<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
CENTURY FINANCIAL CORPORATION
(Name of Issuer)
COMMON STOCK
(Title of Class of Securities)
0001565261
(CUSIP Number)
M. PATRICIA OLIVER, ESQ.
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
(216) 479-8500
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
NOVEMBER 17, 1997
(Date of Event which Requires filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d- 1(a) for other parties to whom copies are to be
sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP No. 0001565261 Page 2 of 7 Pages
- -------------------- -----------------
<TABLE>
<S> <C> <C>
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Citizens Bancshares, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER (a)
OF A GROUP* (b)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
7 SOLE VOTING POWER
NUMBER OF up to 1,016,653, as of November 17, 1997,
SHARES subject to adjustment so as to constitute
BENEFICIALLY 19.9% of outstanding Common Stock
OWNED BY
EACH 8 SHARED VOTING POWER
REPORTING None
PERSON
9 SOLE DISPOSITIVE POWER
up to 1,016,653, as of November 17, 1997,
subject to adjustment so as to constitute
19.9% of outstanding Common Stock
10 SHARED DISPOSITIVE POWER
None
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
up to 1,016,653, as of November 17, 1997, subject to
adjustment so as to constitute 19.9% of outstanding Common
Stock
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
up to 19.9%
14 TYPE OF REPORTING PERSON*
HC
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE> 3
SCHEDULE 13D
CUSIP No. 0001565261 Page 3 of 7 Pages
- -------------------- -----------------
Item 1. Security and Issuer
The title of the class of equity securities to which this
statement relates is the common stock, par value $0.835 per share (the "Common
Stock"), of Century Financial Corporation, a Pennsylvania corporation (the
"Company"). The address of the Company's principal executive office is One
Century Place, Rochester, Pennsylvania 15074.
Item 2. Identity and Background
The person filing this Statement is Citizens Bancshares, Inc., an
Ohio corporation ("Bancshares"), which is a bank holding company registered
under the Bank Holding Company Act of 1956, as amended. The business address of
Bancshares is 10 East Main Street, P.O. Box 247, Salineville, Ohio 43940. As of
the date hereof, Bancshares' primary business is commercial and retail banking.
Bancshares is a holding company for two wholly owned subsidiary banks, a wholly
owned reinsurance company and a wholly owned courier company. During the last
five years, Bancshares has not been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors), nor has it been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which it was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
This statement relates to Bancshares' November 17, 1997
acquisition of a binding option to purchase from the Company up to 19.9% of the
Company's outstanding Common Stock for a purchase price of $18.00 per share (the
"Binding Option"). This acquisition gives Bancshares deemed beneficial ownership
of 19.9% of the Company's outstanding Common Stock, thus triggering this
reporting requirement. If exercised, Bancshares will use its working capital to
purchase the Common Stock available to it pursuant to the Binding Option.
Item 4. Purpose of Transaction
The Company has granted to Bancshares the Binding Option in
furtherance of a proposed affiliation of Bancshares and the Company, pursuant to
which the Company will be merged with and into Bancshares. The proposed
affiliation calls for each outstanding share of Company Common Stock to be
converted in the merger into 0.425 shares of Bancshares common stock, without
par value, in a tax-free exchange, subject to certain adjustments based on the
then current closing price of Bancshares common stock on the NASDAQ National
Market System.
Item 5. Interest in Securities of the Issuer
As of November 17, 1997, excluding the effect of the binding
option, Bancshares did not beneficially own, for purposes of Rule 13d-3 under
the Exchange Act, any Company Common Stock and, during the sixty days prior to
the date of the binding option, Bancshares did not effect any transactions in
Company Common Stock. As disclosed by such persons to Bancshares, as of November
17, 1997, none of the executive officers or directors of Bancshares beneficially
owned any Company Common Stock nor, during the sixty days prior to the date of
the binding option, did any such executive officer or director effect any
transactions in Company Common Stock.
<PAGE> 4
SCHEDULE 13D
CUSIP No. 0001565261 Page 4 of 7 Pages
- -------------------- -----------------
Item 6. Contracts, Arrangements, Understandings or Relationships with
respect to Securities of the Issuer
Bancshares has entered into the following contracts,
arrangements, understandings or relationships (legal or otherwise) with respect
to the securities of the Company:
STOCK OPTION AGREEMENT. On November 17, 1997, Bancshares entered
into a Stock Option Agreement with the Company, whereby Bancshares was granted a
binding option to purchase up to 19.9% of the Company's outstanding Common Stock
(1,016,653 shares as of the date of the agreement) at an exercise price of
$18.00 per share. Bancshares may exercise the option at any time or from time to
time upon the occurrence of a Purchasing Event. A Purchasing Event is defined
as:
(i) the Company entering into an agreement with any person to
merge, consolidate or any other similar transaction for the
purchase, lease or acquisition of all or substantially all of the
assets of the Company or for the purchase or acquisition of
securities representing 10% or more of the voting power of the
Company;
(ii) any person (other than Bancshares) having acquired
beneficial ownership or the right to acquire beneficial ownership
of 19.9% or more of the outstanding Common Stock after the date
of the agreement;
(iii) any person having made a bona fide takeover proposal to the
Company by public announcement or written communication that is
or becomes the subject of public disclosure, and, following such
bona fide takeover proposal, the Company determines not to enter
into a merger agreement with Bancshares or the stockholders of
the Company vote not to adopt a merger agreement between
Bancshares and the Company;
(iv) the Company shall have breached this agreement in any
material respect, which breach shall not have been cured within
15 days after notice thereof; or
(v) the Company shall have breached the merger agreement between
Bancshares and the Company following a bona fide takeover
proposal.
