<PAGE> 1
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- - - --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
NATIONAL CITY CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NATIONAL CITY CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid: 429,999.17
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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<PAGE> 2
[LOGO]
------------------
March , 1996
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of National
City Corporation, which will be held at National City Bank, Indiana, One
National City Center, Fourth Floor, Indianapolis, Indiana 46255, on Monday,
April 22, 1996, commencing at 9:30 a.m., EASTERN STANDARD TIME ("Local Time").
The primary business of the meeting will be the election of directors for
the coming year, the amendment of the National City Corporation 1993 Stock
Option Plan, the adoption of the Agreement and Plan of Merger dated as of August
27, 1995, providing for the merger of Integra Financial Corporation into
National City Corporation (the "Merger"), the approval of the selection of Ernst
& Young LLP as independent auditors for 1996, and to transact such other
business as may properly come before the meeting.
The formal Notice of Annual Meeting and Proxy Statement containing further
information pertinent to the business of the meeting are set forth on the
following pages. Our Annual Report, including financial statements, for the year
1995 was delivered to you previously. We shall report to you at the meeting on
the business and affairs of National City Corporation.
Your vote is important no matter how many shares you own. We hope you will
be able to attend the meeting in person, but, in any event, please sign and date
the enclosed proxy and return it in the accompanying envelope. If you wish to
communicate directly with National City Corporation, the mailing address of the
executive offices of the Corporation is: National City Corporation, 1900 East
Ninth Street, Cleveland, Ohio 44114.
Sincerely,
DAVID A. DABERKO
Chairman and Chief Executive Officer
<PAGE> 3
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Stockholders of
NATIONAL CITY CORPORATION
The Annual Meeting of Stockholders of National City Corporation will be
held at National City Bank, Indiana, One National City Center, Fourth Floor,
Indianapolis, Indiana 46255, on Monday, April 22, 1996, at 9:30 a.m., EASTERN
STANDARD TIME ("Local Time"), for the purpose of considering and voting upon the
following matters:
1. The election of directors;
2. The amendment of the National City Corporation 1993 Stock Option
Plan;
3. The adoption of the Agreement and Plan of Merger dated as of August
27, 1995, by and between National City Corporation and Integra
Financial Corporation;
4. The approval of the selection of independent auditors for 1996;
5. The transaction of such other business as may properly come before
the meeting.
Stockholders of record on February 29, 1996, are entitled to receive notice
of and to vote at the meeting. A list of the Stockholders will be available at
the meeting and for the 10 days preceding the meeting at the offices of National
City Corporation, 1900 East Ninth Street, Cleveland, Ohio 44114 and at the
offices of National City Bank, Indiana, One National City Center, Suite 400E,
Indianapolis, Indiana 46255.
All shareholders who are entitled to vote, even if they now plan to attend
the meeting, are requested to execute the enclosed proxy card and return it
without delay in the enclosed postage-paid envelope. You may revoke your proxy
at any time before it is voted by giving written notice to National City. If you
attend the meeting and vote in person, your vote will supersede your proxy.
Please mark, date, and sign the enclosed proxy and return it in the
accompanying envelope.
By Order of the Board of Directors
DAVID L. ZOELLER
Secretary
March , 1996
<PAGE> 4
[WFR Letterhead]
March , 1996
Dear Shareholder:
You are cordially invited to attend the special meeting of the shareholders
of Integra Financial Corporation ("Integra") to be held in the Wintergarden at
One PPG Place, Pittsburgh, Pennsylvania at 9:30 a.m. Eastern Daylight Savings
Time on Wednesday, April 24, 1996.
The purpose of the meeting is to vote on approval of the Agreement and Plan
of Merger providing for the merger of Integra with and into National City
Corporation ("National City") and to transact such other business as may
properly come before the meeting.
The Agreement and Plan of Merger provides that at the effective time of the
merger each share of Integra common stock outstanding will be converted into two
(2) shares of National City common stock. The Agreement and Plan of Merger must
be approved by the holders of a majority of the shares of Integra common stock
voting at the meeting. National City stockholders will consider and vote on
approval and adoption of the Agreement and Plan of Merger at their separate
meeting to be held on April 22, 1996.
National City is a registered bank holding company that conducts a general
commercial and retail banking business in Ohio, Indiana and Kentucky. At
December 31, 1995, National City had total consolidated assets of approximately
$36.2 billion and total consolidated deposits of approximately $25.2 billion,
and consolidated stockholders' equity of approximately $2.9 billion.
The Board of Directors of Integra believes that the merger is in the best
interests of Integra and its shareholders and recommends that you vote FOR the
approval and adoption of the Agreement and Plan of Merger. The enclosed
Prospectus and Joint Proxy Statement explains the proposed merger in detail.
Please carefully review and consider all of this information.
It is especially important that your shares be represented and voted at the
meeting. Please complete, sign, date and promptly return the enclosed proxy card
even if you currently plan to attend the meeting. You may revoke your proxy at
any time before it is voted by giving written notice to Integra. If you attend
the meeting and vote in person, your vote will supersede your proxy.
Sincerely,
William F. Roemer
Chairman and
Chief Executive Officer
<PAGE> 5
INTEGRA FINANCIAL CORPORATION
FOUR PPG PLACE
PITTSBURGH, PENNSYLVANIA 15222-5408
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of the shareholders of Integra Financial Corporation
("Integra") will be held in the Wintergarden at One PPG Place, Pittsburgh,
Pennsylvania, at 9:30 a.m. Eastern Daylight Savings Time on Wednesday, April 24,
1996 for the following purposes:
1. To vote on approval and adoption of the Agreement and Plan of Merger
dated as of August 27, 1995 between Integra and National City
Corporation ("National City"), providing for the merger of Integra with
and into National City. Upon consummation of the merger, each
outstanding share of Integra common stock will be converted into two
shares of National City common stock. The Agreement and Plan of Merger
is included as Appendix A to the enclosed Prospectus and Joint Proxy
Statement.
2. The transaction of such other business as may come before the meeting.
Only holders of record of Integra common stock at the close of business on
February 29, 1996 are entitled to notice of and to vote at the meeting. Each
share of Integra common stock will entitle the holder thereof to one vote at the
meeting.
All shareholders who are entitled to vote, even if they now plan to attend
the meeting, are requested to execute the enclosed proxy card and return it
without delay in the enclosed postage-paid envelope. You may revoke your proxy
at any time before it is voted by giving written notice to Integra. If you
attend the meeting and vote in person, your vote will supersede your proxy.
By Order of the Board of Directors,
Kenneth C. Thiess
Secretary
March , 1996
<PAGE> 6
PROSPECTUS AND JOINT PROXY STATEMENT
LOGO
67,849,968 Shares of Common Stock
This Prospectus and Joint Proxy Statement relates to the proposed merger of
INTEGRA FINANCIAL CORPORATION, a Pennsylvania corporation ("Integra"), with and
into NATIONAL CITY CORPORATION, a Delaware corporation ("National City"). If the
proposed merger is consummated, the outstanding shares of common stock, par
value $1.00 per share, of Integra ("Integra Common"), will be converted into
shares of common stock, par value $4.00 per share, of National City ("National
City Common") at a rate of 2.00 shares of National City Common for each share of
Integra Common. The transaction is subject to various conditions, including
approval by the stockholders of National City and the shareholders of Integra at
their separate meetings, described herein, and approval by applicable regulatory
authorities, which regulatory approvals have been obtained.
National City Common is traded on the New York Stock Exchange ("NYSE"). The
closing price of National City Common on the NYSE on February 29, 1996 was
$ .
All information concerning National City contained in this Prospectus and
Joint Proxy Statement has been furnished by National City, and all information
concerning Integra has been furnished by Integra. National City has represented
and warranted to Integra, and Integra has represented and warranted to National
City, that the particular information so furnished is true and complete. See
"EXPERTS" with respect to the financial statements of National City and Integra.
------------------------
THE SHARES OF NATIONAL CITY COMMON TO BE ISSUED IN CONNECTION WITH THE
MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS AND JOINT PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF NATIONAL CITY COMMON TO BE ISSUED IN CONNECTION WITH THE
MERGER ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
------------------------
JOINT PROXY STATEMENT
Annual Meeting
of Stockholders of
NATIONAL CITY CORPORATION
to be held on April 22, 1996
Special Meeting
of Shareholders of
INTEGRA FINANCIAL CORPORATION
to be held on April 24, 1996
THIS PROSPECTUS SERVES AS THE JOINT PROXY STATEMENT OF NATIONAL CITY
CORPORATION AND INTEGRA FINANCIAL CORPORATION IN CONNECTION WITH THE
SOLICITATION OF PROXIES TO BE USED AT THEIR RESPECTIVE MEETINGS TO BE HELD FOR
THE PURPOSES DESCRIBED HEREIN.
- - - --------------------------------------------------------------------------------
The date of this Prospectus and Joint Proxy Statement is March , 1996, and
is first being mailed to National City stockholders and Integra shareholders,
together with notices and forms of proxy, on or about March , 1996.
<PAGE> 7
AVAILABLE INFORMATION
Each of National City and Integra is subject to the information reporting
requirements of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), and, accordingly, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information may be inspected or copied at
the public reference facilities of the Commission located at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; at the
Commission's Chicago Regional Office, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and at its New York
Regional Office, R.R. Donnelly Building, 75 Park Place, 14th Floor, New York,
New York 10007. Copies of such materials may also be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. In addition, reports, proxy statements and other
information concerning National City and Integra may be inspected at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus and Joint Proxy Statement does not contain all of the
information set forth in the registration statement on Form S-4 and the exhibits
thereto filed by National City under the Securities Act of 1933, as amended (the
"1933 Act"), with the Commission relating to the shares of National City Common
offered hereby (the "Registration Statement"), certain portions of which have
been omitted pursuant to the rules and regulations of the Commission and to
which portions reference is hereby made for further information with respect to
National City, Integra and the securities offered hereby. The Registration
Statement and the exhibits thereto may be inspected without charge at the
offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies may be obtained from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
National City hereby incorporates in this Prospectus and Joint Proxy
Statement by reference its Annual Report on Form 10-K for the year ended
December 31, 1995, the description of National City Common set forth in the
Restated Certificate of Incorporation of the Registrant, as amended (filed as
Exhibit 3.1 to its Annual Report on Form 10-K for the year ended December 31,
1987), and the description of National City's 8% Cumulative Convertible
Preferred Stock, without par value, set forth in the Certificate of Stock
Designation dated April 18, 1991 (filed as Exhibit 4.4 to its Annual Report on
Form 10-K for the year ended December 31, 1991), each as filed with the
Commission pursuant to the Exchange Act. Integra hereby incorporates in this
Prospectus and Joint Proxy Statement by reference its Annual Report on Form 10-K
for the year ended December 31, 1995, as filed with the Commission pursuant to
the Exchange Act.
All documents filed by National City and Integra pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
Joint Proxy Statement and prior to the respective Annual Meeting of Stockholders
of National City and the Special Meeting of Shareholders of Integra shall be
deemed to be incorporated by reference in this Prospectus and Joint Proxy
Statement and to be a part hereof from the respective dates of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus and Joint Proxy Statement to the extent that
such statement is modified or superseded by a statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus and Joint Proxy Statement.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND JOINT PROXY
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY NATIONAL CITY OR INTEGRA. THIS
PROSPECTUS AND JOINT PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION WITHIN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION WITHIN SUCH JURISDICTION. NEITHER THE DELIVERY
OF THIS PROSPECTUS AND JOINT PROXY STATEMENT NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICA-
2
<PAGE> 8
TION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF NATIONAL CITY OR INTEGRA
SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
THIS PROSPECTUS AND JOINT PROXY STATEMENT INCORPORATES DOCUMENTS OF
NATIONAL CITY AND INTEGRA BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. THE NATIONAL CITY DOCUMENTS (OTHER THAN CERTAIN EXHIBITS TO
ANY SUCH DOCUMENTS) ARE AVAILABLE TO ANY PERSON TO WHOM A COPY OF THIS
PROSPECTUS AND JOINT PROXY STATEMENT HAS BEEN DELIVERED UPON WRITTEN OR ORAL
REQUEST TO NATIONAL CITY CORPORATION, 1900 EAST NINTH STREET, CLEVELAND, OHIO
44114, ATTENTION: THOMAS A. RICHLOVSKY, SENIOR VICE PRESIDENT AND TREASURER,
TELEPHONE NUMBER (216) 575-2126, AND WILL BE FURNISHED WITHOUT CHARGE. THE
INTEGRA DOCUMENTS (OTHER THAN THE EXHIBITS TO ANY SUCH DOCUMENTS) ARE AVAILABLE
TO ANY PERSON TO WHOM A COPY OF THIS PROSPECTUS AND JOINT PROXY STATEMENT HAS
BEEN DELIVERED UPON WRITTEN OR ORAL REQUEST TO INTEGRA FINANCIAL CORPORATION,
CORPORATE SECRETARY'S OFFICE, FOUR PPG PLACE, PITTSBURGH, PA 15222-5408,
TELEPHONE NUMBER (412) 644-8797, AND WILL BE FURNISHED WITHOUT CHARGE. IN ORDER
TO ENSURE TIMELY DELIVERY OF ANY NATIONAL CITY DOCUMENTS, ANY REQUEST SHOULD BE
MADE BY APRIL 15, 1996. IN ORDER TO ENSURE TIMELY DELIVERY OF ANY INTEGRA
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY APRIL 17, 1996.
3
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION................................................................ 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................................... 2
SUMMARY.............................................................................. 7
Parties to the Merger........................................................... 7
Reasons for the Merger.......................................................... 7
Terms of the Merger............................................................. 7
Conditions; Termination; Amendments............................................. 8
Regulatory Approvals............................................................ 8
The Meetings.................................................................... 8
Votes Required.................................................................. 9
Recommendation of the Boards of Directors....................................... 9
Opinions of Financial Advisors.................................................. 10
Appraisal and Dissenters' Rights................................................ 10
Certain Federal Income Tax Consequences and Accounting Treatment................ 10
The Options..................................................................... 10
Comparative Rights of Holders of Shares of Integra Common After the Merger...... 12
Market and Market Prices........................................................ 12
Selected Financial Data......................................................... 12
Comparative Per Share Data...................................................... 15
THE MEETINGS......................................................................... 16
Record Dates and Voting Rights.................................................. 16
Voting and Revocation of Proxies................................................ 16
1. ELECTION OF DIRECTORS -- NATIONAL CITY............................................ 17
Board of Directors and Its Committees........................................... 17
Compensation of Directors....................................................... 18
Nominees for Election as Directors.............................................. 18
Vote by Stockholders............................................................ 18
Beneficial Ownership............................................................ 22
REMUNERATION OF EXECUTIVE OFFICERS AND TRANSACTIONS WITH MANAGEMENT -- NATIONAL
CITY............................................................................... 24
Executive Compensation.......................................................... 24
REPORT OF COMPENSATION AND ORGANIZATION COMMITTEE.................................... 27
Compensation Philosophy......................................................... 27
Executive Compensation Principles............................................... 27
Executive Compensation Programs................................................. 28
Peer Group Banks................................................................ 29
Summary......................................................................... 29
Director Equity Ownership....................................................... 30
REVIEW OF COMPANY PERFORMANCE........................................................ 30
THE COMPENSATION AND ORGANIZATION COMMITTEE'S REVIEW OF CEO COMPENSATION............. 30
Compensation and Organization Committee......................................... 31
STOCKHOLDER RETURN PERFORMANCE....................................................... 32
DESCRIPTION OF NATIONAL CITY'S BENEFIT PLANS......................................... 32
2. PROPOSAL RESPECTING AMENDING THE NATIONAL CITY CORPORATION 1993 STOCK OPTION
PLAN............................................................................... 38
Summary of Current Plan......................................................... 38
Eligibility..................................................................... 39
</TABLE>
4
<PAGE> 10
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Terms of Option Grants.......................................................... 39
Appreciation Rights............................................................. 39
Proposed Amendment.............................................................. 40
Federal Tax Consequences........................................................ 40
Benefits Under the Amendment.................................................... 41
General......................................................................... 42
Approval by Stockholders........................................................ 42
3. SELECTION OF INDEPENDENT AUDITORS -- NATIONAL CITY................................ 42
4. MERGER............................................................................ 43
Background of and Reasons for the Merger -- Integra............................. 43
Background of and Reasons for the Merger -- National City....................... 44
Opinions of Financial Advisors.................................................. 45
Terms of the Merger............................................................. 54
Conversion of Shares of Integra Common.......................................... 54
Assumption of Employee and Director Stock Options............................... 56
Conditions to the Merger........................................................ 56
Regulatory Approvals............................................................ 57
Waiver; Amendment; Termination.................................................. 58
Effective Time.................................................................. 59
Conduct of National City's Business Pending the Merger.......................... 59
Conduct of Integra's Business Pending the Merger................................ 59
Employee Matters................................................................ 61
Indemnification and Insurance................................................... 61
Interests of Certain Persons in the Merger...................................... 61
Management After the Merger..................................................... 63
Certain Federal Income Tax Consequences......................................... 63
Accounting Treatment............................................................ 64
Resales by Affiliates........................................................... 64
Appraisal and Dissenters' Rights................................................ 65
The Options..................................................................... 65
National City Option Agreement.................................................. 65
Integra Option Agreement........................................................ 70
PRO FORMA COMBINED CONSOLIDATED FINANCIAL
INFORMATION (UNAUDITED)............................................................ 74
CERTAIN REGULATORY CONSIDERATIONS.................................................... 80
General......................................................................... 80
Payment of Dividends............................................................ 80
Certain Transactions by Bank Holding Companies with their Affiliates............ 81
Capital......................................................................... 81
Holding Company Support of Subsidiary Banks..................................... 82
FDIC Insurance Assessments...................................................... 82
DESCRIPTION OF NATIONAL CITY CAPITAL STOCK........................................... 82
Common Stock.................................................................... 82
Preferred Stock................................................................. 83
DESCRIPTION OF INTEGRA CAPITAL STOCK................................................. 84
General......................................................................... 84
Integra Preferred Stock......................................................... 84
Integra Common Stock............................................................ 84
</TABLE>
5
<PAGE> 11
<TABLE>
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<S> <C>
GENERAL COMPARISON OF NATIONAL CITY AND INTEGRA CAPITAL STOCK........................ 86
General......................................................................... 86
Directors....................................................................... 86
Limitation of Director Liability in Certain Circumstances....................... 86
Indemnification and Insurance................................................... 87
Antitakeover Statutes........................................................... 88
Pennsylvania Business Combination Statute....................................... 88
Pennsylvania Control Transaction Statute........................................ 89
Consideration of Factors; General Powers........................................ 89
Issuance of Preferred Stock..................................................... 89
Cumulative Voting............................................................... 90
Action Without a Meeting........................................................ 90
Special Meetings................................................................ 91
Voting, Appraisal Rights and Corporate Reorganizations.......................... 91
By-laws......................................................................... 91
Preemptive Rights............................................................... 92
Dividends....................................................................... 92
INFORMATION ABOUT NATIONAL CITY...................................................... 92
INFORMATION ABOUT INTEGRA............................................................ 93
EXPERTS.............................................................................. 93
LEGAL OPINIONS....................................................................... 93
NATIONAL CITY STOCKHOLDER PROPOSALS.................................................. 94
TRANSACTIONS WITH MANAGEMENT......................................................... 94
VOTING............................................................................... 94
National City................................................................... 94
Integra......................................................................... 95
GENERAL.............................................................................. 95
APPENDIX A -- AGREEMENT AND PLAN OF MERGER........................................... A-1
APPENDIX B -- OPINION OF MORGAN STANLEY & CO. INCORPORATED........................... B-1
APPENDIX C -- OPINION OF MERRILL LYNCH & CO.......................................... C-1
APPENDIX D -- NATIONAL CITY OPTION AGREEMENT......................................... D-1
APPENDIX E -- INTEGRA OPTION AGREEMENT............................................... E-1
APPENDIX F -- NATIONAL CITY CORPORATION AMENDED AND RESTATED 1993 STOCK OPTION
PLAN............................................................................... F-1
</TABLE>
6
<PAGE> 12
SUMMARY
The following is a summary of certain information with respect to matters
to be considered at the Annual Meeting of Stockholders of National City and at
the Special Meeting of Shareholders of Integra and is not intended to be a
complete statement of all material facts regarding the matters to be considered
at those meetings. It is qualified in its entirety by reference to more detailed
information contained elsewhere in this Prospectus and Joint Proxy Statement
(hereinafter sometimes referred to as this or the "Proxy Statement") or
incorporated by reference in this Proxy Statement, the accompanying appendices
and the documents referred to herein.
PARTIES TO THE MERGER
Integra. Integra is a regional, multibank holding company registered under
the Bank Holding Company Act of 1956, as amended (the "BHCA"). At December 31,
1995, Integra had consolidated total assets of $14.3 billion and consolidated
total deposits of $10.4 billion. Integra is the third largest bank holding
company in western Pennsylvania and the fifth largest in Pennsylvania. Integra
Bank carries on a general retail and commercial banking business through 263
offices throughout 23 counties in western Pennsylvania. Other major affiliates
include Integra Investment Company with assets of $360.4 million, Integra
Mortgage Company with a $3.7 billion portfolio of loans serviced for others,
Integra Trust Company with assets at a market value of $9.3 billion on December
31, 1995 and Altegra Credit Company, an indirect, non-conforming mortgage and
home equity lender. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE";
"SUMMARY -- Selected Financial Data"; "SUMMARY -- Comparative Per Share Data";
"PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)" and
"INFORMATION ABOUT INTEGRA". The principal office of Integra is located at Four
PPG Place, Pittsburgh, 15222-5401, and its telephone number is (412) 644-7669.
National City. National City is a registered multi-bank holding company
under the BHCA and is a registered savings and loan holding company under the
Home Owners' Loan Act of 1933, as amended (the "HOLA"), and is incorporated
under the laws of the State of Delaware. As of December 31, 1995, National City
owned substantially all of the outstanding stock of 17 commercial banks and 1
Federal Savings Bank in Ohio, Kentucky and Indiana and through these financial
institutions, operated 645 offices. National City subsidiaries provide financial
services that meet a wide range of customer needs, including commercial and
retail banking, trust and investment services, item processing, mortgage
servicing and credit card processing. At December 31, 1995, National City, its
affiliate banks and other subsidiaries had consolidated total assets of $36.2
billion and consolidated total deposits of $25.2 billion. See "SUMMARY --
Selected Financial Data"; "SUMMARY -- Comparative Per Share Data"; "PRO FORMA
COMBINED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)" and "INFORMATION ABOUT
NATIONAL CITY"." The principal office of National City is located at 1900 East
Ninth Street, Cleveland, Ohio 44114, and its telephone number is (216) 575-2000.
REASONS FOR THE MERGER
National City's acquisition strategy includes the expansion into major,
contiguous markets where a significant presence can be established. Western
Pennsylvania is a logical extension of National City's current midwest markets
and the acquisition of Integra will provide National City with a meaningful
presence in western Pennsylvania together with an expansion of National City's
customer base and assets. After exploring various other strategic alternatives,
including the possibility of remaining independent, Integra believes that a sale
of the company to a larger financial institution offers the greatest potential
for achieving long term value for Integra shareholders. See "MERGER --
Background of and Reasons for the Merger -- Integra" and "-- Background of and
Reasons for the Merger -- National City."
TERMS OF THE MERGER
Pursuant to the Agreement and Plan of Merger dated as of August 27, 1995
(the "Agreement"), Integra will merge into National City (the "Merger"). Upon
consummation of the Merger, the surviving entity will be known as National City
Corporation. At the Effective Time, each outstanding share of Integra Common
7
<PAGE> 13
(except shares held by Integra, National City or any of their direct or indirect
wholly owned subsidiaries (other than shares of Integra Common held in trust
accounts, managed accounts or in any similar manner as trustee or in a fiduciary
capacity or acquired in satisfaction of debts previously contracted)) will be
converted into the right to receive 2.00 shares of National City Common (the
"Exchange Rate"). No fractional shares of National City Common will be issued in
the Merger. A copy of the Agreement is attached hereto as Appendix A.
The closing price of National City Common on the NYSE on February 29, 1996
was $ (which is the equivalent of $ for 2.00 shares of National City
Common).
Following the Merger, the directors and officers of National City at the
Effective Time will continue as the directors and officers of National City.
Promptly after the Effective Time, (a) the Board of Directors of National City
shall increase its size to such number as is necessary to create four vacancies,
and it is anticipated that William F. Roemer, James S. Broadhurst, Robert A.
Paul, and Michael A. Schuler, who now serve as directors of Integra, will become
directors of National City. See "MERGER -- Management after the Merger."
CONDITIONS; TERMINATION; AMENDMENTS
Consummation of the Merger is subject to satisfaction of a number of
conditions, including (a) approval by the stockholders of National City and
approval by the shareholders of Integra of the Agreement, (b) approval by
certain federal and state banking authorities, (c) authorization for listing on
the NYSE of the National City Common issuable in the Merger, (d) the issuance by
the Commission of an order declaring the Registration Statement effective, (e)
the receipt by National City and Integra of a letter from Ernst & Young LLP,
National City's independent auditors, to the effect that, for financial
reporting purposes, the Merger qualifies for pooling-of-interests accounting
treatment under generally accepted accounting principles if consummated in
accordance with the Agreement, (f) the receipt by National City and Integra of
the opinion of Buchanan Ingersoll Professional Corporation, counsel to Integra
("Buchanan Ingersoll"), substantially 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 of 1986, as amended (the "Code"),
and (g) the non-existence of a restraining order, preliminary or permanent
injunction or other order by any federal or state court in the United States
preventing the consummation of the Merger. Substantially all of the conditions
to consummation of the Merger (other than required stockholder, shareholder or
regulatory approvals) may be waived, in whole or in part, by the party for whose
benefit they have been created, without the approval of the stockholders or
shareholders, as the case may be, of that party. In addition, the Agreement may
be terminated under certain circumstances, and such termination would not
require stockholder or shareholder approval. The Agreement may be amended or
supplemented upon the written agreement of National City and Integra at any
time, provided that no amendment may be made after any stockholder or
shareholder approval, as applicable, of the Agreement which changes the form or
amount of the merger consideration without further stockholder or shareholder
approval, as applicable. See "MERGER -- Conditions to the Merger" and "MERGER --
Waiver; Amendment; Termination."
REGULATORY APPROVALS
In order for the Merger to be consummated, approvals must be obtained from
the Board of Governors of the Federal Reserve System (the "FRB") and the
Pennsylvania Department of Banking (the "Pennsylvania Department"). The
Pennsylvania Department approved the Merger on January 5, 1996. The FRB approved
the Merger on January 23, 1996 (the "Fed Approval Date"). In accordance with the
terms of the FRB approval, the Merger may not be consummated until the 15th day
after FRB approval is received. See "MERGER -- Regulatory Approvals."
THE MEETINGS
National City. The Annual Meeting of Stockholders of National City will be
held on April 22, 1996, at National City Bank, Indiana, One National City
Center, Fourth Floor, Indianapolis, Indiana 46255, commencing at 9:30 a.m.,
Indianapolis Time ("Eastern Standard Time"). The Board of Directors of National
8
<PAGE> 14
City has fixed the close of business on February 29, 1996 as the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting of Stockholders of National City. The purpose of the Annual Meeting of
Stockholders of National City is (a) to elect directors of National City, (b) to
approve the amendment to the National City Corporation 1993 Stock Option Plan,
(c) to consider and vote on a proposal to adopt the Agreement, (d) to approve
the selection of Ernst & Young LLP as independent auditors, (e) to vote on
adjournment of the meeting, if necessary, to permit further solicitation of
proxies in the event that there are not sufficient votes at the time of the
meeting to approve the Agreement, and (f) to transact such other business as may
properly come before the meeting.
Integra. The Special Meeting of Shareholders of Integra will be held on
April 24, 1996, at the Wintergarden at One PPG Place, Pittsburgh, PA, commencing
at 9:30 a.m., Eastern Daylight Savings Time. The Board of Directors of Integra
has fixed the close of business on February 29, 1996 as the record date for
determination of shareholders entitled to notice of and to vote at the Special
Meeting of Shareholders of Integra. The purpose of the Special Meeting of
Shareholders of Integra is (a) to consider and vote on a proposal to approve the
Agreement, and (b) to vote on adjournment of the meeting, if necessary to permit
further solicitation of proxies in the event that there are not sufficient votes
at the time of the meeting to approve the Agreement.
For additional information with respect to the Meetings, see "THE
MEETINGS"; "ELECTION OF DIRECTORS -- NATIONAL CITY"; "REMUNERATION OF EXECUTIVE
OFFICERS AND TRANSACTIONS WITH MANAGEMENT -- NATIONAL CITY"; and "SELECTION OF
INDEPENDENT AUDITORS -- NATIONAL CITY;" "MERGER."
VOTES REQUIRED
The proposal to adopt the Agreement to be considered at the Annual Meeting
of Stockholders of National City must be adopted by the affirmative vote of the
holders of a majority of the outstanding shares of National City Common entitled
to vote at the Annual Meeting of Stockholders of National City. The adoption of
the Agreement by the stockholders of National City is required under the
Delaware General Corporation Law (the "DGCL") and such adoption is included in
the Agreement as a condition to the parties' obligations to close. As of
December 31, 1995, the directors and executive officers of National City and
their affiliates are entitled to vote approximately . % of the outstanding
shares of National City Common entitled to vote at the Annual Meeting of
Stockholders of National City. See "THE MEETINGS -- Record Dates and Voting
Rights," and "ELECTION OF DIRECTORS -- National City -- Beneficial Ownership."
The proposal to approve the Agreement to be considered at the Special
Meeting of Shareholders of Integra must be adopted by the affirmative vote of
holders of a majority of votes cast by all shareholders entitled to vote. The
approval of the Agreement by the shareholders of Integra is required under
Section 1924 of the Pennsylvania Business Corporation Law ("BCL") and is
included in the Agreement as a condition to the parties' obligations to close.
As of December 31, 1995, the directors and executive officers of Integra and
their affiliates are entitled to vote approximately % of the outstanding
shares of Integra Common eligible to vote at the Special Meeting of Shareholders
of Integra. See "THE MEETINGS -- Record Dates and Voting Rights."
National City and Integra have been advised that their respective directors
and executive officers intend to vote their shares (including shares held in a
fiduciary capacity) in favor of the Agreement. The Agreement provides that,
absent certain circumstances (none of which has occurred), the respective Boards
of Directors of National City and Integra shall recommend that their
stockholders or shareholders, as the case may be, vote in favor of and approve
the Merger and adopt or approve, as applicable, the Agreement at their
respective Meetings.
RECOMMENDATION OF THE BOARDS OF DIRECTORS
The Boards of Directors of National City and Integra (a) have unanimously
approved the Agreement, (b) believe that the proposed Merger is in the best
interests of their respective corporations and stockholders or shareholders, as
the case may be, and (c) unanimously recommend that their stockholders or
shareholders,
9
<PAGE> 15
as the case may be, vote FOR the adoption or approval, as applicable, of the
Agreement. See "MERGER -- Background of and Reasons for the Merger -- Integra"
and "MERGER -- Background of and Reasons for the Merger -- National City."
OPINIONS OF FINANCIAL ADVISORS
Morgan Stanley & Co. Incorporated ("Morgan Stanley"), Integra's financial
advisor, has rendered its opinions that, as of August 26, 1995 and the date of
this Prospectus and Joint Proxy Statement, the Exchange Rate is fair, from a
financial point of view, to the shareholders of Integra. Merrill Lynch & Co.
("Merrill Lynch"), National City's financial advisor, has rendered its opinions,
dated August 27, 1995 and the date of this Prospectus and Joint Proxy Statement,
that as of such dates the Exchange Rate was fair to National City from a
financial point of view. Copies of the opinions of Morgan Stanley and Merrill
Lynch dated the date of this Prospectus and Joint Proxy Statement, which are
attached hereto as Appendices B and C, respectively, describe the assumptions
made, matters considered and limits of the reviews undertaken by Morgan Stanley
and Merrill Lynch in rendering their respective opinions, and should be read in
their entirety. Integra and National City have agreed to pay fees to Morgan
Stanley and Merrill Lynch, respectively, a portion of which are contingent upon
consummation of the Merger. For a further description of the opinions of Morgan
Stanley and Merrill Lynch and the fees payable to them, see "THE
MERGER -- Opinions of Financial Advisors."
APPRAISAL AND DISSENTERS' RIGHTS
Neither holders of National City Common nor holders of Integra Common will
be entitled to any statutory appraisal and dissenters' rights in connection with
the Merger. See "MERGER -- Appraisal and Dissenters' Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES AND ACCOUNTING TREATMENT
The Merger is structured to qualify as a tax-free reorganization under
Section 368 of the Code. The Agreement provides as a condition to the parties'
obligations to consummate the Merger that National City and Integra shall have
received the opinion of Buchanan Ingersoll substantially to the effect, among
other things, that for United States federal income tax purposes no gain or loss
will be recognized by the shareholders of Integra who exchange their shares of
Integra Common solely for shares of National City Common pursuant to the Merger.
See "MERGER -- Certain Federal Income Tax Consequences."
The Merger, if completed as proposed, will qualify as a
pooling-of-interests for accounting and financial purposes. The Agreement
provides as a condition to the parties' obligations to consummate the Merger
that National City and Integra shall have received a letter from Ernst & Young
LLP, dated the day of the Effective Time, to the effect that, for financial
reporting purposes, the Merger qualifies for pooling-of-interests accounting
treatment under generally accepted accounting principles if consummated in
accordance with the Agreement. See "MERGER -- Accounting Treatment."
THE OPTIONS
National City Option. As a condition to National City's entering into the
Agreement, and in consideration therefor, Integra and National City entered into
a Stock Option Agreement dated as of August 27, 1995 (the "National City Option
Agreement"). The National City Option Agreement is intended to increase the
likelihood that the Merger will be consummated by making it more difficult and
more expensive for another party to obtain control of or acquire Integra. See
"MERGER -- The Option." A copy of the National City Option Agreement is attached
hereto as Appendix D.
Pursuant to the National City Option Agreement, Integra granted National
City an option (the "National City Option") to purchase up to 6,501,300 fully
paid and nonassessable shares of Integra Common at a price of $51.875 per share.
In the event that any additional shares of Integra Common are issued or
otherwise become outstanding after the date of the National City Option
Agreement (other than pursuant to the Integra Stock Option Plans as provided for
under the Agreement), the number of shares of Integra Common subject to the
National City Option will be increased so that, after such issuance, it equals
19.9% of the number of shares of Integra Common then issued and outstanding
without giving effect to any shares
10
<PAGE> 16
subject or issued pursuant to the National City Option. National City may
exercise the National City Option only upon the occurrence of certain events
(none of which has occurred) and upon obtaining any regulatory approvals
necessary for the acquisition of shares of Integra subject to the National City
Option. In lieu of exercising the National City Option, National City can
require Integra to repurchase for a formula price the National City Option and
any shares of Integra Common purchased upon exercise of the National City Option
and owned by National City at that time. See "MERGER -- The National City
Option."
In addition to other Exercise Termination Events (as such term is defined
in "MERGER -- The National City Option"), the National City Option Agreement
provides that the National City Option shall terminate upon the termination of
the Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event (as such term is
defined in "MERGER -- The National City Option"). The Agreement may be
terminated at any time prior to the Effective Time by either National City or
Integra if the Merger is not approved at either the Annual Meeting of
Stockholders of National City or the Special Meeting of Shareholders of Integra
(provided that the terminating party is not otherwise in material breach of its
obligations under the Agreement). Accordingly, if no Initial Triggering Event
has occurred, in the event that either the National City stockholders do not
adopt the Agreement at the Annual Meeting of Stockholders of National City or
the Integra shareholders do not approve the Agreement at the Special Meeting of
Shareholders of Integra, and either National City or Integra terminates the
Agreement as a result thereof, the National City Option shall terminate. See
"MERGER -- The National City Option."
Integra Option. As a condition to Integra's entering into the Agreement and
the Plan of Merger, and in consideration therefor, Integra and National City
entered into a Stock Option Agreement dated as of August 27, 1995 (the "Integra
Option Agreement"). The Integra Option Agreement is intended to provide
assurance to Integra shareholders that they will receive National City Common in
exchange for their Integra Common at the consummation of the Merger by making
the acquisition of National City by a third party prior to the consummation of
the Merger more expensive. See "MERGER -- The Integra Option." A copy of the
Integra Option Agreement is attached hereto as Appendix E.
Pursuant to the Integra Option Agreement, National City granted Integra an
option (the "Integra Option") to purchase up to 12,098,600 fully paid and
nonassessable shares of National City Common at a price of $31.625 per share. In
the event that any additional shares of National City Common are issued or
otherwise become outstanding after the date of the Integra Option Agreement
(other than pursuant to the National City Stock Option Plans as provided for
under the Agreement), the number of shares of National City Common subject to
the Integra Option will be increased so that, after such issuance, it equals
8.2% of the number of shares of National City Common then issued and outstanding
without giving effect to any shares subject or issued pursuant to the Integra
Option. Integra may exercise the Integra Option only upon the occurrence of
certain events (none of which has occurred) and upon obtaining any regulatory
approvals necessary for the acquisition of shares of National City subject to
the Integra Option. In lieu of exercising the Integra Option, Integra can
require National City to repurchase for a formula price the Integra Option and
any shares of National City Common purchased upon exercise of the Integra Option
and owned by Integra at that time. See "MERGER -- The Integra Option."
In addition to other Exercise Termination Events (as such term is defined
in "MERGER -- The Integra Option"), the Integra Option Agreement provides that
the Integra Option shall terminate upon the termination of the Agreement in
accordance with the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event (as such term is defined in "MERGER --
The Integra Option"). The Agreement may be terminated at any time prior to the
Effective Time by either Integra or National City if the Merger is not approved
at either the Annual Meeting of Stockholders of National City or the Special
Meeting of Shareholders of Integra (provided that the terminating party is not
otherwise in material breach of its obligations under the Agreement).
Accordingly, if no Initial Triggering Event has occurred, in the event that
either the National City stockholders do not adopt the Agreement at the Annual
Meeting of Stockholders of National City or the Integra shareholders do not
approve the Agreement at the Special Meeting of Shareholders of Integra, and
either Integra or National City terminates the Agreement as a result thereof,
the Integra Option shall terminate. See "MERGER -- The Integra Option."
11
<PAGE> 17
COMPARATIVE RIGHTS OF HOLDERS OF SHARES OF INTEGRA COMMON AFTER THE MERGER
The rights of holders of shares of Integra Common currently are governed by
the BCL, Integra's Articles of Incorporation ("Integra's Articles"), and
Integra's Bylaws ("Integra's Bylaws"). At the Effective Time, Integra's
shareholders will become National City stockholders, and their rights will be
governed by the DGCL, National City's Restated Certificate of Incorporation, as
amended ("National City's Certificate"), and National City's First Restatement
of By-Laws dated April 27, 1987 (as amended through October 24, 1994) ("National
City's By-Laws"). See "GENERAL COMPARISON OF NATIONAL CITY AND INTEGRA CAPITAL
STOCK."
MARKET AND MARKET PRICES
National City Common and Integra Common are traded on the NYSE. Receipt of
authorization for listing on the NYSE of the shares of National City Common
issuable in connection with the Merger is a condition to consummation of the
Merger. See "MERGER -- Conditions to the Merger." The information set forth in
the table below presents (a) the closing prices for National City Common and
Integra Common on the NYSE on August 25, 1995, the last trading day preceding
the public announcement of the Merger, and on February 29, 1996, (b) the high
and low sale prices for National City Common and Integra Common on such dates,
and (c) the Integra equivalent per share price as of August 25, 1995 and
February 29, 1996, calculated by multiplying the closing price of National City
Common on the NYSE on such dates by the Exchange Rate.
<TABLE>
<CAPTION>
NATIONAL EQUIVALENT
CITY INTEGRA VALUE
COMMON COMMON PER SHARE
------------ ------------ ------------
<S> <C> <C> <C>
August 25, 1995
Closing Price............ $31.63 $51.88 $63.25
High..................... 31.63 52.00
Low...................... 31.25 51.75
February 29, 1996
Closing Price............ $ $ $
High.....................
Low......................
</TABLE>
No assurance can be given as to what the market price of National City
Common will be if and when the Merger is consummated or when the shares of
National City Common are actually issued in the Merger. If the Merger had been
consummated on February 29, 1996, the estimated total value of the Merger would
have been .
SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data for (a)
National City on a historical basis, (b) Integra on a historical basis, and (c)
National City and Integra on an unaudited pro forma basis. The pro forma data in
the table assumes that the acquisition of Integra is accounted for as a
pooling-of-interests. See "MERGER -- Accounting Treatment." This table should be
read in conjunction with the financial statements and other financial
information of National City and Integra, respectively, incorporated herein by
reference and the pro forma combined consolidated financial information giving
effect to the Merger included elsewhere in this Proxy Statement. See "AVAILABLE
INFORMATION"; "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "PRO FORMA
COMBINED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)." The pro forma data
presented below is not
12
<PAGE> 18
necessarily indicative of the results which actually would have been obtained if
the Merger had been consummated in the past or which may be obtained in the
future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NATIONAL CITY CORPORATION:
Earnings (In thousands, except per
share data)
Net interest income................ $1,321,085 $1,236,809 $1,200,054 $1,152,745 $1,131,269
Provision for loan losses.......... 97,482 79,356 93,089 129,361 251,076
Net income......................... 465,109 429,434 403,997 346,923 236,805
Earnings per common share:
Primary.......................... 3.03 2.70 2.41 2.09 1.46
Fully diluted.................... 2.95 2.64 2.37 2.06 1.45
Cash dividends declared per common
share............................ 1.30 1.18 1.06 .94 .94
Average Balances (In millions)
Assets............................. 33,797 30,614 28,834 28,635 29,343
Earning assets..................... 30,233 27,261 25,745 25,681 26,279
Deposits........................... 24,472 22,835 21,646 21,967 22,474
Other borrowings................... 4,939 3,954 3,712 3,537 3,903
Corporate long term debt........... 992 712 452 329 318
Stockholders' equity............... 2,739 2,619 2,606 2,362 2,156
INTEGRA FINANCIAL CORPORATION:
Earnings (In thousands, except per
share data)
Net interest income................ 507,260 528,819 542,299 507,791 433,029
Provision for loan losses.......... 16,000 30,000 50,000 96,390 71,837
Income before cumulative effect of
accounting changes............... 128,390 169,033 152,820 60,503 62,339
Net income......................... 128,390 169,033 212,820 60,503 62,339
Earnings per common share before
cumulative effect of accounting
changes.......................... 3.88 5.01 4.50 1.81 2.23
Cash dividends declared per common
share............................ 1.95 1.70 1.37 .98 1.11
Average Balances (In millions)
Assets............................. 14,283 13,597 13,561 12,703 11,410
Earning assets..................... 13,616 12,964 12,897 12,115 10,851
Deposits........................... 10,243 9,997 10,204 10,255 9,704
Other borrowings................... 1,610 1,665 1,621 1,127 776
Corporate long term debt........... 1,204 816 708 434 129
Shareholders' equity............... 1,010 941 831 728 608
</TABLE>
13
<PAGE> 19
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PRO FORMA NATIONAL CITY CORPORATION:
Earnings (In thousands, except per
share data)
Net interest income................ $1,828,345 $1,765,628 $1,742,353 $1,660,536 $1,564,298
Provision for loan losses.......... 113,482 109,356 143,089 225,751 322,913
Income before cumulative effect of
accounting changes............... 591,460 598,467 556,817 407,426 299,144
Net income......................... 591,460 598,467 616,817 407,426 299,144
Earnings per common share before
cumulative effect of accounting
changes
Primary.......................... 2.68 2.64 2.36 2.04 1.37
Fully diluted.................... 2.64 2.60 2.33 2.02 1.37
Average common shares outstanding
Primary.......................... 215,097 220,824 228,794 222,072 207,770
Fully diluted.................... 224,005 229,846 238,314 232,078 216,320
Average Balances (In millions)
Assets............................. 48,102 44,211 42,395 41,338 40,753
Earning assets..................... 43,849 40,225 38,642 37,796 37,130
Deposits........................... 34,715 32,832 31,850 32,222 32,178
Other borrowings................... 6,549 5,619 5,333 4,664 4,679
Corporate long term debt........... 2,196 1,528 1,160 763 447
Stockholders' equity............... 3,701 3,560 3,437 3,090 2,764
</TABLE>
14
<PAGE> 20
COMPARATIVE PER SHARE DATA
Based upon the Exchange Rate of 2.00 shares of National City Common for
each share of Integra Common outstanding immediately prior to the Merger, the
following table sets forth per common share book value, cash dividends declared
and net income of (a) National City on a historical basis, (b) National City pro
forma adjusted to give effect to the Merger as if the Merger had been effected
for the period presented, (c) Integra on a historical basis, and (d) Integra pro
forma equivalent of one share of Integra Common, adjusted for all applicable
stock splits. The following information should be read in conjunction with the
historical financial statements of National City and Integra incorporated by
reference in this Proxy Statement and the pro forma combined consolidated
financial information giving effect to the Merger included elsewhere in the
Proxy Statement. See "AVAILABLE INFORMATION"; "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "PRO FORMA COMBINED CONSOLIDATED FINANCIAL
INFORMATION (UNAUDITED)." The data presented below are not necessarily
indicative of the results which actually would have been obtained if the Merger
had been consummated in the past or which may be obtained in the future.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NATIONAL CITY COMMON STOCK
Earnings per common share before cumulative
effect of accounting changes
Historical
Primary.................................. $ 3.03 $ 2.70 $ 2.41 $ 2.09 $ 1.46
Fully diluted............................ 2.95 2.64 2.37 2.06 1.45
Pro forma combined
Primary.................................. 2.68 2.64 2.36 2.04 1.37
Fully diluted............................ 2.64 2.60 2.33 2.02 1.37
Cash dividends declared per share(2)
Historical.................................. 1.30 1.18 1.06 .94 .94
Book value per share at period-end(1)
Historical.................................. 18.80
Pro forma combined(4)....................... 18.23
INTEGRA FINANCIAL COMMON STOCK
Earnings per common share before cumulative
effect of accounting changes
Historical -- primary....................... 3.88 5.01 4.50 1.81 2.23
Pro forma equivalent(3) -- primary.......... 5.36 5.28 4.72 4.08 2.74
Cash dividends declared per share(2)
Historical.................................. 1.95 1.70 1.37 .98 1.11
Pro forma equivalent(3)..................... 2.60 2.36 2.12 1.88 1.88
Book value per share at period-end(1)
Historical.................................. 34.68
Pro forma equivalent(3)(4).................. 36.46
</TABLE>
- - - ---------------
(1) Included for specified periods only in accordance with SEC rules.
(2) No assurance can be given that equivalent dividends will be declared in the
future. The amount of future dividends payable by National City will depend
upon the earnings and financial condition of National City and other
factors, including applicable regulations and policies.
(3) The equivalent pro forma combined per share data for Integra Common
represents, in the case of book value and earnings per common share, the pro
forma per share data for National City Common multiplied by the Exchange
Rate and, in the case of dividends declared, the historical per share data
for National City Common multiplied by the Exchange Rate.
(4) Pro forma combined book value includes the conversion of the 8% Cumulative
Convertible Preferred Stock as discussed in Note B to the Pro Forma Combined
Consolidated Financial Information. Pro forma combined book value before the
conversion of the Cumulative Convertible Preferred Stock would have been
$18.12.
15
<PAGE> 21
THE MEETINGS
This Prospectus and Joint Proxy Statement is being furnished to the
stockholders of National City and the shareholders of Integra in connection with
the solicitation of proxies by the Boards of Directors of National City and
Integra for use at their respective Annual Meeting of Stockholders and Special
Meeting of Shareholders and at any adjournment or adjournments thereof. The
Annual Meeting of Stockholders of National City will be held on April 22, 1996,
at National City Bank, Indiana, One National City Center, Fourth Floor,
Indianapolis, Indiana, commencing at 9:30 a.m., Eastern Standard Time. The
Special Meeting of Shareholders of Integra will be held on April 24, 1996, in
the Wintergarden at One PPG Place, Pittsburgh, Pennsylvania, commencing at 9:30
a.m., Eastern Daylight Savings Time.
RECORD DATES AND VOTING RIGHTS
National City. The Board of Directors of National City has fixed the close
of business on February 29, 1996 as the record date for determination of
stockholders entitled to receive notice of and to vote at the Annual Meeting of
Stockholders of National City. On the record date, National City had
shares of National City Common outstanding, each of which is
entitled to one vote on all matters to be acted upon at the meeting. The
affirmative vote of the holders of a majority of the outstanding shares of
National City Common entitled to vote at the Annual Meeting of Stockholders of
National City is required to adopt the Agreement and to satisfy the NYSE listing
requirements to which National City is subject.
Integra. The Board of Directors of Integra has fixed the close of business
on February 29, 1996 as the record date for determination of shareholders
entitled to notice of and to vote at the Special Meeting of Shareholders of
Integra. As of the record date, Integra had outstanding and entitled to vote
shares of Integra Common, each of which is entitled to one vote on
all matters to be acted upon at the meeting. The affirmative vote of holders of
a majority of the votes cast by all shareholders entitled to vote is required to
approve the Agreement under the BCL.
VOTING AND REVOCATION OF PROXIES
Proxies for use at the Annual Meeting of the Stockholders of National City
and the Special Meeting of the Shareholders of Integra accompany this Proxy
Statement. A stockholder or shareholder may use his or her proxy if he or she is
unable to attend the meeting in person or wishes to have his or her shares voted
by proxy even if he or she does attend the meeting. The proxy may be revoked in
writing by the person giving it at any time before it is exercised by providing
notice of such revocation to the Secretary of National City or of Integra, as
the case may be, or by submitting a proxy having a later date, or by such person
appearing at the meeting and electing to vote in person. All proxies validly
submitted and not revoked will be voted in the manner specified therein by the
stockholder or shareholder. If no specifications are made, shares of Integra
Common represented by proxy will be voted FOR the approval of the Agreement and
FOR approval of the proposal to adjourn the meeting, to permit the solicitation
of additional votes and shares of National City Common represented by proxy will
be voted FOR the election of directors, FOR the approval of the amendments to
the National City Corporation 1993 Stock Option Plan, FOR the adoption of the
Agreement, FOR the approval of the selection of Ernst & Young LLP as independent
auditors of 1996, FOR approval of the proposal to adjourn the meeting, to permit
the solicitation of additional votes and in their discretion to vote and act
upon such other business as may properly come before the meeting. A
specification to vote against or to abstain from approval or adoption, as
applicable, of the Agreement will constitute a withdrawal of authority of those
proxies to vote for an adjournment of the National City Annual Meeting or the
Integra Special Meeting, as applicable, for the purpose of soliciting additional
proxies.
Each of National City and Integra will bear its own cost of solicitation of
proxies from its stockholders and shareholders, respectively. In addition to
using the mails, proxies may be solicited by personal interview, telephone and
wire. It is anticipated that banks, brokerage houses and other institutions,
nominees or fiduciaries will be requested to forward their proxy soliciting
material to their principals and to obtain authorizations for the executions of
proxies. Officers and regular employees of National City or its subsidiaries and
of Integra or its subsidiaries, acting on behalf of National City or Integra, as
the case may be, may solicit proxies personally or by telephone or wire.
National City and Integra have separately retained Morrow and Co., Inc. to
assist in such solicitations. The fees of Morrow and Co., Inc. are estimated to
be $7,500 for National City and $7,000 for Integra, and Morrow and Co., Inc.
will be reimbursed by the parties for its reasonable out-of-pocket costs and
expenses. Neither National City nor Integra expects to pay any other
16
<PAGE> 22
compensation for the solicitation of proxies, but may, upon request, pay the
standard charges and expenses of banks, brokerage houses, and other
institutions, nominees and fiduciaries for forwarding proxy materials to and
obtaining proxies from their principals. However, no such payment will be made
to any of National City's or Integra's subsidiaries acting through their
nominees or acting as fiduciaries.
Neither the Board of Directors of National City nor the Board of Directors
of Integra is aware of any matter other than the matters set forth in this Proxy
Statement that may be presented for action at the respective meetings, but if
other matters do properly come before the respective meetings or any
adjournments thereof then it is intended that the shares represented by the
accompanying proxy will be voted by the persons named in the proxy in accordance
with their best judgment pursuant to the discretionary authority granted by the
proxy.
1. ELECTION OF DIRECTORS -- NATIONAL CITY
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of National City has responsibility for establishing
broad corporate policies and overall performance of National City. However, it
is not involved in the day to day operating details of National City's business.
Members of the Board are kept informed of National City's business through
various documents and reports provided by the Chairman and other officers of
National City and by participating in Board and committee meetings. Each
director has access to all books, records and reports of National City, and
members of management are available at all times to answer their questions.
In 1995, the Board of Directors of National City held 6 meetings. Average
attendance by directors at those meetings was 88% and, except for Messrs.
Lemieux and Weiss, all directors attended 75% or more of the meetings of the
Board and the Board Committees they were scheduled to attend. Except for Messrs.
Biggar, Evans and Weiss, all of the persons nominated and elected as directors
of National City at National City's 1995 Annual Meeting of Stockholders attended
that Annual Meeting.
The Board of Directors of National City has established several permanent
committees comprising directors who are appointed to those committees annually.
The principal committees are the Audit Committee, the Compensation and
Organization Committee, the Executive Committee, the Nominating Committee and
the Public Policy Committee, each of which is described below. The members of
each of those Committees are identified in the biographical material of the
nominees for election of Directors beginning at page 19.
The Audit Committee. The Audit Committee is required to meet at least
semiannually and met three times during 1995. The Audit Committee is composed of
directors who are independent of the management of National City and are free of
any relationship that would interfere with their exercise of independent
judgment as committee members. The responsibility for effective auditing of
National City and any subsidiary is carried out by the Audit Committee through
the general auditor and the independent auditors. The Audit Committee provides
assistance to the Board of Directors in fulfilling its responsibility to
stockholders, potential stockholders, and investment community relating to
corporate accounting and reporting practices of National City, effectiveness of
its internal control structure and procedures for financial reporting, and
compliance with designated laws and regulations. In so doing, the Audit
Committee maintains free and open communications between the directors, the
independent auditors, the general auditor, and the management of National City.
The Compensation and Organization Committee. The Compensation and
Organization Committee meets on the call of the Chairman of the Board of
Directors and met five times during 1995. The Compensation and Organization
Committee considers all matters relating to compensation policy and compensation
of senior officers of National City and its subsidiaries and makes
recommendations to the Board of Directors on matters relating to succession and
organization of senior executive management. Under the terms of each of National
City's Amended and Restated 1973 Stock Option Plan, as amended, 1984 Stock
Option Plan, as amended, the 1989 Stock Option Plan, and the 1993 Stock Option
Plan the Compensation and Organization Committee is authorized to grant stock
option rights and stock appreciation rights to officers and employees of
National City and its subsidiaries. The Compensation and Organization Committee
also determines participants and establishes the peer group for the Long Term
Incentive Compensation Plan and sets the awards granted pursuant to the Short
Term Incentive Plan. The Compensation and Organization Committee also determines
those employees who are eligible to receive awards of restricted stock under the
National City Corporation Amended and Second Restated 1991 Restricted Stock
Plan.
17
<PAGE> 23
The Executive Committee. The Executive Committee meets on the call of the
Chairman of the Board of Directors and met twice during 1995. The Executive
Committee is empowered to exercise all powers and perform all duties of the
Board of Directors as permitted by applicable law when the Board is not in
session.
The Nominating Committee. The Nominating Committee meets on the call of the
Chairman of the Board of Directors and did not meet during 1995. The Committee
confers, advises and recommends with respect to nominations to fill vacancies on
the Board of Directors. Stockholders may submit the name of a possible nominee
to the Chairman, and he will arrange for that person to be given consideration
by the Committee. Further, Stockholders may make nominations from the floor at
the Annual Meeting of Stockholders.
The Public Policy Committee. The Public Policy Committee meets on the call
of the Chairman of the Committee and met twice during 1995. The Public Policy
Committee has responsibility to oversee the various policies and programs of
National City as they relate to its relationships with employees, regulatory
agencies, governments, charitable organizations and the general public.
COMPENSATION OF DIRECTORS
Members of the Board of Directors of National City who are not officers of
National City, or any of its subsidiaries, receive a yearly retainer, payable in
quarterly installments, and a fee for each meeting of the Board, and of each
committee thereof, which they attend. The yearly retainer is $20,000*. The fee
for attendance at any Board meeting or any committee meeting is $1,000. Each of
the non-officer Chairpersons of committees of the Board of Directors of National
City receives an additional annual retainer of $2,500 paid in quarterly
installments. Under a plan for the deferred payment of director's fees, a
director may elect to have the payment of fees deferred until later years.
