<PAGE> 1
Filed with the Securities and Exchange Commission on November 4, 1994
Registration No. 33-56179
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
F O R M S - 4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
BANC ONE CORPORATION
- ------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio
- ------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
6711
- ------------------------------------------------------------------------------
(Primary Standard Industrial Classification Code Number)
31-0738296
- ------------------------------------------------------------------------------
(I.R.S. Employer Identification No.)
100 East Broad Street, Columbus, Ohio 43271, (614) 248-5944
- ------------------------------------------------------------------------------
(Address, including Zip Code, and telephone number, including area code,
of Registrant's principal executive offices)
Roman J. Gerber, Esq., BANC ONE CORPORATION
100 East Broad Street, Columbus, Ohio 43271, (614) 248-5903
- ------------------------------------------------------------------------------
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
With Copies to:
Bruce Rigelman, Esq.
BANC ONE CORPORATION
100 East Broad Street
Columbus, Ohio 43271
614/248-6045
John T. Kipp, Esq.
Lance M. Hardenburg, Esq.
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201-4761
214/999-4236
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement and all other conditions to the merger of 1st*Bank with and into a
wholly owned subsidiary of the Registrant pursuant to the Merger Agreement
described in the enclosed Prospectus and Proxy Statement have been satisfied or
waived.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box.
<PAGE> 2
<TABLE>
<CAPTION>
Calculation of Registration Fee
- ----------------------------------------------------------------------------------------------------------
Proposed Proposed
maximum maximum
Title of each class Amount offering aggregate Amount of
of securities to be price offering registration
to be registered registered (1) per unit (2) price (2) fee (2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 425,000 $19.5024 $8,288,513 $2,858.11
- ----------------------------------------------------------------------------------------------------------
(1) Based on an estimate of the maximum number of shares of common stock of
the Registrant to be issued in connection with the merger of 1st*Bank with
and into a wholly owned subsidiary of the Registrant.
(2) Estimated solely for purpose of computing the registration fee based upon
the book value per share of the Common Stock, par value $2.00 per share,
of 1st*Bank as of June 30, 1994 in accordance with Rule 457(f)(2) of the
General Rules and Regulations under the Securities Act of 1933.
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- ------------------------------------------------------------------------------
<PAGE> 3
BANC ONE CORPORATION
Cross Reference Sheet
Caption in Prospectus
Item of Form S-4 and Proxy Statement
- ------------------------------------- ---------------------------------
A. Information about the Transaction
Item 1 - Forepart of Registration Outside Front Cover Page;
Statement and Outside Front Cover Reference Sheet; the
Page of Prospectus Letter of the Chairman of the Board
Item 2 - Inside Front and Outside Available Information; Incorpora-
Back Cover Pages of Prospectus tion by Reference; Table of
Contents
Item 3 - Risk Factors, Ratio of Information About the Transaction
Earnings to Fixed Charges and
Other Information
Item 4 - Terms of the Transaction Plan of Merger; Comparative Rights
of Shareholders
Item 5 - Pro Forma Financial Infor- *
mation
Item 6 - Material Contacts with Plan of Merger-Background of
the Company Being Acquired Transaction; -Operations After the
Merger
Item 7 - Additional Information *
Required for Reoffering by
Persons and Parties Deemed To Be
Underwriters
Item 8 - Interests of Named Miscellaneous Information-Experts;
Experts and Counsel - Interests of Counsel
Item 9 - Disclosure of Commission *
Position on Indemnification for
Securities Act Liabilities
<PAGE> 4
Caption in Prospectus
Item of Form S-4 and Proxy Statement
- -------------------------------------- -------------------------------
B. Information about the Registrant
--------------------------------
Item 10 - Information with Respect Information about BANC ONE
to S-3 Registrants CORPORATION; Comparative Rights
of Shareholders
Item 11 - Incorporation of Certain Information about BANC ONE
Information by Reference CORPORATION-Incorporation of
Certain Information About
BANC ONE by Reference
Item 12 - Information with Respect *
to S-2 or S-3 Registrants
Item 13 - Incorporation of Certain *
Information by Reference
Item 14 - Information with Respect *
to Registrants Other Than S-2 or
S-3 Registrants
C. Information about the Company
Being Acquired
-----------------------------
Item 15 - Information with Respect *
to S-3 Companies
Item 16 - Information with Respect *
to S-2 or S-3 Companies
Item 17 - Information with Respect Information about 1ST*BANK
to Companies Other Than S-2 or
S-3 Companies
D. Voting and Management Information
---------------------------------
Item 18 - Information if Proxies, The Special Meeting of Shareholders;
Consents or Authorizations Are To Voting and Management Information
Be Solicited
Item 19 - Information if Proxies, *
Consents or Authorizations Are
Not To Be Solicited or in an
Exchange Offer
* Omitted because item is inapplicable or answer to item is negative
<PAGE> 5
1ST*BANK
1000 South Belt Line Road
Coppell, Texas 75019
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER , 1994
To the Shareholders of 1ST*BANK:
A Special Meeting of the holders of Common Stock, $2.00 par value ("1ST*BANK
Common Stock"), of 1st*Bank, a Texas state banking association ("1ST*BANK"),
will be held at 1ST*BANK's main office located at 1000 South Belt Line Road,
Coppell, Texas, on December , 1994, at 10:00 A.M., local time, for the
purpose of voting on the following matters:
1. To consider and vote upon a proposed plan of merger (the "Plan of
Merger") providing for the merger (the "Merger") of 1ST*BANK into
Bank One, Texas, N.A. ("BANK ONE TEXAS"), a wholly owned subsidiary
of BANC ONE CORPORATION ("BANC ONE"). In the Merger, each
outstanding share of 1ST*BANK Common Stock will be converted into
BANC ONE Common Stock, no par value ("BANC ONE Common Stock"). The
Plan of Merger is set forth in a Merger Agreement dated August 10,
1994 (the "Merger Agreement") between 1ST*BANK and BANK ONE TEXAS,
joined in by BANC ONE and Banc One Texas Corporation. The Merger,
Plan of Merger and Merger Agreement (a copy of which is attached as
Exhibit C to the accompanying Prospectus and Proxy Statement) are
summarized in the accompanying Prospectus and Proxy Statement.
2. To consider and vote upon a proposal (the "Amendment Proposal") to
amend (a) 1ST*BANK's Mandatory Convertible Subordinated Debentures
automatically convertible on April 1, 1998 (the "Debentures")
to provide for their automatic conversion into shares of 1ST*BANK
Common Stock immediately prior to the Merger, and (b) Paragraph
Fourth of 1ST*BANK's Articles of Association to increase the
authorized 1ST*BANK Common Stock from 1,304,167 shares to 1,470,833
shares to provide the additional shares of 1ST*BANK Common Stock
required for conversion of the Debentures. The full text of the
proposed amendment to Paragraph Fourth of 1ST*BANK's Articles of
Association is set forth in the accompanying Prospectus and Proxy
Statement.
3. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof. Management currently
knows of no other business to be brought before the Special Meeting.
The 1ST*BANK Board of Directors has fixed November , 1994 as the record
date for the determination of shareholders entitled to notice of and to vote
at the Special Meeting and any adjournment thereof. Only the holders of
record of 1ST*BANK Common Stock at the close of business on such date are
entitled to notice of and to vote at the Special Meeting or at any adjournment
thereof.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF NOT LESS THAN TWO-THIRDS OF THE
OUTSTANDING SHARES OF 1ST*BANK COMMON STOCK IS REQUIRED FOR APPROVAL OF THE
PLAN OF MERGER AND OF THE AMENDMENT PROPOSAL. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN.
Shareholders are invited to attend the Special Meeting in person. However,
whether or not you plan to attend the Special Meeting, you are urged to
complete and sign the enclosed form of proxy and mail it in the enclosed return
envelope, which requires no postage if mailed in the United States. If a proxy
is properly executed, returned to 1ST*BANK, and not revoked, the shares
represented by such proxy will be voted in accordance with the instructions
contained therein. If no instruction is given, the proxy will be voted FOR
approval of the Plan of Merger and FOR approval of the Amendment Proposal. In
addition, a proxy will confer authority on 1ST*BANK's management to adjourn
the Special Meeting to another date (not more than 30 days after the
originally scheduled meeting date) and/or place for any purpose (including,
without limitation, for the purpose of soliciting additional proxies).
FAILURE TO RETURN THE ENCLOSED PROXY OR TO VOTE AT THE SPECIAL MEETING WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE PLAN OF MERGER AND THE AMENDMENT
PROPOSAL. If you do attend the Special Meeting and decide that you wish to
vote in person, you may revoke your proxy at any time prior to its use.
As more fully described in the accompanying Prospectus and Proxy Statement
under "VOTING AND MANAGEMENT INFORMATION--Rights of Dissenting Shareholders,"
holders of 1ST*BANK Common Stock who vote against the Plan of Merger at the
Special Meeting or who, at or before the Special Meeting, deliver to 1ST*BANK
written notice that they dissent from the Plan of Merger, and who comply with
certain other requirements of federal law may, as an alternative to receiving
BANC ONE Common Stock, dissent from the Plan of Merger and obtain payment in
cash of the fair value of their shares of 1ST*BANK Common Stock. The full
text of Section 215a of the National Bank Act, which sets forth the procedures
to be followed by 1ST*BANK shareholders who choose to dissent under federal
law, is included as Exhibit A to the accompanying Prospectus and Proxy
Statement and should be read in its entirety.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. If the Plan of
Merger is approved, you will be sent instructions regarding the mechanics of
exchanging your existing 1ST*BANK Common Stock certificates for new
certificates representing shares of BANC ONE Common Stock.
BY ORDER OF THE BOARD OF DIRECTORS
William J. Hendrix
Chairman of the Board of Directors
November , 1994
Coppell, Texas
<PAGE> 6
1ST*BANK
, 1994
Dear Fellow Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
1st*Bank ("1ST*BANK") to be held at 1ST*BANK's main office located at 1000
South Belt Line Road, Coppell, Texas, on December , 1994, at 10:00 A.M.,
local time.
The purposes of the Special Meeting are to consider and vote upon (a) a
proposed plan of merger (the "Plan of Merger") set forth in a Merger Agreement
dated August 10, 1994, pursuant to which 1ST*BANK will be merged (the "Merger")
into a wholly owned subsidiary of BANC ONE CORPORATION; and (b) a proposal (the
"Amendment Proposal") to amend (i) 1ST*BANK's Mandatory Convertible
Subordinated Debentures automatically convertible on April 1, 1998 (the
"Debentures") to provide for their automatic conversion into shares of 1ST BANK
Common Stock immediately before the Merger, and (ii) Paragraph Fourth of
1ST*BANK's Articles of Association to authorize the issuance of the additional
shares of 1ST*BANK Common Stock required for such conversion. In the Merger,
each outstanding share of 1ST*BANK Common Stock (including the shares issued
upon conversion of the Debentures), will be converted into BANC ONE Common
Stock as more fully described in the accompanying Prospectus and Proxy
Statement.
Your Board of Directors believes that the terms of the Plan of Merger and of
the Amendment Proposal are in the best interests of 1ST*BANK shareholders,
will provide significant value to all 1ST*BANK shareholders, and will enable
holders of 1ST*BANK Common Stock to participate in the expanded opportunities
for return on investment that the Merger will make possible. Additional
information is contained in the accompanying Prospectus and Proxy Statement,
which I urge you to read carefully.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE PLAN
OF MERGER AND FOR THE APPROVAL OF THE AMENDMENT PROPOSAL.
The Merger is subject to certain conditions and rights of termination as
described in the Prospectus and Proxy Statement and in the Merger Agreement.
If all the conditions are satisfied and the transaction is to be consummated,
shareholders will be notified regarding procedures for exchange of stock
certificates. PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES AT THIS TIME.
The members of the Board of Directors and officers of 1ST*BANK may be deemed
to have interests in the proposed transaction in addition to their interests
as shareholders which are described in the Prospectus and Proxy Statement.
Please indicate your voting instructions, sign and date the enclosed Proxy and
mail it promptly in the return envelope provided. Whether or not you plan to
attend the Special Meeting, it is important that you return the enclosed Proxy
so that your shares of 1ST*BANK Common Stock are voted. If you attend the
Special Meeting and decide that you wish to vote in person, you may revoke
your proxy at any time prior to its use at the Special Meeting.
Sincerely,
William J. Hendrix
Chairman of the
Board of Directors
<PAGE> 7
PROSPECTUS
425,000 Shares
BANC ONE CORPORATION
Common Stock
1ST*BANK
PROXY STATEMENT
for
Special Meeting of Shareholders
December , 1994
This Prospectus and Proxy Statement (this "Prospectus" or "Prospectus and
Proxy Statement") relates to the proposed plan (the "Plan of Merger") to merge
(the "Merger") 1st*Bank ("1ST*BANK") into Bank One, Texas, N.A. ("BANK ONE
TEXAS"), a wholly owned subsidiary of BANC ONE CORPORATION ("BANC ONE"); and
to the related proposed amendment (the "Amendment Proposal") of 1ST*BANK's
Mandatory Convertible Subordinated Debentures due April 1, 1998 (the
"Debentures") and of 1ST*BANK's Articles of Association to provide for the
automatic conversion of the Debentures into shares of 1ST*BANK Common Stock,
par value $2.00 per share ("1ST*BANK Common Stock"), immediately prior to the
Merger. If the Merger is consummated, each outstanding share of 1ST*BANK
Common Stock will be converted into BANC ONE Common Stock, no par value
("BANC ONE Common Stock"), at a rate which will be determined prior to the
date on which the Merger becomes effective but which (assuming a total of
1,470,833 shares of 1ST*BANK Common Stock are outstanding immediately before
the Merger) will not be less than 0.2627 or more than 0.2890 shares of BANC
ONE Common Stock for each share of 1ST*BANK Common Stock. See "PLAN OF
MERGER--Exchange Rate." The Merger and the related Amendment Proposal both
are subject to the affirmative vote of not less than two-thirds of the
outstanding shares of 1ST*BANK Common Stock entitled to vote thereon and to
the satisfaction of certain other conditions, including obtaining regulatory
approval. This Prospectus and Proxy Statement does not cover any resales of
BANC ONE Common Stock received by affiliates of 1ST*BANK upon consummation of
the Merger, and no person is authorized to make use of this Prospectus and
Proxy Statement in connection with any such resale.
____________________
BANC ONE Common Stock is traded on the New York Stock Exchange. The closing
price of BANC ONE Common Stock on the New York Stock Exchange on November ,
1994 was $ per share.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
____________________
A Special Meeting of Shareholders of 1ST*BANK will be held at 1ST*BANK's main
office located at 1000 South Belt Line Road, Coppell, Texas, on
December , 1994, to consider the proposals to approve the Plan of Merger
and the related Amendment Proposal.
____________________
_______________________________________________________________________________
The date of this Prospectus and Proxy Statement is , 1994.
<PAGE> 8
AVAILABLE INFORMATION
BANC ONE is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other
information with the Commission. Reports, proxy and information statements
and other information filed by BANC ONE can be inspected and copied, at
prescribed rates, at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices located at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade
Center, Suite 1300, New York, New York 10048. Reports, proxy and information
statements and other information concerning BANC ONE also can be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
BANC ONE has filed with the Commission a Registration Statement on Form
S-4 (together with any amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the BANC ONE Common Stock to be issued pursuant to the Merger. This
Prospectus and Proxy Statement does not contain all information set forth in
the Registration Statement and exhibits thereto. Such additional information
may be inspected and copied as set forth above. Statements contained in this
Prospectus and Proxy Statement or in any document incorporated into this
Prospectus and Proxy Statement by reference as to the contents of any contract
or other document referred to herein or therein are not necessarily complete,
and in each instance reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such
reference.
INCORPORATION BY REFERENCE
THIS PROSPECTUS AND PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY 1ST*BANK SHAREHOLDER, TO WHOM THIS PROSPECTUS AND PROXY
STATEMENT IS DELIVERED UPON ORAL OR WRITTEN REQUEST TO WILLIAM C. LEITER,
SENIOR VICE PRESIDENT, BANC ONE CORPORATION, 100 EAST BROAD STREET, COLUMBUS,
OHIO 43271-0251, TELEPHONE NUMBER 614/248-5905. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ,
1994.
BANC ONE's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (as amended by the Form 10-KA filed June 29, 1994), BANC
ONE's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994,
June 30, 1994 and September 30, 1994, and BANC ONE's Current Reports on Form
8-K, including the Form 8-K filed January 28, 1994 and the Form 8-K filed
February 17, 1994, in each case filed with the Commission pursuant to Section
13 of the Exchange Act, and the description of BANC ONE Common Stock which is
contained in BANC ONE's registration statement on Form 10 filed under Section
12 of the Exchange Act, including any amendment or report filed for the
purpose of updating such description, are incorporated into this Prospectus
and Proxy Statement by reference.
All documents filed by BANC ONE pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
Special Meeting of Shareholders of 1ST*BANK shall be deemed to be incorporated
by reference in this Prospectus and Proxy Statement and to be a part hereof
from the respective dates of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus and Proxy Statement to the extent that such statement is modified
or superseded by a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus
and Proxy Statement.
No person is authorized to give any information or to make any
representations other than those contained in this Prospectus and Proxy
Statement and, if given or made, such information or representation must not
be relied upon as having been authorized by BANC ONE or 1ST*BANK. This
Prospectus and Proxy Statement does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities, or the solicitation of a
proxy, in any jurisdiction to or from any person to whom it is unlawful to
make any such offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus and Proxy Statement nor any distribution of
securities made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of BANC ONE or
1ST*BANK since the date hereof or that the information herein is correct as of
any time subsequent to such date.
<PAGE> 9
TABLE OF CONTENTS
Page
----
A. INFORMATION ABOUT THE TRANSACTION . . . . . . . . . . . . . . . . . 1
---------------------------------
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1ST*BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BANC ONE CORPORATION . . . . . . . . . . . . . . . . . . . . . . 1
SUMMARY OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . 2
Terms of Plan of Merger and Exchange Rate . . . . . . . . . . . . 2
Management After the Merger . . . . . . . . . . . . . . . . . . . 2
Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . 2
Amendments of Debentures and Articles of Association . . . . . . 2
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . 3
Differences in Shareholder Rights . . . . . . . . . . . . . . . . 3
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 3
Conditions; Termination . . . . . . . . . . . . . . . . . . . . . 3
Selected Financial Data . . . . . . . . . . . . . . . . . . . . 4
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . 5
THE SPECIAL MEETING OF SHAREHOLDERS . . . . . . . . . . . . . . . . 9
Purposes of the Special Meeting of Shareholders . . . . . . . . . 9
Record Dates and Voting Rights . . . . . . . . . . . . . . . . . 9
Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Exchange Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . 11
Conversion of Shares and Exchange of Certificates . . . . . . . . 12
Operations After the Merger . . . . . . . . . . . . . . . . . . . 12
Background of Transaction . . . . . . . . . . . . . . . . . . . . 13
Merger Recommendation and Reasons for Transaction . . . . . . . . 14
Conditions to the Merger; Termination . . . . . . . . . . . . . . 15
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . 16
Resales by Affiliates . . . . . . . . . . . . . . . . . . . . . . 17
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 18
THE AMENDMENT PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . 18
COMPARATIVE RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . 18
Description of BANC ONE Stock . . . . . . . . . . . . . . . . . . 18
Comparison of BANC ONE Common Stock and
1ST*BANK Common Stock . . . . . . . . . . . . . . . . . . . . . 21
MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . 25
Transfer and Exchange Agents . . . . . . . . . . . . . . . . . . 25
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Interests of Counsel . . . . . . . . . . . . . . . . . . . . . . 25
Sources of Information . . . . . . . . . . . . . . . . . . . . . 25
Registration Statement . . . . . . . . . . . . . . . . . . . . . 26
<PAGE> 10
Page
----
B. INFORMATION ABOUT BANC ONE CORPORATION . . . . . . . . . . . . . . . 26
--------------------------------------
General--Business . . . . . . . . . . . . . . . . . . . . . . . . . 26
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . 27
Certain Regulatory Matters . . . . . . . . . . . . . . . . . . . . . 28
Market Prices of and Dividends Paid on BANC ONE Common Stock . . . . 30
Incorporation of Certain Information About BANC ONE . . . . . . . .
by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . 31
C. INFORMATION ABOUT 1ST*BANK . . . . . . . . . . . . . . . . . . . . 31
--------------------------
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Description of Business . . . . . . . . . . . . . . . . . . . . . . 31
Management's Discussion and Analysis
of Financial Condition and
Results of Operations of 1ST*BANK . . . . . . . . . . . . . . . . 32
Market Prices of and Dividends Paid on
1ST*BANK Common Stock, and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . 56
D. VOTING AND MANAGEMENT INFORMATION . . . . . . . . . . . . . . . . . 57
---------------------------------
VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
RIGHTS OF DISSENTING SHAREHOLDERS . . . . . . . . . . . . . . . . . 57
MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF BANC ONE . . . . . . . . . 58
PRINCIPAL SHAREHOLDERS OF 1ST*BANK . . . . . . . . . . . . . . . . . 59
OWNERSHIP OF 1ST*BANK COMMON STOCK BY
1ST*BANK DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . 60
FINANCIAL STATEMENTS
- --------------------
1ST*BANK Unaudited Financial Statements
as of June 30, 1994 and 1993 and for the Six
Month Periods then Ended . . . . . . . . . . . . . . . . . . . . . (1)
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . .
1ST*BANK Audited Financial Statements
as of December 31, 1993, 1992 and 1991
and for the Years then Ended . . . . . . . . . . . . . . . . . . (1)
EXHIBITS
- --------
Exhibit A Section 215a of the National Bank Act
Exhibit B OCC Banking Bulletin 88-22 -- Stock Appraisals/OCC Valuation
Methods
Exhibit C Merger Agreement (without exhibits)
<PAGE> 11
PROSPECTUS AND PROXY STATEMENT
- ------------------------------
1ST*BANK
Coppell, Texas
--------------
SPECIAL MEETING OF SHAREHOLDERS
-------------------------------
A. INFORMATION ABOUT THE TRANSACTION
INTRODUCTION
This Prospectus and Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of 1ST*BANK, a state banking
association organized under the laws of Texas with its main office in Coppell,
Texas, to be voted at the Special Meeting of Shareholders of 1ST*BANK to be
held on December , 1994, for the purpose of considering and taking action
upon (a) a plan to merge (the "Plan of Merger") 1ST*BANK into BANK ONE TEXAS, a
national banking association with its main office in Dallas, Texas that is a
wholly owned subsidiary of Banc One Texas Corporation ("TEXAS CORPORATION"), a
registered bank holding company headquartered in Columbus, Ohio that, in turn,
is a wholly owned subsidiary of BANC ONE, a registered multi-bank holding
company headquartered in Columbus, Ohio; and (b) a related proposal (the
"Amendment Proposal") to amend the Debentures to permit their conversion into
shares of 1ST*BANK Common Stock immediately before the Merger and to amend
1ST*BANK's Articles of Association to authorize the issuance of the additional
shares of 1ST*BANK Common Stock required for such conversion. The Plan of
Merger, which is more fully described below, is set forth in the Merger
Agreement dated August 10, 1994 between 1ST*BANK and BANK ONE TEXAS, joined in
by TEXAS CORPORATION and BANC ONE, a copy of which is attached to this
Prospectus and Proxy Statement as Exhibit C (the "Merger Agreement"). The Plan
of Merger provides for the conversion of 1ST*BANK Common Stock into shares of
BANC ONE Common Stock. The text of the proposed amendment to 1ST*BANK's
Articles of Association is set forth in "THE AMENDMENT PROPOSAL" below.
The principal office of BANC ONE is 100 East Broad Street, Columbus,
Ohio 43271 and its telephone number is 614/248-5944. The principal office of
1ST*BANK is 1000 South Belt Line Road, Coppell, Texas 75019 and its telephone
number is 214/462-1111.
This Prospectus and the form of proxy are being mailed to 1ST*BANK's
Shareholders for the first time on or about November , 1994.
1ST*BANK
1ST*BANK is a state banking association that was organized under the
laws of the State of Texas in 1974 with its main office located at 1000 South
Belt Line Road, Coppell, Texas, and with one branch office located at 1933 East
Frankford Road, Carrollton, Texas. 1ST*BANK has no subsidiaries. As of June
30, 1994, 1ST*BANK had total assets of approximately $134.0 million, total
deposits of approximately $124.8 million, and total shareholders' equity of
approximately $8.3 million (or approximately 6.2% of total assets). See
"INFORMATION ABOUT 1ST*BANK"
BANC ONE CORPORATION
BANC ONE is a registered multi-bank holding company incorporated under
the laws of the State of Ohio which as of September 30, 1994 had a total of
one Arizona, one California, six Colorado, seven Illinois, nine Indiana, eight
Kentucky, four Michigan, eighteen Ohio, one Oklahoma, one Texas, one Utah,
three West Virginia, and fifteen Wisconsin commercial bank subsidiaries.
These 75 banks operate approximately 1,400 offices in this thirteen-state area
and, at June 30, 1994, BANC ONE had consolidated total assets of approximately
$84.5 billion, consolidated total deposits of approximately $62.1 billion, and
consolidated total shareholders' equity of approximately $7.3 billion (or
approximately 8.6% of consolidated total assets). BANK ONE TEXAS is a wholly
owned direct subsidiary of TEXAS CORPORATION which, in turn, is a wholly owned
direct subsidiary of BANC ONE. See "INFORMATION ABOUT BANC ONE CORPORATION",
which includes information about pending acquisitions and dispositions of
commercial bank subsidiaries.
<PAGE> 12
SUMMARY OF THE TRANSACTION
TERMS OF PLAN OF MERGER AND EXCHANGE RATE
Under the terms of the Plan of Merger, upon the Merger becoming
effective, each outstanding share of 1ST*BANK Common Stock will be converted
into BANC ONE Common Stock at a rate that will be determined prior to the date
on which the Merger becomes effective but which, assuming a total of 1,470,833
shares of 1ST*BANK Common Stock are outstanding immediately before the Merger,
will not be less than 0.2627 or more than 0.2890 shares of BANC ONE Common
Stock for each share of 1ST*BANK Common Stock (the "Exchange Rate"). See
"PLAN OF MERGER--Exchange Rate."
MANAGEMENT AFTER THE MERGER
Upon consummation of the Merger in accordance with the Plan of Merger,
1ST*BANK will be merged into BANK ONE TEXAS and the separate corporate
existence of 1ST*BANK will cease. BANK ONE TEXAS, as the surviving
corporation in the Merger and a wholly owned subsidiary of TEXAS CORPORATION
and BANC ONE, will continue operations after the Merger under the name "Bank
One, Texas, N.A.". BANK ONE TEXAS will operate with BANK ONE TEXAS' current
directors, officers and employees, and with its main office in Dallas, Texas.
1ST*BANK's two offices will become branch offices of BANK ONE TEXAS. See
"PLAN OF MERGER--Operations After the Merger."
Under BANC ONE's operating philosophy, BANK ONE TEXAS, like BANC ONE's
other bank subsidiaries, has autonomy to match its products and services to
the needs of its local communities. BANC ONE bank affiliates have authority
to make decisions locally in "people-related" matters such as lending,
personnel, charitable contributions and other community and related matters,
relying upon BANC ONE and its state holding companies for "paper and computer
related" matters such as assistance in accounting, certain legal matters,
investment portfolio management, regulatory compliance, data processing and
other matters that are generally best performed by specialists on a
centralized basis.
TAX CONSEQUENCES
Consummation of the Merger is conditioned on receipt by 1ST*BANK and
BANC ONE of an opinion dated the effective date of the Merger from Coopers &
Lybrand, L.L.P., independent public accountants, to the effect that no gain or
loss will be recognized by 1ST*BANK's shareholders for Federal income tax
purposes as a result of the conversion of their 1ST*BANK Common Stock for BANC
ONE Common Stock in the Merger. The federal income tax consequences of the
proposed transaction to shareholders of 1ST*BANK are summarized below under
"PLAN OF MERGER--Federal Income Tax Consequences."
AMENDMENTS OF DEBENTURES AND ARTICLES OF ASSOCIATION
It is a condition to BANC ONE's obligation to consummate the Merger that
the Debentures be converted into 1ST*BANK Common Stock before the Merger.
Accordingly, 1ST*BANK's shareholders also will be asked at the Special Meeting
to consider and vote upon a proposal to amend the Debentures to provide for
their automatic conversion into 1ST*BANK Common Stock immediately prior to the
Merger, and to amend 1ST*BANK's Articles of Association to authorize the
issuance of up to 166,666 additional shares of 1ST*BANK Common Stock in
exchange for, and upon conversion of, the Debentures. Unless this Amendment
Proposal is approved, it is unlikely that the Merger will occur. See "THE
AMENDMENT PROPOSAL" for further information concerning the Debentures and the
proposed amendments to the Debentures and to 1ST*BANK's Articles of
Association, and for the text of the proposed amendment to 1ST*BANK's Articles
of Association.
VOTE REQUIRED
Not less than two-thirds of the outstanding shares of 1ST*BANK Common
Stock entitled to vote thereon must vote in favor of the Plan of Merger and of
the Amendment Proposal for them to be approved. As of June 30, 1994, the
directors and executive officers of 1ST*BANK, and those persons who may be
deemed to be their respective affiliates and associates, as a group, were
entitled to vote 95.7% of the outstanding shares of 1ST*BANK Common Stock, and
each such holder has indicated his or her intent to vote such shares for
approval of the Plan of Merger and of the Amendment Proposal. No shares of
1ST*BANK Common Stock are held by 1ST*BANK or its nominees in a fiduciary
capacity. It is not necessary for the shareholders of BANC ONE to approve the
Plan of Merger. However, TEXAS CORPORATION, as the sole shareholder of BANK
ONE TEXAS, has approved the Plan of Merger. For information concerning voting
by Shareholders of 1ST*BANK on the Plan of Merger and the Amendment Proposal,
see "PLAN OF MERGER--General" and "VOTING AND MANAGEMENT INFORMATION--Voting."
<PAGE> 13
RIGHTS OF DISSENTING SHAREHOLDERS
Under the National Bank Act, certain rights are available to a
shareholder of 1ST*BANK who votes against the Plan of Merger or who, at or
before the Special Meeting, delivers to 1ST*BANK written notice that he
dissents from approval of the Plan of Merger, and who complies with certain
other legal requirements. See "VOTING AND MANAGEMENT INFORMATION--Rights of
Dissenting Shareholders."
DIFFERENCES IN SHAREHOLDER RIGHTS
There are differences between the rights of BANC ONE shareholders and
the rights of 1ST*BANK shareholders. For example, BANC ONE's Articles of
Incorporation, unlike 1ST*BANK's Articles of Association, authorize the
issuance of preferred as well as common stock. The Texas Banking Code, as
amended (the "TBC"), gives 1ST*BANK's shareholders preemptive rights to
subscribe for proportionate amounts of newly issued shares of 1ST*BANK Common
Stock. BANC ONE's shareholders have no such preemptive rights. Ohio law
permits directors of an Ohio corporation such as BANC ONE, in determining
whether any matter is in the best interests of the corporation, to take
account of a wide range of interests and considerations. The TBC contains no
comparable provision. Ohio law and BANC ONE's Articles of Incorporation also
contain a variety of "anti-takeover" provisions to which there are no
counterparts in applicable Texas laws or 1ST*BANK's Articles of Association.
These anti-takeover provisions include restrictions both on transactions that
would involve acquisition of control of BANC ONE, and on transactions with
persons or groups who hold more than a certain specified percentage of the
outstanding shares of BANC ONE stock. Neither the TBC nor 1ST*BANK's Articles
of Association include any comparable restrictions. There are also a number
of other differences between the provisions of the TBC, Texas corporate law
and Ohio corporate law, and between the provisions of BANC ONE's Articles of
Incorporation and 1ST*BANK's Articles of Association, governing shareholder
rights. See "COMPARATIVE RIGHTS OF SHAREHOLDERS--Comparison of BANC ONE Common
Stock and 1ST*BANK Common Stock."
REGULATORY APPROVALS
For the Merger to be completed, it must be approved by the Office of the
Comptroller of the Currency (the "OCC"). In addition, adoption of the
amendment to 1ST*BANK's Articles of Association (which is, in effect, a
condition to the Merger) will require approval by the Texas Department of
Banking. Applications seeking such approvals have been filed, but such
approvals have not yet been obtained.
CONDITIONS; TERMINATION
Consummation of the Merger is subject to satisfaction or waiver of
various conditions, including compliance with the respective covenants and
confirmation of the respective representations and warranties of the parties
in the Merger Agreement, the absence of any material adverse change in the
financial condition or business of 1ST*BANK or BANC ONE, the fulfillment of
certain earnings tests and other matters. The Merger Agreement also provides
that either party may abandon the Merger if it is not consummated on or before
February 27, 1995. See "PLAN OF MERGER--Conditions to the Merger;
Termination" for a more complete discussion of the conditions to the Merger.
SELECTED FINANCIAL DATA
The following table presents on a historical basis selected unaudited
consolidated financial data for BANC ONE and 1ST*BANK. The financial data is
based on the consolidated financial statements of BANC ONE incorporated herein
by reference, and (in part) on the financial statements of 1ST*BANK set forth
in this Prospectus and Proxy Statement.
<PAGE> 14
<TABLE>
SELECTED FINANCIAL DATA (2)
(thousands, except per share)
(UNAUDITED)
<CAPTION>
Six months
ended
June 30, Year ended December 31,
---------- --------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total interest income and other income:
BANC ONE............................... $ 3,747,748 $ 7,226,790 $ 7,358,393 $ 6,828,327 $ 6,151,959 $ 5,473,099
1ST*BANK............................... 4,149 7,486 7,402 7,187 6,569 5,716
Income (loss) from continuing operations:
BANC ONE............................... $ 628,811 $ 1,120,589 $ 876,588 $ 664,288 $ 536,066 $ 304,916
1ST*BANK............................... 798 1.081 1,384 831 463 446
Income(loss) from continuing operations
per common share:
BANC ONE............................... $ 1.62 $ 2.93 $ 2.29 $ 1.82 $ 1.56 $ 0.97
1ST*BANK............................... 0.61 0.83 1.06 0.64 0.36 0.34
Historical dividends declared per
common share:
BANC ONE............................... $ 0.62 $ 1.07 $ 0.89 $ 0.76 $ 0.69 $ 0.63
1ST*BANK............................... (3) (3) (3) (3) (3) (3)
Total assets (end of period):
BANC ONE............................... $84,544,235 $79,918,561 $76,739,119 $73,840,498 $56,610,126 $48,111,384
1ST*BANK............................... 134,002 131,894 99,751 86,007 76,888 60,723
Long-term borrowings (end of period):
BANC ONE............................... $ 1,741,221 $ 1,701,662 $ 1,357,462 $ 943,726 $ 810,197 $ 624,232
1ST*BANK............................... 500 500 500 500 500 500
Total stockholders' equity (end of period):
BANC ONE............................... $ 7,266,974 $ 7,033,638 $ 6,241,586 $ 5,559,370 $ 4,514,653 $ 3,633,542
1ST*BANK............................... 8,289 7,490 6,322 4,938 4,066 3,369
<FN>
(1) 1989'S income from continuing operations per common share was impacted by a significant increase in Banc One Arizona (formerly
Valley National) Corporation's provision for loan losses.
(2) All BANC ONE per common share amounts are restated to give retroactive effect to the 10% dividend paid on March 4, 1994 to
stockholders of record as of February 16, 1994.
(3) 1ST*BANK did not declare any dividends on its Common Stock in any year presented.
</TABLE>
<PAGE> 15
COMPARATIVE PER SHARE DATA
Based upon Exchange Rates of 0.2627, 0.2758 and 0.2890 shares of BANC
ONE Common Stock for each outstanding share of 1ST*BANK Common Stock (these
being the minimum, midpoint and maximum exchange ratios, respectively, if a
total of 1,470,833 shares of 1ST*BANK Common Stock are outstanding immediately
before the Merger), the following tables set forth per common share income
from continuing operations, dividends, book value, and market value of (i)
BANC ONE; (ii) 1ST*BANK; and (iii) pro forma equivalent of one share of
1ST*BANK Common Stock based on BANC ONE Common Stock.
5
<PAGE> 16
<TABLE>
<CAPTION>
Per Share of 1ST*BANK Common
Stock assuming an exchange
rate of one share of
1ST*BANK Common Stock for
.2627 shares of BANC ONE
Common Stock
------- -------- -------------------------
BANC 1ST* BANC
ONE BANK ONE
------- -------- -------------------------
<S> <C> <C> <C>
Income from continuing
operations per common share:
December 31, 1989 $ 0.97 (5) $ 0.34 0.25
December 31, 1990 1.56 0.36 0.41
December 31, 1991 1.82 0.64 0.48
December 31, 1992 2.29 1.06 0.60
December 31, 1993 2.93 0.83 0.77
June 30, 1994, 1.62 0.61 0.43
Dividends declared per common share:
December 31, 1989 0.63 (6) 0.17
December 31, 1990 0.69 (6) 0.18
December 31, 1991 0.76 (6) 0.20
December 31, 1992 0.89 (6) 0.23
December 31, 1993 1.07 (6) 0.28
June 30, 1994 0.62 (6) 0.16
Book value per common share
as of June 30, 1994 18.29 6.36 4.80
Market value per common share
as of March 8, 1994 (1) 33.13 (2) (3) 8.70
Market value per common share
as of November __, 1994 (4) (2) (3)
<FN>
(1) The business day immediately preceding public announcement of the Merger.
(2) Based on the closing price of BANC ONE Common Stock as reported on the New York Stock Exchange.
(3) No active trading exists for 1ST*BANK Common Stock.
(4) A recent business day preceding the date of this Prospectus.
(5) 1989's income from continuing operations per common share was impacted by a significant increase in Banc One Arizona
(formerly Valley National) Corporation's provision for loan losses.
(6) 1ST*BANK did not declare any dividends on 1ST*BANK Common Stock in any year presented.
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
Per Share of 1ST*BANK Common
Stock assuming an exchange
rate of one share of
1ST*BANK Common Stock for
.2758 shares of BANC ONE
Common Stock
------- -------- -------------------------
BANC 1ST* BANC
ONE BANK ONE
------- -------- -------------------------
<S> <C> <C> <C>
Income from continuing
operations per common share:
December 31, 1989 $ 0.97 (5) $ 0.34 0.27
December 31, 1990 1.56 0.36 0.43
December 31, 1991 1.82 0.64 0.50
December 31, 1992 2.29 1.06 0.63
December 31, 1993 2.93 0.83 0.81
June 30, 1994 1.62 0.61 0.45
Dividends declared per common share:
December 31, 1989 0.63 (6) 0.17
December 31, 1990 0.69 (6) 0.19
December 31, 1991 0.76 (6) 0.21
December 31, 1992 0.89 (6) 0.25
December 31, 1993 1.07 (6) 0.30
June 30, 1994 0.62 (6) 0.17
Book value per common share
as of June 30, 1994 18.29 6.36 5.04
Market value per common share
as of March 8, 1994 (1) 33.13 (2) (3) 9.14
Market value per common share
as of November __, 1994 (4) (2) (3)
<FN>
(1) The business day immediately preceding public announcement of the Merger.
(2) Based on the closing price of BANC ONE Common Stock as reported on the New York Stock Exchange.
(3) No active trading exists for 1ST*BANK Common Stock.
(4) A recent business day preceding the date of this Prospectus.
(5) 1989's income from continuing operations per common share was impacted by a significant increase in
Banc One Arizona (formerly Valley National) Corporation's provision for loan losses.
(6) 1ST*BANK did not declare any dividends on 1ST*BANC Common Stock in any year presented.
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Per Share of 1ST*BANK Common
Stock assuming an exchange
rate of one share of
1ST*BANK Common Stock for
.2890 shares of BANC ONE
Common Stock
------- -------- -------------------------
BANC 1ST* BANC
ONE BANK ONE
------- -------- -------------------------
<S> <C> <C> <C>
Income from continuing
operations per common share:
December 31, 1989 $ 0.97 (5) $ 0.34 0.28
December 31, 1990 1.56 0.36 0.45
December 31, 1991 1.82 0.64 0.53
December 31, 1992 2.29 1.06 0.66
December 31, 1993 2.93 0.83 0.85
June 30, 1994 1.62 0.61 0.47
Dividends declared per common share:
December 31, 1989 0.63 (6) 0.18
December 31, 1990 0.69 (6) 0.20
December 31, 1991 0.76 (6) 0.22
December 31, 1992 0.89 (6) 0.26
December 31, 1993 1.07 (6) 0.31
June 30, 1994 0.62 (6) 0.18
Book value per common share
as of June 30, 1994 18.29 6.36 5.29
Market value per common share
as of March 8, 1994 (1) 33.13 (2) (3) 9.57
Market value per common share
as of November __, 1994 (4) (2) (3)
<FN>
(1) The business day immediately preceding public announcement of the Merger.
(2) Based on the closing price of BANC ONE Common Stock as reported on the New York Stock Exchange.
(3) No active trading exists for 1ST*BANK Common Stock.
(4) A recent business day preceding the date of this Prospectus.
(5) 1989's income from continuing operations per common share was impacted by a significant increase in
Banc One Arizona (formerly Valley National) Corporation's provision for loan losses.
(6) 1ST*BANK did not declare any dividends on 1ST*BANK Common Stock in any year presented.
</TABLE>
<PAGE> 19
THE SPECIAL MEETING OF SHAREHOLDERS
This Prospectus and Proxy Statement is being furnished to 1ST*BANK's
Shareholders in connection with the solicitation of proxies by the 1ST*BANK
Board for use at 1ST*BANK's Special Meeting of Shareholders and at any
adjournment or adjournments thereof. The Special Meeting will be held on
December , 1994, at 10:00 A.M., local time at 1000 South Belt Line Road,
Coppell, Texas.
PURPOSES OF THE SPECIAL MEETING OF SHAREHOLDERS
At the Special Meeting, the holders of 1ST*BANK Common Stock will vote
on the approval of the Plan of Merger and of the Amendment Proposal.
RECORD DATES AND VOTING RIGHTS
The 1ST*BANK Board has fixed the close of business on November , 1994,
as the record date for determination of 1ST*BANK shareholders entitled to
notice of and to vote at the Special Meeting (the "Record Date"). As of the
Record Date, 1ST*BANK had outstanding and entitled to vote 1,304,167 shares of
1ST*BANK Common Stock. Each share of 1ST*BANK Common Stock is entitled to one
vote. At least two-thirds of the outstanding shares of 1ST*BANK Common Stock
must be voted in favor of the Plan of Merger to approve the Plan of Merger, and
at least two-thirds of the outstanding shares of 1ST*BANK Common Stock must be
voted in favor of the Amendment Proposal to approve the Amendment Proposal.
Votes, whether in person or by proxy, will be counted and tabulated by
inspectors appointed by 1ST*BANK. Abstentions and broker non-votes will not
be counted as votes either "for" or "against" any matters coming before the
Special Meeting, nor will such abstentions and broker non-votes be counted
toward determining a quorum. However, such abstentions have the effect of a
"no" vote because applicable federal and state law requires the Plan of Merger
and the Amendment Proposal to be authorized and approved by the affirmative
vote of not less than two-thirds of the 1ST*BANK Common Stock entitled to be
voted, rather than by two-thirds of those shares actually voted.
PROXIES
Proxies for use at the Special Meeting accompany this Proxy Statement.
A shareholder may use a proxy whether or not he or she plans to attend the
Special Meeting in person. The proxy may be revoked by the person giving it
at any time before it is exercised by giving written notice to the Secretary
of 1ST*BANK, by submitting a later dated proxy, or by attending and voting in
person at the Special Meeting. All proxies validly submitted and not revoked
will be voted in the manner specified therein. IF NO SPECIFICATION IS MADE,
THE PROXIES WILL BE VOTED IN FAVOR OF APPROVAL OF THE PLAN OF MERGER AND OF THE
AMENDMENT PROPOSAL. The 1ST*BANK Board is not aware of any other matters
which may be presented for action at the Special Meeting, but if other matters
do properly come before the Special Meeting it is intended that the shares
represented by the accompanying proxy will be voted by the persons named in
the proxy in accordance with their best judgment. The shares represented by the
accompanying proxy may be voted to adjourn the Special Meeting for the purpose
of soliciting additional votes to approve the Plan of Merger.
Solicitation of proxies will be made in person, by mail, or by telephone
or telegraph, or by other communications media by present and former directors,
officers and employees of 1ST*BANK for which no additional compensation will be
paid. 1ST*BANK will bear the cost of solicitation of proxies from its
Shareholders and may reimburse brokers and others for their expenses in
forwarding solicitation material to beneficial owners of 1ST*BANK Common Stock.
1ST*BANK held its 1994 Annual Meeting of Shareholders on March 16, 1994.
9
<PAGE> 20
PLAN OF MERGER
The information in this Prospectus and Proxy Statement concerning the
terms of the Plan of Merger is a summary only and is qualified in its entirety
by reference to the Merger Agreement, a copy of which (without the exhibits
thereto) is attached to this Prospectus and Proxy Statement as Exhibit C, and
which is incorporated herein by reference. The Merger Agreement (including its
exhibits) is also an exhibit to the Registration Statement. See "INCORPORATION
BY REFERNCE" for this procedure for obtaining a copy of the Registration
Statement, including the exhibits thereto.
GENERAL
The Plan of Merger provides for the Merger of 1ST*BANK with and into
BANK ONE TEXAS, in accordance with the applicable provisions of the National
Bank Act, as amended (the "NBA") and the TBC. BANK ONE TEXAS will be the
surviving corporation in the Merger (the "Surviving Corporation"). Upon the
effectiveness of the Merger (the "Effective Time"), each outstanding share of
1ST*BANK Common Stock will be converted into BANC ONE Common Stock at the
Exchange Rate which, assuming a total of 1,470,833 shares of 1ST*BANK Common
Stock are outstanding immediately before the Merger, and subject to adjustment
in certain circumstances, will not be less than 0.2627 or greater than 0.2890
shares of BANC ONE Common Stock for each share of 1ST*BANK Common Stock, which
shares of BANC ONE Common Stock will be issued as a result of the Merger. See
"PLAN OF MERGER--Exchange Rate."
It is a condition to BANC ONE's obligation to consummate the Merger that
the total number of shares of 1ST*BANK Common Stock outstanding immediately
before the Merger must not exceed 1,470,833 (including the shares upon
conversion of the Debentures), that the total number of shares of
BANC ONE Common Stock issued in the Merger must not exceed 425,000, and that
the total number of shares of such stock that are to be settled in cash,
including both fractional share interests and shares whose holders have
asserted rights as dissenting shareholders, must not exceed 10% of the total
number of shares of BANC ONE Common Stock that BANC ONE would issue in the
Merger if there were no such cash settlements. See "VOTING AND MANAGEMENT
INFORMATION--Rights of Dissenting Shareholders."
The affirmative vote of not less than two-thirds of the outstanding
shares of 1ST*BANK Common Stock entitled to vote at the Special Meeting is
required to approve the Plan of Merger and to approve the Amendment Proposal.
See "VOTING AND MANAGEMENT INFORMATION--Voting." Also, it is unlikely that
the Merger will occur if the Amendment Proposal is not approved by 1ST*BANK's
Shareholders at the Special Meeting. See "THE AMENDMENT PROPOSAL." Subject to
such shareholder approval and the satisfaction of certain conditions and
receipt of all requisite regulatory approvals, in each case as provided for in
the Merger Agreement, the Merger will become effective on the date specified by
the OCC in the OCC's final certification of its approval of the Merger.
The Boards of Directors of BANC ONE, TEXAS CORPORATION, BANK ONE TEXAS
and 1ST*BANK have approved the Plan of Merger. The Board of Directors of
1ST*BANK also has approved the Amendment Proposal. TEXAS CORPORATION, as the
sole shareholder of BANK ONE TEXAS, also has approved the Plan of Merger.
Approval of the Plan of Merger by BANC ONE as the sole shareholder of TEXAS
CORPORATION or by the shareholders of BANC ONE is not required for consummation
of the Merger.
EXCHANGE RATE
Under the terms of the Plan of Merger, shares of BANC ONE Common Stock
issued by reason of the Merger will be allocated to 1ST*BANK's Shareholders of
record as of the Effective Time, with the total number of such shares of BANC
ONE Common Stock to be equal to the number of shares of 1ST*BANK Common Stock
outstanding immediately prior to the Effective Time multiplied by the Exchange
Rate. However, it is a condition to BANC ONE's obligation to consummate the
Merger that the total number of shares of 1ST*BANK Common Stock outstanding at
the Effective Time must not exceed 1,470,833 shares (including the shares
issued in exchange for the Debentures), and that the total number of shares of
BANC ONE Common Stock issued in the Merger must not exceed 425,000.
10
<PAGE> 21
Subject to adjustment in certain circumstances, the Exchange Rate will
be based upon the average of the closing trade prices of BANC ONE Common Stock
(the "BANC ONE Average Price") on the New York Stock Exchange (the "NYSE")
during the ten consecutive days on which shares of BANC ONE Common are traded
on the NYSE (each such day, an "NYSE Trading Day") ending on the sixth NYSE
Trading Day immediately prior to the Effective Time (such ten-day period, the
"Valuation Period").
* If the BANC ONE Average Price is $36.30 or more, each share of
1ST*BANK Common Stock will be exchanged for 0.2627 shares of BANC
ONE Common Stock.
* If the BANC ONE Average Price is $33.00 or less, each share of
1ST*BANK Common Stock will be exchanged for 0.2890 shares of BANC
ONE Common Stock.
* If the BANC ONE Average Price is less than $36.30 and more than
$33.00, each share of 1ST*BANK Common Stock will be exchanged for
that number of shares of BANC ONE Common Stock, carried to four
decimal places, that when multiplied by the BANC ONE Average Price
will equal $9.5354.
Thus, assuming that a total of 1,470,833 shares of 1ST*BANK Common Stock are
outstanding immediately before the Merger and no further adjustments are made
in the Exchange Rate, the Exchange Rate will be no less than 0.2627 shares of
BANC ONE Common Stock per share of 1ST*BANK Common Stock, and no greater than
0.2890 shares of BANC ONE Common Stock per share of 1ST*BANK Common Stock; and
(disregarding fractional share interests and shares whose holders exercise
dissenters' rights) the total number of shares of BANC ONE Common Stock
issuable in exchange for the outstanding shares of 1ST*BANK Common Stock will
be no more than 425,000 and no less than 386,388.
The closing price of BANC ONE Common Stock on November , 1994, was
$ per share. At June 30, 1994, a total of 1,304,167 shares of 1ST*BANK
Common Stock were outstanding. In addition, the Debentures are convertible in
aggregate into not more than 166,666 shares of 1ST*BANK Common Stock and, if
the Amendment Proposed is approved, will be so converted immediately prior to
the Merger. See "THE AMENDMENT PROPOSAL." Under the terms of the
Merger Agreement, except for the conversion of the Debentures, 1ST*BANK may
not issue, sell, grant any option for, or acquire for value any shares of its
capital stock.
Unless BANC ONE declares a stock dividend or distribution upon or
subdivides, splits up, reclassifies or combines its Common Stock or declares a
dividend, or makes a distribution, on its Common Stock in any security
convertible into such Common Stock prior to the Effective Time, no further
adjustments will be made to the Exchange Rate. However, in the event of such
a transaction, appropriate adjustment will be made to the Exchange Rate.
FRACTIONAL SHARES
Under the terms of the Plan of Merger, no fractional shares of BANC ONE
Common Stock will be exchanged for shares of 1ST*BANK Common Stock. In lieu
thereof, each shareholder of 1ST*BANK having a fractional interest resulting
from the exchange of 1ST*BANK Common Stock for BANC ONE Common Stock will be
paid by BANC ONE an amount in cash, without interest, equal to the value of
such fractional interest based upon the BANC ONE Average Price.
11
<PAGE> 22
CONVERSION OF SHARES AND EXCHANGE OF CERTIFICATES
Under the terms of the Plan of Merger, upon consummation of the Merger,
the outstanding shares of 1ST*BANK Common Stock will be converted into shares
of BANC ONE Common Stock at the Exchange Rate calculated as described under
the caption "--Exchange Rate." As soon as practicable after the Merger
becomes effective, instructions and forms will be furnished to 1ST*BANK's
shareholders for use in exchanging their 1ST*BANK share certificates for
certificates of BANC ONE Common Stock. If any certificate for shares of BANC
ONE Common Stock is to be issued in a name other than that in which the
certificate for shares of 1ST*BANK Common Stock surrendered for exchange is
registered, the certificate so surrendered must be properly endorsed or
otherwise be in proper form for transfer and the person requesting such
exchange must pay to BANC ONE or its transfer agent any applicable transfer or
other taxes required by reason of the issuance of the certificate.
Until so surrendered, certificates formerly representing shares of
1ST*BANK Common Stock (other than certificates representing treasury shares,
or shares subject to the rights of dissenting shareholders) will be deemed for
all purposes to evidence the ownership of the number of shares of BANC ONE
Common Stock and cash for fractional shares into which such shares have been
converted. Dividends and other distributions, if any, that become payable on
BANC ONE Common Stock pending exchange of certificates representing shares of
1ST*BANK Common Stock will be retained by BANC ONE until surrender of such
certificates, at which time such dividends and distributions will be paid,
without interest. In addition, after the Effective Time the holders of
certificates formerly representing shares of 1ST*BANK Common Stock will cease
to have rights with respect to such shares (except such rights, if any, as
such certificate holders may have as dissenting Shareholders), and, except as
aforesaid, their sole rights will be to exchange such certificates for shares
of BANC ONE Common Stock in accordance with the Merger Agreement.
OPERATIONS AFTER THE MERGER
Under the terms of the Plan of Merger, upon consummation of the Merger
1ST*BANK will be merged into BANK ONE TEXAS and the separate corporate
existence of 1ST*BANK will cease. As a result of the Merger, all rights,
franchises and interests of 1ST*BANK and BANK ONE TEXAS, respectively, in and
to every type of property, real, personal and mixed, and choses in action,
will be transferred to and vested in BANK ONE TEXAS as the Surviving
Corporation, by virtue of the Merger and without any deed or other transfer,
as provided in the NBA. As the Surviving Corporation, BANK ONE TEXAS also
will be responsible for all liabilities of every kind and description of
1ST*BANK and BANK ONE TEXAS existing as of the Effective Time, except as
otherwise provided in the Merger Agreement.
BANK ONE TEXAS, as the Surviving Corporation and a wholly owned
subsidiary of BANC ONE, will continue operations after the Merger under the
name "Bank One, Texas, N.A." and will operate with BANK ONE TEXAS' directors,
officers and employees immediately before the Effective Time, with BANK ONE
TEXAS' Articles of Association and By-Laws as in effect immediately before the
Effective Time, with its business being that of a bank, and with its main
office at 1717 Main Street, Dallas, Texas. Those of 1ST*BANK's officers and
employees who agree to accept such positions will become officers and
employees of BANK ONE TEXAS and, to the extent possible, will continue to hold
the same titles and to perform the same duties and functions for BANK ONE
TEXAS after the Merger as they did for 1ST*BANK before the Merger (subject to
such modification as may be necessary to avoid duplication of officer titles,
duties and functions). Upon consummation of the Merger, 1ST*BANK's two
banking offices will become branch offices of BANK ONE TEXAS.
12
<PAGE> 23
Under BANC ONE's operating philosophy, BANK ONE TEXAS will continue
after the Merger, as it does at present, to have autonomy to match its
products and services to the needs of its local communities. Like other BANC
ONE bank affiliates, it will continue, as it does at present, to have
authority to make decisions locally in "people-related" matters such as
lending, personnel, charitable contributions and other community and related
matters, relying upon BANC ONE and its state holding companies for "paper and
computer related" matters such as assistance in accounting, certain legal
matters, investment portfolio management, regulatory compliance, data
processing and other matters which are generally best performed by specialists
on a centralized basis.
BACKGROUND OF TRANSACTION
The specific terms and conditions of the Merger are the product of
discussions and subsequent arms-length negotiations between representatives of
BANC ONE and 1ST*BANK over a period of approximately sixteen months, beginning
in July 1993. The initial discussions were initiated by BANC ONE and considered
whether the business objectives of BANC ONE and the business interests of
1ST*BANK could be enhanced through a business combination of 1ST*BANK and BANC
ONE.
Linda Carter, the principal shareholder of 1ST*BANK, joined the
management of 1ST*BANK in 1986, at a time when 1ST*BANK was experiencing a
downward business trend. The addition of Ms. Carter to the management of
1ST*BANK was intended to reverse this trend. During her tenure as Chairman of
the Board and President of 1ST*BANK, the earnings and deposits of 1ST*BANK
increased to levels that made the acquisition of 1ST*BANK an attractive option
for other banks. See "INFORMATION ABOUT 1ST*BANK--Description of Business"
for information about loans to and deposits by affiliates of Ms. Carter. Ms.
Carter now desires to retire from her association with 1ST*BANK and to dispose
of her investment in 1ST*BANK in order to allow her to devote more time to her
family life and other business interests. William J. Hendrix joined 1ST*BANK
in the fall of 1993, and at the annual shareholders' and directors' meetings
held in December 1993, Mr. Hendrix was elected to replace Ms. Carter as
Chairman of the Board of 1ST*BANK in order to assist in the process of pursuing
a business combination for 1ST*BANK.
BANC ONE initially approached 1ST*BANK for the purpose of proposing a
merger of 1ST*BANK and BANK ONE TEXAS in 1989, although BANC ONE did not make
a formal offer to 1ST*BANK at that time. In July 1993, BANC ONE again
contacted 1ST*BANK to propose a merger of 1ST*BANK and BANK ONE TEXAS, at
which time the Board of Directors of 1ST*BANK and Ms. Carter determined that
it was in the best interests of 1ST*BANK and the community of Coppell to
pursue such a merger.
After it was revealed that 1ST*BANK was considering a merger with BANK
ONE TEXAS, several other banks contacted 1ST*BANK regarding the possibility of
a merger. In addition, subsequent to BANC ONE's initial proposal on January
12, 1994, which 1ST*BANK rejected as inadequate, Mr. Hendrix contacted several
regional banks to determine their level of interest in pursuing a merger with
1ST*BANK. Although the management of 1ST*BANK had informal discussions with
several other banks regarding a possible merger, none of these discussions
ever reached the negotiation stage.
At the outset of discussions between BANC ONE and 1ST*BANK, both parties
contemplated an exchange of BANC ONE Common Stock for the outstanding shares
of 1ST*BANK Common Stock, without any cash component. No other transaction
structures were discussed during the subsequent negotiations between the
parties. BANC ONE initially offered a specific number of shares of BANC ONE
Common Stock in exchange for all of the outstanding shares of 1ST*BANK Common
Stock, and 1ST*BANK rejected this proposal as inadequate. On January 19,
1994, 1ST*BANK made a counter proposal to BANC ONE. BANC ONE subsequently
made another offer to 1ST*BANK on terms more favorable to 1ST*BANK. This
counter offer was accepted by 1ST*BANK, and on February 28, 1994, the parties
executed an agreement in principle. The parties then proceeded to negotiate
the terms of the Merger, during which time certain potential legal and
environmental issues were resolved. The Merger Agreement was executed and
announced publicly on August 10, 1994.
13
<PAGE> 24
THE BOARD OF DIRECTORS OF 1ST*BANK BELIEVES THAT THE TERMS OF THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, 1ST*BANK SHAREHOLDERS. THE BOARD
OF DIRECTORS OF 1ST*BANK HAS UNANIMOUSLY APPROVED THE MERGER AND THE PLAN OF
MERGER AND UNANIMOUSLY RECOMMENDS APPROVAL OF THE MERGER AND APPROVAL AND
ADOPTION OF THE PLAN OF MERGER AND THE AMENDMENT PROPOSAL BY 1ST*BANK
SHAREHOLDERS.
MERGER RECOMMENDATION AND REASONS FOR TRANSACTION
In approving the terms of the Plan of Merger, the Board of Directors of
1ST*BANK has considered various factors including, but not limited to,
1ST*BANK's business, operations, assets, deposits, earnings, prospects,
shareholders' equity and trends, and Ms. Carter's desire to dispose of her
interest in 1ST*BANK. The Board of Directors of 1ST*BANK also considered the
business and operations of BANC ONE and the long-standing business
relationship between 1ST*BANK and its affiliates and BANC ONE. 1ST*BANK has
not obtained a fairness opinion, appraisal, opinion from an investment banker,
or other report regarding the value of 1ST*BANK, 1ST*BANK Common Stock, or the
BANC ONE Common Stock that is to be exchanged in the Merger for the
outstanding shares of 1ST*BANK Common Stock, or the fairness of the Merger to
1ST*BANK shareholders. The Board of Directors of 1ST*BANK has relied on its
own analysis of the prospects, business, operations, books and records of
1ST*BANK and BANC ONE, the regulatory considerations affecting 1ST*BANK and
BANC ONE, and the risk factors in agreeing on the terms of the Merger and the
Plan of Merger, including the market-based conversion formula set forth in the
Plan of Merger, which is subject to certain limitations. In view of the
circumstances and the wide variety of factors considered in connection with
evaluation of the merger, the Board of Directors of 1ST*BANK did not find it
practicable to assign relative weights to the factors considered in reaching
its decision. The foregoing discussion includes all the material factors
considered by the Board of Directors of 1ST*BANK.
ACCORDINGLY, THE BOARD OF DIRECTORS OF 1ST*BANK UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE PLAN OF MERGER AND THE
AMENDMENT PROPOSAL.
As of June 30, 1994, the directors and executive officers of 1ST*BANK,
together with their respective affiliates and associates, as a group, were
entitled to vote 95.7% of the total shares of 1ST*BANK Common Stock outstanding
and, in addition, that group owned Debentures convertible, in aggregate, into
an additional 120,999 shares of 1ST*BANK Common Stock (which shares will not be
eligible to vote at the Special Meeting). Ms. Carter, alone, is entitled to
vote 92.5% of the total shares of 1ST*BANK Common Stock outstanding. No shares
of 1ST*BANK Common Stock are held by 1ST*BANK or its nominees in a fiduciary
capacity. 1ST*BANK believes that all of the directors' and executive officers'
shares, including Ms. Carter's, will be voted in favor of the Merger and of the
Amendment Proposal. These persons will be entitled to receive the same
consideration for their shares as any other 1ST*BANK shareholder upon approval
of the Plan of Merger. On the date of this Prospectus and Proxy Statement,
apart from the Debentures, there were no outstanding options for shares of
1ST*BANK Common Stock. After the Merger, the individuals who now serve as
directors and/or executive officers of 1ST*BANK, together with their
respective affiliates and associates, as a group, will own only approximately
1/10 of 1% of the total shares of BANC ONE Common Stock outstanding.
In the past five years, several affiliates of 1ST*BANK (including
members of the Carter family and entities controlled by the Carter family)
have had depositor and other banking relationships with BANC ONE and its
affiliates. However, there are not now, nor have there been in the past five
years, any agreements or understandings between 1ST*BANK and its affiliates
and BANC ONE and its affiliates except as are otherwise disclosed herein. See
"INFORMATION ABOUT 1ST*BANK--Description of Business" for information about
loans to and deposits by affiliates of Ms. Carter.
BANC ONE believes that the Merger will provide BANK ONE TEXAS with a
more meaningful presence in the Coppell, Texas area and an expansion of BANK
ONE TEXAS' customer base and assets. Such expansion will provide BANC ONE
with the opportunity to realize increased economies of scale while serving new
customers with the expertise and assistance of the capable and experienced
staff of BANK ONE TEXAS.
14
<PAGE> 25
CONDITIONS TO THE MERGER; TERMINATION
Consummation of the Merger is subject to satisfaction of a number of
conditions, including, among others:
(1) the receipt of all necessary approvals by governmental agencies and
authorities, including the OCC, and each of such approvals remaining in
full force and effect at the Effective Time;
(2) there being no change in the consolidated financial condition, aggregate
net assets, shareholders' equity, business or operating results of
1ST*BANK, or of BANC ONE and its subsidiaries, taken as a whole, from
March 31, 1994 to the Effective Time, that has had a material adverse
effect;
(3) compliance by 1ST*BANK, BANC ONE, TEXAS CORPORATION and BANK ONE TEXAS
with their respective covenants and confirmation of their respective
representations and warranties as set forth in the Merger Agreement,
including the agreement of 1ST*BANK that, except with the approval of
BANC ONE or as otherwise permitted by the Merger Agreement, from
March 31, 1994 to the Effective Time 1ST*BANK will not pay cash dividends
and or conduct its banking operations other than in the ordinary
course of business;
(4) approval of the Plan of Merger by the requisite vote of Shareholders of
1ST*BANK Common Stock (see "MERGER-General" and "VOTING AND MANAGEMENT
INFORMATION-Voting");
(5) receipt by 1ST*BANK and BANC ONE of the opinion relative to the Federal
income tax consequences referred to under the caption "MERGER-Federal
Income Tax Consequences";
(6) receipt by BANC ONE of an opinion from 1ST*BANK's counsel and receipt by
1ST*BANK of an opinion from counsel for BANC ONE and BANK ONE TEXAS,
which opinions are to be in the general forms annexed to the Merger
Agreement;
(7) satisfaction by BANC ONE and 1ST*BANK of the respective earnings tests
set forth in the Merger Agreement or as otherwise agreed between the
parties;
(8) the fractional share interests in BANC ONE Common Stock to be paid in
cash to former holders of 1ST*BANK Common Stock (see "MERGER-Fractional
Shares"), plus the shares of BANC ONE Common Stock that would have been
exchangeable for those 1ST*BANK shares for which dissenters' rights are
asserted, not exceeding 10% of the maximum aggregate number of shares of
BANC ONE Common Stock which could be issued as a result of the Merger;
(9) the shares of BANC ONE Common Stock to be issued in exchange for
1ST*BANK Common Stock having been listed on the NYSE;
(10) receipt of the written opinion of Coopers & Lybrand, L.L.P., independent
certified public accountants for BANC ONE, that the transaction
contemplated by the Merger Agreement may be properly accounted for as a
pooling-of-interests;
(11) conversion of the Debentures into not more than 166,666 shares of
1ST*BANK Common Stock (including the required approval of the Texas
Department of Banking);
(12) the holders of all credit agreements on which 1ST*BANK or any of its
subsidiaries is the maker, issuer or guarantor and which contain
provisions which make the acquisition of 1ST*BANK by or merger into
another entity a condition of default or acceleration, having provided
BANC ONE with a written waiver of all such provisions; and
15
<PAGE> 26
(13) the total number of shares of 1ST*BANK Common Stock issued and
outstanding not exceeding 1,470,833 shares (including the shares issued
upon conversion of the Debentures), and the total number of shares of BANC
ONE Common Stock to be issued in the Merger not exceeding 425,000.
The provisions of the Merger Agreement, including the foregoing
conditions (other than required regulatory approvals), may be waived at any
time by the party entitled to the benefits thereof. However, after 1ST*BANK's
Shareholders have approved the Plan of Merger, 1ST*BANK may only amend the
Merger Agreement if, in the opinion of 1ST*BANK's Board of Directors, such
amendment will not have a material adverse effect on the benefits intended
under the Merger Agreement for 1ST*BANK's Shareholders and will not require
resolicitation of proxies from such Shareholders.
The Merger Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval by 1ST*BANK's
Shareholders, by written notice from BANC ONE to 1ST*BANK, or from 1ST*BANK to
BANC ONE, as the case may be, upon the occurrence of any of the following:
(i) if any material condition to either party's obligations under the Merger
Agreement is not satisfied or waived at the time or times contemplated thereby
(each party's right to terminate under this clause (i) shall relate only to
conditions to that party's obligations); (ii) in the event of a material
breach by a party of any representation, warranty, condition or agreement
contained in the Merger Agreement that is not cured within 30 days of the
giving of notice to such party by the other party; or (iii) if the Merger
shall not have been consummated on or before February 27, 1995. The Merger
Agreement also may be terminated, and the Merger thereby abandoned, by the
mutual consent of the Boards of Directors of 1ST*BANK and BANC ONE at any time
before the Effective Time.
If the Merger is not consummated other than by reason of a willful
breach of any party to the Merger Agreement, 1ST*BANK, BANC ONE, BANK ONE
TEXAS and TEXAS CORPORATION each will pay all of its own expenses incurred
incident to such transaction, except for printing expenses, which BANC ONE
will pay.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material U.S. Federal income tax
consequences of the Merger, including certain consequences to holders of
1ST*BANK Common Stock who are citizens or residents of the United States and
who hold their shares as capital assets. It does not discuss all tax
consequences that may be relevant to 1ST*BANK Shareholders subject to special
Federal income tax treatment (such as insurance companies, dealers in
securities, certain retirement plans, financial institutions, tax exempt
organizations or foreign persons), or to 1ST*BANK Shareholders who acquired
their shares of 1ST*BANK Common Stock pursuant to the exercise of employee
stock options or otherwise as compensation. The summary also does not address
the state, local or foreign tax consequences of the Merger, if any.
Pursuant to the terms of the Merger Agreement, 1ST*BANK and BANC ONE
will receive the opinion of Coopers & Lybrand, dated as of the Effective Time,
to the effect that, for Federal income tax purposes:
(1) The Merger will be viewed as an acquisition by TEXAS CORPORATION of
substantially all of the assets of 1ST*BANK solely in exchange for BANC
ONE Common Stock and the assumption of all of the liabilities of
1ST*BANK by TEXAS CORPORATION followed by the transfer of the assets of
1ST*BANK to BANK ONE TEXAS and the assumption by BANK ONE TEXAS of the
liabilities of 1ST*BANK;
(2) The acquisition by TEXAS CORPORATION of substantially all of the assets
of 1ST*BANK in exchange solely for shares of BANC ONE Common Stock and
the assumption by TEXAS CORPORATION of 1ST*BANK's liabilities will
constitute a reorganization within the meaning of Section 368(a)(1)(C) and
(a)(2)(C) of the Internal Revenue Code, and will not be disqualified
under Section 368(a)(2)(C) by reason of the fact that the assets of
1ST*BANK that were acquired by TEXAS CORPORATION are transferred to BANK
ONE TEXAS;
16
<PAGE> 27
(3) No gain or loss will be recognized by BANC ONE, TEXAS CORPORATION, BANK
ONE TEXAS or 1ST*BANK as a consequence of the transactions contemplated
by the Merger Agreement;
(4) No gain or loss will be recognized by 1ST*BANK's Shareholders on the
exchange of their shares of 1ST*BANK Common Stock for shares of BANC ONE
Common Stock (disregarding for this purpose any cash received for
fractional share interests to which they may be entitled);
(5) The Federal income tax basis of the BANC ONE Common Stock (including
fractional share interests to which they may be entitled) received by
holders of 1ST*BANK Common Stock will be the same as the Federal income
tax basis of the 1ST*BANK Common Stock surrendered in exchange therefor;
(6) The holding period of the BANC ONE Common Stock received by a holder of
1ST*BANK Common Stock will include the period for which the 1ST*BANK
Common Stock exchanged therefor was held, provided the exchanged
1ST*BANK Common Stock was held as a capital asset by such holder on the
date of the exchange;
(7) Where cash is received by a 1ST*BANK shareholder in exchange for all of
his 1ST*BANK Common Stock pursuant to the exercise of his dissenter's
rights, the cash will be treated as having been received in redemption
of his 1ST*BANK Common Stock subject to the provisions and limitations
of Section 302 of the Internal Revenue Code; and to the extent such
payments are not essentially equivalent to a dividend.
