<PAGE> 1
As filed with the Securities and Exchange Commission on September 22, 1994
REGISTRATION NO. 33- _______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-----------------------------
KEYCORP
(Exact name of Registrant as specified in its charter)
Ohio 6711 34-6542451
(State or other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code No.) Identification No.)
Incorporation or
Organization)
127 Public Square, Cleveland, Ohio 44114
(216) 689-6300
(Address of Registrant's principal executive offices, including telephone
number and area code)
------------------
Carter B. Chase, Esq., Executive Vice President, General Counsel, and Secretary
KeyCorp
127 Public Square
Cleveland, Ohio 44114
(Name and address of agent for service)
Telephone number, including area code, of agent for service: 216/689-0994
------------------
Copies to:
Daniel R. Stolzer, Esq. Christine M. Marx, Esq.
Nancy L. Griffith, Esq. Edwards & Angell
KeyCorp Management Company 2700 Hospital Trust Tower
127 Public Square Providence, Rhode Island 02903
Cleveland, Ohio 44114 (401) 274-9200
(216) 689-6300
------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement and all other conditions precedent to the merger of First Citizens
Bancorp of Indiana with and into the Registrant have been satisfied or waived
as described in the enclosed Prospectus/Proxy Statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
=====================+================+==================+===================+=======================
| | PROPOSED MAXIMUM | PROPOSED MAXIMUM |
TITLE OF SECURITIES | AMOUNT TO BE | OFFERING PRICE | AGGREGATE | AMOUNT OF
TO BE REGISTERED | REGISTERED(1) | PER SHARE(2) | OFFERING PRICE(2) | REGISTRATION FEE
- ---------------------+----------------+------------------+-------------------+-----------------------
<S> <C> <C> <C> <C>
Common Shares, with a| 1,960,205(3) | $17.68 | $34,656,424.40 | $11,950.49
par value of $1 each | | | |
=====================+================+==================+===================+=======================
</TABLE>
<PAGE> 2
(1) The number of shares to be registered is based upon the maximum number
of shares of the Registrant's Common Shares which may be issued in
connection with the proposed merger of First Citizens Bancorp of Indiana
("First Citizens") with and into the Registrant.
(2) The maximum offering price was estimated solely for purposes of
calculating the registration fee, computed in accordance with Rule
457(f)(2) on the basis of the book value of the common stock of First
Citizens on August 31, 1994, of $17.68 and based on 1,372,144 shares of
First Citizens common stock outstanding.
(3) Includes associated Rights (the "Rights") to purchase the Registrant's
Common Shares. Until the occurrence of certain prescribed events, none
of which has occurred, the Rights are not exercisable, are evidenced by
the certificates representing the Registrant's Common Shares, and will
be transferred along with and only with the Registrant's Common Shares.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
<TABLE>
KEYCORP
CROSS-REFERENCE SHEET
<CAPTION>
ITEM CAPTION OR LOCATION
NO. FORM S-4 CAPTION IN PROSPECTUS/PROXY STATEMENT
--- ---------------- -----------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus . . . . . . . . . . . . . . Facing page of registration statement;
Outside front cover page of Prospectus/Proxy Statement
2. Inside Front and Outside Back Cover Pages of
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . Inside front cover page of Prospectus/Proxy
Statement; Available Information;
Incorporation of Certain Documents
by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information . . . . . . . . . . . . . . . . . . . Summary; Selected Consolidated Financial
Data; Unaudited Comparative Per Common
Share Data; First Citizens Market Price and
Dividend Information
4. Terms of the Transaction . . . . . . . . . . . . . . . . . . Summary; Background of and Reasons for the
Merger; Terms of the Merger; Comparison
of Certain Rights of Holders of Capital Stock
of KeyCorp and First Citizens
5. Pro Forma Financial Information . . . . . . . . . . . . . . . Not Applicable
6. Material Contacts with the Company being
Acquired . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Background of and Reasons for the
Merger; Terms of the Merger; First Citizens
Voting Agreements
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
8. Interests of Named Experts and Counsel . . . . . . . . . . . Certain Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities . . . . . . Not Applicable
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
ITEM CAPTION OR LOCATION
NO. FORM S-4 CAPTION IN PROSPECTUS/PROXY STATEMENT
--- ---------------- -----------------------------
<S> <C> <C>
10. Information with Respect to S-3 Registrants . . . . . . . . . Available Information; Incorporation of
Certain Documents by Reference; The
Business of KeyCorp; Certain Regulatory
Considerations
11. Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . . . . . . . . . . . Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3
Registrants . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
13. Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
14. Information with Respect to Registrants Other
than S-2 or S-3 Registrants . . . . . . . . . . . . . . . . Not Applicable
15. Information with Respect to S-3 Companies . . . . . . . . . . Not Applicable
16. Information with Respect to S-2 or S-3 Companies . . . . . . Not Applicable
17. Information with Respect to Companies Other
than S-2 or S-3 Companies . . . . . . . . . . . . . . . . . Summary; First Citizens Market Price and
Dividend Information; First Citizens
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; First Citizens Financial Data;
The Business of First Citizens
18. Information if Proxies, Consents or
Authorizations are to be Solicited . . . . . . . . . . . . Outside front cover page of Prospectus/Proxy
Statement; Incorporation of Certain
Documents by Reference; Summary;
Introduction; Special Meeting of First
Citizens' Shareholders; Rights of Dissenting
Shareholders; Shareholder Proposals; Terms
of the Merger; The Business of First
Citizens; Experts
19. Information if Proxies, Consents or
Authorizations are Not to be Solicited, or in an
Exchange Offer . . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 5
FIRST CITIZENS BANCORP OF INDIANA
One Citizens Plaza
Box 729
Anderson, Indiana 46015
__________________, 1994
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of First Citizens Bancorp of Indiana ("First Citizens") to be held at the
______________________________ ___________________________________________ on
November ___, 1994, at ________ a.m., local time.
At the Special Meeting, First Citizens shareholders will be asked to
approve the Agreement and Plan of Merger, dated as of June 30, 1994, between
KeyCorp and First Citizens (as amended, the "Merger Agreement"), pursuant to
which First Citizens will be merged with and into KeyCorp (the "Merger").
KeyCorp is an Ohio corporation and a bank holding company conducting business
in Indiana through its wholly owned subsidiary, Society National Bank,
Indiana, with 82 banking offices in Indiana as of June 30, 1994. KeyCorp also
owns banks in 12 other states. KeyCorp, which will be the surviving corporation
in the Merger, has informed First Citizens that following the consummation of
the Merger, KeyCorp plans to effect the merger of Citizens Banking Company, the
sole bank subsidiary of First Citizens, with and into Society National Bank,
Indiana.
If the Merger Agreement is approved and the transactions contemplated
thereby are consummated, each outstanding share of First Citizens Common Stock
will be converted into the number (carried out to four decimal places) of
KeyCorp Common Shares, with a par value of $1 each, determined by dividing
$37.00 by the "Average Stock Price" (as defined below), subject to certain
adjustments as set forth in the Merger Agreement and as described herein;
provided, however, that (A) if the Average Stock Price shall be less than or
equal to $25.9000 per share, the Average Stock Price shall be deemed to be
$25.9000, or (B) if the Average Stock Price shall be greater than or equal to
$38.8500 per share, the Average Stock Price shall be deemed to be $38.8500.
The term "Average Stock Price" means the average (rounded to the nearest whole
cent) of the last sale price of the day of one KeyCorp Common Share as reported
on the consolidated tape of the New York Stock Exchange for the twenty (20)
consecutive trading days ending on and including the fifth (5th) trading day
immediately preceding (but not including) the closing date of the Merger. The
Merger is expected to be a tax free exchange to holders of First Citizens
Common Stock.
Enclosed are a Notice of Special Meeting of Shareholders and a
Prospectus/Proxy Statement which describe the Merger, the background of the
transaction, and the businesses of KeyCorp and First Citizens. You are urged
to read all these materials carefully. The Board of Directors of First
Citizens has fixed the close of business on , 1994 as the record
date for the Special Meeting. Accordingly, only shareholders of record on that
date will be entitled to notice of, and to vote at, the Special Meeting or any
adjournments or
<PAGE> 6
postponements thereof. The affirmative vote of the holders of a majority of
the shares of First Citizens Common Stock outstanding and entitled to vote is
necessary to approve the Merger Agreement. As of this date, First Citizens
shareholders having beneficial ownership of approximately 59% of the
outstanding voting power of First Citizens have entered into Voting Agreements
with KeyCorp pursuant to which such shareholders have agreed to vote in favor
of approval of the Merger Agreement at the Special Meeting.
THE BOARD OF DIRECTORS OF FIRST CITIZENS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE
IN FAVOR OF THE MERGER AGREEMENT AT THE SPECIAL MEETING.
Dillon, Read & Co., Inc. ("Dillon Read"), First Citizens' financial
advisor, has rendered a written opinion to the Board of Directors of First
Citizens that states, among other things, that as of the date of this
Prospectus/Proxy Statement, the consideration to be received in the Merger by
holders of First Citizens Common Stock is fair, from a financial point of view,
to the holders of First Citizens Common Stock. The written opinion of Dillon
Read dated the date of this Prospectus/Proxy Statement is reproduced in full
as Exhibit B to the accompanying Prospectus/Proxy Statement, and I urge you to
read the opinion carefully.
Holders of shares of First Citizens Common Stock who do not vote to
approve and adopt the Merger Agreement and who comply with the requirements of
Sections 23-1-44-1 ET SEQ. of the Indiana Business Corporation Law will be
entitled, if the Merger is consummated, to exercise appraisal rights with
respect to their shares of First Citizens Common Stock. See "RIGHTS OF
DISSENTING SHAREHOLDERS" in the accompanying Prospectus/Proxy Statement for a
description of the procedures to be followed to exercise such rights.
A form of proxy solicited by the Board of Directors of First Citizens
is enclosed. Please indicate your voting instructions and sign, date, and mail
the proxy card promptly in the return envelope provided. If no specification
is made, the proxies will be voted in favor of approval of the Merger
Agreement. Whether or not you plan to attend the Special Meeting in person,
it is important that you return the enclosed proxy card so that your shares of
First Citizens Common Stock are voted. If you attend the Special Meeting, you
may vote in person if you wish, even if you have previously returned your
proxy card.
Promptly after the Merger, a letter of transmittal will be mailed to
all holders of record of shares of First Citizens Common Stock to use in
connection with surrendering their stock certificates. PLEASE DO NOT SEND YOUR
STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD OR TO THE EXCHANGE AGENT UNTIL
YOU RECEIVE THE LETTER OF TRANSMITTAL, WHICH WILL INCLUDE INSTRUCTIONS AS TO
THE PROCEDURE TO BE USED IN SENDING YOUR STOCK CERTIFICATES.
I strongly support the Merger of First Citizens with KeyCorp and join
with the other members of the Board of Directors of First Citizens in
recommending the Merger to you. We urge you to vote in favor of approval of
the Merger Agreement. If you should have any questions about the Merger or need
assistance in completing your proxy card, please contact Karen S. Ambler at
First Citizens at (317) 646-6682.
Sincerely,
/s/ James D. Strietelmeier
James D. Strietelmeier
President and Chief
Executive Officer
<PAGE> 7
FIRST CITIZENS BANCORP OF INDIANA
One Citizens Plaza
Box 729
Anderson, Indiana 46015
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on November __, 1994
A Special Meeting of Shareholders of First Citizens Bancorp of Indiana
("First Citizens") (including any adjournments or postponements thereof, the
"Special Meeting") will be held on November ____, 1994, at ___________ a.m.
local time, at ____________________________________________, for the following
purposes:
(1) To consider and vote upon a proposal to approve an
Agreement and Plan of Merger, dated as of June 30, 1994,
between KeyCorp and First Citizens (as amended, the "Merger
Agreement"), pursuant to which First Citizens will be merged
with and into KeyCorp, with KeyCorp as the surviving
corporation, as described in the Merger Agreement and the
accompanying Prospectus/Proxy Statement. A copy of the Merger
Agreement is attached as Appendix A to the Prospectus/Proxy
Statement.
(2) To transact such other business as may properly come before
the Special Meeting, or any adjournments or postponements
thereof.
Only holders of record of First Citizens Common Stock as of the close
of business on ________________________, 1994 have the right to receive notice
of and to vote at the Special Meeting.
Shareholders of First Citizens have the right to dissent from the
Merger Agreement by properly exercising their dissenters' rights in strict
compliance with the procedures set forth in Chapter 44 of the Indiana Business
Corporation Law (Indiana Code Chapter 23-1-44), a copy of which is attached as
Appendix C to this Prospectus/Proxy Statement.
The accompanying document constitutes the Proxy Statement of First
Citizens with respect to the Special Meeting. A copy of the Agreement and Plan
of Merger is attached as Appendix A to the Prospectus/Proxy Statement.
You are cordially invited to attend the Special Meeting in person.
Whether or not you plan to attend the Special Meeting, you are urged to
complete, date, sign, and return the enclosed proxy card in the envelope
provided as soon as possible. If no specification is made, the proxies will be
voted in favor of approval of the Merger Agreement. If you attend the Special
Meeting, you will be entitled to vote in person if you choose.
HOLDERS OF FIRST CITIZENS COMMON STOCK SHOULD RETAIN THEIR STOCK
CERTIFICATES UNTIL TRANSMITTAL FORMS HAVE BEEN RECEIVED. STOCK CERTIFICATES
SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY CARD.
<PAGE> 8
The Board of Directors of First Citizens unanimously recommends that
shareholders vote for approval of the Merger Agreement.
By Order of the Board of Directors
Anderson, Indiana
/s/ Karen S. Ambler
______________________________
September __, 1994 Karen S. Ambler, Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING,
PLEASE SIGN, DATE, AND PROMPTLY RETURN
THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
<PAGE> 9
SUBJECT TO COMPLETION, DATED SEPTEMBER 22, 1994
FIRST CITIZENS BANCORP OF INDIANA
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER ___, 1994
--------------------------
KEYCORP
PROSPECTUS
COMMON SHARES, WITH A PAR VALUE OF $1 PER SHARE (NOT TO EXCEED 1,960,205
SHARES) AND THE ASSOCIATED RIGHTS
--------------------------
This Prospectus/Proxy Statement is being furnished to the holders of
Common Stock, par value of $1 per share ("First Citizens Common Stock"), of
First Citizens Bancorp of Indiana, an Indiana corporation ("First Citizens"),
in connection with the solicitation of proxies by the Board of Directors of
First Citizens for use at the Special Meeting of Shareholders to be held at
_________ a.m., local time, on November ___, 1994, at
_____________________________________________________________________________,
and at any adjournments or postponements thereof (the "Special Meeting"). At
the Special Meeting, the shareholders of record of First Citizens Common Stock
as of the close of business on _______________________, 1994, will consider and
vote upon a proposal to approve the Agreement and Plan of Merger dated as of
June 30, 1994, by and between KeyCorp, an Ohio corporation, and First Citizens
(as amended, the "Merger Agreement") pursuant to which First Citizens will
merge with and into KeyCorp (the "Merger"). This Prospectus/Proxy Statement
also constitutes a prospectus of KeyCorp with respect to a maximum of
1,960,205 Common Shares, with a par value of $1 per share ("KeyCorp Common
Stock"), including the associated rights to purchase shares of KeyCorp Common
Stock, to be issued in connection with the Merger. Upon consummation of the
Merger, each outstanding share of First Citizens Common Stock will be converted
into the number of shares of KeyCorp Common Stock (carried out to four decimal
places), determined by dividing $37.00 by the "Average Stock Price" (as defined
below), subject to certain adjustments as set forth in the Merger Agreement
and as described herein; provided, however, that (A) if the Average Stock
Price shall be less than or equal to $25.9000 per share, the Average Stock
Price shall be deemed to be $25.9000, or (B) if the Average Stock Price shall
be greater than or equal to $38.8500 per share, the Average Stock Price shall
be deemed to be $38.8500. The term "Average Stock Price" means the average
(rounded to the nearest whole cent) of the last sale price of the day of one
share of KeyCorp Common Stock as reported on the consolidated tape of the New
York Stock Exchange ("NYSE") for the twenty (20) consecutive trading days
ending on and including the fifth (5th) trading day immediately preceding (but
not including) the closing date of the Merger. See "TERMS OF
<PAGE> 10
THE MERGER - Conversion of First Citizens Capital Stock." Each share of
KeyCorp Common Stock issued to First Citizens shareholders in the Merger will
be accompanied by one Right (as defined herein) to purchase one share of
KeyCorp Common Stock upon the terms and conditions set forth in the Rights
Agreement (as defined herein). See "COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
CAPITAL STOCK OF KEYCORP AND FIRST CITIZENS." Unless the context otherwise
requires, all references herein to the KeyCorp Common Stock also include the
Rights attached thereto. For a description of the Merger Agreement, which is
included in its entirety as Appendix A to this Prospectus/Proxy Statement and
incorporated herein, see "TERMS OF THE MERGER." Upon consummation of the
Merger, each outstanding share of KeyCorp Common Stock and each Right
outstanding prior to the Merger will remain issued and outstanding.
The outstanding shares of KeyCorp Common Stock are listed on
the NYSE. The last reported sale price of KeyCorp Common Stock on the NYSE
composite transaction reporting system on __________________, 1994 was
$___________ per share.
This Prospectus/Proxy Statement does not cover any resales of
KeyCorp Common Stock received by shareholders of First Citizens upon
consummation of the Merger, and no person is authorized to make use of the
Prospectus/Proxy Statement in connection with any such resale.
The Merger is a complex transaction and is discussed in detail
in this Prospectus/Proxy Statement. Shareholders are strongly encouraged to
read and consider carefully this Prospectus/Proxy Statement in its entirety.
This Prospectus/Proxy Statement and the accompanying proxy
cards are first being mailed to shareholders of First Citizens on or about
_________________, 1994.
THESE SECURITIES OF KEYCORP HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE SHARES OF KEYCORP COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS, DEPOSITS, OR OTHER OBLIGATIONS OF
A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY.
The date of this Prospectus/Proxy Statement is ________________, 1994.
<PAGE> 11
AVAILABLE INFORMATION
KeyCorp is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). KeyCorp has filed with
the Commission a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), covering the shares of KeyCorp Common Stock to be issued by KeyCorp in
connection with the Merger. The Registration Statement and the exhibits
thereto, as well as the reports, proxy statements, and other information filed
by KeyCorp under the Exchange Act, can be inspected and copied at prescribed
rates at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at The Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center,
Thirteenth Floor, New York, New York 10048. Copies of such material can be
obtained by mail from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Certain securities
of KeyCorp, including the KeyCorp Common Stock, are listed on the NYSE, and
such reports and proxy statements concerning KeyCorp also may be inspected at
the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York,
New York 10005.
This Prospectus/Proxy Statement does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted
from this Prospectus/Proxy Statement in accordance with the rules and
regulations of the Commission. Reference is made to the Registration Statement
and to the exhibits thereto for further information pertaining to KeyCorp and
the securities offered thereby.
Statements contained herein or in any document incorporated herein by
reference as to the contents of any contract or other document referred to
herein or therein are not necessarily complete and, in each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement or such other document incorporated herein by
reference. Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus/Proxy
Statement the following documents and information heretofore filed by KeyCorp
with the Commission pursuant to Sections 12, 13, or 15 of the Exchange Act:
1. KeyCorp's Annual Report on Form 10-K for the year ended
December 31, 1993;
2. KeyCorp's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1994 and June 30, 1994;
3. KeyCorp's Current Reports on Form 8-K, filed on (a) January
21, 1994, (b) March 16, 1994 (as amended by Amendment No. 1 to
Form 8-K on Form 8-K/A filed on May 4, 1994), (c) April 12,
1994, (d) April 20, 1994 (including as exhibits in the case of
the Form 8-K filed on April 20, 1994 (i) Management's
Discussion and Analysis of Financial Condition and Results of
Operations; (ii) Report of Ernst & Young, Independent Auditors;
-3-
<PAGE> 12
(iii) Consolidated Financial Statements for the fiscal
year ended December 31, 1993; (iv) Notes to Consolidated
Financial Statements; and (v) descriptions of KeyCorp's
business (including a discussion of regulatory and
supervisory matters and properties), all of which reflect the
former KeyCorp, a New York corporation, and Society
Corporation, an Ohio corporation, on a combined basis giving
effect to their March 1, 1994 merger in which Society
Corporation was the surviving corporation, and immediately
after which Society Corporation changed its name to KeyCorp),
(e) July 19, 1994, (f) July 26, 1994 (as amended by Amendment
No. 1 to Form 8-K on Form 8-K/A filed on August 10, 1994), and
(g) August 12, 1994; and
4. The description of KeyCorp's Common Shares and the Rights to
purchase Common Shares contained in KeyCorp's Registration
Statement on Form 8-A dated July 31, 1992, as amended by Form
8-A/A filed on February 25, 1994, under Section 12 of the
Exchange Act.
All reports subsequently filed by KeyCorp pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act after the date of this Prospectus/Proxy
Statement and prior to the date of the Special Meeting shall be deemed to be
incorporated by reference into this Prospectus/Proxy Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus/Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as is modified or
superseded, to constitute a part of this Prospectus/Proxy Statement.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS THERETO, ARE AVAILABLE WITHOUT CHARGE TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS/PROXY STATEMENT
IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO CARTER B. CHASE, EXECUTIVE VICE
PRESIDENT, GENERAL COUNSEL AND SECRETARY, KEYCORP, 127 PUBLIC SQUARE,
CLEVELAND, OHIO 44114-1306 (TELEPHONE (216) 689-6300). IN ORDER TO ENSURE
TIMELY DELIVERY OF SUCH DOCUMENTS, A REQUEST MUST BE RECEIVED NO LATER THAN
NOVEMBER __, 1994.
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS/PROXY STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY KEYCORP OR
FIRST CITIZENS. THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH THEY RELATE AND DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS/PROXY STATEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF KEYCORP OR FIRST CITIZENS SINCE THE DATE HEREOF OR THEREOF OR THAT
THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO SUCH DATE.
-4-
<PAGE> 13
TABLE OF CONTENTS
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . 3
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PARTIES TO THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 9
RECOMMENDATION OF THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . 11
OPINION OF FINANCIAL ADVISOR . . . . . . . . . . . . . . . . . . . . . . 11
TERMS OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
CONVERSION OF FIRST CITIZENS COMMON STOCK . . . . . . . . . . . . . 12
SALE OF TRAVEL AGENCY AND INSURANCE AGENCY . . . . . . . . . . . . . 12
DATA PROCESSING . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . 13
DISSENTERS' RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
NYSE LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
CONDITIONS; REGULATORY APPROVALS . . . . . . . . . . . . . . . . . . 13
TERMINATION OF THE MERGER AGREEMENT . . . . . . . . . . . . . . . . 14
TAX AND ACCOUNTING TREATMENT OF THE MERGER . . . . . . . . . . . . . 14
INTERESTS OF CERTAIN PERSONS IN THE MERGER . . . . . . . . . . . . . 14
SHAREHOLDER MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
DATE, TIME, AND PLACE . . . . . . . . . . . . . . . . . . . . . . . 15
PURPOSE OF MEETING . . . . . . . . . . . . . . . . . . . . . . . . . 15
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE . . . . . . . . 15
VOTE REQUIRED . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SHARES OWNED BY DIRECTORS, EXECUTIVE OFFICERS, AND CERTAIN
SUBSIDIARIES OF FIRST CITIZENS . . . . . . . . . . . . . . . . . . 15
VOTING AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 15
MARKET VALUE OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 17
FIRST CITIZENS MARKET PRICE AND DIVIDEND INFORMATION . . . . . . . . . . . . 18
MARKET PRICES OF FIRST CITIZENS COMMON STOCK . . . . . . . . . . . . . 18
DIVIDEND HISTORY OF FIRST CITIZENS COMMON STOCK . . . . . . . . . . . 19
SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . 20
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UNAUDITED COMPARATIVE PER COMMON SHARE DATA . . . . . . . . . . . . . . . . . 23
FIRST CITIZENS FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . 25
FIRST CITIZENS MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . 48
GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
FINANCIAL CONDITION . . . . . . . . . . . . . . . . . . . . . . . . . 48
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . 50
PROVISION FOR LOAN LOSSES . . . . . . . . . . . . . . . . . . . . . . 56
OTHER INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
OTHER OPERATING EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 57
INCOME TAX EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . 58
CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
LIQUIDITY AND INTEREST RATE SENSITIVITY . . . . . . . . . . . . . . . 59
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SPECIAL MEETING OF FIRST CITIZENS SHAREHOLDERS . . . . . . . . . . . . . . . 62
DATE, TIME, AND PLACE . . . . . . . . . . . . . . . . . . . . . . . . . . 62
PURPOSE OF MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE . . . . . . . . . . 62
VOTE REQUIRED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SHARE OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
VOTING, SOLICITATION, AND REVOCATION OF PROXIES . . . . . . . . . . . . . 64
BACKGROUND OF AND REASONS FOR THE MERGER . . . . . . . . . . . . . . . . . . 65
BACKGROUND OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . 65
FIRST CITIZENS' REASONS FOR THE MERGER . . . . . . . . . . . . . . . . . 66
KEYCORP'S REASONS FOR MERGER . . . . . . . . . . . . . . . . . . . . . . 69
OPINION OF FINANCIAL ADVISOR . . . . . . . . . . . . . . . . . . . . . . 69
RECOMMENDATION OF FIRST CITIZENS' BOARD OF DIRECTORS . . . . . . . . . . 71
TERMS OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
CONVERSION OF FIRST CITIZENS COMMON STOCK; EFFECTS ON KEYCORP
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SURRENDER OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . 73
CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . . . . . . . . . . . 74
SALE OF TRAVEL AGENCY AND INSURANCE AGENCY . . . . . . . . . . . . . . . 76
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ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 77
DATA PROCESSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
NO SOLICITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . 79
REGULATORY APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . 80
WAIVER OF CONDITIONS, AMENDMENT, OR TERMINATION OF THE MERGER AGREEMENT . 82
EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
INTERESTS OF CERTAIN PERSONS IN THE MERGER . . . . . . . . . . . . . . . 83
CERTAIN FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . . 84
ACCOUNTING TREATMENT OF MERGER . . . . . . . . . . . . . . . . . . . . . 86
NYSE LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
RIGHTS OF DISSENTING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . 88
VOTING AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
RESALES OF KEYCORP COMMON STOCK RECEIVED IN THE MERGER . . . . . . . . . . . 90
THE BUSINESS OF KEYCORP . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
BANKING SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . 91
OTHER FINANCIAL SERVICES SUBSIDIARIES . . . . . . . . . . . . . . . . . . 92
RECENTLY COMPLETED ACQUISITION . . . . . . . . . . . . . . . . . . . . . . 93
PENDING ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 93
REGULATION AND SUPERVISION OF KEYCORP . . . . . . . . . . . . . . . . . . 94
THE BUSINESS OF FIRST CITIZENS . . . . . . . . . . . . . . . . . . . . . . . 99
OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100
REGULATION AND SUPERVISION OF FIRST CITIZENS . . . . . . . . . . . . . .101
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF CAPITAL STOCK OF KEYCORP AND FIRST
CITIZENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101
STATE TAKEOVER STATUTES AND TAKEOVER PROVISIONS OF CHARTER DOCUMENTS . .102
SHAREHOLDER RIGHTS PLAN . . . . . . . . . . . . . . . . . . . . . . . . .105
SPECIAL MEETINGS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . .107
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AMENDMENT OF CHARTER DOCUMENTS . . . . . . . . . . . . . . . . . . . . .107
DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .109
DIRECTOR LIABILITY AND INDEMNIFICATION . . . . . . . . . . . . . . . . .110
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .112
CERTAIN LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .112
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .113
SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . .114
APPENDICES
APPENDIX A - AGREEMENT AND PLAN OF MERGER
APPENDIX B - OPINION OF FINANCIAL ADVISOR
APPENDIX C - CHAPTER 44 OF INDIANA BUSINESS CORPORATION LAW (DISSENTERS'
RIGHTS)
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SUMMARY
The following summary is intended to summarize certain information
contained elsewhere in this Prospectus/Proxy Statement. This summary is not
intended to be complete and is qualified in its entirety by reference to the
more detailed information contained elsewhere in this Prospectus/Proxy
Statement, the appendices hereto, and the documents referred to and
incorporated herein.
INTRODUCTION
The Board of Directors of KeyCorp has ratified and the Board of
Directors of First Citizens has unanimously approved and adopted the Merger
Agreement pursuant to which First Citizens will be merged with and into KeyCorp
if the shareholders of First Citizens approve the Merger Agreement by the
requisite shareholder vote, regulatory approvals are received, and certain other
conditions are satisfied. KeyCorp will be the surviving corporation in the
Merger. A copy of the Merger Agreement is incorporated herein by reference and
attached hereto as Appendix A. The terms of the Merger and information
regarding the Special Meeting are summarized below.
PARTIES TO THE MERGER
KEYCORP. On March 1, 1994, KeyCorp ("old Key"), a New York corporation
and a financial services holding company headquartered in Albany, New York,
with approximately $33 billion in assets at December 31, 1993, merged with and
into Society Corporation ("Society"), an Ohio corporation and a financial
services holding company headquartered in Cleveland, Ohio, with approximately
$27 billion in assets at December 31, 1993, pursuant to an Agreement and Plan
of Merger, and a related Supplemental Agreement to Agreement and Plan of
Merger, each dated as of October 1, 1993, and each as amended. In the merger,
Society was the surviving corporation, but changed its name to KeyCorp. All
financial data of KeyCorp set forth in this Prospectus/Proxy Statement has been
restated to give effect to the merger of old Key with and into Society.
The merger of old Key with and into Society created a financial services
holding company which traces its roots back to 1825, when the first predecessor
of KeyCorp was organized. At June 30, 1994, KeyCorp was one of the largest
bank holding companies in the United States with consolidated assets of
approximately $63.4 billion.
KeyCorp provides banking and other financial services across much of the
country's northern tier and in Florida through a network of subsidiaries
operating 1,275 full-service banking offices in 13 states, giving KeyCorp the
nation's fifth largest domestic branch network as of June 30, 1994. KeyCorp's
primary banking subsidiaries include Society National Bank, headquartered in
Cleveland, Ohio, the largest bank in Ohio and one of the nation's major
regional banks with $23.2 billion in total assets and 291 full-service banking
offices at June 30, 1994; Key Bank of New York, headquartered in Albany, New
York, with $14.5 billion in total assets and 330 full-service banking offices
at June 30, 1994; and Society National Bank, Indiana, headquartered in South
Bend, Indiana (described in more detail below). In addition, KeyCorp operates
banking subsidiaries in Alaska, Colorado, Florida, Idaho, Maine, Michigan,
Oregon, Utah, Washington, and Wyoming.
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<PAGE> 18
Society National Bank, Indiana is a national banking association
headquartered in South Bend, Indiana, and a wholly owned subsidiary of KeyCorp.
At June 30, 1994, Society National Bank, Indiana had approximately $3.2 billion
in total assets and 82 full-service banking offices. At such date Society
National Bank, Indiana was the fourth largest bank in Indiana. Society
National Bank, Indiana is engaged in a general banking business in the State of
Indiana providing commercial and retail banking services to consumers and
small, middle-market and large corporate customers. Society National Bank,
Indiana's principal markets are northern and central Indiana, including the
metropolitan areas of South Bend and Indianapolis as well as a number of
smaller urban and rural markets. Retail banking products offered by Society
National Bank, Indiana include, among others, consumer loan products (including
residential real estate mortgage, home equity, direct and indirect installment,
credit card and student lending), and private banking services. Commercial
banking products and services include, among others, real estate, agribusiness,
asset-based and general corporate lending, cash management, correspondent
banking, and trade financing and support services related to international
operations (primarily letter of credit, collection, payment and foreign
exchange services). Following consummation of the Merger, KeyCorp plans to
effect the merger of Citizens Banking Company ("Citizens Bank"), the sole bank
subsidiary of First Citizens, with and into Society National Bank, Indiana.
KeyCorp's other banking subsidiaries also provide a wide range of
banking, fiduciary and other financial services to their corporate, individual
and institutional customers located throughout the country. In addition to the
customary banking services of accepting funds for deposit and making loans,
KeyCorp's banking subsidiaries provide specialized services tailored to
specific markets, including investment management services, personal and
corporate trust services, personal financial services, customer access to money
market and other mutual funds, cash management services, investment banking
services, and international banking services.
In addition to the services provided through its banking offices,
KeyCorp engages in a wide range of other financial services through
subsidiaries, including mortgage banking, investment management, mutual fund
advisory, and trust services.
Through its non-banking subsidiaries, KeyCorp provides additional
financial services both in and outside of its primary banking markets. These
include personal and corporate trust services, investment management,
reinsurance of credit life and accident and health insurance on loans made by
subsidiary banks, venture capital and small business investment financing
services, equipment lease financing, community development financing, stock
transfer agent, and other financial services.
The principal executive offices of KeyCorp are located at 127 Public
Square, Cleveland, Ohio 44114-1306, and its telephone number is (216) 689-6300.
FIRST CITIZENS. First Citizens, an Indiana corporation, is a bank
holding company headquartered in Anderson, Indiana. At June 30, 1994, First
Citizens had total consolidated assets of $349.7 million. Through its banking
subsidiary, Citizens Bank, headquartered in Anderson, Indiana, First Citizens
engages in a general banking business in the Madison County, Indiana area.
Citizens Bank is an Indiana-chartered commercial bank founded in 1855
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<PAGE> 19
which operates nine banking center offices located in the towns of Anderson,
Alexandria, and Chesterfield in Madison County, Indiana. Citizens Bank also
maintains a loan origination office in Indianapolis, Indiana. Through its
various departments, Citizens Bank makes secured, unsecured and government
guaranteed commercial loans, construction and permanent mortgage loans and
consumer loans to individuals for various purposes including the purchase of
automobiles and appliances and for home improvements. Citizens Bank also
provides its customers with letters of credit, lines of credit and revolving
credit loans, and offers checking, savings, money market deposit, and
individual retirement accounts, certificates of deposit, safe deposit and
after-hour deposit services, automated teller machines and wire transfer
services. Citizens Bank's trust department offers a broad array of fiduciary
services, including personal trusts, corporate trusts, estates, services
related to guardianships, portfolio management, farm management, pension and
profit sharing, real estate management, stock transfer agency and registrar
services. As of December 31, 1993, Citizens Bank's trust department had
custody of approximately $97 million in trust assets.
Through its indirect non-banking subsidiaries, First Citizens currently
operates a property and casualty insurance agency, a travel agency, and a real
estate holding company. The Merger Agreement requires First Citizens to sell
or otherwise dispose of its non-banking subsidiaries, other than the real
estate holding company, prior to the consummation of the Merger. See "TERMS OF
THE MERGER -- Sale of Travel Agency and Insurance Agency."
The principal executive offices of First Citizens are located at One
Citizens Plaza, Anderson, Indiana 46016, and its telephone number is (317)
649-8100.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The First Citizens Board of Directors has adopted a resolution approving
the Merger Agreement and, for the reasons set forth herein, has determined that
the Merger is fair to and in the best interests of First Citizens and its
shareholders. The Board of First Citizens, therefore, recommends that First
Citizens' shareholders vote FOR approval of the Merger Agreement. See
"BACKGROUND OF AND REASONS FOR THE MERGER -- Background of the Merger; First
Citizens' Reasons for the Merger; and Opinion of Financial Advisor."
THE BOARD OF DIRECTORS OF FIRST CITIZENS HAS UNANIMOUSLY
APPROVED AND ADOPTED THE MERGER AGREEMENT AND RECOMMENDS
APPROVAL OF THE MERGER AGREEMENT BY THE SHAREHOLDERS OF FIRST CITIZENS
OPINION OF FINANCIAL ADVISOR
Dillon, Read & Co. Inc. ("Dillon Read") has delivered its written
opinions to First Citizens' Board of Directors to the effect that, as of the
date of the Merger Agreement and as of the date of this Prospectus/Proxy
Statement, the consideration to be received by shareholders of First Citizens
pursuant to the Merger Agreement was fair, from a financial point of view, to
the holders of First Citizens' Common Stock on each respective date. A copy of
the opinion of Dillon Read dated as of the date of this Prospectus/Proxy
Statement is attached hereto as Appendix B. The opinion should be read in its
entirety for a description of the procedures
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<PAGE> 20
followed by, assumptions and qualifications made by, matters considered by, and
limitations imposed on Dillon Read. See also "BACKGROUND OF AND REASONS FOR
THE MERGER -- Opinion of Financial Advisor."
TERMS OF THE MERGER
GENERAL. Pursuant to the Merger Agreement, at the Effective Time
(defined below), First Citizens will be merged with and into KeyCorp with
KeyCorp as the surviving corporation. See "TERMS OF THE MERGER -- General."
For information on how First Citizens shareholders will be able to exchange
certificates representing shares of First Citizens Common Stock for new
certificates representing shares of KeyCorp Common Stock, see "TERMS OF THE
MERGER -- Surrender of Certificates."
EFFECTIVE TIME. Subject to the receipt of regulatory approvals and the
satisfaction of other conditions, the Merger is expected to be consummated in
January 1995. The Merger will be consummated after (i) First Citizens'
shareholders' approval of the Merger Agreement; (ii) receipt of required
regulatory approvals and expiration of applicable statutory waiting periods;
and (iii) satisfaction or waiver of all other conditions to consummation of
the Merger pursuant to the Merger Agreement. The time and date at which the
Merger will be consummated is referred to herein as the "Effective Time." See
"TERMS OF THE MERGER -- Effective Time; Conditions to the Merger; and Regulatory
Approvals."
CONVERSION OF FIRST CITIZENS COMMON STOCK. At the Effective Time, each
outstanding share of First Citizens Common Stock will be converted into the
number of shares of KeyCorp Common Stock (carried out to four decimal places),
determined by dividing $37.00 by the Average Stock Price; provided, however,
that (A) if the Average Stock Price shall be less than or equal to $25.9000 per
share, the Average Stock Price shall be deemed to be $25.9000, or (B) if the
Average Stock Price shall be greater than or equal to $38.8500 per share, the
Average Stock Price shall be deemed to be $38.8500 (the foregoing calculation
shall be referred to hereinafter as the "Exchange Ratio"). Cash will be paid
in lieu of issuing fractional shares of KeyCorp Common Stock and to
shareholders who properly exercise dissenters' rights. The Exchange Ratio is
subject to downward adjustment upon the occurrence of certain circumstances as
more fully described herein. See "TERMS OF THE MERGER -- Sale of Insurance
Agency and Travel Agency; Environmental Matters." All references to the shares
of KeyCorp Common Stock in this Prospectus/Proxy Statement include the
associated rights ("Rights") to purchase KeyCorp Common Stock pursuant to a
Rights Agreement, dated as of August 25, 1989, between KeyCorp and Society
National Bank as rights agent, as amended (the "Rights Agreement"); each share
of KeyCorp Common Stock issued to shareholders of First Citizens in the Merger
will be accompanied by one Right which will be evidenced by the certificates
for the KeyCorp Common Stock. See "TERMS OF THE MERGER -- Conversion of First
Citizens Common Stock; Certain Federal Income Tax Consequences;" "COMPARISON OF
CERTAIN RIGHTS OF HOLDERS OF CAPITAL STOCK OF KEYCORP AND FIRST CITIZENS" and
"RIGHTS OF DISSENTING SHAREHOLDERS."
SALE OF TRAVEL AGENCY AND INSURANCE AGENCY. The Merger Agreement
requires First Citizens to sell Citizens Travel, Inc. (the "Travel Agency") and
Citizens Insurance Agency, Inc. (the "Insurance Agency") prior to the closing
date of the Merger. The Travel Agency and the
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<PAGE> 21
Insurance Agency are each indirect subsidiaries of First Citizens. If First
Citizens realizes a net after tax gain on the sale of the Travel Agency and
Insurance Agency, the amount of such gain may be distributed by First Citizens
as a dividend to its shareholders. If First Citizens realizes a net after tax
loss on the sale of the Travel Agency and Insurance Agency, certain downward
adjustments to the Exchange Ratio will be required. See "TERMS OF THE
MERGER -- Conversion of First Citizens Capital Stock; Sale of Travel Agency
and Insurance Agency."
DATA PROCESSING. It is a condition to the consummation of the Merger
that First Citizens enter into a one-year "right to use" extension agreement
(the "Extension Agreement") with Information Technology, Inc. ("ITI") relating
to the use by First Citizens of certain data processing system software. The
Extension Agreement or another third party agreement or arrangement, which
must be reasonably satisfactory to KeyCorp, relating to the operating and
servicing of First Citizens' data processing systems must be entered into no
later than October 1, 1994, and must cover the period from November 1, 1994 to
November 1, 1995. On September 2, 1994, First Citizens entered into an
Extension Agreement with ITI, effective to November 1, 1995. See "TERMS OF THE
MERGER -- Data Processing."
ENVIRONMENTAL MATTERS. First Citizens has agreed to commission, at its
own expense, a Phase I environmental audit of all real property owned or leased
by it, including property relating to its branches and property acquired
through foreclosure and held as real estate owned. Upon review of the Phase I
environmental audit reports, KeyCorp may commission Phase II environmental
audits, with the cost of such audits to be shared equally by First Citizens and
KeyCorp. If, based on any reports resulting from such audits, the estimated
cost of remediation or repair exceeds $250,000, the Exchange Ratio will be
adjusted downward. If the estimated cost of remediation or repair exceeds
$3,000,000, KeyCorp or First Citizens may elect either to terminate the Merger
Agreement or, in lieu of such termination, the parties may agree that further
downward adjustments to the Exchange Ratio will be made on a dollar-for-dollar
basis or at such lesser amount as the parties might then agree. See "TERMS OF
THE MERGER -- Conversion of First Citizens Common Stock; Environmental Matters;
Waiver of Conditions, Amendment, or Termination of the Merger Agreement."
DISSENTERS' RIGHTS. Holders of First Citizens Common Stock may, by
complying with the provisions of Chapter 44 of the Indiana Business Corporation
Law, exercise dissenters' rights. Failure to comply precisely with the
requirements of the applicable statutes will result in the loss of dissenters'
rights. See "RIGHTS OF DISSENTING SHAREHOLDERS."
NYSE LISTING. KeyCorp has agreed to use all reasonable efforts to cause
the listing on the NYSE of (a) the KeyCorp Common Stock issued in the Merger
and (b) the Rights which will accompany the KeyCorp Common Stock issued in the
Merger. See "TERMS OF THE MERGER -- NYSE Listing."
CONDITIONS; REGULATORY APPROVALS. Consummation of the Merger is
conditioned upon approval of the Merger Agreement by the affirmative vote of
holders of a majority of the issued and outstanding shares of First Citizens
Common Stock as set forth herein; receipt of all necessary approvals of the
Merger by governmental regulatory agencies, including the Board of Governors of
the Federal Reserve System ("the Federal Reserve Board"), and the Indiana
Department of
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<PAGE> 22
Financial Institutions, applications for which have been filed, and expiration
of all applicable statutory waiting periods; receipt by each party of a
favorable tax opinion from its legal counsel; the continuing accuracy of the
representations and warranties of each party contained in the Merger Agreement;
performance of specified obligations by each party; notification from holders
of no more than 10% of the issued and outstanding shares of First Citizens
Common Stock that they intend to exercise dissenters' rights; and certain other
conditions. See "TERMS OF THE MERGER -- Conditions to the Merger; Regulatory
Approvals."
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be
terminated, and the Merger abandoned, prior to the Effective Time, whether
before or after its adoption by the shareholders of First Citizens (a) by the
mutual written consent of the Board of Directors of both KeyCorp and First
Citizens; (b) by First Citizens' Board of Directors in the event that the
average per share closing price of KeyCorp Common Stock as reported on the NYSE
over the twenty (20) trading days immediately preceding the fifth (5th) day
prior to the closing date of the Merger (the "Closing Price") is less than
$24.2812; (c) by KeyCorp's Board of Directors in the event that the Closing
Price exceeds $40.4687; or (d) by either Board of Directors under certain
specified circumstances, including if the Merger shall not have been
consummated by March 31, 1995, or if the remediation cost of certain
environmental conditions exceeds $3,000,000. See "TERMS OF THE MERGER --
Waiver of Conditions, Amendment, or Termination of the Merger Agreement;
Environmental Matters."
TAX AND ACCOUNTING TREATMENT OF THE MERGER. Consummation of the Merger
is conditioned upon receipt by KeyCorp and First Citizens of opinions from
their respective legal counsel which may be based on various facts and
representations and subject to various assumptions dated as of the Effective
Time substantially to the effect that the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"). If the Merger
constitutes such a tax-free reorganization, the following would be the material
federal income tax consequences of the Merger: (a) no income, gain, or loss
will be recognized by shareholders of First Citizens upon the exchange of
shares of First Citizens Common Stock for shares of KeyCorp Common Stock
(including the Rights), except that income, gain, or loss will be recognized by
any holder of First Citizens Common Stock receiving cash from exercising
dissenters' rights or receiving cash in lieu of a fractional share of KeyCorp
Common Stock; (b) the tax basis of the shares of KeyCorp Common Stock received
by shareholders of First Citizens will be the same as the tax basis of the
shares of First Citizens Common Stock surrendered in exchange therefor,
decreased by the basis allocated to any fractional share interests; and (c) the
holding period for the shares of KeyCorp Common Stock received by shareholders
of First Citizens will generally include the holding period for shares of First
Citizens Common Stock surrendered in exchange therefor. Shareholders should
consult their own tax advisors regarding the tax consequences of the Merger to
them under applicable law. The Merger will be treated as a purchase for
financial reporting purposes. See "TERMS OF THE MERGER -- Certain Federal
Income Tax Consequences; Accounting Treatment of Merger" and "RIGHTS OF
DISSENTING SHAREHOLDERS."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. On May 5, 1994, First
Citizens entered into an employment agreement with James D. Strietelmeier,
President and Chief Executive Officer of First Citizens. The employment
agreement provides for severance benefits to be paid to Mr. Strietelmeier in
the event his employment is terminated under certain circumstances. See "TERMS
OF THE MERGER -- Interests of Certain Persons in the Merger."
-14-
<PAGE> 23
Approximately 57% of the issued and outstanding shares of First Citizens
Common Stock are beneficially owned by directors, executive officers, and their
affiliates. In addition, shareholders of First Citizens having beneficial
ownership of First Citizens Common Stock representing approximately 59% of the
outstanding voting power have entered into Voting Agreements with KeyCorp
pursuant to which each such First Citizens shareholder has agreed to vote in
favor of the Merger Agreement at the Special Meeting. See "VOTING AGREEMENTS."
SHAREHOLDER MEETING
DATE, TIME, AND PLACE. The Special Meeting of First Citizens
shareholders will be held on November ___, 1994, at _____a.m., local time, at
______________________________. See "SPECIAL MEETING OF FIRST CITIZENS
SHAREHOLDERS -- Date, Time, and Place."
PURPOSE OF MEETING. The purpose of the Special Meeting is for
shareholders of First Citizens to consider and vote upon a proposal to approve
the Merger Agreement, pursuant to which First Citizens will be merged with and
into KeyCorp, with KeyCorp as the surviving corporation. See "SPECIAL MEETING
OF FIRST CITIZENS SHAREHOLDERS -- Purpose of Meeting."
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE. Shares of First
Citizens Common Stock are the only shares entitled to vote at the Special
Meeting. The record date for the Special Meeting established by the Board of
Directors of First Citizens is ______________, 1994 (the "Record Date"); on
that date there were 1,372,144 shares of First Citizens Common Stock
outstanding. See "SPECIAL MEETING -- Shares Outstanding and Entitled to Vote;
Record Date."
VOTE REQUIRED. The affirmative vote by holders of a majority of the
shares of First Citizens Common Stock outstanding on the Record Date is
required to approve the Merger Agreement. See "SPECIAL MEETING OF FIRST
CITIZENS SHAREHOLDERS -- Vote Required." Due to the Voting Agreements
executed by shareholders of First Citizens beneficially owning approximately
59% of the issued and outstanding shares of First Citizens Common Stock,
pursuant to which such shareholders have agreed to vote in favor of the Merger
Agreement, it is anticipated that the Merger Agreement will be approved at the
Special Meeting. See "VOTING AGREEMENTS."
SHARES OWNED BY DIRECTORS, EXECUTIVE OFFICERS, AND CERTAIN SUBSIDIARIES
OF FIRST CITIZENS. As of the Record Date, First Citizens' directors, executive
officers, and their affiliates owned and were entitled to vote 783,158 shares
of First Citizens Common Stock at the Special Meeting; such shares represent
approximately 57% of the total issued and outstanding shares of First Citizens.
The Merger Agreement will be approved with the affirmative vote of a majority
of the issued and outstanding shares of First Citizens Common Stock. In
addition, as of the Record Date, the trust department of Citizens Bank, in a
fiduciary capacity for third parties, had sole voting and dispositive power or
shared voting and dispositive power as to 150,214 shares of First Citizens
Common Stock or approximately 11% of the outstanding First Citizens Common
Stock. See "SPECIAL MEETING OF FIRST CITIZENS SHAREHOLDERS -- Vote Required."
VOTING AGREEMENTS. Eighteen shareholders of First Citizens holding
approximately 59% of the issued and outstanding shares of First Citizens'
Common Stock entitled to vote at the
-15-
<PAGE> 24
Special Meeting have executed and delivered to KeyCorp Voting Agreements
pursuant to which such shareholders have agreed to vote in favor of approval of
the Merger Agreement. These shareholders include directors and their
affiliates owning approximately 57% of the issued and outstanding shares of
First Citizens Common Stock. See "VOTING AGREEMENTS."
-16-
<PAGE> 25
MARKET VALUE OF SECURITIES
The following table sets forth the historical market value per share of each
of KeyCorp Common Stock and First Citizens Common Stock and the equivalent
market value per share of First Citizens Common Stock, each as of June 29,
1994, the last business day preceding public announcement of the Merger. The
equivalent market value per share of First Citizens Common Stock is based on an
exchange ratio of 1.1429 shares of KeyCorp Common Stock, estimated as if the
Exchange Ratio for the Merger were applied using a price per share of KeyCorp
Common Stock of $32.375, which was the closing price of a share of KeyCorp
Common Stock on June 29, 1994, as reported on the NYSE. This exchange ratio is
an estimate only for purposes of this Prospectus/Proxy Statement, and will
likely not be the Exchange Ratio used for the issuance of KeyCorp Common Stock
in connection with the Merger. The Exchange Ratio to be applied in the Merger
is subject to adjustment based on the Average Stock Price (determined in
accordance with the Merger Agreement) of KeyCorp Common Stock, and will be
subject to downward adjustment upon the occurrence of certain other conditions
and pursuant to the Merger Agreement described herein. See "TERMS OF THE
MERGER -- Conversion of First Citizens Common Stock; Sale of Travel Agency and
Insurance Agency; Environmental Matters." The historical market value per
share of KeyCorp Common Stock used to determine the equivalent market value per
share of First Citizens Common Stock below is the closing price per share of
KeyCorp Common Stock on June 29, 1994, as reported on the NYSE. Shares of
First Citizens Common Stock are traded, to a limited degree, through the "Pink
Sheets" service of the National Association of Securities Dealers, Inc.; the
historical market value per share of First Citizens Common Stock used to
determine the equivalent market value per share of First Citizens Common Stock
below is the bid quotation on June 29, 1994, as reported by the Chicago
Corporation, a regional securities brokerage firm. No shares of First Citizens
Common Stock were offered for sale on June 29, 1994.
First Citizens
------------------------------
Equivalent
KeyCorp Market Value
Historical Historical Per Share
---------- ---------- ---------
Closing Prices on
June 29, 1994 . . . . . $ 32.375 $ 21.00 $ 37.00
No assurance can be given as to the market price of KeyCorp Common Stock
if and at the time that the Merger is consummated or when shares of KeyCorp
Common Stock are actually issued.
-17-
<PAGE> 26
FIRST CITIZENS MARKET PRICE AND DIVIDEND INFORMATION
MARKET PRICES OF FIRST CITIZENS COMMON STOCK
There is no established public trading market for the First Citizens
Common Stock and to the best knowledge of First Citizens, sales of such stock
are isolated and infrequent and generally are effected in private transactions
between buyer and seller. The First Citizens Common Stock is quoted through
the "Pink Sheets" service of the National Association of Securities Dealers,
Inc. and a limited trading market is maintained by the Chicago Corporation.
The following table sets forth the range of high and low bid quotations per
share of the First Citizens Common Stock as reported to First Citizens by the
Chicago Corporation for the periods indicated. First Citizens has not verified
the accuracy of those quotations that have been reported. The bid quotations
identified below reflect inter-dealer bids, without markup, markdown or
commissions, and may not represent actual transactions. Additionally, the
quotations identified below may not reflect the prices at which First Citizens
Common Stock would trade in an active public market. As of August 15, 1994,
First Citizens had 327 holders of record of its Common Stock.
<TABLE>
<CAPTION>
1992 HIGH LOW
- ---- ---- ---
<S> <C> <C>
First Quarter $17 $17
Second Quarter $17 $17
Third Quarter $15 $15
Fourth Quarter $16 $16
1993
- ----
First Quarter $17 $17
Second Quarter $17 $17
Third Quarter $17 $17
Fourth Quarter $18 $18
1994
- ----
First Quarter $19 $19
Second Quarter $21 $21
</TABLE>
-18-
<PAGE> 27
DIVIDEND HISTORY OF FIRST CITIZENS COMMON STOCK
The following table indicates the cash dividends declared per share of
First Citizens Common Stock for each of the periods indicated, adjusted to give
retroactive effect to a 5% stock dividend paid on January 5, 1994:
<TABLE>
<CAPTION>
Year First Quarter Second Quarter Third Quarter Fourth Quarter
<S> <C> <C> <C> <C>
1992 $.12 $.12 $.12 $.26
1993 .14 .14 .14 .20
1994 .20 .20
</TABLE>
First Citizens and its wholly owned banking subsidiary Citizens Bank are
each subject to certain governmental regulations that require the maintenance
of certain capital levels. As a result, the amount of equity that is
unrestricted and available for dividends is limited. Additionally, pursuant to
a capital note indenture under which First Citizens has issued Subordinated
Capital Notes, certain restrictions exist on the declaration or payment of cash
dividends on First Citizens Common Stock. See Note 9 "Subordinated Capital
Notes" and Note 15 "Dividends" to the Consolidated Financial Statements of
First Citizens included herein.
-19-
<PAGE> 28
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth selected historical consolidated
financial data for KeyCorp and First Citizens for each of the five years in the
period ended December 31, 1993, and for the six-month periods ended June 30,
1994 and 1993. Such data have been derived from, and should be read in
conjunction with, the consolidated financial statements and the unaudited
consolidated interim financial statements of KeyCorp and First Citizens,
including the notes thereto, incorporated by reference or included elsewhere in
this Prospectus/Proxy Statement. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE" and "FIRST CITIZENS FINANCIAL DATA." Selected unaudited financial
information for the six-month periods ended June 30, 1994 and 1993, for KeyCorp
and First Citizens, in each case, includes all adjustments, consisting only of
normal recurring adjustments that, in the opinion of the management of KeyCorp
and First Citizens, respectively, were considered necessary for a fair
presentation of the consolidated operating results and financial position for
and at the end of such interim periods. Results for the interim periods are
not necessarily indicative of results expected for the year as a whole. See
"AVAILABLE INFORMATION" and "FIRST CITIZENS FINANCIAL DATA."
On March 1, 1994, the former KeyCorp ("old Key"), a New York corporation
and financial services holding company headquartered in Albany, New York,
merged with and into Society Corporation ("Society"), an Ohio corporation and a
financial services holding company headquartered in Cleveland, Ohio, pursuant
to an Agreement and Plan of Merger and a related Supplemental Agreement to
Agreement and Plan of Merger, each dated as of October 1, 1993, and each as
amended. In the merger, Society was the surviving corporation, but changed its
name to KeyCorp. The merger was accounted for as a pooling of interests and,
accordingly, the financial data for KeyCorp is presented as if old Key and
Society had been combined for all periods presented.
Neither the Merger nor any other pending acquisitions under
consideration by KeyCorp is expected to have a material effect on KeyCorp's
selected consolidated financial data. Accordingly, no pro forma combined
selected consolidated financial data is included herein. See "BACKGROUND OF
AND REASONS FOR THE MERGER."
-20-
<PAGE> 29
<TABLE>
KEYCORP AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>
Six months ended
June 30, Year ended December 31,
--------------------- ------------------------------------------------------
(dollars in millions, except per share amounts) 1994 1993 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD
Interest income $2,147.6 $2,112.4 $4,213.9 $4,198.8 $4,652.4 $4,528.8 $4,410.2
Interest expense 799.2 784.1 1,534.9 1,750.1 2,519.4 2,667.7 2,615.8
Net interest income 1,348.4 1,328.3 2,679.0 2,448.7 2,133.0 1,861.1 1,794.4
Provision for loan losses 71.8 115.4 211.7 338.4 466.2 517.2 306.2
Noninterest income 454.0 475.9 1,001.7 925.2 849.3 744.2 635.1
Noninterest expense 1,081.5 1,104.8 2,385.1 2,170.4 2,065.7 1,819.5 1,705.8
Income before income taxes 649.1 584.0 1,083.9 865.1 450.4 268.6 417.5
Net income 430.4 386.8 709.9 592.1 313.7 256.1 286.7
Net income applicable to Common Shares 422.4 376.8 691.8 568.1 297.5 249.0 281.3
- ----------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Net income $1.74 $1.58 $2.89 $2.42 $1.31 $1.13 $1.26
Cash dividends .64 .56 1.12 .98 .92 .88 .80
Weighted average Common Shares (000) 243,382.6 238,733.3 239,775.2 235,004.8 227,116.2 220,078.6 223,901.3
- ----------------------------------------------------------------------------------------------------------------------------------
AT PERIOD-END
Loans $43,157.6 $38,375.9 $40,071.3 $36,021.8 $35,534.3 $34,193.7 $31,570.4
Earning assets 57,347.0 52,699.9 54,352.7 49,380.8 48,207.9 44,668.2 41,871.4
Total assets 63,356.6 57,944.5 59,631.2 55,068.4 53,600.9 49,953.4 47,205.1
Deposits 47,796.2 44,400.8 46,499.1 43,433.1 42,835.0 40,935.3 37,375.4
Long-term debt 2,123.6 1,957.2 1,763.9 1,790.1 1,224.5 1,145.2 1,177.4
Common shareholders' equity 4,438.8 3,999.5 5,233.6 3,683.3 3,272.4 2,941.7 2,929.1
Total shareholders' equity 4,598.8 4,183.5 4,393.6 3,927.3 3,516.4 3,025.7 2,979.4
- ----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets 1.42% 1.38% 1.24% 1.13% .60% .54% .64%
Return on average common equity 19.49 19.75 17.27 16.33 9.29 8.39 9.56
Efficiency (1) 59.27 60.30 60.50 60.96 65.27 66.92 67.09
Overhead (2) 46.05 46.49 46.85 47.21 52.63 54.58 56.50
Net interest margin 4.97 5.38 5.31 5.31 4.71 4.53 4.64
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS AT PERIOD-END
Tangible equity to tangible assets 6.42% 6.16% 6.51% 6.11% 5.45% 4.79% 5.39%
Tier 1 risk-adjusted capital 8.77 8.42 8.73 8.56 7.67 6.75 N/A
Total risk-adjusted capital 12.03 11.98 12.22 11.73 9.80 9.17 N/A
Leverage 6.76 6.48 6.72 6.56 5.97 5.23 N/A
- ----------------------------------------------------------------------------------------------------------------------------------
ASSET QUALITY
Nonperforming loans $309.0 $409.8 $336.3 $552.9 $ 729.5 $ 798.9 $555.4
Nonperforming assets 431.9 701.8 500.1 900.2 1,071.9 1,013.2 683.1
Allowance for loan losses 816.4 795.7 802.7 782.6 793.5 677.3 452.7
Nonperforming loans to period-end loans .72% 1.07% .84% 1.53% 2.05% 2.34% 1.76%
Nonperforming assets to period-end loans
plus OREO and other nonperforming assets 1.00 1.81 1.24 2.47 2.99 2.94 2.16
Allowance for loan losses to nonperforming
loans 264.21 194.18 238.69 141.54 108.79 84.78 81.51
Allowance for loan losses to period-end loans 1.89 2.07 2.00 2.17 2.23 1.98 1.43
Net loan charge-offs to average loans .30 .64 .56 1.02 1.11 1.02 .89
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
The comparability of the information presented above is affected by certain
acquisitions and divestitures that KeyCorp has completed in the time periods
presented.
(1) Calculated as noninterest expense (excluding merger and integration charges
and other nonrecurring charges) divided by taxable-equivalent net interest
income plus noninterest income (excluding net securities transactions and
certain gains on asset sales).
(2) Calculated as noninterest expense (excluding merger and integration charges
and other nonrecurring charges) less noninterest income (excluding net
securities transactions and certain gains on assets sales) divided by
taxable-equivalent net interest income.