In the event Bancshares elects to exercise the option, Bancshares
must send written notice to the Company specifying the total number of shares it
will purchase and the place and date, not earlier than three business days nor
later than 60 business days after the notice date, for the closing of such
purchase. At the closing, Bancshares must pay to the Company the aggregate
purchase price for the Common Stock purchased in immediately available funds by
wire transfer. Simultaneous with the delivery of funds, the Company must deliver
to Bancshares certificates representing the number of shares of Common Stock
purchased.
The Company has represented that it will at all times maintain
sufficient authorized but unissued shares of Common Stock so that the option may
be exercised without authorization of additional shares of Common Stock.
Furthermore, the Company has agreed that, in the event of any change in the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, exchanges or shares or the like, the type and
number of shares subject to the option, and the purchase price per share, will
be adjusted appropriately.
<PAGE> 5
SCHEDULE 13D
CUSIP No. 0001565261 Page 5 of 7 Pages
- -------------------- -----------------
The Binding Option may be terminated in any of the following
manners:
(i) by mutual consent of Bancshares and the Company;
(ii) by either Bancshares or the Company if the Federal Reserve
Board shall have issued an order denying approval of the
affiliation of Bancshares and the Company or if any other
governmental entity shall have issued a final permanent order
enjoining or otherwise prohibiting consummation of the
affiliation;
(iii) by either Bancshares or the Company if the affiliation has
not been consummated on or before September 30, 1998;
(iv) by either Bancshares or the Company if no Purchase Event has
occurred and the either Bancshares' or the Company's stockholders
have failed to approve the affiliation;
(v) by the Company if, on or prior to December 2, 1997, the
Company terminates the Letter of Intent because, as a result of
its due diligence investigation of Bancshares, the Company's
Board of Directors determines in good faith that (a) 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 (b) 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 the Company with Bancshares so that the benefits
of affiliation can be achieved by December 31, 1998; or
(vi) by the Company 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 the Company that are
materially and adversely inconsistent with the disclosures
contained in the periodic reports filed by the Company with the
Securities and Exchange Commission.
LETTER OF INTENT. Simultaneous with the execution of the Binding
Option, Bancshares and the Company entered into a letter of intent calling for
the affiliation of the Company and Bancshares (the "Letter of Intent"). The
Letter of Intent provides that the affiliation will be effected by means of a
merger of the Company with and into Bancshares. In the merger, each outstanding
share of Company common stock, par value $0.835 per share, will be converted
into 0.425 shares of Bancshares common shares, in a tax-free exchange, subject
to certain adjustments based on the then current closing price of Bancshares
common shares on the NASDAQ National Market System.
Assuming (i) the negotiation and execution of a mutually
acceptable definitive agreement containing terms and conditions generally
applicable to transactions of this type and the approval thereof by the Board
of Directors of each of Bancshares and the Company; (ii) completion of
satisfactory due diligence investigations by Bancshares and the Company of one
another; (iii) receipt by the Company's Board of Directors of an opinion from
its financial advisor to the effect that the affiliation is fair to the
Company's shareholders from a financial point of view; (iv) receipt of the
required regulatory approvals, the registration of the Bancshares common shares
to be issued in the transaction with the Securities and Exchange Commission and
necessary state "blue sky" compliance; and (v) the approval of the Company's
and Bancshares' shareholders, Bancshares and the Company hope to consummate the
affiliation by June 30, 1998.
<PAGE> 6
SCHEDULE 13D
CUSIP No. 0001565261 Page 6 of 7 Pages
- -------------------- -----------------
In furtherance of the transactions provided for in the Letter of
Intent, the Company has granted to Bancshares an option to purchase Company
common shares representing up to 19.9% of the outstanding shares of Company
common shares at an exercise price of $18.00 per share. The Company has also
agreed to negotiate exclusively with Bancshares through December 31, 1997.
Item 7. Material to Be Filed as Exhibits
The following documents are filed herewith as exhibits to this
statement:
(a) Form of Stock Option Agreement, dated as of November 17,
1997, by and between Bancshares and the Company.
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
CITIZENS BANCSHARES, INC.
By: /s/ Marty E. Adams
---------------------------------------
Marty E. Adams
President and Chief Executive Officer
Date: November 26, 1997
<PAGE> 7
SCHEDULE 13D
CUSIP No. 0001565261 Page 7 of 7 Pages
- -------------------- -----------------
EXHIBIT INDEX
Exhibit
-------
99.1 Form of Stock Option Agreement, dated as of November 17, 1997, by and
between Bancshares and the Company.
<PAGE> 1
EXHIBIT 99.1
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.
"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.
<PAGE> 2
"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, 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.
2
<PAGE> 3
"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 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.
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
3
<PAGE> 4
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:
(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.
4
<PAGE> 5
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 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;
(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
5
<PAGE> 6
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.
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
6
<PAGE> 7
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 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 acquires the right to purchase in excess
of 2% of the voting shares of
7
<PAGE> 8
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 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
8
<PAGE> 9
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 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
9
