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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 17, 1997
CENTURY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 0-17416 25-1553790
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
One Century Place, Rochester, Pennsylvania 15074
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (412) 774-1872
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Item 5. Other Events.
------------
Century Financial Corporation issued a press release on November 17, 1997,
incorporated herein by reference. The Letter of Intent and Stock Option
Agreement, both dated November 17, 1997, referenced in the press release are
attached hereto as Exhibits 99.02 and 99.03, respectively.
Item 7. Exhibits.
Exhibit No. Description Reference
- ---------- ----------- ---------
99.01 Press Release (November 17, 1997) Filed herewith
99.02 Letter of Intent dated November 17, 1997
between Century Financial Corporation
and Citizens Bancshares, Inc. Filed herewith
99.03 Stock Option Agreement dated
November 17, 1997 between Century
Financial Corporation and Citizens
Bancshares, Inc. Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTURY FINANCIAL CORPORATION
Dated: November 24, 1997 By: /s/ Joseph N. Tosh, II
-------------------------------------
Joseph N. Tosh, II
President and Chief Executive Officer
Dated: November 24, 1997 By: /s/ Donald A. Benziger
-------------------------------------
Donald A. Benziger
Senior Vice President and Chief
Financial Officer
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Exhibit Index
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Sequential Page No.
Exhibit No. Description or Reference
- ---------- ----------- ---------
99.01 Press Release (November 17, 1997) Filed herewith
99.02 Letter of Intent dated November 17, 1997
between Century Financial Corporation
and Citizens Bancshares, Inc. Filed herewith
99.03 Stock Option Agreement dated November 17,
1997 between Century Financial Corporation
and Citizens Bancshares, Inc. Filed herewith
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Century Financial Corporation to Merge with Citizens Bancshares, Inc.
PR Newswire, Monday, November 17, 1997 at 17:34
SALINEVILLE, Ohio, Nov. 17 /PRNewswire/ -- Marty E. Adams, President and
CEO of Citizens Bancshares, Inc. ("Citizens"), Salineville, Ohio,
(NASDAQ:CICS), and Joseph N. Tosh II, President and CEO of Century Financial
Corporation ("Century"), Rochester, Pennsylvania, (NASDAQ:CYFN), have signed a
letter of intent calling for Century to merge with Citizens. In futherance of
the transaction, Century has granted Citizens a binding option, exercisable
under certain conditions, to purchase up to 19.9% of Century's outstanding
common shares. In the merger, each share of Century outstanding common stock
will be converted into .425 shares of Citizens common shares in a tax-free
exchange, subject to certain adjustments. The merger will be accounted for as
pooling of interests. The transaction is valued at approximately $138 million
based on the current market price of $61.75 per share for Citizens common
shares.
Century has assets totaling $459 million, loans of $351 million, and
deposits of $393 million. Century operates 13 banking offices, 12 of which
are in Beaver County, and 1 in Butler County. Initially, Century will operate
as a wholly-owned subsidiary of Citizens. Future plans call for Century to
then operate as a division of Citizens' lead bank, The Citizens Banking
Company.
Assuming execution of a definitive merger agreement, approval by the
appropriate regulatory authorities, and approval by the shareholders of
Century and Citizens, the transaction is expected to be completed during the
second quarter of 1998.
Adams said, "I am excited that Citizens is able to continue the natural
expansion of its market area into western Pennsylvania. This merger provides
even greater convenience for our already existing customer base in that tri-
state region. Century has been very successful in understanding and meeting
the financial needs of the communities it serves. It follows, then, that
Rochester will remain as the division headquarters, and the name 'Century'
will endure. The structure of this merger assures that Century's customers
will continue to receive superior financial service through a local community
institution."
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Tosh commented, "This affiliation delivers a lot of value to Century
shareholders, and ensures that its employees and customers will continue to be
well-served. Century has always prided itself on being the local, community
bank. This affiliation will continue these strong ties to our communities.
Citizens has been very successful in serving its market franchise and, like
us, is committed to providing exceptional customer service. Century employees
should have greater opportunities for professional growth within the combined
Citizens-Century organization; in the long-term, total employment at Century
should actually increase as Citizens-Century continues to grow in western
Pennsylvania."
Citizens is a $1 billion bank holding company, and the parent of Freedom
Financial Life Insurance Company, Freedom Express, Inc., The Citizens Banking
Company, and First National Bank of Chester located in northern West Virginia.
Citizens recently announced the acquisition of 3 Belmont county branches of
Metropolitan Savings Bank of Ohio, and UniBank, a commercial bank in
Steubenville, Ohio, with 12 locations. At the closing of the named
transactions, Citizens will have 3 subsidiary banks operating in 2 counties in
Pennsylvania, 1 county in West Virginia, and 6 counties in Ohio. With 63
contributing bank locations, assets will then total approximately $1.9
billion.
SOURCE Citizens Bancshares, Inc.
