-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C7S1PMqMpY8u11KmbvSWOMpaEDxA6G4S4OggwrtigpJEPAF0PNCu5WXLvZYSZovY stVeYwxl+IDPs4JVlL2gfA== 0000950152-01-502061.txt : 20010516 0000950152-01-502061.hdr.sgml : 20010516 ACCESSION NUMBER: 0000950152-01-502061 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIFTH THIRD BANCORP CENTRAL INDEX KEY: 0000035527 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 310854434 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08076 FILM NUMBER: 1639899 BUSINESS ADDRESS: STREET 1: 38 FOUNTAIN SQ PLZ STREET 2: FIFTH THIRD CENTER CITY: CINCINNATI STATE: OH ZIP: 45263 BUSINESS PHONE: 5135795300 10-Q 1 l88345ae10-q.txt FIFTH THIRD BANCORP 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 2001 Commission File Number 0-8076 FIFTH THIRD BANCORP (Exact name of Registrant as specified in its charter) Ohio 31-0854434 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) Fifth Third Center Cincinnati, Ohio 45263 (Address of principal executive offices) Registrant's telephone number, including area code: (513) 579-5300 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ -- There were 575,506,054 shares of the Registrant's Common Stock, without par value, outstanding as of April 30, 2001. 2 FIFTH THIRD BANCORP INDEX Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - March 31, 2001 and 2000 and December 31, 2000 3 Consolidated Statements of Income - Three Months Ended March 31, 2001 and 2000 4 Consolidated Statements of Cash Flows - Three Months Ended March 31, 2001 and 2000 5 Consolidated Statements of Changes in Shareholders' Equity - Three Months Ended March 31, 2001 and 2000 6 Notes to Consolidated Financial Statements 7 - 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 - 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 Part II. Other Information 16 - 18
2 3 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------ MARCH 31, December 31, March 31, ($000'S) 2001 2000 2000 - ------------------------------------------------------------------------------------------------------------------------ ASSETS - ------------------------------------------------------------------------------------------------------------------------ Cash and Due from Banks $ 754,924 984,729 947,525 Securities Available for Sale (a) 15,805,505 15,601,590 14,875,146 Securities Held to Maturity (b) 22,444 26,990 139,192 Other Short-Term Investments 121,068 198,013 353,197 Loans Held for Sale 893,905 553,264 522,088 Loans and Leases Commercial Loans 6,957,006 6,643,908 6,624,190 Construction Loans 1,570,206 1,483,768 1,085,521 Commercial Mortgage Loans 3,424,295 2,986,428 2,506,964 Commercial Lease Financing 2,874,810 2,751,987 2,293,173 Residential Mortgage Loans 3,745,237 4,034,150 4,796,426 Consumer Loans 6,174,437 6,079,216 5,350,504 Consumer Lease Financing 3,065,990 2,957,024 3,674,307 Unearned Income (1,044,895) (983,680) (919,782) Reserve for Credit Losses (395,693) (383,495) (373,337) - ------------------------------------------------------------------------------------------------------------------------ Total Loans and Leases 26,371,393 25,569,306 25,037,966 Bank Premises and Equipment 540,094 521,396 489,918 Accrued Income Receivable 372,311 390,169 317,760 Other Assets 2,133,103 2,011,449 1,705,973 - ------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS $ 47,014,747 45,856,906 44,388,765 - ------------------------------------------------------------------------------------------------------------------------ LIABILITIES - ------------------------------------------------------------------------------------------------------------------------ Deposits Demand $ 4,698,410 4,705,062 3,929,553 Interest Checking 5,753,376 5,386,380 4,894,269 Savings and Money Market 5,880,858 5,463,609 5,303,241 Time Deposits 12,391,453 15,393,729 14,858,634 - ------------------------------------------------------------------------------------------------------------------------ Total Deposits 28,724,097 30,948,780 28,985,697 Federal Funds Borrowed 3,580,027 1,164,553 5,279,410 Short-Term Bank Notes - - 15,000 Other Short-Term Borrowings 2,756,828 3,094,738 2,604,210 Accrued Taxes, Interest and Expenses 1,481,585 1,374,950 850,726 Other Liabilities 375,315 348,596 486,185 Long-Term Debt 4,723,442 3,861,520 1,842,986 Guaranteed Preferred Beneficial Interest in Convertible Subordinated Debentures 172,500 172,500 172,500 - ------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES 41,813,794 40,965,637 40,236,714 - ------------------------------------------------------------------------------------------------------------------------ SHAREHOLDERS' EQUITY (c) - ------------------------------------------------------------------------------------------------------------------------ Common Stock (d) 1,046,875 1,033,747 1,031,233 Capital Surplus 683,429 590,683 582,532 Retained Earnings 3,421,127 3,241,975 2,836,473 Unrealized Gains (Losses) on Securities Available for Sale 49,522 25,977 (298,187) Treasury Stock - (1,113) - - ------------------------------------------------------------------------------------------------------------------------ TOTAL SHAREHOLDERS' EQUITY 5,200,953 4,891,269 4,152,051 - ------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 47,014,747 45,856,906 44,388,765 - ------------------------------------------------------------------------------------------------------------------------
(a) Amortized cost: March 31, 2001 - $15,729,000, December 31, 2000 - $15,562,000 and March 31, 2000 - $15,340,000. (b) Market value: March 31, 2001 - $22,000, December 31, 2000 - $27,000 and March 31, 2000 - $139,000. (c) 500,000 shares of no par value preferred stock are authorized of which none had been issued as of March 31, 2001. (d) Stated value $2.22 per share; authorized at March 31, 2001 - 1,300,000,000, December 31, 2000 and March 31, 2000 - 650,000,000; outstanding at March 31, 2001 - 471,565,129, December 31, 2000 - 465,651,949 (excludes 21,875 treasury shares) and March 31, 2000 - 464,519,307. See Notes to Consolidated Financial Statements. 3 4 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- ---------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, ------------------------------ ($000'S) 2001 2000 - ---------------------------------------------------------------------------------------- INTEREST INCOME Interest and Fees on Loans and Leases $ 554,029 507,287 Interest on Securities Taxable 252,355 247,465 Exempt from Income Taxes 9,007 9,373 - ---------------------------------------------------------------------------------------- Total Interest on Securities 261,362 256,838 Interest on Other Short-Term Investments 2,257 3,055 - ---------------------------------------------------------------------------------------- Total Interest Income 817,648 767,180 - ---------------------------------------------------------------------------------------- INTEREST EXPENSE Interest on Deposits Interest Checking 39,036 31,546 Savings and Money Market 53,664 42,779 Time Deposits 191,191 171,018 - ---------------------------------------------------------------------------------------- Total Interest on Deposits 283,891 245,343 Interest on Federal Funds Borrowed 33,145 72,072 Interest on Short-Term Bank Notes - 15,207 Interest on Other Short-Term Borrowings 37,005 37,538 Interest on Long-Term Debt and Notes 70,672 33,576 - ---------------------------------------------------------------------------------------- Total Interest Expense 424,713 403,736 - ---------------------------------------------------------------------------------------- NET INTEREST INCOME 392,935 363,444 Provision for Credit Losses 30,290 21,352 - ---------------------------------------------------------------------------------------- NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 362,645 342,092 OTHER OPERATING INCOME Data Processing Income 66,745 50,920 Service Charges on Deposits 56,168 47,655 Investment Advisory Income 55,735 50,763 Other Service Charges and Fees 109,608 90,303 Securities Gains 4,236 522 - ---------------------------------------------------------------------------------------- Total Other Operating Income 292,492 240,163 - ---------------------------------------------------------------------------------------- OPERATING EXPENSES Salaries, Wages and Incentives 118,666 109,929 Employee Benefits 20,397 25,681 Equipment Expenses 13,042 12,685 Net Occupancy Expenses 21,193 19,143 Other Operating Expenses 120,360 106,462 - ---------------------------------------------------------------------------------------- Total Operating Expenses 293,658 273,900 - ---------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 361,479 308,355 Applicable Income Taxes 117,175 101,986 - ---------------------------------------------------------------------------------------- NET INCOME $ 244,304 206,369 - ---------------------------------------------------------------------------------------- Per Share: Earnings $ 0.52 0.45 Diluted Earnings $ 0.51 0.44 Cash Dividends $ 0.20 0.16 - ---------------------------------------------------------------------------------------- Average Shares (000's): Outstanding 467,532 463,780 Diluted 482,023 474,623 - ----------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements. 4 5 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, ------------------------------- ($000'S) 2001 2000 - --------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net Income $ 244,304 206,369 Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities Provision for Credit Losses 30,290 21,352 Depreciation Amortization and Accretion 32,633 27,969 Provision for Deferred Income Taxes 22,323 21,120 Realized Securities Gains (5,643) (599) Realized Securities Losses 1,407 78 Proceeds from Sales of Residential Mortgage Loans Held for Sale 1,076,938 677,962 Net Gains on Sales of Loans (8,654) (2,137) Increase in Residential Mortgage Loans Held for Sale (1,403,951) (900,636) Decrease in Accrued Income Receivable 23,554 3,265 Increase in Other Assets (79,158) (100,571) Increase in Accrued Taxes, Interest and Expenses 64,046 84,532 Increase (Decrease) in Other Liabilities 5,614 (60,455) - --------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 3,703 (21,751) - --------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Proceeds from Sales of Securities Available for Sale 3,991,377 959,690 Proceeds from Calls, Paydowns and Maturities of Securities Available for Sale 1,153,877 350,130 Purchases of Securities Available for Sale (4,571,514) (3,290,701) Proceeds from Calls, Paydowns and Maturities of Securities Held to Maturity 4,546 7 Purchases of Securities Held to Maturity - (10,057) Decrease in Other Short-Term Investments 76,945 2,250 Increase in Loans and Leases (576,575) (716,342) Purchases of Bank Premises and Equipment (26,989) (25,743) Proceeds from Disposal of Bank Premises and Equipment 876 4,340 Net Cash Paid in Acquisitions (16,976) - - --------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 35,567 (2,726,426) - --------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Increase in Core Deposits 551,340 182,470 Increase (Decrease) in CDs - $100,000 and Over, including Foreign (3,605,054) 2,869,667 Increase in Federal Funds Borrowed 2,364,659 2,307,555 Decrease in Short-Term Bank Notes - (1,302,400) Decrease in Other Short-Term Borrowings (356,943) (1,846,186) Proceeds from Issuance of Long-Term Debt and Notes 2,076,263 751,706 Repayment of Long-Term Debt (1,233,202) (422,016) Payment of Cash Dividends (83,810) (74,169) Exercise of Stock Options 13,534 13,903 Other 4,138 2,083 - --------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (269,075) 2,482,613 - --------------------------------------------------------------------------------------------------------------------------- DECREASE IN CASH AND DUE FROM BANKS (229,805) (265,564) CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 984,729 1,213,089 - --------------------------------------------------------------------------------------------------------------------------- CASH AND DUE FROM BANKS AT END OF PERIOD $ 754,924 947,525 - ---------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements. 5 6 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, -------------------------------------- ($000'S) 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31 $ 4,891,269 4,077,031 Net Income 244,304 206,369 Nonowner Changes in Equity, Net of Tax: Change in Unrealized Gain (Losses) on Securities Available for Sale 23,545 (73,671) - -------------------------------------------------------------------------------------------------------------------------- Net Income and Nonowner Changes in Equity 267,849 132,698 Cash Dividends Declared: Fifth Third Bancorp (2001 - $.20 per share and 2000 - $ .16 per share) (94,377) (74,323) Stock Options Exercised Including Treasury Shares Issued 13,534 13,903 Other 122,678 2,742 - -------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31 $ 5,200,953 4,152,051 - --------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements. 6 7 FINANCIAL INFORMATION ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of management, the unaudited Consolidated Financial Statements include all adjustments (which consist of normal recurring accruals) necessary, to present fairly the consolidated financial position as of March 31, 2001 and 2000, the results of operations for the three months ended March 31, 2001 and 2000 and the statements of cash flows for the three months ended March 31, 2001 and 2000. In accordance with accounting principles generally accepted in the United States of America for interim financial information, these statements do not include certain information and footnote disclosures required for complete annual financial statements. Financial information as of December 31, 2000 has been derived from the audited Consolidated Financial Statements of Fifth Third Bancorp (the "Registrant"). The results of operations and statements of cash flows for the three months ended March 31, 2001 and 2000 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the Consolidated Financial Statements and footnotes thereto for the year ended December 31, 2000, included in the Registrant's Annual Report on Form 10-K. Certain reclassifications have been made to prior periods' consolidated financial statements and related notes to conform with the current period presentation. 2. BUSINESS COMBINATIONS: On January 2, 2001, the Registrant completed the acquisition of Resource Management, Inc., d.b.a. Maxus Investment Group ("Maxus"), an Ohio corporation. Maxus was a privately held diversified financial services company that provides investment management and brokerage services, headquartered in Cleveland, Ohio. In connection with this acquisition, the Registrant issued 470,162 shares of Fifth Third common stock and paid $18,090,000 in cash for the outstanding capital stock of Maxus. This transaction was accounted for as a purchase transaction. On March 9, 2001, the Registrant completed the acquisition of Capital Holdings, Inc. ("Capital Holdings") and its subsidiary, Capital Bank N.A., headquartered in Sylvania, Ohio. At December 31, 2000, Capital Holdings had total assets of $1.1 billion and total deposits of $874 million. In connection with this acquisition, the Registrant issued 4,505,385 shares of Fifth Third common stock for the outstanding common shares of Capital Holdings. The accompanying Consolidated Financial Statements of the Registrant as of and for the period ending March 31, 2001, have not been restated for Capital Holdings due to immateriality. In the fourth quarter of 2000, the Registrant entered into a merger agreement with Old Kent Financial Corporation ("Old Kent"), a publicly-traded financial holding company headquartered in Grand Rapids, Michigan. At December 31, 2000, Old Kent had total assets of $23.8 billion and total deposits of $17.4 billion. This transaction was subsequently completed on April 2, 2001 and the Registrant issued 103,716,638 shares of Fifth Third common stock, 7,250 shares of Fifth Third series D perpetual preferred stock and 2,000 shares of Fifth Third series E perpetual preferred stock to the shareholders of Old Kent. The accompanying Consolidated Financial Statements of the Registrant as of and for the period ending March 31, 2001, excludes the financial results of Old Kent. 7 8 ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The Capital and Old Kent transactions are tax-free, stock-for-stock exchanges to be accounted for as poolings-of-interests. 