In addition, currently each non-officer incumbent member of the Board on
the date when the National City Corporation Amended and Second Restated 1991
Restricted Stock Plan became effective was, and each individual who is first
elected or appointed as a member of the Board thereafter will be, awarded 1,000
shares of National City Common subject to transfer restrictions. Furthermore,
each year in which an individual is re-elected or re-appointed as a member of
the Board, such individual is to be awarded an additional 200 shares of National
City Common the transfer of which also is restricted. The restrictions on such
shares of National City Common do not expire until the earlier of the individual
director's death, disability or a date nine months after the date of the award.
NOMINEES FOR ELECTION AS DIRECTORS
Directors are to be elected to serve until the next Annual Meeting of
Stockholders and until their respective successors are duly elected and have
qualified. It is intended that shares represented by the proxies, unless
contrary instructions are given, will be voted for the election of the nominees
listed below as directors, whose number is equal to the total authorized number
of directors. Although management does not expect that any nominee will be
unavailable for election, in the event that vacancies occur unexpectedly, the
shares will be voted for substitute nominees, if any.
The fifteen nominees for election to the Board of Directors are identified
on pages through . All of the nominees are presently directors of National
City. All of the incumbent members of the Board of Directors except Bernadine P.
Healy, M.D. and W. Bruce Lunsford were elected at the last Annual Meeting. The
following material contains biographical information concerning each of the
nominees, including their recent employment, positions with National City, other
directorships, age and the number of shares of National City Common beneficially
owned, all as of January 31, 1996. Unless otherwise indicated, the nominee has
sole voting and investment power with respect to National City's securities
shown to be owned by him. Options that are exercisable within 60 days of January
31, 1996 are separately noted (See page 23.)
VOTE BY STOCKHOLDERS
The election of directors requires the plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors.
- - - ---------------
* Each individual director who is not an officer of National City or any of its
subsidiaries and is a member of the board of directors of a subsidiary
receives compensation from the subsidiary for his responsibilities at that
subsidiary.
18
<PAGE> 24
SANDRA HARDEN AUSTIN, President, Clinical Management Services
Division, Caremark International, a provider of health care
products and services, since 1994. Executive Vice President
and Chief Operating Officer of University of Chicago Hospitals
from 1990 to 1993. Chairperson of the Public Policy Committee
and Member of the Nominating Committee. Age 48. Shares of
National City Common owned: 2,438.
CHARLES H. BOWMAN, Chairman and Chief Executive Officer of BP
America Inc., a diversified petroleum and natural resources
company, since 1994, Managing Director of BP Australia Limited
from 1990 to 1994. Director of National City since 1994,
Member of the Public Policy and Executive Committees. Age 60.
Shares of National City Common owned: 1,200.
EDWARD B. BRANDON, Retired as Chairman of the Board of
National City Corporation in 1995. Chairman of the Board and
Chief Executive Officer of National City from 1987 to 1995.
Director of Premier Industrial Corp., RPM, Inc. and The
Standard Products Company. Director of National City since
1986; Member of the Executive and Nominating Committees. Age
64. Shares of National City Common owned: 92,121; options
exercisable within 60 days: 449,858.
JOHN G. BREEN, Chairman of the Board and Chief Executive
Officer of The Sherwin-Williams Company, a manufacturer of
coatings, since 1980. Director of The Sherwin-Williams
Company, The Mead Corporation, Parker-Hannifin Corporation and
Goodyear Tire & Rubber Co. Director of National City since
1979; Chairman of the Compensation and Organization Committee
and Member of the Executive and Nominating Committees. Age 61.
Shares of National City Common owned: 30,200.
DUANE E. COLLINS, President and Chief Executive Officer of
Parker Hannifin Corporation, a durable goods manufacturer,
since 1993. Vice Chairman of Parker Hannifin Corporation for
the previous year. President -- International 1987 to 1992.
Director of Parker Hannifin Corporation. Director of National
City since 1995, Member of the Compensation and Organization
and Audit Committees. Age: 59. Shares of National City Common
owned: 3,400.
<PAGE> 25
DAVID A. DABERKO, Chairman of the Board and Chief Executive
Officer of National City Corporation since 1995. President and
Chief Operating Officer of the Corporation from 1993 to 1995
and Deputy Chairman of the Corporation from 1987 to 1993.
Director of the Student Loan Marketing Association. Director
of National City since 1988, Chairman of the Executive and
Nominating Committees. Age 50. Shares of Preferred Stock
owned: 600 depositary shares; shares of National City Common
owned: 92,764; options exercisable within 60 days: 197,667.
DANIEL E. EVANS, Chairman of the Board and Chief Executive
Officer of Bob Evans Farms, Inc., a restaurant and food
products company, since 1971. Director of Bob Evans Farms,
Inc. and The Sherwin-Williams Company. Director of National
City since 1992, Member of the Public Policy, Audit and
Compensation and Organization Committees. Age 59. Shares of
National City Common owned: 6,116.
OTTO N. FRENZEL III, Retired as Chairman of National City
Bank, Indiana in 1995. Chairman of National City Bank,
Indiana, a wholly owned subsidiary of National City, since
1992. Chairman and Chief Executive Officer of Merchants
National Corporation from 1979 to 1992. Director of American
United Life Insurance Company, Baldwin & Lyons, Inc. Indiana
Energy, Inc., IPALCO Enterprises, Inc. and IWC Resources Corp.
Director of National City since 1992. Age 65. Shares of
Corporation Common Stock owned: 1,100,238; options exercisable
within 60 days: 11,000. Mr. Frenzel shares voting and
investment powers as to an additional 1,683,869 shares of
National City Common.
BERNADINE P. HEALY, M.D., Dean of Ohio State University
College of Medicine since October 1995. Past Director of the
National Institutes of Health from 1991 to 1993. Director of
National City since 1995 and previously a Director from 1989
to 1990. Age 51. Shares of National City Common owned: 4,129.
JOSEPH H. LEMIEUX, Chairman and Chief Executive Officer of
Owens-Illinois, Inc., a manufacturer of packaging products,
since 1990. Director of Owens-Illinois, Inc., Health Care and
Retirement Corporation, Libbey Inc., and Consol Limited
(Johannesburg Exchange). Director of National City since 1988,
Member of the Executive Committee and Compensation and
Organization Committee. Age 64. Shares of National City Common
owned: 2,909.
<PAGE> 26
THE BOARD OF DIRECTORS OF NATIONAL CITY RECOMMENDS A VOTE FOR THE SLATE OF
DIRECTOR NOMINEES.
W. BRUCE LUNSFORD, Chairman of the Board, President and Chief
Executive Officer of Vencor, Inc., a diversified healthcare
provider, since 1985. Director of Vencor, Inc., Churchill
Downs Incorporated and Res-Care, Inc. Director of National
City since 1995. Age 48. Shares of National City Common owned:
10,000.
A. STEVENS MILES, Retired as President of the National City
and as Chairman of First Kentucky National Corporation, a
wholly owned subsidiary of the National City in 1989, having
served as President of National City Corporation since 1988
and as Chief Executive Officer of the First Kentucky National
Corporation for 15 years. Director of National City since
1988, Member of the Nominating Committee. Age 66. Shares of
National City Common owned: 151,832.
WILLIAM R. ROBERTSON, President of National City Corporation
since 1995. Deputy Chairman of the Corporation from 1987 to
1995. Director of Capitol American Financial Corporation.
Director of National City since 1988. Age 54. Shares of
National City Common owned: 102,074; Mr. Robertson shares
voting and investment powers as to an additional 10,000
shares; options exercisable within 60 days: 161,489.
STEPHEN A. STITLE, Chairman of the Board of National City
Bank, Indiana since 1996. Vice President, Corporate Affairs of
Eli Lilly and Company, a pharmaceutical company, from 1993 to
1995. Vice President of Human Resources of Eli Lilly and
Company from 1989 to 1993. Director of National City since
1992, Member of the Nominating and Executive Committees. Age
50. Shares of National City Common owned: 13,167.
MORRY WEISS, Chairman of the Board and Chief Executive Officer
of American Greetings Corporation, a greeting card
manufacturer, since 1993; President and Chief Executive
Officer of American Greetings Corporation from 1987 to 1993.
Director of American Greetings Corporation, Syratech
Corporation and Artistic Greetings Incorporated. Director of
National City since 1992, Member of the Executive, Audit and
Nominating Committees. Age 55. Shares of National City Common
owned: 6,400.
<PAGE> 27
BENEFICIAL OWNERSHIP
As of January 31, 1996, National City had two classes of equity securities
outstanding, (a) National City Common par value $4.00 and (b) 8% Cumulative
Convertible Preferred Stock, without par value. See "DESCRIPTION OF National
City CAPITAL STOCK."
Beneficial ownership of National City's outstanding equity securities, for
purposes of the ownership disclosures, has been determined in accordance with
Rule 13d-3 of the General Rules and Regulations under the Exchange Act, under
which Rule a person is deemed to be the beneficial owner of securities if he or
she has or shares voting power or investment power in respect of such securities
or has the right to acquire beneficial ownership within 60 days. Accordingly,
the amounts shown do not purport to represent beneficial ownership for any
purpose other than as set forth under such Rule. Further, beneficial ownership
as determined in this manner does not necessarily bear on the economic incidence
of ownership of National City's equity securities.
As of January 31, 1996, to the knowledge of National City, no person or
firm, except as noted below, beneficially owned more than 5% of National City
Common outstanding on that date. As of January 31, 1996, no individual director,
nominee or officer beneficially owned more than 5% of National City's
outstanding Common Stock. For purpose of this disclosure, the amount of
outstanding National City Common is the aggregate number of shares of National
City's Common actually outstanding on such date plus an amount equal to the
aggregate amount of National City's Common which could be issued upon the
exercise of stock options by such person or firm at that date. Beneficial
ownership of National City's Common includes, as of such date, those shares
which could have been acquired by the exercise of stock options and, for
purposes of this disclosure, those shares held for the benefit of such officers
in the National City Corporation Savings and Investment Trust.
As of December 31, 1995, two persons known to National City beneficially
own more than 5% of the outstanding National City Common. National City owns
shares of National City's Common which constituted 13.45% of the
outstanding National City Common on that date. These shares are held in various
fiduciary capacities through National City's wholly owned banking subsidiaries,
primarily National City Bank, National City Bank, Columbus, National City Bank,
Kentucky, and National City Bank, Indiana. Of the shares of National City
Common as to which National City, through its subsidiaries, has voting
authority, it has sole voting authority as to of those shares and
shared voting authority as to the remainder. Of the 19,723,128 shares as to
which National City, through its subsidiaries, has investment authority, it has
sole investment authority as to 14,408,963 of those shares, and shared
investment authority as to the remainder. Included in the aggregate number of
shares held as to which National City has sole voting and investment authorities
are 539,904 shares that are held under the National City Non-Contributory
Retirement Trust. The Capital Group Companies, Inc. and Capital Research and
Management Company beneficially own 9,938,400 shares of National City Common
which constituted 6.83% of the December 31, 1995 shares outstanding.
Under federal securities law, National City's directors, certain officers,
and persons holding more than 10% of any class of National City's equity
securities are required to report, within specified monthly and annual due
dates, their initial ownership in any class of National City's equity securities
and all subsequent acquisitions, dispositions or other transfers of interest in
such securities, if and to the extent reportable events occur that require
reporting by such due dates. National City is required to describe in this proxy
statement whether it has knowledge that any person required to file such a
report may have failed to do so in a timely manner. In this regard, to National
City's knowledge, based solely on the review of copies of reports furnished to
National City by its directors and executive officers pursuant to Rule 16a-3
promulgated pursuant to the Exchange Act, and on written representations that no
other reports were required during the period ending December 31, 1995, all of
National City's directors and officers satisfied such filing requirements in
full, except that Mr. Vincent A. DiGirolamo, who amended his timely filed May,
1995 Form 4 in June, 1995 to correct an inadvertent error.
National City's Board of Directors established stock ownership guidelines
for directors at its February 26, 1996 meeting. The guidelines recommend that
each director beneficially own 10,000 shares of National City
22
<PAGE> 28
Common and provide that such share ownership target should be met within three
years of the establishment of the guidelines or election to the Board of
Directors.
The following table sets forth the beneficial security ownership of (a)
each director and nominee of National City, (b) the chief executive officer and
the four other most highly compensated executive officers of National City and
(c) all directors and executive officers of National City as a Group, as of
January 31, 1996 (including shares that such individuals could have acquired by
the exercise of options within 60 days):
- - - --------------------------------------------------------------------------------
BENEFICIAL SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
SHARE EQUIVALENT TOTAL SHARES &
AMOUNT OF SHARES PERCENT OF HELD IN DEFERRED SHARE EQUIVALENTS
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS COMPENSATION PLANS BENEFICIALLY HELD
- - - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stock Sandra Harden Austin 2,438 *
Common Stock James M. Biggar 5,350 *
Common Stock Charles H. Bowman 1,200 *
Common Stock Morton Boyd 228,461 *
Common Stock Edward B. Brandon 541,979 *
Common Stock John G. Breen 30,200 *
Common Stock Duane E. Collins 3,400 *
Common Stock David A. Daberko 290,431 *
Common Stock Vincent A. DiGirolamo 116,409 *
Common Stock Richard E. Disbrow 2,500 *
Common Stock Daniel E. Evans 6,116 *
Common Stock Otto N. Frenzel III 2,793,757 1.8%
Common Stock Bernadine P. Healy, M.D. 4,129 *
Common Stock Gary A. Glaser 132,349 *
Common Stock Joseph H. Lemieux 2,909 *
Common Stock W. Bruce Lunsford 10,000 *
Common Stock A. Stevens Miles 151,832 *
Common Stock William R. Robertson 273,563 *
Common Stock Stephen A. Stitle 13,167 *
Common Stock Morry Weiss 6,400 *
Common Stock Directors and Executive Officers 5,232,590 3.4%
of National City as a Group
- - - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The percent of National City Common beneficially owned is less than 1%.
The following table sets forth the beneficial security ownership of all
shareholders known to National City to be the beneficial owner of more than five
percent of National City Common.
- - - --------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
(2) (3)
NAME AMOUNT
(1) AND ADDRESS AND NATURE OF (4)
TITLE OF OF BENEFICIAL BENEFICIAL PERCENT
CLASS OWNER OWNERSHIP(1) OF CLASS
- - - ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock National City Corporation 13.45
1900 East Ninth Street
Cleveland, OH 44114-3848
Common Stock The Capital Group Companies, Inc. 9,938,400 6.83
and Capital Research and
Management Company
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
- - - ---------------
(1) No listed beneficial owner has the right to acquire beneficial ownership, as
specified in Rule 13d-3(d)(1) under the Exchange Act.
23
<PAGE> 29
REMUNERATION OF EXECUTIVE OFFICERS
AND TRANSACTIONS WITH MANAGEMENT -- NATIONAL CITY
EXECUTIVE COMPENSATION
(a) COMPENSATION. The following table sets forth, together with certain
other information, the compensation earned during the fiscal year ended December
31, 1995 by (i) David A. Daberko, the chief executive officer, (ii) Edward B.
Brandon, who was Chief Executive Officer through September 30, 1995 and (iii)
the four other most highly compensated executive officers of National City and
its subsidiaries.
- - - --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------------
AWARDS
ANNUAL COMPENSATION -------------------------
------------------------------------------- RESTRICTED SECURITIES PAYOUTS ALL
OTHER STOCK UNDERLYING ---------- OTHER
NAME AND PRINCIPAL BONUS ANNUAL AWARD(S) OPTIONS/ LTIP COMP
POSITION YEAR SALARY($) ($)(1) COMP($) ($)(2) SARS(#) PAYOUTS($) ($)(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - - ----------------------------
D. A. Daberko 1995 $499,375 $ $0 $ 55,269 75,000 $260,910 $ 66,678
Chairman of the Board 1994 $442,083 $263,250 $0 $ 47,700 45,000 $310,333 $ 54,516
and Chief Executive Officer 1993 $399,583 $259,616 $0 $ 42,296 36,000 $ 0 $ 24,880
W. R. Robertson 1995 $441,333 $ $0 $ 79,169 50,000 $235,293 $ 56,198
President 1994 $419,583 $243,352 $0 $ 71,550 32,000 $304,633 $ 51,342
1993 $399,583 $231,868 $0 $ 72,152 36,000 $ 0 $ 24,880
V. A. DiGirolamo 1995 $276,833 $ $0 $ 76,181 30,000 $107,893 $ 34,748
Vice Chairman 1994 $253,833 $ 13,860 $0 $ 37,100 20,000 $135,787 $ 31,415
1993 $240,000 $ 99,630 $0 $ 39,808 17,000 $ 0
M. Boyd 1995 $288,333 $ $0 $ 23,900 18,000 $116,863 $ 40,207
Executive Vice President 1994 $278,333 $148,200 $0 $ 19,875 19,500 $152,595 $ 37,450
1993 $268,067 $145,420 $0 $ 12,440 18,000 $ 0 $ 17,263
G. A. Glaser 1995 $268,167 $ $0 $ 28,381 20,000 $107,893 $ 36,139
Executive Vice President 1994 $257,083 $139,585 $0 $ 21,200 19,500 $139,808 $ 33,011
1993 $245,417 $104,445 $0 $ 17,416 19,000 $ 0 $ 13,857
E. B. Brandon 1995 $565,833 $ $0 $ 0 60,000 $439,833 $ 86,313
Director, Retired Chairman 1994 $689,167 $461,625 $0 $ 385,575 90,000 $608,264 $ 83,822
of the Board and CEO 1993 $630,000 $418,560 $0 $ 385,640 80,000 $ 0 $ 38,161
</TABLE>
- - - --------------------------------------------------------------------------------
(1) The National City Corporation Short Term Incentive Plan for Senior Officers
and the National City Corporation Annual Corporate Performance Plan awards
include both cash and deferred awards. The objectives used in determining
awards and their relative weights under Short Term Plan and Annual Corporate
Performance Plan are set forth on page . Based on the National City
objectives and their weights, the payout under the Annual Corporate
Performance Plan for 1995 was 70% of the maximum.
(2) These grants of restricted stock were offsets to the Supplemental Executive
Retirement Plan, see page . D. A. Daberko has, in the aggregate, 11,550
shares of Restricted Stock having a total value as of 12/31/95 of $382,594.
W. R. Robertson has, in the aggregate, 19,050 shares of Restricted Stock
having a total value as of 12/31/95 of $631,031. V. A. DiGirolamo has, in
the aggregate, 10,250 shares of Restricted Stock having a total value as of
12/31/95 of $339,531. M. Boyd has, in the aggregate, 3,050 shares of
Restricted Stock having a total value as of 12/31/95 of $101,031. G. A.
Glaser has, in the aggregate, 4,250 shares of Restricted Stock having a
total value as of 12/31/95 of $140,781. All restrictions on any restricted
stock Mr. Brandon held lapsed effective as of September 30, 1995, his
retirement date. The named executive officers receive dividends on their
Restricted Stock at the same rate and frequency as all stockholders.
(3) All Other Compensation includes the Executive Savings Plan (see page ) and
the Savings and Investment Plan (see page ) matching and profit sharing
components together with premiums paid by National City in connection with
split dollar insurance contracts, but does not include retirement accruals
as these are not calculable. For the year 1995 each of the named executive
officers and Mr. Brandon credited with the following matching and profit
sharing amount under the Savings and Investment Plan: D. A. Daberko, $9,893;
W. R. Robertson, $9,951; V. A. DiGirolamo, $9,845; M. Boyd, $9,849; G. A.
Glaser, $9,853; and E. B. Brandon, $10,078. The named executive officers and
Mr. Brandon credited with the following match and profit sharing amount
under the Executive Savings Plan during the year 1995: D. A. Daberko,
$30,548; W. R. Robertson, $26,801; V. A. DiGirolamo, $12,881; M. Boyd,
$14,309; G. A. Glaser, $12,301 and E. B. Brandon, $42,240. All other
compensation also includes the following amounts equal to the full dollar
value of the remainder of the premiums paid by National City in connection
with life insurance policies issued pursuant to the Split Dollar Life
Insurance Agreements between National City and the following Named Executive
Officers and Mr. Brandon during 1995, respectively, as applicable: D. A.
Daberko $26,236; W. R. Robertson $19,446; V. A. DiGirolamo $12,022; M. Boyd
$16,049; G. A. Glaser $13,985 and E. B. Brandon
24
<PAGE> 30
$33,995. The premiums paid by National City in connection with the life
insurance policies issued pursuant to such Split Dollar Life Insurance
Agreements set forth in the preceding sentence generally will be recovered
in full by National City upon the cancellation or purchase by a Named
Executive Officer of any such life insurance policy or the payment of any
death benefits under any such life insurance policy.
- - - --------------------------------------------------------------------------------
(b) OPTIONS. The following table provides information on option grants in
fiscal year 1995 to the named executive officers.
- - - --------------------------------------------------------------------------------
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
---------------------------------------------------------------- REALIZABLE VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM(1)(4)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------------
NAME GRANTED(#)(2) FISCAL YEAR(3) ($/SH) DATE 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
- - - ---------------------
D. A. Daberko........ 75,000 3.8 % $ 29.875 6/14/05 $1,409,117 $3,570,979
W. R. Robertson...... 40,000 2.0 % 29.875 6/14/05 751,529 1,904,522
10,000 0.5 % 30.125 9/14/05 189,455 480,115
V. A. DiGirolamo..... 20,000 1.0 % 29.875 6/14/05 375,765 952,261
10,000 0.5 % 30.125 9/14/05 189,455 480,115
M. Boyd.............. 18,000 0.9 % 29.875 6/14/05 338,188 857,035
G. A. Glaser......... 20,000 1.0 % 29.875 6/14/05 375,765 952,261
E. B. Brandon........ 60,000 3.0 % 29.875 6/14/05 1,127,294 2,856,783
</TABLE>
- - - --------------------------------------------------------------------------------
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates dictated by the Securities and Exchange Commission when the
"Potential Realizable Value" alternative is used and are not intended to be
a forecast of National City Common's stock price.
(2) One half of each option grant becomes exercisable one year after the date of
the grant and the remainder becomes exercisable on the second anniversary of
the grant. For incentive stock options a further restriction is placed on
the exercise of options such that the maximum number of shares of National
City Common which become initially available for purchase under all
post-1986 incentive stock option grants from National City in any calendar
year shall be limited to that number of shares the aggregate exercise price
of which does not exceed $100,000.
(3) National City granted options representing 1,993,050 shares to employees
during 1995.
(4)
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
APPRECIATION FOR OPTION TERM
---------------------------------
5% 10%
<S> <C> <C> <C> <C> <C> <C>
Value created for all Stockholders $2,734,545,440 $6,929,875,040
Gain of named executive officers as a percentage of value created for all .17% .17%
Stockholders
</TABLE>
- - - --------------------------------------------------------------------------------
25
<PAGE> 31
The following table sets forth the stock options exercised by each of the
named executive officers during the calendar year 1995 and the December 31, 1995
value of all unexercised options held by the named executive officers.
- - - --------------------------------------------------------------------------------
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT 12/31/95 AT 12/31/95(1)
SHARES ------------- ---------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
- - - -----------------------------------------------------------------------------------------
D. A. Daberko........ 16,702 $ 204,251 197,667 $ 2,518,292
97,501 392,819
W. R. Robertson...... 22,510 272,705 161,489 1,987,100
66,001 266,006
V. A. DiGirolamo..... 0 0 85,199 1,049,285
40,001 161,256
M. Boyd.............. 9,190 114,169 93,959 1,175,240
27,751 123,100
G. A. Glaser......... 2,000 30,810 112,649 1,471,324
29,751 129,600
E. B. Brandon........ 11,070 112,803 446,085 4,647,377
3,773 24,997
- - - -----------------------------------------------------------------------------------------
<FN>
(1) The ultimate realization of profit on the sale of such options of National
City Common is dependent upon the market price of such stock at the time of
the sale. The fiscal year ended December 31, 1995. National City Common had
a closing price on that day on the NYSE of $33.125. The numbers shown
reflect the value of unexercised options accumulated over a ten-year period
based on the 1995 year-end closing price.
- - - -----------------------------------------------------------------------------------------
</TABLE>
The following table provides information on the awards of long term
incentive plan participation during the year 1995.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER NON-
PERFORMANCE STOCK
NUMBER OF OR OTHER PRICE-BASED PLANS(3)
SHARES, UNITS PERIOD UNTIL -----------------------------------
OR OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS(#)(1) PAYOUT(2) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
- - - ----------------------------------------------------------------------------------------------------------
D. A. Daberko........ N/A December 31, 1998 $ 0 $284,066 $568,131
W. R. Robertson...... N/A December 31, 1998 0 192,624 385,247
V. A. DiGirolamo..... N/A December 31, 1998 0 140,680 281,360
M. Boyd.............. N/A December 31, 1998 0 94,147 188,295
G. A. Glaser......... N/A December 31, 1998 0 87,655 175,309
E. B. Brandon........
- - - ----------------------------------------------------------------------------------------------------------
<FN>
(1) The National City Long Term Incentive Plan for Senior Officers grants cash
awards based on a percentage of the individual's base pay. No shares or
other rights are granted. (See page 33)
(2) The LTIP is based on a three year cycle starting 1/1/96 and ending 12/31/98.
Messrs. Daberko, Robertson, DiGirolamo, Boyd and Glaser were each awarded
the opportunity to participate in the next three year cycle. Payouts occur
only at the end of the cycle. (See page 33)
(3) The payout is based on National City's total return to its stockholders over
a three year period as compared to the total return to stockholders of a
peer group of high performing banking companies. Payouts are made on a basis
of a percentage of the average base pay for the three year period for each
participant. (See page 33)
- - - ----------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 32
The value of benefits paid or furnished by National City in 1995 to
Executive Officers, other than those included in the preceding table and in the
Long Term Plan Table on page 26, are less than the amounts required to be
disclosed pursuant to the Exchange Act.
REPORT OF COMPENSATION AND ORGANIZATION COMMITTEE
National City believes that its stockholders should be provided information
about executive compensation that is easily understood and consistent with the
Securities and Exchange Commission's proxy rules on executive compensation.
The information provided is intended to enable stockholders to fully
understand the cash, performance based and equity based compensation programs
for executives. National City welcomes stockholder comments or suggestions on
whether the disclosure objectives have been met. Please send any comments to the
Corporate Secretary, National City Corporation, 1900 East Ninth Street,
Cleveland, Ohio 44114.
COMPENSATION PHILOSOPHY
National City is committed to aligning compensation strategies with overall
business objectives. The performance of National City's employees is key in
delivering the types of products and services that will enable National City to
be the premier diversified financial services company in the Midwest.
National City's compensation philosophy is built on four integral
components that form the basis of National City's new FOCUS ON PERFORMANCE
programs:
- Implement strategies which differentiate and focus on employee
performance.
- Tailor compensation programs to reflect unit and organizational
priorities.
- Compensate employees based on their contributions to the achievement of
National City's goals and objectives.
- Provide and support opportunities for equity ownership.
National City will structure its compensation plans to reward individuals
based on their contributions to individual, unit, and organizational objectives.
Compensation strategies that support and are aligned with business objectives
will be pursued. National City's compensation philosophy recognizes the need for
diversification in pay practices. Variable pay opportunities provided through
incentive plans and performance bonus programs are important vehicles for
rewarding individual employee contributions. National City's FOCUS ON
PERFORMANCE programs are the foundation of achieving individual goals and
National City's financial objectives.
EXECUTIVE COMPENSATION PRINCIPLES
National City's executive compensation programs place a significant portion
of an executive's compensation at risk based upon performance. Rewards are based
on the attainment of both long-term and short-term strategic objectives. A total
compensation approach produces executive rewards that result from the
achievement of individual, unit, and corporate objectives.
National City's focus on equity ownership strengthens the link between
executive rewards and long-term corporate performance, ensuring that
stockholders and employee owners share long-term interests.
National City has adopted stock ownership guidelines for its executives.
Equity ownership is a vital component of National City's total compensation
strategy, which is based on corporate performance and shareholder interests.
Ownership guidelines were determined based on a multiple of the base salary mid
range for employees in Position Levels (1) - (3). Guidelines for the chief
executive officer and president were determined by market median compensation
data. The guidelines are applicable to all executives participating in the
National City Corporation Long-Term Incentive Compensation Plan for Senior
Officers and certain other executive officers of National City or its major
subsidiaries. Currently the number of executives governed by the guidelines is
54.
27
<PAGE> 33
STOCK OWNERSHIP GUIDELINES FOR THE NAMED EXECUTIVES
<TABLE>
<S> <C> <C>
David A. Daberko 5.5 X Multiple of Mid Range $2,200,000 National City Common Value
William R. Robertson 5.5 X Multiple of Mid Range $2,200,000 National City Common Value
Vincent A. DiGirolamo 3.5 X Multiple of Mid Range $1,400,000 National City Common Value
Morton Boyd 3.5 X Multiple of Mid Range $ 962,500 National City Common Value
Gary A. Glaser 3.5 X Multiple of Mid Range $ 962,500 National City Common Value
</TABLE>
The executives have three years in which to meet the stock ownership
guidelines. Both direct and indirect forms of ownership are recognized in
achieving the guidelines. Direct ownership will be in the form of shares of
National City Common owned. Indirect ownership will include deferred
compensation invested in the phantom National City Common and 401(k) funds
invested in the National City Corporation Stock Fund.
National City believes that it is in the best interest of stockholders to
retain as much flexibility as possible, now and in the future, with respect to
the design and payment of compensation to executive officers. National City
does, however, recognize the constraints imposed on this flexibility by Section
162(m) of the Internal Revenue Code, which disallows a tax deduction for
non-exempted compensation it pays in excess of $1,000,000 to key executives.
National City's compensation plans are currently structured in such a manner
that it is unlikely that non-exempted compensation paid to any executive officer
in any year will exceed the limitation for deduction by National City
established by Section 162(m).
EXECUTIVE COMPENSATION PROGRAMS
National City's compensation programs are designed to encourage and reward
performance. The executive compensation package is competitive and comparable to
the levels of compensation offered by National City's peer group companies.
Because building the bottom line is critical to National City's success,
compensation is focused on performance that generates revenue -- directly
through the business line and through increased efficiency as a result of staff
unit contributions. The attainment of National City's goals and objectives
contribute to the maximization of stockholder value and create enhanced
compensation opportunities for participating executives.
National City believes that executive compensation should be driven by the
attainment of aggressive business goals. These goals are based on annual and
three year plan cycles. Peer group comparative measures are established, against
which National City's results are assessed. Above average executive compensation
can only be attained by achieving an above average ranking against National
City's peer group.
National City establishes a salary range for each executive officer that is
determined by an evaluation of job criteria. This internally driven process is
then validated by market comparisons at peer group companies. National City's
objective is to provide base compensation at market median and to provide total
cash compensation opportunities above the market median when there is above
average performance. Executive salaries can vary within National City's range
structure based on performance, experience, and long-term potential.
STOCK OPTIONS are an important component of total compensation and provide
a long-term incentive to participants to align performance with stockholder
interests. Each organizational unit is allocated a pool of options for
distribution based on unit performance. Stock options are awarded to employees
based on their contribution to the performance of the unit. Broad guidelines are
used to award the stock options, with above average awards linked to above
average unit and individual performance.
National City is seeking to amend the National City Corporation 1993 Stock
Option Plan to allow for Additional Options when the employee has used currently
held National City Common to exercise an option grant (a swap transaction). This
program is aligned with National City's focus on increased equity ownership and
provides an additional opportunity for the executive to acquire National City
Common.
THE NATIONAL CITY CORPORATION ANNUAL CORPORATE PERFORMANCE INCENTIVE PLAN,
as amended January 1, 1996, rewards performance relative to peer group
performance based on four factors: growth in earnings per share (33% weight),
return on assets (17%) , overhead ratio (17%), and return on equity (33%).
Awards are
28
<PAGE> 34
paid based on National City's performance over the year as well as the
employee's individual award category. Awards under this plan are a percentage of
base pay and can range from 0% to 76.5% for the chief executive officer, 0% to
60% for the president and vice chairman and 0% to 42% for all other executive
officers of National City or its major subsidiaries. For 1995 National City
ranked 7th out of 16 banks in the peer group. The award payment for 1995 was
equal to 70% of the maximum award.
THE NATIONAL CITY CORPORATION SHORT-TERM INCENTIVE COMPENSATION PLAN FOR
SENIOR OFFICERS rewards performance based on the bottom-line performance of the
line or staff unit and the achievement of individual performance goals. Award
pools are funded based on unit performance. Individual awards are distributed
within each unit based on individual achievement as a percentage of pool
funding. Awards under this plan are a percent of base pay and can range from 0%
to 53.5% for the chief executive officer, 0% to 50% for the president and vice
chairman and 0% to 48% for any executive officer of National City or its major
subsidiaries.
THE NATIONAL CITY CORPORATION LONG-TERM INCENTIVE COMPENSATION PLAN FOR
SENIOR OFFICERS is designed to maximize returns to stockholders by linking the
compensation of key executives to the overall profitability and success of
National City. Awards are based on National City's ranking relative to a peer
group currently comprised of 16 super-regional banks. The ranking is determined
by total stockholder return at the end of each three year plan cycle. Awards are
paid at the completion of each plan cycle. Awards under this plan can range from
0% to 100% for the chief executive officer; 0% to 80% for the president and vice
chairman; and 0% to 60% for any executive officer of National City or its major
subsidiaries. The incentive award is computed based on the executive's average
annual salary during each plan cycle. National City ranked 7th out of 16 banks
in the peer group total return to shareholders for the 1993-1995 plan cycle. The
payout was equal to 70% of the maximum award.
PEER GROUP BANKS
The peer group companies are all included in the KBW 50 Total Return Index
("KBW 50") used in the performance chart on page 32 and, as a group, have
outperformed the KBW 50 over time. National City believes it is important that
the peer group it compares itself to consists of the better performing banks.
SUMMARY
National City has identified six critical success factors which can be
applied in varying degrees to assess performance:
- Knowledge of credit risk and return.
- Knowledge of capital funding and risk management.
- Knowledge of customer asset management.
- Expertise in products, delivery channels, and technology.
- The ability to merchandise products and services.
- The ability to identify, develop, and retain human capital.
National City's compensation programs serve to closely align cash
compensation with the overall performance of National City and ensure management
team continuity. National City will continue to build on programs that tie total
compensation to National City's success.
DIRECTOR EQUITY OWNERSHIP
In addition to the aforementioned executive compensation programs, National
City has adopted stock ownership guidelines for its Board of Directors.
Increased equity ownership for Directors strengthens the linkage to long-term
stockholder interests. The Board established stock ownership guidelines at its
February 26, 1996 meeting. The guidelines recommend that each director
beneficially own 10,000 shares of National City Common and provide that such
share ownership target should be met within three years. Both direct and
indirect National City equity ownership will be aggregated to satisfy the
guideline. Direct ownership includes
29
<PAGE> 35
National City Common or Preferred shares and restricted stock. Indirect
ownership includes deferred compensation invested in the form of phantom
National City Common.
REVIEW OF COMPANY PERFORMANCE
National City's net income in 1995 was $465 million, compared with $429
million in 1994. Net income per common share increased 12% to $3.03, from $2.70
in 1994. Both net income and earnings per share were record results for National
City. The higher earnings were primarily the result of growth in net interest
income due to strong loan demand in the Ohio, Kentucky and Indiana markets.
Return on average common equity, a key performance measure, was 17.64% in
1995, compared with 17.06% in 1994. Return on average assets was 1.38% in 1995,
compared with 1.40% in 1994.
The combination of a solid capital base and strong earnings has enabled
National City to deliver excellent returns on stockholders' investments. Total
return of National City Common, assuming reinvestment of dividends, has
significantly outperformed the Standard & Poor's 500 Index ("S&P 500") over the
past 20 years -- an average of 16.7% per year, versus 14.5% for the S&P 500. The
quarterly dividend was increased in January 1996 to $.36 per share, following
two dividend increases in 1995.
THE COMPENSATION AND ORGANIZATION COMMITTEE'S
REVIEW OF CEO COMPENSATION
National City's executive compensation program is based on corporate and
individual performance and places a significant portion of an executive's
compensation at risk if pre-established goals are not attained. In addition, the
program rewards long term strategic management by using compensation vehicles
which promote equity ownership and emphasize attention to shareholder value.
National City's relative performance over the last three years has produced
fluctuations in Mr. Daberko's compensation.
Mr. Daberko served as president and chief operating officer of National
City from 1993 until July of 1995, when he was named chief executive officer.
Mr. Daberko has been an employee of National City for 27 years. In 1993, Mr.
Daberko's total cash compensation was 7% lower than his 1992 total cash
compensation. In 1994 his total cash compensation was 56% higher than in 1993.
In 1995 Mr. Daberko's total cash compensation . These
fluctuations in compensation are primarily attributable to variations in
performance based incentive plans.
Upon Mr. Daberko's appointment to chief executive officer, his base salary
was increased to $525,000 and his award incentive potential increased for the
current and future plan years under the National City Corporation Short-Term
Incentive Compensation Plan for Senior Officers ("Short Term Plan") and for
future plan years or plan cycles under the National City Corporation Annual
Corporate Performance Incentive Plan ("Annual Corporate Performance Plan") and
the National City Corporation Long Term Incentive Plan for Senior Officers
("Long Term Plan").
Long-Term Plan awards are based solely on total stockholder return as
compared to the total stockholder return of a selected peer group of financial
institutions for a three year period. Based on National City's relative
performance during the 1993-95 time period, Mr. Daberko's award in 1995 was
$260,910.
Mr. Daberko's Short-Term Plan goals for 1995 reflected his transition to
the position of chief executive officer and were based upon improving corporate
earnings, maintaining long-term credit quality, increasing revenue growth and
the forming of his key senior management team. During 1995, all short term goals
were met or exceeded. After reviewing Mr. Daberko's performance as compared to
these pre-established individual goals the Committee awarded Mr. Daberko
$ under the Short Term Plan.
The Annual Corporate Performance Plan awards are determined by comparing
National City's relative performance against a selected peer group of financial
institutions based on pre-selected key financial indices. Mr. Daberko's Annual
Corporate Performance Plan award was $220,500.
30
<PAGE> 36
Stock options are another key element of total compensation. Equity-based
compensation produces a long-term link between the results achieved for
stockholders and the rewards provided to key executive officers. Each year, the
Committee reviews competitive peer group data and individual performance to
determine the level of equity-based awards to be granted to key executives.
National City places significant value and importance on stock ownership by
senior management. As Mr. Daberko met or exceeded all of his 1995 goals and in
recognizing his promotion to chief executive officer, Mr. Daberko received
options in 1995 to purchase 75,000 shares of National City Common with an
exercise price of $29.875 per share. The option award was within the mid range
of option awards made to Chief Executive Officers at the peer group companies.
The Committee does not consider the number of options held by Mr. Daberko in
making this award, except for assuring the Option Plan's limits are not
exceeded.
COMPENSATION AND ORGANIZATION COMMITTEE
John G. Breen, Chairman
Duane E. Collins
Daniel E. Evans
Joseph H. Lemieux
31
<PAGE> 37
STOCKHOLDER RETURN PERFORMANCE
Set forth below is a line graph comparing the five year cumulative total
return of National City Common, assuming reinvestment of dividends, with that of
the S&P 500 and the KBW 50. The KBW 50 is a market-capitalization-weighted bank
stock index developed and published by Keefe, Bruyette & Woods, Inc., a
nationally recognized brokerage and investment banking firm specializing in bank
stocks. The index is made up of 50 of the nation's most important banking
companies and is meant to be representative of the performance of the nation's
large banks.
5 YEAR TOTAL RETURN
12/90 - 12/95
NATIONAL CITY VS. KBW 50 INDEX AND S&P 500
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) NATIONAL CITY S&P 500 KBW INDEX
<S> <C> <C> <C>
1990 100.0 100.0 100.0
1991 125.7 130.4 158.3
1992 174.9 140.3 201.7
1993 180.1 154.3 212.9
1994 198.8 156.2 201.6
1995 265.9 214.7 323.5
</TABLE>
DESCRIPTION OF NATIONAL CITY'S BENEFIT PLANS
SAVINGS PLAN. The National City Savings and Investment Plan (the "Savings
Plan") is a qualified salary reduction profit-sharing plan within the meaning of
Section 401(k) of the Code. Under the Savings Plan as amended, all eligible
employees (generally, an eligible employee is one who has completed one year of
continuous service, is 21 years of age or older and has completed 1,000 hours of
service) of National City and its adopting subsidiaries may participate in the
Savings Plan by directing their employers to make Salary Reduction Contributions
(as defined in the Savings Plan) to the Savings Plan Trust (the "Trust") for
their accounts and to reduce their compensation by an equal amount.
Contributions may be directed in any whole percentage between 1% and 10% of the
employee's base compensation. The employers also make contributions to the Trust
("Employer Matching Contributions") in an amount equal to the Employer Matching
Contribution Percentage then in effect (the Employer Matching Contribution
Percentage is currently an amount equal to 100% of the first 3% of the
employee's pay contributed as a Salary Reduction Contribution, plus 50% of the
next 4% of the employee's pay similarly contributed as a Salary Reduction
Contribution, with no further Employer Matching Contribution for any additional
pay contributed as a Salary Reduction Contribution). Amounts contributed
pursuant to the Savings Plan may be invested in certain investment choices.
Salary Reduction Contributions and Employer Matching Contributions are fully
vested at all times.
32
<PAGE> 38
The Savings Plan has a profit-sharing feature based upon National City's
profitability, as measured by the percentage return on common equity ("ROE")
from year to year. The profit-sharing contribution is in addition to the regular
Employer Matching Contributions described above. The additional amount of this
profit-sharing contribution in any year depends on National City's ROE for that
year and ranges, in five cent increments from no additional contribution if a
minimum ROE of 12% is not attained to a maximum of 50 cents for each $1.00 of an
individual's Salary Reduction Contributions for the year if National City's ROE
is equal to or greater than 18.5%. In 1995, National City's ROE was 17.64% which
resulted in National City contributing 40 cents for each $1.00 of an
individual's Salary Reduction Contribution as a profit-sharing contribution for
the year 1995.
EXECUTIVE PLAN. Effective January 1, 1989, National City adopted the
National City Executive Savings Plan (the "Executive Plan"), in the form of a
non-qualified salary reduction profit-sharing plan, similar to the Savings Plan.
The Executive Plan is to supplement the Savings Plan with respect to employee
Salary Reduction Contributions and the attendant Employer Matching Contributions
which by reason of an individual's annual compensation would not be otherwise
allowed because of the annual maximum limit of the Internal Revenue Code or
because of the application, under the Internal Revenue Code, of actual deferral
percentage testing against prohibited excessive deferrals by highly compensated
employees. The Executive Plan is substantially similar to the Savings Plan as to
amounts of employee Salary Reduction Contributions and Employer Matching
Contributions.
Participants in the Executive Plan are limited to those key officers of
National City or its subsidiaries who may be designated from time to time by the
Compensation and Organization Committee of the Board of Directors. The benefits
of the Executive Plan are without regard to any limitation imposed by the
Internal Revenue Code, or any other applicable law limiting the amount payable
under a qualified plan (such as the Savings Plan), and represent unfunded
general obligations of National City. Portions of such benefits are subject to
certain provisions for forfeiture as set forth in the Executive Plan.
Directors of National City or its subsidiaries who are not also employees
of National City or its subsidiaries are not eligible to participate in the
Savings Plan or the Executive Plan.
LONG TERM PLAN. The National City Long Term Incentive Compensation Plan for
Senior Officers focuses upon providing superior returns to stockholders of
National City and measures National City's total return to its stockholders
against the total returns to stockholders of a peer group of high performing
banking companies to their stockholders. The measurement of total return
includes dividends paid plus changes in the market value of the National City
Common. The measurement over a three-year period is intended to focus on the
long term performance of National City linking senior management's compensation
to the total returns experienced by the stockholders during the period.
Each year begins a new three-year cycle. The awards can range up to 100% of
an individual participant's average annual base salary during the cycle for the
chief executive officer of National City, and up to a lesser percentage for
other senior executive officers selected to participate under the Long Term
Plan. The amount of the award earned is dependent upon the total stockholder
return during the cycle in comparison with the total stockholder return of the
peer group. The peer group is established prior to the beginning of the cycle by
the Compensation and Organization Committee. The banking companies in the peer
group at this time are all included in the KBW 50 index used in the performance
chart on page 32 and, as a group, outperform the KBW 50 over time. National City
believes it is important that the peer group it compares itself to consists of
the better performing banking companies. No awards under the Long Term Plan were
paid prior to the end of the first cycle, December 31, 1990.
Amounts awarded under the Long Term Plan may be in cash, in unfunded future
benefits or a combination thereof. With the exception of a cash award, awards
are not funded, but simply remain contractual liabilities of National City and
are subject to payment upon the recipient's termination of employment with
National City or its subsidiaries. Generally, these unfunded benefits, together
with earnings thereon, are payable to the former officer, his beneficiary or his
estate on an installment basis over 10 years. Unfunded future benefits awards
are considered as invested in the funds described in the Savings Plan or as
33
<PAGE> 39
directed by the recipient from time to time in the equivalent of a savings
account and are subject to the gains or losses on those investments.
In the event of a change in control of National City, the Long Term Plan
provides that all the performance cycles shall terminate. The Long Term Plan
provides that if such change in control occurs, then each of the three-year
performance cycles then existing shall terminate as of the date of change in
control, National City's stockholder total return during each of the abbreviated
performance cycles shall be deemed to have reached that level at which the
participant in the Long Term Plan would be entitled to be awarded his or her
maximum award, and the award for each cycle shall be apportioned based upon the
number of full months from the beginning of the performance cycle to the
premature cycle termination date divided by 36. In adopting this plan, it was
felt this termination was appropriate in that those individuals previously
charged with providing superior total returns to the stockholders of National
City would no longer be in the same position to guide the affairs of National
City as they were prior to the event constituting a change in control and,
furthermore, following such a change in control no further performance
comparisons could be made.
Directors of National City or its subsidiaries who are not also employees
of National City or its subsidiaries are not eligible to participate in the Long
Term Plan.
SHORT TERM COMPENSATION PLAN. The National City Short Term Incentive Plan
for Senior Officers, as amended (the "Short Term Plan") focuses on the short
term goals achieved by the individual participant. Under this plan, awards can
be granted to any senior officer of National City, or to other officers of
National City or its subsidiaries as may be designated from time to time by the
Compensation and Organization Committee. Each participant in the Short Term Plan
is evaluated annually with respect to performance on approved objectives. Awards
are based on individual results and can range from 0% to 53.5% of the
recipient's base salary in effect at the close of the year for which the
evaluation is made. Awards under this plan are paid or credited no later than
the end of first quarter of the following year.
Amounts awarded under the Short Term Plan may be in cash, in unfunded
future benefits or a combination thereof. With the exception of a cash award,
awards are not funded, but simply remain contractual liabilities of National
City and are subject to payment upon the recipient's termination of employment
with National City and its subsidiaries. Generally, these unfunded benefits,
together with earnings thereon, are payable to the former officer or his
beneficiary or his estate on an installment basis over 10 years. Unfunded future
benefits awards are considered as invested as directed by the recipient from
time to time, in funds described in the Savings Plan or in the equivalent of a
savings account and are subject to the gains or losses on those investments.
In the event of a change in control, the Short Term Plan provides that each
participant will be paid at the effective time of the change in control the
maximum benefit the participant is entitled to receive under the Short Term
Plan.
Directors of National City or its subsidiaries who are not also employees
of National City or its subsidiaries are not eligible to receive benefits under
the Short Term Plan.
ANNUAL CORPORATE PERFORMANCE PLAN. The National City Annual Corporate
Performance Incentive Plan (the "Annual Performance Plan") focuses on the annual
operating results achieved by National City. Under this plan, awards can be
granted to any senior officer of National City, or to other officers of National
City or its subsidiaries as may be designated from time to time by the
Compensation and Organization Committee. National City's financial performance
is currently measured in comparison with the financial performance of other high
performing banking companies, weighted as follows: return on equity (33%),
return on assets (17%), overhead ratio (17%) and percentage change in earnings
per share (33%). The high performing banks in the peer group are all included in
the KBW 50 index used in the performance chart on page 32 and, as a group,
outperform the KBW 50 over time. National City believes it important that the
peer group it compares itself to consists of the better performing banks. Awards
are based on the corporate results and can range from 0% to 76.5% of the
recipient's base salary in effect at the close of the year for which the
evaluation is made. Awards under this plan are paid or credited no later than
the end of first quarter of the following year.
Amounts awarded under the Annual Performance Plan may be in cash, in
unfunded future benefits or a combination thereof. With the exception of a cash
award, awards are not funded, but simply remain
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<PAGE> 40
contractual liabilities of National City and are subject to payment upon the
recipient's termination of employment with National City and its subsidiaries.
Generally, these unfunded benefits, together with earnings thereon, are payable
to the former officer or his beneficiary or his estate on an installment basis
over 10 years. Unfunded future benefits awards are considered as invested as
directed by the recipient from time to time, in funds described in the Savings
Plan or in the equivalent of a savings account and are subject to the gains or
losses on those investments.
In the event of a change in control, the Annual Performance Plan provides
that each participant will be paid at the effective time of the change in
control the maximum benefit the participant is entitled to receive under the
Annual Performance Plan.
Directors of National City or its subsidiaries who are not also employees
of National City or its subsidiaries are not eligible to receive benefits.
STOCK OPTION PLANS. National City has in effect the Amended and Restated
1973 Stock Option Plan, as amended, the 1984 Stock Option Plan, as amended, the
1989 Stock Option Plan and the 1993 Stock Option Plan. No options have been
granted since July, 1987 under the 1973 Plan and no further options will be
granted under the 1973 Plan. Each of the four stock option plans (hereinafter
referred to jointly as the "Stock Option Plans") have substantially similar
provisions and generally provide for the granting of options to purchase shares
of National City Common, the options being either non-qualified options or
options which are intended to qualify as "Incentive Stock Options" under Section
422 of the Internal Revenue Code. The Stock Option Plans also provide for the
granting of Appreciation Rights, but only in tandem with stock options
previously granted or contemporaneously being granted. Under the Stock Option
Plans, no options may be granted at less than 100% of the market value of
National City Common on the date of the grant of the option. Stock option awards
are based on current individual performance. Previous awards are not considered
except for assuring the plan maximums are not exceeded.
Directors of National City or its subsidiaries who are not also employees
of National City or its subsidiaries are not eligible to receive options under
the Stock Option Plans.
RESTRICTED STOCK PLAN. National City has in effect the National City
Corporation Amended and Second Restated 1991 Restricted Stock Plan (the
"Restricted Stock Plan"). The purpose of the Restricted Stock Plan is to provide
alternative means of compensation and to promote the long term profitability and
success of National City by providing equity interests and equity based
incentives in National City to key employees and members of the Board of
Directors of National City.
The Restricted Stock Plan is administered by the Compensation and
Organization Committee of the Board of Directors of National City.
Restricted Stock is granted to Executive Officers only as a method of
offsetting the liability of a portion of their Supplemental Retirement Benefits
with the restrictions being lifted at retirement. Grants are based on the
present value of accrued supplemental benefits.
Other employees, who do not receive stock option grants and who have been
identified by their managers as high potential employees have been awarded
restricted stock grants. The restrictions on grants to high potential employees
lapse on the fourth anniversary of the grant.
Generally, the Restricted Stock Plan provides for the granting of shares of
National City Common ("Restricted Stock") to a recipient and restricting that
recipient's rights to transfer the shares for a specific period of time. During
that restricted period, those shares are subject to substantial risk of
forfeiture. To the extent the recipient forfeits his interest in the Restricted
Stock, he or she will have no rights in the Restricted Stock forfeited.
The total amount of Restricted Stock which may be awarded under the
Restricted Stock Plan is 1,000,000 shares of which no more than 150,000 shares
may be awarded in the aggregate to any one individual. Under the Restricted
Stock Plan, awards of Restricted Stock may be made to any regular employee of
National City (including employees who are members of the Board of Directors) or
any of its subsidiaries ("Employee Awards") and to the directors of National
City who are not employees of National City or its subsidiaries ("Director
Awards").
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<PAGE> 41
The Restricted Stock Plan contemplates that the Compensation and
Organization Committee may award Restricted Stock to the employees of National
City and National City's subsidiaries subject to the following restrictions: (a)
all awards are to be made subject to transfer restrictions which are set by the
Compensation and Organization Committee, and such restrictions must last at
least six months from the date of the award, and (b) all awards of Restricted
Stock shall be subject to the award agreement entered into between National City
and the employee receiving the award (such agreements may differ from employee
to employee and from award to award).
Other than directors who also are officers of National City, each
individual who was elected to the Board of Directors of National City on April
22, 1991, the date when the Restricted Stock Plan became effective, was awarded
500 shares of Restricted Stock, and each individual who is first elected or
appointed to the Board of Director will be, awarded 1000 (500 shares adjusted
for the July 1993 100% stock dividend) shares of Restricted Stock subject to
transfer restrictions. In addition, each year in which an individual is
re-elected or re-appointed as a director of National City, such individual is to
be awarded an additional 200 shares of Restricted Stock. The restrictions on the
Director Awards do not expire until the earlier of the individual director's
death, disability or nine months after the date of the award.
The Restricted Stock Plan provides that upon a change in control of
National City (as defined in the Restricted Stock Plan), all Restricted Stock
Plan restrictions will lapse and be of no further force or effect and that
National City shall cause all outstanding Restricted Stock held under the
Restricted Stock Plan to be exchanged for shares of National City Common free of
any Restricted Stock Plan legends or restrictions.
Various individuals who are participants in the Supplemental Plan (as
defined below) and agreed to waive certain rights to receive benefits under the
Supplemental Plan were granted various amounts of Restricted Stock. The
restrictions on the awards granted to these individuals do not lapse until such
time as they would qualify to receive retirement benefits under the Supplemental
Plan.
SEVERANCE AGREEMENTS. National City Corporation recognizes that, as is the
case at most companies, the possibility of a change in control exists.
Accordingly, National City desires to assure itself of both present and future
continuity of management and wishes to ensure that its senior executive officers
and other key employees ("Executives") continue to remain in the employ of
National City by entering into severance pay agreements with certain Executives
of National City. The severance agreements were entered into upon the
recommendation of the Compensation and Organization Committee and the forms of
the agreement were approved by the Board of Directors at its December 19, 1994
meeting. The agreements become immediately operative upon a change in control.
The severance agreements provide that upon termination of employment with
National City, a subsidiary, or a successor to National City within three years
following a change in control, unless the termination is because of death,
permanent disability, or cause, the Executive will be entitled to severance
compensation. The severance agreements also provide that following a change in
control, the Executive may terminate his own employment with National City or a
subsidiary with the right to severance compensation during the period commencing
with the occurrence of the change in control and continuing until the earliest
of (i) the third anniversary of the occurrence of the change in control, (ii)
death, or (iii) attainment of age sixty-five and upon the occurrence of one or
more certain additional events. For fifteen Executives, the severance agreements
also provide that in the event of a change in control, the Executive may
terminate his employment with National City or any subsidiary for any reason
during the thirty-day period immediately following the first anniversary of the
first occurrence of a change in control without cause with the right to
severance compensation.
The severance compensation will be a lump sum payment in an amount equal to
three times the sum of (i) base pay at the highest rate in effect for any period
prior to the termination date plus (ii) incentive pay in an amount equal to not
less than the highest aggregate annual bonus, incentive or other payments of
cash compensation made or to be made in regard to services rendered in any
calendar year during the three calendar years immediately preceding the year in
which the change in control occurs. For thirty-six months following the
termination, National City will arrange to provide the Executive with employee
benefits that are welfare benefits substantially similar to those which the
Executive was receiving or was entitled to receive immediately prior to the
termination date and such thirty-six month period will be considered service
with
36
<PAGE> 42
National City for the purpose of determining service credits and benefits due
and payable under National City's various retirement benefit plans.
National City has agreed to bear the expense of any and all legal fees
incurred by any Executive associated with the interpretation, enforcement, or
defense of his rights under the severance agreements.
RETIREMENT PLANS. The National City Non-Contributory Retirement Plan (the
"Retirement Plan") is a qualified, non-contributory defined benefit plan, and
the pension trust is tax exempt under the Internal Revenue Code. The Retirement
Plan presently covers all regular employees of National City and those
subsidiaries of National City that have adopted the Retirement Plan when such
employees have completed 1,000 hours of service in a 12-month period (normally
the first 12 months of employment), provided they have attained age 21.
