As filed with the Securities and Exchange Commission
On
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIFTH THIRD BANCORP
(Exact name of registrant as specified in its charter)
Ohio 31-0854434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6711
(Primary Standard Industrial
Classification Code Number)
Fifth Third Center, Cincinnati, Ohio 45263
(513) 579-5300
(Address, including Zip Code, and telephone
number, including area code, of registrant's
principal executive offices)
S. Richard Arnold, Esq.
Dinsmore & Shohl
1900 Chemed Center, 255 East Fifth Street
Cincinnati, Ohio 45202
(513) 977-8200
(Name, address, including Zip Code and telephone
number, including area code, of agent for service)
Copies to:
Douglas W. Campbell, Esq.
Dinsmore & Shohl
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
Keith G. Hanley, Esq.
James A. Giesel, Esq.
Brown, Todd & Heyburn
3200 Capital Holding Center
Louisville, Kentucky 40202
Approximate date of commencement of proposed sale of the securities
to the public:
As soon as practicable after this Registration Statement becomes
effective.
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.//
CALCULATION OF REGISTRATION FEE
Title of Amount to be Proposed Proposed Amount of
each class Registered* Maximum Maximum Registration
of securities Offering Aggregate Fee
to be Price Per Offering
registered Unit Price**
__________________________________________________________________
Common Stock, 3,150,000 $47.50 $149,625,000 $51,595.00
no par value
<FN>
* Represents the maximum number of shares of Registrant's Common
Stock issuable to shareholders of The Cumberland Federal
Bancorporation, Inc., assuming that the applicable market value per
share of the Registrant's Common Stock (as defined in the
Affiliation Agreement described herein) is $47.50.
** Based on the maximum aggregate offering price set forth in the
Affiliation Agreement and Merger Agreement, each dated as of
January 10, 1994 between The Cumberland Federal Bancorporation,
Inc. and Fifth Third Bancorp.
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, as amended, or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
FIFTH THIRD BANCORP
Cross Reference Sheet Required by Item 501(b) of Regulation S-K
CAPTION - CAPTION IN PROSPECTUS
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and Outside Front Cover
Page of Prospectus - Facing Page; Notice of Special Meeting
2. Inside Front and Outside Back Cover Pages of Prospectus -
Available Information; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information - Summary of the Proxy Statement and Prospectus;
General Information; Comparative Per Share Data
4. Terms of the Transaction - Summary of the Proxy Statement and
Prospectus; Terms and Conditions of the Proposed Merger;
Description of Capital Stock
5. Pro Forma Financial Information - Not Applicable
6. Material Contacts with the Company Being Acquired - Not
Applicable
7. Additional Information Required for Reoffering by Persons and
Parties Deemed to be Underwriters - Not Applicable
8. Interests of Named Experts and Counsel - Legal Matters
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities - Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
1. Information with Respect to S-3 Registrants - Fifth Third
Bancorp; Selected Historical Financial Data of Fifth Third;
Description of Capital Stock
2. Incorporation of Certain Information by Reference -
Incorporation of Certain Documents by Reference; Available
Information; Description of Capital Stock
3. Information with Respect to S-2 or S-3 Registrants - Not
Applicable
4. Incorporation of Certain Information by Reference - Not
Applicable
5. Information With Respect to Registrants Other Than S-3 or S-2
Registrants - Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED.
1. Information with Respect to S-3 Companies - Incorporation of
Certain Documents by Reference; The Cumberland Federal
Bancorporation, Inc.; Selected Historical Financial Data of The
Cumberland Federal Bancorporation, Inc.; Description of Capital
Stock
2. Information with Respect to S-2 or S-3 Companies - Not
Applicable
3. Information with Respect to Companies Other Than S-2 or S-3
Companies - Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
1. Information if Proxies, Consents or Authorizations Are to Be
Solicited - Summary of the Proxy Statement and Prospectus; Terms
and Conditions of the Proposed Merger; General Information;
Incorporation of Certain Documents by Reference; The Cumberland
Federal Bancorporation, Inc. Board of Directors
2. Information if Proxies, Consents or Authorizations Are Not To Be
Solicited or in an Exchange Offer - Not Applicable
THE CUMBERLAND
FEDERAL BANCORPORATION, INC.
200 West Broadway
Louisville, Kentucky 40202
Dear Shareholder:
On behalf of the Board of Directors, we cordially invite you to
attend the Special Meeting of Shareholders of The Cumberland
Federal Bancorporation, Inc., ("The Cumberland") which will be held
at 10:00 A.M. (Eastern Daylight Time), on Wednesday, June 29, 1994,
in the Bluegrass Room of The Brown Hotel, Fourth and Broadway,
Louisville, Kentucky 40202.
At the Special Meeting, shareholders will be asked to approve an
Affiliation Agreement and a Plan and Agreement of Merger, both
dated as of January 10, 1994 (the "Affiliation Agreement" and the
"Merger Agreement," respectively), between Fifth Third Bancorp
("Fifth Third") and The Cumberland which provide for the merger
(the "Merger") of The Cumberland with and into Fifth Third.
Pursuant to the Affiliation Agreement and Merger Agreement, each
shareholder of The Cumberland will be entitled to receive, for each
share of Cumberland Common Stock which is held by the shareholder
on the effective date of the Merger, a minimum of one (1) and up to
one and two-tenths (1.2) shares of Fifth Third Common Stock. Only
whole shares of Fifth Third Common Stock will be issued.
Accordingly, the shareholder will receive cash in lieu of any
fractional shares to which such shareholder would otherwise be
entitled based on the applicable value per share as defined in the
Affiliation Agreement and Merger Agreement. The proposed Merger is
discussed in detail in the accompanying Proxy Statement and
Prospectus, and you are encouraged to read it in its entirety as
well as the Affiliation Agreement and Merger Agreement which are
appended thereto as Annex A and Annex B, respectively.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS THAT YOU VOTE "FOR" THE MERGER. TO APPROVE THE PROPOSED
MERGER, IT WILL BE NECESSARY TO OBTAIN THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE CUMBERLAND OUTSTANDING SHARES. AS A RESULT, AN
ABSTENTION OR FAILURE TO VOTE HAS THE SAME EFFECT AS A VOTE AGAINST
THE PROPOSED MERGER. IT IS, THEREFORE, IMPORTANT THAT YOU VOTE ON
THE MERGER.
Your vote is very important, regardless of the number of shares you
own. Please sign and return the proxy card in the postage-paid
return envelope provided for your convenience. This will not
prevent you from voting in person, but will assure that your vote
is counted if you are unable to attend the Special Meeting.
Please vote and return your proxy today.
We appreciate your continued support and interest in The Cumberland
Federal Bancorporation, Inc.
Sincerely,
H. David Hale
Chairman and President
IMPORTANT: If your Cumberland shares are held in the name of a
brokerage firm or nominee, only they can execute a proxy on your
behalf. To assure that your shares are voted, we urge you to
telephone today the individual responsible for your account at your
brokerage firm and obtain instructions on how to direct him or her
to execute a proxy.
If you have any questions or need any help in voting your shares,
please telephone Jerry R. Blevins, Sr. or Norma Ferguson at The
Cumberland, (502) 562-5205 or (502) 562-5307, respectively. If you
are calling from outside Louisville, Kentucky, call toll free at
1-800-467-3456.
THE CUMBERLAND FEDERAL BANCORPORATION, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On June 29, 1994
NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders
("Special Meeting") of The Cumberland Federal Bancorporation, Inc.
("The Cumberland") will be held on June 29, 1994, at 10:00 a.m.
E.D.T, in the Bluegrass Room of the Brown Hotel, Fourth and
Broadway, Louisville, Kentucky 40202.
A Proxy Statement and Prospectus and Proxy Card for this Special
Meeting are enclosed herewith. The Special Meeting is for the
purpose of considering and voting upon the following matters:
A. Approval of an Affiliation Agreement and Plan and Agreement of
Merger, both dated as of January 10, 1994 (the "Affiliation
Agreement" and the "Merger Agreement," respectively), between The
Cumberland and Fifth Third Bancorp ("Fifth Third"), which provide
for the merger (the "Merger") of The Cumberland with and into Fifth
Third. Pursuant to the Affiliation Agreement and Merger Agreement,
each shareholder of The Cumberland will be entitled to receive, for
each share of Cumberland's common stock ("Cumberland Common
Stock"), which he or she holds on the effective date of the Merger
(the "Effective Date") shares of Fifth Third common stock ("Fifth
Third Common Stock") in accordance with the following: (i) If the
Applicable Market Value Per Share of Fifth Third Common Stock (as
hereinafter defined) is equal to or greater than $57.00, each share
of Cumberland Common Stock shall be converted into one (1) whole
share of Fifth Third Common Stock. The "Applicable Market Value
Per Share of Fifth Third Common Stock" shall be the average of the
per share closing prices of Fifth Third Common Stock as reported on
the NASDAQ National Market System for the twenty (20) trading days
ending on the fifth trading day prior to the time the Merger
becomes effective (the "Valuation Period"); (ii) If the Applicable
Market Value Per Share of Fifth Third Common Stock is less than
$57.00 and equal to or greater than $47.50, each share of
Cumberland Common Stock shall be converted into that number of
shares of Fifth Third Common Stock equal to the quotient obtained
by dividing $57.00 by the Applicable Market Value Per Share of
Fifth Third Common Stock; or (iii) If the Applicable Market Value
Per Share of Fifth Third Common Stock is less than $47.50, each
share of Cumberland Common Stock shall be converted into one and
two tenths (1.2) shares of Fifth Third Common Stock. The
Cumberland may terminate the Affiliation Agreement and the Merger
Agreement if the Applicable Market Value Per Share of Fifth Third
Common Stock is less than $41.75 and when compared to the closing
price of Fifth Third Common Stock on January 10, 1994, reveals a
decline that is 15% greater than the decline in a weighted average
index of 13 identified bank holding company stocks between January
10, 1994 and the date five trading days prior to the closing date
of the Merger. In addition, The Cumberland may also terminate the
Merger Agreement if the Applicable Market Value Per Share of Fifth
Third Common Stock is $37.50 or less.
B. Such other business as may properly come before the meeting or
any adjournments thereof. The Board of Directors is not aware of
any other business to come before the Special Meeting.
Pursuant to the Bylaws of The Cumberland, the Board of Directors
has fixed __________, 1994 as the record date for the determination
of shareholders entitled to receive notice of, and to vote at, the
Special Meeting and any adjournments thereof. Only holders of
record of Cumberland Common Stock at the close of business on such
date will be entitled to vote at the Special Meeting or any
adjournments thereof.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE ISSUED AND OUTSTANDING
SHARES OF CUMBERLAND COMMON STOCK IS REQUIRED TO APPROVE THE
MERGER. YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES
WHICH YOU OWN.
EACH SHAREHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE SPECIAL
MEETING, IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD WITHOUT DELAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY
PROXY GIVEN BY A SHAREHOLDER MAY BE REVOKED BY SUBMITTING A DULY
EXECUTED PROXY BEARING A LATER DATE. ANY SHAREHOLDER PRESENT AT
THE SPECIAL MEETING MAY REVOKE HIS OR HER PROXY AND VOTE PERSONALLY
ON EACH MATTER BROUGHT BEFORE THE SPECIAL MEETING.
By Order of the Board of Directors
H. David Hale, President ______________, 1994
Louisville, Kentucky
THE CUMBERLAND FEDERAL BANCORPORATION, INC. FIFTH THIRD BANCORP
200 West Broadway Fifth Third Center
Louisville, Kentucky 40202 Cincinnati, Ohio 45263
(502) 562-5200 (513) 579-5300
PROXY STATEMENT AND PROSPECTUS
Fifth Third Bancorp ("Fifth Third") hereby registers up to a total
of 3,150,000 shares of its Common Stock, without par value ("Fifth
Third Common Stock") to be distributed to the shareholders of The
Cumberland Federal Bancorporation, Inc. ("The Cumberland") in
connection with the proposed merger of The Cumberland with and into
Fifth Third. If the merger is approved by the shareholders of The
Cumberland at a Special Meeting of shareholders and all other
conditions of the merger are satisfied, each outstanding common
share of The Cumberland will be converted into a minimum of one (1)
share and up to one and two tenths (1.2) shares of Fifth Third
Common Stock.
This Proxy Statement and Prospectus (the "Proxy Statement and
Prospectus") is being furnished to the shareholders of The
Cumberland, a Kentucky corporation, in connection with the
solicitation of proxies by the Board of Directors of The Cumberland
for use at a Special Meeting of shareholders to be held on June 29,
1994 (the "Special Meeting").
At the Special Meeting, holders of shares of The Cumberland's
common stock, $1.00 par value per share ("Cumberland Common
Stock"), will be asked to approve an Affiliation Agreement and a
Plan and Agreement of Merger, both dated as of January 10, 1994
(the "Affiliation Agreement" and the "Merger Agreement",
respectively), between The Cumberland and Fifth Third, which
together provide for the merger of The Cumberland with and into
Fifth Third (the "Merger"). Pursuant to the Affiliation Agreement
and Merger Agreement, each shareholder of The Cumberland will be
entitled to receive for each share of Cumberland Common Stock held
by such shareholder at the effective time of the Merger (the
"Effective Time"), not less than one (1) or more than one and two
tenths (1.2) shares of Fifth Third Common Stock as determined in
accordance with the following (the "Exchange Ratio"): (i) If the
Applicable Market Value Per Share of Fifth Third Common Stock (as
defined) is equal to or greater than $57.00, each share of
Cumberland Common Stock shall be converted into one (1) whole share
of Fifth Third Common Stock; (ii) If the Applicable Market Value
Per Share of Fifth Third Common Stock is less than $57.00 and equal
to or greater than $47.50, each share of Cumberland Common Stock
shall be converted into that number of shares of Fifth Third Common
Stock equal to the quotient obtained by dividing $57.00 by the
Applicable Market Value Per Share of Fifth Third Common Stock; or
(iii) If the Applicable Market Value Per Share of Fifth Third
Common Stock is less than $47.50, each share of Cumberland Common
Stock shall be converted into one and two tenths (1.2) shares of
Fifth Third Common Stock. The Cumberland may terminate the
Affiliation Agreement and the Merger Agreement if the Applicable
Market Value Per Share of Fifth Third Common Stock is less than
$41.75 and when compared to the closing price of Fifth Third Common
Stock on January 10, 1994, reveals a decline that is 15% greater
than the decline in a weighted average index of 13 identified bank
holding company stocks between January 10, 1994 and the date five
trading days prior to the closing date of the Merger. In addition,
The Cumberland may also terminate the Merger Agreement if the
Applicable Market Value Per Share of Fifth Third Common Stock is
$37.50 or less. See "TERMS AND CONDITIONS OF THE PROPOSED MERGER -
Conditions to Closing." Only whole shares of Fifth Third Common
Stock will be issued in connection with the Merger. No fractional
shares will be issued. Shareholders otherwise entitled to receive
fractional shares will receive cash in lieu thereof based upon the
value per share of Fifth Third Common Stock determined as provided
above.
Under the rules and regulations of the Securities and Exchange
Commission (the "Commission"), the solicitation of The Cumberland's
shareholders to approve the Merger constitutes an offering of Fifth
Third Common Stock to be issued in connection with the Merger.
Accordingly, Fifth Third has filed with the Commission a
Registration Statement under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to such offering, and this
Proxy Statement and Prospectus does not contain all of the
information set forth in such Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations
of the Commission.
This Proxy Statement and Prospectus shall not constitute a
prospectus for public reoffering of the Fifth Third Common Stock
issuable pursuant to the Merger.
THE SECURITIES OF FIFTH THIRD BANCORP TO BE ISSUED IN THE MERGER
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT AND PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement and Prospectus is _____________,
1994.
AVAILABLE INFORMATION
THIS PROXY STATEMENT AND PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
SEE "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." THESE
DOCUMENTS (EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED
THEREIN) ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST
FROM MICHAEL K. KEATING, SECRETARY, FIFTH THIRD BANCORP, FIFTH
THIRD CENTER, CINCINNATI, OHIO 45263 (TELEPHONE NUMBER: (513)
579-5300) WITH RESPECT TO DOCUMENTS CONCERNING FIFTH THIRD, AND
FROM MICHAEL A. RINGSWALD, SECRETARY, THE CUMBERLAND FEDERAL
BANCORPORATION, INC., 200 WEST BROADWAY, LOUISVILLE, KENTUCKY 40202
(TELEPHONE NUMBER: (502) 562-5200) WITH RESPECT TO DOCUMENTS
CONCERNING THE CUMBERLAND. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JUNE 22, 1994.
No person has been authorized to give any information or to make
any representation in connection with this offering other than
those contained in this Proxy Statement and Prospectus, and, if
given or made, such information or representation must not be
relied upon as having been authorized by Fifth Third or The
Cumberland. This Proxy Statement and Prospectus shall not
constitute an offer to sell or a solicitation of an offer to buy
any securities in any jurisdiction in which it would be unlawful to
make such offer or solicitation. Neither the delivery of this
Proxy Statement and Prospectus at any time, nor any offer or
solicitation made hereunder, shall under any circumstances imply
that the information set forth herein or incorporated herein is
correct as of any time subsequent to its date.
Fifth Third and The Cumberland are each subject to the information
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, file reports,
proxy statements and other information with the Commission.
Reports, proxy statements and other information filed by Fifth
Third or The Cumberland can be inspected and copied at Room 1024 of
the Offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices in
New York, (7 World Trade Center, 13th Floor, New York, New York
10048) and Chicago (Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511), and copies of
such material can be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
All information contained in this Proxy Statement and Prospectus
with respect to The Cumberland was supplied by The Cumberland and
all information contained or incorporated in this Proxy Statement
and Prospectus with respect to Fifth Third was supplied by Fifth
Third.
Although neither The Cumberland nor Fifth Third has any knowledge
that would indicate that any statements or information relating to
the other party contained herein is inaccurate or incomplete,
neither The Cumberland nor Fifth Third can warrant the accuracy or
completeness of such statements or information as they relate to
the other party.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated into this Proxy
Statement and Prospectus by reference.
Fifth Third:
(a) Fifth Third's Annual Report on Form 10-K for the year ended
December 31, 1993;
(b) Pages 15-36 of Fifth Third's 1993 Annual Report to
Shareholders;
(c) Fifth Third's Proxy Statement dated February 10, 1994.
The Cumberland:
(a) The Cumberland's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993;
(b) The Cumberland's Proxy Statement dated March 16, 1994;
(c) The Cumberland's Current Report on Form 8-K dated January 10,
1994.
In addition, all subsequent documents filed with the Securities and
Exchange Commission by Fifth Third or The Cumberland pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended, prior to the Effective Time are incorporated
herein by reference. 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 Proxy
Statement and Prospectus to the extent that a statement contained
herein (or in any other subsequently filed document which also 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 so modified or superseded, to
constitute a part of this Proxy Statement and Prospectus.
TABLE OF CONTENTS
AVAILABLE INFORMATION
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
SUMMARY OF THE PROXY STATEMENT AND PROSPECTUS
SELECTED HISTORICAL FINANCIAL DATA OF FIFTH THIRD
SELECTED HISTORICAL FINANCIAL DATA OF THE CUMBERLAND
GENERAL INFORMATION
PURPOSES OF THE SPECIAL MEETING
Proposal to Merge The Cumberland into Fifth Third
Vote Required; Shares Entitled to Vote
Voting and Revocation of Proxies
Solicitation of Proxies
COMPARATIVE MARKET PRICE AND DIVIDEND DATA
COMPARATIVE PER SHARE DATA
TERMS AND CONDITIONS OF THE PROPOSED MERGER
Background and Reasons for the Merger
Recommendation
Effective Time
Conversion of Shares of Cumberland Common Stock
Merger Price
Stock Options and Stock Purchase Plan
No Fractional Shares
Exchange of Certificates
Federal Income Tax Consequences
Accounting Treatment
Rights of Dissenting Shareholders
Conduct Pending Merger; Representations and Warranties
Conditions to Closing
Amendment; Waiver; Termination
Effect on The Cumberland and The Cumberland F.S.B. Employees
Interests of Management
Opinions of Keefe, Bruyette & Woods, Inc. and J. C. Bradford &
Co.
Effects of Merger
Stock Option Agreement
Transaction With Affiliated Persons
CAPITAL REQUIREMENTS
RESALE OF FIFTH THIRD COMMON STOCK BY AFFILIATES
FIFTH THIRD BANCORP
Description of Business
Bank Holding Companies In General
THE CUMBERLAND FEDERAL BANCORPORATION, INC.
Description of Business
Regulation
ADDITIONAL SUPERVISION AND REGULATION
Acquisitions of Savings Associations By Holding Companies
Securities Exchange Act of 1934
Dividends
EFFECT OF GOVERNMENTAL POLICIES
DESCRIPTION OF CAPITAL STOCK
Voting Rights
Dividends
Preemptive Rights
Rights Upon Liquidation
Indemnification and Personal Liability of Directors and
Officers
Shareholders' Meetings; Quorum
Subscription, Conversion, Redemption Rights; Stock
Nonassessable
Change of Control Provisions
The Cumberland Shareholder Rights Agreement
CERTAIN BENEFICIAL OWNERS OF FIFTH THIRD COMMON STOCK
FIFTH THIRD MANAGEMENT
CUMBERLAND BOARD OF DIRECTORS
LEGAL MATTERS
EXPERTS
SHAREHOLDERS' PROPOSALS
OTHER MATTERS
Annexes:
Annex A: Affiliation Agreement dated between Fifth Third Bancorp
and The Cumberland Federal Bancorporation, Inc. dated as of January
10, 1994 (excluding exhibits)
Annex B: Plan and Agreement of Merger dated as of January 10, 1994
between Fifth Third Bancorp and The Cumberland Federal
Bancorporation, Inc.
Annex C: Kentucky Revised Statutes Sections 271B.13-010 et seq.,
Statutory Rights of Dissenting Shareholders
Annex D: Stock Option Agreement between Fifth Third Bancorp and
The Cumberland Federal Bancorporation, Inc.
Annex E: Fairness Opinion of Keefe, Bruyette & Woods, Inc.
Annex F: Fairness Opinion of J.C. Bradford & Co.
SUMMARY OF THE PROXY STATEMENT AND PROSPECTUS
The following is a summary of certain information contained
elsewhere in this Proxy Statement and Prospectus and the documents
incorporated herein by reference. This summary is not intended to
be a summary of all information relating to the Merger and is
qualified in its entirety by reference to the more detailed
information contained elsewhere in this Proxy Statement and
Prospectus, including the Annexes hereto, and the documents
incorporated by reference in this Proxy Statement and Prospectus.
Parties to the Merger:
Fifth Third: Fifth Third is a registered multi-bank holding
company, incorporated under Ohio law, which conducts its principal
activities through its banking and non-banking subsidiaries. As of
December 31, 1993, Fifth Third's 9 subsidiary banks operated a
general banking business from 288 offices located throughout Ohio,
Indiana and Kentucky. Fifth Third is also a registered unitary
savings and loan holding company and operates a federally-chartered
savings bank located in Naples, Florida. At December 31, 1993,
Fifth Third had consolidated assets, deposits and stockholders'
equity of $12.0 billion, $8.6 billion and $1.2 billion,
respectively. Fifth Third's voting stock is traded
over-the-counter and is listed on the NASDAQ National Market System
under the symbol "FITB." Fifth Third's principal executive offices
are located at Fifth Third Center, Cincinnati, Ohio 45263, and its
telephone number is (513) 579-5300.
The Cumberland: The Cumberland is a unitary savings and loan
holding company incorporated under Kentucky law. The Cumberland
owns all of the stock of The Cumberland Federal Savings Bank ("The
Cumberland F.S.B."), which is headquartered in Louisville,
Jefferson County, Kentucky. The Cumberland F.S.B. has branches in
multiple counties in Kentucky. At December 31, 1993, on a
consolidated basis The Cumberland had total assets, total deposits
and shareholders' equity of $1.2 billion, $847 million and $80
million, respectively. The Cumberland's voting stock is traded
over-the-counter and is listed on the NASDAQ National Market System
under the symbol "CMBK." The Cumberland's principal offices are
located at 200 West Broadway, Louisville, Kentucky 40202, and its
telephone number is (502) 562-5200.
Special Meeting of The Cumberland Shareholders:
Time and Date: 10:00 A.M. E.D.T. on June 29, 1994
Place: The Bluegrass Room of The Brown Hotel, Fourth and Broadway,
Louisville, Kentucky 40202
Purpose: To consider and vote upon an Affiliation Agreement and
Merger Agreement which provide for the Merger of The Cumberland
with and into Fifth Third. Pursuant to the Affiliation Agreement
and Merger Agreement, The Cumberland's shareholders will receive
shares of Fifth Third Common Stock in exchange for shares of
Cumberland Common Stock. Copies of the Affiliation Agreement and
Merger Agreement are attached hereto as Annex A and Annex B,
respectively, and are incorporated herein by reference.
Required Vote for the Merger, the Affiliation Agreement and the
Merger Agreement; Record Date: Approval of the Affiliation
Agreement and the Agreement of Merger requires the affirmative vote
of holders of a majority of the [2,412,853] shares of Cumberland's
Common Stock, $1.00 par value per share, outstanding as of the
close of business on __________________. An abstention or failure
to vote has the same effect as voting against the proposed Merger.
Accordingly, shareholders are urged to sign and return their
proxies. See "PURPOSES OF THE SPECIAL MEETING - Voting and
Revocation of Proxies."
Beneficial Ownership by Officers and Directors: As of the close of
business on March 31, 1994, the executive officers and directors of
The Cumberland and their affiliates beneficially owned 461,207
shares (or approximately 19.11%) of the Cumberland Common Stock.
This figure includes options for shares of stock which were
exercisable on that date.
Rights of Dissenting Shareholders: Holders of Cumberland Common
Stock who do not vote in favor of the Merger are entitled to demand
cash in lieu of Fifth Third Common Stock in the amount of the fair
value of their shares determined in accordance with Kentucky law.
See "TERMS AND CONDITIONS OF THE PROPOSED MERGER - Rights of
Dissenting Shareholders" and Annex C.
Terms of the Merger:
Conversion of Cumberland Common Stock; Stock Consideration: Upon
consummation of the Merger, each shareholder of The Cumberland will
be entitled to receive, for each share of Cumberland Common Stock
which he or she holds at the effective time of the Merger (the
"Effective Time"), a minimum of one (1) share and up to one and two
tenths (1.2) shares of Fifth Third Common Stock in accordance with
the following: (i) If the Applicable Market Value Per Share of
Fifth Third Common Stock is equal to or greater than $57.00, each
share of Cumberland Common Stock shall be converted into one (1)
whole share of Fifth Third Common Stock; (ii) If the Applicable
Market Value Per Share of Fifth Third Common Stock is less than
$57.00 and equal to or greater than $47.50, each share of
Cumberland Common Stock shall be converted into that number of
shares of Fifth Third Common Stock equal to the quotient obtained
by dividing $57.00 by the Applicable Market Value Per Share of
Fifth Third Common Stock; or (iii) If the Applicable Market Value
Per Share of Fifth Third Common Stock is less than $47.50, each
share of Cumberland Common Stock shall be converted into one and
two tenths (1.2) shares of Fifth Third Common Stock. The
"Applicable Market Value Per Share of Fifth Third Common Stock"
shall be the average of the per share closing prices of Fifth Third
Common Stock as reported on the NASDAQ National Market System for
the twenty (20) trading days ending on the fifth trading day prior
to the time the Merger becomes effective (the "Valuation Period").
See "TERMS AND CONDITIONS OF THE PROPOSED MERGER - Conversion of
Shares of Cumberland Common Stock" and "- Merger Price."
No Fractional Shares: No fractional shares will be issued in
connection with the Merger. The Cumberland shareholders will
receive cash in lieu of any fractional shares which they would
otherwise be entitled to receive, based on the applicable value per
share of such shares as defined above.
Conditions of Closing: The Merger is subject to several significant
conditions, including shareholder approval, approval by the Board
of Governors of the Federal Reserve System, the Office of Thrift
Supervision and the Kentucky Department of Financial Institutions.
The Cumberland may terminate the Merger Agreement if the Applicable
Market Value Per Share of Fifth Third Common Stock is less than
$41.75 and when compared to the closing price of Fifth Third Common
Stock on January 10, 1994, reveals a decline that is 15% greater
than the decline in a weighted average index of 13 identified bank
holding company stocks between January 10, 1994 and the date five
trading days prior to the closing date of the Merger. In addition,
The Cumberland may also terminate the Merger Agreement if the
Applicable Market Value Per Share of Fifth Third Common Stock is
$37.50 or less. See "TERMS AND CONDITIONS OF THE PROPOSED MERGER
- - Conditions to Closing."
Fifth Third Option: The Cumberland has issued Fifth Third an option
to purchase 19.9% of Cumberland Common Stock under certain
circumstances set forth in a Stock Option Agreement (the "Stock
Option Agreement"). The Stock Option Agreement provides Fifth
Third an option to purchase up to 479,585 shares of Cumberland
Common Stock at $47.00 per share, or at such lesser price that The
Cumberland issues or agrees to issue shares of Cumberland Common
Stock, but only if any person other than Fifth Third or its
affiliates acquires, or enters into an agreement with The
Cumberland to acquire 30% or more of the outstanding Cumberland
Common Stock. See "TERMS AND CONDITIONS OF THE PROPOSED MERGER"
and Annex D.
Merger: Upon consummation of the Merger, The Cumberland will merge
with and into Fifth Third and The Cumberland will cease to exist as
a separate entity. Prior to the merger, Fifth Third will: (i)
create a subsidiary bank holding company incorporated in Kentucky
and located in Louisville, Kentucky and named Fifth Third Kentucky
Bank Holding Company ("Kentucky BHC"); and (ii) transfer ownership
(through a contribution of capital) of its wholly owned subsidiary,
Fifth Third Bank of Central Kentucky, Inc., a Kentucky-chartered,
non-member bank headquartered in Lexington, Fayette County,
Kentucky ("Fifth Third Central") to Kentucky BHC. Simultaneously
with the Merger, Fifth Third plans to transfer ownership through a
contribution to capital of The Cumberland F.S.B. from Fifth Third
to Kentucky BHC.
Fifth Third wishes to also consummate the transactions described in
the next paragraph (the "Related Transactions") simultaneously with
the Merger. The Affiliation Agreement and Merger Agreement,
however, do not require this timing and state that the Related
Transactions are independent of the Merger. Consequently, the
regulatory approval and consummation of the Merger are not
contingent on the regulatory approval and consummation of the
Related Transactions. The Merger will be consummated whether or
not the Related Transactions are so approved and consummated.
In the "Related Transactions" Fifth Third plans to: (i) have Fifth
Third Central become a member of the Federal Reserve System ("Fed
Membership") and then purchase for fair value the majority of the
assets by assuming an equal amount of the liabilities (the "P&A")
of The Cumberland F.S.B. (except certain assets and liabilities
which will remain those of The Fifth Third Savings Bank of Western
Kentucky, F.S.B. (described below)); (ii) move Fifth Third
Central's main office to Louisville, Jefferson County, Kentucky
(iii) have The Cumberland F.S.B. distribute capital of
approximately $40 million to Fifth Third -- Fifth Third will
contribute such capital to Fifth Third Central; (iv) move The
Cumberland F.S.B.'s main office to the current location of its
Mayfield, Graves County, Kentucky branch; (v) change the name of
Fifth Third Central to Fifth Third Bank of Kentucky, Inc. and that
of The Cumberland F.S.B. to The Fifth Third Savings Bank of Western
Kentucky, F.S.B. ("Savings Bank") and (vi) have Fifth Third
Central become a member of the Federal Home Loan Bank (the "FHLB")
and have Savings Bank continue to be a member of such bank.
Effective Time; Right to Terminate: The Effective Time will, unless
the parties agree otherwise, occur on the last business day of the
month in which all of the conditions precedent to the Closing,
including receipt of all regulatory approvals and the expiration of
any applicable waiting periods, have been fully met or effectively
waived. The parties anticipate that the Merger will be consummated
in late August 1994 or shortly thereafter. The Cumberland and
Fifth Third each will have the right to terminate the Affiliation
Agreement if the Effective Time does not occur on or before
December 31, 1994. See "TERMS AND CONDITIONS OF THE PROPOSED
MERGER - Effective Time."
Procedure for Exchange of Shares: Promptly after the Effective
Time, Fifth Third will mail to each shareholder of The Cumberland
a form of transmittal letter and instructions for the surrender of
Cumberland Common Stock for the shares of Fifth Third Common Stock
to which such shareholders are entitled. Certificates for shares
of Fifth Third Common Stock will be issued to shareholders of The
Cumberland only after their certificates for Cumberland Common
Stock have been surrendered in accordance with such instructions.
See "TERMS AND CONDITIONS OF THE PROPOSED MERGER - Exchange of
Certificates."
Federal Income Tax Consequences: The Merger is conditioned, in
part, upon receipt of an opinion of Fifth Third's counsel with
respect to certain tax matters, including an opinion that no gain
or loss (other than with respect to cash received in lieu of
fractional shares, or cash received upon the exercise of
dissenters' rights) will be recognized by The Cumberland's
shareholders upon the exchange of their Cumberland Common Stock for
Fifth Third Common Stock. See "TERMS AND CONDITIONS OF THE
PROPOSED MERGER - Federal Income Tax Consequences." SHAREHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC
CONSEQUENCES TO THEM OF THE MERGER UNDER FEDERAL, STATE, LOCAL AND
ANY OTHER APPLICABLE TAX LAWS.
Accounting: It is intended that the Merger will be accounted for by
the pooling of interests method in accordance with generally
accepted accounting principles. See "TERMS AND CONDITIONS OF THE
PROPOSED MERGER - Accounting Treatment" and "- Conditions to
Closing."
Interests of Certain Persons in the Merger: Fifth Third shall use
its best efforts to employ at Fifth Third or at a Fifth Third
subsidiary or affiliate each of the employees of The Cumberland and
The Cumberland F.S.B. Each employee of The Cumberland or The
Cumberland F.S.B. who becomes an employee of Fifth Third or its
subsidiaries subsequent to the Merger will be entitled to
participate in all employee benefit plans sponsored by Fifth Third
or its subsidiaries on the same terms and to the same extent as
similarly situated employees of Fifth Third. Such employees shall
receive credit for their period of service to The Cumberland or The
Cumberland F.S.B. for purposes of determining participation and
vesting in all Fifth Third employee benefit plans but not for the
purposes of determining the benefits accrued thereunder.
Furthermore, following the Merger, H. David Hale, Chairman,
President and CEO of The Cumberland and President and CEO of The
Cumberland F.S.B., and each current member of the Board of
Directors of The Cumberland who is not an employee of The
Cumberland or The Cumberland F.S.B. will become a member of the
Board of Directors of Kentucky BHC. Mr. Hale shall be the Chairman
and Chief Executive Officer of Kentucky BHC. Fifth Third shall
take such actions as are necessary to add Mr. Hale to the Board of
Directors of Fifth Third as promptly as possible after the
Effective Date. Mr. Hale will receive certain compensation from
Fifth Third in consideration for his termination of his employment
agreement with The Cumberland. In addition, Fifth Third shall
resume and renew for one additional year employment agreements that
exist between The Cumberland F.S.B. and certain of its executive
officers. Finally, the officers and directors of The Cumberland
will be provided certain director and officers liability insurance
protection for three years following the Effective Date. See
"TERMS AND CONDITIONS OF THE PROPOSED MERGER - Effect on The
Cumberland and The Cumberland F.S.B. Employees" and "- Interests of
Management."
Board Recommendation: The Board of Directors of The Cumberland
believes that shareholders will benefit from the Merger through an
affiliation with Fifth Third and unanimously recommends approval of
the Merger. See "TERMS AND CONDITIONS OF THE PROPOSED MERGER -
Background and Reasons for the Merger" and "- Recommendation."
Securities Involved: For a comparative analysis of the Cumberland
Common Stock and the Fifth Third Common Stock, see "DESCRIPTION OF
CAPITAL STOCK."
Comparative Market Prices: The Fifth Third Common Stock and
Cumberland Common Stock are both traded on the National Association
of Securities Dealers Automated Quotation ("NASDAQ") National
Market System under the symbols FITB and CMBK, respectively. On
January 10, 1994, the business day immediately preceding the public
announcement of the execution of the Affiliation Agreement and the
Merger Agreement setting forth the terms of the Merger, and on
____________, 1994, comparative market prices of the Cumberland
Common Stock and the Fifth Third Common Stock were as follows:
Closing Sales Prices
January 10, 1994 __________, 1994
Cumberland Common Stock $43.50 $_____
Fifth Third Common Stock $51.13 $_____
/TABLE
SELECTED HISTORICAL FINANCIAL DATA OF FIFTH THIRD
The following table sets forth certain historical financial data
concerning Fifth Third. This information is based on information
contained in Fifth Third's 1993 Annual Report on Form 10-K which is
incorporated by reference in this Proxy Statement and Prospectus
and should be read in conjunction therewith. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE".
Years Ended December 31,
------------------------------------------------------------
1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
($000's except per share amounts)
Summary of Operations:
Net interest income $436,389 $394,194 $332,221 $286,621 $268,703
Provision for credit losses 44,487 65,315 55,744 39,879 36,468
Net interest income after ----------- ----------- ----------- ----------- -----------
provision for credit losses 391,902 328,879 276,477 246,742 232,235
Other operating income 226,578 200,053 171,911 144,865 124,851
Operating expenses 323,387 289,276 249,792 223,324 207,527
----------- ----------- ----------- ----------- -----------
Income before income taxes 295,093 239,656 198,596 168,283 149,559
Applicable income taxes 98,646 75,564 60,446 47,872 41,241
----------- ----------- ----------- ----------- -----------
Net income $196,447 $164,092 $138,150 $120,411 $108,318
=========== =========== =========== =========== ===========
Common Share Data:
Primary net income per share $3.21 $2.73 $2.32 $2.05 $1.85
Fully diluted net income per share 3.21 2.73 2.31 2.04 1.85
Cash dividends declared per share 1.02 .90 .78 .68 .60
Book value at period end 19.50 16.80 14.81 13.25 11.91
Average shares outstanding (000's):
Primary 62,557 60,255 59,493 58,929 58,521
Fully Diluted 62,563 60,356 59,702 58,974 58,579
Financial Condition at Period End:
Securities Available for Sale (at market) $815,986 -- -- -- --
Securities Held for Investment 1,487,322 $1,933,008 $2,063,766 $1,354,966 $1,059,204
Loans and Leases 8,811,039 7,474,859 5,806,612 5,496,990 5,163,840
Assets 11,966,000 10,213,320 8,826,130 7,955,808 7,142,972
Deposits 8,628,498 7,531,946 6,687,262 6,385,221 5,783,527
Funds Borrowed 1,602,217 1,229,791 1,042,566 607,047 479,219
Long-Term Debt and
Convertible Subordinated Notes 282,864 254,061 12,848 13,517 12,607
Shareholders' Equity 1,197,646 1,005,165 879,450 782,698 699,261
Ratios:
Profitability Ratios:
Return on average assets 1.80% 1.74% 1.68% 1.64% 1.62%
Return on average stockholders' equity 18.2 17.3 16.6 16.2 16.5
Net interest margin 4.51 4.73 4.58 4.53 4.70
Overhead ratio (1) 47.3 47.3 47.7 49.5 50.3
Other operating income to total income (2) 33.5 33.5 33.6 33.6 31.6
Capital Ratios:
Average shareholders' equity to
average assets 9.92 10.07 10.11 10.12 9.83
Tier 1 Capital to risk-adjusted assets (3) 11.4 11.2 12.5 11.9 N/A
Total Capital to risk-adjusted assets (3) 13.8 14.1 13.7 13.2 N/A
Leverage (4) 9.9 9.5 9.7 9.8 N/A
Credit Quality Ratios:
Reserve for credit losses to
nonperforming assets 559.8 214.5 92.6 90.7 221.0
Reserve for credit losses to loans and leases
outstanding 1.53 1.54 1.56 1.55 1.55
Net charge-offs to average loans and leases
outstanding .32 .68 .90 .66 .52
Nonperforming assets to loans, leases and
other real estate owned .27 .71 1.67 1.70 .70
- ------------------------------------------
<FN>
(1) Operating expenses divided by the sum of taxable equivalent net interest income and other
operating income.
(2) Other operating income excluding securities gains and losses as a percent of net interest income
and other operating income excluding securities gains and losses.
(3) Under final year-end 1992 guidelines.
(4) Tier 1 capital (under final year-end 1992 rules) divided by average quarterly assets.
</FN>
/TABLE
SELECTED HISTORICAL FINANCIAL DATA OF THE CUMBERLAND
The following table sets forth certain historical financial data
concerning The Cumberland. This information is based on
information contained in The Cumberland's 1993 Annual Report on
Form 10-K which is incorporated by reference in this Proxy
Statement and Prospectus and should be read in conjunction
therewith. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
At December 31,
1993 1992 1991 1990 1989
(dollars in thousands)
RESULTS OF OPERATIONS
Interest income $85,565 $92,780 $116,127 $133,046 $113,305
Interest expense 48,439 59,104 85,101 102,024 85,635
Net interest income 37,126 33,676 31,026 31,022 27,670
Provision for loan losses 1,525 785 6,720 3,600 6,590
Gain (loss) on sales of securities (414) 7,507 4,115 0 4,785
Mortgage banking activities 217 589 6,436 200 129
Gain on sale of credit card receivables 0 0 4,592 0 0
Income before income taxes, extraordinary 10,170 13,751 10,491 783 7,131
items and cumulative effect of change
in accounting principle
Income tax provision 3,733 4,737 4,217 168 2,112
Income before extraordinary items and 6,437 9,014 6,220 615 5,019
cumulative effect of change in
accounting principle
Extraordinary items, net (894) (1,085) (1,416) 0 0
Cumulative effect of change in 4,245 0 0 0 0
accounting principle
Net income 9,788 7,929 4,804 615
Earnings per share:
Primary $3.93 $3.20 $2.00 $0.25 $2.00
Fully diluted $3.93 $3.20 $1.96 $0.25 $2.00
FINANCIAL CONDITION
Total assets $1,170,582 $1,181,112 $1,156,228 $1,390,161 $1,373,320
Investment securities 13,189 15,391 27,652 54,514 66,813
Mortgage-backed securities 347,996 461,920 523,806 582,279 550,557
Loans receivable, net 749,419 635,005 513,286 664,576 658,970
Deposits 846,589 914,238 945,154 968,375 1,044,456
FHLB advances and other borrowings 214,527 172,831 123,638 337,691 242,236
Stockholders' equity 79,819 71,689 65,241 62,627 63,022
Book value per share $33.08 $29.83 $27.15 $24.92 $25.29
Dividends declared per share $0.80 $0.63 $0.48 $0.48 $0.44
PERFORMANCE RATIOS
Return on average assets 0.85% 0.69% 0.37% 0.04% 0.42%
Return on average equity 12.80 11.56 7.52 0.98 8.11
Average equity to average assets 6.63 5.95 4.96 4.45 5.23
Interest rate spread 3.10 2.88 2.44 2.14 2.24
Net interest yield on average earning a 3.35 3.08 2.56 2.31 2.47
Operating and administrative expenses 2.60 2.20 2.40 1.64 1.58
/TABLE
THE CUMBERLAND FEDERAL BANCORPORATION, INC.
200 West Broadway
Louisville, Kentucky 40202
(502) 562-5200
AND
FIFTH THIRD BANCORP
Fifth Third Center
Cincinnati, Ohio 45263
(513) 579-5300
PROXY STATEMENT AND PROSPECTUS
GENERAL INFORMATION
This Proxy Statement and Prospectus is being furnished to the
shareholders of The Cumberland Federal Bancorporation, Inc. ("The
Cumberland") in connection with the solicitation by the Board of
Directors of The Cumberland of proxies to be used at a Special
Meeting of shareholders (the "Special Meeting") to be held on June
29, 1994, at 10:00 a.m. E.D.T. in the Bluegrass Room of the Brown
Hotel, Fourth and Broadway, Louisville, Kentucky 40202, and at any
adjournments thereof. This Proxy Statement and Prospectus and the
enclosed form of proxy are first being sent to shareholders of The
Cumberland on or about May ____________.
PURPOSES OF THE SPECIAL MEETING
At the Special Meeting, shareholders of The Cumberland will be
asked to approve an Affiliation Agreement and a Plan and Agreement
of Merger, both dated as of January 10, 1994 (the "Affiliation
Agreement" and the "Merger Agreement," respectively), between The
Cumberland and Fifth Third Bancorp ("Fifth Third"), which provide
for the merger (the "Merger") of The Cumberland with and into Fifth
Third (see "TERMS AND CONDITIONS OF THE PROPOSED MERGER" below).
Proposal to Merge The Cumberland into Fifth Third
Pursuant to the Affiliation Agreement and the Merger Agreement,
each shareholder of The Cumberland will be entitled to receive for
each share of Cumberland common stock, $1.00 par value per share
("Cumberland Common Stock"), which such shareholder holds at the
effective time of the Merger (the "Effective Time"), a minimum of
one (1) share and up to one and two tenths (1.2) shares of Fifth
Third common stock, no par value ("Fifth Third Common Stock"). The
number of shares of Fifth Third Common Stock to be issued to each
shareholder in this transaction will be determined as follows: (i)
If the Applicable Market Value Per Share of Fifth Third Common
Stock (as hereinafter defined) is equal to or greater than $57.00,
each share of Cumberland Common Stock shall be converted into one
(1) whole share of Fifth Third Common Stock. The "Applicable
Market Value Per Share of Fifth Third Common Stock" shall be the
average of the per share closing prices of Fifth Third Common Stock
as reported on the NASDAQ National Market System for the twenty
(20) trading days ending on the fifth trading day prior to the time
the Merger becomes effective (the "Valuation Period"); (ii) If the
Applicable Market Value Per Share of Fifth Third Common Stock is
less than $57.00 and equal to or greater than $47.50, each share of
Cumberland Common Stock shall be converted into that number of
shares of Fifth Third Common Stock equal to the quotient obtained
by dividing $57.00 by the Applicable Market Value Per Share of
Fifth Third Common Stock; or (iii) If the Applicable Market Value
Per Share of Fifth Third Common Stock is less than $47.50, each
share of Cumberland Common Stock shall be converted into one and
two tenths (1.2) shares of Fifth Third Common Stock. See "TERMS
AND CONDITIONS OF THE PROPOSED MERGER - Merger Price" below.
