EXHIBIT 2.1
AFFILIATION AGREEMENT
This Affiliation Agreement (this "Agreement") dated as of July 23, 2002 is
entered into by and among FIFTH THIRD BANCORP, a corporation organized and
existing under the General Corporation Law of the State of Ohio (the "OGCL")
with its principal office located in Cincinnati, Ohio ("Fifth Third"), FIFTH
THIRD FINANCIAL CORPORATION, a corporation organized and existing under the OGCL
and a wholly owned subsidiary of Fifth Third, with its principal office located
in Cincinnati, Ohio ("Fifth Third Financial"), and FRANKLIN FINANCIAL
CORPORATION, a corporation organized and existing under the Tennessee Business
Corporation Act (the "TBCA") with its principal office located in Franklin,
Tennessee ("Franklin").
W I T N E S S E T H:
WHEREAS, each of Fifth Third and Franklin is a registered financial services
holding company under the Bank Holding Company Act of 1956, as amended, and
Fifth Third, Fifth Third Financial and Franklin desire to effect a merger under
the authority and provisions of the OGCL and the TBCA pursuant to which at the
Effective Time (as herein defined in Article IX) Franklin will be merged with
and into Fifth Third's wholly owned subsidiary, Fifth Third Financial, with
Fifth Third Financial as the surviving corporation (the "Merger");
WHEREAS, the Board of Directors of Franklin has determined that it is in the
best interests of Franklin and its stockholders to consummate the Merger,
subject to the terms and conditions set forth herein;
WHEREAS, the Executive Committee of 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, subject to the terms and conditions set forth herein;
WHEREAS, the Board of Directors of Fifth Third Financial has determined that it
is in the best interests of Fifth Third Financial and its stockholder to
consummate the Merger, subject to the terms and conditions set forth herein;
WHEREAS, under the terms of this Agreement each share of Common Stock, no par
value per share, of Franklin (the "Franklin 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");
NOW, THEREFORE, in consideration of the mutual covenants herein contained, Fifth
Third, Fifth Third Financial and Franklin 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 this Agreement, at the
Effective Time, Franklin shall be merged with and into Fifth Third Financial.
B. Treatment of Fifth Third Stock. At the Effective Time, all of the shares of
Fifth Third and Fifth Third Financial Capital Stock that are issued and
outstanding or held by Fifth Third or Fifth Third Financial 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 Fifth Third and the
Surviving Corporation (as hereinafter defined), respectively. 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 Franklin Stock. 1. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of
Franklin Common Stock, subject to this Section I.C.1 and Section I.F., each
share of Franklin Common Stock (excluding treasury shares) that is issued and
outstanding immediately prior to the Effective Time will be converted into .4039
shares of Fifth Third Common Stock (or cash in lieu thereof for fractional
shares, if any, as described in Section I.E. below) subject to adjustment as
determined in accordance with the following (the "Exchange Ratio"):
(i) if the Average Closing Price (as defined in I.D.1 below) is
less than or equal to $63.13, the Exchange Ratio will remain at .4039;
(ii) if the Average Closing Price is greater than $63.13 but is
less than $66.55, the Exchange Ratio will be adjusted so that the Exchange Ratio
will equal the quotient obtained by dividing $25.50 by the Average Closing
Price; and
(iii) if the Average Closing Price is equal to or greater than
$66.55, the Exchange Ratio will be adjusted so that the Exchange Ratio will
equal .3832.
At the Effective Time, all shares of Franklin Common Stock held as
treasury shares and all shares of Franklin 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, all of the issued and outstanding shares of
Franklin Common Stock (excluding treasury shares), will be converted as provided
in this Article I, canceled and extinguished and the holders of certificated or
uncertificated shares thereof shall cease to have any rights as shareholders of
Franklin, other than the right to receive any dividend or other distribution
with respect to such Franklin 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 Franklin of shares of Franklin Common Stock.
D. Treatment of Franklin Options. 1. At the Effective Time, each award, option,
or other right to purchase or acquire shares of Franklin Common Stock pursuant
to stock options ("Franklin Rights") granted by Franklin under any stock option
plan, agreement, or arrangement ("Stock Plans"), which are outstanding at the
Effective Time, whether or not exercisable, shall automatically be converted
into and become options with respect to Fifth Third Common Stock, and Fifth
Third shall assume each Franklin Right, in accordance with the same terms and
conditions of the Stock Plan and stock option agreement by which the Franklin
Right is evidenced, except that, from and after the Effective Time, (i) Fifth
Third and its Compensation Committee shall be substituted for the Committee of
Franklin's Board of Directors (including, if applicable, the entire Board of
Directors of Franklin) administering such Stock Plan, (ii) each Franklin Right
assumed by Fifth Third may be exercised solely for shares of Fifth Third Common
Stock, (iii) the number of whole shares of Fifth Third Common Stock subject to
such Franklin Right shall be equal to the number of shares of Franklin Common
Stock subject to such Franklin Right immediately prior to the Effective Time
multiplied by the Exchange Ratio (subject to adjustment pursuant to Section
1.F); and (iv) the per share exercise price under each such Franklin Right shall
be adjusted by dividing the per share exercise price under each such Franklin
Right by the Exchange Ratio (as so adjusted) and rounding 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 Franklin Rights and any fraction of a
share of Fifth Third Common Stock that otherwise would be subject to a converted
Franklin Right (after taking into account all Franklin Rights then being
exercised) shall represent the right to receive a cash payment equal to the
product of such fraction and the excess, if any, of the Average Closing Price
over the per share exercise price of such Franklin
Right (as adjusted in accordance with subparagraph (iv) of this Section I.D.1.).
In addition, notwithstanding the foregoing, each Franklin 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. The "Average Closing Price" means the average of the closing
prices for a share of Fifth Third Common Stock on the Nasdaq National Market
(as reported in The Wall Street Journal, or, if not reported thereby, any other
authoritative source) for the ten (10) consecutive trading days ending on the
fifth (5th ) trading day preceding the Effective Time.
2. 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 Franklin Rights assumed by
Fifth Third in accordance with this Section.
3. As soon as practicable after the Effective Time, Fifth Third shall
file with the SEC a registration statement on the appropriate form with respect
to the shares of Fifth Third Common Stock subject to such options and shall use
its best efforts to maintain the effectiveness of such registration statement or
registration statements (and to maintain the current status of the prospectus or
prospectuses with respect thereto) for so long as such options remain
outstanding.
E. Exchange Procedures. 1. After the Effective Time, each holder of a
certificate or certificates for shares of Franklin Common Stock as of the
Effective Time, upon surrender of the same duly transmitted to the Corporate
Trust Department of Fifth Third Bank, an Ohio banking corporation, Cincinnati,
Ohio, as exchange agent (the "Exchange Agent") (or in lieu of surrendering such
certificates, in the case of uncertificated shares or 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 Franklin 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 (after
taking into account all certificates for shares of Franklin Common Stock
delivered by such holder), 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 Closing Price (such certificates and cash being
hereinafter collectively referred to as the "Exchange Fund"). Within fifteen
(15) business days after the Effective Time, the Exchange Agent will send a
notice and transmittal form to each Franklin 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 Franklin Common Stock in exchange for new certificates of
Fifth Third Common Stock and cash in lieu of fractional shares, or for receiving
certificates of Fifth Third Common Stock and cash in lieu of fractional shares
with respect to uncertificated shares of Franklin Common Stock. Until so
surrendered, as applicable, each uncertificated share and outstanding
certificate that prior to the Effective Time represented shares of Franklin
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 Franklin Common
Stock shall have been so converted shall be paid with respect to such shares
only when the transmittal form shall have been validly executed and delivered
(and, in the case of certificated shares, the certificate or certificates
evidencing shares of Franklin 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
stockholders of Franklin for twelve months after the Effective Time shall be
paid to Fifth Third. Any stockholders of Franklin who have not theretofore
complied with this Section I.E. 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 Franklin 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 Franklin Common Stock
for any amount or security 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 Franklin shareholders the economic benefit
of any stock dividends, reclassifications, recapitalizations, split-ups,
exchanges of shares, mergers, combinations or subdivisions of or affecting Fifth
Third Common Stock (each, a "Share Adjustment") 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 effect a split,
reclassification or combination of the Fifth Third Common Stock, or pay or
declare a stock dividend or other stock distribution in Fifth Third Common
Stock, as of a record date and with a payment date prior to the Effective Time,
or engage in a merger, consolidation, combination or share exchange whereby
Fifth Third Common Stock is exchanged for securities of another entity,
appropriate and proportionate adjustments (rounded to the nearest
one-ten-thousandth of a share) will be made to the Exchange Ratio and the total
number of shares of Fifth Third Common Stock or other securities to be issued in
the transaction so that each shareholder of Franklin shall be entitled to
receive such number of shares of Fifth Third Common Stock or other securities as
such shareholder would have received pursuant to such Share Adjustment had the
record date and the payment date therefor been immediately following the
Effective Time of the Merger. In the event of a Share Adjustment with a record
date between the date of this Agreement and the Effective Time but a payment
date subsequent to the Effective Time, Fifth Third shall take all actions
necessary such that on such payment date, any holder of Franklin Common Stock as
of the Effective Time shall be entitled to receive such number of shares of
Fifth Third Common Stock or other securities as such shareholder would have
received as a result of such Share Adjustment if the record date for such Share
Adjustment had been immediately after the Effective Time.
G. Effectiveness of Merger; Surviving Corporation. After all necessary documents
have been filed and received in accordance with the OGCL and the TBCA, at the
Effective Time, the Merger shall become effective, the separate existence of
Franklin shall cease and Franklin shall be merged into Fifth Third Financial
(which will be the "Surviving Corporation"), which shall continue its corporate
existence under the laws of the State of Ohio under the name "Fifth Third
Financial Corporation".
H. Articles of the Surviving Corporation. The Articles of Incorporation of Fifth
Third Financial 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. 1. The Directors of
Fifth Third Financial 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.
2. The officers of Fifth Third Financial who are in office at the
Effective Time shall continue as officers of the Surviving Corporation, subject
to the Regulations of the Surviving Corporation and in accordance with
applicable law.
J. Regulations of the Surviving Corporation. The Regulations of Fifth Third
Financial at the Effective Time shall be the Regulations of the Surviving
Corporation, until amended as provided therein and in accordance with applicable
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, Tennessee. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time: the separate existence of Franklin
shall cease; Fifth Third Financial as the Surviving Corporation shall possess
and have title to all assets and property (including all real estate) of every
description, and every interest therein, wherever located, without reversion or
impairment, and the rights, privileges, immunities, powers, franchises and
authority, of a public as well as a private nature, of each of Fifth Third
Financial and Franklin, and all obligations owing by or due each of Fifth Third
Financial and Franklin shall be vested in, and become the obligations of, Fifth
Third Financial, without further act or deed; and all rights of
creditors of each of Fifth Third Financial and Franklin shall be preserved
unimpaired, and all liens upon the property of each of Fifth Third Financial and
Franklin 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
Franklin 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 Franklin and otherwise to carry out the purposes of
this Agreement.
