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REGISTRATION NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BANC ONE CORPORATION
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
OHIO 6711 31-0738296
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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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)
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STEVEN ALAN BENNETT
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
BANC ONE CORPORATION
100 EAST BROAD STREET
COLUMBUS, OHIO 43271-0158
(614) 248-7590
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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WITH COPIES TO:
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EDWARD D. HERLIHY, ESQ. KENNETH L. WAGNER, ESQ. RANDALL H. DOUD, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ BANC ONE CORPORATION SKADDEN, ARPS, SLATE, MEAGHER &
51 WEST 52ND STREET 100 EAST BROAD STREET FLOM LLP
NEW YORK, N.Y. 10019 COLUMBUS, OH 43271-0158 919 THIRD AVENUE
TELEPHONE: (212) 403-1000 TELEPHONE: (614) 248-5304 NEW YORK, N.Y. 10022
TELEPHONE: (212) 735-3000
</TABLE>
Approximate date of commencement of proposed sale to the public: Upon
consummation of the transactions described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE FEE(3)
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Common Stock.......................... 162,246,644 $41.12 $6,671,582,001.28 $2,021,691.52
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(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 First USA, Inc.
with and into the Registrant.
(2) Calculated in accordance with Rule 457(f)(1) based on the aggregate market
value on May 8, 1997 of the shares of First USA, Inc. common stock expected
to be canceled in connection with the merger and computed by dividing (i)
the product of (A) the average of the high and low prices of First USA, Inc.
common stock as reported on The New York Stock Exchange, Inc. Composite
Transactions List on May 8, 1997 ($47.9375) and (B) 139,160,000,
representing the maximum number of shares of First USA, Inc. common stock
expected to be canceled in connection with the merger, by (ii) 162,246,644,
representing the maximum number of shares of common stock of the Registrant
to be issued in connection with the Merger.
(3) In accordance with Rule 457(b), $1,471,377.56 previously paid in connection
with filing of the Joint Proxy Statement -- Prospectus included herewith as
preliminary proxy material has been credited against the registration fee of
$2,021,691.52, leaving $550,313.96 payable in connection with the filing of
this Registration Statement.
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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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
[BANK ONE LOGO]
May 12, 1997
Dear Shareholders:
It is my pleasure to invite you to a Special Meeting of BANC ONE
CORPORATION Shareholders. The meeting will be held on Thursday, June 26, 1997 at
9:00 a.m. at the auditorium of the BANC ONE Corporate Center, 1111 Polaris
Parkway, Columbus, Ohio 43240. Your Board of Directors and Management look
forward to greeting those shareholders able to attend.
At the Special Meeting, you will be asked to consider and vote upon
proposals to approve and adopt an agreement and plan of merger between BANC ONE
CORPORATION and First USA, Inc., pursuant to which First USA, Inc. will be
merged with and into BANC ONE CORPORATION, and to amend the BANC ONE CORPORATION
Articles of Incorporation to increase the number of shares of common stock
authorized.
The merger of First USA with BANC ONE is expected to further strengthen
BANC ONE and, over time, enhance BANC ONE's profitability. The merger will
create significant benefits for the customers and shareholders of both BANC ONE
and First USA. The combination of First USA with BANC ONE will solidify BANC
ONE's position as one of the ten largest banking organizations in the United
States while creating the third largest bankcard issuer in the United States.
Lazard Freres & Co. LLC and UBS Securities LLC, each of which has served as
a financial advisor to BANC ONE with respect to the proposed merger with First
USA, have delivered their respective written opinions to the Board of Directors
that, as of the date hereof, the exchange ratio in the merger is fair, from a
financial point of view, to BANC ONE.
For these reasons and for those set forth in the accompanying Joint Proxy
Statement-Prospectus, your Board of Directors unanimously recommends a vote FOR
the approval of the merger agreement with First USA, Inc. and the amendment of
the BANC ONE CORPORATION Articles of Incorporation, all as set forth on the
enclosed Proxy Card. Each of these matters is more fully described in the
accompanying Notice of Meeting and Joint Proxy Statement-Prospectus.
It is important that your shares be represented at the meeting whether or
not you are able to attend personally. Accordingly, I urge you to sign and date
the enclosed Proxy Card and return it in the enclosed envelope as promptly as
possible.
Thank you for your interest and participation in the affairs of BANC ONE.
Sincerely,
/s/ John B. McCoy
John B. McCoy
Chairman and Chief
Executive Officer
<PAGE> 3
[BANK ONE LOGO]
BANC ONE CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Columbus, Ohio
May 12, 1997
To the Shareholders of BANC ONE CORPORATION:
Notice is hereby given that a Special Meeting of Shareholders of BANC ONE
CORPORATION will be held at the auditorium of the BANC ONE Corporate Center,
1111 Polaris Parkway, Columbus, Ohio 43240, on Thursday, June 26, 1997, at 9:00
a.m., Columbus time, for the purpose of considering and voting upon the
following matters, all as set forth in the accompanying Joint Proxy
Statement-Prospectus.
APPROVAL OF MERGER AGREEMENT WITH FIRST USA -- Approval of an
agreement and plan of merger between BANC ONE CORPORATION and First USA,
Inc., pursuant to which First USA, Inc. will be merged with and into BANC
ONE CORPORATION, and the transactions contemplated thereby, including the
issuance of up to 162,246,644 shares of BANC ONE CORPORATION Common Stock.
AMENDMENT OF ARTICLES OF INCORPORATION -- Amendment of the BANC ONE
CORPORATION Amended Articles of Incorporation to increase the number of
shares of BANC ONE CORPORATION Common Stock authorized to 950,000,000
shares.
OTHER BUSINESS -- Transaction of such other business as may properly
come before the meeting.
The close of business on May 6, 1997 has been fixed as the date of record
for those shareholders entitled to vote at the Special Meeting. The stock
transfer books of BANC ONE CORPORATION will not be closed.
By Order of the Board of Directors
/s/ Roman J. Gerber
Roman J. Gerber
Executive Vice President
and Secretary
YOU ARE REQUESTED TO EXECUTE, DATE AND RETURN THE ENCLOSED PROXY IN THE
ENCLOSED POST-PAID ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION
WILL BE APPRECIATED.
<PAGE> 4
[FIRST USA LETTERHEAD]
May 12, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of the Stockholders
of First USA, Inc., to be held on Friday, June 27, 1997 at 9:00 a.m., local
time, at The Tower Club, 48th Floor, 1601 Elm Street, Dallas, Texas 75201.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger, dated as of
January 19, 1997, and amended as of April 23, 1997 (as amended, the "Merger
Agreement"), between First USA and BANC ONE CORPORATION, and each of the
transactions contemplated thereby, pursuant to which First USA will be merged
with and into BANC ONE (the "Merger"). The Merger Agreement, as originally
executed, is set forth as an exhibit to the Current Report on Form 8-K of First
USA filed on January 28, 1997, and the amendment to the Merger Agreement is set
forth as an exhibit to the Current Report on Form 8-K of BANC ONE filed on April
24, 1997.
At the effective time of the Merger, each share of First USA common stock
will be converted into the right to receive 1.1659 shares of BANC ONE common
stock. Pursuant to the Merger Agreement, First USA has called for redemption its
outstanding 6 1/4% Convertible Preferred Stock on and as of May 20, 1997, the
date on which the First USA Convertible Preferred Stock becomes convertible at
the option of First USA. Upon such redemption, all such shares of First USA
Convertible Preferred Stock will be converted to shares of First USA Common
Stock and accordingly there will be no shares of First USA Convertible Preferred
Stock outstanding at the effective time of the Merger.
This strategic transaction for First USA will create the third largest
bankcard issuer in the United States and will provide you with the opportunity
to participate as a stockholder in one of the ten largest banking organizations
in the United States. The Merger will create a strong and profitable banking
institution that will be able to provide a broad array of bankcards and other
financial products and services to the customers it serves more efficiently than
either company could provide separately, creating significant benefits for the
customers and stockholders of both companies.
Merrill Lynch & Co., First USA's financial advisor, has delivered to the
Board of Directors its written opinion that, as of this date, the exchange ratio
in the Merger is fair, from a financial point of view, to First USA's
stockholders.
Enclosed are a Notice of Special Meeting of Stockholders and a Joint Proxy
Statement-Prospectus which describes the Merger and the background to the
transaction. You are urged to read all of these materials carefully. The Board
of Directors has fixed the close of business on May 9, 1997 as the record date
for the Special Meeting. Accordingly, only stockholders of record on that date
are entitled to notice of, and to vote at, the Special Meeting or any
adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF FIRST USA HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF
APPROVING AND ADOPTING THE MERGER AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
I strongly support the Merger of First USA with BANC ONE and join with the
other members of the Board in enthusiastically recommending the Merger to you.
We urge you to vote in favor of approval and adoption of the Merger Agreement.
Very truly yours,
[John C. Tolleson Signature]
John C. Tolleson
Chairman and Chief
Executive Officer
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING,
WHETHER OR NOT YOU PLAN TO ATTEND. ACCORDINGLY, YOU ARE REQUESTED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE SPECIAL
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
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LOGO
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 27, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of First USA,
Inc., a Delaware corporation ("First USA"), will be held on Friday, June 27,
1997, 9:00 a.m., local time, at The Tower Club, 48th Floor, 1601 Elm Street,
Dallas, Texas 75201, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of January 19, 1997, and amended as
of April 23, 1997 (as amended, the "Merger Agreement"), between First USA
and BANC ONE CORPORATION, an Ohio corporation ("BANC ONE"), and the
consummation of the transactions contemplated thereby, pursuant to which
First USA will be merged (the "Merger") with and into BANC ONE upon the
terms and subject to the conditions set forth in the Merger Agreement, as
more fully described in the enclosed Joint Proxy Statement-Prospectus. The
Merger Agreement, as originally executed, is set forth as an exhibit to the
Current Report on Form 8-K of First USA filed on January 28, 1997, and the
amendment to the Merger Agreement is set forth as an exhibit to the Current
Report on Form 8-K of BANC ONE filed on April 24, 1997.
2. To transact such other business as may properly be brought before
the Special Meeting, or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on May 9, 1997 as
the record date for determining stockholders entitled to vote at the Special
Meeting and any adjournments or postponements thereof. Accordingly, only
stockholders of record on such date are entitled to notice of, and to vote at,
the Special Meeting and any adjournments or postponements thereof. A list of
stockholders will be available for inspection at the offices of First USA
located at 1601 Elm Street, Dallas, Texas 75201 at least ten days prior to the
Special Meeting and will also be available for inspection at the Special
Meeting.
The affirmative vote of the holders of a majority of the outstanding shares
of First USA common stock, each of which has one vote, and First USA 6 1/4%
Convertible Preferred Stock, each of which has 4/5 of a vote, voting together as
a class, is necessary to approve and adopt the Merger Agreement. Holders of
First USA common stock and First USA 6 1/4% Convertible Preferred Stock are not
entitled to dissenters' appraisal rights in connection with the Merger.
THE BOARD OF DIRECTORS OF FIRST USA UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
By Order of the Board of Directors
[RICHARD W. VAGUE
SIGNATURE]
Richard W. Vague
President
May 12, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 6
JOINT PROXY STATEMENT
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BANC ONE CORPORATION FIRST USA, INC.
SPECIAL MEETING OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD STOCKHOLDERS TO BE HELD
ON JUNE 26, 1997 ON JUNE 27, 1997
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BANC ONE CORPORATION
PROSPECTUS
This Joint Proxy Statement-Prospectus relates to shares of common stock,
without par value ("BANC ONE Common Stock"), of BANC ONE CORPORATION, an Ohio
corporation ("BANC ONE"), offered hereby to the stockholders of First USA, Inc.,
a Delaware corporation ("First USA"), upon consummation of a proposed merger
(the "Merger") of First USA into BANC ONE (which is also referred to herein as
the "Surviving Corporation") pursuant to an Agreement and Plan of Merger, dated
as of January 19, 1997, and amended as of April 23, 1997, between BANC ONE and
First USA (as amended, the "Merger Agreement"). This Joint Proxy
Statement-Prospectus also serves as the Joint Proxy Statement of BANC ONE and
First USA for use in connection with the solicitation of proxies by the Boards
of Directors of BANC ONE and First USA to be used at the Special Meeting of
Shareholders of BANC ONE (the "BANC ONE Special Meeting") and at the Special
Meeting of Stockholders of First USA (the "First USA Special Meeting"),
respectively, to approve and adopt the Merger Agreement, among other matters.
The Merger Agreement, as originally executed, is set forth as an exhibit to the
Current Report on Form 8-K of First USA filed on January 28, 1997, and the
amendment to the Merger Agreement is set forth as an exhibit to the Current
Report on Form 8-K of BANC ONE filed on April 24, 1997, and each is incorporated
herein by reference.
Upon consummation of the Merger, each share of First USA common stock, $.01
par value per share ("First USA Common Stock"), will be converted into the right
to receive 1.1659 (subject to certain antidilution adjustments pursuant to the
Merger Agreement, the "Exchange Ratio") shares of BANC ONE Common Stock (with
cash in lieu of fractional shares).
Pursuant to the Merger Agreement, First USA has called for redemption its
outstanding 6 1/4% Convertible Preferred Stock (the "First USA Convertible
Preferred Stock" and, together with the First USA Common Stock, the "First USA
Capital Stock") on and as of May 20, 1997, the date on which the First USA
Convertible Preferred Stock becomes convertible at the option of First USA. Upon
such redemption, all such shares of First USA Convertible Preferred Stock will
be exchanged for shares of First USA Common Stock and accordingly there will be
no shares of First USA Convertible Preferred Stock outstanding at the Effective
Time (as defined herein).
The Merger is subject to the approval of the holders of a majority of the
outstanding shares of BANC ONE Common Stock entitled to vote thereon, to the
approval of a majority of the total voting power of the First USA Capital Stock
entitled to vote thereon, voting as a single class, and to the satisfaction of
certain other conditions, including obtaining certain regulatory approvals.
For a more complete description of the Merger Agreement and the Merger, see
"The Merger."
The last reported sale price of BANC ONE Common Stock as reported on The
New York Stock Exchange, Inc. ("NYSE") Composite Transactions List on May 9,
1997 was $42.50 per share, and, on January 17, 1997, the last trading day
preceding public announcement of the proposed Merger, the last reported sale
price of BANC ONE Common Stock as reported on the NYSE Composite Transactions
List was $45.125 per share. The last reported sale price of First USA Common
Stock as reported on the NYSE Composite Transactions List on May 9, 1997 was
$48.00 per share, and, on January 17, 1997, the last reported sale price of
First USA Common Stock as reported on the NYSE Composite Transactions List was
$36.75 per share. The last reported sale price of First USA Convertible
Preferred Stock as reported on the NYSE Composite Transactions list on May 9,
1997 was $80.00 per share, and, on January 17, 1997, the last reported sale
price of First USA Convertible Preferred Stock as reported on the NYSE Composite
Transactions list was $62.00 per share.
THIS JOINT PROXY STATEMENT-PROSPECTUS AND FORMS OF PROXY ARE FIRST BEING
MAILED TO SHAREHOLDERS ON OR ABOUT MAY 14, 1997.
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 JOINT PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER
OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF BANC ONE CORPORATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE "FDIC"), THE BANK
INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
THE DATE OF THIS JOINT PROXY STATEMENT-PROSPECTUS IS MAY 12, 1997.
<PAGE> 7
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED IN THIS JOINT PROXY
STATEMENT-PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BANC ONE OR FIRST USA.
THIS JOINT PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO EXCHANGE
OR SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE, THE SECURITIES
OFFERED BY THIS JOINT PROXY STATEMENT-PROSPECTUS, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT-PROSPECTUS
SPEAKS AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY INDICATED.
INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT-PROSPECTUS REGARDING BANC
ONE, AND PRO FORMA INFORMATION, HAS BEEN FURNISHED BY BANC ONE, AND INFORMATION
IN THIS JOINT PROXY STATEMENT-PROSPECTUS REGARDING FIRST USA HAS BEEN FURNISHED
BY FIRST USA.