THE CUMBERLAND'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE APPROVAL OF THE AFFILIATION AGREEMENT AND MERGER AGREEMENT.
Vote Required; Shares Entitled to Vote
The presence in person or by proxy of the holders of a majority of
the outstanding shares of Cumberland Common Stock will constitute
a quorum for the transaction of business at the Special Meeting.
APPROVAL OF THE MERGER WILL REQUIRE THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE OUTSTANDING SHARES OF CUMBERLAND COMMON STOCK.
Broker non-votes will not be treated as votes cast and, therefore,
will have the same effect as a vote as a note against the proposal.
Holders of record of Cumberland Common Stock at the close of
business on ______________, (the "Record Date") are entitled to
receive notice of, and to vote at, the Special Meeting. At the
close of business on the Record Date, there were [2,412,853] shares
of Cumberland Common Stock outstanding. Each share of Cumberland
Common Stock will be entitled to one vote.
Persons and groups owning in excess of 5% of the Cumberland Common
Stock are required to file certain reports regarding such ownership
with The Cumberland and with the Securities and Exchange
Commission, in accordance with the Securities Exchange Act of 1934.
The information set forth below with respect to persons and groups
owning beneficially in excess of 5% of Cumberland Common Stock is
based on the reports filed by such beneficial owners. As of March
31, 1994, management of The Cumberland was not aware of any person
or group who beneficially owned more than 5% of the outstanding
shares of Cumberland Common Stock except as listed below. Such
table also shows the number of and percentage of outstanding shares
of Fifth Third Common Stock each such beneficial owner will hold
upon consummation of the Merger (assuming that each share of
Cumberland Common Stock is converted into 1.2 shares of Fifth Third
Common Stock.)
Name and Address No. of Percent of Shares of Percent of
of Beneficial Shares Outstanding Fifth Third Outstanding
Owner Benefi- Shares to be Owned Fifth Third
cially (1) Shares (at
Owned March 31,
1994)
John S. Greenebaum
2700 First National
Tower
Louisville, Kentucky
40202 124,000(2) 5.14 148,800 0.24
Keefe Managers, Inc.
375 Park Avenue
31st Floor
New York, New York
10152 200,000(3) 8.3% 240,000 0.39%
U.S. Bancorp
United States
National Bank of
Oregon
111 S.W. Fifth Ave
Portland, OR 97204 159,100(4) 6.6% 190,920 0.31%
All directors and
executive officers
as a group (20
persons) 461,207(5) 19.11% 553,448 0.90%
<FN>
(1) Upon consummation of the Merger, each share of Cumberland
Common Stock shall be converted into not less than 1 nor more than
1.2 shares of Fifth Third Common Stock. For purposes of this Proxy
Statement and Prospectus, it has been assumed that each share of
Cumberland Common Stock will be converted into 1.2 shares of Fifth
Third Common Stock. See ("Merger Price")
(2) Includes 4,000 shares subject to currently exercisable stock
options, 1,000 shares held by Mr. Greenebaum's children of which
beneficial ownership is disclaimed and 2,000 shares held by a non-
profit organization with respect to which Mr. Greenebaum has shared
voting and investment powers.
(3) Keefe Managers, Inc. ("KMI") is a registered investment
adviser. KMI purchased the Common Stock on behalf of its
discretionary clients, including Keefe Partners, L.P., and has sole
power to vote the shares and to direct the disposition of the
shares.
(4) United States National Bank of Oregon is a subsidiary of U.S.
Bancorp. The Common Stock is held by the Trust Group of the bank,
which has sole power to vote the shares but has no power to direct
the disposition of the shares.
(5) Includes shares held directly, shares held by certain family
members, with respect to which shares the respective persons may be
deemed to have shared voting and investment powers, and shares held
under currently exercisable stock options.
</FN>
Voting and Revocation of Proxies
Shares represented by proxies properly signed and returned will be
voted at the Special Meeting in accordance with the instructions
thereon, unless revoked. If a proxy is signed and returned without
voting instructions, the shares represented thereby will be voted
IN FAVOR OF the Merger, and at the discretion of the proxy holders
as to any other matters which may properly come before the Special
Meeting. Each proxy may be revoked at any time before its exercise
by giving written notice to the Secretary of the Meeting. A
subsequently dated proxy will, if properly presented, revoke a
prior proxy. Any shareholder may attend the Special Meeting and
vote in person whether or not such shareholder has previously given
a proxy.
Solicitation of Proxies
Following the mailing of proxy solicitation materials, directors,
officers and employees of The Cumberland may solicit proxies by
mail, telephone, telegraph and personal interviews. The Cumberland
will bear the expense of proxy solicitation, including
reimbursement of reasonable out-of-pocket expenses incurred by
brokerage houses and other custodians, nominees and fiduciaries in
forwarding proxy solicitation material to the beneficial owners of
stock held of record by such persons. The Cumberland has retained
Corporate Investors Communication, Inc., a professional proxy
solicitation firm, to assist in the solicitation of proxies for an
approximate fee of $4,500, plus reimbursement of customary
expenses.
COMPARATIVE MARKET PRICE AND DIVIDEND DATA
Fifth Third Common Stock and Cumberland Common Stock are traded in
the over-the-counter market and quoted on NASDAQ's National Market
System. The following table sets forth (in per share amounts), for
the quarterly periods indicated, the high and low closing sales
prices of Fifth Third Common Stock, the high and low closing sales
prices of Cumberland Common Stock and the dividends declared during
each quarterly period.
Fifth Third Common St Cumberland Common Stock
Dividends Dividends
High Low Declared High Low Declared
Year Ended December 31, 1991:
First Calendar Quarter $28.00 $20.13 $0.18 $10.75 $8.25 $0.12
Second Calendar Quarter $35.13 $27.13 $0.20 $12.50 $10.00 $0.12
Third Calendar Quarter $40.38 $32.50 $0.20 $11.50 $8.50 $0.12
Fourth Calendar Quarter $45.38 $38.00 $0.20 $22.00 $11.00 $0.12
Year Ended December 31, 1992:
First Calendar Quarter $50.38 $43.00 $0.22 $32.00 $21.00 $0.15
Second Calendar Quarter $46.75 $40.13 $0.22 $34.75 $28.00 $0.15
Third Calendar Quarter $52.75 $40.75 $0.22 $33.00 $22.50 $0.15
Fourth Calendar Quarter $54.00 $46.75 $0.24 $30.00 $21.00 $0.18
Year Ended December 31, 1993
First Calendar Quarter $55.13 $49.88 $0.24 $30.25 $26.63 $0.18
Second Calendar Quarter $58.50 $50.25 $0.24 $33.75 $29.00 $0.18
Third Calendar Quarter $54.63 $51.25 $0.27 $39.25 $29.50 $0.22
Fourth Calendar Quarter $54.00 $49.75 $0.27 $43.75 $35.75 $0.22
Year Ended December 31, 1994:
First Calendar Quarter $51.13 $45.13 $0.27 $52.50 $41.88 $0.22
COMPARATIVE PER SHARE DATA
The following table sets forth certain per-share information at the
dates indicated and for the periods then ended of Fifth Third and
The Cumberland. The equivalent values of such information are
based on the exchange of 1.2 shares of Fifth Third Common Stock for
the merger of The Cumberland with and into Fifth Third. Neither
The Cumberland nor Fifth Third can give any assurances that the
following table will accurately reflect figures and values
applicable at the date of consummation of the merger transaction.
Fifth Third Cumberland Equivalent Share Basis
For the Periods Ended: 1.2 Shares of Fifth Third
Common Stock
Fully Fully
Primary Diluted Actual Primary Diluted
Net Income Per Share From
Continuing Operations
December 31, 1989 $1.85 $1.85 $2.02 $2.22 $2.22
December 31, 1990 2.05 2.04 0.25 2.46 2.45
December 31, 1991 2.32 2.31 2.59 2.78 2.77
December 31, 1992 2.73 2.73 3.64 3.28 3.28
December 31, 1993 3.21 3.21 2.58 3.85 3.85
Dividends Declared Per Share
December 31, 1989 $0.60 $0.44 $0.72
December 31, 1990 0.68 0.48 0.82
December 31, 1991 0.78 0.48 0.94
December 31, 1992 0.90 0.63 1.08
December 31, 1993 1.01 0.80 1.22
Book Value Per Share
December 31, 1989 $11.91 $25.29 $14.29
December 31, 1990 13.25 24.92 15.90
December 31, 1991 14.81 27.15 17.77
December 31, 1992 16.80 29.83 20.16
December 31, 1993 19.50 33.08 23.40
March 31, 1994 _____ _____ _____
Market Value Per Share $51.13 43.50 _____
On January 10, 1994 (1)
<FN>
(1) January 10, 1994 was the last day of trading preceding the public announcement of the merger.
</FN>
/TABLE
TERMS AND CONDITIONS OF THE PROPOSED MERGER
The following description contains, among other information,
summaries of certain provisions of the Affiliation Agreement and
the Plan and Agreement of Merger and is qualified in its entirety
by reference to the full text thereof, copies of which are
reproduced as Annex A and Annex B, respectively, to this Proxy
Statement and Prospectus and are incorporated herein by reference.
Background and Reasons for the Merger
In considering the development and expansion of The Cumberland's
operations during the past three years, The Cumberland's management
has examined certain strategic alternatives. The Cumberland's
management has noted the consolidation of financial institutions
occurring in both the regional and national financial institutions
industry. In recent years, executive officers and directors of The
Cumberland have been contacted from time to time by executive
officers of larger regional financial institutions who have
informally expressed interest in a possible affiliation with The
Cumberland.
On February 17, 1993, H. David Hale, Chairman, President and Chief
Executive Officer of The Cumberland, accepted an invitation to meet
with Robert L. Ernst, Vice President of The Fifth Third Bank. Mr.
Ernst expressed Fifth Third's interest in expanding its Kentucky
operations. On March 9, 1993, The Cumberland and Fifth Third
executed a confidentiality agreement with respect to the
commencement of discussions with regard to a possible acquisition
of The Cumberland by Fifth Third. The Cumberland and Fifth Third
proceeded to exchange certain information concerning a possible
merger. Fifth Third, however, advised The Cumberland that it could
not move forward with any transaction until Fifth Third had
resolved certain Kentucky regulatory issues with respect to a
possible transaction.
In mid-June 1993, Mr. Hale met with Mr. Ernst and Robert P.
Niehaus, Senior Vice President of Fifth Third. Fifth Third again
indicated an interest in acquiring The Cumberland, but noted that
it needed additional information to evaluate the transaction.
On September 1, 1993, Messrs. Ernst and Niehaus met with Mr. Hale
to outline Fifth Third's position with respect to a possible
transaction and to discuss the value of The Cumberland. Mr. Hale
indicated that the price interest range was too low and that he
believed The Cumberland's commercial loan portfolio was stronger
than indicated by Fifth Third. In mid-September 1993, Mr. Ernst
and Mr. Hale discussed The Cumberland's loan portfolio, core
earnings and value.
On October 19, 1993, The Cumberland's Board of Directors met to
discuss strategic planning and a possible affiliation with any one
of four regional bank holding companies, including Fifth Third.
The Board of Directors authorized Mr. Hale to contact Keefe,
Bruyette & Woods, Inc. ("Keefe Bruyette") and J. C. Bradford & Co.
("Bradford") for general analysis of possible combinations. Mr.
Hale then requested from each of Keefe Bruyette and Bradford each
investment banker's thoughts on the timeliness of a possible
combination for The Cumberland and price considerations for a
combination.
On November 22, 1993, Mr. Hale met with George A. Schaefer, Jr.,
President and Chief Executive Officer of Fifth Third, and Messrs.
Ernst and Niehaus to continue discussions concerning a possible
business combination. In early December 1993, The Cumberland's
management met with representatives of Keefe Bruyette to discuss
negotiations with Fifth Third. The Cumberland's management
authorized Keefe Bruyette to discuss with representatives of Fifth
Third and its financial advisors the terms and conditions of a
possible combination with Fifth Third. In mid-December 1993, Mr.
Hale indicated to Fifth Third that The Cumberland would proceed
with negotiations concerning a possible combination with Fifth
Third in the general price range indicated to Keefe Bruyette in the
early-December discussions.
On January 4, 1994, The Cumberland's Board of Directors held a
special meeting to discuss the status of the negotiations with
Fifth Third. The Board formally approved the terms of the
engagements of Keefe Bruyette and Bradford to assist The Cumberland
with respect to a possible business combination. From late-
December 1993 to the January 10, 1994 special meeting of The
Cumberland Board of Directors, The Cumberland's senior executive
officers and legal and financial advisors negotiated the terms of
a definitive merger agreement with representatives of Fifth Third.
The Board of Directors of The Cumberland held a special meeting on
January 10, 1994, to consider the Merger, including the Affiliation
Agreement and the Merger Agreement. At such meeting, the Board of
Directors, together with its financial and legal advisors, reviewed
the background of the proposed transaction, the strategic rationale
for, and potential benefits of, the Merger, and the terms of the
various agreements with Fifth Third. After extensive
consideration, the Board of Directors unanimously approved the
Affiliation Agreement and the Merger Agreement and the transactions
contemplated thereby. See "Recommendation." On January 10, 1994,
Keefe Bruyette delivered its oral opinion to The Cumberland's Board
of Directors that, as of such date, the exchange ratio of Fifth
Third Common Stock for Cumberland Common Stock was fair, from a
financial point of view, to The Cumberland shareholders. A copy of
the Keefe Bruyette opinion dated as of the date of this Proxy
Statement and Prospectus is attached hereto as Annex E. Also on
January 10, 1994, Bradford indicated that it believed that,
following additional analysis of the proposed transaction, that it
would be able to deliver its opinion that the exchange ratio of
Fifth Third Common Stock for Cumberland Common Stock was fair, from
a financial point of view, to The Cumberland's shareholders, which
opinion dated as of the date of this Proxy Statement and Prospectus
is attached hereto as Annex F. See "Opinions of Keefe, Bruyette &
Woods, Inc. and J. C. Bradford & Co."
Fifth Third's primary reason for consummating the Merger is to
further a long range commitment of realigning and expanding its
branch system to better meet and satisfy the needs of customers in
The Cumberland and The Cumberland F.S.B. service area.
Recommendation
The Cumberland's Board of Directors has unanimously approved the
Affiliation Agreement and the Merger Agreement and the transactions
contemplated thereby and recommends approval thereof by the
shareholders of The Cumberland. The Cumberland's Board of
Directors believes that the terms of the Merger are fair to, and in
the best interests of, The Cumberland and its shareholders. In
reaching its determination, The Cumberland's Board of Directors
consulted with The Cumberland's management, as well as its
financial and legal advisors, and considered a number of factors
including, among others, the following:
(i) information concerning The Cumberland's and Fifth Third's
business, operations, and prospects;
(ii) The Cumberland's strategic alternatives, including (A)
continuing The Cumberland on its current course as an independent
thrift; (B) attempting more aggressive growth for The Cumberland
through acquisitions of other financial institutions; and (C) a
strategic alliance by combination with one of the region's or
nation's larger financial institutions;
(iii) the financial terms of the Merger, including how the merger
price relates to the market value, book value and earnings per
share of Cumberland Common Stock and Fifth Third Common Stock;
(iv) the effect of the Merger on the employees, customers and
communities in which The Cumberland operates, including the ability
to provide increased commercial loan and other banking services;
(v) an analysis of the market performance which Cumberland Common
Stock would need to achieve in order to provide shareholders of The
Cumberland the same investment return as provided in the proposed
Merger;
(vi) the non-financial terms of the Affiliation Agreement, Merger
Agreement and the Stock Option Agreement, including the anticipated
tax-deferred nature of the Merger to The Cumberland shareholders
under the Internal Revenue Code of 1986, as amended, (the "Code")
(to the extent Fifth Third Common Stock is received);
(vii) the financial terms of other recent merger and acquisition
activity involving financial institutions acquiring thrift
institutions; and
(viii) the receipt of an oral opinion of Keefe Bruyette at the
Board of Directors January 10, 1994 special meeting that as of such
date the exchange ratio of Fifth Third Common Stock for Cumberland
Common Stock, was fair, from a financial point of view, to the
shareholders of The Cumberland, with the consummation of the Merger
conditioned upon The Cumberland's receipt of written opinions to
that effect from Keefe Bruyette and Bradford, such opinions to be
dated as of the date of this Proxy Statement and Prospectus and
also as of the Closing Date.
All of the members of The Cumberland's Board have indicated their
intention to vote their shares of Cumberland Common Stock in favor
of the Merger. As of March 31, 1994, such individuals beneficially
owned 325,165 shares (or approximately 13.48%) of the Cumberland
Common Stock outstanding.
THE BOARD OF DIRECTORS OF THE CUMBERLAND HAS UNANIMOUSLY APPROVED
THE MERGER AND RECOMMENDS A VOTE IN FAVOR OF THE MERGER.
Effective Time
The Effective Time of the Merger will occur on the last business
day of the month in which all conditions precedent contained in the
Affiliation Agreement have been met or waived, including the
expiration of all applicable waiting periods. It is anticipated
that the Merger will be consummated in late August 1994, or shortly
thereafter, although no assurance can be given in this regard. The
Cumberland and Fifth Third each will have the right, but not the
obligation, to terminate the Affiliation Agreement if the Effective
Time does not occur on or before December 31, 1994.
Conversion of Shares of Cumberland Common Stock
Each share of Cumberland Common Stock which is issued and
outstanding immediately prior to the Effective Time which is not a
dissenting share (as described below) will be converted at the
Effective Time into Fifth Third Common Stock and cash in lieu of
any fractional shares of Fifth Third Common Stock. See "Merger
Price" herein.
The exchange ratio set forth herein shall be adjusted so as to give
The Cumberland shareholders the economic benefit of any stock
dividends, reclassifications, recapitalizations, split-ups,
exchanges of shares, distributions or combinations or subdivision
of Fifth Third Common Stock effected between the date of the
Affiliation Agreement and the Effective Date.
Merger Price
At the Effective Time of the Merger, each of the shares of
Cumberland Common Stock that are issued and outstanding immediately
prior to the Effective Time will when the Merger becomes effective
be converted by virtue of the Merger and without further action
into a minimum of one (1) share and up to one and two tenths (1.2)
shares of Fifth Third Common Stock as follows: (i) If the
Applicable Market Value Per Share of Fifth Third Common Stock is
equal to or greater than $57.00, each share of Cumberland Common
Stock shall be converted into one (1) whole share of Fifth Third
Common Stock; (ii) If the Applicable Market Value Per Share of
Fifth Third Common Stock is less than $57.00 and equal to or
greater than $47.50, each share of Cumberland Common Stock shall be
converted into that number of shares of Fifth Third Common Stock
equal to the quotient obtained by dividing $57.00 by the Applicable
Market Value Per Share of Fifth Third Common Stock; or (iii) If the
Applicable Market Value Per Share of Fifth Third Common Stock is
less than $47.50, each share of Cumberland Common Stock shall be
converted into one and two tenths (1.2) shares of Fifth Third
Common Stock.
The Fifth Third Common Stock will be distributed to The Cumberland
shareholders upon the surrender of their certificates for shares of
Cumberland Common Stock to Fifth Third.
Stock Options and Stock Purchase Plan
Currently, there are outstanding options to purchase 197,565 shares
of Cumberland Common Stock held by certain directors and officers
of The Cumberland pursuant to the Cumberland Stock Incentive Plan
(the "Option Plan"), all of which are presently exercisable.
Any stock options outstanding under the Option Plan shall continue
outstanding as an option to purchase in place of the purchase of
shares of Cumberland Common Stock, the number of shares (rounded up
to the nearest whole share) of Fifth Third Common Stock that would
have been received by the optionee in the Merger had the option
been exercised in full for shares of The Cumberland immediately
prior to the Effective Time, in the manner set forth in the
Affiliation Agreement. In the case, prior to the Effective Time,
of any reclassification, reorganization, recapitalization, stock
dividend or distribution, subdivision, combination or exchange of
the outstanding shares of Fifth Third Common Stock or in case of
any consolidation or merger of Fifth Third with or into any other
corporation, or in the case of any sale or transfer of all or
substantially all of Fifth Third's assets, then, the rights of the
optionees under the Option Plan will be appropriately adjusted so
that the optionees will be in the same position as if their options
had been exercised immediately before such corporate action or
transaction.
In 1988, The Cumberland adopted an Employee Stock Purchase Plan
(the "Purchase Plan") that facilitates the purchase of Cumberland
Common Stock by its employees. In the Affiliation Agreement, The
Cumberland agreed that it would issue no more than 3,000 shares of
Cumberland Common Stock pursuant to the Purchase Plan for the
period January 1, 1994 through June 30, 1994 and thereafter any
issuance of additional shares of Cumberland Common Stock under the
Purchase Plan shall be suspended through the Effective Time.
Following the Merger, the Purchase Plan will be terminated.
No Fractional Shares
Only whole shares of Fifth Third Common Stock will be issued in
connection with the Merger. In lieu of fractional shares, each
holder of shares of Cumberland Common Stock otherwise entitled to
a fractional share of Fifth Third Common Stock will be paid in cash
in an amount equal to the amount of such fraction multiplied by the
Applicable Market Value Per Share of Fifth Third Common Stock. No
such holder will be entitled to dividends, voting rights or other
rights in respect of any such fractional share.
Exchange of Certificates
After the Effective Time, holders of certificates previously
representing shares of Cumberland Common Stock will cease to have
any rights as shareholders of The Cumberland and their sole rights
will pertain to the shares of Fifth Third Common Stock into which
their shares of Cumberland Common Stock will have been converted
pursuant to the Merger Agreement. As soon as practicable after the
Effective Time, Fifth Third will send to each former Cumberland
shareholder a letter of transmittal for use in submitting to Fifth
Third (the "Exchange Agent") certificates (or with instructions for
handling lost Cumberland stock certificates) formerly representing
shares of Cumberland Common Stock to be exchanged for certificates
representing Fifth Third Common Stock (and, to the extent
applicable, cash in lieu of fractional shares of Fifth Third Common
Stock) to which the former shareholders of The Cumberland are
entitled to receive as a result of the Merger. Shareholders who
become holders of Fifth Third Common Stock in the Merger will not
be entitled to receive any dividends or other distributions which
may be payable to holders of record of Fifth Third Common Stock
following the Effective Time until they have surrendered and
exchanged their certificates evidencing ownership of shares of
Cumberland Common Stock. Any dividends payable on Fifth Third
Common Stock after the Effective Time will be paid to the Exchange
Agent and, upon receipt of the certificates representing shares of
Cumberland Common Stock, the Exchange Agent will forward to The
Cumberland shareholders (i) certificates representing their shares
of Fifth Third Common Stock, (ii) dividends declared thereon
subsequent to the Effective Time (without interest) and (iii) the
cash value of any fractional shares (without interest). THE
CUMBERLAND'S SHAREHOLDERS ARE REQUESTED NOT TO SUBMIT STOCK
CERTIFICATES UNTIL THEY HAVE RECEIVED WRITTEN INSTRUCTIONS TO DO
SO.
At the Effective Time, the stock transfer books of The Cumberland
will be closed and no transfer of the Cumberland Common Stock will
thereafter be made on such books, and, if a certificate formerly
representing shares of Cumberland Common Stock is presented to The
Cumberland or Fifth Third, it will be forwarded to the Exchange
Agent for cancellation and exchange for a certificate representing
shares of Fifth Third Common Stock.
Federal Income Tax Consequences
The following discussion summarizes the material federal income tax
consequences of the Merger to The Cumberland shareholders.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW NECESSARILY IS
NOT SPECIFIC TO THE SITUATION OF A PARTICULAR SHAREHOLDER AND IS
INCLUDED FOR GENERAL INFORMATION ONLY. EACH OF THE CUMBERLAND
SHAREHOLDERS SHOULD CONSULT HIS OR HER OWN TAX ADVISER AS TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING
THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX
LAWS.
The federal income tax consequences to any of The Cumberland
shareholders depend upon (i) the form of consideration received in
exchange for the shares of Cumberland Common Stock actually owned
by him or her, and (ii) in the case of any of The Cumberland
shareholders receiving cash, or a combination of cash and Fifth
Third Common Stock, the type of consideration received in exchange
for shares of Cumberland Common Stock deemed to be constructively
owned by him or her under Section 318(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), if any. Generally, under
Section 318(a), a shareholder is deemed to constructively own
shares owned directly or indirectly by certain related individuals
(including spouses, children, grandchildren and parents) or by
certain related entities (including partnerships, trusts, estates,
and corporations in which the shareholder owns, directly or
indirectly, 50% or more in value of the stock). Under Section
318(a), if any person has an option to acquire stock, such stock is
considered as owned by such person.
The Cumberland Shareholders Receiving Solely Fifth Third Common
Stock. If any of The Cumberland shareholders receives solely Fifth
Third Common Stock in exchange for all shares of Cumberland Common
Stock actually owned by him or her, such shareholder will not
recognize any gain or loss upon such exchange. The tax basis of
the Fifth Third Common Stock received in such exchange will be
equal to the basis of the shares of Cumberland Common Stock
surrendered and, provided the shares of Cumberland Common Stock
surrendered were held as capital assets at the time of such
exchange, the holding period of the Fifth Third Common Stock
received will include the holding period of the shares of
Cumberland Common Stock surrendered.
The Cumberland Shareholders Receiving Solely Cash. If all the
shares of Cumberland Common Stock actually owned and deemed to be
constructively owned under Code Section 318(a) by a shareholder of
The Cumberland are exchanged solely for cash upon the exercise of
dissenters' rights, such shareholder of The Cumberland will
recognize capital gain or loss (provided he or she held the shares
actually owned by him or her as capital assets at the time of the
exchange) measured by the difference between such shareholder's tax
basis in the shares of Cumberland Common Stock actually owned by
him or her and the amount of cash received by him or her in
exchange for such shares.
If a shareholder of The Cumberland exchanges all the shares of
Cumberland Common Stock actually owned by him or her solely for
cash upon the exercise of dissenters' rights but shares of
Cumberland Common Stock constructively owned by him or her under
Code Section 318(a) are exchanged in whole or in part for Fifth
Third Common Stock, then the tax consequences to such shareholder
will be determined under Code Section 302 which deals with
redemptions. Section 302 contains three tests that are relevant in
this context to determine whether a redemption is taxed as ordinary
income or as a capital gain or loss (provided that the shares were
held as capital assets at the time of the exchange). Under Section
302, a redemption, to the extent of available undistributed
earnings and profits, is treated as a dividend resulting in
ordinary income unless it (1) is "not essentially equivalent to a
dividend"; (2) is "substantially disproportionate" with respect to
the shareholder; or (3) completely terminates the shareholder's
interest. If one of those tests is satisfied, capital gain or loss
recognized will be measured by the difference between the amount of
cash received by the shareholder in exchange for the shares of
Cumberland Common Stock actually owned by him or her and his or her
tax basis in those shares. If none of the tests is satisfied, and
assuming the cash distribution is not in excess of the current and
accumulated earnings and profits of The Cumberland, the shareholder
will be treated as having received dividend income equal to the
amount of cash received (without deduction for such shareholder's
tax basis in The Cumberland shares).
Whether the transaction will be "not essentially equivalent to a
dividend" with respect to a shareholder of The Cumberland depends
upon the particular circumstances applicable to such shareholder,
there being no precise mathematical formula whereby it is possible
to assure satisfaction of this test. On the other hand, the
"substantially disproportionate" test is a mathematical test. The
transaction will be "substantially disproportionate" with respect
to a shareholder of The Cumberland if:
(i) his or her percentage ownership of Fifth Third Common Stock
after the Merger (considering shares actually and constructively
owned) is less than 50% of all Fifth Third Common Stock and less
than 80% of
(ii) his or her hypothetical percentage ownership of the total
number of shares of Fifth Third Common Stock immediately after the
Merger if all of the Cumberland Common Stock had been exchanged for
Fifth Third Common Stock (considering shares actually and
constructively owned).
The third test is the complete termination of interest, which can
only be satisfied if all The Cumberland shares actually and
constructively owned by a shareholder of The Cumberland are
exchanged solely for cash upon the exercise of dissenters' rights,
except that Code Section 302 sets forth a procedure, which, under
certain circumstances, allows a waiver of the constructive
ownership rules as they apply to family members.
Under the rules of Section 302, a shareholder of The Cumberland who
receives cash on exercise of dissenters' rights for any of The
Cumberland shares actually owned by him or her risks having such
amounts treated as a dividend rather than as capital gains if any
shares of Cumberland Common Stock constructively owned by him or
her are exchanged in whole or in part for Fifth Third Common Stock,
the substantially disproportionate test is not met, and the
shareholder cannot or does not waive constructive ownership of the
shares held by others but which are attributed to him or her.
Cash Received in Lieu of Fractional Shares. No fractional shares
of Fifth Third Common Stock will be issued pursuant to the Merger
Agreement. A shareholder of The Cumberland who receives cash in
lieu of a fractional share will be treated as having received such
fractional share of Fifth Third Common Stock and then as having
received such cash in redemption of such fractional share subject
to the provisions of Section 302 of the Code. The circumstances
under which cash is being issued in lieu of a fractional share
interest appear to satisfy the Internal Revenue Service ruling
guidelines under which the receipt of such cash will qualify for
capital gain or loss treatment (provided such fractional interest
is held as a capital asset at the time of such exchange).
Because of the complexity of the tax laws, and because the tax
consequences to any particular shareholder may be affected by
specific matters not common to all shareholders, it is recommended
that The Cumberland shareholders consult their personal tax
advisors concerning the consequences of the Merger to them,
including the consequences of the application of state and local
tax laws, if any.
Accounting Treatment
In accordance with generally accepted accounting principles, the
Merger will be accounted for as a pooling of interests.
Under pooling of interests accounting, as of the Effective Time,
the assets and liabilities of The Cumberland will be added to those
of Fifth Third at their recorded book values and the shareholders'
equity account of The Cumberland will be included on Fifth Third's
consolidated balance sheet. See "COMPARATIVE MARKET PRICE AND
DIVIDEND DATA" and "COMPARATIVE PER SHARE DATA."
Rights of Dissenting Shareholders
The following is only a general summary of the provisions of the
Kentucky Revised Statutes relating to dissenters' rights and should
not be considered to be a comprehensive description. A copy of the
Kentucky dissenters' rights statute (Kentucky Revised Statutes
Sections 271B.13-010 et seq.) is appended hereto as Annex C as a
complete description of the rights and obligations of The
Cumberland and of any shareholder who desires to exercise
dissenters' rights. EACH STEP MUST BE TAKEN IN STRICT COMPLIANCE
WITH THE APPLICABLE PROVISIONS OF THE DISSENTERS' RIGHTS STATUTE IN
ORDER FOR HOLDERS OF CUMBERLAND COMMON STOCK TO PERFECT DISSENTERS'
RIGHTS.
A shareholder of The Cumberland entitled to vote on the adoption of
the Affiliation Agreement and the Merger Agreement may dissent from
the Merger and obtain payment of the fair value of his shares in
accordance with Sections 271B.13-010 et seq. of the Kentucky
Revised Statutes. Any shareholder of The Cumberland who desires to
assert dissenters' rights must not vote his shares of the
Cumberland Common Stock in favor of the proposed Merger and must
deliver to The Cumberland before the vote is taken written notice
of his intent to demand payment for his shares if the Merger is
effectuated. If a shareholder does not initially satisfy these two
requirements, he is not entitled to demand payment for the shares
owned by him subsequent to the approval of the proposed Merger.
If the shareholder delivers the notice to The Cumberland as
required above, The Cumberland shall deliver to him a written
dissenters' notice no later than ten (10 days) after the date on
which the vote of the proposed merger was taken: (a) stating where
the payment demand must be sent and where and when certificates for
certificated shares must be deposited; (b) stating the restrictions
on transfer after the payment demand is received, if any, on
holders of uncertificated shares; (c) supplying a form for
demanding payment that includes the date of the first announcement
to news media or to shareholders of the terms of the Merger and
requiring that the person asserting dissenters' rights certify
whether or not he acquired beneficial ownership of the shares
before that date; (d) indicating a date by which The Cumberland
must receive the payment demand, which date may not be fewer than
thirty nor more than sixty days after the date the notice to be
provided in this paragraph is delivered; and (e) providing a copy
of Sections 271B.13-010 et seq.
If the shareholder is sent a dissenter's notice as described in the
immediately preceding paragraph, he shall demand payment, certify
whether he acquired beneficial ownership of the shares before the
date required to be set forth in the dissenter's notice and deposit
his certificates in accordance with the terms of the notice. IF
THE SHAREHOLDER DOES NOT DEMAND PAYMENT OR DEPOSIT HIS SHARE
CERTIFICATES WHERE REQUIRED IN ACCORDANCE WITH THE TERMS SET FORTH
IN THE DISSENTER'S NOTICE, HE SHALL NOT BE ENTITLED TO PAYMENT FOR
HIS SHARES UNDER SECTIONS 271B.13-010 ET SEQ.
Upon receipt of a payment demand, The Cumberland shall pay the
shareholder who has taken all of the steps enumerated above the
amount The Cumberland estimates to be the fair value of his shares,
plus accrued interest. The payment shall be accompanied by: (1)
The Cumberland'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 that year, a statement of changes
in shareholders' equity for that year, and the latest available
interim financial statements, if any; (2) a statement of The
Cumberland's estimate of the fair value of the shares; (3) an
explanation of how the interest was calculated; and (4) a statement
of the dissenter's right to demand payment under Kentucky Revised
Statutes 271B.13-280.
The shareholder may notify The Cumberland in writing of his own
estimate of the fair value of his shares and amount of interest
due, and demand payment of his estimate (less any payment already
made to the shareholder) if: (a) the dissenter believes that the
amount to be paid as set out in the preceding paragraph is less
than the fair value of his shares or that the interest due is
incorrectly calculated; (b) The Cumberland fails to make payment
within sixty (60) days after the date set for demanding payment; or
(c) The Cumberland, 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. A DISSENTER WAIVES
HIS RIGHT TO DEMAND PAYMENT AS DESCRIBED IN THIS PARAGRAPH UNLESS
HE NOTIFIES THE CUMBERLAND OF HIS DEMAND IN WRITING WITHIN THIRTY
(30) DAYS AFTER THE CUMBERLAND MADE OR OFFERED PAYMENT FOR HIS
SHARES.
If the dissenting shareholder and The Cumberland are unable to
resolve the fair market value of and interest owed upon the shares,
The Cumberland 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 and accrued interest. If
The Cumberland does not commence the proceeding within the sixty
(60) day period, it shall pay the dissenting shareholder the amount
demanded. The Cumberland shall commence the proceeding in
Jefferson County, Kentucky. The court may appoint one (1) or more
persons as appraisers to receive evidence and recommend decision on
the question of fair value. The dissenter shall be entitled to the
same discovery rights as parties in other civil proceedings. The
dissenter shall be entitled to judgment for the amount, if any, by
which the court finds the fair value of his shares, plus interest,
exceeds the amount paid by The Cumberland.
Conduct Pending Merger; Representations and Warranties
The Cumberland has agreed, among other things, that prior to the
Effective Time, it will carry on its business in the ordinary
course. The Cumberland has agreed to give Fifth Third and Fifth
Third's representatives reasonable access during business hours to
its facilities and personnel. The Cumberland has further agreed
that, without Fifth Third's prior written consent, it will not,
among other things, make any changes in its capital or corporate
structures; issue any additional shares of its Common Stock, except
upon exercise of any presently outstanding stock options and except
for up to 3,000 shares of Cumberland Common Stock prior to June 30,
1994 pursuant to the Purchase Plan; issue any securities of any
kind; or make any material changes in its method of business
operations. The Cumberland also has agreed not to make or become
obligated to make any capital expenditures in excess of $50,000,
nor will it make or renew any agreement for services to be provided
to The Cumberland or The Cumberland F.S.B. or permit the automatic
renewal of any such agreement, except any agreement for services
having a term of not more than three months or requiring the
expenditure of not more than $2,500. The Cumberland has also
agreed not to declare or pay any cash dividends on its stock other
than normal and customary cash dividends paid in amounts and at
times The Cumberland historically has paid them; pay any stock
dividends or make any other distributions on its stock and will not
provide any increases in employee salaries or benefits other than
in the ordinary course of business. Moreover, The Cumberland will
not sell, dispose of or otherwise encumber any of the shares of the
capital stock of The Cumberland F.S.B. which are now owned by it.
Fifth Third and The Cumberland have also made numerous
representations and warranties to each other with respect to
financial and other matters. These include, without limitation,
representations and warranties to the effect that both Fifth Third
and The Cumberland have the corporate power and authorization to
enter into the proposed transaction, that each will have provided
the other with financial statements and that Fifth Third has enough
authorized Fifth Third Common Stock with which to accomplish the
proposed transaction. No representations or warranties made by
either The Cumberland or Fifth Third will survive beyond the
Effective Time. Thereafter, neither The Cumberland, The Cumberland
F.S.B. nor any officer or director of either of them will have any
liability or obligation with respect to such representations or
warranties, with the exception of any misrepresentations, breaches
of warranties or violations of covenants that were made with intent
to defraud.
Conditions to Closing
The Affiliation Agreement and Merger Agreement must be approved by
the affirmative vote of a majority of the outstanding shares of the
Cumberland Common Stock. The Merger must also be approved in
writing by the Board of Governors of the Federal Reserve System,
the Office of Thrift Supervision, and the Kentucky Department of
Financial Institutions and must comply with any applicable waiting
periods. No assurance can be given that the required governmental
approvals will be forthcoming.
The obligations of The Cumberland and Fifth Third to consummate the
Merger are also subject to receipt of an opinion of counsel with
respect to certain tax matters. See "Federal Income Tax
Consequences" herein.
Fifth Third's and The Cumberland's obligations to consummate the
Merger are further subject to various other conditions set forth in
the Affiliation Agreement, including, but not limited to, the
absence at the Effective Time of any material actions, proceedings
or investigations of any kind pending or threatened with respect to
the transactions contemplated by the Affiliation Agreement and
Merger Agreement, delivery by Fifth Third's counsel of an opinion
as to certain federal tax aspects of the transaction and both
institutions having performed all of the obligations required of
them under the Affiliation Agreement and Merger Agreement.
Fifth Third's obligation to consummate the Merger is further
subject to conditions set forth in the Affiliation Agreement,
including, but not limited to, the continuing truth and accuracy of
all of the representations and warranties of The Cumberland, The
Cumberland's performance of all of the obligations required of it
under the Affiliation Agreement and Agreement of Merger, delivery
by The Cumberland's counsel of a certain legal opinion addressed to
Fifth Third, The Cumberland's obligation to take the appropriate
actions to terminate its Employee Stock Ownership Plan, and the
aggregate amount of shareholder's equity of The Cumberland
immediately prior to the Effective Time, as shown by and reflected
on its books and records of accounts on a consolidated basis in
accordance with generally accepted accounting principles,
consistently applied, shall not be less than $78,483,000 (its total
shareholders' equity at September 30, 1993), less any adjustments
made in anticipation of, or in connection with, the Merger.
The Cumberland's obligation to consummate the Merger is further
subject to conditions set forth in the Affiliation Agreement,
including, but not limited to, the continuing truth and accuracy of
Fifth Third's representations and warranties, Fifth Third's
performance of all of the obligations required of it under the
Affiliation Agreement and Agreement of Merger, delivery by Fifth
Third's counsel of a certain legal opinion addressed to The
Cumberland, Fifth Third shall have registered its shares of Fifth
Third Common Stock to be issued to The Cumberland shareholders and
the receipt of fairness opinions from Keefe, Bruyette & Woods, Inc.
and J. C. Bradford & Co., financial advisors to The Cumberland
dated as of the Effective Time.
Amendment; Waiver; Termination
The Affiliation Agreement and Merger Agreement may be amended,
modified or supplemented by the written agreement of both parties,
upon the authorization of each company's respective Board of
Directors and without further approval of The Cumberland's
shareholders, except that no amendment, modification or supplement
may be effected without The Cumberland shareholder approval if to
do so would violate any applicable provisions of Kentucky
corporation law.
The Affiliation Agreement and Merger Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time by
written notice delivered by Fifth Third to The Cumberland or by The
Cumberland to Fifth Third in the following instances: (1) by Fifth
Third or The Cumberland, if there has been a material
misrepresentation, a material breach of warranty or a material
failure to comply with any covenant on the part of the other party
with respect to the representations, warranties and covenants set
forth in the Affiliation Agreement and such misrepresentation,
breach or failure to comply has not been cured within ten days of
notice, provided the party in default has no right to terminate for
its own default; (2) by Fifth Third or The Cumberland, if the
business or assets or financial condition of the other party have
materially and adversely changed from that in existence at
September 30, 1993; (3) by Fifth Third or The Cumberland, if the
Merger has not been consummated by December 31, 1994, provided the
terminating party is not in material breach or default of any
representation, warranty or covenant contained in the Affiliation
Agreement on the date of such termination; (4) by Fifth Third or
The Cumberland if the holders of 10% or more of the outstanding
shares of Cumberland Common Stock shall have perfected their rights
as dissenting shareholders pursuant to Kentucky Revised Statutes
Sections 271B.13-010 et. seq.; (5) by The Cumberland if the
Applicable Market Value Per Share of Fifth Third Common Stock is
$37.50 or less; or (6) by The Cumberland if The Cumberland
shareholders fail to approve the Merger Agreement and Affiliation
Agreement.
In addition, the Affiliation Agreement and Merger Agreement may be
terminated and the Merger abandoned by The Cumberland, if The
Cumberland Board of Directors determines by a majority vote of the
members of its entire Board, at any time during the three-day
period ending immediately prior to the Closing Date if both of the
following conditions are satisfied: (i) the Average Closing Price
(as defined) on the Determination Date (as defined) of shares of
Fifth Third Common Stock shall be less than $41.75 (adjusted for
any stock dividend, reclassification, recapitalization, split-up,
combination or exchange of shares or similar transaction); and (ii)
(A) the number obtained by dividing the Average Closing Price on
such Determination Date by the Starting Price (as defined) shall be
less than (B) the number obtained by dividing the Index Price (as
defined) on the Determination Date by the Index Price on the
Starting Date (as defined) and subtracting 0.15 from the quotient
obtained in this clause (ii) (B); provided however that if The
Cumberland elects to exercise its termination right pursuant to
this provision, it must give prompt written notice to Fifth Third
(provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned three-day period).
For purposes of the foregoing provisions:
(i) The term "Average Closing Price" shall mean the average of the
per share closing prices of Fifth Third Common Stock as reported on
the NASDAQ National Market System for the 20 trading days ending on
the fifth trading day prior to the Closing Date as reported in The
Wall Street Journal, expressed in decimal figures carried to five
places.
(ii) The term "Determination Date" means the fifth trading day
prior to the Closing Date.
(iii) The term "Index Group" means the 13 bank holding companies
listed on page 42 of the Affiliation Agreement attached as Annex A
to this Proxy Statement and Prospectus, the common stock of all of
which shall be publicly traded and as to which there shall not have
been a publicly announced proposal since the Starting Date and
before the Determination Date for any such company to be acquired.
In the event that the common stock of any such company ceases to be
publicly traded or a proposal to acquire any such company is
announced after the Starting Date and before the Determination
Date, such company will be removed from the Index Group, and the
weights attributed to the remaining companies will be adjusted
proportionately for purposes of determining the Index Price.
(iv) The term "Index Price," on a given date, means the weighted
average (weighted in accordance with the Weighing Factors listed on
page 42 of the Affiliation Agreement attached as Annex A to this
Proxy Statement and Prospectus) of the closing prices on such date
of the common stocks of the companies comprising the Index Group.
(v) The term "Starting Date" means the close of business on January
10, 1994, the last trading day before the public announcement of
the proposed Merger transaction contemplated by the Affiliation
Agreement.
(vi) "Starting Price" means the per share closing price of Fifth
Third Common Stock as reported on the NASDAQ National Market System
on the Starting Date.
If Fifth Third or any company belonging to the Index Group declares
or effects a stock dividend, reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction
between the Starting Date and the Determination Date, the prices
for the common stock of such company shall be adjusted accordingly.
Effect on The Cumberland and The Cumberland F.S.B. Employees
Fifth Third shall use its best efforts to employ at Fifth Third or
at a Fifth Third subsidiary or affiliate each of the employees of
The Cumberland and The Cumberland F.S.B. Each employee of The
Cumberland or The Cumberland F.S.B. who becomes an employee of
Fifth Third or its subsidiaries subsequent to the Merger will be
entitled to participate in all employee benefit plans sponsored by
Fifth Third or its subsidiaries on the same terms and to the same
extent as similarly situated employees. Such employees shall
receive credit for their period of service to The Cumberland or The
Cumberland F.S.B. for purposes of determining participation and
vesting in all Fifth Third employee benefit plans but not for
purposes of determining the benefits accrued thereunder.
On the Effective Date, the Fifth Third Bancorp Master Retirement
Plan shall assume the obligation to provide the transferring
employees of The Cumberland and The Cumberland F.S.B., their
accrued benefits in the Financial Institutions Retirement Fund
("FIRF"), and shall accept the corresponding transfer of assets
from the FIRF. The Fifth Third Master Retirement Plan shall be
amended to provide, to the maximum extent permitted by law, the
same rights to the employees with respect to their transferred
benefits as they would have had if they had not transferred their
benefits from FIRF.
Each employee of The Cumberland and The Cumberland F.S.B. who has
an accrued benefit under the FIRF and who will be employed by Fifth
Third or a Fifth Third subsidiary or affiliate immediately after
the Effective Time shall become participants immediately after the
Effective Time (or, for the Fifth Third Bancorp Master Profit
Sharing Plan, the beginning of the next payroll period after the
Closing) in the Fifth Third Bancorp Master Retirement Plan and the
Fifth Third Bancorp Master Profit Sharing Plan on the same terms as
other Fifth Third employees; and they shall receive credit under
said plans for vesting and eligibility purposes (but not for
benefit accrual purposes) for service that was taken into account
under the FIRF. For the purpose of benefit accrual under such
plans, all service with Fifth Third or a Fifth Third affiliate or
subsidiary after the Effective Time shall be credited.