Upon reaching the normal retirement age of 65, with five years of vesting
service, each participant in the Retirement Plan generally is entitled to
receive monthly for life a basic benefit (less certain deductions specified in
the Retirement Plan) based upon the participant's highest average annual base
compensation for any 60 consecutive months of active employment during the last
120 months preceding retirement ("Final Average Earnings"). The annual basic
benefit shall be equal to the sum of (a) 1 1/4% times the employee's Final
Average Earnings not in excess of "Covered Compensation" plus (b) 1 3/4% times
the employee's Final Average Earnings in excess of "Covered Compensation," and
such sum multiplied by the number of years of benefit service, but not more than
35 years. "Covered Compensation," which is computed pursuant to government
regulations, generally is based upon the average of the wage base covered by
Social Security, upon the employee's date of birth and upon an assumed 35-year
work experience. Participant's "base compensation" is defined by the Retirement
Plan to mean generally the salary and wages paid to such participant, excluding
overtime, bonuses, commissions and other similar forms of remuneration. The Code
places limits on the amount of annual benefits which may be paid to any
participant by the pension trust of the Retirement Plan.
The Retirement Plan also provides for optional early retirement at a
reduced benefit at any time after a participant attains age 55 with at least 10
years of benefit service. The amount of the reduction of the benefit is
determined by a formula dependent upon the age at which the participant elects
to begin to receive benefits. If a participant has more than 20 years of vesting
service, the participant may elect to retire at 62 and start receiving unreduced
pension benefits.
National City adopted a supplemental retirement plan ("Supplemental Plan")
to supplement the pension payments under the Retirement Plan for those certain
senior officers of National City and its subsidiaries who may be designated from
time to time by the Compensation and Organization Committee. Payments under the
Supplemental Plan are paid from the general revenues of National City and have
no effect on the existing pension trust fund.
The Supplemental Plan's purpose is to augment an individual's income from
Social Security and pension payments the individual is entitled to receive upon
retirement. The amount of the Supplemental Plan benefit for any covered
individual will be the amount of the individual's retirement benefit determined
under the Retirement Plan, but determined (a) without regard to the limitations
on such benefits contained in the Internal Revenue Code, and (b) by adding to
the individual's highest average base compensation the average of the amounts
(if any) of the individual's five largest (not necessarily consecutive) awards
under the National City Corporation Short Term Plan, Incentive Plan and the
National City Corporation Annual Corporation Performance Incentive Plan during
the 10 calendar years completed prior to retirement, less the sum of (i) amounts
payable to the individual under the Retirement Plan, plus (ii) amounts payable
to the individual under any corporate program which is deemed to be another
offset program to the Supplemental Plan, as determined by the Compensation and
Organization Committee of the Board of Directors. The amount of the Supplemental
Plan benefit may, in the discretion of such Committee, be paid to the individual
in a lump sum.
The Supplemental Plan also provides supplemental disability benefits and
supplemental surviving spouse benefits. All benefits under the Supplemental Plan
are computed on the basis of the individual's retirement at age 65 (or age 62 if
he has 20 years of vesting service), and if an individual otherwise entitled to
receive benefits under the Supplemental Plan retires prior to attaining said
age, Supplemental Plan benefits will be
37
<PAGE> 43
reduced in the same manner as pension payments are reduced under the Retirement
Plan, subject, however, to such reduction being waived by that Committee.
In the event of a change in control of National City, the Supplemental Plan
provides for the vesting of all accrued benefits.
- - - --------------------------------------------------------------------------------
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF BENEFIT SERVICE
AVERAGE BASE -------------------------------------------------------------------------------------------------
COMPENSATION 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
<S><C> <C> <C> <C> <C> <C> <C>
- - - ---
$ 25,000 $ 3,125 $ 4,687 $ 6,250 $ 7,812 $ 9,375 $ 10,937
50,000 7,373 11,060 14,747 18,434 22,120 25,807
100,000 16,124 24,185 32,248 40,310 48,371 56,433
200,000 33,623 50,435 67,247 84,059 100,870 117,682
400,000 68,624 102,936 137,248 171,560 205,871 240,183
600,000 103,624 155,436 207,248 259,059 310,873 362,685
800,000 138,623 207,935 277,247 346,559 415,870 485,182
1,000,000 173,624 260,436 347,248 434,060 520,871 607,683
1,200,000 208,624 312,936 417,248 521,561 625,873 730,185
</TABLE>
- - - --------------------------------------------------------------------------------
Retirement benefits above the defined benefit maximum of $150,000 in 1996 are
paid to those officers who are participating through a nonqualified Supplemental
Executive Retirement Plan.
- - - --------------------------------------------------------------------------------
Assuming retirement at age 65 under the Retirement Plan, the number of
years of benefit service under both the Retirement Plan and the Supplemental
Plan for the five individuals named in the Cash Compensation Table would be:
David A. Daberko, 35 years; William R. Robertson, 35 years; Vincent A.
DiGirolamo, 35 years; Morton Boyd, 12 years; and Gary A. Glaser, 35 years.
First Kentucky National Corporation, acquired by the Corporation in 1988,
had a defined contribution retirement plan unlike the Corporation's Retirement
Plan which is a defined benefit plan. The years shown for Mr. Boyd only relate
to benefit service under the Retirement Plan and the Supplemental Plan. Mr.
Boyd, upon retirement, is entitled to receive benefits under the First Kentucky
National Corporation defined contribution retirement plan in addition to those
under the Retirement Plan and Supplemental Plan, subject to offsets as set forth
in the Plans. After First Kentucky National Corporation was acquired by National
City, no further amounts have been accrued for any employee under the First
Kentucky National Corporation defined contribution retirement plan.
2. PROPOSAL RESPECTING AMENDING THE NATIONAL CITY CORPORATION 1993 STOCK OPTION
PLAN.
At the Annual Meeting amendments to the National City Corporation 1993
Stock Option Plan (the "Option Plan") will be presented for approval. The
amendments were adopted by the Board of Directors at its meeting February 26,
1996 subject to the approval of National City's stockholders.
The complete text of the Option Plan, as amended, appears as Appendix F to
this Prospectus and Joint Proxy Statement. While the amendments to the Option
Plan are summarized herein, such summaries are in all respects subject to the
complete text of the Option Plan in Appendix F.
SUMMARY OF CURRENT PLAN
The Option Plan was approved by stockholders on April 26, 1993. The total
number of shares for which options may be granted under the Option Plan is
10,000,000 shares (originally 5,000,000 shares adjusted for the 2 for 1 stock
split in July, 1993) of National City Common. To date options are
outstanding under the Option Plan. Additionally, the Option Plan provides for
the granting of stock appreciation rights
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<PAGE> 44
("Appreciation Rights") in respect of stock options now outstanding or hereafter
granted under the Option Plan, the National City Corporation 1989 Stock Option
Plan, the National City Corporation 1984 Stock Option Plan, the National City
1973 Stock Option Plan or under a stock option plan of an acquired corporation
(if the options are assumed by the Corporation).
ELIGIBILITY
Under the Option Plan, grants of options to purchase National City Common
at a specified price ("Option Rights") may be made to officers (including
officers who are members of the Board of Directors) and other key employees of
National City or of any of its subsidiaries. Appreciation Rights may be granted
to any present or future holder of outstanding Option Rights.
TERMS OF OPTION GRANTS
The Option Plan contemplates that Option Rights may be granted by the
Compensation and Organization Committee of the Board of Directors with respect
to unrestricted shares of National City Common, in accordance with the
provisions of the Plan, which include:
(a) Each grant must specify the number of shares of National City
Common to which it pertains or a method for determining such number.
(b) Each grant shall be at an option price which is not less than the
market value of National City Common on the date of grant.
(c) Successive grants may be made to the same employee whether or not
any Option Rights previously granted to such employee remain unexercised.
No employee may, however, be granted pursuant to the Option Plan more than
1,000,000 (originally 500,000 prior to adjustment for the July, 1993 two
for one stock split) Option Rights, subject to adjustment. Nothing in the
Option Plan would require that earlier options be exercised or expire
before later options are exercised.
(d) Option Rights granted under the Option Plan may be stock options
which are intended to qualify under particular provisions of the Internal
Revenue Code (the "Code"), stock options which are not intended so to
qualify, or a combination of the foregoing.
(e) No Option Right shall be exercised more than 10 years from the
date of grant.
Agreements evidencing Option Rights may contain such other terms and
provisions, consistent with the Option Plan, as the Board of Directors may
approve. National City anticipates that grants of Option Rights normally will
specify a period of service before they will become exercisable. Shares covered
by Option Rights which are terminated for any reason or expire unexercised may
be made the subject of new Option Rights.
The option price is payable at the time of exercise either in cash or by
the transfer to National City of unrestricted National City Common owned by
optionee having a market value equal to the option price or any combination of
both cash and stock. The Compensation and Organization Committee has the
authority to specify at the time Option Rights are granted that National City
Common will not be accepted in payment of the option price until they have been
owned by optionee for a specified period. The Plan does not require any such
holding period, however, and would permit immediate sequential exchanges of
National City Common at the time of exercise of Option Rights.
APPRECIATION RIGHTS
Appreciation Rights provide to optionees an alternative means of realizing
Option Rights benefits. The holder of an Appreciation Right may, in lieu of
exercising all or any part of his Option Rights, receive from National City an
amount equal to 100%, or such lesser percentage as the Board of Directors may
determine, of the spread between the option price and the current market value
of the shares subject to the Option Rights. Exercise of an Appreciation Right
will result in cancellation of the related Option Right, and the exercise of the
Option Right will result in the cancellation of the related Appreciation Right.
The proposed amendment does not provide for the granting of Additional Options
(as defined below) on Appreciation Rights.
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<PAGE> 45
PROPOSED AMENDMENT
National City has established stock ownership guidelines for its top
management personnel. The guidelines seek to have management officials
beneficially own National City Common having a value ranging from 1.5 to 5.5
times the midrange of the base salary for the grade in which the manager's job
is positioned. The amendment is expected to help management personnel achieve
and exceed their ownership goals. National City believes the amendment will
encourage management personnel to exercise options at an earlier date and retain
ownership of shares so exercised.
The amendment provides that National City may grant additional options
("Additional Options") to eligible employees. The purpose of the Additional
Options are to encourage ownership and retention of National City Common by
management personnel by providing for the grant of a new option if the exercise
price of an outstanding option is paid by delivering shares of National City
Common owned by the optionee. Also, Additional Options may be granted with
respect to shares tendered as payment of the amount to be withheld under
federal, state and local income tax laws in connection with the exercise of an
Option Right to which such Additional Option relates.
The proposed amendment to the Stock Option Plan provides that the Committee
may, at or after the date of grant with respect to any outstanding option, grant
Additional Options and may establish the terms and conditions of such Additional
Options. Pursuant to an Additional Option, the optionee would be granted a new
option at the then prevailing market price when the payment of the exercise
price of the option to which such Additional Option relates is made by using
shares of National City Common owned by the optionee and/or when shares of
National City Common are tendered or relinquished as payment of the amount to be
withheld under federal, state and local income tax laws in connection with the
exercise of the option to which such Additional Option relates. The new option
granted upon such exercise would be an option to purchase the number of shares
not exceeding the sum of (i) the number of shares of National City Common
tendered as payment upon the exercise of the option to which such "Additional
Option" option relates and (ii) the number of shares of National City Common
tendered or relinquished as payment of the amount to be withheld under income
tax laws in connection with the exercise of the option to which such Additional
Option relates. Additional Options may be granted with respect to options
previously granted under the Option Plan or any other stock option plan of
National City or any National City subsidiary now or hereafter in effect, or
pursuant to any stock option plan of any corporation which is merged into
National City and where National City has assumed the obligations of such
corporation under such option plan. The amendment provides that the Committee
has the discretion as to setting terms and conditions of the Additional Options
subject to the following provisions: (1) the Additional Option exercise price
shall be the closing price, per share, of the shares of National City Common, on
the NYSE on the date the employee delivers shares of National City Common to
exercise the Option that has the Additional Option feature and/or delivers or
relinquishes shares of National City Common in payment of income tax withholding
on the exercise of an Option that has the Additional Option feature; (2) the
Additional Option shall not be exercised within six months after it is granted
and (3) the Additional Option shall have the same termination provisions as the
underlying option to which such Additional Option relates.
In addition, the proposed amendment provides that the number of shares of
National City Common which may be sold under the Option Plan will be increased
by the number of shares of National City Common that are delivered to National
City in connection with the exercise of a stock option and shares delivered or
relinquished in payment of federal, state and local income tax withholding
liabilities upon exercise of a stock option.
FEDERAL TAX CONSEQUENCES
The Corporation presently anticipates that Option Rights granted pursuant
to the Option Plan will be either "non-qualified" or "incentive stock" options.
Non-qualified Option Rights and Additional Options will not result in any
taxable income to the optionee or deduction to National City at the time they
are granted. In general, the holder of non-qualified Option Rights will realize
taxable ordinary compensation income at the time of the exercise of the Option
Rights or related Additional Options in an amount measured by the excess of the
fair market value of the shares at that
40
<PAGE> 46
time over the option price. The tax basis to the optionee for non-qualified
option shares acquired will be the option price plus such taxable ordinary
compensation income and when the optionee disposes of the shares capital gain or
loss will be recognized, either long or short term, depending on the holding
period of the shares.
The amount included in the income of the optionee of non-qualified Option
Rights or related Additional Options as ordinary taxable income determines the
amount of the deduction to which the National City is entitled.
Option Rights or Additional Options which are incentive stock options will
not result in taxable income to the optionee or a deduction to the National City
at the time granted nor at the time exercised if holding period requirements are
observed. The optionee must hold the stock more than two years from date of
grant and one year from date of exercise. If these holding requirements are met,
the optionee will receive capital gain treatment and National City no deduction.
If these holding requirements are not met, in general, the optionee has ordinary
taxable income and the corporation a deduction measured by the excess of the
fair market value of the shares of National City Common at the time of exercise
or disqualifying sale over the option price, whichever produces a lesser gain.
The tax basis to the optionee for National City Common acquired on exercise
of an Option Right or Additional Option that is an incentive stock option will
be the fair market value at the date the Option Right or Additional Option was
granted. The difference between the fair market value at the date of exercise
and the option price of the incentive stock option will be an item of tax
preference. Thus, it will have to be included when making the alternative
minimum tax calculation for the year in which the incentive stock option was
exercised.
The granting of an Appreciation Right will not produce taxable income to
the optionee or a deduction to National City. Upon exercise of Appreciation
Rights the amount of any cash received and the fair market value of any National
City Common received will be taxable to the optionee as ordinary income and, in
general, determines the amount of the deduction to which National City is
entitled.
BENEFITS UNDER THE AMENDMENT
If National City's option plans had the Additional Option feature available
and all the Options Rights which were exercised during the fiscal year 1995 had
the "Additional Option" feature set forth in the above described amendment, the
individuals listed in the chart below would have been granted the indicated
additional options in exchange for the shares that were delivered to National
City in payment for Option Rights exercised and shares delivered or forfeited in
satisfaction of tax withholding obligations in connection with the exercise of
an outstanding Option Right.
<TABLE>
<CAPTION>
NATIONAL CITY CORPORATION AMENDED AND RESTATED 1993 STOCK OPTION PLAN
- - - --------------------------------------------------------------------------------------------
NUMBER
OF
NAME AND POSITION UNITS
- - - ---------------------------------------------------------------------------------- -------
<S> <C>
D. A. Daberko -- Chairman & CEO...................................................
W. R. Robertson -- President......................................................
V. A. DiGirolamo -- Executive Vice President......................................
M. Boyd -- Executive Vice President...............................................
G. A. Glaser -- Executive Vice President..........................................
E. B. Brandon -- Retired Chairman & CEO...........................................
Executive Group...................................................................
Non-Executive Director Group...................................................... N/A
Non-Executive Officer Employee Group..............................................
</TABLE>
GENERAL
The closing price for the shares of the Corporation's Common Stock as
reported in The Wall Street Journal for February 29, 1996 was per share.
41
<PAGE> 47
No Option Right, Additional Option or related Appreciation Right shall be
transferable by an optionee other than by will or the laws of descent and
distribution, and shall be exercisable during the optionee's lifetime only by
the optionee or the optionee's guardian or legal representative.
APPROVAL BY STOCKHOLDERS
The amendments require for their adoption the favorable vote of the holders
of a majority of the shares present and entitled to vote at the annual meeting.
THE BOARD OF DIRECTORS OF NATIONAL CITY RECOMMENDS A VOTE FOR THIS PROPOSAL.
3. SELECTION OF INDEPENDENT AUDITORS -- NATIONAL CITY
The Board of Directors of National City believes it appropriate to submit
for action by the stockholders of National City the approval of the selection of
Ernst & Young LLP, independent auditors, as auditors for National City for the
year 1996. This firm and its predecessors have served as independent auditors
for National City since its inception in 1973. In the opinion of the Board of
Directors of National City, the reputation, qualifications and experience of the
firm make appropriate its reappointment for 1996. A representative of the firm
is expected to be present at the Annual Meeting of Stockholders of National City
with the opportunity to make a statement if such representative desires to do so
and is expected to be available to respond to appropriate questions. The
affirmative vote of the majority of shares present in person or represented by
proxy at the meeting and entitled to vote is required to approve the selection
of Ernst & Young LLP as auditors for National City for the year 1996.
THE BOARD OF DIRECTORS OF NATIONAL CITY RECOMMENDS A VOTE FOR THIS
PROPOSAL.
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<PAGE> 48
4. MERGER
This section of the Prospectus and Joint Proxy Statement describes certain
aspects of the Merger. The following description of the Merger does not purport
to be complete and is qualified in its entirety by reference to the Agreement,
the National City Option Agreement and the Integra Option Agreement, which are
attached as Appendices A, D and E respectively, to this Prospectus and Joint
Proxy Statement and are incorporated herein by reference. All stockholders of
National City and all shareholders of Integra are urged to read the agreements,
.
BACKGROUND OF AND REASONS FOR THE MERGER -- INTEGRA
In recent years there has been, and there continues to be, substantial
consolidation in the United States banking and financial services industry.
Integra's executive management and Board of Directors have had ongoing
discussions regarding how to respond to this consolidation. In 1993 Integra
decided to remain independent while at the same time executive management was
instructed by the Board of Directors to stay in touch with companies Integra
would like to acquire as well as to get better acquainted with companies that
may be interested in acquiring Integra. Morgan Stanley was retained to advise
Integra in this process. In 1994, William F. Roemer, Chairman and Chief
Executive Officer of Integra ("Roemer"), updated the Executive Committee on the
conversations that he and Leonard M. Carroll, President and Chief Operating
Officer of Integra ("Carroll"), had had with executives from several
institutions. At the Board of Directors retreat in July 1995, an independent
banking consultant again reviewed the state of the industry. This review
covered, among other things, the ability of an independent institution like
Integra to adequately respond to the ongoing consolidation within the industry
and at the same time enhance the value of Integra for its shareholders.
In April 1995, Roemer attended the Bankers Roundtable in Florida and
visited with David A. Daberko ("Daberko"), who at that time was National City's
President and Chief Operating Officer. Roemer and Daberko discussed the
similarities between Integra and National City in regard to their cultures,
business philosophies and approach to managing. They agreed to meet again in May
when Roemer would be in Cleveland. In May they continued their discussions
regarding the similarities between the companies. Daberko stated that Integra
was on a list of National City's top acquisition candidates, but that National
City was only interested in a friendly acquisition. A meeting was then held in
Pittsburgh at the end of June which was attended by Roemer, Carroll, Daberko and
William R. Robertson, Deputy Chairman of National City. Carroll came away from
that meeting sharing the same positive impression regarding the similarities of
philosophies and interests of the two companies as had Roemer.
Following the meeting in Pittsburgh, Roemer contacted representatives of
Morgan Stanley and requested that they enter into an exploratory dialogue with
National City on Integra's behalf. A representative of Morgan Stanley met with
Daberko in early August to discuss the benefits of a proposed merger. While a
number of issues remained to be resolved in negotiations, the price to be paid
by National City in the transaction became the primary point of negotiations
between the parties. On August 18, 1995, a meeting was held in New York City
between Roemer and Carroll from Integra, Daberko and other senior officers from
National City, representatives from Morgan Stanley and representatives from
Merrill Lynch. On August 24, 1995, National City made an offer that Roemer and
Carroll were prepared to recommend to the Integra Board of Directors. The
Executive Committee of the Board of Directors of Integra met on August 24, 1995,
and the full Board met on August 26, 1995 with representatives from Morgan
Stanley in attendance at both meetings. The Board of Directors of Integra
unanimously approved the Agreement and the transactions contemplated thereby,
including the National City Stock Option Agreement and the Integra Option
Agreement, and voted to recommend the Agreement to the shareholders of Integra.
In reaching the determination that the Merger is fair to, and in the best
interests of, Integra and its shareholders, the Integra Board consulted with
Integra management, as well as its financial and legal advisers, and considered
a number of factors, including, without limitation, the following:
(a) Integra's business, operations, earnings, prospects and financial
condition;
(b) the business, operations, earnings, prospects and financial
condition of National City as determined from the due diligence conducted
by Integra management, the enhanced opportunities for
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operating efficiencies (particularly in terms of integration of operations
and support functions) that could result from the Merger, and the enhanced
opportunities for growth that the Merger would make possible;
(c) the opinion of Morgan Stanley that as of August 26, 1995, the
Exchange Rate was fair to Integra shareholders from a financial point of
view;
(d) the value implied by the Exchange Rate in relation to the then
market value, book value and earnings of Integra and the fact that Integra
would be unlikely to match or exceed such value in the foreseeable future
by remaining independent;
(e) comparisons to median deal multiples of other recent bank
acquisitions in terms of premium to market, book value and earnings;
(f) the terms of the proposed Agreement, and the National City Option
Agreement and the Integra Option Agreement;
(g) National City's record as an institution consistently ranked near
the top of its peer group of regional bank holding companies in terms of
asset quality, reserve coverage, capital adequacy and profitability;
(h) alternatives to the Merger (including the alternatives of
remaining independent and growing internally, remaining independent for a
period of time and then selling Integra, and remaining independent and
growing through future acquisitions) and the competitive problems that
Integra was likely to encounter as an independent company;
(i) the apparent absence of any significant problems in obtaining
regulatory approvals for the Merger and the fact that the pro forma capital
position of the combined companies would be well in excess of all
applicable regulatory capital requirements;
(j) the effects on the communities Integra serves, along with the
effects on Integra's borrowers, depositors, suppliers and employees;
(k) the expectation that the Merger will generally be a tax-free
transaction to Integra and its shareholders and that the Merger will be
accounted for under the pooling-of-interests method of accounting (see
"MERGER -- Certain Federal Income Tax Consequences" and "-- Accounting
Treatment"); and
(l) the current and prospective economic environment and competitive
constraints facing financial institutions, including Integra.
The Integra Board did not assign any specific or relative weight to the
foregoing factors in their consideration.
IN VIEW OF ALL OF THE CONSIDERATIONS DESCRIBED ABOVE, THE BOARD OF
DIRECTORS OF INTEGRA UNANIMOUSLY RECOMMENDS THAT INTEGRA SHAREHOLDERS VOTE FOR
THE APPROVAL OF THE AGREEMENT.
BACKGROUND OF AND REASONS FOR THE MERGER -- NATIONAL CITY
National City's acquisition strategy has been to be a major player in its
existing markets and to expand into contiguous markets where a major presence
can be established. National City considers western Pennsylvania an extension of
its Ohio markets because of its proximity and similar characteristics. Integra
represented the most attractive way to enter the western Pennsylvania market.
Over the past year, National City engaged in discussions with Integra management
about the possibility of a merger of the two companies. Discussions intensified
over the summer of 1995 after Integra retained Morgan Stanley to become its
financial advisor in a potential transaction. Negotiations and due diligence
were conducted during the month of August, 1995. The Agreement was executed on
August 27, 1995, after the due diligence review was completed, and an
announcement was made on August 28, 1995.
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As indicated above, concurrent with the negotiation of the Agreement,
National City conducted a detailed due diligence review of Integra. Teams from
National City reviewed such areas as credit quality, risk management, systems,
controls, consolidation opportunities, and management issues. One of the main
objectives of the due diligence review was the verification of assumptions used
to determine the price to be paid for the Integra shares. After the review was
completed, National City became comfortable that cost savings, revenue
enhancements and one-time merger related charges were in line with initial
estimates. National City management presented its findings to its Board of
Directors at a special meeting held on August 27, 1995. At that meeting,
National City's Board approved the transaction.
National City believes that the Merger is fair to and in the best interests
of National City and its stockholders and recommends that its stockholders vote
in favor of the transaction. In negotiating the terms of the Merger and in
considering its recommendation to the stockholders of adoption of the Agreement,
National City reviewed a number of factors with a view to maximizing stockholder
value in the intermediate and long term, including earnings potential,
realization of economies of scale, market position of Integra and National
City's ability to sell its products to Integra's large customer base. In
addition, the National City Board of Directors consulted with National City
management, as well as its financial and legal advisers, and considered other
factors, including, without limitation, the following: (a) the business,
operations, earnings, prospects and financial condition of Integra as determined
from the due diligence conducted by National City management; (b) the opinion of
its financial advisor as described below; (c) the terms of the Agreement, the
National City Option and the Integra Option; and (d) regulatory approval
requirements.
National City believes that the affiliation of Integra with National City
and the acquisition of the banks and other subsidiaries now owned by Integra
will provide National City with a meaningful presence in western Pennsylvania
and an expansion of National City's customer base and assets. National City also
believes that Integra's low loan-to-deposit ratio represents a significant
source of low cost funding for all of National City. Also, Integra's expertise
in consumer finance through its subsidiary, Altegra Credit Company represents a
significant boost to National City's de-novo efforts in that business. In
addition, Integra's strong retail base provides an opportunity for expansion of
National City's products into western Pennsylvania. National City, with its
expertise in middle market lending and in investment banking provides a great
opportunity to grow revenues from the Integra markets.
National City has had substantial prior experience in effecting successful
mergers, including major bank holding company mergers (BancOhio Corporation in
1984, First Kentucky National Corporation in 1988 and Merchants National
Corporation in 1992) as well as other smaller acquisitions. National City has
completed all of its own standardization and consolidation projects and believes
it can effectively integrate the operations of Integra into National City within
one month after the consummation of the Merger, thereby realizing the full
benefits of the Merger within one of the shortest time periods in banking
history, although there can be no assurance. The Board of Directors of National
City believes that the Merger will result in a combined entity with increased
financial resources and greater financial strength than either National City or
Integra standing alone. The anticipated cost savings noted above, coupled with
the expected improved credit quality at Integra, should make the Merger
accretive to National City's earnings per share in 1997. The increased scale of
operations will also aid the profitability of such key product areas as trust,
mortgage servicing, credit card processing and consumer finance.
IN VIEW OF ALL THE CONSIDERATIONS DESCRIBED ABOVE, THE BOARD OF DIRECTORS
OF NATIONAL CITY UNANIMOUSLY RECOMMENDS THAT NATIONAL CITY STOCKHOLDERS VOTE FOR
THE ADOPTION OF THE AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
Integra. Integra retained Morgan Stanley to act as Integra's financial
advisor in connection with the Merger and related matters based upon its
qualifications, expertise and reputation, as well as Morgan Stanley's prior
investment banking relationship and familiarity with Integra. At the August 26,
1995 meeting of the Integra Board, Morgan Stanley rendered its oral opinion to
the Integra Board that, as of such date, the Exchange Ratio pursuant to the
Merger Agreement was fair from a financial point of view to holders of Integra
Common Stock. Morgan Stanley subsequently confirmed its August 26, 1995 oral
opinion by delivery to the Integra Board of a written opinion dated as of the
date of this Prospectus and Joint Proxy Statement.
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THE FULL TEXT OF MORGAN STANLEY'S OPINION, DATED AS OF THE DATE OF THIS
PROSPECTUS AND JOINT PROXY STATEMENT, WHICH SETS FORTH, AMONG OTHER THINGS,
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, AND LIMITATIONS ON
THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX B TO THIS PROSPECTUS AND JOINT
PROXY STATEMENT. INTEGRA SHAREHOLDERS ARE URGED TO READ THE MORGAN STANLEY
OPINION CAREFULLY AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION IS ADDRESSED TO
THE INTEGRA BOARD AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF
INTEGRA COMMON STOCK AS TO HOW SUCH SHAREHOLDERS SHOULD VOTE AT THE INTEGRA
MEETING. THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET FORTH IN THIS
PROSPECTUS AND JOINT PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF SUCH OPINION.
In connection with rendering its opinion dated as of the date of this
Prospectus and Joint Proxy Statement, Morgan Stanley, among other things: (i)
analyzed certain publicly available financial statements and other information
of Integra and National City, respectively; (ii) analyzed certain internal
financial statements and other financial and operating data concerning Integra
and National City prepared by the managements of Integra and National City,
respectively; (iii) analyzed certain financial projections prepared by the
managements of Integra and National City, respectively; (iv) discussed the past
and current operations and financial condition and the prospects of Integra and
National City with senior executives of Integra and National City, respectively;
(v) reviewed the reported prices and trading activity for the Integra Common and
the National City Common; (vi) compared the financial performance of Integra and
National City and the prices and trading activity of the Integra Common and the
National City Common with that of certain other comparable bank holding
companies and their securities; (vii) discussed various regulatory matters with
the respective senior managements of Integra and National City; (viii) reviewed
and discussed with the senior managements of Integra and National City the
strategic objectives of the Merger and synergies and certain other benefits of
the Merger; (ix) analyzed certain pro forma financial projections for the
combined company prepared by Integra and National City; (x) reviewed and
discussed with the senior managements of Integra and National City certain
estimates of the cost savings expected to result from the Merger; (xi) reviewed
the financial terms, to the extent publicly available, of certain comparable
merger transactions; (xii) participated in discussions and negotiations among
representatives of Integra and National City and their financial and legal
advisors; (xiii) reviewed the Merger Agreement and the National City Option and
the Integra Option; and (xiv) performed such other analyses as it deemed
appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of its opinion. With respect to the
financial projections, including the estimates of synergies and other benefits
expected to result from the Merger, Morgan Stanley assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the future financial performance of Integra and National City,
respectively. Morgan Stanley has not made any independent valuation or appraisal
of the assets or liabilities of Integra and National City, nor has Morgan
Stanley been furnished with any such appraisals and Morgan Stanley has not
examined any loan files of Integra and National City. Morgan Stanley's opinion
is necessarily based on economic, market and other conditions as in effect on,
and the information made available to Morgan Stanley as of, the date of the
opinion.
Morgan Stanley was not authorized to solicit, and did not solicit, interest
from any other party with respect to the acquisition of Integra or any of its
assets.
The following is a summary of the analyses presented by Morgan Stanley to
the Integra Board of Directors on August 26, 1995 in connection with rendering
its opinion.
Comparable Company Analysis. Comparable company analysis analyzes a
company's operating performance relative to a group of publicly traded peers.
Based on relative performance and outlook for a company versus its peers, this
analysis enables an implied unaffected market trading value to be determined.
Morgan Stanley analyzed the operating performance of Integra relative to 35
regional banks (the "Morgan Stanley Regional Bank Index," or the "Comparables").
Historical financial information used in connection with the ratios provided
below with respect to the Comparables is as of June 30, 1995.
Morgan Stanley analyzed the relative performance and value of Integra by
comparing certain market trading statistics for Integra with the Comparables.
Market information used in ratios provided below is as of
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August 23, 1995. The market trading information used in the valuation analysis
was market price to book value (which was 1.6x for Integra and 1.7x in the case
of the mean for the Morgan Stanley Regional Bank Index) and market price to
earnings per share estimates for 1996 (which was 9.8x for Integra and 9.6x in
the case of the mean for the Morgan Stanley Regional Bank Index, in each case
based upon Institutional Brokers Estimate System ("IBES") estimates as of August
17, 1995). IBES is a data service that monitors and publishes compilations of
earnings estimates produced by selected research analysts regarding companies of
interest to institutional shareholders.
Morgan Stanley also reviewed the latest 12 months financial performance of
Integra with the Comparables. The trailing financial performance information
used was return on assets (which was 1.16% for Integra and 1.27% in the case of
the mean for the Morgan Stanley Regional Bank Index) and return on common equity
(which was 17.4% for Integra and 16.5% in the case of the mean for the Morgan
Stanley Regional Bank Index).
No company or transaction used in the comparable company and comparable
transaction analyses is identical to Integra or the Merger. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of Integra and other factors that could affect the public
trading value of the companies to which they are being compared. Mathematical
analysis (such as determining the average or median) is not in itself a
meaningful method of using comparable transaction data or comparable company
data.
Dividend Discount Analysis. Morgan Stanley performed a dividend discount
analysis to determine a range of present values per share of Integra Common
assuming Integra continued to operate as a stand-alone entity. This range was
determined by adding (i) the present value of the estimated future dividend
stream that Integra could generate over the period beginning in 1995 and ending
in 1997 and (ii) the present value of the "terminal value" of Integra Common at
the end of 1997. The following two sets of earnings projections formed the basis
for the projected dividend stream: (i) Integra management's projections for
1995, 1996 and 1997; and (ii) IBES estimates for 1995 and 1996, grown at 8%
thereafter through 1997. The "terminal value" of Integra Common at the end of
the period was determined by applying a projected price-to-earnings multiple of
10.0x to 1997 projected net income for Integra. The dividend stream and terminal
values were discounted to present values using discount rates of 13% and 14%,
which Morgan Stanley viewed as the appropriate discount rate range for a company
with Integra's risk characteristics. The fully diluted stand-alone value of
Integra Common ranged from approximately $46 per share to approximately $50 per
share based upon this analysis.
Implied Acquisition Value. As part of its analysis of the acquisition
valuation, Morgan Stanley assumed that the net present value of the estimated
cost savings associated with the Merger was added to the fully diluted
stand-alone value of Integra Common also described above (see "-- Dividend
Discount Analysis"). Based on the cost savings estimated by managements of
Integra and National City of 15%, 20% and 25%, a phase-in of cost savings over
two years, Morgan Stanley estimated the implied acquisition value of Integra
Common to range from $55 to $67 per share. This present value calculation
assumed a perpetual expense growth rate of 3%, a tax rate of 35% and a
restructuring charge equal to 100% of fully phased in cost savings.
Comparable Transaction Analysis. Morgan Stanley performed an analysis of
premiums paid for selected holding companies of commercial banks in transactions
with value of over $500 million in order to obtain a valuation range for the
Integra Common based upon comparable merger transactions. Multiples of market
value, book value, and earnings implied by the consideration to be received by
shareholders of Integra in the Merger were compared with multiples paid in other
comparable merger transactions from 1994 through August 7, 1995. The comparison
included a total of eight transactions. The transactions examined were
(acquiree/acquiror): FirsTier Financial/First Bank System, Premier Bancorp/Banc
One; Midlantic Corporation/PNC Bank; First Fidelity/First Union; West One
Bancorp/U.S. Bancorp; Shawmut National/Fleet Financial Group; Michigan
National/National Australia Bank; and Continental Bank/BankAmerica. The analysis
yielded a mean price paid over market price multiple of 1.4x for the comparable
transactions, compared to approximately 1.2x for the Merger, based on the market
price of the Integra Common as of August 23, 1995 ($51.88). In terms of price to
book multiple, the mean for the comparable transactions was 1.8x (compared to
approximately 2.0x for the Merger, based on Integra's June 30, 1995 book value
of $1,052
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million). The third multiple considered was price to latest twelve month
trailing earnings with a mean for the comparable transactions of 11.8x (compared
with 13.0x for the Merger, based upon Integra's earnings for the twelve months
ended June 30, 1995). For the comparable transactions: (i) multiples of price
paid to market value ranged from 1.0x to 1.7x; (ii) multiples of book value
ranged from 1.2x to 2.1x; and (iii) the multiples of last twelve month trailing
earnings ranged from 8.5x to 16.0x.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. Morgan
Stanley believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinion and the
presentation to the Integra Board. In addition, Morgan Stanley may have given
various analyses more or less weight than other analyses, and may have deemed
various assumptions more or less probable than other assumptions, so that the
ranges of valuations resulting from any particular analysis described above
should not be taken to be Morgan Stanley's view of the actual value of Integra.
In connection with its written opinion dated as of the date of this
Prospectus and Joint Proxy Statement, Morgan Stanley confirmed the
appropriateness of its reliance on the analyses used to render its August 26,
1995 opinion, by performing procedures to update certain of such analyses and by
reviewing the assumptions upon which such analyses were based and the factors
considered in connection therewith.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of National City or Integra.
The analyses performed by Morgan Stanley are not necessarily indicative of
actual values, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as a part of Morgan
Stanley's analysis of the fairness of the Exchange Ratio to the holders of
Integra Common and were provided to the Integra Board in connection with the
delivery of Morgan Stanley's opinion. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold.
In addition, as described above, Morgan Stanley's opinion and presentation to
the Integra Board was one of many factors taken into consideration by the
Integra Board in making its determination to approve the Merger. Consequently,
the Morgan Stanley analyses described above should not be viewed as
determinative of the Integra Board's or Integra management's opinion with
respect to the value of Integra or of whether the Integra Board or Integra
management would have been willing to agree to a different exchange ratio.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. Morgan Stanley makes a market
in Integra Common and National City Common, and may provide investment banking
services to National City in the future. In the course of its market-making and
other trading activities, Morgan Stanley may, from time to time, have a long or
short position in, and buy and sell securities of, Integra and National City. In
the past, Morgan Stanley and its affiliates have provided financial advisory and
financing services to Integra and to National City, and have received customary
fees for the rendering of these services.
Integra has agreed to pay Morgan Stanley (i) an advisory fee estimated to
be between $100,000 and $200,000, if the Merger is not consummated (an "Advisory
Fee"), (ii) an opinion fee of $2 million, which became payable upon the delivery
of its fairness opinion (an "Opinion Fee"), and (iii) an additional fee of $5
million which became payable three months following the execution of the
Agreement (an "Additional Fee"). Upon consummation of the Merger, Morgan Stanley
will be entitled to a transaction fee equal to 0.395% of the aggregate value of
the consideration paid for all outstanding shares of Integra Common (including
in-the-money options and warrants) (a "Transaction Fee"). The Advisory Fee,
Opinion Fee and Additional Fee will be credited against the Transaction Fee. In
addition, Integra has agreed, among other things, to reimburse Morgan Stanley
for all reasonable out-of-pocket expenses incurred in connection with the
services provided by Morgan Stanley, and to indemnify and hold harmless Morgan
Stanley and certain related parties from and
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against certain liabilities and expenses, including certain liabilities under
the federal securities laws, in connection with its engagement.
National City. National City retained Merrill Lynch to act as its
financial advisor in connection with the Merger and related matters based upon
its qualifications, expertise and reputation, as well as Merrill Lynch's prior
investment banking relationship and general familiarity with National City. At
the August 27, 1995 meeting of the National City Board, Merrill Lynch rendered
an oral opinion to the National City Board that, as of such date, the Exchange
Rate pursuant to the Agreement was fair to National City from a financial point
of view. Merrill Lynch subsequently delivered to the National City Board a
written opinion dated as of August 27, 1995, confirming its oral opinion.
Merrill Lynch reconfirmed its August 27, 1995 opinion by delivery to the
National City Board of its written opinion dated the date of this Prospectus and
Joint Proxy Statement that, as of the date of such opinion, the Exchange Rate
was fair to National City from a financial point of view. No limitations were
imposed by National City on the scope of Merrill Lynch's investigation or on the
procedures followed by Merrill Lynch in rendering its opinions.
The full text of Merrill Lynch's opinion dated as of the date of this
Prospectus and Joint Proxy Statement, which sets forth, among other things,
assumptions made, procedures followed, matters considered, and limitations on
the review undertaken by Merrill Lynch, is attached as Appendix C to this
Prospectus and Joint Proxy Statement and is incorporated herein by reference.
National City stockholders are urged to read the Merrill Lynch opinion in its
entirety. The summary of the opinion of Merrill Lynch set forth in this
Prospectus and Joint Proxy Statement is qualified in its entirety by reference
to the full text of such opinion.
MERRILL LYNCH'S OPINION IS DIRECTED TO THE NATIONAL CITY BOARD AND
ADDRESSES ONLY THE EXCHANGE RATE. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS
DECISION TO PROCEED WITH THE MERGER AND DOES NOT CONSTITUTE, NOR SHOULD IT BE
CONSTRUED AS, A RECOMMENDATION TO ANY HOLDER OF NATIONAL CITY COMMON AS TO HOW
SUCH STOCKHOLDER SHOULD VOTE AT THE NATIONAL CITY MEETING.
In connection with rendering its opinion dated the date of this Prospectus
and Joint Proxy Statement, Merrill Lynch, among other things: (i) reviewed
Integra's Annual Reports on Form 10-K and related financial information for the
five fiscal years ended December 31, 1994 and Integra's Quarterly Reports on
Form 10-Q and the related unaudited financial information for the quarterly
periods ending March 31, 1995, June 30, 1995 and September 30, 1995; (ii)
reviewed National City's Annual Reports on Form 10-K and related financial
information for the five fiscal years ended December 31, 1995; (iii) reviewed
certain information, including financial forecasts and assumptions regarding
cost savings resulting from the Merger, relating to the respective business,
earnings, assets, contingencies and prospects of Integra and National City,
furnished to it by Integra and National City; (iv) conducted discussions with
members of senior management of Integra and National City concerning their
respective financial condition, businesses, operations, regulatory condition,
financial forecasts, contingencies and prospects; (v) reviewed the historical
market prices and trading activity for the Integra Common and the National City
Common and compared them with that of certain publicly traded companies which it
deemed to be relevant; (vi) compared the respective results of operations of
Integra and National City with that of certain companies which it deemed to be
relevant; (vii) compared the financial terms of the Merger contemplated by the
Agreement with the financial terms of certain other mergers and acquisitions
which Merrill Lynch deemed to be relevant; (viii) analyzed, based upon
information provided by National City's senior management, the pro forma impact
of the transaction on the earnings and book value per share, consolidated
capitalization and certain balance sheet and profitability ratios of National
City; (ix) reviewed the Agreement; (x) reviewed the National City Option and the
Integra Option; and (xi) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other matters as
it deemed appropriate.
In preparing its opinion, Merrill Lynch relied on the accuracy and
completeness of all financial and other information supplied or otherwise made
available to it by Integra and National City, and did not independently verify
such information or undertake an independent evaluation or appraisal of the
assets or liabilities, contingent or otherwise, of National City or Integra or
any of their subsidiaries, nor was Merrill Lynch furnished with any such
evaluation or appraisal. Merrill Lynch also relied upon the managements of
National
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City and Integra as to the reasonableness and achievability of the financial
forecasts (and the assumptions and bases therefor) provided to Merrill Lynch. In
that regard, Merrill Lynch assumed with National City's consent that such
forecasts, including, without limitation, financial forecasts, evaluations of
contingencies, projected cost savings and operating synergies resulting from the
Merger and projections regarding future economic conditions and results of
operations, reflect the best currently available estimates and judgments of such
respective managements as to the future financial performance of Integra and
National City. Merrill Lynch's opinion was necessarily based upon economic,
market and other conditions as in effect on, and the information made available
to it as of, the date of the opinion. Merrill Lynch is not an expert in the
evaluation of allowances for loan losses and has not assumed any responsibility
for making an independent evaluation of the adequacy of the allowance for loan
losses of National City or Integra, nor has Merrill Lynch reviewed any
individual credit files.
In connection with rendering its August 27, 1995 opinion to the National
City Board, Merrill Lynch performed a variety of analyses, which are summarized
below. The preparation of a fairness opinion is a complex process involving
subjective judgments and is not necessarily susceptible to partial analysis or
summary description. Accordingly, Merrill Lynch believes that its analyses must
be considered as a whole and that selecting portions of its analyses and factors
considered therein, without considering all analyses and factors, or attempting
to ascribe relative weights to some or all such analyses and factors, could
create an incomplete view of the evaluation process underlying Merrill Lynch's
opinions. In addition, Merrill Lynch may have given various analyses more or
less weight than the other analyses, it may have used them for different
purposes and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described below should not be taken to be Merrill Lynch's
view of the actual value of Integra or National City.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of National City and
Integra. With respect to the comparison of selected companies analysis and the
analysis of selected bank merger transactions summarized below, no public
company or transaction utilized as a comparison is identical to National City or
Integra or the Merger and such analyses necessarily involve complex
considerations and judgments concerning the differences in financial and
operating characteristics of such companies and transactions and other factors
that could affect the public trading values of the companies concerned. The
analyses performed by Merrill Lynch are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. In addition, the analyses do not
purport to be appraisals or to reflect the prices at which any securities of
National City or Integra may trade at the present time or at any time in the
future. Such analyses were prepared solely as part of Merrill Lynch's analysis
of the fairness of the Exchange Rate to National City from a financial point of
view. Furthermore, as described above, Merrill Lynch's opinions were one of the
many factors taken into consideration by the National City Board in making its
determination to approve the Merger.
The projections furnished to Merrill Lynch and used by it in certain of its
analyses were prepared by the managements of National City and Integra. National
City and Integra do not publicly disclose internal management projections of the
type provided to Merrill Lynch in connection with its review of the Merger. Such
projections were not prepared with a view towards public disclosure. The
projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions. Accordingly, actual results could vary
significantly from those set forth in subject projections.
The following is a summary of the analyses performed by Merrill Lynch in
connection with its August 27, 1995 opinion to the National City Board.
Transaction Summary. Merrill Lynch reviewed the terms of the proposed
transaction, including the Exchange Rate and the aggregate transaction value.
Merrill Lynch reviewed the implied value of the consideration offered based upon
the closing share price of National City Common on August 24, 1995, which showed
that the implied value of the National City proposal was approximately $62.75
per share of Integra
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Common, representing a 20.7% premium to Integra's August 24, 1995 closing market
price of $52.00 per share, or a total transaction value of approximately $2.10
billion. In addition. Merrill Lynch reviewed the implied value of the
consideration offered based upon the average closing share price of Integra
Common for the 30-day period ending on August 24, 1995 and the closing share
price of National City Common on August 24, 1995, which showed a 20.4% premium.
Merrill Lynch also reviewed the implied value of the consideration based upon
the 52-week high price of Integra Common and the closing share price of National
City Common on August 24, 1995, which showed a 14.4% premium. Based on the
aggregate consideration offered using the August 24, 1995 stock price for
National City, Merrill Lynch calculated the price to fully diluted book value
per share, price to fully diluted tangible book value per share, price to last
twelve months earnings per share and price to First Call estimated 1995 and 1996
earnings per share multiples in the contemplated transaction. This analysis
yielded a price to fully diluted book value per share multiple of 1.96x, a price
to fully diluted tangible book value per share of 2.13x, a price to last twelve
months earnings per share multiple of 13.02x (based on earnings for the twelve
months ended June 30, 1995), and a price to First Call estimated 1995 and 1996
earnings per share multiples of 12.81x and 11.88x, respectively. First Call is a
financial data service that monitors and publishes a compilation of earnings
estimates produced by selected research analysts regarding companies of interest
to institutional investors.
Pro Forma Merger Analysis. Merrill Lynch analyzed, based on projections
provided by National City and Integra, (which included pre-tax cost savings of
$25 million in 1996 and fully phased-in pre-tax cost savings of $85 million in
1997 and subsequent years, and an after-tax restructuring charge of $69
million), certain pro forma effects resulting from the Merger. This analysis
indicated that the transaction would be dilutive to projected earnings per share
of National City Common in 1996 and would be accretive to earnings per share in
1997. The analysis also showed that the Merger was dilutive to National City's
book value and tangible book value per share at June 30, 1995. In this analysis,
Merrill Lynch assumed that National City performed in accordance with the
earnings forecast and cost savings assumptions provided to Merrill Lynch by
National City senior management.
Contribution Analysis. Merrill Lynch reviewed the relative contributions
in terms of various balance sheet items, projected 1995 and 1996 net income and
market capitalization to be made by National City and Integra to the combined
institution based on projected data as of December 31, 1995. The income
statement and balance sheet components analyzed included total assets, total
loans (net), total deposits, fully diluted common equity, fully diluted tangible
common equity, 1995 estimated net income and 1996 estimated net income. Merrill
Lynch also analyzed the fully diluted market capitalization of the combined
institution. This analysis showed that, while National City shareholders would
own approximately 69.80% of the outstanding shares of the combined institution
based upon the Exchange Rate, National City was contributing 71.01% of total
assets, 75.49% of total loans (net), 70.05% of total deposits, 73.37% of fully
diluted common equity, 72.59% of tangible common equity, 74.24% of the fully
diluted market capitalization, 73.95% of 1995 estimated net income and 74.12% of
1996 estimated net income.
Discounted Dividend Stream Analysis. Using a discounted dividend stream
analysis, Merrill Lynch estimated the present value of the future streams of
after-tax cash flows that Integra could produce on a stand-alone basis from 1996
through 2000 and distribute to shareholders ("dividendable net income"). In this
analysis, Merrill Lynch assumed that Integra performed in accordance with the
forecasts provided to Merrill Lynch by National City's and Integra's senior
management and projected the maximum dividends that would permit Integra's
tangible equity to tangible asset ratio to be maintained at a minimum 6.5%
level. In addition, Merrill Lynch assumed an after-tax restructuring charge of
$69 million in connection with the Merger and 100% realization of the cost
savings projected by National City beginning in 1997. Merrill Lynch estimated
the terminal values for the Integra Common at 10.0 and 11.0 times Integra's year
2000 estimated operating income (defined as net income before intangible
amortization). The dividendable net income streams and terminal values were then
discounted to present values using discount rates of 13%, 14% and 15%. This
discounted dividend stream analysis indicated a reference range of between
$62.82 and $71.90 per share of Integra Common. The analysis was based upon
National City's and Integra's senior management's projections, which were based
upon many factors and assumptions, many of which are beyond the control of
National City or Integra. As indicated above, this analysis did not purport to
be indicative of actual future results and did not purport to reflect the prices
at which shares of Integra Common may trade. Merrill Lynch
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noted that discounted cash flow analysis was included because it is a widely
used valuation methodology, but noted that the results of such methodology are
highly dependent upon the numerous assumptions that must be made, including
earnings growth rates, dividend payout rates, terminal values, and discount
rates.
Using a discounted dividend stream analysis, Merrill Lynch also estimated
the present value of the dividendable net income that National City could
produce on a stand-alone basis from 1996 through 2000. In this analysis, Merrill
Lynch assumed that National City performed in accordance with the earnings
forecasts provided to Merrill Lynch by National City's senior management and
projected the maximum dividends that would permit National City's tangible
common equity to tangible asset ratio to be maintained at a minimum 6.5% level.
Merrill Lynch estimated the terminal values for National City Common at 10.0 and
11.0 times National City's year 2000 estimated operating income. The
dividendable net income streams and terminal values were then discounted to
present values using discount rates of 13%, 14% and 15%. This discounted
dividend stream analysis indicated a reference range of between $30.47 and
$34.92 per share of National City Common. The analysis was based upon National
City's senior management's projections, which were based upon many factors and
assumptions, many of which are beyond the control of National City. As indicated
above, this analysis did not purport to be indicative of actual future results
and did not purport to reflect the prices at which shares of National City
Common may trade before or after the Merger.
Analysis of Selected Bank Merger Transactions. Merrill Lynch reviewed
publicly available information regarding selected bank merger transactions in
the United States with a value of greater than $500 million which had been
announced since January 1, 1994 and which were to be accounted for on a
pooling-of-interests basis. The bank merger transactions reviewed by Merrill
Lynch for purposes of this analysis were: PNC Bank Corp./Midlantic Corp., First
Union Corporation/First Fidelity Corporation, U.S. Bancorp/West One Bancorp,
Fleet Financial Group/Shawmut National Corp., and Boatmen's Bancshares/Worthen
Banking Corp. Merrill Lynch calculated the price to market, price to earnings,
price to fully diluted book value and price to fully diluted tangible book value
and the implied deposit premium paid in the contemplated transaction and such
selected bank merger transactions. This analysis yielded a range of price to
market values of $60.32 to $86.84 with a mean of $72.80 and a median of $73.32,
a range of price to earnings values of $59.85 to $74.72 with a mean of $68.85
and a median of $69.81, a range of price to fully diluted book values of
approximately $57.66 to $67.42 with a mean of $63.33 and a median of $64.59, a
range of price to fully diluted tangible book values of $59.41 to $81.20 with a
mean of $69.26 and a median of $68.66, and a range of implied deposit premiums
paid of $57.54 to $79.04 with a mean of $65.92 and a median of $63.39.
No company or transaction used in the above analysis as a comparison is
identical to Integra, National City, or the Merger. Accordingly, an analysis of
the results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
such companies and other factors that could affect the value of the companies to
which they are being compared. Mathematical analysis (such a determining the
mean or median) is not, in itself, a meaningful method of using comparable
company data.
Comparison of Selected Companies. Merrill Lynch compared selected balance
sheet data, asset quality, capitalization and profitability ratios and market
statistics using financial data at or for the twelve months ended June 30, 1995
and market data as of August 24, 1995 for Integra to a group of selected bank
holding companies which Merrill Lynch deemed to be relevant, including AmSouth
Bancorporation, BayBanks, Inc., Crestar Financial Corporation, Central Fidelity
Banks, Inc., First Empire State Corporation, First Security Corporation, Firstar
Corporation, First Tennessee National Corp., Huntington Bancshares Inc.,
Meridian Bancorp, Inc., Marshall & Ilsley Corporation, Old Kent Financial
Corporation, Regions Financial Corp., SouthTrust Corporation, and UJB Financial
Corp., all being bank holding companies with assets between $10 billion and $20
billion (collectively, the "Integra Composite"). This comparison showed, among
other things, that (i) for the twelve month period ended June 30, 1995,
Integra's noninterest expense to average assets was 2.88% compared to a mean of
3.59% and a median of 3.43% for the Integra Composite; (ii) for the twelve month
period ended June 30, 1995, Integra's noninterest income to average assets was
0.90%, compared to a mean of 1.71% and a median of 1.42% for the Integra
Composite; (iii) for the twelve month period ended June 30, 1995, Integra's net
interest margin was 4.07% compared to a mean of 4.43% and a median of 4.47% for
the Integra Composite; (iv) for the twelve month period ended June 30, 1995,
Integra's efficiency ratio
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(defined as noninterest expense divided by the sum of noninterest income and net
interest income before provision for loan losses) was 61.81%, compared to a mean
of 61.72% and a median of 62.14% for the Integra Composite; (v) for the twelve
month period ended June 30, 1995, Integra's return on average assets was 1.16%
compared to a mean of 1.16% and a median of 1.21% for the Integra Composite;
(vi) for the twelve month period ended June 30, 1995, Integra's return on
average equity was 17.40% compared to a mean of 14.90% and a median of 15.51%
for the Integra Composite; (vii) at June 30, 1995, Integra's tangible common
equity to tangible assets was 6.58%, compared to a mean of 6.98% and a median of
7.07% for the Integra Composite; (vii) at June 30, 1995, Integra's nonperforming
loans to total loans was 0.85%, compared to a mean of 0.65% and a median of
0.69% for the Integra Composite; (ix) at June 30, 1995, Integra's nonperforming
assets to total assets were 0.53% compared to a mean of 0.60% and a median of
0.57% for the Integra Composite; (x) at June 30, 1995, Integra's loan loss
reserves to non-performing assets were 287.12% compared to a mean of 243.97% and
a median of 250.94% for the Integra Composite; (xi) Integra's price per share to
1996 estimated earnings per share was 9.85x, compared with a mean of 10.21x and
a median of 10.16x for the Integra Composite; (xii) Integra's price per share to
book value per share at June 30, 1995 was 1.62x, compared with a mean of 1.72x
and a median of 1.66x for the Integra Composite; (xiii) Integra's price per
share to tangible book value per share at June 30, 1995 was 1.76x, compared to a
mean of 1.95x and a median of 1.90x for the Integra Composite; and (xiv)
Integra's dividend yield was 3.85%, compared with a mean of 3.42% and a median
of 3.54% for the Integra Composite. Merrill Lynch then computed an imputed value
for the Integra Common based upon current trading multiples for the Integra
Composite as of August 24, 1995. This analysis yielded a range of imputed values
of $53.14 to $60.98 per share of Integra Common using the mean and median of the
trading multiples for the Integra Composite and a range of imputed values of
$46.93 to $79.19 per share of Integra Common using the full range of low and
high multiples for the Integra Composite.
