As filed with the Securities and Exchange Commission on June 18, 1996
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
FIDELITY FINANCIAL OF OHIO, INC.
(Exact name of Registrant as specified in its charter)
Ohio 6711 31-1455721
(State or other juris- (Primary Standard (I.R.S. Employer
diction of incorporation Industrial Classification Identification No.)
or organization) Code No.)
4555 Montgomery Road
Cincinnati, Ohio 45212
(513) 351-6666
(Address, including zip code and telephone number,
including area code, of Registrant's
principal executive offices)
John R. Reusing
President and Chief Executive Officer
Fidelity Financial of Ohio, Inc.
4555 Montgomery Road
Cincinnati, Ohio 45212
(513) 351-6666
(Name, address, including zip code, and telephone number, including area
code, of agent for service) with a copy to:
Jeffrey D. Haas, Esq. Donald H. Rolf, Jr. Raymond T. Sawyer, Esq.
Philip R. Bevan, Esq. Chairman and President Thompson Hine & Flory P.L.L.
Elias, Matz, Tiernan & Herrick L.L.P. Circle Financial Corporation 127 Public Square
734 15th Street, N.W. 11100 Reading Road Cleveland, Ohio 44114-1216
Washington, D.C. 20005 Sharonville, Ohio 45241-1904 (216) 566-5500
(202) 347-0300 (513) 563-6231
Approximate date of commencement of proposed sale 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 Each Class Proposed Maximum Proposed Maximum
of Securities to be Amount to be Registered(1) Offering Price Per Aggregate Offering Amount of
Registered Share or Unit(2) Price(2) Registration Fee(2)
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, par
value $.10 per share 1,974,965 shares $35.50 $70,111,257.50 $27,176.30
===========================================================================================================================
(1) This Registration Statement covers the maximum number of shares of
common stock of the Registrant issuable upon consummation of the merger
of Circle Financial Corporation ("CFC") with and into a wholly owned
subsidiary of the Registrant (the "Merger").
(2) Estimated solely for the purpose of calculation of the registration
fee. Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of
1933, the registration fee is based on the average of the high and low
prices of the CFC Common Stock as reported on the Nasdaq Stock Market's
National Market on June 12, 1996, and computed based on the maximum
number of shares (415,782) that may be exchanged for the securities
being registered.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
FIDELITY FINANCIAL OF OHIO, INC.
CROSS-REFERENCE SHEET
Item of Form S-4 Location in Prospectus
1. Forepart of Registration Statement Facing Page; Cross Reference Sheet;
and Outside Front Cover Page of Outside Front Cover Page of
Prospectus Prospectus/Joint Proxy Statement
2. Inside Front and Outside Back Cover Inside Front Cover Page of Prospectus;
Pages of Prospectus Table of Contents; Available
Information; Incorporation of Certain
Documents by Reference
3. Risk Factors, Ratio of Earnings to Summary; Market for Common Stock
Fixed Charges and Other Information and Dividends; Comparative Per Share
Data; Selected Consolidated Financial
Data of FFOH; Selected Consolidated
Financial Data of CFC
4. Terms of the Transaction Summary; The Merger; Description of
FFOH Capital Stock; Comparison of
the Rights of Shareholders
5. Pro Forma Financial Information Pro Forma Combined Consolidated
Financial Information
6. Material Contracts with the Company The Merger
Being Acquired
7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and Not Applicable
Counsel
9. Disclosure of Commission's Position Not Applicable
on Indemnification for Securities Act
Liabilities
10. Information with Respect to S-3 Not Applicable
Registrants
11. Incorporation of Certain Information Not Applicable
by Reference
Item of Form S-4 Location in Prospectus
12. Information with Respect to S-2 or Incorporation of Certain Documents by
S-3 Registrants Reference; Summary
13. Incorporation of Certain Information Incorporation of Certain Documents by
by Reference Reference
14. Information with Respect to Not Applicable
Registrants Other than S-2 or S-3
Registrants
15. Information with Respect to S-3 Not Applicable
Companies
16. Information with Respect to S-2 or Incorporation of Certain Documents by
S-3 Companies Reference; Summary
17. Information with Respect to Not Applicable
Companies other than S-2 or S-3
Companies
18. Information if Proxies, Consents or Summary; The Special Meetings; The
Authorizations are to be Solicited Merger; Incorporation of Certain
Documents by Reference; Management
of FFOH after the Merger
19. Information if Proxies, Consents or Not Applicable
Authorizations are not to be Solicited,
or in an Exchange Offer
FIDELITY FINANCIAL OF OHIO, INC.
4555 Montgomery Road
Cincinnati, Ohio 45212
(513) 351-6666
_______ __, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of Fidelity Financial of Ohio, Inc. ("FFOH") at __:__ a.m., Eastern Time, on
_________ __, 1996 at __________________, Cincinnati, Ohio (the "Special
Meeting"). This is a very important meeting regarding your investment in FFOH.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to adopt an Amended and Restated Agreement of Merger, dated as of June
13, 1996 (the "Agreement"), by and among FFOH, Fidelity Acquisition Corporation
("FAC"), a newly formed Ohio corporation and a wholly owned subsidiary of FFOH,
and Circle Financial Corporation ("CFC"), an Ohio corporation, pursuant to
which, among other things, CFC will be merged with and into FAC (the "Merger").
If the Agreement is adopted and the Merger is consummated, each outstanding
share of CFC Common Stock will be converted into the right to receive, subject
to certain terms, conditions, limitations and procedures set forth in the
Agreement, either $38.00 in cash or a number of shares of FFOH Common Stock
which will be determined by applying a formula (the "Exchange Ratio"), set forth
in the Agreement, which is based on the average market price ("Average FFOH
Price") of the FFOH Common Stock over a 20 trading day period (the "pricing
period") ending on the date FFOH and CFC receive all requisite regulatory
approvals and satisfy all applicable waiting periods related to the Merger or,
under certain circumstances, a combination of cash and shares of FFOH Common
Stock. If, over the pricing period, the Average FFOH Price is equal to or
greater than $9.00 but equal to or less than $11.00, shareholders of CFC
electing to receive stock will receive for each share of CFC Common Stock that
number of shares of FFOH Common Stock equal to the ratio determined by dividing
$38.00 by the Average FFOH Price. If the Average FFOH Price is greater than
$11.00, shareholders of CFC will receive 3.45 shares of FFOH Common Stock for
each share of CFC Common Stock, while if the Average FFOH Price is less than
$9.00, they will receive 4.22 shares for each such share.
If the Average FFOH Price is less than $8.00 per share, CFC may
terminate the Agreement, provided that in the event CFC elects to exercise this
termination right and upon notice, FFOH will have the right to adjust the
Exchange Ratio to an amount equal to 4.75 shares of FFOH Common Stock, in which
case the Agreement will not be terminated.
Your Board of Directors has determined the Merger to be in the best
interests of FFOH and its shareholders and has unanimously approved the
Agreement and the transactions contemplated thereby, including the Merger. The
Board of Directors unanimously recommends that shareholders vote "FOR" adoption
of the Agreement.
At the Special Meeting, you will also be asked to consider and vote
upon a proposal to adopt an amendment to FFOH's Articles of Incorporation in
order to increase the authorized number of shares of FFOH Common Stock and
Preferred Stock. The Board of Directors unanimously recommends that shareholders
vote "FOR" adoption of the amendment to FFOH's Articles of Incorporation.
Enclosed are a proxy card, a Notice of Special Meeting of Shareholders
and a Prospectus/Joint Proxy Statement which describes the Merger, its effects
and the background of the transaction. A copy of the Agreement is included as
Annex I to the enclosed Prospectus/ Joint Proxy Statement. Also enclosed are,
for both FFOH and CFC, their respective 1995 Annual Reports to Shareholders and
Quarterly Reports on Form 10-Q or Form 10-QSB for the quarter ended March 31,
1996. You are urged to read all of these materials carefully.
It is very important that your shares be represented at the Special
Meeting. Failure to return a properly executed proxy card or to vote at the
Special Meeting will have the same effect as a vote against the proposal to
amend FFOH's Articles of Incorporation. Accordingly, even if you plan to be
present at the Special Meeting, you are requested to complete, date, sign, and
return the proxy card in the enclosed postage-paid envelope as soon as possible.
If you decide to attend the Special Meeting, you may vote your shares in person
whether or not you have previously submitted a proxy.
On behalf of the Board, I thank you for your attention to this
important matter.
Very truly yours,
John R. Reusing
President and Chief Executive Officer
2
FIDELITY FINANCIAL OF OHIO, INC.
4555 Montgomery Road
Cincinnati, Ohio 45212
(513) 351-6666
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on ________ __, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders
(including any adjournment or postponements thereof, the "Special Meeting") of
Fidelity Financial of Ohio, Inc. ("FFOH") will be held at __:__ _.m., Eastern
Time, on ___________ __, 1996 at __________________________, Cincinnati, Ohio
for the following purposes:
1. To consider and vote upon a proposal to adopt an Amended and
Restated Agreement of Merger, dated as of June 13, 1996 ("Agreement"),
by and among FFOH, Fidelity Acquisition Corporation ("FAC"), a wholly
owned subsidiary of FFOH, and Circle Financial Corporation ("CFC"),
which provides, among other things, for (i) the merger of CFC with and
into FAC (the "Merger") and (ii) the conversion of each share of common
stock of CFC outstanding immediately prior to the Merger (other than
any dissenting shares under Ohio law and any shares held by either FFOH
or CFC) into the right to receive, subject to certain terms,
conditions, limitations and procedures set forth in the Agreement,
either $38.00 in cash or a number of shares of FFOH common stock which
will be determined by applying a formula, set forth in the Agreement,
which is based on the average market price of the FFOH common stock
over a 20 trading day period ending on the date FFOH and CFC receive
all requisite regulatory approvals and satisfy all applicable waiting
periods related to the Merger or, under certain circumstances, a
combination of cash and shares of FFOH Common Stock.
2. To consider and vote upon a proposal to adopt an amendment to FFOH's
Articles of Incorporation in order to increase the authorized number of
shares of common stock and preferred stock of FFOH.
3. To transact such other business, if any, as may properly come before
the Special Meeting.
Pursuant to the Code of Regulations of FFOH, the Board of Directors has
fixed the close of business on ________ __, 1996 as the record date for the
determination of shareholders entitled to notice of and to vote at the Special
Meeting. Only holders of common stock of FFOH of record at the close of business
on that date will be entitled to notice of and to vote at the Special Meeting.
The Board of Directors of FFOH has determined the Merger to be in the
best interests of FFOH and its shareholders and unanimously recommends that
shareholders vote "FOR" adoption of the Agreement. In addition, the Board of
Directors unanimously recommends that shareholders vote "FOR" adoption of the
proposed amendment to FFOH's Articles of Incorporation.
By Order of the Board of Directors
John R. Reusing
President and Chief Executive Officer
Cincinnati, Ohio
________ __, 1996
- --------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING.
FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT
THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST
THE PROPOSAL TO AMEND FFOH'S ARTICLES OF INCORPORATION.
ACCORDINGLY, EVEN IF YOU PLAN TO BE PRESENT AT THE SPECIAL
MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND
RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE
AS SOON AS POSSIBLE. IF YOU ATTEND THE SPECIAL MEETING, YOU
MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY
BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR
TO THE EXERCISE THEREOF.
- --------------------------------------------------------------------------------
2
CIRCLE FINANCIAL CORPORATION
11100 Reading Road
Sharonville, Ohio 45241-1904
(513) 563-6231
_______ __, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of Circle Financial Corporation ("CFC") at __:__ _.m., Eastern Time, on ________
__, 1996 at _______________, Sharonville, Ohio (the "Special Meeting"). This is
a very important meeting regarding your investment in CFC.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to adopt an Amended and Restated Agreement of Merger, dated as of June
13, 1996 (the "Agreement"), by and among Fidelity Financial of Ohio, Inc.
("FFOH"), an Ohio corporation, Fidelity Acquisition Corporation ("FAC"), a newly
formed Ohio corporation and a wholly owned subsidiary of FFOH and CFC, pursuant
to which, among other things, CFC will be merged with and into FAC (the
"Merger"). If the Agreement is adopted and the Merger is consummated, each
outstanding share of CFC Common Stock will be converted into the right to
receive, subject to certain terms, conditions, limitations and procedures set
forth in the Agreement, either $38.00 in cash or a number of shares of FFOH
Common Stock which will be determined by applying a formula (the "Exchange
Ratio"), set forth in the Agreement, which is based on the average market price
("Average FFOH Price") of the FFOH Common Stock over a 20 trading day period
(the "pricing period") ending on the date FFOH and CFC receive all requisite
regulatory approvals and satisfy all applicable waiting periods related to the
Merger or, under certain circumstances, a combination of cash and shares of FFOH
Common Stock. If, over the pricing period, the Average FFOH Price is equal to or
greater than $9.00 but equal to or less than $11.00, shareholders of CFC
electing to receive stock will receive for each share of CFC Common Stock that
number of shares of FFOH Common Stock equal to the ratio determined by dividing
$38.00 by the Average FFOH Price. If the Average FFOH Price is greater than
$11.00, shareholders of CFC will receive 3.45 shares of FFOH Common Stock for
each share of CFC Common Stock, while if the Average FFOH Price is less than
$9.00, they will receive 4.22 shares for each such share.
If the Average FFOH Price is less than $8.00 per share, CFC may
terminate the Agreement, provided that in the event CFC elects to exercise this
termination right and upon notice, FFOH will have the right to adjust the
Exchange Ratio to an amount equal to 4.75 shares of FFOH Common Stock, in which
case the Agreement will not be terminated.
Your Board of Directors has determined the Merger to be in the best
interests of CFC and its shareholders and has unanimously approved the Agreement
and the transactions contemplated thereby, including the Merger. The Board of
Directors unanimously recommends that shareholders vote "FOR" adoption of the
Agreement.
Enclosed are a proxy card, a Notice of Special Meeting of Shareholders
and a Prospectus/Joint Proxy Statement which describes the Merger, its effects
and the background of the transaction. A copy of the Agreement is included as
Annex I to the enclosed Prospectus/ Joint Proxy Statement. Also enclosed are,
for both CFC and FFOH, their respective 1995 Annual Reports to Shareholders and
Quarterly Reports on Form 10-Q or Form 10-QSB for the quarter ended March 31,
1996 . You are urged to read all of these materials carefully.
It is very important that your shares be represented at the Special
Meeting. Failure to return a properly executed proxy card or to vote at the
Special Meeting will have the same effect as a vote against the Agreement.
Accordingly, even if you plan to be present at the Special Meeting, you are
requested to complete, date, sign, and return the proxy card in the enclosed
postage-paid envelope as soon as possible. If you decide to attend the Special
Meeting, you may vote your shares in person whether or not you have previously
submitted a proxy.
On behalf of the Board, I thank you for your attention to this
important matter.
Very truly yours,
Donald H. Rolf, Jr.
Chairman and President
2
CIRCLE FINANCIAL CORPORATION
11100 Reading Road
Sharonville, Ohio 45241-1904
(513) 563-6231
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on ________ __, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders
(including any adjournment or postponements thereof, the "Special Meeting") of
Circle Financial Corporation ("CFC") will be held at __:__ _.m., Eastern Time,
on _________ __, 1996 at _________________________, Sharonville, Ohio for the
following purposes:
1. To consider and vote upon a proposal to adopt an Amended and
Restated Agreement of Merger, dated as of June 13, 1996 (the
"Agreement"), by and among Fidelity Financial of Ohio, Inc. ("FFOH"),
Fidelity Acquisition Corporation ("FAC"), a wholly owned subsidiary of
FFOH, and CFC, which provides, among other things, for (i) the merger
of CFC with and into FAC (the "Merger") and (ii) the conversion of each
share of common stock of CFC outstanding immediately prior to the
Merger (other than any dissenting shares under Ohio law and any shares
held by either FFOH or CFC) into the right to receive, subject to
certain terms, conditions, limitations and procedures set forth in the
Agreement, either $38.00 in cash or a number of shares of FFOH common
stock which will be determined by applying a formula, set forth in the
Agreement, which is based on the average market price of the FFOH
common stock over a 20 trading day period ending on the date FFOH and
CFC receive all requisite regulatory approvals and satisfy all
applicable waiting periods related to the Merger or, under certain
circumstances, a combination of cash and shares of FFOH Common Stock.
2. To transact such other business, if any, as may properly come before
the Special Meeting.
Pursuant to the Code of Regulations of CFC, the Board of Directors has
fixed the close of business on __________ __, 1996 as the record date for the
determination of shareholders entitled to notice of and to vote at the Special
Meeting. Only holders of common stock of CFC of record at the close of business
on that date will be entitled to notice of and to vote at the Special Meeting.
If the Merger is approved and consummated, holders of CFC common stock
will have the right to dissent from the Merger and to obtain payment of the fair
cash value of their shares by complying with Section 1701.85 of the Ohio General
Corporation Law. A copy of Section 1701.85 of the Ohio General Corporation Law
is attached as Annex VIII to the accompanying Prospectus/Joint Proxy Statement.
The Board of Directors of CFC has determined the Merger to be in the
best interests of CFC and its shareholders and unanimously recommends that
shareholders vote "FOR" adoption of the Agreement.
By Order of the Board of Directors
Donald H. Rolf, Jr.
Chairman and President
Sharonville, Ohio
_______ __, 1996
- --------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING.
FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT
THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST
THE AGREEMENT. ACCORDINGLY, EVEN IF YOU PLAN TO BE PRESENT
AT THE SPECIAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE,
SIGN AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE AS SOON AS POSSIBLE. IF YOU ATTEND THE SPECIAL
MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY
PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT
ANY TIME PRIOR TO THE EXERCISE THEREOF.
- --------------------------------------------------------------------------------
2
Prospectus Joint Proxy Statement
FIDELITY FINANCIAL OF OHIO, INC. FIDELITY FINANCIAL OF OHIO, INC.
------ and
Common Stock CIRCLE FINANCIAL CORPORATION
(Par Value $.10 Per Share) ------
Special Meetings of Shareholders to be
held on __________ __, 1996
This Prospectus/Joint Proxy Statement is being furnished in connection
with the solicitation of proxies by the Board of Directors of Fidelity Financial
of Ohio, Inc. ("FFOH") and the Board of Directors of Circle Financial
Corporation ("CFC") to be used at special meetings of shareholders of FFOH and
CFC, respectively, to be held on __________ __, 1996 (including any adjournments
or postponements thereof, the "FFOH Special Meeting" and the "CFC Special
Meeting," respectively, and together the "Special Meetings"). The purpose of the
Special Meetings is to consider and vote upon the adoption of an Amended and
Restated Agreement of Merger, dated as of June 13, 1996, by and among FFOH,
Fidelity Acquisition Corporation ("FAC"), a wholly owned subsidiary of FFOH, and
CFC (the "Agreement"), which amends and restates the Agreement of Merger, dated
as of April 29, 1996, by and between FFOH and CFC, and provides, among other
things, for the merger of CFC with and into FAC (the "Merger"). In addition,
shareholders of FFOH are also being asked to consider and vote upon a proposal
to adopt an amendment to FFOH's Articles of Incorporation in order to increase
the authorized number of shares of common stock and preferred stock of FFOH.
Upon consummation of the Merger, each share of common stock of CFC, par
value $1.00 per share ("CFC Common Stock") (other than (i) any dissenting shares
under Ohio law and (ii) any shares held by FFOH or CFC) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive, subject to certain terms, conditions, limitations and
procedures set forth in the Agreement and described herein, either $38.00 in
cash or a number of shares of common stock of FFOH, par value $.10 per share
("FFOH Common Stock"), which will be determined by applying a formula (the
"Exchange Ratio"), set forth in the Agreement, which is based on the average
market price ("Average FFOH Price") of the FFOH Common Stock over a 20 trading
day period (the "pricing period") ending on the date FFOH and CFC receive all
requisite regulatory approvals and satisfy all applicable waiting periods
related to the Merger. If, over the pricing period, the Average FFOH Price is
equal to or greater than $9.00 but equal to or less than $11.00, shareholders of
CFC electing to receive stock will receive for each share of CFC Common Stock
that number of shares of FFOH Common Stock equal to the ratio determined by
dividing $38.00 by the Average FFOH Price. If the Average FFOH
Price is greater than $11.00, shareholders of CFC will receive 3.45 shares of
FFOH Common Stock for each share of CFC Common Stock, while if the Average FFOH
Price is less than $9.00, they will receive 4.22 shares for each such share. See
"Summary," "The Merger" and Annex I.
If the Average FFOH Price is less than $8.00 per share, CFC may
terminate the Agreement, provided that in the event CFC elects to exercise this
termination right and upon notice, FFOH will have the right to adjust the
Exchange Ratio to an amount equal to 4.75 shares of FFOH Common Stock, in which
case the Agreement will not be terminated.
See "Summary," "The Merger" and Annex I.
This Prospectus/Joint Proxy Statement also constitutes a prospectus of
FFOH relating to the shares of FFOH Common Stock issuable to holders of CFC
Common Stock upon consummation of the Merger.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/JOINT PROXY
STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus/Joint Proxy Statement is
_______ __, 1996.
2
AVAILABLE INFORMATION
Each of FFOH and CFC is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), and, in accordance therewith, files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). Reports, proxy statements and other information filed
with the SEC by FFOH and CFC can be inspected and copied at Room 1024 of the
SEC's office at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's
Regional Offices in New York (7 World Trade Center, Suite 1300, New York, New
York 10048) and Chicago (The Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661), and copies of such material can be obtained from
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. Each of the FFOH Common Stock and the CFC Common
Stock is quoted on the Nasdaq Stock Market's National Market ("NASDAQ").
Consequently, reports, proxy statements and other information relating to FFOH
and CFC also may be inspected at the office of the National Association of
Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus/Joint Proxy Statement does not contain all of the
information set forth in the Registration Statement on Form S-4 of which this
Prospectus/Joint Proxy Statement is a part and exhibits thereto (together with
amendments thereto, the "Registration Statement"), which has been filed by FFOH
with the SEC under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act"), certain portions of which have
been omitted pursuant to the rules and regulations of the SEC and to which
reference is hereby made for further information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by FFOH (File No. 0-27868) and CFC (File
No. 0- 19430) with the SEC pursuant to the Exchange Act are hereby incorporated
by reference in this Prospectus/Joint Proxy Statement:
(1) FFOH's Annual Report on Form 10-K for the year ended
December 31, 1995; and
(2) FFOH's Quarterly Report on Form 10-Q for the three month
period ended March 31, 1996; and
(3) FFOH's Current Reports on Form 8-K, dated February 29,
1996 and April 29, 1996; and
3
(4) The following portions of FFOH's Annual Report to
Shareholders for the year ended December 31, 1995: selected financial
and other data (pages 3 and 4); management's discussion and analysis of
financial condition and results of operations (pages 5 through 13); and
audited financial statements and notes thereto (pages 14 through 33).
(5) CFC's Annual Report on Form 10-KSB for the year ended June
30, 1995; and
(6) CFC's Quarterly Reports on Form 10-QSB for the three month
periods ended September 30, 1995, December 31, 1995 and March 31, 1996;
and
(7) The following portions of CFC's Annual Report to
Shareholders for the year ended June 30, 1995: selected consolidated
financial and other data (page 4); management's discussion and analysis
of financial condition and results of operations (pages 5 through 14);
and audited consolidated financial statements and notes thereto (pages
15 through 38).
Accompanying this Prospectus/Joint Proxy Statement are FFOH's 1995
Annual Report to Shareholders and Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996 and CFC's 1995 Annual Report to Shareholders and Quarterly
Report on Form 10-QSB for the quarter ended March 31, 1996.
All documents and reports filed by FFOH and CFC, respectively, pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the Special Meetings also are hereby incorporated herein by
reference into this Prospectus/Joint Proxy Statement and shall be deemed a part
hereof from the date of filing of such documents or reports. Any statement
contained herein, in any supplement hereto or in a document or report
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of the Registration Statement and this
Prospectus/Joint Proxy Statement to the extent that a statement contained
herein, in any supplement hereto or in any subsequently filed document or report
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement, this Prospectus/Joint Proxy Statement or any supplement
hereto.
This Prospectus/Joint Proxy Statement incorporates documents of FFOH
and CFC by reference which are not presented herein or delivered herewith. All
such documents with respect to FFOH are available without charge (other than
certain exhibits to such documents) upon written or oral request from: Fidelity
Financial of Ohio, Inc., 4555 Montgomery Road, Cincinnati, Ohio 45212,
Attention: Paul D. Staubach, Secretary (telephone number (513) 351-6666). All
such documents with respect to CFC are available without charge (other than
certain exhibits to such documents) upon written or oral request
4
from: Circle Financial Corporation, 11100 Reading Road, Sharonville, Ohio
45241-1904, Attention: Theresa M. Barlow, Secretary (telephone number (513)
563-6231). In order to ensure timely delivery of such documents, any request
should be made by ________ __, 1996.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus/Joint Proxy
Statement and, if given or made, such information or representation must not be
relied upon as having been authorized by FFOH or CFC. Neither the delivery of
this Prospectus/Joint Proxy Statement nor any distribution of the securities to
which this Prospectus/Joint Proxy Statement relates shall, under any
circumstances, create any implication that there has been no change in the
affairs of FFOH or CFC since the date hereof or that the information contained
herein is correct as of any time subsequent to its date. This Prospectus/Joint
Proxy Statement does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities to which it relates or an
offer to sell or solicitation of an offer to buy such securities or the
solicitation of a proxy in any circumstances in which such an offer or
solicitation is not lawful.
5
TABLE OF CONTENTS
Page
Available Information................................................................................... 3
Incorporation of Certain Documents by Reference......................................................... 3
Summary................................................................................................. 9
Market for Common Stock and Dividends................................................................... 21
Unaudited Comparative Per Share Data.................................................................... 22
Selected Consolidated Financial Data of FFOH............................................................ 24
Selected Consolidated Financial Data of CFC............................................................. 26
General Information..................................................................................... 28
The Special Meetings.................................................................................... 28
Time, Date and Place.................................................................................. 28
Matters to be Considered.............................................................................. 28
Shares Outstanding and Entitled to Vote; Record Date.................................................. 28
Votes Required........................................................................................ 29
Voting and Revocation of Proxies...................................................................... 29
Solicitation of Proxies............................................................................... 30
Amendment to Articles of Incorporation.................................................................. 30
The Merger.............................................................................................. 31
General............................................................................................... 31
Background of the Merger.............................................................................. 32
Reasons for the Merger; Recommendations of the Boards of Directors.................................... 35
Opinions of Financial Advisors........................................................................ 38
Effects of the Merger................................................................................. 48
The Merger Consideration.............................................................................. 49
Conditions to the Merger.............................................................................. 52
Regulatory Approvals.................................................................................. 54
Business Pending the Merger........................................................................... 55
No Solicitation....................................................................................... 57
Effective Time of the Merger; Termination and Amendment............................................... 58
Interests of Certain Persons in the Merger............................................................ 59
Certain Employee Matters.............................................................................. 61
Resale of FFOH Common Stock.......................................................................... 62
Certain Federal Income Tax Consequences............................................................... 63
Accounting Treatment of the Merger.................................................................... 64
Expenses of the Merger................................................................................ 64
Stock Option Agreements............................................................................... 64
Stockholder Agreements................................................................................ 67
Dissenters' Rights.................................................................................... 68
Management of FFOH after the Merger..................................................................... 71
Pro Forma Combined Consolidated Financial Information................................................... 72
Description of FFOH Capital Stock....................................................................... 79
FFOH Common Stock..................................................................................... 79
FFOH Preferred Stock.................................................................................. 80
Other Provisions...................................................................................... 80
Transfer Agent........................................................................................ 81
6
Comparison of the Rights of Shareholders................................................................ 81
Authorized Capital Stock.............................................................................. 81
Issuance of Capital Stock............................................................................. 82
Voting Rights......................................................................................... 82
Payment of Dividends.................................................................................. 82
Board of Directors.................................................................................... 82
Limitations on Liability.............................................................................. 83
Indemnification of Directors, Officers, Employees and Agents.......................................... 84
Special Meetings of Shareholders...................................................................... 84
Shareholder Nominations and Proposals................................................................. 84
Shareholder Action without a Meeting.................................................................. 86
Shareholder's Right to Examine Books and Records...................................................... 86
Limitations on Acquisitions of Voting Stock and Voting Rights......................................... 86
Mergers, Consolidations and Sales of Assets........................................................... 87
Business Combinations with Interested Shareholders.................................................... 87
Amendment of Governing Instruments.................................................................... 88
Certain Beneficial Owners of FFOH Common Stock.......................................................... 90
Security Ownership of Management...................................................................... 90
Security Ownership of Certain Beneficial Owners....................................................... 92
Certain Beneficial Owners of CFC Common Stock........................................................... 93
Security Ownership of Management...................................................................... 93
Security Ownership of Certain Beneficial Owners....................................................... 95
Legal Opinion........................................................................................... 97
Experts................................................................................................. 97
Proposals for the 1996 Annual Meetings.................................................................. 97
Annexes:
Annex I - Amended and Restated Agreement of Merger, dated as
of June 13, 1996, by and among FFOH, FAC and CFC,
including an Amended and Restated Agreement of
Merger, dated as of June 13, 1996, by and between
Fidelity Federal and People's Savings, and attached as
Exhibit A thereto
Annex II - Stock Option Agreement, dated as of April 29, 1996,
between CFC (as issuer) and FFOH (as grantee)
Annex III - Stock Option Agreement, dated as of April 29, 1996,
between FFOH (as issuer) and CFC (as grantee)
Annex IV - Stockholder Agreement, dated as of April 29, 1996,
between FFOH and certain stockholders of CFC
Annex V- Stockholder Agreement, dated as of April 29, 1996,
between CFC and certain stockholders of FFOH
Annex VI- Opinion of Stifel, Nicolaus & Company, Incorporated
Annex VII- Opinion of RP Financial, LC.
Annex VIII- Section 1701.85 of the Ohio General Corporation Law
7
Accompanying Documents:
1. FFOH's 1995 Annual Report to Shareholders
2. FFOH's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996
3. CFC's 1995 Annual Report to Shareholders
4. CFC's Quarterly Report on Form 10-QSB for the quarter ended March
31, 1996
8
SUMMARY
The following summary of certain information contained elsewhere in
this Prospectus/Joint Proxy Statement and in the documents incorporated herein
by reference is not intended to be a complete statement of the matters described
herein or therein. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained elsewhere in this
Prospectus/Joint Proxy Statement and in the Annexes attached hereto, including
the Agreement, a copy of which is attached hereto as Annex I, and the
information incorporated herein by reference. Shareholders are urged to
carefully read all such information.
The Special Meetings
The FFOH Special Meeting will be held at __:__ _.m., Eastern Time, on
________ __, 1996 at ___________________, Cincinnati, Ohio, and the CFC Special
Meeting will be held at the same time and on the same date at
______________________, Sharonville, Ohio. Only the holders of record of
outstanding shares of FFOH Common Stock and CFC Common Stock at the close of
business on _______ __, 1996 (the "Record Date") are entitled to notice of and
to vote at the FFOH Special Meeting and the CFC Special Meeting, respectively.
On the Record Date, __________ shares of FFOH Common Stock and _________ shares
of CFC Common Stock were outstanding and entitled to be voted at the FFOH
Special Meeting and the CFC Special Meeting, respectively. Each share of FFOH
Common Stock and each share of CFC Common Stock is entitled to one vote upon
each matter properly submitted at the FFOH Special Meeting and the CFC Special
Meeting, respectively.
At the Special Meetings, shareholders of FFOH and CFC will consider and
vote upon a proposal to adopt the Agreement. In addition, shareholders of FFOH
will also consider and vote upon a proposal to adopt an amendment to FFOH's
Articles of Incorporation in order to increase the authorized number of shares
of FFOH Common Stock and FFOH preferred stock, par value $.10 per share ("FFOH
Preferred Stock"). Subject to the presence of a quorum at each of the Special
Meetings, a majority of the votes cast at the FFOH Special Meeting by holders of
FFOH Common Stock, voting in person or by proxy, is necessary to adopt the
Agreement on behalf of FFOH, and the affirmative vote of the holders of a
majority of the outstanding shares of FFOH Common Stock, voting in person or by
proxy, is necessary to adopt the amendment to FFOH's Articles of Incorporation.
The affirmative vote of the holders of a majority of the outstanding shares of
CFC Common Stock, voting in person or by proxy, is necessary to adopt the
Agreement on behalf of CFC. Because adoption of the Agreement on behalf of CFC
and the adoption of the amendment to FFOH's Articles of Incorporation will be
based on the number of shares outstanding, rather than the number of shares
voting, the failure to vote, either in person or by proxy, or the abstention
from voting, by a shareholder of FFOH and/or CFC will have the same effect as a
vote against such proposals. Under applicable stock exchange rules, brokers who
hold shares in street name for customers are prohibited from giving a proxy to
vote such customers' shares with respect to adoption of the Agreement and the
amendment to FFOH's
9
Articles of Incorporation in the absence of specific instructions from such
customers. Accordingly, such broker nonvotes also will have the same effect as
votes against adoption of such proposals.
As of the Record Date, the directors and executive officers of FFOH and
their affiliates in the aggregate beneficially owned _______ shares, or ____%,
of the outstanding FFOH Common Stock, excluding shares subject to options. In
connection with the execution of the Agreement, CFC and certain shareholders of
FFOH entered into an agreement pursuant to which, among other things, such
shareholders agreed to vote their shares of FFOH Common Stock (which amount to
____% of the shares of such stock outstanding) in favor of the Agreement. See
"Certain Beneficial Owners of FFOH Common Stock" and "The Merger - Stockholder
Agreements."
As of the Record Date, the directors and executive officers of CFC and
their affiliates in the aggregate beneficially owned _______ shares, or ____%,
of the outstanding CFC Common Stock, excluding shares subject to options. In
connection with the execution of the Agreement, FFOH and certain shareholders of
CFC entered into an agreement pursuant to which, among other things, such
shareholders agreed to vote their shares of CFC Common Stock (which amount to
____% of the shares of such stock outstanding) in favor of the Agreement. See
"Certain Beneficial Owners of CFC Stock" and "The Merger Stockholder
Agreements."
Parties to the Merger
FFOH. FFOH is an Ohio corporation and a unitary savings and loan
holding company registered under the Home Owners' Loan Act, as amended (the
"HOLA"). FFOH is the parent holding company of Fidelity Federal Savings Bank, a
federally chartered savings bank ("Fidelity Federal"). Fidelity Federal conducts
business through three full-service offices located in the Cincinnati, Ohio
metropolitan area. The deposits of Fidelity Federal are insured to the maximum
extent provided by law by the Savings Association Insurance Fund ("SAIF"), which
is administered by the Federal Deposit Insurance Corporation ("FDIC"). The
principal business of Fidelity Federal consists of attracting retail deposits
from the general public and using such deposits and other funds to originate
loans secured by first mortgage liens on existing single-family (one-to-four
units) residential properties located primarily in southwestern Ohio. To a
lesser extent, Fidelity Federal originates loans secured by existing
multi-family residential and nonresidential real estate as well as construction
and consumer loans. Fidelity Federal also invests in U.S. Government and federal
agency obligations and mortgage-backed securities which are insured or
guaranteed by federal agencies. FFOH's principal executive offices are located
at 4555 Montgomery Road, Cincinnati, Ohio 45212, and its telephone number is
(513) 351- 6666. At March 31, 1996, Fidelity Federal had, on a consolidated
basis, total assets of $249.4 million, total liabilities of $198.6 million,
including deposits of $182.2 million, and stockholders' equity of $50.8 million.
10
For additional information concerning FFOH, its business, financial
condition and results of operations, see "Available Information," "Incorporation
of Certain Documents by Reference" and "Selected Consolidated Financial Data of
FFOH."
FAC. FAC is a newly formed Ohio corporation which is a wholly owned
subsidiary of FFOH. To date, FAC has not conducted any operations or activities
and was incorporated in order to facilitate the proposed acquisition of CFC.
Upon the receipt of all requisite regulatory and corporate approvals and
immediately prior to the Merger, FFOH will contribute all of the outstanding
capital stock of Fidelity Federal to FAC such that Fidelity Federal will be a
wholly owned subsidiary of FAC and FAC will be a unitary savings and loan
holding company registered under the HOLA. FAC's principal executive offices are
located at 4555 Montgomery Road, Cincinnati, Ohio 45212, and its telephone
number is (513) 351-6666.
CFC. CFC is an Ohio corporation and a unitary savings and loan holding
company registered under the HOLA. CFC is the parent holding company of People's
Savings Association, an Ohio-chartered savings association ("People's Savings").
People's Savings conducts business through seven full-service offices located in
the Cincinnati, Ohio metropolitan area. The deposits of People's Savings are
insured to the maximum extent provided by law by the SAIF, which is administered
by the FDIC. The principal business of People's Savings consists of attracting
retail deposits from the general public and using such deposits and other funds
to originate loans secured by first mortgage liens on existing single-family
residential properties located primarily in southwestern Ohio. To a lesser
extent, People's Savings originates loans secured by existing multi-family
residential and commercial real estate as well as construction (including
acquisition and development loans and land loans) and consumer and other loans.
People's Savings also invests in U.S. Government and federal agency obligations,
corporate notes and mortgage-backed securities, a substantial portion of which
are insured or guaranteed by federal agencies. CFC's principal executive offices
are located at 11100 Reading Road, Sharonville, Ohio 45241, and its telephone
number is (513) 563-6231. At March 31, 1996, People's Savings had, on a
consolidated basis, total assets of $229.4 million, total liabilities of $205.0
million, including deposits of $201.3 million, and stockholders' equity of $24.4
million.
For additional information concerning CFC, its business, financial
condition and results of operations, see "Available Information," "Incorporation
of Certain Documents by Reference" and "Selected Consolidated Financial Data of
CFC."
The Merger and the Bank Merger
In accordance with the terms of and subject to the conditions set forth
in the Agreement, CFC will be merged with and into FAC, a wholly owned
subsidiary of FFOH, with FAC as the surviving corporation of the Merger. The
Agreement provides that at the effective time of the Merger, each outstanding
share of CFC Common Stock (other than (i) any dissenting shares under Ohio law
and (ii) any shares held by either FFOH or CFC) will
11
be converted into the right to receive, subject to certain terms, conditions,
limitations and procedures set forth in the Agreement and described herein,
either $38.00 in cash or a number of shares of FFOH Common Stock (the "Merger
Consideration") which will be determined by applying a formula (the "Exchange
Ratio"), set forth in the Agreement and described herein. If, over the pricing
period, the Average FFOH Price is equal to or greater than $9.00 but equal to or
less than $11.00, shareholders of CFC electing to receive stock will receive for
each share of CFC Common Stock that number of shares of FFOH Common Stock equal
to the ratio determined by dividing $38.00 by the Average FFOH Price. If the
Average FFOH Price is greater than $11.00, shareholders of CFC will receive 3.45
shares of FFOH Common Stock for each share of CFC Common Stock, while if the
Average FFOH Price is less than $9.00, they will receive 4.22 shares for each
such share. See "The Merger."
If the Average FFOH Price is less than $8.00 per share, CFC may
terminate the Agreement, provided that in the event CFC elects to exercise this
termination right and upon notice, FFOH will have the right to adjust the
Exchange Ratio to an amount equal to 4.75 shares of FFOH Common Stock, in which
case the Agreement will not be terminated.
In connection with the execution of the Agreement, Fidelity Federal and
People's Savings entered into an Amended and Restated Agreement of Merger, dated
as of June 13, 1996 (the "Bank Agreement"), which amends and restates the
Agreement of Merger, dated as of April 29, 1996, by and between Fidelity Federal
and People's Savings. The Bank Agreement sets forth the terms and conditions,
which include consummation of the Merger, pursuant to which People's Savings
will merge with and into Fidelity Federal substantially concurrently with the
Merger (the "Bank Merger").
Recommendations of the Boards of Directors of FFOH and CFC
FFOH. The Board of Directors of FFOH (the "FFOH Board") has determined
the Merger to be in the best interests of FFOH and its shareholders and has
unanimously approved the Agreement and the transactions contemplated thereby,
including the Merger. Accordingly, the FFOH Board unanimously recommends that
shareholders of FFOH vote "FOR" adoption of the Agreement.
The FFOH Board also unanimously recommends that shareholders of FFOH
vote "FOR" the proposal to amend FFOH's Articles of Incorporation.
CFC. The Board of Directors of CFC (the "CFC Board") has determined the
Merger to be in the best interests of CFC and its shareholders and has
unanimously approved the Agreement and the transactions contemplated thereby,
including the Merger. Accordingly, the CFC Board unanimously recommends that
shareholders vote "FOR" adoption of the Agreement.
12
See "The Merger - Reasons for the Merger; Recommendations of the Boards
of Directors."
Opinions of Financial Advisors
Stifel, Nicolaus & Company, Incorporated ("Stifel Nicolaus"), CFC's
financial advisor, has delivered to the CFC Board its oral opinion of April 29,
1996, and its written opinion dated the date of this Prospectus/Joint Proxy
Statement, each to the effect that, as of the date of such opinions, the Merger
Consideration was fair, from a financial point of view, to the holders of CFC
Common Stock. RP Financial, LC. ("RP Financial"), FFOH's financial advisor, has
delivered to the FFOH Board its written opinion dated as of April 29, 1996, and
its written opinion dated the date of this Prospectus/Joint Proxy Statement,
each to the effect that, as of the date of such opinions, the Merger
Consideration was fair, from a financial point of view, to the holders of FFOH
Common Stock.
For information on the assumptions made, matters considered and limits
of the reviews by Stifel Nicolaus and RP Financial, see "The Merger - Opinions
of Financial Advisors." Shareholders are urged to read in their entirety the
opinions of Stifel, Nicolaus and RP Financial, dated as of the date of this
Prospectus/Joint Proxy Statement, which are attached as Annexes VI and VII
hereto, respectively.
Regulatory Approvals
Consummation of the Merger is subject to the prior receipt of all
required approvals and consents of the Merger and the Bank Merger by all
applicable federal and state regulatory authorities, including the Office of
Thrift Supervision ("OTS") and the Ohio Department of Commerce, Division of
Financial Institutions ("Department"). Applications have been filed with such
regulatory authorities for approval of the Merger and the Bank Merger. There can
be no assurance that the necessary regulatory approvals will be obtained or as
to the timing or conditions of such approvals. See "The Merger - Regulatory
Approvals."
Conditions to the Merger
The obligations of FFOH and CFC to consummate the Merger are subject
to, among other things, the following conditions: (i) all corporate action
(including without limitation approval by the requisite votes of the respective
shareholders of FFOH, FAC and CFC) necessary to authroize the execution and
delivery of the Agreement and the Bank Agreement and consummation of the
transaction contemplated thereby shall have been duly and validly taken; (ii)
the receipt of all necessary regualtory approvals and consents required to
consummate the Merger and the Bank Merger by any governmental authority, and the
expiration of all notice periods and waiting periods with respect thereto,
provided, however, that no required approval or consent shall include any
condition or requirement that, individually or in the aggregate, would result in
a material adverse effect on the financial
13
condition, results of operations or business of FFOH on a consolidated basis or
would so materially reduce the economic or business benefits of the transactions
contemplated by the Agreement to FFOH that had such condition or requirement
been known FFOH, in its reasonable judgment, would not have entered into the
Agreement; (iii) none of FFOH or CFC or their respective subsidiaries shall be
subject to any statute, rule, regulation, injunction or other order or decree
which prohibits, restricts or makes illegal the consummation of the Merger or
the Bank Merger or any of the other transactions contemplated thereby; (iv) the
Registration Statement shall have become effective under the Securities Act, and
FFOH shall have received all permits, authorizations or exemptions necessary
under all state securities laws to issue FFOH Common Stock in connection with
the Merger, and neither the Registration Statement nor any such permit,
authorization or exemption shall be subject to a stop order or threatened stop
order by any governmental authority; (v) the shares of FFOH Common Stock to be
issued in connection with the Merger shall have been approved for quotation on
NASDAQ; and (vi) each of FFOH and CFC shall have received an opinion to the
effect that the Merger qualifies as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and with respect to certain other related federal income tax considerations. In
addition, the obligation of each of FFOH and CFC to consummate the Merger are
subject to the accuracy of the other party's representations and warranties as
of certain dates, the performance by the other party of its obligations under
the Agreement in all material respects and the other party's delivery of an
officer's certificate and legal opinions covering certain matters. Furthermore,
the obligations of FFOH to consummate the Merger are conditioned on holders of
not more than 10% of the outstanding CFC Common Stock electing to exercise
dissenters' rights. See "The Merger - Conditions to the Merger." Substantially
all of the conditions to consummation of the Merger and the Bank Merger (except
for required shareholder and regulatory approvals) may be waived at any time by
the party for whose benefit they were created, and the Agreement may be amended
at any time by written agreement of the parties, except that no waiver or
amendment occurring after approval of the Agreement by the shareholders of FFOH
or CFC shall change the amount or form of the consideration which CFC's
shareholders are entitled to receive in the Merger or otherwise materially
adversely affect such shareholders without the approval of the shareholders who
would be so affected. If the Merger is not consummated on or before April 29,
1997, FFOH or CFC may terminate the Agreement.
Effective Time of the Merger
The Merger shall become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Ohio, unless a later date and
time is specified as the effective time in such certificate of merger. The
effective time of the Merger (the "Effective Time") shall be as set forth in
such certificate of merger, which will be filed only after the receipt of all
requisite regulatory approvals of the Merger and the Bank Merger, approval of
the Agreement by the requisite votes of the shareholders of FFOH and CFC and the
satisfaction or waiver of all other conditions to the Merger and the Bank Merger
set forth
14
in the Agreement. In addition, the Agreement may be terminated, either before or
after approval by shareholders of FFOH or CFC, under certain circumstances. See
"The Merger - Effective Time of the Merger; Termination and Amendment."
Price-Based Termination; Possible Adjustment of Exchange Ratio
If the Average FFOH Price is less than $8.00 per share, CFC may
terminate the Agreement, provided that in the event CFC elects to exercise this
termination right and upon notice, FFOH will have the right to adjust the
Exchange Ratio to an amount equal to 4.75 shares of FFOH Common Stock, in which
case the Agreement will not be terminated. See "The Merger - Effective Time of
the Merger; Termination and Amendment."
Certain Federal Income Tax Consequences
Consummation of the Merger is conditioned upon delivery of an opinion
of counsel to both FFOH and CFC to the effect that the Merger (i) will
constitute a reorganization within the meaning of Section 368(a) of the Code and
that no taxable gain will be recognized by FFOH, FAC or CFC in connection with
the Merger; (ii) no gain or loss will be recognized by the shareholders of CFC
upon the exchange of their shares of CFC Common Stock solely for shares of FFOH
Common Stock, except for cash received in lieu of fractional shares; and (iii) a
CFC shareholder who exchanges shares of CFC Common stock for cash will recognize
gain, but not in excess of the amount of cash received. The opinion of counsel
is summarized under "The Merger - Certain Federal Income Tax Consequences" and
is filed as an exhibit to the Registration Statement of which this
Prospectus/Joint Proxy Statement is a part. See "The Merger - Certain Federal
Income Tax Consequences."
Each shareholder is urged to consult his or her own tax advisor
concerning the federal and any applicable foreign, state and local income tax
and other tax consequences of the Merger.
Accounting Treatment of the Merger
The Merger will be accounted for as a purchase for accounting purposes.
See "The Merger - Accounting Treatment of the Merger."
Interests of Certain Persons in the Merger
Pursuant to the Agreement, FFOH agreed (i) to take such action as is
necessary to cause Donald H. Rolf, Jr., Chairman and President of CFC, Joseph D.
Hughes, Senior Vice President and a director of CFC, and Thomas N. Spaeth, a
director of CFC, to be elected as directors of FFOH as of the Effective Time and
for terms expiring at FFOH's 1999 annual meeting of shareholders; (ii) that
effective as of the Effective Time, Paul D. Staubach shall resign as a director
of Fidelity Federal, and that the resulting vacancy shall
15
be filled by Donald H. Rolf, Jr.; (iii) to cause FFOH and Fidelity Federal to
elect Mr. Rolf as Chairman of such entities pursuant to the terms of an
employment agreement, in a form previously agreed to by FFOH, CFC and Mr. Rolf,
to be entered into as of the Effective Time; (iv) to cause FFOH and Fidelity
Federal to elect Joseph D. Hughes as Executive Vice President and Chief Lending
Officer of such entities pursuant to the terms of an employment agreement, in a
form previously agreed to by FFOH, CFC and Mr. Hughes, to be entered into as of
the Effective Time; (v) to cause FFOH and Fidelity Federal to enter into
severance agreements, each in a form previously agreed to by FFOH and CFC, with
certain other specified officers of CFC, effective as of the Effective Time;
(vi) to assume and satisfy CFC's obligations under an amended employment
agreement with a former officer of People's Savings; and (vii) to continue
rights to indemnification and liability insurance for directors and officers of
CFC and People's Savings for specified periods. Other than as set forth above,
no director or executive officer of CFC has any direct or indirect material
interest in the Merger, except insofar as ownership of CFC Common Stock and
existing options to purchase such stock might be deemed such an interest. See
"The Merger Interests of Certain Persons in the Merger."
Description of FFOH Common Stock
Subject to the rights of the holders of any class of Preferred Stock of
FFOH if and when outstanding, the holders of FFOH Common Stock possess exclusive
voting rights in FFOH, are entitled to such dividends as may be declared from
time to time by the Board of Directors of FFOH and would be entitled to receive
all assets of FFOH available for distribution in the event of any liquidation,
dissolution or winding up of FFOH. Holders of FFOH Common Stock do not have any
preemptive rights with respect to any shares which may be issued by FFOH in the
future. Each share of FFOH Common Stock offered hereby will be fully paid and
non-assessable. See "Description of FFOH Capital Stock."
Differences in Shareholders' Rights
Shareholders of CFC who receive FFOH Common Stock in the Merger will
become shareholders of FFOH and their rights as shareholders of FFOH will be
governed by FFOH's Articles of Incorporation, Code of Regulations and Bylaws and
the Ohio General Corporation Law ("OGCL"). The rights of shareholders of FFOH
differ in certain respects from the rights of shareholders of CFC. See
"Comparison of the Rights of Shareholders."
Resale of FFOH Common Stock
The shares of FFOH Common Stock to be issued in connection with the
Merger will be freely tradeable by the holders of such shares, except for those
shares held by persons who may be deemed to be "affiliates" of FFOH or CFC under
applicable federal securities laws. See "The Merger - Resale of FFOH Common
Stock."
16
Stock Option Agreements
As an inducement and a condition to FFOH's entering into the Agreement,
FFOH and CFC also entered into a Stock Option Agreement, dated as of April 29,
1996 (the "CFC Option Agreement"), pursuant to which CFC granted FFOH an option
(the "CFC Option"), exercisable upon the occurrence of certain events (none of
which has occurred as of the date hereof to the best of the knowledge of FFOH
and CFC), to purchase up to 140,911 shares of CFC Common Stock, representing
19.9% of the outstanding shares of CFC Common Stock, at a price of $30.00 per
share, subject to adjustment in certain circumstances and termination within
certain periods. As an inducement and a condition to CFC's entering into the
Agreement, FFOH and CFC also entered into a Stock Option Agreement, dated as of
April 29, 1996 (the "FFOH Option Agreement," and together with the CFC Option
Agreement, the "Stock Option Agreements"), pursuant to which FFOH granted CFC an
option (the "FFOH Option"), exercisable upon the occurrence of certain events
(none of which has occurred as of the date hereof to the best of the knowledge
of FFOH and CFC), to purchase up to 403,285 shares of FFOH Common Stock,
representing approximately 9.9% of the outstanding shares of FFOH Common Stock,
at a price of $11.00 per share, subject to adjustment in certain circumstances
and termination within certain periods. The Stock Option Agreements are intended
to increase the likelihood that the Merger will be consummated in accordance
with the terms of the Agreement and may have the effect of discouraging
competing offers to the Merger. Copies of the CFC Option Agreement and the FFOH
Option Agreement are included as Annexes II and III to this Prospectus/Joint
Proxy Statement, respectively, and reference is made thereto for the complete
terms thereof. See "The Merger - Stock Option Agreements."
Stockholder Agreements
In connection with the execution of the Agreement, FFOH entered into a
Stockholder Agreement, dated as of April 29, 1996, with ten shareholders of CFC
solely in their capacities as such (the "CFC Stockholder Agreement"). Pursuant
to the CFC Stockholder Agreement, a copy of which is included as Annex IV
hereto, each of such shareholders agreed, among other things, to vote his or her
shares of CFC Common Stock in favor of the Agreement. In addition, in connection
with the execution of the Agreement, CFC entered into a Stockholder Agreement,
dated as of April 29, 1996, with ten shareholders of FFOH solely in their
capacities as such (the "FFOH Stockholder Agreement.") Pursuant to the FFOH
Stockholder Agreement, a copy of which is included as Annex V hereto, each of
such shareholders agreed, among other things, to vote his or her shares of FFOH
Common Stock in favor of the Agreement. See "The Merger - Stockholder
Agreements."
17
Dissenters' Rights
Pursuant to Section 1701.85 of the OGCL, holders of CFC Common Stock
who (i) file with such respective company not later than ten days after
shareholders vote on the Agreement at the respective Special Meetings, a written
demand for payment to them of the fair cash value of their shares if the Merger
is effected and (ii) have not voted in favor of the Agreement, will be entitled
to be paid the fair cash value of their shares as agreed upon, or if the fair
value remains unsettled, as determined by an Ohio court, provided that the
Merger is consummated and such shareholders properly comply with certain
statutory procedures. The written demand required to be delivered to CFC by a
dissenting shareholder is in addition to and separate from any proxy or vote
against the Merger. The further procedures which must be followed in connection
with the exercise of dissenters' rights by dissenting shareholders are described
herein under "The Merger - Dissenters' Rights" and in Section 1701.85 of the
OGCL, a copy of which is attached as Annex VIII to this Prospectus/Joint Proxy
Statement. Failure to take any step in connection with the exercise of such
rights may result in termination or waiver thereof.
Dissenters' Rights are not available to holders of FFOH Common Stock
regardless of how they vote on the adoption of the Agreement.
Pro Forma Combined Consolidated Financial Information
The unaudited pro forma consolidated condensed combined summary
financial information set forth below gives effect to the Merger under the
purchase accounting method. The pro forma consolidated condensed combined
summary statements of earnings treat the Merger as if it had been consummated at
the beginning of the respective periods, and the pro forma consolidated
condensed combined summary statement of financial condition treats the Merger as
if it had been consummated on March 31, 1996. The pro forma combined per share
data gives effect to an assumed Exchange Ratio of 3.80 shares (which assumes on
Average FFOH Price of $10.00 per share) and assumes that none of the outstanding
stock options to purchase CFC Common Stock are exercised. For a description of
the bases for the pro forma adjustments, see "Pro Forma Combined Consolidated
Financial Information."
18
This pro forma financial information is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred if the Merger had been consummated
at the dates assumed for purposes hereof, nor is it necessarily indicative of
future operating results or financial position. See "Pro Forma Combined
Consolidated Financial Information."
Balance Sheet Data as of March 31, 1996
--------------------------------------------------------------------
Pro Forma
Acquisition Consolidated
Adjustments Condensed
FFOH CFC Dr. (Cr.) Combined
--------------- --------------- --------------- ---------------
(In Thousands)
Cash and cash equivalents(1) $ 18,071 $ 23,245 $(13,351) $ 27,965
Investment and mortgage-
backed securities held to
maturity and available for sale(2) 39,829 52,359 353 92,541
Loans receivable, net 187,109 144,903 (358) 331,654
Total assets 249,366 229,406 (9,157) 469,615
Savings deposits 182,217 201,303 (728) 384,248
Borrowed funds 14,041 2,500 -- 16,541
Total liabilities 198,586 204,969 (480) 404,035
Retained income 25,889 18,798 18,798 25,889
Total stockholders' equity 50,780 24,437 9,637 65,580
(1) Includes interest-bearing deposits in other institutions.