The Fifth Third Bancorp Master Retirement Plan shall be amended to
provide a one-time benefit enhancement for each employee of The
Cumberland and The Cumberland F.S.B. who has his accrued benefit
(and the corresponding assets) transferred to it from the FIRF
pursuant to an election made no later than a reasonable time after
the Effective Time. This one-time benefit shall be designed by the
actuaries for the Fifth Third Bancorp Master Retirement Plan in
accordance with the terms of the Affiliation Agreement.
Any employee whose employment is terminated by Fifth Third other
than for cause or who voluntarily resigns after being notified by
Fifth Third that, as a condition of employment, such employee must
work at a location more than 30 highway miles from such employee's
former location of employment or that such employee's salary will
be decreased by 10% or more, in any case within six months after
the Effective Time, shall be entitled to severance pay equal to, in
the case of a salaried employee, other than an officer, one week's
pay for each year of service up to a maximum of twelve week's pay,
in the case of an officer, one week's pay for each year of service
up to a maximum of twenty-four week's pay and, in the case of an
hourly employee, one week's pay for each year of service up to a
maximum of six week's pay, plus applicable COBRA benefits. Nothing
contained in the Affiliation Agreement shall be construed or
interpreted to limit or modify in any way Fifth Third's at-will
employment policy.
Interests of Management
Except as provided herein, it is not anticipated that Fifth Third
will enter into employment agreements with any officers of The
Cumberland in connection with the transactions contemplated by the
Affiliation Agreement.
In connection with the Merger, Fifth Third shall assume The
Cumberland F.S.B.'s employment agreements with Messrs. John T.
Doyle, Robert C. Pearson and P. Norris Shockley, Jr. for the
balance of their current terms and, one additional one-year renewal
of each of their employment agreements. Therefore, Mr. Doyle's
employment agreement shall terminate in April, 1995, Mr. Shockley's
shall terminate in May, 1995 and Mr. Pearson's shall terminate in
January, 1996. In addition, in connection with the Merger, Fifth
Third has entered into a Termination Agreement with Mr. Hale (the
"Termination Agreement").
Pursuant to the terms of the Termination Agreement, Mr. Hale's
employment agreement with The Cumberland shall be terminated. As
compensation for such termination, Fifth Third directly or through
a subsidiary shall pay Mr. Hale a lump sum amount of $1,110,089 at
the Effective Date reduced by an amount equal to the difference
between 1) the product of 2.99 times the "base amount" as defined
in Section 280G(b)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"), and 2) the sum of all other parachute
payments, as defined in Section 280G(b)(2) of the Code. Mr. Hale
shall continue his employment as Chairman and CEO of the newly
formed Kentucky BHC and as Chairman and CEO of the newly formed
Fifth Third Bank Kentucky. His employment will continue under the
Fifth Third standard employment policy as an at will employee
subject to certain additional conditions. Mr. Hale will receive a
base salary of $280,000 a year. In addition, he will be given an
opportunity to earn an additional 50% of base salary based on
certain performance goals. Mr. Hale also shall immediately become
fully vested in a retirement plan established by The Cumberland
F.S.B. in a form of a rabbi trust. Mr. Hale shall immediately
become fully vested in this retirement plan at the effective time,
and this plan may be subject to an additional contribution at the
termination of the Rabbi trust which anticipated additional
liability did not exceed $37,000 as of February 10, 1994. Fifth
Third will maintain certain other additional benefits for Mr. Hale,
including key man life insurance policy in the amount of $750,000,
country club membership dues and health plans. In consideration of
the foregoing, Mr. Hale releases The Cumberland F.S.B., The
Cumberland and Fifth Third from any obligations under Mr. Hale's
former employment agreement.
All provisions for indemnification and limitation of liability now
existing in favor of the employees, agents, Directors or officers
of The Cumberland as provided by regulation or in their respective
articles of incorporation or bylaws shall survive the Merger, shall
be assumed by Fifth Third and shall continue in full force and
effect with respect to acts or omissions occurring on or prior to
the Effective Time for a period of three years thereafter, or in
the case of matters occurring prior to the Effective Time which
have not been resolved prior to the third anniversary of the
Effective Time, until such matters are finally resolved. Fifth
Third shall also purchase and keep in force for such three year
period, directors' and officers' liability insurance to provide
coverage for acts or omissions of the type and in the amount
currently covered by The Cumberland's existing directors' and
officers' liability insurance for acts or omissions occurring on or
prior to the Effective Time, but only to the extent such insurance
may be purchased or kept in full force on commercially reasonable
terms taking into account the cost thereof and the benefits
provided thereby and excluding claims pending or threatened against
The Cumberland or The Cumberland F.S.B. at the Effective Time that
were not made at such time as to be ineligible for coverage by The
Cumberland's directors' and officers' liability insurance in effect
through the Effective Time. In addition, for actions occurring
after the Effective Time, Fifth Third shall provide to the officers
and Directors of The Cumberland and The Cumberland F.S.B. who
become officers and Directors of any Fifth Third affiliate after
consummation of the Merger, the same directors' and officers'
liability insurance that is provided throughout the Fifth Third
holding company system. Fifth Third agrees that all rights to
indemnification existing in favor of officers and Directors of
Fifth Third affiliates shall be accorded to officers and Directors
of The Cumberland and The Cumberland F.S.B. who become affiliated
with any Fifth Third affiliate in such capacities after the
Effective Time and that such indemnification will relate to covered
actions or inactions prior to, as well as after, the Effective
Time.
Opinions of Keefe, Bruyette & Woods, Inc. and J. C. Bradford & Co.
The Cumberland retained Keefe, Bruyette & Woods, Inc. and J. C.
Bradford & Co. to provide separate opinions as to the fairness of
the Exchange Ratio, from a financial point of view, to the
shareholders of The Cumberland. Before the mailing of this Proxy
Statement and Prospectus, both Keefe, Bruyette & Woods, Inc. and J.
C. Bradford & Co. delivered an opinion, dated as of the date of
this Proxy Statement and Prospectus, that the Exchange Ratio is
fair, from a financial point of view, to the shareholders of The
Cumberland. A copy of the opinions, which sets forth certain
assumptions made, matters considered and limitations on the reviews
undertaken is attached to this Prospectus and Proxy Statement as
Annex E and F respectively.
Keefe, Bruyette & Woods, Inc.
General. Pursuant to an engagement letter dated as of December 17,
1993, The Cumberland retained Keefe Bruyette to render financial
advisory and investment banking services to The Cumberland in
connection with a possible business combination between The
Cumberland and Fifth Third.
Keefe Bruyette is a recognized investment banking firm and, as part
of its investment banking business, is continually engaged in the
valuation of bank and bank holding company securities in connection
with acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements
and valuations for various other purposes. As specialists in the
securities of banking companies, Keefe Bruyette has experience in,
and knowledge of, the valuation of banking enterprises. Keefe
Bruyette was selected on the basis of its ability to evaluate the
fairness of the Exchange Ratio, from a financial point of view, as
set forth in the Affiliation Agreement, its qualifications, its
previous experience and its reputation in the banking and
investment communities. Keefe Bruyette has acted exclusively for
the Board of Directors of The Cumberland in rendering its fairness
opinion and will receive a fee from The Cumberland for its
services.
At the January 10, 1994 meeting with The Cumberland Board of
Directors, Keefe Bruyette rendered its oral opinion to The
Cumberland Board of Directors to the effect that, as of such date,
the Exchange Ratio was fair to the shareholders of The Cumberland
from a financial point of view. [Keefe Bruyette has delivered a
written opinion to The Cumberland Board of Directors dated as of
the date of this Proxy Statement and Prospectus to the effect that,
as of such date, the Exchange Ratio is fair to the shareholders of
The Cumberland from a financial point of view.]
THE FULL TEXT OF KEEFE BRUYETTE'S OPINION IS ATTACHED AS ANNEX E TO
THIS PROXY STATEMENT AND PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. THE DESCRIPTION OF THE OPINION SET FORTH HEREIN IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ANNEX E. THE CUMBERLAND
SHAREHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR A
DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS
CONSIDERED AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW
UNDERTAKEN BY KEEFE BRUYETTE IN CONNECTION THEREWITH.
Keefe Bruyette's opinion is directed only to the Exchange Ratio and
does not constitute a recommendation to any of The Cumberland
shareholders as to how the shareholder should vote at the Special
Meeting.
In connection with its opinion, Keefe Bruyette reviewed, analyzed
and relied upon material relating to the financial and operating
condition of The Cumberland and Fifth Third, including, among other
things, the following: (i) the Affiliation Agreement; (ii) a
draft of the Registration Statement; (iii) Annual Reports to
Shareholders and Annual Reports on Form 10-K for the three years
ended December 31, 1993, of The Cumberland and of Fifth Third;
(iv) certain interim reports to shareholders and Quarterly Reports
of The Cumberland and Fifth Third and certain other communications
from The Cumberland and Fifth Third to their respective
shareholders; (v) other financial information concerning the
businesses and operations of The Cumberland furnished to Keefe
Bruyette by The Cumberland for the purpose of its analysis,
including certain internal financial analyses and forecasts for The
Cumberland prepared by senior management of The Cumberland; (vi)
certain publicly available information concerning the trading of,
and the trading market for, the common stock of The Cumberland and
Fifth Third; and (vii) certain publicly available information with
respect to banking companies and the nature and terms of certain
other transactions that Keefe Bruyette considered relevant to its
inquiry. In addition, Keefe Bruyette held discussions with senior
management of The Cumberland and Fifth Third concerning their past
and current operations, financial condition and prospects, as well
as the results of regulatory examinations.
In conducting its review and arriving at its opinion, Keefe
Bruyette relied upon and assumed the accuracy and completeness of
all of the financial and other information provided to it or
publicly available, and Keefe Bruyette did not attempt to verify
such information independently. Keefe Bruyette relied upon the
management of The Cumberland as to the reasonableness and
achievability of the financial and operating forecasts and
projections (and the assumptions and bases therefor) provided to it
and assumed that such forecasts and projections reflect the best
currently available estimates and judgments of management and that
such forecasts and projections will be realized in the amounts and
in the time periods currently estimated by management. Keefe
Bruyette also assumed, without independent verification, that the
aggregate allowances for loan losses for The Cumberland and Fifth
Third are adequate to cover such losses. Keefe Bruyette did not
make or obtain any evaluations or appraisals of the property of The
Cumberland or Fifth Third, nor did Keefe Bruyette examine any
individual loan credit files. Keefe Bruyette was informed by The
Cumberland, and assumed for purposes of its opinion, that the
Merger will be accounted for as a pooling-of-interests under
generally accepted accounting principles.
Before rendering the written opinion attached as Annex E to this
Proxy Statement and Prospectus, Keefe Bruyette rendered an oral
opinion to The Cumberland Board of Directors on January 10, 1994.
Set forth below is a brief summary of selected analyses presented
by Keefe Bruyette to The Cumberland Board of Directors on January
10, 1994.
Analysis of the Fifth Third Offer. Keefe Bruyette reviewed certain
historical financial information for The Cumberland and Fifth Third
and calculated the imputed value of the Fifth Third offer to
holders of Cumberland Common Stock. This analysis showed that for
each share of Cumberland Common Stock, The Cumberland shareholders
would receive a value of $57.00 of Fifth Third Common Stock based
upon an Exchange Ratio of 1.13 and a closing price of Fifth Third
Common Stock on January 7, 1994 of $50.50 per share. Keefe
Bruyette also calculated the multiple which the Exchange Ratio
represents, based on the $57.00 per share purchase price, when
compared to The Cumberland's September 30, 1993 book value per
share of $32.57, The Cumberland's 1993 estimated earnings per share
of $4.25 and The Cumberland's 1994 estimated earnings per share of
$4.35 (such estimates being based on Keefe Bruyette's published
estimate for 1993 and The Cumberland's budget for 1994). The price
to book value multiple was 175%, and the price to 1993 and 1994
estimated earnings multiples were 13.4 times and 13.1 times,
respectively.
Selected Group Analysis. Keefe Bruyette compared the financial
performance of Fifth Third based on various financial measures of
earnings performance, operating efficiency, capital adequacy and
asset quality to that of a group of midwestern bank holding
companies with assets ranging from approximately $7.6 billion to
$76.5 billion, including Banc One Corporation, PNC Bank
Corporation, Norwest Corporation, NBD Bancorp, National City
Corporation, First Bank System, Inc., First of America Bank,
Huntington Bancshares, Inc., FirStar Corporation, Marshall and
Ilsley Corp., and Star Banc Corporation. This analysis showed,
among other things, that Fifth Third's return on equity for the
quarter ended September 30, 1993 on an annualized basis was 18.65%
compared with an average of 17.45% for the group, its return on
assets for the quarter ended September 30, 1993 on an annualized
basis was 1.85% compared with an average of 1.42% for the group,
and its efficiency ratio for the quarter ended September 30, 1993
on an annualized basis was 47.56% compared with an average of
61.77% for the group. As of September 30, 1993, Fifth Third's
equity to assets ratio was 9.75% compared to an average of 8.24%
for the group, its ratio of nonperforming assets to total loans and
other real estate owned was .29% compared to an average of 1.30%
for the group, and its ratio of reserves to nonperforming loans was
1021.80% compared to an average of 224.49% for the group. As of
January 7, 1994, Fifth Third's price earnings multiple based on
1994 estimated earnings was 14.03 compared to an average of 9.35
for the group and its price to book value multiple was 2.74
compared to an average of 1.77 for the group.
Keefe Bruyette compared the financial performance of The Cumberland
based on various financial measures of earnings performance,
operating efficiency, capital adequacy and asset quality, to that
of a peer group of thrift institutions with assets ranging from
approximately $1.1 billion to $8.0 billion, including Anchor
Bancorp, Inc., Metropolitan Financial Corp., Commercial Federal,
First Financial Corporation, CSF Holdings, Inc., St. Paul Bancorp,
Downey Savings & Loan, MAF Bancorp, Inc., and American Federal
Bank. This analysis showed, among other things, that the group had
an average return on assets of .92% and an average return on equity
of 14.38% for the third quarter of 1993 annualized, versus .90% and
13.19% respectively, for The Cumberland. The peer group for the
third quarter of 1993 recorded an annualized net interest margin of
3.12% versus 3.28% for The Cumberland, and the peer group had an
annualized efficiency ratio of 57.65% compared to 62.33% for The
Cumberland. The analysis also showed that the group had an average
equity/asset ratio of 7.02% versus 6.91% for The Cumberland. On
the measure of nonperforming assets as a percentage of loans plus
other real estate owned, the peer group had a ratio of 2.18% at
September 30, 1993, versus, 2.55% for The Cumberland.
Relative Stock Price Performance. Keefe Bruyette examined the
history of trading prices for both The Cumberland and Fifth Third
common stock for the period from January 1988 to October 1993 and
from January 1993 to January 1994. Keefe Bruyette also examined
the relationship between movements of The Cumberland and Fifth
Third Common Stock market prices and movements in the Keefe Bank
Index of 24 banking companies and the S&P 500 Index. This analysis
showed that the price performances of Cumberland Common Stock and
Fifth Third Common Stock over the period from January 1988 through
October 1993, was relatively comparable and that the market price
of Cumberland Common Stock substantially outperformed the market
price of Fifth Third Common Stock from January 1993 to January
1994. In addition, the analysis showed that the market price of
Fifth Third Common Stock over the period from January 1993 to
January 1994 was relatively comparable to the Keefe Bank Index and
the S&P 500 Index and that it substantially outperformed these two
indices during the period from January 1988 through October 1993.
Analysis of Selected Merger Transactions. Keefe Bruyette reviewed
certain financial data related to selected bank holding company
acquisitions of thrifts. The selected acquisitions included the
following transactions (identified by acquiror/acquiree): Peoples
First Corporation/First Kentucky Bancorp; First of America/LGF
Bancorp; First Bancorp Ohio/ Great Northern Financial; Crestar
Financial/Virginia FSB; AmSouth Bancorp/Fortune Bancorp; Mercantile
Bancorp/United Postal Bancorp; First Financial Bancorp/Highland
Federal Savings Bank; Fourth Financial Corp./Great Southern
Bancorp; Fifth Third Bancorp/TriState Bancorp; Huntington
Bancshares/Railroadmen's Federal Savings and Loan; and PNC Bank
Corp/United Federal Bancorp.
In each of the selected transactions of bank holding companies
acquiring thrifts, Keefe Bruyette calculated the premium to the
target's market price, trailing 12 months earnings and book value.
The calculations yielded the following ranges of percentage
premiums: (i) price offered over market price of the target's
shares before announcement of -4% to 67%, with an average of 33%,
compared with a premium of 34% (measured as of January 7, 1994)
associated with the Fifth Third proposal; (ii) price offered as a
multiple of earnings of 8.6 times to 32.8 times with an average of
15.1 times, compared with a premium of 13.7 times associated with
the Fifth Third proposal; and (iii) price offered as a multiple of
book value of 0.71 times to 2.19 times with an average of 1.53
times, compared with a premium of 1.75 times with the Fifth Third
proposal.
No company or transaction used as a comparison in the above
analysis is identical to The Cumberland, Fifth Third or the
contemplated transaction. Accordingly, an analysis of the results
of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial
and operating characteristics of the companies and other factors
that could affect the public trading value of the companies to
which they are being compared.
Affordability Analysis. Keefe Bruyette compared the financial
ability of Fifth Third to acquire The Cumberland relative to a
selected group of other regional banks, including PNC Bank
Corporation, National City Corporation, Huntington Bancshares,
Inc., SouthTrust Corporation, Star Banc Corporation, First American
Corp, Union Planters Corp and United Bankshares, Inc. as measured
by EPS dilution and incremental EPS dilution. The analysis was
based on Keefe Bruyette's published 1994 earnings estimates and
market price data as of January 9, 1994. Using a range of per
share bid prices of $51.00 to $60.00, Keefe Bruyette calculated pro
forma EPS dilution. At a bid price of $57.00 per share, Fifth
Third incurred the least amount of EPS dilution on a pro forma
basis (.25% anti-dilutive) relative to the banks in the group.
Contribution Analysis. Keefe Bruyette analyzed the relative
contribution of each of The Cumberland and Fifth Third to certain
balance sheet and income statement items, including assets,
shareholders' equity and estimated earnings. The contribution
analysis showed that by virtue of the Exchange Ratio, The
Cumberland would contribute approximately 9% of the combined
assets, 7% of the combined shareholders' equity and 5% of the
estimated 1994 earnings of the two companies.
Pro forma EPS, Book Value and Dividends per Share. Keefe Bruyette
analyzed the pro forma EPS, book value and dividends per share of
The Cumberland assuming a range for the Exchange Ratio of 1.0 share
to 1.2 shares of Fifth Third Common Stock for each share of
Cumberland Common Stock. Based on 1994 EPS estimates of $4.25 and
$3.60 for The Cumberland and Fifth Third, respectively, The
Cumberland's pro forma 1994 EPS would range from $3.63 to $4.32,
reflecting a decrease of 14.6% and an increase of 1.6%,
respectively. The pro forma September 30, 1993 book value would
range from $19.00 to $22.63, a 41.7% and 30.5% decrease,
respectively from the stated book value of $32.57. The
Cumberland's pro forma dividends per share would range from $1.08
to $1.30, a 22.7% and 47.3% increase, respectively from The
Cumberland's dividend per share of $.88.
Discounted Cash Flow Analysis. Keefe Bruyette estimated the
present value of future streams of after-tax cash flows that The
Cumberland could produce through 1996. The analysis was based on
several assumptions, including a $1.20 dividend per share in 1996,
and an earnings per share of $5.08 in 1996. A terminal value was
calculated for 1996 by multiplying The Cumberland's projected 1996
earnings by a price/earnings multiple of 10.0 times. This terminal
valuation and the annual dividend payments were discounted at
12.0%, producing a present value of $38.79. In addition, Keefe
Bruyette constructed a present value sensitivity analysis, using a
range of price/earnings multiples of 9.0 times to 14.5 times and a
range of discount rates of 10% to 15%. This sensitivity analysis
produced a range of present values per share of The Cumberland from
$32.56 to $58.07. Keefe Bruyette compared these values to the
potential value provided to The Cumberland shareholders in the
Merger.
This analysis was based upon varying assumptions concerning
earnings growth rates, dividend rates and exit multiples, which
assumptions are themselves based upon many factors and assumptions
many of which are beyond the control of The Cumberland and Fifth
Third. As indicated below, this analysis is not necessarily
indicative of actual values or actual future results and does not
purport to reflect the prices at which any security may trade at
the present time or any time in the future.
The summary set forth above does not purport to be a complete
description of the presentations by Keefe Bruyette to The
Cumberland Board of Directors or the analyses performed by Keefe
Bruyette. The preparation of a fairness opinion is not necessarily
susceptible to partial analysis or summary description. Keefe
Bruyette believes that its analyses and the summary set forth above
must be considered as a whole and that selecting portions of its
analyses would create an incomplete view of the processes
underlying the analyses set forth in Keefe Bruyette's presentation
and opinion. In addition, Keefe Bruyette may have given various
analyses more or less weight than other analyses and may have
deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Keefe
Bruyette's view of the actual value of The Cumberland or Fifth
Third. The fact that any specific analysis has been referred to in
the summary above is not meant to indicate that such analysis was
given greater weight than any other analyses.
In performing its analyses, Keefe Bruyette made numerous
assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond
the control of The Cumberland and Fifth Third. The analyses
performed by Keefe Bruyette are not necessarily indicative of
actual values or actual future results which may be significantly
more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Keefe Bruyette's analysis
of the fairness of the Exchange Ratio and were provided to The
Cumberland Board of Directors in connection with the delivery of
Keefe Bruyette's opinion. The analyses do not purport to be
appraisals or to reflect the prices at which a company actually
might be sold or the prices at which any securities may trade at
the present time or at any time in the future. In addition, as
described above, Keefe Bruyette's opinion, along with its
presentation to The Cumberland Board of Directors, is just one of
many factors taken into consideration by The Cumberland Board of
Directors.
The Cumberland paid Keefe Bruyette $50,000 concurrently with the
signing of the Affiliation Agreement, and has agreed to pay Keefe
Bruyette $50,000 upon the mailing of the Proxy Statement and
Prospectus and $400,000 at the closing of the Merger. The
Cumberland also has agreed to indemnify Keefe Bruyette against
certain liabilities, including liabilities under the federal
securities laws, and to reimburse Keefe Bruyette for certain out-
of-pocket expenses.
J. C. Bradford & Co.
The Cumberland has also retained the investment banking firm of J.
C. Bradford & Co. ("Bradford") to act as its financial advisor in
connection with a possible business combination between The
Cumberland and Fifth Third.
The Cumberland's Board of Directors selected Bradford as its
financial advisor because Bradford is a recognized investment
banking firm, which, as a part of its investment banking business,
engages in the valuation of securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions
of listed and unlisted securities, private placements and
valuations for various other purposes. [Bradford has delivered a
written opinion to The Cumberland Board dated as of the date of
this Proxy Statement and Prospectus to the effect that, as of such
date, the transaction is fair to the shareholders of The Cumberland
from a financial point of view.] Bradford's opinion does not
constitute a recommendation to any of The Cumberland's shareholders
as to how the shareholder should vote at the Special Meeting.
THE FULL TEXT OF BRADFORD'S OPINION IS ATTACHED AS ANNEX F TO THIS
PROXY STATEMENT AND PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. THE DESCRIPTION OF THE OPINION SET FORTH HEREIN IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ANNEX F. THE CUMBERLAND
SHAREHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR A
DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS
CONSIDERED AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW
UNDERTAKEN BY BRADFORD IN CONNECTION THEREWITH.
In connection with its opinion, Bradford reviewed, analyzed and
relied upon material relating to the financial and operating
condition of The Cumberland and Fifth Third, including, among other
things, the following: (i) the Affiliation Agreement; (ii) a draft
of the Registration Statement; (iii) Annual Reports to Shareholders
and Annual Reports on Form 10-K for the three years ended December
31, 1993, of The Cumberland and of Fifth Third; (iv) certain
interim reports to shareholders and Quarterly Reports of The
Cumberland and Fifth Third and certain other communications from
The Cumberland and Fifth Third to their respective shareholders;
(v) other financial information concerning the businesses and
operations of The Cumberland furnished to Bradford by The
Cumberland for the purpose of its analysis, including certain
internal financial analyses and forecasts for The Cumberland
prepared by senior management of The Cumberland; (vi) certain
publicly available information concerning the trading of, and the
trading market for, the Common Stock of The Cumberland and Fifth
Third; and (vii) certain publicly available information with
respect to banking companies and the nature and terms of certain
other transactions that Bradford considered relevant to its
analysis. In addition, Bradford held discussions with senior
management of The Cumberland and Fifth Third concerning their past
and current operations, financial conditions and prospects, as well
as the results of regulatory examinations.
In connection with its review, Bradford did not independently
verify any of the foregoing information and Bradford relied on such
information being complete and accurate in all material respects.
With respect to forecasts for The Cumberland, Bradford assumed that
such forecasts were reasonably prepared on bases reflecting the
best currently available estimates and judgments of The
Cumberland's management as to the future performance of The
Cumberland. Bradford was not asked to consider and its opinion
does not address the relative merits of the Merger as compared to
any alternative business strategies that might exist for The
Cumberland or the effect of any other transactions in which The
Cumberland might engage. For purposes of its analysis, Bradford
assumed that the Merger will be accounted for as a pooling-of-
interests under generally accepted accounting principles.
The summary set forth below does not purport to be a complete
description of the analyses performed by Bradford. The preparation
of a fairness opinion involves various determinations as to the
most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and,
therefore, such an opinion is not readily susceptible to partial
analysts or summary description. Bradford believes that its
analyses and the summary set forth below must be considered as a
whole in that selecting portions of its analyses could create an
incomplete view of the evaluation process underlying the analyses
set forth in Bradford's opinion. In performing its analyses,
Bradford made numerous assumptions with respect to industry
performance, general business and economic conditions and other
matters, many of which are beyond the control of The Cumberland and
Fifth Third. The analyses performed by Bradford are not
necessarily indicative of actual values or actual future results,
which may be significantly more or less favorable than suggested by
such analyses. Additionally, analyses relating to the values of
businesses do not purport to be appraisals or to reflect the prices
at which businesses actually may be sold. The following are some
of the financial and comparative analyses which were performed by
Bradford in arriving at its opinion as to the fairness of the
transaction.
Analysis of the Fifth Third Offer: Bradford reviewed certain
historical financial information for The Cumberland and Fifth Third
and calculated the imputed value of the Fifth Third offer to
holders of Cumberland Common Stock. This analysis showed a value
of $57.00 per share of Cumberland Common Stock, the consideration
for which is Fifth Third Common Stock based upon as Exchange Ratio
of 1.20 and a closing price of the Fifth Third Common Stock on
April 5, 1994 of $47.50 per share. Bradford calculated the
multiple which a $57.00 purchase price represents, when compared to
The Cumberland's December 31, 1993 tangible book value per share of
$33.08, its 1993 earnings per share of $3.93 and its 1994 estimated
earnings per share of $4.35 (based upon The Cumberland's budget for
1994). The price to tangible book value multiple was 172%, the
price to 1993 actual earnings multiple was 14.5 times and the price
to 1994 estimated earnings multiple was 13.1 times.
Discounted Cash Flow Analysis: Bradford calculated the present
value of estimated future streams of after-tax cash flows of The
Cumberland and Fifth Third through 1996. The analysis was based on
several assumptions, including earnings per share and dividend
forecasts, price/earnings multiples employed in calculating
terminal values and discount rates used to arrive at present
values. In analyzing The Cumberland, Bradford selected discount
rates ranging from 17% to 21%, based upon The Cumberland's cost of
capital, which was calculated to be 19.9%. For purposes of
calculating terminal values, Bradford used two ranges of
price/earnings multiples, reflecting current market multiples and
current buyout multiples. The market multiples ranged from 8.0
times to 12.0 times, and the buyout multiples ranged from 13.0
times to 17.0 times. Bradford constructed a present value
sensitivity analysis incorporating these ranges of multiples and
discount rates. This sensitivity analysis produced a range of
present values per share of The Cumberland from $22.78 to $50.97.
Bradford compared these values to the $57.00 per share imputed
value associated with the Fifth Third offer. In analyzing Fifth
Third, Bradford selected discount rates ranging from 11% to 15%,
based upon Fifth Third's cost of capital, which was calculated to
be 13%. For purpose of calculating terminal values, Bradford used
price/earnings multiples consistent with Fifth Third's trading
history ranging from 12.0 times to 16.0 times. Bradford
constructed a present value sensitivity analysis incorporating
these ranges of multiples and discount rates. This sensitivity
analysis produced a range of present values per share of Fifth
Third of $41.04 to $59.52. Bradford compared these values to Fifth
Third's stock price of $47.50 as of April 5, 1994.
This analysis was based upon varying assumptions concerning
earnings growth rates, dividend rates and exit multiples. As
indicated below, this analysis is not necessarily indicative of
actual values or actual future results and does not purport to
reflect the prices at which any security may trade at the present
time or any time in the future.
Comparable Company Analysis: Bradford compared the financial
performance of The Cumberland based on various financial measures
of profitability, capital adequacy and asset quality to that of a
peer group of midwestern and southeastern thrift institutions with
assets of approximately $1 billion. This group consisted of
AmeriFed Financial Corp., Bankers First Corporation, CitFed
Bancorp, Inc., First Financial Holdings Inc., First Indiana
Corporation, Investors Bank Corp., Mutual Savings Bank, and RS
Financial Corp. This analysis showed among other things, that The
Cumberland 's return on assets for the year ended December 31, 1993
was 0.85% compared to an average of 0.86% for the group, and its
return on equity was 12.80% compared to an average of 12.54% for
the group. As of December 31, 1993, The Cumberland's equity to
assets ratio was 6.82% compared to an average of 7.46% for the
group, and its ratio of nonperforming assets to total assets was
1.34% compared to an average of 1.51% for the group. A value for
the Fifth Third offer of $57.00 per share translates into a
price/earnings multiple for The Cumberland based on 1994 estimated
earnings of 13.10 and a price to tangible book value multiple of
1.72. Based on a $43.50 price on January 10, 1994, the day before
the merger announcement, The Cumberland's price/earnings multiple
based on 1994 estimated earnings was 10.0 times and the price to
tangible book value multiple was 1.31. The price to 1994 estimated
earnings multiples and price to tangible book value multiples of
the group, as of April 5, 1994, were 9.58 and 1.21, respectively.
Bradford also compared the financial performance of Fifth Third
based on various financial measures of profitability, capital
adequacy and asset quality to that of a peer group of midwestern
bank holding companies with assets ranging from approximately $7.6
billion to $79.9 billion. This group consisted of Banc One
Corporation, Firstar Corporation, First of America Bank, Huntington
Bancshares, Inc., National City Corporation, NBD Bancorp, PNC Bank
Corporation, and Star Banc Corporation. This analysis showed,
among other things, that Fifth Third's return on assets for the
year ended December 31, 1993 was 1.80% compared to an average of
1.39% for the group, and its return on equity was 18.17% compared
to an average of 17.19% for the group. As of December 31, 1993,
Fifth Third's equity to assets ratio was 10.01% compared to an
average of 8.07% for the group, and its ratio of nonperforming
assets to total assets was 0.20% compared to an average of 0.74%
for the group. As of April 5, 1994, Fifth Third's price earnings
multiple based on 1994 estimated earnings was 12.84 compared to an
average of 9.18 for the group and its price to tangible book value
multiple was 2.55 compared to an average of 1.83 for the group.
Analysis of Selected Merger Transaction: Bradford reviewed certain
financial data related to selected acquisitions of thrifts.
Specifically, Bradford examined all announced thrift acquisitions
in the Midwest and Southeast since January 1993, and of those
transactions, also examined separately those in which the buyer was
a commercial bank. In each of the selected transactions, Bradford
analyzed premiums to tangible book value, trailing earnings, market
prices one month prior to announcement, and market prices three
months prior to announcement. An analysis of announced
transactions in the Midwest and Southeast since January 1993
involving thrift sellers and either bank or thrift buyers yielded
an average premium to tangible book value of 161% (versus 175%
associated with the Fifth Third offer), an average multiple of
trailing earnings of 13.4 (versus 13.7 associated with the Fifth
Third offer), an average stock price premium, one month prior, of
148% (versus 143% associated with the Fifth Third offer), and an
average stock price premium, three months prior, of 164% (versus
145% associated with the Fifth Third Offer). An analysis of
announced transactions in the Midwest and Southeast since January
1993 involving thrift sellers and bank (but not thrift) buyers
yielded an average premium to tangible book value of 154% (versus
175% associated with the Fifth Third offer), an average multiple of
trailing earnings of 13.7 (versus 13.7 associated with the Fifth
Third offer), an average stock price premium, one month prior, of
144% (versus 143% associated with the Fifth Third offer), and an
average stock price premium, three months prior, of 165% (versus
145% associated with the Fifth Third offer).
No company or transaction used as a comparison in the above
analysis is identical to The Cumberland, Fifth Third, or the
contemplated transaction. Accordingly, an analysis of the results
of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial
and operating characteristics of the companies and other factors
that could affect the public trading value of the companies to
which they are being compared.
Relative Stock Price and Volume Analysis: Bradford examined the
trading history of the Cumberland Common Stock for the period from
January 1, 1990 to the January 11, 1994 merger announcement and
from January 1, 1993 to the January 11, 1994 merger announcement.
Bradford examined the trading history of Fifth Third Common Stock
from January 1, 1990 to April 5, 1994 and from January 1, 1993 to
April 5, 1994. Bradford also compared, over similar time periods,
the trading history of The Cumberland and Fifth Third Common Stock
to a NASDAQ Bank Index and the S&P 500 Index. Among other things,
this analysis showed that the price performances of Cumberland
Common Stock and Fifth Third Common Stock over the period from
January 1990 through June 1993 were relatively comparable and that
the market price of Cumberland Common Stock substantially
outperformed the market price of Fifth Third Common Stock from July
1993 through January 1994. Bradford also examined the volume of
shares traded at various price levels in the Common Stock of The
Cumberland and Fifth Third, in order to compare the proposed
purchase price of The Cumberland and the current price of Fifth
Third to the historical trading patterns of each stock.
Pursuant to an engagement letter dated December 22, 1993, The
Cumberland agreed to pay Bradford a cash fee of $150,000, with
$25,000 being payable upon the execution of the engagement letter,
$50,000 at the time Bradford notifies the Board of Directors that
it is prepared to render the requested opinion and $75,000 upon
consummation of the transaction. The Cumberland has also agreed to
reimburse Bradford for its out-of-pocket expenses, including
reasonable fees and expenses of its legal counsel, and to indemnify
Bradford against certain liabilities arising out of or in
connection with the services rendered by Bradford under the
agreement.
Bradford has provided investment banking services for The
Cumberland in the past and has been compensated for such services.
Effects of Merger
Upon consummation of the Merger, The Cumberland will merge with and
into Fifth Third and The Cumberland will cease to exist as a
separate entity. Prior to the merger, Fifth Third will: (i)
create a subsidiary bank holding company incorporated in Kentucky
and located in Louisville, Kentucky and named Fifth Third Kentucky
Bank Holding Company ("Kentucky BHC"); and (ii) transfer ownership
(through a contribution of capital) of its wholly owned subsidiary,
Fifth Third Bank of Central Kentucky, Inc., a Kentucky-chartered,
non-member bank headquartered in Lexington, Fayette County,
Kentucky ("Fifth Third Central"), to Kentucky BHC. Simultaneously
with the Merger, Fifth Third plans to transfer ownership through a
contribution of capital of The Cumberland F.S.B. from Fifth Third
to Kentucky BHC.
Fifth Third wishes to also consummate the transactions described in
this paragraph (the "Related Transactions") simultaneously with the
Merger. The Affiliation Agreement and Merger Agreement, however,
do not require this timing and state that the Related Transactions
are independent of the Merger. Consequently, the regulatory
approval and consummation of the Merger are not contingent on the
regulatory approval and consummation of the Related Transactions.
The Merger will be consummated whether or not the Related
Transactions are so approved and consummated. In the Related
Transactions Fifth Third plans to: (i) have Fifth Third Central
become a member of the Federal Reserve System ("Fed Membership")
and then purchase for fair value the majority of the assets by
assuming an equal amount of the liabilities (the "P&A") of The
Cumberland F.S.B. (except certain assets and liabilities which will
remain those of The Fifth Third Savings Bank of Western Kentucky,
F.S.B. (described below)); (ii) move Fifth Third Central's main
office to Louisville, Jefferson County, Kentucky; (iii) have The
Cumberland F.S.B. distribute capital of approximately $40 million
to Fifth Third -- Fifth Third will contribute such capital to Fifth
Third Central; (iv) move The Cumberland F.S.B.'s main office to
the current location of its Mayfield, Graves County, Kentucky
branch; (v) change the name of Fifth Third Central to Fifth Third
Bank of Kentucky, Inc. and that of The Cumberland F.S.B. to The
Fifth Third Savings Bank of Western Kentucky, F.S.B. ("Savings
Bank") and (vi) have Fifth Third Central become a member of the
Federal Home Loan Bank (the "FHLB") and have Savings Bank continue
to be a member of such bank.
The Board of Directors of Fifth Third after the Merger is
consummated will consist of all of the members of Fifth Third's
Board of Directors, each of whom will continue to serve as
directors for the term for which such directors were elected,
subject to the Regulations of Fifth Third and in accordance with
law. In addition, Fifth Third shall take such actions as are
necessary to add Mr. Hale to the Board of Fifth Third as promptly
after the Effective Date as possible. The officers of Fifth Third
after the Merger is consummated will be those officers of Fifth
Third who are in office at the Effective Time, subject to the
Regulations of Fifth Third and in accordance with law. Finally,
each current member of the Board of Directors of The Cumberland who
is not an employee of The Cumberland or The Cumberland F.S.B. will
become a member of the Board of Directors of Kentucky B.H.C.
Stock Option Agreement
Concurrently with the Merger Agreement and Affiliation Agreement
(collectively, the "Merger Agreements"), Fifth Third and The
Cumberland entered into a Stock Option Agreement (the "Stock Option
Agreement"). Pursuant to the Stock Option Agreement, The
Cumberland has granted to Fifth Third an irrevocable option (the
"Option") to purchase 479,585 shares of Cumberland Common Stock
(the "Option Shares"), which amount is equal to 19.9% of the number
of shares of Cumberland Common Stock issued and outstanding. The
option price is $47.00 per share, or in the event The Cumberland
issues or agrees to issue any shares of Cumberland Common Stock
(other than as permitted under the Merger Agreement and Affiliation
Agreement) at a price less than $47.00 per share (as adjusted for
changes in capitalization of The Cumberland), the exercise price
for the Option shall be equal to such lesser price. Fifth Third
may exercise the Option, in whole or in part, only if both an
Initial Triggering Event (as defined) and a Purchase Event (as
defined) shall have occurred prior to termination.
An "Initial Triggering Event" means: (i) any person (other than
The Cumberland, any subsidiary of The Cumberland, Fifth Third or
any affiliate of Fifth Third) shall have commenced a bona fide
tender or exchange offer to purchase shares of Cumberland Common
Stock such that upon consummation of such offer such person would
own or control 30% or more of the outstanding shares of Cumberland
Common Stock; (ii) The Cumberland or any subsidiary of The
Cumberland, (1) without having received Fifth Third's prior written
consent, shall have entered into an agreement with any person to,
or (2) any person other than in connection with a transaction to
which Fifth Third has given its prior written consent, shall have
filed an application or notice with any federal or state regulatory
agency for clearance or approval to, (x) merge or consolidate, or
enter into any similar transaction, with The Cumberland or any
subsidiary of The Cumberland, (y) purchase, lease or otherwise
acquire all or substantially all of the assets of The Cumberland or
any subsidiary of The Cumberland or (z) purchase or otherwise
acquire (including by way of merger, consolidation, share exchange
or any similar transaction) securities representing 30% or more of
the voting power of The Cumberland or any subsidiary of The
Cumberland; (iii) any person (other than The Cumberland or Fifth
Third or their subsidiaries or affiliates) shall have acquired
beneficial ownership or the right to acquire beneficial ownership
of 30% or more of the outstanding shares of Cumberland Common Stock
(the term "beneficial ownership" for purposes of the Stock Option
Agreement has the meaning assigned thereto in Section 13(d) of the
Exchange Act and the regulations promulgated thereunder); (iv) any
person (other than The Cumberland or any subsidiary of The
Cumberland) shall have made a bona fide proposal to The Cumberland
by public announcement or written communication that is or becomes
the subject of public disclosure to (x) acquire The Cumberland or
any subsidiary of The Cumberland by merger, consolidation, purchase
of all or substantially all of its assets or any other similar
transaction, or (y) make an offer described in clause (i) above; or
(v) The Cumberland shall have willfully breached any covenant
contained in the Merger Agreements which breach would entitle Fifth
Third to terminate the Merger Agreements and such breach shall not
have been cured prior to the Fifth Third sending notice of exercise
of the Option (the "Notice Date").
The term "Purchase Event" means the time: (i) any person (other
than Fifth Third or any Fifth Third subsidiary or affiliate)
acquires beneficial ownership of 30% or more of the then
outstanding shares of Cumberland Common Stock, or (ii) The
Cumberland enters into an agreement with another person (other than
Fifth Third or any Fifth Third subsidiary) pursuant to which such
person is entitled to acquire 30% or more of the then-outstanding
shares of Cumberland Common Stock.
Subject to other terms of the Stock Option Agreement, Fifth Third
may exercise the Option within 60 days of the Purchase Event and a
closing will be held not earlier than five business days nor later
than 60 business days from the Notice Date, or if prior
notification to or approval of any federal or state regulatory
agency is required, then a closing will be held not less than five
business days nor later than 60 business days from the date any
required notification period has expired or been terminated or such
approval has been obtained and any requisite waiting period shall
have passed.
The Stock Option Agreement further provides The Cumberland will, at
all times required under that agreement, have reserved for issuance
upon exercise of the Option, 479,585 Option shares of Cumberland
Common Stock or such greater number of shares as may be necessary
to meet the terms of the Stock Option Agreement. In the event of
any change in the number of issued and outstanding shares of
Cumberland Common Stock for any reason whatsoever, including by
reason of any stock dividend, stock split, split-up, merger,
recapitalization, combination, conversion, exchange of securities
or the like, other than the transactions contemplated by the Stock
Option Agreement, the number and kind of Option Shares and the
purchase price per Option Share shall be appropriately adjusted to
restore to Fifth Third its rights under the Stock Option Agreement.
Provided that to the extent the Option shall not have been
exercised, it shall terminate and be of no further force and effect
(i) on the Effective Time of the Merger or (ii) upon termination of
the Merger Agreements in accordance with the provisions thereof
(other than a termination resulting from a willful breach by The
Cumberland of any covenant contained therein or, if an Initial
Triggering Event has occurred, failure of The Cumberland's
shareholders to approve the Merger Agreements by the vote required
under applicable law), or (iii) six months after termination of the
Merger Agreements due to a willful breach by The Cumberland of any
covenant contained therein or, if an Initial Triggering Event has
occurred, failure of The Cumberland's shareholders to approve the
Merger Agreements by the vote required under applicable law; and
provided further that any such exercise shall be subject to
compliance with applicable provisions of law or (iv) Fifth Third or
The Cumberland receiving written notice from the Board of Governors
of the Federal Reserve System or its staff to the effect that the
exercise of the Option pursuant to the terms of the Stock Option
Agreement is not consistent with Section 3 of the Bank Holding
Company Act of 1956, as amended, or (v) Fifth Third or The
Cumberland receiving written notice from the Office of Thrift
Supervision or its staff to the effect that the exercise of the
Option pursuant to the terms of the Stock Option Agreement is not
consistent with the Savings and Loan Holding Company Act and
regulations promulgated thereunder. This summary of the Stock
Option Agreement is qualified in its entirety by reference to the
text of such Agreement, which is attached to this Proxy Statement
and Prospectus as Annex D.
Transactions With Affiliated Persons
Pursuant to the Affiliation Agreement, Fifth Third may request that
The Cumberland and The Cumberland F.S.B. enter into an agreement
with Midwest Payment Systems, Inc., a subsidiary of The Fifth Third
Bank ("MPS") to convert all of its electronic funds transfer
("EFT") related services to MPS and the Jeanie (Registered) system.
Any agreement for such services will provide that MPS will be the
exclusive provider of EFT-related services to The Cumberland and
The Cumberland F.S.B. for a period of five years. Fifth Third has
agreed that it will pay all of the costs of either The Cumberland's
or The Cumberland F.S.B.'s conversion to EFT or the Jeanie
(Registered) system (including, without limitation, the cost of all
card reissue, signage and penalties relating to terminating its
current EFT relationships). Fifth Third has further agreed that
the costs and fees to The Cumberland and The Cumberland F.S.B. for
the operation of the Jeanie (Registered) system will not exceed
those charged by its current EFT service provider, subject to any
increases in such costs and fees which would otherwise be permitted
under their current EFT service agreements.
CAPITAL REQUIREMENTS
The Federal Reserve Board, the Office of the Comptroller of the
Currency, and the Federal Deposit Insurance Corporation issued new
guidelines to implement risk-based capital requirements for state
member banks and bank holding companies in the first quarter of
1989. The guidelines established a systematic analytical framework
that makes regulatory capital requirements more sensitive to
differences in risk profiles among banking organizations, takes
off-balance sheet exposures into explicit account in assessing
capital adequacy, and minimizes disincentives to holding liquid,
low-risk assets.
The guidelines provided for phasing in risk-based capital standards
through the end of 1992, at which time the standards became fully
effective. At that time, banking organizations were required to
have capital equivalent to 8 percent of assets, weighted by risk.
Banking organizations must have at least 4 percent Tier 1 capital,
which consists of core capital elements including common
shareholder's equity, retained earnings, and perpetual preferred
stock, to weighted risk assets. The other half of required capital
(Tier 2), can include, among other supplementary capital elements,
limited-life preferred stock and subordinated debt, and loan loss
reserves up to certain limits.
Under Federal Reserve Board policy, the holding company is expected
to act as a source of financial strength to each subsidiary bank
and to commit resources to support each of its subsidiaries. This
support may be required at times when, absent such Board policy,
the holding company may not find itself able to provide it.
Fifth Third, and each of its subsidiary banks, is in compliance
with both the current leverage ratios and the final risk-based
capital standards. As of December 31, 1993, Fifth Third had a
leverage ratio of 9.85%, the Tier 1 Risk-based capital ratio was
11.41% and the total Risk-based capital ratio was 13.82%.
