SCHEDULE 14A INFORMATION
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
[Amendment No. ]
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Fidelity Federal Bancorp
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(Name of Registrant as Specified in Its Charter)
Not Applicable
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 0-11 and 14a-6(i)(1).
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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[LOGO OF FIDELITY FEDERAL BANCORP]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held May 19, 2000
Notice is hereby given that the Annual Meeting of Shareholders of
Fidelity Federal Bancorp ("Fidelity") will be held on May 19, 2000, at 8:30
o'clock a.m., local time, at the downtown office of United Fidelity Bank, fsb
("United"), 18 N.W. Fourth Street, Evansville, Indiana.
The purposes of the meeting are:
(1) Election of Directors: To elect three directors to the Board of
Directors to serve until their successors are duly elected and
qualified;
(2) Approve Stock Purchase Agreement: To consider and vote upon the
Amended and Restated Stock Purchase Agreement effective January 21,
2000, including the proposed issuance to Pedcor Holdings, LLC, and its
affiliates of 1,460,000 shares of common stock of Fidelity
(representing 31.7% of the outstanding shares of common stock of
Fidelity);
(3) Increase Authorized Shares: To consider and vote upon the proposed
amendment to Article III of the Articles of Incorporation of Fidelity
to increase the number of authorized shares of common stock of Fidelity
from 5,000,000 to 15,000,000;
(4) Removal of Cumulative Voting for Directors: To consider and vote
upon the proposed amendment to Article III of the Articles of
Incorporation of Fidelity to remove cumulative voting for directors;
(5) Reduce Terms of Directors: To consider and vote upon the proposed
amendment to Article IV of the Articles of Incorporation of Fidelity to
eliminate "staggered" terms of office and reduce the term of office of
directors from 3 years to 1 year, for all newly-elected directors;
(6) Authorize Additional Provisions for Removal of Directors: To
consider and vote upon the proposed amendment to Article IV of the
Articles of Incorporation of Fidelity to permit a director to be
removed by shareholders with or without "cause" (as defined in the
proposed amendment) and to allow the board of directors to remove a
director with "cause";
(7) Selection of Public Accountants: To ratify the selection of Olive
LLP, Certified Public Accountants, as independent public accountants of
Fidelity for the fiscal year ending December 31, 2000; and
(8) Other Business: To transact such other business as may properly
come before the meeting or any adjournment thereof.
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Other than with respect to procedural matters incident to the conduct
of the meeting, management is not aware of any other matters which may properly
come before the meeting. The Board of Directors of Fidelity has fixed the close
of business on March 31, 2000, as the record date for determination of
shareholders entitled to notice of, and to vote at, the Annual Meeting and at
any adjournment of the Annual Meeting.
By Order of the Board of Directors
JACK CUNNINGHAM
Chairman of the Board of Directors
April 19, 2000
Important--Please mail your proxy promptly.
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You are cordially invited to attend the Annual meeting. It is important that
your shares be represented, regardless of the number you own. Even if you plan
to be present, you are urged to complete, sign, date and return the enclosed
proxy promptly in the envelope provided. If you attend the meeting, you may vote
either in person or by proxy. Any proxy given may be revoked by you in writing
or in person at any time prior to the exercise thereof.
- --------------------------------------------------------------------------------
The date of this Proxy Statement is April 19, 2000.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTORY STATEMENT............................................................................................1
Proposals Presented......................................................................................1
Voting Rights............................................................................................2
Beneficial Ownership.....................................................................................4
Proxies ................................................................................................5
Solicitation of Proxies..................................................................................5
ITEM 1. ELECTION OF DIRECTORS...................................................................................6
INFORMATION CONCERNING NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS.................................................6
Certain Transactions and Other Matters Between Management and Fidelity...................................8
Board Meetings...........................................................................................8
Board Committees.........................................................................................9
EXECUTIVE COMPENSATION AND OTHER INFORMATION......................................................................9
Five-Year Total Shareholder Return.......................................................................9
Compensation Committee Report...........................................................................11
Compensation Committee Insider Participation............................................................12
Summary Compensation Table..............................................................................13
1993 Directors' Stock Option Plan.......................................................................13
1995 Key Employees' Stock Option Plan...................................................................14
Options Grants in Last Fiscal Year......................................................................14
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-end Option Values Table..................14
Other Employee Benefit Plans............................................................................15
Compensation of Directors...............................................................................17
Employment Contracts and Termination of Employment and
Change of Control Arrangements.................................................................17
Security Ownership of Management........................................................................18
Section 16(a) Beneficial Ownership Reporting Compliance.................................................19
ITEM 2. APPROVAL OF STOCK PURCHASE AGREEMENT.................................................................20
Background..............................................................................................20
General Terms of the Stock Purchase Agreement...........................................................21
Additional Purchases by Pedcor..........................................................................21
Restrictions Affecting Fidelity.........................................................................21
Commitments by Pedcor...................................................................................22
Management..............................................................................................22
Employments Agreements..................................................................................22
Share Voting Agreements.................................................................................23
Conditions to Consummation..............................................................................24
Interests of Certain Persons in the Stock Purchase Agreement............................................24
Board Recommendation for Approval of Stock Purchase Agreement and
Transactions Contemplated Thereunder...........................................................24
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ITEM 3. INCREASE AUTHORIZED SHARES OF COMMON STOCK............................................................25
ITEM 4. ELIMINATION OF THREE CLASSES OF DIRECTORS.............................................................26
ITEM 5. ELIMINATION OF CUMULATIVE VOTING......................................................................27
ITEM 6. REMOVAL OF DIRECTORS..................................................................................28
ITEM 7. RATIFICATION OF INDEPENDENT AUDITORS OF FIDELITY......................................................28
SHAREHOLDER PROPOSALS............................................................................................29
ADDITIONAL INFORMATION...........................................................................................29
OTHER MATTERS....................................................................................................29
EXHIBIT A ......................................................................................................A-1
EXHIBIT B ......................................................................................................B-1
EXHIBIT C ......................................................................................................C-1
EXHIBIT D ......................................................................................................D-1
EXHIBIT E ......................................................................................................E-1
</TABLE>
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PROXY STATEMENT
Annual Meeting of Shareholders of Fidelity Federal Bancorp
to be held on May 19, 2000
INTRODUCTORY STATEMENT
This Proxy Statement is being furnished to the shareholders of Fidelity
Federal Bancorp ("Fidelity") in connection with the solicitation of proxies by
the Board of Directors of Fidelity for use at the Annual Meeting of Shareholders
to be held on May 19, 2000, at 8:30 a.m., local time, at the downtown office of
United Fidelity Bank, fsb ("United"), 18 N.W. Fourth Street, Evansville, Indiana
and any adjournment thereof (the "Annual Meeting").
Fidelity is a unitary savings and loan holding company based in
Evansville, Indiana which owns all of the issued and outstanding stock of
United, its savings bank subsidiary. United maintains four locations in
Evansville. United also participates in various real estate activities including
owning and managing housing developments through its wholly-owned subsidiaries:
Village Capital Corporation, Village Housing Corporation, and Village Management
Corporation.
On December 31, 1999, Fidelity changed its fiscal year end from June 30
to December 31. Accordingly, the Annual Meeting is being held for the fiscal
year ended December 31, 1999.
Proposals Presented
At the Annual Meeting, shareholders of Fidelity will be asked to
consider and vote upon the following matters:
(1) Election of Directors. Election of three directors to the
Board of Directors to serve until their successors are duly
elected and qualified.
(2) Approval of Stock Purchase Agreement. Approval of the Amended
and Restated Stock Purchase Agreement effective January 21,
2000, including a proposed issuance to Pedcor Holdings, LLC,
and Pedcor Bancorp, the permitted assigns of Pedcor
Investments, a limited liability company ("Pedcor"), of
1,460,000 shares of common stock of Fidelity (representing
31.7% of the outstanding shares of common stock of Fidelity).
(3) Increase Authorized Shares. A proposed amendment to Article
III of the Articles of Incorporation of Fidelity to increase
the number of authorized shares of common stock of Fidelity
from 5,000,000 to 15,000,000.
(4) Removal of Cumulative Voting for Directors. A proposed
amendment to Article III of the Article of Incorporation of
Fidelity to remove cumulative voting for directors.
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(5) Reduce Terms of Directors. A proposed amendment to Article IV
of the Articles of Incorporation of Fidelity to eliminate
"staggered" terms of office and reduce the term of office of
directors from 3 years to 1 year, for all newly-elected
directors.
(6) Authorize Additional Provisions for Removal of Directors. A
proposed amendment to Article IV of the Articles of
Incorporation of Fidelity to permit a director to be removed
by shareholders with or without "cause" (as defined in the
proposed amendment) and to allow the board of directors to
remove a director with "cause."
(7) Ratification of Public Accountants. To ratify the selection
of Olive LLP, Certified Public Accountants, as independent
public accountants of Fidelity for the fiscal year ending
December 31, 2000.
If any other matters should properly come before the meeting, it is
intended that the proxies will be voted, with respect to these matters, in
accordance with the recommendations of the Board of Directors. Except with
respect to procedural matters incident to the conduct of the meeting, management
of Fidelity does not know of any additional matters that may properly come
before the Annual Meeting.
The Proxy Statement, the attached Notice and the enclosed proxy card
are being first mailed to shareholders of Fidelity on or about April 20, 2000.
Voting Rights
Only holders of shares of common stock of Fidelity of record at the
close of business on March 31, 2000 (the "Record Date") will be entitled to
notice of and to vote at the Annual Meeting. At the close of business on the
Record Date there were 3,147,662 shares of common stock of Fidelity issued and
outstanding. Such shares were held of record by approximately 499 shareholders.
There are no other outstanding securities of Fidelity entitled to vote. The
presence, either in person or by proxy, of the holders of a majority of the
shares of Common Stock issued and outstanding as of the Record Date is necessary
to constitute a quorum at the Annual Meeting. The inspectors of election will
treat abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum but as unvoted for purpose of
determining the approval of any matters submitted to the shareholders for a
vote. If a broker indicates on the proxy that it does not have discretionary
authority to vote certain shares on a particular matter, those shares will not
be considered as present and entitled to vote with respect to that matter. The
nominees for election as director of Fidelity named in this Proxy Statement will
be elected by a plurality of the votes cast. Approval of the Stock Purchase
Agreement and the transactions contemplated thereby, including the issuance of
the shares to Holdings and Pedcor Bancorp, requires the affirmative vote of a
majority of the issued and outstanding shares. Action on the other items or
matters to be presented at the Annual Meeting will be approved if the votes cast
in favor of the action exceed the votes cast opposing the action. The proposed
amendments to the Articles of Incorporation, other than the
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amendment to increase the number of authorized shares of common stock, will only
be effective if the proposed Stock Purchase Agreement is approved by the
shareholders.
Fidelity shareholders of record on the Record Date are entitled to one
vote per share on any matter that may properly come before the Annual Meeting,
except for the ability to cumulate votes with respect to the election of
directors. The Articles of Incorporation of Fidelity provide that shareholders
are entitled to cumulate votes for the election of directors. As such, each
shareholder is entitled to vote, in person or by proxy, the number of shares
owned by the shareholder for each nominee. Alternatively, each shareholder is
entitled to cumulate votes for nominees and give one nominee a number of votes
equal to the number of directors to be elected (3 for the Annual Meeting)
multiplied by the number of votes to which that shareholder's shares are
entitled, or distribute such votes upon the same principal among any number of
the nominees as such shareholder deems appropriate. However, a shareholder may
only cumulate votes for a nominee or nominees whose names have been properly
placed in nomination prior to the Annual Meeting. The nominees receiving the
highest number of votes, up to the number of directors to be elected, shall be
elected. Voting on all other matters to be submitted at the Annual Meeting is
non-cumulative.
The proxies will have full discretion and authority to vote
cumulatively and to allocate votes among all or any of the nominees as the Board
of Directors may determine. Such grant of discretion and authority to the proxy
holders to vote cumulatively may be withheld by checking the box marked
"withhold authority" on the enclosed proxy card. Ballots will be available at
the Annual Meeting for shareholders desiring to vote in person.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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Beneficial Ownership
The following table sets forth information regarding the beneficial
ownership of Fidelity's common stock as of March 31, 2000 by the only persons
known by Fidelity to beneficially own 5% or more of the issued and outstanding
shares of common stock of Fidelity.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership (1) Percent of Class
------------------- ------------------------ ----------------
<S> <C> <C>
M. Brian Davis 795,206 (2) 24.62%
700 S. Green River Road, Suite 2000
Evansville, IN 47715
Bruce A. Cordingley 320,667 (3) 10.03%
8888 Keystone Crossing, Suite 900
Indianapolis, IN 46240
Barry A. Schnakenburg 263,308 (4) 8.31%
8701 Petersburg Road
Evansville, IN 47711
First Financial Fund, Inc. 202,900 (5) 6.45%
c/o Wellington Management
75 State St
Boston, MA 02109
Wellington Management 202,900 (6) 6.45%
75 State St
Boston, MA 02109
Rahmi Soyugenc 171,720 5.46%
119 LaDonna Blvd.
Evansville, IN 47711
</TABLE>
(1) This information is based on Schedule 13D and 13G Reports filed by the
beneficial owner with the Securities and Exchange Commission ("SEC")
pursuant to applicable provisions of the Securities Exchange Act of
1934 ("Exchange Act"), as of March 31, 2000, and any other information
provided to Fidelity by the beneficial owner. It does not reflect any
changes in those shareholdings which may have occurred since that date.
Beneficial ownership is direct except as otherwise indicated by
footnote.
(2) Includes 3,796 shares owned by the spouse of Mr. Davis, 16,226 shares
which Mr. Davis holds as custodian for his minor daughter (Elizabeth
Davis); 15,294 shares which Mr. Davis holds as custodian for his minor
son (Christopher Davis); and 5,580 shares which Mr. Davis holds as
custodian for his minor daughter (Gabrielle Davis). Also includes
39,916 shares which Mr. Davis has the right to acquire pursuant to the
exercise of stock options granted under the 1993 Directors' Stock
Option Plan and 42,720 shares which Mr. Davis has the right to acquire
pursuant to the exercise of stock options granted under Fidelity's 1995
Key Employees' Stock Option Plan. Also includes 99,018 shares of
Fidelity owned by Maybelle V. Reichert, the mother of Mr. Davis, as to
which shares Mr. Davis has authority to vote pursuant to a power of
attorney.
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(3) Includes 196,783 shares held by Pedcor Investments, a limited liability
company, of which Mr. Cordingley is a 41.985% owner and a co-chief
executive officer and President; 6,835 shares held by the spouse of Mr.
Cordingley; and 52,966 shares held by Gerald Pedigo, who together with
Mr. Cordingley and others has filed a Schedule 13D as a "group" under
Section 13(d)(3) of the Securities Exchange Act of 1934. The total also
includes 39,916 shares which Mr. Cordingley has the right to acquire
pursuant to the exercise of stock options granted under Fidelity's 1993
Directors' Stock Options Plan and 8,587 shares which Mr. Cordingley,
Pedcor Investments, and Mr. Cordingley's wife are entitled to purchase
upon exercise of 31 warrants acquired pursuant to the 1994 Rights
Offering.
(4) Includes 5,775 shares held by the spouse of Mr. Schnakenburg, 24,948
shares held by U.S. Industries Group, Inc., 52,263 shares held by
Barry, Inc. and 40,378 shares held by BOAH Associates. The total also
includes 20,097 shares which Mr. Schnakenburg has the right to acquire
through the exercise of stock options granted under Fidelity's 1993
Directors' Stock Option Plan. The total also includes 74,109 shares of
Fidelity pursuant to which Mr. Schnakenburg may exercise voting and
investment power pursuant to a power of attorney.
(5) First Financial Fund, Inc., reports that it had sole voting power and
shared dispositive power with respect to the reported shares. These
shares are also included in the shares beneficially owned by Wellington
Management Company, as investment adviser to First Financial Fund,
Inc., as explained in footnote 6.
(6) Wellington Management Company ("WMC"), in its capacity as investment
adviser, may be deemed to have beneficial ownership of these shares,
which are owned by First Financial Fund, Inc. As of December 31, 1999,
WMC reported that it had no voting power as to these shares, and shared
dispositive power with First Financial Fund, Inc. (see footnote 5) as
to all 202,900 shares.
Proxies
Each properly executed and returned proxy will be voted at the Annual
Meeting in accordance with the instructions thereon. If no instructions are
given, the proxy will be voted by the individuals designated as proxies "FOR"
the matters set forth as items 1-7 in the attached "Notice of Annual Meeting of
Shareholders," in their discretion with respect to all other matters, and with
authority to cumulate votes.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by (i) attending the Annual Meeting, filing a written notice of
revocation with the Secretary of the Annual Meeting and voting in person; (ii)
executing a written instrument to that effect and delivering it to the Secretary
of Fidelity prior to the Annual Meeting; or (iii) duly executing and delivering
a later dated proxy to the Secretary of Fidelity prior to the Annual Meeting.
Solicitation of Proxies
In addition to use of the mails, proxies may be solicited personally or
by telephone or telegraph by officers, directors and certain employees who will
not be specially compensated for such activity. Fidelity will request brokerage
houses, nominees, fiduciaries and other custodians to forward soliciting
materials to beneficial owners. Fidelity will bear all expenses in connection
with the solicitation of proxies for the Annual Meeting.