(2) Includes Federal Home Loan Bank stock.
19
Statement of Earnings For the
Three Months Ended March 31, 1996
--------------------------------------------------------------------
Pro Forma
Acquisition Consolidated
Adjustments Condensed
FFOH CFC Dr. (Cr.) Combined
--------------- --------------- --------------- ---------------
(In Thousands, except shares and per share data)
Interest income $ 4,508 $ 3,891 $ 18 $ 8,381
Interest expense 2,649 2,338 (61) 4,926
Net interest income 1,859 1,553 (43) 3,455
Earnings before income taxes 837 431 (69) 1,337
Net earnings 555 285 (22) 862
Earnings per share:
Primary $ 0.14 $ 0.39 $ -- $ 0.16
Fully diluted $ 0.14 $ 0.39 $ -- $ 0.16
Weighted average shares
and share equivalents
outstanding:
Primary 3,900,014 724,857 -- 5,379,935
Fully diluted 3,904,619 724,857 -- 5,384,540
Statement of Earnings For the
Year Ended December 31, 1995
--------------------------------------------------------------------
Pro Forma
Acquisition Consolidated
Adjustments Condensed
FFOH CFC Dr. (Cr.) Combined
--------------- --------------- --------------- ---------------
(In Thousands, except shares and per share data)
Interest income $ 17,001 $ 13,627 $ 72 $ 30,556
Interest expense 10,167 8,055 (243) 17,979
Net interest income 6,834 5,572 (171) 12,577
Earnings before income taxes 2,733 1,659 (276) 4,668
Net earnings 1,814 1,061 (87) 2,962
Earnings per share:
Primary $ 0.44 $ 1.46 $ -- $ 0.53
Fully diluted $ 0.44 $ 1.46 $ -- $ 0.53
Weighted average shares
and share equivalents
outstanding:
Primary 4,077,750 727,455 -- 5,557,671
Fully diluted 4,090,062 727,455 -- 5,569,983
20
MARKET FOR COMMON STOCK AND DIVIDENDS
Each of the FFOH Common Stock and the CFC Common Stock is listed and
traded in the over-the-counter market on NASDAQ under the symbol "FFOH" and
"CRCL," respectively. Application will be made to list the FFOH Common Stock to
be issued in connection with the Merger on NASDAQ. As of the Record Date, there
were 4,073,589 shares of FFOH Common Stock outstanding, which were held by
approximately 1,000 shareholders of record, and there were 708,096 shares of CFC
Common Stock outstanding, which were held by approximately 300 share-holders of
record. Such numbers of shareholders do not reflect the number of individuals or
institutional investors holding stock in nominee name through banks, brokerage
firms and others.
The following table sets forth during the periods indicated the high
and low prices of the FFOH Common Stock and the CFC Common Stock as reported on
NASDAQ and the dividends declared per share of FFOH Common Stock and CFC Common
Stock.
FFOH CFC
---------------------------------------- ----------------------------------------
Market Price(1) Market Price
-------------------------- --------------------------
Dividends Declared Dividends Declared
1996 High Low Per Share(2) High Low Per Share
- ---------------------- ------------ ------------ ------------ ------------ ------------ ------------
First Quarter $11.00 $9.75 $.094 $29.00 $25.00 $.17
Second Quarter (through
__________ __, 1996)
1995
- ----------------------
First Quarter -- -- .075 27.50 22.00 .15
Second Quarter -- -- .075 27.50 25.00 .15
Third Quarter -- -- .075 30.50 27.00 .15
Fourth Quarter -- -- .075 29.50 27.00 .15
1994
- ----------------------
First Quarter -- -- .058 26.00 23.00 .12
Second Quarter -- -- .058 26.00 22.00 .12
Third Quarter -- -- .058 28.50 24.00 .12
Fourth Quarter -- -- .067 27.50 22.38 .12
(1) The FFOH Common Stock has been traded on the NASDAQ since March 4,
1996. Prior to March 4, 1996, the common stock of Fidelity Federal was
traded in the over-the-counter market; however, there was not an active
and liquid market for Fidelity Federal's common stock.
(2) As adjusted to reflect subsequent stock splits and the exchange ratio
with respect to Fidelity Federal's reorganization into the stock
holding company form of organization on March 4, 1996 (whereby each
share of Fidelity Federal common stock held by public shareholders of
Fidelity Federal was converted into 2.25 shares of FFOH Common Stock).
21
Set forth below is information regarding the price per share of FFOH
Common Stock and CFC Common Stock on April 29, 1996, the last trading day
preceding public announcement of the Agreement following the close of business
on that date. The historical prices are as reported on NASDAQ.
Historical Market
Value Per Share
----------------------------------------
Equivalent Market Value
Date FFOH CFC Per Share of CFC
- ------------------------------- ------------------- ------------------- ---------------------------------
April 29, 1996 $10.625 $27.50 $38.00
Shareholders are advised to obtain current market quotations for the
FFOH Common Stock and the CFC Common Stock. The market price of the FFOH Common
Stock at the Effective Time may be higher or lower than the market price at the
time the Agreement was executed, at the date of mailing of this Prospectus/Joint
Proxy Statement or at the time of the Special Meetings.
UNAUDITED COMPARATIVE PER SHARE DATA
Set forth below is selected earnings, book value and cash dividends
declared per common shares data on an historical basis for FFOH and CFC, on a
pro forma combined basis for FFOH and on a pro forma equivalent basis for CFC.
The pro forma combined per share information assumes an Exchange Ratio of 3.80
shares in the Merger and assumes that none of the outstanding options to
purchase CFC Common Stock are exercised. In addition, per share information at
and for the year ended December 31, 1995 with respect to FFOH has been adjusted
to reflect the exchange ratio with respect to Fidelity Federal's reorganization
into the stock holding company form of organization. The information set forth
below should be read in conjunction with the respective financial statements of
FFOH and CFC incorporated by reference in this Prospectus/Joint Proxy Statement
and with the unaudited pro forma combined consolidated financial information
included under "Pro Forma Combined Consolidated Financial Information." Also see
"Selected Consolidated Financial Data of FFOH" and "Selected Consolidated
Financial Data of CFC."
22
FFOH Common Stock CFC Common Stock
----------------------------- -------------------------------
Pro Forma Pro Forma
Historical Combined Historical(4) Equivalent
------------- ------------- --------------- -------------
Net earnings per share(1):
Three months ended March 31, 1996 $0.14 $0.14 $0.39 $0.53
Year ended December 31, 1995 0.44 0.47 1.46 1.79
Dividends declared per share(2):
Three months ended March 31, 1996 0.09 0.09 0.17 0.34
Year ended December 31, 1995 0.30 0.30 0.60 1.14
Book value per share(3):
March 31, 1996 12.47 11.81 34.51 44.88
December 31, 1995 7.39 8.05 34.30 30.59
- --------------
(1) The pro forma combined net earnings per share of FFOH Common Stock are
based upon the combined historical net earnings for FFOH and CFC,
divided by the pro forma combined average number of shares of FFOH
Common Stock outstanding. The pro forma equivalent net earnings per
share of CFC Common Stock represents the pro forma combined net
earnings per share of FFOH Common Stock multiplied by an assumed
Exchange Ratio of 3.80 shares.
(2) The pro forma combined dividends declared per share of FFOH Common
Stock is determined by dividing FFOH and CFC combined cash dividends
declared by the pro forma combined average number of shares of FFOH
Common Stock outstanding. The pro forma equivalent dividends declared
per share of CFC Common Stock represent the FFOH pro forma combined
dividend rates multiplied by an assumed Exchange Ratio of 3.80 shares.
The current annualized dividend rate per share of FFOH Common Stock,
based upon the most recent quarterly dividend rate of $0.05 per share
payable on July 3, 1996, would be $0.20. On a pro forma equivalent
basis per share of CFC Common Stock, such current annualized FFOH
dividend per share of CFC Common Stock would be $0.89, based on an
assumed Exchange Ratio of 3.80 shares.
(3) The pro forma combined book value per share of FFOH Common Stock is
based upon the historical total stockholder's equity for FFOH and CFC
less acquisition adjustments, divided by the pro forma combined
period-end shares of FFOH Common Stock outstanding. The pro forma
equivalent book value per share of CFC Common Stock represents the pro
forma combined book value per share of FFOH Common Stock multiplied by
an assumed Exchange Ratio of 3.80 shares.
(4) FFOH's fiscal year end is December 31 while CFC's fiscal year end is
June 30. For purposes of the table above, CFC financial data is
presented consistent with the fiscal year end of FFOH.
23
SELECTED CONSOLIDATED FINANCIAL DATA OF FFOH
(Dollars in Thousands, Except Per Share Data)
The following selected historical consolidated financial data of FFOH
for the five years ended December 31, 1995 is derived in part from the audited
consolidated financial statements of FFOH. The historical consolidated financial
data for the three months ended March 31, 1996 and 1995 is derived from
unaudited consolidated financial statements. The unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
accruals, which FFOH considers necessary for a fair presentation of the
financial condition and the results of operations for these periods. Operating
results for the three months ended March 31, 1996 are not necessarily indicative
of the results that may be expected for any other interim period or the entire
year ending December 31, 1996. The selected historical consolidated financial
data set forth below should be read in conjunction with, and is qualified in its
entirety by, the historical consolidated financial statements of FFOH, including
the related notes, incorporated herein by reference. See "Available Information"
and "Incorporation of Certain Documents by Reference."
March 31, December 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------ ------------
(Unaudited)
Selected Financial Condition Data(1):
Total assets $249,366 $231,137 $216,168 $202,991 $194,631 $183,748
Interest-bearing deposits in other
financial institutions 16,258 2,784 1,766 6,002 4,271 4,627
Investment securities - at cost -- -- -- 4,023 3,030 2,000
Investment securities available for
sale - at market(2) 9,566 6,044 4,267 -- -- --
Mortgage-backed securities - at cost -- -- 20,792 23,873 26,573 20,839
Mortgage-backed securities available
for sale - at market(2) 28,377 29,378 6,280 -- -- --
Loans receivable - net(3) 187,109 185,132 175,222 162,392 153,409 150,299
Deposits 182,217 180,697 173,198 157,642 154,659 161,094
FHLB advances 14,041 17,653 12,089 15,954 13,605 3,500
Stockholders' equity(4) 50,780 30,113 28,540 26,905 24,270 17,832
Three Months Ended
March 31, Year Ended December 31,
------------------------ --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ---------- ----------- ----------- ----------- ---------
(Unaudited)
Selected Operating Data(1):
Total interest income $ 4,508 $ 4,106 $17,001 $15,748 $16,310 $17,142 $17,150
Total interest expense 2,649 2,368 10,167 8,331 8,106 9,659 11,423
------- ------- ------ ------ ------ ------ ------
Net interest income 1,859 1,738 6,834 7,417 8,204 7,483 5,727
Provision for losses on loans 17 14 71 44 52 72 474
------- ------- ------- ------ ------ ------ ------
Net interest income after
provision for losses on loans 1,842 1,724 6,763 7,373 8,152 7,411 5,253
Other income 114 87 355 347 250 324 419
General, administrative and
other expense (1,119) (1,073) (4,385) (4,172) (4,000) (3,692) (3,401)
------- ------- ------ ------ ------ ------ ------
Earnings before income taxes
and cumulative effect of
changes in accounting methods 837 738 2,733 3,548 4,402 4,043 2,271
Federal income taxes (282) (252) (919) (1,176) (1,464) (1,371) (850)
------- ------- ------ ------ ------ ------- ------
Earnings before cumulative
effect of changes in accounting
methods 555 486 1,814 2,372 2,938 2,672 1,421
Cumulative effect of changes
in accounting methods -- -- -- -- -- (229) --
-------- -------- ------- ------- ------ ------ ------
Net earnings $ 555 $ 486 $ 1,814 $ 2,372 $ 2,938 $ 2,443 $ 1,421
======= ======= ====== ====== ====== ====== ======
Earnings per share(5) $ .14 $ .12 $ .45 $ .58 $ .73 $ .44 $ N/A
======== ======== ======= ======= ======= ====== =====
24
At or For the Three
Months Ended March 31, At or For the Year Ended December 31,
------------------------ --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ---------- -------- ----------- ----------- -----------
(Unaudited)
Selected Operating Ratios(1)(6):
Return on average assets .93% .90% .82% 1.14% 1.47% 1.29% 0.81%
Return on average equity 6.10 6.75 6.17 8.51 11.41 11.22 8.26
Equity to assets at end of period 20.36 13.29 13.03 13.20 13.25 12.47 9.70
Interest rate spread(7) 2.44 2.61 2.44 3.04 3.63 3.42 2.65
Net interest margin(7) 3.18 3.27 3.13 3.63 4.20 4.03 3.30
Non-performing loans to total
loans at end of period(8) .53 .38 .54 .47 .88 .27 .50
Non-performing assets to total
assets at end of period(8) .40 .36 .44 .43 .77 .46 .42
Allowance for loan losses to non-
performing loans at end of period 80.88 115.34 81.23 95.71 51.50 171.03 33.55
Average interest-earning assets to
average interest-bearing liabilities 116.54 114.75 114.74 114.49 113.91 111.87 110.01
Net interest income after provision
for loan losses to total general,
administrative and other expenses 164.61 160.67 154.23 176.73 203.80 200.73 154.46
General, administrative and other
expenses to average total assets 1.87 1.98 1.97 2.00 2.01 1.95 1.93
Full service offices 3 4 4 4 3 3 3
- ----------------------
(1) Financial condition data and operating data as of and for the year
ended December 31, 1991 are those of Fidelity Federal in mutual form.
(2) FFOH adopted SFAS No. 115 as of January 1, 1994. In connection
therewith, the Savings Bank classified certain of its securities as
available for sale.
(3) At March 31, 1996 and December 31, 1995, included $171,000 and
$646,000, respectively, of loans classified as held for sale. At
December 31, 1994, 1993, 1992 and 1991, FFOH did not have any loans
classified as held for sale.
(4) Comprised of retained earnings only for the year ended December 31,
1991.
(5) Earnings per share is not applicable for the year ended December 31,
1991, as Fidelity Federal converted to the stock form of ownership on
May 11, 1992. Earnings per share for the year ended December 31, 1992
has been computed on a pro forma basis based on the number of days that
Fidelity Federal was a stock institution during the year. Earnings per
share has been adjusted to reflect subsequent stock splits and the
exchange ratio with respect to Fidelity Federal's reorganization into
the stock holding company form of organization (whereby each share of
Fidelity Federal common stock held by public shareholders of Fidelity
Federal was converted into 2.25 shares of FFOH Common Stock).
(6) With the exception of end of period ratios, all ratios are based on
average monthly balances during the periods and have been annualized
where appropriate.
(7) Interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average rate
on interest-bearing liabilities. Net interest margin represents net
interest income as a percentage of average interest-earning assets.
(8) Non-performing loans consist of non-accrual loans and accruing loans
that are contractually past due 90 days or more, and non-performing
assets consist of non-performing loans and real estate acquired by
foreclosure or deed-in-lieu thereof.
25
SELECTED CONSOLIDATED FINANCIAL DATA OF CFC
(Dollars in Thousands, Except Per Share Data)
The following selected historical consolidated financial data of CFC
for the five years ended June 30, 1995 is derived in part from the audited
consolidated financial statements of CFC. The historical consolidated financial
data for the nine months ended March 31, 1996 and 1995 is derived from unaudited
consolidated financial statements. The unaudited consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
which CFC considers necessary for a fair presentation of the financial condition
and the results of operations for these periods. Operating results for the nine
months ended March 31, 1996 are not necessarily indicative of the results that
may be expected for any other interim period or the entire year ending June 30,
1996. The selected historical consolidated financial data set forth below should
be read in conjunction with, and is qualified in its entirety by, the historical
consolidated financial statements of CFC, including the related notes,
incorporated herein by reference. See "Available Information" and "Incorporation
of Certain Documents by Reference."
March 31, June 30,
------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------ ---------- ------------ ------------ ---------- ------------
(Unaudited)
Selected Financial Condition Data:
Total assets $229,406 $189,850 $173,932 $177,698 $186,011 $185,813
Interest-bearing deposits in other
financial institutions 21,779 4,373 862 5,856 6,617 33,712
Investment securities - at cost 2,997 16,998 22,942 48,997 39,714 5,547
Investment securities available for
sale - at market(1) 987 11,877 28,696 3,970 -- --
Mortgage-backed securities - at cost 42,708 29,127 28,438 30,091 41,629 41,047
Mortgage-backed securities available
for sale - at market(1) 3,992 4,104 4,121 -- -- --
Loans receivable - net 144,903 116,200 80,455 77,366 87,453 96,589
Deposits 201,303 151,661 145,875 152,691 162,914 170,950
FHLB advances 2,500 13,500 2,500 -- -- --
Stockholders' equity(2) 24,436 23,821 24,909 24,351 22,779 14,409
Nine Months Ended
March 31, Year Ended June 30,
------------------------ ----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ---------- ---------- -----------
(Unaudited)
Selected Operating Data:
Total interest income $11,222 $ 8,806 $12,026 $10,873 $12,788 $14,881 $16,002
Total interest expense 6,802 4,632 6,537 5,714 7,017 10,096 12,104
------ ------ ------ ------ ------ ------ ------
Net interest income 4,420 4,174 5,489 5,159 5,771 4,785 3,898
Provision (credit) for losses on loans -- -- -- -- -- (2) 245
------ ------ ------- ------ ------ ------ ------
Net interest income after
provision (credit) for losses on
loans 4,420 4,174 5,489 5,159 5,771 4,787 3,653
Other income 611 337 428 864 596 671 333
Other expenses (3,794) (3,504) (4,519) (4,768) (3,786) (3,626) (3,224)
------- ------- ------ ------ ------ ------ ------
Income before income taxes and
cumulative effect of changes in
accounting principles 1,237 1,007 1,398 1,255 2,581 1,832 762
Federal income taxes (454) (342) (475) (420) (881) (586) (330)
------- ------- ------ ------- ------- ------- ------
Income before cumulative
effect of changes in accounting
principles 783 665 923 835 1,700 1,246 432
Cumulative effect of changes
in accounting principles -- -- -- 315 -- -- --
------- ------ ------- ------- ------ ------ ------
Net income $ 783 $ 665 $ 923 $ 1,150 $ 1,700 $ 1,246 $ 432
======= ======= ====== ====== ====== ====== ======
Income per share(3) $ 1.08 $ 0.87 $ 1.22 $ 1.44 $ 2.16 $ 1.62 $ N/A
======= ======= ====== ====== ====== ===== =====
26
At or For the Nine Months
Ended March 31, At or For the Year Ended June 30,
------------------------ -------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ---------- ----------- ------------ -------- -----------
(Unaudited)
Selected Operating Ratios(4):
Return on average assets .48% .50% .52% .65% .93% .66% .24%
Return on average equity(5) 4.31 3.68 3.85 4.70 7.52 5.97 3.01
Equity to assets at end of period 10.65 12.90 12.55 14.32 13.70 12.25 7.75
Interest rate spread(6) 2.45 2.81 2.75 2.54 2.95 2.18 1.83
Net interest margin(6) 2.77 3.25 3.20 3.01 3.33 2.65 2.22
Non-performing loans to total
loans at end of period(7) .10 .13 .12 .53 .25 .11 .08
Non-performing assets to total
assets at end of period(7) .07 .08 .07 .24 .10 .05 .04
Allowance for loan losses to non-
performing loans at end of period(7) 339.33 372.26 369.57 121.46 273.90 512.12 675.64
Average interest-earnings assets to
average interest-bearing liabilities 107.38 112.20 111.72 114.25 109.53 108.40 105.67
Net interest income after provision
for loan losses to other expenses 116.49 119.11 121.46 108.20 152.43 132.02 113.31
Other expenses to average total
assets 2.31 2.65 2.53 2.70 2.07 1.92 1.77
Full service offices 7 6 6 7 7 7 7
- ------------------------------
(1) CFC adopted SFAS No. 115 as of June 30, 1994. In connection therewith,
CFC classified certain of its securities as available for sale.
(2) Reflects retained earnings of People's Savings at June 30, 1991.
(3) Income per share is not applicable for the year ended June 30, 1991, as
People's Savings converted to the stock form of ownership on August 6,
1991.
(4) With the exception of end of period ratios, all ratios are based on
average monthly balances and have been annualized where appropriate.
(5) Includes intangibles. Return on tangible equity for the nine months
ended March 31, 1996 was 4.91%.
(6) Interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average rate
on interest-bearing liabilities. Net interest margin represents net
interest income as a percentage of average interest-earning assets.
(7) Non performing loans consist of non-accrual loans and accruing loans
that are contractually past due 90 days or more, and non-performing
assets consist of non-performing loans and real estate acquired by
foreclosure or deed-in-lieu thereof.
27
GENERAL INFORMATION
This Prospectus/Joint Proxy Statement is being furnished to the holders
of FFOH Common Stock and CFC Common Stock in connection with the solicitation of
proxies by the Boards of Directors of FFOH and CFC for use at the FFOH Special
Meeting and the CFC Special Meeting, respectively. This Prospectus/Joint Proxy
Statement also serves as a prospectus of FFOH in connection with the issuance of
FFOH Common Stock to holders of CFC Common Stock upon consummation of the
Merger.
All information contained or incorporated by reference in this
Prospectus/Joint Proxy Statement with respect to FFOH has been supplied by FFOH,
and all information contained or incorporated by reference in this
Prospectus/Joint Proxy Statement with respect to CFC has been supplied by CFC.
This Prospectus/Joint Proxy Statement and the other documents enclosed
herewith are first being mailed to shareholders of FFOH and CFC on or about
_______ __, 1996.
THE SPECIAL MEETINGS
Time, Date and Place
The FFOH Special Meeting will be held at __:__ _.m., Eastern Time, on
________ __, 1996 at ________________________, Cincinnati, Ohio. The CFC Special
Meeting will be held at __:__ _.m., Eastern Time, on _________ __, 1996, at
_______________, Sharonville, Ohio.
Matters to be Considered
At the Special Meetings, shareholders of FFOH and CFC will each
consider and vote upon a proposal to adopt the Agreement. In addition, at the
FFOH Special Meeting, shareholders of FFOH will consider and vote upon a
proposal to amend FFOH's Articles of Incorporation in order to increase the
authorized shares of FFOH Common Stock and FFOH Preferred Stock. Pursuant to
applicable law and the articles of incorporation, code of regulations and bylaws
of FFOH and CFC, respectively, no other business may properly come before the
FFOH Special Meeting and the CFC Special Meeting.
Shares Outstanding and Entitled to Vote; Record Date
The close of business on _________ __, 1996 has been fixed by the FFOH
Board as the Record Date for the determination of holders of FFOH Common Stock
entitled to notice of and to vote at the FFOH Special Meeting. At the close of
business on the Record Date, there were __________ shares of FFOH Common Stock
outstanding and entitled to
28
vote. Each share of FFOH Common Stock entitles the holder thereof to one vote on
all matters properly presented at the FFOH Special Meeting.
The close of business on _________ __, 1996 has been fixed by the CFC
Board as the Record Date for the determination of holders of CFC Common Stock
entitled to notice of and to vote at the CFC Special Meeting and any adjournment
or adjournments thereof. At the close of business on the Record Date, there were
_________ shares of CFC Common Stock outstanding and entitled to vote. Each
share of CFC Common Stock entitles the holder thereof to one vote on all matters
properly presented at the CFC Special Meeting.
Votes Required
A quorum, consisting of the holders of a majority of the issued and
outstanding shares of FFOH Common Stock or CFC Common Stock, as the case may be,
must be present in person or by proxy before any action may be taken at the FFOH
Special Meeting or the CFC Special Meeting, as the case may be. A majority of
the votes cast at the FFOH Special Meeting by holders of FFOH Common Stock as of
the Record Date, voting in person or by proxy, is necessary to adopt the
Agreement on behalf of FFOH, and the affirmative vote of the holders of a
majority of the shares of FFOH Common Stock outstanding as of the Record Date,
voting in person or by proxy, is necessary to adopt the proposal to amend FFOH's
Articles of Incorporation. The affirmative vote of the holders of a majority of
the shares of CFC Common Stock outstanding as of the Record Date, voting in
person or by proxy, is necessary to adopt the Agreement on behalf of CFC.
The proposals to adopt the Agreement and the amendment to FFOH's
Articles of Incorporation are considered "non-discretionary items" whereby
brokerage firms may not vote in their discretion on behalf of their clients if
such clients have not furnished voting instructions. Abstentions and such broker
"non-votes" at the FFOH Special Meeting and the CFC Special Meeting will be
considered in determining the presence of a quorum at the FFOH Special Meeting
and the CFC Special Meeting, respectively, but will not be counted as votes cast
at such Special Meetings. Because the proposal to adopt the Agreement by CFC's
stockholders and the proposal to amend FFOH's Articles of Incorporation are
required to be approved by the holders of a majority of the outstanding shares
of CFC Common Stock and FFOH Common Stock, respectively, abstentions and broker
"non-votes" will have the same effect as a vote against such proposals (although
abstentions and broker non-votes will not have such an effect in the case of
voting on the proposal to adopt the Agreement at the FFOH Special Meeting).
Voting and Revocation of Proxies
Each copy of this Prospectus/Joint Proxy Statement mailed to holders of
FFOH Common Stock and CFC Common Stock is accompanied by a form of proxy for use
at the FFOH Special Meeting or the CFC Special Meeting, as the case may be. Any
shareholder executing a proxy may revoke it at any time before it is voted by
(i) filing with the Secretary
29
of FFOH (in the case of a FFOH shareholder) or the Secretary of CFC (in the case
of a CFC shareholder) at the address of FFOH or CFC set forth on its respective
Notice of Special Meeting of Shareholders, written notice of such revocation;
(ii) executing and returning a later-dated proxy; or (iii) attending the FFOH
Special Meeting or the CFC Special Meeting, as applicable, and giving notice of
such revocation in person. Attendance at the applicable Special Meeting will
not, in and of itself, constitute revocation of a proxy.
Each proxy returned to FFOH or CFC (and not revoked) by a holder of
FFOH Common Stock and CFC Common Stock, respectively, will be voted in
accordance with the instructions indicated thereon. If no instructions are
indicated, the proxy will be voted for adoption of the Agreement and, in the
case of FFOH, for adoption of the amendment to FFOH's Articles of Incorporation.
Solicitation of Proxies
Each of FFOH and CFC will bear its costs of mailing this
Prospectus/Joint Proxy Statement to its shareholders, as well as all other costs
incurred by it in connection with the solicitation of proxies from its
shareholders on behalf of its Board of Directors, except that FFOH and CFC will
share equally the fees for registration of the FFOH Common Stock offered hereby
and the cost of printing this Prospectus/Joint Proxy Statement. In addition to
solicitation by mail, the directors, officers and employees of each company and
its subsidiaries may solicit proxies from shareholders of such company by
telephone, telegram or in person without compensation other than reimbursement
for their actual expenses. Arrangements also will be made with brokerage firms
and other custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of stock held of record by such
persons, and FFOH or CFC, as the case may be, will reimburse such custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses in
connection therewith.
FFOH has retained _____________________, a professional proxy
solicitation firm, to assist it in the solicitation of proxies. The fee payable
to such firm in connection with the Merger is $_____, plus reimbursement for
reasonable out-of-pocket expenses.
AMENDMENT TO ARTICLES OF INCORPORATION
The FFOH Board is also seeking shareholder adoption of an amendment to
FFOH's Articles of Incorporation to increase the number of authorized shares of
FFOH Common Stock from 7,000,000 to 15,000,000 and the number of authorized
shares of FFOH Preferred Stock from 500,000 to 5,000,000.
The newly authorized shares of FFOH Common Stock and FFOH Preferred
Stock may be issued from time to time in the future for any proper purpose
without further action of the shareholders of FFOH, except as required by the
Articles of Incorporation, applicable
30
law or the applicable listing requirements of NASDAQ. Each share of FFOH Common
Stock to be authorized for issuance will have the same rights and will be
identical in all respects with each other share of FFOH Common Stock. The newly
authorized shares of FFOH Common Stock will not affect the rights, such as
voting and liquidation rights, of the shares of FFOH Common Stock currently
outstanding. Shareholders will not have preemptive rights to purchase any
subsequently issued shares of FFOH Common Stock. FFOH has no current plans to
issue the newly authorized shares of FFOH Common Stock. The FFOH Board is
authorized to issue Preferred Stock and to fix and state voting powers,
designations, preferences or other special rights of such shares and the
qualifications, limitations and restrictions thereof. The FFOH Preferred Stock
may be issued in distinctly designated series, may be convertible into FFOH
Common Stock and may rank prior to the FFOH Common Stock as to dividend rights,
liquidation preferences or both. FFOH has no current plans to issue the newly
authorized shares of FFOH Preferred Stock. Nevertheless, the ability of the FFOH
Board to issue additional shares of FFOH Common Stock or FFOH Preferred Stock
without additional shareholder approval may be deemed to have an anti-takeover
effect. See "Description of FFOH Capital Stock."
Adoption of the proposed amendment to FFOH's Articles of Incorporation
requires the affirmative vote of the holders of a majority of the outstanding
shares of FFOH Common Stock, voting in person or by proxy. The FFOH Board
unanimously recommends that shareholders of FFOH vote "FOR" the proposal to
amend FFOH's Articles of Incorporation.
THE MERGER
The following information relating to the Merger does not purport to be
complete and is qualified in its entirety by reference to the Agreement, a copy
of which is attached to this Prospectus/Joint Proxy Statement as Annex I. All
shareholders are urged to read carefully the Agreement and the exhibits thereto.
General
In accordance with the terms of and subject to the conditions set forth
in the Agreement, CFC will be merged with and into FAC, with FAC as the
surviving corporation of the Merger. The Agreement provides that at the
Effective Time each outstanding share of CFC Common Stock (other than (i) any
dissenting shares under the OGCL and (ii) any shares held by FFOH or CFC) shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into, subject to certain terms, conditions, limitations
and procedures set forth in the Agreement and described herein, either $38.00 in
cash or a number of shares of FFOH Common Stock which will be determined by
applying a formula, set forth in the Agreement. See "- Merger Consideration."
31
In connection with the execution of the Agreement, Fidelity Federal and
People's Savings entered into the Bank Agreement, which sets forth the terms and
conditions, including consummation of the Merger, pursuant to which People's
Savings will merge with and into Fidelity Federal substantially concurrently
with the Merger.
Each of the FFOH Board and the CFC Board has unanimously approved the
Agreement and the transactions contemplated thereby and believes that the Merger
is in the best interests of FFOH and CFC, respectively, and its respective
shareholders. Accordingly, the Board of Directors of each of FFOH and CFC
unanimously recommends that shareholders of FFOH and CFC, respectively, vote
"FOR" adoption of the Agreement.
Background of the Merger
In connection with its normal strategic planning process, CFC
continuously reviews its strategic business alternatives, devoting particular
attention to the continuing consolidation and increasing competition within the
banking and financial services industries in the Cincinnati market area. The
Cincinnati market is home to several large regional commercial banking entities
which have substantially greater financial and marketing resources available to
them as well as a significant number of commercial banks and savings
institutions which are reasonably comparable to CFC and FFOH in size and
resources. In recent years, competition within the local banking and financial
services industries has intensified, especially for smaller institutions like
CFC, leading to CFC's exploration of a possible business combination with FFOH.
In the summer of 1995 and continuing through the fall of 1995, FFOH
began a review of its strategic business alternatives, devoting particular
attention to the limitations on its ability to pursue acquisitions as a result
of its prior mutual holding company ("MHC") ownership structure. As a MHC
institution, FFOH pursued acquisition opportunities with smaller local thrifts
and thrift holding companies. None of such discussions ever advanced beyond
preliminary discussions, in large part because of the ownership and capital
structure limitations imposed by the MHC form of ownership. In the fall of 1995,
the FFOH Board determined that it was in the best interests of FFOH and its
shareholders to convert from the MHC ownership structure to a full stock
corporation. Among other things, the benefits of such a transaction included
increased flexibility to pursue strategic acquisitions by eliminating the
capital stock ownership limitations of the MHC form of ownership. In conjunction
with its conversion to the stock form of organization, the FFOH Board adopted a
business plan that called for FFOH to pursue asset growth through internal
deposit growth, branch purchases and optionally through one or more strategic
acquisitions. Such growth strategies would be pursued with the broad objectives
of leveraging FFOH's excess capital position anticipated as a result of the
conversion and increasing shareholder returns. On March 4, 1996, FFOH completed
its conversion from the mutual to the stock form of organization and, by means
of an offering of FFOH Common Stock in connection with such conversion, raised
approximately $22.1 million of additional capital.
32
On March 5, 1996, a representative of CFC approached senior management
of FFOH, indicating that CFC was interested in meeting with representatives of
FFOH to discuss a possible transaction between the two companies. As a result of
this indication of interest, John R. Reusing, President and Chief Executive
Officer of FFOH, Paul D. Staubach, Senior Vice President and Chief Financial
Officer and Secretary of FFOH, Donald H. Rolf, Jr., Chairman and President of
CFC, and Joseph D. Hughes, Senior Vice President of CFC, met on March 6, 1996 to
discuss the respective companies, the competitive challenges faced by each,
consolidation within the banking industry and the rationale for a potential
business combination between FFOH and CFC. Additional telephone conversations
and meetings among the parties continued over the next several days, during
which the parties continued to discuss the rationale for a potential business
combination, as well as the management and staffing of the combined company. On
March 8, 1996, FFOH and CFC entered into mutual confidentiality agreements.
On March 12, 1996, the FFOH Board met with RP Financial to discuss the
financial rationale for a potential business combination between FFOH and CFC.
At a meeting on March 13, 1996, the FFOH representatives, along with a
representative from RP Financial, met with the CFC representatives, along with
representatives from Stifel Nicolaus. At that meeting, FFOH, CFC and the
financial advisors reviewed certain financial and operational information of the
respective companies and conducted interviews of the respective management teams
to ascertain whether or not the transaction rationale merited further
discussions. At the March 13 meeting, it was agreed that FFOH and CFC would
exchange additional financial information, with the objective of determining
whether or not mutually agreeable financial terms could be reached.
On March 20, 1996, the FFOH representatives, the CFC representatives
and the financial advisors met to discuss the possible financial terms under
which a strategic transaction could be effected. On the basis of its analysis,
FFOH and its financial advisor discussed FFOH's financial objectives should a
strategic transaction be pursued, and outlined, in general, the terms under
which FFOH would be willing to proceed with discussions. During the following
weeks, senior management and the financial advisors of each of FFOH and CFC
continued to discuss the financial and other terms of the proposed strategic
transaction, including the form and amount of consideration to be offered, the
Exchange Ratio, the treatment of CFC stock options, the form of the Stock Option
Agreements, and issues relating to the management and operations of FFOH
following the proposed transaction, including the election of each of Donald H.
Rolf, Jr., Joseph D. Hughes and Thomas N. Spaeth to the FFOH Board and the
employment of Donald H. Rolf, Jr., Chairman and President of CFC and Chairman of
People's Savings, as Chairman of the Boards of Directors of FFOH and Fidelity
Federal, and Joseph D. Hughes, Senior Vice President of CFC and President of
People's Savings, as Executive Vice President of FFOH and Executive Vice
President and Chief Lending Officer of Fidelity Federal. During this period,
FFOH, CFC, and their respective legal counsel and financial advisors conducted
reciprocal due diligence analyses. The form and amount of consideration and the
Exchange Ratio was negotiated on an arm's length basis between the FFOH
representatives, the CFC
33
representatives and the financial advisors. On March 21, 1996 and April 18,
1996, the CFC Board met with CFC's senior management, financial advisor and
legal counsel to review the status of discussions with FFOH and the rationale
for the potential business combination.
On April 29, 1996, at a meeting of the FFOH Board, Messrs. Reusing and
Staubach reviewed with the FFOH Board the reasons for, and the potential
benefits of the Merger; FFOH's legal counsel reviewed the terms of the
Agreement, the Bank Agreement, the Stock Option Agreements and the Stockholder
Agreements and the transactions contemplated thereby, including the election of
each of Donald H. Rolf, Jr., Joseph D. Hughes and Thomas N. Spaeth to the FFOh
Board and the employment of Donald H. Rolf, Jr., Chairman and President of CFC
and Chairman of People's Savings, as Chairman of the Boards of Directors of FFOH
and Fidelity Federal, and Mr. Joseph D. Hughes, Senior Vice President of CFC and
President of People's Savings, as Executive Vice President of FFOH and Executive
Vice President and Chief Lending Officer of Fidelity Federal.; and FFOH's
financial advisor made a presentation regarding the financial terms of the
Agreement and the fairness, from a financial point of view, of the Merger
Consideration to holders of FFOH Common Stock. After a thorough discussion and
consideration of the factors discussed below under "The Merger - Reasons for the
Merger; Recommendations of the Boards of Directors - FFOH", the FFOH Board
unanimously approved the Agreement and the transactions contemplated thereby
(including the Bank Merger), and authorized the execution of the Agreement, the
Bank Agreement, the Stock Option Agreements and the Stockholder Agreements.
On April 29, 1996, at a meeting of the CFC Board, Messrs. Rolf and
Hughes reviewed with the CFC Board the reasons for, and the potential benefits
of the Merger; CFC's legal counsel reviewed the terms of the Agreement, the Bank
Agreement, the Stock Option Agreements and the Stockholder Agreements and the
transactions contemplated thereby, including the election of each of Donald H.
Rolf, Jr., Joseph D. Hughes and Thomas N. Spaeth to the FFOH Board and the
employment of Donald H. Rolf, Jr., Chairman and President of CFC and Chairman of
People's Savings, as Chairman of the Boards of Directors of FFOH and Fidelity
Federal, and Joseph D. Hughes, Senior Vice President of CFC and President of
People's Savings, as Executive Vice President of FFOH and Executive Vice
President and Chief Lending Officer of Fidelity Federal; and CFC's financial
advisor made a presentation regarding the financial terms of the Agreement and
the fairness, from a financial point of view, of the Merger Consideration to
holders of CFC Common Stock. After a thorough discussion and consideration of
the factors discussed below under "The Merger - Reasons for the Merger;
Recommendations of the Boards of Directors - CFC", the CFC Board unanimously
approved the Agreement and the transactions contemplated thereby (including the
Bank Merger), and authorized the execution of the Agreement, the Bank Agreement,
the Stock Option Agreements and the Stockholder Agreements. The Agreement, the
Bank Agreement, the Stock Option Agreements and the Stockholder Agreements were
entered into on April 29, 1996 and on June 13, 1993, the parties amended and
restated the Agreement and the Bank Agreement.
34
Reasons for the Merger; Recommendations of the Boards of Directors
CFC. In reaching its determination to approve and recommend to
shareholders the adoption of the Agreement and the transactions contemplated
thereby, the CFC Board considered a number of factors, including, without
limitation, the following:
(i) the CFC Board's review of the operating environment,
including, but not limited to, the continued consolidation and
increasing competition in the banking and financial services industries
in southwestern Ohio, the prospect for further changes in these
industries and the increasing importance of access to financial
resources to a savings institution's ability to capitalize on
opportunities in these industries;
(ii) the CFC Board's review, with the assistance of management
and Stifel Nicolaus, of the financial condition, results of operations,
business and overall prospects of FFOH, as well as management's best
estimates of CFC's prospects;
(iii) the CFC Board's assessment, based on the analysis of and
presentations to the CFC Board by the management of CFC and Stifel
Nicolaus of CFC's strategic position, that the Merger was consistent
with CFC's strategic objectives (see "The Merger - Background of the
Merger");
(iv) the financial presentation of Stifel Nicolaus and the
opinion of Stifel Nicolaus as to the fairness from a financial point of
view of the Merger Consideration to CFC and its shareholders (see "The
Merger - Opinions of Financial Advisors - CFC");
(v) the anticipated cost savings and operating efficiencies
available to the combined institution from the Merger;
(vi) the CFC Board's belief that the terms of the Agreement
are attractive in that the Agreement allows CFC shareholders to become
shareholders in a combined institution which would represent the
largest public savings institution within the Cincinnati market area
and provides the combined institution with greater ability to expand
its presence in southwestern Ohio;
(vii) the general structure of the transaction and the high
degree of compatibility of the management and business philosophies of
CFC and FFOH;
(viii) the CFC Board's assessment that CFC would be able to
continue its high level of personal service to the customers and the
communities that it serves through an affiliation with another
community-based institution;
35
(ix) the election upon consummation of the Merger of each of
Donald H. Rolf, Jr., Joseph D. Hughes and Thomas N. Spaeth to the FFOH
Board, the execution upon consummation of the Merger of employment
agreements pursuant to which Donald H. Rolf, Jr., Chairman and
President of CFC and Chairman of People's Savings, will serve as
Chairman of the Boards of Directors of FFOH and Fidelity Federal, and
Joseph D. Hughes, Senior Vice President of CFC and President of
People's Savings, will serve as Executive Vice President of FFOH and
Executive Vice President and Chief Lending Officer of Fidelity Federal;
(x) in accordance with its Articles of Incorporation, CFC's
Board also considered other relevant factors, including, without
limitation, the financial and managerial resources and future prospects
of FFOH and the social, legal, environmental and economic effects on
the employees, customers, suppliers and other affected persons, firms
and corporations and on the communities and geographical areas in which
CFC and its subsidiaries operate or are located and on the business and
properties of CFC and its subsidiaries; and
(xi) the expectation that the Merger will generally be a
tax-free transaction to CFC and, with respect to the stock portion of
the Merger Consideration, its shareholders (see "The Merger - Certain
Federal Income Tax Consequences").
The foregoing discussion of the information and factors discussed by
the CFC Board is not meant to be exhaustive but is believed to include all
material factors considered by CFC's Board. The CFC Board did not quantify or
attach any particular weight to the various factors that it considered in
reaching its determination that the Merger is in the best interests of CFC and
its shareholders.
FOR THE REASONS DESCRIBED ABOVE, THE CFC BOARD HAS DETERMINED THE
MERGER TO BE IN THE BEST INTERESTS OF CFC AND ITS SHAREHOLDERS AND HAS
UNANIMOUSLY APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER. ACCORDINGLY, THE CFC BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" ADOPTION OF THE AGREEMENT.
FFOH. In reaching its determination to approve and recommend to
shareholders the adoption of the Agreement and the transactions contemplated
thereby, the FFOH Board considered a number of factors, including, without
limitation, the following:
(i) the FFOH Board's review, with the assistance of management
and of RP Financial, of the financial condition, results of operations,
business and overall prospects of FFOH and CFC;
36
(ii) the fact that CFC's strong banking franchise is
contiguous to FFOH's existing banking franchise in Cincinnati, Ohio and
that the Merger would improve the combined institution's franchise
value as a result of the combined institution's enhanced branch
network;
(iii) the enhanced ability of the combined entity to compete
against larger competitors and the enhanced ability to expand the
combined entity's presence in southwestern Ohio;
(iv) the financial presentations of senior management and RP
Financial and the opinion of RP Financial as to the fairness of the
Merger Consideration from a financial point of view to the FFOH
shareholders (see "The Merger - Opinions of Financial Advisors -
FFOH");
(v) the anticipated cost savings and operating efficiencies
available to the combined institution from the Merger;
(vi) the expectation that each of the Merger and the Bank
Merger will generally be a tax-free transaction to FFOH and Fidelity
Federal;
(vii) the general structure of the transaction and the
compatibility of management and business philosophy;
(viii) the ability of the combined enterprise to compete in
the relevant banking and non-banking markets; and
(ix) the nature of, and likelihood of obtaining, the
regulatory approvals that would be required with respect to the Merger
and the Bank Merger.
The foregoing discussion of the information and factors discussed by
the FFOH Board is not meant to be exhaustive but is believed to include all
material factors considered by FFOH's Board. The FFOH Board did not quantify or
attach any particular weight to the various factors that it considered in
reaching its determination that the Merger is in the best interests of FFOH and
its shareholders.
FOR THE REASONS DESCRIBED ABOVE, THE FFOH BOARD HAS DETERMINED THE
MERGER TO BE IN THE BEST INTERESTS OF FFOH AND ITS SHAREHOLDERS AND HAS
UNANIMOUSLY APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER. ACCORDINGLY, THE FFOH BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" ADOPTION OF THE AGREEMENT.
37
Opinions of Financial Advisors
CFC. CFC has retained Stifel Nicolaus to act as its financial advisor
in connection with rendering a fairness opinion with respect to the Merger.
Stifel Nicolaus is an investment banking and securities firm with membership on
all principal U.S. securities exchanges. As part of its investment banking
activities, Stifel Nicolaus is regularly engaged in the valuation of businesses
and their securities in connection with merger transactions and other types of
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In requesting Stifel Nicolaus' advice and opinion, the CFC Board did
not give any special instructions to, or impose any limitations upon the scope
of the investigation which Stifel Nicolaus might wish to conduct to enable it to
give its opinion. Stifel Nicolaus has rendered its opinion that, based upon and
subject to the various considerations set forth therein, as of April 29, 1996
and the date of this Prospectus/Joint Proxy Statement, the Merger Consideration
to be paid for each share of CFC Common Stock resulted in consideration that was
fair, from a financial point of view, to the holders of CFC Common Stock. Stifel
Nicolaus is familiar with CFC, having acted as its financial advisor in
connection with, and having participated in, the negotiations leading to the
Agreement. Representatives of Stifel Nicolaus participated in certain portions
of the meeting of CFC's Board of Directors on April 29, 1996 at which the
proposed Merger was considered and certain officers of CFC were authorized to
enter into the Agreement.
The full text of Stifel Nicolaus' opinion as of the date hereof, which
sets forth the assumptions made, matters considered and limitations of the
review undertaken, is attached as Annex VI to this Prospectus/Joint Proxy
Statement and is incorporated herein by reference, and should be read in its
entirety in connection with the Prospectus/Joint Proxy Statement. The summary of
the opinion of Stifel Nicolaus set forth in this Prospectus/Joint Proxy
Statement is qualified in its entirety by reference to the full text of such
opinion. The April 29, 1996 oral opinion was substantially identical to the
opinion attached hereto. In connection with its written opinion dated as of the
date of this Prospectus/Joint Proxy Statement, Stifel Nicolaus performed
procedures to update certain of its analyses and reviewed the assumptions on
which such analyses were based and the factors considered in connection
therewith. In updating its opinion, Stifel Nicolaus did not utilize any methods
of analysis in addition to those described.
THE OPINION OF STIFEL NICOLAUS IS DIRECTED TO THE CFC BOARD IN ITS
CONSIDERATION OF THE MERGER CONSIDERATION AS DESCRIBED IN THE AGREEMENT, AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF CFC AS TO ANY ACTION
THAT SUCH SHAREHOLDER SHOULD TAKE IN CONNECTION WITH THE AGREEMENT, OR
OTHERWISE. IT IS FURTHER UNDERSTOOD THAT THE OPINION OF STIFEL NICOLAUS IS BASED
ON MARKET CONDITIONS AND OTHER CIRCUMSTANCES EXISTING ON APRIL 29, 1996 AND THE
DATE HEREOF.
38
In connection with its opinion dated the date hereof, Stifel Nicolaus
reviewed and analyzed material bearing upon the financial and operating
condition of CFC and FFOH and material prepared in connection with the Merger,
including among other things: (a) the Agreement and the Stock Option Agreements;
(b) publicly available reports filed with the SEC by CFC and by FFOH; (c)
certain other publicly available financial and other information concerning CFC
and FFOH and the trading markets for the publicly traded securities of CFC and
FFOH; (d) certain other internal information, including projections for CFC and
FFOH, relating to CFC and FFOH prepared by the managements of CFC and FFOH and
furnished to Stifel Nicolaus for purposes of its analysis; and (e) publicly
available information concerning certain other banks and bank holding companies,
savings banks and savings and loan associations, savings and loan holding
companies, the trading markets for their securities and the nature and terms of
certain other merger and acquisition transactions believed relevant to its
inquiry. Stifel Nicolaus also met with certain officers and representatives of
CFC and FFOH to discuss the foregoing as well as other matters relevant to its
inquiry, including the past and current business operations, results of
regulatory examinations, financial condition and future prospects of CFC and
FFOH, both separately and on a combined basis. In addition, Stifel Nicolaus
reviewed the reported price and trading activity for CFC Common Stock and FFOH
Common Stock, compared certain financial and stock market information for CFC
and FFOH with similar information for certain other companies, the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the commercial banking and thrift industries, and
performed such other studies and analyses as it considered appropriate. Stifel
Nicolaus also took into account its assessment of general economic, market and
financial conditions and its experience in other transactions, as well as its
experience in securities valuations and knowledge of the commercial banking and
thrift industries generally.
In conducting its review and arriving at its opinion, Stifel Nicolaus
relied upon and assumed the accuracy and completeness of the financial and other
information provided to it or publicly available and did not attempt
independently to verify the same. Stifel Nicolaus has relied upon the
managements of CFC and FFOH as to the reasonableness and achievability of the
projections (and the assumptions and basis therefor) provided to Stifel
Nicolaus, and assumed that such projections, including, without limitation,
projected cost savings and operating synergies resulting from the Merger,
reflected the best currently available estimates and judgments of such CFC
management and FFOH representatives and that such projections would be realized
in the amounts and time periods estimated. Stifel Nicolaus also assumed, without
independent verification, that the aggregate allowances for loan losses for CFC
and FFOH were adequate to cover such losses. Stifel Nicolaus did not conduct
physical inspections of any of the properties or assets of CFC or FFOH, and
Stifel Nicolaus did not make or obtain, and was not furnished with, any
evaluations or appraisals of any properties, assets or liabilities of CFC and
FFOH. Stifel Nicolaus was retained by the CFC Board to express an opinion as to
the fairness, from a financial point of view, to the holders of CFC Common Stock
of the Merger Consideration.
39
In connection with rendering its opinion to the CFC Board, Stifel
Nicolaus performed a variety of financial analyses that are summarized below.
The summary of the presentations by Stifel Nicolaus to the CFC Board as set
forth herein does not purport to be a complete description of such
presentations. Stifel Nicolaus believes that its analysis and the summary set
forth herein must be considered as a whole and that selecting portions of such
analyses and the factors considered therein, without considering all factors and
analyses, could create an incomplete view of the analyses and processes
underlying its opinions. The preparation of a fairness opinion is a complex
process involving subjective judgments and is not necessarily susceptible to
partial analysis or summary description. In its analyses, Stifel Nicolaus made
numerous assumptions with respect to industry performance, business and economic
conditions, and other matters, many of which are beyond the control of CFC or
FFOH. Any estimates contained in Stifel Nicolaus' analyses are not necessarily
indicative of actual future values or results, which may be significantly more
or less favorable than suggested by such estimates. Estimates of values of
companies do not purport to be appraisals or necessarily reflect the actual
prices at which companies or their securities actually may be sold. No company
or transaction utilized in Stifel Nicolaus' analyses was identical to CFC or
FFOH or the Merger. Accordingly, such analyses are not based solely on
arithmatic calculations; rather, they involve complex considerations and
judgments concerning differences in financial and operating characteristics of
the relevant companies, the timing of the relevant transactions, and prospective
buyer interest, as well as other factors that could affect the public trading
values of the company or companies to which they are being compared. None of the
analyses performed by Stifel Nicolaus was assigned a greater significance by
Stifel Nicolaus than any other.
The following is a summary of the financial analyses performed by
Stifel Nicolaus in connection with providing its oral opinion to CFC's Board of
Directors on April 29, 1996, which was updated as of the date hereof and is
attached to this Prospectus/Joint Proxy Statement as Annex VI and is
incorporated herein by reference.
Contribution Analysis. Stifel Nicolaus reviewed certain estimated
future operating and financial information developed by both CFC and FFOH for
the projected twelve month period ended December 31, 1996 (the assumed closing
date of the Merger) including total assets, total loans, and total deposits and
compared the percentage contribution of CFC to the pro forma combined figures
for CFC and FFOH and to the percentage of total outstanding FFOH Common Stock
that would be owned by the CFC stockholders as a result of the Merger. The
contribution analysis showed, among other things, that CFC would contribute
47.7% of combined total assets, 43.4% of combined total loans, and 52.0% of
combined total deposits, while receiving 25.9% of the outstanding shares in the
combined institution assuming that the Merger Consideration paid to CFC
shareholders is comprised of 45% cash consideration and 55% stock consideration
as contemplated by the Agreement.
40
Accretion/Dilution Summary. Stifel Nicolaus reviewed certain estimated
future operating and financial information developed by both CFC and FFOH for
the pro forma combined entity resulting from the Merger for the projected twelve
month period ended December 31, 1997. Based on this analysis, Stifel Nicolaus
compared CFC's estimated future stand-alone per share earnings with such
projected figures for the pro forma combined entity for this twelve month
period. The Merger is projected to be accretive to shareholders electing to
receive stock on a projected pro forma basis with respect to earnings per share.
Stifel Nicolaus also reviewed certain estimated future operating and financial
information developed by both CFC and FFOH for the pro forma combined entity
resulting from the Merger for the twelve month period ended December 31, 1996
(the assumed closing date of the Merger). Based on this analysis, Stifel
Nicolaus compared CFC's projected stand-alone book value per share and projected
stand-alone tangible book value per share with such calculated figures for the
pro forma combined entity at December 31, 1996. The Merger is projected to be
accretive to shareholders electing to receive stock on a pro forma basis with
respect to book value per share and tangible book value per share.
Present Value Analysis. Applying discounted cash flow analysis to the
theoretical future earnings and dividends of CFC and FFOH, Stifel Nicolaus
compared the calculated value of a CFC share to the calculated value of a share
of the combined entity. The analysis was based upon a range of assumed returns
on assets (consistent with management's budgets), an assumed annual asset growth
rate, current dividend rates, a range of assumed price/earnings ratios, and a
10% discount rate. Stifel Nicolaus selected the range of terminal price/earnings
ratios on the basis of past and current trading multiples for CFC and other
thrift institutions. Based on this analysis, Stifel Nicolaus concluded that the
Merger increases the calculated value of a share of CFC Common Stock. This
analysis examines the per share impact on a shareholder electing to receive 100%
stock consideration.
Discounted Cash Flow Analysis. Based upon estimates provided by
management of the future earnings and the range of profit improvements for the
pro forma combined entity, Stifel Nicolaus estimated the present value of future
dividends available to be paid to FFOH under various scenarios assuming CFC
maintains a capital level of approximately 6.5% of assets. Based upon
management's estimated profitability ranges and a range of discount rates, under
FFOH ownership, CFC could theoretically produce future cash flows to FFOH with a
present value ranging from $19 million to $33 million.
41
Summary Analysis of Thrift Merger Transactions. Stifel Nicolaus
analyzed certain information relating to transactions in the thrift industry,
including median information for 101 acquisitions announced in the U.S. between
April 17, 1995 and April 17, 1996. Stifel Nicolaus also analyzed 38 thrift
acquisitions announced in the Midwest Region of the U.S. during that same time
period (the "Midwest Transactions"). Stifel Nicolaus also analyzed 10 thrift
acquisitions announced in the U.S. between January 1, 1994 and April 23, 1996
involving sellers with total assets between $100 million and $600 million, total
equity to total assets ratios between 8% and 15% and return on average assets
ratios between 0.25% and 0.75% (the "Selected Transactions"). Stifel Nicolaus
calculated the following ratios with respect to the Merger and the Midwest
Transactions.