RESALE OF FIFTH THIRD COMMON STOCK BY AFFILIATES
No restrictions on the sale, pledge, transfer or other disposition
of the shares of Fifth Third Common Stock issued pursuant to the
Merger will be imposed solely as a result of the Merger, other than
restrictions on the transfer of such shares issued to any of The
Cumberland shareholders who may be deemed to be an "affiliate" of
Fifth Third or The Cumberland for purposes of Rule 145 promulgated
under the Securities Act of 1933, as amended. Directors, executive
officers, or holders of 10% or more of the outstanding shares of
Cumberland Common Stock may be deemed to be affiliates of The
Cumberland for purposes of Rule 145. Affiliates may not sell,
pledge, transfer or otherwise dispose of the shares of Fifth Third
Common Stock issued to them in exchange for their shares of The
Cumberland Common Stock, unless the requirements of Rule 145(d) are
satisfied or the sale, pledge, transfer, or disposition is
otherwise in compliance with the Securities Act of 1933 and the
rules and regulations promulgated thereunder. Generally, under
Rule 145(d) an affiliate of The Cumberland will be permitted to
sell, pledge, transfer, or otherwise dispose of his or her shares
of Fifth Third Common Stock received pursuant to the Merger if one
of the following is satisfied:
(1)The shares are sold in "brokers' transactions" or in
transactions directly with a "market maker," the affiliate does not
solicit or arrange for the solicitation of purchase orders or make
any payments in connection with the sale to anyone other than the
broker or market maker, and the number of shares sold, together
with all other sales of Fifth Third Common Stock by such affiliate
within the preceding three months, does not exceed one percent of
the outstanding shares of Fifth Third Common Stock; or
(2)The affiliate is not an affiliate of Fifth Third and has been
the beneficial owner of the Fifth Third Common Stock for at least
two years, and there is publicly available certain information
regarding Fifth Third.
In addition, shares of Fifth Third Common Stock issued to
affiliates in the Merger may not be sold, pledged, transferred or
otherwise disposed of until such time as financial results covering
at least 30 days of combined operations of Fifth Third and The
Cumberland have been published within the meaning of Section 201.01
of the Securities and Exchange Commission's Codification of
Financial Reporting Policies.
Share certificates for Fifth Third Common Stock issued to
affiliates of The Cumberland will bear a legend as follows:
The shares of stock evidenced by this certificate are subject to
restrictions on transfer and may only be transferred after the
Issuer has received an opinion from its counsel that the transfer
will be in compliance with the requirements of Rule 145(d)
promulgated under the Securities Act of 1933. The Issuer will mail
a copy of Rule 145(d) to the shareholder without charge within five
(5) days after written request therefor.
As this is a general statement of the restrictions on the
disposition of the shares of Fifth Third Common Stock to be issued
in the Merger, those shareholders of The Cumberland who may be
affiliates of The Cumberland should confer with legal counsel with
respect to the resale restrictions.
FIFTH THIRD BANCORP
Description of Business
Fifth Third is an Ohio corporation organized in 1975 as a bank
holding company registered under the Bank Holding Company Act of
1956, as amended, and subject to regulation by the Board of
Governors of the Federal Reserve System (the "Federal Reserve
Board"). Fifth Third, with its principal office located in
Cincinnati, is a multi-bank holding company that owns all of the
outstanding stock of five commercial banks with 243 offices in 30
counties in Ohio. Fifth Third owns all of the outstanding capital
stock of two commercial banks with 24 offices in five counties in
Kentucky. Fifth Third also owns all the outstanding capital stock
of two commercial banks which maintain 21 offices in six counties
in Indiana.
Fifth Third is also a unitary savings and loan holding company. As
such, Fifth Third is registered with and subject to regulation by
the Office of Thrift Supervision ("OTS"). Fifth Third owns all of
the outstanding stock of one federally-chartered savings bank with
one office in Naples, Florida.
Effective as of September 9, 1992, Fifth Third completed its
purchase of First Federal Savings and Loan Association of Lima,
Ohio. As a result of this transaction, The Fifth Third Bank of
Western Ohio, N.A., a wholly-owned subsidiary of Fifth Third was
merged with First Federal Savings and Loan Association of Lima.
The six former offices of First Federal Savings and Loan
Association of Lima were retained and are being operated as
full-service banking centers of The Fifth Third Bank of Western
Ohio.
Effective as of January 22, 1993, Fifth Third completed the
purchase of certain assets and the assumption of certain
liabilities in connection with three branch offices of Home Savings
of America, FSB ("Home Savings"). Three of Fifth Third's
subsidiary banks, The Fifth Third Bank, Cincinnati, The Fifth Third
Bank of Southern Ohio, and The Fifth Third Bank of Northwestern
Ohio, N.A., each purchased the assets and assumed the liabilities
associated with one of the purchased Home Savings branches. Upon
consummation of this transaction each of the three Home Savings
branches is being operated by one of the three Fifth Third
subsidiaries set forth above. The total amount assumed by Fifth
Third's subsidiaries was $53.5 million in deposits.
Effective as of February 26, 1993, Fifth Third completed the
purchase of certain assets and the assumption of certain
liabilities in connection with six branch offices of The First
National Bank, Dayton, Ohio. As a result of this transaction The
Fifth Third Bank, Cincinnati, Ohio, a wholly-owned subsidiary of
Fifth Third assumed $106.4 million in deposits. Upon consummation
of the purchase and assumption, The Fifth Third Bank retained four
of the former offices of The First National Bank as branches of The
Fifth Third Bank while closing two former offices acquired from The
First National Bank.
On September 24, 1993, Fifth Third terminated its agreement to
acquire Shelby County Bancorp, Shelbyville, Indiana, and its thrift
subsidiary, Shelby County Savings Bank, because of certain
environmental issues that were raised in connection with the St.
Paul, Indiana branch office of Shelby County Savings Bank.
On October 15, 1993, Fifth Third acquired five branches of World
Savings and Loan Association ("World Savings") through two of its
subsidiary banks. The Fifth Third Bank of Western Ohio acquired
three branches of World Savings while The Fifth Third Bank of
Northwestern Ohio acquired two branches. The total amount assumed
by Fifth Third's subsidiaries was approximately $131 million in
deposits.
On December 23, 1993, Fifth Third completed the purchase of The
TriState Bancorp, Cincinnati, Ohio, and its thrift subsidiary,
First Financial Savings Association, F.A. As a result of this
transaction, The Fifth Third Bank, Cincinnati, Ohio, a wholly owned
subsidiary of Fifth Third, was merged with First Financial Savings
Association, F.A. The six former offices of First Financial
Savings Association, F.A. were retained and are being operated as
full-service banking centers of The Fifth Third Bank.
On December 6, 1993 Fifth Third entered into an Affiliation
Agreement with The National Bancorp of Kentucky, Inc. Fifth Third
anticipates that through this Affiliation Agreement The National
Bancorp of Kentucky, Inc. will be merged into Fifth Third and that
The National Bancorp of Kentucky, Inc.'s wholly owned subsidiaries,
The First National Bank of Falmouth, Falmouth, Kentucky ("FNB") and
The National Bank of Cynthiana, Cynthiana, Kentucky ("NBC") will
become wholly owned subsidiaries of Fifth Third. Simultaneously
with the merger, FNB will be merged with and into Fifth Third Bank
of Northern Kentucky, Inc. and NBC will merged with and into Fifth
Third Bank of Central Kentucky, Inc. The total amount assumed by
Fifth Third's subsidiaries will be approximately $83.8 million in
deposits. It its anticipated that this transaction will close in
the second quarter of 1994.
On January 11, 1994, Fifth Third, through three of its affiliate
banks, entered into a Purchase of Assets and Liability Assumption
Agreement with Citizens Federal Bank, a Federal Savings Bank,
Miami, Florida ("Citizens"), whereby the three affiliates will
acquire all of the assets and assume all of the liabilities of
eight branches of Citizens. Seven of the eight branches will be
operated as full-service banking centers and one branch will be
closed. Fifth Third anticipates that this acquisition will be
consummated during the second quarter of 1994.
At December 31, 1993, Fifth Third, its affiliated banks and other
subsidiaries had consolidated total assets of $12.0 billion,
consolidated total deposits of $8.6 billion and consolidated total
stockholders' equity of $1.2 billion.
Fifth Third, through its subsidiaries, engages primarily in
commercial, retail and trust banking, investment services and
leasing activities and also provides credit life, accident and
health insurance, discount brokerage services and property
management for its properties. Fifth Third's affiliates provide a
full range of financial products and services to the retail,
commercial, financial, governmental, educational and medical
sectors, including a wide variety of checking, savings and money
market accounts, and credit products such as credit cards,
installment loans, mortgage loans and leasing. Each of the banking
affiliates has deposit insurance provided by the Federal Deposit
Insurance Corporation (the "FDIC") through the Bank Insurance Fund
("BIF") and the savings bank affiliate has deposit insurance
provided by the FDIC through the Savings Association Insurance Fund
("SAIF").
Fifth Third, through its banking subsidiaries, operates for itself
and other financial institutions a proprietary automated teller
machine (ATM) network, Jeanie (Registered). The Jeanie
(Registered) system participates in a shared ATM network called
"Money Station", which includes several Ohio bank holding companies
and over 1,000 ATM's. The "Money Station" network participates in
another shared ATM network called "PLUS System", which is a
nationwide network with over 17,000 participating ATM's. The Fifth
Third Bank through its wholly-owned subsidiary, MPS, also provides
electronic switch services for several regional banks and bank
holding companies in Ohio, Kentucky and Illinois.
Fifth Third is a corporate entity legally separate and distinct
from the affiliates. The principal source of Fifth Third's income
is dividends from its affiliates. There are certain regulatory
restrictions as to the extent to which the affiliates can pay
dividends or otherwise supply funds to Fifth Third. See
"DESCRIPTION OF CAPITAL STOCK."
Bank Holding Companies In General
Bank holding companies and banks are extensively regulated under
both federal and state law. To the extent that the following
information describes statutory and regulatory provisions, it is
qualified in its entirety by reference to the particular statutory
and regulatory provisions.
As a bank holding company, Fifth Third is registered with and
subject to regulation by the Federal Reserve Board. A bank holding
company is required to file with the Federal Reserve Board an
annual report and such additional information as the Federal
Reserve Board may require pursuant to the Bank Holding Company Act.
The Federal Reserve Board may also make examinations of a holding
company and each of its subsidiaries. The Bank Holding Company Act
requires each bank holding company to obtain the prior approval of
the Federal Reserve Board before it may acquire substantially all
of the assets of any bank, or before it may acquire ownership or
control of any voting shares of any bank if, after such
acquisition, it would own or control directly or indirectly, more
than 5% of the voting shares of such bank.
The Bank Holding Company Act also restricts the types of businesses
and operations in which a bank holding company and its subsidiaries
(other than bank subsidiaries) may engage. Generally, permissible
activities are limited to banking and activities found by the
Federal Reserve Board to be so closely related to banking as to be
a proper incident thereto.
The operations of the subsidiary banks of Fifth Third are subject
to requirements and restrictions under federal and state law,
including requirements to maintain reserves against deposits,
restrictions on the types and amounts of loans that may be granted
and the interest that may be charged thereon, and limitations on
the types of investments that may be made and the types of services
which may be offered. Various consumer laws and regulations also
affect the operations of these banking subsidiaries.
National banks are subject to the supervision of and are regularly
examined by the Comptroller of the Currency. In addition, national
banks may be members of the Federal Reserve System and their
deposits are insured by the Federal Deposit Insurance Corporation
and, as such, may be subject to regulation and examination by each
agency. State chartered banking corporations are subject to
federal and state regulation of their business and activities,
including, in the case of banks chartered in Ohio, by the Ohio
Division of Banks and in the case of banks chartered in Kentucky,
by the Kentucky Department of Financial Institutions.
THE CUMBERLAND FEDERAL BANCORPORATION, INC.
Description of Business
The Cumberland is a Kentucky corporation organized in 1988 for the
purpose of becoming the holding company for The Cumberland F.S.B.
The Cumberland is a registered, unitary savings and loan holding
company under the National Housing Act, as amended by the Savings
and Loan Holding Company Act of 1968. In 1987, The Cumberland
F.S.B. converted from a mutual savings loan and association to a
stock savings bank.
The Cumberland F.S.B. conducts business from its headquarters in
Louisville, Kentucky and 44 other offices located in 14 counties
throughout Kentucky. The Cumberland F.S.B. is primarily engaged in
the business of attracting deposits from the general public and
using such deposits, together with borrowings and other funds, to
originate loans secured by first mortgage liens on residential real
estate and, to a lesser extent, on commercial real estate. The
Cumberland F.S.B. also makes construction, consumer and commercial
business loans, and invests in mortgage-backed securities and other
investments. The operations of The Cumberland F.S.B. are
significantly influenced by general economic conditions, by
monetary and fiscal policies of the federal government and by
policies of regulatory authorities.
At December 31, 1993, The Cumberland had total consolidated assets
of $1.2 billion, total deposits of $846.6 million and total
stockholders' equity of $79.8 million.
The principal source of The Cumberland's income is dividends from
The Cumberland F.S.B. There are certain regulatory restrictions as
to the extent to which The Cumberland F.S.B. can pay dividends or
otherwise supply funds to The Cumberland. See "DESCRIPTION OF
CAPITAL STOCK."
Regulation
On August 9, 1989, FIRREA was enacted into law. FIRREA
substantially changed the regulatory structure and oversight for
all savings associations, including The Cumberland F.S.B., and
their holding companies. Prior to FIRREA, The Cumberland F.S.B.
was chartered and regulated by the Federal Home Loan Bank Board
(the "FHLBB"), and its deposits were insured by the Federal Savings
and Loan Insurance Corporation (the "FSLIC"). The FHLBB was
abolished by FIRREA and its regulatory authority was transferred to
the Director of the OTS (the "Director"). In addition, the FSLIC
was abolished and its functions transferred to the FDIC. The FDIC
now administers two separate insurance funds, which are not
commingled: one primarily for federally insured banks and one
primarily for federally insured savings associations. The fund for
banks is called the "Bank Insurance Fund" ("BIF"), and the fund for
savings associations is called the "Savings Association Insurance
Fund" ("SAIF"). As the federal insurer of savings associations,
the FDIC determines whether to grant insurance to newly-chartered
savings associations, has authority to prohibit unsafe or unsound
activities and has enforcement powers over savings associations
(usually in conjunction with the OTS or on its own if the OTS does
not undertake enforcement action). The FDIC also has the authority
to examine insured savings associations.
The Cumberland F.S.B., as a federally chartered stock savings
association, is a member of the Federal Home Loan Bank ("FHLB")
System and its deposits are insured by SAIF, which is administered
by the FDIC. The Cumberland F.S.B. is subject to extensive
regulation by the OTS. Examinations of The Cumberland F.S.B. are
now conducted by the OTS which has, in conjunction with the FDIC in
certain situations, enforcement powers. In addition, federal
savings associations must file reports with various governmental
agencies, and may not enter into certain transactions unless
certain regulatory tests are met or governmental approval is
obtained. This supervision and regulation is intended primarily
for the protection of depositors and federal deposit insurance
funds. The Cumberland F.S.B. is also subject to certain reserve
requirements under regulations of the Federal Reserve Board.
Pursuant to FIRREA, the OTS has adopted a regulation establishing
a schedule for the assessment of fees upon all savings associations
to fund the operations of the OTS. The regulation also contains a
schedule establishing fees for the various types of applications
and filings made by savings associations with the OTS. The general
assessment, to be paid on a semiannual basis, is based upon the
savings association's total assets, including consolidated
subsidiaries, as reported in a recent quarterly thrift financial
report. Effective January 1, 1993, the assessment rate ranged from
.0172761% of assets for associations with $67 million in assets or
less to .0045864% for associations with assets in excess of $35
billion.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") became effective December 19, 1991. Among other things,
FDICIA requires that on-site examinations of The Cumberland F.S.B.
by the OTS occur at least once every 18 months (unless the FDIC has
conducted a full-scope examination during the period in question)
and, after 1993, under certain limited circumstances, once every 12
months. FDICIA also authorizes the FDIC to assess insured
institutions for the cost of FDIC examinations and requires the OTS
to assess federal associations for the costs of its examinations.
FDICIA also requires the OTS and the other federal banking
regulators to prescribe new standards relating to (a) internal
controls, information systems and internal audit systems; (b) loan
documentation; (c) credit underwriting; (d) asset growth; (e)
interest rate exposure; and (f) compensation, fees, and benefits.
The compensation standards must prohibit as an unsafe and unsound
practice any employment contract, compensation or benefit
agreement, fee arrangement, perquisite, stock option plan,
post-employment benefit or other compensatory arrangement that
would provide any executive officer, employee, director or
principal shareholder with excessive compensation, fees or benefits
or that could lead to material financial loss to the institution,
although such standards generally do not apply to well capitalized
institutions. The OTS is also charged by FDICIA with prescribing
standards for federally insured savings associations and their
holding companies specifying (a) a maximum ratio of classified
assets to capital; (b) minimum earnings sufficient to absorb losses
without impairing capital; and (c) to the extent feasible, a
minimum ratio of market value to book value for publicly traded
shares of the association or its holding company. Such standards
went into effect in December, 1993. The OTS, along with the other
banking agencies with respect to similar standards they must
establish, have sought comments from the industry on the substance
of such standards. The impact of these standards on the operations
of The Cumberland and The Cumberland F.S.B. cannot be ascertained
until the final standards are issued. In addition, legislation was
recently adopted which limits the compensation standards to
situations involving safety or soundness concerns or enforcement
proceedings.
FDICIA also required the OTS and other federal banking agencies to
develop jointly a method for insured depository institutions to
provide supplemental disclosure of the estimated fair market value
of assets and liabilities, to the extent feasible and practicable,
in financial statements or reports required to be filed with the
federal banking agencies.
FDICIA also included the Truth in Savings Act, which requires the
Federal Reserve Board to establish regulations providing for clear
and uniform disclosure of the rates, fees and terms of deposit
accounts. The Federal Reserve Board has adopted regulations, which
became effective June 21, 1993, requiring a specific disclosure
before an account is opened, in regularly provided statements and
in advertisements, announcements and solicitations initiated by a
depository institution. The regulations prescribe detailed
disclosure of deposit account yield information, minimum balance
requirements and fee impact on the yield. The regulations also
establish certain recordkeeping requirements.
In addition, within 18 months following the enactment of FDICIA,
the OTS and other federal banking agencies were required to revise
their risk-based capital standards to take adequate account of
interest-rate risk, concentration of credit risk, and the risks of
nontraditional activities, and to reflect the actual performance
and expected risk of multifamily mortgages.
ADDITIONAL SUPERVISION AND REGULATION
Acquisitions of Savings Associations By Holding Companies
Section 4(i) of the Bank Holding Company Act (the "BHCA")
authorizes the Federal Reserve Board to approve the application of
a bank holding company to acquire any savings association under
Section 4(c)(8) of the BHCA. In approving such an application, the
Federal Reserve Board is precluded from imposing any restrictions
on transactions between the bank holding company and the acquired
savings association, except as required by Section 23A or 23B of
the Federal Reserve Act or any other applicable law.
Prior to August, 1994, Section 5(d) of the Federal Deposit
Insurance Act generally prohibits any "conversion transaction"
resulting in the transfer of deposit liabilities from SAIF to BIF
or vice versa, including (a) the change of status of an insured
depository institution from one fund to the other; (b) the merger
of a BIF member with a SAIF member; (c) the assumption of any
liability by a member of one fund to pay any deposits of a member
of the other fund; and (d) the transfer of assets in consideration
for the assumption of any portion of the deposits of a member of
one fund by a member of the other fund. There are a number of
exceptions to this moratorium, including the merger, consolidation
or transfer of a savings association subsidiary of a bank holding
company with and into any subsidiary bank which is a BIF member,
provided that certain conditions are met and that the merged entity
continues to make payment of SAIF assessments on the portion of
liabilities attributable to the merged savings association. This
exception to the moratorium is commonly referred to as an "Oakar
transaction" after the sponsor of the amendment that added the
provision to the FIRREA.
In connection with the Merger, Fifth Third anticipates the
contribution of the stock of The Cumberland F.S.B. to Kentucky BHC,
a wholly owned banking subsidiary of Fifth Third with its main
office located in Louisville, Kentucky, in compliance with the laws
and regulations of the Federal Reserve System.
Securities Exchange Act of 1934
Fifth Third and The Cumberland are each subject to the provisions
of the Securities Exchange Act of 1934 ("Exchange Act") regarding
the filing of periodic reports, the solicitation of proxies, the
disclosure of beneficial ownership of certain securities, short
swing profits and the conduct of tender offers. Such provisions of
the Exchange Act, as applied to bank and thrift holding companies
such as The Cumberland and Fifth Third, are administered by the
Securities and Exchange Commission.
Dividends
For information regarding restrictions on the payment of dividends
see "Description of Capital Stock - Dividends."
EFFECT OF GOVERNMENTAL POLICIES
The earnings of both The Cumberland's and Fifth Third's
subsidiaries are affected not only by domestic and foreign economic
conditions, but also by the monetary and fiscal policies of the
United States and its agencies (particularly the Federal Reserve
Board), foreign governments and other official agencies. The
Federal Reserve Board can and does implement national monetary
policy, such as the curbing of inflation and combating of
recession, by its open market operations in United States
Government securities, control of the discount rate applicable to
borrowings and the establishment of reserve requirements against
deposits and certain liabilities of depository institutions. The
actions of the Federal Reserve Board influence the growth of bank
loans, investments and deposits and also affect interest rates
charged on loans or paid on deposits. The nature and impact of
future changes in monetary and fiscal policies are not predictable.
From time to time various proposals are made in the United States
Congress and in state legislatures and before various regulatory
authorities which would alter the powers or the existing regulatory
framework for banks, bank holding companies, savings banks and
other financial institutions. It is impossible to predict whether
any of the proposals will be adopted and the impact, if any, of
such adoption on the business of The Cumberland or of Fifth Third
and the subsidiaries of each.
DESCRIPTION OF CAPITAL STOCK
Fifth Third is authorized to issue 100,000,000 shares of its Common
Stock, no par value, and 500,000 shares of preferred stock, no par
value ("Fifth Third Preferred Stock"). As of December 31, 1993,
Fifth Third had outstanding 61,402,257 shares of Common Stock and
no shares of Fifth Third Preferred Stock. Pursuant to Article
Fourth of Fifth Third's Seconded Amended Articles of Incorporation,
as amended, the Board of Directors of Fifth Third may, without
further action of the shareholders, (a) divide into one or more new
series the authorized shares of Fifth Third Preferred Stock which
have not previously been designated, (b) fix the number of shares
constituting any such new series and (c) fix the dividend rates,
payment dates, whether dividend rights shall be cumulative or
non-cumulative, conversion rights, redemption rights (including
sinking fund provisions) and liquidation preferences. Except as
otherwise provided by law, holders of any series of Fifth Third
Preferred Stock shall not be entitled to vote on any matter.
The Cumberland is authorized to issue 12,000,000 shares of
Cumberland Common Stock, $1.00 par value, of which [2,412,853]
shares were issued and outstanding and options to purchase a total
of 197,565 shares were outstanding as of __________________. In
addition, The Cumberland also is authorized to issue 5,000,000
shares of serial preferred stock, $1.00 par value ("Cumberland
Preferred Stock"), none of which are outstanding. The Board of
Directors of The Cumberland may, without further action of the
shareholders, (a) divide into one or more new series the authorized
shares of Cumberland Preferred Stock which have not previously been
designated, (b) fix the number of shares constituting any such new
series and (c) fix the dividend rates, redemption rights (including
sinking fund provisions), liquidation preferences, conversion
rights, and voting rights.
Set forth below is a description of Fifth Third Common Stock and
Cumberland Common Stock. This description and analysis are brief
summaries of relevant provisions of the Articles of Incorporation
of Fifth Third and The Cumberland and are qualified in their
entirety by reference to such documents and the parties' Codes of
Regulations and bylaws.
Voting Rights
Holders of both Fifth Third Common Stock and Cumberland Common
Stock are entitled to one vote per share on all matters submitted
to a vote of shareholders except that Kentucky law requires
cumulative voting in the election of directors of The Cumberland as
discussed below.
The Code of Regulations and Bylaws of Fifth Third and The
Cumberland respectively provide for the division of their
respective Boards of Directors into three classes of approximately
equal size, provided that The Cumberland's Bylaws state that if the
Board of Directors consists of less than nine members, then the
Board of Directors shall not be divided into classes. There are
currently only eight directors serving on The Cumberland Board of
Directors, and therefore once the terms of The Cumberland's current
Directors expires, The Cumberland Board of Directors will no longer
be classified and all directors will be elected annually.
Directors of a classified Board of Directors are generally elected
for three-year terms, and the terms of office of approximately
one-third of the members of the classified Board of Directors of
Fifth Third expire each year. This classification of Fifth Third's
Board may make it more difficult for a shareholder to acquire
control of Fifth Third and remove management by means of a hostile
takeover.
The holders of Fifth Third Common Stock have the right to vote
cumulatively in the election of directors. Under applicable Ohio
law, cumulative voting in the election of directors of a
corporation will be permitted if (i) written notice is given by any
shareholder of such corporation to the President, Vice President or
the Secretary of such corporation not less than 48 hours before the
time fixed for holding the meeting at which directors are to be
elected that such shareholder desires that voting for the election
of directors be cumulative and (ii) announcement of the giving of
such notice is made upon the convening of the meeting by the
meeting chairman or secretary or by or on behalf of the shareholder
giving such notice. In such event, each shareholder will be
entitled to cumulate such voting power as he or she possesses and
to give one nominee as many votes as the number of directors to be
elected multiplied by the number of his or her shares, or to
distribute such votes on the same principle among two or more
candidates, as each shareholder sees fit. Shareholders of The
Cumberland also have the right to vote cumulatively in the election
of directors as provided by the Kentucky Business Corporation Act.
Fifth Third is only authorized to effect a merger, consolidation or
sale of assets not in the regular course of business, to dissolve,
or amend its Articles of Incorporation pursuant to authority given
by persons holding two-thirds of its respective capital stock. The
Cumberland's Articles of Incorporation do not contain any similar
provision. The Kentucky Business Corporation Act generally
requires the affirmative vote of the holders of a majority of the
outstanding shares of each class entitled to vote to approve a
merger, share exchange or sale, lease, exchange or other
disposition of all or substantially all of The Cumberland's assets
other than in the ordinary course of business, or to amend The
Cumberland's Articles of Incorporation.
Dividends
Holders of Fifth Third and Cumberland Common Stock are each
entitled to dividends as and when declared by the respective Board
of Directors of each institution out of funds legally available for
the payment of dividends.
Most of the revenues of Fifth Third and The Cumberland available
for payment of dividends derive from amounts paid to each such
corporation by its respective subsidiaries. Under applicable
banking law, the total of all dividends declared in any calendar
year by a national bank or a state-chartered bank may not, without
the approval of the Comptroller of the Currency, Board of Governors
of the Federal Reserve System, or the Federal Deposit Insurance
Corporation, as the case may be, exceed the aggregate of such
bank's net profits (as defined) and retained net profits for the
preceding two years. Under the law applicable to
federally-chartered savings associations, the amount of dividends
which a savings association may make without the approval of the
OTS depends upon the amount of capital possessed by such savings
association. Savings associations, which have capital immediately
prior to, and on a pro forma basis after giving effect to, a
proposed dividend that is equal to or greater than the amount of
their fully phased-in capital requirements, are authorized to pay
dividends during a calendar year up to one hundred percent of their
net income during the calendar year plus the amount that would
reduce by one-half their surplus capital. Some associations that
have capital immediately prior to, and on a pro forma basis after
giving effect to, a proposed dividend that is equal to or in excess
of their minimum capital requirement, but less than their fully
phased-in capital requirements, may pay dividends equal to 75% of
net income during the most recent four quarters (minus dividends
previously paid over that period). Savings associations, which
have capital immediately prior to, or on a pro forma basis after
giving effect to, a proposed dividend that is less than the amount
of their minimum capital requirements, are not authorized to pay
any dividend unless such associations receive prior approval from
the OTS or unless such associations are operating in compliance
with an OTS approved capital plan and the dividend payment is
consistent with such capital plan.
The affiliates of Fifth Third include both state and nationally
chartered banks and one federally chartered savings bank. Under
the applicable regulatory limitations, during the year 1994, the
affiliates of Fifth Third could declare aggregate dividends limited
to their 1994 eligible net profits and $154,963,000, the retained
1993 and 1992 net income, without the approval of their respective
regulators. The Comptroller of the Currency, banking authorities
of the States of Ohio, Indiana and Kentucky, and the Office of
Thrift Supervision, the principal regulators of such affiliates,
have the statutory authority to prohibit a depository institution
under their supervision from engaging in what, in their opinion,
constitutes an unsafe or unsound practice in conducting its banking
or savings association business. The payment of dividends could,
depending upon the financial condition of affiliates, be deemed to
constitute such an unsafe or unsound practice. No affiliate of
Fifth Third has ever been prohibited from declaring dividends or
restricted in paying any dividends declared.
If, in the opinion of the applicable regulatory authority, a
depository institution under its jurisdiction is engaged in or is
about to engage in an unsafe or unsound practice (which, depending
on the financial condition of the depository institution, could
include the payment of dividends), such authority may require,
after notice and hearing, that such bank cease and desist from
practice. The Federal Reserve Board has similar authority with
respect to bank holding companies, and the OTS has similar
authority with respect to savings and loan holding companies. In
addition, the Federal Reserve Board, the Comptroller and the FDIC
have issued policy statements which provide that insured banks and
bank holding companies should generally only pay dividends out of
current operating earnings. Finally, the regulatory authorities
have established guidelines with respect to the maintenance of
appropriate levels of capital by a bank, bank holding company,
savings association or savings and loan holding company under their
jurisdiction. Compliance with the standards set forth in such
guidelines could limit the amount of dividends which Fifth Third
and The Cumberland and their respective affiliates may pay.
Preemptive Rights
The Articles of Incorporation of The Cumberland provide that the
holders of capital stock of The Cumberland are not entitled to
preemptive rights with respect to any shares or other securities of
The Cumberland which may be issued. Shareholders of Fifth Third
also have no preemptive rights.
Rights Upon Liquidation
In the event of any liquidation, dissolution or winding up of The
Cumberland F.S.B., The Cumberland, as holder of The Cumberland
F.S.B.'s capital stock, would be entitled to receive, after payment
or provision for payment of all debts and liabilities of The
Cumberland F.S.B. (including all deposit accounts and accrued
interest thereon) and after distribution of the balance in the
special liquidation account established at the time The Cumberland
F.S.B. converted to stock form, all assets of The Cumberland F.S.B.
available for distribution. In the event of liquidation,
dissolution or winding up of The Cumberland, the holders of
Cumberland Common Stock would be entitled to receive, after payment
or provision for payment of all of its debts and liabilities, all
of the assets of The Cumberland available for distribution. If
Cumberland Preferred Stock is issued, the holders thereof may have
a priority over the holders of Cumberland Common Stock in the event
of liquidation or dissolution.
Indemnification and Personal Liability of Directors and Officers
Fifth Third's Code of Regulations provides for the indemnification
of each director and officer of the corporation, to the fullest
extent permitted by Ohio law, against all expenses and liabilities
reasonably incurred by or imposed on him or her in connection with
any proceeding or threatened proceeding in which he or she may
become involved by reason of his or her being or having been a
director or officer. Generally, Ohio permits such indemnification
provided that the person seeking to be indemnified has acted in
good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect
to any criminal action, had no reasonable cause to believe his
conduct was unlawful, so long as no judgment or other final
adjudication adverse to such person establishes that his acts or
omissions (i) were in breach of his duty of loyalty to the
corporation or its shareholders, (ii) were not in good faith or
involved a knowing violation of law, or (iii) resulted in his or
her receipt of an improper personal benefit. The grant of
indemnification in the context of a derivative or other comparable
suit may have a circular effect, inasmuch as any damages recovered
in such action will be offset by the cost of indemnification.
The Articles of Incorporation of The Cumberland provide that
current and former directors, officers, employees, and agents shall
be indemnified by The Cumberland to the maximum extent permitted or
mandated by, and in accordance with, the Kentucky Business
Corporation Act. The Kentucky Business Corporation Act provides
that a director, employee, officer or agent of a corporation may be
indemnified against liability (and other costs which may be
advanced to the person if done in accordance with the statute)
incurred by such person in connection with a proceeding, provided
such person acted in good faith and (i) in the case of conduct in
his official capacity with the corporation, in a manner such person
reasonably believed to be in the best interests of the corporation
and (ii) in all other cases, his conduct was at least not opposed
to its best interest. Such indemnity may also be available with
respect to any criminal proceeding if the person had no reasonable
cause to believe that his conduct was unlawful.
The Kentucky Business Corporation Act further provides that a
corporation may not indemnify a director, officer, employee or
agent in connection with a proceeding by or in the right of the
corporation in which the person was adjudged liable to the
corporation, nor may indemnity be available in a proceeding
charging improper personal benefit to the person in question in
which such person was adjudged liable on the basis that improper
personal benefit was improperly received by said person. In any
event, indemnification allowed with respect to a proceeding by or
in the right of the corporation shall be limited to reasonable
expenses incurred in connection therewith. Indemnification against
reasonable legal expenses incurred by a person in connection with
a proceeding is mandatory when the person is wholly successful in
the defense of the proceeding. Finally, the Kentucky Business
Corporation Act provides for court-ordered indemnification if the
director, officer, employee or agent is fairly and reasonably
entitled to indemnification in view of all other relevant
circumstances, whether or not (i) the standards of conduct
described above are satisfied, or (ii) the person in question was
adjudged liable with respect to a proceeding by or in the right of
the corporation or in a proceeding charging improper personal
benefit. However, in the event of court-ordered indemnification in
the face of such an adjudication or liability, indemnification
shall be limited to reasonable expenses incurred.
The Kentucky Business Corporation Act provides that a director of
a Kentucky corporation must discharge the duties as a director in
good faith, on an informed basis, and in a manner the director
honestly believes to be in the best interests of the corporation.
To discharge these duties on an informed basis, a director must
make inquiry into the business and affairs of the corporation, or
into a particular action to be taken or decision to be made, with
the care an ordinary prudent person in a like position would
exercise under similar circumstances. Unless the corporation's
articles of incorporation contain a provision further limiting a
director's liability for monetary damages, any action taken as a
director, or any failure to take any action as a director, will not
be the basis for monetary damages or injunctive relief unless (a)
the director has breached or failed to perform his duties as a
director in good faith, on an informed basis, and in a manner the
director honestly believes to be in the best interests of the
corporation; and (b) in the case of an action for monetary damages,
the breach or failure to perform constitutes willful misconduct or
wanton or reckless disregard for the best interests of the
corporation and its shareholders. A person bringing an action for
monetary damages for breach of duty has the burden of proving by
clear and convincing evidence the provisions of (a) and (b) above,
and the burden of proving that the breach or failure to perform was
the legal cause of the damages suffered by the corporation. The
Cumberland's Articles of Incorporation do not further limit a
director's liability for monetary damages.
Shareholders' Meetings; Quorum
Special meetings of Fifth Third's shareholders may be called at any
time by the Board of Directors, or the shareholders of Fifth Third
upon the written application of the holders of at least 25% of all
Fifth Third capital stock entitled to vote on the matters to be
considered at the meeting. Such applications must set forth the
purpose of the meeting. Special meetings of The Cumberland's
shareholders may be called by the Chairman of the Board or the
Board of Directors and shall be called by the Chairman of the Board
upon the written request of the holders of not less than 20% of all
of the shares outstanding and entitled to vote at the meeting.
The presence in person or by proxy of the holders of a majority of
the aggregate number of the outstanding shares of any class or
series of Fifth Third capital stock and of The Cumberland capital
stock each voting at a meeting constitutes a quorum under the
respective Code of Regulations and Bylaws of each institution.
Subscription, Conversion, Redemption Rights; Stock Nonassessable
Neither Fifth Third Common Stock nor Cumberland Common Stock has
subscription or conversion rights, and there are no mandatory
redemption provisions applicable thereto.
Shares of Fifth Third Common Stock issued to shareholders of The
Cumberland pursuant to the Affiliation Agreement will be validly
issued, fully paid and non-assessable.
Change of Control Provisions
Fifth Third's and The Cumberland's Articles of Incorporation and
Code of Regulations and Bylaws, respectively, contain various
provisions which could make more difficult a change in control of
each corporation or discourage a tender offer or other plan to
restructure each corporation. Under Fifth Third's Articles of
Incorporation, Fifth Third's Board of Directors has the authority
to issue 500,000 shares of Preferred Stock and to fix the
designations, powers, preferences and rights of such shares and the
qualifications, limitations or restrictions applicable thereto.
The Cumberland's Articles of Incorporation grant The Cumberland's
Board of Directors the authority to issue 5,000,000 shares of
Cumberland Preferred Stock and fix the designations, powers,
preferences and rights of such shares and the qualifications,
limitations, or restrictions applicable thereto.
Ohio corporation law also provides certain change of control
protective provisions. Section 1701.831 of the Ohio Revised Code
sets forth the procedures for the acquisition of a control share of
an Ohio corporation which include the delivery of an acquiring
person statement to the target corporation and the affirmative vote
of a majority of the shares held by the shareholders of the target
corporation prior to the acquisition of a control share, at a
meeting held for the purpose of voting on such acquisition.
Finally, Fifth Third's and The Cumberland's Code of Regulations and
Bylaws respectively each provide for the election of directors on
a classified basis.
The Ohio and Kentucky corporation statutes include a provision
which permits a corporation's board of directors, when determining
whether an acquisition proposal or any other matter is in the best
interest of the corporation, to take into consideration the
interests of the corporation's employees, suppliers, creditors and
customers, the economy of the state and the nation, community and
societal considerations and the long-term and short-term interests
of the corporation and its shareholders, including the possibility
that such interests may be best served by the continued
independence of the corporation.
The Cumberland Shareholder Rights Agreement
The Board of Directors of The Cumberland declared on February 26,
1991, a dividend distribution of one Right for each outstanding
share of Cumberland Common Stock to shareholders of record at the
close of business on March 5, 1991. Each Right entitles the
registered holder to purchase from The Cumberland a unit consisting
of one one-hundredth of a share (a "Unit") of Series A Preferred
Stock, $1.00 par value (the "Preferred Stock") at a purchase price
of $31.00 (the "Purchase Price") per Unit, subject to adjustment.
The description and terms of the Rights are set forth in a Rights
Agreement, (the "Rights Agreement") between The Cumberland and
Mellon Bank, N.A., as Rights Agent.
The Cumberland and the Rights Agent have executed and delivered the
First Amendment dated as of January 10, 1994 (the "Amendment") to
the Rights Agreement. The Amendment provides, among other things,
that neither Fifth Third nor any of its subsidiaries will become an
"Acquiring Person" and that no "Triggering Event," "Stock
Acquisition Date" or "Distribution Date" (as such terms are defined
below) will occur as a result of the consummation of the Merger.
In addition, the Amendment provides that the Rights will expire
upon consummation of the Merger.
Initially, the Rights were attached to all Cumberland Common Stock
certificates representing shares then outstanding, and no separate
Rights Certificates were distributed. The Rights will separate
from Cumberland Common Stock and a Distribution Date will occur
upon the earlier of (i) 20 business days following a public
announcement that a person or group of affiliated or associated
persons (an "Acquiring Person") has acquired, or obtained the
rights to acquire, beneficial ownership of 20% or more of the
outstanding shares of Cumberland Common Stock (the "Stock
Acquisition Date"), (ii) 20 business days following the
commencement of a tender offer or exchange offer that would result
in a person or group beneficially owning 30% or more of such
outstanding shares of Cumberland Common Stock or (iii) 20 business
days after the Board of Directors of The Cumberland shall declare
any Person to be an Adverse Person, upon a determination that such
person, alone or together with its affiliates and associates, has
become the beneficial owner of an amount of Cumberland Common Stock
which the Board of Directors determines to be substantial (which
amount shall in no event be less than 10% of the shares of
Cumberland Common Stock then outstanding) and a determination by at
least a majority of the Board of Directors who are not officers of
The Cumberland, after reasonable inquiry and investigation,
including consultation with such persons as such directors shall
deem appropriate, that (a) such beneficial ownership by such person
is intended to cause, is reasonably likely to cause or will cause
The Cumberland to repurchase the Cumberland Common Stock
beneficially owned by such person or to cause pressure on The
Cumberland to take action or enter into a transaction or series of
transaction intended to provide such person with short-term
financial gain under circumstances where the Board of Directors
determines that the best long-term interests of The Cumberland and
its shareholders would not be served by taking such action or
entering into such transactions or series of transactions at that
time, or (b) such beneficial ownership is causing or reasonably
likely to cause a material adverse impact (including, but not
limited to, impairment of relationships with customers or
impairment of The Cumberland's ability to maintain its competitive
position or effectuate a transaction that the Board of Directors
deems to be in the best interests of The Cumberland's shareholders)
on the business or prospects of The Cumberland to the detriment of
The Cumberland's shareholders, or (c) such beneficial ownership
otherwise is determined to be not in the best interests of The
Cumberland and its shareholders, employees, customers and
communities in which The Cumberland and its subsidiaries do
business.
However, the Board of Directors may choose not to declare a person
to be an Adverse Person if such person provides to the Board of
Directors in writing a statement of the person's purposes and
intentions in connection with the proposed acquisition of
Cumberland Common Stock, together with any other information
reasonably requested of the person by the Board of Directors, and
the Board of Directors, based on such statement and reasonable
inquiry and investigation as it deems appropriate, determines to
notify and notifies such person in writing that it will not declare
the person to be an Adverse Person; provided, however, that the
Board of Directors may expressly condition in any manner a
determination not to declare a person an Adverse Person on such
conditions as the Board of Directors may select, including, without
limitation, such person's not acquiring more than a specified
amount of common stock and/or on such person's not taking actions
inconsistent with the purposes and intentions disclosed by such
person in the statement provided to the Board of Directors. If the
Board of Directors should at any time determine, upon reasonable
inquiry and investigation, that such person has not met or complied
with any conditions specified by the Board of Directors, the Board
of Directors may at any time thereafter declare the person to be an
Adverse Person.
Until the Distribution Date, (i) the Rights will be evidenced by
Cumberland Common Stock certificates and will be transferred with
and only with such Cumberland Common Stock certificates, (ii) new
Cumberland Common Stock certificates issued after March 5, 1991
will contain a notation incorporating the Rights Agreement by
reference and (iii) the surrender for transfer of any certificates
for Cumberland Common Stock outstanding will also constitute the
transfer of the Rights associated with Cumberland Common Stock
represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
terminate at the close of business on March 5, 2001, unless earlier
expired pursuant to the Rights Agreement, including upon
consummation of the Merger, or earlier redeemed by The Cumberland
as described below.
As soon as practicable after the Distribution Date, Rights
certificates will be mailed to holders of record of Cumberland
Common Stock as of the close of business on the Distribution Date
and, thereafter, the separate Rights certificates alone will
represent the Rights. Except as otherwise determined by the Board
of Directors, only shares of Cumberland Common Stock issued before
the Distribution Date will be issued with Rights.
Except as qualified by the Amendment, if, at any time, following
the Distribution Date, the Board of Directors determines that a
person is an Adverse Person or a Person has acquired, or obtained
the right to acquire, beneficial ownership of more than 30% of the
then outstanding shares of Cumberland Common Stock (except pursuant
to an offer for all outstanding shares of Cumberland Common Stock
which the independent directors determine to be fair to and
otherwise in the best interests of The Cumberland and its
shareholders), each holder of a Right will thereafter generally
have the right to receive, upon exercise, (a) Cumberland Common
Stock (or, in certain circumstances, cash, property, or other
securities of The Cumberland) having a value equal to two times the
exercise price of the Right, or (b) at the discretion of the Board
of Directors, upon exercise and without payment of the exercise
price, Cumberland Common Stock (or, in certain circumstances, cash,
property or other securities of The Cumberland) having a value
equal to the Spread (as defined in the Rights Agreement).
Notwithstanding any of the foregoing, following the occurrence of
any of the events set forth in this paragraph, all Rights that are,
or (under certain circumstances specified in the Rights Agreement)
were, beneficially owned by any Acquiring Person or Adverse Person
will not be exercisable. Rights owned by other persons are not
exercisable following the occurrence of either of the events set
forth above until such time as the Rights are no longer redeemable
by The Cumberland as set forth below.
For example, at an exercise price of $31 per Right, each Right not
owned by an Acquiring Person or an Adverse Person (or by certain
related parties) following an event set forth in the preceding
paragraph would entitle its holder to purchase $62 worth of
Cumberland Common Stock (or other consideration, as noted above)
for $31. Assuming that the Cumberland Common Stock had a per share
value of $7.75 at such time, the holder of each valid Right would
be entitled to purchase 8 shares of Cumberland Common Stock for
$31.
Except as qualified by the Amendment, if, at any time following the
Stock Acquisition Date, (i) The Cumberland is acquired in a merger
or other business combination transaction in which The Cumberland
is not the surviving corporation (other than a merger which the
independent directors determine to be fair to and otherwise in the
best interests of The Cumberland and its shareholders), or (ii) 50%
or more of The Cumberland's assets or earning power is sold or
transferred, each holder of a Right (except Rights which previously
have been voided as set forth above) shall thereafter have the
right to receive, upon exercise, common stock of the acquiring
company having a value equal to two times the exercise price of the
Right. The events set forth in this paragraph and in the second
preceding paragraph are referred to as the "Triggering Events."
The Purchase Price payable, and the number of Units of Preferred
Stock or other securities or property issuable, upon exercise of
the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities
at less than the current market price of the Preferred Stock, or
(iii) upon the distribution to holders of the Preferred Stock of
evidence of indebtedness or assets (excluding regular quarterly
cash dividends) or of subscription rights or warrants (other than
those referred to above).
With certain exceptions, no adjustment in the Purchase Price will
be required until cumulative adjustments amount to at least 1% of
the Purchase Price. No fractional Units will be issued and, in
lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Stock on the last trading date before
the date of exercise.
