Exhibit 2
Affiliation Agreement
Between
Fifth Third Bancorp
And
Peoples Bank Corporation of Indianapolis
AFFILIATION AGREEMENT
This Affiliation Agreement (this "Agreement") dated as of July 12, 1999 is
entered into by and between FIFTH THIRD BANCORP, a corporation organized and
existing under the corporation laws of the State of Ohio with its principal
office located in Cincinnati, ▇▇▇▇▇▇▇▇ County, Ohio ("Fifth Third"), and PEOPLES
BANK CORPORATION OF INDIANAPOLIS, a corporation organized and existing under the
corporation laws of the State of Indiana, with its principal office located in
Indianapolis, ▇▇▇▇▇▇ County, Indiana ("Peoples Bank Corporation").
W I T N E S S E T H :
WHEREAS, Fifth Third is a registered multi-bank holding company under the Bank
Holding Company Act of 1956, as amended, and Peoples Bank Corporation is a
registered bank holding company registered under the Bank Holding Company Act of
1956, as amended, and Fifth Third and Peoples Bank Corporation desire to effect
a merger under the authority and provisions of the corporation laws of the State
of Ohio and the State of Indiana pursuant to which at the Effective Time (as
herein defined in Section IX) Peoples Bank Corporation will be merged with and
into Fifth Third, with Fifth Third as the surviving corporation (the "Merger");
WHEREAS, Peoples Bank Corporation owns all of the issued and outstanding stock
of Peoples Bank & Trust Company, an Indiana banking corporation ("Bank
Subsidiary"), which, at the Effective Time, will be merged with and into Fifth
Third's wholly-owned subsidiary Fifth Third Bank, Indiana, an Indiana banking
corporation ("Fifth Third Bank, Indiana"), with Fifth Third Bank, Indiana as the
surviving corporation (the "Subsidiary Merger");
WHEREAS, the Board of Directors of Peoples Bank Corporation has determined that
it is in the best interests of Peoples Bank Corporation and its stockholders to
consummate the Merger and the Subsidiary Merger, subject to the terms and
conditions set forth herein;
WHEREAS, the Board of Directors of Fifth Third has determined that it is in the
best interests of Fifth Third and its stockholders to consummate the Merger and
the Subsidiary Merger, subject to the terms and conditions set forth herein;
WHEREAS, under the terms of this Agreement each Voting Common Share, without par
value of Peoples Bank Corporation ("Peoples Voting Common Stock") and each
Nonvoting Common Share, without par value of Peoples Bank Corporation ("Peoples
Nonvoting Common Stock" and, together with the Peoples Voting Common Stock, the
"Peoples Bank Corporation Common Stock"), which is issued and outstanding
(excluding any treasury shares) immediately prior to the Effective Time will at
the Effective Time be canceled and extinguished and converted into shares of
Common Stock, without par value, of Fifth Third ("Fifth Third Common Stock"),
all as more fully provided in this Agreement;
WHEREAS, the parties to this Agreement intend that the Merger qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code") and for pooling-of-interests accounting
treatment;
WHEREAS, prior to the date hereof, the Board of Directors of Peoples Bank
Corporation has approved, adopted and recommended this Agreement and the Merger,
upon the terms and subject to the conditions set forth herein (including for
purposes of Chapter 43 of the Indiana Business Corporation Law (the "IBCL"));
NOW, THEREFORE, in consideration of the mutual covenants herein contained, Fifth
Third and Peoples Bank Corporation, agree together as follows:
Article I. Mode of Effectuating Conversion of Shares; Effects of the Merger
A. The Merger. Upon the terms and conditions set forth in the Agreement, Peoples
Bank Corporation shall be merged with and into Fifth Third.
B. Treatment of Fifth Third Stock. At the Effective Time (as defined in Article
IX) all of the shares of Fifth Third Common Stock that are issued and
outstanding or held by Fifth Third as treasury shares immediately prior to the
Effective Time will remain unchanged and will remain outstanding or as treasury
shares, as the case may be, of the surviving corporation. Any stock options,
subscription rights, warrants or other securities outstanding immediately prior
to the Effective Time, entitling the holders to subscribe for purchase of any
shares of the capital stock of any class of Fifth Third, and any securities
outstanding at such time that are convertible into shares of the capital stock
of any class of Fifth Third will remain unchanged and will remain outstanding,
with the holders thereof entitled to subscribe for, purchase or convert their
securities into the number of shares of the class of capital stock of Fifth
Third to which they are entitled under the terms of the governing documents.
C. Treatment of Peoples Bank Corporation Stock. 1. At the Effective Time, each
share of Peoples Bank Corporation Common Stock (excluding treasury shares) that
is issued and outstanding immediately prior to the Effective Time will be
converted by virtue of the Merger and without further action, into 1.09 shares
of Fifth Third Common Stock (the "Exchange Ratio"), or cash in lieu thereof for
fractional shares, if any, as described in Section I.E. below, subject to
adjustment as provided in Section I.F. below. At the Effective Time, all shares
of Peoples Bank Corporation Common Stock held as treasury shares and all shares
of Peoples Bank Corporation Common Stock owned by Fifth Third or any of its
wholly owned subsidiaries (other than in a fiduciary, custodial or similar
capacity or owned as a result of a debt previously contracted) will be canceled
and terminated and no shares of Fifth Third or other consideration will be
issued in exchange therefor.
2. At the Effective Time, each award, option, or other right to
purchase or acquire shares of Peoples Bank Corporation Common Stock pursuant to
stock options ("Peoples Bank Corporation Rights") granted by Peoples Bank
Corporation under the Peoples Bank Corporation of Indianapolis Stock Option
Plan, the Peoples Bank Corporation of Indianapolis 1998 Stock Option Plan, as
amended, or the Peoples Bank Corporation of Indianapolis Directors Stock Option
Plan ("Stock Plans"), which are outstanding at the Effective Time, whether or
not vested or exercisable, shall automatically be converted into and become
options with respect to Fifth Third Common Stock, and Fifth Third shall assume
each Peoples Bank Corporation Right, in accordance with the same terms and
conditions of the Stock Plans and stock option agreement by which the Peoples
Bank Corporation Right is evidenced, except from and after the Effective Time,
(i) Fifth Third and its Compensation Committee shall be substituted for the
Committee of Peoples Bank Corporation's Board of Directors (including, if
applicable, the entire Board of Directors of Peoples Bank Corporation)
administering such Stock Plans, (ii) each Peoples Bank Corporation Right assumed
by Fifth Third may be exercised solely for shares of Fifth Third Common Stock,
(iii) the number of shares of Fifth Third Common Stock subject to such Peoples
Bank Corporation Right shall be equal to the number of shares of Peoples Bank
Corporation Common Stock subject to such Peoples Bank Corporation Right
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
(iv) the per share exercise price under each such Peoples Bank Corporation Right
shall be adjusted by dividing the per share exercise price under each such
Peoples Bank Corporation Right by the Exchange Ratio and rounding up to the
nearest four decimal places. Notwithstanding, the provisions of clause (iii) of
the preceding sentence, Fifth Third shall not be obligated to issue any fraction
of a share of Fifth Third Common Stock upon exercise of Peoples Bank Corporation
Rights and any fraction of a share of Fifth Third Common Stock that otherwise
would be subject to a converted Peoples Bank Corporation Right shall represent
the right to receive a cash payment equal to the product of such fraction and
the excess, if any, of the Applicable Market Value Per Share of Fifth Third
Common Stock as defined in Article I Section E hereof (but calculated as of the
date of exercise) over the per share exercise price of such Peoples Bank
Corporation Right (as adjusted in accordance with subparagraph (iv) of this
Section I.C.2). Any stock appreciation award or right issued by Peoples Bank
Corporation under the Stock Plans shall likewise be converted into the right to
receive cash value in accordance with the terms of such award on the basis of
the value of the number of shares of Fifth Third Common Stock into which the
number of shares of Peoples Bank Corporation Common Stock covered by such award
would be converted at the Effective Time on the basis of the Exchange Ratio with
the exercise price thereof adjusted in the same manner as the exercise prices of
Peoples Bank Corporation Rights are to be adjusted as provided above. In
addition, notwithstanding the foregoing, each Peoples Bank Corporation Right
which is an "incentive stock option" shall be adjusted as required by Section
424 of the Code so as not to constitute a modification, extension, or renewal of
the option, within the meaning of Section 424(h) of the Code. Fifth Third agrees
to take all reasonable steps which are necessary to effectuate the foregoing
provisions of this Section.
3. At or prior to the Effective Time, Fifth Third shall take all
corporate action necessary to reserve for issuance sufficient shares of Fifth
Third Common Stock for delivery upon exercise of Peoples Bank Corporation Rights
assumed by Fifth Third in accordance with this Section.
4. As soon as practicable after the Effective Time, Fifth Third shall
deliver to each holder of Peoples Bank Corporation Rights appropriate notices
setting forth such holders' rights pursuant to the Stock Plans, and the
agreements evidencing the grants of such Peoples Bank Corporation Rights shall
continue in effect on the same terms and conditions (subject to the conversion
required by this Section I.C. after giving effect to the Merger and the
assumption by Fifth Third as set forth above). To the extent necessary to
effectuate the provisions of this Section I.C., Fifth third shall deliver new or
amended agreements reflecting the terms of each of the Peoples Bank Corporation
Rights assumed by Fifth Third and amend the Stock Plans to reflect the terms
hereof.
5. As soon as practical after the Effective Time, Fifth Third shall
file, a registration statement on the appropriate form with respect to shares of
Fifth Third Common Stock subject to such Peoples Bank Corporation Rights and
shall use its reasonable efforts to maintain the effectiveness of such
registration statements (and maintain the current status of the prospectus or
prospectuses with respect thereto), for so long as such Peoples Bank Corporation
Rights remain outstanding.
D. Status of Peoples Bank Corporation Common Stock. At the Effective Time, all
of the shares of Peoples Bank Corporation Common Stock, whether issued or
unissued (including treasury shares), will be canceled and extinguished and the
holders of certificates for shares thereof shall cease to have any rights as
shareholders of Peoples Bank Corporation, other than the right to receive any
dividend or other distribution with respect to such Peoples Bank Corporation
Common Stock with a record date occurring prior to the Effective Time and the
right to receive the consideration provided in this Article I. After the
Effective Time, there shall be no transfers on the stock transfer books of
Peoples Bank Corporation of shares of Peoples Bank Corporation Common Stock.
E. Exchange Procedures. 1. After the Effective Time, each holder of a
certificate or certificates for shares of Peoples Bank Corporation Common Stock
as of the Effective Time, upon surrender of the same duly transmitted to Fifth
Third Trust Department, as exchange agent (the "Exchange Agent") (or in lieu of
surrendering such certificates in the case of lost, stolen, destroyed or mislaid
certificates, upon execution of such documentation as may be reasonably required
by Fifth Third), shall be entitled to receive in exchange therefor a certificate
or certificates representing the number of whole shares of Fifth Third Common
Stock into which such holder's shares of Peoples Bank Corporation Common Stock
shall have been converted by the Merger pursuant to the Exchange Ratio, plus a
cash payment for any fraction of a share to which the holder is entitled, in
lieu of such fraction of a share, without any interest thereon, equal in amount
to the product resulting from multiplying such fraction by the average per share
closing price of Fifth Third Common Stock as reported on the NASDAQ National
Market System for the ten trading days prior to and including the Effective Time
(the "Applicable Market Value Per Share of Fifth Third Common Stock"). Within
seven (7) business days after the Effective Time, the Exchange Agent will send a
notice and transmittal form to each Peoples Bank Corporation shareholder of
record at the Effective Time advising such shareholder of the effectiveness of
the Merger and the procedures for surrendering to the Exchange Agent outstanding
certificates formerly evidencing Peoples Bank Corporation Common Stock in
exchange for new certificates of Fifth Third Common Stock and cash in lieu of
fractional shares. Until so surrendered, each outstanding certificate that prior
to the Effective Time represented shares of Peoples Bank Corporation Common
Stock shall be deemed for all corporate purposes to represent the right to
receive the number of full shares of Fifth Third Common Stock and cash in lieu
of fractional share interests into which the same shall have been converted;
provided, however, that dividends or distributions otherwise payable with
respect to shares of Fifth Third Common Stock into which Peoples Bank
Corporation Common Stock shall have been so converted shall be paid with respect
to such shares only when the certificate or certificates evidencing shares of
Peoples Bank Corporation Common Stock shall have been so surrendered (or in lieu
of surrendering such certificates in the case of lost, stolen, destroyed or
mislaid certificates, upon execution of such documentation as may be reasonably
required by Fifth Third) and thereupon any such dividends and distributions
shall be paid, without interest, to the holder entitled thereto subject however
to the operation of any applicable escheat or similar laws relating to unclaimed
funds.
2. Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Peoples Bank Corporation for twelve (12) months after the
Effective Time shall be paid to Fifth Third. Any shareholders of Peoples Bank
Corporation who have not theretofore complied with this Paragraph E of this
Article I shall thereafter only look to Fifth Third for payment of the shares of
Fifth Third Common Stock and cash in lieu of any fractional shares deliverable
in respect of each share of Peoples Bank Corporation Common Stock such
stockholder holds as determined pursuant to this Agreement, without any interest
thereon. Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to any former holder of Peoples Bank Corporation Common
Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
F. Adjustments to Exchange Ratio. The Exchange Ratio referred to in Section I.C.
shall be adjusted so as to give the Peoples Bank Corporation shareholders the
economic benefit of any stock dividends, reclassifications, recapitalizations,
split-ups, exchanges of shares, or combinations or subdivisions of Fifth Third
Common Stock declared (with a record date prior to the Effective Time) or
effected between the date of this Agreement and the Effective Time. In
particular, without limiting the foregoing, if, prior to the Effective Time,
Fifth Third should split, reclassify or combine the Fifth Third Common Stock, or
pay a stock dividend or other stock distribution in Fifth Third Common Stock, as
of a record date prior to the Effective Time, appropriate adjustments (rounded
to the nearest one-ten-thousandth of a share of Fifth Third Common Stock) will
be made to the Exchange Ratio and the total number of shares of Fifth Third
Common Stock to be issued in the transaction so as to maintain the proportional
interest in Fifth Third Common Stock which the shareholders of Peoples Bank
Corporation would otherwise have received. If, between the date hereof and the
Effective Time, Fifth Third shall consolidate with or be merged with or into any
other corporation (a "Business Combination") and the terms thereof shall provide
that Fifth Third Common Stock shall be converted into or exchanged for the
shares of any other corporation or entity, then provision shall be made as part
of the terms of such Business Combination so that (i) each shareholder of
Peoples Bank Corporation who would be entitled to receive shares of Fifth Third
Common Stock pursuant to this Agreement shall be entitled to receive, in lieu of
each share of Fifth Third Common Stock issuable to such shareholder as provided
herein, the same kind and amount of securities or assets as such shareholder
would have received with respect to such shares if the merger would have been
consummated, and such shareholder had received shares of Fifth Third Common
Stock prior to the consummation of such Business Combination. In the event
between the date of this Agreement and the Effective Time, Fifth Third has
declared or engaged in the distribution of any of its assets (other than a
regular cash dividend), or declared or effected the distribution of equity
securities of any business entity to the Fifth Third shareholders, then the
Exchange Ratio shall be increased in such amount so that the equivalent fair
market value of such transaction shall also be distributed to the Peoples Bank
Corporation shareholders, as of the Effective Time.
G. Effectiveness of Merger; Surviving Corporation. When all necessary documents
have been filed and recorded in accordance with the laws of the States of Ohio
and Indiana, or at such later time as shall be specified therein, the Merger
shall become effective, the separate existence of Peoples Bank Corporation shall
cease and Peoples Bank Corporation shall be merged into Fifth Third (which will
be the "Surviving Corporation"), and which shall continue its corporate
existence under the laws of the State of Ohio under the name "Fifth Third
Bancorp".
H. Articles of the Surviving Corporation. The Second Amended Articles of
Incorporation, as amended, of Fifth Third of record with the Secretary of State
of Ohio as of the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation, until further amended as provided by law.
I. Directors and Officers of the Surviving Corporation. The Directors of Fifth
Third who are in office at the Effective Time shall be the directors of the
Surviving Corporation, each of whom shall continue to serve as a Director for
the term for which he was elected, subject to the Regulations of the Surviving
Corporation and in accordance with applicable law. The officers of Fifth Third
who are in office at the time the Merger becomes effective shall be the officers
of the Surviving Corporation, subject to the Regulations of the Surviving
Corporation and in accordance with law.
J. Regulations of the Surviving Corporation. The Regulations of Fifth Third at
the Effective Time shall be the Regulations of the Surviving Corporation, until
amended as provided therein and in accordance with law.
K. Effects of the Merger. At the Effective Time, the effects of the Merger shall
be as provided by the applicable provisions of the laws of Ohio and, to the
extent applicable, Indiana. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time: the separate existence of Peoples
Bank Corporation shall cease; Fifth Third shall possess all assets and property
of every description, and every interest therein, wherever located, and the
rights, privileges, immunities, powers, franchises and authority, of a public as
well as a private nature, of each of Fifth Third and Peoples Bank Corporation,
and all obligations owing by or due each of Fifth Third and Peoples Bank
Corporation shall be vested in, and become the obligations of, Fifth Third,
without further act or deed; and all rights of creditors of each of Fifth Third
and Peoples Bank Corporation shall be preserved unimpaired, and all liens upon
the property of each of Fifth Third and Peoples Bank Corporation shall be
preserved unimpaired, on only the property affected by such liens immediately
prior to the Effective Time.