3. On June 20, 2000, the Registrant's Board of Directors approved a three-for-two stock split to be effected in the form of a stock dividend. The additional shares resulting from the stock split were paid July 14, 2000 to shareholders of record as of June 30, 2000. Share and per share amounts reflected throughout the consolidated financial statements and notes thereto have been retroactively restated for the stock split. 4. On December 19, 2000, the Registrant's Board of Directors rescinded the authorization dated June 20, 2000 to purchase in the open market up to five percent of the outstanding shares of Fifth Third common stock. 5. For the first three months of 2001, the Registrant paid $441,043,000 in interest and $7,500,000 in Federal income taxes. For the same period in 2000, the Registrant paid $448,143,000 in interest and paid no Federal income taxes. During the first three months of 2001 and 2000, the Registrant had noncash investing activities consisting of the securitization of $583,481,000 and $254,004,000 of residential mortgage loans, respectively. 6. In September 2000, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." The statement is effective for transfers and servicing of financial assets occurring after March 31, 2001, with certain disclosure and reclassification requirements effective for financial statements for fiscal years ending after December 15, 2000. Included in SFAS No. 140, which replaced SFAS No. 125 of the same name, are the accounting and reporting standards related to securitizations and Qualifying Special Purpose Entities ("QSPE"). The adoption of SFAS No. 140 did not have a material effect on the Registrant. 7. Effective January 1, 2001, the Registrant adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, which establishes accounting and reporting standards for derivative instruments and hedging activities and requires recognition of all derivatives as either assets or liabilities in the statement of financial condition and measurement of those instruments at fair value. The accounting for changes in the fair value of a derivative instruments depends on the intended use of the derivative and the resulting designation. Adoption of the standard did not have a material effect on the Registrant. 8. In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," the Registrant has determined its principal segments to be retail banking, commercial banking, investment advisory services and data processing. Retail banking provides a full range of deposit products and consumer loans and leases. Commercial banking offers services to business, government and professional customers. Investment advisory services provides a full range of investment alternatives for individuals, companies and not-for-profit organizations. Data processing, through Midwest Payment Systems ("MPS"), provides electronic funds transfer ("EFT") services, merchant 8 9 ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) transaction processing, operates the Registrant's Jeanie ATM network and provides other data processing services to affiliated and unaffiliated customers. General corporate and other includes the investment portfolio, certain non-deposit funding, unassigned equity, the net effect of funds transfer pricing and other items not allocated to operating segments. Total revenues exclude securities gains and losses. Results of operations and selected financial information by operating segment for the three months ended March 31, 2001 and 2000 are as follows:
THREE MONTHS ENDED INVESTMENT GENERAL MARCH 31, COMMERCIAL RETAIL ADVISORY DATA CORPORATE ($000'S) BANKING BANKING SERVICES PROCESSING (a) AND OTHER ELIMINATIONS (a) TOTAL - -------------------------------------------------------------------------------------------------------------------- 2001 Total Revenues $ 185,537 $ 319,131 $ 66,887 $ 72,436 $ 42,892 $ (5,692) $ 681,191 - -------------------------------------------------------------------------------------------------------------------- Net Income $ 70,600 $ 102,233 $ 18,929 $ 22,921 $ 29,621 $ - $ 244,304 - -------------------------------------------------------------------------------------------------------------------- 2000 Total Revenues $ 152,966 $ 299,564 $ 60,627 $ 54,348 $ 39,745 $ (4,165) $ 603,085 - -------------------------------------------------------------------------------------------------------------------- Net Income $ 61,364 $ 92,776 $ 17,705 $ 16,893 $ 17,631 - $ 206,369 - --------------------------------------------------------------------------------------------------------------------
(a) Data Processing services revenues provided to the banking segments by MPS are eliminated in the Consolidated Statements of Income. There were no material changes in the identifiable assets that were disclosed in the Registrant's December 31, 2000 Annual Report on Form 10-K. 9 10 ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. The Registrant has elected to present the disclosures required by SFAS No. 130, "Reporting Comprehensive Income," in the Consolidated Statement of Changes in Shareholders' Equity on page 6. The caption "Net Income and Nonowner Changes in Equity" represents total comprehensive income as defined in the statement. Disclosure of the reclassification adjustments, related tax effects allocated to nonowner changes in equity and accumulated nonowner changes in equity for the three months are as follows:
THREE MONTHS ENDED MARCH 31, ($000'S) 2001 2000 - --------------------------------------------------------------------------------------------------------------------------- Reclassification Adjustments, Before Tax - --------------------------------------------------------------------------------------------------------------------------- Change in Unrealized Gains (Losses) Arising During Period $ 41,026 (114,532) Reclassification Adjustment for Gains Included in Net Income 4,236 522 - --------------------------------------------------------------------------------------------------------------------------- Net Unrealized Gains (Losses) on Securities Available for Sale $ 36,790 (114,010) - --------------------------------------------------------------------------------------------------------------------------- Related Tax Effects - --------------------------------------------------------------------------------------------------------------------------- Change in Unrealized Gains (Losses) Arising During Period $ 14,545 (40,522) Reclassification Adjustment for Gains Included in Net Income 1,300 183 - --------------------------------------------------------------------------------------------------------------------------- Net Unrealized Gains (Losses) on Securities Available for Sale $ 13,245 (40,339) - --------------------------------------------------------------------------------------------------------------------------- Reclassification Adjustments, Net of Tax - --------------------------------------------------------------------------------------------------------------------------- Change in Unrealized Gains (Losses) Arising During Period $ 26,481 (74,010) Reclassification Adjustment for Gains Included in Net Income 2,936 339 - --------------------------------------------------------------------------------------------------------------------------- Net Unrealized Gains (Losses) on Securities Available for Sale $ 23,545 (73,671) - --------------------------------------------------------------------------------------------------------------------------- Accumulated Nonowner Changes in Equity - --------------------------------------------------------------------------------------------------------------------------- Beginning Balance-Unrealized Holding Gains (Losses) on Securities Available for Sale $ 25,977 (224,516) Current Period Change 23,545 (73,671) - --------------------------------------------------------------------------------------------------------------------------- Ending Balance-Unrealized Holding Gains (Losses) on Securities Available for Sale $ 49,522 (298,187) - ---------------------------------------------------------------------------------------------------------------------------
10. The reconciliation of earnings per share to earnings per diluted share follows:
THREE MONTHS ENDED MARCH 31, 2001 2000 - --------------------------------------------------------------------------------------------------------------------------- NET AVERAGE PER-SHARE NET AVERAGE PER-SHARE ($000'S) INCOME SHARES AMOUNT INCOME SHARES AMOUNT - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- EPS Income Available to Common Shareholders $ 244,304 467,532 $ 0.52 $ 206,369 463,780 $ 0.45 EFFECT OF DILUTIVE SECURITIES Stock Options 10,075 6,427 Interest on 6% Convertible Subordinated Debentures due 2028, Net of Applicable Income Taxes 1,640 4,416 1,640 4,416 - --------------------------------------------------------------------------------------------------------------------------- EARNINGS PER DILUTED SHARE Income Available to Common Shareholders Plus Assumed Conversions $ 245,944 482,023 $ 0.51 $ 208,009 474,623 $ 0.44 - ---------------------------------------------------------------------------------------------------------------------------
10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Registrant's financial condition and results of operations during the periods included in the Consolidated Financial Statements which are a part of this filing. This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, that involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include the economic environment, competition, products and pricing in geographic and business areas in which the Registrant operates, prevailing interest rates, changes in government regulations and policies affecting financial services companies, credit quality and credit risk management, changes in the banking industry including the effects of consolidation resulting from possible mergers of financial institutions, acquisitions and integration of acquired businesses. The Registrant undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this report. RESULTS OF OPERATIONS The Registrant's net income was $244.3 million for the first three months of 2001, an 18 percent increase over last year's $206.4 million. Earnings per diluted share were $.51 for the first quarter of 2001, up 16 percent from $.44 for the same period last year. Net interest income on a fully taxable equivalent basis for the first quarter of 2001 was $412.7 million, a 7 percent increase over $385.5 million for the same period last year, resulting principally from a 4 percent growth in average interest-earning assets and a 15 basis points ("bp") increase in net interest margin, from 3.82 percent during the first quarter of 2000 to 3.97 percent in the first quarter 2001. The positive effect of a 24bp improvement in the yield on average interest-earning assets was offset by a 25bp increase in funding costs due to the repricing of borrowed funds and higher year-over-year deposit rates on existing accounts. The provision for credit losses was $30.3 million in the 2001 first quarter compared to $21.4 million in the same period last year and $23.1 million last quarter. Net charge-offs for the quarter were $30.9 million compared to $14.9 million in the 2000 first quarter and $27.1 million last quarter. Net charge-offs as a percent of average loans and leases outstanding increased 23bp to .47 percent from .24 percent in the same period last year. Nonperforming assets as a percentage of total loans, leases and other real estate owned was .39 percent at March 31, 2001 compared to .32 percent at March 31, 2000 and .39 percent last quarter. Underperforming assets were $190.4 million at March 31, 2001, or .71 percent of total loans, leases and other real estate owned, up 8bp compared to the $160.8 million, or .63 percent, at March 31, 2000 and the $187.1 million or .72 percent last quarter. 11 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Registrant maintains a reserve to absorb probable loan and lease losses inherent in the portfolio. The reserve for credit losses is maintained at a level the Registrant considers to be adequate to absorb probable loan and lease losses inherent in the portfolio, based on evaluations of the collectibility and historical loss experience of loans and leases. Credit losses are charged and recoveries are credited to the reserve. Provisions for credit losses are based on the Registrant's review of the historical credit loss experience and such factors which, in management's judgement, deserve consideration under existing economic conditions in estimating probable credit losses. The reserve is based on ongoing quarterly assessments of the probable estimated losses inherent in the loan and lease portfolio. In determining the appropriate level of reserves, the Registrant estimates losses using a range derived from "base" and "conservative" estimates. The Registrant's methodology for assessing the appropriate reserve level consists of several key elements. Larger commercial loans that exhibit potential or observed credit weaknesses are subject to individual review. Where appropriate, reserves are allocated to individual loans based on management's estimate of the borrower's ability to repay the loan given the availability of collateral, other sources of cash flow and legal options available to the Registrant. Included in the review of individual loans are those that are impaired as provided in Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan." Any reserves for impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or fair value of the underlying collateral. The Registrant evaluates the collectibility of both principal and interest when assessing the need for a loss accrual. Historical loss rates are applied to other commercial loans not subject to specific reserve allocations. The loss rates are derived from a migration analysis, which computes the net charge-off experience sustained on loans according to their internal risk grade. These grades encompass nine categories that define a borrower's ability to repay their loan obligations. Homogenous loans, such as consumer installment, residential mortgage loans, and automobile leases are not individually risk graded. Reserves are established for each pool of loans based on the expected net charge-offs for one year. Loss rates are based on the average net charge-off history by loan category. Historical loss rates for commercial and consumer loans may be adjusted for significant factors that, in management's judgement, reflect the impact of any current conditions on loss recognition. Factors which management considers in the analysis include the effects of the national and local economies, trends in the nature and volume of loans (delinquencies, charge-offs, nonaccrual and problem loans), changes in the internal lending policies and credit standards, collection practices, and examination results from bank regulatory agencies and the Registrant's internal credit examiners. An unallocated reserve is maintained to recognize the imprecision in estimating and measuring loss when evaluating reserves for individual loans or pools of loans. Reserves on individual loans and historical loss rates are reviewed quarterly and adjusted as necessary based on changing borrower and/or collateral conditions and actual collection and charge-off experience. 