consummate the Merger. This Plan is a valid and legally binding
agreement of it enforceable in accordance with the terms hereof.
(ii) It has taken all action required to be taken by it in
order to exempt this Plan and the Stock Option Agreement under which it
is the issuer and the transactions contemplated hereby and thereby,
from, and this Plan and such Stock Option Agreement and the
transactions contemplated hereby and thereby are exempt from (A) the
requirements of any "moratorium," "control share," "fair price,"
"supermajority," "affiliate transactions", "business combination" or
other state antitakeover laws and regulations (collectively, "Takeover
Laws"), including section 1701.831 chapter 1704 of the OGCL and (B) in
the case of Mid Am, the
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<PAGE> 21
requirements of Paragraph 2(i) of Article 8 of Citizens' restated
articles of incorporation, as amended.
(e) Governmental Filings; No Violations. (i) Other than the
applications, notices, reports and other filings required to be made by it in
connection with the approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the Bank Holding Company Act of 1956,
as amended (the "BHC Act"), and the approvals of federal, state and local,
domestic and foreign, authorities regulating financial institutions (the
"Regulatory Approvals") and other than as required under the Investment Company
Act of 1940, as amended, the Securities Exchange Act of 1934, as amended
(including the rules and regulations thereunder, the "Exchange Act"), the
Securities Act of 1933, as amended (including the rules and regulations
thereunder, the "Securities Act"), and state securities and "Blue Sky" laws
(together with the Exchange Act and the Securities Act, the "Securities Laws"),
no applications, notices, reports or other filings are required to be made by it
with, nor are any consents, registrations, approvals, permits or authorizations
required to be obtained by it from, any governmental or regulatory authority,
agency, court, commission or other entity, domestic or foreign ("Governmental
Entity"), in connection with the execution, delivery or performance of this Plan
or the Mid Am Stock Option Agreement or the Citizens Stock Option Agreement, as
the case may be, by it and the consummation by it of the transactions
contemplated hereby and thereby.
(ii) The execution, delivery and performance of this Plan does
not and will not, and the consummation by it of any of the transactions
contemplated hereby will not, constitute or result in (A) a breach or
violation of, or a default under, its articles of incorporation or code
of regulations, or the comparable governing instruments of any of its
subsidiaries, or (B) a breach or violation of, or a default under, or
the acceleration of or the creation of a Lien (with or without the
giving of notice, the lapse of time or both) pursuant to, any provision
of any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation ("Contracts") of it or any of its
subsidiaries or any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or non-governmental permit or
license to which it or any of its subsidiaries is subject, or any
change in the rights or obligations of any party under any of the
Contracts.
(f) Reports and Financial Statements. (i) It has delivered to
the other party each registration statement, offering circular, report,
definitive joint proxy statement or information statement filed, used or
circulated by it under the Securities Act, the Exchange Act and state securities
and "Blue Sky" laws with respect to periods since January 1, 1998 through the
date of this Plan and will promptly deliver each such registration statement,
offering circular, report, definitive proxy statement or information statement
filed, used or circulated after the date hereof (collectively, whether filed
before or after the date hereof, its "Reports"), each in the form (including
exhibits and any amendments thereto) filed with the
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<PAGE> 22
Securities and Exchange Commission (the "SEC") (or if not so filed, in the form
used or circulated).
(ii) As of their respective dates (and without giving effect
to any amendments or modifications filed after the date of this Plan),
each of the Reports, including the financial statements, exhibits and
schedules thereto, filed, used or circulated prior to the date hereof
complied (and each of the Reports filed after the date of this Plan,
will comply) in all material respects with applicable Securities Laws
and did not (or in the case of Reports filed after the date of this
Plan, will not) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(iii) Each of its consolidated statements of condition or
balance sheets included in or incorporated by reference into its
Reports, including the related notes and schedules, fairly presented
(or, in the case of Reports prepared after the date of this Plan, will
fairly present) the consolidated financial position of it and its
subsidiaries as of the date of such statement of condition or balance
sheet and each of the consolidated statements of income, cash flows and
shareholders' equity included in or incorporated by reference into its
Reports, including any related notes and schedules, fairly presented
(or, in the case of Reports prepared after the date of this Plan, will
fairly present) the consolidated results of operations, retained
earnings and cash flows, as the case may be, of it and its subsidiaries
for the periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments), in each case in
accordance with generally accepted accounting principles consistently
applied during the periods involved, except as may be noted therein.
Collectively, its foregoing consolidated statements of condition or
balance sheets, statements of income, cash flows and shareholders'
equity are referred to as its "Financial Statements".
(g) Absence of Certain Events and Changes. (i) Since December
31, 1997, it and its subsidiaries have conducted their respective businesses
only in the ordinary and usual course of such businesses and (ii) there has not
been any change or development or combination of changes or developments which,
individually or in the aggregate, has or resulted in or is reasonably likely to
result in a Material Adverse Effect.
(h) Compliance with Laws. It and each of its subsidiaries:
(i) is in compliance, in the conduct of its business,
with all applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable
thereto or to the employees conducting such businesses, including,
without limitation, the Equal Credit Opportunity Act, the
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<PAGE> 23
Fair Housing Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act, all other applicable fair lending laws or other laws
relating to discrimination and the Bank Secrecy Act;
(ii) has all permits, licenses, franchises,
certificates of authority, orders, and approvals of, and has made all
filings, applications, and registrations with, Governmental Entities
that are required in order to permit it or such subsidiary to carry on
its business as presently conducted;
(iii) has received since December 31, 1995 no
notification or communication from any Governmental Entity (including
the Federal Reserve Board and any other bank, insurance or securities
regulatory authority) (A) asserting that it or any of its subsidiaries
is not in compliance with any statutes, regulations or ordinances, (B)
threatening to revoke any permit, license, franchise, certificate of
authority or other governmental authorization, or (C) threatening or
contemplating revocation or limitation of, or which would have the
effect of revoking or limiting, FDIC deposit insurance; or
(iv) is not a party to or subject to any order,
decree, agreement, memorandum of understanding or similar arrangement
with, or a commitment letter, supervisory letter or similar submission
to, any Governmental Entity charged with the supervision or regulation
of depository institutions or engaged in the insurance of deposits
(including, the FDIC) or the supervision or regulation of it or any of
its subsidiaries and neither it nor any of its subsidiaries has been
advised by any such Governmental Entity that such Governmental Entity
is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum of understanding, commitment letter, supervisory
letter or similar submission.
(i) Litigation. There are no criminal or administrative
investigations or hearings of, before or by any Governmental Entity, or civil,
criminal or administrative actions, suits, claims or proceedings of, before or
by any Person (including any Governmental Entity) pending or, to its knowledge,
threatened, against or affecting it or any of its subsidiaries (including,
without limitation, under the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act or any
other fair lending law or other law relating to discrimination).
(j) Taxes. All federal, state, local and foreign Tax (as
hereinafter defined) returns, including all information returns, required to be
filed by or on behalf of it or any of its subsidiaries have been timely filed or
requests for extensions have been timely filed and any such extension has been
granted and has not expired, and all such filed returns are complete and
accurate in all material respects. Except as disclosed in its Reports, all Taxes
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<PAGE> 24
attributable to it or any of its subsidiaries that are or were due or payable
(without regard to whether such Taxes have been assessed) have been paid in full
or have been adequately provided for on its consolidated balance sheet and
consolidated statement of earnings or income (in accordance with generally
accepted accounting principles). As of the date of this Plan and except as
disclosed in its Reports, there is no outstanding audit examination, defi-
ciency, refund litigation or outstanding waivers or agreements extending the
applicable statute of limitations for the assessment or collection of any Taxes
for any period with respect to any Taxes of it or its subsidiaries. All Taxes
due with respect to completed and settled examinations or concluded litigation
relating to it or any of its subsidiaries have been paid in full or have been
recorded on its or such subsidiary's balance sheet and consolidated statement of
earnings or income (in accordance with generally accepted accounting princi-
ples). Neither it nor any of its subsidiaries is a party to a Tax sharing or
similar agreement or any agreement pursuant to which it or any of its
subsidiaries has indemnified any party (other than it or one of its
subsidiaries) with respect to Taxes that has been entered into in connection
with the sale of a company or a business. The proper and accurate amounts have
been withheld from all employees (and timely paid to the appropriate
Governmental Entity or set aside in an account for such purposes) for all
periods through the Closing Date in compliance with all Tax withholding
provisions of applicable federal, state, local and foreign laws (including,
without limitation, income, social security and employment tax withholding for
all types of compensation). The term "Tax" includes any tax or similar
governmental charge, impost or levy (including, without limitation, income
taxes, franchise taxes, transfer taxes or fees, stamp taxes, sales taxes, use
taxes, excise taxes, ad valorem taxes, withholding taxes, employee withholding
taxes, worker's compensation, payroll taxes, unemployment insurance, social
security, minimum taxes or windfall profits taxes), together with any related
liabilities, penalties, fines, additions to tax or interest, imposed by any
federal, state or local, domestic or foreign government or subdivision or agency
thereof.
(k) Insurance. It and its subsidiaries are insured with
reputable insurers against such risks and in such amounts as its management
reasonably has determined to be prudent in accordance with industry practices.
(l) Labor Matters. Neither it nor any of its subsidiaries is a
party to, or is bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is it
or any of its subsidiaries the subject of any material proceeding asserting that
it or any such subsidiary has committed an unfair labor practice or seeking to
compel it or such subsidiary to bargain with any labor organization as to wages
or conditions of employment, nor is there any strike involving it or any of its
subsidiaries pending or, to its knowledge, threatened, nor is it aware of any
activity involving its or any of its subsidiaries' employees seeking to certify
a collective bargaining unit or engaging in any other organizational activity.
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<PAGE> 25
(m) Employee Benefits. (i) Paragraph 5.3(m) of its Disclosure
Letter sets forth a list of each "employee benefit plan", as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock and stock option plan, employment or
severance contract and all other employee benefit plans that cover current or
former officers or employees ("Employees") or current or former directors of it
and its subsidiaries (its "Compensation Plans").
(ii) All of its Compensation Plans other than Multiemployer
Plans are in compliance with all applicable laws, including ERISA and
the Internal Revenue Code. Each of its Compensation Plans which is an
"employee pension benefit plan" within the meaning of Section 3(2) of
ERISA ("Pension Plan") and which is intended to be qualified under
Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service with respect to
"TRA" (as defined in Section 1 of Rev. Proc. 93-39), and it is not
aware of any circumstances likely to result in revocation of any such
favorable determination letter. There is no pending or, to its
knowledge, threatened litigation relating to its Compensation Plans.
Neither it nor any of its subsidiaries has engaged in a transaction
with respect to any Compensation Plan that, assuming the taxable period
of such transaction expired as of the date hereof, could subject it or
any of its subsidiaries to a tax or penalty imposed by either Section
4975 of the Internal Revenue Code or Section 502(i) of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA
(other than payment of applicable premiums) has been or is expected to
be incurred by it or any of its subsidiaries with respect to any
ongoing, frozen or terminated "single-employer plan", within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity
(an "ERISA Affiliate Plan") which is considered one employer with it
under Section 4001 of ERISA or Section 414 of the Internal Revenue Code
(an "ERISA Affiliate"). It and its subsidiaries and ERISA Affiliates
have neither contributed to nor been obligated to contribute to any
"multiemployer plan" within the meaning of Section 3(37) of ERISA,
regardless of whether based on contributions of an ERISA Affiliate. No
notice of a "reportable event", within the meaning of Section 4043 of
ERISA, for which the 30-day reporting requirement has not been waived,
has been required to be filed for any of its Pension Plans or by any of
its ERISA Affiliates within the 12-month period ending on the date
hereof, or will be required to be filed as a result of the transactions
contemplated by this Plan. Neither it, its subsidiaries nor any of
their respective ERISA Affiliates has incurred or is aware of any facts
that are reasonably likely to result in any liability pursuant to
Sections 4069 or 4204 of ERISA.
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<PAGE> 26
(iv) All contributions required to be made by it and its
subsidiaries under the terms of any of its Compensation Plans have been
timely made or have been reflected on its audited financial statements
or preliminary financial statements. Neither any of its Pension Plans
nor any of its ERISA Affiliate Plans has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412
of the Internal Revenue Code or Section 302 of ERISA. None of it, its
subsidiaries or its ERISA Affiliates has provided, or is required to
provide, security to any Pension Plan or to any ERISA Affiliate Plan
pursuant to Section 401(a)(29) of the Internal Revenue Code.
(v) Under each of its Pension Plans and any ERISA Affiliate
Plans, as of the last day of the most recent plan year ended prior to
the date of this Plan, the actuarially determined present value of all
"benefit liabilities", within the meaning of Section 4001(a)(16) of
ERISA (as determined on the basis of the actuarial assumptions
contained in the most recent actuarial valuation of such Pension Plan
or ERISA Affiliate Plan), did not exceed the then current value of the
assets of such Pension Plan or ERISA Affiliate Plan, and there has been
no change in the financial condition of such Pension Plan or ERISA
Affiliate Plan since the last day of the most recent plan year.
(vi) Neither it nor its subsidiaries have any obligations for
retiree health and life benefits and there are no restrictions on the
rights of it or its subsidiaries to amend or terminate any such Plan
without incurring any liability thereunder in addition to normal
liabilities for benefits.
(vii) The transactions contemplated by this Plan and the Stock
Option Agreements will not result in the vesting or acceleration of
any amounts under any Compensation Plan, any increase in benefits under
any Compensation Plan or payment of any severance or similar
compensation under any Compensation Plan.
(viii) No Compensation Plans covering current or former
non-U.S. employees of its subsidiaries have unfunded liabilities and
all such Compensation Plans are in substantial compliance with local
law.
(n) Environmental Matters. Neither the conduct nor operation
of it or its subsidiaries nor any condition of any property presently or
previously owned, leased or operated by any of them (including, without
limitation, in a fiduciary or agency capacity), or on which any of them holds a
Lien, violates or violated Environmental Laws (as hereinafter defined) and no
condition has existed or event has occurred with respect to any of them or any
such property that, with notice or the passage of time, or both, is reasonably
likely to result in liability under Environmental Laws. Neither it nor any of
its subsidiaries has received any notice from any person or entity that it or
its subsidiaries or the operation or
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condition of any property ever owned, leased, operated, or held as collateral or
in a fiduciary capacity by any of them are or were in violation of or otherwise
are alleged to have liability under Environmental Law, including, but not
limited to, responsibility (or potential responsibility) for the cleanup or
other remediation of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on, beneath, or originating from any such property.