AVAILABLE INFORMATION
BANC ONE has filed with the Commission a Registration Statement (the
"Registration Statement") on Form S-4 under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the securities to be issued in
connection with the Merger. For further information pertaining to the securities
of BANC ONE to which this Joint Proxy Statement-Prospectus relates, reference is
made to the Registration Statement, including the exhibits and schedules filed
as a part thereof. As permitted by the rules and regulations of the Commission,
certain information included in the Registration Statement is omitted from this
Joint Proxy Statement-Prospectus. In addition, BANC ONE and First USA are
subject to certain of the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, file
certain reports, proxy statements and other information with the Commission.
Such reports, proxy statements and other information can be inspected and copied
at the public reference room of the Commission, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and copies of such materials can be obtained by
mail from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The Commission
maintains an Internet web site that contains reports, proxy and information
statements and other information regarding issuers who file electronically with
the Commission. The address of that site is http://www.sec.gov. In addition,
copies of such materials are available for inspection and reproduction at the
public reference facilities of the Commission at its New York Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048; and at its Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Reports, proxy statements and other information concerning
BANC ONE and First USA also may be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by BANC ONE with the Commission
are hereby incorporated by reference in this Joint Proxy Statement-Prospectus:
(i) the BANC ONE Annual Report on Form 10-K for the year ended December 31,
1996, as filed March 20, 1997 (as amended by the Form 10-K/A filed March 21,
1997); (ii) the description of BANC ONE Common Stock contained in the BANC ONE
Registration Statement filed pursuant to Section 12 of the Exchange Act on Form
8-B on May 1, 1989, including any amendment or report filed for the purpose of
updating such description; and (iii) the BANC ONE Current Reports on Form 8-K
filed January 28, 1997, January 29, 1997, April 17, 1997 and April 24, 1997.
(i)
<PAGE> 8
The following documents previously filed by First USA with the Commission
are hereby incorporated by reference in this Joint Proxy Statement-Prospectus:
(i) the First USA Annual Report on Form 10-K for the year ended June 30, 1996
(as filed September 27, 1996 and as amended by Amendment No. 1 on Form 10-K/A
filed April 24, 1997); (ii) the First USA Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1996 (as filed November 13, 1996 and as amended by
Amendment No. 1 on Form 10-Q/A filed April 24, 1997) and December 31, 1996 (as
filed February 13, 1997 and as amended by Amendment No. 1 on Form 10-Q/A filed
April 24, 1997); (iii) the description of the First USA Common Stock contained
in the First USA Registration Statement filed pursuant to Section 12 of the
Exchange Act on Form 8-A on March 9, 1992; (iv) the description of the First USA
Convertible Preferred Stock filed pursuant to Section 12 of the Exchange Act on
Form 8-A on March 1, 1994; and (v) the First USA Current Reports on Forms 8-K
filed August 21, 1996, November 21, 1996, December 26, 1996, January 2, 1997,
January 28, 1997, February 12, 1997, April 9, 1997, April 24, 1997 and April 25,
1997.
In addition, all documents filed by BANC ONE and First USA with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date hereof and prior to the time at which the First USA Special
Meeting and the BANC ONE Special Meeting (together with the First USA Special
Meeting, the "Stockholders Meetings") have been finally adjourned are hereby
deemed to be incorporated by reference herein. Any statements 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 Joint Proxy Statement-
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Joint Proxy Statement-Prospectus.
THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE DOCUMENTS
RELATING TO BANC ONE (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS ARE
NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST TO BANC ONE CORPORATION, OH1-0251,
100 EAST BROAD STREET, COLUMBUS, OHIO 43271-0251, ATTENTION: INVESTOR RELATIONS,
TELEPHONE NUMBER (614) 248-6889. THE DOCUMENTS RELATING TO FIRST USA (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL
REQUEST TO FIRST USA, INC., 1601 ELM STREET, DALLAS, TEXAS 75201, ATTENTION:
CORPORATE AFFAIRS AND INVESTOR RELATIONS, TELEPHONE NUMBER (214) 849-2000. BANC
ONE OR FIRST USA, AS THE CASE MAY BE, WILL SEND THE REQUESTED DOCUMENTS BY
FIRST-CLASS MAIL WITHIN ONE BUSINESS DAY OF THE RECEIPT OF THE REQUEST. IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JUNE
19, 1997 IN THE CASE OF BANC ONE OR JUNE 20, 1997 IN THE CASE OF FIRST USA.
THIS JOINT PROXY STATEMENT-PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
BUSINESS OF BANC ONE FOLLOWING THE CONSUMMATION OF THE MERGER, INCLUDING
STATEMENTS RELATING TO THE COST SAVINGS, REVENUE ENHANCEMENTS AND FUNDING
ADVANTAGES THAT ARE EXPECTED TO BE REALIZED FROM THE MERGER AND THE EXPECTED
IMPACT OF THE MERGER ON BANC ONE'S FINANCIAL PERFORMANCE (SEE "THE
MERGER -- REASONS FOR THE MERGER -- RECOMMENDATION OF THE BANC ONE BOARD AND
REASONS FOR THE MERGER" AND "-- REASONS FOR THE MERGER -- RECOMMENDATION OF THE
FIRST USA BOARD AND REASONS FOR THE MERGER," AND "MANAGEMENT AND OPERATIONS
AFTER THE MERGER"). THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERI-
(ii)
<PAGE> 9
ALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG
OTHERS, THE FOLLOWING POSSIBILITIES: (i) EXPECTED COST SAVINGS FROM THE MERGER
CANNOT BE FULLY REALIZED; (ii) COMPETITIVE PRESSURE IN THE BANKING OR CREDIT
CARD INDUSTRIES INCREASES SIGNIFICANTLY; (iii) COSTS OR DIFFICULTIES RELATED TO
THE INTEGRATION OF THE BUSINESSES OF BANC ONE AND FIRST USA ARE GREATER THAN
EXPECTED; (iv) INCREASES IN CREDIT CARD DELINQUENCY RATES; (v) CHANGES IN THE
INTEREST RATE ENVIRONMENT REDUCES MARGINS; (vi) GENERAL ECONOMIC CONDITIONS,
EITHER NATIONALLY OR REGIONALLY, ARE LESS FAVORABLE THAN EXPECTED, RESULTING IN,
AMONG OTHER THINGS, A DETERIORATION IN CREDIT QUALITY, (vii) CHANGES OCCUR IN
THE REGULATORY ENVIRONMENT, (viii) CHANGES OCCUR IN BUSINESS CONDITIONS AND
INFLATION, AND (ix) CHANGES OCCUR IN THE SECURITIES MARKETS.
THIS JOINT PROXY STATEMENT-PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITH RESPECT TO THE RESULTS OF OPERATIONS AND GROWTH IN EARNINGS PER
SHARE OF FIRST USA (SEE "THE MERGER -- FAIRNESS OPINIONS OF FINANCIAL
ADVISORS.") THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES.
FACTORS THAT MAY CAUSE THE ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY RESULTS
THAT MIGHT BE PROJECTED, FORECAST, ESTIMATED OR BUDGETED BY FIRST USA IN SUCH
FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING
UNCERTAINTIES: INCREASED CREDIT AND OTHER LOSSES; INCREASING COMPETITION FROM
PROVIDERS OF CREDIT CARDS, PAYMENT PROCESSING AND FINANCIAL PRODUCTS AND
SERVICES; CHANGES IN FIRST USA'S AGGREGATE ACCOUNTS OR LOAN BALANCES AND THE
GROWTH RATE THEREOF; INTEREST RATE RISKS, INCLUDING THE EFFECTS OF INTEREST RATE
FLUCTUATIONS ON FIRST USA'S NET INTEREST MARGIN AND THE VALUE OF ITS ASSETS AND
LIABILITIES; DIFFICULTIES OR DELAYS IN THE DEVELOPMENT, PRODUCTION, TESTING AND
MARKETING OF NEW PRODUCTS OR SERVICES; DIFFICULTIES OR DELAYS IN THE
SECURITIZATION OF FIRST USA'S RECEIVABLES AND THE RESULTING IMPACT ON THE COST
AND AVAILABILITY OF SUCH FUNDING; THE IMPACT OF A LACK OF GROWTH OR A DECLINE IN
THE NUMBER AND SCOPE OF CREDIT-BASED PAYMENT TRANSACTIONS, ON A WORLDWIDE BASIS,
AND A LACK OF GROWTH OR A DECLINE IN THE TYPES OF INDUSTRIES AND MERCHANTS THAT
ACCEPT CARD-BASED TRANSACTIONS AS A METHOD OF PAYMENT; CONSOLIDATION IN THE
PAYMENT PROCESSING INDUSTRY; FIRST USA'S ABILITY TO ACQUIRE AND INTEGRATE
MERCHANT PORTFOLIOS, OPERATING BUSINESSES AND PAYMENT PROCESSING ASSETS;
CONTINGENT LIABILITIES; DELAYS AND MALFUNCTIONS IN TECHNOLOGY; AND REGULATION.
FOR A MORE DETAILED DESCRIPTION OF FACTORS THAT COULD HAVE AN IMPACT ON THE
FORWARD-LOOKING INFORMATION INCLUDED OR INCORPORATED BY REFERENCE HEREIN,
REFERENCE IS MADE TO FIRST USA'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED JUNE 30, 1996 (AS AMENDED BY AMENDMENT NO. 1 ON FORM 10-K/A FILED APRIL
24, 1997), WHICH IS INCORPORATED BY REFERENCE HEREIN. SEE "AVAILABLE
INFORMATION."
(iii)
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
AVAILABLE INFORMATION................................................................. (i)
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... (i)
SUMMARY............................................................................... 1
General............................................................................. 1
The Companies....................................................................... 1
BANC ONE Special Meeting and Vote Required.......................................... 2
First USA Special Meeting and Vote Required......................................... 2
The Merger.......................................................................... 3
Recommendations of Boards of Directors.............................................. 4
Opinion of BANC ONE's Financial Advisors............................................ 4
Opinion of First USA's Financial Advisor............................................ 4
Effective Time of the Merger........................................................ 4
Conditions to the Consummation of the Merger........................................ 5
Termination of the Merger Agreement; Waiver and Amendment; Expenses................. 5
BANC ONE and First USA Stock Option Agreements...................................... 5
Interests of Certain Persons in the Merger.......................................... 6
Appraisal Rights.................................................................... 8
Certain Federal Income Tax Consequences............................................. 8
Accounting Treatment................................................................ 9
Regulatory Approvals................................................................ 9
Certain Differences in the Rights of Shareholders................................... 9
Share Information and Market Prices................................................. 9
Unaudited Comparative Per Share Data................................................ 11
Selected Financial Data............................................................. 13
BANC ONE SPECIAL MEETING.............................................................. 18
General............................................................................. 18
Matters to be Considered............................................................ 18
Proxies............................................................................. 18
Solicitation of Proxies............................................................. 18
Record Date and Voting Rights....................................................... 18
Recommendation of BANC ONE Board.................................................... 19
FIRST USA SPECIAL MEETING............................................................. 20
General............................................................................. 20
Matters to be Considered............................................................ 20
Proxies............................................................................. 20
Solicitation of Proxies............................................................. 20
Record Date and Voting Rights....................................................... 20
Recommendation of First USA Board................................................... 22
THE MERGER............................................................................ 23
General............................................................................. 23
Background of the Merger............................................................ 23
Reasons for the Merger.............................................................. 24
Fairness Opinions of Financial Advisors............................................. 27
Structure of the Merger............................................................. 37
Conversion of First USA Common Stock; Treatment of First USA Stock Options.......... 37
Exchange of Certificates; Fractional Shares......................................... 38
Effective Time...................................................................... 39
Representations and Warranties...................................................... 39
</TABLE>
(iv)
<PAGE> 11
<TABLE>
<CAPTION>
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<S> <C>
Conduct of Business Pending the Merger and Other Agreements......................... 40
Conditions to the Consummation of the Merger........................................ 42
Regulatory Approvals Required for the Merger........................................ 44
Certain Federal Income Tax Consequences............................................. 45
Accounting Treatment................................................................ 46
Termination of the Merger Agreement................................................. 47
Waiver and Amendment of the Merger Agreement........................................ 47
Employee Benefits and Plans......................................................... 48
Stock Exchange Listing.............................................................. 48
Expenses............................................................................ 49
Dividends........................................................................... 49
Change of Structure of Merger....................................................... 49
Interests of Certain Persons in the Merger.......................................... 49
BANC ONE and First USA Stock Option Agreements...................................... 53
Restrictions on Resales by Affiliates............................................... 57
First USA Dividend Reinvestment Plan................................................ 58
MANAGEMENT AND OPERATIONS AFTER THE MERGER............................................ 58
PRICE RANGE OF COMMON STOCK AND DIVIDENDS............................................. 59
Market Prices....................................................................... 59
Dividends........................................................................... 60
INFORMATION ABOUT BANC ONE............................................................ 61
General............................................................................. 61
Recent Developments................................................................. 61
INFORMATION ABOUT FIRST USA........................................................... 62
CERTAIN REGULATORY MATTERS............................................................ 62
COMPARISON OF SHAREHOLDER RIGHTS...................................................... 67
Description of BANC ONE Stock....................................................... 67
Comparison of BANC ONE Common Stock and First USA Common Stock...................... 68
RIGHTS OF DISSENTING SHAREHOLDERS..................................................... 75
BANC ONE Shareholders............................................................... 75
First USA Stockholders.............................................................. 77
PROPOSED AMENDMENT TO THE BANC ONE ARTICLES OF INCORPORATION TO INCREASE AUTHORIZED
COMMON STOCK........................................................................ 77
LEGAL MATTERS......................................................................... 79
EXPERTS............................................................................... 80
SHAREHOLDER PROPOSALS................................................................. 80
OTHER MATTERS......................................................................... 80
INDEPENDENT PUBLIC ACCOUNTANTS........................................................ 80
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION.......................... 81
Pro Forma Condensed Combined Balance Sheet.......................................... 82
Pro Forma Condensed Combined Statements of Income................................... 83
APPENDIX A -- Opinion of Lazard Freres & Co. LLC...................................... A-1
APPENDIX B -- Opinion of UBS Securities LLC........................................... B-1
APPENDIX C -- Opinion of Merrill Lynch & Co........................................... C-1
APPENDIX D -- Ohio Revised Code sec. 1701.85 -- Dissenters' Rights.................... D-1
</TABLE>
(v)
<PAGE> 12
SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION SET FORTH ELSEWHERE
IN THIS JOINT PROXY STATEMENT-PROSPECTUS AND IS NOT INTENDED TO BE COMPLETE.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MORE DETAILED
INFORMATION CONTAINED ELSEWHERE IN THIS JOINT PROXY STATEMENT-PROSPECTUS, THE
ACCOMPANYING APPENDICES AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
GENERAL
This Joint Proxy Statement-Prospectus, notice of the First USA Special
Meeting to be held on June 27, 1997 and notice of the BANC ONE Special Meeting
to be held on June 26, 1997, and forms of proxy solicited in connection
therewith are first being mailed to holders of First USA Common Stock and First
USA Convertible Preferred Stock ("First USA Stockholders") and holders of BANC
ONE Capital Stock (as defined in the following paragraph) ("BANC ONE
Shareholders") on or about May 12, 1997.
At the BANC ONE Special Meeting, holders of shares of BANC ONE Common Stock
will consider and vote (i) to approve the Merger Agreement and the transactions
contemplated thereby, (ii) to amend the Amended Articles of Incorporation of
BANC ONE (the "BANC ONE Articles of Incorporation") to increase the number of
authorized shares of BANC ONE Common Stock to 950,000,000 and (iii) on such
other matters as may properly be submitted to a vote at the BANC ONE Special
Meeting. See "The Merger" and "Proposed Amendment to the BANC ONE Articles of
Incorporation to Increase Authorized Common Stock." Shareholder approval of the
amendment to the BANC ONE Articles of Incorporation is necessary in order for
BANC ONE to effect both the Merger and the pending merger of Liberty Bancorp,
Inc. ("LBI") with a wholly-owned subsidiary of BANC ONE. See "Information About
BANC ONE -- Recent Developments -- Proposed Merger with Liberty Bancorp, Inc."
The holders of record of shares of Class C Preferred Stock (as defined herein)
of BANC ONE designated Series C $3.50 Cumulative Convertible Preferred Stock
("BANC ONE Convertible Preferred Stock" and, together with the BANC ONE Common
Stock, the "BANC ONE Capital Stock") will receive notice of, but are not
entitled to vote at, the BANC ONE Special Meeting.