M. Filing of Documents. A certificate of merger shall be filed and/or recorded
in accordance with the requirements of each of the laws of the States of Ohio
and Tennessee, as provided in Article IX. Such filing shall not be made 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 at the Closing contemplated by
Article IX hereof.
N. Tax Treatment. The parties intend that the Merger 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.
O. No Dissenters' Rights. No holder of Fifth Third Common Stock, Fifth Third
Financial Capital Stock, or Franklin Common Stock shall be entitled to relief as
a dissenting shareholder pursuant to the TBCA, 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 reasonably deems such change to be desirable, including,
without limitation, to provide for the merger of Franklin with another
wholly-owned subsidiary of Fifth Third or Fifth Third Financial or the merger of
the Bank Subsidiary (as defined in Section II.B) with a bank 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 Franklin in the Merger, (B) adversely affect the tax treatment
to shareholders of Franklin, or (C) materially impede or delay receipt of any
approvals referred to herein or the consummation of the transactions
contemplated hereby. Franklin shall, if requested by Fifth Third, enter into one
or more amendments to this Agreement prior to the Effective Time in order to
effect such a change.
Q. Plan or Articles of Merger. At the request of Fifth Third, Franklin 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
any applicable law.
R. Disclosure Schedule. Franklin has delivered to Fifth Third a confidential
schedule (the "Disclosure Schedule"), executed by Franklin and Fifth Third
concurrently with the delivery and execution hereof, setting forth, among other
things, in each case with respect to specified sections of this Agreement, items
the disclosure of which shall be necessary or appropriate either in response to
an express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in Article II
hereof. Franklin shall supplement or amend the Disclosure Schedule, and add
additional references to the Disclosure Schedule to its representations and
warranties contained in this Agreement, with respect to any matter arising after
the date hereof or discovered between the date hereof and the date of the
Closing; provided, however, that no such additional information so disclosed to
Fifth Third shall be deemed an exception to any of the representations,
warranties, covenants or agreements of Franklin or the conditions to the
obligations of the parties under this Agreement unless Fifth Third, in its sole
discretion, agrees in writing to accept such exception. A copy of the amended or
supplemented Disclosure Schedule and the additional Disclosure Schedule
references shall be promptly provided to Fifth Third.
Article II. Representations and Warranties of Xxxxxxxx
Xxxxxxxx represents and warrants to Fifth Third and Fifth Third Financial that:
A. Organization; Capitalization; Subsidiaries. 1. Franklin (i) is duly
incorporated, validly existing and in good standing as a corporation under the
TBCA and is a registered financial services holding company under the Bank
Holding Company Act; (ii) is duly authorized, in all material respects, to
conduct the business in which it is engaged in all material respects; (iii) has
an authorized capital stock consisting entirely of 500,000,000 shares of
Franklin Common Stock; (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 Franklin of any kind, other than (a)
7,906,731 shares of Franklin Common Stock, which are authorized, duly issued and
outstanding as of June 1, 2002, all of which shares are fully paid and
non-assessable, (b) options to purchase a total of not more than 2,278,075
shares of Franklin Common Stock as of June 30, 2002, which were granted to and
are currently held by the present and former employees, officers, Directors and
advisory directors of Franklin or the Franklin Subsidiaries (as defined below),
and (c) a number of shares not to exceed 600 per calendar quarter issuable
pursuant to Franklin's 2000 Stock Purchase Plan. Since the date referred to in
clause (iv) of the preceding sentence to the date hereof, Franklin has not
issued any shares, except in connection with the exercise of the outstanding
options referred to in clause (iv)(b). The Disclosure Schedule sets forth a
correct and complete list of all options referred to in clause (iv)(b), together
with the name of the holder, the date of issuance, the exercise price, and
vesting information.
2. The Disclosure Schedule sets forth a complete and correct list of
all of Franklin's subsidiaries (the "Franklin Subsidiaries") in addition to (a)
a description of their businesses, (b) their respective states of incorporation,
and (c) the location of the principal office of each Franklin Subsidiary. Except
for the capital stock and securities referred to in the immediately following
sentence, there are no outstanding shares of capital stock or other equity
securities of any such Franklin Subsidiary, options, warrants, stock
appreciation rights, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
shares of any capital stock or other equity securities of any such Franklin
Subsidiary, or contracts, commitments, understandings or arrangements by which
any such Franklin Subsidiary may become bound to issue additional shares of its
capital stock or other equity securities, or options, warrants, scrip or rights
to purchase, acquire, subscribe to, calls on or commitments for any shares of
its capital stock or other equity securities. Except as set forth on the
Disclosure Schedule, all of the outstanding shares of capital stock or other
securities evidencing ownership of the Franklin Subsidiaries are validly issued,
fully paid and (except as otherwise required by law) non-assessable and such
shares or other securities are owned by Franklin or its wholly-owned Franklin
Subsidiaries free and clear of any lien, claim, charge, option, encumbrance,
mortgage, pledge or security interest with respect thereto. Other than as set
forth on the Disclosure Schedule, Franklin does not own (other than in a bona
fide fiduciary capacity or in satisfaction of a debt previously contracted)
beneficially, directly or indirectly, shares or equity securities or similar
interests of any person or any interest in a partnership or joint venture of any
kind, other than shares, securities and interests as are not material.
B. Bank Subsidiary. Franklin National Bank ("Bank Subsidiary") is duly
incorporated, validly existing and in good standing as a national banking
association, and has all the requisite power and authority to conduct the
banking business as now conducted by it. Each of the other Franklin Subsidiaries
is duly incorporated, validly existing and in good standing in its jurisdiction
of incorporation, and has all the requisite power and authority to conduct its
business as now conducted.
C. Financial Statements; Regulatory Reports. 1. Franklin has previously
furnished to Fifth Third its audited, consolidated balance sheet, statement of
operations and statement of shareholders' equity and cash flows as of
December 31, 2001, and for the year then ended, together with the opinion of its
independent certified public accountants associated therewith. Franklin has made
available to Fifth Third the Call Reports as filed with the Office of the
Comptroller of the Currency (the "OCC") of the Bank Subsidiary as of December
31, 1999, 2000 and 2001. Franklin has also made available to Fifth Third (i) its
unaudited, consolidated condensed financial statements as of
and for the quarter ended March 31, 2002, and (ii) the Bank Call Report as filed
with the OCC for the quarter ended March 31, 2002. Such audited and unaudited
consolidated financial statements of Franklin fairly present the consolidated
financial condition, results of operations and cash flows of Franklin as of the
date thereof, and for the years or periods covered thereby, in conformity with
generally accepted accounting principles ("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). There are no material liabilities, obligations or indebtedness of
Franklin or any of the Franklin Subsidiaries 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). Since March 31, 2002, Franklin
and the Franklin Subsidiaries have not incurred any liabilities outside the
ordinary course of business consistent with past practice.
2. The financial statements of Franklin to be provided to Fifth Third
pursuant to Section V.D.3. hereof will fairly present, as applicable, the
consolidated financial condition, results of operations and cash flows of
Franklin as of the dates thereof and for the years or periods covered thereby,
in conformity with GAAP, consistently applied (for quarterly financial
statements only and 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).
3. Franklin 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 Franklin with the Securities and
Exchange Commission ("SEC"): (a) each final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 2000 by
Franklin or any Franklin Subsidiary with the SEC, pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of
1934 (the "Exchange Act") (the "Franklin Reports"), and (b) each communication
mailed by Franklin to its stockholders since January 1, 2000. Since January 1,
2000, Franklin 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 with respect thereto. As of the date
of filing or mailing, as the case may be, no such registration statement,
prospectus, report or proxy statement contained (and no registration statement,
prospectus, report or proxy statement 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. No event has occurred subsequent to December 31, 2000 which Franklin is
required to describe in a Current Report on Form 8-K other than the Current
Reports heretofore furnished by Franklin to Fifth Third. None of the Franklin
Subsidiaries has any class of securities registered, or is obligated to register
any class of securities, under Section 12 of the Exchange Act.
4. Franklin and the Franklin Subsidiaries have filed all material
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since January 1,
1999 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 material other reports, registrations and
statements required to be filed by them since January 1, 1999, including,
without limitation, any material 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 Franklin and the Franklin
Subsidiaries, or as set forth in the Disclosure Schedule, no Regulatory Agency
has initiated any proceeding or, to the Knowledge of Franklin, investigation
into the business or operations of Franklin or the Franklin Subsidiaries since
January 1, 1999. To the Knowledge of Franklin, 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
Franklin or the Franklin Subsidiaries.
As used herein, the term "Knowledge" as used with respect to an entity
(including references to such entity being aware of a particular matter) shall
mean the actual personal knowledge of each of the executive officers of such
entity and such knowledge as such individual would reasonably be expected to
obtain upon completion of a reasonable investigation of materials pertinent to
such subject matter as would be available to such individual in the ordinary
course of performing his or her duties for such entity.
D. Title to Properties. Franklin and the Franklin Subsidiaries have good and
marketable title to all of the material properties and assets reflected in
Franklin's statement of financial condition as of December 31, 2001, other than
properties and assets sold in the ordinary course of business since that date,
and each has good and marketable title to all material properties and assets
acquired by it after such date (other than properties and assets subsequently
sold in the ordinary course of business), 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. Notwithstanding the foregoing, certain assets located on
Franklin's premises or currently owned by Franklin as such are listed on the
Disclosure Schedule are and will be deemed to be personal assets of Xx. Xxxxxx
Xxxxx, or will be conveyed to him prior to the Effective Time and shall not be
deemed to be assets of Franklin.
E. No Material Adverse Effect. To the Knowledge of Franklin, since December 31,
2001, no event has occurred and no fact or circumstance has come to exist or
come to be known which, directly or indirectly, individually or taken together
with all other facts, circumstances and events (described in any paragraph of
this Article II or otherwise), has had, or is reasonably likely to have, a
Material Adverse Effect with respect to Franklin. As used in this Agreement, the
term "Material Adverse Effect" means, with respect to Franklin or Fifth Third,
any effect that (i) is, or is reasonably expected to be, material and adverse to
the financial condition, results of operations or business of Franklin and its
subsidiaries taken as a whole, or Fifth Third and its subsidiaries taken as a
whole, respectively, or (ii) would materially impair the ability of either
Franklin or Fifth Third to perform its obligations under this Agreement or would
otherwise materially threaten or materially impede the consummation of the
Merger and other transactions contemplated by this Agreement; provided, however,
that Material Adverse Effect shall not be deemed to include the impact of (a)
changes in banking and similar laws of general applicability or interpretations
thereof by courts or governmental authorities, (b) changes in GAAP or regulatory
accounting requirements applicable to banks and their holding companies
generally, and (c) any modifications or changes to valuation or reserve policies
and practices in connection with or in anticipation of the Merger.