As used herein, "Environmental Laws" means all applicable local, state and
federal environmental, health and safety laws and regulations, including,
without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation, and Liability Act, the Clean
Water Act, the Federal Clean Air Act, and the Occupational Safety and Health
Act, each as amended, regulations promulgated thereunder, and state
counterparts.
(o) Community Reinvestment Act. Each of its banking
subsidiaries which is subject to the provisions of the Community Reinvestment
Act has an assigned rating of "satisfactory" or better under the provisions of
the Community Reinvestment Act and the regulations promulgated thereunder.
(p) Agreements. (i) As of the date of this Plan, except for
(A) this Plan and the Stock Option Agreements and (B) arrangements made after
the date, and in accordance with the terms, of this Plan, it and its
subsidiaries are not bound by (x) any material contract (as defined in Item
601(b)(10) of Regulation S-K under the Securities Act) to be performed after the
date hereof that has not been filed with or incorporated by reference in its
Reports filed on or prior to the date hereof or (y) any Contract that restricts
the conduct of business by it or any of its subsidiaries.
(ii) None of it or any of its subsidiaries is in default under
any material Contract.
(q) Knowledge as to Conditions. As of the date of this Plan,
it knows of no reason, including the status of its efforts regarding "year 2000
issues," (i) why the Regulatory Approvals should not be obtained, (ii) why the
accountants' letters referred to in Section 7.1(g) or the opinions of tax
counsel referred to in Section 7.2(c) will not be able to be obtained on the
Closing Date, or (iii) why the opinion of tax counsel referred to in Section
7.3(c) will not be able to be obtained at the Effective Time.
(r) Fairness Opinions. It has received the opinion of,
McDonald & Company Securities, Inc. in the case of Mid Am, and Sandler O'Neill &
Partners, L.P. in the case of Citizens, to the effect that as of the date
hereof, the Exchange Ratio is fair, from a financial point of view, to its
shareholders.
(s) Brokers and Finders. None of it, its subsidiaries or any
of their officers, directors or employees has employed any broker or finder or
incurred any liability for any
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brokerage fees, commissions or finder's fees in connection with the transactions
contemplated herein, except that Mid Am has retained McDonald & Company
Securities, Inc. as its financial adviser and Citizens has retained Sandler
O'Neill & Partners, L.P. as its financial adviser, the arrangements with which
have been set forth in its respective Disclosure Letter.
(t) Risk Management Instruments. All interest rate swaps,
caps, floors, option agreements, futures and forward contracts and other similar
risk management arrangements (collectively, the "Risk Management Instruments"),
whether entered into for its own account, or for the account of one or more of
its subsidiaries or its customers, were entered into (i) in accordance with
prudent business practices and all applicable laws, rules, regulations and
regulatory policies and (ii) with counterparties believed to be financially
responsible at the time; and each of the Risk Management Instruments constitutes
the valid and legally binding obligation of, in the case of representations and
warranties made by Mid Am, Mid Am or one of its subsidiaries or, in the case of
representations and warranties made by Citizens, Citizens or one of its
subsidiaries, enforceable in accordance with the terms of such Risk Management
Instrument (except as 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 is in full force and effect.
(u) Year 2000. The computer software operated by it which is
material to the conduct of its business is capable of providing or is being
adapted to provide uninterrupted millennium functionality to record, store,
process and present calendar dates falling on or after January 1, 2000 in
substantially the same manner and with the same functionality as such software
records, stores, processes and presents such calendar dates falling on or before
December 31, 1999. The costs of the adaptations referred to in this clause will
not have a Material Adverse Effect on it.
(v) Employment Agreements. In the case of Citizens only,
Citizens has entered into certain employment agreements with Edward J. Reiter,
David R. Francisco and Marty E. Adams, each of which has been duly authorized,
executed and delivered by Citizens and none of which shall be modified, amended
or supplemented without the prior written consent of Mid Am.
ARTICLE VI
COVENANTS
6.1 CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME. Each of
Mid Am and Citizens agrees, as to itself and its subsidiaries, that, except
insofar as the other party shall otherwise consent in writing (such consent not
to be unreasonably withheld) or except as
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otherwise expressly contemplated by this Plan or the Stock Option Agreements or
as set forth in paragraph 6.1 of its Disclosure Letter:
(a) The business of it and its subsidiaries will be conducted
only in the ordinary and usual course and, to the extent consistent therewith,
it and its subsidiaries will use all reasonable best efforts to preserve intact
their business organizations and assets and maintain their rights, franchises
and existing relations with customers, suppliers, employees and business
associates and to take no action that would (i) adversely affect the ability of
any of them to obtain (A) any Regulatory Approval, (B) the accountants' letters
referred to in Section 7.1(g) or (C) the opinions of tax counsel referred to, in
the case of Mid Am, in Section 7.2(c) and in the case of Citizens, in Section
7.3(c), or (ii) adversely affect its ability to perform its obligations under
this Plan or the Stock Option Agreements.
(b) It will not (i) sell or pledge, agree to sell or pledge,
or permit any Lien to exist on, any stock owned by it or any of its material
subsidiaries; (ii) other than as contemplated by Section 2.5 and Section 2.6,
amend or restate its articles of incorporation or code of regulations; (iii)
other than as referred to in Section 4.4, split, combine or reclassify any
outstanding capital stock; (iv) other than as permitted by Section 6.2, declare,
set aside or pay any dividend or distribution payable in cash, stock or other
property with respect to any of its capital stock; or (v) except for
acquisitions made by Mid Am National Bank and Trust Company, as trustee under
Mid Am's Employee Stock Ownership Pension Plan, as amended and restated, and Mid
Am's Employee Stock Ownership and Savings Plan, as amended and restated, and by
the trustee under Citizen's Employee Stock Ownership Plan, as amended and
restated, repurchase, redeem or otherwise acquire, or permit any subsidiary to
purchase or otherwise acquire, directly or indirectly, any shares of its capital
stock or any securities convertible into or exercisable for any shares of its
capital stock.
(c) Neither it nor any of its subsidiaries will (i) issue,
sell, pledge, dispose of or encumber, or authorize or propose the issuance,
sale, pledge, disposition or encumbrance of, any shares of, or securities
convertible or exchangeable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of its capital stock of, any class,
except pursuant to this Plan, the Stock Option Agreements, or in connection with
acquisitions announced prior to the date hereof; (ii) transfer, lease, license,
guarantee, sell, mortgage, pledge or dispose of any other material property or
assets or encumber any property or assets other than to a direct or indirect
wholly owned subsidiary of it; (iii) cancel, release, assign or modify any
material amount of indebtedness of any other individual, bank, corporation,
partnership, trust, association or other entity or organization (any of the
foregoing, a "Person") other than in the ordinary and usual course of business
consistent with past practice; or (iv) authorize capital expenditures other than
in the ordinary and usual course of business.
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(d) Except for internal reorganizations involving existing
subsidiaries, or in satisfaction of debts previously contracted in good faith,
neither it nor any of its subsidiaries will make any material acquisition of, or
investment in, assets or stock of any other Person.
(e) Other than in the ordinary course of business consistent
with past practice, it will not incur or permit any of its subsidiaries to incur
any indebtedness for borrowed money or assume, guarantee, endorse or otherwise
as an accommodation become responsible for the obligations of any other Person
or make any loan or advance.
(f) Neither it nor any of its subsidiaries will (i) grant any
increase in compensation or benefits to its Employees, except for normal
increases consistent with past practice or as required by law; (ii) pay any
bonus except as consistent with past practice; (iii) grant any severance or
termination pay to any director or Employee except as consistent with past
practice; (iv) enter into or amend any employment or severance agreement with
any director or Employee (provided that this clause (iv) shall not prohibit
either party from approving a renewal or other extension of an existing
employment or severance agreement in accordance with its terms and in the
ordinary course of business consistent with past practice); (v) grant any
increase in fees or other increases in compensation or other benefits to any of
its present or former directors; or (vi) effect any material change in
retirement benefits for any class of its Employees (unless such change is
required by applicable law or, in the opinion of counsel, is necessary or
advisable to maintain the tax qualification of any plan under which the
retirement benefits are provided).
(g) Except as may be required to satisfy contractual
obligations existing as of the date hereof and the requirements of applicable
law, neither it nor any of its subsidiaries will establish, adopt, enter into or
make any new, or amend any existing, collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension, retire-
ment, employee stock ownership, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any directors or Employees.
(h) Neither it nor any of its subsidiaries will implement or
adopt any change in its accounting principles, practices or methods, other than
as may be required by generally accepted accounting principles or regulatory
accounting principles.
(i) Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding against it, except for any
claim, action or proceeding which involves solely money damages in an amount,
individually or in the aggregate for all such settlements, that is not material
to Citizens or Mid Am and each of their respective subsidiaries, taken as a
whole, and that does not involve or create precedent for claims, actions or
proceedings that are reasonably likely to be material to Citizens or Mid Am and
each of their respective subsidiaries taken as a whole.
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(j) Neither it nor any of its subsidiaries will authorize or
enter into an agreement to take any of the actions referred to in paragraphs (a)
through (i) above.
6.2 DIVIDENDS. Each of Mid Am and Citizens agrees that, from
and after the date hereof until the Effective Time, (i) direct and indirect
wholly owned subsidiaries of each of Mid Am and Citizens may (to the extent
legally and contractually permitted to do so), but shall not be obligated to,
declare and pay dividends in cash, stock or other property and (ii) each may pay
quarterly dividends on outstanding shares of Mid Am Common Stock and Citizens
Common Stock, respectively, at a rate not to exceed $0.16 per share per quarter
in the case of Mid Am and $0.31 per share per quarter in the case of Citizens
(adjusted to $0.16 per share per quarter after the stock split or stock dividend
referred to in Section 4.4). Citizens and Mid Am shall coordinate (on a mutually
agreeable basis that will not materially impair their ability to obtain the
letters referred to in Section 7.1(g)) the declaration of dividends (and the
record and payment dates therefor), it being the intention of the parties hereto
that holders of Citizens Common Stock or Mid Am Common Stock shall not receive
two dividends, or fail to receive one dividend, for any quarter with respect to
their shares of Citizens Common Stock and/or Mid Am Common Stock and any shares
of Citizens Common Stock any such holder receives in the Merger.
6.3 ACQUISITION PROPOSALS. Each of Mid Am and Citizens agrees
that neither it nor any of its subsidiaries nor any of its respective officers
and directors or the officers and directors of its subsidiaries shall, and it
shall direct and use all reasonable best efforts to cause its employees and
agents, including any investment banker, attorney or accountant retained by it
or any of its subsidiaries (collectively, its "Representatives") not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase
of, all or any substantial part of its assets, deposits or any equity securities
of either Mid Am or Citizens or any of their material subsidiaries (any such
proposal or offer in respect of either Mid Am or Citizens being hereinafter
referred to as an "Acquisition Proposal"), other than as expressly contemplated
by this Plan, or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any Person
relating to an Acquisition Proposal or otherwise facilitate any effort or
attempt to implement or make an Acquisition Proposal. Citizens will notify Mid
Am, and Mid Am will notify Citizens, immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, it and
any developments with respect thereto.
6.4 SHAREHOLDER APPROVAL. (a) Mid Am agrees to take, in
accordance with applicable law and its amended articles of incorporation and
code of regulations, all action necessary to convene a meeting of its
shareholders (including any adjournment or postponement, the "Mid Am Meeting"),
as promptly as practicable after the Registration Statement is declared
effective to consider and vote upon the adoption and approval of this Plan and
the Merger. The Board of Directors of Mid Am shall recommend such adoption
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and approval and Mid Am will take all reasonable lawful action to solicit such
adoption and approval and authorization by its shareholders.
(b) Citizens agrees to take, in accordance with applicable law
and its restated articles of incorporation, as amended, and code of regulations,
all action necessary to convene a meeting of its shareholders (including any
adjournment or postponement, the "Citizens Meeting"), as promptly as practicable
after the Registration Statement is declared effective to consider and vote upon
the adoption and approval of this Plan and the Merger and the other matters
contemplated hereby. The Board of Directors of Citizens shall recommend such
adoption and approval and Citizens will take all reasonable lawful action to
solicit such adoption and approval by its shareholders.
6.5 FILINGS; OTHER ACTIONS. (a) Each of Mid Am and Citizens
agrees to cooperate in the preparation of a registration statement on Form S-4
(the "Registration Statement") to be filed by Citizens with the SEC in
connection with the issuance of Citizens Common Stock in the Merger (including
the joint proxy statement and prospectus and other proxy solicitation materials
of Citizens and Mid Am constituting a part thereof (the "Joint Proxy
Statement/Prospectus")). Citizens agrees to use all reasonable efforts to cause
the Registration Statement to be declared effective under the Securities Act as
promptly as practicable after filing thereof. Citizens also agrees to use all
reasonable best efforts to obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the transactions contemplated
by this Plan, and each of Citizens and Mid Am agrees to furnish all information
concerning it and the holders of its capital stock as may be reasonably
requested in connection with any such action.
(b) Each of Mid Am and Citizens agrees to cooperate with the
other and, subject to the terms and conditions set forth in this Plan, use
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions, filings
and other documents, and to obtain all necessary permits, consents, orders,
approvals and authorizations of, or any exemption by, all third parties and
Governmental Entities necessary or advisable to consummate the transactions
contemplated by this Plan, including without limitation the Regulatory
Approvals. Each of Mid Am and Citizens shall have the right to review in
advance, and to the extent practicable each will consult with the other, in each
case subject to applicable laws relating to the exchange of information, with
respect to all the material information relating to the other party, and any of
their respective subsidiaries, which appears in any material filing made with,
or written materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Plan. In exercising the
foregoing right, each of the parties hereto agrees to act reasonably and as
promptly as practicable. Each party hereto agrees that it will consult with the
other party hereto with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this Plan
and each party will
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keep the other party apprized of the status of matters relating to completion of
the transactions contemplated hereby.
(c) Each party agrees, upon request, to furnish the other
party with all information concerning itself, its subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with the Registration Statement or Joint Proxy
Statement/Prospectus or any other statement, filing, notice or application made
by or on behalf of such other party or any of its subsidiaries to any
Governmental Entity in connection with the Merger and the other transactions
contemplated by this Plan.
(d) Each of Mid Am and Citizens agrees to consult and
cooperate with the other in effecting actions and measures for the purpose of
ensuring the orderly consummation of the transactions contemplated hereby and
the efficient conduct of the combined businesses of Mid Am and Citizens
following the Merger. Without limiting the foregoing, each of Mid Am and
Citizens agrees, to the extent consistent with applicable law, to consult and
cooperate with the other in (i) developing a joint business plan for periods
beginning at the Effective Time and (ii) taking reasonable steps in an effort to
result in the achievement of the objectives stated in such joint business plan.