At the First USA Special Meeting, holders of shares of First USA Common
Stock and First USA Convertible Preferred Stock will consider and vote on
whether to approve the Merger Agreement and the transactions contemplated
thereby.
The Merger Agreement, as originally executed, is set forth as an exhibit to
the Current Report on Form 8-K of First USA filed on January 28, 1997, and the
amendment to the Merger Agreement is set forth as an exhibit to the Current
Report on Form 8-K of BANC ONE filed on April 24, 1997, and each is incorporated
herein by reference.
THE COMPANIES
BANC ONE. BANC ONE is a multi-bank holding company incorporated under the
laws of the State of Ohio that, at March 31, 1997, operated approximately 1,500
banking offices in Arizona, Colorado, Illinois, Indiana, Kentucky, Louisiana,
Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. At March 31, 1997,
BANC ONE had consolidated total assets of $101.6 billion, consolidated total
deposits of $72.2 billion and consolidated total shareholders' equity of $8.4
billion. See "Information about BANC ONE." The principal office of BANC ONE is
located at 100 East Broad Street, Columbus, Ohio 43271 and its telephone number
is (614) 248-5944. All references herein to BANC ONE refer to BANC ONE
CORPORATION and its subsidiaries, unless the context otherwise requires. For
additional information regarding BANC ONE and the combined company that would
result from the Merger, see "The Merger," "Management and Operations after the
Merger" and "Information about BANC ONE."
1
<PAGE> 13
First USA. First USA, incorporated in 1989, is a Delaware corporation,
which, through its wholly owned subsidiary, First USA Bank, is the fourth
largest issuer of Visa and MasterCard credit cards in the United States. First
USA's majority owned subsidiary, First USA Paymentech, Inc. ("First USA
Paymentech"), engages in the credit card industry primarily as a payment
processor of credit and debit card transactions. First USA conducts its business
through its wholly owned subsidiary, First USA Financial, Inc. ("First USA
Financial"), which is the parent company of First USA Bank and the majority
stockholder of First USA Paymentech. First USA Federal Savings Bank ("First USA
FSB"), also a wholly owned subsidiary of First USA Financial, offers additional
financial products, including mortgages, auto loans, insurance and installment
loans. First USA's other business units, conducted through other subsidiaries of
First USA Financial, provide services that complement First USA Bank's, First
USA Paymentech's and First USA FSB's business operations. The address of the
principal executive office of First USA is 1601 Elm Street, 47th Floor, Dallas,
Texas 75201, and its telephone number is (214) 849-2000. For additional
information regarding First USA, see "The Merger" and "Information about First
USA."
BANC ONE SPECIAL MEETING AND VOTE REQUIRED
The BANC ONE Special Meeting will be held on June 26, 1997 at 9:00 a.m.,
Columbus time, at the auditorium of the BANC ONE Corporate Center, 1111 Polaris
Parkway, Columbus, Ohio 43240. At that time, the holders of BANC ONE Common
Stock will be asked to consider and vote upon (i) a proposal to approve the
Merger Agreement and the transactions contemplated thereby (the "Merger
Proposal"), (ii) a proposal to amend the BANC ONE Articles of Incorporation to
increase the number of authorized shares of BANC ONE Common Stock to 950,000,000
(the "Articles Amendment", and, together with the Merger Proposal, the "BANC ONE
Matters") and (iii) upon such other matters as may properly be submitted to a
vote at the BANC ONE Special Meeting. The record holders of BANC ONE Common
Stock at the close of business on May 6, 1997 (the "BANC ONE Record Date") are
entitled to notice of and to vote at the BANC ONE Special Meeting. The holders
of record of shares of BANC ONE Convertible Preferred Stock will receive notice
of, but are not entitled to vote at, the BANC ONE Special Meeting. On the BANC
ONE Record Date, there were approximately 96,828 holders of record of BANC ONE
Common Stock and 419,837,271 shares of BANC ONE Common Stock outstanding, and
104 holders of record of BANC ONE Convertible Preferred Stock and 3,774,856
shares of BANC ONE Convertible Preferred Stock outstanding.
The presence, in person or by proxy, of a majority of the aggregate number
of shares of BANC ONE Common Stock outstanding and entitled to vote on the BANC
ONE Record Date is necessary to constitute a quorum at the BANC ONE Special
Meeting. Each share of BANC ONE Common Stock entitles its holder to one vote.
The affirmative vote of a majority of the outstanding shares of BANC ONE Common
Stock is required to approve the Merger Proposal and the Articles Amendment. As
of the BANC ONE Record Date, directors and executive officers of BANC ONE
beneficially owned 3,186,896 shares of BANC ONE Common Stock or approximately
0.7% of the shares entitled to vote at the BANC ONE Special Meeting. It is
currently expected that each such director and executive officer of BANC ONE
will vote the shares of BANC ONE Common Stock beneficially owned by him or her
for approval of the BANC ONE Matters. In addition, as of the BANC ONE Record
Date, the directors and executive officers of First USA beneficially owned 2,480
shares of BANC ONE Common Stock, or significantly less than 1% of the shares
entitled to be voted at the BANC ONE Special Meeting. As of the BANC ONE Record
Date, the banking and trust subsidiaries of BANC ONE, as fiduciaries, custodians
or agents, held a total of 34,375,947 shares of BANC ONE Common Stock,
representing approximately 8.1% of the shares entitled to vote at the BANC ONE
Special Meeting. These entities maintained sole or shared voting power with
respect to 15,853,400 of such shares of BANC ONE Common Stock. See "BANC ONE
Special Meeting."
FIRST USA SPECIAL MEETING AND VOTE REQUIRED
The First USA Special Meeting will be held on June 27, 1997 at 9:00 a.m.,
local time, at The Tower Club, 48th Floor, 1601 Elm Street, Dallas, Texas 75201,
at which time the First USA Stockholders will be asked to approve the Merger
Agreement and the transactions contemplated thereby. The record holders of
2
<PAGE> 14
First USA Common Stock and First USA Convertible Preferred Stock at the close of
business on May 9, 1997 (the "First USA Record Date") are entitled to notice of
and to vote at the First USA Special Meeting. Each share of First USA Common
Stock is entitled to one vote and each share of First USA Convertible Preferred
Stock is entitled to 4/5 of a vote on all matters submitted to the First USA
Stockholders for a vote. Shares of First USA Common Stock and First USA
Convertible Preferred Stock vote together as a single class. On the First USA
Record Date, there were approximately 3,455 holders of record of First USA
Common Stock and 123,472,353 shares of First USA Common Stock outstanding, and
nine holders of record of First USA Convertible Preferred Stock and 5,740,300
shares of First USA Convertible Preferred Stock outstanding.
The presence, in person or by proxy, of shares of First USA Common Stock
and First USA Convertible Preferred Stock representing a majority of the total
voting power of such shares outstanding and entitled to vote on the First USA
Record Date is necessary to constitute a quorum at the First USA Special
Meeting. The affirmative vote of the holders of a majority of the outstanding
voting power of First USA Common Stock and First USA Convertible Preferred
Stock, voting together as a single class, is required to approve the Merger
Agreement and the transactions contemplated thereby. As of the First USA Record
Date, directors and executive officers of First USA beneficially owned
approximately 8,600,000 shares of First USA Common Stock (including options to
purchase approximately 4,100,000 shares of First USA Common Stock that are
exercisable within 60 days of the date hereof) and 4,000 shares of First USA
Convertible Preferred Stock, entitling them to exercise approximately 6.7% of
the voting power of the First USA Capital Stock entitled to vote at the First
USA Special Meeting. It is currently expected that each such director and
executive officer of First USA will vote the shares of First USA Common Stock
beneficially owned by him or her for approval of the Merger Agreement and the
transactions contemplated thereby. In addition, as of the First USA Record Date,
directors and executive officers of BANC ONE beneficially owned 19,400 shares of
First USA Common Stock and no shares of First USA Convertible Preferred Stock,
or significantly less than 1% of the shares entitled to be voted at the First
USA Special Meeting. In addition, as of the First USA Record Date, the banking
and trust subsidiaries of BANC ONE, as fiduciaries, custodians or agents, held a
total of 128,400 shares of First USA Common Stock and no shares of First USA
Convertible Preferred Stock, representing 0.1% of the voting power of the First
USA Common Stock. These entities maintained sole or shared voting power with
respect to 14,700 of such shares of First USA Common Stock. Further, as of the
First USA Record Date, BANC ONE beneficially owned 6 million shares of First USA
Common Stock, representing 4.9% of the voting power of the First USA Common
Stock entitled to vote at the First USA Special Meeting. See "First USA Special
Meeting."
THE MERGER
In the Merger, subject to the terms of the Merger Agreement, First USA will
merge with and into BANC ONE, which will be the Surviving Corporation, and each
outstanding share of First USA Common Stock will be converted into 1.1659
(subject to certain antidilution adjustments pursuant to the Merger Agreement)
shares of BANC ONE Common Stock (with cash in lieu of fractional shares).
Pursuant to the Merger Agreement, First USA has called for redemption all
of the shares of First USA Convertible Preferred Stock on and as of May 20,
1997, the date on which the First USA Convertible Preferred Stock becomes
convertible at the option of First USA. Upon such redemption, all such shares of
First USA Convertible Preferred Stock will be exchanged for shares of First USA
Common Stock and accordingly no shares of First USA Convertible Preferred Stock
will be outstanding at the Effective Time. Each share of BANC ONE Capital Stock
outstanding prior to the Merger will continue to be outstanding after the
Effective Time.
Each stock option to acquire First USA Common Stock granted under First
USA's stock option plans (collectively, the "First USA Stock Plans") which is
outstanding and unexercised immediately prior to the Effective Time will be
converted automatically at the Effective Time into an option to purchase BANC
ONE Common Stock and will continue to be governed by the terms of the First USA
Stock Plans which will be assumed by BANC ONE. The number of shares of BANC ONE
Common Stock subject to such options and
3
<PAGE> 15
the exercise price of such options will be adjusted as provided in the Merger
Agreement to give effect to the Exchange Ratio.
See "The Merger -- Conversion of First USA Common Stock; Treatment of First
USA Stock Options."
RECOMMENDATIONS OF BOARDS OF DIRECTORS
THE BOARD OF DIRECTORS OF BANC ONE (THE "BANC ONE BOARD") AND THE BOARD OF
DIRECTORS OF FIRST USA (THE "FIRST USA BOARD") HAVE UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. THE BANC ONE BOARD
AND THE FIRST USA BOARD BELIEVE THAT THE MERGER IS IN THE BEST INTERESTS OF BANC
ONE AND FIRST USA AND THEIR RESPECTIVE SHAREHOLDERS AND RECOMMEND THAT SUCH
SHAREHOLDERS VOTE "FOR" THE MATTERS TO BE VOTED UPON BY SUCH SHAREHOLDERS IN
CONNECTION WITH THE MERGER. FOR A DISCUSSION OF THE FACTORS CONSIDERED BY THE
BANC ONE BOARD AND THE FIRST USA BOARD IN REACHING THEIR RESPECTIVE CONCLUSIONS,
SEE "THE MERGER -- BACKGROUND OF THE MERGER," "-- REASONS FOR THE
MERGER -- RECOMMENDATION OF THE BANC ONE BOARD AND REASONS FOR THE MERGER" AND
"-- REASONS FOR THE MERGER -- RECOMMENDATION OF THE FIRST USA BOARD AND REASONS
FOR THE MERGER."
OPINION OF BANC ONE'S FINANCIAL ADVISORS
Lazard Freres & Co. LLC ("Lazard Freres") and UBS Securities LLC ("UBS
Securities"), which have jointly served as financial advisors to BANC ONE in
connection with the Merger, have each rendered its respective opinion to the
BANC ONE Board that the Exchange Ratio is fair to BANC ONE from a financial
point of view. Such opinions were delivered to the BANC ONE Board at its meeting
on January 19, 1997 and again on the date of this Joint Proxy
Statement-Prospectus. Copies of the opinions delivered by Lazard Freres and UBS
Securities on the date hereof are attached as Appendix A and B, respectively, to
the Joint Proxy Statement-Prospectus, and should be read in their entirety with
respect to assumptions made, matters considered and limitations of the review
undertaken by Lazard Freres and UBS Securities in rendering such opinions. See
"The Merger -- Fairness Opinions of Financial Advisors -- BANC ONE."
OPINION OF FIRST USA'S FINANCIAL ADVISOR
Merrill Lynch & Co. ("Merrill Lynch"), which has served as financial
advisor to First USA in connection with the Merger, has rendered its opinion to
the First USA Board that the Exchange Ratio is fair from a financial point of
view to the First USA Stockholders (other than BANC ONE and its affiliates).
Such opinion was delivered to the First USA Board at its meeting on January 19,
1997 and again on the date of this Joint Proxy Statement-Prospectus. A copy of
the opinion delivered by Merrill Lynch on the date hereof is attached as
Appendix C to this Joint Proxy Statement-Prospectus and should be read in its
entirety with respect to assumptions made, matters considered and limitations of
the review undertaken by Merrill Lynch in rendering such opinion. See "The
Merger -- Fairness Opinions of Financial Advisors -- First USA."
EFFECTIVE TIME OF THE MERGER
The Merger will become effective on the date and time (the "Effective
Time") as set forth in the certificates of merger which will be filed with the
Secretary of State of Delaware and with the Secretary of State of Ohio.
See "The Merger -- Structure of the Merger," "-- Conversion of First USA
Common Stock; Treatment of First USA Stock Options," "-- Exchange of
Certificates; Fractional Shares," "-- Effective Time" and "-- Interests of
Certain Persons in the Merger."
4
<PAGE> 16
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to certain conditions, including the
approval of the Merger Agreement by the affirmative vote of the holders of a
majority of the shares of BANC ONE Common Stock outstanding and entitled to vote
thereon and the affirmative vote of the holders of a majority of voting power of
the shares of First USA Common Stock and First USA Convertible Preferred Stock
outstanding and entitled to vote thereon, voting as a single class; the
effectiveness of the Registration Statement of which this Joint Proxy
Statement-Prospectus forms a part; the Requisite Regulatory Approvals (as
defined herein); receipt by BANC ONE and First USA of opinions of counsel as to
the tax-free nature of the Merger for federal income tax purposes (except for
cash in lieu of fractional shares); receipt by BANC ONE and First USA of a
letter from Coopers & Lybrand L.L.P. that the Merger will qualify for "pooling
of interests" accounting treatment; the listing, subject to notice of issuance,
on the NYSE of the BANC ONE Common Stock to be issued in the Merger; and certain
other customary closing conditions.
TERMINATION OF THE MERGER AGREEMENT; WAIVER AND AMENDMENT; EXPENSES
The Merger Agreement may be terminated at any time prior to the Effective
Time (i) by the mutual consent of BANC ONE and First USA by a majority vote of
the members of each company's entire Board of Directors; (ii) by either BANC ONE
or First USA if any governmental entity which must grant a regulatory approval
has denied approval of the Merger and such denial has become final and
non-appealable or any governmental entity of competent jurisdiction has issued a
final, non-appealable order enjoining or otherwise prohibiting consummation of
the transactions contemplated by the Merger Agreement; (iii) except if the party
seeking termination is in breach of the Merger Agreement, by either BANC ONE or
First USA, (a) if the Effective Time has not occurred by December 31, 1997 or
(b) if there is a material breach by the other party of any representation,
warranty, covenant or agreement contained in the Merger Agreement which is not
timely cured; or (iv) by either BANC ONE or First USA if the requisite
shareholder approvals of either party have not been obtained.
Prior to the Effective Time, any provision of the Merger Agreement may, to
the extent legally allowed, be (i) waived by the party benefited thereby or (ii)
amended or modified at any time by a written instrument signed by both parties
and approved by their respective Boards of Directors except that, after First
USA Stockholder approval, no waiver or amendment may reduce the amount or change
the form of the consideration to be delivered pursuant to the Merger to First
USA Stockholders (other than as contemplated by the Merger Agreement) without
further approval of the First USA Stockholders.
Each party to the Merger Agreement will bear all expenses incurred by it in
connection with the Merger Agreement and the transactions contemplated thereby,
except that printing expenses and Commission registration fees will be shared
equally between First USA and BANC ONE.
See "The Merger -- Termination of the Merger Agreement," "-- BANC ONE and
First USA Stock Option Agreements," "-- Waiver and Amendment of the Merger
Agreement" and "-- Expenses."