F. Litigation; Regulatory Action. 1. There are no actions, suits, proceedings,
investigations or assessments of any kind pending, or to the Knowledge of
Franklin, threatened, against Franklin or any Franklin Subsidiary which
reasonably can be expected to have a Material Adverse Effect on Franklin. The
Disclosure Schedule lists all pending or, to the Knowledge of Franklin,
threatened claims and proceedings which, in each case, seek, or would be
reasonably likely to result in, damages or other amounts payable by Franklin or
the Franklin Subsidiaries, in excess of $50,000.
2. Except as set forth in the Disclosure Schedule, there are no
actions, suits, claims, proceedings, investigations or assessments of any kind
pending, or to the Knowledge of Franklin, threatened against any of the
Directors or officers of Franklin or any Franklin Subsidiary in their capacities
as such, and no Director or officer of Franklin or any Franklin Subsidiary
currently is being indemnified or seeking to be indemnified by either Franklin
or any Franklin Subsidiary pursuant to applicable law or applicable articles of
incorporation, bylaws or other constituent documents or any indemnity
agreements.
3. Except as set forth in the Disclosure Schedule, neither Franklin nor
any of the Franklin Subsidiaries 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, since
January 1, 1999, has been 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 "Franklin Regulatory Agreement"), nor has Franklin or any
Franklin Subsidiary been advised since January 1, 1999 by any Regulatory Agency
or other governmental entity that it is considering issuing or requesting any
such Franklin Regulatory Agreement. To the Knowledge of Franklin, there is no
pending or threatened regulatory investigation that is reasonably likely to
result in a Franklin Regulatory Agreement.
G. Ordinary Course of Business. Except as disclosed in the Franklin Reports
filed prior to the date hereof, since December 31, 2001, Franklin and the
Franklin 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
increases in the ordinary course of business consistent with past practice, 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 the Franklin Reports filed prior to the date
hereof, since December 31, 2001 to the date hereof, Franklin has not declared or
paid any dividends nor made any distributions of any other kind to its
shareholders except for its regular quarterly cash dividends of $0.055 per
share, which have been paid consistent with its past practice.
H. Taxes. 1. Franklin and each Franklin Subsidiary 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 Franklin or any Franklin Subsidiary
through the date hereof are complete and accurate in all material respects.
Except as set forth on the Disclosure Schedule, none of Franklin, Bank
Subsidiary, nor any of the other Franklin Subsidiaries is currently under audit
nor have any of them been contacted for an audit by any taxing authority. None
of Franklin, Bank Subsidiary, nor any of the Non-Bank Subsidiaries is engaged in
any appeal proceeding in connection with any tax return.
2. Franklin 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.
3. Since December 31, 2001, except insofar as required by a change in
GAAP, there has been no material change in any accounting methods, principles or
practices of Franklin or the Bank Subsidiary.
I. Contracts. Except as set forth on the Disclosure Schedule, neither Franklin
nor any of the Franklin Subsidiaries 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 or engagement of consultants which may be terminated without
material 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 Franklin Reports, (c) which contains any
material non-compete or exclusivity provisions with respect to any business or
geographic area in which business is conducted by Franklin or any of the
Franklin Subsidiaries or which restricts the conduct of any business by Franklin
or any of the Franklin Subsidiaries or any geographic area in which Franklin or
any of the Franklin Subsidiaries may conduct business or requires exclusive
referrals of any business, (d) except as contemplated by Article I or Section
V.E.5., or as required by any Benefit 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. Franklin has previously made
available to Fifth Third true and correct copies of all employment, termination,
compensation, change of control, and similar agreements (including deferred
compensation) with executive officers, key employees or material consultants
which are in writing and to which Franklin or any of the Franklin 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 the Disclosure
Schedule, is referred to herein as a "Franklin Contract", and neither Franklin
nor any of the Franklin Subsidiaries has Knowledge of, or has received notice
of, any violation of any Franklin Contract by it or any of the other parties
thereto.
J. Loan Losses. Since December 31, 2001, to the date hereof, except as disclosed
in Franklin Reports filed prior to the date hereof, none of the Franklin
Subsidiaries has incurred any unusual or extraordinary loan losses which could
reasonably be expected to have a Material Adverse Effect on Franklin. To the
Knowledge of Franklin and in light of each of the Bank Subsidiaries' historical
loan loss experience and its management's analysis of the quality and
performance of its loan portfolio, as December 31, 2001, its reserve for loan
losses was, in the opinion of Franklin, adequate to absorb potential loan losses
determined on the basis of management's continuing review and evaluation of the
loan portfolio and judgment as to the impact of economic conditions on the
portfolio.
K. Broker. Other than Trident Securities, a division of McDonald Investments,
Inc., neither Franklin nor any of the Franklin Subsidiaries has a direct or
indirect commitment to 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 Franklin,
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. The Directors of Franklin have recommended the
Agreement to the shareholders of Franklin and have directed that the Agreement
be submitted to a vote of Franklin's shareholders at the annual or a special
meeting of the shareholders to be called for that purpose.
2. Franklin has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder 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 Franklin
Common Stock, which is the only approval of shareholders required. This
Agreement has been duly authorized and constitutes the valid and binding
obligation of Franklin, 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. Neither the execution of this Agreement, nor the consummation of the
transactions contemplated hereby (either alone or together with any other
event), (i) conflicts with, results in a breach of, violates or constitutes a
default under, (x) Franklin's Charter or By-laws or, to the Knowledge of
Franklin, any federal, state or local law, statute, ordinance, rule, regulation
or court or administrative order, or (y) any material agreement, arrangement, or
commitment, to which Franklin or the Franklin Subsidiaries is subject or bound;
(ii) to the Knowledge of Franklin, 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 Franklin or any
Franklin Subsidiary; (iii) terminates or gives any person the right to
terminate, amend, abandon, or refuse to perform any material agreement,
arrangement or commitment to which Franklin or any Franklin Subsidiary is a
party or by which Franklin's or any Franklin Subsidiary's material rights,
properties or assets are subject or bound; or (iv) to the Knowledge of Franklin,
accelerates or modifies, or gives any party thereto the right to accelerate or
modify, the time within which, or the terms according to which, Franklin or any
Franklin 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 (without limitation) agreements,
arrangements or commitments having a term expiring less than twelve (12) months
from the date of this Agreement or which do not require the expenditure of more
than $50,000 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 any Bank Subsidiary).
4. As of the date hereof, Franklin 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) Charter and
By-laws of Franklin and (ii) the charter and bylaws of each Franklin Subsidiary
in force as of the date hereof have been delivered to Fifth Third.
N. Compliance with Law. To the Knowledge of Franklin, neither Franklin nor any
of the Franklin 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 reasonably be expected
to 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 Franklin, and neither Franklin nor any of
the Franklin Subsidiaries has received notice of any violation of any of the
above that is reasonably likely to have a Material Adverse Effect on Franklin.
To the Knowledge of Xxxxxxxx, Xxxxxxxx and the Franklin Subsidiaries possess all
material 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. Environmental Matters. 1. Franklin has no Knowledge of any actions,
proceedings or investigations pending before any environmental regulatory body,
with respect to or threatened against or affecting Franklin or any Franklin
Subsidiary in respect of, any "facility" owned, leased or operated by any of
them (but excluding any "facility" as to which the sole interest of Franklin or
any Franklin 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 Franklin or any
Franklin Subsidiary ever participated in the financial management to a degree
sufficient to influence, or have the ability to influence, the facility's
treatment of hazardous waste) under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or under any
Federal, state, local or municipal statute, ordinance or regulation in respect
thereof, in connection with any release of any toxic or "hazardous substance",
pollutant or contaminant into the "environment", nor, to the Knowledge of
Franklin, 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 Franklin or any
Franklin Subsidiary is a plaintiff or complainant. Neither Franklin nor any
Franklin Subsidiary has been determined by any court or Regulatory Agency to be,
nor to the Knowledge of Franklin does there exist any facts or circumstances
which could reasonably lead to Franklin or a Franklin Subsidiary being held,
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 has
Franklin or any Franklin Subsidiary been determined by any court or Regulatory
Agency to be, nor to the Knowledge of Franklin does there exist any facts or
circumstances which could reasonably lead to Franklin or a Franklin Subsidiary
being held, liable for any material costs (as a result of the acts or omissions
of Franklin or any Franklin Subsidiary or, to the Knowledge of Franklin, 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 Franklin or any Franklin Subsidiary to prevent or minimize any actual or
threatened release by Franklin or any Franklin 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. To the Knowledge of Franklin, each "facility" owned, leased or
operated by Franklin or any Franklin Subsidiary (but excluding any "facility" as
to which the sole interest of Franklin or the Franklin 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 Franklin or any Franklin Subsidiary ever participated in the
financial management 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 Franklin and the Franklin
Subsidiaries taken as a whole.
P. Employment Matters. 1. Benefit Plans. The Disclosure Schedule lists the name
of each Benefit Plan (as herein defined), together with an indication of the
type of plan (i.e., defined benefit, defined contribution, health and 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, agreement or system, whether written or
unwritten for the benefit of employees, former employees, directors or former
directors, or independent
contractors or former independent contractors which is or was contributed to or
maintained presently or at any time in the last four (4) years by Franklin or
any of the Franklin Subsidiaries in respect of which Franklin, or any of the
Franklin Subsidiaries, are a party or have 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, stock option or other equity based compensation, 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. The term "Benefit Plan" for all purposes of this
Agreement shall include each Predecessor Plan (as hereinafter defined). For
purposes hereof, "Predecessor Plan" shall mean any plan, program, policy,
practice, arrangement, agreement or system as otherwise described herein which
was maintained, contributed to or resulted in liability to any predecessor
employer of Franklin or any Franklin Subsidiary since January 1, 1998. For
purposes hereof, "predecessor employer" shall mean any employer, entity, or
business operation acquired by Franklin or any Franklin Subsidiary in any type
of acquisition (including without limitation, mergers, stock acquisitions and
asset acquisitions). Through the date of this Agreement, neither Franklin nor
any of the Franklin Subsidiaries 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. Plan Documents, Reports and Filings. Either Franklin or a Franklin
Subsidiary has provided to Fifth Third true, complete and correct copies of all
plan documents comprising each Benefit Plan, or, if no plan document exists, a
description of such Benefit Plan, together with, when applicable, (a) the most
recent summary plan description and any material modifications thereto, (b) the
trust agreement insurance contract or other documentation of any related funding
arrangement, (c) the most recent actuarial and financial reports and the most
recent annual reports filed with any governmental agency, including without
limitation all Forms 5500 and all schedules thereto, and (d) 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 five years of the date of this Agreement and any material
communications to or from any governmental agency with respect to such Benefit
Plans.