In general, The Cumberland may redeem the Rights in whole, but not
in part, at a price of $.01 per Right, at any time until twenty
business days following the Stock Acquisition Date. The Cumberland
may not redeem the Rights after 20 business days following the date
of any declaration by the Board of Directors that a person is an
Adverse Person. After the redemption period has expired, The
Cumberland's right of redemption may be reinstated if an Acquiring
Person reduces his beneficial ownership to less than 10% of the
outstanding shares of Cumberland Common Stock in a transaction or
series of transactions not involving The Cumberland and no other
person has become an Acquiring Person. Immediately upon the action
of the Board of Directors ordering redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights
will be to receive the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of The Cumberland, including, without
limitation, the right to vote or to receive dividends. While the
distribution of the Rights will not be taxable to shareholders or
to The Cumberland, shareholders may, depending upon the
circumstances, recognize taxable income if the Rights become
exercisable for Cumberland Common Stock (or other consideration) or
for common stock of the acquiring company as set forth above.
Any of the provisions of the Rights Agreement may be amended by the
Board of Directors of The Cumberland before the Distribution Date.
After the Distribution Date, the provisions of the Rights Agreement
may be amended by the Board in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of
Rights (excluding the interests of any Acquiring Person or Adverse
Person), or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to adjust the time
period governing redemption shall be made at such time as the
Rights are not redeemable.
The Rights have certain anti-takeover effects. The Rights may
cause substantial dilution to a person or group that attempts to
acquire The Cumberland without the approval of the Board of
Directors unless the offer is conditioned upon a substantial number
of Rights being acquired.
The foregoing description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the
Rights Agreement and the Amendment.
CERTAIN BENEFICIAL OWNERS OF FIFTH THIRD COMMON STOCK
The following table shows those persons known to Fifth Third to be
the beneficial owners of more than 5% of Fifth Third Common Stock
at December 31, 1993:
Name and Address Amount & Nature of Percent of
of Beneficial of Ownership Class
Cincinnati Financial
Corporation
6200 South Gilmore
Fairfield, Ohio 45014 12,319,300(1) 19.96%
Fifth Third Bancorp
Subsidiary Banks
Fifth Third Center
Cincinnati, Ohio 45263 5,637,959(2) 9.13%
Capital Growth Management
1 International Place
45th Floor
Boston, MA 02110 4,717,600(3) 7.64%
The Western-Southern
Life Insurance Company
400 Broadway
Cincinnati, Ohio 45202 4,530,732(4) 7.34%
<FN>
(1) Cincinnati Financial Corporation owns 9,210,000 shares of Fifth
Third Common Stock. Cincinnati Insurance Company, a subsidiary of
Cincinnati Financial Corporation, owns 2,695,000 shares.
Cincinnati Casualty Company, another subsidiary, owns 210,000
shares. Cincinnati Life Insurance Company, another subsidiary of
Cincinnati Financial, owns 204,300 shares. In addition, Mr. John
J. Schiff, Jr., a director of Fifth Third and Chairman and a
director of Cincinnati Financial Corporation, individually
beneficially owns 65,440 shares and Mr. Robert B. Morgan, a
director of Fifth Third, who is President and a director of
Cincinnati Financial Corporation and Cincinnati Insurance
individually beneficially owns 12,695 shares. Also affiliated is
a trust in which John J. Schiff, Jr. and Thomas R. Schiff are
trustees which owns 4,500 shares.
(2) There are five wholly-owned bank subsidiaries of Fifth Third,
which are beneficial owners of 3,155,887 shares. The banks hold
these shares in a fiduciary capacity under numerous trust
relationships none of which relates to more than 5% of the shares,
and have sole or shared voting power, and sole or shared investment
decision over these shares. The banks also hold shares in a
non-discretionary capacity, and disclaim any beneficial interest in
all shares held in these capacities.
(3) Capital Growth Management has informed Fifth Third that it is
an investment advisor that may be deemed the beneficial owner of
4,717,600 shares of Common Stock. Capital Growth Management has
sole power to vote or direct the voting of, and to dispose or
direct the disposition of all shares.
(4) The Western-Southern Life Insurance Co. owns 635,468 shares of
Fifth Third Common Stock. Waslic Delaware Company, II, a
subsidiary of The Western-Southern Life Insurance Co., owns
3,895,264 shares. In addition, Mr. John F. Barrett, a director,
President and Chief Operating Officer of The Western-Southern Life
Insurance Co., and a director of Fifth Third individually
beneficially owns 13,683 shares.
</FN>
Fifth Third, its directors, executive officers and their affiliates
(collectively, the "Fifth Third Affiliates") owned no shares of the
Cumberland Common Stock outstanding on December 31, 1993.
FIFTH THIRD MANAGEMENT
The names and ages of the Directors and executive officers of Fifth
Third, their current positions and offices held with Fifth Third,
their business experience during the past five years and certain
other information, together with their beneficial ownership of
Fifth Third Common Stock at December 31, 1993 are as follows:
Name, Age and Principal Director Shares of Fifth
Occupation During Past Five of Fifth Third Common Stock
Years; Other Directorships(1) Third Beneficially Owned
Since(2) at December 31,
1993(3)(6)
Number of Percent
Shares of Class
Owned
Directors
John F. Barrett, 44, President,
Chief Operating Officer and
Director of The
Western-Southern Life
Insurance Co. since
November, 1989. Formerly
Executive Vice President
and Chief Financial Officer,
The Western-Southern Life
Insurance Co. since May,
1987. Director of Cincinnati
Bell Inc. 1988 13,683 .0222
J. Kenneth Blackwell,45
Independent public policy
consultant and writer on
international human rights
since January, 1993.
Formerly the U.S.
Ambassador to the United
Nations Humans Rights
Commission in 1991 with the
rank of Ambassador. Previously,
Mr. Blackwell served as Deputy
Undersecretary of Housing and
Urban Development and Council
member for the City of
Cincinnati.(4) 1993 1,510 .0024
Milton C. Boesel, Jr., 65,
Counsel, Ritter, Robinson,
McReady & James, Attorneys
at Law, Toledo, Ohio,
formerly Ritter, Boesel
& Robinson 1989 10,158 .0165
Clement L. Buenger, 67,
Director of Fifth Third
and The Fifth Third Bank
since April, 1989. Retired
Chairman, Fifth Third and
Fifth Third Bank as of
March, 1993. Retired as
CEO of Fifth Third and The
Fifth Third Bank as of
January, 1991. Previously
President of Fifth Third
and The Fifth Third Bank.
Director of Cincinnati Gas
& Electric Company. 1971 275,600 .4467
Nolan W. Carson, 69, Partner,
Dinsmore & Shohl, Attorneys
at Law and Counsel to Fifth
Third. 1982 30,905 .0501
Thomas L. Dahl, 48, Formerly
President of The Drackett
Co., manufacturers of
household cleaning products
from April, 1990 to January,
1993. Previously Mr. Dahl
was President, Branded Consumer
Products of Weyerhauser
Company since January, 1988. 1991 4,250 .0069
Gerald V. Dirvin, 56,
Director and Executive Vice
President of The Procter
& Gamble Company,
manufacturers of household
and consumer products since
January, 1990. Formerly Mr.
Dirvin was Senior Vice
President since January,
1989 and previously was a
Group Vice President of
The Procter & Gamble
Company. Director of
Cintas Corporation. 1989 7,850 .0127
Thomas B. Donnell, 47,
Chairman, The Fifth Third
Bank of Northwestern Ohio,
N.A. (Toledo, Ohio), the
resulting institution from
the November 12, 1991
merger of The Fifth Third
Bank of Northwestern Ohio,
N.A. and The Fifth Third
Bank of Toledo, N.A.
Formerly President and
Chief Executive Officer
of The Fifth Third Bank of
Northwestern Ohio, N.A. 1984 136,660 .2214
Richard T. Farmer, 59,
Chairman, Chief Executive
Officer and Director, Cintas
Corporation, a service
company that designs,
manufactures and implements
corporate identity uniform
programs. Director of
Safety-Kleen Corp. 1982 27,655 .0448
John D. Geary, 67,
Retired as President,
Midland Enterprises Inc.,
a company engaged in
inland waterway
transportation in June,
1988. 1977 20,288 .0329
Ivan W. Gorr, 64,
Chairman and Chief
Executive Officer of
Cooper Tire & Rubber
Company, a manufacturer
of tires and rubber
products, since
November, 1989.
Previously Mr. Gorr
was President and
Chief Operating Officer
of Cooper Tire &
Rubber Company. 1991 4,852 .0079
Joseph H. Head, Jr.,
61, Chairman, Chief
Executive Officer and
Director, Atkins &
Pearce, Inc., manufacturer
of industrial textiles,
since January, 1990.
Previously, Mr. Head was a
partner with Graydon,
Head & Ritchey, Counsel
to The Fifth Third Bank.
Director of Baldwin
Piano & Organ, Co. 1987 44,188 .0716
Joan R. Herschede, 54,
President and Chief
Executive Officer of
The Frank Herschede
Company, retailer of jewelry,
china, crystal and silver. 1991 4,050 .0066
William G. Kagler, 61,
Chairman, Chief Executive
Officer and a Director of
Skyline Chili, Inc., a
restaurant chain and
frozen food product
manufacturer since
November, 1992 and
President of Kagler
and Associates, Inc.,
a consulting firm
serving the food industry.
Previously Mr. Kagler
was President, Chief
Executive Officer and
Director of Skyline
Chili, Inc., since May 1989.
Director of The Union Central
Life Insurance Company, The
Ryland Group, Inc., The
Future Now Inc. and
Advanced Promotion
Technologies, Inc. 1983 14,145 .0229
William J. Keating, 66,
Retired Chairman and
Publisher, The Cincinnati
Enquirer, a regional
newspaper, since March, 1990.
Previously Mr. Keating was
President and Chief
Executive Officer, Detroit
Newspaper Agency. Director
of The Midland Co. 1980 40,949 .0663
James D. Kiggen, 61,
Chairman, President, Chief
Executive Officer and Director,
Xtek, Inc., manufacturer
of hardened steel parts.
Director of Cincinnati Bell,
Inc. and United States
Playing Card Co. 1982 22,819 .0370
Robert B. Morgan, 59,
President, Chief
Executive Officer and a
Director of Cincinnati
Financial Corporation and
Cincinnati Insurance
Company since April,
1991. Previously, Mr.
Morgan was President and
Director of Cincinnati
Financial Corporation
and Cincinnati Insurance
Company. 1986 12,965 .0210
Michael H. Norris, 57,
President and Director,
The Deerfield
Manufacturing Co.,
a fabricator of sheet
metal stampings,
deep drawn parts and
assemblies. Mr.
Norris is also a
Group Vice President
and Director of the
Ralph J. Stolle Company. 1985 14,587 .0236
Brian H. Rowe, 62,
Chairman, GE Aircraft
Engines, General Electric
Company since September,
1993. Previously Mr. Rowe
was President and Chief
Executive Officer of GE
Aircraft Engines,
General Electric Company
since August 1991.
Formerly Mr. Rowe was
Senior Vice President
of GE Aircraft Engines,
General Electric Company. 1980 13,789 .0223
George A. Schaefer, Jr., 48,
President and Chief
Executive Officer of Fifth
Third and The Fifth Third
Bank since January, 1991.
Previously Mr. Schaefer was
President and Chief
Operating Officer of
Fifth Third and The Fifth
Third Bank since April, 1989.
Formerly Executive Vice
President of Fifth
Third and The Fifth
Third Bank. 1988 193,947 .3142
John J. Schiff, Jr., 50,
Chairman and Director,
John J. & Thomas R.
Schiff & Co., Inc., an
insurance agency. Chairman
and Director of Cincinnati
Financial Corp. and
Cincinnati Insurance Co.
Director of Cincinnati Gas
& Electric Company,
Standard Register Co. and
the Cincinnati Bengals. 1983 65,440 .1060
Stephen Stranahan, 59,
Chairman and President
of Intelco, Inc.
(formerly known as Bay
Enterprises, Inc.), an
industrial air compressor
services and electronic
controls manufacturer.
Director of RPM, Inc.(4) 1989 12,677 .0205
Dennis J. Sullivan, Jr.,
61, Executive Counselor
of Dan Pinger Public
Relations, Inc., an
advertising agency,
since February, 1993.
Formerly Director,
Executive Vice President
and Chief Financial Officer,
Cincinnati Bell, Inc. and
Cincinnati Bell Telephone
Company. Director of
Community Mutual Insurance
Company, Access Corporation
and The Future Now, Inc. 1984 18,478 .0299
Dudley S. Taft, 53,
President and Director,
Taft Broadcasting Company,
owner and operator
of television broadcasting
stations since October,
1987. Director of The Union
Central Life Insurance
Company, Cincinnati Gas &
Electric Company, United
States Playing Card Co.,
and The Future Now, Inc. 1981 19,273 .0312
Executive Officers
Neal E. Arnold, 33,
Treasurer of Fifth Third
and Fifth Third Bank since
October, 1990, and Senior
Vice President of The Fifth
Third Bank since April,
1993. Previously Mr.
Arnold was Vice President
of Fifth Third Bank since
October, 1990. Formerly,
Chief Financial Officer
and Senior Vice President
of First National Bank of
Grand Forks, North Dakota. ---- 2,613 .0042
Michael D. Baker, 43,
Senior Vice President
of Fifth Third since
March, 1993. Senior
Vice President of Fifth
Third Bank since July, 1987. ---- 44,064 .0714
P. Michael Brumm, 46,
Senior Vice President
and Chief Financial Officer
of Fifth Third and The
Fifth Third Bank since
June, 1990. Previously,
Mr. Brumm was Treasurer of
Fifth Third since 1985 and
Senior Vice President
of The Fifth Third Bank
since 1987. ---- 48,418 .0784
Roger W. Dean, 31,
Controller of Fifth Third
and Vice President of
Fifth Third Bank since
June, 1993. Mr. Dean was
formerly with Deloitte &
Touche, independent public
accountants. ---- 195 .0003
Michael K. Keating, 38,
Senior Vice President
and General Counsel of
Fifth Third since March,
1993 and Senior Vice
President and Counsel of
The Fifth Third Bank since
November, 1989, and
Secretary of Fifth Third
and The Fifth Third Bank
since January, 1994.
Previously, Mr. Keating
was Vice President,
Counsel and Assistant
Secretary of The Fifth
Third Bank and Counsel
of Fifth Third. Mr.
Keating is a son of Mr.
William J. Keating,
Director. ---- 19,351 .0313
George W. Landry, 53,
Executive Vice President
of Fifth Third and The
Fifth Third Bank since
November, 1989. Previously
Mr. Landry was Group Vice
President of The Fifth
Third Bank. ---- 86,184 .1396
Robert P. Niehaus, 47,
Senior Vice President
of Fifth Third since
March, 1993, previously
Vice President of Fifth
Third and Senior Vice
President of The Fifth
Third Bank. ---- 54,437 .0882
Stephen J. Schrantz, 45,
Executive Vice President
of Fifth Third and The
Fifth Third Bank since
November, 1989. Previously
Mr. Schrantz was Senior
Vice President of The
Fifth Third Bank.
Director, The Frank
Herschede Company. ---- 54,276 .0879
Gerald L. Wissel, 37,
Auditor of Fifth Third
and The Fifth Third Bank
since March, 1990,
and Senior Vice President
of Fifth Third Bank
since November, 1991.
Previously Mr. Wissel
was Vice President of
The Fifth Third Bank
since March 1990. Mr.
Wissel was formerly
with Deloitte & Touche,
independent public
accountants. ---- 6,812 .0110
All Directors and
Officers of Fifth Third
as a Group (33 persons)(5) 1,327,068 2.1496
<FN>
(1) Unless otherwise indicated, the director or officer has had
the same principal occupation for the past five years.
(2) On April 15, 1975, the Board of Directors of The Fifth Third
Bank became the Board of Directors of Fifth Third pursuant to an
Agreement and Plan of Reorganization under which Fifth Third
acquired The Fifth Third Bank. Service on the Board of The Fifth
Third Bank prior to April 15, 1975 is reflected in the dates shown
above.
(3) As reported to Fifth Third by the persons listed as of the
date stated. Includes shares held in the name of spouses, minor
children, certain relatives, trusts, estates and certain affiliated
companies as to which beneficial ownership may be disclaimed.
(4) Subsequent to December 31, 1993, Mr. Blackwell resigned from
his position as director of Fifth Third. Mr. Stranahan's term as
a director of Fifth Third expired on March 15, 1994. He did not
seek reelection.
(5) Messrs. Morgan and Schiff, Jr. are officers and directors of
Cincinnati Financial Corporation, and Mr. Barrett is an Officer and
Director of The Western-Southern Life Insurance Company, whose
holdings of Fifth Third shares with their affiliates are more fully
set forth above under the caption "CERTAIN BENEFICIAL OWNERS OF
FIFTH THIRD COMMON STOCK."
(6) Shares of Fifth Third Common Stock held by The Fifth Third
Bank in its fiduciary capacity, as set forth above under the
caption "CERTAIN BENEFICIAL OWNERS OF FIFTH THIRD COMMON STOCK,"
are not included in these totals.
(7) The amounts shown represent the total shares owned outright by
such individuals together with shares which are issuable upon the
exercise of all stock options which are currently exercisable.
Specifically the following individuals have the right to acquire
the shares indicated after their names, upon the exercise of such
stock options; Mr. Arnold, 2,113; Mr. Baker, 14,063; Mr. Barrett,
7,125; Mr. Blackwell, 1,500; Mr. Boesel, 7,125; Mr. Brumm, 13,813;
Mr. Buenger, 1,500; Mr. Carson, 7,125; Mr. Dahl, 2,500; Mr. Dean,
175; Mr. Dirvin, 7,125; Mr. Donnell, 3,880; Mr. Farmer, 7,125; Mr.
Geary, 4,875; Mr. Gorr, 3,750; Mr. Head, 12,188; Ms. Herschede,
1,500; Mr. Kagler, 1,500; Mr. M. Keating, 12,376; Mr. W. Keating,
1,500; Mr. Kiggen, 12,188; Mr. Landry, 34,250; Mr. Morgan, 12,188;
Mr. Niehaus, 13,813; Mr. Norris, 5,639; Mr. Rowe, 9,188; Mr.
Schaefer, 85,169; Mr. Schiff, 3,750; Mr. Schrantz, 29,750; Mr.
Stranahan, 7,125; Mr. Sullivan, 1,500; Mr. Taft, 1,500; and Mr.
Wissel, 4,288.
</FN>
THE CUMBERLAND BOARD OF DIRECTORS
The names and ages of The Cumberland Board of Directors, their
current positions and certain other information, together with
their beneficial ownership of Cumberland Common Stock at March 31,
1994 are as follows:
Name Age Principal Director Shares Percent
Occupation Since Common of Class
Stock
Benefi-
cially
Owned
Albert E. Dix 64 Publisher of The
State Journal,
Frankfort,
Kentucky. President
of Wooster
Republican
Printing Company 1984 9,650 .4%
John T. Doyle 44 Executive Vice
President of The
Cumberland and The
Cumberland F.S.B. 1988 8,413 .35%
John C. Everett 66 Retired, Former
CEO and Chairman
of the Board of
The Cumberland
F.S.B. 1973 11,036 .46%
John S.
Greenebaum 63 Attorney, Former
Senior Partner
with law firm of
Greenebaum, Treitz,
Brown & Marshall 1989 124,000 5.14%
H. David Hale 49 Chairman, President
and CEO of The
Cumberland.
Chairman, President
and CEO of The
Cumberland F.S.B. 1986 117,052 4.85%
Willliam W.
Hancock, Jr. 68 Retired, Former
Senior Vice
President and
Secretary of
Louisville Gas &
Electric Company
and Director of
LG&E Energy
Corporation. 1976 7,228 .3%
Robert C.
Pearson 56 Executive Vice
President of The
Cumberland and
The Cumberland
F.S.B. 1975 38,649 1.60%
Bosworth M.
Todd 63 Chairman of Todd
Investment
Advisors, Inc. 1983 9,137 .38%
<FN>
(1) As reported to The Cumberland by the persons listed as of the
date stated. Includes shares held in the name of spouses, minor
children, certain relatives, trusts and estates to which beneficial
ownership may be disclaimed.
</FN>
LEGAL MATTERS
Dinsmore & Shohl, Cincinnati, Ohio, counsel for Fifth Third, has
rendered its opinion that the shares of Fifth Third Common Stock to
be issued to the shareholders of The Cumberland in connection with
the Merger have been duly authorized and, if issued pursuant to the
Affiliation Agreement and Merger Agreement, will be validly issued,
fully paid and non-assessable under the current laws of the State
of Ohio. Such firm will also render its opinion with respect to
certain federal income tax consequences of the Merger to Fifth
Third, The Cumberland and the shareholders of The Cumberland.
Nolan W. Carson, a partner in Dinsmore & Shohl, is a Director of
Fifth Third. As of January 31, 1994, partners of Dinsmore & Shohl
and attorneys employed by such firm beneficially owned 27,154
shares of Fifth Third Common Stock.
EXPERTS
The financial statements incorporated in this prospectus by
reference from Fifth Third's Annual Report on Form 10-K for the
year ended December 31, 1993 have been audited by Deloitte &
Touche, independent Certified Public Accountants, as stated in
their report, which is incorporated herein by reference (which
report expresses an unqualified opinion and includes an explanatory
paragraph relating to a change in the method of accounting for debt
and equity securities) and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts
in accounting and auditing.
The consolidated financial statements of The Cumberland
incorporated in this prospectus by reference from The Cumberland's
Annual Report on Form 10-K for the year ended December 31, 1993,
have been audited by Coopers & Lybrand, independent certified
public accountants, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
SHAREHOLDERS' PROPOSALS
If the Merger fails to be consummated, any shareholder proposal, in
order to be eligible for inclusion in the proxy materials for The
Cumberland's Annual Meeting of Shareholders to be held in April
1995, must be received by The Cumberland on or before November 16,
1994, at its principal executive offices, 200 West Broadway,
Louisville, Kentucky 40202, Attn: Michael A. Ringswald, Secretary.
The Board of Directors will review any shareholder proposals that
are filed as required and will determine whether such proposals
meet applicable criteria for inclusion in its 1995 proxy statement
for consideration at the 1995 Annual Meeting of Shareholders.
OTHER MATTERS
The Board of Directors of The Cumberland knows of no other matters
which may come before the Special Meeting. However, if any matters
other than those set forth in the notice should be properly
presented for action, including any adjournment of the Special
Meeting, such matters will be handled in accordance with applicable
legal requirements.
ANNEX A
AFFILIATION AGREEMENT
BETWEEN
FIFTH THIRD BANCORP
AND
THE CUMBERLAND FEDERAL BANCORPORATION, INC.
DATED AS OF JANUARY 10, 1994
TABLE OF CONTENTS
Parties and Recital
I. Obligations of Fifth Third and Cumberland to be Performed Prior
to the Closing
II. Representations and Warranties of Cumberland
III. Representations and Warranties of Fifth Third
IV. Obligations of Cumberland and Fifth Third Between the Date of
this Agreement and the Effective Time
V. Cooperation and Other Obligations and Other Covenants
VI. Conditions Precedent to Closing
A. Conditions to the Obligations of Each of the Parties
B. Conditions to the Obligations of Fifth Third
C. Conditions to the Obligations of Cumberland
VII. Additional Covenants
VIII. Termination
IX. Closing and Effective Time
X. Amendment
XI. General
XII. Counterparts
Signatures
APPENDICES
Appendix A Agreement of Merger
Appendix B Tax Opinion of Dinsmore & Shohl (form)
Appendix C Opinion of Brown, Todd & Heyburn (form)
Appendix D Corporate Opinion of Dinsmore & Shohl (form)
Appendix E Stock Option Agreement
Appendix F Summary of Fifth Third Employee Benefits
Appendix G Hale Termination Agreement
SCHEDULES
Schedule 1 Disclosure Schedule for Cumberland
AFFILIATION AGREEMENT
This Affiliation Agreement ("Affiliation Agreement") dated as of
January 10, 1994 is entered into by and between FIFTH THIRD
BANCORP, a corporation organized and existing under the corporation
laws of the State of Ohio with its principal office located in
Cincinnati, Hamilton County, Ohio ("Fifth Third"), and THE
CUMBERLAND FEDERAL BANCORPORATION, INC., a corporation organized
and existing under the corporation laws of the State of Kentucky
with its principal office located in Louisville, Jefferson County,
Kentucky ("Cumberland").
W I T N E S E T H:
WHEREAS, Fifth Third is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, and Cumberland is a
registered unitary savings and loan holding company under Section
10 of the Home Owners' Loan Act, as amended, and Fifth Third and
Cumberland desire to effect a merger under the authority and
provisions of the corporation laws of the States of Ohio and
Kentucky pursuant to which at the Effective Time (as herein defined
in Section IX) Cumberland will be merged into Fifth Third, with
Fifth Third to be and become the surviving corporation (the
"Merger"); and
WHEREAS, under the terms of the Plan and Agreement of Merger
("Agreement of Merger") between Fifth Third and Cumberland appended
hereto as Appendix A, the terms of which are incorporated into this
Agreement and made a part hereof, each of the issued and
outstanding shares of the Common Stock, $1 par value per share, of
Cumberland which are issued and outstanding (excluding any treasury
shares) immediately prior to the Effective Time will at the
Effective Time be converted into shares of the Common Stock,
without par value, of Fifth Third ("Fifth Third Common Stock"), all
as more fully provided in this Agreement and in the Agreement of
Merger.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, Fifth Third and Cumberland, agree together as follows:
I. Obligations of Fifth Third and Cumberland to be Performed Prior
to the Closing
A. Fifth Third will, as promptly as practicable, prepare and cause
to be filed at its expense such applications and other documents
with the Board of Governors of the Federal Reserve System, the
Office of Thrift Supervision, the Federal Deposit Insurance
Corporation, and any other governmental agencies as are required to
secure the requisite approval of such agencies to the consummation
of the transactions provided for in this Agreement and in the
Agreement of Merger, and also shall prepare and file at its expense
(accounting, legal, investment banking, financial consulting and
associated expenses of Cumberland and its affiliates excepted) any
registration statements or other documents necessary to comply with
all federal and state securities laws relating to the registration
and issuance of the shares of Fifth Third Common Stock to the
Cumberland shareholders in this transaction, and any other laws
applicable to the transactions provided for in this Agreement and
the Agreement of Merger and use all reasonable efforts to secure
such approvals. Cumberland agrees that it will, as promptly as
practicable after request and at its own expense, provide Fifth
Third with all information and documents concerning Cumberland and
its wholly-owned subsidiary, The Cumberland Federal Savings Bank
("Thrift Subsidiary"), and any other subsidiaries of Cumberland or
any subsidiary of Thrift Subsidiary as shall be required in
connection with preparing such applications, registration
statements and other documents and in connection with securing such
approvals. Prior to filing any such applications, registration
statements or other documents with the applicable governmental
agency, Fifth Third shall provide, at least two days prior to the
filing date, copies thereof to Cumberland.
II. Representations and Warranties of Cumberland
Cumberland represents and warrants to Fifth Third for itself and
for Thrift Subsidiary and all subsidiaries, affiliates and joint
ventures of Cumberland and Thrift Subsidiary that as of the date
hereof or as of the indicated date, as appropriate, and except as
otherwise disclosed in Schedule 1 hereto delivered by Cumberland to
Fifth Third prior to the execution of this Agreement by Fifth
Third:
A. Cumberland (i) is duly incorporated, validly existing and in
good standing as a corporation under the corporation laws of the
State of Kentucky and is a registered unitary savings and loan
holding company under the Savings and Loan Holding Company Act of
1967, as amended, recodified by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 as Section 10 of the Home
Owners' Loan Act, 12 U.S.C. section 1467a et seq.; (ii) is duly
authorized to conduct the business in which it is engaged; (iii)
has 12,000,000 shares, $1 par value per share, of Common Stock
("Cumberland Common Stock") and 5,000,000 shares, $1 par value per
share, of Preferred Stock ("Cumberland Preferred Stock") authorized
pursuant to its Articles of Incorporation, which are the only
classes of shares and the total number of shares Cumberland is
authorized to have outstanding; (iv) has no outstanding securities
of any kind, nor any outstanding options, warrants or other rights
entitling another person to acquire any securities of Cumberland of
any kind, other than (a) 2,412,853 shares of Cumberland Common
Stock, which presently are authorized, duly issued and outstanding
and fully paid and nonassessable, (b) no shares of Cumberland
Common Stock which are issued but not outstanding and are held by
Cumberland as treasury shares, (c) options to purchase a total of
197,565 shares of Cumberland Common Stock, which options were
granted to and are presently held by the officers and Directors of
Cumberland pursuant to the Cumberland Stock Incentive Plan and
191,165 of which are presently exercisable (the "Stock Options"),
(d) rights issued in connection with the 1987 Employee Stock
Purchase Plan (the "Purchase Plan") pursuant to which not more than
a total of 60,259 shares of Cumberland Common Stock may be issued
and (e) rights issued pursuant to the Rights Agreement dated as of
February 26, 1991 (the "Rights Agreement") between Cumberland and
Mellon Bank, N.A; and (v) owns of record and beneficially free and
clear of all liens and encumbrances, all of the 2,471,912
outstanding shares of the capital stock of Thrift Subsidiary, $1
par value per share. No shares of the Cumberland Preferred Stock
are issued and outstanding. Cumberland has no direct subsidiaries
other than Thrift Subsidiary. All outstanding stock appreciation
rights granted to Cumberland executive officers have been cancelled
by action of the holders thereof, each of whom waived his rights to
exercise the stock appreciation rights granted to him, and none
remain outstanding.
B. Thrift Subsidiary is duly incorporated, validly existing and in
good standing as a Federal savings bank under the laws of the
United States and has all the requisite power and authority to
conduct the savings bank business as now conducted by it; and
Thrift Subsidiary has no outstanding securities of any kind, nor
any outstanding options, warrants or other rights entitling another
person to acquire any securities of Thrift Subsidiary of any kind,
other than 2,471,912 shares of its capital stock, $1 par value per
share, all owned of record by Cumberland. Thrift Subsidiary has no
subsidiary corporations, direct or indirect, except as disclosed in
Schedule 1, which disclosure shall include any joint ventures
Cumberland, Thrift Subsidiary or any subsidiaries or affiliates of
either of them are engaged in with any other persons or entities.
C. Cumberland has furnished to Fifth Third its audited,
consolidated statements of financial condition, statements of
earnings, statements of stockholders' equity and statements of cash
flows (the "Financial Statements") as at December 31, 1990, 1991
and 1992 and for the years then ended, together with the opinions
of its independent certified public accountants associated
therewith. Cumberland also has furnished to Fifth Third (i) its
unaudited, separate Financial Statements as at December 31, 1990,
1991 and 1992 and for the years then ended, and (ii) the unaudited,
separate statements of condition and statements of income of Thrift
Subsidiary as at December 31, 1990, 1991 and 1992 and for the years
then ended. Cumberland also has furnished to Fifth Third (i) its
unaudited, consolidated Financial Statements as at September 30,
1993, and for the nine months then ended, (ii) the unaudited,
separate Financial Statements of Cumberland as at September 30,
1993, and for the nine months then ended and (iii) the unaudited,
separate statements of condition and statements of income of Thrift
Subsidiary as at September 30, 1993, and for the nine months then
ended. The unaudited, consolidated Financial Statements of
Cumberland as at September 30, 1993, and for the nine months then
ended fairly present the consolidated financial condition of
Cumberland and Thrift Subsidiary taken as a whole as of their date
and for the period covered thereby in conformity with generally
accepted accounting principles, consistently applied (except for
the omission of notes to unaudited statements and yearend
adjustments to interim results). The unaudited, separate Financial
Statements of Cumberland and unaudited, separate statements of
condition and statements of income of Thrift Subsidiary, both at
September 30, 1993, fairly present the financial condition of
Cumberland and Thrift Subsidiary on a separate basis as of their
date and for the period covered thereby in conformity with
generally accepted accounting principles, consistently applied
(except for the omission of notes to unaudited statements and
yearend adjustments to interim results). There are no material
liabilities, obligations or indebtedness of Cumberland or Thrift
Subsidiary required to be disclosed in the financial statements
furnished as described above other than the liabilities,
obligations or indebtedness disclosed in such financial statements
(including footnotes). Cumberland shall furnish Fifth Third with
its audited, consolidated Financial Statements as at December 31,
1993 and for the year then ended together with the unaudited,
separate Financial Statements of Cumberland and unaudited, separate
statements of condition and statements of income of Thrift
Subsidiary as at December 31, 1993 and for the year then ended,
such unaudited statements duly certified by Cumberland's chief
executive officer and chief financial officer to fairly present the
financial condition of Cumberland and Thrift Subsidiary on a
separate basis as of their date and for the period covered thereby
in conformity with generally accepted accounting principles,
consistently applied (except for the omission of notes to unaudited
statements but reflecting yearend adjustments and except that such
statements are not on a consolidated basis), to the best of their
knowledge, as soon as such statements are publicly available, and
shall continue to furnish such financial information for subsequent
monthly periods to Fifth Third, certified as described above, as
soon as such becomes publicly available until the Closing Date.
D. Cumberland, Thrift Subsidiary and any subsidiaries and
affiliates of either of them each has good and marketable title to
all of the material properties and assets reflected in its separate
statements of condition as at September 30, 1993 and which are
still owned by it and each has good and marketable title to all
material properties and assets acquired by it after such date and
still owned by it, subject to (i) any liens and encumbrances that
do not materially adversely impair the use of the property, (ii)
statutory liens for taxes not yet due and payable and (iii) minor
defects and irregularities in title that do not materially
adversely impair the use of the property.
E. Except as disclosed in Schedule 1 and for events relating to the
business environment in general or changes in laws, rules,
regulations or accounting principles generally applicable to the
thrift industry: (i) since September 30, 1993, to the date hereof
there have been no material adverse changes in the financial
condition, operations or business of Cumberland and Thrift
Subsidiary on a consolidated or separate basis; (ii) neither
Cumberland's chief executive officer nor its chief financial
officer nor the chief executive officer nor the chief financial
officer of Thrift Subsidiary (collectively the "Executive
Officers", in this case and all cases hereinafter in their capacity
as such officers and not personally) is aware of any events which
have occurred since September 30, 1993 or which are reasonably
certain to occur in the future and which reasonably can be expected
to result in any material adverse change in the financial
condition, operations or business of Cumberland and Thrift
Subsidiary on a consolidated or separate basis; and (iii) since
September 30, 1993, to the date hereof there have been no material
changes in the methods of business operations of Cumberland and
Thrift Subsidiary.
F. Except as disclosed in Schedule 1, there are no actions, suits,
proceedings, investigations or assessments of any kind pending, or
to the best knowledge of the Executive Officers, threatened against
Cumberland or Thrift Subsidiary which reasonably can be expected to
result in any material adverse change in the financial condition,
operations or business of Cumberland and Thrift Subsidiary on a
consolidated or separate basis.
G. Except as disclosed in Schedule 1, since September 30, 1993, to
the date hereof Cumberland and Thrift Subsidiary each have been
operated in the ordinary course of business, have not made any
changes in their respective capital or corporate structures, nor
any material changes in their methods of business operations and
have not provided any increases in employee salaries or benefits
other than in the ordinary course of business. Since September 30,
1993, to the date hereof Cumberland has not declared or paid any
dividends nor made any distributions of any other kind to its
shareholders, except cash dividends on shares of Cumberland Common
Stock in amounts and at such times as is in accord with its
historical practice.
H. Except as disclosed in Schedule 1, Cumberland and Thrift
Subsidiary timely have filed all federal, state and local tax
returns required to be filed (after giving effect to all
extensions) by them, respectively, and have paid or provided for
all tax liabilities shown to be due thereon or which have been
assessed against them, respectively. All tax returns filed by
Cumberland or Thrift Subsidiary through the date hereof constitute
complete and accurate representations of the tax liabilities of
Cumberland or Thrift Subsidiary for such years and accurately set
forth all items (to the extent required to be included or reflected
in such returns) relevant to its future tax liabilities, including
the tax bases of its properties and assets in all material
respects.
I. Except as disclosed in Schedule 1, neither Cumberland nor Thrift
Subsidiary is a party to (i) any written employment contracts or
written contracts of any other kind with any of its officers,
Directors or employees or (ii) any material contract, lease or
agreement of any other kind which is not assignable as a result of
the Merger without the consent of another party, except for
contracts, leases or agreements which do not have terms extending
beyond three months from the date of this Agreement or contracts,
leases or agreements (excluding contracts, leases and agreements
pursuant to which credit has been extended by Thrift Subsidiary)
which do not require the expenditure of more than $50,000.00
thereunder.
J. Except as disclosed in Schedule 1, since September 30, 1993, to
the date hereof Thrift Subsidiary has not incurred any unusual or
extraordinary loan losses which are material to Cumberland and
Thrift Subsidiary on a consolidated basis; to the best knowledge of
the Executive Officers and in light of Thrift Subsidiary's
historical loan loss experience and its management's analysis of
the quality and performance of its loan portfolio, as of September
30, 1993, its reserve for loan losses was adequate to absorb all
known and reasonably anticipated losses as of such date.
K. Except as disclosed in Schedule 1, neither Cumberland nor Thrift
Subsidiary has, directly or indirectly, dealt with any broker or
finder in connection with this transaction and neither has incurred
or will incur any obligation for any broker's or finder's fee or
commission in connection with the transactions provided for in this
Agreement and the Agreement of Merger.
L. 1. The Directors of Cumberland, by resolution adopted by the
Directors at a meeting duly called and held in accordance with
applicable law, have duly approved this Agreement and the Agreement
of Merger, and have directed that this Agreement and the Agreement
of Merger be submitted to a vote of Cumberland's shareholders at
the annual or a special meeting of shareholders to be called for
that purpose, all in accordance with and as required by law and in
accordance with the Articles of Incorporation and Bylaws of
Cumberland.
2. Cumberland has the corporate power and authority to enter
into this Agreement and the Agreement of Merger and to carry out
its obligations hereunder and thereunder subject to certain
required regulatory and shareholder approvals. This Agreement and
the Agreement of Merger, when executed and delivered, will have
been duly authorized and will constitute valid and binding
obligations of Cumberland, enforceable in accordance with their
respective terms, except to the extent that (i) enforceability
thereof may be limited by insolvency, reorganization, liquidation,
bankruptcy, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors'
rights generally or the rights of creditors of savings and loan
holding companies, the accounts of whose subsidiaries are insured
by the Federal Deposit Insurance Corporation, and (ii) the
availability of certain remedies may be precluded by general
principles of equity, subject, however, to the receipt of requisite
regulatory approvals and the approval of Cumberland's shareholders.
3. Except as disclosed in Schedule 1, neither the execution of
this Agreement or the Agreement of Merger, nor the consummation of
the Merger, (i) conflicts with, results in a breach of, violates or
constitutes a default under, Cumberland's Articles of Incorporation
or Bylaws or, to the best knowledge of the Executive Officers, any
federal, state or local law, statute, ordinance, rule, regulation
or court or administrative order, or any agreement, arrangement, or
commitment, to which Cumberland or Thrift Subsidiary is subject or
bound; (ii) to the best knowledge of the Executive Officers,
results in the creation of or gives any person the right to create
any material lien, charge, encumbrance, security agreement or any
other material rights of others or other material adverse interest
upon any material right, property or asset belonging to Cumberland
or Thrift Subsidiary other than such rights as may be given
dissenting shareholders of Cumberland pursuant to KRS sections 271B.13-010
et. seq; (iii) except as disclosed in Schedule 1, terminates or
gives any person the right to terminate, amend, abandon, or refuse
to perform any material agreement, arrangement or commitment to
which Cumberland or Thrift Subsidiary is a party or by which
Cumberland's or Thrift Subsidiary's rights, properties or assets
are subject or bound; or (iv) to the best knowledge of the
Executive Officers, accelerates or modifies, or gives any party
thereto the right to accelerate or modify, the time within which,
or the terms according to which, Cumberland or Thrift Subsidiary is
to perform any duties or obligations or receive any rights or
benefits under any material agreements, arrangements or
commitments. For purposes of subparagraphs (iii) and (iv)
immediately preceding, material agreements, arrangements or
commitments exclude agreements, arrangements or commitments having
a term expiring less than three months from the date of this
Agreement or which do not require the expenditure of more than
$50,000 (but shall include all agreements, arrangements or
commitments pursuant to which credit has been extended by Thrift
Subsidiary).
M. Complete and accurate copies of (i) the Articles of
Incorporation and Bylaws of Cumberland and (ii) the Federal Stock
Charter and Bylaws of Thrift Subsidiary in force as of the date
hereof have been delivered to Fifth Third.
N. To the best knowledge of the Executive Officers, except as
disclosed in Schedule 1, neither Cumberland nor Thrift Subsidiary
nor any employee, officer or Director of either has knowingly
engaged in any activity or knowingly omitted to take any action
which, in any material way, has resulted or could result in the
violation by Cumberland or Thrift Subsidiary of (i) any local,
state or federal law (including without limitation the Bank Secrecy
Act, the Community Reinvestment Act, applicable consumer protection
and disclosure laws and regulations, including without limitation,
Truth in Lending, Truth in Savings and similar disclosure laws and
regulations, and equal employment and employment discrimination
laws and regulations) or (ii) any regulation, order, injunction or
decree of any court or governmental body, the violation of any of
which could reasonably be expected to have a material adverse
effect on the financial condition of Cumberland and Thrift
Subsidiary taken as a whole. To the best knowledge of the
Executive Officers, except as disclosed in Schedule 1, Thrift
Subsidiary and each of its subsidiaries and affiliates possess all
licenses, franchises, permits and other governmental authorizations
necessary for the continued conduct of their business without
material interference or interruption.
O. 1. To the best knowledge of the Executive Officers, except as
disclosed in Schedule 1, this Agreement, the Agreement of Merger,
all reports, statements, lists, certificates or other information
furnished by Cumberland or Thrift Subsidiary to Fifth Third or its
agents in connection with this Agreement or the Merger contemplated
hereby (including, without limitation, any information which has
been or shall be supplied with respect to their business operations
and financial condition for inclusion in the proxy
statement/prospectus and registration statement relating to the
Merger), taken as a whole, do not contain and shall not contain
(or, in the case of information relating to the proxy
statement/prospectus, at the time it is mailed, in the case of the
registration statement, at the time it becomes effective, and in
the case of the proxy statement/ prospectus and the registration
statement, at the time the annual or special meeting of
shareholders of Cumberland is held to consider the adoption of this
Agreement and the Agreement of Merger) an untrue statement of a
material fact or omit or shall omit to state a material fact
necessary to make the statements contained herein and therein, in
light of the circumstances in which they are made, not misleading.
2. Cumberland has furnished to Fifth Third or its agents true
and complete copies (including all exhibits and all documents
incorporated by reference) of the following documents as filed by
Cumberland with the Securities and Exchange Commission ("SEC"):
(a) Cumberland's Annual Report on Form 10-K for the years
ended December 31, 1990, 1991 and 1992;
(b) Cumberland's Quarterly Report on Form 10-Q for the
quarters ended March 31, June 30 and September 30, 1993;
(c) Any Current Report on Form 8-K with respect to any event
occurring after December 31, 1992 and prior to the date of this
Agreement;
(d) Any report filed by Cumberland to amend or modify any of
the reports described above; and
(e) All proxy statements prepared in connection with meetings
of Cumberland's shareholders held subsequent to December 31, 1992.
The information set forth in the documents described in this
subsection 2 (including all exhibits thereto and all documents
incorporated therein by reference) did not, as of the later of the
dates on which such reports were filed with the SEC or declared
effective by the SEC, and do not as of the date of this Agreement
(i) contain any untrue statement of a material fact, (ii) omit any
material fact required to be stated therein or necessary to make
the statements contained therein, in light of the circumstances
under which they were made, not misleading or (iii) omit any
material exhibit required to be filed therewith. Prior to the date
hereof, no event has occurred subsequent to December 31, 1992,
which Cumberland is required to describe in a Current Report on
Form 8-K other than the Current Reports heretofore furnished by
Cumberland to Fifth Third. Cumberland timely shall furnish Fifth
Third with copies of all reports filed by Cumberland with the SEC
subsequent to the date of this Agreement and until the Closing
Date.
P. To the best knowledge of the Executive Officers, except as
disclosed in Schedule 1, there are no actions, proceedings or
investigations pending before any environmental regulatory body,
with respect to or threatened against or affecting Cumberland or
Thrift Subsidiary or any subsidiary or affiliate of either of them
in respect of any "facility" owned, leased or operated by any of
them (but excluding any "facility" as to which the sole interest of
Cumberland or Thrift Subsidiary or any subsidiary or affiliate of
either of them is that of a lienholder or mortgagee, but including
any "facility" to which title has been taken pursuant to mortgage
foreclosure or similar proceedings and including any "facility" in
which Cumberland or Thrift Subsidiary or any subsidiary or
affiliate of either of them ever participated in the financial
management of such facility to a degree sufficient to influence, or
have the ability to influence, the facility's treatment of
hazardous waste) under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or
under any Federal, state, local or municipal statute, ordinance or
regulation in respect thereof, in connection with any release of
any toxic or "hazardous substance", pollutant or contaminant into
the "environment" which, if adversely determined, (a) would require
the payment by Cumberland or Thrift Subsidiary or any subsidiary or
affiliate of either of them and/or require Cumberland or Thrift
Subsidiary or any subsidiary or affiliate of either of them to
incur expenses of more than $10,000 (whether or not covered by
insurance) or (b) would otherwise have a material adverse effect on
Cumberland or Thrift Subsidiary or any subsidiary or affiliate of
either of them, nor, to the best knowledge of the Executive
Officers, is there any reasonable basis for the institution of any
such actions or proceedings or investigations which is probable of
assertion, nor are there any such actions or proceedings or
investigations in which Cumberland or Thrift Subsidiary or any
subsidiary or affiliate of either of them is a plaintiff or
complainant. To the best knowledge of the Executive Officers, (a)
neither Cumberland nor Thrift Subsidiary or any subsidiary or
affiliate of either of them is liable in any material respect under
any applicable law for any release by Cumberland or Thrift
Subsidiary or any subsidiary or affiliate of either of them or for
any release by any other "person" of a hazardous substance caused
by the spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing of
hazardous wastes or other chemical substances, pollutants or
contaminants into the environment, (b) nor is Cumberland or Thrift
Subsidiary or any subsidiary or affiliate of either of them liable
for any material costs (as a result of the acts or omissions of
Cumberland or Thrift Subsidiary or any subsidiary or affiliate of
either of them or, to the best knowledge of the Executive Officers,
as a result of the acts or omissions of any other "person") of any
remedial action including, without limitation, costs arising out of
security fencing, alternative water supplies, temporary evacuation
and housing and other emergency assistance undertaken by any
environmental regulatory body having jurisdiction over Cumberland
or Thrift Subsidiary or any subsidiary or affiliate of either of
them to prevent or minimize any actual or threatened release by
Cumberland or Thrift Subsidiary or any subsidiary or affiliate of
either of them of any hazardous wastes or other chemical
substances, pollutants and contaminants into the environment which
would endanger the public health or the environment. All terms
contained in quotation marks in this paragraph and the paragraph
immediately following shall have the meaning ascribed to such
terms, and defined in, CERCLA.