Merrill Lynch also compared selected operating and stock market results of
National City to the publicly available corresponding data of other companies
which Merrill Lynch deemed to be relevant, including Barnett Banks, Inc., Bank
of Boston Corporation, Boatmen's Bancshares, Inc., Comerica Incorporated,
CoreStates Financial Corp., First Bank System Inc., Mellon Bank Corporation,
Republic New York Corporation, SunTrust Banks, Inc., and Wachovia Corporation,
all being bank holding companies with assets between $25 billion and $50 billion
(collectively, the "National City Composite"). This comparison showed, among
other things, that (i) for the twelve month period ended June 30, 1995, National
City's noninterest expense to average assets was 4.38% compared to a mean of
3.48% and a median of 3.47% for the National City Composite; (ii) for the twelve
month period ended June 30, 1995, National City's noninterest income to average
assets was 2.76%, compared to a mean of 1.96% and a median of 1.69% for the
National City Composite; (iii) for the twelve month period ended June 30, 1995,
National City's net interest margin was 4.59% compared to a mean of 4.50% and a
median of 4.52% for the National City Composite; (iv) for the twelve month
period ended June 30, 1995, National City's efficiency ratio (defined as
noninterest expense divided by the sum of noninterest income and net interest
income before provision for loan losses) was 64.76%, compared to a mean of
58.87% and a median of 58.96% for the National City Composite; (v) for the
twelve month period ended June 30, 1995, National City's return on average
assets was 1.39% compared to a mean of 1.22% and a median of 1.25% for the
National City Composite; (vi) for the twelve month period ended June 30, 1995,
National City's return on average equity was 16.92% compared to a mean of 14.94%
and a median of 15.81% for the National City Composite; (vii) for the twelve
month period ended June 30, 1995, National City's tangible common equity to
tangible assets was 6.85%, compared to a mean of 6.87% and a median of 6.75% for
the National City Composite; (viii) for the twelve month period ended June 30,
1995, National City's nonperforming loans to total loans was 0.51%, compared to
a mean of 0.69% and a median of 0.63% for the National City Composite; (ix) for
the twelve month period ended June 30, 1995, National City's nonperforming
assets to total assets were 0.42% compared to a mean of 0.57% and a median of
0.57% for the National City Composite; (x) at June 30, 1995, National City's
loan loss reserves to non-performing assets were 338.28% compared to a mean of
254.45% and a median of 220.91% for the National City Composite; (xi) National
City's price per share to 1996 estimated earnings per share was 9.80x, compared
with a mean of 9.46x and a median of 9.50x for the National City Composite;
(xii) National City's price per share to book value per share at June 30, 1995
was 1.79x, compared with a mean of 1.77x and a median of 1.69x for the National
City Composite; (xiii) National City's price per share to tangible book value
per share at June 30, 1995 was 2.11x, compared to a mean of 2.18x and a median
of 2.03x for the National City Composite; and
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(xiv) National City's dividend yield was 4.29%, compared with a mean of 3.58%
and a median of 3.64% for the National City Composite.
Earnings per share estimates for all companies other than National City and
Integra were based on First Call earnings estimates. Earnings per share
estimates for National City and Integra were based upon estimates provided by
the senior management of National City and Integra.
In connection with its opinion dated the date of this Prospectus and Joint
Proxy Statement, Merrill Lynch performed procedures to update, as necessary,
certain of the analyses described above and reviewed the assumptions on which
such analyses were based and the factors considered in connection therewith.
Merrill Lynch has been retained by the National City Board as an
independent contractor to act as financial advisor to National City with respect
to the Merger and will receive a fee for its services. Merrill Lynch is a
nationally recognized investment banking firm which, among other things,
regularly engages in the valuation of businesses and securities, including
banking institutions, in connection with mergers and acquisitions. Merrill Lynch
has in the past two years provided financial advisory, investment banking and
other services to National City and certain of its affiliates and has received
customary fees for the rendering of such services. In addition, in the ordinary
course of its securities business, Merrill Lynch may actively trade debt and/or
equity securities of Integra and National City and their respective affiliates
for its own account and the accounts of its customers, and Merrill Lynch,
therefore, may from time to time hold a long or short position in such
securities.
National City and Merrill Lynch have entered into a letter agreement dated
August 14, 1995 relating to the services to be provided by Merrill Lynch in
connection with the Merger. National City has agreed to pay Merrill Lynch fees
as follows: (1) a cash fee of $500,000, which was paid upon execution of the
letter agreement, (2) an additional cash fee of $500,000 upon the rendering of
Merrill Lynch's fairness opinion at the August 27, 1995 National City Board
meeting, (3) an additional cash fee of $2,000,000 upon the signing of the
Agreement, and (4) an additional cash fee of $1,000,000 to be paid upon the
closing the Merger. In such letter, National City also agreed to reimburse
Merrill Lynch for its reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of its legal counsel, and to indemnify Merrill
Lynch against certain liabilities relating to or arising out of the Merger,
including liabilities arising under the federal securities laws.
TERMS OF THE MERGER
The Agreement provides for the merger of Integra into National City. Upon
consummation of the Merger, (a) the separate corporate existence of Integra will
cease, (b) National City will be the surviving corporation (the "Surviving
Corporation") and will continue to be governed by the laws of Delaware, (c) the
Certificate of Incorporation and By-Laws of National City in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation and the
By-Laws of the Surviving Corporation, (d) the directors and officers of National
City immediately prior to the Effective Time will be the directors and officers
of the Surviving Corporation from and after the Effective Time until their
successors have been duly elected or appointed and qualified, and (e) promptly
after the Effective Time, in accordance with the By-Laws of National City, the
Board of Directors of National City shall increase its size to such number as is
necessary to create four vacancies and shall elect four Integra directors to
fill such vacancies. It is anticipated that William F. Roemer, James S.
Broadhurst, Robert A. Paul and Michael A. Schuler, who now serve as directors of
Integra, will become directors of National City.
CONVERSION OF SHARES OF INTEGRA COMMON
Conversion of Shares of Integra Common. At the Effective Time, (a) each
then outstanding share of Integra Common other than (i) shares not owned by
National City or any direct or indirect wholly owned subsidiary of National City
(except for any such shares of Integra Common held in trust accounts, managed
accounts or in any similar manner as trustee or in a fiduciary capacity ("Trust
Account Shares") or acquired in satisfaction of debt previously contracted ("DPC
Shares")), and (ii) those shares of Integra Common held in the treasury of
Integra, will be cancelled, retired and converted into the right to receive 2.00
shares of National City Common; (b) each then outstanding share of Integra
Common owned by National City or any
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direct or indirect wholly owned subsidiary of National City (except for any
shares that are Trust Account Shares or DPC Shares) will be cancelled and
retired; and (c) each share of Integra Common issued and held in Integra's
treasury will be cancelled and retired. If between August 27, 1995 and the
Effective Time, the shares of National City Common are changed into a different
number of shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or if a stock dividend thereon shall be
declared with a record date within such period, the Exchange Rate will be
adjusted accordingly.
No Fractional Shares. No certificates or scrip representing fractional
shares of National City Common will be issued in the Merger.
Manner of Exchanging Integra Certificates for National City
Certificates. National City has designated National City Bank to act as exchange
agent (the "Exchange Agent") and Integra Trust Company, National Association to
act as forwarding agent in connection with the Merger. Promptly after the
Effective Time, the Exchange Agent will mail to each holder of record of a
certificate (a "Certificate"), which immediately prior to the Effective Time
represented outstanding shares of Integra Common, a notice advising the holder
of the effectiveness of the Merger accompanied by a letter of transmittal. The
letter of transmittal will contain instructions with respect to the procedures
to be followed in effecting the surrender of the Certificate for exchange
therefor and will specify that delivery will be effected, and risk of loss and
title to such Certificate will pass, only upon proper delivery of the
Certificate to the Exchange Agent. Upon surrender to the Exchange Agent of a
Certificate, together with such letter of transmittal duly executed and
completed in accordance with the instructions thereon, and such other documents
as may reasonably be requested, the Exchange Agent promptly will deliver to the
person entitled thereto a certificate(s) representing 2.00 shares of National
City Common for each share of Integra Common so represented by the Certificate
surrendered by such holder thereof, and such Certificate will then be cancelled.
If delivery of all or part of the shares of National City Common is to be made
to a person other than the person in whose name a surrendered Certificate is
registered, it will be a condition to such delivery or exchange that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such delivery or exchange shall
have paid any transfer and other taxes required by reason of such delivery or
exchange in a name other than that of the registered holder of the Certificate
so surrendered or shall have established to the reasonable satisfaction of the
Exchange Agent that such tax either has been paid or is not payable.
CERTIFICATES FOR SHARES OF INTEGRA COMMON SHOULD NOT BE FORWARDED TO THE
EXCHANGE AGENT UNTIL AN INTEGRA SHAREHOLDER HAS RECEIVED A TRANSMITTAL LETTER
AND SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY.
Right to Shares of National City Common. Until surrendered and exchanged in
accordance with the procedures set forth in the letter of transmittal, after the
Effective Time, each Certificate shall represent solely the right to receive
2.00 shares of National City Common, multiplied by the number of shares of
Integra Common evidenced by such Certificate, together with any dividends or
other distributions as provided in "Distribution with Respect to Unexchanged
Certificates" below, and shall have no other rights. One hundred eighty (180)
days following the Effective Time, the Exchange Agent will deliver to National
City any shares of National City Common and funds (including any interest
received with respect thereto) which National City has made available to the
Exchange Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to National City (subject to
abandoned property, escheat or other similar laws) with respect to the shares of
National City Common deliverable or payable upon due surrender of their
Certificates. Neither the Exchange Agent, National City, nor Integra shall be
liable to any holder of shares of Integra Common for any shares of National City
Common (or dividends, distributions or interest with respect thereto) delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
Distribution with Respect to Unexchanged Certificates. Whenever a dividend
or other distribution is declared by National City on the National City Common,
the record date for which is at or after the Effective Time, the declaration
will include dividends or other distributions on all shares issuable in the
Merger, provided that no dividends or other distributions declared or made with
respect to National City Common will be paid to the holder of any unsurrendered
Certificate with respect to the shares of National City Common
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represented thereby until the holder of such Certificate has surrendered such
Certificate in accordance with the instructions set forth in the letter of
transmittal. National City will pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by Integra on Integra Common in accordance with the terms of
the Agreement on or prior to the Effective Time and which remain unpaid at the
Effective Time.
Voting With Respect to Unexchanged Certificates. Holders of unsurrendered
Certificates will not be entitled to vote at any meeting of National City
stockholders.
Lost Certificates. Any Integra shareholder who has lost or misplaced a
Certificate for any of his or her shares of Integra Common should immediately
call the Exchange Agent (telephone number: (800) 622-6757) for information
regarding the procedures to be followed for replacing the lost certificate.
ASSUMPTION OF EMPLOYEE AND DIRECTOR STOCK OPTIONS
The Agreement provides that all rights under any stock option granted by
Integra pursuant to Integra's Integra Management Incentive Plan, Integra
Employee Stock Option Plan, Equimark's 1986 Stock Option Plan, (Equimark's) 1987
Performance Stock Option Plan, (Equimark's) 1987 Non-Qualified Stock Option
Plan, the Equimark Executive Officer Non-Qualified Stock Option Plan, Union
National Corporation Employee Stock Option Plan, and Pennabancorp Employee Stock
Option Plan (collectively, the "Integra Option Plans") that remain unexercised
immediately prior to the Effective Time ("Unexercised Options") will be assumed
by National City, but will thereafter represent the right to acquire that number
of shares of National City Common to which the optionee would have been entitled
pursuant to the Exchange Rate if immediately prior to the Merger the optionee
had fully exercised the option and had been a shareholder of record of Integra.
The option price of each option will be adjusted to the extent necessary to
assure that the rights and benefits of the optionee under such option shall not
be increased or decreased by reason of the Agreement, and, in addition, each
option which is an incentive stock option shall be adjusted as required by
Section 424 of the Code, and the regulations promulgated thereunder, so as not
to constitute a modification, extension or renewal of the option within the
meaning of Section 424(h) of the Code. On or before the Effective Time, National
City will file, and maintain the effectiveness of, a registration statement with
the Commission covering the Unexercised Options and the sale of the National
City Common issued upon the exercise of the Unexercised Options. At the
Effective Time, all of the Integra Option Plans will be terminated with respect
to the granting of any additional options or option rights. See page 56 for the
description of the impact of the Merger on the Integra Non-Qualified Plans.
CONDITIONS TO THE MERGER
Conditions to Each Party's Obligations. The respective obligations of each
of National City and Integra to effect the Merger are subject to the fulfillment
or waiver of certain conditions, including, but not limited to, the following
conditions:
(a) The Agreement shall have been approved by the stockholders of
National City and approved by the shareholders of Integra;
(b) The National City Common issuable in the Merger shall have been
authorized for listing on the NYSE, upon official notice of issuance;
(c) All material authorizations, consents, orders or approvals of, and
all expirations of waiting periods imposed by, all or any government
agency, including, without limitation, the FRB and the Pennsylvania
Department, which are necessary for the consummation of the Merger, shall
have been obtained or shall have occurred and shall be in full force and
effect at the Effective Time; provided, however, that no such
authorization, consent, order or approval shall be deemed to have been
received if it shall include any conditions or requirements which would so
materially adversely impact the economic or business benefits of the
transactions contemplated by the Agreement so as to render inadvisable, in
the reasonable opinion of the Board of Directors of either National City or
Integra, the consummation of the Merger;
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(d) The Registration Statement shall have become effective in
accordance with the provisions of the 1933 Act, and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and remain in effect;
(e) National City and Integra shall have received a letter from Ernst
& Young LLP National City's Independent Accountants to the effect that, for
financial reporting purposes, the Merger qualifies for pooling-of-interests
accounting treatment under generally accepted accounting principles if
consummated in accordance with the Agreement;
(f) No temporary restraining order, preliminary or permanent
injunction or other order by any federal or state court in the United
States which prevents the consummation of the Merger shall have been issued
and remain in effect; and
(g) Buchanan Ingersoll shall have delivered to Integra and National
City their opinion substantially to the effect that, on the basis of 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 for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. See "MERGER -- Certain
Federal Income Tax Consequences."
Conditions to Integra's Obligations. The obligation of Integra to effect
the Merger also is subject to the fulfillment or waiver of additional
conditions, including, but not limited to, the following conditions:
(a) National City shall have performed in all material respects its
covenants contained in the Agreement to be performed by it at or prior to
the Effective Time;
(b) The representations and warranties of National City contained in
the Agreement shall be true in all material respects as of the Effective
Time as if made at and as of the Effective Time, except as expressly
contemplated or permitted by the Agreement and except for representations
and warranties relating to a time or times other than the Effective Time
which were or will be true in all material respects at such time or times;
and
(c) Integra shall have received all officers' certificates of National
City required by the Agreement.
Conditions to National City's Obligations. The obligation of National City
to effect the Merger also is subject to the fulfillment or waiver of additional
conditions, including, but not limited to, the following conditions:
(a) Integra shall have performed in all material respects its
covenants contained in the Agreement to be performed by it at or prior to
the Effective Time;
(b) The representations and warranties of Integra contained in the
Agreement shall be true in all material respects as of the Effective Time
as if made at and as of the Effective Time, except as expressly
contemplated or permitted by the Agreement and except for representations
and warranties relating to a time or times other than the Effective Time
which were or will be true in all material respects at such time or times;
and
(c) National City shall have received all officers' certificates of
Integra required by the Agreement.
REGULATORY APPROVALS
The Merger is subject to approval by the FRB under the BHCA. The BHCA
prohibits the FRB from approving the Merger if (a) it would result in a
monopoly; (b) it would be in furtherance of any combination or conspiracy to
monopolize the business of banking in any part of the United States; (c) its
effect in any section of the country may be substantially to lessen competition
or to tend to create a monopoly; or (d) it would be in any other manner in
restraint of trade, unless the FRB finds that any anticompetitive effects of the
Merger are clearly outweighed in the public interest by the probable effect of
the transaction in meeting the convenience and needs of the communities to be
served. The Merger may not be consummated until after the 30th day after
approval by the FRB unless reduced in the FRB order to 15 days, during which
time the Merger may be challenged on antitrust grounds by the Department of
Justice.
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In addition, the BHCA requires that the FRB take into consideration, among
other facts, the financial and managerial resources and future prospects of the
institutions and the convenience and needs of the communities to be served. The
FRB has the authority to deny an application if it concludes that the combined
organization would have an inadequate capital position or if the acquiring
organization does not meet the requirements of the Community Reinvestment Act of
1977.
The FRB approved the Merger on January 23, 1996, and the 15-day Department
of Justice waiting period has expired.
In considering the application, the Pennsylvania Department is required to
consider, among other things, (i) whether the Merger, its purposes and probable
effects would be consistent with (A) the safe and sound conduct of the
institutions involved and the resulting institution, (B) the conservation of the
assets of such institutions, (C) the maintenance of public confidence in the
institutions, (D) the protection of the interest of their depositors, creditors
and shareholders and the interests of the public in the preservation of a safe
and sound banking system, (E) the opportunity for such institutions to remain
competitive with other financial institutions, and (F) the opportunity for such
institutions to serve effectively (i) the convenience and needs of their
depositors, borrowers and other creditors; (ii) the management of the surviving
institution; and (iii) whether the proposed transaction would be prejudicial to
the interests of the depositors, creditors, beneficiaries of fiduciary accounts
or stockholders of National City.
The Pennsylvania Department approved the Merger on January 5, 1996.
National City and Integra are not aware of any other governmental approvals
or actions that are required for consummation of the Merger, except as described
above. Should any such approval or action be required, it is presently
contemplated that such approval or action would be sought. There can be no
assurance that any such approval or action, if needed, could be obtained and
would not be conditioned in a manner that would cause National City to abandon
the Merger.
WAIVER; AMENDMENT; TERMINATION
Waiver. Any party to the Agreement may, by written notice to the other
party thereto, (a) extend the time for the performance of any of the obligations
or other actions of the other party under the Agreement; (b) waive any
inaccuracies in the representations or warranties of the other party contained
in the Agreement or in any document delivered pursuant to the Agreement; (c)
waive compliance with any of the conditions or covenants of the other party
contained in the Agreement; or (d) waive or modify performance of any of the
obligations of the other party under the Agreement. Notwithstanding these
provisions, the Merger cannot be consummated unless the approvals of the FRB and
the Pennsylvania Department are obtained and unless the stockholders of National
City adopt, and the shareholders of Integra approve, the Agreement by the
requisite affirmative votes. See "MERGER -- Regulatory Approvals" and "THE
ANNUAL MEETING -- Record Dates and Voting Rights."
Amendment. Subject to the applicable provisions of the DGCL and the BCL,
the Agreement may be amended or supplemented upon the written agreement of
National City and Integra at any time, provided that an amendment may not be
made after any stockholder or shareholder adoption or approval, as applicable,
of the Agreement which reduces or changes the form or amount of the Merger
consideration without further stockholder or shareholder adoption or approval,
as applicable.
Termination. The Agreement may be terminated at any time prior to the
Effective Time, whether before or after the adoption by the National City
stockholders or the approval by shareholders of Integra of the Agreement, under
the following circumstances:
(a) by the mutual consent of the Board of Directors of National City
and the Board of Directors of Integra;
(b) by the Board of Directors of either National City or Integra if
the Merger shall not have been consummated on or before August 27, 1996 or
if the Agreement is not adopted by the National City stockholders at
National City's Annual Meeting or not approved by the Integra shareholders
at Integra's
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Special Meeting (provided the terminating party is not otherwise in
material breach of its obligations under the Agreement);
(c) by the Board of Directors of Integra if any of the conditions to
Integra's obligation to effect the Merger have not been met or waived by
Integra at such time as such conditions can no longer be satisfied. See
"MERGER -- Conditions to the Merger -- Conditions to Each Party's
Obligations" and "Conditions to Integra's Obligations";
(d) by the Board of Directors of National City if any of the
conditions to National City's obligation to effect the Merger have not been
met or waived by National City at such time as such conditions can no
longer be satisfied. See "MERGER -- Conditions to the Merger -- Conditions
to Each Party's Obligations" and "Conditions to National City's
Obligations"; and
Expenses. (a) If the Merger is consummated, it is estimated that the costs
and expenses incurred in connection with the Agreement, and the transactions
contemplated thereby will be $13.1 million in the aggregate.
(b) In the event the Agreement is terminated by National City or Integra
because of the willful breach by the other party of any representation,
warranty, covenant, undertaking or restriction contained in the Agreement, and
if the terminating party is not in material breach of any representation,
warranty, covenant, undertaking or restriction contained in the Agreement, then
the breaching party shall pay all costs and expenses of the terminating party;
provided, however, that if the Agreement is terminated under circumstances other
than the ones described above in this paragraph, all costs and expenses incurred
in connection with the Agreement and the transactions contemplated thereby will
be paid by the party incurring such costs and expenses. If termination is due to
a willful breach, the payment of expenses pursuant to the Agreement shall not
constitute the non-breaching party's sole legal remedy. Final settlement with
respect to payment of fees and expenses by the parties shall be made within 30
days of the termination of the Agreement.
Assignment. Without the prior written consent of the other parties to the
Agreement, neither National City nor Integra may assign any of its rights or
delegate any of its obligations under the Agreement.
EFFECTIVE TIME
As soon as practicable after satisfaction or waiver of all conditions to
the Merger under the Agreement, National City and Integra shall cause a
certificate of merger complying with the requirements of the DGCL (the
"Certificate of Merger") to be filed with the Secretary of State of the State of
Delaware and articles of merger complying with the requirements of the BCL (the
"Articles of Merger") to be filed with the Secretary of State of the
Commonwealth of Pennsylvania, respectively. The Merger will become effective at
the later of the times at which such filings are made with the Secretaries of
State of the State of Delaware and the Commonwealth of Pennsylvania (the
"Effective Time"). National City and Integra currently anticipate that the
Merger will be completed during the second quarter of 1996. See "MERGER --
Regulatory Approvals." In the event the Merger is not consummated on or before
August 27, 1996, either National City or Integra may terminate the Agreement.
See "MERGER -- Waiver; Amendments; Termination -- Termination."
CONDUCT OF NATIONAL CITY'S BUSINESS PENDING THE MERGER
The Agreement requires that from August 27, 1995 to the Effective Time,
National City will not, without the prior written consent of Integra, declare or
pay any extraordinary or special dividend on the National City Common or take
any action that would (a) materially delay or adversely affect the ability of
National City to obtain any approvals of any governmental agencies required to
permit consummation of the Merger or (b) materially adversely affect its ability
to perform its obligations under the Agreement or to consummate the transactions
contemplated thereby.
CONDUCT OF INTEGRA'S BUSINESS PENDING THE MERGER
General. The Agreement requires that from August 27, 1995 to the Effective
Time, Integra and its subsidiaries conduct their respective business only in,
and not take any action except in, the ordinary course of
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business consistent with past practice. Integra has covenanted to use reasonable
efforts to preserve intact the business organization of Integra and each of its
subsidiaries, to keep available the services of its and their present key
officers and employees and to preserve the goodwill of those having business
relationships with Integra or its subsidiaries. In addition, the Agreement
restricts Integra and its subsidiaries from engaging in certain transactions
during the interim period from August 27, 1995 to the Effective Time, unless
approved in writing by National City, including, among other things, (a)
incurring any indebtedness for borrowed money (other than in the ordinary course
of business consistent with past practice or short term indebtedness incurred to
refinance short term indebtedness and indebtedness of Integra or any of its
subsidiaries), assuming, guaranteeing, endorsing or otherwise as an
accommodation becoming responsible for the obligations of any other person or
entity, or making any loan or advance other than in the ordinary course of
business consistent with past practice; (b) making any change or amendment to
their respective articles of incorporation or by-laws (or comparable governing
instruments); (c) issuing or selling any shares of capital stock or any other
securities (other than pursuant to the Integra Option Plans) or issuing any
securities convertible into or exchangeable for, or options, warrants to
purchase, scrip, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or entering into any contract, understanding or
arrangement with respect to the issuance of, any shares of capital stock or any
other securities of any of the foregoing (other than pursuant to the Integra
Option Plans) or entering into any arrangement or contract with respect to the
purchase or voting of shares of their capital stock, or adjusting, splitting,
combining or reclassifying any of their capital stock or other securities or
making any other changes in their capital structures; (d) granting any
additional options under any Integra Option Plans; (e) declaring, setting aside,
paying or making any dividend or other distribution or payment (whether in cash,
stock or property) with respect to, or purchasing or redeeming, any shares of
their capital stock, other than (i) regular quarterly cash dividends on Integra
Common in an amount not to exceed 50 cents per share of Integra Common payable
on Integra's regular historical payment dates (the parties agreeing that they
will cooperate so that there will not be any duplication or omission of a
dividend payment to Integra shareholders) (National City has consented to first
and second quarter 1996 dividends in the amount of 54 cents each, which
dividends have been declared. The four cent increase was consistent in timing
and amount with Integra's history of dividend increases.) and (ii) dividends
paid by any Integra subsidiary to another Integra subsidiary or Integra with
respect to its capital stock between August 27, 1995 and the Effective Time; (f)
adopting or amending (except as required by law) any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other employee benefit agreements, trusts,
plans, funds or other arrangements for the benefit or welfare of any director,
officer or employee, or (except for normal merit increases in the ordinary
course of business consistent with past practice) increasing the compensation or
fringe benefits of any director, officer or employee or paying any benefit not
required by any existing plan or arrangement (including, without limitation, the
granting of stock options or stock appreciation rights) or taking any action or
granting any benefit not required under the terms of any existing agreements,
trusts, plans, funds or other such arrangements or entering into any contract,
agreement, commitment or arrangement to do any of the foregoing (National City
consented to an increase in Integra's contribution to Integra's Profit Sharing
Plan in 1995 and to the payment of certain cash bonuses under Integra's
Management Incentive Plan in 1995).
Certain Policies. The Agreement requires Integra to use its best efforts to
modify and change its loan, litigation and real estate valuation policies and
practices (including loan classifications and level of reserves) prior to the
Effective Time so as to be consistent on a mutually satisfactory basis with
those of National City and generally accepted accounting principles; provided,
however, that Integra shall not be required to modify or change any such
policies or practices until (a) such time as National City acknowledges that all
conditions to its obligation to consummate the Merger have been waived or
satisfied or (b) immediately prior to the Effective Time. Integra's
representations, warranties or covenants contained in the Agreement shall not be
deemed to be untrue or breached in any respect for any purpose as a consequence
of any such modifications or changes. Integra does not currently anticipate that
such changes or modifications, assuming the Merger is consummated during the
second quarter of 1996, will in the aggregate result in any material change in
the valuation of Integra's assets.
Acquisition Proposals. The Agreement provides that each of Integra and its
subsidiaries shall not, and shall instruct and otherwise use its best efforts to
cause their respective officers, directors, employees, agents or
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advisors or other representatives or consultants not to, directly or indirectly,
(a) solicit or initiate any proposals or offers from any other person or entity
relating to any acquisition or purchase of all or a material amount of the
assets of, or any securities of, or any merger, consolidation or business
combination with, Integra or any of its subsidiaries (each such transaction an
"Acquisition Transaction") or (b) except to the extent that the Board of
Directors of Integra is required in the exercise of its fiduciary duties in
accordance with applicable law (based on the written advice of its legal
counsel), participate in any discussion or negotiations regarding, or furnish to
any other person or entity any information with respect to, an Acquisition
Transaction. Integra has agreed to cease any existing activities, discussions or
negotiations with any other parties conducted prior to the execution of the
Agreement with respect to any Acquisition Transaction. Integra has agreed to
notify National City 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, Integra.
EMPLOYEE MATTERS
The Agreement provides that upon consummation of the Merger, Integra
employees shall have benefits that in the aggregate are not less favorable than
the benefits enjoyed generally by National City employees working in similar
business lines. National City shall credit employees of Integra and its
subsidiaries, who become employees of National City as a result of the Merger,
with all service with Integra or any of its subsidiaries for purposes of
eligibility and vesting under its retirement plans as if such service had been
performed for National City but not for purposes of benefit accrual; provided,
however, that such provision will not change the treatment under the National
City Non-Contributory Retirement Plan and Trust of service with National City or
any of its subsidiaries prior to the Closing Date. Further, National City shall
honor, on and after the Effective Time, without deduction, counterclaims,
interruptions or deferment (other than withholding under applicable law), all
vested benefits of any person under all of Integra's employee plans or
agreements.
INDEMNIFICATION AND INSURANCE
The Agreement provides that, from and after the Effective Time, National
City will assume and honor any obligation as provided for and permitted by
applicable federal and state law Integra had immediately prior to the Effective
Time with respect to the indemnification of each person who was on August 27,
1995, or has been at any time prior to August 27, 1995, or who becomes prior to
the Effective Time, a director or officer of Integra or any of its subsidiaries
or was serving at the request of Integra as a director or officer of any
domestic or foreign corporation joint venture, trust, employee benefit plan or
other enterprise (collectively, the "Indemnitees") arising out of Integra's
Articles of Incorporation or Integra's By-Laws or any indemnification (to the
maximum extent available thereunder and permitted by applicable law or
regulation) against any and all losses in connection with or arising out of any
claim which is based upon, arises out of or in any way relates to any actual or
alleged act or omission occurring at or prior to the Effective Time in the
Indemnitee's capacity as a director or officer (whether elected or appointed) of
Integra or any of its subsidiaries. The Agreement further provides that, for a
period of three years after the Effective Time, National City will use all
reasonable efforts to cause to be maintained in effect current directors' and
officers' liability insurance in an aggregate limit of $35 million which will
insure Integra's directors and officers for events which occurred before the
Effective Time but were undiscovered at the Effective Time; provided, however,
that the Agreement does not obligate National City to expend, in order to
maintain or provide insurance coverage pursuant to the Agreement, any amount per
annum in excess of 150% of the amount of the annual premium paid as of the date
of the Agreement by National City for its current directors and officers
liability insurance.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In the Merger, (i) each director of Integra, (ii) each executive officer of
Integra, and (iii) each person who holds five percent or more of the Integra
Common Stock outstanding will receive, in exchange for the Integra Common Stock
beneficially owned by them, shares of National City Common Stock to the same
extent as other shareholders of Integra.
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Messrs. Roemer, Carroll, Skillington and Echement are parties to Employment
Agreements with Integra which provide that upon a change of control of Integra,
either the employee or Integra (or Integra's successor) may terminate the
employee's employment, at which time the employee is entitled to (except in the
case of a termination for cause) up to three years' Annual Compensation (as
hereinafter defined) and the right to receive continued (or equivalent) coverage
for the employee and his eligible dependents under Integra's (or its
successor's) benefit plans for three years. The Merger constitutes a change of
control under the Employment Agreements. For purposes of the Employment
Agreements, "Annual Compensation" is defined as the employee's highest base
salary in the current or any one of the three preceding calendar years plus an
amount equal to the sum of the employee's highest awards from all of Integra's
profit sharing, bonus and short term compensation plans in which the employee
participated, if any, in any one of the three preceding years. The amount that
the employee is entitled to receive upon a change in control declines
proportionately for each month the employee is older than 62 at the time of the
change of control to zero at age 65. Each employee will also receive an
additional payment (a "Gross Up Payment") equal to the amount of any excise tax
imposed on any payments or distributions in excess of specified amounts under
the Internal Revenue Code which may be paid to the employee in connection with a
change of control. Further, the Employment Agreements provide that upon
termination of the employee's employment other than for cause, the employee is
entitled to receive his full, accrued benefits under the Integra Supplemental
Executive Retirement Plan at or after age 55 as if it were his normal retirement
age. National City wished to retain Mr. Skillington's services after the Merger
and agreed to modify Mr. Skillington's Employment Agreement by (i) extending
from one to three years the period during which Mr. Skillington may be
terminated and receive his change of control benefits under the Employment
Agreement, (ii) provide for change of control benefits in the event of Mr.
Skillington's death or disability during such three year period and (iii)
provide for the payment of Mr. Skillington's full accrued benefits under the
Integra Supplemental Executive Retirement Plan in the event of the termination
of his employment other than for cause as if it were his normal retirement age.
Messrs. Roemer, Carroll and Echement have each elected to terminate their
employment pursuant to their respective Employment Agreement following
consummation of the Merger, and National City has agreed to honor the Employment
Agreements. In order to assure a smooth transition through the Merger, Integra
entered into a consulting agreement with Mr. Roemer pursuant to which Mr. Roemer
will provide consulting services to National City upon consummation of the
Merger until Mr. Roemer attains age 65. Under the consulting agreement, Mr.
Roemer will receive an annual consulting fee of $225,000. The consulting
agreement also provides that Mr. Roemer will receive the payments and benefits
provided under his Employment Agreement as described above and an additional
payment equal to the taxes paid by him as a result of his receipt of the
Gross-Up Payment. The consulting agreement provides that in the event Integra or
its successor terminates Mr. Roemer without cause or without Mr. Roemer's
written consent, Mr. Roemer will be entitled to receive the balance of the
consulting fees due under the consulting agreement.
Integra is also a party to Change of Control Agreements with 15 other
senior officers of Integra, including all of the executive officers of Integra
(other than Messrs. Roemer, Carroll, Skillington and Echement). The Change of
Control Agreements provide for the continued payment of salary and medical and
dental benefits for the employee for twenty-four months following the
termination of the employee's employment by Integra (or its successor) without
"cause" or by the employee for "good reason," as defined in the agreement,
following a change of control of Integra. The Merger constitutes a change of
control under the Change of Control Agreements. It is anticipated that the
employment of 7 senior officers with Change of Control Agreements will be
terminated in connection with the Merger, and National City has agreed to honor
those Change of Control Agreements.
Under certain of Integra's stock option plans, the date on which the
options held by directors and executive officers of Integra become exercisable
is accelerated upon a change of control of Integra.
Promptly after the Effective Time, the Board of Directors of National City
will increase the size of National City's Board to such number as is necessary
to create four vacancies, and it is anticipated that William F. Roemer, James S.
Broadhurst, Robert A. Paul and Michael A. Schuler, who now serve as directors of
Integra, will become directors of National City. It is also anticipated that
certain executive officers of Integra, including Charles A. Skillington, Thomas
W. Golonski and Stephen G. Hartle will become officers of one of National City's
subsidiaries after the Merger.
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National City has agreed to indemnify the directors and officers of Integra
and its subsidiaries following the Merger for any liability they incur as a
result of acts and omissions occurring prior to the Merger to the same extent
that they were entitled to indemnification by Integra prior to the Merger.
Further, National City has agreed to maintain for three years following the
Merger, directors and officers liability insurance covering the former directors
and officers of Integra and its subsidiaries for events that occurred prior to
the Merger, provided that such insurance is available at a cost which is not in
excess of 150% of the annual premium paid by National City as of August 27, 1995
for its directors and officers liability insurance. (See "Merger Indemnification
and Insurance").
Neither Integra nor National City is aware of any material relationship
between Integra, its directors or executive officers or their affiliates and
National City or its directors or executive officers or their affiliates, except
as contemplated by the Merger Agreement or as described herein. In the ordinary
course of business and from time to time, Integra may do business with National
City, Integra may enter into banking transactions with certain of National
City's directors, executive officers and their affiliates, and National City may
enter into banking transactions with certain of Integra's directors, executive
officers and their affiliates.
As of January 1, 1996, Integra Trust Company, a subsidiary of Integra, may
be deemed to beneficially own shares ( %) of National City Common
Stock as to which it exercises, solely in a fiduciary capacity, sole voting
power with respect to shares, shared voting power with respect to
shares, sole investment power with respect to shares,
shared investment power with respect to shares, and shares of
National City Preferred Stock.
MANAGEMENT AFTER THE MERGER
Following the Merger, the directors and officers of National City at the
Effective Time will continue as the directors and officers of National City.
Promptly after the Effective Time, (a) the Board of Directors of National City
shall increase its size to such number as is necessary to create four vacancies,
and it is anticipated that William F. Roemer, James S. Broadhurst, Robert A.
Paul, and Michael A. Schuler, who now serve as directors of Integra, will become
directors of National City. See "MERGER -- Management after the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and,
accordingly, for United States federal income tax purposes:
(i) no gain or loss will be recognized by either National City or
Integra as a result of the Merger;
(ii) no gain or loss will be recognized by shareholders of Integra who
exchange their shares of Integra Common solely for shares of National City
Common pursuant to the Merger;
(iii) the tax basis of shares of National City Common received by
shareholders of Integra who exchange all of their shares of Integra Common
solely for shares of National City Common in the Merger will be the same as
the tax basis of the shares of Integra Common surrendered in exchange
therefor; and
(iv) the holding period of the shares of National City Common received
in the Merger will include the holding period of the Integra Common
surrendered in exchange therefor were held, provided such shares of Integra
Common were held as capital assets at the Effective Time.
The Merger Agreement provides that both National City's and Integra's
obligations to close the transactions contemplated by the Merger Agreement are
conditioned upon their receipt of an opinion of Buchanan Ingersoll Professional
Corporation, substantially to the foregoing effect. Buchanan Ingersoll's opinion
will be based on facts, representations and assumptions set forth in such
opinion, the Agreement, and certificates of officers of Integra and National
City (including, among others, representations that (a) to the best knowledge of
Integra, there is no plan or intention by the shareholders of Integra to dispose
of a number of shares of National City Common received in the Merger such that
the value, as of the date of the Merger, of the shares of National City Common
retained by such shareholders is less than 50% of the value of the formerly
outstanding Integra Common held by such shareholders as of that date, (b) there
is no plan or
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intention for National City to reacquire any of the National City Common issued
pursuant to the Merger, and (c) there is no plan or intention to dispose of any
of the assets of Integra acquired in the Merger (other than in the ordinary
course of business)).
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. IT
DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. THE
DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND
PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. THE OPINION OF COUNSEL DESCRIBED ABOVE IS NOT BINDING UPON THE
IRS, AND NO RULINGS OF THE IRS WILL BE SOUGHT OR OBTAINED. THERE IS NO ASSURANCE
THAT THE IRS WILL AGREE WITH THE TAX CONSEQUENCES OF THE MERGER DESCRIBED ABOVE.
ALL OF THE FOREGOING IS SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE
CONTINUING VALIDITY OF THIS DISCUSSION.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO AN INTEGRA SHAREHOLDER
WHO ACQUIRED SHARES OF INTEGRA COMMON PURSUANT TO THE EXERCISE OF AN EMPLOYEE
STOCK OPTION OR OTHERWISE AS COMPENSATION. EACH INTEGRA SHAREHOLDER IS URGED TO
CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING THE SPECIFIC TAX CONSEQUENCES OF
THE MERGER TO SUCH SHAREHOLDER, INCLUDING THE APPLICABILITY AND EFFECT OF
FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND ANY PROPOSED CHANGES IN SUCH TAX
LAWS.
ACCOUNTING TREATMENT
The Merger, if completed as proposed, will qualify as a
pooling-of-interests for accounting and financial reporting purposes. Under the
pooling-of-interests method of accounting, the historical basis of the assets
and liabilities of National City and Integra will be retroactively combined for
the entire fiscal period in which the Merger occurs and for all periods prior to
the Merger at historically recorded amounts. See "PRO FORMA COMBINED
CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)."
The obligations of National City, Acquisition and Integra to effect the
Merger are conditioned, among other things, upon their receipt from Ernst &
Young LLP of a letter, dated the day of the Effective Time, to the effect that,
for financial reporting purposes, the Merger qualifies for pooling-of-interests
accounting treatment under generally accepted accounting principles if
consummated in accordance with the Agreement. See "MERGER -- Conditions to the
Merger -- Conditions to Each Party's Obligations." The Agreement further
provides that neither National City nor Integra shall intentionally take or
cause to be taken any action, whether before or after the Effective Time, which
would disqualify the Merger as a pooling-of-interests for accounting purposes.
RESALES BY AFFILIATES
The shares of National City Common issued to Integra shareholders pursuant
to the Agreement will have been registered under the 1933 Act, but such
registration does not cover resales by shareholders of Integra who may be deemed
to be "affiliates" of Integra, as that term is used in paragraphs (c) and (d) of
Rule 145 promulgated under the 1933 Act. In addition, there are limitations on
resales by affiliates of Integra for purposes of qualifying for
pooling-of-interests accounting treatment. Pursuant to the Agreement, prior to
the Effective Time, Integra shall identify to National City all persons who
were, at the time of Integra's Special Meeting of Shareholders, possible
"affiliates" of Integra. The Agreement further provides that Integra shall use
reasonable efforts to obtain from each person it identifies to National City as
a possible "affiliate" of Integra a commitment that such person will not sell,
pledge, transfer or otherwise dispose of any shares of Integra Common held by
such "affiliate" or shares of National City Common received by such "affiliate"
in the Merger: (a) in the case of National City Common only, except in
compliance with the applicable provisions of the 1933 Act and the rules and
regulations promulgated thereunder, and (b) during the periods during which any
such sale, pledge, transfer or other disposition would, under generally accepted
accounting principles or the rules, regulations or interpretations of the
Commission, disqualify the Merger for pooling-of-
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interests treatment. Commission guidelines indicate that the
pooling-of-interests method of accounting generally will not be challenged on
the basis of sales by "affiliates" of the acquiring or acquired company if such
"affiliates" do not dispose of any of the shares of the acquired or acquired
company they owned prior to the consummation of a merger or shares of the
acquiring corporation they receive in connection with a merger during the period
beginning 30 days before the merger and ending when financial results covering
at least 30 days of post-merger operations of the combined entity have been
published.
APPRAISAL AND DISSENTERS' RIGHTS
National City. Section 262(b)(1) of the DGCL provides that no appraisal
rights under the DGCL shall be available for the holders of shares of any class
or series of stock which, at the record date fixed to determine the stockholders
entitled to receive notice of and vote at the meeting of stockholders to act
upon an agreement of merger, were either listed on a national securities
exchange or held of record by more than 2,000 stockholders. Because National
City Common is listed on the NYSE and is held of record by more than 2,000
stockholders, stockholders of National City are not entitled to appraisal or
dissenters' rights in connection with the Merger.
Integra. Section 1571(b)(1) of the BCL provides that no dissenters rights
under the BCL shall be available for the holders of shares of any class or
series if, on the date fixed to determine the shareholders entitled to receive
notice of and vote at the meeting of shareholders at which a merger is to be
acted on, the shares of that class or series were listed on a national
securities exchange or were held of record by more than 2,000 shareholders.
Because Integra Common is traded on NYSE, shareholders of Integra are not
entitled to dissenters rights in connection with the Merger.
THE OPTIONS
NATIONAL CITY OPTION AGREEMENT
As a condition to National City's entering into the Agreement, and in
consideration therefor, Integra entered into the National City Option Agreement,
pursuant to which Integra granted National City the National City Option on
August 27, 1995. The National City Option Agreement is intended to increase the
likelihood that the Merger will be consummated by making it more difficult and
more expensive for another party to obtain control of or acquire Integra.
Grant of Option. The Option entitles National City to purchase up to
6,501,300 fully paid and non-assessable shares of Integra Common, representing
19.9% of the shares of Integra Common issued and outstanding as of August 27,
1995 without giving effect to any shares subject or issued pursuant to the
option, at a price of $51.875 per share; provided, however, that in the event
Integra issues or agrees to issue any shares of Integra Common (other than as
permitted pursuant to the Integra Option Plans as provided under the Agreement)
at a price less than $51.875 per share (as adjusted as described below), such
price shall be equal to such lesser price (such price, as adjusted if
applicable, the "National City Option Price"); provided further, that in no
event may the number of shares for which the National City Option is exercisable
at any time exceed 19.9% of the issued and outstanding shares of Integra Common
without giving effect to any shares subject or issued pursuant to the National
City Option. The aggregate purchase price for the shares of Integra Common that
may be purchased upon the exercise of the National City Option at the original
National City Option Price is $337,254,937.50.
Triggering Events; Exercise of Option. The National City Option Agreement
provides that National City may exercise the National City Option, in whole or
in part, if both an Initial Triggering Event (as defined below) and a Subsequent
Triggering Event (as defined below) shall have occurred prior to the occurrence
of an Exercise Termination Event (as defined below), provided that National City
shall have sent to Integra written notice of such exercise within 30 days
following such Subsequent Triggering Event (or such later date as is necessary
to obtain all regulatory approvals for the exercise of the National City Option
and for the expiration of all statutory waiting periods, and to avoid liability
under Section 16(b) of the Exchange Act by reason of such exercise).
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For purposes of the National City Option Agreement:
(a) The term "Initial Triggering Event" means any of the following events
or transactions occurring after August 27, 1995:
(i) Integra, or any of its subsidiaries, without having received
National City's prior written consent, shall have entered into an agreement
to engage in an Acquisition Transaction (as defined below) with any person
(the term "person" for purposes of the National City Option Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act and the rules and regulations promulgated thereunder), or the
Board of Directors of Integra shall have recommended that the shareholders
of Integra approve or accept any Acquisition Transaction other than the
Merger. For purposes of the National City Option Agreement, the term
"Acquisition Transaction" means (A) a merger or consolidation, or any
similar transaction, involving Integra or any of its banking subsidiaries
or mortgage banking subsidiaries (each a "Significant Subsidiary"), (B) a
purchase, lease or other acquisition of all or substantially all of the
assets of Integra or any Significant Subsidiary, or (C) 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
Integra or any Significant Subsidiary; provided, however, the term
"Acquisition Transaction" specifically does not include any merger or
consolidation among Integra and/or its subsidiaries;
(ii) The Board of Directors of Integra does not recommend that the
shareholders of Integra approve the Agreement;
(iii) Any person other than National City, any stockholder of National
City who, at August 27, 1995, beneficially held 10% or more of the
outstanding shares of National City Common, any subsidiary of National City
or any subsidiary of Integra acting in a fiduciary capacity shall have
acquired beneficial ownership or the right to acquire beneficial ownership
of 10% or more of the outstanding shares of Integra Common (the term
"beneficial ownership" for purposes of the National City Option Agreement
having the meaning assigned thereto in Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder);
(iv) Any person other than National City or any subsidiary of National
City shall have made a bona fide proposal to Integra or its shareholders by
public announcement or written communication that is or becomes the subject
of public disclosure to engage in an Acquisition Transaction;
(v) After a proposal is made by a third party to Integra or its
shareholders to engage in an Acquisition Transaction, Integra shall have
breached any covenant or obligation contained in the Agreement and such
breach (A) would entitle National City to terminate the Agreement and (B)
shall not have been cured prior to the date of the notice of the exercise
of the National City Option; or
(vi) Any person other than National City or any subsidiary of National
City, other than in connection with a transaction to which National City
has given its prior written consent, shall have filed an application with
the FRB or other governmental agency for approval to engage in an
Acquisition Transaction.
(b) The term "Subsequent Triggering Event" means either of the following
events or transactions occurring after August 27, 1995:
(i) The acquisition by any person of beneficial ownership of 15% or
more of the then outstanding shares of Integra Common other than by any
person who, at August 27, 1995, beneficially owned more than 15% of the
outstanding shares of Integra Common; or
(ii) The occurrence of the Initial Triggering Event described above in
clause (a)(i), except that the percentage referred to in subclause
(a)(i)(C) shall be 15%.
(c) Each of the following events constitutes an "Exercise Termination
Event":
(i) immediately prior to the Effective Time;
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(ii) termination of the Agreement in accordance with the provisions
thereof if such termination occurs prior to the occurrence of an Initial
Triggering Event; or
(iii) the passage of twelve months after termination of the Agreement
if such termination follows the occurrence of an Initial Triggering Event;
provided, that if an Initial Triggering Event continues or another Initial
Triggering Event occurs beyond such termination, the Exercise Termination
Event shall be twelve months from the expiration of the Last Triggering
Event but in no event more than 18 months after such termination. For
purposes of the National City Option Agreement, the term "Last Triggering
Event" means the last Initial Triggering Event to occur.
As of the date hereof, no Initial Triggering Event or Subsequent Triggering
Event has occurred.
The Agreement may be terminated at any time prior to the Effective Time by
either National City or Integra if the Merger is not approved at either the
Annual Meeting of Stockholders of National City or the Special Meeting of
Shareholders of Integra (provided that the terminating party is not otherwise in
material breach of its obligations under the Agreement). Accordingly, if no
Initial Triggering Event has occurred, in the event that either the National
City stockholders do not adopt the Agreement at the Annual Meeting of
Stockholders of National City or the Integra shareholders do not approve the
Agreement at the Special Meeting of Shareholders of Integra, and either National
City or Integra terminates the Agreement as a result thereof, the National City
Option shall terminate.
In the event of any change in Integra Common by reason of a stock dividend,
split-up, merger, recapitalization, combination, subdivision, conversion,
exchange of shares or similar transaction, the type and number of shares of
Integra Common subject to the National City Option and the purchase price
therefor will be adjusted appropriately.
Whenever the number of shares of Integra Common purchasable upon exercise
of the National City Option is adjusted as provided in the preceding paragraph,
the National City 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
Integra Common purchasable prior to the adjustment and the denominator of which
shall be equal to the number of shares of Integra Common purchasable after the
adjustment.
Repurchase of the National City Option. Upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise Termination Event, at the
request of National City, delivered within 30 days of the Subsequent Triggering
Event (or such later date as is necessary to obtain all regulatory approvals and
for the expiration of all statutory waiting periods, and to avoid liability
under Section 16(b) of the Exchange Act), Integra (a) shall repurchase the
National City Option from National City at a price (the "National City Option
Repurchase Price") equal to (i) the amount by which (A) the market/offer price
(as defined below) exceeds (B) the National City Option Price, multiplied by the
number of shares for which the National City Option may then be exercised, plus
(ii) National City's Out-of-Pocket Expenses (as defined below) (to the extent
not previously reimbursed) and (b) shall repurchase such number of shares of
Integra Common issued upon total or partial exercise of the National City Option
(the "National City Option Shares") from National City as National City shall
designate at a price (the "National City Option Share Repurchase Price") equal
to (i) the market/offer price multiplied by the number of National City Option
Shares so designated plus (ii) National City's Out-of-Pocket Expenses (to the
extent not previously reimbursed).
For purposes of the National City Option Agreement:
(a) The term "Out-of-Pocket Expenses" means National City's reasonable
out-of-pocket expenses incurred in connection with the transactions contemplated
by the Agreement and the Plan of Merger, including, without limitation, legal,
accounting and investment banking fees.
(b) The term "market/offer price" means the highest of
(i) the price per share of Integra Common at which a tender offer or
exchange offer therefor has been made after August 27, 1995;
(ii) the price per share of Integra Common to be paid by any third
party pursuant to an agreement with Integra;
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(iii) the highest closing price for shares of Integra Common within
the 30-day period immediately preceding the date National City gives notice
of the required repurchase of the National City Option or the National City
Option Shares, as the case may be; or
(iv) in the event of a sale of all or substantially all of Integra's
assets, the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Integra as determined by a
nationally recognized investment banking firm selected by National City,
divided by the number of shares of Integra Common outstanding at the time
of such sale. In determining the market/offer price, the value of
consideration other than cash will be determined by a nationally recognized
investment banking firm selected by National City, whose determination will
be conclusive and binding on all parties.
Substitute Option. The National City Option Agreement provides that in the
event that prior to an Exercise Termination Event, Integra enters into an
agreement (a) to consolidate or merge with any person, other than National City
or one of its subsidiaries, and Integra is not the continuing or surviving
corporation of such consolidation or merger, (b) to permit any person, other
than National City or one of its subsidiaries, to merge into Integra and Integra
is the continuing or surviving corporation, but, in connection with such merger,
the then outstanding shares of Integra Common 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 Integra Common after such merger represent less
than 50% of the outstanding shares and share equivalents of the merged company,
or (c) to sell or otherwise transfer all or substantially all of its assets to
any person, other than National City or one of its subsidiaries, then, and in
each such case, the agreement governing such transaction must make proper
provision so that the National City Option shall, upon the consummation of any
such transaction, be converted into, or exchanged for, an option (the
"Substitute National City Option"), at the election of National City, of either
(i) the Acquiring Corporation (as defined below) or (ii) any person that
controls the Acquiring Corporation. For purposes of the National City Option
Agreement, the term "Acquiring Corporation" means (A) the continuing or
surviving corporation of a consolidation or merger with Integra (if other than
Integra), (B) Integra in a merger in which Integra is the continuing or
surviving corporation, and (C) the transferee of all or substantially all of
Integra's assets.
The Substitute National City Option shall have the same terms as the
National City Option; provided, however, that if the terms of the Substitute
National City Option cannot, for legal reasons, be the same as the National City
Option, such terms shall be as similar as possible and in no event less
advantageous to National City. The National City Option Agreement provides that
Integra may not enter into any transaction described above triggering a
Substitute National City Option unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assumes in writing all the obligations
of Integra under the National City Option Agreement. The National City Option
Agreement further provides that the issuer of the Substitute National City
Option shall enter into an agreement with National City in substantially the
same form as the National City Option Agreement, which agreement shall be
applicable to the Substitute National City Option and shall provide for the
repurchase of the Substitute National City Option and any shares of the issuer
issued pursuant thereto on terms similar to the repurchase of the National City
Option and the National City Option Shares.
The Substitute National City Option will be exercisable for such number of
shares of common stock of the issuer of the Substitute National City Option
("Substitute Common Stock") as is equal to the market/offer price multiplied by
the number of shares of Integra Common for which the National City Option is
then exercisable, divided by the Average Price. For purposes of the National
City Option Agreement, the term "Average Price" means the average closing price
of a share of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of a share of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided, however, that if Integra is the issuer
of the Substitute National City Option, the Average Price will be computed with
respect to a share of common stock issued by the person merging into Integra or
by any company which controls or is controlled by such person, as National City
may elect. The exercise price of the Substitute National City Option per share
of Substitute Common Stock will then be equal to the National City Option Price
multiplied by a fraction, the numerator of which will be the number of shares of
Integra
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Common for which the National City Option is then exercisable and the
denominator of which will be the number of shares of Substitute Common Stock for
which the Substitute National City Option is exercisable.
The National City Option Agreement provides that the Substitute National
City Option may not be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute National
City Option. In the event that the Substitute National City Option would be
exercisable for more than 19.9% of the shares of Substitute Common Stock
outstanding prior to exercise, the issuer of the Substitute National City Option
will be required to make a cash payment to National City equal to the excess of
(a) the value of the Substitute National City Option without giving effect to
the foregoing limitation over (b) the value of the Substitute National City
Option after giving effect to the foregoing limitation. Such difference in value
will be determined by a nationally recognized investment banking firm selected
by National City.
Registration Rights. Within 30 days after the occurrence of a Subsequent
Triggering Event (or such later date as is necessary to obtain all regulatory
approvals and for the expiration of all statutory waiting periods, and to avoid
liability under Section 16(b) of the Exchange Act), National City may request
Integra to prepare and file a registration statement with the Commission if such
registration is necessary to permit the sale or other disposition of the shares
of Integra Common purchased upon exercise of the National City Option. Integra
is required to use its best efforts to cause such registration statement to
become effective and then to remain effective for 180 days or such shorter time
as may be reasonably necessary to effect such sales or dispositions. National
City has the right to demand two such registrations. Integra also will permit
National City to include the sale of shares of Integra Common purchased upon
exercise of the National City Option in certain registration statements
initiated by Integra.
Assignment of National City Option. Neither National City nor Integra may
assign any of its rights or obligations under the National City Option Agreement
or the National City Option to any other person without the express written
consent of the other party, except that in the event a Subsequent Triggering
Event occurs prior to an Exercise Termination Event, National City may assign,
in whole or in part, its rights and obligations under the National City Option
Agreement or the National City Option within 30 days following such Subsequent
Triggering Event (or such later date as is necessary to obtain all regulatory
approvals and for the expiration of all statutory waiting periods, and to avoid
liability under Section 16(b) of the Exchange Act); provided, however, that
until the date 30 days following the date at which the FRB approves an
application by National City under the BHCA to acquire the shares of Integra
Common subject to the National City Option, National City may not assign its
rights under the National City Option except in (a) a widely dispersed public
distribution, (b) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Integra, (c) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on National City's behalf, or
(d) any other manner approved by the FRB.
Termination of the National City Option. The National City option will
terminate upon the occurrence of an Exercise Termination Event. In the event
that the holder of the National City Option or the owner of National City Option
Shares or any affiliate thereof is a person making an offer or proposal to
engage in an Acquisition Transaction (other than the Merger), then (a) in the
case of a holder of the National City Option or any affiliate thereof, the
National City Option held by it will immediately terminate, and (b) in the case
of an owner of National City Option Shares or any affiliate thereof, the
National City Option Shares held by it will be immediately repurchasable by
Integra at the National City Option Price.
Additional Provisions. Certain rights and obligations of National City and
Integra under the National City Option Agreement are subject to receipt of
required regulatory approvals. Among other things, the approval of the FRB is
required for the acquisition by National City of more than 5% of the outstanding
shares of Integra Common. Accordingly, an application for FRB approval of the
exercise of the National City Option was filed as part of the application
referred to on page 57 and approval has been received.
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INTEGRA OPTION AGREEMENT
As a condition to Integra's entering into the Agreement, and in
consideration therefor, National City entered into the Integra Option Agreement,
pursuant to which National City granted Integra the Integra Option on August 27,
1995. The Integra Option Agreement is intended to provide assurance to Integra
shareholders that they will receive National City Common in exchange for their
Integra Common at the consummation of the Merger by making the acquisition of
National City by a third party prior to consummation of the Merger more
expensive.