12 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Total other operating income, excluding securities gains, increased 20 percent to $288.3 million in the first quarter of 2001, compared to $239.6 million in the first quarter 2000, with data processing income increasing 31 percent, to $66.7 million. Increases in electronic funds transfers ("EFT") and higher transaction volume from increased debit and ATM card usage, coupled with expansion of business-to-business e-commerce, contributed to the increase in data processing income. Investment advisory income increased 10 percent to $55.7 million in the first quarter of 2001 compared to $50.8 million in the same period last year. Personal trust revenue increased 8 percent over first quarter last year and brokerage fees increased 21 percent on the strength of a more productive sales force and increased market activity. Revenue from foundation and endowment services and custody services remains strong with double-digit growth rates across the board. Service charges on deposits increased 18 percent over the same period last year primarily due to the success of new account campaigns, while other service charges and fees grew 21 percent over the same period last year, reflecting an increase in mortgage loan servicing fees, a 36 percent increase in commercial banking fees and advances in credit card fees and loan and lease fees. The efficiency ratio (operating expenses divided by the sum of taxable equivalent net interest income and other operating income) was 41.9 percent for the first quarter of 2001, down from 43.8 percent in the same period last year. The improvement in the 2001 efficiency ratio was primarily due to increased revenues during the first quarter. Total operating expenses increased to $293.7 million in the 2001 first quarter, or 7 percent over the same period last year. Salaries, incentives and benefits increased 3 percent in the first quarter of 2001 to $139.1 million. Net occupancy expense increased to $21.2 million during the first quarter primarily due to rent expense incurred, while total other operating expenses increased 13 percent, to $120.4 million for the quarter. FINANCIAL CONDITION The Registrant's balance sheet remains strong with high-quality assets and solid capital levels. Total assets were $47 billion at March 31, 2001 compared to $45.9 billion at December 31, 2000 and $44.4 billion at March 31, 2000, an increase of 3 percent and 6 percent, respectively. Return on average equity was 19.6 percent and return on average assets was 2.18 percent for the first quarter of 2001 compared to 19.4 percent and 1.90 percent, respectively, for the same quarter of last year. Net interest income growth continues to be fueled by interest-earning asset mix and growth and an increase in net interest margin. Average interest-earning assets increased to $42.1 billion for the first quarter of 2001, an increase of $1.5 billion, or 4 percent, over the same period last year and $715 million, or 2 percent, over 2000 year-end. Average interest-earning assets increased primarily due to growth in securities available for sale, coupled with growth in commercial loans and leases and consumer loans and leases. 13 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Transaction account deposits grew 16 percent, or $2.2 billion, over the same period last year and $778 million, or 5 percent, over 2000 year-end. Deposits growth during the period is primarily attributable to the success of campaigns emphasizing customer deposit accounts. LIQUIDITY AND CAPITAL RESOURCES The maintenance of an adequate level of liquidity is necessary to ensure sufficient funds are available to meet customer loan demand and deposit withdrawals. The banking subsidiaries' liquidity sources consist of short-term marketable securities, maturing loans and federal funds loaned and selected securitizable loan assets. Liquidity has also been obtained through liabilities such as customer-related core deposits, funds borrowed, certificates of deposit and public funds deposits. At March 31, 2001, shareholders' equity was $5.2 billion compared to $4.2 billion at March 31, 2000, an increase of $1 billion, or 25 percent. Shareholders' equity as a percentage of total assets as of March 31, 2001 was 11.1 percent. The Federal Reserve Board has adopted risk-based capital guidelines which assign risk weightings to assets and off-balance sheet items and also define and set minimum capital requirements (risk-based capital ratios). The guidelines also define "well-capitalized" ratios of Tier 1, total capital and leverage as 6 percent, 10 percent and 5 percent, respectively. The Registrant exceeded these "well-capitalized" ratios at March 31, 2001 and 2000. At March 31, 2001, the Registrant had a Tier 1 risk-based capital ratio of 13.03 percent, a total risk-based capital ratio of 14.76 percent and a leverage ratio of 10.65 percent. At March 31, 2000, the Registrant had a Tier 1 risk-based capital ratio of 11.62 percent, a total risk-based capital ratio of 13.38 percent and a leverage ratio of 9.52 percent. 14 15 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest rate risk management focuses on maintaining consistent growth in net interest income within Board-approved policy limits. The Registrant uses an earnings simulation model to analyze net interest income sensitivity to movements in interest rates. Given an immediate, sustained 200 basis point upward shock to the yield curve used in the simulation model, it is estimated net interest income for the Registrant would increase by 1.00 percent over one year and increase by 1.62 percent over two years. A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 2.46 percent over one year and decrease net interest income by an estimated 6.16 percent over two years. 15 16 PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 2(c) On January 2, 2001, the Registrant issued 470,162 shares of Fifth Third common stock to the shareholders of Maxus in connection with the acquisition of Maxus. These securities were issued pursuant to the exemptions contained in section 4(2) of the Securities Act of 1933, as amended and Rule 506 of Regulation D promulgated thereunder. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On March 20, 2001, the Registrant held a Special Meeting of Shareholders and its Annual Meeting of Shareholders for which the Board of Directors solicited proxies. At the Special Meeting and Annual Meeting, the shareholders adopted and approved all of the proposals stated in the Proxy Statements dated January 25, 2001 and February 9, 2001, respectively, which are incorporated herein by reference. The proposal voted on and approved by shareholders at the Special Meeting was as follows: 1. Adoption of an amended and restated agreement and plan of merger dated January 16, 2001 by and among Old Kent Financial Corporation, the Registrant and Fifth Third Financial Corporation and approval of the issuance of shares of Fifth Third common stock to the shareholders of Old Kent in the merger of Old Kent with and into Fifth Third Financial pursuant to the amended and restated plan and agreement of merger by vote of 370,506,682 for, 2,177,329 against and 2,869,036 withheld. The proposals voted on and approved by shareholders at the Annual Meeting were as follows: 1. Election of six (6) Class III Directors (Darryl F. Allen, Gerald V. Dirvin, Joseph H. Head, Jr., Allen M. Hill, Dr. Mitchel D. Livingston, and James E. Rogers) to serve until the Annual Meeting in 2004. 2. Approval of the proposal to amend Article Fourth of the Amended Articles of Incorporation, as amended, to increase the authorized number of shares of Common Stock of the Registrant, without par value, to 1,300,000,000 shares by vote of 380,048,183 for, 9,143,225 against and 2,236,019 withheld. 3. Approval of the proposal to amend Article II Section 11 of the Code of Regulations, as amended, to allow Shareholders to grant proxies by electronic and telephonic means by vote of 385,837,413 for, 3,399,309 against and 2,190,705 withheld. 4. Approval of the proposal to amend the Fifth Third Bancorp 1998 Long-Term Incentive Stock Plan to increase the number of shares of the Registrant's Common Stock eligible for issuance under the Long-Term Plan to 37,733,020 shares by vote of 357,388,944 for, 30,675,900 against and 3,362,583 withheld. 16 17 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONTINUED) - ------------------------------------------------------------------------ 5. Approval of the proposal to approve the Fifth Third Bancorp Stock Option Gain Deferral Plan, including the issuance of up to 1,000,000 shares of the Registrant's Common Stock thereunder by vote of 370,271,402 for, 16,981,847 against and 4,174,178 withheld. 6. Approval of the proposal to approve The Fifth Third Bancorp Nonqualified Deferred Compensation Plan, including the issuance of up to 1,000,000 shares of the Registrant's Common Stock thereunder by vote of 372,862,903 for, 14,565,664 against and 3,998,860 withheld. 7. Approval of the proposal to appoint the firm of Deloitte & Touche LLP to serve as independent auditors for the Registrant for the year 2001 by vote of 386,340,857 for, 3,075,273 against and 2,011,297 withheld. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) List of Exhibits (3)(i) Amended Articles of Incorporation, as amended. (3)(ii) Code of Regulations, as amended. (b) Reports on Form 8-K The Registrant filed a report on Form 8-K/A dated January 30, 2001 related to 1) the Amended and Restated Agreement and Plan of Merger with and between Old Kent Financial Corporation and the Registrant; and 2) unaudited pro forma condensed combined financial information of Fifth Third giving effect to Fifth Third's then-pending acquisitions of both Old Kent Financial Corporation and Capital Holdings, Inc. The Registrant filed a report on Form 8-K dated March 6, 2001 related to financial information prepared to further assist investors, financial analysts and other interested parties in determining the effect the then-pending transaction with Old Kent Financial Corporation will have on Fifth Third's future results, Fifth Third prepared unaudited condensed pro forma financial statement information and supplemental financial data for the year ended December 31, 2000 and for the three months ended December 31, September 30, June 30 and March 31, 2000. 17 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED) The Registrant filed a report on Form 8-K dated March 9, 2001 related to Fifth Third Bancorp and the U. S. Justice Department agreement that, as a condition to approving the merger of Old Kent Financial Corporation with Fifth Third Financial Corporation, six banking locations in areas where the two banks overlap will be sold. The Registrant filed a report on Form 8-K dated March 14, 2001 related to 1) the March 12, 2001 approval by the Federal Reserve Board of the then-pending merger of Fifth Third Bancorp and Old Kent Financial Corporation; and (2) the approval at a special meeting of Old Kent shareholders, held March 13, 2001, of the then-pending merger of Fifth Third Bancorp and Old Kent Financial Corporation. The Registrant filed a report on Form 8-K dated March 20, 2001 related to 1) financial statements and exhibits that included the Registrant's discussion of financial trends; and 2) Regulation FD Disclosure to assist investors, financial analysts and other interested parties in their analysis of Fifth Third Bancorp. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Fifth Third Bancorp ------------------- Registrant Date: May 15, 2001 /s/ Neal E. Arnold ------------------- Neal E. Arnold Executive Vice President and Chief Financial Officer 18 EX-3.I 2 l88345aex3-i.txt EXHIBIT 3(I) 1 EXHIBIT (3)(i) SECOND AMENDED ARTICLES OF INCORPORATION OF FIFTH THIRD BANCORP, AS AMENDED FIRST: The name of the corporation shall be FIFTH THIRD BANCORP. SECOND: The place in the State of Ohio where the principal office of the corporation is to be located is the City of Cincinnati, County of Hamilton. THIRD: The purpose for which the corporation is formed is to engage in any and/or all lawful acts or activities for which corporations may be formed under Section 1701.01 to 1701.98, inclusive, of the Ohio Revised Code, as amended. FOURTH: (A) The total authorized number of shares of the corporation is One Billion Three Hundred Million Five Hundred Thousand (1,300,000,00) shares, which shall be classified as follows: 1) One Billion Three Hundred Million (1,300,000,000) shares of common stock, without par value. Each share of common stock shall entitle the holder thereof to one (1) vote on each matter properly submitted to the stockholders for their vote, consent, waiver, release or other action, subject to the provisions of the law with respect to cumulative voting. 2) Five Hundred Thousand (500,000) shares of preferred stock, without par value. (a) Series D Perpetual Preferred Stock. Seven-Thousand Two-Hundred Fifty (7,250) shares of the preferred stock of the corporation shall be designated "Series D Perpetual Preferred Stock" and shall have the rights, preferences and entitlements that follow: 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as Series D Perpetual Preferred Stock (the "Series D Preferred Stock"), which shall be a closed series consisting of 7,250 shares of cumulative perpetual convertible preferred stock. The number of authorized shares of the Series D Preferred Stock may not be increased or decreased. Each share of the Series D Preferred Stock shall have a stated value of $1,000 per share (the "Series D Stated Value"). 2. DIVIDENDS. (i) Entitlement. The holders of the Series D Preferred Stock shall be entitled to receive, as and when declared payable by the Board of Directors from funds of the corporation legally available for the payment thereof, cumulative preferred dividends in lawful money of the United States of America at the applicable rate fixed and determined as herein authorized, and no more, payable quarterly on the last day of each March, June, September, and December (the "Series D Dividend Payment Dates") in each year with respect to the quarterly period beginning on the first day of each calendar quarter and ending on each such respective payment date (the "Series D Dividend Period") to shareholders of record on a date, to be fixed by the Board of Directors, not exceeding forty (40) days preceding each Series D Dividend Payment 2 Date. Accumulations of dividends shall not bear interest. The initial dividend payment for Series D Preferred Stock will accrue from the date such series is issued and will be payable on the First Series D Dividend Payment Date following such date. The annual rate of preferred dividends on each share of Series D Preferred Stock shall be the product of the applicable Series D Dividend Rate (as hereinafter described) and the Series D Stated Value, payable in quarterly installments, provided, however, that if any change in the Series D Dividend Rate shall occur, the dividends payable for that part of the Series D Dividend Period occurring prior to such change shall be payable on the basis of the Series D Dividend Rate in effect prior to such change and the dividends payable for that part of the Series D Dividend Period from and after such change shall be payable on the basis of the Series D Dividend Rate then becoming effective and such determination shall be made on the basis of a thirty (30) day month and a three hundred and sixty (360) day year. (ii) Series D Dividend Rate. The rate of preferred dividends per share of the Series D Preferred Stock per annum based on the Series D Stated Value (the "Series D Dividend Rate") shall be eight percent (8%). (iii) Cumulative and Perpetual. All dividends payable on account of the Series D Preferred Stock shall be cumulative and shall be paid, from funds of the corporation legally available for the payment thereof, so long as any shares of the Series D Preferred Stock are outstanding. (iv) Restrictions on Dividend Payments. All shares of Common Stock and each series of Preferred Stock shall rank junior to the Series D Preferred Stock as to dividends. So long as any shares of the Series D Preferred Stock remain outstanding, no dividend shall be paid or declared, or declared and set apart for payment, or other distribution made, on the shares of any class of stock ranking, as to dividend rights, junior to the Series D Preferred Stock, nor shall any shares of any class of stock (or series thereof) of the corporation ranking, as to dividend rights, junior to, or on a parity with, the Series D Preferred Stock, be purchased, redeemed or otherwise acquired for value by the corporation, unless all dividends, at the applicable rate, on the Series D Preferred Stock shall have been declared and paid, or declared and set apart for payment, for all past Series D Dividend Periods ending immediately prior to the date on which such dividend, distribution, purchase, redemption or acquisition is to occur and the then current Series D Dividend Period; provided, however, that the foregoing restrictions shall not apply (a) to the declaration and payment, on shares ranking junior to the Series D Preferred Stock as to dividend rights, of dividends payable solely in shares of stock of any class of shares ranking junior to the Series D Preferred Stock as to dividend rights, or (b) to the acquisition of any shares ranking junior to, or on a parity with, the Series D Preferred Stock as to dividend rights through application of the proceeds of the issue and sale of any class of any shares ranking junior to, or on a parity with, the Series D Preferred Stock as to dividend rights sold at or about the time of such acquisition. No dividends shall be paid or declared, or declared and set apart for payment, or other distribution made on any shares of any class of stock (or series thereof) of the corporation ranking, as to dividend rights, on a parity with the Series D Preferred Stock for any dividend period unless, at the same time, a like proportion of dividends for the same or similar dividend period, ratably in proportion to the respective annual dividend rate fixed therefor, shall be paid or declared, or declared and set apart for payment, on all shares of Series D Preferred Stock. 