(8) The payment of cash in lieu of fractional share interests of BANC ONE
Common Stock will be treated as if the fractional shares were
distributed as part of the exchange and then redeemed by BANC ONE, and
will be treated as having been received as distributions in full payment
and in exchange for the 1ST*BANK Common Stock redeemed as provided in
Section 302(a) of the Internal Revenue Code to the extent such payments
are not essentially equivalent to a dividend.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED ON THE INTERNAL REVENUE CODE (AND AUTHORITIES
THEREUNDER) AS IN EFFECT ON THE DATE OF THIS PROSPECTUS AND PROXY STATEMENT,
WITHOUT CONSIDERATION OF THE PARTICULAR FACTS OR CIRCUMSTANCES OF ANY
SHAREHOLDER. SHAREHOLDERS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
WITH RESPECT TO THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IN THEIR
PARTICULAR SITUATIONS, AS WELL AS CONSEQUENCES UNDER ANY APPLICABLE STATE,
LOCAL OR FOREIGN TAX LAWS.
RESALES BY AFFILIATES
The shares of BANC ONE Common Stock issuable to 1ST*BANK Shareholders
upon consummation of the Merger have been registered under the Securities Act,
but such registration does not cover resales by affiliates (within the meaning
of Rule 144 under the Securities Act) ("Affiliates") of 1ST*BANK. BANC ONE
Common Stock received and beneficially owned by those 1ST*BANK Shareholders
who are deemed to be Affiliates may be resold without registration as provided
in Rule 145 under the Securities Act, or as otherwise permitted by law.
1ST*BANK Affiliates would include all persons who, directly or indirectly,
control, are controlled by, or are under common control with 1ST*BANK at the
time the Plan of Merger is submitted for approval by a vote of 1ST*BANK's
Shareholders. Each 1ST*BANK Affiliate who desires to resell the BANC ONE Common
Stock received in the Merger must sell such BANC ONE Common Stock either (i)
pursuant to an effective registration statement under the Securities Act, (ii)
in accordance with the applicable provisions of Rule 145 under the Securities
Act or (iii) in a transaction that, in the opinion of counsel for such
Affiliate or as described in a "no-action" or interpretive letter from the
Staff of the Commission (in each case reasonably satisfactory in form and
substance to BANC ONE), is exempt from the registration requirements of the
Securities Act.
17
<PAGE> 28
Rule 145(d) requires that persons deemed to be Affiliates resell their
BANC ONE Common Stock, if publicly offered, pursuant to certain of the
requirements of Rule 144 under the Securities Act if such BANC ONE Common Stock
is sold within the first two years after it is acquired. After two years, if
such person is not an Affiliate of BANC ONE and BANC ONE is current in filing
its periodic reports under the Exchange Act, a former Affiliate of 1ST*BANK may
freely resell the BANC ONE Common Stock received in the Merger without
limitation. After three years from the issuance of the BANC ONE Common Stock,
if such person is not an Affiliate of BANC ONE at the time of sale or for at
least three months prior to such sale, such person may freely resell such BANC
ONE Common Stock, without limitation, regardless of the status of BANC ONE's
periodic securities law reports.
1ST*BANK has agreed to provide BANC ONE with a list of those persons who
may be deemed to be Affiliates at the time of the Special Meeting. 1ST*BANK
will use its best efforts to cause each such person to deliver to BANC ONE
prior to the Effective Time a written agreement to the effect that no sale
will be made of any shares of BANC ONE Common Stock received in the Merger by
an Affiliate of 1ST*BANK except (i) in accordance with the Securities Act and
(ii) if, as it expects to do, BANC ONE utilizes pooling-of-interests
accounting in accounting for the Merger, until such time as BANC ONE shall
first publish the financial results of at least 30 days of post-merger
combined operations of 1ST*BANK and BANC ONE, provided that BANC ONE shall
publish such results not later than four months after the Effective Time. The
certificates of BANC ONE Common Stock issued to Affiliates of 1ST*BANK in the
Merger may contain an appropriate restrictive legend, and appropriate stop
transfer orders may be given to the transfer agent for such certificates.
ACCOUNTING TREATMENT
BANC ONE expects to account for the acquisition of 1ST*BANK as a
pooling-of-interests.
THE AMENDMENT PROPOSAL
At the Special Meeting, 1ST*BANK's Shareholders also will be asked to
consider and vote upon a proposal to amend the Debentures to provide for their
automatic conversion into shares of 1ST*BANK Common Stock immediately prior to
the Merger, and to amend 1ST*BANK's Articles of Association to authorize the
issuance of up to 166,666 additional shares of 1ST*BANK Common Stock
upon the conversion of the Debentures.
1ST*BANK issued the Debentures, in an aggregate principal amount of
$500,000, in April 1988. By their present terms, the Debentures will mature on
April 1, 1998, and are mandatorily convertible at maturity into a total of no
more than 166,666 shares of 1ST*BANK Common Stock at a price of $3.00 per
share. Interest is due and payable on the Debentures on the first day of each
April and October, and the interest rate on the Debentures is adjusted each
April and October to equal the prime rate of interest as set forth in the Money
Rates Section of the Wall Street Journal. The Debentures are subordinated in
right of payment to 1ST*BANK's obligations to its depositors and to 1ST*BANK's
other obligations to its general and secured creditors.
At the time the Debentures were issued, each 1ST*BANK shareholder was
given the opportunity to subscribe for them, although to be eligible to
purchase Debentures a shareholder also was required to subscribe for a portion
of certain newly issued shares of 1ST*BANK Common Stock that were being issued
at the time. At present, the Debentures are held primarily by the directors,
officers and principal shareholders of 1ST*BANK.
As noted above, under the Merger Agreement it is a condition to BANC ONE's
obligation to consummate the Merger that the Debentures be converted into not
more than 166,666 shares of 1ST*BANK Common Stock before the Effective Time.
To meet that requirement, it will be necessary, first, to amend the Debentures
to provide for their automatic conversion into 1ST*BANK Common Stock
immediately prior to the Merger; and second, to amend Paragraph Fourth of
1ST*BANK's Articles of Association to authorize the issuance of such additional
shares of 1ST*BANK Common Stock. At the Special Meeting, 1ST*BANK's
shareholders will be asked to vote upon both amendments. If the Amendment
Proposal is adopted, the Fourth Article of 1ST*BANK's Articles of Association,
as so amended, will read as follows:
"The amount of capital stock shall be $2,941,666, which shall be
divided into 1,470,833 shares of $2 (par value) each, all of
which has been bona fide subscribed."
THE BOARD OF DIRECTORS OF 1ST*BANK UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE AMENDMENT PROPOSAL.
COMPARATIVE RIGHTS OF SHAREHOLDERS
DESCRIPTION OF BANC ONE STOCK
GENERAL. The authorized capital stock of BANC ONE consists of (i)
600,000,000 shares of BANC ONE Common Stock, and (ii) 35,000,000 shares of
Preferred Stock, without par value ("Preferred Stock"), divided into
10,000,000 shares of Class A Preferred Stock (the "Class A Preferred Stock"),
1,000,000 shares of Class B Convertible Preferred Stock ("Class B Preferred
Stock") and 24,000,000 shares of Class C Preferred Stock of which the $3.50
Cumulative Convertible Preferred Stock constitutes a series ("Series C
Preferred Stock"). As of June 30, 1994, there were issued and outstanding
4,998,000 shares of Series C Preferred Stock and 383,634,239 shares of BANC
ONE Common Stock; and no shares of Class A or Class B Preferred Stock were
issued or outstanding.
The following summary of the terms of BANC ONE's capital stock does not
purport to be complete and is qualified in its entirety by reference to the
applicable provisions of the Ohio General Corporation Law (the "OGCL") and
BANC ONE's Articles of Incorporation and Code of Regulations.
COMMON STOCK. Holders of BANC ONE Common Stock are entitled to receive
dividends out of funds legally available therefor as and if declared by the
Board of Directors, provided that, so long as any shares of Preferred Stock
are outstanding, no dividends (other than dividends payable in BANC ONE Common
Stock) or other distributions (including redemptions and purchases) may be
made with respect to the BANC ONE Common Stock unless full cumulative
dividends on the shares of Preferred Stock have been paid.
Holders of shares of BANC ONE Common Stock are entitled to one vote for
each share for the election of directors and on all other matters. Holders of
BANC ONE Common Stock vote together as a class with holders of Class B
Preferred Stock (although no shares of Class B Preferred Stock currently are
issued or outstanding). With certain limited exceptions, holders of Series C
Preferred Stock have no voting rights.
18
<PAGE> 29
The issued and outstanding shares of BANC ONE Common Stock are fully
paid and nonassessable. Holders of BANC ONE Common Stock are not entitled to
preemptive rights, to conversion or redemption rights, or to cumulative voting
rights in the election of directors.
In the event of the voluntary or involuntary dissolution, liquidation or
winding up of BANC ONE, holders of BANC ONE Common Stock would be entitled to
receive, pro rata, after satisfaction in full of the prior rights of creditors
(including holders of BANC ONE's indebtedness) and holders of Preferred Stock,
all the remaining assets of BANC ONE available for distribution.
PREFERRED STOCK. BANC ONE's Board of Directors has the authority to
issue each class of Preferred Stock in one or more series and to fix the
designations, number of shares, dividends, redemption rights, sinking fund
requirements, liquidation prices, conversion rights and other rights,
qualifications, limitations or restrictions thereon (except voting rights) as
the Board of Directors may from time to time be permitted by law to fix or
change.
Currently, no shares of Preferred Stock except shares of Series C
Preferred Stock are outstanding. Holders of Series C Preferred Stock are
entitled to receive out of funds legally available therefor cumulative cash
dividends at the annual rate of $3.50 per share payable quarterly on the last
day of March, June, September and December in each year. In the event that
full cumulative dividends on outstanding shares of Series C Preferred Stock
have not been paid, no dividends may be declared or paid on, and no amounts
may be set aside or applied to the redemption or purchase of, any shares of
BANC ONE Common Stock or any other shares of capital stock of BANC ONE ranking
junior to shares of Series C Preferred Stock. Upon the voluntary or
involuntary dissolution, liquidation or winding up of BANC ONE, holders of
Series C Preferred Stock are entitled to receive a preferential distribution
of $50 per share plus accrued and unpaid dividends, if any.
Generally holders of shares of Series C Preferred Stock have no voting
rights. However, the approval of a majority of the outstanding shares of
Series C Preferred Stock voting together as a class is required in order to
amend BANC ONE's Articles of Incorporation to affect adversely the rights of
the holders of the Series C Preferred Stock or to take any action that would
result in the creation of or an increase in the number of authorized shares
senior or superior with respect to dividends or upon liquidation to the Series
C Preferred Stock. Holders of Series C Preferred Stock also have the right to
elect two additional directors during any period in which dividends on Series
C Preferred Stock are cumulatively in arrears in the amount of six or more
full quarterly dividends.
At the option of the holder of any shares of Series C Preferred Stock,
such shares may be converted into shares of BANC ONE Common Stock at the
conversion rate then in effect. The present conversion rate is 1.5942 shares
of BANC ONE Common Stock for each share of Series C Preferred Stock and is
subject to adjustment for any additional stock dividends, subdivisions, splits
or combinations and for any distribution of rights or warrants to purchase
BANC ONE Common Stock at a price per share less than the BANC ONE Common
Stock's then-current market value.
The issued shares of Series C Preferred Stock may be redeemed, in whole
or in part, by BANC ONE at its election at any time after April 15, 1995, at a
redemption price of $52.10 per share during the period from April 15, 1995
through but not including March 31, 1996, and thereafter at the redemption
prices during the 12-month periods beginning on March 31 of the years shown
below, plus accrued and unpaid dividends, if any.
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C> <C>
1996 . . . . . . . . . . . . . . . . $51.75
1997 . . . . . . . . . . . . . . . . $51.40
1998 . . . . . . . . . . . . . . . . $51.05
1999 . . . . . . . . . . . . . . . . $50.70
2000 . . . . . . . . . . . . . . . . $50.35
2001 and thereafter . . . . . . . . . $50.00
</TABLE>
19
<PAGE> 30
SPECIAL VOTING REQUIREMENTS FOR CERTAIN TRANSACTIONS. Under the OGCL, a
merger or consolidation by an Ohio corporation generally requires the
affirmative vote of shares representing at least two-thirds of the shareholder
voting power of the corporation, unless the corporation's articles of
incorporation provide for approval by a different proportion not less than a
majority. BANC ONE's Articles of Incorporation generally require only
majority shareholder approval for such transactions.
However, Article Eleventh of BANC ONE's Articles incorporates, to a
large extent, the provisions of the Ohio "control share acquisition" statute
(the "Ohio Control Share Statute"), as set forth in Section 1701.831 of the
OGCL. Article Eleventh sets forth procedures for obtaining shareholder
consent of "control share acquisitions" subject to the right of the Board of
Directors to screen out proposals that do not meet certain standards set forth
in Article Eleventh. Article Eleventh defines a "control share acquisition"
as any acquisition, directly or indirectly, of shares of BANC ONE which, when
added to all other shares of BANC ONE owned or controlled by the acquiror,
would entitle the acquiror, alone or with others, to exercise or direct the
exercise of voting power in BANC ONE in the election of directors within any
of the following ranges of voting power: (a) one-fifth or more but less than
one-third; (b) one-third or more but less than a majority; and (c) a majority
or more. A control share acquisition which meets certain criteria set forth
in Article Eleventh as determined by the Board of Directors must be presented
to a meeting of the shareholders of BANC ONE and approved by the affirmative
vote of both (a) a majority of the voting power represented at the meeting and
(b) a majority of that portion of such voting power excluding any "interested
shares" (that is, those shares held by the acquiring person, executive
officers of BANC ONE and employees of BANC ONE who are also directors).
Article Eleventh may be amended by a vote of 85% of the votes entitled to be
cast by all holders of voting stock.
BANC ONE's Articles of Incorporation also include a "fair price"
provision that is designed to provide reasonable assurances to shareholders
that in the event any shareholder or group of shareholders acquires 20% or
more of BANC ONE's voting stock (an "acquiror") and then seeks to acquire all
or part of the remaining voting stock through a merger or other transaction
that would force a change or termination of the other shareholders' ownership
interests (a "business combination"), such other shareholders must receive
consideration at least equivalent to the highest price paid by the acquiror in
acquiring its 20% stock interest, unless the business combination is approved
either (i) by a majority of directors who are unrelated to the acquiror or
(ii) by the affirmative vote of 75% of all the votes entitled to be cast by
all holders of voting stock and 67% of the votes entitled to be cast by all
holders of voting stock held by shareholders other than the acquiror.
Article Tenth of BANC ONE's Articles of Incorporation, which contains
this provision, may be amended only by a vote of 85% of the votes entitled to
be cast by all holders of voting stock, unless the amendment is approved
unanimously by the unrelated directors, in which case only majority
shareholder approval would be required.
Chapter 1704 of the OGCL (the "Ohio Business Combination Statute") is
similar to the "fair price" provision contained in BANC ONE's Articles of
Incorporation. The Ohio Business Combination Statute prohibits an "issuing
public corporation" from engaging in a "Chapter 1704 Transaction" with an
"interested shareholder" for a period of three years following the date on
which the person becomes an interested shareholder unless, prior to such date,
the directors of the issuing public corporation approve either the Chapter
1704 Transaction or the acquisition of shares pursuant to which such person
became an interested shareholder. After the initial three-year moratorium has
expired, an issuing public corporation may engage in a Chapter 1704
Transaction if (i) the acquisition of shares pursuant to which the person
became an interested shareholder received the prior approval of the board of
directors of the issuing public corporation, (ii) the Chapter 1704 Transaction
is approved by the affirmative vote of the holders of shares representing at
least two-thirds of the voting power of the issuing public corporation and by
the holders of at least a majority of voting shares that are not beneficially
owned by an interested shareholder or an affiliate or associate of an
interested shareholder, or (iii) the Chapter 1704 Transaction meets certain
statutory tests designed to ensure that it be economically fair to all
shareholders.
20
<PAGE> 31
For this purpose, an "issuing public corporation" is any Ohio
corporation with 50 or more shareholders that has its principal place of
business, principal executive offices or substantial assets within the State
of Ohio. BANC ONE currently is an issuing public corporation. An "interested
shareholder" is any person who is the beneficial owner of a sufficient number
of shares to allow such person, directly or indirectly, alone or with others,
including affiliates and associates, to exercise or direct the exercise of 10%
of the voting power of the issuing public corporation. A "Chapter 1704
Transaction" includes any merger, consolidation, combination or majority share
acquisition between or involving an issuing public corporation and an
interested shareholder or an affiliate or associate of an interested
shareholder. A Chapter 1704 Transaction also includes certain transfers of
property, dividends and issuance or transfers of shares, from or by an issuing
public corporation or a subsidiary of an issuing public corporation to, with
or for the benefit of an interested shareholder or an affiliate or associate
of an interested shareholder unless such transaction is in the ordinary course
of business of the issuing public corporation on terms no more favorable to
the interested shareholder than those acceptable to third parties as
demonstrated by contemporaneous transactions. Finally, Chapter 1704
Transactions include certain transactions which (i) increase the proportionate
share ownership of an interested shareholder, (ii) result in the adoption of a
plan or proposal for the dissolution, winding up of the affairs or liquidation
of the issuing public corporation if such plan is proposed by or on behalf of
the interested shareholder, or (iii) pledge or extend the credit or financial
resources of the issuing public corporation to or for the benefit of the
interested shareholder.
COMPARISON OF BANC ONE COMMON STOCK AND 1ST*BANK COMMON STOCK
If the holders of 1ST*BANK Common Stock approve the Plan of Merger and
the Merger is subsequently consummated, holders of 1ST*BANK Common Stock will
become holders of BANC ONE Common Stock. As BANC ONE Common Stockholders,
their rights will be somewhat different than those that they currently have as
1ST*BANK Common Stockholders.
The rights of BANC ONE shareholders are governed by BANC ONE's Articles
of Incorporation and Code of Regulations and by the applicable provisions of
the OGCL; the rights of 1ST*BANK shareholders are governed by 1ST*BANK's
Articles of Association and Bylaws and by the applicable provisions of the
TBC. The following comparison of 1ST*BANK and BANC ONE Common Stockholders'
rights is based upon the current terms of the governing documents of the two
companies, and on the current provisions of the OGCL and the TBC.
The rights of BANC ONE and of 1ST*BANK Common Stockholders are similar
in several respects: Common Stockholders in both companies are entitled to
one vote for each share held on all matters submitted to a vote of Common
Stockholders, and also are entitled to receive pro rata any assets distributed
to Common Stockholders upon liquidation, dissolution or winding up of the
affairs of the company. Likewise, Common Stockholders have no right, in the
case of either company, to cumulative voting for the election of directors.
There are, however, some differences. Although it is impracticable to
note all the differences between the governing documents of 1ST*BANK and BANC
ONE, or between the applicable provisions of the OGCL and the TBC, the
following discussion summarizes certain significant differences between the
rights of 1ST*BANK Common Stockholders and those of BANC ONE Common
Stockholders.
PREFERRED STOCK. 1ST*BANK's Articles of Association, unlike BANC ONE's,
do not authorize the issuance of preferred stock. Instead, 1ST*BANK's
authorized capital stock consists entirely of the 1,304,167 shares of 1ST*BANK
Common Stock that currently are outstanding.
21
<PAGE> 32
AUTHORIZED UNISSUED STOCK. Under the TBC and under 1ST*BANK's Articles
of Association, 1ST*BANK is not authorized to issue any additional shares of
its capital stock without amending its Articles of Association, which in turn
requires the approval both of 1ST*BANK's shareholders and of the Texas
Department of Banking. In contrast, BANC ONE's Articles of Incorporation
authorize the issuance of additional shares of BANC ONE capital stock, up to
certain specified limits, without shareholder approval, and BANC ONE does not
require regulatory approval to issue additional shares of its capital stock.
PREEMPTIVE RIGHTS. Under the TBC, with certain limited exceptions, each
1ST*BANK Common Stockholder has the preemptive right to subscribe for a
proportionate share of any issuance of additional shares of 1ST*BANK Common
Stock that are effected from 1ST*BANK's own surplus funds or undivided
profits or that are sold for cash. Compliance with such preemptive rights has
been fulfilled with respect to the issuance of shares of 1ST*BANK Common Stock
upon conversion of the Debentures. BANC ONE Common Stockholders have no such
preemptive rights.
DIRECTORS. BANC ONE's thirteen directors, like 1ST*BANK's seven
directors, are elected annually to one-year terms. Directors of the two
companies, however, must meet somewhat different qualification requirements.
To qualify for election to BANC ONE's Board of Directors, an individual must
own a "substantial" number of shares of BANC ONE's capital stock (although no
specific number or amount of shares is prescribed), and must not also serve as
a director or officer of or in any other management relationship for any
financial institution that is in competition with BANC ONE or any of its
subsidiaries. Under the TBC, an individual cannot qualify for election to
1ST*BANK's Board of Directors unless he owns unencumbered and unpledged shares
of 1ST*BANK stock with an aggregate par value of at least $1,000. Under
1ST*BANK's Articles of Association, an individual must own at least 500 shares
of 1ST*BANK's capital stock to qualify for 1ST*BANK's Board, and a majority of
1ST*BANK's directors must be bona fide residents of the State of Texas.
DIRECTOR DISCRETION. The OGCL permits the directors (but not the
officers) of an Ohio corporation such as BANC ONE, in determining whether any
matter (including a proposed tender offer or business combination) is in the
best interests of the corporation, to take into consideration the interests of
the corporation's employees, suppliers, creditors and customers, the economy
of the state and the nation, community and societal considerations and the
long-term and short-term interests of the corporation and its shareholders,
including the possibility that such interests may be best served by the
continued independence of the corporation. Neither the TBC nor 1ST*BANK's
governing documents include any comparable provision.
DIVIDENDS. Under the OGCL, BANC ONE is authorized to pay dividends out
of retained earnings and surplus, including both earned surplus and capital
surplus, in cash, property or shares of the corporation, provided that such
dividend payments are not in violation of the rights of any other class of
securities and are not made when the corporation is insolvent or there is
reasonable ground to believe that by such payment it will be rendered
insolvent. Under the TBC, 1ST*BANK is authorized to pay dividends out of
retained earnings and surplus. However, 1ST*BANK is required to set aside a
portion of its surplus as "certified surplus", and is required to transfer to
"certified surplus", before payment of any dividend, not less than 10% of its
net profits earned since its last dividend was declared until its "certified
surplus" at least equals its capital. 1ST*BANK is prohibited by the TBC from
paying any dividend out of its "certified surplus".
Of course, neither BANC ONE nor 1ST*BANK could pay a dividend that would
reduce its capital below the minimum required by bank regulatory authorities.
SPECIAL REQUIREMENTS FOR CERTAIN TRANSACTIONS. Unlike the OGCL and BANC
ONE's Articles of Incorporation, neither the TBC nor 1ST*BANK's Articles of
Association or Bylaws impose any restrictions on "control share acquisitions",
transactions with "interested shareholders" or the like. There is no analogue
in the TBC to the Ohio Control Share or Business Combination Statutes, and no
analogue in 1ST*BANK's governing documents to the "control share acquisition"
or "fair price" provisions in BANC ONE's Articles of Incorporation.
22
<PAGE> 33
As noted above, see "--Description of BANC ONE Stock--Special Voting
Requirements for Certain Transactions", under BANC ONE's Articles of
Incorporation, only approval by a majority of the outstanding shares of BANC
ONE Common Stock generally is required for a merger, consolidation or similar
transaction to which BANC ONE is a party. Under the TBC, in contrast,
approval by at least two-thirds of the outstanding shares of 1ST*BANK Common
Stock generally is required for a merger, consolidation or similar
transaction, including the proposed Merger, to which 1ST*BANK is a party.
AMENDMENT OF GOVERNING DOCUMENTS. BANC ONE's Articles of Incorporation
can be amended by the affirmative vote of the holders of a majority of the
voting power of BANC ONE, except that amendments to the "control share
acquisition" and "fair price" provisions require a supermajority vote, and the
amendment of certain provisions requires that holders of shares of a class
vote and approve the amendment as a class. See "--Description of BANC ONE
Stock--Special Voting Requirements for Certain Transactions." BANC ONE's Code
of Regulations can be amended only by the affirmative vote of a majority of
the voting power represented by the outstanding voting stock of BANC ONE
present in person or by proxy at an annual or special meeting called for such
purpose.
Under the TBC, 1ST*BANK's Articles of Association can be amended only
with the affirmative vote of at least two-thirds of the outstanding shares of
1ST*BANK Common Stock, either at a regular meeting or at a special meeting
called for the purpose, and only with the approval of the Texas Banking
Commissioner. Under the TBC, 1ST*BANK's Bylaws can be amended only with the
affirmative vote of at least a majority of the outstanding shares of 1ST*BANK
Common Stock at any regular shareholders meeting or at any special meeting
called for the purpose.
DISSENTERS' APPRAISAL RIGHTS. Under both the OGCL and the TBC, a
shareholder who dissents from certain transactions is entitled to receive
payment of the fair value of his or her shares. However, where, as in the
case of the proposed Merger, a Texas-chartered bank is to be merged into a
national banking association, the dissenters' appraisal rights of the
shareholders of the Texas-chartered bank are governed, not by the TBC, but
instead by the NBA. The NBA's provisions governing dissenters' appraisal
rights are described below. See "VOTING AND MANAGEMENT INFORMATION--Rights of
Dissenting Shareholders."
Under the OGCL, dissenting shareholders are entitled to appraisal rights
in connection with the lease, sale, exchange, transfer or other disposition of
all or substantially all of the assets of a corporation and in connection with
certain amendments to its articles of incorporation. In addition,
shareholders of an Ohio corporation being merged into a new corporation are
entitled to appraisal rights, and shareholders of an acquiring corporation are
entitled to appraisal rights in a merger, combination or majority share
acquisition in which such shareholders are entitled to voting rights.
INDEMNIFICATION; LIMITATION OF LIABILITY. Under the TBC, directors and
officers of a Texas-chartered bank such as 1ST*BANK are liable for financial
losses sustained by the bank to the extent that directors and officers of
other corporations are now responsible for such losses in equity and common
law. However, the TBC permits any director or officer who does not approve an
act or omission of the bank's board of directors to relieve himself from any
personal liability for such act or omission by promptly announcing his
opposition thereto and causing such opposition to be noted in the minutes of
the appropriate board meeting.
23
<PAGE> 34
The TBC permits, but does not require, a Texas-chartered bank to
indemnify any person in connection with any action, suit, or proceeding to
which the person is a party by reason of his being, or having been, a
director, officer or employee of the bank, or having served as a director,
officer, partner, proprietor, trustee or in any similar capacity for any
corporation, partnership, joint venture, sole proprietorship, trust or other
enterprise at the request of the bank. However, under the TBC no person may
be indemnified who is finally adjudged to have been guilty or, or liable for,
willful misconduct, gross neglect of duty or a criminal act. Also, if there
is a compromise in any such action or proceeding, indemnification is allowed
under the TBC only with the affirmative vote of a majority of the outstanding
shares of the bank's capital stock.
1ST*BANK's Articles of Association provide that, to the fullest extent
not prohibited by law, a director shall not be liable to 1ST*BANK or its
shareholders for monetary damages for an act or omission in the director's
capacity as a director, except for any (a) breach of the director's duty of
loyalty to the bank, (b) act or omission not in good faith or that involves
intentional misconduct or a knowing violation of the law, (c) transaction from
which the director received an improper benefit, (d) act or omission for which
the liability of the director is expressly provided by statute, or (e) act
related to an unlawful stock repurchase or dividend payment.
Under the OGCL, Ohio corporations are authorized to indemnify directors,
officers and agents within prescribed limits and must indemnify them under
certain circumstances. Ohio law does not provide statutory authorization for
a corporation to indemnify directors and officers for settlements, fines or
judgments in the context of derivative suits. However, it provides that
directors (but not officers) are entitled to mandatory advancement of
expenses, including attorneys' fees, incurred in defending any action,
including derivative actions, brought against the director, provided the
director agrees to cooperate with the corporation concerning the matter and to
repay the amount advanced if it is proved by clear and convincing evidence
that his act or failure to act was done with deliberate intent to cause injury
to the corporation or with reckless disregard for the corporation's best
interests. Ohio law does not authorize payment of expenses or judgments to an
officer or other agent after a finding of negligence or misconduct in a
derivative suit absent a court order. Indemnification is required, however,
to the extent such person succeeds on the merits. In all other cases, if a
director or officer acted in good faith and in a manner he reasonably believed
to be in (or not opposed to) the best interests of the corporation,
indemnification is discretionary except as otherwise provided by a
corporation's articles, code of regulations or by contract except with respect
to the advancement of expenses of directors. The statutory right to indemnity
is not exclusive in Ohio. Ohio law provides express authority for Ohio
corporations to procure not only insurance policies, but also to furnish
protection similar to insurance, including trust funds, letters of credit and
self-insurance, or to provide similar protection such as indemnity against
loss of insurance.
BANC ONE's Code of Regulations authorizes BANC ONE to indemnify any
director or officer (or former director or officer) of the corporation, and
any person who is or has served at BANC ONE's request as a director, officer
or trustee of another enterprise, against any expenses, judgments, fines or
amounts paid in settlement actually and reasonably incurred by him by reason
of the fact that he is or was such a director, officer or trustee, to the full
extent and according to the procedures and requirements set forth in the
OGCL. BANC ONE's Code of Regulations also authorizes BANC ONE, for such
purpose, to obtain insurance and to enter into indemnity agreements, and also
to indemnify employees, agents and others.
Ohio law has codified the traditional business judgment rule, and
provides that the business judgment presumption of good faith may only be
overcome by clear and convincing evidence, rather than the preponderance of
the evidence standard applicable in most states. There is no counterpart to
this provision in the TBC.
24
<PAGE> 35
MISCELLANEOUS INFORMATION
TRANSFER AND EXCHANGE AGENTS
Bank One, Indianapolis, N.A., Indianapolis, Indiana, serves as Transfer
Agent and as Registrar for BANC ONE Common Stock, and will act as Exchange
Agent in connection with the Merger. 1ST*BANK acts as its own Transfer Agent
and Registrar for 1ST*BANK Common Stock.
EXPERTS
The audited consolidated financial statements of BANC ONE incorporated by
reference in this Prospectus have been audited by Coopers & Lybrand,
independent public accountants, to the extent and for the years included in
their reports, which reports are included or are incorporated herein, and have
been so included or incorporated in reliance upon their reports given on the
authority of that firm as experts in accounting and auditing.
The audited financial statements of 1ST*BANK as of December 31, 1993,
and for each of the years in the three-year period ended December 31, 1993,
included in this Prospectus and Proxy Statement have been audited by Fisk &
Robinson, a professional corporation, independent certified public accountants,
and have been so included in reliance upon their report set forth herein with
respect thereto, given upon their authority as experts in auditing and
accounting. The information concerning 1ST*BANK included herein under "SUMMARY
OF THE TRANSACTION--Selected Financial Data" as of December 31, 1990, and for
each of the years in the two-year period ended December 31, 1990, have been
derived from audited financial statements of 1ST*BANK audited by Cheshier &
Fuller, Inc., P.C., independent auditors, and are included in reliance upon the
reports with respect thereto given upon their authority as experts in
accounting and auditing.
The Board of Directors of 1ST*BANK appointed Fisk & Robinson, a
professional corporation, as the independent public accountants for 1ST*BANK
in 1991. Prior to that time, 1ST*BANK had retained Cheshier & Fuller, Inc.,
P.C., as its independent public accountants. During the period of Cheshier &
Fuller, Inc., P.C.'s retention by 1ST*BANK, there were no disagreements
between Cheshier & Fuller, Inc., P.C. and 1ST*BANK on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of
Cheshier & Fuller, Inc., P.C., would have caused them to make reference to the
disagreement in any of their financial reports to 1ST*BANK. In addition, no
report on the financial statements of 1ST*BANK rendered by Cheshier & Fuller,
Inc., P.C. contained an adverse opinion or a disclaimer of opinion or was
qualified or modified as to uncertainty, the scope of the audit performed, or
accounting principles.
INTERESTS OF COUNSEL
Certain legal matters will be passed upon for 1ST*BANK by counsel for
1ST*BANK, Gardere & Wynne, L.L.P., Dallas, Texas. The validity of the BANC
ONE Common Stock offered hereby has been passed upon by Steven A. Bennett,
General Counsel and Senior Vice President of BANC ONE. Mr. Bennett owns
shares of BANC ONE Common Stock and holds options to purchase additional
shares of such stock. M. Douglas Adkins, a partner in Gardere & Wynne,
L.L.P., owns shares of 1ST*BANK Common Stock.
SOURCES OF INFORMATION
The information concerning BANC ONE and 1ST*BANK has been supplied by
the management of the respective companies.
25
<PAGE> 36
REGISTRATION STATEMENT
This Prospectus and Proxy Statement does not include all of the
information set forth or incorporated by reference in the Registration
Statement on Form S-4 and the exhibits thereto filed by BANC ONE with the
Commission under the Securities Act with respect to the Merger. The
Registration Statement may be inspected at the principal office of the
Commission in Washington, D.C., or at its regional offices, and copies may be
obtained upon payment of prescribed fees. See "AVAILABLE INFORMATION" for
addresses of the Commission's offices. Reference is hereby made to the
Registration Statement and exhibits thereto for further information pertaining
to BANC ONE and 1ST*BANK.
B. INFORMATION ABOUT BANC ONE CORPORATION
GENERAL -- BUSINESS
BANC ONE is a registered multi-bank holding company with bank
subsidiaries in Arizona, California, Colorado, Illinois, Indiana, Kentucky,
Michigan, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. However,
BANC ONE has entered into definitive agreements to sell its California bank
subsidiary and its four Michigan bank subsidiaries. At June 30, 1994, BANC
ONE had consolidated total assets of approximately $84.5 billion, consolidated
total deposits of approximately $62.1 billion and consolidated total
Shareholders' equity of approximately $7.3 billion (or approximately 8.6% of
consolidated total assets). At June 30, 1994, BANC ONE ranked eighth among
the nation's bank holding companies in terms of period-end assets and ranked
seventh among the nation's bank holding companies in terms of period-end Tier
1 capital. For the six months ended June 30, 1994, BANC ONE's return on
average assets was 1.56%.
At September 30, 1994 BANC ONE owned a total of 75 commercial banks (the
"affiliate banks") and, at that date, held through its affiliate banks the
largest statewide share of total bank deposits in Arizona, Indiana and West
Virginia, the second largest share of such deposits in Ohio, and third largest
share of such deposits in Colorado, Wisconsin and Texas. BANC ONE has smaller
statewide market shares in the other states in which BANC ONE operates banks.
At June 30, 1994, except for Bank One, Texas, N.A., no single BANC ONE
affiliate bank accounted for more than 20% of BANC ONE's consolidated total
assets. BANC ONE also owns subsidiaries that offer financial services in the
areas of mortgage banking, credit card processing, consumer finance, equipment
leasing, fiduciary and trust services, credit life insurance, discount
brokerage, venture capital and investment and merchant banking.
Since its formation in 1968, BANC ONE has acquired over 100 banking
institutions and the number of banking offices of its affiliate banks has
increased from 24 to over 1,400. BANC ONE anticipates that it will continue
to expand by acquisition in the future. BANC ONE is frequently in discussions
regarding possible acquisitions. See "--Recent Developments" for information
with respect to pending and potential acquisitions.
BANC ONE is a legal entity separate and distinct from its affiliate
banks and its nonbanking subsidiaries. Accordingly, the right of BANC ONE,
and thus the right of BANC ONE's creditors and shareholders, to participate in
any distribution of the assets or earnings of any affiliate bank or other
subsidiary is necessarily subject to the prior claims of creditors of the
affiliate bank or subsidiary, except to the extent that claims of BANC ONE in
its capacity as a creditor may be recognized. The principal source of BANC
ONE's revenues is dividends and fees from its affiliates. See "--Certain
Regulatory Matters" for a discussion of regulatory restrictions on the ability
of the affiliate banks to pay dividends to BANC ONE.
26
<PAGE> 37
RECENT DEVELOPMENTS
In recent years, BANC ONE has pursued an active acquisition program. On
August 15, 1994 BANC ONE completed its acquisition of Liberty National
Bancorp, Inc., a multi-bank holding company headquartered in Louisville,
Kentucky with assets of approximately $4.9 billion as of December 31, 1993.
At September 30, 1994, BANC ONE had pending one additional acquisition, which
is not financially material to BANC ONE. In addition, BANC ONE has entered
into definitive agreements to sell its one California bank subsidiary and all
four of its Michigan bank subsidiaries.
BANC ONE continues to explore opportunities to acquire banks and nonbank
companies permitted by the Bank Holding Company Act of 1956. Discussions are
continually being carried on relating to the acquisition of bank-related
companies and other banks. It is not presently known whether, or on what
terms, such discussions will result in further acquisitions. BANC ONE's
acquisition strategy is flexible in that it does not require BANC ONE to
effect specific acquisitions so as to enter certain markets or to attain
specified growth levels. Rather than being market driven or size motivated,
BANC ONE's acquisition strategy reflects BANC ONE's willingness to consider
potential acquisitions wherever and whenever such opportunities arise based on
the then-existing market conditions and other circumstances. Banks to be
acquired must be of sufficient size to support and justify having management
of a caliber capable of making lending and other management decisions at the
local level under BANC ONE's operating philosophy. BANC ONE also is willing
from time to time to acquire a smaller bank when it can be acquired through a
reorganization into an existing affiliate. BANC ONE's interest in the
acquisition of non-bank companies has been limited to bank-related services
with which BANC ONE already has familiarity. BANC ONE's acquisitions may be
made by the exchange of stock, through cash purchases, and with other
consideration.
Other than as described above, BANC ONE does not currently have any
definite understandings or agreements for any acquisitions or divestitures
material to BANC ONE. However, BANC ONE anticipates that it will continue to
expand by acquisition in the future.
During the last two years, one of the issues in the banking industry and
at BANC ONE has been the use of a financial instrument known as "interest rate
swaps" used to protect banks against changes in interest rates. For a
discussion of BANC ONE's use of interest rate swaps and its policies and
procedures to manage them, reference is made to BANC ONE's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993. See "INCORPORATION BY
REFERENCE."
27
<PAGE> 38
CERTAIN REGULATORY MATTERS
GENERAL. BANC ONE is subject to the supervision of, and to regular
inspection by, the Board of Governors of the Federal Reserve System (the
"Federal Reserve"). BANC ONE's principal bank affiliates are organized as
national banking associations, which are subject to regulation by the OCC. In
addition, various state authorities regulate BANC ONE's state bank affiliates,
and all of BANC ONE's bank affiliates are subject to regulation in some degree
by the Federal Reserve and the Federal Deposit Insurance Corporation (the
"FDIC"). In addition to banking laws, regulations and regulatory agencies,
BANC ONE and its affiliates are subject to various other laws, regulations and
regulatory agencies, all of which directly or indirectly affect BANC ONE's
operations, management and ability to make distributions. The following
discussion summarizes certain aspects of those laws and regulations that
affect BANC ONE.
Proposals to change the laws and regulations governing the banking
industry are frequently raised in Congress, in the state legislatures and
before the various bank regulatory agencies. The likelihood and timing of any
changes and the impact such changes might have on BANC ONE and its
subsidiaries are difficult to determine.
According to Federal Reserve policy, bank holding companies are expected
to act as a source of financial strength to each subsidiary bank and to commit
resources to support each such subsidiary. This support may be required at
times when a bank holding company may not be able to provide such support.
Furthermore, in the event of a loss suffered or anticipated by the FDIC --
either as a result of default of a banking or thrift subsidiary of BANC ONE or
related to FDIC assistance provided to a subsidiary in danger of default --
the other banking subsidiaries of BANC ONE may be assessed for the FDIC's
loss, subject to certain exceptions.
BANC ONE's banks are affected by various state and federal laws and by
the fiscal and monetary policies of the federal government and its agencies,
including the Federal Reserve. An important purpose of these policies is to
curb inflation and control recessions through control of the supply of money
and credit. The Federal Reserve uses its powers to regulate reserve
requirements of its member banks, the discount rate on its member bank
borrowings, interest rates on time and savings deposits of its member banks,
and to conduct open market operations in United States government securities
so as to exercise control over the supply of money and credit. These policies
have a direct effect on the amount of bank loans and deposits and on the
interest rates charged on loans and paid on deposits, with the result that
such policies have a material effect on bank earnings. Future policies of the
Federal Reserve and other authorities cannot be predicted, nor can their
effect on future bank earnings be predicted. Similarly, future changes in
state and federal laws and wage, price and other economic restraints of the
federal government cannot be predicted nor can their effect on future bank
earnings be predicted.
CAPITAL REQUIREMENTS. BANC ONE is subject to capital ratios,
requirements and guidelines imposed by the Federal Reserve, which are
substantially similar to the ratios, requirements and guidelines imposed by
the OCC and the FDIC on the banks within their respective jurisdictions.
These capital requirements are designed to require more capital of banks
and bank holding companies that are subject to greater risks. For this
purpose, a bank's or holding company's assets and certain specified
off-balance sheet commitments are assigned to four risk categories, each
weighted differently based on the level of risk that such assets or
commitments are thought to carry. A bank's or holding company's capital, in
turn, is divided into two tiers: core ("Tier 1") capital, which includes
common equity, non-cumulative perpetual preferred stock and related surplus
(excluding auction rate issues), and minority interests in equity accounts of
consolidated subsidiaries, less goodwill and certain other intangible assets;
and supplementary ("Tier 2") capital, which includes, among other items,
cumulative and limited-life preferred stock, mandatory convertible securities,
subordinated debt and allowances for loan and lease losses, subject to certain
limitations, less certain required deductions.
28
<PAGE> 39
BANC ONE, like most other bank holding companies, currently is required
to maintain total capital equal to at least 8% and Tier 1 capital equal to at
least 4% of its total risk-weighted assets. At December 31, 1993 BANC ONE met
both requirements, with total capital equal to 14.19% and Tier 1 capital equal
to 10.51% of its total risk-weighted assets.
The Federal Reserve also requires bank holding companies to maintain a
minimum "leverage ratio" (Tier 1 capital to adjusted total assets) of 3%, if
the holding company has the highest regulatory rating and meets certain other
requirements, or of 3% plus an additional cushion of at least 100 to 200 basis
points if the holding company does not meet these requirements. To date the
Federal Reserve has not notified BANC ONE of any minimum leverage ratio (other
than the standard 3% ratio) that BANC ONE is required to meet. At December
31, 1993 BANC ONE met this requirement with a leverage ratio of 8.66%.
The Federal Reserve may set capital requirements higher than the
minimums noted above for holding companies whose circumstances warrant it.
For example, holding companies experiencing or anticipating significant growth
may be expected to maintain capital ratios including tangible capital
positions well above the minimum levels. The Federal Reserve has not,
however, imposed any such special capital requirement on BANC ONE.
DIVIDEND RESTRICTIONS. Various federal and state statutory provisions
limit the amount of dividends BANC ONE's affiliate banks can pay to BANC ONE
without regulatory approval. The approval of the appropriate bank regulator
is required for any dividend by a national bank or by a state-chartered bank
that is a member of the Federal Reserve System (a "state member bank") if the
total of all dividends declared by the bank in any calendar year would exceed
the total of its net profits, as defined by regulatory agencies, for such year
combined with its retained net profits for the preceding two years. In
addition, a national bank or a state member bank may not pay a dividend in an
amount greater than its net profits then on hand. Under these provisions and
various state law restrictions, BANC ONE's affiliate banks could have
declared, as of December 31, 1993, without obtaining prior regulatory
approval, aggregate dividends of approximately $1.2 billion. In addition,
federal bank regulatory authorities have authority to prohibit the affiliate
banks from engaging in an unsafe or unsound practice in conducting their
business. The payment of dividends, depending upon the financial condition of
the bank in question, could be deemed to constitute such an unsafe or unsound
practice. The ability of BANC ONE's affiliate banks to pay dividends in the
future is presently, and could be further, influenced by bank regulatory
policies and capital guidelines.
FDICIA. The Federal Deposit Insurance Corporation Improvement Act of
1991 (the "FDICIA"), which became law on December 19, 1991, revises several
banking statutes, including the Federal Deposit Insurance Act, affecting bank
regulation, deposit insurance and provisions for funding of the Bank Insurance
Fund (the "BIF") administered by the FDIC. Under FDICIA the bank regulators'
authority to intervene is linked to the deterioration of a bank's capital
level. In addition, FDICIA places limits on real estate lending and brokered
deposit activities, expands audit and reporting requirements, and imposes
limitations and requirements on various banking functions. BANC ONE believes
that the deposit insurance and brokered deposit limitations under FDICIA will
not have any material impact on the liquidity or funding of BANC ONE or its
affiliate banks.
DEPOSIT INSURANCE ASSESSMENTS. The deposits of each of BANC ONE's banks
are insured up to regulatory limits by the FDIC. Accordingly, BANC ONE's
banks are subject to deposit insurance assessments to maintain the FDIC's
BIF. Some BANC ONE banks also hold deposits that were acquired from savings
institutions and that, accordingly, are insured by the FDIC's Savings
Association Insurance Fund ("SAIF"). Deposit insurance premiums may, from
time to tome, be charged at a higher rate for SAIF- than for BIF-insured
deposits.
29
<PAGE> 40
FDICIA requires the FDIC to establish a schedule to increase the reserve
ratio of the BIF to 1.25% of insured deposits over a 15 year period, and to
increase the assessment rate on banks, if necessary, to achieve that ratio.
As also required by FDICIA, the FDIC has adopted regulations establishing a
permanent risk-related deposit insurance assessment system. Under this
system, the FDIC places each insured bank in one of nine risk categories based
(a) on the bank's capitalization and (b) on supervisory risk factors based on
the FDIC's consideration of supervisory evaluations provided by the
institution's primary federal regulator. Each insured bank's insurance
assessment rate is then determined by the risk category in which it has been
classified by the FDIC. There is an eight basis point spread between the
highest and lowest assessment rates, so that banks classified as strongest by
the FDIC are subject to a rate of $0.23 per $100 of deposits and banks
classified as weakest by the FDIC are subject to a rate of $0.31 per $100 of
deposits.
It is possible that BIF assessments will be further increased and it is
possible that there may be special additional assessments in the future.
DEPOSITOR PREFERENCE STATUTE. Federal legislation has been enacted
providing that deposits and certain claims for administrative expenses and
employee compensation against an insured depository institution would be
afforded a priority over other general unsecured claims against such
institution, including federal funds and letters of credit, in the
"liquidation or other resolution" of the institution by any receiver.
BROKERED DEPOSITS. Under FDIC regulations, no FDIC-insured bank or
savings institution can accept brokered deposits unless it (a) is well
capitalized, or (b) is adequately capitalized and receives a waiver from the
FDIC. In addition, these regulations prohibit any bank or savings institution
that is not well capitalized from (a) paying an interest rate on deposits in
excess of 75 basis points over certain prevailing market rates, or (b)
offering "pass through" deposit insurance on certain employee benefit plan
accounts unless it provides certain notice to affected depositors.
MARKET PRICES OF AND DIVIDENDS PAID ON BANC ONE COMMON STOCK
BANC ONE Common Stock is, and the shares offered hereby will be, listed
on the NYSE. The following table sets forth, for the periods indicated, the
high and low reported closing sale prices per share of BANC ONE Common Stock
on the NYSE Composite Tape and cash dividends per share of BANC ONE Common
Stock. The dividend and stock price information has been adjusted to reflect
all stock dividends and stock splits on BANC ONE Common Stock, including the
10% dividend on BANC ONE Common Stock paid on March 4, 1994, the five shares
for four shares BANC ONE Common Stock split paid on August 31, 1993 and the
10% dividend on BANC ONE Common Stock paid on February 14, 1992.
<TABLE>
<CAPTION>
Price Range of Common Stock
---------------------------
High Low Dividends
---- --- ---------
1992
- ----
<S> <C> <C> <C>
First Quarter . . . . . $36.36 $30.75 $.21
Second Quarter . . . . 34.55 30.73 .21
Third Quarter . . . . . 34.27 30.64 .23
Fourth Quarter . . . . 38.91 31.82 .24
1993
- ----
First Quarter . . . . . $42.27 $36.36 $.25
Second Quarter. . . . . 44.73 36.73 .26
Third Quarter . . . . . 42.19 34.55 .28
Fourth Quarter . . . . 39.77 32.27 .28
1994
- ----
First Quarter . . . . . $35.47 $31.88 $.31
Second Quarter . . . . . 38.00 30.75 .31
Third Quarter . . . . . 35.50 29.50 .31
Fourth Quarter (through
November , 1994). . .
</TABLE>
30
<PAGE> 41
BANC ONE intends to continue its present policy of paying quarterly cash
dividends to its shareholders so that dividends as a percentage of income will
average between 35 and 40 percent of net income. The timing and amount of
future dividends will depend upon earnings, cash requirements, the financial
condition of BANC ONE and its subsidiaries, applicable government regulations
and other factors deemed relevant by the Board of Directors. Certain debt
instruments to which BANC ONE is a party limit its ability to pay dividends on
BANC ONE Common Stock. Under the most restrictive of these limitations, BANC
ONE on a consolidated basis would have been permitted to pay cash dividends on
BANC ONE Common Stock in excess of its $1.2 billion of retained earnings as of
December 31, 1993. As described under "Certain Regulatory Matters," various
state and federal laws limit the ability of affiliate banks to pay dividends
to BANC ONE.
INCORPORATION OF CERTAIN INFORMATION ABOUT BANC ONE BY REFERENCE
BANC ONE's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (as amended by the Form 10-KA filed June 29, 1994), BANC
ONE's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994,
June 30, 1994 and September 30, 1994, and BANC ONE's Current Reports on Form
8-K, including the Form 8-K filed January 28, 1994, and the Form 8-K filed
February 17, 1994, in each case filed with the Commission pursuant to Section
13 of the Exchange Act, and the description of BANC ONE Common Stock that is
contained in BANC ONE's registration statement on Form 10 filed under Section
12 of the Exchange Act, including any amendment or report filed for the
purpose of updating such description, are incorporated into this Prospectus and
Proxy Statement by reference. See "Incorporation by Reference."
C. INFORMATION ABOUT 1ST*BANK
GENERAL
1ST*BANK is an independent state banking association chartered by the
Texas Department of Banking with its main office located at 1000 South
Beltline Road, Coppell, Texas, and with one branch office located at 1933 East
Frankford Road, Carrollton, Texas. At June 30, 1994 1ST*BANK had total assets
of approximately $134.0 million, total deposits of approximately $124.8
million, and total shareholders' equity of approximately $8.3 million (or
approximately 6.2% of total assets). 1ST*BANK, which opened as a new bank on
February 14, 1974, in Coppell, Texas, is not a member of the Federal Reserve
System. Its deposits are insured by the FDIC.
DESCRIPTION OF BUSINESS
1ST*BANK is engaged in traditional commercial and consumer banking
activities. It offers a full range of checking and savings accounts as well
as certificates of deposit and safe deposit boxes, and competes in its market
area with other financial institutions, including major banks, savings and
loans, and credit unions. 1ST*BANK owns its premises located at 1000 Beltline
Road in Coppell, Texas, and leases its premises located at 1933 East Frankford
Road in Carrollton, Texas.
At June 30, 1994, 1ST*BANK's deposits totaled approximately $124.8
million. At the same date, 1ST*BANK's loans outstanding, before deduction of
unearned discount and allowances for loan and lease losses, totaled
approximately $40.9 million, and included approximately $13.8 million of
commercial loans, $19.0 million of real estate loans, $5.9 million of interim
construction loans, and $3.7 million of consumer installment loans. At June
30, 1994, approximately $0.5 million, or 0.4%, of 1ST*BANK's total deposits,
and approximately $0.7, or 1.8%, of 1ST*BANK's total loans, were to officers,
directors and principal shareholders of 1ST*BANK, and members of their
immediate families. In addition, at that date, approximately $46.3 million, or
37.1%, of 1ST*BANK's total deposits, and approximately $0.7 million, or 1.6%,
of 1ST*BANK's total loans, were to affiliates of 1ST*BANK's principal
shareholder. In contrast, at December 31, 1991, 1ST*BANK's deposits totaled
approximately $80.0 million, of which approximately $3.5 million, or 4.4%, were
held by affiliates of 1ST*BANK's principal shareholder; and 1ST*BANK's loans
outstanding, before deduction of unearned discount and allowances for loan and
lease losses, totaled approximately $26.6 million, of which approximately $0.1
million, or 0.43%, were to affiliates of 1ST*BANK's principal shareholder.
31
<PAGE> 42
1ST*BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF 1ST*BANK
Introduction
------------
1st*Bank had total assets of $131.9 million and stockholders' equity of $7.5
million at December 31, 1993. Total assets and stockholders' equity at June
30, 1994, were $134.0 million and $8.3 million, respectively.
The following discussion and analysis presents the significant changes in the
results of operations and financial condition for the periods indicated. This
discussion should be read in conjunction with the audited financial statements
and notes and unaudited financial statements for the six month periods ended
June 30, 1994 and 1993, included in this Proxy Statement/Prospectus. Earnings
per share computations are based upon primary earnings per share, and thus, do
not take into effect potential dilution of subordinated debentures. Table 1
presents 1st*Bank's selected financial highlights for the past three years.
Included in this review are the following sections:
I. Years ended December 31, 1993, 1992 and 1991
A. Results of Operations
B. Net Interest Income
C. Other Income, Other Expense and Income Taxes
D. Asset Quality
E. Liquidity and Interest Rate Sensitivity
F. Capital
II. Six Months Ended June 30, 1994 and 1993
III. Quarterly Selected Financial Data
IV. Other Items For Consideration
<PAGE> 43
1ST*BANK
A. RESULTS OF OPERATIONS
---------------------
Net income for 1993 was $1.17 million, compared to net income of $1.38 million
for 1992 and $872 thousand for 1991. The decline in net income from 1992 to
1993 of approximately $210 thousand is partially attributable to an increase in
noninterest expense of approximately $960 thousand offset by an increase in net
interest income of approximately $400 thousand and related federal income tax
effects.
Additionally, the Bank experienced a decrease in net gains on sales of
investment securities from $492 thousand in 1992 to $375 thousand in 1993,
offset by a decrease in the provision for possible loan losses from $480
thousand in 1992 to $361 thousand in 1993.
The increase in net income from 1991 to 1992 of approximately $508,000 is
partially attributable to increases in net interest income and noninterest
income in the approximate amounts of $360 thousand and $500 thousand,
respectively, offset by related federal income tax effects. Additionally, the
Bank experienced an increase in net gains on sales of investment securities
from $55 thousand in 1991 to $492 thousand in 1993, primarily resulting from
the Bank's decision to reposition its investment portfolio from government
agency to pass-through certificates and collateralized mortgage obligations.
The provision for possible loan losses also decreased from $565 thousand in
1991 to $480 thousand in 1992.
Table 1 on the following page sets forth, numerically, a summary of selected
financial highlights.
<PAGE> 44
<TABLE>
1ST*BANK
TABLE 1. SELECTED FINANCIAL DATA
-----------------------
(Dollars in thousands, except per share data)
<CAPTION>
Year Ended December 31,
------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Income statement highlights:
Net interest income $ 4,126 $ 3,728 $ 3,366
Provision for loan losses 361 480 565
Gain from operations 1,630 2,073 1,301
Gain from sales of investment
securities 375 492 55
Provision for income taxes 549 689 469
Net income 1,168 1,384 872
Per share:
Gain from operations 1.25 1.59 1.00
Net income .90 1.06 .67
Balance Sheet highlights:
Assets 131,894 99,751 86,007
Loans (net) 37,921 29,009 26,596
Allowance for loan losses 924 866 1,020
Deposits 123,684 92,594 80,002
Subordinated debentures1 500 500 500
Stockholders' equity 7,490 6,322 4,938
Book value per common share 5.74 4.85 3.79
Financial ratios:
Return on average assets 1.09% 1.39% 1.11%
Return on average equity 17.35% 24.55% 19.59%
Average equity as a percent
of assets 6.29% 5.64% 5.64%
<FN>
1 Convertible into no more than 166,666 shares of capital stock, if
not redeemed by April 1, 1998.
</TABLE>
<PAGE> 45
1ST*BANK
B. NET INTEREST INCOME
-------------------
Interest earning assets at year end increased to $114.2 million in 1993 from
$89.6 million in 1992 and $77.5 million in 1991. Investment securities
increased to $59.5 million from $44.7 million in 1992 and $41.4 million in
1991. Loans increased to $37.9 million from $29.0 million in 1992 and $26.6
million in 1991. The loan growth was due, in part, to the opening of an
additional branch in the later part of 1992, continued economic growth in the
Bank's market areas, and the addition of several more experienced loan
officers.
The investment security growth was primarily due to deposit base growth from
$80.0 million to $92.6 million to $123.7 million for the years ended December
31, 1991, 1992 and 1993, respectively.
Table 2 presents three year average balance sheets and an analysis of interest
yields and rates.
Table 3 presents changes in interest income and interest expense due to changes
in volume and rate.
<PAGE> 46
<TABLE>
1ST*BANK
Table 2. Three-Year Average Balance Sheets/Analysis of Interest Yields and Rates
-----------------------------------------------------------------------
(Dollars In Thousands)
<CAPTION>
1993 1992 1991
-------------------------------- ------------------------------- ---------------------------------
Interest Interest Interest
Average Income/ Average Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- -------- ------- ------- -------- ------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earning Assets:
Short term investments $ 16,642 $ 503 3.02% $ 11,310 $ 405 3.58% $ 9,660 $ 523 5.41%
Securities 45,288 2,254 4.98 46,443 2,883 6.21 35,339 2,797 7.92
Loans 34,698 3,713 10.70 27,629 3,098 11.21 27,374 3,341 12.21
------ -------- ------ ------- ------- ----- ------- -------- -------
Total earning assets $ 96,628 $ 6,470 6.70% $ 85,382 $ 6,386 7.48% $ 72,373 $ 6,661 9.20%
====== ======== ====== ======== ======== ==== ======= ======== =======
Interest bearing liabilities:
Deposits $ 73,824 $ 2,313 3.13% $ 69,011 $ 2,628 3.81% $ 59,809 $ 3,266 5.46%
Subordinated debentures 500 30 6.00 500 30 6.00 500 30 6.00
------- -------- ------ -------- -------- ----- -------- -------- --------
Total interest bearing
liabilities $ 74,324 2,343 3.15% $ 69,511 2,658 3.82% $ 60,309 3,296 5.47
======== ====== ===== ======== ======== ==== ======== ======== ========
Net interest income $ 4,127 $ 3,728 $ 3,365
======== ======== ========
Interest rate spread 3.55% 3.66% 3.73%
====== ====== ======
Net interest margin 4.27% 4.37% 4.65%
====== ====== ======
</TABLE>
<PAGE> 47
1ST*BANK
TABLE 3. VOLUME/RATE ANALYSIS
<TABLE>
<CAPTION>
Year December 31,
----------------------------------------------
1993 Over 1992
--------------------------
Volume Rate Total
------ ---- -----
<S> <C> <C> <C>
Increase (decrease) in interest
income:
Short term investments $ 190,693 $( 93,237) $ 97,456
Securities ( 70,578) ( 557,916) ( 628,494)
Loans 792,058 ( 176,963) 615,095
----------- ----------- ------------
Total 912,173 ( 828,116) 84,057
----------- ----------- -----------
Increase (decrease) in interest
expense:
Deposits 184,875 ( 499,217) ( 314,342)
----------- ----------- -----------
Total 184,875 ( 499,217) ( 314,342)
----------- ----------- -----------
Increase (decrease) in net
interest income $ 727,298 $( 328,899) $ 398,399
=========== =========== ===========
<CAPTION>
Year December 31,
--------------------------------------------------
1992 Over 1991
---------------------------
Volume Rate Total
------ ---- -----
<S> <C> <C> <C>
Increase (decrease) in interest
income:
Short term investments $ 89,587 $( 207,927) $( 118,340)
Securities 880,934 ( 795,344) 85,590
Loans 32,466 ( 275,862) ( 243,396)
----------- ----------- -----------
Total 1,002,987 (1,279,133) ( 276,146)
----------- ----------- -----------
Increase (decrease) in interest
expense:
Deposits 501,869 (1,140,191) ( 638,322)
----------- ----------- -----------
Total 501,869 (1,140,191) ( 638,322)
----------- ----------- -----------
Increase (decrease) in net
interest income $ 501,118 $( 138,942) $ 362,176
=========== =========== ===========
</TABLE>
<PAGE> 48
1ST*BANK
Lower interest rates in 1993, compared to 1992, were partially offset by
substantial increases in interest earning assets for the same period, resulting
in an increase in interest earned on assets of $84,057. The $628,494 decrease
in securities interest income was offset by an increase of $615,095 in loan
interest income due to the opening of an additional branch in the latter part
of 1992 and continued economic growth in the Bank's market areas, resulting in
an $8.9 million (30.7%) increase in loans from 1992 to 1993.
Lower interest rates in 1992, compared to 1991, contributed to the reduction in
interest earned on assets of $276,146, however, this reduction was partially
offset by an approximate $11 million (31.4%) increase in average investment
securities from 1991 to 1992.
The increase in total interest income in 1993 and the decline in 1992, was more
than offset by significant declines in 1st*Bank's interest expense for similar
periods of $314,342 and $638,322, respectively. Together with a 27.6% increase
in earning assets the resulting effect in 1993 was an increase in net interest
income of $398,399 over 1992. This increase is comparable to the 1992 increase
in net interest income of $362,176 over 1991.
Securities and Short-Term Investments
- -------------------------------------
Investment securities have substantially increased from $41.4 million in 1991
to $59.5 million 1993, a 43.7% increase. This increase is primarily
attributable to the investment of excess funds as a result of deposit growth.
Short-term investments represented 14.7% of earning assets at year-end 1993,
compared to 17.7% in 1992 and 12.3% in 1991.
Table 4 summarizes the composition of investment securities. Short term
investments (not summarized) primarily represent federal funds sold.
Loan Portfolio
- --------------
Interest income on loans increased by $615,095 in 1993 after a decrease of
$243,396 in 1992. A growth of approximately $9 million in net outstanding
loans more than helped maintain loan interest income despite falling rates in
1993.
<PAGE> 49
<TABLE>
1ST*BANK
Table 4. Composition of Investment Securities
------------------------------------
(Dollars In Thousands)
<CAPTION>
1993 1992 1991
------------------------------- ---------------------------- ----------------------------
Amortized Cost Amortized Cost Amortized Cost
------------------------------- ---------------------------- ----------------------------
Market Market Market
Type Amount Percent Value Amount Percent Value Amount Percent Value
- ---- ------ ------- ------ ------ ------- ------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. treasury $ 2,006 3.37% $ 2,015 $ 14,368 32.16% $ 14,601 $ 8,165 19.70% $ 8,239
U.S. government agency 5,000 8.40 4,939 5,000 11.19 5,017 14,092 34.00 14,520
State and political
subdivisions 5,637 9.47 5,611 999 2.24 1,032 1,015 2.45 1,048
Pass-through certificates
guaranteed by FNMA, GNMA
and FHLMC 21,949 36.87 21,720 19,070 42.69 18,839 18,170 43.85 18,079
Collateralized mortgage
obligations 24,937 41.89 24,889 5,238 11.72 5,183 - - -
------ ------ -------- ------ ------ ------ ------ ----- ------
$ 59,529 100.00% $ 59,174 $ 44,675 100.00% $ 44,672 $ 41,442 100.00% $ 41,886
======== ====== ======== ======== ====== ======== ======== ====== ========
</TABLE>
<PAGE> 50
1ST*BANK
TABLE 5. LOAN CONCENTRATIONS
-------------------
(In Thousands)
<TABLE>
<CAPTION>
1993 1992
------------------------- -------------------------
Balance Percent Balance Percent
at of at of
Year End Loans Year End Loans
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Commercial $ 13,872 35.29% $ 7,848 26.87%
Real estate 16,918 43.04 15,385 50.73
Interim construction 5,200 13.23 4,038 13.31
Installment 3,314 8.42 3,046 9.07
Other 6 .02 8 .02
-------- ------ -------- ------
39,310 100.00 30,325 100.00
Unearned income ( 465) - ( 450) -
Allowance for possible
loan losses ( 924) - ( 866) -
-------- ------ -------- ------
$ 37,921 100.00% $ 29,009 100.00%
======== ====== ======== ======
</TABLE>
Loan concentrations in year end 1993 changed from year end 1992 as a result of
the opening of a new branch in the latter part of 1992, in a commercial area,
continued economic growth in such area, and the addition of several commercial
loan officers, thereby increasing the percent of commercial loans to total
loans in 1993. 1st*Bank's loan to deposit ratio was 33.24% at year end 1991,
fell to 31.33% in 1992, and fell slightly to 30.66% in 1993.
Table 6 represents the maturities of loans at December 31, 1993. Excluded are
credit card loans and overdrafts. Variable rate loans are slotted at the
earlier of repricing or maturity date.
TABLE 6. MATURITY SCHEDULE OF LOANS AT DECEMBER 31, 1993
------------------------------------------------
(In Thousands)
<TABLE>
<CAPTION>
Fixed Variable Total
----- -------- -----
<S> <C> <C> <C>
1994 $ 7,734 $18,923 $26,657
1995 through 1998 11,286 - 11,286
After 1998 1,367 - 1,367
------- ------- -------
$20,387 $18,923 $39,310
======= ======= =======
</TABLE>
<PAGE> 51
1ST*BANK
Deposits
- --------
1st*Bank has historically enjoyed a favorable noninterest bearing to total
deposit ratio. At year end 1993, noninterest bearing deposits were 28.6% of
total deposits, 22.4% in 1992 and 22.0% in 1991. Certificates of Deposits
declined as a percent of total deposits from 53.6% at year end 1991 to 42.5% at
year end 1992, and to a low of 36.7% at year end 1993. As interest rates
declined in 1993, depositors moved funds into more liquid deposit products. As
a result, Money Market and NOW accounts were 19.8% of total deposits at year
end 1991, but grew to 26.1% at year end 1992 and fell to 21.9% at year end
1993. Savings accounts grew from 4.3% of total deposits at year end 1991 to
8.8% at year end 1992 and 12.6% at year end 1993. This shift in funds among
deposit products together with falling interest rates helped produce an overall
lower cost of funds which increased 1st*Bank's net interest margin and net
interest income.
C. OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
--------------------------------------------
Noninterest income remained relatively consistent at year end 1993 compared to
1992. The most significant increase occurred in service charges on deposit
accounts, where the Bank regularly reviews service charges on accounts and the
local market for such charges. The increase of $491,244 in noninterest income
from 1991 to 1992 is primarily attributable to an increase in net gain on sales
of investment securities of $437,404 as the Bank began to reposition its
investment portfolio from U.S. government agency obligations to collateralized
mortgage obligations.
Noninterest expense increased significantly from 1992 to 1993 in the amount of
$960,365, or 43.84%. The significant areas of noninterest expense attributable
to such increase are salaries and employee benefits and other real estate owned
in the amounts of $329,856 and $335,380, respectively. Salaries and employee
benefits primarily increased due to the addition of several loan officers and
staff pursuant to the opening of a new branch in the latter part of 1992 and
continued economic growth in the Bank's market areas. Other real estate owned
expenses increased primarily due to an increase in the provision for losses of
approximately $270,000.
Noninterest expense increased $165,506 from 1991 to 1992, which was primarily
due to an increase in salaries and employee benefits of $99,761.
<PAGE> 52
1ST*BANK
TABLE 7. ANALYSIS OF CHANGES IN OTHER INCOME AND OTHER EXPENSES
------------------------------------------------------
<TABLE>
<CAPTION>
$ Change $ Change
1993-1992 1992-1991
--------- ---------
<S> <C> <C>
Other income:
Service charges on deposit accounts $ 119,400 $ 42,679
Net gain on sales of investment
securities (117,772) 437,404
Other ( 1,999) 11,161
--------- ---------
Total other income change $( 371) $ 491,244
========= =========
Other expenses:
Salaries and employee benefits $ 329,856 $ 99,761
Occupancy expense 119,793 17,137
Other real estate owned 335,380 ( 36,586)
Outside services and processing 40,347 30,553
Other 134,989 54,641
--------- ---------
Total other expense $ 960,365 $ 165,506
========= =========
</TABLE>
The provision for income taxes as a percent of net income before income taxes,
extraordinary credit, and cumulative effect of change in accounting principle
was 36.09% at year end 1991, 33.2% in 1992, and 33.7% in 1993. The primary
temporary differences between the recorded amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes
are bank premises and equipment basis, loan loss reserves, other real estate
owned basis, and loan fees deferred.
Effective January 1, 1993, 1st*Bank adopted SFAS 109 resulting in a cumulative
effect of change in accounting principle benefit of approximately $87,000.
<PAGE> 53
1ST*BANK
D. ASSET QUALITY
-------------
Nonperforming Assets
- --------------------
Nonperforming assets include nonaccrual loans and foreclosed property. Loans
where there exists a reasonable doubt as to the full, timely collection of
interest or principal or when a loan becomes contractually past due by ninety
days or more with respect to principal or interest are designated as nonaccrual
loans. Covered transactions are sales of previously foreclosed property where
less than 10% of the total sales price is in cash, where there is financing by
the Bank of all or a portion of the sales price on more favorable terms than
those customarily required, or where the transaction does not transfer from the
Bank to the buyer the usual risks of ownership.
TABLE 8. NONPERFORMING ASSETS
--------------------
<TABLE>
(Dollars In Thousands)
<CAPTION>
December 31,
-----------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Nonaccrual loans $ 29 $ 985 $ 596
Foreclosed property, net 136 395 192
Covered transactions - 383 422
-------- -------- --------
Total $ 165 $ 1,763 $ 1,210
======== ======== ========
Ratio of nonperforming assets
to total assets .13% 1.77% 1.41%
======== ======== ========
Ratio of nonperforming assets
to total loans and foreclosed
property .44% 6.12% 4.55%
======== ======== ========
</TABLE>
The substantial decrease in nonperforming assets during 1993 is primarily
attributable to improvement in loan quality, dispositions of other real estate
and subsequent collections on covered transactions sufficient to mitigate
covered transaction classification.
Allowance for Possible Loan Losses
- ----------------------------------
At December 31, 1993, the allowance for possible loan losses was $923,532, or
2.38%, of total loans, compared to $865,768, or 2.9%, at December 31, 1992.
<PAGE> 54
1ST*BANK
Table 9 presents the activity in the allowance for possible loan losses for the
past three years.
TABLE 9. ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
(Dollars In Thousands)
<CAPTION>
December 31,
-----------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 866 $ 1,020 $ 876
Provision for loan losses 361 480 565
Loans charged off ( 339) ( 664) ( 459)
Recoveries of loans previously
charged off 36 30 38
-------- -------- --------
Balance at end of year $ 924 $ 866 $ 1,020
======== ======== ========
Average total loans $ 35,629 $ 28,708 $ 28,366
======== ======== ========
Net charge-offs as a percent
of average loans .85% 2.21% 1.48%
======== ======== ========
Allowance for loan losses as
a percent of year end loans 2.38% 2.90% 3.69%
======== ======== ========
</TABLE>
Management considers the allowance for possible loan losses to be adequate at
December 31, 1993. The adequacy of the reserve is determinable only on an
approximate basis since estimation of the magnitude and timing of loan losses
involves subjective judgements.