3. Qualified Retirement Plan Compliance. With respect to each Benefit
Plan which is an employee pension benefit plan (as defined in Section 3(2) of
ERISA) other than any such plan that meets the "top-hat" exception under Section
201(1) of ERISA (a "Qualified Benefit Plan"): (a) the IRS has issued a
determination letter which determined that such Qualified Benefit Plan (as
amended by any and all amendments other than the GUST amendment referred to
below) satisfies the requirements of Section 401(a) of the Code, as amended by
all 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 timely amended and submitted to the IRS with a timely application for
determination letter to meet the requirements of "GUST" (i.e., all the
legislation referred to in IRS Announcement 2001-77), and Franklin has taken or
will take all actions necessary to obtain the favorable IRS determination
letter; (c) except as listed in the Disclosure Schedule, 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;
(d) 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; (e) any Qualified Benefit Plan
which is an ESOP as defined in Section 4975(e)(7) of the Code (an "ESOP
Qualified Benefit Plan") is in material compliance with the applicable
qualification requirements of Section 409 of the Code; (f) any Qualified Benefit
Plan terminated within the last five years 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 (g) any and all plan documents and amendments to the
Qualified Benefit Plans not covered by an IRS determination letter should not
adversely affect the qualified and tax exempt status of such plans and there are
no amendments that are required to continue such tax exempt status.
4. General Plan Compliance. With respect to each Benefit Plan, except
as noted on the Disclosure Schedule: (a) such Benefit Plan, if it is intended to
provide favorable tax benefits to plan participants, has been maintained and
continues to be in material compliance with applicable Code provisions; and (b)
such Benefit Plan has been and continues to be 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")
and/or the Health Insurance Portability and Accountability Act of 1996, as
amended ("HIPAA"), has been and continues to be operated in substantial
compliance with such COBRA and HIPAA requirements and (c) all payments due from
Franklin or any of the Franklin Subsidiaries to date with respect to each
Benefit Plan have been timely made.
5. Prohibited Transactions. No prohibited transaction under Section 406
of ERISA or 4975 of the Code and not exempt under Section 408 of ERISA or 4975
of the Code 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 or
other liability under Section 409 or 502(i) of ERISA.
6. Lawsuits or Claims. No actions, suits or claims that would
reasonably be expected to have a Material Adverse Effect on Franklin are pending
or, to the Knowledge of Franklin, threatened against any Benefit Plan or against
Franklin or any of the Franklin Subsidiaries with respect to any Benefit Plan.
7. Disclosure of Unfunded Liabilities. All material Unfunded
Liabilities (as defined below) with respect to each Benefit Plan have been
recorded and disclosed on the most recent financial statement of Franklin and
the Franklin Subsidiaries or, if not, in the Disclosure Schedule. For purposes
hereof, the term "Unfunded Liabilities" shall mean any amounts properly accrued
to date under GAAP in effect as of the date of this Agreement, or amounts not
yet accrued for GAAP purposes but for which an obligation 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, owed by Controlled Group Members (as defined below),
(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, (g) unpaid premiums for contributions required under any group health
plan to maintain such plan's coverage through the Effective Time, (h) bonuses,
(i) variable compensation, (j) contractual payments, (k) accruals and (l) any
other off balance sheet items relating to payments to employees, former
employees or directors.
8. Defined Benefit Pension Plan Liabilities. Franklin, the Franklin
Subsidiaries and any entity treated as a single employer with Franklin and any
of the Franklin 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. Except as otherwise disclosed in
the Disclosure Schedule, 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 and no such plan which is subject to section 302 of ERISA or
section 412 of the Code has incurred any "accumulated funding deficiency" (as
defined in section 302 of ERISA and section 412 of the Code, respectively),
whether or not waived. Neither Franklin, any of the Franklin 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). No employee, former employee, plan participant or any other party (other
than Franklin or the Franklin 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.
9. Third Party Plans. Franklin and the Franklin Subsidiaries (a) have
not breached any duties assumed in connection with acting as an independent
trustee, custodian, agent, investment manager, investment advisor or otherwise
with respect to any employee benefit plan (as defined in Section 3(3) of ERISA)
and have complied in all material respects with all applicable law, except for
any breach or non-compliance that could not give rise to any material liability,
(b) have not incurred any asserted or, to the Knowledge of Franklin, unasserted
material liability for breach of duties assumed in connection with acting as an
independent trustee, custodian, agent, investment manager, investment advisor or
otherwise with respect to any employee benefit plan (as defined in Section 3(3)
of ERISA), (c) have not authorized nor knowingly participated in a material
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code
not exempt under Section 408 of ERISA and (d) have not received notice of any
material actions, suits or claims (other than routine claims for benefits)
pending or threatened against the sponsor or any other fiduciary of any such
plan or against Franklin or the Franklin Subsidiaries.
10. Retiree Benefits. Except as listed on the Disclosure Schedule and
identified as "Retiree Liability", Franklin and the Franklin Subsidiaries have
no obligation to provide health benefits, or life insurance benefits to or with
respect to retirees, former employees, individuals on disability or any of their
relatives, except for any continuation coverage provided in accordance with
COBRA.
11. Right to Amend and Terminate. Either Franklin or a Franklin
Subsidiary has all power and authority necessary to amend or terminate each
Benefit Plan 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.
12. Consummation of Transactions. Except as set forth in the Disclosure
Schedule, 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 Franklin or any of the Franklin Subsidiaries or their successors.
13. Labor. Neither Franklin nor any Franklin Subsidiary is a party to
any collective bargaining agreements. There are no labor unions or other
organizations representing, purporting to represent or attempting to
represent, any employee of Franklin or the Franklin Subsidiaries.
14. Independent Contractors. Neither Franklin nor any Franklin
Subsidiary has any material liability, whether absolute or contingent, including
any obligation under any employee benefit plans with respect to any
misclassification of a person as an independent contractor rather than as an
employee and no individual has been treated by the Company or any subsidiary of
the Company as a "leased employee" (within the meaning of Section 414(n) of the
Code).
Q. Investment Portfolio. The investment portfolios of Franklin and the Franklin
Subsidiaries consist in all material respects of securities in marketable form.
Since December 31, 2001 to the date hereof neither Franklin nor any Franklin
Subsidiary has incurred any material and unusual or extraordinary losses in its
investment portfolio, and, except for matters of general application to the
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, Franklin 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 Franklin's and the Franklin Subsidiaries' investment
portfolio on a consolidated basis.
R. Derivative Instruments. All swaps, caps, floors, futures, forward contracts,
option agreements, and any other derivative financial instruments, contracts or
arrangements, whether entered into for Franklin's own account, or by Franklin
for the account of one or more of the Franklin Subsidiaries or for their
respective 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 by
Franklin to be financially responsible at the time; and each of them constitutes
the valid and legally binding obligation of Franklin or one of the Franklin
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 Franklin.
Franklin and each of the Franklin 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 Franklin's Knowledge, there are no
material breaches, violations or defaults or allegations or assertions of such
by any party thereunder.
S. Fairness Opinion. On or before the date hereof, Trident Securities, a
division of McDonald Investments, Inc., has delivered its opinion to Franklin's
Board of Directors that the consideration to be received by the shareholders of
Franklin pursuant to this Agreement is fair, from a financial point of view, to
the holders of the Franklin Common Stock, a true and correct form of which has
been delivered to Fifth Third.
T. Transactions with Affiliates. Except as disclosed in the Franklin Reports
filed prior to the date hereof, from January 1, 2001 through the date hereof
there have been no transactions, agreements, arrangements or understandings
between Franklin or any of the Franklin Subsidiaries, on the one hand, and
Franklin's affiliates (other than wholly-owned subsidiaries of Franklin) 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.
U. Expiration of Representations and Warranties. All representations and
warranties contained in this Article II shall expire at the Effective Time, and,
thereafter, Franklin shall have no further liability or obligations with respect
thereto.
V. Anti-Takeover Provisions. No dissenters' rights, control share acquisition or
similar anti-takeover statute enacted under the laws of the State of Tennessee
applies to the Merger or the transactions contemplated by this Agreement.
W. No Untrue Statements. Neither this Agreement nor any report, statement, list,
certificate or other information furnished by Franklin or the Franklin
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.
X. Employment, Severance and Change in Control Agreements. The Disclosure
Schedule sets forth (i) each employment or severance agreement to which Franklin
or any Franklin Subsidiary is party and (ii) each other agreement pursuant to
which Franklin, a Franklin Subsidiary or Fifth Third will be obligated to make
any payment as a result of the change of control of Franklin effected by the
Merger.
Article III. Representations and Warranties of
Fifth Third and Fifth Third Financial
Fifth Third and Fifth Third Financial, each jointly and severally, represents
and warrants to Franklin that as of the date hereof or as of the indicated date,
as appropriate:
A. Organization. Each of Fifth Third and Fifth Third Financial is duly
incorporated, validly existing and in good standing as a corporation under the
OGCL, is a registered financial services 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. 1. 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 1,300,500,000, of which
1,300,000,000 shares are classified as Common Stock, without par value, and
500,000 shares are classified as Preferred Stock, without par value, of which
7,250 shares are designated, issued and outstanding as Series D Perpetual
Preferred Stock $1,000 stated value per share, and 2000 shares are designated,
issued and outstanding as Series E Perpetual Preferred Stock, $1,000 stated
value per share. As of the close of business on June 30, 2002, 580,985,828
shares of Fifth Third Common Stock were issued and outstanding and 2,441,276
shares were held in its treasury. 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 or shares to be issued or purchased by employees or shareholders
under its deferred compensation, dividend reinvestment, and stock purchase
plans. At June 30, 2002, 40,225,173 shares of Fifth Third Common Stock were
reserved for issuance in connection with outstanding options granted under its
stock option plans and 10,013,255 shares were reserved for issuance under
options to be granted in the future.
2. The authorized capital stock of Fifth Third Financial consists of
800 shares of common stock, of which, as of the date of this Agreement, 100
shares were issued and outstanding and all such 100 shares were beneficially
owned by Fifth Third.
C. Due Issuance. All shares of Fifth Third Common Stock to be received by the
shareholders of Franklin as a result of the Merger pursuant to the terms of this
Agreement shall be, upon transfer or issuance, duly and validly issued, fully
paid and non-assessable, and will not, upon such transfer or issuance, be
subject to the preemptive rights of any shareholder of Fifth Third.