3 3. STATUS OF REACQUIRED SHARES. The corporation shall retire any of the shares of the Series D Preferred Stock that are converted into shares of Common Stock pursuant to Paragraph (2)(a)5., or that it repurchases or otherwise acquires, and such shares shall not be reissued as shares of Series D Preferred Stock but shall revert to authorized but unissued shares of Preferred Stock and may be reissued as shares of a different series of Preferred Stock in any future designation by the Board of Directors. 4. RESTRICTION ON ISSUANCE OF ADDITIONAL PREFERRED STOCK. So long as any shares of the Series D Preferred Stock are outstanding, the corporation shall not issue any securities ranking senior to, or on a parity with, the Series D Preferred Stock as to dividend rights or rights upon the liquidation, dissolution or winding up of the corporation, without the prior approval of the holders of a majority of the Series D Preferred Stock. 5. CONVERSION. (i) Right of Conversion. Subject to the provisions for adjustment set forth herein, each share of Series D Preferred Stock shall be convertible, at the option of the holder thereof, in the manner hereinafter provided, into fully paid and nonassessable shares of Common Stock at the conversion price, determined as herein provided, in effect on the date of conversion, each share of Series D Preferred Stock being credited at its Series D Stated Value. The price at which shares of Common Stock shall be delivered upon conversion of shares of Series D Preferred Stock (the "Series D Conversion Price") shall be initially $23.5399 per share of Common Stock. The Series D Conversion Price shall be adjusted in certain instances as provided in Paragraph (2)(a)5.(iii) below. (ii) Procedure for Conversion. Any holder of shares of Series D Preferred Stock desiring to convert such shares into shares of Common Stock shall surrender the certificate or certificates for the shares of Series D Preferred Stock being converted, duly endorsed in blank or duly endorsed or assigned to the corporation, at the principal office of the corporation or at a bank or trust company appointed by the corporation for that purpose, accompanied by a written notice of conversion specifying the number of shares of Series D Preferred Stock to be converted and the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issue of shares of Common Stock in such name or names. If less than all of the shares of Series D Preferred Stock represented by a certificate are to be converted by a holder, the corporation, upon such conversion, shall issue and deliver, or cause to be issued and delivered, to such holder a certificate or certificates for the shares of Series D Preferred Stock not so converted. The holders of shares of Series D Preferred Stock at the close of business on the record date fixed for a Series D Dividend Payment Date shall be entitled to receive the dividend payable on such shares of Series D Preferred Stock on the corresponding Series D Dividend Payment Date notwithstanding the subsequent conversion thereof or the corporation's default in payment of the dividend due on such Series D Dividend Payment Date. However, shares of Series D Preferred Stock surrendered for conversion during the period from the close of business on any record date fixed for a Series D Dividend Payment Date for the Series D Preferred Stock to the opening of business on the corresponding Series D Dividend Payment Date must be accompanied by payment of an amount equal to the dividend payable on such shares of Series D Preferred Stock on such Series D Dividend Payment Date. A holder of shares of Series D Preferred Stock on a record date fixed for a Series D Dividend Payment Date 4 who (or whose transferee) converts shares of Series D Preferred Stock on a Series D Dividend Payment Date will receive the dividend payable on such shares of Series D Preferred Stock by the corporation on such date, and the converting holder need not include payment in the amount of such dividend upon surrender of shares of Series D Preferred Stock for conversion. Except as provided above, no payment or adjustment will be made on account of unpaid dividends upon the conversion of Series D Preferred Stock. As promptly as practicable after the surrender of certificates for shares of Series D Preferred Stock as aforesaid, the corporation shall issue and shall deliver at such office to such holder, or on his or her written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such shares in accordance with the provisions of this Paragraph (2)(a)5., and any fractional interest in respect of a share of Common Stock arising upon such conversion shall be promptly settled as provided in Paragraph (2)(a)5.(vi). Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of Series D Preferred Stock shall have been surrendered and such notice received by the corporation as aforesaid; the shares of Series D Preferred Stock so surrendered for conversion shall no longer be deemed to be outstanding and all rights with respect to such shares of Series D Preferred Stock shall cease, except the right of the holders thereof to receive full shares of Common Stock in exchange therefor, payment of dividends as provided in the first paragraph of this Paragraph (2)(a)5.(ii) and payment for any fractional shares; and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date. All shares of Common Stock delivered upon conversions of the Series D Preferred Stock will upon delivery be duly and validly issued and fully paid and nonassessable. (iii) Adjustments of the Series D Conversion Price. (A) The Series D Conversion Price shall be adjusted from time to time as follows: (1) In case the corporation shall pay or make a dividend or other distribution on any class of capital stock of the corporation in shares of Common Stock, the Series D Conversion Price in effect at the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Series D Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. (2) In case the corporation shall issue rights or warrants entitling any person to subscribe for or purchase Common Stock at a price per share less than the current market price per share (determined as provided in Paragraph (2)(a)5.(iii)(B) herein) of the Common Stock on the date fixed for the determination of the persons entitled to receive such rights or warrants, the Series D Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by 5 multiplying such Series D Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. Notwithstanding the foregoing, in the event that the corporation shall distribute or shall have distributed any rights or warrants to acquire capital stock ("Rights") pursuant to this Paragraph (2)(a)5.(iii)(A)(2), the distribution of separate certificates representing the Rights subsequent to their initial distribution (whether or not the initial distribution of the Rights shall have occurred prior to the date of the issuance of the Series D Preferred Stock) shall be deemed to be the distribution of the Rights for purposes of this Paragraph (2)(a)5.(iii)(A)(2); provided that the corporation may, in lieu of making any adjustment pursuant to this Paragraph (2)(a)5.(iii)(A)(2) upon a distribution of separate certificates representing the Rights, make proper provision so that each holder of Series D Preferred Stock who converts such Series D Preferred Stock (or any portion thereof) (A) before the record date for such distribution of separate certificates shall be entitled to receive upon conversion shares of Common Stock issued with Rights and (B) after such record date and prior to the expiration, redemption or termination of the Rights shall be entitled to receive upon conversion, in addition to the shares of Common Stock issuable upon conversion, the same number of Rights as would a holder of the number of shares of Common Stock that such Series D Preferred Stock so converted would have entitled the holder thereof to purchase in accordance with the terms and provisions applicable to the Rights if such Series D Preferred Stock were converted immediately prior to the record date for such distribution. Common Stock owned by or held for the account of the Corporation or any majority owned subsidiary shall not be deemed outstanding for the purpose of any adjustment required under this Paragraph (2)(a)5.(iii)(A)(2). (3) In case the corporation shall, by dividend or otherwise, distribute to any holder of the corporation's securities evidences of indebtedness or assets (including securities, but excluding any rights or warrants referred to in Paragraph (2)(a)5.(iii)(A)(2), any dividend or distribution paid in cash out of the surplus of the corporation and any dividend or distribution referred to in Paragraph (2)(a)5.(iii)(A)(1) herein), the Series D Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Series D Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of shareholders entitled to receive such distribution by a fraction of which the numerator shall be the current market price per share (determined as provided in Paragraph (2)(a)5.(iii)(B) herein) of the Common Stock on the date fixed for such determination, less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed allocable to one share of Common Stock, and the denominator shall be such current market price per share of Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such distribution. (4) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares, the Series D Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes 6 effective shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall each be combined into a smaller number of shares, the Series D Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (5) The reclassification of Common Stock into securities other than Common Stock (other than any reclassification upon a consolidation or merger to which Paragraph (2)(a)5.(iii)(E) applies) shall be deemed to involve (a) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of shareholders entitled to receive such distribution" and the "date fixed for such determination" within the meaning of Paragraph (2)(a)5.(iii)(A)(3), and (b) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision becomes effective," or "the day upon which such combination becomes effective," as the case may be, and "the day upon which such subdivision or combination becomes effective," within the meaning of Paragraph (2)(a)5.(iii)(A)(4). (B) For the purpose of any computation under Paragraph (2)(a)5.(iii)(A)(2) and Paragraph (2)(a)5.(iii)(A)(3), the current market price per share of Common Stock on any day shall be deemed to be the average of the average high and low sales price per share for the Common Stock, as reported on the Nasdaq National Market or such national securities exchange on which the Common Stock is primarily traded at the time of such computation, for thirty (30) consecutive trading days immediately preceding the day in question. (C) Notwithstanding the provisions of Paragraph (2)(a)5.(iii)(A) above, no adjustment in the Series D Conversion Price shall be required unless such adjustment (plus any adjustments not previously made by reason of this Paragraph (2)(a)5.(iii)(C)) would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Paragraph (2)(a)5.(iii)(C) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Paragraph (2)(a)5.(iii) shall be made to the nearest cent. (D) The corporation may make such reductions in the Series D Conversion Price, in addition to those required by this Paragraph (2)(a)5.(iii), as it considers to be advisable in order to avoid or diminish any income tax to any holder of shares of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes or for any other reasons. (E) In case the Corporation shall effect any capital reorganization of the Common Stock (other than a subdivision, combination, capital reorganization or reclassification provided for in Paragraph (2)(a)5.(iii)(A)) or shall consolidate, merge or engage in a statutory share exchange with or into any other corporation (other than a consolidation, merger or share exchange in which the corporation is the surviving corporation and each share of Common Stock outstanding immediately prior to such consolidation or merger 7 is to remain outstanding immediately after such consolidation or merger) or shall sell or transfer all or substantially all its assets to any other corporation, lawful provision shall be made as a part of the terms of such transaction whereby the holders of Series D Preferred Stock shall receive upon conversion thereof, in lieu of each share of Common Stock which would have been issuable upon conversion of such stock if converted immediately prior to the consummation of such transaction, the same kind and amount of stock (or other securities, cash or property, if any) as may be issuable or distributable in connection with such transaction with respect to each share of Common Stock outstanding at the effective time of such transaction, subject to subsequent adjustments for subsequent stock dividends and distributions, subdivisions or combination of shares, capital reorganization, reclassifications, consolidations, mergers or share exchanges, as nearly equivalent as possible to the adjustments provided for in this Paragraph (2)(a)5.(iii). (F) Whenever the Series D Conversion Price is adjusted as herein provided, a notice stating that the Series D Conversion Price has been adjusted and setting forth the adjusted Series D Conversion Price shall, as soon as practicable, be mailed to the holders of record of outstanding shares of Series D Preferred Stock. (G) In case: (1) the corporation shall declare a dividend or other distribution on the Common Stock otherwise than in cash out of its surplus; (2) the corporation shall authorize the granting to the holders of the Common Stock of rights or warrants entitling them to subscribe for or purchase any shares of capital stock of any class or of any other rights; (3) of any reclassification of the Common Stock (other than a subdivision or combination of outstanding shares of Common Stock), or of any consolidation, merger or share exchange to which the corporation is a party and for which approval of any shareholders of the corporation is required, or of the sale or transfer of all or substantially all the assets of the corporation; or (4) of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; then the corporation shall cause to be mailed to the holders of record of the outstanding shares of Series D Preferred Stock, at least twenty (20) days (or ten (10) days in any case specified in Paragraph (2)(a)5.(iii)(G)(1) or Paragraph (2)(a)5.(iii)(G)(2) above) prior to the applicable record or effective date hereinafter specified, a notice stating (a) the date as of which the holders of record of shares of Common Stock to be entitled to such dividend, distribution, rights or warrants is to be determined, or (b) the date on which such reclassification, consolidation, merger, share exchange, sale, transfer, liquidation, dissolution or winding up is expected to become effective and the date as of which it is expected that holders of record of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, share exchange, sale, transfer, liquidation, dissolution or winding up. Such notice shall also state whether such transaction will result in any adjustment in the Series D Conversion Price applicable to the Series D Preferred Stock and, if so, shall state what the adjusted Series D Conversion Price will be and when it will become effective. Neither 8 the failure to give the notice required by this Paragraph (2)(a)5.(iii)(G), nor any defect therein, to any particular holder shall affect the sufficiency of the notice or the legality or validity of the proceedings described in Paragraph (2)(a)5.(iii)(G)(1) through Paragraph (2)(a)5.