The provision for possible loan losses has experienced a trend of decline from
$565 thousand at year end 1991 to $361 thousand at year end 1993. Charge-offs
were abnormally high in 1992 compared to prior years, as the Bank identified
probable losses on three loans aggregating $470,000.
<PAGE> 55
1ST*BANK
E. INTEREST AND LIQUIDITY RATE SENSITIVITY
---------------------------------------
Interest Rate Sensitivity
- -------------------------
Interest rate sensitivity is the relationship between market interest rates and
net interest income due to the pricing of certain assets and liabilities. If
more assets than liabilities reprice within a given period, an asset sensitive
position is created. When an institution is in an asset sensitive position, a
decline in market rates will have a negative impact on net interest income.
Alternatively, when liabilities reprice more quickly than assets in a given
period, a liability sensitive position exists and a decline in interest rates
will increase net interest income. One way to reduce the adverse effect of
market rate fluctuations on net interest income is to minimize the difference
between rate sensitive assets and liabilities, referred to as gap, by
maintaining a balanced interest rate sensitivity position. Matching interest
sensitivity will reduce some of the risks from adverse changes in market rates;
it will not guarantee a stable net interest spread because yields and rates may
change simultaneously but by different amounts. These changes in market
spreads could materially affect the overall net interest spread even if assets
and liabilities were perfectly matched.
1st*Bank, through its Asset/Liability Committee, monitors its interest
sensitivity position and provides guidance in the management of such position.
It is 1st*Bank's objective to maintain a reasonably balanced position with
respect to interest rate sensitivity of assets and liabilities in order to
reduce the risk of an unfavorable impact to the income statement and maintain a
more stable net interest spread. 1st*Bank's interest sensitivity position at
December 31, 1993, is presented in Table 10. At December 31, 1993, 1st*Bank
was in a liability sensitive position under three months. During a declining
interest rate environment, this position would produce higher net interest
income, and during a rising interest rate environment, this position would
produce lower net interest income. It should be noted that the interest
sensitivity position is presented at a point in time and can be altered by
management as changing conditions dictate.
<PAGE> 56
<TABLE>
1ST*BANK
TABLE 10. INTEREST RATE SENSITIVITY AT DECEMBER 31, 1993
----------------------------------------------
(Dollars In Thousands)
<CAPTION>
Within Four To One To Over
Three Twelve Five Five
Months Months Years Years Total
------ -------- ------ ----- -----
<S> <C> <C> <C> <C> <C>
Earning Assets:
Federal funds sold $ 16,700 $ - $ - $ - $ 16,700
Deposit with other financial
institutions 98 - - - 98
Securities:
Variable rate 36,755 5,729 - - 42,484
Fixed 1,000 1,006 2,258 12,782 17,046
-------- -------- -------- -------- --------
Total securities 37,755 6,735 2,258 12,782 59,530
Loans:
Variable rate 18,923 - - - 18,923
Fixed 2,216 5,446 11,286 1,367 20,315
-------- -------- -------- -------- --------
Total loans 21,139 5,446 11,286 1,367 39,238
-------- -------- -------- -------- --------
Total earning assets 75,692 12,181 13,544 14,149 115,566
-------- -------- -------- -------- ========
Interest bearing liabilities:
Demand-interest bearing 12,489 - - - 12,489
Regular and money market
savings 32,874 - - - 32,874
CDs 37,661 5,325 - - 42,986
-------- -------- -------- -------- --------
Total interest bearing
liabilities 83,024 5,325 - - 88,349
-------- -------- -------- -------- --------
GAP $( 7,332) $ 6,856 $ 13,544 $ 14,149 $ 27,217
======== ======== ======== ========= =======
Cumulative gap $( 7,332) $( 476) $ 13,068 $ 27,217
======== ======== ======== ========
Cumulative gap as a percent
of total earning assets ( 6.34%) ( .41%) 11.31% 23.55%
======= ======= ======== ========
</TABLE>
<PAGE> 57
1ST*BANK
LIQUIDITY
- ---------
Liquidity for 1st*Bank is the ability to raise funds to support asset growth,
meet deposit withdrawals, fund customers' legitimate borrowing needs, satisfy
maturities of short-term borrowings, and maintain reserve requirements.
Liquidity needs can be met from either assets or liabilities. On the asset
side, the primary sources of liquidity are cash and due from banks, time
deposits with banks, federal funds sold and securities purchased under
agreements to resell, short-term marketable investment securities and scheduled
repayments and maturities of loans. Average cash and due from banks for 1993
was $7.8 million, an increase of $2.6 million, or 50%, from 1992. 1st*Bank's
average level of federal funds sold and securities purchased under agreements
to resell was $16.5 million for 1993, compared to $11.2 million for 1992.
On the liability side, the principal sources of liquidity are deposit growth,
the maturity distribution of purchased funds and the accessibility to money and
capital markets. Deposits for 1993 averaged $98.9 million, an increase of
$12.5 million, or 14.5%, from 1992. Deposits increased primarily as a result
of the opening of a new branch in the latter part of 1992.
1st*Bank monitors its liquidity position continuously in relation to changes in
long-term and short-term interest rates. Maturity distribution and interest
sensitivity of assets and liabilities are adjusted in response to those
changes. 1st*Bank has historically maintained adequate liquidity.
F. CAPITAL
-------
The Bank is required to maintain minimum amounts of capital to total "risk
weighted" assets, as defined by the banking regulators. At December 31, 1993,
the Bank was required to have a minimum total capital to risk based assets
ratio of 8%. The Texas Department of Banking requires a minimum equity capital
ratio of 6%. At December 31, 1993, the Bank's actual total capital to risk
based assets and equity capital ratios were 11.3% and 5.6%, respectively.
<PAGE> 58
1ST*BANK
II. SIX MONTHS ENDED JUNE 30, 1994 AND 1993
---------------------------------------
A. RESULTS OF OPERATIONS
---------------------
Net income for the six months ended June 30, 1994 was $798 thousand, or $.61
per share, compared to net income of $500 thousand or $.38 per share for the
six months ended June 30, 1993.
B. NET INTEREST INCOME
-------------------
Net interest income for the six months ended June 30, 1994 increased $547
thousand, or 28%, from the six months ended June 30, 1993. This increase is
mainly attributable to significant volume increases as average earning assets
increased from $89.3 million at June 30, 1993 to $119.5 million at June 30,
1994.
Table 11 presents the year to date average balance sheet/analysis of interest
yield and rates; Table 12 presents the volume/rate analysis.
<PAGE> 59
<TABLE>
1ST*BANK
TABLE 11. YEAR-TO-DATE AVERAGE BALANCE SHEETS/ANALYSIS OF INTEREST YIELDS AND RATES
-------------------------------------------------------------------------
(Dollars In Thousands)
<CAPTION>
Six Months Ended June 30, 1994 Six Months Ended June 30, 1993
------------------------------ ------------------------------
Annualized Annualized
Interest Interest
Average Income/ Average Average Income /Average
Balance Expense Rate Balance Expense Rate
-------- -------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Short term investments $ 13,602 $ 489 3.60% $ 12,087 $ 364 3.01%
Securities 65,880 3,138 4.76 44,521 2,308 5.18
Loans 40,061 4,009 10.01 32,696 3,440 10.52
-------- -------- ------ -------- ----- -----
Total earning assets $119,543 $ 7,636 6.39% $ 89,304 $ 6,112 6.84%
======== ======== ====== ======== ======== =====
Interest bearing liabilities:
Deposits $ 90,943 $ 2,740 3.01% $ 70,663 $ 2,184 3.09%
Subordinated debentures 500 30 6.00 500 30 6.00
-------- -------- ------ -------- -------- -----
Total interest bearing
liabilities $ 91,443 2,770 3.03% $ 71,163 2,214 3.11%
======== -------- ====== ======== -------- =====
Net interest income $ 4,866 $ 3,898
======== ========
Interest rate spread 3.36% 3.73%
====== ======
Net interest margin 4.07% 4.36%
====== ======
</TABLE>
<PAGE> 60
<TABLE>
1ST*BANK
TABLE 12. VOLUME RATE ANALYSIS
--------------------
<CAPTION>
Six Months Ended June 30, 1994
---------------------------------------------------
1994 over 1993
---------------------------------------------------
Volume Rate Total
------ ---- -----
<S> <C> <C> <C>
Increase (decrease) in interest income:
Short term investments $ 45,420 $ 79,580 $ 125,000
Securities 1,104,584 ( 274,584) 830,000
Loans 774,417 ( 205,417) 569,000
------------ ------------ ------------
Total $ 1,924,421 $( 400,421) $ 1,524,000
============ ============ ============
Increase (decrease) in interest expense:
Deposits $ 626,139 $( 70,139) $ 556,000
------------ ------------ ------------
Increase (decrease) in net interest
income $ 1,298,282 $( 330,282) $ 968,000
============ ============ ============
</TABLE>
C. NONINTEREST INCOME
------------------
Noninterest income for the six months ended June 30, 1994, increased $21
thousand, or 6.8%, from the six months ended June 30, 1993.
D. NONINTEREST EXPENSE
-------------------
Noninterest expense for the six months ended June 30, 1994 increased $211
thousand or 15.5% from the six months ended June 30, 1993. The increase in
1994 resulted from increased salaries and employee benefits, and occupancy and
data processing expenses pursuant to the opening of a new branch in the latter
part of 1992, and continued economic growth in the Bank's market areas,
resulting in the required addition of several loan officers and other Bank
personnel.
<PAGE> 61
1ST*BANK
E. ANALYSIS OF FINANCIAL CONDITION
-------------------------------
INVESTMENT SECURITIES
Investment securities at June 30, 1994 increased $18.7 million or 39.9%, from
June 30, 1993. This increase is primarily attributable to the investment of
excess funds arising from deposit growth. Total deposits at June 30, 1994
increased $23.4 million, or 23%, from June 30, 1993. At June 30, 1994, the
cost basis of investment securities approximated $65.5 million. The market
value of such investment securities approximated $63.6 million.
LOANS
Net loans were $40.9 million at June 30, 1994, an increase of $6.3 million, or
18%, from June 30, 1993. This increase is primarily attributable to the loan
base growth related to the opening of a new branch in the latter part of 1992,
and is mainly in the commercial loan portfolio. Table 13 summarizes the loan
composition at June 30, 1994 and 1993.
TABLE 13. LOAN CONCENTRATION
------------------
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------
1994 1993
----------------- --------------------------------------------
Balance Percent Balance Percent
at of at of
Year End Loans Year End Loans
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Commercial $ 13,769 32.53% $ 10,831 30.12%
Real estate 18,989 44.86 16,795 46.71
Interim construction 5,882 13.89 5,345 14.86
Installment 3,665 8.71 2,977 8.30
Other 16 .01 11 .01
-------- ------ -------- ------
42,321 100.00 35,959 100.00
Unearned income ( 533) - ( 467) -
Allowance for possible
loan losses ( 897) - ( 875) -
-------- ------ -------- ------
Loans, net of unearned
income $ 40,891 100.00% $ 34,617 100.00%
======== ====== ======== ======
</TABLE>
<PAGE> 62
<TABLE>
1ST*BANK
MATURITY SCHEDULE OF LOANS AT JUNE 30, 1994
- -------------------------------------------
(In Thousands)
<CAPTION>
Fixed Variable Total
----- -------- -----
<S> <C> <C> <C>
1995 $ 7,636 $20,385 $28,021
1996 through 1999 13,261 - 13,261
After 1999 1,039 - 1,039
------- ------- -------
$21,936 $20,385 $42,321
======= ======= =======
</TABLE>
NONPERFORMING ASSETS
- --------------------
Nonperforming assets include nonaccrual loans, restructured loans and other
real estate and collateral acquired. Loans are placed on nonaccrual when, in
the opinion of management, collectibility of principal or interest is doubtful.
Loans past due 90 days or more with respect to principal or interest are placed
on nonaccrual, unless they are both well secured and in the process of
collection.
Nonperforming assets at June 30, 1994 aggregated $98 thousand, comprised of $29
thousand in nonaccrual loans and $69 thousand in other real estate owned.
Comparatively, nonperforming assets at June 30, 1993 aggregated $864 thousand,
comprised of $132 thousand in nonaccrual loans and $732 thousand in other real
estate owned.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
- ----------------------------------
Table 14 summarizes the activity in the allowance for possible loan losses.
<PAGE> 63
<TABLE>
1ST*BANK
TABLE 14. SUMMARY OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
---------------------------------------------
(Dollars In Thousands)
<CAPTION>
June 30, June 30,
1994 1993
-------- --------
<S> <C> <C>
Balance at beginning of period $ 924 $ 866
Provision for loan losses 120 270
Loans charged off ( 147) ( 292)
Recoveries - 31
-------- --------
Balance at end of year $ 897 $ 875
======== ========
Allowance for loan losses as a
percent of period end loans 2.15% 2.47%
======== ========
</TABLE>
DEPOSITS
Table 15 summarizes the composition of deposits. Total deposits have
experienced a significant growth as a result of the opening of a new branch in
the latter part of 1992.
TABLE 15. DEPOSITS
--------
(Dollars In Thousands)
<TABLE>
<CAPTION>
June 30,
----------------------------------------------------------
1994 1993
------------------------- -------------------------
Amount Percent Amount Percent
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Noninterest bearing demand
accounts $ 33,831 27.1% $ 27,750 27.3%
Interest bearing demand
accounts 9,280 7.4 7,191 7.1
Savings accounts 15,755 12.6 11,408 11.3
Individual retirement
accounts 2,433 2.0 2,041 2.0
Limited access money market
accounts 14,957 12.0 13,148 13.0
Certificates of deposit, less
than $100,000 3,160 2.5 3,468 3.4
Certificates of deposit
$100,000 and greater 45,190 36.2 36,234 35.7
State of Texas time 242 0.2 242 0.2
-------- ----- -------- -----
$124,848 100.0% $101,482 100.0%
======== ===== ======== =====
</TABLE>
<PAGE> 64
1ST*BANK
The weighted average interest rate on deposits at June 30, 1994 and 1993 was
approximately 2.3% and 2.4%, respectively.
CAPITAL RESOURCES
- -----------------
The Bank is required to maintain minimum amounts of capital to total "risk
weighted" assets, as defined by the banking regulators. At June 30, 1994 and
1993, the FDIC required the Bank to have a minimum total capital to risk based
assets ratio of 8%. The Texas Department of Banking requires a minimum equity
capital ratio of 6%. At June 30, 1994 and 1993, the Bank's actual total
capital to risk based assets and equity capital ratios were 10.2% and 9.9%,
respectively, and 6.2% and 6.3%, respectively.
ASSET AND LIABILITY MANAGEMENT
- ------------------------------
INTEREST RATE SENSITIVITY
- -------------------------
Interest rate sensitivity is the relationship between market interest rates and
net interest income due to the repricing of certain assets and liabilities.
1st*Bank's interest sensitivity position at June 30, 1994 is presented in Table
16.
<PAGE> 65
<TABLE>
1ST*BANK
TABLE 16. INTEREST RATE SENSITIVITY ANALYSIS AT JUNE 30, 1994
(Dollars In Thousands)
<CAPTION>
Within Four To One To Over
Three Twelve Five Five
Months Months Years Years Total
------ -------- ------ ----- -----
<S> <C> <C> <C> <C> <C>
Earning Assets:
Federal funds sold $ 17,350 $ - $ - $ - $ 17,350
Securities:
Variable rate 40,969 3,607 - - 44,576
Fixed - 1,324 6,130 13,519 20,973
-------- -------- -------- -------- --------
Total securities 40,969 4,931 6,130 13,519 65,549
Loans:
Variable rate 20,385 - - - 20,385
Fixed 2,335 5,261 13,261 1,039 21,896
-------- -------- -------- -------- --------
Total loans 22,720 5,261 13,261 1,039 42,281
-------- -------- -------- -------- --------
Total earning assets 81,039 10,192 19,391 14,558 125,180
-------- -------- -------- -------- --------
Interest bearing liabilities:
Demand-interest bearing 9,280 - - - 9,280
Regular and money market
savings 33,454 - - - 33,454
CDs 45,973 2,211 100 - 48,284
-------- -------- -------- -------- --------
Total interest bearing
liabilities 88,707 2,211 100 - 91,018
-------- -------- -------- -------- --------
GAP $( 7,668) $ 7,981 $ 19,291 $ 14,558 $ 34,162
======== ======== ======== ======== ========
Cumulative gap $( 7,668) $ 313 $ 19,604 $ 34,162
======== ======== ======== ========
Cumulative gap as a percent
of total earning assets ( 6.13%) .25% 15.66% 27.29%
======= ======= ======== ========
</TABLE>
Liquidity
Liquidity for 1st*Bank is the ability to raise funds to support asset growth,
meet deposit withdrawals, fund customers' legitimate borrowing needs, satisfy
maturities of short-term borrowings, and maintain reserve requirements.
Average cash and due from banks for the second quarter of 1994 was $9.15
million, an increase of $1.9 million, or 25.9%, from the second quarter of
1993. The Bank's average level of federal funds sold was $13.6 million for the
second quarter of 1994, an increase of $1.6 million, or 13.3%, from the second
quarter of 1993.
<PAGE> 66
1ST*BANK
Average deposits for the second quarter of 1994 were $122.3 million, an
increase of $30.3 million, or 32.9% from the second quarter of 1993.
III. SELECTED QUARTERLY DATA
-----------------------
Table 17 presents condensed quarterly income statements beginning with the
first quarter ended March 31, 1992 and continuing through successive quarters
ended thereafter through and including the quarter ended June 30, 1994.
As is noted on Table 16, total interest income gradually increased throughout
the quarters. This increase is attributable to the investment of excess funds
in investment securities and growth in loan base as a result of the opening of
a new branch in the latter part of 1992, and continued economic growth in the
Bank's market areas and the addition of several more loan officers.
Total interest expense was higher in the first three quarters of 1992, began to
fall in the fourth quarter of 1992 through the second quarter of 1993, and then
began to rise. These fluctuations can be attributed to higher interest rates
in the first three quarters of 1992, gradually lower rates in the fourth
quarter of 1992 through remaining quarters, and the opening of a new branch
location in the latter part of 1992 (which resulted in a growth in deposit
base, thereby increasing volume).
Noninterest income and noninterest expense gradual increases throughout the
quarters are attributable to the new branch location. Additionally, other
noninterest expense in the third quarter of 1993 is higher due to liberal
write-downs on foreclosed properties.
The other adjustment amount in the first quarter of 1993 represents the
cumulative effect of adoption of SFAS No. 109, "Accounting for Income Taxes."
IV. OTHER ITEMS FOR CONSIDERATION
-----------------------------
A. ACCOUNTING PRONOUNCEMENTS
-------------------------
The Financial Accounting Standards Board issued Statement No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS 115) in May 1993.
This statement is required for fiscal years beginning after December 15, 1993,
and requires those applicable investments to be classified into three
categories; held to maturity, available for sale, and trading. As of June 30,
1994, the entire investment portfolio of the Bank is carried at amortized cost
because management believes the Bank has the ability and intent to hold such
securities to maturity and that no anticipated events are likely to occur in
the foreseeable future which might require disposal.
<PAGE> 67
1ST*BANK
B. COMMITMENTS
The Bank entered into a noncancelable operating lease relating to its branch in
Carrollton, Texas during 1993. At December 31, 1993, future minimum lease
payments under this operating lease are as follows:
<TABLE>
<S> <C>
Year ending December 31, 1994 $ 19,602
1995 19,602
1996 14,702
Thereafter -
------------
$ 53,906
============
</TABLE>
<PAGE> 68
<TABLE>
1ST*BANK
TABLE 17. 1ST*BANK CONDENSED QUARTERLY INCOME STATEMENTS
----------------------------------------------
(Dollars In Thousands)
<CAPTION>
1994 1993
----------------------- ---------------------------------------------------------
Second First Fourth Third Second First
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans:
Real estate $ 636 $ 615 $ 705 $ 620 $ 578 $ 541
Installment 80 75 74 70 71 67
Commercial and other 300 297 280 253 239 211
-------- -------- -------- -------- -------- ---------
1,016 987 1,059 943 888 819
Deposits at other bank - 1 1 - 1 1
Investment securities:
Taxable 746 698 499 555 558 571
Tax-exempt 63 62 36 11 13 12
-------- -------- -------- -------- -------- ---------
809 760 535 566 571 583
Federal funds sold 142 102 185 133 96 85
-------- -------- -------- -------- -------- ---------
Total interest income 1,967 1,850 1,780 1,642 1,556 1,488
-------- -------- -------- -------- -------- ---------
Interest expense:
Demand deposits 169 171 175 165 161 174
Savings deposits 145 138 158 136 108 95
Time deposits - over $100 350 281 264 268 250 243
Time deposits - under $100 27 26 27 29 32 28
Subordinated debentures 8 7 7 8 7 8
-------- -------- -------- -------- -------- ---------
Total interest expense 699 623 631 606 558 548
-------- -------- -------- -------- -------- ---------
Net interest income 1,268 1,227 1,149 1,036 998 940
Provision for possible loan
losses 60 60 65 35 135 135
-------- -------- -------- -------- -------- ---------
Net interest income after
provision for possible
loan losses 1,208 1,167 1,084 1,001 863 805
-------- -------- -------- -------- -------- ---------
<CAPTION>
1992
--------------------------------------------------------
Fourth Third Second First
------ ----- ------ -----
<S> <C> <C> <C> <C>
Interest income:
Loans:
Real estate $ 524 $ 536 $ 518 $ 503
Installment 71 69 71 72
Commercial and other 187 182 175 154
-------- -------- -------- --------
782 787 764 729
Deposits at other bank 1 1 1 1
Investment securities:
Taxable 620 714 752 741
Tax-exempt 14 14 14 14
-------- -------- -------- --------
634 728 766 755
Federal funds sold 78 58 143 122
-------- -------- -------- --------
Total interest income 1,495 1,574 1,674 1,607
-------- -------- -------- --------
Interest expense:
Demand deposits 184 216 199 220
Savings deposits 101 88 84 73
Time deposits - over $100 267 289 388 360
Time deposits - under $100 31 39 38 47
Subordinated debentures 8 8 8 10
-------- -------- -------- --------
Total interest expense 591 640 717 710
-------- -------- -------- --------
Net interest income 904 934 957 897
Provision for possible loan
losses 120 120 120 120
-------- -------- -------- --------
Net interest income after
provision for possible
loan losses 784 814 837 777
-------- -------- -------- --------
</TABLE>
<PAGE> 69
<TABLE>
1ST*BANK
TABLE 17. 1ST*BANK CONDENSED QUARTERLY INCOME STATEMENTS (CONTINUED)
----------------------------------------------------------
(Dollars In Thousands)
<CAPTION>
1994 1993 1992
--------------- ----------------------------------- ----------------------------------
Second First Fourth Third Second First Fourth Third Second First
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest income:
Service charges on deposit
accounts 135 143 147 147 132 135 122 114 102 104
Gains (losses) on sales of
securities - (12) (15) 390 - - - 492 - -
Other 20 32 (4) 26 27 34 26 29 29 44
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total noninterest income 155 163 128 563 159 169 148 635 131 148
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Noninterest expense:
Salaries and employee
benefits 366 365 361 333 342 287 281 254 228 230
Occupancy expenses 131 121 112 109 90 78 71 66 62 62
Other 282 296 351 508 323 249 267 247 173 260
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total noninterest expenses 779 782 824 950 755 614 619 567 463 552
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Income before income taxes,
extraordinary items, and
other adjustments 584 548 388 614 267 360 313 882 505 373
Income tax provision (benefit) 194 139 130 205 91 123 120 300 173 96
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Income before extraordinary
items and other adjustments 390 409 258 409 176 237 193 582 332 277
Extraordinary items and other
adjustments - - - - - 87 - - - -
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net income $390 $409 $258 $409 $176 $324 $193 $582 $332 $277
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
<PAGE> 70
MARKET PRICES OF AND DIVIDENDS PAID
ON 1ST*BANK COMMON STOCK, AND RELATED
SHAREHOLDER MATTERS
As of June 30, 1994, shares of 1ST*BANK Common Stock were privately held
of record by 79 holders. Presently, there is no recognized public market for
the trading of shares of 1ST*BANK Common Stock, and the officers and directors
of 1ST*BANK are not aware of any recent transactions in the 1ST*BANK Common
Stock which would indicate the present market value of the 1ST*BANK Common
Stock. The book value per share of 1ST*BANK Common Stock, determined in
accordance with generally accepted accounting principles and without any
adjustments, as of June 30, 1994, was $6.36.
As of June 30, 1994, 14 of the holders of 1ST*BANK Common Stock also
held, in the aggregate, the entire $500,000 aggregate principal amount of the
Debentures. The Debentures are mandatorily convertible at maturity into an
aggregate of up to 166,666 shares of 1ST*BANK Common Stock at a price of $3.00
per share. The Merger Agreement provides that the Debentures shall be amended
so as to be convertible into up to 166,666 shares of 1ST*BANK Common Stock
immediately prior to the Merger. Presently, there is no recognized public
market for the Debentures, and the officers and directors of 1ST*BANK are not
aware of any recent transactions in the Debentures which would indicate the
present market value of the Debentures.
1ST*BANK did not declare any dividends on the 1ST*BANK Common Stock in
any of the years in the three-year period ended December 31, 1993, nor during
1994. See "PLAN OF MERGER--Conditions to the Merger; Termination" for a
description of the covenants of 1ST*BANK which prohibit it from declaring or
paying any dividends prior to the Effective Time.
Under federal and state banking laws, there are legal restrictions
limiting the amount of dividends 1ST*BANK can declare on the 1ST*BANK Common
Stock. The regulatory authorities may prohibit the declaration of any
dividends if they determine that certain circumstances exist as to 1ST*BANK,
including those relating to the financial condition of 1ST*BANK, such that
payment of dividends would be considered an unsafe and unsound practice.
Approval of the regulatory authorities is required if the effect of
dividends declared would be to cause the regulatory capital of 1ST*BANK to
fall below specified minimum levels. 1ST*BANK is subject to capital ratios,
requirements and guidelines imposed by the FDIC, which are substantially
similar to the ratios, requirements and guidelines imposed by the OCC and the
Federal Reserve on the banks within their respective jurisdictions.
Currently, 1ST*BANK is required to maintain total capital equal to at least 8%
and Tier 1 capital equal to at least 4% of its total risk-weighted assets, and
Tier 1 capital equal to at least 3% of its adjusted total assets. In
addition, the Texas Department of Banking requires 1ST*BANK to maintain total
equity capital equal to at least 6% of its total assets. At June 30, 1994,
1ST*BANK had total capital equal to 10.2% of its total risk-weighted assets,
Tier 1 capital equal to 8.6% of its total risk-weighted assets and to 8.8% of
its adjusted total assets, and total equity capital equal to 6.2% of its
total assets.
56
<PAGE> 71
D. VOTING AND MANAGEMENT INFORMATION
BANC ONE will pay the costs of preparing and printing this Prospectus
and Proxy Statement and 1ST*BANK will bear the cost of soliciting proxies for
the Special Meeting. Solicitation of proxies will be made in person, by mail,
or by telephone, telegraph or other electronic medium by present and former
directors, officers and employees of 1ST*BANK for which no additional
compensation will be paid. 1ST*BANK will bear the cost of solicitation of
proxies from its Shareholders. Copies of the form of proxy and Notice and
this Prospectus will be mailed to Shareholders on or about , 1994.
VOTING
The proxy accompanying this Prospectus is solicited by the Board of
Directors of 1ST*BANK and, if properly executed and returned, will be voted in
accordance with the instructions given therein. IF NO INSTRUCTIONS ARE GIVEN,
THE PROXY WILL BE VOTED FOR THE PROPOSAL TO APPROVE THE PLAN OF MERGER AND THE
AMENDMENT PROPOSAL. Any proxy may be revoked at any time before it is voted
by furnishing 1ST*BANK with either written notice of revocation or a
subsequently dated proxy or appearing at the Special Meeting and electing to
vote in person.
The 1ST*BANK Board has fixed the close of business on November , 1994,
as the Record Date for the determination of Shareholders entitled to notice of
and to vote at the Special Meeting. As of the Record Date, 1,304,167 shares
of 1ST*BANK Common Stock were outstanding, each of which entitled its holder
to one vote at the Special Meeting. The affirmative vote of two-thirds of the
outstanding shares of 1ST*BANK Common Stock entitled to vote thereon is
required for approval of the Merger Agreement and the Amendment Proposal.
The Directors of 1ST*BANK have approved the Merger Agreement and the
Amendment Proposal, and each Director has indicated an intention to vote all
of his shares in favor of the Plan of Merger and the Amendment Proposal.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors and
management of 1ST*BANK are not aware of any matter which will come before the
Special Meeting other than the Plan of Merger. Should any other matter
requiring a vote of the shareholders arise, the proxy in the enclosed form
confers upon the person or persons entitled to vote the shares represented by
such proxy discretionary authority to vote the same with regard to any other
matter in accordance with their best judgment in the interest of 1ST*BANK.
RIGHTS OF DISSENTING SHAREHOLDERS
The following summary does not purport to be a complete statement of the
procedures to be followed by 1ST*BANK shareholders desiring to exercise
dissenters' rights and is qualified in its entirety by reference to the
provisions of Section 215A of the National Bank Act, 12 U.S.C. Section 215a,
the full text of which is attached hereto as Exhibit A. Because the
preservation and exercise of dissenters' rights requires strict adherence to
these provisions, 1ST*BANK shareholders who might desire to exercise such rights
should review these provisions carefully, timely consult their own legal
advisors and strictly adhere to the provisions' requirements.
Under the provisions of Section 215a of the National Bank Act, each
1ST*BANK shareholder who objects to the Merger has the right to demand that he
be paid in cash the value of his shares (as of the time the Merger becomes
effective), if and when the Merger is consummated, subject to the following
conditions:
(1) A shareholder will have the right to such payment only if he either
votes against the Plan of Merger at the Special Meeting or gives
written notice to 1ST*BANK at or before the Special Meeting that he
dissents from the Plan of Merger, which notice may be addressed to
;
57
<PAGE> 72
(2) Any shareholder seeking to exercise dissenters' rights must, within
30 days after the effective date of the Merger, make a written
request for payment to BANK ONE TEXAS, the surviving entity in the
Merger, which request may be addressed to
(1ST*BANK's shareholders will be notified of the effective date of
the Merger); and
(3) The written request for payment must be accompanied by surrender of
the certificate(s) representing the 1ST*BANK shares in question.
Thus a 1ST*BANK shareholder who does not either (a) vote against the
Plan of Merger at the Special Meeting or (b) give 1ST*BANK written notice at
or before the Special Meeting that he dissents from the Merger, or who does
not within 30 days after the effective date of the Merger send BANK ONE TEXAS
a written request for payment accompanied by the certificate(s) for the
1ST*BANK shares in question, will be deemed to have waived his right to demand
payment in cash for his 1ST*BANK shares.
The value of dissenting shares will be determined by three appraisers,
one to be selected by majority vote of the owners of the shares involved, one
to be selected by the Board of Directors of BANK ONE TEXAS, and the third to
be chosen by the other two. The evaluation agreed upon by any two appraisers
will govern. If the appraisal is not completed within 90 days after the
Merger becomes effective, the OCC will, upon request, cause an appraisal to be
made. If the value fixed by the appraisers is not satisfactory to any
dissenting shareholder who has requested payment, the shareholder may, within
five days after being notified of such value, appeal to the OCC which will
cause a reappraisal to be made. Such reappraisal will be final and binding as
to the value of the shares of the person so appealing. The OCC's expenses in
making any such appraisal or reappraisal, as the case may be, will be borne by
BANK ONE TEXAS. Failure to comply with any of the foregoing conditions will
result in the loss of the rights described above.
The shares of BANC ONE Common Stock which would have been delivered to
any dissenting shareholders had they not requested payment will be sold at an
advertised public auction and, if such shares are sold at a price greater than
the amount paid to such dissenting shareholders, based on the appraisal, the
excess in such sale price will be paid to such dissenting shareholders. The
OCC has issued a Bulletin describing its appraisal methods, a copy of which is
attached hereto as Exhibit B.
The full text of Section 215a of the National Bank Act is set forth as
Exhibit A to this Prospectus and Proxy Statement. Since the foregoing
description is not a complete summary of its provisions, any shareholder who
may be considering exercising his rights as a dissenter is urged to refer to
such text. The provisions of Section 215a of the National Bank Act require
strict compliance, and any 1ST*BANK shareholder who wishes to object to the
Merger and demand payment for his shares should consider consulting his own
advisor.
If a shareholder fails to perfect his dissenter's rights by failing
strictly to comply with the applicable statutory requirements, he will be
bound by the terms of the Merger Agreement. An executed proxy on which no
voting direction is made will be voted FOR approval of the Merger, so a
dissenting shareholder who wishes to have his shares represented by a proxy at
the Special Meeting but preserve his dissenters' rights must mark his proxy
card either to vote against the Merger or to abstain from voting thereon, in
addition to complying with the other requirements as described herein.
MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF BANC ONE
Information concerning the directors and executive officers of BANC ONE,
compensation of directors and executive officers of BANC ONE and any related
transactions in which they have an interest, together with information related
to principal shareholders of BANC ONE, is set forth in BANC ONE's Proxy
Statement, dated March 11, 1994, incorporated herein by reference to BANC
ONE's Annual Report on Form 10-K for the year ended December 31, 1993. See
"Incorporation by Reference."
58
<PAGE> 73
PRINCIPAL SHAREHOLDERS OF 1ST*BANK
To the knowledge of 1ST*BANK, no person owned of record or beneficially
on the Record Date more than five percent (5%) of the outstanding 1ST*BANK
Common Stock at June 30, 1994, other than the following persons, as to whom
information below is provided:
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Owner- Percentage
Beneficial Owner Ship as of 6/30/94(a) of Class
- ------------------- ---------------------- ----------
<S> <C> <C>
Linda J. Carter 1,205,733(b)(c)(d) 92.45%
441 Carter Drive
Coppell, Texas 75019
Donald J. Carter 1,205,733(b)(c)(d) 92.45
441 Carter Drive
Coppell, Texas 75019
<FN>
(a) The securities "beneficially owned" by an individual are determined
in accordance with the definition of "beneficial ownership" set forth
in the rules and regulations of the Commission and, accordingly, may
include securities owned by or for, among others, the spouse and/or
minor children of the individual and any other relative who has the
same home as such individual, as well as other securities as to which
the individual has or shares voting or investment power or has the
right to acquire within sixty days after June 30, 1994.
(b) Ms. Carter and Mr. Carter are husband and wife. Ms. Carter holds
884,577 shares of 1ST*BANK Common Stock in her name alone. Mr.
Carter holds 270,000 shares of 1ST*BANK Common Stock in his name
alone. Under the rules and regulations of the Commission, these
1,154,577 shares of 1ST*BANK Common Stock are deemed to be
beneficially owned by both Mr. and Ms. Carter. Excludes the shares
of 1ST*BANK Common Stock issuable upon conversion of the $349,000
principal amount of Debentures held by Ms. Carter. It is anticipated
that, immediately prior to the consummation of the Merger, such
Debentures will be convered into 116,333 shares of 1ST*BANK Common
Stock pursuant to the conditions of the Merger Agreement.
(c) Includes 39,560 shares of 1ST*BANK Common Stock owned by a wholly
owned subsidiary of a corporation of which Mr. Carter is an
affiliate, as to which Mr. Carter is deemed to be the beneficial
owner under the rules and regulations of the Commission.
Excludes the shares of 1ST*BANK Common Stock issuable upon conversion
of the $118,000 principal amount of Debentures owned by such wholly
owned subsidiary. It is anticipated that, immediately prior to the
consummation of the Merger, such Debentures will be converted into
39,333 shares of 1ST*BANK Common Stock pursuant to the conditions of
the Merger Agreement.
(d) Includes 11,596 shares of 1ST*BANK Common Stock held by Ms. Carter's
children, Ronald L. Carter (3,101 shares), Donald J. Carter, Jr.
(5,394 shares), and Christi Lynn Carter Urschel (3,101 shares).
Excludes the shares of 1ST*BANK Common Stock issuable upon conversion
of the $4,000 aggregate principal amount of Debentures held by Ms.
Carter's children. It is anticipated that, immediately prior to the
consummation of the Merger, the Debentures held by Ms. Carter's
children will be converted into an aggregate of 1,332 shares of
1ST*BANK Common Stock pursuant to the conditions of the Merger
Agreement.
</TABLE>
59
<PAGE> 74
OWNERSHIP OF 1ST*BANK COMMON STOCK
BY 1ST*BANK DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of 1ST*BANK Common
Stock beneficially owned as of June 30, 1994, by each of 1ST*BANK's directors
and by all directors and executive officers of 1ST*BANK as a group. Unless
otherwise indicated, the shares listed in the table are owned directly by the
individual, his or her minor children, or his or her spouse, and the
individual has sole voting and investment power with respect to the shares, or
such power is shared with his or her spouse.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Owner-
ship of 1ST*BANK Com- Percentage
Name Title mon Stock 6/30/94(a) of Class
- ------------------ ------------- --------------------- ----------
<S> <C> <C> <C>
William J. Hendrix Chairman of 1,000(b) 0.07%
the Board and
Director
Linda J. Carter Director 1,205,733(c) 92.45
T. Wayne Claycomb Vice Chairman 27,189(d) 2.08
of the Board
and Director
Glenn Facka Director 4,299(e) 0.33
Bill McClung Director 7,631(f) 0.59
Philip P. Martin Senior Vice 2,500(g) 0.19
President and
President
Carrollton
branch
All Executive Officers
and Directors as a Group
(a total of 12, including
those named above)(h) 1,248,352(i) 95.72
<FN>
(a) The securities "beneficially owned" by an individual are determined
in accordance with the definition of "beneficial ownership" set forth
in the rules and regulations of the Commission and, accordingly, may
include securities owned by or for, among others, the spouse and/or
minor children of the individual and any other relative who has the
same home as such individual, as well as other securities as to which
the individual has or shares voting or investment power or has the
right to acquire within sixty days after June 30, 1994.
(b) Excludes the shares of 1ST*BANK Common Stock issuable upon conversion
of the $3,000 principal amount of Debentures held by Mr. Hendrix. It
is anticipated that, immediately prior to the consummation of the
Merger, the Debentures held by Mr. Hendrix will be converted into
1,000 shares of 1ST*BANK Common Stock pursuant to the conditions of
the Merger Agreement.
</TABLE>
60
<PAGE> 75
[FN]
(c) Includes 270,000 shares of 1ST*BANK Common Stock owned by Ms.
Carter's spouse, Donald J. Carter, and 39,560 shares of
1ST*BANK Common Stock owned by a wholly owned subsidiary of a
corporation of which Mr. Carter is an affiliate, as to which Mr.
Carter is deemed to be the beneficial owner under the rules and
regulations of the Commission. Excludes the shares of 1ST*BANK
Common Stock issuable upon conversion of the $118,000 principal amount
of Debentures owned by such wholly owned subsidiary. It is
anticipated that, immediately prior to consummation of the Merger,
such Debentures will be converted into 39,333 shares of 1ST*BANK
Common Stock, pursuant to the conditions of the Merger Agreement.
Includes 11,596 shares of 1ST*BANK Common stock held by Ms. Carter's
children, Ronald L. Carter (3,101 shares), Donald J. Carter, Jr.
(5,394 shares), and Christi Lynn Carter Urschel (3,101 shares).
Excludes the shares of 1ST*BANK Common Stock issuable upon conversion
of the $349,000 principal amount of Debentures held by Ms. Carter.
It is anticipated that, immediately prior to the consummation of the
Merger, the Debentures held by Ms. Carter will be converted into
116,333 shares of 1ST*BANK Common Stock pursuant to the conditions of
the Merger Agreement. Also excludes the shares of 1ST*BANK Common
Stock issuable upon conversion of the $4,000 aggregate principal
amount of Debentures held by Ms. Carter's children. It is
anticipated that, immediately prior to the consummation of the
Merger, the Debentures held by Ms. Carter's children will be converted
into an aggregate of 1,332 shares of 1ST*BANK Common Stock pursuant to
the conditions of the Merger Agreement.
(d) Held in joint tenancy with Louise Claycomb. Excludes the shares
issuable upon conversion of the $10,000 principal amount of
Debentures held in joint tenancy by Mr. and Mrs. Claycomb. It is
anticipated that, immediately prior to the consummation of the
Merger, the Debentures held by Mr. and Mrs. Claycomb will be
converted into 3,333 shares of 1ST*BANK Common Stock pursuant to the
conditions of the Merger Agreement.
(e) Excludes the shares issuable upon conversion of the $1,000 principal
amount of Debentures held by Mr. Facka. It is anticipated that,
immediately prior to the consummation of the Merger, the Debentures
held by Mr. Facka will be converted into 333 shares of 1ST*BANK
Common Stock pursuant to the conditions of the Merger Agreement.
(f) Includes 881 shares of 1ST*BANK Common Stock held by Mr. McClung's
children, Debbie McClung (280 shares), Michelle McClung (280 shares)
and Mike McClung (321 shares).
(g) Held in joint tenancy with Margaret K. Martin.
(h) In this table, the term "Executive Officer" refers to a Chairman of
the Board, President, Chief Executive Officer, Senior Vice President,
Vice President or Cashier.
(i) Excludes the shares of 1ST*BANK Common Stock issuable upon conversion
of the aggregate of $363,000 principal amount of Debentures held by
the Directors and Executive Officers of 1ST*BANK. It is anticipated
that, immediately prior to the consummation of the Merger, these
Debentures will be converted into 120,999 shares of 1ST*BANK Common
Stock pursuant to the conditions of the Merger Agreement.
61
<PAGE> 76
1ST*BANK
INDEX TO FINANCIAL STATEMENTS
Page
----
Unaudited Financial Statements F-1
as of June 30, 1994 and 1993
Independent Auditors' Report F-20
Audited Financial Statements as of F-21
December 31, 1993, 1992 and 1991
<PAGE> 77
1ST*BANK
Balance Sheet
June 30, 1994 and 1993
(unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 7,767,154 $ 9,256,989
Interest bearing deposits in other banks - 98,000
Investment securities:
Held to maturity 65,548,683 46,859,960
Available for sale - -
Federal funds sold 17,350,000 14,750,000
Loans 40,891,191 34,617,235
Bank premises and equipment 1,483,790 1,659,784
Other real estate owned 69,169 732,244
Other assets 891,689 1,166,324
------------ ------------
$134,001,676 $109,140,536
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Noninterest bearing $ 33,830,571 $ 27,749,815
Interest bearing 91,017,744 73,732,340
------------ ------------
Total deposits 124,848,315 101,482,155
Other liabilities 364,848 336,284
Subordinated debentures 500,000 500,000
Commitments and contingencies - -
Stockholders' equity:
Common stock, $2 par value;
1,304,167 shares authorized,
issued and outstanding 2,608,334 2,608,334
Capital surplus 3,654,166 2,054,166
Undivided profits 2,026,013 2,159,597
------------ ------------
Total stockholders' equity 8,288,513 6,822,097
------------ ------------
$134,001,676 $109,140,536
============ ============
</TABLE>
See accompanying notes to financial statements and accountants' report.
F-1
<PAGE> 78
<TABLE>
1ST*BANK
Statement of Income
For the Six Months Ended June 30, 1994 and 1993
(unaudited)
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 2,004,668 $ 1,720,217
Interest and dividends on:
Investment securities 1,568,772 1,154,080
Deposits in other banks 524 1,646
Federal funds sold 244,352 180,759
------------ ------------
Total interest income 3,818,316 3,056,702
------------ ------------
Interest expense:
Deposit accounts 1,307,209 1,091,974
Subordinated debentures 15,313 15,000
------------ ------------
Total interest expense 1,322,522 1,106,974
------------ ------------
Net interest income 2,495,794 1,949,728
Provision for possible loan losses 120,000 270,000
------------ ------------
Net interest income after provision 2,375,794 1,679,728
------------ ------------
Noninterest income:
Service charges on deposit accounts 278,418 267,091
Other 52,593 42,926
------------ ------------
Total noninterest income 331,011 310,017
------------ ------------
Noninterest expense:
Salaries and employee benefits 731,489 628,923
Occupancy of bank premises 251,828 148,811
Data processing 122,372 104,873
Other real estate owned 24,690 26,803
Other 443,203 453,460
------------ ------------
Total noninterest expense 1,573,582 1,362,870
------------ ------------
See accompanying notes to financial statements and accountants' report.
</TABLE>
F-2
<PAGE> 79
<TABLE>
1ST*BANK
Statement of Income (Continued)
For the Six Months Ended June 30, 1994 and 1993
(unaudited)
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Net income before income taxes,
extraordinary credit and
cumulative effect of change in
accounting principle 1,133,223 626,875
Provision for income taxes 334,850 214,223
------------ ------------
Net income before cumulative effect
of change in accounting principle 798,373 412,652
Cumulative effect of change in
accounting principle - 87,185
------------ ------------
Net income $ 798,373 $ 499,837
============ ============
Primary earnings per share $ .61 $ .38
============ ============
Fully diluted earnings per share $ .55 $ .35
============ ============
See accompanying notes to financial statements and accountants' report.
</TABLE>
F-3
<PAGE> 80
<TABLE>
1ST*BANK
Statement of Changes in Stockholders' Equity
For the Six Months Ended June 30, 1994 and 1993
(unaudited)
<CAPTION>
Common Stock
----------------------- Capital Undivided
Shares Amount Surplus Profits Total
------ ------ ------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance January 1, 1993 1,304,167 $ 2,608,334 $ 2,054,166 $ 1,659,760 $ 6,322,260
Net income - - - 499,837 499,837
--------- ----------- ----------- ----------- -----------
Balance June 30, 1993 1,304,167 $ 2,608,334 $ 2,054,166 $ 2,159,597 $ 6,822,097
========= =========== =========== =========== ===========
Balance January 1, 1994 1,304,167 $ 2,608,334 $ 3,654,166 $ 1,227,640 $ 7,490,140
Net income - - - 798,373 798,373
--------- ----------- ----------- ----------- -----------
Balance June 30, 1994 1,304,167 $ 2,608,334 $ 3,654,166 $ 2,026,013 $ 8,288,513
========= =========== =========== =========== ===========
See accompanying notes to financial statements and accountants' report.
</TABLE>
F-4
<PAGE> 81
<TABLE>
1ST*BANK
Statement of Cash Flows
For the Six Months Ended June 30, 1994 and 1993
(unaudited)
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 798,373 $ 499,837
Adjustments to reconcile net income
before extraordinary credit to net
cash provided by operating
activities:
Depreciation 108,796 70,364
Provision for possible loan losses 120,000 270,000
Net amortization of securities 159,654 217,672
Increase in accrued interest
receivable, prepaid expenses
and other assets ( 381,413) ( 307,730)
Increase in accrued interest
payable and other liabilities 144,825 1,382
------------ ------------
Net cash provided by operating
activities 950,235 751,525
------------ ------------
Cash flows from investing activities:
Redemption of interest bearing
deposits in other banks $ 98,000 $ -
Proceeds from sales and maturities
of investment securities 1,926,418 7,891,455
Purchases of investment securities ( 8,105,000) (10,294,089)
Net loans originated ( 3,090,230) ( 5,831,509)
Net additions to fixed assets - ( 342,082)
Proceeds from sale of other real
estate owned 66,690 -
------------ ------------
Net cash used by investing
activities ( 9,104,122) ( 8,576,225)
------------ ------------
Cash flows from financing activities:
Net (decrease) increase in demand
deposits, NOW and savings accounts ( 4,417,461) 6,635,855
Net increase in time deposits 5,582,178 2,252,716
------------ ------------
Net cash provided by
financing activities 1,164,717 8,888,571
------------ ------------
Net (decrease) increase in cash and
cash equivalents ( 6,989,170) 1,063,871
Cash and cash equivalents at beginning
of year 32,106,324 22,943,118
------------ ------------
Cash and cash equivalents at end of year $ 25,117,154 $ 24,006,989
============ ============
See accompanying notes to financial statements and accountants' report.
</TABLE>
F-5
<PAGE> 82
1ST*BANK
Notes to Financial Statements
June 30, 1994 and 1993
(unaudited)
1. Summary of significant accounting policies
------------------------------------------
The accounting and reporting policies of 1st*Bank (Bank) conform to generally
accepted accounting principles and to general practice within the banking
industry. The following is a description of the more significant of those
policies.
Cash and cash equivalents
- -------------------------
For the purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and federal funds sold. Federal funds are
normally sold for one-day periods.
Investment securities
- ---------------------
Securities are carried at amortized cost. The securities are not carried at
the lower of cost or market because management believes the Bank has the
intention and ability to hold these securities to maturity and that no events
are likely that will require disposal of such securities in the foreseeable
future. Management, however, from time to time, may decide to sell certain
securities prior to maturity for liquidity, tax planning, or other valid
business purposes. Gains or losses on sales of investment securities are
recognized upon realization and are presented separately in the statement of
income.
Mortgage-backed securities represent participating interests in pools of
long-term first mortgage loans originated and serviced by the issuers of the
securities. Such securities are recorded at unpaid principal balances,
adjusted for unamortized premiums and unearned discounts.
Loans and allowance for possible loan losses
- --------------------------------------------
Loans are stated net of participations sold without recourse, allowance for
possible loan losses and unearned income. Unearned income on installment loans
is taken into income over the term of the loan by the sum-of-the-periodic
balances method. The effect of not using the interest method is insignificant.
F-6
<PAGE> 83
1ST*BANK
Loans on which the accrual of interest has been discontinued are designated as
nonaccrual loans. Accrual of interest on loans generally is discontinued
either when reasonable doubt exists as to the full, timely collection of
interest or principal or when a loan becomes contractually past due by ninety
days or more with respect to principal or interest. When a loan is placed on
nonaccrual status, all interest previously accrued but not collected is
reversed against current period income. Income on such loans is then
recognized to the extent that cash is received and where the future collection
of principal is probable. Accruals are resumed on loans when they are brought
fully current with respect to interest and principal and when, in the judgment
of management, the loan is estimated to be fully collectible as to both
principal and interest.
The allowance for possible loan losses represents provisions for possible loan
losses charged to earnings, less loan charge-offs net of recoveries. Loans are
charged against the allowance for possible loan losses when management
believes that the collectibility of the principal is unlikely. The provision
for possible loan losses charged to earnings is the amount which is necessary
to establish the allowance at a level management believes will be adequate to
absorb possible losses on existing loans that may become uncollectible, based
on evaluations of the collectibility of loans and prior loan loss experience.
The evaluations take into consideration such factors as changes in the nature
and volume of the loan portfolio, overall portfolio quality, review of any
specific problem loans and current economic conditions that may affect the
borrower's ability to repay.
Fees and costs associated with originating loans
- ------------------------------------------------
Fees associated with originating loans are deferred and recognized over the
life of the loan. Costs associated with originating loans are recognized in
the period costs are incurred. The provisions of Statement of Financial
Accounting Standards No. 91 (FAS 91), generally provide that such fees and
related costs be deferred and recognized over the life of the loan as an
adjustment of yield. For the six months ended June 30, 1994 and 1993,
management believes that not deferring such costs and amortizing them over the
life of the related loans does not materially affect the financial position or
results of operations of the Bank.
F-7
<PAGE> 84
1ST*BANK
Bank premises and equipment
- ---------------------------
Bank premises and equipment are stated at cost less accumulated depreciation.
Provisions for depreciation are computed using the straight-line method.
Average useful lives used for depreciation with respect to major
classifications of property are as follows:
Building and improvements 40 years
Furniture, fixtures and equipment 3-5 years
Automobiles 3 years
Leasehold improvements Term of lease
Maintenance and repairs are charged to expense; betterments and renewals are
capitalized. Upon retirement or replacement, the cost of the asset and the
related accumulated depreciation are eliminated with the resulting gain or loss
included in the statement of income.
Other real estate owned
- -----------------------
Other real estate owned is recorded at the time of foreclosure at the lower of
the Bank's cost of acquisition or the asset's fair market value which becomes
the property's new basis. Any writedowns at date of acquisition are charged to
the allowance for loan losses. At the date of acquisition, the Bank
establishes a reserve for disposal costs by a charge to operations. Expenses
incurred in maintaining other real estate owned and subsequent writedowns to
reflect declines in the fair market value of the property are included in other
noninterest expense.
Federal income taxes
- --------------------
The Bank accounts for certain income and expense items differently for
financial reporting purposes than for federal income tax purposes. Provisions
for deferred taxes are made in recognition of such differences.
Earnings per share
- ------------------
Primary earnings per share amounts are based on the weighted average number of
shares outstanding of 1,304,167 shares at June 30, 1994 and 1993. Fully
diluted earnings per share amounts are based on an increased number of shares
that would be outstanding assuming conversion of the subordinated debentures.
Net income has been adjusted for the interest expense (net of tax) on the
subordinated debentures. The number of shares used in the computations of
fully diluted earnings per share were 1,470,833 in 1994 and 1993.
Reclassification
- ----------------
Certain amounts previously reported have been reclassified to conform to the
current format.
F-8
<PAGE> 85
1ST*BANK
2. Accounting changes
------------------
The Financial Accounting Standards Board issued Statement No. 115, "Accounting
For Certain Investments in Debt and Equity Securities" (SFAS 115) in May 1993.
This statement is required for fiscal years beginning after December 15, 1993,
and requires that those investments be classified into three categories: held
to maturity, available for sale, and trading.
The Financial Accounting Standards Board issued Statement No. 109, "Accounting
for Income Taxes" (SFAS 109). This statement, as amended, is effective for
fiscal years beginning after December 15, 1992, and requires the Bank to use
the liability method in providing for income taxes. Effective January 1, 1993,
the Bank changed its method of accounting for income taxes from the deferred
method to the liability method required by SFAS 109. As permitted under the
new rules, prior years' financial statements have not been restated.
3. Statement of cash flows
-----------------------
The Bank has chosen to report on a net basis its cash receipts and cash
payments for time deposits accepted and repayments of those deposits, loans
made to customers and principal collections on those loans and interest bearing
deposits in other banks.
The Bank has chosen to report its cash flows by the indirect method.
Supplemental information on cash flows and noncash transactions for the six
months ended June 30, 1994 and 1993 is presented below:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash transactions:
Interest income received $ 3,578,711 $ 3,025,907
============ ============
Interest expense paid $ 1,302,892 $ 1,113,522
============ ============
Income taxes paid $ 290,000 $ 113,000
============ ============
Noncash transactions:
Net acquisition (disposition)
of other real estate owned $ 69,169 $( 46,417)
============ ============
</TABLE>
F-9
<PAGE> 86
1ST*BANK
4. Investment securities
---------------------
Investment securities, classified in accordance with the provisions of SFAS
115, their approximate unrealized gains and losses and related estimated market
values at June 30, 1994 are as follows:
<TABLE>
<CAPTION>
1994
--------------------------------------------------------------------
Unrealized
Securities Classified Amortized ----------------------------- Market
as Held to Maturity Cost Gain Loss Value
--------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. treasury securities $ 5,209,598 $ - $ 114,598 $ 5,095,000
U.S. government agency obligations 5,000,000 - 174,590 4,825,410
State and political subdivisions 5,628,524 16,328 481,864 5,162,988
Pass-through certificates guaranteed
by FNMA, GNMA and FHLMC 24,415,848 - 1,124,928 23,290,920
Collateralized mortgage
obligations 25,294,713 - 14,285 25,280,428
------------ ------------ ------------ ------------
Total held to maturity $ 65,548,683 $ 16,328 $ 1,910,265 $ 63,654,746
============ ============ ============ ============
1994
--------------------------------------------------------------------
Unrealized
Securities Classified Amortized ------------------------------ Market
as Available for Sale Cost Gain Loss Value
--------------------- ------------ ------------ ------------ ------------
None $ - $ - $ - $ -
----------- ----------- ----------- -----------
Total available for sale $ - $ - $ - $ -
=========== =========== =========== ===========
</TABLE>
The provisions of SFAS 115 were implemented by the Bank on January 1, 1994.
The Bank has classified all of their investment securities as held to maturity.
The effect of this classification has no effect on stockholders' equity as of
June 30, 1994.
The amortized cost and estimated market value for investment securities at June
30, 1993 are as follows:
<TABLE>
<CAPTION>
1993
--------------------------------------
Amortized Market
cost value
------------ ------------
<S> <C> <C>
U.S. treasury securities $ 14,263,718 $ 14,607,000
U.S. government agency obligations 3,000,000 2,985,000
State and political subdivisions 847,009 883,000
Pass-through certificates guaranteed
by FNMA, GNMA and FHLMC 24,705,215 24,736,000
Collateralized mortgage obligations 4,044,018 3,997,000
------------ ------------
$ 46,859,960 $ 47,208,000
============ ============
</TABLE>
F-10
<PAGE> 87
1ST*BANK
The approximate unrealized gains and unrealized losses at June 30, 1993 are as
follows:
<TABLE>
<CAPTION>
1993
------------------------------------
Unrealized Unrealized
gain loss
---------- ----------
<S> <C> <C>
U.S. treasury securities $ 343,000 $ -
U.S. government agency obligations - 15,000
State and political subdivisions 36,000 -
Pass-through certificates guaranteed
by FNMA, GNMA and FHLMC 87,000 56,000
Collateralized mortgage obligations - 47,000
------------ ------------
$ 466,000 $ 118,000
============ ============
</TABLE>
The amortized cost and estimated market value of investment securities at June
30, 1994, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
1994
---------------------------------------------------------------
Held to Maturity Available for Sale
------------------------------ ---------------------------
Amortized Market Amortized Market
Cost Value Cost Value
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Due in one year or less $ 1,323,829 $ 1,318,465 $ - $ -
Due after one year through five
years 9,749,648 9,471,743 - -
Due after five years through
ten years 2,560,827 2,312,085 - -
Due after ten years 2,203,818 1,981,105 - -
------------ ------------ ------------ ------------
15,838,122 15,083,398 - -
Mortgage-backed securities 49,710,561 48,571,348 - -
------------ ------------ ------------ ------------
$ 65,548,683 $ 63,654,746 $ - $ -
============ ============ ============ ============
</TABLE>
There were no sales of investment securities during the six months ended June
30, 1994 and 1993.
There were no changes in unrealized holding losses during the six months ended
June 30, 1994.
Investment securities with an amortized cost of approximately $26,532,000 and
$15,928,000 were pledged to secure public fund time deposits at June 30, 1994
and 1993, respectively.
F-11
<PAGE> 88
1ST*BANK
5. Loans and allowance for possible loan losses
--------------------------------------------
Loans at June 30, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Commercial $ 13,769,189 $ 10,830,691
Real estate 18,988,999 16,795,729
Interim construction 5,881,694 5,344,663
Installment 3,664,961 2,977,258
Other 16,540 11,546
------------ ------------
42,321,383 35,959,887
Unearned income ( 533,667) ( 467,092)
Allowance for possible
loan losses ( 896,525) ( 875,560)
------------ ------------
$ 40,891,191 $ 34,617,235
============ ============
</TABLE>
The Bank extends real estate, commercial and consumer credit to customers in
the Dallas/Ft. Worth metropolitan area. At June 30, 1994 and 1993,
substantially all of the Bank's loans were collateralized with real estate,
equipment, accounts receivable and other assets. Although the Bank has a
diversified loan portfolio, its debtors' ability to honor their contracts is
substantially dependent upon the general economic conditions of the region.
Loans on which the accrual of interest has been discontinued amounted to
approximately $29,000 and $132,000 at June 30, 1994 and 1993, respectively. If
interest had been accrued on these loans, such income would have been
approximately $1,500 and $6,600 during 1994 and 1993, respectively.
Loans which were contractually delinquent over ninety days which continue to
accrue interest amounted to approximately $611,000 at June 30, 1993. There
were no such loans at June 30, 1994.
An analysis of the allowance for possible loan losses for the six months ended
June 30, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Balance at beginning of period $ 923,532 $ 865,768
Provision charged to earnings 120,000 270,000
Loans charged to the allowance account ( 147,631) ( 291,619)
Recoveries on loans previously
charged off 624 31,411
------------ ------------
Balance at end of period $ 896,525 $ 875,560
============ ============
</TABLE>
F-12
<PAGE> 89
1ST*BANK
6. Bank premises and equipment
---------------------------
Bank premises and equipment at June 30, 1994 and 1993 consisted of the
following:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Land $ 497,534 $ 497,534
Building and improvements 1,294,307 1,287,436
Furniture, fixtures, equipment
and automobiles 847,855 804,155
Leasehold improvements 60,019 78,088
------------ ------------
2,699,715 2,667,213
Less accumulated depreciation 1,215,925 1,007,429
------------ ------------
$ 1,483,790 $ 1,659,784
============ ============
</TABLE>
7. Other real estate owned
-----------------------
Other real estate owned at June 30, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Foreclosed properties, net
of allowance for possible
losses of $25,000 in 1993 $ - $ 465,885
In-substance foreclosures - -
Covered transactions 69,169 266,359
------------ ------------
$ 69,169 $ 732,244
============ ============
</TABLE>
An analysis of the allowance for possible losses on other real estate owned for
the six months ended June 30, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Balance at beginning
of period $ 20,700 $ -
Provision charged to
earnings - 25,000
Write-downs charged to the
allowance ( 20,700) -
------------ ------------
Balance at end of period $ - $ 25,000
============ ============
</TABLE>
F-13
<PAGE> 90
1ST*BANK
8. Deposits
--------
Deposits at June 30, 1994 and 1993 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
------------------------------ ------------------------------
Amount Percent Amount Percent
------------ ------- ------------ -------
<S> <C> <C> <C> <C>
Noninterest bearing
demand accounts $ 33,830,571 27.1% $ 27,749,815 27.3%
Interest bearing demand
accounts 9,279,902 7.4 7,190,576 7.1
Savings accounts 15,755,391 12.6 11,408,366 11.3
Individual retirement
accounts 2,433,576 2.0 2,041,442 2.0
Limited access money
market accounts 14,956,765 12.0 13,147,626 13.0
Certificates of deposit,
less than $100,000 3,159,749 2.5 3,468,002 3.4
Certificates of deposit
$100,000 and greater 45,190,361 36.2 36,234,328 35.7
State of Texas time 242,000 0.2 242,000 0.2
------------ ----- ------------ -----
$124,848,315 100.0% $101,482,155 100.0%
============ ===== ============ =====
</TABLE>
The weighted average interest rate on deposits at June 30, 1994 and 1993 was
approximately 2.3% and 2.4%, respectively.
Included in deposits at June 30, 1994 and 1993 were public fund deposits of
approximately $8,500,000 and $3,071,000, respectively.
9. Income taxes
------------
The provision for income taxes for the six months ending June 30, 1994 and 1993
consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Federal income tax expense (benefit):
Current $ 403,750 $ 190,398
Deferred ( 68,900) 23,825
------------ ------------
$ 334,850 $ 214,223
============ ============
</TABLE>
F-14
<PAGE> 91
1ST*BANK
Deferred income taxes reflect the net tax effects of temporary differences
between the recorded amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Bank's deferred tax liabilities and assets as of June 30, 1994 are as
follows:
<TABLE>
<CAPTION>
1994
------------
<S> <C>
Deferred tax liability:
Bank premises and equipment basis for book
in excess of tax $ 112,000
------------
Total deferred tax liability $ 112,000
============
Deferred tax assets:
Loan loss reserve for book in excess of tax $ 36,000
Other real estate basis for tax in excess
of book 7,000
Loan fees deferred for book recognized for tax 34,000
Gains deferred for book recognized for tax 3,000
------------
Total deferred tax assets $ 80,000
============
Net deferred tax liability $ 32,000
============
</TABLE>
Included in other assets at June 30, 1994 and 1993 are federal income taxes
receivable of approximately $69,000 and $16,000, respectively. Included in
other liabilities at June 30, 1994 are deferred federal income taxes payable of
approximately $32,000.
As discussed in Note 2, the Bank adopted SFAS 109 during 1993. The adoption of
SFAS 109 changed the Bank's method of accounting for income taxes from the
deferred method to the asset and liability method. SFAS 109 requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been recognized in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement carrying
amounts and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse.
Differences between financial reporting and tax bases arise most frequently
from differences in timing of income and expense recognition and as a result of
business acquisitions.
F-15
<PAGE> 92
1ST*BANK
The cumulative effect of adopting Statement 109 as of January 1, 1993 was to
increase net income by approximately $13,000. The cumulative effect represents
the adjustment of previously recorded deferred tax assets and liabilities to
reflect the lower prevailing tax rates.
10. Employee benefits
-----------------
The Bank adopted an employee thrift plan during 1993, in which all employees
are eligible to participate after three months of service. In 1993, the Bank
matched 25% of employee contributions. Participants in the plan are fully
vested in the Bank's matching contributions and discretionary contributions
after five years of service. Costs associated with the plan of $10,725,
including contributions made by the Bank, were recorded during 1993. No
contributions were made during the six months ended June 30, 1994.
11. Commitments and contingencies
-----------------------------
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. Those instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the balance sheet.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of these
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. At June
30, 1994 and 1993, the approximate amounts of these financial instruments were
as follows:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $ 9,465,000 $ 9,579,000
Standby letters of credit 169,000 181,000
------------ ------------
$ 9,634,000 $ 9,760,000
============ ============
</TABLE>
F-16
<PAGE> 93
1ST*BANK
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. The amount of collateral
obtained if deemed necessary by the Bank upon extension of credit is based on
management's credit evaluation of the counterparty. Collateral held varies but
may include accounts receivable, inventory, property, plant and equipment and
income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
The Bank is involved in certain legal actions arising from normal business
activities. Management believes that the outcome of such proceedings will not
materially affect the financial position or results of operations of the Bank.
The Bank entered into a noncancelable operating lease relating to its branch in
Carrollton, Texas during 1993. Rental expense related to this operating lease
amounted to approximately $11,000 for the six months ended June 30, 1994. At
June 30, 1994, future minimum lease payments under this operating lease are as
follows:
Year ending December 31, 1994 $ 9,801
1995 19,602
1996 14,702
Thereafter -
-------
$44,105
=======
The Bank does not anticipate any material losses as a result of the commitments
and contingent liabilities.
F-17
<PAGE> 94
1ST*BANK
12. Related party transactions
--------------------------
In the ordinary course of business, the Bank has and expects to continue to
have transactions, including borrowings, with its employees, officers,
directors and their affiliates. In the opinion of management, such
transactions are on the same terms, including interest rates and collateral
requirements, as those prevailing at the time for comparable transactions with
unaffiliated persons. At June 30, 1994 and 1993, the aggregate amounts of such
loans were approximately $663,000 and $439,000, respectively. Gross paydowns
on these loans were approximately $13,000 and loans originated were
approximately $282,000 during the six months ended June 30, 1994. At June 30,
1994 and 1993, the Bank held deposits from related parties of approximately
$47,421,000 and $38,582,000, respectively.
At June 30, 1994 and 1993, over 90% of the Bank's outstanding stock and
subordinated debentures were held by a director of the Bank and the director's
related interests. The existence of such controlling interest contributed to
the financial position of the Bank.
13. Subordinated debentures
-----------------------
The subordinated debentures are payable primarily to related parties, bear
interest at prime, are payable semi-annually and are due April 1, 1998. If not
redeemed, the debentures will be converted at maturity into 166,666 shares of
the Bank's capital stock.
14. Stockholders' equity
--------------------
Under banking law, there are legal restrictions limiting the amount of
dividends the Bank can declare. Approval of the regulatory authorities is
required if the effect of dividends declared would cause the regulatory capital
of the Bank to fall below specified minimum levels.
The regulatory authorities may prohibit the declaration of any dividends if
they determine that certain circumstances exist in the Bank, including those
relating to the financial condition of the Bank, such that payment of dividends
would be considered an unsafe and unsound practice. The Bank is also required
to maintain minimum amounts of capital to total "risk weighted" assets, as
defined by the banking regulators. At June 30, 1994 and 1993, the FDIC
required the Bank to have a minimum total capital to risk based assets ratio of
8%. The Texas Department of Banking requires a minimum equity capital ratio of
6%. At June 30, 1994 and 1993, the Bank's actual total capital to risk based
assets and equity capital ratios were 10.2% and 9.9%, respectively and 6.2% and
6.3%, respectively.
F-18
<PAGE> 95
1ST*BANK
15. Supplementary income and expense information
--------------------------------------------
The following amounts are included in other noninterest income and noninterest
expense in the accompanying statement of income for the six months ended June
30, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Noninterest income
------------------
Miscellaneous fees $ 40,604 $ 27,571
Gain on sale of loans 8,727 9,449
All other 3,262 5,906
------------ ------------
$ 52,593 $ 42,926
============ ============
Noninterest expense
-------------------
Insurance $ 7,184 $ 19,075
ATM 38,951 12,800
FDIC assessment 125,552 100,301
Postage 31,498 27,471
Legal and professional 23,865 49,175
Real estate taxes 6,787 24,558
All other 209,366 220,080
------------ ------------
$ 443,203 $ 453,460
============ ============
</TABLE>
F-19
<PAGE> 96
Independent Auditors' Report
----------------------------
The Board of Directors
1st*Bank
We have audited the accompanying balance sheet of 1st*Bank as of December 31,
1993, 1992 and 1991 and the related statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 1st*Bank as of December 31,
1993, 1992 and 1991, the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in Notes 2 and 9 to the financial statements, the Bank adopted the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
Fisk & Robinson P.C.