Grant of Integra Option. The Integra Option entitles Integra to purchase
up to 12,098,600 fully paid and non-assessable shares of Integra Common,
representing 8.2% of the shares of National City Common issued and outstanding
as of August 27, 1995 without giving effect to any shares subject or issued
pursuant to the Integra Option, at a price of $31.625 per share; provided,
however, that in the event National City issues or agrees to issue any shares of
National City Common (other than as permitted pursuant to the National City
Option Plans as provided under the Agreement) at a price less than $31.625 per
share (as adjusted as described below), such price shall be equal to such lesser
price (such price, as adjusted if applicable, the "Integra Option Price");
provided further, that in no event may the number of shares for which the
Integra Option is exercisable at any time exceed 8.2% of the issued and
outstanding shares of National City Common without giving effect to any shares
subject or issued pursuant to the Integra Option. The aggregate purchase price
for the shares of National City Common that may be purchased upon the exercise
of the Integra Option at the original Integra Option Price is $382,618,225.
Triggering Events; Exercise of Integra Option. The Integra Option
Agreement provides that Integra may exercise the Integra Option, in whole or in
part, if both an Initial Triggering Event (as defined below) and a Subsequent
Triggering Event (as defined below) shall have occurred prior to the occurrence
of an Exercise Termination Event (as defined below), provided that Integra shall
have sent to National City written notice of such exercise within 30 days
following such Subsequent Triggering Event (or such later date as is necessary
to obtain all regulatory approvals for the exercise of the Integra Option and
for the expiration of all statutory waiting periods, and to avoid liability
under Section 16(b) of the Exchange Act by reason of such exercise).
For purposes of the Option Agreement:
(a) The term "Initial Triggering Event" means any of the following events
or transactions occurring after August 27, 1995:
(i) National City, or any of its subsidiaries, without having received
Integra's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as defined below) with any person
(the term "person" for purposes of the Integra Option Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Exchange
Act and the rules and regulations promulgated thereunder), or the Board of
Directors of National City shall have recommended that the shareholders of
National City approve or accept any Acquisition Transaction other than the
Merger. For purposes of the Integra Option Agreement, the term "Acquisition
Transaction" means (A) a merger or consolidation, or any similar
transaction, involving Integra or any of its banking subsidiaries or
mortgage banking subsidiaries (each a "Significant Subsidiary"), (B) a
purchase, lease or other acquisition of all or substantially all of the
assets of Integra or any Significant Subsidiary, or (C) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 30% or more of the voting power of
National City or any Significant Subsidiary; provided, however, the term
"Acquisition Transaction" specifically does not include any merger or
consolidation among National City and/or its subsidiaries; or
(ii) Any person other than Integra, any subsidiary of Integra or any
subsidiary of National City acting in a fiduciary capacity shall have
acquired beneficial ownership or the right to acquire beneficial ownership
of 30% or more of the outstanding shares of National City Common (the term
"beneficial ownership" for purposes of the National City Option Agreement
having the meaning assigned thereto in Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder);
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(b) The term "Subsequent Triggering Event" means either of the following
events or transactions occurring after August 27, 1995:
(i) The acquisition by any person of beneficial ownership of 40% or
more of the then outstanding shares of National City;
(ii) The occurrence of the Initial Triggering Event described above in
clause (a)(i), except that the percentage referred to in subclause
(a)(i)(C) shall be 40%.
(c) Each of the following events constitutes an "Exercise Termination
Event":
(i) immediately prior to the Effective Time;
(ii) termination of the Agreement in accordance with the provisions
thereof if such termination occurs prior to the occurrence of an Initial
Triggering Event; or
(iii) the passage of twelve months after termination of the Agreement
if such termination follows the occurrence of an Initial Triggering Event;
provided, that if an Initial Triggering Event continues or another Initial
Triggering Event occurs beyond such termination, the Exercise Termination
Event shall be twelve months from the expiration of the Last Triggering
Event but in no event more than 18 months after such termination. For
purposes of the Integra Option Agreement, the term "Last Triggering Event"
means the last Initial Triggering Event to occur.
As of the date hereof, no Initial Triggering Event or Subsequent Triggering
Event has occurred.
The Agreement may be terminated at any time prior to the Effective Time by
either National City or Integra if the Merger is not approved at either the
Annual Meeting of Stockholders of National City or the Special Meeting of
Shareholders of Integra (provided that the terminating party is not otherwise in
material breach of its obligations under the Agreement). Accordingly, if no
Initial Triggering Event has occurred, in the event that either the National
City stockholders do not adopt the Agreement at the Annual Meeting of
Stockholders of National City or the Integra shareholders do not approve the
Agreement at the Special Meeting of Shareholders of Integra, and either National
City or Integra terminates the Agreement as a result thereof, the Integra Option
shall terminate.
In the event of any change in National City Common by reason of a stock
dividend, split-up, merger, recapitalization, combination, subdivision,
conversion, exchange of shares or similar transaction, the type and number of
shares of National City Common subject to the Integra Option and the purchase
price therefor will be adjusted appropriately.
Whenever the number of shares of National City Common purchasable upon
exercise of the Integra Option is adjusted as provided in the preceding
paragraph, the Integra Option Price shall be adjusted by multiplying the Integra
Option Price by a fraction, the numerator of which shall be equal to the number
of shares of National City Common purchasable prior to the adjustment and the
denominator of which shall be equal to the number of shares of National City
Common purchasable after the adjustment.
Repurchase of Integra Option. Upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise Termination Event, at the
request of Integra, delivered within 30 days of the Subsequent Triggering Event
(or such later date as is necessary to obtain all regulatory approvals and for
the expiration of all statutory waiting periods, and to avoid liability under
Section 16(b) of the Exchange Act), National City (a) shall repurchase the
Integra Option from Integra at a price (the "Integra Option Repurchase Price")
equal to (i) the amount by which (A) the market/offer price (as defined below)
exceeds (B) the Integra Option Price, multiplied by the number of shares for
which the Integra Option may then be exercised, plus (ii) Integra's
Out-of-Pocket Expenses (as defined below) (to the extent not previously
reimbursed) and (b) shall repurchase such number of shares of National City
Common issued upon total or partial exercise of the Integra Option (the "Integra
Option Shares") from Integra as Integra shall designate at a price (the "Integra
Option Share Repurchase Price") equal to (i) the market/offer price multiplied
by the number of Integra Option Shares so designated plus (ii) Integra's
Out-of-Pocket Expenses (to the extent not previously reimbursed).
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For purposes of the Integra Option Agreement:
(a) The term "Out-of-Pocket Expenses" means Integra's reasonable
out-of-pocket expenses incurred in connection with the transactions contemplated
by the Agreement and the Plan of Merger, including, without limitation, legal,
accounting and investment banking fees.
(b) The term "market/offer price" means the highest of
(i) the price per share of National City Common at which a tender
offer or exchange offer therefor has been made after August 27, 1995;
(ii) the price per share of National City Common to be paid by any
third party pursuant to an agreement with National City;
(iii) the highest closing price for shares of National City Common
within the 30-day period immediately preceding the date Integra gives
notice of the required repurchase of the Integra Option or the Integra
Option Shares, as the case may be; or
(iv) in the event of a sale of all or substantially all of National
City's assets, the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of National City as
determined by a nationally recognized investment banking firm selected by
Integra, divided by the number of shares of National City Common
outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash will be determined by a
nationally recognized investment banking firm selected by Integra, whose
determination will be conclusive and binding on all parties.
Substitute Option. The Integra Option Agreement provides that in the event
that prior to an Exercise Termination Event, National City enters into an
agreement (a) to consolidate or merge with any person, other than Integra or one
of its subsidiaries, and National City is not the continuing or surviving
corporation of such consolidation or merger, (b) to permit any person, other
than Integra or one of its subsidiaries, to merge into National City and
National City is the continuing or surviving corporation, but, in connection
with such merger, the then outstanding shares of National City Common 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 National City
Common after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (c) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Integra or one
of its subsidiaries, then, and in each such case, the agreement governing such
transaction must make proper provision so that the Integra Option shall, upon
the consummation of any such transaction, be converted into, or exchanged for,
an option (the "Substitute Integra Option"), at the election of Integra, of
either (i) the Acquiring Corporation (as defined below) or (ii) any person that
controls the Acquiring Corporation. For purposes of the Integra Option
Agreement, the term "Acquiring Corporation" means (A) the continuing or
surviving corporation of a consolidation or merger with National City (if other
than National City), (B) National City in a merger in which National City is the
continuing or surviving corporation, and (C) the transferee of all or
substantially all of National City's assets.
The Substitute Integra Option shall have the same terms as the Integra
Option; provided, however, that if the terms of the Substitute Integra Option
cannot, for legal reasons, be the same as the Integra Option, such terms shall
be as similar as possible and in no event less advantageous to Integra. The
Integra Option Agreement provides that National City may not enter into any
transaction described above triggering a Substitute Integra Option unless the
Acquiring Corporation and any person that controls the Acquiring Corporation
assumes in writing all the obligations of National City under the Integra Option
Agreement. The Integra Option Agreement further provides that the issuer of the
Substitute Integra Option shall enter into an agreement with Integra in
substantially the same form as the Integra Option Agreement, which agreement
shall be applicable to the Substitute Integra Option and shall provide for the
repurchase of the Substitute Integra Option and any shares of the issuer issued
pursuant thereto on terms similar to the repurchase of the Integra Option and
the Integra Option Shares.
The Substitute Integra Option will be exercisable for such number of shares
of common stock of the issuer of the Substitute Integra Option ("Substitute
Common Stock") as is equal to the market/offer price
72
<PAGE> 78
multiplied by the number of shares of National City Common for which the Integra
Option is then exercisable, divided by the Average Price. For purposes of the
Integra Option Agreement, the term "Average Price" means the average closing
price of a share of Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no event higher
than the closing price of a share of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided, however, that if
National City is the issuer of the Substitute Integra Option, the Average Price
will be computed with respect to a share of common stock issued by the person
merging into National City or by any company which controls or is controlled by
such person, as Integra may elect. The exercise price of the Substitute Integra
Option per share of Substitute Common Stock will then be equal to the Integra
Option Price multiplied by a fraction, the numerator of which will be the number
of shares of National City Common for which the Integra Option is then
exercisable and the denominator of which will be the number of shares of
Substitute Common Stock for which the Substitute Integra Option is exercisable.
The Integra Option Agreement provides that the Substitute Integra Option
may not be exercisable for more than 8.2% of the shares of Substitute Common
Stock outstanding prior to exercise of the Substitute Integra Option. In the
event that the Substitute Integra Option would be exercisable for more than 8.2%
of the shares of Substitute Common Stock outstanding prior to exercise, the
issuer of the Substitute Integra Option will be required to make a cash payment
to Integra equal to the excess of (a) the value of the Substitute Integra Option
without giving effect to the foregoing limitation over (b) the value of the
Substitute Integra Option after giving effect to the foregoing limitation. Such
difference in value will be determined by a nationally recognized investment
banking firm selected by Integra.
Registration Rights. Within 30 days after the occurrence of a Subsequent
Triggering Event (or such later date as is necessary to obtain all regulatory
approvals and for the expiration of all statutory waiting periods, and to avoid
liability under Section 16(b) of the Exchange Act), Integra may request National
City to prepare and file a registration statement with the Commission if such
registration is necessary to permit the sale or other disposition of the shares
of National City Common purchased upon exercise of the Integra Option. National
City is required to use its best efforts to cause such registration statement to
become effective and then to remain effective for 180 days or such shorter time
as may be reasonably necessary to effect such sales or dispositions. Integra has
the right to demand two such registrations. National City also will permit
Integra to include the sale of shares of National City Common purchased upon
exercise of the Integra Option in certain registration statements initiated by
National City.
Assignment of Integra Option. Neither National City nor Integra may assign
any of its rights or obligations under the Integra Option Agreement or the
Integra Option to any other person without the express written consent of the
other party, except that in the event a Subsequent Triggering Event occurs prior
to an Exercise Termination Event, Integra may assign, in whole or in part, its
rights and obligations under the Integra Option Agreement or the Integra Option
within 30 days following such Subsequent Triggering Event (or such later date as
is necessary to obtain all regulatory approvals and for the expiration of all
statutory waiting periods, and to avoid liability under Section 16(b) of the
Exchange Act); provided, however, that until the date 30 days following the date
at which the FRB approves an application by Integra under the BHCA to acquire
the shares of National City Common subject to the Integra Option, Integra may
not assign its rights under the Integra Option except in (a) a widely dispersed
public distribution, (b) a private placement in which no one party acquires the
right to purchase in excess of 2% of the voting shares of National City, (c) an
assignment to a single party (e.g., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on Integra's
behalf, or (d) any other manner approved by the FRB.
Termination of the Integra Option. The Integra Option will terminate upon
the occurrence of an Exercise Termination Event. In the event that the holder of
the Integra Option or the owner of Integra Option Shares or any affiliate
thereof is a person making an offer or proposal to engage in an Acquisition
Transaction (other than the Merger), then (a) in the case of a holder of the
Integra Option or any affiliate thereof, the Integra Option held by it will
immediately terminate, and (b) in the case of an owner of Integra Option Shares
or any affiliate thereof, the Integra Option Shares held by it will be
immediately repurchasable by National City at the Integra Option Price.
73
<PAGE> 79
Additional Provisions. Certain rights and obligations of Integra and
National City under the Integra Option Agreement are subject to receipt of
required regulatory approvals. Among other things, the approval of the FRB is
required for the acquisition by Integra of more than 5% of the outstanding
shares of National City Common.
PRO FORMA COMBINED
CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
The unaudited financial information on the following pages presents (a) the
historical consolidated balance sheets of both National City and Integra at
December 31, 1995 and the pro forma combined consolidated balance sheet as of
December 31, 1995, giving effect to the Merger as if it had occurred on that
date on a pooling-of-interests accounting basis; and (b) the historical
consolidated statements of income of both National City and Integra and the pro
forma combined consolidated statements of income for the years ending December
31, 1995, 1994 and 1993, giving effect to the Merger on a pooling-of-interests
accounting basis. Certain reclassifications have been made to the historical
financial information to conform presentation.
The financial information assumes all of the outstanding shares of Integra
Common are converted into shares of National City Common. The pro forma
information is based on the historical financial statements, giving effect to
the Merger under the pooling-of-interests method of accounting. The pro forma
statements exclude the estimated effect of potential expense savings associated
with the consolidation of the operations of National City and Integra, and may
not be indicative of the results that actually would have occurred had the
Merger been consummated on the dates indicated, or which may be attained in the
future.
74
<PAGE> 80
NATIONAL CITY CORPORATION
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NATIONAL INTEGRA
CITY FINANCIAL PRO FORMA PRO FORMA
(IN THOUSANDS OF DOLLARS) CORPORATION CORPORATION ADJUSTMENTS COMBINED
- - - ----------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and demand balances due from
banks.................................. $ 2,637,049 $ 358,856 $ $ 2,995,905
Loans, net of unearned income............ 26,222,319 8,243,507 34,465,826
Allowance for loan losses................ (490,679) (215,167) (705,846)
----------- ----------- ----------- -----------
Net loans............................ 25,731,640 8,028,340 -- 33,759,980
Securities available for sale, at
market................................. 4,949,654 5,395,334 10,344,988
Federal funds sold and security resale
agreements............................. 724,564 10,000 734,564
Other short term investments............. 51,207 54,786 105,993
Properties and equipment................. 424,479 169,027 593,506
Customers' acceptance liability.......... 66,169 -- 66,169
Accrued income and other assets.......... 1,614,248 329,629 21,363(C,F) 1,965,240
----------- ----------- ----------- -----------
TOTAL ASSETS......................... $36,199,010 $14,345,972 $ 21,363 $50,566,345
============ ============ ============ ============
LIABILITIES
Deposits in domestic offices:
Noninterest bearing.................... $ 5,563,717 $ 1,429,504 $ $ 6,993,221
Interest bearing....................... 18,918,968 8,950,955 27,869,923
Deposits in overseas offices............. 717,823 -- 717,823
----------- ----------- ----------- -----------
Total deposits....................... 25,200,508 10,380,459 -- 35,580,967
Federal funds borrowed and security
repurchase agreements.................. 4,010,149 976,346 4,986,495
Other borrowed funds..................... 2,089,150 327,939 2,417,089
Corporate long-term debt................. 1,215,356 1,268,120 2,483,476
Acceptances outstanding.................. 66,169 -- 66,169
Accrued expenses and other liabilities... 696,701 248,200 68,902(C,F) 1,013,803
----------- ----------- ----------- -----------
TOTAL LIABILITIES.................... 33,278,033 13,201,064 68,902 46,547,999
STOCKHOLDERS' EQUITY
Preferred stock.......................... 185,400 -- (185,400)(B) --
Common stock............................. 582,183 33,592 265,869(A,B) 881,644
Capital surplus.......................... 202,669 451,680 (104,496)(A,B) 549,853
Treasury stock........................... -- (24,027) 24,027(A) --
Retained earnings........................ 1,953,467 683,663 (47,539)(C,F) 2,589,591
Shares acquired by ESOP trust............ (2,742) -- -- (2,742)
----------- ----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY........... 2,920,977 1,144,908 (47,539) 4,018,346
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................. $36,199,010 $14,345,972 $ 21,363 $50,566,345
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Pro Forma Combined Consolidated Financial Information
75
<PAGE> 81
NATIONAL CITY CORPORATION
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NATIONAL INTEGRA
CITY FINANCIAL PRO FORMA PRO FORMA
(IN THOUSANDS EXCEPT PER SHARE DATA) CORPORATION CORPORATION ADJUSTMENTS COMBINED
- - - --------------------------------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans and loans held for sale,
including fees....................... $2,206,199 $ 703,871 $ $2,910,070
Securities:
Taxable.............................. 256,278 347,085 603,363
Exempt from Federal income taxes..... 37,091 7,856 44,947
Other interest income.................. 33,545 12,106 45,651
----------- ----------- ----------- ----------
Total interest income.............. 2,533,113 1,070,918 -- 3,604,031
INTEREST EXPENSE
Deposits............................... 858,418 391,280 1,249,698
Other borrowings....................... 283,915 96,501 380,416
Corporate long term debt............... 69,695 75,877 145,572
----------- ----------- ----------- ----------
Total interest expense............. 1,212,028 563,658 -- 1,775,686
----------- ----------- ----------- ----------
Net interest income................ 1,321,085 507,260 -- 1,828,345
Provision for loan losses.............. 97,482 16,000 113,482
----------- ----------- ----------- ----------
Net interest income after provision
for loan losses.................. 1,223,603 491,260 -- 1,714,863
NONINTEREST INCOME
Item processing revenue................ 327,929 19,538 347,467
Trust fees............................. 138,028 29,196 167,224
Service charges on deposit accounts.... 157,486 36,008 193,494
Credit card fees....................... 82,226 8,858 91,084
Mortgage banking revenue............... 69,827 17,085 (3,137)(F) 83,775
Brokerage revenue...................... 28,329 1,173 29,502
Other.................................. 88,868 19,381 108,249
----------- ----------- ----------- ----------
Total fees and other income........ 892,693 131,239 (3,137) 1,020,795
Security gains......................... 24,076 18,289 42,365
----------- ----------- ----------- ----------
Total noninterest income........... 916,769 149,528 (3,137) 1,063,160
NONINTEREST EXPENSE
Salaries and employee benefits......... 685,322 197,893 883,215
Net occupancy.......................... 93,777 32,695 126,472
Equipment.............................. 95,181 32,431 127,612
Other.................................. 596,374 199,205 795,579
----------- ----------- ----------- ----------
Total noninterest expense.......... 1,470,654 462,224 -- 1,932,878
----------- ----------- ----------- ----------
Income before income taxes............. 669,718 178,564 (3,137) 845,145
Income tax expense..................... 204,609 50,174 (1,098)(F) 253,685
----------- ----------- ----------- ----------
NET INCOME......................... $ 465,109 $ 128,390 $ (2,039) $ 591,460
=========== =========== ============ ==========
EARNINGS PER COMMON SHARE:
PRIMARY............................ $ 3.03 $ 3.88 $ 2.68
FULLY DILUTED...................... 2.95 -- 2.64
AVERAGE COMMON SHARES OUTSTANDING:
PRIMARY............................ 148,851 33,123 215,097
FULLY DILUTED...................... 157,759 -- 224,005
</TABLE>
See Accompanying Notes to Pro Forma Combined Consolidated Financial Information
76
<PAGE> 82
NATIONAL CITY CORPORATION
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
NATIONAL INTEGRA PRO FORMA
CITY FINANCIAL ADJUSTMENTS PRO FORMA
(IN THOUSANDS EXCEPT PER SHARE DATA) CORPORATION CORPORATION (D, E) COMBINED
- - - ------------------------------------------------------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans and loans held for sale, including fees.......... $1,765,898 $619,884 $ $2,385,782
Securities:
Taxable............................................ 204,463 331,906 536,369
Exempt from Federal income taxes................... 40,085 5,309 45,394
Other interest income.................................. 31,418 3,679 35,097
---------- -------- ----------- ----------
Total interest income......................... 2,041,864 960,778 -- 3,002,642
INTEREST EXPENSE
Deposits............................................... 592,870 317,867 910,737
Other borrowings....................................... 162,947 66,180 229,127
Corporate long term debt............................... 49,238 47,912 97,150
---------- -------- ----------- ----------
Total interest expense........................ 805,055 431,959 -- 1,237,014
---------- -------- ----------- ----------
Net interest income........................... 1,236,809 528,819 -- 1,765,628
Provision for loan losses.............................. 79,356 30,000 109,356
---------- -------- ----------- ----------
Net interest income after provision for loan
losses...................................... 1,157,453 498,819 -- 1,656,272
NONINTEREST INCOME
Item processing revenue................................ 312,358 23,060 335,418
Trust fees............................................. 125,668 27,763 153,431
Service charges on deposit accounts.................... 153,870 33,545 187,415
Credit card fees....................................... 85,308 6,810 92,118
Mortgage banking revenue............................... 67,406 10,822 78,228
Brokerage revenue...................................... 18,790 958 19,748
Other.................................................. 89,438 15,344 104,782
---------- -------- ----------- ----------
Total fees and other income................... 852,838 118,302 -- 971,140
Security gains......................................... 10,530 19,749 30,279
---------- -------- ----------- ----------
Total noninterest income...................... 863,368 138,051 -- 1,001,419
NONINTEREST EXPENSE
Salaries and employee benefits......................... 653,890 177,789 831,679
Net occupancy.......................................... 89,994 32,219 122,213
Equipment.............................................. 93,345 28,933 122,278
Other.................................................. 565,904 156,295 722,199
---------- -------- ----------- ----------
Total noninterest expense..................... 1,403,133 395,236 -- 1,798,369
---------- -------- ----------- ----------
Income before income taxes............................. 617,688 241,634 -- 859,322
Income tax expense..................................... 188,254 72,601 260,855
---------- -------- ----------- ----------
NET INCOME.................................... $ 429,434 $169,033 $ -- $ 598,467
========== ========= ============ ==========
EARNINGS PER COMMON SHARE:
PRIMARY............................................ $ 2.70 $ 5.01 $ 2.64
FULLY DILUTED...................................... 2.64 -- 2.60
AVERAGE COMMON SHARES OUTSTANDING:
PRIMARY............................................ 153,354 33,735 220,824
FULLY DILUTED...................................... 162,376 -- 229,846
</TABLE>
See Accompanying Notes to Pro Forma Combined Consolidated Financial Information
77
<PAGE> 83
NATIONAL CITY CORPORATION
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
NATIONAL INTEGRA PRO FORMA
CITY FINANCIAL ADJUSTMENTS PRO FORMA
(IN THOUSANDS EXCEPT PER SHARE DATA) CORPORATION CORPORATION (D,E) COMBINED
- - - ----------------------------------------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans and loans held for sale, including
fees................................... $1,582,106 $612,768 $ $2,194,874
Securities:
Taxable.............................. 229,007 360,325 589,332
Exempt from Federal income taxes..... 47,279 3,082 50,361
Other interest income.................... 31,772 1,611 33,383
---------- -------- ----------- ----------
Total interest income........... 1,890,164 977,786 -- 2,867,950
INTEREST EXPENSE
Deposits................................. 542,165 345,261 887,426
Other borrowings......................... 119,568 50,275 169,843
Corporate long term debt................. 28,377 39,951 68,328
---------- -------- ----------- ----------
Total interest expense.......... 690,110 435,487 -- 1,125,597
---------- -------- ----------- ----------
Net interest income............. 1,200,054 542,299 -- 1,742,353
Provision for loan losses................ 93,089 50,000 143,089
---------- -------- ----------- ----------
Net interest income after
provision for loan losses..... 1,106,965 492,299 -- 1,599,264
NONINTEREST INCOME
Item processing revenue.................. 267,962 18,429 286,391
Trust fees............................... 122,597 26,829 149,426
Service charges on deposit accounts...... 152,609 33,142 185,751
Credit card fees......................... 92,966 5,991 98,957
Mortgage banking revenue................. 58,678 2,736 61,414
Brokerage revenue........................ 9,013 971 9,984
Other.................................... 95,990 17,796 113,786
---------- -------- ----------- ----------
Total fees and other income..... 799,815 105,894 -- 905,709
Security gains........................... 11,922 29,862 41,784
---------- -------- ----------- ----------
Total noninterest income........ 811,737 135,756 -- 947,493
NONINTEREST EXPENSE
Salaries and employee benefits........... 623,472 167,277 790,749
Net occupancy............................ 89,729 37,024 126,753
Equipment................................ 89,005 25,950 114,955
Other.................................... 545,534 177,313 722,847
---------- -------- ----------- ----------
Total noninterest expense....... 1,347,740 407,564 -- 1,755,304
---------- -------- ----------- ----------
Income before income taxes............... 570,962 220,491 -- 791,453
Income tax expense....................... 166,965 67,671 234,636
---------- -------- ----------- ----------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES ........ $ 403,997 $152,820 $ -- $ 556,817
========== ========= ============ ==========
EARNINGS PER COMMON SHARE BEFORE
CUMULATIVE EFFECT OF ACCOUNTING CHANGES:
PRIMARY.............................. $ 2.41 $ 4.50 $ 2.36
FULLY DILUTED........................ 2.37 -- 2.33
AVERAGE COMMON SHARES OUTSTANDING:
PRIMARY.............................. 161,164 33,815 228,794
FULLY DILUTED........................ 170,684 -- 238,314
</TABLE>
See Accompanying Notes to Pro Forma Combined Consolidated Financial Information
78
<PAGE> 84
NOTES TO PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
(A) The pro forma combined consolidated balance sheet gives effect to the
proposed Merger of National City and Integra by combining the respective balance
sheets of the two companies at December 31, 1995 on a pooling-of-interests
basis. The capital accounts have been adjusted to reflect the issuance of
66,025,390 shares of National City Common in exchange for all the outstanding
shares of Integra Common after giving effect to the cancellation of 579,667
shares of Integra Common held as treasury stock.
(B) The pro forma adjustments include the anticipated exercise of National
City's option to redeem the outstanding 8% Cumulative Convertible Preferred
Stock as of May 1, 1996. Based on current market prices, it is expected that
this action would result in the conversion into common stock of substantially
all of the outstanding preferred stock. At December 31, 1995, 3,708,000
depository shares of preferred stock were outstanding. These shares would be
convertible into 8,839,872 shares of National City Common based on the
applicable conversion rate of 2.384 (see Note 11 to National City's consolidated
financial statements).
(C) A liability of $70 million has been recorded in the pro forma combined
consolidated balance sheet to reflect management's estimate of anticipated
expenses and nonrecurring charges related to the Merger. This liability resulted
in a $46 million after-tax adjustment to retained earnings in the pro forma
combined consolidated balance sheet. It is anticipated that substantially all of
these charges will be recognized at or near consummation of the Merger. The
following table provides detail of the estimated charges by type:
<TABLE>
<CAPTION>
PRE-TAX AMOUNT
TYPE OF COST (IN MILLIONS)
------------ --------------
<S> <C>
Operations and Facilities......................................... $ 27
Personnel Related................................................. 31
Other............................................................. 12
</TABLE>
Operations and facilities consists of costs associated with the elimination of
certain operational facilities, furniture and equipment that will be sold or
retired, write-offs of computer hardware and software due to incompatibility or
duplication, and signage write-offs. Personnel related costs consist primarily
of charges related to employment contracts, severance and the termination of
certain employee benefit plans. Other charges primarily include investment
banker fees, legal and accounting fees, and other consulting fees. Management
continues to review these charges and there can be no assurance that such
expenses and charges will not exceed the amounts described above.
(D) Effective January 1, 1993 Integra adopted FAS 106, "Employers Accounting for
Postretirement Benefits Other Than Pensions." As permitted under FAS 106,
Integra elected to recognize immediately the January 1, 1993 transitional
liability of $8 million ($5 million after-tax) as the cumulative effect of a
change in accounting principle in the first quarter of 1993. National City
adopted FAS 106 on January 1, 1991, and as permitted under that statement,
elected not to recognize its transitional liability but to amortize that
liability over 20 years. The pro forma amounts do not include the effects of
Integra adopting FAS 106 on January 1, 1991 and recognizing the transitional
liability over an amortization period of 20 years as the impact would not be
material to the pro forma combined consolidated financial statements.
(E) On January 1, 1993 Integra adopted FAS 109, "Accounting for Income Taxes."
The adoption increased earnings by $65 million and was recognized as the
cumulative effect of a change in accounting principle. National City adopted FAS
109 in 1992. The cumulative effect of adopting FAS 109 was not material to
National City's 1992 results of operations. A calculation was not done to
determine the amount of the cumulative effect of a change in accounting
principle if Integra would have adopted FAS 109 on January 1, 1992 as it is not
practical.
(F) Integra adopted FAS 122 "Accounting for Mortgage Servicing Rights" during
the second quarter of 1995 effective as of January 1, 1995. National City
adopted FAS 122 as of January 1, 1996. As required under the
pooling-of-interests accounting rules, an accounting adjustment was made to
conform the timing of Integra's adoption to National City's. This resulted in a
$2 million after-tax reduction to net income in 1995.
79
<PAGE> 85
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
Bank holding companies and banks are extensively regulated under both
federal and state law. To the extent that the following information describes
statutory and regulatory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. A change in
applicable law or regulation may have a material effect on the business of
National City or Integra.
As bank holding companies, National City and Integra are subject to
regulation under the BHCA and its examination and reporting requirements. Under
the BHCA, bank holding companies may not (subject to certain limited exceptions)
directly or indirectly acquire the ownership or control of more than 5% of any
class of voting shares or substantially all of the assets of any company,
including a bank, without the prior written approval of the FRB. In addition,
bank holding companies are generally prohibited under the BHCA from engaging in
nonbanking activities, subject to certain exceptions.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
amended Section 3(d) of the BHCA by authorizing the FRB to approve on or after
September 29, 1995 the acquisition by a bank holding company of more than 5% of
any class of the voting shares of, or substantially all the assets of, any bank
(or its holding company) located outside of the state in which the operations of
such acquiring bank holding company's banking subsidiaries are principally
conducted on the date such company became a bank holding company, regardless of
whether the acquisition would be prohibited by State law. However the amendment
to Section 3(d) of the BHCA provides that the FRB may only approve the
acquisition applications of bank holding companies that are "adequately
capitalized" and "adequately managed". In addition, the FRB may not approve an
out of state bank holding company's application to acquire a bank (or its
holding company) in another State that has not existed for a minimum period of
time if any, required by the "host State". In no event shall the "host State's"
law require that a bank have existed more than five years. Also the FRB may not
approve a bank holding company's application, if the applicant, including its
insured depository affiliates, controls or would control, more than ten (10)
percent of the total amount of deposits of insured depository institutions in
the United States. Furthermore, amended Section 3(d) prohibits the FRB's
approval of an acquisition if the applicant, including all insured depository
affiliates, would control 30 percent or more of the deposits of all insured
depository institutions in an affected State. In determining whether to approve
an application, the FRB is required to comply with its responsibilities under
Section 804 of the Community Reinvestment Act of 1977, and consider the
applicants compliance with state community reinvestment laws. Many states,
including Ohio and Pennsylvania have adopted legislation that permits
out-of-state bank holding companies located throughout the United States to
acquire local banks and bank holding companies without minimum age requirements
at least on a reciprocal basis.
PAYMENT OF DIVIDENDS
Each of National City and Integra is a legal entity separate and distinct
from its banking and other subsidiaries. Most of National City's and Integra's
revenues result from dividends paid to it by its bank subsidiaries. There are
statutory and regulatory requirements applicable to the payment of dividends by
subsidiary banks as well as by National City to its stockholders and Integra to
its shareholders.
Each state bank subsidiary that is a member of the Federal Reserve System
and each national banking association is required by federal law to obtain the
prior approval of the FRB or the Comptroller of the Currency (the
"Comptroller"), as the case may be, for the declaration and payment of dividends
if the total of all dividends declared by the board of directors of such bank in
any year will exceed the total of (a) such bank's net profits (as defined and
interpreted by regulation) for that year plus (b) the retained net profits (as
defined and interpreted by regulation) for the preceding two years, less any
required transfers to surplus. In addition, these banks may only pay dividends
to the extent that retained net profits (including the portion transferred to
surplus) exceed bad debts (as defined by regulation).
In 1995, National City's subsidiary banks, without obtaining governmental
approvals, could declare aggregate dividends of approximately $386.0 million
from retained net profits. During 1995, National City's subsidiary banks paid
$221.4 million in dividends. As of January 1, 1996, the subsidiary banks could
initiate dividend payments, without prior regulatory approval, of $432.0
million.
80
<PAGE> 86
In 1995, Integra's subsidiary banks, without obtaining governmental
approvals, could declare aggregate dividends of approximately $317.8 million
from retained net profits. During 1995, Integra's subsidiary banks paid $109.1
million in dividends. As of January 1, 1996, the subsidiary banks could initiate
dividend payments, without prior regulatory approval, of $67.4 million.
The payment of dividends by National City and its bank subsidiaries are
also affected by various regulatory requirement and policies, such as the
requirement to maintain adequate capital. In addition, if, in the opinion of the
applicable regulatory authority, a bank under its jurisdiction is engaged in or
is about to engage in an unsafe or unsound practice (which, depending on the
financial condition of the bank, could include the payment of dividends), such
authority may require, after notice and hearing, that such bank cease and desist
from such practice. The FRB and the Comptroller have each indicated that paying
dividends that deplete a bank's capital base to an inadequate level would be an
unsafe and unsound banking practice. The FRB, the Comptroller and the Federal
Deposit Insurance Corporation (the "FDIC") have issued policy statements which
provide that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.
CERTAIN TRANSACTIONS BY BANK HOLDING COMPANIES WITH THEIR AFFILIATES
There are also various legal restrictions on the extent to which National
City, Integra and most of their respective nondepository subsidiaries can borrow
or otherwise obtain credit from, or engage in certain other transactions
("covered transactions") with, its depository institution subsidiaries. Such
borrowings and other transactions by an insured depository institution with
their nondepository affiliates are limited to the following amounts: (a) in the
case of any one such affiliate, the aggregate amount of covered transactions of
the insured depository institution and its subsidiaries cannot exceed 10% of the
capital stock and surplus of the insured depository institution; and (b) in the
case of all affiliates, the aggregate amount of covered transactions of the
insured depository institution and its subsidiaries cannot exceed 20% of the
capital stock and surplus of the insured depository institution. In addition,
such extensions of credit must be collateralized in prescribed amounts.
Furthermore, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services.
CAPITAL
National City and Integra are each subject to capital adequacy guidelines
of the Federal Reserve. Under the Federal Reserve's capital guidelines, a
holding company's capital is divided into two tiers, Tier 1 and Tier 2. The
respective components of Tier 1 and Tier 2 capital are described in materials
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE". The minimum guideline for the ratio of Total Capital (Tier 1 plus
Tier 2 capital) to risk-adjusted assets is 8%, of which half (4%) must be Tier 1
capital. In addition the Federal Reserve requires a leverage ratio (Tier 1
capital to average total consolidated assets) of at least 3% for bank holding
companies that meet specified criteria, including having the highest regulatory
rating. To be considered well capitalized, the Tier 1 capital ratio, the Total
Capital ratio and the leverage ratio must be at least 6%, 10%, and 5%,
respectively.
The following table sets forth the ratio of Tier 1 capital to risk-adjusted
assets, Total Capital to risk-adjusted assets and Tier 1 capital to average
total consolidated assets for National City and Integra individually and on a
pro forma combined basis as of December 31, 1995 (in each case calculated
pursuant to the current risk-based capital guidelines).
<TABLE>
<CAPTION>
NATIONAL PRO FORMA
CITY INTEGRA COMBINED
-------- ----- ---------
<S> <C> <C> <C>
TIER 1 RISK-BASED CAPITAL...................... 8.54% 11.13% 9.01%
TOTAL RISK-BASED CAPITAL....................... 13.13 14.61 13.34
LEVERAGE....................................... 7.37 7.02 7.17
</TABLE>
Each of National City's and Integra's subsidiary banks is subject to
similar capital requirements established by the subsidiary's primary federal
regulator. At December 31, 1995, all of National City's and Integra's subsidiary
banks were considered well-capitalized.
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Effective January 17, 1995, the Federal Reserve and the other federal
banking agencies amended the risk-based capital standards to consider risk from
concentrations of credit and the risks of nontraditional activities, as well as
an institution's ability to manage these risks, as important factors in
determining the adequacy of an institution's capital. Institutions with higher
than desired levels of risk will be expected to maintain a higher capital ratio
or minimum levels of capital. The federal banking agencies also issued an
amendment to the capital standards, effective September 1, 1995, which requires
the banking agencies to consider an institution's exposure to interest rate risk
when assessing the adequacy of capital. This amendment does not codify a
measurement framework for assessing the level of interest rate exposure. It is
anticipated that at some future date the federal banking agencies will establish
an explicit capital charge for interest rate risk that will be based upon an
institution's measured interest rate risk exposure.
Under federal banking laws, failure to meet the minimum regulatory capital
requirements could subject a banking institution to a variety of enforcement
remedies including the possible termination of deposit insurance by the FDIC and
seizure of the institution.
HOLDING COMPANY SUPPORT OF SUBSIDIARY BANKS
Under FRB policy, National City and Integra are expected to act as a source
of financial strength to each of its subsidiary banks and to commit resources to
support each of such subsidiaries. This support may be required at times when,
absent such FRB policy, National City or Integra would not otherwise be required
to provide it. In addition, any capital loans by National City or Integra to a
subsidiary bank would be subordinate in right of payment to deposits and to
certain other indebtedness of such bank. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a subsidiary bank will be
assumed by the bankruptcy trustee and entitled to a priority of payment. This
priority apparently would apply to guarantees of capital restoration plans under
the Federal Deposit Insurance Corporation Improvement Act of 1991.
A depository institution insured by the FDIC can be held liable for any
loss incurred by, or reasonably expected to be incurred by, the FDIC in
connection with (a) the default of a commonly controlled FDIC-insured depository
institution, or (b) any assistance provided by the FDIC to any commonly
controlled FDIC-insured depository institution in danger of default.
FDIC INSURANCE ASSESSMENTS
National City's and Integra's subsidiary banks are subject to FDIC deposit
insurance assessments. The FDIC has set an assessment rate for well capitalized
banks in the Bank Insurance Fund (the "BIF") at 4 cents per $100 of deposits,
effective on and after .
DESCRIPTION OF NATIONAL CITY CAPITAL STOCK
COMMON STOCK
General. National City has 350,000,000 authorized shares of National City
Common, of which 145,545,689 shares were issued and outstanding on December 31,
1995, and an additional 17,465,886 shares were reserved for issuance in
connection with National City's stock option plans (options to purchase
8,797,235 of such shares have been granted and are outstanding) and the National
City Corporation Amended and Second Restated 1991 Restricted Stock Plan (awards
of 551,250 of such shares have been granted and are outstanding). The shares of
National City Common to be issued in connection with the Merger will be validly
issued, fully paid and nonassessable. National City Common is listed on the NYSE
and trades under the symbol NCC. As of December 31, 1995 there were 22,194
National City Common Stockholders of record. The transfer agent, registrar and
dividend disbursing agent for shares of National City Common is National City
Bank, Cleveland.
Dividend and Liquidation Rights. Holders of National City Common are
entitled to such dividends as may be declared by National City's Board of
Directors out of funds legally available therefor. In the event of liquidation,
holders of National City Common will be entitled to receive pro rata any assets
distributable to
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stockholders in respect of the number of shares held by them. The dividend and
liquidation rights of National City Common are subject to the rights of any
preferred stock of National City.
Voting, Preemptive, Conversion and Redemption Rights. Holders of National
City Common are entitled to one vote per share on all matters submitted to
stockholders and are not entitled to cumulative voting rights in the election of
directors or to preemptive rights for the purchase of additional shares of any
class of National City's stock. National City Common has no conversion or
redemption rights.
PREFERRED STOCK
General. Under National City's Certificate, the Board of Directors of
National City is authorized without further stockholder action to provide for
the issuance of up to 5,000,000 shares of preferred stock, without par value, in
one or more series as the Board of Directors may determine, and to fix the
relative powers, preferences and rights (including voting rights) of each such
series of preferred stock in relation to the powers, preferences and rights of
any other series of preferred stock. Voting rights, if any, may be general,
special, conditional or limited. The Board of Directors of National City also
has the discretion to determine the number of votes per share which each holder
of a share of a series of the preferred stock will have, but in no event may any
holder of any series of National City preferred stock be entitled to more than
one vote per share. Additionally, the Board of Directors of National City is
authorized to permit the holders of a series of preferred stock to vote
separately or together with the holders of one or more other series of preferred
stock on all or some matters as a separate voting group. National City may, at
its option, elect to offer depositary shares evidenced by depositary receipts,
each representing a fractional interest in a share of the particular series of
the National City preferred stock issued and deposited with a depositary
selected by National City.
Convertible Preferred Stock. By resolution dated April 18, 1991, the Board
of Directors of National City designated a series of National City preferred
stock as 8% Cumulative Convertible Preferred Stock, without par value, of
National City ("Convertible Preferred Stock"). The number of shares constituting
such series is 800,000, of which 741,600 shares (3,708,000 depositary shares)
were issued and outstanding as of December 31, 1995. Each depositary share of
Convertible Preferred Stock (a "Depositary Share") represents a one-fifth
interest in a share of Convertible Preferred Stock. The Depositary Shares are
listed on the NYSE. The transfer agent, registrar, dividend disbursing agent,
redemption agent and depositary for shares of Convertible Preferred Stock and
Depositary Shares is National City Bank, Cleveland.
Dividends. Holders of shares of Convertible Preferred Stock are entitled
to receive, when and as declared by the Board of Directors of National City out
of funds legally available therefor, cash dividends at the rate of 8% per annum
(equivalent to $4.00 per Depositary Share). Dividends on Convertible Preferred
Stock are payable quarterly on February 1, May 1, August 1 and November 1 of
each year, commencing August 1, 1991, at such annual rate. Dividends are
cumulative from the date of original issue.
Redemption. The Convertible Preferred Stock is redeemable at the option of
National City, in whole or in part, on or after May 1, 1996 and for each
12-month period thereafter through the year 2000. National City has elected to
exercise its option to redeem the outstanding Convertible Preferred Stock as of
May 1, 1996 and mailed the notice of redemption on March 4, 1996 to all holders
of record. It is expected that this action will result in the conversion into
National City Common of substantially all of the outstanding Convertible
Preferred Stock. The Convertible Preferred Stock is redeemable at a price of
$260 per share ($52.00 per Depositary Share) for the period May 1, 1996 to May
1, 1997.
Conversion Rights. The Convertible Preferred Stock is convertible at the
option of the holder into 2.384 shares of National City Common per Depositary
Share. Accordingly, as of December 31, 1995, 8,839,872 shares of National City
Common were reserved for the conversion of the Convertible Preferred Stock.
Fractional shares of National City Common Stock will not be delivered upon
conversion, but a cash adjustment will be paid in respect of such fractional
interests, based on the then current market price of National City Common.
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DESCRIPTION OF INTEGRA CAPITAL STOCK
The following description of the capital stock of Integra is qualified in
its entirety by reference to the Articles of Incorporation and Bylaws of
Integra, as amended.
GENERAL
Integra's Articles of Incorporation provide for authorized capital stock
consisting of 19,642,631 shares of Integra preferred stock ("Integra Preferred
Stock"), without par value, and 100,000,000 shares of Integra Common, par value
$1.00 per share.
As of December 31, 1995, there were 33,012,695 shares of Integra Common
outstanding. No shares of Integra Preferred Stock were outstanding on that date.
INTEGRA PREFERRED STOCK
The Board of Directors of Integra is authorized, without further action by
Integra shareholders, to issue Integra Preferred Stock from time to time as a
class or in one or more series, with whatever rights, designations, preferences,
qualifications, privileges, limitations, options and other special rights, if
any, including without limitation, dividend rights, conversion rights, voting
rights, redemption rights and maturity dates, as are specified by the Board of
Directors of Integra in the resolution fixing the terms of the class or
establishing the series.
The Integra Preferred Stock is available for possible future financing and
acquisition transactions, stock dividends or distributions, employee benefit
plans and other general corporate purposes. Under certain circumstances, the
Integra Preferred Stock could be used to create voting impediments or to
frustrate persons seeking to effect a takeover, assume control of the Board, or
otherwise gain control of Integra.
INTEGRA COMMON
The rights of the holders of Integra Common described below are subject to
any rights and preferences pertaining to any class or series of Integra
Preferred to the extent set forth in the resolution of the Board of Directors of
Integra fixing the terms of the class or establishing the class or series.
Voting Rights. Holders of Integra Common are entitled to one vote per
share. The Board of Directors of Integra has the authority to grant proportional
voting rights to fractional shares of any class or series of any class or stock
of Integra.
Holders of Integra Common have cumulative voting rights in the election of
directors -- that is, each holder is entitled to a number of votes equal to the
number of shares held multiplied by the number of directors to be elected in
each class and to cast all such votes for a single nominee in the class being
elected or to distribute them among the nominees in the class as such holder
sees fit.
Integra's Board of Directors is divided into three classes. One of the
three classes of the Board is elected each year for a three-year term. The
affirmative vote of holders of not less than two-thirds (66 2/3%) of the
outstanding shares of each class of stock of Integra, voting as a class, is
required to amend or repeal the provision of Integra's Articles of Incorporation
providing for a classified Board. The classification of the Board of Directors
helps to insure continuity and stability of corporate leadership and policy. It
also has the effect, however, of increasing the number of shares required,
pursuant to the exercise of cumulative voting, to elect a given number of
directors and it increases the period of time before a majority of the Board is
re-elected or can be replaced.
Dividend Rights. Dividends may be paid on Integra Common at the discretion
of Integra's Board of Directors out of any funds legally available therefor.
Under the BCL, dividends may not be paid if Integra is at the time insolvent or
would be insolvent after payment of such dividend.
The parent company's principal assets are its investments in its
subsidiaries and the dividends from its subsidiary banks constitute an important
source of operating income. Dividends that may be paid by Integra Bank to
Integra are subject to certain regulatory limitations. The dividends paid by a
Pennsylvania state bank
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may not exceed accumulated net earnings (essentially, undivided profits) of the
bank. Generally, the prior approval of the FRB is required if the total of all
dividends declared by a state member bank in any calendar year exceeds its net
profits (as defined) for that year combined with its retained net profits for
the preceding two calendar years. Further, no dividends may be paid by an
insured bank if the bank is in arrears in the payment of any insurance
assessment due to the FDIC. The FDIC, the FRB and the Pennsylvania Department of
Banking also have the authority to disallow the payment of dividends if the
payment of such dividends is determined to constitute an unsafe and unsound
practice.
Integra Trust Company, National Association, a national bank regulated by
the Office of the Comptroller of the Currency, is subject to restrictions on the
payment of dividends that are similar to the restrictions to which Integra Bank
is subject.
Integra Bank is subject to certain restrictions imposed by Federal law on
any extensions of credit to, and certain other transactions with Integra and
certain other affiliates, on investments in stock or other securities thereof
and on the taking of such securities as collateral for loans. The payment of
dividends by Integra Bank may also be affected or limited by other factors, such
as the requirement to maintain adequate capital above regulatory minimums.
Liquidation Rights. In the event of a voluntary or involuntary liquidation
or dissolution of Integra, the holders of Integra Common are entitled to receive
pro rata the net assets available for distribution to common stock shareholders
after payment of all liabilities and obligations of Integra and all preference
distributions to holders of Integra Preferred Stock.
Integra is a legal entity separate and distinct from its subsidiary banks
and other subsidiaries. Accordingly, the right of Integra and its shareholders
to participate in any distribution of the assets or earnings of any subsidiary
is necessarily subject to the prior claims of creditors of the subsidiary
(including depositors of Integra Bank), except to the extent that claims of
Integra itself as a creditor may be recognized.
Issuance of Additional Shares. The Integra Common does not carry preemptive
rights. Integra may issue Integra Common, option rights or securities having
conversion or option rights without first offering them to holders of Integra
Common.
Integra's Articles of Incorporation provide that, except as limited by the
provisions of any class or series of Integra Preferred Stock, the Board of
Directors may in its discretion, at any time or from time to time, issue or
cause to be issued all or any part of the authorized and unissued shares of
Integra Common for consideration of such character and value as the Board shall,
from time to time, fix or determine.
Conversion Rights, Sinking Fund and Redemption Provisions. There are no
conversion rights or sinking fund provisions applicable to Integra Common, and
Integra Common is not subject to redemption.
Amendment to the Articles of Incorporation and By-laws of Integra. Under
the BCL, Integra's Articles of Incorporation may be amended by the affirmative
vote of at least a majority of the votes cast by all shareholders entitled to
vote on the proposed amendment, except that by its terms the provision
establishing a classified Board of Directors may be amended only by the
affirmative vote of not less than two-thirds of the outstanding shares of each
class of stock of Integra, voting as a class.
The Bylaws of Integra may be amended by a vote of a majority of the Board
of Directors at any regular meeting of the Board or at any special meeting
called for that purpose, except that under the BCL, the Board of Directors may
not amend the Bylaws in certain respects, including the provision relating to
the limitation of the personal liability of directors. Further, under the BCL,
any amendment of the Bylaws by Integra's Board of Directors is subject to the
power of the shareholders to change such action.
Considerations to be Observed in Acquisitions or Sales. The Articles of
Incorporation of Integra provide that the Board of Directors of Integra, when
evaluating any offer by Integra to acquire a bank or bank holding company or any
offer by a third party to acquire the securities or assets of or to combine with
Integra, shall, in the exercise of its business judgment, give due consideration
to all relevant factors, including the social, economic and other effects on
depositors, borrowers, customers and employees of the bank or banks affected
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and on the communities in which such banks are located, in determining the
action that is in the best interests of Integra and its shareholders. The
consideration of such factors is authorized under Pennsylvania law.
GENERAL COMPARISON OF NATIONAL CITY AND INTEGRA CAPITAL STOCK
GENERAL
If the shareholders of Integra approve, and the stockholders of National
City adopt, the Agreement and the Merger is subsequently consummated, all
shareholders of Integra will become stockholders of National City. National City
is a corporation organized under, and governed by, the DGCL, whereas Integra is
a corporation organized under, and governed by, the BCL.
The following is a brief summary of certain differences between the
Delaware corporate laws applicable to National City and the Pennsylvania
corporate laws applicable to Integra and certain differences between National
City's Certificate and Bylaws and Integra's Articles and Bylaws. The purpose of
this summary is to briefly indicate the differences between holding National
City capital stock and Integra capital stock to the extent such differences are
created by the state corporation laws applicable to National City and Integra or
arise because of differences between National City's Certificate and Bylaws and
Integra's Articles and Bylaws. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE DGCL, THE BCL, NATIONAL CITY'S CERTIFICATE AND BYLAWS AND
INTEGRA'S ARTICLES AND BYLAWS.
DIRECTORS
National City's bylaws provide that the number of directors of National
City shall be determined by resolution of the Board of Directors, that such
directors shall be elected at the annual meeting of the stockholders of National
City, and that each director elected shall hold office until his or her
successor is duly elected and shall qualify. The number of directors as of the
Annual Meeting is set at 15. Section 141 of the DGCL provides that any director
or the entire board of directors may be removed, with or without cause, by the
holders of a majority of shares then entitled to vote at an election of
directors.
The Integra bylaws and Articles of Incorporation provide that the Integra
Board of Directors shall be divided into three classes, each class serving a
staggered three year term, with the term of one class expiring each year. If at
any meeting of Integra shareholders, whether an annual meeting or special
meeting for the election of directors, directors of more than one class are to
be elected, separate elections shall be held for the directors of each class.
The classification of Integra's Board of Directors may restrict a minority
shareholder's ability to obtain representation on the Integra Board of
Directors.
LIMITATION OF DIRECTOR LIABILITY IN CERTAIN CIRCUMSTANCES
As permitted by the DGCL, Article Seventh of National City's Certificate
provides that directors of National City shall not be liable personally to
National City or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability arising out of (a) any breach of the
director's duty of loyalty to National City or its stockholders, (b) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) payment of a dividend or approval of a stock repurchase in
violation of Section 174 of the DGCL or (d) any transaction from which the
director derived an improper personal benefit. This provision protects National
City directors against personal liability for monetary damages from breaches of
their duty of care. Under Delaware law, absent adoption of Article Seventh,
directors can be held liable for gross negligence in connection with decisions
made on behalf of the corporation in the performance of their duty of care, but
may not be liable for simple negligence. Although Article Seventh provides
National City directors with protection from certain awards of monetary damages
for breaches of their duty of care, it does not eliminate the director's duty of
care. Accordingly, Article Seventh has no effect on the availability of
equitable remedies, such as an injunction or rescission, based upon a director's
breach of his duty of care. Article Seventh does not apply to officers of
National City who are not directors of National City.
The Bylaws of Integra provide that a director of Integra shall not be
personally liable for monetary damages for any action taken, or any failure to
take any action except to the extent that such elimination or
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limitation of liability is expressly prohibited by applicable law. Under the
BCL, the personal liability of a director may not be eliminated or limited if:
(1) the director has breached or failed to perform the duties of his office
under the BCL (relating to the fiduciary duties of directors); and (2) the
breach or failure to perform constitutes self-dealing, willful misconduct or
recklessness. Furthermore, this limitation on the personal liability of
directors of Integra does not apply to: (1) the responsibility or liability of a
director pursuant to any criminal statute; or (2) the liability of a director
for the payment of taxes pursuant to local, state or federal law.
INDEMNIFICATION AND INSURANCE
National City. Under Section 145 of the DGCL, directors, officers,
employees and other individuals may be indemnified against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement in connection
with specified actions, suits or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation -- a "derivative action") if they acted in good faith and in a
manner they reasonably believed to be in, or not opposed to, the best interests
of the corporation, and, regarding any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions. The DGCL requires court approval before
there can be any indemnification where the person seeking indemnification has
been found liable to the corporation. To the extent that a person otherwise
eligible to be indemnified is successful on the merits of any claim or defense
described above, indemnification for expenses (including attorneys' fees)
actually and reasonably incurred is mandated by the DGCL.
Article VI of National City's Bylaws provides that National City must
indemnify, to the fullest extent authorized by the DGCL, each person who was or
is made party to, is threatened to be made a party to, or is involved in, any
action, suit or proceeding because he is or was a director, officer or employee
of National City or of any National City subsidiary (or was serving at the
request of National City as a director, trustee, officer, employee or agent of
another entity) while serving in such capacity against all expenses, liabilities
or loss incurred by such person in connection therewith. The amount of any
indemnification to which any person shall otherwise be entitled under Article VI
shall be reduced to the extent that such person shall otherwise be entitled to
valid and collectible indemnification provided by a subsidiary of National City
or any other source.
Article VI also provides that National City may pay expenses incurred in
defending the proceedings specified above in advance of their final disposition.
National City may advance expenses to any director, officer or employee only
upon delivery to National City of an undertaking by the indemnified party
stating that he has reasonably incurred or will reasonably incur actual expenses
in defending an actual civil or criminal suit, action or proceeding in his
capacity as such director, officer or employee, or arising out of his status as
such director, officer or employee, and that he undertakes to repay all amounts
so advanced if it is ultimately determined that the person receiving such
payments is not entitled to be indemnified.
Finally, Article VI provides that National City may maintain insurance, at
its expense, to protect itself and any of its directors, officers, employees or
agents against any expense, liability or loss, regardless of whether National
City has the power or obligation to indemnify that person against such expense,
liability or loss under the provisions of Article VI.