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<PAGE>
ITEM 1. ELECTION OF DIRECTORS
The Board of Directors of Fidelity is currently composed of six
members. Fidelity's Articles of Incorporation divide the Board of Directors into
three classes, as nearly equal in size as possible, with one class of Directors
elected each year for a three-year term. The terms of Curt J. Angermeier, Donald
R. Neel, and Barry A. Schnakenburg expire at the 2000 Annual Meeting of
Shareholders. All of these individuals have been nominated for re-election to a
three-year term to expire at the 2003 Annual Meeting of Shareholders; provided,
however, that if the Stock Purchase Agreement and the proposed amendment to
Article IV, Section 3 of the Articles of Incorporation of Fidelity is approved
by the shareholders at the Annual Meeting (which will eliminate the three
classes of directors so that all directors are elected for one-year terms), the
Directors elected at this Annual Meeting and each subsequent annual meeting will
have a one year term. This proposed amendment is discussed below under "PROPOSED
AMENDMENTS TO ARTICLES OF INCORPORATION - Elimination of Three Classes of
Directors."
If for any reason Messrs. Angermeier, Neel, or Schnakenburg become
unable or are unwilling to serve at the time of the Annual Meeting, the person
named in the enclosed proxy card will have discretionary authority to vote for a
substitute nominee or nominees. It is anticipated that Messrs. Angermeier, Neel,
and Schnakenburg will be available for election.
At the Annual Meeting, proxies cannot be voted for a greater number of
persons than the number of nominees named.
The Board of Directors recommends that the shareholders vote FOR the
election of Messrs. Angermeier, Neel, and Schnakenburg.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth information as to each Director continuing in
office after the Annual Meeting, and each executive officer of Fidelity as of
March 31, 2000, including their ages, present principal occupations, other
business experience during the last five years, directorships in other publicly
held companies, and the year they were first elected or appointed to the Board
of Directors (if applicable). Each individual's service with Fidelity began at
the formation of Fidelity in 1993, unless otherwise noted.
There are no arrangements or understandings between any of the
Directors, executive officers or any other person pursuant to which any Director
or executive officer has been selected for his or her respective position.
CURT J. ANGERMEIER Age - 46, term expires in 2000.
- ------------------
Mr. Angermeier was appointed to the Board of Directors of Fidelity on March 21,
1996. Mr. Angermeier is a practicing attorney, concentrating on insurance law
matters. Mr. Angermeier is a
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member of the Indiana Bar Association, Indiana Defense Lawyers Association and
the Evansville Bar Association.
WILLIAM R. BAUGH Age - 79, term expires in 2001.
- ----------------
Mr. Baugh is a Director of Fidelity and has been Chairman Emeritus of the Board
of Directors since October 1994. Mr. Baugh served as Chairman of the Board of
Directors of Fidelity from its formation in 1993 until October 1994. He served
as a Director of United from 1955 until 2000, was Chairman of the Board of
United from 1979 until October 1994, and was President of United from 1970 until
1981 and from 1983 until 1986.
JACK CUNNINGHAM Age - 69, term expires in 2002.
- ---------------
Mr. Cunningham is a Director of Fidelity and has served as Chairman of Fidelity
and United since April 1998. Mr. Cunningham served as Secretary of Fidelity and
United from April 1998 until December 1998. He served as President of Fidelity
from May 1994 through October 1994 and as President of United from May 1994
through December 1994. Mr. Cunningham again served as President and CEO of
United from March 1997 until January 1998. Mr. Cunningham is Chairman of the
Board of Village Management Corporation and Village Housing Corporation (the two
service corporation subsidiaries of United involved in the management and
ownership of affordable housing units), Village Capital Corporation, and Village
Insurance Corporation. Mr. Cunningham has been a Director of United since 1985
and an officer of United since 1974.
M. BRIAN DAVIS Age - 45, term expires in 2001.
- --------------
Mr. Davis is a Director of Fidelity and has served as its President and Chief
Executive Officer since November 1996. Mr. Davis is also a Director of United
and has served as its interim Chief Executive Officer since January 1998. Mr.
Davis previously served as Chief Operating Officer of Fidelity from June 1995 to
November 1996. Mr. Davis is also a Director of Village Management Corporation
and Village Housing Corporation (the two service corporation subsidiaries of
United involved in the management and ownership of affordable housing units).
Mr. Davis is the President of Village Management Corporation, Village Insurance
Corporation, Village Housing Corporation, and Village Capital Corporation. Mr.
Davis has been a Director of United since 1992. Mr. Davis was a partner in the
Davis Brothers Real Estate Partnership, located in Evansville, Indiana, which
has developed and managed commercial real estate throughout the Midwest. He is
also currently President of Southern Investment Corporation, a real estate
investment company.
DONALD R. NEEL Age - 36, term expires in 2000.
- --------------
Mr. Neel is a Director of Fidelity and serves as Executive Vice-President, Chief
Financial Officer, and Treasurer of Fidelity, and as Executive Vice President
and Chief Operating Officer of United. Mr. Neel also serves as Treasurer of
Village Management Corporation, Village Insurance Corporation, and as Executive
Vice President and Treasurer of Village Capital Corporation and Village Housing
Corporation. Prior to joining United and Fidelity in 1993, Mr. Neel served as
Vice-
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President and Controller of INB Banking Company, Southwest (successor to Peoples
Bank) from May 1987 through April 1993.
BARRY A. SCHNAKENBURG Age - 52, term expires in 2000.
- ---------------------
Mr. Schnakenburg is a Director of Fidelity and has served as a Director of
United since 1990. Mr. Schnakenburg currently serves as a Director of Village
Capital Corporation and as a Director and the Executive Vice-President and Chief
Operating Officer of Village Insurance Corporation. Mr. Schnakenburg has served
as the President of U.S. Industries Group, Inc. for the past 10 years. U.S.
Industries Group, Inc. is a sheet metal and roofing contractor located in
Evansville, Indiana.
Certain Transactions and Other Matters Between Management and Fidelity
Directors and executive officers of Fidelity and United and their
associates are customers of, and have had transactions with, Fidelity and United
in the ordinary course of business. Comparable transactions may be expected to
take place in the future. Directors of Fidelity may not obtain extensions of
credit from Fidelity or United. Loans made to non-director officers were made in
the ordinary course of business on substantially the same terms as those
prevailing at the time for comparable transactions with other persons. These
loans did not involve more than the normal risk of collectibility or present
other unfavorable features.
The Office of Thrift Supervision ("OTS"), the primary federal banking
regulatory agency of United, by regulation has provided that each director,
officer, or affiliated person of a savings association, such as United, has a
fundamental duty to avoid placing himself in a position which creates, or which
leads to or could lead to, a conflict of interest or appearance of a conflict of
interest having an adverse effect upon, among other things, the interests of the
members of the savings association or the association's soundness. In addition,
the OTS by regulation has stated that the fiduciary relationship owed by a
director or officer of a savings association, such as United, includes the duty
to protect the association and that the OTS would consider this duty to be
breached if such individual would take advantage of a business opportunity for
his own or another person's personal benefit or profit when the opportunity is
within the corporate powers of the savings association (or its service
corporation) and when the opportunity is of a present or potential practical
advantage to the savings association. The members of the Board of Directors of
Fidelity and United are aware of these regulations and requirements of the OTS
and believe they have conducted, and intend to continue to conduct themselves in
compliance with these requirements at all times.
Board Meetings
Fidelity had 12 regularly scheduled Board of Directors meetings and 2
special meetings during its fiscal year ended June 30, 1999 and had 6 regularly
scheduled and 2 special meetings for the six months ended December 31, 1999.
Each of the incumbent Directors of Fidelity attended at least 75% of the
meetings of the Board of Directors and any committees upon which he served
during the period which such individual served.
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Board Committees
The Board of Directors has a Nominating Committee which consists of M.
Brian Davis (Chairman), Jack Cunningham, and William R. Baugh. The Nominating
Committee, whose purpose is to nominate directors for election to the Board of
Directors, met twice during the fiscal year ended June 30, 1999 and once during
the six months ended December 31, 1999. Under Fidelity's by-laws, no nominations
for director, except those made by the Nominating Committee, shall be voted upon
at the Annual Meeting unless other nomination by shareholders are made in
writing and delivered to the Secretary of Fidelity not later than the close of
business on the tenth day following the date the notice of the Annual Meeting
was mailed to shareholders. Shareholders who wish to recommend nominees must do
so in writing to the Secretary of Fidelity as described above.
The Board of Directors also has an Audit Committee consisting of Curt
J. Angermeier (Chairman), William R. Baugh, Jack Cunningham and Barry A.
Schnakenburg. The Audit Committee, whose purpose is to review audit reports,
loan review reports, and related matters to ensure effective compliance with
regulatory and internal policies and procedures, met four times during the
fiscal year ended June 30, 1999 and 2 times during the six months ended December
31, 1999. The members of the Audit Committee also serve as the committee
authorized to direct the grant of options to eligible Key Employees under the
1993 Directors' Stock Option Plan and the 1995 Key Employees' Stock Option Plan.
The Executive Committee of the Board of Directors serves as the
Compensation Committee. The Executive Committee is currently composed of Jack
Cunningham (Chairman), M. Brian Davis, Barry A. Schnakenburg, and Donald R.
Neel. The Executive Committee met eleven times during the fiscal year ended June
30, 1999 and 1 time during the six months ended December 31, 1999. Messrs. Davis
and Neel meet with the Compensation Committee but abstain and recuse themselves
from discussions related to their compensation.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Five-Year Total Shareholder Return
The following indexed graph indicates Fidelity's total return to its
shareholders on its common stock for the past five years, assuming dividend
reinvestment, as compared to total return for the NASDAQ Market Index and the
Peer Group Index (which is a line-of-business index prepared by an independent
third party consisting of savings and loan holding companies or federally
chartered savings institutions with the same SIC number as Fidelity and which
have been publicly traded for at least six years). The comparison of total
return on investment for each of the periods assumes that $100 was invested on
January 1, 1995, in each of Fidelity, the NASDAQ Market Index, and the Peer
Group Index.
9
<PAGE>
Comparative 5-Year Cumulative Total Return
Among Fidelity Federal Bancorp,
NASDAQ Market Index and SIC Code Index
Assumes $100 Invested on January 1, 1995
Assumes Dividends Reinvested
Year Ended December 31, 1999
1994 1995 1996 1997 1998 1999
-----------------------------------------------------
FIDELITY FEDERAL 100 201.53 145.82 161.29 53.68 19.88
SIC CODE INDEX 100 156.90 200.64 340.12 288.98 245.88
NASDAQ MARKET INDEX 100 129.71 161.18 197.16 278.08 490.46
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG FIDELITY FEDERAL BANCORP,
NASDAQ MARKET INDEX AND SIC CODE INDEX
[GRAPH APPEARS HERE]
ASSUMES $100 INVESTED ON JANUARY 1, 1995
ASSUMES DIVIDEND REINVESTED
YEAR ENDED DECEMBER 31, 1999
10
<PAGE>
Compensation Committee Report
Decisions on compensation of Fidelity's executives are made by the
Executive Committee of the Board of Directors of Fidelity, which also serves as
the Compensation Committee. All decisions of the Executive Committee relating to
the compensation of Fidelity's officers are reviewed by the full board. Set
forth below is a report submitted by Messrs. Davis, Cunningham, Schnakenburg,
and Neel in their capacity as the Board's Executive Committee, addressing
Fidelity's compensation policies for the six months ended December 31, 1999 as
they affected Fidelity's executive officers.
Compensation Policies Toward Executive Officers.
-----------------------------------------------
The Executive Committee's executive compensation policies are designed
to provide competitive levels of compensation to the executive officers and to
reward officers for satisfactory individual performance and for satisfactory
performance of Fidelity as a whole. There are no established goals or standards
relating to performance of Fidelity which have been utilized in setting
compensation of individual employees.
Base Salary.
-----------
Each executive officer is reviewed individually by the Executive
Committee, which includes an analysis of the performance of Fidelity. In
addition, the review includes, among other things, an analysis of the
individual's performance during the past fiscal year, focusing primarily upon
the following aspects of the individual's job or characteristics of the
individual exhibited during the most recent fiscal year: quality and quantity of
work; supervisory skills; dependability; initiative; attendance; overall skill
level; and overall value to Fidelity.
Other Compensation Plans.
------------------------
At various times in the past Fidelity has adopted certain broad based
employee benefit plans in which the senior executives are permitted to
participate on the same terms as non-executive employees who meet applicable
eligibility criteria, subject to any legal limitations on the amount that may be
contributed or the benefits that may be payable under the plans.
Benefits.
--------
Fidelity provides medical, defined benefit, and defined contribution
plans to the senior executives that are generally available to the other
Fidelity employees. The amount of perquisites, as determined in accordance with
the rules of the SEC relating to executive compensation, did not exceed 10% of
salary and bonus for the six months ended December 31, 1999.
11
<PAGE>
Mr. Davis' 1999 Compensation.
----------------------------
Regulations of the Securities and Exchange Commission require that the
Executive Committee disclose the Committee's basis for compensation reported for
any individual who served as the Chief Executive Officer during the last fiscal
year. Mr. Davis' salary is determined in the same manner as discussed above for
other senior executives. Mr. Davis did not participate in the deliberations of
the Executive Committee with respect to his compensation level. See
"Compensation Committee Insider Participation."
Current Members of the Executive Committee:
Jack Cunningham (Chairman) M. Brian Davis
Barry A. Schnakenburg Donald R. Neel
Compensation Committee Insider Participation
During the past fiscal year, Messrs. Davis and Neel, current officers
of Fidelity, Mr. Cunningham, a former officer of Fidelity, and Mr. Schnakenburg
served on the Executive Committee. Messrs. Davis and Neel did not participate in
any discussion or voting with respect to his respective salary as an executive
officer and was not present in the room during the discussion by the Executive
Committee of his respective compensation.
The following table sets forth, for the fiscal years ended June 30,
1999, 1998 and 1997 and for the six month period ended December 31, 1999, the
cash compensation paid by Fidelity or its subsidiaries, as well as certain other
compensation paid or awarded during those years, to the Chief Executive Officer
of Fidelity at any time during the fiscal year ended June 30, 1999 and December
31, 1999 and the executive officers of Fidelity whose salary and bonus exceeded
$100,000 during the fiscal year ended June 30, 1999 and December 31, 1999.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
12
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------------
Annual Compensation Awards Payouts
--------------------------------- ---------------------- ---------
Other Securities
Annual Underly-
Compen- Restricted ing All Other
Name and Principal Year Salary sation Stock Options/ LTIP Compen-
Position (1) (1)(2) Bonus (3)(4) Awards SARs Payouts sation (5)
- ---------------------- --------- --------- --------- ---------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
M. Brian Davis,
President, CEO and
Director 12/31/99 $ 119,256 0 $ 9,600 0 0 0 $ 823
6/30/99 233,692 0 19,200 0 0 0 2,841
6/30/98 226,646 0 19,200 0 15,000 0 2,343
6/30/97 220,783 0 15,600 0 0 0 1,671
Donald R. Neel, Exec.
Vice President, CFO,
Treasurer and Director 12/31/99 $ 59,525 0 $ 7,200 0 0 0 $ 893
1999 116,892 0 14,400 0 5,923 0 1,888
1998 103,164 0 8,400 0 7,500 0 1,547
1997 89,619 0 0 0 0 0 1,356
</TABLE>
(1) On December 31, 1999, Fidelity changed its fiscal year-end from June 30
to December 31. Figures for 12/31/99 reflect amounts for the six
months ended December 31, 1999.
(2) Effective January 1, 2000, the annual salary for Mr. Davis was reduced
to $175,000.
(3) While officers enjoy certain perquisites, such perquisites do not
exceed the lesser of $50,000 or 10% of such officer's salary and bonus
and are not required to be disclosed by applicable rules of the SEC.
(4) Consists of Directors' fees paid to Mr. Davis and to Mr. Neel for the
fiscal years indicated. Effective January 1, 2000, Messrs. Davis and
Neel, as employees of Fidelity, will no longer receive Directors' fees.
(5) Includes contributions by Fidelity under Fidelity's Retirement Savings
401(k) Plan.
1993 Directors' Stock Option Plan
The 1993 Directors' Stock Option Plan ("Directors' Plan") expired on
August 1, 1998. It provided for the grant of non-qualified stock options to
individuals who are directors of Fidelity or any of its subsidiaries to acquire
shares of common stock of Fidelity for a price of not less than $2 above the
average of the high and low bid quotations as reported by NASDAQ for the common
stock of Fidelity for the five trading days immediately preceding the date the
option is granted.
No additional options may be granted under the plan; however,
outstanding options shall remain in effect until they have been exercised,
terminated, forfeited, or have expired. As such, options will be outstanding
under the Directors' Plan through November 19, 2007. The number
13
<PAGE>
of shares and option exercise prices under the Directors' Plan have been
adjusted to reflect a twenty percent stock dividend distributed in 1994, a 2.1
for 1 stock split in 1995, and a 10% stock dividend in 1996. As of March 31,
2000 there were options for 136,293 shares outstanding.