N/A = Not Applicable
</TABLE>
-21-
<PAGE> 30
<TABLE>
FIRST CITIZENS BANCORP OF INDIANA AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>
Six months ended
June 30, Year ended December 31,
------------------- --------------------------------------------------
(dollars in millions, except per share amounts) 1994 1993 1993 1992 1991 1990 1989
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD
Interest income $11.1 $11.3 $22.0 $18.2 $19.5 $19.6 $18.6
Interest expense 4.6 4.9 9.7 8.4 10.8 11.7 11.2
Net interest income 6.5 6.3 12.3 9.8 8.8 7.9 7.5
Provision for loan losses .2 .5 1.1 .7 .8 .6 .8
Noninterest income 1.2 1.1 2.2 1.8 1.8 2.0 1.7
Noninterest expense 4.8 5.2 9.8 7.6 6.9 6.9 6.6
Income before income taxes
and accounting change 2.6 1.6 3.7 3.3 2.8 2.5 1.8
Net income 1.8 1.5 2.9 2.4 2.1 1.8 1.5
Net income applicable to Common Shares 1.8 1.5 2.9 2.4 2.1 1.8 1.5
- -------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Net income $1.34 $1.08 $2.13 $1.85 $1.62 $1.44 $1.17
Cash dividends .40 .28 .62 .62 .50 .38 .24
Weighted average Common Shares (000) 1372 1,372 1,372 1,288 1,274 1,155 1,155
- -------------------------------------------------------------------------------------------------------------------------
AT PERIOD-END
Loans $249.5 $233.1 $234.9 $229.3 $135.3 $134.7 $126.0
Earning assets 324.7 314.6 320.2 315.2 202.1 199.7 180.1
Total assets 349.7 339.3 347.1 345.2 221.7 220.5 206.0
Deposits 295.3 297.1 305.2 307.3 190.9 187.9 175.5
Long-term debt 4.2 4.4 4.4 4.5 5.0 5.2 5.4
Common shareholders' equity 23.9 22.0 23.4 20.9 17.9 16.4 15.1
Total shareholders' equity 23.9 22.0 23.4 20.9 17.9 16.4 15.1
- -------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets 1.06% .88% .85% .84% .93% .89% .76%
Return on average common equity 15.56 14.01 13.21 12.25 12.04 11.63 10.30
Efficiency (1) 58.71 70.47 64.27 62.00 62.60 65.90 68.55
Overhead (2) 51.55 62.08 58.15 55.36 55.36 57.87 61.76
Net interest margin 4.26 4.22 4.10 4.02 4.62 4.05 4.39
- -------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS AT PERIOD-END
Tangible equity to tangible assets 12.00% 11.24% 12.07% 10.87% 13.38% 12.29% N/A
Tier 1 risk-adjusted capital 10.61 9.79 10.60 9.41 11.73 10.63 N/A
Total risk-adjusted capital 12.00 11.24 12.07 10.87 13.38 12.29 N/A
Leverage 6.36 5.94 6.06 5.43 7.78 7.20 6.90
- -------------------------------------------------------------------------------------------------------------------------
ASSET QUALITY DATA
Nonperforming loans $1.5 $1.6 $1.6 $1.3 $1.6 $1.7 $2.2
Nonperforming assets 1.8 2.2 2.2 1.6 1.8 2.0 2.6
Allowance for loan losses 3.4 2.8 3.1 2.4 2.2 2.1 2.2
Nonperforming loans to period-end loans .62% .67% .67% .56% 1.15% 1.24% 1.76%
Nonperforming assets to period-end loans plus
OREO and other nonperforming assets .72 .96 .92 .71 135.49 148.49 206.40
Allowance for loan losses to nonperforming
loans 219.60% 179.45% 198.79% 183.04% 138.52% 127.86% 97.79%
Allowance for loan losses to period-end loans 1.36 1.21 1.33 1.03 1.59 1.59 1.72
Net loan charge-offs to average loans .06 .15 .14 .29 .58 .56 .49
<FN>
- -------------------------------------------------------------------------------------------------------------------------
(1) Calculated as noninterest expense divided by taxable-equivalent net interest income plus noninterest income.
(2) Calculated as noninterest expense less noninterest income divided by taxable-equivalent net interest income.
N/A = Not Applicable
</TABLE>
-22-
<PAGE> 31
UNAUDITED COMPARATIVE PER COMMON SHARE DATA
The following table sets forth unaudited comparative per common share
book value, cash dividends declared and income data: (a) on an historical
basis for KeyCorp and First Citizens; (b) on a pro forma basis per share of
KeyCorp Common Stock adjusted to give effect to the Merger as if the Merger had
occurred at June 30, 1994, with respect to the presentation of book value and as
if the Merger had occurred at January 1, 1993, with respect to the presentation
of income before cumulative effect of change in accounting principle; and (c)
on an equivalent pro forma basis per share of First Citizens Common Stock. The
information presented assumes that KeyCorp will acquire First Citizens in a
tax-free exchange of stock for total consideration of $50.8 million (equal to a
value of $37 per share for each share of First Citizens Common Stock
outstanding). Based on the closing price of KeyCorp's Common Stock on June 29,
1994, the information assumes an exchange ratio of 1.1429 shares of KeyCorp
Common Stock for each share of First Citizens Common Stock outstanding
immediately prior to the Merger in a transaction to be accounted for as a
purchase. This exchange ratio is an estimate only for purposes of this
Prospectus/Proxy Statement, and will not likely be the Exchange Ratio used for
the issuance of KeyCorp Common Stock in connection with the Merger. The actual
number of shares of KeyCorp Common Stock to be exchanged for each share of
First Citizens Common Stock will be determined by dividing $37 (subject to
adjustment pursuant to the terms of the Merger Agreement) by the Average Stock
Price (as described on the cover page to this Prospectus/Proxy Statement) of
one share of KeyCorp Common Stock.
The following information should be read in conjunction with the
historical financial statements of KeyCorp and First Citizens incorporated by
reference or included elsewhere in this Prospectus/Proxy Statement. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "AVAILABLE INFORMATION," and
"FIRST CITIZENS FINANCIAL DATA". The pro forma data prior to the "Effective
Time" may not be indicative of the results that actually would have occurred if
the Merger had been in effect during the periods presented or which may be
attained in the future.
-23-
<PAGE> 32
<TABLE>
UNAUDITED COMPARATIVE PER COMMON SHARE DATA
<CAPTION>
KeyCorp First Citizens
---------------------- --------------------------
Equivalent
Historical Pro Forma Historical Pro Forma (1)
---------- --------- ---------- -------------
<S> <C> <C> <C> <C>
BOOK VALUE
June 30, 1994 $18.17 $18.26 $17.45 $20.87
December 31, 1993 17.53 17.62 17.05 20.14
CASH DIVIDENDS DECLARED (2)
Second quarter 1994 $ .32 $ .32 $ .20 $ .37
First quarter 1994 .32 .32 .20 .37
Fourth quarter 1993 .28 .28 .20 .32
Third quarter 1993 .28 .28 .14 .32
Second quarter 1993 .28 .28 .14 .32
First quarter 1993 .28 .28 .14 .32
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (3)
Six months ended June 30, 1994 $1.74 $1.73 $1.34 $1.98
Year ended December 31, 1993 2.89 2.87 1.90 3.28
<FN>
(1) The equivalent pro forma per share amounts for First
Citizens Common Stock represent, in the cases of book
value and income before cumulative effect of change
in accounting principle, the pro forma amounts for
shares of KeyCorp Common Stock multiplied by 1.1429
(the exchange ratio) and, in the case of cash
dividends declared, the historical data for shares of
KeyCorp Common Stock multiplied by 1.1429 (the
exchange ratio).
(2) The KeyCorp pro forma cash dividends declared
represent KeyCorp's historical dividends. No
assurance can be given that equivalent dividends will
be paid in the future. The amount of future dividends
payable by KeyCorp will depend upon the earnings and
financial condition of KeyCorp and other factors,
including, without limitation, applicable
governmental regulations and policies.
(3) For KeyCorp, there was no cumulative effect of a change in
accounting principle reported for the periods presented in this schedule.
</TABLE>
-24-
<PAGE> 33
FIRST CITIZENS FINANCIAL DATA
INDEPENDENT AUDITOR'S REPORT
----------------------------
Shareholders and Board of Directors
First Citizens Bancorp of Indiana
Anderson, Indiana
We have audited the accompanying consolidated balance sheets of FIRST CITIZENS
BANCORP OF INDIANA as of December 31, 1993 and 1992 and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FIRST
CITIZENS BANCORP OF INDIANA as of December 31, 1993 and 1992, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, FIRST CITIZENS BANCORP OF
INDIANA changed its method of accounting for income taxes and investment
securities in 1993.
CROWE, CHIZEK AND COMPANY
Indianapolis, Indiana
February 11, 1994
-25-
<PAGE> 34
<TABLE>
CONSOLIDATED BALANCE SHEETS
---------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993 AND 1992
<CAPTION>
ASSETS 1993 1992
- ------ ---- ----
<S> <C> <C>
Cash and due from banks (Note 12) $ 15,141,294 $ 16,823,812
Short-term investments 3,895,000 5,992,432
------------- -------------
Total cash and cash equivalents 19,036,294 22,816,244
Investment securities available-for-sale (Note 2) 69,473,634 0
Investment securities held-to-maturity (Note 2) 11,970,984 79,972,992
Total loans (Note 3) 234,904,999 229,258,695
Less: Allowance for loan losses (Note 4) 3,117,243 2,351,774
------------- -------------
Loans, net 231,787,756 226,906,921
Premises and equipment, net (Note 5) 8,081,662 8,718,184
Accrued income and other assets 6,754,042 6,823,117
------------- -------------
Total assets $ 347,104,372 $ 345,237,458
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
LIABILITIES
- -----------
Non-interest bearing deposits $ 25,625,281 $ 21,786,232
Interest bearing deposits (Note 6) 279,566,477 285,502,476
------------- -------------
Total deposits 305,191,758 307,288,708
Short-term borrowings (Note 7) 12,035,991 10,364,605
Federal Home Loan Bank advance (Note 8) 3,900,000 4,000,000
Subordinated capital notes (Note 9) 500,000 500,000
Accrued expenses and other liabilities 2,074,950 2,158,767
------------- -------------
Total liabilities 323,702,699 324,312,080
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 13)
- -----------------------------
SHAREHOLDERS' EQUITY (Note 15)
- --------------------
Common stock, ($1 par value - 5,000,000 shares
authorized, 1,372,144 shares (1993) and
1,306,930 shares (1992) issued and outstanding
(Note 19) 1,372,144 1,306,930
Additional paid-in capital 9,898,647 8,828,485
Retained earnings 11,716,429 10,789,963
Net unrealized holding gain - available-for-sale securities (Note 1) 414,453 0
------------- -------------
Total shareholders' equity 23,401,673 20,925,378
------------- -------------
Total liabilities and shareholders'
equity $ 347,104,372 $ 345,237,458
============= =============
<FN>
See accompanying notes to financial statements.
</TABLE>
-26-
<PAGE> 35
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FIRST CITIZENS BANCORP OF INDIANA
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $17,449,435 $13,364,564 $14,063,269
Interest on deposits in other banks 0 44,132 142,080
Interest on federal funds sold 240,572 152,536 272,249
Interest on investment securities
Taxable 3,777,608 4,011,779 4,299,867
Tax exempt 580,233 631,713 734,434
----------- ----------- -----------
Total interest income 22,047,848 18,204,724 19,511,899
----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 9,075,558 7,713,392 10,098,780
Interest on short-term borrowed funds 292,786 254,375 202,558
Interest on long-term debt 341,208 424,479 450,788
----------- ----------- -----------
Total interest expense 9,709,552 8,392,246 10,752,126
----------- ----------- -----------
Net interest income 12,338,296 9,812,478 8,759,773
Provision for loan losses (Note 4) 1,080,000 720,000 800,000
----------- ----------- -----------
Net interest income after provision for
loan losses 11,258,296 9,092,478 7,959,773
----------- ----------- -----------
OTHER OPERATING INCOME
Trust fees 430,000 344,000 309,000
Service charge income 1,155,827 960,986 927,310
Insurance commission income 286,521 250,102 301,494
Other operating income 354,363 259,854 225,164
Gain on investments 0 2,600 33,326
----------- ----------- -----------
Total other operating income 2,226,711 1,817,542 1,796,294
----------- ----------- -----------
OTHER OPERATING EXPENSES
Salaries and employee benefits (Note 10) 4,477,875 3,675,536 3,376,414
Occupancy expenses - net 845,076 739,621 699,386
Equipment expenses 702,106 629,009 565,737
FDIC insurance assessment 685,805 456,108 391,816
Other operating expenses 3,083,078 2,069,404 1,898,652
----------- ----------- -----------
Total other operating expenses 9,793,940 7,569,678 6,932,005
----------- ----------- -----------
Income before income taxes and cumulative
effect of change in accounting method 3,691,067 3,340,342 2,824,067
Less: Income taxes (Note 11) 1,089,377 964,896 758,843
----------- ----------- -----------
Income before cumulative effect of change 2,601,690 2,375,446 2,065,219
in accounting method
Cumulative effect of changing to a different
method of accounting for income taxes (Note 1) 325,000 0 0
----------- ----------- -----------
NET INCOME $ 2,926,690 $ 2,375,446 $ 2,065,219
=========== =========== ===========
Earnings per share (Note 12)
Income before cumulative effect of
change in accounting method $1.90 $1.85 $1.62
Cumulative effect of change in accounting method .23 0 0
----- ----- -----
Net Income $2.13 $1.85 $1.62
===== ===== =====
<FN>
See accompanying notes to financial statements.
</TABLE>
-27-
<PAGE> 36
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
NET UNREALIZED
ADDITIONAL HOLDING GAIN - TOTAL
COMMON PAID-IN RETAINED AVAILABLE FOR SALE SHAREHOLDERS'
STOCK CAPITAL EARNINGS SECURITIES EQUITY
----- ------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
BALANCE AS OF
- -------------
JANUARY 1, 1991
- --------------- $1,213,180 $7,447,200 $ 7,774,784 $ 0 $16,435,164
Net income for 1991 2,065,219 2,065,219
Cash dividends
($.50 per share) (636,919) (636,919)
---------- ---------- ------------ ------------- -----------
BALANCE AS OF
- -------------
DECEMBER 31, 1991 1,213,180 7,447,200 9,203,084 0 17,863,464
- -----------------
Net income for 1992 2,375,446 2,375,446
Cash dividends
($.62 per share) (788,567) (788,567)
Proceeds from sale of
stock (93,750 shares)
(Note 18) 93,750 1,381,285 1,475,035
---------- ---------- ------------ ------------- -----------
BALANCE AS OF
- -------------
DECEMBER 31, 1992 1,306,930 8,828,485 10,789,963 0 20,925,378
- -----------------
Net Income for 1993 2,926,690 2,926,690
Cash dividends
($.62 per share) (864,848) (864,848)
Stock Dividend (65,214
shares) (Note 12) 65,214 1,070,162 (1,135,376) 0
Change in net unrealized
holding gain-available
for sale securities 414,453 414,453
---------- ---------- ------------ ------------- -----------
BALANCE AS OF
- -------------
DECEMBER 31, 1993
- ----------------- $1,372,144 $9,898,647 $11,716,429 $414,453 $23,401,673
========== ========== ============ ============= ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
-28-
<PAGE> 37
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1993 1992 1991
- ------------------------------------ ---- ---- ----
<S> <C> <C> <C>
Net income $ 2,926,690 $ 2,375,446 $ 2,065,219
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 1,150,689 691,292 614,527
Provision for loan losses 1,080,000 720,000 800,000
Gain on investments (2,600) (33,326)
Change in interest receivable 123,185 (127,865) 408,192
Change in interest payable 339,450 (230,636) (394,251)
Change in other assets (272,544) (145,527) 280,035
Change in other liabilities (423,267) 436,566 3,777
Net amortization on investments 596,111 418,030 52,241
(Gain)/Loss on sale of fixed assets (5,549) 4,255 110,988
Change in taxes payable (481,822) (174,199) (34,238)
----------- ----------- -----------
Total adjustments 2,106,253 1,589,316 1,807,945
----------- ----------- -----------
Net cash from operating activities 5,032,943 3,964,762 3,873,164
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Proceeds from sales and maturities of
investments 41,169,243 38,210,198 22,859,297
Purchase of investments (42,550,685) (37,692,637) (28,354,762)
Net change in loans (5,960,835) (23,642,811) (1,446,050)
Property and equipment expenditures (365,486) (716,312) (425,965)
Proceeds from sale of property and equipment 285,282 600 87,977
Cash acquired upon acquisition of branches,
net of purchase price (Note 17) 16,421,067
----------- ----------- -----------
Net cash used for investing activities (7,422,481) (7,419,895) (7,279,503)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Net increase/(decrease) in deposits (2,096,950) 10,964,313 3,063,435
Dividends paid (864,848) (788,567) (636,919)
Proceeds from issuance of stock 1,475,035
Principal reduction of mortgage bonds payable (4,025,000) (170,000)
Principal reduction of capital notes (500,000)
Advance from/(payment to) Federal Home Loan Bank (100,000) 4,000,000
Net change in short-term borrowing 1,671,386 4,077,673 (2,625,068)
----------- ----------- -----------
Net cash from financing activities (1,390,412) 15,203,454 (368,552)
----------- ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS
- --------------------------------------- (3,779,950) 11,748,321 (3,774,891)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
- ------------------------------------------------ 22,816,244 11,067,923 14,842,814
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD
- ------------------------------------------ $19,036,294 $22,816,244 $11,067,923
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- -------------------------------------------------
Cash paid during the period for:
Interest $10,049,002 $ 8,622,882 $11,146,377
Income taxes 1,173,000 1,139,095 793,081
<FN>
See accompanying notes to financial statements.
</TABLE>
-29-
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
DESCRIPTION OF BUSINESS: First Citizens Bancorp of Indiana ("Company") is a
one bank holding company whose wholly-owned subsidiary, Citizens Banking
Company ("Bank"), grants commercial, installment, and residential loans to
customers primarily in the Madison County, Indiana area. Substantially all
loans are secured by specific items of collateral including business assets,
consumer assets, and real property.
BASIS OF REPORTING: The financial statements of the Company include the
accounts of the Bank and its wholly-owned subsidiaries, CIBCO Realty, Inc.,
Citizens Insurance Agency, Inc. and Citizens Travel, Inc. Upon consolidation,
all significant intercompany accounts and transactions have been eliminated.
STATEMENT OF CASH FLOWS: For purposes of this statement, cash and cash
equivalents are defined to include cash and due from banks and short-term
money market investments. The Company reports net cash flows for customer loan
and deposit transactions.
INVESTMENT SECURITIES: The Company classifies securities into
held-to-maturity and available-for-sale categories. Held-to-maturity
securities are those which the Company has the positive intent and ability to
hold to maturity, and are reported at amortized cost. Available-for-sale
securities are those which the Company may sell, if needed, for liquidity,
asset-liability management, or other reasons. Available-for-sale securities
are reported at fair value, with unrealized gains or losses included as a
separate component of equity, net of tax.
At December 31, 1993, the Company adopted Financial Accounting Standard (FAS)
No. 115 and accordingly classified its securities into the categories discussed
above. Prior to this date, securities were reported at amortized cost, except
for securities held for sale, which were reported at the lower of cost or
market value. The adoption of FAS No. 115 increased equity by $414,453 at
December 31, 1993.
Realized gains or losses are determined based on the amortized cost of the
specific security sold. Interest and dividend income, adjusted for the
amortization of purchase premium or the accretion of purchase discount, is
included in earnings.
-30-
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------------------
INTEREST INCOME ON LOANS: Interest on loans is accrued over the term of the
loans based on the principal outstanding. The recognition of interest income is
discontinued when, in management's judgment, the interest will not be
collectible in the normal course of business. Loan fees, net of certain direct
loan origination costs, are deferred and recognized into interest income over
the term of the loan using the level yield method.
ALLOWANCE FOR LOAN LOSSES: The balance in the allowance and the amount of
the annual provision charged to expense are judgmentally determined based upon
a number of factors. Estimating the risk of loss and the amount of loss on any
loan is necessarily subjective. Accordingly, the allowance is maintained by
management at a level considered adequate to cover possible losses that are
currently anticipated based on past loss experience, general economic
conditions, information about specific borrower situations, including their
financial position and collateral values, and other factors and estimates which
are subject to change over time. While management may periodically allocate
portions of the allowance for specific problem loan situations, the whole
allowance is available for any loan chargeoffs that occur. Increases to the
allowance are recorded by a provision for possible loan losses charged to
expense. A loan is charged off by management as a loss when deemed
uncollectible, although collection efforts continue and future recoveries may
occur.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation. Premises and equipment are depreciated on the
straight-line method over the estimated useful lives of the assets.
Maintenance and repairs are expensed and major improvements are capitalized.
INTANGIBLE ASSETS: Accrued income and other assets includes goodwill of
$484,250 related to the acquisition of the Alexandria Banking Company in 1986.
Goodwill is being amortized using the straight line method over twenty years.
Also included in accrued income and other assets are a core deposit intangible
of $1,519,537 and a non-compete agreement of $391,667 which were acquired in
the purchase of the Colonial Central Savings Bank Branches in 1992. The core
deposit intangible and non-compete agreement are being amortized over their
estimated lives of ten and five years using the level yield method and the
straight line method, respectively. Amortization expense recorded during the
year ended December 31, 1993 was $37,320, $389,750 and $108,333 for the
goodwill, core deposit intangible and non-compete agreement, respectively.
-31-
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------------------
OTHER REAL ESTATE: Real estate acquired through foreclosure is carried at the
lower of cost (fair value at date of foreclosure) or fair value less estimated
selling costs. If it is later determined that the total capitalized cost of
the property cannot be recovered through sale or use, the loss is immediately
recognized by a charge to income and the creation of a reserve for other real
estate.
CHANGE IN ACCOUNTING FOR INCOME TAXES: Effective January 1, 1993, the
Company adopted Statement of Financial Accounting Standard No. 109 (FAS 109),
Accounting for Income Taxes. The adoption of FAS 109 changes the method of
accounting for income taxes from the deferred method to an asset and liability
approach which requires the recognition of deferred tax liabilities and assets
for the expected future tax consequences of temporary differences between the
carrying amounts and the tax basis of assets and liabilities. The effect on
previously recorded deferred tax amounts at that date is reflected in the
statement of income as the cumulative effect of accounting change. The effect
of adopting the new standard in 1993 was to increase net income by $325,000,
the cumulative effect of the accounting change.
INCOME TAXES: Deferred tax liabilities and assets are determined at each
balance sheet date. They are measured by applying enacted tax laws to future
amounts that will result from differences in the financial statement and tax
basis of assets and liabilities. Recognition of deferred tax assets is limited
by the establishment of a valuation reserve unless management concludes that
they are more likely than not going to result in future tax benefits to the
Company. In years prior to 1993, the Company recorded tax expense based on the
effect of timing differences on taxable income during the year the timing
differences arose or reversed.
PROFIT SHARING PLAN: Employees of the Bank and its subsidiaries are
participants in a profit sharing plan adopted January 1, 1986. Effective July
1, 1991 the plan was amended to include 401(k) and employer matching
provisions. Under the plan, the Bank may make annual contributions on behalf
of qualified participants. The annual contributions are determined by the
Bank's Board of Directors. (See Note 10).
FAIR VALUE DISCLOSURES: The Company discloses the estimated fair value of
its financial instruments. These estimates are included in the footnotes to
the Company's financial statements. For purposes of these disclosures of
estimated fair value, the following assumptions were used as of December 31,
1993 and 1992. The estimated fair value for cash and cash equivalents is
considered to approximate cost. The estimated fair value for securities is
based on quoted market values for the individual securities or for equivalent
securities. The estimated fair value for loans is based on estimates of the
difference in interest rate the Bank would charge the borrowers for similar
such loans with similar maturities applied for an estimated time period until
the loan is assumed to reprice or be paid.
-32-
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ---------------------------------------------------------------
Fair Value Disclosures Continued:
- ----------------------
The estimated fair value for demand and savings deposits and short-term
borrowings is based on their carrying value. The estimated fair value for
certificates of deposit is based on estimates of the rate the Bank would pay on
such deposits, applied for the time period until maturity. The estimated fair
value of commitments is based on the amount the Bank would charge to enter into
a similar commitment.
While these estimates of fair value are based on management's judgment of the
most appropriate factors, there is no assurance that were the Bank to have
disposed of such items, the estimated fair values would necessarily have been
achieved at those dates, since market values may differ depending on various
circumstances. The estimated fair values should not necessarily be considered
to apply at subsequent dates.
In addition, other assets and liabilities of the Company that are not defined
as financial instruments are not included in the above disclosures, such as
property and equipment. Also, non-financial instruments typically not
recognized in financial statements nevertheless may have value but are not
included in the above disclosures. These include, among other items, the
estimated earnings power of core deposit accounts, the earnings potential of
loan servicing rights, the earnings potential of the Bank's trust department,
the trained work force, customer goodwill and similar items.
FINANCIAL STATEMENT PRESENTATION: Certain items in the 1992 and 1991
financial statements have been reclassified to correspond with the 1993
presentation. These reclassifications had no effect on shareholders' equity or
the results of operations.
-33-
<PAGE> 42
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
NOTE 2 - INVESTMENT SECURITIES
- ------------------------------
Information regarding held-to-maturity securities follows:
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
SECURITY TYPE: COST GAINS LOSSES VALUE
- -------------- ---- ----- ------ -----
<S> <C> <C> <C> <C>
At December 31, 1993:
Obligations of states
and political subdivisions $11,970,984 $ 367,812 $ (10,813) $12,327,983
=========== ========== ========== ===========
At December 31, 1992:
U.S. Treasury and agency
securities $ 9,310,961 $ 327,416 $ (2) $ 9,638,375
FHLB stock 792,300 0 0 792,300
Obligations of states
and political subdivisions 9,475,849 283,979 (17,430) 9,742,398
U.S. government mortgage-backed investments 43,987,464 659,417 (40,414) 44,606,467
Other asset-backed obligations 3,556,786 23,440 (2,050) 3,578,176
Corporate securities 12,849,632 6,783 (11,790) 12,844,625
----------- ---------- ---------- -----------
Total $79,972,992 $1,301,035 $ (71,686) $81,202,341
=========== ========== ========== ===========
</TABLE>
Contractual maturities of held-to-maturity securities at December 31, 1993 are
shown below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties. The contractual maturity of EDC bonds is
not reflected because the principal balance of these bonds is repaid by
periodic scheduled payments over the term of the bonds.
<TABLE>
<CAPTION>
AMORTIZED FAIR
MATURITY COST VALUE
-------- ---- -----
<S> <C> <C>
Due within one year $ 1,763,166 $ 1,793,898
Due within one to five years 7,019,220 7,284,765
Due within five to ten years 2,368,869 2,429,590
EDC Bonds 819,729 819,729
----------- -----------
Total $11,970,984 $12,327,982
=========== ===========
-34-
</TABLE>
<PAGE> 43
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
NOTE 2 - INVESTMENT SECURITIES (CONTINUED)
- ------------------------------------------
Information regarding available-for-sale securities follows:
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
SECURITY TYPE: COST GAINS LOSSES VALUE
- -------------- ---- ----- ------ -----
<S> <C> <C> <C> <C>
At December 31, 1993:
U.S. Treasury and agency
securities $31,965,350 $178,784 $ (71,384) $32,072,750
FHLB stock 1,192,100 0 0 1,192,100
U.S. government mortgage-
backed investments 25,001,517 491,364 (19,213) 25,473,668
Corporate securities 10,628,372 106,744 0 10,735,116
----------- -------- --------- -----------
Total $68,787,339 $776,892 $ (90,597) $69,473,634
=========== ======== ========= ===========
</TABLE>
Contractual maturities at December 31, 1993 are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties. Mortgage-backed investments are not reported in a specific maturity
grouping since payments on the underlying collateral are passed-through prior
to contractual maturity. FHLB stock is not reported in a specific maturity
grouping since this security does not have a stated maturity.
<TABLE>
<CAPTION>
AMORTIZED FAIR
MATURITY COST VALUE
-------- ---- -----
<S> <C> <C>
Due within one year $10,816,838 $10,908,978
Due within one to five years 31,776,884 31,898,888
Due within five to ten years 0 0
Mortgage-backed investments 25,001,517 25,473,668
FHLB stock 1,192,100 1,192,100
----------- -----------
Total $68,787,339 $69,473,634
=========== ===========
</TABLE>
Other information:
- ------------------
Proceeds from the sales of investments were $3,740,475 during 1991.
Gross gains of $33,326 were realized on these sales. A gain of $2,600 was
recognized during 1992 when an investment was called prior to its maturity.
There were no investment sales during 1993.
Investment securities with a book value of approximately $20,107,000
and $18,905,000 as of December 31, 1993 and 1992, were pledged to secure public
deposits and borrowings.
-35-
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
NOTE 3 - LOANS
- --------------
Loans as presented on the balance sheet are comprised of the following:
<CAPTION>
1993 % 1992 %
---- - ---- -
<S> <C> <C> <C> <C>
Commercial loans $ 80,933,702 34.5 $ 73,571,631 32.1
Real estate loans 92,934,152 39.6 101,907,251 44.5
Installment loans 61,037,145 25.9 53,779,813 23.4
------------ ----- ------------ -----
Total loans $234,904,999 100.0% $229,258,695 100.0%
============ ===== ============ =====
</TABLE>
At December 31, 1993 and 1992, the fair value of the Company's loan
portfolio is estimated to be $238,531,000 and $232,581,000. At December 31,
1993 and 1992, non-accrual loans totalled $1,207,418 and $587,373. Income
recorded on these loans during 1993, 1992 and 1991 was $19,978, $4,110, and
$59,147, respectively. Income which would have been recorded on these loans
during 1993, 1992 and 1991, had they been accruing all year, was $119,371,
$85,081, and $164,751, respectively.
At December 31, 1993 and 1992, the Company had loans totalling $360,765
and $698,379, respectively, which were over ninety days delinquent and were
still accruing interest. These amounts include guaranteed student loans which,
as of December 31, 1993 and 1992, totalled $345,370 and $427,734.
<TABLE>
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
- ----------------------------------
The activity in the allowance for loan losses is as follows:
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Balance, January 1 $2,351,774 $2,154,428 $2,142,955
Provision charged to operations 1,080,000 720,000 800,000
Loans charged off (490,180) (777,183) (911,174)
Recoveries 175,649 254,529 122,647
---------- ---------- ----------
Balance, December 31 $3,117,243 $2,351,774 $2,154,428
========== ========== ==========
</TABLE>
<TABLE>
NOTE 5 - PREMISES AND EQUIPMENT
- -------------------------------
A summary of premises and equipment by major category follows:
<CAPTION>
1993 1992
<S> <C> <C>
Land $ 1,350,395 $ 1,637,488
Buildings and improvements 9,245,405 9,169,459
Furniture and equipment 4,780,435 4,575,373
----------- -----------
Total 15,376,235 15,382,320
Accumulated depreciation (7,294,573) (6,664,136)
----------- -----------
Net $ 8,081,662 $ 8,718,184
=========== ===========
</TABLE>
Depreciation expense for the years ended December 31, 1993, 1992 and
1991 totalled $722,275, $645,907 and $569,131.
-36-
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
NOTE 6 - INTEREST BEARING DEPOSITS
- ----------------------------------
At December 31, 1993 and 1992, the fair value of the Company's portfolio of
interest bearing deposits is estimated to be $280,965,000 and $287,282,000.
Interest bearing deposits issued in denominations of $100,000 or greater
totalled $8,803,890 and $13,043,421 at December 31, 1993 and 1992. Interest
expense in 1993, 1992 and 1991 for interest bearing deposits greater than
$100,000 totalled $508,171, $488,521 and $762,553, respectively.
NOTE 7 - SHORT-TERM BORROWINGS
- ------------------------------
Short-term borrowings consist of repurchase agreements and treasury tax and
loan deposits. The majority of the Bank's repurchase agreements are subject to
daily repricing and redemption. Treasury tax and loan deposits are due on
demand and repriced daily. The composition of short-term borrowings at
December 31, 1993 and 1992 was as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Repurchase agreements $11,492,804 $10,364,605
Treasury tax and loan deposits 543,187 0
----------- -----------
Total $12,035,991 $10,364,605
=========== ===========
<FN>
The fair value of short-term borrowings is approximately equal to their carrying value.
</TABLE>
NOTE 8 - FEDERAL HOME LOAN BANK ADVANCE
- ---------------------------------------
At December 31, 1993 and 1992, the Bank had a Federal Home Loan Bank Advance
of $3,900,000 and $4,000,000, respectively. The Advance bears interest at an
annual rate of 7.54% and is fully secured by mortgage-backed securities.
Annual principal payments over the next five years are $200,000, $300,000,
$700,000, $700,000 and $600,000. The Advance matures April 15, 2002. The fair
value of the Advance is estimated to be $4,185,000 and $4,156,000 at December
31, 1993 and 1992, respectively.
NOTE 9 - SUBORDINATED CAPITAL NOTES
- -----------------------------------
The $500,000 in subordinated capital notes carry a coupon rate of 9.00% and
mature September 1, 1997. The capital note indenture prohibits the Bank from
declaring or paying cash dividends on common stock in excess of one-half of the
net income for the period from September 1, 1977, to the end of the most recent
fiscal quarter, plus proceeds from issuance of common stock, unless prior
approval is granted by the holders of the notes. As of December 31, 1993,
approximately $3,957,000 of the Bank's retained earnings were available for
payments of dividends to the Company without noteholder approval. Certain
limitations are also placed on incurring additional debt.
At December 31, 1993 and 1992, the fair value of the capital notes is
estimated to be $554,000 and $518,000, respectively.
-37-
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
NOTE 10- PROFIT SHARING PLAN
- ----------------------------
The Bank (including Citizens Insurance Agency, Inc. and Citizens Travel, Inc.)
maintains a profit sharing plan covering employees who have reached age 21 and
who have completed one year of service. Under the plan, the Bank may make
annual contributions on behalf of the participants as determined by the Bank's
Board of Directors. In addition, the plan allows for elective employee
contributions and requires, subject to certain limitations, the Bank to match
those elective employee contributions. Profit sharing expense reflected in
these financial statements is $239,000, $213,383 and $139,293 for 1993, 1992
and 1991, respectively. The amount of that expense allocated to match employee
contributions during 1993, 1992 and 1991 was $45,411, $40,750 and $9,891,
respectively.
<TABLE>
NOTE 11 - INCOME TAXES
- ----------------------
Income taxes consist of the following components:
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Income taxes/(benefit):
Current $1,556,011 $1,070,904 $768,643
Deferred (466,634) (106,008) ( 9,800)
---------- ---------- --------
Total income tax expense $1,089,377 $ 964,896 $758,843
========== ========== ========
</TABLE>
Income taxes applicable to securities transactions were $0, $1,030 and
$11,331 in 1993, 1992 and 1991.
<TABLE>
The following is a reconciliation of income taxes to the amount computed by applying the statutory federal
income tax rate of 34% to income before income taxes:
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory rate applied to income
before income taxes $1,254,963 $1,135,717 $960,181
Add/(deduct)
Tax exempt interest income (424,498) (360,394) (304,481)
Non deductible interest expense 36,130 35,704 36,039
Alternative minimum tax credit 0 (50,674) (110,164)
State tax expense (net of
federal tax benefit) 185,284 178,271 165,628
Other 37,498 26,272 11,640
---------- --------- --------
Total income tax expense $1,089,377 $ 964,896 $758,843
========== ========= ========
</TABLE>
The net deferred tax asset, at December 31, 1993, reflected in the
consolidated balance sheet is comprised of the following components:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets from:
Bad debt deductions $ 801,372
Intangible asset amortization 128,963
Net operating loss carryforward 64,485
Other 44,293
----------
1,039,113
Deferred tax liabilities for:
Unrealized holding gains on investments (271,841)
Fixed asset depreciation (89,199)
Other (901)
----------
(361,941)
Valuation allowance for deferred tax assets 0
----------
Net deferred tax asset $ 677,172
===========
Deferred tax benefits recorded in 1992 and 1991 were due primarily to timing differences between book and tax bad debt provisions.
</TABLE>
-38-
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
NOTE 12 - EARNINGS PER SHARE
- ----------------------------
The Board of Directors approved a 5% stock dividend on September 23,
1993 payable on January 5, 1994. Earnings and dividends per share have been
retroactively restated for the effect of the stock dividend for all periods
presented. Earnings per share have been computed based on the weighted average
number of shares outstanding during the years presented which were 1,372,144
for 1993, 1,288,411 for 1992 and 1,273,839 for 1991.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
The Company is a party to various legal actions arising in the normal
course of business. In the opinion of management, the Company has adequate
legal defenses and/or insurance coverage with respect to these actions, and
does not believe their resolution will materially affect the operations or
financial position of the Company.
At December 31, 1993, the Bank was required to have $5,363,000 on deposit
with the Federal Reserve or as cash on hand. In the normal course of business,
the Company is party to financial instruments which are not reflected in the
financial statements. The Company's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments
to make loans and standby letters of credit is represented by the contractual
amount of those instruments. The Company uses the same credit policy to make
such commitments as it uses for on-balance sheet loans.
Commitments to make loans, unused lines of credit, and standby letters of
credit at December 31, are as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Real estate $ 4,273,752 $ 7,709,043
Commercial 19,091,212 10,809,151
Revolving 7,786,066 8,765,464
Standby letters of credit 3,265,414 3,121,747
</TABLE>
Since many commitments to make loans expire without being used, these
amounts do not necessarily represent future cash commitments. Collateral
obtained upon exercise of the commitment is determined based upon management's
credit evaluation of the borrower. The carrying value of these commitments
(which is zero) is a reasonable estimation of fair value. These instruments are
generally variable rate and short-term in nature, with minimal fees charged.
NOTE 14 - RELATED PARTY TRANSACTIONS
- ------------------------------------
Certain of the Company's directors, officers and their businesses were
loan customers of the Bank. A schedule of the aggregate activity in these
loans follows:
<TABLE>
<CAPTION>
<S> <C>
Balance, January 1, 1993 $4,351,695
New loans 2,740,664
Loan reductions (2,435,280)
----------
Balance, December 31, 1993 $4,657,079
==========
</TABLE>
-39-
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
NOTE 15 - DIVIDENDS
- -------------------
The Company and the Bank are subject to regulations which require the
maintenance of both a leverage ratio (tier one capital to adjusted total
assets) and a risk-based capital ratio (total capital to risk adjusted assets).
Compliance with these regulations limits the amount of dividends that may be
paid by the companies. These regulations define an "adequately capitalized"
financial institution as one which has a leverage ratio of at least 4% and a
risk-based capital ratio of at least 8%. Financial institutions which fail to
achieve at least those levels of capital compliance are subject to regulatory
action. At December 31, 1993, the Company's leverage and risk-based capital
ratios, which are essentially the same as the Bank's, were 6.06% and 12.07%,
respectively, which exceed the levels required to be deemed adequately
capitalized by 2.06% ($7,136,000) and 4.07% ($8,052,000), respectively.
<TABLE>
NOTE 16 - PARENT COMPANY STATEMENTS
- -----------------------------------
Presented below are condensed balance sheets, statements of income and cash flows for the parent company:
<CAPTION>
CONDENSED BALANCE SHEETS
-----------------------------
December 31,
-----------------------------
ASSETS 1993 1992
- ------ ----------- -----------
<S> <C> <C>
Cash on deposit with subsidiary $ 562,862 $ 628,199
Investment in Bank subsidiary 23,095,729 20,596,184
Other assets 19,815 34,619
----------- -----------
Total assets $23,678,406 $21,259,002
=========== ===========
LIABILITIES
- -----------
Other liabilities $ 276,733 $ 333,624
SHAREHOLDERS' EQUITY 23,401,673 20,925,378
- -------------------- ----------- -----------
Total liabilities and shareholders'
equity $23,678,406 $21,259,002
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
----------------------------------------------
For the year: 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
OPERATING INCOME
- ----------------
Dividends from Bank subsidiary $ 864,848 $ 788,567 $ 636,919
Other income 0 0 0
----------- ----------- -----------
Total 864,848 788,567 636,919
OPERATING EXPENSE
- -----------------
Other expense 38,497 1,871 36,050
----------- ----------- -----------
Total 38,497 1,871 36,050
----------- ----------- -----------
Income before income taxes and
equity in undistributed income
of subsidiary 826,351 786,696 600,869
Applicable income tax benefit 15,250 741 14,278
----------- ----------- -----------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
- -------------------------------------
INCOME OF SUBSIDIARY 841,601 787,437 615,147
- --------------------
EQUITY IN UNDISTRIBUTED INCOME OF
SUBSIDIARY 2,085,089 1,588,009 1,450,072
----------- ----------- -----------
NET INCOME $ 2,926,690 $ 2,375,446 $ 2,065,219
- ---------- =========== =========== ===========
</TABLE>
-40-
<PAGE> 49
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
NOTE 16 - PARENT COMPANY STATEMENTS (CONTINUED)
- ------------------------------------------------
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
For the year: 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $2,926,690 $2,375,446 $2,065,219
Adjustments to reconcile net income to
cash from operating activities:
Undistributed income of subsidiary (2,085,089) (1,588,009) (1,450,072)
Change in other assets 14,803 (741) (14,277)
Change in other liabilities (56,893) 60,659 60,658
---------- ---------- ----------
Total adjustments (2,127,179) (1,528,091) (1,403,691)
---------- ---------- ----------
Net cash from operating activities 799,511 847,355 661,528
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Bank subsidiary (2,000,000)
----------
Net cash used in investing activities (2,000,000)
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock 0 1,475,035 0
Dividends paid (864,848) (788,567) (636,919)
---------- ---------- ----------
Net cash used for financing activities (864,848) 686,468 (636,919)
NET CHANGE IN CASH (65,337) (466,177) 24,609
- ------------------
CASH AT BEGINNING OF YEAR 628,199 1,094,376 1,069,767
- ------------------------- ---------- ---------- ----------
CASH AT END OF YEAR $ 562,862 $ 628,199 $1,094,376
- ------------------- ========== ========== ==========
</TABLE>
NOTE 17 - BRANCH ACQUISITION BY THE BANK
- ----------------------------------------
On December 4, 1992 the Bank consummated a branch acquisition agreement
with Colonial Central Savings Bank, F.S.B. headquartered in Mount Clemens,
Michigan. The agreement includes the assumption of all Madison County, Indiana
deposits of Colonial Central by the Bank and the purchase of certain assets,
including five banking center locations.
A summary of the estimated fair value of assets acquired and liabilities
assumed is presented below.
ASSETS
Cash and cash equivalents $ 19,847,352
Investment securities 14,186,727
Loans 70,795,719
Premises and equipment 1,500,000
Other assets 569,910
Core deposit intangible 1,909,287
Non-compete agreement 500,000
------------
Total assets 109,308,995
------------
LIABILITIES
Deposits 105,400,146
Other liabilities 482,564
------------
Total liabilities 105,882,710
------------
Purchase price $ 3,426,285
============
The $500,000 non-compete agreement and the $1,909,287 Core Deposit
Intangible are being amortized over five years and ten years, respectively.
The excess/deficiency of the fair value over the book value of certain
assets/liabilities at the time of acquisition is being amortized/accreted over
the estimated remaining lives of the assets or liabilities.
-41-
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
FIRST CITIZENS BANCORP OF INDIANA
DECEMBER 31, 1993, 1992 AND 1991
NOTE 18 - ISSUANCE OF COMMON STOCK
- ----------------------------------
The Company issued 93,750 shares of common stock at a price of $16.00 per
share on November 23, 1992. The issuance generated net proceeds of $1,475,035
after deducting sale expenses of $24,965.
NOTE 19 - INDUSTRY SEGMENT INFORMATION
- --------------------------------------
The Company operates primarily in the banking industry which accounts for
more than 90 percent of its revenues, operating income and assets.
-42-
<PAGE> 51
<TABLE>
FIRST CITIZENS BANCORP OF INDIANA
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
June 30, December 31,
1994 1993
---- ----
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $13,389 $19,036
Available-for-sale securities 60,979 69,473
Investment securities 14,126 11,971
Total loans 249,524 234,905
Less: Allowance for loan losses (3,395) (3,117)
-------- --------
Net loans 246,129 231,788
Premises and equipment, net 7,786 8,082
Accrued income and other assets 7,272 6,754
-------- --------
Total assets $349,681 $347,104
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Non-interest bearing deposits $24,540 $25,625
Interest bearing deposits 270,791 279,567
-------- --------
Total deposits 295,331 305,192
Short-term borrowings 24,063 12,036
Other borrowings 4,200 4,400
Accrued expenses and other liabilities 2,149 2,075
-------- --------
Total liabilities 325,743 323,703
-------- --------
SHAREHOLDERS' EQUITY
Common stock: $1 par value, 5,000,000
shares authorized, 1,372,144 shares
issued and outstanding 1,372 1,372
Additional paid-in capital 9,899 9,899
Retained earnings 13,006 11,716
Net unrealized holding gain/(loss) on
available-for-sale securities (339) 414
-------- --------
Total shareholders' equity 23,938 23,401
-------- --------
Total liabilities and shareholders' equity $349,681 $347,104
======== ========
<FN>
See accompanying notes to financial statements.
</TABLE>
-43-
<PAGE> 52
<TABLE>
FIRST CITIZENS BANCORP OF INDIANA
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $4,563 $4,263 $9,022 $8,929
Interest on federal funds sold 2 55 13 103
Interest on investment securities:
Taxable 842 981 1,706 1,981
Tax exempt 173 132 341 254
------ ------ ------ ------
Total interest income 5,580 5,431 11,082 11,267
INTEREST EXPENSE
Interest on deposits 2,171 2,035 4,266 4,648
Interest on short-term borrowings 110 58 191 124
Interest on other borrowings 81 84 165 170
------ ------ ------ ------
Total interest expense 2,362 2,177 4,622 4,942
NET INTEREST INCOME 3,218 3,254 6,460 6,325
PROVISION FOR LOAN LOSSES (110) (270) (230) (540)
------ ------ ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,108 2,984 6,230 5,785
OTHER INCOME
Trust fees 116 105 222 204
Service charge income 345 288 659 558
Insurance commission income 75 67 138 116
Gain/(loss) on investments 0 0 0 0
Other income 59 84 147 173
------ ------ ------ ------
Total other income 595 544 1,166 1,051
OTHER EXPENSE
Salaries and benefits 1,138 1,176 2,272 2,333
Occupancy and equipment, net 341 405 681 791
FDIC insurance 173 173 345 345
Other expense 721 793 1,489 1,718
------ ------ ------ ------
Total other expense 2,373 2,547 4,787 5,187
------ ------ ------ ------
Income before income taxes and
change in accounting method 1,330 981 2,609 1,649
Less: income taxes (392) (312) (770) (486)
------ ------ ------ ------
Income before change in
accounting method 938 669 1,839 1,163
Cumulative effect of change in
accounting method 0 0 0 325
------ ------ ------ ------
NET INCOME $938 $669 $1,839 $1,488
====== ====== ====== ======
Per share data:
Income before change in
accounting method $0.68 $0.49 $1.34 $0.85
Cumulative effect of change in
accounting method 0.00 0.00 0.00 0.23
------ ------ ------ ------
Net income $0.68 $0.49 $1.34 $1.08
====== ====== ====== ======
<FN>
See accompanying notes to financial statements.
</TABLE>
-44-
<PAGE> 53
<TABLE>
FIRST CITIZENS BANCORP OF INDIANA
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands, except per share data)
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Balance January 1 $23,402 $20,925
Net income 1,839 1,488
Dividends ($.40/share - 1994
$.28/share - 1993) (550) (391)
Change in net unrealized holding
gain/(loss) on available-for-sale
securities (753) 0
------- -------
Balance June 30 $23,938 $22,022
======= =======
<FN>
See accompanying notes to financial statements.
</TABLE>
-45-
<PAGE> 54
<TABLE>
FIRST CITIZENS BANCORP OF INDIANA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30: 1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,839 $1,488
Adjustments to reconcile net income to net
cash from operating activities 931 1,462
------- -------
Net cash from operating activities 2,770 2,950
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of
investment securities 1,995 18,357
Proceeds from maturities of - -
available-for-sale securities 6,945 -
Purchase of investment securities (4,176) (13,207)
Purchase of available-for-sale securities - -
Net change in loans (14,571) (3,933)
Property and equipment expenditures (26) (83)
------- -------
Net cash from investing activities (9,833) 1,134
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase/(decrease) in deposits (9,861) (10,203)
Dividends paid (550) (391)
Net change in short-term borrowing 12,027 3,326
Repayment of FHLB advance (200) (100)
------- -------
Net cash from financing activities 1,416 (7,368)
------- -------
Net change in cash and cash equivalents (5,647) (3,284)
Cash and cash equivalents at
beginning of period 19,036 22,816
------- -------
Cash and cash equivalents at end of period $13,389 $19,532
======= =======
<FN>
See accompanying notes to financial statements.
</TABLE>
-46-
<PAGE> 55
FIRST CITIZENS BANCORP OF INDIANA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1994
Note 1 - General
The financial statements of the Company include the accounts of First Citizens
Bancorp, its wholly-owned subsidiary, Citizens Banking Company, and the Bank's
wholly-owned subsidiaries, CIBCO Realty, Inc., Citizens Insurance Agency, Inc.
and Citizens Travel, Inc. Upon consolidation, all significant intercompany
accounts and transactions have been eliminated. The June 30, 1994 and 1993
financial statements have been prepared on a basis consistent with the
Company's annual financial statements and include, in the opinion of
management, all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the consolidated results of operations
and financial position for and at the end of such interim periods.
Note 2 - Proposed sale of the Company
On June 30, 1994, the Company entered into a definitive agreement to merge with
KeyCorp. Pursuant to the agreement, each shareholder of the Company's common
stock would exchange their stock in the Company for a specified number of
shares of KeyCorp common stock. The exchange ratio will be determined based
upon the average price of KeyCorp's common stock during the period prior to
the effective date of the merger. Consummation of the merger requires the
approval of First Citizens Bancorp's shareholders and various regulatory
agencies.
-47-
<PAGE> 56
FIRST CITIZENS
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is intended to address the significant
factors affecting First Citizens' financial condition and results of operations
during 1993, 1992 and 1991 and during the six month periods ended June 30, 1994
and 1993. It is designed to provide a more comprehensive review of First
Citizens' financial condition and results of operations than could be obtained
from a review of the consolidated financial statements alone. However, it
should be read in conjunction with the consolidated financial statements and
related notes and the selected consolidated financial data included elsewhere
herein.
GENERAL
In December 1992, First Citizens consummated the acquisition of five
branches from Colonial Central Savings Bank, F.S.B. ("Colonial") that resulted
in the addition of $14.2 million of investments, $70.8 million of primarily
mortgage loans and $105.4 million in deposits. This acquisition significantly
increased First Citizens' market share and altered the composition of its loan
portfolio by increasing mortgage loans as a percentage of total loans.
Management's efforts since that acquisition have been directed toward
integrating the additional facilities and personnel that accompanied the
acquired branch network and continuing to investigate ways to profitably expand
the core businesses of First Citizens.
FINANCIAL CONDITION
During the six months ended June 30, 1994, First Citizens redirected funds
from its short-term investment and investment securities portfolios toward the
continued increase in its loan portfolio. The aggregate amount of
available-for-sale securities declined $8.5 million, primarily due to
maturities and principal reductions of such securities. No available-for-sale
securities were sold during the period. However, the pre-tax unrealized
gain/(loss) on available-for-sale securities declined to a loss of more than
$500,000 at June 30, 1994 from a gain of more than $600,000 at December 31,
1993 due to the general increase in interest rates beginning in February 1994.
Investment securities (held to maturity) consist of tax-free investments and
the aggregate amount of such securities increased $2.2 million during the six
month period ended June 30, 1994 due to the more attractive tax equivalent
yields on such securities.
The funds generated from maturing investments along with short-term
investments were used to increase First Citizens' total loan portfolio by $14.6
million (6.2%) to $249.5 million at June 30, 1994 from $234.9 million at
December 31, 1993. Total loans grew 69.4% from December 1991 to December 1992,
2.5% from December 1992 to December 1993, and 6.2% from December 1993 to June
1994. The large increase in loans from 1991 to 1992 was caused by the Colonial
branch acquisition in December 1992 referred to above. The mix of loans was
also impacted by the Colonial acquisition. Mortgage loans rose to 44.5% of the
portfolio as of December 31, 1992 from 29.9% as of December 31, 1991, an
increase primarily due to mortgage loans acquired in the acquisition of
Colonial. Mortgage loans have since declined as a percentage of total loans
due to refinancings caused by the general decline in market interest rates. At
December 31, 1993, mortgage loans fell to 39.6% of the loan portfolio, and as
of
-48-
<PAGE> 57
June 30, 1994, mortgage loans had fallen to 37.0% of the loan portfolio. The
continuing repayment of the acquired mortgage loans and management's focus on
commercial and consumer lending are expected to result in the continued decline
of mortgage loans as a percent of total loans.
First Citizens had no significant loan concentrations at December 31, 1993
or June 30, 1994.
Total deposits declined $9.7 million during the six month period ended June
30, 1994 to $295.3 million. This represents a seasonal decline due to the
withdrawal of public funds. First Citizens experienced a similar decline
($10.2 million) between December 31, 1992 and June 30, 1993. The decline in
deposits was offset by an increase in short-term borrowings of $12 million.
Short-term borrowings at June 30, 1994 consist of $12.7 million of customer
repurchase agreements and $11.4 million of federal funds purchased.
During 1993, the changes to First Citizens' financial position were nominal.
Total assets increased $1.9 million, primarily funded by earnings retention.
Effective December 31, 1993, First Citizens adopted Financial Accounting
Standard No. 115 which resulted in the designation of investments as either
available-for-sale or held-to-maturity. Total investments at December 31, 1993
increased $1.5 million from December 31, 1992, but approximately $600,000 of
that increase was the unrecognized gain on available-for-sale securities at
December 31, 1993. Total loans at December 31, 1993 increased $5.6 million
from December 31, 1992, or 2.5%, to $234.9 million at December 31, 1993.
Within the loan portfolio, the volume of commercial and consumer loans
increased and the volume of mortgage loans decreased as a result of the
repayment of mortgage loans purchased in the Colonial acquisition and
management's efforts to increase First Citizens' consumer and commercial
portfolios. Total deposits at December 31, 1993 decreased $2.1 million from
December 31, 1992, offset by a $1.6 million increase in short-term borrowings.
NET INCOME
First Citizens' net income for the six months ended June 30, 1994 was
$1,839,000, or $1.34 per share, compared to net income of $1,488,000, or $1.08
per share, for the same period in 1993. On January 1, 1993, First Citizens
adopted Financial Accounting Standard No. 109 ("FAS 109"), "Accounting for
Income Taxes." Adoption of this standard increased 1993 net income by $325,000
or $.23 per share. Income, before the effect of adopting FAS 109, for the
six months ended June 30, 1993, was $1,163,000, or $.85 per share. Significant
factors contributing to the $676,000 increase in income before the change
in accounting method were a $310,000 decline in the provision for loan losses
for the six months ended June 30, 1994, and $200,000 of non-interest expense
recorded during the first six months of 1993 related to the settlement of
litigation. Increased net interest income and higher service charge income
also improved net income for the six months ended June 30, 1994, compared with
the same period in 1993.
First Citizens recorded net income of $2,927,000, $2,375,000, and $2,065,000
for the years ended December 31, 1993, 1992 and 1991, respectively. Net income
per share was $2.13, $1.85 and $1.62 for these periods. As discussed above,
1993 earnings per share
-49-
<PAGE> 58
included $0.23 due to the adoption of FAS 109. Income for the year ended
December 31, 1993, before the cumulative effect of adopting FAS 109, was
$2,602,000. First Citizens' operating results for 1993 reflect the results of
the acquisition of the assets and liabilities of the five Madison County,
Indiana branches of Colonial. The acquisition occurred in December, 1992. As
a result, all categories of income and expense increased notably during 1993,
as compared to 1992. Net income rose to $2,375,000 in 1992 from $2,065,000 in
1991, an increase of $310,000. The primary factor causing the increase in 1992
net income was increased net interest income which was partially offset by an
increase in non-interest expense.
NET INTEREST INCOME
Net interest income, the difference between the income on earning assets and
the cost of interest bearing liabilities, is the most significant component of
First Citizens' earnings. Net interest income is determined by the relative
volume and characteristics of interest-earning assets and interest-bearing
liabilities and by the difference, or spread, between the yields earned on
interest-earning assets and rates paid on interest-bearing liabilities. The
interest rate sensitivity of First Citizens' interest-earning assets and
interest-bearing liabilities can significantly affect net interest income. The
mix of interest-earning assets and interest-bearing liabilities can also have a
major impact on net interest income.
Despite the general decline in market interest rates over the past three
years, First Citizens' net interest spread remained relatively stable. The net
interest spread decreased by 0.05% for the six month period ended June 30,
1994, as compared to the same period in 1993. The net interest spread
increased to 3.68% for the year ended December 31, 1993, compared to 3.55% for
1992. First Citizens' net interest spread for 1991 was 3.69%, almost identical
to the spread of 3.68% for 1993.
The stability of First Citizens' net interest rate spread reflects the
effectiveness of management's efforts to balance First Citizens' interest rate
gap (see "Liquidity and Interest Rate Sensitivity" below) as the yields on
interest-earning assets and costs of interest-bearing liabilities declined
dramatically during the period. The average yield on earning assets for the
six months ended June 30, 1994 was 6.85%, down slightly from the average yield
for 1993 which was 6.94% but down significantly from 1991's average yield of
9.71%. First Citizens' average cost of interest-bearing liabilities was 3.12%
for the six months ended June 30, 1994 compared to 6.02% for the year ended
December 31, 1991. These declines resulted from the general declines in market
interest rates and affected all of First Citizens' interest sensitive assets
and liabilities.
While First Citizens' net interest spread remained relatively stable from
period to period, net interest income grew as a result of increased volumes of
interest-earning assets and interest-bearing liabilities. Net interest income
grew to $6,460,000 for the six months ended June 30, 1994, from $6,325,000 for
the same period in 1993. Net interest income grew to $12,338,000 from
$9,813,000 and $8,760,000 for the years ended December 31, 1993, 1992, and
1991, respectively. Net interest income grew 25.7% from 1992 to 1993 and 12.0%
from 1991 to 1992. First Citizens was able to achieve this strong growth
through increases in interest-earning assets and interest-bearing liabilities.
Average earning assets grew to $323,688,000 for the six months ended June 30,
1994 from $313,683,000 for the same period in 1993. Average interest-
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<PAGE> 59
earning assets were $317,736,000, $258,643,000, and $200,871,000 for the years
ended December 31, 1993, 1992, and 1991, respectively. The average balances of
interest-bearing liabilities increased comparably. The majority of the growth
resulted from the Colonial branch acquisition in December 1992.
First Citizens' net interest margin, defined as net interest income divided
by average earning assets, declined from 1991 when the margin was 4.36%, to
levels below 4% in every period thereafter. This decline is primarily
attributable to the Colonial acquisition and the nature of the assets and
liabilities acquired. In addition, the expansion of First Citizens' branch
facilities resulted in generally higher levels of non-interest-earning assets.
Both factors combined to decrease the ratio of average interest-earning assets
to average interest-bearing liabilities to 1.07% for 1993 compared to 1.13% for
1991.
The following tables present average assets and liability balances, the
related interest income and expense balances, and the resultant yields on
interest-earning assets and costs of interest-bearing liabilities for the six
months ended June 30, 1994 and 1993 as well as the years ended December 31,
1993, 1992, and 1991.
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<PAGE> 60
<TABLE>
FIRST CITIZENS BANCORP OF INDIANA
The following table sets forth, for the periods indicated, information regarding the average balances of interest-earning assets
and interest-bearing liabilities, the dollar amount of interest income and interest expense and the resulting yields on average
interest-earning assets and rate on average interest-bearing liabilities. Average balances are also provided for
non-interest-earning assets and non-interest-bearing liabilities and shareholders' equity.
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------
1994 1993
---------------------------- ------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Interest-earning deposits $ 0 $ 0 0.00% $ 0 $ 0 0.00%
Federal funds sold 820 13 3.17% 5,979 103 3.45%
Investment Securities:
Taxable 66,083 1,706 5.16% 66,780 1,981 5.93%
Tax-exempt 13,887 341 4.91% 8,189 254 6.20%
Loans (net of unearned
income)(1) 225,812 8,512 7.54% 222,360 8,614 7.75%
Tax-exempt loans 17,086 510 5.97% 10,375 315 6.07%
-------- ------ ------- ------
Total Interest-
earning assets 323,688 11,082 6.85% 313,683 11,267 7.18%
-------- ------ -------- ------
Non-earning assets:
Cash and due from banks 11,535 12,313
Bank premises and
equipment net 8,067 8,583
Other nonearning assets 5,871 5,607
Allowance for loan losses (3,271) (2,574)
------ ------
Total assets $345,890 $337,612
======== ========
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Transaction accounts $ 80,797 859 2.13% $ 73,692 964 2.62%
Savings deposits 42,291 519 2.45% 38,189 537 2.81%
Time deposits 157,346 2,888 3.67% 165,385 3,147 3.81%
Short-term borrowings 11,643 191 3.28% 8,996 124 2.76%
FHLB advance 3,815 143 7.50% 3,957 148 7.48%
First Mortgage Bond 0 0 0.00% 0 0
Capital notes 500 22 8.80% 500 22 8.80%
--- -- --- --
Total interest-bearing
liabilities 296,392 4,622 3.12% 290,719 4,942 3.40%
------- ----- ------- -----
Non-Interest-bearing liabilities:
Demand deposits 24,474 24,132
Other liabilities 1,392 1,506
Shareholders' equity 23,632 21,255
------ ------
Total liabilities and
shareholders' equity $345,890 $337,612
======== ----- ======== -----
Net interest income 6,460 6,325
Net interest spread 3.73% 3.78%
Net interest margin 3.99% 4.03%
Tax-equivalent data:(2)
Tax-equivalent adjustment 438 293
--- ---
Adjusted net interest income $6,898 $6,618
------ ------
Net interest spread 4.00% 3.97%
Net interest margin 4.26% 4.22%
<FN>
(1)Average total loans include non-accrual loans and loan income includes loan fee income on loans held in the loan portfolio.
(2)Tax-equivalent adjustment is computed using a 34% statutory tax rate for all periods presented.
</TABLE>
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<PAGE> 61
<TABLE>
FIRST CITIZENS BANCORP OF INDIANA
The following table sets forth, for the periods indicated, information regarding the average balanaces of interest-earning assets
and interest-bearing liabilities, the dollar amount of interest income and interest expense and the resulting yields on average
interest-earning assets and rate on average interest-bearing liabilities. Average balances are also provided for
non-interest-earning assets and non-interest-bearing liabilities and shareholders' equity.
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------------------------------
1993 1992 1991
-------------------------- ---------------------------- -----------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ------- -------- -------- ------- -------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Interest-earning deposits $ 0 $ 0 0.00% $ 495 $ 44 8.89% $ 1,244 $ 142 11.42%
Federal funds sold 4,944 241 4.88% 2,996 153 5.11% 1,875 272 14.51%
Investment Securities:
Taxable 69,986 3,778 5.40% 62,871 4,012 6.38% 51,726 4,300 8.31%
Tax-exempt 10,724 580 5.41% 9,980 632 6.33% 11,012 734 6.67%
Loans (net of unearned
income)(1) 219,732 16,721 7.61% 175,112 12,874 7.35% 131,801 13,794 10.47%
Tax-exempt loans 12,350 728 5.89% 7,189 490 6.82% 3,213 270 8.40%
------- ------ -------- ------ -------- ---
Total interest-
earning assets 317,736 22,048 6.94% 258,643 18,205 7.04% 200,871 19,512 9.71%
------- ------ -------- ------ -------- ------
Non-earning assets:
Cash and due from banks 15,983 13,946 11,081
Bank premises and
equipment net 8,400 7,936 7,324
Other nonearning assets 6,789 5,220 3,983
Allowance for loan losses (2,735) (2,253) (2,149)
Total Assets $346,173 $283,492 $221,110
======== ======== ========
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Transaction accounts $ 72,064 1,602 2.22% $ 56,035 1,449 2.59% $ 37,070 1,836 4.95%
Savings deposits 48,154 1,312 2.72% 35,724 1,112 3.11% 23,682 1,250 5.28%
Time deposits 162,413 6,162 3.79% 135,362 5,153 3.81% 104,997 7,012 6.68%
Short-term borrowings 10,929 293 2.68% 8,326 254 3.05% 7,600 203 2.67%
FHLB advance 3,950 296 7.49% 2,000 213 10.65% 0 0 0.00%
First Mortgage Bond 0 0 0.00% 2,013 137 0.00% 4,110 362 8.81%
Capital notes 500 45 9.00% 750 74 9.87% 1,000 89 8.90%
------- ------ -------- ----- -------- -----
Total interest-bearing
liabilities 298,010 9,710 3.26% 240,210 8,392 3.49% 178,459 10,752 6.02%
------- ------ -------- ------ -------- ------
Non-Interest-bearing liabilities:
Demand deposits 23,882 21,986 23,645
Other liabilities 2,117 1,902 1,857
Shareholders' equity 22,164 19,394 17,149
-------- -------- --------
Total liabilities and
shareholders' equity $346,173 $283,492 $221,110
======== ------ ======== ------ ======== -----
Net interest income 12,338 9,813 8,760
Net interest spread 3.68% 3.55% 3.69%
Net interest margin 3.88% 3.79% 4.36%
Tax-equivalent data:(2)
Tax-equivalent adjustment 674 578 517
--- --- ---
Adjusted net interest income $13,012 $10,391 $9,277
======= ------- ======
Net interest spread 3.89% 3.77% 3.95%
Net interest margin 4.10% 4.02% 4.62%
<FN>
(1) Average total loans include non-accrual loans and loan income includes loan fee income on loans held in the loan portfolio.