-0- 11/17/97
/CONTACT: William L. White III, Chief Financial Officer, of Citizens
Bancshares, 330-679-2328, ext. 2805
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November 17, 1997
Del F. Goedeker
Chairman of the Board
Joseph N. Tosh II
President and Chief Executive
Officer
Century Financial Corporation
One Century Place
Rochester, Pennsylvania 15074
Re: Century Financial Corporation
Gentlemen:
This letter constitutes a letter of intent by and between Citizens
Bancshares, Inc. and Century Financial Corporation ("Century") for the purpose
of setting forth the general terms and conditions under which Century will
affiliate with Bancshares (the "Affiliation"). Specifically we have agreed
as follows:
1. The Definitive Agreement.
-------------------------
It is contemplated that the Affiliation will be consummated pursuant to a
definitive agreement containing terms and conditions generally applicable to
transactions of this type (the "Definitive Agreement"). It is understood that
the terms and conditions of the Definitive Agreement will include, among other
things, the following:
a. Structure and Use of Century Name.
----------------------------------
The Affiliation will be effected by means of a merger of
Century with and into Bancshares, with Century's wholly-owned
banking subsidiary, Century National Bank and Trust Company
("CNB"), remaining as an independent subsidiary of Bancshares
for not less than six (6) months after consummation of the
merger. It is expected that the financial benefits of
consolidating CNB with one of Bancshares' banking subsidiaries,
The Citizens Banking Company ("Citizens"), will dictate a
long-term structure in which CNB will be operated as an
independent division of Citizens, retaining the valuable
Century name. As a division of Citizens, CNB will continue to
operate its existing group of offices as autonomously as
possible, receiving significant support from Bancshares. In
recognition of the profitable growth that is associated with
Century, the Affiliation will permit Century's name to remain
predominate on an ongoing basis in its marketplace.
b. Consideration; Exchange Ratio.
------------------------------
In the Affiliation, the outstanding shares of Century common
stock, par value $.835 per share (the "Century Stock") will be
converted into Bancshares common shares, without par value
(the "Bancshares Shares"), in a tax-free exchange. Outstanding
options on Century Stock (including those to be issued in
January, 1998), will be exchanged for options to purchase
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Bancshares Shares at the same exchange ratio applicable to the
Century Stock. The exchange ratio for the conversion of
Century Stock into Bancshares Shares will be as follows:
At the effective time of the merger, each outstanding
share of Century Stock will be converted into .425 Bancshares
Shares (i.e., $26.67 per share for Century shareholders based
on Bancshares' closing stock price of $62.75 on November 7,
1997); subject, however, to the following adjustments:
(i) If the Average NMS Closing Price (as defined below) is
greater than $67.50, then each outstanding share of
Century Stock will be converted into that number of
Bancshares Shares that results from dividing $28.70 by
the Average NMS Closing Price; provided, however, that if
prior to the effective time of the merger, Bancshares
publicly announces that it has agreed to a transaction in
which control of Bancshares will be acquired by another
company, then in no event will the exchange ratio be less
than .3976; or
(ii) If the Average NMS Closing Price is less than $56.50, but
greater than or equal to $54.25, then each outstanding
share of Century Stock will be converted into that number
of Bancshares Shares that results from dividing $24.00 by
the Average NMS Closing Price; or
(iii)If the Average NMS Closing Price is less than $54.25, then
each outstanding share of Century Stock will be converted
into .4424 Bancshares Shares.
The term "NMS Closing Price" shall mean the price per share of the last
sale of Bancshares Shares reported on the NASDAQ National Market System at the
close of the trading day by the National Association of Securities Dealers,
Inc. The term "Average NMS Closing Price" shall mean the arithmetic mean of
the NMS Closing Prices for the ten (10) trading days immediately preceding the
fifth (5th) trading day prior to the consummation of the Affiliation.
c. Termination Events.
-------------------
(i) If the Average NMS Closing Price is less $46.50, then
Century may terminate the Definitive Agreement; or
(ii) If (i) the Average NMS Closing Price is less than
$54.25, and (ii) Bancshares' Average NMS Closing Price is
more than ten (10) percent lower than the average of the
NMS Closing Price of an index of selected, publicly
traded, peer group, commercial banking institutions in
Ohio, Pennsylvania and West Virginia, then Century may
terminate the Definitive Agreement.
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d. Employees.
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Bancshares recognizes that Century's employees are one of
its most valuable assets. Bancshares will seek to minimize the
impact of the Affiliation on those employees. To that end, the
Definitive Agreement will provide that there will be no
involuntary terminations (other than for "cause") of any of
Century's employees for at least six (6) months after the
consummation of the Affiliation. Bancshares will first seek to
accomplish changes in the workforce through job transfers,
internal job postings and attrition. Century employees should
have greater opportunities for professional growth within the
combined Bancshares-Century organization and it is Century's
hope that in the long-term, total employment at CNB will
actually increase as Bancshares continues to grow in western
Pennsylvania.
e. Employment Agreements.