6.6 INFORMATION SUPPLIED. Each of Citizens and Mid Am agrees,
as to itself and its subsidiaries, that none of the information supplied or to
be supplied by it for inclusion or incorporation by reference in (a) the
Registration Statement will, at the time the Registration Statement and each
amendment and supplement thereto, if any, become effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (b) the Joint Proxy Statement/Prospectus and any
amendment or supplement thereto, at the date of mailing to shareholders and at
the times of the Citizens Meeting and the Mid Am Meeting, will contain any
statement which, in the light of the circumstances under which such statement is
made, will be false or misleading with respect to any material fact, or will
omit to state any material fact necessary in order to make the statements
therein not false or misleading or necessary to correct any statement in any
earlier statement in the Joint Proxy Statement/Prospectus or any amendment or
supplement thereto. Neither the Joint Proxy Statement/Prospectus nor the
Registration Statement will be filed, and, prior to the termination of this
Plan, no amendment or supplement to the Joint Proxy Statement/Prospectus or the
Registration Statement shall be filed, by Mid Am or Citizens without
consultation with the other party and its counsel.
6.7 ACCESS AND INVESTIGATIONS. (a) Upon reasonable notice and
whether during or after the due diligence periods provided for in Sections
8.3(a) and 8.4(a), each of Mid Am and Citizens agrees to (and shall cause each
of its subsidiaries to) afford the other party's Representatives access, during
normal business hours throughout the period until the Closing Date, to its
properties, books, contracts and records and, during such period, shall
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(and shall cause each of its subsidiaries to) furnish promptly to the other
party all material information concerning its business, properties and personnel
as may reasonably be requested. Neither Citizens nor Mid Am nor any of their
respective subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of such party's customers, jeopardize the attorney-client privilege of
the institution in possession or control of such information or contravene any
law, rule regulation, order, judgment or decree or any binding agreement entered
into prior to the date of this Plan. The parties hereto will make appropriate
substitute disclosure arrangements under circumstances in which restrictions of
the preceding sentence apply.
(b) Each party agrees, and will cause its respective
Representatives not to, use any information obtained from the other party (or
such other party's affiliates or Representatives), pursuant to this Section 6.7
or otherwise, for any purpose unrelated to the consummation of the transactions
contemplated by this Plan. Each party will keep, and will cause its
Representatives to keep, all information and documents obtained from the other
party pursuant to this Section 6.7 or during the investigation leading up to the
execution of this Plan confidential unless such information (i) was already
known to such party, (ii) becomes available to such party from other sources not
known by such party to be bound by a confidentiality obligation, (iii) is
disclosed with the prior written approval of the party to which such information
pertains or (iv) is or becomes readily ascertainable from published information
or trade sources. In the event that this Plan is terminated or the transactions
contemplated by this Plan shall otherwise fail to be consummated, each party
shall promptly cause all copies of documents or extracts thereof containing
information and data as to another party hereto to be returned to the party
which furnished the same.
6.8 CERTAIN MODIFICATIONS; RESTRUCTURING CHARGES. Citizens and
Mid Am agree to consult with respect to their loan, litigation and real estate
valuation policies and practices (including loan classifications and levels of
reserves) and shall make such modifications or changes to its policies and
practices, if any, and at such date prior to the Effective Time, as may be
mutually agreed upon. Citizens and Mid Am shall also consult with respect to the
character, amount and timing of restructuring charges to be taken by each of
them in connection with the transactions contemplated hereby and shall take such
charges in accordance with generally accepted accounting principles, as may be
mutually agreed upon. No party's representations, warranties and covenants
contained in this Plan shall be deemed to be untrue or breached in any respect
for any purpose as a consequence of any modifications or changes to such
policies and practices which may be undertaken on account of this Section 6.8.
6.9 TAKEOVER LAWS. If any Takeover Law may become, or may
purport to be, applicable to the transactions contemplated hereby or by the
Stock Option Agreements, each of Mid Am and Citizens and the members of their
respective Boards of Directors will grant such approvals and take such actions
as are necessary so that the transactions contemplated by this Plan or by the
Stock Option Agreements may be consummated as promptly as
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practicable on the terms contemplated hereby and thereby and otherwise act to
eliminate or minimize the effects of any Takeover Law on any of the transactions
contemplated by this Plan.
6.10 OPTIONS. (a) Conversion of Options. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of an option, each option granted by Mid Am to purchase shares of Mid Am Common
Stock (any such option to purchase shares of Mid Am Common Stock being referred
to as a "Mid Am Option") that is outstanding and unexercised, whether vested or
unvested, immediately prior thereto (excluding any such option the holder of
which is then entitled to receive cash or stock in satisfaction thereof under
the terms of such option or warrant) shall be converted into an option (each, a
"New Option") to purchase such number of shares of Citizens Common Stock at an
exercise price determined as provided below (and otherwise having the same
duration and other terms as the original Mid Am Option):
(i) the number of shares of Citizens Common Stock to be
subject to the New Option shall be equal to the product of (A) the
number of shares of Mid Am Common Stock purchasable upon exercise of
the original Mid Am Option and (B) the Exchange Ratio, the product
being rounded, if necessary, up or down, to the nearest whole share;
and
(ii) the exercise price per share of Citizens Common
Stock under the New Option shall be equal to (A) the exercise price per
share of Mid Am Common Stock under the original Mid Am Option divided
by (B) the Exchange Ratio, rounded, if necessary, up or down, to the
nearest cent.
With respect to any Mid Am Options that are "incentive stock options" (as
defined in Section 422(b) of the Internal Revenue Code), the foregoing
adjustments shall be effected in a manner consistent with Section 424(a) of the
Internal Revenue Code.
(b) Assumption by Citizens. At or prior to the Effective Time,
Mid Am shall make all necessary arrangements with respect to its plans to permit
assumption of the unexercised Mid Am Options by Citizens pursuant to this
Section 6.10.
6.11 BENEFIT PLANS. (a) From and after the Effective Time,
unless otherwise mutually determined, the benefit plans in effect as of the date
of this Plan shall remain in effect with respect to the employees of Citizens
(or its subsidiaries) and the employees of Mid Am (or its subsidiaries) covered
by such plans at the Effective Time (respectively, the "Former Mid Am Employees"
and the "Former Citizens Employees") until such time as the Surviving
Corporation shall, subject to applicable law, the terms of this Plan and the
terms of such plans, adopt new benefit plans with respect to employees of the
Surviving Corporation or take the other actions contemplated by this Section
6.11. Prior to the Effective Time,
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Citizens and Mid Am agree to cooperate in reviewing, evaluating and analyzing
the Citizens benefit plans and Mid Am benefit plans with a view towards either
developing appropriate new benefit plans or amending, supplementing or modifying
existing benefit plans of Citizens or Mid Am. It is the intention of the parties
that, to the extent practicable and except as otherwise determined by Citizens
and Mid Am prior to the Effective Time: (i) the employee benefit plans of the
Surviving Corporation and its subsidiaries shall be structured to result in
similarly situated Former Mid Am Employees and Former Citizens Employees having
substantially equivalent benefits, in the aggregate, and (ii) until such plans
as are intended to be adopted or amended in light of the preceding provision are
so adopted or amended, Former Mid Am Employees and Former Citizens Employees
shall continue to be provided with employee benefits that, in the aggregate,
provide a similar level of benefits to that provided to Former Mid Am Employees
as a group or Former Citizens Employees as a group, respectively, prior to the
Effective Time. The Surviving Corporation agrees that if Citizens establishes or
continues employee benefit plans under which an employee's benefit depends, in
whole or in part, on length of service with Mid Am or Citizens prior to the
Effective Time, credit will be given, to the extent reasonably practicable, for
service credited under similar plans of Mid Am or Citizens or any of their
respective subsidiaries, provided that such crediting of service does not result
in duplication of benefits.
(b) The foregoing notwithstanding, Citizens agrees to honor in
accordance with their terms all benefits vested under Mid Am's Compensation
Plans.
(c) It is the express understanding and intention of the
parties that no employee or other Person shall be deemed to be a third party
beneficiary, or have or acquire any right to enforce the provisions, of this
Section 6.11, and that nothing in this Plan shall be deemed to constitute a
"plan" or an "amendment to a plan."
6.12 INDEMNIFICATION AND INSURANCE. (a) Citizens agrees to
indemnify and hold harmless (including the advancement of expenses as incurred)
each present and former director and officer of Mid Am and Citizens and their
subsidiaries (each, an "Indemnified Party") for a period of six years after the
Effective Time, against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent permitted under applicable law. Citizens' obligations under this
paragraph (a) shall continue in full force and effect for a period of six years
from the Effective Time, provided, however, that all rights to indemnification
in respect of any claim asserted or made within such period shall continue until
the final disposition of such claim.
(b) Citizens shall cause the Persons serving as officers and
directors of Mid Am and Citizens immediately prior to the Effective Time to be
covered for a period of six
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years after the Effective Time by the directors' and officers' liability
insurance policy currently maintained by Citizens (provided that Citizens may
substitute policies providing comparable or better coverage than such policy)
with respect to acts or omissions occurring prior to the Effective Time which
were committed by such officers and directors in their capacity as such;
provided, however, that in no event shall Citizens be required to expend more
than 200% of the amount currently expended by Mid Am (the "Maximum Amount") to
maintain or procure insurance coverage pursuant hereto, and provided further
that, if Citizens is unable to maintain or obtain the insurance called for by
this Section 6.12(b), Citizens shall use its best efforts to obtain as much
comparable insurance as available for the Maximum Amount; provided, further,
that such Persons may be required to make application and provide customary
representations and warranties to Citizens' insurance carrier for the purpose of
obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification
under Section 6.12(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify Citizens thereof; provided
that the failure so to notify shall not affect the obligations of Citizens under
Section 6.12(a) unless and to the extent that Citizens is actually prejudiced as
a result of such failure.
(d) If Citizens or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the continuing
or surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any entity, then and in each case, proper
provision shall be made so that the successors and assigns of Citizens shall
assume the obligations set forth in this Section 6.12.
(e) The provisions of this Section 6.12 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
6.13 AFFILIATE AGREEMENTS. (a) As soon as practicable after
the date hereof, Mid Am shall identify to Citizens and Citizens shall identify
to Mid Am all Persons who are at the date hereof (or at another reasonably
proximate date) "affiliates" of Mid Am or Citizens, respectively, as that term
is used in paragraphs (c) and (d) of Rule 145 under the Securities Act and/or
Accounting Series Releases 130 and 135, as amended, of the SEC ("Affiliates").
Each of Mid Am and Citizens shall use all reasonable best efforts to obtain a
written agreement in the form of, in the case of Mid Am, Annex 4 and, in the
case of Citizens, Annex 5, from each Person who is so identified as a possible
Affiliate and shall deliver copies of such written agreements to the other party
as soon as practicable.
(b) As soon as practicable after the date of the Mid Am
Meeting or Citizens Meeting, as applicable, Mid Am shall identify to Citizens
and Citizens shall identify to Mid Am all Persons who were, at the time of the
Mid Am Meeting or the Citizens Meeting, Affiliates of Mid Am and Citizens,
respectively, and who were not previously identified in accordance with Section
6.13(a). Each of Mid Am and Citizens shall use all reasonable best
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<PAGE> 38
efforts to obtain a written agreement in the form specified in paragraph (a)
from each Person who is so identified and shall deliver copies of such written
agreements to the other party as soon as practicable.
6.14 PUBLICITY. The initial press release relating hereto will
be a joint press release and thereafter Citizens and Mid Am shall agree with
each other prior to issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and prior to
making any filings with any Governmental Entity.
6.15 REASONABLE BEST EFFORTS. Subject to the terms and
conditions of this Plan, each of Mid Am and Citizens agrees to cooperate fully
with each other and to use reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective, at the time and in the manner
contemplated by this Plan, the Merger, including, without limitation, using
reasonable best efforts to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
Merger.
6.16 NOTIFICATION OF CERTAIN MATTERS. Each of Mid Am and
Citizens will give prompt notice to the other upon its becoming aware of the
occurrence or existence of any fact, event or circumstance that (i) is
reasonably likely to result in any Material Adverse Effect with respect to it,
or (ii) would cause or constitute a material breach of any of its
representations, warranties, covenants or agreements contained herein.
6.17 EXPENSES. Each of the parties shall bear and pay all
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial or other consultants, investment bankers, accountants and counsel,
except that Mid Am and Citizens each shall bear and pay one-half of the
following expenses: (i) the costs (excluding the fees and disbursements of
counsel and accountants) incurred in connection with the preparation (including
copying and printing) of the Joint Proxy Statement/Prospectus and Registration
Statement and applications to Governmental Entities for the approval of the
Merger and (ii) all listing, filing or registration fees, including, without
limitation, fees paid for filing the Registration Statement and the Joint Proxy
Statement/Prospectus with the SEC and fees paid for filings with Governmental
Entities.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each of Mid Am and Citizens to consummate
the Merger is subject to the fulfillment or written waiver by Mid Am and
Citizens prior to the Effective Time of each of the following conditions:
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<PAGE> 39
(a) Shareholder Approval. This Plan and the Merger and the
Articles Amendments and the Amendments to the Code of Regulations shall have
been duly adopted and approved by the requisite votes of the shareholders of Mid
Am and the shareholders of Citizens.
(b) Governmental and Regulatory Consents. All regulatory
approvals required to consummate the transactions contemplated hereby, shall
have been obtained and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired and no such approvals
shall contain any conditions, restrictions or requirements which either of the
Citizens Board of Directors or the Mid Am Board of Directors reasonably
determines would following the Effective Time, have a Material Adverse Effect on
the Surviving Corporation and its subsidiaries taken as a whole.
(c) Third Party Consents. All consents or approvals of all
Persons (other than Governmental Entities) required for consummation of the
Merger shall have been obtained and shall be in full force and effect, unless
the failure to obtain any such consent or approval is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on the
financial condition or results of operations of the Surviving Corporation.
(d) No Prohibitions. No United States or state court or other
Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, statute, rule, regulation, judgment,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and prohibits consummation of the Merger.
(e) Registration Statement. The Registration Statement shall
have become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC
or any other Governmental Entity.
(f) Blue Sky Approvals. All permits and other authorizations
under the Securities Laws (other than that referred to in Section 7.1(e)) and
other authorizations necessary to consummate the Merger and to issue the shares
of Citizens Common Stock to be issued in the Merger shall have been received and
be in full force and effect.