(2) Tax-equivalent adjustment is computed using 34% statutory tax rate for all periods presented.
</TABLE>
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<PAGE> 62
<TABLE>
FIRST CITIZENS BANCORP OF INDIANA
LOAN PORTFOLIO SUMMARY
(IN THOUSANDS)
<CAPTION>
The following table sets forth loans, by category, at the dates indicated:
June 30, -----------------------December 31,--------------------------
1994 % 1993 % 1992 % 1991 % 1990
---- - ---- - ---- - ---- - ----
<S> <C> <C> <C> <C> <C>
Commercial loans $86,577 34.7 $80,934 34.5 $73,572 32.1 $48,419 35.8 $44,528
Real estate loans 92,254 37.0 92,934 39.6 101,907 44.5 40,482 29.9 38,537
Installment loans 70,693 28.3 61,037 25.9 53,780 23.4 46,442 34.3 51,672
------ ---- ------ ---- ------ ---- ------ ---- ------
Total loans $249,524 100.0% $234,905 100.0% $229,259 100.0% $135,343 100.0% $134,737
======== ===== ======== ===== ======== ===== ======== ===== ========
<CAPTION>
The following table sets forth loans, by category, at the dates indicated:
% 1989 %
- ---- -
<S> <C> <C>
Commercial loans 33.0 $45,934 36.4
Real estate loans 28.6 30,486 24.2
Installment loans 38.4 49,611 39.4
---- ------ ----
Total loans 100.0% $126,031 100.0%
===== ======== =====
</TABLE>
<TABLE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
(IN THOUSANDS)
The following table sets forth the allocation of the Company's allowance for loan losses to the various categories
of loans at the following dates:
<CAPTION>
June 30, ------------------December 31,----------------------
1994 % 1993 % 1992 % 1991 % 1990
---- - ---- - ---- - ---- - ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial loans $1,020 30.0% $678 21.8% $798 33.9% $928 43.1% $877
Real estate loans 149 4.4% 155 5.0% 164 7.0% 128 5.9% 96
Installment loans 727 21.4% 593 19.0% 810 34.4% 616 28.6% 506
Unallocated 1,499 44.2% 1,691 54.2% 580 24.7% 482 22.4% 664
----- ---- ----- ---- --- ---- --- ---- ---
Total Allowance for
Loan Losses $3,395 100.0% $3,117 100.0% $2,352 100.0% $2,154 100.0% $2,143
====== ===== ====== ===== ====== ===== ====== ===== ======
<CAPTION>
% 1989 %
- ---- -
<S> <C> <C> <C>
Commercial loans 40.9% $928 42.7%
Real estate loans 4.5% 36 1.7%
Installment loans 23.6% 529 24.4%
Unallocated 31.0% 676 31.2%
---- --- ----
Total Allowance for
Loan Losses 100.0% $2,169 100.0%
===== ====== =====
</TABLE>
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<PAGE> 63
<TABLE>
FIRST CITIZENS BANCORP OF INDIANA
<CAPTION>
NON-PERFORMING LOANS
(IN THOUSANDS)
The following table sets forth the composition of non-performing loans at the dates indicated:
June 30, December 31,
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans $1,262 $1,207 $587 $1,249 $1,335 $1,689
Troubled debt restructurings 0 0 0 0 0 0
Loans contractually past due 90 days
or more, and still accruing 284 361 698 306 341 529
--- --- --- --- --- ---
Total non-performing loans $1,546 $1,568 $1,285 $1,555 $1,676 $2,218
====== ====== ====== ====== ====== ======
Non-performing loans as a percent
of total loans 0.62% 0.67% 0.56% 1.15% 1.24% 1.76%
</TABLE>
<TABLE>
ALLOWANCE FOR LOAN LOSSES
(IN THOUSANDS)
<CAPTION>
The following table presents activity in the allowance for loan losses for the periods indicated:
Six
Months
Ended
June 30, --------- Years Ended December 31, ---------
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Beginning balance $3,117 $2,352 $2,154 $2,143 $2,169 $1,987
Loans charged off:
Commercial loans 0 217 191 50 502 165
Real estate loans 50 1 143 7 25 58
Installment loans 36 272 443 854 510 538
-- --- --- --- --- ---
Total charge-offs 86 490 777 911 1,037 761
Recoveries on charged-off loans:
Commercial loans 14 77 154 52 199 83
Real estate loans 43 0 1 3 28 14
Installment loans 77 98 100 67 79 86
-- -- --- -- -- --
Total recoveries 134 175 255 122 306 183
--- --- --- --- --- ---
Net charge-offs (48) 315 522 789 731 578
Addition incident to merger - - - - 105 -
Provision charged to operations 230 1,080 720 800 600 760
--- ----- --- --- --- ---
Ending balance $3,395 $3,117 $2,352 $2,154 $2,143 $2,169
====== ====== ====== ====== ====== ======
Allowance as a percent
of total loans 1.36% 1.33% 1.03% 1.59% 1.59% 1.72%
Allowance as a percent
of non-performing loans 219.60% 198.79% 183.04% 138.52% 127.86% 97.79%
</TABLE>
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<PAGE> 64
PROVISION FOR LOAN LOSSES
The preceding tables present information about the composition of First
Citizens' loan portfolio, non-performing loans and allowance for loan losses
for the past five years and for the six-month period ending June 30, 1994.
The provision for loan losses (a direct charge to operating expenses)
provides a reserve (the allowance for loan losses) to which loan losses are
charged as those losses become evident. The provision is determined based upon
management's quarterly review and analysis of the risk in First Citizens' loan
portfolio as well as analysis of First Citizens' historical loan default
ratios. During the analysis, management considers past due, non-accrual, and
restructured loans; other potential problem loans; the prevailing economic
conditions in First Citizens' primary market area; and any recent trends in
historical loan default ratios. This type of evaluation takes into
consideration identified problem credits as well as unidentified losses which
are inherent in the loan portfolio. In addition to problem loan management and
monitoring, First Citizens' internal loan review function also independently
reviews First Citizens' large commercial loans as well as samples of other loan
types. This review provides an ongoing, independent assessment of the credit
risk within the loan portfolio and adherence to First Citizens' underwriting
standards. Based upon all of these factors, an appropriate expense provision
is determined in order to maintain the allowances for loan losses at an
adequate level.
The provision for loan losses for the six month period ended June 30, 1994
was $230,000 as compared to $540,000 for the same period in the prior year.
The primary factor contributing to the decline in the expense provision during
the six months ended June 30, 1994 was First Citizens' improving loan quality.
As reflected in the tabular disclosures, First Citizens' ratio of
non-performing loans to total loans has steadily declined over the past 5 years
and was .62% at June 30, 1994.
The provision for loan losses was $1,080,000, $720,000, and $800,000 for the
years ended December 31, 1993, 1992, and 1991, respectively. The increase in
the provision between 1993 and 1992 was due primarily to the large increase in
loans resulting from the Colonial acquisition. While the acquired loans were
subject to a comprehensive credit quality review, management elected to
increase the loan loss provision in 1993 in recognition of the fact that
approximately $10.0 million of the acquired loans were commercial real estate
loans and that many of the one to four family mortgage loans originated in
areas other than First Citizens' normal market area. The decrease in the
provision in 1992, compared to 1991, was due to improved loan quality in 1992
versus 1991. The ratio of the allowance for loan losses to total loans was
1.36% at June 30, 1994 and 1.33%, 1.03% and 1.59% at December 31, 1993, 1992,
and 1991, respectively.
First Citizens recorded net recoveries of $48,000 for the six months ended
June 30, 1994, compared to net charge-offs of $315,000, $522,000 and $789,000
for the years ended December 31, 1993, 1992, and 1991, respectively. First
Citizens records charge-offs when management concludes that a loan, or a
portion of that loan, is uncollectible. Net charge-offs as a percent of the
allowance for loan losses have dropped consistently over the last three years.
Another measure of loan quality is the ratio of non-performing loans as a
percent of total loans. Non-performing loans include non-accrual loans,
troubled debt restructurings, and loans
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<PAGE> 65
contractually 90 days or more past due and still accruing interest. Loans are
generally placed on non-accrual status when they become delinquent more than 90
days, unless such loans are well secured and in the process of collection. At
the time a loan is placed on non-accrual status, existing accrued interest is
either reversed from income or charged-off. The ratio of non-performing loans
to total loans has dropped steadily to .62% at June 30, 1994 from 1.76% at
December 31, 1989. Interest foregone on non-accrual loans was $73,000 for the
six months ended June 30, 1994 and $119,000 for the year ended December 31,
1993.
As part of the quarterly reserve analysis process, management maintains a
"watch list" of loans that, while performing, are of concern due to past
performance problems, negative financial trends or other reasons. At June 30,
1994, management's watch list included approximately $2.3 million of primarily
commercial loans that were performing but were being closely monitored by
management, up slightly from $1.9 million at December 31, 1993.
The result of the quarterly reserve analysis is an allocation of portions of
the allowance to categories of loans. Specific amounts are allocated to
individual problem loans, including non-performing loans and other "watch list"
loans. In addition, portions of the allowance are allocated to the remaining
loans based on First Citizens' historical loss experience adjusted for
management's expectations about future losses and trends. As a result of
continued improvements in asset quality, the unallocated portion of the
allowance has increased from approximately 31% at December 31, 1989 to 44% at
June 30, 1994. While reserve analysis is, by its nature, a judgmental process,
management believes that First Citizens' allowance for loan losses at June 30,
1994 is adequate to provide for the risks within First Citizens' loan
portfolio.
OTHER INCOME
Other income for the six month period ended June 30, 1994 increased $115,000
to $1,166,000 from $1,051,000 in the comparable period in 1993. Service charge
income made up the majority of the increase in income. This was a result of
First Citizens raising service charges on certain types of deposit accounts
during January 1994. All other categories of other income remained stable.
Other income for the years ended December 31, 1993, 1992, and 1991 was
$2,227,000, $1,818,000, and $1,796,000, respectively. The increase in other
income in 1993 versus 1992 was due to an increase in service fee income, trust
fees and other operating income. Service fee income rose as a result of higher
levels of deposit accounts due to the accounts acquired in the Colonial
acquisition. Trust fees increased 25.0% in 1993, following an 11.3% increase
in 1992 due to management's emphasis on expanding Citizens Bank's trust
business. Other operating income increased due to higher levels of safe
deposit box rental income and other fees charged to customers. Total other
income remained relatively unchanged in 1992 as compared to 1991. Increased
trust fees and service charge income in 1992, compared to 1991, were offset by
a decline in commissions generated by First Citizens' insurance commission
income.
OTHER OPERATING EXPENSES
Total other operating expense declined $400,000 to $4,787,000 for the six
months ended June 30, 1994 from $5,187,000 for the six months ended June 30,
1993. The decline in total
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<PAGE> 66
other operating expense stemmed primarily from a decline in other expense and
in net occupancy and equipment expense. Other expense declined as a result of
a non-recurring expense of approximately $200,000 recorded in 1993 when First
Citizens settled litigation. Net occupancy and equipment expense declined in
1994 primarily as a result of increased rental income generated by the leasing
of unused space in a branch facility acquired from Colonial.
Other operating expenses for the years ended December 31, 1993, 1992, and
1991 totalled $9,794,000, $7,570,000 and $6,932,000, respectively. Total other
operating expense increased $2,224,000, or 29.38%, during 1993 due to higher
expenses in all categories resulting from the Colonial acquisition. Total
other operating expense increased $638,000, or 9.20%, during 1992. Such
increased expenses are primarily attributable to the overall growth of First
Citizens. In addition, during 1993, First Citizens hired a chief operating
officer, replaced its chief financial officer and hired a head of operations.
These new positions contributed to the increase in salaries and employee
benefits expense.
INCOME TAX EXPENSE
Income tax expense rose to $770,000 for the six months ended June 30, 1994
from $486,000 for the six months ended June 30, 1993. Income tax expense was
$1,089,000, $965,000, and $759,000 for the years ended December 31, 1993, 1992,
and 1991, respectively. Income tax expense increased as a result of higher
levels of income before tax during these periods.
Pursuant to FAS No. 109, "Accounting for Income Taxes", effective January 1,
1993, First Citizens adopted a balance sheet approach to determining its tax
expense. The cumulative effect of adopting this standard resulted in a
non-recurring positive income statement effect of $325,000. Under this
standard, deferred tax liabilities and assets are computed using currently
effective tax rates. Should such effective tax rates change, that change will
have an immediate effect on tax expense in the period that such change becomes
effective.
Net deferred tax assets result, primarily, from book bad debt deductions and
intangible asset amortization in excess of the amounts deductible for tax
purposes. Based on First Citizens' historical levels of taxable income and the
relatively small size of the deferred tax assets recorded, management does not
believe that a valuation allowance for the deferred tax asset is needed at
either December 31, 1993 or June 30, 1994.
CAPITAL
Both First Citizens and Citizens Bank are required to comply with
capital requirements promulgated by their primary regulators. Those
requirements affect the ability of both such entities to pay dividends and can
affect their operations. The capital regulations require the maintenance of
specified levels of Tier I capital (as defined in the regulations) and total
capital (as defined in the regulations) to risk adjusted assets (as defined in
the regulations). These regulations also require the maintenance of a leverage
ratio (Tier I capital to average assets) of at least 3% for the most sound
entities (other entities will be required to maintain leverage ratios of 4% or
5%), and a total risk-based capital ratio of at least 8%. Further, regulations
promulgated by the Federal Deposit Insurance Corporation ("FDIC") define
specified levels of capitalization that affect the
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<PAGE> 67
amount that a financial institution will be assessed for deposit insurance and
can result in operational limitations. Financial institutions which have
leverage ratios in excess of 5% and total risk-based capital ratios in excess
of 10% are deemed to be "well capitalized," pay the lowest deposit insurance
assessment and are not subject to operational restrictions. At June 30, 1994,
leverage and total risk-based capital ratios of First Citizens, which are
substantially the same as Citizens Bank, exceeded the levels required to be
deemed well capitalized by 1.36% ($4.7 million) and 2.00% ($4.2 million),
respectively. The following table provides information regarding First
Citizens' capital ratios at the dates indicated:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
---------- ------------
(dollars in thousands)
<S> <C> <C>
Total Assets $ 349,681 $ 347,104
Risk-based Assets 208,482 197,997
Tier I Capital 22,115 20,984
Total Capital 25,026 23,892
Leverage Ratio 6.36% 6.06%
Tier I Risk-based Capital Ratio 10.61 10.60
Total Risk-based Capital Ratio 12.00 12.07
</TABLE>
LIQUIDITY AND INTEREST RATE SENSITIVITY
Two basic aspects of asset/liability management strategy are First
Citizens' maintenance of adequate levels of liquid assets and the monitoring of
its interest rate sensitivity position.
Liquidity management practices are designed to ensure that First
Citizens has access to or holds sufficient liquid funds to meet the normal
transactional requirements of its customers and to provide a cushion against
unforeseen liquidity needs. First Citizens' primary sources of liquidity
include its short-term investments and investment securities which mature in
the near term. In addition, the ongoing repayment of loans and mortgage-backed
securities provide available funds. At June 30, 1994, First Citizens'
short-term investments and investment securities which mature within one year
totalled approximately $17.2 million compared to approximately $16.4 million at
December 31, 1993. At June 30, 1994, commitments to make loans, standby
letters of credit and the unused balances of customer lines of credit
(including commercial, home equity and credit card lines) aggregated $29.5
million compared to $34.4 million at December 31, 1993. However, since many of
these commitments expire without being used, they do not necessarily represent
future cash commitments.
In addition to the sources of asset liquidity noted above, First
Citizens is able to borrow overnight and term funds from correspondent banks
and, as a member of the Federal Home Loan Bank, may enter into short and
long-term borrowing agreements. Management believes First Citizens currently
has sufficient sources of liquidity to meet its current anticipated needs.
The management of a financial institution's net interest margin is
referred to as asset/liability management and involves the determination of the
effect that changing interest rates will have on a company's net interest
margin. The process of estimating interest rate risk begins
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<PAGE> 68
with determining the interest rate "gap." The gap is the difference in the
amount of interest-earning assets and interest-bearing liabilities that will
reprice within a specified time period. Assets and liabilities reprice in two
ways. First, the rate on a particular asset or liability may be variable and
subject to change to reflect changed market rates. Certain products may only
be adjusted at specified points while others may be changed by management at
any time. Second, fixed rate assets and liabilities are deemed to reprice at
the time they mature.
The interest rate gap during a selected time period provides a general
indication of the potential effect on net interest income of changes in
interest rates. If rate sensitive assets exceed rate sensitive liabilities, an
institution is deemed to have a "positive" gap whereas an institution which has
more rate sensitive liabilities than rate sensitive assets is deemed to have a
"negative" gap. If all assets and liabilities reacted equally to a change in
market interest rates, an institution with a positive gap would realize
increased net interest income when rates rose and decreased net interest income
when rates fell. Conversely, an institution with a negative gap would realize
increased net interest income when rates fell and decreased net interest income
when rates rose.
Management focuses its gap measurement evaluation on First Citizens'
interest rate sensitivity over a one year time horizon. The table following
this section illustrates First Citizens' interest rate sensitivity at June 30,
1994. The interest rate "gap," for each period and cumulatively, is presented
at the bottom of the table in dollars and as a percent of total assets.
At June 30, 1994, liabilities that are subject to repricing during the
next year exceed assets that are subject to similar repricing by $83.9 million
(24.0% of assets). A significant assumption that results in the large negative
gap is that all interest-bearing demand and savings accounts are subject to
immediate repricing. While it is true that, contractually, those accounts are
subject to immediate repricing, the rates paid on those accounts are not
generally tied to specific indexes and are influenced by market conditions and
other factors. Accordingly, a general movement in interest rates, either up or
down, may not have any immediate effect on the rates paid on these deposit
accounts.
The interest rate gap technique is only one source of information about
the sensitivity of First Citizens' net interest margin to movements in interest
rates. The core of First Citizens' asset/liability management process consists
of simulations that take into account the time that various assets and
liabilities may reprice and the degree to which various categories of such
assets and liabilities will respond to general interest rate movements. The
existence of a negative gap during the past several years has been of some
benefit to First Citizens as general interest rates have declined and First
Citizens' net interest income has increased. However, in general, First
Citizens' net interest margin has remained relatively stable despite dramatic
changes in market interest rates. Management plans for anticipated future
changes in interest rates by reviewing the projected effect of those changes on
net interest margin. Depending upon their expectations, management may employ
marketing and product pricing strategies in an effort to balance the interest
rate sensitivity of First Citizens' assets and liabilities and, where possible,
to take advantage of opportunities to benefit from movements in interest rates.
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FIRST CITIZENS BANCORP OF INDIANA
The following table illustrates the repricing opportunities, or rate
sensitivity, of interest-earning assets and interest-bearing liabilities as of
June 30, 1994. The difference, or "gap", is indicated as a percentage of total
assets. The information reflects the repriciing opportunity for variable, or
floating, rate assets and liabilities and the maturities and/or estimated cash
flows for fixed rate assets and liabilities.
<TABLE>
<CAPTION>
At June 30, 1994
Maturing or Repricing Within
------------------------------------------------------------
6 Months
0 to 3 3 to 6 to 1 to 5 After 5
Months Months 1 Year Years Years Total
--------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $74,883 $29,001 $31,276 $80,363 $34,001 $249,524
Investments 15,812 9,258 12,891 29,737 7,407 75,105
Federal funds sold 31 0 0 0 0 31
Interest-bearing balances
with financial institutions 0 0 0 0 0 0
Total interest-earning assets 90,726 38,259 44,167 110,100 41,408 324,660
--------- ------- ------- ------- ------- --------
Interest-bearing liabilities:
Demand and savings
accounts 116,114 0 0 0 0 116,114
Time deposits 56,902 27,844 31,824 37,872 235 154,677
Other borrowings 0 0 300 2,700 1,200 4,200
Short-term borrowings 24,063 0 0 0 0 24,063
--------- ------- ------- ------- ------- --------
Total interest-bearing
liabilities 197,079 27,844 32,124 40,572 1,435 299,054
--------- ------- ------- ------- ------- --------
Asset (liability) gap ($106,353) $10,415 $12,043 $69,528 $39,973 $25,606
========= ======= ======= ======= ======= ========
Cumulative asset
(liability) gap ($106,353) ($95,938) ($83,895) ($14,367) $25,606
========= ======= ======= ======= =======
Cumulative gap to total assets -30.41% -27.44% -23.99% -4.11% 7.32%
</TABLE>
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INTRODUCTION
This Prospectus/Proxy Statement is being furnished to the holders of
First Citizens Common Stock in connection with the solicitation of proxies by
the Board of Directors of First Citizens for use at a Special Meeting of First
Citizens' shareholders and at any adjournments or postponements thereof. This
Prospectus/Proxy Statement also serves as a prospectus for the KeyCorp Common
Stock (including the Rights) which will be issued upon the effectiveness of the
Merger.
All information contained in this Prospectus/Proxy Statement relating to
KeyCorp has been furnished by KeyCorp and First Citizens is relying upon the
accuracy of such information. All information contained in this
Prospectus/Proxy Statement relating to First Citizens has been furnished by
First Citizens and KeyCorp is relying on the accuracy of such information.
SPECIAL MEETING OF FIRST CITIZENS SHAREHOLDERS
DATE, TIME, AND PLACE
The Special Meeting will be held at ______________________ on November
__, 1994, commencing at ______ a.m., local time.
PURPOSE OF MEETING
The purpose of the Special Meeting is to consider and vote upon the
approval of the Merger Agreement and to conduct any other business that may
properly come before the Special Meeting or any adjournments or postponements
thereof.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The close of business on _______________, 1994 has been fixed by the
Board of Directors of First Citizens as the Record Date for the determination
of holders of shares of First Citizens Common Stock entitled to notice of and
to vote at the Special Meeting. At the close of business on the Record Date,
there were 1,372,144 shares of First Citizens Common Stock issued and
outstanding held by 327 holders of record. Holders of record of First Citizens
Common Stock on _______________, 1994 are entitled to one vote per share and
are entitled to exercise dissenters' rights. See "RIGHTS OF DISSENTING
SHAREHOLDERS." Due to the Voting Agreements executed by shareholders of First
Citizens beneficially owning approximately 59% of the issued and outstanding
shares of First Citizens Common Stock, pursuant to which such shareholders have
agreed to vote in favor of the Merger Agreement, it is anticipated that the
Merger Agreement will be approved at the Special Meeting. See "VOTING
AGREEMENTS."
VOTE REQUIRED
At August 15, 1994, 1,372,144 shares of First Citizens Common Stock were
outstanding and entitled to vote, of which approximately 783,158 shares, or
approximately 57% were held by directors and executive officers of First
Citizens and their respective affiliates. Additionally,
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the holders of 807,535 shares of First Citizens Common Stock, or approximately
59% of First Citizens Common Stock, which includes certain of First Citizens'
directors and their affiliates, have entered into Voting Agreements with
KeyCorp pursuant to which each such holder has agreed to vote for approval of
the Merger Agreement. The affirmative vote of holders of a majority of the
shares of First Citizens Common Stock issued, outstanding and entitled to vote
at the Special Meeting is required to approve the Merger Agreement. The
approval of the Merger Agreement by First Citizens' shareholders is a
condition to the consummation of the Merger.
SHARE OWNERSHIP
BENEFICIAL OWNERS. The following table gives information concerning the
beneficial ownership of First Citizens Common Stock on August 15, 1994, by each
person known by First Citizens to own beneficially more than 5% of the issued
and outstanding shares of First Citizens Common Stock.
<TABLE>
<CAPTION>
Number of Percentage of
Shares of Total Outstanding
Name and Address Common Stock Common Stock
---------------- ------------ ------------
<S> <C> <C>
Leland E. Boren (1) 510,392 (2) 37.20%
9315 S 950 E
Upland, IN 46989
LaRita R. Boren (1) 510,392 (3) 37.20%
9315 S 950 E
Upland, IN 46989
Richard T. Doermer (1) 140,129 10.21%
5310 Century Ct.
Ft. Wayne, IN 46807
<FN>
(1) Director of First Citizens.
(2) Includes (i) 218,461 shares of First Citizens Common Stock held of record by LaRita R. Boren, Mr. Boren's wife and
(ii) 8,930 shares of First Citizens Common Stock held by a trust, the trustee of which is Mrs. Boren.
(3) Includes (i) 282,981 shares of First Citizens Common Stock held of record by Leland E. Boren, Mrs. Boren's husband and
(ii) 8,930 shares of First Citizens Common Stock held by a trust, the trustee of which is Mrs. Boren.
</TABLE>
The following table gives information concerning the beneficial
ownership of the First Citizens Common Stock on August 15, 1994 by
(i) each director of First Citizens; (ii) the chief executive officer of
First Citizens; and (iii) all directors and executive officers of First
Citizens as a group.
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<PAGE> 72
<TABLE>
<CAPTION>
Number of Percentage of
Shares of Total Outstanding
Name Common Stock Common Stock
---- ------------ ------------
<S> <C> <C>
Leland E. Boren(1) 510,392(2) 37.20%
LaRita R. Boren(1) 510,392(3) 37.20%
Scott L. Bowser(1) 33,250 2.42%
Virgil E. Cook(1) 22,434(4) 1.63%
Thomas F. DeVoe(1) 2,310 *
Richard T. Doermer(1) 140,129 10.21%
James L. Edwards(1) 1,210(5) *
William O'Neal(1) 323 *
Charlie Owens(1) 28,417 2.07%
Robert E. Reitz(1) 8,463 *
Jack Robinson(1) 210 *
Jeffrey E. Stoops(1) 59,702 4.35%
James D. Strietelmeier(1) 4,028 *
Sandra L. Volk(1) 593 *
All directors and executive officers 783,158 57.08%
<FN>
(1) Director of First Citizens.
(2) Includes (i) 218,461 shares of First Citizens Common Stock held of record by LaRita R. Boren, Mr. Boren's wife and
(ii) 8,930 shares of First Citizens Common Stock held by a trust, the trustee of which is Mrs. Boren.
(3) Includes (i) 282,981 shares of First Citizens Common Stock held of record by Leland E. Boren, Mrs. Boren's husband and
(ii) 8,930 shares of First Citizens Common Stock held by a trust, the trustee of which is Mrs. Boren.
(4) Includes 9,204 shares of First Citizens Common Stock held of record by a holding company of which Mr. Cook is the principal
shareholder.
(5) Includes 1,000 shares of First Citizens Common Stock held of record by Anderson University. As President of Anderson
University, Mr. Edwards has authority to vote and dispose of such shares on behalf of Anderson University.
* less than 1%.
</TABLE>
As of the Record Date, the trust department of Citizens Bank had sole or
shared voting and dispositive power, in a fiduciary or co-fiduciary capacity
for third parties, as to 150,214 shares of First Citizens Common Stock or
approximately 11% of the outstanding First Citizens Common Stock.
VOTING, SOLICITATION, AND REVOCATION OF PROXIES
Proxy cards for use at the Special Meeting accompany this
Prospectus/Proxy Statement delivered to record holders of First Citizens Common
Stock. A holder of First Citizens Common Stock may use the proxy if he or she
does not attend the Special Meeting in person or wishes to have his or her
shares voted by proxy even if he or she does attend the Special Meeting. The
proxy may be revoked in writing by the person giving it at any time before it
is exercised by notice of such revocation to the Secretary of First Citizens,
or by submitting a
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proxy having a later date, or by such person appearing at the Special Meeting
and electing to vote in person. All proxies validly submitted and not revoked
will be voted in the manner specified therein. If no specification is made,
the proxies will be voted in favor of approval of the Merger Agreement.
Under Indiana law and the First Citizens By-Laws, the presence, in
person or by proxy, of a majority of the outstanding shares of First Citizens
Common Stock is necessary to constitute a quorum of shareholders to take action
at the Special Meeting. For these purposes, shares which are present, or
represented by a proxy, at the Special Meeting will be counted for quorum
purposes regardless of whether the holder of the shares or proxy abstains on
the proposal relating to the Merger Agreement ("abstentions") or whether a
broker with discretionary authority fails to exercise its discretionary
authority to vote shares with respect to the proposal relating to the Merger
Agreement ("broker non-votes"). For voting purposes, only shares voted for
the approval of the Merger Agreement or shares represented by a proxy where
the holder of the shares returns a signed proxy card but fails to indicate
voting instructions, and neither abstentions nor broker non-votes, will be
counted as voting in favor in determining whether the Merger Agreement is
approved by the holders of a majority of First Citizens Common Stock. As a
consequence, abstentions and broker non-votes will have the same effect as
votes against approval of the Merger Agreement.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER
In February 1994, First Citizens received an informal indication of
interest from a financial institution regarding the possible acquisition of
Citizens Bank. On February 24, 1994, the Board of Directors of First Citizens
met and discussed this indication of interest. At that meeting, Dillon Read
advised the Board regarding the market for bank mergers and acquisitions and
presented information which it had compiled illustrating the relative extent to
which shareholder value might be enhanced through various acquisition options.
Dillon Read advised that it would be appropriate for First Citizens to conduct
a confidential survey of a number of banking institutions to determine whether
there would be sufficient interest on the part of such institutions to engage
in a possible acquisition of or merger with First Citizens at a premium over
its then current market price. At the meeting, the First Citizens Board of
Directors authorized the engagement of Dillon Read to serve as First Citizens'
financial advisor to explore various alternative strategies of further
enhancing shareholder value, including discussions with possible acquirors.
Additionally, the First Citizens Board of Directors established an Ad Hoc
Committee on Shareholder Value (the "Ad Hoc Committee") to work with Dillon
Read and management regarding such matters.
Following the meeting of the First Citizens Board of Directors on
February 24, 1994, Dillon Read contacted sixteen bank holding companies
headquartered in the midwest that were deemed by Dillon Read to be likely to
have an interest in acquiring First Citizens. These contacts resulted in
meetings between representatives of Dillon Read and senior officers of ten bank
holding companies. On April 29, 1994, those ten bank holding companies plus
one additional bank holding company submitted preliminary indications of
interest to First Citizens.
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These preliminary indications took the form of valuations ranging from $26.00
to $36.44 per share.
After an extensive analysis of the preliminary indications of interest
received and after consultation with Dillon Read, the Ad Hoc Committee invited
seven organizations which had submitted such preliminary indications to conduct
a one week, on-site review of the operations of First Citizens. Five
prospective acquirors accepted the invitation and visited First Citizens in
Anderson, Indiana, to review financial, operational and legal documents and
interview management and Mr. Boren, the Chairman of the Board. On June 17,
1994, following the on-site review, three organizations, including KeyCorp,
submitted definitive proposals to acquire First Citizens. In addition, two of
the three organizations returned detailed comments on the form of Merger
Agreement which had been delivered to such entities for their review on June
10, 1994.
On June 22, 1994, following analysis of the definitive proposals, the Ad
Hoc Committee authorized Dillon Read to approach KeyCorp seeking clarification
of certain issues relating to the terms of the Merger Agreement.
At a meeting of the First Citizens Board of Directors held on June 29,
1994, the Ad Hoc Committee reported to the Board on the process which it had
conducted, its analysis of the alternatives available to First Citizens, and
its recommendation that the Board approve the proposed transaction with
KeyCorp. Also, Dillon Read presented the First Citizens Board of Directors
with detailed financial and valuation analysis of the offers which had been
received from KeyCorp and the other two prospective acquirors. At the meeting,
Dillon Read delivered to the First Citizens Board of Directors its oral opinion
to the effect that as of such date the Exchange Ratio to be received by the
holders of First Citizens Common Stock pursuant to the Merger Agreement would
be fair from a financial point of view to First Citizens shareholders. The
First Citizens Board of Directors discussed, among other things, the terms of
the Merger Agreement and the shareholder and regulatory approvals that would be
required to consummate the Merger.
The Board of Directors reconvened in a meeting on June 30, 1994 to act
on the matters presented at the meeting on June 29, 1994. At such meeting on
June 30, 1994, Dillon Read presented its written opinion to the effect that the
Exchange Ratio of the KeyCorp Common Stock to be received for the First
Citizens Common Stock in the proposed transaction would be fair to the First
Citizens shareholders from a financial point of view. At the conclusion of
this meeting, the Board of Directors of First Citizens unanimously adopted the
Merger Agreement and determined to recommend to the shareholders of First
Citizens that they approve the Merger. The Merger Agreement was entered into
on June 30, 1994.
FIRST CITIZENS' REASONS FOR THE MERGER
In the course of reaching its decision to adopt the Merger Agreement,
the First Citizens Board of Directors consulted with its legal advisors
regarding the legal terms of the Merger Agreement and the directors'
obligations in their respective consideration thereof, its financial advisors
regarding the financial terms and fairness, from a financial point of view, of
the Exchange Ratio in the proposed Merger, and the management of First
Citizens. Without
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assigning any relative or specific weights thereto, the Board of Directors
considered the factors outlined below, among others, that it believed relevant
to reaching its determination.
The terms of the proposed transaction with KeyCorp as set forth in the
Merger Agreement, including the Exchange Ratio, were reached on the basis of
arms length negotiations between First Citizens and KeyCorp. In reaching the
conclusion that the terms of the Merger Agreement are fair, the First Citizens
Board of Directors considered, among other things, the market value, book
value, and dividends and earnings per share of First Citizens Common Stock, as
well as the market value, market performance, book value, earnings per share
and prospects of KeyCorp Common Stock. It is the business judgment of the
Board of Directors of First Citizens that the Merger provides an opportunity
for the shareholders of First Citizens to receive consideration for their
shares in the form of securities of KeyCorp, which securities have a value in
excess of the book value of the First Citizens Common Stock. The First
Citizens Board of Directors is also of the opinion that the Exchange Ratio
represents a substantial premium over the prices at which the First Citizens
Common Stock has traded in the recent past (and the range of prices at which
First Citizens Common Stock is expected to trade in the near future in the
absence of the Merger). Further, the Board of Directors of First Citizens
concluded that a merger with KeyCorp would provide First Citizens' shareholders
with enhanced value by providing greater liquidity resulting from the
acquisition of shares of a NYSE listed corporation with an active trading
market.
The Board of Directors of First Citizens took into consideration the
recommendation of the Ad Hoc Committee and the opinion of Dillon Read, First
Citizens' financial advisor, that the KeyCorp proposal was fair from a
financial point of view. At the June 29, 1994 meeting of First Citizens' Board
of Directors, Dillon Read made a presentation regarding the financial aspects
of the Merger and rendered its oral opinion to the effect that, as of such
date, the Exchange Ratio was fair to such shareholders from a financial point
of view. That opinion was rendered again in writing on June 30, 1994. A copy
of an updated written opinion dated the date of this Prospectus/Proxy Statement
is attached as Appendix B to this Prospectus/Proxy Statement. First Citizens'
Board of Directors considered the analyses presented to it by Dillon Read
relating to selected financial and stock market data concerning First Citizens
and KeyCorp and other publicly held bank holding companies, certain financial
analyses of the terms of the Merger, including a discounted cash flow analysis,
and a comparison to the terms of other recent business combinations involving
bank holding companies. See "BACKGROUND OF AND REASONS FOR THE MERGER --
Opinion of Financial Advisor."
The First Citizens Board of Directors considered the strategic
alternatives available to First Citizens, including the possibility of
remaining independent, soliciting additional competing proposals, or accepting
KeyCorp's bid, before concluding that the Merger represented the best available
means of enhancing shareholder value at this time and that the Exchange Ratio
was fair to the shareholders of First Citizens.
In assessing the alternatives to remaining independent, the First
Citizens Board of Directors considered the long-range business prospects and
risks of First Citizens' business, financial condition and results of
operations in the context of the present status and anticipated future
direction of the financial services industry, specifically the industry's
intensely competitive nature. In considering the competitive pressures in the
financial services industry in
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general and the banking industry in particular, the First Citizens Board of
Directors recognized that the banking industry is in the midst of a major
transformation and restructuring. In particular, the Board of Directors
believes that the banking industry is experiencing significant pressure for
consolidation as a result of many factors, including industry overcapacity,
increased competition from non-bank financial services competitors,
technological change, and the evolving legislative environment. First
Citizens' Board of Directors believes that the proposed business combination
with KeyCorp could lead to significant competitive advantages through greater
diversity of product offerings, cost-savings achieved through integration of
operations, improved access to capital and funding, and geographic expansion of
operations.
The First Citizens Board of Directors considered the process that was
used to solicit indications of interest on the part of potential acquirors of
First Citizens. In deciding to accept the offer submitted by KeyCorp after
soliciting indications of interest on a confidential basis, the First Citizens
Board of Directors considered the fact that each of the large institutions with
a significant market presence in the midwest had been approached for (or had
approached First Citizens with) an indication of possible interest, and that
Dillon Read had also approached certain banks not currently in the market
served by First Citizens which were viewed by Dillon Read as potential
acquirors. The Board also considered Dillon Read's opinion that these
institutions represented the most likely prospective bidders for First
Citizens.
The First Citizens Board of Directors considered the historical growth
in KeyCorp's earnings per share and book value, the historical dividends paid
on the First Citizens Common Stock and KeyCorp Common Stock, respectively, and
the significant increase in dividends which would result to First Citizens
shareholders from the Merger. Further, the First Citizens Board of Directors
considered the expectation that the Merger will be a tax-free transaction to
First Citizens shareholders, First Citizens, and KeyCorp.
With regard to the conditions to the Merger and the risks to First
Citizens if the Merger was not consummated, the Board of Directors was advised
that the conditions to the Merger included, among other things, (a) that the
representations and warranties contained in the Merger Agreement be true and
correct in all material respects as of the date of the Merger Agreement and as
of the closing date of the Merger, and (b) that all regulatory approvals
required to consummate the Merger are obtained and remain in full force and
effect and all statutory waiting periods in respect thereof shall have expired.
The Board of Directors considered the risks to First Citizens of
non-consummation of the transaction, including the possibility of adverse
operational consequences for First Citizens and Citizens Bank.
Finally, the First Citizens Board of Directors considered the possible
impact of the Merger on First Citizens' and Citizens Bank's employees,
customers and community. The Board of Directors believes that the Merger, if
consummated, will result in expanded banking services to the community, and
will afford access to the resources of a strong financial parent.
Additionally, the Board of Directors believes that, while the Merger may result
in the termination of a certain number of employees of First Citizens and
Citizens Bank, certain employees of Citizens Bank may experience expanded job
opportunities within the KeyCorp organization after consummation of the Merger,
and terminated employees will receive severance benefits provided for in the
Merger Agreement. See "TERMS OF MERGER -- Effect on Employee Benefits."
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KEYCORP'S REASONS FOR THE MERGER
In reaching its determination that the Merger and the Merger Agreement
are fair to, and in the best interest of, KeyCorp and its shareholders, KeyCorp
management considered a number of factors including the following:
(a) A variety of factors affecting and relating to the overall
strategic focus of KeyCorp, including KeyCorp's desire to
expand its presence through Society National Bank, Indiana in
central Indiana;
(b) KeyCorp management's due diligence review of First Citizens
including the business, operations, earnings, asset quality,
and financial condition of First Citizens on a historical,
prospective, and pro forma basis, and the enhanced
opportunities through Society National Bank, Indiana for both
operating efficiencies and synergies that are expected to
result from the Merger, the enhanced opportunities for growth
that the Merger makes possible, and the respective
contributions the parties would bring to a combined
institution, recognizing that Society National Bank, Indiana
presently conducts a banking business in the State of Indiana;
(c) The review by KeyCorp of the provisions of the Merger Agreement;
(d) The expectation that the Merger will be tax-free for federal
income tax purposes to KeyCorp (see "TERMS OF THE MERGER --
Certain Federal Income Tax Considerations; Accounting
Treatment"); and
(e) The current and prospective economic environment facing
financial institutions, including KeyCorp.
KeyCorp management did not assign any specific or relative weights to the
factors in its consideration. The Board of KeyCorp concurred with management's
analysis and recommendation regarding the Merger and ratified KeyCorp's
adoption of the Merger Agreement.
OPINION OF FINANCIAL ADVISOR
The Board of Directors of First Citizens retained the investment banking
firm of Dillon Read as its financial advisor in connection with a potential
acquisition of First Citizens. On June 30, 1994, Dillon Read delivered to
First Citizens' Board of Directors its written opinion stating that, on and as
of the date of such opinion, and based upon and subject to the assumptions
described therein, the consideration offered in the Merger is fair, from a
financial point of view, to the holders of the Common Stock of First Citizens.
Dillon Read has also delivered a written opinion to First Citizens' Board of
Directors stating that, on and as of the date of this Prospectus/Proxy
Statement, the consideration offered in the Merger is fair, from a financial
point of view, to the holders of First Citizens Common Stock. The full text of
Dillon Read's updated opinion, which sets forth the assumptions made, matters
considered therein, and
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the limitations thereof, is included as Appendix B to this Prospectus/Proxy
Statement and should be read carefully and in its entirety.
In arriving at its opinion, Dillon Read reviewed and analyzed, among
other things: (i) the Merger Agreement; (ii) the Annual Reports on Form 10-K
for old Key and Society for the four years ended December 31, 1992 and certain
interim reports on Form 10-Q for the nine months ended September 30, 1993;
(iii) the Proxy Statement of old Key dated December 29, 1993 relating to the
merger between old Key and Society; (iv) the Annual Report on Form 10-K for old
Key for the year ended December 31, 1993; (v) KeyCorp's Current Report on Form
8-K filed on April 20, 1994; (vi) certain interim reports to shareholders and
the Quarterly Reports on Form 10-Q of KeyCorp and certain other communications
from First Citizens and KeyCorp to their respective shareholders; (vii) audited
financial statements of First Citizens as presented in First Citizens' Annual
Reports for 1993, 1992 and 1991; and (viii) certain internal financial analyses
and forecasts for First Citizens prepared by its management and consultants
retained by First Citizens management. Dillon Read also held discussions with
members of the senior management of First Citizens and KeyCorp regarding their
respective past and current business operations, financial condition and future
prospects. In addition, Dillon Read reviewed the reported price for the First
Citizens Common Stock and the KeyCorp Common Stock over the six months prior to
the date of its opinion and the historical price of old Key and Society common
stock for the five years prior to the date of its opinion and the trading
activity for KeyCorp Common Stock, compared certain financial and stock market
information for First Citizens and KeyCorp with similar information for certain
other companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the commercial
banking industry and performed such other studies and analyses it considered
relevant.
As set forth in its opinion, Dillon Read relied without independent
verification upon the accuracy and completeness of all the financial and other
information reviewed by it for the purposes of its opinion. It assumed that
the financial forecasts had been reasonably prepared on a basis reflecting the
best currently available judgments and estimates of the management of First
Citizens and that such forecasts would be realized in the amounts and at the
times contemplated thereby. Dillon Read also assumed the allowances for loan
losses for First Citizens and KeyCorp were adequate to cover such losses. It
did not review individual credit files or make an independent evaluation or
appraisal of the assets and liabilities of First Citizens or KeyCorp or any of
their subsidiaries and was not furnished with any such evaluation or appraisal.
Dillon Read is an internationally recognized investment banking firm,
and as part of its investment banking services, is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities and private placements, and
valuations for estate, corporate and other purposes. Dillon Read is familiar
with First Citizens having acted as its financial advisor in connection with,
and having participated in certain of the negotiations leading to, the Merger
Agreement.
As compensation for its services in connection with the Merger, First
Citizens has (i) paid Dillon Read a fee of $50,000 and (ii) agreed to pay
Dillon Read a fee payable upon
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consummation of the Merger based on the aggregate amount of consideration
received by First Citizens' shareholders determined at such time. Based on a
share price for KeyCorp Common Stock of $_________ per share as of
_________________, 1994, the fee payable upon consummation of the Merger would
total approximately $_______. In addition, First Citizens has agreed to
reimburse Dillon Read for reasonable expenses incurred in connection with the
Merger and to indemnify Dillon Read against certain liabilities.
In the ordinary course of business, Dillon Read may trade the securities
of KeyCorp for its own account and for the accounts of its customers, and
accordingly, may at any time hold a long or short position in such securities.
RECOMMENDATION OF FIRST CITIZENS' BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF FIRST CITIZENS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE
MERGER.
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TERMS OF THE MERGER
This portion of the Prospectus/Proxy Statement describes various aspects
of the Merger. The following description does not purport to be complete and
is qualified in its entirety by reference to the Merger Agreement attached
hereto as Appendix A, and incorporated herein by reference. ALL SHAREHOLDERS
OF FIRST CITIZENS ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY.
GENERAL
The Merger Agreement provides that, subject to approval of the Merger
Agreement by the shareholders of First Citizens, receipt of all necessary
regulatory approvals and expiration of all applicable statutory waiting
periods, and satisfaction, or in certain cases waiver, of certain other
conditions, First Citizens will be merged with and into KeyCorp. The Merger
will occur as promptly as practicable after the date upon which all of the
conditions to the Merger are satisfied or waived or at such other time and
date as First Citizens and KeyCorp may agree. First Citizens and KeyCorp,
however, currently anticipate that the Merger will be completed during January
1995, but, in any event prior to March 31, 1995. Upon consummation of the
Merger, the separate corporate existence of First Citizens will cease, KeyCorp
will be the surviving corporation, and the shareholders of First Citizens will
become shareholders of KeyCorp. See "TERMS OF THE MERGER -- Effective Time."
Following the consummation of the Merger, KeyCorp plans to effect the merger
of Citizens Bank, First Citizens' sole banking subsidiary, into Society
National Bank, Indiana.
The Board of Directors and executive officers of KeyCorp in office
immediately prior to the Effective Time will be the directors and officers,
respectively, of KeyCorp after consummation of the Merger.
CONVERSION OF FIRST CITIZENS COMMON STOCK; EFFECTS ON KEYCORP SHAREHOLDERS
CONVERSION OF FIRST CITIZENS COMMON STOCK. At the Effective Time, each
share of First Citizens Common Stock then issued and outstanding (other than
(i) treasury shares held by First Citizens, (ii) shares held by any First
Citizens shareholder properly exercising dissenters' rights, or (iii) First
Citizens Common Stock owned by KeyCorp for its own accounts) will cease to be
outstanding and will be converted into the number of shares of KeyCorp Common
Stock (carried out to four decimal places) determined by dividing $37.00 by the
Average Stock Price; provided, however, that (A) if the Average Stock Price
shall be less than or equal to $25.9000 per share, the Average Stock Price
shall be deemed to be $25.9000, or (B) if the Average Stock Price shall be
greater than or equal to $38.8500 per share, the Average Stock Price shall be
deemed to be $38.8500 (the foregoing calculation shall be referred to
hereinafter as the "Exchange Ratio"). Each share of KeyCorp Common Stock
issued to First Citizens shareholders in the Merger will be accompanied by one
Right to be evidenced by certificates for KeyCorp Common Stock under the Rights
Agreement. Each Right represents the right to purchase one share of KeyCorp
Common Stock upon the terms and conditions set forth in the Rights Agreement.
See "COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF CAPITAL STOCK OF KEYCORP AND
FIRST CITIZENS." The Exchange Ratio may be
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subject to downward adjustment in certain circumstances as more fully described
herein. See "TERMS OF THE MERGER -- Sale of Travel Agency and Insurance
Agency; Environmental Matters."
EFFECT ON KEYCORP SHAREHOLDERS. At the Effective Time, each share of
KeyCorp Common Stock then issued and outstanding will remain outstanding and
will continue to be accompanied by one Right under the Rights Agreement.
NO FRACTIONAL SHARES OF KEYCORP COMMON STOCK TO BE ISSUED. No
fractional shares of KeyCorp Common Stock will be issued in the Merger, but, in
lieu thereof, each holder of First Citizens Common Stock who otherwise would
have been entitled to a fraction of a share of KeyCorp Common Stock, upon
surrender of his or her certificates representing shares of First Citizens
Common Stock, will be paid the cash value (without interest) of such fraction,
which will be equal to such fraction multiplied by the number of shares of
KeyCorp Common Stock (carried out to four decimal places) determined pursuant
to the Exchange Ratio. See "TERMS OF THE MERGER -- Certain Federal Income Tax
Consequences."
DISSENTERS' RIGHTS. No conversion of First Citizens Common Stock into
KeyCorp Common Stock shall be made with respect to any share of First Citizens
Common Stock as to which a shareholder of First Citizens has properly elected
to exercise any rights to dissent and obtain payment of the fair value of his
or her shares under the Indiana Business Corporation Law. See "RIGHTS OF
DISSENTING SHAREHOLDERS."
SURRENDER OF CERTIFICATES
MANNER OF EXCHANGE-CERTIFICATES. KeyCorp and First Citizens have
selected Society National Bank as the exchange agent (the "Exchange Agent") to
effect the exchange of certificates representing shares of First Citizens
Common Stock in connection with the Merger. Promptly after the Effective Time,
the Exchange Agent will mail to each holder of record (other than holders of
First Citizens Common Stock who have properly demanded and perfected
dissenters' rights under the Indiana Business Corporation Law) of certificates
which immediately prior to the Effective Time represented outstanding shares of
First Citizens Common Stock, a notice advising the holder of the effectiveness
of the Merger accompanied by a transmittal form (the "Certificate Transmittal
Form"). The Certificate Transmittal Form will contain instructions with
respect to the surrender of certificates representing First Citizens Common
Stock to be exchanged for shares of KeyCorp Common Stock (together with cash in
lieu of any fractional share) and will specify that delivery will be effected,
and risk of loss and title to such certificates will pass, only upon delivery
of the certificates to the Exchange Agent. Upon surrender, in accordance with
the instructions contained in the Certificate Transmittal Form, to the Exchange
Agent of certificates representing shares of First Citizens Common Stock, the
holder thereof will be entitled to receive in exchange therefor a
certificate(s) representing the appropriate number of shares of KeyCorp Common
Stock to which such holder is entitled and cash in lieu of any fractional share
of KeyCorp Common Stock.
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FIRST CITIZENS STOCK CERTIFICATES SHOULD NOT BE FORWARDED TO THE
EXCHANGE AGENT UNTIL THE SHAREHOLDER HAS RECEIVED A CERTIFICATE TRANSMITTAL
FORM AND SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY.
RIGHTS OF HOLDERS OF FIRST CITIZENS STOCK CERTIFICATES PRIOR TO
SURRENDER. Prior to the time certificates representing shares of First
Citizens Common Stock are surrendered, no dividend or other distribution
payable to holders of record of KeyCorp Common Stock on any date on or after
the Effective Time will be paid to any former shareholder of First Citizens
until such holder physically surrenders for exchange his or her certificates
representing shares of First Citizens Common Stock and such holder's other
rights as a shareholder of KeyCorp, including his or her right to vote, shall
be suspended at the Effective Time until such holder physically surrenders his
or her certificates representing First Citizens Common Stock for exchange.
Upon surrender by any such shareholder of his or her certificates representing
First Citizens Common Stock to the Exchange Agent the former First Citizens
shareholder will receive certificates representing the shares of KeyCorp Common
Stock into which such shareholder's shares of First Citizens Common Stock were
converted, will be paid the dividends or other distributions (without interest)
that have theretofore become payable with respect to such shares of KeyCorp
Common Stock since the Effective Time and, if suspended, such shareholder's
other rights as a shareholder will thereupon be restored.
LOST CERTIFICATES AND DEPOSITORY RECEIPTS. Any First Citizens
shareholder who has lost or misplaced a certificate for any of his or her
shares of First Citizens Common Stock should immediately call the First
Citizens stock transfer agent, Ms. Patricia Coffin, at (317) 646-6762 for
information regarding the procedures to be followed for replacing the lost
certificate(s). Until a replacement certificate is obtained, the First
Citizens shareholder will be unable to properly submit the Certificate
Transmittal Form.
CONDUCT OF BUSINESS PENDING THE MERGER
GENERAL. The Merger Agreement contains certain restrictions on the
conduct of the business of First Citizens pending the consummation of the
Merger. In particular, unless the prior written consent of KeyCorp is
obtained, prior to the Effective Time, the Merger Agreement requires First
Citizens and its subsidiaries to (a) conduct their respective businesses in the
ordinary course consistent with past practices, and (b) preserve intact their
respective business organizations and assets and maintain their rights and
franchises.
The Merger Agreement also prohibits First Citizens and its subsidiaries
from engaging in certain activities prior to the Effective Time without the
prior written consent of KeyCorp. Specifically, without such consent, neither
First Citizens, nor its subsidiaries, may:
(a) change its capital structure, corporate structure, or any
provision of its charter or by-laws including the number of
shares of its authorized or issued capital stock;
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(b) issue or sell any shares of capital stock or any other equity
or long-term debt securities or enter into any arrangement,
contract, or commitment with respect to the purchase or voting
of shares of their capital stock;
(c) acquire beneficial ownership of equity securities or any
similar interests of any corporation, bank, business, trust,
association, or similar organization or merge with or acquire
control over any thrift institution, bank, corporation, or
organization or create or acquire any subsidiary;
(d) issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character
relating to the authorized or issued capital stock of First
Citizens or any securities convertible into shares of such
stock or purchase, redeem, retire or otherwise acquire, or
hypothecate, pledge or otherwise encumber, any shares of its
capital stock;
(e) adjust, split, combine or reclassify any shares of its capital
stock;
(f) declare, set aside, pay or make any dividend or other
distribution or payment (whether in cash, stock or property or
any combination thereof) in respect of the capital stock of
First Citizens except regular quarterly dividends not to exceed
$.20 per share;
(g) other than pursuant to written agreements or policies of First
Citizens or its subsidiaries in effect on June 30, 1994, grant
any severance or termination pay to, or enter into any
employment agreement or deferred compensation, non-competition,
bonus, stock option, or profit-sharing plan with, any of its
officers or other employees or its directors, or, except as
required by applicable law or regulation, renew, amend or
modify any such agreement, arrangement or plan now in existence
or increase the compensation payable to or grant bonuses to any
of its directors, executive officers or other employees, or pay
any bonus, compensation, or benefit or enter into any contract,
agreement, commitment or arrangement to do any of the
foregoing, other than merit increases pursuant to written
agreements or policies in effect on the date of the Merger
Agreement;
(h) make any capital expenditures other than in the ordinary course
of business or as necessary to maintain existing assets in good
repair, in either case, not to exceed $25,000;
(i) make application for the opening or closing of, or open or
close, any branches or automated banking facilities or sell,
assign, transfer, or otherwise dispose of to a third party any
of its branch offices or any of its material properties or
assets, including mortgage or other loans and rights to the
servicing of mortgage loans;
(j) merge into, consolidate with, affiliate with, or be purchased
or acquired by, any other corporation, entity or person, or
permit any other
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corporation, entity or person, to be merged, consolidated or
affiliated with it or be purchased or acquired by it, or,
except to realize upon collateral and except for purchases of
sales of loans or investment securities in the ordinary course
of its business, acquire all or any substantial portion of the
assets of any other corporation, entity or person, or sell all
or any portion of its assets;
(k) make any change in its accounting methods or practices, other
than changes in accordance with generally accepted accounting
principles or as required by law;
(l) renew or enter into any real property lease;
(m) enter into any transaction, contract, loan, lease, agreement,
or commitment (or any amendment to any transaction, contract,
lease, agreement, or commitment) outside of the ordinary course
of business, including, without limitation, any loans or loan
commitments to officers, directors, or owners of 5% or more of
the issued and outstanding shares of First Citizens Common
Stock (or any person or business entity controlled by or
affiliated with such officers, directors, or stockholders);
(n) purchase or otherwise acquire from a third party, branch
offices, assets constituting any other line of business, or any
other material properties or assets, including mortgage or
other loans and rights for the servicing of mortgage loans; or
(o) incur any indebtedness otherwise than in the ordinary course of
business.
SALE OF TRAVEL AGENCY AND INSURANCE AGENCY
The Merger Agreement requires First Citizens to cause Citizens Bank to
sell or otherwise dispose of each of Citizens Travel, Inc. (the "Travel
Agency") and Citizens Insurance Agency, Inc. (the "Insurance Agency") prior to
the Effective Time, whether through a sale of assets (followed by a dissolution
of the selling corporation), a sale of stock, a merger or otherwise. The
Travel Agency and Insurance Agency are wholly owned subsidiaries of Citizens
Bank, which in turn, is a wholly owned subsidiary of First Citizens. Upon
disposition of the Travel Agency and the Insurance Agency prior to the
Effective Time, First Citizens will be entitled to distribute, as a dividend,
an amount equal to the aggregate net after tax gain realized by First Citizens
on the sales, determined in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods. In the event
First Citizens realizes an aggregate net after tax loss on the sales
(determined in accordance with generally accepted accounting principles
consistently applied), the Exchange Ratio will be adjusted by reducing the
amount to be divided by the Average Stock Price by the amount of such aggregate
net after tax loss per outstanding share of First Citizens Common Stock. See
"TERMS OF THE MERGER -- Conversion of First Citizens Common Stock."
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ENVIRONMENTAL MATTERS
First Citizens has agreed to commission, at its own expense, a Phase I
environmental audit of all real property owned or leased by it, including
property relating to its banking center offices and property acquired through
foreclosure and held as real estate owned, and to provide KeyCorp with the
results of such audit. Upon review of the Phase I environmental audit reports,
KeyCorp may commission Phase II environmental audits, with the cost being
divided equally between First Citizens and KeyCorp. If, based upon the results
of any environmental audit, the aggregate estimated cost to repair, remediate
or otherwise correct any situation or circumstance which violates any local,
state or federal environmental law, regulation, or ordinance to the extent
necessary so that such condition or circumstance would no longer be such a
violation ("Remedial Cost Estimate") is less than $250,000, the Merger will be
consummated without adjustment to the Exchange Ratio. In the event that the
Remedial Cost Estimate exceeds $250,000 (such excess, the "Excess Remediation
Cost"), the Merger will be consummated; however, the Exchange Ratio shall be
adjusted downward by reducing the amount to be divided by the Average Stock
Price by the Excess Remediation Cost per outstanding share of First Citizens
Common Stock. In the event that the Remedial Cost Estimate exceeds $3,000,000,
First Citizens and KeyCorp shall each have the election to terminate the Merger
Agreement or, in lieu of such termination, the parties may agree that further
downward adjustment to the Exchange Ratio will be made on a dollar-for-dollar
basis or such lesser amount as the parties might then agree. See "TERMS OF THE
MERGER -- Conversion of First Citizens Common Stock; Waiver of Conditions,
Amendment, or Termination of the Merger Agreement."
DATA PROCESSING
First Citizens is a party to an agreement with Information Technology,
Inc. ("ITI") pursuant to which ITI provides data processing support and other
servicing to enable First Citizens to complete its year-end data processing
for each of First Citizens' fiscal years. This agreement with ITI will
terminate on November 1, 1994, at which time, without the support of ITI,
First Citizens would be unable to complete its year-end processing. As a
result, First Citizens has agreed, pursuant to the Merger Agreement, to use its
best efforts to enter into, as soon as practicable, but no later than October
1, 1994, a one-year "right to use" extension agreement relating to the use by
First Citizens of certain data processing system software (the "Extension
Agreement") with ITI or such other party as is reasonably acceptable to KeyCorp
covering the period from November 1, 1994 to November 1, 1995. On September 2,
1994, First Citizens secured such an Extension Agreement with ITI, effective to
November 1, 1994. Pursuant to the Merger Agreement and in connection with the
Extension Agreement, KeyCorp has agreed to provide data processing support and
other servicing to assist First Citizens in completing its year-end processing
for its fiscal year ended December 31, 1994. During the term of the Extension
Agreement, it is anticipated that KeyCorp will also assist First Citizens to
convert its data processing onto KeyCorp's data processing system.
In the event of a termination of the Merger Agreement by First Citizens
due to a breach by KeyCorp of any of its representations, warranties, or
covenants, if such termination occurs on or after September 1, 1994 but prior
to completion of a conversion of First Citizens onto
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KeyCorp's data processing system, KeyCorp will, without cost to First Citizens,
continue to provide First Citizens, for a period beginning at the later of the
date of termination of the Merger Agreement or November 1, 1994 and ending six
months following the date of the termination of the Merger Agreement, with all
support and other servicing to enable First Citizens to complete its year-end
data processing for the fiscal year ended December 31, 1994. If such a
termination of the Merger Agreement occurs after the conversion of First
Citizens' data processing system onto KeyCorp's data processing systems,
KeyCorp has agreed to permit First Citizens to remain on its system until such
time as First Citizens may reasonably be converted onto an appropriate
alternative system.
In the event of a termination of the Merger Agreement by First Citizens
or KeyCorp not involving a breach by either party, if such termination occurs
on or after September 1, 1994 but prior to completion of a conversion of First
Citizens' data processing system onto KeyCorp's data processing system, KeyCorp
will, without cost to First Citizens, continue to provide First Citizens with
all support and other servicing to complete First Citizens' year-end data
processing for its fiscal year ended December 31, 1994. In addition, KeyCorp
will continue, for a period beginning at the later of the date of termination
of the Merger Agreement or November 1, 1994 and ending six months after the
date of such termination of the Merger Agreement, to provide such other
services to First Citizens relating to its data processing system as KeyCorp is
reasonably capable of providing. If a termination of the Merger Agreement not
involving a breach by either party occurs after the conversion of First
Citizens data processing system onto KeyCorp's data processing systems, KeyCorp
and First Citizens have agreed to cooperate to effectuate the conversion of
First Citizens onto an appropriate alternative data processing system.