(iii)(G)(4). (iv) Reservation of Shares Issuable Upon Conversion. The corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, for the purpose of issuance upon conversion of Series D Preferred Stock, the full number of shares of Common Stock then issuable upon the conversion of all shares of Series D Preferred Stock then outstanding and shall take all action necessary so that shares of Common Stock so issued will be validly issued, fully paid and nonassessable. (v) Allocation of Costs. The corporation will pay any and all stamp or similar taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on conversion of Series D Preferred Stock. The corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series D Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person requesting such issuance has paid to the corporation the amount of any such tax or has established to the satisfaction of the corporation that such tax has been paid. (vi) Payment in Lieu of Fractional Shares. No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of Series D Preferred Stock. If any such conversion would otherwise require the issuance of such a fractional share, an amount equal to such fraction multiplied by the average of the average high and low sales price per share for the Common Stock, as reported on the Nasdaq National Market or such national securities exchange on which the Common Stock is primarily traded at the time of such computation, for thirty (30) consecutive trading days immediately preceding the date of conversion, shall be paid to the holder in cash by the corporation. (vii) Approval of Conversion. Conversion of shares of the Series D Preferred Stock held of record by Thomas D. Flanagan may be converted into shares of Common Stock pursuant to this Paragraph (2)(a)5 only if the conversion has received the prior approval of the Board of Governors of the Federal Reserve System or, where permitted to be approved by a Federal Reserve Bank, the prior approval of the appropriate Federal Reserve Bank, unless at the time of such redemption, such prior approval shall not be required under applicable laws, rules or regulations, or order of said Board of Governors. 6. LIQUIDATION PREFERENCE. In the event of a voluntary or involuntary liquidation, dissolution or winding up of the corporation, each holder of the Series D Preferred Stock shall be entitled to receive out of the assets of the corporation available for distribution to shareholders, after payment in full of all amounts owing to the holders of all shares of all classes or series of stock having rights senior to the Series D Preferred Stock upon the liquidation, dissolution or winding up of the corporation, an amount per share equal to, but no more than, the Series D Stated Value per share of each share of Series D Preferred Stock held by such holder, including all accrued and unpaid dividends, whether or not declared, to and including the date of the voluntary or involuntary liquidation, dissolution or winding up of the corporation. Until payment to the holders of the Series D Preferred Stock of all amounts owing as aforesaid, or until money or other assets sufficient for such payment shall have been set apart from its other funds and assets for payment by the corporation, for the account of such holders, so as to be and continue to 9 be available for payment to such holders, no payment or distribution upon such liquidation, dissolution or winding up shall be made to holders of shares ranking junior to, or on a parity with, the Series D Preferred Stock as to rights upon the liquidation, dissolution or winding up of the corporation. The Common Stock and each series of Preferred Stock shall be junior to the Series D Preferred Stock as to rights upon the liquidation, dissolution or liquidation or winding up of the corporation, except that the Series E Preferred Stock shall be on a parity with the Series D Preferred Stock with respect to the right to receive payment or distribution upon the liquidation, dissolution or liquidation or winding up of the corporation. If upon any such liquidation, dissolution or winding up, the assets of the corporation available for payment and distribution to shareholders are insufficient to make payment in full, as hereinabove provided, to the holders of the Series D Preferred Stock and the holders of all other shares of Preferred Stock which rank on a parity with the Series D Preferred Stock as to rights upon the liquidation, dissolution or winding up of the corporation, payment shall be made to such holders ratably in accordance with the liquidation value of shares held by them, respectively. Neither a consolidation nor merger of the corporation with or into any other corporation, nor a merger of any other corporation into the corporation, nor the purchase or redemption of all or any part of the outstanding shares of any class or classes of stock of the corporation, nor the sale or transfer of properties of the corporation substantially as an entirety, shall be construed to be a liquidation, dissolution or winding up of the corporation within the meaning of the foregoing provisions. 7. BUSINESS COMBINATIONS AND OTHER TRANSACTIONS. The Corporation shall not effect a merger, consolidation, reorganization, recapitalization or similar transaction or an exchange of securities with another party unless, following such merger, consolidation, reorganization, recapitalization, similar transaction or exchange of securities, (i) the Series D Preferred Stock will remain issued and outstanding, or (ii) provision shall have been made for the issuance to the holders of the Series D Preferred Stock of another series of preferred stock with powers, preferences and special rights substantially identical to those of the Series D Preferred Stock. 8. VOTING OF SERIES D PREFERRED STOCK. The holders of the Series D Preferred Stock shall have no right to vote upon any matter except as shall be affirmatively provided in the Ohio General Corporation Law. (b) Series E Perpetual Preferred Stock. Two-Thousand shares of preferred stock of the corporation shall be designated "Series E Perpetual Preferred Stock" and shall have the rights, preferences and entitlements that follow: 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as Series E Perpetual Preferred Stock (the "Series E Preferred Stock"), which shall be a closed series consisting of 2,000 shares of cumulative perpetual preferred stock. The number of authorized shares of Series E Preferred Stock may not be increased or decreased. Each share of the Series E Preferred Stock shall have a stated value of $1,000 per share (the "Series E Stated Value"). 2. DIVIDENDS. 10 (i) Entitlement. The holders of Series E Preferred Stock shall be entitled to receive, as and when declared payable by the Board of Directors from funds of the corporation legally available for the payment thereof, cumulative preferred dividends in lawful money of the United States of America at the applicable rate fixed and determined as herein authorized, and no more, payable quarterly on the last day of each March, June, September, and December (the "Series E Dividend Payment Dates") in each year with respect to the quarterly period beginning on the first day of each calendar quarter and ending on each such respective payment date (the "Series E Dividend Period") to shareholders of record on a date, to be fixed by the Board of Directors, not exceeding forty (40) days preceding each Series E Dividend Payment Date. Accumulations of dividends shall not bear interest. The initial dividend payment for Series E Preferred Stock will accrue from the date such series is issued and will be payable on the first Series E Dividend Payment Date following such date. The annual rate of preferred dividends on each share of Series E Preferred Stock shall be the product of the applicable Series E Dividend Rate (as hereinafter described) and the Series E Stated Value, payable in quarterly installments, provided, however, that if any change in the Series E Dividend Rate shall occur the dividends payable for that part of the Series E Dividend Period occurring prior to such change shall be payable on the basis of the Series E Dividend Rate in effect prior to such change and the dividends payable for that part of the Series E Dividend Period from and after such change shall be payable on the basis of the Series E Dividend Rate then becoming effective and such determination shall be made on the basis of a thirty (30) day month and a three hundred and sixty (360) day year. (ii) Series E Dividend Rate. The rate of preferred dividends per share of the Series E Preferred Stock per annum based on the Series E Stated Value (the "Series E Dividend Rate") shall be eight percent (8%). (iii) Cumulative and Perpetual. Dividends payable on account of the Series E Preferred Stock shall be cumulative and shall be paid, from funds of the corporation legally available for the payment thereof, so long as any shares of the Series E Preferred Stock are outstanding. (iv) Restrictions on Dividend Payments. All shares of the Common Stock and each series of Preferred Stock shall rank junior to the Series E Preferred Stock as to dividends, except that the Series D Preferred Stock shall rank senior to the Series E Preferred Stock as to dividends. So long as any shares of the Series E Preferred Stock remain outstanding, no dividend shall be paid or declared, or declared and set apart for payment, or other distribution made, on the shares of any class of stock ranking, as to dividend rights, junior to the Series E Preferred Stock, nor shall any shares of any class of stock (or series thereof) of the corporation ranking, as to dividend rights, junior to, or on a parity with, the Series E Preferred Stock, be purchased, redeemed or otherwise acquired for value by the corporation, unless dividends on the Series E Preferred Stock shall have been declared and paid, or declared and set apart for payment, for all past Series E Dividend Periods ending immediately prior to the date on which such dividend, distribution, purchase, redemption or acquisition is to occur and the then current Series E Dividend Period; provided, however, that the foregoing restrictions shall not apply (a) to the declaration and payment, on shares ranking junior to the Series E Preferred Stock as to dividend rights, of dividends payable solely in shares of stock of any class of shares ranking junior to the Series E Preferred Stock as to dividend rights or, (b) to the acquisition of any shares ranking 11 junior to, or on a parity with, the Series E Preferred Stock as to dividend rights through application of the proceeds of the issue and sale of any class of any shares ranking junior to, or on a parity, with the Series E Preferred Stock as to dividend rights sold at or about the time of such acquisition. No dividends shall be paid or declared, or declared and set apart for payment, or other distribution made on any shares of any class of stock (or series thereof) of the corporation ranking, as to dividend rights, on a parity with the Series E Preferred Stock for any dividend period unless, at the same time, a like proportion of dividends for the same or similar dividend period, ratably in proportion to the respective annual dividend rate fixed therefor, shall be paid or declared, or declared and set apart for payment, on all shares of Series E Preferred Stock. 3. STATUS OF REACQUIRED SHARES. The corporation shall retire any of the shares of the Series E Preferred Stock that are converted into cash pursuant to Paragraph (2)(b)5., or that it repurchases or otherwise acquires, and such shares shall not be reissued as shares of Series E Preferred Stock but shall revert to authorized but unissued shares of Preferred Stock and may be reissued as shares of a different series of Preferred Stock in any future designation by the Board of Directors. 4. RESTRICTION ON ISSUANCE OF ADDITIONAL PREFERRED STOCK. So long as any shares of the Series E Preferred Stock are outstanding, the corporation shall not issue any securities ranking senior to, or on a parity with, the Series E Preferred Stock as to dividend rights or rights upon the liquidation, dissolution or winding up of the corporation without the prior approval of the holders of a majority of the Series E Preferred Stock. 5. CHANGE OF CONTROL. In the event of a Change of Control (as defined below) of the corporation that is not approved by the holders of a majority of the outstanding shares of the Series E Preferred Stock and upon the approval of the holders of a majority of the outstanding shares of Series E Preferred Stock, the shares of Series E Preferred Stock then outstanding shall convert into the right to receive a cash payment, effective as of the effective date of such Change of Control, (the "Change of Control Effective Date"), equal to the sum of (1) the value of the consideration exchanged or paid in connection with the Change of Control for such whole number of shares of Common Stock into which the shares of Series E Preferred Stock outstanding on the Change of Control Effective Date would be convertible if such shares were at the time shares of Series D Preferred Stock, and (2) the amount that would have been payable in lieu of fractional shares to a holder of such number of shares of Series D Preferred Stock upon conversion into Common Stock. For purposes of this Paragraph (2)(b)5. a "Change of Control" shall mean any merger, consolidation, reorganization, recapitalization or similar transaction, a tender offer by or exchange of securities with another party, or a combination of the foregoing, wherein another party or its affiliates shall acquire voting securities of the corporation which, together with voting securities already owned by such party or affiliates, exceeds 50% of the voting power of the corporation entitled to vote in the election of directors of the corporation. Any consideration paid in a Change of Control other than cash shall be valued for purposes of this Paragraph (2)(b)5. on the same basis that it was valued in good faith by the Board of Directors of the corporation in taking any action on or with respect to the Change of Control. 6. LIQUIDATION PREFERENCE. In the event of a voluntary or involuntary liquidation, dissolution or winding up of the corporation, each holder of the Series E Preferred Stock shall be entitled to receive out of the assets of the corporation available for distribution to shareholders, after payment in full of all amounts owing to the holders of all shares of all classes or series of 12 stock having rights senior to the Series E Preferred Stock upon the liquidation, dissolution or winding up of the corporation, an amount per share equal to, but no more than, the Series E Stated Value per share of each share of Series E Preferred Stock, including all accrued and unpaid dividends whether or not declared, to and including the date of the voluntary or involuntary liquidation, dissolution or winding up of the corporation. Until payment to the holders of the Series E Preferred Stock of all amounts owing as aforesaid, or until money or other assets sufficient for such payment shall have been set apart from its other funds and assets for payment by the corporation, for the account of such holders, so as to be and continue to be available for payment to such holders, no payment or distribution upon such liquidation, dissolution or winding up shall be made to holders of shares ranking junior to, or on a parity with, the Series E Preferred Stock as to rights upon the liquidation, dissolution or winding up. The Common Stock and each series of Preferred Stock shall be junior to the Series E Preferred Stock as to rights upon the liquidation, dissolution or liquidation or winding up of the corporation, except that the Series D Preferred Stock shall be on a parity with the Series E Preferred Stock with respect to the right to receive payment or distribution upon the liquidation, dissolution or liquidation or winding up of the corporation. If upon any such liquidation, dissolution or winding up, the assets of the corporation available for payment and distribution to shareholders are insufficient to make payment in full, as hereinabove provided, to the holders of the Series E Preferred Stock and the holders of all other shares of Preferred Stock which rank on a parity with the Series E Preferred Stock as to rights upon the liquidation, dissolution or winding up of the corporation, payment shall be made to such holders ratably in accordance with the liquidation value of shares held by them, respectively. Neither a consolidation nor merger of the corporation with or into any other corporation, nor a merger of any other corporation into the corporation, nor the purchase or redemption of all or any part of the outstanding shares of any class or classes of stock of the corporation, nor the sale or transfer of properties of the corporation substantially as an entirety, shall be construed to be a liquidation, dissolution or winding up of the corporation within the meaning of the foregoing provisions. 