(g) Accountants' Pooling Letters. Each of Mid Am and Citizens
shall have received letters, dated as of the mailing date of the Joint Proxy
Statement/Prospectus and the Effective Time, from Crowe, Chizek and Company LLP
and Price Waterhouse LLP, independent auditors, to the effect that the Merger
will qualify for pooling-of-interests accounting treatment under Accounting
Principles Board Opinion No. 16 and SEC Accounting Series Releases 130 and 135,
as amended, if consummated in accordance with this Plan.
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<PAGE> 40
(h) Nasdaq Listing. The shares of Citizens Common Stock that
shall be issued to the shareholders of Mid Am upon consummation of the Merger
shall have been authorized for listing on the Nasdaq subject to official notice
of issuance.
7.2 CONDITIONS TO OBLIGATION OF MID AM. The obligation of Mid
Am to consummate the Merger is also subject to the fulfillment, or the written
waiver by Mid Am prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Citizens set forth in this Plan shall be, giving effect to
Sections 5.1 and 5.2, true and correct as of the date of this Plan and as of the
Effective Time as though made at and as of the Effective Time (except that
representations and warranties that by their terms speak specifically as of the
date of this Plan or some other date shall be true and correct as of such date);
and Mid Am shall have received a certificate, dated the Closing Date, signed on
behalf of Citizens by the Chief Executive Officer and the Chief Financial
Officer of Citizens to such effect.
(b) Performance of Obligations of Citizens. Citizens shall
have performed in all material respects all obligations required to be performed
by it under this Plan at or prior to the Effective Time, and Mid Am shall have
received a certificate, dated the Closing Date, signed on behalf of Citizens by
the Chief Executive Officer and the Chief Financial Officer of Citizens to such
effect.
(c) Opinion of Tax Counsel. Mid Am shall have received an
opinion of Sullivan & Cromwell, special counsel to Mid Am, dated the Closing
Date and in customary form, to the effect that the Merger will be treated for
Federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, and that each of Citizens and Mid Am will
be a party to that reorganization within the meaning of Section 368(b) of the
Internal Revenue Code. If Citizens or an affiliate of Citizens is the surviving
or acquiring corporation in the Merger, such opinion shall include a statement
to the effect that on the basis of the assumptions set forth in such opinion, no
gain or loss will be recognized for Federal income tax purposes by the
stockholders of Mid Am who exchange all of their Mid Am Common Stock solely for
Citizens Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in Citizens Common Stock). In
rendering its opinion, Sullivan & Cromwell may require and rely upon
representations contained in letters from Citizens, Mid Am and others.
7.3 CONDITIONS TO OBLIGATION OF CITIZENS. The obligation of
Citizens to consummate the Merger is also subject to the fulfillment, or the
written waiver by Citizens prior to the Effective Time, of each of the following
conditions:
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<PAGE> 41
(a) Representations and Warranties. The representations and
warranties of Mid Am set forth in this Plan shall be, giving effect to Sections
5.1 and 5.2, true and correct as of the date of this Plan and as of the
Effective Time as though made at and as of the Effective Time (except that
representations and warranties that by their terms speak specifically as of the
date of this Plan or some other date shall be true and correct as of such date)
and Citizens shall have received a certificate, dated the Closing Date, signed
on behalf of Mid Am by the Chief Executive Officer and the Chief Financial
Officer of Mid Am to such effect.
(b) Performance of Obligations of Mid Am. Mid Am shall have
performed in all material respects all obligations required to be performed by
it under this Plan at or prior to the Effective Time; and Citizens shall have
received a certificate, dated the Closing Date, signed on behalf of Mid Am by
the Chief Executive Officer and the Chief Financial Officer of Mid Am to such
effect.
(c) Opinion of Tax Counsel. Citizens shall have received an
opinion from Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates, special
counsel to Citizens, dated the Effective Time, substantially to the effect that,
on the basis of the facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing at the Effective
Time, the Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, and that each of Citizens and Mid
Am will be a party to that reorganization within the meaning of Section 368(b)
of the Internal Revenue Code. If pursuant to Section 1.1 of this Agreement the
method of effecting the combination of Citizens and Mid Am is changed such that
Mid Am or an affiliate of Mid Am is the surviving or acquiring corporation in
the Merger, such opinion shall also include a statement substantially to the
effect that no gain or loss will be recognized for Federal income tax purposes
by the stockholders of Citizens who exchange all of their Citizens Common Stock
solely for Mid Am Common Stock pursuant to the Merger (except with respect to
cash received in lieu of a fractional share interest in Mid Am Common Stock). In
rendering its opinion, Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates may
require and rely upon representations and covenants, including those contained
in certificates of officers of Citizens, Mid Am and others, reasonably
satisfactory in form and substance to such counsel.
ARTICLE VIII
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT. This Plan may be terminated
and the Merger may be abandoned at any time prior to the Effective Time (whether
or not the shareholders of Citizens Common Stock or Mid Am Common Stock have
adopted and approved this Plan), upon the mutual consent of Mid Am and Citizens,
by action of their respective Boards of Directors.
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<PAGE> 42
8.2 TERMINATION BY EITHER MID AM OR CITIZENS. This Plan may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either Mid Am or Citizens if (a) the Merger shall not have been consummated
by March 31, 1999 (the "Termination Date"), (b) any required Regulatory Approval
shall have been denied by the relevant Governmental Entity or such Governmental
Entity shall have requested the permanent withdrawal of any application
therefor, or (c) the approval of the shareholders of Mid Am or Citizens referred
to in Section 7.1(a) shall not have been obtained at the Mid Am Meeting or the
Citizens Meeting, respectively (provided, that the terminating party is not then
in material breach of its obligations under Section 6.4).
8.3 TERMINATION BY CITIZENS. This Plan may be terminated and
the Merger may be abandoned by action of the Board of Directors of Citizens as
follows:
(a) It is intended that Citizens will continue its due
diligence review of Mid Am for up to 30 days after the date hereof. In the event
that Citizens' due diligence investigation of Mid Am and its subsidiaries
discloses one or more matters which either (i) Citizens in good faith believes
in the reasonable judgment of the Board of Directors of Citizens to be
inconsistent with any of the representations and warranties of Mid Am and which
constitute or have had or are reasonably likely to have a Material Adverse
Effect on Mid Am or (ii) in the reasonable judgment of the Board of Directors of
Citizens either (A) is of such significance as to constitute or have or be
reasonably likely to have a Material Adverse Effect on Mid Am and its
subsidiaries, taken as a whole, or (B) deviates materially and adversely from
the financial statements for the year ended December 31, 1997 or the three
months ended March 31, 1998, of Mid Am, the Board of Directors of Citizens may
elect to terminate this Plan by giving notice of termination to Mid Am within or
at the end of the 30 day period following the date hereof;
(b) At any time prior to the Effective Time, if Mid Am shall
have breached any representation, warranty, covenant or agreement contained
herein that would result in the failure to satisfy the closing condition set
forth in Section 7.3(a) or 7.3(b) and such breach cannot be or has not been
cured within 30 days after the giving of a written notice to Mid Am of such
breach;
(c) At any time prior to the Mid Am Meeting, if the Board of
Directors of Mid Am shall have failed to make or shall have withdrawn, or
materially modified or changed, its approval or recommendation referred to in
Section 6.4(a); or
(d) at any time prior to the close of business, Eastern
Standard Time, on May 21, 1997, if Mid Am shall have not executed and delivered
the Mid Am Stock Option Agreement to Citizens.
8.4 TERMINATION BY MID AM. This Plan may be terminated and the
Merger may be abandoned by action of the Board of Directors of Mid Am as
follows:
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(a) It is intended that Mid Am will continue its due diligence
review of Citizens for up to 30 days after the date hereof. In the event that
Mid Am's due diligence investigation of Citizens and its subsidiaries discloses
one or more matters which either (i) Mid Am in good faith believes in the
reasonable judgment of the Board of Directors of Mid Am to be inconsistent with
any of the representations and warranties of Citizens and which constitute or
have had or are reasonably likely to have a Material Adverse Effect on Citizens
or (ii) in the reasonable judgement of the Board of Directors of Mid Am either
(A) is of such significance as to constitute or have or be reasonably likely to
have a Material Adverse Effect on Citizens and its subsidiaries, taken as a
whole, or (B) deviates materially and adversely from the financial statements
for the year ended December 31, 1997 or the three months ended March 31, 1998,
of Citizens, the Board of Directors of Mid Am may elect to terminate this Plan
by giving notice of termination to Citizens within or at the end of the 30 day
period following the date hereof;
(b) At any time prior to the Effective Time, if Citizens shall
have breached any representation, warranty, covenant or agreement contained
herein that would result in the failure to satisfy the closing condition set
forth in Section 7.2(a) or 7.2(b) and such breach cannot be or has not been
cured within 30 days after the giving of a written notice to Citizens of such
breach;
(c) At any time prior to the Citizens Meeting, if the Board of
Directors of Citizens shall have failed to make, or shall have withdrawn, or
materially modified or changed, its approval or recommendation referred to in
Section 6.4(b); or
(d) at any time prior to the close of business, Eastern
Standard Time, on May 21, 1997, if Citizens shall have not executed and
delivered the Citizens Stock Option Agreement to Mid Am.
8.5 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Plan and the abandonment of the Merger pursuant to this
Article VIII, (a) no party to this Plan shall have any liability or further
obligation to any other party hereunder provided, however, termination will not
relieve a breaching party from liability for any willful breach giving rise to
such termination and (b) this Plan shall forthwith be void and of no further
legal effect, other than the provisions of this Section 8.5 and Sections 6.7(b)
and 6.17 and Article IX. Notwithstanding the foregoing, in the event of any
termination of this Plan, the Stock Option Agreements shall remain in full force
and effect in accordance with their respective terms.
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ARTICLE IX
MISCELLANEOUS
9.1 SURVIVAL. Except for the agreements and covenants
contained in Article II, Article III, Article IV, Section 6.10, Section 6.11,
Section 6.12 and this Article IX, the representations and warranties, agreements
and covenants contained in this Plan shall be deemed only to be conditions of
the Merger and shall not survive the Effective Time.
9.2 MODIFICATION OR AMENDMENT. Subject to applicable law, at
any time prior to the Effective Time, the parties hereto may modify or amend
this Plan, by written agreement executed and delivered by duly authorized
officers of the respective parties.
9.3 WAIVER OF CONDITIONS. The conditions to each party's
obligation to consummate the Merger are for the sole benefit of such party and
may be waived by such party as a whole or in part to the extent permitted by
applicable law. No waiver shall be effective unless it is in a writing signed by
a duly authorized officer of the waiving party that makes express reference to
the provision or provisions subject to such waiver.
9.4 COUNTERPARTS. For the convenience of the parties hereto,
this Plan may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
9.5 GOVERNING LAW. THIS PLAN SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WITHIN SUCH STATE.
9.6 NOTICES. Any notice, request, instruction or other
document to be given hereunder by any party to the other shall be in writing and
shall be deemed to have been duly given (a) on the date of delivery if delivered
personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b)
on the first business day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the third business day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice.
(a) If to Mid Am:
Mid Am, Inc.
- -----------------------------
221 South Church Street
- -----------------------------
Bowling Green, Ohio 43402
- -----------------------------
Attention: Edward J. Reiter
------------------
Telecopy: (419) 354-5263
------------------
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<PAGE> 45
with copies to: and
W. Granger Souder, Esq. H. Rodgin Cohen, Esq.
- ----------------------------- ---------------------------
Mid Am, Inc. Mark J. Menting, Esq.
- ----------------------------- ---------------------------
221 South Church Street Sullivan & Cromwell
- ----------------------------- ---------------------------
Bowling Green, Ohio 43402 125 Broad Street
- ----------------------------- ---------------------------
Telecopy: (419) 354-5263 New York, New York 10004
------------------ ---------------------------
Telecopy: (212) 558-3588
----------------
(b) If to Citizens:
Citizens Bancshares, Inc.
- -----------------------------
10 East Main Street
- -----------------------------
Salineville, Ohio 43945
- -----------------------------
Attention: Marty E. Adams
------------------
Telecopy: (330) 679-0523
------------------
with copies to: and
Patricia Oliver, Esq. William S. Rubenstein, Esq.
- -------------------------------------------- ---------------------------
Squire, Sanders & Dempsey L.l.p. Skadden, Arps, Slate,
- -------------------------------------------- ---------------------
4900 Key Tower Meagher & Flom & Affiliates
- -------------------------------------------- ---------------------------
127 Public Square 919 Third Avenue
- -------------------------------------------- ----------------
Cleveland, Ohio 44114 New York, New York 10022
- -------------------------------------------- ------------------------
Telecopy: (216) 479-8776 Telecopy: (212) 735-2000
--------------------------------- --------------
9.7 ENTIRE AGREEMENT, ETC. This Plan (including the Annexes
hereto and the Disclosure Letters) and any Stock Option Agreements constitute
the entire agreement, and supersede all other prior agreements, understandings,
representations and warranties, both written and oral, between the parties, with
respect to the subject matter hereof and thereof, and this Plan shall not be
assignable by operation of law or otherwise (any attempted assignment in
contravention of this Section 9.7 being null and void).
9.8 DEFINITION OF "SUBSIDIARY"; COVENANTS WITH RESPECT TO
SUBSIDIARIES. (a) When a reference is made in this Plan to a subsidiary of a
Person, the term "subsidiary" means those other Persons that are controlled,
directly or indirectly, by such Person.
(b) Insofar as any provision of this Plan shall require a
subsidiary of a party to take or omit to take any action, such provision shall
be deemed a covenant by Mid Am or Citizens, as the case may be, to cause such
action or omission to occur.
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9.9 INTERPRETATION; EFFECT. When a reference is made in this
Plan to Sections or Annexes, such reference shall be to a Section of, or Annex
to, this Plan unless otherwise indicated. The table of contents and headings
contained in this Plan are for reference purposes only and are not part of this
Plan. Whenever the words "include," "includes" or "including" are used in this
Plan, they shall be deemed to be followed by the words "without limitation." No
provision of this Plan shall require Mid Am or Citizens or any of their
respective Subsidiaries, affiliates or directors to take any action which would
violate applicable law (whether statutory or common law), rule or regulation or
prevent any of them from taking any action the failure of which to take would
result in such a violation.
9.10 SEVERABILITY. If any provision of this Plan or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon a suitable and equitable
substitute provision to effect the original intent of the parties.
9.11 NO THIRD PARTY BENEFICIARIES. Nothing contained in this
Plan, expressed or implied, is intended to confer upon any Person, other than
the parties hereto, any benefit, right or remedies except that the provisions of
Section 6.12 shall inure to the benefit of the Persons referred to therein.