D. Financial Statements. 1. Fifth Third has previously furnished to Franklin its
audited, consolidated balance sheet, statement of operations and statement of
shareholders' equity and cash flows as of and at December 31, 2001, and for the
year then ended, together with the opinion of its independent certified public
accountants associated therewith. Fifth Third has also furnished to Franklin its
unaudited, consolidated condensed financial statements as at March 31, 2002 and
June 30, 2002, and for the periods then ended. Such audited and unaudited
consolidated financial statements of Fifth Third fairly present the consolidated
financial condition, results of operations and cash flows of Fifth Third as of
the date thereof and for the year 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). There are no material liabilities,
obligations or indebtedness of Fifth Third or any of its subsidiaries 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). Since
June 30, 2002, Fifth Third and its subsidiaries have not incurred any
liabilities outside the ordinary course of business consistent with past
practice.
2. The financial statements of Fifth Third to be provided to Franklin
pursuant to Section V.D.4. hereof will fairly present, as applicable, the
consolidated financial condition, results of operations and cash flows of Fifth
Third as of the dates thereof, and for the 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).
E. No Material Adverse Effect. Since June 30, 2002, no event has occurred and no
fact or circumstance shall have come to exist or come to be known which,
directly or indirectly, individually or taken together with all other facts,
circumstances and events (described in any paragraph of this Article III or
otherwise), has had, or is reasonably likely to have, a Material Adverse Effect
with respect to Fifth Third.
F. Board Approval; Corporate Authority; No Breach. 1. The Executive Committee of
the Board of Directors of Fifth Third, by resolution adopted by the members
present at a meeting duly called and held, at which meeting a quorum was at all
times present and acting, has approved this Agreement, including reserving for
issuance to Franklin shareholders in accordance with this Agreement, a
sufficient number of shares of Fifth Third Common Stock. The Executive Committee
of the Board of Directors of Fifth Third is empowered to act in these matters
for the full Board of Directors of Fifth Third under Ohio law and the Articles
of Incorporation and Code of Regulations of Fifth Third. Approval and adoption
of this Agreement by the shareholders of Fifth Third is not required under Ohio
law or under the Articles of Incorporation or Code of Regulations of Fifth
Third. Approval and adoption of
this Agreement by the shareholder of Fifth Third Financial is not required
under Ohio law or under the Articles of Incorporation or Code of Regulations of
Fifth Third Financial. The directors of Fifth Third Financial have duly and
validly approved and adopted this Agreement.
2. Each of Fifth Third and Fifth Third Financial 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 has
been duly executed and delivered and constitutes the valid and binding
obligation of each of Fifth Third and Fifth Third Financial, enforceable in
accordance with its terms, except to the extent that (i) enforceability hereof
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. Neither the execution of this Agreement, nor the consummation of the
transactions contemplated hereby, does or will (i) conflict with, result in a
breach of, violate or constitute a default under, either Fifth Third's or Fifth
Third Financial's Articles of Incorporation, or Code of Regulations or, to the
Knowledge of Fifth Third, 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 or Fifth Third Financial is
subject or bound; (ii) to the Knowledge 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 or Fifth Third
Financial is a party or by which Fifth Third's or Fifth Third Financial'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 or Fifth Third Financial is
to perform any duties or obligations or receive any rights or benefits under any
material agreement, arrangements or commitments.
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.
G. Articles and Regulations. Complete and accurate copies of (i) the Articles of
Incorporation, and (ii) the Code of Regulations of each of Fifth Third and Fifth
Third Financial in force as of the date hereof have been delivered to Franklin.
H. Compliance with Law. To the Knowledge of Fifth Third and except as disclosed
by Fifth Third to Franklin, neither Fifth Third nor any of its subsidiaries has
knowingly engaged in any activity or omitted to take any action which, in any
material way, has resulted or could result in the violation 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 on Fifth
Third. To the Knowledge of Fifth Third, Fifth Third and its subsidiaries possess
all licenses, franchises, permits and other governmental authorizations
necessary for the continued conduct of their businesses without material
interference or interruption.
I. SEC Filings; Regulatory Reports. 1. Fifth Third has made available to
Franklin 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) each final registration statement, prospectus, report,
schedule and definitive proxy statement filed since January 1, 2000 by Fifth
Third with the SEC, pursuant to the Securities Act or the Exchange Act, and (b)
each communication mailed by Fifth Third to its stockholders since January 1,
2000. Since January 1, 2000, 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 June 30, 2002 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 Franklin.
2. Fifth Third and its subsidiaries have filed all material reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since January 1, 2000 with
any SRO and any other Regulatory Agencies, and all other material reports,
registrations and statements required to be filed by them since January 1, 2000,
including, without limitation, any material 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, and except as disclosed by Fifth Third to Franklin, no Regulatory
Agency has initiated any proceeding or, to the Knowledge of Fifth Third,
investigation into the business or operations of Fifth Third or its subsidiaries
since January 1, 2000. To the Knowledge of Fifth Third and except as disclosed
by Fifth Third to Franklin, 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.
J. Litigation. There are no actions, suits, proceedings, investigations or
assessments of any kind pending or, to the Knowledge 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.
K. Loan Losses. Since June 30, 2002 to the date hereof, none of Fifth Third's
banking subsidiaries has incurred any unusual or extraordinary loan losses which
would be material to Fifth Third on a consolidated basis; and to the Knowledge
of Fifth Third, and in the light of any banking subsidiary's historical loan
loss experience and their managements' analysis of the quality and performance
of their respective loan portfolios, as of June 30, 2002, their consolidated
reserves for loan losses are adequate to absorb potential loan losses determined
on the basis of management's continuing review and evaluation of the loan
portfolio and its judgment as to the impact of economic conditions on the
portfolio.
L. Tax Returns. Fifth Third and its 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 Fifth Third and its subsidiaries are
complete and accurate in all material respects.
M. Broker. Fifth Third has no direct or indirect commitment to 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.
N. Investment Portfolio. The investment portfolios of Fifth Third and its
subsidiaries and affiliates consist in all material respects of securities in
marketable form. Since June 30, 2002 to the date hereof Fifth Third and its
subsidiaries, on a consolidated basis, have not incurred any material and
unusual or extraordinary losses in their respective investment portfolios, and,
except for matters of general application to the 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 subsidiaries on
a consolidated basis.
O. Taxes. 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.
P. Expiration of Representations and Warranties. All representations and
warranties contained in this Article III shall expire at the Effective Time, and
thereafter, neither Fifth Third nor Fifth Third Financial shall have any further
liability or obligation with respect thereto.
Q. No Untrue Statements. Neither this Agreement nor any report, statement, list,
certificate or other information furnished by Fifth Third or its subsidiaries to
Franklin 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.
Article IV. Obligations of Franklin Between the Date of this Agreement
and the Effective Time.
A. Shareholders' Meeting. Franklin, in consultation with Fifth Third, will take
all actions necessary to call and hold an annual or a special meeting of
Franklin'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
any other documents or actions necessary to the consummation of the Merger)
pursuant to law. Franklin shall state in the proxy materials relating to the
annual or special meeting that all Directors of Franklin have indicated their
intent to vote all shares of Franklin 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
Franklin that the Franklin 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 Franklin 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 Franklin upon the advice of its
outside counsel, such action is required in order for the Board of Directors of
Franklin to comply with duties applicable to directors under applicable law,
(b) Franklin has given Fifth Third five business days' prior notice of its
intention to withdraw or modify such recommendation and Franklin's Board of
Directors has considered any proposed changes to this Agreement (if any)
proposed by Fifth Third prior to the end of such five day period, and (c)
Franklin has fully and completely complied with Section IV.B. Without limiting
the generality of the foregoing, Franklin 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 Franklin
of any Acquisition Proposal (as defined below) or a decision by the Board of
Directors of Franklin to withdraw or modify in a manner adverse to Fifth Third
(or not to continue to make) its recommendation to its stockholders to approve
the Merger and the plan of merger contained in this Agreement.
B. No Solicitation. Franklin and its subsidiaries, and the officers, directors,
financial or legal advisors of Franklin and its subsidiaries, will not, directly
or indirectly, (a) take any action to solicit, initiate or encourage any
Acquisition Proposal or (b) engage in negotiations with, or disclose any
nonpublic information relating to Franklin or any of its subsidiaries or afford
access to the properties, books or records of Franklin or any of its
subsidiaries to, any person that may be considering making, or has made, an
Acquisition Proposal; provided that Franklin may receive and, only to the extent
necessary to become adequately informed of the terms thereof, engage in
discussions (but not disclose information or engage in negotiations) regarding
an unsolicited written proposal from a third party with respect to an
Acquisition Proposal if (i) in the reasonable opinion of the Board of Directors
of Franklin upon the advice of its outside counsel, such action is required for
the Board of Directors of Franklin to comply with the duties applicable to
directors under applicable law and (ii) Franklin has received from such third
party an executed confidentiality agreement with terms not materially less
favorable to Franklin than those contained in the confidentiality agreement
entered into between Franklin and Fifth Third dated June 15, 2002. Franklin 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 request for information and set forth the material terms thereof)
after having received any Acquisition Proposal or request or inquiry relating to
a prospective Acquisition Proposal. Franklin will keep Fifth Third fully and
currently informed of the status and details of any such Acquisition Proposal,
request or inquiry and any related discussions or negotiations. Franklin shall,
and shall cause the Franklin Subsidiaries and its and their 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. Nothing in this
Section IV.B. shall prohibit Franklin or its Board of Directors from taking and
disclosing to the stockholders of Franklin 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 stockholders of Franklin which, in the
reasonable opinion of the Board of Directors of Franklin upon the advice of its
outside counsel, is required under applicable law; provided that nothing in this
sentence shall affect the obligations of Franklin and its Board of Directors
under any other provision of this Agreement. For purposes of this Agreement,
"Acquisition Proposal" means any offer or proposal for, or any indication of
interest in (a) 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 Franklin or more than 25% of any Significant Subsidiary of Franklin,
(b) a purchase, lease or other acquisition or assumption of all or a substantial
portion of the assets or deposits of Franklin or all or a substantial portion of
the assets or deposits of any Significant Subsidiary of Franklin, (c) a merger
or consolidation, or any similar transaction, involving Franklin or any
Significant Subsidiary of Franklin, or (d) any substantially similar
transaction.