January 14, 1994
F-20
<PAGE> 97
1ST*BANK
Balance Sheet
December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
ASSETS
- ------
Cash and due from banks $ 15,406,324 $ 7,168,118 $ 5,808,823
Interest bearing deposits
in other banks 98,000 98,000 98,000
Investment securities:
Held to maturity 59,529,755 44,674,998 41,442,891
Available for sale - - -
Federal funds sold 16,700,000 15,775,000 9,400,000
Loans 37,920,961 29,009,309 26,595,989
Bank premises and equipment 1,592,586 1,388,066 1,209,590
Other real estate owned 135,859 778,661 614,211
Other assets 510,276 858,594 837,037
------------ ------------ ------------
$131,893,761 $ 99,750,746 $ 86,006,541
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Noninterest bearing $ 35,335,403 $ 20,768,711 $ 17,544,237
Interest bearing 88,348,195 71,824,873 62,458,153
------------ ------------ ------------
Total deposits 123,683,598 92,593,584 80,002,390
Other liabilities 220,023 334,902 566,299
Subordinated debentures 500,000 500,000 500,000
Commitments and
contingencies - - -
Stockholders' equity:
Common stock, $2 par
value; 1,304,167 shares
authorized, issued and
outstanding 2,608,334 2,608,334 2,608,334
Capital surplus 3,654,166 2,054,166 2,054,166
Undivided profits 1,227,640 1,659,760 275,352
------------ ------------ ------------
Total stockholders'
equity 7,490,140 6,322,260 4,937,852
------------ ------------ ------------
$131,893,761 $ 99,750,746 $ 86,006,541
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE> 98
1ST*BANK
Statement of Income
For the Years Ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 3,712,677 $ 3,097,582 $ 3,340,978
Interest and dividends on:
Investment securities 2,254,486 2,882,980 2,797,390
Deposits in other banks 3,252 4,079 1,901
Federal funds sold 499,286 401,003 521,521
------------ ------------ ------------
Total interest income 6,469,701 6,385,644 6,661,790
------------ ------------ ------------
Interest expense:
Deposit accounts 2,313,482 2,627,824 3,266,146
Subordinated debentures 30,000 30,000 30,000
------------ ------------ ------------
Total interest expense 2,343,482 2,657,824 3,296,146
------------ ------------ ------------
Net interest income 4,126,219 3,727,820 3,365,644
Provision for possible loan
losses 361,000 480,000 564,715
------------ ------------ ------------
Net interest income after
provision 3,765,219 3,247,820 2,800,929
------------ ------------ ------------
Noninterest income:
Service charges on deposit
accounts 561,260 441,860 399,181
Net gain on sales of
investment securities 374,657 492,429 55,025
Other 80,051 82,050 70,889
------------ ------------ ------------
Total noninterest
income 1,015,968 1,016,339 525,095
------------ ------------ ------------
Noninterest expense:
Salaries and employee
benefits 1,323,002 993,146 893,385
Occupancy of bank premises 347,473 227,680 210,543
Data processing 222,016 181,669 151,116
Other real estate owned 347,860 12,480 49,066
Other 910,765 775,776 721,135
------------ ------------ ------------
Total noninterest
expense 3,151,116 2,190,751 2,025,245
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE> 99
<TABLE>
1ST*BANK
Statement of Income (Continued)
For the Years Ended December 31, 1993, 1992 and 1991
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Net income before income
taxes, extraordinary
credit and cumulative
effect of change in
accounting principle 1,630,071 2,073,408 1,300,779
Provision for income taxes 549,376 689,000 469,439
------------ ------------ ------------
Net income before extraordinary
credit and cumulative effect
of change in accounting
principle 1,080,695 1,384,408 831,340
Extraordinary credit from
utilization of net operating
loss carryforward - - 40,589
Cumulative effect of change
in accounting principle 87,185 - -
------------ ------------ ------------
Net income $ 1,167,880 $ 1,384,408 $ 871,929
============ ============ ============
Primary earnings per share $ .90 $ 1.06 $ .67
============ ============ ============
Fully diluted per share $ .80 $ .95 $ .60
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE> 100
<TABLE>
1ST*BANK
Statement of Changes in Stockholders' Equity
For the Years Ended December 31, 1993, 1992 and 1991
<CAPTION>
Common Stock
------------ Capital Undivided
Shares Amount Surplus Profits Total
------ ------ ------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance January 1, 1991 1,304,167 $ 2,608,334 $ 2,054,166 $( 596,577) $ 4,065,923
Net income - - - 871,929 871,929
--------- ----------- ----------- ----------- -----------
Balance December 31, 1991 1,304,167 2,608,334 2,054,166 275,352 4,937,852
Net income - - - 1,384,408 1,384,408
--------- ----------- ----------- ----------- -----------
Balance December 31, 1992 1,304,167 2,608,334 2,054,166 1,659,760 6,322,260
Transfer undivided profits
to capital surplus - - 1,600,000 (1,600,000) -
Net income - - - 1,167,880 1,167,880
--------- ----------- ----------- ----------- -----------
Balance December 31, 1993 1,304,167 $ 2,608,334 $ 3,654,166 $ 1,227,640 $ 7,490,140
========= =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE> 101
<TABLE>
1ST*BANK
Statement of Cash Flows
For the Years Ended December 31, 1993, 1992 and 1991
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 1,167,880 $ 1,384,408 $ 831,340
Adjustments to reconcile
net income before
extraordinary credit to
net cash provided by
operating activities:
Depreciation 170,064 94,709 89,943
Provision for possible
loan losses 361,000 480,000 564,715
Net amortization of
securities 382,150 422,511 172,499
Writedowns and net
losses of other real
estate owned 286,792 22,134 94,577
Net gain on sale of
investment
securities ( 374,657) ( 492,429) ( 55,025)
Decrease (increase) in
accrued interest
receivable, prepaid
expenses and other
assets 113,166 ( 21,557) 54,095
Increase (decrease) in
accrued interest
payable and other
liabilities 120,273 ( 231,397) 87,650
------------ ------------ ------------
Net cash provided by
operating activities
before extraordinary
credit 2,226,668 1,658,379 1,839,794
Extraordinary credit
from utilization of
net operating loss
carryforward - - 40,589
------------ ------------ ------------
Net cash provided
by operating
activities 2,226,668 1,658,379 1,880,383
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE> 102
<TABLE>
1ST*BANK
Statement of Cash Flows
(Continued)
For the Years Ended December 31, 1993, 1992 and 1991
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash flows from investing
activities:
Purchase of interest bearing
deposits in other banks $ - $ - $( 98,000)
Proceeds from sales and
maturities of investment
securities 28,751,537 26,061,118 25,361,454
Purchases of investment
securities (43,613,787) (29,223,307) (35,844,374)
Net loans originated ( 8,991,588) ( 3,095,612) ( 2,021,582)
Net additions to fixed
assets ( 374,584) ( 273,185) ( 24,718)
Proceeds from sale of
other real estate owned 74,946 15,708 295,777
------------ ------------ ------------
Net cash used by
investing
activities (24,153,476) ( 6,515,278) (12,331,443)
------------ ------------ ------------
Cash flows from financing
activities:
Net increase in demand
deposits, NOW and
savings accounts 25,771,698 16,642,756 7,975,543
Net increase (decrease)
in time deposits 5,318,316 ( 4,051,562) 183,467
------------ ------------ ------------
Net cash provided
by financing
activities 31,090,014 12,591,194 8,159,010
------------ ------------ ------------
Net increase (decrease) in
cash and cash equivalents 9,163,206 7,734,295 ( 2,292,050)
Cash and cash equivalents at
beginning of year 22,943,118 15,208,823 17,500,873
------------ ------------ ------------
Cash and cash equivalents
at end of year $ 32,106,324 $ 22,943,118 $ 15,208,823
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE> 103
1ST*BANK
Notes to Financial Statements
December 31, 1993, 1992 and 1991
1. Summary of significant accounting policies
------------------------------------------
The accounting and reporting policies of 1st*Bank (Bank) conform to generally
accepted accounting principles and to general practice within the banking
industry. The following is a description of the more significant of those
policies.
Cash and cash equivalents
- -------------------------
For the purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and federal funds sold. Federal funds are
normally sold for one-day periods.
Investment securities
- ---------------------
Securities are carried at amortized cost. The securities are not carried at
the lower of cost or market because management believes the Bank has the
intention and ability to hold these securities to maturity and that no events
are likely that will require disposal of such securities in the foreseeable
future. Management, however, from time to time, may decide to sell certain
securities prior to maturity for liquidity, tax planning, or other valid
business purposes. Gains or losses on sales of investment securities are
recognized upon realization and are presented separately in the statement of
income.
Mortgage-backed securities represent participating interests in pools of
long-term first mortgage loans originated and serviced by the issuers of the
securities. Such securities are recorded at unpaid principal balances,
adjusted for unamortized premiums and unearned discounts.
Loans and allowance for possible loan losses
- --------------------------------------------
Loans are stated net of participations sold without recourse, allowance for
possible loan losses and unearned income. Unearned income on installment loans
is taken into income over the term of the loan by the sum-of-the-periodic
balances method. The effect of not using the interest method is insignificant.
F-27
<PAGE> 104
1ST*BANK
Loans on which the accrual of interest has been discontinued are designated as
nonaccrual loans. Accrual of interest on loans generally is discontinued
either when reasonable doubt exists as to the full, timely collection of
interest or principal or when a loan becomes contractually past due by ninety
days or more with respect to principal or interest. When a loan is placed on
nonaccrual status, all interest previously accrued but not collected is
reversed against current period income. Income on such loans is then
recognized to the extent that cash is received and where the future collection
of principal is probable. Accruals are resumed on loans when they are brought
fully current with respect to interest and principal and when, in the judgment
of management, the loan is estimated to be fully collectible as to both
principal and interest.
The allowance for possible loan losses represents provisions for possible loan
losses charged to earnings, less loan charge-offs net of recoveries. Loans are
charged against the allowance for possible loan losses when management
believes that the collectibility of the principal is unlikely. The provision
for possible loan losses charged to earnings is the amount which is necessary
to establish the allowance at a level management believes will be adequate to
absorb possible losses on existing loans that may become uncollectible, based
on evaluations of the collectibility of loans and prior loan loss experience.
The evaluations take into consideration such factors as changes in the nature
and volume of the loan portfolio, overall portfolio quality, review of any
specific problem loans and current economic conditions that may affect the
borrower's ability to repay.
Fees and costs associated with originating loans
- ------------------------------------------------
Fees associated with originating loans are deferred and recognized over the
life of the loan. Costs associated with originating loans are recognized in
the period costs are incurred. The provisions of Statement of Financial
Accounting Standards No. 91 (SFAS 91), generally provide that such fees and
related costs be deferred and recognized over the life of the loan as an
adjustment of yield. For 1993, 1992 and 1991, management believes that not
deferring such costs and amortizing them over the life of the related loans
does not materially affect the financial position or results of operations of
the Bank.
F-28
<PAGE> 105
1ST*BANK
Bank premises and equipment
- ---------------------------
Bank premises and equipment are stated at cost less accumulated depreciation.
Provisions for depreciation are computed using the straight-line method.
Average useful lives used for depreciation with respect to major
classifications of property are as follows:
Building and improvements 40 years
Furniture, fixtures and equipment 3-5 years
Automobiles 3 years
Leasehold improvements Term of lease
Maintenance and repairs are charged to expense; betterments and renewals are
capitalized. Upon retirement or replacement, the cost of the asset and the
related accumulated depreciation are eliminated with the resulting gain or loss
included in the statement of income.
Other real estate owned
- -----------------------
Other real estate owned is recorded at the time of foreclosure at the lower of
the Bank's cost of acquisition or the asset's fair market value which becomes
the property's new basis. Any writedowns at date of acquisition are charged to
the allowance for loan losses. At the date of acquisition, the Bank
establishes a reserve for disposal costs by a charge to operations. Expenses
incurred in maintaining other real estate owned and subsequent writedowns to
reflect declines in the fair market value of the property are included in other
noninterest expense.
Federal income taxes
- --------------------
The Bank accounts for certain income and expense items differently for
financial reporting purposes than for federal income tax purposes. Provisions
for deferred taxes are made in recognition of such differences.
Earnings per share
- ------------------
Primary earnings per share amounts are based on the weighted average number of
shares outstanding of 1,304,167 shares for all periods presented. Fully
diluted earnings per share amounts are based on an increased number of shares
that would be outstanding assuming conversion of the subordinated debentures.
Net income has been adjusted for the interest expense (net of tax) on the
subordinated debentures. The number of shares used in the computations of
fully diluted earnings per share were 1,470,833 for all periods presented.
Reclassification
- ----------------
Certain amounts previously reported have been reclassified to conform to the
current format.
F-29
<PAGE> 106
1ST*BANK
2. Accounting changes
------------------
The Financial Accounting Standards Board issued Statement No. 115, "Accounting
For Certain Investments in Debt and Equity Securities" (SFAS 115) in May 1993.
This statement is required for fiscal years beginning after December 15, 1993,
and will require that those investments be classified into three categories:
held to maturity, available for sale, and trading.
The Financial Accounting Standards Board issued Statement No. 109, "Accounting
for Income Taxes" (SFAS 109). This statement, as amended, is effective for
fiscal years beginning after December 15, 1992, and requires the Bank to use
the liability method in providing for income taxes. Effective January 1, 1993,
the Bank changed its method of accounting for income taxes from the deferred
method to the liability method required by SFAS 109. As permitted under the
new rules, prior years' financial statements have not been restated.
3. Statement of cash flows
-----------------------
The Bank has chosen to report on a net basis its cash receipts and cash
payments for time deposits accepted and repayments of those deposits, loans
made to customers and principal collections on those loans and interest bearing
deposits in other banks.
The Bank has chosen to report its cash flows by the indirect method.
Supplemental information on cash flows and noncash transactions for the years
ended December 31, 1993, 1992 and 1991 is presented below:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash transactions:
Interest income received $ 6,567,728 $ 5,519,560 $ 6,801,244
============ ============ ============
Interest expense paid $ 2,400,946 $ 2,792,001 $ 3,307,546
============ ============ ============
Income taxes paid $ 403,000 $ 717,725 $ 195,551
============ ============ ============
Noncash transactions:
Net (disposition)
acquisition of other
real estate owned $( 281,064) $ 202,292 $ 86,582
============ ============ ============
</TABLE>
F-30
<PAGE> 107
1ST*BANK
4. Investment securities
---------------------
The amortized cost and estimated market value for investment securities at
December 31, 1993, 1992, and 1991 are as follows:
<TABLE>
<CAPTION>
1993
----
Amortized Market
cost value
--------- ------
<S> <C> <C>
U.S. treasury securities $ 2,006,125 $ 2,015,000
U.S. government agency obligations 5,000,000 4,939,000
State and political subdivisions 5,637,254 5,611,000
Pass-through certificates guaranteed
by FNMA, GNMA and FHLMC 21,948,909 21,720,000
Collateralized mortgage obligations 24,937,467 24,889,000
------------ ------------
$ 59,529,755 $ 59,174,000
============ ============
</TABLE>
The provisions of SFAS 115 were implemented by the Bank on January 1, 1994.
The Bank has classified all of their investment securities as held to maturity.
The effect of this classification has no effect on stockholders' equity as of
January 1, 1994.
<TABLE>
<CAPTION>
1992
----
Amortized Market
cost value
--------- ------
<S> <C> <C>
U.S. treasury securities $ 14,368,445 $ 14,601,000
U.S. government agency obligations 5,000,190 5,017,000
State and political subdivisions 998,722 1,032,000
Pass-through certificates guaranteed
by FNMA and FHLMC 19,069,646 18,839,000
Collateralized mortgage obligations 5,237,995 5,183,000
------------ ------------
$ 44,674,998 $ 44,672,000
============ ============
</TABLE>
<TABLE>
<CAPTION>
1991
----
Amortized Market
cost value
--------- ------
<S> <C> <C>
U.S. treasury securities $ 8,165,412 $ 8,239,000
U.S. government agency obligations 14,092,342 14,520,000
State and political subdivisions 1,014,833 1,048,000
Pass-through certificates guaranteed
by FNMA and FHLMC 18,170,304 18,079,000
------------ ------------
$ 41,442,891 $ 41,886,000
============ ============
</TABLE>
F-31
<PAGE> 108
1ST*BANK
The approximate unrealized gains and unrealized losses at December 31, 1993,
1992 and 1991 are as follows:
<TABLE>
<CAPTION>
1993
----
Unrealized Unrealized
gain loss
---------- ----------
<S> <C> <C>
U.S. treasury securities $ 9,000 $ -
U.S. government agency obligations - 61,000
State and political subdivisions 34,000 61,000
Pass-through certificates guaranteed
by FNMA, GNMA and FHLMC - 229,000
Collateralized mortgage obligations 19,000 67,000
------------ ------------
$ 62,000 $ 418,000
============ ============
</TABLE>
<TABLE>
<CAPTION>
1992
----
Unrealized Unrealized
gain loss
---------- ----------
<S> <C> <C>
U.S. treasury securities $ 233,000 $ -
U.S. government agency obligations 17,000 -
State and political subdivisions 33,000 -
Pass-through certificates guaranteed
by FNMA and FHLMC 30,000 261,000
Collateralized mortgage obligations - 55,000
------------ ------------
$ 313,000 $ 316,000
============ ============
</TABLE>
<TABLE>
<CAPTION>
1991
----
Unrealized Unrealized
gain loss
---------- ----------
<S> <C> <C>
U.S. treasury securities $ 74,000 $ -
U.S. government agency obligations 428,000 -
State and political subdivisions 33,000 -
Pass-through certificates guaranteed
by FNMA and FHLMC - 91,000
------------ ------------
$ 535,000 $ 91,000
============ ============
</TABLE>
F-32
<PAGE> 109
1ST*BANK
The amortized cost and estimated market value of investment securities at
December 31, 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
1993
----
Amortized Market
cost value
--------- ---------
<S> <C> <C>
Due in one year or less $ 2,006,125 $ 2,015,000
Due after one year through five years 5,869,707 5,838,000
Due after five years through ten years 3,353,585 3,318,000
Due after ten years 1,413,962 1,394,000
------------ ------------
12,643,379 12,565,000
Mortgage-backed securities 46,886,376 46,609,000
------------ ------------
$ 59,529,755 $ 59,174,000
============ ============
</TABLE>
Proceeds from the sale of investment securities were approximately $15,579,000,
$7,546,000 and $8,995,000 during the years ended December 31, 1993, 1992 and
1991, respectively. Gross gains of approximately $386,000, $492,000 and
$162,000 were realized on those sales during the years ended 1993, 1992 and
1991, respectively. Gross losses of approximately $12,000 and $107,000 were
realized in 1993 and 1991, respectively. No losses were realized on sales
during 1992.
Investment securities with an amortized cost of approximately $16,239,000,
$16,004,000 and $19,199,000 were pledged to secure public fund time deposits at
December 31, 1993, 1992 and 1991, respectively.
5. Loans and allowance for possible loan losses
--------------------------------------------
Loans at December 31, 1993, 1992 and 1991 consisted of the following:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Commercial $ 13,871,714 $ 7,848,450 $ 7,529,555
Real estate 16,918,447 15,384,767 14,459,217
Interim construction 5,200,345 4,038,383 2,803,079
Installment 3,313,234 3,046,013 3,293,791
Other 6,129 7,431 34,663
------------ ------------ ------------
39,309,869 30,325,044 28,120,305
Unearned income ( 465,376) ( 449,967) ( 504,793)
Allowance for possible
loan losses ( 923,532) ( 865,768) ( 1,019,523)
------------ ------------ ------------
$ 37,920,961 $ 29,009,309 $ 26,595,989
============ ============ ============
</TABLE>
F-33
<PAGE> 110
1ST*BANK
The Bank extends real estate, commercial and consumer credit to customers in
the Dallas/Ft. Worth metropolitan area. At December 31, 1993, 1992 and 1991,
substantially all of the Bank's loans were collateralized with real estate,
equipment, accounts receivable and other assets. Although the Bank has a
diversified loan portfolio, its debtors' ability to honor their contracts is
substantially dependent upon the general economic conditions of the region.
Loans on which the accrual of interest has been discontinued amounted to
approximately $29,000, $985,000 and $596,000 at December 31, 1993, 1992 and
1991, respectively. If interest had been accrued on these loans, such income
would have been approximately $3,000, $60,000 and $47,000 during 1993, 1992 and
1991, respectively.
Loans, which were contractually delinquent over ninety days which continue to
accrue interest amounted to approximately $20,000 and $70,000 at December 31,
1993 and 1991. There were no such loans at December 31, 1992.
An analysis of the allowance for possible loan losses for the three years ended
December 31, 1993, 1992 and 1991 is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $ 865,768 $ 1,019,523 $ 876,087
Provision charged to earnings 361,000 480,000 564,715
Loans charged to the allowance
account ( 339,180) ( 663,788) ( 459,220)
Recoveries on loans previously
charged off 35,944 30,033 37,941
------------ ------------ ------------
Balance at end of period $ 923,532 $ 865,768 $ 1,019,523
============ ============ ============
</TABLE>
6. Bank premises and equipment
---------------------------
Bank premises and equipment at December 31, 1993, 1992 and 1991 consisted of
the following:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Land $ 497,534 $ 497,534 $ 497,534
Building and improvements 1,294,307 1,287,436 1,158,923
Furniture, fixtures, equipment
and automobiles 847,855 540,161 395,488
Leasehold improvements 60,019 - -
------------ ------------ ------------
2,699,715 2,325,131 2,051,945
Less accumulated depreciation 1,107,129 937,065 842,355
------------ ------------ ------------
$ 1,592,586 $ 1,388,066 $ 1,209,590
============ ============ ============
</TABLE>
F-34
<PAGE> 111
1ST*BANK
7. Other real estate owned
-----------------------
Other real estate owned at December 31, 1993, 1992 and 1991 consisted of the
following:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Foreclosed properties, net
of allowance for possible
losses of $20,700 and
$46,062 in 1993 and 1991,
respectively $ 135,859 $ 395,329 $ 192,475
In-substance foreclosures - - -
Covered transactions - 383,332 421,736
------------ ------------ ------------
$ 135,859 $ 778,661 $ 614,211
============ ============ ============
</TABLE>
An analysis of the allowance for possible losses on other real estate owned for
the years ended December 31, 1993, 1992 and 1991 is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balance at beginning
of period $ - $ 46,062 $ 54,062
Provision charged to
earnings 267,662 - 2,214
Write-downs charged to the
allowance ( 246,962) ( 46,062) ( 10,214)
------------ ------------ ------------
Balance at end of period $ 20,700 $ - $ 46,062
============ ============ ============
</TABLE>
F-35
<PAGE> 112
<TABLE>
1ST*BANK
8. Deposits
--------
Deposits at December 31, 1993, 1992 and 1991 are summarized as follows:
<CAPTION>
1993 1992 1991
---- ---- ----
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing
demand accounts $ 35,335,403 28.6% $ 20,768,711 22.4% $ 17,544,237 22.0%
Interest bearing
demand accounts 12,488,338 10.1 7,785,733 8.4 6,486,971 8.1
Savings accounts 15,612,759 12.6 8,136,532 8.8 3,450,796 4.3
Individual retirement
accounts 2,595,691 2.1 1,832,736 2.0 1,443,000 1.8
Limited access money
market accounts 14,641,475 11.8 16,378,258 17.7 9,334,210 11.7
Certificates of deposit,
less than $100,000 3,610,131 2.9 3,507,238 3.8 4,428,274 5.5
Certificates of deposit
$100,000 and greater 39,157,801 31.7 33,942,376 36.7 37,072,902 46.3
State of Texas time 242,000 0.2 242,000 0.2 242,000 0.3
------------ ----- ----------- ---- ----------- -----
$123,683,598 100.0% $ 92,593,584 100.0% $ 80,002,390 100.0%
============ ===== ============ ===== ============= =====
</TABLE>
The weighted average interest rate on deposits at December 31, 1993, 1992 and
1991 was approximately 2.2%, 2.4% and 3.8%, respectively.
Included in deposits at December 31, 1993, 1992 and 1991 were public fund
deposits of approximately $8,200,000, $9,306,000 and $5,587,000, respectively.
F-36
<PAGE> 113
<TABLE>
1ST*BANK
9. Income taxes
------------
The provision for income taxes for the years ending December 31, 1993, 1992 and
1991 consisted of the following:
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Federal income tax expense
(benefit):
Current $ 536,043 $ 597,000 $ 431,327
Deferred 13,333 92,000 ( 4,360)
State income tax
expense - - 42,472
------------ ------------ ------------
$ 549,376 $ 689,000 $ 469,439
============ ============ ============
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the recorded amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Bank's deferred tax liabilities and assets as of December 31, 1993 are
as follows:
<TABLE>
<CAPTION>
1993
----
<S> <C>
Deferred tax liability:
Bank premises and equipment basis
for book in excess of tax $ 112,000
------------
Total deferred tax liability $ 112,000
============
Deferred tax assets:
Loan loss reserve for book in
excess of tax $ 36,000
Other real estate basis for tax in
excess of book 7,000
Loan fees deferred for book
recognized for tax 34,000
Gains deferred for book recognized
for tax 3,000
------------
Total deferred tax assets $ 80,000
============
Net deferred tax liability $ 32,000
============
</TABLE>
F-37
<PAGE> 114
1ST*BANK
Included in other assets at December 31, 1992 are federal income taxes
receivable of approximately $117,000. Included in other liabilities at
December 31, 1993 and 1992 are deferred federal income taxes payable of
approximately $32,000 and $92,000, respectively. Included in other liabilities
at December 31, 1991 are current federal income taxes payable of approximately
$161,000.
As discussed in Note 2, the Bank adopted SFAS 109 during 1993. The adoption of
SFAS 109 changed the Bank's method of accounting for income taxes from the
deferred method to the asset and liability method. SFAS 109 requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been recognized in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement carrying
amounts and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse.
Differences between financial reporting and tax bases arise most frequently
from differences in timing of income and expense recognition and as a result of
business acquisitions.
The cumulative effect of adopting Statement 109 as of January 1, 1993 was to
increase net income by approximately $13,000. The effect of applying FAS 109
to income from operations for the year ended December 31, 1993 was a benefit of
approximately $79,000. The cumulative effect represents the adjustment of
previously recorded deferred tax assets and liabilities to reflect the lower
prevailing tax rates.
10. Employee benefits
-----------------
The Bank adopted an employee thrift plan during 1993, in which all employees
are eligible to participate after three months of service. In 1993, the Bank
matched 25% of employee contributions. Participants in the plan are fully
vested in the Bank's matching contributions and discretionary contributions
after five years of service. Costs associated with the plan of $10,725,
including contributions made by the Bank, were recorded during 1993.
11. Commitments and contingencies
-----------------------------
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. Those instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the balance sheet.
F-38
<PAGE> 115
1ST*BANK
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of these
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. At
December 31, 1993, 1992 and 1991, the approximate amounts of these financial
instruments were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Financial instruments whose
contract amounts represent
credit risk:
Commitments to extend
credit $ 7,899,000 $ 5,074,000 $ 3,864,000
Standby letters of credit 208,000 147,000 114,000
------------ ------------ ------------
$ 8,107,000 $ 5,221,000 $ 3,978,000
============ ============ ============
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. The amount of collateral
obtained if deemed necessary by the Bank upon extension of credit is based on
management's credit evaluation of the counterparty. Collateral held varies but
may include accounts receivable, inventory, property, plant and equipment and
income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
The Bank is involved in certain legal actions arising from normal
business activities. Management believes that the outcome of such proceedings
will not materially affect the financial position or results of operations of
the Bank.
F-39
<PAGE> 116
1ST*BANK
The Bank entered into a noncancelable operating lease relating to its branch in
Carrollton, Texas during 1993. Rental expense related to this operating lease
amounted to approximately $10,000 in 1993. At December 31, 1993, future
minimum lease payments under this operating lease are as follows:
Year ending December 31, 1994 $ 19,602
1995 19,602
1996 14,702
Thereafter -
------------
$ 53,906
============
The Bank does not anticipate any material losses as a result of the commitments
and contingent liabilities.
12. Related party transactions
--------------------------
In the ordinary course of business, the Bank has and expects to continue to
have transactions, including borrowings, with its employees, officers,
directors and their affiliates. In the opinion of management, such
transactions are on the same terms, including interest rates and collateral
requirements, as those prevailing at the time for comparable transactions with
unaffiliated persons. At December 31, 1993, 1992 and 1991, the aggregate
amounts of such loans were approximately $394,000, $454,000 and $409,000,
respectively. Gross paydowns on these loans were approximately $60,000 and no
new loans were originated in 1993. At December 31, 1993, 1992 and 1991, the
Bank held deposits from related parties of approximately $47,172,000,
$36,651,000 and $37,202,000, respectively.
At December 31, 1993, 1992 and 1991, over 90% of the Bank's outstanding stock
and subordinated debentures were held by a director of the Bank and the
director's related interests. The existence of such controlling interest
contributed to the financial position of the Bank.
13. Subordinated debentures
-----------------------
The subordinated debentures are payable primarily to related parties, bear
interest at prime, are payable semi-annually and are due April 1, 1998. If not
redeemed, the debentures will be converted at maturity into 166,666 shares of
the Bank's capital stock.
F-40
<PAGE> 117
1ST*BANK
14. Stockholders' equity
--------------------
Under banking law, there are legal restrictions limiting the amount of
dividends the Bank can declare. Approval of the regulatory authorities is
required if the effect of dividends declared would cause the regulatory capital
of the Bank to fall below specified minimum levels.
The regulatory authorities may prohibit the declaration of any dividends if
they determine that certain circumstances exist in the Bank, including those
relating to the financial condition of the Bank, such that payment of dividends
would be considered an unsafe and unsound practice. The Bank is also required
to maintain minimum amounts of capital to total "risk weighted" assets, as
defined by the banking regulators. At December 31, 1993, the FDIC required the
Bank to have a minimum total capital to risk based assets ratio of 8%. The
Texas Department of Banking requires a minimum equity capital ratio of 6%. At
December 31, 1993, the Bank's actual total capital to risk based assets and
equity capital ratios were 11.3% and 5.6%, respectively.
15. Supplementary income and expense information
--------------------------------------------
<TABLE>
The following amounts are included in other noninterest income and noninterest
expense in the accompanying statement of income for the years ended December
31, 1993, 1992 and 1991:
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Noninterest income
------------------
Miscellaneous fees $ 59,007 $ 73,922 $ 66,723
Gain on sale of loans 14,641 - -
All other 6,403 8,128 4,166
------------ ------------ ------------
$ 80,051 $ 82,050 $ 70,889
============ ============ ============
Noninterest expense
-------------------
Insurance $ 41,210 $ 33,730 $ 33,102
ATM 55,475 31,653 54,090
FDIC assessment 199,863 183,888 97,885
Postage 55,808 48,732 46,624
Legal and professional 83,535 84,482 54,894
Real estate taxes 56,871 10,603 82,568
All other 418,003 382,688 351,972
------------ ------------ ------------
$ 910,765 $ 775,776 $ 721,135
============ ============ ============
</TABLE>
F-41
<PAGE> 118
EXHIBIT A
---------
Section 215a of Title 12, United States Code
- --------------------------------------------
(a) One or more national banking associations or one or more State banks, with
the approval of the Comptroller, under an agreement not inconsistent with
sections 215-2150 of this title, may merge into a national banking
association located within the same State, under the charter of the
receiving association. The merger agreement shall --
(1) be agreed upon in writing by a majority of the board of directors of
each association or State bank participation in the plan of merger;
(2) be ratified and confirmed by the affirmative vote of the shareholders
of each such association or State bank owning at least two-thirds of
its capital stock outstanding, or by a greater proportion of such
capital stock in the case of a State bank if the laws of the State
where it is organized so require, at a meeting to be held on the call
of the directors, after publishing notice of the time, place, and
object of the meeting for four consecutive weeks in a newspaper of
general circulation published in the place where the association or
State bank is located, or, if there is no such newspaper, then in the
newspaper of general circulation published nearest thereto, and after
sending such notice to each shareholder of record by certified or
registered mail at least ten days prior to the meeting, except to
those shareholders who specifically waive notice, but any additional
notice shall be given to the shareholders of such State bank which
may be required by the laws of the State where it is organized.
Publication of notice may be waived, in cases where the Comptroller
determines that an emergency exists justifying such waiver, by
unanimous action of the shareholders of the association or State bank;
(3) specify the amount of the capital stock of the receiving association,
which shall not be less than that required under existing law for the
organization of a national bank in the place in which it is located
and which will be outstanding upon completion of the merger, the
amount of stock (if any) to be allocated, and cash (if any) to be
paid, to the shareholders of the association or State bank being
merged into the deceiving association; and
(4) provide that the receiving association shall be liable for all
liabilities of the association or State bank being merged into the
receiving association.
(b) If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank
participating in the plan of merger, and thereafter the merger shall be
approved by the Comptroller, any shareholder of any association or State
bank to be merged into the receiving association who has voted against
such merger at the meeting of the association or bank of which he is a
stockholder, or has given notice in writing at or prior to such meeting to
the presiding officer that he dissents from the plan of merger, shall be
entitled to receive the value of the shares so held by him which such
merger shall be approved by the Comptroller upon written request made to
the receiving association at any time before thirty days after the date of
consummation of the merger, accompanied by the surrender of his stock
certificates.
(c) The value of the shares of any dissenting shareholders shall be
ascertained, as of the effective date of the merger, by an appraisal made
by a committee of three persons, composed of (1) one selected by the vote
of the holders of the majority of the stock, the owners of which are
entitled to payment in cash; (2) one selected by the directors of the
receiving association; and (3) one selected by the two so selected. The
valuation agreed upon by any two of the three appraisers shall govern. If
the value so fixed shall not be satisfactory to any dissenting shareholder
who has requested payment, that shareholder may, within five days after
being notified of the appraised value of his shares, appeal to the
Comptroller, who shall cause a reappraisal to be made which shall be final
and binding as to the value of the shares of the appellant.
A-1
<PAGE> 119
(d) If, within ninety days from the date of consummation of the merger, for
any reason one or more of the appraisers is not selected as herein
provided, or the appraisers fail to determine the value of such shares,
the Comptroller shall upon written request of any interested party cause
an appraisal to be made which shall be final and binding on all parties.
The expenses of the Comptroller in making the reappraisal or the
appraisal, as the case may be, shall be paid by the receiving
association. The value of the shares ascertained shall be promptly paid
to the dissenting shareholders by the receiving association. The shares
of stock of the receiving association which would have been delivered to
such dissenting shareholders had they not requested payment shall be sold
by the receiving association at an advertised public auction, and the
receiving association shall have the right to purchase any of such shares
at such public auction, if it is the highest bidder therefor, for the
purpose of reselling such shares within thirty days thereafter to such
person or persons and at such price not less than par as its board of
directors by resolution may determine. If the shares are sold at public
auction at a price greater than the amount paid to the dissenting
shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any f
State bank shall be determined in the manner prescribed by the law of the
State in such cases, rather than as provided in this section, if such
provision is made in the State law; and no such merger shall be in
contravention of the law of the State under which such bank is
incorporated. The provisions of this subsection shall apply only to
shareholders of (and stock owned by them in) a bank or association being
merged into the receiving association.
(e) The corporate existence of each of the merging banks or banking
associations participating in such merger shall be merged into and
continued in the receiving association and such receiving association
shall be deemed to be the same corporation as each bank or banking
association participating in the merger. All rights, franchises, and
interests of the individual merging banks or banking associations in and
to every type of property (real, personal, and mixed) and choses in action
shall be transferred to and vested in the receiving association by virtue
of such merger without any deed or other transfer. The receiving
association, upon the merger and without any order or other action on the
part of the court or otherwise, shall hold and enjoy all rights of
property, franchises, and interests, including appointments, designations,
and nominations, and all other rights and interest as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates,
assignee, receiver, and committee of estates of lunatics, and in every
other fiduciary capacity, in the same manner and to the same extent as
such rights, franchises, and interests were held or enjoyed by any one of
the merging banks or banking associations at the time of the merger,
subject to the conditions hereinafter provided.
(f) Where any merging bank or banking association, at the time of the merger,
was acting under appointment of any court as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates,
assignee, receiver, or committee of estates of lunatics, or in any other
fiduciary capacity, the receiving association shall be subject to removal
by a court of competent jurisdiction in the same manner and to the same
extent as was such merging bank or banking association prior to the
merger. Nothing contained in this section shall be considered to impair
in any manner the right of any court to remove the receiving association
and to appoint in lieu thereof a substitute trustee, executor, or other
fiduciary, except that such right shall not be exercised in such a manner
as to discriminate against national banking associations, nor shall any
receiving association be removed solely because of the fact that it is a
national banking association.
(g) Stock of the receiving association may be issued as provided by the terms
of the merger agreement, free from any preemptive rights of the
shareholders of the respective merging banks.
A-2
<PAGE> 120
EXHIBIT B
---------
Stock Appraisals
OCC Valuation Methods
Comptroller of the Currency. Administrator of National Banks. Banking
Bulletin 88-22. August 22, 1988.
TO: Chief Executive Officers of National Banks,
Deputy Comptrollers (District), Department and
Division Heads, and Examining Personnel
Purpose
- --------
This banking bulletin is to inform all national banks of the valuation methods
used by the Office of the Comptroller of the Currency to estimate the value of
a bank's shares when it is involved in a conversion, merger, or
consolidation. The results of appraisals performed for transactions that were
consummated in 1985 and 1986 are also summarized.
References: 12 U.S.C. 214a, 215 and 215a; 12 CFR 11.590 (Item 2)
Background
- ----------
Under 12 U.S.C. Sections 214a, 215 and 215a, any shareholder dissenting to a
conversion, consolidation, or merger involving a national bank may request
from the resulting bank a valuation of the shares held by the dissenting
shareholder. A committee of three appraisers (a representative of the
dissenting shareholder, a representative of the resulting bank, and a third
appraiser selected by the other two) is then to be formed to appraise the
value of the shares. If the committee is formed and renders an appraisal that
is acceptable to the dissenting shareholder, the process is complete and the
appraised value of the shares is paid to the dissenting shareholder by the
resulting bank. If, for any reason, the committee is not formed or if it
renders an appraisal that is not acceptable to the dissenting shareholder, an
interested party may request an appraisal by the Office of the Comptroller of
the Currency (OCC).
The above provides only a general overview of the appraisal process. The
specific requirements of the process are set forth in the statutes themselves.
Methods of Valuation Used
- -------------------------
Through its appraisal process, the OCC attempts to arrive at a fair estimate
of the value of a bank's shares. After reviewing the particular facts in each
case and the available information on a bank's shares, the OCC selects an
appropriate valuation method, or combination of methods, to determine a
reasonable estimate of the shares' value.
Market Value
- ------------
The OCC uses various methods to establish the market value of shares being
appraised. If sufficient trading in the shares exists and the prices are
available from direct quotes from The Wall Street Journal or a market-maker,
those quotes are considered in determining the market value. If no market
value is readily available, or if the market value available is not well
established, other methods of estimating market value can be used, such as the
investment value and adjusted book value methods.
B-1
<PAGE> 121
Investment Value
- ----------------
Investment value requires an assessment of the value to investors of a share
in the future earnings of the target bank. Investment value is estimated by
applying an average price/earnings ratio of banks with similar earnings
potential to the earnings capacity of the target bank.
The peer group selection is based on location, size, and earnings patterns.
If the state in which the subject bank is located provides a sufficient number
of comparable banks using locations, size and earnings patterns as the
criteria for selection, the price/earnings ratios assigned to the banks are
applied to the earnings per share estimated for the subject bank. In order to
select a reasonable peer group when there are too few comparable independent
banks in a location that is comparable to that of the subject bank, the pool
of banks from which a peer group is selected is broadened by including
one-bank holding company banks in a comparable location, and/or by selecting
banks in less comparable locations, including adjacent states, that have
earnings patterns similar to the subject bank.
Adjusted Book Value
- -------------------
As a rule, the OCC does not place any weight on "unadjusted book value."
While book value is a type of value, it is based on historical acquisition
costs of the bank's assets, and does not reflect investors' perceptions of the
value of the bank as a going concern. The OCC does consider "adjusted book
value." Adjusted book value is calculated by multiplying the book value of
the target bank's assets per share times the average market price to book
value ratio of comparable banking organizations. The average market price to
book value ratio measures the premium or discount to book value which
investors attribute to shares of similarly situated banking organizations.
Both the investment value method and the adjusted book value method present
appraised values which are based on the target bank's value as a going
concern. These techniques provide estimates of the market value of the shares
of the subject bank.
Overall Valuation
- -----------------
The OCC may use more than one of the above-described methods in deriving the
value of shares of stock. If more than one method is used, varying weights
may be applied in reaching an overall valuation. The weight given to the
value by a particular valuation method is based on how accurately the given
method is believed to represent market value. For example, more weight may be
given to a market value representing infrequent trading by shareholders than
to the value derived from the investment value method when the subject bank's
earnings trend is so irregular that it is considered to be a poor predictor of
future earnings.
Purchase Premiums
- -----------------
For mergers and consolidations, the OCC recognizes that purchase premiums do
exist and may, in some instances, be paid in the purchase of small blocks of
shares. However, the payment of purchase premiums depends entirely on the
acquisition or control plans of the purchaser, and such payments are not
regular or predictable elements of market value. Consequently, the OCC's
valuation methods do not include consideration of purchase premiums in
arriving at the value of shares.
Statistical Data
- ----------------
The chart below lists the results of appraisals performed by the OCC for
transactions that were consummated in 1985 and 1986. The statistical data on
book value and price/earnings ratios are provided for comparative purposes and
are not necessarily relied on by the OCC in determining the value of the
bank's shares. These historical data are provided to inform banks and
investors about the results of past appraisals and should not be viewed as
determinative for future appraisals.
B-2
<PAGE> 122
In connection with disclosures given to shareholders under 12 CFR 11.590 (Item
2), banks may provide shareholders a copy of this banking bulletin or disclose
the information contained herein, including the past results of OCC
appraisals. If the bank discloses the past results of the OCC appraisals, it
should advise shareholders that (1) the OCC did not rely on all the
information set forth in the chart in performing each appraisal and (2) that
the OCC's past appraisals are not necessarily determinative of its future
appraisals of a particular bank's shares.
Appraisal Results
<TABLE>
<CAPTION>
OCC Average Price/
Appraisal Appraisal Price Book Earnings Ratio
Date Value Offered Value of Peer Group
<S> <C> <C> <C> <C>
1/1/85 107.05 110.00 178.29 5.3
1/2/85 73.16 NA 66.35 6.8
1/15/85 53.41 60.00 83.95 4.8
1/31/85 22.72 20.00 38.49 5.4
2/1/85 30.63 24.00 34.08 5.7
2/25/85 27.74 27.55 41.62 5.9
4/30/85 25.98 35.00 42.21 4.5
7/30/85 3,153.10 2,640.00 6,063.66 NC
9/1/85 17.23 21.00 21.84 4.7
11/22/85 316.74 338.75 519.89 5.0
11/22/85 30.28 NA 34.42 5.9
12/16/85 66.29 77.00 89.64 5.6
12/27/85 60.85 57.00 119.36 5.3
12/31/85 61.77 NA 73.56 5.9
12/31/85 75.79 40.00 58.74 12.1
1/12/86 19.93 NA 26.37 7.0
3/14/86 59.02 200.00 132.20 3.1
4/21/86 40.44 35.00 43.54 6.4
5/2/86 15.50 16.50 23.69 5.0
7/3/86 405.74 NA 612.82 3.9
7/31/86 297.34 600.00 650.63 4.4
8/2/86 103.53 106.67 136.23 NC
<FN>
The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA--Not Available
NC--Not Computed
</TABLE>
<PAGE> 123
EXHIBIT C
MERGER AGREEMENT
between
1ST*BANK
and
BANK ONE, TEXAS, NATIONAL ASSOCIATION,
and joined in by
BANC ONE CORPORATION
and
BANC ONE TEXAS CORPORATION
C-1
<PAGE> 124
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Page
----
<S> <C> <C>
1. Acquisition and National Bank Merger . . . . . . . . . . . . . . 3
2. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Effective Time of Merger; Articles of Association . . . . . . . . 3
5. Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . 4
6. Liabilities upon Merger . . . . . . . . . . . . . . . . . . . . . 4
7. Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . 4
8. Board of Directors; Employees . . . . . . . . . . . . . . . . . . 9
9. Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . 9
10. Undertakings of the Parties . . . . . . . . . . . . . . . . . . . 10
11. Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . 16
12. Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
13. Representations and Warranties of BANC ONE . . . . . . . . . . . 18
14. Representations and Warranties of BANC ONE TEXAS. . . . . . . . . 28
15. Representations and Warranties of BOTNA . . . . . . . . . . . . . 30
16. Representations and Warranties of 1ST*BANK. . . . . . . . . . . . 32
17. Action by 1ST*BANK Pending Effective Date . . . . . . . . . . . . 43
18. Action by BANC ONE Pending Effective Time . . . . . . . . . . . . 47
19. Conditions to Obligations of BANC ONE, BANC ONE TEXAS & BOTNA . . 48
20. Conditions to Obligations of 1ST*BANK . . . . . . . . . . . . . . 51
21. Conditions to Obligations of All Parties . . . . . . . . . . . . 54
22. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 55
23. Non-Survival of Representations and Warranties . . . . . . . . . 58
24. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 58
25. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
26. Satisfaction of Conditions; Termination . . . . . . . . . . . . . 58
27. Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . . . 60
28. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 61
29. Captions; Counterparts . . . . . . . . . . . . . . . . . . . . . 61
30. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Exhibit A - Articles of Association of BOTNA
Exhibit B - Form of Undertaking by Affiliates
Exhibit C - Escrow Agreement
Exhibit D - Opinion of Counsel for 1ST*BANK
Exhibit E - Opinion of Counsel for BANC ONE
</TABLE>
C-2
REG9929/2
<PAGE> 125
MERGER AGREEMENT
----------------
MERGER AGREEMENT dated August 10, 1994, between 1st*Bank (hereinafter
called "1ST*BANK") and Bank One, Texas, National Association (hereinafter
called "BOTNA") and joined in by BANC ONE CORPORATION (hereinafter called
"BANC ONE") and Banc One Texas Corporation (hereinafter called "BANC ONE
TEXAS").
WITNESSETH:
1ST*BANK is a banking association duly organized under the laws of the State
of Texas which has its principal office in Coppell, Dallas County, Texas. As
of March 31, 1994, 1ST*BANK had 1,304,167 shares of authorized capital stock
consisting solely of common stock with par value of $2 per share ("1ST*BANK
Common"), all of which are issued and outstanding and none of which were
shares of treasury stock. As of March 31, 1994 1ST*BANK had capital of
$2,608,334, surplus of $3,654,166, undivided profits, including capital
reserves and net unrealized gains (losses) on investment securities classified
as held for sale of $1,227,207, and total resources of $7,489,707.
BOTNA is a national banking association duly organized under the laws of the
United States which has its principal office in Dallas, Dallas County, Texas.
As of March 31, 1994, BOTNA had 12,000,000 shares of authorized capital stock
consisting solely of common stock with par value of $35 per share ("BOTNA
Common"), 6,400,000 of which were issued and outstanding and none of which
were shares of treasury stock. As of March 31, 1994 BOTNA had capital of
$224,000,000, surplus of $778,762,000, undivided profits, including capital
reserves and net unrealized gains (losses) on investment securities classified
as held for stock of $429,213,000, and total resources of $1,431,975,000.
BANC ONE is a corporation duly organized under the laws of the State of Ohio.
Its principal office is located at 100 East Broad Street, Columbus, Franklin
County, Ohio. As of March 31, 1994 BANC ONE had capital stock of
$2,150,726,106, divided into 600,000,000 shares of common stock, without par
value ("BANC ONE Common"), 381,585,796 of which shares of BANC ONE Common were
issued and 250,000 of which were shares of treasury stock owned by BANC ONE,
C-3
<PAGE> 126
and 35,000,000 shares of preferred stock without par value, of which 4,998,000
shares were issued and outstanding as Series C $3.50 Cumulative Convertible
Preferred Stock. As of March 31, 1994, BANC ONE had surplus of $3,762,152,819
undivided profits, including capital reserves and net unrealized gains
(losses) on investment securities classified as held for sale of
$1,287,379,686, and total consolidated assets of $83,426,669,758.
BANC ONE TEXAS is a corporation duly organized under the laws of the State of
Ohio. Its principal office is located at 100 East Broad Street, Columbus,
Franklin County, Ohio. BANC ONE TEXAS is a wholly-owned subsidiary of BANC
ONE and holds all the issued and outstanding shares of BOTNA.
A majority of the entire Board of Directors of 1ST*BANK and a majority of the
entire Board of Directors of BOTNA, respectively, have approved the entering
into of this Merger Agreement and have authorized its execution. A majority
of the entire Board of Directors of each of BANC ONE and BANC ONE TEXAS have
approved this Merger Agreement, undertaken that BANC ONE and BANC ONE TEXAS
shall join in and for valuable consideration be bound by it, and authorized
the agreements and undertakings hereinafter made by BANC ONE and BANC ONE
TEXAS. From and after the time the merger of 1ST*BANK into BOTNA, as
hereinafter described, shall become effective, as set forth in Section 4 of
this Merger Agreement, and as and when required by the provisions of this
Merger Agreement, BANC ONE will issue the shares of BANC ONE Common which the
shareholders of 1ST*BANK shall be entitled to receive in accordance with the
provisions hereinafter provided, it being understood by each of the parties
hereto that BANC ONE seeks indirectly to acquire all of the assets and
liabilities of 1ST*BANK through the acquisition of such assets and liabilities
by BANC ONE TEXAS pursuant to which BANC ONE TEXAS will direct the transfer of
such assets and liabilities to BOTNA by means of the merger of 1ST*BANK into
BOTNA, that 1ST*BANK, BOTNA, BANC ONE TEXAS and BANC ONE, as appropriate, will
apply to the Office of the Comptroller of the Currency (the "Comptroller")
and, if applicable, the Texas Department of Banking ("Texas Commissioner") for
prior approval of the transaction herein contemplated and that BANC ONE will
exert its best efforts to obtain such regulatory approvals and to complete
such other actions as are necessary or appropriate to effect the merger of
1ST*BANK with and into BOTNA. Except as may be required upon application of
C-4
<PAGE> 127
Sections 7(e) and/or 7(f) of this Merger Agreement, BANC ONE will issue not
more than 425,000 shares of BANC ONE Common in connection with the
transactions contemplated by this Merger Agreement.
In consideration of the premises, 1ST*BANK, BOTNA, BANC ONE TEXAS and BANC ONE
hereby make this Merger Agreement and prescribe the terms and conditions of
the merger of 1ST*BANK with and into BOTNA and the mode of carrying the
acquisition into effect as follows:
1. ACQUISITION AND NATIONAL BANK MERGER. BANC ONE TEXAS shall acquire all of
the assets and assume all of the liabilities of 1ST*BANK; provided,
however, BANC ONE TEXAS shall direct that all of such assets and
liabilities shall be transferred to BOTNA by means of the merger of
1ST*BANK into BOTNA (the "Merger"). Subject to the terms and conditions
hereinafter set forth, 1ST*BANK shall be merged with and into BOTNA under
the Charter of BOTNA pursuant to the provisions of and with the effect
provided in Section2(a) of Act of November 7, 1918, as amended (12 U.S.C.
Section215a). All of the shares of BOTNA shall be owned by BANC ONE
TEXAS, and indirectly by BANC ONE, prior to and at the time of the Merger.
2. NAME. The name of the receiving association (hereinafter called the
"Receiving Association" whenever reference is made to it as of the time
the Merger shall become effective or thereafter) shall be "Bank One,
Texas, National Association."
3. BUSINESS. The business of the Receiving Association shall be that of a
national banking association. This business shall be conducted by the
Receiving Association at its main office which shall be located at 1717
Main Street, Dallas, Texas and at its legally established branches.
4. EFFECTIVE TIME OF MERGER: ARTICLES OF ASSOCIATION. As used in this
Agreement, the "Effective Time" shall be and mean the effective date of
the Merger provided for in this Merger Agreement as specified by the
Comptroller upon the request of BOTNA in accordance with Section 10(c) of
this Merger Agreement. From and after the Effective Time, the Bylaws of
BOTNA immediately prior to the Effective Time shall be the Bylaws of the
C-5
<PAGE> 128
Receiving Association and the Articles of Association of the Receiving
Association shall read in their entirety as set forth in Exhibit A annexed
hereto and incorporated herein by reference.
5. EFFECT OF MERGER. Upon the Merger becoming effective, the separate
corporate existence of 1ST*BANK and of BOTNA, respectively, shall, as
provided by the aforementioned 12 U.S.C. Section 215a, be merged into and
continued in the Receiving Association which shall be deemed to be the
same banking association as 1ST*BANK and BOTNA. All rights, franchises
and interests of 1ST*BANK and BOTNA, respectively, in and to every type of
property, real, personal and mixed, and choses in action, shall be
transferred to and vested in the Receiving Association by virtue of such
Merger without any deed or other transfer in the same manner and to the
same extent as such rights, franchises and interests were held or enjoyed
by 1ST*BANK and BOTNA, respectively, at the Effective Time, as provided in
said 12 U.S.C. Section 215a.
6. LIABILITIES UPON MERGER. The Receiving Association shall be responsible
for all of the liabilities of every kind and description of 1ST*BANK and
BOTNA existing as of the Effective Time.
7. CONVERSION OF SHARES.
(a) For purposes of this Merger Agreement, the following terms shall have
the following meanings:
"1ST*BANK Conversion Shares" shall mean those shares of 1ST*BANK
Common that are issued and outstanding immediately prior to the
Effective Time (except for shares of 1ST*BANK Common, if any, carried
by 1ST*BANK as treasury shares and shares of 1ST*BANK Common subject
to the rights, if any, of a dissenting shareholder); provided,
however, that the total number of 1ST*BANK Conversion Shares shall
not exceed 1,470,833 shares which shares include all shares of
1ST*BANK Common that may be issued and outstanding if and assuming
that, as of not later than immediately prior to the Effective Time,
all of 1ST*BANK's Mandatory Convertible Subordinated Debentures
issued on or about March 31, 1988 ("1ST*BANK Debentures") have been
converted into not more than 166,666 shares of 1ST*BANK Common.
C-6
<PAGE> 129
"Valuation Period" shall mean the ten consecutive days on which
shares of BANC ONE Common are traded on the New York Stock Exchange
(the "NYSE") ending on the sixth NYSE trading day immediately prior
to the Effective Time.
"BANC ONE Average Price" shall mean the average of the closing trade
prices of BANC ONE Common on the NYSE during the Valuation Period as
reported in THE WALL STREET JOURNAL for NYSE Composite Transactions.
(b) At the Effective Time
(i) The holders of record of 1ST*BANK Conversion Shares shall be
allocated and entitled to receive (upon surrender of
certificates representing said shares for cancellation or, as
set forth in the last paragraph of Section 7(d), such evidence
and, in appropriate cases, indemnity, reasonably acceptable to
BANC ONE, supporting ownership of 1ST*BANK Conversion Shares by
the purported owners thereof) and each 1ST*BANK Conversion
Share shall be converted into shares of BANC ONE Common at the
Exchange Rate. The Exchange Rate shall be as follows:
(A) If the BANC ONE Average Price is $36.30 or more, each
1ST*BANK Conversion Share shall be exchanged for 0.2627
share of BANC ONE Common.
(B) If the BANC ONE Average Price is $33.00 or less, each
1ST*BANK Conversion Share shall be exchanged for 0.2890
share of BANC ONE Common.
(C) If the BANC ONE Average Price is less than $36.30 and more
than $33.00, each 1ST*BANK Conversion Share shall be
exchanged for that number of shares of BANC ONE Common,
carried to four decimal places, which when multiplied by
the BANC ONE Average Price, will equal $9.5354.
C-7
<PAGE> 130
In no event shall all the 1ST*BANK Conversion Shares be
converted into more than 425,000 shares of BANC ONE Common. In
no event shall the Exchange Rate be less than 0.2627 or more
than 0.2890 share of BANC ONE Common; provided, however, that
the Exchange Rate will be subject to the anti-dilution
provisions of Sections 7(e) and 7(f) of this Merger Agreement
and (ii) provisions of Section 7(c) with respect to fractional
shares.
(ii) The 6,400,000 shares of BOTNA Common issued and outstanding
immediately prior to the Effective Time shall continue to be
issued and outstanding shares of common stock $35 par value of
the Receiving Association, all of which shall be owned of
record by BANC ONE TEXAS.
(iii) All shares of 1ST*BANK Common held by 1ST*BANK as treasury
stock immediately prior to the Effective Time, if any, shall be
cancelled and shall not represent capital stock of the
Receiving Association and shall not be exchanged for shares of
BANC ONE Common.
(c) No certificate for fractional shares of BANC ONE Common will be
issued by BANC ONE in connection with the exchange contemplated by
the Merger, but in lieu thereof, any holder of 1ST*BANK Conversion
Shares shall, upon surrender of the certificate or certificates
representing such 1ST*BANK Conversion Share(s), be paid cash, without
interest, by BANC ONE for such fractional shares on the basis of the
BANC ONE Average Price.
(d) At or after the Effective Time, holders of certificates formerly
representing 1ST*BANK Conversion Shares will tender such certificates
to BANC ONE in accordance with forms and procedures distributed to
such holders by BANC ONE or Bank One, Indianapolis, N.A., as Exchange
Agent for BANC ONE,and subject to the provisions set forth above
relating to fractional shares, BANC ONE or said Exchange Agent will
distribute to the holders of certificates formerly representing
C-8
<PAGE> 131
1ST*BANK Conversion Shares in exchange for and upon surrender
for cancellation by such holders of a certificate or certificates
formerly representing 1ST*BANK Conversion Shares the certificate(s)
for shares of BANC ONE Common in accordance with the Exchange Rate.
Each certificate formerly representing 1ST*BANK Conversion Shares
(which will not include certificates representing treasury shares or
shares of 1ST*BANK subject to the rights of dissenting shareholders)
shall be deemed for all purposes to evidence the ownership of the
number of shares of BANC ONE Common and cash for fractional shares
into which such shares have been converted, except, however, and
notwithstanding the foregoing, that, until such surrender of the
certificate or certificates formerly representing 1ST*BANK Conversion
Shares, the holder thereof shall not be entitled to receive any
dividend or other payment or distribution payable to holders of BANC
ONE Common. Upon such surrender (or in lieu of surrender other
provisions reasonably satisfactory to BANC ONE as are made as set
forth in the next following paragraph), there shall be paid to the
person entitled thereto the aggregate amount of dividends or other
payments or distributions (in each case without interest) which became
payable after the Effective Time on the whole shares of BANC ONE
Common represented by the certificates issued upon such surrender and
exchange or in accordance with such other provisions, as the case may
be. After the Effective Time, the holders of certificates formerly
representing 1ST*BANK Conversion Shares shall cease to have rights
with respect to such shares (except such rights, if any, as they may
have as dissenting shareholders), and except as aforesaid, their sole
rights shall be to exchange said certificates for shares of BANC ONE
Common and cash for fractional shares in accordance with this Merger
Agreement. After the Effective Time, each former shareholder of
1ST*BANK Conversion Shares shall be a shareholder of record of the
shares of BANC ONE Common into which his 1ST*BANK Conversion Shares
have been converted and shall have rights and privileges associated
therewith until such shares are sold, exchanged or otherwise
alienated.
C-9
<PAGE> 132
Certificates representing 1ST*BANK Conversion Shares surrendered for
cancellation by each shareholder entitled to exchange 1ST*BANK
Conversion Shares for shares of BANC ONE Common by reason of the
Merger shall be appropriately endorsed or accompanied by such
appropriate instruments of transfer as BANC ONE may reasonably
require and which BANC ONE or the Exchange Agent shall have
distributed to the holders of the 1ST*BANK Conversion Shares;
provided, however, that if there be delivered to BANC ONE by any
person who is unable to produce any such certificate formerly
representing 1ST*BANK Conversion Shares for transfer (i) evidence to
the reasonable satisfaction of BANC ONE that any such certificate has
been lost, wrongfully taken or destroyed, and (ii) such security or
indemnity as reasonably may be requested by BANC ONE to save it
harmless, and (iii) evidence to the reasonable satisfaction of BANC
ONE that such person is the owner of the shares theretofore
represented by each certificate claimed by him to be lost, wrongfully
taken or destroyed and that he is the person who would be entitled to
present each such certificate and to receive shares of BANC ONE
Common pursuant to this Merger Agreement, then BANC ONE, in the
absence of actual notice to it that any shares theretofore
represented by any such certificate have been acquired by a bona fide
purchaser, shall deliver to such person the certificate(s)
representing shares of BANC ONE Common and, if applicable, cash for
fractional share interests, which such person would have been
entitled to receive upon surrender of each such lost, wrongfully
taken or destroyed certificate representing 1ST*BANK Conversion
Shares.
(e) If prior to the Effective Time BANC ONE shall declare a stock
dividend or subdivide, split up, reclassify or combine its shares of
common stock or declare a dividend or make a distribution on its
common stock in any security convertible into its common stock,
appropriate adjustment or adjustments will be made in the Exchange
Rate and other factors used to determine or limit the Exchange Rate.
C-10
<PAGE> 133
(f) If prior to the Effective Time BANC ONE shall declare a stock
dividend or subdivide, split up, reclassify or combine its shares of
common stock or declare a dividend or make a distribution on its
common stock in any security convertible into its common stock, and
the "Ex-Dividend Date" (as herein defined) established for the shares
being so divided or otherwise diluted (if an "Ex-Dividend Date" is
not established by the NYSE) or the Record Date, whichever is
applicable, is subsequent to the Valuation Period appropriate
adjustment or adjustments will be made in the Exchange Rate and other
factors used to determine or limit the Exchange Rate. The
"Ex-Dividend Date" is that date established by the NYSE for such
distribution. The Record Date is that date established by resolution
of the Board of Directors of the distributing party as the time as of
which record ownership of the distributing securities will entitle
the record owner(s) to such distribution.
8. BOARD OF DIRECTORS; EMPLOYEES. Each of those persons who currently serves
on the present Board of Directors of BOTNA and shall be so serving at the
Effective Time, shall serve on the Board of Directors of the Receiving
Association until its next annual or special meeting or until such time as
his successor has been elected and has qualified or until his earlier
resignation, removal from office or death.
The officers and employees of the Receiving Association immediately
following the Effective Time shall include, among others, the officers and
employees of 1ST*BANK and BOTNA immediately prior to the Effective Time.
Such officers shall, whenever possible, serve the Receiving Association
with the same title and perform the same duties and functions as they did
with 1ST*BANK or BOTNA; provided, however, that the titles, duties and
functions of persons who were officers and employees of 1ST*BANK
immediately prior to the Effective Time shall be modified, as necessary,
to avoid duplication of officer titles, duties and functions within the
Receiving Association after the Effective Time.
9. EMPLOYEE BENEFITS. Following the Effective Time, the employee benefit
programs to be available and applicable to the officers and employees of
1ST*BANK shall be as described in and governed by a Letter Agreement dated
July 27, 1994 between 1ST*BANK and BANC ONE (the "Benefits Agreement").
C-11
<PAGE> 134
10. UNDERTAKINGS OF THE PARTIES. 1ST*BANK, BOTNA, BANC ONE TEXAS and BANC ONE
further agree as follows:
(a) This Merger Agreement shall be submitted to the shareholders of
1ST*BANK and BOTNA for ratification and confirmation at meetings to
be called and held in accordance with the applicable provisions of
law and the respective Articles of Association and By-Laws of
1ST*BANK and BOTNA. 1ST*BANK's shareholders' meeting will be
scheduled to be held at a time mutually acceptable to 1ST*BANK and
BANC ONE approximately 30 days following the mailing by 1ST*BANK of
its proxy statement to its shareholders, which mailing will promptly
follow the effective date of the registration statement to be filed
by BANC ONE with the Securities and Exchange Commission (the "SEC")
as provided in Section 10(d). 1ST*BANK and BANC ONE will use their
reasonable best efforts to cooperate with each other in order to
facilitate the preparation, filing and effectiveness of the
registration statement and the proxy statement under Federal and
State securities laws to be used with respect to such shareholders'
meeting and the exchange of shares as contemplated by this Merger
Agreement.
(b) BANC ONE, 1ST*BANK and BOTNA will use their reasonable best efforts
to cooperate in the preparation by BANC ONE of the merger application
to the Comptroller under the provisions of Section18(c) of the Federal
Deposit Insurance Act, as amended (12 U.S.C. 1828(c)), and the
provisions of 12 U.S.C. 215a, and, to the extent required, the
application to the Texas Commissioner for the prior approval of the
proposed acquisition of 1ST*BANK by BANC ONE and BANC ONE TEXAS and
of the Merger, and, to the extent required, the application to the
Federal Reserve System (the "Board") under appropriate provisions of
Section 3 of the Bank Holding Company Act of 1956, as amended.
1ST*BANK will furnish BANC ONE such information, appropriate
representations and documents as may reasonably be requested in
connection therewith and will use its reasonable best efforts to
cooperate with BANC ONE in the procurement of requisite corporate and
C-12
<PAGE> 135
regulatory approvals to effect the Merger. BANC ONE will
provide 1ST*BANK and its counsel with reasonable opportunity to
comment on the applications which it proposes to file in connection
with such regulatory approvals and will incorporate such comments and
revisions as are reasonably deemed required by 1ST*BANK and its
counsel before making such filings. BANC ONE, BOTNA and 1ST*BANK will
use their reasonable best efforts to cause such applications to be
filed with and approved by the Comptroller and, to the extent
necessary, by the Texas Commissioner and/or the Board and to obtain
such other regulatory consents and approvals as may be necessary to
facilitate the merger of 1ST*BANK with and into BOTNA, in each case as
soon as reasonably possible. BANC ONE will promptly provide 1ST*BANK
with copies of all such applications, consents and approvals together
with correspondence to or from the Comptroller and, as applicable, the
Texas Commissioner and/or the Board related thereto.
(c) After receipt of required regulatory approvals, including, but not
limited to the approval of the Merger by the Comptroller, and after
the approval of the Merger by the shareholders of 1ST*BANK, BOTNA, at
the direction of BANC ONE and following consultation with 1ST*BANK,
shall designate in writing to the Comptroller the proposed Effective
Time, and the Effective Time shall be as specified by the Comptroller
in accordance with such request, subject to Section 26 of this Merger
Agreement. In no event will the date designated by BOTNA as the
Effective Time be sooner than the day following the day on which all
approvals of the shareholders of 1ST*BANK, the Comptroller and, if
required, the Texas Commissioner and/or the Board have been received
and any required waiting periods with respect thereto have expired,
nor will the date designated by BOTNA as the Effective Time be later
than 31 days following the date at which all such approvals have been
received and any required waiting periods with respect thereto have
expired.
(d) BANC ONE will prepare and file with the SEC and use its reasonable
best efforts to cause to become effective, a registration statement,
including the related prospectus and proxy statement referred to in
C-13
<PAGE> 136
Section 10(a), above ("Proxy Statement"), and any required
amendments thereto or supplements to any prospectus contained therein,
relating to the exchange of BANC ONE shares in the Merger contemplated
by this Merger Agreement. BANC ONE will prepare and file with the
NYSE and use its reasonable best efforts to cause to be accepted an
application to list on the NYSE for trading, upon notice of issuance,
the shares of BANC ONE Common to be issued in exchange for 1ST*BANK
Conversion Shares at the Effective Time. BANC ONE will provide
1ST*BANK and its counsel a reasonable opportunity to comment on such
proposed filings and will incorporate such comments and revisions as
are reasonably deemed required by 1ST*BANK and its counsel before
making any such filing. Such registration statement will not cover
resales by any persons who may be considered "underwriters" under Rule
145(c) of the Securities Act of 1933, as amended (the "1933 Act").
BANC ONE shall use its best efforts to have the shares of BANC ONE
Common qualified or exempted from qualification under all applicable
state securities laws as soon as possible. In the event that a stop
order has been issued, or threatened, by the SEC, that suspends or
would suspend the effectiveness of the registration statement, BANC
ONE shall use its best efforts to promptly remove, or cause not to be
issued, any such stop order. The shares of BANC ONE Common to be
issued in exchange for the 1ST*BANK Conversion Shares shall have been
qualified or exempted from qualification under all applicable state
securities laws prior to the Effective Time.
(e) Except as herein otherwise provided, BANC ONE and/or BANC ONE TEXAS
will assume and pay all expenses incident to the obtaining of the
requisite regulatory consents and approvals. Without limiting the
generality of the foregoing, the expenses to be assumed and paid by
BANC ONE and/or BANC ONE TEXAS shall include (i) all legal and other
expenses and taxes incurred by BANC ONE incident to the consummation
of the Merger contemplated by this Merger Agreement; (ii) all legal
and other expenses incurred by BANC ONE incident to the preparation
and filing of acquisition, and merger applications and other requests
for regulatory consents and approvals with the appropriate bank
regulatory agencies as set forth in or contemplated by this Merger
C-14
<PAGE> 137
Agreement; and, (iii) all legal and other expenses, if any,
incurred in connection with the registration of the common stock of
BANC ONE under the Federal and state securities laws. The expenses to
be assumed and paid by BANC ONE and/or BANC ONE TEXAS shall not
include any legal or other expenses incurred by 1ST*BANK in the
examination and review of documents for its own benefit or in
connection with its own corporate proceedings. BANC ONE will pay the
expenses of reproducing the Proxy Statement. 1ST*BANK shall be
responsible for its legal and accounting fees associated with the
Proxy Statement including the expenses associated with 1ST*BANK's
provision, if necessary, of certain 1ST*BANK financial statements and
related documents as more specifically described in Section 10(h).
(f) All information furnished by one party to another party in connection
with this Merger Agreement (whether before or after the date of this
Merger Agreement) and the transactions contemplated hereby will be
kept confidential by such other party (although it may be shared,
under a corresponding nondisclosure obligation with officers,
directors and others necessary for such party to effect the
transactions contemplated hereby) and will be used only in connection
with this Merger Agreement and the transactions contemplated hereby,
except to the extent that such information (i) is already known to
such other party when received, (ii) thereafter becomes lawfully
obtainable from other sources, otherwise than in violation of this
paragraph or similar duties or provisions regarding confidentiality,
or (iii) is, in the reasonable opinion of legal counsel for BANC ONE,
required to be disclosed in any document filed with the SEC, the
Board, the Texas Commissioner, the Comptroller or any other
governmental agency or authority. The provisions of this Merger
Agreement shall be in addition to the provisions of the
Confidentiality Agreement dated October 27, 1993 between 1ST*BANK and
BOTNA (the "Confidentiality Agreement") and shall not be deemed to
supersede nor to terminate said Confidentiality Agreement.
(g) BANC ONE will provide 1ST*BANK with copies of all filings made by
BANC ONE with the SEC under the Securities Exchange Act of 1934, as
amended, (the "1934 Act") and the 1933 Act and the respective rules
C-15
<PAGE> 138
and regulations of the SEC thereunder and with the NYSE with
respect to the BANC ONE Common to be issued at the Effective Time
pursuant hereto at the time such filings are made at any time from the
date of this Merger Agreement and prior to the Effective Time.
(h) BANC ONE, BANC ONE TEXAS and BOTNA will furnish to 1ST*BANK all
information concerning BANC ONE, BANC ONE TEXAS and BOTNA reasonably
required by 1ST*BANK in connection with the preparation of its proxy
solicitation materials for use in soliciting proxies in connection
with the meeting of 1ST*BANK's shareholders called for the purpose of
voting on the Merger and will promptly advise 1ST*BANK if BANC ONE,
BANC ONE TEXAS and/or BOTNA determines that any of such information
is or becomes false or misleading in any material respect. 1ST*BANK
will furnish to BANC ONE all information concerning 1ST*BANK
reasonably required by BANC ONE in connection with BANC ONE's
preparation of registration statements (including the related
prospectus) and any required amendments or supplements thereto, or in
connection with other filings by BANC ONE relating to the
registration of its shares and/or preparation of proxy statements to
shareholders and will promptly advise BANC ONE if 1ST*BANK determines
that any such information is or becomes false or misleading in any
material respect. 1ST*BANK shall provide BANC ONE with such
financial statements, management discussion and analysis and other
similar documents as BANC ONE reasonably deems necessary to be
included in the registration statement, which financial statements
shall be audited and certified by Fisk & Robinson, P.C. or another
accounting firm acceptable to BANC ONE and deemed by BANC ONE to be
knowledgeable with respect to the preparation of financial statements
to be included in registration statements filed with the SEC.
(i) No press release or other public disclosure of matters related to
this Merger Agreement or any of the transactions contemplated hereby
shall be made by 1ST*BANK or BANC ONE and its affiliates unless the
other party shall have provided its prior consent to the form and
substance thereof; provided, however, that nothing herein shall be
C-16
<PAGE> 139
deemed to prohibit any party hereto from making any
disclosure which its counsel deems necessary or advisable in order to
fulfill such party's disclosure obligations imposed by law.
(j) Prior to the Effective Time, BANC ONE TEXAS will vote all the shares
of BOTNA to ratify and confirm the proposal to merge 1ST*BANK with
and into BOTNA at a meeting of the shareholders of BOTNA held for
such purpose or by means of a unanimous written consent of BOTNA
shareholders adopted in lieu of a meeting to ratify and confirm the
Merger Agreement.
(k) For not less than the two-year period immediately following the
Effective Time, BANC ONE shall make available adequate current public
information about itself as that terminology is used in and as
required by Rule 144(c) of the SEC under the 1933 Act.