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<PAGE> 47
IN WITNESS WHEREOF, this Plan has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
MID AM, INC.
By: /s/ David R. Francisco
-----------------------------------
Name: David R. Francisco
Title: President and
Chief Operating Officer
CITIZENS BANCSHARES, INC.
By: /s/ Marty E. Adams
-----------------------------------
Name: Marty E. Adams
Title: President and
Chief Executive Officer
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<PAGE> 48
ANNEX 1
FORM OF [MID AM] [CITIZENS] STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 21, 1998, between [Mid Am, Inc.
("Mid Am")] [Citizens Bancshares, Inc. (Citizens)], an Ohio corporation
("Grantee"), and [Citizens] [Mid Am], an Ohio corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer are entering into an Agreement and Plan of
Merger (the "Merger Agreement");
WHEREAS, as a condition and an inducement to Grantee's entering into the
Merger Agreement, Issuer is granting Grantee the Option (as hereinafter defined)
and, as a condition and an inducement to Issuer's entering into the Merger
Agreement, Grantee is granting Issuer a Reciprocal Option (as hereinafter
defined) on terms and conditions substantially identical to those of this
Agreement; and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement prior to the date hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of [IF MID AM IS GRANTOR- 4,648,726][IF CITIZENS IS GRANTOR-
1,761,308] fully paid and nonassessable shares of the common stock, without par
value, of Issuer ("Common Stock") at a price per share equal to [IF MID AM IS
GRANTOR - $27.00] [IF CITIZENS IS GRANTOR- $72.75], (such price, as adjusted if
applicable, the "Option Price"); provided, however, that in no event shall the
number of shares for which this Option is exercisable exceed 19.9% of the issued
and outstanding shares of Common Stock. The number of shares of Common Stock
that may be received upon the exercise of the Option and the Option Price are
subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals
<PAGE> 49
19.9% of the number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section l(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer to issue shares in breach of any provision of the
Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section [IF MID AM IS GRANTOR- 8.4(b)][IF
CITIZENS IS GRANTOR- 8.3(b)] due to a willful breach by Issuer (a "Listed
Termination"); or (iii) the passage of eighteen (18) months (or such longer
period as provided in Section 10) after termination of the Merger Agreement if
such termination follows the occurrence of an Initial Triggering Event or is a
Listed Termination. Notwithstanding anything to the contrary contained herein,
(i) the Option may not be exercised at any time when Grantee shall be in
material breach of any of its covenants or agreements contained in the Merger
Agreement such that Issuer shall be entitled to terminate the Merger Agreement
pursuant to Section [IF MID AM IS GRANTOR- 8.3(b)][IF CITIZENS IS GRANTOR-
8.4(b)] thereof and (ii) this Agreement shall automatically terminate upon the
proper termination of the Merger Agreement (A) by Issuer pursuant to Section [IF
MID AM IS GRANTOR- 8.3(b)][IF CITIZENS IS GRANTOR- 8.4(b)] thereof as a result
of the material breach by Grantee of its covenants or agreements contained in
the Merger Agreement or (B) pursuant to Section 8.3(a) or Section 8.4(a) unless
the Grantor is in willful and material breach of the Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any of its Subsidiaries (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (each an "Issuer Subsidiary"), without having received Grantee's
prior written consent, shall have entered into an agreement to engage in
an Acquisition Transaction (as hereinafter defined) with any person (the
term "person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer (the "Issuer Board")
shall have recommended that the shareholders of Issuer approve or accept
any Acquisition Transaction other than as
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contemplated by the Merger Agreement. For purposes of this Agreement, (a)
"Acquisition Transaction" shall mean (x) a merger or consolidation, or any
similar transaction, involving Issuer or any Issuer Subsidiary or group of
Issuer Subsidiaries (other than mergers, consolidations or similar
transactions (i) involving solely Issuer and/or one or more wholly-owned
Subsidiaries of the Issuer or (ii) after which the common shareholders of
the Issuer immediately prior thereto in the aggregate own or continue to
own at least 65% of the common stock of the Issuer or the publicly held
surviving or successor corporation immediately following consummation
thereof, provided, that any such transaction is not entered into in
violation of the terms of the Merger Agreement), (y) a purchase, lease or
other acquisition of all or any substantial part of the assets or deposits
of Issuer or any Issuer Subsidiary or group of Issuer Subsidiaries that
is, or would on an aggregate basis constitute, a Significant Subsidiary
(as defined in Rule 1-02 of Regulation S-X), or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power of
Issuer or any Issuer Subsidiary or group of Issuer Subsidiaries that is,
or would on an aggregate basis constitute, a Significant Subsidiary,
provided, that Acquisition Transaction shall not include any transaction
specifically disclosed in the Issuer's Reports filed prior to the date
hereof, and (b) "Subsidiary" shall have the meaning set forth in Rule
12b-2 under the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary or
any Issuer Subsidiary acting in a fiduciary capacity in the ordinary
course of business shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 10% or more of the outstanding shares
of Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to approve
the Merger Agreement and the Merger at a meeting which has been held for
that purpose or any adjournment or postponement thereof, or such meeting
shall not have been held in violation of the Merger Agreement or shall
have been cancelled prior to termination of the Merger Agreement if, prior
to such meeting (or if such meeting shall not have been held or shall have
been cancelled, prior to such termination), it shall have been publicly
announced that any person (other than Grantee or any of its Subsidiaries)
shall have made, or disclosed an intention to make, a proposal to engage
in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in
any respect to Grantee its recommendation that the shareholders of Issuer
approve the transactions contemplated by the Merger Agreement, or Issuer
or ANY ISSUER SUBSIDIARY OR GROUP OF ISSUER SUBSIDIARIES THAT IS, OR WOULD
ON AN AGGREGATE BASIS CONSTITUTE, A SIGNIFICANT
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<PAGE> 51
SUBSIDIARY shall have authorized, recommended, proposed (or publicly
announced its intention to authorize, recommend or propose) an agreement
to engage in an Acquisition Transaction with any person other than Grantee
or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer materials
with respect to a potential exchange or tender offer that would constitute
an Acquisition Transaction (or filed a preliminary proxy statement with
the SEC with respect to a potential vote by its shareholders to approve
the issuance of shares to be offered in such an exchange offer);
(vi) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(vii) Any person other than Grantee or any Grantee Subsidiary shall
have filed an application or notice with the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") or other federal or
state bank regulatory or antitrust authority, which application or notice
has been accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 20% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 20%.
(d) The term "Reciprocal Option" shall mean the option granted pursuant to
the option agreement dated the date hereof between the Grantee, as issuer of
such option, and Issuer, as grantee of such option.
(e) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(f) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein
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referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided, that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
or antitrust agency is required in connection with such purchase, the Holder
shall promptly file the required notice or application for approval, shall
promptly notify Issuer of such filing, and shall expeditiously process the same
and the period of time that otherwise would run pursuant to this sentence shall
run instead from the date on which any required notification periods have
expired or been terminated or such approvals have been obtained and any
requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(g) At the closing referred to in subsection (f) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option.
(h) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (g) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(i) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement, dated as of _________,
199__, between the registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt by Issuer of a
written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the A1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend
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<PAGE> 53
shall be removed by delivery of substitute certificate(s) without such reference
if the shares have been sold or transferred in compliance with the provisions of
this Agreement and under circumstances that do not require the retention of such
reference in the opinion of Counsel to the Holder; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding clauses (i) and (ii)
are both satisfied. In addition, such certificates shall bear any other legend
as may be required by law.
(j) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (f) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal banking law, prior approval
of or notice to the Federal Reserve Board or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the
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<PAGE> 54
same conditions as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
of like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like (including any stock dividend split-up or subdivision announced
prior to the date hereof but not yet effective), the type and number of shares
of Common Stock purchasable upon exercise hereof shall be appropriately adjusted
and proper provision shall be made so that, in the event that any additional
shares of Common Stock are to be issued or otherwise become outstanding as a
result of any such change (other than pursuant to an exercise of the Option),
the number of shares of Common Stock that remain subject to the Option shall be
increased so that, after such issuance and together with shares of Common Stock
previously issued pursuant to the exercise of the Option (as adjusted on account
of any of the foregoing changes in the Common Stock), it equals 19.9% of the
number of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in Section
10) of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares
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<PAGE> 55
issued and issuable pursuant to this Option and shall use its reasonable best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the twelve (12) month period
referred to in the first sentence of this section shall be increased to
twenty-four (24) months. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall the number of registrations that Issuer is obligated to effect be
increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later
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<PAGE> 56
period as provided in Section 10), Issuer (or any successor thereto) shall
repurchase the Option from the Holder at a price (the "Option Repurchase Price")
equal to the amount by which (A) the market/offer price (as defined below)
exceeds (B) the Option Price, multiplied by the number of shares for which this
Option may then be exercised and (ii) at the request of the owner of Option
Shares from time to time (the "Owner"), delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase such number of the Option Shares from
the Owner as the Owner shall designate at a price (the "Option Share Repurchase
Price") equal to the market/offer price multiplied by the number of Option
Shares so designated. The term "market/offer price" shall mean the highest of
(i) the price per share of Common Stock at which a tender or exchange offer
therefor has been made, (ii) the price per share of Common Stock to be paid by
any third party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of Option Shares, as
the case may be, or (iv) in the event of a sale of all or any substantial part
of Issuer's assets or deposits, the sum of the net price paid in such sale for
such assets or deposits and the current market value of the remaining net assets
of Issuer as determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to Issuer, divided by the number of shares of Common Stock of Issuer
outstanding at the time of such sale. In determining the market/offer price, the
value of consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by the Holder or Owner, as the case
may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price,
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respectively, that it is no longer prohibited from delivering, within five
business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
delivering to the Holder and/or the Owner, as appropriate, the Option Repurchase
Price and the Option Share Repurchase Price, respectively, in full (and Issuer
hereby undertakes to use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish such repurchase), the Holder or Owner may
revoke its notice of repurchase of the Option and/or the Option Shares whether
in whole or to the extent of the prohibition, whereupon, in the latter case,
Issuer shall promptly (i) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Repurchase Price and/or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new Agreement evidencing
the right of the Holder to purchase that number of shares of Common Stock
obtained by multiplying the number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and the denominator
of which is the Option Repurchase Price, and/or (B) to the Owner, a certificate
for the Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Holder shall nonetheless have the right to exercise the
Option until the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation,
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but, in connection with such merger or plan of exchange, the then outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other person or cash or any other property or the then
outstanding shares of Common Stock shall after such merger or plan of exchange
represent less than 50% of the outstanding shares and share equivalents of the
merged or acquiring company, or (iii) to sell or otherwise transfer all or a
substantial part of its or the Issuer Subsidiary's assets or deposits to any
person, other than Grantee or a Grantee Subsidiary, then, and in each such case,
the agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) the Issuer in a merger or plan of exchange in which
Issuer is the continuing or surviving or acquiring person, and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits (or
the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined in
Section 7.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person,
as the Holder may elect.
(c) Subject to paragraph (d) of this Section 8, the Substitute Option
shall have the same terms as the Option, provided that if the terms of the
Substitute Option cannot, for legal reasons, be the same as the Option, such
terms shall be as similar as possible and in no event less advantageous to the
Holder. The issuer of the Substitute Option shall also enter into an agreement
with the then Holder or Holders of the Substitute Option in substantially the
same
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form as this Agreement (after giving effect for such purpose to the provisions
of Section 9), which agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or
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the Substitute Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
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<PAGE> 61
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12, 14 and 15 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) The execution, delivery and performance of this Agreement, does not
and will not, and the consummation by it of any of the transactions contemplated
hereby will not
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<PAGE> 62
constitute or result in (A) a breach or violation of, or a default under, its
articles of incorporation or code of regulations, or the comparable governing
instruments of any of its subsidiaries, or (B) a breach or violation of, or a
default under, or the acceleration of or the creation of a lien (with or without
the giving of notice, the lapse of time or both) pursuant to, any provision of
any agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation ("Contracts") of it or any of its subsidiaries or any judgment,
decree, order, award or governmental or non-governmental permit or license to
which it or any of its subsidiaries is subject.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board has approved an application by Grantee to acquire the shares of Common
Stock subject to the Option, Grantee may not assign its rights under the Option
except in (i) a widely dispersed public distribution, (ii) a private placement
in which no one party acquires the right to purchase in excess of 2% of the
voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker
or investment banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board.
13. Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
Federal Reserve Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
14. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash fee equal
to the Surrender Price; provided, however, that Grantee may not exercise its
rights pursuant to this Section 14 if Issuer has repurchased the Option (or any
portion thereof) or any Option Shares pursuant to Section 7. The "Surrender
Price" shall be equal to $25 million (i) plus, if applicable, Grantee's purchase
price with respect to any Option Shares being so relinquished and (ii) minus, if
applicable, the sum of (1) the excess of (A) the net cash amounts, if any,
received by Grantee pursuant to the arms' length sale of Option Shares (or any
other securities into which such Option Shares were converted or exchanged) to
any unaffiliated party, over (B) Grantee's purchase
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<PAGE> 63
price of such Option Shares, and (2) the net cash amounts, if any, received by
Grantee pursuant to an arms' length sale of any portion of the Option sold.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 14 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 14 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 14 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Date shall be extended to a date six months from the date
on which the Exercise Termination Date would have occurred if not for the
provisions of this Section 14(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
14).
15. (a) In the event that any Person who has participated in a Subsequent
Triggering Event enters into any agreement or understanding with Grantee with
respect to Grantee's exercise of, or its election not to exercise, any of
Grantee's rights set forth in Section 2, 7 or 14 of this Agreement, Issuer may,
by written notice to Grantee, require that Grantee sell to Issuer, and Grantee
shall sell to Issuer, (i) the Option and (ii) all (but not less than all) Option
Shares purchased by Grantee pursuant hereto and with respect to which Grantee
then has beneficial ownership; provided, however, that any such exercise by the
Issuer shall not operate to limit Grantee's rights pursuant to Sections 7 and 14
hereof. The date of Grantee's written notice referred to above is referred to as
the "Section 15 Notice Date." Such
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<PAGE> 64
repurchase shall be at an aggregate price (the "Section 15 Repurchase
Consideration") equal to:
(i) the aggregate Purchase Price paid by Grantee for any Option
Shares acquired pursuant to the Option with respect to which Grantee then
has beneficial ownership; plus
(ii) the excess, if any, of (x) the market/offer price as of the
Section 15 Notice Date for a share of Common Stock over (y) the Option
Price (subject to adjustment pursuant to Section 5), multiplied by the
number of shares of Common Stock with respect to which the Option has not
been exercised; plus
(iii) the excess, if any, of the market/offer price as of the
Section 15 Notice Date over the Option Price paid (or, in the case of
Option Shares with respect to which the Option has been exercised but the
Closing Date has not occurred, payable (subject to adjustment pursuant to
Section 5)) by Grantee for each Option Share with respect to which Grantee
then has beneficial ownership, multiplied by the number of such shares;
plus
(iv) the amount of the documented reasonable out-of-pocket expenses
incurred by Grantee in connection with the Merger Agreement and this
Agreement and the transactions contemplated thereby and hereby, including
reasonable accounting, investment banking and legal fees.