L. Further Actions. From time to time as and when requested by the Surviving
Corporation, or by its successors or assigns, the officers and Directors of
Peoples Bank Corporation in office immediately prior to the Effective Time shall
execute and deliver such instruments and shall take or cause to be taken such
further or other action as shall be necessary in order to vest or perfect in the
Surviving Corporation or to confirm of record or otherwise, title to, and
possession of, all the assets, property, interests, rights, privileges,
immunities, powers, franchises and authority of Peoples Bank Corporation and
otherwise to carry out the purposes of this Agreement.
M. Filing of Documents. This Agreement shall be filed (only if necessary) and
recorded along with a certificate or articles of merger in accordance with the
requirements of the laws of the States of Ohio and Indiana, respectively. This
Agreement shall not be filed with the Secretary of the State of Indiana or the
Secretary of State of Ohio until, but shall be filed promptly after, all of the
conditions precedent to consummating the Merger as contained in Article VI of
this Agreement shall have been fully satisfied or effectively waived.
N. Tax and Accounting Treatment. 1. The parties intend that the Merger will
qualify as a "reorganization" within the meaning of Section 368(a) of the Code.
The Agreement is intended to be a "plan of reorganization" within the meaning of
the regulations promulgated under the Code and for purposes of Section 354 and
361 of the Code.
2. The Merger is intended to qualify for pooling-of-interests accounting
treatment.
O. Dissenters' Rights. No holder of Fifth Third Common Stock or Peoples
Non-Voting Common Stock shall be entitled to relief as a dissenting shareholder
pursuant to the IBCL, the Ohio General Corporation Law (the "OGCL") or
otherwise. Holders of Peoples Voting Common Stock shall be entitled to
dissenters' rights under Section 23-1-44 of the IBCL. Each outstanding share of
Peoples Voting Common Stock the holder of which has perfected his right to
dissent under the IBCL and has not effectively withdrawn or lost such rights as
of the Effective Time shall not be converted into or represent a right to
receive Fifth Third Common Stock, and the holder thereof shall be entitled only
to such rights as are granted by the IBCL. Peoples Bank Corporation shall give
Fifth Third prompt notice upon receipt by Peoples Bank Corporation of any such
written demands for payment of the fair value of such shares (such shares being
referred to as "Dissenting Shares") of Peoples Voting Common Stock and of
withdrawals of such demands and any other instruments provided pursuant to the
IBCL (any shareholder duly making such demands being hereinafter called a
"Dissenting Shareholder"). Any payments made in respect of Dissenting Shares
shall be made by the Surviving Corporation or Fifth Third. If any Dissenting
Shareholders shall effectively withdraw or lose (through failure to perfect or
otherwise) his right to such payment, such holder's shares of Peoples Voting
Common Stock shall be converted into a right to receive Fifth Third Common Stock
in accordance with the applicable provisions of this Agreement. No holder of
Fifth Third Common Stock shall be entitled to relief as a dissenting shareholder
pursuant to Section 1701.85 of the OGCL or otherwise
P. Consolidation of Entities; Changes to Form of Merger. The parties agree to
cooperate and take all reasonable requisite action prior to or following the
Effective Time to merge or otherwise consolidate legal entities (effective at or
after the Effective Time) to the extent desirable in Fifth Third's good faith
judgment for commercial, regulatory or other reasons, and further agree that
Fifth Third may, at any time, change the legal method of effecting the Merger
(including without limitation the provisions of Article I hereof) if and to the
extent Fifth Third deems such change to be desirable, including, without
limitation, to provide for the merger of Peoples Bank Corporation with a
wholly-owned subsidiary of Fifth Third; provided, however, that no such change
shall (A) alter or change the amount or kind of the consideration for the Merger
to be received by the shareholders of Peoples Bank Corporation or holders of
Peoples Bank Corporation Rights in the Merger, (B) adversely affect the tax
treatment to shareholders of Peoples Bank Corporation or holders of Peoples Bank
Corporation Rights, or (C) materially impede or delay receipt of any approvals
referred to herein or the consummation of the transactions contemplated hereby.
Q. Plan or Articles of Merger. At the request of Fifth Third, Peoples Bank
Corporation shall enter into a separate plan of merger or articles of merger
reflecting the terms hereof (including Section I.P. hereof) for purposes of any
filing required by the IBCL or the OGCL.
R. Survival of Representations and Warranties. All representations and
warranties set forth in Article II shall expire at the Effective Time and
thereafter neither Peoples Bank Corporation nor the Bank Subsidiary nor any
shareholder, officer or director of either of them shall have any liability or
obligation with respect thereto.
Article II. Representations and Warranties of Peoples Bank Corporation.
Peoples Bank Corporation represents and warrants to Fifth Third that as of the
date hereof or as of the indicated date, as appropriate, and except as otherwise
disclosed in Schedule 1 hereto delivered by Peoples Bank Corporation to Fifth
Third concurrently with the execution of this Agreement by Fifth Third:
A. Organization; Capitalization; Subsidiaries. Peoples Bank Corporation (i) is
duly incorporated and validly existing as a corporation under the corporation
laws of the State of Indiana and has filed all annual reports required by law
with the Indiana Secretary of State and is a registered unitary bank holding
company under the Bank Holding Company Act; (ii) is duly authorized to conduct
the business in which it is engaged; (iii) has authorized capital stock
consisting entirely of 300,000 shares of Peoples Voting Common Stock and
4,000,000 shares of Peoples Non-Voting Common Stock, no par value per share;
(iv) has no outstanding securities of any kind, nor any outstanding options,
warrants or other rights, contracts, understandings or commitments entitling
another person to acquire (or to receive consideration based on the value of)
any securities of Peoples Bank Corporation of any kind, other than (a) 264,096
shares of Peoples Voting Common Stock, which are authorized, duly issued and
outstanding as of June 30, 1999, all of which shares are fully paid and
non-assessable, (b) 2,715,701 shares of Peoples Non-Voting Common Stock, which
are authorized, duly issued and outstanding as of June 30, 1999, all of which
shares are fully paid and non-assessable, and (c) options to purchase a total of
197,025 shares of Peoples Non-Voting Common Stock as of June 30, 1999, and stock
appreciation awards relating to 66,000 shares of Peoples Bank Corporation
Non-Voting Common Stock, all of which were granted to and are currently held by
the present and former employees, officers and Directors of Peoples Bank
Corporation and/or its subsidiaries; (v) owns of record and beneficially free
and clear of all liens and encumbrances, all of the 35,000 outstanding shares of
the common stock of the Bank Subsidiary, no par value per share, which shares
constitute all of the issued and outstanding capital stock thereof. Since March
31, 1999, Peoples Bank Corporation has not issued any shares, except in
connection with the exercise of the options referred to in clause (iv)(b), or
any additional options. Peoples Bank Corporation has no direct or indirect
subsidiaries other than the Bank Subsidiary and the subsidiaries listed on
Schedule 1 attached hereto (all subsidiaries owned directly or indirectly by
Peoples Bank Corporation are collectively referred to herein as the "PBC
Subsidiaries" and each individually as a "PBC Subsidiary"). Other than as set
forth on Schedule 1, Peoples Bank Corporation does not own (other than in a bona
fide fiduciary capacity or in satisfaction of a debt previously contracted)
beneficially, directly or indirectly, any shares or any equity securities or
similar interests of any person or any interest in a partnership or joint
venture of any kind. Each of the PBC Subsidiaries are duly formed and validly
existing the their respective states of incorporation as set forth on Schedule
1.
B. Bank Subsidiary. The Bank Subsidiary is duly incorporated and validly
existing as an Indiana banking corporation under the laws of the State of
Indiana, and has all the requisite power and authority to conduct the banking
business as now conducted by it; and the Bank Subsidiary does not have any
outstanding equity securities of any kind, nor any outstanding options, warrants
or other rights, contracts, understandings or commitments entitling another
person to acquire any equity securities of the Bank Subsidiary of any kind,
other than 35,000 shares of the common stock, no par value per share, of the
Bank Subsidiary owned of record and beneficially by Peoples Bank Corporation.
Schedule 1 sets forth the record and beneficial ownership of all issued and
outstanding shares of capital stock of each of the PBC Subsidiaries. None of the
PBC Subsidiaries has outstanding any options, warrants or other rights entitling
another person to acquire any equity securities of such PBC Subsidiary. The Bank
Subsidiary has no direct or indirect subsidiaries other than Peoples Building
Corporation, PIC, Ltd., and Peoples Investment Services, Inc.
C. Financial Statements; Regulatory Reports. 1. Peoples Bank Corporation has
previously furnished to Fifth Third its audited, consolidated balance sheets,
statements of operations, statements of stockholders' equity and cash flows as
at December 31, 1998, and for the year then ended, together with the opinions of
its independent certified public accountants associated therewith. Peoples Bank
Corporation also has previously furnished to Fifth Third the Bank Financial
Reports as filed with the FDIC and the Indiana Department of Financial
Institutions of the Bank Subsidiary as at December 31, 1996, 1997 and 1998.
Peoples Bank Corporation also has furnished to Fifth Third (i) its unaudited,
consolidated financial statements as at March 31, 1999, and for the three (3)
months then ended, and (ii) the Bank Financial Reports as filed with the Federal
Reserve Bank of the Bank Subsidiary for the quarter ended March 31, 1999. Such
audited and unaudited consolidated financial statements of Peoples Bank
Corporation fairly present or and all audited and unaudited financial statements
to be delivered prospectively as required by this Agreement will fairly present,
as applicable, the consolidated financial condition, results of operations and
cash flows of Peoples Bank Corporation as of the date thereof, and for the years
or periods covered thereby, in conformity with GAAP, consistently applied
(except as stated therein and except for the omission of notes to unaudited
statements and except for normal (in nature and amount) year-end adjustments to
interim results). Except as disclosed on Schedule 1, there are no material
liabilities, obligations or indebtedness of Peoples Bank Corporation, the Bank
Subsidiary or any other PBC Subsidiary required to be disclosed in the financial
statements (or in the footnotes to the financial statements) so furnished other
than the liabilities, obligations or indebtedness disclosed in such financial
statements (including footnotes). Except as disclosed in Schedule 1, since March
31, 1999, none of Peoples Bank Corporation, the Bank Subsidiary nor any of the
PBC Subsidiaries has incurred any liabilities outside the ordinary course of
business consistent with past practice.
2. Peoples Bank Corporation has made available to Fifth Third an
accurate and complete copy (including all exhibits and all documents
incorporated by reference) of each of the following documents as filed by
Peoples Bank Corporation with the SEC: (a) final registration statement,
prospectus, report, schedule and definitive proxy statement filed since January
1, 1997 by Peoples Bank Corporation or the Bank Subsidiary with the Securities
and Exchange Commission (the "SEC"), pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act ("Peoples Bank Corporation
Reports"), and (b) communication mailed by the Peoples Bank Corporation to its
shareholders since January 1, 1997. Since January 1, 1997, Peoples Bank
Corporation has timely filed all reports and other documents required to be
filed by it under the Securities Act and the Exchange Act, and, as of their
respective dates, all such reports complied in all material respects with the
published rules and regulations of the SEC with respect thereto. As of the date
of filing or mailing, as the case may be, no such registration statement,
prospectus, report, schedule, proxy statement or communication contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date (but filed before the date hereof)
shall be deemed to modify information as of an earlier date, or omitted any
material exhibit required to be filed therewith. No event has occurred
subsequent to December 31, 1998 which Peoples Bank Corporation is required to
describe in a Current Report on Form 8-K other than the Current Reports
heretofore furnished by Peoples Bank Corporation to Fifth Third and Current
Reports required as a result of this Agreement. No subsidiary of Peoples Bank
Corporation is required under the Securities Act or the Exchange Act to file any
reports or other documents with the SEC.
3. Peoples Bank Corporation, the Bank Subsidiary and the PBC
Subsidiaries have filed all reports, registrations and statements, together with
any amendments required to be made with respect thereto, that they were required
to file since January 1, 1997 with any applicable industry self-regulatory
organization or stock exchange ("SRO") and any other federal, state, local or
foreign governmental or regulatory agency or authority (collectively with the
SEC and the SROs, "Regulatory Agencies"), and all other reports, registrations
and statements required to be filed by them since January 1, 1997, including,
without limitation, any report or statement required to be filed pursuant to the
laws, rules or regulations of the United States, any state, or any Regulatory
Agency, and have paid all fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a Regulatory Agency in
the regular course of the business of Peoples Bank Corporation and the Bank
Subsidiary, no Regulatory Agency has initiated any proceeding or, to the best
knowledge of Peoples Bank Corporation, investigation into the business or
operations of Peoples Bank Corporation, the Bank Subsidiary or any PBC
Subsidiary since January 1, 1997. To the knowledge of Peoples Bank Corporation,
there is no unresolved violation, or material criticism or exception, by any
Regulatory Agency with respect to any report, registration or statement relating
to any examinations of the Peoples Bank Corporation, the Bank Subsidiary or any
PBC Subsidiary.
D. Title to Properties. Except as disclosed on Schedule 1, Peoples Bank
Corporation, the Bank Subsidiary and the PBC Subsidiaries have good and
marketable title to all of the material properties and assets reflected in its
separate statement of financial condition as at December 31, 1998, and which are
still owned by each and each has good and marketable title to all material
properties and assets acquired by it after such date and still owned by it,
subject to (i) any liens and encumbrances that do not materially adversely
impair the use of the property, (ii) statutory liens for taxes not yet due and
payable, and (iii) minor defects and irregularities in title that do not
materially adversely impair the use of the property.
E. No Material Adverse Changes. Except as disclosed in Schedule 1 and for events
relating to the business environment in general: (i) since December 31, 1998,
there have been no material adverse changes in the financial condition,
operations or business of Peoples Bank Corporation, the Bank Subsidiary and the
PBC Subsidiaries on a consolidated basis; (ii) Peoples Bank Corporation is not
aware of any events which have occurred since December 31, 1998 or which are
reasonably expected to occur in the future and which reasonably can be expected
to result in any material adverse change in the financial condition, operations
or business of Peoples Bank Corporation, the Bank Subsidiary and the PBC
Subsidiaries on a consolidated basis, excluding in each instance matters of
general application to the banking industry (which shall include but not be
limited to changes in general economic condition, changes in interest rates
generally, changes in laws or regulations of general applicability or changes in
GAAP) or are reasonably likely to prevent or delay the consummation of the
transactions contemplated by this Agreement; and (iii) since December 31, 1998
there have been no material changes in the methods of business operations of
Peoples Bank Corporation, the Bank Subsidiary or any of the PBC Subsidiaries.
F. Litigation; Regulatory Action. 1. Except as disclosed in Schedule 1, there
are no actions, suits, proceedings, investigations or assessments of any kind
pending of which Peoples Bank Corporation has received written notice, or to the
best knowledge of Peoples Bank Corporation, threatened against Peoples Bank
Corporation, the Bank Subsidiary or any of the PBC Subsidiaries which reasonably
can be expected to result in any material liability or any material adverse
change in the financial condition, operations or business of Peoples Bank
Corporation, the Bank Subsidiary and the PBC Subsidiaries on a consolidated
basis, or which are reasonably likely to prevent or delay the consummation of
the transactions contemplated by this Agreement.
2. Except as disclosed in Schedule 1, as of the date hereof, there are
no actions, suits, claims, proceedings, investigations or assessments of any
kind pending of which Peoples Bank Corporation has received written notice, or
to the best knowledge of Peoples Bank Corporation, threatened against any of the
Directors or officers of Peoples Bank Corporation, the Bank Subsidiary or the
PBC Subsidiaries in their capacities as such, and no Director or officer of
Peoples Bank Corporation, the Bank Subsidiary or the PBC Subsidiaries currently
is receiving indemnification payments or seeking to be indemnified by either
Peoples Bank Corporation, the Bank Subsidiary or any of the PBC Subsidiaries
pursuant to applicable law or Peoples Bank Corporation's Restated Articles of
Incorporation or Amended By-laws, the Bank Subsidiary's Articles of
Incorporation or Bylaws or the Articles and By-Laws of any PBC Subsidiary.
3. Except as disclosed in Schedule 1, none of Peoples Bank Corporation,
the Bank Subsidiary nor any PBC Subsidiary is subject to any cease-and-desist or
other order issued by, or is a party to any written agreement, consent agreement
or memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any supervisory letter from or has adopted any board resolutions at
the request of, any Regulatory Agency or other governmental entity, that
restricts the conduct of its business or has resulted, or could reasonably be
expected to result, in a liability or that in any manner relates to its capital
adequacy, its credit policies, its management or its business (each a
"Regulatory Agreement"), nor have any of Peoples Bank Corporation, the Bank
Subsidiary or any PBC Subsidiary (a) been advised since January 1, 1996 by any
Regulatory Agency or other governmental entity that it is considering issuing or
requesting any such Regulatory Agreement or (b) any knowledge of any pending or
threatened regulatory investigation.
G. Ordinary Course of Business. Except as disclosed in Schedule 1, since
December 31, 1998, Peoples Bank Corporation, the Bank Subsidiary and the PBC
Subsidiaries have each been operated in the ordinary course of business, have
not made any changes in their respective capital or corporate structures, nor
any material changes in their methods of business operations and have not
provided any increases in employee salaries or benefits other than (in the case
only of persons who are not officers or Directors of Peoples Bank Corporation or
the Bank Subsidiary) increases in the ordinary course of business and have not
instituted or made any announcements to institute or amend any existing employee
benefit plan, policy or arrangement or any employment contract or policy. Except
as disclosed in Schedule 1, since December 31, 1998, to the date hereof Peoples
Bank Corporation has not declared or paid any dividends nor made any
distributions of any other kind to its shareholders.