----------------------
In connection with the Affiliation, Bancshares will honor the
Employment Agreements referred to in g hereof.
f. Post-Affiliation Board Structure.
---------------------------------
It is the practice of Bancshares and Citizens to structure
their respective Boards of Directors with individuals well
versed in business and having familiarity with local markets.
In keeping with past practices, 3 directors from Century's
Board of Directors will be invited to join the Board of
Bancshares (one of whom will be designated for membership on
the Board's Executive Committee) and 4 Century directors will
be invited to join the Citizens Board. The remaining Century
Board members will be asked to serve on the Century Advisory
Board.
g. Closing; Certain Conditions.
----------------------------
Subject to the receipt of required regulatory approvals, the
registration of the Bancshares Shares with the Securities and
Exchange Commission (and necessary state "blue sky"
compliance), and the approval of Century's and Bancshares'
shareholders, it is expected that the Affiliation will be
consummated by June 30, 1998 (or such other date as is mutually
agreed upon). The Affiliation will also be conditioned (i)
with respect to Bancshares, on the receipt of an opinion from
Bancshares' independent auditors that the transaction will be
treated as a "pooling of interests" business combination for
accounting purposes and reaching mutually agreed upon
employment agreements with the following Century executives:
Joseph N. Tosh II, Donald A. Benzinger, Edwin C. Schaffnit and
C. David Becker (collectively, the "Employment Agreements") and
(ii) with respect to Century, on receipt of an opinion from
Century's counsel to the effect that the merger is tax-free for
Century shareholders.
2. Conditions to Execution of a Definitive Agreement:
--------------------------------------------------
The execution of the Definitive Agreement is subject to (i) negotiation of a
mutually acceptable Definitive Agreement and approval thereof by the Board of
Directors of each of Bancshares and Century; (ii) completion of satisfactory
due diligence investigations by Bancshares and Century of each other and (iii)
receipt by Century's Board of Directors of an opinion from its financial
advisor to the effect that the Affiliation is fair to Century's shareholders
from a financial point of view. We expect that on-site reviews will begin as
soon as possible and that both Bancshares' and Century's due diligence
investigations will be completed on or before December 2, 1997. Assuming the
successful completion of our due
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diligence efforts, we expect that the Definitive Agreement will be entered
into by December 2, 1997.
3. Confidentiality.
----------------
Bancshares and Century will treat in complete confidence any information
received from the other, and will use it solely for the purpose of evaluating
the Affiliation, as well as for the purpose of any subsequent negotiations.
4. Grant of Stock Option; Exclusive Dealing.
-----------------------------------------
In recognition of the time, expense, and resources to be expended by
Bancshares in working toward consummation of the Affiliation, Century hereby
(i) is granting to Bancshares an option to purchase Century Stock representing
up to 19.9% of the outstanding shares of Century Stock at an exercise price of
$18.00 per share payable in cash and (ii) is agreeing to negotiate exclusively
with Bancshares through December 31, 1997, all as more specifically set forth
in the Stock Option Agreement attached to and made a part of this letter (the
"Option Agreement").
5. Termination.
------------
This letter of intent may be terminated at any time by mutual consent of the
parties, or by either party by giving written notice thereof to the other
party at the party's executive offices, attn: President and Chief Executive
Officer. It is understood that paragraph 3 and the Option Agreement will
survive and continue in full force and effect in the event this letter of
intent is terminated.
6. Miscellaneous.
--------------
The parties do not intend to be legally bound unless and until the Definitive
Agreement is executed, and except as set forth in paragraph 3 hereof and in
the Option Agreement (which shall be binding upon Bancshares and Century and
our respective successors and assigns), no contractual rights or obligations
shall arise from this Offer. Each of us will be responsible for our own costs
and expenses incurred in connection with the Affiliation.
We believe that the Affiliation represents substantial value for Century
shareholders and exciting opportunities for your customers and employees. If
the foregoing accurately sets forth the basis upon which you are willing to
proceed with the Affiliation, please so indicate by signing and returning the
duplicate copy of this letter and the enclosed Option Agreement by midnight on
November 17, 1997.
Very truly yours,
CITIZENS BANCSHARES, INC.
By:/s/ Marty E. Adams
----------------------------
Marty E. Adams, President and
Chief Executive Officer
ACCEPTED AND AGREED to as of this 17th day of November 1997.
CENTURY FINANCIAL CORPORATION
By:/s/ Del F. Goedeker
------------------------------------
Del F. Goedeker, Chairman
By:/s/ Joseph N. Tosh, II
------------------------------------
Joseph N. Tosh II
President and Chief Executive Officer
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STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Agreement"), effective as of this 17th
day of November, 1997, by and between Citizens Bancshares, Inc. of
Salineville, Ohio, an Ohio corporation ("Grantee"); and Century Financial
Corporation, a Pennsylvania corporation ("Grantor");
WITNESSETH:
A. Grantor and Grantee have entered into a letter of intent dated of
even date herewith (the "Letter of Intent") and intend to negotiate and
execute a definitive agreement providing for their affiliation with one
another.