(b) Issuer shall, within 2 business days of receiving the notice referred
to in Section 15(a) above, pay the Section 15 Repurchase Consideration in
immediately available funds, and Grantee shall surrender to Issuer the Option
and the certificates evidencing the Option Shares purchased hereunder with
respect to which Grantee then has beneficial ownership, and Grantee shall
warrant that it has sole record and beneficial ownership of such shares and that
the same are then free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever. To the extent that Issuer is prohibited under applicable
law or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify Grantee and thereafter the rights and obligations of the
Issuer and the Grantee with respect thereto shall be the same as under Section
7(c).
(c) If, prior to the date which is 18 months after the Section 15 Notice
Date, Issuer enters into, or is the subject of, any transaction which would have
constituted a Repurchase Event hereunder but for the prior repurchase by Issuer
of the Option and Option Shares under this Section 15, then concurrently with
the occurrence of such event, Issuer shall pay to Grantee, as additional
consideration for the Option and Option Shares purchased by Issuer pursuant to
this Section, an amount in immediately available funds equal to the excess, if
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<PAGE> 65
any, of (i) the Section 15 Repurchase Consideration calculated as if the Section
15 Notice Date had occurred on the date of such Repurchase Event over (ii) the
amount previously paid by Issuer to Grantee pursuant to this Section 15.
(d) In the event that Issuer is, as a result of law or regulation,
prohibited from performing any of its obligations under this Section 15, Issuer
shall not thereafter enter into any Acquisition Transaction unless the other
parties thereto agree to assume Issuer's obligations under this Section 15 to
the extent not previously performed. The foregoing sentence shall not operate to
limit or waive any remedies Grantee may have against Issuer for Issuer's failure
to perform its obligations under this Section 15.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
17. Each of the Grantor and the Issuer hereby acknowledges and agrees that
no profit from the sale of the Common Stock acquired pursuant to the terms of
this Option shall be recoverable under Section 1707.043 of the Ohio General
Corporation Law.
18. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
19. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio without regard to the conflict of law principles
thereof (except to the extent that mandatory provisions of Federal law are
applicable).
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<PAGE> 66
21. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
22. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
23. Except as otherwise expressly provided herein, in the Reciprocal
Option or in the Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assignees. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors except as assignees, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
24. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
CITIZENS BANCSHARES, INC.
By:
------------------------------------
Name:
Title:
MID AM, INC.
By:
------------------------------------
Name:
Title:
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<PAGE> 67
ANNEX 2
CERTIFICATE OF AMENDMENT
OF
FOURTH AMENDED ARTICLES OF INCORPORATION
OF
CITIZENS BANCSHARES, INC.
Marty Adams, President of Citizens Bancshares, Inc., an Ohio
corporation (the "Corporation"), does hereby certify that a special meeting of
the shareholders was duly called and held on the __th day of _______, 1998, at
which meeting a quorum of the shareholders was present in person or by proxy,
and by the affirmative vote of the holders of shares entitling them to exercise
more than a majority of the voting power of the Corporation, as required by
Article NINTH, Division B, of the Fourth Amended Articles of Incorporation, the
following amendment to the Corporation's Fourth Amended Articles of
Incorporation was duly adopted:
Article FOURTH of the Corporation's Fourth Amended Articles of
Incorporation is amended in its entirety to read as follows:
FOURTH: The total number of shares of all classes which the
Corporation shall have authority to issue is one hundred million two
hundred thousand (100,200,000) shares, divided into two classes as
follows: 200,000 Serial Preferred Shares, par value $10.00 (Ten
Dollars) per share (hereinafter called the "Serial Shares") and
100,000,000 Common Shares, without par value (hereinafter called the
"Common Shares").
<PAGE> 68
ANNEX 2
IN WITNESS WHEREOF, Marty E. Adams, President of the
Corporation, acting for and on behalf of the Corporation has hereunto subscribed
his name this __th day of _________, 1998.
CITIZENS BANCSHARES, INC.
By:
-------------------------------
Marty E. Adams
President
<PAGE> 69
ANNEX 3
AMENDMENT
TO
CODE OF REGULATIONS
OF
CITIZENS BANCSHARES, INC.
In accordance with Section 37 of the Code of Regulations of
Citizens Bancshares, Inc., an Ohio corporation (the "Corporation"), the Board of
Directors recommended the following amendment to the Code of Regulations of the
Corporation by the affirmative vote of at least two-thirds of the Board of
Directors then in office at a duly called meeting held on the __th day of
_________, 1998. A special meeting of the shareholders was duly called and held
on the __th day of _______, 1998, at which meeting a quorum of the shareholders
was present in person or by proxy, and by the affirmative vote of the holders of
shares entitling them to exercise more than a majority of the voting power of
the Corporation, as required by Section 37 of the Code of Regulations of the
Corporation, the following amendment to the Corporation's Code of Regulations
was adopted:
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<PAGE> 70
ANNEX 3
Section 7 of the Corporation's Code of Regulations was amended
in its entirety to read as follows:
SECTION 7. NUMBER.
The number of directors shall not be less than five
(5) nor more than twenty-five (25), the exact number of
directors to be determined from time to time by an eighty
percent (80 percent) majority vote of the directors then in
office, and such exact number shall be twenty-two (22) until
otherwise so determined.
-2-
<PAGE> 71
ANNEX 4
FORM OF AFFILIATE LETTER
______, 1998
Mid Am, Inc.
221 South Church Street
Bowling Green, Ohio 43402
Citizens Bancshares, Inc.
10 East Main Street
Salineville, Ohio 43945
Attention:
Ladies and Gentlemen:
I have been advised that I may be deemed to be, but do not
admit that I am, an "affiliate" of Mid Am, Inc. an Ohio corporation ("Mid Am"),
as that term is defined in Rule 145 promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), and/or SEC Accounting Series Releases 130 and 135. I
understand that pursuant to the terms of the Agreement and Plan of Merger, dated
as of May 20, 1998 (the "Merger Agreement"), by and between Mid Am and Citizens,
an Ohio corporation ("Citizens"), Mid Am plans to merge with and into Citizens
(the "Merger") and that the Merger is intended to be accounted for under the
"pooling of interest" accounting method.
I further understand that as a result of the Merger, I may
receive shares of common stock, without par value, of Citizens ("Citizens
Stock") (i) in exchange for shares of common stock, without par value, of Mid Am
("Mid Am Stock") or (ii) as a result of the exercise of Rights (as defined in
the Merger Agreement).
I have carefully read this letter and reviewed the Merger
Agreement and discussed their requirements and other applicable limitations upon
my ability to sell, transfer, or otherwise dispose of Citizens Stock and Mid Am
Stock, to the extent I felt necessary, with my counsel or counsel for Mid Am.
1
<PAGE> 72
I represent, warrant and covenant with and to Citizens that
in the event I receive any Citizens Stock as a result of the Merger:
1. I shall not make any sale, transfer, or other disposition of such
Citizens Stock unless (i) such sale, transfer or other disposition
has been registered under the Securities Act, (ii) such sale,
transfer or other disposition is made in conformity with the
provisions of Rule 145 under the Securities Act (as such rule may
be amended from time to time), or (iii) in the opinion of counsel
in form and substance reasonably satisfactory to Citizens, or
under a "no-action" letter obtained by me from the staff of the
SEC, such sale, transfer or other disposition will not violate or
is otherwise exempt from registration under the Securities Act.
2. I understand that Citizens is under no obligation to register the
sale, transfer or other disposition of shares of Citizens Stock by
me or on my behalf under the Securities Act or to take any other
action necessary in order to make compliance with an exemption
from such registration available.
3. I understand that stop transfer instructions will be given to
Citizens's transfer agent with respect to shares of Citizens Stock
issued to me as a result of the Merger and that there will be
placed on the certificates for such shares, or any substitutions
therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933 applies. The shares represented by this
certificate may be transferred only in accordance with the
terms of a letter agreement, dated May __, 1998, between the
registered holder hereof and ______,Inc., a copy of which
agreement is on file at the principal offices of _______,Inc."
4. I understand that, unless transfer by me of the Citizens Stock
issued to me as a result of the Merger has been registered under
the Securities Act or such transfer is made in conformity with the
provisions of Rule 145(d) under the Securities Act, Citizens
reserves the right, in its sole discretion, to place the following
legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired
from a person who received such shares in a transaction to
which Rule 145 under the Securities Act of 1933 applies. The
shares have been acquired by the holder not with a view to, or
for resale in connection with, any distribution thereof within
2
<PAGE> 73
the meaning of the Securities Act of 1933 and may not be
offered, sold, pledged or otherwise transferred except in
accordance with an exemption from the registration
requirements of the Securities Act of 1933."
It is understood and agreed that the legends set forth in
paragraphs (3) and (4) above shall be removed by delivery of substitute
certificates without such legends if I shall have delivered to Citizens (i) a
copy of a "no action" letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Citizens, to the effect that
such legend is not required for purposes of the Securities Act, or (ii) evidence
or representations satisfactory to Citizens that Citizens Stock represented by
such certificates is being or has been sold in conformity with the provisions of
Rule 145(d).
I further represent, warrant and covenant with and to Citizens
that I will not sell, transfer or otherwise dispose of, or reduce my risk
relative to, any shares of Mid Am Stock or Citizens Stock (whether or not
acquired by me in the Merger) during the period commencing 30 days prior to
effective date of the Merger and ending at such time as Citizens notifies me
that results covering at least 30 days of combined operations of Mid Am and
Citizens after the Merger have been published by Citizens. I understand that
Citizens is not obligated to publish such combined financial results except in
accordance with its normal financial reporting practice.
I further understand and agree that this letter agreement shall
apply to all shares of Mid Am Stock and Citizens Stock that I am deemed to
beneficially own pursuant to applicable federal securities law.
I also understand that the Merger is intended to be treated as a
"pooling of interests" for accounting purposes, and I agree that if Mid Am or
Citizens advises me in writing that additional restrictions apply to my ability
to sell, transfer, or otherwise
3
<PAGE> 74
dispose of Mid Am Stock or Citizens Stock in order for Citizens to be entitled
to use the pooling of interests accounting method, I will abide by such
restrictions.
Very truly yours,
By
------------------------
Name:
Accepted this ____ day of
_______________, 1998.
MID AM, INC.
By
---------------------------
Name:
Title:
CITIZENS BANCSHARES, INC.
By
---------------------------
Name:
Title:
4
<PAGE> 75
ANNEX 5
FORM OF AFFILIATE LETTER
_____, 1998
Citizens Bancshares, Inc.
10 East Main Street
Salineville, Ohio 43945
Ladies and Gentlemen:
I have been advised that I may be deemed to be, but do not admit
that I am, an "affiliate" of Citizens, an Ohio corporation ("Citizens") as that
term is defined in the Securities and Exchange Commission's Accounting Series
Releases 130 and 135. I understand that pursuant to the terms of the Agreement
and Plan of Merger, dated as of May 20, 1998 (the "Merger Agreement"), by and
between Mid Am, Inc., an Ohio corporation ("Mid Am"), and Citizens, Mid Am plans
to merge with and into Citizens (the "Merger") and that the merger is intended
to be accounted for under the "pooling of interests" accounting method.
I have carefully read this letter and reviewed the Merger
Agreement and discussed their requirements and other applicable limitations upon
my ability to sell, transfer, or otherwise dispose of common stock of Citizens
and Mid Am, to the extent I felt necessary, with my counsel or counsel for
Citizens.
I hereby represent, warrant and covenant with and to Citizens
that:
1. I will not sell, transfer or otherwise dispose of, or reduce
my risk relative to, any shares of common stock of Mid Am or
Citizens (whether or not acquired by me in the Merger) during
the period commencing 30 days prior to the effective date of
the Merger and ending at such time as Citizens notifies me
that results covering at least 30 days of combined operations
of Mid Am and Citizens after the Merger have been published by
Citizens. I understand that Citizens is not obligated to
publish such combined financial results except in accordance
with its normal financial reporting practice.
1
<PAGE> 76
2. I further understand and agree that this letter agreement
shall apply to all shares of common stock of Mid Am and
Citizens that I am deemed to beneficially own pursuant to
applicable federal securities laws.
3. If Citizens advises me in writing that additional restrictions
apply to my ability to sell, transfer, or otherwise dispose of
common stock of Mid Am or Citizens in order for Citizens to be
entitled to use the "pooling of interests" accounting method,
I will abide by such restrictions.
Very truly yours,
By
---------------------------
Name:
Accepted this ____ day of
_______________, 1998.
CITIZENS BANCSHARES, INC.
By
-------------------------------
Name:
Title:
2
<PAGE> 1
Exhibit 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 21, 1998, between Citizens
Bancshares, Inc, an Ohio corporation ("Grantee"), and Mid Am, Inc, an Ohio
corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer are entering into an Agreement and Plan of
Merger (the "Merger Agreement");
WHEREAS, as a condition and an inducement to Grantee's entering into the
Merger Agreement, Issuer is granting Grantee the Option (as hereinafter defined)
and, as a condition and an inducement to Issuer's entering into the Merger
Agreement, Grantee is granting Issuer a Reciprocal Option (as hereinafter
defined) on terms and conditions substantially identical to those of this
Agreement; and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement prior to the date hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 4,648,726 fully paid and nonassessable shares of the common stock,
without par value, of Issuer ("Common Stock") at a price per share equal to
$27.00 (such price, as adjusted if applicable, the "Option Price"); provided,
however, that in no event shall the number of shares for which this Option is
exercisable exceed 19.9% of the issued and outstanding shares of Common Stock.
The number of shares of Common Stock that may be received upon the exercise of
the Option and the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach of any provision of the Merger Agreement.