1995 Key Employees' Stock Option Plan
The Key Employees' Plan provides for the grant of incentive stock
options and non-qualified stock options to acquire shares of common stock of
Fidelity for a price of not less than the fair market value of the share on the
date which the option is granted. A total of 236,500 shares were reserved for
issuance under the Key Employees Plan. The option price per share for each
incentive stock option granted to an employee must not be less than the fair
market value of the share of common stock on the date the option is granted. The
option price per share for an incentive stock option granted to an employee
owning 10% or more of the common stock of Fidelity must not be less than 110% of
the fair market value of the share on the date that the option is granted. The
option price per share for non-qualified stock options will be determined by the
Administrative Committee of the Key Employees' Plan, but may not be less than
100% of the fair market value of a share of common stock on the date of the
grant of the option.
The Key Employees' Plan will expire on March 15, 2005, except
outstanding options will remain in effect until they have been exercised,
terminated, forfeited, or have expired. As such, options may be outstanding
under the Key Employees' Plan through March 15, 2015. The number of shares and
option exercise prices under the Key Employees' Plan have been adjusted to
reflect a 2.1 for 1 stock split in 1995, and a 10% stock dividend in 1996.
Options Grants in Last Fiscal Year
No options were granted to Messrs. Davis or Neel during the six-months
ended December 31, 1999.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-end Option Values
Table
The following table shows for the named executive officers the shares
covered by both exercisable and non-exercisable stock options as of December 31,
1999. Neither Mr. Davis nor Mr. Neel exercised any options during the last
fiscal year. The exercise price of all options held by Messrs. Davis and Neel
exceed the fiscal year-end price of Common Stock.
14
<PAGE>
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Unexercised Stock
Options 12/31/99
---------------------------------------
Name Exercisable Unexercisable
- ------------------------------ ----------------- -----------------
M. Brian Davis 39,916 0(1)
27,720 0(2)
9,000 6,000(3)
Donald R. Neel 4,500 3,000(3)
0 5,923(4)
(1) The bid value of Fidelity's Common Stock at December 31, 1999 ($1.25
per share), was less than the exercise price ($6.22 per share).
(2) The bid value of Fidelity's Common Stock at December 31, 1999 ($1.25
per share), was less than the exercise price ($10.60 per share).
(3) The bid value of Fidelity's Common Stock at December 31, 1999 ($1.25
per share), was less than the exercise price ($10.81 per share).
(4) The bid value of Fidelity's Common Stock at December 31, 1999 ($1.25
per share), was less than the exercise price ($2.88 per share).
Other Employee Benefit Plans
Pension Plan
Fidelity currently participates in a defined benefit pension plan
sponsored by the Financial Institutions Retirement Fund, a non-profit, tax
qualified, tax-exempt pension plan and trust in which Federal Home Loan Banks,
savings and loan associations and similar institutions participate ("Pension
Plan"). All employees of Fidelity or its subsidiaries (which excludes
non-employee Directors of Fidelity) (i) who have not attained age sixty (60)
prior to being hired, and (ii) who work a minimum of 1000 hours per year are
covered by the Pension Plan and become participants upon completion of one year
of service and attainment of age 21. Participants are not required or allowed to
make contributions to the Pension Plan.
A participant in the Pension Plan is entitled to receive benefits based
upon years of service for Fidelity or its subsidiaries and a percentage of the
individual's average annual salary during the five (5) consecutive years of
service which produce the highest such average without deduction for Social
Security benefits. For purposes of computing benefits, "salary" includes an
15
<PAGE>
employee's regular base salary or wage inclusive of bonuses and overtime but is
exclusive of special payments such as fees, deferred compensation, severance
payments and contributions by Fidelity to the Pension Plan.
Participants become fully vested in their benefits after completion of
five (5) years of service. Upon attaining age sixty-five (65), participants
become one hundred percent (100%) vested in their benefits provided by Fidelity
under the Pension Plan, regardless of the number of their years of service.
Benefits are payable at normal retirement age (age 65). The Pension Plan also
contains provisions for the payment of benefits on the early retirement, late
retirement, death or disability of a participant.
The regular benefit under the Pension Plan to be paid on a
participant's retirement is a monthly pension for the life of a participant with
minimum guaranteed benefit of twelve (12) times the participant's annual
retirement benefit under the Pension Plan. Thus, the regular form of all
retirement benefits includes not only a retirement allowance, but also a lump
sum retirement death benefit which is twelve (12) times the annual retirement
benefit less the sum of such retirement benefits made before death. The Pension
Plan provides that married participants will receive the regular retirement
benefit in the form of an actuarially equivalent joint and survivor annuity.
Optional forms of payments are available to all participants; however, married
participants must obtain written spousal consent to the distribution of benefits
in a form other than a joint and survivor annuity.
According to the Pension Plan sponsor, the actuaries for the Pension
Plan have determined that no contributions were required to be made to the
Pension Plan by Fidelity for the plan year ended December 31, 1999.
The following table shows estimated annual benefits payable at normal
retirement to persons in specified remuneration classifications. The benefit
amounts presented in the totals are annual pension amounts for the life of the
participant, with a minimum guaranteed benefit of twelve (12) times the annual
retirement benefit under the Pension Plan, for a participant at normal
retirement (age 65) with the years of service set forth below with no deduction
for Social Security or other offset amounts. The maximum compensation which may
be taken into account for any purpose under the Pension Plan is limited by the
Internal Revenue Code to $160,000 for 1999. As of December 31, 1999, M. Brian
Davis had 5 years of service and Donald R. Neel had 6 1/2 years of service under
the Pension Plan.
16
<PAGE>
Annual Benefit of Normal Retirement Years of Service
<TABLE>
<CAPTION>
Highest Five-
Year Average
Annual Salary 10 15 20 25 30 35 40
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 50,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
$ 75,000 15,000 22,500 30,000 37,500 45,000 52,500 60,000
$ 100,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000
$ 125,000 25,000 37,500 50,000 62,500 75,000 87,500 100,000
$ 150,000 30,000 45,000 60,000 75,000 90,000 105,000 120,000
$ 175,000 35,000 52,500 70,000 87,500 105,000 122,500 140,000
</TABLE>
Retirement Savings Plan.
-----------------------
In 1994 Fidelity adopted a defined contribution plan under Internal
Revenue Code Section 401(k) in which substantially all employees may
participate. Under this plan, employees may contribute up to 15% of pay, and
contributions up to 6% are supplemented by Fidelity contributions. Fidelity
contributions are made at the rate of 25 cents for each dollar contributed by
the participant. Participants may elect to have all or a portion of their
contributions made on a tax-deferred basis pursuant to provisions in the plan
meeting the requirements of Section 401(k) of the Internal Revenue Code.
Fidelity's expense for the plan was $17,000 for the fiscal year ended June 30,
1999 and $8,000 for the six months ended December 31, 1999.
Compensation of Directors
The Directors of Fidelity and United, who were the same individuals for
the six months ended December 31, 1999, were compensated for their services in
the amount of $1,000 per month (or $12,000 per year) plus an additional $200 per
month if the Director attended that month's regularly scheduled Board meeting.
Executive Committee members received an additional $400 per month for their
services. The maximum compensation received by any Director for his or her
service on the Board was $19,200 for the fiscal year ended June 30, 1999 and
$9,600 for the six months ended December 31, 1999. As a part of Fidelity's
profit enhancement plan, effective January 1, 2000, the maximum compensation
that could be received during any fiscal year in Directors' fees by any
individual for his or her service as a Director will be $6,000. In addition,
Directors who are also employees of Fidelity or United will not receive
Directors' fees.
Employment Contracts and Termination of Employment and Change of Control
Arrangements
On December 1, 1997, Fidelity entered into severance agreements with
Messrs. Davis and Neel. Each of these agreements were extended by the Board in
1999 to December 1, 2000, and
17
<PAGE>
may be extended annually for successive one year periods. Each agreement
provides that if during the two year period following a change in control (as
defined in the agreement), the executive is terminated for any reason other than
cause (as defined in the agreement), disability, retirement or death, or if the
executive resigns due to a reduction in his duties or responsibilities, a
reduction in his compensation or benefits, or a requirement that he be based at
a location other than Evansville, the executive is entitled to an amount equal
to 2.99 times his average annual base salary and bonus, plus an amount computed
by the actuary for Fidelity's retirement plan equal to the present value of the
executive's accrued benefit (as defined in the plan) computed as if the
executive had remained employed by Fidelity for two years after his termination
of employment. In addition, Fidelity must maintain for the benefit of the
executive for three years following termination all employee welfare plans and
programs in which he was entitled to participate prior to termination, and
reimburse the executive for the cost of obtaining such benefits for the first 24
months following termination. No payments may be made pursuant to the agreement
if such payments would, among other things, be considered by a federal or state
regulatory authority having jurisdiction over Fidelity an unsafe or unsound
practice. From time to time Fidelity has entered into change of control
agreements with other members of management. These agreements have been filed
with the Securities and Exchange Commission as an exhibit on Form 10-K.
Security Ownership of Management
The following table sets forth certain information as of March 31,
2000, with respect to the common stock of Fidelity beneficially owned by each
Director of Fidelity and by all executive officers and directors as a group.
Number of Shares Percent of Class
Name Beneficially (1)
- ------------------------------------ ---------------- ----------------
Curt J. Angermeier (2) 35,678 1.13%
William R. Baugh (3) 28,970 .92
Jack Cunningham (4) 53,335 1.68
M. Brian Davis (5) 795,206 24.62
Donald R. Neel (6) 20,250 .64
Barry A. Schnakenburg (7) 263,308 8.31
All Executive Officers and Directors 1,196,747 36.28
as a Group (6 Persons)
(1) The information contained in this column is based upon information
furnished to Fidelity as of March 31, 2000, by the individuals named
above. The nature of beneficial ownership for shares shown in this
column represent sole or shared voting and investment unless otherwise
noted. At March 31, 2000, Fidelity had 3,147,662 shares of common stock
outstanding.
18
<PAGE>
(2) Includes 19,401 shares held in a Family Trust of Mr. Angermeier. The
total also includes 8,740 shares which Mr. Angermeier has the right to
acquire pursuant to the exercise of stock options granted under the
1993 Directors' Stock Option Plan.
(3) Includes 27,000 shares beneficially owned by Mr. Baugh. Also includes
1,970 shares which Mr. Baugh has the right to acquire pursuant to the
exercise of stock options granted under the 1993 Directors' Stock
Option Plan.
(4) Includes 9,744 shares held in the name of Mr. Cunningham's wife and
23,674 shares which Mr. Cunningham has the right to acquire pursuant to
the exercise of stock options granted under Fidelity's 1993 Directors'
Stock Option Plan.
(5) Includes 3,796 shares owned by the spouse of Mr. Davis, 16,226 shares
which Mr. Davis holds as custodian for his minor daughter (Elizabeth
Davis); 15,294 shares which Mr. Davis holds as custodian for his minor
son (Christopher Davis); and 5,580 shares which Mr. Davis holds as
custodian for his minor daughter (Gabrielle Davis). Also includes
39,916 shares which Mr. Davis has the right to acquire pursuant to the
exercise of stock options granted under the 1993 Directors' Stock
Option Plan and 42,720 shares which Mr. Davis has the right to acquire
pursuant to the exercise of stock options granted under Fidelity's 1995
Key Employees' Stock Option Plan. Also includes 99,018 shares of
Fidelity owned by Maybelle V. Reichert, the mother of Mr. Davis, as to
which shares Mr. Davis has authority to vote pursuant to a power of
attorney.
(6) Includes 5,827 shares beneficially owned by Donald R. Neel, Executive
Vice-President, Chief Financial Officer and Treasurer of Fidelity and
1,000 shares owned by Jamie Neel, the wife of Mr. Neel. Also includes
13,423 shares which Mr. Neel has the right to acquire pursuant to the
exercise of the stock options granted under Fidelity's 1995 Key
Employees' Stock Option Plan.
(7) Includes 5,775 shares held by the spouse of Mr. Schnakenburg, 24,948
shares held by U.S. Industries Group, Inc., 52,263 shares held by
Barry, Inc. and 40,378 shares held by BOAH Associates. The total also
includes 20,097 shares which Mr. Schnakenburg has the right to acquire
through the exercise of stock options granted under Fidelity's 1993
Directors' Stock Option Plan. The total also includes 74,109 shares of
Fidelity pursuant to which Mr. Schnakenburg may exercise voting and
investment power pursuant to a Power of Attorney.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Fidelity's directors and
executive officers, and persons who own more than 10% of a registered class of
Fidelity's equity securities to file with the SEC initial reports of ownership
and reports of changes in ownership of Fidelity common stock and other equity
securities of Fidelity. Officers, directors and greater than 10% shareholders
are required by SEC regulations to furnish Fidelity with copies of all Section
16(a) forms they file. To the best knowledge of Fidelity, during the fiscal year
ended June 30, 1999 and during the six months ended December 31, 1999, there
were no late filings with respect to the Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% beneficial owners.
19
<PAGE>
ITEM 2. APPROVAL OF STOCK PURCHASE AGREEMENT
Background
As previously reported, in February 1999 United became subject to and
began operating under a Supervisory Agreement entered into with the OTS. The
Supervisory Agreement imposes certain operating restrictions upon United. In
order to better comply with the conditions imposed by the Supervisory Agreement,
Fidelity sought to raise additional capital. In this respect, Fidelity held
discussions with several interested parties about the possibility of investing
in Fidelity, and entered into a letter of intent with Mortgage Finance
Acquisition Partners, L.P., an affiliate of Lincolnshire Equity Fund II. The
letter of intent and related negotiations involved the potential sale of a
number of shares to Mortgage Finance Acquisition Partners, L.P., from Fidelity
equal to approximately 51% of the fully-diluted common stock. In November 1999,
Fidelity announced that negotiations with Mortgage Finance Acquisition Partners,
L.P., had terminated.
Following termination of these discussions, Fidelity actively explored
other strategic alternatives. On December 28, 1999 Pedcor Investments, a limited
liability company ("Pedcor"), contacted Fidelity regarding a potential purchase
of stock. Pedcor was the only entity which proposed to extend an offer to
Fidelity at that time. Following negotiations, Fidelity and Pedcor signed a
Stock Purchase Agreement to sell 1,460,000 shares of its common stock to Pedcor.
A copy of the Stock Purchase Agreement is attached to this proxy statement as
Exhibit A.
Pedcor is a real estate development and investment company located in
Indianapolis, Indiana. One of the principals of Pedcor is Bruce A. Cordingley,
who was a director of Fidelity until his resignation on December 27, 1999. Mr.
Cordingley is also the president of Pedcor Bancorp, a bank holding company which
controls International City Bank, NA, located in Long Beach, California.
On April 6, 2000, pursuant to the terms of the Stock Purchase
Agreement, Pedcor assigned its purchase obligations under the Stock Purchase
Agreement to Pedcor Holdings, LLC ("Holdings"), and Pedcor Bancorp, affiliated
entities of Pedcor. Holdings is a newly formed entity which was formed to
purchase shares of Fidelity pursuant to the Stock Purchase Agreement. Mr.
Cordingley is the president of Holdings and Pedcor Bancorp. In connection with
the Stock Purchase Agreement, Holdings will purchase all of the shares from
Fidelity, except for the purchase by Pedcor Bancorp of an amount which will
result in the ownership by Pedcor Bancorp of less than 5% of the outstanding
shares of Fidelity.
20
<PAGE>
General Terms of the Stock Purchase Agreement
The shares to be sold to Holdings and Pedcor Bancorp will equal in the
aggregate approximately 31.7% of the outstanding shares after the sale, and will
result in Holdings and its affiliates owning or controlling approximately 37.6%
of the outstanding common stock of Fidelity. Under the terms of the Stock
Purchase Agreement, Holdings and Pedcor Bancorp will pay to Fidelity in the
aggregate cash in the amount of $3,000,000. In addition, Pedcor will provide
Fidelity with (1) a five-year guarantee to United in an aggregate amount up to
$1,500,000 against any negative cash flow from operations of certain specified
development properties in United's Section 42 loan portfolio; and (2) an
agreement to provide management services and certain accounting services to the
specified properties for ten years. For these management and accounting
services, Pedcor will charge no fee to the properties being managed, United or
Fidelity for the first three years and no fee to Fidelity or United for years
four through ten.
At January 21, 2000, the effective date of the Stock Purchase
Agreement, the book value of Fidelity was $1.72, and the closing bid price for
the common stock of Fidelity was $2.13. In negotiations of the terms and
conditions of the Stock Purchase Agreement, the Board considered these values,
the need for additional capital by Fidelity, and the lack of other definitive
offers. As of March 31, 2000 the book value of Fidelity was $1.74; as of the
close of business on April 19, 2000, the last trade of the common stock of
Fidelity was at $2.19.
Additional Purchases by Pedcor
For 3 years following the sale of the shares contemplated by the Stock
Purchase Agreement, Pedcor (or its permitted assigns, such as Holdings and
Pedcor Bancorp) is entitled under the terms of the Stock Purchase Agreement to
purchase additional shares from Fidelity in an aggregate amount up to $5
million. For shares purchased in the first year following the closing of the
Stock Purchase Agreement, Pedcor will pay $3.00 per share. For shares purchased
in the second and third year following the closing of the Stock Purchase
Agreement, Pedcor will pay the "fair market value" of the shares, as defined in
the Stock Purchase Agreement.