Midwest Transactions
------------------------------------------------------
CFC/
FFOH
Ratios Merger Mean Median Minimum Maximum
- ----------------------------------------- ------------ ------------ ------------ ------------ ------------
Deal Price per share/Book Value 113.99% 134.46% 126.85% 93.09% 207.59%
Deal Price per share/Tangible
Book Value 131.42 135.41 127.01 99.36 207.59
Adjusted Deal Price/6.50% Equity 122.93 168.75 160.17 90.06 265.79
Deal Price per share/Last 12 months
earnings per share 26.39x 25.70x 20.20x 10.11x 60.26x
Deal Price/Assets 12.14 17.28 16.49 6.50 32.59
Premium over Tangible Book
Value/Deposits 3.31 5.97 5.46 (0.08) 14.31
Deal Price/Deposits 13.84 23.30 22.91 10.61 50.32
===== ===== ===== ===== =====
Stifel Nicolaus calculated the following ratios with respect to the
Merger and the Selected Transactions:
Selected Transactions
------------------------------------------------------
CFC/
FFOH
Ratios Merger Mean Median Minimum Maximum
- ----------------------------------------- ------------ ------------ ------------ ------------ ------------
Deal Price per share/Book Value 113.99% 131.64% 128.94% 106.99% 163.36%
Deal price per share/Tangible 131.42 138.52 133.13 107.04 191.63
Book Value
Adjusted Deal Price/6.50% Equity 122.93 155.85 149.10 129.80 217.92
Deal Price per share/Last 12 months
earnings per share 26.39x 24.49x 26.06x 17.55x 29.80x
Deal Price/Assets 12.14 13.43 12.11 10.32 18.44
Premium over Tangible Book
Value/Deposits 3.31 5.16 4.43 2.45 9.28
Deal Price/Deposits 13.84 17.59 17.52 11.92 23.06
===== ===== ===== ===== =====
No company or transaction used in the above analyses as a comparison is
identical to FFOH, CFC, or the Merger. 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 facts that could affect the public trading value of
the companies to which they are being compared.
42
Premium to Market Price. Stifel Nicolaus examined a range of implied
prices of each share of CFC Common Stock based on premiums to market trading
prices paid in two groups of comparable merger transactions involving thrift
institutions as sellers. Stifel Nicolaus analyzed the Midwest Transactions and
Selected Transactions to determine the 25th, 50th, and 75th percentile range of
announced acquisition premiums to market trading prices for the publicly traded
thrift institutions. Stifel Nicolaus applied acquisition premiums ranging from
14.2% to 40.8% to the CFC market trading price of $26.00 and calculated an
implied per share valuation range of $29.69 to $36.61 per share of CFC Common
Stock.
As described above, Stifel Nicolaus' opinion and presentation to the
CFC Board of Directors were among the many factors taken into consideration by
the CFC Board in making its determination to approve the Merger.
For Stifel Nicolaus' services in connection with the Merger, CFC has
paid Stifel Nicolaus $90,000 and will pay Stifel Nicolaus a total fee of 1% of
the Merger Consideration (of which such $90,000 shall be deemed partial payment)
upon the closing of the Merger pursuant to the terms of an engagement letter and
has agreed to reimburse Stifel Nicolaus for certain out-of-pocket expenses.
Pursuant to the engagement letter, CFC has agreed to indemnify Stifel Nicolaus,
its affiliates and their respective partners, directors, officers, agents,
consultants, employees and controlling persons against certain liabilities,
including liabilities under the federal securities laws.
In the ordinary course of its business, Stifel Nicolaus actively trades
equity securities of CFC and FFOH for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities.
FFOH. The Board of Directors of FFOH retained RP Financial in March
1996 to provide certain financial advisory and investment banking services to
FFOH in conjunction with the Merger, including the rendering of an opinion with
respect to the fairness of the Merger Consideration from a financial point of
view to FFOH shareholders. In requesting RP Financial's advice and opinion, the
Board of Directors of FFOH did not give any special instructions to, or impose
any limitations upon the scope of the investigation which RP Financial might
wish to conduct to enable it to give its opinion. RP Financial was selected by
FFOH to act as its financial advisor because of RP Financial's expertise in the
valuation of businesses and their securities for a variety of purposes including
its expertise in connection with mergers and acquisitions of savings and loan
associations, savings banks and savings and loan holding companies. RP Financial
previously acted as financial advisor to FFOH in a variety of planning and
valuation matters not related to the Merger.
On April 29, 1996, at the meeting in which the FFOH Board approved and
adopted the Agreement and the transactions contemplated thereby, RP Financial
rendered its opinion to the FFOH Board that, as of such date, the Merger
Consideration was fair to FFOH shareholders from a financial point of view. That
opinion was updated as of the date of this Prospectus/Joint Proxy Statement. In
connection with its opinion dated the date of
43
this Prospectus/Joint Proxy Statement, RP Financial also confirmed the
appropriateness of its reliance on the analysis used to render its April 29,
1996 opinion by performing procedures to update certain of such analyses and by
reviewing the assumptions on which such analyses were based and the factors
considered in connection therewith.
The full text of the opinion of RP Financial, which sets forth the
assumptions made, matters considered and limitations on the review undertaken,
is attached to this Prospectus/Joint Proxy Statement as Annex VII and is
incorporated herein by reference. FFOH's shareholders are urged to read the
opinion in its entirety.
THE OPINION OF RP FINANCIAL IS DIRECTED TO THE FFOH BOARD IN ITS
CONSIDERATION OF THE MERGER CONSIDERATION AS DESCRIBED IN THE AGREEMENT, AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF FFOH AS TO ANY ACTION
THAT SUCH SHAREHOLDER SHOULD TAKE IN CONNECTION WITH THE AGREEMENT, OR
OTHERWISE. IT IS FURTHER UNDERSTOOD THAT THE OPINION OF RP FINANCIAL IS BASED ON
MARKET CONDITIONS AND OTHER CIRCUMSTANCES EXISTING ON APRIL 29, 1996 AND THE
DATE HEREOF.
The opinion states that RP Financial reviewed and analyzed the
following material in conjunction with its analysis of the Merger Consideration
as described in the Agreement: (1) the Agreement of Merger, dated April 29,
1996, including all exhibits thereto; (2) the following information for CFC: (a)
audited financial statements for the fiscal years ended June 30, 1992 through
June 30, 1995, incorporated in CFC's annual reports to shareholders or Form
10-KSBs, shareholder and internal reports, and quarterly financial statements
for the quarters ended September 30, 1995, December 31, 1995 and March 31, 1996
incorporated in Form 10-QSBs; (b) the Prospectus utilized in connection with
People's Savings' mutual-to-stock conversion dated June 25, 1991; (c) proxy
statements for the last two years; and (d) unaudited internal and regulatory
financial reports and analyses prepared by management of CFC regarding various
aspects of CFC's assets and liabilities, particularly rates, volumes,
maturities, market values, trends, credit risk, interest rate risk and liquidity
risk of assets, liabilities, off-balance sheet assets, commitments and
contingencies of CFC; and (3) the following information for FFOH: (a) audited
financial statements for the fiscal years ended December 31, 1993 through
December 31, 1995, incorporated in FFOH's annual reports to shareholders or Form
10-Ks, and quarterly financial statements for the quarter ended March 31, 1996
incorporated in FFOH's Form 10-Q; (b) the Prospectus utilized in connection with
FFOH's mutual-to-stock conversion dated January 11, 1996; (c) proxy statements
for the last two years; and (d) unaudited internal and regulatory financial
reports and analyses prepared by management of FFOH regarding various aspects of
FFOH's assets and liabilities, particularly rates, volumes, maturities, market
values, trends, credit risk, interest rate risk and liquidity risk of assets,
liabilities, off-balance sheet assets, commitments and contingencies of FFOH.
44
The opinion further states that RP Financial reviewed the trading
activity of the CFC Common Stock, and compared it to similar information for
thrift institutions with comparable resources, financial condition, earnings,
operations and markets as well as for publicly-traded thrifts with comparable
financial condition, earnings, operations and markets. The opinion further
states that in the course of its evaluation and analyses, RP Financial conducted
discussions with managements of FFOH and CFC regarding past and current business
operations, financial condition, and future prospects. RP Financial reviewed
CFC's financial, operational and market area characteristics compared to similar
information for comparable thrift institutions, evaluated the potential for
growth and profitability for CFC in its market, specifically regarding
competition by other banks, thrifts, mortgage banking companies and other
financial services companies, economic projections in the local market area, the
impact of the regulatory, legislative and economic environments on operations
and the public perception of the thrift and banking industries, and the pro
forma impact on FFOH's financial condition and operations of the Merger,
including potential cost savings and earnings improvements available to FFOH as
a result of the Merger.
As set forth in the opinion, RP Financial relied, without independent
verification, on the accuracy and completeness of the information concerning
FFOH and CFC furnished to RP Financial by the respective companies, as well as
publicly-available information regarding other financial institutions and
economic data. RP Financial relied upon the managements of FFOH and CFC as to
the reasonableness and achievability of the financial forecasts (and the
assumptions and bases therefor) provided to RP Financial, and assumed that such
forecasts reflected the best currently available estimates and judgments of such
managements and that such financial forecasts would be realized in the amounts
and in the time periods estimated by such managements. RP Financial did not
perform or obtain any independent appraisals or evaluations of the assets and
liabilities and potential and/or contingent liabilities of FFOH or CFC.
Moreover, RP Financial expressed no opinion on matters of a legal, accounting or
tax nature or the ability of the Merger to be consummated as set forth in the
Agreement.
The financial forecasts reviewed by RP Financial were prepared by the
managements of FFOH and CFC. Neither FFOH nor CFC publicly discloses internal
management forecasts of the type provided to the FFOH Board and RP Financial in
connection with the review of the Merger, and such financial forecasts were not
prepared with a view towards public disclosure. The financial forecasts were
based upon numerous variables and assumptions which are inherently uncertain,
including without limitation factors related to general economic and competitive
conditions, as well as trends in asset quality. Accordingly, actual results
could vary significantly from those set forth in such financial forecasts.
In connection with rendering its opinion dated April 29, 1996 and
updated as of the date of this Prospectus/Joint Proxy Statement, RP Financial
performed a variety of analyses, which are summarized below. The preparation of
a fairness opinion is a complex process involving subjective judgments and is
not necessarily susceptible to partial analyses or summary description. RP
Financial stated that its analyses must be considered as a whole
45
and that selecting portions of such analyses and of the factors considered by RP
Financial without considering all such analyses and factors could create an
incomplete view of the process underlying RP Financial's opinion. In its
analyses, RP Financial made numerous assumptions with respect to industry
performance, business and economic conditions, applicable laws and regulations,
and other matters, many of which are beyond the control of FFOH. Any estimates
contained in RP Financial's analyses are not necessarily indicative of future
results or values, which may be significantly more or less favorable than such
estimates. No company or transaction utilized in RP Financial's analyses was
identical to FFOH, CFC or the Merger. None of the analyses performed by RP
Financial was assigned a greater significance by RP Financial than any other.
The following is a summary of the material financial analyses performed
by RP Financial in connection with providing its opinion of April 29, 1996 and
does not purport to be a complete description of all analyses employed by RP
Financial.
(a) Transaction Summary. RP Financial summarized the terms of the
Merger, including the conversion of each share of CFC Common Stock into the
right to receive either cash or FFOH Common Stock. RP Financial also summarized
the purchase accounting treatment of the Merger including the calculation of
intangible assets, the collars and related provisions negotiated in conjunction
with the issuance of FFOH Common Stock, and the pricing ratios indicated by the
Merger Consideration relative to the book value, tangible book value, earnings
and assets of CFC.
(b) Comparable Transactions Analysis. In this analysis, RP Financial
conducted an evaluation of the financial terms, financial and operating
condition and market area of other recent business combinations among comparable
thrift institutions both pending and completed. In conjunction with its
analysis, RP Financial considered the multiples of book value, earnings and
assets implied by the terms in such completed and pending comparable
transactions involving: (i) selling companies whose financial characteristics
were comparable to those of CFC including companies operating in the Midwest
U.S. with total assets of between $100 and $400 million, equity to assets
greater than 8.0 percent and return on equity of less than 8.0 percent
("Comparable Transactions"); and (ii) selling companies headquartered in the
State of Ohio or Northern Kentucky ("Ohio/No. Kentucky Transactions"). The
average price-to-book value ratios indicated by the Comparable Transactions and
Ohio/No. Kentucky Transactions were 130% and 144%, respectively, versus a
price-to-book value ratio of approximately 113% indicated by the Merger
Consideration based on March 31, 1996 financial data and 114% based on
forecasted December 31, 1996 financial data. The average price-to-tangible book
value ratios indicated by the Comparable Transactions and Ohio/No. Kentucky
Transactions were 132% and 144%, respectively, versus a price-to-tangible book
value ratio of approximately 130% indicated by the Merger Consideration based on
March 31, 1996 financial data and 131% based on forecasted December 31, 1996
financial data. The average price-to-earnings multiples indicated by the
Comparable Transactions and the Ohio/No. Kentucky Transactions were 24.85 times
and 22.63 times, respectively, versus a price-to-earnings
46
multiple of approximately 26.47 times indicated by the Merger Consideration
based on March 31, 1996 financial data and 18.95 times based on forecasted
December 31, 1996 financial data. The average price-to-assets ratios indicated
by the Comparable Transactions and Ohio/No. Kentucky Transactions were 18.97%
and 21.98%, respectively, versus a price- to-assets ratio of approximately
12.01% indicated by the Merger Consideration based on March 31, 1996 financial
data and 12.02% based on forecasted December 31, 1996 financial data.
(c) Ability to Pay Analysis. In this analysis, RP Financial analyzed
certain balance sheet and income statement data for FFOH and CFC on a pro forma
combined basis. Such analysis reviewed the pro forma and forecasted
profitability, capital, tangible capital, credit quality, and asset size of FFOH
and CFC. The analysis showed, among other things, that the combined company will
have approximately $470 million in assets and stockholders' equity of $66
million on a pro forma combined basis after the Merger. Approximately $4.5
million of intangible assets will be created as a result of the Merger in
addition to the approximately $3.1 million of existing intangible assets of CFC.
Profitability was evaluated assuming expense savings of approximately $750,000
annually, and the forecasted financial information was evaluated utilizing a
sensitivity analysis. The results of the Ability to Pay Analysis indicated that
the financial terms of the Merger were forecasted to be dilutive to FFOH's
tangible book value per share, with tangible book value per share realizing a
decrease of between 14% and 19%, with the level of such dilution depending upon
the issuance price of FFOH Common Stock at the date the Exchange Ratio is
determined. The results of the Ability to Pay Analysis indicated that the
financial terms of the Merger were forecasted to be accretive to FFOH's earnings
per share, with fiscal 1997 earnings per share realizing an increase of between
approximately 12% and 18%, depending upon the issuance price of FFOH Common
Stock at the date the Exchange Ratio is determined, and fiscal 1998 earnings per
share realizing an increase of between approximately 11% to 17%. The benefits to
the holders of FFOH Common Stock of the earnings accretion were evaluated
relative to the dilution in tangible book value. RP Financial also took into
account such factors as FFOH's greater market capitalization and the greater
liquidity of the FFOH Common Stock on a combined pro forma basis, as well as the
competitive advantages anticipated to be realized by FFOH as a result of the
Merger in terms of increased asset size, available economies of scale, expanded
number of markets served through the expanded branch network, and future
opportunities for expansion. The Ability to Pay Analysis was based on data
available at the time performed and should not be construed as indicative of the
actual impact of the Merger upon consummation or future impact of the Merger
following consummation.
(d) Alternative Strategies. RP Financial evaluated alternative
strategies that could potentially be pursued by FFOH in lieu of the Merger to
increase earnings per share. Evaluated were two alternative strategies. In the
first alternative strategy, instead of the Merger, FFOH pursued a leverage
strategy that sought to increase earnings per share by quickly adding new assets
and liabilities at a positive yield-cost spread. Such leverage was assumed to be
in addition to internal growth forecasted by FFOH, and was comprised of
47
purchases of investment and mortgage-backed securities funded with borrowings
(i.e. "wholesale growth") at a pre-tax spread of between 0.50% and 0.75%. In the
second alternative strategy, FFOH pursued an aggressive stock repurchase
strategy, repurchasing shares of FFOH Common Stock in the open market to
increase earnings per share. Stock repurchases by FFOH were assumed at $10.12
per share with a pretax funding cost of 6.5% for the cash utilized to repurchase
shares. To achieve an earnings per share accretion of approximately 15% (i.e.,
comparable to the anticipated midrange of earnings increases forecasted for the
Merger) under the alternative strategies, FFOH would be required to either
leverage the balance sheet with wholesale growth of between $80 to $120 million
or would be required to repurchase approximately 30 percent of the existing
outstanding shares of FFOH Common Stock. RP Financial concluded that such
alternative strategies would likely face sufficient regulatory and market
hurdles as to make them unfeasible to implement. In addition, RP Financial's
analysis considered a comparative analysis of other such factors as market
share, competitive considerations, and other benefits to FFOH provided by the
Merger than would not be provided by such alternative strategies.
On the basis of these analyses, RP Financial concluded that the Merger
Consideration, as described in the Agreement, is fair to the shareholders of
FFOH from a financial point of view. As described above, RP Financial's opinion
and presentation to the FFOH Board was one of many factors taken into
consideration by the FFOH Board in making its determination to approve the
Agreement. Although the foregoing summary describes the material components of
the analyses presented by RP Financial to the FFOH Board, it does not purport to
be a complete description of all the analyses performed by RP Financial and is
qualified by reference to the written opinion of RP Financial attached to this
Prospectus/Joint Proxy Statement as Annex VII, which the FFOH shareholders are
urged to read in its entirety.
FFOH and RP Financial have entered into a letter agreement, dated April
5, 1996 (the "RP Financial Engagement Letter"), relating to the services to be
provided by RP Financial in connection with the Merger. Pursuant to the RP
Financial Engagement Letter, FFOH agreed to pay RP Financial total fees of
$65,000, of which $40,000 has been paid to date, plus reimbursement of certain
out-of-pocket expenses, for its services in connection with the Merger. In
addition, pursuant to the RP Financial Engagement Letter, FFOH also agreed to
indemnify RP Financial against certain liabilities, including liabilities under
the federal securities laws.
Effects of the Merger
Effect on CFC's Shareholders. Upon consummation of the Merger, each
shareholder of CFC shall be entitled to receive either cash or shares of FFOH
Common Stock, or, in certain circumstances, a combination of cash and shares of
FFOH Common Stock, in consideration for each share of CFC Common Stock then held
and thereupon shall cease to be a shareholder of CFC.
48
Effect on CFC and People's Savings. Upon consummation of the Merger,
FAC, as the surviving corporation of the Merger, shall succeed to all the
rights, obligations and properties of CFC, the separate corporate existence of
which shall cease. In addition, upon consummation of the Bank Merger, Fidelity
Federal, as the surviving corporation of the Bank Merger, shall succeed to all
the rights, obligations and properties of People's Savings, the separate
corporate existence of which shall cease.
Effect on FFOH. Upon consummation of the Merger, Messrs. Rolf, Hughes
and Spaeth will become directors of FFOH, for terms expiring at FFOH's 1999
annual meeting of shareholders. In addition, upon consummation of the Merger,
Mr. Staubach shall resign as a director of Fidelity Federal, and the resultant
vacancy shall be filled by Mr. Rolf.
The Merger Consideration
General. The Agreement provides that at the Effective Time, each share
of CFC Common Stock (other than (i) any dissenting shares under the OGCL and
(ii) any shares held by FFOH or CFC) shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into the right to
receive, subject to certain terms, conditions, limitations and procedures set
forth in the Agreement, either $38.00 in cash or a number of shares of FFOH
Common Stock which will be determined by applying a formula, set forth in the
Agreement, which is based on the Average FFOH Price over a 20 trading day period
(the "pricing period") ending on the date FFOH and CFC receive all requisite
regulatory approvals and satisfy all applicable waiting periods related to the
Merger or, under certain circumstances, a combination of cash and shares of FFOH
Common Stock. If, over the pricing period, the Average FFOH Price is equal to or
greater than $9.00 but equal to or less than $11.00, shareholders of CFC
electing to receive stock will receive for each share of CFC Common Stock that
number of shares of FFOH Common Stock equal to the ratio determined by dividing
$38.00 by the Average FFOH Price. If the Average FFOH Price is greater than
$11.00, shareholders of CFC will receive 3.45 shares of FFOH Common Stock for
each share of CFC Common Stock, while if the Average FFOH Price is less than
$9.00, they will receive 4.22 shares for each such share.
If the Average FFOH Price is less than $8.00 per share, CFC may
terminate the Agreement, provided that in the event CFC elects to exercise this
termination right and upon notice, FFOH will have the right to adjust the
Exchange Ratio to an amount equal to 4.75 shares of FFOH Common Stock, in which
case the Agreement will not be terminated.
If between the date of the Prospectus/Joint Proxy Statement and the
Effective Time, the shares of FFOH Common Stock are changed into or exchanged
for a different number or kind of shares by reason of any reorganization,
reclassification, recapitalization, stock dividend, stock split, reverse stock
split or other changes in FFOH's capitalization, the Merger Consideration as
specified above shall be adjusted accordingly.
49
Election and Exchange Procedures. As promptly as practicable after the
Effective Time (and in no event later than seven business days following the
Effective Time), FFOH shall cause a to-be-designated exchange agent ("Exchange
Agent") to mail or make available to each holder of record of a certificate or
certificates which immediately prior the Effective Time represented issued and
outstanding shares of CFC Common Stock (i) a notice and letter of transmittal
(which shall specify that delivery shall be effected and risk of loss and title
to the certificates theretofore representing shares of CFC Common Stock shall
pass only upon proper delivery of such certificates to the Exchange Agent)
advising such holder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent such certificate or certificates in exchange
for the Merger Consideration and (ii) an election form in such form as FFOH and
CFC shall mutually agree ("Election Form"). Each Election Form shall permit the
holder (or in the case of nominee record holders, the beneficial owner through
proper instructions and documentation) (i) to elect to receive FFOH Common Stock
with respect to all such holder's CFC Common Stock (the "Stock Election
Shares"), (ii) to elect to receive cash with respect to all such holder's CFC
Common Stock (the "Cash Election Shares"), or (iii) to indicate that such holder
makes no such election with respect to such holder's shares of CFC Common Stock
(the "No-Election Shares"). Any shares of CFC Common Stock with respect to which
the holder thereof shall not, as of a to-be-specified deadline ("Election
Deadline"), have made such an election by submission to the Exchange Agent of an
effective, properly completed Election Form shall be deemed to be No-Election
Shares.
Any election to receive FFOH Common Stock or cash shall have been
properly made only if the Exchange Agent shall have actually received a properly
completed Election Form by the Election Deadline. An Election Form will be
properly completed only if accompanied by certificates representing all shares
of CFC Common Stock covered thereby, subject to certain limited exceptions in
the case of lost or destroyed certificates. Any Election Form may be revoked or
changed by the person submitting such Election Form to the Exchange Agent by
written notice to the Exchange Agent only if such notice is actually received by
the Exchange Agent at or prior to the Election Deadline. The certificate or
certificates representing CFC Common Stock relating to any revoked Election Form
shall be promptly returned without charge to the person submitting the Election
Form to the Exchange Agent. The Exchange Agent shall have reasonable discretion
to determine when any election, modification or revocation is received and
whether any such election, modification or revocation has been properly made.
Within ten business days after the Election Deadline, the Exchange
Agent will effect the allocation among holders of CFC Common Stock of rights to
receive FFOH Common Stock or cash in accordance with the Election Form.
50
If the number of Cash Election Shares times $38.00 is less than the
product of the number of shares of CFC Common Stock (other than shares of CFC
Common Stock owned by CFC (including treasury shares) or FFOH) outstanding at
the Effective Time times .45 times $38.00 (the "Aggregate Cash Consideration"),
then:
(1) all Cash Election Shares will be converted into the right to
receive cash,
(2) the Exchange Agent will select first from among the holders of
No-Election Shares and then (if necessary) will allocate among the
holders of Stock Election Shares (by the method of allocation described
below), a sufficient number of Stock Election Shares ("Reallocated Cash
Shares") such that the sum of the number of Cash Election Shares plus
the number of Reallocated Cash Shares times $38.00 equals the Aggregate
Cash Consideration, and all Reallocated Cash Shares will be converted
into the right to receive cash, and
(3) the No-Election Shares and Stock Election Shares which are not
Reallocated Cash Shares will be converted into the right to receive
Acquiror Common Stock.
If the number of Cash Election Shares times $38.00 is greater than the
Aggregate Cash Consideration, then:
(1) all Stock Election Shares and all No-Election Shares will be
converted into the right to receive FFOH Common Stock,
(2) the Exchange Agent will allocate among the holders of Cash Election
Shares (by the method of allocation described below), a sufficient
number of Cash Election Shares ("Reallocated Stock Shares") such that
the number of remaining Cash Election Shares times $38.00 equals the
Aggregate Cash Consideration, and all Reallocated Stock Shares shall be
converted into the right to receive FFOH Common Stock, and
(3) the Cash Election Shares which are not Reallocated Stock Shares
will be converted into the right to receive cash.
After the completion of the foregoing allocation, each holder of an
outstanding certificate or certificates which prior thereto represented shares
of CFC Common Stock who surrenders such certificate or certificates to the
Exchange Agent will, upon acceptance thereof by the Exchange Agent, be entitled
to a certificate or certificates representing the number of full shares of FFOH
Common Stock or the amount of cash into which the aggregate number of shares of
CFC Common Stock previously represented by such certificate or certificates
surrendered shall have been converted pursuant to the Agreement and, if such
holder's shares of CFC Common Stock have been converted into FFOH Common Stock,
any other distribution theretofore paid with respect to the FFOH Common Stock
issuable in the Merger, in each case without interest. The Exchange Agent shall
51
accept such certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. Each outstanding
certificate which prior to the Effective Time represented CFC Common Stock and
which is not surrendered to the Exchange Agent in accordance with the procedures
provided for in the Agreement shall, except as otherwise provided in the
Agreement, until duly surrendered to the Exchange Agent be deemed to evidence
ownership of the number of shares of FFOH Common Stock or the right to receive
the amount of cash into which such CFC Common Stock shall have been converted.
After the Effective Time, there shall be no further transfer on the records of
CFC of certificates representing shares of CFC Common Stock and if such
certificates are presented to FFOH for transfer, they shall be cancelled against
delivery of certificates for FFOH Common Stock or cash as provided in the
Agreement. No dividends which have been declared will be remitted to any person
entitled to receive shares of FFOH Common Stock until such person surrenders the
certificate or certificates representing CFC Common Stock, at which time such
dividends shall be remitted to such person, without interest.
No Fractional Shares of FFOH Common Stock to be Issued. No fractional
shares of FFOH Common Stock shall be issued in the Merger to holders of shares
of CFC Common Stock. Each holder of shares of CFC Common Stock who otherwise
would have been entitled to a fraction of a shares of FFOH Common Stock shall
receive in lieu thereof, at the time of surrender of the certificate or
certificates representing such holder's shares of CFC Common Stock, an amount of
cash (without interest) determined by multiplying the fractional share interest
to which such holder would otherwise be entitled by the Average FFOH Price.
Treatment of Outstanding Stock Options for CFC Common Stock. The
Agreement provides that immediately before the Effective Time, each option with
respect to CFC Common Stock that is outstanding and exercisable at the Effective
Time shall be cancelled and converted into the right to receive from CFC,
subject to required withholding taxes, if any, cash in an amount determined by
multiplying (i) the excess, if any, of $38.00 over the applicable exercise price
per share of such option by (ii) the number of shares of CFC Common Stock
subject to such option.
Conditions to the Merger
The Agreement provides that consummation of the Merger is subject to
the satisfaction of certain conditions, or the waiver of such conditions by the
party or parties entitled to do so, at or before the Effective Time. Each of the
parties' obligations under the Agreement is subject to the following conditions:
(i) all corporate action (including without limitation approval by the requisite
votes of the respective shareholders of FFOH, FAC and CFC) necessary to
authorize the execution and delivery of the Agreement and the Bank Agreement and
consummation of the transactions contemplated thereby shall have been duly and
validly taken; (ii) the receipt of all necessary regulatory approvals and
consents required to consummate the Merger and the Bank Merger by any
governmental
52
authority, and the expiration of all notice periods and waiting periods with
respect thereto, provided, however, that no required approval or consent shall
include any condition or requirement that, individually or in the aggregate,
would result in a material adverse effect on the financial condition, results of
operations or business of FFOH on a consolidated basis or would so materially
reduce the economic or business benefits of the transactions contemplated by the
Agreement to FFOH that had such condition or requirement been known FFOH, in its
reasonable judgment, would not have entered into the Agreement; (iii) none of
FFOH or CFC or their respective subsidiaries shall be subject to any statute,
rule, regulation, injunction or other order or decree which prohibits, restricts
or makes illegal the consummation of the Merger or the Bank Merger or any of the
other transactions contemplated thereby; (iv) the Registration Statement shall
have become effective under the Securities Act, and FFOH shall have received all
permits, authorizations or exemptions necessary under all state securities laws
to issue FFOH Common Stock in connection with the Merger, and neither the
Registration Statement nor any such permit, authorization or exemption shall be
subject to a stop order or threatened stop order by any governmental authority;
(v) the shares of FFOH Common Stock to be issued in connection with the Merger
shall have been approved for quotation on NASDAQ; and (vi) each of FFOH and CFC
shall have received an opinion to the effect that the Merger qualifies as a
reorganization within the meaning of Section 368(a) of the Code and with respect
to certain other related federal income tax considerations.
In addition to the foregoing conditions, the obligations of FFOH under
the Agreement are conditioned upon (i) the accuracy in all material respects as
of the date of the Agreement and as of the Effective Time of the representations
and warranties of CFC set forth in the Agreement, except as to any
representation or warranty which specifically relates to an earlier date and
except as otherwise contemplated by the Agreement; (ii) the performance in all
material respects of all covenants and obligations required to be complied with
and satisfied by CFC; (iii) the receipt of a certificate from specified officers
of CFC with respect to compliance with the conditions relating to (i) and (ii)
immediately above as set forth in the Agreement; (iv) the receipt of certain
legal opinions from CFC's legal counsel; (v) the receipt by FFOH of such
certificates of CFC's officers or others and such other documents to evidence
fulfillment of the conditions relating to CFC as FFOH may reasonably request;
and (vi) the holders of not more than 10% of the outstanding CFC Common Stock
shall have elected to exercise dissenters' or appraisal rights under Section
1701.85 of the OGCL. Any of the foregoing conditions may be waived by FFOH.
In addition to the other conditions set forth above, CFC's obligations
under the Agreement are conditioned upon (i) the accuracy in all material
respects as of the date of the Agreement and as of the Effective Time of the
representations and warranties of FFOH set forth in the Agreement, except as to
any representation or warranty which specifically relates to an earlier date and
except as otherwise contemplated by the Agreement; (ii) the performance in all
material respects of all covenants and obligations required to be complied with
and satisfied by FFOH; (iii) the receipt of a certificate from specified
officers of FFOH with respect to compliance with the conditions relating to (i)
and (ii) immediately
53
above as set forth in the Agreement; (iv) the receipt of certain legal opinions
from legal counsel to FFOH; and (v) the receipt by CFC of such certificates of
FFOH's officers or others and such other documents to evidence fulfillment of
the conditions relating to them as CFC may reasonably request. Any of the
foregoing conditions may be waived by CFC.
Regulatory Approvals
Consummation of the Merger is subject to prior receipt of all required
approvals and consents of the Merger and the Bank Merger by all applicable
federal and state regulatory authorities. In order to consummate the Merger and
the Bank Merger, FFOH must obtain the prior consent and approval, as applicable,
of the OTS and the Department.
The Merger is subject to the prior approval of the OTS under the HOLA
and the Bank Merger is subject to the prior approval of the OTS under the Bank
Merger Act ("BMA") provisions of the Federal Deposit Insurance Act. Pursuant to
the applicable provisions of the HOLA and the BMA, the OTS may not approve the
Merger or the Bank Merger if (i) such transaction would result in a monopoly or
would be in furtherance of any combination or conspiracy to monopolize or
attempt to monopolize the business of banking in any part of the United States;
or (ii) the effect of such transaction, in any section of the country, may be to
substantially lessen competition, or tend to create a monopoly, or in any other
manner to restrain trade, in each case unless the OTS finds that the
anticompetitive effects of the proposed transaction are clearly outweighed in
the public interests by the probable effect of the transaction in meeting the
convenience and needs of the community to be served. In conducting its review of
any application for approval, the OTS is required to consider whether the
financial and managerial resources of the acquiring savings and loan holding
company and acquiring savings institution are adequate (including consideration
by a variety of means of the competence, experience and integrity of the
applicant's directors, officers and principal shareholders and compliance with,
among other things, fair lending laws). The OTS has the authority to deny an
application if it concludes that the combined organization would have an
inadequate capital position or if the acquiring organization does not meet the
requirements of the Community Reinvestment Act of 1977, as amended.
Each of the HOLA and the BMA provides that a transaction approved by
the OTS generally may not be consummated until 30 days after approval by such
agency. If the U.S. Department of Justice and the OTS otherwise agree, this
30-day period may be reduced to as few as 15 days. During such period, the U.S.
Department of Justice may commence a legal action challenging the transaction
under the antitrust laws. The commencement of an action would stay the
effectiveness of the approval of the OTS unless a court specifically orders
otherwise. If, however, the U.S. Department of Justice does not commence a legal
action during such waiting period, it may not thereafter challenge the
transaction except in an action commenced under Section 2 of the Sherman
Antitrust Act.
54
The approval of the Department also is required for consummation of the
Merger. Under Ohio law, the Department shall not approve an application for such
a transaction unless it determines, after a consideration of all relevant
evidence, that the rights of all interested parties are protected. The factors
to be considered by the Department in this regard are substantially similar to
those to be considered by the OTS, as discussed above.
Applications have been filed with applicable regulatory authorities for
approval of the Merger and the Bank Merger. Although neither FFOH nor CFC is
aware of any basis for disapproving the Merger and the Bank Merger, there can be
no assurance that all requisite approvals will be obtained, that such approvals
will be received on a timely basis or that such approvals will not impose
conditions or requirements which, individually or in the aggregate, would (i)
result in a material adverse effect on the financial condition, results of
operations or business of FFOH on a consolidated basis or (ii) so materially
reduce the economic or business benefits of the transactions contemplated by the
Agreement to FFOH that had such condition or requirement been known FFOH, in its
reasonable judgment, would not have entered into the Agreement. If any such
condition or requirement is imposed, the Agreement permits the Board of
Directors of FFOH to terminate the Agreement.
Business Pending the Merger
Pursuant to the Agreement, CFC agreed that, except as contemplated by
the Agreement or with the prior written consent of FFOH, during the period from
the date of the Agreement and continuing until the Effective Time, CFC and CFC's
subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice. Pursuant to the Agreement, CFC also agreed to use
all reasonable efforts to (i) preserve its business organization and that of its
subsidiaries intact, (ii) keep available to itself and FFOH the present services
of the employees of CFC and its subsidiaries and (iii) preserve for itself and
FFOH the goodwill of the customers of CFC and its subsidiaries and others with
whom business relationships exist. In addition, under the terms of the
Agreement, CFC agreed, except as contemplated by the Agreement, not to take
certain actions, nor permit its subsidiaries to take certain actions, without
the prior written consent of FFOH, including, among other things, the following:
(i) declare, set aside, make or pay any dividend or other distribution in
respect of CFC Common Stock, except for regular quarterly cash dividends at a
rate per share of CFC Common Stock not in excess of $.17 per share, which shall
have the same record and payment dates as the record and payment dates relating
to dividends on the FFOH Common Stock, it being the intention of the parties
that the shareholders of CFC receive dividends for any particular quarter on
either the CFC Common Stock or the FFOH Common Stock but not both; (ii) issue,
grant or authorize any capital stock or rights to acquire the same, other than
in each case pursuant to the CFC Option Agreement; purchase any shares of CFC
Common Stock; or effect any recapitalization, reclassification, stock dividend,
stock split or like change in capitalization; (iii) amend its articles of
incorporation, code of regulations or bylaws; impose, or suffer the imposition
of, any material lien, charge or encumbrance on any share of stock held by CFC
in any of its
55
subsidiaries, or permit any such lien to exist; or waive or release any material
right or cancel or compromise any material debt or claim; (iv) increase the rate
of compensation of, pay or agree to pay any bonus or severance to, or provide
any other new employee benefit or incentive to, any of its directors, officers
or employees, except (a) as may be required pursuant to binding commitments
existing on the date of the Agreement or as previously disclosed to FFOH, (b) in
the case of employees who are not executive officers, such as may be granted in
the ordinary course of business consistent with past practice and (c) in the
case of Messrs. Rolf and Hughes, in the event the Merger is not consummated by
January 1, 1997, such as may be granted in the ordinary course of business
consistent with past practice; (v) enter into or, except as may be required by
law, modify any employee benefit plan, or make any contributions to any defined
benefit or defined contribution plan other than in the ordinary course of
business consistent with past practice; (vi) enter into (w) any agreement,
arrangement or commitment not made in the ordinary course of business, (x) any
agreement, indenture or other instrument relating to the borrowing of money by
CFC or its subsidiaries or guarantee by CFC or its subsidiaries of any such
obligation, except for deposits and certain other borrowings in the ordinary
course of business consistent with past practice, (y) any employment, consulting
or severance contracts or agreements, or amend any such existing agreement, or
(z) any contract, agreement or understanding with a labor union; (vii) change
its methods of accounting or tax reporting, except as may be required by changes
in generally accepted accounting principles or applicable law; (viii) purchase
or otherwise acquire, or sell or otherwise dispose of, any assets or incur any
liabilities other than in the ordinary course of business consistent with past
practice and policies; (ix) make any capital expenditures in excess of $50,000
individually or $100,000 in the aggregate, other than pursuant to binding
commitments existing on the date of the Agreement and other than expenditures
necessary to maintain existing assets in good repair; (x) file any applications
or make any contract with respect to branching or site location or relocation;
(xi) acquire in any manner whatsoever (other than to realize upon collateral for
a defaulted loan) any business or entity; (xii) engage in any transaction with
affiliated persons or affiliates other than loans to directors, officers and
employees in the ordinary course of business consistent with past practice and
which are in compliance with the requirements of applicable laws and
regulations; (xiii) discharge or satisfy any lien or encumbrance or pay any
material obligation or liability (absolute or contingent) other than at
scheduled maturity or in the ordinary course of business; (xiv) change its
lending, investment, deposit or asset and liability management or other banking
policies in any material respect except as may be required by applicable law;
(xv) enter into any futures contract, option contract, interest rate cap,
interest rate floor, interest rate exchange agreement or other agreement for
purposes of hedging interest rate risk; (xvi) enter or agree to enter into any
agreement or arrangement granting any preferential right to purchase any of its
assets or rights or requiring the consent of any party to the transfer and
assignment of any such assets or rights; (xvii) take any action that would
result in any of the representations and warranties of CFC contained in the
Agreement not to be true and correct in any material respect at the Effective
Time; or (xviii) agree to do any of the foregoing.
56
Pursuant to the Agreement, FFOH agreed that during the period from the
date of the Agreement to the Effective Time, except as expressly contemplated or
permitted by the Agreement or with the prior written consent of CFC, FFOH and
Fidelity Federal shall carry on their respective businesses in the ordinary
course consistent with past practice and use all reasonable efforts to preserve
intact their present business organizations and relationships. In addition,
under the terms of the Agreement, FFOH agreed, except as contemplated by the
Agreement, not to take the following actions, nor permit Fidelity Federal to
take the following actions, without the prior written consent of CFC: (i)
declare, set aside, make or pay any dividend or other distribution in respect of
FFOH Common Stock, except for regular quarterly cash dividends at a rate per
share of FFOH Common Stock not in excess of $.05 per share; (ii) issue, grant or
authorize any capital stock or rights to acquire the same, other than in each
case pursuant to the FFOH Option Agreement or FFOH employee stock benefit plans;
(iii) effect any recapitalization, reclassification, stock split or like change
in capitalization; (iv) amend its articles of incorporation, code of regulations
or bylaws in a manner which would adversely affect the terms of the FFOH Common
Stock or the ability of FFOH to consummate the transactions contemplated by the
Agreement; (v) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity (including acquisitions
of branch offices and related deposit liabilities); (vi) change its method of
accounting in a manner which would have a material adverse effect on FFOH's
financial condition or results of operations during fiscal 1996, except as may
be required by changes in generally accepted accounting principles or applicable
law; (vii) take any action that would result in any of the representations and
warranties of FFOH contained in the Agreement not to be true and correct in any
material respect at the Effective Time; or (viii) agree to do any of the
foregoing.
Pursuant to the Agreement, FFOH and CFC also agreed to provide the
other party and its representatives with such financial data and other
information with respect to its and its subsidiaries' business and properties as
such party shall from time to time reasonably request. Each party will cause all
non-public financial and business information obtained by it from the other to
be treated confidentially. If the Merger is not consummated, each party will
return to the other all non-public financial statements, documents and other
materials previously furnished by such party.
No Solicitation
Pursuant to the Agreement, neither CFC nor FFOH shall, and each of them
shall cause its respective subsidiaries not to, solicit or encourage inquiries
or proposals with respect to, furnish any information relating to, or
participate in any negotiations or discussions concerning, any acquisition,
lease or purchase of all or a substantial portion of the assets of, or any
equity interest in, such party or any of its subsidiaries, other than as
contemplated by the Agreement, provided, however, that the Board of Directors of
CFC or FFOH, on behalf of CFC and FFOH, respectively, may furnish such
information or participate in such negotiations or discussions if such Board of
Directors, after having consulted with and considered the advice of outside
counsel, has determined that the failure
57
to do the same would cause the members of such Board of Directors to breach
their fiduciary duties under applicable laws. Each of CFC and FFOH has agreed to
promptly inform the other party of any such request for information or of any
such negotiations or discussions, as well to instruct its and its subsidiaries'
directors, officers, representatives and agents to refrain from taking any
action prohibited by the above-described restrictions.
Effective Time of the Merger; Termination and Amendment
The Effective Time of the Merger shall be the date and time of the
filing of a certificate of merger with the Secretary of State of Ohio, unless a
different date and time is specified as the effective time in such certificate
of merger. The Effective Time shall be as set forth in such certificate of
merger, which will be filed only after the receipt of all requisite regulatory
approvals of the Merger and the Bank Merger, approval of the Agreement by the
requisite votes of the shareholders of CFC and FFOH and the satisfaction or
waiver of all other conditions to the Merger and the Bank Merger set forth in
the Agreement.
A closing (the "Closing") shall take place immediately prior to the
Effective Time on the fifth business day following the satisfaction or waiver
(to the extent permitted) of all the conditions to consummation of the Merger
specified in the Agreement (other than the delivery of certificates, opinions
and other instruments and documents to be delivered at the Closing), or on such
other date as the parties may mutually agree upon.
The Agreement may be terminated as follows: (i) at any time on or prior
to the Effective Time by the mutual consent in writing of the parties; (ii) at
any time on or prior to the Effective Time in the event of a material breach by
the other party of any representation, warranty, material covenant or
undertaking, which breach has not been cured within the time period specified in
the Agreement; (iii) at any time by any party in writing if any application for
any required federal or state regulatory approval has been denied or is approved
with any condition or requirement which would prevent satisfaction of this
condition to FFOH's obligation to consummate the Merger, and the time period for
appeals and requests for reconsideration has run; (iv) at any time by any party
in writing if the shareholders of FFOH or CFC fail to approve the Agreement at a
meeting duly called for the purpose, unless the failure of such occurrence is
due to the failure of the party seeking to terminate to perform or observe in
any material respect its agreements set forth in the Agreement; (v) by any party
in writing in the event that the Merger is not consummated by April 29, 1997,
provided that this right to terminate shall not be available to any party whose
failure to perform an obligation under the Agreement resulted in the failure of
the Merger to be consummated by such date; (vi) at any time by either FFOH or
CFC if such party is not in default and such party determines in good faith that
any condition precedent to such party's obligations to consummate the Merger is
or would be impossible to satisfy, and such condition is not waived by the other
party; and (vii) by CFC if the Average FFOH Price is less than $8.00, subject,
however, to the following three sentences. If CFC elects to exercise its
termination right pursuant to clause (vii) above, it
58
shall give written notice to FFOH. During the five-day period commencing with
its receipt of such notice, FFOH shall have the option to increase the stock
portion of the consideration to be received by the holders of CFC Common Stock
under the Agreement by adjusting the Exchange Ratio to 4.75 shares. If FFOH so
elects within such five-day period, it shall give prompt written notice to CFC
of such election and the revised Exchange Ratio, whereupon no termination shall
have occurred pursuant to clause (vii) above and the Agreement shall remain in
effect in accordance with its terms (except as the Exchange Ratio shall have
been so modified).
In the event of termination, the Agreement shall become null and void,
except that certain provisions thereof relating to expenses and confidentiality
shall survive any such termination and any such termination shall not relieve
any breaching party from liability for any willful breach of any covenant,
undertaking, representation or warranty giving rise to such termination.
To the extent permitted under applicable law, the Agreement may be
amended or supplemented at any time by written agreement of the parties whether
before or after the approval of the shareholders of FFOH or CFC, provided that
after any such approval the Agreement may not be amended or supplemented in a
manner which modifies either the amount or form of the consideration to be
received by CFC's shareholders or otherwise materially adversely affects CFC
shareholders without further approval by those shareholders who are so affected.
Interests of Certain Persons in the Merger
Certain directors and executive officers of CFC may be deemed to have
interests in the Merger in addition to their interests as shareholders
generally. The Board of Directors of CFC was aware of these factors and
considered them, among other matters, in approving the Agreement and the
transactions contemplated thereby.
Election of Directors. Pursuant to the Agreement, FFOH agreed that it
will take such action as is necessary to cause each of Donald H. Rolf, Jr.,
Joseph D. Hughes and Thomas N. Spaeth to be elected as a director of FFOH for a
term which expires at FFOH's 1999 annual meeting of shareholders. In addition,
FFOH has agreed that effective as of the Effective Time, Paul D. Staubach shall
resign as a director of Fidelity Federal, and the resultant vacancy shall be
filled by Donald H. Rolf, Jr.
Employment and Severance Arrangements. Pursuant to the Agreement, as of
the Effective Time, FFOH and Fidelity Federal shall enter into an employment
agreement with Donald H. Rolf, Jr., Chairman and President of CFC, and Joseph D.
Hughes, Senior Vice President of CFC, pursuant to which Messrs. Rolf and Hughes
shall serve as Chairman and Executive Vice President, respectively, of FFOH and
Fidelity Federal for a period of three years from the Effective Time. In
addition, subject to satisfactory reviews by the Boards of Directors of FFOH and
Fidelity Federal (collectively, the "Employers"), the employment
59
agreements may be extended for additional one-year terms on each anniversary
date so that the remaining term shall be three years. Pursuant to the employment
agreements, Messrs. Rolf and Hughes shall be entitled to be compensated at a
rate not less than the rate of compensation received by him from People's
Savings immediately prior to the Effective Time.
The employment agreements are terminable with or without cause by the
Employers. Messrs. Rolf and Hughes shall have no right to compensation or other
benefits pursuant to the employment agreements for any period after voluntary
termination or termination by the Employers for cause, disability, retirement or
death, provided, however, that (i) in the event that either Mr. Rolf or Mr.
Hughes terminates his employment because of failure of the Employers to comply
with any material provision of the respective employment agreement or (ii) such
employment agreement is terminated by the Employers other than for cause,
disability, retirement or death or by Mr. Rolf or Mr. Hughes as a result of
certain adverse actions which are taken with respect to Mr. Rolf's or Mr.
Hughes' respective employment, in each case following a Change in Control of
FFOH, as defined, Messrs. Rolf and Hughes will be entitled to a cash severance
amount equal to three times his respective base salary. In addition, Messrs.
Rolf and Hughes will be entitled to a continuation of benefits similar to those
they are receiving at the time of such termination for the remaining term of the
agreement or until such employee obtains full-time employment with another
employer.
A Change in Control is generally defined in the employment agreements
to include any change in control required to be reported under the federal
securities laws, as well as (i) the acquisition by any person of 25% or more of
the FFOH's outstanding voting securities and (ii) a change in majority of the
directors of FFOH during any two-year period without the approval of at least
two-thirds of the persons who were directors of FFOH at the beginning of such
period.
The employment agreements provide that in the event that any of the
payments to be made thereunder or otherwise upon termination of employment are
deemed to constitute "excess parachute payments" within the meaning of Section
280G of the Code, then such payments and benefits received thereunder shall be
reduced, in the manner determined by the employee, by the amount, if any, which
is the minimum necessary to result in no portion of the payments and benefits
being non-deductible by the Employers for federal income tax purposes. Excess
parachute payments generally are payments in excess of three times the base
amount, which is defined to mean the recipients average annual compensation from
the employer includable in the recipient's gross income during the most recent
five taxable years ending before the date on which a change in control of the
employer occurred. Recipients of excess parachute payments are subject to a 20%
excise tax on the amount by which such payments exceed the base amount, in
addition to regular income taxes, and payments in excess of the base amount are
not deductible by the employer as compensation expense for federal income tax
purposes.
60
In connection with the Merger and pursuant to the Agreement, as of the
Effective Time, the Employers will also enter into severance agreements with
Anita G. Glasmeier, an existing officer of People's Savings, and Carolyn R.
Watt, an existing officer of CFC and People's Savings, in order to assist the
Employers in maintaining a stable and competent management base. The severance
agreements provide for a two-year term, and subject to satisfactory performance
reviews by the Boards of Directors, may be extended on each anniversary date for
an additional year so that the remaining term will be two years. The severance
agreements provide for severance payments in the event that certain adverse
actions are taken with respect to an employee's employment following a Change in
Control of FFOH, as defined, in an amount equal to two times the respective
employee's annual compensation.
Finally, pursuant to the Agreement, as of the Effective Time, FFOH will
assume and satisfy CFC's obligations under an amended employment agreement with
a former officer of CFC.
Indemnification and Insurance. Pursuant to the Agreement, FFOH agreed,
from and after the Effective Time through the third anniversary of the Effective
Time, to indemnify and hold harmless each present and former director, officer
and employee of CFC or its subsidiaries determined as of the Effective Time
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent to which such indemnified
parties were entitled under the articles of incorporation, code of regulations
and bylaws of CFC and any subsidiary of CFC as in effect as of the date of
execution of the Agreement.
Pursuant to the Agreement, FFOH also agreed to permit CFC to purchase
directors' and officers' liability insurance (on substantially the same terms
and conditions as the liability insurance currently provided for CFC's directors
and officers as of the date of the Agreement) for acts or omissions occurring
prior to the Effective Time for a period of three years following the Effective
Time, subject to certain limitations with respect to the cost of such insurance
coverage.
Other than as set forth above, no director or executive officer of CFC
has any direct or indirect material interest in the Merger, except insofar as
ownership of CFC Common Stock and existing options to purchase such stock might
be deemed such an interest.
Certain Employee Matters
The Agreement provides that current employees of CFC and its
subsidiaries shall be entitled to participate in FFOH's employee benefit plans
on the same terms and to the same extent as similarly situated employees of FFOH
and its subsidiaries. For purposes of
61
determining eligibility to participate in and the vesting of benefits under
FFOH's employee benefit plans, FFOH shall recognize years of service with CFC
and its subsidiaries as such service is recognized by CFC and its subsidiaries.
Resale of FFOH Common Stock
The FFOH Common Stock issued pursuant to the Merger will be freely
transferable under the Securities Act, except for shares issued to any CFC
shareholder who may be deemed to be an affiliate of FFOH for purposes of Rule
144 promulgated under the Securities Act ("Rule 144") or an affiliate of CFC for
purposes of Rule 145 promulgated under the Securities Act ("Rule 145") (each an
"Affiliate"). Affiliates will include persons (generally executive officers,
directors and 10% shareholders) who control, are controlled by or are under
common control with (i) FFOH or CFC at the time of the CFC Special Meeting or
(ii) FFOH at or after the Effective Time.
Rules 144 and 145 will restrict the sale of FFOH Common Stock received
in the Merger by Affiliates and certain of their family members and related
interests. Generally speaking, during the two years following the Effective
Time, those persons who are Affiliates of CFC at the time of the CFC Special
Meeting, provided they are not Affiliates of FFOH at or following the Effective
Time, may publicly resell any FFOH Common Stock received by them in the Merger,
subject to certain limitations as to, among other things, the amount of FFOH
Common Stock sold by them in any three-month period and as to the manner of
sale. After the two-year period, such Affiliates may resell their shares without
such restrictions so long as there is adequate current public information with
respect to FFOH as required by Rule 144. Persons who are Affiliates of FFOH
after the Effective Time may publicly resell the FFOH Common Stock received by
them in the Merger subject to similar limitations and subject to certain filing
requirements specified in Rule 144.
The ability of Affiliates to resell shares of FFOH Common Stock
received in the Merger under Rule 144 or 145 as summarized herein generally will
be subject to FFOH's having satisfied its Exchange Act reporting requirements
for specified periods prior to the time of sale. Affiliates also would be
permitted to resell FFOH Common Stock received in the Merger pursuant to an
effective registration statement under the Securities Act or another available
exemption from the Securities Act registration requirements. This
Prospectus/Joint Proxy Statement does not cover any resales of FFOH Common Stock
received by persons who may be deemed to be Affiliates of FFOH or CFC in the
Merger.
FFOH has received from each person who may be deemed to be an Affiliate
(for purposes of Rule 145) of CFC a letter agreement intended to ensure
compliance with the foregoing provisions of the Securities Act.
62
Certain Federal Income Tax Consequences
The following summary discusses the material federal income tax
consequences of the Merger. The summary is based on the Code, applicable
Treasury Regulations thereunder, and administrative rulings and judicial
authority as of the date hereof. All of the foregoing are subject to change, and
any such change could affect the continuing validity of this discussion. This
summary is not a complete description of all of the consequences of the Merger
and, in particular, may not address federal income tax considerations that may
affect the treatment of a shareholder which, at the Effective Time, already owns
FFOH Common Stock, is not a U.S. citizen, is a tax-exempt entity or an
individual who acquired CFC Common Stock pursuant to an employee stock option,
or exercises some form of control over CFC. In addition, no information is
provided herein with respect to the tax consequences of the Merger under
applicable foreign, state, or local laws.
Thompson Hine & Flory, P.L.L. has rendered an opinion to FFOH and CFC,
based upon the assumptions set forth therein, that the Merger will have the
federal income tax consequences as discussed below.
The Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code, and FFOH, FAC and CFC
will each be a party to a reorganization. Accordingly, neither FFOH, FAC nor CFC
will recognize any gain or loss as a result of the Merger. In addition, no gain
or loss will be recognized by a shareholder of CFC upon the exchange of shares
of CFC Common Stock solely for shares of FFOH Common Stock except for any gain
recognized with respect to cash received by a shareholder of CFC in lieu of
fractional shares of FFOH Common Stock. A shareholder of CFC who receives cash
in lieu of a fractional interest in FFOH Common Stock will be treated as if a
fractional share were distributed as part of the Merger exchange, immediately
redeemed, and then as having received a cash distribution in full payment of the
stock thus redeemed as provided in Section 302 of the Code. Any shareholder of
CFC who receives cash in exchange for their shares of CFC Common Stock will
recognize gain, if any, equal to the lesser of (i) the excess of the amount of
cash plus the fair market value of any FFOH Common Stock received in the Merger
over the shareholder's adjusted tax basis in their CFC Common Stock, or (ii) the
amount of cash received. The adjusted tax basis of the FFOH Common Stock
received by shareholders of CFC who exchange all of their CFC Common Stock
solely for FFOH Common Stock in the Merger will be the same as the adjusted tax
basis of the shares of CFC Common Stock surrendered in exchange therefor,
decreased by any amount allocable to a fractional share interest for which cash
is received. The holding period of the FFOH Common Stock received by
shareholders of CFC who exchange all of their CFC Common Stock solely for FFOH
Common Stock in the Merger will include the holding period of the shares of CFC
Common Stock surrendered in exchange therefor, provided that such CFC Common
Stock is held as a capital asset by the CFC shareholder at the consummation of
the Merger.
63
THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS OF THE MERGER AND DOES NOT CONSIDER THE
PARTICULAR FACTS OR CIRCUMSTANCES OF ANY SHAREHOLDER. THUS, CFC SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO
THEM OF THE MERGER.