<PAGE> 2
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 8.4(b) due to a willful breach by
Issuer (a "Listed Termination"); or (iii) the passage of eighteen (18) months
(or such longer period as provided in Section 10) after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a Listed Termination. The term "Holder" shall mean the
holder or holders of the Option. Notwithstanding anything to the contrary
contained herein, (i) the Option may not be exercised at any time when Grantee
shall be in material breach of any of its covenants or agreements contained in
the Merger Agreement such that Issuer shall be entitled to terminate the Merger
Agreement pursuant to Section 8.3(b) thereof and (ii) this Agreement shall
automatically terminate upon the proper termination of the Merger Agreement by
Issuer (A) pursuant to Section 8.3(b) thereof as a result of the material
breach by Grantee of its covenants or agreements contained in the Merger
Agreement or (B) pursuant to a Section 8.3(a) or Section 8.4(a) unless the
Issuer is in willful and material breach of the Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any of its Subsidiaries (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (each an "Issuer Subsidiary"), without having received Grantee's
prior written consent, shall have entered into an agreement to engage in
an Acquisition Transaction (as hereinafter defined) with any person (the
term "person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer (the "Issuer Board")
shall have recommended that the shareholders of Issuer approve or accept
any Acquisition Transaction other than as contemplated by the Merger
Agreement. For purposes of this Agreement, (a) "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction,
involving Issuer or any Issuer Subsidiary or group of Issuer Subsidiaries
(other than mergers, consolidations or similar transactions (i) involving
solely Issuer and/or one or more wholly-owned Subsidiaries of the Issuer
or (ii) after which the common shareholders of the Issuer immediately
prior thereto in the aggregate own or continue to own at least 65% of the
common stock of the publicly held surviving or successor corporation
immediately following consummation thereof, provided, that any such
transaction is not entered into in violation of the terms of the Merger
Agreement), (y) a purchase, lease or other acquisition of
<PAGE> 3
all or any substantial part of the assets or deposits of Issuer or any
Issuer Subsidiary or group of Issuer Subsidiaries that is, or would on an
aggregate basis constitute, a Significant Subsidiary (as defined in Rule
1-02 of Regulation S-X), or (z) a purchase or other acquisition (including
by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or any
Issuer Subsidiary or group of Issuer Subsidiaries that is, or would on an
aggregate basis constitute, a Significant Subsidiary, provided, that
Acquisition Transaction shall not include any transaction specifically
disclosed in the Issuer's Reports filed prior to the date hereof, and (b)
"Subsidiary" shall have the meaning set forth in Rule 12b-2 under the 1934
Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary or
any Issuer Subsidiary acting in a fiduciary capacity in the ordinary
course of business shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 10% or more of the outstanding shares
of Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to
approve the Merger Agreement and the Merger at a meeting which has been
held for that purpose or any adjournment or postponement thereof, or such
meeting shall not have been held in violation of the Merger Agreement or
shall have been cancelled prior to termination of the Merger Agreement if,
prior to such meeting (or if such meeting shall not have been held or
shall have been cancelled, prior to such termination), it shall have been
publicly announced that any person (other than Grantee or any of its
Subsidiaries) shall have made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in
any respect to Grantee its recommendation that the shareholders of Issuer
approve the transactions contemplated by the Merger Agreement, or Issuer
or any Issuer Subsidiary or group of Issuer Subsidiaries that is, or would
on an aggregate basis constitute, a Significant Subsidiary shall have
authorized, recommended, proposed (or publicly announced its intention to
authorize, recommend or propose) an agreement to engage in an Acquisition
Transaction with any person other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer materials
with respect to a potential exchange or tender offer that would constitute
an Acquisition Transaction (or filed a preliminary proxy statement with
the SEC with respect to a potential vote by its shareholders to approve
the issuance of shares to be offered in such an exchange offer);
<PAGE> 4
(vi) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(vii) Any person other than Grantee or any Grantee Subsidiary shall
have filed an application or notice with the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") or other federal or
state bank regulatory or antitrust authority, which application or notice
has been accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 20% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 20%.
(d) The term "Reciprocal Option" shall mean the option granted pursuant to
the option agreement dated the date hereof between the Grantee, as issuer of
such option, and Issuer, as grantee of such option.
(e) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(f) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the Federal Reserve Board
or any other regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing, and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals
<PAGE> 5
have been obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
(g) At the closing referred to in subsection (f) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option.
(h) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (g) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(i) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement, dated as of _________,
199__, between the registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt by Issuer of a
written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the opinion of Counsel to the Holder;
and (iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(j) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (f) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not
<PAGE> 6
then be actually delivered to the Holder. Issuer shall pay all expenses, and any
and all United States federal, state and local taxes and other charges that may
be payable in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal banking law, prior approval
of or notice to the Federal Reserve Board or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of
<PAGE> 7
shares of Common Stock purchasable upon the exercise of the Option and the
Option Price shall be subject to adjustment from time to time as provided in
this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like (including any stock dividend split-up or subdivision announced
prior to the date hereof but not yet effective), the type and number of shares
of Common Stock purchasable upon exercise hereof shall be appropriately adjusted
and proper provision shall be made so that, in the event that any additional
shares of Common Stock are to be issued or otherwise become outstanding as a
result of any such change (other than pursuant to an exercise of the Option),
the number of shares of Common Stock that remain subject to the Option shall be
increased so that, after such issuance and together with shares of Common Stock
previously issued pursuant to the exercise of the Option (as adjusted on account
of any of the foregoing changes in the Common Stock), it equals 19.9% of the
number of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in Section
10) of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such
<PAGE> 8
offering the offer and sale of the Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of the Holder shall constitute at least 25% of the total number
of shares to be sold by the Holder and Issuer in the aggregate; and provided
further, however, that if such reduction occurs, then Issuer shall file a
registration statement for the balance as promptly as practicable thereafter as
to which no reduction pursuant to this Section 6 shall be permitted or occur and
the Holder shall thereafter be entitled to one additional registration and the
twelve (12) month period referred to in the first sentence of this section shall
be increased to twenty-four (24) months. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for
Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to Issuer to be entitled
to registration rights under this Section 6, in each case by promptly mailing
the same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall the number of registrations that Issuer is obligated to effect
be increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and
<PAGE> 9
reasonably acceptable to Issuer, divided by the number of shares of Common Stock
of Issuer outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder or Owner,
as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall
<PAGE> 10
be scheduled to occur at any time before the expiration of a period ending on
the thirtieth day after such date, the Holder shall nonetheless have the right
to exercise the Option until the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or a substantial part of its or the Issuer Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) the Issuer in a merger or plan of exchange in which
Issuer is the continuing or surviving or acquiring person, and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits (or
the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
<PAGE> 11
(iii) "Assigned Value" shall mean the market/offer price, as defined
in Section 7.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person,
as the Holder may elect.
(c) Subject to paragraph (d) of this Section 8, the Substitute Option
shall have the same terms as the Option, provided that if the terms of the
Substitute Option cannot, for legal reasons, be the same as the Option, such
terms shall be as similar as possible and in no event less advantageous to the
Holder. The issuer of the Substitute Option shall also enter into an agreement
with the then Holder or Holders of the Substitute Option in substantially the
same form as this Agreement (after giving effect for such purpose to the
provisions of Section 9), which agreement shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
<PAGE> 12
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
<PAGE> 13
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12, 14 and 15 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
<PAGE> 14
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) The execution, delivery and performance of this Agreement, does not
and will not, and the consummation by it of any of the transactions contemplated
hereby will not constitute or result in (A) a breach or violation of, or a
default under, its articles of incorporation or code of regulations, or the
comparable governing instruments of any of its subsidiaries, or (B) a breach or
violation of, or a default under, or the acceleration of or the creation of a
lien (with or without the giving of notice, the lapse of time or both) pursuant
to, any provision of any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation ("Contracts") of it or any of its subsidiaries
or any judgment, decree, order, award or governmental or non-governmental permit
or license to which it or any of its subsidiaries is subject.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board has approved an application by Grantee to acquire the shares of Common
Stock subject to the Option, Grantee may not assign its rights under the Option
except in (i) a widely dispersed public distribution, (ii) a private placement
in which no one party acquires the right to purchase in excess of 2% of the
voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker
or investment banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board.
13. Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
Federal Reserve Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
14. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the
<PAGE> 15
Option (together with any Option Shares issued to and then owned by Grantee) to
Issuer in exchange for a cash fee equal to the Surrender Price; provided,
however, that Grantee may not exercise its rights pursuant to this Section 14 if
Issuer has repurchased the Option (or any portion thereof) or any Option Shares
pursuant to Section 7. The "Surrender Price" shall be equal to $25 million (i)
plus, if applicable, Grantee's purchase price with respect to any Option Shares
being so relinquished and (ii) minus, if applicable, the sum of (1) the excess
of (A) the net cash amounts, if any, received by Grantee pursuant to the arms'
length sale of Option Shares (or any other securities into which such Option
Shares were converted or exchanged) to any unaffiliated party, over (B)
Grantee's purchase price of such Option Shares, and (2) the net cash amounts, if
any, received by Grantee pursuant to an arms' length sale of any portion of the
Option sold.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 14 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 14 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 14 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Date shall be extended to a date six months from the date
on which the Exercise Termination Date would have occurred if not for the
provisions of this Section 14(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
14).
15. (a) In the event that any Person who has participated in a Subsequent
Triggering Event enters into any agreement or understanding with Grantee with
respect to Grantee's exercise of, or its election not to exercise, any of
Grantee's rights set forth in Section 2, 7 or 14 of this Agreement, Issuer may,
by written notice to Grantee, require that Grantee sell to Issuer, and Grantee
shall sell
<PAGE> 16
to Issuer, (i) the Option and (ii) all (but not less than all) Option Shares
purchased by Grantee pursuant hereto and with respect to which Grantee then has
beneficial ownership; provided, however, that any such exercise by the Issuer
shall not operate to limit Grantee's rights pursuant to Sections 7 and 14
hereof. The date of Grantee's written notice referred to above is referred to as
the "Section 15 Notice Date." Such repurchase shall be at an aggregate price
(the "Section 15 Repurchase Consideration") equal to:
(i)the aggregate Purchase Price paid by Grantee for any Option
Shares acquired pursuant to the Option with respect to which Grantee then
has beneficial ownership; plus
(ii)the excess, if any, of (x) the market/offer price as of the
Section 15 Notice Date for a share of Common Stock over (y) the Option
Price (subject to adjustment pursuant to Section 5), multiplied by the
number of shares of Common Stock with respect to which the Option has not
been exercised; plus
(iii)the excess, if any, of the market/offer price as of the Section
15 Notice Date over the Option Price paid (or, in the case of Option
Shares with respect to which the Option has been exercised but the Closing
Date has not occurred, payable (subject to adjustment pursuant to Section
5)) by Grantee for each Option Share with respect to which Grantee then
has beneficial ownership, multiplied by the number of such shares; plus
(iv)the amount of the documented reasonable out-of-pocket expenses
incurred by Grantee in connection with the Merger Agreement and this
Agreement and the transactions contemplated thereby and hereby, including
reasonable accounting, investment banking and legal fees.
(b) Issuer shall, within 2 business days of receiving the notice referred
to in Section 15(a) above, pay the Section 15 Repurchase Consideration in
immediately available funds, and Grantee shall surrender to Issuer the Option
and the certificates evidencing the Option Shares purchased hereunder with
respect to which Grantee then has beneficial ownership, and Grantee shall
warrant that it has sole record and beneficial owenrship of such shares and that
the same are then free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever. To the extent that Issuer is prohibited under applicable
law or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify Grantee and thereafter the rights and obligations of the
Issuer and the Grantee with respect thereto shall be the same as under Section
7(c).
(c) If, prior to the date which is 18 months after the Section 15 Notice
Date, Issuer enters into, or is the subject of, any transaction which would have
constituted a Repurchase Event hereunder but for the prior repurchase by Issuer
of the Option and Option Shares under this Section 15, then concurrently with
the occurrence of such event, Issuer shall pay to Grantee, as additional
consideration for the Option and Option Shares purchased by Issuer pursuant to
this Section, an
<PAGE> 17
amount in immediately available funds equal to the excess, if any, of (i) the
Section 15 Repurchase Consideration calculated as if the Section 15 Notice Date
had occurred on the date of such Repurchase Event over (ii) the amount
previously paid by Issuer to Grantee pursuant to this Section 15.
(d) In the event that Issuer is, as a result of law or regulation,
prohibited from performing any of its obligations under this Section 15, Issuer
shall not thereafter enter into any Acquisition Transaction unless the other
parties thereto agree to assume Issuer's obligations under this Section 15 to
the extent not previously performed. The foregoing sentence shall not operate to
limit or waive any remedies Grantee may have against Issuer for Issuer's failure
to perform its obligations under this Section 15.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
17. Each of the Grantee and the Issuer hereby acknowledges and agrees that
no profit from the sale of the Common Stock acquired pursuant to the terms of
this Option shall be recoverable under Section 1707.043 of the Ohio General
Corporation Law.
18. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
19. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio without regard to the conflict of law principles
thereof (except to the extent that mandatory provisions of Federal law are
applicable).
<PAGE> 18
21. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
22. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
23. Except as otherwise expressly provided herein, in the Reciprocal
Option or in the Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assignees. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors except as assignees, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
24. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
<PAGE> 19
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
CITIZENS BANCSHARES, INC.
By: /s/ MARTY E. ADAMS
----------------------------------
Name: Marty E. Adams
Title: President and Chief
Executive Officer
MID AM, INC.
By: /s/ DAVID R. FRANCISCO
----------------------------------
Name: David R. Francisco
Title: President and
Chief Operating Officer
<PAGE> 1
Exhibit 3
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 21, 1998, between Mid Am, Inc., an
Ohio corporation ("Grantee"), and Citizens Bancshares, Inc., an Ohio corporation
("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer are entering into an Agreement and Plan of
Merger (the "Merger Agreement");
WHEREAS, as a condition and an inducement to Grantee's entering into the
Merger Agreement, Issuer is granting Grantee the Option (as hereinafter defined)
and, as a condition and an inducement to Issuer's entering into the Merger
Agreement, Grantee is granting Issuer a Reciprocal Option (as hereinafter
defined) on terms and conditions substantially identical to those of this
Agreement; and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement prior to the date hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 1,761,308 fully paid and nonassessable shares of the common stock,
without par value, of Issuer ("Common Stock") at a price per share equal to
$72.75 (such price, as adjusted if applicable, the "Option Price"); provided,
however, that in no event shall the number of shares for which this Option is
exercisable exceed 19.9% of the issued and outstanding shares of Common Stock;
and provided further that on and after June 1, 1998 (the effective date of a
previously announced stock split by the Issuer) the aggregate number of shares
of Common Stock granted under this Option shall be 3,552,616. The number of
shares of Common Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach of any provision of the Merger Agreement.