H. Taxes; Accounting. 1. Except as disclosed in Schedule 1, Peoples Bank
Corporation, the Bank Subsidiary and the PBC Subsidiaries have timely filed all
federal, state and local tax returns required to be filed (after giving effect
to all extensions) by them, respectively, and have paid or provided for all tax
liabilities shown to be due thereon or which have been assessed against them,
respectively. All tax returns filed by Peoples Bank Corporation, the Bank
Subsidiary and the PBC Subsidiaries through the date hereof are complete and
accurate in all material respects.
2. Peoples Bank Corporation has no reason to believe that any
conditions exist that would prevent or impede the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code or for
pooling-of-interests accounting treatment.
3. Since December 31, 1998, except insofar as required by a change in
GAAP, there has been no change in accounting methods, principles or practices of
Peoples Bank Corporation, the Bank Subsidiary or any of the PBC Subsidiaries.
I. Contracts. Except as disclosed in Schedule 1, none of Peoples Bank
Corporation, the Bank Subsidiary nor any PBC Subsidiary is a party to or bound
by any contract, arrangement, commitment or understanding (a) as of the date
hereof, with respect to the employment, termination or compensation of any
directors, executive officers, employees or material consultants (other than
oral contracts of employment at will which may be terminated without penalty),
(b) which is a "material contract" (as such term is defined in Item 601(b)(10)
of Regulation S-K of the SEC) that has not been filed with or incorporated by
reference in the Peoples Bank Corporation Reports, (c) which contains any
material non-compete or exclusivity provisions with respect to any business or
geographic area in which business is conducted with respect to Peoples Bank
Corporation, the Bank Subsidiary or any of the PBC Subsidiaries or which
restricts the conduct of any business by Peoples Bank Corporation, the Bank
Subsidiary or any of the PBC Subsidiaries or any geographic area in which
Peoples Bank Corporation or any of its affiliates may conduct business or
requires exclusive referrals of any business, (d) except as contemplated by
Article I hereof or as set forth in Schedule 1 (including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan)
any of the benefits of which will be increased, or the funding, vesting or
payment of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement (either alone or together
with any other event), or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement or (e) which would prohibit or materially delay the consummation of
the Merger. Peoples Bank Corporation has previously made available to Fifth
Third true and correct copies of all employment, termination and compensation
agreements (including deferred compensation) with executive officers, key
employees or material consultants which are in writing and to which Peoples Bank
Corporation, the Bank Subsidiary or any of the PBC Subsidiaries is a party. Each
contract, arrangement, commitment or understanding of the type described in this
Section II.I., whether or not set forth in Schedule 1, is referred to herein as
a "Peoples Contract", and none of Peoples Bank Corporation, the Bank Subsidiary
nor any PBC Subsidiary has knowledge of, or has received notice of, any
violation of any Peoples Contract by any of the other parties thereto.
J. Loan Losses. Except as disclosed in Schedule 1, since December 31, 1998, to
the date hereof none of Peoples Bank Corporation, Bank Subsidiary nor any PBC
Subsidiary has incurred any unusual or extraordinary loan losses which are
material to Peoples Bank Corporation, the Bank Subsidiary and the PBC
Subsidiaries on a consolidated basis; to the best knowledge of Peoples Bank
Corporation and in light of the historical loan loss experience of the Bank
Subsidiary and the PBC Subsidiaries and its management's analysis of the quality
and performance of its loan portfolio, as of December 31, 1998, its reserve for
loan losses was, in the opinion of Peoples Bank Corporation, adequate to absorb
all known and reasonably anticipated losses as of such date.
K. Broker. Except for McDonald Investments, Inc., whose fee in connection with
the transactions contemplated by this Agreement is disclosed in Schedule 1,
neither Peoples Bank Corporation, nor the Bank Subsidiary nor any of the PBC
Subsidiaries has, directly or indirectly, dealt with any investment banker,
broker, or finder in connection with this transaction and neither has incurred
or will incur any obligation for any investment banker's, broker's or finder's
fee or commission in connection with the transactions provided for in this
Agreement.
L. Board Approval; Corporate Authority; No Breach. 1. The Directors of Peoples
Bank Corporation, by resolution adopted by the unanimous vote of all Directors
present at a meeting duly called and held in accordance with applicable law,
have duly approved this Agreement and have adopted this Agreement as a "plan of
merger" within the meaning of Section 23-1-40-1 of the IBCL. The Directors of
Peoples Bank Corporation have directed that the plan of merger contained in this
Agreement be submitted to a vote of Peoples Bank Corporation's shareholders at
the annual or a special meeting of the shareholders to be called for that
purpose, and, as of the date of this Agreement, have recommended a favorable
vote by such shareholders, all in accordance with or as required by law and in
accordance with the Restated Articles of Incorporation and Amended By-laws of
Peoples Bank Corporation. As of the date of this Agreement, each member of the
Board of Directors of People Bank Corporation has indicated that he or she
currently intends to vote all shares of Peoples Bank Corporation which they own
in favor of the Merger.
2. Peoples Bank Corporation has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder and
thereunder subject to required regulatory approvals and, in the case of
consummation of the Merger, subject to approval by the holders of a majority of
the outstanding shares of Peoples Voting Common Stock and a majority of the
outstanding Peoples Non-Voting Common Stock, voting as separate voting groups,
which are the only approvals of shareholders required. The consummation of the
transactions contemplated hereby does not require the consent of any
non-governmental third party. This Agreement has been duly authorized and
constitutes the valid and binding obligation of Peoples Bank Corporation,
enforceable in accordance with its terms, except to the extent that (i)
enforceability thereof may be limited by insolvency, reorganization,
liquidation, bankruptcy, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the availability of certain remedies may be precluded by
general principles of equity.
3. Except as disclosed in Schedule 1, neither the execution of the
Agreement, nor the consummation of the transactions contemplated hereby and
thereby (either alone or together with any other event), (i) conflicts with,
results in a breach of, violates or constitutes a default under, (x) Peoples
Bank Corporation's Restated Articles of Incorporation or Amended By-laws or, to
the best knowledge of Peoples Bank Corporation, any federal, state or local law,
statute, ordinance, rule, regulation or court or administrative order, or (y)
any agreement, arrangement, or commitment, to which Peoples Bank Corporation,
the Bank Subsidiary or any PBC Subsidiary is subject or bound; (ii) results in
the creation of or gives any person the right to create any material lien,
charge, encumbrance, or security agreement or any other material rights of
others or other material adverse interest upon any material right, property or
asset belonging to Peoples Bank Corporation, the Bank Subsidiary or any PBC
Subsidiary; (iii) except as disclosed in Schedule 1, terminates or gives any
person the right to terminate, amend, abandon, or refuse to perform any material
agreement, arrangement or commitment to which Peoples Bank Corporation, the Bank
Subsidiary or any PBC Subsidiary is a party or by which the rights, properties
or assets of Peoples Bank Corporation, the Bank Subsidiary or any PBC Subsidiary
are subject or bound; or (iv) to the best knowledge of Peoples Bank Corporation,
accelerates or modifies, or gives any party thereto the right to accelerate or
modify, the time within which, or the terms according to which, Peoples Bank
Corporation, the Bank Subsidiary or any PBC Subsidiary is to perform any duties
or obligations or receive any rights or benefits under any material agreements,
arrangements or commitments. For purposes of clauses (iii) and (iv) immediately
preceding, material agreements, arrangements or commitments exclude agreements,
arrangements or commitments having a term expiring less than six (6) months from
the date of this Agreement or which do not require the expenditure of more than
$150,000 over the term of the agreement, arrangement or commitment (but shall
include all agreements, arrangements or commitments pursuant to which credit has
been extended by the Bank Subsidiary and all PBC Subsidiaries).
4. As of the date hereof, Peoples Bank Corporation is not aware of the
existence of any factor that would materially delay or materially hinder
issuance of any of the required regulatory approvals necessary to consummate the
Merger or the other transactions contemplated hereby.
M. Articles and By-laws. Complete and accurate copies of the (i) Restated
Articles of Incorporation and Amended By-laws of Peoples Bank Corporation, (ii)
the Articles of Incorporation and Bylaws of the Bank Subsidiary, and (iii) the
Articles of Incorporation and Bylaws of the PBC Subsidiaries in force as of the
date hereof, have been delivered to Fifth Third.
N. Compliance with Law. Except as disclosed in Schedule 1, none of Peoples Bank
Corporation, the Bank Subsidiary, the PBC Subsidiaries nor any employee, officer
or Director of any of them, acting in such capacity, has engaged in any activity
or omitted to take any action which, in any material way, has resulted or could
result in the violation of, or material failure to comply with the regulatory
requirements of (i) any local, state or federal law (including without
limitation the Bank Secrecy Act, the Community Reinvestment Act, applicable
consumer protection and disclosure laws and regulations, including without
limitation, Truth in Lending, Truth in Savings and similar disclosure laws and
regulations, and equal employment and employment discrimination laws and
regulations) or (ii) any regulation, order, injunction or decree of any court or
governmental body, the violation of either of which could reasonably be expected
to have a material adverse effect, individually or in the aggregate, on the
financial condition or operations of Peoples Bank Corporation, the Bank
Subsidiary and the PBC Subsidiaries taken as a whole. None of Peoples Bank
Corporation, the Bank Subsidiary nor any of the PBC Subsidiaries has received
notice of any violations of any of the above. To the best knowledge of Peoples
Bank Corporation and except as disclosed in Schedule 1, Peoples Bank
Corporation, the Bank Subsidiary and all PBC Subsidiaries possess all licenses,
franchises, permits and other authorizations necessary to continue to conduct
such businesses as they are presently conducted following the Effective Time
without material interference or interruption.
O. No Untrue Statements. Except as disclosed in Schedule 1, neither this
Agreement nor any report, statement, list, certificate or other information
furnished by Peoples Bank Corporation, the Bank Subsidiary or the PBC
Subsidiaries to Fifth Third or its agents in connection with this Agreement or
any of the transactions contemplated hereby contains or shall contain an untrue
statement of material fact or omits or shall omit to state a material fact
required to be stated therein and necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
P. Environmental Matters. 1. Except as described on Schedule 1, there are no
actions or proceedings pending before any environmental regulatory body and
Peoples Bank Corporation has received no notice of any investigations by any
regulatory body and to its knowledge, no such proceeding or investigation is
threatened, which, in any such case affects Peoples Bank Corporation, the Bank
Subsidiary or any of the PBC Subsidiaries in respect to any "facility" owned,
leased or operated by any of them (but excluding any "facility" as to which the
sole interest of Peoples Bank Corporation, the Bank Subsidiary or any PBC
Subsidiary is that of a lienholder or mortgagee, but including any "facility" to
which title has been taken pursuant to mortgage foreclosure or similar
proceedings and including any "facility" in which Peoples Bank Corporation, the
Bank Subsidiary or any PBC Subsidiary ever participated in the financial
management of such facility to a degree sufficient to influence, or have the
ability to influence, the facility's treatment of hazardous waste) under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or under any Federal, state, local or municipal statue,
ordinance or regulation in respect thereof, in connection with any release of
any toxic or "hazardous substance", pollutant or contaminant into the
"environment" which, if adversely determined, (a) would require the payment by
Peoples Bank Corporation, the Bank Subsidiary or any PBC Subsidiary and/or
require Peoples Bank Corporation, the Bank Subsidiary or any PBC Subsidiary to
incur expenses of more than $50,000 (whether or not covered by insurance) or (b)
would otherwise have a material adverse effect on Peoples Bank Corporation, the
Bank Subsidiary or the PBC Subsidiaries, nor, to the best knowledge of Peoples
Bank Corporation after reasonable inquiry, is there any reasonable basis for the
institution of any such actions or proceedings or investigations which is
probable of assertion, nor are there any such actions or proceedings or
investigations in which Peoples Bank Corporation, the Bank Subsidiary or any PBC
Subsidiary is a plaintiff or complainant. None of Peoples Bank Corporation, the
Bank Subsidiary nor any PBC Subsidiary is liable in any material respect under
any applicable law for any release by any of them or for any release by any
other "person" of a hazardous substance caused by the spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of hazardous wastes or other chemical substances,
pollutants or contaminants into the environment, nor are any of Peoples Bank
Corporation, the Bank Subsidiary or any PBC Subsidiary liable for any material
costs (as a result of the acts or omissions of Peoples Bank Corporation, the
Bank Subsidiary or any PBC Subsidiary or, to the best knowledge of Peoples Bank
Corporation, as a result of the acts or omissions of any other "person") of any
remedial action including, without limitation, costs arising out of security
fencing, alternative water supplies, temporary evacuation and housing and other
emergency assistance undertaken by any environmental regulatory body having
jurisdiction over Peoples Bank Corporation, the Bank Subsidiary or any PBC
Subsidiary to prevent or minimize any actual or threatened release by Peoples
Bank Corporation, the Bank Subsidiary or any PBC Subsidiary of any hazardous
wastes or other chemical substances, pollutants and contaminants into the
environment which would endanger the public health or the environment. All terms
contained in quotation marks in this paragraph and the paragraph immediately
following shall have the meaning ascribed to such terms, and defined in, CERCLA.
2. Except as disclosed in Schedule 1, to the best knowledge of Peoples
Bank Corporation each "facility" owned, leased or operated by Peoples Bank
Corporation, the Bank Subsidiary or any PBC Subsidiary (but excluding any
"facility" as to which the sole interest of Peoples Bank Corporation, the Bank
Subsidiary or any PBC Subsidiary is that of a lienholder or mortgagee, but
including any "facility" to which title has been taken pursuant to mortgage
foreclosure or similar proceedings and including any "facility" in which Peoples
Bank Corporation, the Bank Subsidiary or any PBC Subsidiary ever participated in
the financial management of such facility to a degree sufficient to influence,
or have the ability to influence, the facility's treatment of hazardous waste)
is, in all material respects, in compliance with all applicable Federal, state,
local or municipal statutes, ordinances, laws and regulations and all orders,
rulings or other decisions of any court, administrative agency or other
governmental authority relating to the protection of the environment, except to
the extent a failure to comply would not have a material adverse effect on the
business, operations and financial condition of Peoples Bank Corporation, the
Bank Subsidiary and the PBC Subsidiaries taken as a whole.
Q. Employment Matters. 1. Benefit Plans. Schedule 1 lists the name and a short
description of each Benefit Plan (as herein defined), together with an
indication of its type of plan (i.e. defined benefit, defined contribution,
health, welfare, etc.) and funding status (e.g., funded trust, unfunded
obligation or insurance policy). For purposes hereof, the term "Benefit Plan"
shall mean any plan, program, policy, practice, arrangement or system for the
benefit of employees, former employees, directors or former directors which is,
or has been within the ten (10) years preceding the date of this Agreement,
contributed to or maintained currently or at any time within the ten (10) years
preceding the date of this Agreement, by Peoples Bank Corporation, the Bank
Subsidiary or any of the PBC Subsidiaries or for which Peoples Bank Corporation,
the Bank Subsidiary or any PBC Subsidiary have currently (or have had within the
ten (10) years preceding the date of this Agreement) any liability (contingent
or otherwise) and shall include, without limitation, (a) any retirement plan
such as a pension, profit sharing, stock bonus plan or employee stock ownership
plan ("ESOP"), (b) any plan, program or arrangement providing deferred
compensation, bonus deferral change in control payments or benefits or incentive
benefits, whether funded or unfunded, and (c) any welfare plan, program or
policy providing vacation, severance, salary continuation, supplemental
unemployment, disability, life, health coverage, retiree health, Voluntary
Employees' Beneficiary Association, medical expense reimbursement or dependent
care assistance benefits, in any such foregoing case without regard to whether
the Benefit Plan constitutes an employee benefit plan under Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
number of employees covered under such Benefit Plan. Except as disclosed in
Schedule 1 attached hereto, through the date of this Agreement, none of Peoples
Bank Corporation, the Bank Subsidiary nor any PBC Subsidiary have made or have
committed to make any contributions to any Benefit Plan outside the ordinary
course of business and inconsistent with past practice with regard to amounts.
None of the Benefit Plans is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
2. Predecessor Plan. The term "Benefit Plan" for all purposes
of this Agreement shall include each Predecessor Plan (as herein defined). For
purposes hereof, "Predecessor Plan" shall mean any plan, program, policy,
practice, arrangement or system as otherwise described in Section II.Q.1. but
was maintained, contributed to or resulted in liability to any predecessor
employer of Peoples Bank Corporation, Bank Subsidiary, the PBC Subsidiaries or
any other direct or indirect subsidiary of Peoples Bank Corporation prior to the
date hereof. For purposes hereof, "predecessor employer" shall mean any
employer, entity or business operation acquired by Peoples Bank Corporation, the
Bank Subsidiary, the PBC Subsidiaries or any other direct or indirect subsidiary
of Peoples Bank Corporation in any type of acquisition (including, without
limitation, mergers, stock acquisitions and asset acquisitions). Schedule 1
describes (in addition to the information required by Section II.Q.1.) the
current status of the Predecessor Plan (such as ongoing plan, frozen plan or
terminated), and if the Predecessor Plan is no longer in existence, how the
Predecessor Plan was handled (such as through termination or merger into another
specified plan).
3. Plan Documents, Reports and Filings. Except as disclosed on
Schedule 1, Peoples Bank Corporation, the Bank Subsidiary and the PBC
Subsidiaries have provided true, complete and correct copies of all plan
documents, or, if no plan document exists, a description of such Benefit Plan,
comprising each Benefit Plan, together with, when applicable, (a) the most
recent summary plan description and any material modifications thereto, (b) the
most recent actuarial and financial reports and the most recent annual reports
filed with any governmental agency and (c) all Internal Revenue Service ("IRS")
or other governmental agency rulings and determination letters or any open
requests for IRS rulings or letters with respect to Benefit Plans issued within
ten (10) years prior to the date hereof.