If data processing services are being provided by KeyCorp after a
termination of the Merger Agreement as described above, First Citizens will use
good faith efforts to promptly obtain from a third party services that would
obviate the need for KeyCorp to provide such services.
EMPLOYEE BENEFITS
The Merger Agreement provides that KeyCorp will honor all employment,
severance and other compensation contracts between First Citizens or any of its
subsidiaries (excluding the Travel Agency and the Insurance Agency) and any
director, officer, or employee of First Citizens or its subsidiaries (excluding
the Travel Agency and the Insurance Agency). Each employee of First Citizens
or any of its subsidiaries (excluding the Travel Agency and the Insurance
Agency) will receive full credit for each year of service with such company for
purposes of determining eligibility for participation and vesting, but not for
purposes of benefit accrual, in KeyCorp's employee benefit plans. The employee
benefits provided by KeyCorp, for a period of two years after consummation of
the Merger, to former employees of First Citizens or its subsidiaries
(excluding the Travel Agency and the Insurance Agency) retained or employed by
KeyCorp, will be no less favorable in the aggregate than such benefits
maintained by First Citizens and its subsidiaries prior to the Merger.
The Merger Agreement further provides that KeyCorp will provide
severance benefits to all permanent employees of First Citizens (excluding
employees of the Travel Agency or the
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Insurance Agency) who are terminated at any time after the Effective Time.
These benefits will be provided under the KeyCorp Separation Pay Plan, and
consist of a range of separation pay benefits computed pursuant to a formula
based on a minimum number of weeks' base compensation for each year of service.
Notwithstanding any provision of the KeyCorp Separation Pay Plan, First
Citizens employees entitled to severance benefits will receive benefits that
are generally no less favorable than those they would have been entitled to
receive under any applicable severance plan maintained by First Citizens.
Additionally, certain key executives of First Citizens will be entitled to
receive additional severance benefits pursuant to the Citizens Bank Key
Employee 1994 Severance Plan upon termination within one year following the
consummation of a "Change of Control Transaction." A "Change of Control
Transaction" is any transaction the consummation of which results in the
owners of First Citizens Common Stock holding less than 50% of the direct and
indirect beneficial ownership of First Citizens. The severance compensation
for such executives shall consist of an aggregate of (i) regular service
compensation equal to one week's base compensation for each year of service
with First Citizens or its subsidiaries and (ii) an additional severance amount.
NO SOLICITATIONS
Pursuant to the Merger Agreement, First Citizens and its subsidiaries
are prohibited from soliciting or, except to the extent required by applicable
law relating to fiduciary obligations of directors, upon advice of counsel,
holding discussions or negotiations with, or assisting or providing any
information to, any person, entity, or group (other than KeyCorp) concerning
any merger, disposition of a significant portion of its assets, or similar
transactions involving First Citizens or, except for the Travel Agency and the
Insurance Agency, any First Citizens subsidiary. Notwithstanding these
provisions, First Citizens will promptly communicate to KeyCorp the terms of
any proposal, discussion, negotiation, or inquiry relating to a merger or
disposition of a significant portion of its capital stock or similar
transaction involving First Citizens or any subsidiary and the identity of the
party making such proposal or inquiry which it receives with respect to any
such transaction.
CONDITIONS TO THE MERGER
The respective obligations of KeyCorp and First Citizens to effect the
Merger are subject to the satisfaction prior to the Effective Time of certain
conditions, including, but not limited to, the following significant conditions
(some of which may be waived):
(a) in the case of each party, performance in all material respects
at or prior to the Effective Time of the agreements and
covenants required to be performed by the other party;
(b) in the case of each party, the truth and correctness in all
material respects as of the Effective Time and the date of
signing of the Merger Agreement of the representations and
warranties of the other party contained in the Merger
Agreement, except as expressly contemplated by the Merger
Agreement and except for any representation and warranty made
as of a specified date (which shall be true and correct as of
such date);
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(c) approval of the Merger Agreement by the requisite vote of
shareholders of First Citizens. See "SPECIAL MEETING OF FIRST
CITIZENS SHAREHOLDERS;"
(d) receipt of all approvals of governmental agencies or other
third parties required to consummate the transactions
contemplated by the Merger Agreement. See "TERMS OF THE MERGER
-- Regulatory Approvals;"
(e) absence of any temporary restraining order, injunction, or
other order by any federal or state court or agency which
enjoins or prohibits consummation of the Merger;
(f) receipt by each of KeyCorp and First Citizens of a written
opinion from their respective legal counsel as to certain
federal income tax consequences of the Merger. See "TERMS OF
THE MERGER -- Certain Federal Income Tax Consequences;"
(g) holders of no more than 10% of the issued and outstanding
shares of First Citizens Common Stock have notified First
Citizens that they intend to exercise dissenters' rights;
(h) the Registration Statement of which this Prospectus/Proxy
Statement is a part shall have been declared effective by the
Commission and shall not be subject to a stop order suspending
the effectiveness of the Registration Statement and no
proceedings for the purpose of suspending the effectiveness of
the Registration Statement shall be pending before or
threatened by the Commission.
REGULATORY APPROVALS
Consummation of the Merger is subject to receipt by KeyCorp and First
Citizens of all necessary regulatory approvals and expiration of all applicable
statutory waiting periods. The regulatory approvals that must be obtained as a
condition to the consummation of the Merger are the approvals of the Federal
Reserve Board and the Indiana Department of Financial Institutions, and, if the
Insurance Agency is not sold prior to the Effective Time, the Indiana
Department of Insurance.
IT IS ANTICIPATED THAT THE REGULATORY APPROVALS DESCRIBED HEREIN WILL BE
OBTAINED IN TIME TO ALLOW FOR CONSUMMATION OF THE MERGER IN JANUARY 1995, BUT
NO ASSURANCE CAN BE GIVEN THAT SUCH REGULATORY APPROVALS WILL BE OBTAINED SO AS
TO PERMIT CONSUMMATION OF THE MERGER OR THAT SUCH APPROVALS WILL NOT BE
CONDITIONED UPON MATTERS THAT WOULD CAUSE THE PARTIES TO ABANDON THE MERGER.
THERE LIKEWISE CAN BE NO ASSURANCE THAT THE UNITED STATES DEPARTMENT OF JUSTICE
OR A STATE ATTORNEY GENERAL WILL NOT CHALLENGE THE MERGER, OR IF SUCH A
CHALLENGE IS MADE, AS TO THE RESULTS THEREOF.
The Merger is subject to approval by the Federal Reserve Board under
Section 3 of the Bank Holding Company Act of 1956, as amended (the "BHCA").
Section 3 of the BHCA
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requires that the Federal Reserve Board take into consideration the financial
and managerial resources and future prospects of the existing and proposed
institutions and the convenience and needs of the communities to be served.
The Federal Reserve Board has indicated that it will not approve a significant
acquisition unless the resulting institution has adequate capitalization,
taking into account, among other things, asset quality. The BHCA prohibits the
Federal Reserve Board from approving the Merger if (a) it would result in a
monopoly or would be in furtherance of any combination or conspiracy to
monopolize the business of banking in any part of the United States or (b) its
effect in any section of the country may be substantially to lessen competition
or to tend to create a monopoly or would be in restraint of trade in any other
manner, unless the Federal Reserve Board finds that any anti-competitive
effects of the Merger are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs of the
communities to be served. In addition, under the Community Reinvestment Act,
as amended (the "Community Reinvestment Act"), the Federal Reserve Board must
take into account the records of performance of the bank subsidiaries of
KeyCorp and First Citizens in meeting the credit needs of each community,
including low and moderate income neighborhoods, served by such bank
subsidiaries. The Federal Reserve Board must also determine, under Section
3(d) of the BHCA, that the State of Indiana authorizes the acquisition of First
Citizens' bank subsidiary by a bank holding company principally located in
Ohio; this determination will require a finding that the interstate statute of
Indiana is reciprocal with the Ohio interstate statute, which reciprocity has
been determined to exist on prior occasions.
Under the BHCA, the Merger may not be consummated until the 30th day
following the date of Federal Reserve Board approval, during which time the
United States Department of Justice may challenge the Merger on antitrust
grounds. The commencement of an antitrust action by the Department of Justice
would stay the effectiveness of the Federal Reserve Board's approval unless a
court specifically orders otherwise. KeyCorp and First Citizens believe that
antitrust concerns will not interfere with the consummation of the Merger.
Applications seeking the foregoing approvals of the Federal Reserve
Board were filed on September 19, 1994.
The consummation of the Merger is subject to approval of the Indiana
Department of Financial Institutions pursuant to Section 28-2-16-17 of the
Indiana Code. In deciding whether to approve the Merger, the Indiana
Department of Financial Institutions must consider various factors, including
(a) the safe, sound, and prudent operation of the banks already controlled by
KeyCorp, (b) the financial condition of KeyCorp and its affiliates, (c) the
adequacy and appropriateness of the services, including services contemplated
by the Community Reinvestment Act, provided by the banks already controlled by
KeyCorp to the communities they serve and of the services, including services
contemplated by the Community Reinvestment Act, proposed to be offered by
KeyCorp in the communities served by the banking subsidiary of First Citizens,
(d) the character and financial responsibility of the management of KeyCorp,
(e) the effect of the Merger on the interests of the depositors and creditors
and the general public, and (f) whether KeyCorp fails or refuses to furnish
required information to the Indiana Department of Financial Institutions.
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The application seeking the foregoing approval of the Indiana Department
of Financial Institutions was filed on September 20, 1994.
WAIVER OF CONDITIONS, AMENDMENT, OR TERMINATION OF THE MERGER AGREEMENT
WAIVER. The Merger Agreement provides that either KeyCorp or First
Citizens may waive any term, condition, or provision of the Merger Agreement to
which such party is entitled to the benefit thereof.
AMENDMENT. The Merger Agreement may be amended, either before or after
its adoption by the shareholders of First Citizens, upon approval of each of
their Boards of Directors (except for certain technical amendments). However,
any such amendment made subsequent to the approval of the Merger Agreement by
the shareholders of First Citizens, unless approved by the requisite vote of
such shareholders, may not alter the manner or basis in which shares of First
Citizens Common Stock will be exchanged for shares of KeyCorp Common Stock in
the Merger. Only an amendment which constitutes a fundamental change to the
Merger Agreement as described herein would require subsequent solicitation by
First Citizens of its shareholders.
TERMINATION. The Merger Agreement may be terminated, and the Merger
abandoned, at any time prior to the Effective Time, whether before or after
approval of the Merger Agreement by the shareholders of First Citizens:
(a) by mutual consent of the Board of Directors of both KeyCorp and
First Citizens for any reasons;
(b) by a vote of a majority of the Board of Directors of either
KeyCorp or First Citizens at any time after March 31, 1995, if
the Merger is not consummated by that date;
(c) by a vote of a majority of the Board of Directors of either
KeyCorp or First Citizens in the event of a breach by the other
party of any of such party's warranties or covenants contained
in the Merger Agreement, if (i) the nonbreaching party
determines in good faith that it would not have entered into
the Merger Agreement if it had known of the breach prior to
execution, or (ii) if there occurs a material breach of either
party's warranties or covenants which breach cannot be cured or
has not been cured within 45 days after notice to the breaching
party of such breach;
(d) by a vote of a majority of the Board of Directors of either
KeyCorp or First Citizens if any of the conditions to such
party's obligations to consummate the Merger have not been
satisfied or waived at such time as such conditions are no
longer capable of being satisfied. See "TERMS OF THE MERGER --
Conditions to the Merger;"
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(e) by majority vote of the Board of Directors of First Citizens in
the event that the average per share closing price of a share
of KeyCorp Common Stock as reported on the NYSE over the twenty
trading days immediately preceding the fifth day prior to the
closing date of the Merger (the "Closing Price") is less than
$24.2812;
(f) by majority vote of the Board of Directors of KeyCorp in the
event that the Closing Price exceeds $40.4687; or
(g) by majority vote of the Board of Directors of either KeyCorp or
First Citizens if remediation of any circumstance or situation
which violates any federal, state, or local environmental laws,
regulations, or ordinances is required and the cost of such
remediation will exceed $3,000,000.
EFFECTIVE TIME
The Merger becomes effective when KeyCorp and First Citizens file
appropriate certificates with, and such filings are accepted by, the Secretary
of State of the State of Indiana and the Secretary of State of the State of
Ohio. Upon the Merger becoming effective, KeyCorp will be the surviving
corporation and the separate existence of First Citizens will cease. For a
description of circumstances under which KeyCorp or First Citizens may
terminate the Merger Agreement, see "TERMS OF THE MERGER -- Waiver of
Conditions, Amendment, or Termination of the Merger Agreement." If not so
terminated by either Board of Directors, the Effective Time will occur as
promptly as practicable after the date upon which all of the conditions to the
Merger are satisfied or duly waived or at such other time and date as KeyCorp
and First Citizens may agree. However, KeyCorp and First Citizens currently
anticipate that the Merger will be completed during January 1995, but, in any
event, prior to March 31, 1995. See "TERMS OF THE MERGER -- Regulatory
Approvals."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
SHARES OWNED BY DIRECTORS AND EXECUTIVE OFFICERS OF FIRST CITIZENS.
Approximately 57% of the issued and outstanding shares of First Citizens Common
Stock are held by directors and executive officers of First Citizens and their
respective affiliates.
VOTING AGREEMENTS. Eighteen shareholders of First Citizens, including
certain directors of First Citizens and their affiliates, who in the aggregate
own or have the power to direct the vote of approximately 59% of the issued and
outstanding shares of First Citizens Common Stock, have entered into Voting
Agreements with KeyCorp pursuant to which each shareholder has agreed to: (i)
vote in favor of the approval of the Merger Agreement; (ii) vote against any
proposal relating to a competing merger or business combination involving the
acquisition of First Citizens; and (iii) not to sell or otherwise voluntarily
dispose of any shares of First Citizens Common Stock owned by such shareholder
or take any voluntary action which would have the effect of eliminating such
shareholder's ability to vote the First Citizens Common Stock owned by such
shareholder.
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STRIETELMEIER EMPLOYMENT AGREEMENT. On May 5, 1994, James D.
Strietelmeier, President and Chief Executive Officer of First Citizens, First
Citizens and Citizens Bank, entered into an employment agreement which provides
for the payment of severance benefits if Mr. Strietelmeier's employment is
terminated within two years after the consummation of a Change of Control
Transaction. Pursuant to the terms of the agreement, in the event of the
termination of Mr. Strietelmeier's employment within two years subsequent to
the consummation of a Change of Control Transaction, Mr. Strietelmeier would be
entitled to receive, in addition to the severance benefits generally available
to all permanent First Citizens employees, severance equal to his annual
compensation which would have been payable during the period commencing on the
date of termination and ending on the second anniversary of the Change of
Control Transaction, together with an amount equal to the aggregate cost to
First Citizens of any material employee benefits which were withdrawn, reduced
or terminated upon the termination of Mr. Strietelmeier's employment.
Consummation of the Merger would constitute a Change of Control Transaction
under Mr. Strietelmeier's employment agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Neither KeyCorp nor First Citizens has requested or will receive an
advance ruling from the Internal Revenue Service as to the tax consequences of
the Merger to shareholders of First Citizens, First Citizens, or KeyCorp.
Consummation of the Merger is conditioned on the delivery of the tax opinions
of Edwards & Angell, counsel to First Citizens, and Thompson, Hine and Flory,
counsel to KeyCorp, dated as of the Effective Time, which opinions may be based
on various facts and representations and subject to various assumptions. The
opinion of Edwards & Angell will provide that, for federal income tax purposes,
the Merger will constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, and KeyCorp and First Citizens each will
be a party to the reorganization within the meaning of Section 368(b) of the
Internal Revenue Code, and, accordingly, no gain or loss will be recognized by
a First Citizens shareholder upon exchange of his or her First Citizens Common
Stock for Key Corp Common Stock, except in respect of cash received in lieu of
a fractional share interest in KeyCorp Common Stock. The opinion of Thompson,
Hine and Flory will provide that, for federal income tax purposes, the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and KeyCorp and First Citizens will each be a party to
the reorganization within the meaning of Section 368(b) of the Internal Revenue
Code, and that no gain or loss will be recognized by either KeyCorp or its
shareholders as a result of the Merger.
If the Merger constitutes a reorganization under Section 368(a) of the
Internal Revenue Code, the following would be the material federal income tax
consequences which would result from the Merger:
(a) no income, gain, or loss will be recognized by either KeyCorp
or First Citizens as a result of the consummation of the
Merger;
(b) no income, gain, or loss will be recognized by a shareholder of
First Citizens upon the exchange of shares of First Citizens
Common Stock pursuant to the Merger, except as discussed below
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with respect to cash received in lieu of a fractional share
interest in KeyCorp Common Stock;
(c) the adjusted tax basis of the shares of KeyCorp Common Stock
received by a shareholder of First Citizens pursuant to the
Merger will be the same as the adjusted tax basis of the shares
of First Citizens Common Stock (reduced only by amounts
allocable to a fractional share interest for which cash is to
be received) surrendered in exchange therefor; and
(d) the holding period of the shares of KeyCorp Common Stock
received by a shareholder of First Citizens in the Merger will
include the period during which the shares of First Citizens
Common Stock surrendered in exchange therefor were held,
provided that such First Citizens Common Stock is held as a
capital asset by the First Citizens shareholder at the
Effective Time.
The above tax opinions are based upon certain customary representations
and assumptions (including satisfaction of the continuity of interest
requirement) referred to in the opinion letters. It is a condition to
consummation of the Merger that KeyCorp and First Citizens also receive the
above tax opinions as of the Effective Time.
CASH RECEIVED IN LIEU OF FRACTIONAL SHARES. A First Citizens
shareholder who receives cash in the Merger in lieu of a fractional share
interest in KeyCorp Common Stock will be treated for federal income tax
purposes as having received cash in redemption of such fractional share
interest. The shareholder will recognize gain or loss as of the Effective Time
equal to the difference between the amount of cash received and the portion of
the shareholder's adjusted tax basis in the shares of First Citizens Common
Stock allocable to the fractional share interest. Any gain or loss will be
capital gain or loss if the shareholder holds the First Citizens Common Stock
as a capital asset at the Effective Time and will be long-term capital gain or
loss if the holding period (determined as described above) for the fractional
share interest deemed to be received and then redeemed is more than one year.
CASH RECEIVED BY SHAREHOLDERS WHO EXERCISE DISSENTERS' RIGHTS. A holder
of First Citizens Common Stock who exercises dissenters' rights and who
receives cash in exchange for such holder's shares will be treated as having
received such payment in redemption of the shares. In general, if the shares
are held as a capital asset at the Effective Time, the holder will recognize
capital gain or loss measured by the difference between the amount of cash
received and the holder's adjusted tax basis for the shares. If, however, the
holder owns, either actually or constructively under the constructive ownership
rules of Section 318 of the Internal Revenue Code, any First Citizens Common
Stock that is exchanged in the Merger for KeyCorp Common Stock, the payment
made to such holder could, in certain circumstances, be treated as dividend
income. In general, under the constructive ownership rules of the Internal
Revenue Code, a holder may be considered to own stock that is owned, and in
some cases constructively owned, by certain related individuals or entities, as
well as stock that the holder (or related individuals or entities) has the
right to acquire by exercising an option or converting a convertible security.
Each holder who contemplates exercising dissenters' rights should
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consult such holder's own tax advisor as to the possibility that any payment to
such holder will be treated as dividend income.
RIGHTS. Pursuant to the position of the Internal Revenue Service as set
forth in Revenue Ruling 90-11, the Rights accompanying the shares of KeyCorp
Common Stock received by former holders of First Citizens Common Stock in the
Merger should be considered part of the KeyCorp Common Stock prior to the
occurrence of a Triggering Event (as defined in the Rights Agreement). The
current position of the Internal Revenue Service as set forth in several
private letter rulings is that the receipt of such rights upon the exchange of
shares in a merger that is a tax-free reorganization does not give rise to the
realization of gross income. Accordingly, the tax opinion described in
subparagraph (b) above that a holder of First Citizens Common Stock will not
realize gross income on the receipt of Rights in the Merger is based upon the
current ruling positions of the Internal Revenue Service. No assurance can be
given that the Internal Revenue Service will not change its position on the tax
treatment of rights in a merger and assert that such receipt of rights results
in the realization of gross income to the extent of the value of such rights,
if any, when received. See "COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF CAPITAL
STOCK OF KEYCORP AND FIRST CITIZENS -- Shareholder Rights Plan."
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS BASED UPON CURRENT
LAW. BECAUSE EACH SHAREHOLDER'S TAX CIRCUMSTANCES MAY DIFFER, EACH SHAREHOLDER
IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER, INCLUDING THE APPLICABILITY AND
EFFECT OF STATE, LOCAL, AND OTHER TAX LAWS AND ANY PROPOSED CHANGES IN SUCH TAX
LAWS.
ACCOUNTING TREATMENT OF MERGER
The Merger, if consummated as proposed, will qualify as a purchase for
financial reporting purposes. Accordingly, under generally accepted accounting
principles, the purchase price will be allocated to assets acquired and
liabilities assumed based on their estimated values on the date the Merger
becomes effective. Income of KeyCorp after the Effective Time will not include
income or loss of First Citizens prior to such date.
NYSE LISTING
KeyCorp Common Stock is listed on the NYSE. KeyCorp has agreed to use
its best efforts to cause the listing on the NYSE of (a) the shares of KeyCorp
Common Stock to be issued in the Merger and (b) the Rights which will accompany
the KeyCorp Common Stock issued in the Merger.
EXPENSES
The Merger Agreement provides, in general, that KeyCorp and First
Citizens will each pay its own expenses in connection with the Merger Agreement
and the transactions contemplated thereby, including fees and expenses of its
own financial and other consultants,
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investment bankers, accountants, and counsel except that KeyCorp will bear the
costs of printing this Prospectus/Proxy Statement and all listing, filing, and
registration fees paid by or incurred on behalf of KeyCorp, including fees paid
to the Commission and other regulatory agencies.
Notwithstanding the foregoing, in the event that either KeyCorp or First
Citizens terminates the Merger Agreement due to a willful and material breach
by the other party of any of such other party's representations, warranties,
covenants, or agreements contained in the Merger Agreement, the costs and
expenses incurred by KeyCorp or First Citizens, as the case may be, in
connection with the Merger Agreement and the transactions contemplated by the
Merger Agreement shall be paid by such breaching party, including all fees of
financial and other consultants, investment bankers, accountants, and counsel.
See "TERMS OF THE MERGER -- Waiver of Conditions, Amendment or Termination of
the Merger Agreement."
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RIGHTS OF DISSENTING SHAREHOLDERS
Holders of First Citizens Common Stock who so desire are entitled to
relief as dissenting shareholders under Chapter 44 of the Indiana Business
Corporation Law, as amended (the "IBCL") (Indiana Code Sections 23-1-44-1 et
seq.). However, a holder of shares of First Citizens Common Stock shall only
be entitled to such rights if he or she strictly complies with all of the
provisions of Chapter 44 of the IBCL. The following summary does not purport
to be a complete statement of the method of compliance with Chapter 44 of the
IBCL and is qualified in its entirety by reference to that Chapter which is
attached hereto as Appendix C.
A First Citizens shareholder who wishes to perfect his or her rights as
a dissenting shareholder in the event the Merger is effected must:
(a) not vote in favor of approval of the Merger Agreement; and
(b) deliver to First Citizens, before the taking of the vote on the
Merger Agreement at the Special Meeting, a written notice of the
shareholder's intent to demand payment for all shares of First
Citizens Common Stock beneficially owned by him or her if the
Merger is effected.
Any written notice of intent to demand payment pursuant to clause (b) of
the immediately preceding paragraph should be mailed or delivered to First
Citizens Bancorp of Indiana, One Citizens Plaza, Anderson, Indiana 46016,
Attention: Secretary. Because the written demand must be delivered before the
shareholder vote on the Merger Agreement, it is recommended, although not
required, that a shareholder using the mails should use certified or registered
mail, return receipt requested, to confirm that timely delivery has been made.
A First Citizens shareholder may not dissent as to less than all of the
shares as to which he or she has a right to dissent held by him or her
beneficially. Upon consummation of the Merger, dissenting shareholders will
cease to have any of the rights of a shareholder of First Citizens except the
right to be paid the "fair value" of their shares in accordance with Chapter 44
of the IBCL.
If the Merger is approved, within 10 days after the Special Meeting,
First Citizens or KeyCorp, as the case may be, will send written notice of such
adoption to each of the shareholders who has satisfied the conditions described
above. Such notice shall also include the following:
(a) an address to which shareholders must send demand for payment;
(b) instructions as to where and when certificates representing
First Citizens Common Stock must be surrendered and deposited;
(c) a form for demanding payment which will require the shareholder
to certify whether he or she acquired beneficial ownership of
his or her
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First Citizens Common Stock prior to June 30, 1994, which was
the date on which the Merger was announced;
(d) a date as to when the above described payment demand must be
received by First Citizens or KeyCorp, as the case may be; and
(e) a copy of Chapter 44 of the IBCL.
Upon timely receipt of a properly completed demand for payment,
accompanied by all other required documents as set forth in the notice, First
Citizens or KeyCorp, as the case may be, will pay to each dissenter the amount
the corporation estimates to be the fair value of the dissenter's shares. Such
payment will be accompanied by recent financial statements of First Citizens or
KeyCorp, as the case may be, a statement of the estimated fair value of the
shares of First Citizens Common Stock, and a procedure to be followed if the
dissenter disagrees with the estimate of fair value. First Citizens or KeyCorp
may elect to delay payment to all dissenters who obtained their shares after
June 30, 1994 until after consummation of the Merger. If First Citizens or
KeyCorp so elects, the corporation shall, after consummation of the Merger, pay
each such dissenter the fair value of his or her shares of First Citizens
Common Stock. This payment will be accompanied by a statement of the estimated
value of shares of First Citizens Common Stock and a procedure to be followed
if the dissenter disagrees with the estimate of fair value.
If a dissenter disagrees with the estimate of fair value, he or she may
notify KeyCorp or First Citizens, as the case may be, within 30 days of the
dissenter's receipt of the corporation's offer or payment of fair value, of the
dissenter's own estimate of fair value. A dissenter is entitled to so notify
First Citizens or KeyCorp if the dissenter believes that the amount offered in
payment for his or her shares is less than the fair value of those shares or if
KeyCorp fails to pay dissenters the estimated fair value of the shares within
60 days of the date set for receipt of dissenters' demands for payment.
If KeyCorp and any dissenter fail to agree upon the fair value of shares
of First Citizens Common Stock within 60 days of KeyCorp's or First Citizens'
receipt of any demand for payment, KeyCorp shall commence a court proceeding
within such 60 day period to fix the fair value of the dissenters' shares. The
proceeding shall be commenced in the circuit or superior court of the county in
which First Citizens' principal office is located. All dissenters whose
demands remain unsettled shall be made parties to the action and shall be
served with a copy of the petition by registered mail or by publication.
The court may appoint one or more appraisers to receive evidence and
make a recommendation to the court on the question of fair value. Each
dissenter made party to the proceeding shall be entitled to judgment for the
amount, if any, by which the court finds the fair value of the dissenters'
shares, plus interest, exceeds the amount paid therefor by First Citizens or
KeyCorp. In addition, the court shall determine all costs of the proceeding
and shall assess such costs against such parties and in such amounts as the
court finds equitable.
The rights of any dissenting shareholder will terminate if such
shareholder does not demand payment or deposit his or her share certificates
where required, each by the date set
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forth in the dissenter's notice. For a discussion of certain federal income
tax consequences to a shareholder exercising dissenters' rights, see "TERMS OF
THE MERGER -- Certain Federal Income Tax Consequences."
BECAUSE A PROXY CARD WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL,
UNLESS REVOKED, BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT, A FIRST CITIZENS
SHAREHOLDER WHO WISHES TO EXERCISE DISSENTERS' RIGHTS MUST EITHER NOT SIGN AND
RETURN HIS OR HER PROXY CARD OR, IF HE OR SHE DOES SIGN AND RETURN THE PROXY
CARD, VOTE AGAINST OR ABSTAIN FROM VOTING ON THE APPROVAL OF THE MERGER
AGREEMENT.
VOTING AGREEMENTS
Following the execution of the Merger Agreement, certain First Citizens
shareholders delivered Voting Agreements to KeyCorp pursuant to which each such
shareholder agreed to vote in favor of the Merger Agreement at the Special
Meeting. Such shareholders further agreed to vote against any proposal
relating to any competing merger or business combination by any entity other
than KeyCorp, and against any other transaction inconsistent with the
obligations of First Citizen under the Merger Agreement. The term of the
Voting Agreements expires upon the earlier of termination of the Merger
Agreement or consummation of the Merger. The shareholders have also agreed
not to sell their shares or otherwise restrict their ability to vote on the
proposal to approve the Merger Agreement at the Special Meeting. Eighteen
shareholders of First Citizens owning approximately 807,535 shares, or 59%, of
the issued and outstanding shares of First Citizens Common Stock as of June
30, 1994, have executed Voting Agreements as described above. See "TERMS OF
THE MERGER -- Interests of Certain Persons in the Merger."
RESALES OF KEYCORP COMMON STOCK RECEIVED IN THE MERGER
The shares of KeyCorp Common Stock that will be issued if the Merger is
consummated will have been registered under the Securities Act and will be
freely transferable, except for shares received by persons, including directors
and executive officers of First Citizens, who may be deemed to be "affiliates"
of First Citizens, as that term is used in paragraphs (c) and (d) of Rule 145
under the Securities Act. Affiliates may not sell their shares of KeyCorp
Common Stock acquired pursuant to the Merger, except (a) pursuant to an
effective registration statement under the Securities Act covering those
shares, (b) in compliance with Rule 145, or (c) in the opinion of counsel
reasonably satisfactory to KeyCorp pursuant to another applicable exemption
from the registration requirements of the Securities Act. First Citizens and
KeyCorp intend to obtain customary agreements with all directors, officers, and
affiliates of First Citizens under which those persons would represent that
they will not dispose of their shares of KeyCorp Common Stock received in the
Merger or the shares of First Citizens Common Stock held by them prior to the
Merger, except in compliance with the Securities Act and the rules and
regulations promulgated thereunder. This Prospectus/Proxy Statement does not
cover any resales of KeyCorp Common Stock received by affiliates of First
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Citizens. Forms of the agreements of the affiliates of First Citizens are set
forth as Exhibit D(3) to the Merger Agreement, which is attached hereto as
Appendix A.
THE BUSINESS OF KEYCORP
OVERVIEW
On March 1, 1994, old Key, a financial services holding company
headquartered in Albany, New York, with approximately $33 billion in assets at
December 31, 1993, merged into and with Society, a financial services holding
company headquartered in Cleveland, Ohio, with approximately $27 billion in
assets at December 31, 1993, pursuant to an Agreement and Plan of Merger, and a
related Supplemental Agreement to Agreement and Plan of Merger, each dated as
of October 1, 1993, and each as amended. In the merger, Society was the
surviving corporation, but changed its name to KeyCorp. All financial data of
KeyCorp set forth in this Prospectus/Proxy Statement has been restated to give
effect to the merger of old Key into and with Society.
The merger of old Key into and with Society created a financial services
holding company which traces its roots back to 1825, when the first predecessor
of KeyCorp was organized. The merger of old Key and Society created the "new"
KeyCorp, a financial services company which, at June 30, 1994, was one of the
largest bank holding companies in the United Sates with consolidated assets of
approximately $63.4 billion.
KeyCorp is a legal entity separate and distinct from its banking and
other subsidiaries. Accordingly, the right of KeyCorp, its security holders
and its creditors to participate in any distribution of the assets or earnings
of its banking and other subsidiaries is necessarily subject to the prior
claims of the respective creditors of such banking and other subsidiaries,
except to the extent that claims of KeyCorp in its capacity as a creditor of
such banking and other subsidiaries may be recognized.
BANKING SUBSIDIARIES
KeyCorp provides banking and other financial services across much of the
country's northern tier and in Florida through a network of subsidiaries
operating 1,275 full-service banking offices in 13 states, giving KeyCorp the
nation's fifth largest domestic branch network as of June 30, 1994. KeyCorp's
primary banking subsidiaries include Society National Bank, headquartered in
Cleveland, Ohio, the largest bank in Ohio and one of the nation's major
regional banks with $23.2 billion in total assets and 291 full-service banking
offices at June 30, 1994; Key Bank of New York, headquartered in Albany, New
York, with $14.5 billion in total assets and 330 full-service banking offices
at June 30, 1994; Key Bank of Washington, headquartered in Tacoma, Washington,
with $7.4 billion in total assets and 191 full-service banking offices at June
30, 1994; and Society National Bank, Indiana, headquartered in South Bend,
Indiana (described in more detail below). In addition, KeyCorp operates
banking subsidiaries in Alaska, Colorado, Florida, Idaho, Maine, Michigan,
Oregon, Utah, and Wyoming.
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Society National Bank, Indiana is a national banking association
headquartered in South Bend, Indiana, and a wholly owned subsidiary of KeyCorp.
At June 30, 1994, Society National Bank, Indiana had approximately $3.2 billion
in total assets and 82 full-service banking offices. At such date Society
National Bank, Indiana was the fourth largest bank in Indiana. Society
National Bank, Indiana is engaged in a general banking business in the State of
Indiana providing commercial and retail banking services to consumers and
small, middle-market and large corporate customers. Society National Bank,
Indiana's principal markets are northern and central Indiana, including the
metropolitan areas of South Bend and Indianapolis as well as a number of
smaller urban and rural markets. Retail banking products offered by Society
National Bank, Indiana include, among others, consumer loan products (including
residential real estate mortgage, home equity, direct and indirect installment,
credit card and student lending), and private banking services. Commercial
banking products and services include, among others, real estate, agribusiness,
asset-based and general corporate lending, cash management, correspondent
banking, and trade financing and support services related to international
operations (primarily letter of credit, collection, payment and foreign
exchange services).
KeyCorp's other banking subsidiaries also provide a wide range of
banking, fiduciary and other financial services to their corporate, individual
and institutional customers located throughout the country. In addition to the
customary banking services of accepting funds for deposit and making loans,
KeyCorp's banking subsidiaries provide specialized services tailored to
specific markets, including investment management services, personal and
corporate trust services, personal financial services, customer access to money
market and other mutual funds, cash management services, investment banking
services, and international banking services.
OTHER FINANCIAL SERVICES SUBSIDIARIES
In addition to the services provided through its banking offices,
KeyCorp engages in a wide range of other financial services through
subsidiaries, including mortgage banking, investment management, mutual fund
advisory, and trust services. At June 30, 1994, through its banking and other
companies, KeyCorp serviced approximately $27 billion in mortgage loans,
managed approximately $32 billion in assets (excluding corporate trust assets)
in its investment management and trust operations, and, among bank holding
companies, operated the nation's thirteenth largest bank mutual fund business.
KeyCorp engages in the mortgage banking business through KeyCorp
Mortgage Inc., a mortgage banking subsidiary of Key Bank of New York. KeyCorp
Mortgage Inc. originates, services, packages and sells residential mortgage
loans, and, to a lesser extent, services commercial and income property loans.
Its business activities are conducted throughout all of the geographic areas in
which the banking subsidiaries of KeyCorp are located, except Florida (Alaska,
Colorado, Idaho, Indiana, Maine, Michigan, New York, Ohio, Oregon, Utah,
Washington and Wyoming), and in Arizona, California, and New Jersey where
KeyCorp's subsidiary banks do not maintain any branches.
KeyCorp engages in the investment management business through its bank
and trust company subsidiaries as noted above and also through two registered
investment adviser subsidiaries owned by Society National Bank. Through these
entities, KeyCorp provides
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investment management services to institutional and individual clients,
including large corporate and public retirement plans, Taft-Hartley plans,
foundations and endowments, and high net worth individuals. KeyCorp's bank and
investment management subsidiaries also serve as investment advisers to
KeyCorp's proprietary mutual funds.
Through its nonbanking subsidiaries, KeyCorp provides additional
financial services both in and outside of its primary banking markets. These
include personal and corporate trust services, investment management,
reinsurance of credit life and accident and health insurance on loans made by
subsidiary banks, venture capital and small business investment financing
services, equipment lease financing, community development financing, stock
transfer agent, and other financial services. KeyCorp is also a participant in
a joint venture with a number of other unaffiliated bank holding companies in
Electronic Payment Services, Inc., which through its subsidiary, Money Access
Service Inc., which is more commonly known as the MAC network, provides
automated teller machine access for bank customers throughout much of the
United States.
RECENTLY COMPLETED ACQUISITION
STATE HOME SAVINGS BANK, FSB. On September 16, 1994, Society National
Bank, a wholly owned subsidiary of KeyCorp, acquired State Home Savings Bank,
FSB ("State Home Savings"), a closely held Federal stock savings bank based in
Bowling Green, Ohio, in a cash purchase. The transaction was accounted for as
a purchase. State Home Savings had 14 branches in five Northwest Ohio counties
and total assets of $335 million at June 30, 1994.
PENDING ACQUISITIONS
OMNIBANCORP. On September 1, 1994, KeyCorp reached a definitive
agreement to acquire Omnibancorp, based in Denver, Colorado, in a tax-free
exchange of stock. Under the terms of the agreement, KeyCorp Common Stock will
be exchanged for all of the outstanding shares of Omnibancorp common stock
(based on an exchange ratio of .2452 shares of KeyCorp Common Stock for each
share of Omnibancorp). Based on KeyCorp's closing stock price on August 19,
1994, the value of the KeyCorp Common Stock to be issued would be approximately
$132 million. Omnibancorp is a privately held bank holding company for six
affiliate Colorado-chartered banks ("Omnibanks"), and had 18 branches and total
assets of $503 million at June 30, 1994. The transaction, which is subject to
regulatory and shareholder approvals, is expected to close during the first
quarter of 1995, and will be accounted for as a purchase. Subsequent to the
consummation of the acquisition, the Omnibanks will be merged with and into Key
Bank of Colorado, a wholly owned subsidiary of KeyCorp.
CASCO NORTHERN BANK, NATIONAL ASSOCIATION AND BANKVERMONT CORPORATION.
On June 23, 1994, KeyCorp reached definitive agreements to acquire Casco
Northern Bank, National Association ("Casco Northern"), headquartered in
Portland, Maine, and BANKVERMONT Corporation, headquartered in Burlington,
Vermont, for total cash consideration of $198.5 million. The aggregate
purchase price is to be adjusted by the amount by which adjusted tier I capital,
as defined in the agreements, exceeds (resulting in an upward adjustment) or
falls below (resulting in a downward adjustment) a specified level for each
entity as of a specified date prior to the closing of the transactions.
Following the consummation of the acquisition, Casco Northern, with 34 branches
in Maine and total assets of $1.1 billion at March 31, 1994, will merge with and
into Key Bank of Maine, an indirect wholly owned subsidiary of KeyCorp. As of
the same date, BANKVERMONT Corporation's subsidiary, Bank of Vermont, had 12
branches and total assets of $684 million. These acquisitions, which
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are subject to certain regulatory approvals, are expected to close during the
first quarter of 1995 and will be accounted for as purchases.
THE BANK OF GREELEY. On October 5, 1993, KeyCorp agreed to acquire the
Bank of Greeley, a single branch bank headquartered in Greeley, Colorado
("Greeley Bank"). Under the terms of the agreement, shares of KeyCorp Common
Stock will be exchanged for all of the outstanding shares of Greeley Bank stock
(based on an exchange ratio of 1.026 common shares for each share of Greeley
Bank). The transaction, which is subject to certain regulatory approvals, is
expected to close during the fourth quarter of 1994 and will be accounted for
as a purchase. Greeley Bank had total assets of $61 million at June 30, 1994.
REGULATION AND SUPERVISION OF KEYCORP
GENERAL. As a bank holding company, KeyCorp is subject to the
regulation and supervision of the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended (the "BHCA"). Under the BHCA, bank holding
companies may not, in general, directly or indirectly acquire the ownership or
control of more than 5% of the voting shares or substantially all of the assets
of any company, including a bank, without the prior approval of the Federal
Reserve Board. In addition, bank holding companies are generally prohibited
under the BHCA from engaging in nonbanking (i.e., commercial or industrial)
activities, subject to certain exceptions. As a result of the 1993 acquisition
of the institution that is now known as Society First Federal Savings Bank
("Society First Federal"), KeyCorp is also subject to the regulation and
supervision of the Office of Thrift Supervision (the "OTS") as a savings and
loan holding company registered under the Home Owners' Loan Act of 1993, as
amended (the "HOLA").
The banking and savings association subsidiaries (collectively, the
"banking subsidiaries" or "subsidiary banks") of KeyCorp are subject to
extensive supervision, examination, and regulation by applicable Federal and
state banking agencies. Society National Bank, Society National Bank, Indiana,
and Key Bank USA N.A. are national banking associations with full banking
powers, subject to regulation, supervision, and examination by the Office of
the Comptroller of the Currency (the "OCC"). Two other national banking
subsidiaries of KeyCorp operate under charters that limit their banking powers
to trust-related activities. These entities are also subject to the
regulation, supervision, and examination of the OCC, although they are not
regulated as banks for purposes of the BHCA. All of the other banking
subsidiaries of KeyCorp, other than Society First Federal, are state chartered
banks that are subject to supervision, examination, and regulation by the
applicable state banking authority in the state in which each such institution
is chartered. In addition, KeyCorp's state-chartered banks are not members of
the Federal Reserve System (and are therefore so-called "nonmember banks"),
and, accordingly, are subject to the regulation, supervision, and examination
of the FDIC. Because each of KeyCorp's banking subsidiaries is insured by the
FDIC, the FDIC also has regulatory and supervisory authority over the banking
subsidiaries in that capacity. The OTS is charged with regulation of Federal
savings associations such as Society First Federal, presently KeyCorp's only
such institution. Depository institutions are affected significantly by the
actions of the Federal Reserve Board as it attempts to control the money supply
and credit availability in order to influence the economy. The regulatory
regime applicable to bank holding companies and their subsidiaries is not
intended generally for the
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protection of investors but is directed toward protecting the interest of
depositors, the FDIC deposit insurance funds, and the U.S. banking system as a
whole.
KeyCorp also has nonbanking subsidiaries that are subject to
supervision, regulation, and examination by the Federal Reserve Board, as well
as other applicable regulatory agencies. For example, KeyCorp's insurance
subsidiaries are subject to regulation by the insurance regulatory authorities
of the various states, and KeyCorp's state chartered trust company subsidiaries
(which are considered nonbanking companies for purposes of the BHCA) are
subject to regulation by state banking authorities. Other nonbanking
subsidiaries are subject to other laws and regulations of both the Federal
government and the various states in which they are authorized to do business.
For example, KeyCorp's discount brokerage and investment adviser subsidiaries
are subject to supervision and regulation by the Commission, the National
Association of Securities Dealers, Inc., and state securities regulators.
The following references to certain statutes and regulations are brief
summaries thereof. The references are not intended to be complete and are
qualified in their entirety by reference to the statutes and regulations
themselves. In addition there are a number of other statutes and regulations
not summarized below that apply to and regulate the operation of KeyCorp and
its banking and nonbanking subsidiaries. A change in applicable law or
regulation may have an effect on the business of KeyCorp.
DIVIDEND RESTRICTIONS. KeyCorp is a legal entity separate and distinct
from its banking and other subsidiaries. The principal source of cash flow of
KeyCorp, including cash flow to pay dividends on KeyCorp's common and preferred
shares and debt service on KeyCorp's debt, is dividends from its banking and
other subsidiaries. Various Federal and state statutory and regulatory
provisions limit the amount of dividends that may be paid to KeyCorp by its
banking subsidiaries without regulatory approval. No such statutory or
regulatory limits apply to the amount of dividends that may be paid to KeyCorp
by its other, nonbanking subsidiaries. The Federal Reserve Board, the OCC,
the FDIC, and the OTS, however, have issued policy statements which provide
that insured depository institutions and their holding companies should
generally pay dividends only out of current earnings.
Under all of the laws, regulations, and other restrictions applicable to
KeyCorp's banking subsidiaries, management estimates that, as of June 30, 1994,
KeyCorp's banking and thrift subsidiaries could have declared dividends
estimated to be $595.4 million in the aggregate, without obtaining prior
regulatory approval, not including dividends that may be payable to KeyCorp by
KeyCorp's trust company subsidiaries, Society First Federal, and certain other
financial service subsidiaries.
HOLDING COMPANY STRUCTURE -- Transactions Involving Banking
Subsidiaries. Transactions involving KeyCorp's banking subsidiaries are
subject to Federal Reserve Act restrictions which limit the transfer of funds
from such subsidiaries to KeyCorp and (with certain exceptions) to KeyCorp's
nonbanking subsidiaries (together, "affiliates") in so-called "covered
transactions," such as loans and other extensions of credit, investments, or
asset purchases. Unless an exemption applies, each such transaction by a
banking subsidiary with one of its non-banking affiliates is limited in amount
to 10% of that banking subsidiary's capital and surplus and, with respect to
all such transfers to affiliates in the aggregate, to 20%
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of that banking subsidiary's capital and surplus. Furthermore, loans and
extensions of credit are required to be secured in specified amounts. In
addition, a bank holding company and its banking subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any extension
of credit, lease or sale of property, or furnishing of services.
SOURCE OF STRENGTH/COMMONLY CONTROLLED BANKING SUBSIDIARIES. Under
Federal Reserve Board policy, a bank holding company is expected to serve as a
source of financial and managerial strength to each of its subsidiary banks
and, under appropriate circumstances, to commit resources to support each such
subsidiary bank. This support may be required by the Federal Reserve Board at
times when KeyCorp may not have the resources to provide it or, for other
reasons, would not otherwise be inclined to provide it. Certain loans by a
bank holding company to any of its subsidiary banks are subordinate in right of
payment to deposits in, and certain other indebtedness of, the subsidiary bank.
In addition, the Crime Control Act of 1990 provides that in the event of a bank
holding company's bankruptcy, any commitment by a bank holding company to a
Federal bank regulatory agency to maintain the capital of a subsidiary bank
will be assumed by the bankruptcy trustee and entitled to priority of payment.
Under Federal law, a depository institution, the deposits of which are
insured by the FDIC, can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC in connection with (i) the default of a
commonly controlled FDIC-insured depository institution or (ii) any assistance
provided by the FDIC to a commonly controlled FDIC-insured depository
institution in danger of default (the so-called "cross guaranty" provision).
"Default" is defined under the FDIC's regulations generally as the appointment
of a conservator or receiver and "in danger of default" is defined generally as
the existence of certain conditions indicating that a "default" is likely to
occur in the absence of regulatory assistance.
CAPITAL REQUIREMENTS. The Federal Reserve Board, the FDIC, and the OCC
have issued substantially similar risk-based and leverage capital guidelines
for United States banking organizations. The minimum ratio of total capital to
risk-adjusted assets (including certain off-balance sheet items, such as
standby letters of credit) required by the Federal Reserve Board for bank
holding companies is currently 8%. At least one-half of the total capital must
be comprised of common equity, retained earnings, qualifying non-cumulative,
perpetual preferred stock, a limited amount of qualifying cumulative, perpetual
preferred stock and minority interest in the equity accounts of consolidated
subsidiaries, less goodwill and certain other intangible assets ("Tier I
capital"). The remainder may consist of hybrid capital instruments, perpetual
debt, mandatory convertible debt securities, a limited amount of subordinated
debt, other preferred stock, and a limited amount of loan and lease loss
reserves ("Tier II capital"). As of June 30, 1994, KeyCorp's Tier I and total
capital to risk-adjusted assets ratios were 8.77% and 12.03%, respectively.
In addition, KeyCorp is subject to guidelines relating to its minimum
leverage ratio (Tier I capital to total consolidated quarterly average assets
less goodwill and certain other intangible assets for the relevant period).
These guidelines provide for a minimum leverage ratio of 3% for bank holding
companies that meet certain specified criteria, such as having the highest
supervisory rating. All other bank holding companies are required to maintain
leverage ratios which are a least 100 to 200 basis points higher (i.e., a
leverage ratio of at least 4% to
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5%). Neither KeyCorp nor any of its banking subsidiaries has been advised by
its appropriate Federal regulatory agency of any specific leverage ratio
applicable to it. As of June 30, 1994, KeyCorp's Tier I leverage ratio was
6.76%. Federal Reserve Board policy provides that banking organizations
generally, and, in particular, those that are experiencing internal growth or
actively making acquisitions, will be expected to maintain strong capital
positions substantially above the minimum supervisory levels, without
significant reliance on intangible assets. Furthermore, the guidelines
indicate that the Federal Reserve Board will continue to consider a "tangible
Tier I leverage ratio" in evaluating proposals for expansion or new activities.
The tangible Tier I leverage ratio is the ratio of a banking organization's
Tier I capital less all intangible assets to total consolidated quarterly
average assets less all intangible assets. For purposes of this calculation,
purchased mortgage servicing rights are not considered to be intangible assets.
As of June 30, 1994, KeyCorp's tangible Tier I leverage ratio was 6.68%.
Each of KeyCorp's banking subsidiaries is also subject to capital
requirements adopted by applicable Federal regulatory agencies which are
substantially similar to those imposed by the Federal Reserve Board on bank
holding companies. These requirements include minimum Tier I, total capital
and leverage ratios. As of June 30, 1994, each of KeyCorp's banking
subsidiaries had capital in excess of all minimum regulatory requirements.
SIGNIFICANT AMENDMENTS TO THE FEDERAL DEPOSIT INSURANCE ACT -- General.
The Federal Deposit Insurance Corporation Improvement Act of 1991, enacted
December 19, 1991, amended several Federal banking statutes, including the
Federal Deposit Insurance Act (the "FDIA"), and, among other things, increased
the FDIC's borrowing authority to resolve bank failures, mandated least-cost
resolutions and prompt regulatory action with regard to undercapitalized
institutions, expanded consumer protection, and mandated increased supervision
of domestic depository institutions and the U.S. operations of foreign
depository institutions. The 1991 amendments to the FDIA required the Federal
banking agencies to promulgate regulations and specify standards in a number of
areas of bank operations, including interest rate exposure, asset growth,
internal controls, credit underwriting, executive officer and director
compensation, real estate construction financing, additional review of capital
standards, interbank liabilities and other operational and managerial standards
as the agencies determine appropriate. In general, KeyCorp management believes
that these regulations have increased, and may continue to increase, the cost
of and the regulatory burden associated with the business of banking.
-- PROMPT CORRECTIVE ACTION. Effective in December 1992, the OCC, the
Federal Reserve Board, the FDIC, and the OTS adopted new regulations to
implement the so-called "prompt corrective action" provisions of the FDIA. The
regulations classify FDIC-insured depository institutions into five broad
categories based on their capital ratios. The five categories are "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized," as follows:
- An institution is "well capitalized" if it has a total
risk-based capital ratio (total capital to risk-adjusted
assets) of 10% or greater, a Tier I risk-based capital ratio
(Tier I capital to risk-adjusted assets) of 6% or greater, and
a Tier I leverage capital ratio (Tier I capital to average
total assets) of 5% or
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greater, and it is not subject to a regulatory order,
agreement, or directive to meet and maintain a specific capital
level for any capital measure;
- An institution is "adequately capitalized" if it has a total
risk-based capital ratio of 8% or greater, a Tier I risk-based
capital ratio of 4% or greater, and (generally) a Tier I
leverage capital ratio of 4% or greater, and the institution
does not meet the definition of a "well capitalized"
institution;
- An institution is "undercapitalized" if the relevant capital
ratios are less than those specified in the definition of an
"adequately capitalized" institution;
- An institution is "significantly undercapitalized" if it has a
total risk-based capital ratio of less than 6%, a Tier I
risk-based capital ratio of less than 3%, or a Tier I leverage
capital ratio of less than 3%; and
- An institution is "critically undercapitalized" if it has a
ratio of tangible equity (as defined in the regulations) to
total assets of 2% or less.
An institution may be downgraded to, or be deemed to be in, a capital
category that is lower than is indicated by its actual capital position if it
is determined to be in an unsafe or unsound condition or if it receives an
unsatisfactory examination rating with respect to certain matters.
The capital-based prompt corrective action provisions of the FDIA and
their implementing regulations apply to FDIC-insured depository institutions,
such as all of KeyCorp's banking subsidiaries, but they are not applicable to
holding companies, such as KeyCorp, which control such institutions. However,
both the Federal Reserve Board and the OTS have indicated that, in regulating
holding companies, they will take appropriate action at the holding company
level based on their assessment of the effectiveness of supervisory action
imposed upon subsidiary depository institutions pursuant to such provisions and
regulations.
The FDIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the institution would thereafter be
undercapitalized. Undercapitalized depository institutions are also subject to
restrictions on borrowing from the Federal Reserve System, increased monitoring
by the appropriate Federal banking agency and limitations on growth, and are
required to submit a capital restoration plan to their primary Federal
regulatory agency. If a depository institution fails to submit an acceptable
plan, it is treated as if it were significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of additional requirements and restrictions including orders to sell
sufficient voting stock to become adequately capitalized and requirements to
reduce total assets, and are prohibited from receiving deposits from
correspondent banks. "Critically undercapitalized" institutions are subject to
the appointment of a receiver or conservator.
-- FDIC INSURANCE. Under the risk-related insurance assessment system
adopted in final form effective beginning with the January 1, 1994 assessment
period, a bank or savings association is required to pay an annual assessment
ranging from $.23 to $.31 per $100 of
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deposits based on the institution's risk classification. The risk
classification is based on an assignment of the institution by the FDIC to one
of three capital groups and to one of three supervisory subgroups. The capital
groups are "well capitalized," "adequately capitalized," and
"undercapitalized." The three supervisory subgroups are Group "A" (for
financially solid institutions with only a few minor weaknesses), Group "B"
(for those institutions with weaknesses which, if uncorrected, could cause
substantial deterioration of the institution and increase the risk to the
deposit insurance fund), and Group "C" (for those institutions with a
substantial probability of loss to the fund absent effective corrective
action). For the period commencing on July 1, 1994 through December 31, 1994,
insurance premiums on deposits of all of KeyCorp's banking subsidiaries were
paid at the rate of $.23 per $100 of deposits.
INTERSTATE BANKING LEGISLATION. The U.S. Congress recently passed the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Act"). Under the Interstate Act, commencing one year from the date
of its enactment, bank holding companies will be permitted to acquire banks
located in any state regardless of the state law in effect at the time. The
Interstate Act also provides for the nationwide interstate branching of banks.
Under the Interstate Act, both national and state chartered banks will be
permitted to merge across state lines (and to thereby create interstate
branches) commencing June 1, 1997. States are permitted to "opt-out" of the
interstate branching authority by taking action prior to the commencement date.
States may also "opt-in" early (i.e. prior to June 1, 1997) to the interstate
branching provisions. The Interstate Act is expected to become law shortly
upon signing by the President. KeyCorp does not currently have any plans
generally to consolidate its banking subsidiaries or to take any other actions
that would be contingent on the enactment of the Interstate Act.
CONTROL ACQUISITIONS. The Change in Bank Control Act (the "CBCA")
prohibits a "person" (as defined in the CBCA and the regulations thereunder) or
group of persons from acquiring "control" (as defined in the CBCA and the
regulations thereunder) of a bank holding company unless the Federal Reserve
Board has been given 60 days prior written notice of the proposed acquisition
and within that time period the Federal Reserve Board has not issued a notice
disapproving the proposed acquisition or extending for up to another 30 days
the period during which such a disapproval may be issued. An acquisition may
be made prior to the expiration of the disapproval period if the Federal
Reserve Board issues written notice of its intention not to disapprove the
action. Under a refutable presumption established by the Federal Reserve
Board, the acquisition of 10% or more of a class of voting stock of a bank
holding company with a class of securities registered under Section 12 of the
Exchange Act, such as KeyCorp, would, under the circumstances set forth in the
presumption, constitute the acquisition of control.
In addition, any "company" (as defined in the CBCA and the regulations
thereunder) is required to obtain the approval of the Federal Reserve Board
under the BHCA before acquiring 25% (5% in the case of an acquiror that is a
bank holding company) or more of the outstanding Common Shares of KeyCorp, or
otherwise obtaining control over KeyCorp.
THE BUSINESS OF FIRST CITIZENS
OVERVIEW
First Citizens is an Indiana corporation organized in 1981. It became a
bank holding company in 1982 when it acquired all of the outstanding shares of
Citizens Bank. Through Citizens Bank, First Citizens provides personal and
business related banking services to customers through nine banking center
offices and two freestanding off-site automated teller machines in Madison
County within the towns of Anderson, Alexandria, and Chesterfield, Indiana, and
a loan origination office in Indianapolis, Indiana.
Citizens Bank is a commercial bank organized and operated under the
Indiana Financial Institutions Act. If offers a wide range of personal and
business related financial services and trust services to individuals,
corporations, municipalities and other public and governmental entities.
Throughout its various departments, Citizens Bank makes secured, unsecured and
government guaranteed commercial loans, construction and permanent mortgage
loans and
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consumer loans to individuals for various purposes including the purchase of
automobiles and appliances and for home improvements. Citizens Bank also
provides its customers with letters of credit, lines of credit and revolving
credit loans, and offers checking, savings, money market deposit, and
individual retirement accounts, certificates of deposit, safe deposit and
after-hour deposit services, automated teller machines and wire transfer
services. Citizens Bank's trust department offers a broad array of fiduciary
services, including personal trusts, corporate trusts, estates, services
related to guardianships, portfolio management, farm management, pension and
profit sharing, real estate management, stock transfer agency and registrar
services. As of December 31, 1993, the Citizens Bank trust department had
custody of approximately $97 million in trust assets.
First Citizens currently operates an insurance agency through Citizens
Insurance Agency, Inc., and operates a travel agency through Citizens Travel,
Inc., each of which is a wholly owned subsidiary of Citizens Bank. Citizens
Bank also owns all of the stock of CIBCO Realty, Inc., a real estate holding
company which owns First Citizens' headquarters and a branch facility.
Pursuant to the terms of the Merger Agreement, First Citizens has agreed
to cause Citizens Bank to sell or otherwise dispose of each of the Insurance
Agency and the Travel Agency prior to the closing date of the Merger. See
"TERMS OF THE MERGER -- Sale of Travel Agency and Insurance Agency."
Citizens Bank was founded in 1855 and became a wholly owned subsidiary
of First Citizens upon the organization of First Citizens in 1981. The
Insurance Agency was organized in 1902 and has operated as a subsidiary of
Citizens Bank for more than the past 35 years. The Travel Agency was acquired
by Citizens Bank in 1968 and became a wholly owned subsidiary of Citizens Bank
upon the incorporation of the Travel Agency in 1989.
In April 1986, First Citizens acquired the stock of the Alexandria
Banking Company, a troubled state-chartered bank with $23.5 million in assets,
based in Alexandria, Indiana, for approximately $2 million in cash. In
September 1990, First Citizens acquired all of the stock of Madison County Bank
& Trust for approximately $800,000 in cash. The acquisition included
approximately $9 million in assets and two banking center offices, one of which
Citizens Bank continues to operate. In December 1992, First Citizens acquired
five Indiana-based banking center offices and the associated deposit
liabilities of Colonial Central Savings Bank, F.S.B. for $3.4 million.
COMPETITION
The banking business in the area served by First Citizens is highly
competitive. First Citizens' principal market area consists primarily of
Madison County, which had a population of approximately 130,669 in 1990, but
also extends into contiguous counties. Citizens Bank is the largest chartered
bank, ranked by total assets, located in Madison County. Citizens Bank
competes with savings and loan associations, credit unions and other depository
institutions and with finance companies, personal loan companies, money market
funds and other non-depository financial intermediaries.
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REGULATION AND SUPERVISION OF FIRST CITIZENS
First Citizens is a bank holding company within the meaning of the BHCA
and is registered with and regulated and examined by the Federal Reserve Board.
Citizens Bank is supervised and regulated by the Indiana Department of
Financial Institutions ("IDFI") and the FDIC. Citizens Bank is examined
regularly by the IDFI and the FDIC. Regulation and examination by banking
regulatory authorities are primarily directed toward the benefit of depositors,
rather than shareholders.
The Federal Reserve Board has adopted regulations that specify the types
of activities in which bank holding companies may engage. Regulations
promulgated by the Federal Reserve Board and FDIC also subject bank holding
companies and their subsidiary banks to certain restrictions on the extension
of credit by subsidiary banks to the bank holding company or any of its
subsidiaries or affiliates. In addition, federal and state banking laws
include requirements as to the maintenance of reserves against deposits,
minimum requirements as to capital, restrictions on dividends and restrictions
on the nature and amount of loans.
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
CAPITAL STOCK OF KEYCORP AND FIRST CITIZENS
If the Merger is consummated, all shareholders of First Citizens (except
shareholders of First Citizens who perfect their dissenters' rights) will
become shareholders of KeyCorp. KeyCorp is a corporation organized under, and
governed by, Ohio law, the KeyCorp Amended and Restated Articles of
Incorporation (the "KeyCorp Articles of Incorporation"), and the KeyCorp
Regulations, whereas First Citizens is a corporation organized under, and
governed by, Indiana law, the First Citizens Articles of Incorporation as
amended (the "First Citizens Articles of Incorporation"), and the First
Citizens By-Laws as amended (the "First Citizens By-Laws"). If the Merger is
consummated, KeyCorp will remain a corporation organized under, and governed
by, Ohio law, the KeyCorp Articles of Incorporation, and the KeyCorp
Regulations. The rights of a holder of KeyCorp Common Stock and First Citizens
Common Stock are each similar in some respects and different in other respects.
Certain of these similarities and differences are summarized below. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE INDIANA BUSINESS
CORPORATION LAW, THE OHIO GENERAL CORPORATION LAW, THE OHIO INTERESTED
SHAREHOLDER TRANSACTION LAW, THE KEYCORP ARTICLES OF INCORPORATION AND THE
KEYCORP REGULATIONS, THE FIRST CITIZENS ARTICLES OF INCORPORATION AND THE FIRST
CITIZENS BY-LAWS.
VOTING RIGHTS
CUMULATIVE VOTING AND PRE-EMPTIVE RIGHTS. No holder of shares of any
class of capital stock of KeyCorp or First Citizens is entitled to the right of
cumulative voting or to pre-emptive rights.
MERGERS, CONSOLIDATIONS, DISSOLUTIONS, COMBINATIONS, AND OTHER
TRANSACTIONS. Under Indiana law, a merger, share exchange, dissolution, or
sale or disposition of all or substantially
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all of a corporation's assets not in the usual course of business generally
must be approved by the affirmative vote of the holders of a majority of all
outstanding shares entitled to vote. First Citizens' Articles of Incorporation
do not raise or lower the vote required by Indiana law.