Accounting Treatment of the Merger
The Merger will be accounted for as a purchase for financial reporting
purposes. Under this method of accounting, FFOH will record the acquisition of
CFC at its cost at the Effective Time of the Merger, which cost would include
the cash paid in the Merger, the fair value of the shares of FFOH Common Stock
issued in the Merger and all direct acquisition costs. The acquisition cost will
be allocated to the acquired assets and liabilities of CFC based upon their fair
values at the Effective Time of the Merger in accordance with generally accepted
accounting principles. Acquisition cost in excess of the fair values of the net
assets acquired, if any, will be recorded as an intangible asset and amortized
over a period of 15 years for financial accounting purposes. The reported income
of FFOH will include the operations of CFC after the Effective Time of the
Merger. See "Pro Forma Combined Consolidated Financial Information."
Expenses of the Merger
The Agreement provides that each party thereto shall each bear and pay
all costs and expenses incurred by it in connection with the transactions
contemplated by the Agreement, including fees and expenses of its own financial
consultants, accountants and counsel, except that expenses of printing the
Registration Statement and the registration fee to be paid to the SEC in
connection therewith shall be shared equally between FFOH and CFC.
Stock Option Agreements
As an inducement and a condition to FFOH's entering into the Agreement,
FFOH and CFC also entered into the CFC Option Agreement, pursuant to which CFC,
as issuer, granted FFOH, as grantee, the CFC Option, upon the occurrence of
certain events (none of which has occurred as of the date hereof to the best of
the knowledge of FFOH and CFC), to purchase up to 140,911 shares of CFC Common
Stock, representing 19.9% of the outstanding shares of CFC Common Stock, at a
price of $30.00 per share, subject to adjustment in certain circumstances and
termination within certain periods. As an inducement and a condition to CFC's
entering into the Agreement, FFOH and CFC also entered into the FFOH Option
Agreement, pursuant to which FFOH, as issuer, granted CFC, as grantee, the FFOH
Option, upon the occurrence of certain events (none of which has occurred as of
the date hereof to the best of the knowledge of FFOH and CFC), to purchase up to
403,285 shares of FFOH Common Stock, representing approximately 9.9% of the
outstanding shares of FFOH Common Stock, at a price of $11.00 per share, subject
64
to adjustment in certain circumstances and termination within certain periods.
With the exception of the number and percentage of shares of common stock of the
Issuer ("Issuer Common Stock") subject to an Option ("Option Shares") and the
per share price at which an Option may be exercised, the terms of the CFC Stock
Option Agreement and the FFOH Stock Option Agreement are substantially
identical.
For purposes of the following summary of the material provisions of the
Stock Option Agreements, the term (i) "Issuer" means CFC with respect to the CFC
Option Agreement and FFOH with respect to the FFOH Option Agreement, (ii)
"Grantee" means FFOH with respect to the CFC Option Agreement and CFC with
respect to the FFOH Option Agreement and (iii) "Option" means the CFC Option or
the FFOH Option, as applicable.
Provided that the holder of an Option (which is initially the Grantee
thereof) is not in material breach of the Agreement or the applicable Stock
Option Agreement and there is no applicable injunction or order in effect, the
holder of the Option may exercise the Option, in whole or in part, at any time
and from time to time following the occurrence of a Purchase Event (as defined),
provided that the Option shall terminate and be of no further force and effect
upon the earliest to occur of (i) the Effective Time, (ii) termination of the
Agreement in accordance with its terms prior to the occurrence of a Purchase
Event or a Preliminary Purchase Event (as defined), other than a termination of
the Agreement by Grantee as a result of the Issuer having breached a material
covenant or obligation in the Agreement (a "Default Termination"); (iii) 12
months after termination of the Agreement by Grantee pursuant to a Default
Termination and (iv) 12 months after termination of the Agreement (other than
pursuant to a Default Termination) following the occurrence of a Purchase Event
or a Preliminary Purchase Event. The purchase of any shares of Issuer Common
Stock pursuant to a Stock Option Agreement is subject to compliance with
applicable law, including the receipt of necessary approvals under the change in
Bank Control Act of 1978, as amended (the "CBC Act").
Each Stock Option Agreement defines a "Purchase Event" to mean any of
the following events:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case 20% or more of the
consolidated assets of Issuer and its subsidiaries, or (C) the
issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 20% or more of the voting power of Issuer or any of its
subsidiaries (any of the foregoing an "Acquisition Transaction"); or
65
(ii) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined in Section 13(d)(3) of the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then outstanding shares of Issuer
Common Stock.
Each Stock Option Agreement defines a "Preliminary Purchase Event" to
include any of the following events:
(i) any person (other than Grantee or any subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filed a registration statement
under the Securities Act with respect to, a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 10% or
more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to as a "Tender Offer" and an "Exchange Offer,"
respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have
approved the Agreement at the meeting of such shareholders held for the
purpose of voting on the Agreement, (B) such meeting shall not have
been held or shall have been canceled prior to termination of the
Agreement, or (C) Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of Issuer's
Board of Directors with respect to the Agreement, in each case after it
shall have been publicly announced that any person (other than Grantee
or any subsidiary of Grantee) shall have (x) made, or disclosed an
intention to make, a proposal to engage in an Acquisition Transaction,
(y) commenced a Tender Offer or filed a registration statement under
the Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under
certain banking laws for approval to engage in an Acquisition
Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Agreement and such breach would
entitle Grantee to terminate the Agreement in accordance with its terms
(without regard to the cure period provided for therein unless such
cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Agreement), after (x) a bona fide
proposal is made by any person (other than Grantee or any subsidiary of
Grantee) to Issuer or its shareholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any subsidiary of
Grantee) states its intention to Issuer or its shareholders to make a
proposal to engage in an Acquisition Transaction if the Agreement
terminates, or (z) any person (other than Grantee or any subsidiary of
Grantee) shall have filed an application or notice with an applicable
governmental authority to engage in an Acquisition Transaction.
66
As used in the Stock Option Agreements, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
Each Stock Option Agreement provides that, subject to limitations set
forth therein, the holder of the Option may demand that Issuer promptly prepare,
file and keep current a registration statement under the Securities Act covering
the Option Shares and use its reasonable efforts to cause such registration
statement to become effective and remain current in order to permit the
disposition of the Option Shares by such holder.
Each Stock Option Agreement provides for adjustment in the number of
Option Shares to reflect any change in Issuer Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction. Each Stock Option Agreement also provides that
upon the occurrence of certain events set forth therein the Option must be
converted into, or exchanged for, an option, at the election of the holder of
the Option, covering the stock of another corporation or Issuer (the "Substitute
Option"). The number of shares subject to the Substitute Option and the exercise
price per share will be determined in accordance with a formula set forth in
each Stock Option Agreement.
At the request of a holder of an Option at any time beginning on the
first occurrence of certain events, including, among others, the acquisition by
a third party of beneficial ownership of 50% or more of the outstanding Issuer
Common Stock, and ending 12 months thereafter, Issuer will repurchase from the
holder of the Option (i) the Option and (ii) all shares of Issuer Common Stock
purchased by the holder of the Option pursuant to the applicable Stock Option
Agreement with respect to which such holder then has beneficial ownership. The
manner for determining the repurchase price of the Option and such shares of
Issuer Common Stock is set forth in each Stock Option Agreement.
The Stock Option Agreements are intended to increase the likelihood
that the Merger will be consummated in accordance with the terms of the
Agreement and may have the effect of discouraging competing offers to the
Merger.
Copies of the CFC Option Agreement and the FFOH Option Agreement are
included as Annexes II and III to this Prospectus/Joint Proxy Statement,
respectively, and reference is made thereto for the complete terms thereof.
Stockholder Agreements
In conjunction with the Agreement, FFOH also entered into the CFC
Stockholder Agreement, dated as of April 29, 1996, with certain directors and
executive officers of CFC. See "Certain Beneficial Owners of CFC Common Stock."
Pursuant to the CFC Stockholder Agreement, a copy of which is included as Annex
IV hereto, each of such persons, solely in his or her capacity as a shareholder
of CFC, agreed, among other things, not to sell, pledge, transfer or otherwise
dispose of his or her shares of CFC Common Stock prior to the
67
meeting of shareholders of CFC at which the Agreement is considered and to vote
such shares of CFC Common Stock in favor of the Agreement. In addition, in
conjunction with the Agreement, CFC also entered into the FFOH Stockholder
Agreement, dated as of April 29, 1996, with certain directors and executive
officers of FFOH. See "Certain Beneficial Owners of FFOH Common Stock." Pursuant
to the FFOH Stockholder Agreement, a copy of which is included as Annex V
hereto, each of such persons, solely in his or her capacity as a shareholder of
FFOH, agreed, among other things, not to sell, pledge, transfer or otherwise
dispose of his or her shares of FFOH Common Stock prior to the meeting of
shareholders of FFOH at which the Agreement is considered and to vote such
shares of FFOH Common Stock in favor of the Agreement.
Dissenters' Rights
Pursuant to Section 1701.85 of the OGCL, in the event that the Merger
is consummated, any holder of shares of CFC Common Stock who objects to the
Merger is entitled to dissent from the Merger and to have the fair value of such
shares ("Dissenting Stock") as determined by FFOH, CFC, or if necessary,
judicially determined, paid to him or her, by complying with the provisions of
Section 1701.85 of the OGCL. Failure to take any steps set forth in Section
1701.85 in connection with the exercise of such rights may result in termination
or waiver thereof.
The following is a summary of the statutory procedures required to be
followed by a holder of Dissenting Stock (a "dissenting shareholder") in order
to exercise his or her rights under the OGCL. This summary is qualified in its
entirety by reference to Section 1701.85 of the OGCL, the text of which is
attached as Annex VIII to this Prospectus/Joint Proxy Statement.
Under Section 1701.85 where a merger is to be submitted for approval at
a meeting of shareholders, as in the case of the CFC Special Meeting, not later
than ten days after such meeting, any holder of CFC Common Stock for which
appraisal rights are available who wishes to assert his appraisal rights shall
deliver to CFC a written demand for payment to him of the fair cash value of the
shares for which he seeks relief. The demand shall include the dissenting
shareholder's address, the number and class of such shares and the amount
claimed by him as the fair cash value of the shares. ANY SUCH SHAREHOLDER WHO
WISHES TO EXERCISE SUCH APPRAISAL RIGHTS SHOULD REVIEW CAREFULLY THE FOLLOWING
DISCUSSION AND ANNEX VIII TO THIS PROSPECTUS/JOINT PROXY STATEMENT BECAUSE
FAILURE TO TIMELY AND PROPERLY COMPLY WITH THE PROCEDURES SPECIFIED WILL RESULT
IN THE LOSS OF APPRAISAL RIGHTS UNDER SECTION 1701.85.
A demand for appraisal rights must be in addition to and separate from
any proxy or vote against the Merger. A vote against the Merger does not, by
itself, constitute a demand for appraisal rights. Also, voting for the Merger
will result in the loss of appraisal rights with respect to such shares.
68
Only a holder of record of shares of CFC Common Stock is entitled to
assert appraisal rights for the shares of CFC Common Stock registered in that
holder's name. A demand for appraisal should be executed by or on behalf of the
holder of record fully and correctly, as his name appears on his stock
certificates. If the shares of CFC Common Stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the shares of CFC Common
Stock are owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand should be executed by or on behalf of all joint
owners. An authorized agent, including one or more joint owners, may execute a
demand for appraisal on behalf of a holder of record; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is agent for such owner or owners. A record
holder such as a broker who holds shares of CFC Common Stock as nominee for
several beneficial owners may exercise appraisal rights with respect to the
shares of CFC Common Stock held for one or more beneficial owners while not
exercising such rights with respect to the shares of CFC Common Stock held for
other beneficial owners; in such case, the written demand should set forth the
number of shares of CFC Common Stock as to which appraisal is sought and where
no number of shares of CFC Common Stock is expressly mentioned the demand will
be presumed to cover all shares of CFC Common Stock held in the name of the
record owner. Shareholders who hold their shares of CFC Common Stock in
brokerage accounts or other nominee forms and who wish to exercise appraisal
rights must take all necessary steps in order that a demand for appraisal is
made by the record holder of such shares and are urged to consult with their
brokers to determine the appropriate procedures for the making of a demand for
appraisal by the record holder and for surrendering the certificates for such
shares for notation of appraisal rights as set forth below.
All written demands for appraisal with respect to CFC Common Stock
should be sent or delivered to Theresa M. Barlow, Secretary, Circle Financial
Corporation, 11100 Reading Road, Sharonville, Ohio 45241, within ten days
following the CFC Special Meeting.
If CFC sends to a dissenting shareholder, at the address specified in
his demand, a request for the certificates representing the shares as to which
he seeks relief, the dissenting shareholder, within fifteen days from the date
of the sending of such request, shall deliver to CFC the certificates requested
so that such institution may endorse on them a legend to the effect that demand
for the fair cash value of such shares has been made. CFC shall promptly return
such endorsed certificates to the dissenting shareholder. Failure to deliver
such certificates to CFC terminates, at the option of CFC, the dissenting
shareholder's appraisal rights if CFC exercises such option by providing written
notice to the dissenting shareholder within twenty days after the lapse of
fifteen-day period unless a court for good cause shown otherwise directs.
If CFC and any holder of CFC Common Stock who has complied with the
foregoing procedures and who is entitled to appraisal rights under Section
1701.85 have not agreed as to the fair value of his shares within three months
after the service of the demand by the
69
dissenting shareholder, CFC, FFOH or the shareholder may file a complaint with
the court of common pleas in the county in which the principal office of CFC is
located. Other dissenting shareholders, within the three-month period, may join
as plaintiffs.
If a complaint requesting an appraisal is timely filed, after a hearing
on such petition, the court may determine that the holders of shares of CFC
Common Stock are entitled to appraisal rights and, in such a case, may order an
appraisal of the "fair value" of the shares of such CFC Common Stock, as of the
day prior to the day on which the vote by the shareholders was taken. Such
appraisal may be conducted by an appraiser appointed by the court. The fair cash
value for purposes of appraisal rights is the amount that a willing seller who
is under no compulsion to sell would be willing to accept and that a willing
buyer under no compulsion to purchase would be willing to pay. Holders of shares
of CFC Common Stock considering seeking appraisal rights should be aware that
the fair value of their shares of CFC Common Stock as determined under Section
1701.85 could be more than, the same as, or less than the value of the
consideration they would receive pursuant to the Agreement if they did not seek
appraisal of their shares of CFC Common Stock.
The costs of any appraisal proceeding may be apportioned and assessed
by the court as it deems equitable against all or some of the parties. The final
order of the court may be appealed as set forth in Section 1701.85.
Any holder of shares of CFC Common Stock who has duly demanded an
appraisal in compliance with Section 1701.85 will not, after the Effective Time,
be entitled to vote the shares of CFC Common Stock subject to such demand for
any purpose or be entitled to the payment of dividends or other distributions on
those shares (except dividends or other distributions payable to holders of
record of shares of FFOH Common Stock shall be paid to the holder of record as a
credit upon the fair cash value of the shares).
If any holder of CFC Common Stock who demands appraisal of his shares
under Section 1701.85 fails to perfect, or effectively withdraws or loses his
right to appraisal as provided in Section 1701.85, the shares of such
shareholder will be converted into the right to receive the Merger Consideration
in accordance with the terms of the Agreement. A holder may withdraw his demand
for appraisal by delivering to CFC a written withdrawal of his demand for
appraisal.
Failure to follow the steps required by Section 1701.85 for perfecting
appraisal rights may result in the loss of such rights.
70
MANAGEMENT OF FFOH AFTER THE MERGER
Upon consummation of the Merger, the directors and executive officers
of FFOH will be the directors and executive officers of FFOH immediately prior
to the Merger, except three of the existing directors of CFC will become
directors of FFOH. See "The Merger-Effects of the Merger."
The following table sets forth certain information about each director
of CFC who will become a director of FFOH upon consummation of the Merger.
Position with CFC and Director
Principal Occupation of CFC
Name Age During the Past Five Years Since(1)
---- ----- ----------------------------- ----------
Donald H. Rolf, Jr. 55 Chairman of the Board and 1982
President of CFC; Chairman
of the Board and President of
People's Savings. Mr. Rolf is
also an attorney.
Joseph D. Hughes 44 Senior Vice President and 1995
director of CFC; President
and director of People's
Savings; from January 1994
through August 1994, served
as Vice President of Mortgage
Banking of Fidelity Federal;
from 1989 through 1993, was
employed as President of First
Financial Savings Association,
F.A., Cincinnati, Ohio
Thomas N. Spaeth 58 Director of CFC and People's 1992
Savings; managing partner of
Spaeth and Batterberry, a
certified public accounting
firm since 1983
- --------------
(1) Includes service with predecessor institutions.
71
Additional information about the foregoing persons is contained in
CFC's Proxy Statement for its 1995 annual meeting of shareholders, relevant
portions of which are incorporated by reference in this Prospectus/Joint Proxy
Statement pursuant to CFC's Annual Report on Form 10-KSB for the year ended June
30, 1995. See "Incorporation of Certain Documents by Reference" and "Available
Information."
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma combined consolidated financial information set
forth below should be read in conjunction with the audited consolidated
financial statements, including the notes thereto, of FFOH and CFC that are
incorporated by reference in this Prospectus/Joint Proxy Statement. See
"Incorporation of Certain Documents by Reference," "FFOH Selected Consolidated
Financial Data" and "CFC Selected Consolidated Financial Data." The unaudited
pro forma combined consolidated financial information set forth below gives
effect to the Merger under the purchase accounting method. The pro forma
combined consolidated statement of financial condition treats the Merger as if
it had been consummated on March 31, 1996, and the pro forma combined
consolidated statements of earnings treat the Merger as if it has been
consummated at the beginning of the respective periods. The pro forma combined
per share data gives effect to an assumed Exchange Ratio of 3.80 shares of FFOH
Common Stock for each share of CFC Common Stock not converted into the right to
receive cash in the Merger and assumes that none of the outstanding stock
options to purchase CFC Common Stock are exercised.
72
This pro forma financial information is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred if the Merger had been consummated
at the dates assumed for purposes hereof, nor is it necessarily indicative of
future operating results or financial position.
Unaudited Pro Forma Combined
Consolidated Statement of Financial Condition
March 31, 1996
---------------------------------------------------------------------------
Pro Forma
Acquisition Consolidated
Adjustments Condensed Footnote
FFOH CFC Dr. (Cr.) Combined References
------------ ------------ ------------- ----------------- ------------
(In Thousands, except per share data)
Assets:
Cash and due from banks $ 1,813 $ 1,466 $ (101) $ 3,178 (A)
Interest-bearing deposits in other
institutions 16,258 21,779 (13,250) 24,787 (A)
Investment securities available for
sale - at market 9,566 2,997 -- 12,563
Investment securities held to
maturity - at cost -- 987 85 1,072 (B)
Mortgage-backed securities available
for sale - at market 28,377 3,992 -- 32,369
Mortgage-backed securities held to
maturity - at cost -- 42,708 268 42,976 (B)
Loans receivable, net 187,109 144,903 (358) 331,654 (C)
Federal Home Loan Bank stock 1,886 1,675 -- 3,561
Goodwill and other intangible assets -- 3,240 (3,240) -- (D)
-- -- 7,439 7,439 (D)
Other assets 4,357 5,659 -- 10,016
------- ------- ------- -------
Total assets $249,366 $229,406 $ (9,157) $469,615
======= ======= ======= =======
Liabilities:
Savings deposits $182,217 $201,303 $ 728 $384,248 (E)
Borrowed funds 14,041 2,500 -- 16,541
Other liabilities 2,328 1,166 (248) 3,246 (F)
------- ------- ------- -------
Total liabilities 198,586 204,969 (480) 404,035
------- ------- ------- -------
Stockholders' equity:
Common stock 407 776 628 555 (G)
Additional paid-in capital 26,782 6,606 (8,046) 41,434 (H)
Retained income 25,889 18,798 18,798 25,889 (I)
Treasury stock, at cost -- (1,722) (1,722) -- (I)
Less shares acquired by Employee
Stock Ownership Plan (2,135) -- -- (2,135)
Less shares acquired by Management
Recognition Plan (15) -- -- (15)
Unrealized losses on securities
designated as available for
sale - net (148) (21) (21) (148) (I)
------- ------- ------- -------
Total stockholders' equity 50,780 24,437 9,637 65,580
------- ------- ------- -------
Total liabilities and stockholders'
equity $249,366 $229,406 $ 9,157 $469,615
======= ======= ======= =======
Tangible book value per share $ 12.47 $ 29.94 $ 10.47
======= ======= =======
(Footnotes on following page)
73
- ------------------
(A) FFOH intends to utilize $13.3 million of interest-bearing deposits in
other institutions and $100,000 of cash on hand and due from banks as
sources of funds for the cash portion of the Merger Consideration.
Shares of CFC Common Stock outstanding at
March 31, 1996 (708,096 x 45%) 318,643
Cash payment per share $ 38.00
------------
Cash portion of the Merger Consideration $12,108,434
Cash to be paid to holders of the 47,871
Options to purchase CFC Common Stock,
net of tax benefits 642,557
Estimated acquisition costs 600,000
------------
Total estimated cash payments by FFOH $13,350,991
============
The Merger Consideration in the form of FFOH Common Stock will be as
shown below:
Shares of CFC Common Stock outstanding at
March 31, 1996 (708,096 x 55%) 389,453
Exchange ratio 3.800
---------
Total shares of FFOH Common Stock to be
issued 1,479,921
=========
Fractional shares are not determinable at this point in time. Cash will
be paid in lieu of fractional shares at an assumed rate of $10.00 per
full share (which assumes an Average FFOH Price of $10.00 per share).
(B) The adjustment to investment securities and mortgage-backed securities,
designated as held to maturity, reflects the recording of CFC's
respective portfolios to fair value at the date of acquisition.
(C) The adjustment to loans receivable, net of unearned interest, reflects
the adjustment of CFC's loan portfolio to fair value by discounting the
portfolio using the estimated remaining lives of the various types of
loans and estimated current interest rates as of March 31, 1996.
74
(D) This adjustment reflects the allocation to goodwill and other
intangible assets as a result of the fair value adjustments set forth
in Notes B, C, E and F herein. The calculation of this adjustment is
shown below:
Total shares of FFOH Common Stock issued
pursuant to the Agreement 1,479,921
Market price of FFOH Common Stock used for exchange of FFOH Common Stock (based
upon the closing market price of FFOH at
April 30, 1996) 10.00
-----------
Market value of shares exchanged $14,799,210
Cash payment by FFOH pursuant to Note A 13,350,991
Less CFC's March 31, 1996 tangible
stockholders' equity (21,196,350)
Mark to market adjustments (1) 485,000
-----------
$ 7,438,851
============
(1) Represents the net amount of the adjustments discussed in
Notes B, C, D, E and F.
(E) The adjustment to savings deposits reflects the fair value of such
deposits by discounting the deposits on the basis of the estimated
remaining lives of the various types of savings deposits and their
estimated current interest rates as of March 31, 1996.
(F) The $248,000 adjustment of other liabilities reflects the tax effect of
the fair value adjustments set forth in Notes B, C and E.
(G) Represents the elimination of CFC's Common Stock and the issuance of
1,479,921 shares of FFOH Common Stock pursuant to the Agreement.
(H) Represents the elimination of CFC's Additional Paid-in Capital and the
issuance of 1,479,921 shares of FFOH Common Stock at the current market
value of $10.00 per share on April 30, 1996, less the $10.00 per share
value.
(I) Represents the elimination of CFC's historical retained earnings,
treasury stock and unrealized loss on investment securities.
75
Unaudited Pro Forma Consolidated Condensed
Combined Statements of Earnings
Three Months Ended March 31, 1996
---------------------------------------------------------------------------------------
Pro Forma
Consolidated
Adjustments Condensed Footnote
FFOH CFC Dr. (Cr.) Combined References
------------ ------------ --------------- --------------- ------------
(In Thousands, except shares and per share data)
Interest income:
Loans $3,782 $2,660 $ (6) $6,448 (A)
Mortgage-backed securities 460 834 13 1,281 (B)
Investment securities 93 242 11 324 (C)
Interest-bearing deposits and other 173 155 (1) 329 (D)
----- ----- ----- -----
Total interest income 4,508 3,891 17 8,382
Interest expense:
Deposits 2,406 2,296 (61) 4,641 (E)
Borrowings 243 42 -- 285
----- ----- ----- -----
Total interest expense 2,649 2,338 (61) 4,926
----- ----- ----- -----
Net interest income 1,859 1,553 (44) 3,456
Provision for losses on loans 17 -- -- 17
----- ------ ----- -----
Net interest income after provision
for losses on loans 1,842 1,553 (44) 3,439
Other income 114 138 -- 252
General, administrative and other
expenses 1,119 1,260 (103) 2,276 (F)
Write-off of intangible assets -- -- 70 70 (G)
------ ------ ------ -----
Earnings before income taxes 837 431 (77) 1,345
Federal income taxes 282 146 50 478 (H)
----- ----- ------ -----
Net earnings $ 555 $ 285 $ (27) $ 867
===== ===== ====== =====
Earnings per share: (I)
Primary $ 0.14 $ 0.39 $ -- $ 0.16
===== ===== =====
Fully diluted $ 0.14 $ 0.39 $ -- $ 0.16
===== ===== =====
Weighted average shares and
share equivalents outstanding:
Primary 3,900,014 724,857 -- 5,379,935
Fully diluted 3,904,619 724,857 -- 5,384,540
76
Unaudited Pro Forma Consolidated Condensed
Combined Statements of Earnings
Year Ended December 31, 1995
-------------------------------------------------------------
Pro Forma
Consolidated
Adjustments Condensed Footnote
FFOH CFC Dr. (Cr.) Combined References
------------ ------------ --------------- --------------- ------------
(In Thousands, except shares and per share data)
Interest income:
Loans $14,697 $ 9,113 $ (24) $23,834 (A)
Mortgage-backed securities 1,695 2,775 53 4,417 (B)
Investment securities 307 1,501 43 1,765 (C)
Interest-bearing deposits and other 302 238 (346) 886 (D)
------ ------ ----- ------
Total interest income 17,001 13,627 (274) 30,902
Interest expense:
Deposits 9,267 7,648 (243) 16,672 (E)
Borrowings 900 407 -- 1,307
------ ------ ----- -------
Total interest expense 10,167 8,055 (243) 17,979
------ ------ ----- -------
Net interest income 6,834 5,572 (517) 12,923
Provision for losses on loans 71 -- -- 71
------ ------- ----- ------
Net interest income after provision
for losses on loans 6,763 5,572 (517) 12,852
Other income 355 675 -- 1,030
General, administrative and other
expenses 4,385 4,588 (257) 8,716 (F)
Write-off of intangible assets -- -- 280 280 (G)
------- ------ ---- -------
Earnings before income taxes 2,733 1,659 (494) 4,886
Federal income taxes 919 598 263 1,780 (H)
------ ----- ----- -------
Net earnings $ 1,814 $ 1,061 $ (231) $ 3,106
====== ====== ===== ======
Earnings per share: (I)
Primary $ 0.44 $ 1.46 $ -- $ 0.56
====== ====== ======
Fully diluted $ 0.44 $ 1.46 $ -- $ 0.56
====== ====== ======
Weighted average shares and
share equivalents outstanding:
Primary 4,077,750 727,455 -- 5,557,671
Fully diluted 4,090,062 727,455 -- 5,569,983
77
- ------------------
(A) Represents the current amortization of the adjustment to fair value of
the loans receivable of CFC using the interest method over an estimated
remaining life of approximately 15 years.
(B) Represents the current amortization of the adjustment to fair value of
the mortgage-backed securities of CFC using the interest method over an
estimated remaining life of approximately five years.
(C) Represents the current amortization of the adjustment to fair value of
the investment securities of CFC using the interest method over an
estimated remaining life of approximately two years.
(D) Represents earnings as a result of $19.5 million in net
proceeds from FFOH's stock conversion on March 4, 1996, net of the
$13.4 million of cash used to fund the Merger, at an average rate
of 5.6%. The weighted average rate was derived from the historic
yields on assets identified to fund the cash consideration of
the Merger. This pro forma adjustment for the three months
ended March 31, 1996, was prorated to take into account the
completion of FFOH's stock offering on March 4, 1996.
(E) Represents the period accretion of the fair value adjustment applied to
CFC deposits, using the interest method over an estimated remaining
life of approximately three years.
(F) Represents direct cost reductions as a result of the Merger,
primarily attributable to declines in employee compensation and
benefits, net of additional expenses due to FFOH's stock
conversion on March 4, 1996 as follows:
Direct cost reductions $ 750,000
Adjustments due to FFOH's stock conversion
Ohio franchise tax adjustment (190,000)
ESOP adjustment (121,000)
1996 Recognition Plan adjustment (182,000)
---------
$ 257,000
=========
This pro forma adjustment for the three months ended March 31, 1996,
was prorated to take into account the completion of FFOH's stock
offering on March 4, 1996.
(G) Represents amortization of additional goodwill and other intangible
assets over an estimate weighted average life of fifteen years.
(H) Represents the income tax effect with respect to the fair value and
other adjustments described in Notes A through G above.
(I) Earnings per share are based upon the combined historical income of
FFOH and CFC divided by the historical weighted average shares during
the periods as presented above. Weighted average shares outstanding has
been adjusted to reflect the exchange ratio with respect to FFOH's
reorganization into the stock holding company form of organization on
March 4, 1996 (whereby each share of Fidelity Federal common stock held
by public shareholders of Fidelity Federal were converted into 2.25
shares of FFOH Common Stock). For purposes of calculating pro forma
earnings per share, the weighted average shares gives effect to FFOH's
historic weighted average shares outstanding plus the FFOH Common Stock
to be issued as part of the Merger Consideration pursuant to the
Agreement at the beginning of each of the periods presented.
78
DESCRIPTION OF FFOH CAPITAL STOCK
FFOH is currently authorized to issue up to 7,000,000 shares of FFOH
Common Stock and up to 500,000 shares of FFOH Preferred Stock. The FFOH Board is
currently seeking shareholder approval of an amendment to FFOH's Articles of
Incorporation to increase the number of authorized shares of FFOH Common Stock
and FFOH Preferred Stock to 15,000,000 and 5,000,000, respectively. The capital
stock of FFOH does not represent or constitute a deposit account and is not
insured by the FDIC.
The following description of the FFOH capital stock does not purport to
be complete and is qualified in all respects by reference to the Articles of
Incorporation ("Articles"), Code of Regulations and Bylaws of FFOH and the OGCL.
FFOH Common Stock
General. Each share of FFOH Common Stock has the same relative rights
and is identical in all respects with each other share of FFOH Common Stock. The
FFOH Common Stock is not subject to call for redemption and, at the Effective
Time of the Merger, each share of FFOH Common Stock offered hereby will be fully
paid and non-assessable.
Voting Rights. Except as provided in any resolution or resolutions
adopted by the FFOH Board establishing any series of FFOH Preferred Stock, the
holders of FFOH Common Stock possess exclusive voting rights in FFOH. Each
holder of FFOH Common Stock is entitled to one vote for each share held on all
matters voted upon by shareholders, and shareholders are not permitted to
cumulate votes in elections of directors.
Dividends. Subject to the rights of the holders of any series of FFOH
Preferred Stock, the holders of the FFOH Common Stock are entitled to such
dividends as may be declared from time to time by the FFOH Board out of funds
legally available therefor.
Preemptive Rights. Holders of FFOH Common Stock do not have any
preemptive rights with respect to any shares which may be issued by FFOH in the
future; thus, FFOH may issue and sell shares of FFOH Common Stock without first
offering them to the then holders of the FFOH Common Stock.
Liquidation. In the event of any liquidation, dissolution or winding up
of FFOH, the holders of the FFOH Common Stock would be entitled to receive,
after payment of all debts and liabilities of FFOH, all assets of FFOH available
for distribution, subject to the rights of the holders of any FFOH Preferred
Stock which may be issued with a priority in liquidation or dissolution over the
holders of the FFOH Common Stock.
79
FFOH Preferred Stock
The FFOH Board is authorized to issue FFOH Preferred Stock and to fix
and state voting powers, designations, preferences or other special rights of
such shares and the qualifications, limitations and restrictions thereof. The
FFOH Preferred Stock may be issued in distinctly designated series, may be
convertible into FFOH Common Stock and may rank prior to the FFOH Common Stock
as to dividend rights, liquidation preferences, or both.
The authorized but unissued shares of FFOH Preferred Stock (as well as
the authorized but unissued and unreserved shares of FFOH Common Stock) are
available for issuance in future mergers or acquisitions, in a future public
offering or private placement or for other general corporate purposes. Except as
otherwise required to approve the transaction in which the additional authorized
shares of FFOH Preferred Stock (as well as FFOH Common Stock) would be issued,
shareholder approval generally would not be required for the issuance of these
shares. Depending on the circumstances, however, shareholder approval may be
required pursuant to the requirements for continued listing of the FFOH Common
Stock on the Nasdaq Stock Market's National Market or the requirements of any
exchange on which the FFOH Common Stock may then be listed.
Other Provisions
Certain provisions of FFOH's Articles, Code of Regulations and Bylaws
which deal with matters of corporate governance and rights of shareholders might
be deemed to have a potential anti-takeover effect. These provisions, which are
described under "Comparison of the Rights of Shareholders" below, provide, among
other things, (i) that the Board of Directors of FFOH shall be divided into up
to three classes; (ii) that special meetings of shareholders may only be called
by the Chairman of the Board, President or the Board of Directors of FFOH and
upon written request by the holders of 50% or more of the outstanding voting
shares; (iii) that shareholders generally must provide FFOH advance notice of
shareholder proposals and nominations for director and provide certain specified
related information; (iv) that no person may acquire more than 10% of the issued
and outstanding shares of any class of an equity security of FFOH, subject to
certain exceptions, until March 4, 2001; (v) for the authority of the FFOH Board
to issue shares of authorized but unissued FFOH Common Stock and FFOH Preferred
Stock and to establish the terms of any one or more series of FFOH Preferred
Stock, including voting rights; and (vi) restrictions on FFOH's ability to
engage in certain business combinations with "related persons." In addition to
the foregoing, and also as described under "Comparison of the Rights of
Shareholders" below, the OGCL generally restricts FFOH's ability to engage in
certain business combinations with "interested shareholders" and restricts the
voting rights of shares acquired by a person in excess of 20% of the outstanding
shares.
80
The foregoing provisions of the Articles, Code of Regulations and
Bylaws of FFOH and the OGCL could have the effect of discouraging an acquisition
of FFOH or purchases of shares of FFOH Common Stock in furtherance of an
acquisition, and could accordingly, under certain circumstances, discourage
transactions which might otherwise have a favorable effect on the price of the
FFOH Common Stock.
Transfer Agent
The transfer agent and registrar for the FFOH Common Stock is Fifth
Third Bank, Cincinnati, Ohio.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
The rights of holders of FFOH Common Stock are governed by the OGCL and
FFOH's Articles, Code of Regulations and Bylaws, while the rights of holders of
CFC Common Stock are governed by the OGCL and CFC's Articles of Incorporation
("Articles") and Code of Regulations. Upon consummation of the Merger,
shareholders of CFC will become shareholders of FFOH and their rights as
shareholders of FFOH will be governed by the Articles, Code of Regulations and
Bylaws of FFOH and the OGCL.
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE A COMPLETE STATEMENT OF THE
DIFFERENCES AFFECTING THE RIGHTS OF CFC'S SHAREHOLDERS, BUT RATHER SUMMARIZES
THE MORE SIGNIFICANT DIFFERENCES AFFECTING THE RIGHTS OF SUCH SHAREHOLDERS AND
CERTAIN IMPORTANT SIMILARITIES; THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE ARTICLES AND CODE OF REGULATIONS OF CFC, THE ARTICLES, CODE OF
REGULATIONS AND BYLAWS OF FFOH AND APPLICABLE LAWS AND REGULATIONS.
Authorized Capital Stock
FFOH's authorized capital stock consists of 7,000,000 shares of FFOH
Common Stock, of which _______________ shares were outstanding as of the Record
Date, and 500,000 shares of FFOH Preferred Stock, none of which are issued and
outstanding. The FFOH Board is currently seeking shareholder approval of an
amendment to FFOH's Articles to increase the number of authorized shares of FFOH
Common Stock and FFOH Preferred Stock to 15,000,000 and 5,000,000, respectively.
The FFOH Preferred Stock is issuable in series, each series having such rights
and preferences as FFOH's Board may fix and determine.
CFC's authorized capital stock consists of 5,000,000 shares of CFC
Common Stock, of which _______________ shares were outstanding as of the Record
Date, and 2,000,000 shares of preferred stock, par value $1.00 per share ("CFC
Preferred Stock"), of which no shares are issued and outstanding. The CFC
Preferred Stock is issuable in series, each series having such rights and
preferences as CFC's Board may fix and determine.
81
Issuance of Capital Stock
Under the OGCL, FFOH and CFC may issue shares of their capital stock
and rights or options for the purchase of shares of their capital stock on such
terms and for such consideration as may be determined by the respective Boards.
Neither the OGCL nor FFOH's Articles, Code of Regulations and Bylaws or CFC's
Articles and Code of Regulations require shareholder approval of any such
actions. However, the Bylaws of the National Association of Securities Dealers,
Inc. ("NASD") generally require corporations, such as FFOH and CFC, with
securities which are quoted on the Nasdaq Stock Market's National Market to
obtain shareholder approval of certain issuances of common stock and most stock
compensation plans for directors, officers and key employees of the corporation.
Shareholder approval of stock-related compensation plans also may be sought in
certain instances in order to qualify such plans for favorable federal income
tax and securities law treatment under current laws and regulations.
Voting Rights
Except as set forth in FFOH's and CFC's respective Articles, holders of
both FFOH Common Stock and CFC Common Stock are entitled to one vote per share
on all matters properly presented at meetings of shareholders. Neither FFOH's
Articles nor CFC's Articles permit shareholders to cumulate their votes in an
election of directors.
For additional information relating to voting rights, see "-
Limitations on Acquisitions of Voting Stock and Voting Rights" and "Business
Combinations with Interested Shareholders" below.
Payment of Dividends
Both FFOH and CFC can pay dividends on their outstanding shares in
accordance with the terms of the OGCL. The OGCL generally provides that, subject
to any restrictions in the corporation's articles of incorporation, a
corporation may make distributions to its shareholders, provided that the
dividend does not exceed the combination of the surplus of the corporation
(defined generally as the excess of a corporation's assets plus stated capital
over its liabilities); and provided further that no dividend or distribution
shall be paid to the holders of shares of any class in violation of the rights
of the holders of shares of any other class, or when the corporation is
insolvent or there is reasonable ground to believe that by such payment the
corporation would be rendered insolvent.
Board of Directors
The Articles of FFOH require that the FFOH Board consist of not less
than five nor more than 15 members and be divided into two classes if the FFOH
Board consists of six, seven or eight members, or into three classes if the FFOH
Board consists of nine or more members. Each class must consist of no fewer than
three members and the members of
82
each class shall be elected for a term of two or three years and until their
successors are elected and qualified. The Articles of CFC provide that the CFC
Board shall consist of not less than six nor more than 15 members and that the
CFC Board be divided into three classes as nearly equal in number as possible
and that the members of each class shall be elected for a term of three years
and until their successors are elected and qualified, with one class being
elected annually.
Under the Articles of both FFOH and CFC, any vacancies in the
respective Boards may be filled by the affirmative vote of two-thirds of the
remaining directors, whether or not a quorum. Persons elected to fill vacancies
on FFOH's or CFC's Board may serve until the respective annual meeting of
shareholders at which the term of the class to which the director has been
elected expires.
FFOH's Articles provide that any director may be removed without cause
at a duly constituted meeting of shareholders called expressly for that purpose
upon the vote of the holders of at least 75% of the total votes eligible to be
cast by shareholders, and with cause by the affirmative vote of a majority of
the total votes eligible to be cast by shareholders. Cause for removal shall
exist only if the director whose removal is proposed has been either declared
incompetent by order of a court, convicted of a felony or an offense punishable
by imprisonment for a term of more than one year by a court of competent
jurisdiction, or deemed liable by a court of competent jurisdiction for gross
negligence or misconduct in the performance of such directors' duties to FFOH.
Under the Articles of CFC, any director may be removed with or without cause by
the holders of at least 80% of the outstanding voting shares entitled to vote
generally in an election of directors at a meeting of shareholders called for
that purpose.
Limitations on Liability
The Articles of FFOH provide that a director of FFOH shall not be
personally liable for monetary damages for any action taken, or for any failure
to take any action, except to the extent that by law a director's liability for
monetary damages may not be limited. The Articles of CFC do not contain a
provision limiting the personal liability of directors. Section 1701.59 of the
OGCL currently provides that directors generally will not be liable for any
action taken as a director, or any failure to take any action, unless (i) the
director has failed to perform the duties of the director's office in compliance
with said section (i.e., in good faith, with the care an ordinarily prudent
person in a like position would exercise under similar circumstances and in a
manner the director reasonably believes to be in the best interests of the
corporation) and (ii) the breach or failure to act is undertaken with deliberate
intent to cause injury to the corporation or undertaken with reckless disregard
for the best interests of the corporation. The foregoing limitation on the
liability of directors does not apply to certain actions set forth in Sections
1701.60 and 1701.95 of the OGCL.
83
Indemnification of Directors, Officers, Employees and Agents
The Articles of FFOH provide that FFOH shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed formal or informal action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of FFOH or any
predecessor of FFOH, or is or was serving at the request of FFOH or any
predecessor of FFOH as a director, officer, trustee, member, manager, employee
or agent of another corporation, partnership, limited liability company, joint
venture, trust or other enterprise, against expenses (including court costs and
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding to the fullest extent authorized by law. The Articles of CFC do not
contain a provision providing for indemnification for officers, directors,
employees or other related persons of CFC. Section 1701.13 of OGCL provides that
such indemnity shall be made only if (i) such person's conduct was in good
faith; (ii) such person acted in a manner he reasonably believed to be in or not
opposed to the corporation's best interests; and (iii) in the case of any
criminal proceeding, the person had no reasonable cause to believe that such
person's conduct was unlawful, with certain exceptions in the case of actions by
or in the right of the corporation.
Special Meetings of Shareholders
The Articles of both FFOH and CFC contain a provision pursuant to which
special meetings of shareholders only may be called by the Chairman, President
(or, in the case of FFOH, in the President's absence, death or disability, a
Vice-President authorized to exercise the authority of the President), the Board
of Directors by action at a meeting or a majority of the Board of Directors
acting without a meeting or by the Chairman, President or Secretary upon the
written request of the holders of 50% or more of the outstanding capital stock
entitled to vote at a meeting.
Shareholder Nominations and Proposals
The Articles of FFOH provide that all nominations for election to the
FFOH Board and proposals for any new business, other than those made by the FFOH
Board or a committee thereof, shall be made by a shareholder who has complied
with the notice provisions in the Articles. Written notice of a shareholder
nomination or written notice of a shareholder proposal must be communicated to
the attention of the Secretary and either delivered to, or mailed and received
at, the principal executive offices of FFOH not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting. Each such notice
given by a shareholder with respect to nominations for the election of directors
shall set forth (i) the name, age, business address and, if known, residence
address of each nominee proposed in such notice; (ii) the principal occupation
or employment of each such nominee; and (iii) the number of shares of stock of
FFOH which are beneficially
84
owned by each such nominee. Furthermore, any notice given by a shareholder to
the Secretary with respect to business proposals to be brought before a meeting
shall set forth in writing as to each matter: (i) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting; (ii) the name and address, as they appear on
FFOH's books, of the shareholder proposing such business; (iii) the class and
number of shares of FFOH which are beneficially owned by the shareholder; and
(iv) any material interest of the shareholder in such business.
The Code of Regulations of CFC provides that nominations for election
as directors at any meeting of shareholders may be made (a) by, or at the
direction of, a majority of the CFC Board, or (b) by any shareholder of record
entitled to vote at such meeting. Nominations, other than those made by, or at
the direction of, the CFC Board, may only be made pursuant to timely notice in
writing to the Secretary of CFC. To be timely, a shareholder's notice shall be
delivered to, or mailed and received by the Secretary, for an annual meeting,
not less than 60 days nor more than 90 days in advance of the anniversary date
(month and day) of the previous year's annual meeting, and for a special
meeting, not less than 60 days nor more than 90 days in advance of the date
(month and day) of the special meeting, regardless of any postponement or
adjournments of that meeting to a later date. Such shareholder notice shall set
forth (a) as to each person whom the shareholder proposes to nominate for
election as a director (i) the name, age, business address and residential
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of CFC's stock which are
beneficially owned by such person on the date of such shareholder notice and
(iv) any other information relating to such person that would be required to be
disclosed on Schedule 13D pursuant to Regulation 13D-G under the Exchange Act;
and (b) as to the shareholder giving the notice (i) the name and address, as
they appear on the CFC's books, of such shareholder and the name and principal
business or residential address of any other beneficial shareholders known by
such shareholder to support such nominee(s) and (ii) the class and number of
shares of CFC's stock which are beneficially owned by such shareholder on the
date of such shareholder notice and the number of shares owned beneficially by
any other record or beneficial shareholders known by such shareholder to be
supporting such nominee(s) on the date of such shareholder notice. Any new
business to be conducted at the annual meeting of the shareholders shall be
stated in writing and filed with the Secretary of CFC on or before thirty (30)
days in advance of the anniversary date (month and day) of the previous year's
annual meeting, and all business so stated, proposed and filed shall, unless
prior action thereon is required by the CFC Board, be considered at the annual
meeting. Any shareholder may make any other proposal at the annual meeting and
the same may be discussed and considered, but unless stated in writing and filed
with the Secretary of CFC on or before thirty (30) days in advance of the
anniversary date (month and day) of the previous year's annual meeting, such
proposal may only be voted upon at a meeting held at least thirty (30) days
after the annual meeting at which it is presented.
85
Shareholder Action Without a Meeting
The Articles of FFOH provide that any action permitted to be taken by
the shareholders at a meeting may be taken without a meeting if a consent in
writing setting forth the action so taken shall be signed by all of the
shareholders entitled to vote.
The Articles of CFC specifically provide that shareholders may not take
action without a meeting and the power of shareholders to consent in writing to
action without a meeting is denied.
Shareholder's Right to Examine Books and Records
Neither FFOH's Articles nor Code of Regulations addresses a
shareholder's right to examine books and records of FFOH. Nevertheless, the OGCL
provides that a shareholder may inspect books and records for any reasonable and
proper purpose upon written demand stating the purpose of the inspection.
CFC's Code of Regulations provides a shareholder with the right to
examine books and records of CFC upon written demand and a proper purpose.
Limitations on Acquisitions of Voting Stock and Voting Rights
The Articles of FFOH provide that for a period of five years from March
4, 1996, no person shall directly or indirectly offer to acquire or acquire the
beneficial ownership of (i) more than 10% of the issued and outstanding shares
of any class of an equity security of FFOH, or (ii) any securities convertible
into, or exercisable for, any equity securities of FFOH if, assuming conversion
or exercise by such person of all securities of which such person is the
beneficial owner which are convertible into, or exercisable for, such equity
securities (but of no securities convertible into, or exercisable for, such
equity securities of which such person is not the beneficial owner), such person
would be the beneficial owner of more than 10% of any class of an equity
security of FFOH. The term "person" is broadly defined in the Articles to
prevent circumvention of this restriction.
The foregoing restrictions do not apply to (i) any offer with a view
toward public resale made exclusively to FFOH by underwriters or a selling group
acting on its behalf, (ii) any employee benefit plan established by FFOH or
Fidelity Federal, and (iii) any other offer or acquisition approved in advance
by the affirmative vote of two-thirds of FFOH's Board. In the event that shares
are acquired in violation of this restriction, all shares beneficially owned by
any person in excess of 10% shall not be counted as shares entitled to vote and
shall not be voted by any person or counted as voting shares in connection with
any matters submitted to shareholders for a vote.
86
The Articles of CFC contain a similar provision. However, pursuant to
its terms, the five year period will expire effective August 6, 1996 and,
consequently, after such date such provision will no longer be applicable.
Mergers, Consolidations and Sales of Assets
The OGCL requires the approval of the board of directors and, unless
the articles of incorporation provide for a different vote (which cannot be less
than a majority), the affirmative vote of the holders of two-thirds of the
outstanding stock entitled to vote thereon for mergers or consolidations, and
for sales, leases or exchanges of all or substantially all of a company's
assets. The OGCL permits a company to merge with another corporation without
obtaining the approval of shareholders if the company is the surviving
corporation of such merger and if: (i) the articles of incorporation or code of
regulations of the company do not require the company to obtain shareholder
approval; (ii) the terms of the merger do not conflict with the company's
articles of incorporation; (iii) the company's articles of incorporation will
not differ from its articles of incorporation before the merger; and (iv) the
number of voting shares issuable as a result of the merger will not exceed
one-sixth of the shares of the company's common stock outstanding immediately
prior to the merger.
FFOH's Articles do not provide for a lesser vote in the case of
mergers, consolidations or sales of assets. CFC's Articles, however, do provide
that mergers, consolidations and sales of assets may be approved by a majority
of the outstanding shares of stock (as opposed to two-thirds).
Business Combinations with Interested Shareholders
The Articles of FFOH contain certain provisions which require the
holders of at least 80% of FFOH's outstanding shares of voting stock and a
majority of such shares not including shares deemed beneficially owned by a
"related person" (generally defined to include any shareholder owning more than
10% of FFOH's outstanding voting stock) to approve certain "business
combinations," as defined therein. FFOH's Articles require the approval of the
shareholders in accordance with the increased voting requirements in connection
with any such transactions, except in cases where the proposed transaction has
been approved in advance by at least two-thirds of the Continuing Directors
(generally, those members of the FFOH Board who are not affiliated with the
related person and were directors before the related person became a related
person). These provisions of FFOH's Articles apply to any "business
combination," which generally is defined to include (i) any merger or
consolidation of FFOH with or into a related person; (ii) any sale, lease,
exchange, mortgage, transfer or other disposition of all or a substantial part
of the assets of FFOH or of a subsidiary to a related person (the term
"substantial part" is defined to include more than 25% of the FFOH's total
assets); (iii) any merger or consolidation of a related person with or into FFOH
or a subsidiary; (iv) any sale, lease, exchange, mortgage, transfer or other
disposition of all or any substantial part of the assets of a related person
87
to FFOH or a subsidiary; (v) the issuance of any securities of FFOH or a
subsidiary to a related person; (vi) the acquisition by FFOH or a subsidiary of
any securities of a related person; (vii) any reclassification of FFOH Common
Stock, or any recapitalization involving the FFOH Common Stock; and (viii) any
agreement, contract or other arrangement providing for any of the foregoing
transactions.
The Articles of CFC also contain certain provisions which require the
holders of at least 80% of CFC's outstanding shares of voting stock to approve
certain transactions with a "related person" (generally defined to include any
shareholder owning more than 5% of the outstanding voting stock). CFC's Articles
require the approval of the shareholders in accordance with the increased voting
requirements in connection with any such transactions, except in certain
circumstances such as where the proposed transaction has been approved in
advance by at least two-thirds of the CFC Board. These provisions apply to (i)
the purchase by CFC of any of its shares from any related person who owned such
shares for less than two years; (ii) any merger or consolidation of CFC with or
into a related person; (iii) any sale, lease, exchange, transfer or other
disposition of all or a substantial part of the assets of CFC or a subsidiary of
CFC to or with any related person; (iv) the purchase by CFC from a related
person of any assets or securities having an aggregate fair market value in
excess of $1.0 million; (v) the issuance or transfer of any securities of CFC to
any related person for cash (except in connection with an employee benefit plan
of CFC or a subsidiary thereof); (vi) the adoption of any plan or proposal for
the voluntary dissolution, liquidation, spin-off or split-up of any kind of CFC
or a subsidiary, or a recapitalization or reclassification of any securities of
CFC, proposed by or on behalf of any related person; or (vii) any other material
transaction involving CFC or a subsidiary of CFC with, or proposed by or on
behalf of, any related person.
In addition, Ohio law generally provides that an "interested
shareholder" (generally defined to include any shareholder owning more than 10%
of a company's outstanding voting stock) may not engage in a business
combination and certain other specified transactions with the company for a
period of three years following the date he became an interested shareholder
unless the business combination or the transaction by which the interested
shareholder became an interested shareholder was approved prior to such date by
the company's Board of Directors. If such Board approval is not obtained,
following the expiration of this three-year period, any business combination
with the interested shareholder must be approved by a two-thirds vote of
disinterested shareholders or meet certain fair price and other procedural
requirements.
Amendment of Governing Instruments
The Articles of FFOH generally provide that they may be amended by the
affirmative vote of at least a majority of the voting power of FFOH, except that
any amendment to Articles IV (number of directors), VII (indemnification), X
(meetings of shareholders, director nominations and shareholder proposals), XI
(directors), XII (removal of directors), XIII (duties of directors and
limitation of liability), XIV (restrictions on share purchases),
88
XV (business combinations), XVI (amendments to the Code of Regulations) and XVII
(amendments to the Articles) must be approved by the affirmative vote of the
holders of not less than 75% of the voting power of FFOH entitled to vote
thereon. The Code of Regulations of FFOH may only be amended by a vote of not
less than two-thirds of the then outstanding voting power of FFOH entitled to
vote at a meeting of shareholders called for that purpose and the Bylaws of FFOH
may only be amended by a majority vote of the FFOH Board.
The Articles of CFC may generally be amended upon the affirmative vote
of a majority of the voting power of CFC except that, the provisions of Articles
Eighth (the board of directors), Ninth (removal of directors), Tenth
(restrictions on share purchases), Eleventh (supermajority vote for
extraordinary transactions) and Thirteenth (amendments) may not be repealed,
replaced, altered, amended or rescinded in any respect unless the same is
approved by the affirmative vote of the holders of not less than 80 percent of
the voting power of CFC entitled to vote at a meeting of shareholders called for
that purpose. The Code of Regulations of CFC may be amended by the shareholders
by the vote of the holders of not less than a majority of the voting power
entitled to vote at a meeting of shareholders called for that purpose.
89
CERTAIN BENEFICIAL OWNERS OF FFOH COMMON STOCK
Security Ownership of Management
The following table sets forth information as to the FFOH Common Stock
beneficially owned as of March 31, 1996 by (i) each director and executive
officer of FFOH and (ii) all directors and executive officers of FFOH as a
group.
Shares Beneficially Owned
as of March 31, 1996(1)
--------------------------------
Name of Beneficial Owner Amount Percent
------------------------------------ --------------------- ---------
Directors:
Michael W. Jordan............................................................ 12,925(2) *
David A. Luecke.............................................................. 12,187(3) *
Constantine N. Papadakis..................................................... 10,000 *
John R. Reusing.............................................................. 87,944(4) 2.2%
Paul D. Staubach............................................................. 60,072(5) 1.5
Robert W. Zumbiel............................................................ 26,875(6) *
Executive Officers who are not Directors:
Lloyd L. Kuster ............................................................. 33,742(7) *
M. Robin Ruholl-Cassady...................................................... 19,893(8) *
Gregory G. Eagan............................................................. 2,000 *
Jerald L. Jones.............................................................. 36,682(9) *
Deborah A. Peter............................................................. 19,326(10) *
All directors and executive officers of
FFOH as a group (11 persons).................................................. 321,646(11) 7.8%
- ------------------------------------
* Represents less than 1.0% of the issued and outstanding FFOH Common
Stock.
(1) The number of shares beneficially owned by the persons set forth above
is determined under rules under Section 13 of the Exchange Act, and the
information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rules, an individual is considered to
beneficially own any shares of FFOH Common Stock if he or she directly
or indirectly has or shares: (i) voting power, which includes the power
to vote or to direct the voting of the shares, or (ii) investment
power, which includes the power to dispose or direct the disposition of
the shares. Unless otherwise indicated, an individual has sole voting
power and sole investment power with respect to the indicated shares.