4. Qualified Retirement Plan Compliance. With respect to each
Benefit Plan which is an employee pension benefit plan (as defined in section
3(2) of ERISA) other than any such plan that meets the "top-hat" exception under
section 201(2) of ERISA or the excess benefit plan exception under Section
201(7) of ERISA (a "Qualified Benefit Plan"), except as disclosed on Schedule 1:
(a) the IRS has issued a determination letter which determined that such
Qualified Benefit Plan (as amended by any and all amendments) satisfies the
requirements of section 401(a) of the Code, as amended by all of the laws
referred to in Section 1 of Revenue Procedure 93-39, such determination letter
has not been revoked or threatened to be revoked by the IRS, and the scope of
such determination letter is complete and does not exclude consideration of any
of the requirements or matters referred to in sections 4.02 through 4.04 of
Revenue Procedure 93-39; (b) such Qualified Benefit Plan has been maintained in
accordance with and continues to be in material compliance with all
qualification requirements of Section 401(a) of the Code; (c) such Qualified
Benefit Plan has been maintained in accordance with and continues to be in
substantial compliance with all notice, reporting and disclosure requirements of
ERISA and the Code; (d) no Qualified Benefit Plan is an ESOP as defined in
Section 4975(e)(7) of the Code (an "ESOP Qualified Benefit Plan"); (e) any
previously terminated Qualified Benefit Plan was terminated in material
compliance with the requirements of ERISA and the Code, has received a favorable
determination letter therefor, and the liabilities of such Qualified Benefit
Plan and the requirements of the Pension Benefit Guaranty Corporation ("PBGC")
were fully satisfied; and (f) any and all amendments to the Qualified Benefit
Plans not covered by an IRS determination letter do not adversely affect the
qualified and tax exempt status of such plans.
5. General Plan Compliance. With respect to each Benefit Plan,
except as noted on Schedule 1: (a) such Benefit Plan, if it is intended to
provide favorable tax benefits to plan participants, has been in substantial
compliance with applicable Code provisions; and (b) such Benefit Plan has been,
to the best knowledge of Peoples Bank Corporation, operated in substantial
compliance with its terms and all applicable laws, including, without
limitation, ERISA and the Code, and to the extent such Benefit Plan is a group
health plan subject to the requirements of Section 4980B of the Code ("COBRA"),
has been, to the best knowledge of Peoples Bank Corporation, operated in
substantial compliance with such COBRA requirements.
6. Prohibited Transactions. No prohibited transaction under
Section 406 of ERISA and not exempt under Section 408 of ERISA has occurred with
respect to any Benefit Plan which would result, with respect to any person, in
(a) the imposition, directly or indirectly, of a material excise tax under
Section 4975 of the Code or (b) material fiduciary liability under Section 409
of ERISA.
7. Lawsuits or Claims. No material actions, suits or claims
(other than routine claims of benefits) are pending or, to the best knowledge of
Peoples Bank Corporation, threatened against any Benefit Plan or against Peoples
Bank Corporation, the Bank Subsidiary or any PBC Subsidiaries with respect to
any Benefit Plan.
8. Disclosure of Unfunded Liabilities. All material Unfunded
Liabilities with respect to each Benefit Plan have been recorded and disclosed
on the most recent financial statement of Peoples Bank Corporation, the Bank
Subsidiary and all PBC Subsidiaries or, if not, in Schedule 1. For purposes
hereof, the term "Unfunded Liabilities" shall mean any amounts properly accrued
to date under GAAP, or amounts not yet accrued for GAAP purposes but for which
an obligation (which has legally accrued and cannot legally be eliminated and
which is subject to reasonable estimate) exists for payment in the future which
is attributable to any Benefit Plan, including but not limited to (a) severance
pay benefits, (b) deferred compensation or unpaid bonuses, (c) any liabilities
on account of the change in control which will result from this Agreement,
including any potential liabilities relating to excess parachute payments under
Section 280G of the Code, (d) any unpaid pension contributions for the current
plan year or any accumulated funding deficiency under Section 412 of the Code
and related penalties under Section 4971 of the Code, including unpaid pension
contributions or funding deficiencies owed by members of a controlled group of
corporations which includes Peoples Bank Corporation, the Bank Subsidiary or any
PBC Subsidiary and for which Peoples Bank Corporation, the Bank Subsidiary or
any PBC Subsidiary is liable under applicable law, (e) any authorized but unpaid
profit sharing contributions or contributions under Section 401(k) and Section
401(m) of the Code, (f) retiree health benefit coverage and (g) unpaid premiums
for contributions required under any group health plan to maintain such plan's
coverage through the Effective Time.
9. Defined Benefit Pension Plan Liabilities. Peoples Bank
Corporation, the Bank Subsidiary, the PBC Subsidiaries and any entity treated as
a single employer with Peoples Bank Corporation, the Bank Subsidiary and the PBC
Subsidiaries in accordance with Section 414(b), (c), (m) and (o) of the Code
(hereinafter a "Controlled Group Member") (or any pension plan maintained by any
of them) have not incurred any material liability to the PBGC or the IRS with
respect to any employee pension plan which is a defined benefit pension plan,
except for the payment of PBGC premiums pursuant to Section 4007 of ERISA, all
of which if due prior to the date of this Agreement have been fully paid, and no
PBGC reportable event under Section 4043 of ERISA has occurred with respect to
any such pension plan (other than any filing that may be required by reason of
the Merger). Except as otherwise disclosed in Schedule 1, the benefit
liabilities, as defined in Section 4001(a)(16) of ERISA, of each such employee
pension plan subject to Title IV of ERISA, using the actuarial assumptions that
would be used by the PBGC in the event of termination of such plan, do not
exceed the fair market value of the assets of such plan. None of Peoples Bank
Corporation, the Bank Subsidiary, any of the PBC Subsidiaries nor any Controlled
Group Member participates in, or has incurred any liability under Sections 4201,
4063 or 4064 of ERISA for a complete or partial withdrawal from a multiple
employer plan or a multi-employer plan (as defined in Section 3(37) of ERISA).
Subject to Section 4044(d)(2) of ERISA, no employee, former employee, plan
participant or any other party (other than Peoples Bank Corporation, the Bank
Subsidiary and the PBC Subsidiaries) has any entitlement (under the terms of any
plan document or otherwise) to any surplus assets in any Qualified Benefit Plan
which is a defined benefit plan as defined in Section 414(j) of the Code.
10. Third Party Plans. Peoples Bank Corporation, the Bank
Subsidiary and the PBC Subsidiaries (a) have not incurred any asserted or, to
the best knowledge of Peoples Bank Corporation, unasserted material liability
for breach of duties assumed in connection with acting as an independent
trustee, custodian, agent, investment manager or otherwise with respect to any
employee benefit plan (as defined in Section 3(3) of ERISA) which is maintained
by an employer unrelated in ownership to Peoples Bank Corporation, the Bank
Subsidiary or the PBC Subsidiaries, (b) have not authorized nor knowingly
participated in a material prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code and (c) have not received notice of any material
actions, suits or claims (other than routine claims for benefits) pending or
threatened against the unrelated employer or against them.
11. Retiree Benefits. Except as set forth on Schedule 1 and
identified as "Retiree Liability", Peoples Bank Corporation, the Bank Subsidiary
and the PBC Subsidiaries have no obligation to provide health benefits, or life
insurance benefits to or with respect to retirees, former employees or any of
their relatives.
12. Right to Amend and Terminate. Except as set forth on
Schedule 1, Peoples Bank Corporation, the Bank Subsidiary and the PBC
Subsidiaries have all power and authority necessary to amend or terminate each
Benefit Plan in accordance with its terms (and the terms of each Benefit Plan,
authorize amendments and terminations) and applicable law, without incurring any
penalty or liability provided that, in the case of an employee pension benefit
plan (as defined in section 3(2) of ERISA), benefits accrued as of the date of
amendment or termination are not reduced, provided, further, that no such
amendment or termination may eliminate contractual rights without the consent of
the party holding such rights under any Benefit Plan not subject to ERISA.
13. Consummation of Transactions. Except as set forth in
Schedule 1, the consummation of the transactions contemplated by this Agreement
(alone or together with any other event which, standing alone, would not by
itself trigger such entitlement or acceleration) will not (i) entitle any person
to any benefit under any Benefit Plan, (ii) accelerate the time of payment or
vesting, or increase the amount, of any compensation due to any person under any
Plan or (iii) result in the payment of any "excess parachute payment" under
Section 280G of the Code or any other payment that is not deductible for any
reason by the Peoples Bank Corporation, the Bank Subsidiary, the PBC
Subsidiaries or their respective successors.
R. Investment Portfolio. The investment portfolios of Peoples Bank Corporation,
the Bank Subsidiary and the PBC Subsidiaries consist of securities in marketable
form. Except as disclosed in Schedule 1, since December 31, 1998 to the date
hereof none of Peoples Bank Corporation, the Bank Subsidiary nor any PBC
Subsidiary has incurred any unusual or extraordinary losses in its investment
portfolio, and, except for matters of general application to banking industry
(including, but not limited to, changes in laws or regulations or GAAP) or for
events relating to the business environment in general, including market
fluctuations and changes in interest rates, Peoples Bank Corporation is not
aware of any events which are reasonably certain to occur in the future and
which reasonably would be expected to result in any material adverse change in
the quality or performance of Peoples Bank Corporation's, the Bank Subsidiary's
and the PBC Subsidiaries' investment portfolios on a consolidated basis.
S. Anti-takeover Provisions. The Board of Directors of Peoples Bank Corporation
has taken all requisite action under Chapter 43 of the IBCL to permit the
transactions contemplated by this Agreement to be consummated in compliance with
Section 23-1-43-19(1). No other control share acquisition or similar
anti-takeover statute enacted under the laws of the State of Indiana applies to
the Merger or the transactions contemplated by this Agreement.
T. Derivative Instruments. All swaps, caps, floors, futures, forward contracts,
option agreements, and any other derivative financial instruments, contracts or
arrangements, whether entered into for Peoples Bank Corporation's own account,
or for the account of one or more of its subsidiaries or their customers, were
entered into (i) in the ordinary course of business, (ii) in accordance with
prudent banking practices and all applicable laws, rules, regulations and
regulatory policies and (iii) with counter-parties reasonably believed to be
financially responsible at the time; and each of them constitutes the valid and
legally binding obligation of Peoples Bank Corporation or one of its
subsidiaries, enforceable in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and are in full force and effect (except to the extent that they
have been fully performed or terminated) in all respects material to Peoples
Bank Corporation. Peoples Bank Corporation and each of its subsidiaries have
duly performed in all material respects all of their obligations thereunder to
the extent that such obligations to perform have accrued, and, to Peoples Bank
Corporation's knowledge, there are no breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
U. Year 2000. Neither Peoples Bank Corporation nor any of its subsidiaries has
received, nor to the knowledge of Peoples Bank Corporation are there facts that
would reasonably be expected to form the basis for the issuance of, a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulatory Letter No. SR 98-3 (SUP), dated March 4,
1998). Peoples Bank Corporation has provided to Fifth Third a complete and
accurate copy of its plan, including its good faith estimate of the anticipated
associated costs, for addressing the issues set forth in the Year 2000 guidance
papers issued by the Federal Financial Institutions Examination Council,
including the statements dated May 5, 1997, entitled "Year 2000 Project
Management Awareness", December 17, 1997, entitled "Safety and Soundness
Guidelines Concerning the Year 2000 Business Risk", and October 15, 1998,
entitled "Interagency Guidelines Establishing Year 2000 Standards for Safety and
Soundness", as such issues affect any of Peoples Bank Corporation or its
subsidiaries. Between the date of this Agreement and the Effective Time, Peoples
Bank Corporation shall use its reasonable best efforts to implement such plan.
W. Fairness Opinion. On or before the date hereof, McDonald Investments Inc. has
rendered its oral opinion to Peoples Bank Corporation's Board of Directors that
the Exchange Ratio is fair, from a financial point of view, to the holders of
the Peoples Bank Corporation Common Stock.
X. Transactions with Affiliates. Except as disclosed in the Peoples Bank
Corporation Reports filed prior to the date hereof, from January 1, 1999 through
the date hereof there have been no transactions, agreements, arrangements or
understandings between Peoples Bank Corporation or any of its subsidiaries, on
the one hand, and the Peoples Bank Corporation's affiliates (other than wholly
owned subsidiaries of Peoples Bank Corporation) or other persons, on the other
hand, that would be required to be disclosed under Item 404 of Regulation S-K
under the Securities Act.
Y. PIC, Ltd. PIC, Ltd. ("PIC") is a duly organized and validly existing
corporation incorporated under the laws of Bermuda. All required federal and
state regulatory approvals relating to such formation were received by Peoples
Bank Corporation. PIC is in material compliance with all applicable state and
federal tax laws, rules and regulations. There are no material adverse tax
consequences expected in the event PIC is merged with and into Bank Subsidiary.
Fifth Third could terminate the employment agreement with the investment manager
that manages PIC's investment portfolio with 120 days prior written notice for
any reason with a severance payment.
Article III. Representations and Warranties of Fifth Third
Fifth Third represents and warrants to Peoples Bank Corporation that as of the
date hereof or as of the indicated date, as appropriate:
A. Organization. Fifth Third is duly incorporated, validly existing and in good
standing as a corporation under the corporation laws of the State of Ohio, is a
registered bank holding company under the Bank Holding Company Act of 1956, as
amended, and is duly authorized to conduct the business in which it is engaged.
B. Capitalization. Pursuant to Fifth Third's Second Amended Articles of
Incorporation, as amended, the total number of shares of capital stock Fifth
Third is authorized to have outstanding is 500,500,000 of which 500,000,000
shares are classified as Common Stock without par value and 500,000 shares are
classified as Preferred Stock without par value. As of the close of business on
June 30, 1999, 271,234,131 shares of Fifth Third Common Stock were issued and
outstanding and 73,636 shares were held in its treasury. As of the date of this
Agreement, no shares of Preferred Stock have been issued by Fifth Third. Fifth
Third does not have outstanding any stock options, subscription rights, warrants
or other securities entitling the holders to subscribe for or purchase any
shares of its capital stock other than options granted and to be granted to
employees and Directors under its stock option plans. At June 30, 1999, (a)
16,330,218 shares of Fifth Third Common Stock were reserved for issuance in
connection with outstanding options granted under it stock option plans and
7,426,429 shares were reserved for issuance under options to be granted in the
future, (b) 3,466,200 shares of Fifth Third Common Stock were reserved for
issuance to the shareholders of Peoples Bank Corporation pursuant to the terms
of this Agreement.
C. Fifth Third Bank, Indiana. Fifth Third Bank, Indiana is duly incorporated,
validly existing and in good standing as an Indiana banking corporation under
the laws of the State of Indiana, and has all the requisite power and authority
to conduct the banking business as now conducted by it; and Fifth Third Bank,
Indiana does not have any outstanding securities of any kind, nor any
outstanding options, warrants or other rights, contracts, understandings or
commitments entitling another person to acquire any securities of Fifth Third
Bank, Indiana of any kind, other than 60,000 shares of the common stock, no par
value per share, of Fifth Third Bank, Indiana owned of record and beneficially
by Fifth Third.
D. Due Issuance. All shares of Fifth Third Common Stock to be received by the
shareholders of Peoples Bank Corporation as a result of the Merger pursuant to
the terms of this Agreement shall be, upon transfer or issuance, validly issued,
fully paid and non-assessable, and will not, upon such transfer or issuance, be
subject to the preemptive rights of any shareholder of Fifth Third.
E. Financial Statements. Fifth Third has previously furnished to Peoples Bank
Corporation its audited, consolidated balance sheets, statements of operations,
statements of stockholders' equity and cash flows as of and at December 31, 1998
and for the year then ended together with the opinions of its independent public
accountants associated therewith. ). Since March 31, 1999, other than the
acquisition transactions described in Fifth Third's filings with the SEC (the
"Acquisitions"), Fifth Third and its subsidiaries have not incurred any material
liabilities outside the ordinary course of business consistent with past
practice. Fifth Third also has furnished to Peoples Bank Corporation (i) its
unaudited, consolidated financial statements as at March 31, 1999, and for the
three (3) months then ended, and (ii) the Call Reports as filed with the Federal
Reserve Bank of the Fifth Third Bank, Indiana for the quarter ended March 31,
1999. Such consolidated financial statements fairly present the consolidated
financial condition, results of operations and cash flows of Fifth Third as of
their respective dates and for the respective periods covered thereby in
conformity with GAAP consistently followed throughout the periods covered
thereby. Neither Fifth Third nor any significant subsidiaries of Fifth Third
have any material liabilities, obligations or indebtedness required to be
disclosed in such financial statements other than the liabilities, obligations
and indebtedness disclosed in such financial statements (including footnotes).
Since December 31, 1998, no event has occurred which has had, and Fifth Third
has no knowledge of any such event that has occurred since such date that is
reasonably likely to have, a material adverse effect with respect to Fifth
Third.