Subject to the provisions discussed in "State Takeover Statutes and
Takeover Provisions of Charter Documents" below, Ohio law requires adoption of
a merger, consolidation, dissolution, disposition of all or substantially all
of the corporation's assets, and a "majority share acquisition" or combination
by the affirmative issuance or transfer of shares with one-sixth or more of the
voting power of the corporation by the affirmative vote of the holders of
shares entitled to exercise at least two-thirds of the voting power of a
corporation on such proposal, unless the articles of incorporation specify a
different proportion (not less than a majority). Adoption by the affirmative
vote of the holders of two-thirds of any class of shares, unless otherwise
provided in the articles, may also be required if the rights of holders of that
class are affected in certain respects by the merger or consolidation. In lieu
of the two-thirds shareholder vote required by law, the KeyCorp Articles of
Incorporation require adoption by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of KeyCorp on any
such proposal, and by the affirmative vote of the majority of any class if a
class vote is required.
FAIR PRICE AND SUPERMAJORITY VOTE PROVISIONS. Neither the First
Citizens Articles of Incorporation nor the KeyCorp Articles of Incorporation
include fair price or supermajority vote provisions.
STATE TAKEOVER STATUTES AND TAKEOVER PROVISIONS OF CHARTER DOCUMENTS
Indiana law prohibits Indiana corporations from engaging in certain
transactions (including mergers, consolidation, asset sales, liquidations or
dissolutions, reclassifications, recapitalizations, disproportionate share
conversions, loans, advances, other financial assistance, or tax benefits not
received proportionately by all shareholders) (each, a "business combination")
with a person that is the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the outstanding voting shares of the corporation
(an "interested shareholder") for a period of five years after such person
becomes an interested shareholder unless, prior to the date the interested
shareholder becomes an interested shareholder, the board of directors of the
corporation approves either the transaction in which such person becomes an
interested shareholder or such business combination. Following the five-year
moratorium period, the corporation may engage in certain business combinations
with an interested shareholder only if, among other things, (a) the business
combination is approved by the affirmative vote of the holders of a majority of
the outstanding voting shares not beneficially owned by the interested
shareholder proposing the business combination or (b) the business combination
meets certain criteria designed to ensure that the remaining shareholders
receive fair consideration for their shares.
Under Indiana law, the acquisition by any person (as used in this
section, an "acquiring person") of shares of voting stock of First Citizens
that, when added to all other shares owned by such person, would give the
acquiring person voting power of First Citizens within any of the following
ranges would constitute a "control share acquisition": (a) one-fifth or more
but less than one-third of all voting power; (b) one-third or more but less
than a majority of all
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voting power; (c) a majority of all voting power. Such shares are defined as
"control shares." Unless otherwise provided in a corporation's articles of
incorporation or by-laws, control shares will have the same voting rights
accorded those shares prior to the control share acquisition only to the extent
granted by a majority of the outstanding shares of the corporation, voting by
class if appropriate, excluding all "interested shares." "Interested shares"
means shares of a corporation owned by (a) an acquiring person, (b) an officer
of the corporation, or (c) any employee of the corporation who is also a
director. The shareholders will vote on the issue of the voting rights of
control shares either in a special meeting called for that purpose if requested
by the acquiring person or at the next annual or special meeting of the
shareholders of the corporation. The control share acquisition statute only
applies to a corporation that has 100 or more shareholders, has its principal
place of business in Indiana, and has either more than 10% of its shareholders
or 10,000 of its shares owned by shareholders resident in Indiana or more than
10% of its shares owned by Indiana residents. An acquisition of shares
consummated pursuant to a plan of merger or share exchange made in compliance
with the IBCL does not constitute a control share acquisition. A corporation's
articles of incorporation or by-laws may provide that the control share
acquisition provisions summarized herein do not apply to the corporation.
Neither First Citizens' Articles of Incorporation nor By-laws contain such an
opt-out provision.
Under the Ohio Interested Shareholder Transaction Law, applicable to
KeyCorp, a corporation is prohibited from entering into a "Chapter 1704.
transaction" (as defined herein) with a direct or indirect beneficial owner of
10% or more of the shares of the corporation (a "10% shareholder") for at least
three years after the shareholder attains 10% ownership unless the board of
directors of the corporation approves, before the shareholder attains 10%
ownership, either the transaction or the purchase of shares resulting in such
person becoming a 10% shareholder. A "Chapter 1704. transaction" is broadly
defined to include, among other things, a merger or consolidation involving the
corporation and the 10% shareholder, a sale or purchase of substantial assets
between the corporation and the 10% shareholder, a reclassification,
recapitalization, or other transaction proposed by the 10% shareholder that
results in an increase in the proportion of shares beneficially owned by the
10% shareholder, and the receipt by the 10% shareholder of a loan, guarantee,
other financial assistance, or tax benefit not received proportionately by all
shareholders. Even after the three-year period, Ohio law restricts these
transactions between the corporation and the 10% shareholder. At that time,
such a transaction may proceed only if (a) the board of directors of the
corporation had approved the purchase of shares that gave the shareholder the
10% ownership, (b) the transaction is approved by the holders of shares of the
corporation with at least two-thirds of the voting power of the corporation (or
a different proportion set forth in the articles of incorporation), including
at least a majority of the outstanding shares after excluding shares held or
controlled by the 10% shareholder, or (c) the business combination results in
shareholders, other than the 10% shareholder, receiving a prescribed fair price
plus interest for their shares.
In addition, under Ohio law, the acquisition by any person (as used in
this section, an "acquiring person") of shares of voting stock of KeyCorp
giving the acquiring person voting power of KeyCorp within any of the following
ranges would constitute a "control share acquisition": (a) one-fifth or more
but less then one-third of such voting power; (b) one-third or more but less
than a majority of such voting power; or (c) a majority or more of such
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voting power. An acquiring person may make a control share acquisition only if
(1) the shareholders of KeyCorp who hold shares entitling them to vote in the
election of directors authorize such acquisition at a special meeting held for
that purpose at which a quorum is present by an affirmative vote of a majority
of the voting power of KeyCorp in the election of directors represented at such
meeting in person or by proxy, and of a majority of the portion of such voting
power excluding the voting power of "interested shares" (as defined below). A
quorum shall be deemed to be present at such special meeting if at least a
majority of the voting power of KeyCorp in the election of directors, and a
majority of the portion of such voting power excluding the voting power of
interested shares, are represented at such meeting in person or by proxy; and
(2) such acquisition is consummated, in accordance with the terms so
authorized, no later than 360 days following shareholder authorization of the
control share acquisition. "Interested shares" means the shares of KeyCorp in
respect of which any of the following persons may exercise or direct the
exercise of the voting power of KeyCorp in the election of directors: (a) the
acquiring person; (b) any officer of KeyCorp elected or appointed by a director
of KeyCorp; or (c) any employee of KeyCorp who is also a director of KeyCorp.
"Interested shares" also means any shares of KeyCorp acquired, directly or
indirectly, by any person from the holder or holders thereof for valuable
consideration during the period beginning with the date of the first public
disclosure of a proposed control share acquisition of KeyCorp or any proposed
merger, consolidation, or other transaction that would result in a change in
control of KeyCorp or all or substantially all of its assets and ending on the
date of any special meeting of KeyCorp's shareholders held thereafter for the
purpose of voting on a control share acquisition proposed by an acquiring
person if either of the following applies: (a) the aggregate consideration
paid or given by the person who acquired the shares, and any other person
acting in concert with such person, for all such shares exceeds $250,000; or
(b) the number of shares acquired by the person who acquired the shares, and
any other persons acting in concert with such person, exceeds one-half of one
percent of the outstanding shares entitled to vote in the election of
directors. The KeyCorp Articles of Incorporation contain an express opt-out
provision with regard to the Ohio control share acquisition law. See "CERTAIN
REGULATORY CONSIDERATIONS -- Control Acquisitions."
Ohio law further requires that any offer or making of a "control bid"
for any securities of a "subject company" pursuant to a tender offer must file
information specified in the Ohio Securities Act with the Ohio Division of
Securities when the bid commences. The Ohio Division of Securities must then
decide whether it will suspend the bid under the statute within three calendar
days. If it does so, it must initiate hearings on the suspension within 10
calendar days of the suspension date, and make a determination of whether to
maintain the suspension within 16 calendar days of the suspension date. For
this purpose, a "control bid" is the purchase of or an offer to purchase any
equity security of a subject company from a resident of Ohio that would, in
general, result in the offeror acquiring 10% or more of the outstanding shares
of such company. A "subject company" includes any company with both (a) its
principal place of business or principal executive office in Ohio or assets
located in Ohio with a fair market value of at least $1,000,000 and (b) more
than 10% of its record or beneficial equity security holders in Ohio, more than
10% of its equity securities owned of
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record or beneficially by Ohio residents, or more than 1,000 of its record or
beneficial equity security holders in Ohio.
To avoid continued suspension of its bid in Ohio, an offer must comply
with three requirements: (a) the information required by the statute must be
provided to the Ohio Division of Securities, (b) all material information
regarding the control bid must be provided to the offerees, and (c) there may
be no material violation of any provision of the Ohio Securities Act.
SHAREHOLDER RIGHTS PLAN
The following summarizes the principal terms of the Rights Agreement, as
amended to date.
Rights have been and will continue to be issued in respect of all shares
of KeyCorp Common Stock that are (a) issued after the Record Date but before
the earlier of the expiration or redemption of the Rights or the occurrence of
a Triggering Event (as defined herein), or (b) issued before the expiration or
redemption of the Rights upon the exercise of any employee stock option granted
prior to a Triggering Event.
Each of the Rights initially represents the right to purchase one share
of KeyCorp Common Stock for $65 (as used in this section, "Purchase Price").
The Rights will become exercisable 20 days after the earlier of (a) a public
announcement that a person or group has become an Acquiring Person (as
hereinafter defined) or (b) the commencement of a tender offer or exchange
offer that would result in a person or group becoming an Acquiring Person. As
used in this section, an "Acquiring Person" means a person or group that
beneficially owns more than 15% of the shares of KeyCorp Common Stock
outstanding, except that (a) a person will not be deemed to be an Acquiring
Person if the person becomes the beneficial owner of more than 15% of the
shares of KeyCorp Common Stock as a result of a reduction in the number of
shares of KeyCorp Common Stock outstanding unless, after the reduction, the
person acquires additional shares of KeyCorp Common Stock, and (b) a person
will not be deemed to be an Acquiring Person if the person becomes the
beneficial owner of more than 15% of the shares of KeyCorp Common Stock
inadvertently and, as soon as practicable after learning about such beneficial
ownership, divests enough KeyCorp Common Stock so that the person ceases to be
the beneficial owner of more than 15% of the KeyCorp Common Stock.
Until the Rights become exercisable, they will be represented by the
certificate which represents the associated shares of KeyCorp Common Stock, and
any transfer of KeyCorp Common Stock will also constitute a transfer of the
associated Rights. When the Rights become exercisable, they will begin to
trade separate and apart from the shares of KeyCorp Common Stock. At that
time, separate certificates representing the Rights will be mailed to holders
of KeyCorp Common Stock.
Twenty days after certain events occur (as used in this section,
"Flip-in Events"), each of the Rights will become the right to purchase one
share of KeyCorp Common Stock for the then par value per share (now $1 per
share), and the Rights beneficially owned by the Acquiring Person will become
void. The Flip-in Events are (a) the beneficial ownership by a person or
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group of more than 15% of the outstanding shares of KeyCorp Common Stock,
unless the shares of KeyCorp Common Stock are acquired in a tender or exchange
offer for all of the KeyCorp Common Stock at a price and on other terms
approved in advance by KeyCorp's Board of Directors, (b) certain self-dealing
transactions between KeyCorp and an Acquiring Person, and (c) a
reclassification or recapitalization of KeyCorp that has the effect of
increasing by more than 1% of the percentage of KeyCorp Common Stock owned by
an Acquiring Person.
If, after a person or group becomes an Acquiring Person, KeyCorp is
acquired in a merger or other business combination or more than 50% of its
assets or earning power is sold, each of the Rights will "flip-over" and become
the right to purchase common shares of the acquiror (as used in this section,
"Flip-over Event"). The holder of each Right would, upon the occurrence of a
Flip-over Event, be entitled to purchase for the then par value of a share of
KeyCorp Common Stock (now $1) the number of common shares of the acquiror
having a market price equal to the market price of the KeyCorp Common Stock.
The Purchase Price and/or the number of shares of KeyCorp Common Stock
(or common shares of an acquiror) to be purchased upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution in the event
KeyCorp (a) declares a dividend on the KeyCorp Common Stock payable in KeyCorp
Common Stock, (b) subdivides or combines the KeyCorp Common Stock in a
reclassification of the KeyCorp Common Stock, or (c) makes a distribution to
all holders of KeyCorp Common Stock of debt securities, subscription rights,
warrants, or other assets (except regular cash dividends). With certain
exceptions, no adjustment will be required until a cumulative adjustment of at
least 1% is required. KeyCorp is not required to issue fractional shares and,
instead, may make cash payments based on the market price of KeyCorp Common
Stock.
KeyCorp's Board of Directors may redeem the Rights for 1/2 cent each (as
used in this section, "Redemption Price") at any time before a "Triggering
Event" (which is defined as the occurrence of a Flip-over Event or the 20th day
after a Flip-in Event). However, the Rights may not be redeemed while there is
an Acquiring Person unless (a) Continuing Directors (as defined herein)
constitute a majority of the Board of Directors and (b) a majority of the
Continuing Directors approves the redemption. "Continuing Directors" are
defined as directors who were in office prior to a person or group becoming an
Acquiring Person or whose election to office was recommended by a majority of
Continuing Directors and who are not affiliated with the Acquiring Person. The
Rights will expire on September 12, 1999, unless they are redeemed before that
date. Until the KeyCorp Rights are exercised, the holders of the Rights, as
such, will have no rights as shareholders of KeyCorp, including the right to
vote or receive dividends.
The provisions of the Rights Agreement may be amended by KeyCorp's Board
of Directors to cure any ambiguity or correct any defect or inconsistency or,
prior to the occurrence of a Triggering Event, to make other changes that the
Board of Directors deems to be desirable and not adverse to the interests of
KeyCorp and its shareholders.
The Rights will not prevent a takeover of KeyCorp. However, the Rights
may cause substantial dilution to a person or group that acquires 15% or more
of the KeyCorp Common Stock unless the Rights are first redeemed by the Board
of Directors of KeyCorp.
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The Merger will not constitute a Triggering Event under the Rights
Agreement.
Copies of the Rights Agreement, dated as of August 25, 1989, between
KeyCorp and First Chicago Trust Company of New York, as rights agent, the First
Amendment to Rights Agreement, dated as of February 21, 1991, the Second
Amendment to Rights Agreement, dated as of September 12, 1991, and the Third
Amendment to Rights Agreement dated as of October 1, 1993 are included as
exhibits to a Registration Statement on Form 8-A filed by KeyCorp with the
Commission on August 29, 1989, a Registration Statement on Form 8-A filed by
KeyCorp with the Commission on February 28, 1991, a Schedule 13D filed by
KeyCorp on September 23, 1991, and a Schedule 13D filed by KeyCorp on October
12, 1993. The foregoing description of the KeyCorp Rights does not purport to
be complete and is qualified in its entirety by reference to the Rights
Agreement, as amended.
SPECIAL MEETINGS OF SHAREHOLDERS
Under Indiana law, a special meeting of shareholders may be called by
either the corporation's board of directors or by any other person authorized
to do so in the corporation's articles of incorporation or by-laws. The
By-laws of First Citizens provide that a special meeting of shareholders may be
called by (a) the Board of Directors, (b) the Chairman of the Board, or (c)
shareholders holding not less than one-fourth of the shares entitled to vote at
such meeting.
Under Ohio law a special meeting of shareholders may be called
by holders of record of at least 25% of all shares outstanding and entitled to
vote at a special meeting unless the corporation's articles or regulations
specify a different percentage (not to exceed 50%). KeyCorp's Regulations
provide that a special meeting of shareholders may be called by (i) the
Chairman of the Board, (ii) the President, or in the case of the President's
absence, death, or disability, the vice president authorized to exercise the
authority of the President, (iii) the Board of Directors by action at a
meeting, or by a majority of the Board of Directors acting without a meeting,
or (iv) by persons who hold 50% of all shares outstanding and entitled to vote
at the special meeting.
AMENDMENT OF CHARTER DOCUMENTS
CERTIFICATE OF INCORPORATION. Under Indiana law, the approval of a
majority of the outstanding voting shares of a corporation is required to amend
its articles of incorporation, except as otherwise provided therein (which
amendment may only be voted on by the shareholders after approval by the Board
of Directors), subject to a class vote in certain instances. First Citizens'
Articles of Incorporation do not raise or lower the vote required by Indiana
law. Indiana law provides that the holders of shares of each particular class
of stock are entitled to vote on any amendment that does any of the following:
(a) increases or decreases the number of authorized shares of the class, (b)
effects an exchange or reclassification of all or part of the shares of the
class into shares of another class, (c) effects an exchange or reclassification
or creates the right of exchange of all or part of the shares of another class
into shares of the class, (d) changes the express terms of the shares of the
class, (e) changes the shares into a different number of shares of the same
class, (f) creates a new class of shares having rights or preferences with
respect to distributions or dissolution that are prior, superior,
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or substantially equal to the shares of the class, (g) increases the rights,
preferences, or number of authorized shares of any class that have rights or
preferences with respect to distributions or dissolution that are prior,
superior, or substantially equal to the shares of the class, (h) limits or
denies any preemptive right of the shares of the class, (i) cancels or
otherwise affects rights to accumulated but not yet declared dividends or
distributions.
Ohio law provides that generally at least two-thirds of the voting power
of a corporation, subject to a class vote in certain instances, is required to
approve any amendment to the articles of incorporation, unless otherwise
provided therein. KeyCorp's Articles of Incorporation require that a majority
of the voting power of KeyCorp approve any such amendment, subject to a class
vote in those instances required by law and subject to any greater vote
required to approve a Chapter 1704. transaction. Under Ohio law, the holders
of shares of a particular class, and in the circumstances outlined in sections
(e), (f), and (g) below, the holders of shares of every class, are entitled to
vote as a class on the adoption of an amendment to the articles of
incorporation that does any of the following: (a) increases or decreases the
par value of the issued shares of the particular class, (b) changes issued
shares of the particular class, whether with or without par value, into a
lesser number of shares of the same class or into the same or different number
of shares of any other class, with or without par value, theretofore or then
authorized, (c) changes the express terms of issued shares of any class senior
to the particular class in any manner substantially prejudicial to the holder
of the particular class, (d) authorizes shares of another class that are
convertible into, or authorizes the conversion of shares of another class into,
shares of the particular class, or authorizes the directors to fix or alter
conversion rights of shares of another class that are convertible into shares
of the particular class, (e) provides, in the case of any amendment described
in sections (a) or (b) above, that the stated capital of the corporation shall
be reduced or eliminated as a result of the amendment, or provides, in the case
of an amendment described in section (d) above, that the stated capital of the
corporation shall be reduced or eliminated upon the exercise of such conversion
rights, provided that any such reduction or elimination is consistent with
certain provisions of Ohio General Corporation Law regarding stated capital,
(f) changes substantially the purposes of the corporation, or provides that
thereafter an amendment to the articles may be adopted that changes
substantially the purposes of the corporation, or (g) changes the corporation
into a nonprofit corporation. See "COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
CAPITAL STOCK OF KEYCORP AND FIRST CITIZENS -- Voting Rights."
BY-LAWS/REGULATIONS. The First Citizens By-laws provide that such
By-laws may be adopted, amended, or repealed by a majority of the First
Citizens Board of Directors.
Directors may not amend regulations of an Ohio corporation. The KeyCorp
Regulations provide for amendment by shareholders holding a majority of the
voting power at a meeting, but require that all amendments by written consent
of the shareholders without a meeting must be approved unanimously by the
shareholders entitled to vote thereon. In addition, any amendments regarding
the calling of special meetings of shareholders, nomination of directors,
classification of directors, removal of directors, or amendment to the KeyCorp
Regulations, which are not recommended by at least two-thirds of the directors,
must be approved by shareholders holding at least 75% of the voting power of
KeyCorp at a meeting.
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The KeyCorp Regulations provide that through December 31, 1998, the
provisions of the KeyCorp Regulations relating to (a) the number,
classification, and term of office of directors, (b) Chairman of the Board,
Chairman of the Executive Committee, and chairmen of other committees, (c)
nominations and removal of directors and filling vacancies in the Board of
Directors, (d) the Nominating Committee, (e) Chief Executive Officer and
President through December 31, 1998, (f) removal of officers, (g) the
headquarters of KeyCorp, and (h) amendments of the Regulations may only be
amended, repealed, or altered (i) by the affirmative vote of the holders of
shares entitling them to exercise three-quarters of the voting power of KeyCorp
on such proposal, (ii) if such amendment, repeal, or alteration is recommended
by three-quarters of the entire authorized Board of Directors of KeyCorp, by
the affirmative vote of the holders of shares entitling them to exercise a
majority of the voting power of KeyCorp on such proposal, or (iii) without a
meeting, by the written consent of the holders of shares entitling them to
exercise 100% of the voting power of KeyCorp on such proposal. The KeyCorp
Regulations also provide that until December 31, 1998, any KeyCorp Regulations,
other than those KeyCorp Regulations specifically listed in the immediately
preceding sentence, and, after December 31, 1998, any KeyCorp Regulations, may
be adopted, amended, repealed, or altered (x) by the affirmative vote of the
holders of shares entitling them to exercise three-quarters of the voting power
of KeyCorp on such proposal, (y) if such adoption, amendment, repeal, or
alteration is recommended by two-thirds of the entire authorized Board of
Directors of KeyCorp, by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of KeyCorp on such
proposal, or (z) without a meeting, by the written consent of the holders of
shares entitling them to exercise 100% of the voting power of KeyCorp on such
proposal.
DIRECTORS
NUMBER; CLASSIFICATION. The First Citizens' By-laws provide that the
number of directors of First Citizens shall be 14. The Board of Directors is
not divided into classes.
The KeyCorp Regulations provide that the number of directors of KeyCorp
shall be between 20 and 24 directors, as fixed from time to time by majority
vote of the entire board. The number of directors is currently fixed at 22.
The Board of Directors is divided into three classes, each serving three-year
terms, so that approximately one-third of the directors of KeyCorp are elected
at each annual meeting of the shareholders of KeyCorp.
The Board of Directors of KeyCorp may change the size of the Board of
Directors within the foregoing range, subject to certain limitations described
therein, by the affirmative vote of two-thirds of the entire authorized Board.
The shareholders of KeyCorp may change the size of the Board of Directors of
KeyCorp within the foregoing range, subject to certain limitations described
under "Nominations of Candidates for Election of Directors" below, at a meeting
of the shareholders of KeyCorp called for the purpose of election of directors
(i) by the affirmative vote of the holders of shares entitling them to exercise
three-quarters of the voting power of KeyCorp represented at the meeting and
entitled to elect directors or (ii) if the proposed change in the number of
directors is recommended by two-thirds of the entire authorized Board of
Directors of KeyCorp, by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of KeyCorp
represented at the meeting and entitled to elect directors. In addition, the
number of directors of KeyCorp is subject to automatic increase by
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two during certain periods when dividends payable on any class or series of
preferred stock of KeyCorp are in arrears for six quarterly dividend payment
periods, as set forth in the KeyCorp Articles of Incorporation and/or the
express terms of the preferred stock of KeyCorp.
The effect of KeyCorp having a classified Board of Directors is that
only approximately one-third of the members of the Board will be elected each
year and, as a result, two annual meetings will be required for KeyCorp
shareholders to change a majority of the members constituting the Board of
Directors.
NOMINATIONS OF CANDIDATES FOR ELECTION AS DIRECTORS. Neither the First
Citizens' Articles of Incorporation nor the First Citizens By-laws provide a
specific procedure for nominating candidates for election as directors.
The KeyCorp Regulations establish a specific procedure for director
nominations made by the Board of Directors of KeyCorp. Through December 31,
1998, nominations for the election of directors of KeyCorp may be made by (a)
the affirmative vote of three-quarters of the entire Board of Directors of
KeyCorp and three-quarters of the members of the Nominating Committee of the
Board of Directors of KeyCorp, or (b) any shareholder of KeyCorp entitled to
vote for the election of directors at a meeting, but only if written notice of
such shareholder's intent to make such nomination is received by the Secretary
of KeyCorp not less than 60 nor more than 90 days prior to the meeting. After
December 31, 1998, nominations for the election of directors may be made by (a)
the affirmative vote of two-thirds of the entire authorized Board of Directors
of KeyCorp, or (b) any shareholder of KeyCorp in accordance with the procedures
summarized above.
REMOVAL OF DIRECTORS. The First Citizens Articles of Incorporation
provide that directors of First Citizens may be removed from office, with or
without cause, at a meeting of shareholders called expressly for that purpose,
by the affirmative vote of holders of a majority of the outstanding voting
shares of First Citizens.
KeyCorp's Regulations provide that the Board of Directors may remove any
director upon judicial declaration of mental unsoundness, adjudicated
bankruptcy, or failure to accept election as a director. KeyCorp's
shareholders may remove any or all directors, with or without cause, by an
affirmative vote of holders of at least 75% of the shares of KeyCorp Common
Stock. Through December 31, 1998, the Board of Directors may fill vacancies
only by the affirmative vote of two-thirds of the members of the Board of
Directors and two-thirds of the members of the Nominating Committee of the
Board of Directors.
DIRECTOR LIABILITY AND INDEMNIFICATION
Under the IBCL, a corporation may indemnify officers and directors
against reasonable expenses, including attorneys' fees, if the officer or
director acted in good faith and, if acting in his or her official capacity,
for a purpose he or she reasonably believed to be in the best interests of the
corporation or, in all other cases, for a purpose he or she reasonably believed
was not opposed to the best interests of the corporation, and if, in a criminal
action, he or she had reasonable cause to believe his or her conduct was lawful
or no reasonable cause to believe that his or her conduct was unlawful. A
corporation may reimburse expenses incurred by an
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officer or director prior to final disposition of a proceeding provided the
corporation obtains an undertaking from such director or officer to repay any
reimbursed expenses if it is ultimately determined that he or she was not
entitled to indemnification.
Indemnification is mandatory if the officer or director is wholly
successful, on the merits or otherwise, in the proceeding. The foregoing
statutory rights are not exclusive, and indemnification may be provided under
the corporation's articles of incorporation or by-laws or, if such documents so
provide, under a board or shareholder resolution or an agreement.
The First Citizens Articles of Incorporation and By-laws provide that
First Citizens will indemnify and hold harmless from all costs, expenses and
liabilities, including but not limited to attorney's fees, costs of
investigation and defense preparation, the amounts of judgments and fines or
penalties, any person who is a director or officer of First Citizens or who
served any other corporation at the request of First Citizens but no director
or officer will be indemnified with respect to any matter as to which such
director or officer shall in any action, suit or proceeding be finally adjudged
guilty of wilful misconduct in the performance of his or her duties as such
director or officer.
Under Ohio law, Ohio corporations are authorized to indemnify directors,
officers, employees, and agents within prescribed limits and must indemnify
them under certain circumstances. Ohio law does not provide statutory
authorization for a corporation to indemnify directors, officers, employees,
and agents for settlements, fines, or judgments in the context of derivative
suits. However, it provides that directors (but not officers, employees, and
agents) are entitled to mandatory advancement of expenses, including attorneys'
fees, incurred in defending any action, including derivative actions, brought
against the director, provided the director agrees to cooperate with the
corporation concerning the matter and to repay the amount advanced if it is
proved by clear and convincing evidence that his or her action or failure to
act was done with deliberate intent to cause injury to the corporation or with
reckless disregard for the corporation's best interests.
Ohio law does not authorize payment of judgments to a director, officer,
employee, or agent after a finding of negligence or misconduct in a derivative
suit absent a court order. Indemnification is required, however, to the extent
such person succeeds on the merits. In all other cases, if a director,
officer, employee or agent acted in good faith and in a matter he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, indemnification is discretionary except as otherwise provided by a
corporation's articles, code of regulations, or by contract except with respect
to the advancement of expenses of directors.
Under Ohio law, a director is not liable for monetary damages unless it
is proved by clear and convincing evidence that his or her action or failure to
act was undertaken with deliberate intent to cause injury to the corporation or
with reckless disregard for the best interests of the corporation. There is,
however, no comparable provision limiting the liability of officers, employees,
or agents of a corporation. The statutory right to indemnification is not
exclusive in Ohio, and Ohio corporations may, among other things, procure
insurance for such persons.
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The KeyCorp Regulations provide that KeyCorp shall indemnify to the
fullest extent permitted by law any person made or threatened to be made a
party to any action, suit, or proceeding by reason of the fact that he or she
is or was a director, officer, or employee of KeyCorp or of any other bank,
corporation, partnership, trust, or other enterprise for which he or she was
serving as a director, officer, or employee at the request of KeyCorp.
Under the Merger Agreement, KeyCorp has agreed to indemnify all present
and former officers and directors of First Citizens and its subsidiaries after
the Effective Time for any liabilities arising out of any act or omission prior
to the Effective Time in their capacity as officer or director to the fullest
extent provided by Indiana law.
DIVIDENDS
An Ohio corporation may pay dividends out of surplus, however created,
but must notify its shareholders if a dividend is paid out of capital surplus.
An Indiana corporation may pay dividends without limitation, provided that such
dividend would not be permitted if, after giving effect to the payment of that
dividend, the corporation would not be able to pay its debts as they become due
in the ordinary course of business, or if the corporation's total assets would
be less than total liabilities.
The Board of Directors of KeyCorp reviews the declaration and payment of
dividends by KeyCorp on a quarterly basis in light of cash needs, general
business conditions, availability of dividends from subsidiaries, and
regulatory policies. There can, of course, be no assurance as to declaration
or the amount of future dividends on KeyCorp's Common Stock.
Regulations restricting the ability of KeyCorp's subsidiary banks and
other subsidiaries to pay dividends to KeyCorp after the Effective Time are set
forth in "BUSINESS OF KEYCORP -- Regulation and Supervision of KeyCorp -
Dividend Restrictions."
CERTAIN LEGAL MATTERS
The validity of the KeyCorp Common Stock to be issued in connection with
the Merger has been passed upon for KeyCorp by Steven N. Bulloch, Senior Vice
President and Senior Managing Counsel of KeyCorp Management Company, an
affiliate of KeyCorp. On August 1, 1994, Mr. Bulloch owned approximately 2,700
shares of KeyCorp Common Stock and options to purchase 4,000 shares of KeyCorp
Common Stock which were exercisable within sixty days of such date. Certain
tax matters relating to the Merger will be passed upon KeyCorp's counsel,
Thompson, Hine and Flory, 1100 National City Bank Building, Cleveland,
Ohio 44114. Attorneys at Thompson, Hine and Flory owned approximately
60,400 shares of KeyCorp Common Stock on August 1, 1994. Certain tax matters
relating to the Merger will be passed upon for First Citizens by its counsel
Edwards & Angell.
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EXPERTS
The following consolidated financial statements of KeyCorp have been
audited by Ernst & Young, independent auditors, as set forth in their reports
thereon, included therein and incorporated herein by reference in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing:
(a) consolidated financial statements for the year ended December
31, 1993 of KeyCorp, as restated to give effect to the March 1,
1994 merger of old Key and Society, which was accounted for as
a pooling of interests; such financial statements are included
in and incorporated by reference into KeyCorp's Current Report
on Form 8-K filed with the Commission on April 20, 1994;
(b) consolidated financial statements for the year ended December
31, 1993 of old Key (the combining company), which on March 1,
1994 merged with Society, subsequently renamed KeyCorp,
included in KeyCorp's Current Report on Form 8-K filed with the
Commission on March 16, 1994; and
(c) supplemental consolidated financial statements for the year
ended December 31, 1993 of KeyCorp (the combined entity)
included in KeyCorp's Annual Report on Form 10-K filed with the
Securities and Exchange Commission. The supplemental
consolidated financial statements became the historical
financial statements of KeyCorp upon the filing of the
KeyCorp's Current Report on Form 8-K with the Commission on
April 20, 1994.
In addition, the consolidated financial statements for the year ended
December 31, 1993 of Society included in KeyCorp's Annual Report on Form 10-K
filed with the Commission have been audited by Ernst & Young, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing. Society's
consolidated financial statements subsequently have been restated to give
effect to the March 1, 1994 merger of the old Key and Society.
With respect to the unaudited consolidated interim financial information
for the three-month periods ended March 31, 1994 and March 31, 1993 and for the
three and six-month periods ended June 30, 1994 and June 30, 1993, incorporated
by reference in this Prospectus/Proxy Statement, Ernst & Young have reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate reports,
included in KeyCorp's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994 and June 30, 1994, and incorporated herein by reference, state
that they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports on
such information should be restricted in light of the limited nature of the
review procedures applied. The independent auditors are not subject to the
liability provisions of Section 11 of the Securities Act, for their report on
the unaudited interim financial information because that report is not a
"report" or a "part" of the
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Registration Statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Securities Act.
The consolidated financial statements of First Citizens at December 31,
1993 and 1992 and for the three years in the period ended December 31, 1993
have been audited by Crowe, Chizek and Company, independent auditors, as set
forth in their report thereon appearing elsewhere herein and are included in
reliance upon such report given upon the authority of such firm as experts in
auditing and accounting.
SHAREHOLDER PROPOSALS
It is currently anticipated that KeyCorp will hold its 1995 annual
meeting of shareholders on or about May 18, 1995. KeyCorp's Regulations require
that notice of a nomination by shareholders of individuals for election to the
Board of Directors of KeyCorp, whether or not proposed to be included in
KeyCorp's proxy statement, be given to the Secretary of KeyCorp by March 17,
1995, assuming that the 1995 annual meeting is held on May 18, 1995, and that
the notice include certain information relating to the nominee and the
nominating shareholder. Shareholder proposals intended to be presented at
KeyCorp's 1995 annual meeting of shareholders must be submitted to KeyCorp by
December 21, 1994, in order to be considered for inclusion in the proxy
materials for that meeting.
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<PAGE> 123
APPENDIX A
AGREEMENT AND PLAN OF MERGER
By and Between
KEYCORP
and
FIRST CITIZENS BANCORP OF INDIANA
<PAGE> 124
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
1 THE ACQUISITION MERGER . . . . . . . . . . . . . . . . 1
1.1 The Acquisition Merger . . . . . . . . . . . . . . . 1
1.2 Effective Time. . . . . . . . . . . . . . . . . . . . 2
1.3 Charter and By-laws. . . . . . . . . . . . . . . . . 2
1.4 Capital Stock. . . . . . . . . . . . . . . . . . . . 2
1.5 Directors and Officers. . . . . . . . . . . . . . . . 2
1.6 Additional Actions. . . . . . . . . . . . . . . . . . 2
1.7 Conversion of Bancorp Shares. . . . . . . . . . . . . 3
1.8 Exchange Procedures. . . . . . . . . . . . . . . . . 4
1.9 No Fractional Shares. . . . . . . . . . . . . . . . . 6
1.10 Dissenters' Rights. . . . . . . . . . . . . . . . . . 6
1.11 Tax-Free Reorganization . . . . . . . . . . . . . . . 7
2 REPRESENTATIONS AND WARRANTIES OF BANCORP. . . . . . . . 7
2.1 Corporate Organization. . . . . . . . . . . . . . . . 7
2.2 Capitalization. . . . . . . . . . . . . . . . . . . . 8
2.3 Authority . . . . . . . . . . . . . . . . . . . . . . 9
2.4 No Violation. . . . . . . . . . . . . . . . . . . . . 9
2.5 Consents and Approvals. . . . . . . . . . . . . . . . 10
2.6 Financial Statements; Undisclosed Liabilities . . . . 10
2.7 Other Statements and Reports. . . . . . . . . . . . . 11
2.8 Absence of Certain Changes or Events. . . . . . . . . 11
2.9 Legal Proceedings . . . . . . . . . . . . . . . . . . 13
2.10 Taxes and Tax Returns . . . . . . . . . . . . . . . . 13
2.11 Bancorp Loans; Allowance for Loan Losses; Capital . . 14
2.12 Properties. . . . . . . . . . . . . . . . . . . . . . 15
2.13 Agreements with Banking Authorities . . . . . . . . . 16
2.14 Certain Contracts . . . . . . . . . . . . . . . . . . 16
2.15 Material Contract Defaults. . . . . . . . . . . . . . 17
2.16 Insurance . . . . . . . . . . . . . . . . . . . . . . 17
2.17 Employee Benefit Plans. . . . . . . . . . . . . . . . 17
2.18 Compliance with Applicable Law. . . . . . . . . . . . 20
2.19 Broker's Fees . . . . . . . . . . . . . . . . . . . . 20
2.20 Labor Matters . . . . . . . . . . . . . . . . . . . . 20
2.21 Governmental Franchises, Licenses, Permits, and
Authorizations. . . . . . . . . . . . . . . . . . . . 21
2.22 No Material Adverse Change. . . . . . . . . . . . . . 21
2.23 Vote Required . . . . . . . . . . . . . . . . . . . . 21
2.24 Trust Administration. . . . . . . . . . . . . . . . . 21
3 REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . 22
3.1 Corporate Organization. . . . . . . . . . . . . . . . 22
3.2 Capitalization. . . . . . . . . . . . . . . . . . . . 23
3.3 Authority . . . . . . . . . . . . . . . . . . . . . . 23
3.4 No Violation. . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE> 125
Table of Contents
<TABLE>
<S> <C>
3.5 Consents and Approvals. . . . . . . . . . . . . . . . 24
3.6 Certain Statements, Reports and Documents. . . . . . 25
3.7 Other Statements and Reports. . . . . . . . . . . . . 25
3.8 Absence of Certain Changes or Events. . . . . . . . . 25
3.9 Compliance with Applicable Law. . . . . . . . . . . . 26
3.10 Broker's Fees . . . . . . . . . . . . . . . . . . . . 26
3.11 Buyer Common Stock. . . . . . . . . . . . . . . . . . 26
3.12 Buyer Information . . . . . . . . . . . . . . . . . . 26
3.13 Access to Information . . . . . . . . . . . . . . . . 26
4 COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . 27
4.1 Conduct of Business of Bancorp. . . . . . . . . . . . 27
4.2 Current Information. . . . . . . . . . . . . . . . . 31
4.3 Access to Properties and Records. . . . . . . . . . . 31
4.4 Financial and Other Statements. . . . . . . . . . . . 32
4.5 Approval of Bancorp's Stockholders. . . . . . . . . . 32
4.6 Tax-Free Reorganization Treatment. . . . . . . . . . 34
4.7 Failure to Fulfill Conditions. . . . . . . . . . . . 34
4.8 Consents and Approvals of Third Parties. . . . . . . 34
4.9 Stock Exchange Listing. . . . . . . . . . . . . . . . 34
4.10 Employment and Benefit Matters. . . . . . . . . . . . 35
4.11 Further Assurances. . . . . . . . . . . . . . . . . . 35
4.12 Indemnification . . . . . . . . . . . . . . . . . . . 36
4.13 No Solicitation . . . . . . . . . . . . . . . . . . . 36
4.14 Sale of Travel Agency and Insurance Agency. . . . . . 37
4.15 1993 Tax Returns. . . . . . . . . . . . . . . . . . . 37
4.16 Data Processing . . . . . . . . . . . . . . . . . . . 37
4.17 Compliance with Securities Act. . . . . . . . . . . . 40
4.18 Unpaid Bancorp Dividends. . . . . . . . . . . . . . . 40
5 CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . 40
5.1 Conditions to Each Party's Obligations under this
Agreement . . . . . . . . . . . . . . . . . . . . . . 40
5.2 Conditions to the Obligations of Buyer under this
Agreement . . . . . . . . . . . . . . . . . . . . . . 41
5.3 Conditions to the Obligations of Bancorp under this
Agreement . . . . . . . . . . . . . . . . . . . . . . 42
6 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . 44
6.1 Environmental Representations and Warranties of
Bancorp . . . . . . . . . . . . . . . . . . . . . . . 44
6.2 Phase I Environmental Audit . . . . . . . . . . . . . 46
6.3 Phase II Environmental Audit and Environmental
Audit Response. . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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<TABLE>
<CAPTION>
Table of Contents
<S> <C> <C>
6.4 Environmental Occurrence Notification . . . . . . . . 46
6.5 Remediation; Allocation of Remediation Costs;
Termination of Agreement. . . . . . . . . . . . . . . 47
6.6 Definitions . . . . . . . . . . . . . . . . . . . . . 48
7 THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . 50
7.1 Time and Place. . . . . . . . . . . . . . . . . . . . 50
7.2 Deliveries at the Closing . . . . . . . . . . . . . . 50
8 TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . 50
8.1 Termination . . . . . . . . . . . . . . . . . . . . . 50
8.2 Effect of Termination . . . . . . . . . . . . . . . . 51
8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . 52
8.4 Waiver. . . . . . . . . . . . . . . . . . . . . . . . 52
9 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 52
10 COOPERATION . . . . . . . . . . . . . . . . . . . . . . 53
10.1 Proxy Statement/Prospectus. . . . . . . . . . . . . . 53
10.2 Regulatory Approvals. . . . . . . . . . . . . . . . . 53
10.3 Further Information . . . . . . . . . . . . . . . . . 53
11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 54
11.1 Confidentiality . . . . . . . . . . . . . . . . . . . 54
11.2 Certain Definitions . . . . . . . . . . . . . . . . . 54
11.3 Public Announcements. . . . . . . . . . . . . . . . . 55
11.4 Survival. . . . . . . . . . . . . . . . . . . . . . . 55
11.5 Notices . . . . . . . . . . . . . . . . . . . . . . . 55
11.6 Parties in Interest . . . . . . . . . . . . . . . . . 56
11.7 Complete Agreement. . . . . . . . . . . . . . . . . . 56
11.8 Counterparts. . . . . . . . . . . . . . . . . . . . . 56
11.9 Severability. . . . . . . . . . . . . . . . . . . . . 57
11.10 Governing Law; Jurisdiction and Venue. . . . . . . . 57
11.11 Headings . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
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<PAGE> 127
AGREEMENT AND PLAN OF MERGER
By and Between
KEYCORP
and
FIRST CITIZENS BANCORP OF INDIANA
THIS AGREEMENT AND PLAN OF MERGER dated as of June 30, 1994
(this "Agreement"), by and between KeyCorp ("Buyer"), an Ohio
corporation, and First Citizens Bancorp of Indiana ("Bancorp"),
an Indiana corporation.
In consideration of the mutual covenants, representations,
warranties and agreements herein contained, and of other good
and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that
Buyer shall acquire all of the outstanding capital stock of
Bancorp pursuant to a merger (the "Acquisition Merger") of
Bancorp with and into Buyer. The terms and conditions of the
Acquisition Merger, the manner in which the Acquisition Merger
is effected, the determination of the purchase price and
certain other provisions relating to the Acquisition Merger
shall be as hereinafter set forth.
ARTICLE 1
THE ACQUISITION MERGER
1.1. THE ACQUISITION MERGER. At the Effective Time (as
defined in Section 1.2), Bancorp shall be merged with and into
Buyer in accordance with the provisions of Section 1701.78 of
the Ohio General Corporation Law ("OGCL") and Section 23-1-40-7
of the Indiana Business Corporation Law ("IBCL") (the
"Acquisition Merger") and Buyer shall be the surviving company
and shall continue to be incorporated under Ohio law
("Surviving Company"). The identity, rights, privileges,
powers, franchises, properties, assets, liabilities and
obligations of Buyer shall continue unaffected and unimpaired
by the Acquisition Merger. At the Effective Time (as defined
in Section 1.2), the identity and separate existence of Bancorp
shall cease, and all of the rights, privileges, powers,
franchises, properties, assets, liabilities and obligations of
<PAGE> 128
Bancorp shall be vested in and assumed by Surviving Company.
The Acquisition Merger shall have such further effects, if any,
as specified in the OGCL and the IBCL.
1.2. EFFECTIVE TIME. As soon as practicable following the
Closing (as defined in Article 7), Surviving Company shall file
articles of merger complying with the requirements of Section
23-1-40-5 of the IBCL (the "Indiana Articles of Merger") with
the Secretary of the State of Indiana (the "Indiana Secretary")
and a certificate of merger complying with the requirements of
Section 1701.81 of the OGCL (the "Ohio Certificate of Merger")
with the Secretary of State of the State of Ohio (the "Ohio
Secretary"). The term "Effective Time" shall mean the date and
time upon which the Acquisition Merger shall be effective. The
Effective Time shall be the later of the date and time upon
which (i) the Indiana Articles of Merger are filed with the
Indiana Secretary or (ii) the Ohio Certificate of Merger is
filed with the Ohio Secretary, or such later date and time as
may be specified in accordance with the OGCL and the IBCL.
1.3. CHARTER AND BY-LAWS. The Amended and Restated
Articles of Incorporation and Regulations of Surviving Company
shall be the Amended and Restated Articles of Incorporation and
Regulations of Buyer as in effect immediately prior to the
Effective Time, until thereafter amended as provided therein
and by applicable law.
1.4. CAPITAL STOCK. The total number of shares and the
par value of each class of capital stock that Surviving Company
is authorized to issue shall be equal to the number of shares
and the par value of each class of capital stock of Buyer as
contained in its Amended and Restated Articles of
Incorporation, until thereafter amended in accordance with the
Amended and Restated Articles of Incorporation of Surviving
Company and applicable law.
1.5. DIRECTORS AND OFFICERS. The directors and officers
of Buyer immediately prior to the Effective Time will be the
directors and officers, respectively, of Surviving Company,
from and after the Effective Time, until their successors have
been duly elected or appointed and qualified or until their
earlier death, resignation, or removal in accordance with the
terms of Surviving Company's Amended and Restated Articles of
Incorporation and Regulations and the OGCL.
1.6. ADDITIONAL ACTIONS. If, at any time after the
Effective Time, Surviving Company shall consider or be advised
that any further deeds, bills of sale, assignments or
assurances in law or any other acts are necessary or desirable
(a) to vest, perfect or confirm, of record or otherwise, in
Surviving Company, right, title or interest to and possession
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<PAGE> 129
of any property, asset or right of Bancorp acquired or to be acquired by
reason of, or as a result of, the Acquisition Merger, or (b) otherwise to
carry out the purposes of this Agreement, Bancorp and its proper officers and
directors shall be deemed to have granted to Surviving Company an irrevocable
power of attorney to execute and deliver all such proper deeds, bills of sale,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such property or rights in
Surviving Company and otherwise to carry out the purposes of this Agreement;
and the proper officers and directors of Surviving Company are fully authorized
in the name of Bancorp or otherwise to take any and all such action.
1.7. CONVERSION OF BANCORP SHARES. At the Effective Time, by virtue
of the Acquisition Merger and without any action on the part of Buyer, Bancorp
or the holder of any Bancorp Shares (as defined below), each share of common
stock, $1.00 par value per share, of Bancorp ("Bancorp Common Stock") issued
and outstanding immediately prior to the Effective Time (other than any shares
held by Bancorp or any Bancorp Subsidiary (as defined in Section 2.1(b)), or
Buyer or any subsidiary of Buyer (in each case other than in a fiduciary
capacity or as a result of debts previously contracted), which shall be
cancelled ("Bancorp Shares") shall, by virtue of the Acquisition Merger,
automatically and without any action on the part of the holder thereof, be
cancelled, retired and converted into and become, subject to the provisions of
Sections 1.8, 1.9 and 1.10, the right to receive that number (carried out to
four decimal points) of Common Shares, with a par value of $1.00 each, of Buyer
("Buyer Common Stock") determined by dividing $37.00 by the Average Stock Price
(as defined below); provided, however, that if the Average Stock Price as
calculated as aforesaid shall be (A) less than or equal to $25.9000(1) per
share, the Average Stock Price shall be deemed to be $25.9000 for all purposes
of this Agreement, or (B) greater than or equal to $38.8500(2) per share, the
Average Stock Price shall be deemed to be $38.8500 for all purposes of this
Agreement; provided further, that if Bancorp realizes an aggregate net after
tax
- ----------------------
(1) The closing price of Buyer Common Stock at the close of
business on the date immediately preceding the date
hereof less 20 percent.
(2) The closing price of Buyer Common Stock at the close of
business on the date immediately preceding the date
hereof plus 20 percent.
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<PAGE> 130
loss (determined in accordance with generally accepted
accounting principles consistently applied) from the sale of
both Citizens Travel, Inc. (the "Travel Agency") and Citizens
Insurance Agency, Inc. (the "Insurance Agency") on the basis
contemplated in Section 4.14(a), the amount to be divided by
the Average Stock Price shall be reduced by the amount of such
aggregate net after tax loss per outstanding share of Bancorp
Common Stock; and provided, further, that the amount to be
divided by the Average Stock Price shall also be reduced by the
amount of any After-Tax Excess Remediation Cost (as defined
below) per outstanding share of Bancorp Common Stock.
After-Tax Excess Remediation Cost means Excess Remediation Cost
determined in accordance with Article 6, reduced to give effect
to the federal and state tax treatment of such costs to Buyer.
"Average Stock Price" means the average (rounded to the
nearest whole cent) of the last sale price of the day of
one share of Buyer Common Stock as reported on the
consolidated tape of the New York Stock Exchange ("NYSE")
for the twenty (20) consecutive trading days ending on and
including the fifth (5th) trading day immediately preceding
(but not including) the Closing Date (as defined in Section
7.1).
"Merger Consideration" means the shares of Buyer Common
Stock (and, in the case of payments in lieu of fractional
shares, cash) that holders of Bancorp Shares are entitled
to receive hereunder.
Each share of Buyer Common Stock outstanding at the
Effective Time shall continue to be an issued and outstanding
Common Share, with a par value of $1.00 each, of Buyer and each
share of Buyer Common Stock held in Buyer's treasury
immediately prior to the Effective Time shall continue to be
held in the treasury of Buyer at the Effective Time.
Pursuant to the Agreement, dated August 25, 1989, as
amended, between Buyer and Society National Bank, as successor
rights agent (the "Buyer Rights Plan") each share of Buyer
Common Stock issued in the Acquisition Merger shall be
accompanied by a right (a "Buyer Right") under the Buyer Rights
Plan. For purposes of this Agreement, all references to a
share of Buyer Common Stock shall be deemed to include the
accompanying Buyer Right.
1.8. EXCHANGE PROCEDURES.
(a) As promptly as practicable after the Effective
Time, Buyer shall issue and deliver to the Exchange Agent (as
defined below) certificates representing the number of shares
of Buyer Common Stock to be issued hereunder. Exchange Agent
means Society National Bank or such other bank or trust company
with a capital and surplus of at least $25 million,
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<PAGE> 131
selected by Buyer and reasonably acceptable to Bancorp to,
among other things, effect the exchange of Bancorp Shares for
the Merger Consideration.
(b) Promptly after the Effective Time, Buyer shall
cause the Exchange Agent to mail and/or make available to each
record holder of a Certificate (as defined below) a notice and
letter of transmittal advising such holder of the effectiveness
of the Acquisition Merger and the procedures to be used in
effecting the surrender of the Certificate for exchange
therefor and specifying that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificate to the Exchange Agent,
and such other matters as Buyer shall reasonably specify. Upon
surrender to the Exchange Agent of a Certificate, together with
such letter of transmittal duly executed and completed in
accordance with the instructions thereon, and such other
documents as may reasonably be requested by Buyer or the
Exchange Agent, and subject to any withholding of taxes, the
Exchange Agent shall promptly deliver to the person entitled
thereto the appropriate Merger Consideration, and the
surrendered Certificate shall, by virtue of such delivery,
automatically be cancelled.
(c) After the Effective Time, each holder of a
certificate that, prior to the Effective Time, represented
Bancorp Shares ("Certificate") that has previously surrendered
or thereafter surrenders such Certificate to the Exchange Agent
will, upon acceptance thereof by the Exchange Agent, be
entitled to (i) a certificate or certificates representing the
number of full shares of Buyer Common Stock into which the
surrendered Certificate shall have been converted pursuant to
this Agreement, together with any cash payment in lieu of
fractional shares of Buyer Common Stock pursuant to Section
1.9, and (ii) when such holder's Bancorp Shares have been
converted into shares of Buyer Common Stock, any other
distribution theretofore declared and not yet paid with respect
to such shares of Buyer Common Stock issuable in the Merger
unless the Average Stock Price includes the value of such
distribution, in each case without interest.
(d) Each Certificate shall, except as otherwise
provided in this Agreement, until duly surrendered to the
Exchange Agent, be deemed to evidence only the right to receive
the Merger Consideration into which such Bancorp Shares shall
have been converted. After the Effective Time, there shall be
no further transfer on the records of Bancorp of Certificates,
and if such Certificates are presented to Bancorp for transfer,
they shall be cancelled against delivery of the Merger
Consideration provided therefor in this Agreement.
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<PAGE> 132
(e) No dividends declared with respect to Buyer
Common Stock with a record date on or after the Effective Time
will be remitted to any person entitled to receive Buyer Common
Stock under this Agreement and such holder's other rights as a
shareholder of Buyer shall be suspended until such person
surrenders the Certificate or Certificates, at which time such
dividends shall be remitted to such person, without interest
and less any taxes that may have been imposed thereon, and such
holder's other rights as a shareholder of Buyer shall be
restored. Neither the Exchange Agent, Buyer nor Bancorp shall
be liable to any holder of Bancorp Shares for any consideration
paid to a public official pursuant to applicable abandoned
property, escheat or similar laws. Buyer and the Exchange
Agent shall be entitled to rely upon the stock transfer books
of shares of Bancorp Common Stock to establish the identity of
those persons entitled to receive Merger Consideration
specified in this Agreement, which books shall be conclusive
with respect thereto. In the event of a dispute with respect
to ownership of any shares of Bancorp Common Stock, Buyer and
the Exchange Agent shall be entitled to deposit any Merger
Consideration in respect thereof, if any, represented thereby
in escrow with an independent third party and thereafter be
relieved of any liability with respect to any claims thereto.
1.9. NO FRACTIONAL SHARES. Notwithstanding any other
provision of this Agreement, neither certificates nor scrip for
fractional shares of Buyer Common Stock shall be issued in the
Acquisition Merger. Each holder of Bancorp Shares who
otherwise would have been entitled to a fraction of a share of
Buyer Common Stock shall receive in lieu thereof cash (without
interest) in an amount determined by multiplying the fractional
share interest to which such holder would otherwise be entitled
by the average of the high and low sales price of Buyer Common
Stock on the NYSE on the last trading day immediately preceding
the Effective Time. No such holder shall be entitled to
dividends, voting rights or any other rights in respect to any
fractional share.
1.10. DISSENTERS' RIGHTS. Notwithstanding anything in
this Agreement to the contrary and unless otherwise provided by
applicable law, Bancorp Shares which are issued and outstanding
immediately prior to the Effective Time and which are owned by
stockholders who, pursuant to applicable law, (a) deliver to
Bancorp, before the taking of the vote of Bancorp's
stockholders on the Acquisition Merger, written demand for the
appraisal of their shares, if the Acquisition Merger is
effected, and (b) whose shares are not voted in favor of the
Acquisition Merger, nor consented thereto in writing (the
"Dissenting Shares"), shall not be converted into the Merger
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<PAGE> 133
Consideration, unless and until such holders shall have failed
to perfect or shall have effectively withdrawn or lost their
right of appraisal and payment under applicable laws. If any
such holder shall have failed to perfect or shall have
effectively withdrawn or lost such right of appraisal, the
Bancorp Shares of such holder shall thereupon be deemed to have
been converted into and exchangeable for, at the Effective
Time, the right to receive the Merger Consideration. Bancorp
shall forthwith give Buyer notice of any written demands for
appraisal of any shares, attempted withdrawals of such demands
and any other instruments or notices served pursuant to the
IBCL received by Bancorp relating to dissenters' rights of its
stockholders.
1.11. TAX-FREE REORGANIZATION. The parties hereto agree
that they intend that the Acquisition Merger shall constitute a
tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF BANCORP
Bancorp hereby represents and warrants to Buyer as follows:
2.1. CORPORATE ORGANIZATION.
-----------------------
(a) Bancorp is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Indiana and is registered as a bank holding company with the
Board of Governors of the Federal Reserve System (the "FRB")
under the Bank Holding Company Act of 1956, as amended (the
"BHCA"). Citizens Banking Company (the "Bank") is a commercial
bank duly organized and validly existing under the laws of the
State of Indiana, and in good standing with the Indiana
Department of Financial Institutions (the "DFI"). Each of the
other Bancorp Subsidiaries (as defined below) is a corporation,
in each case duly organized, validly existing and in corporate
good standing under the laws of the jurisdiction of its
organization. Each of Bancorp and the Bancorp Subsidiaries has
the power and authority to own or lease all of its properties
and assets and to conduct its business as it is now being
conducted, and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which the nature of
the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such
licensing or qualification necessary, except where the failure
to be so licensed, qualified or in good standing would not have
a Material Adverse Effect (as defined in Section 11.2) on
Bancorp and the Bancorp Subsidiaries taken as a whole. Bancorp
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<PAGE> 134
has previously made available to Buyer for inspection true and
complete copies of the (i) Articles of Incorporation and
By-Laws as amended to date of Bancorp and all similar charter
and by-law documents of each of the Bancorp Subsidiaries, and
(ii) all official records of all meetings and other corporate
action taken by the stockholders, Board of Directors and
committees thereof, of Bancorp and each of the Bancorp
Subsidiaries.
(b) As used in this Agreement, all references to the
"Bancorp Subsidiaries" shall mean any corporation, all of the
shares of capital stock (or other voting interests) of which is
owned directly or indirectly by Bancorp or any Bancorp
Subsidiary. The Subsidiaries listed in Item 2.01 of a
disclosure schedule of even date herewith executed and
delivered to Buyer by Bancorp (the "Bancorp Disclosure
Schedule") constitute all of the Bancorp Subsidiaries. All
issued and outstanding shares of capital stock of the Bank are
owned by Bancorp, free and clear of any security interest,
pledge, lien, claim or other encumbrance and all issued and
outstanding shares of capital stock of each Bancorp Subsidiary
(other than the Bank) are owned by the Bank free and clear of
any security interest, pledge, lien, claim or other
encumbrance. No capital stock of any Bancorp Subsidiaries are
or may become required to be issued by reason of any options,
warrants, scrip, rights to subscribe, calls or commitments of
any character whatsoever; there are outstanding no securities
or rights convertible into, or exchangeable for, shares of any
capital stock of any Bancorp Subsidiary; and there are no other
contracts, commitments, understandings or arrangements by which
any Bancorp Subsidiary is bound to issue additional shares of
its capital stock or options, warrants or rights to purchase or
acquire any additional shares of its capital stock. All of the
shares of capital stock of each Bancorp Subsidiary are validly
issued and outstanding, fully paid and non-assessable. Except
for the stock of the Bancorp Subsidiaries and except as set
forth in Item 2.01 of the Bancorp Disclosure Schedule, neither
Bancorp nor any of the Bancorp Subsidiaries is a general
partner in a partnership or owns, controls or holds with the
power to vote, directly or indirectly, of record, beneficially
or otherwise, any capital stock or any equity or ownership
interest in any Person (as defined in Section 11.2).
2.2. CAPITALIZATION.
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(a) The authorized capital stock of Bancorp consists
solely of 5,000,000 shares of Bancorp Common Stock, par value
$1.00 per share. As of the close of business on the date
hereof, there were 1,372,144 shares of Bancorp Common Stock
issued and outstanding and no shares are issued and held as
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treasury shares of Bancorp. All issued and outstanding shares
of Bancorp Common Stock have been duly authorized and validly
issued and are fully paid and non-assessable and not issued in
violation of any pre-emptive rights. All issued and
outstanding shares of capital stock of each Bancorp Subsidiary
have been duly authorized and validly issued and are fully paid
and non-assessable and not issued in violation of any
pre-emptive rights.
(b) Bancorp does not have and is not bound by any
outstanding subscriptions, options, warrants, scrip, rights,
calls, convertible securities, commitments or agreements of any
character obligating, or which may obligate, Bancorp to
deliver, sell or issue, or enter into any such subscription,
option, warrant, call, commitment or agreement, or representing
the right to purchase, subscribe for or otherwise receive, any
shares of its capital stock or any securities convertible into
or representing the right to receive, purchase or subscribe for
any such shares of Bancorp Common Stock, and there are no
agreements or understandings with respect to the voting of any
shares of capital stock of Bancorp or that restrict the
transfer of such shares to which Bancorp is a party, nor does
Bancorp have knowledge of any such agreements or understandings
with respect to the voting of any such shares or which restrict
the transfer of such shares. The aggregate number of issued
and outstanding shares of Bancorp Common Stock at the Effective
Time shall not exceed 1,372,144.
2.3. AUTHORITY. Bancorp has full corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
approved by the Board of Directors of Bancorp, including,
without limitation, all approvals required under Section
23-1-43-18 of the IBCL. Except for the adoption of this
Agreement by the stockholders of Bancorp, no other corporate
proceedings on the part of Bancorp are necessary to consummate
this Agreement and the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by
Bancorp, constitutes the valid and binding obligation of
Bancorp, and is enforceable against Bancorp in accordance with
its terms.
2.4. NO VIOLATION. Neither the execution and delivery of
this Agreement or the other documents executed and delivered in
connection herewith by Bancorp, nor the consummation by Bancorp
of the transactions contemplated hereby or thereby, nor the
compliance by Bancorp with any of the terms or provisions
hereof, does or will (a) violate any provision of the Charter
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or By-laws of Bancorp or any Bancorp Subsidiary, (b) assuming
that the consents and approvals referred to in Sections 2.5 and
4.5 hereof are duly obtained, violate any statute, code,
ordinance, permit, authorization, registration, rule,
regulation, judgment, order, writ, decree or injunction
applicable to Bancorp or any Bancorp Subsidiary or any of their
respective properties, securities or assets (including, without
limitation, Sections 23-1-42 and 23-1-43 of the IBCL), or (c)
assuming that the consents and approvals referred to in
Sections 2.5 and 4.5 hereof are duly obtained, violate,
conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a material default) under,
result in the termination of, accelerate the performance
required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the
respective properties or assets of Bancorp or any Bancorp
Subsidiary under any of the terms, conditions or provisions of
any contract to which Bancorp or any Bancorp Subsidiary is a
party, or by which they or any of their respective properties
or assets may be bound or affected, except for such breaches or
defaults referred to in this clause, and (c) that would not
individually or in the aggregate have a Material Adverse Effect
on Bancorp and the Bancorp Subsidiaries taken as a whole.
2.5. CONSENTS AND APPROVALS. Other than as set forth in
Item 2.05 of the Bancorp Disclosure Schedule and other than in
connection with or in compliance with the Securities Act of
1933, as amended (the "Securities Act") and any applicable blue
sky laws, except for consents and approvals of or filings or
registrations with the FRB, the DFI, the Indiana Secretary, the
Ohio Secretary and the stockholders of Bancorp, no consents or
approvals of, notices to or filings or registrations with any
third party or any public body or authority are necessary in
connection with (a) the execution and delivery by Bancorp of
this Agreement and any other documents executed and delivered
in connection herewith, and (b) the consummation by Bancorp of
the Acquisition Merger and the other transactions contemplated
hereby.