To the best knowledge of the Executive Officers and except as
disclosed in Schedule 1, each "facility" owned, leased or operated
by Cumberland or Thrift Subsidiary or any subsidiary or affiliate
of either of them (but excluding any "facility" as to which the
sole interest of Cumberland or Thrift Subsidiary or any subsidiary
or affiliate of either of them is that of a lienholder or
mortgagee, but including any "facility" to which title has been
taken pursuant to mortgage foreclosure or similar proceedings and
including any "facility" in which Cumberland or Thrift Subsidiary
or any subsidiary or affiliate of either of them ever participated
in the financial management of such facility to a degree sufficient
to influence, or have the ability to influence, the facility's
treatment of hazardous waste) is, in all material respects, in
compliance with all applicable Federal, state, local or municipal
statutes, ordinances, laws and regulations and all orders, rulings
or other decisions of any court, administrative agency or other
governmental authority relating to the protection of the
environment, except to the extent a failure to comply would not
have a material adverse effect on the business, operations and
financial condition of Cumberland and Thrift Subsidiary or any
subsidiary or affiliate of either of them taken as a whole. No
underground storage tank presently is located on, nor, to the best
knowledge of the Executive Officers, has any such tank ever been
located on, any property owned by Cumberland or Thrift Subsidiary
or any subsidiary or affiliate of either of them or any "facility"
where Thrift Subsidiary or any of its subsidiaries has exercised
any significant management role.
Q. 1. Benefit Plans. Schedule 1 lists the name and a short
description of each Benefit Plan (as herein defined), together with
an indication of its funding status (e.g., trust, insured or
general company assets). For purposes hereof, the term "Benefit
Plan" shall mean any plan, program, arrangement or system of
employee or Director benefits maintained by Cumberland or Thrift
Subsidiary for the benefit of employees, Directors, former
employees or former Directors of Cumberland or Thrift Subsidiary
and shall include (a) any qualified retirement plan such as a
pension, profit sharing, stock bonus plan or employee stock
ownership plan ("ESOP"), (b) any plan, program or arrangement
providing deferred compensation, bonus deferral or incentive
benefits, whether funded through trust or otherwise, and (c) any
welfare plan, program or policy providing vacation, severance,
salary continuation, supplemental unemployment, disability, life,
health coverage, retiree health, VEBA, education continuation
assistance, medical expense reimbursement or dependent or elder
care assistance benefits, in any such foregoing case without regard
to whether the Benefit Plan constitutes an employee benefit plan
under Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or the number of employees covered
under such Benefit Plan.
2. Plan Documents, Reports and Filings. Except as disclosed on
Schedule 1, Cumberland or Thrift Subsidiary has provided true,
complete and correct copies of all plan documents, if any,
comprising each Benefit Plan, together with, when applicable, (a)
the most recent summary plan description, (b) the most recent
actuarial and financial reports and the most recent annual reports
filed with any governmental agency and (c) all Internal Revenue
Service ("IRS") or other governmental agency rulings and
determination letters and any open requests for IRS rulings or
letters with respect to the Benefit Plans.
3. Qualified Retirement Plan Compliance. With respect to each
Benefit Plan which is an employee pension benefit plan (as defined
in Section 3(2) of ERISA) and qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code") (a
"Qualified Benefit Plan"), except as disclosed on Schedule 1 (which
Schedule lists all Qualified Benefit Plans, complete copies of all
such listed plans previously have been furnished to Fifth Third):
(a) the IRS has issued a determination letter which determined that
such Qualified Benefit Plan satisfied the requirements of Section
401(a) of the Code as amended by all of the laws referred to in
Section 1 of Revenue Procedure 93-39, such determination letter has
not been revoked or threatened to be revoked by the IRS and the
scope of such determination letter is complete and does not exclude
consideration of any of the requirements or matters referred to in
Sections 4.02-4.04 of Revenue Procedure 93-39; (b) such Qualified
Benefit Plan is in material compliance with all qualification
requirements of Section 401(a) of the Code; (c) such Qualified
Benefit Plan has been operated in substantial compliance with all
notice, reporting and disclosure requirements of ERISA which apply
to employee pension benefit plans; (d) any Qualified Benefit Plan
which is an ESOP as defined in Section 4975(e)(7) of the Code (an
"ESOP Qualified Benefit Plan") is in material compliance with the
applicable qualification requirements of Section 409 of the Code;
and (e) with respect to such Qualified Benefit Plan, if it was
terminated or is currently in the process of being terminated, has
been or is being terminated in material compliance with the
requirements of the Code, including but not limited to, extending
100% vesting to all participants upon termination and the amendment
and restatement of such Qualified Benefit Plan for compliance with
the Tax Reform Act of 1986 and all applicable subsequent
legislation affecting the qualified status of the Qualified Benefit
Plan, and the liabilities of such Qualified Benefit Plan, if
already terminated, were fully satisfied or, if such Plan is in the
process of termination, are not greater than the assets held under
such Plan.
4. Welfare Plan Compliance.With respect to each Benefit Plan
which is an employee welfare benefit plan (as defined in Section
3(1) of ERISA) (a "Welfare Benefit Plan"), except as noted in
Schedule 1: (a) to the extent such Welfare Benefit Plan is intended
to provide benefits to plan participants that are not subject to
federal income tax so long as specific provisions of the Code are
met such Welfare Benefit Plan currently meets such Code provisions;
(b) such Welfare Benefit Plan has been operated in substantial
compliance with all notice, reporting and disclosure requirements
of ERISA which apply to employee welfare benefit plans; and (c)
such Welfare Benefit Plan, if a group health plan subject to the
requirements of Section 4980B of the Code, has been operated in
substantial compliance with such requirements.
5. Prohibited Transactions. To the best knowledge of the
Executive Officers, no prohibited transaction under Section 406 of
ERISA and not exempt under Section 408 of ERISA has occurred with
respect to any Benefit Plan which would result, with respect to any
person, in (a) the imposition, directly or indirectly, of a
material excise tax under Section 4975 of the Code or (b) material
fiduciary liability under Section 409 of ERISA. No ESOP Qualified
Benefit Plan is leveraged.
6. Lawsuits or Claims. No material actions, suits or claims
(other than routine claims for benefits) are pending or, to the
best knowledge of the Executive Officers, threatened against any
Benefit Plan or against Cumberland or Thrift Subsidiary with
respect to any Benefit Plan.
7. Disclosure of Unfunded Liabilities. All material Unfunded
Liabilities, as hereinafter defined, with respect to each Benefit
Plan have been recorded and disclosed on the most recent financial
statements of Cumberland and Thrift Subsidiary or, if not, in
Schedule 1. For purposes hereof, the term "Unfunded Liabilities"
shall mean any amounts properly accrued to date under (i) generally
accepted accounting principles (GAAP) in effect as of the date of
this Agreement, or (ii) amounts not yet accrued for GAAP purposes
but for which an obligation (which has legally accrued and cannot
legally be eliminated and which is subject to reasonable estimate)
exists for payment in the future which is attributable to any
Benefit Plan, including but not limited to (a) severance pay
benefits, (b) deferred compensation or unpaid bonuses, (c) any
liabilities on account of the change in control which will result
from this Agreement, including any potential 20% excise tax under
Section 4999 of the Code relating to excess parachute payments
under Section 280G of the Code, (d) any unpaid pension
contributions for the current plan year or any accumulated funding
deficiency under Section 412 of the Code and related penalties
under Section 4971 of the Code, including unpaid pension
contributions of funding deficiencies owed by members of a
controlled group of corporations which includes Cumberland or
Thrift Subsidiary and for which Cumberland or Thrift Subsidiary is
liable under applicable law, (e) authorized but unpaid profit
sharing contributions or contributions under Section 401(k) and
Section 401(m) of the Code, (f) former employee or Director health
benefit or life insurance coverage and (g) unpaid premiums for
contributions required under any group health plan to maintain such
plan's coverage through the Effective Time.
8. Defined Benefit Pension Plan Liabilities. Cumberland and
Thrift Subsidiary (or any pension plan maintained by any of them)
have not incurred any material liability to the Pension Benefit
Guaranty Corporation ("PBGC") or the IRS with respect to any
Benefit Plan which is a defined benefit pension plan, except for
the payment of PBGC premiums pursuant to Section 4007 of ERISA, all
of which if due prior to the date of this Agreement have been fully
paid, and no PBGC reportable event under Section 4043(b) of ERISA
has occurred with respect to any such pension plan. Cumberland has
no liability for additional contributions to the Financial
Institutions Retirement Fund retirement plan upon such plan
termination or withdrawal if effected on or before the Effective
Time. Neither Cumberland, Thrift Subsidiary nor any controlled
group member of Cumberland or Thrift Subsidiary participates in, or
has incurred any liability under Sections 4201, 4063 or 4064 or
ERISA for a complete or partial withdrawal from, a multiple
employer plan or a multiemployer plan (as defined in Section 3(37)
of ERISA).
9. Independent Trustee. To the best knowledge of the Executive
Officers, Cumberland and Thrift Subsidiary (a) have not incurred
any asserted or unasserted material liability for breach of duties
assumed in connection with acting as an independent trustee of any
employee pension plan (as defined in Section 3(2) of ERISA) which
is intended to be qualified under Section 401(a) of the Code and
which is maintained by an employer unrelated in ownership to
Cumberland or Thrift Subsidiary, (b) have not authorized nor
knowingly participated in a material prohibited transaction under
Section 406 of ERISA and not exempt under Section 408 of ERISA and
(c) have not received notice of any material actions, suits or
claims (other than routine claims for benefits) pending or
threatened against the unrelated employer or against them.
10. Material. For purposes of this Paragraph Q as a whole, the
term "material" in connection with a liability shall mean a
liability or loss, taxes, penalties, interest and related legal
fees in the total amount of $50,000 or more, with such
determination being made on the basis of the aggregate affected
participants of a Benefit Plan and not with respect to any single
participant.
R. The investment portfolios of Cumberland and Thrift Subsidiary
consist of securities in marketable form. Except as disclosed in
Schedule 1, since September 30, 1993, to the date hereof neither
Cumberland nor Thrift Subsidiary has incurred any unusual or
extraordinary losses in its investment portfolio, and, except for
events relating to the business environment in general, including
market fluctuations, the Executive Officers are not aware of any
events which are reasonably certain to occur in the future and
which reasonably can be expected to result in any material adverse
change in the quality or performance of Cumberland's and Thrift
Subsidiary's investment portfolio on a consolidated basis.
S. Cumberland has taken all action, as necessary, with respect to
the Rights Agreement to prevent the approval, execution or delivery
of the Agreement of Merger or the Stock Option Agreement attached
hereto as Appendix E (the "Fifth Third Option Agreement"), or the
consummation of the Merger or the acquisition of shares of
Cumberland Common Stock by Fifth Third or any subsidiary of Fifth
Third pursuant to the Fifth Third Option Agreement, from being the
basis for detaching the rights related to the Cumberland Common
Stock or from otherwise resulting in the grant, issuance or
triggering of any right to any person (other than Fifth Third)
under the Rights Agreement or enabling or allowing any right
associated with the Rights Agreement to be exercised, distributed
or triggered. Upon consummation of the Merger, all Rights (as
defined in the Rights Agreement) will expire.
T. Except as disclosed in Schedule 1, there are no actions, suits,
claims, proceedings, investigations or assessments of any kind
pending, or to the best knowledge of the Executive Officers,
threatened against any of the Directors or officers of Cumberland
or Thrift Subsidiary or any subsidiary or affiliate of either of
them in their capacities as such, and no Director or officer of
Cumberland or Thrift Subsidiary currently is being indemnified or
seeking to be indemnified by either Cumberland or Thrift Subsidiary
pursuant to applicable law or Cumberland's Articles of
Incorporation or Bylaws or Thrift Subsidiary's Federal Stock
Charter or Bylaws.
All representations and warranties contained in this Section II
shall expire at the Effective Time, and, thereafter, neither
Cumberland, Thrift Subsidiary nor any officer or Director of either
of them shall have any liability or obligation with respect
thereto, except for any misrepresentations, breaches of warranties
or violations of covenants that were made with intent to defraud.
III. Representations and Warranties of Fifth Third
Fifth Third represents and warrants to Cumberland that as of the
date hereof or as of the indicated date, as appropriate:
A. Fifth Third is duly incorporated, validly existing and in good
standing as a corporation under the corporation laws of the State
of Ohio, is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended, and is duly authorized to
conduct the business in which it is engaged.
B. Pursuant to Fifth Third's Second Amended Articles of
Incorporation, as amended, the total number of shares of capital
stock it is authorized to have outstanding is 100,500,000 of which
100,000,000 shares are classified as Common Stock without par value
("Fifth Third Common Stock") and 500,000 shares are classified as
Preferred Stock without par value. As of the close of business on
December 31, 1993, 61,402,251 shares of Fifth Third Common Stock
were issued and outstanding and no shares were held in its
treasury. As of the date of this Agreement, no shares of its
Preferred Stock have been issued. Fifth Third does not have
outstanding any stock options, subscription rights, warrants or
other securities entitling the holders to subscribe for or purchase
any shares of its capital stock other than options granted and to
be granted to employees and Directors under its stock option plans
and $143,750,000 of 4.25% Convertible Subordinated Notes due January
15, 1998 (the "Notes"). At December 31, 1993, 1,406,751 shares of
Fifth Third Common Stock were reserved for issuance in connection
with outstanding options under its stock option plans and 946,727
shares were reserved for issuance under options to be granted in
the future. The Notes are convertible at any time prior to
maturity at the option of each holder thereof, unless previously
redeemed, into shares of Fifth Third Common Stock at a conversion
price of $63-5/8 per share of Fifth Third Common Stock (equivalent
to a conversion rate of approximately 15.72 shares per $1,000
principal amount of the Notes), subject to adjustment for stock
splits, stock dividends and similar stock distributions. If all of
the Notes were converted, Fifth Third would issue a maximum of
approximately 2,259,750 shares of Fifth Third Common Stock to the
holders of the Notes.
C. All shares of Fifth Third Common Stock to be received by the
shareholders of Cumberland as a result of the Merger pursuant to
the terms of this Agreement and the Agreement of Merger shall be,
upon transfer or issuance, validly issued, fully paid and non-
assessable, and will not, upon such transfer or issuance, be
subject to the preemptive rights of any shareholder of Fifth Third.
D. Fifth Third has furnished to Cumberland its consolidated
Financial Statements as at December 31, 1990, December 31, 1991 and
December 31, 1992 and for the respective years then ended together
with the opinions of its independent public accountants associated
therewith. In addition, Fifth Third has furnished to Cumberland
its unaudited consolidated Financial Statements as at September 30,
1993 and for the nine months then ended. Such unaudited
consolidated Financial Statements fairly present the consolidated
financial condition of Fifth Third as of their respective dates and
for the respective periods covered thereby in conformity with
generally accepted accounting principles consistently followed
throughout the periods covered thereby (except for the omission of
notes to unaudited statements and yearend adjustments to interim
results). Neither Fifth Third nor any subsidiaries of Fifth Third
have any material liabilities, obligations or indebtedness required
to be disclosed in such financial statements other than the
liabilities, obligations and indebtedness disclosed in such
financial statements (including footnotes). Fifth Third shall
furnish Cumberland with its audited consolidated Financial
Statements as at December 31, 1993 and for the year then ended,
together with the opinion of its independent public accountants
associated therewith, as soon as such statements publicly are
available, and shall continue to furnish unaudited financial
information for subsequent monthly periods to Cumberland as soon as
such becomes publicly available until the Closing Date, such
unaudited financial information to consist of that information
regularly prepared by Fifth Third's internal accounting department
and to be certified by the Chief Executive Officer and Chief
Financial Officer of Fifth Third that, to the best of their
knowledge, such financial information fairly presents the
consolidated financial condition of Fifth Third as of their date
and for the period covered thereby in conformity with generally
accepted accounting principles, consistently applied (except for
the omission of notes to unaudited statements and yearend
adjustments to interim results).
E. Fifth Third and its subsidiaries have good and marketable title
to all of the material properties and assets reflected in Fifth
Third's consolidated statement of condition as at September 30,
1993 and which are still owned by them and each has good and
marketable title to all material properties and assets acquired by
it after such date and still owned by it, subject to (i) any liens
and encumbrances that do not materially adversely impair the use of
the property, (ii) statutory liens for taxes not yet due and
payable and (iii) minor defects and irregularities in title that do
not materially adversely impair the use of the property.
F. Except for events relating to the business environment in
general or changes in laws, rules, regulations or accounting
practices generally applicable to the banking industry: (i) since
September 30, 1993, to the date hereof there have been no material
adverse changes in the consolidated financial condition, operations
or business of Fifth Third; (ii) the chief executive officer and
the chief financial officer of Fifth Third are not aware of any
events which have occurred since September 30, 1993 or which are
reasonably certain to occur in the future and which reasonably can
be expected to result in any material adverse change in the
consolidated financial condition, operations or business of Fifth
Third; and (iii) since September 30, 1993, to the date hereof there
have been no material changes in the methods of business operations
of Fifth Third and its subsidiaries.
G. Since September 30, 1993, to the date hereof Fifth Third has
been operated in the ordinary course of business, has not made any
changes in its capital or corporate structures, nor any material
changes in its methods of business operations and has not provided
any increases in employee salaries or benefits other than in the
ordinary course of business. Since September 30, 1993, to the date
hereof Fifth Third has not declared or paid any dividends nor made
any distributions of any other kind to its shareholders, except
cash dividends on shares of Fifth Third Common Stock in amounts and
at such times as is in accord with its historical practice.
H. Fifth Third timely has filed all federal, state and local tax
returns required to be filed (after giving effect to all
extensions) by it and has paid or provided for all tax liabilities
shown to be due thereon or which have been assessed against it.
All tax returns filed by Fifth Third through the date hereof
constitute complete and accurate representations of the tax
liabilities of Fifth Third for such years and accurately set forth
all items (to the extent required to be included or reflected in
such returns) relevant to its future tax liabilities, including the
tax bases of its properties and assets in all material respects.
I. Neither Fifth Third nor any of its subsidiaries is a party to
any written employment contracts or written contracts of any other
kind with any of its officers, Directors or employees, except for
employment agreements assumed as part of an acquisition which have
not yet expired or been terminated.
J. 1. The Executive Committee of the Board of Directors of Fifth
Third, by resolution adopted by the members present at a meeting
duly called and held, at which meeting a quorum was at all times
present and acting, has approved this Agreement and the Agreement
of Merger, including reserving for issuance to the Cumberland
shareholders and optionees in accordance with this Agreement and
the Agreement of Merger of a sufficient number of shares of Fifth
Third Common Stock. Approval and adoption of this Agreement and
the Agreement of Merger by the shareholders of Fifth Third is not
required under Ohio law or under the Second Amended Articles of
Incorporation, as amended, or Code of Regulations of Fifth Third.
2. Fifth Third has the corporate power and authority to enter into
this Agreement and the Agreement of Merger and to carry out its
obligations hereunder and thereunder subject to certain required
regulatory approvals. This Agreement and the Agreement of Merger
when executed and delivered, will have been duly authorized and
will constitute valid and binding obligations of Fifth Third,
enforceable in accordance with their terms except to the extent
that (i) enforceability thereof may be limited by insolvency,
reorganization, liquidation, bankruptcy, readjustment of debt or
other laws of general application relating to or affecting the
enforcement of creditors' rights generally or the rights of
creditors of bank holding companies, the accounts of whose
subsidiaries are insured by the Federal Deposit Insurance
Corporation, and (ii) the availability of certain remedies may be
precluded by general principles of equity, subject, however, to the
receipt of requisite regulatory approvals.
3. Neither the execution of this Agreement or the Agreement of
Merger nor the consummation of the transactions contemplated hereby
and thereby, does or will (i) conflict with, result in a breach of,
violate or constitute a default, under Fifth Third's Second Amended
Articles of Incorporation, as amended, or Code of Regulations or,
to the best knowledge of its chief executive officer and chief
financial officer, any federal, foreign, state or local law,
statute, ordinance, rule, regulation or court or administrative
order, or any agreement, arrangement, or commitment to which Fifth
Third is subject or bound; (ii) to the best knowledge of the chief
executive officer and chief financial officer of Fifth Third,
result in the creation of or give any person the right to create
any material lien, charge, encumbrance, security agreement or any
other material rights of others or other material adverse interest
upon any material right, property or asset belonging to Fifth Third
or any of its subsidiaries other than such rights as may be given
the shareholders of Cumberland pursuant to KRS sections 271B.13-010 et.
seq; (iii) terminate or give any person the right to terminate,
amend, abandon, or refuse to perform any material agreement,
arrangement or commitment to which Fifth Third or any of its
subsidiaries is a party or by which Fifth Third's or any of its
subsidiaries' rights, properties or assets are subject or bound; or
(iv) accelerate or modify, or give any party thereto the right to
accelerate or modify, the time within which, or the terms according
to which, Fifth Third or any of its subsidiaries is to perform any
duties or obligations or receive any rights or benefits under any
material agreements, arrangements or commitments.
K. Complete and accurate copies of (i) the Second Amended Articles
of Incorporation, as amended, and Code of Regulations of Fifth
Third in force as of the date hereof have been delivered to
Cumberland.
L. To the best knowledge of the chief executive officer and chief
financial officer of Fifth Third, neither Fifth Third nor any of
its subsidiaries nor any employee, officer or Director of Fifth
Third or any of its subsidiaries has knowingly engaged in any
activity or omitted to take any action which, in any material way,
has resulted or could result in the violation by Fifth Third or any
of its subsidiaries of (i) any local, state or federal law
(including without limitation the Bank Secrecy Act, the Community
Reinvestment Act, applicable consumer protection and disclosure
laws and regulations, including without limitation, Truth in
Lending, Truth in Savings and similar disclosure laws and
regulations, and equal employment and employment discrimination
laws and regulations) or (ii) any regulation, order, injunction or
decree of any court or governmental body, the violation of any of
which could reasonably be expected to have a material adverse
effect on the financial condition of Fifth Third and its
subsidiaries taken as a whole. To the best knowledge of the chief
executive officer and chief financial officer of Fifth Third, Fifth
Third and its subsidiaries possess all licenses, franchises,
permits and other governmental authorizations necessary for the
continued conduct of their businesses without material interference
or interruption. Fifth Third shall comply, and as of the Closing
Date (as hereinafter defined) Fifth Third shall have complied, with
all applicable laws, rules, and regulations in connection with the
registration and issuance of the shares of Fifth Third Common Stock
in connection with the Merger contemplated hereby.
M. 1. To the best knowledge of the chief executive officer and
chief financial officer of Fifth Third, this Agreement, the
Agreement of Merger, all reports, statements, lists, certificates
or other information furnished or to be furnished by Fifth Third to
Cumberland or its agents in connection with this Agreement or the
Merger contemplated hereby (including, without limitation, any
information which has been or shall be supplied with respect to its
business operations and financial condition for inclusion in the
proxy statement/prospectus and registration statement relating to
the Merger), taken as a whole, contain or shall contain (in the
case of information relating to the proxy statement/prospectus, at
the time it is mailed, and, in the case of the registration
statement, at the time it becomes effective and, in the case of the
proxy statement/prospectus and the registration statement, at the
time the annual or special meeting of shareholders of Cumberland is
held to consider the adoption of this Agreement and the Agreement
of Merger) an untrue statement of a material fact or omit or shall
omit to state a material fact necessary to make the statements
contained herein and therein, in light of the circumstances in
which they are made, not misleading.
2. Fifth Third has furnished to Cumberland or its agents true and
complete copies (including all exhibits and all documents
incorporated by reference) of the following documents as filed by
Fifth Third with the SEC:
(a) Fifth Third's Annual Report on Form 10-K for the year ended
December 31, 1992;
(b) Fifth Third's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30 and September 30, 1993;
(c) any Current Report on Form 8-K with respect to any event
occurring after December 31, 1992 and prior to the date of this
Agreement;
(d) any report filed by Fifth Third to amend or modify any of the
reports described above; and
(e) all proxy statements prepared in connection with meetings of
Fifth Third's shareholders held subsequent to December 31, 1992.
The information set forth in the documents described in this
subsection 2 (including all exhibits thereto and all documents
incorporated therein by reference) did not, as of the later of the
dates on which such reports were filed with the SEC or declared
effective by the SEC, (a) contain any untrue statement of a
material fact, (b) omit any material fact required to be stated
therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not
misleading, or (c) omit any material exhibit required to be filed
therewith. Prior to the date hereof no event has occurred
subsequent to December 31, 1992 which Fifth Third is required to
describe in a Current Report on Form 8-K other than the Current
Reports heretofore furnished by Fifth Third to Cumberland. Fifth
Third timely shall furnish Cumberland with copies of all reports
filed by Fifth Third with the SEC subsequent to the date of this
Agreement and until the Closing Date.
N. There are no actions, suits, proceedings, investigations or
assessments of any kind pending or, to the best knowledge of the
chief executive officer and chief financial officer of Fifth Third,
threatened against Fifth Third or any Fifth Third subsidiary, which
reasonably can be expected to result in any material adverse change
in the consolidated financial condition, operations or business of
Fifth Third.
O. Since September 30, 1993, to the date hereof none of Fifth
Third's banking subsidiaries and thrift subsidiary has incurred any
unusual or extraordinary loan losses which would be material to
Fifth Third on a consolidated basis; and to the best knowledge and
belief of the chief executive officer and chief financial officer
of Fifth Third, and in the light of such banking subsidiaries' and
thrift subsidiary's historical loan loss experience and their
managements' analyses of the quality and performance of their
respective loan portfolios, as of September 30, 1993 their
consolidated reserves for loan losses are adequate to absorb all
known and reasonably anticipated losses as of such date.
P. Fifth Third has not, directly or indirectly, other than with J.
P. Morgan Securities Inc., dealt with any broker or finder in
connection with this transaction and has not incurred and will not
incur any obligation for any broker's or finder's fee or commission
in connection with the transactions provided for in this Agreement
and the Agreement of Merger. Fifth Third shall be responsible for
the payment of any monies to J.P. Morgan Securities Inc. for
services rendered in connection with this Agreement and the Merger.
Q. Fifth Third has no unfunded liabilities with respect to any
Benefit Plan (as such term is defined in subparagraph Q.1. of
Section II hereof, but applied to Fifth Third, its subsidiaries and
affiliates) that are material, either individually or in the
aggregate, to Fifth Third on a consolidated basis and that have not
been recorded and disclosed as required by generally accepted
accounting principles (GAAP) in the most recent year-end, audited
Financial Statements of Fifth Third supplied to Cumberland pursuant
to Paragraph D of Section III hereof. A summary of the benefits
provided to Fifth Third employees is attached hereto as Appendix F;
Fifth Third presently has no medical panel in Louisville so the
description of benefits may be subject to adjustment depending upon
the medical panel that is put in place in Kentucky.
R. The investment portfolios of Fifth Third and its subsidiaries
and affiliates consist of securities in marketable form. Since
September 30, 1993, to the date hereof Fifth Third and its
affiliates, on a consolidated basis, have not incurred any unusual
or extraordinary losses in their respective investment portfolios,
and, except for events relating to the business environment in
general, including market fluctuations, the management of Fifth
Third is not aware of any events which are reasonably certain to
occur in the future and which reasonably can be expected to result
in any material adverse change in the quality or performance of the
investment portfolios of Fifth Third and its affiliates on a
consolidated basis.
S. To the best knowledge of the chief executive officer and chief
financial officer of Fifth Third, there are no actions, proceedings
or investigations pending before any environmental regulatory body,
with respect to or threatened against or affecting Fifth Third or
any subsidiary or affiliate of it in respect of any "facility"
owned, leased or operated by any of them (but excluding any
"facility" as to which the sole interest of Fifth Third or any
subsidiary or affiliate of it is that of a lienholder or mortgagee,
but including any "facility" to which title has been taken pursuant
to mortgage foreclosure or similar proceedings and including any
"facility" in which Fifth Third or any subsidiary or affiliate of
it ever participated in the financial management of such facility
to a degree sufficient to influence, or have the ability to
influence, the facility's treatment of hazardous waste) under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), or under any Federal, state,
local or municipal statute, ordinance or regulation in respect
thereof, in connection with any release of any toxic or "hazardous
substance", pollutant or contaminant into the "environment" which,
if adversely determined, (a) would require the payment by Fifth
Third or any subsidiary or affiliate of it and/or require Fifth
Third or any subsidiary or affiliate of it to incur expenses of
more than $10,000 (whether or not covered by insurance) or (b)
would otherwise have a material adverse effect on Fifth Third or
any subsidiary or affiliate of it, nor, to the best knowledge of
the chief executive officer and chief financial officer of Fifth
Third, is there any reasonable basis for the institution of any
such actions or proceedings or investigations which is probable of
assertion, nor are there any such actions or proceedings or
investigations in which Fifth Third or any subsidiary or affiliate
of it is a plaintiff or complainant. To the best knowledge of the
chief executive officer and chief financial officer of Fifth Third,
(a) neither Fifth Third nor any subsidiary or affiliate of it is
liable in any material respect under any applicable law for any
release by Fifth Third or any subsidiary or affiliate of it or for
any release by any other "person" of a hazardous substance caused
by the spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing of
hazardous wastes or other chemical substances, pollutants or
contaminants into the environment, (b) nor is Fifth Third or any
subsidiary or affiliate of it liable for any material costs (as a
result of the acts or omissions of Fifth Third or any subsidiary or
affiliate of it or, to the best knowledge of the chief executive
officer and chief financial officer of Fifth Third, as a result of
the acts or omissions of any other "person") of any remedial action
including, without limitation, costs arising out of security
fencing, alternative water supplies, temporary evacuation and
housing and other emergency assistance undertaken by any
environmental regulatory body having jurisdiction over Fifth Third
or any subsidiary or affiliate of it to prevent or minimize any
actual or threatened release by Fifth Third or any subsidiary or
affiliate of it of any hazardous wastes or other chemical
substances, pollutants and contaminants into the environment which
would endanger the public health or the environment. All terms
contained in quotation marks in this paragraph and the paragraph
immediately following shall have the meaning ascribed to such
terms, and defined in, CERCLA.
To the best knowledge of the chief executive officer and chief
financial officer of Fifth Third, each "facility" owned, leased or
operated by Fifth Third or any subsidiary or affiliate of it (but
excluding any "facility" as to which the sole interest of Fifth
Third or any subsidiary or affiliate of it is that of a lienholder
or mortgagee, but including any "facility" to which title has been
taken pursuant to mortgage foreclosure or similar proceedings and
including any "facility" in which Fifth Third or any subsidiary or
affiliate of it ever participated in the financial management of
such facility to a degree sufficient to influence, or have the
ability to influence, the facility's treatment of hazardous waste)
is, in all material respects, in compliance with all applicable
Federal, state, local or municipal statutes, ordinances, laws and
regulations and all orders, rulings or other decisions of any
court, administrative agency or other governmental authority
relating to the protection of the environment, except to the extent
a failure to comply would not have a material adverse effect on the
business, operations and financial condition of Fifth Third or any
subsidiary or affiliate of it taken as a whole. No underground
storage tank presently is located on, nor, to the best knowledge of
the chief executive officer and chief financial officer of Fifth
Third, has any such tank ever been located on, any property owned
by Fifth Third or any subsidiary or affiliate of it or any
"facility" where Fifth Third or any of its subsidiaries has
exercised any significant management role, except for underground
storage tanks previously removed from 740 N. Cable Road, Lima,
Ohio, and 1601 Sylvania Road, Toledo, Ohio.
T. There are no actions, suits, claims, proceedings, investigations
or assessments of any kind pending, or to the best knowledge of the
chief executive officer and chief financial officer of Fifth Third,
threatened against any of the Directors or officers of Fifth Third
or any subsidiary or affiliate of it in their capacities as such,
and no Director or officer of Fifth Third currently is being
indemnified or seeking to be indemnified by Fifth Third or any
subsidiary pursuant to applicable law or Fifth Third's Articles of
Incorporation or Code of Regulations or the charter or bylaws of
any subsidiary.
All representations and warranties contained in this Section III
shall expire at the Effective Time, and, thereafter, neither Fifth
Third nor any officer or Director of Fifth Third shall have any
further liability or obligation with respect thereto, except for
any misrepresentations, breaches of warranties or violations of
covenants that were made with intent to defraud.
IV. Obligations of Cumberland and Fifth Third Between the Date of
this Agreement and the Effective Time
A. Cumberland, in consultation with Fifth Third, will take all
action necessary to call and hold its annual or a special meeting
of its shareholders within 45 days after the Fifth Third
registration statement relating to this transaction has been
declared effective by the SEC and under all applicable state
securities laws for the purpose of approving and adopting this
Agreement, the Agreement of Merger and any other documents or
actions necessary to the consummation of the merger provided for
herein pursuant to law. The Board of Directors of Cumberland
intends to inform the shareholders of Cumberland in the proxy
materials relating to the annual or special meeting that all
Directors of Cumberland intend to vote all shares of Cumberland
Common Stock which they own of record or have voting control over
in favor of approving this Agreement, the Agreement of Merger and
any such other necessary documents or actions, and the Directors
will recommend approval of this Agreement and the Agreement of
Merger to the other shareholders of Cumberland, subject only to
such Directors' fiduciary obligations and their review of Fifth
Third's registration statement to be filed with the SEC described
in the next sentence and their reasonable satisfaction with the
information set forth therein. Cumberland shall cooperate with
Fifth Third in the preparation of such proxy materials which shall
be included and filed with, as a part of, Fifth Third's
registration statement on Form S-4 (or any such other appropriate
form) filed with the SEC for the registration of the shares of
Fifth Third Common Stock to be issued to the Cumberland
shareholders pursuant to the transactions contemplated by this
Agreement and the Agreement of Merger.
B. (i) The merger between Cumberland and Fifth Third is intended to
be structured to qualify for treatment under present accounting
rules as a pooling of interests and Cumberland and Fifth Third
agree with each other to take no action which would disqualify this
treatment under generally accepted accounting principles. (ii)
Consistent with generally accepted accounting principles,
Cumberland agrees that on or before the Effective Time based on a
review of Thrift Subsidiary's loan losses, current classified
assets and commercial, multi-family and residential mortgage loans,
Cumberland will work with Fifth Third to achieve the goal of
establishing, by the Effective Time, collection procedures,
internal valuation reviews, credit policies and practices and
general valuation allowances which are consistent with the
guidelines used by The Fifth Third Bank, Cincinnati, Ohio. Fifth
Third will direct The Fifth Third Bank to provide such assistance
and direction to Cumberland as is necessary in conforming to such
policies, practices and procedures. (iii) From the date of this
Agreement until the Effective Time, Cumberland and Thrift
Subsidiary each will be operated in the ordinary course of
business, and neither of them will, without the prior written
consent of Fifth Third, which consent shall not be unreasonably
withheld: make any changes in its capital or corporate structures;
issue any additional shares of its Common Stock except upon
exercise of the presently outstanding Stock Options to purchase up
to 197,565 shares of Cumberland Common Stock for the purchase price
set forth in the applicable Stock Options agreements; issue any
other equity securities, or issue as borrower any long term debt or
convertible or other securities of any kind, or rights to acquire
any of its securities, including without limitation the granting of
any additional Stock Options or any stock appreciation rights; make
any material changes in its method of business operations; make,
enter into any agreement to make, or become obligated to make, any
capital expenditures in excess of $50,000; make, enter into or
renew any agreement for services to be provided to Cumberland or
Thrift Subsidiary or permit the automatic renewal of any such
agreement, except any agreement for services having a term of not
more than three months or requiring the expenditure of not more
than $2,500 (for this purpose the phrase "permit the automatic
renewal" includes the failure to send a notice of termination of
such a contract if such failure would constitute a renewal); open
for business any branch office which has been approved by the
appropriate regulatory authorities but not yet opened or apply to
the appropriate regulatory authorities to establish a new branch
office or expand any existing branch office, the approved but
unopened loan production office in Elizabethtown, Kentucky excepted
herefrom; acquire, become obligated to acquire, or enter into any
agreement to acquire, any banking or non-banking company or any
branch offices of any such companies; declare or pay any cash
dividends on its stock other than normal and customary cash
dividends paid in such amounts and at such times as Cumberland
historically has done on its Common Stock, provided this covenant
shall only apply to Cumberland; pay any stock dividends or make any
other distributions on its stock other than cash dividends as
described in the immediately preceding clause; and provide any
increases in employee salaries or benefits other than in the
ordinary course of business or as described in Schedule 1.
Cumberland agrees that it will not sell or otherwise dispose of or
encumber any of the shares of the capital stock of Thrift
Subsidiary which are now owned by it. Cumberland also may issue no
more than 3,000 shares of Cumberland Common Stock to Cumberland
and/or Thrift Subsidiary employees under the Purchase Plan for the
period from January 1 - June 30, 1994, and thereafter any
participation in the Purchase Plan and any issuance of shares
thereunder shall be suspended through the Effective Time so that no
additional shares of Cumberland Common Stock will be issued under
the Purchase Plan.
C. Fifth Third covenants that it will not declare extraordinary
cash dividends on shares of Fifth Third Common Stock that have a
record, ex-dividend or payment date that falls during the Valuation
Period, as defined in the Agreement of Merger.
V. Cooperation and Other Obligations and Other Covenants
A. Each of the parties hereto agrees to use its best efforts and to
cooperate with the other party in all reasonable respects in order
to carry out and consummate the transactions contemplated by this
Agreement and the Agreement of Merger at the earliest practicable
time including, without limitation, the filing of applications,
notices and other documents with, and obtaining approval from,
appropriate governmental regulatory agencies.
B. Cumberland agrees to permit Fifth Third, its officers,
employees, accountants, agents and attorneys, and Fifth Third
agrees to permit Cumberland, its officers, employees, accountants,
agents and attorneys, to have reasonable access during business
hours to their respective books, records and properties, and those
of Thrift Subsidiary and The Fifth Third Bank, The Fifth Third Bank
of Northwestern Ohio, National Association, and Midwest Payment
Systems, Inc. as well, for the purpose of making a detailed
examination, or updating and amplifying prior examinations, of the
financial condition, assets, liabilities, legal compliance, affairs
and the conduct of the business of Cumberland and Thrift Subsidiary
or Fifth Third and The Fifth Third Bank, The Fifth Third Bank of
Northwestern Ohio, National Association, and Midwest Payment
Systems, Inc., as the case may be, prior to the Effective Time, and
also to permit the monitoring of the foregoing on an ongoing basis
(such rights of examination and monitoring to be subject to the
confidentiality obligations set forth in Paragraph VII.D. hereof);
provided, however, that any such examination by Fifth Third or
Cumberland shall not relieve Fifth Third or Cumberland from any
responsibility or liability for any material misrepresentation or
material breach of warranty hereunder discovered in the course of
or subsequent to such examination and prior to the Effective Time.
C. At the Effective Time, each outstanding option under the
Cumberland Stock Incentive Plan (the "Option Plan") shall continue
outstanding as an option to purchase, in place of the purchase of
shares of Cumberland Common Stock, the number of shares (rounded up
to the nearest whole share) of Fifth Third Common Stock that would
have been received by the optionee pursuant to paragraph 1(b) of
Article VII of the Agreement of Merger had the option been
exercised in full (without regard to any limitations contained
therein on exercise) for shares of Cumberland Common Stock
immediately prior to the Effective Time upon the same terms and
conditions, including without limitation, payment in full of the
contractual exercise price, under the relevant option as were
applicable immediately prior to the Effective Time (except that all
options shall be immediately exercisable). Fifth Third and
Cumberland agree to take such actions as shall be necessary to give
effect to the foregoing.
At all times after the Effective Time, Fifth Third shall reserve
for issuance such number of shares of Fifth Third Common Stock as
necessary so as to permit the exercise of options granted under the
Option Plan in the manner contemplated by this Agreement and the
instruments pursuant to which such options were granted. Fifth
Third shall make all filings required under federal and state
securities laws, including without limitation filing a registration
statement on Form S-8 (or such other form as may be appropriate)
with the SEC, so as to permit the exercise of such options and the
sale of the shares received by the optionee upon such exercise.
In case, prior to the Effective Time, of any reclassification,
reorganization, recapitalization, stock dividend or distribution,
subdivision, combination or exchange of the outstanding shares of
Fifth Third Common Stock or in case of any consolidation or merger
of Fifth Third with or into any other corporation, or in the case
of any sale or transfer of all or substantially all of Fifth
Third's assets, then, the rights of the optionees under the Option
Plan shall be appropriately adjusted so that the optionees will be
in the same position as if their options had been exercised
immediately before such corporate action or transaction. The
provisions hereof shall similarly apply to successive
reclassifications, reorganizations, recapitalizations, stock
dividends or distributions, subdivisions, combinations or
exchanges, consolidations, mergers, sales or transfers.
VI. Conditions Precedent to Closing
A. Conditions to the Obligations of Each of the Parties:
The obligation of each of the parties hereto to consummate the
Merger provided for herein and in the Agreement of Merger is
subject to the fulfillment on or prior to the Effective Time of
each of the following conditions:
1. The shareholders of Cumberland shall have duly approved and
adopted this Agreement and the Agreement of Merger in accordance
with and as required by law and in accordance with its Articles of
Incorporation and Bylaws.
2. All necessary governmental and regulatory orders, consents,
clearances and approvals and requirements shall have been secured
and satisfied for the consummation of the Merger, including without
limitation, those of the Federal Reserve System, the Office of
Thrift Supervision and the Federal Deposit Insurance Corporation
and the Kentucky Department of Financial Institutions to the extent
required.
3. Dinsmore & Shohl, counsel for Fifth Third, shall have delivered
an opinion as to certain federal tax aspects of the Merger
addressed to Cumberland and it shareholders in substantially the
form appended hereto as Appendix B.
4. Prior to or at the Effective Time, no material investigation by
any state or federal agency shall have been threatened or
instituted seeking to enjoin or prohibit, or enjoining or
prohibiting, the Merger contemplated hereby and no material action
or proceeding shall have been threatened or instituted before any
court or government body or authority, seeking to enjoin or
prohibit, or enjoining or prohibiting, the Merger contemplated
hereby other than investigations, actions and proceedings which
have been withdrawn prior to or at the Effective Time without
material adverse effect to Fifth Third or Cumberland and other than
regularly-scheduled regulatory examinations.
5. Any waiting period mandated by law in respect of the final
approval by any applicable Federal regulator(s) of the Merger
contemplated herein shall have expired.
B. Conditions to the Obligations of Fifth Third:
The obligation of Fifth Third to consummate the Merger provided for
herein and in the Agreement of Merger are subject to the
fulfillment at or prior to the Effective Time of each of the
following conditions unless waived by Fifth Third in a writing
delivered to Cumberland which specifically refers to the condition
or conditions being waived:
1.All of the representations and warranties of Cumberland set forth
in Section II of this Agreement shall be true and correct in all
material respects as of the date of this Agreement and at and as of
the Closing Date (as hereinafter defined) as if each such
representation and warranty was given on and as of the Closing
Date, except (i) for any such representations and warranties made
as of a specified date, which shall be true and correct in all
material respects as of such date and (ii) for breaches of
representations and warranties which would not have, or would not
reasonably be expected to have, a material adverse effect on the
business or operations of Cumberland and Thrift Subsidiary taken as
a whole.
2. Cumberland shall have performed all of the obligations required
of it under the terms of this Agreement and the Agreement of Merger
in all material respects, except for breaches of obligations which
would not have, or would not reasonably be expected to have, any
material adverse effect on the business or operations of Cumberland
and Thrift Subsidiary taken as a whole.
3. Brown, Todd & Heyburn, counsel for Cumberland and Thrift
Subsidiary, shall have delivered an opinion addressed to Fifth
Third in substantially the form appended hereto as Appendix C.
4. (a) By the Effective Time, Cumberland shall have taken all
necessary actions to freeze the benefits as of the Effective Time
of each individual attributable to its participation in the FIRF
(as defined in Paragraph VII.0.1 hereof) (that is, benefits must
cease to accrue as of the Effective Time and there shall be no
liability to Fifth Third or any Fifth Third subsidiary or affiliate
after the Effective Time).
(b) By the Effective Time, Cumberland shall have taken all
necessary actions to provide to each employee of Cumberland and
Thrift Subsidiary who has an accrued benefit under the FIRF and who
will be employed by Fifth Third or a Fifth Third subsidiary or
affiliate immediately after the Effective Time an election to
transfer his accrued benefit under the FIRF (and the Distributable
Assets (as provided for in the December 17, 1993 letter from FIRF
to Thrift Subsidiary)) to the Fifth Third Bancorp Master Retirement
Plan.
(c) The actions required pursuant to the foregoing paragraphs shall
be taken in a manner which will not jeopardize the availability of
the 1994 Projected FECO (as defined in Paragraph VII.0. hereof)
less the $785,000 referred to in Paragraph VII.0.(3) hereof and any
applicable transfer charges imposed by FIRF.
(d) By the Effective Time, Cumberland shall have taken all action
necessary to ensure that there will be no liability after the first
payroll period that begins after the Effective Time with respect to
the FITP (as defined in Paragraph VII.0.1 hereof).
(e) By the Effective Time, Cumberland, using its best efforts,
shall have caused the FIRF and the FITP to have obtained from the
IRS favorable determination letters which determined that
Cumberland's participation in the FIRF and the FITP satisfied the
requirements of Section 401(a) of the Code, as amended by all of
the laws referred to in Section 1 of Revenue Procedure 93-39.