The right to indemnification is not exclusive of any other right which any
person may have or acquire under any statute, provision of National City's
Certificate or bylaws, or otherwise. Additionally, no amendment to National
City's Certificate can increase the liability of any director or officer for any
act or omission by him prior to such amendment.
Integra. The BCL provides in general that a corporation may indemnify any
person, including its directors, officers and employees, who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative
(other than actions by or in the right of the corporation) by reason of the fact
that he or she is or was a representative of or serving at the request of the
corporation, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with the action or
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proceeding if he or she is determined by the board of directors, or in certain
circumstances by independent legal counsel to the shareholders, to have acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal proceeding, had no reason to believe his conduct was unlawful. In the
case of actions by or in the right of the corporation, indemnification is not
permitted in respect of any claim, issue or matter as to which the person has
been adjudged to be liable to the corporation except to the extent a court
determines that the person is fairly and reasonably entitled to indemnification.
In any case, to the extent that the person has been successful on the merits or
otherwise in defense of any claim, issue or matter, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith. The BCL also provides that the
indemnification permitted or required by the BCL is not exclusive of any other
rights to which a person seeking indemnification may be entitled.
Integra's Articles of Incorporation and Bylaws provide that Integra shall
indemnify and hold harmless to the full extent not prohibited by law any person
who was or is made a party to, or threatened to be made a party to, or is
involved in, any action, suit, or proceeding (including actions by or in the
right of Integra) by reason of the fact that he or she is or was a director,
officer or employee of Integra (or is or was serving at the request of Integra
as a director, officer, trustee, employee, or agent of a related enterprise,
including any employee benefit plan of Integra, or is or was serving at the
specific written request of Integra as a director, officer, trustee, employee,
or agent of an unrelated enterprise) against all expenses and liabilities he or
she actually incurs, including, without limitation, judgments and amounts paid
or to be paid in settlement of or in actions brought by or in the right of
Integra. Directors and officers are also entitled to payment in advance of
expenses incurred in defending any such action, suit or proceeding, upon receipt
of an undertaking to repay all amounts so advanced if it is ultimately
determined that they are not entitled to be indemnified, or, in the case of a
criminal action, if a majority of the Board of Directors so determines. Under
the BCL, indemnification pursuant to this provision of Integra's Articles of
Incorporation and bylaws is not permitted in any case in which the act or
failure to act giving rise to the claim for indemnification is determined by a
court to have constituted willful misconduct or recklessness. There may be other
circumstances where indemnification may not be permitted as a matter of public
policy.
Integra and its subsidiaries also carry insurance for their officers,
directors and certain other persons against certain liabilities, including
certain liabilities under the Securities Act, which they might incur as
directors, officers and certain other persons of Integra or its subsidiaries or
as a representative of any other organization which they serve at Integra's
request.
ANTITAKEOVER STATUTES
Delaware Business Combination Statute. Section 203 of the DGCL ("Section
203"), which applies to National City, regulates transactions with major
stockholders after they become major stockholders. Section 203 prohibits a
Delaware corporation from engaging in mergers, dispositions of 10% or more of
its assets, issuances of stock and other transactions ("business combinations")
with a person or group that owns 15% or more of the voting stock of the
corporation (an "interested stockholder"), for a period of three years after the
interested stockholder crosses the 15% threshold. These restrictions on
transactions involving an interested stockholder do not apply if (a) before the
interested stockholder owned 15% or more of the voting stock, the board of
directors approved the business combination or the transaction that resulted in
the person or group becoming an interested stockholder; (b) in the transaction
that resulted in the person or group becoming an interested stockholder, the
person or group acquired at least 85% of the voting stock other than stock owned
by inside directors and certain employee stock plans; (c) after the person or
group became an interested stockholder, the board of directors and at least
two-thirds of the voting stock other than stock owned by the interested
stockholder approves the business combination; or (d) certain competitive
bidding circumstances.
PENNSYLVANIA BUSINESS COMBINATION STATUTE
Integra is subject to provisions of the BCL regarding business
combinations. The BCL prohibits certain business combinations (as defined in the
BCL) involving a Pennsylvania corporation that has voting shares registered
under the Exchange Act and an "interested shareholder" unless one of five
conditions is satisfied or an exemption is found. An "interested shareholder" is
generally defined to include a person who beneficially
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owns at least 20% of the votes that all shareholders would be entitled to cast
in an election of directors of the corporation. In general, a corporation can
effect a business combination involving an interested shareholder under the BCL
if one of the following five conditions is satisfied: (i) prior to the date on
which the person becomes an interested shareholder, the board of directors
approves the business combination or the purchase of shares that causes the
person to become an interested shareholder; (ii) the business combination is
approved by an affirmative vote of the holders of all outstanding shares; (iii)
the business combination is approved by a majority of the disinterested
shareholders at a meeting called at least five years after the date the person
becomes an interested shareholder; (iv) the interested shareholder holds 80% or
more of the votes that all shareholders would be entitled to cast in an election
of directors of the corporation and the business combination is approved by a
majority of the disinterested shareholders at a meeting held at least three
months after the interested shareholder acquired such 80% interest, provided
that the fair price and procedural requirements set forth in the BCL are
satisfied; or (v) the business combination is approved by the shareholders at a
meeting called at least five years after the date the person becomes an
interested shareholder, provided that the fair price and procedural requirements
set forth in the BCL are satisfied.
PENNSYLVANIA CONTROL TRANSACTION STATUTE
The BCL provides that any holder of voting shares of a registered
corporation who objects to a "control transaction" will be entitled to make a
written demand on the "controlling person or group" for payment of the fair
value of the voting shares of the corporation held by the shareholder. A
"control transaction" is defined as the acquisition by a person or group (the
controlling person or group) that would entitle the holders thereof to cast at
least 20% of the votes that all shareholders would be entitled to cast in an
election of the directors of the corporation.
CONSIDERATION OF FACTORS; GENERAL POWERS
The BCL provides that in discharging the duties of their respective
positions, the board of directors, committees of the board and individual
directors of Integra may, in considering the best interests of the corporation,
consider to the extent they deem appropriate the following factors: (i) the
effects of any action upon any or all groups affected by such action, including
shareholders, employees, suppliers, customers and creditors of Integra, and upon
communities in which offices or other establishments of the corporation are
located; (ii) the short-term and long-term interests of the corporation,
including benefits that may accrue to the corporation from its long-term plans
and the possibility that these interest may be best served by the continued
independence of the corporation; (iii) the resources, intent and conduct (past,
stated and potential) of any person seeking to acquire control of the
corporation; and (iv) all other pertinent factors.
Integra's Articles of Incorporation provide that the Board of Directors of
Integra, when evaluating any offer by Integra to acquire a bank or bank holding
company or any offer by a third party to acquire the securities or assets of or
to combine with Integra, shall in the exercise of its judgment give due
consideration to all relevant factors, including the social, economic and other
effects on depositors, borrowers, customers and employees of the bank or banks
affected and on the communities in which such banks are located, in determining
the action that is in the best interests of Integra and its shareholders. See
"DESCRIPTION OF INTEGRA CAPITAL STOCK--Integra Common Stock."
ISSUANCE OF PREFERRED STOCK
National City's Certificate and Integra's Articles authorize the Board of
Directors of the respective companies to issue shares of preferred stock, from
time to time, in one or more series as the Boards of Directors may determine,
and to fix the relative powers, preferences and rights (including voting rights)
of each such series of preferred stock in relation to the powers, preferences
and rights of any other series of preferred stock. Voting rights, if any, may be
general, special, conditional or limited. The Boards of Directors of National
City and Integra also have the discretion to determine the number of votes per
share which each holder of a share of a series of the preferred stock will have,
but in no event may any holder of any series of National City preferred stock be
entitled to more than one vote per share. Additionally, the Boards of Directors
of National City and Integra are authorized to permit the holders of a series of
preferred stock to vote separately or together with the holders of one or more
other series of preferred stock on all or some
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matters as a separate voting group. Except with respect to the number of votes
per share, National City's Certificate does not materially differ from the
provisions of Integra's Articles with respect to the ability of the Boards of
Directors of National City and Integra to issue preferred stock in one or more
series and to fix the relative powers, preferences and rights of each such
series in relation to the powers, preferences and rights of any other series of
preferred stock. The power of the Boards of Directors of National City and
Integra to issue preferred stock with voting or other powers, preferences and
rights may be used to impede or discourage a takeover attempt. See "DESCRIPTION
OF NATIONAL CITY CAPITAL STOCK -- Preferred Stock" and "DESCRIPTION OF INTEGRA
CAPITAL STOCK -- Preferred Stock -- General."
Generally, the issuance of preferred stock by National City could (a)
result in a class of securities outstanding which will have certain preferences
regarding distributions in a liquidation over National City Common and might
provide for certain rights (whether general, special, conditional or limited)
that could dilute the voting rights of National City Common and (b) result in
dilution of the net income per share and net book value per share relating to
National City Common. Further, the issuance of any additional shares of National
City Common, pursuant to any conversion rights granted holders of any preferred
stock, may also result in dilution of the voting rights, net income per share
and net book value of National City Common.
Specifically, the terms of National City's Convertible Preferred Stock
provide that in the event of any voluntary or involuntary liquidation,
dissolution or winding up of National City, the holders of shares of Convertible
Preferred Stock are entitled to receive out of the assets of National City
available for distribution to stockholders, before any distribution of assets is
made to holders of National City Common, liquidation distributions in the amount
of $250 per share (equivalent to $50 per Depositary Share) plus accrued and
unpaid dividends. Additionally, if the equivalent of six quarterly dividends
payable on the Convertible Preferred Stock are in arrears, the number of
directors of National City will be increased by two, and the holders of
Convertible Preferred Stock will be entitled to elect two directors to fill such
vacancies. Such right to elect two additional directors shall continue until all
dividends in arrears have been paid or declared and set apart for payment.
Finally, shares of Convertible Preferred Stock are convertible at any time at
the option of the holder thereof into shares of National City Common at a
conversion price of $20.975 per share of National City Common (equivalent to a
conversion rate of approximately 11.919 shares of National City Common for each
share of Convertible Preferred Stock and 2.384 shares for each Depositary
Share). See "DESCRIPTION OF NATIONAL CITY CAPITAL STOCK -- Preferred Stock."
CUMULATIVE VOTING
Section 214 of the DGCL provides that no cumulative voting rights, in
respect of elections of directors, exist under Delaware Law, unless a
corporation's certificate of incorporation provides otherwise. National City's
Certificate does not provide for cumulative voting in elections of directors.
The Integra Articles of Incorporation provide shareholders with the right
to cumulate their votes in the election of the Board of Directors. Under
cumulative voting, each shareholder is entitled to the number of votes equal to
the number of shares held multiplied by the total number of directors to be
elected in the same election and may cast that whole number of votes for one
candidate or distribute them among two or more candidates. The right of
cumulative voting may provide minority shareholders with a greater ability to
obtain representation on the Board.
ACTION WITHOUT A MEETING
Section 228 of the DGCL permits any action required or permitted to be
taken at a stockholders' meeting to be taken by written consent signed by the
holders of the number of shares that would have been required to effect the
action at an actual meeting of the stockholders. Generally, holders of a
majority of outstanding shares can effect such an action. The DGCL also provides
that a corporation's certificate of incorporation may restrict or even prohibit
stockholders' action without a meeting. National City's Certificate does not
restrict or prohibit stockholders' action without a meeting.
Under the BCL, in corporations which have a class of voting stock
registered under the Exchange Act such as Integra, an action may be authorized
by the shareholders without a meeting by less than unanimous
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consent only if such action without a meeting is permitted by the corporation's
articles of incorporation. Integra's Articles do not permit such action by
shareholders without a meeting.
SPECIAL MEETINGS
Under Section 211(d) of the DGCL, the board of directors or those persons
authorized by the corporation's certificate of incorporation or bylaws may call
a special meeting of the corporation's stockholders. National City's Bylaws
provide that a special meeting may be called by the Chairman of the Board and
must be called by the Chairman of the Board or Secretary at the request in
writing of a majority of the Board of Directors, or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of National
City issued and outstanding and entitled to vote.
In comparison, Section 1755 of the BCL provides that special meetings of
the shareholders may be called at any time by its board of directors or the
person or persons specifically authorized to do so by the Bylaws or at the
request of shareholders holding of record not less than one-fifth of all of the
shares outstanding and entitled to vote on the business for which the meeting is
being called. Integra's bylaws provide that a special meeting may be called by
the Chairman of the Board, the President, any Vice-Chairman of the Board or the
Board of Directors.
VOTING, APPRAISAL RIGHTS AND CORPORATE REORGANIZATIONS
The DGCL generally requires a majority vote of stockholders to approve a
merger, sale of assets or similar reorganization transaction. Under Section
251(f) of the DGCL, however, no vote of the stockholders of a corporation
surviving the merger is required if the number of shares to be issued in the
merger does not exceed 20% of the shares of the surviving corporation
outstanding immediately prior to the date of the merger and if certain other
conditions are met. Although the approval of the Agreement by the stockholders
of National City is not required under the DGCL because the Merger is with a
subsidiary of National City, such adoption is included in the Agreement as a
condition to the parties' obligations for the purpose of meeting the NYSE
listing requirements to which National City is subject.
Section 262 of the DGCL does not provide for dissenters' rights of
appraisal for (a) the sale, lease or exchange of all or substantially all of the
assets of a corporation, (b) a merger by a corporation, the shares of which are
either listed on a national securities exchange or held by more than 2,000
stockholders if such stockholders receive shares of the surviving corporation or
of a listed or widely held corporation or (c) stockholders of a corporation
surviving a merger if no vote of such stockholders is required to approve the
merger. See "MERGER -- Appraisal and Dissenters' Rights -- National City."
The BCL requires that a majority of votes cast by shareholders entitled to
vote thereon is required to approve a plan of merger or share exchange. The
approval of the Agreement by the affirmative vote of a majority of the votes
cast of Integra Common eligible to vote is a condition to the parties'
obligation to close.
Section 1571 of the BCL does not provide for dissenters' rights for a
merger or plan of share exchange by a corporation the shares of which are (a)
registered on a national securities exchange, or (b) held of record by 2,000
shareholders. See "MERGER -- Appraisal and Dissenters' Rights -- Integra."
BYLAWS
Section 109 of the DGCL places the power to adopt, amend or repeal bylaws
in the corporation's shareholders, but permits the corporation, in its
certificate of incorporation, also to vest such power with the board of
directors. National City's Certificate contains such a provision. Although the
Board of Directors of National City has been vested with such authority,
National City's stockholders' power to adopt, amend or repeal Bylaws remains
unrestricted.
The Bylaws of Integra may be amended by a vote of a majority of the Board
of Directors at any regular meeting of the Board or at any special meeting
called for that purpose, except that under the BCL, the Board of Directors may
not amend the Bylaws in certain respects, including the provision relating to
the limitation of the personal liability of directors. Further, under the BCL,
any amendment of the Bylaws by Integra's Board of Directors is subject to the
power of the shareholders to change such action.
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PREEMPTIVE RIGHTS
Under Section 102 of the DGCL, no statutory preemptive rights will exist,
unless a corporation's certificate of incorporation specifies otherwise.
National City's Certificate does not provide for any such preemptive rights.
Section 1530 of the BCL provides that the shareholders of a corporation do
not have a preemptive right to acquire a corporation's unissued shares except to
the extent the articles of incorporation so provide. Integra's Articles do not
provide for any such preemptive rights.
DIVIDENDS
Delaware corporations may pay dividends out of surplus or, if there is no
surplus, out of net profits for the fiscal year in which declared and for the
preceding fiscal year. Section 170 of the DGCL also provides that dividends may
not be paid out of net profits if, after the payment of the dividend, capital is
less than the capital represented by the outstanding stock of all classes having
a preference upon the distribution of assets.
In comparison, the BCL does not permit dividend distributions if, after
giving effect to the proposed dividend, (a) the corporation would be unable to
pay its debts as they become due in the ordinary course of business, or (b) the
corporation's total assets would be less than the sum of its total liabilities
plus (unless the articles of incorporation permit otherwise) the amount that
would be needed, if the corporation were to be dissolved at the time of
distribution, to satisfy the preferential rights (if any) of shareholders whose
preferential rights are superior to those shareholders receiving the
distribution.
National City and Integra are subject to the same FRB policies regarding
payment of dividends, which generally limit dividends to operating earnings. See
"CERTAIN REGULATORY CONSIDERATIONS -- Payment of Dividends."
INFORMATION ABOUT NATIONAL CITY
National City is a registered multi-bank holding company under the BHCA and
is a registered savings and loan holding company under the Home Owners' Loan Act
of 1933, as amended (the "HOLA"), and is incorporated under the laws of the
State of Delaware. As of December 31, 1995, National City owned substantially
all of the outstanding stock of 17 commercial banks and 1 Federal Savings Bank
in Ohio, Kentucky and Indiana and through these financial institutions, operated
645 offices. National City subsidiaries provide financial services that meet a
wide range of customer needs, including commercial and retail banking, trust and
investment services, item processing, mortgage servicing and credit card
processing. At December 31, 1995, National City, its affiliate banks and other
subsidiaries had consolidated total assets of $36.2 billion and consolidated
total deposits of $25.2 billion.
National City was organized under Delaware law in 1972, and had, along with
its subsidiaries, 20,767 full-time equivalent employees at December 31, 1995.
As of December 31, 1995, the four largest commercial banking subsidiaries
of National City had offices and total assets, loans, deposits and equity
capital, as follows:
<TABLE>
<CAPTION>
(MILLIONS OF DOLLARS)
-------------------------------------------------------
TOTAL EQUITY
OFFICES ASSETS LOANS DEPOSITS CAPITAL
------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
National City Bank...................... 97 $ 10,188 $ 6,243 $5,935 $ 623
National City Bank, Kentucky............ 84 6,928 4,890 4,076 485
National City Bank, Columbus............ 121 6,764 4,367 4,651 390
National City Bank, Indiana............. 125 5,618 4,149 4,394 474
</TABLE>
For more detailed information about National City, reference is made to the
National City Annual Report on Form 10-K for the year ended December 31, 1995,
which is incorporated herein by reference. See
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"AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
INFORMATION ABOUT INTEGRA
Integra is a regional, multibank holding company registered under the BHCA.
At December 31, 1995, Integra had consolidated total assets of $14.3 billion and
consolidated total deposits of $10.4 billion. Integra is the third largest bank
holding company in western Pennsylvania and the fifth largest in Pennsylvania.
Integra Bank carries on a general retail and commercial banking business through
263 offices throughout 23 counties in western Pennsylvania. Other major
affiliates include Integra Investment Company with unrealized appreciation in
its marketable equity securities portfolio of $113.7 million, Integra Mortgage
Company with a $3.7 billion portfolio of loans serviced for others, Integra
Trust Company with assets at a market value of $9.3 billion on December 31, 1995
and Altegra Credit Company, an indirect, non-conforming mortgage and home equity
lender.
For more detailed information about Integra, reference is made to the
Integra Annual Report on Form 10-K for the year ended December 31, 1995, which
is incorporated herein by reference. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
EXPERTS
The consolidated financial statements of National City appearing in
National City's Annual Report on Form 10-K for the year ended December 31, 1995,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements included in Integra's Annual Report
on Form 10-K for the year ending December 31, 1995, incorporated by reference in
this Prospectus and Joint Proxy Statement, have been incorporated herein in
reliance on the report, which includes an explanatory paragraph discussing the
adoption of various Financial Accounting Standards Board Statements in 1995 and
1993, of Coopers & Lybrand L.L.P., independent certified public accountants,
given on the authority of that firm as experts in accounting and auditing.
LEGAL OPINIONS
The Agreement provides as a condition to the parties' obligation to close
that National City and Integra shall have received the opinion of Buchanan
Ingersoll Professional Corporation, substantially to the effect, among other
things, that no gain or loss will be recognized by the shareholders of Integra
who exchange their shares of Integra Common solely for shares of National City
Common pursuant to the Merger.
NATIONAL CITY STOCKHOLDER PROPOSALS
Holders of National City Common who wish to make a proposal to be included
in National City's Proxy Statement and Proxy for National City's 1997 Annual
Meeting of Shareholders which, unless changed, is scheduled to be held on April
28, 1997, in Cleveland, Ohio, must cause such proposal to be received by
National City at its principal office not later than November 6, 1996. Each
proposal submitted should be accompanied by the name and address of the
stockholder submitting the proposal, the number of shares of National City
Common owned, and the dates those shares were acquired by the stockholder. If
the proponent is not a stockholder of record, proof of beneficial ownership
should also be submitted. The proponent should also state his or her intention
to appear at National City's 1997 Annual Meeting, either in person or by
representative, to present the proposal. The proxy rules of the Commission
govern the content and form of stockholder proposals and the minimum
stockholding requirement. All proposals must be a proper subject for action at
National City's 1997 Annual Meeting.
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TRANSACTIONS WITH MANAGEMENT
Certain of National City's directors, executive officers and associates of
directors or executive officers were customers of or had various transactions
with National City and its subsidiaries in the ordinary course of business in
1995. These transactions cover a wide range of banking and trust services, both
personal and corporate. Without exception, all services were provided to the
directors, executive officers and their associates at market rates consistent
with published fee schedules. Similar additional transactions may be expected to
take place in the ordinary course of business in the future. Although various
laws and regulations governing National City and its subsidiaries allow National
City and its subsidiaries to make loans to a limited extent to its executive
officers, all loans and loan commitments and sales of commercial paper involving
executive officers, directors or their affiliates were made on substantially the
same terms, including interest rates and collateral, as those prevailing at that
time for comparable transactions with other persons and, did not involve more
than the normal risk of collectibility or other unfavorable features.
VOTING
NATIONAL CITY
A quorum is required for the transaction of business by stockholders at the
meeting. The election of directors requires the plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. The approval of the amendment to the Option
Plan and the approval of the selection of Ernst and Young LLP as independent
auditors for 1996 require the affirmative vote of the holders of the majority of
shares present in person or represented by proxy and entitled to vote at the
Annual Meeting. The proposal to adopt the Agreement requires the affirmative
vote of the holders of a majority of the shares outstanding and entitled to
vote. Shares represented by proxies which are marked "abstain" on any of the
proposals will be counted for the purposes of determining the number of shares
represented by proxy at the meeting and not in support of the proposal. Such
proxies will thus have the effect as if the shares represented thereby were
voted against those proposals marked "abstain" (except for the election of
directors is by a plurality of the votes). Shares not voted on proxies returned
by brokers will be treated as not represented at the meeting and will therefor
have no impact on the adoption of all the proposals set forth in this proxy
except for the adoption of the Agreement. Any action or inaction other than a
vote for the adoption of the Agreement or the returning of the proxy signed but
not marked is the equivalent to a no vote.
INTEGRA
A quorum is required for the transaction of business by shareholders at the
Integra Special Meeting of Shareholders. The presence in person or by proxy of
at least a majority of the shares of Integra Common outstanding and entitled to
vote at the meeting constitutes a quorum. Under Pennsylvania law, abstentions do
not count as votes cast and, therefore, have no effect on the vote required on
any matter at the meeting since the affirmative vote of at least a majority of
the votes cast (not counting abstentions) is required for approval of a matter.
Given the nature of the matters being considered at the Integra Special Meeting
of Shareholders, there should not be any broker nonvotes, although like
abstentions, broker nonvotes have no impact on the vote.
GENERAL
Management of National City is not aware of any matter which may be
presented for action at the Annual Meeting other than the matters herein set
forth. If any other matters come before the meeting or any adjournment thereof,
it is the intention of the persons named in the enclosed proxy to vote the
shares represented thereby in accordance with their best judgment pursuant to
the discretionary authority granted in the proxy.
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Appendix A
AGREEMENT AND PLAN OF MERGER
----------------------------
by and between
NATIONAL CITY CORPORATION,
and
INTEGRA FINANCIAL CORPORATION
dated as of August 27, 1995
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TABLE OF CONTENTS
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<TABLE>
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PAGE
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<S> <C>
I. THE MERGER
1.1 Merger 1
1.2 Effective Time 1
1.3 Effect of Merger 2
1.4 Certificate of Incorporation and By-laws 2
1.5 Directors and Officers 2
(a) Surviving Corporation 2
(b) NCC 2
1.6 Additional Actions 2
II. CONVERSION OF SHARES
2.1 Conversion of Shares 3
2.2 Assumption of Employee Stock Options 4
2.3 Exchange of Certificates
(a) Exchange Agent 5
(b) Notice of Exchange 5
(c) Transfer 5
(d) Right to Merger Consideration 6
(e) Distribution with Respect to Unexchanged
Certificates 6
(f) Voting With Respect to Unexchanged Certificates 7
(g) No Fractional Shares 7
2.4 Closing of the Company's Transfer Books 7
2.5 Changes in NCC Common Stock 7
III. REPRESENTATIONS AND WARRANTIES OF NCC
3.1 Corporate Organization 8
3.2 Authority 8
3.3 Capitalization 8
3.4 Subsidiaries 9
3.5 Information in Disclosure Documents,
Registration Statement, Etc. 10
3.6 Consents and Approvals; No Violation 11
3.7 Reports and Financial Statements 12
3.8 Taxes 12
3.9 Employee Plans 13
3.10 Material Contracts 14
</TABLE>
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<TABLE>
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<S> <C>
3.11 Absence of Certain Changes or Events 15
3.12 Litigation 15
3.13 Compliance with Laws and Orders 15
3.14 Agreements with Bank Regulators, Etc. 15
3.15 NCC Ownership of Stock 16
3.16 Accounting Matters 16
3.17 Fees 16
3.18 NCC and Acquisition Action 16
3.19 Vote Required 16
3.20 Material Interests of Certain Persons 17
3.21 Environmental Matters 17
IV. REPRESENTATIONS AND WARRANTIES OF IFC
4.1 Corporate Organization 19
4.2 Authority 19
4.3 Capitalization 20
4.4 Subsidiaries 20
4.5 Information in Disclosure Documents,
Registration Statement, Etc. 21
4.6 Consent and Approvals; No Violation 21
4.7 Reports and Financial Statements 22
4.8 Taxes 22
4.9 Employee Plans 23
4.10 Material Contracts 24
4.11 Absence of Certain Changes or Events 25
4.12 Litigation 25
4.13 Compliance with Laws and Orders 25
4.14 Agreements with Bank Regulators, Etc. 26
4.15 Accounting Matters 26
4.16 Fees 26
4.17 Company Action 26
4.18 Vote Required 27
4.19 Material Interests of Certain Persons 27
4.20 Environmental Matters 27
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
V. COVENANTS
5.1 Acquisition Proposals 27
5.2 Interim Operations of IFC 28
(a) Conduct of Business 28
(b) Articles and By-laws 28
(c) Capital Stock 28
(d) Dividends 29
(e) Employee Plans, Compensation, Etc. 29
(f) Certain Policies 30
5.3 Interim Operations of NCC 30
5.4 Employee Matters 30
(a) Benefit Agreements 30
(b) Retirement Plans 30
(c) General 30
5.5 Access and Information 31
5.6 Certain Filings, Consents and Arrangements 31
5.7 State Takeover Statutes 32
5.8 Indemnification and Insurance 32
(a) Indemnification 32
(b) Insurance 32
5.9 Additional Agreements 32
5.10 Publicity 33
5.11 Registration Statement 33
5.12 Securities Act; Pooling-of-Interests 33
5.13 Stock Exchange Listings 34
5.14 Proxy 34
5.15 Stockholders' Meetings 35
5.16 Pooling-of-Interests and Tax-Free Reorganization Treatment 35
5.17 Provision of Shares 35
VI. CLOSING MATTERS
6.1 The Closing 35
6.2 Documents and Certificates 36
VII. CONDITIONS
7.1 Conditions to Each Party's Obligations to Effect the Merger 37
7.2 Conditions to Obligation of IFC to Effect the Merger 38
7.3 Conditions to Obligation of NCC to Effect the
Merger 38
</TABLE>
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<TABLE>
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PAGE
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<S> <C>
VIII. MISCELLANEOUS
8.1 Termination 39
8.2 Non-Survival of Representations, Warranties and
Agreements 39
8.3 Waiver and Amendment 40
8.4 Entire Agreement 40
8.5 Applicable Law; Consent to Jurisdiction 40
8.6 Certain Definitions; Headlines 40
8.7 Notices 41
8.8 Counterparts 43
8.9 Parties in Interest; Assignment 43
8.10 Expenses 43
8.11 Enforcement of the Agreement 44
8.12 Severability 44
Signatures 44
Index to Definitions i
</TABLE>
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INDEX TO DEFINITIONS
<TABLE>
<CAPTION>
DEFINITIONS SECTIONS
- - - ----------- --------
<S> <C>
Acquisition Transaction Section 5.1
Affiliate Section 5.12
Agreement Introduction
Articles of Merger Section 1.2
BCL Section 1.1
BHCA Section 3.1
Benefit Agreements Section 3.10
Certificate Section 2.3(a)
Closing Section 6.1
Closing Date Section 6.1
Code Introduction
Commission Section 3.5
Consents Section 7.1(c)
Constituent Corporations Section 1.2
Control Section 8.6(ii)
Certificate of Merger Section 1.2
DGCL Section 1.1
DPC Shares Section 2.1(a)
ERISA Section 3.9
Effective Time Section 1.3
Environmental Law Section 3.21
Exchange Act Section 3.5
Exchange Agent Section 2.3(a)
FRB Section 3.6
Fed Approval Date Section 8.6
Governmental Entity Section 3.6
HSR Act Section 3.6
Hazardous Substance Section 3.21
IRS Section 3.9
Indemnitees Section 5.8
Loan Portfolio Properties and Other Properties Owned Section 3.21
IFC Introduction
IFC Common Stock Section 2.1(a)
IFC Contracts Section 4.10
IFC Disclosure Letter Section 4.3
IFC Employee Plans Section 4.9
IFC Meeting Section 5.15(a)
IFC Option Plans Section 2.2
IFC Reports Section 4.7
IFC Retirement Plan Section 5.4(b)
</TABLE>
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<TABLE>
<CAPTION>
DEFINITIONS SECTIONS
- - - ----------- --------
<S> <C>
IFC Subsidiaries Section 4.4
Market Price Section 2.3(g)
Material Adverse Effect Section 3.1
Merger Section 1.1
Merger Consideration Section 2.1(a)
NCC Introduction
NCC Common Stock Section 2.1(a)
NCC Contracts Section 3.10
NCC Disclosure Letter Section 1.4
NCC Employee Plans Section 3.9
NCC Meeting Section 5.15
NCC Preferred Stock Section 3.3
NCC Reports Section 3.7
NCC Retirement Plan Section 5.4(b)
Option Agreement Section 4.3
PBGC Section 3.9
Person Section 8.6
Plan of Merger Section 1.2
Pooling-of-Interests Introduction
Proxy Statement Section 3.5
Registration Statement Section 3.5
SBIA Section 3.6
Securities Act Section 3.5
Significant Subsidiaries Section 3.4
State Entities Section 3.6
Subsidiary Section 8.6
Surviving Corporation Section 1.3
Trust Account Shares Section 2.1(a)
Unexercised Options Section 2.2
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of August 27, 1995
("Agreement"), is made by and between National City Corporation, a Delaware
corporation ("NCC") and Integra Financial Corporation, a Pennsylvania
corporation ("IFC").
WHEREAS, NCC and IFC have each determined that it is in the best
interests of their respective stockholders for IFC to merge with and into NCC
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of NCC and IFC have each
approved this Agreement and the consummation of the transactions contemplated
hereby and approved the execution and delivery of this Agreement;
WHEREAS, for Federal income tax purposes, it is intended that the
merger shall qualify as a reorganization under the provisions of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the merger shall
be accounted for as a "pooling-of-interests"; and
WHEREAS, as a condition to, and contemporaneously with the
execution of this Agreement, the parties have entered into the Option
Agreement (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, the parties
hereto hereby agree as follows:
I. THE MERGER
----------
1.1 MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3), IFC will be merged with
and into NCC and the separate corporate existence of the IFC will thereupon
cease (the "Merger") in accordance with the applicable provisions of the
Pennsylvania Business Corporation Law ("BCL") and the Delaware General
Corporation Law ("DGCL").
1.2 EFFECTIVE TIME. As soon as practicable after satisfaction
or waiver of all conditions to the Merger, NCC and IFC (the "Constituent
Corporations") shall cause a certificate of merger complying with the
requirements of the DGCL (the " Certificate of Merger") to be filed with the
Secretary of State of the State of Delaware and the Articles of Merger to be
filed with the
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Secretary of State of the Commonwealth of Pennsylvania ("Articles of Merger")
pursuant to the BCL. The Merger will become effective at the time the later
of the following to occur: (a) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware and (b) the filing of the
Articles of Merger with Secretary of State of the Commonwealth of Pennsylvania
or such later time as shall be specified in such filings ("Effective Time").
1.3 EFFECT OF MERGER. The Merger will have the effects specified in
BCL and DGCL. Without limiting the generality of the foregoing, NCC will be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation") and will continue to be governed by the laws of
the State of Delaware, and the separate corporate existence of NCC and all
of its rights, privileges, powers and franchises, public as well as
private, and all its debts, liabilities and duties as a corporation
organized under the DGCL, will continue unaffected by the Merger.
1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and By-laws of NCC in effect immediately prior to the Effective
Time, which shall be in the form set forth in a disclosure letter executed by
NCC and dated and delivered by NCC to IFC as of the date hereof ("NCC
Disclosure Letter"), shall be the Certificate of Incorporation and By-laws of
the Surviving Corporation, until amended in accordance with applicable law.
1.5 DIRECTORS AND OFFICERS.
(a) SURVIVING CORPORATION. The directors and officers of NCC
immediately prior to the Effective Time will be the directors and
officers, respectively, of the Surviving Corporation, from and
after the Effective Time, until their successors have been duly
elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the terms of the
Surviving Corporation's Certificate of Incorporation
and By-laws and the DGCL.
(b) NCC. Promptly after the Effective Time, in accordance
with the Bylaws of NCC, the Board of Directors of NCC shall increase
its size to such number as is necessary to create 4 vacancies and
shall elect 4 IFC directors to fill such vacancies. The identity of
the IFC directors to be elected to NCC's Board of Directors shall be
mutually agreed upon by IFC and NCC prior to the Effective
Time.
1.6 ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances in law or any other acts are necessary or
desirable to (i) vest, perfect or confirm, of record or otherwise,
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in the Surviving Corporation its right, title or interest in, to or under
any of the rights, properties or assets of IFC, or (ii) otherwise carry out
the purposes of this Agreement, IFC and its officers and directors shall be
deemed to have granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such deeds, assignments or assurances in
law or any other acts as are necessary or desirable to (i) vest, perfect or
conform, of record or otherwise, in the Surviving Corporation its right,
title or interest in, to or under any of the rights, properties or assets of
IFC or (ii) otherwise carry out the purposes of this Agreement, IFC and its
officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all
such deeds, assignments or assurances in law and to all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out
the purposes of this Agreement, and the officers and directors of the
Surviving Corporation are authorized in the name of IFC or otherwise to take
any and all such action.
II. CONVERSION OF SHARES
--------------------
2.1 CONVERSION OF SHARES. Subject to Section 2.3, at the Effective
Time,
(a) each then-outstanding share of common stock, par value
$1.00 per share, of IFC ("IFC Common Stock") not owned by NCC or any
direct or indirect wholly-owned subsidiary of NCC (except for any
such shares of IFC Common Stock held in trust accounts, managed
accounts or in any similar manner as trustee or in a fiduciary
capacity ("Trust Account Shares") or acquired in satisfaction of debts
previously contracted ("DPC Shares")) other than those shares of IFC
Common Stock held in the treasury of the IFC, will be canceled,
retired and converted into two shares of common stock, par value
$4.00 per share, of NCC ("NCC Common Stock"). The number of shares
of NCC Common Stock that each share of IFC Common Stock will be
converted into is sometimes referred to herein as the "Merger
Consideration";
(b) each then-outstanding share of IFC Common Stock owned
by NCC or any direct or indirect wholly-owned subsidiary of NCC
(except for any shares that are Trust Account Shares or DPC Shares)
will be canceled and retired;
(c) each share of IFC Common Stock issued and held in IFC's
treasury will be canceled and retired; and
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(d) each share of common stock, par value $4.00 per share,
of NCC issued and outstanding immediately prior to the Effective
Time shall continue to be an issued and outstanding share of common
stock, par value $4.00 per share, of the Surviving Corporation from
and after the Effective Time.
2.2 ASSUMPTION OF EMPLOYEE AND DIRECTOR STOCK OPTIONS. Except as
expressly provided in this Section 2.2, all rights under any stock option
granted by IFC or its predecessors pursuant to Integra Management Incentive
Plan, Integra Employee Stock Option Plan, Equimark's 1986 Stock Option Plan,
(Equimark's)1987 Performance Stock Option Plan, (Equimark's) 1987
Non-Qualified Stock Option Plan the Equimark Executive Officer Non-Qualified
Stock Option Plan Union National Corporation Employee Stock Option Plan and
Pennbancorp Employee Stock Option Plan, (collectively, the "IFC Option
Plans") that remains unexercised immediately prior to the Effective Time
("Unexercised Options") shall be assumed by NCC, but shall thereafter
represent the right to acquire that number of shares of NCC Common Stock to
which the optionee would have been entitled pursuant to the conversion ratio
provided for in Section 2.1(a) ("Conversion Ratio") if immediately prior to
the Merger the optionee had fully exercised the option and had been a
shareholder of record of IFC. The option price per share of NCC Common Stock
shall be equal to the exercise price per share of the IFC Common Stock
under each option divided by the Conversion Ratio necessary to assure that the
rights and benefits of the optionee under such option shall not be increased
or decreased by reason of this Section 2.2, and, in addition, each option which
is an incentive stock option shall be adjusted as required by section 424 of
the Internal Revenue Code of 1986 (the "Code"), and the regulations
promulgated thereunder so as not to constitute a modification, extension or
renewal of the option within the meaning of section 424(h) of the Code. On
or before the Effective Time NCC shall file, and maintain the effectiveness
of, a registration statement with the Securities and Exchange Commission
covering the Unexercised Options and the sale of the NCC Common Stock issued
upon exercise of Unexercised Options. At the Effective Time all IFC Option
Plans shall be terminated with respect to the granting of any additional
options or option rights. The duration and other terms of the options shall
be the same as the original IFC options, except that reference to IFC shall
be deemed to be references to NCC.
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2.3 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, NCC
shall designate National City Bank to act as exchange agent (the
"Exchange Agent") and Integra Trust Company National Association to
act as forwarding agent in connection with the Merger pursuant to
an exchange agent agreement providing for, among other things, the
matters set forth in this Section 2.3. Except as set forth herein,
from and after the Effective Time each holder of a certificate that
immediately prior to the Effective Time represented outstanding shares
of IFC Common Stock ("Certificate") shall be entitled to receive in
exchange therefor, upon surrender thereof to the Exchange Agent, the
Merger Consideration for each share of IFC Common Stock so
represented by the Certificate surrendered by such holder thereof.
The certificates representing shares of NCC Common Stock which
constitute the Merger Consideration shall be properly issued and
countersigned and executed and authenticated, as appropriate.
(b) NOTICE OF EXCHANGE. Promptly after the Effective Time,
NCC and the Surviving Corporation shall cause the Exchange Agent to
mail and/or make available to each record holder of a Certificate a
notice and letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificate
shall pass, only upon proper delivery of the Certificate to the
Exchange Agent or its forwarding agent) advising such holder of the
effectiveness of the Merger and the procedures to be used in
effecting the surrender of the Certificate for exchange therefor.
Upon surrender to the Exchange Agent of a Certificate, together
with such letter of transmittal duly executed and completed in
accordance with the instructions thereon, and such other documents as
may reasonably be requested, the Exchange Agent shall promptly deliver
to the person entitled thereto the appropriate Merger Consideration
for each share of IFC Common Stock so represented by the Certificate
surrendered by such holder thereof, and such Certificate shall
forthwith be canceled.
(c) TRANSFER. If delivery of all or part of the Merger
Consideration is to be made to a person other than the person in
whose name a surrendered Certificate is registered, it shall be a
condition to such delivery or exchange that the Certificate
surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such
delivery or exchange shall have paid any transfer and other taxes
required by reason of such delivery or exchange in a name other
than that of the registered holder
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of the Certificate surrendered or shall have established to the
reasonable satisfaction of the Exchange Agent that such tax either
has been paid or is not payable.
(d) RIGHT TO MERGER CONSIDERATION. Subject to Subsection
2.3(e), until surrendered and exchanged in accordance with this
Section 2.3, each Certificate shall, after the Effective Time,
represent solely the right to receive the Merger Consideration,
multiplied by the number of shares of IFC Common Stock evidenced by
such Certificate, together with any dividends or other
distributions as provided in Sections 2.3(e) and 2.3(f), and shall
have no other rights. From and after the Effective Time, NCC and
Surviving Corporation shall be entitled to treat such Certificates
that have not yet been surrendered for exchange as evidencing the
ownership of the aggregate Merger Consideration into which the shares
of IFC Common Stock represented by such Certificates may be
converted, notwithstanding any failure to surrender such
Certificates. One hundred eighty (180) days following the Effective
Time, the Exchange Agent shall deliver to the Surviving Corporation
any shares of NCC Common Stock and funds (including any interest
received with respect thereto) which NCC has made available to the
Exchange Agent and which have not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to
look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) with respect to the shares of NCC
Common Stock and cash in lieu of fractional shares deliverable or
payable upon due surrender of their Certificates. Neither Exchange
Agent nor any party hereto shall be liable to any holder of shares
of IFC Common Stock for any Merger Consideration (or dividends,
distributions or interest with respect thereto) delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
(e) DISTRIBUTION WITH RESPECT TO UNEXCHANGED CERTIFICATES.
Whenever a dividend or other distribution is declared by NCC on the
NCC Common Stock, the record date for which is at or after the
Effective Time, the declaration shall include dividends or other
distributions on all shares issuable pursuant to this Agreement,
provided that no dividends or other distributions declared or made
with respect to NCC Common Stock shall be paid to the holder of
any unsurrendered Certificate with respect to the share of NCC
Common Stock represented thereby until the holder of such Certificate
shall surrender such Certificate in accordance with this Article II.
The Surviving Corporation shall pay any dividends or make any other
distributions with a record date prior to the
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<PAGE> 113
Effective Time which may have been declared or made by the IFC on
IFC Common Stock in accordance with the terms of this Agreement on or
prior to the Effective Time and which remain unpaid at the Effective
Time.
(f) LOST OR DESTROYED EXCHANGED CERTIFICATES. In the event
that any Certificate shall have been lost, stolen or destroyed, the
Exchange Agent shall deliver in exchange for such lost, stolen or
destroyed certificate, upon the making of an affidavit of that fact
by the holder thereof in form satisfactory to the Exchange Agent, the
Merger Consideration, as may be required pursuant to this Agreement;
provided, however, that the Exchange Agent may, in its sole
discretion and as a condition precedent to the delivery of the Merger
Consideration to which the holder of such certificate is entitled as
a result of the Merger, require the owner of such lost, stolen or
destroyed certificate to deliver a bond in such sum as it may direct
as indemnity against any claim that may be made against IFC, NCC or
the Exchange Agent or any other party with respect to the certificate
alleged to have been lost, stolen or destroyed.
(g) VOTING WITH RESPECT TO UNEXCHANGED CERTIFICATES. Holders
of unsurrendered Certificates will not be entitled to vote at any
meeting of NCC stockholders.
(h) NO FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of NCC Common Stock shall be issued
upon the surrender for exchange of a Certificate or Certificates.
No dividends or distributions of NCC shall be payable on or with
respect to any fractional share and any such fractional share interest
will not entitle the owner thereof to vote or to any rights of
stockholders of NCC. In lieu of any such fractional shares, holders
of Certificates otherwise entitled to fractional shares shall be
entitled to receive promptly from the Exchange Agent a cash payment in
an amount equal to the fraction of such share of NCC Common Stock to
which such holder would otherwise be entitled multiplied by the
Market Price.
2.4 CLOSING OF THE COMPANY'S TRANSFER BOOKS. The stock transfer
books of IFC shall be closed at the close of business on the business day
immediately preceding the date of the Effective Time. In the event of a
transfer of ownership of IFC Common Stock which is not registered in the
transfer records of IFC, the Merger Consideration to be distributed pursuant
to this Agreement may be delivered to a transferee, if a Certificate is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by payment of any applicable stock
transfer taxes. NCC and The Exchange Agent shall be entitled
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<PAGE> 114
to rely upon the stock transfer books of IFC to establish the identity of
those persons entitled to receive the Merger Consideration specified in this
Agreement for their shares of IFC Common Stock, which books shall be
conclusive with respect to the ownership of such shares. In the event of a
dispute with respect to the ownership of any such shares, the Surviving
Corporation and the Exchange Agent shall be entitled to deposit any Merger
Consideration represented thereby in escrow with an independent party and
thereafter be relieved with respect to any claims to such Merger
Consideration.
2.5 CHANGES IN NCC COMMON STOCK. If between the date of this
Agreement and the Effective Time, the shares of NCC Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or if a stock
dividend thereon shall be declared with a record date within said period, the
Merger Consideration shall be adjusted accordingly.
III. REPRESENTATIONS AND WARRANTIES OF NCC
-------------------------------------
NCC hereby represents and warrants to IFC that:
3.1 CORPORATE ORGANIZATION.
NCC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is duly qualified
to do business as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the nature of the business conducted by
it makes such qualification necessary, except for such jurisdictions in which
the failure to be so qualified would not have a Material Adverse Effect.
NCC is registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended (the "BHCA"). NCC has the requisite corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as it is now being conducted. NCC has heretofore delivered to
IFC true and complete copies of its certificate of incorporation and by-laws.
3.2 AUTHORITY. NCC has the requisite corporate power and authority
to execute and deliver this Agreement and, except for any required approval of
NCC's stockholders, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation
of the transactions contemplated herein have been duly approved by the Board
of Directors of NCC and no other corporate proceedings on the part of NCC
are necessary to authorize this Agreement or to consummate the transactions
so contemplated, subject only to approval by the stockholders of NCC as
provided in Subsection
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<PAGE> 115
5.15(b). This Agreement has been duly executed and delivered by, and
constitutes valid and binding obligations of NCC enforceable against NCC in
accordance with its terms, except as enforceability thereof may be limited
by applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws affecting the enforcement of creditors'
rights generally and except that the availability of the equitable remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which any proceedings may be brought.
3.3 CAPITALIZATION. As of the date hereof, the authorized
capital stock of NCC consists of 350,000,000 shares of NCC Common Stock and
5,000,000 shares of NCC preferred stock. As of the close of business on
August 25, 1995 (i) 147,543,325 shares of NCC Common Stock were validly
issued and outstanding, fully paid and nonassessable and (ii) 744,160
shares of eight percent (8%) Cumulative Convertible Preferred Stock (issued
as 3,720,800 Depository Shares) no par of NCC ("NCC Preferred Stock") were
validly issued and outstanding, fully paid and nonassessable. As of the date
hereof, except as set forth in this Section 3.3, pursuant to the exercise of
employee stock options under NCC's various stock option plans in effect, NCC's
dividend reinvestment plan and stock grants made pursuant to the NCC 1991
Restricted Stock Plan, or set forth in the NCC Disclosure Letter, there are no
other shares of capital stock of NCC authorized, issued or outstanding and
there are no outstanding subscriptions, options, warrants, rights,
convertible securities or any other agreements or commitments of any
character relating to the issued or unissued capital stock or other securities
of NCC obligating NCC to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of NCC or obligating
NCC to grant, extend or enter into any subscription, option, warrant,
right, convertible security or other similar agreement or commitment. As of
the date hereof, except as provided in this Agreement or as set forth in the
NCC Disclosure Letter, there are no voting trusts or other agreements or
understandings to which NCC or any NCC Subsidiary (as defined herein) is a
party with respect to the voting of the capital stock of NCC. All of the
shares of NCC Common Stock issuable in exchange for the IFC Common Stock
at the Effective Time in accordance with this Agreement and all of the
shares of NCC Common Stock issuable upon exercise of Unexercised Options
will be, when so issued, duly authorized, validly issued, fully paid and
nonassessable and will not be subject to preemptive rights.
3.4 SUBSIDIARIES. The name and state of incorporation of each
significant subsidiary (as defined herein) of NCC (collectively, the
"Significant Subsidiaries") is set forth in the NCC
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<PAGE> 116
Disclosure Letter. Each of the NCC Subsidiaries is a bank or a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization and is duly
qualified to do business as a foreign corporation in each jurisdiction in
which its ownership or lease of property or the nature of the business
conducted by it makes such qualification necessary, except for such
jurisdictions in which the failure to be so qualified would not have a
Material Adverse Effect. Each of NCC's subsidiaries has the requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its businesses as they are now being conducted. Except
as set forth in the NCC Disclosure Letter, all outstanding shares of capital
stock of each of NCC's subsidiaries are owned by NCC or another of NCC's
subsidiaries and are validly issued, fully paid and (except pursuant to 12
USC Section 55 in the case of each national bank subsidiary and applicable
state law in the case of each state bank subsidiary) nonassessable, are not
subject to preemptive rights and are owned free and clear of all liens, claims
and encumbrances. There are no outstanding subscriptions, options, warrants,
rights, convertible securities or any other agreements or commitments of any
character relating to the issued or unissued capital stock or other
securities of any NCC subsidiary obligating any of NCC subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold
additional shares of its capital stock or obligating any of NCC's
subsidiaries to grant, extend or enter into any subscription, option,
warrant, right, convertible security or other similar agreement or commitment.
3.5 INFORMATION IN DISCLOSURE DOCUMENTS, REGISTRATION STATEMENT, ETC.
None of the information with respect to NCC or any of NCC's subsidiaries
provided by NCC for inclusion in (i) the Registration Statement to be filed
with the Securities and Exchange Commission (the "Commission") by NCC on
Form S-4 under the Securities Act of 1933, as amended (the "Securities
Act"), for the purpose of registering the shares of NCC Common Stock to be
issued in the Merger (the "Registration Statement") and (ii) any joint proxy
statement of IFC and NCC ("Proxy Statement") required to be mailed to IFC's
and NCC's stockholders in connection with the Merger will, in the case of the
Proxy Statement or any amendments or supplements thereto, at the time of the
mailing of the Proxy Statement and any amendments or supplements thereto,
and at the time of the IFC Meeting and the NCC Meeting (as defined herein),
or, in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
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they are made, not misleading. The Registration Statement will comply as
to form in all material respects with the provisions of the Securities
Act and the rules and regulations promulgated thereunder. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder.
3.6 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth in
the NCC Disclosure Letter, neither the execution and delivery of this
Agreement by NCC or the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of its certificate
of incorporation or by-laws, (b) violate, conflict with, constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or result in the creation of any lien or other encumbrance upon
any of the properties or assets of NCC or any of NCC's subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which NCC or any of NCC's subsidiaries is a party or to which they or any
of their respective properties or assets are subject, except for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens or other encumbrances, which are set forth in the NCC
Disclosure Letter or which, individually or in the aggregate, will not have a
Material Adverse Effect or (c) require any consent, approval, authorization
or permit of or from, or filing with or notification to, any court,
governmental authority or other regulatory or administrative agency or
commission, domestic or foreign ("Governmental Entity"), except (i) pursuant
to the Exchange Act and the Securities Act, (ii) filing the Certificate of
Merger and a designation pursuant to the DGCL, (iii) filing the Articles
of Merger, (iv) filings required under the securities or blue sky laws of
the various states, (v) filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (vi) filings with, and
approval by, the Federal Reserve Board (the "FRB"), (vii) filings with,
and approvals by, the Ohio Superintendent of Banks, the Pennsylvania
Department of Financial Institutions, and the Arizona Director of Insurance
(collectively, the "State Entities"), (viii) filings and approvals pursuant to
any applicable state takeover law, (ix) filings and approvals under the
Small Business Investment Act of 1958 and the rules and regulations
thereunder ("SBIA") or (x) consents, approvals, authorizations, permits,
filings or notifications which, if not obtained or made will not, individually
or in the aggregate, have a Material Adverse Effect.
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3.7 REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1990, NCC and
each of NCC's subsidiaries have filed all reports, registrations and
statements, together with any required amendments thereto, that they were
required to file with the Commission under Section 12(b), 12(g), 13(a) or
14(a) of the Securities Exchange Act of 1934, including, but not limited to
Forms 10-K, Forms 10-Q and proxy statements (the "NCC Reports"). NCC has
previously furnished or will promptly furnish IFC with true and complete
copies of each of NCC's annual reports on Form 10-K for the years 1990
through 1994 and its quarterly reports on Form 10-Q for March 31, 1995 and
June 30, 1995. As of their respective dates, the NCC Reports complied with
the requirements of the Commission and did 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 therein, in light of the circumstance
under which they were made, not misleading. The audited consolidated
financial statements and unaudited interim financial statements of NCC included
in the NCC Reports have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and fairly present the consolidated
financial position of NCC and NCC's subsidiaries as of the dates thereof and
the results of their operations and changes in cash flows for the periods then
ended subject, in the case of the unaudited interim financial statements, to
normal year-end and audit adjustments and any other adjustments
described therein. There exist no material liabilities of NCC and its
consolidated subsidiaries, contingent or otherwise of a type required to be
disclosed in accordance with generally accepted accounting practices, except
as disclosed in the NCC Reports. NCC's reserve for possible loan losses as
shown in its Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1995 was adequate, within the meaning of generally accepted accounting
principles and safe and sound banking practices.
3.8 TAXES. NCC will promptly make available to IFC, upon request
by IFC, true and correct copies of the federal, state and local income tax
returns, and state and local property and sales tax returns and any other tax
returns filed by NCC and any of NCC's subsidiaries for each of the fiscal
years that remains open, for examination or assessment of tax. NCC and each
NCC subsidiary have prepared in good faith and duly and timely filed, or
caused to be duly and timely filed, all federal, state, local and foreign
income, estimated tax, withholding tax, franchise, sales and other tax returns
or reports required to be filed by them on or before the date hereof, except to
the extent that all such failures to file, taken together, would not have a
Material Adverse Effect. NCC and each of its subsidiaries have paid, or have
made adequate provision or set up an
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adequate accrual or reserve for the payment of, all taxes, shown or required
to be shown to be owing on all such returns or reports, together with any
interest, additions or penalties related to any such taxes or to any open
taxable year or period. Except as set forth in the NCC Disclosure Letter,
neither NCC nor any of NCC's subsidiaries has consented to extend the statute
of limitations with respect to the assessment of any tax. Except as set
forth in the NCC Disclosure Letter, neither NCC nor any of NCC's
subsidiaries is a party to any action or proceeding, nor to the best of
NCC's knowledge is any such action or proceeding threatened, by any
Governmental Entity in connection with the determination, assessment or
collection of any taxes, and no deficiency notices or reports have been
received by NCC or any of NCC's subsidiaries in respect of any material
deficiencies for any tax, assessment, or government charges.
3.9 EMPLOYEE PLANS. All employee benefit, welfare, bonus,
deferred compensation, pension, profit sharing, stock option, employee stock
ownership, consulting, severance, or fringe benefit plans, formal or informal,
written or oral, and all trust agreements related thereto, relating to any
present or former directors, officers or employees of NCC or its
subsidiaries ("NCC Employee Plans") have been maintained, operated, and
administered in substantial compliance with their terms and currently comply,
and have at all relevant times complied, in all material respects with the
applicable requirements of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), the Code, and any other applicable laws. With
respect to each NCC Employee Plan which is a pension plan (as defined in
Section 3(2) of ERISA): (a) except for recent amendment(s) to the plans not
materially affecting the qualified status of the plans (which are disclosed
in, and copies of which are attached to, the NCC Disclosure Letter), each
pension plan as amended (and any trust relating thereto) intended to be a
qualified plan under Section 401(a) of the Code either: (i) has been
determined by the Internal Revenue Service ("IRS") to be so qualified, (ii)
is the subject of a pending application for such determination that was timely
filed, or (iii) will be submitted for such a determination prior to end of the
"remedial amendment period" within the meaning of Section 401(b) of the Code,
(b) there is no accumulated funding deficiency (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, and no waiver of
the minimum funding standards of such sections has been requested from the
IRS, (c) neither NCC nor any of its subsidiaries has provided, or is required
to provide, security to any pension plan pursuant to Section 401(a)(29) of
the Code, (d) the fair market value of the assets of each defined benefit
plan (as defined in Section 3(35) of ERISA) exceeds the value of the "benefit
liabilities" within the meaning of Section 4001(a)(16)
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of ERISA under such defined benefit plan as of the end of the most recent
plan year thereof ending prior to the date hereof, calculated on the basis of
the actuarial assumptions used in the most recent actuarial valuation for
such defined benefit plan as of the date hereof, (e) no reportable event
described in Section 4043 of ERISA for which the 30 day reporting requirement
has not been waived has occurred, (f) except as disclosed in the NCC
Disclosure Letter, no defined benefit plan has been terminated, nor has the
Pension Benefit Guaranty Corporation ("PBGC") instituted proceedings to
terminate a defined benefit plan or to appoint a trustee or administrator
of a defined benefit plan, and no circumstances exist that constitute
grounds under Section 4042(a)(2) of ERISA entitling the PBGC to institute any
such proceedings and (g) no pension plan is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA. Neither NCC nor any of its subsidiaries
has incurred any liability to the PBGC with respect to any "single-employer
plan" within the meaning of Section 4001(a)(15) of ERISA currently or
formerly maintained by any entity considered one employer with it under
Section 4001 of ERISA or Section 414 of the Code, except for premiums all of
which have been paid when due. Neither NCC nor any of its subsidiaries has
waived any withdrawal liability with respect to a multiemployer plan under
Subtitle E of Title IV of ERISA. Neither NCC nor any of its subsidiaries has
any obligations for retiree health and life benefits under any NCC Employee
Plan, except as set forth in the NCC Disclosure Letter. There are no
restrictions on the rights of NCC or its subsidiaries to amend or terminate
any such NCC Employee Plan without incurring any liability thereunder.