BANC ONE AND FIRST USA STOCK OPTION AGREEMENTS
As an inducement to BANC ONE to enter into the Merger Agreement, First USA
and BANC ONE entered into the First USA Stock Option Agreement, dated January
19, 1997 (the "First USA Stock Option Agreement"), pursuant to which First USA
granted BANC ONE an option to purchase from First USA 24,480,231 shares of First
USA Common Stock (subject to adjustment, but in no event to exceed 19.9% of the
then outstanding First USA Common Stock), at a price of $46.50 per share (the
"First USA Option"). The closing price on the NYSE of First USA Common Stock on
Friday, January 17, 1997, the last NYSE trading day prior to the date of the
First USA Stock Option Agreement, was $36.75. BANC ONE may exercise the First
USA Option only upon the occurrence of certain events (none of which has
occurred as of the date hereof). At the request of the holder of the First USA
Option, under certain circumstances, First USA will repurchase, for a formula
price, the First USA Option and any shares of First USA Common Stock purchased
upon the exercise of the First USA Option and beneficially owned by such holder
at that time.
5
<PAGE> 17
As an inducement to First USA to enter into the Merger Agreement, BANC ONE
and First USA entered into the BANC ONE Stock Option Agreement, dated January
19, 1997 (the "BANC ONE Stock Option Agreement" and, together with the First USA
Stock Option Agreement, the "Option Agreements"), pursuant to which BANC ONE
granted First USA an option to purchase from BANC ONE 85,025,391 shares of BANC
ONE Common Stock (subject to adjustment, but in no event to exceed 19.9% of the
then outstanding BANC ONE Common Stock), at a price of $45.125 per share (the
"BANC ONE Option"). The closing price on the NYSE of BANC ONE Common Stock on
Friday, January 17, 1997, the last NYSE trading day prior to the date of the
BANC ONE Stock Option Agreement, was $45.125. First USA may exercise the BANC
ONE Option only upon the occurrence of certain events (none of which has
occurred as of the date hereof). At the request of the holder of the BANC ONE
Option, under certain circumstances, BANC ONE will repurchase, for a formula
price, the BANC ONE Option and any shares of BANC ONE Common Stock purchased
upon the exercise of the BANC ONE Option and beneficially owned by such holder
at that time.
The circumstances under which the respective issuers of the options will be
obligated (upon a request made prior to the expiration of the option) to
repurchase such options (or shares of common stock previously issued pursuant
thereto) include: the consummation of certain transactions involving the issuer
or its significant subsidiaries, including merger, consolidation or similar
transactions, any acquisition of all or substantially all assets or deposits
thereof, any acquisition of voting power in excess of a specified threshold (or
any substantially similar transaction) and the acquisition of beneficial
ownership of 50% or more of such issuer's outstanding common stock. The formula
price per share at which the issuer may be obligated to effect such repurchase
is generally equal to, in the case of shares of common stock previously issued
upon exercise of the option, the highest of (a) the price at which a tender or
exchange offer has been made for such common stock, (b) the price at which a
third party has agreed with such issuer to purchase such common stock, (c) the
highest closing price of such common stock for the preceding six months or (d)
in the event of a sale of all or substantially all of such issuer's assets, a
price per share calculated based on the sum of the price paid for such assets
and the market value of the assets not sold. In the case of an option to be
repurchased, the formula per share repurchase price is equal to the foregoing
price less the per share exercise price of the option.
The Option Agreements are intended to increase the likelihood that the
Merger will be consummated in accordance with the terms set forth in the Merger
Agreement. Consequently, certain aspects of the Option Agreements may have the
effect of discouraging persons who might now or at any time prior to the
Effective Time be interested in acquiring all of or a significant interest in
First USA or BANC ONE from considering or proposing such an acquisition, even
if, in the case of First USA, such persons were prepared to offer to pay
consideration to First USA Stockholders which had a higher current market price
than the shares of BANC ONE Common Stock to be received for each share of First
USA Common Stock pursuant to the Merger Agreement.
See "The Merger -- BANC ONE and First USA Stock Option Agreements."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of First USA's management and the First USA Board may be
deemed to have certain interests in the Merger that are in addition to their
interests as First USA Stockholders generally.
Outstanding Stock-Based Awards. All of the executive officers and
directors of First USA hold options to acquire shares of First USA Common Stock
("First USA Stock Options"). Pursuant to the Merger Agreement, at the Effective
Time, each outstanding First USA Stock Option, whether exercisable or not, will
automatically be converted into an option to acquire shares of BANC ONE Common
Stock adjusted to account for the Exchange Ratio.
Pursuant to the stock option plans maintained by First USA for the benefit
of its officers and employees, upon approval of the Merger by First USA's
stockholders at the First USA Special Meeting, all outstanding options to
acquire shares of First USA Common Stock will become immediately exercisable in
full. As of the First USA Record Date, John C. Tolleson, the Chairman of the
Board and Chief Executive Officer of First
6
<PAGE> 18
USA, Richard W. Vague, the President of First USA, Jack M. Antonini, the Vice
Chairman and Chief Financial Officer of First USA, Randy L. Christofferson, the
President of First USA Bank, and Pamela Patsley, the President and Chief
Executive Officer of First USA Paymentech, held unexercisable options to
purchase 490,000, 400,000, 170,000, 320,000 and 62,000 shares of First USA
Common Stock, respectively, which will become exercisable as a result of such
stockholder approval. In addition, as of the First USA Record Date, all
executive officers of First USA and its subsidiaries as a group held
unexercisable options to purchase an aggregate of 2,192,000 shares of First USA
Common Stock which will become exercisable upon approval of the Merger by First
USA's stockholders at the First USA Special Meeting.
Pursuant to the First USA Paymentech 1996 Stock Option Plan, upon
consummation of the Merger, all outstanding options to acquire shares of First
USA Paymentech common stock, par value $.01 per share ("First USA Paymentech
Common Stock"), will become immediately exercisable in full. As of the First USA
Record Date, Messrs. Tolleson, Vague, Antonini and Christofferson and Ms.
Patsley had unexercisable options to purchase 30,000, 30,000, 13,200, 13,200 and
120,000 shares of First USA Paymentech Common Stock, respectively, which will
become exercisable upon consummation of the Merger. In addition, as of the First
USA Record Date, all executive officers of First USA and its subsidiaries and
all non-officer directors of First USA as a group held unexercisable options to
purchase an aggregate of 246,900 shares of First USA Paymentech Common Stock
which will become exercisable upon consummation of the Merger.
Pursuant to the First USA 1994 Restricted Stock Plan, upon approval of the
Merger by First USA's stockholders at the First USA Special Meeting, all
unvested shares of restricted First USA Common Stock will become fully vested.
As of the First USA Record Date, Messrs. Tolleson, Vague, Antonini and
Christofferson and Ms. Patsley held 90,000, 90,000, 40,000, 100,000 and 60,000
shares of restricted First USA Common Stock, respectively, which will become
vested as a result of such stockholder approval. In addition, as of the First
USA Record Date, all executive officers of First USA and its subsidiaries as a
group held 704,000 shares of restricted First USA Common Stock which will become
vested as a result of the approval of the Merger by First USA's stockholders at
the First USA Special Meeting.
Stock Loan Forgiveness. In connection with First USA Paymentech's initial
public offering in March 1996 (the "Paymentech IPO"), First USA and First USA
Paymentech made loans to employees to purchase shares of First USA Paymentech
Common Stock. Upon consummation of the Merger, all of such loans will be
forgiven in accordance with their terms and all of the shares of First USA
Paymentech Common Stock pledged thereunder will be released from such pledges.
As of the First USA Record Date, an aggregate of $14,283,500 in principal
amount of loans made by First USA and First USA Paymentech to purchase shares of
First USA Paymentech Common Stock in connection with the Paymentech IPO was
outstanding. As of the First USA Record Date, Messrs. Tolleson, Vague, Antonini
and Christofferson and Ms. Patsley had outstanding loans received in connection
with the Paymentech IPO of $1,464,750, $1,464,750, $488,250, $488,250 and
$1,953,000, respectively, and all executive officers of First USA as a group had
an aggregate of $7,323,750 in outstanding loans received in connection with the
Paymentech IPO.
Existing Employment Agreements. Pursuant to First USA's employment
agreement with Mr. Tolleson, which provides that, in the event of a "change in
control" of First USA (defined in such employment agreement to include the
approval by the First USA Board of the Merger Agreement), Mr. Tolleson may
terminate his employment and receive a lump sum payment equal to approximately
$2.8 million, assuming the Merger occurs on June 30, 1997.
First USA Retirement Benefit Plan. Pursuant to First USA's supplemental
retirement plan, upon termination of his employment upon consummation of the
Merger, Mr. Tolleson will receive a lump sum payment, which, assuming the Merger
occurs on June 30, 1997, will equal approximately $441,000. In addition,
pursuant to such supplemental retirement plan, upon consummation of the Merger,
First USA will transfer to a trust created for the benefit of Mr. Vague an
amount, which, assuming the Merger occurs on June 30, 1997, will equal
approximately $156,000.
7
<PAGE> 19
First USA Board of Directors. Pursuant to the terms of First USA's
Retirement Plan for Outside Directors, as amended, each outside director will
become entitled to a lump sum payment upon consummation of the Merger, which is
expected to be approximately $184,000 assuming the Merger occurs on June 30,
1997.
BANC ONE Board of Directors. It is the intention of BANC ONE and First USA
that Mr. Tolleson will be appointed to the BANC ONE Board following the
Effective Time. Mr. Tolleson will receive customary compensation for his
services as a director of BANC ONE.
New Employment Agreements. Pursuant to the Merger Agreement, Messrs.
Vague, Antonini and Christofferson and Ms. Patsley and each of the eight
Executive Vice Presidents of First USA will be offered employment agreements
with BANC ONE and First USA or, in the case of Ms. Patsley, First USA
Paymentech, which will become effective at the Effective Time.
New Stock-Based Awards. Pursuant to the Merger Agreement, at the Effective
Time, Mr. Vague will be awarded an option to acquire 300,000 shares of BANC ONE
Common Stock at an exercise price per share equal to the market value of a share
of BANC ONE Common Stock on the date of grant and will also be awarded 45,455
shares of restricted BANC ONE Common Stock. In addition, pursuant to the Merger
Agreement, at the Effective Time certain other officers and key employees of
First USA or its subsidiaries will be granted options to acquire an aggregate of
1,607,704 shares of BANC ONE Common Stock at an exercise price per share equal
to the market value of a share of BANC ONE Common Stock on the date of grant and
will also be awarded an aggregate of 166,818 shares of restricted BANC ONE
Common Stock.
Pursuant to the Merger Agreement, and subject to the approval of the First
USA Paymentech Board of Directors, at the Effective Time certain officers and
key employees of First USA Paymentech will be granted options to acquire an
aggregate of 456,000 shares of First USA Paymentech Common Stock at an exercise
price per share equal to the market value of the First USA Paymentech Common
Stock on the date of the grant and will also be awarded an aggregate of 142,000
shares of restricted First USA Paymentech Common Stock.
Indemnification; Directors and Officers Insurance. BANC ONE has agreed to
indemnify and to maintain directors and officers insurance covering the First
USA directors and officers following the Merger.
See "The Merger -- Interests of Certain Persons in the Merger" and
"Management and Operations after the Merger."
The First USA Board was aware of these interests and considered them, among
other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
APPRAISAL RIGHTS
BANC ONE Shareholders. Pursuant to Section 1701.84 of the Ohio Revised
Code (the "Ohio Law"), BANC ONE Shareholders at the BANC ONE Record Date who
follow certain statutory procedures set forth in Section 1701.85 of the Ohio Law
have the right to demand payment of the "fair cash value" of their shares of
BANC ONE Common Stock if the Merger is consummated. See "Rights of Dissenting
Shareholders -- BANC ONE Shareholders." Section 1701.85 of the Ohio Law is
attached as Appendix D to this Joint Proxy Statement-Prospectus.
First USA Stockholders. First USA Stockholders will not be entitled to any
appraisal rights under Delaware law or any other statute in connection with the
Merger. See "Rights of Dissenting Shareholders -- First USA Stockholders."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Each party's obligation to effect the Merger is conditioned on delivery of
an opinion, in the case of BANC ONE, from Wachtell, Lipton, Rosen & Katz,
special counsel to BANC ONE, and, in the case of First USA, from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to First USA, each dated as of the Effective
Time, based upon certain customary representations and assumptions set forth
therein, substantially to the effect that
8
<PAGE> 20
for federal income tax purposes the Merger constitutes a reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code").
Based on such opinions, the material federal income tax results of the
Merger will be as follows: (i) no gain or loss will be recognized by BANC ONE or
by First USA as a result of the Merger; (ii) no gain or loss will be recognized
by the First USA Stockholders who exchange their First USA Common Stock for BANC
ONE Common Stock pursuant to the Merger (except with respect to cash received in
lieu of a fractional share interest in BANC ONE Common Stock); and (iii) the tax
basis of the BANC ONE Common Stock received by First USA Stockholders who
exchange their First USA Common Stock for BANC ONE Common Stock in the Merger
will generally be the same as the tax basis of the First USA Common Stock
surrendered in exchange therefor.
Each stockholder should consult such stockholder's own tax advisors as to
the tax consequences of the Merger to such stockholder under federal, state,
local or any other applicable law.
See "The Merger -- Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a "pooling of
interests" by BANC ONE under generally accepted accounting principles ("GAAP").
It is a condition to consummation of the Merger that BANC ONE and First USA
receive an opinion from Coopers & Lybrand L.L.P. that the Merger will be
accounted for as a "pooling of interests." See "The Merger -- Accounting
Treatment."
REGULATORY APPROVALS
The Merger is subject to the approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). A copy of the notice filed
by BANC ONE and First USA with the Federal Reserve Board has been filed with the
Department of Justice (the "DOJ") and the Federal Trade Commission (the "FTC").
In addition, the Merger is subject to the approval of or notice to the bank
regulatory authorities in Delaware and Utah and any other applicable state and
of the FDIC (collectively, the "Additional Regulatory Authorities"). The
Additional Regulatory Authorities have approved the Merger or have notified BANC
ONE that they do not disapprove of the Merger, as the case may be. The Merger
may not be consummated until expiration of applicable waiting periods.
There can be no assurance that the approval of the Federal Reserve Board
will be obtained or as to the date of such approval.
See "The Merger -- Conditions to the Consummation of the Merger" and
"-- Regulatory Approvals Required for the Merger."
CERTAIN DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
The rights of First USA Stockholders are currently governed by the Delaware
General Corporation Law (the "Delaware Law"), the First USA Restated Certificate
of Incorporation, as amended (the "First USA Certificate of Incorporation"), and
the First USA By-laws (the "First USA By-laws"). Upon consummation of the
Merger, the First USA Stockholders who receive BANC ONE Common Stock in the
Merger will become BANC ONE Shareholders, and their rights will be governed by
the Ohio Law, the BANC ONE Articles of Incorporation and the BANC ONE Code of
Regulations (the "BANC ONE Regulations"). See "Comparison of Shareholder
Rights."
SHARE INFORMATION AND MARKET PRICES
The BANC ONE Common Stock is listed on the NYSE under the symbol "ONE." As
of the BANC ONE Record Date, there were 419,837,271 shares of BANC ONE Common
Stock outstanding held by approximately 96,828 holders of record and 3,774,856
shares of BANC ONE Convertible Preferred Stock outstanding held by 104 holders
of record. The First USA Common Stock is listed on the NYSE under the symbol
"FUS" and the First USA Convertible Preferred Stock is listed on the NYSE under
the symbol "FUSp". As of the First USA Record Date, there were 123,472,353
shares of First USA Common Stock
9
<PAGE> 21
outstanding held by approximately 3,455 holders of record and 5,740,300 shares
of First USA Convertible Preferred Stock outstanding held by nine holders of
record.
The following table sets forth the last sale price reported on the NYSE
Composite Transactions List for shares of BANC ONE Common Stock and First USA
Common Stock on January 17, 1997, the last trading day preceding public
announcement of the proposed Merger, and on May 8, 1997. The "First USA Common
Stock Equivalent" represents the last sale price of a share of BANC ONE Common
Stock on such date multiplied by the Exchange Ratio of 1.1659.