(l) Each of BANC ONE, BANC ONE TEXAS, BOTNA and 1ST*BANK will use its
reasonable best efforts to cause the Merger to qualify for
pooling-of-interests accounting treatment.
(m) 1ST*BANK will use its reasonable best efforts to cause each person
who, in the joint opinion of counsel for BANC ONE and 1ST*BANK, is at
the Effective Time or was, at the time of 1ST*BANK's shareholders'
meeting referred to in Section 10 hereof, an "affiliate" of 1ST*BANK
(as that term is used in Rules 144 and 145 promulgated by the SEC
under the 1933 Act), to execute and deliver to BANC ONE the written
undertakings in the form attached hereto as EXHIBIT B.
(n) BANC ONE and 1ST*BANK shall each provide the other with adequate
opportunity to conduct such reviews and examinations of the business,
properties and conditions (financial and otherwise) of the other as
BANC ONE and 1ST*BANK, respectively, shall deem prudent, provided
that such investigations shall not interfere unreasonably with the
normal operations of the party being reviewed.
C-17
<PAGE> 140
11. DISSENTING SHAREHOLDERS. Any shareholder of 1ST*BANK who has voted
against the Merger at the meeting of shareholders of 1ST*BANK called to
vote on the Merger or has given notice in writing at or prior to such
meeting to the presiding officer that he dissents from the Merger shall be
entitled to receive the value of his shares subject to and in accordance
with the provisions of said 12 U.S.C. Section215a, and notwithstanding
anything in Section 7 to the contrary, his shares shall not be exchanged
for BANC ONE Common, but shall evidence his rights to receive the value
thereof pursuant to said 12 U.S.C. Section 215a.
Immediately prior to the Effective Time, BANC ONE and 1ST*BANK shall
determine, with the assistance of legal counsel, the maximum aggregate
number of shares of 1ST*BANK Common held by 1ST*BANK shareholders for
which the holder thereof, potentially, may have the right to be paid the
value thereof in cash pursuant to 12 USC Section 215a. Such aggregate
number of shares shall be based upon the number of shares of 1ST*BANK
Common voted against the Merger together with the number of shares owned
by a shareholder who has given 1ST*BANK written notice of such holder's
dissent from the plan of merger prior to 1ST*BANK's meeting of shareholders
held to consider the Merger proposal. Such aggregate number of shares
shall be multiplied by the larger of the market value or book value of one
share of 1ST*BANK Common immediately prior to the Effective Time. Such
amount together with an additional sum of $10,000 shall, immediately prior
to the Effective Time, be paid by 1ST*BANK from its assets to Bank One,
Indianapolis, N.A., as Escrow Agent pursuant to the terms of the Escrow
Agreement annexed hereto as Exhibit C. An Escrow Agreement in the form of
Exhibit C will be executed prior to the Effective Time by 1ST*BANK, BOTNA
and Bank One, Indianapolis, N.A. as the Escrow Agent. In the event that
immediately prior to the Merger no holders of 1ST*BANK Common have
positioned themselves as potential dissenting shareholders who may
effectively demand the value of their shares of 1ST*BANK Common in cash,
1ST*BANK shall not be required to pay any amount to the Escrow Agent and
the Escrow Agreement will not be executed. Under no circumstances will
the total amount paid into the escrow account by 1ST*BANK exceed one
percent (1%) of 1ST*BANK's net assets. Under no circumstances will any
assets of BANC ONE, BANC ONE TEXAS or BOTNA be paid into the escrow
account or be used to pay 1ST*BANK shareholders who dissent to the Merger.
C-18
<PAGE> 141
12. TAX OPINION. BANC ONE and 1ST*BANK shall use their respective reasonable
best efforts to obtain from Coopers & Lybrand a written opinion addressed
to, among others, 1ST*BANK, its shareholders and BANC ONE, that based upon
the Internal Revenue Code and regulations thereunder and rulings issued by
the Internal Revenue Service in transactions similar to those contemplated
by this Merger Agreement:
(a) For Federal income tax purposes, the transaction is viewed as an
acquisition by BANC ONE TEXAS of substantially all of the assets of
1ST*BANK solely in exchange for BANC ONE Common and the assumption of
all of the liabilities of 1ST*BANK by BANC ONE TEXAS followed by the
transfer of the assets of 1ST*BANK to BOTNA and the assumption by
BOTNA of the liabilities of 1ST*BANK.
(b) The acquisition by BANC ONE TEXAS of substantially all of the assets
of 1ST*BANK in exchange solely for shares of BANC ONE Common and the
assumption by BANC ONE TEXAS of 1ST*BANK's liabilities will
constitute a reorganization within the meaning of Section 368(a)(1)(A)
and (a)(2)(D) of the Internal Revenue Code. Pursuant to Section
368(a)(2)(C), the acquisition by BANC ONE TEXAS of substantially all
of the assets of 1ST*BANK will not be disqualified under Section
368(a)(2)(D) by reason of the fact that the assets of 1ST*BANK that
were acquired by BANC ONE TEXAS are transferred to BOTNA.
(c) No gain or loss will be recognized by BANC ONE, BANC ONE TEXAS, BOTNA
or 1ST*BANK as a consequence of the transactions herein contemplated;
(d) No gain or loss will be recognized to the shareholders of 1ST*BANK on
the exchange of their shares of 1ST*BANK Common (including shares of
1ST*BANK Common received by any such shareholders immediately prior
to the Effective Time by reason of the conversion of 1ST*BANK
Debentures into shares of 1ST*BANK Common) solely for shares of BANC
ONE Common (disregarding for this purpose any cash received for
fractional share interests to which they may be entitled);
C-19
<PAGE> 142
(e) The Federal income tax basis of the BANC ONE Common (including
fractional share interests to which they may be entitled) received by
the shareholders of 1ST*BANK (including shares of BANC ONE Common
exchanged for 1ST*BANK Common which were received by any such
shareholders immediately prior to the Effective Time by reason of the
conversion of 1ST*BANK Debentures into shares of 1ST*BANK Common)
will be the same as the Federal income tax basis of the 1ST*BANK
Common surrendered in exchange therefor; and
(f) The holding period of the BANC ONE Common received by a shareholder
of 1ST*BANK will include the period for which the 1ST*BANK Common
exchanged therefor was held (including shares of 1ST*BANK Common
which were received by any such shareholders immediately prior to the
Effective Time by reason of the conversion of 1ST*BANK Debentures
into shares of 1ST*BANK Common), provided the exchanged 1ST*BANK
Common was held as a capital asset by such shareholder on the date of
the exchange.
13. REPRESENTATIONS AND WARRANTIES OF BANC ONE. BANC ONE represents and
warrants to 1ST*BANK that, except as set forth in BANC ONE's disclosure
letter to 1ST*BANK dated July 27, 1994 and delivered to 1ST*BANK not later
than the time of 1ST*BANK's execution of this Merger Agreement (the "BANC
ONE Disclosure Letter"), and except as otherwise indicated below:
(a) BANC ONE is a corporation duly organized and validly existing in good
standing under the laws of the State of Ohio, is a registered bank
holding company under the Bank Holding Company Act of 1956, as
amended, and is qualified to do business and is in good standing in
the State of Ohio, together with all other jurisdictions where it is
both required to so qualify and where the failure to so qualify would
have a material adverse effect on the business, operations, financial
condition or results of operations of BANC ONE and its subsidiaries,
taken as a whole, or on the ability of BANC ONE to consummate the
transactions contemplated hereby (a "BANC ONE Material Adverse
Effect"), and BANC ONE has full power and authority (including all
licenses, franchises, permits and other governmental authorizations
C-20
<PAGE> 143
which are legally required) to engage in the businesses and
activities now conducted by it and its subsidiaries. BANC ONE is not
subject to any formal or informal agreement or understanding with,
nor is it subject to any order of, any bank regulatory authority
restricting or prohibiting or attempting to restrict or prohibit any
activities or conduct of BANC ONE. As of March 31, 1994, the
authorized capital stock of BANC ONE consisted of (i) 600,000,000
shares of common stock without par value, of which a total of
381,835,796 shares were issued and 250,000 of which were shares held
by BANC ONE as treasury stock and (ii) 35,000,000 shares of preferred
stock without par value, of which 4,998,000 shares were issued and
outstanding as Series C $3.50 Cumulative Convertible Preferred
Stock. All of the issued and outstanding shares of BANC ONE's
capital stock are duly authorized, validly issued, fully paid,
nonassessable and subject to no pre-emptive rights. Subject only to
obtaining the required regulatory and shareholder approvals, BANC ONE
is, and at all times after the date of this Merger Agreement to and
including the Effective Time will be, authorized to effect the Merger
under applicable law.
(b) BANC ONE has furnished to 1ST*BANK copies of the following financial
statements relating to BANC ONE and its consolidated subsidiaries:
(i) the audited Consolidated Balance Sheets of BANC ONE as of
December 31, 1993 and 1992 and the Consolidated Statements of Income,
Shareholders' Equity and Cash Flows for the years then ended,
together with the notes thereto, as audited by Coopers & Lybrand,
independent auditors together with the notes thereto; and (ii) the
unaudited Consolidated Balance Sheet of BANC ONE as at March 31, 1994
and the unaudited Consolidated Statements of Income and Shareholders'
Equity for the quarterly period then ended, together with the notes
thereto. Each of the aforementioned financial statements present
fairly, in accordance with generally accepted accounting principles
(applied on a consistent basis except as disclosed in the footnotes
thereto), the consolidated financial position and results of
operations of BANC ONE as of the dates and for the periods therein
set forth. Such financial statements do not, as of the dates
C-21
<PAGE> 144
thereof, include any material asset or omit any material
liability, absolute or contingent, or other fact, the inclusion or
omission of which renders such financial statements, in light of the
circumstances under which they were made, misleading in any material
respect. Since March 31, 1994, there has not been any change in the
financial condition, results of operations or business of BANC ONE and
its subsidiaries that has had a BANC ONE Material Adverse Effect.
Since March 31, 1994, BANC ONE has issued approximately 1,799,000
additional shares of BANC ONE Common.
(c) The Board of Directors of BANC ONE has duly authorized the execution
and delivery of this Merger Agreement and approved the Merger as
contemplated by said Merger Agreement. No authorization of this
Merger Agreement or of the transactions hereby contemplated is
required by the shareholders of BANC ONE. BANC ONE has all requisite
power and authority to enter into this Merger Agreement and, after
BANC ONE TEXAS' vote of the shares of BOTNA in favor of the Merger as
contemplated by Section 10(j), BANC ONE will have the authority to
consummate the transactions contemplated hereby. This Merger
Agreement constitutes the valid and legally binding and enforceable
obligation of BANC ONE and this Merger Agreement and the consummation
of the Merger have been duly authorized and approved on behalf of
BANC ONE by all requisite corporate action. Provided the required
approvals are obtained from the Comptroller and, to the extent
necessary, the Texas Commissioner and/or the Board, neither the
execution and delivery of this Merger Agreement nor the consummation
of the Merger will conflict with, result in the breach of, constitute
a default under or accelerate the performance provided by the terms
of any law, or any rule or regulation of any governmental agency or
authority or any judgment, order or decree of any court, bank
regulatory agency or other governmental agency to which BANC ONE is
subject, any contract, agreement or instrument to which BANC ONE is a
party or by which BANC ONE is bound or committed, or the Articles of
Incorporation or Regulations of BANC ONE, or constitute an event
which with the lapse of time or action by a third party, could, to
the best of BANC ONE's knowledge, result in the default under any of
C-22
<PAGE> 145
the foregoing or result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of BANC ONE or upon
any of the stock of BANC ONE or adversely affect the ability of BANC
ONE to consummate the transactions contemplated hereby, except, in
the case of contracts, agreements or instruments, such defaults,
conflicts or breaches which either (i) will be cured or waived prior
to the Effective Time or (ii) if not so cured or waived would not, in
the aggregate, have any BANC ONE Material Adverse Effect.
(d) The reserve for possible loan and lease losses shown on the March 31,
1994 Consolidated Balance Sheet of BANC ONE and its subsidiaries is
adequate in all material respects under the requirements of generally
accepted accounting principles to provide for possible losses, net of
recoveries relating to loans previously charged off, on loans
outstanding (including, without limitation, accrued interest
receivable) as of March 31, 1994.
(e) Except as disclosed in the financial statements referred to in
Section 13(b), there is no litigation, action, suit, investigation or
proceeding pending or, to the best of the knowledge after due inquiry
of BANC ONE and its executive officers, overtly threatened, against
or affecting BANC ONE or its subsidiaries or involving any of their
respective properties or assets, at law or in equity, before any
federal, state, municipal, local or other governmental authority,
which is reasonably likely to be resolved adversely to the interest
of BANC ONE or its subsidiaries and, if so resolved, would have a
BANC ONE Material Adverse Effect or materially impair its ability, or
that of BANC ONE TEXAS, to perform under this Merger Agreement, and
to the best of the knowledge and belief after due inquiry of BANC ONE
and its executive officers, no one has reasonable or valid grounds on
which it reasonably can be expected that anyone will assert or
initiate any such litigation, action, suit, investigation or
proceeding against BANC ONE based upon the wrongful action or
inaction of BANC ONE or its subsidiaries or any of their respective
officers, directors or employees.
C-23
<PAGE> 146
(f) At the Effective Time and on such subsequent dates when the former
shareholders of 1ST*BANK surrender their 1ST*BANK share certificates
for cancellation, the shares of BANC ONE Common to be exchanged with
former shareholders of 1ST*BANK will have been duly authorized and
validly issued by BANC ONE and will be fully paid and nonassessable
and subject to no pre-emptive rights and will be duly approved for
listing on the NYSE upon notice of issuance.
(g) BANC ONE and each of its subsidiaries have good and marketable title
to all their respective assets and properties, whether real or
personal, tangible or intangible, including without limitation the
capital stock of its subsidiaries and all other assets and properties
reflected in BANC ONE's Balance Sheet as of March 31, 1994 or
acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of for fair value in the ordinary
course of business since March 31, 1994). Such assets and properties
are subject to no liens, mortgages, security interests, encumbrances,
pledges or charges of any kind, except (i) as noted in said Balance
Sheet or the notes thereto; (ii) statutory liens for taxes not yet
delinquent; (iii) landlord's liens; and (iv) minor defects and
irregularities in title and encumbrances which do not materially
impair the use thereof for the purposes for which they are held; and
such liens, mortgages, security interests, encumbrances and charges
do not, in the aggregate, have a BANC ONE Material Adverse Effect.
BANC ONE and its subsidiaries as lessees have the unqualified right
under valid and subsisting leases to occupy, use, possess and control
all property leased by BANC ONE and its subsidiaries.
(h) To the best of the knowledge after due inquiry of BANC ONE and its
executive officers, BANC ONE and its subsidiaries have complied with
all laws, regulations and orders applicable to them and to the
conduct of their businesses, including without limitation, all
statutes, rules and regulations pertaining to the conduct of banking
activities except for violations which together with any penalty
which results therefrom has not had and will not have a BANC ONE
Material Adverse Effect. Neither BANC ONE nor any of its
C-24
<PAGE> 147
subsidiaries is in default under, and no event has occurred
which, to the best of BANC ONE's knowledge, after due inquiry, is
likely to result in the default under the terms of any judgment,
decree, order, writ, rule or regulation of any governmental authority
or court, whether federal, state or local and whether at law or in
equity, in each case where the default has had or is likely to have a
BANC ONE Material Adverse Effect.
(i) BANC ONE has not incurred and will not incur directly or indirectly
any liability for brokerage, finders', agents' or investment bankers'
fees or commissions in connection with this Merger Agreement or the
transactions contemplated hereby.
(j) Each pension, stock bonus or purchase, profit-sharing, retirement,
health and welfare plan maintained by or covering employees of BANC
ONE or any subsidiary of BANC ONE other than a multiemployer plan
(for purposes of this paragraph hereinafter referred to collectively
as the "Plans") which purports to be a qualified plan under Section
401(a) of the Code is so qualified. All of the Plans which
constitute employee pension benefit or employee welfare benefit plans
subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), have been maintained in compliance in all material
respects with the applicable requirements of ERISA. All material
notices, reports and other filings required under applicable law to
be given or made to or with any governmental agency with respect to
the Plans have been timely filed or delivered. BANC ONE has no
knowledge of any circumstances which would adversely affect the
qualification of the Plans or their compliance with the applicable
requirements of ERISA, would result or have resulted in liability
under Title IV of ERISA or of any "reportable event" (as such term is
defined in Section 4043(b) of ERISA) or any "prohibited transaction"
(as such term is defined in Section 406 of ERISA and Section 4975(c)
of the Code) which has occurred since the date on which said sections
became applicable to the Plans and which could reasonably be expected
to result in any material liability of BANC ONE or any subsidiary to
the Pension Benefit Guaranty Corporation (the "PBGC"), the Department
C-25
<PAGE> 148
of Treasury, the Department of Labor or any multiemployer
plan. Those Plans which are defined benefit plans within the meaning
of ERISA meet the minimum funding standards set forth in the Code and
ERISA and the assets of such Plans equal or exceed the current value
of accrued benefits under such Plans as of the most recent plan
valuation date. There are no pending or threatened claims (other than
claims for benefits in the ordinary course), lawsuits or arbitrations
which have been asserted or instituted against the Plans, any
fiduciaries thereof with respect to their duties to the Plans or the
assets of any of the trusts under any of the Plans which could
reasonably be expected to result in any material liability of BANC ONE
or any subsidiary to the PBGC, Department of Treasury, Department of
Labor or any multiemployer plan.
(k) BANC ONE and/or its subsidiaries have duly filed all federal, state,
county and local income, franchise, bank, excise, real and personal
property and other tax returns and reports (including, but not
limited to, those relating to social security, withholding,
unemployment insurance, and occupation, sales and use taxes and those
filed on a consolidated, combined or unitary basis) required to have
been filed by BANC ONE or its subsidiaries up to the date hereof.
All of the foregoing returns are true and correct in all material
respects, and BANC ONE and its subsidiaries have paid or, prior to
the Effective Time, will pay all taxes, interest and penalties shown
on such returns or reports as being due or (except to the extent the
same are contested in good faith and, if material, summarized in the
BANC ONE Disclosure Letter) or claimed to be due to any federal,
state, county, local or other taxing authority, and there is, and at
the Effective Time will be, no basis for any additional claim or
assessment which might materially and adversely affect BANC ONE and
its subsidiaries, except for those being contested in good faith and
summarized in the BANC ONE Disclosure Letter. BANC ONE and its
subsidiaries have paid or made adequate provision in its financial
statements or its books and records for all taxes payable in respect
of all periods ending on or before the date hereof. BANC ONE and its
subsidiaries have, or at the Effective Time will have, no liability
C-26
<PAGE> 149
for any taxes, interest or penalties of any nature
whatsoever, except for those taxes which may have arisen up to the
Effective Time in the ordinary course of business and are properly
accrued on the books of BANC ONE as of the Effective Time or are being
contested in good faith and have, if material, been summarized in the
BANC ONE Disclosure Letter.
(l) BANC ONE has in effect insurance coverage with reputable insurers,
which in respect of amounts, premiums, types and risks insured,
constitutes reasonably adequate coverage against all risks
customarily insured against by bank holding companies comparable in
size and operation to BANC ONE.
(m) Neither the Proxy Statement nor the related registration statement
nor any amendment or supplement thereto that is filed with the SEC in
connection with the transactions contemplated hereby (except for any
information which has been or shall be supplied by 1ST*BANK for
inclusion in the Proxy Statement and registration statement and is so
included as so supplied) shall contain (in the case of information
relating to the Proxy Statement, at the time it is mailed and in the
case of information relating to the registration statement at the
time it becomes effective and at the time of 1ST*BANK's shareholders'
meeting) any untrue statement of a material fact or shall omit to
state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they are made, not
misleading. The registration statement and any amendments or
supplements thereto that are filed with the SEC in connection with
the transactions contemplated hereby will comply as to form in all
material respects with the provisions of the 1933 Act and the rules
and regulations promulgated thereunder. All documents that BANC ONE
files with the NYSE in connection with the transactions contemplated
hereby will comply as to form in all material respects with the
provisions of applicable law.
(n) No employee of BANC ONE or any of its subsidiaries is represented,
for purposes of collective bargaining, by a labor organization of any
type. BANC ONE is unaware of any efforts during the past five years
C-27
<PAGE> 150
to unionize or organize any employees of BANC ONE or any of
its subsidiaries, and no claim related to such employees under the
Fair Labor Standards Act, National Labor Relations Act, Civil Rights
Act of 1964, Walsh-Healy Act, Davis Bacon Act, Civil Rights Act of
1866, Age Discrimination in Employment Act, Equal Pay Act of 1963,
Executive Order No. 11246, Federal Unemployment Tax Act, Vietnam Era
Veterans Readjustment Act, Occupational Safety and Health Act, or any
state or local employment related law, order, ordinance or regulation,
no unfair labor practice, discrimination or wage-and-hour claim is
pending or, to the best of BANC ONE's knowledge, threatened against
BANC ONE or any of its subsidiaries which claim has had or is
reasonably likely to have a BANC ONE Material Adverse Effect.
(o) To the actual knowledge of BANC ONE and its executive officers:
(i) with respect to any contaminant, pollutant, hazardous substance,
hazardous waste, hazardous pollutant, toxic pollutant, toxic waste or
toxic substance ("Contaminant"), there are no material actions,
proceedings or investigations pending or threatened before any
federal or state environmental regulatory body, or before any federal
or state court, alleging non-compliance with or liability in
connection with, by BANC ONE or any of its subsidiaries, the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. Section Section 9601 et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, 42 U.S.C. Section Section 6901 et seq.
("RCRA"), the Clean Water Act, 33 U.S.C. Section Section 1251 et seq.
("CWA"), or the Clean Air Act, 42 U.S.C. Section Section 7401 et seq.
("CAA"), as each is amended from time to time, or any other federal,
state, local or municipal statute, ordinance or regulation, or order,
ruling or other decision of any court, administrative agency or other
governmental authority relating to health or safety or environmental
protection (such statutes, ordinances, regulations, orders, rulings
and decisions, together, "Environmental Laws"); (ii) there is no
reasonable basis for the institution of any material action,
proceeding or investigation against BANC ONE or any of its
subsidiaries under any Environmental Law; (iii) neither BANC ONE nor
any of its subsidiaries is responsible in any material respect under
any Environmental Law for
C-28
<PAGE> 151
any release by any person at or in the vicinity of real
property of any Contaminant, caused by the spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of any such hazardous substance into
the environment (collectively "Release"); (iv) neither BANC ONE nor
any of its subsidiaries is responsible for any material costs of any
response action required by virtue of any Release of any Contaminant
into the environment including, without limitation, costs arising from
investigation, removal or remediation of Contaminants, security
fencing, alternative water supplies, temporary evacuation and housing
and other emergency assistance undertaken by any environmental
regulatory body or any other person; (v) BANC ONE and its subsidiaries
are, in all material respects, in compliance with all applicable
Environmental Laws; and (vi) no real property owned or used by BANC
ONE or any of its subsidiaries contains any Contaminant including,
without limitation, any asbestos, PCBs or petroleum products or
byproducts in any form, the presence, location or condition of which
(a) could require remediation or other corrective action pursuant to
any Environmental Law in any material respect, or (b) otherwise would
pose any significant health or safety risk unless remedial measures
were taken.
(p) BANC ONE and/or its subsidiaries (i) have surveyed the facilities
where BANC ONE and its subsidiaries conduct their businesses
including, without limitation, automatic teller machines
(collectively, the "BANC ONE Facilities") for compliance with the
Americans with Disabilities Act and the regulations issued thereunder
(collectively, "ADA"); (ii) have developed action plans to remove
architectural barriers including communication barriers that are
structural in nature from existing BANC ONE Facilities (collectively,
the "BANC ONE Barriers") when such removal is "readily achievable,"
as that term is defined in ADA; (iii) have finalized action plans for
automatic teller machines ("ATMs") in conformance with the Joint
Final Rule of the Architectural and Transportation Barriers
Compliance Board ("ATBCB") and the Department of Transportation,
effective August 16, 1993; (iv) have developed or will develop
C-29
<PAGE> 152
schedules for BANC ONE Barrier removal from BANC ONE
Facilities in such action plans so that BANC ONE Barrier removal was
complete on January 26, 1992 or will be completed as soon as
practicable thereafter; and (v) have removed all BANC ONE Barriers in
BANC ONE Facilities or will cause all BANC ONE Barriers to be removed
in accordance with such action plans. All "alterations" (as such term
is defined in ADA) to BANC ONE Facilities undertaken after January 26,
1992 comply with ADA and the ATBCB Accessibility Guidelines for
Buildings and Facilities ("ADAAG"). Effective January 26, 1992, all
plans and designs for new construction to be utilized by BANC ONE and
its subsidiaries comply with ADA and ADAAG. To the best of BANC ONE's
knowledge, after due inquiry, no material investigations, proceedings,
or complaints, formal or informal, are pending or threatened against
BANC ONE and/or its subsidiaries in connection with BANC ONE
Facilities under ADA, ADAAG, or any other state or federal law
concerning accessibility for individuals with disabilities.
(q) The statements made and the information included in the BANC ONE
Disclosure Letter and any attachments thereto shall be deemed to
constitute representations and warranties of BANC ONE under this
Merger Agreement to the same extent as if herein set forth in full.
Anything disclosed in the BANC ONE Disclosure Letter or the
attachments thereto shall be considered to have been disclosed for
purposes of all representations, warranties and covenants under this
Merger Agreement.
14. REPRESENTATIONS AND WARRANTIES OF BANC ONE TEXAS. BANC ONE TEXAS
represents and warrants to 1ST*BANK that, except as set forth in the BANC
ONE Disclosure Letter or as otherwise indicated below:
(a) BANC ONE TEXAS is a corporation duly organized and validly existing
in good standing under the laws of the State of Ohio, is a registered
bank holding company under the Bank Holding Company Act of 1956, as
amended, and is qualified to do business and is in good standing in
the State of Ohio together with all other jurisdictions where it is
C-30
<PAGE> 153
both required to so qualify and the failure to so qualify
would have materially adverse effect on the business, operations,
financial condition or results of operations of BANC ONE TEXAS and its
subsidiaries, taken as a whole, or on the ability of BANC ONE TEXAS to
consummate the transactions contemplated hereby, and BANC ONE TEXAS
has full power and authority (including all licenses, franchises,
permits and other governmental authorizations which are legally
required) to engage in the businesses and activities now conducted by
it. BANC ONE TEXAS owns all of the issued and outstanding shares of
BOTNA Common.
(b) The Board of Directors of BANC ONE TEXAS has authorized execution of
this Merger Agreement and approved the acquisition of 1ST*BANK as
contemplated by said Merger Agreement. No authorization of this
Merger Agreement or of the transactions hereby contemplated is
required by the shareholders of BANC ONE TEXAS. BANC ONE TEXAS has
all requisite power and authority to enter into this Merger Agreement
and, after the vote by BANC ONE TEXAS of its shares of BOTNA in favor
of the Merger as contemplated by Section 10(j), BANC ONE TEXAS will
have the authority to consummate the transactions contemplated
hereby. This Merger Agreement constitutes the valid and legally
binding obligation of BANC ONE TEXAS and this Merger Agreement and
the consummation hereof have been duly authorized and approved on
behalf of BANC ONE TEXAS by all requisite corporate action. Provided
the required approvals are obtained from the Comptroller and, to the
extent necessary, the Texas Commissioner and/or the Board, neither
the execution and delivery of this Merger Agreement nor the
consummation of the Merger will conflict with, result in the breach
of, constitute a default under or accelerate the performance provided
by the terms of any law, or any rule or regulation of any
governmental agency or authority or any judgment, order or decree of
any court or other governmental agency to which BANC ONE TEXAS may be
subject, any contract, agreement or instrument to which BANC ONE
TEXAS is a party or by which BANC ONE TEXAS is bound or committed, or
the Articles of Incorporation or Code of Regulations of BANC ONE
TEXAS, or constitute an event which with the lapse of time or action
C-31
<PAGE> 154
by a third party, could, to the best of BANC ONE TEXAS's
knowledge, result in the default under any of the foregoing or result
in the creation of any lien, charge or encumbrance upon any of the
assets or properties of BANC ONE TEXAS or adversely affect the ability
of BANC ONE to consummate the transactions contemplated hereby.
15. REPRESENTATIONS AND WARRANTIES OF BOTNA. BOTNA represents and warrants to
1ST*BANK that, except as set forth in the BANC ONE Disclosure Letter or as
otherwise indicated below:
(a) BOTNA is a national banking association duly organized, validly
existing and in good standing under the laws of the United States of
America. BOTNA has heretofore delivered to 1ST*BANK true, accurate
and complete copies of the currently effective Articles of
Association and Bylaws of BOTNA, including all amendments thereto.
BOTNA (i) is duly authorized to conduct a general banking business,
subject to the supervision of the OCC as provided in the national
banking laws, (ii) is a member of the Federal Reserve system and a
stockholder of the Federal Reserve Bank of Dallas, (iii) is an
insured bank as defined in the Federal Deposit Insurance Act, and
(iv) has full power and authority (including all licenses,
franchises, permits and other governmental authorizations which are
legally required) to engage in the business and activities now
conducted by BOTNA. As of March 31, 1994, BOTNA had 12,000,000
shares of authorized capital stock consisting solely of common stock
with par value of $35.00 per share ("BOTNA Common"), 6,400,000 of
which were issued and outstanding. As of March 31, 1994, BOTNA had
surplus of $778,762,000, undivided profits including net unrealized
gains (losses) on investment securities classified as held for sale
of $429,213,000, and total resources of $1,431,975,000. All of the
capital stock of BOTNA has been duly and validly authorized and
issued by BOTNA. All of said issued shares are fully paid and
nonassessable (except to the extent provided in Section 5205 of the
Revised Statutes of the United States) and are not issued in
violation of the preemptive rights of any shareholder. There are no
outstanding options, warrants or commitments of any kind relating to
BOTNA's capital stock.
C-32
<PAGE> 155
(b) There is no litigation, action, suit, investigation or proceeding
pending or, to the best of the knowledge, after due inquiry, of BOTNA
or its executive officers, overtly threatened, against or affecting
BOTNA or involving any of its properties or assets, at law or in
equity or before any federal, state, municipal, local or other
governmental authority or any court, involving a material amount
which, if resolved adversely to the interest of BOTNA, would
materially affect the operations of BOTNA and/or its ability to
perform under this Merger Agreement, and no one has asserted and, to
the best of the knowledge and belief of BOTNA and its executive
officers, after due inquiry, no one has reasonable or valid grounds
on which it reasonably can be expected that anyone will assert any
such claims against BOTNA based upon the wrongful action or inaction
of BOTNA or any of its officers, directors or employees.
(c) The Board of Directors of BOTNA has duly authorized execution and
delivery of this Merger Agreement and approved the Merger as
contemplated by the Merger Agreement and will recommend it to its
shareholder for adoption. Subject to ratification and confirmation
of the Merger Agreement by the shareholders of BOTNA, this Merger
Agreement constitutes the valid, legally binding and enforceable
obligation of BOTNA and BOTNA has all requisite power and authority
to enter into this Merger Agreement and BOTNA has the authority to
consummate the transactions contemplated hereby so that, provided all
required corporate and regulatory approvals are obtained, neither the
execution and delivery of this Merger Agreement nor the consummation
of the Merger will conflict with, result in the breach of, constitute
a default under or accelerate the performance provided by the terms
of any law, or any rule or regulation of any governmental agency or
authority or any judgment, order or decree of any court, bank
regulatory agency or other governmental agency to which BOTNA may be
subject, any contract, agreement or instrument to which BOTNA is a
party or by which BOTNA is bound or committed, or the Articles of
Association or By-Laws of BOTNA, or constitute an event which with
the lapse of time or action by a third party, could, to the best of
BOTNA's knowledge after due inquiry, result in the default under any
of the foregoing.
C-33
<PAGE> 156
16. REPRESENTATIONS AND WARRANTIES OF 1ST*BANK. 1ST*BANK represents and
warrants to BANC ONE and BOTNA that, except as set forth in 1ST*BANK's
disclosure letter to BANC ONE dated July __, 1994 and delivered to BANC
ONE not later than the time of BANC ONE's execution of this Merger
Agreement (the "1ST*BANK Disclosure Letter") and except as otherwise
indicated below:
(a) 1ST*BANK is a banking corporation duly organized, validly existing
and in good standing under the laws of the State of Texas and is
qualified to do business and is in good standing in all jurisdictions
where it is both required to so qualify and where the failure to so
qualify would have a material adverse effect on the business,
operations, financial condition or results of operations of 1ST*BANK
or on the ability of 1ST*BANK to consummate the transactions
contemplated hereby (a "1ST*BANK Material Adverse Effect") and
1ST*BANK has full corporate power and authority (including all
licenses, franchises, permits and other governmental authorizations
which are legally required) to engage in the businesses and
activities now conducted by it and the Subsidiaries. 1ST*BANK has
heretofore delivered to BANC ONE true, accurate and complete copies
of the currently effective Articles of Association and Bylaws of
1ST*BANK, including all amendments thereto. 1ST*BANK (i) is duly
authorized to conduct a general banking business, subject to the
supervision of the Texas Commissioner and the FDIC as provided in
applicable Texas and national banking laws, (ii) is not a member of
the Federal Reserve system, (iii) is an insured bank as defined in
the Federal Deposit Insurance Act, and (iv) has full power and
authority (including all licenses, franchises, permits and other
governmental authorizations which are legally required) to engage in
the business and activities now conducted by it. 1ST*BANK is not
subject to any formal or informal agreement or understanding with,
nor is it subject to any order of, any bank regulatory authority
restricting or prohibiting or attempting to restrict or prohibit any
activities or conduct of 1ST*BANK. As of March 31, 1994, 1ST*BANK
had 1,304,167 shares of authorized capital stock consisting solely of
1,304,167 shares of common stock with par value of $2.00 per share
C-34
<PAGE> 157
("1ST*BANK Common"), all of which shares were issued and
outstanding and none of which were shares of treasury stock owned by
1ST*BANK. As of March 31, 1994, 1ST*BANK had surplus of $3,654,166,
undivided profits including net unrealized gains (losses) on
investment securities classified as held for sale of $1,227,207, and
total resources of $7,489,709. All of the capital stock of 1ST*BANK
has been duly and validly authorized and issued by 1ST*BANK. All of
said issued shares are fully paid and nonassessable and are not issued
in violation of the preemptive rights of any shareholder. There are
no outstanding options, warrants, debentures, or commitments of any
kind relating to 1ST*BANK's capital stock except for the 1ST BANK
Debentures which are convertible into not more than 166,666 shares of
1ST*BANK Common.
(b) 1ST*BANK has furnished to BANC ONE copies of the following financial
statements relating to 1ST*BANK: (i) the audited Balance Sheet of
1ST*BANK as of December 31, 1993 and 1992, and the Statements of
Income, Stockholders' Equity and Cash Flows for the years then ended,
together with the notes thereto, as audited by Fisk & Robinson P.C.,
Certified Public Accountants; (ii) the unaudited Balance Sheet of
1ST*BANK as of March 31, 1994 and the unaudited Statement of Income
for the period then ended, together with the notes thereto (iii) the
financial statements contained in 1ST*BANK's Consolidated Reports of
Condition and Consolidated Reports of Income, Expenses and Dividends
("Call Reports") at December 31, for the years 1993 and 1992 as
furnished to the FDIC, and (iv) the financial statements contained in
1ST*BANK's Call Report for the quarter ended March 31, 1994 as
furnished to the FDIC. Each of the aforementioned financial
statements presents fairly, in accordance with generally accepted
accounting principles (applied on a consistent basis except as
disclosed in the footnotes thereto), the financial position and
results of operations of 1ST*BANK as of the dates and for the periods
therein set forth. Such financial statements do not, as of the dates
thereof, include any material asset or omit any material liability,
absolute or contingent, or other fact, the inclusion or omission of
which renders such financial statements, in light of the
circumstances under which they were made, misleading in any material
C-35
<PAGE> 158
respect. Since March 31, 1994, there has not been any change
in the financial condition, results of operations or business of
1ST*BANK that has had an 1ST*BANK Material Adverse Effect.
(c) The Board of Directors of 1ST*BANK has duly authorized execution and
delivery of this Merger Agreement and approved the Merger as
contemplated by the Merger Agreement and recommended it to its
shareholders for adoption. 1ST*BANK has all requisite corporate
power and authority to enter into this Merger Agreement,and upon
ratification and confirmation of the Merger Agreement by the
shareholders of 1ST*BANK, 1ST*BANK will have the corporate authority
to consummate the transactions contemplated hereby. This Merger
Agreement constitutes the valid, legally binding and enforceable
obligation of 1ST*BANK, and this Merger Agreement and the
consummation of the Merger, upon the approval of the 1ST*BANK
shareholders, will have been duly authorized and approved on behalf
of 1ST*BANK by all requisite corporate action. Provided the required
approvals are also obtained from the Comptroller and, to the extent
necessary, the Texas Commissioner and/or the Board, neither the
execution and delivery of this Merger Agreement nor the consummation
of the Merger will conflict with, result in the breach of, constitute
a default under or accelerate the performance provided by the terms
of any law, or any rule or regulation of any governmental agency or
authority or any judgment, order or decree of any court, bank
regulatory agency or other governmental agency to which 1ST*BANK may
be subject, any contract, agreement or instrument to which 1ST*BANK
is a party or by which 1ST*BANK is bound or committed, or the
Articles of Association or By-Laws of 1ST*BANK, or constitute an
event which with the lapse of time or action by a third party, could,
to the best of 1ST*BANK's knowledge after due inquiry, result in the
default under any of the foregoing or result in the creation of any
lien, charge or encumbrance upon any of the assets or properties of
1ST*BANK or upon any of 1ST*BANK's capital stock; except, (i) in the
case of contracts, agreements or instruments, such defaults,
conflicts or breaches which will be cured or waived prior to the
Effective Time or (ii) as would not, in the aggregate, have a
1ST*BANK Material Adverse Effect.
C-36
<PAGE> 159
(d) The reserve for possible loan and lease losses shown on the March 31,
1994 Call Report and Balance Sheet of 1ST*BANK is adequate in all
material respects under the requirements of regulatory accounting
principles to provide for possible losses, net of recoveries relating
to loans previously charged off, on loans outstanding (including,
without limitation, accrued interest receivable) as of March 31, 1994.
(e) Except as disclosed in the financial statements referenced to in
Section 15(b) or in the 1ST*BANK Litigation Schedule (the "1ST*BANK
Litigation Schedule") attached to the 1ST*BANK Disclosure Letter,
there is no litigation, action, suit, investigation or proceeding
pending or, to the best of the knowledge after due inquiry of
1ST*BANK and its executive officers, overtly threatened, against or
affecting 1ST*BANK or involving any of its properties or assets, at
law or in equity, before any federal, state, municipal, local or
other governmental authority which is reasonably likely to be
resolved adversely to the interest of 1ST*BANK and, if so resolved,
would have a 1ST*BANK Material Adverse Effect, and to the best of the
knowledge and belief after due inquiry of 1ST*BANK and its executive
officers, no one has reasonable or valid grounds on which it
reasonably can be expected that anyone will assert or initiate any
such litigation, action, suit, investigation or proceeding against
1ST*BANK based upon the wrongful action or inaction of 1ST*BANK or
any of its officers, directors or employees.
(f) 1ST*BANK has good and marketable title to all assets and properties,
whether real or personal, tangible or intangible, reflected in
1ST*BANK's Call Report and Balance Sheet as of March 31, 1994 or
acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of for fair value in the ordinary
course of business since March 31, 1994). Such assets and properties
are subject to no liens, mortgages, security interests, encumbrances,
pledges or charges of any kind, except (i) as reflected in said Call
Report and Balance Sheet or the notes thereto; (ii) statutory liens
for taxes not yet delinquent; (iii) landlord's liens; (iv) minor
defects and irregularities in title and encumbrances which do not
materially impair the use thereof for the purposes for which they are
C-37
<PAGE> 160
held; and such liens, mortgages, security interests,
encumbrances and charges do not, in the aggregate, have a 1ST*BANK
Material Adverse Effect. 1ST*BANK as lessee has the right under valid
and subsisting leases to occupy, use, possess and control all property
leased by 1ST*BANK. At the Effective Time all limitations affecting
such properties will not, in the aggregate, have a 1ST*BANK Material
Adverse Effect. To the best of 1ST*BANK's knowledge, after due
inquiry, all significant buildings, structures, fixtures and
appurtenances comprising part of the real properties of 1ST*BANK are,
considering their ages, in good condition and have reasonably been
maintained.
(g) To the best of the knowledge after due inquiry of 1ST*BANK and its
executive officers, 1ST*BANK has complied with all laws, regulations
and orders applicable to them and to the conduct of its business,
including without limitation, all statutes, rules and regulations
pertaining to the conduct of banking activities except for violations
which together with any penalty which results therefrom has not had
and will not have a 1ST*BANK Material Adverse Effect. 1ST*BANK is
not in default under, and no event has occurred which, to the best of
1ST*BANK's knowledge, after due inquiry, is likely to result in the
default under the terms of any judgment, decree, order, writ, rule or
regulation of any governmental authority or court, whether federal,
state or local and whether at law or in equity, in each case when the
default has had or is likely to have a 1ST*BANK Material Adverse
Effect.
(h) 1ST*BANK has not, since March 31, 1994 to the date hereof, (i) sold
or issued any corporate debt securities or sold, issued, reissued or
increased its shares of its capital stock; (ii) granted any option
for the purchase of capital stock; (iii) declared or set aside or
paid any dividend or other distribution in respect of its capital
stock, except as permitted pursuant to Section 17(a) hereof or as
incurred in carrying out the transactions contemplated by this Merger
Agreement, or directly or indirectly, purchased, redeemed or
otherwise acquired any shares of such stock; (iv) incurred any
C-38
<PAGE> 161
obligation or liability (absolute or contingent) except
obligations or liabilities incurred in the ordinary course of business
or pursuant to this Merger Agreement, or mortgaged, pledged or
subjected to lien or encumbrance (other than landlord's liens and
statutory liens for taxes not yet delinquent and banking transactions
conducted in the ordinary course of business) on any of its material
assets or properties; (v) discharged or satisfied any material lien or
encumbrance or paid any material obligation or liability (absolute or
contingent), other than current liabilities included in 1ST*BANK's
Call Report and Balance Sheet as of March 31, 1994, current
liabilities incurred since the date thereof in the ordinary course of
business and liabilities incurred in carrying out the transactions
contemplated by this Merger Agreement; (vi) sold, exchanged or
otherwise disposed of any material capital assets; (vii) made any
extraordinary officers' salary increase or wage increase, entered into
any employment contract with any officer or salaried employee or
instituted any employee welfare, bonus, stock option, profit-sharing,
retirement or similar plan or arrangement; (viii) suffered any damage,
destruction or loss, whether or not covered by insurance, that has had
a 1ST*BANK Material Adverse Effect or waived any rights of value
which, in the aggregate, have had a 1ST*BANK Material Adverse Effect;
(ix) entered or agreed to enter into any agreement or arrangement
granting any preferential right to purchase any of its material
assets, properties or rights or requiring the consent of any party to
the transfer and assignment of any such material assets, properties or
rights; or (x) entered into any other material transaction except as
expressly contemplated by this Merger Agreement.
(i) Except as set forth in the 1ST*BANK Document List (the "1ST*BANK
Document List") attached to the 1ST*BANK Disclosure Letter, 1ST*BANK
is not a party to or bound by any written or oral (i) employment or
consulting contract which is not terminable by 1ST*BANK on 60 days or
less notice, (ii) employee bonus, deferred compensation, pension,
stock bonus or purchase, profit-sharing, retirement or stock option
plan, (iii) other employee benefit or welfare plan, or (iv) other
executory material contract as defined by the Instructions to
C-39
<PAGE> 162
Exhibit 10 under Item 601 of SEC Regulation S-K. All such
pension, stock bonus or purchase, profit-sharing, retirement, health
and welfare plans (other than any multiemployer plans) set forth in
the 1ST*BANK Document List are in this section hereinafter referred to
collectively as the "Plans." Those Plans intended to be qualified
plans under Section 401(a) of the Code meet any applicable
requirements for favorable tax treatment under the Code. All of the
Plans which constitute employee pension benefit plans or employee
welfare plans subject to ERISA have been maintained in compliance in
all material respects with the applicable requirements of ERISA. All
material notices, reports and other filings required under applicable
law to be given or made to or with any governmental agency with
respect to the Plans have been timely filed or delivered. 1ST*BANK
has no knowledge of any circumstances which would adversely affect the
qualification of the Plans or their compliance with the applicable
requirements of ERISA, would result or have resulted in liability
under Title IV of ERISA or of any unreported "reportable event" (as
such term is defined in Section 4043(b) of ERISA) or any "prohibited
transaction" (as such term is defined in Section 406 of ERISA and
Section 4975(c) of the Code) which has occurred since the date on
which said sections became applicable to the Plans and which could
reasonably be expected to result in any material liability of 1ST*BANK
to the PBGC, the Department of Treasury, the Department of Labor or
any multiemployer plan. Those plans which are defined benefit plans
within the meaning of ERISA meet the minimum funding standards set
forth in the Internal Revenue Code and ERISA and the assets of such
plans equal or exceed the current value of accrued benefits on a
termination basis under such plans as of the most recent plan
valuation date. There are no pending or threatened claims (other than
claims for benefits in the ordinary course and pursuant to domestic
relations orders), lawsuits or arbitrations which have been asserted
or instituted against the plans, any fiduciaries thereof with respect
to their duties to the plans or the assets of any of the trusts under
any of the plans which could reasonably be expected to result in any
material liability of 1ST*BANK to the PBGC, the Department of
Treasury, the Department of Labor or any multiemployer plan.
C-40
<PAGE> 163
(j) 1ST*BANK has duly filed all federal, state, county and local income,
franchise, bank, excise, real and personal property and other tax
returns and reports (including, but not limited to, those relating to
social security, withholding, unemployment insurance, and occupation,
sales, and use taxes and those filed on a consolidated, combined or
unitary basis) required to have been filed by 1ST*BANK up to the date
hereof. 1ST*BANK has made available to BANC ONE a copy of its
Federal income tax return for the years 1993 and 1992. All of the
foregoing returns are true and correct in all material respects, and
1ST*BANK has paid or, prior to the Effective Time, will pay all
taxes, interest and penalties shown on such returns or reports as
being due or (except to the extent the same are contested in good
faith and, if material, summarized in the 1ST*BANK Disclosure Letter)
claimed to be due to any federal, state, county, local or other
taxing authority, and there is, and at the Effective Time will be, no
valid basis for any additional claim or assessment which might
materially and adversely affect 1ST*BANK, except for those being
contested in good faith and summarized in the 1ST*BANK Disclosure
Letter. 1ST*BANK has paid or made adequate provision in its
financial statements or its books and records for all taxes payable
in respect of all periods ending on or before the date hereof.
1ST*BANK has, or at the Effective Time will have, no liability for
any taxes, interest or penalties of any nature whatsoever, except for
those taxes which may have arisen up to the Effective Time in the
ordinary course of business and are properly accrued on the books of
1ST*BANK as of the Effective Time or are being contested in good
faith and have, if material, been summarized in the 1ST*BANK
Disclosure Letter.
(k) 1ST*BANK has in effect insurance coverage with reputable insurers
which in respect of amounts, premiums, types and risks insured,
constitutes reasonably adequate coverage against all risks
customarily insured against by banks comparable in size and operation
to 1ST*BANK.
C-41
<PAGE> 164
(l) 1ST*BANK has not incurred and will not incur any liability for
brokerage, finders', agents', or investment bankers' fees or
commissions in connection with this Merger Agreement or the
transactions contemplated hereby.
(m) 1ST*BANK has annexed to the 1ST*BANK Disclosure Letter a loan
schedule identifying certain loan agreements, notes and borrowing
arrangements (the "1ST*BANK Loan Schedule") between 1ST*BANK and
borrowers of 1ST*BANK as of the date hereof. Except as specifically
noted on the 1ST*BANK Loan Schedule, as of the date hereof, 1ST*BANK
is not a party to any written or oral (i) loan agreement, note or
borrowing arrangement, other than credit card loans and other loans
the unpaid balance of which does not exceed $25,000 per loan, under
the terms of which the obligor is 60 days delinquent in payment of
principal or interest and which has not been charged off by 1ST*BANK
or, to the best of 1ST*BANK's knowledge, in default of any other
provision thereof; (ii) loan agreement, note or borrowing arrangement
which has been classified as "substandard," "doubtful," "other loans
especially mentioned" or any comparable classifications by 1ST*BANK
or banking regulator; (iii) loan agreement, note, or borrowing
arrangement, including any loan guaranty, with any director,
executive officer or ten percent shareholder of 1ST*BANK, or any
person, corporation or enterprise controlling, controlled by or under
common control with any of the foregoing; or, (iv) to the best of
1ST*BANK's knowledge, loan agreement, note or borrowing arrangement
in violation of any law, regulation or rule of any governmental
authority and which violation could, to the best of 1ST*BANK's
knowledge after due inquiry, have a 1ST*BANK Material Adverse Effect.
(n) None of the information provided by 1ST*BANK to BANC ONE for
inclusion in the Proxy Statement or related registration statement or
any amendment or supplement thereto (to the extent so included as so
provided) shall contain (in the case of information relating to the
Proxy Statement, at the time it is mailed and in the case of
information relating to the registration statement, at the time it
becomes effective) any untrue statement of a material fact or shall
C-42
<PAGE> 165
omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they are
made, not misleading. Insofar as is under 1ST*BANK's reasonable
control, the Proxy Statement that is filed with the SEC in connection
with the meeting of the shareholders of 1ST*BANK will comply as to
form in all material respects with the provisions of the 1934 Act and
the rules and regulations promulgated thereunder (as though 1ST*BANK
were subject thereto).
(o) 1ST*BANK has annexed a contracts schedule (the "1ST*BANK Contracts
Schedule") to the 1ST*BANK Disclosure Letter setting forth certain
material contracts, including credit agreements, on which 1ST*BANK is
the obligor, maker, issuer or guarantor. Except as specifically
disclosed on the 1ST*BANK Contracts Schedule, 1ST*BANK is not a party
to any material contract and/or any credit agreement as obligor,
maker, issuer or guarantor and which contract contains covenants
which make the acquisition of 1ST*BANK or its merger with another
entity a condition of default or acceleration.
(p) 1ST*BANK has no subsidiaries, is not a party to any partnership or
joint venture and does not hold 5% or more of the outstanding capital
stock of any entity.
(q) No employee of 1ST*BANK is represented, for purposes of collective
bargaining, by a labor organization of any type. 1ST*BANK is unaware
of any efforts during the past five years to unionize or organize any
employees of 1ST*BANK, and no claim related to such employees under
the Fair Labor Standards Act, National Labor Relations Act, Civil
Rights Act of 1964, Walsh-Healy Act, Davis Bacon Act, Civil Rights
Act of 1866, Age Discrimination in Employment Act, Equal Pay Act of
1963, Executive Order No. 11246, Federal Unemployment Tax Act,
Vietnam Era Veterans Readjustment Act, Occupational Safety and Health
Act, or any state or local employment related law, order, ordinance
or regulation, no unfair labor practice, discrimination or
wage-and-hour claim is pending or, to the best of 1ST*BANK's
knowledge, threatened against 1ST*BANK, which claim has had or is
reasonably likely to have an 1ST*BANK Material Adverse Effect.
C-43
<PAGE> 166
(r) To the actual knowledge of 1ST*BANK and its executive officers:
(i) with respect to any Contaminant, there are no material actions,
proceedings or investigations pending or threatened before any
federal or state environmental regulatory body, or before any federal
or state court, alleging non-compliance with or liability in
connection with, by 1ST*BANK, CERCLA or any other Environmental Laws;
(ii) there is no reasonable basis for the institution of any material
action, proceeding or investigation against 1ST*BANK under any
Environmental Law; (iii) 1ST*BANK is not responsible in any material
respect under any Environmental Law for any Release; (iv) 1ST*BANK is
not responsible for any material costs of any response action
required by virtue of any Release of any Contaminant into the
environment including, without limitation, costs arising from
investigation, removal or remediation of Contaminants, security
fencing, alternative water supplies, temporary evacuation and housing
and other emergency assistance undertaken by any environmental
regulatory body or any other person; (v) 1ST*BANK is, in all material
respects, in compliance with all applicable Environmental Laws; and
(vi) no real property owned or used by 1ST*BANK contains any
Contaminant including, without limitation, any asbestos, PCBs or
petroleum products or byproducts in any form, the presence, location
or condition of which (a) could require remediation or other
corrective action pursuant to any Environmental Law in any material
respect, or (b) otherwise would pose any significant health or safety
risk unless remedial measures were taken.
(s) 1ST*BANK (i) has surveyed the facilities where 1ST*BANK conducts its
business including, without limitation, ATMs (collectively, the
"1ST*BANK Facilities") for compliance with ADA; (ii) has developed
action plans to remove architectural barriers including communication
barriers that are structural in nature from existing 1ST*BANK
Facilities (collectively, the "1ST*BANK Barriers") when such removal
is "readily achievable," as that term is defined in ADA; (iii) has
finalized action plans for ATMs in conformance with the Joint Final
Rule of the ATBCB and the Department of Transportation, effective
August 16, 1993; (iv) has developed or will develop schedules for
C-44
<PAGE> 167
1ST*BANK Barrier removal from 1ST*BANK Facilities in such
action plans so that 1ST*BANK Barrier removal was complete on January
26, 1992 or will be completed as soon as practicable thereafter; and
(v) has removed all 1ST*BANK Barriers in 1ST*BANK Facilities or will
cause all 1ST*BANK Barriers to be removed in accordance with such
action plans. All "alterations" (as such term is defined in ADA) to
1ST*BANK Facilities undertaken after January 26, 1992 comply with ADA
and the ADAAG. Effective January 26, 1992, all plans and designs for
new construction to be utilized by 1ST*BANK comply with ADA and ADAAG.
To the best of 1ST*BANK's knowledge, after due inquiry, no material
investigations, proceedings, or complaints, formal or informal, are
pending or threatened against 1ST*BANK in connection with 1ST*BANK
Facilities under ADA, ADAAG, or any other state or federal law
concerning accessibility for individuals with disabilities.
(t) The statements made in the 1ST*BANK Disclosure Letter and any
attachments thereto shall be deemed to constitute representations and
warranties of 1ST*BANK under this Merger Agreement to the same extent
as if herein set forth in full. Anything disclosed in the 1ST*BANK
Disclosure Letter or the attachments thereto shall be considered to
have been disclosed for purposes of all representations, warranties
and covenants under this Merger Agreement.
17. ACTION BY 1ST*BANK PENDING EFFECTIVE DATE. 1ST*BANK agrees that from the
date of this Merger Agreement until the earlier of the Effective Time or
the time that this Merger Agreement is terminated, except with the prior
written permission of BANC ONE, which, in any case covered by
Section 17(d) hereof, shall not be unreasonably withheld:
(a) After March 31, 1993 1ST*BANK will not declare or pay any dividends
or make any distributions on shares of 1ST*BANK Common.
(b) 1ST*BANK will not issue, sell, grant any option for, or acquire for
value any shares of its capital stock or otherwise effect any change
in connection with its equity capitalization; provided, however, that
C-45
<PAGE> 168
1ST*BANK may issue not more than 166,666 shares of 1ST*BANK
Common in consideration for and upon conversion of the 1ST*BANK
Debentures.
(c) Except as otherwise set forth in or contemplated by this Merger
Agreement, 1ST*BANK will carry on its businesses in substantially the
same manner as heretofore, use its reasonable best efforts to keep in
full force and effect insurance comparable in amount and scope of
coverage to that now maintained by it and use its reasonable best
efforts to maintain and preserve its business organization intact.
(d) 1ST*BANK will not (i) enter into any new line of business or incur or
agree to incur any obligation or liability except liabilities and
obligations (including corporate debt issuances) incurred in the
ordinary course of business, except as may be directed by any
regulatory agency; (ii) except as may be directed by any regulatory
agency, change its lending, investment, liability management and
other material banking policies in any material respect; (iii) except
in the ordinary course of business and consistent with prior
practice, grant any general or uniform increase in the rates of pay
of employees; (iv) establish any new employee benefit plan or amend
any existing plan (except as required by law) so as to increase by
any significant amount the benefits payable thereunder; (v) incur or
commit to any capital expenditures other than in the ordinary course
of business (which will in no event include the establishment of new
branches or any other facilities or any capital expenditures in
excess of $25,000 for any individual project for any purpose); or
(vi) merge into, consolidate with or permit any other corporation to
be merged or consolidated with it or acquire outside of the ordinary
course of business part of or all the assets or stock of any other
corporation or person.
(e) 1ST*BANK will not change its method of accounting in effect at
March 31, 1994, except as required by changes in generally accepted
accounting principles as concurred in by Fisk & Robinson P.C. or
change any of its methods of reporting income and deductions for
Federal income tax purposes from those employed in the preparation of
C-46
<PAGE> 169
1ST*BANK's Federal income tax returns for the taxable years
ending December 31, 1993 and 1992, except as required by changes in
law.
(f) 1ST*BANK will afford BANC ONE, its officers and other authorized
representatives, such access to all books, records, tax returns,
leases, contracts and documents of 1ST*BANK at reasonable times for
inspection without any material interference with the normal business
operations of 1ST*BANK and will furnish to BANC ONE such information
with respect to the assets and business of 1ST*BANK as BANC ONE may
from time to time reasonably request in connection with this Merger
Agreement and the transactions contemplated hereby.
(g) 1ST*BANK will promptly advise BANC ONE in writing of all material
corporate actions taken by the directors and shareholders of
1ST*BANK, furnish BANC ONE with copies of all monthly and other
interim financial statements of 1ST*BANK as they become available,
and keep BANC ONE fully informed concerning all trends and
developments which in the opinion of 1ST*BANK may have a 1ST*BANK
Material Adverse Effect.
(h) 1ST*BANK and its officers, directors and employees will not contract
for or acquire, at the expense of 1ST*BANK, a policy or policies
providing for insurance coverage for directors, officers and/or
employees of 1ST*BANK for any period subsequent to the Effective Time
for events occurring before or after the Effective Time; provided,
however, that 1ST*BANK may renew, extend or replace existing policies
in the ordinary course consistent with past practices for periods of
not greater than one year.
(i) Prior to the Effective Time, 1ST*BANK shall have sold all assets
which, if owned by 1ST*BANK, would be required to be reported on
Schedules RC-B and/or RC Item 5 (Assets held in Trading Accounts) of
its Call Reports. Such sales shall be on terms reasonably acceptable
to BOTNA.
C-47
<PAGE> 170
(j) Prior to the Effective Time, 1ST*BANK will use its reasonable best
efforts to enter into binding agreements, which, in the reasonable
judgment of counsel for BOTNA, shall terminate, prior to the
Effective Time, the following agreements on terms reasonably
acceptable to BOTNA: (i) that certain Correspondent Bank Agreement
between 1ST*BANK and First USA Bank dated May 26, 1992 (the
"Correspondent Bank Agreement"); (ii) that certain Credit Card
Processing Agreement between 1ST*BANK and First USA Merchant
Services, Inc. dated March 21, 1990 (the "Credit Card Processing
Agreement"); (iii) that certain undated Data Processing Service
Agreement between 1ST*BANK and Affiliated Computer Systems, Inc, now,
Electronic Data Systems Corporation (the "D.P. Service Agreement");
(iv) that certain MPACT On-Line Automated Teller Machine Support
Service Agreement between 1ST*BANK and Electronic Data Systems
Corporation dated July 7, 1980 (the "ATM Service Agreement"); and (v)
that certain MPACT Interchange Agreement between 1ST*BANK and EDS
dated July 7, 1980 (the "Interchange Agreement").
(k) Not later than the record date for the meeting of holders of 1ST*BANK
Common, 1ST*BANK shall use its reasonable best efforts to cause
1ST*BANK and the holders of the 1ST*BANK Debentures to amend the
terms of the 1ST*BANK Debentures to provide for the conversion of all
1ST*BANK Debentures into not more than 166,666 shares of 1ST*BANK
Common not later than immediately prior to the Effective Time.
(l) Prior to the Effective Time, 1ST*BANK should use its reasonable best
efforts to cause the Landlord to provide 1ST*BANK and BANC ONE with
its written agreement, reasonably satisfactory to counsel for BOTNA,
which shall (i) consent to the assignment of the Branch Lease by
1ST*BANK to BOTNA as a result of the Merger and by operation of law;
(ii) limit the amount of insurance which Landlord may require
pursuant to Section 12.01 of the Branch Lease to $2,000,000; (iii)
amend the waiver of subrogation provisions set forth in Section 13.01
of the Branch Lease; (iv) delete Section 34 of the Branch Lease; (v)
provide for the potential use of a portion of the premises utilized
by 1ST*BANK pursuant to the Branch Lease by non-bank affiliates of
BOTNA and/or
C-48
<PAGE> 171
for non-traditional financial services and (vi) confirming
(A) that Landlord is the current and sole lessor under the Branch
Lease, (B) that the expiration date of the initial term under the
Branch Lease is June 30, 1996, (C) that two renewal options remain
under the Branch Lease, (D) that the Branch Lease has not been
previously amended or modified in any manner and is in full force and
effect as originally written, (E) that no default exists under the
Branch Lease nor does any condition exist which, with the passage of
time or the giving of notice, or both, would become a default, and (F)
such additional facts (if true) as BOTNA shall reasonably request.
18. ACTION BY BANC ONE PENDING EFFECTIVE TIME. BANC ONE agrees that from the
date of this Agreement until the Effective Time, except with prior written
permission of 1ST*BANK:
(a) BANC ONE will not adopt or implement any amendment to its Articles of
Incorporation or any plan of reorganization which would affect in any
manner the terms and provisions of the shares of BANC ONE Common or
the rights of the holders of such shares or reclassify the BANC ONE
Common.
(b) Except as otherwise set forth in or contemplated by this Merger
Agreement, BANC ONE will carry on its businesses in substantially the
same manner as heretofore, keep in full force and effect insurance
comparable in amount and scope of coverage to that now maintained by
it and use its best efforts to maintain and preserve its business
organization intact.
(c) BANC ONE will not change its methods of accounting in effect at
December 31, 1993, except as required by changes in generally
accepted accounting principles as concurred in with Coopers &
Lybrand, its independent auditors, or change any of its methods of
reporting income and deductions for Federal income tax purposes from
those employed in the preparation of the Federal income tax returns
of BANC ONE for the taxable years ending December 31, 1993 and 1992,
except as required by changes in law.
C-49
<PAGE> 172
(d) BANC ONE will afford 1ST*BANK, its officers and other authorized
representatives, such access to all books, records, tax returns,
leases, contracts and documents of BANC ONE and its subsidiaries and
will furnish to 1ST*BANK such information with respect to the assets,
earnings and business of BANC ONE and its subsidiaries as 1ST*BANK
may from time to time reasonably request in connection with this
Merger Agreement and the transactions contemplated hereby.
19. CONDITIONS TO OBLIGATIONS OF BANC ONE, BANC ONE TEXAS AND BOTNA. The
obligations of BANC ONE, BANC ONE TEXAS and BOTNA under this Merger
Agreement are subject, unless waived by BANC ONE, to the satisfaction of
the following conditions on or prior to the Effective Time:
(a) There shall not have been any change in the financial condition,
aggregate net assets, shareholders' equity, business or operating
results of 1ST*BANK from March 31, 1994 to the Effective Time that
has had a 1ST*BANK Material Adverse Effect.
(b) 1ST*BANK shall not have paid cash dividends from March 31, 1994 to
the Effective Time.
(c) All representations by 1ST*BANK contained in this Merger Agreement
shall be true in all material respects at, or as of, the Effective
Time as though such representations were made at and as of said date,
except for (i) changes contemplated by the Merger Agreement and (ii)
representations as of a specified time other than the Effective Time,
which shall be true in all material respects at such specified time
(provided, however, that the representation of 1ST*BANK contained in
Section 16(d) shall be true in all material respects as applied to
the latest Balance Sheet of 1ST*BANK prior to the Effective Time and
to the last Call Report of 1ST*BANK filed with the FDIC prior to the
Effective Time and the reserve for possible loan and lease losses
included therein, as though each reference to "March 31, 1994" in
such Section were a reference to the last day of the most recent
calendar quarter prior to the Effective Time.
C-50
<PAGE> 173
(d) BANC ONE shall have received the opinion of legal counsel for
1ST*BANK, dated as of the Effective Time, substantially to the effect
set forth in EXHIBIT D hereto, together with a certificate of
"existence" from the Texas Commissioner dated as of a date not more
than 20 days prior to the Effective Time.
(e) 1ST*BANK shall have performed, in all material respects, all
agreements and conditions required by this Merger Agreement to be
performed and satisfied by it at or prior to the Effective Time.
(f) As of the close of the most recent calendar quarter (or if the
Effective Time shall occur within 20 days following the close of a
calendar quarter, then as of the next preceding calendar quarter)
cumulative earnings reported by 1ST*BANK since March 31, 1994 shall
be greater than or equal to the amount calculated by multiplying
(x) $306,000 by (y) the number of full calendar quarters which have
passed since March 31, 1994 and for which earnings have been reported
as of such date, times (z) 0.9. As used in this Section "reported"
means reported on 1ST*BANK's Call Reports and Balance Sheets prepared
in accordance with regulatory accounting principles applied on a
consistent basis, subject to any subsequent adjustments required to
be reported whether or not such adjustments have, as yet, been
reported, with the following adjustments, if any, net of related tax
savings and costs, which adjustments were reflected in net income for
the relevant period(s), added back into or deducted from net income
for the applicable period: (i) outside legal and accounting fees, or
other costs associated with the Merger; (ii) gains or losses on sales
of assets; (iii) any increase in loan loss reserve and/or other real
estate reserves effected by 1ST*BANK prior to the Effective Time
which 1ST*BANK would not have made or which 1ST*BANK would not have
otherwise been required to make, except for provisions of this Merger
Agreement or made at the request of BANC ONE; (iv) any loss on a sale
of investments by 1ST*BANK prior to the Effective Time which sale was
effected solely to fulfill a requirement of this Merger Agreement or
made at the specific request of BANC ONE; and (v) any other expenses
upon which BANC ONE and 1ST*BANK shall mutually agree.
C-51
<PAGE> 174
(g) The total number of shares of 1ST*BANK Common issued and outstanding,
including shares of 1ST*BANK Common upon the conversion of the
1ST*BANK Debentures, shall not be more than 1,470,833. There shall
be no options, warrants, debentures (including the 1ST*BANK
Debentures) or commitments of any kind related to the capital stock
of 1ST*BANK.
(h) The aggregate of (i) the fractional share interests of BANC ONE
Common to be paid in cash pursuant to Section 7(c), and (ii) the
shares of BANC ONE Common to which holders of 1ST*BANK Common would
have been entitled as of the Effective Time but who, as of the
Effective Time, have taken steps to perfect their rights as
dissenting shareholders pursuant to the provisions of applicable law,
shall not be more than 10% of the maximum aggregate number of shares
of BANC ONE Common which could be issued as a result of the Merger.
(i) The holders of all credit agreements on which 1ST*BANK is the maker,
issuer or guarantor and which contain provisions which make the
acquisition of 1ST*BANK by or merger of 1ST*BANK into another entity
a condition of default or acceleration, which default or acceleration
would have a 1ST*BANK Material Adverse Effect, shall have provided
BANC ONE with a written waiver of all such provisions.
(j) Coopers & Lybrand shall have issued its written opinion, dated as of
the Effective Time, satisfactory, in good faith, to BANC ONE,
advising that the transaction herein contemplated may be properly
accounted for as a pooling-of-interests.
(k) 1ST*BANK's general ledger shall reflect an allowance for loan and
lease losses equal to an amount as hereafter requested by BOTNA. Any
additional provision to the 1ST*BANK's allowance for loan and lease
loss reserve required to comply with this Section shall not exceed
$1.3 million.
(l) 1ST*BANK will have entered into binding agreements which, in the
reasonable judgment of counsel for BOTNA, shall have terminated each
of the following agreements on terms reasonably acceptable to BOTNA:
C-52
<PAGE> 175
(i) the Correspondent Bank Agreement; (ii) the Credit Card
Processing Agreement; (iii) the D.P. Service Agreement; (iv) the ATM
Agreement; and (v) the Interchange Agreement.
(m) Counsel for BOTNA shall have determined that all 1ST*BANK Debentures
have been converted into not more than 166,666 shares of 1ST*BANK
Common and that no rights or obligations exist with respect to any
1ST*BANK Debenture.
(n) Counsel for BOTNA shall have reasonably confirmed that an agreement
between Landlord and 1ST*BANK is effective and enforceable with
respect to each of the matters set forth in Section 17(l) of this
Merger Agreement.
(o) 1ST*BANK shall have furnished BANC ONE a certificate, signed on its
behalf by the Chairman or President and the Secretary or an Assistant
Secretary of 1ST*BANK and dated as of the Effective Time, certifying
as to the form of and adoption of resolutions of the Board and
shareholders of 1ST*BANK approving the Merger Agreement and to the
effect that the conditions described in Paragraphs (a), (b), (c),
(e), (f), (g), (h), and (i) of this Section 19 have been fully
satisfied.
20. CONDITIONS TO OBLIGATIONS OF 1ST*BANK. The obligations of 1ST*BANK to
effect the Merger are subject, unless waived by 1ST*BANK, to the
satisfaction on or prior to the Effective Time of the following conditions:
(a) There shall not have been any change in the consolidated financial
condition, aggregate net assets, shareholders' equity, business, or
operating results of BANC ONE and its subsidiaries, taken as a whole,
from March 31, 1994 to the Effective Time that has had a BANC ONE
Material Adverse Effect.
(b) All representations by BANC ONE, BANC ONE TEXAS and BOTNA contained
in this Merger Agreement shall be true in all material respects at,
or as of, the Effective Time as though such representations were made
at and as of said date, except for (i) changes contemplated by this
C-53
<PAGE> 176
Merger Agreement and (ii) representations as of a specified
time other than the Effective Time, which shall be true in all
material respects at such specified time (provided, however, that the
representation of BANC ONE contained in Section 13(d) shall be true in
all material respects as applied to the Balance Sheet of BANC ONE
included in the most recently available quarterly report to BANC ONE's
shareholders and/or BANC ONE's report to the SEC on Form 10-Q or Form
10-K as of the close of the most recent calendar quarter prior to the
Effective Time and the reserve for possible loan and lease losses
included therein, as though each reference to "March 31, 1994" in such
section were a reference to the last day of the most recent calendar
quarter prior to the Effective Time.
(c) 1ST*BANK shall have received the opinion of counsel for BANC ONE,
BANC ONE TEXAS and BOTNA, (i) on and dated the date on which the
registration statement described in Section 10(d) of this Merger
Agreement shall have become effective as described in Section 21(b)
of this Merger Agreement substantially to the effect of paragraphs
numbered 6, 7 and 8 of EXHIBIT E hereto and (ii) on and dated as of
the Effective Time substantially to the effect set forth in EXHIBIT E
hereto, together with a copy of the Articles of Incorporation of BANC
ONE certified by the Secretary of State of the State of Ohio, a
Certificate of Good Standing of BANC ONE dated as of a date not more
than 20 days prior to the day of the Effective Time from the
Secretary of State of the State of Ohio and a Certificate of Good
Standing of BOTNA dated as of a date not more the 20 days prior to
the day of the Effective Time from the Comptroller.