3.10 MATERIAL CONTRACTS. Except as set forth in the NCC Disclosure
Letter or disclosed in the NCC Reports, neither NCC nor any of its subsidiaries
is a party to, or is bound or affected by, or receives benefits under (a)
any employment, severance, termination, consulting or retirement agreement
(collectively, "Benefit Agreements") providing for aggregate payments to any
person in any calendar year in excess of $100,000, (b) any material
agreement, indenture or other instrument relating to the borrowing of money by
NCC or any of its subsidiaries or the guarantee by NCC or any of its
subsidiaries of any such obligation (other than trade payables and
instruments relating to borrowings or guaranties made in the ordinary course
of business) or (c) any other contract or agreement or amendment thereto that
would be required to be filed as an exhibit to a Form 10-K filed by NCC with
the Commission as of the date of this Agreement (collectively, the "NCC
Contracts"). Neither NCC nor any of NCC's subsidiaries is in default under
any of the NCC Contracts, which default is reasonably likely to have, either
individually or
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in the aggregate, a Material Adverse Effect and there has not occurred any
event that with the lapse of time or the giving of notice or both would
constitute such a default. Except as set forth in the NCC Disclosure Letter,
neither NCC nor any of NCC's 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 NCC or any of
NCC's subsidiaries the subject of a 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 and
conditions of employment, nor is there any strike or other labor dispute
involving it or any of its subsidiaries pending or threatened.
3.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
the NCC Disclosure Letter or disclosed in the NCC Reports filed by NCC with
the Commission prior to the date of this Agreement, since December 31, 1994,
there has not been any change in the financial condition, results of
operations or business of NCC and its subsidiaries which would or in the future
will have a Material Adverse Effect.
3.12 LITIGATION. Except as disclosed in the NCC Reports filed by
NCC with the Commission prior to the date of this Agreement, there is no suit,
action or proceeding pending, or, to the knowledge of NCC, threatened against
or affecting NCC or any of NCC's subsidiaries which, if decided adversely to
NCC, would be reasonably expected to result in a Material Adverse
Effect, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator, outstanding against NCC or any of
NCC's subsidiaries having, or which, insofar as reasonably can be foreseen, in
the future would have, a Material Adverse Effect.
3.13 COMPLIANCE WITH LAWS AND ORDERS. Except as set forth in the NCC
Disclosure Letter or disclosed in the NCC Reports filed by NCC with the
Commission prior to the date of this Agreement, the businesses of NCC and of
NCC's subsidiaries are not being conducted in violation of any law, ordinance,
regulation, judgment, order, decree, license or permit of any Governmental
Entity (including, without limitation, in the case of NCC's subsidiaries that
are banks, all statutes, rules and regulations pertaining to the conduct of
the banking business and the exercise of trust powers), except for violations
which individually or in the aggregate do not, and, insofar as reasonably can
be foreseen, in the future will not, have a Material Adverse Effect. Except
as set forth in the NCC Disclosure Letter, no investigation or review by
any Governmental Entity with respect to NCC or any of NCC's subsidiaries
is pending or, to the knowledge of NCC, threatened, nor has any
Governmental Entity indicated an intention to
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conduct the same in each case other than those the outcome of which will not
have a Material Adverse Effect.
3.14 AGREEMENTS WITH BANK REGULATORS, ETC. Neither NCC nor any NCC
subsidiary is a party to any written agreement or memorandum of understanding
with, or a party to any commitment letter, board resolution or similar
undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, any Governmental
Entity which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies or its
management, nor has NCC been advised by any Governmental Entity that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter or similar
submission. Neither NCC nor any of NCC's subsidiaries is required by
Section 32 of the Federal Deposit Insurance Act ("FDIA") to give prior
notice to a Federal banking agency of the proposed addition of an individual
to its board of directors or the employment of an individual as a senior
executive officer. NCC knows of no reason why the regulatory approvals referred
to in Subsection 3.6(c) should not be obtained.
3.15 NCC OWNERSHIP OF STOCK. As of the date of this Agreement,
neither NCC nor any of its affiliates or associates (i) beneficially owns,
directly or indirectly, or (ii) are parties to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of,
IFC Common Stock (other than DPC Shares or Trust Account Shares), which
in the aggregate, represent 5% or more of the outstanding shares of IFC
Common Stock.
3.16 ACCOUNTING MATTERS. Neither NCC nor, to its best knowledge,
any of its affiliates, has, through the date of this Agreement, taken or
agreed to take any action or knows of any reason that with respect to NCC and
its affiliates would prevent NCC from accounting for the business combination
to be effected by the Merger as a "pooling-of-interests."
3.17 FEES. Except for the fees paid and payable to Merrill Lynch &
Co., neither NCC nor any of NCC's subsidiaries has paid or will become
obligated to pay any fee or commission to any broker, finder or intermediary
in connection with the transactions contemplated by this Agreement.
3.18 COMPANY ACTION. The Board of Directors of NCC (at a meeting
duly called, constituted and held) has by the requisite vote of all directors
present (a) determined that the Merger is advisable and in the best interests
of NCC and its stockholders and (b) approved this
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Agreement and the transactions contemplated by this Agreement and has
directed that the Merger be submitted for consideration by NCC's
stockholders at the NCC Meeting. The Board of Directors of NCC has approved
the transactions contemplated by this Agreement and the Option Agreement such
that the provisions of Section 203 of the DGCL any other applicable state
business combination or anti-takeover provisions of NCC Certificate of
Incorporation or By-laws shall not be triggered by the Merger or any
transactions contemplated by this Agreement.
3.19 VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of NCC Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of NCC
capital stock necessary to approve this Agreement and the transactions
contemplated herein.
3.20 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in
NCC's Proxy Statement for its 1995 Annual Meeting of Stockholders, no officer
or director of NCC, or any "associate" (as such term is defined in Rule 14a-1
under the 1934 Act) of any such officer or director, has any material
interest in any material contract or property (real or personal), tangible
or intangible, used in or pertaining to the business of NCC or any of its
subsidiaries.
3.21 ENVIRONMENTAL MATTERS. For purposes of this Agreement, the
following terms shall have the indicated meanings:
"ENVIRONMENTAL LAW" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, determination, judgment,
decree, injunction or agreement with any governmental entity relating
to (1) the health, protection, preservation or restoration of the
environment including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface soil,
subsurface soil, wetlands, plant and animal life or any other natural
resource, conservation, and/or (2) the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Substances. The term
Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42
U.S.C. Section 9601, ET SEQ.; the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. 9601(2)(D); the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, ET
SEQ.; the Clean Air Act, as amended, 42 U.S.C. Section 7401, ET SEQ.;
the Federal Water Pollution Control Act, as amended by the Clean Water
Act, 33 U.S.C. Section 1251, ET SEQ.; the Toxic Substances
Control Act, as amended, 15 U.S.C. Section
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9601, ET SEQ.; the Emergency Planning and Community Right to Know
Act, 42 U.S.C. Section 11001, ET SEQ.; the Safe Drinking Water Act, 42
U.S.C. Section 300f, ET SEQ.; and all comparable state and local
laws, and (2) any common law (including without limitation common law
that may impose strict liability) that may impose liability for
injuries or damages due to the release of any Hazardous Substance.
"HAZARDOUS SUBSTANCE" means (i) any hazardous wastes, toxic
chemicals, materials, substances or wastes as defined by or for the
purposes of any Environmental Law; (ii) any "oil", as defined by the
Clean Water Act, as amended from time to time, and regulations
promulgated thereunder (including crude oil or any fraction thereof
and any petroleum products or derivatives thereof); (iii) any
substance, the presence of which is prohibited, regulated or
controlled by any applicable federal, state or local laws,
regulations, statutes or ordinances now in force or hereafter
enacted relating to waste disposal or environmental protection with
respect to the exposure to, or manufacture, possession, presence, use,
generation, storage, transportation, treatment, release, emission,
discharge, disposal, abatement, cleanup, removal, remediation or
handling of any such substance; (iv) any asbestos or
asbestos-containing materials, polychlorinated biphenyls ("PCBs") in
the form of electrical equipment, fluorescent light fixtures with
ballasts, cooling oils or any other form, urea formaldehyde,
atmospheric radon; (v) any solid, liquid, gaseous or thermal
irritant or contaminant, such as smoke, vapor, soot, fumes,
alkalis, acids, chemicals, pesticides, herbicides, sewage,
industrial sludge or other similar wastes; (vi) industrial, nuclear
or medical by-products; (vii) any lead based paint or coating and
(viii) any underground storage tank(s).
"LOAN PORTFOLIO PROPERTIES, TRUST PROPERTIES AND OTHER
PROPERTIES" means any real property, appurtenances, rights and
personal property attendant thereto, which is owned, leased as a
landlord or a tenant, managed or operated or upon which is held a
mortgage, deed of trust or other security interest by NCC or IFC, as
the case may be, or any of their subsidiaries whether directly, as
an agent, as trustee or other fiduciary or otherwise.
Except as set forth in the NCC Disclosure Letter, (i) to the
best of NCC's knowledge, neither NCC nor any of its subsidiaries is
in violation of or has any liability, absolute or contingent, in
connection with or under any Environmental Law, except any such
violations or liabilities which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect; (ii) to the best of NCC's knowledge,
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none of the Loan Portfolio Properties, Trust Properties and
Other Properties of NCC or its subsidiaries is in violation of or
has any liability, absolute or contingent, under any Environmental
Law, except any such violations or liabilities which, individually
or in the aggregate would not have a Material Adverse Effect; and
(iii) to the best of NCC's knowledge, there are no actions, suits,
demands, notices, claims, investigations or proceedings pending or
threatened relating to any Loan Portfolio Properties, Trust
Properties and Other Properties including, without limitation any
notices, demand letters or requests for information from any federal
or state environmental agency relating to any such liability under
or violation of Environmental Law, which would impose a liability
upon NCC or its subsidiaries pursuant to any Environmental Law,
except such as would not, individually or in the aggregate have a
Material Adverse Effect.
IV. REPRESENTATIONS AND WARRANTIES OF IFC
-------------------------------------
IFC hereby represents and warrants to NCC that:
4.1 CORPORATE ORGANIZATION. IFC is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth
of Pennsylvania and is duly qualified to do business as a foreign corporation
in each jurisdiction in which its ownership or lease of property or the
nature of the business conducted by it makes such qualification necessary,
except for such jurisdictions in which the failure to be so qualified would
not have a Material Adverse Effect. IFC is registered as a bank holding
company under the BHCA. IFC has the requisite corporate power and authority
to own, lease and operate its properties and assets and to carry on its
business as it is now being conducted. IFC has heretofore delivered to NCC
true and complete copies of its Articles of Incorporation and By-laws.
4.2 AUTHORITY. IFC has the requisite corporate power and
authority to execute and deliver this Agreement and, except for any
required approval of IFC's shareholders, to consummate the transactions
contemplated by such. The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein have been duly approved
by the Board of Directors of IFC and no other corporate proceedings on the
part of IFC are necessary to authorize this Agreement or to consummate the
transactions so contemplated, subject only to approval by the shareholders of
IFC as provided in Section 5.15. This Agreement has been duly executed and
delivered by, and constitute valid and binding obligations of IFC, enforceable
against IFC in accordance with its terms, except as the enforceability thereof
may be
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limited by applicable bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought.
4.3 CAPITALIZATION. As of the date hereof, the authorized capital
stock of IFC consists of 100,000,000 shares of IFC Common Stock and 19,642,631
shares of preferred stock, no par value. As of the close of business on August
25, 1995, 32,913,023 shares of IFC Common Stock were validly issued and
outstanding, fully paid and nonassessable and no shares of preferred stock
were issued or outstanding. As of the date of this Agreement except as set
forth in this Section 4.3 or in a disclosure letter executed by IFC and
dated and delivered by IFC to NCC as of the date hereof ("IFC Disclosure
Letter"), and except for a Stock Option Agreement by and between NCC and IFC,
dated August 27, 1995 ("Option Agreement") or pursuant to IFC's Option Plans,
there are no shares of capital stock of IFC authorized, issued or outstanding
and there are no outstanding subscriptions, options, warrants, rights,
convertible securities or any other agreements or commitments of any character
relating to the issued or unissued capital stock or other securities of IFC
obligating IFC to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of IFC or obligating IFC to grant,
extend or enter into any subscription, option, warrant, right, convertible
security or other similar agreement or commitment. Except as set forth in the
IFC Disclosure Letter, there are no voting trusts or other agreements or
understandings to which IFC or any of IFC's subsidiaries is a party with
respect to the voting of the capital stock of IFC. As of the date of this
Agreement, there were outstanding under the IFC Option Plans options to
purchase 999,330 shares of IFC Common Stock, which IFC stock options had an
average exercise price of $33.31 and for which adequate shares of IFC
Common Stock have been reserved for issuance under the IFC Option Plans.
Since January 31, 1995, IFC has not granted or awarded any IFC Stock Options.
4.4 SUBSIDIARIES. The IFC Disclosure Letter sets forth the name
and state of incorporation of each subsidiary of IFC (collectively, "IFC
Subsidiaries"). Each of IFC Subsidiaries is a bank or a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization and is duly
qualified to do business as a foreign corporation in each jurisdiction in
which its ownership or lease of property or the nature of the business
conducted by it makes such qualification necessary, except for such
jurisdictions in which the failure to be so qualified would not have a Material
Adverse
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Effect. Each of IFC Subsidiaries has the requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its businesses as they are now being conducted. Except as set forth in the
IFC Disclosure Letter, all outstanding shares of capital stock of each IFC
Subsidiary is owned by IFC or another IFC Subsidiary and are validly issued,
fully paid and nonassessable, are not subject to preemptive rights and are
owned free and clear of all liens, claims and encumbrances. There are no
outstanding subscriptions, options, warrants, rights, convertible securities
or any other agreements or commitments of any character relating to the
issued or unissued capital stock or other securities of any IFC Subsidiary
obligating any IFC Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold additional shares of its capital stock or obligating
any IFC Subsidiary to grant, extend or enter into any subscription, option,
warrant, right, convertible security or other similar agreement or commitment.
4.5 INFORMATION IN DISCLOSURE DOCUMENTS, REGISTRATION STATEMENT,
ETC. None of the information with respect to IFC or any IFC Subsidiary
provided by IFC for inclusion in the Proxy Statement or the Registration
Statement will, in the case of the Proxy Statement or any amendments or
supplements thereto, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the IFC Meeting and the
NCC Meeting, or, in the case of the Registration Statement, at the time it
becomes effective, contain any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations promulgated thereunder.
4.6 CONSENT AND APPROVALS; NO VIOLATION. Except as set forth in the
IFC Disclosure Letter neither the execution and delivery of this Agreement by
IFC nor the consummation by IFC of the transactions contemplated hereby will
(a) conflict with or result in any breach of any provision of its Articles
of Incorporation or By-laws, (b) violate, conflict with, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate
the performance required by, or result in the creation of any lien or other
encumbrance upon any of the properties or assets of IFC or any of IFC
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which IFC or any IFC Subsidiary is a party
or to which they or any of their respective properties or assets are subject,
except for such violations, conflicts, breaches, defaults, terminations,
accelerations or
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creations of liens or other encumbrances, which are set forth in the IFC
Disclosure Letter or which, individually or in the aggregate, will not have a
Material Adverse Effect or (c) require any consent, approval, authorization or
permit of or from, or filing with or notification to, any Governmental Entity,
except (i) pursuant to the Exchange Act and the Securities Act, (ii) filing
the Certificate of Merger pursuant to the DGCL, (iii) filing the Articles of
Merger, (iv) filings required under the securities or blue sky laws of the
various states, (v) filing under the HSR Act, (vi) filings with, and
approval by, the FRB, (vii) filings with, and approvals by, the State
Entities, (viii) filings and approvals pursuant to any applicable state
takeover law, (ix) filings and approvals under the SBIA or (x) consents,
approvals, authorizations, permits, filings or notifications which, if not
obtained or made will not, individually or in the aggregate, have a Material
Adverse Effect.
4.7 REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1990, IFC
and each IFC Subsidiary have filed all reports, registrations and statements,
together with any required amendments thereto, that they were required to
file with the Commission under Sections 12(b), 12(g), 13(a) or 14(a) of the
Securities Exchange Act of 1934, including, but not limited to Forms 10-K,
Forms 10-Q and proxy statements (the "IFC Reports"). IFC has previously
furnished or will promptly furnish NCC with true and complete copies of each
of IFC annual reports on Form 10-K for the years 1990 through 1994 and its
quarterly reports on Form 10-Q for March 31, 1995 and June 30, 1995. As of
their respective dates, IFC Reports complied with the requirements of the
Commission and did 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 therein, in light of the circumstance under which they
were made, not misleading. The audited consolidated financial statements
and unaudited interim financial statements of IFC included in the IFC
Reports have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and fairly present the financial
position of IFC and IFC Subsidiaries taken as a whole as at the dates
thereof and the consolidated results of their operations and changes in cash
flows for the periods then ended subject, in the case of the unaudited interim
financial statements, to normal year-end and audit adjustments and any other
adjustments described therein. There exist no material liabilities of IFC
and its consolidated subsidiaries, contingent or otherwise of a type required
to be disclosed in accordance with generally accepted accounting practices,
except as disclosed in the IFC Reports. IFC's reserve for possible loan
losses as shown in its Quarterly Report on Form
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10-Q for the fiscal quarter ended June 30, 1995 was adequate, within the
meaning of generally accepted accounting principles and safe and sound banking
practices.
4.8 TAXES. IFC will promptly make available to NCC, upon request by
NCC, true and correct copies of the federal income tax returns, state income
tax returns, and state sales tax returns filed by IFC and IFC Subsidiaries
for each of the fiscal years that remains open, as of the date hereof, for
examination or assessment of tax. IFC and each IFC Subsidiary have prepared
in good faith and duly and timely filed, or caused to be duly and timely
filed, all federal, state, local and foreign income, franchise, sales and
other tax returns or reports required to be filed by them on or before the
date hereof, except to the extent that all failures to file, taken
together, would not have a Material Adverse Effect. IFC and each IFC
Subsidiary have paid, or have made adequate provision or set up an adequate
accrual or reserve for the payment of, all taxes shown or required to be
shown to be owing on all such returns or reports, together with any
interest, additions or penalties related to any such taxes or to any open
taxable year or period. Except as set forth in the IFC Disclosure Letter,
neither IFC nor any IFC Subsidiary has consented to extend the statute of
limitations with respect to the assessment of any tax. Except as set forth
in the IFC Disclosure Letter, neither IFC nor any of IFC Subsidiaries is a
party to any action or proceeding, nor to the best of IFC's knowledge is any
such action or proceeding threatened, by any Governmental Entity in
connection with the determination, assessment or collection of any taxes, and
no deficiency notices or reports have been received by IFC or any of IFC
Subsidiaries in respect of any material deficiencies for any tax, assessment,
or government charge.
4.9 EMPLOYEE PLANS. Except as set forth in the IFC Disclosure
Letter, all employee benefit, welfare, bonus, deferred compensation, pension,
profit sharing, stock option, employee stock ownership, consulting,
severance, or fringe benefit plans, formal or informal, written or oral and
all trust agreements related thereto, relating to any present or former
directors, officers or employees of IFC or IFC Subsidiaries ("IFC Employee
Plans") have been maintained, operated, and administered in substantial
compliance with their terms and currently comply, and have at all relevant
times complied, in all material respects with the applicable requirements of
ERISA, the Code, and any other applicable laws. Except as set forth in the
IFC Disclosure Letter, with respect to each IFC Employee Plan which is a
pension plan (as defined in Section 3(2) of ERISA): (a) except for recent
amendment(s) to the plans not materially affecting the qualified status of
the plans (which are disclosed in the IFC Disclosure Letter, and copies of
which were previously made available to NCC), each pension plan as amended (and
any trust
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relating thereto) intended to be a qualified plan under Section 401(a) of the
Code either has been determined by the IRS to be so qualified or is the
subject of a pending application for such determination that was timely
filed, (b) there is no accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived, and no
waiver of the minimum funding standards of such sections has been requested
from the IRS, (c) neither IFC nor any of the IFC Subsidiaries has provided,
or is required to provide, security to any pension plan pursuant to Section
401(a)(29) of the Code, (d) the fair market value of the assets of each
defined benefit plan (as defined in Section 3(35) of ERISA) exceeds the value
of the "benefit liabilities" within the meaning of Section 4001(a)(16) of ERISA
under such defined benefit plan as of the end of the most recent plan year
thereof ending prior to the date hereof, calculated on the basis of the
actuarial assumptions used in the most recent actuarial valuation for such
defined benefit plan as of the date hereof, (e) no reportable event described
in Section 4043 of ERISA for which the 30 day reporting requirement has not
been waived has occurred, (f) no defined benefit plan has been terminated,
nor has the Pension Benefit Guaranty Corporation ("PBGC") instituted
proceedings to terminate a defined benefit plan or to appoint a trustee or
administrator of a defined benefit plan, and no circumstances exist that
constitute grounds under Section 4042(a)(2) of ERISA entitling the PBGC to
institute any such proceedings and (g) no pension plan is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA. Neither IFC nor any IFC
Subsidiary has incurred any liability to the PBGC with respect to any
"single-employer plan" within the meaning of action 4001(a)(15) of ERISA
currently or formerly maintained by any entity considered one employer with
it under Section 4001 of ERISA or Section 414 of the Code, except for
premiums all of which have been paid when due. Neither IFC nor any of its
subsidiaries has incurred any withdrawal liability with respect to a
multiemployer plan under Subtitle E of Title IV of ERISA. Neither IFC nor
any IFC Subsidiary has any obligations for retiree health and life benefits
under any IFC Employee Plan, except as set forth in the IFC Disclosure
Letter. There are no restrictions on the rights of IFC or IFC Subsidiaries
to amend or terminate any such IFC Employee Plan without incurring any
liability thereunder.
4.10 MATERIAL CONTRACTS. Except as set forth in the IFC Disclosure
Letter or disclosed in the IFC Reports, neither IFC nor any IFC Subsidiary is
a party to, or is bound or affected by, or receives benefits under (a) any
Benefit Agreements providing for aggregate payments to any person in any
calendar year in excess of $100,000, (b) any material agreement, indenture or
other
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instrument relating to the borrowing of money by IFC or any IFC Subsidiary or
the guarantee by IFC or any IFC Subsidiary of any such obligation (other than
trade payables and instruments relating to transactions entered into in the
ordinary course of business) or (c) any other contract or agreement or
amendment thereto that would be required to be filed as an exhibit to a Form
10-K filed by IFC with the Commission as of the date of this Agreement
(collectively, the "IFC Contracts"). Neither IFC nor any IFC Subsidiary is
in default under any IFC Contract, which default is reasonably likely to have,
either individually or in the aggregate, a Material Adverse Effect, and there
has not occurred any event that with the lapse of time or the giving of notice
or both would constitute such a default. Except as set forth in the IFC
Disclosure Letter, neither IFC nor any of IFC Subsidiary 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
IFC or any IFC Subsidiary the subject of a proceeding asserting that is or
any IFC Subsidiary has committed an unfair labor practice or seeking to compel
it or such subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike or other labor dispute
involving it or any IFC Subsidiary pending or threatened.
4.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
the IFC Disclosure Letter or disclosed in IFC Reports filed by IFC with the
Commission prior to the date of this Agreement, since December 31, 1994,
there has not been any change in the financial condition, results of
operations or business of IFC and IFC Subsidiaries which would or in the future
will have a Material Adverse Effect.
4.12 LITIGATION. Except as disclosed in IFC Reports filed by IFC
with the Commission prior to the date of this Agreement, there is no suit,
action or proceeding pending, or, to the knowledge of IFC, threatened against
or affecting IFC or any IFC Subsidiary which, if determined adversely to IFC,
would be reasonably expected to have a Material Adverse Effect, nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator, outstanding against IFC or any IFC Subsidiary having, or
which, insofar as reasonably can be foreseen, in the future would have, a
Material Adverse Effect.
4.13 COMPLIANCE WITH LAWS AND ORDERS. Except as set forth in the
IFC Disclosure Letter or as disclosed in IFC Reports filed by IFC with the
Commission prior to the date of this Agreement, the businesses of IFC and IFC
Subsidiaries are not being conducted in violation of any law, ordinance,
regulation, judgment, order, decree, license or permit of any Governmental
Entity (including, without limitation, in the case of IFC Subsidiaries that
are banks, all statutes,
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rules and regulations pertaining to the conduct of the banking business
and the exercise of trust powers), except for violations which individually
or in the aggregate do not, and, insofar as reasonably can be foreseen, in
the future will not, have a Material Adverse Effect. Except as set forth in
the IFC Disclosure Letter, no investigation or review by any Governmental
Entity with respect to IFC or any IFC Subsidiary is pending or, to the
knowledge of IFC threatened, nor has any Governmental Entity indicated an
intention to conduct the same in each case other than those the outcome of
which will not have a Material Adverse Effect.
4.14 AGREEMENTS WITH BANK REGULATORS, ETC. Neither IFC nor any IFC
Subsidiary is a party to any written agreement or memorandum of understanding
with, or a party to any commitment letter, board resolution or similar
undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, any Governmental
Entity which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies or its
management, except for those the existence of which has been disclosed in the
IFC Disclosure Letter, nor has IFC been advised by any Governmental Entity
that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, extraordinary supervisory letter, commitment
letter or similar submission, except as set forth in the IFC Disclosure
Letter. Neither IFC nor any IFC Subsidiary is required by Section 32 of
the Federal Deposit Insurance Act to give prior notice to a Federal banking
agency of the proposed addition of an individual to its board of directors or
the employment of an individual as a senior or executive officer. IFC knows
of no reason why the regulatory approvals referred to in Subsections 4.6(c)
should not be obtained.
4.15 ACCOUNTING MATTERS. Neither IFC nor, to its best knowledge,
any of its affiliates, has, through the date of this Agreement, taken or
agreed to take any action or knows of any reason that with respect to IFC and
its affiliates would prevent NCC from accounting for the business combination
to be effected by the Merger as a "pooling-of-interests."
4.16 FEES. Except for fees paid and payable to Morgan and Stanley &
Co., neither IFC nor any IFC Subsidiary has paid or will become obligated to
pay any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated by this Agreement.
4.17 COMPANY ACTION. The Board of Directors of IFC (at a meeting
duly called, constituted and held) has by the requisite vote of all directors
present (a) determined that the
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Merger is advisable and in the best interests of IFC and its shareholders,
(b) approved this Agreement and the transactions contemplated hereby,
including the Merger, and (c) has directed that the Merger be submitted for
consideration by the IFC's shareholders at the IFC Meeting.
4.18 VOTE REQUIRED. The affirmative votes of a majority of the votes
cast of IFC Common Stock entitled to vote thereon are the only votes of the
holders of any class or series of IFC capital stock necessary to approve this
Agreement and the transactions contemplated by the Agreement.
4.19 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in
IFC's Proxy Statement for its 1995 Annual Meeting of Shareholders or as set
forth in the IFC Disclosure Letter, no officer or director of IFC, or any
"associate" (as such term is defined in Rule 14a-1 under the 1934 Act) of any
such officer or director, has any material interest in any material contracts
or property (real or personal), tangible or intangible, used in or pertaining
to the business of IFC or any IFC Subsidiaries.
4.20 ENVIRONMENTAL MATTERS. (i) To the best of IFC's knowledge, neither
IFC nor any of its subsidiaries is in violation of or has any liability,
absolute or contingent, in connection with or under any Environmental Law,
except any such violations or liabilities which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
(ii) to the best of IFC's knowledge, none of the Loan Portfolio Properties,
Trust Properties and Other Properties of IFC or its subsidiaries is in
violation of or has any liability, absolute or contingent, under any
Environmental Law, except any such violations or liabilities which,
individually or in the aggregate would not have a Material Adverse Effect; and
(iii) to the best of IFC's knowledge, there are no actions, suits, demands,
notices, claims, investigations or proceedings pending or threatened
relating to any Loan Portfolio Properties, Trust Properties and Other
Properties including, without limitation any notices, demand letters or
requests for information from any federal or state environmental agency
relating to any such liability under or violation of Environmental Law, which
would impose a liability upon IFC or its subsidiaries pursuant to any
Environmental Law, except such as would not, individually or in the aggregate
have a Material Adverse Effect.
V. COVENANTS
---------
5.1 ACQUISITION PROPOSALS. Each of IFC and IFC Subsidiaries shall
not, directly or indirectly, and shall instruct and otherwise use its best
efforts to cause their respective officers,
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directors, employees, agents or advisors or other representatives or
consultants not to, directly or indirectly, (i) solicit or initiate any
proposals or offers from any person relating to any acquisition or purchase
of all or a material amount of the assets of, or any securities of, or any
merger, consolidation or business combination with, IFC or any of IFC
Subsidiaries (such transactions are referred to herein as "Acquisition
Transactions") or (ii) except to the extent that the Board is required, in
a written opinion of counsel to the Board, in the exercise of its fiduciary
duties in accordance with applicable law, to participate in any discussions
or negotiation regarding, or furnish to any other person any information with
respect to, an Acquisition Transaction; PROVIDED, HOWEVER, that nothing
contained in this Section 5.1 shall restrict or prohibit any disclosure by
IFC that is required in any document to be filed with the Commission after
the date of this Agreement or any disclosure that, in the written opinion
of counsel to the Board of Directors of the Company, is otherwise required
under applicable law. IFC will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. IFC will notify
NCC 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 IFC.
5.2 INTERIM OPERATIONS OF IFC. During the period from the date
of this Agreement to the Effective Time, except as specifically
contemplated by this Agreement, set forth in the IFC Disclosure Letter or as
otherwise approved expressly in writing by NCC (which approval will not be
unreasonably withheld):
(a) CONDUCT OF BUSINESS. IFC shall, and shall cause each of
IFC Subsidiaries to, conduct their respective businesses only in, and
not take any action except in, the ordinary course of business
consistent with past practice. IFC shall use reasonable efforts to
preserve intact the business organization of IFC and each of IFC
Subsidiaries, to keep available the services of its and their present
key officers and employees and to preserve the goodwill of those
having business relationships with IFC or IFC Subsidiaries. Other
than in the ordinary course of business consistent with past
practice, IFC shall not (i) incur any indebtedness for borrowed money
(it being understood and agreed that incurrence of indebtedness in the
ordinary course of business shall include, without limitation, the
creation of deposit liabilities, purchases of federal funds, sales
of certificates of deposit and entering into repurchase agreements),
(ii) assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any
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other individual, corporation or other entity, or (iii) make any loan
or advance other than in the ordinary course of business consistent
with past practice;
(b) ARTICLES AND BY-LAWS. IFC shall not and shall not
permit any IFC Subsidiary to make any change or amendment to their
respective articles of incorporation or by-laws (or comparable
governing instruments).
(c) CAPITAL STOCK. IFC shall not, and shall not permit any
IFC Subsidiary to, issue or sell any shares of capital stock or any
other securities of any of them (other than pursuant to outstanding
exercisable stock options granted pursuant to one of the IFC Option
Plans) or issue any securities convertible into or exchangeable
for, or options, warrants to purchase, scrip, rights to subscribe
for, calls or commitments of any character whatsoever relating to,
or enter into any contract, understanding or arrangement with respect
to the issuance of, any shares of capital stock or any other
securities of any of them (other than pursuant to the IFC Option
Plans) or enter into any arrangement or contract with respect to the
purchase or voting of shares of their capital stock, or adjust,
split, combine or reclassify any of their capital stock or other
securities or make any other changes in their capital structures.
Neither IFC nor any IFC Subsidiaries shall grant any additional stock
options under any IFC Option Plans. Subject to any restrictions
imposed by applicable law or regulations IFC will use its best
efforts to purchase in the open market an equivalent number of shares
as are issued in connection with outstanding stock options which are
exercised between the date of the Agreement and the Closing Date.
(d) DIVIDENDS. IFC shall not and shall not permit any IFC
Subsidiary to, declare, set aside, pay or make any dividend or other
distribution or payment (whether in cash, stock or property) with
respect to, or purchase or redeem, any shares of the capital stock of
any of them other than (a) regular quarterly cash dividends in an
amount not to exceed $.50 per share of IFC Common Stock payable on the
regular historical payment dates and (b) dividends paid by any IFC
Subsidiary to another IFC Subsidiary or IFC with respect to its
capital stock between the date hereof and the Effective Time. It
is agreed by the parties hereto that they will cooperate to assure
that, during any quarter, there shall not be a duplication of nor
omission of payment of dividends to shareholders of IFC.
(e) EMPLOYEE PLANS, COMPENSATION, ETC. Without NCC's prior
consent, which consent shall not be unreasonably withheld, IFC
shall not, and shall not permit any IFC Subsidiary to, adopt or amend
(except as required by law) any bonus, profit sharing,
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compensation, severance, termination, stock option, pension,
retirement, deferred compensation, employment or other
employee benefit agreements, trusts, plans, funds or other
arrangements for the benefit or welfare of any director, officer or
employee, or (except for normal merit increases in the ordinary
course of business consistent with past practice) increase the
compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any existing plan or arrangement
(including, without limitation, the granting of stock options or
stock appreciation rights) or take any action or grant any benefit
not required under the terms of any existing agreements, trusts,
plans, funds or other such arrangements or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
(f) CERTAIN POLICIES. IFC will modify and change its loan,
litigation, real estate valuation asset, liquidity and investment
portfolio policies and practices (including loan classifications and
level of reserves) prior to the Effective Time so as to be consistent
on a mutually satisfactory basis with those of NCC and generally
accepted accounting principles, at the earlier of (i) such time as
NCC acknowledges that all conditions to its obligations to
consummate the Merger set forth in Sections 7.1 and 7.3 have been
waived or satisfied or (ii) immediately prior to the Effective
Time. IFC's representations, warranties or covenants contained in
this Agreement shall not be deemed to be untrue or breached in any
respect for any purpose as a consequence of any such
modifications or changes.
5.3 INTERIM OPERATIONS OF NCC. During the period from the date of
this Agreement to the Effective Time, without the prior written consent of
IFC, NCC will not declare or pay any extraordinary or special dividend on
the NCC Common Stock or take any action that would (a) materially delay or
adversely affect the ability of NCC to obtain any approvals of Governmental
Authorities required to permit consummation of the Merger or (b) materially
adversely affect its ability to perform its obligations under this Agreement
or to consummate the transaction contemplated hereby.
5.4 EMPLOYEE MATTERS.
(a) BENEFIT AGREEMENTS. Surviving Corporation agrees that
it shall honor, on and after the Effective Time, without deduction,
counterclaims, interruptions or deferment (other than withholding
under applicable law), all vested benefits of any person under all
plans or agreements.
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(b) RETIREMENT PLANS. NCC shall credit employees of IFC
and IFC Subsidiaries who become employees of NCC or Surviving
Corporation as a result of the Merger with all service with IFC or
any of IFC Subsidiaries for purposes of eligibility and vesting as
if such service had been performed for NCC but not for purposes of
benefit accrual, provided, however, that this provision shall not
change the treatment under the National City Non-Contributory
Retirement Plan and Trust of service with NCC or any of NCC's
subsidiaries prior to the Closing Date.
(c) GENERAL. Upon and after the Merger, IFC employees shall
have benefits that in the aggregate are no less favorable than the
benefits enjoyed generally by NCC employees working in similar
business lines.
5.5 ACCESS AND INFORMATION. Upon reasonable notice, each of the
parties shall (and shall cause each of the parties' subsidiaries to) afford to
the other parties and their representatives (including, without limitation,
directors, officers and employees of the parties and their affiliates, and
counsel, accountants and other professionals retained) such access during
normal business hours throughout the period prior to the Effective Time to
the books, records (including, without limitation, tax returns and work
papers of independent auditors), properties, personnel and to such other
information as any party may reasonably request; PROVIDED, HOWEVER, that no
party shall be required to provide access to any such information if the
providing of such access (i) would be reasonably likely, in the written
opinion of counsel, to result in the loss or impairment of any privilege
generally recognized under law with respect to such information or (ii) would
be precluded by any law, ordinance, regulation, judgment, order, decree,
license or permit of any Governmental Entity. All information furnished by
one party to any of the others in connection with this Agreement or the
transactions contemplated hereby shall be kept confidential by such other
party (and shall be used by it only in connection with this Agreement and the
transactions contemplated hereby) except to the extent that such information
(i) already is known to such other party when received from a source not known
by the receiving party to be under an obligation of confidentiality, (ii)
thereafter becomes lawfully obtainable from other sources or (iii) is
required to be disclosed in any non-confidential document filed with the
Commission, the FRB, the Department of Justice or any other agency or
any government. In the event that the transactions contemplated by this
Agreement shall fail to consummate, 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 or
destroyed.
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5.6 CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. NCC and IFC
shall (a) as soon as practicable make any required filings and
applications required to be filed with Governmental Authorities between the
date of this Agreement and the Effective Time, (b) cooperate with one another
(i) in promptly determining whether any other filings are required to be made
or consents, approvals, permits or authorizations are required to be obtained
under any other relevant federal, state or foreign law or regulation and
(ii) in promptly making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such consents,
approvals, permits or authorizations and (c) deliver to the other parties to
this Agreement copies of the publicly available portions of all such reports
promptly after they are filed.
5.7 STATE TAKEOVER STATUTES. IFC shall take all reasonable steps to
(i) exempt IFC and the Merger from the requirements of any state takeover law
by action of the Company's Board of Directors or otherwise and (ii), upon the
request of NCC, assist in any challenge by NCC to the applicability to the
Merger of any state takeover law.
5.8 INDEMNIFICATION AND INSURANCE.
(a) INDEMNIFICATION. From and after the Effective Time, NCC
will assume and honor any obligation as provided for and permitted by
applicable federal and state law IFC had immediately prior to the
Effective Time with respect to the indemnification of each person who
is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, a director or officer of IFC
or any IFC Subsidiary or was serving at the request of IFC as a
director, officer of any domestic or foreign corporation joint
venture, trust, employee benefit plan or other enterprise
(collectively, the "Indemnitees") arising out of IFC's Articles of
Incorporation or By-Laws or any indemnification (to the maximum
extent available thereunder and permitted by applicable law or
regulation) against any and all Losses in connection with or arising
out of any claim which is based upon, arises out of or in any way
relates to any actual or alleged act or omission occurring at or
prior to the Effective Time in the Indemnitee's capacity as a
director or officer (whether elected or appointed), of IFC or any IFC
Subsidiary. This Section 5.8 will be construed as an agreement, as to
which the Indemnitees are intended to be third-party beneficiaries.
(b) INSURANCE. For a period of three years after the
Effective Time, NCC shall use all reasonable efforts to maintain in
effect current directors' and officers' liability
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insurance in an aggregate limit of $35 million, which will insure
IFC's directors and officers for events which occurred prior to the
Effective Time but were undiscovered at the Effective Time; provided,
however, that in no event shall NCC be obligated to expend, in order
to maintain or provide insurance coverage pursuant to this Subsection
5.8(b), any amount per annum in excess of 150% of the amount of the
annual premium paid as of the date hereof by NCC for its current
director's and officers' liability insurance.
5.9 ADDITIONAL AGREEMENTS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its reasonable
efforts to take promptly, or cause to be taken promptly, all actions and to
do promptly, or cause to be done promptly, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, including using its best efforts to obtain all necessary actions
or non-actions, extensions, waivers, consents and approvals from all
applicable Governmental Entities, effecting all necessary registrations,
applications and filings (including, without limitation, filings under any
applicable state securities laws) and obtaining any required contractual
consents and regulatory approvals.
5.10 PUBLICITY. The initial press release announcing this
Agreement shall be a joint press release and thereafter IFC and NCC shall
consult with each other in issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby and in
making any filings with any Governmental Entity or with any national securities
exchange with respect thereto.
5.11 REGISTRATION STATEMENT. NCC shall prepare and file the
Registration Statement with the Commission as soon as is reasonably
practicable following receipt of final comments from the Staff of the
Commission on the Proxy Statement (or advice that such Staff will not review
such filing) and shall use all reasonable efforts to have the Registration
Statement declared effective by the Commission as promptly as practicable and
to maintain the effectiveness of such Registration Statement. NCC shall also
take any action required to be taken under state blue sky or securities laws
in connection with the issuance of the NCC Common Stock pursuant to the
Merger, and IFC shall furnish NCC all information concerning IFC and the
holders of its capital stock and shall take any action as NCC may reasonably
request in connection with any such action.
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5.12 SECURITIES ACT; POOLING-OF-INTERESTS.
(a) Prior to the Effective Time, IFC shall identify to NCC
all persons who were, at the time of the IFC Meeting (as herein
later defined), possible "affiliates" of IFC as that term is used
in paragraphs (c) and (d) of Rule 145 under the Securities Act (at
the minimum, all those persons subject to the reporting requirements
of Rule 16(a) under the Exchange Act) and for purposes of
qualifying for "pooling-of-interests" accounting treatment (the
"Affiliates").
(b) IFC shall use its best efforts to obtain a written
agreement from each person who is identified as a possible
Affiliate pursuant to clause (a) above providing that such person
will not sell, pledge, transfer or otherwise dispose of any shares of
IFC Common Stock held by such "affiliate" and the Merger
Consideration to be received by such "affiliate" in the Merger:
(1) in the case of shares of NCC Common Stock only, except in
compliance with the applicable provisions of the Securities Act and
the rules and regulations thereunder; and (2) during the periods
during which any such sale, pledge, transfer or other disposition
would, under generally accepted accounting principles or the rules,
regulations or interpretations of the Commission, disqualify the
Merger for "pooling-of-interests" accounting treatment. The parties
understand that such periods in general encompass the period
commencing thirty (30) days prior to the Merger and ending at the
time of the publication of financial results covering at least 30
days of combined operations of NCC and IFC within the meaning of
Section 201.01 of the Commission's Codification of Financial
Reporting Policies. NCC shall file such financial results within 90
days of the Effective Time. IFC shall deliver such written agreements
to NCC at or prior to the Effective Time.
5.13 STOCK EXCHANGE LISTINGS. NCC shall use its best efforts to
list on the New York Stock Exchange, upon official notice of issuance, the
NCC Common Stock to be issued pursuant to the Merger.
5.14 PROXY. As soon as practicable after the date hereof, IFC and NCC
shall prepare the Proxy Statement, file it with the Commission, respond to
comments of the Staff of the Commission, clear the Proxy Statement with the
Staff of the Commission and promptly thereafter mail the Proxy Statement to
all holders of shares of IFC Common Stock and NCC Common Stock. NCC and
IFC shall cooperate with each other in the preparation of the Proxy
Statement.
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5.15 STOCKHOLDERS' MEETINGS.
(a) IFC shall take all action necessary, in accordance with
applicable law and its Articles of Incorporation and By-laws, to
convene a special meeting of the holders of IFC Common Stock (the
"IFC Meeting") as promptly as practicable for the purpose of
considering and taking action upon this Agreement. Unless the
Board of Directors of IFC shall have received the written advice
of counsel, reasonably acceptable to NCC, to the effect that making
such a recommendation would cause the Board of Directors of IFC to
violate its fiduciary duty under applicable law and provided that
such advice is not predicated solely upon the price of NCC Common
Stock, the Board of Directors of IFC shall recommend that the holders
of the IFC Common Stock vote in favor of and approve the Merger and
adopt this Agreement at the IFC Meeting.
(b) NCC shall take all action necessary, in accordance with
applicable law and its certificate of incorporation and by-laws, to
convene a meeting of the holders of NCC Common Stock (the "NCC
Meeting") for the purpose of considering and taking action upon this
Agreement. The Board of Directors of NCC shall recommend that holders
of NCC Common Stock vote in favor of and approve the Merger and
adopt this Agreement at the NCC Meeting.
5.16 POOLING-OF-INTERESTS AND TAX-FREE REORGANIZATION TREATMENT.
Neither NCC nor IFC shall intentionally take or cause to be taken any
action, whether before or after the Effective Time, which would disqualify the
Merger as a "pooling of interests" for accounting purposes or as a
"reorganization" within the meaning of Section 368 of the Code.
5.17 PROVISION OF SHARES. NCC shall issue and provide the shares
of NCC Common Stock deliverable upon the conversion of the IFC Common Stock
pursuant to this Agreement, and will provide the cash to be paid in lieu of
fractional shares of NCC Common Stock as provided in Subsection 2.3(f). The
shares of NCC Common Stock to be issued and exchanged for shares of IFC Common
Stock pursuant to this Agreement will, at the Effective Time, be duly
authorized, validly issued, fully paid and nonassessable and subject to no
preemptive rights.
VI. CLOSING MATTERS
---------------
6.1 THE CLOSING. Subject to satisfaction or waiver of all
conditions precedent set forth in Article VII of this Agreement, the closing
("Closing") at such location mutually agreeable to the parties and on a date
("Closing Date") which is the first business day after the later of:
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(a) the first date on which the Merger may be consummated in
accordance with the approvals of any Governmental Entities or
(b) the date the required approvals of IFC's shareholders and
NCC's stockholders have been obtained.
If all conditions are determined to be satisfied in all material respects (or
are duly waived) at the Closing, the Closing shall be consummated by the
making of all necessary filing required by all Governmental Entities.
6.2 DOCUMENTS AND CERTIFICATES. NCC and IFC shall use their
respective best efforts, on or prior to Closing, to execute and deliver all
such instruments, documents or certificates as may be necessary or advisable,
on the advice of counsel, for the consummation at the Closing of the
transactions contemplated by this Agreement to occur as soon as practicable.
VII. CONDITIONS
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7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) The Merger shall have been approved and adopted by the
requisite vote of the holders of IFC Common Stock and by the
requisite vote of the holders of NCC Common Stock.
(b) The NCC Common Stock issuable in the Merger shall have
been authorized for listing on the New York Stock Exchange, upon
official notice of issuance.
(c) All authorizations, consents, orders or approvals of,
and all expirations of waiting periods imposed by, any Governmental
Entity (collectively, "Consents") which are necessary for the
consummation of the Merger, (other than immaterial Consents, the
failure to obtain which would not be materially adverse to the
combined businesses of NCC, IFC, NCC's subsidiaries and IFC
Subsidiaries taken as a whole) shall have been obtained or shall
have occurred and shall be in full force and effect at the Effective
Time; PROVIDED, HOWEVER, that no such authorization, consent, order
or approval shall be deemed to have been received if it shall include
any conditions or requirements which would so adversely impact the
economic or business benefits of the transactions contemplated by
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this Agreement so as to render inadvisable in the reasonable opinion
of the Board of Directors of NCC the consummation of the Merger.
(d) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall have
been issued by the Commission and remain in effect.
(e) NCC and IFC shall have received a letter, dated the
date of the Closing, from Ernst and Young, NCC's independent
accountants, to the effect that, for financial reporting purposes,
the Merger qualifies for pooling-of-interests accounting treatment
under generally accepted accounting principles if consummated in
accordance with this Agreement.
(f) No temporary restraining order, preliminary or permanent
injunction or other order by any federal or state court in the
United States which prevents the consummation of the Merger shall have
been issued and remain in effect.
(g) Buchanan Ingersoll Professional Corporation, counsel to
IFC, shall have delivered to IFC and NCC their opinion, dated the
day of the Effective Time, substantially to the effect that, on the
basis of 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 for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of
the Code and that, accordingly: (i) no gain or loss will be
recognized by NCC or IFC as a result of the Merger; (ii) no gain or
loss will be recognized by the shareholders of IFC who exchange their
shares of the IFC Common Stock solely for shares of NCC Common Stock
pursuant to the Merger (except with respect to cash received in lieu
of a fractional share interest in NCC Common Stock); (iii) the tax
basis of the shares of NCC Common Stock received by shareholders
who exchange all of their shares of IFC Common Stock solely for
shares of NCC.
Common Stock in the Merger will be the same as the tax basis of the
shares of IFC Common Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest for which cash is received);
and (iv) the holding period of the shares of NCC Common Stock received in
the Merger will include the period during which the shares of IFC Common Stock
surrendered in exchange therefor were held, provided such shares of IFC Common
Stock were held as capital assets at the Effective
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Time. In rendering such opinion, counsel may require and rely upon
representations contained in certificates of officers of IFC, NCC, and
others.
7.2 CONDITIONS TO OBLIGATION OF IFC TO EFFECT THE MERGER. The
obligation of IFC to effect the Merger shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the additional following
conditions:
(a) NCC shall have performed in all material respects its
covenants contained in this Agreement required to be performed at or
prior to the Effective Time.
(b) The representations and warranties of NCC contained in
this Agreement shall be true in all material respects when made and
the representations and warranties set forth in Article 3 shall be
true in all material respects as of the Effective Time as if made at
and as of such time, except as expressly contemplated or permitted by
this Agreement and except for representations and warranties relating
to a time or times other than the Effective Time which were or will be
true in all material respects at such time or times.
(c) NCC shall have furnished IFC a Certificate dated the date
of the Closing, signed by the Chief Executive Officer and Chief
Financial Officer of NCC that, to the best of their knowledge and
belief after due inquiry, the conditions set forth in Subsections
7.2(a) and 7.2(b) have been satisfied.
(d) IFC and its directors and officers who sign the
Registration Statement shall have received from Ernst and Young,
NCC's independent certified public accountants, "comfort" letters,
dated (i) the date of the mailing of the Proxy Statement to NCC's
shareholders and (ii) shortly prior to the Effective Date, with
respect to certain financial information regarding NCC in the form
customarily issued by such accountants at such time in
transactions of this type.
7.3 CONDITIONS TO OBLIGATION OF NCC TO EFFECT THE MERGER. The
obligation of NCC to effect the Merger shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the additional following
conditions:
(a) IFC shall have performed in all material respects its
covenants contained in this Agreement required to be performed at or
prior to the Effective Time.
(b) The representations and warranties of IFC contained in
this Agreement shall be true in all material respects when made and
the representations and warranties set forth in Article 4 shall be
true in all material respects as of the Effective Time as if made
on and
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as of such time, except as expressly contemplated or permitted by
this Agreement and except for representations and warranties
relating to a time or times other than the Effective Time which were
or will be true in all material respects at such time or times.
(c) IFC shall have furnished NCC a Certificate dated the
date of the Closing signed by the Chief Executive Officer and Chief
Financial Officer of IFC that, to the best of their knowledge and
belief after due inquiry, the conditions set forth in subsections
7.3(a) and 7.3(c) have been satisfied.
(d) NCC and its directors and officers who sign the
Registration Statement shall have received from Coopers & Lybrand
LLP, IFC's independent certified public accountants, "comfort"
letters, dated (i) the date of the mailing of the Proxy
Statement to IFC's shareholders and (ii) shortly prior to the
Effective Date, with respect to certain financial information
regarding IFC in the form customarily issued by such accountants at
such time in transactions of this type.
VIII. MISCELLANEOUS
-------------
8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of IFC and/or the stockholders of NCC:
(a) by mutual consent of the Board of Directors of NCC and the
Board of Directors of IFC;
(b) by either NCC or IFC if the Merger shall not have been
consummated on or before August 27, 1996 or if this Agreement was
not approved at either the IFC Meeting or the NCC Meeting
(provided the terminating party is not otherwise in material breach
of its obligations under this Agreement);
(c) by IFC if any of the conditions specified in Sections 7.1
and 7.2 have not been met or waived by IFC at such time as such
condition can no longer be satisfied;
(d) by NCC if any of the conditions specified in Sections 7.1
and 7.3 have not been met or waived by NCC at such time as such
condition can no longer be satisfied;
8.2 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations and warranties or covenants in this Agreement will
terminate at the Effective Time or the earlier termination of this
Agreement pursuant to Section 7.1, as the case may be; PROVIDED, HOWEVER,
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that if the Merger is consummated, Sections 1.6, 2.1 through 2.4, 5.4, 5.5,
5.8, 5.17 and 8.2 hereof will survive the Effective Time to the extent
contemplated by such Sections; PROVIDED, FURTHER, that the last sentence of
Section 5.5 and all of Section 8.10 hereof will in all events survive any
termination of this Agreement.
8.3 WAIVER AND AMENDMENT. Subject to applicable provisions of the
DGCL and BCL, any provision of this Agreement may be waived at any time by the
party which is, or whose stockholders are, entitled to the benefits thereof,
and this Agreement may be amended or supplemented at any time, provided that
no amendment will be made after any stockholder approval of the Merger which
reduces or changes the form of the Merger Consideration without further
stockholder approval. No such waiver, amendment or supplement will be
effective unless in a writing which makes express reference to this Section 8.3
and is signed by the party or parties sought to be bound thereby.
8.4 ENTIRE AGREEMENT. This Agreement together with the Option
Agreement contain the entire agreement among NCC and IFC with respect to the
Merger and the other transactions contemplated hereby and thereby, and
supersedes all prior agreements among the parties with respect to such matters.
8.5 APPLICABLE LAW; CONSENT TO JURISDICTION. This Agreement will
be governed by and construed in accordance with the laws of the State of
Ohio except to the extent laws of the state of Delaware and Commonwealth of
Pennsylvania govern the merger. NCC and IFC consent to personal jurisdiction
in any action brought in any federal or state court within the State of Ohio
having subject matter jurisdiction in the matter for purposes of any action
arising out of this Agreement.
8.6 CERTAIN DEFINITIONS; HEADLINES. (a) For purposes of this
Agreement, the term:
(i) "affiliate", "associate" and "significant
subsidiary" shall have the respective meanings ascribed to such
terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act, as in effect on the date hereof.
(ii) "control" (including the terms "controlled by"
and "under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause
the direction of the management or policies of a person, whether
through the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise;
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(iii) "Fed Approval Date" means the day the FRB issues
order approving consummation of the Merger.
(iv) "Market Price" means the average of the per share
closing prices on the New York Stock Exchange of NCC Common Stock
for the 20 consecutive trading days ending at the end of the third
trading day immediately preceding the Effective Time.
(v) "Material Adverse Effect" means an event,
change or occurrence which has a material negative impact on the
financial condition, businesses or results of operations of IFC and
its subsidiaries, taken as a whole, or NCC and its subsidiaries, taken
as a whole, as the case may be, or the ability of IFC or NCC, as the
case may be, to consummate the transactions contemplated hereby. The
effect of any action taken by IFC solely pursuant to Subsection
5.2(f) shall not be taken into consideration in determining whether
any Material Adverse Effect has occurred.
(vi) "person" means an individual, corporation, partnership,
association, trust or unincorporated organization; and
(vii) "subsidiary" of IFC, NCC or any other person means,
except where the context otherwise requires, any corporation,
partnership, trust or similar association of which IFC, NCC or any
other person, as the case may be (either alone or through or together
with any other subsidiary), owns, directly or indirectly, more than
50% of the stock or other equity interests, the holders of which are
generally entitled to vote for the election of the board of directors
or other governing body of such corporation.
(b) The descriptive headings contained in this Agreement are
for convenience and reference only and will not affect in any way
the meaning or interpretation of this Agreement.
(c) Unless the context of this Agreement expressly indicates
otherwise, (i) any singular term in this Agreement will include the
plural and any plural term will include the singular and (ii) the
term section or schedule will mean a section or schedule of
or to this Agreement.
8.7 NOTICES. All notices, consents, requests, demands and other
communications hereunder will be in writing and will be deemed to have been
duly given or delivered if delivered personally, telexed with receipt
acknowledged, mailed by registered or certified mail return receipt
requested, sent by facsimile with confirmation of receipt, or delivered by a
recognized commercial courier addressed as follows:
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If to IFC to:
Integra Financial Corporation
Four PPG Place
Pittsburgh, Pennsylvania 15222-5408
Fax No. (412) 261-7279
Attention: Chairman of the Board
With copies to:
Integra Financial Corporation
Four PPG Place
Pittsburgh, Pennsylvania 15222-5408
Fax No. (412) 261-7279
Attention: General Counsel
With copies to:
Buchanan Ingersoll P.C.