(2) Includes 8,925 shares owned jointly with Mr. Jordan's wife and 4,000
shares held in Mr. Jordan's Individual Retirement Account ("IRA").
90
(3) Includes 11,687 shares owned jointly with Mr. Luecke's wife and 500
shares of Mr. Luecke's daughter for which Mr. Luecke is custodian.
(4) Includes 46,352 shares owned jointly with Mr. Reusing's wife, 337
shares owned by Mr. Reusing's wife, which shares may be deemed to be
owned by Mr. Reusing, 337 shares held as custodian for Mr. Reusing's
son, 2,576 shares which were awarded to Mr. Reusing pursuant to FFOH's
Management Recognition Plan (and which vest at the rate of 20% per
year), options to purchase 21,375 shares pursuant to FFOH's 1992 Stock
Incentive Plan, 9,267 shares held by FFOH's Employee Stock Ownership
Plan ("ESOP") for the account of Mr. Reusing and 7,700 shares held by
FFOH's 401(k) Retirement Plan.
(5) Includes 36,307 shares owned jointly with Mr. Staubach's wife, 1,546
shares which were awarded to Mr. Staubach pursuant to FFOH's Management
Recognition Plan (and which vest at the rate of 20% per year), options
to purchase 13,500 shares pursuant to FFOH's 1992 Stock Incentive Plan,
4,979 shares held by FFOH's ESOP for the account of Mr. Staubach, 3,090
shares held by FFOH's 401(k) Retirement Plan, and 650 shares held in
trust for Mr. Staubach's children, for which Mr.
Staubach is custodian.
(6) All of such shares are owned jointly with Mr. Zumbiel's wife.
(7) Includes 1,546 shares which were awarded to Mr. Kuster pursuant to
FFOH's Management Recognition Plan (and which vest at the rate of 20%
per year), options to purchase 3,038 shares pursuant to FFOH's 1992
Stock Incentive Plan, 4,563 shares held by FFOH's ESOP for the account
of Mr. Kuster and 2,550 shares held by FFOH's 401(k) Retirement Plan.
(8) Includes options to purchase 10,687 shares pursuant to FFOH's 1992
Stock Incentive Plan, 3,479 shares held by FFOH's ESOP for the account
of Ms. Ruholl-Cassady, and 2,352 shares held by FFOH's 401(k)
Retirement Plan.
(9) Includes 25 shares for Mr. Jones' grandson for which Mr. Jones is
custodian, options to purchase 2,250 shares pursuant to FFOH's 1992
Stock Incentive Plan, 4,059 shares held by FFOH's ESOP for the account
of Mr. Jones, and 3,500 shares held by FFOH's 401(k) Retirement Plan.
(10) Includes options to purchase 7,578 shares pursuant to FFOH's 1992 Stock
Incentive Plan, 3,159 shares held by FFOH's ESOP for the account of Ms.
Peter, and 2,400 shares held by the FFOH's 401(k) Retirement Plan.
(11) Includes in the case of all directors and executive officers of FFOH as
a group, options to purchase 58,428 shares granted pursuant to FFOH's
1992 Stock Incentive Plan, 5,668 shares which were awarded to certain
officers of FFOH pursuant to
91
FFOH's Management Recognition Plan, 21,592 shares held for the
account of participating executive officers in FFOH's 401(k)
Retirement Plan and 29,506 shares which are held by the trust
established pursuant to FFOH's ESOP, which have been allocated
to the accounts of participating officers.
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to the FFOH Common Stock
beneficially owned by each person or entity, including any "group" as that term
is used in Section 13(d)(3) of the Exchange Act, who or which was known by FFOH
to be the beneficial owner of 5% or more of the outstanding FFOH Common Stock as
of March 31, 1996.
Shares Beneficially Owned
as of March 31, 1996
-----------------------------------------
Name and Address of
Beneficial Owner Amount Percent
- ------------------------------------------------------------ ------------------- -------------------
FFOH Employee Stock Ownership 329,854(1) 8.1%
Plan Trust
4555 Montgomery Road
Cincinnati, Ohio 45212
Jeffrey S. Halis, et al. 406,400 9.9
500 Park Avenue, Fifth Floor
New York, New York 10022
- ------------------------
(1) The FFOH Employee Stock Ownership Plan Trust ("Trust") was established
pursuant to the FFOH ESOP by an agreement between FFOH and the six
directors of FFOH, who act as trustees of the ESOP ("Trustees"). As of
March 31, 1996, 262,741 shares held in the Trust were unallocated and
67,113 shares held in the Trust had been allocated to the accounts of
participating employees. Under the terms of the ESOP, the Trustees must
vote all allocated shares held in the ESOP in accordance with the
instructions of the participating employees, and unallocated shares and
allocated shares for which employees do not give instructions will be
voted in the same ratio on any matter as to those shares for which
instructions are given.
92
CERTAIN BENEFICIAL OWNERS OF CFC COMMON STOCK
Security Ownership of Management
The following table sets forth information as to the CFC Common Stock
beneficially owned as of March 31, 1996 by (i) each director and executive
officer of CFC and (ii) all directors and executive officers of CFC as a group.
Shares Beneficially Owned
as of March 31, 1996(1)
------------------------------------
Name of Beneficial Owner Amount Percent
------------------------------------ ------------------------ ----------
Directors:
Donald H. Rolf, Jr........................................................ 59,000(2)(11) 8.16%
David C. Greis............................................................ 45,565(3)(11) 6.37
Frederick A. Tobergte..................................................... 18,660(4) 2.64
Theodore G. Hagen......................................................... 11,345(5) 1.60
Catherine del Campo Hartman............................................... 1,000(6) *
Joseph D. Hughes.......................................................... 18,160(7) 2.57
S. Patrick Raffel......................................................... 1,600(6)(8) *
Thomas N. Spaeth.......................................................... 3,135(6)(9) *
Lloyd C. Sullivan......................................................... 7,545(10) 1.07
Executive Officers who are not Directors:
Theresa M. Barlow......................................................... 12,025(11)(12) 1.69
Carolyn R. Watt........................................................... 1,742(11)(13) *
All directors and executive officers of
CFC as a group (12 persons)................................................ 179,777(5)(6)(11)(14) 24.32%
- ------------------------------------
* Represents less than 1.0% of the issued and outstanding CFC Common
Stock.
(1) The number of shares beneficially owned by the persons set forth above
is determined under rules under Section 13 of the Exchange Act, and the
information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rules, an individual is considered to
beneficially own any shares of CFC Common Stock if he or she directly
or indirectly has or shares: (i) voting power, which includes the power
to vote or to direct the voting of the shares, or (ii) investment
power, which includes the power to dispose or direct the disposition of
the shares. Unless otherwise indicated, an individual has sole voting
power and sole investment power with respect to the indicated shares.
(2) Includes 14,559 shares held through the People's Savings and Investment
Plan Trust (the "Savings Plan Trust") and 731 shares owned by his IRA
account, for which he has power to dispose or direct the disposition
and to vote or direct the voting. Does not include the remaining 23,292
shares held by the Savings Plan Trust, as to which Mr. Rolf is a
trustee and as such might be deemed to have shared power to vote or
direct the voting of such shares and as to which Mr. Rolf disclaims
beneficial
93
ownership. See "- Securities Ownership of Certain Beneficial Owners."
Does not include 2,821 shares owned by Mr. Rolf's spouse, as to which
Mr. Rolf disclaims beneficial ownership.
(3) Includes 13,768 shares held through the Savings Plan Trust and 6,081
shares owned by his IRA account, for which he has power to dispose or
direct the disposition and to vote or direct the voting. Does not
include 766 shares owned by Mr. Greis' spouse, as to which Mr. Greis
disclaims beneficial ownership.
(4) Includes 7,803 shares owned by his IRA account, for which he has power
to dispose or direct the disposition and to vote or direct the voting.
Does not include 313 shares owned by Mr. Tobergte's spouse, as to which
Mr. Tobergte disclaims beneficial ownership.
(5) Includes options to purchase 750 shares granted pursuant to the CFC
1991 Nonstatutory Stock Option Plan, which are exercisable within 60
days by Mr. Hagen, and 10,595 shares held indirectly in trust. Does not
include 750 shares owned by Mr. Hagen's wife in a trust, as to which
Mr. Hagen disclaims beneficial ownership.
(6) Includes options in each case to purchase 1,000 shares granted pursuant
to the CFC 1994 Non-employee Directors Stock Option Plan which are
exercisable within 60 days by Ms. Hartman, Mr. Raffel and Mr. Spaeth,
respectively.
(7) Includes 79 shares held through the Savings Plan Trust and 12,261
shares owned by his IRA account, for which he has the power to dispose
or direct the disposition and to vote or direct the voting.
(8) Includes 500 shares owned by his IRA account, for which he has power to
dispose or direct the disposition and to vote or direct the voting.
Does not include 500 shares owned by the IRA account of Mr. Raffel's
spouse, as to which Mr. Raffel disclaims beneficial ownership.
(9) Includes 1,091 shares owned by his IRA account, for which Mr. Spaeth
has power to dispose or direct the disposition and to vote or direct
the voting and 1,044 shares held through his 401(k) plan.
(10) Includes 4,545 shares owned by his IRA account, for which Mr. Sullivan
has power to dispose or direct the disposition and to vote or direct
the voting.
(11) Includes options to purchase 14,587, 6,937, 5,213, 769 and 27,506
shares granted pursuant to the CFC 1991 Incentive Stock Option Plan
which are exercisable within 60 days by Mr. Rolf, Mr. Greis, Ms.
Barlow, Ms. Watt and all directors and executive officers as a group,
respectively.
94
(12) Includes 4,318 shares held through the Savings Plan Trust. Does not
include 651 shares owned by Ms. Barlow's spouse, as to which Ms. Barlow
disclaims beneficial ownership.
(13) Includes 973 shares held through the Savings Plan Trust.
(14) Includes 3,640 unvested shares purchased by the People's Savings
Management Recognition Plan and allocated to accounts of individual
officers. Does not include any shares held in the Savings Plan Trust
allocated to accounts of employees who are not directors or executive
officers.
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to the CFC Common Stock
beneficially owned by each person or entity, including any "group" as that term
is used in Section 13(d)(3) of the Exchange Act, who or which was the beneficial
owner of 5% or more of the outstanding CFC Common Stock as of March 31, 1996.
Shares Beneficially Owned
as of March 31, 1996(1)
-----------------------------------------
Name and Address of
Beneficial Owner Amount Percent
- ------------------------------------------------------------ ------------------- -------------------
Donald H. Rolf, Jr. 59,000(1)(2) 8.16%
11100 Reading Road
Sharonville, Ohio 45241
Barbara Vorjohan 49,364(3) 6.97
6510 Apache Circle
Cincinnati, Ohio 45243
David C. Greis 45,565(4) 6.37
11100 Reading Road
Cincinnati, Ohio 45241
Berkshire Asset Management, Inc. 39,149(5) 5.53
Michael H. Cook
Suite 510
First Eastern Bank Building
11 West Market Street
Wilkes-Barre, Pennsylvania 18701
(Footnotes on following page)
95
- -----------------
(1) Donald H. Rolf, Jr. is one of the trustees of the Savings Plan Trust
and as such might be deemed to share the power to vote the shares held
in the Savings Plan Trust with the participants to whose accounts the
shares are allocated. An aggregate of 37,851 shares is held by the
Savings Plan Trust, which constituted approximately 5.35% of the
outstanding shares of CFC Common Stock at March 31, 1996. Mr. Rolf
disclaims beneficial ownership of the shares held by the Savings Plan
Trust, except as to the 14,559 shares held in his account in the
Savings Plan Trust and included in the number of shares listed above.
The trustees of the Savings Plan Trust further disclaim that they are a
"group" for the purposes of Section 13 of the Exchange Act.
(2) Includes 731 shares owned by his IRA account, for which he has power to
dispose or direct the disposition and to vote or direct the voting, and
options to purchase 14,587 shares which are exercisable within 60 days
by Mr. Rolf. Does not include 2,821 shares owned by Mr. Rolf's spouse,
as to which Mr. Rolf disclaims beneficial ownership.
(3) Includes 39,364 shares held in the Frank H. Vorjohan Revocable Trust,
dated August 18, 1995, of which Mrs. Vorjohan is the sole trustee with
the power to dispose or direct the disposition and to vote or direct
the voting.
(4) Includes 13,768 shares held through the Savings Plan Trust, 6,081
shares owned by his IRA account, for which he has power to dispose or
direct the disposition and to vote or direct the voting, and options to
purchase 6,937 shares which are exercisable within 60 days by Mr.
Greis. Does not include 766 shares owned by Mr. Greis' spouse, as to
which Mr. Greis disclaims beneficial ownership.
(5) Berkshire Asset Management, Inc. and Michael H. Cook, President of
Berkshire Asset Management, Inc. filed with the SEC Amendment No. 1 to
a Schedule 13D, dated February 3, 1993, pursuant to Section 13 of the
Exchange Act. As stated in the Schedule 13D, Berkshire Asset
Management, Inc. has sole power to dispose or direct the disposition
of, and has sole power to vote or direct the voting of, 7,000 shares,
and has shared power to dispose of or direct the disposition of, and
shared power to vote or direct the voting of 32,149 shares. Michael H.
Cook has sole power to dispose or direct the disposition of, and has
sole power to vote or direct voting of, 7,000 shares and has shared
power to dispose of, or direct the disposition of, and shared power to
vote or direct voting of, 32,149 shares; Berkshire Asset Management,
Inc. is a Pennsylvania corporation and an investment adviser registered
as such under the Investment Advisers Act of 1940; and Michael H. Cook
is the President, Chief Executive Officer and majority stockholder of
Berkshire Asset Management, Inc.
96
LEGAL OPINION
The validity of the FFOH Common Stock offered hereby will be passed
upon for FFOH by Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C.
EXPERTS
The consolidated financial statements of FFOH as of December 31, 1995
and 1994, and for each of the years in the three-year period ended December 31,
1995 incorporated by reference herein and elsewhere in the Registration
Statement, have been incorporated by reference herein and elsewhere in the
Registration Statement in reliance upon the report of Grant Thornton LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of CFC as of June 30, 1995 and
1994, and for each of the years in the three-year period ended June 30, 1995
incorporated by reference herein and elsewhere in the Registration Statement,
have been incorporated by reference herein and elsewhere in the Registration
Statement in reliance upon the report of Clark, Schaeffer, Hackett & Co.,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
PROPOSALS FOR THE 1996
ANNUAL MEETINGS
In the case of CFC, the deadline set forth in Rule 14a-8 under the
Exchange Act for the submission of proposals by shareholders for inclusion in
the proxy statement and form of proxy to be used by CFC in connection with its
1996 annual meeting of shareholders has passed. In the case of FFOH,
the deadline set forth in Rule 14a-8 under the Exchange Act for the submission
of proposals by shareholders for inclusion in the proxy statement and form of
proxy to be used by FFOH in connection with its 1997 annual meeting of
shareholders is December 16, 1996.
97
ANNEX I
AMENDED AND RESTATED
AGREEMENT OF MERGER
among
FIDELITY FINANCIAL OF OHIO, INC.,
FIDELITY ACQUISITION CORPORATION
and
CIRCLE FINANCIAL CORPORATION
dated as of June 13, 1996
AMENDED AND RESTATED
AGREEMENT OF MERGER
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS............................................................................. 2
ARTICLE II THE MERGER AND THE BANK MERGER.......................................................... 7
2.1 The Merger............................................................................. 7
2.2 Effective Time; Closing................................................................. 7
2.3 Conversion of Shares ................................................................... 8
2.4 Election and Exchange Procedures....................................................... 9
2.5 No Fractional Shares................................................................... 13
2.6 Stock Options.......................................................................... 13
2.7 Withholding Rights..................................................................... 14
2.8 Dissenting Shares...................................................................... 14
2.9 Anti-Dilution Provisions............................................................... 14
2.10 Additional Actions..................................................................... 15
2.11 The Bank Merger........................................................................ 15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................ 16
3.1 Capital Structure........................................................................ 16
3.2 Organization, Standing and Authority of the Company...................................... 16
3.3 Ownership of the Company Subsidiaries.................................................... 16
3.4 Organization, Standing and Authority of the
Company Subsidiaries................................................................... 17
3.5 Authorized and Effective Agreement....................................................... 17
3.6 Securities Documents and Regulatory Reports.............................................. 19
3.7 Financial Statements..................................................................... 19
3.8 Material Adverse Change.................................................................. 20
3.9 Environmental Matters.................................................................... 20
3.10 Allowance for Loan Losses and Real Estate Owned.......................................... 21
3.11 Tax Matters.............................................................................. 21
3.12 Legal Proceedings........................................................................ 22
3.13 Compliance with Laws..................................................................... 22
3.14 Deposit Insurance and Other Regulatory Matters........................................... 23
3.15 Certain Information...................................................................... 24
3.16 Employee Benefit Plans................................................................... 24
3.17 Certain Contracts........................................................................ 25
3.18 Brokers and Finders...................................................................... 26
i
3.19 Insurance................................................................................ 26
3.20 Properties............................................................................... 27
3.21 Labor.................................................................................... 27
3.22 Transactions with Affiliated Persons and Affiliates...................................... 28
3.23 Required Vote............................................................................ 28
3.24 Disclosures.............................................................................. 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
AND THE ACQUISITION CORPORATION.......................................................... 29
4.1 Capital Structure of the Acquiror........................................................ 29
4.2 Organization, Standing and Authority of the Acquiror..................................... 29
4.3 Ownership of the Acquisition Corporation
and the Bank............................................................................ 29
4.4 Organization, Standing and Authority of the Bank......................................... 30
4.5 Authorized and Effective Agreement....................................................... 30
4.6 Securities Documents and Regulatory Reports.............................................. 32
4.7 Financial Statements..................................................................... 32
4.8 Material Adverse Change.................................................................. 33
4.9 Environmental Matters.................................................................... 33
4.10 Allowance for Loan Losses and Real Estate Owned.......................................... 34
4.11 Tax Matters.............................................................................. 34
4.12 Legal Proceedings........................................................................ 35
4.13 Compliance with Laws..................................................................... 36
4.14 Deposit Insurance and Other Regulatory Matters........................................... 36
4.15 Certain Information...................................................................... 37
4.16 Employee Benefit Plans................................................................... 37
4.17 Certain Contracts......................................................................... 39
4.18 Brokers and Finders...................................................................... 40
4.19 Insurance................................................................................ 40
4.20 Properties............................................................................... 40
4.21 Labor.................................................................................... 41
4.22 Transactions with Affiliated Persons and Affiliates ..................................... 41
4.23 Required Vote............................................................................ 41
4.24 Disclosures.............................................................................. 42
4.25 Organization, Standing and Authority of the Acquisition
Corporation................................................................................42
ARTICLE V COVENANTS................................................................................ 42
5.1 Reasonable Best Efforts.................................................................. 42
5.2 Shareholder Meetings..................................................................... 42
5.3 Regulatory Matters....................................................................... 43
5.4 Investigation and Confidentiality........................................................ 44
5.5 Press Releases........................................................................... 45
ii
5.6 Business of the Parties.................................................................. 45
5.7 Current Information...................................................................... 49
5.8 Indemnification; Insurance............................................................... 50
5.9 Directors, Officers and Employees........................................................ 51
5.10 Certain Policies; Integration............................................................ 52
5.11 Restrictions on Resale................................................................... 53
5.12 Disclosure Supplements................................................................... 53
5.13 Failure to Fulfill Conditions............................................................ 53
ARTICLE VI CONDITIONS PRECEDENT..................................................................... 54
6.1 Conditions Precedent - The Acquiror, the Acquisition
Corporation and the Company............................................................ 54
6.2 Conditions Precedent - The Company....................................................... 55
6.3 Conditions Precedent - The Acquiror and
the Acquisition Corporation.............................................................. 56
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT........................................................ 58
7.1 Termination.............................................................................. 58
7.2 Effect of Termination.................................................................... 59
7.3 Survival of Representations, Warranties
and Covenants.......................................................................... 59
7.4 Waiver................................................................................... 59
7.5 Amendment or Supplement.................................................................. 60
ARTICLE VIII MISCELLANEOUS.................................................................................... 60
8.1 Expenses................................................................................. 60
8.2 Entire Agreement......................................................................... 60
8.3 No Assignment............................................................................. 61
8.4 Notices.................................................................................. 61
8.5 Alternative Structure.................................................................... 62
8.6 Interpretation........................................................................... 62
8.7 Counterparts............................................................................. 62
8.8 Governing Law............................................................................ 62
iii
Exhibit A Form of Amended and Restated Merger Agreement
between Fidelity Federal Savings
Bank and People's Savings Association
Exhibit B Form of Company Stock Option Agreement
Exhibit C Form of Company Stockholder Agreement
Exhibit D Form of Acquiror Stock Option Agreement
Exhibit E Form of Acquiror Stockholder Agreement
Exhibit F Form of Company Affiliate Letter
Exhibit G Matters to be covered by Opinion of Counsel to the Acquiror
Exhibit H Matters to be covered by Opinion of Counsel to the Company
iv
AMENDED AND RESTATED AGREEMENT OF MERGER
Amended and Restated Agreement of Merger (the "Agreement"), dated as of
June 3, 1996, by and among Fidelity Financial of Ohio, Inc. (the "Acquiror"), an
Ohio corporation, Fidelity Acquisition Corporation ("Acquisition Corporation"),
an Ohio corporation, and Circle Financial Corporation (the "Company"), an Ohio
corporation, which amends and restates the Agreement of Merger between the
Acquiror and the Company dated as of April 29, 1996 ("Initial Agreement").
W I T N E S S E T H:
WHEREAS, the Acquiror and the Company entered into the Initial
Agreement on April 29, 1996 and, pursuant to Section 8.5 thereof, subsequently
determined to modify the structure of the acquisition of the Company by
providing for the merger of the Company with and into Acquisition Corporation, a
wholly owned subsidiary of the Acquiror; and
WHEREAS, the Boards of Directors of the Acquiror, Acquisition
Corporation and the Company have determined that it is in the best interests of
their respective companies and their shareholders to consummate the business
combination transactions provided for herein, including the merger of the
Company with and into the Acquisition Corporation, subject to the terms and
conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Acquiror's willingness to
enter into the Initial Agreement, (i) the Company entered into a Stock Option
Agreement with the Acquiror (the "Company Stock Option Agreement"), in
substantially the form attached hereto as Exhibit B, pursuant to which the
Company granted to the Acquiror the option to purchase shares of Company Common
Stock (as defined herein) under certain circumstances and (ii) certain
stockholders of the Company entered into a Stockholder Agreement with the
Acquiror (the "Company Stockholder Agreement"), in substantially the form
attached hereto as Exhibit C, pursuant to which, among other things, such
stockholders agreed to vote their shares of Company Common Stock in favor of
this Agreement and the transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Company's willingness to
enter into the Initial Agreement, (i) the Acquiror entered into a Stock Option
Agreement with the Company (the "Acquiror Stock Option Agreement"), in
substantially the form attached hereto as Exhibit D, pursuant to which the
Acquiror granted to the Company the option to purchase shares of Acquiror Common
Stock (as defined herein) under certain circumstances and (ii) certain
stockholders of the Acquiror entered into a Stockholder Agreement with the
Company (the "Acquiror Stockholder Agreement"), in substantially the form
attached hereto as Exhibit E, pursuant to which, among other things, such
stockholders agreed to vote their shares of Acquiror Common Stock in favor of
this Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquiror Common Stock" shall mean the common stock, par value $.10 per
share, of the Acquiror.
"Acquiror Employee Plans" shall have the meaning set forth in Section
4.16(a) hereof.
"Acquiror Employee Stock Benefit Plans" shall mean the following
employee benefit plans of the Acquiror: 1992 Stock Incentive Plan, 1992
Directors' Stock Option Plan, Management Recognition Plan, Employee Stock
Ownership Plan, Fidelity Federal Savings Bank 401(k) Retirement Plan, 1996 Stock
Option Plan and 1996 Management Recognition Plan and Trust.
"Acquiror Financial Statements" shall mean (i) the statements of
financial condition (including related notes and schedules, if any) of the Bank
as of December 31, 1995, 1994 and 1993 and the statements of earnings,
stockholders' equity and cash flows (including related notes and schedules, if
any) of the Bank for each of the three years ended December 31, 1995, 1994 and
1993 as filed by the Bank in its Securities Documents, and (ii) the consolidated
statements of financial condition of the Acquiror (including related notes and
schedules, if any) and the consolidated statements of earnings, stockholders'
equity and cash flows (including related notes and schedules, if any) of the
Acquiror included in the Securities Documents filed by the Acquiror with respect
to the quarterly and annual periods ended subsequent to December 31, 1995.
"Acquiror Preferred Stock" shall mean the shares of serial preferred
stock, par value $.10 per share, of the Acquiror.
"Aggregate Cash Consideration" shall have the meaning set forth in
Section 2.3(c)(2)(i) hereof.
2
"Association" shall mean People's Savings Association, an
Ohio-chartered savings and loan association and a wholly-owned subsidiary of the
Company.
"Average Acquiror Share Price" shall have the meaning set forth in
Section 2.3(c)(2)(ii).
"Bank" shall mean Fidelity Federal Savings Bank, a federally-chartered
savings bank which upon the receipt of all requisite regulatory approvals and
the contribution to the Acquisition Corporation of all of the capital stock of
the Bank, will become a wholly-owned subsidiary of the Acquisition Corporation.
"Bank Merger" shall have the meaning set forth in Section 2.11 hereof.
"Bank Merger Agreement" shall have the meaning set forth in Section
2.11 hereof.
"Cash Election Shares" shall have the meaning set forth in Section
2.4(a) hereof.
"Certificate of Merger" shall have the meaning set forth in Section
2.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Company Common Stock" shall mean the common stock, par value $1.00 per
share, of the Company.
"Company Dissenting Shares" shall have the meaning set forth in Section
2.8(a) hereof.
"Company Employee Plans" shall have the meaning set forth in Section
3.16(a) hereof.
"Company Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of the Company as of June 30, 1995, 1994 and 1993 and the consolidated
statements of income, stockholders' equity and cash flows (including related
notes and schedules, if any) of the Company for each of the three years ended
June 30, 1995, 1994 and 1993 as filed by the Company in its Securities
Documents, and (ii) the consolidated statements of financial condition of the
Company (including related notes and schedules, if any) and the consolidated
statements of income, stockholders' equity and cash flows (including related
notes and schedules, if any) of the Company included in the Securities Documents
filed by the Company with respect to the quarterly and annual periods ended
subsequent to June 30, 1995.
3
"Company Preferred Stock" shall mean the shares of serial preferred
stock, par value $1.00 per share, of the Company.
"Department" shall mean the Ohio Department of Commerce, Division of
Financial Institutions or any successor thereto.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental
Entity or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any Governmental
Entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss.7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss.9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss.1101, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq; and all comparable
state and local laws, and (2) any common law (including without limitation
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Ratio" shall have the meaning set forth in Section
2.3(c)(1)(i) hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
4
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"Form S-4" shall mean the registration statement on Form S-4 (or on any
successor or other appropriate form) to be filed by the Acquiror in connection
with the issuance of shares of Acquiror Common Stock pursuant to the Merger,
including the Proxy Statement which forms a part thereof, as amended and
supplemented.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"HOLA" shall mean the Home Owners' Loan Act.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of the Company with and into the
Acquisition Corporation pursuant to the terms hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"No-Election Shares" shall have the meaning set forth in Section 2.4(a)
hereof.
"OGCL" shall mean the Ohio General Corporation Law.
"OTS" shall mean the Office of Thrift Supervision of the U.S.
Department of the Treasury and its predecessor, the Federal Home Loan Bank
Board, or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Per Share Cash Consideration" and "Per Share Stock Consideration"
shall have the meanings set forth in Section 2.3(c)(1) hereof.
"Previously Disclosed" shall mean disclosed (i) in a letter dated the
date hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) in a letter dated after
the date hereof from the disclosing party specifically referring to this
Agreement and describing in reasonable detail the matters contained therein and
delivered by the other party pursuant to Section 5.12 hereof.
5
"Proxy Statement" shall mean the joint prospectus/proxy statement
contained in the Form S-4, as amended or supplemented, and to be delivered to
shareholders of the Acquiror and the Company in connection with the solicitation
of their approval of this Agreement and the transactions contemplated hereby.
"Real Estate Owned" shall mean real estate acquired by foreclosure or
by deed-in- lieu of foreclosure, real estate in judgment and subject to
redemption and in-substance foreclosures under generally accepted accounting
principles.
"Reallocated Cash Shares" shall have the meaning set forth in Section
2.4(d)(i)(2).
"Reallocated Stock Shares" shall have the meaning set forth in Section
2.4(d)(ii)(2).
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests in the entity.
"SAIF" means the Savings Association Insurance Fund administered by the
FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated pursuant to such laws.
"SGFSC" means Spring Garden Financial Service Corp., an Ohio
corporation and a wholly-owned subsidiary of the Association.
"Stock Election Shares" shall have the meaning set forth in Section
2.4(a) hereof.
"Subsidiary" shall mean any corporation, bank, savings association,
partnership, joint venture or other organization more than 10% of the stock or
ownership interest of which is owned, directly or indirectly, by an entity.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
6
ARTICLE II
THE MERGER AND THE BANK MERGER
2.1 The Merger
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), the Company shall be merged
with and into the Acquisition Corporation (the "Merger") in accordance with the
applicable provisions of the OGCL. The Acquisition Corporation shall be the
surviving corporation (hereinafter sometimes called the "Surviving Corporation")
of the Merger, and shall continue its corporate existence under the laws of the
State of Ohio. The name of the Surviving Corporation shall continue to be
"Fidelity Acquisition Corporation" and the Surviving Corporation will continue
to operate as a wholly owned subsidiary of Fidelity Financial of Ohio, Inc. Upon
consummation of the Merger, the separate corporate existence of the Company
shall terminate.
(b) From and after the Effective Time, the Merger shall have the
effects set forth in Section 1701.82 of the OGCL.
(c) The Articles of Incorporation, Code of Regulations and Bylaws of
the Acquisition Corporation, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation, Code of Regulations and Bylaws of
the Surviving Corporation, respectively, until altered, amended or repealed in
accordance with their terms and applicable law.
(d) Upon consummation of the Merger, (i) the directors of the Acquiror
shall consist of (x) Donald H. Rolf, Jr., Joseph D. Hughes and Thomas N. Spaeth
(each of whom is presently a director of the Company; in the event of the death,
disability or other inability to serve of any one or more of them, the Company
and the Acquiror shall mutually agree upon another individual presently or at
such time serving as a director of the Company to replace such person in this
capacity), and (y) all six of the directors of the Acquiror immediately prior to
the Effective Time, (ii) the executive officers of the Acquiror shall be the
executive officers of the Acquiror immediately prior to the Effective Time,
except that Donald H. Rolf, Jr. shall be Chairman of the Board of the Acquiror
and Joseph D. Hughes shall be Executive Vice President of the Acquiror.
Directors and officers of the Acquiror shall serve for such terms as are
specified herein and in the Articles of Incorporation, Code of Regulations and
Bylaws of the Acquiror.
2.2 Effective Time; Closing
The Merger shall become effective upon the occurrence of the filing of
a certificate of merger (the "Certificate of Merger") with the Secretary of
State of the State of Ohio pursuant to the OGCL, unless a later date and time is
specified as the effective time in such Certificate of Merger (the "Effective
Time"). A closing (the "Closing") shall take place immediately prior to the
Effective Time at 10:00 a.m., Eastern Time, on or before the fifth business day
following the satisfaction or waiver, to the extent permitted hereunder, of the
7
conditions to the consummation of the Merger specified in Article VI of this
Agreement (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing), at the principal
executive offices of the Acquiror in Cincinnati, Ohio, or at such other place,
at such other time, or on such other date as the parties may mutually agree
upon. At the Closing, there shall be delivered to the Acquiror and the Company
the opinions, certificates and other documents required to be delivered under
Article VI hereof.
2.3 Conversion of Shares
At the Effective Time, by virtue of the Merger and without any action
on the part of a holder of shares of Company Common Stock:
(a) Each share of Acquiror Common Stock that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding and
shall be unchanged by the Merger.
(b) All shares of Company Common Stock owned by the Company (including
treasury shares) or the Acquiror or any of their respective wholly-owned
subsidiaries shall be cancelled and retired and shall not represent capital
stock of the Surviving Corporation and shall not be exchanged for shares of
Acquiror Common Stock, cash or other consideration.
(c) (1) Subject to paragraph (a) of Section 2.8 and Sections 2.5 and
2.9, each share of Company Common Stock issued and outstanding at the Effective
Time (other than shares to be cancelled in accordance with Section 2.3(b)) shall
be converted into, and shall be cancelled in exchange for, the right to receive,
at the election of the holder thereof,
(i) the number of shares of Acquiror Common Stock which is
equal to (the "Exchange Ratio") (A) if the Average Acquiror Share Price
is equal to or greater than $9.00 but equal to or less than $11.00, the
quotient determined by dividing (x) $38.00 by (y) the Average Acquiror
Share Price, (B) if the Average Acquiror Share Price is less than
$9.00, 4.22 shares or (C) if the Average Acquiror Share Price is
greater than $11.00, 3.45 shares (the "Per Share Stock Consideration"),
or
(ii) a cash amount equal to $38.00 per share of Company Common
Stock (the "Per Share Cash Consideration").
(2) For purposes of this Agreement:
(i) the "Aggregate Cash Consideration" shall amount to the
product of the number of shares of Company Common Stock (other than
Company Common Stock owned by the Company (including treasury shares)
or the Acquiror) outstanding at the Effective Time times .45 times
$38.00;
8
(ii) the "Average Acquiror Share Price" shall mean the average
of the closing bid and asked price per share of Acquiror Common Stock,
as reported on the Nasdaq Stock Market's National Market (as reported
by The Wall Street Journal or, if not reported thereby, another
authoritative source), for the 20 trading days ending on the date the
Acquiror and the Company receive all requisite regulatory approvals and
satisfy all applicable waiting periods; and
(d) Each share of common stock, par value $.01 per share, of the
Acquisition Corporation ("Acquisition Corporation Common Stock") that is issued
and outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall be unchanged by the Merger.
2.4 Election and Exchange Procedures
(a) The parties shall designate an exchange agent to act as agent (the
"Exchange Agent") for purposes of conducting the election procedure and the
exchange procedure as described in Sections 2.4 and 2.5. No later than seven
business days following the Effective Time, the Acquiror shall cause the
Exchange Agent to mail or make available to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding shares of Company Common Stock (i) a notice
and letter of transmittal (which shall specify that delivery shall be effected
and risk of loss and title to the certificates theretofore representing shares
of Company Common Stock shall pass only upon proper delivery of such
certificates to the Exchange Agent) advising such holder of the effectiveness of
the Merger and the procedure for surrendering to the Exchange Agent such
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding shares of Company Common Stock in exchange
for the consideration set forth in Section 2.3(c) hereof deliverable in respect
thereof pursuant to this Agreement and (ii) an election form in such form as the
Acquiror and the Company shall mutually agree ("Election Form"). Each Election
Form shall permit the holder (or in the case of nominee record holders, the
beneficial owner through proper instructions and documentation) (i) to elect to
receive Acquiror Common Stock with respect to all such holder's Company Common
Stock as hereinabove provided (the "Stock Election Shares"), (ii) to elect to
receive cash with respect to all such holder's Company Common Stock as
hereinabove provided (the "Cash Election Shares"), or (iii) to indicate that
such holder makes no such election with respect to such holder's shares of
Company Common Stock (the "No-Election Shares"). Any shares of Company Common
Stock with respect to which the holder thereof shall not, as of the Election
Deadline, have made such an election by submission to the Exchange Agent of an
effective, properly completed Election Form shall be deemed to be No-Election
Shares. Any Company Dissenting Shares shall be deemed to be Cash Election
Shares, and with respect to such shares the holders thereof shall in no event be
classified as Reallocated Stock Shares (as hereinafter defined).
(b) The term "Election Deadline," as used below, shall mean 5:00 p.m.,
Eastern Time, on the 20th business day following but not including the date of
mailing of the
9
Election Form or such other date as the Acquiror and the Company shall mutually
agree upon.
(c) Any election to receive Acquiror Common Stock or cash shall have
been properly made only if the Exchange Agent shall have actually received a
properly completed Election Form by the Election Deadline. An Election Form will
be properly completed only if accompanied by certificates representing all
shares of Company Common Stock covered thereby, subject to the provisions of
subsection (h) below of this Section 2.4. Any Election Form may be revoked or
changed by the person submitting such Election Form to the Exchange Agent by
written notice to the Exchange Agent only if such notice is actually received by
the Exchange Agent at or prior to the Election Deadline. The certificate or
certificates representing Company Common Stock relating to any revoked Election
Form shall be promptly returned without charge to the person submitting the
Election Form to the Exchange Agent. The Exchange Agent shall have reasonable
discretion to determine when any election, modification or revocation is
received and whether any such election, modification or revocation has been
properly made.
(d) Within ten business days after the Election Deadline, the Exchange
Agent shall effect the allocation among holders of Company Common Stock of
rights to receive Acquiror Common Stock or cash in the Merger in accordance with
the Election Forms as follows:
(i) If the number of Cash Election Shares times the Per Share
Cash Consideration is less than the Aggregate Cash Consideration, then:
(1) all Cash Election Shares (subject to Section
2.8(a) with respect to Company Dissenting Shares) will be
converted into the right to receive cash,
(2) the Exchange Agent will select first from among
the holders of No-Election Shares and then (if necessary) will
allocate among the holders of Stock Election Shares (by the
method of allocation described below), a sufficient number of
Stock Election Shares ("Reallocated Cash Shares") such that
the sum of the number of Cash Election Shares plus the number
of Reallocated Cash Shares times the Per Share Cash
Consideration equals the Aggregate Cash Consideration, and all
Reallocated Cash Shares will be converted into the right to
receive cash, and
(3) the No-Election Shares and Stock Election Shares
which are not Reallocated Cash Shares will be converted into
the right to receive Acquiror Common Stock.
(ii) If the number of Cash Election Shares times the Per Share
Cash Consideration is greater than the Aggregate Cash Consideration,
then:
10
(1) all Stock Election Shares and all No-Election
Shares will be converted into the right to receive Acquiror
Common Stock,
(2) the Exchange Agent will allocate among the
holders of Cash Election Shares (by the method of allocation
described below), a sufficient number of Cash Election Shares
(excluding any Company Dissenting Shares) ("Reallocated Stock
Shares") such that the number of remaining Cash Election
Shares (including Company Dissenting Shares) times the Per
Share Cash Consideration equals the Aggregate Cash
Consideration, and all Reallocated Stock Shares shall be
converted into the right to receive Acquiror Common Stock, and
(3) the Cash Election Shares (subject to Section
2.8(a) with respect to Company Dissenting Shares) which are
not Reallocated Stock Shares will be converted into the right
to receive cash.
(iii) If the number of Cash Election Shares times the Per
Share Cash Consideration is equal to the Aggregate Cash Consideration,
then subparagraphs (d)(i) and (ii) above shall not apply and all
No-Election Shares and all Stock Election Shares will be converted into
the right to receive Acquiror Common Stock.
(e) In the event that the Exchange Agent is required pursuant to
Section 2.4(d)(i)(2) to designate from among all Stock Election Shares the
Reallocated Cash Shares to receive cash, each holder of Stock Election Shares
shall be allocated a pro rata portion of the remainder of the total Reallocated
Cash Shares less the number of No Election Shares which are Reallocated Cash
Shares. In the event the Exchange Agent is required pursuant to Section
2.4(d)(ii)(2) to designate from among all holders of Cash Election Shares the
Reallocated Stock Shares to receive Acquiror Common Stock, each holder of Cash
Election Shares shall be allocated a pro rata portion of the total Reallocated
Stock Shares.
(f) At the Effective Time, the Acquiror shall issue to the Exchange
Agent the number of shares of Acquiror Common Stock issuable and the amount of
cash payable in the Merger (which shall be held by the Exchange Agent in trust
for the holders of Company Common Stock and invested only in deposit accounts
issued by the Exchange Agent (or an FDIC-insured affiliate of the Exchange
Agent), direct obligations of the U.S. Government or obligations issued or
guaranteed by an agency thereof which carry the full faith and credit of the
United States). Within 10 business days after the Election Deadline, the
Exchange Agent shall distribute Acquiror Common Stock and cash as provided
herein. The Exchange Agent shall not be entitled to vote or exercise any rights
of ownership with respect to the shares of Acquiror Common Stock held by it from
time to time hereunder, except that it shall receive and hold all dividends or
other distributions paid or distributed with respect to such shares for the
account of the persons entitled thereto.
11
(g) After the completion of the foregoing allocation, each holder of an
outstanding certificate or certificates which prior thereto represented shares
of Company Common Stock who surrenders such certificate or certificates to the
Exchange Agent will, upon acceptance thereof by the Exchange Agent, be entitled
to a certificate or certificates representing the number of full shares of
Acquiror Common Stock or the amount of cash into which the aggregate number of
shares of Company Common Stock previously represented by such certificate or
certificates surrendered shall have been converted pursuant to this Agreement
and, if such holder's shares of Company Common Stock have been converted into
Acquiror Common Stock, any other distribution theretofore paid with respect to
the Acquiror Common Stock issuable in the Merger, in each case without interest.
The Exchange Agent shall accept such certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. Each
outstanding certificate which prior to the Effective Time represented Company
Common Stock and which is not surrendered to the Exchange Agent in accordance
with the procedures provided for herein shall, except as otherwise herein
provided, until duly surrendered to the Exchange Agent be deemed to evidence
ownership of the number of shares of Acquiror Common Stock or the right to
receive the amount of cash into which such Acquiror Common Stock shall have been
converted. After the Effective Time, there shall be no further transfer on the
records of the Company of certificates representing shares of Company Common
Stock and if such certificates are presented to the Company for transfer, they
shall be cancelled against delivery of certificates for Acquiror Common Stock or
cash as hereinabove provided. No dividends which have been declared will be
remitted to any person entitled to receive shares of Acquiror Common Stock under
this Section 2.4 until such person surrenders the certificate or certificates
representing Company Common Stock, at which time such dividends shall be
remitted to such person, without interest.
(h) The Acquiror shall not be obligated to deliver cash and/or a
certificate or certificates representing shares of Acquiror Common Stock to
which a holder of Company Common Stock would otherwise be entitled as a result
of the Merger until such holder surrenders the certificate or certificates
representing the shares of Company Common Stock for exchange as provided in this
Section 2.4, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be required in each case by the
Acquiror. If any certificates evidencing shares of Acquiror Common Stock are to
be issued in a name other than that in which the certificate evidencing Company
Common Stock surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered shall be
properly endorsed or accompanied by an executed form of assignment separate from
the certificate and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange Agent any transfer or other tax
required by reason of the issuance of a certificate for shares of Acquiror
Common Stock in any name other than that of the registered holder of the
certificate surrendered or otherwise establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
12
(i) Any portion of the shares of Company Common Stock and cash
delivered to the Exchange Agent by the Acquiror pursuant to Section 2.4(f) that
remains unclaimed by the shareholders of the Company for six months after the
Effective Time (as well as any proceeds from any investment thereof) shall be
delivered by the Exchange Agent to the Acquiror. Any shareholders of the Company
who have not theretofore complied with Section 2.4(g) shall thereafter look only
to the Acquiror for the consideration deliverable in respect of each share of
Company Common Stock such shareholder holds as determined pursuant to this
Agreement without any interest thereon. If outstanding certificates for shares
of Company Common Stock are not surrendered or the payment for them is not
claimed prior to the date on which such shares of Acquiror Common Stock or cash
would otherwise escheat to or become the property of any governmental unit or
agency, the unclaimed items shall, to the extent permitted by abandoned property
and any other applicable law, become the property of the Acquiror (and to the
extent not in its possession shall be delivered to it), free and clear of all
claims or interest of any person previously entitled to such property. Neither
the Exchange Agent nor any party to this Agreement shall be liable to any holder
of stock represented by any certificate for any consideration paid to a public
official pursuant to applicable abandoned property, escheat or similar laws. The
Acquiror and the Exchange Agent shall be entitled to rely upon the stock
transfer books of the Company to establish the identity of those persons
entitled to receive consideration specified in this Agreement, which books shall
be conclusive with respect thereto. In the event of a dispute with respect to
ownership of stock represented by any certificate, the Acquiror and the Exchange
Agent shall be entitled to deposit any consideration represented thereby in
escrow with an independent third party and thereafter be relieved with respect
to any claims thereto.
2.5 No Fractional Shares
Notwithstanding any other provision of this Agreement, neither
certificates nor scrip for fractional shares of Acquiror Common Stock shall be
issued in the Merger. Each holder who otherwise would have been entitled to a
fraction of a share of Acquiror Common Stock shall receive in lieu thereof cash
(without interest) in an amount determined by multiplying the fractional share
interest to which such holder would otherwise be entitled by the Average
Acquiror Share Price. No such holder shall be entitled to dividends, voting
rights or any other rights in respect of any fractional share.
2.6 Stock Options
Immediately before the Effective Time, each option with respect to
Company Common Stock (a "Company Stock Option") that is outstanding and
exercisable at the Effective Time shall be cancelled and converted into the
right to receive from the Company, subject to required withholding taxes, if
any, cash in an amount equal to the difference between the exercise price of
such Company Stock Option and the Per Share Cash Consideration for each share of
Company Common Stock subject to such Company Stock Option.
13
2.7 Withholding Rights
The Acquiror (through the Exchange Agent, if applicable) shall be
entitled to deduct and withhold from any amounts otherwise payable pursuant to
this Agreement to any holder of shares of Company Common Stock such amounts as
the Acquiror is required under the Code or any provision of state, local or
foreign tax law to deduct and withhold with respect to the making of such
payment. Any amounts so withheld shall be treated for all purposes of this
Agreement as having been paid to the holder of Company Common Stock in respect
of which such deduction and withholding was made by the Acquiror.
2.8 Dissenting Shares
(a) Each outstanding share of Company Common Stock the holder of which
has perfected his right to dissent under the OGCL and has not effectively
withdrawn or lost such right as of the Effective Time (the "Company Dissenting
Shares") shall not be converted into or represent a right to receive shares of
Acquiror Common Stock or cash hereunder, and the holder thereof shall be
entitled only to such rights as are granted by the OGCL. The Company shall give
the Acquiror prompt notice upon receipt by the Company of any such written
demands for payment of the fair value of such shares of Company Common Stock and
of withdrawals of such demands and any other instruments provided pursuant to
the OGCL (any shareholder duly making such demand being hereinafter called a
"Dissenting Company Shareholder"). Any payments made in respect of Company
Dissenting Shares shall be made by the Surviving Corporation. If any Company
Dissenting Shareholder shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to such payment at or prior to the Effective
Time, such holder's shares of Company Common Stock shall be converted into a
right to receive cash or Acquiror Common Stock in accordance with the applicable
provisions of this Agreement. If such holder shall effectively withdraw or lose
(through failure to perfect or otherwise) his right to such payment after the
Effective Time, each share of Company Common Stock of such holder shall be
converted on a share by share basis into either the right to receive cash or
Acquiror Common Stock as the Acquiror shall determine.
(b) No holder of Acquiror Common Stock shall be entitled to relief as a
dissenting shareholder pursuant to Section 1701.85 of the OGCL or otherwise.
2.9 Anti-Dilution Provisions
The Exchange Ratio, the Per Share Stock Consideration, the Per Share
Cash Consideration and the Stock Amount shall be subject to appropriate
adjustments as mutually agreed to by the Acquiror and the Company in the event
that, subsequent to the date of this Agreement but prior to the Effective Time,
the outstanding Acquiror Common Stock shall have been increased, decreased,
changed into or exchanged for a different number or kind of shares or securities
through reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other like changes in Acquiror's
capitalization.
14
Nothing contained herein shall be deemed to permit any action which may be
proscribed by this Agreement.
2.10 Additional Actions
If at any time after the Effective Time the Surviving Corporation shall
consider that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its rights, title or interest in, to or under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger, or
(ii) otherwise carry out the purposes of this Agreement, the Company and its
proper officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments and assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
2.11 The Bank Merger
The Acquiror and the Company shall take all action necessary and
appropriate, including causing the entering into of an amended and restated
agreement of merger by the Bank and the Association (the "Bank Merger
Agreement") which amends and restates the Agreement of Merger between the Bank
and the Association dated as of April 29, 1996, the form of which is attached
hereto as Exhibit A, to cause the Association to merge with and into the Bank
(the "Bank Merger") immediately after consummation of the Merger in accordance
with the applicable laws of the State of Ohio and the United States and the
regulations of the Department and the OTS thereunder. The Bank shall be the
surviving corporation in the Bank Merger, and shall continue its corporate
existence under the name "Fidelity Bank" under the laws of the United States.
The Bank will become a wholly-owned subsidiary of the Acquisition Corporation
upon the receipt of all requisite regulatory approvals and the contribution to
the Acquisition Corporation of all the capital stock of the Bank. Upon
consummation of the Bank Merger, the separate corporate existence of the
Association shall cease. The directors and executive officers of the Bank upon
consummation of the Bank Merger shall be as set forth in the Bank Merger
Agreement.
15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror as follows:
3.1 Capital Structure
The authorized capital stock of the Company consists of 5,000,000
shares of Company Common Stock and 2,000,000 shares of Company Preferred Stock.
As of the date hereof, there are 708,096 shares of Company Common Stock issued
and outstanding, 67,927 shares of Company Common Stock are directly held as
treasury stock by the Company and no shares of Company Preferred Stock are
issued and outstanding. All outstanding shares of Company Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable, and
none of the outstanding shares of Company Common Stock has been issued in
violation of the preemptive rights of any person, firm or entity. Except for (i)
47,871 shares of Company Common Stock issuable upon exercise of outstanding
stock options which have been granted pursuant to the 1991 Non-Statutory Stock
Option Plan, 1991 Incentive Stock Option Plan, 1994 Employee Stock Option Plan
and 1994 Non- Employee Director Stock Option Plan and (ii) shares of Company
Common Stock issuable pursuant to the terms of the Company Stock Option
Agreement, there are no Rights authorized, issued or outstanding with respect to
the capital stock of the Company.
3.2 Organization, Standing and Authority of the Company
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or qualification
and where the failure to be so licensed, qualified or in good standing would
have a material adverse effect on the financial condition, results of operations
or business of the Company on a consolidated basis. The Company is duly
registered as a savings and loan holding company under the HOLA and the
regulations of the OTS thereunder. The Company has heretofore delivered to the
Acquiror true and complete copies of the Articles of Incorporation, Code of
Regulations and Bylaws of the Company as in effect as of the date hereof.
3.3 Ownership of the Company Subsidiaries
The only direct or indirect Subsidiaries of the Company are the
Association and SGFSC (the "Company Subsidiaries"). Except for capital stock of
the Company Subsidiaries, stock in the FHLB of Cincinnati, securities and other
interests taken in consideration of debts previously contracted and by virtue of
the Acquiror Stock Option Agreement, the Company does not own or have the right
to acquire, directly or indirectly, any outstanding
16
capital stock or other voting securities or ownership interests of any
corporation, bank, savings association, partnership, joint venture or other
organization. The outstanding shares of capital stock or other ownership
interests of each of the Company Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable, and are directly or indirectly
owned by the Company free and clear of all liens, claims, encumbrances, charges,
pledges, restrictions or rights of third parties of any kind whatsoever. No
Rights are authorized, issued or outstanding with respect to the capital stock
or other ownership interests of any Company Subsidiary and there are no
agreements, understandings or commitments relating to the right of the Company
to vote or to dispose of said shares or other ownership interests.
3.4 Organization, Standing and Authority of the Company Subsidiaries
The Association is a savings and loan association duly organized,
validly existing and in good standing under the laws of the State of Ohio, and
SGFSC is a corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio. Each of the Company Subsidiaries (i) has
full power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and (ii) is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a material adverse effect on the financial condition,
results of operations or business of the Company on a consolidated basis. The
Company has heretofore delivered to the Acquiror true and complete copies of the
Articles of Incorporation, Constitution and Bylaws of the Association and the
Articles of Incorporation, Code of Regulations and Bylaws of SGFSC as in effect
as of the date hereof.
3.5 Authorized and Effective Agreement
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of the Company, except for the approval of this
Agreement by the Company's shareholders. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company which is enforceable against the Company in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger and
the Bank Merger), nor compliance by the Company with any of the provisions
hereof (i) does or will conflict with
17
or result in a breach of any provisions of the Articles of Incorporation, Code
of Regulations or Bylaws of the Company or the equivalent documents of any
Company Subsidiary, (ii) except as Previously Disclosed, violate, conflict with
or result in a breach of any term, condition or provision of, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of the Company or any
Company Subsidiary pursuant to, any material note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which the Company or any Company Subsidiary is a party, or by which any of their
respective properties or assets may be bound or affected, or (iii) subject to
receipt of all required governmental and shareholder approvals, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any Company Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the OTS and the Department, (ii) the
filing and effectiveness of the Form S-4 with the Commission, (iii) compliance
with applicable state securities or "blue sky" laws and the NASD Bylaws in
connection with the issuance of Acquiror Common Stock pursuant to this
Agreement, (iv) the approval of this Agreement by the requisite vote of the
shareholders of the Company and the Acquiror, (v) the filing of the Certificate
of Merger with the Secretary of State of Ohio pursuant to the OGCL in connection
with the Merger and (vi) the filing of a Certificate of Merger with the
Secretary of State of Ohio and Articles of Combination with the OTS in
connection with the Bank Merger, and except for such filings, authorizations or
approvals which are Previously Disclosed, no consents or approvals of or filings
or registrations with any Governmental Entity or with any third party are
necessary on the part of the Company or any Company Subsidiary in connection
with (i) the execution and delivery by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby and (ii) the
execution and delivery by the Association of the Bank Merger Agreement and the
consummation by the Association of the transactions contemplated thereby.
(d) As of the date hereof, neither the Company nor any of the Company
Subsidiaries is aware of any reasons relating to the Company or any of the
Company Subsidiaries (including, without limitation, Community Reinvestment Act
compliance) why all consents and approvals shall not be procured from all
regulatory agencies having jurisdiction over the transactions contemplated by
this Agreement as shall be necessary for (i) consummation of the transactions
contemplated by this Agreement and the Bank Merger Agreement and (ii) the
continuation by the Acquiror after the Effective Time of the business of each of
the Acquiror and the Company as such business is carried on immediately prior to
the Effective Time, free of any conditions or requirements which, in the
reasonable opinion of the Company, could have a material adverse effect upon the
financial condition, results of operations or business of the Acquiror or the
Company on a consolidated basis or materially impair the value of the Company
and the Company Subsidiaries to the Acquiror.
18
3.6 Securities Documents and Regulatory Reports
(a) The Company has previously delivered or made available to the
Acquiror a complete copy of all Securities Documents filed by the Company
pursuant to the Securities Laws or mailed by the Company to its shareholders as
a class since January 1, 1993. The Company has timely filed with the Commission
all Securities Documents required by the Securities Laws and such Securities
Documents complied in all material respects with the Securities Laws and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided that information as of a later date shall be deemed to
modify information as of an earlier date.
(b) Since January 1, 1993, each of the Company and the Association has
duly filed with the OTS, the FDIC and the Department, as the case may be, in
correct form the reports required to be filed under applicable laws and
regulations and such reports were in all material respects complete and accurate
and in compliance with the requirements of applicable laws and regulations,
provided that information as of a later date shall be deemed to modify
information as of an earlier date; and the Company has previously delivered or
made available to the Acquiror accurate and complete copies of all such reports.
In connection with the most recent examinations of the Company and the
Association by the OTS and the Department, neither the Company nor the
Association was required to correct or change any action, procedure or
proceeding which the Company or the Association believes has not been corrected
or changed as required.