F. No Material Adverse Change. Except for events relating to the business
environment in general and the Acquisitions: (i) since December 31, 1998, there
have been no material adverse changes in the consolidated financial condition,
operations or business of Fifth Third; (ii) the chief executive officer and the
chief financial officer of Fifth Third are not aware of any events which have
occurred since December 31, 1998, or which are reasonably expected to occur in
the future and which reasonably can be expected to result in any material
adverse change in the consolidated financial condition, operations or business
of Fifth Third, excluding in each instance matters of general application to the
banking industry (which shall include but not be limited to changes in general
economic condition, changes in interest rates generally, changes in laws or
regulations of general applicability or changes in GAAP) or are reasonably
likely to prevent or delay the consummation of the transactions contemplated by
this Agreement; and (iii) since December 31, 1998, there have been no material
changes in the methods of business operations of Fifth Third and its
subsidiaries.
G. Board Approval; Corporate Authority; No Breach. 1. The Board of Directors of
Fifth Third, by resolution adopted by the members present at a meeting duly
called and held, at which meeting a quorum was at all times present and acting,
has approved this Agreement, including authorizing and reserving a sufficient
number of shares of Fifth Third Common Stock for issuance to Peoples Bank
Corporation shareholders in accordance with this Agreement. Approval and
adoption of this Agreement by the shareholders of Fifth Third is not required
under Ohio law or under the Second Amended Articles of Incorporation, as
amended, or Code of Regulations of Fifth Third.
2. Fifth Third has corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder subject to certain required
regulatory approvals. This Agreement, when executed and delivered, will have
been duly authorized and will constitute the valid and binding obligation of
Fifth Third, enforceable in accordance with its terms, except to the extent that
(i) enforceability thereof may be limited by insolvency, reorganization,
liquidation, bankruptcy, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the availability of certain remedies may be precluded by
general principles of equity, subject, however, to the receipt of requisite
regulatory approvals.
3. Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby and thereby, does or will (i) conflict with,
result in a breach of, violate or constitute a default, under Fifth Third's
Second Amended Articles of Incorporation, as amended, or Code of Regulations or,
to the best knowledge of its chief executive officer and chief financial
officer, any federal, foreign, state or local law, statute, ordinance, rule,
regulation or court or administrative order, or any agreement, arrangement, or
commitment to which Fifth Third is subject or bound; (ii) to the best knowledge
of the chief executive officer and chief financial officer of Fifth Third,
result in the creation of or give any person the right to create any material
lien, charge, encumbrance, security agreement or any other material rights of
others or other material adverse interest upon any material right, property or
asset belonging to Fifth Third or any of its subsidiaries; (iii) terminate or
give any person the right to terminate, amend, abandon, or refuse to perform any
material agreement, arrangement or commitment to which Fifth Third is a party or
by which Fifth Third's rights, properties or assets are subject or bound; or
(iv) accelerate or modify, or give any party thereto the right to accelerate or
modify, the time within which, or the terms according to which, Fifth Third is
to perform any duties or obligations or receive any rights or benefits under any
material agreement, arrangements or commitments. For purposes of clauses (iii)
and (iv) immediately preceding, material agreements, arrangements or commitments
exclude agreements, arrangements or commitments having a term expiring less than
six months from the date of this Agreement or which do not require the
expenditure of more than $100,000 over the term of the agreement, arrangement or
commitment.
4. As of the date hereof, Fifth Third is not aware of the existence of
any factor that would materially delay or materially hinder issuance of any of
the required regulatory approvals necessary to consummate the Merger or the
other transactions contemplated hereby.
H. Articles and Regulations. Complete and accurate copies of (i) the Second
Amended Articles of Incorporation, as amended, and (ii) the Code of Regulations
of Fifth Third in force as of the date hereof have been delivered to Peoples
Bank Corporation.
I. Compliance with Law. To the best knowledge of the chief executive officer and
chief financial officer of Fifth Third, neither Fifth Third nor any of its
subsidiaries has engaged in any activity or omitted to take any action which, in
any material way, has resulted or could result in the violation of (i) any
local, state or federal law or (ii) any regulation, order, injunction or decree
of any court or governmental body, the violation of either of which could
reasonably be expected to have a material adverse effect on the financial
condition Fifth Third and its subsidiaries taken as a whole. To the best
knowledge of the chief executive officer and chief financial officer of Fifth
Third, Fifth Third and its subsidiaries possess all licenses, franchise, permits
and other governmental authorizations necessary for the continued conduct of
their businesses without material interference or interruption.
J. No Untrue Statements; SEC Filings. 1. To the best knowledge of the chief
executive officer and chief financial officer of Fifth Third, neither this
Agreement nor any report, statement, list, certificate or other information
furnished or to be furnished by Fifth Third to Peoples Bank Corporation or
Peoples Bank Corporation's agents in connection with this Agreement or any of
the transactions contemplated hereby contains or shall contain an untrue
statement of a material fact or omits or shall omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
2. Fifth Third has made available to Peoples Bank Corporation an
accurate and complete copy (including all exhibits and all documents
incorporated by reference) of each of the following documents as filed by Fifth
Third with the SEC: (a) final registration statement, prospectus, report,
schedule and definitive proxy statement filed since January 1, 1999 by Fifth
Third with the SEC, pursuant to the Securities Act or the Exchange Act, and (b)
communication mailed by Fifth Third to its stockholders since January 1, 1999.
Since January 1, 1999, Fifth Third has timely filed (and will timely file after
the date of this Agreement) all reports and other documents required to be filed
by it under the Securities Act and the Exchange Act, and, as of their respective
dates, all such reports complied (and, in the case of all reports and other
documents filed after the date of this Agreement, will comply) in all material
respects with the published rules and regulations of the SEC. As of the date of
filing or mailing, as the case may be, no such registration statement,
prospectus, report, schedule, proxy statement or communication contained (and no
registration statement, prospectus, report, schedule, proxy statement or
communication filed or mailed after the date of this Agreement will contain) any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date (but filed before the date hereof)
shall be deemed to modify information as of an earlier date, or omitted any
material exhibit required to be filed therewith. No event has occurred
subsequent to December 31, 1998 which Fifth Third is required to describe in a
Current Report on Form 8-K other than the Current Reports heretofore furnished
by Fifth Third to Peoples Bank Corporation. Fifth Third timely shall furnish
Peoples Bank Corporation with copies of all reports filed by Fifth Third with
the SEC subsequent to the date of this Agreement and until the Closing Date.
3. Fifth Third and its subsidiaries have filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since January 1, 1997 with
any SRO and any other Regulatory Agencies, and all other reports, registrations
and statements required to be filed by them since January 1, 1997, including,
without limitation, any report or statement required to be filed pursuant to the
laws, rules or regulations of the United States, any state, or any Regulatory
Agency, and have paid all fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a Regulatory Agency in
the regular course of the business of Fifth Third and its subsidiaries, no
Regulatory Agency has initiated any proceeding or, to the best knowledge of
Fifth Third, investigation into the business or operations of Fifth Third or its
subsidiaries since January 1, 1997. To the best knowledge of Fifth Third, there
is no unresolved violation, or material criticism or exception, by any bank
Regulatory Agency with respect to any report, registration or statement relating
to any examinations of Fifth Third or its subsidiaries.
K. Litigation. There are no actions, suits, proceedings, investigations or
assessments of any kind pending or, to the best knowledge of the chief executive
officer and chief financial officer of Fifth Third, threatened against Fifth
Third or any Fifth Third subsidiary, which reasonably can be expected to result
in any material adverse change in the consolidated financial condition,
operations or business of Fifth Third, or reasonably likely to prevent or delay
the consummation of the transactions contemplated by this Agreement.
L. Loan Losses. Since December 31, 1998 to the date hereof, none of Fifth Third
nor any of its banking subsidiaries has incurred any unusual or extraordinary
loan losses which would be material to Fifth Third on a consolidated basis; and
to the best knowledge and belief of the chief executive officer and chief
financial officer of Fifth Third, and in the light of any banking or Bank
Subsidiary's historical loan loss experience and their managements' analysis of
the quality and performance of their respective loan portfolios, as of December
31, 1998, their consolidated reserves for loan losses are adequate to absorb all
known and reasonably anticipated losses as of such date.
M. Tax Returns. Fifth Third and its subsidiaries have filed all federal, state
and local tax returns required to be filed (after giving effect to all
extensions) by them, respectively, and have paid or provided for all tax
liabilities shown to be due thereon or which have been assessed against them,
respectively. All tax returns filed by fifth Third and its subsidiaries are
complete and accurate in all material respects.
N. Broker. Fifth Third has not, directly or indirectly, dealt with any
investment banker, broker or finder in connection with this transaction and has
not incurred and will not incur any obligation for any investment banker's,
broker's or finder's fee or commission in connection with the transactions
provided for in this Agreement.
O. Investment Portfolio. The investment portfolios of Fifth Third and its
subsidiaries and affiliates consist of securities in marketable form. Since
December 31, 1998, to the date hereof Fifth Third and its affiliates, on a
consolidated basis, have not incurred any unusual or extraordinary losses in
their respective investment portfolios, and, except for matters of general
application to banking industry (including, but not limited to, changes in laws
or regulations or GAAP) or for events relating to the business environment in
general, including market fluctuations and changes in interest rates, the
management of Fifth Third is not aware of any events which are reasonably
certain to occur in the future and which reasonably can be expected to result in
any material adverse change in the quality or performance of the investment
portfolios of Fifth Third and its affiliates on a consolidated basis.
P. Taxes; Accounting. Fifth Third has no reason to believe that any conditions
exist that might prevent or impede the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code or for
pooling-of-interests accounting treatment.
Q. Expiration of Representations and Warranties. All representations and
warranties contained in this Section III shall expire at the Effective Time, and
thereafter, neither Fifth Third nor any officer or Director of Fifth Third shall
have any further liability or obligation with respect thereto, except for any
misrepresentations, breaches of warranties or violations of covenants that were
made with intent to defraud.
Article IV. Obligations of Peoples Bank Corporation Between the Date of
this Agreementand the Effective Time.
A. Shareholder Meeting. Peoples Bank Corporation, in consultation with Fifth
Third, will take all actions necessary to call and hold an annual or a special
meeting of Peoples Bank Corporation's shareholders as soon as practicable after
the Fifth Third registration statement relating to the shares of Fifth Third
Common Stock to be issued in the Merger has been declared effective by the SEC
and under all applicable state securities laws for the purpose of approving the
Merger and the plan of merger (within the meaning of Section 23-1-40-1 of the
IBCL) contained in this Agreement (and any other documents or actions necessary
to the consummation of the Merger) pursuant to law. Peoples Bank Corporation
shall include in the proxy materials relating to the annual or special meeting
that all Directors of Peoples Bank Corporation have indicated their intent to
vote all shares of Peoples Bank Corporation Common Stock which they own of
record in favor of approving this Agreement and any such other necessary
documents or actions, and shall include the recommendation of the Board of
Directors of Peoples Bank Corporation that the Peoples Bank Corporation
shareholders vote in favor of approving this Agreement and any other necessary
documents or actions, except as provided in the next sentence. The Board of
Directors of Peoples Bank Corporation shall be permitted to withdraw or modify
in a manner adverse to Fifth Third (or not to continue to make) its
recommendation to its shareholders if, but only if, (a) in the reasonable
opinion of the Board of Directors of Peoples Bank Corporation upon the advice of
outside counsel, such action is required in order for the Board of Directors of
Peoples Bank Corporation to comply with duties applicable to directors under
applicable law, and (b) the Peoples Bank Corporation has given Fifth Third five
business days' prior notice of its intention to withdraw or modify such
recommendation and Peoples Bank Corporation's Board of Directors has considered
any proposed changes to this Agreement (if any) proposed by Fifth Third and (c)
Peoples Bank Corporation has fully and completely complied with Section IV.B.
Without limiting the generality of the foregoing, Peoples Bank Corporation
agrees that its obligations pursuant to the first sentence of this Section IV.A.
shall not be altered by the commencement, public proposal, public disclosure or
communication to Peoples Bank Corporation of any Acquisition Proposal (as
defined below), including without limitation a Superior Proposal (as defined
below), or a decision by the Board of Directors of Peoples Bank Corporation to
withdraw or modify in a manner adverse to Fifth Third (or not to continue to
make) its recommendation to its stockholders to approve and adopt this Agreement
and the Merger and the plan of merger contained in this Agreement. For the
purposes of this Agreement, "Superior Proposal" shall mean any bona fide
Acquisition Proposal for all of the outstanding shares of the Peoples Bank
Corporation Common Stock on terms the Board of Directors of Peoples bank
Corporation determines in its good faith judgment (taking into account the
advice of a financial advisor of nationally recognized reputation, taking into
account all the terms and conditions of the Acquisition Proposal, including any
break-up fees, expense reimbursement provisions and conditions to consummation)
are more favorable and provide greater value to all of Peoples Bank
Corporation's shareholders than this Agreement and the Merger taken as a whole.
B. No Solicitation. Peoples Bank Corporation and its subsidiaries, and the
officers, directors, financial or legal advisors of Peoples Bank Corporation and
its subsidiaries, will not, directly or indirectly, (a) take any action to
solicit, initiate or encourage any Acquisition Proposal or Alternative Offer or
(b) engage in negotiations with, or disclose any nonpublic information relating
to Peoples Bank Corporation or any of its subsidiaries or afford access to the
properties, books or records of Peoples Bank Corporation or any of its
subsidiaries to, any person that may be considering making, or has made, an
Acquisition Proposal or Alternative Offer; provided that Peoples Bank
Corporation may, in response to an unsolicited written proposal from a third
party regarding an Acquisition Proposal or Alternative Offer engage in the
activities specified in clause (b) of this Section IV.B., if (i) in the
reasonable opinion of the Board of Directors of Peoples Bank Corporation, with
the advice of outside counsel, such action is required for the Board of
Directors of Peoples Bank Corporation to comply with the duties applicable to
directors under applicable law and (ii) Peoples Bank Corporation has received
from such third party an executed confidentiality agreement with terms not
materially less favorable to Peoples Bank Corporation than those contained in
the confidentiality agreement entered into between Peoples Bank Corporation and
Fifth Third dated June 3, 1999. Peoples Bank Corporation will immediately notify
Fifth Third orally and will promptly (and in no event later than 24 hours after
the relevant event) notify Fifth Third in writing (which oral and written
notices shall identify the person making the Acquisition Proposal or Alternative
Offer or request for information and set forth the material terms thereof) after
having received any Acquisition Proposal or Alternative Offer, or request for
nonpublic information relating to Peoples Bank Corporation or any of its
subsidiaries or for access to the properties, books or records of Peoples Bank
Corporation or any of its subsidiaries by any person who is considering making
or has made an Acquisition Proposal or Alternative Offer. Peoples Bank
Corporation will keep Fifth Third fully and currently informed of the status and
details of any such Acquisition Proposal or Alternative Offer or request and any
related discussions or negotiations. Subject to the foregoing, Peoples Bank
Corporation shall, and shall cause the Bank Subsidiary and each of the PBC
Subsidiaries' and their respective directors, officers and financial and legal
advisors to, cease immediately and cause to be terminated all activities,
discussions or negotiations, if any, with any persons conducted heretofore with
respect to any Acquisition Proposal or Alternative Offer. Nothing in this
Section IV.B. shall prohibit Peoples Bank Corporation or its Board of Directors
from taking and disclosing to the shareholders of Peoples Bank Corporation a
position with respect to an Acquisition Proposal by a third party to the extent
required under the Exchange Act or from making such disclosure to the
shareholders of Peoples Bank Corporation which, in the judgment of the Board of
Directors of Peoples Bank Corporation on advice of outside counsel, is required
under applicable law; provided that nothing in this sentence shall affect the
obligations of Peoples Bank Corporation and its Board of Directors under any
other provision of this Agreement. For purposes of this Agreement, "Alternative
Offer" means any offer or proposal for, or any indication of interest in (a) an
acquisition of securities representing 10% or more of the voting power of
Peoples Bank Corporation or 25% or more of the voting power of any Significant
Subsidiary (as defined in Regulation S-X of the SEC) of Peoples Bank Corporation
or (b) a purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of any of Peoples Bank
Corporation's subsidiaries. For purposes of this Agreement, "Acquisition
Proposal" means any offer or proposal for, or any indication of interest in (w)
a merger or consolidation, or any similar transaction, involving Peoples Bank
Corporation or any Significant Subsidiary of Peoples Bank Corporation, (x) a
purchase, lease or other acquisition or assumption of all or a substantial
portion of the assets or deposits of Peoples Bank Corporation or all or
substantially all of the assets or deposits of any Significant Subsidiary of
Peoples Bank Corporation, (y) a purchase or other acquisition (including by way
of merger, consolidation, share exchange or otherwise) of beneficial ownership
(the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Exchange Act, and the rules and
regulations thereunder) of securities representing 10% or more of the voting
power of Peoples Bank Corporation or more than 25% of any Significant Subsidiary
of Peoples Bank Corporation, or (z) any substantially similar transaction.
C. Valuation Adjustment. Consistent with GAAP, Peoples Bank Corporation agrees
that on or before the Effective Time based on a review of the Bank Subsidiary's
loan losses, current classified assets and commercial, multi-family and
residential mortgage loans and investment portfolio, Peoples Bank Corporation
will work with Fifth Third with the goal of establishing collection procedures,
internal valuation reviews, credit policies and practices and general valuation
allowances which are consistent with the guidelines used within the Fifth Third
holding company system. Fifth Third shall provide such assistance and direction
to Peoples Bank Corporation as is necessary in conforming to such polices,
practices, procedures and asset dispositions which are mutually agreeable
between the date of this Agreement until the Effective Time.