5. The aggregate amount of Shareholders' Equity (including Common
Stock, Additional Paid-In Capital and Retained Earnings and
excluding Treasury Stock) of Cumberland immediately prior to the
Effective Time, as shown by and reflected in its books and records
of accounts on a consolidated basis in accordance with generally
accepted principles, consistently applied, shall not be less than
$78,483,000, its total shareholders' equity as at September 30,
1993, less any adjustments made in anticipation of, or in
connection with, the transactions contemplated by this Agreement.
6. Fifth Third's independent certified public accountants shall
have reviewed the unaudited consolidated Financial Statements of
Cumberland as at the end of the month immediately preceding the
Effective Time, as well as the unaudited separate financial
statements of Thrift Subsidiary as of the same date, performed such
other auditing procedures as may be requested by Fifth Third and
shall not have reported to Fifth Third that they are aware of any
material modifications (i.e., modifications that would have a
material adverse effect on the financial condition of Cumberland or
Thrift Subsidiary) that should be made in order for such financial
statements to (i) be in conformity with generally accepted
accounting principles, consistently applied, excluding the
presentation of footnotes, and (ii) accurately state the
consolidated financial condition and results of operations of
Cumberland and the separate financial condition and results of
operations of Thrift Subsidiary.
In the event such independent certified public accountants report
to Fifth Third that material modifications to Cumberland's
financial statements should be made, such accountants shall consult
with the independent certified public accountants of Cumberland to
attempt to come to a mutual resolution of the problems or
discrepancies necessitating such accountants to so report. If they
cannot resolve such problems or discrepancies, independent
certified public accountants acceptable to both Fifth Third and
Cumberland shall be selected to review such unaudited statements
and do any necessary auditing procedures, and the report of such
mutually acceptable independent certified public accountants shall
be binding on both Fifth Third and Cumberland. If independent
accountants mutually acceptable to Fifth Third and Cumberland are
utilized, it shall be a condition to Fifth Third's obligation to
consummate the Merger contemplated hereby, which shall supersede
the condition set forth in the first paragraph of this Paragraph
VI.B.6, that such report state that such accountants are not aware
of any material modifications that should be made in order for such
financial statements to be in conformity with generally accepted
accounting principles, consistently applied, excluding the
presentation of footnotes and accurately state the financial
condition and results of operations of Cumberland and Thrift
Subsidiary. Fifth Third and Cumberland covenant with one another
to complete such resolution process as expeditiously as
practicable.
7.The receipt of a certificate from Cumberland and Thrift
Subsidiary, executed by the Executive Officers, dated the Closing
Date, certifying to their best knowledge and belief that: (i) all
of the representations and warranties set forth in Section II were
true and correct in all material respects at and as of the date
hereof and at and as of the Closing Date, except (x) for any such
representations and warranties made as of a specified date, which
shall be true and correct in all material respects as of such date,
(y) for breaches of representations and warranties which would not
have, or would not reasonably be expected to have, a material
adverse effect on the business or operations of Cumberland and
Thrift Subsidiary taken as a whole and (z) except as stated in the
certificate; and (ii) it has met and fully complied in all material
respects with all of the obligations required of it under the terms
of this Agreement and the Agreement of Merger, except as stated in
the certificate.
8.The total issued and outstanding shares of Cumberland Common
Stock shall not exceed 2,613,418 shares, which includes any shares
issuable upon the exercise of any outstanding Stock Options but no
stock appreciation rights and includes up to 3,000 shares issued
under the Purchase Plan for the period from January 1 - June 30,
1994.
9.Fifth Third shall have received a letter from Deloitte & Touche,
Fifth Third's independent public accountants, to the effect that
the Merger will qualify for "pooling of interests" accounting
treatment.
10.Fifth Third and H. David Hale shall have executed a termination
agreement of Mr. Hale's employment agreement as described in
Paragraph VII. B.2.
C.Conditions to the Obligations of Cumberland:
The obligation of Cumberland to consummate the transactions
provided for herein and in the Agreement of Merger is subject to
the fulfillment at or prior to the Effective Time of each of the
following conditions unless waived by Cumberland in a writing
delivered to Fifth Third which specifically refers to the condition
or conditions being waived:
1.All of the representations and warranties of Fifth Third set
forth in Section III of this Agreement shall be true and correct in
all material respects as of the date of this Agreement and at and
as of the Closing Date as if each such representation and warranty
was given on and as of the Closing Date, except (x) for any such
representations and warranties made as of a specified date, which
shall be true and correct in all material respects as of such date
and (y) for breaches of representations and warranties which would
not have, or would not reasonably be expected to have, a material
adverse effect on the business or operations of Fifth Third taken
as a whole.
2.Fifth Third shall have performed all of the obligations required
of it under the terms of this Agreement and the Agreement of Merger
in all material respects, except for breaches of obligations which
would not have, or would not reasonably be expected to have, any
material adverse effect on the consolidated business or operations
of Fifth Third.
3.Dinsmore & Shohl, counsel for Fifth Third, shall have delivered
an opinion addressed to Cumberland in substantially the form
appended hereto as Appendix D.
4.The receipt of a certificate from Fifth Third, executed by its
chief executive officer and chief financial officer, dated the
Closing Date, certifying to their best knowledge and belief that:
(i) all of the representations and warranties set forth in Section
III were true and correct at and as of the date hereof and at and
as of the Closing Date, except (x) for any such representations and
warranties made as of a specified date, which shall be true and
correct in all material respects as of such date, (y) for breaches
of representations and warranties which would not have, or would
not reasonably be expected to have, a material adverse effect on
the consolidated business or operations of Fifth Third taken as a
whole and (z) except as stated in the certificate; and (ii) Fifth
Third has met and fully complied in all material respects with all
of the obligations required of it under the terms of this Agreement
and the Agreement of Merger, except as stated in the certificate.
5.Fifth Third shall have registered its shares of Common Stock to
be issued to the Cumberland shareholders hereunder and pursuant to
the Agreement of Merger with the SEC pursuant to the Securities Act
of 1933, as amended, and with all applicable state securities
authorities. The registration statement with respect thereto shall
have been declared effective by the SEC and all applicable state
securities authorities and no stop order shall have been issued and
no proceedings affecting said registration statement are pending or
threatened. The shares of Fifth Third Common Stock to be issued to
the Cumberland shareholders hereunder shall have been authorized
for trading on the National Market System of the National
Association of Securities Dealers upon official notice of issuance.
6.The receipt of a fairness opinion from each of Keefe, Bruyette &
Woods, Inc. and J. C. Bradford & Co. dated as of the effective date
of the registration statement described in Paragraph 5 immediately
preceding and also as of the Closing Date stating that the
consideration to be received by the Cumberland shareholders is fair
to the shareholders of Cumberland from a financial point of view.
VII. Additional Covenants
A.If permitted by applicable law, Thrift Subsidiary shall be merged
with and into a new Fifth Third bank covering the geographical area
of Western Kentucky (Fifth Third Western Kentucky), effective the
Effective Time. The parties hereto agree to cooperate with one
another to effect such merger, but Fifth Third acknowledges that
any delay in effecting such merger shall have no bearing on the
Closing of the Merger. Upon consummation of such merger, the
separate corporate existence of Thrift Subsidiary shall cease by
operation of law. The Fayette County, Kentucky offices of Thrift
Subsidiary shall become offices of The Fifth Third Bank of Central
Kentucky, Inc. ("Fifth Third Central Kentucky"), but all other
offices of Thrift Subsidiary shall become offices of Fifth Third
Western Kentucky. Fifth Third Central Kentucky and Fifth Third
Western Kentucky shall, at the Effective Time, become direct,
wholly-owned subsidiaries of a new bank holding company wholly-
owned by Fifth Third (Fifth Third Kentucky BHC). Fifth Third
Kentucky BHC shall have an eleven-member Board of Directors which
initially shall consist of H. David Hale, Samuel G. Barnes, the
five present members of the Cumberland Board that are outside
Directors, three present members of the Board of Fifth Third
Central Kentucky selected by Fifth Third and a liaison officer from
The Fifth Third Bank, Cincinnati, Ohio, as is in accord with Fifth
Third's customary practice. H. David Hale shall be the Chairman
and Chief Executive Officer and Samuel G. Barnes the President and
Chief Operating Officer of Fifth Third Kentucky BHC. In addition,
Fifth Third shall take such actions as are necessary to add David
Hale to the Board of Directors of Fifth Third as promptly after the
Effective Time as possible.
B.1.Fifth Third shall use its best efforts but shall not be under
any obligation to continue the employment at Fifth Third or at a
Fifth Third subsidiary or affiliate each of the employees of
Cumberland and Thrift Subsidiary. Any Cumberland or Thrift
Subsidiary employee who continues his employment with Fifth Third
after the Effective Time shall receive the standard package of
employee benefits that are provided holding company-wide and which
are listed and summarized in Appendix F hereto, and there shall be
no pre-existing condition limitation thereon. Such employees shall
receive credit for their period of service to Cumberland and/or
Thrift Subsidiary for purposes of determining participation and
vesting in all Fifth Third employee plans (but not the Fifth Third
Bancorp Master Retirement Plan and Fifth Third Bancorp Master
Profit Sharing Plan), but not for purposes of determining the
benefits accrued thereunder. In addition, employees of Cumberland
or Thrift Subsidiary who continue as employees of Fifth Third or a
Fifth Third affiliate or subsidiary as at the Effective Time shall
be given credit for years of service with Cumberland or Thrift
Subsidiary at the rate of twelve (12) days for each credited year
of service to be applied towards their Fifth Third accumulated sick
day balance, not to exceed one hundred thirty (130) days. Any
employee whose employment is terminated by Fifth Third other than
for cause or who voluntarily resigns after being notified by Fifth
Third that, as a condition of employment, such employee must work
at a location more than 30 highway miles from such employee's
former location of employment or that such employee's salary will
be decreased by 10% or more, in any case only within six months
after the Effective Time, shall be entitled to severance pay equal
to, in the case of a salaried employee other than an officer, one
week's pay for each year of service up to a maximum of twelve (12)
week's pay, in the case of an officer, one week's pay for each year
of service up to a maximum of twenty four (24) week's pay and, in
the case of an hourly employee, one week's pay for each year of
service up to a maximum of six (6) week's pay, plus applicable
COBRA benefits. Nothing contained in this Paragraph VII.B.2 shall
be construed or interpreted to limit or modify in any way Fifth
Third's at will employment policy.
B. 2. Fifth Third shall assume Thrift Subsidiary's employment
agreements with Messrs. Doyle, Pearson and Shockley for the balance
of their current terms and, one additional one-year renewal of each
of their employment agreements. Therefore, Mr. Doyle's employment
agreement shall terminate in April, 1995, Mr. Shockley's shall
terminate in May, 1995, Mr. Pearson's shall terminate in January,
1996, and Mr. Hale's shall terminate in July, 1998. Fifth Third
covenants that it shall offer to enter into a termination agreement
of the employment agreement of H. David Hale substantially in the
form of Appendix G hereto; provided, that at H. David Hale's
option, the payments and vesting provided for therein may be
reduced. Such offer shall be made by February 10, 1994 and remain
open to the Effective Time.
C. All provisions for indemnification and limitation of liability
now existing in favor of the employees, agents, Directors or
officers of Cumberland or Thrift Subsidiary as provided by
regulation or in their respective certificate or articles of
incorporation or bylaws shall survive the acquisition of Cumberland
by Fifth Third, shall be assumed by Fifth Third and shall continue
in full force and effect with respect to acts or omissions
occurring on or prior to the Effective Time for a period of three
years thereafter, or in the case of matters occurring prior to the
Effective Time which have not been resolved prior to the third
anniversary of the Effective Time, until such matters are finally
resolved. Fifth Third shall also purchase and keep in force for
such three year period, directors' and officers' liability
insurance to provide coverage for acts or omissions of the type and
in the amount currently covered by Cumberland's existing directors'
and officers' liability insurance for acts or omissions occurring
on or prior to the Effective Time, but only to the extent such
insurance may be purchased or kept in full force on commercially
reasonable terms taking into account the cost thereof and the
benefits provided thereby and excluding claims pending or
threatened against Cumberland or Thrift Subsidiary at the Effective
Time that were not made at such time as to be ineligible for
coverage by Cumberland's directors' and officers' liability
insurance in effect through the Effective Time. In addition, for
actions occurring after the Effective Time, Fifth Third shall
provide to the officers and Directors of Cumberland and Thrift
Subsidiary who become officers and Directors of any Fifth Third
affiliate after consummation of the Merger, the same directors' and
officers' liability insurance that is provided throughout the Fifth
Third holding company system. Fifth Third agrees that all rights
to indemnification existing in favor of officers and Directors of
Fifth Third affiliates shall be accorded to officers and Directors
of Cumberland and Thrift Subsidiary who become affiliated with any
Fifth Third affiliate in such capacities after the Effective Time
and that such indemnification will relate to covered actions or
inactions prior to, as well as after, the Effective Time.
D. Fifth Third will not disclose to others and will hold in
confidence any non-public, confidential information disclosed to it
by Cumberland concerning Cumberland or Thrift Subsidiary.
Cumberland will not disclose to others and will hold in confidence
any non-public, confidential information disclosed to it concerning
Fifth Third or any of its affiliates. In the event the Merger is
not completed, all non-public financial statements, documents and
materials, and all copies thereof, shall be returned to Cumberland
or Fifth Third, as the case may be, and shall not be used by Fifth
Third or Cumberland, as the case may be, in any way detrimental to
Cumberland or Fifth Third.
E. All notices under this Agreement or under the Agreement of
Merger shall be in writing and shall be sufficient in all respects
if delivered in person or mailed by certified mail, return receipt
requested, with postage prepaid and addressed, if to Cumberland to
Mr. H. David Hale, Chairman, President and Chief Executive Officer,
200 W. Broadway, Louisville, Kentucky 40202, with a copy to Keith
G. Hanley, Esq., Brown, Todd & Heyburn, 3200 Capital Holding
Center, Louisville, Kentucky 40202-3363; if to Fifth Third, to Mr.
George A. Schaefer, Jr., President and Chief Executive Officer,
Fifth Third Bancorp, 38 Fountain Square Plaza, Cincinnati, Ohio
45263, with a copy to Paul L. Reynolds, Esq., Vice President and
Counsel, Fifth Third Bancorp, Legal Division, 38 Fountain Square
Plaza, 2nd Floor, Cincinnati, Ohio 45263 and another copy to S.
Richard Arnold, Esq., Dinsmore & Shohl, 1900 Chemed Center, 255 E.
Fifth Street, Cincinnati, Ohio 45202-3172. Such notices shall be
deemed to be received when delivered in person or when deposited in
the mail by certified mail, return receipt requested with postage
prepaid.
F. This Agreement and the Agreement of Merger (which together shall
constitute a single agreement), together with the written
instruments specifically referred to herein and such other written
agreements delivered by Fifth Third or Cumberland to each other
pursuant hereto constitute the entire agreement between the parties
with regard to the transactions contemplated herein and in the
Agreement of Merger and supersede any prior agreements, whether
oral or in writing (except that they do not supersede the
Confidentiality Agreement dated March 9, 1993 between Fifth Third
and Cumberland). This Agreement and the Agreement of Merger may be
hereafter amended only by a written instrument executed by each of
the parties pursuant to Section X hereof.
G. During the period from the date of this Agreement to the
Effective Time, except with the prior approval of Fifth Third,
Cumberland shall not, and shall not permit its representatives to,
directly or indirectly, subject to the exercise by the Directors of
Cumberland of their fiduciary duties, initiate, solicit, negotiate
with, encourage discussions with, provide information to, or agree
to a transaction with, any corporation, partnership, person or
other entity or group concerning any merger in which neither
Cumberland nor Thrift Subsidiary is the acquiror or any sale of
substantial assets, sale of shares of capital stock (or securities
convertible or exchangeable into or otherwise evidencing, or any
agreement or instrument evidencing, the right to acquire capital
stock) or similar transaction involving Cumberland or Thrift
Subsidiary (any such transaction being referred to herein as an
"Acquisition Transaction"). Subject to the exercise by the
Directors of Cumberland of their fiduciary duties, Cumberland shall
promptly communicate to Fifth Third the terms of any proposal which
it may receive in respect of an Acquisition Transaction and any
request by or indication of interest on the part of any third party
with respect to initiation of any Acquisition Transaction or
discussions with respect thereto.
H. Attached hereto as Appendix E is a Stock Option Agreement that
grants Fifth Third an option to purchase up to 479,585 authorized
but unissued shares of Cumberland Common Stock at an exercise price
of $47 per share upon the occurrence of certain events and subject
to the terms and conditions of such Stock Option Agreement. Such
Stock Option Agreement is hereby incorporated by reference herein
in its entirety.
I. Fifth Third and Cumberland shall each indemnify and hold the
other harmless for any claim, liability or expense (including
reasonable attorneys' fees) arising from a misstatement or omission
in the applications submitted to regulatory agencies for approval
of the transaction contemplated by this Agreement and the Agreement
of Merger relating to the indemnifying party which is based or made
in reliance upon any misstatement or omission in any
representation, warranty, or covenant of such party in this
Agreement or any certification, document, or other information
furnished or to be furnished by such party pursuant to this
Agreement. From and after the Effective Time, this subsection
shall be of no further force or effect.
J. 1. Cumberland and Thrift Subsidiary agree to cooperate with the
Fifth Third affiliate, Midwest Payment Systems, Inc. ("MPS"), to
convert at the Effective Time all electronic funds transfer ("EFT")
related services to MPS and the Jeanie (Registered) system. Any
agreement to convert shall provide that MPS will be the exclusive
provider of such services to Cumberland and Thrift Subsidiary for
a period of five (5) years from the date such agreements are
executed. Fifth Third agrees that the cost of the conversion of
Cumberland or Thrift Subsidiary to EFT provided by MPS and
conversion to the Jeanie (Registered) system (including, without
limitation, the cost of all card reissue, signage and penalties
relating to terminating its current EFT relationships) will be paid
by Fifth Third. Fifth Third further agrees that the costs and fees
to Cumberland and Thrift Subsidiary for the Jeanie (Registered)
service shall not exceed those charged by the current EFT service
provider of Cumberland and Thrift Subsidiary, subject to any
increases in such costs and fees which would otherwise be permitted
under their current EFT processing agreements. In the event this
Agreement is terminated pursuant to Section VIII hereof for any
reason except a material breach or default by Cumberland or the
occurrence of any of the events specified in Section 3(b) of the
Stock Option Agreement attached hereto as Appendix E, and if, in
such instance, Cumberland desires to convert to another provider of
EFT services, Fifth Third shall pay all costs and expenses
associated with such conversion, provided, however, such costs and
expenses are reasonable when compared to costs and expenses
ordinarily charged in the EFT services industry. In no event shall
Cumberland or Thrift Subsidiary be required to take any actions
pursuant to this Paragraph J or otherwise under this Agreement or
the Agreement of Merger that are contrary to any applicable law,
regulation, rule or order or which constitute a breach of the
fiduciary duties of the Directors of Cumberland or Thrift
Subsidiary. Cumberland shall give reasonable consideration to any
Fifth Third proposal to effect, or begin effecting, a conversion
prior to the Effective Time.
2. Cumberland and Thrift Subsidiary agree to cooperate with Fifth
Third or an affiliate of Fifth Third to convert at the Effective
Time the provision of any and all data processing services
including, without limitation, item processing and application
processing to Fifth Third's systems. Fifth Third agrees that it
will assume any and all expense related to the conversion to such
Fifth Third services and that the costs and fees payable by
Cumberland and Thrift Subsidiary for such services shall not exceed
the costs and fees payable by Cumberland and Thrift Subsidiary
under existing agreements for such services, subject to any
increases in such cost and fees which would otherwise be permitted
under their current agreements for such services. In the event
that Fifth Third determines that a third party should provide such
services to Cumberland and Thrift Subsidiary, Cumberland and Thrift
Subsidiary agree to have such services provided by the third party
recommended for such purpose by Fifth Third provided that the cost
and fees for such services do not exceed those currently being
paid, or which may otherwise be payable by Cumberland and Thrift
Subsidiary under existing agreements. In the event this Agreement
is terminated pursuant to Section VIII hereof for any reason except
a material breach or default by Cumberland or the occurrence of any
of the events specified in Section 3(b) of the Stock Option
Agreement attached hereto as Appendix E, and if, in such instance,
Cumberland desires to convert to another provider of data
processing services, Fifth Third shall pay all costs and expenses
associated with such conversion, provided, however, such costs and
expenses are reasonable when compared to costs and expenses
ordinarily charged in the data processing industry. In no event
shall Cumberland or Thrift Subsidiary be required to take any
actions pursuant to this Paragraph J.2. or otherwise under this
Agreement or the Agreement of Merger that are contrary to any
applicable law, regulation, rule or order or which constitute a
breach of the fiduciary duties of the Directors of Cumberland or
Thrift Subsidiary. Cumberland shall give reasonable consideration
to any Fifth Third proposal to effect, or begin effecting, a
conversion prior to the Effective Time.
K. Fifth Third and Cumberland agree that each will use its best
efforts to secure the regulatory approvals necessary to consummate
the transactions contemplated herein at the earliest practicable
time, and Cumberland agrees to cooperate with Fifth Third and Fifth
Third agrees to cooperate with Cumberland in all reasonable
respects in securing such approvals.
L. Fifth Third and Cumberland shall agree with each other as to the
form and substance of any press release related to this Agreement
and the Agreement of Merger or the transactions contemplated hereby
and thereby, and shall consult with each other as to the form and
substance of other public disclosures related thereto, provided,
however, that nothing contained herein shall prohibit either party
from making any disclosure which its counsel deems required by law.
M. Each party hereto shall bear and pay all costs and expenses
incurred by it in connection with the transactions contemplated by
this Agreement and the Agreement of Merger, including, without
limitation, fees, costs and expenses of its own financial
consultants, investment bankers, accountants and counsel, without
reduction or modification in the number of shares of Fifth Third
Common Stock to be issued hereunder.
N. 1. Between the date hereof and the Closing Date, Cumberland
shall promptly advise Fifth Third in writing of any fact that, if
existing or known at the date hereof, would have been required to
be set forth or disclosed in or pursuant to this Agreement or of
any fact that, if existing or known at the date hereof, would have
made any of the representations contained herein untrue to any
material extent.
2. Between the date hereof and the Closing Date, Fifth Third shall
promptly advise Cumberland in writing of any fact that, if existing
or known at the date hereof, would have been required to be set
forth or disclosed in or pursuant to this Agreement or of any fact
that, if existing or known at the date hereof, would have made any
of the representations contained herein untrue to any material
extent.
O. Cumberland agrees as follows:
(1) Except as provided in (3) below, Cumberland shall take no
action which would have the effect, directly or indirectly, of
increasing the level of vested benefits provided through its
participation in the Financial Institutions Retirement Fund
("FIRF") or the Financial Institutions Thrift Plan ("FITP") (except
benefits that will increase simply by the passage of time or by the
earning of additional compensation by employees otherwise permitted
by this Agreement before the Effective Time);
(2) Except as provided in (3) below, Cumberland shall take no
action which would have the effect, directly or indirectly, of
decreasing the projected July 1, 1994 FECO attributable to
Cumberland's participation in the Financial Institutions Retirement
Fund, as disclosed by said Fund in its letter dated December 17,
1993 to Thrift Subsidiary, (the "1994 Projected FECO") (except
decreases resulting from increases in benefits simply by the
passage of time or by the earning of additional compensation by
employees otherwise permitted by this Agreement or investment gains
or losses before the Effective Time); and
(3) Notwithstanding (1) and (2) above, Cumberland may amend the
terms of its participation in the FIRF to provide for an increase
in vested benefits provided that said increase may not cause a
reduction in the 1994 Projected FECO of more than $785,000
(determined using the same actuarial assumptions as used in
determining the 1994 Projected FECO); and provided further that
Fifth Third and its actuaries are given the opportunity to review
said amendment at leat 15 days in advance of its adoption; and
provided further that said amendment is adopted no later than 60
days after the date of this Affiliation Agreement.
(4) Cumberland shall permit Fifth Third and its actuaries and
advisors to conduct whatever reasonable review and due diligence
they determine appropriate in connection with the determination of
the FECO (as that term is used in Paragraph VII.O.2 hereof), the
amendment permitted under Paragraph VII.O.3 hereof and the FIRF
generally. This shall include but not be limited to the conducting
of employee surveys to project which employees will elect to
transfer their benefit from the FIRF to the Fifth Third Bancorp
Master Retirement Plan.
P. Fifth Third agrees as follows:
(A) Upon the transfers to the Fifth Third Bancorp Master Retirement
Plan, said Plan shall assume the obligation to provide the
transferring employees their FIRF accrued benefit determined and
frozen as of the Effective Time (and shall accept the corresponding
transfer of assets from the FIRF). The Fifth Third Master
Retirement Plan shall be amended to provide, to the maximum extent
permitted by law, the same rights to the employees with respect to
their transferred benefits as they would have had if they had not
transferred their benefits from FIRF.
(B) Each employee of Cumberland and Thrift Subsidiary who has an
accrued benefit under the FIRF and who will be employed by Fifth
Third or a Fifth Third subsidiary or affiliate immediately after
the Effective Time shall become participants immediately after the
Effective Time in the Fifth Third Bancorp Master Retirement Plan
and the Fifth Third Bancorp Master Profit Sharing Plan on the same
terms as other Fifth Third employees; and they shall receive credit
under said plans for vesting and eligibility purposes (but not for
benefit accrual purposes) for service that was taken into account
under the FIRF. For the purpose of benefit accrual under such
plans, all service with Fifth Third or a Fifth Third affiliate or
subsidary after the Effective Time shall be credited.
(C) The Fifth Third Bancorp Master Retirement Plan shall be amended
to provide a one-time benefit enhancement for each employee of
Cumberland and Thrift Subsidiary who has his accrued benefit (and
the corresponding assets) transferred to it from the FIRF pursuant
to an election made no later than a reasonable time after the
Effective Time. The one-time benefit enhancement shall be designed
by the actuaries for the Fifth Third Bancorp Master Retirement Plan
to have a cost (using the actuarial assumptions they reasonably
deem appropriate) in the aggregate to that Plan of not less than
$215,000; provided that if the 1944 Projected FECO is reduced by
less than $785,000 (determined using the same actuarial assumptions
as used in determining the 1994 Projected FECO) by any benefit
increase Cumberland is permitted to make pursuant to Paragraph
VII.O. (3) above, then the difference shall be added to said
$215,000 benefit enhancement under the Fifth Third Bancorp Master
Retirement Plan. In determining the cost of the benefit
enhancement, the actuaries shall assume that each employee of
Cumberland and Thrift Subsidiary who has an accrued benefit under
the FIRF and who will be employed by Fifth Third or a Fifth Third
subsidiary or affiliate immediately after the Effective Time will
have his accrued benefit under the FIRF transferred in a manner to
qualify for the one-time benefit enhancement. Notwithstanding the
foregoing, in no event shall the cost of the benefit enhancement
exceed the amount of the "FECO" actually transferred to the Fifth
Third Bancorp Master Retirement Plan.
VIII. Termination
A. This Agreement and the Agreement of Merger may be terminated at
any time prior to the Effective Time by written notice delivered by
Fifth Third to Cumberland or by Cumberland to Fifth Third in the
following instances:
1. By Fifth Third or Cumberland, if there has been a material
misrepresentation, a material breach of warranty or a material
breach of any covenant on the part of the other party with respect
to the representations, warranties, and covenants set forth herein
and such misrepresentation or breach has not been cured (if capable
of timely cure) within ten (10) days after receipt of written
notice, provided, the party in default shall have no right to
terminate for its own default.
2. By Fifth Third or Cumberland, if the business or assets or
financial condition of the other party shall have materially and
adversely changed from that in existence at September 30, 1993.
3. By Fifth Third or Cumberland, if the merger transaction
contemplated herein has not been consummated by December 31, 1994,
provided the terminating party is not in material breach or default
of any material representation, warranty or covenant contained
herein on the date of such termination.
4. By Fifth Third or Cumberland if the holders of ten percent (10%)
or more of the outstanding shares of Cumberland Common Stock shall
have perfected their rights as dissenting shareholders pursuant to
KRS sections 271B.13-010 et. seq.
5. By Cumberland, if its Board of Directors so determines by a
majority vote of the members of its entire Board, at any time
during the three-day period ending on the business day immediately
prior to the Closing Date if both of the following conditions are
satisfied:
(i) the Average Closing Price on the Determination Date of
shares of Fifth Third Common Stock shall be less than $41.75
(adjusted as indicated below in the last sentence of this Paragraph
VIII.A.5); and
(ii) (A) the number obtained by dividing the Average Closing
Price on such Determination Date by the Starting Price shall be
less than (B) the number obtained by dividing the Index Price on
the Determination Date by the Index Price on the Starting Date and
subtracting 0.15 from the quotient obtained in this clause (ii)(B);
subject, however, to the following sentence. If Cumberland elects
to exercise its termination right pursuant to this Paragraph
VIII.A.5, it shall give prompt written notice to Fifth Third
(provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned three-day period).
For purposes of this Paragraph VIII.A.5, the following terms shall
have the meanings indicated:
"Average Closing Price" shall mean the average of the per share
closing prices of Fifth Third Common Stock as reported on the
NASDAQ National Market System for the 20 trading days ending on the
fifth trading day prior to the Closing Date as reported in The Wall
Street Journal, expressed in decimal figures carried to five
places.
"Determination Date" means the fifth trading day prior to the
Closing Date.
"Index Group" means the 13 bank holding companies listed below,
the common stock of all of which shall be publicly traded and as to
which there shall not have been a publicly announced proposal since
the Starting Date and before the Determination Date for any such
company to be acquired. In the event that the common stock of any
such company ceases to be publicly traded or a proposal to acquire
any such company is announced after the Starting Date and before
the Determination Date, such company will be removed from the Index
Group, and the weights attributed to the remaining companies will
be adjusted proportionately for purposes of determining the Index
Price. The 13 bank holding companies and the weights attributed to
them are as follows:
BANK HOLDING COMPANY MARKET WEIGHTING FACTOR
CAPITALIZATION
($ MILLION)
BancOne Corp. 12,576 0.23
Norwest Corporation 6,906 0.12
PNC Bank Corp. 6,799 0.12
NBD Bancorp, Inc. 4,819 0.09
National City Corporation 3,917 0.07
First Bank System, Inc. 3,524 0.06
Comerica Incorporated 3,155 0.06
CoreStates Financial Corp 3,048 0.05
State Street Boston
Corporation 2,767 0.05
Huntington Bancshares
Incorporated 2,248 0.04
Northern Trust Corporation 2,138 0.04
Firstar Corporation 1,969 0.04
Marshall & Ilsley
Corporation 1,431 0.03
TOTALS 55,297 1.00
"Index Price," on a given date, means the weighted average
(weighted in accordance with the Weighing Factors above, which were
calculated with reference to the market capitalizations listed
above) of the closing prices on such date of the common stocks of
the companies comprising the Index Group.
"Starting Date" means the close of business on January 10, 1994,
the last trading day before the public announcement of the merger
transaction contemplated by this Agreement.
"Starting Price" means the per share closing price of Fifth Third
Common Stock as reported on the NASDAQ National Market System on
the Starting Date.
If Fifth Third or any company belonging to the Index Group declares
or effects a stock dividend, reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction
between the Starting Date and the Determination Date, the prices
for the common stock of such company shall be appropriately
adjusted for the purposes of applying this Paragraph VIII.A.5.
6. By the mutual written consent of Fifth Third and Cumberland.
7. By Cumberland if the Applicable Market Value Per Share of Fifth
Third Common Stock (as defined in the Agreement of Merger) is
$37.50 or less.
B. If the Cumberland shareholders, acting at a meeting held for the
purpose of voting upon this Agreement and the Agreement of Merger,
fail to approve such agreements in the manner required by law, then
this Agreement and the Agreement of Merger shall be deemed to be
automatically terminated.
C. Upon termination as provided in this Section, this Agreement and
the Agreement of Merger, except for the provisions of Paragraphs D,
J and L of Section VII hereof and except as provided in Paragraph
H of Section VII hereof, shall be void and of no further force or
effect, and, except as provided in Paragraphs H and J of Section
VII hereof, neither party hereto not in material breach or default
of its representations, warranties and covenants hereunder shall
have any liability of any kind to the other party including but not
limited to liability for expenses incurred by the other party in
connection with this transaction; provided that no such termination
shall relieve a breaching party from liability for any uncured
willful breach of a covenant, undertaking, representation or
warranty giving rise to such termination.
IX. Closing and Effective Time
The consummation of the transactions contemplated by this Agreement
and the Agreement of Merger shall take place at a closing to be
held at 9:00 A.M. at the offices of Fifth Third in Cincinnati, Ohio
on the last business day of the month in which all of the
conditions precedent to closing set forth in Section VI hereof,
including the 30-day waiting period required by any banking or
thrift regulatory agency after its approval of the Merger is issued
before the transaction may be consummated, have been fully met or
effectively waived (the "Closing Date"). Pursuant to the filing of
a certificate or articles of merger (which shall be acceptable to
Cumberland and Fifth Third) with the Secretaries of State of Ohio
and Kentucky in accordance with law, this Agreement and the
Agreement of Merger, the Merger provided for herein and in the
Agreement of Merger shall become effective at the close of business
on said day (the "Effective Time"). By mutual agreement of the
parties, the closing may be held at any other time or place or on
any other date and the effectiveness of the Merger (and the
Effective Time) may be changed by such mutual agreement.
X. Amendment
This Agreement may be amended, modified or supplemented by the
written agreement of Cumberland and Fifth Third upon the
authorization of each company's respective Board of Directors and
without further approval of Cumberland's shareholders, except that
no such amendment, modification or supplement may be effected
without Cumberland shareholder approval if to do so would violate
any applicable provisions of Ohio or Kentucky corporate law.
XI. General
This Agreement was made in the State of Ohio and shall be
interpreted under the laws of the United States and the State of
Ohio. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns but none of the
provisions hereof shall inure to the benefit of any other person,
firm or corporation whomsoever, except that the provisions of
Paragraphs V.C., VII.B., VII.C. and VII.P. also are for the benefit
of the Cumberland and Thrift Subsidiary Directors, officers and
employees who are the subject thereof, and that such persons
accordingly may enforce such provisions or seek damages for the
breach thereof. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned or transferred
by operation of law or otherwise by any party hereto without the
prior written consent of the other party; provided, however, that
the merger, consolidation or sale of all or substantially all of
the assets of Fifth Third shall not be deemed an assignment
hereunder if Fifth Third is the surviving corporation in such
merger, consolidation or sale of all or substantially all of the
assets of Fifth Third and its Common Stock shall thereafter
continue to be publicly traded and issuable to Cumberland
shareholders pursuant to the terms of this Agreement and the
Agreement of Merger.
XII. Counterparts
This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original for all purposes but such
counterparts taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Affiliation Agreement as of the date hereinabove set forth.
FIFTH THIRD BANCORP
(SEAL)By:
George A. Schaefer, Jr.
President and Chief Executive
Officer
Attest:
Michael K. Keating
Assistant Secretary
THE CUMBERLAND FEDERAL
BANCORPORATION, INC.
(SEAL)By:
H. David Hale
Chairman, President and Chief Executive Officer
Attest:
Michael A. Ringswald
Secretary
ANNEX B
PLAN AND AGREEMENT OF MERGER
OF
THE CUMBERLAND FEDERAL BANCORPORATION, INC.
(a Kentucky Corporation)
with and into
FIFTH THIRD BANCORP
(an Ohio Corporation)
under the name
FIFTH THIRD BANCORP
Dated as of January 10, 1994
TABLE OF CONTENTS
PARTIES AND RECITALS
ARTICLE I JURISDICTIONS
ARTICLE II THE MERGER
ARTICLE III ARTICLES OF INCORPORATION
ARTICLE IV DIRECTORS AND OFFICERS
ARTICLE V REGULATIONS
ARTICLE VI SERVICE OF PROCESS
ARTICLE VII MODE OF EFFECTUATING CONVERSION OF SHARES
ARTICLE VIII VESTING OF PROPERTIES AND OTHER MATTERS
ARTICLE IX REPRESENTATIONS AND AGREEMENTS OF SURVIVING
CORPORATION
ARTICLE X APPROVAL AND ADOPTION BY DIRECTORS AND SHAREHOLDERS;
EFFECTIVE TIME
ARTICLE XI AMENDMENT; TERMINATION; ASSIGNMENT
SIGNATURES
PLAN AND AGREEMENT OF MERGER
of
THE CUMBERLAND FEDERAL BANCORPORATION, INC.
(a Kentucky Corporation)
with and into
FIFTH THIRD BANCORP
(an Ohio Corporation)
under the name
FIFTH THIRD BANCORP
THIS PLAN AND AGREEMENT OF MERGER (the "Agreement of Merger") dated
as of January 10, 1994, between THE CUMBERLAND FEDERAL
BANCORPORATION, INC., Louisville, Jefferson County, Kentucky, a
Kentucky corporation (hereinafter called "Cumberland"), and FIFTH
THIRD BANCORP, Cincinnati, Hamilton County, Ohio, an Ohio
corporation (hereinafter sometimes called the "Surviving
Corporation" or "Fifth Third"), Cumberland and Fifth Third being
hereinafter sometimes collectively called "the Constituent
Corporations";
W I T N E S E T H:
WHEREAS, the Constituent Corporations deem it advisable for their
benefit respectively, and for the benefit of their respective
shareholders, that Cumberland merge into Fifth Third pursuant to
this Agreement and the applicable provisions of the laws of the
States of Ohio and Kentucky;
NOW, THEREFORE, the Constituent Corporations hereby agree each with
the other, in accordance with the applicable provisions of the laws
of the States of Ohio and Kentucky, that Cumberland shall merge
into Fifth Third with Fifth Third as the Surviving Corporation and
that the terms and conditions of such merger (the "Merger") hereby
agreed upon and the mode of carrying the same into effect are and
shall be as follows:
ARTICLE I
JURISDICTIONS
The jurisdictions under the laws of which each of the Constituent
Corporations exists are as follows: Fifth Third is a corporation
which exists under the laws of the State of Ohio and Cumberland is
a corporation which exists under the laws of the Commonwealth of
Kentucky.
ARTICLE II
THE MERGER
When this Agreement shall have been approved and adopted and shall
have been filed and recorded along with other necessary documents
in accordance with the laws of the States of Ohio and Kentucky, and
the Merger becomes effective, the separate existence of Cumberland
shall cease and Cumberland shall be merged into Fifth Third which
will be the Surviving Corporation and which shall continue its
corporate existence under the laws of the State of Ohio under the
name "Fifth Third Bancorp".
ARTICLE III
ARTICLES OF INCORPORATION
The Second Amended Articles of Incorporation, as amended, of Fifth
Third of record with the Secretary of State of Ohio at the time the
Merger becomes effective in accordance with the provisions of
Section 4 of Article X hereof (which are incorporated by reference
herein and made a part of this Agreement of Merger as though set
out in full in the body hereof) shall be the Articles of
Incorporation of the Surviving Corporation, until further amended
as provided by law.
ARTICLE IV
DIRECTORS AND OFFICERS
The Directors of Fifth Third who are in office at the time the
Merger becomes effective shall be the Directors of the Surviving
Corporation, each of whom shall continue to serve as a Director for
the term for which he was elected, subject to the Regulations of
the Surviving Corporation and in accordance with law. The officers
of Fifth Third who are in office at the time the Merger becomes
effective shall be the officers of the Surviving Corporation,
subject to the Regulations of the Surviving Corporation and in
accordance with law.
ARTICLE V
REGULATIONS
The Regulations of Fifth Third at the time the Merger becomes
effective shall be the Regulations of the Surviving Corporation,
until amended as provided therein and in accordance with law.
ARTICLE VI
SERVICE OF PROCESS
The names and addresses of the statutory agents of each of the
Constituent Corporations and the Surviving Corporation upon whom
any process, notice or demand may be served are as follows: the
statutory agent for Fifth Third, one of the Constituent
Corporations and the Surviving Corporation, is George A. Schaefer,
Jr., 38 Fountain Square Plaza, Cincinnati, Hamilton County, Ohio
45263; the registered agent for Cumberland, one of the Constituent
Corporations, is Michael A. Ringswald, 200 W. Broadway, Louisville,
Kentucky 40202.
ARTICLE VII
MODE OF EFFECTUATING CONVERSION OF SHARES
1. At the time the Merger becomes effective:
(a) All of the shares of the Common Stock without par value of
Fifth Third ("Fifth Third Common Stock") that are issued and
outstanding or held by Fifth Third as treasury shares immediately
prior to the time the Merger becomes effective will remain
unchanged and will remain outstanding or as treasury shares, as the
case may be, when the Merger becomes effective as shares of the
Common Stock without par value of the Surviving Corporation. Any
stock options, subscription rights, warrants or other securities
outstanding immediately prior to the time the Merger becomes
effective, entitling the holders to subscribe for or purchase any
shares of the capital stock of any class of Fifth Third, and any
securities outstanding at such time that are convertible into
shares of the capital stock of any class of Fifth Third will remain
unchanged and will remain outstanding when the Merger becomes
effective with the holders thereof entitled to subscribe for,
purchase or convert their securities into the number of shares of
the class of capital stock of Fifth Third to which they are
entitled under the terms of the governing documents.
(b) Each of the shares of the Common Stock, $1 par value per share,
of Cumberland ("Cumberland Common Stock") (but not including any
shares held as treasury shares) that is issued and outstanding
immediately prior to the time the Merger becomes effective shall,
when the Merger becomes effective, be converted by virtue of the
Merger and without further action, into such number of shares of
Fifth Third Common Stock as determined in accordance with the
following:
(i) If the Applicable Market Value Per Share of Fifth Third Common
Stock (as hereinafter defined) is equal to or greater than $57.00,
each share of Cumberland Common Stock (but not including any shares
held as treasury shares) shall be converted into one (1) whole
share of Fifth Third Common Stock. The "Applicable Market Value
Per Share of Fifth Third Common Stock" shall be the average of the
per share closing prices of Fifth Third Common Stock as reported on
the NASDAQ National Market System for the twenty (20) trading days
ending on the fifth trading day prior to the time the Merger
becomes effective (the "Valuation Period");
(ii) If the Applicable Market Value Per Share of Fifth Third
Common Stock is less than $57.00 and equal to or greater than
$47.50, each share of Cumberland Common Stock (but not including
any shares held as treasury shares) shall be converted into that
number of shares of Fifth Third Common Stock equal to the quotient
obtained by dividing $57.00 by the Applicable Market Value Per
Share of Fifth Third Common Stock; or
(iii) If the Applicable Market Value Per Share of Fifth Third
Common Stock is less than $47.50, each share of Cumberland Common
Stock (but not including any shares held as treasury shares) shall
be converted into 1.2 shares of Fifth Third Common Stock.
Notwithstanding the foregoing, should such conversion of shares of
Cumberland Common Stock into shares of Fifth Third Common Stock
result in a Cumberland shareholder owning a fraction of a share of
Fifth Third Common Stock, such shareholder's shares of Cumberland
Common Stock shall be converted only into whole shares of Fifth
Third Common Stock and such shareholder shall be entitled to
receive a cash payment in lieu of such fraction of a share as
provided in paragraph 3 of this Article VII.
2. At the time the Merger becomes effective, all of the shares of
Cumberland Common Stock, whether issued or unissued (including
treasury shares), shall be converted into shares of Fifth Third
Common Stock and the holders of certificates for shares thereof
shall cease to have any rights as shareholders of Cumberland,
except such rights, if any, as they may be entitled to under the
provisions of KRS sections 271B.13-010 et. seq. with respect to the rights
of dissenting shareholders, and, except as aforesaid, their sole
rights as shareholders shall pertain to the Fifth Third Common
Stock and cash in lieu of fractional shares, if any (as described
in the immediately succeeding paragraph), into which their
Cumberland Common Stock shall have been converted by virtue of the
Merger. Any stock options outstanding under the Cumberland Stock
Incentive Plan shall continue outstanding as an option to purchase
upon payment of the full exercise price in place of the purchase of
shares of Cumberland Common Stock, the number of shares of Fifth
Third Common Stock that would have been received by the optionee in
the Merger had the option been exercised in full for shares of
Cumberland immediately prior to the time the Merger becomes
effective, all as in accord with Paragraph C of Section V of the
Affiliation Agreement dated the same date hereof between Fifth
Third and Cumberland (the "Affiliation Agreement").
3. After the time the Merger becomes effective, each holder of a
certificate or certificates for shares of Cumberland Common Stock,
upon surrender of the same duly transmitted to Fifth Third (or in
lieu of surrendering such certificates in the case of lost, stolen,
destroyed or mislaid certificates, upon execution of such
documentation as may be reasonably required by Fifth Third), shall
be entitled to receive in exchange therefor a certificate or
certificates representing the number of whole shares of Fifth Third
Common Stock into which such holder's shares of Cumberland Common
Stock shall have been converted by the Merger, plus a cash payment
for any fraction of a share to which the holder is entitled, in
lieu of such fraction of a share, equal in amount to the product
resulting from multiplying such fraction by the Applicable Market
Value Per Share of Fifth Third Common Stock determined in
accordance with the provisions of paragraph 1(b) of this Article
VII. Until so surrendered, each outstanding certificate that prior
to the time the Merger becomes effective represented shares of
Cumberland Common Stock shall be deemed for all corporate purposes
to evidence ownership of the number of full shares of Fifth Third
Common Stock into which the same shall have been converted;
provided, however, that dividends or distributions otherwise
payable with respect to shares of Fifth Third Common Stock into
which Cumberland Common Stock shall have been so converted shall be
paid with respect to such shares only when the certificate or
certificates evidencing shares of Cumberland Common Stock shall
have been so surrendered (or in lieu of surrendering such
certificates in the case of lost, stolen, destroyed or mislaid
certificates, upon execution of such documentation as may be
reasonably required by Fifth Third) and thereupon any such
dividends and distributions shall be paid, without interest, to the
holder entitled thereto subject however to the operation of any
applicable escheat or similar laws relating to unclaimed funds.
4. The conversion ratios and dollar amounts referred to in Section
1(b) of this Article VII shall be adjusted so as to give the
Cumberland shareholders the economic benefit of any stock
dividends, reclassifications, recapitalizations, split-ups,
exchanges of shares, distributions or combinations or subdivisions
of Fifth Third Common Stock effected between the date of this
Agreement and the time the Merger becomes effective.