Restrictions Affecting Fidelity
The Stock Purchase Agreement requires that, pending consummation of the
Stock Purchase Agreement, Fidelity must continue to conduct its business in the
ordinary course consistent with its past practices and may not negotiate or
discuss with third parties any matter relating to any merger, business
combination, tender offer, or similar transaction (including a sale of
substantially all of the assets of Fidelity) involving Fidelity.
21
<PAGE>
Commitments by Pedcor
Under the terms of the Stock Purchase Agreement, Pedcor has agreed to
use commercially reasonable efforts to cause Fidelity to continue to list its
shares on the National Association of Security Dealers Automated Quotation
System, subject to certain conditions set forth in the Stock Purchase Agreement.
Pedcor also has agreed that it will not sell or otherwise dispose of
any shares purchased for 1 year from the closing date of the Stock Purchase
Agreement. The Stock Purchase Agreement does permit Pedcor to assign shares to
any person, entity or corporation which would be considered an affiliate for
purposes of the change of control regulations of the Office of Thrift
Supervision, or to any person or entity who controls, is controlled by, or is
under common control with Pedcor.
Pedcor is obligated for three (3) years after the closing of the Stock
Purchase Agreement that it will not take any action to amend the Article of
Incorporation or By-Laws of Fidelity in any manner which would reduce the amount
of indemnification of directors or officers permitted under applicable law, the
Article of Incorporation, or Fidelity's Directors and Officers' Liability
Insurance Policy. Pedcor has also agreed for 5 years to cause Fidelity to
maintain a directors and officers liability insurance policy providing for
coverage at least as comprehensive as those existing on the closing date;
provided, that the cost of maintaining such insurance policy does not increase
by more than fifty percent (50%) above the cost as of the closing date.
The above restrictions and requirements of Pedcor also apply to
Holdings and Pedcor Bancorp and to any other of the permitted assigns of Pedcor.
Management
Upon consummation of the Stock Purchase Agreement, Bruce A. Cordingley
and two other individuals designated by Pedcor will be elected to the Board of
Directors of Fidelity, thereby increasing the size of the Board from six to nine
individuals. The Executive Committee of Fidelity will be comprised of Mr.
Cordingley (as Chairman), M. Brian Davis and one other individual currently
serving as a Director of Fidelity to be designated by Pedcor. Mr. Cordingley
and one other individual to be designated by Pedcor will be elected to the Board
of Directors of United, thereby increasing the size of the Board from five to
seven. The Executive Committee of United will consist of Mr. Cordingley (as
Chairman), M. Brian Davis and Donald R. Neel.
Employment Agreements
Contemporaneously with the closing of the Stock Purchase Agreement,
Messrs. Davis and Neel each will enter into an Employment Agreement pursuant to
which Mr. Davis will be employed as the President and Chief Executive Officer of
Fidelity, and Mr. Neel will be employed as the Chief Financial Officer of
Fidelity and Executive Vice President, Chief Operating Officer and Treasurer of
United. Effective July 1, 2000, Mr. Neel will become the
22
<PAGE>
President and Chief Executive Officer of United. The term of each Employment
Agreement is 3 years, which may be extended annually for successive 1 year
periods. Messrs. Davis and Neel will earn an annual base salary equal to
$195,000 and $140,000, respectively, subject to any increases which may be
approved by the Board of Directors. In addition, Messrs. Davis and Neel will
each be granted options to purchase 50,000 shares and 25,000 shares,
respectively, at an option price of $4.00 per share. If during the one year
period following a prospective change in control (as defined in the Employment
Agreement, which excludes the transactions contemplated by the Stock Purchase
Agreement), the executive is terminated for any reason other than cause (as
defined in the Employment Agreement), disability, retirement or death, or if the
executive resigns due to a material breach of the Employment Agreement by
Fidelity, the executive is entitled to an amount equal to 2.99 times his average
annual base salary and bonus for the previous five (5) years. In addition,
Fidelity must maintain for the benefit of the executive for three years
following termination all employee welfare plans and programs in which he was
entitled to participate prior to termination, and reimburse the executive for
the cost of obtaining such benefits for the first 24 months following
termination. If the executive is terminated for any reason other than cause (as
defined in the Employment Agreement), disability, retirement or death, or if the
executive resigns due to a material breach of the Employment Agreement by
Fidelity, and such termination or resignation does not follow a change in
control, the executive is entitled to an amount equal to his base salary during
the remaining term of the Employment Agreement. In addition, Fidelity must
maintain for the benefit of the executive for the remainder of the term of the
Employment Agreement all employee welfare plans and programs in which he was
entitled to participate prior to termination, and reimburse the executive for
the cost of obtaining such benefits. No payments may be made pursuant to the
agreement if such payments would, among other things, be considered by a federal
or state regulatory authority having jurisdiction over Fidelity an unsafe or
unsound practice. The existing Severance Agreement of both Mr. Davis and Mr.
Neel will be terminated upon the effectiveness of their respective Employment
Agreement. The Employment Agreements also provide a 3-year covenant not to
compete and covenants regarding confidentiality.
Share Voting Agreement
In connection with the Stock Purchase Agreement, the Directors entered
into "Share Voting Agreements" with Pedcor, which has subsequently assigned its
rights and obligations under these agreements to Holdings and Pedcor Bancorp.
Pursuant to the Share Voting Agreements, the members of the Board of Directors
individually agree to use their best efforts to vote all shares of common stock
which they hold of record or beneficially at the Annual Meeting in favor of the
sale of stock pursuant to the Stock Purchase Agreement and the related proposed
amendments to the Articles of Incorporation of Fidelity. In addition, the
Directors have agreed, subject to their fiduciary duties, to recommend approval
and adoption of the Stock Purchase Agreement and the related proposed amendments
to the Articles of Incorporation of Fidelity at the Annual Meeting. The members
of the Board of Directors beneficially own, in the aggregate, 1,046,207 shares
or 33.24% of the issued and outstanding shares of Fidelity.
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Conditions to Consummation
Consummation of the proposed sale of the stock is subject to several
conditions, including receipt of all required regulatory approvals. Pedcor has
filed applications with the regulatory authorities for approval of the purchase
of shares contemplated by the Stock Purchase Agreement. There can be no
assurance as to when, if ever, such approvals may be received or what conditions
such approvals, if received, may contain.
Interests of Certain Persons in the Stock Purchase Agreement
The Directors and executive officers of Fidelity have certain interests
in the Stock Purchase Agreement as set forth under "Employment Agreements,"
"Management," and "Commitments by Pedcor" with respect to indemnification
matters.
Board Recommendation for Approval of Stock Purchase Agreement and Transactions
Contemplated Thereunder
The Board of Directors is seeking shareholder approval of the Stock
Purchase Agreement, and the sale of shares under the terms and conditions set
forth in the Stock Purchase Agreement, to Holdings and Pedcor Bancorp. The Board
of Directors believes it is in the best interest of Fidelity to sell the shares
to raise additional capital which may be used to strengthen the financial
condition of Fidelity and United. The Board recommends a vote FOR approval of
the Stock Purchase Agreement and the transactions contemplated thereby.
Approval of the Stock Purchase Agreement and the issuance of the shares
thereunder requires the affirmative vote of a majority of the issued and
outstanding shares. The Board of Directors and Pedcor have indicated their
intent to vote their shares in favor of this matter.
PROPOSED AMENDMENTS TO ARTICLES OF INCORPORATION
In connection with the approval of the Stock Purchase Agreement on
January 21, 2000, the Board unanimously approved amendments to the Articles of
Incorporation and directed that such amendments be considered at the Annual
Meeting. The proposed amendments, upon approval by the shareholders would (a)
increase the number of authorized shares of common stock of Fidelity, (b)
eliminate the three classes of directors, (c) eliminate cumulative voting in the
election of directors, and (d) allow for the removal of members of the Board,
with or without cause, by the affirmative vote of a majority of the outstanding
shares and the removal of members of the Board, with cause, by the affirmative
vote of a majority of the Board.
The proposed amendments will be approved by the shareholders if the
votes cast in favor of the amendment at the Annual Meeting exceed the votes cast
against the amendment. Furthermore, the amendments regarding classes of
directors, cumulative voting, and removal of directors will only be effective if
the Stock Purchase Agreement is approved by the shareholders.
24
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If sufficient votes are received, the amendments will become effective upon the
filing of Articles of Amendment to Fidelity's Articles of Incorporation with the
Indiana Secretary of State.
The Board of Directors believes that the requirement of a classified
board of directors, the limitation on the ability to remove a director from
office, and the existence of cumulative voting rights generally limit the power
of the holders of a majority of Fidelity's common stock to take certain actions.
Upon consummation of the purchase of the shares by Holdings and Pedcor Bancorp,
Holdings, Pedcor Bancorp, and their affiliates will own 37.6 % of the issued and
outstanding shares of Fidelity.
ITEM 3. INCREASE AUTHORIZED SHARES OF COMMON STOCK
The Board has approved and is recommending that the shareholders
approve an amendment to Article III, Section 1 of the Articles of Incorporation
to increase the authorized shares of common stock from 5,000,000 to 15,000,000
shares. No change is being proposed to Fidelity's preferred stock. On March 31,
2000, there were 3,147,662 shares of Fidelity Common Stock outstanding, and
281,054 shares reserved for issuance pursuant to outstanding warrants and the
stock option plans of Fidelity.
The Board of Directors has determined it is in the best interests of
Fidelity and its shareholders to increase the amount of Fidelity's authorized
capital stock at this year's Annual Meeting of Shareholders. Approximately
1,460,000 of the additional shares of Common Stock authorized by the amendment
would be sold to Holdings and Pedcor Bancorp pursuant to the Stock Purchase
Agreement, if approved by shareholders and regulatory authorities. The remaining
additional shares of Common Stock authorized by the amendment will be available
for general corporate purposes, including financings, stock dividends or stock
splits.
If the amendment is adopted by the shareholders of Fidelity, the Board
of Directors could authorize the issuance of any authorized but unissued shares
of common stock on terms determined by it without further action by the
shareholders, unless the shares were issued in a transaction requiring
shareholder approval. All attributes of the additional shares of common stock
would be the same as those of the existing shares of authorized and unissued
common stock.
The authorization of the additional shares of common stock may have
certain dilutive and anti-takeover effects, as described below.
o Potential Dilutive Impact. Under Fidelity's Articles of
Incorporation, Fidelity shareholders have no preemptive rights
to subscribe to or purchase any shares of common stock or
other securities of Fidelity. Shareholders also should note
that issuance of additional shares of common stock other than
on a pro-rata basis to all current shareholders will reduce
the proportionate interests in Fidelity held by current
shareholders.
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o Potential Anti-Takeover Impact. The amendment is not intended
as an anti-takeover provision, but it may have an
anti-takeover effect. Although the Board presently has no
intention of doing so, the authorized but unissued common
stock could be used to discourage or render more difficult
certain takeover attempts of Fidelity through the issuance of
a number of shares sufficient to dilute the interests of a
person seeking control or to increase the total amount of
consideration necessary for a person to obtain control of
Fidelity.
The text of Article III, Section 1 of the Articles of Incorporation,
which is proposed to be modified and amended, is set forth in its entirety in
Exhibit B attached hereto.
The Board unanimously recommends that the shareholders vote "FOR"
approval of the amendment.
ITEM 4. ELIMINATION OF THREE CLASSES OF DIRECTORS
The Board has approved and is recommending that the shareholders
approve an amendment to Article IV, Section 3 of the Articles of Incorporation
which will eliminate the three classes of directors so that all directors are
elected for one-year terms. Article IV, Section 3 of the Articles of
Incorporation currently provides for three classes of directors with one-third
of the directors elected annually to three-year terms.
Adoption of the proposed amendment to Article IV, Section 3 to
eliminate the three classes of directors will transform the Board over a 2 year
period from one with a staggered-term structure whose directors serve three-year
terms and approximately one-third of whose membership is elected each year, to
one whose entire membership is elected annually. If the proposal is approved,
Directors elected at this Annual Meeting and at each subsequent annual meeting
will serve for a one year term. Any additional directorships resulting from an
increase in the number of directors will also be for a term of one year. The
proposed amendment, if adopted by the necessary shareholder vote, will not
decrease the term of any existing Director.
This provision was included in the charter of United when it converted
from the mutual to the stock form of ownership in 1987. When Fidelity later was
formed as a holding company for United in 1993, the Board elected to continue
this provision for Fidelity.
o Benefits of a Staggered Board. The staggered board provision
is designed to help ensure continuity of Fidelity policies and
make management changes more gradual, thus providing the
benefit of stability to Fidelity's business. For example, upon
any significant shift in share ownership of Fidelity, the
entire Board could not be replaced in one year. This would
tend to make any changes in Fidelity policies and management
changes more gradual.
o Advantages of Eliminating a Staggered Board. The Board
believes that based upon the history of Fidelity's ownership
and the absence of any hostile takeover
26
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threats, the potential benefits of a staggered board are not
as important as permitting the shareholders to vote upon the
election to office of all Directors at each annual meeting.
Approval of this proposed amendment, and thus deletion of the
staggered board provision, will allow the shareholders of
Fidelity to access on a more frequent basis their satisfaction
with the performance of the Board of Directors of Fidelity.
The text of Article IV, Section 3 of the Articles of Incorporation,
which is proposed to be modified and amended, is set forth in its entirety in
Exhibit C attached hereto.
The Board recommends a vote FOR approval of the proposed amendment to
Article IV, Section 3, of the Articles of Incorporation to eliminate the three
classes of directors as described above.
ITEM 5. ELIMINATION OF CUMULATIVE VOTING
The Board has approved and is recommending that the shareholders
approve an amendment to Article III, Section 4 of the Articles of Incorporation
which will eliminate cumulative voting. Article III, Section 4 of the Articles
of Incorporation currently provides that each shareholder has the right to
cumulate votes in the election of directors by giving one candidate as many
votes as the number of shares owned by that shareholder multiplied by the number
of directors to be elected or any other allocation of such votes among
candidates as the shareholder may determine. Without cumulative voting, the
maximum number of votes that any shareholder could cast in favor of a nominee to
the Board would be the number of shares owned by such shareholder.
This provision was included in the charter of United when it
converted from the mutual to the stock form of ownership in 1987. When Fidelity
later was formed as a holding company for United in 1993, the Board elected to
continue this provision for Fidelity.
o Effect of Elimination of Cumulative Voting. The elimination of
cumulative voting will reduce significantly the possibility
that a small group of shareholders having less than a majority
of the voting power will be able to elect one or more
directors. With cumulative voting, if a minority shareholder
were to cast all its votes for one nominee, that shareholder
may succeed in electing one or more nominees to the Board who
would not otherwise have received sufficient votes to be
elected.
o Benefits of Elimination of Cumulative Voting. The Board
believes that cumulative voting affords rights to minority
shareholders out of proportion to their holdings. The Board
believes that the elimination of cumulative voting is
desirable because it would preclude the election of a director
or small group of directors representing a special interest
group of shareholders, and would enable
27
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shareholders holding a majority of the voting power to decide
who will be elected to the Board.
The text of Article III, Section 4 of the Articles of Incorporation,
which is proposed to be modified and amended, is set forth in its entirety in
Exhibit D attached hereto.
The Board recommends a vote FOR approval of the proposed amendment to
Article III, Section 4, of the Articles of Incorporation to eliminate cumulative
voting.
ITEM 6. REMOVAL OF DIRECTORS
The Articles of Incorporation of Fidelity currently provide that
Directors may only be removed by shareholders for cause. The Board has approved
and is recommending that the shareholders approve an amendment to Article IV,
Section 4 of the Articles of Incorporation which will permit holders of a
majority of the shares then entitled to vote in the election of Directors to
remove one or more Directors, with or without cause, and permit a majority of
the entire Board of Directors to remove a Director for cause. This provision
will not apply during the current term of any Director currently serving as a
Director.
o Benefits of Proposed Amendment. The Board believes, consistent
with its view that it is in the best interests of the
shareholders that holders of a majority of the voting power be
able to elect the members of the Board, that a majority of
shareholders also be able to remove a Director, with or
without cause. In addition, the Board believes that it is in
the best interests of Fidelity to grant to the Board the power
to remove a member from the Board, if such removal is with
cause.
The text of Article IV, Section 4 of the Articles of Incorporation,
which is proposed to be modified and amended, is set forth in its entirety in
Exhibit E attached hereto.
The Board recommends a vote FOR approval of the proposed amendment to
Article IV, Section 4, of the Articles of Incorporation with respect to the
removal of directors.
ITEM 7. RATIFICATION OF INDEPENDENT AUDITORS OF FIDELITY
The Board of Directors of Fidelity proposes that the shareholders
ratify the selection of the firm of Olive LLP, Certified Public Accountants, as
independent public accounts for Fidelity for the fiscal year ending December 31,
2000, subject to acceptance of the engagement by Olive LLP. Representatives of
Olive LLP are expected to be present at the meeting and available to respond to
appropriate questions. They will be given an opportunity to make a statement if
they desire to do so. Olive LLP has been the independent auditors of Fidelity
since 1982. In the event the selection of Olive LLP is not ratified by the
shareholders, the Board of Directors will consider selection of other
independent public accountants for the fiscal year ending December 31, 2000.
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SHAREHOLDER PROPOSALS
Any proposal which a shareholder intends to bring before the next
Annual Meeting of Shareholders to be held in 2001 must be received by Fidelity
no later than December 22, 2000 for inclusion in next year's proxy statement.