<TABLE>
<CAPTION>
FIRST USA
BANC ONE FIRST USA COMMON
COMMON COMMON STOCK
STOCK STOCK EQUIVALENT
-------- --------- ----------
<S> <C> <C> <C>
January 17, 1997........................................... $ 45.125 $36.750 $ 52.611
May 9, 1997................................................ 42.500 48.000 49.551
</TABLE>
For additional information regarding the market prices of the BANC ONE
Common Stock and First USA Capital Stock during the previous two years, see
"Price Range of Common Stock and Dividends -- Market Prices."
10
<PAGE> 22
UNAUDITED COMPARATIVE PER SHARE DATA
The following table sets forth (i) selected comparative per share data for
each of BANC ONE and First USA on an historical basis and (ii) selected
unaudited pro forma comparative per share data reflecting the consummation by
BANC ONE of the Merger. The unaudited pro forma comparative per share data
assumes the Merger had been consummated at the beginning of the periods
presented. The unaudited pro forma data has been prepared giving effect to the
Merger using the "pooling of interests" method of accounting. See "The
Merger -- Accounting Treatment." BANC ONE has a fiscal year ending December 31
and First USA has a fiscal year ending June 30. Accordingly, the unaudited
comparative per share data combines the historical financial information of BANC
ONE for the fiscal years ended December 31, 1996, 1995 and 1994, with the
historical financial information of First USA for the twelve-month periods ended
December 31, 1996, 1995 and 1994, respectively (as amended, in the case of First
USA, by Amendment No. 1 on Form 10-K/A to First USA's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996, Amendment No. 1 on Form 10-Q/A to First
USA's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and
Amendment No. 1 on Form 10-Q/A to First USA's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1996).
Pro forma adjustments have been made to the condensed combined financial
statements to conform significant accounting policy differences identified by
BANC ONE and First USA.
The unaudited pro forma comparative per share data does not give effect to
BANC ONE's pending acquisition of Liberty Bancorp, Inc. ("LBI"), as the
acquisition is not material to BANC ONE individually or in the aggregate since
it represents less than 3% of BANC ONE's consolidated assets as of December 31,
1996. See "Information about BANC ONE -- Recent Developments -- Proposed Merger
with Liberty Bancorp, Inc."
The comparative per share data presented herein is based on and derived
from, and should be read in conjunction with, the historical consolidated
financial statements and the related notes thereto of BANC ONE and the
historical consolidated financial statements and the related notes thereto of
First USA (as amended, in the case of First USA, by Amendment No. 1 on Form
10-K/A to First USA's Annual Report on Form 10-K for the fiscal year ended June
30, 1996, Amendment No. 1 on Form 10-Q/A to First USA's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996 and Amendment No. 1 on Form 10-Q/A
to First USA's Quarterly Report on Form 10-Q for the quarter ended December 31,
1996) all of which are incorporated by reference herein. See "Available
Information," "Incorporation of Certain Documents by Reference" and "Unaudited
Pro Forma Condensed Combined Financial Information." Pro forma amounts are not
necessarily indicative of results of operations or the combined financial
position that would have resulted had the Merger been consummated at the
beginning of the periods indicated.
11
<PAGE> 23
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
BANC ONE COMMON STOCK(1)
Income from continuing operations per common share:
Historical...................................................... $ 3.23 $ 2.91 $2.20
Pro forma(2).................................................... 2.83 2.46 1.96
Cash dividends declared per common share:
Historical...................................................... 1.36 1.24 1.13
Pro forma(3).................................................... 1.36 1.24 1.13
Book value per common share as of end of period:
Historical...................................................... 19.75
Pro forma(4).................................................... 16.70
FIRST USA COMMON STOCK(1)
Income from continuing operations per common share:
Historical...................................................... $ 2.04 $ 1.40 $1.49
Equivalent pro forma(5)......................................... 3.30 2.87 2.29
Cash dividends declared per common share:
Historical...................................................... 0.165 0.09 0.05
Equivalent pro forma(5)......................................... 1.59 1.45 1.32
Book value per common share as of end of period:
Historical...................................................... 9.64
Equivalent pro forma(5)......................................... 19.48
</TABLE>
- ---------------
(1) The pro forma data does not, given the operational overlap of credit card
operations between BANC ONE and First USA, reflect the incurrence of certain
costs relating to or resulting from the Merger. Such costs are expected to
result in an estimated charge to earnings of $150 million; however, the
actual costs could be substantially greater. Furthermore, the pro forma data
does not reflect any benefits from potential cost savings or synergies
expected to be achieved following the Merger.
(2) The pro forma comparative per share data combines the financial information
of BANC ONE for the fiscal years ended December 31, 1996, 1995 and 1994 with
the financial information of First USA for the twelve-month periods ended
December 31, 1996, 1995 and 1994, respectively. BANC ONE has a fiscal year
ending December 31, and First USA has a fiscal year ending June 30. The pro
forma average common shares used in the calculation reflects the combined
weighted average outstanding shares of BANC ONE Common Stock and First USA
Common Stock, adjusted to equivalent shares of BANC ONE Common Stock.
(3) The pro forma cash dividends declared per common share are equal to the
historical BANC ONE cash dividends per common share.
(4) The pro forma book value per common share was determined by combining the
common equity of BANC ONE and First USA, including pro forma adjustments,
and dividing the result by the total number of shares of BANC ONE Common
Stock and First USA Common Stock outstanding as of December 31, 1996,
adjusted to equivalent shares of BANC ONE Common Stock.
(5) The equivalent pro forma amounts are computed by multiplying the pro forma
amounts by a factor of 1.1659 to reflect the Exchange Ratio.
12
<PAGE> 24
SELECTED FINANCIAL DATA
The following tables present (i) summary selected financial data for each
of BANC ONE and First USA on an historical basis and (ii) summary unaudited pro
forma selected financial data of BANC ONE reflecting the consummation by BANC
ONE of the Merger. The unaudited pro forma selected financial data has been
prepared giving effect to the Merger using the "pooling of interests" method of
accounting. See "The Merger -- Accounting Treatment."
The summary selected historical financial data for BANC ONE for each of the
five years ended December 31, 1996 is based on and derived from, and should be
read in conjunction with, the historical consolidated financial statements and
the related notes thereto of BANC ONE, which are incorporated by reference
herein. The summary selected historical financial data for First USA for each of
the five years ended June 30, 1996 is based on and derived from, and should be
read in conjunction with, the historical consolidated financial statements and
the related notes thereto of First USA, as amended by Amendment No. 1 on Form
10-K/A, filed April 24, 1997, to First USA's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996, which are incorporated by reference herein. The
summary selected financial data for First USA for the periods ended December 31,
1996 and 1995 is unaudited and should be read in conjunction with First USA's
Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1996
(as amended by Amendment No. 1 on Form 10-Q/A filed April 24, 1997), which is
incorporated by reference herein. The information set forth in the unaudited
summary selected pro forma financial data should be read in connection with the
unaudited pro forma condensed combined financial information appearing elsewhere
herein. Results of each of BANC ONE and First USA for less than a full financial
year are not necessarily indicative of results expected for the entire year. See
"Available Information" and "Incorporation of Certain Documents by Reference."
SELECTED HISTORICAL FINANCIAL DATA OF BANC ONE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total interest income and other
income..................................... $ 10,272,356 $ 8,970,888 $ 7,777,941 $ 7,547,130 $ 7,740,657
Income from continuing operations............ 1,426,533 1,277,863 1,005,109 1,172,103 922,227
Income from continuing operations per common
share...................................... 3.23 2.91 2.20 2.62 2.06
Historical cash dividends declared per common
share...................................... 1.36 1.24 1.13 0.97 0.81
Total assets (end of period)................. 101,848,087 90,453,963 88,922,586 84,834,656 81,304,864
Long-term borrowings (end of period)......... 4,189,513 2,720,373 1,866,448 1,805,272 1,396,797
Total stockholders' equity (end of period)... 8,646,960 8,197,478 7,564,860 7,433,170 6,594,813
</TABLE>
SELECTED HISTORICAL FINANCIAL DATA OF FIRST USA
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
------------------------ ------------------------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Total interest income and other
income........................ $1,037,372 $ 796,552 $1,633,742 $1,192,059 $ 815,760 $ 495,947 $ 437,288
Income from continuing
operations.................... 143,188 113,962 246,736 178,422 150,934 40,484 18,891
Income from continuing
operations per common share... 1.05 0.86 1.84 1.36 1.23 0.36 0.16
Historical cash dividends
declared per common share..... 0.105 0.06 0.12 0.06 0.04 0.025 --
Total assets (end of period).... 10,278,579 7,397,120 7,708,501 6,379,116 5,573,767 3,380,433 2,493,390
Long-term borrowings (end of
period)....................... 1,743,448 1,230,765 1,230,637 1,087,299 918,526 201,000 357,367
Cumulative redeemable preferred
stock (end of period)......... -- -- -- -- -- -- 35,533
Total stockholders' equity (end
of period).................... 1,278,350 881,557 1,113,880 764,815 574,547 212,898 146,965
</TABLE>
13
<PAGE> 25
RECENT DEVELOPMENTS
FINANCIAL RESULTS
On April 15, 1997, BANC ONE announced its unaudited financial results for
the quarterly period ended March 31, 1997.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------------
1997 1996
---------- ----------
(DOLLARS IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Interest Income......................................... $2,124,161 $1,984,982
Income before income taxes.............................. 566,045 516,055
Net income.............................................. 370,665 345,881
Net income per common share............................. 0.86 0.77
Weighted average common shares outstanding (000)........ 426,146 444,027
</TABLE>
Net interest income increased $87.6 million reflecting both average earning
asset growth and increased net interest margin. Average managed loan balances
grew by 9% from the year earlier quarter, while average securities balances
declined 12%, reflecting the ongoing strategy to improve the mix of
higher-yielding earning assets. The 1997 net interest margin was 5.76%, an
increase of 17 basis points from 5.59% reported a year earlier. Non-interest
income before securities transactions increased 14% or $68.7 million, primarily
from increased activity in investment management, insurance and investment
banking. Non-interest expense increased $50 million. However, non-interest
expense remained essentially flat if costs for the consolidation and
standardization of systems and procedures were excluded from each quarter. The
allowance for credit losses was 1.48% of ending loans and the provision for
credit losses was $235 million in the quarter, exceeding net charge-offs of $212
million by $23 million.
On April 24, 1997, First USA announced its unaudited financial results for
the quarterly period ended March 31, 1997.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-------------------------
1997 1996
-------- --------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Interest income........................................... $153,699 $145,002
Income before income taxes and subsidiary trust
distributions........................................... 42,487 133,459
Net income................................................ 24,124 84,999
Net income per common share............................... $0.17 $0.63
Weighted average common shares outstanding (000).......... 139,103 134,130
</TABLE>
Net income for the quarter ended March 31, 1997 was $24.1 million, or $0.17
per share, compared with restated net income of $85.0 million, or $0.63 per
share, for the quarter ended March 31, 1996. The quarter ended March 31, 1996
reflects a restatement of its financial statements by First USA as discussed
below. The restatement increased net income for the March 31, 1996 quarter from
$64.1 million, or $0.48 per share, to $85.0 million, or $0.63 per share.
Increases in First USA's net operating results attributable to a 27% growth
in average managed loans were more than offset by increased credit losses, a
reduction in net gains on securitization transactions and increased marketing
costs associated with loan solicitations. Increased credit losses were a result
of intense competition and the overall softening in consumer credit. The
reduction in securitization gains was due to a reduction in projected interest
rate spread on securitized loans resulting primarily from an increase in
estimated credit losses.
Managed loans outstanding at the end of the quarter were $23.2 billion,
compared with $18.3 billion at March 31, 1996. First USA's net interest margin
on managed loans for the quarter was 6.41%, compared with 6.06% for the quarter
ended March 31, 1996. First USA's net credit loss rate on managed loans for the
quarter was 5.01%, compared with 3.36% for the quarter ended March 31, 1996. The
delinquency rate on managed loans at the end of the quarter was 4.96%, compared
with 4.04% at March 31, 1996.
14
<PAGE> 26
First USA adopted Statement of Financial Accounting Standards ("SFAS") No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," for all securitization transactions occurring
subsequent to December 31, 1996, including transfers of receivables pursuant to
existing securitization structures that occurred after December 31, 1996.
Because the Company restated its financial statements as discussed below, and
therefore has recorded gains on securitization transactions as a result of the
restatement, the adoption of SFAS No. 125 had no material effect on First USA's
consolidated financial statements as of and for the three months ended March 31,
1997. However, by restating its financial statements and recording gains on
securitization transactions in prior periods, First USA's net income for the
quarter ended March 31, 1997 was less than it would otherwise have been due to a
reduction in the one-time effect of adopting SFAS No. 125 of $53 million
after-tax, or $0.38 per share. In addition, First USA anticipates that the
restatements will reduce net income from what it would otherwise have been by
approximately $176 million, or $1.28 per share, for the 12 months ending
December 31, 1997 because earnings expected to be recognized in the 12-month
period ending December 31, 1997 have been recognized in the restatement of prior
periods' results in accordance with the corrected accounting policy. This
non-cash earnings reduction is limited to calendar 1997 and should not have an
adverse effect on subsequent periods.
RESTATEMENT OF FINANCIAL STATEMENTS
On April 24, 1997, First USA announced that it had restated its financial
statements to properly reflect two items. Prior to the restatement, First USA
had not recorded gains on securitization transactions consistent with its belief
and common industry assumption that such gains would not be significant due to
the relatively short life of the outstanding balances and the narrow spread
between the account yield and the sum of the cost of servicing these accounts
and investor yield on the securitizations. As a result of a more detailed
analysis of gains on all securitizations of credit card receivable balances in
connection with the preparation for the adoption of SFAS 125, which is effective
January 1, 1997, First USA restated its financial statements to recognize gains
in prior periods.
In addition, First USA, prior to the restatement, had been deferring the
costs to solicit new accounts. These costs were deferred and matched with the
future revenues from these new accounts over a 12-month period. The average life
of these new accounts, including all annual renewals, is expected to be seven
years. During the course of a review of First USA's accounting policies in
connection with the Merger, First USA learned that, while its deferred costs
were paid to independent third parties, these costs were not eligible for
deferral, and that its accounting policy regarding such solicitation costs did
not conform with the accounting policy of BANC ONE. As a result, First USA
restated its financial statements to expense these costs in the period such
costs were incurred.
The restatement of the financial statements did not affect First USA's net
cash flows, liquidity or regulatory capital compliance, nor did the restatement
have an effect on First USA's fiscal year 1996 and 1995 net income. The
restatement did, however, have an effect on previously reported quarterly
results of the 1996 and 1995 fiscal years and increased fiscal year 1994
earnings. The selected financial data set forth herein have been adjusted to
reflect the restatement of First USA's financial statements. See "-- Selected
Financial Data."
On April 24, 1997, First USA filed with the Commission Amendment No. 1 on
Form 10-K/A to its Annual Report on Form 10-K for the fiscal year ended June 30,
1996, Amendment No. 1 on Form 10-Q/A to its Quarterly Report on Form 10-Q for
the period ended September 30, 1996 and Amendment No. 1 on Form 10-Q/A to its
Quarterly Report on Form 10-Q for the period ended December 31, 1996 to reflect
the restatement of its financials. Each such Amendment is incorporated herein by
reference. See "Incorporation of Certain Documents by Reference."
AMENDMENT TO MERGER AGREEMENT
On April 23, 1997, in connection with the restatement of financial
statements of First USA, BANC ONE and First USA agreed to amend the Merger
Agreement to (a) provide that BANC ONE would not assert such restatement (or
certain related effects) as a basis for terminating the Merger Agreement and (b)
to remove a provision that had permitted First USA to terminate the Merger
Agreement if the market price of BANC ONE Common Stock fell below $38.60 during
a specified period shortly before the anticipated Effective Time and BANC ONE
did not elect to make a compensatory adjustment to the Exchange Ratio. See
"Incorporation of Certain Documents by Reference" and "The Merger -- Background
of the Merger."