7. BUSINESS COMBINATIONS AND OTHER TRANSACTIONS. The Corporation shall not effect a merger, consolidation, reorganization, recapitalization or similar transaction or an exchange of securities with another party unless, following such merger, consolidation, reorganization, recapitalization, similar transaction or exchange of securities, (i) the Series E Preferred Stock will remain issued and outstanding, (ii) provision shall have been made for the issuance to the holders of the Series E Preferred Stock of another series of preferred stock with powers, preferences and special rights substantially identical to those of the Series E Preferred Stock, or (iii) the holders of a majority of the outstanding shares of the Series E Preferred Stock shall have approved the conversion of the outstanding shares of Series E Preferred Stock into the right to receive a cash payment in accordance with Paragraph (2)(b)5. 8. VOTING OF SERIES E PREFERRED STOCK. The holders of the Series E Preferred Stock shall have no right to vote upon any matter except as shall be affirmatively provided in the Ohio General Corporation Law. (c) With respect to all other shares of preferred stock of the corporation: 1. Each share of the preferred stock shall entitle the holder thereof to no voting rights, except as otherwise required by law. 13 2. The dividend rights of the preferred stock shall be non- cumulative, except as otherwise provided by the Board of Directors. 3. The Board of Directors shall have the right to adopt amendments to these Articles of Incorporation in respect of any unissued or treasury shares of the preferred stock and thereby fix or change: the division of such shares into series and the designation and authorized number of shares of each series; the dividend rate; whether dividend rights shall be cumulative or non-cumulative; the dates of payment of dividends and the dates from which they are cumulative; liquidation price; redemption rights and price; sinking fund requirements, conversion rights and restrictions on the issuance of such shares or any series thereof; provided however, except for the foregoing variations which the Board of Directors are authorized to fix or change, all of the express terms of different series of such shares be identical. Upon the adoption of any amendment pursuant to the foregoing authority, a certificate signed by the president or a vice president and by a secretary or an assistant secretary, containing a copy of the resolution adopting the amendment and a statement of the manner and basis or its adoption, shall be accompanied by the fees then required by law, before the corporation shall have the rights to issue any of such shares. (B) The Board of Directors may, from time to time, determine the time when, the terms under which, and the considerations for which the corporation issues, disposes of, or receives subscriptions for its shares of any class or series thereof, including treasury shares. Payment for shares shall be made with money or other property of any description, or any interest therein, actually transferred to the corporation, or labor or services actually rendered to the corporation. FIFTH: The corporation, by its Board of Directors, may, subject to these Articles of Incorporation, purchase, repurchase, redeem or otherwise acquire the shares of any class issued by it, at such times and on such terms as they shall determine to be in the best interests of the corporation. All shares of the corporation purchased, redeemed or otherwise acquired, unless the Board of Directors or the laws of the State of Ohio specifically provide otherwise, shall be held as treasury shares. Provided, however, that this Article Fifth shall not create authority in the Board of Directors to cause an involuntary redemption of the shares of the common stock. SIXTH: The Board of Directors shall have the right, to the extent permitted by law: (i) to fix, determine and vary the amount of stated capital of the corporation; (ii) to determine whether any, and if any, what part of the surplus of the corporation, however created or arising, shall be used, disposed of or declared in dividends or paid to the stockholders; and (iii) without action by the stockholder, to use and apply the surplus of the corporation, or any part thereof, at any time or from time to time, in the purchase or acquisition of shares of any class, voting trust certificates for shares, bonds, debentures, notes, script, warrants, obligations, evidences of indebtedness, or other securities of the corporation, to such extent of in such amount, in such manner and upon such terms as the Board of Directors shall determine expedient. SEVENTH: No holder of any share or shares of any class issued by the corporation shall be entitled as such, as a matter of right, at any time, to subscribe for or purchase (i) shares of any class issued by the corporation, now or hereafter authorized, (ii) securities of the corporation 14 convertible into or exchangeable for shares of any class issued by the corporation, now or hereafter authorized, or (iii) securities of the corporation to which shall be attached or appertain any rights or options, whether by the terms of such securities or in the contracts, warrants or other instruments (whether transferable or non-transferable or separable or inseparable from such securities) evidencing such rights or options, entitling the holders thereof to subscribe for or purchase shares of any class issued by the corporation, now or hereafter authorized; it being the intent and is the effect of this Article Seventh to fully eliminate any and all pre-emptive rights with respect to the shares of any class issued by the corporation, now or hereafter authorized. EIGHTH: These Amended Articles of Incorporation supersede and take the place of the existing Amended Articles of Incorporation. EX-3.II 3 l88345aex3-ii.txt EXHIBIT 3(II) 1 EXHIBIT (3)(ii) AS OF MARCH 20, 2001 CODE OF REULATIONS OF FIFTH THIRD BANCORP AS AMENDED ARTICLE I. OFFICES The principal office of Fifth Third Bancorp (hereinafter referred to as the "Corporation") shall be located in the City of Cincinnati, County of Hamilton, State of Ohio and the Corporation may establish or discontinue, from time to time, such other offices and places of business within or without the State of Ohio as may be deemed proper for the conduct of the Corporation's business. ARTICLE II. MEETINGS OF STOCKHOLDERS Section 1. ANNUAL MEETING. The annual meeting of the stockholders shall be held at such hour and at such place as may be fixed in the notice of such meeting and on such date not earlier than the second Tuesday of January or later than the third Tuesday in April of each year as shall be fixed by the Board of Directors, and communicated in writing to the stockholders not later than 20 days prior to such meeting Section 2. SPECIAL MEETINGS. In addition to such special meetings as are provided for by law or by the Articles of Incorporation, special meetings of the holders of any class or series or of all classes or series of the Corporation's stock may be called at any time by the Board of Directors, and special meetings of the holders of the Common Stock (hereinafter called "Common Stock") shall be called by the Secretary upon written request, stating the purpose or purposes of any such meeting, of the holders of Common Stock who hold of record collectively at least twenty-five percent (25%) of the outstanding shares of Common Stock of the Corporation. Unless limited by law, the Articles of Incorporation, this Code of Regulations, or by the terms of the notice thereof, any and all business may be transacted by any special meeting of stockholders. Section 3. PLACE OF MEETINGS. Meetings of the stockholders shall be held at such place within or without the State of Ohio as shall be designated by the Board of Directors. Section 4. NOTICE OF MEETINGS. Except as otherwise provided by law, notice of each meeting of stockholders shall be given either by delivering a notice personally or mailing a notice to each stockholder of record entitled thereto. If mailed, the notice shall be directed to the stockholder in a postage-paid envelope at his address as it appears on the stock books of the Corporation, unless prior to the time of mailing, the Secretary shall have received from any such stockholder a written request that notices intended for him be mailed to some other address, in which case notices intended for such stockholder shall be mailed to the address designated in such request. Notice of each meeting of stockholders shall be in such form as is approved by the Board of Directors and shall state the purpose or purposes for which the meeting is called, the time when and the place where it is to be held, and shall be delivered personally or mailed not less than seven (7) nor more than sixty (60) days before the day of the meeting. 1 2 Section 5. WAIVER OF NOTICE. Anything herein contained to the contrary notwithstanding, notice of any meeting of stockholders shall not be required as to any stockholder who shall attend and participate in the business transacted at such meeting in person or by proxy, and who shall have protested the lack of proper notice prior to or at the commencement of such meeting, or who shall, or whose proxy or attorney duly authorized shall, sign a written waiver thereof, whether before or after the time stated therein. Section 6. ORGANIZATION. The Chairman of the Board, if one be elected, the Vice Chairman, if one be elected in the absence of the Chairman, or the President, in the absence of the Chairman and the Vice Chairman, shall act as chairman at all meetings of stockholders at which he is present, and as such chairman shall call such meetings of stockholders to order and preside thereat. If the Chairman of the Board, the Vice Chairman, and the President shall be absent from any meeting of stockholders, the duties otherwise provided in this Section 6 of Article II to be performed by him at such meeting shall be performed at such meeting by the officer prescribed in Article VI hereof. If no such officer is present at such meeting, any stockholder or the proxy of any stockholder entitled to vote at the meeting may call the meeting to order and a chairman shall be elected who shall preside thereat. The Secretary of the Corporation shall act as the secretary at all meetings of the stockholders, but in his absence the chairman of the meeting may appoint any person present to act as secretary of the meeting. Section 7. INSPECTORS. Except as otherwise provided by law or by the Articles of Incorporation, all votes by ballot at any meeting of stockholders shall be conducted by three inspectors who shall be appointed for the purpose by the chairman of the meeting. The inspectors shall decide upon the qualifications of voters, count the votes and declare the result. Section 8. STOCKHOLDERS ENTITLED TO VOTE. Nothing herein contained shall be construed to enlarge the voting rights of any stockholder of the Corporation as provided by the Articles of Incorporation or by the laws of the State of Ohio. The Board of Directors may close the stock transfer books of the Corporation for a period not exceeding sixty (60) days preceding the date of any meeting of stockholders or preceding the last day on which the consent or dissent of stockholders may effectively be expressed for any purpose without a meeting. In lieu of closing the stock transfer books of the Corporation as aforesaid, the Board of Directors may fix a date not more than sixty (60) days prior to the date of any meeting of stockholders, or prior to the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose without a meeting, as a record date for the determination of the stockholders entitled to notice of, and to vote at, such meeting and any adjournment thereof, or to give such consent or express such dissent and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed, shall be entitled to notice of, and to vote at, such meeting and any adjournment thereof, or to give such consent or express such dissent, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. The Secretary shall prepare and make or cause to be prepared and made, at least ten (10) days before every election of directors, a complete list of the stockholders entitled to vote at such election, arranged in alphabetical order and showing the address of each such stockholder and the number of shares registered in the name of each such stockholder. Such list shall be open to the examination of any stockholder during ordinary business hours, for a period of at least ten (10) days prior to the election, either at a place, specified in the notice of the meeting, within the city where the election is to be held, or at the place where the election is to be held. Such list shall be produced and kept at the time and place of election during the whole time thereof, and subject to the inspection of any stockholder who may be present. Section 9. QUORUM AND ADJOURNMENT. The holders of a majority of the shares of stock entitled to vote at the meeting on every matter that is to be voted on shall constitute a quorum at all meetings of the stockholders. In the absence of a quorum, the holders of a majority of such shares of stock present in 2 3 person or by proxy may adjourn any meeting, from time to time, until a quorum shall attend. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting as originally called. No notice of any adjourned meeting need be given other than by announcement at the meeting that is being adjourned. Section 10. ORDER OF BUSINESS. The order of business at all meetings of stockholders shall be determined by the chairman of the meeting or as is otherwise determined by the vote of the holders of a majority of the shares of stock present in person or by proxy and entitled to vote on every matter that is to be voted on. Section 11. VOTE OF STOCKHOLDER. Except as otherwise permitted by law or by the Articles of Incorporation all action by stockholders shall be taken at a stockholders' meeting. Every stockholder of record as determined pursuant to Section 8 of this Article II and who is entitled to vote, shall be entitled by every meeting of the stockholders to one vote for every share of stock standing in his name on the books of the Corporation. Every stockholder entitled to vote shall have the right to vote in person or by proxy duly appointed by an instrument in writing subscribed by such stockholder or a verifiable communication authorized by such stockholder and executed or authorized not more than eleven (11) months prior to the meeting, unless the instrument or verifiable communication provides for a longer period. Any transmission that creates a record capable of authentication, including, but not limited to, a telegram, a cablegram, electronic mail, or an electronic, telephonic, or other transmission, that appears to have been transmitted by a stockholder entitled to vote, and that appoints a proxy is a sufficient verifiable communication to appoint a proxy. A photographic, photostatic, facsimile transmission, or equivalent reproduction of a writing that is signed by a stockholder entitled to vote and that appoints a proxy is a sufficient writing to appoint a proxy. Except as otherwise provided by law or by the Articles of Incorporation, no vote on any question upon which a vote of the stockholders may be taken need be by ballot unless the chairman of the meeting shall determine that it shall be by ballot or the holders of a majority of the shares of stock present in person or by proxy and entitled to participate in such vote shall so demand. In a vote by ballot each ballot shall state the number of shares voted and name of the stockholder or proxy voting. All elections of directors shall be by a plurality vote unless notice demanding cumulative voting has been presented to the Corporation as provided in Section 1701.55 of the Ohio Revised