Such proposals should be addressed to Jack Cunningham, Chairman of Fidelity, at
700 S. Green River Road, Suite 2000, PO Box 5584, Evansville, Indiana 47715.
ADDITIONAL INFORMATION
The Form 10-K which is required to be filed with the Securities and
Exchange Commission for the transition period ending December 31, 1999,
containing financial statements as of and for the six months ended December 31,
1999, and other information concerning the operations of Fidelity is enclosed
herewith, but is not to be regarded as proxy soliciting material, except for the
audited financial statements included in such 10-K, and the sections entitled
"Supplementary Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Changes and Disagreements with
Accountants on Accounting and Financial Disclosure," and "Quantitative and
Qualitative Disclosure about Market Risk," which are incorporated by reference
into this Proxy Statement.
OTHER MATTERS
The Annual Meeting is called for the purposes set forth in the Notice.
The Board of Directors of Fidelity does not know of any matters for action by
shareholders at the Annual Meeting other than the matters described in the
Notice. However, the enclosed Proxy will confer discretionary authority with
respect to matters which are not known to the Board of Directors at the time of
the printing hereof and which may properly come before the Annual Meeting. It is
the intention of the persons named in the Proxy to vote pursuant to the Proxy
with respect to such matters in accordance with the recommendations of the Board
of Directors.
By Order of the Board of Directors
Jack Cunningham
Chairman
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EXHIBIT A
--------------------------------------------------------------
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
--------------------------------------------------------------
Between
FIDELITY FEDERAL BANCORP
and
PEDCOR INVESTMENTS, A LIMITED LIABILITY COMPANY
Effective as of January 21, 2000
<PAGE>
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT, dated as of April 6,
2000 and effective as of January 21, 2000 by and among FIDELITY FEDERAL BANCORP,
an Indiana corporation (the "Seller"), and PEDCOR INVESTMENTS, A LIMITED
LIABILITY COMPANY, a Wyoming limited liability company ("Purchaser").
W I T N E S S E T H:
-------------------
WHEREAS, the Seller is a savings and loan holding company and the
holder of all of the outstanding capital stock of United Fidelity Bank, FSB (the
"Bank"), Village Securities Corporation ("VSC") and Village Affordable Housing
Corporation ("VAHC");
WHEREAS, the Seller has 3,147,622 shares of Common Stock, stated value
$1.00 per share (the "Common Stock"), outstanding as of the date hereof.
WHEREAS, the Bank is currently operating under the restrictions imposed
by the OTS (as hereinafter defined) pursuant to the provisions of the
Supervisory Agreement (as hereinafter defined) and requires an infusion of
additional capital to strengthen its financial condition and to return to
profitable operations.
WHEREAS, Purchaser desires to purchase One Million Four Hundred Sixty
Thousand (1,460,000) newly issued shares of Common Stock from the Seller all
upon the terms and other conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, and intending to be legally
bound, Purchaser and the Seller hereby agree as follows:
A-1
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Stock Purchase
Agreement, dated as of January 21, 2000, among Purchaser and the Seller
(including all of the Exhibits and Schedules hereto), and all amendments hereto
made in accordance with the provisions of Section 8.8.
"Assets" means all tangible and intangible assets, personal
and mixed, used or required in the operation of the Business of the Seller and
its respective affiliates and subsidiaries, including without limitation, cash
and cash equivalents, interest-bearing deposits, investment securities, loans
receivable, notes receivable, Federal Home Loan Bank of Indianapolis Stock,
facilities equipment, office furniture and furnishings, owned real property,
leased real property, tangible personal property and all rights and the benefits
accruing to the Seller or the Subsidiaries under the Material Contracts relating
to the conduct of the Business.
"Bank" has the meaning specified in the preamble to this
Agreement.
"Bank Subsidiaries" means Village Housing Corporation, Village
Management Corporation, Village Capital Corporation and Village Insurance
Corporation.
"Bank Subsidiary Stock" has the meaning specified in Section
3.3
A-2
<PAGE>
"Business" means the business of the Seller, the Bank and the
other Subsidiaries as now or heretofore conducted, including, without
limitation, all other business which has been conducted through the date hereof
directly and through the Subsidiaries.
"Business Day" means any day that is not a Saturday, a Sunday
or legal holiday on which banking institutions in the State of Indiana are
authorized to remain closed.
"Closing" has the meaning specified in Section 2.3.
"Closing Date" has the meaning specified in Section 2.3.
"Common Stock" has the meaning specified in the preamble to
this Agreement.
"D&O Policy" has the meaning specified in Section 5.8 of this
Agreement.
"dollars" and "$" means the lawful currency of the United
States of America.
"Employment Agreements" has the meaning specified in Section
6.3 hereof.
"Encumbrance(s)" means any security interest, pledge,
mortgage, lien, charge, encumbrance, adverse claim, preferential arrangement
with a creditor or restriction, including, without limitation, any restriction
on the use, voting, transfer, receipt of income or other exercise of any
attributes of ownership.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Expiration Date" has the meaning specified in Section 7.1.
"Financial Statements" means the consolidated audited balance
sheets of the Seller as at June 30, 1997, 1998 and 1999, and the three
statements of income and cash flows of the Seller for the years ended June 30,
1997, 1998 and 1999 together with the report thereon of Seller's Accountants.
"GAAP" means United States generally accepted accounting
principles and practices in effect from time to time and applied consistently
throughout the periods involved.
A-3
<PAGE>
"Governmental Authority" means any United States Federal,
state or local or any foreign government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Authority.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvement Acts of 1976, as amended.
"Indebtedness" means, with respect to any Person, (a) all
indebtedness of such Person, whether or not contingent, for borrowed money, (b)
all obligations of such Person for the deferred purchase price of property or
services except trade accounts payable and accrued liabilities that arise in the
ordinary course of business, (c) all obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments, (d) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all obligations of such
Person as lessee under leases that have been or should be, in accordance with
GAAP, recorded as capital leases, (f) all obligations, contingent or otherwise,
of such Person under acceptances, letters of credit or similar facilities, (g)
all obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any capital stock of such Person or any warrants, rights or
options to acquire such capital stock, (h) all Indebtedness of others referred
to in clauses (a) through (f) above guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness, (ii)
to purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor to make payment
of such
A-4
<PAGE>
Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to
supply funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether such property
is received or such services are rendered) or (iv) otherwise to assure a
creditor against loss, and (i) all Indebtedness referred to in clauses (a)
through (f) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Encumbrance on
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.
"Law" means any Federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law.
"Liabilities" means any and all debts (including all
Indebtedness), liabilities and obligations, whether accrued or fixed, absolute
or contingent, matured or unmatured or determined or determinable, including,
without limitation, those arising under any Law (including, without limitation,
any Environmental Law), Action or Governmental Order and those arising under any
contract, agreement, arrangement, commitment or undertaking.
"Licenses" means all state and Federal licenses or consents
required to be obtained by the Seller and the Bank and any of the other
Subsidiaries from any and all relevant Governmental Authorities to conduct the
Business to the fullest extent conducted through the Closing Date, in each
jurisdiction which requires an entity engaged in a business such as the Business
of the Seller to be licensed.
"Material Adverse Effect" means any change in, or effect on,
the Seller that, individually or in the aggregate, is materially adverse to the
Business or financial condition of the Seller and the Bank and any of the other
Subsidiaries, in each case, taken as a whole.
A-5
<PAGE>
"Mortgage Debt" means all advances under warehouse finance
facilities or other borrowings which are used to fund loans that the Bank and
any of the other Subsidiaries originate or purchase including such advances or
borrowings as are secured by the mortgages or security interests on the real or
personal properties which such advances or borrowings are used to fund.
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation System.
"OTS" means the Office of Thrift Supervision of the Treasury
Department of the United States of America.
"Pedcor Control Group" means Purchaser and all other persons,
entities and corporations which the OTS would consider affiliates for purposes
of a change of control.
"Permitted Encumbrances" means such of the following as to
which no enforcement, collection, execution, levy or foreclosure proceeding has
been, or shall have been, commenced as of the date indicated: (a) liens for
taxes, assessments and governmental charges or levies not yet due and payable or
which are being contested in good faith and by appropriate proceedings and with
respect to which appropriate reserves have been set forth on the Seller's
Consolidated Balance Sheet; (b) Encumbrances imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business; (c) pledges or
deposits to secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations including deposits of
funds of public agencies.
"Per Share Purchase Price" has the meaning specified in
Section 2.2.
"Permitted Assigns" shall mean, with respect to Purchaser,
the Affiliates of the Purchaser.
A-6
<PAGE>
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
"Purchaser" has the meaning specified in the preamble to this
Agreement; provided, however, that, as used herein with respect to periods after
the Closing, such term shall include the Seller.
"Reference Consolidated Balance Sheet" means the November 30,
1999 consolidated unaudited balance sheet of the Seller.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" has the meaning specified in the preamble to this
Agreement and, unless otherwise indicated or where the context otherwise
requires, shall also refer to the Bank and each of the other Subsidiaries and
each representation, warranty or covenant of the Seller shall also be a joint
and several representation, warranty or covenant of the Bank and each of the
other Subsidiaries.
"Share Voting Agreements" has the meaning specified in Section
5.5 of this Agreement.
"Shareholders' Equity" means the Seller's assets, less
liabilities, all as determined in accordance with GAAP.
"Shares" has the meaning specified in Section 3.2 of this
Agreement.
"Subsidiaries" shall mean all of the subsidiaries of Fidelity
Federal Bancorp and all of the subsidiaries of the Subsidiaries of Fidelity
Federal Bancorp.
"Subsidiary" means with respect to any Person, any
corporation, limited liability company or limited partnership of which
securities having the power to elect a majority of that corporation's Board of
Directors or similar governing body (other than securities having that power
A-7
<PAGE>
only upon the happening of a contingency that has not occurred) are held by such
Person or one or more of its subsidiaries.
"Subsidiary Stock" has the meaning specified in Section 3.3.
"Supervisory Agreement" means the agreement between the Bank
and the OTS, dated as of February 3, 1999, relating to the restrictions on the
operations of the Bank. "VAHC" has the meaning specified in the preamble to this
Agreement. "VSC" has the meaning specified in the preamble to this Agreement.
ARTICLE II
PURCHASE AND SALE
SECTION 2.1. Purchase and Sale of the Common Stock. Upon the
terms and subject to the conditions of this Agreement, at the Closing, Purchaser
shall purchase from the Seller One Million Four Hundred Sixty Thousand
(1,460,000) (the "Purchased Shares") authorized but unissued shares of Common
Stock of the Seller. Seller will not register the issuance of the Purchased
Shares under the Securities Act in reliance upon Section 4(2) of the Securities
Act and Rule 506 of Regulation D as promulgated thereunder.
SECTION 2.2. Purchase Price. The per share purchase price for
the Purchased Shares (the "Per Share Purchase Price") shall be Three Dollars and
No Cents ($3.00), payable as follows:
(a) Purchaser shall pay to Seller cash in the amount of Three
Million Dollars and No Cents ($3,000,000). Seller will deliver to Purchaser One
Million (1,000,000) shares pursuant to this Section 2.2(a).
(b) For each of the five (5) years from the date of the
Closing, Purchaser will reimburse to the Seller or the Bank on a
property-by-property basis (and not on an aggregate basis) for any negative
operating cash flow (as determined on an accrual basis; as such, Purchaser will
not
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be liable for the cost of any deferred maintenance or any delinquent real estate
taxes, etc., existing as of the Closing Date) in an amount up to Three Hundred
Thousand Dollars ($300,000) on those development properties set forth on
Schedule 2.2(b). Such reimbursement shall be in immediately available funds and
shall be made no later than three (3) days after the end of the month in which
such negative operating cash flow for the subject property occurs. It is
anticipated that Purchaser will assist Seller in structuring the refinancing of
most, if not all, of the current credit facilities, with recasting current
Seller financing and/or with external financing, using part or all of the
reserves as of December 31, 1999, so that most, if not all, of the credit
facilities will not be classified. The parties agree that the value of this
obligation of the Purchaser for purposes of GAAP as of March 31, 2000, which
requires that such value be set at the fair market value of the shares, is Eight
Hundred Twenty-five Thousand Dollars ($825,000), or $2.75 per share.
Accordingly, Seller will deliver to Purchaser Three Hundred Thousand (300,000)
shares pursuant to this Section 2.2(b). Purchaser shall pledge the Three Hundred
Thousand (300,000) shares purchased pursuant to this Section 2.2(b) to the
Seller to secure its reimbursement obligations under this Section 2.2(b);
however, the reimbursement obligation of the Purchaser pursuant to this Section
2.2(b) shall be a general obligation of the Purchaser. As such, to the extent of
any deficiency in the amount owed to Seller after the exercise of its rights
under the pledge, Seller may seek satisfaction of any such deficiency against
any of the assets of the Purchaser. At the end of each three (3) month period
following the Closing Date, one-twelfth (1/12) of the 300,000 shares (i.e.,
25,000 shares) shall be released from the pledge; provided, however, that no
shares shall be released from the pledge while Purchaser is in default under any
of its obligations under Article II of this Agreement. If any shares are not
released from the pledge due to the default of Purchaser, such shares shall be
released upon the cure of such default.
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(c) For the three (3) years immediately subsequent to the date
of the Closing, Purchaser shall cause Pedcor Management Corp. to manage for no
fee and provide unaudited property based accounting to the properties set forth
on Schedule 2.2(c). For the fourth (4th) through the tenth (10th) years
immediately subsequent to the date of the Closing, Purchaser shall cause Pedcor
Management Corp. to manage and provide unaudited property based accounting to
the properties set forth on Schedule 2.2(c) for a fee payable by the properties
equal to at least five percent (5%) of such property's gross rents for such
year. In no event shall the Seller, the Bank, or the general partner of the
partnership for the subject property be charged a fee for these services. The
parties agree that the value of this obligation of the Purchaser for purposes of
GAAP as of March 31, 2000, which requires that such value be set at the fair
market value of the shares, is Four Hundred Forty Thousand Dollars ($440,000),
or $2.75 per share. Accordingly, Seller will deliver to Purchaser One Hundred
Sixty Thousand (160,000) shares pursuant to this Section 2.2(c). Purchaser shall
pledge these One Hundred Sixty Thousand (160,000) shares to the Seller to secure
its obligations under this Section 2.2(c); however, the obligation of the
Purchaser pursuant to this Section 2.2(c) shall be a general obligation of the
Purchaser. As such, to the extent of any deficiency in the amount owed to Seller
after the exercise of its rights under the pledge, Seller may seek satisfaction
of any such deficiency against any of the assets of the Purchaser. At the end of
each three (3) month period following the Closing Date, one-twelfth (1/12) of
the 160,000 shares (i.e., 13,333 shares) shall be released from the pledge;
provided, however, that no shares shall be released from the pledge while
Purchaser is in default under any of its obligations under Article II of this
Agreement. If any shares are not released from the pledge due to the default of
Purchaser, such shares shall be released upon the cure of such default.
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SECTION 2.3. Closing.
(a) Upon the terms and subject to the conditions of this
Agreement, the sale and purchase of the Purchased Shares shall take place at a
closing (the "Closing") to be held at such place as Purchaser and the Seller may
mutually agree upon in writing by the close of business on June 30, 2000, upon
five (5) days prior written notice from Purchaser to Seller or such other date
as may be mutually agreed upon by Seller and Purchaser (the day on which the
Closing takes place being the "Closing Date").
(b) Notwithstanding the time of the Closing on the Closing
Date, the parties agree that the Closing shall be deemed to have occurred from
and after the close of business on the day immediately preceding the Closing
Date.
SECTION 2.4. Closing Deliveries by Seller. At the Closing,
the Seller shall deliver or cause to be delivered to Purchaser:
(a) stock certificates evidencing the final number of
Purchased Shares being sold by the Seller to Purchaser;
(b) a certificate of the Seller's Chief Financial Officer or
President stating that (i) the Reference Consolidated Balance Sheet was prepared
in accordance with GAAP, (ii) the financial condition of the Company is not
materially different from that set forth on the Reference Consolidated Balance
Sheet, and (iii) the Seller and the Subsidiaries have not experienced a Material
Adverse Effect since the date of the Reference Consolidated Balance Sheet; and
(c) the other certificates and documents required to be
delivered to Purchaser pursuant to Section 6.2.
SECTION 2.5. Closing Deliveries by Purchaser. At the Closing,
Purchaser shall deliver or cause to be delivered to the Seller:
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(a) Three Million Dollars ($3,000,000) pursuant to
written wiring instructions from the Seller;
(b) the shares of Common Stock being pledged to the
Seller pursuant to Article II, with executed pledge agreements in form
satisfactory to Seller;
(c) the other certificates and documents required to be
delivered to the Seller pursuant to Section 6.1.
SECTION 2.6.Closing Deliveries by Purchaser and Seller. At
the Closing, each of the Purchaser and the Seller shall deliver, or caused to
be delivered to the other party:
(a) the Employment Agreements;
(b) evidence of the completion (if required) of notice
filing under the HSR Act;
(c) the other agreements, certificates and documents
required to be delivered pursuant to Section 6.3.
SECTION 2.7. Additional Purchases.