B. As further inducement for the parties to engage in such negotiations
and to spend the resources necessary to arrive at a mutually acceptable
definitive agreement, Grantor wishes to grant Grantee the option described
herein.
NOW, THEREFORE, the parties agree as follows:
1. Definitions.
"Applicable Price" shall mean the highest of (i) the highest price
per share of Grantor Common Stock paid for any such share by the person or
groups described in the definition of a Repurchase Event, (ii) the price per
share of Grantor Common Stock received by holders of Grantor Common Stock in
connection with any merger or other business combination transaction which is
a Purchase Event, or (iii) the highest closing sales price per share of
Grantor Common Stock quoted on the National Association of Securities Dealers
Automated Quotations National Market System ("NASDAQ/NMS")(or if Grantor
Common Stock is not quoted on NASDAQ/NMS, the highest bid price per share as
quoted on the principal trading market or securities exchange on which such
shares are traded as reported by a recognized source chosen by a Grantee)
during the 60 business days preceding the Request Date; provided, however,
that in the event of a sale of less than all of Grantor's assets, the
Applicable Price shall be the sum of the price paid in such sale for such
assets and the current market value of the remaining assets of Grantor as
determined by a nationally recognized investment banking firm selected by
Grantee, divided by the number of shares of Grantor Common Stock outstanding
at the time of such sale. If the consideration to be offered, paid or
received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in
good faith by an independent nationally recognized investment banking firm
selected by Grantee and reasonably acceptable to Grantor, which determination
shall be conclusive for all purposes of this Agreement.
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"Bank" shall mean a financial institution subsidiary of a party.
"Burdensome Condition" shall mean, in connection with the grant of a
requisite regulatory approval or otherwise, imposition by a governmental
entity of any condition or restriction upon the party or one of its Banks
which would reasonably be expected to either (i) have a material adverse
effect after the effective time of the Merger Agreement on the present or
prospective consolidated financial condition, business or operating results of
the party, or (ii) prevent the parties from realizing the major portion of the
economic benefits of the transactions contemplated by the Merger Agreement
that they currently anticipate obtaining.
"Commission" shall mean the Securities and Exchange Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Grantee" shall mean Citizens Bancshares, Inc.
"Grantor" shall mean Century Financial Corporation.
"Grantor Common Stock" shall mean the respective shares of common
stock of the same class for which Century is granting an Option under this
Agreement.
"Letter of Intent" shall mean the letter of intent between Grantor
and Grantee dated of even date herewith.
"Merger Agreement" shall mean the definitive agreement (if and when
executed by Bancshares and Century) pursuant to which the parties hereto
intend to affiliate.
"Option" shall mean the option granted by Century to Bancshares
under this Agreement.
"Person" shall have the meanings specified in Sections 3(a)(9) and
13(d)(3) of the Exchange Act.
"Purchase Event" shall mean any of the following events or
transactions occurring after the date of this Agreement with respect to the
Grantor:
(i) the Grantor or its Bank, without having received the
Grantee's prior written consent, shall have entered into an agreement with any
person (x) to merge or consolidate, or enter into any similar transaction,
except as contemplated by the Letter of Intent or Merger Agreement, (y) to
purchase, lease or otherwise acquire all or substantially all of the assets of
the Grantor or its Bank, or (z) to purchase or otherwise acquire (including by
way of merger,
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consolidation, share exchange or any similar transaction) securities
representing 10% or more of the voting power of such Grantor or its Bank
(other than pursuant to this Agreement);
(ii) any person (other than the Grantor or its Bank in a
fiduciary capacity, or Grantee or a Grantee Bank in a fiduciary capacity)
shall have acquired beneficial ownership or the right to acquire beneficial
ownership of 19.9% or more of the outstanding shares of such Grantor Common
Stock after the date of this Agreement (the term "beneficial ownership" for
purposes of this Agreement having the meaning assigned thereto in Section
13(d) of the Exchange Act and the regulations promulgated thereunder);
(iii) Grantor shall have breached this Agreement in any
material respect, which breach shall not have been cured within fifteen (15)
days after notice thereof is given by Grantor to Grantee;
(iv) any person shall have made a bona fide Takeover Proposal
to the Grantor by public announcement or written communication that is or
becomes the subject of public disclosure, and following such bona fide
Takeover Proposal (a) Grantor determines not to enter into the Merger
Agreement with Grantee (other than by reason of a termination pursuant to
Sections 8(e) or (f) hereof) or (b), following execution of the Merger
Agreement, the stockholders of the Grantor vote not to adopt the Merger
Agreement; or
(v) Grantor shall have breached the Merger Agreement following
a bona fide Takeover Proposal to such Grantor or its Bank, which breach would
entitle a Grantee to terminate the Merger Agreement and such breach shall not
have been cured prior to the Notice Date (as defined below).