15
<PAGE> 27
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
BANC ONE has a fiscal year ending December 31 and First USA has a fiscal
year ending June 30. Accordingly, the following unaudited selected pro forma
financial data combine BANC ONE's historical results for the years ended
December 31, 1996, 1995, 1994, 1993 and 1992 with First USA's historical results
for the twelve-month periods ended December 31, 1996, 1995 and 1994, and June
30, 1994 and 1993, respectively, as amended, in the case of First USA, by
Amendment No. 1 on Form 10-K/A to First USA's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996, Amendment No. 1 on Form 10-Q/A to First USA's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and
Amendment No. 1 on Form 10-Q/A to First USA's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1996, giving effect to the Merger as if it had
occurred on January 1, 1992. First USA's financial information for the six-month
period ended June 30, 1994 has been combined with the financial information of
BANC ONE for both the twelve months ended December 31, 1994 and December 31,
1993 to derive the pro forma financial data. First USA's net income and net
income per share were $82.1 million and $0.68, respectively, for the six-month
period ended June 30, 1994.
Pro forma adjustments have been made to the condensed combined financial
statements to conform significant accounting policy differences identified by
BANC ONE and First USA.
The selected pro forma financial data does not give effect to BANC ONE's
pending acquisition of LBI, as the acquisition is not material to BANC ONE
individually or in the aggregate since it represents less than 3% of BANC ONE's
consolidated assets as of December 31, 1996. See "Information about BANC ONE --
Recent Developments -- Proposed Merger with Liberty Bancorp, Inc."
See "Available Information" and "Incorporation of Certain Documents by
Reference."
16
<PAGE> 28
SELECTED PRO FORMA FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
SELECTED FINANCIAL DATA(1) 1996 1995 1994 1993(5) 1992(5)
- ------------------------------------------------ ------------ ------------ ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Pro Forma Combined Statement of Operations
Total interest income
and other income: (2)....................... $12,146,918 $10,399,182 $8,777,616 $8,362,890 $8,236,604
Income from continuing
operations: (2)............................. 1,702,495 1,463,074 1,194,430 1,323,037 962,711
Income from continuing operations per common
share: (2).................................. 2.83 2.46 1.96 2.25 1.66
Cash dividends declared per common share:
(3)......................................... 1.36 1.24 1.13 .97 .81
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
PRO FORMA COMBINED BALANCE SHEET (1) 1996
- ------------------------------------------------ ------------
<S> <C> <C> <C> <C> <C>
Total assets (end of period):................... $112,129,558
Long-term borrowings
(end of period):.............................. 5,932,961
Total stockholders' equity
(end of period):.............................. 9,927,190
Book value per common share(4).................. 16.70
</TABLE>
- ---------------
(1) The pro forma data does not, given the operational overlap of credit card
operations between BANC ONE and First USA, reflect the incurrence of certain
costs relating to or resulting from the Merger. Such costs are expected to
result in an estimated charge to earnings of $150 million; however, the
actual costs could be substantially greater. Furthermore, the pro forma data
does not reflect any benefits from potential cost savings or synergies
expected to be achieved following the Merger.
(2) BANC ONE has a fiscal year ending December 31, and First USA has a fiscal
year ending June 30. Accordingly, the pro forma total interest income and
other income, income from continuing operations and income from continuing
operations per common share combines the historical financial information of
BANC ONE for the fiscal years ended December 31, 1996, 1995, 1994, 1993 and
1992 with the historical financial information of First USA for the
twelve-month periods ended December 31, 1996, 1995 and 1994, and June 30,
1994 and 1993, respectively. The pro forma average common shares outstanding
used in the calculation reflects the combined weighted average outstanding
shares of BANC ONE Common Stock and First USA Common Stock, adjusted to
equivalent shares of BANC ONE Common Stock.
(3) The pro forma cash dividends declared per common share are equal to the
historical BANC ONE cash dividends per common share.
(4) The pro forma book value per common share was determined by combining the
common equity of BANC ONE and First USA, including pro forma adjustments,
and dividing the result by the total number of shares of BANC ONE Common
Stock and First USA Common Stock outstanding as of December 31, 1996,
adjusted to equivalent shares of BANC ONE Common Stock.
(5) Information is for the years ended June 30, 1994 and 1993 with respect to
the selected financial data of First USA.
17
<PAGE> 29
BANC ONE SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is first being mailed to BANC ONE
Shareholders on or about May 14, 1997, and is accompanied by the notice of the
BANC ONE Special Meeting and a form of proxy that is solicited by the BANC ONE
Board for use at the BANC ONE Special Meeting to be held on Thursday, June 26,
1997, at 9:00 a.m., Columbus time, at the auditorium of the BANC ONE Corporate
Center, 1111 Polaris Parkway, Columbus, Ohio 43240, and at any adjournments or
postponements thereof.
MATTERS TO BE CONSIDERED
At the BANC ONE Special Meeting, BANC ONE Shareholders will be asked to
consider and vote upon (i) the Merger Proposal, to approve the Merger Agreement
and the transactions contemplated thereby, (ii) the Articles Amendment, to
increase the number of authorized shares of BANC ONE Common Stock to 950,000,000
and (iii) on such other matters as may properly be submitted to a vote at the
BANC ONE Special Meeting. Shareholder approval of the Articles Amendment is
necessary in order for BANC ONE to effect both the Merger and the LBI Merger.
See "Information About BANC ONE -- Recent Developments -- Proposed Merger with
Liberty Bancorp, Inc." The BANC ONE Shareholders may also be asked to vote upon
a proposal to adjourn or postpone the BANC ONE Special Meeting, which
adjournment or postponement could be used for the purpose, among others, of
allowing additional time for the soliciting of additional votes to approve the
BANC ONE Matters.
PROXIES
The accompanying form of proxy is for use at the BANC ONE Special Meeting
if a BANC ONE Shareholder will be unable to attend in person. The proxy may be
revoked by a BANC ONE Shareholder at any time before it is exercised, by
submitting to the Secretary of BANC ONE written notice of revocation, a properly
executed proxy of a later date or by attending the BANC ONE Special Meeting and
electing to vote in person. Written notices of revocation and other
communications with respect to the revocation of BANC ONE proxies should be
addressed to BANC ONE CORPORATION, 100 East Broad Street, Columbus, Ohio 43271,
Attention: Corporate Secretary. All shares represented by valid proxies received
pursuant to this solicitation, and not revoked before they are exercised, will
be voted in the manner specified therein. If no specification is made, the
proxies will be voted in favor of the BANC ONE Matters; provided that no proxy
that is voted against any of the BANC ONE Matters will be voted in favor of any
adjournment or postponement of the BANC ONE Special Meeting for the purpose of
soliciting additional proxies.
SOLICITATION OF PROXIES
The entire cost of soliciting the proxies from the BANC ONE Shareholders
will be borne by BANC ONE; provided, however, that First USA and BANC ONE have
each agreed to pay one-half of the printing costs of this Joint Proxy
Statement-Prospectus and related materials. In addition to the solicitation of
the proxies by mail, BANC ONE will request banks, brokers and other record
holders to send proxies and proxy material to the beneficial owners of the stock
and secure their voting instructions, if necessary. BANC ONE will reimburse such
record holders for their reasonable expenses in so doing. BANC ONE has also made
arrangements with Georgeson & Company Inc. to assist it in soliciting proxies
from banks, brokers and nominees, and has agreed to pay $6,500 plus expenses for
such services. If necessary, BANC ONE may also use several of its regular
employees, who will not be specially compensated, to solicit proxies from
shareholders, either personally or by telephone, telegram, facsimile or special
delivery letter.
RECORD DATE AND VOTING RIGHTS
Pursuant to the provisions of the Ohio Law and the BANC ONE Regulations,
May 6, 1997 has been fixed as the BANC ONE Record Date for determination of
holders of BANC ONE Common Stock entitled
18
<PAGE> 30
to notice of and to vote at the BANC ONE Special Meeting. Accordingly, only
holders of shares of BANC ONE Common Stock of record that are such holders at
the close of business on the BANC ONE Record Date will be entitled to notice of
and to vote at the BANC ONE Special Meeting. The number of outstanding shares of
BANC ONE Common Stock entitled to vote at the BANC ONE Special Meeting is
419,837,271. The holders of record of shares of BANC ONE Convertible Preferred
Stock will receive notice of, but are not entitled to vote at, the BANC ONE
Special Meeting. On the BANC ONE Record Date, there were approximately 96,828
holders of record of BANC ONE Common Stock and 104 holders of record of BANC ONE
Convertible Preferred Stock. Shares of BANC ONE Common Stock present in person
at the BANC ONE Special Meeting but not voting, and shares of BANC ONE Common
Stock for which BANC ONE has received proxies but with respect to which holders
of such shares have abstained, will be counted as present at the BANC ONE
Special Meeting for purposes of determining the presence or absence of a quorum
for the transaction of business. Brokers who hold shares of BANC ONE Common
Stock in nominee or "street" name for customers who are the beneficial owners of
such shares are prohibited from giving a proxy to vote shares held for such
customers with respect to the BANC ONE Matters without specific instructions
from such customers. Shares represented by proxies returned by a broker holding
such shares in "street" name will be counted for purposes of determining whether
a quorum exists, even if such shares are not voted in matters where
discretionary voting by the broker is not allowed ("broker non-votes").
Each share of BANC ONE Common Stock entitles its holder to one vote. The
affirmative vote of a majority of the outstanding shares of BANC ONE Common
Stock is required to approve the Merger Proposal and the Articles Amendment.
BECAUSE APPROVAL OF THE MERGER PROPOSAL AND THE ARTICLES AMENDMENT REQUIRES
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF
BANC ONE COMMON STOCK, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME
EFFECT AS NEGATIVE VOTES. ACCORDINGLY, THE BANC ONE BOARD URGES THE HOLDERS OF
BANC ONE COMMON STOCK TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
As of the BANC ONE Record Date, directors and executive officers of BANC
ONE beneficially owned 3,186,896 shares of BANC ONE Common Stock, or
approximately 0.7% of the shares entitled to vote at the BANC ONE Special
Meeting. It is currently expected that each such director and executive officer
of BANC ONE will vote the shares of BANC ONE stock beneficially owned by him or
her for approval of the BANC ONE Matters. In addition, as of the BANC ONE Record
Date, the directors and executive officers of First USA beneficially owned 2,480
shares of BANC ONE Common Stock, or significantly less than 1% of the shares
entitled to be voted at the BANC ONE Special Meeting. As of the Record Date, the
banking and trust subsidiaries of BANC ONE, as fiduciaries, custodians or
agents, held a total of 34,375,947 shares of BANC ONE Common Stock, representing
approximately 8.1% of the shares entitled to vote at the BANC ONE Special
Meeting. These entities maintained sole or shared voting power with respect to
15,853,400 of such shares of BANC ONE Common Stock.
RECOMMENDATION OF BANC ONE BOARD
The BANC ONE Board has unanimously approved the BANC ONE Matters, including
the Merger Agreement and the transactions contemplated thereby. The BANC ONE
Board believes that the BANC ONE Matters are in the best interests of BANC ONE
and the BANC ONE Shareholders and recommends that the BANC ONE Shareholders vote
"FOR" the BANC ONE Matters. See "The Merger -- Reasons for the
Merger -- Recommendation of the BANC ONE Board and Reasons for the Merger" and
"Proposed Amendment to the BANC ONE Articles of Incorporation to Increase
Authorized Common Stock."
19
<PAGE> 31
FIRST USA SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is first being mailed to the First
USA Stockholders on or about May 14, 1997, and is accompanied by the notice of
the First USA Special Meeting and a form of proxy that is solicited by the First
USA Board for use at the First USA Special Meeting to be held on Friday, June
27, 1997, at 9:00 a.m., local time, at The Tower Club, 48th Floor, 1601 Elm
Street, Dallas, Texas 75201, and at any adjournments or postponements thereof.
MATTERS TO BE CONSIDERED
The purpose of the First USA Special Meeting is to take action with respect
to the approval of the Merger Agreement and the transactions contemplated
thereby. The holders of First USA Common Stock and First USA Convertible
Preferred Stock may also be asked to vote upon a proposal to adjourn or postpone
the First USA Special Meeting, which adjournment or postponement could be used
for the purpose, among others, of allowing additional time for the soliciting of
additional votes to approve the Merger Agreement.
PROXIES
The accompanying form of proxy is for use at the First USA Special Meeting
if a First USA Stockholder will be unable to attend in person. The proxy may be
revoked by the First USA Stockholder at any time before it is exercised, by
submitting to the Secretary of First USA written notice of revocation, a
properly executed proxy of a later date or by attending the First USA Special
Meeting and electing to vote in person. Written notices of revocation and other
communications with respect to the revocation of First USA proxies should be
addressed to First USA, Inc., 1601 Elm Street, Dallas, Texas 75201, Attention:
Corporate Affairs and Investor Relations. All shares represented by valid
proxies received pursuant to this solicitation, and not revoked before they are
exercised, will be voted in the manner specified therein. If no specification is
made, the proxies will be voted in favor of approval of the Merger Agreement.
The First USA Board is unaware of any other matters that may be presented for
action at the First USA Special Meeting. If other matters do properly come
before the First USA Special Meeting, however, it is intended that shares
represented by proxies in the accompanying form will be voted or not voted by
the persons named in the proxies in their discretion, provided that no proxy
that is voted against approval and adoption of the Merger Agreement will be
voted in favor of any adjournment or postponement of the First USA Special
Meeting for the purpose of soliciting additional proxies.
SOLICITATION OF PROXIES
The entire cost of soliciting the proxies from the First USA Stockholders
will be borne by First USA; provided, however, that BANC ONE and First USA have
each agreed to pay one-half of the printing costs of this Joint Proxy
Statement-Prospectus and related materials. In addition to the solicitation of
the proxies by mail, First USA will request banks, brokers and other record
holders to send proxies and proxy material to the beneficial owners of the stock
and secure their voting instructions, if necessary. First USA will reimburse
such record holders for their reasonable expenses in so doing. First USA has
also made arrangements with Georgeson & Company Inc. to assist it in soliciting
proxies from banks, brokers and nominees and has agreed to pay approximately
$10,000 plus expenses for such services. If necessary, First USA may also use
several of its regular employees, who will not be specially compensated, to
solicit proxies from shareholders, either personally or by telephone, telegram,
facsimile or special delivery letter.
RECORD DATE AND VOTING RIGHTS
Pursuant to the provisions of the Delaware Law and the First USA By-laws,
May 9, 1997 has been fixed as the First USA Record Date for determination of
holders of First USA Common Stock and First USA Convertible Preferred Stock
entitled to notice of and to vote at the First USA Special Meeting. Accordingly,
only holders of shares of First USA Common Stock and First USA Convertible
Preferred Stock of record at
20
<PAGE> 32
the close of business on the First USA Record Date will be entitled to notice of
and to vote at the First USA Special Meeting. At the close of business on the
First USA Record Date, there were 123,472,353 shares of First USA Common Stock
outstanding held by approximately 3,455 holders of record and 5,740,300 shares
of First USA Convertible Preferred Stock outstanding held by approximately nine
holders of record. The presence, in person or by proxy, of shares of First USA
Common Stock and First USA Convertible Preferred Stock representing a majority
of the total voting power of such shares outstanding and entitled to vote on the
First USA Record Date is necessary to constitute a quorum at the First USA
Special Meeting. Each share of First USA Common Stock outstanding on the First
USA Record Date entitles its holder to one vote, and each share of First USA
Convertible Preferred Stock outstanding on the First USA Record Date entitles
the holder to 4/5 of a vote.
Shares of First USA Common Stock and First USA Convertible Preferred Stock
present in person at the First USA Special Meeting but not voting, and shares of
First USA Common Stock and First USA Convertible Preferred Stock for which First
USA has received proxies but with respect to which holders of such shares have
abstained, will be counted as present at the First USA Special Meeting for
purposes of determining the presence or absence of a quorum for the transaction
of business. Brokers who hold shares of First USA Common Stock or First USA
Convertible Preferred Stock in nominee or "street" name for customers who are
the beneficial owners of such shares are prohibited from giving a proxy to vote
shares held for such customers with respect to the matters to be considered and
voted upon at the First USA Special Meeting without specific instructions from
such customers. Shares represented by proxies returned by a broker holding such
shares in "street" name will be counted for purposes of determining whether a
quorum exists, even if such shares are not voted in matters where discretionary
voting by the broker is not allowed ("broker non-votes").
Under the Delaware Law and the First USA Certificate of Incorporation,
approval of the Merger Agreement requires the affirmative vote of the holders of
a majority of the voting power of outstanding First USA Common Stock and First
USA Convertible Preferred Stock, voting together as a single class, at the First
USA Special Meeting.