(a) No later than three (3) years from the Closing Date but at
such time prior to three (3) years from the Closing Date as Purchaser shall
determine in its sole discretion, and upon the terms and subject to the
conditions of this Agreement, Purchaser may, in its discretion, purchase
additional shares of Common Stock in one or more transactions for cash in an
amount up to and including Five Million Dollars ($5,000,000).
(b) If Purchaser purchases additional shares on or prior to
the first anniversary of the Closing Date, Purchaser shall pay to Seller a price
of Three Dollars and No Cents ($3.00) per each share of Common Stock purchased.
If Purchaser purchases additional shares after the first anniversary of the
Closing Date, Purchaser shall pay to Seller a price per share equal to the
Common Stock's "fair market value." For purposes of this Section 2.7(b), "fair
market value" shall mean the average for the five (5) Business Days preceding
the Closing Date of the mid-point between the
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reported closing bid and ask prices for the shares of Common Stock as quoted by
the National Association of Securities Dealer Automated Quotation System
("NASDAQ"). If the Common Stock is not quoted on NASDAQ, the fair market value
shall be determined by Seller based upon quotations of the entities which make a
market in the Company's stock. In the event no entities make a market in the
Common Stock, "fair market value" shall mean the amount agreed upon by Purchaser
and Seller. If Purchaser and Seller are unable to reach an agreement regarding
the fair market value of the stock within ten (10) days following the date upon
which Purchaser gives Seller written notice of its intent to purchase additional
shares of common Stock pursuant to this Section 2.7, then Purchaser and Seller
shall each select an appraisal firm and the two firms shall determine the fair
market value of the Common Stock. If the two appraisal firms cannot agree upon
the value within thirty (30) days of their appointment, they shall appoint a
third appraiser, the decision of a majority of the three (3) appraisers shall be
final and binding on Purchaser and Seller. The costs of any appraisals shall be
paid one-half by Purchaser and one-half by Seller.
(c) Notwithstanding the above, Purchaser shall have no right
to purchase any additional shares of Common Stock pursuant to this section of
the Agreement while any default of Purchaser's obligations under Article II of
this Agreement has occurred and is continuing. Purchaser shall be entitled to
purchase additional shares of Common Stock pursuant to this section of the
Agreement upon the cure of such default.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SUBSIDIARIES
SECTION 3.1. Organization, Authority and Qualification. The
Seller is a corporation duly organized and validly existing under the laws of
the State of Indiana and has all necessary corporate power and authority to own
the Subsidiaries and to own, operate or lease all other properties and Assets
now owned, operated or leased by it and to carry on its Business as it has been
and is currently conducted. Each of the Subsidiaries are corporations duly
organized and validly existing under the laws of the State of Indiana and each
of the Subsidiaries has all necessary corporate power to own, operate or lease
all of their respective properties and assets now owned, operated or leased by
any of them and to carry on their respective businesses as it has been conducted
to date except for restrictions mandated by the Supervisory Agreement. The
Seller has full power and authority (i) to execute and deliver this Agreement
and to perform its obligations hereunder and thereunder. All corporate actions
taken by the Seller, in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized. This Agreement has been duly executed and delivered by the
Seller, and constitutes (assuming the due authorization, execution and delivery
thereof by the other parties thereto), a legal, valid and binding obligation of
the Seller, enforceable against the Seller in accordance with their respective
terms, except as enforceability thereof may be limited by applicable bankruptcy
and insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
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SECTION 3.2. Capital Stock of the Seller; Ownership of the
Shares. The total authorized capital stock of the Seller consists of 5,000,000
shares of Common Stock (the "Shares") and 5,000,000 shares of preferred stock.
As of the date hereof, and without giving effect to the transactions
contemplated hereby, 3,147,662 Shares of Common Stock of the Seller are issued
and outstanding, all of which Shares are duly authorized, validly issued, fully
paid and nonassessable, and no shares of preferred stock are issued and
outstanding. None of the issued and outstanding Shares of Common Stock of the
Seller was issued in violation of any preemptive rights. The Purchased Shares
have been duly authorized issued and will, upon issuance, be validly issued,
fully paid, non-assessable. Except as set forth on Schedule 3.2, there are no
(i) options, warrants, convertible securities or other rights, agreements,
arrangements or commitments of any character relating to the Common Stock of the
Seller obligating the Seller to issue or sell any Shares of Common Stock of, or
any other interest in, the Seller, (ii) outstanding contractual obligations of
the Seller to repurchase, redeem or otherwise acquire any Shares of Common Stock
or to provide funds to, or make any investment (in the form of a guarantee or
otherwise) in, any other Person, or (iii) voting trusts, shareholder agreements,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of any of the shares of Common Stock of the Seller. The
Shares of Common Stock and preferred stock are the only class or series of
capital stock authorized for issuance by the Seller. Upon consummation of the
transactions contemplated by this Agreement, Purchaser will acquire good, valid
and marketable title to the Purchased Shares free and clear of all Encumbrances.
SECTION 3.3. Subsidiaries. Except as set forth on Schedule
3.3, the Seller is the record and beneficial owner and has good and marketable
title, free and clear of any Encumbrances, to all of the issued and outstanding
capital stock of all classes of each of the Subsidiaries (the "Subsidiary
Stock"). All shares of Subsidiary Stock have been validly issued, fully
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paid and are non-assessable. The Bank is the record and beneficial owner and has
good and marketable title, free and clear of any Encumbrances, to all of the
issued and outstanding capital stock of all classes of each of the Bank
Subsidiaries (the "Bank Subsidiary Stock"). All shares of Bank Subsidiary Stock
have been validly issued, fully paid and nonassessable.
SECTION 3.4. Corporate Books and Records. The minute books of
the Seller contains accurate records of all meetings of, and accurately reflects
all other actions taken by, the shareholders, Board of Directors and all
committees of the Boards of Directors of the Seller.
SECTION 3.5. No Conflict. Assuming the making and obtaining of
all filings, notifications, consents, approvals, authorizations and other
actions described in Schedule 3.6, including, without limitation, obtaining the
approval of the OTS and the making (if required) of the notification filing
under the HSR Act and the obtaining of any other consent, approval or
authorization from any state or Federal agency with respect to the Licenses, the
transactions contemplated by this Agreement, the execution, delivery and
performance by the Seller of this Agreement do not (a) violate, conflict with or
result in the breach of any provision of the Articles of Incorporation or
By-laws of the Seller, (b) conflict with or violate (or cause an event which
would have a Material Adverse Effect as a result of) any Law or Governmental
Order applicable to the Seller or any of its Assets, properties or businesses,
including, without limitation, the Business, or (c) except as set forth in
Schedule 3.5 hereof, conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any Encumbrance on any of the
Shares or on any of the Assets or properties of the Seller pursuant to, any
note, bond, mortgage or indenture, Material Contract, Permit or other material
instrument or arrangement to
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which the Seller is a party or by which any of the Shares or any of such assets
or properties is bound or affected.
SECTION 3.6. Governmental Consents and Approvals. Except for
the approval of the OTS, the HSR Notice Filing (if required) or as otherwise
described in Schedule 3.6, the execution, delivery and performance by the Seller
of this Agreement do not and will not require on the part of the Seller any
consent, approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority.
SECTION 3.7. No Undisclosed Liabilities. There are no other
liabilities or obligations of the Seller, either accrued, absolute, contingent
or otherwise, except (i) as provided in the Financial Statements, (ii) as set
forth in Schedule 3.7, (iii) for unfunded loan commitments and obligations on
letters of credit issued in favor of customers of the Bank and (iv) for
obligations incurred in the ordinary course of business, consistent with the
past practices of the Seller or as permitted hereunder and there are no
Encumbrances on the Assets except for Permitted Encumbrances or as disclosed in
Schedule 3.7; or Encumbrances which will be satisfied at or prior to the Closing
(which shall also be set forth on Schedule 3.7).
SECTION 3.8. Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions. Except: (i) in the ordinary course of
the Seller's Business consistent with past practice, (ii) as disclosed in
Schedule 3.8, or (iii) as contemplated by this Agreement, since the date of the
Reference Consolidated Balance Sheet, neither the Seller nor the Bank or any of
the other Subsidiaries have:
(a) permitted or allowed any material Assets or
properties (whether tangible or intangible) to be subjected to any Encumbrance,
other than Permitted Encumbrances and Encumbrances that will be released at or
prior to the Closing;
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(b) discharged or otherwise obtained the release of
any material Encumbrance or paid or otherwise discharged any material Liability;
(c) made any loan to, guaranteed any Indebtedness of
or otherwise incurred any Indebtedness on behalf of any Person other than the
Mortgage Debt;
(d) failed to pay any creditor any material amount
owed to such creditor upon the later of when such amount became due or within
the applicable grace period;
(e) redeemed any of the capital stock or declared,
made or paid any dividends or distributions (whether in cash, securities or
other property) to the holders of capital stock of the Seller;
(f) merged with, entered into a consolidation with
or acquired an interest in any Person or acquired a substantial portion of the
assets or business of any Person or any division or line of business thereof;
(g) made any capital expenditures or commitment for
any capital expenditures in excess of $10,000 individually and $50,000 in the
aggregate;
(h) proposed to or actually sold, transferred,
leased, subleased, licensed or otherwise disposed of any properties or assets
(other than loans), real, personal or mixed in excess of $5,000;
(i) issued or sold any capital stock, notes, bonds
or other securities, or any option, warrant or other right to acquire, be
converted into or exchanged for the same;
(j) entered into any agreement or transaction with
any of its directors, officers, employees or shareholders;
(k) (i) granted any material increase in the
compensation payable by the Seller or any of the Subsidiaries to their
respective employees or paid any bonuses, including, without limitation, any
increase or change pursuant to any Employee Plan or (ii) established or
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increased or promised to increase any material benefits under any Employee Plan,
in either case, except as required by Law;
(l) amended, terminated, canceled or compromised any
material claims of the Seller or waived any other rights of substantial value to
the Seller;
(m) made any change in any method of accounting or
accounting practice or policy used by the Seller, other than such changes
required by GAAP;
(n) allowed any permit that was issued to the Seller
pursuant to any environmental law to lapse or terminate or failed to renew any
such permit that is scheduled to terminate or expire within 30 calendar days of
the Closing Date;
(o) incurred any Indebtedness for borrowed money
other than Mortgage Debt incurred in the ordinary course of business;
(p) amended or modified in any material respect or
terminated or consented to the termination of any Material Contract;
(q) amended or restated the Articles of Incorporation
or the By-laws of the Seller;
(r) terminated, discontinued, closed or disposed of
any plant, facility or other Business operation;
(s) permitted to lapse or abandoned any Intellectual
Property to which,or under which, the Seller have any right, title, interest or
license;
(t) made any express or deemed election or settled or
compromised any material liability, with respect to Taxes;
(u) suffered any casualty loss or damage with respect
to any of the Assets which is not covered by insurance; and
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(v) agreed, whether in writing or otherwise, to take
any of the actions specified in this Section 3.8 or granted any options to
purchase, rights of first refusal, rights of first offer or any other similar
rights or commitments with respect to any of the actions specified in this
Section 3.8, except as expressly contemplated or permitted by this Agreement.
SECTION 3.9. Litigation. Except as set forth in Schedule 3.9,
there are no Actions by or against the Seller or any of the Subsidiaries pending
before any Governmental Authority or, to the Seller's Knowledge, threatened in
writing or, if not in writing, of which M. Brian Davis ("Davis"), Donald R. Neel
("Neel"), any in-house counsel, senior lending officers or senior credit
officers of the Seller have Knowledge to be brought by or before any
Governmental Authority. None of the matters disclosed in Schedule 3.9 has or has
had or would have a Material Adverse Effect or will adversely affect the
legality, validity or enforceability of this Agreement or the consummation of
the transactions contemplated hereby.
SECTION 3.10. Year 2000 Compatibility. The computer and
management information systems, software and Tangible Personal Property (i) used
by the Seller and the Subsidiaries in the conduct of the Business as currently
conducted, whether owned by the Seller or leased or licensed from others, and
(ii) utilized by data processing vendors of the Seller and substantially relied
upon by the Seller and/or the Subsidiaries in the conduct of the Business, are
performing their intended functions without regard to any references to or
computations based on calendar dates or periods of elapsed time, including,
without limitation, any thereof with respect to any dated or dates in 1999 or
2000.
SECTION 3.11. Brokers. Except as set forth on Schedule 3.11,
no broker, finder, consultant, advisor or investment banker is entitled to any
brokerage, finder's, consultant's, advisor's or other fees or commissions in
connection with the transactions contemplated by this
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Agreement, or for other services rendered in connection therewith, based upon
arrangements made by or on behalf of the Seller or any Affiliate of the Seller.
SECTION 3.12. Articles of Incorporation. In accordance with
the provisions of the Business Corporations Law of the State of Indiana, the
Seller, in its Articles of Incorporation has "opted out" of the provisions of
(i) the Control Share Acquisitions Chapter of the Business Corporations Law of
the State of Indiana (codified at Indiana Code Section 23-1-42); and (ii) the
Business Combinations Chapter of the Business Corporations Law of the State of
Indiana (codified at Indiana Code Section 23-1-43). The above-described "opt
out" provisions of the Seller's Articles of Incorporation are both in effect as
of the date hereof and shall remain in effect as of the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Purchaser hereby represents and warrants to the Seller as follows:
SECTION 4.1. Organization and Authority of Purchaser.
Purchaser is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Wyoming and has all necessary power
and authority to enter into this Agreement to carry out its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement, the performance by
Purchaser of its obligations hereunder and thereunder and the consummation by
Purchaser of the transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of Purchaser. This Agreement has
been duly executed and delivered by Purchaser, and constitutes (assuming the due
authorization, execution and delivery thereof by the other parties thereto) a
legal, valid and binding obligation of Purchaser enforceable against Purchaser
in accordance with its
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terms, except as enforceability thereof may be limited by applicable bankruptcy
and insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
SECTION 4.2. No Conflict. Assuming approval by the OTS, and
compliance with any other applicable License requirements and the making and
obtaining of all filings, notifications, consents, approvals, authorizations and
other actions referred to in Section 4.3, the execution, delivery and
performance of this Agreement and the Transaction Documents of which Purchaser
is a signatory do not (a) violate, conflict with or result in the breach of any
provision of the Operating Agreement or other organizational documents of
Purchaser, (b) conflict with or violate any Law or Governmental Order applicable
to Purchaser or (c) conflict with, or result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation, or
cancellation of, or result in the creation of any Encumbrance on any of the
assets or properties of Purchaser pursuant to any note, bond, mortgage or
indenture, contract, permit, franchise or other material instrument or
arrangement to which Purchaser is a party or by which any of such assets or
properties is bound or affected which would have a material adverse effect on
the ability of Purchaser to perform under this Agreement or consummate the
transactions contemplated by this Agreement.
SECTION 4.3. Governmental Consents and Approvals. The
execution, delivery and performance by Purchaser of this Agreement does not and
will not require any consent, approval, authorization or other order of, action
by, filing with, or notification to any Governmental Authority, except the
approval of the OTS and pursuant to any applicable License requirements.
SECTION 4.4. Investment Purpose. Purchaser is acquiring the
Purchased Shares for the purpose of investment and not with a view to, or for
offer or sale in connection with
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any distribution thereof. Purchaser is an accredited investor as such term is
defined in Rule 501 of Regulation D as promulgated under the Securities Act.
SECTION 4.5. Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Purchaser or any Affiliate of Purchaser. Purchaser
agrees to indemnify the Seller for any claim made by any third party for the
payment of any broker's, finder's, advisor's or investment banker's fee based
upon arrangements made by or on behalf of Purchaser or any Affiliate of
Purchaser in connection with the transactions contemplated by this Agreement.
SECTION 4.6. Litigation. Except as disclosed in Schedule 4.6
there is no action, suit, proceeding or investigation pending, or, to
Purchaser's knowledge, threatened against or related to Purchaser which could
materially adversely affect or restrict Purchaser's ability to consummate the
transactions contemplated hereby.
SECTION 4.7. Authority. Pedcor Management Corp. has or will
have on the Closing Date all necessary power and authority and all licenses
necessary to manage all properties currently being managed by Village Housing
Corporation which are set forth on Schedule 2.2(c) and to provide unaudited
property based accounting for such properties, as contemplated by Section 2.2(c)
of this Agreement.
SECTION 4.8. Financial Information. Purchaser hereby
represents and warrants that its financial information which it has previously
provided to Seller is true and accurate, and that no material adverse change to
Purchaser's financial condition has occurred since the date of such information.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Conduct of Business of the Seller Prior to
the Closing.
(a) Except as described in Schedule 5.1(a) or as
contemplated by this Agreement, between the date hereof and the Closing Date,
the Seller shall conduct, and shall cause the Subsidiaries to conduct, the
Business in the ordinary course consistent with the Seller's prior practices.
Without limiting the generality of the foregoing, except as described in
Schedule 5.1(a), the Seller shall (i) continue its advertising and marketing
activities in accordance with past practice; (ii) use its reasonable best
efforts to (A) preserve intact the Seller's business organization, (B) keep
available to Purchaser the services of all of the current the employees of the
Seller, (C) continue without material modification the Seller's existing
policies or binders of insurance, and (D) preserve the Seller's significant
business relationships; and (iii) not knowingly engage in any practice or take
any action which would cause the representations and warranties of the Seller or
the Subsidiaries in this Agreement to be untrue in any material respect, or
result in a material breach of any covenant made by the Seller herein.