If more than one of the transactions giving rise to a Purchase Event
under this Agreement is undertaken or effected, then all such transactions
shall be deemed to give rise only to one Purchase Event with respect to the
Option, which Purchase Event shall be deemed continuing for all purposes
hereunder until all such transactions are abandoned.
"Repurchase Event" shall mean if (i) any person (other than the
Grantee or any subsidiary of the Grantee) shall have acquired actual ownership
or control, or any "group" (as such term is defined under the Exchange Act)
shall have been formed which shall have acquired actual ownership or control,
of 35% or more of the then outstanding shares of Grantor Common Stock, or (ii)
any Purchase Event shall be consummated.
"Takeover Proposal" shall mean any tender or exchange offer,
proposal for a merger, consolidation or other business combination involving
Grantor or its Bank or any proposal or offer to acquire in any manner 20% or
more of the outstanding shares of any class of voting securities, or 15% or
more of the consolidated assets, of the Grantor or its Bank, other than the
transactions contemplated by this Letter of Intent or the Merger Agreement.
If Grantor receives an
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unsolicited Takeover Proposal, it shall notify Grantee as soon as possible of
the receipt of such Takeover Proposal.
2. Grant of Option.
Subject to the terms and conditions set forth herein, Grantor hereby
grants to Grantee an option to purchase up to 19.9% (i.e., 1,016,653 shares as
of the date of this Agreement) of Century Common Stock at an exercise price of
$18.00 per share payable in cash as provided in Section 4. In the event the
Grantor issues or agrees to issue any shares of Grantor Common Stock (other
than as permitted under the Merger Agreement at a price less than the exercise
price per share set forth in this section (as adjusted pursuant to Section 6),
the exercise price of the Option shall be such lesser price.
3. Exercise of Option.
(a) Unless the Grantee shall have breached in any material
respect any material covenant, representation or warranty contained in this
Agreement or the Merger Agreement and such breach shall not have been cured,
the Grantee may exercise the Option, in whole or part, at any time or from
time to time if a Purchase Event shall have occurred with respect to the
Grantor and be continuing; provided that to the extent the Option shall not
have been exercised, it shall terminate and be of no further force and effect
(i) on the effective date of the transaction contemplated by the Merger
Agreement, or (ii) upon termination of the Merger Agreement in accordance with
the provisions thereof (other than a termination resulting from a willful
breach by the Grantor of the Merger Agreement or following the occurrence of a
Purchase Event, failure of the Grantor's stockholders to approve the Merger
Agreement by the vote required under applicable law or under the respective
Grantor's articles), or (iii) 12 months after termination of the Merger
Agreement due to a willful breach by the Grantor of the Merger Agreement or,
following the occurrence of a Purchase Event, failure of the Grantor's
stockholders to approve the Merger Agreement by the vote required under
applicable law or under the Grantor's articles. Any exercise of the Option
shall be subject to compliance with applicable provisions of law.
(b) In the event the Grantee wishes to exercise the Option, it
shall send to the Grantor 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 (3) business days nor later than 60 business days after the Notice
Date for the closing of such purchase ("Closing Date"). If prior notification
to or approval of any federal or state regulatory agency is required in
connection with such purchase, the Grantee 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 section shall
run instead from the date on which any required notification period has
expired or been terminated or any requisite approval has been obtained and any
requisite waiting period shall have passed.
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4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3, the Grantee shall
pay to the Grantor the aggregate purchase price for the shares of Grantor
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by a wire transfer to a bank account designated by the
Grantor.
(b) At such closing, simultaneously with the delivery of funds
as provided in Section 4(a), the Grantor shall deliver to the Grantee a
certificate or certificates representing the number of shares of Grantor
Common Stock purchased by the Grantee, and the Grantee shall deliver to the
Grantor a letter agreeing that Grantee will not offer to sell or otherwise
dispose of such shares in violation of applicable law or the provisions of
this Agreement.
(c) Certificates for Grantor Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
The transfer of the shares represented by this certificate is
subject to certain provisions of a Stock Option Agreement dated
_____________, 1997, between the registered holder hereof and
[Grantor] (a copy of which agreement is on file at the principal
office of [Grantor]). A copy of such agreement will be provided to
the holder hereof without charge within five days after receipt by
[Grantor] of a written request therefor. The shares evidenced by
this certificate have not been registered under the Securities Act
of 1933 and may not be sold, pledged, transferred, or hypothecated
except pursuant to an opinion of counsel satisfactory to the
corporation that such transfer is lawful.