BECAUSE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE VOTING POWER OF THE OUTSTANDING SHARES OF FIRST
USA COMMON STOCK AND FIRST USA CONVERTIBLE PREFERRED STOCK, VOTING TOGETHER AS A
SINGLE CLASS, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS
NEGATIVE VOTES. ACCORDINGLY, THE FIRST USA BOARD URGES THE HOLDERS OF FIRST USA
COMMON STOCK AND FIRST USA CONVERTIBLE PREFERRED STOCK TO COMPLETE, DATE AND
SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.
As of the First USA Record Date, directors and executive officers of First
USA beneficially owned approximately 8,600,000 shares of First USA Common Stock
(including options to purchase approximately 4,100,000 shares of First USA
Common Stock that are exercisable within 60 days of the date hereof) and 4,000
shares of First USA Convertible Preferred Stock, entitling them to exercise 6.7%
of the voting power of the First USA Capital Stock entitled to vote at the First
USA Special Meeting. It is currently expected that each such director and
executive officer of First USA will vote the shares of First USA Capital Stock
beneficially owned by him or her for approval of the Merger Agreement and the
transactions contemplated thereby. In addition, as of the First USA Record Date,
directors and executive officers of BANC ONE beneficially owned 19,400 shares of
First USA Common Stock and no shares of First USA Convertible Preferred Stock,
or significantly less than 1% of the shares entitled to be voted at the First
USA Special Meeting. In addition, as of the First USA Record Date, the banking
and trust subsidiaries of BANC ONE, as fiduciaries, custodians or agents, held a
total of 128,400 shares of First USA Common Stock and no shares of First USA
Convertible Preferred Stock, representing 0.1% of the total voting power of the
outstanding shares of the First USA Common Stock, under trust agreements and
other instruments and agreements. These entities maintained sole or shared
voting power with respect to 14,700 of such shares of First USA Common Stock.
Further, as of the First USA Record Date, BANC ONE beneficially owned 6 million
shares of First
21
<PAGE> 33
USA Common Stock, representing 4.9% of the voting power of the First USA Common
Stock entitled to vote at the First USA Special Meeting.
Additional information with respect to beneficial ownership of First USA
Common Stock and First USA Convertible Preferred Stock by persons and entities
owning more than 5% of such stock and more detailed information with respect to
beneficial ownership of First USA Common Stock by directors and executive
officers of First USA is incorporated by reference to the 1996 Annual Report on
Form 10-K (as amended by Amendment No. 1 on Form 10-K/A filed on April 24, 1997)
of First USA. See "Incorporation of Certain Documents by Reference."
RECOMMENDATION OF FIRST USA BOARD
The First USA Board has unanimously approved the Merger Agreement and the
transactions contemplated thereby. The First USA Board believes that the Merger
Agreement is in the best interests of First USA and the First USA Stockholders
and recommends that the First USA Stockholders vote "FOR" the approval and
adoption of the Merger Agreement. See "The Merger -- Reasons for the
Merger -- Recommendation of the First USA Board and Reasons for the Merger."
22
<PAGE> 34
THE MERGER
THE FOLLOWING SUMMARY OF CERTAIN TERMS AND PROVISIONS OF THE MERGER
AGREEMENT AND THE OPTION AGREEMENTS, WHICH SUMMARY DESCRIBES ALL MATERIAL TERMS
THEREOF, IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT (AS
AMENDED BY THE AMENDMENT TO THE MERGER AGREEMENT SET FORTH AS AN EXHIBIT TO THE
CURRENT REPORT ON FORM 8-K, FILED APRIL 24, 1997, OF BANC ONE) THE FIRST USA
OPTION AGREEMENT AND THE BANC ONE OPTION AGREEMENT, WHICH ARE INCLUDED AS
EXHIBITS TO THE CURRENT REPORT ON FORM 8-K, FILED JANUARY 28, 1997, OF FIRST USA
AND ARE INCORPORATED HEREIN BY REFERENCE. SEE "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
GENERAL
The BANC ONE Board and the First USA Board have each unanimously approved
the Merger Agreement, which provides for the Merger at the Effective Time, with
BANC ONE as the Surviving Corporation in the Merger. With certain limited
exceptions described below, each share of First USA Common Stock outstanding at
the Effective Time shall be converted into the right to receive a number of
shares of BANC ONE Common Stock equal to the Exchange Ratio. Shares of BANC ONE
capital stock, including BANC ONE Common Stock, issued and outstanding
immediately prior to the Effective Time will remain issued and outstanding after
the Merger.
The Merger Agreement also provides that, at the Effective Time, unless
redeemed prior thereto, each share of First USA Convertible Preferred Stock will
be converted into a share of a new series of BANC ONE preferred stock, with
rights, terms and preferences substantially the same as those of the First USA
Convertible Preferred Stock from which it was converted. However, pursuant to
the Merger Agreement, First USA has called for redemption all of the shares of
First USA Convertible Preferred Stock on and as of May 20, 1997, the date on
which the First USA Convertible Preferred Stock becomes convertible at the
option of First USA. BANC ONE and First USA intend that the Merger will be
consummated after May 20, 1997. Accordingly, it is intended that there will be
no shares of First USA Convertible Preferred Stock outstanding at the Effective
Time or so converted.
Each of the BANC ONE Board and the First USA Board believes that the terms
of the Merger Agreement are fair and in the best interest of the parties and
their respective shareholders, and unanimously recommends that the BANC ONE
Shareholders and the First USA Stockholders, respectively, vote to approve and
adopt the Merger Agreement and the consummation of the transactions contemplated
thereby and the BANC ONE Board recommends that the BANC ONE Shareholders vote to
approve the Articles Amendment.
This section of the Joint Proxy Statement-Prospectus describes certain
aspects of the proposed Merger, including the principal provisions of the Merger
Agreement and the Option Agreements. Certain capitalized terms used herein
without definition shall have the meanings ascribed them in the Merger Agreement
or the Option Agreements.
BACKGROUND OF THE MERGER
BANC ONE is an active acquiror of banking and non-bank financial
institutions. Since its formation in 1968, BANC ONE has acquired over 100
banking institutions. BANC ONE has followed a flexible acquisition strategy
reflecting a willingness to consider potential acquisitions as opportunities
arise based on then-existing market conditions and other circumstances.
BANC ONE has been familiar with First USA and its profile and performance
in the credit card industry since 1985 when the predecessor company to First USA
entered the industry. From time to time, representatives of BANC ONE and First
USA have had contact in the ordinary course of their businesses.
In December, 1996, John B. McCoy and William P. Boardman of BANC ONE
contacted John C. Tolleson of First USA to ascertain whether First USA might be
interested in engaging in a business combination with BANC ONE.
Mr. Tolleson indicated to Messrs. McCoy and Boardman that First USA might
be receptive to such a combination and discussed the potential business
combination with legal counsel, members of the First USA Board, executive
officers of First USA and First USA's financial advisor in December, 1996.
Beginning in
23
<PAGE> 35
early January, 1997, executives of BANC ONE and First USA commenced discussions
concerning the terms upon which a possible business combination could be
accomplished.
During the week commencing January 13, 1997, the companies commenced formal
due diligence investigations with respect to one another and, together with
their legal and financial advisors, met in person and by telephone to negotiate
the terms of the proposed Merger and the related Merger Agreement and Option
Agreements. The Exchange Ratio and other financial terms of the Merger were
negotiated directly by the executive managements of BANC ONE and First USA.
At a meeting of the BANC ONE Board held on January 19, 1997, Messrs. McCoy
and Boardman and other members of BANC ONE management presented the terms of the
proposed merger to the BANC ONE Board and discussed with the BANC ONE Board
various factors relating to the proposed Merger as described under "-- Reasons
for the Merger -- Recommendation of the BANC ONE Board and Reasons for the
Merger." Each of Lazard Freres and UBS Securities rendered its opinion that the
Exchange Ratio was fair to BANC ONE from a financial point of view. After
consideration of the foregoing matters, the BANC ONE Board determined that the
Merger was in the best interests of BANC ONE and its shareholders and
unanimously approved the Merger Agreement and the Option Agreements and the
transactions contemplated thereby.
At a meeting of the First USA Board held on January 19, 1997, Mr. Tolleson,
Mr. Richard W. Vague and other executives of First USA presented the terms of
the proposed merger to the First USA Board and discussed with the First USA
Board various factors relating to the proposed Merger as described below under
"-- Reasons for the Merger -- Recommendation of the First USA Board and Reasons
for the Merger." In addition, legal counsel summarized the then current drafts
of the Merger Agreement and the Option Agreements and provided advice regarding
the First USA Board's legal responsibilities and the fiduciary duties of the
directors. Merrill Lynch rendered its opinion that the Exchange Ratio was fair
to the First USA Stockholders from a financial point of view. After due
consideration of the foregoing matters, the First USA Board determined that the
Merger was in the best interests of First USA and its stockholders and
unanimously approved the Merger Agreement and the Option Agreements and the
transactions contemplated thereby.
Immediately following the meetings of the BANC ONE Board and First USA
Board, the Merger Agreement and the Option Agreements were executed by BANC ONE
and First USA.
On April 23, 1997, in connection with the restatement of certain historical
financial statements of First USA related to First USA's adoption of revised
accounting policies, BANC ONE and First USA agreed to amend the Merger Agreement
(a) to provide that BANC ONE would not assert such restatement (or certain
related effects) as a basis for terminating the Merger Agreement and (b) to
remove a provision that had permitted First USA to terminate the Merger
Agreement if the market price of BANC ONE Common Stock fell below $38.60 during
a specified period shortly before the anticipated Effective Time and BANC ONE
did not elect to make a compensatory adjustment to the Exchange Ratio. See
"Incorporation of Certain Documents by Reference" and "Summary -- Selected
Financial Data."
REASONS FOR THE MERGER
Recommendation of the BANC ONE Board and Reasons for the Merger. THE BANC
ONE BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF,
BANC ONE AND THE BANC ONE SHAREHOLDERS. THE BANC ONE BOARD UNANIMOUSLY
RECOMMENDS THAT THE BANC ONE SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER AND THE ISSUANCE OF SHARES OF BANC ONE COMMON
STOCK.
The BANC ONE Board believes that the consummation of the Merger presents a
unique opportunity to create a premier national financial services company,
which is a leading issuer of credit cards, processor of credit and debit cards
and provider of other financial products and services.
In reaching its conclusion to approve the Merger Agreement and the Option
Agreements, the BANC ONE Board reviewed with BANC ONE management, as well as
with its financial and legal advisors, a variety of factors, including the
following:
(a) The BANC ONE Board's familiarity with and review of BANC ONE's
business, operations, financial condition, earnings and prospects.
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(b) The anticipated effectiveness of the Merger in implementing and
accelerating BANC ONE's strategy to be a national financial services
provider and the benefits associated with First USA's strong credit card
franchise, the depth of its management team and the quality of its
operations. In this regard, the BANC ONE Board noted the national reach of
First USA's business and the record of First USA's management in achieving
earnings growth, as well as the anticipated performance of the combined
company's credit card operations after the Merger.
(c) The business, operations, financial condition, earnings and
prospects of each of BANC ONE and First USA. In making its determination,
the BANC ONE Board took into account the results of BANC ONE's due
diligence review of First USA's business.
(d) The anticipated financial impact of the proposed transaction on
BANC ONE's future financial performance. The BANC ONE Board considered the
historical growth rate of the First USA business and the likelihood of a
continuation of similar growth over the next several years, and the growth
rate anticipated to be available in other businesses in which BANC ONE
operates.
(e) The expectation that the Merger would result in cost synergies for
the combined company's credit card operations and result in an advantageous
cost structure relative to competitors. The BANC ONE Board noted that,
although no assurances could be given that any particular level of cost
synergies will be achieved, the managements of BANC ONE and First USA had
identified potential synergies in the form of cost savings and loss
reductions of at least $180 million, and revenue enhancements and funding
advantages of at least $155 million, which could be achieved in the first
three years following consummation of the Merger. See "Management and
Operations After the Merger."
(f) The structure of the Merger and the terms of the Merger Agreement
and the Option Agreements, including the fact that the fixed Exchange Ratio
provides certainty as to the number of shares of BANC ONE Common Stock to
be issued in the Merger and that the Merger is intended to qualify for
"pooling of interests" accounting treatment. The BANC ONE Board also
considered the proposed arrangements with members of management of First
USA, including the fact that the combined credit card operations of the
resulting company would be consolidated under the leadership of Richard
Vague, President of First USA and Chairman and Chief Executive Officer of
First USA Bank; the fact that employment and compensation arrangements with
key members of the First USA management team had been negotiated and could
reasonably be expected to enhance the likelihood of continuity in the First
USA management team following the Effective Time (see "-- Interests of
Certain Persons in the Merger"); and the fact that Mr. Tolleson would be
joining the BANC ONE Board following the Merger.
(g) The opinions of Lazard Freres and UBS Securities that, as of
January 19, 1997, the Exchange Ratio was fair to BANC ONE from a financial
point of view. See "-- Fairness Opinions of Financial Advisors -- BANC
ONE."
(h) The combined company's innovative marketing strategies, broader
product offerings and substantially increased customer base as well as the
enhanced technological, financial and human resources of the combined
company. The BANC ONE Board noted the potential for the combined company to
leverage First USA's marketing expertise and technological capability
through the greater scale and financial resources of BANC ONE's branch
banking system.
(i) The competitive advantage that the combined company would have as
one of the largest issuers of credit cards in terms of cardholders and
assets, as well as current trends and growth rates in the industry
including the growing use of credit cards as a channel for delivering
financial services.
(j) The likelihood of the Merger being approved by the appropriate
regulatory authorities. See "-- Regulatory Approvals Required for the
Merger."
The foregoing discussion of the information and factors considered by the
BANC ONE Board is not intended to be exhaustive but is believed to include all
material factors considered by the BANC ONE Board. In reaching its determination
to approve and recommend the Merger, the BANC ONE Board did not assign any
relative or specific weights to the foregoing factors, and individual directors
may have given differing
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<PAGE> 37
weights to different factors. The BANC ONE Board is unanimous in its
recommendation that holders of BANC ONE Common Stock vote for approval and
adoption of the Merger Agreement.
Recommendation of the First USA Board and Reasons for the Merger. THE
FIRST USA BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS
OF, FIRST USA AND THE FIRST USA STOCKHOLDERS. ACCORDINGLY, THE FIRST USA BOARD
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT THE FIRST USA
STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
The First USA Board believes that the consummation of the Merger presents a
unique opportunity to create a premier financial services company and a leading
issuer and processor of credit and debit cards and other financial products and
services.
In reaching its conclusion that the Merger is fair to and in the best
interests of First USA Stockholders, the First USA Board consulted with First
USA management as well as with its financial and legal advisors, and considered
a number of factors, including, but not limited to, the following:
(a) The First USA Board's familiarity with and review of First USA's
business, operations, financial condition, earnings and prospects.
(b) The First USA Board's review, based in part on a presentation by
Merrill Lynch, First USA's financial advisor, of (a) the business,
operations, financial condition and earnings of BANC ONE on a historical
and prospective basis and of the combined company on a pro forma basis, and
(b) the historical market price and potential future value of the BANC ONE
Common Stock, taking into account the anticipated impact of the Merger on
the price of the BANC ONE Common Stock over the short term and the long
term, the resulting relative interests of First USA Stockholders and BANC
ONE Shareholders in the equity of the combined company, and the potential
for increased earnings and book value per share for First USA Stockholders
as shareholders of the combined company.
(c) The presentation of Merrill Lynch to the First USA Board on
January 19, 1997 in connection with the First USA Board's consideration of
the Merger Agreement, and the opinion dated January 19, 1997 of Merrill
Lynch that, as of such date, the Exchange Ratio was fair, from a financial
point of view, to First USA Stockholders. See "-- Fairness Opinions of
Financial Advisors -- First USA."
(d) The expectation that the Merger would result in cost synergies for
the combined company's bankcard operations. The First USA Board noted that,
although no assurances can be given that any particular level of cost
synergies will be achieved, the managements of First USA and BANC ONE had
identified potential synergies in the form of cost savings and loss
reductions of at least $180 million, and revenue enhancements and funding
advantages of at least $155 million, which could be achieved in the first
three years following consummation of the Merger.
(e) The enhanced potential for marketing First USA's products and
services given the broader customer base of the combined company, the
ability of the combined company to offer a broader product line to current
customers of both companies than is currently available from First USA
alone and the ability to market First USA's bankcard products through BANC
ONE's branch banking system.