3.7 Financial Statements
(a) The Company has previously delivered or made available to the
Acquiror accurate and complete copies of the Company Financial Statements which,
in the case of the consolidated statements of financial condition of the Company
as of June 30, 1995, 1994 and 1993 and the consolidated statements of income,
stockholders' equity and cash flows for each of the three years ended June 30,
1995, 1994 and 1993, are accompanied by the audit reports of Clark, Schaefer,
Hackett & Co., independent public accountants with respect to the Company. The
Company Financial Statements referred to herein, as well as the Company
Financial Statements to be delivered pursuant to Section 5.7 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of the Company as of the respective dates set forth therein, and the
consolidated results of operations, stockholders' equity and cash flows of the
Company for the respective periods or as of the respective dates set forth
therein.
(b) Each of the Company Financial Statements referred to in Section
3.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of the Company and the Company
Subsidiaries have been conducted
19
in all material respects in accordance with generally accepted auditing
standards. The books and records of the Company and the Company Subsidiaries are
being maintained in material compliance with applicable legal and accounting
requirements, and such books and records accurately reflect in all material
respects all dealings and transactions in respect of the business, assets,
liabilities and affairs of the Company and the Company Subsidiaries.
(c) Except to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Company as of December,
1995 (including related notes) and (ii) of liabilities incurred since December
31, 1995 in the ordinary course of business, neither the Company nor any Company
Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of the Company on a consolidated basis.
3.8 Material Adverse Change
(a) There has not been any material adverse change in the business,
operations, prospects, assets or financial condition of the Company on a
consolidated basis since December 31, 1995 and to the best knowledge of the
Company, no fact or condition exists which the Company believes will cause such
a material adverse change in the future.
(b) Except as Previously Disclosed, neither the Company nor any of the
Company Subsidiaries has taken or permitted any of the actions set forth in
Section 5.6(a) hereof between December 31, 1995 and the date hereof.
3.9 Environmental Matters
(a) To the best of the Company's knowledge, the Company and the Company
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the aggregate,
have a material adverse effect on the financial condition, results of operations
or business of the Company on a consolidated basis. Neither the Company nor any
Company Subsidiary has received any written communication alleging that the
Company or any Company Subsidiary is not in such compliance and, to the best
knowledge of the Company, there are no present circumstances that would prevent
or interfere with the continuation of such compliance.
(b) To the best of the Company's knowledge, none of the properties
owned, leased or operated by the Company or the Company's Subsidiaries has been
or is in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
material adverse effect on the financial condition, results of operations or
business of the Company on a consolidated basis.
(c) To the best of the Company's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that
20
could result in the imposition of any liability arising under any Environmental
Law against the Company or any Company Subsidiary or against any person or
entity whose liability for any Environmental Claim the Company or any Company
Subsidiary has or may have retained or assumed either contractually or by
operation of law, except such which would not have a material adverse effect on
the financial condition, results of operations or business of the Company on a
consolidated basis.
(d) Except as Previously Disclosed, the Company has not conducted any
environmental studies during the past five years with respect to any properties
owned by it or any Company Subsidiary as of the date hereof.
3.10 Allowance for Loan Losses and Real Estate Owned
The allowance for loan losses reflected on the Company's consolidated
statements of financial condition included in the Company Financial Statements
is, or will be in the case of subsequently delivered Company Financial
Statements, as the case may be, in the opinion of the Company's management
adequate in all material respects as of their respective dates under the
requirements of generally accepted accounting principles to provide for
reasonably anticipated losses on outstanding loans net of recoveries. The Real
Estate Owned reflected on the consolidated statements of financial condition
included in the Company Financial Statements is, or will be in the case of
subsequently delivered Company Financial Statements, as the case may be, carried
at the lower of cost or fair value, less estimated costs to sell, as required by
generally accepted accounting principles.
3.11 Tax Matters
(a) The Company and the Company Subsidiaries, and each of their
predecessors, have timely filed all federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be filed by them
(including, without limitation, estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and, as of the Effective Time, will have
paid, or where payment is not required to have been made, will have set up an
adequate reserve or accrual for the payment of, all taxes for any subsequent
periods ending on or prior to the Effective Time. Neither the Company nor any of
the Company Subsidiaries will have any material liability for any such taxes in
excess of the amounts so paid or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Company and the Company Subsidiaries are complete and accurate in
all material respects. Neither the Company nor any of the Company Subsidiaries
is delinquent in the payment of any tax, assessment or governmental charge, and
none of them has requested any extension of time
21
within which to file any tax returns in respect of any fiscal year or portion
thereof which have not since been filed. Except as Previously Disclosed, the
federal, state and local income tax returns of the Company and the Company
Subsidiaries have been examined by the applicable tax authorities (or are closed
to examination due to the expiration of the applicable statute of limitations)
and no deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or otherwise) against the Company or
any Company Subsidiary as a result of such examinations or otherwise which have
not been settled and paid. There are currently no agreements in effect with
respect to the Company or any Company Subsidiary to extend the period of
limitations for the assessment or collection of any tax. As of the date hereof,
no audit, examination or deficiency or refund litigation with respect to such
return is pending or, to the best of the Company's knowledge, threatened.
(c) Except as Previously Disclosed, none of the Company or the Company
Subsidiaries (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company or the Company Subsidiaries (nor does the
Company have any knowledge that the Internal Revenue Service has proposed any
such adjustment or change of accounting method) or (iii) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
3.12 Legal Proceedings
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of the Company, threatened against the Company or any Company
Subsidiary or against any asset, interest or right of the Company or each of the
Company Subsidiaries, or against any officer, director or employee of any of
them that in any such case, if decided adversely, would have a material adverse
effect on the financial condition, results of operations or business of the
Company on a consolidated basis. Neither the Company nor any Company Subsidiary
is a party to any order, judgment or decree which has or could reasonably be
expected to have a material adverse effect on the financial condition, results
of operations or business of the Company on a consolidated basis.
3.13 Compliance with Laws
(a) Each of the Company and each of the Company Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently being conducted and the absence
of which could reasonably be expected to have a material adverse effect on the
financial condition, results of operations or business of the Company on a
consolidated basis; all such permits, licenses, certificates of authority,
orders
22
and approvals are in full force and effect; and to the best knowledge of the
Company, no suspension or cancellation of any of the same is threatened.
(b) Neither the Company nor any of the Company Subsidiaries is in
violation of its respective Articles of Incorporation, Code of Regulations,
Constitution or other chartering instrument or Bylaws, or of any applicable
federal, state or local law or ordinance or any order, rule or regulation of any
federal, state, local or other governmental agency or body (including, without
limitation, all banking (including, without limitation, all regulatory capital
requirements), securities, municipal securities, safety, health, environmental,
zoning, anti-discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a material adverse effect on the
financial condition, results of operations or business of the Company on a
consolidated basis; and neither the Company nor any Company Subsidiary has
received any written notice or communication from any federal, state or local
governmental authority asserting that the Company or any Company Subsidiary is
in violation of any of the foregoing which could reasonably be expected to have
a material adverse effect on the financial condition, results of operations or
business of the Company on a consolidated basis. Neither the Company nor any
Company Subsidiary is subject to any regulatory or supervisory cease and desist
order, agreement, written directive, memorandum of understanding or written
commitment (other than those of general applicability to all savings
institutions or holding companies thereof issued by governmental authorities),
and none of them has received any written communication requesting that they
enter into any of the foregoing.
3.14 Deposit Insurance and Other Regulatory Matters
(a) The deposit accounts of the Association are insured by the SAIF to
the maximum extent permitted by the FDIA, and the Association has paid all
premiums and assessments required by the FDIA and the regulations thereunder.
(b) The Association is a member in good standing of the FHLB of
Cincinnati and owns the requisite amount of stock in the FHLB of Cincinnati.
(c) The Association is a "qualified thrift lender," as such term is
defined in the HOLA and the regulations thereunder.
(d) The Association has at all time qualified as a "domestic building
and loan association," as such term is defined in Section 7701(a)(19) of the
Code, for purposes of Section 593 of the Code.
23
3.15 Certain Information
None of the information relating to the Company and the Company
Subsidiaries supplied or to be supplied for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 and any amendment
thereto becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) the Proxy Statement, as of the date(s) such Proxy
Statement is mailed to shareholders of the Company and the Acquiror and up to
and including the date(s) of the meetings of shareholders to which such Proxy
Statement relates, will contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date. The Proxy Statement mailed by the Company to its shareholders in
connection with the meeting of shareholders at which this Agreement will be
considered by such shareholders will comply as to form in all material respects
with the Exchange Act and the rules and regulations promulgated thereunder.
3.16 Employee Benefit Plans
(a) The Company has Previously Disclosed all stock option, employee
stock purchase and stock bonus plans, qualified pension or profit-sharing plans,
any fringe benefit, incentive, deferred compensation, consultant, bonus or group
insurance contract, plan or arrangement, or any other welfare plan (as defined
under Section 3(1) of ERISA), employee pension benefit plan (as defined under
Section 3(2) of ERISA) or agreement maintained for the benefit of employees or
former employees of the Company or any Company Subsidiary (the "Company Employee
Plans"), and the Company has previously furnished or made available to the
Acquiror accurate and complete copies of the same together with (i) the most
recent actuarial and financial reports prepared with respect to any qualified
plans, (ii) the most recent annual reports filed with any governmental agency,
and (iii) all rulings and determination letters and any open requests for
rulings or letters that pertain to any qualified plan.
(b) None of the Company, any Company Subsidiary, any pension plan
maintained by any of them and qualified under Section 401 of the Code or, to the
best of the Company's knowledge, any fiduciary of such plan has incurred any
material liability to the PBGC or the Internal Revenue Service with respect to
any employees of the Company or any Company Subsidiary. To the best of the
Company's knowledge, no reportable event under Section 4043(b) of ERISA has
occurred with respect to any such pension plan.
(c) Neither the Company nor any Company Subsidiary participates in or
has incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
24
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Employee Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) (a "Company Pension
Plan") which is intended to qualify under Section 401 of the Code to the effect
that such plan is qualified under Section 401 of the Code and the trust
associated with such employee pension plan is tax exempt under Section 501 of
the Code. No such letter has been revoked or, to the best of the Company's
knowledge, is threatened to be revoked and the Company does not know of any
ground on which such revocation may be based. Except as Previously Disclosed,
neither the Company nor any Company Subsidiary has any liability under any such
plan that is not reflected on the consolidated statement of financial condition
of the Company at December 31, 1995 included in the Company Financial
Statements, other than liabilities incurred in the ordinary course of business
in connection therewith subsequent to the date thereof.
(e) No prohibited transaction (which shall mean any transaction
prohibited by Section 406 of ERISA and not exempt under Section 408 of ERISA or
Section 4975 of the Code) has occurred with respect to any Company Employee Plan
which would result in the imposition, directly or indirectly, of a material
excise tax under Section 4975 of the Code or otherwise have a material adverse
effect on the financial condition, results of operations or business of the
Company on a consolidated basis.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Company Employee
Plan or ERISA; no accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect to
any Company Pension Plan, and, except as Previously Disclosed, there is no
"unfunded current liability" (as defined in Section 412 of the Code) with
respect to any Company Pension Plan.
(g) The Company Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations.
(h) There are no pending or, to the best knowledge of the Company,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Employee Plans or any trust related thereto or any
fiduciary thereof.
3.17 Certain Contracts
(a) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary is a party to, is bound or affected by, receives, or is obligated to
pay, benefits under (i) any agreement, arrangement or commitment, including
without limitation any
25
agreement, indenture or other instrument, relating to the borrowing of money by
the Company or any Company Subsidiary or the guarantee by the Company or any
Company Subsidiary of any obligation, (ii) any agreement, arrangement or
commitment relating to the employment of a consultant or the employment,
election or retention in office of any present or former director, officer or
employee of the Company or any Company Subsidiary, (iii) any agreement,
arrangement or understanding pursuant to which any payment (whether of severance
pay or otherwise) became or may become due to any director, officer or employee
of the Company or any Company Subsidiary upon execution of this Agreement or
upon or following consummation of the transactions contemplated by this
Agreement (either alone or in connection with the occurrence of any additional
acts or events), (iv) any agreement, arrangement or understanding pursuant to
which the Company or any Company Subsidiary is obligated to indemnify any
director, officer, employee or agent of the Company or any Company Subsidiary,
(v) any agreement, arrangement or understanding to which the Company or any
Company Subsidiary is a party or by which any of the same is bound which limits
the freedom of the Company or any Company Subsidiary to compete in any line of
business or with any person, (vi) any assistance agreement, supervisory
agreement, memorandum of understanding, consent order, cease and desist order or
condition of any regulatory order or decree with or by the OTS, the FDIC, the
Department or any other regulatory agency, or (vii) any other agreement,
arrangement or understanding which would be required to be filed as an exhibit
to the Company's Annual Report on Form 10-KSB under the Exchange Act and which
has not been so filed.
(b) Neither the Company nor any Company Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a material adverse effect on the financial condition, results of operations
or business of the Company on a consolidated basis or the transactions
contemplated hereby, under any contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument to which it is a party or by which
its assets, business or operations may be bound or affected, whether entered
into in the ordinary course of business or otherwise and whether written or
oral, and there has not occurred any event that with the lapse of time or the
giving of notice, or both, would constitute such a default or non-compliance.
3.18 Brokers and Finders
Except as Previously Disclosed, neither the Company nor any Company
Subsidiary, nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
3.19 Insurance
The Company and each Company Subsidiary is insured for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies engaged in a similar business would, in accordance with good
business practice, customarily
26
be insured and has maintained all insurance required by applicable laws and
regulations. Neither the Company nor any of the Company Subsidiaries has
received any notice of cancellation or notice of a material amendment of any
such insurance policy or bond or is in default under such policy or bond, no
coverage thereunder is being disputed and all material claims thereunder have
been filed in a timely fashion.
3.20 Properties
All real and personal property owned by the Company or any of the
Company Subsidiaries or presently used by any of them in their respective
business is in an adequate condition (ordinary wear and tear excepted) and is
sufficient to carry on the business of the Company and the Company Subsidiaries
in the ordinary course of business consistent with their past practices. The
Company and the Company Subsidiaries have good and marketable title free and
clear of all liens, encumbrances, charges, defaults or equities (other than
equities of redemption under applicable foreclosure laws) to all of the material
properties and assets, real and personal, reflected on the consolidated
statement of financial condition of the Company as of December 31, 1995 included
in the Company Financial Statements or acquired after such date, except (i)
liens for current taxes not yet due or payable, (ii) pledges to secure deposits
and other liens incurred in the ordinary course of its banking business, (iii)
such imperfections of title, easements and encumbrances, if any, as are not
material in character, amount or extent and (iv) as reflected on the
consolidated statement of financial condition of the Company as of December 31,
1995 included in the Company Financial Statements. All real and personal
property which is material to the Company's business on a consolidated basis and
leased or licensed by the Company or any Company Subsidiary is held pursuant to
leases or licenses which are valid and enforceable in accordance with their
respective terms and such leases will not terminate or lapse prior to the
Effective Time. The Company has Previously Disclosed an accurate listing of each
such lease or license referred to in the immediately preceding sentence pursuant
to which the Company or any of the Company Subsidiaries acts as lessor (other
than month-to-month leases) or lessee, including the expiration date and the
terms of any renewal options which relate to the same, as well as a listing of
each material real property owned by the Company or any Company Subsidiary and
used in the conduct of its business.
3.21 Labor
No work stoppage involving the Company or any Company Subsidiary is
pending or, to the best knowledge of the Company, threatened. Neither the
Company nor any Company Subsidiary is involved in, or threatened with or
affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding involving the employees of the Company or any Company Subsidiary
which could have a material adverse effect on the financial condition, results
of operations or business of the Company on a consolidated basis. Employees of
the Company and the Company Subsidiaries are not represented by any labor union
nor are any collective bargaining agreements otherwise in effect with respect to
such employees, and to
27
the best of the Company's knowledge, there have been no efforts to unionize or
organize any employees of the Company or any Company Subsidiary during the past
five years.
3.22 Transactions with Affiliated Persons and Affiliates
Except as Previously Disclosed, (i) no "affiliated person" or
"affiliate" of the Association, as defined in 12 C.F.R. ss.561.5 and 12 C.F.R.
ss.563.41, respectively, has engaged in any transaction with the Association
since January 1, 1993 which was not in compliance with applicable laws and
regulations and (ii) as of the date hereof there is no loan or extension of
credit outstanding to any of the same which is not in compliance with applicable
laws and regulations.
3.23 Required Vote
(a) The affirmative vote of the holders of a majority of the issued and
outstanding shares of Company Common Stock is necessary to approve this
Agreement and the transactions contemplated hereby on behalf of the Company.
(b) At least two-thirds of the whole Board of Directors (as defined in
the Articles of Incorporation of the Company) has approved the Merger and this
Agreement such that the provisions of (i) Section 1 of Article Eleventh of the
Articles of Incorporation of the Company and (ii) Section 1704.02 of the Ohio
Revised Code shall be inapplicable to the Merger and this Agreement and the
transactions contemplated hereby.
3.24 Disclosures
None of the representations and warranties of the Company or any of the
written information or documents furnished or to be furnished by the Company to
the Acquiror in connection with or pursuant to this Agreement or the
consummation of the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or necessary
to make any such information or document, in light of the circumstances, not
misleading.
28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
AND THE ACQUISITION CORPORATION
The Acquiror and the Acquisition Corporation represent and warrant to
the Company as follows:
4.1 Capital Structure of the Acquiror
The authorized capital stock of the Acquiror consists of 7,000,000
shares of Acquiror Common Stock and 500,000 shares of Acquiror Preferred Stock.
As of the date hereof, there are 4,073,589 shares of Acquiror Common Stock
issued and outstanding, no shares of Acquiror Common Stock are directly or
indirectly held as treasury stock by the Acquiror and there are no shares of
Acquiror Preferred Stock issued and outstanding. All outstanding shares of
Acquiror Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable, and none of the outstanding shares of Acquiror Common
Stock have been issued in violation of the preemptive rights of any person, firm
or entity. Except for (i) shares of Acquiror Common Stock issuable pursuant to
the Acquiror Employee Stock Benefit Plans, now or hereafter, and (ii) shares of
Acquiror Common Stock issuable pursuant to the terms of the Acquiror Stock
Option Agreement, there are no Rights authorized, issued or outstanding with
respect to the capital stock of the Acquiror.
4.2 Organization, Standing and Authority of the Acquiror
The Acquiror is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or qualification
and where the failure to be so licensed, qualified or in good standing would
have a material adverse effect on the financial condition, results of operations
or business of the Acquiror on a consolidated basis. The Acquiror is duly
registered as a savings and loan holding company under the HOLA and the
regulations of the OTS thereunder. The Acquiror has heretofore delivered to the
Company true and complete copies of the Articles of Incorporation, Code of
Regulations and Bylaws of the Acquiror as in effect as of the date hereof.
4.3 Ownership of the Acquisition Corporation and the Bank
The only direct or indirect subsidiaries of the Acquiror are the
Acquisition Corporation and the Bank. Except as Previously Disclosed and except
for capital stock of the Acquisition Corporation and the Bank, stock in the FHLB
of Cincinnati, securities and other interests taken in consideration of debts
previously contracted and by virtue of this Agreement and the Company Stock
Option Agreement, the Acquiror does not own or have
29
the right to acquire, directly or indirectly, any outstanding capital stock or
other voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization. The outstanding
shares of capital stock of the Acquisition Corporation and the Bank have been
duly authorized and validly issued, are fully paid and nonassessable, and are
directly or indirectly owned by the Acquiror free and clear of all liens,
claims, encumbrances, charges, pledges, restrictions or rights of third parties
of any kind whatsoever. No Rights are authorized, issued or outstanding with
respect to the capital stock or other ownership interests of the Acquisition
Corporation and the Bank and there are no agreements, understandings or
commitments relating to the right of the Acquiror to vote or to dispose of said
shares or other ownership interests.
4.4 Organization, Standing and Authority of the Bank
The Bank is a savings bank duly organized, validly existing and in good
standing under the laws of the United States. The Bank (i) has full power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and (ii) is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such qualification and where
the failure to be so licensed, qualified or in good standing would have a
material adverse effect on the financial condition, results of operations or
business of the Acquiror on a consolidated basis. The Acquiror has heretofore
delivered to the Company true and complete copies of the Charter and Bylaws of
the Bank as in effect as of the date hereof.
4.5 Authorized and Effective Agreement
(a) Each of the Acquiror and the Acquisition Corporation has all
requisite corporate power and authority to enter into this Agreement and
(subject to receipt of all necessary governmental approvals and the approval of
the Acquiror's shareholders of this Agreement) to perform all of its obligations
under this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
the Acquiror and the Acquisition Corporation, except for the approval of this
Agreement by the Acquiror's shareholders and by Acquiror as sole shareholder of
the Acquisition Corporation. This Agreement has been duly and validly executed
and delivered by each of the Acquiror and the Acquisition Corporation and
constitutes a legal, valid and binding obligation of the Acquiror and the
Acquisition Corporation which is enforceable against the Acquiror and the
Acquisition Corporation in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger and
the Bank Merger), nor compliance by the Acquiror or the Acquisition Corporation
with any of the provisions hereof
30
(i) does or will conflict with or result in a breach of any provisions of the
Articles of Incorporation, Code of Regulations, Charter or Bylaws of the
Acquiror, the Acquisition Corporation or the Bank, (ii) except as Previously
Disclosed, violate, conflict with or result in a breach of any term, condition
or provision of, or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or give rise to any
right of termination, cancellation or acceleration with respect to, or result in
the creation of any lien, charge or encumbrance upon any property or asset of
the Acquiror, the Acquisition Corporation or the Bank pursuant to, any material
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Acquiror, the Acquisition
Corporation or the Bank is a party, or by which any of their respective
properties or assets may be bound or affected, or (iii) subject to receipt of
all required governmental and shareholder approvals, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Acquiror, the
Acquisition Corporation or the Bank.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the OTS and the Department, (ii) the
filing and effectiveness of the Form S-4 with the Commission, (iii) compliance
with applicable state securities or "blue sky" laws and the NASD Bylaws in
connection with the issuance of Acquiror Common Stock pursuant to this
Agreement, (iv) the approval of this Agreement by the requisite vote of the
shareholders of the Company and the Acquiror and by the Acquiror as sole
shareholder of the Acquisition Corporation, (v) the filing of the Certificate of
Merger with the Secretary of State of Ohio pursuant to the OGCL in connection
with the Merger and (vi) the filing of a Certificate of Merger with the
Secretary of State of Ohio and Articles of Combination with the OTS in
connection with the Bank Merger, and except for such filings, authorizations or
approvals as are Previously Disclosed, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are necessary
on the part of the Acquiror, the Acquisition Corporation or the Bank in
connection with (i) the execution and delivery by the Acquiror and the
Acquisition Corporation of this Agreement and the consummation by the Acquiror
and the Acquisition Corporation of the transactions contemplated hereby and (ii)
the execution and delivery by the Bank of the Bank Merger Agreement and the
consummation by the Bank of the transactions contemplated thereby.
(d) As of the date hereof, none of the Acquiror, the Acquisition
Corporation or the Bank is aware of any reasons relating to the Acquiror, the
Acquisition Corporation or the Bank (including, without limitation, Community
Reinvestment Act compliance) why all consents and approvals shall not be
procured from all regulatory agencies having jurisdiction over the transactions
contemplated by this Agreement as shall be necessary for (i) consummation of the
transactions contemplated by this Agreement and the Bank Merger Agreement and
(ii) the continuation by the Acquiror and the Acquisition Corporation after the
Effective Time of the business of each of the Acquiror and the Company as such
business is carried on immediately prior to the Effective Time, free of any
conditions or requirements which, in the reasonable opinion of the Acquiror,
could have a material
31
adverse effect upon the financial condition, results of operations or business
of the Acquiror on a consolidated basis or materially impair the value of the
Company and the Company Subsidiaries to the Acquiror.
4.6 Securities Documents and Regulatory Reports
(a) The Acquiror has previously delivered or made available to the
Company a complete copy of all Securities Documents filed by the Acquiror or the
Bank pursuant to the Securities Laws or mailed by the Acquiror or the Bank to
its respective shareholders as a class since January 1, 1993. The Acquiror has
timely filed with the Commission (and the Bank has timely filed with the OTS)
all Securities Documents required by the Securities Laws and such Securities
Documents complied in all material respect with the Securities Laws and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided that information as of a later date shall be deemed to
modify information as of an earlier date.
(b) Since January 1, 1993, each of the Acquiror and the Bank has duly
filed with the OTS and the FDIC, as the case may be, in correct form the reports
required to be filed under applicable laws and regulations and such reports were
in all material respects complete and accurate and in compliance with the
requirements of applicable laws and regulations, provided that information as of
a later date shall be deemed to modify information as of an earlier date; and
the Acquiror has previously delivered or made available to the Company accurate
and complete copies of all such reports. In connection with the most recent
examinations of the Acquiror and the Bank by the OTS, neither the Acquiror nor
the Bank was required to correct or change any action, procedure or proceeding
which the Acquiror or the Bank believes has not been corrected or changed as
required.
4.7 Financial Statements
(a) The Acquiror has previously delivered or made available to the
Company accurate and complete copies of the Acquiror Financial Statements which,
in the case of the statements of financial condition of the Bank as of December
31, 1995, 1994 and 1993 and the statements of income, stockholders' equity and
cash flows for each of the three years ended December 31, 1995, 1994 and 1993,
are accompanied by the audit reports of Grant Thornton LLP, independent public
accountants with respect to the Acquiror and the Bank. The Acquiror Financial
Statements referred to herein, as well as the Acquiror Financial Statements to
be delivered pursuant to Section 5.7 hereof, fairly present or will fairly
present, as the case may be, the consolidated financial condition of the
Acquiror or the Bank, as applicable, as of the respective dates set forth
therein, and the consolidated results of operations, stockholders' equity and
cash flows of the Acquiror or the Bank, as applicable, for the respective
periods or as of the respective dates set forth therein.
32
(b) Each of the Acquiror Financial Statements referred to in Section
4.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of the Acquiror and the Bank have
been conducted in all material respects in accordance with generally accepted
auditing standards. The books and records of the Acquiror, the Acquisition
Corporation and the Bank are being maintained in material compliance with
applicable legal and accounting requirements, and all such books and records
accurately reflect in all material respects all dealings and transactions in
respect of the business, assets, liabilities and affairs of the Acquiror, the
Acquisition Corporation and the Bank.
(c) Except to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Bank as of December 31,
1995 (including related notes) and (ii) of liabilities incurred since December
31, 1995 in the ordinary course of business, none of the Acquiror, the
Acquisition Corporation or the Bank has any liabilities, whether absolute,
accrued, contingent or otherwise, material to the financial condition, results
of operations or business of the Acquiror on a consolidated basis.
4.8 Material Adverse Change
(a) There has not been any material adverse change in the business,
operations, prospects, assets or financial condition of the Acquiror on a
consolidated basis since December 31, 1995 and to the best knowledge of the
Acquiror, no fact or condition exists which the Acquiror believes will cause
such a material adverse change in the future.
(b) Except as Previously Disclosed, none of the Acquiror, the
Acquisition Corporation or the Bank has taken or permitted any of the actions
set forth in Section 5.6(b) hereof between December 31, 1995 and the date
hereof.
4.9 Environmental Matters
(a) To the best of the Acquiror's knowledge, the Acquiror, the
Acquisition Corporation and the Bank are in compliance with all Environmental
Laws, except for any violations of any Environmental Law which would not, singly
or in the aggregate, have a material adverse effect on the financial condition,
results of operations or business of the Acquiror on a consolidated basis. None
of the Acquiror, the Acquisition Corporation or the Bank has received any
written communication alleging that the Acquiror, the Acquisition Corporation or
the Bank is not in such compliance and, to the best knowledge of the Acquiror,
there are no present circumstances that would prevent or interfere with the
continuation of such compliance.
(b) To the best of the Acquiror's knowledge, none of the properties
owned, leased or operated by the Acquiror, the Acquisition Corporation or the
Bank has been or is in violation of or liable under any Environmental Law,
except any such violations or liabilities
33
which would not singly or in the aggregate have a material adverse effect on the
financial condition, results of operations or business of the Acquiror on a
consolidated basis.
(c) To the best of the Acquiror's knowledge and except as Previously
Disclosed, there are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim or other claim or action or governmental investigation that
could result in the imposition of any liability arising under any Environmental
Law against the Acquiror, the Acquisition Corporation or the Bank or against any
person or entity whose liability for any Environmental Claim the Acquiror, the
Acquisition Corporation or the Bank has or may have retained or assumed either
contractually or by operation of law, except such which would not have a
material adverse effect on the financial condition, results of operations or
business of the Acquiror on a consolidated basis.
(d) Except as Previously Disclosed, the Acquiror has not conducted any
environmental studies during the past five years with respect to any properties
owned by it or the Bank as of the date hereof.
4.10 Allowance for Loan Losses and Real Estate Owned
The allowance for loan losses reflected on the Acquiror's statements of
financial condition included in the Acquiror Financial Statements is, or will be
in the case of subsequently delivered Acquiror Financial Statements, as the case
may be, in the opinion of the Acquiror's management adequate in all material
respects as of their respective dates under the requirements of generally
accepted accounting principles to provide for reasonably anticipated losses on
outstanding loans net of recoveries. The Real Estate Owned reflected on the
statements of financial condition included in the Acquiror Financial Statements
is, or will be in the case of subsequently delivered Acquiror Financial
Statements, as the case may be, carried at the lower of cost or fair value, less
estimated costs to sell, as required by generally accepted accounting
principles.
4.11 Tax Matters
(a) The Acquiror, the Acquisition Corporation and the Bank, and each of
their predecessors, have timely filed all federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be filed by them
(including, without limitation, estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and, as of the Effective Time, will have
paid, or where payment is not required to have been made, will have set up an
adequate reserve or accrual for the payment of, all taxes for any subsequent
periods ending on or prior to the Effective Time. None of the Acquiror, the
Acquisition Corporation or the Bank will have
34
any material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Acquiror, the Acquisition Corporation and the Bank are complete and
accurate in all material respects. None of the Acquiror, the Acquisition
Corporation or the Bank is delinquent in the payment of any tax, assessment or
governmental charge, and neither of them has requested any extension of time
within which to file any tax returns in respect of any fiscal year or portion
thereof which have not since been filed. Except as Previously Disclosed, the
federal, state and local income tax returns of the Acquiror, the Acquisition
Corporation and the Bank have been examined by the applicable tax authorities
(or are closed to examination due to the expiration of the applicable statute of
limitations) and no deficiencies for any tax, assessment or governmental charge
have been proposed, asserted or assessed (tentatively or otherwise) against the
Acquiror, the Acquisition Corporation or the Bank as a result of such
examinations or otherwise which have not been settled and paid. There are
currently no agreements in effect with respect to the Acquiror, the Acquisition
Corporation or the Bank to extend the period of limitations for the assessment
or collection of any tax. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to such return is pending or, to
the best of the Acquiror's knowledge, threatened.
(c) Except as Previously Disclosed, none of the Acquiror, the
Acquisition Corporation or the Bank (i) is a party to any agreement providing
for the allocation or sharing of taxes, (ii) is required to include in income
any adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by the Acquiror, the Acquisition
Corporation or the Bank (nor does the Acquiror have any knowledge that the
Internal Revenue Service has proposed any such adjustment or change of
accounting method) or (iii) has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply.
4.12 Legal Proceedings
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of the Acquiror, threatened against the Acquiror, the Acquisition
Corporation or the Bank or against any asset, interest or right of the Acquiror,
the Acquisition Corporation or the Bank, or against any officer, director or
employee of any of them that in any such case, if decided adversely, would have
a material adverse effect on the financial condition, results of operations or
business of the Acquiror on a consolidated basis. None of the Acquiror, the
Acquisition Corporation or the Bank is a party to any order, judgment or decree
which has or could reasonably be expected to have a material adverse effect on
the financial condition, results of operations or business of the Acquiror on a
consolidated basis.
35
4.13 Compliance with Laws
(a) Each of the Acquiror, the Acquisition Corporation and the Bank has
all permits, licenses, certificates of authority, orders and approvals of, and
has made all filings, applications and registrations with, federal, state, local
and foreign governmental or regulatory bodies that are required in order to
permit it to carry on its business as it is presently being conducted and the
absence of which could reasonably be expected to have a material adverse effect
on the financial condition, results of operations or business of the Acquiror on
a consolidated basis; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect; and to the best knowledge of
the Acquiror, no suspension or cancellation of any of the same is threatened.
(b) None of the Acquiror, the Acquisition Corporation or the Bank is in
violation of its respective Articles of Incorporation, Code of Regulations,
Charter or other chartering instrument or Bylaws, or of any applicable federal,
state or local law or ordinance or any order, rule or regulation of any federal,
state, local or other governmental agency or body (including, without
limitation, all banking (including, without limitation, all regulatory capital
requirements), securities, municipal securities, safety, health, environmental,
zoning, anti- discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a material adverse effect on the
financial condition, results of operations or business of the Company on a
consolidated basis; and none of the Acquiror, the Acquisition Corporation or the
Bank has received any written notice or communication from any federal, state or
local governmental authority asserting that the Acquiror, the Acquisition
Corporation or the Bank is in violation of any of the foregoing which could
reasonably be expected to have a material adverse effect on the financial
condition, results of operations or business of the Acquiror on a consolidated
basis. None of the Acquiror, the Acquisition Corporation or the Bank is subject
to any regulatory or supervisory cease and desist order, agreement, written
directive, memorandum of understanding or written commitment (other than those
of general applicability to all savings institutions or holding companies
thereof issued by governmental authorities), and none of them has received any
written communication requesting that it enter into any of the foregoing.
4.14 Deposit Insurance and Other Regulatory Matters
(a) The deposit accounts of the Bank are insured by the SAIF to the
maximum extent permitted by the FDIA, and the Bank has paid all premiums and
assessments required by the FDIA and the regulations thereunder.
(b) The Bank is a member in good standing of the FHLB of Cincinnati and
owns the requisite amount of stock in the FHLB of Cincinnati.
36
(c) The Bank is a "qualified thrift lender," as such term is defined in
the HOLA and the regulations thereunder.
(d) The Bank has at all times qualified as a "domestic building and
loan association," as such term is defined in Section 7701(a)(19) of the Code,
for purposes of Section 593 of the Code.
4.15 Certain Information
None of the information relating to the Acquiror, the Acquisition
Corporation and the Bank to be included or incorporated by reference in (i) the
Form S-4 will, at the time the Form S-4 and any amendment thereto becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(ii) the Proxy Statement, as of the date(s) such Proxy Statement is mailed to
shareholders of the Acquiror and the Company and up to and including the date(s)
of the meetings of shareholders to which such Proxy Statement relates, will
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier date. The Proxy
Statement mailed by the Acquiror to shareholders of the Company and the Acquiror
in connection with the meetings of shareholders at which this Agreement will be
considered by such shareholders will comply as to form in all material respects
with the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
4.16 Employee Benefit Plans
(a) The Acquiror has Previously Disclosed all stock option, employee
stock purchase and stock bonus plans, qualified pension or profit-sharing plans,
any fringe benefit, incentive, deferred compensation, consultant, bonus or group
insurance contract, plan or arrangement, or any other welfare plan (as defined
in Section 3(1) of ERISA), employee pension benefit plan (as defined under
Section 3(2) of ERISA) or agreement maintained for the benefit of employees or
former employees of the Acquiror, the Acquisition Corporation or the Bank (the
"Acquiror Employee Plans"), and the Acquiror has previously furnished or made
available to the Company accurate and complete copies of the same together with
(i) the most recent actuarial and financial reports prepared with respect to any
qualified plans, (ii) the most recent annual reports filed with any governmental
agency, and (iii) all rulings and determination letters and any open requests
for rulings or letters that pertain to any qualified plan.
(b) Except as Previously Disclosed, none of the Acquiror, the
Acquisition Corporation, the Bank, any pension plan maintained by either of them
and qualified under Section 401 of the Code or, to the best of the Acquiror's
knowledge, any fiduciary of such
37
plan has incurred any material liability to the PBGC or the Internal Revenue
Service with respect to any employees of the Acquiror, the Acquisition
Corporation or the Bank. Except as Previously Disclosed, to the best of the
Acquiror's knowledge, no reportable event under Section 4043(b) of ERISA has
occurred with respect to any such pension plan.
(c) None of the Acquiror, the Acquisition Corporation or the Bank
participates in or has incurred any liability under Section 4201 of ERISA for a
complete or partial withdrawal from a multi-employer plan (as such term is
defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Acquiror Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (an
"Acquiror Pension Plan") which is intended to qualify under Section 401 of the
Code to the effect that such plan is qualified under Section 401 of the Code and
the trust associated with such employee pension plan is tax exempt under Section
501 of the Code. No such letter has been revoked or, to the best of the
Acquiror's knowledge, is threatened to be revoked and the Acquiror does not know
of any ground on which such revocation may be based. Neither the Acquiror nor
the Bank has any liability under any such plan that is not reflected on the
statement of financial condition of the Bank at December 31, 1995 included in
the Acquiror Financial Statements, other than liabilities incurred in the
ordinary course of business in connection therewith subsequent to the date
thereof.
(e) No prohibited transaction (which shall mean any transaction
prohibited by Section 406 of ERISA and not exempt under Section 408 of ERISA or
Section 4975 of the Code) has occurred with respect to any Acquiror Employee
Plan which would result in the imposition, directly or indirectly, of a material
excise tax under Section 4975 of the Code or otherwise have a material adverse
effect on the financial condition, results of operations or business of the
Acquiror on a consolidated basis.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Acquiror
Employee Plan or ERISA; no accumulated funding deficiency (as defined in Section
302 of ERISA or Section 412 of the Code), whether or not waived, exists with
respect to any Acquiror Pension Plan, and there is no "unfunded current
liability" (as defined in Section 412 of the Code) with respect to any Acquiror
Pension Plan.
(g) The Acquiror Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations.
38
(h) There are no pending or, to the best knowledge of the Acquiror,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Acquiror Employee Plans or any trust related thereto or any
fiduciary thereof.
4.17 Certain Contracts
(a) Except as Previously Disclosed, none of the Acquiror, the
Acquisition Corporation or the Bank is a party to, is bound or affected by,
receives, or is obligated to pay, benefits under (i) any agreement, arrangement
or commitment, including without limitation any agreement, indenture or other
instrument, relating to the borrowing of money by the Acquiror, the Acquisition
Corporation or the Bank or the guarantee by the Acquiror, the Acquisition
Corporation or the Bank of any obligation, (ii) any agreement, arrangement or
commitment relating to the employment of a consultant or the employment,
election or retention in office of any present or former director, officer or
employee of the Acquiror, the Acquisition Corporation or the Bank, (iii) any
agreement, arrangement or understanding pursuant to which any payment (whether
of severance pay or otherwise) became or may become due to any director, officer
or employee of the Acquiror, the Acquisition Corporation or the Bank upon
execution of this Agreement or upon or following consummation of the
transactions contemplated by this Agreement (either alone or in connection with
the occurrence of any additional acts or events), (iv) any agreement,
arrangement or understanding pursuant to which the Acquiror, the Acquisition
Corporation or the Bank is obligated to indemnify any director, officer,
employee or agent of the Acquiror, the Acquisition Corporation or the Bank, (v)
any agreement, arrangement or understanding to which the Acquiror, the
Acquisition Corporation or the Bank is a party or by which any of the same is
bound which limits the freedom of the Acquiror, the Acquisition Corporation or
the Bank to compete in any line of business or with any person, (vi) any
assistance agreement, supervisory agreement, memorandum of understanding,
consent order, cease and desist order or condition of any regulatory order or
decree with or by the OTS, the FDIC or any other regulatory agency, or (vii) any
other agreement, arrangement or understanding which would be required to be
filed as an exhibit to the Acquiror's Annual Report on Form 10-K under the
Exchange Act and which has not been so filed.
(b) None of the Acquiror, the Acquisition Corporation or the Bank is in
default or in non-compliance, which default or non-compliance could reasonably
be expected to have a material adverse effect on the financial condition,
results of operations or business of the Acquiror on a consolidated basis or the
transactions contemplated hereby, under any contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is a party
or by which its assets, business or operations may be bound or affected, whether
entered into in the ordinary course of business or otherwise and whether written
or oral, and there has not occurred any event that with the lapse of time or the
giving of notice, or both, would constitute such a default or non-compliance.
39
4.18 Brokers and Finders
Except as Previously Disclosed, none of the Acquiror, the Acquisition
Corporation or the Bank, nor any of their respective directors, officers or
employees, has employed any broker or finder or incurred any liability for any
broker or finder fees or commissions in connection with the transactions
contemplated hereby.
4.19 Insurance
The Acquiror and the Bank are insured for reasonable amounts with
financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations. Neither the Acquiror nor the Bank has received
any notice of cancellation or notice of a material amendment of any such
insurance policy or bond or is in default under such policy or bond, no coverage
thereunder is being disputed and all material claims thereunder have been filed
in a timely fashion.
4.20 Properties
All real and personal property owned by the Acquiror, the Acquisition
Corporation or the Bank or presently used by any of them in its respective
business is in an adequate condition (ordinary wear and tear excepted) and is
sufficient to carry on its business in the ordinary course of business
consistent with their past practices. The Acquiror, the Acquisition Corporation
and the Bank have good and marketable title free and clear of all liens,
encumbrances, charges, defaults or equities (other than equities of redemption
under applicable foreclosure laws) to all of the material properties and assets,
real and personal, reflected on the statement of financial condition of the Bank
as of December 31, 1995 included in the Acquiror Financial Statements or
acquired after such date, except (i) liens for current taxes not yet due or
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are not material in character, amount or
extent and (iv) as reflected on the statement of financial condition of the Bank
as of December 31, 1995 included in the Acquiror Financial Statements. All real
and personal property which is material to the Acquiror's business on a
consolidated basis and leased or licensed by the Acquiror or the Bank is held
pursuant to leases or licenses which are valid and enforceable in accordance
with their respective terms and such leases will not terminate or lapse prior to
the Effective Time. The Acquiror has Previously Disclosed an accurate listing of
each such lease or license referred to in the immediately preceding sentence
pursuant to which the Acquiror, the Acquisition Corporation or the Bank acts as
lessor (other than month-to-month leases) or lessee, including the expiration
date and the terms of any renewal options which relate to the same, as well as a
listing of each material real property owned by the Acquiror, the Acquisition
Corporation or the Bank and used in the conduct of its business.
40
4.21 Labor
No work stoppage involving the Acquiror, the Acquisition Corporation or
the Bank is pending or, to the best knowledge of the Acquiror, threatened. None
of the Acquiror, the Acquisition Corporation or the Bank is involved in, or
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding involving its employees which could have a material
adverse effect on the financial condition, results of operations or business of
the Acquiror on a consolidated basis. Employees of the Acquiror, the Acquisition
Corporation and the Bank are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees, and to the best of the Acquiror's knowledge, there have been no
efforts to unionize or organize any employees of the Acquiror, the Acquisition
Corporation or the Bank during the past five years.
4.22 Transactions with Affiliated Persons and Affiliates
Except as Previously Disclosed, (i) no "affiliated person" or
"affiliate" of the Bank, as defined in 12 C.F.R. ss.561.5 and 12 C.F.R.
ss.563.41, respectively, has engaged in any transaction with the Bank since
January 1, 1993 which was not in compliance with applicable laws and regulations
and (ii) as of the date hereof there is no loan or extension of credit
outstanding to any of the same which is not in compliance with applicable laws
and regulations.
4.23 Required Vote
(a) Subject to the presence of a quorum at the meeting of the
shareholders of Acquiror called for the purpose of considering and acting upon
the Merger, a majority of the total votes cast on the proposal by the holders of
the issued and outstanding shares of Acquiror's Common Stock is necessary to
approve the Merger and this Agreement and the transactions contemplated hereby
on behalf of the Acquiror.
(b) At least two-thirds of the Continuing Directors (as defined in the
Articles of Incorporation of the Acquiror) has approved the Merger and this
Agreement such that the provisions of (i) Paragraph A of Article XIV of the
Articles of Incorporation of the Acquiror, (ii) Paragraph A of Article XV of the
Articles of Incorporation of the Acquiror and (ii) Section 1704.02 of the Ohio
Revised Code shall be inapplicable to the Merger and this Agreement and the
transactions contemplated hereby.
(c) The affirmative vote of two-thirds of the holders of the issued and
outstanding shares of common stock of Acquisition Corporation is necessary to
approve the Merger and this Agreement and the transaction contemplated hereby on
behalf of Acquisition Corporation.
41
4.24 Disclosures
None of the representations and warranties of the Acquiror or any of
the written information or documents furnished or to be furnished by the
Acquiror to the Company in connection with or pursuant to this Agreement or the
consummation of the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or necessary
to make any such information or document, in light of the circumstances, not
misleading.
4.25 Organization, Standing and Authority of the Acquisition Corporation
The Acquisition Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio with full
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as now conducted and is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
licensing or qualification and where the failure to be so licensed, qualified or
in good standing would have a material adverse effect on the financial
condition, results of operations or business of the Acquiror on a consolidated
basis. The Acquisition Corporation has heretofore delivered to the Company true
and complete copies of the Articles of Incorporation, Code of Regulations and
Bylaws of the Acquisition Corporation as in effect as of the date hereof.
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
Subject to the terms and conditions of this Agreement, each of the
Company, the Acquiror and the Acquisition Corporation shall use its reasonable
best efforts in good faith to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary or advisable under applicable laws
and regulations so as to permit consummation of the Merger and the Bank Merger
as promptly as reasonably practicable and to otherwise enable consummation of
the transactions contemplated hereby, and shall cooperate fully with the other
party or parties hereto to that end.
5.2 Shareholder Meetings
Each of the Acquiror, the Acquisition Corporation and the Company shall
take all action necessary to properly call and convene a meeting of its
shareholders as soon as practicable after the date hereof to consider and vote
upon this Agreement and the transactions contemplated hereby. The Board of
Directors of the Acquiror, the Board of
42
Directors of the Acquisition Corporation, and the Board of Directors of the
Company will recommend that the shareholders of the Acquiror, the Acquisition
Corporation and the Company, respectively, approve this Agreement and the
transactions contemplated hereby, provided that the Board of Directors of the
Company may fail to make such recommendation, or withdraw, modify or change any
such recommendation, if such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the making of such
recommendation, or the failure to withdraw, modify or change such
recommendation, would constitute a breach of the fiduciary duties of such
directors under applicable law.
5.3 Regulatory Matters
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-4, including the Proxy Statement. Each of
the Acquiror and the Company shall use its reasonable best efforts to have the
Form S-4 declared effective under the Securities Act as promptly as practicable
after such filing, and the Acquiror and the Company each shall thereafter
promptly mail the Proxy Statement to its respective shareholders. The Acquiror
also shall use its reasonable best efforts to obtain all necessary state
securities law or "blue sky" permits and approvals required to carry out the
issuance of Acquiror Common Stock pursuant to the Merger and all other
transactions contemplated by this Agreement, and the Company shall furnish all
information concerning the Company and the holders of the Company Common Stock
as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to prepare and file within 30 days of the date of this
Agreement all necessary documentation, to effect all applications, notices,
petitions and filings, and to obtain as promptly as practicable all permits,
consents, approvals and authorizations of all Governmental Entities and third
parties which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including without limitation the Merger and the
Bank Merger). The Acquiror and the Company shall have the right to review in
advance, and to the extent practicable each will consult with the other on, in
each case subject to applicable laws relating to the exchange of information,
all the information which appears in any filing made with or written materials
submitted to any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as practicable.
The parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) The Acquiror and the Company shall, upon request, furnish each
other with all information concerning themselves, their respective Subsidiaries,
directors, officers and
43
shareholders and such other matters as may be reasonably necessary or advisable
in connection with the Proxy Statement, the Form S-4 or any other statement,
filing, notice or application made by or on behalf of the Acquiror, the Company
or any of their respective Subsidiaries to any Governmental Entity in connection
with the Merger, the Bank Merger and the other transactions contemplated hereby.
(d) The Acquiror and the Company shall promptly furnish each other with
copies of written communications received by the Acquiror or the Company, as the
case may be, or any of their respective Subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
5.4 Investigation and Confidentiality
(a) Each of the Acquiror and the Company shall permit the other party
and its representatives reasonable access to its properties and personnel, and
shall disclose and make available to such other party all books, papers and
records relating to the assets, stock ownership, properties, operations,
obligations and liabilities of it and its Subsidiaries, including, but not
limited to, all books of account (including the general ledger), tax records,
minute books of meetings of boards of directors (and any committees thereof) and
shareholders, organizational documents, bylaws, material contracts and
agreements, filings with any regulatory authority, accountants' work papers,
litigation files, loan files, plans affecting employees, and any other business
activities or prospects in which the other party may have a reasonable interest,
provided that such access shall be reasonably related to the transactions
contemplated hereby and, in the reasonable opinion of the respective parties
providing such access, not unduly interfere with normal operations. Each of the
Acquiror and the Company and its Subsidiaries shall make their respective
directors, officers, employees and agents and authorized representatives
(including counsel and independent public accountants) available to confer with
the other party and its representatives, provided that such access shall be
reasonably related to the transactions contemplated hereby and shall not unduly
interfere with normal operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall return to the party which
furnished such information all documents or other materials containing,
reflecting or referring to such information, shall use its best efforts to keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purposes. The obligation to
keep such information confidential shall continue for five years from the date
the proposed transactions are abandoned but shall not apply to (i) any
information which (x) the party receiving the information can establish by
convincing evidence was already in its possession prior to the disclosure
thereof by the party furnishing the information; (y) was then generally known to
the public; or (z) became known to the public through no fault of the party
receiving the
44
information; or (ii) disclosures pursuant to a legal requirement or in
accordance with an order of a court of competent jurisdiction, provided that the
party which is the subject of any such legal requirement or order shall use its
best efforts to give the other party at least ten business days prior notice
thereof.
5.5 Press Releases
The Acquiror and the Company shall agree with each other as to the form
and substance of any press release related to this Agreement or the transactions
contemplated hereby, and consult with each other as to the form and substance of
other public disclosures which may relate to the transactions contemplated by
this Agreement, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which is required by law or regulation.
5.6 Business of the Parties
(a) During the period from the date of this Agreement and continuing
until the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of the Acquiror, the Company and the
Company Subsidiaries shall carry on their respective businesses in the ordinary
course consistent with past practice. The Company will use all reasonable
efforts to (x) preserve its business organization and that of the Company
Subsidiaries intact, (y) keep available to itself and the Acquiror the present
services of the employees of the Company and the Company Subsidiaries and (z)
preserve for itself and the Acquiror the goodwill of the customers of the
Company and the Company Subsidiaries and others with whom business relationships
exist. Without limiting the generality of the foregoing, except with the prior
written consent of the Acquiror or as expressly contemplated hereby, between the
date hereof and the Effective Time, the Company shall not, and shall cause each
Company Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Company Common Stock, except for regular
quarterly cash dividends at a rate per share of Company Common Stock
not in excess of $.17 per share, which shall have the same record and
payment dates as the record and payment dates relating to dividends on
the Acquiror Common Stock (as Previously Disclosed by the Acquiror), it
being the intention of the parties that the shareholders of the Company
receive dividends for any particular quarter on either the Company
Common Stock or the Acquiror Common Stock but not both;
(ii) issue any shares of its capital stock, other than
pursuant to the Company Stock Option Agreement, or issue, grant, modify
or authorize any Rights, other than the Company Stock Option Agreement;
purchase any shares of Company Common Stock or Acquiror Common Stock;
or effect any recapitalization, reclassification, stock dividend, stock
split or like change in capitalization;
45
(iii) amend its Articles of Incorporation, Code of Regulations
or other governing instrument or Bylaws; impose, or suffer the
imposition, on any share of stock held by the Company in any Company
Subsidiary of any material lien, charge or encumbrance or permit any
such lien, charge or encumbrance to exist; or waive or release any
material right or cancel or compromise any material debt or claim;
(iv) increase the rate of compensation of any of its
directors, officers or employees, or pay or agree to pay any bonus or
severance to, or provide any other new employee benefit or incentive
to, any of its directors, officers or employees, except (i) as may be
required pursuant to binding commitments existing on the date hereof or
as Previously Disclosed, (ii) in the case of employees who are not
executive officers, such as may be granted in the ordinary course of
business consistent with past practice and (iii) in the case of Donald
H. Rolf, Jr. and Joseph D. Hughes, in the event the Merger is not
consummated by January 1, 1997, such as may be granted in the ordinary
course of business consistent with past practice;
(v) except as Previously Disclosed, enter into or, except as
may be required by law, modify any pension, retirement, stock option,
stock purchase, stock appreciation right, savings, profit sharing,
deferred compensation, supplemental retirement, consulting, bonus,
group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement related thereto,
in respect of any of its directors, officers or employees; or make any
contributions to any defined benefit or defined contribution plan not
in the ordinary course of business consistent with past practice;
(vi) enter into (w) any agreement, arrangement or commitment
not made in the ordinary course of business, (x) any agreement,
indenture or other instrument relating to the borrowing of money by the
Company or any Company Subsidiary or guarantee by the Company or any
Company Subsidiary of any such obligation, except in the case of the
Association for deposits and borrowings in the ordinary course of
business consistent with past practice, (y) any agreement, arrangement
or commitment relating to the employment of, or severance of, an
employee, or, except as contemplated by Section 5.9 hereof, amend any
such existing agreement, arrangement or commitment, provided that the
Company and any Company Subsidiary may employ an employee if necessary
to operate the business of the Company or a Company Subsidiary in the
ordinary course of business consistent with past practice and if the
employment of such employee is terminable by the Company and any
successor at will without liability, other than as required by law; or
(z) any contract, agreement or understanding with a labor union;
(vii) change its method of accounting in effect for the year
ended June 30, 1995, except as required by changes in laws or
regulations or generally accepted accounting principles concurred in by
its and the Acquiror's independent certified public accountants, or
change any of its methods of reporting income and deductions
46
for federal income tax purposes from those employed in the preparation
of its federal income tax return for the year ended June 30, 1995,
except as required by changes in laws or regulations;
(viii) purchase or otherwise acquire, or sell or otherwise
dispose of, any assets or incur any liabilities other than in the
ordinary course of business consistent with past practice and policies;
(ix) make any capital expenditures in excess of $50,000
individually or $100,000 in the aggregate, other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
(x) file any applications or make any contract with respect to
branching or site location or relocation;
(xi) acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) any business or entity;
(xii) engage in any transaction with an "affiliated person" or
"affiliate," in each case as defined in Section 3.22 hereof, other than
loans to directors, officers and employees in the ordinary course of
business consistent with past practice and which are in compliance with
the requirements of applicable laws and regulations or transactions
contemplated by this Section 5.6;
(xiii) discharge or satisfy any lien or encumbrance or pay any
material obligation or liability (absolute or contingent) other than at
scheduled maturity or in the ordinary course of business;
(xiv) change its lending, investment, deposit or asset and
liability management or other banking policies in any material respect
except as may be required by applicable law;
(xv) enter into any futures contract, option contract,
interest rate cap, interest rate floor, interest rate exchange
agreement or other agreement for purposes of hedging the exposure of
its interest-earning assets and interest-bearing liabilities to changes
in market rates of interest;
(xvi) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of its
assets or rights or requiring the consent of any party to the transfer
and assignment of any such assets or rights;
47
(xvii) take any action that would result in any of the
representations and warranties of the Company contained in this
Agreement not to be true and correct in any material respect at the
Effective Time; or
(xviii) agree to do any of the foregoing.