The above legend shall be removed or modified as appropriate by
delivery of substitute certificate(s) without such legend if the Grantee shall
have delivered to the Grantor a copy of a letter from the staff of the
Commission, or an opinion of counsel, in form and substance satisfactory to
Grantor, to the effect that such legend is not required for purposes of the
Securities Act of 1933, as amended.
5. Representations.
The Grantor represents, warrants and covenants to the Grantee as
follows:
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(a) Grantor shall at all times maintain sufficient authorized
but unissued shares of Grantor Common Stock so that the Option may be
exercised without authorization of additional shares of Grantor Common Stock.
(b) The shares to be issued upon due exercise, in whole or in
part, of the Option, when paid for as provided herein, will be duly
authorized, validly issued, fully paid and nonassessable.
(c) Grantor has full corporate power and authority to execute,
deliver and perform this Agreement and all corporate action necessary for
execution, delivery and performance of this Agreement has been duly taken by
such party.
(d) Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby (assuming all appropriate
shareholder and regulatory approvals) will violate or result in any violation
of or be in conflict with or constitute a default under any term of the
articles, regulations or by-laws of such party or any agreement, instrument,
judgment, decree, statute, rule or order applicable to such party.
6. Adjustment Upon Changes in Capitalization.
The Grantor agrees that, in the event of any change in its Grantor
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, exchanges of shares or the like, the type and
number of shares subject to the Option, and the purchase price per share, as
the case may be, shall be adjusted appropriately. The Grantor agrees that, in
the event that any additional shares of its Grantor Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the number of shares of its Grantor Common Stock
subject to the Option shall be adjusted so that, after such issuance, it
equals the same percentage (as that on the date of this Agreement) of the
number of shares of Grantor Common Stock then issued and outstanding without
giving effect to any shares subject to or issued pursuant to the Option.
Nothing contained in this Section 6 shall be deemed to authorize the Grantor
to breach any provision of the Merger Agreement.
7. Registration Rights.
If requested by the Grantee, the Grantor shall as expeditiously as
possible file a registration statement on a form of general use under the
Securities Act of 1933 if necessary in order to permit the sale or other
disposition of the shares of Grantor Common Stock that have been acquired upon
exercise of the Option in accordance with the intended method of sale or other
disposition requested by the Grantee. The Grantee shall provide all
information reasonably requested by the Grantor for inclusion in any
registration statement to be filed hereunder. The Grantor 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
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statement first becomes effective as may be reasonably necessary to effect
such sales or other dispositions. The first registration effected under this
Section 7 shall be at the Grantor's expense, except for underwriting
commissions and the fees and disbursements of the Grantee's counsel
attributable to the registration of such Grantor Common Stock. A second
registration may be requested hereunder at the Grantee's expense. In no event
shall Grantor be required to effect more than two registrations hereunder.
The filing of any registration statement hereunder may be delayed for such
period of time as may reasonably be required to facilitate any public
distribution by the Grantor of other Grantor Common Stock. If requested by
the Grantee, in connection with any such registration, Grantor will 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 in respect of issuers of shares being sold by a
selling shareholder. Upon receiving any request from a Grantee or permitted
assignee thereof under this Section 7, Grantor agrees to send a copy of the
registration statement and prospectus and each amendment to the Grantee and to
any permitted assignee thereof known to Grantor, in each case by promptly
mailing the same, postage prepaid, to the address of record of the persons
entitled to receive such copies.
8. Termination.
This Agreement may be terminated at any time prior to the effective
date of the transaction set forth in the Merger Agreement, by action taken or
authorized by the Board of Directors of the terminating party or parties,
whether before or after approval by the stockholders of the matters presented
in connection with the Merger Agreement:
(a) by mutual consent of Bancshares and Century;
(b) by either Bancshares or Century if the Federal Reserve
Board shall have issued an order denying approval of the transaction set forth
in the Merger Agreement or if any governmental entity of competent
jurisdiction shall have issued a final permanent order enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this
Agreement or the Merger Agreement, or imposing a Burdensome Condition, and in
any such case the time for appeal or petition for reconsideration of such
order shall have expired without such appeal or petition being granted;
(c) by either Bancshares or Century if the transaction
contemplated by the Letter of Intent shall not have been consummated on or
before September 30, 1998, unless such date is extended by mutual consent of
the parties hereto;
(d) by either Bancshares or Century if no Purchase Event has
occurred and if any approval of their stockholders required for the
consummation of the transactions set forth in the Merger Agreement shall not
have been obtained by reason of the failure to obtain the required vote at a
duly called and held meeting of stockholders or at any adjournment thereof;
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(e) by Century if, on or prior to December 2, 1997, Century
terminates the Letter of Intent because, as a result of its due diligence
investigation of Bancshares, Century's Board of Directors determines in good
faith that (i) facts and circumstances exist with respect to Bancshares that
are materially and adversely inconsistent with the disclosures contained in
the periodic reports filed by Bancshares with the Securities and Exchange
Commission, or (ii) the "back office" systems of Bancshares, Bancshares'
financial and operation control systems, and/or the experience of Bancshares'
systems conversion staff are not reasonably adequate to permit the
consolidation of Century into Bancshares so that the benefits of affiliation
can be achieved by December 31, 1998. The bases for Century's termination of
the Letter of Intent shall be set forth in a written notice delivered to
Bancshares on or before December 2, 1997.