1 Oxford Center
301 Grant Street, 20th Floor
Pittsburgh, Pennsylvania 15219-1410
Fax No. (412) 562-1041
Attention: William R. Newlin
If to NCC to:
National City Corporation
P. O. Box 5756
Cleveland, Ohio 44101-0756
Attention: Chairman of the Board
Fax No. (216) 575-3332
With a copy to:
National City Corporation
Law Department
P. O. Box 5756
Cleveland, Ohio 44101-0756
Attention: General Counsel
Fax No. (216) 575-3332
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or to such other address as any party may have furnished to the other parties
in writing in accordance with this Section 8.7.
8.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original but all of which
together will constitute but one agreement.
8.9 PARTIES IN INTEREST; ASSIGNMENT. Except for Section 2.2, (which
is intended to be for the benefit of the holders of Outstanding Options under
the IFC Option Plans to the extent contemplated thereby and their
beneficiaries, and may be enforced by such persons) and Sections 5.4 and
5.8 hereof (which are intended to be for the benefit of directors, officers
or employees to the extent contemplated thereby and their beneficiaries, and
may be enforced by such persons), this Agreement is not intended to nor
will it confer upon any other person (other than the parties hereto) any
rights or remedies. Without the prior written consent of the other parties to
this Agreement neither NCC nor IFC shall assign any rights or delegate any
obligations under this Agreement. Any such purported assignment or
delegation made without prior consent of the other parties hereto shall be null
and void.
8.10 EXPENSES.
(a) If the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the Surviving Corporation.
(b) Notwithstanding anything contained in Subsection 8.10(a)
to the contrary, if this Agreement is terminated by IFC or NCC
pursuant to Subsection 8.1(c) or 8.1(d), respectively, because of
the willful breach by the other party of any representation,
warranty, covenant, undertaking or restriction contained in this
Agreement and if the terminating party is not in material breach of
any representation, warranty, covenant, undertaking or restriction
contained in this Agreement, then the breaching party shall pay all
costs and expenses of the terminating party; PROVIDED, HOWEVER, that
if this Agreement is terminated under circumstances other than those
described in this Subsection 8.10(b), all costs and expenses incurred
such costs and expenses. Nothing contained in this Subsection 8.10(b)
shall constitute or shall be deemed to constitute liquidated damages
for the willful breach by a party of the terms of this Agreement or
otherwise limit the rights of the nonbreaching party.
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(c) Final settlement with respect to payment of fees and
expenses by the parties to this Agreement pursuant to Subsection
8.10(b) shall be made within thirty (30) days of the termination
of this Agreement.
8.11 ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties hereto
will be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.12 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other terms and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party hereto. Upon any such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto will negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement are consummated to the extent possible.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the date first above
written.
INTEGRA FINANCIAL CORPORATION
Attest Leonard M. Carroll By /s/ William F. Roemer
-------------------- ----------------------------
Its: Chairman & CEO
----------------------------
NATIONAL CITY CORPORATION
Attest David L. Zoeller By /s/ David A. Daberko
-------------------- ----------------------------
Its: President & CEO
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APPENDIX B
March , 1996
Board of Directors
Integra Financial Corporation
Four PPG Place
Pittsburgh, PA 15222
Members of the Board:
We understand that Integra Financial Corporation ("IFC" or the "Company")
and National City Corporation ("NCC") have entered an Agreement and Plan of
Merger dated August 27, 1995 (the "Merger Agreement"), which provides, among
other things, for the merger (the "Merger") of IFC with and into NCC. Pursuant
to the Merger, each outstanding share of common stock, par value $1.00 per
share, of IFC ("IFC Common Stock"), other than shares held in treasury or held
by NCC or any direct or indirect wholly-owned subsidiary of NCC (except for any
such shares of IFC Common Stock held in trust accounts, managed accounts or in
any similar manner as trustee or in a fiduciary capacity or acquired in
satisfaction of debts previously contracted), will be canceled, retired and
converted into 2.00 (the "Exchange Ratio") shares of common stock, par value
$4.00 per share, of NCC (the "NCC Common Stock"). We understand that the
transaction will be accounted for as a pooling of interests. The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to holders of IFC
Common Stock (other than NCC and its subsidiaries).
For purposes of the opinion set forth herein, we have:
<TABLE>
<S> <C>
(i) analyzed certain publicly available financial statements and other information of
IFC and NCC, respectively;
(ii) analyzed certain internal financial statements and other financial and operating
data concerning IFC and NCC prepared by the managements of IFC and NCC,
respectively;
(iii) analyzed certain financial projections prepared by the managements of IFC and NCC,
respectively;
(iv) discussed the past and current operations and financial condition and the prospects
of IFC and NCC with senior executives of IFC and NCC, respectively;
(v) reviewed the reported prices and trading activity for the IFC Common Stock and the
NCC Common Stock;
(vi) compared the financial performance of IFC and NCC and the prices and trading
activity of the IFC Common Stock and the NCC Common Stock with that of certain other
comparable bank holding companies and their securities;
(vii) discussed the results of regulatory examinations of IFC and NCC with the senior
managements of the respective companies;
(viii) reviewed and discussed with the senior managements of IFC and NCC the strategic
objectives of the Merger and the synergies and certain other benefits of the Merger;
(ix) analyzed certain pro forma financial projections for the combined company prepared
by IFC and NCC;
(x) reviewed and discussed with the senior managements of IFC and NCC certain estimates
of the cost savings expected to result from the Merger;
(xi) reviewed the financial terms, to the extent publicly available, of certain
comparable merger transactions;
(xii) participated in discussions and negotiations among representatives of IFC and NCC
and their financial and legal advisors;
</TABLE>
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<TABLE>
<S> <C>
(xiii) reviewed the draft Merger Agreement, the draft Stock Option Agreement between IFC
and NCC substantially in the form of the draft dated August 21, 1995 and certain
related documents; and
(xiv) performed such other analyses as we have deemed appropriate.
</TABLE>
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for purposes of this
opinion. With respect to the financial projections, including the estimates of
synergies and other benefits expected to result from the Merger, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of IFC and
NCC, respectively. We have not made any independent valuation or appraisal of
the assets or liabilities of IFC and NCC, nor have we been furnished with any
such appraisals and we have not examined any loan files of IFC and NCC. Our
opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any other party with respect to the acquisition of IFC or
any of its assets.
We have acted as financial advisor to the Board of Directors of IFC in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services to IFC and NCC and have received fees
for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of IFC and may not be used for any other purpose without prior written
consent.
Based on and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to holders of IFC Common Stock (other than NCC and its
subsidiaries).
Very truly yours,
MORGAN STANLEY & CO.
INCORPORATED
By:
---------------------------
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APPENDIX C
TO BE PLACED ON MERRILL LYNCH LETTERHEAD
[To be Dated at Proxy Date, 1996]
Board of Directors
National City Corporation
1900 East 9th Street
Cleveland, Ohio 44114
Members of the Board:
National City Corporation ("National City") and Integra Financial
Corporation ("Integra") have entered into an Agreement and Plan of Merger (the
"Agreement") dated August 27, 1995, pursuant to which Integra will be merged
with and into National City in a transaction (the "Merger") in which each
outstanding share of Integra's common stock, par value $1.00 per share (the
"Integra Shares"), will be converted into the right to receive 2.00 shares (the
"Exchange Ratio") of the common stock, par value $4.00 per share, of National
City (the "National City Shares"), all as set forth more fully in the Agreement.
In connection with the Merger, the parties have also entered into agreements,
dated August 27, 1995, (the "Option Agreements") pursuant to which National City
and Integra have granted to the other an option to acquire, under certain
circumstances, a certain number of their respective common shares outstanding,
all as set forth more fully in the Option Agreements.
You have asked us whether, in our opinion, the proposed Exchange Ratio in
the Merger is fair to National City from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed Integra's Annual Reports on Form 10-K and related financial
information for the five fiscal years ended December 31, 1994 and
Integra's Quarterly Reports on Form 10-Q and the related unaudited
financial information for the quarterly periods ending March 31, 1995,
June 30, 1995 and September 30, 1995;
(2) Reviewed National City's Annual Reports on Form 10-K and related
financial information for the five fiscal years ended December 31,
1994 and National City's Quarterly Reports on Form 10-Q and the
related unaudited financial information for the quarterly periods
ending March 31, 1995, June 30, 1995 and September 30, 1995;
(3) Reviewed certain information, including financial forecasts and
assumptions regarding cost savings resulting from the Merger, relating
to the respective business, earnings, assets, contingencies and
prospects of Integra and National City, furnished to us by Integra and
National City;
(4) Conducted discussions with members of senior management of Integra and
National City concerning their respective financial condition,
businesses, operations, regulatory condition, financial forecasts,
contingencies and prospects;
(5) Reviewed the historical market prices and trading activity for the
Integra Shares and the National City Shares and compared them with
that of certain publicly traded companies which we deemed to be
relevant;
(6) Compared the results of operations of Integra and National City with
that of certain companies which we deemed to be relevant;
(7) Compared the proposed financial terms of the Merger contemplated by
the Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;
(8) Analyzed, based upon information provided by National City's senior
management, the pro forma impact of the transaction on the earnings
and book value per share, consolidated capitalization and certain
balance sheet and profitability ratios of National City;
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(9) Reviewed the Agreement;
(10) Reviewed the Option Agreements; and
(11) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed appropriate.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by Integra and
National City, and we have not independently verified such information or
undertaken an independent evaluation or appraisal of the assets or liabilities,
contingent or otherwise, of Integra or National City or any of their
subsidiaries, nor have we been furnished any such evaluation or appraisal. We
have also relied upon the managements of Integra and National City as to the
reasonableness and achievability of the financial forecasts (and the assumptions
and bases therefor) provided to us. In that regard, we have assumed with your
consent that such forecasts, including without limitation, financial forecasts,
evaluations of contingencies, projected cost savings and operating synergies
resulting from the Merger and projections regarding future economic conditions
and results of operations reflect the best currently available estimates and
judgments of such respective managements as to the future financial performance
of Integra and National City. Our opinion is necessarily based on economic,
market and other conditions as in effect on, and the information made available
to us as of, the date hereof. We are not experts in the evaluation of allowances
for loan losses and we have not assumed any responsibility for making an
independent evaluation of the adequacy of the allowance for loan losses of
Integra and National City nor have we reviewed any individual credit files.
We have been retained by the Board of Directors of National City as an
independent contractor to act as financial advisor to National City with respect
to the Merger and will receive a fee for our services. We may have, in the past,
provided financial advisory and financing services to Integra and National City
and received fees for the rendering of such services. In addition, in the
ordinary course of business, we may actively trade debt and/or equity securities
of Integra and National City and their respective affiliates for our own account
and the accounts of our customers, and we therefore may from time to time hold a
long or short position in such securities.
Our opinion is directed to the Board of Directors of National City and does
not constitute a recommendation to any shareholder of National City as to how
such shareholder should vote at any shareholder meeting of National City held in
connection with the Merger.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed Exchange Ratio in the Merger is fair to National City from a
financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
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Appendix D
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 27, 1995, between
National City Corporation, a Delaware corporation ("Grantee"), and Integra
Financial Corporation, a Pennsylvania corporation ("Issuer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, as a condition to, and contemporaneous with the
execution of this Stock Option Agreement the parties are entering into an
Agreement and Plan of Merger dated August 27, 1995 ("Agreement") and in
consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafer defined):
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the 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 6,501,300 fully paid and nonassessable shares of Common Stock, par value
$1.00 ("Common Stock"), of Issuer at a price of $51.875 share; PROVIDED,
HOWEVER, that in the event Issuer issues or agrees to issue any shares of
Common Stock at a price less than $51.875 per share (as adjusted pursuant to
subsection 5(b)), such price shall be equal to such lesser price (such price,
as adjusted if applicable, the "Option Price"); PROVIDED FURTHER that in no
event shall the number of shares for which this Option is exercisable together
with the number of shares owned by National City Corporation other than Trust
Account Shares (as defined in the Agreement) exceed 19.9% of the Issuer's
issued and outstanding common shares without giving effect to any shares
subject or issued pursuant to the Option. 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 Stock Option
Agreement, the number of shares of Common Stock subject to the Option shall be
increased so that, after such issuance, together with the number of shares
owned by National City Corporation other than Trust Account Shares 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 1(b) or elsewhere in this Stock Option Agreement
shall be deemed to authorize Issuer or Grantee to breach any provision of the
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 30 days
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following such Subsequent Triggering Event (or such later date as provided in
Section 10). Each of the following shall be an Exercise Termination Event: (i)
immediately prior to the Effective Time of the Merger; (ii) termination of the
Agreement in accordance with the provisions thereof (other than a termination
resulting from a willful breach by Issuer of a provision of the Agreement) if
such termination occurs prior to the occurrence of an Initial Triggering Event;
or (iii) the passage of twelve months after termination of the Agreement if
such termination follows the occurrence of an Initial Triggering Event
(PROVIDED that if an Initial Triggering Event continues or another Initial
Triggering Event occurs beyond such termination, the Exercise Termination Event
shall be twelve months from the expiration of the Last Triggering Event but in
no event more than 18 months after such termination). The "Last Triggering
Event" shall mean the last Initial Triggering Event to occur. The term
"Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its subsidiaries (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 Stock Option Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934 (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 shall
have recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction other than as contemplated by the Agreement.
For purposes of this Stock Option Agreement, "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction,
involving Issuer or any of Issuer's bank, trust company or finance
company subsidiaries ("Significant Subsidiary"), (y) a purchase, lease
or other acquisition of all or substantially all of the assets of Issuer
or any Significant Subsidiary, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise)
of securities representing 10% or more of the voting power of Issuer or
Significant Subsidiary; (The term Acquisition Transaction specifically
does not include any merger or consolidation among Issuer and/or Issuer
Subsidiaries.)
(ii) The Board of Directors of Issuer does not
recommend that the shareholders of Issuer approve the Agreement;
(iii) Any person other than Grantee, any shareholder
of Grantee who currently beneficially holds 10% or more of Grantee's
outstanding shares of Common Stock, any Grantee Subsidiary or any Issuer
Subsidiary acting in a fiduciary capacity 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 Stock Option Agreement having the meaning assigned
thereto in Section 13(d) of the 1934 Act, and the rules and regulations
thereunder);
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(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a BONA FIDE proposal to Issuer or its
shareholders by public announcement or written communication that is or
becomes the subject of public disclosure to engage in an Acquisition
Transaction;
(v) After a proposal is made by a third party to
Issuer or its shareholders to engage in an Acquisition Transaction,
Issuer shall have breached any covenant or obligation contained in the
Agreement and such breach (x) would entitle Grantee to terminate the
Agreement and (y) shall not have been cured prior to the Notice Date (as
defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which Grantee
has given its prior written consent, shall have filed an application or
notice with The Board of Governors of the Federal Reserve System (the
"FRB") or other governmental authority or regulatory or administrative
agency or commission, domestic or foreign (each, a "Government Entity"),
for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either
of the following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial
ownership of 15% or more of the then outstanding Common Stock other than
by any person who currently beneficially owns more than 15% of the
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection 2(b), except that the percentage
referred to in clause (z) shall be 15%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, 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 FRB or any other
Governmental Entity is required in connection with such purchase, the Holder
shall promptly file the required notice or application for approval and shall
expeditiously process the same and the period of time that otherwise would run
pursuant to this sentence shall run from the later of (x) the date on which any
required notification periods have expired or been terminated and (y) the date
on which such approvals have been obtained and any
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requisite waiting period or periods shall have passed. Any exercise of the
option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall 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, PROVIDED that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder, and
the Holder shall deliver to Issuer a copy of this Stock Option Agreement and a
letter agreeing that the Holder will not offer to sell or otherwise dispose of
such shares in violation of applicable law or the provisions of this Stock
Option Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder shall 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 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 Securities and Exchange Commission (the "SEC"), or an opinion
of counsel, in form and substance 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 Stock Option 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
Stock Option Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may
be required by law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
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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 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, or the Change in Bank Control Act of 1978, as amended, or
any state banking law, prior approval of or notice to the FRB or to any other
Governmental Entity is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to each such Governmental Entity 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 Stock Option Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Stock Option 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 "Stock
Option Agreement" and "Option" as used herein include any Stock Option
Agreements and related options for which this Stock Option 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 Stock Option Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Stock Option Agreement, if mutilated, Issuer will execute and deliver a
new Stock Option Agreement of like tenor and date. Any such new Stock Option
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Stock Option 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 Stock Option
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Agreement, the number of shares of Common Stock purchasable upon the exercise
of the Option shall be subject to adjustment from time to time as provided in
this Section 5.
(a) In the event of any change in Common Stock by
reason of stock dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and number
of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted.
(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 30 days (or such later date as may be provided
pursuant to 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 shelf registration statement under the 1933 Act
covering any shares issued and issuable pursuant to this Option and shall use
its 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;
PROVIDED, HOWEVER, that Issuer may postpone filing a registration statement
relating to a registration request by Grantee under this Section 6 for a period
of time (not in excess of 180 days) if in its judgment such filing would
require the disclosure of material information that Issuer has a BONA FIDE
business purpose for preserving as confidential. Issuer will use its best
efforts to cause such registration statement first 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. 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. The foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in the
process of registration with respect to an underwritten public offering 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 offering or inclusion of the Holder's Option
or 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
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total number of shares to be issued by the Holder and Issuer in the aggregate;
PROVIDED FURTHER, however, that if such reduction occurs, then the Issuer shall
file a registration statement for the balance as promptly as practical and no
reduction shall thereafter occur. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. 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.
7. (a) Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, (i) at the request of the
Holder, delivered within 30 days of the Subsequent Trigger Event (or such later
period as may be provided pursuant to Section 10), Issuer shall repurchase the
Option from the Holder at a price (the "Option Repurchase Price") equal to (x)
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 plus (y) Grantee's Out-of-Pocket Expenses (as defined below)
(to the extent not previously reimbursed) and (ii) at the request of the owner
of Option Shares from time to time (the "Owner"), delivered within 30 days of a
Subsequent Trigger Event (or such later period as may be provided pursuant to
Section 10), Issuer 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 (x) the market/offer price multiplied by the number of Option
Shares so designated plus (y) Grantee's Out-of-Pocket Expenses (to the extent
not previously reimbursed). The term "Out-of-Pocket Expenses" shall mean
Grantee's reasonable out-of-pocket expenses incurred in connection with the
transactions contemplated by the Agreement, including, without limitation,
legal, accounting and investment banking fees. The term "market/offer price"
shall mean the highest of (i) the price per share of Common Stock at which a
tender offer or exchange offer therefor has been made after the date hereof,
(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 30-day 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 substantially all of Issuer's assets, the sum
of the price paid in such sale for such assets and the current market value of
the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may
be, 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,
whose determination shall be conclusive and binding on all parties.
(b) The Holder or 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 Stock Option 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
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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 subsection (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 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 or the Option
Shares either 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 Purchase Price 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 Stock Option 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 Stock Option 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 sum of (x) the portion thereof theretofore delivered
to the Holder and (y) Out-of-Pocket Expenses and the denominator of which is
the Option Repurchase Price less Out-of-Pocket Expenses, or (B) to the Owner, a
certificate for the Option Shares it is then so prohibited from repurchasing,
assuming that the portion of the Option Share Repurchase Price theretofore
delivered is first applied to the payment of Out-of-Pocket Expenses and then to
the repurchase of Option Shares.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate or merge with
any person, other than Grantee or one of its subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, 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 represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or one
of its subsidiaries, then, and
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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:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer
is the continuing or surviving person, and (iii) the transferee of all
or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common
stock to be issued by the issuer of the Substitute Option upon exercise
of the Substitute Option.
(3) "Assigned Value" shall mean the market/offer
price, as defined in Section 7.
(4) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in question, but
in no event higher than the closing price of the shares of Substitute
Common Stock on the day preceding such consolidation, merger or sale;
PROVIDED, that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common stock
issued by the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as 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 Stock Option
Agreement, which 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 is then
exercisable, 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 is then exercisable and
the denominator of which shall be the number of shares of Substitute Common
Stock for which the Substitute Option is exercisable.
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(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for a number of shares that together
with the number of shares owned by National City Corporation, other than Trust
Account Shares, is 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 the 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 (x) 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 plus (y) Grantee's Out-of-Pocket Expenses (to the
extent not previously reimbursed), 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 (x) the Highest
Closing Price multiplied by the number of Substitute Shares so designated plus
(y) Grantee's Out-of-Pocket Expenses (to the extent not previously reimbursed).
The term "Highest Closing Price" shall mean the highest closing price for
shares of Substitute Common Stock within the 30-day 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 or the Substitute Share
Owner, as the case may be, may exercise its respective right 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
Stock Option Agreement) and 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
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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 Share Repurchase Price, respectively, which it is
no longer prohibited from delivering, within five 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 best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder 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 the 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 sum of (x) the portion thereof theretofore
delivered to the Substitute Option Holder and (y) Out-of-Pocket Expenses and
the denominator of which is the Substitute Option Repurchase Price less
Out-of-Pocket Expenses, or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing,
assuming that the portion of the Substitute Share Repurchase Price theretofore
delivered is first applied to the payment of Out-of-Pocket Expenses and then to
the repurchase of Substitute Shares.
10. The 30-day period for exercise of certain rights under
Sections 2, 6, 7 and 12 shall be extended: (i) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, 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:
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(a) Issuer has full corporate power and authority to execute
and deliver this Stock Option Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Stock Option Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Stock Option
Agreement or to consummate the transactions so contemplated. This Stock Option
Agreement has been duly and validly executed and delivered by Issuer. This
Stock Option Agreement is the valid and legally binding obligation of 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 Stock Option 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 hereto, will be duly authorized, validly issued,
fully paid, nonassessable, and will be delivered free and clear of all claims,
liens, encumbrances and security interests and not subject to any preemptive
rights.
12. Neither of the parties hereto may assign any of its
rights and obligations under this Stock Option 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 within 30 days following such Subsequent Triggering Event
(or such later period as may be provided pursuant to Section 10); PROVIDED,
HOWEVER, that until the date 30 days following the date at which the FRB
approves an application by Grantee under the Bank Holding Company Act 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.Q., 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 FRB.
13. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third parties and
Governmental Entities necessary to the consummation of the transactions
contemplated by this Stock Option Agreement, including without limitation
making application to list the shares of Common Stock issuable hereunder on the
New York Stock Exchange upon official notice of issuance and applying to the
FRB under the Bank Holding Company Act for approval to acquire the shares
issuable hereunder.
14. Notwithstanding anything to the contrary herein, in the
event that the Holder or Owner or any affiliate (as defined in Rule 12b-2 of
the rules and regulations under the 1934 Act) thereof is a person making an
offer or proposal to engage in an Acquisition Transaction
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(other than the Merger), then (i) in the case of a Holder or any affiliate
thereof, the Option held by it shall immediately terminate and be of no further
force or effect, and (ii) in the case of an Owner or any affiliate thereof, the
Option Shares held by it shall be immediately repurchasable by Issuer at the
Option Price.
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Stock Option Agreement by either party
hereto and that the obligations of the parties shall hereto be enforceable by
either party hereto through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained
in this Stock Option 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 Stock Option 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 1(a)
hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is the express
intention of Issuer to allow the Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
17. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Agreement.
18. This Stock Option Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
19. This Stock Option Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
20. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the
Agreement, this Stock Option 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 Stock Option Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors
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and permitted assigns. Nothing in this Stock Option Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors except as assigns, any rights, remedies,
obligations or liabilities under or by reason of this Stock Option Agreement,
except as expressly provided herein.
22. Terms used in this Stock Option Agreement and not defined
herein but defined in the Agreement shall have the meanings assigned thereto in
the Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
NATIONAL CITY CORPORATION
By: /s/ David A. Daberko
--------------------
Title: President & CEO
---------------
INTEGRA FINANCIAL CORPORATION
By: /s/ William F. Roemer
---------------------
Title: Chairman & CEO
--------------
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Appendix E
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 27, 1995, between
National City Corporation, a Delaware corporation ("Issuer"), and Integra
Financial Corporation, a Pennsylvania corporation ("Grantee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, as a condition to, and contemporaneous with the
execution of this Stock Option Agreement the parties are entering into an
Agreement and Plan of Merger dated August 27, 1995 ("Agreement") and in
consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafer defined):
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the 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 12,098,600 fully paid and nonassessable shares of Common Stock, no par value
("Common Stock"), of Issuer at a price of $31.625 share; PROVIDED, HOWEVER,
that in the event Issuer issues or agrees to issue any shares of Common Stock
at a price less than $31.625 per share (as adjusted pursuant to subsection
5(b)), such price shall be equal to such lesser price (such price, as adjusted
if applicable, the "Option Price"); PROVIDED FURTHER that in no event shall the
number of shares for which this Option is exercisable exceed 8.2% of the
Issuer's issued and outstanding common shares without giving effect to any
shares subject or issued pursuant to the Option. 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 Stock Option
Agreement, the number of shares of Common Stock subject to the Option shall be
increased so that, after such issuance, it equals 8.2% 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
1(b) or elsewhere in this Stock Option Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the 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 30 days following such Subsequent Triggering Event (or such later date
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) immediately prior to the Effective
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Time of the Merger; (ii) termination of the Agreement in accordance with the
provisions thereof (other than a termination resulting from a willful breach by
Issuer of any provision of the Agreement) if such termination occurs prior to
the occurrence of an Initial Triggering Event; or (iii) the passage of twelve
months after termination of the Agreement if such termination follows the
occurrence of an Initial Triggering Event (PROVIDED that if an Initial
Triggering Event continues or another Initial Triggering Event occurs beyond
such termination, the Exercise Termination Event shall be twelve months from
the expiration of the Last Triggering Event but in no event more than 18 months
after such termination). The "Last Triggering Event" shall mean the last
Initial Triggering Event to occur. The term "Holder" shall mean the holder or
holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its subsidiaries (each an
"Issuer Subsidiary"), without having received Grantee's prior written
consent, shall have engaged in an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes of
this Stock Option Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934
(the "1934 Act"), and the rules and regulations thereunder) other than
Grantee or any of its subsidiaries (each a "Grantee Subsidiary") other
than as contemplated by the Agreement. For purposes of this Stock
Option Agreement, "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or any of
Issuer's banking subsidiaries, specifically excluding Madison Bank and
Trust Company and National City Bank, Ashland, ("Significant
Subsidiary"), (y) a purchase, lease or other acquisition of all or
substantially all of the assets of Issuer or any Significant Subsidiary,
or (z) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing
30% or more of the voting power of Issuer; (The term Acquisition
Transaction specifically does not include any merger or consolidation
among Issuer and/or Issuer Subsidiaries.)
(ii) Any person other than Grantee, any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity shall
have acquired beneficial ownership of 30% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for purposes of
this Stock Option Agreement having the meaning assigned thereto in
Section 13(d) of the 1934 Act, and the rules and regulations
thereunder);
(c) The term "Subsequent Triggering Event" shall mean either
of the following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of
40% or more of the then outstanding Common Stock; or
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(ii) The occurrence of the Initial Triggering Event described
in clause (i) of subsection 2(b), except that the percentage referred to
in clause (z) shall be 40%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, 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 FRB or any other
Governmental Entity is required in connection with such purchase, the Holder
shall promptly file the required notice or application for approval and shall
expeditiously process the same and the period of time that otherwise would run
pursuant to this sentence shall run from the later of (x) the date on which any
required notification periods have expired or been terminated and (y) the date
on which such approvals have been obtained and any requisite waiting period or
periods shall have passed. Any exercise of the option shall be deemed to occur
on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall 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, PROVIDED that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder, and
the Holder shall deliver to Issuer a copy of this Stock Option Agreement and a
letter agreeing that the Holder will not offer to sell or otherwise dispose of
such shares in violation of applicable law or the provisions of this Stock
Option Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder shall 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 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."
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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 Securities and Exchange Commission (the "SEC"), or an opinion
of counsel, in form and substance 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 Stock Option 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
Stock Option Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may
be required by law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed 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 premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section l8a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended, or the Change in Bank Control Act of 1978, as amended, or
any state banking law, prior approval of or notice to the FRB or to any other
Governmental Entity is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to each such Governmental Entity 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.
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4. This Stock Option Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Stock Option 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 "Stock
Option Agreement" and "Option" as used herein include any Stock Option
Agreements and related options for which this Stock Option 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 Stock Option Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Stock Option Agreement, if mutilated, Issuer will execute and deliver a
new Stock Option Agreement of like tenor and date. Any such new Stock Option
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Stock Option 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 Stock Option Agreement, the number of shares of Common Stock
purchasable upon the exercise of the Option shall be subject to adjustment from
time to time as provided in this Section 5.
(a) In the event of any change in Common Stock by
reason of stock dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and number
of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted.
(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 30 days (or such later date as may be provided
pursuant to 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 shelf registration statement under the 1933 Act
covering any shares issued and issuable pursuant to this Option and shall use
its 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;
PROVIDED, HOWEVER, that Issuer may postpone filing a registration statement
relating to a registration request by Grantee under this Section 6 for a period
of time (not in excess of 180 days) if in its judgment such filing would
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require the disclosure of material information that Issuer has a BONA FIDE
business purpose for preserving as confidential. Issuer will use its best
efforts to cause such registration statement first 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. 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. The foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in the
process of registration with respect to an underwritten public offering 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 offering or inclusion of the Holder's Option
or 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 issued by the
Holder and Issuer in the aggregate; PROVIDED FURTHER, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. 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.
7. (a) Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, (i) at the request of the
Holder, delivered within 30 days of the Subsequent Trigger Event (or such later
period as may be provided pursuant to Section 10), Issuer shall repurchase the
Option from the Holder at a price (the "Option Repurchase Price") equal to (x)
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 plus (y) Grantee's Out-of-Pocket Expenses (as defined below)
(to the extent not previously reimbursed) and (ii) at the request of the owner
of Option Shares from time to time (the "Owner"), delivered within 30 days of a
Subsequent Trigger Event (or such later period as may be provided pursuant to
Section 10), Issuer 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 (x) the market/ offer price multiplied by the number of Option
Shares so designated plus (y) Grantee's Out-of-Pocket Expenses (to the extent
not previously reimbursed). The term "Out-of-Pocket Expenses" shall mean
Grantee's reasonable out-of-pocket expenses incurred in connection with the
transactions contemplated by the Agreement, including, without limitation,
legal, accounting and investment banking fees. The term "market/offer price"
shall mean the highest of (i) the price per share of Common Stock at which a
tender offer or exchange offer
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therefor has been made after the date hereof, (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
30-day 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 substantially all of Issuer's assets, the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Issuer as determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, 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, whose determination shall be
conclusive and binding on all parties.
(b) The Holder or 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 Stock Option 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 subsection (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 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 or the Option
Shares either 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 Purchase Price 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 Stock Option 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
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surrendered Stock Option 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 sum of (x) the portion thereof theretofore delivered
to the Holder and (y) Out-of-Pocket Expenses and the denominator of which is
the Option Repurchase Price less Out-of-Pocket Expenses, or (B) to the Owner, a
certificate for the Option Shares it is then so prohibited from repurchasing,
assuming that the portion of the Option Share Repurchase Price theretofore
delivered is first applied to the payment of Out-of-Pocket Expenses and then to
the repurchase of Option Shares.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate or merge with
any person, other than Grantee or one of its subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, 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 represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or one
of its subsidiaries, 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:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer
is the continuing or surviving person, and (iii) the transferee of all
or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common
stock to be issued by the issuer of the Substitute Option upon exercise
of the Substitute Option.
(3) "Assigned Value" shall mean the market/offer
price, as defined in Section 7.
(4) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the 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
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Issuer or by any company which controls or is controlled by such person,
as the Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as 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 Stock Option
Agreement, which 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 is then
exercisable, 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 is then exercisable 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 8.2% 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 8.2%
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 the 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 (x) 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 plus (y) Grantee's Out-of-Pocket
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Expenses (to the extent not previously reimbursed), 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
(x) the Highest Closing Price multiplied by the number of Substitute Shares so
designated plus (y) Grantee's Out-of-Pocket Expenses (to the extent not
previously reimbursed). The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within the 30-day
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 or the Substitute Share
Owner, as the case may be, may exercise its respective right 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
Stock Option Agreement) and 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 Share Repurchase Price, respectively, which it is
no longer prohibited from delivering, within five 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 best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder 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 the 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
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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 sum of (x) the portion thereof theretofore delivered to the Substitute
Option Holder and (y) Out-of-Pocket Expenses and the denominator of which is
the Substitute Option Repurchase Price less Out-of-Pocket Expenses, or (B) to
the Substitute Share Owner, a certificate for the Substitute Option Shares it
is then so prohibited from repurchasing, assuming that the portion of the
Substitute Share Repurchase Price theretofore delivered is first applied to the
payment of Out-of-Pocket Expenses and then to the repurchase of Substitute
Shares.
10. The 30-day period for exercise of certain rights under
Sections 2, 6, 7 and 12 shall be extended: (i) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, 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 Stock Option Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Stock Option Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Stock Option
Agreement or to consummate the transactions so contemplated. This Stock Option
Agreement has been duly and validly executed and delivered by Issuer. This
Stock Option Agreement is the valid and legally binding obligation of 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 Stock Option 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 hereto, will be duly authorized, validly issued,
fully paid, nonassessable, and will be delivered free and clear of all claims,
liens, encumbrances and security interests and not subject to any preemptive
rights.
12. Neither of the parties hereto may assign any of its
rights and obligations under this Stock Option 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 within 30 days following such Subsequent Triggering Event
(or such later period as may be provided pursuant to Section 10); PROVIDED,
HOWEVER, that until the date 30 days following the date at which the FRB
approves an application by Grantee under the Bank Holding Company Act to
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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.Q., 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 FRB.
13. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third parties and
Governmental Entities necessary to the consummation of the transactions
contemplated by this Stock Option Agreement, including without limitation
making application to list the shares of Common Stock issuable hereunder on the
New York Stock Exchange upon official notice of issuance and applying to the
FRB under the Bank Holding Company Act for approval to acquire the shares
issuable hereunder.
14. Notwithstanding anything to the contrary herein, in the
event that the Holder or Owner or any affiliate (as defined in Rule 12b-2 of
the rules and regulations under the 1934 Act) thereof is a person making an
offer or proposal to engage in an Acquisition Transaction (other than the
Merger), then (i) in the case of a Holder or any affiliate thereof, the Option
held by it shall immediately terminate and be of no further force or effect,
and (ii) in the case of an Owner or any affiliate thereof, the Option Shares
held by it shall be immediately repurchasable by Issuer at the Option Price.
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Stock Option Agreement by either party
hereto and that the obligations of the parties shall hereto be enforceable by
either party hereto through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained
in this Stock Option 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 Stock Option 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 1(a)
hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is the express
intention of Issuer to allow the Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
17. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Agreement.
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18. This Stock Option Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
19. This Stock Option Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
20. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the
Agreement, this Stock Option 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 Stock Option Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this Stock Option
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors except as assigns, any
rights, remedies, obligations or liabilities under or by reason of this Stock
Option Agreement, except as expressly provided herein.
22. Terms used in this Stock Option Agreement and not defined
herein but defined in the Agreement shall have the meanings assigned thereto in
the Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
NATIONAL CITY CORPORATION
By: /s/ David A. Daberko
-----------------------------
Title: President & CEO
--------------------------
INTEGRA FINANCIAL CORPORATION
By: /s/ William F. Roemer
-----------------------------
Title: Chairman & CEO
-------------------------
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APPENDIX F
NATIONAL CITY CORPORATION
AMENDED AND RESTATED
1993 STOCK OPTION PLAN
(The proposed changes to the National City Corporation 1993 Stock Option Plan
are set forth below. The italicized language is the language that will be added.
The language that will be deleted is shown with a rule drawn through the text.)
1. PURPOSES. The purposes of this 1993 Stock Option Plan are to provide
employment incentives and to encourage capital accumulation and stock ownership
by Eligible Employees of National City Corporation (the "Corporation") or of any
of its Subsidiaries, and to provide to designated Optionees under stock options
heretofore or hereafter granted pursuant to any stock option plan of the
Corporation or of any of its Subsidiaries an alternative method of realizing the
benefits provided by such stock options.
2. DEFINITIONS. As used in this Plan,
(a) The term "Appreciation Right" means a right granted pursuant to
Paragraph 5 of this Plan.
(b) The term "Board of Directors" means the Board of Directors of National
City Corporation.
(c) The term "Committee" means the Committee provided for in Paragraph 9(a)
of this Plan.
(d) The term "Common Stock" means Common Stock, par value $4 per share, of
the Corporation or any security into which such Common Stock may be changed by
reason of any transaction or event of the type described in Paragraph 7 of
this Plan.
(e) The term "Eligible Employees" means persons who are at the time the
officers (including officers who are members of the Board of Directors) and
other key employees of the Corporation or of any of its Subsidiaries.
(f) The term "Market Value per Share" means, at any date, the closing price,
per share, of the shares of Common Stock, on the New York Stock Exchange on
that date as reported by The Wall Street Journal (Midwest Edition) or, if the
Common Stock shall be primarily traded in another market, as determined in a
manner specified by the Board of Directors using quotations in such other
market.
(g) The term "Optionee" shall mean the optionee named in an agreement
evidencing an Outstanding Option.
(h) The term "Option Right" means the right to purchase a share of Common
Stock upon exercise of an Outstanding Option.
(i) The term "Outstanding Option" means, at any time, an option to purchase
shares of Common Stock granted by the Corporation or any of its Subsidiaries
pursuant to this Plan or any other stock option plan of the Corporation or any
such Subsidiary now or hereafter in effect, or pursuant to any stock option
plan of any corporation which is merged into the Corporation and where the
Corporation has by action of its Board of Directors, assumed the obligations
of such corporation under such stock option plan, all whether or not such
option is at the time exercisable, to the extent that such option at such time
has not been exercised and has not terminated.
(j) "Additional Option Feature" means a feature of an Option that provides
for the automatic grant of an Additional Option in accordance with the
provisions described in Section 5.
(k) "Additional Option" means an Option Right granted to an Optionee to
purchase a number of shares of Common Stock equal to the number of shares of
already owned Company stock delivered by the Optionee as payment of the
exercise price upon exercise of an Option Right and/or the number of shares of
Common Stock tendered or relinquished as payment of the amount to be withheld
under applicable federal, state and local income tax laws in connection with
the exercise of an option as described in Section 5.
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(j) (l) The term "Spread" means the excess of the Market Value per Share of
Common Stock on the date when an Appreciation Right is exercised over the
option price provided for in the related Option Right.
(k) (m) The term "Subsidiary" shall mean any corporation in which at the
time the Corporation owns or controls, directly or indirectly, not less than
50% of the total combined voting power represented by all classes of stock
issued by such corporation.
(l) (n) The term "Internal Revenue Code" means the 1986 Internal Revenue
Code, as amended from time to time.
(m) (o) The term "Incentive Stock Option" means an Option Right granted by
the Corporation to an eligible employee, which Option Right is intended to
qualify as an "Incentive Stock Option" as that term is used in Section 422A of
the Internal Revenue Code.
3. SHARES AVAILABLE UNDER PLAN.
(a) The shares of Common Stock which may be made the subject of Option
Rights and Appreciation Rights pursuant to this Plan may be treasury shares or
shares of original issue or a combination of the foregoing.
(b) Subject to adjustments in accordance with Paragraph 7 of this Plan, the
maximum number of shares of Common Stock which may be sold upon the exercise
of Option Rights granted pursuant to this Plan shall be 5,000,000 shares of
Common Stock which are made available for sale by virtue of this Plan. For
purposes of determining the number of shares that may be sold under the Plan,
such number shall increase by the number of shares surrendered by an optionee
or relinquished to the Corporation (a) in connection with the exercise of a
Stock Option or (b) in payment of federal, state and local income tax
withholding liabilities upon exercise of an Option Right.
(c) Subject to adjustments in accordance with Paragraph 7 of this Plan, the
maximum number of Shares of Common Stock which may be delivered upon the
exercise of Appreciation Rights granted pursuant to this Plan shall not exceed
5,000,000.
(d) Shares covered by Option Rights cancelled upon exercise of Appreciation
Rights shall not be available for the granting of further Option Rights under
this Plan or under any other stock option plan of the Corporation or of any of
its Subsidiaries, anything in this Plan or such other stock option plan to the
contrary notwithstanding.
4. GRANTS OF OPTION RIGHTS. The Board of Directors may, from time to time
and upon such terms and conditions as it may determine, authorize the granting
to Eligible Employees of Option Rights. Each such grant may utilize any or all
of the authorizations, and shall be subject to all of the limitations, contained
in the following provisions:
(a) Each grant shall specify the number of shares of Common Stock to which
it pertains.
(b) Each grant shall specify an option price per share not less than the
Market Value per Share on the date of grant.
(c) Successive grants may be made to the same Eligible Employee whether or
not any Option Rights previously granted to such Eligible Employee remain
unexercised. No Eligible Employee may, however, be granted under this plan, in
the aggregate, more than 500,000 Option Rights, subject to adjustment pursuant
to Paragraph 7 of this Plan.
(d) Option Rights granted under this Plan may be (i) options which are
intended to qualify under particular provisions of the Internal Revenue Code,
as in effect from time to time, (ii) options which are not intended so to
qualify, or (iii) combinations of the foregoing.
(e) The date of grant of each Option Right shall be the date of its
authorization by the Board of Directors, except that the date of grant of an
Additional Option shall be the date of exercise of the underlying Option
Right. No Option Right shall be exercisable more than 10 years from such date
of grant.
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(f) Upon exercise of an Option Right, the option price shall be payable (i)
in cash, (ii) by the transfer to the Corporation by the Optionee of shares of
Common Stock with a value (Market Value per Share times the number of shares)
equal to the total option price, or (iii) by a combination of such methods of
payment.
(g) Each grant of Option Rights shall be evidenced by an agreement executed
on behalf of the Corporation by any officer designated by the Board of
Directors for this purpose and delivered to and accepted by the Eligible
Employee and shall contain such terms and provisions, consistent with this
Plan, as the Board of Directors may approve.
(h) No Option Rights, intended to be an Incentive Stock Option, shall be
granted hereunder to any Optionee which would allow the aggregate fair market
(determined at the time the Option Rights are granted) of the stock subject of
all post 1986 Incentive Stock Options, including the Incentive Stock Option in
question, which such Optionee may exercise for the first time during any
calendar year, to exceed $100,000. The term "post 1986 Incentive Stock
Options" shall mean all Option Rights, which are intended to be Incentive
Stock Options, granted on or after January 1, 1987 under any Stock Option Plan
of the Corporation or its subsidiaries. If the Corporation shall ever be
deemed to have a "parent," as such term is used in Section 422A of the
Internal Revenue Code, as amended, then Stock Options intended to be Incentive
Stock Options, granted after January 1, 1987, under such parent's Stock Option
plans, shall be included with the terms of the definition of "post 1986
Incentive Stock Options".
5. ADDITIONAL OPTION. (a) The Committee may, at or after the date of
grant of Option Rights, grant Additional Options. Additional Options may be
granted with respect to any Outstanding Option.
(b) If an Optionee exercises an Outstanding Option that has an Additional
Option Feature by delivering already owned shares of Common Stock and/or when
shares of Common Stock are tendered or relinquished as payment of the amount to
be withheld under applicable federal, state and local income tax laws (at
withholding rates not to exceed the Optionee's applicable marginal tax rates) in
connection with the exercise of an option, the Optionee shall automatically be
granted an Additional Option. The Additional Option shall be subject to the
following provisions:
(1) The Additional Option shall cover the number of shares of Common Stock
equal to the sum of (A) the number of shares of Common Stock delivered as
consideration upon the exercise of the previously granted Outstanding Option
to which such Additional Option Feature relates and (B) the number of shares
of Common Stock tendered or relinquished as payment of the amount to be
withheld under applicable federal, state and local income tax laws in
connection with the exercise of the option to which such Additional Option
Feature relates;
(2) The Additional Option will not have an Additional Option Feature unless
the Committee directs otherwise;
(3) The Additional Option option price shall be 100% of the Market Value per
Share on the date the employee delivers shares of Common Stock to exercise the
Option that has the Additional Option Feature and/or delivers or forfeits
shares of Common Stock in payment of income tax withholding on the exercise of
an Option that has the Additional Option Feature;
(4) The Additional Option shall not be exercised within the first six months
after it is granted; provided that this restriction shall not apply if the
Optionee becomes disabled or dies during the six-month period; and
(5) The Additional Option shall have the same termination date and other
termination provisions as the underlying Option that had the Additional Option
Feature.
5. 6. GRANTS OF APPRECIATION RIGHTS. The Board of Directors may from time
to time authorize the granting of Appreciation Rights in respect of any or all
of the Option Rights under any Outstanding Option (including Options Rights
simultaneously granted) to the Optionee thereunder. An Appreciation Right shall
be a right in the Optionee to receive from the Corporation an amount which shall
be determined by the Board of Directors and shall be expressed as a percentage
of the Spread (not exceeding 100%) at the time of exercise. To the extent such
Optionee elects to exercise such Appreciation Right instead of the related
Option
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Right, the related Option Right shall be cancelled, and vice versa. Each such
grant may utilize any or all of the authorizations, and shall be subject to all
of the limitations, contained in the following provisions:
(a) Any grant may permit the exercise of an Appreciation Right with respect
to the value of shares of Common Stock covered by the related Option Rights.
(b) Any grant may specify that the amount payable on exercise of an
Appreciation Right may be paid by the Corporation in cash, in shares of Common
Stock or in any combination thereof, and may either grant to the Optionee or
retain in the Board of Directors the right to elect among those alternatives.
(c) Each grant shall provide that the maximum number of shares of Common
Stock deliverable upon exercise of an Appreciation Right may not exceed the
number of shares of Common Stock purchasable upon exercise of the related
Option Rights.
(d) Any grant may specify waiting periods before exercise and permissible
exercise dates or periods. No Appreciation Right shall be exercisable except
at a time when the related Option Right is also exercisable.
(e) Each grant of an Appreciation Right shall be evidenced by an agreement
executed on behalf of the Corporation by any officer designated by the Board
of Directors for this purpose and delivered to and accepted by the Optionee,
which agreement shall describe such Appreciation Right, identify the related
Option Rights, state that such Appreciation Right is subject to all the terms
and conditions of this Plan, including the right of the Board of Directors to
amend, suspend or terminate such Appreciation Right as set forth in Paragraph
10(c) of this Plan, and contain such other terms and provisions, consistent
with this Plan, as the Board of Directors may approve.
6. 7. TRANSFERABILITY. No Option Right including any related Appreciation
Right shall be transferable by an Optionee other than by will or the laws of
descent and distribution. Option Rights and Appreciation Rights shall be
exercisable during the Optionee's lifetime only by the Optionee or by the
Optionee's guardian or legal representative.
7. 8. ADJUSTMENTS. The Board of Directors may make or provide for such
adjustments in the maximum numbers of shares of Common Stock specified in
Paragraphs 3(b) and (c) and 4(c) of this Plan, in the numbers of shares of
Common Stock covered by Option Rights and Appreciation Rights granted hereunder,
and in the prices per share applicable under such Option Rights and Appreciation
Rights, as such Board in its sole discretion, exercised in good faith, may
determine is equitably required to prevent dilution or enlargement of the rights
of Optionees that otherwise would result from any stock dividend, stock split,
combination of shares, recapitalization or other change in the capital structure
of the Corporation, merger, consolidation, spin-off, reorganization, partial or
complete liquidation, issuance of rights or warrants to purchase securities, or
any other corporate transaction or event having an effect similar to any of the
foregoing.
8. 9. FRACTIONAL SHARES. The Corporation shall not be required to issue
any fractional share of Common Stock pursuant to this Plan. The Board of
Directors may provide for the elimination of fractions or for the settlement of
fractions in cash.
9. 10. ADMINISTRATION OF THE PLAN.
(a) This Plan shall be administered by the Board of Directors, which may
from time to time delegate all or any part of its authority under this Plan to
a Compensation and Organization Committee of the Board of Directors of not
less than three disinterested Directors appointed by the Board of Directors.
To the extent of such delegation, references herein to the "Board of
Directors" shall include the Compensation and Organization Committee. No
Option Right or Appreciation Right shall be granted to any member of the
Compensation and Organization Committee so long as his membership continues.
(b) The interpretation and construction by the Board of Directors of any
provision of this Plan or of any agreement evidencing the grant of Option
Rights or Appreciation Rights and any determination by the Board of Directors
pursuant to any provision of this Plan or of any such agreement shall be final
and
F-4
<PAGE> 186
conclusive. No member of the Board of Directors shall be liable for any such
action or determination made in good faith.
11. AMENDMENTS, ETC.
(a) This Plan may be amended from time to time by the Board of Directors but
without further approval by the stockholders of the Corporation no such
amendment shall (i) increase the maximum numbers of shares of Common Stock
specified in Paragraphs 3(b) and (c) and 4(c) of this Plan (except that
adjustments authorized by Paragraph 7 of this Plan shall not be limited by
this provision), (ii) change the definition of "Eligible Employees", or (iii)
materially increase the benefits accruing to Optionees hereunder.
(b) The Board of Directors may, with the concurrence of the affected
Optionee, cancel any agreement evidencing Option Rights granted under this
Plan. In the event of such cancellation, the Board of Directors may authorize
the granting of new Option Rights (which may or may not cover the same number
of shares which had been the subject of the prior agreement) in such manner,
at such option price and subject to the same terms, conditions and discretions
as, under this Plan, would have been applicable had the cancelled Option
Rights not been granted.
(c) The Board of Directors may at any time amend, suspend or terminate any
agreement evidencing Appreciation Rights granted under this Plan; in the case
of an amendment, the amended Appreciation Right shall conform to the
provisions of this Plan.
(d) In the case of any Option or Appreciation Right not immediately
exercisable in full, the Board of Directors in its discretion may accelerate
the time at which Option or Appreciation Rights may be exercised.
12. ASSUMPTIONS.
(a) In the event that a corporation is merged into the Corporation, and the
Corporation is the survivor of such merger, the Board of Directors may elect,
in its sole discretion, to assume under this Plan any or all outstanding
options granted by such corporation to its officers and employees under any
stock option plan adopted by it prior to such merger. Such assumptions shall
be on such terms and conditions as the Board of Directors may determine in its
sole discretion, provided, however, that the options as assumed do not provide
or contain any terms, conditions or rights which an Option Right may not
provide or contain under Sections 2 through 10 hereunder.
F-5
<PAGE> 187
NATIONAL CITY CORPORATION PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR APRIL 22, 1996
ANNUAL MEETING
P The undersigned stockholder of National City Corporation hereby
appoints Thomas A. Richlovsky and David L. Zoeller and each of them,
R with power of substitution, proxies for the undersigned to vote all
the shares of COMMON STOCK of National City which the undersigned is
O entitled to vote at the Annual Meeting of Stockholders of National
City to be held on April 22, 1996 and any adjournment thereof as
X follows and in their discretion to vote and act upon such other
business as may properly come before the meeting. The Board of
Y Directors recommends a vote FOR the following:
1. THE ELECTION OF DIRECTORS
FOR all nominees listed below / / WITHHOLD AUTHORITY / /
(except as otherwise marked below) to vote for all nominees
listed below
S. H. Austin, C. H. Bowman, E. B. Brandon, J. G. Breen, D. E.
Collins, D. A. Daberko, D. E. Evans, O. N. Frenzel, III, B. P.
Healy, J. H. Lemieux, W. B. Lunsford, A. S. Miles, W. R.
Robertson, S. A. Stitle and M. Weiss.
(Instructions: to withhold authority to vote for any individual
nominee, strike a line through that nominee's name.)
2. APPROVE THE AMENDMENT OF THE NATIONAL CITY CORPORATION 1993 STOCK
OPTION PLAN
/ / FOR / / AGAINST / / ABSTAIN
3. APPROVE THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
/ / FOR / / AGAINST / / ABSTAIN
4. ADOPT THE AGREEMENT AND PLAN OF MERGER DATED AS OF AUGUST 27, 1995,
BY AND BETWEEN NATIONAL CITY CORPORATION AND INTEGRA FINANCIAL
CORPORATION
/ / FOR / / AGAINST / / ABSTAIN
(Continued, and to be signed, on the reverse side.)
Proxy No. (Continued from reverse side.) Shares
UNLESS OTHERWISE INDICATED, THE PROXIES ARE INSTRUCTED TO VOTE FOR THE ELECTION
OF DIRECTORS, FOR THE APPROVAL OF THE AMENDMENT OF THE NATIONAL CITY CORPORATION
1993 STOCK OPTION PLAN, FOR THE SELECTION OF ERNST & YOUNG LLP AND FOR THE
ADOPTION OF THE AGREEMENT AND PLAN OF MERGER DATED AS OF AUGUST 27, 1995, BY AND
BETWEEN NATIONAL CITY CORPORATION AND INTEGRA FINANCIAL CORPORATION.
Dated , 1996
-----------------
----------------------------
----------------------------
(Sign here)
INSTRUCTIONS: Please sign
exactly as shown hereon.
When signing as a fiduciary
or on behalf of a
corporation, bank, trust
company, or other similar
entity, your title or
capacity should be shown.
PLEASE SIGN, DATE, AND RETURN YOUR PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE TO STOCK
TRANSFER DEPT., (NCC),
NATIONAL CITY BANK, P.O. BOX 92301, CLEVELAND,
OHIO 44193-0900.
<PAGE> 188
INTEGRA FINANCIAL CORPORATION
Four PPG Place, Pittsburgh, PA 15222-5408
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R The undersigned hereby appoints Charles R. Skillington and Robert H.
Stevenson as proxies, and each of them, with full power of
O substitution, and hereby authorizes them to represent and vote as
designated below the same number of shares of Common Stock of
X Integra Financial Corporation (other than shares held under the
Integra Employee Stock Purchase Plan) which the undersigned would be
Y entitled to vote if personally present at the Special Meeting of
Shareholders to be held on April 24, 1996 and any adjournment
thereof and in their discretion to vote and act upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ADOPTION OF THE AGREEMENT AND
PLAN OF MERGER PROVIDING FOR THE MERGER OF INTEGRA FINANCIAL
CORPORATION WITH AND INTO NATIONAL CITY CORPORATION.
1. ADOPTION OF THE AGREEMENT AND PLAN OF MERGER PROVIDING FOR
THE MERGER OF INTEGRA FINANCIAL CORPORATION WITH AND INTO
NATIONAL CITY CORPORATION
<TABLE>
<S> <C> <C>
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
(Continued on reverse side)
(Continued from other side)
Instructions: Please sign exactly as the name appears at the left.
When shares are held jointly, all owners must sign. Please date and
return the proxy card promptly, using the enclosed envelope.
DATE:
---------------------------
Signature
---------------------------
Signature if held jointly
IMPORTANT
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title. If a
corporation, please sign in
full corporate name by
president or other
authorized officer. If a
partnership, please sign in
ownership name by
authorized person.
<PAGE> 189
SPECIAL PROXY FOR SHARES HELD IN THE
INTEGRA FINANCIAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
The undersigned hereby appoints Charles R. Skillington and Robert H.
R Stevenson as proxies, and each of them, with full power of
substitution, and hereby authorizes them to represent and vote as
O designated below the same number of shares of Common Stock of
Integra Financial Corporation held for the undersigned under the
X Integra Employee Stock Purchase Plan which the undersigned would be
entitled to vote if personally present at the Special Meeting of
Y Shareholders to be held on April 24, 1996 and any adjournment
thereof and in their discretion to vote and act upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ADOPTION OF THE AGREEMENT AND
PLAN OF MERGER PROVIDING FOR THE MERGER OF INTEGRA FINANCIAL
CORPORATION WITH AND INTO NATIONAL CITY CORPORATION AND FOR PROPOSAL
2.
1. ADOPTION OF THE AGREEMENT AND PLAN OF MERGER PROVIDING FOR
THE MERGER OF INTEGRA FINANCIAL CORPORATION WITH AND INTO
NATIONAL CITY CORPORATION
<TABLE>
<S> <C> <C>
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
(Continued on reverse side)
(Continued from other side)
Instructions: Please sign exactly as the name appears at the left.
When shares are held jointly, all owners must sign. Please date and
return the proxy card promptly, using the enclosed envelope.
DATE:
---------------------------
Signature
---------------------------
Signature if held jointly
IMPORTANT
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title. If a
corporation, please sign in
full corporate name by
president or other
authorized officer. If a
partnership, please sign in
ownership name by
authorized person.