(b) During the period from the date of this Agreement and continuing
until the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of the Company, the Acquiror, the
Acquisition Corporation and the Bank shall carry on their respective businesses
in the ordinary course consistent with past practice and use all reasonable
efforts to preserve intact their present business organizations and
relationships. Without limiting the generality of the foregoing, except with the
prior written consent of the Company or as expressly contemplated hereby,
between the date hereof and the Effective Time, the Acquiror shall not, and
shall cause the Acquisition Corporation and the Bank not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Acquiror Common Stock, except for regular
quarterly cash dividends which are not in excess of $.05 per share of
Acquiror Common Stock, provided, however, that nothing contained herein
shall be deemed to affect the ability of the Bank to pay dividends on
its common stock to the Acquiror;
(ii) issue any shares of its capital stock or issue, grant,
modify or authorize any Rights, other than in each case pursuant to (i)
Rights granted pursuant to the Acquiror Employee Stock Benefit Plans,
(ii) the Acquiror Stock Option Agreement or (iii) any acquisition to
the extent permitted under subsection (v) below;
(iii) effect any recapitalization, reclassification, stock
split or like change in capitalization;
(iv) amend its Articles of Incorporation, Code of Regulations,
Charter or other governing instrument or Bylaws in a manner which would
adversely affect in any manner the terms of the Acquiror Common Stock
or the ability of the Acquiror to consummate the transactions
contemplated hereby;
(v) except as Previously Disclosed as of the date hereof,
acquire in any manner whatsoever (other than to realize upon collateral
for a defaulted loan) any business or entity (including acquisitions of
branch offices and related deposit liabilities);
(vi) change its method of accounting in effect for the year
ended December 31, 1995 in a manner which would have a material adverse
effect on the Company's financial condition or results of operations
during fiscal 1996, except as required by
48
changes in laws or regulations or generally accepted accounting
principles concurred in by its and the Company's independent certified
public accountants;
(vii) take any action that would result in any of the
representations and warranties of the Acquiror contained in this
Agreement not to be true and correct in any material respect at the
Effective Time; or
(viii) agree to do any of the foregoing.
(c) Neither the Company nor the Acquiror shall, and each of them shall
cause its respective Subsidiaries not to, solicit or encourage inquiries or
proposals with respect to, furnish any information relating to, or participate
in any negotiations or discussions concerning, any acquisition, lease or
purchase of all or a substantial portion of the assets of, or any equity
interest in, such party or any of its Subsidiaries (other than in the case of
the Company with the Acquiror or an affiliate thereof and in the case of the
Acquiror as permitted by Section 5.6(b)(v) hereof), provided, however, that the
Board of Directors of the Company or the Acquiror, on behalf of the Company and
the Acquiror, respectively, may furnish such information or participate in such
negotiations or discussions if such Board of Directors, after having consulted
with and considered the advice of outside counsel, has determined that the
failure to do the same would cause the members of such Board of Directors to
breach their fiduciary duties under applicable laws. Each of the Company and the
Acquiror will promptly inform the other party of any such request for
information or of any such negotiations or discussions, as well as instruct its
and its Subsidiaries' directors, officers, representatives and agents to refrain
from taking any action prohibited by this Section 5.6(c).
5.7 Current Information
During the period from the date of this Agreement to the Effective
Time, each party shall, upon the request of the other party, cause one or more
of its designated representatives to confer on a monthly or more frequent basis
with representatives of the other party regarding its financial condition,
operations and business and matters relating to the completion of the
transactions contemplated hereby. As soon as reasonably available, but in no
event more than 45 days after the end of each calendar quarter ending after the
date of this Agreement (other than the last quarter of each fiscal year ending
June 30, in the case of the Company, and December 31, in the case of the
Acquiror), the Company and the Acquiror will deliver to the other party its
quarterly report on Form 10-Q (or Form 10- QSB) under the Exchange Act, and, as
soon as reasonably available, but in no event more than 90 days after the end of
each fiscal year, the Company and the Acquiror will deliver to the other party
its Annual Report on Form 10-K (or Form 10-KSB). Within 25 days after the end of
each month, the Company and the Acquiror will deliver to the other party a
consolidated statement of financial condition and a consolidated statement of
income, without related notes, for such month prepared in accordance with
generally accepted accounting principles.
49
5.8 Indemnification; Insurance
(a) From and after the Effective Time through the third anniversary of
the Effective Time, the Acquiror (the "Indemnifying Party") shall indemnify and
hold harmless each present and former director, officer and employee of the
Company or any Company Subsidiary determined as of the Effective Time (the
"Indemnified Parties") against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent to which such Indemnified Parties were entitled
under the Articles of Incorporation, Code of Regulations or other governing
instrument and Bylaws of the Company and any Company Subsidiary as in effect on
the date hereof.
(b) Any Indemnified Party wishing to claim indemnification under
Section 5.8(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements
therefor are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present such counsel
with a conflict of interest), (ii) the Indemnified Parties will cooperate in the
defense of any such matter and (iii) the Indemnifying Party shall not be liable
for any settlement effected without its prior written consent.
(c) On or prior to the Effective Time, the Company shall purchase
insurance coverage on substantially the same terms and conditions as the
liability insurance provided by the Company for its directors and officers as of
the date hereof for a period of three years following the Effective Time,
provided, however, that in no event shall the Company expend, in order to obtain
such insurance, any amount per annum in excess of 140% of the amount of the
actual premiums paid as of the date hereof by the Company for such insurance
(the "Maximum Amount"). If the amount of the annual premiums necessary to
maintain or procure such insurance coverage exceeds the Maximum Amount, the
Company
50
shall use all reasonable efforts to maintain the most advantageous policies of
directors' and officers' insurance obtainable for an annual premium equal to the
Maximum Amount.
(d) In the event that the Acquiror or any of its respective successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.8, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
5.9 Directors, Officers and Employees
(a) Effective as of the Effective Time, (i) the number of directors of
the Acquiror shall be increased by three and (ii) the Acquiror agrees to take
all action necessary to elect Donald H. Rolf, Jr., Joseph D. Hughes and Thomas
N. Spaeth as directors for terms expiring at the 1999 annual meeting of
stockholders of the Acquiror.
(b) Effective as of the Effective Time, Paul D. Staubach shall resign
as a director of the Bank, and the resulting vacancy shall be filled by Donald
H. Rolf, Jr.
(c) Effective as of the Effective Time, Donald H. Rolf, Jr. shall be
elected as Chairman of the Board of the Acquiror and the Bank and Mr. Rolf shall
be entitled to be compensated at a rate not less than the rate of compensation
received by him from the Association immediately prior to the Effective Time.
Effective as of the Effective Time, Mr. Rolf shall, subject to any requisite
regulatory approval, enter into an employment agreement with the Acquiror and
the Bank, the form of which has been Previously Disclosed.
(d) Effective as of the Effective Time, Joseph D. Hughes shall be
elected as Executive Vice President and Chief Lending Officer of the Acquiror
and the Bank and Mr. Hughes shall be entitled to be compensated at a rate not
less than the rate of compensation received by him from the Association
immediately prior to the Effective Time. Effective as of the Effective Time, Mr.
Hughes shall, subject to any requisite regulatory approval, enter into an
employment agreement with the Acquiror and the Bank, the form of which has been
Previously Disclosed.
(e) Effective as of the Effective Time, Anita G. Glasmeier and Carolyn
R. Watt shall, subject to any requisite regulatory approval, enter into
severance agreements with the Acquiror and the Bank, the form of which has been
Previously Disclosed.
(f) Effective as of the Effective Time, the Acquiror and the Bank shall
assume and agree to perform all obligations set forth in the Amended Employment
Agreement, dated December 21, 1995, by and between the Association and David C.
Greis.
51
(g) The Acquiror and the Bank shall have the right, but not the
obligation, to offer employment, as officers and employees of the Acquiror or
the Bank, immediately following the Effective Time, to any persons who are
officers and employees of the Company or any Company Subsidiary immediately
before the Effective Time. To the extent that the employment of any employee of
the Company or any Company Subsidiary (other than any employee who is party to
an employment or severance agreement) is involuntarily terminated at or during
the one-year period following the Effective Time as a result of the elimination
of a job position, such employee will be entitled to receive severance benefits
in accordance with and to the extent Previously Disclosed (which severance
benefits shall not in any event be less than the severance benefits that an
employee of the Acquiror or the Bank with similar years of service would be
entitled to in the event of termination). For purposes of determining severance
benefits, each employee whose employment is terminated will be credited with his
or her years of service with the Company or a Company Subsidiary prior to the
Effective Time.
(h) The Company shall use its best efforts to begin the process of
terminating the People's Savings Association Pension Plan prior to the Effective
Time.
(i) On or after the Effective Time, the Acquiror shall cause the
People's Savings Association Savings & Investment Plan to be merged with and
into the Fidelity Federal Savings Bank 401(k) Retirement Plan. The Company and
the Acquiror agree to cooperate with respect to any government filing,
including, but not limited to, the filing of Internal Revenue Service Forms
5310, if necessary, to effect the merger contemplated by this Section 5.9(h).
(j) Each current employee of the Company and the Company Subsidiaries
who remains an employee of the Acquiror and/or the Bank following the Effective
Time shall be entitled to participate in all Acquiror Employee Plans on the same
terms and to the same extent as similarly situated employees of the Acquiror and
the Bank. Employees of the Company and the Company Subsidiaries shall receive
credit for their years of service with the Company and the Company Subsidiaries
for purposes of determining eligibility and vesting, but not benefit accrual, in
all Acquiror Employee Plans.
5.10 Certain Policies; Integration
(a) If requested by the Acquiror, on the business day immediately prior
to the Effective Time, the Company shall, consistent with generally accepted
accounting principles, establish such additional accruals and reserves as may be
necessary to conform the Company's accounting and credit loss reserve practices
and methods to those of the Acquiror (as such practices and methods are to be
applied to the Company or its Subsidiaries from and after the Effective Time)
and reflect the Acquiror's plans with respect to the conduct of the Company's
business following the Merger and to provide for the costs and expenses relating
to the consummation by the Company of the transactions contemplated by this
Agreement; provided, however, that the Company shall not be required
52
to take such action (i) if such action is prohibited by applicable law or by
generally accepted accounting principles, (ii) if such action would have a
material adverse effect on the financial condition, results of operations or
business of the Acquiror on a consolidated basis following consummation of the
Merger and the Bank Merger or (iii) unless the Acquiror informs the Company that
all conditions to the Acquiror's obligations to consummate the transactions
contemplated by this Agreement set forth in Article VI hereof have been
satisfied or waived. The establishment of such accruals and reserves shall not,
in and of itself, constitute a breach of any representation or warranty of the
Company contained in this Agreement.
(b) During the period from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its directors, officers and employees
to, cooperate with and assist the Company in the formulation of a plan of
integration for the Acquiror and the Company and their respective banking
subsidiaries.
5.11 Restrictions on Resale
(a) The Company has Previously Disclosed to the Acquiror a schedule of
each person that, to the best of its knowledge, is deemed to be an "affiliate"
of the Company (each an "Affiliate"), as that term is used in Rule 145 under the
Securities Act.
(b) The Company shall use its reasonable best efforts to cause each
person who may be deemed to be an Affiliate of the Company to execute and
deliver to the Acquiror an agreement in the form attached hereto as Exhibit F.
5.12 Disclosure Supplements
From time to time prior to the Effective Time, each party shall
promptly supplement or amend any materials Previously Disclosed and delivered to
the other party pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement, would have
been required to be set forth or described in materials Previously Disclosed to
the other party or which is necessary to correct any information in such
materials which has been rendered materially inaccurate thereby; no such
supplement or amendment to such materials shall be deemed to have modified the
representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
5.13 Failure to Fulfill Conditions
In the event that either of the parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated hereby cannot be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party or parties. Each party will
promptly inform the other party or parties of any facts applicable to it that
would be likely to prevent or materially delay approval of the Merger
53
or the Bank Merger by any Governmental Entity or third party or which would
otherwise prevent or materially delay completion of the Merger or the Bank
Merger.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - The Acquiror, the Acquisition Corporation and
the Company
The respective obligations of the Acquiror, the Acquisition Corporation
and the Company to effect the transactions contemplated by this Agreement shall
be subject to satisfaction of the following conditions at or prior to the
Effective Time.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby shall have been duly and validly taken by the Acquiror, the Acquisition
Corporation and the Company, including approval by the requisite vote of the
respective shareholders of the Acquiror, the Acquisition Corporation and the
Company of this Agreement, and all corporate and shareholder action necessary to
authorize the execution and delivery of the Bank Merger Agreement and
consummation of the transactions contemplated thereby shall have been duly and
validly taken by the Association and the Bank.
(b) All approvals and consents for the transactions contemplated hereby
and the Bank Merger Agreement from the OTS, the Department and any other
Governmental Entity the approval or consent of which is required for the
consummation of the Merger, the Bank Merger and the other transactions
contemplated hereby shall have been received and all statutory waiting periods
in respect thereof shall have expired; and the Acquiror and the Company shall
have procured all other approvals, consents and waivers of each person (other
than the Governmental Entities referred to above) whose approval, consent or
waiver is necessary to the consummation of the Merger, the Bank Merger and the
other transactions contemplated hereby.
(c) None of the Acquiror, the Company or their respective Subsidiaries
shall be subject to any statute, rule, regulation, injunction or other order or
decree which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
consummation of the Merger or the Bank Merger or any of the other transactions
contemplated hereby.
(d) The Form S-4 shall have become effective under the Securities Act,
and the Acquiror shall have received all state securities laws or "blue sky"
permits and other authorizations or there shall be exemptions from registration
requirements necessary to issue the Acquiror Common Stock in connection with the
Merger, and neither the Form S-4 nor any such permit, authorization or exemption
shall be subject to a stop order or threatened stop order by the Commission or
any state securities authority.
54
(e) The shares of Acquiror Common Stock to be issued in connection with
the Merger shall have been approved for listing on the Nasdaq Stock Market's
National Market.
(f) The parties shall have received an opinion addressed to both the
Acquiror and the Company and issued by either Thompson Hine & Flory P.L.L. or a
law firm or accounting firm designated by the Acquiror and reasonably acceptable
to the Company, which opinion shall be reasonably acceptable to the parties and
to the effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing at
the Effective Time, the Merger and the Bank Merger will be treated for federal
income tax purposes as part of one or more reorganizations within the meaning of
Section 368 of the Code, and that accordingly:
(i) no gain or loss will be recognized by (x) the Acquiror,
the Acquisition Corporation or the Company as a result of the Merger or
(y) the Bank or the Association as a result of the Bank Merger;
(ii) no gain or loss will be recognized by the shareholders of
the Company who exchange their Company Common Stock solely for Acquiror
Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in Acquiror Common
Stock);
(iii) the tax basis of the Acquiror Common Stock received by
shareholders who exchange all of their Company Common Stock solely for
Acquiror Common Stock in the Merger will be the same as the tax basis
of the Company Common Stock surrendered in exchange therefor (reduced
by any amount allocable to a fractional share interest for which cash
is received); and
(iv) any shareholders of the Company who receive cash in
exchange for their shares of Company Common Stock will recognize gain,
if any, equal to the lesser of (i) the excess of the amount of cash
plus the fair market value of any Acquiror Common Stock received in the
Merger over the shareholder's adjusted tax basis in their Company
Common Stock, or (ii) the amount of cash received.
In rendering such opinion, Thompson Hine & Flory P.L.L. or such other
law firm or accounting firm will require and rely upon representations contained
in certificates of officers of the Acquiror, the Acquisition Corporation, the
Company, the Bank and the Association.
6.2 Conditions Precedent - The Company
The obligations of the Company to effect the transactions contemplated
by this Agreement shall be subject to satisfaction of the following conditions
at or prior to the Effective Time unless waived by the Company pursuant to
Section 7.4 hereof.
55
(a) The representations and warranties of the Acquiror and the
Acquisition Corporation as set forth in Article IV hereof shall be true and
correct as of the date of this Agreement and as of the Effective Time as though
made on and as of the Effective Time (or on the date when made in the case of
any representation and warranty which specifically relates to an earlier date),
provided, however, that notwithstanding anything herein to the contrary, this
Section 6.2(a) shall be deemed to have been satisfied even if such
representations or warranties are not true and correct unless the failure of any
of the representations or warranties to be so true and correct would have,
individually or in the aggregate, a material adverse effect on the financial
condition, results of operations or business of the Acquiror on a consolidated
basis or on the ability of the Acquiror, the Acquisition Corporation, the
Company, the Bank and the Association, as applicable, to consummate the Merger
and the Bank Merger.
(b) The Acquiror and the Acquisition Corporation shall have performed
in all material respects all obligations and complied with all covenants
required to be performed and complied with by them pursuant to this Agreement on
or prior to the Effective Time (including without limitation the covenants set
forth in Sections 5.9(a), (b), (c) and (d) hereof).
(c) Each of the Acquiror and the Acquisition Corporation shall have
delivered to the Company a certificate, dated the date of the Closing and signed
by its President and by its Chief Financial Officer, to the effect that the
conditions set forth in Sections 6.2(a) and 6.2(b) have been satisfied.
(d) The Company shall have received the written opinion of Elias, Matz,
Tiernan & Herrick L.L.P., dated the date of the Closing, that collectively
address the matters set forth in Exhibit G hereto.
(e) The Acquiror and/or the Acquisition Corporation shall have
furnished the Company with such certificates of its respective officers or
others and such other documents to evidence fulfillment of the conditions set
forth in Sections 6.1 and 6.2 as such conditions relate to the Acquiror or the
Acquisition Corporation as the Company may reasonably request.
6.3 Conditions Precedent - The Acquiror and the Acquisition Corporation
The obligations of the Acquiror and the Acquisition Corporation to
effect the transactions contemplated by this Agreement shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Acquiror or the Acquisition Corporation pursuant to Section
7.4 hereof.
(a) The representations and warranties of the Company set forth in
Article III hereof shall be true and correct as of the date of this Agreement
and as of the Effective Time as though made on and as of the Effective Time (or
on the date when made in the
56
case of any representation and warranty which specifically relates to an earlier
date), provided, however, that notwithstanding anything herein to the contrary,
this Section 6.3(a) shall be deemed to have been satisfied even if such
representations or warranties are not true and correct unless the failure of any
of the representations or warranties to be so true and correct would have,
individually or in the aggregate, a material adverse effect on the financial
condition, results of operations or business of the Company on a consolidated
basis or on the ability of the Acquiror, the Acquisition Corporation, the
Company, the Bank and the Association, as applicable, to consummate the Merger
and the Bank Merger.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
(c) The Company shall have delivered to the Acquiror a certificate,
dated the date of the Closing and signed by its Chairman and President and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.3(a) and 6.3(b) have been satisfied.
(d) No approval or consent referred to in Section 6.1(b) hereof shall
include any condition or requirement that, individually or in the aggregate,
would (i) result in a material adverse effect on the financial condition,
results of operations or business of the Acquiror on a consolidated basis or
(ii) reduce the economic or business benefits of the transactions contemplated
by this Agreement to the Acquiror in so significant a manner that the Acquiror,
in its reasonable judgment, would not have entered into this Agreement.
(e) The Acquiror shall have received the written opinion of Thompson
Hine & Flory P.L.L., dated the date of the Closing, that collectively address
the matters set forth in Exhibit H hereto.
(f) The Company shall have furnished the Acquiror with such
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 6.1 and 6.3 as such
conditions relate to the Company as the Acquiror may reasonably request.
(g) Holders of not more than 10% of the outstanding Company Common
Stock shall have elected to exercise dissenters' or appraisal rights under
Section 1701.85 of the OGCL.
57
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by the Acquiror in
writing if the Company has, or by the Company in writing if the Acquiror or the
Acquisition Corporation has, in any material respect, breached (i) any material
covenant (including without limitation the covenants set forth in Sections
5.9(a), (b), (c) and (d) hereof) or undertaking contained herein or (ii) any
representation or warranty contained herein, in any case if such breach has not
been cured by the earlier of 30 days after the date on which written notice of
such breach is given to the party committing such breach or the Effective Time;
(c) at any time, by any party hereto in writing, if any of the
applications for prior approval referred to in Section 5.3 hereof are denied or
are approved in a manner which does not satisfy the requirements of Section
6.1(b) hereof, and the time period for appeals and requests for reconsideration
has run;
(d) at any time, by any party hereto in writing, if the shareholders of
the Acquiror, the Acquisition Corporation or the Company do not approve this
Agreement after a vote taken thereon at a meeting duly called for such purpose
(or at any adjournment thereof), unless the failure of such occurrence shall be
due to the failure of the party seeking to terminate to perform or observe in
any material respect its agreements set forth herein to be performed or observed
by such party at or before the Effective Time;
(e) by either the Company or the Acquiror in writing if the Effective
Time has not occurred by the close of business on the first anniversary of the
date hereof, provided that this right to terminate shall not be available to any
party whose failure to perform an obligation in breach of such party's
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Merger and the other transactions contemplated hereby to be
consummated by such date;
(f) by the Company, by action of a majority of its entire Board of
Directors, in the event the Average Acquiror Share Price is less than $8.00,
provided, however, that during the five day period following the provision by
the Company of such a written notice of termination to the Acquiror pursuant to
this Section 7.1(f), the Acquiror shall have the option of changing the Per
Share Stock Consideration to an amount equal to 4.75 shares. If the Acquiror so
elects within such five-day period, it shall give prompt written notice to the
Company of such election and the revised Exchange Ratio, whereupon no
termination
58
shall have occurred pursuant to this Section 7.1(f) and this Agreement shall
remain in effect in accordance with its terms (except that the Exchange Ratio
shall have been so modified).
(g) at any time by any party hereto in writing if such party is not in
default hereunder and such party determines in good faith that any condition
precedent to such party's obligations to consummate the Merger and the other
transactions contemplated hereby is or would be impossible to satisfy, and such
condition is not waived by the other party.
7.2 Effect of Termination
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality and expenses set forth in Section 5.4 and
Section 8.1, respectively, and this Section 7.2 shall survive any such
termination and (ii) a termination pursuant to Section 7.1(b), (d), (e) and (g)
shall not relieve the breaching party from liability for willful breach of any
covenant, undertaking, representation or warranty giving rise to such
termination.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including without
limitation the covenants set forth in Sections 5.8 and 5.9 hereof), provided
that no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive the Acquiror or the Company (or any
director, officer or controlling person thereof) of any defense at law or in
equity which otherwise would be available against the claims of any person,
including, without limitation, any shareholder or former shareholder of either
the Acquiror or the Company.
7.4 Waiver
Each party hereto by written instrument signed by an executive officer
of such party, may at any time (whether before or after approval of this
Agreement by the shareholders of the Acquiror, the Acquisition Corporation and
the Company) extend the time for the performance of any of the obligations or
other acts of the other party hereto and may waive (i) any inaccuracies of the
other party in the representations or warranties contained in this Agreement or
any document delivered pursuant hereto, (ii) compliance with any of the
covenants, undertakings or agreements of the other party, (iii) to the extent
permitted by law, satisfaction of any of the conditions precedent to its
obligations contained herein or (iv) the performance by the other party of any
of its obligations set forth herein, provided that any such waiver granted, or
any amendment or supplement pursuant to Section 7.5 hereof executed after
shareholders of the Acquiror, the Acquisition Corporation or the Company have
approved this Agreement shall not modify either the amount or form of the
59
consideration to be provided hereby to the holders of Company Common Stock upon
consummation of the Merger or otherwise materially adversely affect such
shareholders without the approval of the shareholders who would be so affected.
7.5 Amendment or Supplement
This Agreement may be amended or supplemented at any time by mutual
agreement of the Acquiror, the Acquisition Corporation and the Company, subject
to the proviso to Section 7.4 hereof. Any such amendment or supplement must be
in writing and authorized by their respective Boards of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses
(a) Each party hereto shall bear and pay all costs and expenses
incurred by it in connection with the transactions contemplated by this
Agreement, including fees and expenses of its own financial consultants,
accountants and counsel, except that expenses of printing the Form S-4 and the
registration fees to be paid to the Commission in connection therewith shall be
shared equally between the Company and the Acquiror.
(b) Notwithstanding any provision in this Agreement to the contrary, in
the event that any of the parties shall default in its obligations hereunder,
either of the non-defaulting parties may pursue any remedy available at law or
in equity to enforce its rights and shall be paid by the defaulting party for
all damages, costs and expenses, including without limitation legal, accounting,
investment banking and printing expenses, incurred or suffered by such
non-defaulting party in connection herewith or in the enforcement of its rights
hereunder.
8.2 Entire Agreement
This Agreement contains the entire agreement among the parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto (including the respective
confidentiality letter agreements dated as of March 8, 1996), written or oral,
other than documents referred to herein and therein. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and thereto and their respective successors. Nothing in this 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 other than as set forth in Sections 5.8 and 5.9
hereof.
60
8.3 No Assignment
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to the Acquiror or the Acquisition Corporation:
Fidelity Financial of Ohio, Inc.
4555 Montgomery Road
Cincinnati, Ohio 45212
Attn: John R. Reusing
President and Chief Executive Officer
Fax: 513-458-3475
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Jeffrey D. Haas, Esq.
Fax: 202-347-2172
If to the Company:
Circle Financial Corporation
11100 Reading Road
Sharonville, Ohio 45241-1904
Attn: Donald H. Rolf, Jr.
Chairman and President
Fax: 513-563-2264
With a required copy to:
Thompson Hine & Flory P.L.L.
3900 Society Center
127 Public Square
Cleveland, Ohio 44114-1216
Attn: Raymond T. Sawyer, Esq.
Fax: 216-566-5800
61
8.5 Alternative Structure
Notwithstanding any provision of this Agreement to the contrary, the
Acquiror may, with the written consent of the Company, which shall not be
unreasonably withheld, elect, subject to the filing of all necessary
applications and the receipt of all required regulatory approvals, to modify the
structure of the acquisition of the Company and the Association set forth herein
(including without limitation restructuring the Bank Merger or delaying the Bank
Merger), provided that (i) the federal income tax consequences of any
transactions created by such modification shall not be other than those set
forth in Section 6.1(f) hereof, (ii) the consideration to be paid to the holders
of the Company Common Stock is not thereby changed in kind or reduced in amount
as a result of such modification and (iii) such modification will not materially
delay or jeopardize receipt of any required regulatory approvals or any other
condition to the obligations of the Acquiror set forth in Sections 6.1 and 6.3
hereof.
8.6 Interpretation
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio applicable to agreements made and entirely to be
performed within such jurisdiction.
62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
FIDELITY FINANCIAL OF OHIO, INC.
Attest:
/s/ Paul D. Staubach By: /s/ John R. Reusing
- ------------------------- -------------------------
Name: Paul D. Staubach Name: John R. Reusing
Title: Senior Vice President, Chief Title: President and Chief Executive Officer
Financial Officer and Secretary
FIDELITY ACQUISITION CORPORATION
Attest:
/s/ Paul D. Staubach By: /s/ John R. Reusing
- -------------------- --------------------
Name: Paul D. Staubach Name: John R. Reusing
Title: Senior Vice President, Chief Title: President and Chief
Financial Officer and Executive Officer
Secretary
CIRCLE FINANCIAL CORPORATION
Attest:
/s/ Theresa M. Barlow By: /s/ Donald H. Rolf, Jr.
- --------------------- --------------------------
Name: Theresa M. Barlow Name: Donald H. Rolf, Jr.
Title: Secretary Title: Chairman and President
63
EXHIBIT A
AMENDED AND RESTATED AGREEMENT OF MERGER
Amended and Restated Agreement of Merger, dated as of June 13, 1996, by
and between Fidelity Federal Savings Bank (the "Acquiror Bank") and People's
Savings Association (the "Association") which amends and restates the Agreement
of Merger between the Acquiror Bank and the Association dated as of April 29,
1996.
WITNESSETH:
WHEREAS, the Association is a Ohio-chartered savings and loan
association and a wholly-owned subsidiary of Circle Financial Corporation (the
"Company"); and
WHEREAS, the Acquiror Bank is a federally chartered savings bank which
upon the receipt of all requisite regulatory approvals and the contribution of
all of the capital stock of the Bank, will become a wholly-owned subsidiary of
Fidelity Acquisition Corporation ("Acquisition Corporation") which is in turn a
wholly-owned subsidiary of Fidelity Financial of Ohio, Inc. (the "Acquiror");
and
WHEREAS, the Acquiror, Acquisition Corporation and the Company have
entered into an Amended and Restated Agreement of Merger, dated as of June __,
1996 (the "Agreement"), pursuant to which the Company will merge with and into
the Acquisition Corporation (the "Parent Merger"); and
WHEREAS, the Association and the Acquiror Bank desire to merge on the
terms and conditions herein provided immediately following the effective time of
the Parent Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. The Merger. Subject to the terms and conditions of this Amended and
Restated Agreement of Merger, at the Effective Time (as defined in Section 2
hereof), the Association shall merge with and into the Acquiror Bank (the
"Merger") under the laws of the State of Ohio and the United States. The
Acquiror Bank shall be the surviving bank of the Merger (the "Surviving Bank").
2. Effective Time. The Merger shall become effective on the date and at
the time that a Certificate of Merger is filed with the Secretary of State of
Ohio and Articles of Combination are declared effective by the Office of Thrift
Supervision (the "OTS"), unless a later date and time is specified as the
effective time on such certificate or Articles of Combination (the "Effective
Time").
3. Charter; Bylaws. The Charter and Bylaws of the Acquiror Bank in
effect immediately prior to the Effective Time shall be the Charter and Bylaws
of the Surviving Bank, until altered, amended or repealed in accordance with
their terms and applicable law.
4. Name; Offices. The name of the Surviving Bank shall be "Fidelity
Bank." The main office of the Surviving Bank shall be the main office of the
Acquiror Bank immediately prior to the Effective Time. All branch offices of the
Association and the Acquiror Bank which were in lawful operation immediately
prior to the Effective Time shall be the branch offices of the Surviving Bank
upon consummation of the Merger, subject to the opening or closing of any
offices which may be authorized by the Association or the Acquiror Bank and
applicable regulatory authorities after the date hereof. Schedule I hereto
contains a list of each of the deposit taking offices of the Association and the
Acquiror Bank which shall be operated by the Surviving Bank, subject to the
opening or closing of any offices which may be authorized by the Association or
the Acquiror Bank and applicable regulatory authorities after the date hereof.
5. Directors and Executive Officers. Upon consummation of the Merger,
(i) the directors of the Surviving Bank shall consist of six persons the names
and residence addresses of which are set forth as Schedule II hereto and (ii)
the executive officers of the Surviving Bank shall be the executive officers of
the Acquiror Bank immediately prior to the Effective Time, except that Donald H.
Rolf, Jr. shall be Chairman of the Board of Directors of the Surviving Bank and
Joseph D. Hughes shall be Executive Vice President and Chief Lending Officer of
the Surviving Bank. Directors and officers of the Surviving Bank shall serve for
such terms as are specified in the Charter and Bylaws of the Surviving Bank.
6. Effects of the Merger. Upon consummation of the Merger, and in
addition to the effects set forth at 12. C.F.R. ss. 552.13, Sections 1151.36 and
1151.60 of the Ohio Revised Code and other applicable law:
(i) all rights, franchises and interests of the Association in
and to every type of property (real, personal and mixed), tangible and
intangible, and chooses in action shall be transferred to and vested in the
Surviving Bank by virtue of the Merger without any deed or other transfer, and
the Surviving Bank, without any order or other action on the part of any court
or otherwise, shall hold and enjoy all rights of property, franchises and
interests, including appointments, designations and nominations, and all other
rights and interests as trustee, executor, administrator, registrar of stocks
and bonds, guardian of estates, assignee, receiver and committee, and in every
other fiduciary capacity, in the same manner and to the same extent as such
rights, franchises and interest were held or enjoyed by the Association
immediately prior to the Effective Time; and
(ii) the Surviving Bank shall be liable for all liabilities of
the Association, fixed or contingent, including all deposits, accounts, debts,
obligations and contracts thereof, matured or unmatured, whether accrued,
absolute, contingent or otherwise, and whether or not reflected or reserved
against on balance sheets, books of account or records thereof, and
2
all rights of creditors or obligees and all liens on property of the Association
shall be preserved unimpaired; after the Effective Time, the Surviving Bank will
continue to issue savings accounts on the same basis as immediately prior to the
Effective Time. In accordance with 12 C.F.R. ss. 563b.3(f), the Surviving Bank
shall assume and maintain the liquidation account established by the Association
in connection with its conversion to stock form.
7. Effect on Shares of Stock.
(a) Each share of Acquiror Bank common stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding.
(b) At the Effective Time, each share of Association common stock
issued and outstanding prior to the Merger shall, by virtue of the Merger and
without any action on the part of the holder thereof, be canceled. Any shares of
Association common stock held in the treasury of the Association immediately
prior to the Effective Time shall be retired and canceled.
8. Additional Actions. If, at any time after the Effective Time, the
Surviving Bank shall consider that any further assignments or assurances in law
or any other acts are necessary or desirable to (i) vest, perfect or confirm, of
record or otherwise, in the Surviving Bank its rights, title or interest in, to
or under any of the rights, properties or assets of the Association acquired or
to be acquired by the Surviving Bank as a result of, or in connection with, the
Merger, or (ii) otherwise carry out the purposes of this Agreement of Merger,
the Association and its proper officers and directors shall be deemed to have
granted to the Surviving Bank an irrevocable power of attorney to execute and
deliver all such proper deeds, assignments and assurances in law and to do all
acts necessary or proper to vest, perfect or confirm title to and possession of
such rights, properties or assets in the Surviving Bank and otherwise to carry
out the purposes of this Agreement of Merger; and the proper officers and
directors of the Surviving Bank are fully authorized in the name of the
Association or otherwise to take any and all such action.
9. Counterparts. This Amended and Restated Agreement of Merger may be
executed in one or more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one agreement.
10. Governing Law. This Amended and Restated Agreement of Merger shall
be governed in all respects, including, but not limited to, validity,
interpretation, effect and performance, by the laws of the United States and, to
the extent applicable, the State of Ohio.
3
11. Amendment. Subject to applicable law, this Amended and Restated
Agreement of Merger may be amended, modified or supplemented only by written
agreement of the Acquiror Bank and the Association at any time prior to the
Effective Time.
12. Waiver. Any of the terms or conditions of this Amended and Restated
Agreement of Merger may be waived at any time by whichever of the parties hereto
is, or the shareholders of which are, entitled to the benefit thereof by action
taken by the Board of Directors of such waiving party.
13. Assignment. This Amended and Restated Agreement of Merger may not
be assigned by any party hereto without the prior written consent of the other
party.
14. Termination. This Amended and Restated Agreement of Merger shall
terminate upon the termination of the Agreement in accordance with its terms.
15. Procurement of Approvals. This Amended and Restated Agreement of
Merger shall be subject to the approval of the sole shareholder of the Acquiror
Bank and the Company as the sole shareholder of the Association at a meeting to
be called and held or by consent in lieu thereof in accordance with the
applicable provisions of law and their respective Charter, Articles of
Incorporation, Constitution and Bylaws (or a consent or consents in lieu
thereof). The Acquiror Bank and the Association shall proceed expeditiously and
cooperate fully in the procurement of any other consents and approvals and in
the taking of any other action, and the satisfaction of all other requirements
prescribed by law or otherwise necessary for consummation of the Merger on the
terms provided herein, including without limitation the preparation and
submission of such applications or other filings for approval of the Merger to
the Superintendent and OTS as may be required by applicable laws and
regulations.
16. Conditions Precedent. The obligations of the parties under this
Amended and Restated Agreement of Merger shall be subject to: (i) the approval
of this Amended and Restated Agreement of Merger by the Acquisition Corporation
as the sole shareholder of the Acquiror Bank and the Company as the sole
shareholder of the Association at meetings of shareholders duly called and held
(or by consent or consents in lieu thereof), in each case without any exercise
of such dissenters' rights as may be applicable; (ii) receipt of approval of the
Merger from all governmental and banking authorities whose approval is required;
(iii) receipt of any necessary regulatory approval to operate the main office
and the branch offices of the Association as offices of the Surviving Bank; and
(iv) the consummation of the Parent Merger pursuant to the Agreement on or
before the Effective Time.
17. Effectiveness of Agreement. Notwithstanding anything to the
contrary contained herein, the execution and delivery of this Amended and
Restated Agreement of Merger by the parties hereto shall not be deemed to be
effective unless and until the requirements of 12 C.F.R. ss. 552.13 and Sections
1151.36 and 1151.60 of the Revised Code of Ohio are met.
4
IN WITNESS WHEREOF, each of the Acquiror Bank and the Association has
caused this Amended and Restated Agreement of Merger to be executed on its
behalf by its duly authorized officers.
FIDELITY FEDERAL SAVINGS BANK
Attest:
/s/ Paul D. Staubach By: /s/ John R. Reusing
- -------------------- --------------------
Name: Paul D. Staubach Name: John R. Reusing
Title: Senior Vice President, Title: President and Chief Executive
Chief Financial Officer and Officer
Secretary
PEOPLE'S SAVINGS ASSOCIATION
Attest:
/s/ Theresa M. Barlow By: /s/ Donald H. Rolf, Jr.
- ---------------------- -----------------------
Name: Theresa M. Barlow Name: Donald H. Rolf, Jr
Title: Secretary Title: Chairman
5
SCHEDULE I
List of Offices of
the Surviving Corporation
Home Office:
4555 Montgomery Road
Cincinnati, Ohio 45212
Branch Offices:
8434 Vine Street
Cincinnati, Ohio 45216
7136 Miami Avenue
Cincinnati, Ohio 45243
11100 Reading Road
Cincinnati, Ohio 45241
11700 Princeton Pike
Springdale, Ohio 45246
4144 Hunt Road
Blue Ash, Ohio 45236
5030 Delhi Avenue
Cincinnati, Ohio 45238
3316 Glenmore Avenue
Cincinnati, Ohio 45211
3777 Hamilton Cleves Road
Ross, Ohio 45061
8045 Colerain Avenue
Cincinnati, Ohio 45239
6
SCHEDULE II
Term of
Office
Name of Director Residence Address Expires
- ------------------------------------------ ------------------------------------------------ -----------------
Donald H. Rolf, Jr. 1128 Cleveland Avenue 1997
Park Hills, Kentucky 41011
David A. Luecke 6609 Powner Farm Drive 1997
Cincinnati, Ohio 45248
Michael W. Jordan 5796 Bayberry Drive 1998
Cincinnati, Ohio 45242
Constantine N. Papadakis 103 Airdale Road 1998
Rosemont, Pennsylvania 19010
John R. Reusing 1307 Tara Ridge 1999
Milford, Ohio 45150
Robert W. Zumbiel 2339 Harris Avenue 1999
Norwood, Ohio 45212
7
ANNEX II
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of April 29, 1996 (the "Agreement"), by
and between Circle Financial Corporation, an Ohio corporation ("Issuer"), and
Fidelity Financial of Ohio, Inc. an Ohio corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement of Merger,
dated as of April 29, 1996 (the "Plan"), providing for, among other things, the
merger of Issuer with and into Grantee (the "Merger"), with Grantee as the
surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Plan and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's execution of the Plan
and this Agreement, Grantee has agreed to grant an option to Issuer on terms and
conditions which are substantially identical to those of the Option and this
Agreement with respect to 9.9% of the common stock of Grantee.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 140,911 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of Common Stock, par value $1.00 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $30.00, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 19.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, Grantee may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (i) the Effective Time of the Merger,
(ii) termination of the Plan in accordance with the terms thereof prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section 7.1(b)(i) of the Plan (a
"Default Termination"), (iii) 12 months after the termination of the Plan by
Grantee pursuant to a Default Termination, and (iv) 12 months after termination
of the Plan (other than pursuant to a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event; and provided,
further, that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable laws, including without limitation the
Change in Bank Control Act of 1978, as amended (the "CBC Act"). The term
"Holder" shall mean the holder or holders of the Option from time to time, and
which is initially Grantee. The rights set forth in Section 8 hereof shall
terminate when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an intention
to authorize, recommend or propose, or entered into an agreement with any person
(other than Grantee or any subsidiary of Grantee) to effect (A) a merger,
consolidation or similar transaction involving Issuer or any of its
subsidiaries, (B) the disposition, by sale, lease, exchange or otherwise, of
assets of Issuer or any of its subsidiaries representing in either case 20% or
more of the consolidated assets of Issuer and its subsidiaries, or (C) the
issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 20% or more of the voting power of Issuer or any of its
subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee) shall
have acquired beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Exchange Act) of or the right to acquire beneficial
ownership of, or any "group" (as such term is defined in Section 13(d)(3) of the
Exchange Act) shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of, 25% or more of the then outstanding shares of
Issuer Common Stock.
2
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange Act),
or shall have filed a registration statement under the Securities Act with
respect to, a tender offer or exchange offer to purchase any shares of Issuer
Common Stock such that, upon consummation of such offer, such person would own
or control 10% or more of the then outstanding shares of Issuer Common Stock
(such an offer being referred to herein as a "Tender Offer" and an "Exchange
Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have approved the
Plan at the meeting of such stockholders held for the purpose of voting on the
Plan, (B) such meeting shall not have been held or shall have been canceled
prior to termination of the Plan or (C) Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee the recommendation of
Issuer's Board of Directors with respect to the Plan, in each case after it
shall have been publicly announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (x) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction, (y) commenced a Tender Offer
or filed a registration statement under the Securities Act with respect to an
Exchange Offer, or (z) filed an application (or given notice), whether in draft
or final form, under the CBC Act or the Bank Merger Act, as amended, for
approval to engage in an Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty, covenant
or obligation contained in the Plan and such breach would entitle Grantee to
terminate the Plan under Section 7.1(b) thereof (without regard to the cure
period provided for therein unless such cure is promptly effected without
jeopardizing consummation of the Merger pursuant to the terms of the Plan) after
(x) a bona fide proposal is made by any person (other than Grantee or any
subsidiary of Grantee) to Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any subsidiary of Grantee)
states its intention to Issuer or its stockholders to make a proposal to engage
in an Acquisition Transaction if the Plan terminates, or (z) any person (other
than Grantee or any subsidiary of Grantee) shall have filed an application or
notice with any Governmental Entity to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event, it being understood that the
giving of such notice by Issuer shall not be a condition to the right of Holder
to exercise the Option.
3
(e) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise, and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Office of Thrift Supervision (the "OTS") or
any other Governmental Entity is required in connection with such purchase,
Issuer shall cooperate with Grantee in the filing of the required notice of
application for approval and the obtaining of such approval and the Closing
shall occur immediately following such regulatory approvals (and any mandatory
waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares to
be purchased on such Closing Date, and (ii) present and surrender this Agreement
to Issuer at the address of Issuer specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever, other than such lien or encumbrance created by Grantee, and not
subject to preemptive rights, and (B) if the Option is exercised in part only,
an executed new agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Issuer Common Stock purchasable
hereunder, and (ii) Holder shall deliver to Issuer a letter agreeing that Holder
shall not offer to sell or otherwise dispose of such Option Shares in violation
of applicable federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF APRIL , 1996. A COPY OF
SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT
BY ISSUER OF A WRITTEN REQUEST THEREFOR.
4
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer either a copy of a letter from the staff of the Commission,
or an opinion of counsel in form and substance reasonably satisfactory to Issuer
and its counsel, to the effect that such legend is not required for purposes of
the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under Section 3(e), the tender of the
applicable purchase price in immediately available funds and the tender of this
Agreement to Issuer, Holder shall be deemed to be the holder of record of the
shares of Issuer Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Issuer Common Stock shall not then be actually
delivered to Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its
5
Articles of Incorporation, Code of Regulations or Bylaws or a default (or give
rise to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
(c) Authorized Stock. Issuer has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue, and at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance upon exercise
of the Option that number of shares of Issuer Common Stock equal to the maximum
number of shares of Issuer Common Stock at any time and from time to time
purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever (except any such lien
or encumbrance created by Grantee) and not be subject to any preemptive rights.
(d) Board Action. By action of the Board of Directors of Issuer prior to
the execution of this Agreement, resolutions were duly adopted approving the
execution, delivery and performance of the Plan and the other transactions
contemplated thereby. Accordingly, the provisions of Section 1704.02 of the Ohio
Revised Code as they relate to Issuer and Section 1 of Article Eleventh of
Issuer's Articles of Incorporation do not and will not apply to the Plan or any
of the other transactions contemplated thereby.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer as follows:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee, and this Agreement has been duly executed and delivered by Grantee.
(b) Purchase Not for Distribution. This Option is not being acquired
with a view to the public distribution thereof and neither this Option nor any
Option Shares will be transferred or otherwise disposed of except in a
transaction registered or exempt from registration under the Securities Act.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar
6
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transactions so that
Holder shall receive, upon exercise of the Option, the number and class of
shares or other securities or property that Holder would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such event, or the record date therefor, as applicable. If any
additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or one
of its subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Holder, of any of (x) the Acquiring Corporation (as
hereinafter defined), (y) any person that controls the Acquiring Corporation or
(z) in the case of a merger described in clause (ii), Issuer (such person being
referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. Substitute Option Issuer also shall enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of Substitute Option
per share of Substitute Common Stock (the "Substitute Option Price") shall then
be equal to the Purchase Price multiplied by a fraction in which the numerator
is the number of shares of Issuer Common Stock for which
7
the Option was theretofore exercisable and the denominator is the number of
shares of the Substitute Common Stock for which the Substitute Option is
exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving
person, or (iii) the transferee of all or substantially all of Issuer's assets
(or a substantial part of the assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital stock (or
similar equity interest) with the greatest voting power in respect of the
election of directors (or persons similarly responsible for the direction of the
business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per share
of Issuer Common Stock at which a Tender Offer or an Exchange Offer therefor has
been made, (x) the price per share of Issuer Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (y) the highest closing price
for shares of Issuer Common Stock within the six-month period immediately
preceding the consolidation, merger or sale in question and (z) in the event of
a sale of all or substantially all of Issuer's assets or deposits, an amount
equal to (i) the sum of the price paid in such sale for such assets (and/or
deposits) and the current market value of the remaining assets of Issuer, as
determined by a nationally-recognized investment banking firm selected by
Holder, divided by (ii) the number of shares of Issuer Common Stock outstanding
at such time. In the event that a Tender Offer or an Exchange Offer is made for
Issuer Common Stock or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for Issuer
Common Stock shall be determined by a nationally-recognized investment banking
firm selected by Holder.
(4) "Average Price" shall mean the average closing price of a share of
Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to a share
of common stock issued by Issuer, the person merging into Issuer or by any
company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute
8
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
aggregate of the shares of Substitute Common Stock but for the limitation in the
first sentence of this Section 7(f), Substitute Option Issuer shall make a cash
payment to Holder equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in the first sentence of this Section
7(f) over (ii) the value of the Substitute Option after giving effect to the
limitation in the first sentence of this Section 7(f). This difference in value
shall be determined by a nationally-recognized investment banking firm selected
by Holder.
(g) Issuer shall not enter into any transaction described in Section
7(b) hereof unless the Acquiring Corporation and any person that controls the
Acquiring Corporation assume in writing all the obligations of Issuer hereunder
and take all other actions that may be necessary so that the provisions of this
Section 7 are given full force and effect (including, without limitation, any
action that may be necessary so that the holders of the other shares of common
stock issued by Substitute Option Issuer are not entitled to exercise any rights
by reason of the issuance or exercise of the Substitute Option and the shares of
Substitute Common Stock are otherwise in no way distinguishable from or have
lesser economic value (other than any diminution in value resulting from the
fact that the shares of Substitute Common Stock are restricted securities, as
defined in Rule 144 under the Securities Act or any successor provision) than
other shares of common stock issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the request of
Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of Issuer
Common Stock acquired pursuant to the Option with respect to which Holder then
has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined below)
for each share of Issuer Common Stock over (y) the Purchase Price (subject to
adjustment pursuant to Section 7), multiplied by the number of shares of Issuer
Common Stock with respect to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case of
Option Shares with
9
respect to which the Option has been exercised but the Closing Date has not
occurred, payable) by Holder for each share of Issuer Common Stock with respect
to which the Option has been exercised and with respect to which Holder then has
beneficial ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the OTS or any other Governmental Entity is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8, in whole or in part, or to require
that Issuer deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If the OTS or any
other Governmental Entity disapproves of any part of Issuer's proposed
repurchase pursuant to this Section 8, Issuer shall promptly give notice of such
fact to Holder. If the OTS or any other Governmental Entity prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by the OTS or
other Governmental Entity, determine whether the repurchase should apply to the
Option and/or Option Shares and to what extent to each, and Holder shall
thereupon have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Request Date less the sum of
the number of shares covered by the Option in respect of which payment has been
made pursuant to Section 8(a)(ii) and the number of shares covered by the
portion of the Option (if any) that has been repurchased. Holder shall notify
Issuer of its determination under the preceding sentence within five business
days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, (i) Issuer shall not be
obligated to repurchase the Option or any shares of Issuer Common Stock pursuant
to this Section 8 on more than one occasion, except that Issuer's obligation to
repurchase on one occasion any Option or shares of Issuer Common Stock shall be
reinstated in the event that Grantee has revoked its request for repurchase in
accordance with the provisions of this Section 8 and (ii) all of Grantee's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a) hereof, unless this Option shall have been
exercised in whole or in part prior to the date of termination described in
clause (ii) above, then Grantee's rights under this Section 8 shall terminate 12
months after such date of termination.
10
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) hereof, or (iii) the highest closing
sales price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder during the 60 business days preceding the
Request Date); provided, however, that in the event of a sale of less than all
of Issuer's assets, the Applicable Price shall be the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Issuer as determined by a nationally-recognized investment banking firm
selected by Holder, divided by the number of shares of Issuer Common Stock
outstanding at the time of such sale. If the consideration to be offered, paid
or received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in good
faith by an independent nationally-recognized investment banking firm selected
by Holder and reasonably acceptable to Issuer, which determination shall be
conclusive for all purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of Issuer Common Stock,
or (ii) any of the transactions described in Section 7(b)(i), Section 7(b)(ii)
or Section 7(b)(iii) hereof shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the conditions
of Section 9(c), if requested by any Holder, as expeditiously as possible
prepare and file a registration statement under the Securities Act if such
registration is necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Holder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Holder in such
request, including without limitation a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and Issuer shall
use its best efforts to qualify such shares or other securities for sale under
any applicable state securities laws.
11
(b) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to clause (i) may only
be made one time. If some but not all the shares of Issuer Common Stock with
respect to which Issuer shall have received requests for registration pursuant
to this Section 9(b) shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Holders permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such Holder bears to the total number of shares requested
to be registered by all such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) Conditions to Required Registration. Issuer shall use all reasonable
efforts to cause each registration statement referred to in Section 9(a) to
become effective and to obtain all consents or waivers of other parties which
are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if Issuer
shall in good faith determine that any such registration would adversely affect
an offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant to
Article VII thereof, and (B) a Purchase Event or a Preliminary Purchase Event;
(ii) on more than one occasion during any calendar year;
(iii) within 90 days after the effective date of a registration referred
to in Section 9(b) pursuant to which the Holder or Holders concerned were
afforded the opportunity to register such shares under the Securities Act and
such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option Shares
(including shares of Issuer Common Stock issuable upon exercise of the Option)
then outstanding.
12
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Notwithstanding
anything to the contrary contained herein, in no event shall Issuer be obligated
to effect more than two registrations pursuant to the first sentence of Section
9(a) hereof by reason of the fact that there shall be more than one Holder as a
result of any assignment of this Agreement or division of this Agreement
pursuant to Section 11 hereof. Issuer shall use all reasonable efforts to make
any filings, and take all steps, under all applicable state securities laws to
the extent necessary to permit the sale or other disposition of the Option
Shares so registered in accordance with the intended method of distribution for
such shares, provided, however, that Issuer shall not be required to consent to
general jurisdiction or to qualify to do business in any state where it is not
otherwise required to so consent to such jurisdiction or to so qualify to do
business.
(d) Expenses. Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses, accounting
expenses, legal expenses and printing expenses incurred by it) in connection
with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Holder, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such Holder or such underwriter,
as the case may be, expressly for such use.
13
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable
to a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to be indemnified
as a result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the selling Holders and the
underwriters in connection with the statement or omissions which results in such
expenses, losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The amount paid or payable by a party as a result of
the expenses, losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim;
provided, however, that in no case shall the selling Holders be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(g) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any Holder to
indemnify shall be several and not joint with other Holders.
14
In connection with any registration pursuant to Section 9(a) or (b)
above, Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on the NASDAQ/NMS or such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. Division of Option. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of the Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
15
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9 hereof, 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) Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits of such provision.
This Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(c) Entire Agreement; No Third Party Beneficiaries; Severability. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof,
and (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) hereof and any transferee
of the Option Shares or any permitted transferee of this Agreement pursuant to
Section 12(h) hereof) any rights or remedies hereunder. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or a federal or state regulatory agency to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Holder to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Sections 3 and 8 hereof (as adjusted pursuant to
Section 7 hereof), it is the express intention of Issuer to allow Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Ohio without regard to any applicable
conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
16
If to Grantee:
Fidelity Financial of Ohio, Inc.
4555 Montgomery Road
Cincinnati, Ohio 45212
Attn: John R. Reusing
President and Chief Executive Officer
Fax: 513-458-3475
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Jeffrey D. Haas, Esq.
Fax: 202-347-2172
If to Issuer:
Circle Financial Corporation
11100 Reading Road
Sharonville, Ohio 45241-1904
Attn: Donald H. Rolf, Jr.
Chairman and President
Fax: 513-563-2264
With a required copy to:
Thompson Hine & Flory P.L.L.
3900 Society Center
127 Public Square
Cleveland, Ohio 44114-1216
Attn: Raymond T. Sawyer, Esq.
Fax: 216-566-5800
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under the Option shall be assigned by any of the
parties hereto
17
(whether by operation of law or otherwise) without the prior written consent of
the other party, except that Holder may assign this Agreement to a wholly-owned
subsidiary of Holder and Holder may assign its rights hereunder in whole or in
part after the occurrence of a Purchase Event. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive relief
and other equitable relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
18
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
FIDELITY FINANCIAL OF OHIO, INC.
Attest:
/s/ Paul D. Staubach By: /s/ John R. Reusing
- -------------------- -----------------------
Name: Paul D. Staubach Name: John R. Reusing
Title: Senior Vice President, Title: President and Chief Executive Officer
Chief Financial Officer
and Secretary
CIRCLE FINANCIAL CORPORATION
Attest:
/s/ Theresa M. Barlow By: /s/ Donald H. Rolf, Jr.
- --------------------- -----------------------
Name: Theresa M. Barlow Name: Donald H. Rolf, Jr.
Title: Secretary Title: Chairman and President
19
ANNEX III
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of April 29, 1996 (the "Agreement"),
by and between Fidelity Financial of Ohio, Inc., an Ohio corporation ("Issuer"),
and Circle Financial Corporation, an Ohio corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger, dated as of April 29, 1996 (the "Plan"), providing for, among other
things, the merger of Grantee with and into Issuer (the "Merger"), with Issuer
as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Plan and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's execution of the
Plan and this Agreement, Grantee has agreed to grant an option to Issuer on
terms and conditions which are substantially identical to those of the Option
and this Agreement with respect to 19.9% of the common stock of Grantee.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 403,285 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of Common Stock, par value $.10 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $11.00, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 9.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, Grantee may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (i) the Effective Time of the Merger,
(ii) termination of the Plan in accordance with the terms thereof prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section 7.1(b)(i) of the Plan (a
"Default Termination"), (iii) 12 months after the termination of the Plan by
Grantee pursuant to a Default Termination, and (iv) 12 months after termination
of the Plan (other than pursuant to a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event; and provided,
further, that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable laws, including without limitation the
Change in Bank Control Act of 1978, as amended (the "CBC Act"). The term
"Holder" shall mean the holder or holders of the Option from time to time, and
which is initially Grantee. The rights set forth in Section 8 hereof shall
terminate when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case 20% or more of the
consolidated assets of Issuer and its subsidiaries, or (C) the
issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 20% or more of the voting power of Issuer or any of its
subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially owns or
has the right to acquire beneficial ownership of, 25% or more of the then
outstanding shares of Issuer Common Stock.