D. Operations in the Ordinary Course; Forbearances. From the date of this
Agreement until the Effective Time, Peoples Bank Corporation, the Bank
Subsidiary and the PBC Subsidiaries will be operated in the ordinary course of
business, and none of them will, without the prior written consent of Fifth
Third, which consent shall not be unreasonably withheld: make any changes in its
Restated Articles of Incorporation, Amended By-laws, or capital or corporate
structures; issue any additional shares of Peoples Bank Corporation Common Stock
other than pursuant to the exercise of options granted prior to the date hereof;
issue, sell or permit to become outstanding any other equity securities, other
than pursuant to the exercise of options granted prior to the date referred to
in Section II.A.; or, issue as borrower any long term debt or convertible or
other securities of any kind, or right to acquire any of its securities; make
any material changes in its method of business operations; except for
expenditures in the amounts and for the purposes set forth in Schedule 1
attached hereto, all of which are in excess of $10,000, make, enter into any
agreement to make, or become obligated to make, any capital expenditures in
excess of $10,000; make, enter into or renew any agreement for services to be
provided to Peoples Bank Corporation, the Bank Subsidiary or any of the Bank
Subsidiaries or permit the automatic renewal of any such agreement, other than
the agreements identified in Schedule 1 which are specifically identified on
such Schedule as agreements which Peoples Bank Corporation intends to renew,
except any agreement for services having a term of not more than six (6) months
or requiring the expenditure of not more than $50,000 (for this purpose the
phrase "permit the automatic renewal" includes the failure to send a notice of
termination of such contract if such failure would constitute a renewal); open
for business any branch office which has been approved by the appropriate
regulatory authorities but not yet opened or apply to the appropriate regulatory
authorities to establish a new branch office or expand any existing branch
office; acquire, become obligated to acquire, or enter into any agreement to
acquire, any banking or non-banking company or any branch offices of any such
companies or any material assets or liabilities outside the ordinary course of
business, other than such agreements existing on the date hereof and disclosed
in Schedule 1; make, declare, pay or set aside for payment any cash dividends on
its own stock other than normal and customary cash dividends per quarter paid in
such amounts and at such times as Peoples Bank Corporation historically has done
on its Common Stock and which shall not exceed $.15 per share for the July 16
dividend (which may be increased by up to $.005 per share in each subsequent
quarter in accordance with any increase in earnings, excluding extraordinary
items and merger related expenses) or be paid more frequently than once per
calendar quarter, provided this covenant shall only apply to Peoples Bank
Corporation, and provided further that notwithstanding anything to the contrary
herein, Peoples Bank Corporation and Fifth Third shall cooperate in selecting
the Effective Time to ensure that the holders of Peoples Bank Corporation Common
Stock do not become entitled to receive both a dividend with respect to their
Peoples Bank Corporation Common Stock and a dividend with respect to their Fifth
Third Common Stock or fail to be entitled to receive any dividend with respect
to any quarterly period or portion thereof in which the Effective Time occurs;
pay any stock dividends or make any other distributions on its stock other than
cash dividends as described in the immediately preceding clause; change or
otherwise amend any Benefit Plans other than as required by law or as
contemplated herein; provide any increases in employee salaries or benefits
other than in the ordinary course of business or as contemplated herein; or take
any intentional action that is intended or may reasonably be expected to result
in any of its representations and warranties set forth in this Agreement being
or becoming untrue in any material respect at any time prior to the Effective
Time, or in any of the conditions to the Merger set forth in Article VI not
being satisfied or in a violation of any provision of this Agreement, except, in
every case, as required by applicable law, regulation or safe and sound banking
practices. Peoples Bank Corporation agrees that it will not sell, transfer,
mortgage or otherwise dispose of or encumber any of the shares of the capital
stock of the Bank Subsidiary or any other PBC Subsidiary which are now owned by
it, and none of Peoples Bank Corporation, the Bank Subsidiary nor any PBC
Subsidiary shall sell, transfer, mortgage or otherwise dispose of or encumber
any other assets, except in the ordinary course of business consistent with past
practice.
E. Filings. Peoples Bank Corporation will timely file after the date of this
Agreement all reports and other documents required to be filed by it under the
Securities Act and the Exchange Act, and, as of their respective dates, all such
reports will comply in all material respects with the published rules and
regulations of the SEC with respect thereto. As of the date of filing or
mailing, as the case may be, no such registration statement, prospectus, report,
schedule, proxy statement or communication filed or mailed after the date of
this Agreement will 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 in which they were
made, not misleading, except that information as of a later date shall be deemed
to modify information as of an earlier date, or omitted any material exhibit
required to be filed therewith. Peoples Bank Corporation shall furnish Fifth
Third in a timely manner with copies of all reports filed by Peoples Bank
Corporation with the SEC subsequent to the date of this Agreement and until the
Closing Date.
F. Resolution. A certified copy of the resolution of the Board of Directors of
Peoples Bank Corporation approving the execution of this Agreement, specifically
referring to the oral fairness opinion rendered by McDonald Investments Inc.
shall be delivered to Fifth Third on the date of execution of this Agreement. A
copy of the executed written opinion of McDonald Investments Inc. dated
effective as of the date of the board action will be delivered to Fifth Third as
soon as practicable after the date of this Agreement.
Article V. Cooperation and Other Obligations and Other Covenants
A. Registration Statement and Proxy Statement. 1. Each of Fifth Third and
Peoples Bank Corporation agrees to cooperate in the preparation of a
registration statement on Form S-4 (the "Registration Statement") to be filed by
Fifth Third as promptly as reasonably practicable with the SEC in connection
with the issuance of Fifth Third Common Stock in the Merger (including the proxy
statement and prospectus and other proxy solicitation materials of Peoples Bank
Corporation constituting a part thereof (the "Proxy Statement") and all related
documents). The Registration Statement and the Proxy Statement shall comply as
to form in all material respects with the applicable provisions of the
Securities Act and the Exchange Act and the rules and regulations thereunder.
Each of Fifth Third and Peoples Bank Corporation shall, as promptly as
practicable after receipt thereof, provide copies of any written comments
received from the SEC with respect to the Registration Statement and the Proxy
Statement, as the case may be, to the other party, and advise the other party of
any oral comments with respect to the Registration Statement or the Proxy
Statement received from the SEC. Each of Fifth Third and Peoples Bank
Corporation agrees to use reasonable best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
reasonably practicable after filing thereof. As promptly as possible after the
Registration Statement is declared effective, Peoples Bank Corporation agrees to
mail the Proxy Statement to its shareholders in accordance with the directions
and under the supervision of Fifth Third. Fifth Third also agrees to use
reasonable best efforts to obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the transactions contemplated
by the Agreement. Peoples Bank Corporation agrees to furnish to Fifth Third all
information concerning Peoples Bank Corporation, its Subsidiaries, officers,
directors and stockholders as may be reasonably requested in connection with the
foregoing.
2. Each of Fifth Third and Peoples Bank Corporation agrees, as to
itself and its subsidiaries, that none of the information supplied or to be
supplied by it for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement and each
amendment or supplement thereto, if any, becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and (ii) the Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to shareholders and at the time
of the Peoples Bank Corporation shareholder meeting to approve the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading.
3. Fifth Third agrees to advise Peoples Bank Corporation, promptly
after Fifth Third receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been filed, of
the issuance of any stop order or the suspension of the qualification of the
Fifth Third Common Stock for offering or sale in any jurisdiction, of the
initiation or threat of any proceeding for any such purpose, or of any request
by the SEC for the amendment or supplement of the Registration Statement or for
additional information. Peoples Bank Corporation agrees to advise Fifth Third of
any request by the SEC for the amendment or supplement of the Proxy Statement or
for additional information.
B. Regulatory Approvals. 1. Fifth Third will prepare and cause to be filed, at
the expense of Fifth Third, such notices, applications and other documents with
the Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Ohio Division of Financial Institutions, the Indiana
Department of Financial Institutions, and any other Regulatory Agencies or stock
exchanges as are required to secure the requisite approvals for the consummation
of the transactions provided for in this Agreement. Fifth Third shall use all
reasonable efforts to file all such applications within sixty (60) days of the
date of this Agreement and to secure all such approvals. Peoples Bank
Corporation agrees that it will cooperate with Fifth Third and, as promptly as
practicable after request and at its own expense, provide Fifth Third with all
information and documents concerning Peoples Bank Corporation, the Bank
Subsidiary and the PBC Subsidiaries, as shall be required in connection with
preparing such notices, applications and other documents and in connection with
securing such approvals. Prior to filing any such applications or other
documents with the applicable governmental agencies, Fifth Third shall provide
copies thereof to Peoples Bank Corporation.
2. Third Fifth and Peoples Bank Corporation shall promptly advise each
other upon receiving any communication from any governmental entity whose
consent or approval is required for consummation of the transactions
contemplated by this Agreement.
C. Reasonable Best Efforts. Each of the parties hereto agrees to use its
reasonable best efforts and to cooperate with the other party in all reasonable
respects in order to carry out and consummate the transactions contemplated by
this Agreement at the earliest practicable time including, without limitation,
the filing of applications, notices and other documents with, and obtaining
approval from, appropriate governmental regulatory agencies; provided that
nothing in this Agreement shall obligate Fifth Third to agree to any conditions,
restraints or requirements that would materially reduce the anticipated benefits
of the Merger to Fifth Third or could reasonably be expected to have a material
adverse effect on Peoples Bank Corporation, the Bank Subsidiary and the PBC
Subsidiaries taken as a whole (it being understood that a condition preventing
the integration of the computer systems of Peoples Bank Corporation, the Bank
Subsidiary or any PBC Subsidiary with those of Fifth Third or its subsidiaries
until after January 1, 2000 shall not be deemed such a burdensome condition).
D. Access to Information. 1. Peoples Bank Corporation agrees to permit Fifth
Third, its officers, employees, accountants, agents and attorneys, and Fifth
Third agrees to permit Peoples Bank Corporation, its officers, employees,
accountants, agents and attorneys, to have reasonable access during business
hours to their respective books, records and properties, and those of its
respective subsidiaries as well, for the purpose of making a detailed
examination, or updating and amplifying prior examinations, of the financial
condition, assets, liabilities, legal compliance, affairs and the conduct of the
business of Peoples Bank Corporation, the Bank Subsidiary and the PBC
Subsidiaries or Fifth Third and its subsidiaries, as the case may be, prior to
the Effective Time, and also to permit the monitoring of the foregoing on an
ongoing basis (such rights of examination and monitoring to be subject to the
confidentiality obligations set forth in Section VII.D. hereof); provided,
however, no investigation by any of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
2. Fifth Third will not disclose to others, shall not use in respect of
its (or any of its subsidiaries) business operations, and will hold in
confidence any non-public, confidential information disclosed to it by Peoples
Bank Corporation concerning Peoples Bank Corporation, the Bank Subsidiary or any
of the PBC Subsidiaries. Peoples Bank Corporation will not disclose to others,
shall not use in respect of its (or any of its subsidiaries) business
operations, and will hold in confidence any non-public, confidential information
disclosed to it concerning Fifth Third or any of its affiliates. In the event
the Merger is not completed, all non-public financial statements, documents and
materials, and all copies thereof, shall be returned to Peoples Bank Corporation
or Fifth Third, as the case may be, and shall not be used by Fifth Third or
Peoples Bank Corporation, as the case may be, in any way detrimental to Peoples
Bank Corporation or Fifth Third.
3. As soon as they are available, Peoples Bank Corporation will provide
to Fifth Third Peoples Bank Corporation's unaudited, consolidated balance
sheets, statements of income, changes in stockholders' equity and cash flows as
of and at June 30, 1999, and for the six months then ended, and shall continue
to furnish such financial information for subsequent monthly and quarterly
periods to Fifth Third, and audited, consolidated financial statements as at
December 31, 1999 and for the year then ended, as soon as practicable, in each
case, until the Closing Date. Such audited and unaudited consolidated financial
statements of Peoples Bank Corporation will fairly present, as applicable, the
consolidated financial condition, results of operations and cash flows of
Peoples Bank Corporation as of the date thereof, and for the years or periods
covered thereby, in conformity with GAAP, consistently applied (except as stated
therein and except for the omission of notes to unaudited statements and except
for normal (in nature and amount) year-end adjustments to interim results).
Peoples Bank Corporation timely shall furnish Fifth Third with copies of all
reports filed by Peoples Bank Corporation with the SEC subsequent to the date of
this Agreement and until the Closing Date.
4. As soon as they are available, Fifth Third will provide to Peoples
Bank Corporation Fifth Third's unaudited, consolidated balance sheets,
statements of operations, statements of stockholders' equity and cash flows as
of and at June 30, 1999, and for the six months then ended, and shall continue
to furnish such financial information for subsequent monthly and quarterly
periods to Peoples Bank Corporation, and audited, consolidated financial
statements as at December 31, 1999 and for the year then ended, as soon as
practicable, in each case, until the Closing Date. Such audited and unaudited
consolidated financial statements of Fifth Third fairly will fairly present, as
applicable, the consolidated financial condition, results of operations and cash
flows of Fifth Third as of the date thereof, and for the years or periods
covered thereby, in conformity with GAAP, consistently applied (except as stated
therein and except for the omission of notes to unaudited statements and except
for normal (in nature and amount) year-end adjustments to interim results).
Fifth Third timely shall furnish Peoples Bank Corporation with copies of all
reports filed by Fifth Third with the SEC subsequent to the date of this
Agreement and until the Closing Date.
E. Employee Benefit Matters. 1. If Fifth Third so requests, Peoples Bank
Corporation, the Bank Subsidiary or any PBC Subsidiary shall develop a plan and
timetable for terminating any or all of the Qualified Benefit Plans, and, with
the advance written approval of Fifth Third, shall proceed with the
implementation of said termination plan and timetable; provided that such
terminations will not adversely affect qualification of such Qualified Benefit
Plan under the Code.
2. Peoples Bank Corporation, the Bank Subsidiary and the PBC
Subsidiaries shall provide to Fifth Third at least sixty (60) days prior to the
Effective Time, documentation reasonably satisfactory to Fifth Third
demonstrating that the requirements of Sections 404, 412, 415, 416, 401(k) and
(m) of the Code have been satisfied by all of its Qualified Benefit Plans for
the 1996, 1997 and 1998 plan years.
3. With respect to any Benefit Plan that provides for vesting of
benefits, there shall be no discretionary acceleration of vesting without Fifth
Third's consent whether or not such discretionary acceleration of vesting is
provided under the terms of the Benefit Plan; provided that a Benefit Plan which
pursuant to its terms provides for an acceleration of vesting upon a change of
control of Peoples Bank Corporation shall not be deemed to involve a
discretionary acceleration of vesting and vesting thereunder shall accelerate as
of the Effective Time or any later date as provided therein.
4. If requested by Fifth Third, Peoples Bank Corporation, the Bank
Subsidiary and the PBC Subsidiaries shall take all actions necessary to freeze
the Qualified Benefit Plans other than the Pension Plan as of a date at least
thirty (30) days prior to the Effective Time such that no further contributions
(including employee 401(k) contributions) shall be made under the Qualified
Benefit Plans after the Effective Time.
5. Peoples Bank Corporation, the Bank Subsidiary and the PBC
Subsidiaries, without the advance written consent of Fifth Third, which shall
not be unreasonably withheld or delayed, shall not (a) adopt any amendments to
the Qualified Benefit Plans after the date of this Agreement; or (b) make any
distributions from the Qualified Benefit Plans after the date of this Agreement;
or (c) make any contributions to the Qualified Benefit Plans (except 401(k)
employee contributions and any required employer matching contributions which
are consistent with past practice of Peoples Bank Corporation with respect to
the timing and amount of contributions) after the date of this Agreement; or (d)
take any action which would reduce or restrict the availability of surplus
(excess of plan assets over plan liabilities) under any defined benefit plan as
defined in Section 414(j) of the Code. After Peoples Bank Corporation has
satisfied the requirements of Section E (2) above, consent of Fifth Third shall
not be required for distributions permitted pursuant to the terms of the
Qualified Benefit Plans as currently in effect.
6. Within thirty (30) days after the date of this Agreement, Peoples
Bank Corporation, the Bank Subsidiary and the PBC Subsidiaries shall take any
and all actions necessary to amend the Peoples Bank & Trust Company Employees'
Pension Plan ("Pension Plan") so as to revoke the amendment to the Pension Plan
which was adopted June 17, 1999 to the extent permitted by law. Such actions
shall be taken in accordance with all applicable laws, regulations and the
Pension Plan documents in such a way that ensures that participants and
beneficiaries in the Pension Plan have no legal entitlement to any overfunding
in the Pension Plan. Within forty-five (45) days after the date of this
Agreement, Peoples Bank Corporation shall have received the reasoned opinion of
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel to Peoples Bank Corporation, in a form reasonably
acceptable to Fifth Third, to the effect that, after the actions taken to revoke
the June 17, 1999 amendment to the Pension Plan, to the extent permitted by law
(a) no participant, beneficiary or other party (other than Peoples Bank
Corporation, the Bank Subsidiary or the PBC Subsidiaries) should have any
entitlement to any surplus assets in the Pension Plan and (b) the actions taken
to revoke such amendment should not constitute an impermissible reduction in
accrued benefits.
7. Within thirty (30) days after the date of this Agreement, Peoples
Bank Corporation, the Bank Subsidiary and the PBC Subsidiaries shall take any
and all actions necessary to amend the Peoples Bank & Trust Company Unfunded
Supplemental Retirement Plan For a Select Group of Management Employees (the
"SERP") so as to revoke the Third Amendment to the SERP which was adopted June
17, 1999. Such actions shall be taken in accordance with all applicable laws,
regulations and the SERP documents in such a way that ensures that participants
and beneficiaries in the SERP have no legal entitlement to any benefits based on
said Third Amendment. Such actions shall include but not be limited to obtaining
the written consent of such revocation of each participant and beneficiary under
the SERP and each participant's written agreement that they will receive no
benefit if he or she terminates (for any reason) service before attaining age
60, except in the case of death or disability in accordance with the terms of
the SERP in effect prior to such Third Amendment.