C. Valuation Reserve Adjustment. Consistent with GAAP, Franklin agrees that on
or before the Effective Time based on a review of the Franklin Subsidiaries'
loan losses, current classified assets and commercial, multi-family and
residential mortgage loans and investment portfolio, Franklin 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, provided that no adjustment to general valuation
allowances or reserves shall be made until immediately prior to the Effective
Time and all conditions precedent to the obligations of the parties hereto have
either been satisfied or waived as confirmed by such parties in writing. Fifth
Third shall provide such assistance and direction to Franklin as is necessary in
conforming to such policies, 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, Franklin and the Franklin 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 or unreasonably delayed: make any changes in its Charter,
By-laws, or corporate structures; issue any additional shares of Franklin Common
Stock, share appreciation rights, restricted stock, options or other equity
securities other than pursuant to the exercise of options granted prior to June
30, 2002, in the form of permissible stock dividends (as described below) or as
set forth in Section II.A.1. with respect to Franklin's 2000 Stock Purchase
Plan; or issue as borrower any long term debt or convertible or other securities
of any kind, or right to acquire any of its securities; repurchase any equity
securities, other than (subject to Section VII.H.) the repurchase of shares of
Franklin Common Stock in accordance with past practice (as to timing and amount)
and in compliance with applicable law and the safe harbor requirements of Rule
10b-18 of the Exchange Act; make any material changes in its method of business
operations; make, enter into any agreement to make, or become obligated to make,
any capital expenditures in excess of $50,000 (except as set forth in the
Disclosure Schedule); make, enter into or renew any agreement for services to be
provided to Franklin or the Franklin Subsidiaries or permit the automatic
renewal of any such agreement, other than the agreements identified in the
Disclosure Schedule which are specifically identified on such Schedule as
agreements which Franklin intends to renew, except any agreement for services
having a term of not more than twelve months and 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); 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 previously publicly
announced or disclosed in the Disclosure Schedule; 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
Franklin historically has done on its Common Stock and which shall not exceed
$0.055 per share, or be paid more frequently than once per calendar quarter,
provided this covenant shall only apply to Franklin; make any other
distributions on its stock; except as set forth in the Disclosure Schedule,
change or otherwise amend any Benefit Plans other than as required by law or as
contemplated herein (including but not limited to Section V.E.5. hereof);
provide any increases in employee salaries or benefits other than in the
ordinary course of business or as set forth in the Disclosure Schedule; 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; or engage
in any transaction with any employee or shareholder, except, in every case, as
required by applicable law, regulation or safe and sound banking practices.
Franklin agrees that it will not sell, transfer, mortgage or otherwise dispose
of or encumber any of the shares of the capital stock of the Franklin
Subsidiaries which are now owned by it, and neither Franklin nor any of the
Franklin Subsidiaries shall sell, transfer, mortgage or otherwise dispose of or
encumber any other assets, except in the ordinary course of business consistent
with past practice. Franklin agrees that neither it nor the Franklin
Subsidiaries will agree to, or make any commitment to, take any of the actions
prohibited by this Section IV.D.
E. Filings. Franklin 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. Franklin shall furnish Fifth Third in a timely manner with copies of
all reports filed by Franklin with the SEC subsequent to the date of this
Agreement and until the Closing Date.
Article V. Cooperation and Other Obligations and Other Covenants
A. Registration Statement and Proxy Statement. 1. Each of Fifth Third, Fifth
Third Financial and Franklin agree to cooperate in the preparation of a
registration statement on Form S-4 (the "Registration Statement") to be filed by
Fifth Third 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 Franklin 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. Fifth Third, Fifth Third Financial and Franklin agree to
each use their best efforts to enable Fifth Third to file the Registration
Statement with the SEC within sixty (60) days of the date hereof and Fifth Third
and Fifth Third Financial agree to furnish the Registration Statement in draft
form for comments to Franklin at least ten calendar days prior to the
anticipated filing. Each party hereto shall, as promptly as practicable after
receipt thereof, provide copies of any written comments received from the SEC
with respect to the Registration Statement to the other party hereto, and advise
the other party hereto of any oral comments with respect to the Registration
Statement received from the SEC. Each of Fifth Third, Fifth Third Financial and
Franklin 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, Franklin 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.
Franklin agrees to furnish to Fifth Third all information concerning Franklin,
its Subsidiaries, officers, directors and stockholders as may be reasonably
requested in connection with the foregoing.
2. Each of Fifth Third, Fifth Third Financial and Franklin 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 Franklin 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 Franklin, 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. Franklin 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 OCC, 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 its reasonable best efforts to file all
such applications within sixty (60) days of the date of this Agreement and to
use all reasonable efforts to secure all such approvals. Franklin 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 Franklin and the Franklin Subsidiaries, as shall be required in
connection with preparing such notices, applications and other documents and in
connection with securing such approvals.
2. Fifth Third and Franklin 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 or Fifth Third Financial to
agree to any conditions, restraints or requirements that would materially
adversely reduce the anticipated economic or business benefits of the Merger to
Fifth Third or Fifth Third Financial or could reasonably be expected to have a
Material Adverse Effect on Franklin (a "Burdensome Condition").
D. Access to Information. 1. Franklin agrees to permit Fifth Third, Fifth Third
Financial, and each of their officers, employees, accountants, agents and
attorneys, and Fifth Third agrees to permit Franklin, 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 Franklin and the Franklin 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 V.D.2. hereof); provided, however, no investigation by any of
the parties or their respective representatives shall affect the representations
and warranties of the other party 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 Franklin
concerning Franklin or the Franklin Subsidiaries. Franklin 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 Franklin or Fifth Third,
as the case may be, and shall not be used by Fifth Third or Franklin, as the
case may be, in any way detrimental to Franklin or Fifth Third.
3. As soon as they are available, Franklin will provide to Fifth Third
Franklin's unaudited, consolidated balance sheets, statements of operations and
statements of stockholders' equity and cash flows for monthly and quarterly
periods until the Closing Date.
4. As soon as they are available, Fifth Third will provide to Franklin
Fifth Third's unaudited, consolidated balance sheets, statements of operations
and statements of stockholders' equity and cash flows for monthly and quarterly
periods until the Closing Date. Fifth Third timely shall furnish Franklin 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, Franklin or the
Franklin Subsidiaries 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 of any Qualified Benefit Plans will
not adversely affect qualification of such Qualified Benefit Plans under the
Code.
2. Franklin or the Franklin 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 401(a)(4), 404, 410(b), 411, 412, 415, 416, 401(k) and (m) of
the Code have been satisfied by all of its Qualified Benefit Plans for the 1998,
1999, 2000 and 2001 plan years.
3. Franklin or the Franklin Subsidiaries shall provide to Fifth Third
at least sixty (60) days prior to the Effective Time, documentation reasonably
satisfactory to Fifth Third with respect to any Benefit Plan (including any
Predecessor Plan) that was merged, terminated or frozen since January 1, 1998,
demonstrating that all legal requirements pertaining to such merger, termination
or freeze have been satisfied.
4. If Fifth Third so requests, Franklin or the Franklin Subsidiaries
shall take all actions necessary to file an application for determination letter
with the Internal Revenue Service prior to the Effective Time, for any Qualified
Benefit Plan requested by Fifth Third.
5. 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, however, that
notwithstanding anything to the contrary in this Agreement, Franklin may in its
sole discretion accelerate the exercisability of any or all options to acquire
Franklin Common Stock issued and outstanding as of June 1, 2002, with such
acceleration to be effective, if at all, immediately prior to the Effective
Time.
6. If Fifth Third so requests, Franklin or any of the Franklin
Subsidiaries shall take all actions necessary to freeze any or all Qualified
Benefit Plans as of a date not earlier than one day prior to the Effective Time
such that no further contributions (including employee 401(k) contributions)
shall be made and no further benefits shall accrue under such Qualified Benefit
Plans after such freeze date.
7. Except as provided otherwise pursuant hereto, Franklin and any of
the Franklin 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 other than in the ordinary course of operations of such Qualified
Benefit Plans; or (c) make any contributions to the defined benefit plans
maintained by Franklin or discretionary contributions to any of the Qualified
Benefit Plans 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.
8. Franklin shall provide to Fifth Third at least sixty (60) days prior
to the Effective Time, documentation reasonably satisfactory to Fifth Third
demonstrating that it has all power and authority necessary to amend and/or
terminate any plan providing retiree medical or life insurance coverage, thereby
reducing or eliminating future liability.
F. State Takeover Statutes. Franklin will take all steps within its reasonable
control necessary to exempt (or continue the exemption of) the Merger, this
Agreement and the transactions contemplated hereby) from any applicable state
takeover law, as now or hereafter in effect.
G. Affiliates. Not later than the 15th day prior to the mailing of Franklin's
Proxy Statement with respect to the Merger, Franklin shall deliver to Fifth
Third a list of each person that, to Franklin'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 "Franklin
Affiliates"). Franklin shall use its best efforts to cause each Franklin
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. Forbearances of Fifth Third. From the date of this Agreement until the
Effective Time, Fifth Third will not, without the prior written consent of
Franklin, which consent shall not be unreasonably withheld or unreasonably
delayed: make any changes in its Second Amended Articles of Incorporation or
Code of Regulations in a manner adverse to the shareholders of Franklin; make,
declare, pay or set aside for payment any extraordinary cash dividends on its
own stock; or agree to, or make any commitment to, take any of the actions
prohibited by this Section V. H.
I. Coordination of Dividends. Fifth Third and Franklin shall coordinate the
timing of the declaration and payment of dividends payable after the date hereof
so that Fifth Third and Franklin shareholders will receive during each quarter
fair dividends and in no event shall Fifth Third or Franklin shareholders fail
to receive a fair dividend, or receive more than one fair dividend, during any
quarter up to and including the quarter immediately following the quarter during
which the Effective Time occurs.
J. Exemption From Liability Under Section 16(b). Assuming that Franklin 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
Franklin'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 Franklin Insiders of Fifth Third Common Stock
in exchange for shares of Franklin Common Stock, and of options to purchase
shares of Fifth Third Common Stock upon conversion of options to purchase shares
of Franklin 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 Franklin 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 Franklin Insiders, the number
of shares of Franklin Common Stock held by each such Franklin 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 Franklin Common
Stock held by each such Franklin Insider and expected to be converted into
options to purchase shares of Fifth Third Common Stock in connection with the
Merger. " Franklin Insiders" shall mean those officers and directors of Franklin
who are subject to the reporting requirements of Section 16(a) of the Exchange
Act and who are listed in the Section 16 Information.
K. Directors of Bank Subsidiary. Prior to the Effective Time, Fifth Third shall
determine and communicate to Franklin those individuals who shall be appointed
to serve as Directors of the Bank Subsidiary following the Effective Time, each
of whom shall serve as a Director for the term for which he was appointed,
subject to the Charter and Bylaws of Bank Subsidiary and in accordance with
applicable law.
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 Franklin shall have duly approved the Merger and
the plan of merger contained within this Agreement in accordance with and as
required by law and in accordance with Franklin's Charter and Bylaws.
2. All necessary governmental and regulatory orders, consents,
clearances and approvals and requirements shall have been secured and satisfied
for the consummation of such transactions, including without limitation, those
of the Federal Reserve System, the Ohio Division of Financial Institutions, the
OCC and the Federal Deposit Insurance Corporation to the extent required and, in
the case of Fifth Third's obligation, none of such orders, consents, clearances
and approvals and requirements shall be subject to a Burdensome Condition.
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. No order or injunction of any federal or state agency or court shall
be in effect preventing, prohibiting or enjoining the transactions contemplated
by this Agreement.