2
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filed a registration statement
under the Securities Act with respect to, a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 10% or
more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" and an "Exchange
Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have
approved the Plan at the meeting of such stockholders held for the
purpose of voting on the Plan, (B) such meeting shall not have been
held or shall have been canceled prior to termination of the Plan or
(C) Issuer's Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Plan, in each case after it shall have
been publicly announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (x) made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction, (y)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under
the CBC Act or the Bank Merger Act, as amended, for approval to engage
in an Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would
entitle Grantee to terminate the Plan under Section 7.1(b) thereof
(without regard to the cure period provided for therein unless such
cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Plan) after (x) a bona fide
proposal is made by any person (other than Grantee or any subsidiary of
Grantee) to Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any subsidiary of
Grantee) states its intention to Issuer or its stockholders to make a
proposal to engage in an Acquisition Transaction if the Plan
terminates, or (z) any person (other than Grantee or any subsidiary of
Grantee) shall have filed an application or notice with any
Governmental Entity to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event, it being understood that
the giving of such notice by Issuer shall not be a condition to the right of
Holder to exercise the Option.
3
(e) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise, and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Office of Thrift Supervision (the "OTS") or
any other Governmental Entity is required in connection with such purchase,
Issuer shall cooperate with Grantee in the filing of the required notice of
application for approval and the obtaining of such approval and the Closing
shall occur immediately following such regulatory approvals (and any mandatory
waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to Issuer at the address of Issuer specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever, other than such lien or encumbrance created by Grantee, and not
subject to preemptive rights, and (B) if the Option is exercised in part only,
an executed new agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Issuer Common Stock purchasable
hereunder, and (ii) Holder shall deliver to Issuer a letter agreeing that Holder
shall not offer to sell or otherwise dispose of such Option Shares in violation
of applicable federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS
OF APRIL __, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE
HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN
REQUEST THEREFOR.
4
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer either a copy of a letter from the staff of the Commission,
or an opinion of counsel in form and substance reasonably satisfactory to Issuer
and its counsel, to the effect that such legend is not required for purposes of
the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under Section 3(e), the tender of the
applicable purchase price in immediately available funds and the tender of this
Agreement to Issuer, Holder shall be deemed to be the holder of record of the
shares of Issuer Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Issuer Common Stock shall not then be actually
delivered to Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its
5
Articles of Incorporation, Code of Regulations or Bylaws or a default (or give
rise to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
(c) Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and at all
times from the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for issuance upon
exercise of the Option that number of shares of Issuer Common Stock equal to the
maximum number of shares of Issuer Common Stock at any time and from time to
time purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever (except any such lien
or encumbrance created by Grantee) and not be subject to any preemptive rights.
(d) Board Action. By action of the Board of Directors of Issuer prior
to the execution of the Plan, resolutions were duly adopted approving the
execution, delivery and performance of the Plan and the other transactions
contemplated thereby. Accordingly, the provisions of Section 1704.02 of the Ohio
Revised Code as they relate to Issuer and Paragraph A of Article XV of Issuer's
Articles of Incorporation do not and will not apply to the Plan or any of the
other transactions contemplated thereby.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer as follows:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee, and this Agreement has been duly executed and delivered by Grantee.
(b) Purchase Not for Distribution. This Option is not being acquired
with a view to the public distribution thereof and neither this Option nor any
Option Shares will be transferred or otherwise disposed of except in a
transaction registered or exempt from registration under the Securities Act.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar
6
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transactions so that
Holder shall receive, upon exercise of the Option, the number and class of
shares or other securities or property that Holder would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such event, or the record date therefor, as applicable. If any
additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 9.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or one
of its subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Holder, of any of (x) the Acquiring Corporation (as
hereinafter defined), (y) any person that controls the Acquiring Corporation or
(z) in the case of a merger described in clause (ii), Issuer (such person being
referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. Substitute Option Issuer also shall enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided by
the Average Price (as hereinafter defined). The exercise price of Substitute
Option per share of Substitute Common Stock (the "Substitute Option Price")
shall then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of Issuer Common Stock for which
7
the Option was theretofore exercisable and the denominator is the number of
shares of the Substitute Common Stock for which the Substitute Option is
exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, or (iii) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly responsible
for the direction of the business and affairs) of the Substitute Option
Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price
per share of Issuer Common Stock at which a Tender Offer or an Exchange
Offer therefor has been made, (x) the price per share of Issuer Common
Stock to be paid by any third party pursuant to an agreement with
Issuer, (y) the highest closing price for shares of Issuer Common Stock
within the six-month period immediately preceding the consolidation,
merger or sale in question and (z) in the event of a sale of all or
substantially all of Issuer's assets or deposits, an amount equal to
(i) the sum of the price paid in such sale for such assets (and/or
deposits) and the current market value of the remaining assets of
Issuer, as determined by a nationally-recognized investment banking
firm selected by Holder, divided by (ii) the number of shares of Issuer
Common Stock outstanding at such time. In the event that a Tender Offer
or an Exchange Offer is made for Issuer Common Stock or an agreement is
entered into for a merger or consolidation involving consideration
other than cash, the value of the securities or other property issuable
or deliverable in exchange for Issuer Common Stock shall be determined
by a nationally-recognized investment banking firm selected by Holder.
(4) "Average Price" shall mean the average closing price of a
share of Substitute Common Stock for the one year immediately preceding
the consolidation, merger or sale in question, but in no event higher
than the closing price of the shares of Substitute Common Stock on the
day preceding such consolidation, merger or sale; provided that if
Issuer is the issuer of the Substitute Option, the Average Price shall
be computed with respect to a share of common stock issued by Issuer,
the person merging into Issuer or by any company which controls such
person, as Holder may elect.
8
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 9.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 9.9% of the aggregate of the shares of Substitute Common Stock but
for the limitation in the first sentence of this Section 7(f), Substitute Option
Issuer shall make a cash payment to Holder equal to the excess of (i) the value
of the Substitute Option without giving effect to the limitation in the first
sentence of this Section 7(f) over (ii) the value of the Substitute Option after
giving effect to the limitation in the first sentence of this Section 7(f). This
difference in value shall be determined by a nationally-recognized investment
banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section
7(b) hereof unless the Acquiring Corporation and any person that controls the
Acquiring Corporation assume in writing all the obligations of Issuer hereunder
and take all other actions that may be necessary so that the provisions of this
Section 7 are given full force and effect (including, without limitation, any
action that may be necessary so that the holders of the other shares of common
stock issued by Substitute Option Issuer are not entitled to exercise any rights
by reason of the issuance or exercise of the Substitute Option and the shares of
Substitute Common Stock are otherwise in no way distinguishable from or have
lesser economic value (other than any diminution in value resulting from the
fact that the shares of Substitute Common Stock are restricted securities, as
defined in Rule 144 under the Securities Act or any successor provision) than
other shares of common stock issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the request of
Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares
of Issuer Common Stock acquired pursuant to the Option with respect to
which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7),
multiplied by the number of shares of Issuer Common Stock with respect
to which the Option has not been exercised; and
9
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or,
in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the OTS or any other Governmental Entity is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8, in whole or in part, or to require
that Issuer deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If the OTS or any
other Governmental Entity disapproves of any part of Issuer's proposed
repurchase pursuant to this Section 8, Issuer shall promptly give notice of such
fact to Holder. If the OTS or any other Governmental Entity prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by the OTS or
other Governmental Entity, determine whether the repurchase should apply to the
Option and/or Option Shares and to what extent to each, and Holder shall
thereupon have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Request Date less the sum of
the number of shares covered by the Option in respect of which payment has been
made pursuant to Section 8(a)(ii) and the number of shares covered by the
portion of the Option (if any) that has been repurchased. Holder shall notify
Issuer of its determination under the preceding sentence within five business
days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, (i) Issuer shall not
be obligated to repurchase the Option or any shares of Issuer Common Stock
pursuant to this Section 8 on more than one occasion, except that Issuer's
obligation to repurchase on one occasion any Option or shares of Issuer Common
Stock shall be reinstated in the event that Grantee has revoked its request for
repurchase in accordance with the provisions of this Section 8^ and (ii) all of
Grantee's rights under this Section 8 shall terminate on the date of termination
of this Option pursuant to Section 3(a) hereof, unless this Option shall have
been exercised in whole or in part prior to the date of termination described in
clause (ii) above, then
10
Grantee's rights under this Section 8 shall terminate 12 months after such date
of termination.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) hereof, or (iii) the highest closing
sales price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder during the 60 business days preceding the
Request Date); provided, however, that in the event of a sale of less than all
of Issuer's assets, the Applicable Price shall be the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Issuer as determined by a nationally-recognized investment banking firm
selected by Holder, divided by the number of shares of Issuer Common Stock
outstanding at the time of such sale. If the consideration to be offered, paid
or received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in good
faith by an independent nationally-recognized investment banking firm selected
by Holder and reasonably acceptable to Issuer, which determination shall be
conclusive for all purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of Issuer Common Stock,
or (ii) any of the transactions described in Section 7(b)(i), Section 7(b)(ii)
or Section 7(b)(iii) hereof shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the conditions
of Section 9(c), if requested by any Holder, as expeditiously as possible
prepare and file a registration statement under the Securities Act if such
registration is necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Holder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Holder in such
request, including without limitation a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and Issuer shall
use its best efforts to qualify such shares or other securities for sale under
any applicable state securities laws.
11
(b) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to clause (i) may only
be made one time. If some but not all the shares of Issuer Common Stock with
respect to which Issuer shall have received requests for registration pursuant
to this Section 9(b) shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Holders permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such Holder bears to the total number of shares requested
to be registered by all such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) Conditions to Required Registration. Issuer shall use all
reasonable efforts to cause each registration statement referred to in Section
9(a) to become effective and to obtain all consents or waivers of other parties
which are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if Issuer
shall in good faith determine that any such registration would adversely affect
an offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan
pursuant to Article VII thereof, and (B) a Purchase Event or a
Preliminary Purchase Event;
(ii) on more than one occasion during any calendar year;
(iii) within 90 days after the effective date of a
registration referred to in Section 9(b) pursuant to which the Holder
or Holders concerned were afforded the opportunity to register such
shares under the Securities Act and such shares were registered as
requested; and
(iv) unless a request therefor is made to Issuer by the Holder
or Holders of at least 25% or more of the aggregate number of Option
Shares (including shares of Issuer Common Stock issuable upon exercise
of the Option) then outstanding.
12
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Notwithstanding
anything to the contrary contained herein, in no event shall Issuer be obligated
to effect more than two registrations pursuant to the first sentence of Section
9(a) hereof by reason of the fact that there shall be more than one Holder as a
result of any assignment of this Agreement or division of this Agreement
pursuant to Section 11 hereof. Issuer shall use all reasonable efforts to make
any filings, and take all steps, under all applicable state securities laws to
the extent necessary to permit the sale or other disposition of the Option
Shares so registered in accordance with the intended method of distribution for
such shares, provided, however, that Issuer shall not be required to consent to
general jurisdiction or to qualify to do business in any state where it is not
otherwise required to so consent to such jurisdiction or to so qualify to do
business.
(d) Expenses. Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees and expenses,
accounting expenses, legal expenses and printing expenses incurred by it) in
connection with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Holder, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such Holder or such underwriter,
as the case may be, expressly for such use.
13
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable
to a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to be indemnified
as a result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the selling Holders and the
underwriters in connection with the statement or omissions which results in such
expenses, losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The amount paid or payable by a party as a result of
the expenses, losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim;
provided, however, that in no case shall the selling Holders be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(g) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any Holder to
indemnify shall be several and not joint with other Holders.
14
In connection with any registration pursuant to Section 9(a) or (b)
above, Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on the NASDAQ/NMS or such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. Division of Option. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of the Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
15
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9 hereof, 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) Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits of such provision.
This Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(c) Entire Agreement; No Third Party Beneficiaries; Severability. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof,
and (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) hereof and any transferee
of the Option Shares or any permitted transferee of this Agreement pursuant to
Section 12(h) hereof) any rights or remedies hereunder. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or a federal or state regulatory agency to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Holder to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Sections 3 and 8 hereof (as adjusted pursuant to
Section 7 hereof), it is the express intention of Issuer to allow Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Ohio without regard to any applicable
conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
16
If to Grantee:
Circle Financial Corporation
11100 Reading Road
Sharonville, Ohio 45241-1904
Attn: Donald H. Rolf, Jr.
Chairman and President
Fax: 513-563-2264
With a required copy to:
Thompson, Hine and Flory
3900 Society Center
127 Public Square
Cleveland, Ohio 44114-1216
Attn: Raymond T. Sawyer, Esq.
Fax: 216-566-5800
If to Issuer:
Fidelity Financial of Ohio, Inc.
4555 Montgomery Road
Cincinnati, Ohio 45212
Attn: John R. Reusing
President and Chief Executive Officer
Fax: 513-458-3475
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Jeffrey D. Haas, Esq.
Fax: 202-347-2172
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
17
(h) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive relief
and other equitable relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
18
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
CIRCLE FINANCIAL CORPORATION
Attest:
/s/ Theresa M. Barlow By: /s/ Donald H. Rolf, Jr.
- --------------------- -----------------------
Name: Theresa M. Barlow Name: Donald H. Rolf, Jr.
Title: Secretary Title: Chairman and President
FIDELITY FINANCIAL OF OHIO, INC.
Attest:
/s/ Paul D. Staubach By: /s/ John R. Reusing
- ------------------------------------------- ----------------------
Name: Paul D. Staubach Name: John R. Reusing
Title: Senior Vice President, Title: President and Chief Executive
Chief Financial Officer and Officer
Secretary
19
ANNEX IV
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of April 29, 1996, by and among
Fidelity Financial of Ohio, Inc. (the "Acquiror"), an Ohio corporation, and
certain stockholders of Circle Financial Corporation (the "Company"), an Ohio
corporation, named on Schedule I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror and the Company have entered into an Agreement of
Merger, dated as of the date hereof (the "Agreement"), which is being executed
simultaneously with the execution of this Stockholder Agreement and provides
for, among other things, the merger of the Company with and into the Acquiror
(the "Merger"); and
WHEREAS, in order to induce the Acquiror to enter into the Agreement,
each of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacity as a stockholder of the Company.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of Company Common Stock. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of the
number of shares of common stock of the Company, $1.00 par value per share
("Company Common Stock"), set forth opposite such Stockholder's name on Schedule
I hereto.
2. Agreements of the Stockholders. Each Stockholder covenants and
agrees that:
(a) such Stockholder shall, at any meeting of the Company's
stockholders called for the purpose, vote, or cause to be voted, all shares of
Company Common Stock in which such stockholder has the right to vote (whether
owned as of the date hereof or hereafter acquired) in favor of the Agreement;
(b) except as otherwise expressly permitted hereby, such Stockholder
shall not, prior to the meeting of the Company's stockholders referred to in
Section 2(a) hereof or the earlier termination of the Agreement in accordance
with its terms, sell, pledge, transfer or otherwise dispose of the Stockholder's
shares of Company Common Stock;
(c) such Stockholder shall not in his capacity as a stockholder of the
Company directly or indirectly encourage or solicit or hold discussions or
negotiations with, or provide any information to, any person, entity or group
(other than the Acquiror or an affiliate thereof) concerning any merger, sale of
substantial assets or liabilities not in the ordinary course of business, sale
of shares of capital stock or similar transactions involving the Company or any
subsidiary of the Company (provided that nothing herein shall be deemed to
affect the ability of any Stockholder to fulfill his duties as a director and/or
officer of the Company); and
(d) such Stockholder shall use his reasonable best efforts to take or
cause to be taken all action, and to do or cause to be done all things,
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the agreements contemplated by this Stockholder
Agreement.
Each Stockholder further agrees that the Company's transfer agent shall
be given an appropriate stop transfer order and shall not be required to
register any attempted transfer of shares of Company Common Stock, unless the
transfer has been effected in compliance with the terms of this agreement.
3. Successors and Assigns. Subject to Section 5.11 of the Agreement and
the terms of the agreement with affiliates of the Company referred to therein, a
Stockholder may sell, pledge, transfer or otherwise dispose of his shares of
Company Common Stock, provided that, with respect to any sale, transfer or
disposition which would occur on or before the meeting of the Company's
stockholders referred to in Section 2(a) hereof, such Stockholder obtains the
prior written consent of the Acquiror and that any acquiror of such Company
Common Stock expressly agrees in writing to be bound by the terms of this
Stockholder Agreement.
4. Termination. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically terminated in the event
that the Agreement is terminated in accordance with its terms.
5. Notices. Notices may be provided to the Acquiror and the
Stockholders in the manner specified in Section 8.4 of the Agreement, with all
notices to the Stockholders being provided to them at the Company in the manner
specified in such section.
6. Governing Law. This Stockholder Agreement shall be governed by the
laws of the State of Ohio without giving effect to the principles of conflicts
of laws thereof.
2
7. Counterparts. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. Headings and Gender. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender herein
shall be considered to represent the masculine, feminine or neuter gender
whenever appropriate.
IN WITNESS WHEREOF, the Acquiror, by a duly authorized officer, and
each of the Stockholders have caused this Stockholder Agreement to be executed
as of the day and year first above written.
FIDELITY FINANCIAL OF OHIO, INC.
By: /s/ John R. Reusing
-------------------
Name: John R. Reusing
Title: President and Chief Executive Officer
COMPANY STOCKHOLDERS:
/s/ Theresa M. Barlow
----------------------
Theresa M. Barlow
/s/ David C. Greis
-------------------
David C. Greis
/s/ Theodore G. Hagen
---------------------
Theodore G. Hagen
/s/ Joseph D. Hughes
--------------------
Joseph D. Hughes
3
/s/ S. Patrick Raffel
---------------------
S. Patrick Raffel
/s/ Donald H. Rolf, Jr.
-----------------------
Donald H. Rolf, Jr.
/s/ Thomas N. Spaeth
--------------------
Thomas N. Spaeth
/s/ Lloyd C. Sullivan
---------------------
Lloyd C. Sullivan
/s/ Frederick A. Tobergte
--------------------------
Frederick A. Tobergte
/s/ Carolyn R. Watt
---------------------
Carolyn R. Watt
4
SCHEDULE I
Number of Shares of
Company Common Stock
Name of Stockholder Beneficially Owned
- ----------------------------------------------------------- -----------------------------------
Theresa M. Barlow 6,812
David C. Greis 38,628
Theodore G. Hagen 10,595
Joseph D. Hughes 18,160
S. Patrick Raffel 600
Donald H. Rolf, Jr. 44,413
Thomas N. Spaeth 2,135
Lloyd C. Sullivan 7,545
Frederick A. Tobergte 13,660
Carolyn R. Watt 973
ANNEX V
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of April 29, 1996, by and among Circle
Financial Corporation (the "Company"), an Ohio corporation, and certain
stockholders of Fidelity Financial of Ohio, Inc. (the "Acquiror"), an Ohio
corporation, named on Schedule I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror and the Company have entered into an Agreement of
Merger, dated as of the date hereof (the "Agreement"), which is being executed
simultaneously with the execution of this Stockholder Agreement and provides
for, among other things, the merger of the Company with and into the Acquiror
(the "Merger"); and
WHEREAS, in order to induce the Company to enter into the Agreement,
each of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacity as a stockholder of the Acquiror.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of Acquiror Common Stock. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of the
number of shares of common stock of the Acquiror, $.10 par value per share
("Acquiror Common Stock"), set forth opposite such Stockholder's name on
Schedule I hereto.
2. Agreements of the Stockholders. Each Stockholder covenants and
agrees that:
(a) such Stockholder shall, at any meeting of the Acquiror's
stockholders called for the purpose, vote, or cause to be voted, all shares of
Acquiror Common Stock in which such stockholder has the right to vote (whether
owned as of the date hereof or hereafter acquired) in favor of the Agreement;
(b) except as otherwise expressly permitted hereby, such Stockholder
shall not, prior to the meeting of the Acquiror's stockholders referred to in
Section 2(a) hereof or the earlier termination of the Agreement in accordance
with its terms, sell, pledge, transfer or otherwise dispose of the Stockholder's
shares of Acquiror Common Stock; and
(c) such Stockholder shall use his reasonable best efforts to take or
cause to be taken all action, and to do or cause to be done all things,
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the agreements contemplated by this Stockholder
Agreement.
Each Stockholder further agrees that the Acquiror's transfer agent
shall be given an appropriate stop transfer order and shall not be required to
register any attempted transfer of shares of Acquiror Common Stock, unless the
transfer has been effected in compliance with the terms of this agreement.
3. Successors and Assigns. A stockholder may sell, pledge, transfer or
otherwise dispose of his shares of Acquiror Common Stock, provided that, with
respect to any sale, transfer or disposition which would occur on or before the
meeting of the Acquiror's stockholders referred to in Section 2(a) hereof, such
Stockholder obtains the prior written consent of the Company and that any
acquiror of such Acquiror Common Stock expressly agrees in writing to be bound
by the terms of this Stockholder Agreement.
4. Termination. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically terminated in the event
that the Agreement is terminated in accordance with its terms.
5. Notices. Notices may be provided to the Company and the Stockholders
in the manner specified in Section 8.4 of the Agreement, with all notices to the
Stockholders being provided to them at the Acquiror in the manner specified in
such section.
6. Governing Law. This Stockholder Agreement shall be governed by the
laws of the State of Ohio without giving effect to the principles of conflicts
of laws thereof.
7. Counterparts. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. Headings and Gender. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender herein
shall be considered to represent the masculine, feminine or neuter gender
whenever appropriate.
2
IN WITNESS WHEREOF, the Company, by a duly authorized officer, and each
of 1the Stockholders have caused this Stockholder Agreement to be executed as of
the day and year first above written.
CIRCLE FINANCIAL CORPORATION
By: /s/ Donald H. Rolf, Jr.
-------------------------
Name: Donald H. Rolf, Jr.
Title: Chairman and President
ACQUIROR STOCKHOLDERS:
/s/ Gregory G. Eagan
----------------------
Gregory G. Eagan
/s/ Michael W. Jordan
---------------------
Michael W. Jordan
/s/ Lloyd L. Kuster
---------------------
Lloyd L. Kuster
/s/ David A. Luecke
--------------------
David A. Luecke
/s/ Constantine N. Papadakis
----------------------------
Constantine N. Papadakis
/s/ Deborah A. Peter
---------------------
Deborah A. Peter
3
/s/ John R. Reusing
-----------------------
John R. Reusing
/s/ M. Robin Ruholl-Cassady
----------------------------
M. Robin Ruholl-Cassady
/s/ Paul D. Staubach
----------------------
Paul D. Staubach
/s/ Robert W. Zumbiel
----------------------
Robert W. Zumbiel
4
SCHEDULE I
Number of Shares of
Acquiror Common Stock
Name of Stockholder Beneficially Owned
- -------------------------------- ------------------------------------
Gregory G. Eagan 2,000
Michael W. Jordan 12,925
Lloyd L. Kuster 30,704
David A. Luecke 12,187
Constantine N. Papadakis 10,000
Deborah A. Peter 11,748
John R. Reusing 66,569
M. Robin Ruholl-Cassady 9,206
Paul D. Staubach 46,572
Robert W. Zumbiel 26,875
5
ANNEX VI
________ __, 1996
Board of Directors
Circle Financial Corporation
11100 Reading Road
Sharonville, Ohio 45241-1904
Members of the Board:
You have requested our opinion as to the fairness from a financial
point of view to the shareholders of Circle Financial Corporation ("CFC") of the
consideration to be paid by Fidelity Financial of Ohio, Inc. ("FFOH") pursuant
to the terms of the Amended and Restated Agreement of Merger, dated as of June
13, 1996 by and between FFOH and CFC (the "Agreement"). Pursuant to the
Agreement, the holder of each share of common stock of CFC would be entitled to
receive, subject to certain terms, conditions, limitations and procedures set
forth in the Agreement, either $38.00 in cash or a number of shares of FFOH
Common Stock which will be determined by applying a formula, set forth in the
Agreement, which is based on the average market price of the FFOH Common Stock
over a 20 trading day period ending on the date FFOH and CFC receive all
requisite regulatory approvals and satisfy all applicable waiting periods
related to the Merger (the "Average FFOH Price"). For the purposes of our
opinion, we have assumed that the Average FFOH Price remains in a range of $8.00
per share to $13.00 per share. No opinion is expressed as to the fairness of the
consideration resulting from an Average FFOH Price outside of this range. For
the purposes of our opinion we have also assumed that no securities will be
issued under the Option Agreements being entered into between CFC and FFOH.
Additionally, we have assumed that the transaction will constitute a tax-free
reorganization as contemplated by the Agreement.
Stifel, Nicolaus & Company, Incorporated ("Stifel"), as part of its
investment banking services, is regularly engaged in the independent valuation
of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. We
are familiar with CFC and FFOH and have completed our financial analysis of this
transaction.
Board of Directors
_________ __, 1996
Page 2
In rendering our opinion, we have reviewed the Agreement as well as
financial and other information that was publicly available or furnished to us
by CFC and FFOH including information provided during Stifel's discussions with
their respective management. We have conducted conversations with CFC's senior
management and FFOH's senior management regarding recent developments and
management's financial projections for CFC and FFOH. In addition, we have spoken
to members of CFC's management and FFOH's management regarding factors which
affect each entity's business. We have also compared certain financial and
securities data (as appropriate) of CFC and FFOH with various other companies
whose securities are traded in public markets, reviewed the historical stock
prices and trading volumes of the common stock of CFC and FFOH, reviewed prices
and premiums paid in other business combinations and conducted such other
financial studies, analyses and investigations as we deemed appropriate for
purposes of this opinion.
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all of the financial
and other information that was provided to us or that was otherwise reviewed by
us. With respect to the financial projections supplied to us, we have assumed
that they were reasonably prepared on the basis reflecting the best currently
available estimates and judgments of the management of CFC and FFOH as to the
future operating and financial performance of CFC and FFOH and that they
provided a reasonable basis upon which we could form our opinion. We also
assumed that there were no material changes in the assets, liabilities,
financial condition, results of operations, business or prospects of either CFC
or FFOH since the date of the last financial statements made available to us. We
did not make or obtain any independent evaluation, appraisal or physical
inspection of CFC's or FFOH's assets or liabilities nor did we review loan files
of CFC or FFOH. We relied on advice of counsel to CFC as to all legal matters
with respect to CFC, the Agreement and the transactions and other matters
contained or contemplated therein.
Our opinion is necessarily based on economic, market, financial and
other conditions as they exist on, and on the information made available to us
as of, the date of this letter. Our opinion is directed to the Board of
Directors of CFC and does not constitute a recommendation to any shareholder as
to how such shareholder should vote on the proposed transaction, nor have we
expressed any opinion as to the prices at which any securities of CFC or FFOH
might trade in the future. Except as required by applicable law, including
without limitation federal securities laws, our opinion may not be published or
otherwise used or referred to, nor shall any public reference to Stifel be made,
without our prior consent.
Board of Directors
_________ __, 1996
Page 3
Based upon the foregoing and such other factors as we deem relevant, we
are of the opinion as of the date hereof that within the ranges discussed above
the consideration to be paid to the shareholders of CFC pursuant to the
Agreement is fair to the shareholders of CFC from a financial point of view.
Very truly yours,
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
ANNEX VII
_________, 1996
[RP FINANCIAL LETTERHEAD]
[*DRAFT FORM OF OPINION*]
Board of Directors
Fidelity Financial of Ohio, Inc.
4555 Montgomery Road
Cincinnati, Ohio 45212-3133
Gentlemen:
You have requested RP Financial, LC. ("RP Financial") to provide you
with our opinion as to the fairness from a financial point of view to the
shareholders of Fidelity Financial of Ohio, Inc., Cincinnati, Ohio, an Ohio
corporation (the "Acquiror"), of the Agreement of Merger (the "Agreement"),
dated April 29, 1996, by and between the Acquiror and Circle Financial
Corporation (the "Company"), an Ohio corporation.
Summary Description of Consideration
The Agreement is incorporated herein by reference. Unless otherwise
defined, all capitalized terms incorporated herein have the meanings ascribed to
them in the Agreement. As of the date hereof, there are 708,096 shares of
Company Common Stock issued and outstanding, and there are 47,871 shares of
Company Common Stock issuable upon exercise of outstanding stock options
("Company Stock Options"). At the Effective Time, by virtue of the Merger and
without any action on the part of a holder of shares of Company Common Stock:
(a) each share of Acquiror Common Stock that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding and
shall be unchanged by the Merger; (b) all shares of Company Common Stock owned
by the Company (including treasury shares) or the Acquiror or any of their
respective wholly-owned subsidiaries shall be cancelled and retired and shall
not represent capital stock of the Surviving Corporation and shall not be
exchanged for shares of Acquiror Common Stock, cash or other consideration; and
(c) each share of Company Common Stock issued and outstanding at the Effective
Time (other than shares to be cancelled in accordance with provision (b) above)
shall be converted into, and shall be cancelled in exchange for, the right to
receive, at the election of the holder thereof, (i) the number of shares of
Acquiror Common Stock which is equal to (the "Exchange Ratio") (A) if the
Average Acquiror Share Price is equal to or greater than $9.00 but equal to or
less than $11.00, the quotient determined by dividing (x) $38.00 by (y) the
Average Acquiror Share Price, (B) if the Average Acquiror Share Price is less
than $9.00, 4.22 shares or (C) if the Average Acquiror Share Price is greater
than $11.00, 3.45 shares (the "Per Share Stock Consideration"), or (ii)
RP Financial, LC.
Board of Directors
_______________, 1996
Page 2
a cash amount equal to $38.00 per share of Company Common Stock (the "Per Share
Cash Consideration"); (2) For purposes of the Agreement: (i) the Aggregate Cash
Consideration shall amount to the product of the number of shares of Company
Common Stock outstanding at the Effective Time times .45 times $38.00; and (ii)
the Average Acquiror Share Price shall mean the average of the closing bid and
asked price per share of Acquiror Common Stock, as reported on the NASDAQ Stock
Market's National Market (as reported by The Wall Street Journal or, if not
reported thereby, another authoritative source), for the 20 trading days ending
on the date the Acquiror and the Company receive all requisite regulatory
approvals and satisfy all applicable waiting periods. The shares of Acquiror
Common Stock to be issued in the merger and the Aggregate Cash Consideration
shall be hereinafter referred to as the Merger Consideration.
Each holder of Company Common Stock will be allowed to specify the form
of consideration on an Election Form. Each Election Form will permit the holder
(i) to elect to receive Acquiror Common Stock with respect to all such holder's
Company Common Stock ("Stock Election Shares"); (ii) to elect to receive cash
with respect to all such holder's Company Common Stock ("Cash Election Shares");
or (iii) to indicate that such holder makes no such election with respect to
such holder's shares of Company Common Stock ("No-Election Shares"). Any shares
of Company Common Stock with respect to which the holder thereof shall not, as
of the Election Deadline, have made such an election by submission to the
Exchange Agent of an effective, properly completed Election Form shall be deemed
to be No-Election Shares. Within ten (10) business days after the Election
Deadline, the Exchange Agent will effect the allocation among holders of Company
Common Stock of rights to receive Acquiror Common Stock or cash in the Merger in
accordance with the Election Forms. Such allocation will be made in the manner
described in the Agreement.
Immediately before the Effective Time, each Company Stock Option that
is outstanding and exercisable at the Effective Time shall be cancelled and
converted into the right to receive from the Company, cash in an amount equal to
the difference between the exercise price of such Company Stock Option and the
Per Share Cash Consideration for each share of Company Common Stock subject to
such Company Stock Option.
RP Financial Background and Experience
RP Financial, as part of its financial institution valuation and consulting
practice, is regularly engaged in the valuation of financial institution
securities in connection with mergers and acquisitions of commercial banks and
thrift institutions, initial and secondary
RP Financial, LC.
Board of Directors
_______________, 1996
Page 3
offerings, mutual-to-stock conversions of thrift institutions, and business
valuations for other corporate purposes for financial institutions. As
specialists in the securities of financial institutions, RP Financial has
experience in, and knowledge of, the Ohio and Midwest U.S. markets for thrift
and bank securities and the institutions operating in Cincinnati.
Materials Reviewed and Analyses Performed
RP Financial reviewed and analyzed the following material in conjunction
with its analysis of the Merger Consideration as described in the Agreement: (1)
the Agreement of Merger, dated April 29, 1996, including exhibits; (2) the
following information for the Company - (a) audited financial statements for the
fiscal years ended June 30, 1992 through June 30, 1995, incorporated in Annual
Reports to shareholders or Form 10-Ks, shareholder and internal reports,
quarterly financial statements for the quarters ended September 30, 1995 and
December 31, 1995 incorporated in Form 10-QSBs, and internal quarterly financial
results through March 31, 1996; (b) the Prospectus for the Company's
mutual-to-stock conversion dated June 25, 1991; (c) proxy statements for the
last two years, and (d) unaudited internal and regulatory financial reports and
analyses prepared by management of the Company regarding various aspects of the
Company's assets and liabilities, particularly rates, volumes, maturities,
market values, trends, credit risk, interest rate risk and liquidity risk of
assets, liabilities, off-balance sheet assets, commitments and contingencies of
the Company; and (3) the following information for the Acquiror - (a) audited
financial statements for the fiscal years ended December 31, 1993 through
December 31, 1995, incorporated in Annual Reports to shareholders or Form 10-Ks
and internal quarterly financial results through March 31, 1996; (b) the
Prospectus for the Acquiror's mutual-to-stock conversion dated January 11, 1996;
(c) proxy statements for the last two years, and (d) unaudited internal and
regulatory financial reports and analyses prepared by management of the Acquiror
regarding various aspects of the Acquiror's assets and liabilities, particularly
rates, volumes, maturities, market values, trends, credit risk, interest rate
risk and liquidity risk of assets, liabilities, off-balance sheet assets,
commitments and contingencies of the Acquiror.
RP Financial, LC.
Board of Directors
_______________, 1996
Page 4
RP Financial reviewed the trading activity of the Company Common Stock,
and compared it to similar information for thrift institutions with comparable
resources, financial condition, earnings, operations and markets as well as for
publicly-traded thrifts with comparable financial condition, earnings,
operations and markets. In the course of its evaluation and analyses, RP
Financial conducted discussions with management of the Company regarding past
and current business operations, financial condition, and future prospects. RP
Financial reviewed the Company's financial, operational and market area
characteristics compared to similar information for comparable thrift
institutions, evaluated the potential for growth and profitability for the
Company in its market, specifically regarding competition by other banks,
thrifts, mortgage banking companies and other financial services companies,
economic projections in the local market area, the impact of the regulatory,
legislative and economic environments on operations and the public perception of
the thrift and banking industries, and the pro forma impact on the Acquiror's
financial condition and operations of the merger, including potential cost
savings and earnings improvements available to the Acquiror as a result of the
merger. RP Financial's analyses included: (i) an evaluation of the financial
terms, financial and operating condition and market areas of other recent
business combinations among comparable thrift institutions in the Midwest U.S.
and Ohio; (ii) an impact analysis of the merger on the Acquiror's financial
condition and operations; and (iii) an evaluation of possible alternative
business strategies available to the Acquiror, with a comparison of the
potential financial and operational impact of such strategies compared to the
merger. The results of these analyses and the other factors considered were
evaluated as a whole, with the aggregate results indicating a range of financial
parameters utilized to assess the Merger Consideration as described in the
Agreement.
In rendering our opinion, RP Financial relied, without independent
verification, on the accuracy and completeness of the information concerning the
Acquiror and the Company furnished to us for review for purposes of this
opinion, as well as publicly- available information regarding other financial
institutions and economic data. Neither the Acquiror nor the Company has
restricted RP Financial as to the material it was permitted to review. RP
Financial has not performed or obtained any independent appraisals or
evaluations of the assets and liabilities and potential and/or contingent
liabilities of the Acquiror or the Company. RP Financial expresses no opinion on
matters of a legal, accounting or tax nature or the ability of the merger to be
consummated as set forth in the Agreement.
RP Financial, LC.
Board of Directors
_______________, 1996
Page 5
Opinion
It is understood that this letter is directed to the Board of Directors
of the Acquiror in its consideration of the Agreement, and does not constitute a
recommendation to any shareholder of the Acquiror as to any action that such
shareholder should take in connection with the Agreement, or otherwise.
It is understood that this opinion is based on market conditions and
other circumstances existing on the date hereof.
It is understood that this opinion may be included in its entirety in
any communication by the Acquiror or its Board of Directors to the stockholders
of the Acquiror. It is also understood that this opinion may be included in its
entirety in any regulatory filing by the Acquiror or the Company. Except as
described above, this opinion may not be summarized, excerpted from or otherwise
publicly referred to without our prior written consent.
Based upon and subject to the foregoing, and other such matters as we
consider relevant, it is RP Financial's opinion that, as of the date hereof, the
Merger Consideration as described in the Agreement, is fair to the shareholders
of the Acquiror from a financial point of view.
Respectfully submitted,
RP FINANCIAL, LC.
ANNEX VIII
1701.85 RELIEF FOR DISSENTING SHAREHOLDERS; QUALIFICATION;
PROCEDURES.---(A)(1) A shareholder of a domestic corporation is entitled to
relief as a dissenting shareholder in respect of the proposals described in
sections 1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance
with this section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
share of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date of
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the certificates representing the
shares as to which he seeks relief, the dissenting shareholder, within fifteen
days from the date of the sending of such request, shall deliver to the
corporation the certificates requested so that the corporation may forthwith
endorse on them a legend to the effect that demand for the fair cash value of
such shares has been made. The corporation promptly shall return such endorsed
certificates to the dissenting shareholder. A dissenting shareholder's failure
to deliver such certificates terminates his rights as a dissenting shareholder,
at the option of the corporation, exercised by written notice sent to the
dissenting shareholder within twenty days after the lapse of the fifteen-day
period, unless a court for good cause shown otherwise directors. If
shares represented by a certificate on which such a legend has been endorsed are
transferred, each new certificate issued for them shall bear a similar legend,
together with the name of the original dissenting holder of such shares. Upon
receiving a demand for payment from a dissenting shareholder who is the record
holder of uncertificated securities, the corporation shall make an appropriate
notation of the demand for payment in its shareholder records. If uncertificated
shares for which payment has been demanded are to be transferred, any new
certificate issued for the shares shall bear the legend required for
certificated securities as provided in this paragraph. A transferee of the
shares so endorsed, or of uncertificated securities where such notation has been
made, acquires only such rights in the corporation as the original dissenting
holder of such shares had immediately after the service of a demand for payment
of the fair cash value of such shares. A request under this paragraph by the
corporation is not an admission by the corporation that the shareholder is
entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to
an agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the compliant of any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the court may
appoint one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such power
and authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and shall
render judgment against the corporation for the payment of it, with interest at
such rate and from such date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by
the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant
2
to the Rules of Appellate Procedure and, to the extent not in conflict with
those rules, Chapter 2505 of the Revised Code. If, during the pendency of any
proceeding instituted under this section, a suit or proceeding is or has been
instituted to enjoin or otherwise to prevent the carrying out of the action as
to which the shareholder has dissented, the proceeding instituted under this
section shall be stayed until the final determination of the other suit or
proceeding. Unless any provision in division (D) of this section is applicable,
the fair cash value of the shares that is agreed upon by the parties or fixed
under this section shall be paid within thirty days after the date of final
determination of such value under this division, the effective date of the
amendment to the articles, or the consummation of the other action involved,
whichever occurs last. Upon the occurrence of the last such event, payment shall
be made immediately to a holder of uncertificated securities entitled to such
payment. In the case of holders of shares represented by certificates, payment
shall be made only upon and simultaneously with the surrender to the corporation
of the certificates representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of
the corporation, fair cash value as to those shareholders shall be determined as
of the day prior to the day on which the vote by the shareholders was taken,
and, in the case of a merger pursuant to section 1701.80 or 1701.801 of the
Revised Code, fair cash value as to shareholders of a constituent subsidiary
corporation shall be determined as of the day before the adoption of the
agreement of merger by the directors of the particular subsidiary corporation.
The fair cash value of a share for the purposes of this section is the amount
that a willing seller who is under no compulsion to sell would be willing to
accept and that a willing buyer who is under no compulsion to purchase would be
willing to pay, but in no event shall the fair cash value of a share exceed the
amount specified in the demand of the particular shareholder. In computing such
fair cash value, any appreciation or depreciation in market value resulting from
the proposal submitted to the directors or to the shareholders shall be
excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive
such fair cash value and to sell such shares as to which he seeks relief, and
the right and obligation of the corporation to purchase such shares and to pay
the fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this
section, unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind their
adoption, of the action involved;
(c) The dissenting shareholder withdraws his demand, with the
consent of the corporation by its directors;
3
(d) The corporation and the dissenting shareholder have not
come to an agreement as to the fair cash value per share, and neither the
shareholder nor the corporation has filed or joined in a complaint under
division (B) of this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the
merger or consolidation has become effective and the surviving or new entity is
not a corporation, action required to be taken by the directors of the
corporation shall be taken by the general partners of a surviving or new
partnership or the comparable representatives of any other surviving or new
entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
4
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Article VII of the Registrant's Articles of Incorporation provides as
follows:
The Corporation shall 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, including actions by or in the right
of the Corporation, by reason of the fact that such person 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, member, manager, or agent of another corporation, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against expenses, including attorney's fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit, or
proceeding to the full extent permissible under Ohio law.
Section 1701.13 of the Ohio General Corporation Law provides
as follows with respect to indemnification:
(E) (1) 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, member, manager, or agent of
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against expenses, including attorney's 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, if he 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 contendere 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.
(2) 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, member, manager,
or agent of another corporation, domestic or foreign, nonprofit or for
profit, a limited liability company, or a partnership, joint venture,
trust, or other enterprise, against expenses, including attorney's
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 of the following:
(a) Any claim, issue, or matter as to which
such person is 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;
(b) Any action or suit in which the only
liability asserted against a director is pursuant to section 1701.95 of
the Revised Code.
(3) To the extent that a director, trustee, officer,
employee, member, manager, or agent has been successful on the merits
or otherwise in defense of any action, suit, or proceeding referred to
in division (E)(1) or (2) of this section, or in defense of any claim,
issue, or matter therein, he shall be indemnified against expenses,
including attorney's fees, actually and reasonably incurred by him in
connection with the action, suit, or proceeding.
(4) Any indemnification under division (E)(1) or (2)
of this section, unless ordered by a court, shall be made by the
corporation only as authorized in the specific case, upon a
determination that indemnification of the director, trustee, officer,
employee, member, manager, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
division (E)(1) or (2) of this section. Such determination shall be
made as follows:
(a) By a majority vote of a quorum
consisting of directors of the indemnifying corporation who were not
and are not parties
II-2
to or threatened with the action, suit or proceeding referred to in
division (E)(1) or (2) of this section;
(b) If the quorum described in division
(E)(4)(a) of this section is not obtainable or if a majority vote of a
quorum of disinterested directors so directs, in a written opinion by
independent legal counsel other than an attorney, or a firm having
associated with it an attorney, who has been retained by or who has
performed services for the corporation or any person to be indemnified
within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the
court in which the action, suit, or proceeding referred to in division
(E)(1) or (2) of this section was brought.
Any determination made by the disinterested directors under
division (E)(4)(a) or by independent legal counsel under division
(E)(4)(b) of this section shall be promptly communicated to the person
who threatened or brought the action or suit by or in the right of the
corporation under division (E)(2) of this section, and, within ten days
after receipt of such notification, such person shall have the right to
petition the court of common pleas or the court in which such action or
suit was brought to review the reasonableness of such determination.
(5) (a) Unless at the time of a director's act or
omission that is the subject of an action, suit, or proceeding referred
to in division (E)(1) or (2) of this section, the articles or the
regulations of a corporation state, by specific reference to this
division, that the provisions of this division do not apply to the
corporation and unless the only liability asserted against a director
in an action, suit, or proceeding referred to in division (E)(1) or (2)
of this section is pursuant to section 1701.95 of the Revised Code,
expenses, including attorney's fees, incurred by a director in
defending the action, suit, or proceeding shall be paid by the
corporation 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 do both of the
following:
(i) Repay such amount if it is proved by
clear and convincing evidence in a court of competent jurisdiction 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;
II-3
(ii) Reasonably cooperate with the
corporation concerning the action, suit, or proceeding.
(b) Expenses, including attorney's fees,
incurred by a director, trustee, officer, employee, member, manager, or
agent in defending any action, suit, or proceeding referred to in
division (E)(1) or (2) of this section, may be paid by the corporation
as they are incurred, in advance of the final disposition of the
action, suit, or proceeding, as authorized by the directors in the
specific case, upon the receipt of an undertaking by or on behalf of
the director, trustee, officer, employee, member, manager, or agent to
repay such amount, if it ultimately is determined that he is not
entitled to be indemnified by the corporation.
(6) The indemnification authorized by this section
shall not be exclusive of, and shall be in addition to, any other
rights granted to those seeking indemnification under the articles, the
regulations, any agreement, a vote of shareholders or disinterested
directors, or otherwise, both as to action in their official capacities
and as to action in another capacity while holding their offices or
positions, and shall continue as to a person who has ceased to be a
director, trustee, officer, employee, member, manager, or agent and
shall inure to the benefit of the heirs, executors, and administrators
of such a person.
(7) A corporation may purchase and maintain insurance
or furnish similar protection, including, but not limited to, trust
funds, letters of credit, or self-insurance, on behalf of or for any
person who 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, member, manager, or agent or
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify
him against such liability under this section. Insurance may be
purchased from or maintained with a person in which the corporation has
a financial interest.
(8) The authority of a corporation to indemnify
persons pursuant to division (E)(1) or (2) of this section does not
limit the payment of expenses as they are incurred, indemnification,
insurance, or other protection that may be provided pursuant to
divisions (E)(5), (6), and (7) of this section. Divisions (E)(1) and
(2) of this section do not create any obligation to repay or return
payments made by the corporation pursuant to division (E)(5), (6), or
(7).
II-4
(9) As used in division (E) of this section,
"corporation" includes all constituent entities in a consolidation or
merger and the new or surviving corporation, so that any person who is
or was a director, officer, employee, trustee, member, manager, or
agent of such a constituent entity, or is or was serving at the request
of such constituent entity as a director, trustee, officer, employee,
member, manager, or agent of another corporation, domestic or foreign,
nonprofit or for profit, a limited liability company, or a partnership,
joint venture, trust, or other enterprise, shall stand in the same
position under this section with respect to the new or surviving
corporation as he would if he had served the new or surviving
corporation in the same capacity.
II-5
Item 21. Exhibits and Financial Statement Schedules.
The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:
(a) List of Exhibits:
Exhibit No. Exhibit Location
2(a) Amended and Restated Agreement of Merger, dated as of
June 13, 1996, among FFOH, FAC and CFC, including the
Amended and Restated Agreement of Merger, dated as of
June 13, 1996, between Fidelity Federal and Peoples'
Savings, and attached as Exhibit
A thereto (1)
2(b) Stock Option Agreement, dated as of April 29, 1996,
between FFOH (as grantee) and CFC (as issuer) (2)
2(c) Stock Option Agreement, dated as of April 29, 1996,
between FFOH (as issuer) and CFC (as grantee) (2)
2(d) Stockholder Agreement, dated as of April 29, 1996,
among FFOH and certain shareholders of CFC (2)
2(e) Stockholder Agreement, dated as of April 29, 1996,
among CFC and certain shareholders of FFOH (2)
3(a) Articles of Incorporation of FFOH (3)
3(b) Code of Regulations of FFOH (3)
3(c) Bylaws of FFOH (3)
4(a) Specimen Common Stock certificate (4)
5 Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding legality of securities being registered E-1
8 Opinion of Thompson Hine & Flory P.L.L. regarding
certain federal income tax consequences E-2
10(a) 1992 Stock Incentive Plan (3)
10(b) 1992 Directors' Stock Option Plan (3)
10(c) Management Recognition Plan (3)
10(d) Employee Stock Ownership Plan (3)
II-6
Exhibit No. Exhibit Location
10(e) Employment Agreement among FFOH, Fidelity Federal
and John R. Reusing (4)
10(f) Employment Agreement among FFOH, Fidelity Federal
and Paul D. Staubach (4)
10(g) Form of Severance Agreements among FFOH, Fidelity
Federal and certain officers of FFOH and Fidelity
Federal (4)
10(h) Form of Employment Agreement among FFOH, Fidelity
Federal and Donald H. Rolf, Jr. E-6
10(i) Form of Employment Agreement among FFOH, Fidelity
Federal and Joseph D. Hughes E-18
21 Subsidiaries of FFOH (4)
23(a) Consent of Elias, Matz, Tiernan & Herrick L.L.P.
(contained in the opinion included as Exhibit 5) --
23(b) Consent of Thompson Hine & Flory P.L.L.
(contained in the opinion included as Exhibit 8) --
23(c) Consent of Grant Thornton LLP E-29
23(d) Consent of Clark, Schaeffer, Hackett & Co. E-30
23(e) Consent of RP Financial, LC. E-31
23(f) Consent of Stifel, Nicolaus & Company, Incorporated E-32
24 Powers of Attorney (included in the signature page to the
initial filing of this Registration Statement) --
99(a) Form of proxy for the FFOH Special Meeting E-33
99(b) Form of proxy for the CFC Special Meeting E-35
99(c) Other FFOH solicitation materials E-37
99(d) Consent of Donald H. Rolf, Jr. to be named as
prospective director E-43
99(e) Consent of Joseph D. Hughes to be named as
prospective director E-44
99(f) Consent of Thomas N. Spaeth to be named as
prospective director E-45
II-7
(1) Exhibit is attached as an Annex I to the Prospectus/Joint Proxy
Statement included herein.
(2) Exhibit is incorporated by reference to the Form 8-K report filed by
FFOH with the SEC on May 1, 1996. In addition, the exhibit is attached
as an Annex to the Prospectus/Joint Proxy Statement included herein.
(3) Exhibit is incorporated by reference to the Form S-1 Registration
Statement (No. 33-99304) filed by FFOH with the SEC on November 14,
1995.
(4) Exhibit and/or discussion is incorporated by reference to FFOH's Annual
Report on Form 10-K for the year ended December 31, 1995, filed with
the SEC on April 1, 1996.
FFOH's management contracts or compensatory plans or arrangements
consist of Exhibit Nos. 10(a)-(i) listed above.
(b) Financial Statement Schedules.
No financial statement schedules are filed because the required
information is not applicable or is included in the consolidated financial
statements or related notes.
Item 22. Undertakings
(a) The undersigned Registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the registration statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement; and
II-8
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs (a) (1) (i) and
(a) (1) (ii) do not apply if the registration statement is on
Form S-3 or Form S-8, and the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the registration
statement.
(2) 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.
(3) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a 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.
(4) That every prospectus (i) that is filed pursuant to
paragraph (3) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a
part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) That, for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains
a form of prospectus 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.
II-9
(6) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(7) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to 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 questions whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) 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.
(c) 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.
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant 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 the 13th day of June 1996.
FIDELITY FINANCIAL OF OHIO, INC.
By: /s/ John R. Reusing
--------------------
John R. Reusing
President and Chief Executive Officer
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. Each of the directors and/or officers of
Fidelity Financial of Ohio, Inc. whose signature appears below hereby appoints
John R. Reusing, and each of them severally, as his attorney-in-fact to sign in
his name and behalf, in any and all capacities stated below and to file with the
Securities and Exchange Commission any and all amendments, including
post-effective amendments, to this Registration Statement on Form S-4, making
such changes in the Registration Statement as appropriate, and generally to do
all such things in their behalf in their capacities as directors and/or officers
to enable Fidelity Financial of Ohio, Inc. to comply with the provisions of the
Securities Act of 1933, and all requirements of the Securities and Exchange
Commission.
/s/ John R. Reusing Date: June 13, 1996
- -----------------------------------
John R. Reusing
President and Chief Executive
Officer (principal executive
officer)
/s/ Paul D. Staubach Date: June 13, 1996
- -------------------------------------
Paul D. Staubach
Director, Senior Vice President,
Chief Financial Officer and
Secretary (principal financial
and accounting officer)
II-11
/s/ Michael W. Jordan Date: June 13, 1996
- --------------------------------------
Michael W. Jordan
Director
/s/ David A. Luecke Date: June 13, 1996
- ----------------------------------------
David A. Luecke
Director
/s/ Constantine Papadakis Date: June 13, 1996
- ----------------------------------------
Constantine Papadakis
Director
/s/ Robert W. Zumbiel Date: June 13, 1996
- -----------------------------------
Robert W. Zumbiel
Director
II-12
EXHIBIT INDEX
Exhibit No. Exhibit Location
2(a) Amended and Restated Agreement of Merger, dated as of
June 13, 1996, among FFOH, FAC and CFC, including the
Amended and Restated Agreement of Merger, dated as of
June 13, 1996, between Fidelity Federal and Peoples'
Savings, and attached as Exhibit
A thereto. (1)
2(b) Stock Option Agreement, dated as of April 29, 1996,
between FFOH (as grantee) and CFC (as issuer) (2)
2(c) Stock Option Agreement, dated as of April 29, 1996,
between FFOH (as issuer) and CFC (as grantee) (2)
2(d) Stockholder Agreement, dated as of April 29, 1996,
among FFOH and certain shareholders of CFC (2)
2(e) Stockholder Agreement, dated as of April 29, 1996,
among CFC and certain shareholders of FFOH (2)
3(a) Articles of Incorporation of FFOH (3)
3(b) Code of Regulations of FFOH (3)
3(c) Bylaws of FFOH (3)
4(a) Specimen Common Stock certificate (4)
5 Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding legality of securities being registered E-1
8 Opinion of Thompson Hine & Flory P.L.L. regarding
certain federal income tax consequences E-2
10(a) 1992 Stock Incentive Plan (3)
10(b) 1992 Directors' Stock Option Plan (3)
10(c) Management Recognition Plan (3)
10(d) Employee Stock Ownership Plan (3)
10(e) Employment Agreement among FFOH, Fidelity Federal
and John R. Reusing (4)
10(f) Employment Agreement among FFOH, Fidelity Federal
and Paul D. Staubach (4)
Exhibit No. Exhibit Location
10(g) Form of Severance Agreements among FFOH, Fidelity
Federal and certain officers of FFOH and Fidelity (4)
Federal
10(h) Form of Employment Agreement among FFOH, Fidelity
Federal and Donald H. Rolf, Jr. E-6
10(i) Form of Employment Agreement among FFOH, Fidelity
Federal and Joseph D. Hughes E-18
21 Subsidiaries of FFOH (4)
23(a) Consent of Elias, Matz, Tiernan & Herrick L.L.P.
(contained in the opinion included as Exhibit 5) --
23(b) Consent of Thompson Hine & Flory P.L.L.
(contained in the opinion included as Exhibit 8) --
23(c) Consent of Grant Thornton LLP E-29
23(d) Consent of Clark, Schaeffer, Hackett & Co. E-30
23(e) Consent of RP Financial, LC. E-31
23(f) Consent of Stifel, Nicolaus & Company, Incorporated E-32
24 Powers of Attorney (included in the signature page to the
initial filing of this Registration Statement) --
99(a) Form of proxy for the FFOH Special Meeting E-33
99(b) Form of proxy for the CFC Special Meeting E-35
99(c) Other FFOH solicitation materials E-37
99(d) Consent of Donald H. Rolf, Jr. to be named as
prospective director E-43
99(e) Consent of Joseph D. Hughes to be named as
prospective director E-44
99(f) Consent of Thomas N. Spaeth to be named as
prospective director E-45
- ------------------
(1) Exhibit is attached as Annex I to the Prospectus/Joint Proxy
Statement included herein.
2
(2) Exhibit is incorporated by reference to the Form 8-K report filed
by FFOH with the SEC on May 1, 1996. In addition, the exhibit is
attached as an Annex to the Prospectus/Joint Proxy Statement
included herein.
(3) Exhibit is incorporated by reference to the Form S-1 Registration
Statement (No. 33-99304) filed by FFOH with the SEC on November 14,
1995.
(4) Exhibit and/or discussion is incorporated by reference to FFOH's
Annual Report on Form 10-K for the year ended December 31, 1995,
filed with the SEC on April 1, 1996.
3