2.6. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
Bancorp has previously delivered to Buyer audited consolidated
financial statements of Bancorp and the Bancorp Subsidiaries
consisting of consolidated balance sheets for the fiscal years
ended December 31, 1991, 1992 and 1993 and consolidated
statements of income, stockholders' equity, and cash flows for
the years ended December 31, 1991, 1992 and 1993 with the
report thereon of Crowe, Chizek and Company, certified public
accountants, and unaudited interim consolidated financial
statements of Bancorp consisting of the consolidated balance
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sheet of March 31, 1994 and consolidated statements of income,
stockholders' equity, and cash flows for the three month period
ended on such date (all such documents being herein
collectively referred to as the "Bancorp Reports," and the
December 31, 1993 balance sheet contained in Bancorp's Annual
Report to Shareholders for the fiscal year ended December 31,
1993, being herein referred to as the "Base Balance Sheet").
The Bancorp Reports present fairly the financial position and
results of operations of Bancorp and the Bancorp Subsidiaries
on a consolidated basis at the dates shown and for the periods
indicated in accordance with generally accepted accounting
principles applied on a consistent basis, subject, in the case
of unaudited interim financial statements to normal year-end
audit adjustments. Except as set forth in Item 2.06 of the
Bancorp Disclosure Schedule, there are no obligations or
liabilities, whether absolute, accrued, contingent, or
otherwise (including, without limiting the generality of the
foregoing, liabilities as guarantor under any guarantees or
liabilities for taxes), which are material in amount
(individually or in the aggregate) of Bancorp or the Bancorp
Subsidiaries which are required in accordance with generally
accepted accounting principles to be reflected, reserved
against or disclosed in the Bancorp Reports and which have not
been so reflected, reserved, or disclosed. All reserves
established by Bancorp on or in connection with the Bancorp
consolidated financial statements in respect of obligations or
liabilities of Bancorp or any Bancorp Subsidiary (whether
absolute, accrued, contingent, or otherwise, including, without
limiting the generality of the foregoing, liabilities for
taxes, for violations of laws or regulations, for discontinued
operations, if any, for severance, or for other matters) are
adequate in all respects to cover and pay for the full amount
of the matters for which such reserves were established, and
there are no material amounts of any such obligations or
liabilities in excess of such reserves for the matters involved.
2.7. OTHER STATEMENTS AND REPORTS. Bancorp has previously
made available to Buyer true and complete copies of (a) each
final registration statement, prospectus or offering circular
that Bancorp has used in connection with the sale of its
capital stock within the past five years, (b) each definitive
proxy statement distributed by Bancorp to its stockholders
within the past five years, and (c) each other report that was,
during the past five years, either distributed to stockholders
or filed by Bancorp or any Bancorp Subsidiary with the FRB, the
Federal Deposit Insurance Corporation (the "FDIC") or any other
federal or state regulatory authority.
2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
December 31, 1993, each of Bancorp and the Bancorp Subsidiaries
has conducted its respective business only in the ordinary
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course and consistent with past practice. Since December 31,
1993, except as disclosed in Item 2.08 of the Bancorp
Disclosure Schedule, there has not been:
(a) any incurrence by Bancorp or the Bancorp
Subsidiaries of any liability (whether absolute, accrued,
contingent or otherwise) or any acquisition or disposition of
assets, except in the ordinary course of their business
consistent with their past practices, or any change in the
business, assets, financial condition or results of operations
of Bancorp and the Bancorp Subsidiaries, that has had, or could
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Bancorp and the Bancorp
Subsidiaries taken as a whole;
(b) any change or event that, individually or in the
aggregate, has had, or could reasonably be expected to have, a
Material Adverse Effect on Bancorp and the Bancorp Subsidiaries
taken as a whole;
(c) any employment contract, severance contract,
bonus, pension, retirement, incentive or similar arrangement or
plan including, without limitation, any Bancorp Plan (as
defined in Section 2.17), instituted, agreed to or amended by
Bancorp or any Bancorp Subsidiary, except as required by
applicable law or any sum paid or distributed except to
participants in the ordinary course of the affairs of the plan
or similar arrangement or plan (including any Bancorp Plan);
(d) any increase in the compensation payable or to
become payable to any of the officers, directors or employees
of Bancorp or any Bancorp Subsidiary or any bonus payment or
arrangement made to or with any of them, except grants of
normal individual bonuses and increases in compensation to
employees in accordance with established written procedures
previously provided to Buyer;
(e) any agreement, contract or commitment entered
into or agreed to be entered into including, without
limitation, any agreement for the sale or acquisition of
assets, except for those in the ordinary course of business
(none of which, individually or in the aggregate, has had, or
could reasonably be expected to have, a Material Adverse Effect
on Bancorp and the Bancorp Subsidiaries taken as a whole);
(f) any change in any of the accounting methods or
practices of Bancorp or any Bancorp Subsidiary other than
changes required by applicable law or generally accepted
accounting principles;
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(g) any issuance, sale, or delivery or any agreement
to issue, sell, or deliver any additional shares of Bancorp's
capital stock or any options, warrants, or rights to acquire
any such capital stock or securities convertible into or
exchangeable for such capital stock, or stock split, or other
change to its authorized capitalization;
(h) any mortgage, pledge, lien or lease relating to
any of its assets, tangible or intangible, or permitting or
suffering of any such asset to be subjected to any lien or
lease, except in the ordinary course of business;
(i) declaration, payment, or setting apart of any sum
or property for any dividend or other distribution or payment
or transfer of any funds or property to its stockholders, or,
direct or indirect, redemption or other acquisition of any of
its capital stock; and
(j) any plan or transaction involving an expenditure
of more than $100,000 other than in the ordinary course of
business.
2.9. LEGAL PROCEEDINGS. Except as set forth in Item 2.09
of the Bancorp Disclosure Schedule, there are no pending or, to
the knowledge of Bancorp, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental
investigations of any nature against Bancorp or any Bancorp
Subsidiary which, if adversely determined, would, individually
or in the aggregate, have a Material Adverse Effect on Bancorp
and the Bancorp Subsidiaries taken as a whole nor any judgment,
injunction, decree, consent, order, or regulatory restriction
imposed on Bancorp or any Bancorp Subsidiary, or any officer or
director of Bancorp or any Bancorp Subsidiary, or the assets or
business of Bancorp or any Bancorp Subsidiary which,
individually or in the aggregate, have a Material Adverse
Effect on Bancorp and the Bancorp Subsidiaries taken as a
whole. Bancorp knows of no basis or grounds for any action,
suit, proceeding, claim, or investigation of the type referred
to in this Section 2.9.
2.10. TAXES AND TAX RETURNS.
----------------------
(a) Each of Bancorp and the Bancorp Subsidiaries has
duly filed in correct form all federal, state, and local
information returns and tax returns required to be filed by it
(all such returns being accurate and complete in all material
respects) and has duly paid or made provisions for the payment
of all taxes and other governmental charges the nonpayment of
which would, in the aggregate, have a Material Adverse Effect
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on Bancorp and the Bancorp Subsidiaries taken as a whole, and
which have been incurred or that are due or claimed to be due
from it by federal, state or local taxing authorities
(including, without limitation, those due in respect of its
properties, income, business, capital stock, deposits,
franchises, licenses, sales and payrolls) other than taxes or
other charges which (i) are not yet delinquent or are being
contested in good faith, and (ii) have not been finally
determined, in the case of (i) and (ii), as set forth in Item
2.10 of the Bancorp Disclosure Schedule. The amounts set up as
reserves as shown on the Base Balance Sheet for the payment of
all unpaid federal, state and local taxes (including any
interest or penalties thereon), whether or not disputed or
accrued, through the year ended December 31, 1993 or for any
year or period ending prior thereto, and for which Bancorp or
any Bancorp Subsidiary may be liable in its own right or as
transferee of the assets of, or successor to, any corporation,
person, association, partnership, joint venture or other
entity, are adequate under generally accepted accounting
principles and auditing standards and are sufficient to cover
all such taxes due. There are no disputes pending, or claims
asserted for, federal, state or local taxes or assessments upon
Bancorp or any Bancorp Subsidiary, nor has Bancorp or any
Bancorp Subsidiary been requested to give or given any
currently effective waivers extending the statutory period of
limitation applicable to any federal or state income tax return
for any period. Neither Bancorp or any Bancorp Subsidiary is
being audited by any Federal, state, local or other tax
authorities, except as disclosed in Item 2.10 of the Bancorp
Disclosure Schedule. All taxes, interest, additions and
penalties due with respect to any completed and settled
examination, or concluded litigation relating to Bancorp, have
been paid in full or adequate provision has been made for any
such taxes on the Base Balance Sheet.
2.11. BANCORP LOANS; ALLOWANCE FOR LOAN LOSSES; CAPITAL.
--------------------------------------------------
(a) All currently outstanding loans of, or current
extensions of credit by, Bancorp or any Bancorp Subsidiary
(individually, a "Bancorp Loan", and collectively, the "Bancorp
Loans") were solicited, originated and currently exist in
compliance with all applicable requirements of federal and
state law and regulations promulgated thereunder except where
the failure to so comply would not individually or in the
aggregate have a Material Adverse Effect on Bancorp and the
Bancorp Subsidiaries taken as a whole. Each note evidencing a
Bancorp Loan or loan or credit agreement or security instrument
related to the Bancorp Loans constitutes a valid, legal and
binding obligation of the obligor thereunder, enforceable in
accordance with the terms thereof, except where the failure
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thereof, individually or in the aggregate, would not have a
Material Adverse Effect on Bancorp and the Bancorp Subsidiaries
taken as a whole. There are no oral modifications or
amendments or additional agreements related to the Bancorp
Loans that are not reflected in the records of the Bancorp
Subsidiary making such Bancorp Loan, and, to the knowledge of
Bancorp, no claims of defense as to the enforcement of any
Bancorp Loan have been asserted, and, to the knowledge of
Bancorp, there are no acts or omissions or conditions which
exist which would give rise to any claim or right to
rescission, set-off, counterclaim or defense, except in each
case where such modifications, amendments or agreements, claims
or defenses, or acts or omissions would not have, either
individually or in the aggregate, a Material Adverse Effect on
Bancorp and the Bancorp Subsidiaries taken as a whole.
(b) Since December 31, 1993 Bancorp has not incurred
any unusual or extraordinary loan losses, except as set forth
in Item 2.11 of the Bancorp Disclosure Schedule. The allowance
for possible loan losses shown on the Base Balance Sheet was
adequate in all material respects to provide for possible
losses, net of recoveries relating to loans previously charged
off, and loans outstanding (including accrued interest
receivable) as of the date thereof (i) under the standards
applied by the applicable regulatory authorities and (ii) under
generally accepted accepting principles.
(c) Each of Bancorp and the Bancorp Subsidiaries is
in compliance with all currently applicable capital
requirements and guidelines prescribed by all applicable
federal and state regulatory agencies.
2.12. PROPERTIES.
(a) Item 2.12 of the Bancorp Disclosure Schedule sets
forth a complete and correct list of all real property owned,
leased, or operated by Bancorp or the Bancorp Subsidiaries,
including all of its branches and all its properties acquired
in foreclosure proceedings in the ordinary course of business
("Properties Owned"). Except as set forth in Item 2.12 of the
Bancorp Disclosure Schedule, Bancorp and the Bancorp
Subsidiaries have good and marketable title to all real
property to be listed as owned by them in the Bancorp
Disclosure Schedule and valid leasehold interests in all real
property to be listed as leased by them in the Bancorp
Disclosure Schedule free and clear of any liens and
encumbrances, except liens for current taxes and assessments
not yet due and payable and utility and other easements that do
not interfere with the use of the property for the business
being conducted thereon. The real property owned or leased by
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Bancorp or the Bancorp Subsidiaries does not violate any local
zoning or similar land use laws or governmental regulations or
any restrictive convenant, or encroach on, and is not
encroached upon by, any property owned by any other person.
There are not, under any leases pursuant to which Bancorp or
any Bancorp Subsidiary leases any real property, any existing
breaches, defaults, events of default, or events which with
notice and/or lapse of time would constitute a breach, default
or event of default, nor has Bancorp or such Bancorp Subsidiary
received notice of or made a claim with respect to, any breach
or default, the consequences of which, individually or in the
aggregate, would have a Material Adverse Effect on Bancorp and
the Bancorp Subsidiaries taken as a whole.
(b) Except as set forth in Item 2.12 of the Bancorp
Disclosure Schedule, the personal property owned by Bancorp or
the Bancorp Subsidiaries, is owned by Bancorp or the Bancorp
Subsidiaries free and clear of any material liens and
encumbrances.
2.13. AGREEMENTS WITH BANKING AUTHORITIES. Neither
Bancorp nor any Bancorp Subsidiary is a party to any written
agreement or memorandum of understanding with, or a party to
any commitment letter or similar undertaking to, or is subject
to any order or directive by, or is the recipient of any
extraordinary supervisory letter from, any governmental entity
outside the ordinary course of business and not generally
applicable to entities engaged in the same business, nor has
Bancorp or any Bancorp Subsidiary been advised by any
governmental entity that it is contemplating issuing,
requiring, or requesting any such order, directive, agreement,
memorandum of understanding, extraordinary supervisory letter,
commitment letter, or similar undertaking.
2.14. CERTAIN CONTRACTS. Except as set forth in Item 2.14
of the Bancorp Disclosure Schedule, neither Bancorp nor any
Bancorp Subsidiary is a party to or bound by any commitment,
agreement or other instrument that is material to the business
or operations of Bancorp and the Bancorp Subsidiaries taken as
a whole, other than loan agreements and loan commitments
entered into in the ordinary course of business. Except as set
forth in Item 2.14 of the Bancorp Disclosure Schedule (i) no
commitment, agreement or other instrument to which Bancorp or
any Bancorp Subsidiary is a party limits the freedom of Bancorp
or any Bancorp Subsidiary to compete in any line of business or
with any person, and (ii) other than in connection with loans
and loan commitments, neither Bancorp nor any Bancorp
Subsidiary is a party to any agreement, pursuant to which
Bancorp or any Bancorp subsidiary may be required to transfer
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funds to, make an investment in, or guarantee the debt of, any
entity, in each case in excess of $50,000 in any twelve month
period.
2.15. MATERIAL CONTRACT DEFAULTS. Except as set forth in
Item 2.15 of the Bancorp Disclosure Statement, (i) each Bancorp
or Bancorp Subsidiary agreement, commitment or other instrument
listed in Item 2.14 is valid and subsisting and in full force
and effect, (ii) Bancorp and each Bancorp Subsidiary have in
all material respects performed all obligations required to be
performed by them to date under each such agreement, commitment
or other instrument, (iii) neither Bancorp nor any Bancorp
Subsidiary is in default, and there has not occurred any event
that with the lapse of time or giving of notice or both would
constitute such a default, under any of the agreements,
commitments or other instruments referred to in Section 2.14
hereof which, individually or in the aggregate, has or would
have a Material Adverse Effect on Bancorp and the Bancorp
Subsidiaries taken as a whole, and (iv) to the best of Bancorp's
and the Bancorp Subsidiary's knowledge, as the case may be, no
party to an agreement, commitment or other instrument listed in
Item 2.14 of the Bancorp Disclosure Schedule, other than
Bancorp or a Bancorp subsidiary, is in default under the terms
of the respective agreement, commitment or other instrument.
2.16. INSURANCE. Item 2.16 of the Bancorp Disclosure
Schedule sets forth a complete and correct list of the
insurance policies and fidelity bonds which are maintained by
Bancorp or any Bancorp Subsidiary on the date hereof including,
without limitation, any directors and officers liability
insurance policies. Except as set forth in the Bancorp
Disclosure Schedule all premiums due thereon have been paid,
and the Bancorp Subsidiary has complied in all respects with
the provisions of such policies and bonds. Bancorp and each
Bancorp Subsidiary has not failed to give any notice or present
any claim under any insurance policy or fidelity bond in due
and timely fashion. Bancorp has made available to Buyer copies
of the policies listed in Item 2.16 of the Bancorp Disclosure
Schedule.
2.17. EMPLOYEE BENEFIT PLANS.
-----------------------
(a) Item 2.17 of the Bancorp Disclosure Schedule
lists each ERISA (as defined below) plan and each other
arrangement, program, or plan pursuant to which any benefit is
or will be provided to an employee, former employee, or retired
employee whether formal or informal, including, without
limitation, those providing any form of bonus, deferred
compensation, pensions, profit-sharing, retirement, stock
purchase, stock options, severance pay and benefits
continuation, relocation assistance, medical, health, and
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dental insurance, vacation pay, tuition aid, matching gifts for
charitable contributions to educational or cultural
institutions, and any other fringe benefit plans of a similar
nature. Each of such plans, including but not limited to any
plan that is an "employee benefit plan" (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) maintained by Bancorp and/or each
Bancorp Subsidiary, and/or any trade or business, whether or
not incorporated (an "ERISA Affiliate"), that together with
Bancorp and/or each Bancorp Subsidiary would be deemed a
"single employer" within the meaning of Section 4001 of ERISA
(each, a "Bancorp Plan"), is and has been operated in
compliance with all applicable provisions of ERISA, the
Internal Revenue Code of 1986, as amended, all regulations,
rulings and announcements promulgated or issued thereunder, and
all other applicable governmental laws and regulations and all
relevant plan documents. No Bancorp Plan is subject to Title
IV of ERISA. Each Bancorp Plan which is intended to be a
qualified plan within the meaning of Section 401(a) of the Code
has been determined by the IRS to be so qualified and has been
operated in accordance with the provisions of the Code, and any
and all related trusts are qualified under Section 501(a) of
the Code. Since September 2, 1974, neither Bancorp nor any
Bancorp Subsidiary nor any ERISA Affiliate has maintained,
contributed to or been required to contribute to any
"multi-employer plan" (within the meaning of Section 3(37) of
ERISA).
(b) Full payment has been made of all amounts which
Bancorp or any Bancorp Subsidiary is required under the terms
of all Bancorp Plans to have paid as contributions or premiums
to or in respect of such plans as of the last day of the most
recent fiscal year of each such Bancorp Plan ended prior to
January 1, 1994. All expenses relating to contributions or
premiums due and owing with respect to the Bancorp Plans have
been properly accrued and reflected in the Base Balance Sheet,
as defined in Section 3.6 below, and the financial statements
included in the Bancorp Reports as of the date of such
financial statements. None of the Bancorp Plans has incurred
any "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA and Section 412 of the Code), whether or
not waived, as of the last day of the most recent fiscal year
of each such Bancorp Plan ended prior to the date hereof.
(c) To the knowledge of Bancorp, neither Bancorp nor
any Bancorp Subsidiary has engaged in a prohibited transaction
(as defined in Section 406 of ERISA or Section 4975 of the
Code) in connection with which Bancorp or any such Bancorp
Subsidiary could be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section
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4975 of the Code. No liability under Title IV of ERISA has
been incurred either directly or indirectly by Bancorp or any
Bancorp Subsidiary or any ERISA Affiliate, other than liability
for premiums to the Pension Benefit Guaranty Corporation (the
"PBGC"), that has not been satisfied in full and which is set
forth in Item 2.17 of the Bancorp Disclosure Schedule. To the
knowledge of Bancorp, the PBGC has not instituted proceedings
to terminate any Bancorp Plan. There have been no "reportable
events" (within the meaning of Section 4043(b) of ERISA) with
respect to any Bancorp Plan since the effective date of said
Section 4043(b), except as may result from the consummation of
the Acquisition Merger. No event has occurred and there exists
no condition or set of circumstances which presents a risk of
the termination or partial termination of any Bancorp Plan
which could result in any liability on the part of Bancorp or
any Bancorp Subsidiary to the PBGC. There is no pending or, to
the knowledge of Bancorp, threatened claim against or otherwise
involving any Bancorp Plan, or any fiduciary thereof, by or on
behalf of any participant or beneficiary under any Bancorp Plan
(other than routine claims for benefits), nor is there any
pending or, to the knowledge of Bancorp, threatened claim by or
on behalf of any of the Bancorp Plans, that has or could have a
Material Adverse Effect on Bancorp and the Bancorp Subsidiaries
taken as a whole. To the knowledge of Bancorp, there is no
judgment, decree, injunction, rule or order of any court,
governmental body, commission, agency or arbitrator outstanding
against or in favor of any Bancorp Plan or any fiduciary
thereof (other than routine orders relating to divorce or
similar proceedings).
(d) Except as otherwise indicated in Item 2.17 of the
Bancorp Disclosure Schedule, there are no unfunded obligations
under any Bancorp Plan providing benefits after termination of
employment to any employee of Bancorp or any Bancorp Subsidiary
who may be employed by Buyer after the Closing Date (including
without limitation continuation of health coverage as required
by Part 6 of Title I of ERISA and payment of severance,
termination and supplemental retirement benefits to certain
executives). No events have occurred and no condition exists
that would subject Bancorp, any Bancorp Subsidiary, Buyer or
any Buyer affiliate to any tax or fine under Section 4971,
4972, 4977, 4979, 4980B or 6652(e) of the Code or Section
502(c) of ERISA which has or could have individually or in the
aggregate a Material Adverse Effect on Bancorp and the Bancorp
Subsidiaries taken as a whole. Except as set forth in Item
2.17 of the Bancorp Disclosure Schedule, no provision of any
Bancorp Plan nor any amendment to any Bancorp Plan would result
in any limitation on the right of Bancorp, any Bancorp
Subsidiary, Buyer or any affiliate of Buyer, as applicable, to
terminate such Bancorp Plan and, in
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the case of a defined benefit pension plan, to receive residual
amounts from any such Bancorp Plan under Section 4044 of ERISA,
including Section 4044(d)(2) of ERISA.
(e) True, correct and complete copies, in all
material respects, (or, if not reduced to writing, accurately
written descriptions) of all Bancorp Plans, all amendments, all
summary plan descriptions and, to the extent applicable, copies
of the most recent of the following, have been furnished to
Buyer: (i) determination letter of the Internal Revenue
Service and any outstanding request for a determination letter;
(ii) ruling letter or interpretative letter issued by the
Department of Labor, the Internal Revenue Service (the "IRS"),
the PBGC or any other governmental agency with respect to such
Plan; and (iii) general notification to employees of their
rights under Section 4980B of the Code and the form of
letter(s) distributed upon the occurrence of a qualifying event
described in such section.
2.18. COMPLIANCE WITH APPLICABLE LAW. Bancorp and each
Bancorp Subsidiary holds, and has at all times held, all
licenses, franchises, permits, approvals, consents,
qualifications and authorizations necessary for the lawful
conduct of its business under and pursuant to, and, to the
knowledge of Bancorp, has complied with, and is not in default
under, any applicable law, statute (including 31 U.S.C. 5311,
et seq.), policy and/or guideline of any federal, state or
local governmental authority relating to Bancorp or any Bancorp
Subsidiary, except where the failure to so hold or comply would
not, individually or in the aggregate, have a Material Adverse
Effect on Bancorp and the Bancorp Subsidiaries taken as a whole.
2.19. BROKER'S FEES. Neither Bancorp nor any Bancorp
Subsidiary nor any of their respective officers or directors
has employed any broker or finder or incurred any liability for
any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated by this Agreement,
except that Bancorp has engaged, and will pay the fees and
expenses of, Dillon, Read & Co. Inc. (the "Bancorp Financial
Advisor") in connection with such engagement.
2.20. LABOR MATTERS. As of the date of this Agreement,
neither Bancorp nor any Bancorp Subsidiary is a party to any
collective bargaining or labor agreement or union contract,
there are no labor or representation negotiations or union
organizing efforts pending which involve Bancorp or any Bancorp
Subsidiary or any of their respective employees and there are no
charges of unfair labor practices pending or, to the knowledge
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of Bancorp, threatened by or before any governmental authority
which involve Bancorp or any Bancorp Subsidiary or any of their
present or former employees.
2.21. GOVERNMENTAL FRANCHISES, LICENSES, PERMITS, AND
AUTHORIZATIONS. Bancorp and each of the Bancorp Subsidiaries
have all governmental licenses, franchises, permits, and other
authorizations necessary to own their respective assets and
properties and conduct their respective businesses as such
businesses are now conducted, except where the failure to have
such license, franchise, permit, or other authorization, would
not have a Material Adverse Effect on the financial condition,
results of operations, business, or prospects of Bancorp and
the Bancorp Subsidiaries, taken as a whole.
2.22. NO MATERIAL ADVERSE CHANGE. Since December 31,
1993, there has been no change in the business, operations,
results of operations, properties, assets, liabilities,
securities, capitalization or condition (financial or
otherwise) of Bancorp and the Bancorp Subsidiaries which has
had a Material Adverse Effect on Bancorp and the Bancorp
Subsidiaries taken as a whole.
2.23. VOTE REQUIRED. The affirmative vote of the holders
of a majority of the outstanding shares of Bancorp Common Stock
entitled to vote thereon is the only vote necessary to approve
this Agreement and the transactions contemplated hereby.
2.24. TRUST ADMINISTRATION.
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(a) All trusts now or heretofore held by Bancorp or
any Bancorp Subsidiary have been properly administered in all
material respects in conformity with the terms of the
applicable governing documents and with the governing law
(including applicable standards of fiduciary conduct),
including, without limitation, accountings, distributions,
allocations, credits and charges between and to income and
principal accounts, investments, investment review procedures,
reporting, obtaining necessary approvals, compliance with
instructions, laws and regulations, maintenance and security of
assets, fees charged and taxes.
(b) In connection with the performance of services
related to fiduciary positions, neither Bancorp nor any Bancorp
Subsidiary has made any guarantee or assurance to any person
concerning a rate of return, marketability or quality of the
assets held in the trusts.
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(c) The trust documents under which Bancorp or any
Bancorp Subsidiary is serving in fiduciary positions are in
full force and effect and provide Bancorp or such Bancorp
Subsidiary with the requisite authority to act as fiduciary.
(d) The term "trusts now or heretofore held" includes
(i) any and all common law or other trusts between individual,
corporate or other entities with Bancorp or any Bancorp
Subsidiary as a trustee or co-trustee, including, without
limitation, pension, compensation, testamentary, and charitable
trusts and indenture, (ii) any and all decedents' estates where
Bancorp or any Bancorp Subsidiary is serving as a co- or sole
executor, personal representative or administrator, or in any
similar fiduciary capacity, (iii) any and all guardianships,
conservatorships or similar positions where Bancorp or any
Bancorp Subsidiary is serving or has served as a co- or sole
guardian or conservator, or any similar fiduciary capacity,
(iv) any and all agency and/or custodial accounts and/or
similar arrangements under which Bancorp or any Bancorp
Subsidiary is serving or has served as an agent or custodian
for the owner or other party establishing the account with or
without investment authority, and (v) any and all escrow
arrangements under which Bancorp or any Bancorp Subsidiary
holds or held assets for any party or parties on stated terms
and conditions.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
BUYER
Buyer hereby represents and warrants to Bancorp as follows:
3.1. CORPORATE ORGANIZATION.
-----------------------
(a) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Ohio. Each direct or indirect subsidiary of Buyer that is a
significant subsidiary as defined in Regulation S-X promulgated
by the Securities and Exchange Commission (the "SEC")
(individually, a "Buyer Subsidiary" and collectively, the
"Buyer Subsidiaries") is a corporation or a banking institution
in each case duly organized, validly existing and in good
standing under the laws of the state of its incorporation or
the United States. Each of Buyer and the Buyer Subsidiaries
has the power and authority to own or lease all of its
properties and assets and to conduct its business as it is now
being conducted, and is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which
the nature of the business conducted by it or the character or
location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, except where
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the failure to be so licensed, qualified or in good standing
would not have a Material Adverse Effect on Buyer and the Buyer
Subsidiaries taken as a whole. Buyer has previously made
available to Bancorp true and complete copies of the Amended
and Restated Articles of Incorporation and the Regulations as
in effect on the date of this Agreement, of Buyer. Buyer is a
bank holding company registered with the FRB under the BHCA.
(b) Buyer owns all of the outstanding stock of each
Buyer Subsidiary, free and clear of all liens, charges,
encumbrances and security interests.
3.2. CAPITALIZATION.
---------------
(a) As of the date hereof, the authorized capital
stock of Buyer consists of 900,000,000 shares of Buyer Common
Stock, 1,400,000 shares of 10% Cumulative Preferred Stock,
Class A, of the par value of $5.00 per share (the "Class A
Preferred Stock"), and 25,000,000 shares of preferred stock,
with a par value of $1 each (the "Serial Preferred Stock"). As
of the close of business on June 24, 1994, there were
244,542,831 shares of Buyer Common Stock and 1,280,000 shares
of Class A Preferred Stock issued and outstanding and no
shares of Serial Preferred Stock issued and outstanding. All
issued and outstanding shares of Buyer Common Stock, and all
shares of capital stock of each Buyer Subsidiary, have been
duly authorized and validly issued and are fully paid and
non-assessable.
(b) Except for options to acquire 12,461,309 shares
of Buyer Common Stock pursuant to stock options outstanding
under various stock option plans of Buyer, neither Buyer nor
any Buyer Subsidiary has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the transfer, purchase
or issuance of any shares of its capital stock or any
securities representing the right to purchase or otherwise
receive any shares of its capital stock or any securities
convertible into or representing the right to receive, purchase
or subscribe for any such shares, or shares of any such Buyer
Subsidiary, and there are no agreements or understandings with
respect to the voting of any such shares or which restrict the
transfer of any such shares. The shares of Buyer Common Stock
are registered pursuant to the Exchange Act and are listed on
the NYSE.
3.3. AUTHORITY. Buyer has full corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
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Acquisition Merger have been duly and validly approved by the
Board of Directors of Buyer. No other corporate proceedings on
the part of Buyer are necessary to consummate this Agreement
and the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Buyer,
constitutes valid and binding obligations of Buyer, and is
enforceable against Buyer in accordance with its respective
terms.
3.4. NO VIOLATION. Neither the execution and delivery of
this Agreement by Buyer nor the consummation by Buyer of the
transactions contemplated hereby, nor the compliance by Buyer
with any of the terms or provisions hereof, does or will (a)
violate any provision of the Amended and Restated Articles of
Incorporation or Regulations of Buyer, or charter or other
organizational documents or by-laws of any Buyer Subsidiary,
(b) assuming that the consents and approvals referred to in
Section 3.5 hereof are duly obtained, violate any statute,
code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Buyer or any Buyer
Subsidiary or any of their respective properties, securities or
assets, the violation of which would have a Material Adverse
Effect on Buyer and the Buyer Subsidiaries taken as a whole, or
(c) assuming that the consents and approvals referred to in
Section 3.5 hereof are duly obtained, violate, conflict with,
result in a breach of any provisions of, constitute a default
(or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination
of, accelerate the performance required by, or result in the
creation of any lien, security interest, charge or other
encumbrance upon any of the respective properties or assets of
Buyer or any Buyer Subsidiary under any of the terms,
conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Buyer or any Buyer Subsidiary
is a party, or by which they or any of their respective
properties or assets may be bound or affected, except for any
such breach or default referred to in this clause (c) which
would not have a Material Adverse Effect on Buyer and the Buyer
Subsidiaries taken as a whole.
3.5. CONSENTS AND APPROVALS. Other than in connection
with or in compliance with the Securities Act or the Exchange
Act and the securities or blue sky laws of the various states
under which a filing or consent may be required, consents or
approvals of or filings or registrations with the Ohio
Secretary, the FRB, and the DFI, no consents or approvals of or
filings or registrations with any third party or any public
body or authority are necessary in connection with (a) the
execution and delivery by Buyer of this Agreement and any other
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documents executed and delivered in connection with the
Acquisition Merger, and (b) the consummation by Buyer of the
Acquisition Merger and the other transactions contemplated
hereby, except for such consents, approvals, filings or
registrations, the failure of which to obtain would not,
individually or in the aggregate, have a Material Adverse
Effect on Buyer and the Buyer Subsidiaries taken as a whole or
prevent the consummation of the Acquisition Merger and the
transactions contemplated hereby.
3.6. CERTAIN STATEMENTS, REPORTS AND DOCUMENTS. Buyer has
previously made available to Bancorp true and complete copies
of its (a) Current Report on Form 8-K filed with the SEC on
April 20, 1994, and its Annual Report to Shareholders for its
1993 fiscal year; and (b) Quarterly Reports on Form 10-Q and
Current Reports, if any, on Form 8-K, filed with the SEC since
April 20, 1994 (all such documents, as amended, being herein
referred to collectively as the "Buyer Reports" and the balance
sheet contained in Buyer's Annual Report to shareholders for
the fiscal year ended December 31, 1993, being herein referred
to as the "Buyer Base Balance Sheet"). Each of the balance
sheets included in the Buyer Reports (including any related
notes and schedules) fairly presents in all material respects,
the consolidated financial position of Buyer as of its date,
and the other financial statements included in the Buyer
Reports (including any related notes and schedules) fairly
present in all material respects the consolidated results of
operations or other information included therein of Buyer for
the periods or as of the dates therein set forth, subject to
the notes thereto, and, in the case of unaudited financial
statements, subject to normal year-end adjustments, in each
case in accordance with generally accepted accounting
principles applied on a consistent basis except as otherwise
disclosed therein.
3.7. OTHER STATEMENTS AND REPORTS. Buyer has previously
made available to Bancorp true and complete, in all material
respects, copies of (a) the final Registration Statement on
Form S-4 (including the Joint Proxy Statement/Prospectus which
is a part thereof), dated as of December 29, 1993, and (b) each
definitive proxy statement distributed by Buyer to its
stockholders since the date of the Registration Statement
referred to in (a) above.
3.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in Buyer's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994, or in any Current Reports of
Buyer on Form 8-K filed prior to the date of this Agreement
(including, without limitation, the Current Reports on Form 8-K
filed with the SEC on March 16 and April 20, 1994), since
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December 31, 1993, there has not been any change in the
business, assets, financial condition or results of operations
of Buyer or any of its subsidiaries which has had, or is
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Buyer and the Buyer Subsidiaries
taken as a whole.
3.9. COMPLIANCE WITH APPLICABLE LAW. Buyer and each Buyer
Subsidiary holds, and has at all times held, all licenses,
franchises, permits, approvals, consents, qualifications and
authorizations necessary for the lawful conduct of its business
under and pursuant to, and, to the knowledge of Buyer, has
complied with, and is not in default under, any applicable law,
statute (including, without limitation, ERISA, the Code, and 31
U.S.C. 5311, et seq.), order, rule, regulation (including 31
C.F.R. Part 103), policy and/or guideline of any federal, state
or local governmental authority relating to Buyer or any Buyer
Subsidiary, except where the failure to so hold or comply would
not have a Material Adverse Effect on Buyer and the Buyer
Subsidiaries taken as a whole.
3.10. BROKER'S FEES. Neither Buyer, any Buyer Subsidiary
nor any of their respective officers or directors has employed
any broker or finder or incurred any liability for any broker's
fees, commissions or finder's fees in connection with any of
the transactions contemplated by this Agreement.
3.11. BUYER COMMON STOCK. The Buyer Common Stock to be
issued in the Acquisition Merger is duly authorized and, when
issued at the Effective Time, will be validly issued, fully
paid and non-assessable and not subject to preemptive rights,
with no personal liability attaching thereto.
3.12. BUYER INFORMATION. The information relating to
Buyer and the Buyer Subsidiaries to be contained in the
Registration Statement and the Proxy Statement/Prospectus as
defined in Section 4.5. and any other documents filed with the
SEC or any regulatory agency in connection herewith, to the
extent such information is provided in writing by Buyer, will
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make such information not
misleading.
3.13. ACCESS TO INFORMATION. Buyer acknowledges and
agrees that it has been given such access to the books, records
and management of Bancorp and the Bancorp Subsidiaries and has
had the opportunity to review such other information regarding
the financial condition, results of operations, business,
properties, management and prospects of Bancorp and the Bancorp
Subsidiaries as Buyer has deemed necessary in its sole judgment
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to evaluate the transactions with Bancorp contemplated by this
Agreement. Buyer further acknowledges and agrees that neither
Bancorp nor any of its officers, directors, affiliates or
agents (i) assumes any responsibility for the accuracy or
adequacy of any information heretofore or hereafter furnished
to Buyer by or on behalf of Bancorp (including without
limitation the information contained in the confidential
Offering Memorandum dated April 8, 1994), or (ii) makes any
representation or warranty regarding the results of operations,
business, properties, management or prospects of Bancorp and
the Bancorp Subsidiaries, except in any such case identified in
(i) or (ii) hereof as and to the extent expressly set forth in
this Agreement and subject to the conditions and limitations
set forth herein.
ARTICLE 4
COVENANTS OF THE PARTIES
4.1. CONDUCT OF BUSINESS OF BANCORP.
-------------------------------
(a) During the period from the date of this Agreement
to the Effective Time, except with the written consent of
Buyer, Bancorp will, and will cause each Bancorp Subsidiary to:
(i) maintain its corporate existence and remain
in good standing under its respective jurisdiction of
organization and qualification;
(ii) conduct its business and engage in
transactions only in the ordinary course and
consistent with prior practice;
(iii) use reasonable best efforts to preserve
the goodwill of those having business relationships
with Bancorp or the Bancorp Subsidiaries;
(iv) use reasonable best efforts to maintain and
keep its properties in as good repair and condition in
all material respects as they presently exist, except
for depreciation due to ordinary wear and tear and
damage due to casualty;
(v) maintain in full force and effect insurance
generally comparable in amount and in scope of
coverage to that now maintained by it; and
(vi) comply with and perform its obligations and
duties (A) under contracts, leases and documents
relating to or affecting its assets, properties and
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business and (B) imposed upon it by all federal,
state, municipal, and local laws and all rules,
regulations and orders imposed by Federal, state,
municipal and local governmental authorities, judicial
orders, judgments, decrees and similar determinations,
except when the failure to so comply or perform would
not have a Material Adverse Effect on Bancorp and the
Bancorp Subsidiaries taken as a whole.
(b) Bancorp agrees that from the date of this
Agreement to the Effective Time, except as otherwise
permitted or required by this Agreement, or consented to
by Buyer, Bancorp will not, and will cause each Bancorp
Subsidiary not to:
(i) change its capital structure, corporate
structure, or any provision of its Charter or By-laws;
(ii) change the number of shares of its
authorized or issued capital stock;
(iii) issue or sell any shares of capital stock
or any other equity or long-term debt securities of
Bancorp or any Bancorp Subsidiary;
(iv) enter into any arrangement, contract, or
commitment with respect to the purchase or voting of
shares of their capital stock;
(v) acquire beneficial ownership of equity
securities or any similar interests of any
corporation, bank, business, trust, association, or
similar organization nor merge with or acquire control
over any thrift institution, bank, corporation, or
organization or create or acquire any subsidiary;
(vi) issue or grant any option, warrant, call,
commitment, subscription, right to purchase or
agreement of any character relating to the authorized
or issued capital stock of Bancorp or any of the
Bancorp Subsidiaries, or any securities convertible
into shares of such stock;
(vii) adjust, split, combine or reclassify any
shares of its capital stock;
(viii) declare, set aside, pay or make any
dividend or other distribution or payment (whether in
cash, stock or property or any combination thereof) in
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respect of the capital stock of Bancorp except regular
quarterly dividends in the amount of $.20 per share;
(ix) purchase, redeem, retire or otherwise
acquire, or hypothecate, pledge or otherwise encumber,
any shares of its capital stock;
(x) grant any severance or termination pay
(other than pursuant to written agreements or policies
of Bancorp or the Bank in effect on the date of this
Agreement, copies of which have been provided to Buyer
and which agreements or policies are set forth in the
Bancorp Disclosure Schedule) to, or enter into any
employment agreement or deferred compensation,
non-competition, bonus, stock option, profit-sharing,
retirement or incentive plan or any other similar plan
(including, without limitation, any Bancorp Plan)
with, any of its officers or other employees or its
directors, or, except as required by applicable law or
regulation, renew, amend or modify any such agreement,
arrangement or plan (including, without limitation,
any Bancorp Plan) now in existence or increase the
compensation payable to or grant bonuses to any of its
directors, executive officers or other employees, or
pay any bonus, compensation, or benefit or enter into
any contract, agreement, commitment or arrangement to
do any of the foregoing, other than merit increases
pursuant to written agreements or policies of Bancorp
or the Bancorp Subsidiaries in effect on the date of
this Agreement, copies of which have been provided to
Buyer and which agreements or policies are set forth
in the Bancorp Disclosure Schedule;
(xi) make any capital expenditures other than in
the ordinary course of business or as necessary to
maintain existing assets in good repair in either
case, not to exceed $25,000;
(xii) make application for the opening or
closing of, or open or close, any branches or
automated banking facilities;
(xiii) take any action that would result in the
representations and warranties of Bancorp contained in
this Agreement not being true and correct in all
material respects on the date of this Agreement or at
any future date on or prior to the date of the Closing;
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(xiv) merge into, consolidate with, affiliate
with, or be purchased or acquired by, any other
corporation, entity or person, or permit any other
corporation, entity or person to be merged,
consolidated or affiliated with it or be purchased or
acquired by it, or, except to realize upon collateral
and except for purchases or sales of loans or
investment securities in the ordinary course of its
business, acquire all or any substantial portion of
the assets of any other corporation, entity or person,
or sell all or any portion of its assets;
(xv) make any change in its accounting methods
or practices, other than changes in accordance with
generally accepted accounting principles or as
required by law;
(xvi) renew or enter into any real property
lease without the consent of Buyer as to the terms of
any such real property lease;
(xvii) sell, assign, transfer, or otherwise
dispose of to a third party branch offices or any of
its material properties or assets, including mortgage
or other loans and rights to the servicing of mortgage
loans;
(xviii) enter into any transaction, contract,
loan, lease, agreement, or commitment (or any
amendment to any transaction, contract, lease,
agreement, or commitment) outside of the ordinary
course of business, including, without limitation, any
loans or loan commitments to officers, directors, or
5% or more stockholders (or any person or business
entity controlled by or affiliated with such officers,
directors, or stockholders);
(xix) fail to notify Buyer promptly of its
receipt of any letter, notice, or other communication,
whether written or oral, from any governmental entity
advising Bancorp or any Bancorp Subsidiary that it is
contemplating issuing, requiring, or requesting any
agreement, memorandum of understanding, or similar
undertaking, or order, directive, or supervisory
letter;
(xx) purchase or otherwise acquire from a third
party, branch offices, assets constituting any other
line of business, or any other material properties or
assets, including mortgage or other loans and rights
for the servicing of mortgage loans;
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(xxi) incur any indebtedness otherwise than in
the ordinary course of business; or
(xxii) enter into a binding agreement to do any
of the foregoing.
4.2. CURRENT INFORMATION. During the period from the date
of this Agreement to the Effective Time, Bancorp will cause
one or more of its designated representatives to promptly
notify Buyer of (a) any material change in the normal course of
its business, (b) any governmental complaints, audits,
investigations, or hearings (or communications indicating that
the same may be contemplated), or receipt of any memorandum of
understanding or cease and desist order from a regulatory
authority, or (c) the institution or threat of litigation
involving Bancorp other than in the normal course of its
business, and Bancorp will keep Buyer fully informed of such
events. Bancorp and Buyer will each promptly notify the other
after senior management of Bancorp or Buyer, as the case may
be, receives notice of any condition or event which would
constitute a violation of the terms and conditions of this
Agreement. Notwithstanding Section 4.3, Bancorp shall provide
Buyer within 10 days prior to Closing with an updated Bancorp
Disclosure Schedule to reflect any and all additions,
deletions, or other changes up through and including the date
of such updated Bancorp Disclosure Memorandum, as applicable.
4.3. ACCESS TO PROPERTIES AND RECORDS. Bancorp shall
permit Buyer and its officers, attorneys, accountants, and
other representatives access (during normal business hours)
during the period prior to the Effective Time to its properties
and those of the Bancorp Subsidiaries, and shall disclose, and
make available, and, as reasonably requested by such
representatives of Buyer, provide true and complete copies to
Buyer of all books, papers and records relating to the assets,
stock ownership, properties, operations, obligations and
liabilities, including, but not limited to, all books of
account (including the general ledger), tax records, minute
books of directors' and stockholders' meetings, organizational
documents, by-laws, material contracts and agreements, filings
with any regulatory authority, litigation files, plans
affecting employees and personnel records and reports, and any
other business activities in which Buyer may have a reasonable
interest. Bancorp shall not be required to provide access to
or to disclose information where such access or disclosure
would violate or prejudice the rights or business interests or
confidences of any customer or other person, would jeopardize
the attorney-client privilege of Bancorp, or would contravene
any law, rule, regulation, order, judgment, decree or binding
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agreement. In accordance with the foregoing, Bancorp agrees
that it will provide Buyer with reasonable access to its
properties, operations, and data systems and customer
information in order to facilitate any conversion of Bancorp's
data processing system to effectuate the Acquisition Merger,
including, pursuant to Section 4.16, all information disclosed
by Bancorp to Buyer pursuant to this Section 4.3 shall be
subject to Section 11.1 hereof.
4.4. FINANCIAL AND OTHER STATEMENTS. During the term of
this Agreement, the parties shall provide to each other the
following documents and information:
(a) As soon as reasonably available, but in no event
more than 45 days after the end of each fiscal quarter ending
after the date of this Agreement, Buyer will deliver to Bancorp
Buyer's Quarterly Report on Form 10-Q as filed under the
Exchange Act, and Bancorp will deliver to Buyer the Bank's
Quarterly Call Report as filed with the FDIC. Buyer will also
deliver to Bancorp, contemporaneously with its being filed with
the SEC, a copy of all Current Reports on Form 8-K, and, in the
event that the Effective Time is on or after March 30, 1995, a
copy of its Annual Report on Form 10-K for the fiscal year
ended December 31, 1994.
(b) Promptly upon receipt thereof, Bancorp will
furnish to Buyer copies of all internal control reports
submitted to it or any of its subsidiaries by independent
accountants in connection with each annual, interim or special
audit of the books of each such party and its respective
Subsidiaries made by such accountants. Bancorp shall further
provide Buyer with copies of its monthly consolidating balance
sheet and income statement within 5 days of Bancorp's
preparation thereof and not later than the 20th day of the
following month.
(c) As soon as practicable, Bancorp will furnish to
Buyer copies of all such financial statements and reports as it
or any Subsidiary shall send to its stockholders, the SEC, or
any other regulatory authority, to the extent any such reports
furnished to any such regulatory authority are not confidential
and except as legally prohibited thereby.
(d) With reasonable promptness, Bancorp will furnish
to Buyer, and Buyer will furnish to Bancorp, such additional
financial data as Buyer or Bancorp may reasonably request.
4.5. APPROVAL OF BANCORP'S STOCKHOLDERS.
-----------------------------------
(a) Bancorp will take all steps necessary to duly
call, give notice of, solicit proxies for, convene and hold a
special meeting (the "Special Meeting") of its stockholders as
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soon as practicable following the effective date of the
Registration Statement referred to below for the purpose of
approving this Agreement and the transactions contemplated
hereby. Subject to its fiduciary obligations under applicable
law, the Board of Directors of Bancorp will recommend to
Bancorp's stockholders the approval of this Agreement and the
transactions contemplated hereby. Bancorp shall submit no
other matter for approval at the Special Meeting without the
consent of Buyer. Bancorp will cooperate and consult with
Buyer with respect to each of the foregoing matters. Bancorp
will use its reasonable best efforts to obtain, as promptly as
practicable, the necessary approvals by Bancorp's stockholders
of this Agreement and the transactions contemplated hereby.
(b) As promptly as practicable after the date of this
Agreement, Buyer shall prepare and file with the SEC a
registration statement on Form S-4 (the "Registration
Statement") under the Securities Act relating to the shares of
Buyer Common Stock to be delivered to shareholders of Bancorp
in the Merger and including therein the form of proxy statement
to be used in connection with the Special Meeting. Buyer will
use its reasonable best efforts to cause the Registration
Statement to be declared effective by the SEC as soon as
practicable after such filing and to remain effective at all
times necessary for the issuance of the shares of Buyer Common
Stock covered thereby. At the time the Registration is
declared effective by the SEC it will comply in all material
respects with the requirements of the Securities Act and the
rules and regulations of the SEC thereunder, and will not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not false or
misleading, and at the time of mailing thereof to the
shareholders of Bancorp, at the time of the Special Meeting,
and at the Effective Time the prospectus included as part of
the Registration Statement, as amended or supplemented from
time to time, will not contain any untrue statement of a
material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however,
that none of the provisions of this paragraph (b) shall apply
to statements in or omissions from the Registration Statement
or the prospectus contained therein, as amended or supplemented
from time to time, made by Buyer in reliance upon and in
conformity with information furnished to Buyer by Bancorp in
writing expressly for use therein. At the time the proxy
statement to be used in connection with the Special Meeting is
mailed and at all times thereafter up to and including the date
of the Special Meeting, the proxy statement and all amendments
or supplements thereto, with respect to all amendments or
supplements thereto, with respect to all information set forth
therein furnished or to be furnished by Buyer relating to Buyer
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(i) will comply in all materials respects with any applicable
provisions of the federal securities laws and (ii) will not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements contained therein not
misleading.
(c) VOTING AGREEMENT. Bancorp will deliver to Buyer on
July 1, 1994 agreements in the form of Exhibit A hereto
executed by persons owning or having the power to vote an
aggregate of more than 50 percent of Bancorp Common Stock.
Such agreements will be executed as of July 1, 1994 and will
constitute a valid and binding obligation of each such person,
enforceable in accordance with its terms (except as may be
limited by bankruptcy, insolvency, or other similar laws) and
all such agreements will remain in full force and effect as of
the date of the Special Meeting.
4.6. TAX-FREE REORGANIZATION TREATMENT.
----------------------------------
(a) Bancorp shall not take or cause to be taken any
action, on or before the Effective Time, which would disqualify
the Acquisition Merger as a "reorganization" within the meaning
of Section 368(a) of the Code. Bancorp shall use its best
efforts to obtain appropriate certificates from the holders of
5% or more of the outstanding Bancorp Common Stock with respect
to their intent to hold Buyer Common Stock.
(b) Buyer shall not take or cause to be taken any
action, whether before or after the Effective Time, which would
disqualify the Acquisition Merger as a "reorganization" within
the meaning of Section 368(a) of the Code.
4.7. FAILURE TO FULFILL CONDITIONS. In the event that
either Bancorp or Buyer determines that a condition to its
obligation to complete the Acquisition Merger cannot be
fulfilled and that it will not waive that condition, it will
promptly notify the other party.
4.8. CONSENTS AND APPROVALS OF THIRD PARTIES. Bancorp and
Buyer shall each use its reasonable best efforts to obtain as
soon as practicable all consents and approvals of any other
persons (including applicable regulatory authorities) necessary
or desirable for the consummation of the transactions
contemplated by this Agreement.
4.9. STOCK EXCHANGE LISTING. Buyer shall use all
reasonable best efforts to cause the shares of Buyer Common
Stock to be issued in connection with the Acquisition Merger to
be approved for listing on the NYSE subject to official notice
of issuance, as of or prior to the Effective Time.
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4.10. EMPLOYMENT AND BENEFIT MATTERS.
-------------------------------
(a) SERVICE CREDIT. In the event that any employee
of Bancorp or any Bancorp Subsidiary is transferred to Buyer or
any affiliate of Buyer or becomes a participant in an employee
benefit plan, program or arrangement maintained by or
contributed to by Buyer or any of its affiliates, Buyer shall
cause such plan, program or arrangement to treat the prior
service of such employee with Bancorp or any of its affiliates
as service rendered to Buyer or its affiliate, as the case may
be, for purposes of eligibility to participate, vesting and
eligibility for special benefits under such plan, program or
arrangement, but not for benefit accrual. Without limiting the
foregoing, Buyer shall not treat any employee of Bancorp or any
Bancorp Subsidiary as a "new" employee for purposes of any
exclusion under any health or similar plan of Buyer or any of
its affiliates for a pre-existing medical condition. For a
period of two (2) years after the Effective Time, Buyer agrees
to provide the employees of Bancorp and the Bancorp
Subsidiaries with employee benefits generally no less favorable
than those maintained either by Bancorp and the Bancorp
Subsidiaries immediately prior to the Effective Time.
(b) EMPLOYMENT, SEVERANCE AND OTHER OBLIGATIONS.
Following the Effective Time, Buyer as the Surviving Company
shall honor in accordance with their terms all employment,
severance, and other compensation contracts between Bancorp or
any Bancorp Subsidiary and any director, officer or employee of
Bancorp or any Bancorp Subsidiary. Without limiting the
foregoing, after the Effective Time Buyer shall, and shall
cause Surviving Company and the Bank to, provide the severance
and other benefits set forth in Item 4.10 of the Bancorp
Disclosure Schedule to the officers and employees of Bancorp
and/or the Bank.
4.11. FURTHER ASSURANCES. Subject to the terms and
conditions herein provided, Buyer and Bancorp each agrees to
use its reasonable best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions
contemplated by the Agreement, including, without limitation,
using all reasonable best efforts to lift or rescind any
injunction or restraining order or other order adversely
affecting the abilities of the parties to consummate the
transactions contemplated hereby.
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4.12. INDEMNIFICATION.
----------------
(a) From and after the Effective Time, Buyer shall
indemnify, defend and hold harmless all present and former
directors and officers of Bancorp and the Bancorp Subsidiaries
("Indemnified Parties") against all losses, expenses, claims,
damages or liabilities arising out of acts or omissions prior
to the Effective Time by the Indemnified Party as a director or
officer of Bancorp as and to the extent provided under Indiana
law as of the date of this Agreement.
(b) Any Indemnified Party shall promptly notify Buyer
of any claim, action, suit, proceeding or investigation for
which it may seek indemnification under this Section 4.12. In
the event of any such claim, actions, suit or proceeding
(whether arising before or after the Effective Time), Buyer
shall have the right to select counsel and assume the defense
and shall not be liable to the Indemnified Parties for any
expenses or fees of other counsel or any other expenses
subsequently incurred by the Indemnified Parties for any
expenses or fees of other counsel or any other expenses
subsequently incurred by the Indemnified Parties in connection
with the defense, except that an Indemnified party shall have
the right to retain, at Buyer's expense, separate counsel
reasonably acceptable to Buyer if the representation of that
Indemnified party by the same counsel would be inappropriate,
under applicable standards of professional conduct, due to a
conflict of interest. The Indemnified Parties shall cooperate
in the defense of any such matter, and Buyer shall not be
liable for any settlement effected without its prior written
consent.
4.13. NO SOLICITATION. None of Bancorp, any Bancorp
Subsidiary and any of the directors, officers, employees,
representatives and agents of Bancorp and other persons
controlled by Bancorp shall solicit or, except to the extent
required by applicable law relating to fiduciary obligations of
directors, upon advice of counsel, hold discussions or
negotiations with, or assist or provide any information to, any
person, entity, or group (other than Buyer) concerning any
merger, disposition of a significant portion of its assets, or
acquisition of a significant portion of its capital stock or
similar transactions involving Bancorp or, except for the
Travel Agency and the Insurance Agency, any Bancorp
Subsidiary. Nothing contained in this Section 4.13 shall
prohibit Bancorp or its Board of Directors from taking and
disclosing to the stockholders of Bancorp a position with
respect to a tender offer by a third party pursuant to Rules
14d-9 and 14e-2 promulgated under the Exchange Act or making
such other disclosure to the stockholders of Bancorp which, in
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the judgment of the Board of Directors, based upon the advice
of counsel, may be required under applicable law. Bancorp will
promptly communicate to Buyer the terms of any proposal,
discussion, negotiation, or inquiry relating to a merger or
disposition of a significant portion of its capital stock or
similar transaction involving Bancorp or any Bancorp Subsidiary
and the identity of the party making such proposal or inquiry
which it receives with respect to any such transaction.
4.14. SALE OF TRAVEL AGENCY AND INSURANCE AGENCY.
-------------------------------------------
(a) Bancorp shall use all reasonable efforts to sell
or otherwise dispose of the Travel Agency and the Insurance
Agency prior to the Effective Time, whether through a sale of
assets (followed by a dissolution of the selling corporation),
a sale of stock, a merger or otherwise. Neither Bancorp nor
any Bancorp Subsidiary shall retain any liabilities or
obligations of the Travel Agency or the Insurance Agency, or
incur any liabilities or obligations in connection with the
sale of the Travel Agency or the Insurance Agency that survive
the Effective Time (including but not limited to obligations to
indemnify the purchaser or purchasers thereof), without the
prior written consent of Buyer.
(b) Upon disposition of the Travel Agency and the
Insurance Agency prior to the Effective Time, Bancorp shall be
entitled to distribute, as a dividend, an amount equal to the
aggregate net after tax gain realized by Bancorp on the sales,
determined in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods.
In the event Bancorp realizes an aggregate net after tax loss
on the sales (determined in accordance with generally accepted
accounting principles consistently applied), the Merger
Consideration shall be adjusted in accordance with Section 1.7.
4.15. 1993 TAX RETURNS. Each of Bancorp and the Bancorp
Subsidiaries shall promptly file in correct form all federal,
state and local information returns and tax returns for the
year ended December 31, 1993 (all such returns and tax returns
being accurate and complete in all material respects) not yet
filed at the date of this Agreement and shall promptly deliver
full and complete copies thereof to Buyer.
4.16. DATA PROCESSING.
----------------
(a) "RIGHT TO USE" EXTENSION. Bancorp shall use its
best efforts to enter into, as soon as practicable, but no
later than October 1, 1994, a one-year "right to use" extension
agreement (the "Extension Agreement") with ITI covering the
period from November 1, 1994 to November 1, 1995 relating
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to the licensing to Bancorp of the data processing software
used in connection with Bancorp's data processing system, on
such terms and conditions that are reasonably satisfactory to
Buyer. Buyer shall have no obligation pursuant to this Section
4.16 unless Bancorp has entered into the Extension Agreement.
(b) BUYER SUPPORT. If the Extension Agreement is
entered into by Bancorp and ITI in accordance with Section
4.16(a) above, Buyer shall (i) provide to Bancorp all data
processing support and other servicing related to and
reasonably required to complete Bancorp's year-end processing
for its fiscal year ended December 31, 1994, and (ii) use its
reasonable efforts from the date of the Extension Agreement
until the Effective Time to assist Bancorp in complying with
any regulatory changes which become effective prior to the
Effective Time and which affect Bancorp's data processing
system.
(c) OPTIONAL CONVERSION. Notwithstanding the
foregoing, in the event of the occurrence of a regulatory
change which is determined in good faith by Buyer to have a
material effect on the data processing and reporting
requirements and compliance capabilities of Bancorp, or upon
the mutual agreement of Bancorp and Buyer, Buyer shall have the
right, prior to the Effective Time, and regardless of whether
the Extension Agreement has been entered into by Bancorp and
ITI, to convert Bancorp's data processing system onto Buyer's
system. If such a conversion occurs, Bancorp and Buyer shall
enter into a servicing agreement, on terms and conditions
mutually agreeable to Bancorp and Buyer, pursuant to which
Buyer shall agree to provide, for the period prior to the
Effective Time, operational and other administrative services
to Bancorp in connection with Bancorp's data processing system.
(d) TERMINATION DUE TO A BREACH BY BUYER.
-------------------------------------
(i) In the event of a termination of this
Agreement by Bancorp pursuant to and in accordance with
Article 8 hereof due to a breach by Buyer of any
representation, warranty, or covenant of Buyer in this
Agreement, if such termination occurs on or after September
1, 1994 but prior to completion of a conversion of Bancorp
onto Buyer's data processing system, Buyer shall be
obligated, without cost to Bancorp, to continue to provide
Bancorp, for a period beginning at the later of the date
of termination or November 1, 1994 and ending six months
following the date of the termination, with all support and
other servicing related to and reasonably required to
complete Bancorp's year-end data processing for its fiscal
year ended December 31, 1994 and shall continue to use its
best efforts, without cost to Bancorp, to assist Bancorp in
complying with any regulatory changes which become
effective during such six month period and which affect
Bancorp's data processing system.
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(ii) If a termination of the type referred to in
paragraph (i) above occurs after the conversion of Bancorp
onto Buyer's data processing system, Buyer shall permit
Bancorp to remain on its system until such time as it may
reasonably be converted onto an appropriate alternative
system, shall assist Bancorp in identifying such an
alternative system and effectuating such a conversion and
shall continue to provide servicing to Bancorp in
accordance with the terms of the servicing agreement
referred to in (c) above (provided, however, that after the
date of the termination, such services shall be rendered to
Buyer at no cost).
(e) OTHER TERMINATION EVENTS.
-------------------------
(i) In the event of a termination of this
Agreement by Bancorp or Buyer pursuant to and in accordance
with Article 8 for any reason other than that identified in
paragraph (d)(i) above, if such termination occurs on or
after September 1, 1994 but prior to completion of a
conversion of Bancorp onto Buyer's data processing system,
Buyer shall be obligated, without cost to Bancorp, to
continue to provide Bancorp with all support and other
servicing related to and reasonably required to complete
Bancorp's year-end data processing for its fiscal year
ended December 31, 1994. In addition, in the event of a
termination of the type and at the time referred to in this
paragraph (i) Buyer shall agree, on reasonable terms
mutually agreeable to both parties, to continue, for a
period beginning at the later of the date of termination
or November 1, 1994 and ending six months after the date of
such termination, to provide such other services to Bancorp
relating to Bancorp's data processing system as it is
reasonably capable of providing, including, without
limitation, such services related to compliance by Bancorp
with any regulatory changes affecting its data processing.
(ii) If a termination of the type referred to in
paragraph (i) above occurs after the conversion of Bancorp
onto Buyers's data processing system, Buyer and Bancorp
shall cooperate to effectuate the conversion of Bancorp
onto an appropriate alternative data processing system
within such time as may be reasonable, and Buyer shall
continue to provide such services agreed to be provided to
Bancorp under the servicing agreement referred to in
paragraph (c) above on such terms and conditions set forth
in such servicing agreement.
(f) GOOD FAITH OBLIGATION. If services are being
provided by Buyer pursuant to Section 4.16(d) or (e),
Bancorp shall use good faith efforts to promptly obtain
from a third party, services that would obviate the need
for Buyer to provide services hereunder.
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4.17. COMPLIANCE WITH SECURITIES ACT.
-------------------------------
(a) Within 30 days after the date of this Agreement,
Bancorp shall identify to Buyer all persons whom it reasonably
believes are its "affiliates" as that term is used in
paragraphs (c) and (d) of Rule 145 of the Securities Act (the
"Affiliates"). Thereafter and until the Effective Time,
Bancorp shall identify to Buyer each additional person whom it
reasonably believes to have thereafter become an Affiliate of
Bancorp.