5. Fifth Third shall have registered its shares of Fifth Third Common
Stock to be issued to the Franklin 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 and be continuing. The shares of Fifth Third Common Stock
to be issued to the Franklin shareholders hereunder shall have been authorized
for trading on the Nasdaq National Market upon official notice of issuance.
B. Additional Conditions to the Obligations of Fifth Third and Fifth Third
Financial.
The obligation of Fifth Third and Fifth Third Financial 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 Franklin which specifically refers to
the condition or conditions being waived:
1. The representations and warranties of Franklin contained herein
shall be true and correct both as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier date) as
of the Closing Date.
2. Franklin shall have performed all of the obligations required of it
under the terms of this Agreement in all material respects.
3. Fifth Third shall have received a certificate from Franklin,
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.B.1. and VI.B.2. have
been satisfied.
4. No investigation or action by any state or federal agency shall have
been threatened in writing or instituted seeking to enjoin or prohibit or unwind
the transactions contemplated hereby and no governmental action or proceeding
shall have been threatened or instituted before any court or governmental body
or authority, seeking to enjoin or prohibit or unwind, the transactions
contemplated hereby or seeking to impose material sanctions or penalties as a
result thereof (other than investigations, actions and proceedings which have
been withdrawn prior to the Closing without a Material Adverse Effect on Fifth
Third or Franklin, and other than regularly scheduled regulatory examinations).
5. At or prior to the Effective Time, Fifth Third shall have entered
into written employment, severance and/or non-competition agreements with
each of (a) Xxxxxx Xxxxx, (b) Xxxxx Xxxxx, (c) Xxxxxxx Xxxxxxxxxx, (d)
Xxxxxx X. Xxxx, Xx., and (e) Xxxx Xxxxxxxx on terms satisfactory to Fifth
Third and each of the foregoing individuals.
6. (a) In consideration of the consummation of the Merger, each of the
Directors of Franklin and Bank Subsidiary (except those persons who enter into
an agreement as required by VI.B.5 above) shall receive a cash payment from
Fifth Third in the amount of $5,000, and each Director of Franklin (except those
persons who enter into an agreement as required by VI.B.5 above) shall have
executed and delivered to Fifth Third an agreement by which the Directors shall
agree for a period of three years after the Effective Time to refrain from
directly or indirectly, whether for his or her own account or for the account of
any other person, firm, corporation, or other business organization, (i) in the
states of Kentucky or Tennessee, engage in providing Banking Services (as
defined below) as an employee, officer, director, or consultant on behalf of any
other business organization who is a competitor of Fifth Third, (ii) provide
Banking Services to any Client (as defined below), (iii) make any statement or
take any actions that may interfere with Fifth Third's or any Affiliate's
business relationships with any Client, (iv) contact either directly or
indirectly any Client or otherwise induce or attempt to induce any Client to
enter into any business relationship with any person or firm other than Fifth
Third or an Affiliate relating to Banking Services of any type, (v) endeavor or
entice away from Franklin or Fifth Third any person who the Director has actual
knowledge that such person is, or was at any time during the period the Director
was employed by Franklin or Fifth Third or during the Restricted Period,
employed by or associated with Fifth Third or Franklin as an executive, officer,
employee, manager, salesperson, consultant, independent contractor,
representative or other agent, or (vi) take any actions that may interfere with
Fifth Third's property rights in lists of Clients or otherwise diminish the
value of such lists to Fifth Third. Notwithstanding any provision contained in
this Section 6, the restrictions contained herein shall not be applicable to any
activity of the Director or any activity of his or her spouse which existed at
the time of this Agreement and which was disclosed by the Director to Fifth
Third, and may be waived by Fifth Third with respect to one or more Directors in
writing at any time and from time to time in Fifth Third's sole discretion after
receipt of a written request from any Director.
(b) The term "Restricted Period" shall mean the period beginning on the
Effective Time and ending three years thereafter.
(c) The term "Banking Services" shall mean retail or commercial deposit
or lending business, including mortgage lending, trust services, securities
brokerage, asset management, data processing, merchant processing and all other
services which are customarily provided by banks or which are otherwise provided
by Fifth Third or its affiliates.
(d) For all purposes of this Agreement, the term "Client" shall mean
all persons or entities who are or were clients of Franklin or Fifth Third at
the Effective Time or at any time during the three-year period ending at the
Effective Time, and any potential clients who to the Director's actual
knowledge, have been identified and contacted by a representative of Fifth
Third. The term "Client" shall not include any member of the Employee's
immediate family, as defined under Rule 16a-1 of the Exchange Act or any trust
of which the Director or any member of his immediate family (as defined in Rule
16a-1 of the Exchange Act) is a trustee or beneficiary.
7. The aggregate amount of consolidated shareholders' equity (including
Common Stock, Additional Paid-In Capital and Retained Earnings and excluding
Treasury Stock) of Franklin 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 GAAP, consistently applied, shall not be less than $37,000,000.
For purposes of this subparagraph, (A) any expenses or accruals after the date
hereof relating to (i) the adjustments contemplated by Section IV.C. (i) herein,
(ii) termination or funding of any of Benefit Plans of Franklin, and the
Franklin Subsidiaries as contemplated herein, (iii) expenses associated with
this Agreement and the transactions contemplated herein, and (iv) expenses and
losses associated with valuing of Franklin's or any of the Franklin
Subsidiaries' investments at current market value as required by GAAP (including
SFAS 115) shall be excluded for purposes of calculation of Franklin's
shareholders' equity as contemplated herein prior to the Effective Time.
8. Fifth Third's independent certified public accountants shall have
reviewed the unaudited consolidated financial statements of Franklin as at the
end of the month immediately preceding the Effective Time (the "Preceding
Month") if such Preceding Month ended at least six days before the Effective
Time or as at the end of the month
immediately preceding the Preceding Month if the Preceding Month ended less than
six days before the Effective Time, as well as the unaudited separate financial
statements of Franklin and the Franklin Subsidiaries 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 Franklin 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 Franklin
and the Franklin Subsidiaries.
9. The total number of issued and outstanding shares of Franklin Common
Stock and shares of Franklin Common Stock issuable upon the exercise of
outstanding options shall not exceed the sum of 10,184,806 and the number of
shares issued between the date hereof and the Closing Date pursuant to the
Franklin 2000 Stock Purchase Plan (which shall not exceed 600 shares per
calendar quarter).
10. Xxxxxx X. Xxxx, Xx., Executive Vice President, Secretary and
General Counsel for Franklin, shall have delivered an opinion addressed to
Fifth Third and Fifth Third Financial in substantially the form attached
hereto as Appendix C.
11. Either (i) Fifth Third shall have entered into an assumption of
lease agreement with Xxxxxx Xxxxx covering all of the buildings presently leased
by Xxxxxx Xxxxx to Franklin that are located in downtown Franklin, Tennessee
(collectively, the "Headquarters"), or (ii) Xxxxxx Xxxxx and Bank Subsidiary
shall have entered into a real estate lease agreement concerning the
Headquarters for a 10-year term with two 5-year options to renew, at lease rates
acceptable to Fifth Third and Xxxxxx Xxxxx.
12. At or prior to the Effective Time, any and all liens, claims,
charges, options, encumbrances, mortgages, pledges or security interests on any
capital stock or other securities evidencing ownership of any Franklin
Subsidiary shall have been satisfied and removed and Franklin or a Franklin
Subsidiary shall own all of the outstanding capital stock or other securities
evidencing ownership of the Franklin Subsidiaries in each case free and clear of
any lien, claim, charge, option, encumbrance, mortgage, pledge or security
interest.
13. Fifth Third shall have received an opinion of Xxxxxxx Head &
Xxxxxxx LLP, 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, the Merger constitutes a "reorganization" within the meaning of Section
368 of the Code. In rendering its opinion, counsel to Fifth Third may require
and rely upon representations contained in letters from Franklin and Fifth
Third.
14. On the date of the execution of this Agreement, Xxxxxx Xxxxx shall
have executed and delivered to Fifth Third a Shareholder Support Agreement in
the form of Appendix F Attached hereto, which Shareholder Support Agreement
shall be in full force and effect and which all parties thereto shall be in
compliance at and as of the Closing Date.
C. Additional Conditions to the Obligations of Franklin.
The obligation of Franklin 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 Franklin in a writing delivered
to Fifth Third which specifically refers to the condition or conditions being
waived:
1. The representations and warranties of Fifth Third and Fifth Third
Financial contained herein shall be true and correct both as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date.
2. Fifth Third and Fifth Third Financial shall have each performed all
of the obligations required of it under the terms of this Agreement in all
material respects.
3. Franklin shall have received a certificate from each of Fifth Third
and Fifth Third Financial, executed by its respective 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.
4. Xxxx X. Xxxxxxxx, General Counsel for Fifth Third shall have
delivered an opinion addressed to Franklin in substantially the form
attached hereto as Appendix D.
5. Franklin shall have received an opinion of Xxxxx, Xxxxxxxx &
Xxxxxxx, LLP, counsel to Franklin, dated the Closing Date, to the effect that,
on the basis of facts, representations and assumptions set forth in such
opinion, (i) the Merger constitutes a "reorganization" within the meaning of
Section 368 of the Code and (ii) the exchange in the Merger of Franklin Common
Stock for Fifth Third Common Stock will not give rise to gain or loss to the
shareholders of Franklin with respect to such exchange (except to the extent of
any cash received). In rendering its opinion, counsel to Franklin may require
and rely upon representations contained in letters from Franklin and Fifth
Third.
Article VII. Additional Covenants
A. Employment Arrangements. 1. Fifth Third shall consider employing at
Fifth Third Financial or other Fifth Third subsidiaries or affiliates as many of
the employees of Franklin and all of the Franklin Subsidiaries 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. As promptly as practicable following the
Effective Time as Fifth Third shall reasonably determine, Fifth Third shall
provide the full-time employees (in the aggregate and not individually) of
Franklin and all subsidiaries of Franklin ("Transferred Employees") who become
employees of Fifth Third or any of its subsidiaries or affiliates at or
immediately subsequent to the Merger as a group with employee benefit plans that
in the aggregate are of comparable value to the benefit plans provided to
similarly situated employees of Fifth Third (excluding from consideration the
Fifth Third Master Retirement Plan which has been frozen to new participants).
Under each employee benefit plan sponsored or maintained by Fifth Third or its
subsidiaries or affiliates in which Transferred Employees participate, prior
service with Franklin and any of the subsidiaries of Franklin (including service
prior to acquisition by Franklin to the extent Franklin takes such service into
account) shall be treated as prior service with Fifth Third for purposes of
eligibility and vesting. Notwithstanding the preceding sentence, with respect to
any payroll practice (such as accrued vacation) where service is utilized to
determine the amount of benefit under such practice, prior service with Franklin
and any subsidiaries of Franklin (including service prior to acquisition by
Franklin to the extent Franklin takes such service into account) shall be
treated as prior service with Fifth Third.