(d) BANC ONE, BANC ONE TEXAS and BOTNA shall have each performed, in all
material respects, all agreements and conditions required by this
Merger Agreement to be performed and satisfied by it at or prior to
the Effective Time.
(e) As of the close of the most recent calendar quarter (or if the
Effective Time shall occur within 20 days following the close of a
calendar quarter, then as of the close of the next preceding calendar
quarter) cumulative earnings per share reported by BANC ONE since
C-54
<PAGE> 177
March 31, 1994 shall be greater than or equal to the amount
calculated by multiplying (x) $0.81 by (y) the number of full
calendar quarters which have passed since March 31, 1994 and for
which earnings per share have been reported as of such date, times
(z) 0.9. As used in this Section, "reported" means reported on BANC
ONE's financial statements prepared in accordance with generally
accepted accounting principles applied on a basis consistent with
BANC ONE's financial statements for the years ended December 31, 1993
and 1992, as included in BANC ONE's reports to the SEC on Forms 10-K
or BANC ONE's annual reports to shareholders subject to any
subsequent adjustments required to be reported to the SEC whether or
not such adjustments have, as yet, been reported.
(f) The shares of BANC ONE Common to be issued to the holders of 1ST*BANK
Common shall be listed on the NYSE.
(g) BANC ONE shall have furnished 1ST*BANK a certificate, signed by the
Chairman or President or an Executive Vice President and by the
Secretary or Assistant Secretary of BANC ONE and dated as of the
Effective Time certifying as to the form of and adoption of the
resolution of the Board of BANC ONE approving the Merger Agreement,
and to the effect that the conditions described in Paragraphs (a),
(b), (d), (e) and (f) of this Section 20 have been fully satisfied as
to it.
(h) BOTNA shall have furnished 1ST*BANK a certificate, signed by the
Chairman or President and the Secretary or Assistant Secretary of
BOTNA and dated as of the Effective Time, to the effect that the
conditions described in Sections 20(b) and 20(d) have been fully
satisfied as to BOTNA.
21. CONDITIONS TO OBLIGATIONS OF ALL PARTIES. In addition to the provisions
of Sections 19 and 20 hereof, the obligations of 1ST*BANK, BANC ONE, BANC
ONE TEXAS and BOTNA to effect the Merger shall be subject to the
satisfaction of the following conditions on or prior to the Effective Time:
C-55
<PAGE> 178
(a) The parties hereto shall have received all necessary approvals of
governmental agencies and authorities of the transactions
contemplated by this Merger Agreement and each of such approvals
shall remain in full force and effect at the Effective Time. BANC
ONE shall notify 1ST*BANK promptly upon receipt of all necessary
governmental approvals. At the Effective Time, (i) no party hereto
shall be subject to any order, decree or injunction of a court or
governmental agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger and (ii) no statute, rule,
regulation, order, injunction or decree shall have been enacted,
entered, promulgated or enforced by any governmental authority which
prohibits or makes illegal consummation of the Merger.
(b) The registration statement required to be filed by BANC ONE pursuant
to Section 10(d) of this Merger Agreement shall have become effective
by an order of the SEC and the shares of BANC ONE Common to be
exchanged in the Merger shall have been qualified or exempted under
all applicable state securities laws, and there shall have been no
stop order issued or threatened by the SEC that suspends or would
suspend the effectiveness of the registration statement, and no
proceeding by the SEC shall have been commenced, pending or overtly
threatened for such purpose.
(c) This Merger Agreement and the Merger shall have been duly approved
and adopted by the requisite affirmative vote of the shareholders of
1ST*BANK and BOTNA.
(d) Coopers & Lybrand shall have issued its written opinion, dated as of
the day of the Effective Time, satisfactory to 1ST*BANK and BANC ONE,
respectively, substantially to the effect set forth in clauses (a)
through (f) of Section 12 of this Merger Agreement and there shall
exist as of, at or immediately prior to the Effective Time, no facts
or circumstances which would render such opinion inapplicable in any
respect to the transactions to be consummated hereunder.
C-56
<PAGE> 179
22. INDEMNIFICATION.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether formal or informal and whether
civil, administrative or criminal, including, without limitation, any
such claim, action, suit, proceeding or investigation pursuant to
which any person who is now, or has been at any time prior to the
date hereof, or who becomes prior to the Effective Time, a director,
officer, employee, fiduciary or agent of 1ST*BANK (the "Indemnified
Parties") is, or is threatened to be, made a party or a witness,
based in whole or in part on, or arising in whole or in part out of,
or pertaining to, this Merger Agreement or any of the transactions
contemplated hereby (a "Merger Related Event"), whether in any case
asserted or arising before or after the Effective Time, the parties
hereto agree to cooperate and use their reasonable best efforts to
defend against and respond to such claim, action, suit, proceedings
or investigation. It is understood and agreed that, provided that,
with regard to any Merger Related Event, and conditioned upon the
Merger becoming effective, BANC ONE shall indemnify, defend and hold
harmless, as and to the fullest extent permitted by applicable law,
each Indemnified Party against any and all losses, claims, damages,
liabilities, costs, expenses (including attorneys' fees and
expenses), judgments and fines, and amounts paid in settlement, in
connection with any such threatened or actual claim, action, suit,
proceedings or investigation; provided, however, that BANC ONE shall
not be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld). In the
event of any such threatened or actual claim, action, suit,
proceedings or investigation (whether asserted or arising before or
after the Effective Time), (i) BANC ONE shall pay expenses (including
attorney's fees and expenses) in advance of the final disposition of
any claim, suit, proceedings or investigation to each Indemnified
Party to the fullest extent permitted by applicable law, and
(ii) BANC ONE shall use its reasonable best efforts to vigorously
defend any such matter; provided, however, that BANC ONE's
obligations as herein set forth shall not apply to any losses,
C-57
<PAGE> 180
claims, damages, liabilities, costs, expenses, judgments,
fines and amounts paid in settlement by any Indemnified Party
involving the fraud, bad faith and/or reckless disregard of such
Indemnified Party or related to any threatened or actual claim,
action, suit, proceedings or investigation brought by BANC ONE against
any Indemnified Party. THE PARTIES HERETO AGREE THAT THE
INDEMNIFICATION PROVISIONS CONTAINED IN THIS SECTION 22(a) ARE
INTENDED TO, AND SHALL HAVE THE EFFECT OF, INDEMNIFYING AN INDEMNIFIED
PARTY AGAINST THE RESULTS OF ITS OWN NEGLIGENCE OTHER THAN GROSS
NEGLIGENCE. Any Indemnified Party wishing to claim indemnification
and defense under this Section 22(a) shall, upon the earlier to occur
of (A) receiving actual notice of any such claim, action, suit,
proceeding or investigation, (B) otherwise learning of such claim,
action, suit, proceeding or investigation or (C) receiving other
information which would give a reasonably prudent person reason to
believe that such a claim, action, suit, proceeding or investigation
had or might be brought, notify BANC ONE thereof as soon as reasonably
practicable thereafter. BANC ONE's obligations pursuant to this
Section 22(a) are conditioned upon BANC ONE being given prompt written
notice of any such claim, action, suit, proceeding or investigation by
the Indemnified Party (unless BANC ONE otherwise has notice or
knowledge of such claim, action, suit, proceeding or investigation in
such manner and at such times so as to provide BANC ONE with a
reasonable opportunity to pursue the defense or compromise thereof),
together with the right to control and direct the investigation,
defense and/or settlement of each such matter, and further provided
that the Indemnified Party shall reasonably cooperate with BANC ONE in
connection therewith.
(b) BANC ONE shall insure that all rights to indemnification and defense
and all limitations of liability existing in favor of the Indemnified
Parties as provided in 1ST*BANK's Articles of Association and By-laws
as in effect as of March 31, 1994, or as otherwise provided for or
allowed under applicable law as in effect as of the date hereof or as
amended at a time prior to the Effective Time, with respect to claims
or liabilities arising from facts or events existing or occurring
C-58
<PAGE> 181
prior to the Effective Time, shall survive the Merger and
shall continue in full force and effect, without any amendment
thereto, for a period of four (4) years from the Effective Time;
provided, however, that all rights to indemnification in respect of
any claim asserted or made within such period shall continue until the
final disposition of such claim.
(c) From and after the Effective Time, persons who, immediately prior to
the Effective Time, served as the directors, officers and employees
of 1ST*BANK, who, following the Effective Time, continue as
directors, officers and/or employees of BOTNA, or one of its
subsidiaries, shall have indemnification and defense rights having
prospective application only, except, however, for the
indemnification and defense rights set forth in paragraphs (a) and
(b) of this Section 22. These prospective indemnification and
defense rights shall consist of (i) such rights to which directors,
officers and employees are entitled under the provisions of the
Articles of Association, By-laws or similar governing documents of
BOTNA and its subsidiaries, as applicable, as in effect from time to
time after the Effective Time, as applicable, and provisions of
applicable law as in effect from time to time after the Effective
Time and (ii) those indemnification and defense rights set forth in
agreements, if any, between BANC ONE and the directors and executive
officers of BOTNA and its subsidiaries. Such agreements, if any,
which shall be executed as soon as practicable following the
Effective Time, shall provide certain indemnification and defense
rights that are comparable to those provided to directors, officers
and employees of BANC ONE and its subsidiaries generally, but which
rights may be greater or lesser than the indemnification and defense
rights available in clause (i) above.
(d) The obligations of BANC ONE provided under paragraphs (a) and (b) of
this Section 22 are intended to be the joint and several obligations
of BANC ONE and BOTNA and to benefit, and be enforceable against BANC
ONE and BOTNA directly by, the Indemnified Parties, and shall be
binding on all respective successors and permitted assigns of BANC
ONE and BOTNA.
C-59
<PAGE> 182
(e) In the event BANC ONE or Receiving Association or any of its
successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation,
receiving association or entity of such consolidation or merger, or
(ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of BANC
ONE or the Receiving Association, as the case may be, assume the
obligations set forth in this Section 22.
23. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of 1ST*BANK, BOTNA, BANC ONE TEXAS and BANC
ONE shall not survive the Effective Time.
24. GOVERNING LAW. This Merger Agreement and the transactions contemplated
hereby shall be construed, interpreted, enforced and governed by and
according to the national banking laws and the laws of the State of Texas.
25. ASSIGNMENT. This Merger Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Merger
Agreement nor any of the rights, interest, or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent
of each of the other parties.
26. SATISFACTION OF CONDITIONS; TERMINATION.
(a) BANC ONE, BANC ONE TEXAS and BOTNA agree to use their reasonable best
efforts to obtain satisfaction of the conditions of this Agreement
insofar as they relate to and BANC ONE, BANC ONE TEXAS, and BOTNA,
and 1ST*BANK agrees to use its reasonable best efforts to obtain the
satisfaction of the conditions of this Agreement insofar as they
relate to 1ST*BANK, in each case as soon as reasonably possible.
(b) This Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger by the
shareholders of BOTNA or by 1ST*BANKS's shareholders, upon the
C-60
<PAGE> 183
occurrence of any of the following by written notice from
BANC ONE to 1ST*BANK (authorized by the Board of Directors of BANC
ONE), or by written notice from 1ST*BANK to BANC ONE (authorized by
the Board of Directors of 1ST*BANK), as the case may be:
(i) If any material condition to the obligations of BANC ONE, BANC
ONE TEXAS and/or BOTNA set forth in Section 19 or 21 is not
substantially satisfied at the time or times contemplated
thereby and such condition is not waived by BANC ONE or if any
material condition to the obligations of 1ST*BANK set forth in
Section 20 or 21 is not substantially satisfied at the time or
times contemplated thereby and such condition is not waived by
1ST*BANK, each party's right to terminate under this
Section 26 (b)(i) shall relate only to conditions to that
party's obligations;
(ii) In the event of a material breach by the other of any
representation, warranty, condition or agreement contained in
this Merger Agreement that is not cured within 30 days of the
time that written notice of such breach is received by such
other party from the party giving notice; or
(iii) If the Merger shall not have been consummated on or before
February 27, 1995.
(c) This Merger Agreement may be terminated and abandoned (whether before
or after approval of the Merger by the shareholders of BOTNA or
1ST*BANK's shareholders) by mutual written consent of BANC ONE and
1ST*BANK, authorized by their respective Boards of Directors.
(d) In the event of termination of this Merger Agreement caused otherwise
than by a willful breach of this Merger Agreement by any of the
parties hereto, this Merger Agreement shall cease and terminate, the
acquisition of 1ST*BANK as provided herein shall not be consummated,
and none of BANC ONE, BANC ONE TEXAS, BOTNA nor 1ST*BANK shall have
any liability to any other party under this Merger Agreement of any
C-61
<PAGE> 184
nature whatever, except for BANC ONE's obligations related to
the printing of the proxy solicitation materials, including any
liability for damages, provided, however, that the duties of the
parties with respect to confidential information as set forth in
Section 10(f) shall survive any such termination. If the Merger is
not consummated as the result of termination of this Merger Agreement
caused otherwise than by willful breach of a party hereto, BANC ONE,
BANC ONE TEXAS, BOTNA and 1ST*BANK each shall pay its own fees and
expenses incident to the negotiation, preparation and execution of
this Merger Agreement, the respective shareholders' meetings and
actions of the parties and all other acts incidental to, contemplated
by or in pursuance of the transactions contemplated by this Merger
Agreement, including fees and expenses of their respective counsel,
accountants and other experts and advisors.
(e) If termination of this Merger Agreement shall be judicially
determined to have been caused by willful breach of this Merger
Agreement, then, in addition to other remedies at law or equity for
breach of this Merger Agreement, the party so found to have willfully
breached this Merger Agreement shall indemnify the other parties for
their respective costs, fees and expenses of their counsel,
accountants and other experts and advisors as well as fees and
expenses incident to negotiation, preparation and execution of this
Merger Agreement and related documentation and their shareholders'
meetings and consents.
27. WAIVERS; AMENDMENTS. Any of the provisions of this Merger Agreement may
be waived at any time by the party which is, or the shareholders of which
are, entitled to the benefit thereof, provided, however, such waiver, if
material to 1ST*BANK or its shareholders, may be made by 1ST*BANK only
following due authorization by the Board of Directors of 1ST*BANK. This
Merger Agreement may be amended in whole or in part by an agreement in
writing executed in the same manner (but not necessarily by the same
persons) as this Merger Agreement and which makes reference to this Merger
Agreement; provided, however, such amendment or modification may be made
only following due authorization by the respective Boards of Directors of
C-62
<PAGE> 185
1ST*BANK, BANC ONE, BANC ONE TEXAS and BOTNA; provided, further,
however, that after a favorable vote by the shareholders of a party any
such action shall be taken by that party only if, in the opinion of its
Board of Directors, such amendment or modification will not have any
material adverse effect on the benefits intended under this Merger
Agreement for the shareholders of such party and will not require
resolicitation of any proxies from such shareholders.
28. ENTIRE AGREEMENT. Subject to the exceptions noted in the next following
sentence, this Merger Agreement supersedes any other agreement, whether
written or oral, that may have been made or entered into by 1ST*BANK,
BOTNA, BANC ONE TEXAS and/or BANC ONE or by any officer or officers of
such parties relating to the acquisition of the business or the capital
stock of 1ST*BANK by BANC ONE, BANC ONE TEXAS or BOTNA. Except for the
BANC ONE Disclosure Letter and any attachments thereto, the 1ST*BANK
Disclosure Letter and any attachments thereto, the Benefits Agreement
addressing benefit plans and policies and the Confidentiality Agreement,
this Merger Agreement constitutes the entire agreement by the parties, and
there are no agreements or commitments except as set forth herein and
therein.
29. CAPTIONS; COUNTERPARTS. The captions in this Merger Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Merger Agreement.
This Merger Agreement may be executed in several counterparts, each of
which shall constitute one and the same instrument.
30. NOTICES. All notices and other communications hereunder may be made by
mail, hand-delivery or by courier service and notice shall be deemed to
have been given when received; provided, however, if notices and other
communications are made by nationally recognized overnight courier service
for overnight delivery, such notice shall be deemed to have been given one
business day after being forwarded to such a nationally recognized
overnight courier service for overnight delivery.
C-63
<PAGE> 186
(a) If to BANC ONE, to:
BANC ONE CORPORATION
Attention of: Chief Executive Officer
100 East Broad Street
Columbus, Ohio 43271
With a copy to:
BANC ONE CORPORATION
Attention of: Roman J. Gerber
General Counsel
100 East Broad Street
Columbus, Ohio 43271
(b) If to 1ST*BANK, to:
1ST*BANK
Attention of: William J. Hendrix
Chairman of the Board
1000 S. Belt Line Road
Coppell, Texas 75019
With a copy to:
Gardere & Wynne, L.L.P.
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Attention of: Dan L. Nicewander
(c) If to BOTNA, to:
Bank One, Texas, National Association
Attention of: Harvey R. Mitchell, Chairman
1717 Main Street
Dallas, Texas 76202
With a copy to:
Bank One, Texas, N.A.
Attention of: Chris Klimko
1600 Pacific, Sixth Floor
Dallas, Texas 75201
(d) If to BANC ONE TEXAS, to:
Banc One Texas Corporation
Attention of: Roman J. Gerber, Secretary
100 East Broad Street
Columbus, Ohio 43271
C-64
<PAGE> 187
IN WITNESS WHEREOF, this Merger Agreement has been executed the day and year
first above written.
ATTEST: BANC ONE CORPORATION
/s/ Charles F. Andrews By: /s/ Roman J. Gerber
- --------------------------- -------------------------
ATTEST: 1st*Bank
/s/ Sam MacGregor By: /s/ William J. Hendrix
- --------------------------- -------------------------
William J. Hendrix
Chairman of the Board
Bank One, Texas,
ATTEST: National Association
/s/ Christopher T. Klimko By: /s/ Ronald G. Steinhart
- --------------------------- -------------------------
ATTEST: Banc One Texas Corporation
/s/ Lee S. Adams By: /s/ Roman J. Gerber
- --------------------------- -------------------------
REG9928
C-65
<PAGE> 188
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 1701.13(E) of the OGCL sets forth provisions which define the extent
to which a corporation may indemnify directors, officers, and employees.
Those provisions have been adopted by the Registrant in Article V of
Registrant's Code of Regulations. Article V provides for the indemnification
or the purchase of insurance for the benefit of the directors, officers,
employees and agents of the Registrant in the event such persons are subject
to legal action as a result of actions in their capacities as directors,
officers, employees or agents of the Registrant. Registrant has entered into
indemnification agreements with its directors and executive officers that
provide for indemnification unless the indemnitee's conduct is finally
adjudged by a court to be knowingly fraudulent, deliberately dishonest or
willful misconduct. Registrant indemnifies other officers, employees or
agents provided such persons acted in good faith and in a manner which they
reasonably believed to be in or not opposed to the best interest of the
Registrant or, with respect to criminal actions, had no reason to believe was
unlawful.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits are filed herewith except those indicated which have
been filed previously as shown below and which are incorporated herein by
reference.
2.1 Merger Agreement dated August 10, 1994, between 1ST*BANK and Bank One,
Texas, N.A., joined in by BANC ONE CORPORATION and Banc One Texas
Corporation.
2.3 Form of Proxy to be used by 1ST*BANK
3.1 Amended Articles of Incorporation of the Registrant (incorporated by
reference from Exhibit 3-1 of the Annual Report of the Registrant on
Form 10-K for the year ended December 31, 1991.)
3.2 Code of Regulations of the Registrant (incorporated by reference from
Exhibit 3-2 of the Annual Report of the Registrant on Form 10-K for the
year ended December 31, 1991).
4.1 Form of Common Stock Certificate of the Registrant (incorporated by
reference from Exhibit 4.1 to the Annual Report of the Registrant on
Form 10-K for the year ended December 31, 1989).
5 Opinion of Steven A. Bennett, General Counsel and Executive Vice
President of BANC ONE CORPORATION, regarding the legality of securities
being offered, including consent.
8 Opinion of Coopers & Lybrand regarding the Federal income tax
consequences of the Merger, including consent.
23 Consents of Coopers & Lybrand and Steven A. Bennett are included
elsewhere in Part II of this Registration Statement.
23.1 Consent of Coopers & Lybrand
23.2 Consent of Fisk & Robinson, a professional corporation
II-1
<PAGE> 189
23.3 Consent of Cheshier & Fuller, Inc., P.C.
24 Power of attorney is included elsewhere in Part II of this Registration
Statement.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the Registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this Registration Statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other Items of the
applicable form.
(c) The Registrant hereby undertakes that every prospectus (i) that is filed
pursuant to paragraph (a) above, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the Registration Statement
and will not be used until such amendment has become effective, and that
for the purpose of determining liabilities under the Act, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business
day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-2
<PAGE> 190
(g) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement:
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 191
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Columbus, State of
Ohio, on November 3, 1994.
BANC ONE CORPORATION
By: /s/ Roman J. Gerber
--------------------
Roman J. Gerber
Executive Vice President
POWER OF ATTORNEY
We, the undersigned officers and directors of BANC ONE CORPORATION, hereby
severally constitute and appoint Roman J. Gerber, George R. L. Meiling and
William C. Leiter, our true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for us and in our stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing necessary or
advisable to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
WITNESS our hands and common seal on the dates set forth below.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John B. McCoy Chairman of the Board November 3, 1994
- ----------------- (Principal Executive Officer
John B. McCoy & Director)
/s/ Donald L. McWhorter President and Director November 3, 1994
- -----------------------
Donald L. McWhorter
</TABLE>
II-4
<PAGE> 192
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Frederick L. Cullen Chief Financial Officer November 3, 1994
- ---------------------------- (Principal Financial Officer)
Frederick L. Cullen
/s/ William C. Leiter Senior Vice President November 3, 1994
- ---------------------------- (Principal Accounting Officer)
William C. Leiter
/s/ Charles E. Exley Director November 3, 1994
- ----------------------------
Charles E. Exley
/s/ E. Gordon Gee Director November 3, 1994
- ----------------------------
E. Gordon Gee
/s/ John R. Hall Director November 3, 1994
- ----------------------------
John R. Hall
/s/ Laban P. Jackson, Jr. Director November 3, 1994
- ----------------------------
Laban P. Jackson, Jr.
/s/ John G. McCoy Director November 3, 1994
- ----------------------------
John G. McCoy
/s/ Rene C. McPherson Director November 3, 1994
- ----------------------------
Rene C. McPherson
/s/ Thekla R. Shackelford Director November 3, 1994
- ----------------------------
Thekla R. Shackelford
/s/ Alex Shumate Director November 3, 1994
- ----------------------------
Alex Shumate
/s/ Frederick P. Stratton, Jr. Director November 3, 1994
- ----------------------------
Frederick P. Stratton, Jr.
/s/ Romeo J. Ventres Director November 3, 1994
- ----------------------------
Romeo J. Ventres
/s/ Robert D. Walter Director November 3, 1994
- ----------------------------
Robert D. Walter
</TABLE>
II-5
<PAGE> 193
------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------------
Form S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-------------------------------------------
BANC ONE CORPORATION
(Exact name of Registrant as specified in Charter)
-------------------------------------------
EXHIBITS
<PAGE> 194
EXHIBIT INDEX
Exhibit No. EXHIBIT TITLE Page
- ----------- ---------------------------------------------- -----------
2.1 Merger Agreement dated August 10, 1994
between 1st*Bank and Bank One, Texas, N.A.,
joined in by BANC ONE CORPORATION and Banc
One Texas Corporation
2.3 Form of Proxy to be used by 1st*Bank
5 Opinion of Steven A. Bennett, General Counsel
for BANC ONE CORPORATION regarding legality
of securities being offered, including consent
8 Opinion of Coopers & Lybrand regarding
federal income tax consequences, including
consent
23.1 Consent of Coopers & Lybrand
23.2 Consent of Fisk & Robinson, a professional
corporation
23.3 Consent of Cheshier & Fuller, Inc., P.C.
<PAGE> 1
EXHIBIT 2.1
<PAGE> 2
MERGER AGREEMENT
between
1ST*BANK
and
BANK ONE, TEXAS, NATIONAL ASSOCIATION,
and joined in by
BANC ONE CORPORATION
and
BANC ONE TEXAS CORPORATION
<PAGE> 3
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Page
----
<S> <C> <C>
1. Acquisition and National Bank Merger . . . . . . . . . . . . . . 3
2. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Effective Time of Merger; Articles of Association . . . . . . . . 3
5. Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . 4
6. Liabilities upon Merger . . . . . . . . . . . . . . . . . . . . . 4
7. Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . 4
8. Board of Directors; Employees . . . . . . . . . . . . . . . . . . 9
9. Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . 9
10. Undertakings of the Parties . . . . . . . . . . . . . . . . . . . 10
11. Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . 16
12. Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
13. Representations and Warranties of BANC ONE . . . . . . . . . . . 18
14. Representations and Warranties of BANC ONE TEXAS. . . . . . . . . 28
15. Representations and Warranties of BOTNA . . . . . . . . . . . . . 30
16. Representations and Warranties of 1ST*BANK. . . . . . . . . . . . 32
17. Action by 1ST*BANK Pending Effective Date . . . . . . . . . . . . 43
18. Action by BANC ONE Pending Effective Time . . . . . . . . . . . . 47
19. Conditions to Obligations of BANC ONE, BANC ONE TEXAS & BOTNA . . 48
20. Conditions to Obligations of 1ST*BANK . . . . . . . . . . . . . . 51
21. Conditions to Obligations of All Parties . . . . . . . . . . . . 54
22. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 55
23. Non-Survival of Representations and Warranties . . . . . . . . . 58
24. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 58
25. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
26. Satisfaction of Conditions; Termination . . . . . . . . . . . . . 58
27. Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . . . 60
28. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 61
29. Captions; Counterparts . . . . . . . . . . . . . . . . . . . . . 61
30. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Exhibit A - Articles of Association of BOTNA
Exhibit B - Form of Undertaking by Affiliates
Exhibit C - Escrow Agreement
Exhibit D - Opinion of Counsel for 1ST*BANK
Exhibit E - Opinion of Counsel for BANC ONE
</TABLE>
REG9929/2
<PAGE> 4
MERGER AGREEMENT
----------------
MERGER AGREEMENT dated August 10, 1994, between 1st*Bank (hereinafter
called "1ST*BANK") and Bank One, Texas, National Association (hereinafter
called "BOTNA") and joined in by BANC ONE CORPORATION (hereinafter called
"BANC ONE") and Banc One Texas Corporation (hereinafter called "BANC ONE
TEXAS").
WITNESSETH:
1ST*BANK is a banking association duly organized under the laws of the State
of Texas which has its principal office in Coppell, Dallas County, Texas. As
of March 31, 1994, 1ST*BANK had 1,304,167 shares of authorized capital stock
consisting solely of common stock with par value of $2 per share ("1ST*BANK
Common"), all of which are issued and outstanding and none of which were
shares of treasury stock. As of March 31, 1994 1ST*BANK had capital of
$2,608,334, surplus of $3,654,166, undivided profits, including capital
reserves and net unrealized gains (losses) on investment securities classified
as held for sale of $1,227,207, and total resources of $7,489,707.
BOTNA is a national banking association duly organized under the laws of the
United States which has its principal office in Dallas, Dallas County, Texas.
As of March 31, 1994, BOTNA had 12,000,000 shares of authorized capital stock
consisting solely of common stock with par value of $35 per share ("BOTNA
Common"), 6,400,000 of which were issued and outstanding and none of which
were shares of treasury stock. As of March 31, 1994 BOTNA had capital of
$224,000,000, surplus of $778,762,000, undivided profits, including capital
reserves and net unrealized gains (losses) on investment securities classified
as held for stock of $429,213,000, and total resources of $1,431,975,000.
BANC ONE is a corporation duly organized under the laws of the State of Ohio.
Its principal office is located at 100 East Broad Street, Columbus, Franklin
County, Ohio. As of March 31, 1994 BANC ONE had capital stock of
$2,150,726,106, divided into 600,000,000 shares of common stock, without par
value ("BANC ONE Common"), 381,585,796 of which shares of BANC ONE Common were
issued and 250,000 of which were shares of treasury stock owned by BANC ONE,
<PAGE> 5
and 35,000,000 shares of preferred stock without par value, of which 4,998,000
shares were issued and outstanding as Series C $3.50 Cumulative Convertible
Preferred Stock. As of March 31, 1994, BANC ONE had surplus of $3,762,152,819
undivided profits, including capital reserves and net unrealized gains
(losses) on investment securities classified as held for sale of
$1,287,379,686, and total consolidated assets of $83,426,669,758.
BANC ONE TEXAS is a corporation duly organized under the laws of the State of
Ohio. Its principal office is located at 100 East Broad Street, Columbus,
Franklin County, Ohio. BANC ONE TEXAS is a wholly-owned subsidiary of BANC
ONE and holds all the issued and outstanding shares of BOTNA.
A majority of the entire Board of Directors of 1ST*BANK and a majority of the
entire Board of Directors of BOTNA, respectively, have approved the entering
into of this Merger Agreement and have authorized its execution. A majority
of the entire Board of Directors of each of BANC ONE and BANC ONE TEXAS have
approved this Merger Agreement, undertaken that BANC ONE and BANC ONE TEXAS
shall join in and for valuable consideration be bound by it, and authorized
the agreements and undertakings hereinafter made by BANC ONE and BANC ONE
TEXAS. From and after the time the merger of 1ST*BANK into BOTNA, as
hereinafter described, shall become effective, as set forth in Section 4 of
this Merger Agreement, and as and when required by the provisions of this
Merger Agreement, BANC ONE will issue the shares of BANC ONE Common which the
shareholders of 1ST*BANK shall be entitled to receive in accordance with the
provisions hereinafter provided, it being understood by each of the parties
hereto that BANC ONE seeks indirectly to acquire all of the assets and
liabilities of 1ST*BANK through the acquisition of such assets and liabilities
by BANC ONE TEXAS pursuant to which BANC ONE TEXAS will direct the transfer of
such assets and liabilities to BOTNA by means of the merger of 1ST*BANK into
BOTNA, that 1ST*BANK, BOTNA, BANC ONE TEXAS and BANC ONE, as appropriate, will
apply to the Office of the Comptroller of the Currency (the "Comptroller")
and, if applicable, the Texas Department of Banking ("Texas Commissioner") for
prior approval of the transaction herein contemplated and that BANC ONE will
exert its best efforts to obtain such regulatory approvals and to complete
such other actions as are necessary or appropriate to effect the merger of
1ST*BANK with and into BOTNA. Except as may be required upon application of
<PAGE> 6
Sections 7(e) and/or 7(f) of this Merger Agreement, BANC ONE will issue not
more than 425,000 shares of BANC ONE Common in connection with the
transactions contemplated by this Merger Agreement.
In consideration of the premises, 1ST*BANK, BOTNA, BANC ONE TEXAS and BANC ONE
hereby make this Merger Agreement and prescribe the terms and conditions of
the merger of 1ST*BANK with and into BOTNA and the mode of carrying the
acquisition into effect as follows:
1. ACQUISITION AND NATIONAL BANK MERGER. BANC ONE TEXAS shall acquire all of
the assets and assume all of the liabilities of 1ST*BANK; provided,
however, BANC ONE TEXAS shall direct that all of such assets and
liabilities shall be transferred to BOTNA by means of the merger of
1ST*BANK into BOTNA (the "Merger"). Subject to the terms and conditions
hereinafter set forth, 1ST*BANK shall be merged with and into BOTNA under
the Charter of BOTNA pursuant to the provisions of and with the effect
provided in Section2(a) of Act of November 7, 1918, as amended (12 U.S.C.
Section215a). All of the shares of BOTNA shall be owned by BANC ONE
TEXAS, and indirectly by BANC ONE, prior to and at the time of the Merger.
2. NAME. The name of the receiving association (hereinafter called the
"Receiving Association" whenever reference is made to it as of the time
the Merger shall become effective or thereafter) shall be "Bank One,
Texas, National Association."
3. BUSINESS. The business of the Receiving Association shall be that of a
national banking association. This business shall be conducted by the
Receiving Association at its main office which shall be located at 1717
Main Street, Dallas, Texas and at its legally established branches.
4. EFFECTIVE TIME OF MERGER: ARTICLES OF ASSOCIATION. As used in this
Agreement, the "Effective Time" shall be and mean the effective date of
the Merger provided for in this Merger Agreement as specified by the
Comptroller upon the request of BOTNA in accordance with Section 10(c) of
this Merger Agreement. From and after the Effective Time, the Bylaws of
BOTNA immediately prior to the Effective Time shall be the Bylaws of the
<PAGE> 7
Receiving Association and the Articles of Association of the Receiving
Association shall read in their entirety as set forth in Exhibit A annexed
hereto and incorporated herein by reference.
5. EFFECT OF MERGER. Upon the Merger becoming effective, the separate
corporate existence of 1ST*BANK and of BOTNA, respectively, shall, as
provided by the aforementioned 12 U.S.C. Section 215a, be merged into and
continued in the Receiving Association which shall be deemed to be the
same banking association as 1ST*BANK and BOTNA. All rights, franchises
and interests of 1ST*BANK and BOTNA, respectively, in and to every type of
property, real, personal and mixed, and choses in action, shall be
transferred to and vested in the Receiving Association by virtue of such
Merger without any deed or other transfer in the same manner and to the
same extent as such rights, franchises and interests were held or enjoyed
by 1ST*BANK and BOTNA, respectively, at the Effective Time, as provided in
said 12 U.S.C. Section 215a.
6. LIABILITIES UPON MERGER. The Receiving Association shall be responsible
for all of the liabilities of every kind and description of 1ST*BANK and
BOTNA existing as of the Effective Time.
7. CONVERSION OF SHARES.
(a) For purposes of this Merger Agreement, the following terms shall have
the following meanings:
"1ST*BANK Conversion Shares" shall mean those shares of 1ST*BANK
Common that are issued and outstanding immediately prior to the
Effective Time (except for shares of 1ST*BANK Common, if any, carried
by 1ST*BANK as treasury shares and shares of 1ST*BANK Common subject
to the rights, if any, of a dissenting shareholder); provided,
however, that the total number of 1ST*BANK Conversion Shares shall
not exceed 1,470,833 shares which shares include all shares of
1ST*BANK Common that may be issued and outstanding if and assuming
that, as of not later than immediately prior to the Effective Time,
all of 1ST*BANK's Mandatory Convertible Subordinated Debentures
issued on or about March 31, 1988 ("1ST*BANK Debentures") have been
converted into not more than 166,666 shares of 1ST*BANK Common.
<PAGE> 8
"Valuation Period" shall mean the ten consecutive days on which
shares of BANC ONE Common are traded on the New York Stock Exchange
(the "NYSE") ending on the sixth NYSE trading day immediately prior
to the Effective Time.
"BANC ONE Average Price" shall mean the average of the closing trade
prices of BANC ONE Common on the NYSE during the Valuation Period as
reported in THE WALL STREET JOURNAL for NYSE Composite Transactions.
(b) At the Effective Time
(i) The holders of record of 1ST*BANK Conversion Shares shall be
allocated and entitled to receive (upon surrender of
certificates representing said shares for cancellation or, as
set forth in the last paragraph of Section 7(d), such evidence
and, in appropriate cases, indemnity, reasonably acceptable to
BANC ONE, supporting ownership of 1ST*BANK Conversion Shares by
the purported owners thereof) and each 1ST*BANK Conversion
Share shall be converted into shares of BANC ONE Common at the
Exchange Rate. The Exchange Rate shall be as follows:
(A) If the BANC ONE Average Price is $36.30 or more, each
1ST*BANK Conversion Share shall be exchanged for 0.2627
share of BANC ONE Common.
(B) If the BANC ONE Average Price is $33.00 or less, each
1ST*BANK Conversion Share shall be exchanged for 0.2890
share of BANC ONE Common.
(C) If the BANC ONE Average Price is less than $36.30 and more
than $33.00, each 1ST*BANK Conversion Share shall be
exchanged for that number of shares of BANC ONE Common,
carried to four decimal places, which when multiplied by
the BANC ONE Average Price, will equal $9.5354.
<PAGE> 9
In no event shall all the 1ST*BANK Conversion Shares be
converted into more than 425,000 shares of BANC ONE Common. In
no event shall the Exchange Rate be less than 0.2627 or more
than 0.2890 share of BANC ONE Common; provided, however, that
the Exchange Rate will be subject to the anti-dilution
provisions of Sections 7(e) and 7(f) of this Merger Agreement
and (ii) provisions of Section 7(c) with respect to fractional
shares.
(ii) The 6,400,000 shares of BOTNA Common issued and outstanding
immediately prior to the Effective Time shall continue to be
issued and outstanding shares of common stock $35 par value of
the Receiving Association, all of which shall be owned of
record by BANC ONE TEXAS.
(iii) All shares of 1ST*BANK Common held by 1ST*BANK as treasury
stock immediately prior to the Effective Time, if any, shall be
cancelled and shall not represent capital stock of the
Receiving Association and shall not be exchanged for shares of
BANC ONE Common.
(c) No certificate for fractional shares of BANC ONE Common will be
issued by BANC ONE in connection with the exchange contemplated by
the Merger, but in lieu thereof, any holder of 1ST*BANK Conversion
Shares shall, upon surrender of the certificate or certificates
representing such 1ST*BANK Conversion Share(s), be paid cash, without
interest, by BANC ONE for such fractional shares on the basis of the
BANC ONE Average Price.
(d) At or after the Effective Time, holders of certificates formerly
representing 1ST*BANK Conversion Shares will tender such certificates
to BANC ONE in accordance with forms and procedures distributed to
such holders by BANC ONE or Bank One, Indianapolis, N.A., as Exchange
Agent for BANC ONE,and subject to the provisions set forth above
relating to fractional shares, BANC ONE or said Exchange Agent will
distribute to the holders of certificates formerly representing
<PAGE> 10
1ST*BANK Conversion Shares in exchange for and upon surrender
for cancellation by such holders of a certificate or certificates
formerly representing 1ST*BANK Conversion Shares the certificate(s)
for shares of BANC ONE Common in accordance with the Exchange Rate.
Each certificate formerly representing 1ST*BANK Conversion Shares
(which will not include certificates representing treasury shares or
shares of 1ST*BANK subject to the rights of dissenting shareholders)
shall be deemed for all purposes to evidence the ownership of the
number of shares of BANC ONE Common and cash for fractional shares
into which such shares have been converted, except, however, and
notwithstanding the foregoing, that, until such surrender of the
certificate or certificates formerly representing 1ST*BANK Conversion
Shares, the holder thereof shall not be entitled to receive any
dividend or other payment or distribution payable to holders of BANC
ONE Common. Upon such surrender (or in lieu of surrender other
provisions reasonably satisfactory to BANC ONE as are made as set
forth in the next following paragraph), there shall be paid to the
person entitled thereto the aggregate amount of dividends or other
payments or distributions (in each case without interest) which became
payable after the Effective Time on the whole shares of BANC ONE
Common represented by the certificates issued upon such surrender and
exchange or in accordance with such other provisions, as the case may
be. After the Effective Time, the holders of certificates formerly
representing 1ST*BANK Conversion Shares shall cease to have rights
with respect to such shares (except such rights, if any, as they may
have as dissenting shareholders), and except as aforesaid, their sole
rights shall be to exchange said certificates for shares of BANC ONE
Common and cash for fractional shares in accordance with this Merger
Agreement. After the Effective Time, each former shareholder of
1ST*BANK Conversion Shares shall be a shareholder of record of the
shares of BANC ONE Common into which his 1ST*BANK Conversion Shares
have been converted and shall have rights and privileges associated
therewith until such shares are sold, exchanged or otherwise
alienated.
<PAGE> 11
Certificates representing 1ST*BANK Conversion Shares surrendered for
cancellation by each shareholder entitled to exchange 1ST*BANK
Conversion Shares for shares of BANC ONE Common by reason of the
Merger shall be appropriately endorsed or accompanied by such
appropriate instruments of transfer as BANC ONE may reasonably
require and which BANC ONE or the Exchange Agent shall have
distributed to the holders of the 1ST*BANK Conversion Shares;
provided, however, that if there be delivered to BANC ONE by any
person who is unable to produce any such certificate formerly
representing 1ST*BANK Conversion Shares for transfer (i) evidence to
the reasonable satisfaction of BANC ONE that any such certificate has
been lost, wrongfully taken or destroyed, and (ii) such security or
indemnity as reasonably may be requested by BANC ONE to save it
harmless, and (iii) evidence to the reasonable satisfaction of BANC
ONE that such person is the owner of the shares theretofore
represented by each certificate claimed by him to be lost, wrongfully
taken or destroyed and that he is the person who would be entitled to
present each such certificate and to receive shares of BANC ONE
Common pursuant to this Merger Agreement, then BANC ONE, in the
absence of actual notice to it that any shares theretofore
represented by any such certificate have been acquired by a bona fide
purchaser, shall deliver to such person the certificate(s)
representing shares of BANC ONE Common and, if applicable, cash for
fractional share interests, which such person would have been
entitled to receive upon surrender of each such lost, wrongfully
taken or destroyed certificate representing 1ST*BANK Conversion
Shares.
(e) If prior to the Effective Time BANC ONE shall declare a stock
dividend or subdivide, split up, reclassify or combine its shares of
common stock or declare a dividend or make a distribution on its
common stock in any security convertible into its common stock,
appropriate adjustment or adjustments will be made in the Exchange
Rate and other factors used to determine or limit the Exchange Rate.
<PAGE> 12
(f) If prior to the Effective Time BANC ONE shall declare a stock
dividend or subdivide, split up, reclassify or combine its shares of
common stock or declare a dividend or make a distribution on its
common stock in any security convertible into its common stock, and
the "Ex-Dividend Date" (as herein defined) established for the shares
being so divided or otherwise diluted (if an "Ex-Dividend Date" is
not established by the NYSE) or the Record Date, whichever is
applicable, is subsequent to the Valuation Period appropriate
adjustment or adjustments will be made in the Exchange Rate and other
factors used to determine or limit the Exchange Rate. The
"Ex-Dividend Date" is that date established by the NYSE for such
distribution. The Record Date is that date established by resolution
of the Board of Directors of the distributing party as the time as of
which record ownership of the distributing securities will entitle
the record owner(s) to such distribution.
8. BOARD OF DIRECTORS; EMPLOYEES. Each of those persons who currently serves
on the present Board of Directors of BOTNA and shall be so serving at the
Effective Time, shall serve on the Board of Directors of the Receiving
Association until its next annual or special meeting or until such time as
his successor has been elected and has qualified or until his earlier
resignation, removal from office or death.
The officers and employees of the Receiving Association immediately
following the Effective Time shall include, among others, the officers and
employees of 1ST*BANK and BOTNA immediately prior to the Effective Time.
Such officers shall, whenever possible, serve the Receiving Association
with the same title and perform the same duties and functions as they did
with 1ST*BANK or BOTNA; provided, however, that the titles, duties and
functions of persons who were officers and employees of 1ST*BANK
immediately prior to the Effective Time shall be modified, as necessary,
to avoid duplication of officer titles, duties and functions within the
Receiving Association after the Effective Time.
9. EMPLOYEE BENEFITS. Following the Effective Time, the employee benefit
programs to be available and applicable to the officers and employees of
1ST*BANK shall be as described in and governed by a Letter Agreement dated
July 27, 1994 between 1ST*BANK and BANC ONE (the "Benefits Agreement").
<PAGE> 13
10. UNDERTAKINGS OF THE PARTIES. 1ST*BANK, BOTNA, BANC ONE TEXAS and BANC ONE
further agree as follows:
(a) This Merger Agreement shall be submitted to the shareholders of
1ST*BANK and BOTNA for ratification and confirmation at meetings to
be called and held in accordance with the applicable provisions of
law and the respective Articles of Association and By-Laws of
1ST*BANK and BOTNA. 1ST*BANK's shareholders' meeting will be
scheduled to be held at a time mutually acceptable to 1ST*BANK and
BANC ONE approximately 30 days following the mailing by 1ST*BANK of
its proxy statement to its shareholders, which mailing will promptly
follow the effective date of the registration statement to be filed
by BANC ONE with the Securities and Exchange Commission (the "SEC")
as provided in Section 10(d). 1ST*BANK and BANC ONE will use their
reasonable best efforts to cooperate with each other in order to
facilitate the preparation, filing and effectiveness of the
registration statement and the proxy statement under Federal and
State securities laws to be used with respect to such shareholders'
meeting and the exchange of shares as contemplated by this Merger
Agreement.
(b) BANC ONE, 1ST*BANK and BOTNA will use their reasonable best efforts
to cooperate in the preparation by BANC ONE of the merger application
to the Comptroller under the provisions of Section18(c) of the Federal
Deposit Insurance Act, as amended (12 U.S.C. 1828(c)), and the
provisions of 12 U.S.C. 215a, and, to the extent required, the
application to the Texas Commissioner for the prior approval of the
proposed acquisition of 1ST*BANK by BANC ONE and BANC ONE TEXAS and
of the Merger, and, to the extent required, the application to the
Federal Reserve System (the "Board") under appropriate provisions of
Section 3 of the Bank Holding Company Act of 1956, as amended.
1ST*BANK will furnish BANC ONE such information, appropriate
representations and documents as may reasonably be requested in
connection therewith and will use its reasonable best efforts to
cooperate with BANC ONE in the procurement of requisite corporate and
<PAGE> 14
regulatory approvals to effect the Merger. BANC ONE will
provide 1ST*BANK and its counsel with reasonable opportunity to
comment on the applications which it proposes to file in connection
with such regulatory approvals and will incorporate such comments and
revisions as are reasonably deemed required by 1ST*BANK and its
counsel before making such filings. BANC ONE, BOTNA and 1ST*BANK will
use their reasonable best efforts to cause such applications to be
filed with and approved by the Comptroller and, to the extent
necessary, by the Texas Commissioner and/or the Board and to obtain
such other regulatory consents and approvals as may be necessary to
facilitate the merger of 1ST*BANK with and into BOTNA, in each case as
soon as reasonably possible. BANC ONE will promptly provide 1ST*BANK
with copies of all such applications, consents and approvals together
with correspondence to or from the Comptroller and, as applicable, the
Texas Commissioner and/or the Board related thereto.
(c) After receipt of required regulatory approvals, including, but not
limited to the approval of the Merger by the Comptroller, and after
the approval of the Merger by the shareholders of 1ST*BANK, BOTNA, at
the direction of BANC ONE and following consultation with 1ST*BANK,
shall designate in writing to the Comptroller the proposed Effective
Time, and the Effective Time shall be as specified by the Comptroller
in accordance with such request, subject to Section 26 of this Merger
Agreement. In no event will the date designated by BOTNA as the
Effective Time be sooner than the day following the day on which all
approvals of the shareholders of 1ST*BANK, the Comptroller and, if
required, the Texas Commissioner and/or the Board have been received
and any required waiting periods with respect thereto have expired,
nor will the date designated by BOTNA as the Effective Time be later
than 31 days following the date at which all such approvals have been
received and any required waiting periods with respect thereto have
expired.
(d) BANC ONE will prepare and file with the SEC and use its reasonable
best efforts to cause to become effective, a registration statement,
including the related prospectus and proxy statement referred to in
<PAGE> 15
Section 10(a), above ("Proxy Statement"), and any required
amendments thereto or supplements to any prospectus contained therein,
relating to the exchange of BANC ONE shares in the Merger contemplated
by this Merger Agreement. BANC ONE will prepare and file with the
NYSE and use its reasonable best efforts to cause to be accepted an
application to list on the NYSE for trading, upon notice of issuance,
the shares of BANC ONE Common to be issued in exchange for 1ST*BANK
Conversion Shares at the Effective Time. BANC ONE will provide
1ST*BANK and its counsel a reasonable opportunity to comment on such
proposed filings and will incorporate such comments and revisions as
are reasonably deemed required by 1ST*BANK and its counsel before
making any such filing. Such registration statement will not cover
resales by any persons who may be considered "underwriters" under Rule
145(c) of the Securities Act of 1933, as amended (the "1933 Act").
BANC ONE shall use its best efforts to have the shares of BANC ONE
Common qualified or exempted from qualification under all applicable
state securities laws as soon as possible. In the event that a stop
order has been issued, or threatened, by the SEC, that suspends or
would suspend the effectiveness of the registration statement, BANC
ONE shall use its best efforts to promptly remove, or cause not to be
issued, any such stop order. The shares of BANC ONE Common to be
issued in exchange for the 1ST*BANK Conversion Shares shall have been
qualified or exempted from qualification under all applicable state
securities laws prior to the Effective Time.
(e) Except as herein otherwise provided, BANC ONE and/or BANC ONE TEXAS
will assume and pay all expenses incident to the obtaining of the
requisite regulatory consents and approvals. Without limiting the
generality of the foregoing, the expenses to be assumed and paid by
BANC ONE and/or BANC ONE TEXAS shall include (i) all legal and other
expenses and taxes incurred by BANC ONE incident to the consummation
of the Merger contemplated by this Merger Agreement; (ii) all legal
and other expenses incurred by BANC ONE incident to the preparation
and filing of acquisition, and merger applications and other requests
for regulatory consents and approvals with the appropriate bank
regulatory agencies as set forth in or contemplated by this Merger
<PAGE> 16
Agreement; and, (iii) all legal and other expenses, if any,
incurred in connection with the registration of the common stock of
BANC ONE under the Federal and state securities laws. The expenses to
be assumed and paid by BANC ONE and/or BANC ONE TEXAS shall not
include any legal or other expenses incurred by 1ST*BANK in the
examination and review of documents for its own benefit or in
connection with its own corporate proceedings. BANC ONE will pay the
expenses of reproducing the Proxy Statement. 1ST*BANK shall be
responsible for its legal and accounting fees associated with the
Proxy Statement including the expenses associated with 1ST*BANK's
provision, if necessary, of certain 1ST*BANK financial statements and
related documents as more specifically described in Section 10(h).
(f) All information furnished by one party to another party in connection
with this Merger Agreement (whether before or after the date of this
Merger Agreement) and the transactions contemplated hereby will be
kept confidential by such other party (although it may be shared,
under a corresponding nondisclosure obligation with officers,
directors and others necessary for such party to effect the
transactions contemplated hereby) and will be used only in connection
with this Merger Agreement and the transactions contemplated hereby,
except to the extent that such information (i) is already known to
such other party when received, (ii) thereafter becomes lawfully
obtainable from other sources, otherwise than in violation of this
paragraph or similar duties or provisions regarding confidentiality,
or (iii) is, in the reasonable opinion of legal counsel for BANC ONE,
required to be disclosed in any document filed with the SEC, the
Board, the Texas Commissioner, the Comptroller or any other
governmental agency or authority. The provisions of this Merger
Agreement shall be in addition to the provisions of the
Confidentiality Agreement dated October 27, 1993 between 1ST*BANK and
BOTNA (the "Confidentiality Agreement") and shall not be deemed to
supersede nor to terminate said Confidentiality Agreement.
(g) BANC ONE will provide 1ST*BANK with copies of all filings made by
BANC ONE with the SEC under the Securities Exchange Act of 1934, as
amended, (the "1934 Act") and the 1933 Act and the respective rules
<PAGE> 17
and regulations of the SEC thereunder and with the NYSE with
respect to the BANC ONE Common to be issued at the Effective Time
pursuant hereto at the time such filings are made at any time from the
date of this Merger Agreement and prior to the Effective Time.
(h) BANC ONE, BANC ONE TEXAS and BOTNA will furnish to 1ST*BANK all
information concerning BANC ONE, BANC ONE TEXAS and BOTNA reasonably
required by 1ST*BANK in connection with the preparation of its proxy
solicitation materials for use in soliciting proxies in connection
with the meeting of 1ST*BANK's shareholders called for the purpose of
voting on the Merger and will promptly advise 1ST*BANK if BANC ONE,
BANC ONE TEXAS and/or BOTNA determines that any of such information
is or becomes false or misleading in any material respect. 1ST*BANK
will furnish to BANC ONE all information concerning 1ST*BANK
reasonably required by BANC ONE in connection with BANC ONE's
preparation of registration statements (including the related
prospectus) and any required amendments or supplements thereto, or in
connection with other filings by BANC ONE relating to the
registration of its shares and/or preparation of proxy statements to
shareholders and will promptly advise BANC ONE if 1ST*BANK determines
that any such information is or becomes false or misleading in any
material respect. 1ST*BANK shall provide BANC ONE with such
financial statements, management discussion and analysis and other
similar documents as BANC ONE reasonably deems necessary to be
included in the registration statement, which financial statements
shall be audited and certified by Fisk & Robinson, P.C. or another
accounting firm acceptable to BANC ONE and deemed by BANC ONE to be
knowledgeable with respect to the preparation of financial statements
to be included in registration statements filed with the SEC.
(i) No press release or other public disclosure of matters related to
this Merger Agreement or any of the transactions contemplated hereby
shall be made by 1ST*BANK or BANC ONE and its affiliates unless the
other party shall have provided its prior consent to the form and
substance thereof; provided, however, that nothing herein shall be
<PAGE> 18
deemed to prohibit any party hereto from making any
disclosure which its counsel deems necessary or advisable in order to
fulfill such party's disclosure obligations imposed by law.
(j) Prior to the Effective Time, BANC ONE TEXAS will vote all the shares
of BOTNA to ratify and confirm the proposal to merge 1ST*BANK with
and into BOTNA at a meeting of the shareholders of BOTNA held for
such purpose or by means of a unanimous written consent of BOTNA
shareholders adopted in lieu of a meeting to ratify and confirm the
Merger Agreement.
(k) For not less than the two-year period immediately following the
Effective Time, BANC ONE shall make available adequate current public
information about itself as that terminology is used in and as
required by Rule 144(c) of the SEC under the 1933 Act.
(l) Each of BANC ONE, BANC ONE TEXAS, BOTNA and 1ST*BANK will use its
reasonable best efforts to cause the Merger to qualify for
pooling-of-interests accounting treatment.
(m) 1ST*BANK will use its reasonable best efforts to cause each person
who, in the joint opinion of counsel for BANC ONE and 1ST*BANK, is at
the Effective Time or was, at the time of 1ST*BANK's shareholders'
meeting referred to in Section 10 hereof, an "affiliate" of 1ST*BANK
(as that term is used in Rules 144 and 145 promulgated by the SEC
under the 1933 Act), to execute and deliver to BANC ONE the written
undertakings in the form attached hereto as EXHIBIT B.
(n) BANC ONE and 1ST*BANK shall each provide the other with adequate
opportunity to conduct such reviews and examinations of the business,
properties and conditions (financial and otherwise) of the other as
BANC ONE and 1ST*BANK, respectively, shall deem prudent, provided
that such investigations shall not interfere unreasonably with the
normal operations of the party being reviewed.
<PAGE> 19
11. DISSENTING SHAREHOLDERS. Any shareholder of 1ST*BANK who has voted
against the Merger at the meeting of shareholders of 1ST*BANK called to
vote on the Merger or has given notice in writing at or prior to such
meeting to the presiding officer that he dissents from the Merger shall be
entitled to receive the value of his shares subject to and in accordance
with the provisions of said 12 U.S.C. Section215a, and notwithstanding
anything in Section 7 to the contrary, his shares shall not be exchanged
for BANC ONE Common, but shall evidence his rights to receive the value
thereof pursuant to said 12 U.S.C. Section 215a.
Immediately prior to the Effective Time, BANC ONE and 1ST*BANK shall
determine, with the assistance of legal counsel, the maximum aggregate
number of shares of 1ST*BANK Common held by 1ST*BANK shareholders for
which the holder thereof, potentially, may have the right to be paid the
value thereof in cash pursuant to 12 USC Section 215a. Such aggregate
number of shares shall be based upon the number of shares of 1ST*BANK
Common voted against the Merger together with the number of shares owned
by a shareholder who has given 1ST*BANK written notice of such holder's
dissent from the plan of merger prior to 1ST*BANK's meeting of shareholders
held to consider the Merger proposal. Such aggregate number of shares
shall be multiplied by the larger of the market value or book value of one
share of 1ST*BANK Common immediately prior to the Effective Time. Such
amount together with an additional sum of $10,000 shall, immediately prior
to the Effective Time, be paid by 1ST*BANK from its assets to Bank One,
Indianapolis, N.A., as Escrow Agent pursuant to the terms of the Escrow
Agreement annexed hereto as Exhibit C. An Escrow Agreement in the form of
Exhibit C will be executed prior to the Effective Time by 1ST*BANK, BOTNA
and Bank One, Indianapolis, N.A. as the Escrow Agent. In the event that
immediately prior to the Merger no holders of 1ST*BANK Common have
positioned themselves as potential dissenting shareholders who may
effectively demand the value of their shares of 1ST*BANK Common in cash,
1ST*BANK shall not be required to pay any amount to the Escrow Agent and
the Escrow Agreement will not be executed. Under no circumstances will
the total amount paid into the escrow account by 1ST*BANK exceed one
percent (1%) of 1ST*BANK's net assets. Under no circumstances will any
assets of BANC ONE, BANC ONE TEXAS or BOTNA be paid into the escrow
account or be used to pay 1ST*BANK shareholders who dissent to the Merger.
<PAGE> 20
12. TAX OPINION. BANC ONE and 1ST*BANK shall use their respective reasonable
best efforts to obtain from Coopers & Lybrand a written opinion addressed
to, among others, 1ST*BANK, its shareholders and BANC ONE, that based upon
the Internal Revenue Code and regulations thereunder and rulings issued by
the Internal Revenue Service in transactions similar to those contemplated
by this Merger Agreement:
(a) For Federal income tax purposes, the transaction is viewed as an
acquisition by BANC ONE TEXAS of substantially all of the assets of
1ST*BANK solely in exchange for BANC ONE Common and the assumption of
all of the liabilities of 1ST*BANK by BANC ONE TEXAS followed by the
transfer of the assets of 1ST*BANK to BOTNA and the assumption by
BOTNA of the liabilities of 1ST*BANK.
(b) The acquisition by BANC ONE TEXAS of substantially all of the assets
of 1ST*BANK in exchange solely for shares of BANC ONE Common and the
assumption by BANC ONE TEXAS of 1ST*BANK's liabilities will
constitute a reorganization within the meaning of Section 368(a)(1)(A)
and (a)(2)(D) of the Internal Revenue Code. Pursuant to Section
368(a)(2)(C), the acquisition by BANC ONE TEXAS of substantially all
of the assets of 1ST*BANK will not be disqualified under Section
368(a)(2)(D) by reason of the fact that the assets of 1ST*BANK that
were acquired by BANC ONE TEXAS are transferred to BOTNA.
(c) No gain or loss will be recognized by BANC ONE, BANC ONE TEXAS, BOTNA
or 1ST*BANK as a consequence of the transactions herein contemplated;
(d) No gain or loss will be recognized to the shareholders of 1ST*BANK on
the exchange of their shares of 1ST*BANK Common (including shares of
1ST*BANK Common received by any such shareholders immediately prior
to the Effective Time by reason of the conversion of 1ST*BANK
Debentures into shares of 1ST*BANK Common) solely for shares of BANC
ONE Common (disregarding for this purpose any cash received for
fractional share interests to which they may be entitled);
<PAGE> 21
(e) The Federal income tax basis of the BANC ONE Common (including
fractional share interests to which they may be entitled) received by
the shareholders of 1ST*BANK (including shares of BANC ONE Common
exchanged for 1ST*BANK Common which were received by any such
shareholders immediately prior to the Effective Time by reason of the
conversion of 1ST*BANK Debentures into shares of 1ST*BANK Common)
will be the same as the Federal income tax basis of the 1ST*BANK
Common surrendered in exchange therefor; and
(f) The holding period of the BANC ONE Common received by a shareholder
of 1ST*BANK will include the period for which the 1ST*BANK Common
exchanged therefor was held (including shares of 1ST*BANK Common
which were received by any such shareholders immediately prior to the
Effective Time by reason of the conversion of 1ST*BANK Debentures
into shares of 1ST*BANK Common), provided the exchanged 1ST*BANK
Common was held as a capital asset by such shareholder on the date of
the exchange.
13. REPRESENTATIONS AND WARRANTIES OF BANC ONE. BANC ONE represents and
warrants to 1ST*BANK that, except as set forth in BANC ONE's disclosure
letter to 1ST*BANK dated July 27, 1994 and delivered to 1ST*BANK not later
than the time of 1ST*BANK's execution of this Merger Agreement (the "BANC
ONE Disclosure Letter"), and except as otherwise indicated below:
(a) BANC ONE is a corporation duly organized and validly existing in good
standing under the laws of the State of Ohio, is a registered bank
holding company under the Bank Holding Company Act of 1956, as
amended, and is qualified to do business and is in good standing in
the State of Ohio, together with all other jurisdictions where it is
both required to so qualify and where the failure to so qualify would
have a material adverse effect on the business, operations, financial
condition or results of operations of BANC ONE and its subsidiaries,
taken as a whole, or on the ability of BANC ONE to consummate the
transactions contemplated hereby (a "BANC ONE Material Adverse
Effect"), and BANC ONE has full power and authority (including all
licenses, franchises, permits and other governmental authorizations
<PAGE> 22
which are legally required) to engage in the businesses and
activities now conducted by it and its subsidiaries. BANC ONE is not
subject to any formal or informal agreement or understanding with,
nor is it subject to any order of, any bank regulatory authority
restricting or prohibiting or attempting to restrict or prohibit any
activities or conduct of BANC ONE. As of March 31, 1994, the
authorized capital stock of BANC ONE consisted of (i) 600,000,000
shares of common stock without par value, of which a total of
381,835,796 shares were issued and 250,000 of which were shares held
by BANC ONE as treasury stock and (ii) 35,000,000 shares of preferred
stock without par value, of which 4,998,000 shares were issued and
outstanding as Series C $3.50 Cumulative Convertible Preferred
Stock. All of the issued and outstanding shares of BANC ONE's
capital stock are duly authorized, validly issued, fully paid,
nonassessable and subject to no pre-emptive rights. Subject only to
obtaining the required regulatory and shareholder approvals, BANC ONE
is, and at all times after the date of this Merger Agreement to and
including the Effective Time will be, authorized to effect the Merger
under applicable law.
(b) BANC ONE has furnished to 1ST*BANK copies of the following financial
statements relating to BANC ONE and its consolidated subsidiaries:
(i) the audited Consolidated Balance Sheets of BANC ONE as of
December 31, 1993 and 1992 and the Consolidated Statements of Income,
Shareholders' Equity and Cash Flows for the years then ended,
together with the notes thereto, as audited by Coopers & Lybrand,
independent auditors together with the notes thereto; and (ii) the
unaudited Consolidated Balance Sheet of BANC ONE as at March 31, 1994
and the unaudited Consolidated Statements of Income and Shareholders'
Equity for the quarterly period then ended, together with the notes
thereto. Each of the aforementioned financial statements present
fairly, in accordance with generally accepted accounting principles
(applied on a consistent basis except as disclosed in the footnotes
thereto), the consolidated financial position and results of
operations of BANC ONE as of the dates and for the periods therein
set forth. Such financial statements do not, as of the dates
<PAGE> 23
thereof, include any material asset or omit any material
liability, absolute or contingent, or other fact, the inclusion or
omission of which renders such financial statements, in light of the
circumstances under which they were made, misleading in any material
respect. Since March 31, 1994, there has not been any change in the
financial condition, results of operations or business of BANC ONE and
its subsidiaries that has had a BANC ONE Material Adverse Effect.
Since March 31, 1994, BANC ONE has issued approximately 1,799,000
additional shares of BANC ONE Common.
(c) The Board of Directors of BANC ONE has duly authorized the execution
and delivery of this Merger Agreement and approved the Merger as
contemplated by said Merger Agreement. No authorization of this
Merger Agreement or of the transactions hereby contemplated is
required by the shareholders of BANC ONE. BANC ONE has all requisite
power and authority to enter into this Merger Agreement and, after
BANC ONE TEXAS' vote of the shares of BOTNA in favor of the Merger as
contemplated by Section 10(j), BANC ONE will have the authority to
consummate the transactions contemplated hereby. This Merger
Agreement constitutes the valid and legally binding and enforceable
obligation of BANC ONE and this Merger Agreement and the consummation
of the Merger have been duly authorized and approved on behalf of
BANC ONE by all requisite corporate action. Provided the required
approvals are obtained from the Comptroller and, to the extent
necessary, the Texas Commissioner and/or the Board, neither the
execution and delivery of this Merger Agreement nor the consummation
of the Merger will conflict with, result in the breach of, constitute
a default under or accelerate the performance provided by the terms
of any law, or any rule or regulation of any governmental agency or
authority or any judgment, order or decree of any court, bank
regulatory agency or other governmental agency to which BANC ONE is
subject, any contract, agreement or instrument to which BANC ONE is a
party or by which BANC ONE is bound or committed, or the Articles of
Incorporation or Regulations of BANC ONE, or constitute an event
which with the lapse of time or action by a third party, could, to
the best of BANC ONE's knowledge, result in the default under any of
<PAGE> 24
the foregoing or result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of BANC ONE or upon
any of the stock of BANC ONE or adversely affect the ability of BANC
ONE to consummate the transactions contemplated hereby, except, in
the case of contracts, agreements or instruments, such defaults,
conflicts or breaches which either (i) will be cured or waived prior
to the Effective Time or (ii) if not so cured or waived would not, in
the aggregate, have any BANC ONE Material Adverse Effect.
(d) The reserve for possible loan and lease losses shown on the March 31,
1994 Consolidated Balance Sheet of BANC ONE and its subsidiaries is
adequate in all material respects under the requirements of generally
accepted accounting principles to provide for possible losses, net of
recoveries relating to loans previously charged off, on loans
outstanding (including, without limitation, accrued interest
receivable) as of March 31, 1994.
(e) Except as disclosed in the financial statements referred to in
Section 13(b), there is no litigation, action, suit, investigation or
proceeding pending or, to the best of the knowledge after due inquiry
of BANC ONE and its executive officers, overtly threatened, against
or affecting BANC ONE or its subsidiaries or involving any of their
respective properties or assets, at law or in equity, before any
federal, state, municipal, local or other governmental authority,
which is reasonably likely to be resolved adversely to the interest
of BANC ONE or its subsidiaries and, if so resolved, would have a
BANC ONE Material Adverse Effect or materially impair its ability, or
that of BANC ONE TEXAS, to perform under this Merger Agreement, and
to the best of the knowledge and belief after due inquiry of BANC ONE
and its executive officers, no one has reasonable or valid grounds on
which it reasonably can be expected that anyone will assert or
initiate any such litigation, action, suit, investigation or
proceeding against BANC ONE based upon the wrongful action or
inaction of BANC ONE or its subsidiaries or any of their respective
officers, directors or employees.
<PAGE> 25
(f) At the Effective Time and on such subsequent dates when the former
shareholders of 1ST*BANK surrender their 1ST*BANK share certificates
for cancellation, the shares of BANC ONE Common to be exchanged with
former shareholders of 1ST*BANK will have been duly authorized and
validly issued by BANC ONE and will be fully paid and nonassessable
and subject to no pre-emptive rights and will be duly approved for
listing on the NYSE upon notice of issuance.
(g) BANC ONE and each of its subsidiaries have good and marketable title
to all their respective assets and properties, whether real or
personal, tangible or intangible, including without limitation the
capital stock of its subsidiaries and all other assets and properties
reflected in BANC ONE's Balance Sheet as of March 31, 1994 or
acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of for fair value in the ordinary
course of business since March 31, 1994). Such assets and properties
are subject to no liens, mortgages, security interests, encumbrances,
pledges or charges of any kind, except (i) as noted in said Balance
Sheet or the notes thereto; (ii) statutory liens for taxes not yet
delinquent; (iii) landlord's liens; and (iv) minor defects and
irregularities in title and encumbrances which do not materially
impair the use thereof for the purposes for which they are held; and
such liens, mortgages, security interests, encumbrances and charges
do not, in the aggregate, have a BANC ONE Material Adverse Effect.
BANC ONE and its subsidiaries as lessees have the unqualified right
under valid and subsisting leases to occupy, use, possess and control
all property leased by BANC ONE and its subsidiaries.
(h) To the best of the knowledge after due inquiry of BANC ONE and its
executive officers, BANC ONE and its subsidiaries have complied with
all laws, regulations and orders applicable to them and to the
conduct of their businesses, including without limitation, all
statutes, rules and regulations pertaining to the conduct of banking
activities except for violations which together with any penalty
which results therefrom has not had and will not have a BANC ONE
Material Adverse Effect. Neither BANC ONE nor any of its
<PAGE> 26
subsidiaries is in default under, and no event has occurred
which, to the best of BANC ONE's knowledge, after due inquiry, is
likely to result in the default under the terms of any judgment,
decree, order, writ, rule or regulation of any governmental authority
or court, whether federal, state or local and whether at law or in
equity, in each case where the default has had or is likely to have a
BANC ONE Material Adverse Effect.
(i) BANC ONE has not incurred and will not incur directly or indirectly
any liability for brokerage, finders', agents' or investment bankers'
fees or commissions in connection with this Merger Agreement or the
transactions contemplated hereby.
(j) Each pension, stock bonus or purchase, profit-sharing, retirement,
health and welfare plan maintained by or covering employees of BANC
ONE or any subsidiary of BANC ONE other than a multiemployer plan
(for purposes of this paragraph hereinafter referred to collectively
as the "Plans") which purports to be a qualified plan under Section
401(a) of the Code is so qualified. All of the Plans which
constitute employee pension benefit or employee welfare benefit plans
subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), have been maintained in compliance in all material
respects with the applicable requirements of ERISA. All material
notices, reports and other filings required under applicable law to
be given or made to or with any governmental agency with respect to
the Plans have been timely filed or delivered. BANC ONE has no
knowledge of any circumstances which would adversely affect the
qualification of the Plans or their compliance with the applicable
requirements of ERISA, would result or have resulted in liability
under Title IV of ERISA or of any "reportable event" (as such term is
defined in Section 4043(b) of ERISA) or any "prohibited transaction"
(as such term is defined in Section 406 of ERISA and Section 4975(c)
of the Code) which has occurred since the date on which said sections
became applicable to the Plans and which could reasonably be expected
to result in any material liability of BANC ONE or any subsidiary to
the Pension Benefit Guaranty Corporation (the "PBGC"), the Department
<PAGE> 27
of Treasury, the Department of Labor or any multiemployer
plan. Those Plans which are defined benefit plans within the meaning
of ERISA meet the minimum funding standards set forth in the Code and
ERISA and the assets of such Plans equal or exceed the current value
of accrued benefits under such Plans as of the most recent plan
valuation date. There are no pending or threatened claims (other than
claims for benefits in the ordinary course), lawsuits or arbitrations
which have been asserted or instituted against the Plans, any
fiduciaries thereof with respect to their duties to the Plans or the
assets of any of the trusts under any of the Plans which could
reasonably be expected to result in any material liability of BANC ONE
or any subsidiary to the PBGC, Department of Treasury, Department of
Labor or any multiemployer plan.
(k) BANC ONE and/or its subsidiaries have duly filed all federal, state,
county and local income, franchise, bank, excise, real and personal
property and other tax returns and reports (including, but not
limited to, those relating to social security, withholding,
unemployment insurance, and occupation, sales and use taxes and those
filed on a consolidated, combined or unitary basis) required to have
been filed by BANC ONE or its subsidiaries up to the date hereof.