(f) by Century, if Bancshares terminates the Letter of Intent
or does not make reasonable good faith efforts to negotiate a Merger Agreement
for any reason other than the good faith determination of Bancshares' Board of
Directors that facts and circumstances exist with respect to Century that are
materially and adversely inconsistent with the disclosures contained in the
periodic reports filed by Century with the Securities and Exchange Commission.
The bases for Bancshares' termination of the Letter of Intent or failure to
make reasonable good faith efforts to negotiate a Merger Agreement shall be
set forth in a written notice delivered to Century on or before December 31,
1997.
9. Effect of Termination.
(a) In the event of termination of this Agreement by any party
as provided in Section 8, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party or their
respective officers or directors except (i) Sections 11, 12, 13 and 14 of this
Agreement shall survive the termination and (ii) with respect to any
liabilities or damages incurred or suffered by a party as a result of the
breach by another party of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
(b) If a Purchase Event occurs with respect to the Grantor,
then in such event Grantor shall pay to the Grantee, within five business days
after a termination of this Agreement following such an event, the reasonable
expenses of Grantee incurred in connection with this Agreement and the
transactions set forth in the Merger Agreement, but not more than $75,000.
10. Access to Information.
During the term of this Agreement, each party will afford each of
the other parties full and free access during normal business hours to such
party, its personnel, properties, contracts, books and records, and all other
documents and data.
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11. Confidentiality.
Except as and to the extent required by law, no party will disclose
or use, and will direct its representatives not to disclose or use, any
Confidential Information (as defined below) with respect to the other parties
furnished or to be furnished by such other parties, or their respective
representatives to the party or its representatives at any time or in any
manner other than in connection with its evaluation of the transaction
proposed in this Agreement. For purposes of this section, "Confidential
Information" means any information about the Letter of Intent, the Merger
Agreement and this Agreement as well as any information about a party stamped
"confidential" or identified in writing as such promptly following its
disclosure, unless (i) such information is already known to the party or its
representatives or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of the party or its
representatives, (b) the use of such information is necessary in making any
filing or obtaining any consent or approval required for the consummation of
the transactions set forth in the Merger Agreement, or (c) the furnishing or
use of such information is required by or necessary in connection with legal
proceedings. Upon the written request of a party, each of the other parties
will promptly return or destroy any Confidential Information in its possession
and certify in writing to the disclosing party that it has done so.
12. Exclusive Dealing.
(a) The Grantor will not and will cause its Bank not to, directly
or indirectly, through any representative or otherwise, solicit or entertain
offers from, negotiate with or in any manner encourage, discuss, accept or
consider any proposal of any other Person relating to the acquisition of the
Grantor, its shares or its Bank, their assets or business, in whole or in
part, whether directly or indirectly, through purchase, merger, consolidation,
share exchange or otherwise (other than sales in the ordinary course of
business); and
(b) Grantor will immediately notify Grantee regarding any contact
between Grantor, its Bank or their respective representatives and any other
Person regarding any such offer or proposal or any related inquiry. In the
event this Agreement is terminated by Century in accordance with the
provisions of Sections 8(e) or (f) hereof, it is understood and agreed that
this Section 12 shall remain in full force and effect through December 31,
1997.
13. Disclosure.
Except as and to the extent required by law, without the prior
written consent of the other parties, no party will, and each will direct its
representatives not to, make directly or indirectly any public comment,
statement or communication with respect to, or otherwise to disclose or to
permit the disclosure of the existence of discussions regarding, a possible
transaction among the parties or any of the terms, conditions or other aspects
of the transaction proposed in this Agreement. If a party is required by law
to make any such disclosure, it must first provide to
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the other parties the content of the proposed disclosure, the reasons that
such disclosure is required by law, and the time and place that the disclosure
will be made.
14. Costs.
Except as otherwise expressly agreed, each party will be responsible
for and bear all of its own costs and expenses (including any broker's or
finder's fees and the expenses of its representatives) incurred at any time in
connection with this Agreement and in pursuing or consummating the Merger
Agreement.
15. Severability.
If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or regulatory agency
determines that applicable law will not permit the Grantee to acquire the full
number of shares of Grantor Common Stock provided in Section 2 (as adjusted
pursuant to Section 6), it is the express intention of the Grantor to allow
the Grantee to acquire such lesser number of shares as may be permissible,
without any amendment or modification hereof.