8. Schedule 1 lists all of the split dollar life insurance agreements
and policies as to which Peoples Bank Corporation, the Bank Subsidiary and the
PBC Subsidiaries is a party.
F. State Anti-Takeover Statutes. Peoples Bank Corporation will take all steps
reasonably within its control which are necessary to exempt (or continue the
exemption of) the Merger, this Agreement and the transactions contemplated
hereby and thereby from any applicable state anti-takeover law, as now or
hereafter in effect.
G. Affiliates. Not later than the 15th day prior to the mailing of Peoples Bank
Corporation's Proxy Statement with respect to the Merger, Peoples Bank
Corporation shall deliver to Fifth Third a list of each person that, to the best
of Peoples Bank Corporation's knowledge, is or is reasonably likely to be, as of
the date of the annual or special meeting called to approve the Merger, deemed
an "affiliate" of it as that term is used in Rule 145 under the Securities Act,
or SEC Accounting Series Releases 130 and 135 (the "Peoples Bank Corporation
Affiliates"). Peoples Bank Corporation shall use its reasonable best efforts to
cause each Peoples Bank Corporation Affiliate to execute and deliver to Fifth
Third on or before the mailing of such Proxy Statement an agreement in the form
of Appendix A hereto.
H. Employment Agreements. Within thirty (30) days after the date of this
Agreement, Peoples Bank Corporation shall have obtained signed agreements and
releases (in a form previously approved by Fifth Third) from the officers of
Peoples Bank Corporation listed on Article V, Section H of Schedule 1 attached
hereto, in which such employees have agreed to terminate their employment
agreements and waive their rights to any payments under said agreements.
I. Exchange Fund. Immediately prior to the Effective Time, the Exchange Agent,
will acknowledge in writing to Peoples Bank Corporation that the Exchange Agent
is in receipt of (i) certificates representing a whole number of shares of Fifth
Third Common Stock to be issued to the shareholders of Peoples Bank Corporation
pursuant to this Agreement, and (ii) sufficient cash to be paid to the Peoples
Bank Corporation shareholders for fractional shares.
J. Exemption From Liability Under Section 16(B). Assuming that Peoples Bank
Corporation delivers to Fifth Third the Section 16 Information in a timely
fashion prior to the Effective Time, the Board of Directors of Fifth Third, or a
committee of Non-Employee Directors thereof (as such term is defined for
purposes of Rule 16b-3(d) under the Exchange Act), shall reasonably promptly
thereafter and in any event prior to the Effective Time adopt a resolution,
expressly relying on Peoples Bank Corporation's representation that any such
options or other grants were upon their issuance exempt from liability pursuant
to Section 16(b) under the Exchange Act, providing that the receipt by the
Peoples Insiders of Fifth Third Common Stock in exchange for shares of Peoples
Bank Corporation Common Stock, and of options to purchase shares of Fifth Third
Common Stock upon conversion of options to purchase shares of Peoples Bank
Corporation Common Stock, in each case pursuant to the transactions contemplated
hereby and to the extent such securities are listed in the Section 16
Information, are intended to be exempt from liability pursuant to Section 16(b)
under the Exchange Act; provided, however, that the Board of Directors of Fifth
Third will be under no obligation to adopt such a resolution unless it may
expressly rely on a written representation by Peoples Bank Corporation that any
such options or other grants were, upon their issuance, exempt from liability
pursuant to Section 16(b) under the Exchange Act. "Section 16 Information" shall
mean information accurate in all respects regarding the Peoples Insiders, the
number of shares of Peoples Bank Corporation Common Stock held by each such
Peoples Insider and expected to be exchanged for Fifth Third Common Stock in the
Merger, and the number and description of the options to purchase shares of
Peoples Bank Corporation Common Stock held by each such Peoples Insider and
expected to be converted into options to purchase shares of Fifth Third Common
Stock in connection with the Merger. "Peoples Insiders" shall mean those
officers and directors of Peoples Bank Corporation who are subject to the
reporting requirements of Section 16(a) of the Exchange Act and who are listed
in the Section 16 Information.
Article VI. Conditions Precedent to Closing.
A. Conditions to the Obligations of Each of the Parties:
The obligation of each of the parties hereto to consummate the transactions
provided for herein is subject to the fulfillment on or prior to the Effective
Time of each of the following conditions:
1. The shareholders of Peoples Bank Corporation shall have duly
approved the Merger and the plan of merger contained within this Agreement, by
the affirmative vote of a majority of the outstanding shares of Peoples Voting
Common Stock and by the affirmative vote of a majority of the outstanding shares
of Peoples Non-Voting Common Stock, voting as separate voting groups, in
accordance with and as required by law and in accordance with Peoples Bank
Corporation's Restated Articles of Incorporation and Amended Bylaws.
2. All necessary governmental and regulatory orders, consents,
clearances and approvals and requirements shall have been secured and satisfied
for the consummation of such transactions, including without limitation, those
of the Federal Reserve System, the Ohio Division of Financial Institutions, the
Indiana Division of Financial Institutions, and the Federal Deposit Insurance
Corporation to the extent required and, in the case of Fifth Third, none of such
orders, consents, clearances and approvals and requirements shall be subject to
a condition, restriction or requirement of the type referred to in the proviso
to Section VI.C. hereof.
3. Any waiting period mandated by law in respect of the final requisite
approval by any applicable Regulatory Agency of the transaction contemplated
herein shall have expired.
4. Prior to or at the Effective Time, no investigation by any state or
federal agency shall have been threatened or instituted seeking to enjoin or
prohibit, or enjoining or prohibiting, the transactions contemplated hereby and
no governmental action or proceeding shall have been threatened or instituted
before any court or government body or authority, seeking to enjoin or prohibit,
or enjoining or prohibiting, the transactions contemplated hereby other than
investigations, actions and proceedings which have been withdrawn prior to or at
the Effective Time without material adverse effect to Fifth Third or Peoples
Bank Corporation, individually or on a combined basis, and other than regularly
scheduled regulatory examinations.
5. Fifth Third shall have registered its shares of Fifth Third Common
Stock to be issued to the Peoples Bank Corporation shareholders hereunder with
the SEC pursuant to the Securities Act, and with all applicable state securities
authorities. The registration statement with respect thereto shall have been
declared effective by the SEC and all applicable state securities authorities
and no stop order shall have been issued. The shares of Fifth Third Common Stock
to be issued to the Peoples Bank Corporation shareholders hereunder shall have
been authorized for trading on the NASDAQ National Market System upon official
notice of issuance.
B. Additional Conditions to the Obligations of Fifth Third:
The obligation of Fifth Third to consummate the transactions provided for herein
is subject to the fulfillment at or prior to the Effective Time of each of the
following additional conditions unless waived by Fifth Third in a writing
delivered to Peoples Bank Corporation which specifically refers to the condition
or conditions being waived:
1. All of the representations and warranties of Peoples Bank
Corporation set forth in Article II of this Agreement that contain a materiality
standard shall be true and correct, and all of the other representations and
warranties of Peoples Bank Corporation set forth in Article II of this Agreement
shall be true and correct in all material respects, in each case, both as of the
date of this Agreement and at and as of the Closing Date (as hereinafter
defined) as if each such representation and warranty was given on and as of the
Closing Date, except for any such representations and warranties made as of a
specified date, which shall be true and correct in all material respects as of
such date.
2. Peoples Bank Corporation shall have performed all of the obligations
required of it under the terms of this Agreement, except for breaches of
obligations which would not have, and would not reasonably be expected to have,
any material adverse effect on the financial condition, business or operations
of Peoples Bank Corporation, the Bank Subsidiary and the PBC Subsidiaries taken
as a whole.
3. ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel for Peoples Bank Corporation, the Bank
Subsidiary and the PBC Subsidiaries, shall have delivered an opinion addressed
to Fifth Third in substantially the form appended hereto as Appendix B.
4. The aggregate amount of consolidated shareholders' equity (including
Peoples Bank Corporation Common Stock and retained earnings and excluding
treasury stock) of Peoples Bank Corporation immediately prior to the Effective
Time, as shown by and reflected in its books and records of accounts on a
consolidated basis in accordance with generally accepted principles,
consistently applied, shall not be less than $52,000,000. For purposes of this
Section VI.B.4., (A) any expenses or accruals after the date hereof relating to
(i) the adjustments contemplated by Section IV.B.(i) herein, (ii) termination or
funding of any of Peoples Bank Corporation's, the Bank Subsidiary's and the PBC
Subsidiaries' Benefit Plans, as contemplated herein, (iii) expenses associated
with the Merger, or (iv) expenses or losses associated with the valuing of the
investments of Peoples Bank Corporation, the Bank Subsidiary or the PBC
Subsidiaries at current market value as required by GAAP shall be excluded for
purposes of calculation of Peoples Bank Corporation's shareholders' equity as
contemplated herein prior to the Effective Time.
5. Peoples Bank Corporation's independent certified public accountants
shall have reviewed the unaudited consolidated financial statements of Peoples
Bank Corporation as at the end of the month immediately preceding the Effective
Time, as well as the unaudited separate financial statements of the Bank
Subsidiary and each PBC Subsidiary as of the same date, performed such other
auditing procedures as may be requested by Fifth Third and reported in good
faith that they are not aware of any material modifications which would have a
material adverse effect on the financial condition of Peoples Bank Corporation,
the Bank Subsidiary or any PBC Subsidiary that should be made in order for such
financial statements to (i) be in conformity with GAAP, consistently applied,
excluding the presentation of footnotes, and (ii) accurately state the financial
condition and results of operations of Peoples Bank Corporation, the Bank
Subsidiary and the PBC Subsidiaries, and such modifications, in either case,
would have a material adverse effect on the financial condition of Peoples Bank
Corporation, the Bank Subsidiary or the PBC Subsidiaries.
6. Fifth Third shall have received a certificate from Peoples Bank
Corporation and the Bank Subsidiary, executed by the chief executive officer and
chief financial officer of each, dated the Closing Date, certifying to the best
knowledge and belief of the chief executive officer and chief financial officer
of each that the conditions set forth in Section VI.B.1. and VI.B.2. have been
satisfied.
7. The total number of shares of Peoples Bank Corporation Common Stock
issued and outstanding, or issuable pursuant to any outstanding options (whether
or not exercisable or vested) shall not exceed 3,180,000 shares.
8. (a) In consideration of the consummation of this transaction, each
of the Directors of Peoples Bank Corporation shall have executed and delivered
to Fifth Third an agreement by which the Directors shall agree for the
Restricted Period (as defined below) not to directly or indirectly, whether for
their own account or for the account of any other person, firm, corporation, or
other business organization, (i) serve as a director of, or beneficially own
more than 5% of the voting common stock of, any financial institution engaged in
the provision of Banking Services headquartered in the State of Indiana, or (ii)
join with any other parties to apply to any State or Federal regulatory
authority for the issuance of a bank or savings and loan charter for operation
in the State of Indiana. Notwithstanding any provision contained in this Section
8, the restrictions contained herein shall not be applicable to (i) any activity
or investment of the Director which existed at the time of this Agreement and
which was disclosed by the Director to Fifth Third, (ii) any activity of the
Director's spouse.
(b) The term "Restricted Period" shall mean the period beginning on the
Effective Date and ending three (3) years from the Effective Time.
(c) The term "Banking Services" shall mean retail or commercial deposit
or lending business, asset management and all other services which are
customarily provided by banks or which are otherwise provided by Fifth Third or
its affiliates.
9. Fifth Third shall have received an opinion of ▇▇▇▇▇▇▇, Head &
▇▇▇▇▇▇▇, counsel to Fifth Third, dated the Closing Date, to the effect that, on
the basis of facts, representations and assumptions set forth in such opinion:
(a) the Merger constitutes a "reorganization" within the meaning of Section 368
(a) of the Code and (b) that, accordingly, no gain or loss will be recognized by
Fifth Third as a result of the Merger. In rendering such opinion, such counsel
may require and rely upon representations contained in letters from Fifth Third
and Peoples Bank Corporation.
10. On the date of execution of this Agreement, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ each executes and delivers to Fifth Third a Shareholder
Support Agreement in the form of Appendix E attached hereto.
C. Additional Conditions to the Obligations of Peoples Bank Corporation:
The obligation of Peoples Bank Corporation to consummate the transactions
provided for herein is subject to the fulfillment at or prior to the Effective
Time of each of the following additional conditions unless waived by Peoples
Bank Corporation in a writing delivered to Fifth Third which specifically refers
to the condition or conditions being waived:
1. All of the representations and warranties of Fifth Third set forth
in Article III of this Agreement that contain a materiality standard shall be
true and correct, and all of the other representations and warranties of Fifth
Third set forth in Article III of this Agreement shall be true and correct in
all material respects, in each case, both shall be true and correct in all
material respects as of the date of this Agreement and at and as of the Closing
Date as if each such representation and warranty was given on and as of the
Closing Date, except for any such representations and warranties made as of a
specified date, which shall be true and correct in all material respects as of
such date.
2. Fifth Third shall have performed all of the obligations required of
it under the terms of this Agreement in all material respects.
3. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, counsel for Fifth Third, shall have delivered an
opinion addressed to Peoples Bank Corporation in substantially the form appended
hereto as Appendix C.
4. Peoples Bank Corporation shall have received a certificate from
Fifth Third, executed by its chief executive officer and chief financial
officer, dated the Closing Date, certifying to each of such officers' best
knowledge and belief that the conditions set forth in Section VI.C.1. and
VI.C.2. have been satisfied.
5. Peoples Bank Corporation shall have received an opinion of ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, counsel to Peoples Bank Corporation, dated the Closing Date, to the
effect that, on the basis of facts, representations and assumptions set forth in
such opinion (a) the Merger constitutes a "reorganization" within the meaning of
Section 368 (a) of the Code and (b) that, accordingly, (i) no gain or loss will
be recognized by Peoples Bank Corporation as a result of the Merger and (ii) no
gain or loss will be recognized by a stockholder of Peoples Bank Corporation who
receives Fifth Third Common Stock in exchange for shares of Peoples Bank
Corporation Common Stock, except with respect to cash received in lieu of
fractional share interests. In rendering such opinion, such counsel may require
and rely upon representations contained in letters from Fifth Third and Peoples
Bank Corporation.
6. McDonald Investments Inc. shall have delivered to the Peoples Bank
Corporation Board of Directors its written opinion updated to the date of the
proxy statement for the meeting of the Peoples Bank Corporation shareholders
called to approve the Merger to the effect that the Exchange Ratio is fair from
a financial point of view to the holders of Peoples Bancorp Common Stock.
Article VII. Additional Covenants
A. Bank Merger. The Bank Subsidiary shall be merged with and into Fifth Third
Bank, Indiana, to be effective at the Effective Time. The parties hereto agree
to cooperate with one another to effect such merger. Upon consummation of any
merger of the Bank Subsidiary, the separate corporate existence of the Bank
Subsidiary shall cease by operation of law. Fifth Third reserves the right in
its sole discretion to not merge the Bank Subsidiary with Fifth Third Bank,
Indiana and instead to keep the separate existence of the Bank Subsidiary or to
merge the Bank Subsidiary with any other affiliate of Fifth Third.
B. Employment Arrangements. 1. Fifth Third shall consider employing at Fifth
Third or other Fifth Third subsidiaries or affiliates as many of the Peoples
Bank Corporation and Bank Subsidiary employees who desire employment within the
Fifth Third holding company system as possible, to the extent of available
positions and consistent with Fifth Third's standard staffing levels and
personnel policies; provided that such continuing employees will not be subject
to any exclusion or penalty for pre-existing conditions that were covered under
the Bank Subsidiary's medical plan immediately prior to the Effective Time or
any waiting period relating to coverage under Fifth Third's medical plan.
2. Those employees who do not have an employment or severance agreement
and who are not employed by Fifth Third or who are terminated or voluntarily
resign after being notified that, as a condition of employment, such employee
must work at a location more than thirty (30) miles from such employee's former
location of employment or that such employee's salary will be materially
decreased, in any case and in both cases, within ninety (90) days after the
Effective Time, and who sign and deliver a termination and release agreement in
the form attached as Appendix D hereto, shall be entitled to severance pay equal
to, (a) in the case of employees named on Schedule 1, the amounts listed with
respect to each such employee on such Schedule 1 provided that in the event
severance payments under this Section VII (B)(2) exceed $1,100,000 the amounts
due such employees shall be reduced ratably to the extent of such excess, (b) in
the case of officers of Peoples Bank Corporation or the Bank Subsidiary not
listed on Schedule 1, two (2) weeks of pay for each year of service up to a
maximum of twenty-six (26) weeks of pay and a minimum of four (4) weeks of pay,
(c) in the case of all other exempt employees two (2) weeks of pay for each year
of service up to a maximum of twelve (12) weeks of pay and a minimum of four (4)
weeks of pay, and (d) in the case of all other employees two (2) weeks of pay
for each year of service up to a maximum of eight (8) weeks of pay and a minimum
of four (4) weeks of pay. All officers of Peoples Bank Corporation identified on
Article V Section H of Schedule 1 will not be entitled to receive the severance
benefits described in this Section 2. For these purposes, if there has been a
break in an employee's period of employment, the prior period shall be added to
the current period of employment. Fifth Third shall provide sufficient
notification to Peoples Bank Corporation of those employees that will not be
offered a position with Fifth Third subsequent to the Effective Time in order
that such employees terminated by Peoples Bank Corporation can be given
appropriate notice of termination in advance of the effectiveness thereof.