All of the foregoing returns are true and correct in all material
respects, and BANC ONE and its subsidiaries have paid or, prior to
the Effective Time, will pay all taxes, interest and penalties shown
on such returns or reports as being due or (except to the extent the
same are contested in good faith and, if material, summarized in the
BANC ONE Disclosure Letter) or claimed to be due to any federal,
state, county, local or other taxing authority, and there is, and at
the Effective Time will be, no basis for any additional claim or
assessment which might materially and adversely affect BANC ONE and
its subsidiaries, except for those being contested in good faith and
summarized in the BANC ONE Disclosure Letter. BANC ONE and its
subsidiaries have paid or made adequate provision in its financial
statements or its books and records for all taxes payable in respect
of all periods ending on or before the date hereof. BANC ONE and its
subsidiaries have, or at the Effective Time will have, no liability
<PAGE> 28
for any taxes, interest or penalties of any nature
whatsoever, except for those taxes which may have arisen up to the
Effective Time in the ordinary course of business and are properly
accrued on the books of BANC ONE as of the Effective Time or are being
contested in good faith and have, if material, been summarized in the
BANC ONE Disclosure Letter.
(l) BANC ONE has in effect insurance coverage with reputable insurers,
which in respect of amounts, premiums, types and risks insured,
constitutes reasonably adequate coverage against all risks
customarily insured against by bank holding companies comparable in
size and operation to BANC ONE.
(m) Neither the Proxy Statement nor the related registration statement
nor any amendment or supplement thereto that is filed with the SEC in
connection with the transactions contemplated hereby (except for any
information which has been or shall be supplied by 1ST*BANK for
inclusion in the Proxy Statement and registration statement and is so
included as so supplied) shall contain (in the case of information
relating to the Proxy Statement, at the time it is mailed and in the
case of information relating to the registration statement at the
time it becomes effective and at the time of 1ST*BANK's shareholders'
meeting) any untrue statement of a material fact or shall omit to
state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they are made, not
misleading. The registration statement and any amendments or
supplements thereto that are filed with the SEC in connection with
the transactions contemplated hereby will comply as to form in all
material respects with the provisions of the 1933 Act and the rules
and regulations promulgated thereunder. All documents that BANC ONE
files with the NYSE in connection with the transactions contemplated
hereby will comply as to form in all material respects with the
provisions of applicable law.
(n) No employee of BANC ONE or any of its subsidiaries is represented,
for purposes of collective bargaining, by a labor organization of any
type. BANC ONE is unaware of any efforts during the past five years
<PAGE> 29
to unionize or organize any employees of BANC ONE or any of
its subsidiaries, and no claim related to such employees under the
Fair Labor Standards Act, National Labor Relations Act, Civil Rights
Act of 1964, Walsh-Healy Act, Davis Bacon Act, Civil Rights Act of
1866, Age Discrimination in Employment Act, Equal Pay Act of 1963,
Executive Order No. 11246, Federal Unemployment Tax Act, Vietnam Era
Veterans Readjustment Act, Occupational Safety and Health Act, or any
state or local employment related law, order, ordinance or regulation,
no unfair labor practice, discrimination or wage-and-hour claim is
pending or, to the best of BANC ONE's knowledge, threatened against
BANC ONE or any of its subsidiaries which claim has had or is
reasonably likely to have a BANC ONE Material Adverse Effect.
(o) To the actual knowledge of BANC ONE and its executive officers:
(i) with respect to any contaminant, pollutant, hazardous substance,
hazardous waste, hazardous pollutant, toxic pollutant, toxic waste or
toxic substance ("Contaminant"), there are no material actions,
proceedings or investigations pending or threatened before any
federal or state environmental regulatory body, or before any federal
or state court, alleging non-compliance with or liability in
connection with, by BANC ONE or any of its subsidiaries, the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. Section Section 9601 et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, 42 U.S.C. Section Section 6901 et seq.
("RCRA"), the Clean Water Act, 33 U.S.C. Section Section 1251 et seq.
("CWA"), or the Clean Air Act, 42 U.S.C. Section Section 7401 et seq.
("CAA"), as each is amended from time to time, or any other federal,
state, local or municipal statute, ordinance or regulation, or order,
ruling or other decision of any court, administrative agency or other
governmental authority relating to health or safety or environmental
protection (such statutes, ordinances, regulations, orders, rulings
and decisions, together, "Environmental Laws"); (ii) there is no
reasonable basis for the institution of any material action,
proceeding or investigation against BANC ONE or any of its
subsidiaries under any Environmental Law; (iii) neither BANC ONE nor
any of its subsidiaries is responsible in any material respect under
any Environmental Law for
<PAGE> 30
any release by any person at or in the vicinity of real
property of any Contaminant, caused by the spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of any such hazardous substance into
the environment (collectively "Release"); (iv) neither BANC ONE nor
any of its subsidiaries is responsible for any material costs of any
response action required by virtue of any Release of any Contaminant
into the environment including, without limitation, costs arising from
investigation, removal or remediation of Contaminants, security
fencing, alternative water supplies, temporary evacuation and housing
and other emergency assistance undertaken by any environmental
regulatory body or any other person; (v) BANC ONE and its subsidiaries
are, in all material respects, in compliance with all applicable
Environmental Laws; and (vi) no real property owned or used by BANC
ONE or any of its subsidiaries contains any Contaminant including,
without limitation, any asbestos, PCBs or petroleum products or
byproducts in any form, the presence, location or condition of which
(a) could require remediation or other corrective action pursuant to
any Environmental Law in any material respect, or (b) otherwise would
pose any significant health or safety risk unless remedial measures
were taken.
(p) BANC ONE and/or its subsidiaries (i) have surveyed the facilities
where BANC ONE and its subsidiaries conduct their businesses
including, without limitation, automatic teller machines
(collectively, the "BANC ONE Facilities") for compliance with the
Americans with Disabilities Act and the regulations issued thereunder
(collectively, "ADA"); (ii) have developed action plans to remove
architectural barriers including communication barriers that are
structural in nature from existing BANC ONE Facilities (collectively,
the "BANC ONE Barriers") when such removal is "readily achievable,"
as that term is defined in ADA; (iii) have finalized action plans for
automatic teller machines ("ATMs") in conformance with the Joint
Final Rule of the Architectural and Transportation Barriers
Compliance Board ("ATBCB") and the Department of Transportation,
effective August 16, 1993; (iv) have developed or will develop
<PAGE> 31
schedules for BANC ONE Barrier removal from BANC ONE
Facilities in such action plans so that BANC ONE Barrier removal was
complete on January 26, 1992 or will be completed as soon as
practicable thereafter; and (v) have removed all BANC ONE Barriers in
BANC ONE Facilities or will cause all BANC ONE Barriers to be removed
in accordance with such action plans. All "alterations" (as such term
is defined in ADA) to BANC ONE Facilities undertaken after January 26,
1992 comply with ADA and the ATBCB Accessibility Guidelines for
Buildings and Facilities ("ADAAG"). Effective January 26, 1992, all
plans and designs for new construction to be utilized by BANC ONE and
its subsidiaries comply with ADA and ADAAG. To the best of BANC ONE's
knowledge, after due inquiry, no material investigations, proceedings,
or complaints, formal or informal, are pending or threatened against
BANC ONE and/or its subsidiaries in connection with BANC ONE
Facilities under ADA, ADAAG, or any other state or federal law
concerning accessibility for individuals with disabilities.
(q) The statements made and the information included in the BANC ONE
Disclosure Letter and any attachments thereto shall be deemed to
constitute representations and warranties of BANC ONE under this
Merger Agreement to the same extent as if herein set forth in full.
Anything disclosed in the BANC ONE Disclosure Letter or the
attachments thereto shall be considered to have been disclosed for
purposes of all representations, warranties and covenants under this
Merger Agreement.
14. REPRESENTATIONS AND WARRANTIES OF BANC ONE TEXAS. BANC ONE TEXAS
represents and warrants to 1ST*BANK that, except as set forth in the BANC
ONE Disclosure Letter or as otherwise indicated below:
(a) BANC ONE TEXAS is a corporation duly organized and validly existing
in good standing under the laws of the State of Ohio, is a registered
bank holding company under the Bank Holding Company Act of 1956, as
amended, and is qualified to do business and is in good standing in
the State of Ohio together with all other jurisdictions where it is
<PAGE> 32
both required to so qualify and the failure to so qualify
would have materially adverse effect on the business, operations,
financial condition or results of operations of BANC ONE TEXAS and its
subsidiaries, taken as a whole, or on the ability of BANC ONE TEXAS to
consummate the transactions contemplated hereby, and BANC ONE TEXAS
has full power and authority (including all licenses, franchises,
permits and other governmental authorizations which are legally
required) to engage in the businesses and activities now conducted by
it. BANC ONE TEXAS owns all of the issued and outstanding shares of
BOTNA Common.
(b) The Board of Directors of BANC ONE TEXAS has authorized execution of
this Merger Agreement and approved the acquisition of 1ST*BANK as
contemplated by said Merger Agreement. No authorization of this
Merger Agreement or of the transactions hereby contemplated is
required by the shareholders of BANC ONE TEXAS. BANC ONE TEXAS has
all requisite power and authority to enter into this Merger Agreement
and, after the vote by BANC ONE TEXAS of its shares of BOTNA in favor
of the Merger as contemplated by Section 10(j), BANC ONE TEXAS will
have the authority to consummate the transactions contemplated
hereby. This Merger Agreement constitutes the valid and legally
binding obligation of BANC ONE TEXAS and this Merger Agreement and
the consummation hereof have been duly authorized and approved on
behalf of BANC ONE TEXAS by all requisite corporate action. Provided
the required approvals are obtained from the Comptroller and, to the
extent necessary, the Texas Commissioner and/or the Board, neither
the execution and delivery of this Merger Agreement nor the
consummation of the Merger will conflict with, result in the breach
of, constitute a default under or accelerate the performance provided
by the terms of any law, or any rule or regulation of any
governmental agency or authority or any judgment, order or decree of
any court or other governmental agency to which BANC ONE TEXAS may be
subject, any contract, agreement or instrument to which BANC ONE
TEXAS is a party or by which BANC ONE TEXAS is bound or committed, or
the Articles of Incorporation or Code of Regulations of BANC ONE
TEXAS, or constitute an event which with the lapse of time or action
<PAGE> 33
by a third party, could, to the best of BANC ONE TEXAS's
knowledge, result in the default under any of the foregoing or result
in the creation of any lien, charge or encumbrance upon any of the
assets or properties of BANC ONE TEXAS or adversely affect the ability
of BANC ONE to consummate the transactions contemplated hereby.
15. REPRESENTATIONS AND WARRANTIES OF BOTNA. BOTNA represents and warrants to
1ST*BANK that, except as set forth in the BANC ONE Disclosure Letter or as
otherwise indicated below:
(a) BOTNA is a national banking association duly organized, validly
existing and in good standing under the laws of the United States of
America. BOTNA has heretofore delivered to 1ST*BANK true, accurate
and complete copies of the currently effective Articles of
Association and Bylaws of BOTNA, including all amendments thereto.
BOTNA (i) is duly authorized to conduct a general banking business,
subject to the supervision of the OCC as provided in the national
banking laws, (ii) is a member of the Federal Reserve system and a
stockholder of the Federal Reserve Bank of Dallas, (iii) is an
insured bank as defined in the Federal Deposit Insurance Act, and
(iv) has full power and authority (including all licenses,
franchises, permits and other governmental authorizations which are
legally required) to engage in the business and activities now
conducted by BOTNA. As of March 31, 1994, BOTNA had 12,000,000
shares of authorized capital stock consisting solely of common stock
with par value of $35.00 per share ("BOTNA Common"), 6,400,000 of
which were issued and outstanding. As of March 31, 1994, BOTNA had
surplus of $778,762,000, undivided profits including net unrealized
gains (losses) on investment securities classified as held for sale
of $429,213,000, and total resources of $1,431,975,000. All of the
capital stock of BOTNA has been duly and validly authorized and
issued by BOTNA. All of said issued shares are fully paid and
nonassessable (except to the extent provided in Section 5205 of the
Revised Statutes of the United States) and are not issued in
violation of the preemptive rights of any shareholder. There are no
outstanding options, warrants or commitments of any kind relating to
BOTNA's capital stock.
<PAGE> 34
(b) There is no litigation, action, suit, investigation or proceeding
pending or, to the best of the knowledge, after due inquiry, of BOTNA
or its executive officers, overtly threatened, against or affecting
BOTNA or involving any of its properties or assets, at law or in
equity or before any federal, state, municipal, local or other
governmental authority or any court, involving a material amount
which, if resolved adversely to the interest of BOTNA, would
materially affect the operations of BOTNA and/or its ability to
perform under this Merger Agreement, and no one has asserted and, to
the best of the knowledge and belief of BOTNA and its executive
officers, after due inquiry, no one has reasonable or valid grounds
on which it reasonably can be expected that anyone will assert any
such claims against BOTNA based upon the wrongful action or inaction
of BOTNA or any of its officers, directors or employees.
(c) The Board of Directors of BOTNA has duly authorized execution and
delivery of this Merger Agreement and approved the Merger as
contemplated by the Merger Agreement and will recommend it to its
shareholder for adoption. Subject to ratification and confirmation
of the Merger Agreement by the shareholders of BOTNA, this Merger
Agreement constitutes the valid, legally binding and enforceable
obligation of BOTNA and BOTNA has all requisite power and authority
to enter into this Merger Agreement and BOTNA has the authority to
consummate the transactions contemplated hereby so that, provided all
required corporate and regulatory approvals are obtained, neither the
execution and delivery of this Merger Agreement nor the consummation
of the Merger will conflict with, result in the breach of, constitute
a default under or accelerate the performance provided by the terms
of any law, or any rule or regulation of any governmental agency or
authority or any judgment, order or decree of any court, bank
regulatory agency or other governmental agency to which BOTNA may be
subject, any contract, agreement or instrument to which BOTNA is a
party or by which BOTNA is bound or committed, or the Articles of
Association or By-Laws of BOTNA, or constitute an event which with
the lapse of time or action by a third party, could, to the best of
BOTNA's knowledge after due inquiry, result in the default under any
of the foregoing.
<PAGE> 35
16. REPRESENTATIONS AND WARRANTIES OF 1ST*BANK. 1ST*BANK represents and
warrants to BANC ONE and BOTNA that, except as set forth in 1ST*BANK's
disclosure letter to BANC ONE dated July __, 1994 and delivered to BANC
ONE not later than the time of BANC ONE's execution of this Merger
Agreement (the "1ST*BANK Disclosure Letter") and except as otherwise
indicated below:
(a) 1ST*BANK is a banking corporation duly organized, validly existing
and in good standing under the laws of the State of Texas and is
qualified to do business and is in good standing in all jurisdictions
where it is both required to so qualify and where the failure to so
qualify would have a material adverse effect on the business,
operations, financial condition or results of operations of 1ST*BANK
or on the ability of 1ST*BANK to consummate the transactions
contemplated hereby (a "1ST*BANK Material Adverse Effect") and
1ST*BANK has full corporate power and authority (including all
licenses, franchises, permits and other governmental authorizations
which are legally required) to engage in the businesses and
activities now conducted by it and the Subsidiaries. 1ST*BANK has
heretofore delivered to BANC ONE true, accurate and complete copies
of the currently effective Articles of Association and Bylaws of
1ST*BANK, including all amendments thereto. 1ST*BANK (i) is duly
authorized to conduct a general banking business, subject to the
supervision of the Texas Commissioner and the FDIC as provided in
applicable Texas and national banking laws, (ii) is not a member of
the Federal Reserve system, (iii) is an insured bank as defined in
the Federal Deposit Insurance Act, and (iv) has full power and
authority (including all licenses, franchises, permits and other
governmental authorizations which are legally required) to engage in
the business and activities now conducted by it. 1ST*BANK is not
subject to any formal or informal agreement or understanding with,
nor is it subject to any order of, any bank regulatory authority
restricting or prohibiting or attempting to restrict or prohibit any
activities or conduct of 1ST*BANK. As of March 31, 1994, 1ST*BANK
had 1,304,167 shares of authorized capital stock consisting solely of
1,304,167 shares of common stock with par value of $2.00 per share
<PAGE> 36
("1ST*BANK Common"), all of which shares were issued and
outstanding and none of which were shares of treasury stock owned by
1ST*BANK. As of March 31, 1994, 1ST*BANK had surplus of $3,654,166,
undivided profits including net unrealized gains (losses) on
investment securities classified as held for sale of $1,227,207, and
total resources of $7,489,709. All of the capital stock of 1ST*BANK
has been duly and validly authorized and issued by 1ST*BANK. All of
said issued shares are fully paid and nonassessable and are not issued
in violation of the preemptive rights of any shareholder. There are
no outstanding options, warrants, debentures, or commitments of any
kind relating to 1ST*BANK's capital stock except for the 1ST BANK
Debentures which are convertible into not more than 166,666 shares of
1ST*BANK Common.
(b) 1ST*BANK has furnished to BANC ONE copies of the following financial
statements relating to 1ST*BANK: (i) the audited Balance Sheet of
1ST*BANK as of December 31, 1993 and 1992, and the Statements of
Income, Stockholders' Equity and Cash Flows for the years then ended,
together with the notes thereto, as audited by Fisk & Robinson P.C.,
Certified Public Accountants; (ii) the unaudited Balance Sheet of
1ST*BANK as of March 31, 1994 and the unaudited Statement of Income
for the period then ended, together with the notes thereto (iii) the
financial statements contained in 1ST*BANK's Consolidated Reports of
Condition and Consolidated Reports of Income, Expenses and Dividends
("Call Reports") at December 31, for the years 1993 and 1992 as
furnished to the FDIC, and (iv) the financial statements contained in
1ST*BANK's Call Report for the quarter ended March 31, 1994 as
furnished to the FDIC. Each of the aforementioned financial
statements presents fairly, in accordance with generally accepted
accounting principles (applied on a consistent basis except as
disclosed in the footnotes thereto), the financial position and
results of operations of 1ST*BANK as of the dates and for the periods
therein set forth. Such financial statements do not, as of the dates
thereof, include any material asset or omit any material liability,
absolute or contingent, or other fact, the inclusion or omission of
which renders such financial statements, in light of the
circumstances under which they were made, misleading in any material
<PAGE> 37
respect. Since March 31, 1994, there has not been any change
in the financial condition, results of operations or business of
1ST*BANK that has had an 1ST*BANK Material Adverse Effect.
(c) The Board of Directors of 1ST*BANK has duly authorized execution and
delivery of this Merger Agreement and approved the Merger as
contemplated by the Merger Agreement and recommended it to its
shareholders for adoption. 1ST*BANK has all requisite corporate
power and authority to enter into this Merger Agreement,and upon
ratification and confirmation of the Merger Agreement by the
shareholders of 1ST*BANK, 1ST*BANK will have the corporate authority
to consummate the transactions contemplated hereby. This Merger
Agreement constitutes the valid, legally binding and enforceable
obligation of 1ST*BANK, and this Merger Agreement and the
consummation of the Merger, upon the approval of the 1ST*BANK
shareholders, will have been duly authorized and approved on behalf
of 1ST*BANK by all requisite corporate action. Provided the required
approvals are also obtained from the Comptroller and, to the extent
necessary, the Texas Commissioner and/or the Board, neither the
execution and delivery of this Merger Agreement nor the consummation
of the Merger will conflict with, result in the breach of, constitute
a default under or accelerate the performance provided by the terms
of any law, or any rule or regulation of any governmental agency or
authority or any judgment, order or decree of any court, bank
regulatory agency or other governmental agency to which 1ST*BANK may
be subject, any contract, agreement or instrument to which 1ST*BANK
is a party or by which 1ST*BANK is bound or committed, or the
Articles of Association or By-Laws of 1ST*BANK, or constitute an
event which with the lapse of time or action by a third party, could,
to the best of 1ST*BANK's knowledge after due inquiry, result in the
default under any of the foregoing or result in the creation of any
lien, charge or encumbrance upon any of the assets or properties of
1ST*BANK or upon any of 1ST*BANK's capital stock; except, (i) in the
case of contracts, agreements or instruments, such defaults,
conflicts or breaches which will be cured or waived prior to the
Effective Time or (ii) as would not, in the aggregate, have a
1ST*BANK Material Adverse Effect.
<PAGE> 38
(d) The reserve for possible loan and lease losses shown on the March 31,
1994 Call Report and Balance Sheet of 1ST*BANK is adequate in all
material respects under the requirements of regulatory accounting
principles to provide for possible losses, net of recoveries relating
to loans previously charged off, on loans outstanding (including,
without limitation, accrued interest receivable) as of March 31, 1994.
(e) Except as disclosed in the financial statements referenced to in
Section 15(b) or in the 1ST*BANK Litigation Schedule (the "1ST*BANK
Litigation Schedule") attached to the 1ST*BANK Disclosure Letter,
there is no litigation, action, suit, investigation or proceeding
pending or, to the best of the knowledge after due inquiry of
1ST*BANK and its executive officers, overtly threatened, against or
affecting 1ST*BANK or involving any of its properties or assets, at
law or in equity, before any federal, state, municipal, local or
other governmental authority which is reasonably likely to be
resolved adversely to the interest of 1ST*BANK and, if so resolved,
would have a 1ST*BANK Material Adverse Effect, and to the best of the
knowledge and belief after due inquiry of 1ST*BANK and its executive
officers, no one has reasonable or valid grounds on which it
reasonably can be expected that anyone will assert or initiate any
such litigation, action, suit, investigation or proceeding against
1ST*BANK based upon the wrongful action or inaction of 1ST*BANK or
any of its officers, directors or employees.
(f) 1ST*BANK has good and marketable title to all assets and properties,
whether real or personal, tangible or intangible, reflected in
1ST*BANK's Call Report and Balance Sheet as of March 31, 1994 or
acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of for fair value in the ordinary
course of business since March 31, 1994). Such assets and properties
are subject to no liens, mortgages, security interests, encumbrances,
pledges or charges of any kind, except (i) as reflected in said Call
Report and Balance Sheet or the notes thereto; (ii) statutory liens
for taxes not yet delinquent; (iii) landlord's liens; (iv) minor
defects and irregularities in title and encumbrances which do not
materially impair the use thereof for the purposes for which they are
<PAGE> 39
held; and such liens, mortgages, security interests,
encumbrances and charges do not, in the aggregate, have a 1ST*BANK
Material Adverse Effect. 1ST*BANK as lessee has the right under valid
and subsisting leases to occupy, use, possess and control all property
leased by 1ST*BANK. At the Effective Time all limitations affecting
such properties will not, in the aggregate, have a 1ST*BANK Material
Adverse Effect. To the best of 1ST*BANK's knowledge, after due
inquiry, all significant buildings, structures, fixtures and
appurtenances comprising part of the real properties of 1ST*BANK are,
considering their ages, in good condition and have reasonably been
maintained.
(g) To the best of the knowledge after due inquiry of 1ST*BANK and its
executive officers, 1ST*BANK has complied with all laws, regulations
and orders applicable to them and to the conduct of its business,
including without limitation, all statutes, rules and regulations
pertaining to the conduct of banking activities except for violations
which together with any penalty which results therefrom has not had
and will not have a 1ST*BANK Material Adverse Effect. 1ST*BANK is
not in default under, and no event has occurred which, to the best of
1ST*BANK's knowledge, after due inquiry, is likely to result in the
default under the terms of any judgment, decree, order, writ, rule or
regulation of any governmental authority or court, whether federal,
state or local and whether at law or in equity, in each case when the
default has had or is likely to have a 1ST*BANK Material Adverse
Effect.
(h) 1ST*BANK has not, since March 31, 1994 to the date hereof, (i) sold
or issued any corporate debt securities or sold, issued, reissued or
increased its shares of its capital stock; (ii) granted any option
for the purchase of capital stock; (iii) declared or set aside or
paid any dividend or other distribution in respect of its capital
stock, except as permitted pursuant to Section 17(a) hereof or as
incurred in carrying out the transactions contemplated by this Merger
Agreement, or directly or indirectly, purchased, redeemed or
otherwise acquired any shares of such stock; (iv) incurred any
<PAGE> 40
obligation or liability (absolute or contingent) except
obligations or liabilities incurred in the ordinary course of business
or pursuant to this Merger Agreement, or mortgaged, pledged or
subjected to lien or encumbrance (other than landlord's liens and
statutory liens for taxes not yet delinquent and banking transactions
conducted in the ordinary course of business) on any of its material
assets or properties; (v) discharged or satisfied any material lien or
encumbrance or paid any material obligation or liability (absolute or
contingent), other than current liabilities included in 1ST*BANK's
Call Report and Balance Sheet as of March 31, 1994, current
liabilities incurred since the date thereof in the ordinary course of
business and liabilities incurred in carrying out the transactions
contemplated by this Merger Agreement; (vi) sold, exchanged or
otherwise disposed of any material capital assets; (vii) made any
extraordinary officers' salary increase or wage increase, entered into
any employment contract with any officer or salaried employee or
instituted any employee welfare, bonus, stock option, profit-sharing,
retirement or similar plan or arrangement; (viii) suffered any damage,
destruction or loss, whether or not covered by insurance, that has had
a 1ST*BANK Material Adverse Effect or waived any rights of value
which, in the aggregate, have had a 1ST*BANK Material Adverse Effect;
(ix) entered or agreed to enter into any agreement or arrangement
granting any preferential right to purchase any of its material
assets, properties or rights or requiring the consent of any party to
the transfer and assignment of any such material assets, properties or
rights; or (x) entered into any other material transaction except as
expressly contemplated by this Merger Agreement.
(i) Except as set forth in the 1ST*BANK Document List (the "1ST*BANK
Document List") attached to the 1ST*BANK Disclosure Letter, 1ST*BANK
is not a party to or bound by any written or oral (i) employment or
consulting contract which is not terminable by 1ST*BANK on 60 days or
less notice, (ii) employee bonus, deferred compensation, pension,
stock bonus or purchase, profit-sharing, retirement or stock option
plan, (iii) other employee benefit or welfare plan, or (iv) other
executory material contract as defined by the Instructions to
<PAGE> 41
Exhibit 10 under Item 601 of SEC Regulation S-K. All such
pension, stock bonus or purchase, profit-sharing, retirement, health
and welfare plans (other than any multiemployer plans) set forth in
the 1ST*BANK Document List are in this section hereinafter referred to
collectively as the "Plans." Those Plans intended to be qualified
plans under Section 401(a) of the Code meet any applicable
requirements for favorable tax treatment under the Code. All of the
Plans which constitute employee pension benefit plans or employee
welfare plans subject to ERISA have been maintained in compliance in
all material respects with the applicable requirements of ERISA. All
material notices, reports and other filings required under applicable
law to be given or made to or with any governmental agency with
respect to the Plans have been timely filed or delivered. 1ST*BANK
has no knowledge of any circumstances which would adversely affect the
qualification of the Plans or their compliance with the applicable
requirements of ERISA, would result or have resulted in liability
under Title IV of ERISA or of any unreported "reportable event" (as
such term is defined in Section 4043(b) of ERISA) or any "prohibited
transaction" (as such term is defined in Section 406 of ERISA and
Section 4975(c) of the Code) which has occurred since the date on
which said sections became applicable to the Plans and which could
reasonably be expected to result in any material liability of 1ST*BANK
to the PBGC, the Department of Treasury, the Department of Labor or
any multiemployer plan. Those plans which are defined benefit plans
within the meaning of ERISA meet the minimum funding standards set
forth in the Internal Revenue Code and ERISA and the assets of such
plans equal or exceed the current value of accrued benefits on a
termination basis under such plans as of the most recent plan
valuation date. There are no pending or threatened claims (other than
claims for benefits in the ordinary course and pursuant to domestic
relations orders), lawsuits or arbitrations which have been asserted
or instituted against the plans, any fiduciaries thereof with respect
to their duties to the plans or the assets of any of the trusts under
any of the plans which could reasonably be expected to result in any
material liability of 1ST*BANK to the PBGC, the Department of
Treasury, the Department of Labor or any multiemployer plan.
<PAGE> 42
(j) 1ST*BANK has duly filed all federal, state, county and local income,
franchise, bank, excise, real and personal property and other tax
returns and reports (including, but not limited to, those relating to
social security, withholding, unemployment insurance, and occupation,
sales, and use taxes and those filed on a consolidated, combined or
unitary basis) required to have been filed by 1ST*BANK up to the date
hereof. 1ST*BANK has made available to BANC ONE a copy of its
Federal income tax return for the years 1993 and 1992. All of the
foregoing returns are true and correct in all material respects, and
1ST*BANK has paid or, prior to the Effective Time, will pay all
taxes, interest and penalties shown on such returns or reports as
being due or (except to the extent the same are contested in good
faith and, if material, summarized in the 1ST*BANK Disclosure Letter)
claimed to be due to any federal, state, county, local or other
taxing authority, and there is, and at the Effective Time will be, no
valid basis for any additional claim or assessment which might
materially and adversely affect 1ST*BANK, except for those being
contested in good faith and summarized in the 1ST*BANK Disclosure
Letter. 1ST*BANK has paid or made adequate provision in its
financial statements or its books and records for all taxes payable
in respect of all periods ending on or before the date hereof.
1ST*BANK has, or at the Effective Time will have, no liability for
any taxes, interest or penalties of any nature whatsoever, except for
those taxes which may have arisen up to the Effective Time in the
ordinary course of business and are properly accrued on the books of
1ST*BANK as of the Effective Time or are being contested in good
faith and have, if material, been summarized in the 1ST*BANK
Disclosure Letter.
(k) 1ST*BANK has in effect insurance coverage with reputable insurers
which in respect of amounts, premiums, types and risks insured,
constitutes reasonably adequate coverage against all risks
customarily insured against by banks comparable in size and operation
to 1ST*BANK.
<PAGE> 43
(l) 1ST*BANK has not incurred and will not incur any liability for
brokerage, finders', agents', or investment bankers' fees or
commissions in connection with this Merger Agreement or the
transactions contemplated hereby.
(m) 1ST*BANK has annexed to the 1ST*BANK Disclosure Letter a loan
schedule identifying certain loan agreements, notes and borrowing
arrangements (the "1ST*BANK Loan Schedule") between 1ST*BANK and
borrowers of 1ST*BANK as of the date hereof. Except as specifically
noted on the 1ST*BANK Loan Schedule, as of the date hereof, 1ST*BANK
is not a party to any written or oral (i) loan agreement, note or
borrowing arrangement, other than credit card loans and other loans
the unpaid balance of which does not exceed $25,000 per loan, under
the terms of which the obligor is 60 days delinquent in payment of
principal or interest and which has not been charged off by 1ST*BANK
or, to the best of 1ST*BANK's knowledge, in default of any other
provision thereof; (ii) loan agreement, note or borrowing arrangement
which has been classified as "substandard," "doubtful," "other loans
especially mentioned" or any comparable classifications by 1ST*BANK
or banking regulator; (iii) loan agreement, note, or borrowing
arrangement, including any loan guaranty, with any director,
executive officer or ten percent shareholder of 1ST*BANK, or any
person, corporation or enterprise controlling, controlled by or under
common control with any of the foregoing; or, (iv) to the best of
1ST*BANK's knowledge, loan agreement, note or borrowing arrangement
in violation of any law, regulation or rule of any governmental
authority and which violation could, to the best of 1ST*BANK's
knowledge after due inquiry, have a 1ST*BANK Material Adverse Effect.
(n) None of the information provided by 1ST*BANK to BANC ONE for
inclusion in the Proxy Statement or related registration statement or
any amendment or supplement thereto (to the extent so included as so
provided) shall contain (in the case of information relating to the
Proxy Statement, at the time it is mailed and in the case of
information relating to the registration statement, at the time it
becomes effective) any untrue statement of a material fact or shall
<PAGE> 44
omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they are
made, not misleading. Insofar as is under 1ST*BANK's reasonable
control, the Proxy Statement that is filed with the SEC in connection
with the meeting of the shareholders of 1ST*BANK will comply as to
form in all material respects with the provisions of the 1934 Act and
the rules and regulations promulgated thereunder (as though 1ST*BANK
were subject thereto).
(o) 1ST*BANK has annexed a contracts schedule (the "1ST*BANK Contracts
Schedule") to the 1ST*BANK Disclosure Letter setting forth certain
material contracts, including credit agreements, on which 1ST*BANK is
the obligor, maker, issuer or guarantor. Except as specifically
disclosed on the 1ST*BANK Contracts Schedule, 1ST*BANK is not a party
to any material contract and/or any credit agreement as obligor,
maker, issuer or guarantor and which contract contains covenants
which make the acquisition of 1ST*BANK or its merger with another
entity a condition of default or acceleration.
(p) 1ST*BANK has no subsidiaries, is not a party to any partnership or
joint venture and does not hold 5% or more of the outstanding capital
stock of any entity.
(q) No employee of 1ST*BANK is represented, for purposes of collective
bargaining, by a labor organization of any type. 1ST*BANK is unaware
of any efforts during the past five years to unionize or organize any
employees of 1ST*BANK, and no claim related to such employees under
the Fair Labor Standards Act, National Labor Relations Act, Civil
Rights Act of 1964, Walsh-Healy Act, Davis Bacon Act, Civil Rights
Act of 1866, Age Discrimination in Employment Act, Equal Pay Act of
1963, Executive Order No. 11246, Federal Unemployment Tax Act,
Vietnam Era Veterans Readjustment Act, Occupational Safety and Health
Act, or any state or local employment related law, order, ordinance
or regulation, no unfair labor practice, discrimination or
wage-and-hour claim is pending or, to the best of 1ST*BANK's
knowledge, threatened against 1ST*BANK, which claim has had or is
reasonably likely to have an 1ST*BANK Material Adverse Effect.
<PAGE> 45
(r) To the actual knowledge of 1ST*BANK and its executive officers:
(i) with respect to any Contaminant, there are no material actions,
proceedings or investigations pending or threatened before any
federal or state environmental regulatory body, or before any federal
or state court, alleging non-compliance with or liability in
connection with, by 1ST*BANK, CERCLA or any other Environmental Laws;
(ii) there is no reasonable basis for the institution of any material
action, proceeding or investigation against 1ST*BANK under any
Environmental Law; (iii) 1ST*BANK is not responsible in any material
respect under any Environmental Law for any Release; (iv) 1ST*BANK is
not responsible for any material costs of any response action
required by virtue of any Release of any Contaminant into the
environment including, without limitation, costs arising from
investigation, removal or remediation of Contaminants, security
fencing, alternative water supplies, temporary evacuation and housing
and other emergency assistance undertaken by any environmental
regulatory body or any other person; (v) 1ST*BANK is, in all material
respects, in compliance with all applicable Environmental Laws; and
(vi) no real property owned or used by 1ST*BANK contains any
Contaminant including, without limitation, any asbestos, PCBs or
petroleum products or byproducts in any form, the presence, location
or condition of which (a) could require remediation or other
corrective action pursuant to any Environmental Law in any material
respect, or (b) otherwise would pose any significant health or safety
risk unless remedial measures were taken.
(s) 1ST*BANK (i) has surveyed the facilities where 1ST*BANK conducts its
business including, without limitation, ATMs (collectively, the
"1ST*BANK Facilities") for compliance with ADA; (ii) has developed
action plans to remove architectural barriers including communication
barriers that are structural in nature from existing 1ST*BANK
Facilities (collectively, the "1ST*BANK Barriers") when such removal
is "readily achievable," as that term is defined in ADA; (iii) has
finalized action plans for ATMs in conformance with the Joint Final
Rule of the ATBCB and the Department of Transportation, effective
August 16, 1993; (iv) has developed or will develop schedules for
<PAGE> 46
1ST*BANK Barrier removal from 1ST*BANK Facilities in such
action plans so that 1ST*BANK Barrier removal was complete on January
26, 1992 or will be completed as soon as practicable thereafter; and
(v) has removed all 1ST*BANK Barriers in 1ST*BANK Facilities or will
cause all 1ST*BANK Barriers to be removed in accordance with such
action plans. All "alterations" (as such term is defined in ADA) to
1ST*BANK Facilities undertaken after January 26, 1992 comply with ADA
and the ADAAG. Effective January 26, 1992, all plans and designs for
new construction to be utilized by 1ST*BANK comply with ADA and ADAAG.
To the best of 1ST*BANK's knowledge, after due inquiry, no material
investigations, proceedings, or complaints, formal or informal, are
pending or threatened against 1ST*BANK in connection with 1ST*BANK
Facilities under ADA, ADAAG, or any other state or federal law
concerning accessibility for individuals with disabilities.
(t) The statements made in the 1ST*BANK Disclosure Letter and any
attachments thereto shall be deemed to constitute representations and
warranties of 1ST*BANK under this Merger Agreement to the same extent
as if herein set forth in full. Anything disclosed in the 1ST*BANK
Disclosure Letter or the attachments thereto shall be considered to
have been disclosed for purposes of all representations, warranties
and covenants under this Merger Agreement.
17. ACTION BY 1ST*BANK PENDING EFFECTIVE DATE. 1ST*BANK agrees that from the
date of this Merger Agreement until the earlier of the Effective Time or
the time that this Merger Agreement is terminated, except with the prior
written permission of BANC ONE, which, in any case covered by
Section 17(d) hereof, shall not be unreasonably withheld:
(a) After March 31, 1993 1ST*BANK will not declare or pay any dividends
or make any distributions on shares of 1ST*BANK Common.
(b) 1ST*BANK will not issue, sell, grant any option for, or acquire for
value any shares of its capital stock or otherwise effect any change
in connection with its equity capitalization; provided, however, that
<PAGE> 47
1ST*BANK may issue not more than 166,666 shares of 1ST*BANK
Common in consideration for and upon conversion of the 1ST*BANK
Debentures.
(c) Except as otherwise set forth in or contemplated by this Merger
Agreement, 1ST*BANK will carry on its businesses in substantially the
same manner as heretofore, use its reasonable best efforts to keep in
full force and effect insurance comparable in amount and scope of
coverage to that now maintained by it and use its reasonable best
efforts to maintain and preserve its business organization intact.
(d) 1ST*BANK will not (i) enter into any new line of business or incur or
agree to incur any obligation or liability except liabilities and
obligations (including corporate debt issuances) incurred in the
ordinary course of business, except as may be directed by any
regulatory agency; (ii) except as may be directed by any regulatory
agency, change its lending, investment, liability management and
other material banking policies in any material respect; (iii) except
in the ordinary course of business and consistent with prior
practice, grant any general or uniform increase in the rates of pay
of employees; (iv) establish any new employee benefit plan or amend
any existing plan (except as required by law) so as to increase by
any significant amount the benefits payable thereunder; (v) incur or
commit to any capital expenditures other than in the ordinary course
of business (which will in no event include the establishment of new
branches or any other facilities or any capital expenditures in
excess of $25,000 for any individual project for any purpose); or
(vi) merge into, consolidate with or permit any other corporation to
be merged or consolidated with it or acquire outside of the ordinary
course of business part of or all the assets or stock of any other
corporation or person.
(e) 1ST*BANK will not change its method of accounting in effect at
March 31, 1994, except as required by changes in generally accepted
accounting principles as concurred in by Fisk & Robinson P.C. or
change any of its methods of reporting income and deductions for
Federal income tax purposes from those employed in the preparation of
<PAGE> 48
1ST*BANK's Federal income tax returns for the taxable years
ending December 31, 1993 and 1992, except as required by changes in
law.
(f) 1ST*BANK will afford BANC ONE, its officers and other authorized
representatives, such access to all books, records, tax returns,
leases, contracts and documents of 1ST*BANK at reasonable times for
inspection without any material interference with the normal business
operations of 1ST*BANK and will furnish to BANC ONE such information
with respect to the assets and business of 1ST*BANK as BANC ONE may
from time to time reasonably request in connection with this Merger
Agreement and the transactions contemplated hereby.
(g) 1ST*BANK will promptly advise BANC ONE in writing of all material
corporate actions taken by the directors and shareholders of
1ST*BANK, furnish BANC ONE with copies of all monthly and other
interim financial statements of 1ST*BANK as they become available,
and keep BANC ONE fully informed concerning all trends and
developments which in the opinion of 1ST*BANK may have a 1ST*BANK
Material Adverse Effect.
(h) 1ST*BANK and its officers, directors and employees will not contract
for or acquire, at the expense of 1ST*BANK, a policy or policies
providing for insurance coverage for directors, officers and/or
employees of 1ST*BANK for any period subsequent to the Effective Time
for events occurring before or after the Effective Time; provided,
however, that 1ST*BANK may renew, extend or replace existing policies
in the ordinary course consistent with past practices for periods of
not greater than one year.
(i) Prior to the Effective Time, 1ST*BANK shall have sold all assets
which, if owned by 1ST*BANK, would be required to be reported on
Schedules RC-B and/or RC Item 5 (Assets held in Trading Accounts) of
its Call Reports. Such sales shall be on terms reasonably acceptable
to BOTNA.
<PAGE> 49
(j) Prior to the Effective Time, 1ST*BANK will use its reasonable best
efforts to enter into binding agreements, which, in the reasonable
judgment of counsel for BOTNA, shall terminate, prior to the
Effective Time, the following agreements on terms reasonably
acceptable to BOTNA: (i) that certain Correspondent Bank Agreement
between 1ST*BANK and First USA Bank dated May 26, 1992 (the
"Correspondent Bank Agreement"); (ii) that certain Credit Card
Processing Agreement between 1ST*BANK and First USA Merchant
Services, Inc. dated March 21, 1990 (the "Credit Card Processing
Agreement"); (iii) that certain undated Data Processing Service
Agreement between 1ST*BANK and Affiliated Computer Systems, Inc, now,
Electronic Data Systems Corporation (the "D.P. Service Agreement");
(iv) that certain MPACT On-Line Automated Teller Machine Support
Service Agreement between 1ST*BANK and Electronic Data Systems
Corporation dated July 7, 1980 (the "ATM Service Agreement"); and (v)
that certain MPACT Interchange Agreement between 1ST*BANK and EDS
dated July 7, 1980 (the "Interchange Agreement").
(k) Not later than the record date for the meeting of holders of 1ST*BANK
Common, 1ST*BANK shall use its reasonable best efforts to cause
1ST*BANK and the holders of the 1ST*BANK Debentures to amend the
terms of the 1ST*BANK Debentures to provide for the conversion of all
1ST*BANK Debentures into not more than 166,666 shares of 1ST*BANK
Common not later than immediately prior to the Effective Time.
(l) Prior to the Effective Time, 1ST*BANK should use its reasonable best
efforts to cause the Landlord to provide 1ST*BANK and BANC ONE with
its written agreement, reasonably satisfactory to counsel for BOTNA,
which shall (i) consent to the assignment of the Branch Lease by
1ST*BANK to BOTNA as a result of the Merger and by operation of law;
(ii) limit the amount of insurance which Landlord may require
pursuant to Section 12.01 of the Branch Lease to $2,000,000; (iii)
amend the waiver of subrogation provisions set forth in Section 13.01
of the Branch Lease; (iv) delete Section 34 of the Branch Lease; (v)
provide for the potential use of a portion of the premises utilized
by 1ST*BANK pursuant to the Branch Lease by non-bank affiliates of
BOTNA and/or
<PAGE> 50
for non-traditional financial services and (vi) confirming
(A) that Landlord is the current and sole lessor under the Branch
Lease, (B) that the expiration date of the initial term under the
Branch Lease is June 30, 1996, (C) that two renewal options remain
under the Branch Lease, (D) that the Branch Lease has not been
previously amended or modified in any manner and is in full force and
effect as originally written, (E) that no default exists under the
Branch Lease nor does any condition exist which, with the passage of
time or the giving of notice, or both, would become a default, and (F)
such additional facts (if true) as BOTNA shall reasonably request.
18. ACTION BY BANC ONE PENDING EFFECTIVE TIME. BANC ONE agrees that from the
date of this Agreement until the Effective Time, except with prior written
permission of 1ST*BANK:
(a) BANC ONE will not adopt or implement any amendment to its Articles of
Incorporation or any plan of reorganization which would affect in any
manner the terms and provisions of the shares of BANC ONE Common or
the rights of the holders of such shares or reclassify the BANC ONE
Common.
(b) Except as otherwise set forth in or contemplated by this Merger
Agreement, BANC ONE will carry on its businesses in substantially the
same manner as heretofore, keep in full force and effect insurance
comparable in amount and scope of coverage to that now maintained by
it and use its best efforts to maintain and preserve its business
organization intact.
(c) BANC ONE will not change its methods of accounting in effect at
December 31, 1993, except as required by changes in generally
accepted accounting principles as concurred in with Coopers &
Lybrand, its independent auditors, or change any of its methods of
reporting income and deductions for Federal income tax purposes from
those employed in the preparation of the Federal income tax returns
of BANC ONE for the taxable years ending December 31, 1993 and 1992,
except as required by changes in law.
<PAGE> 51
(d) BANC ONE will afford 1ST*BANK, its officers and other authorized
representatives, such access to all books, records, tax returns,
leases, contracts and documents of BANC ONE and its subsidiaries and
will furnish to 1ST*BANK such information with respect to the assets,
earnings and business of BANC ONE and its subsidiaries as 1ST*BANK
may from time to time reasonably request in connection with this
Merger Agreement and the transactions contemplated hereby.
19. CONDITIONS TO OBLIGATIONS OF BANC ONE, BANC ONE TEXAS AND BOTNA. The
obligations of BANC ONE, BANC ONE TEXAS and BOTNA under this Merger
Agreement are subject, unless waived by BANC ONE, to the satisfaction of
the following conditions on or prior to the Effective Time:
(a) There shall not have been any change in the financial condition,
aggregate net assets, shareholders' equity, business or operating
results of 1ST*BANK from March 31, 1994 to the Effective Time that
has had a 1ST*BANK Material Adverse Effect.
(b) 1ST*BANK shall not have paid cash dividends from March 31, 1994 to
the Effective Time.
(c) All representations by 1ST*BANK contained in this Merger Agreement
shall be true in all material respects at, or as of, the Effective
Time as though such representations were made at and as of said date,
except for (i) changes contemplated by the Merger Agreement and (ii)
representations as of a specified time other than the Effective Time,
which shall be true in all material respects at such specified time
(provided, however, that the representation of 1ST*BANK contained in
Section 16(d) shall be true in all material respects as applied to
the latest Balance Sheet of 1ST*BANK prior to the Effective Time and
to the last Call Report of 1ST*BANK filed with the FDIC prior to the
Effective Time and the reserve for possible loan and lease losses
included therein, as though each reference to "March 31, 1994" in
such Section were a reference to the last day of the most recent
calendar quarter prior to the Effective Time.
<PAGE> 52
(d) BANC ONE shall have received the opinion of legal counsel for
1ST*BANK, dated as of the Effective Time, substantially to the effect
set forth in EXHIBIT D hereto, together with a certificate of
"existence" from the Texas Commissioner dated as of a date not more
than 20 days prior to the Effective Time.
(e) 1ST*BANK shall have performed, in all material respects, all
agreements and conditions required by this Merger Agreement to be
performed and satisfied by it at or prior to the Effective Time.
(f) As of the close of the most recent calendar quarter (or if the
Effective Time shall occur within 20 days following the close of a
calendar quarter, then as of the next preceding calendar quarter)
cumulative earnings reported by 1ST*BANK since March 31, 1994 shall
be greater than or equal to the amount calculated by multiplying
(x) $306,000 by (y) the number of full calendar quarters which have
passed since March 31, 1994 and for which earnings have been reported
as of such date, times (z) 0.9. As used in this Section "reported"
means reported on 1ST*BANK's Call Reports and Balance Sheets prepared
in accordance with regulatory accounting principles applied on a
consistent basis, subject to any subsequent adjustments required to
be reported whether or not such adjustments have, as yet, been
reported, with the following adjustments, if any, net of related tax
savings and costs, which adjustments were reflected in net income for
the relevant period(s), added back into or deducted from net income
for the applicable period: (i) outside legal and accounting fees, or
other costs associated with the Merger; (ii) gains or losses on sales
of assets; (iii) any increase in loan loss reserve and/or other real
estate reserves effected by 1ST*BANK prior to the Effective Time
which 1ST*BANK would not have made or which 1ST*BANK would not have
otherwise been required to make, except for provisions of this Merger
Agreement or made at the request of BANC ONE; (iv) any loss on a sale
of investments by 1ST*BANK prior to the Effective Time which sale was
effected solely to fulfill a requirement of this Merger Agreement or
made at the specific request of BANC ONE; and (v) any other expenses
upon which BANC ONE and 1ST*BANK shall mutually agree.
<PAGE> 53
(g) The total number of shares of 1ST*BANK Common issued and outstanding,
including shares of 1ST*BANK Common upon the conversion of the
1ST*BANK Debentures, shall not be more than 1,470,833. There shall
be no options, warrants, debentures (including the 1ST*BANK
Debentures) or commitments of any kind related to the capital stock
of 1ST*BANK.
(h) The aggregate of (i) the fractional share interests of BANC ONE
Common to be paid in cash pursuant to Section 7(c), and (ii) the
shares of BANC ONE Common to which holders of 1ST*BANK Common would
have been entitled as of the Effective Time but who, as of the
Effective Time, have taken steps to perfect their rights as
dissenting shareholders pursuant to the provisions of applicable law,
shall not be more than 10% of the maximum aggregate number of shares
of BANC ONE Common which could be issued as a result of the Merger.
(i) The holders of all credit agreements on which 1ST*BANK is the maker,
issuer or guarantor and which contain provisions which make the
acquisition of 1ST*BANK by or merger of 1ST*BANK into another entity
a condition of default or acceleration, which default or acceleration
would have a 1ST*BANK Material Adverse Effect, shall have provided
BANC ONE with a written waiver of all such provisions.
(j) Coopers & Lybrand shall have issued its written opinion, dated as of
the Effective Time, satisfactory, in good faith, to BANC ONE,
advising that the transaction herein contemplated may be properly
accounted for as a pooling-of-interests.
(k) 1ST*BANK's general ledger shall reflect an allowance for loan and
lease losses equal to an amount as hereafter requested by BOTNA. Any
additional provision to the 1ST*BANK's allowance for loan and lease
loss reserve required to comply with this Section shall not exceed
$1.3 million.
(l) 1ST*BANK will have entered into binding agreements which, in the
reasonable judgment of counsel for BOTNA, shall have terminated each
of the following agreements on terms reasonably acceptable to BOTNA:
<PAGE> 54
(i) the Correspondent Bank Agreement; (ii) the Credit Card
Processing Agreement; (iii) the D.P. Service Agreement; (iv) the ATM
Agreement; and (v) the Interchange Agreement.
(m) Counsel for BOTNA shall have determined that all 1ST*BANK Debentures
have been converted into not more than 166,666 shares of 1ST*BANK
Common and that no rights or obligations exist with respect to any
1ST*BANK Debenture.
(n) Counsel for BOTNA shall have reasonably confirmed that an agreement
between Landlord and 1ST*BANK is effective and enforceable with
respect to each of the matters set forth in Section 17(l) of this
Merger Agreement.
(o) 1ST*BANK shall have furnished BANC ONE a certificate, signed on its
behalf by the Chairman or President and the Secretary or an Assistant
Secretary of 1ST*BANK and dated as of the Effective Time, certifying
as to the form of and adoption of resolutions of the Board and
shareholders of 1ST*BANK approving the Merger Agreement and to the
effect that the conditions described in Paragraphs (a), (b), (c),
(e), (f), (g), (h), and (i) of this Section 19 have been fully
satisfied.
20. CONDITIONS TO OBLIGATIONS OF 1ST*BANK. The obligations of 1ST*BANK to
effect the Merger are subject, unless waived by 1ST*BANK, to the
satisfaction on or prior to the Effective Time of the following conditions:
(a) There shall not have been any change in the consolidated financial
condition, aggregate net assets, shareholders' equity, business, or
operating results of BANC ONE and its subsidiaries, taken as a whole,
from March 31, 1994 to the Effective Time that has had a BANC ONE
Material Adverse Effect.
(b) All representations by BANC ONE, BANC ONE TEXAS and BOTNA contained
in this Merger Agreement shall be true in all material respects at,
or as of, the Effective Time as though such representations were made
at and as of said date, except for (i) changes contemplated by this
<PAGE> 55
Merger Agreement and (ii) representations as of a specified
time other than the Effective Time, which shall be true in all
material respects at such specified time (provided, however, that the
representation of BANC ONE contained in Section 13(d) shall be true in
all material respects as applied to the Balance Sheet of BANC ONE
included in the most recently available quarterly report to BANC ONE's
shareholders and/or BANC ONE's report to the SEC on Form 10-Q or Form
10-K as of the close of the most recent calendar quarter prior to the
Effective Time and the reserve for possible loan and lease losses
included therein, as though each reference to "March 31, 1994" in such
section were a reference to the last day of the most recent calendar
quarter prior to the Effective Time.
(c) 1ST*BANK shall have received the opinion of counsel for BANC ONE,
BANC ONE TEXAS and BOTNA, (i) on and dated the date on which the
registration statement described in Section 10(d) of this Merger
Agreement shall have become effective as described in Section 21(b)
of this Merger Agreement substantially to the effect of paragraphs
numbered 6, 7 and 8 of EXHIBIT E hereto and (ii) on and dated as of
the Effective Time substantially to the effect set forth in EXHIBIT E
hereto, together with a copy of the Articles of Incorporation of BANC
ONE certified by the Secretary of State of the State of Ohio, a
Certificate of Good Standing of BANC ONE dated as of a date not more
than 20 days prior to the day of the Effective Time from the
Secretary of State of the State of Ohio and a Certificate of Good
Standing of BOTNA dated as of a date not more the 20 days prior to
the day of the Effective Time from the Comptroller.
(d) BANC ONE, BANC ONE TEXAS and BOTNA shall have each performed, in all
material respects, all agreements and conditions required by this
Merger Agreement to be performed and satisfied by it at or prior to
the Effective Time.
(e) As of the close of the most recent calendar quarter (or if the
Effective Time shall occur within 20 days following the close of a
calendar quarter, then as of the close of the next preceding calendar
quarter) cumulative earnings per share reported by BANC ONE since
<PAGE> 56
March 31, 1994 shall be greater than or equal to the amount
calculated by multiplying (x) $0.81 by (y) the number of full
calendar quarters which have passed since March 31, 1994 and for
which earnings per share have been reported as of such date, times
(z) 0.9. As used in this Section, "reported" means reported on BANC
ONE's financial statements prepared in accordance with generally
accepted accounting principles applied on a basis consistent with
BANC ONE's financial statements for the years ended December 31, 1993
and 1992, as included in BANC ONE's reports to the SEC on Forms 10-K
or BANC ONE's annual reports to shareholders subject to any
subsequent adjustments required to be reported to the SEC whether or
not such adjustments have, as yet, been reported.
(f) The shares of BANC ONE Common to be issued to the holders of 1ST*BANK
Common shall be listed on the NYSE.
(g) BANC ONE shall have furnished 1ST*BANK a certificate, signed by the
Chairman or President or an Executive Vice President and by the
Secretary or Assistant Secretary of BANC ONE and dated as of the
Effective Time certifying as to the form of and adoption of the
resolution of the Board of BANC ONE approving the Merger Agreement,
and to the effect that the conditions described in Paragraphs (a),
(b), (d), (e) and (f) of this Section 20 have been fully satisfied as
to it.
(h) BOTNA shall have furnished 1ST*BANK a certificate, signed by the
Chairman or President and the Secretary or Assistant Secretary of
BOTNA and dated as of the Effective Time, to the effect that the
conditions described in Sections 20(b) and 20(d) have been fully
satisfied as to BOTNA.
21. CONDITIONS TO OBLIGATIONS OF ALL PARTIES. In addition to the provisions
of Sections 19 and 20 hereof, the obligations of 1ST*BANK, BANC ONE, BANC
ONE TEXAS and BOTNA to effect the Merger shall be subject to the
satisfaction of the following conditions on or prior to the Effective Time:
<PAGE> 57
(a) The parties hereto shall have received all necessary approvals of
governmental agencies and authorities of the transactions
contemplated by this Merger Agreement and each of such approvals
shall remain in full force and effect at the Effective Time. BANC
ONE shall notify 1ST*BANK promptly upon receipt of all necessary
governmental approvals. At the Effective Time, (i) no party hereto
shall be subject to any order, decree or injunction of a court or
governmental agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger and (ii) no statute, rule,
regulation, order, injunction or decree shall have been enacted,
entered, promulgated or enforced by any governmental authority which
prohibits or makes illegal consummation of the Merger.
(b) The registration statement required to be filed by BANC ONE pursuant
to Section 10(d) of this Merger Agreement shall have become effective
by an order of the SEC and the shares of BANC ONE Common to be
exchanged in the Merger shall have been qualified or exempted under
all applicable state securities laws, and there shall have been no
stop order issued or threatened by the SEC that suspends or would
suspend the effectiveness of the registration statement, and no
proceeding by the SEC shall have been commenced, pending or overtly
threatened for such purpose.
(c) This Merger Agreement and the Merger shall have been duly approved
and adopted by the requisite affirmative vote of the shareholders of
1ST*BANK and BOTNA.
(d) Coopers & Lybrand shall have issued its written opinion, dated as of
the day of the Effective Time, satisfactory to 1ST*BANK and BANC ONE,
respectively, substantially to the effect set forth in clauses (a)
through (f) of Section 12 of this Merger Agreement and there shall
exist as of, at or immediately prior to the Effective Time, no facts
or circumstances which would render such opinion inapplicable in any
respect to the transactions to be consummated hereunder.
<PAGE> 58
22. INDEMNIFICATION.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether formal or informal and whether
civil, administrative or criminal, including, without limitation, any
such claim, action, suit, proceeding or investigation pursuant to
which any person who is now, or has been at any time prior to the
date hereof, or who becomes prior to the Effective Time, a director,
officer, employee, fiduciary or agent of 1ST*BANK (the "Indemnified
Parties") is, or is threatened to be, made a party or a witness,
based in whole or in part on, or arising in whole or in part out of,
or pertaining to, this Merger Agreement or any of the transactions
contemplated hereby (a "Merger Related Event"), whether in any case
asserted or arising before or after the Effective Time, the parties
hereto agree to cooperate and use their reasonable best efforts to
defend against and respond to such claim, action, suit, proceedings
or investigation. It is understood and agreed that, provided that,
with regard to any Merger Related Event, and conditioned upon the
Merger becoming effective, BANC ONE shall indemnify, defend and hold
harmless, as and to the fullest extent permitted by applicable law,
each Indemnified Party against any and all losses, claims, damages,
liabilities, costs, expenses (including attorneys' fees and
expenses), judgments and fines, and amounts paid in settlement, in
connection with any such threatened or actual claim, action, suit,
proceedings or investigation; provided, however, that BANC ONE shall
not be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld). In the
event of any such threatened or actual claim, action, suit,
proceedings or investigation (whether asserted or arising before or
after the Effective Time), (i) BANC ONE shall pay expenses (including
attorney's fees and expenses) in advance of the final disposition of
any claim, suit, proceedings or investigation to each Indemnified
Party to the fullest extent permitted by applicable law, and
(ii) BANC ONE shall use its reasonable best efforts to vigorously
defend any such matter; provided, however, that BANC ONE's
obligations as herein set forth shall not apply to any losses,
<PAGE> 59
claims, damages, liabilities, costs, expenses, judgments,
fines and amounts paid in settlement by any Indemnified Party
involving the fraud, bad faith and/or reckless disregard of such
Indemnified Party or related to any threatened or actual claim,
action, suit, proceedings or investigation brought by BANC ONE against
any Indemnified Party. THE PARTIES HERETO AGREE THAT THE
INDEMNIFICATION PROVISIONS CONTAINED IN THIS SECTION 22(a) ARE
INTENDED TO, AND SHALL HAVE THE EFFECT OF, INDEMNIFYING AN INDEMNIFIED
PARTY AGAINST THE RESULTS OF ITS OWN NEGLIGENCE OTHER THAN GROSS
NEGLIGENCE. Any Indemnified Party wishing to claim indemnification
and defense under this Section 22(a) shall, upon the earlier to occur
of (A) receiving actual notice of any such claim, action, suit,
proceeding or investigation, (B) otherwise learning of such claim,
action, suit, proceeding or investigation or (C) receiving other
information which would give a reasonably prudent person reason to
believe that such a claim, action, suit, proceeding or investigation
had or might be brought, notify BANC ONE thereof as soon as reasonably
practicable thereafter. BANC ONE's obligations pursuant to this
Section 22(a) are conditioned upon BANC ONE being given prompt written
notice of any such claim, action, suit, proceeding or investigation by
the Indemnified Party (unless BANC ONE otherwise has notice or
knowledge of such claim, action, suit, proceeding or investigation in
such manner and at such times so as to provide BANC ONE with a
reasonable opportunity to pursue the defense or compromise thereof),
together with the right to control and direct the investigation,
defense and/or settlement of each such matter, and further provided
that the Indemnified Party shall reasonably cooperate with BANC ONE in
connection therewith.
(b) BANC ONE shall insure that all rights to indemnification and defense
and all limitations of liability existing in favor of the Indemnified
Parties as provided in 1ST*BANK's Articles of Association and By-laws
as in effect as of March 31, 1994, or as otherwise provided for or
allowed under applicable law as in effect as of the date hereof or as
amended at a time prior to the Effective Time, with respect to claims
or liabilities arising from facts or events existing or occurring
<PAGE> 60
prior to the Effective Time, shall survive the Merger and
shall continue in full force and effect, without any amendment
thereto, for a period of four (4) years from the Effective Time;
provided, however, that all rights to indemnification in respect of
any claim asserted or made within such period shall continue until the
final disposition of such claim.
(c) From and after the Effective Time, persons who, immediately prior to
the Effective Time, served as the directors, officers and employees
of 1ST*BANK, who, following the Effective Time, continue as
directors, officers and/or employees of BOTNA, or one of its
subsidiaries, shall have indemnification and defense rights having
prospective application only, except, however, for the
indemnification and defense rights set forth in paragraphs (a) and
(b) of this Section 22. These prospective indemnification and
defense rights shall consist of (i) such rights to which directors,
officers and employees are entitled under the provisions of the
Articles of Association, By-laws or similar governing documents of
BOTNA and its subsidiaries, as applicable, as in effect from time to
time after the Effective Time, as applicable, and provisions of
applicable law as in effect from time to time after the Effective
Time and (ii) those indemnification and defense rights set forth in
agreements, if any, between BANC ONE and the directors and executive
officers of BOTNA and its subsidiaries. Such agreements, if any,
which shall be executed as soon as practicable following the
Effective Time, shall provide certain indemnification and defense
rights that are comparable to those provided to directors, officers
and employees of BANC ONE and its subsidiaries generally, but which
rights may be greater or lesser than the indemnification and defense
rights available in clause (i) above.
(d) The obligations of BANC ONE provided under paragraphs (a) and (b) of
this Section 22 are intended to be the joint and several obligations
of BANC ONE and BOTNA and to benefit, and be enforceable against BANC
ONE and BOTNA directly by, the Indemnified Parties, and shall be
binding on all respective successors and permitted assigns of BANC
ONE and BOTNA.
<PAGE> 61
(e) In the event BANC ONE or Receiving Association or any of its
successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation,
receiving association or entity of such consolidation or merger, or
(ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of BANC
ONE or the Receiving Association, as the case may be, assume the
obligations set forth in this Section 22.
23. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of 1ST*BANK, BOTNA, BANC ONE TEXAS and BANC
ONE shall not survive the Effective Time.
24. GOVERNING LAW. This Merger Agreement and the transactions contemplated
hereby shall be construed, interpreted, enforced and governed by and
according to the national banking laws and the laws of the State of Texas.
25. ASSIGNMENT. This Merger Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Merger
Agreement nor any of the rights, interest, or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent
of each of the other parties.
26. SATISFACTION OF CONDITIONS; TERMINATION.
(a) BANC ONE, BANC ONE TEXAS and BOTNA agree to use their reasonable best
efforts to obtain satisfaction of the conditions of this Agreement
insofar as they relate to and BANC ONE, BANC ONE TEXAS, and BOTNA,
and 1ST*BANK agrees to use its reasonable best efforts to obtain the
satisfaction of the conditions of this Agreement insofar as they
relate to 1ST*BANK, in each case as soon as reasonably possible.
(b) This Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger by the
shareholders of BOTNA or by 1ST*BANKS's shareholders, upon the
<PAGE> 62
occurrence of any of the following by written notice from
BANC ONE to 1ST*BANK (authorized by the Board of Directors of BANC
ONE), or by written notice from 1ST*BANK to BANC ONE (authorized by
the Board of Directors of 1ST*BANK), as the case may be:
(i) If any material condition to the obligations of BANC ONE, BANC
ONE TEXAS and/or BOTNA set forth in Section 19 or 21 is not
substantially satisfied at the time or times contemplated
thereby and such condition is not waived by BANC ONE or if any
material condition to the obligations of 1ST*BANK set forth in
Section 20 or 21 is not substantially satisfied at the time or
times contemplated thereby and such condition is not waived by
1ST*BANK, each party's right to terminate under this
Section 26 (b)(i) shall relate only to conditions to that
party's obligations;
(ii) In the event of a material breach by the other of any
representation, warranty, condition or agreement contained in
this Merger Agreement that is not cured within 30 days of the
time that written notice of such breach is received by such
other party from the party giving notice; or
(iii) If the Merger shall not have been consummated on or before
February 27, 1995.
(c) This Merger Agreement may be terminated and abandoned (whether before
or after approval of the Merger by the shareholders of BOTNA or
1ST*BANK's shareholders) by mutual written consent of BANC ONE and
1ST*BANK, authorized by their respective Boards of Directors.
(d) In the event of termination of this Merger Agreement caused otherwise
than by a willful breach of this Merger Agreement by any of the
parties hereto, this Merger Agreement shall cease and terminate, the
acquisition of 1ST*BANK as provided herein shall not be consummated,
and none of BANC ONE, BANC ONE TEXAS, BOTNA nor 1ST*BANK shall have
any liability to any other party under this Merger Agreement of any
<PAGE> 63
nature whatever, except for BANC ONE's obligations related to
the printing of the proxy solicitation materials, including any
liability for damages, provided, however, that the duties of the
parties with respect to confidential information as set forth in
Section 10(f) shall survive any such termination. If the Merger is
not consummated as the result of termination of this Merger Agreement
caused otherwise than by willful breach of a party hereto, BANC ONE,
BANC ONE TEXAS, BOTNA and 1ST*BANK each shall pay its own fees and
expenses incident to the negotiation, preparation and execution of
this Merger Agreement, the respective shareholders' meetings and
actions of the parties and all other acts incidental to, contemplated
by or in pursuance of the transactions contemplated by this Merger
Agreement, including fees and expenses of their respective counsel,
accountants and other experts and advisors.
(e) If termination of this Merger Agreement shall be judicially
determined to have been caused by willful breach of this Merger
Agreement, then, in addition to other remedies at law or equity for
breach of this Merger Agreement, the party so found to have willfully
breached this Merger Agreement shall indemnify the other parties for
their respective costs, fees and expenses of their counsel,
accountants and other experts and advisors as well as fees and
expenses incident to negotiation, preparation and execution of this
Merger Agreement and related documentation and their shareholders'
meetings and consents.
27. WAIVERS; AMENDMENTS. Any of the provisions of this Merger Agreement may
be waived at any time by the party which is, or the shareholders of which
are, entitled to the benefit thereof, provided, however, such waiver, if
material to 1ST*BANK or its shareholders, may be made by 1ST*BANK only
following due authorization by the Board of Directors of 1ST*BANK. This
Merger Agreement may be amended in whole or in part by an agreement in
writing executed in the same manner (but not necessarily by the same
persons) as this Merger Agreement and which makes reference to this Merger
Agreement; provided, however, such amendment or modification may be made
only following due authorization by the respective Boards of Directors of
<PAGE> 64
1ST*BANK, BANC ONE, BANC ONE TEXAS and BOTNA; provided, further,
however, that after a favorable vote by the shareholders of a party any
such action shall be taken by that party only if, in the opinion of its
Board of Directors, such amendment or modification will not have any
material adverse effect on the benefits intended under this Merger
Agreement for the shareholders of such party and will not require
resolicitation of any proxies from such shareholders.
28. ENTIRE AGREEMENT. Subject to the exceptions noted in the next following
sentence, this Merger Agreement supersedes any other agreement, whether
written or oral, that may have been made or entered into by 1ST*BANK,
BOTNA, BANC ONE TEXAS and/or BANC ONE or by any officer or officers of
such parties relating to the acquisition of the business or the capital
stock of 1ST*BANK by BANC ONE, BANC ONE TEXAS or BOTNA. Except for the
BANC ONE Disclosure Letter and any attachments thereto, the 1ST*BANK
Disclosure Letter and any attachments thereto, the Benefits Agreement
addressing benefit plans and policies and the Confidentiality Agreement,
this Merger Agreement constitutes the entire agreement by the parties, and
there are no agreements or commitments except as set forth herein and
therein.
29. CAPTIONS; COUNTERPARTS. The captions in this Merger Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Merger Agreement.
This Merger Agreement may be executed in several counterparts, each of
which shall constitute one and the same instrument.
30. NOTICES. All notices and other communications hereunder may be made by
mail, hand-delivery or by courier service and notice shall be deemed to
have been given when received; provided, however, if notices and other
communications are made by nationally recognized overnight courier service
for overnight delivery, such notice shall be deemed to have been given one
business day after being forwarded to such a nationally recognized
overnight courier service for overnight delivery.
<PAGE> 65
(a) If to BANC ONE, to:
BANC ONE CORPORATION
Attention of: Chief Executive Officer
100 East Broad Street
Columbus, Ohio 43271
With a copy to:
BANC ONE CORPORATION
Attention of: Roman J. Gerber
General Counsel
100 East Broad Street
Columbus, Ohio 43271
(b) If to 1ST*BANK, to:
1ST*BANK
Attention of: William J. Hendrix
Chairman of the Board
1000 S. Belt Line Road
Coppell, Texas 75019
With a copy to:
Gardere & Wynne, L.L.P.
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Attention of: Dan L. Nicewander
(c) If to BOTNA, to:
Bank One, Texas, National Association
Attention of: Harvey R. Mitchell, Chairman
1717 Main Street
Dallas, Texas 76202
With a copy to:
Bank One, Texas, N.A.
Attention of: Chris Klimko
1600 Pacific, Sixth Floor
Dallas, Texas 75201
(d) If to BANC ONE TEXAS, to:
Banc One Texas Corporation
Attention of: Roman J. Gerber, Secretary
100 East Broad Street
Columbus, Ohio 43271
<PAGE> 66
IN WITNESS WHEREOF, this Merger Agreement has been executed the day and year
first above written.