16. Miscellaneous.
(a) Third Parties. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective permitted successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
(b) Entire Agreement. Except as otherwise expressly provided
herein, this Agreement, together with the Letter of Intent, contain the entire
agreement among the parties with respect to the transactions contemplated
hereunder and supersede all prior arrangements or understandings with respect
thereto, written or oral. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective permitted successors and assigns.
(c) Assignment. Neither of the parties hereto may assign any
of its rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written consent of the
other parties, except that in the event a Purchase Event shall have occurred
and be continuing, the Grantee may assign in whole or in part its rights and
obligations hereunder; provided, however, that 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
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acquires the right to purchase in excess of 2% of the voting shares of the
Grantor, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution
on the Grantee's behalf, or (iv) any other manner approved by applicable
regulatory authorities.
(d) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if
delivered by registered or certified mail, postage prepaid, express service,
personal delivery, telecopy or telefacsimile to the following addresses:
If to Bancshares, to:
10 East Main Street
P.O. Box 247
Salineville, Ohio 43940
Attn: Marty E. Adams, President & CEO
If to Century, to:
Century Financial Corporation
One Century Place
Rochester, Pennsylvania 15074
Attn: Del F. Goedeker, Chairman and
Joseph N. Tosh II, President & CEO
(e) Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but
one agreement.
(f) Specific Performance. The parties agree that damages
would be an inadequate remedy for a breach of the provisions of this Agreement
by any party hereto and that this Agreement may be enforced by a party hereto
through injunctive or other equitable relief.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of Ohio applicable to agreements made
and entirely to be performed within such state and such federal laws as may be
applicable.
17. Repurchase at the Option of Grantee.
(a) At the request of the Grantee at any time commencing upon
the first occurrence of a Repurchase Event and ending 12 months immediately
thereafter, Grantor shall repurchase from Grantee (i) the Option and (ii) all
shares of Grantor Common Stock purchased by
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Grantee pursuant hereto with respect to which Grantee then has beneficial
ownership. The date on which Grantee exercises its rights under this Section
17 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Repurchase Consideration") equal to the sum of:
(i) the aggregate purchase price paid by Grantee for any
shares of Grantor Common Stock acquired pursuant to the Option with respect to
which Grantee then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price for
each share of Grantor Common Stock over (y) the purchase price (subject to
adjustment pursuant to Section 6 hereof, multiplied by the number of shares of
Grantor Common Stock with respect to which the Option has not been exercised;
and
(iii) the excess, if any, of the Applicable Price over
the purchase price (subject to adjustment pursuant to Section 6 hereof paid
(or, in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Grantee for each
share of Grantor Common Stock with respect to which the Option has been
exercised and with respect to which Grantee then has beneficial ownership,
multiplied by the number of such shares.
(b) If Grantee exercises its rights under this section,
Grantor shall, within 10 business days after the Request Date, pay the Grantor
Repurchase Consideration to Grantee in immediately available funds, and
contemporaneously with such payment Grantee shall surrender to Grantor the
Option and the certificates evidencing the shares of Grantor Common Stock
purchased thereunder with respect to which Grantee then has beneficial
ownership, and Grantee shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever.
Notwithstanding the foregoing, to the extent that prior notification to or
approval of the Federal Reserve Board or other regulatory authority is
required in connection with the repayment of all or any portion of the
Repurchase Consideration Grantee shall have the ongoing option to revoke its
request for repurchase pursuant to this section, in whole or in part, or to
require that Grantor deliver from time to time that portion of the Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If the Federal
Reserve Board or any other regulatory authority disapproves of any part of
Grantor's proposed repurchase pursuant to the section, Grantor shall promptly
give notice of such fact to Grantee. If the Federal Reserve Board or other
agency prohibits the repurchase in part but not in whole, then Grantee shall
have the right (i) to revoke the repurchase request, or (ii) to the extent
permitted by the Federal Reserve Board or other agency, determine whether the
purchase should apply to the Option and or Option shares and to what extent to
each, and Grantee shall thereupon have the right to exercise the Option as to
the number of Option shares for which the Option was exercisable at the
Request Date less the sum
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of the number of shares covered by the Option in respect of which payment has
been made pursuant to this section and the number of shares covered by the
portion of the Option (if any) that has been repurchased. Grantee shall
notify Grantor of its determination under the preceding sentence within five
(5) business days of receipt of notice of disapproval of the purchase.
Notwithstanding anything herein to the contrary, all of Grantee's
rights under this section shall terminate on the date of termination of this
Option.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement to be effective as of the day and year set forth in the first
paragraph above.
CITIZENS BANCSHARES, INC.
By:/s/ Marty E. Adams
----------------------------------
Marty E. Adams, President & CEO
CENTURY FINANCIAL CORPORATION
By:/s/ Del F. Goedeker
----------------------------------
Del F. Goedeker, Chairman
By:/s/ Joseph N. Tosh, II
----------------------------------
Joseph N. Tosh, II, President & CEO
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