(b) Bancorp shall use its best efforts to cause each
person who is identified as an Affiliate pursuant to clause (a)
above to deliver to Buyer, not later than the date the Proxy
Statement is mailed to shareholders of Bancorp, a written
agreement substantially in the form of Exhibit B. Buyer shall
not be required to maintain the effectiveness of the
Registration Statement under the Securities Act for the
purposes of resale of Buyer Common Stock by such Affiliates.
4.18. UNPAID BANCORP DIVIDENDS. Buyer shall pay any
regular quarterly dividend declared by Bancorp with a record
date prior to the Effective Time but unpaid at the Effective
Time on the payment date scheduled by Bancorp for such
dividends. Buyer shall make such payment to all shareholders
of record of Bancorp Common Stock as of the record date for
such dividend.
ARTICLE 5
CLOSING CONDITIONS
5.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS
AGREEMENT. The respective obligations of each party under this
Agreement shall be subject to the fulfillment at or prior to
the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and, to the
extent necessary, the transactions contemplated hereby shall
have been approved in accordance with applicable law and the
Articles of Incorporation and By-Laws of Bancorp by the
requisite vote of the stockholders of Bancorp.
(b) INJUNCTIONS. None of the parties hereto shall be
subject to any order, decree or injunction of a court or agency
of competent jurisdiction which enjoins or prohibits the
consummation of the transactions contemplated hereby.
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(c) REGULATORY APPROVALS. All necessary approvals,
authorizations and consents of all governmental bodies required
to consummate the Acquisition Merger and the other transactions
contemplated by this Agreement shall have been obtained, shall
not contain or be subject to any restriction or condition which
Buyer reasonably determines to be materially burdensome, and
shall remain in full force and effect and all waiting periods
relating to such approvals, authorizations or consents shall
have expired.
(d) REGISTRATION STATEMENT EFFECTIVE. The
Registration Statement shall have become effective under the
Securities Act and shall not be subject to a stop order or a
threatened stop order.
5.2. CONDITIONS TO THE OBLIGATIONS OF BUYER UNDER THIS
AGREEMENT. The obligations of Buyer under this Agreement shall
be further subject to the satisfaction, at or prior to the
Effective Time, of the following conditions:
(a) COVENANTS; REPRESENTATIONS. The obligations of
Bancorp (both on its own behalf and on behalf of the Bancorp
Subsidiaries) required to be performed by it at or prior to the
Closing pursuant to the terms of this Agreement shall have been
duly performed and complied with in all material respects, and
the representations and warranties of Bancorp (both on its own
behalf and on behalf of the Bancorp Subsidiaries) contained in
this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the
Effective Time, as though made at and as of the Effective Time
(except to the extent such representations and warranties
expressly relate to a specific date or time).
(b) LEGAL OPINION. Buyer shall have received an
opinion from Edwards & Angell, counsel to Bancorp, dated the
date of Closing, substantially to the effect set forth in
Exhibit C hereto.
(c) TAX OPINION. Buyer shall have received an
opinion or opinions of counsel reasonably acceptable to it with
respect to federal tax laws or regulations to the effect that
the Acquisition Merger will qualify as a tax-free
reorganization under Section 368(a) of the Code, and that
Bancorp will not recognize any gain or loss under federal tax
law as a result of the Acquisition Merger.
(d) DIRECTORS. The Bank and CIBCO Realty, Inc.
("CIBCO") shall have received any resignations of members of
its Board of Directors not selected by Buyer to serve on the
Board of Directors of the Bank or CIBCO, as the case may be,
after the Effective Time.
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(e) MATERIAL ADVERSE CHANGE. There shall have
occurred no change in the business, operations, results of
operations, properties, assets, liabilities, securities,
capitalization or condition (financial or otherwise) of Bancorp
and the Bancorp Subsidiaries which has had a Material Adverse
Effect on Bancorp and the Bancorp Subsidiaries taken as a whole
since the date of the Base Balance Sheet.
(f) CONSENTS. All necessary permits, consents,
waivers, clearances, approvals and authorizations of all third
parties required to consummate the Acquisition Merger and the
other transactions contemplated by this Agreement shall have
been obtained and shall remain in full force and effect.
(g) SALE OF TRAVEL AGENCY AND INSURANCE AGENCY. The
sale of the Travel Agency and the Insurance Agency shall have
been completed on the basis contemplated by Section 4.14(a).
(h) MATERIAL LITIGATION. No suit, action, or
investigation by a governmental body, or legal or
administrative proceeding shall have been brought or threatened
in connection with the transactions contemplated hereby which,
if decided adversely to one of the parties hereto, would, in
Buyer's sole opinion, have a Material Adverse Effect on Buyer.
(i) DISSENTERS' RIGHTS. Holders of no more than 10%
of the issued and outstanding shares of Bancorp Common Stock
have indicated that they intend to exercise dissenters' rights
in respect to the Acquisition Merger.
(j) In accordance with its obligations under Section
4.16 hereof, Bancorp shall have entered into (a) a one-year
extension of the term of the ITI Agreement on such terms and
conditions reasonably satisfactory to Buyer, or (b) such other
third-party agreement or arrangement reasonably satisfactory to
Buyer relating to the operation and servicing of Bancorp's data
processing systems.
Bancorp will furnish Buyer with such certificates in the
name and on behalf of Bancorp executed by its officers and such
other documents to evidence fulfillment of the conditions set
forth in this Section 5.2 as Buyer may reasonably request.
5.3. CONDITIONS TO THE OBLIGATIONS OF BANCORP UNDER THIS
AGREEMENT. The obligations of Bancorp under this Agreement
shall be further subject to the satisfaction, at or prior to
the Effective Time, of the following conditions:
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(a) COVENANTS; REPRESENTATIONS. The obligations of Buyer required to
be performed by it at or prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed and complied with in all material
respects, and the representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Effective Time, as though made at and as of the
Effective Time (except to the extent such representations and warranties
expressly relate to a specific date or time).
(b) LEGAL OPINION. Bancorp shall have received an opinion from
Thompson, Hine and Flory, counsel to Buyer, dated the date of the Closing,
substantially to the effect set forth in Exhibit D hereto.
(c) TAX OPINION. Bancorp shall have received an opinion or opinions
of counsel reasonably acceptable to it with respect to federal and Indiana tax
laws or regulations to the effect that the Acquisition Merger will qualify as a
tax-free reorganization under Section 368(a) of the Code, and that Bancorp will
not recognize any gain or loss under federal and Indiana tax law as a result of
the Acquisition Merger, nor will any stockholders of Bancorp recognize any gain
or loss under federal and Indiana tax law as a result of the Acquisition
Merger, other than with respect to any cash received pursuant to this
Agreement.
(d) EXCHANGE LISTING. The shares of Buyer Common Stock to be issued
pursuant to this Agreement shall have been authorized for listing on the NYSE
upon official notice of issuance.
(e) MATERIAL ADVERSE CHANGE. There shall have occurred no change in
the business, operations, results of operations, properties, assets,
liabilities, securities, capitalization or condition (financial or otherwise)
of Buyer and the Buyer Subsidiaries which has had a Material Adverse Effect on
Buyer and the Buyer Subsidiaries taken as a whole since the date of the Buyer
Base Balance Sheet.
(f) CONSENTS. All necessary permits, consents, waivers, clearances,
approvals and authorizations of all third parties required to consummate the
Acquisition Merger and the other transactions contemplated by this Agreement
shall have been obtained and shall remain in full force and effect.
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Buyer will furnish Bancorp with such certificates in the name
and on behalf of Buyer executed by its Treasurer and Secretary
or others and such other documents to evidence fulfillment of
the conditions set forth in this Section 5.3 as Bancorp may
reasonably request.
ARTICLE 6
ENVIRONMENTAL MATTERS
6.1. ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES OF
-----------------------------------------------
BANCORP.
--------
(a) "Properties Owned" as used in this Article 6
shall include (i) all real property owned or leased by Bancorp
and each Bancorp Subsidiary, and (ii) all Real Estate Owned
("REO") by Bancorp and each Bancorp Subsidiary that is, or
should have been, listed in Item 2.12 of the Bancorp Disclosure
Schedule as provided in Section 2.12 of this Agreement.
(b) "Trust Properties" as used in this Article 6
shall include all real property which Bancorp or any Bancorp
Subsidiary holds, manages, or administers in a trust or other
fiduciary relationship.
(c) Except as disclosed in Item 6.01 of the Bancorp
Disclosure Schedule, Bancorp and each Bancorp Subsidiary have
obtained all material permits, licenses and other
authorizations which are required with respect to the operation
of their respective businesses and all Properties Owned or
Trust Properties under any Environmental Laws (as hereinafter
defined) (such permits, licenses and authorizations being
hereinafter referred to as "Environmental Permits"), including
all federal, state and local laws relating to pollution or
protection of the environment such as the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA"), laws relating to emissions, discharges, releases or
threatened release of hazardous, toxic or other pollutants,
contaminants, chemicals or materials regulated by Environmental
Laws ("Regulated Material") including, but not limited to,
ambient air, surface water, ground water, land surface or
subsurface strata, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage disposal,
transport or handling of Regulated Material (which laws,
together with all regulations, rules, codes, plans, decrees,
judgments, injunctions, notice and demand letters issued,
entered, promulgated or approved thereunder with respect to
Bancorp or any Bancorp Subsidiary being herein referred to as
"Environmental Laws"). Except as disclosed in Item 6.01 of the
Bancorp Disclosure Schedule, Bancorp and each Bancorp
Subsidiary are in compliance with all terms and conditions of
all Environmental Permits required under the Environmental
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Laws, and are also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions,
requirements, obligations, orders, agreements, schedules and
timetables contained in the Environmental Laws, except where
the failure to be in such compliance would not have a Material
Adverse Effect on Bancorp and the Bancorp Subsidiaries taken as
a whole. Bancorp has provided Buyer with complete copies of
all notices in the possession of Bancorp, including notices
received by any previous owner or lessee of any Properties
owned or Trust Properties or any business currently owned or
leased by Bancorp or a Bancorp Subsidiary within the five years
preceding the date of this Agreement and alleging noncompliance
with any Environmental Law.
(d) To the best knowledge of Bancorp, there is no
civil, criminal or administrative action, demand, claim,
investigation or proceeding pending or threatened against
Bancorp or any Bancorp Subsidiary with regard to any Properties
Owned or Trust Properties, including, without limitation, any
notices, demand letters or requests for information from any
federal or state environmental agency, under or relating in any
way to the Environmental Laws, except as disclosed in Item 6.01
of the Bancorp Disclosure Schedule.
(e) With regard to any of the Properties Owned or
Trust Properties, except as disclosed in Item 6.01 of the
Bancorp Disclosure Schedule, there are no past, present or, to
the best knowledge of Bancorp, anticipated future events,
conditions, circumstances, or plans which may interfere with or
prevent compliance or continued compliance with the
Environmental Laws in any material respect, or which may give
rise to any material common law or other legal liability, or
which otherwise may form the basis of any material claim,
action, demand, proceeding, notice of violation or
investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling or the emission, discharge, release or
threatened release into the environment, of any Regulated
Material. Without in any way limiting the foregoing, except as
disclosed in Item 6.01 of the Bancorp Disclosure Schedule, to
the best knowledge of Bancorp, no release, emission or
discharge into the environment of any Regulated Material which
would give rise to material liability under any Environmental
Laws has occurred, is currently occurring at any Properties
Owned or any Trust Properties, and, except as disclosed in Item
6.01 of the Bancorp Disclosure Schedule, to the best knowledge
of Bancorp, there is no spill, deposit, or discharge of any
such Regulated Material at, on, into, under or having
originated from any of the Properties Owned or Trust
Properties. Except as disclosed in Item 6.01 of the Bancorp
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Disclosure Schedule, to the best knowledge of Bancorp, none of
the Properties Owned or Trust Properties includes any
equipment, machinery, device, or other apparatus that contains
polychlorinated biphenyls that is now or ever has been leaking;
any asbestos that is or reasonably may be anticipated to become
in a condition which reasonably may threaten the health and/or
safety of a person exposed to the asbestos; or any type of
underground storage tank.
6.2. PHASE I ENVIRONMENTAL AUDIT. With respect to all
Properties Owned, Bancorp shall commission, at its sole
expense, a Phase I Environmental Audit (as defined in Section
6.6) by one or more qualified independent environmental
engineers or consultants acceptable to Buyer. The
Environmental Audit Reports (as defined in Section 6.6)
relating to the Phase I Environmental Audit shall be provided
to Buyer as soon as is practicable and, in any event, no later
than 45 days following the date of this Agreement.
6.3. PHASE II ENVIRONMENTAL AUDIT AND ENVIRONMENTAL AUDIT
RESPONSE. Within ten business days after either Buyer's
receipt of the Environmental Audit Report relating to any
Environmental Audit or the date of this Agreement, whichever is
later, and within ten business days after Buyer's receipt of
any Environmental Occurrence Notification, Buyer shall, with
respect to each parcel of the Properties Owned, provide Bancorp
with an Environmental Audit Response. If the Environmental
Audit Response requests an initial or additional Phase II
Environmental Audit (as defined in Section 6.6), Buyer shall
commission a Phase II Environmental Audit by the environmental
engineer or consultant who performed the Phase I Environmental
Audit or by such other qualified environmental engineer or
consultant as Buyer may elect and Bancorp shall approve (such
approval not to be unreasonably withheld). The cost of each
such Phase II Environmental Audit shall be paid one-half by
Bancorp and one-half by Buyer. Such Phase II Environmental
Audit shall be completed as soon as is practicable and Buyer
shall, promptly after receipt of the Environmental Audit
Report, deliver a copy to Bancorp.
6.4. ENVIRONMENTAL OCCURRENCE NOTIFICATION. In the event
that either Bancorp receives notice from any governmental
entity, or any of its managers or management personnel
responsible for environmental matters has actual knowledge at
any time after the date of this Agreement and prior to the
Effective Time that there are any Environmental Action Items
(as defined in Section 6.6) emanating from, occurring on, or in
any way related to, the Properties Owned, which Environmental
Action Items are not fully disclosed in the Phase I
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Environmental Audit Report or, if applicable, the Phase II
Environmental Audit Report, Bancorp shall provide Buyer with
notice setting forth the details thereof (the "Environmental
Occurrence Notification") as soon as is reasonably practicable,
but in no event later than the earlier of three days after
becoming aware of such Environmental Action Item or at the
Effective Time.
6.5. REMEDIATION; ALLOCATION OF REMEDIATION COSTS;
---------------------------------------------
TERMINATION OF AGREEMENT.
- -------------------------
(a) If based upon the Phase I or Phase II
Environmental Audit reports, the aggregate estimated costs to
repair, remediate or otherwise correct any Environmental Action
Item to the extent necessary so that such condition or
circumstance would no longer be an Environmental Action Item
("Remedial Cost Estimate") is less than $250,000.00 the Closing
shall take place in accordance with Article 7 without abatement
or adjustment to the Purchase Price. In the event that the
Remedial Cost Estimate exceeds $250,000.00 (such excess, the
"Excess Remediation Cost"), the Closing shall take place in
accordance with Article 7; however, the purchase price shall be
reduced as set forth in Section 1.7 hereof. In the event that
the Remedial Cost Estimate exceeds $3,000,000.00, Bancorp and
Buyer shall each have the election to terminate this Agreement
by giving written notice to such effect to the other party
within fifteen (15) days following such party's receipt of the
Environmental Audit reports. Upon such termination this
Agreement shall be null and void and the parties shall have no
further obligations hereunder. In the event of any dispute
between the parties concerning the accuracy or completeness of
the Remedial Cost Estimate, Bancorp and Buyer shall each have
the right to obtain, at their sole cost, a separate estimate
from an independent environmental consultant. If any such
estimate(s) is within fifteen (15%) percent of the Remedial
Cost Estimate, the Remedial Cost Estimate shall be deemed
conclusive and shall be binding. If such estimate(s) is not
within fifteen (15%) percent of the Remedial Cost Estimate the
environmental consultant which prepared the Remedial Cost
Estimate and the environmental consultant for the party
disputing the Remedial Cost Estimate shall jointly select a
third party to prepare a cost estimate. The estimate prepared
by such third party shall be conclusive and binding. In the
event a third estimate is necessary, the parties shall evenly
share the costs of such environmental consultant.
(b) COOPERATION ON REMEDIAL ACTIVITIES PRIOR TO THE
EFFECTIVE DATE. If based upon the results of any Phase I
Environmental Audit, Phase II Environmental Audit or
Environmental Occurrence Notification, Buyer identifies any
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Environmental Action Item which involves underground storage
tanks or soil or groundwater conditions which Buyer reasonably
believes should be remediated prior to the Closing and which
remediation will not unreasonably interfere with Bancorp's
present use of, or access to, any Properties Owned or otherwise
require any work within the interior of any building presently
utilized by Bancorp, Bancorp shall, at Buyer's sole cost and
expense, with reasonable diligence, retain a qualified
consultant or contractor, approved by Buyer, to correct such
Environmental Action Item to the extent necessary so that such
condition or circumstance would no longer be an Environmental
Action Item. Such cost and expense shall be allocated at the
Closing in accordance with Section 6.5(a). Buyer shall be
solely responsible for the costs of any such remedial
activities and shall indemnify and hold Bancorp harmless from
any claims or losses incurred as a result of any remedial
activities performed at any Properties Owned pursuant to this
Section 6.5. Notwithstanding any other provision of this
Agreement, Buyer's obligations under this Section 6.5 shall
survive cancellation or termination of this Agreement. Bancorp
shall promptly notify Buyer of any claim, action, suit,
proceeding or investigation for which it may seek
indemnification under this Section 6.5(b). In the event of any
such claim, action, suit or proceeding, Buyer shall have the
right to select counsel and assume the defense and shall not be
liable to Bancorp for any expenses or fees of other counsel or
any other expenses subsequently incurred by Bancorp in
connection with the defense. Bancorp shall cooperate in the
defense of such matter, and Buyer shall not be liable for any
settlement effected without its prior written consent.
6.6. DEFINITIONS. Except as otherwise defined in this
Article or in this Agreement:
"Phase I Environmental Audit" means an inspection,
investigation, and audit of the Properties Owned with respect
to all Environmental Laws and Environmental Action Items which
shall include a view of the Properties Owned, inquiry into
present and past uses of the Properties Owned reasonably
consistent with the so-called "Innocent Purchaser" defense
contained in Section 101(35) of CERCLA, review of public
records of the United States Environmental Protection Agency
and applicable state or local environmental protection agencies
which are readily available to the Consultant, field
observations, review of applicable air and water discharge
permits, solid and hazardous waste disposal permits, if any,
the status thereof and all requirements associated therewith,
and such additional investigations (without physical sampling
or analysis) as Bancorp and the applicable environmental
engineer or consultant shall determine are appropriate;
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provided, however, that at a minimum, the Phase I Environmental
Audit shall be conducted in accordance with the 1993 ASTM
standard promulgated thereof and shall in all events contain an
estimate covering the cost to correct any identified
Environmental Action Item.
"Phase II Environmental Audit" means such additional
investigation and analysis, including physical sampling and
analysis, as Buyer and the applicable environmental engineer or
consultant shall determine are appropriate and shall in all
events contain an estimate covering the cost to correct any
identified Environmental Action Item.
"Environmental Audit Response" means the written
notification to be provided to Bancorp by Buyer based upon the
results of the applicable Environmental Audit, such
notification to either (i) state that there are no events or
conditions which require further investigation or constitute
Environmental Action Items; or (ii) specifically identify and
describe, referring to relevant portions from the applicable
Environmental Audit Report, any events or conditions identified
in the Environmental Audit Report, which, in the reasonable
judgment of Buyer, require further investigation or constitute
an Environmental Action Item.
"Environmental Action Item" means any condition or
circumstance which violates, is not in compliance with, or is
not consistent with any Appropriate Governmental Standard
without regard to whether any such condition or circumstance
otherwise would or would not be required to be reported
pursuant to any applicable Environmental Laws and without
regard to whether any such condition or circumstance otherwise
would or would not be required to be reported pursuant to any
applicable Environmental Laws and without regard to whether any
such condition or circumstance would or would not be a
violation of, or a condition required to be addressed or
remediated by, any applicable Environmental Law.
"Appropriate Governmental Standard" means the
following, in each case as in effect at the time the relevant
task pursuant to this Agreement is being performed: (i) with
respect to the presence of any Regulated Material in any
environmental medium or media, the relevant clean-up or
remediation standards that would be applied by the Indiana
Department of Environmental Management; and, (ii) with respect
to all other conditions or circumstances, any applicable
Environmental Law.
"Environmental Audit Report" means the written report
of the applicable environmental engineer or consultant with
respect to the Phase I Environmental Audit or the Phase II
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Environmental Audit, as the case may be. Any Phase II
Environmental Audit Report shall either state the applicable
environmental engineer or consultant's opinion as to the
actions to be taken in order to remediate any Environmental
Action Item to the extent necessary so that such conditions or
circumstances would no longer constitute Environmental Action
Items, or specify the additional work necessary to render such
opinion. Any Phase II Environmental Audit Report shall, on the
basis of actual bids or otherwise, estimate the cost to
remediate Environmental Action Items as specified above.
ARTICLE 7
THE CLOSING
7.1. TIME AND PLACE. Subject to the provisions of
Articles 5 and 8 hereof, the closing (the "Closing") of the
transactions contemplated hereby shall take place at the
offices of Edwards & Angell, 750 Lexington Avenue, New York,
New York, within five (5) business days after the last required
approval for the Acquisition Merger and the other transactions
contemplated hereby have been received and of the expiration of
the last of all required waiting periods under such approvals
has expired, or at such other time and place as may be mutually
agreeable to Buyer and Bancorp (the date of the Closing to be
referred to herein as the "Closing Date").
7.2. DELIVERIES AT THE CLOSING. At the Closing there
shall be delivered to Buyer and Bancorp the opinions,
certificates, and other documents and instruments required to
be delivered under Article 5 hereof.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after
approval of this Agreement and the transactions contemplated
hereby by the stockholders of Bancorp, as follows:
(a) by mutual written consent of Buyer and Bancorp;
(b) by Bancorp or Buyer, as the case may be, in the
event of a breach by the other party of any representation or
warranty contained in this Agreement, if the nonbreaching party
in good faith determines that it would not have entered into
this Agreement, or that the Merger Consideration might have
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been different, if the nonbreaching party had known of the
breach prior to execution of this Agreement; or if there has
been a material breach on the part of the other party of any
covenant or agreement contained herein which cannot be or has
not been cured within 45 days after written notice by Buyer to
Bancorp (or by Bancorp to Buyer) of such breach;
(c) by either Bancorp or Buyer, if the Acquisition
Merger has not been consummated and the Effective Time shall
not have occurred by March 31, 1995, or such other date, if
any, as Buyer and Bancorp may agree in writing; provided that
no party may terminate this Agreement pursuant to this clause
if such party's failure to fulfill any of its obligations under
this Agreement shall have been the reason that the Acquisition
Merger shall not have been consummated;
(d) by Buyer if any of the conditions specified in
Sections 5.1 and 5.2 have not been met or waived by Buyer at
such time as such conditions are no longer capable of being
satisfied; or
(e) by Bancorp if any of the conditions specified in
Sections 5.1 and 5.3 have not been met or waived by Bancorp at
such time as such condition is no longer capable of being
satisfied; or
(f) by Bancorp, in the event that the average per
share closing price of Buyer Common Stock as reported on the
NYSE over the twenty (20) trading days immediately preceding
the fifth (5th) day prior to the date of the Closing (the
"Closing Price") is less than $24.2812(3); or
(g) by Buyer in the event that the Closing Price exceeds
$40.4687.(4)
8.2. EFFECT OF TERMINATION. In the event of termination
of this Agreement pursuant to any provision of Section 8.1
other than Section 8.1(b), this Agreement shall forthwith
become void and of no effect and there shall be no liability on
- --------------------
(3) The closing price of Buyer Common Stock at the close of
business on the date immediately preceding the date
hereof less 25 percent.
(4) The closing price of Buyer Common Stock at the close of
business on the date immediately preceding the date hereof
plus 25 percent.
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the part of either Bancorp or Buyer or their respective
officers or directors, PROVIDED, HOWEVER, that the provisions
of Article 9 and this Section 8.2 shall survive such
termination. In the event of termination of this Agreement
pursuant to Section 8.1(b) as a result of a willful and
material breach by any party of any representation, warranty or
agreement contained herein, and if the terminating party is not
also in material breach of this Agreement then, notwithstanding
Article 8 hereof, the breaching party shall be fully liable for
any and all costs and expenses, including, without limitation,
reasonable attorney's fees, sustained or incurred by the other
party as a result of such breach and such payment shall not
constitute liquidated damages or otherwise limit the rights of
a non-breaching party.
8.3. AMENDMENT. This Agreement may be amended as
hereinafter provided by the parties hereto, at any time before
or after approval of the Acquisition Merger by the stockholders
of Bancorp, PROVIDED, HOWEVER, that after any such approval no
such amendment shall reduce the amount or change the form of
the Merger Consideration to be delivered to each of Bancorp's
stockholders as contemplated by this Agreement. The parties
hereto shall make such technical changes to this Agreement, not
inconsistent with the purpose hereof, as may be required to
effect or facilitate any governmental approval or acceptance of
the Merger of this Agreement or to effect or facilitate any
filing or recording required for the consummation of any of the
transactions contemplated hereby. This Agreement may not be
amended except by an instrument in writing signed on behalf of
each of the parties hereto.
8.4. WAIVER. Any term, condition or provision of this
Agreement may be waived in writing at any time by the party
that is, or whose stockholders are, entitled to the benefits
thereof.
ARTICLE 9
EXPENSES
All legal and other costs and expenses incurred in
connection with this Agreement and the transactions
contemplated hereby shall be borne by the party incurring such
costs and expenses; provided, however, that in the event of a
willful and material breach by any party of its obligations
hereunder, the non-defaulting party may pursue any remedy
available at law or in equity to enforce its rights and shall
be paid by the defaulting party for all damages, costs and
expenses, including legal, accounting, investment banking,
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printing and mailing expenses, incurred or suffered by the
non-defaulting party in connection herewith or in the
enforcement of its rights hereunder.
ARTICLE 10
COOPERATION
10.1. PROXY STATEMENT/PROSPECTUS. Bancorp and Buyer each
will cooperate with the other and use its reasonable best
efforts (i) to prepare the Registration Statement and the proxy
statement/prospectus included therein to be distributed to
Bancorp's stockholders to solicit their approval of this
Agreement (the "Proxy Statement/Prospectus"), and (ii) to take
all such action as may be required under state blue sky or
securities laws by Buyer in connection with the transactions
contemplated by this Agreement. Buyer shall use its reasonable
best efforts to have the Registration Statement become
effective under the Securities Act and to maintain the
effectiveness of the Registration Statement for the period
required by law.
10.2. REGULATORY APPROVALS. Bancorp and Buyer each will
cooperate with the other and use its reasonable best efforts to
prepare all necessary documentation, to effect all necessary
filings and to obtain all necessary permits, consents,
approvals and authorizations of all third parties and
governmental bodies necessary to consummate the transactions
contemplated by this Agreement, including without limitation
any required from the SEC, the FRB and the DFI. Bancorp and
Buyer shall each have the right to review and approve in
advance all characterizations of the information relating to
Bancorp and Buyer, as the case may be, and any of their
respective subsidiaries, which appear in any filing made in
connection with the transactions contemplated by this Agreement
with any governmental body. In exercising the foregoing right,
Bancorp and Buyer shall each act as promptly as practicable,
recognizing that time is of the essence to the transactions
contemplated by this Agreement.
10.3. FURTHER INFORMATION. Bancorp and Buyer will furnish
each other and each other's counsel with all information
concerning themselves, their subsidiaries, directors, officers
and stockholders and such other matters as may be necessary or
advisable in connection with the Registration Statement, Proxy
Statement/Prospectus, applications to the FRB, the DFI, and the
FDIC, or any other statement or application to any governmental
body in connection with the Acquisition Merger and the other
transactions contemplated by this Agreement, and each covenants
with the other that no information furnished in connection with
such actions will contain any untrue statement of a material
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fact or omit to state a material fact required to be stated in
order to make any information so furnished not misleading.
Bancorp and Buyer shall each promptly notify the other if at
any time before or after the Effective Time it becomes aware
that the Proxy Statement/Prospectus or the Registration
Statement, or any such regulatory filing or application,
contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or
necessary to make the statements contained therein not
misleading. In such event, Bancorp or Buyer shall cooperate in
the preparation of a supplement or amendment to the Proxy
Statement/Prospectus or the Registration Statement, or any such
regulatory filing or application, as the case may be, that
corrects such misstatement or omission, and shall cause the
same to be filed with the SEC and distributed to stockholders
of Bancorp, or with the appropriate regulatory agency, as the
case may be.
ARTICLE 11
MISCELLANEOUS
11.1. CONFIDENTIALITY. Except as specifically set forth
herein, Buyer agrees to be bound by the terms of the
confidentiality letter agreement dated April 18, 1994 (the
"Confidentiality Agreement") previously executed by Buyer and
Bancorp Financial Advisor (as agent for Bancorp), which
agreement is hereby incorporated herein by reference. The
parties hereto agree that the Confidentiality Agreement shall
continue in accordance with its respective terms,
notwithstanding the termination of this Agreement.
Notwithstanding anything to the contrary herein, Buyer shall
have the benefit of the terms and conditions of any and all
other confidentiality agreements entered into with the Bancorp
Financial Advisor in connection with the sale of Bancorp and
the Bancorp Subsidiaries.
11.2. CERTAIN DEFINITIONS. As used in this Agreement,
except as otherwise provided herein or as otherwise clearly
required by the context, the following terms shall have the
respective meanings set forth below.
"Person" shall mean any individual, corporation,
partnership, bank, joint venture, association, trust,
unincorporated organization or government or any agency or
political subdivision thereof.
"Material Adverse Effect" shall mean, when used with
respect to any Person, a material adverse effect on the
consolidated business, operations, results of operations or
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financial condition of such Person, other than any such effect
attributable to or resulting directly or indirectly from
changes in the general level of interest rates or general
economic conditions. With respect to Bancorp, Material Adverse
Effect shall not include any effect related to the application
of the accounting methods required under Statement of Financial
Accounting Standards No. 115.
11.3. PUBLIC ANNOUNCEMENTS. Bancorp and Buyer shall
cooperate with each other in the development and distribution
of all news releases and other public information disclosures
with respect to this Agreement or any of the transactions
contemplated hereby, except as may be otherwise required by
law, and neither Bancorp nor Buyer shall issue any joint news
releases with respect to this Agreement or any of the
transactions contemplated hereby, unless such news releases
have been mutually agreed upon by the parties hereto.
11.4. SURVIVAL. The respective representations,
warranties and agreements of the parties contained in this
Agreement (except those contained in Article 1, Article 8,
Article 9, Section 4.11, Section 4.12 and Section 6.5, which
are intended to be for the benefit of and enforceable by the
persons referred to therein), or in any Exhibit, the Disclosure
Schedule, certificate, list, letter or other instrument
referred to in this Agreement, and which are delivered or made
pursuant to this Agreement (or in connection with any
transaction contemplated by this Agreement) shall not survive
the Closing but shall terminate as of the Closing.
11.5. NOTICES. All notices or other communications
hereunder shall be in writing and shall be deemed given if
delivered by receipted hand delivery or mailed by prepaid
registered or certified mail (return receipt requested) or by
cable, telegram, telex or telecopy addressed as follows:
If to Buyer to:
Society National Bank, Indiana
Anthony Heyworth, Chairman and
Chief Executive Officer
202 S. Michigan Boulevard
South Bend, Indiana 46601
Facsimile No.: 317-464-8277
Copy to:
KeyCorp
127 Public Square
Cleveland, Ohio 44114
Attention: Daniel R. Stolzer, Esq.
Senior Vice President and Senior Managing Counsel
Facsimile No.: 216-689-4121
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If to Bancorp to:
First Citizens Bancorp of Indiana
c/o Mr. Leland E. Boren, Chairman
Avis Industrial Corporation
P.O. Box 528
Upland, Indiana 46989
Facsimile No.: 317-998-8111
Copy to:
Edwards & Angell
750 Main Street
Hartford, Connecticut 06103
Attention: Theodore P. Augustinos, Esquire
Facsimile No.: 203-527-4198
or such other address as shall be furnished in writing by any
party in the manner provided in this Section 11.5, and any such
notice or communication shall be deemed to have been given as
of the date so mailed.
11.6. PARTIES IN INTEREST. This Agreement shall be
binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns; provided,
however, that neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any
party hereto without the prior written consent of the other
party, and that nothing in this Agreement, other than Sections
4.9 and 4.11 hereof, is intended to confer, expressly or by
implication, upon any other person any rights or remedies under
or by reason of this Agreement.
11.7. COMPLETE AGREEMENT. This Agreement, including the
Exhibits and the Bancorp Disclosure Schedule, and the documents
and other writings referred to herein or delivered pursuant
hereto, contains the entire agreement and understanding of the
parties with respect to its subject matter. There are no
restrictions, agreements, promises, warranties, covenants or
undertakings between the parties other than those expressly set
forth herein or therein. This Agreement supersedes all prior
agreements and understandings (other than the Confidentiality
Agreement between the parties), both written and oral, with
respect to its subject matter.
11.8. COUNTERPARTS. This Agreement may be executed in one
or more counterparts all of which shall be considered one and
the same agreement and each of which shall be deemed an
original.
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11.9. SEVERABILITY. In the event that any one or more
provisions of this Agreement shall for any reason be held
invalid, illegal or unenforceable in any respect, by any court
of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provisions of this
Agreement and the parties shall use their best efforts to
substitute a valid, legal and enforceable provision which,
insofar as practical, implements the purposes and intents of
this Agreement.
11.10. GOVERNING LAW; JURISDICTION AND VENUE. This
Agreement shall be governed by the internal laws of the State
of Indiana without regard to its conflicts of laws principles.
Each of Buyer and Bancorp hereby irrevocably and
unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Indiana and of the
United States of America located in Madison County in the State
of Indiana for any actions, suits or proceedings arising out of
or relating to this Agreement (and each of Buyer and Bancorp
agrees not to commence any action, suit or proceeding relating
thereto except in such courts), and further agrees that service
of any process, summons, notice or document by U.S. registered
mail to its address set forth in Section 11.5 shall be
effective service of process for any action, suit or proceeding
brought against Buyer or Bancorp, as the case may be, in any
such court. Each of Buyer and Bancorp hereby irrevocably and
unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement in
the courts of the State of Indiana or the United States of
America located in Madison County in the State of Indiana, and
hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such
action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
11.11. HEADINGS. The Article and Section headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of
this Agreement.
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IN WITNESS WHEREOF, Buyer and Bancorp have caused this Agreement
to be executed under seal by their duly authorized officers as of
the day and year first above written.
KEYCORP
By: /S/ Andrew R. Tyson
---------------------------------
Name: Andrew R. Tyson
Title: Senior Vice President
By: /S/ Steven N. Bulloch
---------------------------------
Name: Steven N. Bulloch
Title: Assistant Secretary
[SEAL] FIRST CITIZENS BANCORP OF INDIANA
Attest:
/s/ Karen S. Ambler By: /S/ Leland E. Boren
- --------------------------------- ---------------------------------
Secretary Name: Leland E. Boren
Title: Chairman
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Exhibit A
VOTING AGREEMENT
This Voting Agreement is entered into as of the first day
of July, 1994, between KeyCorp, an Ohio corporation
("KeyCorp"), and the shareholder ("Shareholder") of First
Citizens Bancorp of Indiana, an Indiana corporation,
("Bancorp") executing this Agreement and identified on the last
page hereof.
RECITALS
A. The Shareholder owns or has the power to vote the
number of shares of Common Stock, $1.00 par value per share of
First Citizens Bancorp of Indiana ("Bancorp Common Stock")
(together with all shares of Bancorp Common Stock which the
Shareholder subsequently acquires or obtains the power to vote,
the "Bancorp Shares") set forth opposite the Shareholder's
signature on the last page of this Agreement.
B. KeyCorp and Bancorp have entered into an Agreement and
Plan of Merger (the "Merger Agreement") relating to the merger
of Bancorp into KeyCorp. Pursuant to the Merger Agreement,
each outstanding share of Bancorp Common Stock will be
converted into the right to receive shares of KeyCorp Common
Stock in accordance with and as determined by the Merger
Agreement. The Merger Agreement contains, among other things,
representations and warranties of the parties with respect to
the merger contemplated thereby (the "Merger") and conditions
precedent to the obligations of the parties to consummate the
Merger.
<PAGE> 186
C. As an inducement to KeyCorp to enter into the Merger
Agreement, the Shareholder has agreed to commit to vote the
Bancorp Shares in favor of the Merger.
AGREEMENTS
Accordingly, the parties hereto agree as follows:
1. BANCORP SHAREHOLDER VOTE. The Shareholder agrees to
vote the Bancorp Shares as follows:
(i) in favor of the adoption of the Merger Agreement
and the approval of the Merger at the Special Meeting of
Shareholders of Bancorp;
(ii) against the approval of any proposal relating to
a competing merger or business combination involving an
acquisition of Bancorp or the purchase of all or a
substantial portion of the Bancorp Common Stock or of the
assets of Bancorp by any person or entity other than
KeyCorp or an affiliate of KeyCorp; and
(iii) against any other transaction that is
inconsistent with the obligation of Bancorp to consummate
the Merger in accordance with the Merger Agreement.
2. LIMITATION ON VOTING POWER. If the Shareholder is
also a director of Bancorp, it is expressly understood and
acknowledged by the parties hereto that nothing contained
herein is intended to restrict the Shareholder from voting on
any matter, or otherwise from acting, in the Shareholder's
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capacity as a director of Bancorp with respect to any matter,
including but not limited to, the general management or
over-all operation of Bancorp.
3. TERMINATION. Sections 1 and 2 of this Agreement shall
terminate on the earlier of (a) the date on which the Merger
Agreement is terminated in accordance with the terms thereof,
or (b) the date on which the Merger is consummated.
4. REPRESENTATIONS, WARRANTIES, AND ADDITIONAL COVENANTS
OF THE SHAREHOLDER. The Shareholder hereby represents,
warrants and covenants to KeyCorp that:
(a) the Shareholder has the capacity and all
necessary power and authority to vote the Bancorp Shares;
(b) this Agreement constitutes a legal, valid, and
binding obligation of the Shareholder enforceable in
accordance with its terms except as may be limited by
bankruptcy, insolvency, or similar laws affecting
enforcement of creditors rights generally; and
(c) during the term of this Agreement, the
Shareholder will not sell or otherwise voluntarily dispose
of any of the Bancorp Shares which are owned by the
Shareholder or take any voluntary action which would have
the effect of removing the Shareholder's power to vote the
Bancorp Shares or which would be inconsistent with this
Agreement.
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5. BENEFIT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
heirs, successors, and assigns.
6. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original for all
purposes, but such counterparts taken together shall constitute
one and the same instrument.
7. SPECIFIC PERFORMANCE. The parties hereto acknowledge
that damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agree that the obligations
of the Shareholder shall be specifically enforceable and
KeyCorp shall be entitled to injunctive and other equitable
relief. The Shareholder further agrees to waive any bond in
connection with the obtaining of any such injunctive or
equitable relief. This provision is without prejudice to any
other rights that KeyCorp may have against the Shareholder for
any failure to perform his obligations under this Agreement.
8. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of Indiana,
without regard to its conflict of laws principles.
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IN WITNESS WHEREOF, the parties hereto have executed this
Voting Agreement as of the day of year first above written.
KEYCORP [Shareholder]
By:_____________________________ ______________________________
Title:__________________________ ______________________________
Print Name
No. of Bancorp Shares
Shares owned or subject to
voting power:_________________
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Exhibit B
Gentlemen:
I have been advised that as of the date hereof I may be
deemed to be an "affiliate" of First Citizens Bancorp of
Indiana, an Indiana corporation ("Bancorp"), as the term
"affiliate" is defined for purposes of paragraphs (c) and (d)
of Rule 145 of the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the
"Act"). Pursuant to the terms of the Agreement and Plan of
Merger, dated as of June 30, 1994, by and between Bancorp and
KeyCorp, an Ohio corporation ("KeyCorp") (the "Agreement"),
Bancorp will be merged (the "Merger") into and with KeyCorp.
As used herein, "Bancorp Capital Stock" means the Common
Shares, par value $1.00 per share, of Bancorp and "KeyCorp
Capital Stock" means the Common Shares, with a par value of $1.00
each, of KeyCorp.
I represent, warrant, and covenant to KeyCorp that in the
event I receive any KeyCorp Capital Stock as a result of the
Merger:
A. I shall not make any sale, transfer, or other
disposition of any KeyCorp Capital Stock acquired by me in the
Merger in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement
and discussed their requirements and other applicable
limitations upon my ability to sell, transfer, or otherwise
dispose of KeyCorp Capital Stock, to the extent I felt
necessary, with my counsel or counsel for Bancorp.
C. I have been advised that the issuance of KeyCorp
Capital Stock to me pursuant to the Merger has been or will be
registered with the Commission under the Act on a Registration
Statement on Form S-4. However, I have also been advised that,
because at the time of the Merger will be submitted for a vote
of the shareholders of Bancorp, I may be deemed to be an
<PAGE> 191
affiliate of Bancorp, the distribution by me of any KeyCorp
Capital Stock acquired by me in the Merger will not be
registered under the Act and that I may not sell, transfer, or
otherwise dispose of any KeyCorp Capital Stock acquired by me
in the Merger unless (i) such sale, transfer, or other
disposition has been registered under the Act, (ii) such sale,
transfer, or other disposition is made in conformity with the
volume and other limitations of Rule 145 promulgated by the
Commission under the Act, or (iii) in the opinion of counsel
reasonably acceptable to KeyCorp, such sale, transfer, or other
disposition is otherwise exempt from registration under the Act.
D. I understand that KeyCorp is under no obligation to
register under the Act the sale, transfer, or other disposition
by me or on my behalf of any KeyCorp Capital Stock acquired by
me in the Merger or to take any other action necessary in order
to make an exemption from such registration available.
E. I also understand that stop transfer instructions will
be given to KeyCorp's transfer agent with respect to KeyCorp
Capital Stock and that there will be placed on the certificates
for KeyCorp Capital Stock acquired by me in the Merger, or any
substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were
issued in a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. The shares
represented by this certificate may only be
transferred in accordance with the terms of an
agreement dated , 1994 between the
registered holder hereof and the issuer of the
certificate, a copy of which agreement will be mailed
to the holder hereof without charge within five days
after receipt of written request therefor."
F. I also understand that unless the transfer by me of my
KeyCorp Capital Stock has been registered under the Act or is a
sale made in conformity with the provisions of Rule 145,
KeyCorp reserves the right to put the following legend on the
certificates issued to my transferee:
"The shares represented by this certificate have
not been registered under the Securities Act of 1933
and were acquired from a person who received such
shares in a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. The shares
may not be sold, pledged or otherwise transferred
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<PAGE> 192
except in accordance with an exemption from the
registration requirements of the Securities Act of
1933."
It is understood and agreed that the legends set forth in
paragraph E and F above shall be removed by delivery of
substitute certificates without such legend if the undersigned
shall have delivered to KeyCorp a copy of a letter from the
staff of the Commission, or an opinion of counsel in form and
substance reasonably satisfactory to KeyCorp, to the effect
that such legend is not required for purposes of the Act.
Very truly yours,
by
------------------------------
Name:
Accepted this day of
-----
, 1994
- --------
by
------------------------------
- ---------------------------------
Name:
Title:
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Exhibit C
Form of Opinion of First Citizens' Counsel
(a) Bancorp is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Indiana. Citizens Banking Company is a commercial bank duly
organized, validly existing and in good standing under the laws
of the State of Indiana.
(b) The execution and delivery of the Merger Agreement by
Bancorp, and the consummation by Bancorp of the transactions
provided for therein, have been duly authorized by all
requisite corporate action on the part of Bancorp. The Merger
Agreement has been executed and delivered by Bancorp and is a
valid and binding obligation of Bancorp except as may be
limited by bankruptcy, insolvency or other similar laws
affecting enforcement of creditors' rights generally and except
that the enforceability of the obligations of Bancorp is
subject to general principles of equity.
(c) The execution, delivery and performance by Bancorp of
the Merger Agreement do not violate the Articles of
Incorporation or By-Laws of Bancorp.
(d) Except for consents and approvals of or filings or
registrations with the Board of Governors of the Federal
Reserve System, the Indiana Secretary of State and the Indiana
Department of Financial Institutions which have been obtained
or made, or as set forth in Items 2.5 and 2.14 of the Bancorp
Disclosure Schedule, to the best of our knowledge, without our
having made any special investigation concerning any law, or
concerning the applicability of any law based on any facts
known to us, other than the laws specifically referred to in
this opinion, no consent or approval of, or other action by or
filing with, any court or administrative or governmental body
which has not been obtained, taken or made is required under
the laws of the State of Indiana or the laws of the United
States of America, or any court order or judgment specifically
applicable to Bancorp and actually known to us, for Bancorp to
execute and deliver the Merger Agreement and to consummate the
transactions provided for therein. We express no opinion,
however, as to any such consent, approval, action or filing (i)
that may be required as a result of your involvement in the
transactions contemplated by the Merger Agreement because of
facts specifically pertaining to you, (ii) the absence of which
does not have any Material Adverse Effect
<PAGE> 194
on you or does not deprive you of any material benefit under
the Merger Agreement, or (iii) that can be readily obtained or
effected without adverse effect on you during the period of
such consent, approval, action or filing. The foregoing
opinion relates only to consents, approvals, actions, and
filings required under Indiana and federal laws that, in our
experience, are normally applicable to transactions of the type
provided for in the Merger Agreement.
(e) Pursuant to Section 23-1-40-7 of the Indiana Business
Corporation Law (the "IBCL"), upon completion of the filing of
(i) the Articles of Merger with the Secretary of State of
Indiana in compliance with Section 23-1-40-5 of the IBCL and
the issuance of a Certificate of Merger by the Indiana
Secretary of State, and (ii) all documents required to be filed
pursuant to the Ohio General Corporation Law, the Merger of
Bancorp with and into KeyCorp will become effective for all
purposes of the laws of the State of Indiana in accordance with
Section 23-1-40-5 of the IBCL.
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Exhibit D
Form of Opinion of KeyCorp's Counsel
1. KeyCorp has been organized and is existing and in good
standing, as a corporation under the laws of the State of Ohio.
2. The execution and delivery of the Merger Agreement by
KeyCorp and the consummation by KeyCorp of the transactions
provided for therein have been duly authorized by all requisite
corporate action on the part of KeyCorp. The Merger Agreement
has been executed and delivered by KeyCorp and is a valid and
binding obligation of KeyCorp except as may be limited by
bankruptcy, insolvency, or other similar laws affecting
enforcement of creditors' rights generally and except that the
enforceability of the obligations of KeyCorp is subject to
general principles of equity.
3. The execution, delivery and performance by KeyCorp of
the Merger Agreement will not violate the Amended and Restated
Articles of Incorporation, as amended, or Regulations, as
amended, of KeyCorp.
4. Except for consents and approvals of or filings or
registrations with the Board of Governors of the Federal
Reserve System, the Ohio Secretary of State and the Securities
and Exchange Commission, which have been obtained or made, to
the best of our knowledge, without our having made any special
investigation concerning any law, or concerning the
applicability of any law based on any facts known to us, other
than the laws specifically referred to in this opinion, no
consent or approval of, or other action by or filing with, any
court or administrative or governmental body which has not been
obtained, taken or made is required under the laws of the State
of Ohio or the laws of the United States of America, or any
court order or judgment specifically applicable to KeyCorp and
actually known to us, for KeyCorp to execute and deliver the
Merger Agreement and to consummate the transactions provided
for therein. We express no opinion, however, as to any such
consent, approval, action or filing (i) that may be required as
a result of your involvement in the transactions contemplated
by the Merger Agreement because of facts specifically
pertaining to you, (ii) the absence of which does not have any
<PAGE> 196
Material Adverse Effect on you or does not deprive you of any
material benefit under the Merger Agreement, or (iii) that can
be readily obtained or effected without adverse effect on you
during the period of such consent, approval, action or filing.
The foregoing opinion relates only to consents, approvals,
actions, and filings required under Ohio and federal laws that,
in our experience, are normally applicable to transactions of
the type provided for in the Merger Agreement.
5. Pursuant to Section 1701.78 of the Ohio General
Corporation Law (the "OGCL"), upon completion of the filing of
(i) all documents required to be filed pursuant to the Indiana
Business Corporation Law, and (ii) the Ohio Certificate of
Merger with the Secretary of State of Ohio in compliance with
Section 1701.81 of the OGCL, the Merger of Bancorp with and
into KeyCorp will become effective for all purposes of the laws
of the State of Ohio in accordance with Section 1701.81 of the
OGCL.
6. The shares of KeyCorp Common Stock and the Buyer
Rights to be issued in connection with the Merger will be
validly issued, fully paid and nonassessable, and the issuance
of such shares and rights will not violate either any
pre-emptive rights of any shareholders of KeyCorp or any stock
purchase or other agreement pursuant to which KeyCorp is a
party or by which KeyCorp is bound.
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APPENDIX B
OPINION OF DILLON READ
(TO BE FILED BY AMENDMENT)
B-1
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APPENDIX C
INDIANA GENERAL CORPORATION ACT
CHAPTER 44
DISSENTERS' RIGHTS
23-1-44-1. "CORPORATION" DEFINED. As used in this chapter,
"corporation" means the issuer of the shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
23-1-44-2. "DISSENTER" DEFINED. As used in this chapter, "dissenter"
means a shareholder who is entitled to dissent from corporate action under
section 8 of this chapter and who exercises that right when and in the manner
required by sections 10 through 18 of this chapter.
23-1-44-3. "FAIR VALUE" DEFINED. As used in this chapter, "fair
value," with respect to a dissenter's shares, means the value of the shares
immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable.
23-1-44-4. "INTEREST" DEFINED. As used in this chapter, "interest"
means interest from the effective date of the corporate action until the date
of payment, at the average rate currently paid by the corporation on its
principal bank loans or, if none, at a rate that is fair and equitable under
all the circumstances.
23-1-44-5. "RECORD SHAREHOLDER" DEFINED. As used in this chapter,
"record shareholder" means the person in whose name shares are registered in
the records of a corporation or the beneficial owner of shares to the extent
that treatment as a record shareholder is provided under a recognition
procedure or a disclosure procedure established under IC 23-1-30-4.
23-1-44-6. "BENEFICIAL SHAREHOLDER" DEFINED. As used in this chapter,
"beneficial shareholder" means the person who is a beneficial owner of shares
held by a nominee as the record shareholder.
23-1-44-7. "SHAREHOLDER" DEFINED. As used in this chapter,
"shareholder" means the record shareholder or the beneficial shareholder.
23-1-44-8. SHAREHOLDER DISSENT. (a) A shareholder is entitled to
dissent from, and obtain payment of the fair value of the shareholder's shares
in the event of, any of the following corporate actions.
(1) Consummation of a plan of merger to which the corporation is a
party if:
(A) Shareholder approval is required for the merger by IC
23-1-40-3 or the articles of incorporation; and
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(B) The shareholder is entitled to vote on the merger.
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation other than in the
usual and regular course of business, if the shareholder is
entitled to vote on the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to court order
or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be
distributed to the shareholders within one (1) year after the
date of sale.
(4) The approval of a control share acquisition under IC 23-1-42.
(5) Any corporate action taken pursuant to a shareholder vote to
the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
(b) This section does not apply to the holders of shares of any
class or series if, on the date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting of shareholders at which the merger,
plan of share exchange, or sale or exchange of property is to be acted on, the
shares of that class or series were:
(1) Registered on a United States securities exchange registered
under the Exchange Act (as defined in IC 23-1-43-9); or
(2) Traded on the National Association of Securities Dealers, Inc.
Automated Quotations System Over-the-Counter Markets --
National Market Issues or a similar market.
(c) A shareholder:
(1) Who is entitled to dissent and obtain payment for the
shareholder's shares under this chapter; or
(2) Who would be so entitled to dissent and obtain payment but for
the provisions of subsection (b);
may not challenge the corporate action creating (or that, but for the
provisions of subsection (b), would have created) the shareholder's
entitlement.
23-1-44-9. BENEFICIAL SHAREHOLDER DISSENT. (a) A record shareholder
may assert dissenters' rights as to fewer than all the shares registered in the
shareholder's name only if the shareholder dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in
writing of the name and address of each person on whose behalf the
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shareholder asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares as to which the
shareholder dissents and the shareholder's other shares were registered in the
names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to
shares held on the shareholder's behalf only if:
(1) The beneficial shareholder submits to the corporation the
record shareholder's written consent to the dissent not later than the
time the beneficial shareholder asserts dissenters' rights; and
(2) The beneficial shareholder does so with respect to all the
beneficial shareholder's shares or those shares over which the
beneficial shareholder has power to direct the vote.
23-1-44-10. NOTICE OF DISSENTERS' RIGHTS PRECEDING SHAREHOLDER VOTES.
(a) If proposed corporate action creating dissenters' rights under section 8 of
this chapter is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert
dissenters' rights under this chapter.
(b) If corporation action creating dissenters' rights under
section 8 of this chapter is taken without a vote of shareholders, the
corporation shall notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in section 12 of this chapter.
23-1-44-11. NOTICE OF DISSENTERS' RIGHTS PRECEDING SHAREHOLDER VOTE.
(a) If proposed corporate action creating dissenters' rights under section 8 of
this chapter is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken
written notice of the shareholder's intent to demand payment for the
shareholder's shares if the proposed action is effectuated; and
(2) Must not vote the shareholder's shares in favor of the
proposed action.
(b) A shareholder who does not satisfy the requirements of
subsection (a) is not entitled to payment for the shareholder's shares under
this chapter.
23-1-44-12. NOTICE OF DISSENTERS' RIGHTS FOLLOWING ACTION CREATING
RIGHTS. (a) If proposed corporate action creating dissenters' rights under
section 8 of this chapter is authorized at a shareholders' meeting, the
corporation shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of section 11 of this chapter.
(b) The dissenters' notice must be sent no later than ten (10)
days after approval by the shareholders or if corporate action is taken without
approval by the shareholders, then ten (10) days after the corporate action was
taken. The dissenters' notice must:
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(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited.
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is
received;
(3) Supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the terms of
the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person acquired
beneficial ownership of the shares before that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30) nor more than
sixty (60) days after the date the subsection (a) notice is delivered;
and
(5) Be accompanied by a copy of this chapter.
23-1-44-13. DEMAND FOR PAYMENT BY DISSENTER. (a) A shareholder sent a
dissenters' notice described in IC 23-1-42-11 or in section 12 of this chapter
must demand payment, certify whether the shareholder acquired beneficial
ownership of the shares before the date required to be set forth in the
dissenters' notice under section 12(b)(3) of this chapter, and deposit the
shareholder's certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits the
shareholder's shares under subsection (a) retains all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(c) A shareholder who does not demand payment or deposit the
shareholder's share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for the shareholder's shares
under this chapter and is considered, for purposes of this article, to have
voted the shareholder's shares in favor of the proposed corporate action.
23-1-44-14. TRANSFER OF SHARES RESTRICTED AFTER DEMAND FOR PAYMENT.
(a) The corporation may restrict the transfer of uncertificated shares from the
date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under section 16 of this chapter.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
23-1-44-15. PAYMENT TO DISSENTER. (a) Except as provided in section
17 of this chapter, as soon as the proposed corporate action is taken, or, if
the transaction did not need shareholder approval and has been completed, upon
receipt of a payment demand, the corporation shall pay each dissenter who
complied with section 13 of this chapter the amount the corporation estimates
to be the fair value of the dissenter's shares.
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(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an
income statement for the year, a statement of changes in shareholders'
equity for the year, and the latest available interim financial
statements, if any;
(2) A statement of the corporation's estimate of the fair value of
the shares; and
(3) A statement of the dissenter's right to demand payment under
section 18 of this chapter.
23-1-44-16. RETURN OF SHARES AND RELEASE OF RESTRICTIONS. (a) If the
corporation does not take the proposed action within sixty (60) days after the
date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing
transfer restrictions, the corporation takes the proposed action, it must send
a new dissenters' notice under section 12 of this chapter and repeat the
payment demand procedures.
23-1-44-17. OFFER OF FAIR VALUE OF SHARES OBTAINED AFTER FIRST
ANNOUNCEMENT. (a) A corporation may elect to withhold payment required by
section 15 of this chapter from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders
of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares and shall pay this amount to each dissenter who
agrees to accept it in full satisfaction of the dissenter's demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares and a statement of the dissenter's right to demand payment
under section 18 of this chapter.
23-1-44-18. DISSENTER DEMAND FOR FAIR VALUE UNDER CERTAIN CONDITIONS.
(a) A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and demand payment of the
dissenter's estimate (less any payment under section 15 of this chapter), or
reject the corporation's offer under section 17 of this chapter and demand
payment of the fair value of the dissenter's shares, if:
(1) The dissenter believes that the amount paid under section 15
of this chapter or offered under section 17 of this chapter is less
than the fair value of the dissenter's shares;
(2) The corporation fails to make payment under section 15 of this
chapter within sixty (60) days after the date set for demanding
payment; or
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(3) The corporation, having failed to take the proposed action,
does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within sixty (60) days
after the date set for demanding payment.
(b) A dissenter waives the right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's demand
in writing under subsection (a) within thirty (30) days after the corporation
made or offered payment for the dissenter's shares.
23-1-44-19. EFFECT OF FAILURE TO PAY DEMAND -- COMMENCEMENT OF
JUDICIAL APPRAISAL PROCEEDING. (a) If a demand for payment under IC 23-1-42-11
or under section 18 of this chapter remains unsettled, the corporation shall
commence a proceeding within sixty (60) days after receiving the payment demand
and petition the court to determine the fair value of the shares. If the
corporation does not commence the proceeding within the sixty (60) day period,
it shall pay each dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit
or superior court of the county where a corporation's principal office (or, if
none in Indiana, its registered office) is located. If the corporation is a
foreign corporation without a registered office in Indiana, it shall commence
the proceeding in the county in Indiana where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters (whether or not
residents of this state) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is
commenced under subsection (b) is plenary and exclusive. The court may appoint
one (1) or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them or in any amendment to it. The
dissenters are entitled to the same discovery rights as parties in other civil
proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment.
(1) For the amount, if any, by which the court finds the fair
value of the dissenter's shares, plus interest, exceeds the amount paid
by the corporation; or
(2) For the fair value, plus accrued interest, of the dissenter's
after acquired shares for which the corporation elected to withhold
payment under section 17 of this chapter.
23-1-44-20. JUDICIAL DETERMINATION AND ASSESSMENT OF COSTS. (a) The
court in an appraisal proceeding commenced under section 18 of this chapter
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against such parties and in such amounts as the court
finds equitable.
C-6
<PAGE> 204
(b) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters
if the court finds the corporation did not substantially comply with
the requirements of sections 10 through 18 of this chapter; or
(2) Against the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatious, or not in good
faith with respect to the rights provided in this chapter.
(c) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated
and that the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be paid
out of the amounts awarded the dissenters who were benefited.
C-7
<PAGE> 205
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Ohio law, Ohio corporations are authorized to indemnify directors,
officers, employees, and agents within prescribed limits and must indemnify
them under certain circumstances. Ohio law does not provide statutory
authorization for a corporation to indemnify directors, officers, employees,
and agents for settlements, fines, or judgments in the context of derivative
suits. However, it provides that directors (but not officers, employees, and
agents) are entitled to mandatory advancement of expenses, including attorneys'
fees, incurred in defending any action, including derivative actions, brought
against the director, provided the director agrees to cooperate with the
corporation concerning the matter and to repay the amount advanced if it is
proved by clear and convincing evidence that his or her act or failure to act
was done with deliberate intent to cause injury to the corporation or with
reckless disregard for the corporation's best interest.
Ohio law does not authorize payment of judgments to a director, officer,
employee, or agent after a finding of negligence or misconduct in a derivative
suit absent a court order. Indemnification is required, however, to the extent
such person succeeds on the merits. In all other cases, if a director,
officer, employee, or agent acted in good faith and in a matter he or she
reasonably believed to be in or not opposed to the best interest of the
corporation, indemnification is discretionary except as otherwise provided by a
corporation's articles, code of regulations, or by contract except with respect
to the advancement of expenses of directors.
Under Ohio law, a director is not liable for monetary damages unless it
is proved by clear and convincing evidence that his or her action or failure to
act was undertaken with deliberate intent to cause injury to the corporation or
with reckless disregard for the best interest of the corporation. There is,
however, no comparable provision limiting the liability of officers, employees,
or agents of a corporation. The statutory right to indemnification is not
exclusive in Ohio, and an Ohio corporation may, among other things, procure
insurance for such persons.
The KeyCorp Regulations provide that KeyCorp shall indemnify to the
fullest extent permitted by law any person made or threatened to be made a
party to any action, suit, or proceeding by reason of the fact that he or she
is or was a director, officer, or employee of KeyCorp or of any other bank,
corporation, partnership, trust, or other enterprise for which he or she was
serving a director, officer, or employee at the request of KeyCorp.
Except as stated above, neither the Articles of Incorporation of KeyCorp
nor any other contract or arrangement to which KeyCorp is a party provides for
such indemnification. Under the terms of KeyCorp's directors' and officers'
liability and company reimbursement insurance policy, directors and officers of
KeyCorp are insured against certain liabilities, including liabilities arising
under the Securities Act.
II-1
<PAGE> 206
KeyCorp is a party to Employment Agreements with, respectively, Victor
J. Riley, Jr., Robert W. Gillespie, and Roger Noall, and KeyCorp is party to
Change of Control Agreements with certain other executive officers (the
provisions of which became effective as a result of the merger of old Key with
and into Society), pursuant to which KeyCorp has agreed to indemnify the
officer, to the full extent permitted or authorized by Ohio law, if the officer
is made or threatened to be made a party to any action, suit, or proceeding by
reason of the officer's serving as an employee, officer, or director of KeyCorp
and/or any of its subsidiaries or any other company at the request of KeyCorp
or any of the subsidiaries, and KeyCorp has agreed to advance expenses incurred
by the officer in defending any such action, suit, or proceeding.
Under the Merger Agreement, KeyCorp has agreed to indemnify all present
and former officers and directors of First Citizens and its subsidiaries after
the Effective Time for any liabilities arising out of any act or omission prior
to the Effective Time in their capacity as officer or director to the fullest
extent provided by Indiana law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See Index to Exhibits.
ITEM 22. UNDERTAKINGS.
(a) KeyCorp, the undersigned Registrant, hereby undertakes: To
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represents a
fundamental change in the information in the Registration Statement.