Nothing contained in this Section VII.B.2 shall be construed or interpreted to
limit or modify in any way Fifth Third's at will employment policy.
3. With the consent of Fifth Third, Peoples Bank Corporation, the Bank
Subsidiary and the PBC Subsidiaries may make such payments as they determine
appropriate to selected key employees as retention bonuses, noncompete payments
and/or severance. Any employee entitled to receive such a payment shall not be
entitled to severance payments under 2 above. As a condition to receiving any
such payments, an employee shall be required to sign and deliver a termination
and release agreement in the form comparable to that attached as Appendix D.
4. Fifth Third shall honor and perform, and pay when due amounts
required under, Severance Agreements, dated the date hereof with the officers of
Peoples Bank Corporation listed on Schedule 1 attached hereto.
5. The Bank Subsidiary is authorized to continue to accrue and pay
bonuses in accordance with the bonus and incentive compensation plans listed on
Schedule 1, which are paid in the ordinary course of business; provided that the
Bank Subsidiary may elect to accrue and pay all bonuses that would otherwise be
paid for 1999 pursuant to such plans at the Effective Time (based upon a
projected income for 1999 of the Bank Subsidiary as of the date of such payment
without deduction for merger related expenses). Such bonus arrangements are
described on Schedule 1. Any employee whose employment is terminated voluntarily
or involuntarily prior to the Effective Time shall not be paid a bonus or
incentive compensation without the prior written consent of Fifth Third. Such
bonus payments will not exceed $1,300,000 in the aggregate without the prior
written consent of Fifth Third.
C. Director, Officer and Employee Indemnification. (i) From and after the
Effective Time, Fifth Third shall assume the obligations of Peoples Bank
Corporation and Bank Subsidiary or any of their subsidiaries arising under
applicable Ohio, Indiana and Federal law in existence as of the date hereof or
as amended prior to the Effective Time and under the Peoples Bank Corporation's
Restated Articles of Incorporation and Amended By-laws or the Bank Subsidiary's
Articles of Incorporation and Bylaws as in effect on the date hereof, to
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof or who become, prior to the Effective Time, an
officer or director of Peoples Bank Corporation, Bank Subsidiary, or any of
their subsidiaries (the "Indemnified Parties") against losses, claims, damages,
costs, expenses (including reasonable attorneys' fees), liabilities or judgments
or amounts that are paid in settlement (which settlement shall require the prior
written consent of Fifth Third) of or in connection with any claim, action,
suit, proceeding or investigation (a "Claim") in which an Indemnified Party is,
or is threatened to be made, a party or a witness based in whole or in part on
or arising in whole or in part out of the fact that such person is or was a
director or officer of Peoples Bank Corporation, the Bank Subsidiary or any of
their subsidiaries if such Claim pertains to any matter or fact arising,
existing or occurring prior to the Effective Time (including, without
limitation, the Merger and the transactions contemplated by this Agreement),
regardless of whether such Claim is asserted or claimed prior to, at or after
the Effective Time. Fifth Third shall pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
full extent permitted by law and under Peoples Bank Corporation's Restated
Articles of Incorporation or Amended By-laws or Bank Subsidiary's Articles of
Incorporation or Bylaws. Fifth Third's assumption of the indemnification
obligations of Peoples Bank Corporation, Bank Subsidiary or any of their
subsidiaries as provided herein shall continue for a period of five years after
the Effective Time or, in the case of claims asserted prior to the fifth
anniversary of the Effective Time until such matters are finally resolved. Any
Indemnified Party wishing to claim indemnification under this provision, upon
learning of any Claim shall notify Fifth Third (but the failure to so notify
Fifth Third shall not relieve Fifth Third from any liability which Fifth Third
may have under this section except to the extent Fifth Third is materially
prejudiced thereby). Notwithstanding the foregoing, the Indemnified Parties as a
group may retain only one law firm to represent them with respect to each matter
under this section unless there is, under applicable standards of professional
conduct, a conflict on any one significant issue between the positions of any
two or more Indemnified Parties.
(ii) From and after the Effective Time, the directors, officers and
employees of Peoples Bank Corporation and its subsidiaries who become directors,
officers or employees of Fifth Third or any of its subsidiaries, except for the
indemnification rights set forth in subparagraph (i) above, shall have
indemnification rights with prospective application only. The prospective
indemnification rights shall consist of such rights to which directors, officers
or employees of Fifth Third or the subsidiary by which such person is employed
are entitled under the provisions of the Articles of Incorporation of Fifth
Third or similar governing documents of Fifth Third or its applicable
subsidiaries, as in effect from time to time after the Effective Time, as
applicable, and provisions of applicable law as in effect from time to time
after the Effective Time.
(iii) The obligations of Fifth Third provided under this Section VII.C.
are intended to benefit, and be enforceable against Fifth Third directly by, the
Indemnified Parties, and shall be binding on all respective successors of Fifth
Third.
(iv) Fifth Third shall also purchase and keep in force for a three (3)
year period, a policy of directors' and officers' liability insurance to provide
coverage for acts or omissions of the type and in at least the amount currently
covered by Peoples Bank Corporation's existing directors' and officers'
liability insurance for acts or omission occurring on or prior to the Effective
Time, but only to the extent such insurance may be purchased or kept in full
force on commercially reasonable terms taking into account the cost thereof and
the benefits provided thereby. It is agreed that such costs shall be
commercially reasonable so long as they do not exceed 150% of the costs
currently paid for such coverage by Peoples Bank Corporation.
D. Notices. All notices, requests, consents, and demands under this Agreement
shall be in writing and shall be sufficient in all respects if delivered in
person or mailed by certified mail, return receipt requested, with postage
prepaid, or by confirmed air courier, and addressed, if to Peoples Bank
Corporation to ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chairman and CEO, Peoples Bank
Corporation of Indianapolis, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, with a copy to ▇▇▇▇ ▇. ▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇; and, if to Fifth Third, to ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇., President and Chief Executive Officer, Fifth Third Bancorp, ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.,
Senior Vice President and General Counsel, Fifth Third Bank, Legal Division, ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇. Such notices shall
be deemed to be received when delivered in person or when deposited in the mail
by certified mail, return receipt requested with postage prepaid. If sent by
confirmed air courier, such notice shall be deemed to be given upon the earlier
to occur of the date upon which it is actually received by the addressee or the
business day upon which delivery is made at such address as confirmed by the air
courier (or if the date of such confirmed delivery is not a business day, the
next succeeding business day). If mailed, such notice shall be sent by certified
mail, postage pre-paid, return receipt requested.
E. Entire Agreement. This Agreement, together with the written instruments
specifically referred to herein and such other written agreements delivered by
Fifth Third or Peoples Bank Corporation to each other pursuant hereto,
constitute the entire agreement between the parties with regard to the
transactions contemplated herein and supersede any prior agreements, whether
oral or in writing. This Agreement may be hereafter amended only by a written
instrument executed by each of the parties pursuant to Section X hereof.
F. Indemnification. Fifth Third and Peoples Bank Corporation shall each
indemnify and hold the other harmless for any claim, liability or expense
(including reasonable attorneys' fees) arising from a misstatement or omission
in the applications submitted to regulatory agencies for approval of the
transaction contemplated by this Agreement relating to the indemnifying party
which is based or made in reliance upon any representation, warranty, or
covenant of such party in this Agreement or any certification, document, or
other information furnished or to be furnished by such party pursuant to this
Agreement. From and after Closing Date, this subsection shall be of no further
force or effect.
G. Electronic Funds Transfers. Upon the request of Fifth Third and at the sole
option of Fifth Third, Peoples Bank Corporation and the Bank Subsidiary shall
execute and deliver to Midwest Payment Systems, Inc. ("MPS") an agreement to
convert all electronic funds transfer ("EFT") related services to MPS and the
▇▇▇▇▇▇(R) system. Such Agreement shall provide that MPS will be the exclusive
provider of such services to Peoples Bank Corporation and Bank Subsidiary for a
period of five (5) years from the date such agreements are executed. Fifth Third
agrees that the cost of the conversion of Peoples Bank Corporation and Bank
Subsidiary to EFT provided by MPS and conversion to the ▇▇▇▇▇▇(R) system
(including, without limitation, the cost of all card reissue, signage and
penalties relating to terminating its current EFT relationships) will be paid by
Fifth Third. Fifth Third further agrees that the costs and fees to Peoples Bank
Corporation and the Bank Subsidiary for the ▇▇▇▇▇▇(R) service shall not exceed
those charged by the current EFT service provider of Peoples Bank Corporation
and the Bank Subsidiary, subject to any increases in such costs and fees which
would otherwise be permitted under their current EFT processing agreements. In
the event this Agreement is terminated pursuant to Article VIII hereof for any
reason except a material breach or default by Peoples Bank Corporation or a
failure of Peoples Bank Corporation's shareholders to approve the Merger, and
if, in such instance, Peoples Bank Corporation desires to convert to another
provider of EFT services, Fifth Third shall pay all costs and expenses
associated with such conversion, provided, however, such costs and expenses are
reasonable when compared to costs and expenses ordinarily charged in the EFT
services industry. In no event shall Peoples Bank Corporation or the Bank
Subsidiary be required to take any actions pursuant to this Section G or
otherwise under this Agreement that are contrary to any applicable law,
regulation, rule or order or which constitute a breach of the fiduciary duties
of the directors of Peoples Bank Corporation or the Bank Subsidiary.
H. Press Releases. Fifth Third and Peoples Bank Corporation 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 thereby, and shall consult
with each other as to the form and substance of other public disclosures related
thereto, provided, however, that nothing contained herein shall prohibit either
party from making any disclosure which its counsel deems required by law and
provided, further, however, that Fifth Third shall not be required to
incorporate any comments from Peoples Bank Corporation into such releases or
public filings unless determined to be appropriate by Fifth Third in good faith.
I. Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that printing expenses and SEC registration fees shall be shared equally between
Fifth Third and Peoples Bank Corporation.
J. Advice of Changes. 1. Between the date hereof and the Closing Date, Peoples
Bank Corporation shall promptly advise Fifth Third in writing of any fact that,
if existing or known at the date hereof, would have been required to be set
forth or disclosed in or pursuant to this Agreement or of any fact that, if
existing or known at the date hereof, would have made any of the representations
contained herein untrue to any material extent; provided, that no such
disclosure shall affect or modify any representation or warranty of Peoples Bank
Corporation contained herein or made pursuant hereto.
2. Between the date hereof and the Closing Date, Fifth Third shall
promptly advise Peoples Bank Corporation in writing of any fact that, if
existing or known at the date hereof, would have been required to be set forth
or disclosed in or pursuant to this Agreement or of any fact that, if existing
or known at the date hereof, would have made any of the representations
contained herein untrue to any material extent; provided, that no such
disclosure shall affect or modify any representation or warranty of Fifth Third
contained herein or made pursuant hereto.
3. Each party hereto will promptly notify the other party in writing of
the occurrence of any event which will or may result in the failure to satisfy
any material condition precedent set forth in this Agreement. Between the date
of this Agreement and the Closing Date, each party hereto will notify the other
of the satisfaction of such material conditions precedent as they occur.
K. Tax Treatment. Neither Fifth Third or Peoples Bank Corporation will take any
action while knowing that such action would, or is reasonably likely to, prevent
or impede the Merger from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code.
L. Enforcement of this Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, such remedy being in addition to any other
remedy to which any party is entitled at law or in equity.
Article VIII. Termination
A. Bases for Termination. This Agreement may be terminated at any time prior to
the Effective Time by written notice delivered by Fifth Third to Peoples Bank
Corporation or by Peoples Bank Corporation to Fifth Third in the following
instances:
1. By Fifth Third or Peoples Bank Corporation, if there has been to the extent
contemplated in Section VI.B.1. and 2. and Section VI.C.1. and 2. herein, a
material misrepresentation, a material breach of warranty or a material failure
to comply with any covenant on the part of the other party with respect to the
representations, warranties, and covenants set forth herein and such
misrepresentations, breach or failure to comply has not been cured within thirty
(30) days after receipt of written notice or is not capable of being cured,
provided, the party in default shall have no right to terminate for its own
default. For purposes hereof, a breach of Sections IV.A. and IV.B. will be
deemed not capable of being cured.
2. By Fifth Third or Peoples Bank Corporation, if the business or
assets or financial condition of the other party, in each case taken as a whole,
shall have materially and adversely changed from that in existence at December
31, 1998, other than any such change attributable to or resulting from any
change in law or regulation or GAAP, changes in interest rates, economic,
financial or market conditions affecting the banking industry generally or
changes that occur as a consequence of actions or inactions that either party
hereto is expressly obligated to take under this Agreement.
3. By Fifth Third or Peoples Bank Corporation, if the merger
transaction contemplated herein has not been consummated by February 1, 2000,
provided the terminating party is not in material breach or default of any
representations, warranty or covenant contained herein on the date of such
termination.
4. By the mutual written consent of Fifth Third and Peoples Bank
Corporation.
5. By Fifth Third if any event occurs which renders impossible of
satisfaction one or more of the conditions to the obligations of Fifth Third to
effect the Merger set forth in Sections VI.A. and B. herein and non-compliance
is not waived by Fifth Third.
6. By Peoples Bank Corporation if any event occurs which renders
impossible of satisfaction one or more of the conditions of the obligations of
Peoples Bank Corporation to effect the Merger as set forth in Sections VI.A. and
C. herein and non-compliance is not waived by Peoples Bank Corporation.
7. By Fifth Third if the Board of Directors of Peoples Bank Corporation
shall have publicly announced that it has withdrawn or modified in a manner
adverse to Fifth Third its favorable recommendation of the Merger.
8. By Fifth Third or Peoples Bank Corporation if Peoples Bank
Corporation shareholders, acting at a meeting held for the purpose of voting
upon the Merger, vote not to approve the Merger in the manner required by law.
9. By Peoples Bank Corporation if the average of the closing price of
Fifth Third Common Stock for the thirty (30) trading days ending five (5)
trading days before the Effective Time is less than $50.25 per share.
10. By Fifth Third if the average of the closing price of Fifth Third
Common Stock for the thirty (30) trading days ending five (5) trading days
before the Effective Time is greater than $83.70 per share.
B. Effect of Termination. Upon termination as provided in this Section, this
Agreement, except for the provisions of Section V.D.2. and Paragraphs F, G, and
I of Article VII hereof, shall be void and of no further force or effect, and,
except as provided in Paragraph F of Article VII hereof, neither party hereto
(nor any of their respective officers, directors or subsidiaries) shall have any
liability of any kind to the other party including but not limited to liability
for expenses incurred by the other party in connection with this transaction;
provided that no such termination shall relieve a breaching party from liability
for any uncured willful breach of a covenant, undertaking, representation or
warranty giving rise to such termination, but in no event shall any party be
liable for punitive or exemplary damages.
Article IX. Closing and Effective Time
The consummation of the transactions contemplated by this Agreement shall take
place at a closing to be held at the offices of Fifth Third in Cincinnati, Ohio
on a Friday which is as soon as is reasonably possible following the date that
all of the conditions precedent to closing set forth in Section VI hereof,
including the expiration of all regulatory waiting periods, have been fully met
or effectively waived (the "Closing Date"). Pursuant to the filing of a
certificate or articles of merger (which shall be prepared by Fifth Third and
reasonably satisfactory to Peoples Bank Corporation) with the Secretary of State
of the State of Ohio and the Secretary of State of the State of Indiana,
respectively, in accordance with law and this Agreement, the Merger provided for
herein shall become effective at the close of business on said day (the
"Effective Time"). By mutual agreement of the parties, the closing may be held
at any other time or place or on any other date and the effectiveness of the
Merger (and the Effective Time) may be changed by such mutual agreement. None of
the representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for agreements of the parties which by their terms are intended to
be performed after the Effective Time.
Article X. Amendment
This Agreement may be amended, modified or supplemented by the written agreement
of Peoples Bank Corporation and Fifth Third upon the authorization of each
company's respective Board of Directors at any time before or after approval of
the Merger and this Agreement by the shareholders of Peoples Bank Corporation,
but after any such approval by the shareholders of Peoples Bank Corporation no
amendment shall be made (without further shareholder approval) which changes in
any manner adverse to such shareholders the consideration to be provided to such
shareholders pursuant to this Agreement.
Article XI. General
This Agreement was made in the State of Ohio and shall be interpreted under the
laws of the United States and the State of Ohio, except to the extent that the
Merger and Peoples Bank Corporation are subject to the IBCL. Each of the parties
hereto irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or related to this Agreement or the transactions
contemplated hereby. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns but except as specifically set forth herein
(including, without limitation, Sections VII. B. and VII. C. hereof) none of the
provisions hereof shall be binding upon and inure to the benefit of any other
person, firm or corporation whomsoever. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned or transferred by
operation of law or otherwise by any party hereto without the prior written
consent of the other party hereto; provided, however, that the merger or
consolidation of Fifth Third shall not be deemed an assignment hereunder if
Fifth Third is the surviving corporation in such merger or consolidation and its
Common Stock shall thereafter continue to be traded on the NASDAQ National
Market System or the New York Stock Exchange and issuable to Peoples Bank
Corporation shareholders pursuant to the terms of this Agreement. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
Article XII. Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original for all purposes but such counterparts taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date hereinabove set forth.
FIFTH THIRD BANCORP
(SEAL) By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
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President and Chief Executive Officer
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Assistant Secretary
PEOPLES BANK CORPORATION OF INDIANAPOLIS
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Chairman and Chief Executive Officer
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Secretary