<PAGE> 2
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 8.3(b) due to a willful breach by
Issuer (a "Listed Termination"); or (iii) the passage of eighteen (18) months
(or such longer period as provided in Section 10) after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a Listed Termination. The term "Holder" shall mean the
holder or holders of the Option. Notwithstanding anything to the contrary
contained herein, (i) the Option may not be exercised at any time when Grantee
shall be in material breach of any of its covenants or agreements contained in
the Merger Agreement such that Issuer shall be entitled to terminate the Merger
Agreement pursuant to Section 8.4(b) thereof and (ii) this Agreement shall
automatically terminate upon the proper termination of the Merger Agreement by
Issuer (A) pursuant to Section 8.4(b) thereof as a result of the material
breach by Grantee of its covenants or agreements contained in the Merger
Agreement or (B) pursuant to Section 8.3(a) or Section 8.4(a) unless the Issuer
is in willful and material breach of the Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any of its Subsidiaries (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (each an "Issuer Subsidiary"), without having received Grantee's
prior written consent, shall have entered into an agreement to engage in
an Acquisition Transaction (as hereinafter defined) with any person (the
term "person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer (the "Issuer Board")
shall have recommended that the shareholders of Issuer approve or accept
any Acquisition Transaction other than as contemplated by the Merger
Agreement. For purposes of this Agreement, (a) "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction,
involving Issuer or any Issuer Subsidiary or group of Issuer Subsidiaries
(other than mergers, consolidations or similar transactions (i) involving
solely Issuer and/or one or more wholly-owned Subsidiaries of the Issuer
or (ii) after which the common shareholders of the Issuer immediately
prior thereto in the aggregate own or continue to own at least 65% of the
common stock of the publicly held surviving or successor corporation
immediately following consummation thereof, provided, that any such
transaction is not entered into in violation of the terms of the Merger
Agreement), (y) a purchase, lease or other acquisition of
<PAGE> 3
all or any substantial part of the assets or deposits of Issuer or any
Issuer Subsidiary or group of Issuer Subsidiaries that is, or would on an
aggregate basis constitute, a Significant Subsidiary (as defined in Rule
1-02 of Regulation S-X), or (z) a purchase or other acquisition (including
by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or any
Issuer Subsidiary or group of Issuer Subsidiaries that is, or would on an
aggregate basis constitute, a Significant Subsidiary, provided, that
Acquisition Transaction shall not include any transaction specifically
disclosed in the Issuer's Reports filed prior to the date hereof, and (b)
"Subsidiary" shall have the meaning set forth in Rule 12b-2 under the 1934
Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary or
any Issuer Subsidiary acting in a fiduciary capacity in the ordinary
course of business shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 10% or more of the outstanding shares
of Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to approve
the Merger Agreement and the Merger at a meeting which has been held for
that purpose or any adjournment or postponement thereof, or such meeting
shall not have been held in violation of the Merger Agreement or shall
have been cancelled prior to termination of the Merger Agreement if, prior
to such meeting (or if such meeting shall not have been held or shall have
been cancelled, prior to such termination), it shall have been publicly
announced that any person (other than Grantee or any of its Subsidiaries)
shall have made, or disclosed an intention to make, a proposal to engage
in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in
any respect to Grantee its recommendation that the shareholders of Issuer
approve the transactions contemplated by the Merger Agreement, or Issuer
or any Issuer Subsidiary or group of Issuer Subsidiaries that is, or would
on an aggregate basis, constitute a Significant Subsidiary shall have
authorized, recommended, proposed (or publicly announced its intention to
authorize, recommend or propose) an agreement to engage in an Acquisition
Transaction with any person other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer materials
with respect to a potential exchange or tender offer that would constitute
an Acquisition Transaction (or filed a preliminary proxy statement with
the SEC with respect to a potential vote by its shareholders to approve
the issuance of shares to be offered in such an exchange offer);
<PAGE> 4
(vi) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(vii) Any person other than Grantee or any Grantee Subsidiary shall
have filed an application or notice with the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") or other federal or
state bank regulatory or antitrust authority, which application or notice
has been accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 20% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 20%.
(d) The term "Reciprocal Option" shall mean the option granted pursuant to
the option agreement dated the date hereof between the Grantee, as issuer of
such option, and Issuer, as grantee of such option.
(e) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(f) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the Federal Reserve Board
or any other regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing, and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
<PAGE> 5
(g) At the closing referred to in subsection (f) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option .
(h) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (g) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(i) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement, dated as of _________,
199__, between the registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt by Issuer of a
written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the opinion of Counsel to the Holder;
and (iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(j) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (f) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the
<PAGE> 6
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal banking law, prior approval
of or notice to the Federal Reserve Board or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5.
<PAGE> 7
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like (including any stock dividend split-up or subdivision announced
prior to the date hereof but not yet effective), the type and number of shares
of Common Stock purchasable upon exercise hereof shall be appropriately adjusted
and proper provision shall be made so that, in the event that any additional
shares of Common Stock are to be issued or otherwise become outstanding as a
result of any such change (other than pursuant to an exercise of the Option),
the number of shares of Common Stock that remain subject to the Option shall be
increased so that, after such issuance and together with shares of Common Stock
previously issued pursuant to the exercise of the Option (as adjusted on account
of any of the foregoing changes in the Common Stock), it equals 19.9% of the
number of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in Section
10) of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account
<PAGE> 8
of the Holder shall constitute at least 25% of the total number of shares to be
sold by the Holder and Issuer in the aggregate; and provided further, however,
that if such reduction occurs, then Issuer shall file a registration statement
for the balance as promptly as practicable thereafter as to which no reduction
pursuant to this Section 6 shall be permitted or occur and the Holder shall
thereafter be entitled to one additional registration and the twelve (12) month
period referred to in the first sentence of this section shall be increased to
twenty-four (24) months. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall the number of registrations that Issuer is obligated to effect be
increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
<PAGE> 9
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option until
the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
<PAGE> 10
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or a substantial part of its or the Issuer Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) the Issuer in a merger or plan of exchange in which
Issuer is the continuing or surviving or acquiring person, and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits (or
the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined in
Section 7.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the
<PAGE> 11
issuer of the Substitute Option, the Average Price shall be computed with
respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person,
as the Holder may elect.
(c) Subject to paragraph (d) of this Section 8, the Substitute Option
shall have the same terms as the Option, provided that if the terms of the
Substitute Option cannot, for legal reasons, be the same as the Option, such
terms shall be as similar as possible and in no event less advantageous to the
Holder. The issuer of the Substitute Option shall also enter into an agreement
with the then Holder or Holders of the Substitute Option in substantially the
same form as this Agreement (after giving effect for such purpose to the
provisions of Section 9), which agreement shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the
<PAGE> 12
"Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute
Shares"), the Substitute Option Issuer shall repurchase the Substitute Shares at
a price (the "Substitute Share Repurchase Price") equal to the Highest Closing
Price multiplied by the number of Substitute Shares so designated. The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding the
date the Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share
<PAGE> 13
Repurchase Price that the Substitute Option Issuer is not prohibited from
delivering; and (ii) deliver, as appropriate, either (A) to the Substitute
Option Holder, a new Substitute Option evidencing the right of the Substitute
Option Holder to purchase that number of shares of the Substitute Common Stock
obtained by multiplying the number of shares of the Substitute Common Stock for
which the surrendered Substitute Option was exercisable at the time of delivery
of the notice of repurchase by a fraction, the numerator of which is the
Substitute Option Repurchase Price less the portion thereof theretofore
delivered to the Substitute Option Holder and the denominator of which is the
Substitute Option Repurchase Price, and/or (B) to the Substitute Share Owner, a
certificate for the Substitute Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to the
date of the notice by the Substitute Option Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
the Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12, 14 and 15 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) The execution, delivery and performance of this Agreement, does not
and will not, and the consummation by it of any of the transactions contemplated
hereby will not constitute or result in (A) a breach or violation of, or a
default under, its articles of incorporation or code of regulations,
<PAGE> 14
or the comparable governing instruments of any of its subsidiaries, or (B) a
breach or violation of, or a default under, or the acceleration of or the
creation of a lien (with or without the giving of notice, the lapse of time or
both) pursuant to, any provision of any agreement, lease, contract, note,
mortgage, indenture, arrangement or other obligation ("Contracts") of it or any
of its subsidiaries or any judgment, decree, order, award or governmental or
non-governmental permit or license to which it or any of its subsidiaries is
subject.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board has approved an application by Grantee to acquire the shares of Common
Stock subject to the Option, Grantee may not assign its rights under the Option
except in (i) a widely dispersed public distribution, (ii) a private placement
in which no one party acquires the right to purchase in excess of 2% of the
voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker
or investment banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board.
13. Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
Federal Reserve Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
14. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash fee equal
to the Surrender Price; provided, however, that Grantee may not exercise its
rights pursuant to this Section 14 if Issuer has repurchased the Option (or any
portion thereof) or any Option Shares pursuant to Section 7. The "Surrender
Price" shall be equal to $25 million (i) plus, if applicable, Grantee's purchase
price with respect to any Option Shares being so relinquished and (ii) minus, if
applicable, the sum of (1) the excess of (A) the net cash amounts, if any,
received by Grantee pursuant to the arms' length sale of Option Shares (or any
other securities into which such Option Shares were converted or exchanged) to
any unaffiliated party, over (B) Grantee's purchase price of such Option Shares,
and (2) the net cash amounts, if any, received by Grantee pursuant to an arms'
length sale of any portion of the Option sold.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 14 by surrendering to Issuer, at its principal
office, a copy of this Agreement together
<PAGE> 15
with certificates for Option Shares, if any, accompanied by a written notice
stating (i) that Grantee elects to relinquish the Option and Option Shares, if
any, in accordance with the provisions of this Section 14 and (ii) the Surrender
Price. The Surrender Price shall be payable in immediately available funds on or
before the second business day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 14 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Date shall be extended to a date six months from the date
on which the Exercise Termination Date would have occurred if not for the
provisions of this Section 14(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
14).
15. (a) In the event that any Person who has participated in a Subsequent
Triggering Event enters into any agreement or understanding with Grantee with
respect to Grantee's exercise of, or its election not to exercise, any of
Grantee's rights set forth in Section 2, 7 or 14 of this Agreement, Issuer may,
by written notice to Grantee, require that Grantee sell to Issuer, and Grantee
shall sell to Issuer, (i) the Option and (ii) all (but not less than all) Option
Shares purchased by Grantee pursuant hereto and with respect to which Grantee
then has beneficial ownership; provided, however, that any such exercise by the
Issuer shall not operate to limit Grantee's rights pursuant to Sections 7 and 14
hereof. The date of Grantee's written notice referred to above is referred to as
the "Section 15 Notice Date." Such repurchase shall be at an aggregate price
(the "Section 15 Repurchase Consideration") equal to:
(i) the aggregate Purchase Price paid by Grantee for any Option
Shares acquired pursuant to the Option with respect to which Grantee then
has beneficial ownership; plus
(ii) the excess, if any, of (x) the market/offer price as of the
Section 15 Notice Date for a share of Common Stock over (y) the Option
Price (subject to adjustment pursuant to Section 5), multiplied by the
number of shares of Common Stock with respect to which the Option has not
been exercised; plus
<PAGE> 16
(iii) the excess, if any, of the market/offer price as of the
Section 15 Notice Date over the Option Price paid (or, in the case of
Option Shares with respect to which the Option has been exercised but the
Closing Date has not occurred, payable (subject to adjustment pursuant to
Section 5)) by Grantee for each Option Share with respect to which Grantee
then has beneficial ownership, multiplied by the number of such shares;
plus
(iv) the amount of the documented reasonable out-of-pocket expenses
incurred by Grantee in connection with the Merger Agreement and this
Agreement and the transactions contemplated thereby and hereby, including
reasonable accounting, investment banking and legal fees.
(b) Issuer shall, within 2 business days of receiving the notice referred
to in Section 15(a) above, pay the Section 15 Repurchase Consideration in
immediately available funds, and Grantee shall surrender to Issuer the Option
and the certificates evidencing the Option Shares purchased hereunder with
respect to which Grantee then has beneficial ownership, and Grantee shall
warrant that it has sole record and beneficial owenrship of such shares and that
the same are then free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever. To the extent that Issuer is prohibited under applicable
law or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify Grantee and thereafter the rights and obligations of the
Issuer and the Grantee with respect thereto shall be the same as under Section
7(c).
(c) If, prior to the date which is 18 months after the Section 15 Notice
Date, Issuer enters into, or is the subject of, any transaction which would have
constituted a Repurchase Event hereunder but for the prior repurchase by Issuer
of the Option and Option Shares under this Section 15, then concurrently with
the occurrence of such event, Issuer shall pay to Grantee, as additional
consideration for the Option and Option Shares purchased by Issuer pursuant to
this Section, an amount in immediately available funds equal to the excess, if
any, of (i) the Section 15 Repurchase Consideration calculated as if the Section
15 Notice Date had occurred on the date of such Repurchase Event over (ii) the
amount previously paid by Issuer to Grantee pursuant to this Section 15.
(d) In the event that Issuer is, as a result of law or regulation,
prohibited from performing any of its obligations under this Section 15, Issuer
shall not thereafter enter into any Acquisition Transaction unless the other
parties thereto agree to assume Issuer's obligations under this Section 15 to
the extent not previously performed. The foregoing sentence shall not operate to
limit or waive any remedies Grantee may have against Issuer for Issuer's failure
to perform its obligations under this Section 15.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be
<PAGE> 17
enforceable by either party hereto through injunctive or other equitable relief.
In connection therewith both parties waive the posting of any bond or similar
requirement.
17. Each of the Grantee and the Issuer hereby acknowledges and agrees that
no profit from the sale of the Common Stock acquired pursuant to the terms of
this Option shall be recoverable under Section 1707.043 of the Ohio General
Corporation Law.
18. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
19. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio without regard to the conflict of law principles
thereof (except to the extent that mandatory provisions of Federal law are
applicable).
21. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
22. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
23. Except as otherwise expressly provided herein, in the Reciprocal
Option or in the Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assignees. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than
<PAGE> 18
the parties hereto, and their respective successors except as assignees, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
24. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
<PAGE> 19
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
CITIZENS BANCSHARES, INC.
By: /s/ Marty Adams
-------------------------------------
Name: Marty Adams
Title: President and Chief
Executive Officer
MID AM, INC.
By: /s/ David R. Francisco
-------------------------------------
Name: David R. Francisco
Title: President and
Chief Operating Officer