2. Those employees of Franklin and the Franklin Subsidiaries (other
than temporary and/or co-operative employees) who do not have an employment,
change in control or severance agreements 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 a form attached hereto as
Appendix E, shall be entitled to severance pay equal to, in the case of Franklin
or subsidiaries of Franklin, two (2) weeks of pay for each completed year of
service up to a maximum of twenty-six (26) weeks of pay, plus any earned but not
paid vacation pay. The severance payment referred to above shall be under
Franklin's current severance pay plan, if any, or a new severance pay plan but
in no event shall there be any duplication of severance pay. Fifth Third shall
provide sufficient notification to Franklin of those employees it will not be
hiring in order that such employees terminated by Franklin can be given
appropriate notice of termination in advance of the effectiveness thereof.
Franklin shall cooperate with Fifth Third to effectuate the foregoing and to
comply with, and provide notices regarding, the Workers Adjustment and
Retraining Act or any similar state or local law, including without limitation,
providing notices to employees and government representatives. Nothing contained
in this Section VII.A.2. shall be construed or interpreted to limit or modify in
any way Fifth Third's at will employment policy. In no event shall severance pay
or any severance period be taken into account in determining the amount of any
other benefit (including but not limited to, an individual's benefit under any
pension plan). If, by reason of the controlling plan document, controlling law
or otherwise, severance pay or any severance period is taken into account in
determining any other benefit, the severance pay otherwise payable shall be
reduced by the present value of the additional benefit determined under other
benefit plans attributable to the severance pay or period.
3. Notwithstanding anything herein to the contrary, in lieu of any severance
benefits provided in Section VII.A.2. above, Fifth Third shall acknowledge and
assume, upon consummation of the Merger, the obligations of Franklin under all
existing change in control, severance and employment agreements. Franklin has
specifically identified such agreements in Section II.X of the Disclosure
Schedule.
B. Director, Officer and Employee Indemnification. 1. From and after the
Effective Time, Fifth Third shall assume the obligations of Franklin and the
Franklin Subsidiaries arising under applicable law in existence as of the date
hereof or as amended prior to the Effective Time and under Franklin's Charter
and By-laws or the Franklin Subsidiaries' respective charters 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 becomes,
prior to the Effective Time, an officer or director of Franklin, any Franklin
Subsidiary, or any of their predecessors (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 Franklin or any
Franklin Subsidiary 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 Franklin's Charter or By-laws or the
Franklin Subsidiaries' respective charters or bylaws. 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 VII.B. 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 VII.B. 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.
2. From and after the Effective Time, the directors, officers and
employees of Franklin 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 Section VII.B.1., 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.
3. The obligations of Fifth Third provided under this Section VII.B.
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.
4. Fifth Third shall also purchase and keep in force for a three-year
period, a policy of directors' and officers' liability insurance to provide
coverage for acts or omissions of the type currently covered by Franklin's
existing directors' and officers' liability insurance for acts or omissions
occurring on or prior to the Effective Time, but only to the extent such
insurance may be purchased or kept in full force on commercially reasonable
terms taking into account the cost thereof and the benefits provided thereby. It
is agreed that such costs shall be commercially reasonable so long as they do
not exceed 150% per annum of the costs currently paid per annum for such
coverage by Franklin.
5. The rights set forth in this Section VII.B. are in addition to and
not in substitution of other indemnification and related rights that such
Indemnified Parties may otherwise be entitled to receive under Franklin's
Charter and By-laws or applicable law.
6. Notwithstanding anything in this Section VII.B to the contrary,
Fifth Third shall not be required to provide any indemnity hereunder or may make
or agree to make any indemnification payment unless that payment is reasonable
and all of the following conditions are met: (1) Fifth Third's Board of
Directors determines in writing that the Indemnified Party acted in good faith
and the best interests of Franklin or the Franklin Subsidiary as the case may
be; (2) the Fifth Third Board of Directors determines that the payment will not
materially affect Fifth Third's or any subsidiary of Fifth Third's safety and
soundness; (3) the payment does not fall within the definition of a "prohibited
indemnification payment"; and (4) the Indemnified Party agrees in writing to
reimburse Fifth Third, to the extent not covered by permissible insurance, for
payments made in the event that an administrative action results in a final
order or settlement in which the Indemnified Party is assessed a civil money
penalty, is removed or prohibited from banking, or is required, under a final
order, to cease an action or take any affirmative action. For purposes hereof, a
"prohibited indemnification payment" is defined to include any payment or
agreement to make a payment by a bank or a bank holding company to an
institution-affiliated party to pay or reimburse such person for any liability
or legal expense in any administrative proceeding brought by the appropriate
federal banking agency that results in a final order or settlement in which the
institution-affiliated party is assessed a civil money penalty, is removed or
prohibited from banking, or is required to cease an action or take any
affirmative action, including making restitution, with respect to the bank or
bank holding company.
C. 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 Franklin to Franklin
Financial Corporation, 000 Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxx 00000 with a copy
of Xxxxxx X. Xxxxxxxx, Esq., Xxxxx, Xxxxxxxx & Xxxxxxx, LLP, Suite 3100,
Promenade II, 0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000-0000 and if to
Fifth Third and Fifth Third Financial to Fifth Third Bancorp, 00 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxxxx, Xxxx 00000, Attention: Xxxxxx X. Xxxxxxxx, Xx., with a copy
to Fifth Third Bancorp, 00 Xxxxxxxx Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxx 00000,
Attention: Xxxx, X. Xxxxxxxx, Executive Vice President and General Counsel 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.
D. Entire Agreement. This Agreement, together with the written instruments
specifically referred to herein and such other written agreements delivered by
Fifth Third, Fifth Third Financial or Franklin 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 Article X hereof.
E. Press Releases. Fifth Third and Franklin 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 outside counsel deems required by law; and
provided, further, however, that Fifth Third shall not be required to
incorporate any comments from Franklin into such releases or public filings
unless determined to be appropriate by Fifth Third in good faith.
F. Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that printing and mailing expenses for the Proxy Statement shall be shared
equally between Fifth Third and Franklin and the SEC filing and registration
fees for the Registration Statement shall be paid by Fifth Third.
G. Advice of Changes. 1. Between the date hereof and the Closing Date, Franklin
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 Franklin contained herein or made
pursuant hereto.
2. Between the date hereof and the Closing Date, each of Fifth Third
and Fifth Third Financial shall promptly advise Franklin 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
and Fifth Third Financial 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.
H. Tax Treatment. Neither Fifth Third nor Franklin 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.
I. 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.
J. MPS. Upon the request of Fifth Third and at the sole option of Fifth Third,
Franklin and 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 Xxxxxx(R) system. Such Agreement shall
provide that MPS will be the exclusive provider of such services to Franklin 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 Franklin and
Bank Subsidiary to EFT provided by MPS and conversion to the Xxxxxx(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 Franklin and
Bank Subsidiary for the Xxxxxx(R) service shall not exceed those charged by the
current EFT service provider of Franklin and 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 Franklin, and if, in such instance, Franklin 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 Franklin or Bank Subsidiary be required to
take any actions pursuant to this Paragraph J or otherwise under this Agreement
or the Agreement of merger that are contrary to any applicable law, regulation,
rule or order or which constitute a breach of the fiduciary duties of the
directors of Franklin or Bank Subsidiary.
Article VIII. Termination
A. Basis for Termination. This Agreement may be terminated at any time prior to
the Effective Time by written notice delivered by Fifth Third to Franklin, or by
Franklin to Fifth Third in the following instances:
1. By Fifth Third or Franklin, if there has been to the extent
contemplated in Section VI.B.1. or VI.B.2. or Section VI.C.1. or VI.C.2. herein,
as the case may be, a breach of a representation or warranty (subject to the
standard in Section I.R.) or a material breach of any covenant on the part of
the other party with respect to the representations, warranties, and covenants
set forth herein and such breach has not been cured within thirty (30) days
after receipt of written notice or is not capable of being cured; provided, the
party in breach or default shall have no right to terminate for its own breach
or default. For purposes hereof, a breach of Sections IV.A. or IV.B. will be
deemed not capable of being cured.
2. By Fifth Third or Franklin, if the merger transaction
contemplated herein has not been consummated by January 31, 2003, provided the
terminating party is not in material breach or default of any representation,
warranty or covenant contained herein on the date of such termination.
3. By Fifth Third or Franklin, 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 December 31, 2001,
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.
4. By the mutual written consent of Fifth Third, Fifth Third Financial
and Franklin.
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 and Fifth Third Financial to effect the Merger set forth in Sections
VI.A. and VI.B. herein and non-compliance is not waived by Fifth Third and
Fifth Third Financial.
6. By Franklin if any event occurs which renders impossible of
satisfaction one or more of the conditions of the obligations of Franklin to
effect the Merger as set forth in Sections VI.A. and VI.C. herein and
non-compliance is not waived by Franklin.
7. By Fifth Third if the Board of Directors of Franklin shall have
publicly announced its withdrawal or modification in a manner adverse to Fifth
Third and Fifth Third Financial of its favorable recommendation of the Merger.
8. By Fifth Third or Franklin if Franklin 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.
B. Effect of Termination. Upon termination as provided in this Article VIII,
this Agreement, except for the provisions of Sections V.D.2., VII.F. or VII.J.
hereof, shall be void and of no further force or effect, and no party hereto
(nor any of their respective officers, directors or subsidiaries) shall have any
liability of any kind to any 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 (the "Closing") to be held at the offices of Fifth Third in
Cincinnati, Ohio on a Friday selected by Fifth Third which is not more than 15
days after the satisfaction or waiver of all of the conditions precedent to
consummation of the Merger set forth in Article VI hereof (other than those
conditions which by their nature cannot be satisfied until the Closing),
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 of merger (which shall be prepared by Fifth Third and reasonably
satisfactory to Franklin) with the Secretary of State of each of the State of
Ohio and the State of Tennessee, 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 Franklin and Fifth Third Financial 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 Franklin, but
after any such approval by the shareholders of Franklin 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
Except to the extent that provisions of the TBCA are applicable to the Merger,
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. 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, with the exception of Section I.C., Section I.D. and
Section VII.B., 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 or Fifth Third Financial shall
not be deemed an assignment hereunder as long as the provisions of Section I.F.
are complied with. 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:_________________________________
Name:____________________________
Title:___________________________
Attest:__________________________
Name:____________________________
Title:___________________________
FIFTH THIRD FINANCIAL CORPORATION
(SEAL) By:_________________________________
Name:____________________________
Title:___________________________
Attest:__________________________
Name:____________________________
Title:___________________________
FRANKLIN FINANCIAL CORPORATION
(SEAL) By:_________________________________
Name:____________________________
Title:___________________________
Attest:__________________________
Name:____________________________
Title:___________________________