(b) Except (i) as described in Schedule 5.1(b), (ii) in the
ordinary course of business consistent with past practice, or (iii) as
contemplated by this Agreement, without the prior written consent of Purchaser,
neither the Seller nor any of the Subsidiaries will take, or cause to be taken,
any of the actions, or enter into any of the transactions set forth in clauses
(a)-(w) of Section 3.8 hereof prior to the Closing Date, including, without
limitation, the issuance or sale by the Seller of any capital stock, notes,
bonds or other securities of the Seller, or any option, warrant or other right
to acquire, be converted into or exchanged for the same; .
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SECTION 5.2. Access to Information.
(a) From the date hereof until the Closing Date, upon
reasonable notice, the Seller shall, and shall cause the Subsidiaries' and the
Seller's officers, directors, employees, agents, representatives, accountants
and counsel to: (i) afford the officers, employees and authorized agents of
Purchaser reasonable access, during normal business hours, to the offices,
properties, plants, other facilities, books and records of the Seller and of the
Subsidiaries and to those officers, directors, employees and agents of the
Seller and of Subsidiaries who have knowledge relating to the Seller or the
Business, and (ii) furnish to the officers, employees and authorized agents of
Purchaser such additional financial and operating data and other information (or
legible copies thereof) regarding the Seller and the Business as Purchaser may
from time to time reasonably request.
(b) In order to facilitate the resolution of any claims made
by or against or incurred by Purchaser or the Seller after the Closing Date or
for any other reasonable purpose, for a period consistent with past practice or
as required by applicable Federal and state banking regulations, Purchaser and
the Seller shall (i) retain any books and records in their possession or control
which relate to the Seller, the Bank, the other Subsidiaries and the Business
for periods prior to the Closing which shall not otherwise have been delivered
to the other parties as of the Closing Date, and (ii) upon reasonable notice,
afford the officers, employees and authorized agents and representatives of such
other parties reasonable access (including the right to make photocopies, at the
expense of Purchaser or the Seller), during normal business hours, to such books
and records.
(c) Seller shall make available to Purchaser all reports,
filings or other documents filed prior to the Closing Date with (i) the OTS,
(ii) the SEC, and (iii) any other Governmental Authority, subject to applicable
law and any pre-existing confidentiality agreements.
SECTION 5.3. Confidentiality. Each party hereto agrees to,
and shall cause its respective agents, representatives, Affiliates, employees,
officers and directors to treat and hold
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as confidential all confidential or proprietary information relating to the
Seller and the Business. In the event that such party or any such agent,
representative, Affiliate, employee, officer or director becomes legally
compelled to disclose any such information, such Person shall provide Purchaser
(in the case where the disclosure is required to be made by the Seller or an
Affiliate of the Seller) or the Seller (in the case where the disclosure is
required to be made by Purchaser or an Affiliate of Purchaser) with prompt
written notice of such requirement so that Purchaser or the Seller, as the case
may be, may seek a protective order or other remedy or waive compliance with
this Section 5.3. In the event that such protective order or other remedy is not
obtained, or Purchaser or the Seller, as the case may be, waives compliance with
this Section 5.3, such Person shall furnish only that portion of such
confidential information which is legally required to be provided and exercise
its reasonable best efforts to obtain assurances that confidential treatment
will be accorded such information. Each such Person in possession of such
confidential information shall, prior to, at, or as soon as practicable
following the Closing, promptly furnish to the Seller or Purchaser, as
applicable, any and all copies (in whatever form or medium) of all such
confidential information then in the possession of such Person or any of its
agents, representatives, Affiliates, employees, officers and directors and,
except as otherwise required by Section 5.2(b), destroy any and all additional
copies then in the possession of such Person or any of its agents,
representatives, Affiliates, employees, officers and directors of such
information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof; provided, however, that
this Section 5.3 shall not apply to any information that, at the time of
disclosure, is available publicly and was not disclosed in breach of this
Agreement by such Person, its agents, representatives, Affiliates, employees,
officers or directors. Each party hereto agrees and acknowledges that remedies
at law for any breach of its obligations under this Section 5.3 are inadequate
and that, in addition thereto, the other parties hereto shall be entitled to
seek equitable relief, including injunction and specific performance, in the
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event of any such breach. Purchaser shall, however, retain the right to disclose
any such confidential information at any time in the event such disclosure is
required or, in the opinion of counsel, beneficial to the defense of a claim (or
prosecution of a claim, as the case may be) in the event that Purchaser or any
of Purchaser's Affiliates become a party to a legal action or proceeding arising
out of the transactions contemplated by this Agreement.
SECTION 5.4. No Solicitations. From the date hereof through
June 30, 2000, the Seller shall not, and shall not authorize or permit any of
the Seller's officers, directors, employees or Affiliates or any investment
banking firms, financial advisors, attorneys, accountants or other
representatives or agents retained by the Seller to, solicit or encourage
(including by way of furnishing nonpublic information), or take any other action
to facilitate any inquiries or the making of any proposals which constitute, or
may reasonably be expected to lead to, any Competing Transaction (as defined
below), or agree to or endorse any Competing Transaction, or participate in any
discussions or negotiations, or provide third parties with any nonpublic
information, relating to any such inquiry or proposal. The Seller shall promptly
advise Purchaser both orally and in writing of any such inquiries or proposals.
As used in this Agreement, "Competing Transaction" shall mean any proposed
tender or exchange offer, sale of assets, proposal for merger, consolidation or
other business combination involving the Seller or the Subsidiaries or any
proposal or offer to acquire directly or through the sale or grant of any
option, convertible security or any other right to purchase any (by way of
exercise, exchange or conversion of such option, convertible security or right)
of the outstanding shares of Common Stock or any substantial portion of the
assets, of the Seller or the Subsidiaries, other than pursuant to the
transactions contemplated by this Agreement.
SECTION 5.5. Shareholder Meeting; Proxy Materials.
(a) The Seller shall place on the agenda for the approval and
adoption of the shareholders at the next Shareholder Meeting, proposed
amendments to the Seller's Articles of
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Incorporation, in the form annexed hereto as Exhibit A, to: (i) amend Article
III, Section 1 to increase the total number of shares of Common Stock that the
Seller has the authority to issue to 15,000,000; (ii) delete Article III,
Section 4 entitled "Cumulative Voting for Directors" in its entirety; (iii)
amend Article IV, Section 3 entitled "Terms of Directors" to eliminate staggered
terms of office of the Directors and replace such staggered terms with fixed one
year terms upon the expiration of the current terms of office; and (iv) amend
Article IV, Section 4 to allow the shareholders of the Seller to remove a
Director of the Seller with or without "cause" and to allow the Board of
Directors to remove a Director with "cause" (as such term is defined in the
Articles of Incorporation of the Seller). Subject to their fiduciary duties, the
Directors of the Seller shall recommend approval and adoption of these
amendments by the Seller's shareholders at the Shareholder Meeting, and will
include such recommendations in the Proxy Statement.
(b) Simultaneously with the execution and delivery of this
Agreement, the Seller shall deliver to the Purchaser agreements, substantially
in the form of Exhibit B annexed hereto, executed by such members of the Board
of Directors of the Seller who are also holders of shares of Common Stock of the
Seller, pursuant to which such members of the Board of Directors shall agree to
vote his or her shares of Common Stock (held of record and/or beneficially by
such person) at the Shareholders' Meeting in favor of the proposed amendments to
the Articles of Incorporation of the Seller and, if required by applicable law
or the rules or interpretations of NASDAQ, the issuance to Purchaser of the
Purchased Shares (the "Share Voting Agreements").
SECTION 5.6. Regulatory and Other Authorizations; Notices,
Consents and Licenses. Each party hereto shall use its best efforts to obtain
(and, in the case of the Seller, cause the Bank and the other Subsidiaries to
obtain) any authorizations, consents, orders and approvals of Governmental
Authorities, including, without limitation, the approval of the OTS and NASDAQ
and the notification (if required) under the HSR Act, and officials that may be
or become necessary for
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its or their performance of its or their respective obligations pursuant to this
Agreement and will cooperate fully with the other parties hereto in promptly
seeking to obtain all such authorizations, consents, orders and approvals.
Subject to the provisions of Section 7.2 hereof, each party hereto agrees to
cooperate with each other party hereto in order to obtain the approval of the
OTS and any required consent, approval or authorization of any Governmental
Authority to keep in good standing the Seller's existing Licenses as required to
enable the Seller to operate the Business in a manner acceptable to the
Purchaser.
SECTION 5.7. Notice of Developments. Prior to the Closing,
each party to this Agreement shall promptly notify the other parties to this
Agreement in writing of any of the following matters which come to such party's
attention: (i) all events, circumstances, facts and occurrences, including the
commencement or threat of any Action, arising subsequent to the date of this
Agreement which are reasonably likely to result in a breach of a representation,
warranty or covenant of such party in this Agreement or which has the effect of
making any representation or warranty of such party in this Agreement untrue or
incorrect in any material respect, and (ii) all other developments affecting
such party which are reasonably likely to have a material adverse effect on such
party's ability to timely consummate the transactions contemplated in this
Agreement. To the extent required to reflect any material changes in the
information provided in the Schedules hereto, the Seller shall update the
Schedules to this Agreement as of the Closing Date by delivering revised
Schedules to Purchaser at or prior to the Closing.
SECTION 5.8. Director and Officer Liability and
Indemnification. Purchaser agrees that for a period of three (3) years after the
Closing Date, it shall not, and shall not permit the Seller to, amend, repeal or
modify any provision in the Seller's Articles of Incorporation or Bylaws
relating to exculpation or indemnification of former officers and directors
(unless required by law), it being the intent of the parties that the officers
and directors of the Seller prior to the Closing shall
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continue to be entitled to such exculpation and indemnification to the fullest
extent permitted under the Indiana Business Corporation Law, the Articles of
Incorporation, or the D&O Policy (as defined below) whichever provides the
greatest indemnification and exculpation. In addition, Purchaser agrees that
after the Closing Date, it shall cause Seller to maintain a directors and
officers' liability insurance policy ("D&O Policy") which provides for coverage
which is at least as comprehensive as the D&O Policy of the Seller as of the
Closing Date for any events arising at or prior to the Closing Date, provided,
however, that Purchaser shall have no obligation to maintain the D&O Policy
under this Section 5.8 if the cost of maintaining such D&O Policy after the
Closing Date increases by more than fifty percent (50%) above the cost of the
D&O Policy as of the Closing Date, and, provided, further, that the Purchaser's
obligation to maintain the D&O Policy shall terminate on the fifth anniversary
of the Closing Date.
SECTION 5.9. Further Action. Each of the parties hereto shall
use its reasonable best efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable Law, and to execute and deliver such documents and other instruments
or papers as may be required to carry out the provisions of this Agreement and
to consummate and render effective the transactions contemplated by this
Agreement.
SECTION 5.10. Continued Listing on NASDAQ. Subject to the
condition that the Seller continues to satisfy the requirements for quotation of
its shares of Common Stock NASDAQ as of the Closing Date, until such date as the
Purchaser has sold or otherwise disposed of more than fifty percent (50%) of the
Purchased Shares, Purchaser shall use commercially reasonable efforts to cause
the Seller to meet all material requirements, including filing of requisite
reports and other documents, to enable the Common Stock of the Seller to be
quoted on the NASDAQ - NM, subject, however, to the following exceptions:
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(a) Depending upon the future growth of the Seller and
management's determination concerning the best capital markets for its equity
securities, the Seller may hereafter list its Common Stock (and/or other classes
of equity securities of the Seller) on a national securities exchange; and
(b) The Purchaser shall no longer be required to use its
commercially reasonable efforts to cause the Common Stock of the Seller to
remain quoted on the NASDAQ - NM or listed on any national securities exchange
in the event that:
(i) the Seller is sold (by way of merger,
consolidation or sale of assets or of outstanding capital stock) to one or more
unaffiliated entities, or to Pedcor Bancorp; provided, that if the Seller is
sold to Pedcor Bancorp, Purchaser must make commercially reasonable efforts to
cause the common stock of Pedcor Bancorp to be quoted on the NASDAQ - NM or
listed on any national securities exchange; or
(ii) management of the Seller determines to effect a
transaction whereby the Seller is taken private through the purchase of
outstanding shares of Common Stock of the Seller not held by the Purchaser,
management or their affiliates in transactions which are in compliance with
applicable Federal and state securities laws and with respect to which such
shareholders received equitable treatment.
SECTION 5.11. Intentionally left blank.
SECTION 5.12 Election of Directors and Officers. Upon the
Closing, the Seller shall cause (i) Bruce A. Cordingley ("Cordingley") and two
(2) other individuals designated by the Purchaser to be elected to the Board of
Directors of the Seller; (ii) the executive committee of the Seller to be
comprised of Cordingley (Chairman), Brian M. Davis, and one other individual
serving as a director of the Seller to be appointed by the Purchaser; (iii)
Cordingley and one other individual designated by the Purchaser to be elected to
the Board of Directors of the Bank; (iv) the
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executive committee of the Bank to be comprised of Cordingley (Chairman), M.
Brian Davis and Donald R. Neel; and (v) the Board of Directors of VHC to be
comprised of Cordingley (Chairman and President), M. Brian Davis and at least
three other individuals selected by a majority of the outside directors of the
Seller immediately prior to consummation of the acquisition of the Purchased
Shares by the Purchaser, it being the intent of the parties hereto that no
change in control of VHC result by virtue of the acquisition of the Purchased
Shares by the Purchaser. The Bylaws of the Seller and the Bank each shall be
amended to provide that the president of each respective entity shall report
directly to the respective executive committee and chairman of each respective
executive committee. The By Laws of the Seller shall be amended to designate the
executive committee of the Seller as the board nominating committee. The By Laws
of VHC shall be amended to provide that a majority of its directors shall be
designated by the outside directors of the Bank who are not otherwise Affiliates
of the Purchaser.
SECTION 5.13 Sale of Purchased Shares. Purchaser hereby agrees
that it will not sell or otherwise dispose of the Purchased Shares for a period
of one (1) year from the Closing Date; provided, however, that this Section 5.13
shall not operate or be interpreted to prohibit (i) Purchaser from transferring
the Purchased Shares to its Permitted Assigns or the Pedcor Control Group or
from pledging any or all of the Purchased Shares, or (ii) any individual or
entity to whom the Purchased Shares are pledged from exercising any rights under
the applicable pledge agreement.
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ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1. Conditions to Obligations of Seller. The
obligation of the Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing Date,
of each of the following conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of Purchaser contained in this Agreement shall
have been true and correct in all material respects when made and shall be true
and correct in all material respects as of the Closing Date, with the same force
and effect as if made as of the Closing Date, other than such representations
and warranties as are made as of a specified date or time other than the Closing
Date (which need only be true and correct as of such date or time). The
covenants and agreements contained in this Agreement to be complied with by
Purchaser on or before the Closing shall have been complied with in all material
respects. Purchaser shall have delivered to the Sellers a certificate dated the
Closing Date from a duly authorized officer of Purchaser to the foregoing
effect;
(b) No Proceedings or Litigation. (i) No Action shall have
been commenced by any Governmental Authority against the Seller or Purchaser
seeking to restrain or materially and adversely alter the transactions
contemplated by this Agreement, and (ii) no injunction or order of any
Governmental Authority or any Law shall be in effect which, in the case of each
of (i) and (ii), in the reasonable, good faith determination of the Seller, is
likely to render it impossible or unlawful to consummate such transactions;
provided, however, that the provisions of this Section 7.1(b) shall not apply if
the Seller has directly or indirectly solicited or encouraged any such Action;
(c) Organizational Documents and Board Resolutions. The Seller
shall have received copies of (i) the Certificate of Organization, as amended to
date, of Purchaser, certified by the Secretary of State of Wyoming, (ii) the
Articles of Organization of Purchaser, and (iii)
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resolutions duly and validly adopted by the Board of Directors of the Purchaser
evidencing its authorization of the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, in each case,
accompanied by a certificate of the Secretary or Assistant Secretary of the
Purchaser, dated as of the Closing Date, stating that no amendments have been
made thereto from the date thereof through the Closing Date;
(d) Incumbency Certificate. The Sellers shall have received
a certificate of the Secretary or an Assistant Secretary of the Purchaser
certifying the names and signatures of the officers of the Purchaser, authorized
to sign this Agreement;
(e) Good Standing Certificates. The Sellers shall have
received from Purchaser (i) a good standing or equivalent certificate from the
Secretary of State of Wyoming, and (ii) a certificate of Qualification To
Transact Business, or equivalent certificate from the Secretary of State of any
state where Purchaser transacts business and such a qualification is necessary
under the Laws of such state;
(f) Pledge Agreements. Purchaser shall have delivered to the
Seller at the Closing the pledge agreements contemplated by Sections 2.2(b) and
2.2(c).
(g) Authority. Purchaser shall deliver to the Seller evidence
that Pedcor Management Corp. has the authority to and that it has all necessary
licenses to manage the properties as contemplated by Section 2.2(c) of the
Agreement.
(h) Purchaser's Deliveries. Purchaser shall have delivered to
the Seller at the Closing the items specified in Section 2.5 and 2.6 hereof.