To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
That, for the purpose of determining any liability under the Securities
Act of 1993, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes as follows: (1) that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of
II-2
<PAGE> 207
this Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition
to the information called for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, as amended, each such post-effective
amendment shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to provisions described in Item 20 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) KeyCorp, the undersigned Registrant, hereby undertakes to
respond to requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(c) KeyCorp, the undersigned Registrant, hereby undertakes to
supply by means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was not the
subject of or included in the Registration Statement when it became effective.
II-3
<PAGE> 208
<TABLE>
FORM S-4
REGISTRATION STATEMENT
INDEX TO EXHIBITS
<CAPTION>
FORM
S-4
EXHIBIT NO. DESCRIPTION
- ----------- ------------
<S> <C> <C>
(2) (a) Agreement and Plan of Merger, dated as of
June 30, 1994, by and between KeyCorp and
First Citizens Bancorp of Indiana (included
as Appendix A to the Prospectus/ Proxy
Statement)
(4) (a) Amended and Restated Articles of Incorporated herein by reference to Exhibit
Incorporation of KeyCorp 7 to Form 8-A/A filed on February 25, 1994
(b) Regulations of KeyCorp Incorporated herein by reference to Exhibit
to Form 8-A/A filed on February 25, 1994
(c) Rights Agreement, dated as of August 25, Incorporated herein by reference to Exhibit
1989, between Society Corporation (renamed 1 to Form 8-A filed on August 29, 1989
KeyCorp on March 1, 1994) and First Chicago
Trust Company of New York, as Rights Agent,
including as Exhibit A thereto the form of
Rights Certificate
(d) Amendment No. 1 to Rights Agreement, dated Incorporated herein by reference to Exhibit
February 21, 1991, between Society 1 to Form 8-A filed on February 28, 1991
Corporation (renamed KeyCorp on March 1,
1994) and First Chicago Trust Company of New
York, as Rights Agent
</TABLE>
II-4
<PAGE> 209
<TABLE>
<CAPTION>
FORM
S-4
EXHIBIT NO. DESCRIPTION
- ----------- ------------
<S> <C> <C>
(e) Amendment No. 2 to Rights Agreement, dated Incorporated herein by reference to Exhibit
September 12, 1991, between Society 4 to Schedule 13D filed on September 23,
Corporation (renamed KeyCorp on March 1, 1991
1994) and First Chicago Trust Company of New
York, as Rights Agent
(f) Amendment No. 3 to Rights Agreement, dated Incorporated herein by reference to Exhibit
October 1, 1993, between Society Corporation 4 to Schedule 13D filed on October 12, 1993
(renamed KeyCorp on March 1, 1994) and
Society National Bank, as Rights Agent.
(5) Opinion of KeyCorp as to the legality of the
securities to be registered
(8) (a) Opinion of Thompson, Hine and Flory as to
certain federal income tax matters*
(b) Opinion of Edwards & Angell as to certain
federal income tax matters*
(15) Letter re unaudited interim financial
information
(21) List of KeyCorp subsidiaries
(23) (a) Consent of Ernst & Young
(b) Consent of Crowe, Chizek and
Company
(c) Consent of Thompson, Hine and Flory (included
as part of Exhibit 8(a))*
(d) Consent of Edwards & Angell (included as part
of Exhibit 8(b))*
(24) (a) Powers of Attorney
</TABLE>
II-5
<PAGE> 210
<TABLE>
<CAPTION>
FORM
S-4
EXHIBIT NO. DESCRIPTION
- ----------- ------------
<S> <C>
(b) Certified Resolutions of Board of Directors
of KeyCorp
(99) (a) Form of First Citizens Voting Agreement
(included as Exhibit A to Merger Agreement,
Exhibit 2(a))
(b) Opinion of Dillon, Read & Co., dated
________________, 1994 (included as Appendix
B to the Prospectus/Proxy Statement)*
(c) Employment Agreement dated May 5, 1994, by
and between First Citizens Bancorp of Indiana
and James D. Strietelmeier
(d) Form of Proxy to be used by First Citizens
Bancorp of Indiana
(e) Citizens Bank Key Employee
1994 Severance Plan
<FN>
* To be filed by amendment.
</TABLE>
II-6
<PAGE> 211
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cleveland, State of Ohio, on this
twenty-second day of September, 1994.
KEYCORP
By: /s/ Daniel R. Stolzer
---------------------------
Daniel R. Stolzer
Senior Vice President and
Senior Managing Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the capacity
indicated.
Title and Description
---------------------
Victor J. Riley, Jr., Chairman of the Board, Chief Executive Officer, and
Director (Principal Executive Officer); James W. Wert (Principal Financial
Officer); Lee G. Irving (Principal Accounting Officer); H. Douglas Barclay,
Director; William G. Bares, Director; Albert C. Bersticker, Director; Thomas
A. Commes, Director; Kenneth M. Curtis, Director; John C. Dimmer, Director;
Robert W. Gillespie, Director; Stephen R. Hardis, Director; Henry S. Hemingway,
Director; Charles R. Hogan, Director; Lawrence A. Leser, Director; Steven A.
Minter, Director; M. Thomas Moore, Director; John C. Morley, Director; Richard
W. Pogue, Director; Robert A. Schumacher, Director; Ronald B. Stafford,
Director; Peter G. Ten Eyck II, Director; and Nancy B. Veeder, Director.
By: /s/ Daniel R. Stolzer
---------------------------
Daniel R. Stolzer
Attorney-in-Fact
September 22, 1994
II-7
<PAGE> 1
Exhibit 5
KEYCORP
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114-1306
SEPTEMBER 15, 1994
Securities and Exchange Commission
Washington D. C. 20549
Re: Merger of First Citizens Bancorp of Indiana with and into KeyCorp
Gentlemen:
I am Senior Vice President and Senior Managing Counsel of KeyCorp
Management Company, an affiliate of KeyCorp. I have acted as counsel of
KeyCorp in connection with the merger of First Citizens Bancorp of Indiana
("First Citizens") with and into KeyCorp (the "Merger"), pursuant to an
Agreement and Plan of Merger by and Between First Citizens and KeyCorp, dated
as of June 30, 1994 (as amended, the "Merger Agreement"). This opinion is
furnished to you in connection with a Registration Statement on Form S-4 of
KeyCorp (the "Registration Statement") with respect to a maximum of 1,960,205
Common Shares of KeyCorp, with a par value of $1 each (the "Common Shares"), to
be issued in connection with the Merger.
In connection with this opinion, I have made such investigations of law
and fact as I have deemed necessary and appropriate for the purpose of this
opinion and have examined the Merger Agreement (and exhibits thereto), the
Registration Statement (and exhibits thereto) as filed with the Securities and
Exchange Commission, as well as KeyCorp's Amended and Restated Articles of
Incorporation and Regulations, and relevant corporate records. In addition, I
have made such investigations and reviewed such other documents as I have
deemed necessary or appropriate for the purpose of this opinion. In making
such examinations, I have assumed the authenticity of all original documents
and records, the conformity of all documents and records submitted to me as
conformed copies or photocopies of original documents, and the capacity to sign
and genuineness of all signatures.
Based upon the foregoing and legal matters that I deem relevant, I am
of the opinion that the Common Shares, when issued in accordance with the terms
of the Merger Agreement, will be validly issued, fully paid, and
non-assessable.
<PAGE> 2
Securities and Exchange Commission
September 15, 1994
Page 2
The information set forth herein is as of the date hereof. I assume no
obligation to advise you of changes that may hereafter be brought to my
attention. This opinion is based on statutory laws and judicial decisions that
are in effect on the date hereof, and I do not opine with respect to any law,
regulation, rule, or governmental policy that may be enacted or adopted after
the date hereof, nor do I assume any responsibility to advise you of future
changes in my opinion.
This opinion is solely for your information in connection with the
transaction contemplated by the Merger Agreement and is not to be quoted in
whole or in part or otherwise referred to in any of KeyCorp's financial
statements or other public release. This letter may not be relied upon by any
other person or for any other purposes whatsoever.
Very truly yours,
/s/ Steven N. Bulloch
Steven N. Bulloch
Senior Vice President and
Senior Managing Counsel
<PAGE> 1
Exhibit 8(a)
[Form of opinion of Thompson, Hine & Flory]
September ___, 1994
KeyCorp
127 Public Square
Cleveland, Ohio 44114
Gentlemen:
This letter is in response to your request for our
opinion with respect to certain Federal income tax consequences of the proposed
merger of First Citizens Bankcorp of Indiana ("First Citizens") with and into
KeyCorp ("Key Corp") (the "Merger") pursuant to the Agreement and Plan of
Merger, dated as of June 30, 1994, by and between First Citizens and KeyCorp
(the "Agreement"). Unless otherwise specified, the terms used herein are
defined in the Prospectus/Proxy Statement of KeyCorp and First Citizens. This
opinion is effective as of the Effective Time of the Merger.
In connection with the proposed Merger, you have
informed us of the following:
(a) First Citizens will merge with KeyCorp, which
will be the surviving corporation, in compliance with the laws of the
States of Ohio and Indiana;
(b) Pursuant to the Merger, all of the assets of
First Citizens will be transferred to KeyCorp and KeyCorp will assume
all of First Citizens' liabilities;
(c) At the Effective Time, each outstanding share of
First Citizens Common Stock will be converted into a right to receive
a number of shares of KeyCorp
<PAGE> 2
Common Stock determined pursuant to a formula set forth in the
Agreement;
(d) At the Effective Time, each holder of First
Citizens Common Stock who otherwise would have been entitled to a
fraction of a KeyCorp Common Stock will receive in lieu thereof a
right to receive cash equal to such fraction multiplied by the average
of the high and low sales prices of the KeyCorp Common Stock as
reported on New York Stock Exchange on the trading day immediately
preceding the Effective Time;
(e) As soon as practicable at or after the Effective
Time, the exchange agent will distribute KeyCorp Common Stock and cash
in lieu of fraction shares to holders of First Citizens Common Stock.
(f) KeyCorp will continue to conduct the historic
business of First Citizens or use a significant portion of First
Citizens' historic business assets in a business within the meaning of
Treasury Regulation Section 1.368-1(d).
This opinion is expressly contingent upon satisfaction of the
continuity of interest requirement of the Treasury Regulations Section
1.368-1(b) ("Treasury Regulations"). The management of First Citizens has
advised us that there is no plan or intention by stockholders of First Citizens
who own 5 percent or more of its stock and to the best of their knowledge there
is no plan or intention on the part of the remaining First Citizens
stockholders, in each case, to sell, exchange or otherwise dispose of KeyCorp
Common Stock received in the Merger that would result in failure to satisfy the
continuity of interest requirement as prescribed in the Treasury Regulations
and the Internal Revenue Service guidelines as set forth in Revenue Procedure
77-37, as modified to the date hereof.
In connection herewith, we have examined the Agreement, the
Registration Statement on Form S-4 filed by Society with
<PAGE> 3
the Securities and Exchange Commission (which contains a Prospectus/Proxy
Statement) and such other information as we have deemed relevant.
As to questions of fact material to the opinions herein, we have relied
upon representations of KeyCorp and First Citizens set forth in letters
dated September ____, 1994 certified by their respective officers. On the
basis of the foregoing and subject to the conditions, qualifications and
limitations set forth herein, we are of the opinion that for Federal income tax
purposes:
(a) The Merger will constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code 1986, as amended (the "Code"), and KeyCorp and
First Citizens will each be a party to the reorganization;
(b) KeyCorp will recognize no income, gain or
loss as a result of the Merger.
(c) No income, gain or loss will be
recognized by a shareholder of KeyCorp as a result of the Merger.
This opinion does not relate to or purport to cover
any matters other than the ones expressly stated herein. The opinion expressed
herein is limited to the consequences of the Merger under current federal
income tax law as described herein and as of the date of this opinion letter.
No opinion is expressed with respect to state, local or other tax laws, nor
with respect to the treatment of shares received as a result of the exercise of
employee stock options. We assume no obligation to revise or supplement this
opinion should the present federal income tax laws be changed by any
legislation, judicial decisions, or otherwise.
We hereby consent to the reference to use
<PAGE> 4
under the caption "Certain Federal Income Tax Consequences" in
the Prospectus/Proxy Statement forming a part of the Registration Statement and
to the filing of a copy of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
<PAGE> 1
Exhibit 8(b)
FORM OF OPINION OF EDWARDS & ANGELL
[ ], 1994
First Citizens Bancorp of Indiana
One Citizens Plaza
Anderson, Indiana 460l6
Re: FEDERAL INCOME TAX CONSEQUENCES OF MERGER OF FIRST
CITIZENS BANCORP OF INDIANA WITH AND INTO KEYCORP
-------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to First Citizens Bancorp
of Indiana ("First Citizens") in connection with the proposed
Merger (the "Merger") of First Citizens with and into KeyCorp
("KeyCorp") pursuant to an Agreement and Plan of Merger dated
as of June 30, 1994 (the "Merger Agreement") by and between
First Citizens and KeyCorp, whereby upon consummation of the
merger, the separate corporate existence of First Citizens will
cease, KeyCorp will be the surviving corporation, and the
shareholders of First Citizens will become shareholders of
KeyCorp, as described more fully in the Registration Statement
on Form S-4 of KeyCorp (the "Registration Statement") filed
with the Securities and Exchange Commission under the
Securities Act of 1933, as amended. You have requested our
opinion (i) that the Merger of First Citizens and KeyCorp will
constitute a reorganization within the meaning of section
368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and (ii) as to certain other federal income tax
consequences arising in connection with the Merger.
In preparing this opinion, we have reviewed such documents
and materials as we have considered necessary for the purpose
of rendering such opinion. The opinions expressed herein are
based on the terms of the Merger as described in the Merger
Agreement (including exhibits thereto), as well as on certain
factual statements relating to the Merger and the transactions
contemplated thereby set forth in the Registration Statement
and on certain factual representations set forth below. Such
representations have been made to us in representation letters
from First Citizens and KeyCorp dated as of the date of this
opinion letter.
<PAGE> 2
The discussion and conclusions set forth below are based on
the Code, the Treasury Regulations promulgated thereunder and
existing administrative and judicial interpretations thereof,
all of which are subject to change. No assurance therefore can
be given that the federal income tax consequences described
below will not be altered in the future.
Capitalized terms used herein and not otherwise defined
shall have the meanings given them in the Registration
Statement.
I. PLAN OF REORGANIZATION
A. THE MERGER
Subject to the terms and conditions of the Merger
Agreement, First Citizens will be merged with and into KeyCorp
pursuant to the Merger Agreement, the separate existence of
First Citizens will cease, and KeyCorp will be the surviving
corporation in the Merger.
At the Effective Time, each share of First Citizens Common
Stock then issued and outstanding (other than treasury shares
held by First Citizens or First Citizens Common Stock owned by
KeyCorp for its own accounts) will cease to be outstanding and
will be converted into the number of shares of KeyCorp Common
Stock (carried out to four decimal places), with a par value of
$1.00 each, determined by dividing $37.00 by the "Average Stock
Price" (as defined below); provided, however, that (A) if the
Average Stock Price calculated as aforesaid shall be less than
or equal to $25.9000 per share, the Average Stock Price shall
be deemed to be $25.9000, or (B) if the Average Stock Price
calculated as described below shall be greater than or equal to
$38.8500 per share, the Average Stock Price shall be deemed to
be $38.8500 (the foregoing calculation shall be referred to
hereinafter as the "Exchange Ratio"). The term "Average Stock
Price" means the average (rounded to the nearest whole cent) of
the last sale price of the day of one share of KeyCorp Common
Stock as reported on the consolidated tape of the NYSE for the
twenty (20) consecutive trading days ending on and including
the fifth (5th) trading day immediately preceding (but not
including) the Closing Date of the Merger (as defined in the
Merger Agreement). The Exchange Ratio is subject to adjustment
upon the occurrence of certain circumstances. Each share of
KeyCorp Common Stock issued to First Citizens shareholders in
the Merger will be accompanied by one Right to be evidenced by
certificates for KeyCorp Common Stock under the Rights
Agreement. Each Right represents the right to purchase one
share of KeyCorp Common Stock upon the terms and conditions set
forth in the Rights Agreement.
-2-
<PAGE> 3
No fractional shares of KeyCorp Common Stock will be issued
in the Merger, but, in lieu thereof, each holder of First
Citizens Common Stock who otherwise would have been entitled to
a fraction of a share of KeyCorp Common Stock, upon surrender
of his or her certificates representing shares of First
Citizens Common Stock, will be paid the cash value (without
interest) of such fraction, which will be equal to such
fraction multiplied by the number of shares of KeyCorp Common
Stock (carried out to four decimal places), with a par value of
$1.00 each, determined pursuant to the Exchange Ratio.
No conversion of First Citizens Common Stock into KeyCorp
Common Stock shall be made with respect to any share of First
Citizens Common Stock as to which a shareholder of First
Citizens has properly elected to exercise any rights to dissent
and obtain payment of the fair value of his or her shares under
the Indiana General Corporation Act.
Except in the event of termination of the Merger Agreement,
each party to the Merger will pay its own costs and expenses
incurred in connection with the Merger Agreement; provided,
however, that KeyCorp shall pay the costs and expenses of
printing and mailing the Prospectus/Proxy Statement, and all
filing and other fees paid to the Securities and Exchange
Commission or any other governmental entity in connection with
the Merger and the other transactions contemplated by the
Merger Agreement.
II. REPRESENTATIONS
In connection with our preparation of this opinion, we have
with your permission and without investigation relied upon the
following representations provided to us by First Citizens and
KeyCorp:
1. There is no plan or intention by the stockholders of
First Citizens to sell, exchange or otherwise dispose of a
number of shares of KeyCorp Common Stock received in the Merger
that would reduce the First Citizens stockholders' ownership of
KeyCorp Common Stock to a number of such shares having a value,
as of the Effective Time, of less than 50% of the value of all
formerly outstanding stock of First Citizens as of the same
date. For purposes of this representation, shares of First
Citizens Common Stock exchanged for cash in lieu of fractional
shares of KeyCorp Common Stock will be treated as outstanding
First Citizens Common Stock on the date of the Merger.
Moreover, shares of First Citizens Common Stock and shares of
KeyCorp Common Stock received by First Citizens stockholders in
the Merger and otherwise sold, redeemed or disposed of prior or
subsequent to the Merger are taken into account in making this
representation.
-3-
<PAGE> 4
2. The payment of cash in lieu of fractional shares of
KeyCorp Common Stock is solely for the purpose of avoiding the
expense and inconvenience to KeyCorp of issuing fractional
shares and does not represent a separately bargained-for
consideration. The total cash consideration that will be paid
in the Merger to the holders of First Citizens Common Stock
instead of issuing fractional shares of KeyCorp Common Stock
will be less than 1% of the total consideration that will be
issued in the transaction to the holders of First Citizens
Common Stock in exchange for their shares of First Citizens
Common Stock. The fractional share interests of each holder of
First Citizens Common Stock will be aggregated and no holder of
First Citizens Common Stock will receive cash in an amount
equal to or greater than the value of one full share of KeyCorp
Common Stock.
3. The liabilities of First Citizens assumed by KeyCorp
and the liabilities to which the transferred assets of First
Citizens are subject have been incurred by First Citizens in
the ordinary course of its business.
4. KeyCorp has no plan or intention to reacquire any of
the KeyCorp Common Stock issued in the Merger, except that from
time to time KeyCorp does reacquire its own common stock in the
open market or through a self-tender for general corporate
purposes such as stock option exercises, dividend reinvestment
requirements or acquisitions of businesses and business
assets. There is no intention by KeyCorp to target the KeyCorp
Common Stock issued to the stockholders of First Citizens in a
manner different from all other stockholders of KeyCorp.
5. As of the Effective Time, First Citizens has only
one class of stock outstanding, the First Citizens Common Stock.
6. There is no intercorporate indebtedness existing
between First Citizens and KeyCorp that was issued, acquired,
or will be settled at a discount.
7. First Citizens is not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of
section 368(a)(3)(A) of the Code.
8. As of the Effective Time of the Merger, the fair
market value and the total adjusted basis of the assets of
First Citizens transferred to KeyCorp will equal or exceed the
sum of the liabilities assumed by KeyCorp plus the amount of
liabilities, if any, to which the transferred assets are
subject.
-4-
<PAGE> 5
9. First Citizens and the stockholders of First
Citizens will pay all of their own costs and expenses incurred
in connection with the Merger, other than as noted above. Any
costs or expenses properly attributable to First Citizens and
paid by KeyCorp will be solely and directly related to the
Merger and will be paid by having KeyCorp assume the liability
for such costs or expenses. No payment of cash or other
property will be made to First Citizens by any party.
10. Following the Merger, KeyCorp will continue the
historic business of First Citizens or use a significant
portion of First Citizens' historic business assets in a
business.
11. KeyCorp has no plan or intention to sell, exchange or
otherwise dispose of any of the assets of First Citizens
acquired by KeyCorp in the Merger, except for dispositions made
in the ordinary course of business.
III. OPINION
Based on the foregoing, it is our opinion that:
1. The Merger of First Citizens into KeyCorp will
constitute a reorganization within the meaning of section
368(a) of the Code, and for federal income tax purposes no gain
or loss will be recognized by First Citizens or KeyCorp as a
result of the Merger.
2. No gain or loss will be recognized by a First
Citizens stockholder (other than as a result of cash payments
made in lieu of fractional shares) upon the exchange of his
First Citizens Common Stock for KeyCorp Common Stock.
3. The tax basis of the KeyCorp Common Stock received
by a First Citizens stockholder who exchanges his First
Citizens Common Stock for KeyCorp Common Stock will be the same
as such stockholder's tax basis in the First Citizens Common
Stock surrendered in exchange therefor (subject to any
adjustments required by the receipt of cash in lieu of a
fractional share interest of KeyCorp Common Stock).
4. The holding period for federal income tax purposes
of the KeyCorp Common Stock received by a First Citizens
stockholder will include the period during which the First
Citizens Common Stock, surrendered in exchange therefor was
held (provided that such First Citizens Common Stock was held
by such First Citizens stockholder as a capital asset at the
Effective Time).
-5-
<PAGE> 6
5. Cash, if any, received by a First Citizens
stockholder in lieu of a fractional share interest of KeyCorp
Common Stock will be treated as having been received in a
distribution in full payment in exchange for the fractional
share interest of KeyCorp Common Stock which he would otherwise
be entitled to receive, and any gain or loss so recognized will
qualify as capital gain or loss (assuming the First Citizens
Common Stock was a capital asset in such stockholder's hands at
the Effective Time).
This opinion is furnished solely for the benefit of the
addressee in connection with the transactions contemplated by
the Merger Agreement and may not be relied upon by any other
person or entity or for any other purpose without our prior
written consent.
We consent to the use of this opinion as an exhibit to
the Registration Statement and to the use of our name in
the Registration Statement and Prospectus/Proxy Statement
constituting a part thereof.
Very truly yours,
Edwards & Angell
-6-
<PAGE> 1
Exhibit 15
ACKNOWLEDGMENT LETTER OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
KeyCorp
We are aware of the incorporation by reference in KeyCorp's Registration
Statement on Form S-4 pertaining to the merger of First Citizens Bancorp of
Indiana with and into KeyCorp dated September 22, 1994, of our reports dated
April 19, 1994 and July 18, 1994 relating to the unaudited consolidated interim
financial statements of KeyCorp, included in its Forms 10-Q for the quarters
ended March 31, 1994 and June 30, 1994.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a part
of the Registration Statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
ERNST & YOUNG
Cleveland, Ohio
September 22, 1994
<PAGE> 1
<TABLE>
Exhibit 21
KEYCORP
ORGANIZATION CHART
SUBSIDIARIES
<CAPTION>
NAME DOMICILE PARENT % OWNERSHIP
- ---- -------- ------ -----------
<S> <C> <C> <C> <C>
1. A.T.-Sentinel, Inc. DE SNB 100%
2. American Advisers, Inc. OH SAMI 100%
3. Ameritrust Company OH KEYCORP 100%
4. AT Acceptance Corporation OH KEYCORP 100%
5. AT Financial Corporation OH KEYCORP 100%
6. AT Management Co. DE KEYCORP 100%
7. Bar T Bar Fiduciary Holding Company AZ SNB 100%
8. Beechnut Development Company WA KEYCORP 100%
9. Belgate Investors Limited Partnership WA RSDC 100%
10. Black & Warr Insurance Agency, Inc. ID GEM 100%
11. Boulevard, Inc. ID KB, ID 100%
12. CFS One, Inc. AL KEYCORP 100%
13. Check Services Northwest, Inc. WA KB,WA 100%
14. Commercial Agency, Inc. CO KB,CO 100%
15. Commercial Building Corporation UT KB,UT 100%
16. Electronic Payment Services, Inc. DE KEYCORP 7.02%
17. Emgee Coal Company, The OH SNB 100%
18. First Appraisal Services Corporation FL SFFSB 100%
19. Gem State Properties Corporation ID KB, ID 100%
20. Goldome Mortgage Investment Corp. NY KMI 100%
21. GRCC Mid-Hudson Hotel Corp. NY KMI 100%
22. INDORE Corporation IN SNB,IN 100%
23. Interstate Financial Corporation OH KEYCORP 100%
24. Investco WY KBS, WY 100%
25. KBID Leasing Corporation ID KB, ID 100%
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
NAME DOMICILE PARENT % OWNERSHIP
- ---- -------- ------ -----------
<S> <C> <C> <C> <C>
26. KBNY Leasing NY KB, NY 100%
27. KBWA Leasing Corporation WA KB,WA 100%
28. KBWA Services, Inc. WA KB,WA 100%
29. Key Agricultural Credit Corporation WY KB,WY 100%
30. Key Bancshares of Alaska, Inc. AK KEYCORP 100%
31. Key Bancshares of Idaho Inc. ID KEYCORP 100%
32. Key Bancshares of Maine Inc. ME KEYCORP 100%
33. Key Bancshares of New York, Inc. NY KEYCORP 100%
34. Key Bancshares of Utah Inc. UT KEYCORP 100%
35. Key Bancshares of Washington, Inc. WA KEYCORP 100%
36. Key Bancshares of Wyoming WY KEYCORP 100%
37. Key Bank Life Insurance, Ltd. AZ KEYCORP 100%
38. Key Bank of Alaska AK KBS, AK 100%
39. Key Bank of Colorado CO KEYCORP 100%
40. Key Bank of Idaho ID KBI, ID 100%
41. Key Bank of Maine ME KBS, ME 100%
42. Key Bank of New York NY KBS, NY 100%
43. Key Bank of Oregon OR KBS, AK 100%
44. Key Bank of Utah UT KBS, UT 100%
45. Key Bank of Washington WA KBS, WA 100%
46. Key Bank of Wyoming WY KBS, WY 100%
47. Key Bank USA N.A. U.S. KBS, NY 100%
48. Key Brokerage Company, Inc. NY KB, USA 100%
49. Key Capital Corporation OH KEYCORP 100%
50. Key Community Development Corporation OH KEYCORP 100%
</TABLE>
Page 2 of 8
<PAGE> 3
<TABLE>
<CAPTION>
NAME DOMICILE PARENT % OWNERSHIP
- ---- -------- ------ -----------
<S> <C> <C> <C> <C>
51. Key Equity Capital Corporation OH SNB 100%
52. Key Financial Services, Inc. NY KB, NY 100%
53. Key Lease, Inc. of Ohio OH SNB 100%
54. Key Savings Bank WA KBS, WA 100%
55. Key Services Corporation NY KBS, NY 100%
56. Key Trust Company NY KBS, NY 100%
57. Key Trust Company of Alaska AK KB, AK 100%
58. Key Trust Company of the West WY KBS, WY 100%
59. Key Trust Company of Maine ME KBS, ME 100%
60. Key Trust Company of the Northwest WA KEYCORP 100%
61. KeyCorp NY KBS, NY 100%
62. KeyCorp OH Parent 100%
63. KeyCorp Asset Management Holdings, Inc. OH SAMI 100%
64. KeyCorp Financial Services Inc. OH KEYCORP 100%
65. KeyCorp Insurance Agency, Inc. NY KB, USA 100%
66. KeyCorp Insurance Agency (Idaho), Inc. ID KB, USA 100%
67. KeyCorp Insurance Agency (Maine), Inc. ME KB, USA 100%
68. KeyCorp Insurance Agency (Wyoming), Inc. WY KB, USA 100%
69. KeyCorp Insurance Company, Ltd. Bermuda KEYCORP 100%
70. KeyCorp Leasing Ltd. DE KB, USA 100%
71. KeyCorp Management Company OH KEYCORP 100%
72. KeyCorp Mortgage Inc. MD KB, NY 100%
73. KeyCorp Network Holdings, Inc. OR KEYCORP 100%
74. KLIHTC Corp. NY KB, NY 100%
75. Michigan Shared Properties Company OH SNB 100%
</TABLE>
Page 3 of 8
<PAGE> 4
<TABLE>
<CAPTION>
NAME DOMICILE PARENT % OWNERSHIP
- ---- -------- ------ -----------
<S> <C> <C> <C> <C>
76. Midwest Power Company OH KEYCORP 100%
77. Millennium Asset Holding Corp. NY KB, NY 100%
78. Money Station, Inc. OH KEYCORP 13.95%
79. National Financial Services Corporation OH KEYCORP 100%
80. NCB Properties, Inc. NY KBS, NY 100%
81. Niagara Asset Management Corp. NY KB, NY 100%
82. Niagara Portfolio Management Corp TX KB, NY 100%
83. Northwest Audit and Adjustment Company WA CSNW 100%
84. OREO Corp. OH SNB 100%
85. P.B. Participation OR KEYCORP 100%
86. P.S.M. Financial Management Corp. WA KSB 100%
87. Pacific Avenue Parking, Inc. WA KBW 100%
88. PacWest Building Corp. OR KEYCORP 100%
89. Platinum Springs Corporation MD KB, NY 100%
90. Puget Sound Mortgage Servicing Corporation WA KSB 100%
91. Puget Sound Plaza, Inc. WA KB, WA 100%
92. Puget Sound Securities, Inc. WA KSB 100%
93. Royal Skies Development Company WA KB, WA 100%
94. Schaenen Wood & Associates, Inc. NY SAMI 100%
95. Second Street Community Urban Redevelopment OH SNB 100%
Corporation
96. Security Capital Leasing, Inc. KY KEYCORP 100%
97. SELCO Service Corporation OH SNB 100%
98. Society Asset Management, Inc. OH SNB 100%
99. Society Aviation Company DE KEYCORP 100%
100. Society Bancorp of Michigan, Inc. MI KEYCORP 100%
</TABLE>
Page 4 of 8
<PAGE> 5
<TABLE>
<CAPTION>
NAME DOMICILE PARENT % OWNERSHIP
- ---- -------- ------ -----------
<S> <C> <C> <C> <C>
101. Society Bank, Michigan MI SBC, MI 100%
102. Society Corporation OH KEYCORP 100%
103. Society Equipment Leasing Company OH KEYCORP 100%
104. Society Equipment Leasing Corporation OH SNB 100%
105. Society First Federal Savings Bank U.S. KEYCORP 100%
106. Society Foundation (non-profit) OH N/A N/A
107. Society Funding Corporation OH SELCORP 100%
108. Society Investments, Inc. OH SNB 100%
109. Society National Bank U.S. KEYCORP 100%
110. Society National Bank, Indiana U.S. KEYCORP 100%
111. Society National Trust Company U.S. KEYCORP 100%
112. Society Shareholder Services, Inc. DE SNB 100%
113. Society Trust Company of New York NY KEYCORP 100%
114. St. Joseph Insurance Agency, Inc. IN KEYCORP 100%
115. Summit Street Properties, Inc. OH SNB 100%
116. Summitt International Sales, Inc. Virgin Islands SNB 100%
117. Swans Island Salmon, Ltd. ME KB, ME 100%
118. TCIS, Inc. OH KEYCORP 100%
119. Trustcorp Financing Services, Inc. OH KEYCORP 100%
120. Virginia Stone Corporation VA KB, NY 100%
121. Washington Mortgage Corporation WA KBS, WA 100%
</TABLE>
Page 5 of 8
<PAGE> 6
<TABLE>
<S> <C> <C>
1. SNB Society National Bank
2. SNB, IN Society National Bank, Indiana
3. KB, CO Key Bank of Colorado
4. KB, NY Key Bank of New York
5. KB, UT Key Bank of Utah
6. KB, ID Key Bank of Idaho
7. KB, ME Key Bank of Maine
8. KB, WY Key Bank of Wyoming
9. KB, AK Key Bank of Alaska
10. KB, USA Key Bank USA N.A.
11. KSB Key Savings Bank
12. SFFSB Society First Federal Savings Bank
13. KBS, NY Key Bancshares of New York, Inc.
14. KBS, ME Key Bancshares of Maine Inc.
15. KBS, WY Key Bancshares of Wyoming
16. KBS, WA Key Bancshares of Washington, Inc.
17. KBS, AK Key Bancshares of Alaska, Inc.
18. KBS, ID Key Bancshares of Idaho Inc.
19. KBS, UT Key Bancshares of Utah Inc.
20. SBC, MI Society Bancorp of Michigan, Inc.
21. KTC Key Trust Company
22. SELCORP Society Equipment Leasing Corporation
23. SAMI Society Asset Management, Inc.
24. KMI KeyCorp Mortgage Inc.
25. GEM Gem State Properties Corporation
26. CSNW Check Service Northwest, Inc.
27. RSDC Royal Skies Development Company
</TABLE>
<PAGE> 7
<TABLE>
KEYCORP
ORGANIZATION CHART (CONTINUED)
Partnership Interests Exceeding 5%
as reported to the Federal Reserve on FR Y-6A
as of August 31, 1994
<CAPTION>
Type Percentage
Investment Ownership
-------------------- ----------
<S> <C> <C>
KEY BANK OF IDAHO:
Blue Meadows Limited Partnership Limited Partnership 99.00%
Five Mile Apartment Associates Limited Partnership Limited Partnership 99.00%
KEY BANK OF OREGON:
Alder House Limited Partnership Limited Partnership 33.00%
Berry Heights Limited Partnership Limited Partnership 99.00%
Foster Apartments Limited Partnership Limited Partnership 99.00%
Morrison Park Limited Partnership Limited Partnership 99.00%
Oregon Equity Fund Limited Partnership Limited Partnership 12.00%
Village Square Limited Partnership Limited Partnership 98.00%
KEY BANK OF WASHINGTON:
The Tacoma Partnership Limited Partnership 99.00%
KEY BANK OF UTAH:
TK of Lynns, LTD. Limited Partnership 99.00%
KEYCORP:
Cleveland Development Partnership I, Limited Partnership Limited Partnership 9.00%
KEY COMMUNITY DEVELOPMENT CORPORATION:
Ascension Village Investment Limited Partnership Limited Partnership 20.00%
Avalon Partnership, Inc. Limited Partnership 24.74%
Cleveland Neighborhood Equity Fund III, Limited Partnership Limited Partnership 18.56%
Homestart Limited Partnership V Limited Partnership 49.50%
Indiana Equity Fund, Limited Partnership Limited Partnership 8.30%
Kenton Street Limited Partnership Limited Partnership 20.13%
Luther Woods Apartment L.P. Limited Partnership 16.70%
North Rhine Limited Partnership Limited Partnership 7.20%
Ohio Equity Fund For Housing Limited Partnership I Limited Partnership 12.21%
St. Mary's Development Limited Partnership Limited Partnership 13.57%
Starr/High Investment Limited Partnership Limited Partnership 20.00%
William Street Apartment Limited Partnership Limited Partnership 24.75%
YWCA Redevelopment Limited Partnership Limited Partnership 19.80%
Toledo Convention Hotel Limited Partnership 8.90%
Beacon Place Corporation, LTD (a) Limited Partnership 5.00%
</TABLE>
<PAGE> 8
<TABLE>
KEYCORP
ORGANIZATION CHART (CONTINUED)
Partnership Interests Exceeding 5%
as reported to the Federal Reserve on FR Y-6A
as of August 31, 1994
<CAPTION>
Type Percentage
Investment Ownership
-------------------- ----------
<S> <C> <C>
AMERICAN ADVISERS, INC.
Native American Asset Advisers General Partnership 25.00%
MIDWEST POWER COMPANY:
Perry One Beta, Limited Partnership Limited Partnership 99.00%
PUGET SOUND PLAZA, INC.:
Touchstone Limited Partnership Limited Partnership 99.00%
PACWEST BUILDING CORPORATION:
PacWest Building Partnership, Ltd. Limited Partnership 99.90%
1200 Building Associates Partnership 10.00%
P.S.M. FINANCIAL MANAGEMENT CORP.:
Touchstone Limited Partnership General Partnership 1.00%
SOCIETY NATIONAL BANK:
Beacon Place Corporation, LTD (a) Limited Partnership 44.00%
Cleveland Housing Partnership Equity Fund, 1988 LP Limited Partnership 5.10%
Homestart Limited Partnership I Limited Partnership 99.00%
<FN>
(a) Combined holdings of Beacon Place Corporation, LTD total 49%.
</TABLE>
<PAGE> 9
<TABLE>
KEYCORP
ORGANIZATION CHART (CONTINUED)
Investments of Venture Capital Companies
as reported to the Federal Reserve on FR Y-6A
as of August 31, 1994
<CAPTION>
Type Percentage
Investment Ownership
--------------------- -----------
<S> <C> <C>
KEY CAPITAL CORPORATION (VENTURE CAPITAL):
Aerobraze Limited Partnership Limited Partnership 22.27%
Apex Limited Partnership Limited Partnership 6.47%
Kirtland Capital, Limited Partnership Limited Partnership 9.77%
Linsalata Capital Partners I, Limited Partnership Limited Partnership 9.90%
RDK Capital Limited Partnership Limited Partnership 24.75%
Trust Technologies Limited Partnership Limited Partnership 24.75%
</TABLE>
<PAGE> 10
<TABLE>
KEY CORP
ORGANIZATION CHART (CONTINUED)
Investments of Small Business Investment Companies
as reported to the Federal Reserve on FR Y-6A
as of August 31, 1994
<CAPTION>
Type Percentage
Investment Ownership
---------------------- -----------
<S> <C> <C>
KEY EQUITY CAPITAL CORPORATION (SBIC):
ACP Holding Company Voting common 25.00%
ACP Holding Company Nonvoting equity 40.40%
Advanced Cast Products, Inc. Voting common 100.00%
Alloy Holdings, Inc. Voting common 76.00%
American Alloy Corporation Voting common 100.00%
CFA Holding Company Voting common 12.90%
Decatur Aluminum Holding Corporation Voting common 47.60%
Decatur Aluminum Holding Corporation Nonvoting equity 39.30%
Decatur Aluminum Corporation Voting common 100.00%
DeCrane Aircraft Holdings, Inc. Voting common & preferred 34.80%
Tri-Star Electronics, Inc. Voting common 100.00%
Hollingsead International, Inc. Voting common 100.00%
Degree Communications II, Inc. (inactive) Voting common 65.00%
GAR Holding Voting common 8.30%
GEO Specialty Chemicals, Inc. Voting common 48.00%
GEO Specialty Chemicals, Inc. Nonvoting equity 100.00%
Isolab, Inc. Voting common 10.29%
LFD Holding Corporation Voting common 35.70%
LFD Holding Corporation Nonvoting equity 99.70%
LFD Acquisition Corporation Voting common 100.00%
National Medical Diagnostics, Inc. Voting common & preferred 11.90%
OPI Holding Company Voting common 49.50%
OPI Holding Company Nonvoting equity 94.00%
Omega Pultrusions Incorporated Voting common 100.00%
O.S. Kelly Corporation Voting common 16.10%
Point Group, Inc. Voting common 31.74%
PPMI Holdings, Inc. Voting common 10.70%
Radio Acquisition, Inc. Voting common 18.00%
RDK Aerospace, Inc. Voting common 34.30%
Heintz Corporation Voting common 100.00%
Spectra, Inc. Voting common 10.00%
Tri-City Radio, Limited Partnership Limited Partnership 22.44%
Underground Technology Voting common 23.33%
</TABLE>
<PAGE> 11
<TABLE>
KEY CORP
ORGANIZATION CHART (CONTINUED)
Interests exceeding 5% in joint venture
as reported to the Federal Reserve on FR Y-6A
as of August 31, 1994
<CAPTION>
Type Percentage
Investment Ownership
---------------------- ----------
<S> <C> <C>
ELECTRONIC PAYMENT SERVICES, INC.
BUYPASS Corporation Common Equity 100.00%
MONEY ACCESS SERVICE INC. Common Equity 100.00%
Metroteller Security Corporation (inactive) Common Equity 100.00%
MONEY ACCESS SERVICE CORP. Common Equity 100.00%
NetOps Corporation Common Equity 100.00%
<FN>
Note: As KeyCorp owns only a 7.02% interest in, and does not exercise management control of, EPS, EPS and its subsidiaries are not
"subsidiaries" of KeyCorp within the meaning of Section 207 of the BHC Act.
</TABLE>
<PAGE> 1
Exhibit 23(a)
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus pertaining to the
merger of First Citizens Bancorp of Indiana with and into KeyCorp dated
September 22, 1994 and to the incorporation by reference therein of our
reports:
(a) dated March 1, 1994, with respect to the consolidated financial
statements for the year ended December 31, 1993, of KeyCorp as
restated to give effect to the March 1, 1994 merger of KeyCorp and
Society Corporation, accounted for as a pooling of interests, such
financial statements are included in and incorporated by reference
into the Corporation's Current Report on Form 8-K filed with the
Commission on April 20, 1994;
(b) dated January 20, 1994, except for Note 2 as to which the date is
March 1, 1994, with respect to the consolidated financial statements
for the year ended December 31, 1993, of KeyCorp (the combining
company), which on March 1, 1994 merged with Society Corporation,
subsequently renamed KeyCorp, included in the Corporation's Current
Report on Form 8-K filed with the Commission on March 16, 1994; and
(c) dated March 1, 1994, with respect to the supplemental consolidated
financial statements for the year ended December 31, 1993 of KeyCorp
(the combined entity) included in KeyCorp's Annual Report on Form 10-K
filed with the Securities and Exchange Commission. The supplemental
consolidated financial statements became the historical financial
statements of KeyCorp upon filing of the Corporation's Current Report
on Form 8-K with the Commission on April 20, 1994.
In addition, we consent to the incorporation by reference in this Registration
Statement of our report dated January 28, 1994, except for Note 2 as to which
the date is March 1, 1994, with respect to the consolidated financial
statements for the year ended December 31, 1993 of Society Corporation included
in the Annual Report on Form 10-K filed with the Securities and Exchange
Commission that have subsequently been restated to give effect to the March 1,
1994 merger of KeyCorp and Society Corporation.
ERNST & YOUNG
Cleveland, Ohio
September 22, 1994
<PAGE> 1
Exhibit 23(b)
CROWE CHIZEK
Consent of Independent Accountants
The Board of Directors
First Citizens Bancorp of Indiana
We consent to the use in this Registration Statement of KeyCorp on Form S-4, of
our report dated February 11, 1994 on the 1993 consolidated financial
statements of First Citizens Bancorp of Indiana. We also consent to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
Crowe, Chizek and Company
September 9, 1994
Indianapolis, Indiana
<PAGE> 1
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 12, 1994.
/s/ Victor J. Riley, Jr.
-------------------------------
<PAGE> 2
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 20, 1994.
/s/ James W. Wert
-------------------------------
<PAGE> 3
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 20, 1994.
/s/ Lee G. Irving
-------------------------------
<PAGE> 4
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 12, 1994.
/s/ H. Douglas Barclay
-------------------------------
<PAGE> 5
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 12, 1994.
/s/ William G. Bares
-------------------------------
<PAGE> 6
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 12, 1994.
/s/ Albert C. Bersticker
-------------------------------
<PAGE> 7
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 14, 1994.
/s/ Thomas A. Commes
-------------------------------
<PAGE> 8
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 12, 1994.
/s/ Kenneth M. Curtis
-------------------------------
<PAGE> 9
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 12, 1994.
/s/ John C. Dimmer
-------------------------------
<PAGE> 10
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 14, 1994.
/s/ Robert W. Gillespie
-------------------------------
<PAGE> 11
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 13, 1994.
/s/ Stephen R. Hardis
-------------------------------
<PAGE> 12
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 13, 1994.
/s/ Henry S. Hemingway
-------------------------------
<PAGE> 13
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 12, 1994.
/s/ Charles R. Hogan
-------------------------------
<PAGE> 14
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 14, 1994.
/s/ Lawrence A. Leser
-------------------------------
<PAGE> 15
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 14, 1994.
/s/ Steven A. Minter
-------------------------------
<PAGE> 16
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 12, 1994.
/s/ M. Thomas Moore
-------------------------------
<PAGE> 17
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 12, 1994.
/s/ John C. Morley
-------------------------------
<PAGE> 18
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 14, 1994.
/s/ Richard W. Pogue
-------------------------------
<PAGE> 19
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 15, 1994.
/s/ Robert A. Schumacher
-------------------------------
<PAGE> 20
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 12, 1994.
/s/ Ronald B. Stafford
-------------------------------
<PAGE> 21
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 13, 1994.
/s/ Peter G. Ten Eyck II
-------------------------------
<PAGE> 22
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 13, 1994.
/s/ Nancy B. Veeder
-------------------------------
<PAGE> 23
EXHIBIT 24(a)
KEYCORP
-------
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director of KeyCorp, an Ohio corporation, which anticipates filing with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4,
with respect to its Common Shares issuable in the proposed merger of First
Citizens Bancorp of Indiana into KeyCorp hereby constitutes and appoints Carter
B. Chase, Roger Noall, and Daniel R. Stolzer, and each of them, as attorney for
the undersigned, with full power of substitution and resubstitution, for and in
the name, place, and stead of the undersigned, to sign and file the proposed
Registration Statement and any and all amendments, post-effective amendments,
and exhibits thereto, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to such securities
or such registration with full power and authority to do and perform any and
all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute or substitutes.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of September 14, 1994.
/s/ Dennis W. Sullivan
-------------------------------
<PAGE> 1
Exhibit 24(b)
KEYCORP
SECRETARY'S CERTIFICATE
I, Steven N. Bulloch, hereby certify that I am the Assistant Secretary
of KeyCorp, that the attached is a true and correct copy of a resolution duly
adopted by the Board of Directors of the Corporation at a meeting thereof duly
called and held on July 21, 1994, at which meeting a quorum of the Board was
present throughout, and that the resolution has not been rescinded or amended
and is still in full force and effect.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and the
seal of the Corporation this 15th day of September, 1994.
/s/ Steven N. Bulloch
________________________________________
Steven N. Bulloch
Assistant Secretary
<PAGE> 2
Resolution adopted by of the Board of Directors of KeyCorp on July 21, 1994.
RESOLVED, that the Board of Directors does hereby ratify and approve
any and all actions taken by Victor J. Riley Jr. as Chairman of the Board and
Chief Executive Officer of KeyCorp, Robert W. Gillespie as President and Chief
Operating Officer of KeyCorp, Roger Noall as Senior Executive Vice President
and Chief Administrative Officer of KeyCorp, Carter B. Chase as Executive Vice
President, General Counsel and Secretary of KeyCorp, Andrew R. Tyson as Senior
Vice President of KeyCorp, Daniel R. Stolzer as Senior Managing Counsel of
KeyCorp Management Company, or any other officer of KeyCorp, or of a subsidiary
of KeyCorp, designated by any one of them (each an "Authorized Official"), in
connection with the submission of the offer on behalf of KeyCorp and the
entering into a definitive Agreement and Plan of Merger by and between KeyCorp
and First Citizens Bancorp of Indiana (the "Agreement"), pursuant to which
First Citizens Bancorp of Indiana ("Bancorp") is to merge with and into KeyCorp
under the terms provided therein, including without limitation that:
(1) Each share of Bancorp stock shall be converted into the number of Common
Shares of KeyCorp determined by dividing $37.00 by the Average Stock
Price of KeyCorp's Common Shares, which term is defined as the average
(rounded to the nearest whole cent) of the last sale price of the day of
KeyCorp's Common Shares as reported on the New York Stock Exchange
("NYSE") for the twenty consecutive trading days ending on and including
the fifth trading day immediately preceding (but not including) the
Closing Date, as such term is defined in the Agreement, which date shall
hereinafter be referred to as the "Determination Date"; and
(2) Notwithstanding the foregoing, if the Average Stock Price of KeyCorp's
Common Shares, as defined above, is (a) less than or equal to $25.9000
on the Determination Date, the Average Stock Price shall be deemed to be
$25.9000 for purposes of the Agreement or (b) greater than or equal
to $38.8500 on the Determination Date, the Average Stock Price shall be
deemed to be equal to $38.8500 for purposes of the Agreement; and
(3) Bancorp shall have the right to terminate the Agreement in the event that
the average per share closing price of KeyCorp Common Shares as reported
on the NYSE over the twenty trading days immediately preceding the
Determination Date is less than $24.2812; and
-1-
<PAGE> 3
(4) Keycorp shall have the right to terminate the Agreement in the event that
the average per share closing price of Bancorp Common Stock for the
twenty trading days immediately preceding the Determination Date exceeds
$40.4687,
and with such other terms conditions and exceptions as the Authorized Official
officer executing the bid may determine.
RESOLVED, that each Authorized Official be and they hereby are
authorized and empowered for and in the name and on behalf of KeyCorp to
execute and deliver pursuant to the laws of the United States and the State of
Ohio applications for such approvals as may be necessary or desirable in order
to provide for the merger of Bancorp into KeyCorp pursuant to the Agreement.
RESOLVED, that each Authorized Official be and they each hereby are
severally authorized to take such action and to execute such documents as may
be necessary or desirable to prepare, execute, and file with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended, a
registration statement including the prospectus/proxy statement, financial
statements and any amendments and any post-effective amendments relating to the
registration for public offering of up to the maximum number of KeyCorp Common
Shares that may be required to be issued pursuant to the terms of the
Agreement.
RESOLVED, that Roger Noall, Carter B Chase, and Daniel R. Stolzer and
each of them, be appointed agents for service and attorney-in-fact of KeyCorp,
with the powers conferred upon them as such agents and attorneys by the
Securities Act of 1933, as amended, and the Rules and Regulations thereunder,
including, without limitation, the authority to sign any and all amendments
(including post-effective amendments) to the registration statement,
prospectus/proxy statement, and exhibits, and to file the same and all other
documents in connection therewith with the SEC, with full power of substitution
and resubstitution.
RESOLVED, that the proper officers of KeyCorp be and they hereby are
authorized and directed to execute, seal, attest, acknowledge, and deliver such
documents, applications and other instruments for the registration or
qualification of the Common Shares of KeyCorp as they may, upon advice of
counsel, deem necessary or advisable in order to permit the distribution of
such securities under the Blue Sky or Securities laws of any state of the
United States; and for this purpose, the proper officers of KeyCorp be and they
hereby are and authorized and directed to
-2-
<PAGE> 4
execute, seal, attest, acknowledge, and deliver in the name and on behalf of
KeyCorp such consents to the service of process, issuer's covenants, powers of
attorney, and other documents; and each and every resolution required to be
adopted by any legislation or law, or by order or regulation of any government,
body, or agency in any state or jurisdiction wherein such securities may be
registered, qualified, or offered for sale shall be deemed to be, and the same
hereby is, adopted, approved, and confirmed.
RESOLVED, that when the Registration Statement has been declared
effective by the SEC and the Common Shares have been duly registered or
qualified for sale pursuant to the Blue Sky or Securities laws of the several
states wherein such registration or qualification is required, and upon
consummation of the Agreement in accordance with its terms, the proper officers
of KeyCorp be and they hereby are authorized and directed to issue an aggregate
of up to the maximum number of KeyCorp Common Shares that may be required to be
issued pursuant to the terms of the Agreement, $1.00 par value, each of such
shares to be fully paid and nonassessable (to the extent provided under law),
and to pay the amount of cash due shareholders for fractional and dissenting
shares under such Agreement.
RESOLVED, that pursuant to Section 1701.35 of the Ohio Revised Code and
Article Fifth of KeyCorp's Amended Articles of Incorporation, KeyCorp is
hereby authorized from time to time to purchase in the open market or in
negotiated transactions a number of KeyCorp's Common Shares that does not
exceed the number of shares reasonably anticipated to be issued pursuant to the
terms of the Agreement;
-3-
<PAGE> 5
RESOLVED, that the authority granted by these resolutions to repurchase
KeyCorp's Common Shares shall, to the extent not exercised, expire on the date
90 days after the consummation of the transactions comtemplated by the
Agreement;
RESOLVED, that the Common Shares purchased pursuant to the these
resolutions shall be retained as treasury shares until such time as such Common
Shares are issued for the purpose of fulfilling KeyCorp's obligations under the
Agreement;
RESOLVED, that the Chief Financial Officer, the Treasurer, and any
Senior Vice President of KeyCorp or of KeyCorp Management Company, in either
case, with responsibility for corporate treasury functions of KeyCorp (each, a
"Designated Officer") be and each of them is hereby authorized to enter into
agreements with a third party or parties as are necessary to provide price
protection, or to reduce the cost of KeyCorp of the purchase of the Common
Shares (or a portion thereof) for such period or periods as any of the
Designated Officers determines necessary or advisable, including hedging or
other transactions;
RESOLVED, that the Designated Officers of KeyCorp be and each of them
is hereby authorized to appoint such agents and to open brokerage accounts for
and in the name of KeyCorp and to take any and all action and to execute and
deliver any and all documents necessary or advisable to carry out the
provisions of the foregoing resolutions with respect to the purchase of KeyCorp
Common Shares;
RESOLVED, that any form of additional resolution appropriate to or
required by law, regulation, or a regulatory agency in connection with the
acquisition or the resolutions herein adopted, be and it hereby is adopted and
that the Secretary or any Assistant Secretary of KeyCorp be and each of them
hereby is severally authorized to certify as having been adopted by the Board
of Directors, such form of authorizing resolution required in accordance with
the foregoing, provided that a copy of each such form of resolution so
certified shall be attached to this resolution.
RESOLVED, that the proper offecers of KeyCorp be and they hereby are
authorized and directed in the name and on behalf of KeyCorp, or otherwise, to
execute all such instruments, documents, and certificates and take all such
further and other action in connection with the resolutions herein adopted as
they may deem necessary, advisable, or proper to effectuate the intents and
purposes of these resolutions.
-4-
<PAGE> 1
Exhibit 99(c)
JEC/51794
1978
May 5, 1994
James D. Strietelmeier, President
First Citizens Bancorp of Indiana
One Citizens Plaza
PO Box 729
Anderson, IN 46015-0729
Dear Jim:
This letter sets forth the understanding between First Citizens
Bancorp of Indiana and Citizens Banking Company (collectively,
the "Bank") and you concerning the terms of your engagement as
President of the Bank.
1. BACKGROUND. The Bank's Board of Directors is engaged
in an evaluation of certain strategic alternatives for
maximizing shareholder value which may result in a "Change of
Control" of the Bank (defined as a transaction or series of
transactions as a result of which the persons presently holding
all of the common stock of First Citizens Bancorp of Indiana
will hold less than 50% of the direct and indirect beneficial
ownership of the Bank). You are a key executive of the Bank
and the Bank wishes to assure your continued employment and
continued attention to your responsibilities without undue
distraction.
2. RIGHT TO SPECIAL COMPENSATION. In the event of the
consummation of a Change of Control transaction and a
subsequent "Change of Status" (as hereinafter defined) within
two (2) years after the consummation of such Change of Control
transaction, you shall be entitled to special compensation (the
"Special Compensation") on the terms hereinafter set forth. As
used herein, a "Change of Status" shall mean (i) any
termination of your employment except for "just cause", defined
as breach of fiduciary duty, failure to perform the duties of
your position after reasonable notice and opportunity to cure,
or material misconduct in the performance of your duties, or
<PAGE> 2
(ii) any reduction in your base compensation or any material
change in the employee benefits available to you as such base
compensation and benefits were in effect immediately prior to
the Change of Control transaction. A change of your duties and
responsibilities within the Bank shall not constitute a
termination of your employment or a "Change of Status" as
provided for herein, except when coupled with a reduction in
base compensation or material reduction in benefits.
3. AMOUNT; PAYMENT TERMS, ETC. In the event of a Change
of Status within two (2) years after the consummation of a
Change of Control transaction, you shall be entitled to receive
Special Compensation, payable monthly in arrears on the last
day of each calendar month, during the period commencing on the
effective date of your Change of Status and ending on the
second anniversary of the Change of Control transaction, equal
to the following aggregate sum (pro-rated on a monthly basis):
(a) Your monthly base compensation as in effect
immediately prior to the Change in Status, less
any compensation actually paid to you by the Bank
for services rendered during such period; and
(b) An amount equal to the monthly cost to the Bank
of any material employee benefits to you that
were a part of your benefit compensation
immediately prior to the Change in Status and
which were subsequently withdrawn, reduced or
terminated.
4. LIMITATIONS. The Special Compensation payable
hereunder shall be in addition to and not in lieu of any other
compensation or severance or service pay otherwise due to you
under the policies of the Bank (but, as provided above, shall
be net of payments for compensation for services rendered).
Specifically, in the event of any termination, you shall be
eligible to receive service pay at the rate of one week's pay
for each year of continuous service, on the same terms as the
other employees of the Bank. Such Special Compensation shall
also be payable for a maximum of six (6) months in the event of
your death or disability either (a) which results in a Change
of Status, or (b) occurs while you are receiving Special
Compensation.
5. NO OTHER AGREEMENTS, ETC. This letter provides for
compensation to you under a limited set of circumstances and
shall not be construed to grant you any rights to continued
employment by the Bank or otherwise limit the authority of the
Bank to take such actions with respect to your employment,
including termination with or without cause, as shall be deemed
by the Bank to be in its best interest.
<PAGE> 3
Please indicate your agreement to the foregoing by signing and
returning a copy of this letter.
Very truly yours,
FIRST CITIZENS BANCORP OF INDIANA
By:
------------------------------------
Leland E. Boren, Chairman
AGREED TO this day of May, 1994
- ------------------------------------
James D. Strietelmeier
<PAGE> 1
Exhibit (99)(d)
FIRST CITIZENS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE SPECIAL MEETING OF SHAREHOLDERS ON __________________,1994
P The undersigned hereby constitutes and appoints JAMES D. STRIETELMEIER and
R KAREN S. AMBLER, and each of them, his true and lawful agents and proxies
O with full power of substitution in each, to represent the undersigned at
X the Special Meeting of Shareholders of First Citizens Bancorp of Indiana
Y to be held at November __ 1994 on ___________________, __________________,
and at any adjournments thereof.
(Change of Address)
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
(If you have written in the above space, please mark the
corresponding box on the reverse side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. YOUR SHARES CANNOT
BE VOTED UNLESS YOU SIGN AND RETURN THIS CARD.
________________
| |
| SEE REVERSE |
| SIDE |
|_______________|
<PAGE> 2
_____
| |
| X |
|___|
Please mark your
votes as in this
example.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
_____ _____ _____
1. Approval of the Agreement | | | | | | 2. Authorization of proxies to vote in
and Plan of Merger by and |____| |____| |____| accordance with their judgment upon
between First Citizens Bancorp any other matters as may properly
of Indiana and KeyCorp, dated as Change of Address come before the Special Meeting which
of June 30, 1994, as amended _____ relate to the Agreement and Plan of Merger
pursuant to which First Citizens | | and the transactions contemplated
will be merged with and into KeyCorp. |____| thereby.
The Board of Directors recommends Attend Meeting
a vote FOR proposal 1. _____ This proxy when properly executed will be
| | voted in the manner directed herein. IF NO
|____| DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
The signer hereby revokes all proxies
heretofore given by the signer to vote at
said meeting or any adjournments thereof.
SIGNATURE(S)__________________________________________________________ DATE ___________________
SIGNATURE(S)__________________________________________________________ DATE ___________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such.
</TABLE>
<PAGE> 1
Exhibit 99(e)
Citizens Bank
of
Anderson, Indiana
Key Employee
1994 Severance Plan
-------------------
1. POLICY AND PURPOSE: It is the policy of Citizens Bank and its affiliates
to recognize and appropriately compensate the loyal and dedicated service
of its key employees whose positions may be affected by events or
transactions which affect the ownership and management of First Citizens
Bancorp and the Bank. The purpose of this 1994 Severance Plan is to assist
the Bank and First Citizens in retaining the services of such key employees
and allowing them to continue to perform their duties without undue
distraction.
2. SPECIAL SEVERANCE COMPENSATION: (Each of the persons listed on Exhibit A
annexed hereto (the "Participants") shall be entitled to receive the
aggregate severance compensation (the "Special Severance Compensation")
set forth for such person on Exhibit A, on the following terms and
conditions:
a. There shall have been a "Change of Control" of First Citizens,
defined as a transaction or series of transactions in which the
persons holding all the common stock of First Citizens on February 24,
1994 shall constitute the holders of less than 50% of the direct or
indirect beneficial ownership of the Bank.
b. After and within (1) year of the consummation of the Change of
Control transaction, a Participant (i) shall have been terminated as
an employee of the Bank or any of its affiliates without just cause,
or (ii) shall have suffered any reduction in base compensation or any
material reduction in employee benefits from the base compensation and
benefits to which such participant is entitled immediately prior to
such Change of Control transaction.
c. The Special Severance Compensation shall consist of an aggregate
of (i) regular service compensation equal to one (1) week's base
compensation for each year of service with the Bank or its affiliates,
up to a maxumum of 6 months' base compensation, and (ii) severance
compensation an additional sum, if any, up to the "Adjusted Total"
amount set forth on Exhibit A.
<PAGE> 2
d. Notwithstanding the provisions of paragraph c. above, the
amount of the "severance" portion of the Special Severance Compensation
(as opposed to the years of service portions) shall decline ratably
(1/24th for each full month) over the 24-month period commencing with
the 1st month after the consummation of a Change of Control transaction
and ending with the 24th month.
e. The Special Severance Compensation shall be paid in a lump sum, net
of applicable withholding, within ten (10) days after the date of
termination of employment.
f. No Special Severance Compensation pursuant to the 1994 Severance
Plan shall be payable to any employee (i) who shall have voluntarily
resigned (except for voluntary resignations at the request of, or with
the approval of, the Bank) or (ii) who shall have been terminated for
"just cause", defined as breach of fiduciary duty, failure to perform
regular duties of the employee's position after reasonable notice and
opportunity to cure, or material misconduct in the performance of
duties.
g. Employees who voluntarily resign (other than those who receive
Special Severance Compensation under paragraph f. above) or who are
terminated for just cause shall receive such compensation to which
they may be entitled under existing policies of the Bank and its
affiliates. Employees whose employment is terminated within 24 months,
after a Change of Control transaction is consummated by death,
disability or retirement at regular retirement age shall receive
Special Severance Compensation.
-2-