ATTEST: BANC ONE CORPORATION
/s/ Charles F. Andrews By: /s/ Roman J. Gerber
- --------------------------- -------------------------
ATTEST: 1st*Bank
/s/ Sam MacGregor By: /s/ William J. Hendrix
- --------------------------- -------------------------
William J. Hendrix
Chairman of the Board
Bank One, Texas,
ATTEST: National Association
/s/ Christopher T. Klimko By: /s/ Ronald G. Steinhart
- --------------------------- -------------------------
ATTEST: Banc One Texas Corporation
/s/ Lee S. Adams By: /s/ Roman J. Gerber
- --------------------------- -------------------------
REG9928
<PAGE> 67
EXHIBIT A
- ---------
ARTICLES
(to be provided)
<PAGE> 68
EXHIBIT B
---------
(FORM OF UNDERTAKING BY AFFILIATES)
UNDERTAKING OF AFFILIATE
------------------------
______________ , 1994
In consideration and anticipation of the receipt by the undersigned of Common
Stock of BANC ONE CORPORATION ("BANC ONE") upon consummation of a proposed
merger (the "Merger") of 1st*Bank and Bank One, Texas, National Association, a
subsidiary of BANC ONE, pursuant to the terms of a certain Merger Agreement
dated __________________ , 1994, (the "Merger Agreement"), and in view of the
fact that the undersigned has, pursuant to the Merger Agreement, been
identified as a possible "affiliate" of 1ST*BANK within the meaning of Rules
144 and 145 ("Rule 144" and "Rule 145", respectively), as amended, of the
General Rules and Regulations under the Securities Act of 1933, as amended
(the "1933 Act"), the undersigned (the "Affiliate") represents and undertakes
as follows:
The Affiliate shall not offer, sell or otherwise dispose of or transfer any of
the shares of the Common Stock of BANC ONE to be received by him upon
consummation of the Merger (the "Shares"), except the Affiliate may offer,
sell or transfer the Shares (1) in a manner and to the extent permitted by the
applicable provisions of Rule 144 or 145, (2) pursuant to an effective
registration statement relating to the Shares under the 1933 Act, or (3) in a
transaction which, in the opinion of counsel for the Affiliate or as described
in a "no-action" or interpretive letter from the staff of the Securities and
Exchange Commission, in each case reasonably satisfactory in form and
substance to BANC ONE, is exempt from the registration requirements of the
1933 Act.
BANC ONE's transfer agents may be given appropriate instructions prohibiting
transfer of the Shares unless these provisions are complied with and the
certificate(s) for the Shares may bear a restrictive legend in substantially
the following form:
"The shares represented by this certificate have been issued to the
registered holder as a result of a transaction to which Rule 145 under the
Securities Act of 1933, as amended (the "1933 Act") applies. The shares
represented by this certificate may not be sold, transferred or assigned,
and the issuer shall not be required to give effect to any attempted sale,
<PAGE> 69
transfer or assignment, except pursuant to (i) a registration statement
then in effect under the 1933 Act, (ii) a transaction permitted by
Rule 145 as to which the issuer has received evidence of compliance with
the provisions of said Rule 145 reasonably satisfactory to it or (iii) a
transaction which, in the opinion of counsel for the Affiliate or as
described in a 'no action' or interpretive letter from the staff of the
Securities and Exchange Commission, in each case reasonably satisfactory
in form and substance to the issuer, is exempt from the registration
requirements of the 1933 Act. The restrictions of this paragraph shall
become null and void and this paragraph shall have no effect on and after
___________________________ ."
The undersigned undertakes to take such action as shall be necessary to cause
the Shares to be received by the undersigned to be registered in a manner that
will allow for the placement of a restrictive legend on the certificate(s)
representing such Shares.
The undersigned further undertakes that, if it is necessary in order to
preserve pooling-of-interests accounting treatment, none of the Shares to be
received by the undersigned, directly or indirectly, will be sold or otherwise
disposed of during a period of time beginning with the effective date of the
Merger and ending with a date upon which financial results of at least 30 days
of post-merger combined operations have been first published by BANC ONE in
accordance with SEC Accounting Series Release No. 130 as amended by Release
No. 135, provided that BANC ONE hereby agrees that such financial results will
be published not later than five months from the Merger.
IN WITNESS WHEREOF, the Affiliate has made this undertaking as of the day and
year first above written.
-------------------------------
REG9929/5
<PAGE> 70
EXHIBIT C
---------
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT dated ________________ , 199__ is by and among
1st*Bank (the "1ST*BANK"), Bank One, Texas, National Association ("BOTNA") and
Bank One, Indianapolis, N.A. (the "Escrow Agent").
RECITALS
--------
1ST*BANK and BOTNA, together with BANC ONE CORPORATION and Banc One Texas
Corporation, have entered into a Merger Agreement dated __________________ ,
1994 wherein Banc One Texas Corporation will acquire all the assets and
liabilities of 1ST*BANK in exchange for BANC ONE CORPORATION Common Stock.
Pursuant thereto, Banc One Texas Corporation has directed that assets and
liabilities of 1ST*BANK be transferred to BOTNA by means of the statutory
merger of 1ST*BANK with and into BOTNA pursuant to 12 USC Section 215a.
AGREEMENT
---------
In consideration of the foregoing, the covenants of the parties herein set
forth, and to ensure that funds ultimately required to be paid to dissenting
shareholders pursuant to 12 USC Section 215a, if any, shall be paid from funds
and assets attributable to 1ST*BANK, the parties agree as follows:
1. ESCROW AGENT. 1ST*BANK and BOTNA appoint Bank One, Indianapolis, N.A. as
the Escrow Agent for the purposes and under the terms and conditions
herein set forth and the Escrow Agent hereby accepts such appointment and
designation without charge or monetary consideration therefor under the
terms and conditions set forth.
2. ESCROW FUND. Pursuant to Section 11 of the Merger Agreement, simultaneous
with execution of this Escrow Agreement by 1ST*BANK, 1ST*BANK is
delivering to the Escrow Agent the sum of $__________________ , in cash.
For purposes of this Escrow Agreement, at all times following such
delivery of such sum pursuant to the terms of this Escrow Agreement, such
<PAGE> 71
sum and any interest accrued thereon less any payments made from such
sum shall be referred to as the "Escrow Fund." Any cash held in the Escrow
Fund shall be invested by the Escrow Agent in an account bearing money
market rates of interest.
3. TERM OF ESCROW. The Escrow Fund shall serve as a source of any cash
payments required to be made to dissenting former shareholders of 1ST*BANK
pursuant to 12 USC Section 215a. The Escrow Agent shall hold the Escrow
Fund from and after delivery thereof and make distributions therefrom in
accordance with, and only in accordance with, this Agreement.
4. PAYMENT FROM ESCROW. In the event that payments are ordered by a court of
competent jurisdiction, the Comptroller of the Currency, or by agreement
between BOTNA and a dissenting shareholder following the effective time of
the merger, written certification of the identity of the dissenting
shareholder(s) to be paid and the amount to be paid such dissenting
shareholder(s) from the Escrow Fund shall be directed to the Escrow Agent
by BOTNA. Immediately upon receipt of such direction from BOTNA and
receipt of the certificates for the shares of 1ST*BANK Common Stock held
by such dissenting shareholder(s) or such other evidence required by BANC
ONE CORPORATION pursuant to Section 7(d) of the Merger Agreement, the
Escrow Agent shall pay the amount directed by BOTNA to said dissenting
shareholder(s).
At such time as no persons being former shareholders of 1ST*BANK remain
who have the potential to effect payment of the value of their shares of
1ST*BANK in cash pursuant to 12 USC Section 215a, BOTNA shall so advise the
Escrow Agent. At such time, the Escrow Agent will forward any and all
unpaid portions of the Escrow Fund to BOTNA.
In the event that the merger has not become effective by _____________ ,
1995 or if BOTNA and 1ST*BANK shall advise the Escrow Agent in writing
that the merger as contemplated by the Merger Agreement shall not have
become effective, the Escrow Agent shall return all of the Escrow Fund to
1ST*BANK.
<PAGE> 72
5. LIABILITY OF ESCROW AGENT. The Escrow Agent's sole liability under this
Agreement shall be to hold the Escrow Fund, to make payments and other
distributions in accordance with the terms of this Agreement, to
distribute information and otherwise to discharge its obligations as
provided herein. The Escrow Agent shall not be liable for any act
performed in good faith or in reliance on any document, instrument or
statement believed by it to be genuine. The Escrow Agent may act upon any
notice, certificate, instrument, request, paper or other document believed
by it to be genuine or to have been made, sent or signed, prescribed or
presented by the proper person or persons and shall not be obligated to
institute or defend any action, suit or legal proceeding in connection
herewith, or to take any other action likely to result in expenses to it,
unless the party or parties who desire that it undertake such action first
indemnify it to its satisfaction.
6. TERMINATION. The obligations of the Escrow Agent pursuant to this
Agreement will terminate upon the complete distribution of the Escrow Fund
by the Escrow Agreement pursuant to Section 4 of this Agreement.
7. NOTICES. All notices, instructions and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been delivered upon personal delivery of such mailing, if mailed
first class, postage prepaid, registered or certified mail, return receipt
requested, as follows:
If to BOTNA, to:
Bank One, Texas, National Association
Attention: Harvey R. Mitchell, Chairman
1717 Main Street
Dallas, Texas 76202
If to Escrow Agent, to:
Bank One, Indianapolis, National Association
Attention: James M. Dimitroff, Vice President
101 Monument Circle
Indianapolis, Indiana 46277
<PAGE> 73
If to 1ST*BANK, to:
1st*Bank
Attention: William J. Hendrix
Chairman of the Board
1000 S. Belt Line Road
Coppell, Texas 75019
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on the respective
heirs, executors, administrators, legal representatives, successors and
assigns and of the parties hereto.
9. CONTROLLING LAW. This Agreement shall be construed under and the
respective rights and obligations of the parties shall be determined with
reference to and governed by the laws of the State of Indiana.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
Bank One, Texas,
National Association
By:
------------------------
Harvey R. Mitchell
Chairman
1st*Bank
By:
------------------------
William J. Hendrix
Chairman of the Board
Bank One, Indianapolis,
National Association
By:
------------------------
James M. Dimitroff
Vice President
REG9929/9
<PAGE> 74
(OPINION OF COUNSEL FOR 1ST*BANK) EXHIBIT D
---------
__________________ , 1994
BANC ONE CORPORATION
100 East Broad Street
Columbus, Ohio 43271
Gentlemen:
We have acted as counsel to 1st*Bank ("1ST*BANK"), a banking association
organized under the laws of the State of Texas, in connection with the merger
(the "Merger") of 1ST*BANK with and into Bank One, Texas, National Association
("BOTNA"), a national banking association and an indirect wholly owned
subsidiary of BANC ONE CORPORATION ("BANC ONE"), pursuant to which each of the
issued and outstanding 1ST*BANK Conversion Shares will be converted into
shares of BANC ONE Common. The Merger is to be consummated pursuant to the
terms of a Merger Agreement dated July ___ , 1994 ("Merger Agreement"), between
BOTNA and 1ST*BANK and joined in by BANC ONE and Banc One Texas Corporation
("BANC ONE TEXAS"). This Opinion Letter is furnished to you at the request of
1ST*BANK to satisfy the condition set forth in Section 19(d) of the Merger
Agreement.
Except as otherwise indicated herein, capitalized terms used in this Opinion
Letter are defined in the Merger Agreement or in the Legal Opinion Accord (the
"Accord") of the ABA Section of Business Law (1991). In the event of any
inconsistency between the definition of any such term in the Merger Agreement
and the Accord, the definition set forth in the Accord shall govern.
This Opinion Letter is governed by, and is to be interpreted in accordance
with, the Accord. As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage, and other
limitations, all as more particularly described in the Accord, and this
Opinion Letter should be read in conjunction therewith.
The law covered by the opinions expressed herein is limited solely to the Laws
of the State of Texas and the Federal Law of the United States.
Based upon and subject to the foregoing, as well as the qualifications
expressed below, we are of the opinion that:
1. The Merger Agreement is enforceable against 1ST*BANK.
2. Except as set forth in the 1ST*BANK Disclosure Letter or in the officers'
certificate delivered by 1ST*BANK pursuant to Section 19(p) of the Merger
Agreement, the execution and delivery by 1ST*BANK of, and the performance
by 1ST*BANK of its agreements in, the Merger Agreement do not (a) violate
<PAGE> 75
BANC ONE CORPORATION
_____________ , 1994
Page 2
the Constituent Documents of 1ST*BANK; (b) violate applicable provisions
of statutory law or regulation; (c) breach or otherwise violate any
existing obligation of 1ST*BANK under any Court Orders identified in the
Officer's Certificate of an officer of 1ST*BANK that is attached as
EXHIBIT A hereto; or (d) breach, or result in a default under, any
material obligation of 1ST*BANK under any material written Other Agreement
identified in the Officer's Certificate attached as EXHIBIT A hereto.
3. We have no Actual Knowledge of any litigation or other proceeding or any
governmental investigation pending or threatened against or related to
1ST*BANK or involving any of its properties or assets, or any of the
transactions contemplated by the Merger Agreement, that is (a) required to
be disclosed pursuant to Section 16(e) of the Merger Agreement, except as
set forth in the 1ST*BANK Litigation Schedule provided to BANC ONE as an
attachment to the 1ST*BANK Disclosure Letter or (b) seeks to affect the
enforceability of the Merger Agreement.
The General Qualifications, as well as other Common Texas Qualifications
contained in the State Bar of Texas Business Law Section Report of the Legal
Opinions Committee Regarding Legal Opinions in Business Transactions (1992) (a
copy of which is attached as EXHIBIT B hereto and is incorporated herein),
apply to each of the opinions set forth above.
No Actual Knowledge shall be imputed to this Firm by virtue of the fact that
M. Douglas Adkins, a partner of this Firm, is an advisory director of 1ST*BANK.
For the purpose of Paragraph 3, Section 17 of the Accord is modified (in
accordance with Section 21 of the Accord) to delete any review of a litigation
docket. We have instead polled the Primary Lawyer Group with respect to the
requested information.
This Opinion Letter is solely for the benefit of BANC ONE, BANC ONE TEXAS and
BOTNA in connection with the transactions described in the Merger Agreement.
It may not be relied upon by any other purpose, or quoted or filed with any
regulatory agency, without (in each instance) our prior written approval.
Very truly yours,
Gardere & Wynne, L.L.P.
By:
----------------------------
Partner
REG9929/11
<PAGE> 76
Exhibit A
OFFICER'S CERTIFICATE
As the duly elected, qualified and acting __________________________ of
1ST*BANK, a Texas banking association (the "Bank"), to enable Gardere & Wynne,
L.L.P., as the Bank's counsel, to render opinions in connection with the
Merger Agreement between the Bank and Bank One, Texas, National Association, a
joined in by BANC ONE CORPORATION and Banc One Texas Corporation, dated as of
July __ , 1994 (the "Merger Agreement"), the undersigned hereby certifies the
following:
1. The following is a complete and correct list of all court and
administrative orders, writs, judgments and decrees that name the
Bank and are specifically directed to the Bank or its property or
assets:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
2. Attached as Schedule I hereto is a complete and correct list of all
material written agreements to which the Bank is now a party or by
which it or its properties or assets are now bound.
IN WITNESS WHEREOF, this Officer's certificate has been signed to be effective
as of the ____ day of __________ , 1994.
-------------------------------
REG9929/12
<PAGE> 77
Exhibit B
OTHER COMMON TEXAS QUALIFICATIONS
---------------------------------
Other provisions which may be excepted from the Remedies Opinion by Texas
lawyers and which are not found in the Other Common Qualifications under the
ABA Accord, include the following (herein referred to as the "Other Common
Texas Qualifications"):
(a) provisions restricting access to courts or to legal or equitable remedies
or purporting to affect the jurisdiction or venue of courts;
(b) provisions purporting to establish evidentiary standards for suits or
proceedings to enforce the Transaction Documents;
(c) provisions purporting to waive rights to notice, legal defenses, statutes
of limitations, or other benefits that cannot be waived under applicable
law;
(d) provisions granting powers of attorney or authority to execute documents
or to act by power of attorney on behalf of the Client;
(e) self-help remedies provided for in the Transaction Documents (other than
those remedies available pursuant to an exercise in accordance with the
provisions of Section 51.002 of the Property Code or Chapter 9 of the
Texas Business and Commerce Code);
(f) provisions providing that remedies are cumulative;
(g) provisions that decisions by a party are conclusive;
(h) provisions purporting to provide remedies inconsistent with the UCC, to
the extent the UCC is applicable thereof;
(i) provisions purporting to grant to or limit rights of third parties; and
(j) provisions purporting to create a trust or constructive trust without
compliance with applicable trust law.
REG9929/13
<PAGE> 78
Schedule I to Officer's Certificate
Material Written Agreements
<PAGE> 79
EXHIBIT E
(OPINION OF COUNSEL FOR BANC ONE CORPORATION, ---------
BANC ONE TEXAS CORPORATION and BANK ONE, TEXAS, N.A.)
___________________ , 199
1ST*BANK
1000 S. Belt Line Road
Coppell, Texas 75019
Attention: Chairman
Gentlemen:
I am counsel for BANC ONE CORPORATION, an Ohio corporation and a registered
bank holding company ("BANC ONE"), Banc One Texas Corporation ("BANC ONE
TEXAS"), an Ohio corporation, a registered bank holding company and wholly
owned subsidiary of BANC ONE, and Bank One, Texas, National Association
("BOTNA"), a national banking association and indirect subsidiary of BANC ONE,
and have acted as counsel for BANC ONE, BANC ONE TEXAS and BOTNA in connection
with the merger (the "Merger") of 1ST*BANK and BOTNA pursuant to which each of
the issued and outstanding 1ST*BANK Conversion Shares will be converted into
shares of BANC ONE Common. Such Merger is to be consummated pursuant to the
terms of a Merger Agreement dated ______________ , 1994 ("Merger Agreement")
between 1ST*BANK and BOTNA and joined in by BANC ONE and BANC ONE TEXAS. This
Opinion Letter is furnished to you pursuant to Section 20(c) of the Merger
Agreement.
Except as otherwise indicated herein, capitalized terms used in this Opinion
Letter are defined in the Merger Agreement or in the Legal Opinion Accord (the
"Accord") of the ABA Section of Business Law (1991), respectively. In the
event of any inconsistency between the definition of any such term in the
Merger Agreement and the Accord, the definition set forth in the Accord shall
govern. For purposes of this Opinion Letter, "Opinion Giver" is defined as
the BANC ONE CORPORATION Legal Department.
This Opinion Letter is governed by, and is to be interpreted in accordance
with, the Accord. As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage, and other
limitations, all as more particularly described in the Accord, and this
Opinion Letter should be read in conjunction therewith.
The law covered by the opinions expressed herein is limited solely to the Laws
of the State of Ohio, except as it relates to the status of BOTNA under the
national banking laws, and the Federal Law of the United States.
<PAGE> 80
1ST*BANK
____________ , 1994
Page 2
Based upon and subject to the foregoing, I am of the opinion that:
1. The Merger Agreement is enforceable against BANC ONE.
2. The Merger Agreement is enforceable against BANC ONE TEXAS.
3. The Merger Agreement is enforceable against BOTNA.
4. Except as set forth in the BANC ONE Disclosure Letter, the execution and
delivery by BANC ONE, BANC ONE TEXAS and BOTNA of, and the performance by
BANC ONE, BANC ONE TEXAS and BOTNA of their agreements in, the Merger
Agreement do not (a) violate the respective Constituent Documents of BANC
ONE, BANC ONE TEXAS and BOTNA; (b) violate applicable provisions of
statutory law or regulation; (c) breach or otherwise violate any existing
obligation of BANC ONE, BANC ONE TEXAS or BOTNA under any Court Orders of
which the Opinion Giver has Actual Knowledge; or (d) breach, or result in
a default under, any material obligation of BANC ONE, BANC ONE TEXAS, or
BOTNA under a material Other Agreement of which the Opinion Giver has
Actual Knowledge.
5. The Opinion Giver hereby confirms to you, pursuant to the requirements of
Section 13(e) of the Merger Agreement, that there are no actions or
proceedings against BANC ONE or any of its subsidiaries, pending or
overtly threatened in writing, before any court, governmental agency or
arbitrator which (i) seek to affect the enforceability of the Merger
Agreement or (ii) come within the objective standard established in the
Merger Agreement for disclosure, except as set forth in the BANC ONE
Disclosure Letter.
6. I have participated in the preparation of the Registration Statement on
Form S-4 or other appropriate registration statement form
(No. __________ ) of BANC ONE ("Registration Statement"), and in
rendering this opinion have limited my review of the facts concerning the
Registration Statement to discussions with and inquiry of Directors,
officers and employees of BANC ONE, and Coopers & Lybrand, the independent
accountants who examined certain of the financial statements of BANC ONE
included in the Registration Statement, and based thereon and subject to
the General Qualifications, I am of the opinion that such Registration
Statement, and the Prospectus included in the Registration Statement
(except as to financial statements, other financial data and any
information concerning 1ST*BANK included therein, as to which I express no
opinion) at the time the Registration Statement became effective under the
Securities Act of 1933 (the "1933 Act") complied as to form in all
material respects with the 1933 Act and the rules and regulations of the
Securities and Exchange Commission thereunder.
<PAGE> 81
1ST*BANK
____________ , 1994
Page 3
7. I confirm that the Registration Statement has become effective under the
1933 Act, and to the best of my Actual Knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the 1933 Act.
8. I have not checked the accuracy or completeness of, or otherwise verified,
any statement of fact contained in the Registration Statement and
Prospectus. Based on the participations, discussions and inquiries
described above, however, I have no reason to believe that the
Registration Statement (except as to financial statements, other financial
data and any information concerning 1ST*BANK included therein, as to which
no view is expressed) at the time it became effective and as of the date
of this letter contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, or that
the Prospectus (except as to financial statements, other financial data
and any information concerning 1ST*BANK included therein, as to which no
view is expressed) at such times contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading or that since the effective date of the
Registration Statement, any event has occurred which should have been set
forth in an amendment or supplement to the Registration Statement or the
Prospectus which has not been set forth in such an amendment or supplement.
The General Qualifications apply to all of the opinions set forth above.
I am rendering this opinion solely for the benefit of 1ST*BANK in connection
with the transactions described in the Merger Agreement. It may not be relied
upon by any other person or for any other person.
Very truly yours,
- ----------------------------------
- ----------------------------------
REG9929/17
<PAGE> 1
EXHIBIT 2.3
<PAGE> 2
SPECIAL MEETING OF SHAREHOLDERS
PROXY
1ST*BANK
_______________ , 1994
PLEASE SIGN AND RETURN IMMEDIATELY
I, the undersigned shareholder of 1st*Bank, 1000 South Belt Line Road,
Coppell, Texas, do hereby revoke all proxies by me heretofore made and so
hereby nominate, constitute and appoint ___________ , OR ___________ each
or either one of them my true and lawful attorney, with full power of
substitution and revocation, for me and in my name, place and stead, to vote
all of the capital stock of said Bank owned by me and/or standing in my name
on the books of said Bank on ____________ , 1994, at the Special Meeting of
Stockholders of said Bank to be held on __________ , 1994, at ____ local time
and at any adjournment thereof with all powers the undersigned would possess
if personally present as follows:
1. To approve the Plan of Merger set forth in the Merger
Agreement dated August 10, 1994 between 1st*Bank and Bank One, Texas,
N.A., joined in by BANC ONE CORPORATION and Banc One Texas
Corporation, providing for the merger (the "Merger") of 1st*Bank into
Bank One, Texas, N.A.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To approve the amendment of (a) 1st*Bank's Mandatory Convertible
Subordinated Debentures automatically convertible on April
1, 1998 (the "Debentures") to provide for their automatic conversion
into not more than 166,666 shares of 1st*Bank Common Stock immediately
prior to the Merger; and (b) Paragraph Fourth of 1st*Bank's Articles
of Association to authorize the issuance of the additional shares of
1st*Bank Common Stock required for the conversion of the Debentures.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion on such other matters as may properly come before
the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE 1ST*BANK BOARD OF DIRECTORS. SHARES
REPRESENTED BY ALL PROPERLY EXECUTED PROXIES WILL BE VOTED IN ACCORDANCE WITH
INSTRUCTIONS APPEARING IN THE PROXY. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS,
PROXIES WILL BE VOTED FOR ITEM 1 AND ITEM 2, AND IN THE DISCRETION OF THE PROXY
HOLDERS AS TO ANY OTHER MATTERS.
NUMBER OF SHARES Please sign exactly as the stock is registered. When
signing as Attorney, Executor, Administrator, Trustee,
- --------------- Guardian, etc. give full title as such. If stock is
held jointly, each joint owner should sign.
Corporations please sign full corporate name by
president or other authorized officer. Partnerships
please sign in partnership name by authorized person.
DATE
-----------------------------------------------
---------------------------------------------------
(Stockholder)
---------------------------------------------------
(Witness to Signature)
<PAGE> 1
EXHIBIT 5
<PAGE> 2
November 3, 1994
BANC ONE CORPORATION
100 East Broad Street
Columbus, Ohio 43215
Re: BANC ONE CORPORATION REGISTRATION STATEMENT
ON FORM S-4 (1ST*BANK)
Gentlemen:
I have acted as counsel to BANC ONE CORPORATION ("BANC ONE") in connection
with the Registration Statement on Form S-4 (the "Registration Statement") to
be filed by BANC ONE with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, relating to the proposed merger (the
"Merger") of 1st*Bank, Coppell, Texas ("1st*Bank") into Bank One, Texas,
National Association, Dallas, Texas ("Bank One Texas"), a wholly owned
subsidiary of BANC ONE's wholly owned subsidiary Banc One Texas Corporation,
pursuant to the terms of a Merger Agreement dated August 10, 1994 (the "Merger
Agreement") between 1st*Bank and Bank One Texas, joined in by BANC ONE and
Banc One Texas Corporation. The Registration Statement relates to the
issuance of up to 425,000 shares of the Common Stock, no par value, of BANC
ONE (the "Shares") to the shareholders of 1st*Bank in connection with the
Merger.
In this connection, I have examined such corporate records and other documents
and certificates of public officials as I have deemed necessary in order to
render the opinion set forth below.
Based upon the foregoing, it is my opinion that upon the satisfaction of
certain conditions provided for in the Merger Agreement, the Shares, when
issued and delivered pursuant to the provisions of the Merger Agreement and
upon consummation of the Merger, will be validly issued, fully paid and
non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Steven Alan Bennett
Steven Alan Bennett
Senior Vice President
and General Counsel
<PAGE> 1
EXHIBIT 8
Cooper & Lybrand Letterhead
October 19, 1994
Mr. Charles F. Andrews
Assistant General Counsel
BANC ONE CORPORATION
100 East Broad Street
Columbus, Ohio 43271-0261
RE: Federal Income Tax Effects of Proposed Merger between 1st*Bank and
Bank One, Texas, National Association, and joined in by BANC ONE
CORPORATION and Banc One Texas Corporation
To 1st*Bank, the Shareholders of 1st*Bank, and BANC ONE CORPORATION:
Pursuant to your request and as required by Section 12 of the Merger Agreement
entered into between 1st*Bank and Bank One, Texas, National Association and
joined in by BANC ONE CORPORATION and Banc One Texas Corporation on or about
August 10, 1994, we are providing our opinion of the Federal income tax
consequences of the transaction described herein. Unless otherwise noted, all
Section references herein shall be to the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder.
FACTS
A. INTRODUCTION OF PARTIES TO THE PROPOSED TRANSACTION
1. 1st*Bank ("1ST*BANK")
---------------------
1ST*BANK is a banking corporation duly organized under the laws of the State of
Texas. As of March 31, 1994, the authorized capital stock of 1ST*BANK
consisted of 1,304,167 shares of common stock with a par value of $2.00, all of
which were issued and outstanding and none of which were shares of treasury
stock owned by 1ST*BANK. 1ST*BANK has issued and outstanding Mandatory
Convertible Subordinated Debentures issued on or about March 31, 1988
("1ST*BANK Debentures") that are convertible into not more than 166,666 shares
of 1ST*BANK Common.
2. Bank One, Texas, National Association ("BOTNA")
-----------------------------------------------
BOTNA is a national banking association duly organized under the laws of the
United States. As of March 31, 1994, the authorized capital stock of BOTNA
consisted of 12,000,000 shares of common stock with a par value of $35 per
share, 6,400,000 shares of which were issued and
<PAGE> 2
BANC ONE CORPORATION
Page 2
October 19, 1994
outstanding and none of which were shares of treasury stock owned by BOTNA.
BOTNA is a wholly-owned subsidiary of Banc One Texas Corporation.
3. Banc One Texas Corporation ("BANC ONE TEXAS")
---------------------------------------------
BANC ONE TEXAS is a corporation duly organized under the laws of the State of
Ohio. BANC ONE TEXAS is a wholly-owned subsidiary of BANC ONE CORPORATION and
holds all of the issued and outstanding shares of BOTNA.
4. BANC ONE CORPORATION ("BANC ONE")
---------------------------------
BANC ONE is a corporation duly organized under the laws of the State of Ohio.
As of March 31, 1994, the authorized common stock of BANC ONE consisted of
600,000,000 shares of common stock without par value, 381,595,796 of which were
issued and outstanding and 250,000 of which were shares of treasury stock owned
by BANC ONE. The authorized preferred stock consisted of 35,000,000 shares
without par value, 4,998,000 shares of which were issued and outstanding as
Series C $3.50 Cumulative Convertible Preferred Stock.
B. PROPOSED TRANSACTION BETWEEN THE PARTIES
At the effective date of the merger of 1ST*BANK into BOTNA ("EFFECTIVE TIME"),
BANC ONE will indirectly acquire the assets and liabilities of 1ST*BANK through
its wholly-owned subsidiary, BANC ONE TEXAS. Specifically, the Merger
Agreement provides: "BANC ONE TEXAS shall acquire all of the assets and assume
all of the liabilities of 1ST*BANK; provided, however, BANC ONE TEXAS shall
direct that all of such assets and liabilities shall be transferred to BOTNA by
means of the merger of 1ST*BANK into BOTNA (the "Merger")."
At the EFFECTIVE TIME, 1ST*BANK shall be merged with and into BOTNA in
accordance with 12 U.S.C. Section 215a. All property rights and liabilities
of 1ST*BANK and BOTNA will vest in the Receiving Association (BOTNA and
1ST*BANK). Under the terms of the Merger Agreement, the Receiving Association
shall have the same name, business, Bylaws, and board of directors as BOTNA.
The Merger shall be effective at the date provided by the Merger Agreement as
specified by the Comptroller of the Currency upon the request of BOTNA in
accordance with Section 10(c) of the Merger Agreement. In no event will the
date proposed by BOTNA as the EFFECTIVE TIME be sooner than the day following
the day on which all necessary approvals by governmental agencies and
authorities are received and any required waiting periods with respect thereto
have expired nor will the date designated by BOTNA as the EFFECTIVE TIME be
later than 31 days following the date at which all such approvals have been
received and any required waiting periods with respect thereto have expired.
At the EFFECTIVE TIME, each of the not more than 1,470,833 issued and
outstanding shares of 1ST*BANK common stock (1,304,167 outstanding as of March
31, 1994 plus the outstanding Mandatory Convertible Subordinated Debentures
convertible to 166,666 additional common shares) shall be converted into shares
of BANC ONE common stock at an established Exchange
<PAGE> 3
BANC ONE CORPORATION
Page 3
October 19, 1994
Rate, which is defined in Section 7(a)(i) of the Merger Agreement. At the
EFFECTIVE TIME, 1ST*BANK's shareholders shall be allocated and entitled to
receive shares of BANC ONE common stock in exchange for the surrender and
cancellation of their 1ST*BANK common stock.
The Exchange Rate for converting 1ST*BANK common shares into BANC ONE common
shares is computed under Section 7(b)(i) of the Merger Agreement. The BANC ONE
Average Price will determine the Exchange Rate. If the BANC ONE Average Price
is $36.30 or more, each 1ST*BANK share shall be exchanged for 0.2627 share of
BANC ONE common. If the BANC ONE Average Price is $33.00 or less, each
1ST*BANK share shall be exchanged for 0.2890 share of BANC ONE common. If the
BANC ONE Average Price is between $33.00 and $36.30, each 1ST*BANK share shall
be exchanged for that number of shares of BANC ONE common, carried to four
decimal places, which when multiplied by the average price, will equal $9.5354.
Furthermore, all of the 1ST*BANK shares shall be converted into not more than
425,000 shares of BANC ONE common. Additionally, in no event shall the
Exchange Rate be less than 0.2627 or more than 0.2890 shares of BANC ONE
common, subject to the anti-dilution provisions of Sections 7(e) and 7(f) of
the Merger Agreement and the provisions of Section 7(c) of the Merger Agreement
regarding fractional shares.
The term "Valuation Period" is defined in Section 7(a) of the Merger Agreement
as "the ten consecutive days on which shares of BANC ONE common are traded on
the New York Stock Exchange (the "NYSE") ending on the sixth NYSE trading day
immediately prior to the Effective Time."
The term "BANC ONE Average Price" is defined in Section 7(a) of the Merger
Agreement as "the average of the closing trade prices of BANC ONE Common on the
NYSE during the Valuation Period as reported in THE WALL STREET JOURNAL for
NYSE Composite Transactions."
The 6,400,000 shares of BOTNA common issued and outstanding immediately prior
to the EFFECTIVE TIME shall continue to be issued and outstanding shares of
common stock, $35 par value, of the Receiving Association.
The anti-dilution provisions of Section 7 of the Merger Agreement provide:
(e) If prior to the Effective Time BANC ONE shall declare
a stock dividend or subdivide, split up, reclassify or combine
its shares of common stock or declare a dividend or make a
distribution on its common stock in any security convertible
into its common stock, appropriate adjustment or adjustments
will be made in the Exchange Rate and other factors used to
determine or limit the Exchange Rate.
(f) If prior to the Effective Time BANC ONE shall declare
a stock dividend or subdivide, split up, reclassify or combine
its shares of common stock or declare a divided or make a
distribution on its common stock in any security convertible
into its common
<PAGE> 4
BANC ONE CORPORATION
Page 4
October 19, 1994
stock, and the "Ex-Dividend Date" (as herein defined)
established for the shares being so divided or otherwise
diluted (if an "Ex-Dividend Date" is not established by the
NYSE) or the Record Date, whichever is applicable, is
subsequent to the Valuation Period appropriate adjustment or
adjustments will be made in the Exchange Rate and other
factors used to determine or limit the Exchange Rate. The
"Ex-Dividend Date" is that date established by the NYSE for
such distribution. The Record Date is that date established
by resolution of the Board of Directors of the distributing
party as the time as of which record ownership of the
distributing securities will entitle the record owner(s) to
such distribution.
1ST*BANK's shareholders with fractional shares, at the EFFECTIVE TIME, shall
not be entitled to receive BANC ONE common stock for such fractional shares.
Instead, any holder of fractional shares of 1ST*BANK common shall, upon
surrender, be paid cash by BANC ONE on the basis of the BANC ONE Average Price,
as defined in Section 7(a) of the Merger Agreement.
The shareholders of 1ST*BANK who do not vote their shares in favor of the
Merger or who otherwise perfect applicable dissenters' rights will be entitled
to receive the value of their shares in accordance with the provisions of 12
U.S.C. Section 215a. The maximum aggregate number of dissenting shares,
multiplied by the larger of the market or book value of one share of 1ST*BANK
common stock, plus an additional $10,000 shall be paid by 1ST*BANK from its
assets to Bank One, Indianapolis, N.A., as Escrow Agent. This Escrow Fund
shall serve as the source of any cash payments required to be made to
dissenting former shareholders of 1ST*BANK and shall ensure that the funds used
to pay the dissenting shareholders are paid from funds and assets attributable
to 1ST*BANK. Furthermore, under no circumstances will the total amount paid
into the escrow account by 1ST*BANK exceed 1% of 1ST*BANK's net assets. Nor,
under any circumstances will any assets of BANC ONE, BANC ONE TEXAS, or BOTNA
be paid into the escrow account or be used to pay 1ST*BANK shareholders who
dissent.
C. ADDITIONAL REPRESENTATIONS
In addition to the foregoing, the following pertinent representations
have been made by the parties to the proposed transaction:
1. The fair market value of BANC ONE common stock received by each
1ST*BANK shareholder will be approximately equal to the fair market
value of the 1ST*BANK common stock surrendered in the exchange.
2. There is no plan or intention by the shareholders who own five percent
or more of 1ST*BANK common stock, and to the best of the knowledge of
the management of BANK, there is no plan or intention on the part of
the remaining shareholders of 1ST*BANK to sell, exchange, or otherwise
dispose of a number of shares of BANC ONE common stock received in the
transaction that would reduce their ownership of BANC ONE common stock
to a number of shares having a value, as of the date of the
<PAGE> 5
BANC ONE CORPORATION
Page 5
October 19, 1994
transaction, of less than 50 percent of the value of all of the
formerly outstanding common stock of 1ST*BANK as of the same date.
For purposes of this representation, shares of 1ST*BANK common stock
exchanged for cash or other property, surrendered by dissenters, or
exchanged for cash in lieu of fractional shares of BANC ONE common
stock will be treated as outstanding 1ST*BANK common stock on the date
of the transaction. Moreover, shares of 1ST*BANK common stock and
shares of BANC ONE common stock held by shareholders of 1ST*BANK and
otherwise sold, redeemed, or disposed of prior or subsequent to the
EFFECTIVE TIME will be considered in making this representation.
3. BANC ONE TEXAS will acquire at least ninety percent (90%) of the fair
market value of the net assets and at least seventy percent (70%) of
the fair market value of the gross assets held by 1ST*BANK immediately
prior to the transaction. For purposes of this representation,
amounts paid by 1ST*BANK to dissenters, amounts paid by 1ST*BANK to
shareholders who receive cash or other property, 1ST*BANK assets used
to pay its reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by 1ST*BANK
immediately preceding the transfer will be included as assets of
1ST*BANK held immediately prior to the transaction.
4. Prior to the transaction, BANC ONE will be in control of BANC ONE
TEXAS within the meaning of Section 368(c) and BANC ONE TEXAS will be
in control of BOTNA within the meaning of Section 368(c).
5. Following the transaction, BANC ONE TEXAS will not issue any
additional shares of its stock that would result in BANC ONE losing
control of BANC ONE TEXAS within the meaning of Section 368(c), nor
will BOTNA issue any additional shares of its stock that would result
in BANC ONE TEXAS losing control of BOTNA within the meaning of
Section 368(c).
6. BANC ONE has no plan or intention to reacquire any of its stock issued
in the transaction.
7. BANC ONE has no plan or intention to liquidate BANC ONE TEXAS, to
merge BANC ONE TEXAS into another corporation, or to sell or otherwise
dispose of the stock of BANC ONE TEXAS. Furthermore, neither BANC ONE
nor BANC ONE TEXAS has any plan or intention to liquidate BOTNA, to
merge BOTNA into another corporation, to sell or otherwise dispose of
the stock of BOTNA, or to cause BOTNA to sell or otherwise dispose of
any of the assets of 1ST*BANK acquired in the transaction, except for
dispositions in the ordinary course of business or transfers described
in Section 368(a)(2)(C).
8. BOTNA has no plan or intention to sell or otherwise dispose of any of
the assets acquired from 1ST*BANK, except for dispositions in the
ordinary course of business.
9. BOTNA will not transfer or otherwise convey any of the assets of
1ST*BANK received in the transaction to BANC ONE, BANC ONE TEXAS, or
any subsidiary of BANC ONE or BANC ONE TEXAS, except in the ordinary
course of business.
<PAGE> 6
BANC ONE CORPORATION
Page 6
October 19, 1994
10. 1ST*BANK will distribute the stock, securities, and other property it
receives in the transaction, and its other properties, in pursuance of
the plan of reorganization.
11. The liabilities of 1ST*BANK assumed by BOTNA and the liabilities to
which the transferred assets of 1ST*BANK are subject, were incurred by
1ST*BANK in the ordinary course of its business.
12. Following the transaction, BOTNA will continue the historic
business of 1ST*BANK or use a significant portion of
1ST*BANK's historic business assets in a business.
13. BANC ONE, BANC ONE TEXAS, BOTNA, and 1ST*BANK and its shareholders
will pay their respective expenses, if any, incurred in connection
with the transaction. BOTNA will pay or assume only those expenses of
1ST*BANK that are solely and directly related to the transaction in
accordance with the guidelines established in Rev. Rul. 73-54, 1973-1
C.B. 187.
14. There is no intercorporate indebtedness existing between BANC ONE and
1ST*BANK, BANC ONE TEXAS and 1ST*BANK, or BOTNA and 1ST*BANK that was
issued, acquired, or will be settled at a discount.
15. No two parties to the transaction are investment companies as defined
in Section 368(a)(2)(F)(iii) and (iv).
16. Neither BANC ONE, BANC ONE TEXAS, nor BOTNA own directly or
indirectly, nor have they owned during the past five years, directly
or indirectly, any stock of 1ST*BANK.
17. The fair market value of the assets of 1ST*BANK transferred to BOTNA
will equal or exceed the sum of the liabilities assumed by BOTNA plus
the amount of liabilities, if any, to which the transferred assets are
subject.
18. 1ST*BANK is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A).
19. The payment of cash in lieu of fractional shares of BANC ONE common
stock is solely for the purpose of avoiding the expense and
inconvenience to BANC ONE of issuing fractional shares and
does not represent separately bargained-for consideration. The total
cash consideration that will be paid in the transaction to the
1ST*BANK shareholders instead of issuing fractional shares of BANC ONE
common stock will not exceed one percent of the total consideration
that will be issued in the transaction to the 1ST*BANK shareholders in
exchange for the shares of 1ST*BANK common stock. The fractional
share interests of each 1ST*BANK shareholder will be aggregated, and
no 1ST*BANK shareholder will receive cash in an amount equal to or
greater than the value of one full share of BANC ONE common stock.
<PAGE> 7
BANC ONE CORPORATION
Page 7
October 19, 1994
20. None of the compensation received by any shareholder-employees of
1ST*BANK will be separate consideration for, or allocable to, any of
their shares of 1ST*BANK common stock; none of the shares of BANC ONE
common stock received by any shareholder-employees will be separate
consideration for, or allocable to, any employment agreement or
non-competition agreement; and the compensation to be paid to any
shareholder-employee will be for services actually rendered and will
be commensurate with amounts actually paid to third parties bargaining
at arm's length for similar services.
21. No stock of BANC ONE TEXAS and no stock of BOTNA will be issued as
consideration in the transaction.
22. Under the provisions of Section 215a of Title 12 of the United States
Code, any holder of 1ST*BANK stock who objects to the merger has the
right to demand that he or she be paid in cash the appraised value of
his shares (as of the merger date) if and when the merger is
consummated, subject to the satisfaction of certain conditions. If
such conditions are satisfied, the dissenting shareholder will be
entitled to receive the appraised value of the shares held by him or
her. The determination of the amount to be paid for those shares will
be made under the procedures set forth in subsection (c) and, if
necessary, subsection (d) of Section 215a of Title 12 of the United
States Code. As a result of the escrow of cash to be established by
1ST*BANK immediately prior to the EFFECTIVE TIME, all cash ultimately
paid to dissenting shareholders will be from assets held by 1ST*BANK
just prior to the merger.
23. No dividend or other distribution on 1ST*BANK stock has been or will
be paid prior to the consummation of the reorganization, other than
regular periodic dividends consistent in amount and effect with prior
dividend policy.
The facts, assumptions, and representations set forth above have been
reviewed by the management of 1ST*BANK, BOTNA, BANC ONE TEXAS, and BANC ONE.
These facts, assumptions, and representations are a material basis for the
opinions contained herein. We have been instructed to rely on them in
preparing this opinion letter. We have not independently investigated the
validity of the facts, assumptions, or representations set forth above.
ISSUES
I. Whether the acquisition by BANC ONE TEXAS of substantially all of the
assets of 1ST*BANK solely in exchange for BANC ONE common stock and
the assumption by BANC ONE TEXAS of 1ST*BANK's liabilities will
constitute a reorganization within the meaning of Section 368(a)(1)(C)
of the Code. And, whether the acquisition by BANC ONE TEXAS of
substantially all of the assets of 1ST*BANK will be disqualified by
reason of the fact that the assets of 1ST*BANK that are acquired by
BANC ONE TEXAS are transferred to BOTNA.
II. Whether the transaction will be viewed for Federal income tax purposes
as an acquisition by BANC ONE TEXAS of substantially all of the assets
of 1ST*BANK solely in exchange for BANC ONE common stock and the
assumption of all of the liabilities of
<PAGE> 8
BANC ONE CORPORATION
Page 8
October 19, 1994
1ST*BANK by BANC ONE TEXAS followed by the transfer of the
assets of 1ST*BANK to BOTNA and the assumption by BOTNA of the
liabilities of 1ST*BANK.
III. Whether gain or loss will be recognized by BANC ONE, BANC ONE TEXAS,
BOTNA, or 1ST*BANK as a consequence of the Merger.
IV. Whether gain or loss will be recognized to the shareholders of
1ST*BANK on the exchange of their shares of 1ST*BANK common stock for
shares of BANC ONE common stock (disregarding for this purpose any
cash received for fractional share interests to which they may be
entitled).
V. Whether the Federal income tax basis of the BANC ONE common stock
(including the fractional share interests to which they may be
entitled) received by the shareholders of 1ST*BANK will be the same as
the Federal income tax basis of the 1ST*BANK common stock surrendered
in exchange therefor.
VI. Whether the holding period of the BANC ONE common stock received
by a shareholder of 1ST*BANK will include the period for which the
1ST*BANK common stock exchanged therefor was held, provided thr
exchanged 1ST*BANK common stock was held as a capital asset by
such shareholder on the date of the exchange.
VII. Whether the cash received by 1ST*BANK shareholders in exchange for
their 1ST*BANK common stock pursuant to the exercise of their
dissenters' rights will be treated as having been received in
redemption of their 1ST*BANK common stock and subject to the
provisions of Section 302 of the Code.
VIII. Whether the payment of cash in lieu of fractional share interests of
BANC ONE common stock will be treated as if the fractional shares were
distributed as part of the exchange and then redeemed by BANC ONE, the
redemption being subject to the provisions of Section 302 of the
Code.
<PAGE> 9
BANC ONE CORPORATION
Page 9
October 19, 1994
CONCLUSIONS
For Federal income tax purposes, the following conclusions with respect to the
above issues are made:
I. TAX-FREE REORGANIZATION STATUS
------------------------------
The acquisition by BANC ONE TEXAS of substantially all of the assets of
1ST*BANK in exchange for shares of BANC ONE common stock and the assumption by
BANC ONE TEXAS of 1ST*BANK's liabilities, as described above, will constitute a
tax-free reorganization within the meaning of Section 368(a)(1)(C) of the
Code. For purposes of this Opinion, "substantially all" means at least ninety
percent (90%) of the fair market value of the net assets and at least seventy
percent (70%) of the fair market value of the gross assets of 1ST*BANK.
Pursuant to Section 368(a)(2)(C) of the Code, the acquisition by BANC ONE TEXAS
of substantially all of the assets of 1ST*BANK will not be disqualified under
Section 368(a)(1)(C) by reason of the fact that the assets of 1ST*BANK that
were acquired by BANC ONE TEXAS are transferred to BOTNA. Furthermore, BANC
ONE, BANC ONE TEXAS, BOTNA, and 1ST*BANK will qualify as "parties to the
reorganization" under Section 368(b). See also Priv. Ltr. Rul. 89-27-041
(Apr. 11, 1989).
II. CHARACTERIZATION OF THE TRANSACTION
-----------------------------------
The transaction will be viewed as the acquisition by BANC ONE TEXAS of
substantially all of the assets of 1ST*BANK solely in exchange for the voting
stock of BANC ONE and the assumption by BANC ONE TEXAS of 1ST*BANK's
liabilities followed by the transfer of 1ST*BANK's assets to BOTNA and the
assumption by BOTNA of the liabilities of 1ST*BANK. See Priv. Ltr. Rul.
89-27-041 (Apr. 11, 1989).
III. GAIN OR LOSS RECOGNITION BY BANC ONE, BANC ONE TEXAS, BOTNA, AND
----------------------------------------------------------------
1ST*BANK
- --------
1ST*BANK will recognize no gain or loss upon the transfer of its assets
to BANC ONE TEXAS, Section 361(a); nor will BANC ONE and BANC ONE TEXAS
recognize gain or loss upon the acquisition by BANC ONE TEXAS of 1ST*BANK's
assets, Rev. Rul. 57-278, 1957-1 C.B. 124. Furthermore, BANC ONE TEXAS and
BOTNA will recognize no gain or loss upon BANC ONE TEXAS' transfer of
1ST*BANK's assets to BOTNA, Section Section 351(a), 1032(a).
IV. GAIN OR LOSS RECOGNITION BY SHAREHOLDERS OF 1ST*BANK
----------------------------------------------------
Disregarding for this purpose any cash received pursuant to the exercise of
statutory dissenters' rights or for fractional share interests to which they
may be entitled, no gain or loss will be recognized to the shareholders of
1ST*BANK upon receipt of BANC ONE common stock. Section 354(a)(1).
<PAGE> 10
BANC ONE CORPORATION
Page 10
October 19, 1994
V. FEDERAL INCOME TAX BASIS FOR SHAREHOLDERS OF 1ST*BANK
-----------------------------------------------------
The Federal income tax basis of BANC ONE common stock (including fractional
share interests to which they may be entitled) to be received by the
shareholders of 1ST*BANK will be the same as the basis of the 1ST*BANK common
stock surrendered in exchange therefor. Section 358(a)(1).
VI. FEDERAL INCOME TAX HOLDING PERIOD OF BANC ONE COMMON STOCK
----------------------------------------------------------
Provided that the 1ST*BANK common stock was held as a capital asset on the date
of the exchange, the holding period of BANC ONE common stock received by the
shareholders of 1ST*BANK will include the period during which the shareholders
held the 1ST*BANK common stock surrendered in exchange therefor. Section
1223(1).
VII. REDEMPTION TREATMENT FOR CASH RECEIVED PURSUANT TO THE EXERCISE OF
------------------------------------------------------------------
DISSENTERS' RIGHTS BY 1ST*BANK SHAREHOLDERS
- -------------------------------------------
The shareholders who exercise their dissenters' rights will be treated as
having received the cash as a distribution in redemption of their 1ST*BANK
stock subject to the provisions and limitations of Section 302 Rev. Rul.
74-515, 1974-2 C.B. 118
VIII. REDEMPTION TREATMENT FOR CASH RECEIVED IN LIEU OF FRACTIONAL SHARE
------------------------------------------------------------------
INTERESTS
- ---------
The payments of cash in lieu of fractional share interests will be treated as
if the fractional shares were distributed as part of the exchange and then
redeemed by BANC ONE. The payments will be treated as having been received as
a distribution in full payment in exchange for the stock redeemed as provided
in Section 302(a). Rev. Rul. 66-365, 1966-2 C.B. 116; Rev. Proc. 77-41,
1977-2 C.B. 574.
DISCUSSION
I. TAX-FREE REORGANIZATION STATUS
------------------------------
A. Statement of Law
Tax-free reorganizations are governed by Section 368 of the Code. The purpose
of the reorganization provisions of the Code is to exempt from taxation
specifically described exchanges incident to readjustments of corporate
structures that are required by business exigencies and effect only a
readjustment of continuing interests in property under a modified corporate
form. Treas. Reg. Section 1.368-1(b). Requisite to a reorganization under the
Code are:
1. CONTINUITY OF BUSINESS ENTERPRISE, which requires
that the acquiring corporation either (a) continue the
acquired corporation's historic business, or (b) use a
significant portion of the acquired corporation's historic
business assets in a business. Treas. Reg. Section
1.368-1(d)(2);
<PAGE> 11
BANC ONE CORPORATION
Page 11
October 19, 1994
2. CONTINUITY OF INTEREST by the persons who were
the owners prior to the reorganization. This requires that
the target shareholders acquire a definite and substantial
proprietary interest in the acquiring corporation. See
Treas. Reg. Section 1.368-1(b). The Internal Revenue
Service's advance ruling guidelines provide that this
requirement will be met if the former target shareholders
receive stock or equity equal in value to 50% of the value of
the formerly outstanding target stock. Rev. Proc. 77-37,
1977-2 C.B. 568.
3. A BONA FIDE BUSINESS PURPOSE. Treas. Reg. Section
Section 1.368-1(b), (c), -2(g); See Gregory v. Helvering, 293
U.S. 465 (1935).
4. A LACK OF OVERALL PLAN OF TAX AVOIDANCE wherein such
overall plan uses a corporate reorganization to disguise the
real character of the transaction.
Other pertinent reorganization provisions of the Code are as follows:
Section 368(a)(1)(C) of the Code provides that the term
"reorganization" includes the acquisition by one corporation,
in exchange solely for all or part of its voting stock (or in
exchange solely for all or a part of the voting stock of a
corporation which is in control of the acquiring corporation),
of substantially all of the properties of another corporation,
but in determining whether the exchange is solely for stock
the assumption by the acquiring corporation of a liability of
the other, or the fact that property acquired is subject to a
liability, shall be disregarded.
In defining "substantially all," the Internal Revenue Service has focused not
only on the percentage of assets transferred but also on the nature of the
properties retained by the target corporation and the purpose of the retention,
in addition to other facts and circumstances. See Rev. Rul. 57-518, 1957-2
C.B. 253, and Treas. Reg. Section 1.368-1(d)(4). The Internal Revenue
Service's advance ruling guidelines provide that the "substantially all"
requirement is satisfied if there is a transfer of assets representing at least
ninety percent (90%) of the fair market value of the net assets and seventy
percent (70%) of the fair market value of the gross assets held by the target
corporation immediately prior to the transfer. Rev. Proc. 77-37, 1977-2 C.B.
568.
Section 368(b) of the Code states that the term "a party to the reorganization"
includes both corporations in the case of a reorganization resulting from the
acquisition by one corporation of stock or properties of another. Under
Section 368(b), "a party to a reorganization" includes the controlling
corporation in cases where the stock of the corporation controlling the
acquiring corporation is exchanged for the properties of the target
corporation.
For purposes of Section 368, "control" is defined as "the ownership of stock
possessing at least eighty percent (80%) of the total combined voting power of
all classes of stock entitled to vote and at least eighty percent (80%) of the
total number of shares of all other classes of stock of the corporation."
Section 368(c).
<PAGE> 12
BANC ONE CORPORATION
Page 12
October 19, 1994
B. Application of Law
The present transaction meets all of the requirements for a reorganization
under the Code. First, BOTNA will continue the historic business of 1ST*BANK
or use a significant portion of 1ST*BANK's historic business assets in a
business. Thus, the transaction meets the continuity of business enterprise
requirement.
Second, the parties have represented that there is no plan or intention by the
shareholders of 1ST*BANK to sell, exchange, or otherwise dispose of a number of
shares of BANC ONE common stock received in the transaction that would reduce
their ownership of BANC ONE common stock to a number of shares having a value,
immediately prior to the EFFECTIVE TIME, of less than 50 percent of the total
fair market value of 1ST*BANK stock outstanding as of the same date. Thus, the
transaction meets the continuity of interest requirement.
Third, this transaction will strengthen 1ST*BANK's ability to meet its
customers' needs for a broader range of banking services and compete more
effectively with similar banks in 1ST*BANK's current geographical area. It
will also enable BANC ONE to expand its existing customer base while keeping
its costs constant due to the economies of scale to be achieved as a result of
the transaction. Thus, a bona fide business purpose exists for this
transaction.
Finally, there appears to be no overall plan of tax avoidance wherein a
corporate reorganization is being used to disguise the real character of the
transaction. This requirement is satisfied because the transaction does not
appear to be one of a series of planned transactions which would, if collapsed
into a single transaction, in substance be a taxable transaction.
This transaction qualifies as a reorganization under Section 368(a)(1)(C).
There has been (1) an acquisition by one corporation (BANC ONE TEXAS), (2) in
exchange for the stock of a controlling corporation (BANC ONE), (3) of
substantially all of the properties of another corporation (1ST*BANK).
Further, the "substantially all" requirement is satisfied in that BANC ONE
TEXAS will acquire at least ninety percent (90%) of the fair market value of
the net assets and at least seventy percent (70%) of the fair market value of
the gross assets held by 1ST*BANK immediately prior to the transaction. See
Priv. Ltr. Rule 89-27-041 (Apr. 11, 1989).
In conclusion, the acquisition by BANC ONE TEXAS of substantially all of the
assets of 1ST*BANK in exchange for shares of BANC ONE common stock satisfies
the requirements for a reorganization within the meaning of Section Section
368(a)(1)(C) of the Code. Furthermore, BANC ONE, BANC ONE TEXAS, BOTNA, and
1ST*BANK will each qualify as a "party to the reorganization" as defined in
Section 368(b) of the Code. See Priv. Ltr. Rule 89-27-041 (Apr. 11, 1989).
<PAGE> 13
BANC ONE CORPORATION
Page 13
October 19, 1994
II. CHARACTERIZATION OF THE TRANSACTION
-----------------------------------
A. Statement of Law
Section 368(a)(2)(C) of the Code provides that "[a] transaction otherwise
qualifying under paragraph (1)(A), (1)(B), or (1)(C) shall not be disqualified
by reason of the fact that part or all of the assets or stock which were
acquired in the transaction are transferred to a corporation controlled by the
corporation acquiring such assets or stock."
In Revenue Ruling 64-73, 1964-1 C.B. 142, the Internal Revenue Service found
that the acquisition by a parent corporation of a portion of the target's
assets and the acquisition of the remaining assets of the target by a second
tier subsidiary of the parent constituted a tax-free reorganization. The
Service reached this result based upon Code Section 368(a)(2)(C). The Service
reasoned that Code Section 368(a)(2)(C) is "not intended to exclude a transfer
of assets to a wholly owned subsidiary of a corporation which is controlled by
the parent corporation." Rev. Rul. 64-73, 1964-1 C.B. 142.
In Revenue Ruling 70-224, 1970-1 C.B. 79, the Internal Revenue Service found
that the acquisition of a target's assets by a parent corporation, where the
parent corporation subsequently transfers the acquired assets to its wholly
owned subsidiary, constitutes a tax-free reorganization. In reaching this
conclusion, the Service found that such transfer was permitted by Code Section
368(a)(2)(C). Additionally, the Service found that the parent corporation is
treated as acquiring the target's assets, as provided in the merger agreement,
and transferring such assets to its wholly owned subsidiary.
B. Application of Law
In the present transaction, BANC ONE TEXAS, which is controlled by BANC ONE,
will cause the assets and liabilities of an unrelated target (1ST*BANK) to be
transferred to its wholly-owned subsidiary, BOTNA, by means of a merger in
exchange for the voting stock of BANC ONE. The transfer of the assets and
liabilities of 1ST*BANK acquired by BANC ONE TEXAS through its wholly owned
subsidiary, BOTNA, is permitted by Code Section 368(a)(2)(C). Additionally,
the transaction will be viewed as the acquisition of 1ST*BANK's assets and
liabilities by BANC ONE TEXAS with BANC ONE TEXAS transferring such assets to
BOTNA. Rev. Rul. 70-224, 1970-1 C.B. 79. See also Priv. Ltr. Rul. 89-27-041
(Apr. 11, 1989).
III. GAIN OR LOSS RECOGNITION BY BANC ONE, BANC ONE TEXAS, BOTNA, AND 1ST*BANK
-------------------------------------------------------------------------
A. Statement of Law
Section 351(a) of the Code provides that "[n]o gain or loss shall be recognized
if property is transferred to a corporation by one or more persons solely in
exchange for stock in such corporation and immediately after the exchange such
person or persons are in control (as defined in Section 368(c)) of the
corporation."
<PAGE> 14
BANC ONE CORPORATION
Page 14
October 19, 1994
Section 361(a) of the Code provides that "[n]o gain or loss shall be recognized
to a corporation if such corporation is a party to the reorganization and
exchanges property, in pursuance of the plan of reorganization, solely for
stock or securities in another corporation a party to the reorganization."
Section 357(a) provides that if the taxpayer receives property that would be
permitted to be received under Section 361 without recognition of gain and, in
addition, another party to the exchange assumes a liability of the taxpayer or
acquires property subject to a liability, then such assumption or acquisition
is not treated as "money or other property" and should not prevent the exchange
from falling within the non-recognition provisions of Section 361(a). Section
357(c) of the Code provides an exception to this general rule, however. Under
Section 357(c), gain is recognized to the extent that "the sum of the
liabilities assumed plus the amount of liabilities to which property is subject
exceeds the total of the adjusted basis of the property transferred . . .."
Revenue Ruling 57-278, 1957-1 C.B. 124, concluded that no gain or loss is
recognized to a controlling corporation or its subsidiary upon the acquisition
by the subsidiary of substantially all of the target corporation's assets in
exchange for the stock of the controlling corporation.
Section 1032(a) of the Code provides that "[n]o gain or loss shall be
recognized to a corporation on the receipt of money or other property in
exchange for stock of such corporation."
B. Application of Law
1ST*BANK is a "party to the reorganization" as defined in Code Section 368(b).
Thus, under Section 361(a), 1ST*BANK recognizes no gain or loss upon the
transfer of substantially all of its assets to BANC ONE TEXAS solely in
exchange for BANC ONE common stock. In addition, under Section 357(a), the
assumption by BANC ONE TEXAS of the liabilities of 1ST*BANK will not be treated
as "money or other property" and will not prevent the exchange from falling
within the non-recognition provision of Section 361(a). Additionally, the
exception to Code Section 357(a) provided by Code Section 357(c) is
inapplicable.
Neither BANC ONE nor BANC ONE TEXAS will recognize gain or loss upon the
acquisition by BANC ONE TEXAS of substantially all of the assets of 1ST*BANK in
exchange for shares of BANC ONE common stock and the assumption by BANC ONE
TEXAS of 1ST*BANK's liabilities. Code Section 1032, and Rev. Rul. 57-278,
1957-1 C.B. 124.
BANC ONE TEXAS will recognize no gain or loss upon the transfer of all of
1ST*BANK's assets to BOTNA in constructive exchange for BOTNA stock and the
assumption by BOTNA of 1ST*BANK's liabilities. Code Section 351(a) and Rev.
Rul. 57-278, 1957-1 C.B. 124. Nor will BANC ONE recognize any gain or loss
upon the exchange of its common shares for the assets and liabilities of
1ST*BANK. Code Section 1032(a). Section 357(c) is inapplicable to the
Section 351 transaction because the liabilities assumed will not exceed the
basis of the assets received in the transfer.
<PAGE> 15
BANC ONE CORPORATION
Page 15
October 19, 1994
IV. GAIN OR LOSS RECOGNITION BY SHAREHOLDERS OF 1ST*BANK
----------------------------------------------------
A. Statement of Law
Section 354(a)(1) of the Code provides that "[n]o gain or loss shall be
recognized if stock . . . in a corporation a party to a reorganization [is] . .
. exchanged solely for stock or securities in such corporation or in another
corporation a party to the reorganization."
B. Application of Law
Disregarding any cash received pursuant to the exercise of statutory
dissenters' rights or fractional share interests, the shareholders of 1ST*BANK
will receive BANC ONE common stock solely in exchange for cancellation of their
1ST*BANK common stock. Therefore, the exchange will be solely for stock in
another corporation which is a party to the reorganization. As a result, no
gain or loss will be recognized by the shareholders of 1ST*BANK upon the
Merger, ignoring the statutory dissenters' rights or fractional share
interests.
V. FEDERAL INCOME TAX BASIS FOR SHAREHOLDERS OF 1ST*BANK
-----------------------------------------------------
A. Statement of Law
In general, Section 358(a)(1) provides that in the case of an exchange to
which Section 354 applies, "[t]he basis of the property permitted to be
received under such section without the recognition of gain or loss shall be
the same as that of the property exchanged."
B. Application of Law
Under Section 358(a)(1), the aggregate basis of BANC ONE common stock
(including any fractional share interests) to be received by the shareholders
of 1ST*BANK will be the same aggregate Federal income tax basis as the 1ST*BANK
common stock surrendered in the exchange therefor.
VI. FEDERAL INCOME TAX HOLDING PERIOD OF BANC ONE COMMON STOCK
----------------------------------------------------------
A. Statement of Law
Section 1223(1) of the Code provides:
In determining the period for which the taxpayer has held property
received in an exchange, there shall be included the period for which
he held the property exchanged if, under this chapter, the property
has, for the purpose of determining gain or loss from a sale or
exchange, the same basis in whole or in part in his hands as the
property exchanged, and, in the case of such exchanges after March 1,
1954, the property exchanged at the time of such exchange was a
capital asset as defined in section 1221 or property described in
section 1231.
<PAGE> 16
BANC ONE CORPORATION
Page 16
October 19, 1994
B. Application of Law
The holding period of BANC ONE common stock to be received by the shareholders
of 1ST*BANK will include the period during which they held the shares of
1ST*BANK common stock surrendered in the exchange therefor, provided that
1ST*BANK stock was held as a capital asset on the date of the exchange. Code
Section 1223(1).
VII. REDEMPTION TREATMENT FOR CASH RECEIVED PURSUANT TO THE EXERCISE OF
------------------------------------------------------------------
DISSENTERS' RIGHTS BY 1ST*BANK SHAREHOLDERS
- -------------------------------------------
A. Statement of Law
Section 302(a) of the Code provides:
If a corporation redeems its stock (within the meaning of
section 317(b)), and if paragraph (1), (2), (3), or (4)
of subsection (b) applies, such redemption shall be treated
as a distribution in part or full payment in exchange for
the stock.
Section 302(b)(3) provides:
Subsection (a) shall apply if the redemption is a
complete redemption of all of the stock of the corporation
owned by the shareholder.
Section 317(b) of the Code provides:
For purposes of this part, stock shall be treated as
redeemed by a corporation if the corporation acquires its
stock from a shareholder in exchange for property, whether or
not the stock so acquired is canceled, retired, or held as
treasury stock.
B. Application of Law
The shareholders who exercise their dissenters' rights will be treated as
having received the cash as a distribution in redemption of their 1ST*BANK
stock subject to the provisions and limitations of Section 302 of the Code
because they will have a complete termination of their interest in 1ST*BANK.
See Rev. Rul. 74-515, 1974-2 C.B. 118.
VIII. REDEMPTION TREATMENT FOR CASH RECEIVED IN LIEU OF FRACTIONAL SHARE
------------------------------------------------------------------
INTERESTS
- ---------
A. Statement of Law
In Rev. Rul. 66-365, 1966-2 C.B. 116, the Internal Revenue Service concluded
that where cash payments are made to the shareholders of the target corporation
in lieu of fractional share
<PAGE> 17
BANC ONE CORPORATION
Page 17
October 19, 1994
interests, those cash payments are treated as distributions followed by
redemptions under Section 302 of the Code. The Internal Revenue Service's
advance ruling guidelines provide that:
cash to be distributed to shareholders in lieu of fractional
share interests arising in corporate reorganizations, stock
splits, stock dividends, conversion of convertible stocks, and
other similar transactions will be treated as having been
received in part or full payment in exchange for the stock
redeemed if the cash distribution is undertaken solely for the
purpose of saving the corporation the expense and
inconvenience of issuing and transferring fractional shares,
and is not separately bargained-for consideration.
Rev. Proc. 77-41, 1977-2 C.B. 574.
Thus, if the redemption is not essentially equivalent to a dividend, each
shareholder's redemption will be treated as a distribution in full payment in
exchange for the shareholder's fractional share interest under Section 302(a)
of the Code. Rev. Proc. 77-41, 1977-2 C.B. 574.
B. Application of Law
In this case, the payment of cash in lieu of issuing fractional shares is
solely for the purpose of avoiding the expense and inconvenience to BANC ONE of
issuing fractional shares and does not represent separately bargained-for
consideration. These payments of cash will be treated as if the fractional
shares were distributed as part of the exchange and then redeemed by BANC ONE.
The payments will be treated as having been received as a distribution in full
payment in exchange for the stock redeemed as provided in Section 302(a) of
the Code, to the extent such payments are not essentially equivalent to a
dividend.
OPINION
Based upon the foregoing and taking into consideration the statements contained
in the section marked "CAVEAT" below, it is our opinion that the transaction
will produce the following Federal income tax consequences:
1. The transaction will be characterized as an
acquisition by BANC ONE TEXAS of substantially all of the
assets of 1ST*BANK solely in exchange for BANC ONE common
stock and the assumption of all of the liabilities of
1ST*BANK, followed by the transfer of the assets and
liabilities of 1ST*BANK to BOTNA.
2. A tax-free reorganization will take place under
Section Section 368(a)(1)(C) and 368(a)(2)(C) of the code.
3. Except with respect to any cash payments
received pursuant to the exercise of statutory dissenters'
rights or for fractional shares, no gain or loss will be
recognized by BANC ONE, BANC ONE TEXAS, BOTNA, 1ST*BANK, or
the shareholders of 1ST*BANK.
<PAGE> 18
BANC ONE CORPORATION
Page 18
October 19, 1994
4. The Federal income tax basis of the BANC ONE common
stock (including fractional share interests to which the
shareholders of 1ST*BANK may be entitled) received by the
shareholders of 1ST*BANK will be the same as the Federal
income tax basis of the 1ST*BANK common stock surrendered in
exchange therefor.
5. The holding period of the shares of BANC ONE common
stock received by a shareholder of 1ST*BANK will include the
period for which the 1ST*BANK common exchanged therefor was
held (including shares of 1ST*BANK common which were received
by any shareholder immediately prior to the EFFECTIVE TIME by
reason of the conversion of 1ST*BANK Debentures into shares of
1ST*BANK common), provided that the 1ST*BANK common stock was
held as a capital asset on the date of the exchange.
6. The shareholders who exercise their dissenters'
rights will be treated as having received the cash as a
distribution in redemption of their 1ST*BANK stock subject to
the provisions and limitations of Section 302 of the Code.
7. The payments of cash in lieu of fractional share
interests will be treated as if the fractional shares were
distributed as part of the exchange and then redeemed by BANC
ONE, with the redemption being entitled to treatment as a
distribution in full payment in exchange for the stock
redeemed as provided in Section 302(a) of the Code, to the
extent such payments are not essentially equivalent to a
dividend.
CAVEAT
The foregoing opinion is directed solely towards those items set forth
in the section of this opinion labeled "ISSUES;" therefore, no opinion is
hereby expressed regarding any other Federal, state, local, or other tax issues
or on any other matter not specifically mentioned therein. If any of the
statements of facts, assumptions, or representations contained herein are
subsequently determined to be incorrect in whole or in part such that they
would have a material effect upon the tax treatment of the issues addressed
herein, then no opinion is expressed as to the tax treatment of the proposed
transaction.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement filed on Form S-4.
Very truly yours,
/s/ Coopers & Lybrand L.L.P.
APC:c:\cldata\AmiPro\BancOne\1STBC.SAM
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
BANC ONE CORPORATION on Form S-4 of our report which includes an explanatory
paragraph regarding the change in method of accounting for income taxes and
post-retirement benefits other than pensions in 1993, dated February 21, 1994
on our audits of the consolidated financial statements of BANC ONE CORPORATION
as of December 31, 1993 and 1992, and for the years ended December 31, 1993,
1992, and 1991, included in BANC ONE CORPORATION's Annual Report on Form 10-K
for the year ended December 31, 1993 (as amended by Form 10-KA filed on June
29, 1994). We also consent to the reference to our Firm under the caption
"Experts" in said Registration Statement.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
November 3, 1994
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED ACCOUNTANTS
We have issued our reports dated January 14, 1994 on our audits of the
balance sheet of 1st*Bank as of December 31, 1993, 1992, and 1991 and the
related financial statements and schedules of 1st*Bank for each of the three
years ended December 31, 1993, which are contained in this Registration
Statement and Prospectus. We consent to the use of the aforementioned reports
in this Registration Statement and Prospectus, and to the reference to our firm
under the captions "Experts" and "Selected Consolidated Financial Data."
FISK & ROBINSON, A PROFESSIONAL CORPORATION
Fisk & Robinson P. C.
Dallas, Texas
November 3, 1994
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED ACCOUNTANTS
We have issued our reports dated January 14, 1991 on our audits of the
financial statements and schedules of 1st*Bank as of December 31, 1990 and
1989, and for the years then ended. We consent to the reliance on the
aforementioned reports in this Registration Statement and Prospectus, and to
the reference to our firm under the captions "Experts" and "Selected
Consolidated Financial Data."
CHESHIER & FULLER, INC., P.C.
Dallas, Texas
November 3, 1994