SECTION 6.2. Conditions to Obligations of Purchaser. The
obligations of Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing, of
each of the following conditions:
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(a) Representations, Warranties and Covenants. The respective
representations and warranties of the Seller and of the Subsidiaries contained
in this Agreement shall have been true and correct in all material respects when
made and shall be true and correct in all material respects as of the Closing
Date, with the same force and effect as if made as of the Closing Date, other
than such representations and warranties as are made as of a specified date or
time other than the Closing Date (which need only be true and correct as of such
date or time). The covenants and agreements contained in this Agreement to be
complied with by the Seller and each of the Subsidiaries on or before the
Closing shall have been complied with in all material respects. The Seller and
each of the Subsidiaries shall have delivered to Purchaser certificates dated
the Closing Date from a duly authorized officer of each of the Seller and the
Subsidiaries, respectively, to the foregoing effect;
(b) Organizational Documents; Shareholder and Board
Resolutions. Purchaser shall have received true and complete copies of
resolutions duly and validly adopted by the Board of Directors of the Seller
and, if required, the Shareholders of the Seller evidencing their respective
authorizations of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and, in each case,
accompanied by a certificate of the Secretary or Assistant Secretary of the
Seller and the Subsidiaries, as applicable, dated as of the Closing Date,
stating that no amendments have been made thereto from the date thereof through
the Closing Date.
(c) No Proceedings or Litigation. (i) No Action shall have
been commenced by any Governmental Authority the Seller or Purchaser seeking to
restrain or materially and adversely alter the transactions contemplated hereby
and (ii) no injunction or order of any Governmental Authority or Law shall be in
effect, which, in the case of each of (i) and (ii), is likely to render it
impossible or unlawful to consummate the transactions contemplated by this
Agreement or has or is reasonably likely to have a Material Adverse Effect, in
each case, in the reasonable good faith
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determination of Purchaser; provided, however, that the provisions of this
Section 6.2(c) shall not apply if Purchaser has directly or indirectly solicited
or encouraged any such Action;
(d) Incumbency Certificate. Purchaser shall have received an
incumbency certificate of the Seller certifying as to the names and signatures
of the persons authorized on behalf the Seller to sign this Agreement and all of
the Transaction Documents to be delivered by the Seller hereunder;
(e) Certificates of Existence. Purchaser shall have received a
certificate of existence for the Seller and for each of the Subsidiaries from
the Secretary of State of Indiana and all other jurisdictions in which the
properties owned or leased by the Seller or the Subsidiaries or the operation of
the Business in such jurisdiction, requires the Seller or the Subsidiaries to
qualify to do business as a foreign corporation, in each case dated as of a date
not earlier than five (5) Business Days prior to the Closing Date;
(f) Officers' Certificate. A certificate of the Seller's Chief
Financial Officer or President stating that (i) the financial condition of the
Company is not materially different from that set forth on the Reference
Consolidated Balance Sheet, and (ii) the Seller and the Subsidiaries have not
experienced a Material Adverse Effect since the date of the Reference
Consolidated Balance Sheet.
(g) Legal Opinion. (i) Purchaser shall have received from
Krieg, DeVault, Alexander & Capehart, LLP, counsel to the Seller, a legal
opinion, dated the Closing Date, addressed to Purchaser in the form attached as
Exhibit C hereto;
(h) Intentionally left blank.
(i) OTS Approval. The OTS shall have approved the
transactions contemplated by this Agreement and consented to the change in
control of the Seller.
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(j) No Material Adverse Effect. No event or events shall
have occurred which, individually or in the aggregate, has or have had a
Material Adverse Effect; and
(k) Broker's Release. Purchaser shall have received a release
letter from the Seller's financial advisor(s), dated as of the Closing Date, to
the effect that all broker's, finder's, advisor's, consultant's, investment
banking or any other fees or obligations have been satisfied in full by the
Seller.
(l) Intentionally left blank.
(m) Stock Registration Agreement. The Seller and the Purchaser
shall have entered into an agreement, substantially in the form of Exhibit E
annexed hereto, pursuant to which the Seller shall agree to register the
Purchased Shares under the Securities Act.
SECTION 6.3. Conditions to Both Party's Obligations. The
obligation of the each of the parties to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, at or prior
to the Closing Date, of each of the following conditions:
(a) Executive Employment Agreements. The Seller, M. Brian
Davis ("Davis") and Donald R. Neel ("Neel") shall have all executed and
delivered executive employment agreements providing for Messrs. Davis' and
Neel's respective employment by the Seller in the form of Exhibits F and G,
annexed hereto (the "Employment Agreements"); and
(b) HSR Notification. The notification filing under the HSR
Act (if required) shall have been completed.
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ARTICLE VII
TERMINATION AND WAIVER
SECTION 7.1. Termination. This Agreement may be terminated
(by delivery of written notice given by the terminating party except with
respect to a termination pursuant to Section 7(a)) at any time prior to the
Closing only as follows:
(a) by written agreement of the Seller and Purchaser at
any time;
(b) by the Seller or Purchaser in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and nonappealable; provided that the terminating party
has not directly or indirectly instigated or been instrumental in instigating
the Action in which any such order, decree or ruling is issued; and
(c) by Purchaser or the Seller if the Closing shall not have
occurred on or prior to the close of business, Eastern time, on June 30, 2000;
provided, however, that the right to terminate this Agreement under this Section
7.1(c) shall not be available to any party whose failure to fulfill any
obligation under this Agreement in any material respect shall have been the
cause of, or shall have resulted in, the failure of the Closing to occur on or
prior to such date.
SECTION 7.2. Effect of Termination. In the event that this
Agreement is terminated pursuant to Section 7.1, this Agreement shall forthwith
be canceled and rendered null and void in its entirety without further liability
or obligation of any party to another party except that the provisions of
Sections 5.3 and 8.1 shall survive.
SECTION 7.3. Waiver. Each party to this Agreement may (a)
extend the time for the performance of any of the obligations or other acts of
any other party, (b) waive any inaccuracies in the representations and
warranties of any other party contained herein or in any
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document delivered by such other party pursuant hereto, (c) waive compliance
with any of the agreements of any other party contained herein, or (d) waive any
conditions precedent to such party's obligation to consummate the transactions
contemplated by this Agreement. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The failure of
any party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
SECTION 8.2. Notices. All notices, requests, claims, demands
and other communications hereunder (collectively, "Notices") shall be in writing
and shall be given or made by delivery in person, by reputable overnight courier
service, by telecopy (followed promptly by first class mail), or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 8.2):
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(a) if to Purchaser:
Pedcor Investments, a limited liability company
c/o Bruce A. Cordingley
8888 Keystone Crossing, Suite 900
Indianapolis, Indiana 46240
Telecopy No.: (317) 587-0340
(b) if to the Seller (or the Seller prior to Closing)
Fidelity Federal Bancorp
700 S. Green River Road - Suite 2000
Evansville, Indiana 47715
Attn: M. Brian Davis, President, CEO
Telecopy No.: (812) 269-2101
with a copy to:
Krieg, DeVault, Alexander & Capehart, LLP
One Indiana Square - Suite 2800
Indianapolis, Indiana 46204
Attn: John W. Tanselle, Esq.
Telecopy No.: (317) 636-1507
Notices shall be deemed given hereunder (i) upon delivery if
delivered in person or by telecopy (followed promptly by first class mail), (ii)
one Business Day after delivery to a reputable overnight courier service for
next day delivery, and (iii) three Business Days after placement in the United
States mail for registered or certified mail (postage prepaid, return receipt
requested).
SECTION 8.3. Public Announcements. No party to this Agreement
shall make, or cause to be made, any press release or public announcement in
respect of this Agreement or the transactions contemplated hereby or otherwise
communicate with any news media without the prior written consent of the other
party, which consent shall not be unreasonably withheld, and the parties shall
cooperate as to the timing and contents of any such press release or public
announcement.
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SECTION 8.4. Headings. The descriptive headings contained in
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement. All references herein to
Articles, Sections or clauses refer to specific provisions of this Agreement.
SECTION 8.5. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 8.6. Assignment. Prior to the Closing, the respective
rights and obligations of the parties under this Agreement may not be assigned
by operation of law or otherwise without the express written consent of the
other parties hereto (which consent may be granted or withheld in the sole
discretion of any such party); provided, however, that Purchaser may assign its
rights and obligations hereunder to its Permitted Assigns, although Purchaser
shall remain obligated hereunder as if no such assignment had taken place.
SECTION 8.7. No Third Party Beneficiaries. Except for the
provisions of Article VIII relating to Indemnified Parties, this Agreement shall
be binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
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SECTION 8.8. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
Seller, the Seller and Purchaser or (b) by a waiver in accordance with Section
8.3.
SECTION 8.9. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Indiana,
applicable to contracts executed in and to be performed entirely within that
state (without giving effect to principles of conflicts of laws of such state or
any other jurisdiction).
SECTION 8.10. Consent to Jurisdiction and Venue. Purchaser and
the Seller hereby irrevocably submit to the exclusive jurisdiction of any
Indiana State or Federal court sitting in the City of Indianapolis in any action
or proceeding arising out of or relating to this Agreement, including any appeal
and any action for enforcement or recognition of any judgment relating thereto,
and Purchaser and the Seller hereby irrevocably agree that all claims in respect
of such action or proceeding may not be heard or determined in any court or
before any panel other than such Indiana State or Federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgement or in any other manner provided by law. Each of the parties hereto
hereby irrevocably waives, to the fullest extent it may legally and effectively
do so, any objection it may have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby in any Indiana State or Federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent it may legally and
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court. Each of the parties hereto
irrevocably consents to service of process in any such Action in the manner
provided for the delivery of notices in Section 8.3; provided that nothing
herein shall affect the right of any such party to serve process in any other
manner permitted by law.
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SECTION 8.11. Waiver of Punitive Damages and Jury Trial.
(a) THE PARTIES TO THIS AGREEMENT EXPRESSLY WAIVE AND
FOREGO ANY RIGHT TO RECOVER PUNITIVE, EXEMPLARY, CONSEQUENTIAL OR SIMILAR
DAMAGES IN ANY ARBITRATION, LAWSUIT, LITIGATION OR PROCEEDING ARISING OUT OF OR
RESULTING FROM ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
(c) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE EITHER OF THE FOREGOING WAIVERS, (ii) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.11.
SECTION 8.12. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and
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<PAGE>
the same instrument, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart.
SECTION 8.13. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
is not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
SECTION 8.14. Schedules and Exhibits. The Schedules and
Exhibits annexed hereto and referred to herein are a part of this Agreement and
unless otherwise expressly stated, terms which are defined in this Agreement
shall have the same meanings when used in the Schedules and Exhibits hereto.
SECTION 8.15. Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and thereof and supersede all prior agreements and undertakings, both written
and oral, between Purchaser and the Seller with respect to the subject matter
hereof and thereof.
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<PAGE>
EXHIBIT B
AMENDMENTS TO THE ARTICLES
ARTICLE III
Authorized Shares
Section 1. Number of Shares. The total number of shares of capital
stock which the Corporation has authority to issue is 20,000,000 shares, all of
which shall be divided into two classes of shares to be designated "Common
Stock" and "Preferred Stock", respectively, as follows:
15,000,000 shares of Common Stock; and
5,000,000 shares of Preferred Stock.
The number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof issued and outstanding) by
the affirmative vote of the holders of a majority of shares of Common Stock then
issued and outstanding, without a vote of holders of the shares of the Preferred
Stock, or of any series thereof, unless a vote of any such holders is required
pursuant to the terms and conditions establishing the series of Preferred Stock.
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EXHIBIT C
ARTICLE III
Authorized Shares
Section 4. Voting for Directors. At each election of directors, every
shareholder entitled to vote at an election shall have the right to vote, in
person or by proxy, the number of shares owned by the shareholder for as many
persons as there are directors to be elected and for whose election the
shareholder has a right to vote; however, there shall not be any cumulative
voting either by giving one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of shares owned by the
shareholder, or by distributing such votes accumulated by the same method among
any number of candidates.
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EXHIBIT D
ARTICLE IV
Directors
Section 3. Terms of Directors and Removal. With respect to any
directors whose terms are scheduled to expire when their successors are elected
and qualified at the Annual Meeting of Shareholders (or any special meeting in
lieu thereof) in 2000, the terms of office of each such successor shall
thenceforth be for one year commencing at such annual meeting. With respect to
any directors whose terms of office are scheduled to expire when their
successors are elected and qualified at the Annual Meeting of Shareholders in
2001, the terms of office of each such successor shall thenceforth be for one
year commencing at such annual meeting. With respect to any directors whose
terms of office are scheduled to expire when their successors are elected and
qualified at the Annual Meeting of Shareholders in 2002, the terms of office of
each such successor shall thenceforth be for one year commencing at such annual
meeting and thereafter each such successor may be removed at a meeting. Any
additional directorships resulting from an increase in the number of directors
shall be for a term of one year.
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<PAGE>
EXHIBIT E
ARTICLE IV
Directors
Section 4. Removal of Directors with or Without Cause. Each director
who is elected and qualified at the Annual Meeting of Shareholders (or any
special meeting held in lieu thereof) in 2000 or thereafter may be removed (i)
with or without cause, at a meeting of shareholders called expressly for that
purpose, by a vote of the holders of a majority of the shares then entitled to
vote at an election of directors, or (ii) with cause, by a vote of a majority of
directors then in office. Any additional directors resulting from an increase in
the number of directors or who are elected to fill any vacancy may also be
removed as provided in this Article IV, Section 4. "Cause" for removal of a
director shall be limited to the grounds specifically enumerated in 12 C.F.R.
Section 563.39 (or any successor provision) with respect to termination for
cause.
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<PAGE>
FIDELITY FEDERAL BANCORP
Annual Meeting of Shareholders
May 19, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF FIDELITY FEDERAL BANCORP
The undersigned shareholder of Fidelity Federal Bancorp, an Indiana
corporation ("Fidelity"), hereby appoints M. Brian Davis and Jack Cunningham, or
any of them, with full power to act alone, the true and lawful attorney-in-fact
and proxy of the undersigned, with the full power of substitution and
revocation, and hereby authorizes him to represent and to vote all shares of
Common Stock of Fidelity held of record on March 31, 2000, which the undersigned
is entitled to vote at the Annual Meeting of Shareholders of Fidelity to be held
at the downtown office of United Fidelity Bank, fsb, 18. N.W. Fourth Street,
Evansville, Indiana on May 19, 2000, at 8:30 a.m., local time, and at any
adjournment thereof, with all powers the undersigned would possess if personally
present as follows:
Please specify choices by clearly marking the appropriate line.
ITEM 1. Election of Directors
Nominees: Curt J. Angermeier Donald R. Neel Barry A. Schnakenburg
FOR the nominees listed above (except vote withheld from the
following nominees, if any).
---
---------------------
WITHHOLD AUTHORITY to vote for the nominees listed above
---
WITHHOLD AUTHORITY TO CUMULATE VOTES
---
ITEM 2. Approval of Stock Purchase Agreement Vote upon the Amended
and Restated Stock Purchase Agreement effective January 21,
2000, including the proposed issuance to Pedcor Holdings, LLC,
and its affiliates of 1,460,000 shares of common stock of
Fidelity (representing 31.7% of the outstanding shares of
common stock of Fidelity)
FOR AGAINST ABSTAIN
--- --- ---
ITEM 3. Increase Authorized Shares from 5,000,000 to 15,000,000
Vote upon the proposed amendment to Article III of the
Articles of Incorporation of Fidelity to increase the number
of authorized shares of common stock of Fidelity from
5,000,000 to 15,000,000
FOR AGAINST ABSTAIN
--- --- ---
ITEM 4. Removal of Cumulative Voting for Directors (subject to
shareholder approval of the Stock Purchase Agreement) Vote
upon the proposed amendment to Article III of the Articles of
Incorporation of Fidelity to remove cumulative voting for
directors
FOR AGAINST ABSTAIN
--- --- ---
ITEM 5. Reduction of Terms of Directors (subject to shareholder approval
of the Stock Purchase Agreement) Vote upon the proposed amendment
to Article IV of the Articles of Incorporation of Fidelity to
eliminate "staggered" terms of office and reduce the term of office
of directors from 3 years to 1 year, for all newly-elected directors
FOR AGAINST ABSTAIN
--- --- ---
PLEASE COMPLETE, SIGN AND DATE ON THE FOLLOWING PAGE.
<PAGE>
ITEM 6. Authorize Additional Provisions for Removal of Directors
(subject to shareholder approval of the Stock Purchase
Agreement) Vote upon the proposed amendment to Article IV of
the Articles of Incorporation of Fidelity to permit a director
to be removed by shareholders with or without "cause" (as
defined in the proposed amendment) and to allow the board of
directors to remove a director with "cause"
FOR AGAINST ABSTAIN
--- --- ---
ITEM 7. Ratification of Accountants
Ratify the selection of Olive LLP, as independent public
accountants for Fidelity for the fiscal year ending December
31, 2000.
FOR AGAINST ABSTAIN
--- --- ---
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE MATTERS LISTED
ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF MANAGEMENT.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears hereon.
If signing as a representative, please include
capacity.
_____________________________________________
Signature of Shareholder (if jointly held)
Dated:_________________________________, 2000
Tax Identification Number:___________________
_____________________________________________
Signature of Shareholder (if jointly held)
Dated:_________________________________, 2000
Tax Identification Number:___________________