Code and in such event the Directors shall be elected by cumulative voting as provided in such section, and, except as otherwise provided by law, by the Articles of Incorporation or by Section 14 of Article III hereof, all other elections and all questions shall be decided by the vote of the holders of a majority of the shares of stock present in person or by proxy at the meeting and entitled to vote in the election or on the question." Section 12. ATTENDANCE AT STOCKHOLDERS' MEETING. Any stockholder of the Corporation who is not entitled to notice of, or to vote at, a meeting of stockholders of the Corporation may nevertheless attend any such meeting upon receipt of a written invitation from the Board of Directors of the Corporation. ARTICLE III. BOARD OF DIRECTORS Section 1. ELECTION AND TERM. Except as otherwise provided by law or by the Articles of Incorporation, and subject to the provisions of Sections 12, 13 and 14 of this Article III, Directors shall be elected at the annual meeting of stockholders to serve until the end of the term to which they are elected and until their successors are elected and qualify. The number of Directors of the Corporation shall be fixed from time to time by this Code of Regulations and may be increased or decreased as therein 3 4 provided, but the number thereof shall in no event be less than three. The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of Directors constituting the whole Board permits, it not being required that each class have the same number of members if such is mathematically impossible, with the term of office of one class expiring each year. At the Annual Meeting of Shareholders in 1983, Directors of the first class shall be elected to hold office for a term expiring at the next succeeding Annual Meeting, Directors of the second class shall be elected to hold office for a term expiring at the second succeeding Annual Meeting, and directors of the third class shall be elected to hold office for a term expiring at the third succeeding Annual Meeting. Thereafter, at each Annual Meeting of shareholders the successors to the class of Directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding Annual Meeting after such election. In the event of any increase in the number of Directors of the Corporation, the additional Directors shall be so classified that all classes of Directors shall be increased equally as nearly as may be possible, it not being required that each class have the same number of members if such is mathematically impossible. In the event of any decrease in the number of Directors of the Corporation, all classes of Directors shall be decreased equally as nearly as may be possible, it not being required that each class have the same number of members if such is mathematically impossible. Section 2. NUMBER. The Board of Directors shall be composed of twenty-six (26) persons unless this number is changed by: (1) the shareholders in accordance with the laws of Ohio or (2) the vote of a majority of the Directors in office. The Directors may increase the number to not more than thirty (30) persons and may decrease the number to not less than fifteen (15) persons. Any Director's office created by the Directors by reason of an increase in their number may be filled by action of majority of the Directors in office. Section 3. GENERAL POWERS. The Board of Directors may exercise all the powers of the Corporation and do all lawful acts and things which are not reserved to the stockholders by law, by the Articles of Incorporation or by this Code of Regulations. Specifically, the business, properties and affairs of the Corporation shall be managed by the Board of Directors, which without limiting the generality of the foregoing, shall have power to elect and appoint the officers of the Corporation, to appoint and direct agents, to grant general or limited authority to officers, employees and agents of the Corporation to make, execute and deliver contracts and other instruments and documents in the name and on behalf of the Corporation, without specific authority in each case, and to appoint committees, the membership of which may consist of such persons as may be designated by the Board of Directors whether or not any of such persons is then a director of the Corporation, and which committees so appointed may advise the Board of Directors with respect to any matters relating to the conduct of the Corporation's business. Section 4. PLACE OF MEETING. Meetings of the Board of Directors may be held at any place, within or without the State of Ohio, from time to time designated by the Board of Directors and meetings of the Directors may be held through any communications equipment in accordance with the provision of Ohio Revised Code 1701.61(B). Section 5. ORGANIZATION MEETING. A newly elected Board of Directors shall meet and organize as soon as practicable after each annual meeting of stockholders, at the place at which such meeting of stockholders took place, without notice of such meeting, provided a majority of the whole of Board of Directors is present. If such a majority is not present, such organization meeting may be held at any other time or place which may be specified in a notice given in the manner provided in Section 7 of this Article III for special meetings of the Board of Directors, or in a waiver of notice thereof. Section 6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times as may be determined by resolution of the Board of Directors and no notice shall be required for 4 5 any regular meeting. Except as otherwise provide by law, any business may be transacted at any regular meeting of the Board of Directors. Section 7. SPECIAL MEETINGS; NOTICE AND WAIVER OF NOTICE. Special meetings of the Board of Directors shall be called by the Secretary on the request of the Chairman of the Board, if one be elected, or of the Vice Chairman of the Board, if one be elected, or of the President, or in their absence of a Vice President, or of any five directors stating the purpose or purposes of such meeting. Notice of any special meeting shall be in form approved by the officer requesting, or if the meeting is called pursuant to the request of five directors, and there shall be a failure to approve the form of notice as aforesaid, then in form approved by such directors. Notices of special meetings shall be mailed to each director, addressed to him at his residence or usual place of business, not later than seven (7) days before the day on which the meeting is to be held, or shall be sent to him at such place by telegraph or cablegram or delivered personally, not later than two (2) days before such day of meeting. Notice of any meeting of the Board of Directors need not be given to any director if he shall sign a written waiver thereof either before or after the time stated therein, or if he shall be present at the meeting and not prior to or at the commencement of the meeting protest the lack of proper notice; and any meeting of the Board of Directors shall be a legal meeting without any notice thereof having been given, if all the members shall be present thereat. Unless limited by law, by the Articles of Incorporation, by the Code of Regulations, or by the terms of the notice thereof, any and all business may be transacted at any special meeting. Section 8. ORGANIZATION. The Chairman of the Board, if he be elected, the Vice Chairman of the Board, if he be elected, in the absence of the Chairman, or the President, in the absence of the Chairman of the Board or the Vice Chairman of the Board, shall preside at all meetings of the Board of Directors. If the Chairman of the Board, the Vice Chairman of the Board and the President shall all be absent from any meeting of the Board of Directors, the duties otherwise provided in this Section 8 of Article III to be performed by him at such meeting shall be performed at such meeting by the officer prescribed by Article VI hereof. If no such officer is present at such meeting, one of the directors present shall be chosen by the members of the Board of Directors present to preside at such meeting. The Secretary of the Corporation shall act as the secretary at all meetings of the Board of Directors but in his absence the chairman of the meeting may appoint any person present to act as secretary of the meeting. Section 9. QUORUM AND MANNER OF ACTING. Except as otherwise provided, at every meeting of the Board of Directors one-third (1/3) of the total number of Directors shall constitute a quorum. Except as otherwise provided by law, or by this Code of Regulations, the act of a majority of the directors present at any such meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum, a majority of the directors present may adjourn any meeting, from time to time, until a quorum is present. No notice of any adjourned meeting need be given other than by announcement at the meeting that is being adjourned. Section 10. VOTING. On any question on which the Board of Directors shall vote, the names of those voting and their votes shall be entered in the minutes of the meeting when any member of the Board of Directors so requests. Section 11. ACTION WITHOUT A MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board of Directors or such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or the committee. Section 12. RESIGNATIONS. Any director may resign at any time either by oral tender of resignation at any meeting of the Board of Directors or by such tender to the Chairman of the Board or the 5 6 President or by giving written notice thereof to the Corporation. Any resignation shall be effective immediately unless a date certain is specified for it to take effect and acceptance of any resignation shall not be necessary to make it effective, irrespective of whether the resignation is tendered subject to such acceptance. Section 13. REMOVAL OF DIRECTORS. No director shall be removed, without cause, during his term of office. Any director may be removed, for cause, at any time, by action of the holders of record of majority of the outstanding shares of stock entitled to vote thereon at a meeting of the holders of such shares, and the vacancy in the Board of Directors caused by any such removal may be filled by action of such stockholders at such meeting or at any subsequent meeting. Section 14. FILLING OF VACANCIES NOT CAUSED BY REMOVAL. Expect as otherwise provided by law, in case of any increase in the number of directors, or of any vacancy created by death, resignation or otherwise, the additional director or directors may be elected, or, as the case may be, the vacancy or vacancies may be filled either (a) by the Board of Directors at any meeting by affirmative vote of a majority of the remaining directors though the remaining directors be less than the quorum provided for by this Article III, or (b) by the holders of Common Stock of the Corporation entitled to vote thereon, either at an annual meeting of stockholders or at a special meeting of such holders called for the purpose. The directors so chosen shall hold office until the next annual meeting of stockholders and until their successors are elected and qualify. Section 15. DIRECTOR'S COMPENSATION. Each director shall be entitled to reimbursement for his expense incurred in attending meetings or otherwise incurred in connection with his attention to the business of the Corporation. Each director, for his services, as a director and as a member of any committee of the Board of Directors, shall also be entitled to receive such compensation as the Board shall from time to time fix. Such compensation may be a salary or a fee for attendance at a meeting of the Board or both. Section 16. TRANSACTIONS BY DIRECTORS. A director shall not be disqualified from dealing or contracting with the Corporation as vendor, purchaser, employee, agent or otherwise; nor shall any transaction or contract or act of the Corporation be void or voidable or in any way affected or invalidated by the fact that any director or any firm of which any director is a member or any corporation of which any director is a shareholder, director, officer or employee is in any way interested in such transaction or contract or act, provided the fact that such director or such firm or such corporation is so interested shall be disclosed or shall be known to the Board of Directors or such members thereof as shall be present at any meeting of the Board of Directors at which action upon any such contract or transaction or act shall be taken; nor shall any such director be accountable or responsible to the Corporation for or in respect to any such transaction or contract or act of the Corporation or for any gains or profits realized by him by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer is interested in such transaction or contract or act; and any such director may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize or take action in respect to any such contract, or transaction, or act, including the establishment of and payment of compensation to such director and may vote to authorize, ratify, or approve any such contract or transaction or act, including the establishment of and payment of compensation to such director, with like force and effect as if he or any firm of which he is a member, or any corporation of which he is a shareholder, director or officer were not interested in such transaction or contract or act or compensation. Section 17. INDEMNIFICATION. The Corporation shall indemnify each director and each officer of the Corporation, and each person employed by the Corporation who serves at the written request of the President of the Corporation as a director, trustee, officer, employee, or agent of another corporation, 6 7 domestic or foreign, non-profit or for profit, partnership, joint venture, trust or other enterprise, to the full extent permitted by Ohio law. The term `officer' as used in this Section shall include the Chairman of the Board and the Vice Chairman of the Board if such offices are filled, the President, each Vice President, the Treasurer, the Secretary, the Controller, the Auditor, the Counsel and any other person who is specifically designated as an `officer' within the operation of this Section by action of the Board of Directors. The Corporation may indemnify assistant officers, employees and others by action of the Board of Directors to the extent permitted by Ohio law. Section 18. AMENDMENTS. Notwithstanding Article X of this Code of Regulations, Sections 1 and 13 of this Article III may only be altered, amended or repealed by the affirmative vote at a meeting held for such purpose, or without a meeting by the written consent, of the holders of shares entitling them to exercise at least two-thirds (2/3) of the voting power of the Corporation on such proposal. ARTICLE IV EXECUTIVE COMMITTEE Section 1. CONSTITUTION AND POWERS. The Board of Directors may appoint an Executive Committee, which shall have and may exercise, during the intervals between the meetings of the Board of Directors, all the powers of the Board of Directors in the management of the business, properties and affairs of the Corporation, including authority to take all action provided in this Code of Regulations to be taken by the Board of Directors; provided, however, that the foregoing is subject to the applicable provisions of law and shall not be construed as authorizing action by the Executive Committee with respect to any action which pursuant to Section 14(a) of Article III, this Section 1, and Section 8 of this Article IV, Section 1 of Article V and Section 3 and Section 6 of Article VI, is required to be taken by vote of a specified proportion of the whole Board of Directors, or as authorizing the Executive Committee to declare any dividend. The Executive Committee shall consist of such number of directors as may from time to time be designated by the Board of Directors, but shall not be less than three (3) nor more than seven (7) directors. So far as practicable, the members and alternate members of the Executive Committee shall be appointed at the organization meeting of the Board of Directors in each year, and unless sooner discharged by affirmative vote of a majority of the whole Board of Directors, shall hold office until the next annual meeting of the stockholders and until their respective successors are appointed. All acts done and powers conferred by the Executive Committee shall be deemed to be and may be certified as being, done or