ARTICLE VIII
VESTING OF PROPERTIES AND OTHER MATTERS
1. At the time the Merger becomes effective, the effect shall be as
provided by the applicable provisions of the laws of Ohio and
Kentucky. Without limiting the generality of the foregoing, and
subject thereto, at the time the Merger becomes effective: the
separate existence of Cumberland shall cease; the Surviving
Corporation shall possess all assets and property of every
description, and every interest therein, wherever located, and the
rights, privileges, immunities, powers, franchises and authority,
of a public as well as of a private nature, of each of the
Constituent Corporations, and all obligations owing by or due each
of the Constituent Corporations, shall be vested in, and become the
obligations of, the Surviving Corporation, without further act or
deed, including without limitation any liability to dissenting
shareholders under KRS sections 271B.13-010 et.seq.; and all rights of
creditors of each Constituent Corporation shall be preserved
unimpaired, and all liens upon the property of each of the
Constituent Corporations shall be preserved unimpaired, on only the
property affected by such liens immediately prior to the time the
Merger becomes effective.
2. From time to time as and when requested by the Surviving
Corporation, or by its successors or assigns, the officers and
Directors of Cumberland in office at the time the Merger becomes
effective shall execute and deliver such instruments and shall take
or cause to be taken such further or other action as shall be
necessary in order to vest or perfect in the Surviving Corporation
or to confirm of record or otherwise, title to, and possession of,
all the assets, property, interests, rights, privileges,
immunities, powers, franchises and authority of Cumberland and
otherwise to carry out the purposes of this Agreement.
ARTICLE IX
REPRESENTATIONS AND AGREEMENTS OF SURVIVING CORPORATION
1. Fifth Third, the Surviving Corporation, agrees that it may be
served with process in Kentucky in any proceeding for the
enforcement of any obligation of Cumberland, one of the Constituent
Corporations, and in any proceeding for the enforcement of the
rights of a dissenting shareholder of Cumberland against the
Surviving Corporation.
2. Fifth Third, the Surviving Corporation, irrevocably appoints
the Secretary of State of Kentucky as its agent to accept service
of process in any such proceeding referred to in Section 1 of this
Article IX. The address of Fifth Third to which a copy of such
process should be mailed by the Secretary of State of Kentucky is
set forth in Article VI of this Agreement.
3. Fifth Third, the Surviving Corporation, agrees that it will
promptly pay to any dissenting shareholders of Cumberland, one of
the Constituent Corporations, if not previously paid by Cumberland,
the amount, if any, to which they shall be entitled under the
provisions of KRS sections 271B.13-010 et.seq. with respect to the rights
of dissenting shareholders.
ARTICLE X
APPROVAL AND ADOPTION BY DIRECTORS AND SHAREHOLDERS;
EFFECTIVE TIME
1. Fifth Third, the Surviving Corporation, represents and
warrants that the Board of Directors of Fifth Third duly has
approved this Agreement of Merger; Division (D) of Section 1701.78
of the Ohio Revised Code does not require adoption of this
Agreement of Merger by the shareholders of Fifth Third; and
pursuant to Division (H) of Section 1701.78 of the Ohio Revised
Code, the approval of this Agreement of Merger by the Directors of
Fifth Third shall constitute adoption by Fifth Third.
2. Cumberland, one of the Constituent Corporations, represents
and warrants that the Directors of Cumberland have by resolution
adopted by them, approved this Agreement of Merger and directed
that this Agreement of Merger be submitted to a vote of the
shareholders entitled to vote in respect thereof at a meeting of
stockholders held for such purpose. Notice of such meeting as
required by the provisions of Kentucky corporate law and the Bylaws
of Cumberland shall be duly given.
3. Cumberland, one of the Constituent Corporations, represents
and warrants that this Agreement of Merger is required to be
approved and adopted by the affirmative vote of the holders of a
majority of the issued and outstanding shares of Cumberland
entitled to vote in respect thereof, in accordance with the
provisions of Kentucky corporate law and the Articles of
Incorporation and Bylaws of Cumberland.
4. This Agreement shall be filed and recorded along with a
Certificate of Merger or Articles of Merger in accordance with the
requirements of the laws of the States of Ohio and Kentucky and
shall become effective at the close of business on the day this
Agreement and other necessary documents are filed (unless another
date is specified in the Certificate or Articles of Merger) with
the Secretaries of State of Ohio and Kentucky. This Agreement
shall not be filed with the Secretaries of State of Ohio and
Kentucky until, but shall be filed promptly after, all of the
conditions precedent to consummating the Merger as contained in
Section VI of the Affiliation Agreement shall have been fully met
or effectively waived, the filing of this Agreement of Merger being
an acknowledgement that such conditions precedent have been fully
met or effectively waived.
ARTICLE XI
AMENDMENT; TERMINATION; ASSIGNMENT
1. At any time prior to the time the Merger becomes effective, the
Constituent Corporations may, from time to time, amend this
Agreement of Merger by mutual agreement authorized by their
respective Boards of Directors or Executive Committees (and whether
before or after the shareholders of Cumberland have approved and
adopted this Agreement of Merger) to facilitate the performance
thereof, to augment the intention of the parties in carrying out
the transactions provided for herein, to clarify any ambiguities
herein or to comply with any applicable regulation, order or
requirement of any governmental authority; provided, however, that
any such amendment shall be effected under, and strictly in
accordance with, the provisions of Section X of the Affiliation
Agreement.
2. This Agreement of Merger may be terminated by the parties
hereto prior to the time it becomes effective under the
circumstances provided in, and strictly in accordance with the
provisions of, Section VIII of the Affiliation Agreement.
3. This Agreement of Merger and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns but none of the
provisions hereof shall inure to the benefit of any other person,
firm or corporation whomsoever. Neither this Agreement of Merger
nor any of the rights, interests or obligations hereunder shall be
assigned or transferred by operation of law or otherwise by either
of the parties hereto without the prior written consent of the
other party; provided, however, that the merger, consolidation or
sale of all or substantially all of the assets of Fifth Third shall
not be deemed an assignment hereunder if Fifth Third is the
surviving corporation in such merger, consolidation or sale of all
or substantially all of the assets of Fifth Third and its Common
Stock shall thereafter continue to be publicly traded and issuable
to Cumberland shareholders pursuant to the terms of this Agreement
of Merger and the Affiliation Agreement.
4. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original for all purposes but such
counterparts taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
FIFTH THIRD BANCORP
(SEAL)By:
George A. Schaefer, Jr.
President and Chief Executive
Officer
Attest:
Michael K. Keating
Assistant Secretary
THE CUMBERLAND FEDERAL
BANCORPORATION, INC.
(SEAL) By:
H. David Hale
Chairman, President and
Chief Executive Officer
Attest:
Michael A. Ringswald
Secretary
ANNEX C
KENTUCKY 1988 BUSINESS CORPORATION ACT
Dissenters' Rights
Right to Dissent and Obtain Payment for Shares
271B.13-010 DEFINITIONS. -- As used in this subtitle:
(1)"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.
(2) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under KRS 271B.13-020 and who exercises that
right when and in the manner required by KRS 271B.13-200 to
271B.13-280.
(3) "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. In any transaction
subject to the requirements of KRS 271B.12-210 or exempted by KRS
271B.12-220(2), "fair value" shall be at least an amount required
to be paid under KRS 271B.12-220(2) in order to be exempt from the
requirements of KRS 271B.12-210.
(4) "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.
(5) "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 of the rights granted by a nominee
certificate on file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the
record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
271B.13-020 RIGHT TO DISSENT. -- (1) A shareholder shall be
entitled to dissent from, and obtain payment of the fair value of
his shares in the event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is
a party:
1. If shareholder approval is required for the merger by KRS
271B.11-040 or the articles of incorporation and the shareholder is
entitled to vote on the merger; or
2. If the corporation is a subsidiary that is merged with its
parent under KRS 271B.11-040;
(b) 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;
(c) 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;
(d) An amendment of the articles of incorporation that materially
and adversely affects rights in respect of a dissenter's shares
because it:
1. Alters or abolishes a preferential right of the shares to a
distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption
or repurchase, of the shares;
3. Excludes or limits the right of the shares to vote on any
matter other than a limitation by dilution through issuance of
shares or other securities with similar voting rights; or
4. Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under KRS 271B.6-040;
(e) Any transaction subject to the requirements of KRS 271B.12-210
or exempted by KRS 271B.12-220(2); or
(f) 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.
(2) A shareholder entitled to dissent and obtain payment for his
shares under this chapter shall not challenge the corporate action
creating his entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
271B.13-030 DISSENT BY NOMINEE AND BENEFICIAL OWNERS. -- (1) A
record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he shall dissent with
respect to all shares beneficially owned by any one (1) person and
notify the corporation in writing of the name and address of each
person on whose behalf he asserts dissenters' rights. The rights
of a partial dissenter under this subsection shall be determined as
if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to
shares held on his behalf only if:
(a) He 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
(b) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the
vote.
Procedure for Exercise of Dissenters' Rights
271B.13-200 NOTICE OF DISSENTERS' RIGHTS. -- (1) If proposed
corporate action creating dissenters' rights under KRS 271B.13-020
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 subtitle and the corporation
shall undertake to provide a copy of this subtitle to any
shareholder entitled to vote at the shareholders' meeting upon
request of that shareholder.
(2) If corporate action creating dissenters' rights under KRS
271B.13-020 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 KRS 271B.13-220.
271B.13-210 NOTICE OF INTENT TO DEMAND PAYMENT. -- (1) If proposed
corporate action creating dissenters' rights under KRS 271B.13-020
is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights:
(a) Shall deliver to the corporation before the vote is taken
written notice of his intent to demand payment for his shares if
the proposed action is effectuated; and
(b) Shall not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of
subsection (1) of this section shall not be entitled to payment for
his shares under this chapter.
271B.13-220 DISSENTERS' NOTICE. -- (1) If proposed corporate
action creating dissenters' rights under KRS 271B.13-020 is
authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who
satisfied the requirements of KRS 271B.13-210.
(2) The dissenters' notice shall be sent no later than ten (10)
days after the date the proposed corporate action was authorized by
the shareholders, or, if no shareholder authorization was obtained,
by the board of directors, and shall:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand
is received;
(c) 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 he acquired
beneficial ownership of the shares before that date;
(d) 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 notice provided in subsection
(1) of this section is delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230 DUTY TO DEMAND PAYMENT. -- (1) A shareholder who is
sent a dissenters' notice described in KRS 271B.13-220 shall demand
payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters'
notice pursuant to subsection (2)(c) of KRS 271B.13-220, and
deposit his certificates in accordance with the terms of the
notice.
(2) The shareholder who demands payment and deposits his share
certificates under subsection (1) of this section shall retain all
other rights of a shareholder until these rights are cancelled or
modified by the taking of the proposed corporate action.
(3) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the
dissenters' notice, shall not be entitled to payment for his shares
under this subtitle.
271B.13-240 SHARE RESTRICTIONS. -- (1) 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 KRS 271B.13-260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares shall retain all other rights of a
shareholder until these rights are cancelled or modified by the
taking of the proposed corporate action.
271B.13-250 PAYMENT. -- (1) Except as provided in KRS 271B.13-
270, as soon as the proposed corporate action is taken, or upon
receipt of a payment demand, the corporation shall pay each
dissenter who complied with KRS 271B.13-230 the amount the
corporation estimates to be the fair value of his shares, plus
accrued interest.
(2) The payment shall be accompanied by:
(a) 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 that year, a statement of changes
in shareholders' equity for that year, and the latest available
interim financial statements, if any;
(b) A statement of the corporation's estimate of the fair value of
the shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment under
KRS 271B.13-280.
271B.13-270 FAILURE TO TAKE ACTION. -- (1) 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.
(2) If after returning deposited certificates and releasing
transfer restrictions, the corporation takes the proposed action,
it shall send a new dissenters' notice under KRS 271B.13-220 and
repeat the payment demand procedure.
271B.13-270 AFTER-ACQUIRED SHARES. -- (1) A corporation may elect
to withhold payment required by KRS 271B.13-250 from a dissenter
unless he 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.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate
action, it shall estimate the fair value of the shares, plus
accrued interest, and shall pay this amount to each dissenter who
agrees to accept it in full satisfaction of his demand. The
corporation shall send with its offer a statement of its estimate
of the fair value of the shares, an explanation of how the interest
was calculated, and a statement of the dissenters' right to demand
payment under KRS 271B.13-280.
271B.13-290 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER. -- (1) A dissenter may notify the corporation in writing of
his own estimate of the fair value of his shares and amount of
interest due, and demand payment of his estimate (less any payment
under KRS 271B.13-250), or reject the corporation's offer under KRS
271B.13-270 and demand payment of the fair value of his shares and
interest due, if:
(a) The dissenter believes that the amount paid under KRS 271B.13-
250 or offered under KRS 271B.13-270 is less than the fair value of
his shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.13-250
within sixty (60) days after the date set for demanding payment; or
(c) 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.
(2) A dissenter waives his right to demand payment under this
section unless he shall notify the corporation of his demand in
writing under subsection (1) of this section within thirty (30)
days after the corporation made or offered payment for his shares.
Judicial Appraisal of Shares
271B.13-300 COURT ACTION. -- (1) If a demand for payment under
KRS 271B.13-280 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 and accrued interest. 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.
(2) The corporation shall commence the proceeding in the circuit
court of the county where a corporation's principal office (or, if
none in this state, its registered office) is located. If the
corporation is a foreign corporation without a registered office in
this state, it shall commence the proceeding in the county in this
state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign
corporation was located.
(3) 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
shall be served with a copy of the petition. Nonresidents may be
served by registered or certified mail or by publication as
provided by law.
(4) The jurisdiction of the court in which the proceeding is
commenced under subsection (2) of this section shall be 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 shall be entitled to the same discovery rights as
parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding shall be
entitled to judgment:
(a) For the amount, if any, by which the court finds the fair
value of his shares, plus interest, exceeds the amount paid by the
corporation; or
(b) For the fair value, plus accrued interest, of his after-
acquired shares for which the corporation elected to withhold
payment under KRS 271B.13-270.
271B.13-310 COURT COSTS AND COUNSEL FEES. -- (1) The court in an
appraisal proceeding commenced under KRS 271B.13-300 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 the corporation, except
that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds
equitable:
(a) 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 KRS 271B.13-200 to 271B.13-280; or
(b) Against either 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, vexatiously, or
not in good faith with respect to the rights provided by this
subtitle.
(3) 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.
ANNEX D
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Option Agreement") dated as of
January __, 1994, by and between THE CUMBERLAND FEDERAL
BANCORPORATION, INC., a Kentucky corporation, ("Cumberland"), and
FIFTH THIRD BANCORP, an Ohio corporation ("Fifth Third").
WITNESSETH
WHEREAS, the Boards of Directors of Cumberland and Fifth Third have
approved or are expected to approve an Affiliation Agreement dated
as of the date hereof (the "Affiliation Agreement") and have
adopted or are expected to adopt a related Plan and Agreement of
Merger dated as of the date hereof (such Affiliation Agreement and
Plan and Agreement of Merger together referred to herein as the
"Merger Agreements"), providing for certain transactions pursuant
to which Cumberland would be merged into Fifth Third; and
WHEREAS, as a condition to Fifth Third's entry into the Merger
Agreements and to induce such entry, Cumberland has agreed to grant
to Fifth Third the option set forth herein to purchase authorized
but unissued shares of the Common Stock, $1.00 par value per share,
of Cumberland ("Cumberland Common Stock").
NOW, THEREFORE, in consideration of the premises herein contained,
the parties agree as follows:
1. Definitions.
Capitalized terms defined in the Merger Agreements and used herein
shall have the same meanings as in the Merger Agreements.
2. Grant of Option.
Subject to the terms and conditions set forth herein, Cumberland
hereby grants to Fifth Third an option ("Option") to purchase up to
479,585 shares of Cumberland Common Stock, at a price of $47 per
share payable in cash as provided in Section 4 hereof; provided,
however, that in the event Cumberland issues or agrees to issue any
shares of Cumberland Common Stock (other than as permitted under
the Merger Agreements) at a price less than $47 per share (as
adjusted pursuant to Section 6 hereof), the exercise price shall be
equal to such lesser price.
3. Exercise of Option.
(a) Provided that (i) no preliminary or permanent injunction or
other order issued by any Federal or state court of competent
jurisdiction in the United States prohibiting the exercise of the
Option or the delivery of the shares to be issued under the Option
shall be in effect, (ii) any such exercise shall otherwise be
subject to compliance with applicable law, and (iii) Fifth Third is
not then in material breach of the Merger Agreements, Fifth Third
may exercise the Option in whole or in part at any time or from
time to time after the occurrence of both an Initial Triggering
Event and a Purchase Event (as defined in Section 3(c) hereof) if,
but only if, both the Initial Triggering Event and the Purchase
Event shall have occurred before this Option Agreement is
terminated in accordance with this Section 3(a). Provided that to
the extent the Option shall not have been exercised, it shall
terminate and be of no further force and effect (i) on the
Effective Time of the Merger or (ii) upon termination of the Merger
Agreements in accordance with the provisions thereof (other than a
termination resulting from a willful breach by Cumberland of any
covenant contained therein or, if an Initial Triggering Event has
occurred, failure of Cumberland's shareholders to approve the
Merger Agreements by the vote required under applicable law), or
(iii) six months after termination of the Merger Agreements due to
a willful breach by Cumberland of any covenant contained therein
or, if an Initial Triggering Event has occurred, failure of
Cumberland's shareholders to approve the Merger Agreements by the
vote required under applicable law; and provided further that any
such exercise shall be subject to compliance with applicable
provisions of law or (iv) Fifth Third or Cumberland receiving
written notice from the Board of Governors of the Federal Reserve
System (the "Board") or its staff to the effect that the exercise
of the Option pursuant to the terms of this Agreement is not
consistent with Section 3 of the Bank Holding Company Act of 1956,
as amended, or (v) Fifth Third or Cumberland receiving written
notice from the Office of Thrift Supervision or its staff to the
effect that the exercise of the Option pursuant to the terms of
this Option Agreement is not consistent with the Savings and Loan
Holding Company Act and regulations promulgated thereunder.
(b) As used herein, an "Initial Triggering Event" shall mean any
of the following events or transactions occurring after the date
hereof:
(i) any person (other than Cumberland, any Cumberland subsidiary,
Fifth Third or any affiliate of Fifth Third) shall have commenced
a bona fide tender or exchange offer to purchase shares of
Cumberland Common Stock such that upon consummation of such offer
such person would own or control 30% or more of the outstanding
shares of Cumberland Common Stock;
(ii) Cumberland or any Cumberland subsidiary, (1) without having
received Fifth Third's prior written consent, shall have entered
into an agreement with any person to, or (2) any person other than
in connection with a transaction to which Fifth Third has given its
prior written consent, shall have filed an application or notice
with any federal or state regulatory agency for clearance or
approval to, (x) merge or consolidate, or enter into any similar
transaction, with Cumberland or any Cumberland subsidiary,
(y) purchase, lease or otherwise acquire all or substantially all
of the assets of Cumberland or any Cumberland subsidiary or
(z) purchase or otherwise acquire (including by way of merger,
consolidation, share exchange or any similar transaction)
securities representing 30% or more of the voting power of
Cumberland or any Cumberland subsidiary;
(iii) any person (other than Cumberland or Fifth Third or their
subsidiaries or affiliates) shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 30% or
more of the outstanding shares of Cumberland Common Stock (the term
"beneficial ownership" for purposes of this Option Agreement having
the meaning assigned thereto in Section 13(d) of the Exchange Act
and the regulations promulgated thereunder);
(iv) any person (other than Cumberland or any Cumberland
subsidiary) shall have made a bona fide proposal to Cumberland by
public announcement or written communication that is or becomes the
subject of public disclosure to (x) acquire Cumberland or any
Cumberland subsidiary by merger, consolidation, purchase of all or
substantially all of its assets or any other similar transaction,
or (y) make an offer described in clause (i) above; or
(v) Cumberland shall have willfully breached any covenant
contained in the Merger Agreements which breach would entitle Fifth
Third to terminate the Merger Agreements and such breach shall not
have been cured prior to the Notice Date (as defined below).
As used in this Option Agreement, "person" shall have the meanings
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(c) For purposes of this Option Agreement, a "Purchase Event"
shall have occurred at such time as (i) any person (other than
Fifth Third or any Fifth Third subsidiary or affiliate) acquires
beneficial ownership of 30% or more of the then-outstanding shares
of Cumberland Common Stock, or (ii) Cumberland enters into an
agreement with another person (other than Fifth Third or any Fifth
Third subsidiary) pursuant to which such person is entitled to
acquire 30% or more of the then-outstanding shares of Cumberland
Common Stock.
(d) In the event Fifth Third wishes to exercise the Option, it
shall send to Cumberland a written notice (the date of which being
herein referred to as "Notice Date") within 60 days of the Purchase
Event, specifying (i) the total number of shares it will purchase
pursuant to such exercise, and (ii) a place and date not earlier
than five business days nor later than 60 business days from the
Notice Date for the closing of such purchase ("Closing Date");
provided that if prior notification to or approval of any federal
or state regulatory agency is required in connection with such
purchase, Fifth Third shall promptly file the required notice or
application for approval and shall expeditiously process the same
and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which any required
notification period has expired or been terminated or such approval
has been obtained and any requisite waiting period shall have
passed.
4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3(d) hereof, Fifth Third
shall pay to Cumberland the aggregate purchase price for the shares
of Cumberland Common Stock purchased pursuant to the exercise of
the Option in immediately available funds by a wire transfer to a
bank account designated by Cumberland.
(b) At such closing, simultaneously with the delivery of cash as
provided in subsection (a), Cumberland shall deliver to Fifth Third
a certificate or certificates representing the number of shares of
Cumberland Common Stock purchased by Fifth Third, and Fifth Third
shall deliver to Cumberland a letter agreeing that Fifth Third will
not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Option Agreement.
(c) Certificates for Cumberland Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend which
shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and The Cumberland Federal Bancorporation,
Inc. and to resale restrictions arising under the Securities Act of
1933, as amended, a copy of which agreement is on file at the
principal office of The Cumberland Federal Bancorporation, Inc. A
copy of such agreement will be provided to the holder hereof
without charge upon receipt by The Cumberland Federal
Bancorporation, Inc. of a written request."
It is understood and agreed that the above legend shall be removed
by delivery of substitute certificate(s) without such legend if
Fifth Third shall have delivered to Cumberland a copy of a letter
from the staff of the Securities and Exchange Commission, or an
opinion of counsel, in form and substance reasonably satisfactory
to Cumberland, to the effect that such legend is not required for
purposes of the Securities Act of 1933, as amended (the "33 Act").
5. Representations.
Cumberland hereby represents, warrants and covenants to Fifth Third
as follows:
(a) Cumberland shall at all times maintain sufficient authorized
but unissued shares of Cumberland Common Stock not subject to any
pre-emptive rights so that the Option may be exercised without
authorization of additional shares of Cumberland Common Stock.
(b) The shares to be issued upon due exercise, in whole or in
part, of the Option, when paid for as provided herein, will be duly
authorized, validly issued, fully paid and nonassessable.
6. Adjustment Upon Changes in Capitalization.
In the event of any change in Cumberland Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations,
combinations, exchanges of shares or the like, the type and number
of shares subject to the Option, and the purchase price per share,
as the case may be, shall be adjusted appropriately. In the event
that any additional shares of Cumberland Common Stock are issued or
otherwise become outstanding after the date of this Option
Agreement (other than pursuant to this Option Agreement), the
number of shares of Cumberland Common Stock subject to the Option
shall be adjusted so that, after such issuance, it equals 19.9% of
the number of shares of Cumberland Common Stock then issued and
outstanding without giving effect to any shares subject or issued
pursuant to the Option. Nothing contained in this Section 6 shall
be deemed to authorize Cumberland to breach any provision of the
Merger Agreements.
7. Registration Rights.
Cumberland shall, if requested by Fifth Third, as expeditiously as
possible file a registration statement on a form of general use
under the 33 Act (and applicable Blue Sky filings) if necessary in
order to permit the sale or other disposition of the shares of
Cumberland Common Stock that have been acquired upon exercise of
the Option in accordance with the intended method of sale or other
disposition requested by Fifth Third. Fifth Third shall provide
all information reasonably requested by Cumberland for inclusion in
any registration statement to be filed hereunder. Cumberland will
use its best efforts to cause such registration statement first to
become effective and then to remain effective for such period not
in excess of 270 days from the day such registration statement
first becomes effective as may be reasonably necessary to effect
such sales or other dispositions. The first registration effected
under this Section 7 shall be at Cumberland's expense except for
all filing and agency fees and underwriting commissions and the
fees and disbursements of Fifth Third's counsel attributable to the
registration of such Cumberland Common Stock which amounts shall be
borne by Fifth Third. A second registration may be requested
hereunder at Fifth Third's expense. In no event shall Cumberland
be required to effect more than two registrations hereunder. The
filing of any registration statement hereunder may be delayed by
Cumberland for such period of time as may reasonably be required to
facilitate any public distribution by Cumberland of Cumberland
Common Stock. If requested by Fifth Third, in connection with any
such registration, Cumberland will become a party to any
underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements
customarily required of issuers in such underwriting agreements.
8. Severability.
If any term, provision, covenant or restriction contained in this
Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants
and restrictions contained in this Option Agreement shall remain in
full force and effect, and shall in no way be affected, impaired or
invalidated and Fifth Third agrees that it shall not seek recovery
from Cumberland, its Directors, officers or counsel in such
circumstances. If for any reason such court or regulatory agency
determines that the Option will not permit the holder to acquire
the full number of shares of Cumberland Common Stock provided in
Section 2 hereof (as adjusted pursuant to Section 6 hereof), it is
the express intention of Cumberland to allow the holder to acquire
such lesser number of shares as may be permissible, without any
amendment or modification hereof.
9. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred
by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) Entire Agreement. Except as otherwise expressly provided
herein, this Option Agreement contains the entire agreement between
the parties with respect to the transactions contemplated hereunder
and supersedes all prior arrangements or understandings with
respect thereto, written or oral. The terms and conditions of this
Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns.
Nothing in this Option Agreement, expressed or implied, is intended
to confer upon any party, other than the parties hereto, and their
respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Option Agreement, except as
expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of
its rights or obligations under this Option Agreement or the Option
created hereunder to any other person, without the express written
consent of the other party; provided, Fifth Third and Cumberland
agree to use their respective reasonable efforts to cause, and to
cause any underwriters of any sale or other disposition to cause,
any sale or other disposition of Cumberland Common Stock issued
hereunder to be effected in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party
acquires the right to purchase in excess of 2% of the voting shares
of Cumberland, or (iii) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of conducting a widely
dispersed public distribution on Fifth Third's behalf.
(d) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient
if delivered in the manner and to the addresses provided for in or
pursuant to Section VII.E of the Affiliation Agreement.
(e) Counterparts. This Option Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed
to be an original instrument, but all such counterparts together
shall constitute but one agreement.
(f) Specific Performance. The parties agree that damages would be
an inadequate remedy for a breach of the provisions of this Option
Agreement by either party hereto and that this Option Agreement may
be enforced by either party hereto through injunctive or other
equitable relief.
(g) Other Termination. This Option Agreement shall terminate if
any person shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 40% or more of the outstanding
shares of Fifth Third's common stock.
(h) Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Kentucky applicable to agreements made and entirely to be performed
within such state and such federal laws as may be applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Option Agreement as of the day and year first written above.
FIFTH THIRD BANCORP
By
George A. Schaefer, Jr.
President and Chief Executive Officer
THE CUMBERLAND FEDERAL
BANCORPORATION, INC.
By
H. David Hale
Chairman, President and Chief Executive Officer
ANNEX E
Draft
_____________, 1994
The Board of Directors
The Cumberland Federal Bancorporation, Inc.
200 West Broadway
Louisville, Kentucky 40202
Members of the Board:
You have requested our opinion as investment bankers as to the
fairness, from a financial point of view, to the shareholders of
The Cumberland Federal Bancorporation, Inc. ("The Cumberland") of
the exchange ratio in the proposed merger (the "Merger") of The
Cumberland with and into Fifth Third Bancorp ("Fifth Third"),
pursuant to the Affiliation Agreement (the "Affiliation Agreement")
dated as of January 10, 1994. Under the terms of the Affiliation
Agreement, each outstanding share of common stock, $1 par value, of
The Cumberland (the "Common Shares") will be converted into a
number of shares of Fifth Third $2.22 stated value common stock as
determined by dividing $57.00 by the Applicable Market Value Per
Share of Fifth Third common stock (as defined in the Affiliation
Agreement); provided that no fewer than one (1) share of Fifth
Third common stock and no more than 1.20 shares of Fifth Third
common stock will be exchanged (the "Exchange Ratio").
Keefe, Bruyette & Woods, Inc., as part of its investment banking
business, is continually engaged in the valuation of bank and bank
holding company securities in connection with acquisitions,
negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for various
other purposes. As specialists in the securities of banking
companies, we have experience in, and knowledge of, the valuation
of banking enterprises. In the ordinary course of our business as
a broker-dealer, we may, from time to time, purchase securities
from, and sell securities to, The Cumberland and Fifth Third and as
a market maker in securities we may from time to time have a long
or short position in, and buy or sell, debt or equity securities of
The Cumberland and Fifth Third for our own account and for the
accounts of our customers. To the extent we have any such position
as of the date of this opinion it has been disclosed to The
Cumberland. We have acted exclusively for the Board of Directors
of The Cumberland in rendering this fairness opinion and will
receive a fee from The Cumberland for our services.
In arriving at our opinion, we have reviewed, analyzed and relied
upon material bearing upon the financial and operating condition of
The Cumberland and Fifth Third, including, among other things, the
following: (i) the Affiliation Agreement; (ii) the Registration
Statement on Form S-4 filed by Fifth Third to register the shares
of its common stock to be issued in the Merger; (iii) Annual
Reports to Shareholders and Annual Reports on Form 10-K for the
three years ended December 31, 1993 of The Cumberland and Fifth
Third; (iv) certain interim reports to shareholders of The
Cumberland and Fifth Third and Quarterly Reports on Form 10-Q of
The Cumberland and Fifth Third and certain other communications
from The Cumberland and Fifth Third to their respective
shareholders; (v) other financial information concerning the
businesses and operations of The Cumberland and Fifth Third
furnished to us by The Cumberland and Fifth Third for purposes of
our analysis; (vi) plans for the combined company and the strategic
objectives of the Merger with the senior executives of Fifth Third
and The Cumberland; (vii) certain publicly available information
concerning trading of, and the trading market for, the common stock
of The Cumberland and Fifth Third; and (viii) certain publicly
available information with respect to banking companies and the
nature and terms of certain other transactions that we consider
relevant to our inquiry.
In conducting our review and arriving at our opinion, we have
relied upon and assumed the accuracy and completeness of all of the
financial and other information provided to us or publicly
available and we have not attempted independently to verify such
information. We have relied upon the management of The Cumberland
and Fifth Third as to the reasonableness and achieveability of the
financial and operating forecasts and projections (and the
assumptions and bases therefor) provided to us, and we have assumed
that such forecasts and projections reflect the best currently
available estimates and judgments of such managements and that such
forecasts and projections will be realized in the amounts and in
the time periods currently estimated by such managements. We have
also assumed, without independent verification, that the aggregate
allowances for loan losses for The Cumberland and Fifth Third are
adequate to cover such losses. We have not made or obtained any
evaluations or appraisals of the property of The Cumberland or
Fifth Third, nor have we examined any individual loan credit files.
Finally, you have informed us and we have assumed that the Merger
will be recorded as a pooling-of-interests under generally accepted
accounting principles.
We have considered such financial and other factors as we have
deemed appropriate under the circumstances, including among others
the following: (i) the historical and current financial position
and results of operations of The Cumberland and Fifth Third, (ii)
the assets and liabilities of The Cumberland and Fifth Third, and
(iii) the nature and terms of certain other merger transactions
involving banks and bank holding companies. We have also taken
into account our assessment of general economic, market and
financial conditions and our experience in other transactions, as
well as our experience in securities valuation and our knowledge of
the banking industry generally. Our opinion is necessarily based
upon conditions as they exist and can be evaluated on the date
hereof and the information made available to us through the date
hereof.
Based upon and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Exchange Ratio in the Merger is
fair, from a financial point of view, to the holders of the Common
Shares.
Very truly yours,
Keefe, Bruyette & Woods, Inc.
ANNEX F
J.C. BRADFORD & CO.
Corporate Finance Draft
________, 1994
The Board of Directors
The Cumberland Federal Bancorporation, Inc.
200 West Broadway
Louisville, Kentucky 40202
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, to the shareholders of The Cumberland Federal
Bancorporation, Inc. ("The Cumberland") of the exchange ratio in
the proposed merger (the "Merger") of The Cumberland with and into
Fifth Third Bancorp ("Fifth Third"), pursuant to the Affiliation
Agreement (the "Affiliation Agreement") dated as of January 10,
1994. Under the terms of the Affiliation Agreement, each
outstanding share of common stock, $1 par value, of The Cumberland
(the "Common Shares") will be converted into a number of shares of
Fifth Third $2.22 stated value common stock as determined by
dividing $57.00 by the Applicable Market Value Per Share of Fifth
Third common stock (as defined in the Affiliation Agreement);
provided that no fewer than one (1) share of Fifth Third common
stock and no more than 1.20 shares of Fifth Third common stock will
be exchanged (the "Exchange Ratio").
J.C. Bradford & Co., as part of its investment banking business,
engages in the valuation of securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions
of listed and unlisted securities, private placements and
valuations for corporations or other purposes. In the ordinary
course of our business as a broker-dealer, we may, from time to
time, purchase securities from, and sell securities to, The
Cumberland and Fifth Third and as a market maker in securities we
may from time to time have a long or short position in, and buy or
sell, debt or equity securities of The Cumberland and Fifth Third
for our own account and for the accounts of our customers. To the
extent we have any such position as of the date of this opinion it
has been disclosed to The Cumberland. We have acted exclusively
for the Board of Directors of The Cumberland in rendering this
fairness opinion and will receive a fee from The Cumberland for our
service.
In arriving at our opinion, we have reviewed, analyzed and relied
upon material bearing upon the financial and operating condition of
The Cumberland and Fifth Third, including, among other things, the
following: (i) the Affiliation Agreement; (ii) the Registration
Statement on Form S-4 filed by Fifth Third to register the shares
of its common stock to be issued in the Merger; (iii) Annual
Reports to Shareholders and Annual Reports on Form 10-K for the
three years ended December 31, 1993, of The Cumberland and Fifth
Third; (iv) certain interim reports to shareholders of The
Cumberland and Fifth Third and Quarterly Reports on Form 10-Q of
The Cumberland and Fifth Third and certain other communications
from The Cumberland and Fifth Third to their respective
shareholders; (v) other financial information concerning the
businesses and operations of The Cumberland and Fifth Third
furnished to us by The Cumberland and Fifth Third for purposes of
our analysis, including certain financial analyses for The
Cumberland and Fifth Third prepared by the senior management of The
Cumberland and Fifth Third; (vi) certain internal financial
analyses and forecasts of The Cumberland prepared by the senior
management of The Cumberland; (vii) plans for the combined company
and the strategic objectives of the Merger with the senior
executives of Fifth Third and The Cumberland; (viii) certain
publicly available information concerning trading of, and the
trading market for, the common stock of The Cumberland and Fifth
Third; and (ix) certain publicly available information with respect
to banking companies and the nature and terms of certain other
transactions that we consider relevant to our inquiry.
In conducting our review and arriving at our opinion, we have
relied upon and assumed the accuracy and completeness of all of the
financial and other information provided to us or publicly
available and we have not attempted independently to verify such
information. We have relied upon the management of The Cumberland
and Fifth Third as to the reasonableness and achieveability of the
financial and operating forecasts and projections (and the
assumptions and bases therefore) provided or discussed with us, and
we have assumed that such forecasts and projections reflect the
best currently available estimates and judgments of such
managements and that such forecasts and projections will be
realized in the amounts and in the time periods currently estimated
by such managements. We have also assumed, without independent
verification, that the aggregate allowances for loan losses for The
Cumberland and Fifth Third are adequate to cover such losses. We
have not made or obtained any evaluations or appraisals of the
property of The Cumberland or Fifth Third, nor have we examined any
individual loan credit files. Finally, you have informed us and we
have assumed that the Merger will be recorded as a pooling-of-
interest under generally accepted accounting principles.
We have considered such financial and other factors as we have
deemed appropriate under the circumstances, including among others
the following: (i) the historical and current financial position
and results of operations of The Cumberland and Fifth Third, (ii)
the assets and liabilities of The Cumberland and Fifth Third, and
(iii) the nature and terms of certain other merger transactions
involving banks and bank holding companies. We have also taken
into account our assessment of general economic, market and
financial conditions and our experience in other transactions, as
well as our experience in securities valuation and our knowledge of
the banking industry generally. Our opinion is necessarily based
upon conditions as they exist and can be evaluated on the date
hereof and the information made available to us through the date
hereof.
Based upon and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Exchange Ratio in the Merger is
fair, from a financial point of view, to the holders of the Common
Shares.
Very truly yours,
J. C. Bradford & Co.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers
Section 1701.13 of the Ohio Revised Code provides that a
Corporation may indemnify or agree to indemnify any person who was
or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, other
than an action by or in the right of the corporation, by reason of
the fact that he is or was a director, officer, employee, or agent
of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee, or agent of
another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust or other enterprise against
expenses, including attorneys' fees, judgments, fines, and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendre or its equivalent, shall not, of
itself, create a presumption that the person did not act in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and with respect
to any criminal action or proceeding he had reasonable cause to
believe that his conduct was unlawful. Section 1701.13 further
specifies that a corporation may indemnify or agree to indemnify
any person who was or is a party, or is threatened to be made a
party, to any threatened, pending, or completed action or suit by
or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer,
employee, or agent of another corporation, domestic or foreign,
nonprofit or for profit partnership, joint venture, trust or other
enterprise against expenses, including attorneys' fees actually and
reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall
be made in respect of any claim, issue, or matter as to which such
person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation
unless, and only to the extent that the court of common pleas, or
the court in which such action or suit was brought, determines upon
application that, despite the adjudication of liability, but in
view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses as the court
of common pleas or such other court shall deem proper. In
addition, Section 1701.13 of the Ohio Revised Code requires a
corporation to pay any expenses, including attorney's fees, of a
director in defending an action, suit or proceeding referred to
above as they are incurred, in advance of the final disposition of
the action, suit or proceeding, upon receipt of an undertaking by
or on behalf of the director in which he agrees to both (i) repay
such amount if it is proved by clear and convincing evidence that
his action or failure to act involved an act or omission undertaken
with deliberate intent to cause injury to the corporation or
undertaken with reckless disregard for the best interests of the
corporation and (ii) reasonably cooperate with the corporation
concerning the action, suit or proceeding. The indemnification
provided by Section 1701.13 shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled
under the articles or regulations of the Registrant.
The Code of Regulations of Fifth Third provides that Fifth Third
shall indemnify each director and each officer of Fifth Third, and
each person employed by Fifth Third who serves at the written
request of the President of Fifth Third as a director, trustee,
officer, employee or agent of another corporation, domestic or
foreign, non profit or for profit, to the full extent permitted by
Ohio law. The Registrant may indemnify assistant officers,
employees and others by action of the Board of Directors to the
extent permitted by Ohio law.
The Registrant carries directors' and officers' liability insurance
coverage which insures its directors and officers and the directors
and officers of its subsidiaries in certain circumstances.
Exhibits and Financial Statement Schedules
Document Exhibit Page Number
in Sequential
Numbering
System
Affiliation Agreement and
Plan and Agreement of Merger
dated as of January 10, 1994,
by and between Fifth Third
Bancorp and The Cumberland
(excluding exhibits)
(set forth in Annex A and
Annex B to the Proxy
Statement and Prospectus
included in this Registration
Statement) 2
Seconded Amended Articles of
Incorporation of Fifth Third
Bancorp, as amended 3.1 Incorporated
by Reference(1)
Code of Regulations of Fifth
Third Bancorp, as amended 3.2 Incorporated
by Reference(1)
Form of opinion of Dinsmore
& Shohl as to the legality of
the securities being issued 5
Form of opinion of Dinsmore &
Shohl as to tax matters 8
Fifth Third Bancorp 1982 Stock
Option Plan 10.1 Incorporated
by Reference(2)
Fifth Third Bancorp 1987 Stock
Option Plan 10.2 Incorporated by
Reference(3)
Fifth Third Bancorp Unfunded
Deferred Compensation Plan for
Non-Employee Directors 10.3 Incorporated by
Reference(4)
Fifth Third Bancorp Nonqualified
Deferred Compensation Plan 10.4 Incorporated by
Reference(5)
Fifth Third Bancorp 1990 Stock
Option Plan 10.5 Incorporated by
Reference(6)
Termination Agreement dated as
of February 10, 1994 by and
between Fifth Third Bancorp
and Mr. H. David Hale, Chairman,
President and Chief Executive
Officer of The Cumberland and
The Cumberland F.S.B. 10.7
Stock Option Agreement dated as
of January 10, 1994 by and
between Fifth Third Bancorp
and The Cumberland (set forth
in Annex D to the Proxy
Statement and Prospectus
included in this
Registration Statement) 10.8
1994 Annual Report to
Shareholders of Fifth Third
Bancorp 13.1 Incorporated by
Reference
Fifth Third Bancorp Annual
Report on Form 10-K then
ended at December 31, 1993
and for year then ended 13.2 Incorporated by
Reference
Subsidiaries of Fifth Third
Bancorp 21 Incorporated by
Reference(7)
Consent of Deloitte & Touche
(with respect to Fifth Third) 23.1
Consent of Coopers & Lybrand
(with respect to The Cumberland) 23.2
Consent of Keefe, Bruyette &
Woods, Inc. 23.3
Consent of J.C. Bradford & Co. 23.4
Consent of Dinsmore & Shohl 23.5(8)
A power of attorney where various
individuals authorize the signing
of their names to any and all
amendments to this Registration
Statement and other documents
submitted in connection therewith
is contained on the first page
of the Signature pages following
Part II of this Registration
Statement 24
Fairness Opinion of Keefe,
Bruyette & Woods, Inc. (set forth
in Annex E to the Proxy Statement
and Prospectus included in this
Registration Statement) 99.1
Fairness Opinion of J.C. Bradford
& Co. (set forth in Annex F to the
Proxy Statement and Prospectus
included in this Registration
Statement) 99.2
Form of Proxy Card 99.3
<FN>
(1) Filed with the Securities and Exchange Commission as an exhibit
to a Registration Statement on Form S-4, Registration No. 33-63966.
(2) Filed with the Securities and Exchange Commission as an exhibit
to a Registration Statement on Form S-2, Registration No. 2-98550,
which is effective.
(3) Filed with the Securities and Exchange Commission as an exhibit
to a Registration Statement on Form S-2, Registration No. 33-13252,
which is effective.
(4) Incorporated by reference to the Registrant's Annual Report on
Form 10-K filed for fiscal year ended December 31, 1985.
(5) Filed with the Securities and Exchange Commission as Exhibit
10.4 to a Registration Statement on Form S-4, Registration No.
33-21139, declared effective April 20, 1988.
(6) Filed with the Securities and Exchange Commission as an exhibit
to a Registration Statement on Form S-8, Registration No. 33-34075,
which is effective.
(7) Incorporated by reference to the Registrant's Annual Report on
Form 10-K filed for fiscal year ended December 31, 1993.
(8) The consents of counsel are contained in their opinions.
Undertakings
(1)The undersigned Registrant hereby 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
that time shall be deemed to be the initial bona fide offering
thereof.
(2)The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this
registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the issuer
undertakes that 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.
(3)The Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (2) immediately preceding, or (ii) that
purports to meet the requirements of section 10(a)(3) of the
Securities Act of 1933 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, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offering therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(4)Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, 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.
(5)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 and included in the registration statement
when it became effective.
(6)The undersigned Registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or
Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article
3 of Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide
such interim financial information.
(7)The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 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.
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 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
Cincinnati, State of Ohio, on April 15, 1994.
FIFTH THIRD BANCORP
By:/S/ George A. Schaefer, Jr.
George A. Schaefer, Jr.
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints GEORGE A. SCHAEFER, JR. his
true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to
this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and
purposes as he might or could do in person and agent, or his
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in
the capacities and on the dates indicated.
Principal Executive Officer:
/S/ George A. Schaefer, Jr. President and April 15, 1994
George A. Schaefer, Jr. Chief
Executive
Officer
/S/ P. Michael Brumm Senior Vice April 15, 1994
P. Michael Brumm President and
Chief
Financial
Officer
Directors of the Company:
/S/ John F. Barrett April 15, 1994
John F. Barrett
/S/ Milton C. Boesel, Jr. April 15, 1994
Milton C. Boesel, Jr.
/S/ Clement L. Buenger April 15, 1994
Clement L. Buenger
/S/ Nolan W. Carson April 15, 1994
Nolan W. Carson
/S/ Thomas L. Dahl April 15, 1994
Thomas L. Dahl
/S/ Gerald V. Dirvin April 15, 1994
Gerald V. Dirvin
/S/ Thomas B. Donnell April 15, 1994
Thomas B. Donnell
________, 1994
Richard T. Farmer
/S/ John D. Geary April 15, 1994
John D. Geary
________, 1994
Ivan W. Gorr
/S/ Joseph H. Head, Jr. April 15, 1994
Joseph H. Head, Jr.
/S/ Joan R. Herschede April 15, 1994
Joan R. Herschede
/S/ William G. Kagler April 15, 1994
William G. Kagler
/S/ William J. Keating April 15, 1994
William J. Keating
/S/ James D. Kiggen April 15, 1994
James D. Kiggen
/S/ Robert B. Morgan April 15, 1994
Robert B. Morgan
/S/ Michael H. Norris April 15, 1994
Michael H. Norris
/S/ Brian H. Rowe April 15, 1994
Brian H. Rowe
/S/ George A. Schaefer, Jr. April 15, 1994
George A. Schaefer, Jr.
/S/ John J. Schiff, Jr. April 15, 1994
John J. Schiff, Jr.
/S/ Dennis J. Sullivan, Jr. April 15, 1994
Dennis J. Sullivan, Jr.
/S/ Dudley S. Taft April 15, 1994
Dudley S. Taft