conferred under authority of the Board of Directors. Section 2. PLACE OF MEETING. Meetings of the Executive Committee may be held at any place, within or without the State of Ohio, from time to time designated by the Board of Directors or the Executive Committee, and meetings of the Executive Committee may also be held through any communications equipment in accordance with the provisions of Ohio Revised Code 1701.61(B). The Board of Directors may also appoint one or more directors or alternate member of such Committee. Section 3. MEETINGS; NOTICE AND WAIVER OF NOTICE. Regular meetings of the Executive Committee shall be held at such times as may be determined by resolution either of the Board of Directors or the Executive Committee and no notice shall be required for any regular meeting. Special meetings of the Executive Committee shall be called by the Secretary upon the request of any member thereof. Notice of any special meeting of the Executive Committee shall be in form approved by the Chairman of the Executive Committee, or if the meeting is called pursuant to the request of some other member of the Executive Committee and there shall be a failure to approve the form of notice as aforesaid, then in the form approved by such member. Notice of special meetings shall be mailed to each member, addressed to him at his residence or usual place of business, not later than two (2) days before the day on which the 7 8 meeting is to be held, or shall be sent to him at such place by telegraph, or be delivered personally or by telephone, not later than the day before such day of meeting. Notices of such meeting need not be to any member of the Executive Committee, however, if waived by him as provided in Section 7 of Article III, the provisions of such Section 7 with respect to waiver of notice of meetings of the Board of Directors applying to meetings of the Executive Committee as well. Section 4. ORGANIZATION. The Chairman of the Executive Committee shall be elected by the Board of Directors and shall preside at all meetings of the Executive Committee at which he is present. In the absence of the Chairman of the Executive Committee, one of the members present shall be chosen by the members of the Executive Committee present to preside at such meeting. The Chairman of the Executive Committee shall designate a member of said Committee to act as secretary at all meetings of the Executive Committee and in his absence a temporary secretary shall be appointed by the chairman of the meeting. Section 5. QUORUM AND MANNER OF ACTING. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present, shall be the act of the Executive Committee. In the absence of a quorum, a majority of the members of the Executive Committee present may adjourn any meeting, from time to time, until a quorum is present. No notice of any adjourned meeting need be given other than by announcement at the meeting that is being adjourned. The provisions of Section 11 of Article III with respect to action taken by a committee of the Board of Directors without a meeting shall apply to action taken by the Executive Committee. Section 6. VOTING. On any question on which the Executive Committee shall vote, the names of those voting and their votes shall be entered in the minutes of the meeting when any member of the Executive Committee so requests. Section 7. RECORDS. The Executive Committee shall keep minutes of its acts and proceedings which shall be submitted at the next regular meeting of the Board of Directors, and any action taken by the Board of Directors with respect thereto shall be entered in the minutes of the Board of Directors. Section 8. VACANCIES. Any vacancy among the appointed members of the Executive Committee may be filled by affirmative vote of a majority of the whole Board of Directors. ARTICLE V. OTHER COMMITTEES Section 1. APPOINTING OTHER COMMITTEES. The Board of Directors may from time to time by resolution adopted by affirmative vote of a majority of the whole Board of Directors, appoint other committees of the Board of Directors which shall have such powers and duties as the Board of Directors may properly determine. No such other committee of the Board of Directors shall be composed of fewer than three (3) directors. Section 2. TIME AND PLACE OF MEETINGS; MANNER OF ACTING; NOTICE AND WAIVER OF NOTICE. Meetings of such committees of the Board of Directors may be held at any place, within or without the State of Ohio, from time to time designated by the Board of Directors, or the committee in question, and meetings of any such committee may also be held through any communications equipment in accordance with the provisions of Ohio Revised Code 1701.61(B). Regular meetings of any such committee shall be held at such times as may be determined by resolution of the Board of Directors, or the committee and no 8 9 notice shall be required for any regular meeting. A special meeting of any such committee shall be called by resolution of the Board of Directors, or by its Secretary upon request of any member of the committee. The provisions of Section 3 of Article IV with respect to notice and waiver of notice of special meetings of the Executive Committee shall also apply to all special meetings of other committees of the Board of Directors. Any such committee may make rules for holding and conducting its meetings and shall keep minutes thereof. The provisions of Section 11 of Article III with respect to action taken by a committee of the Board of Directors without a meeting shall apply to action taken by any such committee. ARTICLE VI. THE OFFICERS Section 1. OFFICERS. The elected officers of the Corporation shall be a Chairman of the Board (if desired), a Vice Chairman of the Board (if desired), a President, one or more Vice Presidents, a Secretary and a Treasurer. The elected officers shall be elected by the Board of Directors. The Chairman, Vice Chairman of the Board and President shall be selected from the Directors. The Board of Directors may also appoint one or more Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other officers and agents as in their judgment the business of the Corporation may require. Section 2. TERMS OF OFFICE; VACANCIES. So far as is practicable, all elected officers shall be elected at the organization meeting of the Board of Directors in each year, and, except as otherwise provided in this Article VI, shall hold office until the organization meeting of the Board of Directors in the next subsequent year and until their respective successors are elected and qualify, provided, however, that this Section 2 shall not be deemed to create any contract rights in such offices. All other officers hold office during the pleasure of the Board of Directors. If any vacancy shall occur in any office, the Board of Directors may elect or appoint a successor to fill such vacancy for the remainder of the term. Section 3. REMOVAL OF ELECTED OFFICERS. Any elected officer may be removed at any time, either for or without cause, by affirmative vote of a majority of the whole Board of Directors, at any regular meeting or at any special meeting called for the purpose. Section 4. RESIGNATIONS. Any officer may resign at any time, either by oral tender or resignation to the Chairman of the Board or the President or by giving written notice thereof to the Corporation. Any resignation shall be effective immediately unless a date certain is specified for it to take effect and acceptance of any resignation shall not be necessary to make it effective unless such resignation is tendered subject to such acceptance. Section 5. OFFICERS HOLDING MORE THAN ONE OFFICE. Any officer may hold two or more offices the duties of which can be consistently performed by the same person. Section 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Corporation shall be so designated from time to time by vote of a majority of the whole Board of Directors. Subject to the direction and control of the Executive Committee and the Board of Directors he shall have general and active management of the business and affairs of the Corporation, and shall have the responsibility for having all orders of the Executive Committee and the Board of Directors carried into effect. He shall have general authority to execute bonds, deeds and contracts in the name and on behalf of the Corporation, and in general to exercise all the power generally appertaining to the chief executive officer of a corporation. In the absence of the Chief Executive Officer his duties shall be performed and his powers may be exercised by the persons so designated by vote of a majority of the whole Board of Directors. 9 10 Section 7. THE CHAIRMAN OF THE BOARD, THE VICE CHAIRMAN OF THE BOARD, THE PRESIDENT AND VICE Presidents. The Chairman of the Board, the Vice Chairman of the Board, the President and Vice President (or Vice Presidents ) shall perform such duties and have such powers as may from time to time be assigned to them by the Board of Directors or the Executive Committee. Section 8. THE SECRETARY. The Secretary shall attend to the giving of notice of all meetings of stockholders, shall keep minutes of all proceedings at meetings of the stockholders, and the Board of Directors, and shall perform such other duties as assigned to him by the Board of Directors or the Executive Committee. Section 9. THE TREASURER. The Treasurer shall have the care and custody of all the funds of the Corporations and shall deposit the same in such banks or other depositories as the Board of Directors, or any officer or officers, or any officer and agent jointly, thereunto duly authorized by the Board of Directors shall, from time to time, direct or approve. He shall keep a full and accurate account of all moneys received and paid on account of the Corporation, and shall render a statement of accounts whenever the Board of Directors shall require. He shall perform all other necessary acts and duties in connection with administration of the financial affairs of the Corporation, and shall generally perform all the duties usually appertaining to the affairs of the treasurer of a corporation, including specifically the duty of supervising and causing the timely filing of all federal, state and municipal tax reports and returns and the timely payment of all taxes due to or withheld for such federal, state or local governments. When required by the Board of Directors, he shall give bonds for the faithful discharge of his duties in such and with such sureties as the Board of Directors shall approve. In the absence of the Treasurer, such person as shall be designated by the Chief Executive Officer shall perform his duties. Section 10. ADDITIONAL POWERS AND DUTIES. In addition to the foregoing especially enumerated duties and powers, the several officers of the Corporation shall perform such other duties and exercise such further powers as the Board of Directors may, from time to time, determine, or as may be assigned to them by any superior officer. Section 11. COMPENSATION. The compensation of all officers and directors of the Corporation shall be fixed by the Board of Directors. The compensation of all other employees and agents of the Corporation shall be fixed by the Chief Executive Officer or by such person or persons as shall be designated by him. ARTICLE VII. STOCK AND TRANFERS OF STOCK Section 1. STOCK CERTIFICATES. The stock of the Corporation shall be represented by certificates signed by the Chairman of the Board, the President or a Vice President and the Secretary or Treasurer or an Assistant Secretary, and sealed with the seal of the Corporation. Such signatures and/or seal may be a facsimile, engraved or printed. In case any such officer who has signed any such certificate shall have ceased to be such officer before such certificate is delivered by the Corporation, it may nevertheless be issued and delivered by the Corporation with the same effect as if such officer had not ceased to be such at the date of its delivery. The certificate representing the stock of the Corporation shall be in such form as shall be approved by the Board of Directors and shall conform to the requirements of the laws of the State of Ohio. 10 11 Section 2. TRANSFER OF STOCK. Transfers of stock shall be made of the books of the Corporation only by the person named in the certificate, or by an attorney lawfully constituted in writing, and upon surrender and cancellation of a certificate or certificates for a like number of shares of the same class or series of stock, with duly executed assignment and power of transfer endorsed thereon or attached thereto, and with such proof of the authenticity of the signatures as the Corporation or its agents may reasonably require. No transfer of stock shall be valid until such transfer shall have been made upon the books of the Corporation. Section 3. LOST CERTIFICATES. In case any certificate of stock shall be lost, stolen or destroyed the Board of Directors, in its discretion, or any officer or officers thereunto duly authorized by the Board of Directors, may authorize the issue of a substitute certificate in the place of the certificate so lost, stolen or destroyed; provided, however, that in each such case, the applicant for a substitute certificate shall furnish to the Corporation evidence to the Corporation, which determines in its discretion is satisfactory, of the loss, theft, or destruction of such certificate and of the ownership thereof, and also such security or indemnity as may be required. Section 4. DETERMINATION OF STOCKHOLDERS OF RECORD FOR CERTAIN PURPOSES. The Board of Directors may fix a date, not exceeding thirty (30) days preceding the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of its capital stock, and in such case only stockholders of record on the date so fixed shall be entitled to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, notwithstanding any transfer books of the Corporation for a period not exceeding thirty (30) days prior to the date for the payment of any such dividend or the date for the allotment of any such rights or the date when any such change or conversion or exchange of capital stock shall go into effect. ATICLE VIII. CORPORATE SEAL Section 1. SEAL. The seal of the Corporation shall be in the form of a circle, and shall bear the names of the Corporation and the state of "Ohio" and in the center of the circle the word "Seal." Section 2. AFFIXING AND ATTESTING. The seal of the Corporation shall be in the custody of the Secretary, who shall have the power to affix it to the proper corporate instruments and documents, and who shall attest it. In his absence, it may be affixed and attested by an Assistant Secretary or by the Treasurer, or an Assistant Treasurer, or by any other person or persons as may be designated by the Board of Directors. ARTICLE IX. MISCELLANEOUS Section 1. FISCAL YEAR. The fiscal year of the corporation shall end on the 31st day of December in each year and the succeeding fiscal year shall begin the 1st day of January next succeeding the last day of the preceding fiscal year. 11 12 Section 2. SIGNATURES ON NEGOTIABLE INSTRUMENTS. All bills, notes, checks or other instruments for the payment of money shall be signed or countersigned by such officers or agents and in such manner as, from time to time, may be prescribed by resolution (whether general or special) of the Board of Directors. Section 3. REFERENCES TO ARTICLE AND SECTION NUMBERS AND TO THE CODE OF REGULATIONS AND ARTICLES OF INCORPORATION. Whenever in this Code of Regulations reference is made to an Article or Section number, such reference is to the number of an Article or Section of this Code of Regulations. Whenever in this Code of Regulations reference is made to Code of Regulations such reference is to this Code of Regulations as the same may from time to time be amended, and whenever reference is made to the Articles of Incorporation, such reference is to the Articles of Incorporation of the Corporation as the same may from time to time be amended. ARTICLE X. AMENDMENTS This Code of Regulation may be altered, amended or repealed, from time to time, at a meeting held for such purpose, by the affirmative vote the holders of shares entitling them to exercise a majority of the voting power of the Corporation on such proposal, or may be adopted without a meeting by the written consent of the holders of shares entitling them to exercise two-thirds (2/3) of the voting power on such proposal. 12 -----END PRIVACY-ENHANCED MESSAGE-----