(f) The competitive advantage that the combined company would have as
one of the largest issuers of bankcards in terms of managed credit card
receivables, the competitive position of First USA within the industry and
current trends in the industry. In particular, the First USA Board
considered that the greater scale and financial, technological and human
resources of the combined company available to direct toward competition
with other issuers of bankcards and other providers of financial products
would be more effective than the resources of First USA alone in fulfilling
the long-term objective of increasing overall size and enhancing market
presence while maintaining asset quality and credit standards.
(g) The superior credit rating of BANC ONE, which will give the
combined company a lower cost of funds than is currently available to First
USA.
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(h) The structure of the Merger, which is intended to be tax-free
under federal tax laws to First USA and First USA Stockholders and which is
expected to qualify as a "pooling of interests" for accounting and
financial reporting purposes, and which provides First USA Stockholders an
opportunity to participate, as BANC ONE Shareholders, in the anticipated
growth of the combined company's business, which the First USA Board
believes will provide stockholders with a greater opportunity for long-term
appreciation than if First USA remains independent.
(i) The terms of the Merger, which provide for a fixed exchange ratio
of 1.1659 shares of BANC ONE Common Stock for each share of First USA
Common Stock, thereby enabling First USA Stockholders to benefit from any
increase in the trading price of the BANC ONE Common Stock prior to the
Merger while subjecting First USA Stockholders to possible declines in such
trading price prior to the Merger, and which represented $52.61 in value of
BANC ONE Common Stock to be received for each share of First USA Common
Stock in the Merger (based on the closing price of the BANC ONE Common
Stock on the NYSE on January 17, 1997, the last trading day prior to the
execution and delivery of the Merger Agreement) or a premium of
approximately 43% over the $36.75 closing sale price per share of First USA
Common Stock on the NYSE on January 17, 1997.
(j) The other terms of the Merger Agreement and the Merger, including
(a) the proposed arrangements with respect to First USA's management
following the Merger, (b) the conditions to BANC ONE's obligations to
consummate the Merger, including that certain executive officers of First
USA or its subsidiaries enter into employment agreements with BANC ONE and
First USA or one of its subsidiaries prior to the Effective Time, and (c)
the conditions to each company's obligations to consummate the Merger,
including that each company's shareholders approve the terms of the Merger
Agreement and the Merger and that BANC ONE's independent accountants
deliver a letter to each company that the Merger will qualify for "pooling
of interests" accounting treatment.
(k) The terms of the Option Agreements, which are reciprocal in
nature, including (a) the risk that the existence of the First USA Stock
Option Agreement might inhibit other offers from being made, recognizing
that the execution of the First USA Stock Option Agreement was a condition
to BANC ONE's willingness to enter into the Merger Agreement, (b) that,
under certain circumstances, First USA could be required to repurchase the
First USA Option and any shares of First USA Common Stock issued thereunder
for cash, and (c) that the exercise or repurchase of the First USA Option
is likely to prohibit any other acquiror of First USA from accounting for
any acquisition of First USA using the "pooling of interests" accounting
method.
The foregoing discussion of the information and factors considered by the
First USA Board is not intended to be exhaustive but is believed to include all
material factors considered by the First USA Board. In view of the factors
considered in connection with its evaluation of the Merger, the First USA Board
did not find it practicable to and did not quantify or otherwise assign relative
weights to the factors considered in reaching its determination. In addition,
individual members of the First USA Board may have given different weights to
different factors. For a discussion of the interests of the executive officers
and directors of First USA in the Merger, see "-- Interests of Certain Persons
in the Merger."
FAIRNESS OPINIONS OF FINANCIAL ADVISORS
BANC ONE. Lazard Freres and UBS Securities each rendered opinions to the
BANC ONE Board on January 19, 1997, to the effect that, at the date of such
opinions, the Exchange Ratio in the Merger was fair to BANC ONE from a financial
point of view. Each of Lazard Freres and UBS Securities subsequently delivered
to the BANC ONE Board a written opinion dated as of the date of this Joint Proxy
Statement-Prospectus confirming its opinion of January 19, 1997.
The full texts of the opinions of Lazard Freres and UBS Securities dated as
of the date of this Joint Proxy Statement-Prospectus, which set forth, among
other things, assumptions made, procedures followed, matters considered and
limits on the review undertaken by Lazard Freres and UBS Securities, are
attached as Appendices A and B, respectively, to this Joint Proxy
Statement-Prospectus. Holders of BANC ONE Common Stock are urged to read the
opinions in their entirety. Lazard Freres' and UBS Securities' opinions
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<PAGE> 39
are addressed to the BANC ONE Board and do not constitute a recommendation to
any BANC ONE Shareholder as to how such shareholder should vote at the BANC ONE
Special Meeting. The summary set forth in this Joint Proxy Statement-Prospectus
of the opinions of Lazard Freres and UBS Securities is qualified in its entirety
by reference to the full text of the opinions attached as Appendices A and B,
respectively, to this Joint Proxy Statement-Prospectus.
In connection with their opinions, Lazard Freres and UBS Securities: (i)
reviewed the financial terms and conditions of the Merger Agreement; (ii)
analyzed certain historical business and financial information relating to BANC
ONE and First USA; (iii) reviewed various financial forecasts and other data
provided to them by (a) BANC ONE relating to its businesses, prospects and
strategic objectives and to the businesses, prospects and strategic objectives
of First USA, and (b) First USA relating to its businesses, prospects and
strategic objectives (and Lazard Freres and UBS Securities also reviewed
possible financial benefits projected by BANC ONE to be realized in connection
with the Merger); (iv) participated in discussions with members of the senior
managements of BANC ONE and First USA with respect to the businesses and
prospects of BANC ONE and First USA, respectively, the strategic objectives of
each, and possible financial benefits which might be realized in connection with
the Merger; (v) reviewed public information with respect to certain other
companies which Lazard Freres and UBS Securities believe to be relevant or
comparable to BANC ONE and First USA, the securities of which are publicly
traded; (vi) reviewed the financial terms of certain business combinations or
other financial transactions which Lazard Freres and UBS Securities believe to
be relevant or comparable to First USA; (vii) reviewed the historical stock
prices and trading volumes of shares of BANC ONE Common Stock and First USA
Common Stock; and (viii) conducted such other financial studies, analyses and
investigations as Lazard Freres and UBS Securities deemed appropriate, including
with respect to First USA Paymentech.
In conducting their review and arriving at their opinions, Lazard Freres
and UBS Securities relied upon the accuracy and completeness of the foregoing
financial and other information, and did not assume any responsibility for any
independent verification of such information. With respect to financial
forecasts (including projected cost savings, revenue enhancements, operating
synergies and other possible operating and financial benefits), Lazard Freres
and UBS Securities assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of management of
BANC ONE and First USA as to the future financial performance of BANC ONE and
First USA respectively, and Lazard Freres and UBS Securities assumed that such
forecasts and projections would be realized in the amounts and at the times
contemplated thereby. Lazard Freres and UBS Securities assume no responsibility
for and express no view as to such forecasts and projections or the assumptions
on which they are based. Lazard Freres and UBS Securities are not experts in the
evaluation of loan portfolios or the allowances for loan losses with respect
thereto and assumed, with BANC ONE's consent, that such allowances for BANC ONE
and First USA are, in the aggregate, adequate to cover such losses. In addition,
Lazard Freres and UBS Securities did not review individual credit files nor did
they make or obtain any independent evaluation or appraisal of the assets and
liabilities of BANC ONE or First USA or any of their respective subsidiaries or
affiliates, and Lazard Freres and UBS Securities were not furnished with any
such evaluation or appraisal. Lazard Freres and UBS Securities were informed by
BANC ONE and assumed, with BANC ONE's consent, that the Merger would be recorded
as a "pooling of interests" in accordance with GAAP.
Lazard Freres' and UBS Securities' opinions were necessarily based on
economic, monetary, market and other conditions as in effect on, and the
information made available to Lazard Freres and UBS Securities as of, the date
of their opinions.
In rendering their opinions, Lazard Freres and UBS Securities each assumed
that the Merger would be consummated on the terms described in the Merger
Agreement, without any waiver of any material terms or conditions by BANC ONE
and that obtaining the necessary regulatory approvals for the Merger would not
have an adverse effect on BANC ONE, First USA or the combined company. No
limitations were imposed by BANC ONE upon either Lazard Freres or UBS Securities
with respect to the investigations made or procedures followed by such firm in
rendering its respective opinion.
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In connection with rendering their opinions to the BANC ONE Board, Lazard
Freres and UBS Securities performed a variety of financial analyses in support
of their opinions which are summarized below. Lazard Freres and UBS Securities
believe that their analyses must be considered as a whole and that selecting
portions of their analyses and the factors considered by them, without
consideration of all factors and analyses, could create a misleading view of the
analyses and the processes underlying Lazard Freres' and UBS Securities'
opinions. Lazard Freres and UBS Securities arrived at their opinions based on
the results of all the analyses they undertook assessed as a whole, and they did
not draw conclusions from or with regard to any one method of analysis. The
preparation of a fairness opinion is a complex process involving subjective
judgments, and is not necessarily susceptible to partial analyses or summary
description. With respect to the comparable company analysis and the consumer
finance company transactions, credit card portfolio transactions and bank merger
and acquisition transactions analyses summarized below, no public company
utilized as a comparison is identical to BANC ONE or First USA, no transaction
is identical in nature or rationale to the contemplated transaction between BANC
ONE and First USA and such analyses necessarily involve complex considerations
and judgments concerning the differences in financial and operating
characteristics of the companies and other factors that could affect the
acquisition or public trading values of the companies concerned. The earnings
forecasts and projections furnished by the senior management of BANC ONE and
First USA contained in or underlying Lazard Freres' and UBS Securities' analyses
are not necessarily indicative of future results or values, which may be
significantly more or less favorable than such forecasts and projections.
Neither First USA nor BANC ONE publicly discloses internal management estimates
of the type provided to Lazard Freres and UBS Securities in connection with
their review of the financial terms of the Merger. The estimates were based on
numerous variables and assumptions that are inherently uncertain, including,
without limitation, factors related to general economic and competitive
conditions. Estimates of values of companies or assets do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities actually may be sold.
The following is a brief summary of the material analyses performed by
Lazard Freres and UBS Securities in support of their respective opinions
rendered on January 19, 1997, which as indicated above, were confirmed as of the
date hereof:
(a) Transaction Summary. Lazard Freres and UBS Securities reviewed
the closing prices for the BANC ONE Common Stock and First USA Common Stock
on January 17, 1997 of $45.125 and $36.75, respectively, as well as the
Exchange Ratio of 1.1659, resulting in a value per share of First USA
Common Stock of $52.61 and an aggregate value of approximately $7.3 billion
(based on the acquisition of 139.4 million fully diluted shares of First
USA Common Stock, net of option proceeds). This analysis showed that the
Exchange Ratio represented a premium of 43% to market price. This analysis
also showed that the Exchange Ratio, as a multiple of actual calendar year
1996 and estimated calendar year 1997 earnings per share ("EPS"),
represented 25.1x EPS for 1996 and 19.4x EPS for 1997 based upon 1996 EPS,
adjusted for certain non-recurring items ("adjusted calendar year 1996
EPS") and First USA management estimates of 1997 EPS. Lazard Freres and UBS
Securities also noted that the Merger would result in a combined entity
that is the third largest credit card issuer in terms of managed credit
card receivables measured as of September 30, 1996.
(b) Comparable Company Analysis. Lazard Freres and UBS Securities
reviewed and compared certain financial, operating and market information
of First USA with the following three mono-line credit card issuers that
they believed to be appropriate for comparison: Advanta Corp. ("Advanta"),
Capital One Financial Corporation ("Capital One") and MBNA Corporation
("MBNA"). This comparison showed that (i) First USA's growth in total
managed loans for the period from 1992 to 1995 was 71.4%, as compared to
48.6% for Advanta, 73.9% for Capital One and 39.4% for MBNA; (ii) First
USA's net income growth for the period from 1992 to 1995 was 82.7%, as
compared to 38.3% for Advanta, 57.7% for Capital One and 26.9% for MBNA;
(iii) First USA's return on average assets ("ROAA") for the last twelve
months ("LTM") ended September 30, 1996 was 3.28%, as compared to 2.65% for
Advanta, 2.95% for Capital One and 3.13% for MBNA; (iv) First USA's return
on average equity ("ROAE") for the LTM ended September 30, 1996 was 27.94%,
as compared to 19.51% for Advanta, 23.83% for Capital One and 32.74% for
MBNA; (v) First USA's stock price as a multiple of
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LTM EPS was 18.8x, as compared to 14.1x for Advanta A Shares, 13.1x for
Advanta B Shares, 14.7x for Capital One and 25.3x for MBNA; (vi) First
USA's stock price as a multiple of adjusted calendar year 1996 EPS was
17.5x, as compared to price/earnings multiples, based upon 1996 estimated
EPS (based upon IBES estimates) of 11.1x for Advanta A Shares, 10.3x for
Advanta B Shares, 14.6x for Capital One and 18.7x for MBNA; (vii) First
USA's stock price as a multiple of First USA management estimated calendar
year 1997 EPS was 13.6x, as compared to price/earnings multiples, based
upon 1997 estimated EPS (based upon IBES estimates) of 9.3x for Advanta A
Shares, 8.6x for Advanta B Shares, 12.1x for Capital One and 15.6x for
MBNA; and (viii) First USA's stock price as a multiple of book value per
share was 4.26x, as compared to 2.30x for Advanta A Shares, 2.13x for
Advanta B Shares, 3.17x for Capital One and 7.15x for MBNA. IBES is a data
service that monitors and publishes compilations of earnings estimates by
selected research analysts regarding companies of interest to institutional
investors.
(c) Comparable Credit Card Portfolio Sale Premiums Analysis. Lazard
Freres and UBS Securities analyzed 61 selected credit card portfolio sales
over the period from 1990 through 1996 for which information was publicly
available. This analysis, which was based on the purchase price premium as
a percentage of card portfolio assets as reported by selected purchasers
and sellers of credit card portfolios, showed that the Exchange Ratio
represented a premium to the First USA managed receivables of 25.3%,
compared to a high premium of 29.0% and a median premium of 15.5%. The
premium to First USA's managed receivables was calculated based on managed
receivables at December 31, 1996 of $22.4 billion and an implied premium of
$5.7 billion calculated by taking the total transaction value of $7.3
billion and subtracting the sum of (x) the then current market value of
First USA's investment in First USA Paymentech and (y) First USA's tangible
book value excluding its equity investment in First USA Paymentech.
(d) Price to Earnings as a Multiple of Growth. Lazard Freres and UBS
Securities analyzed 10 commercial bank transactions greater than $500
million in aggregate value since 1995 based upon the financial and market
statistics for such transactions as of their respective announcement dates.
The transactions analyzed were BANC ONE/Liberty Bancorp, Inc., Crestar
Financial Corp./Citizens Bancorporation, Southern National Corp./United
Carolina Bancshares, Regions Financial Corp./First National Bancorp,
NationsBank Corporation/Bank South Corporation, NationsBank Corporation/
Boatmen's Bancshares, Inc., Mercantile Bancorporation/Mark Twain
Bancshares, Bank of Boston Corporation/BayBanks, Inc., Fleet Financial
Group, Inc./Shawmut National Corp. and CoreStates Financial Corp./Meridian
Bancorp. This analysis showed (i) that the Exchange Ratio represented a
price/next twelve months ("NTM") EPS (based on IBES median consensus
estimates at the time the Merger was announced) of 20.5x, compared to a
high of 18.5x, a median of 16.0x and a low of 13.3x for the selected
transactions, (ii) a projected growth rate (based on IBES median consensus
estimates at the time the Merger was announced) of 23.0% for First USA,
compared to a high of 10.0%, a median of 8.0% and a low of 6.3% for the
selected target companies and (iii) as a result, a P/E to growth ratio of
0.9x for the Merger, compared to a high of 2.4x, a median of 2.0x and a low
of 1.4x for the selected transactions.
(e) Comparable Consumer Finance Company Acquisitions Analysis. Lazard
Freres and UBS Securities analyzed four consumer finance company
acquisitions. The transactions analyzed were Barnett Banks/Oxford
Resources, Mercury Finance/Fidelity Acceptance, Southern National/Regional
Acceptance and KeyCorp/Auto Finance Group, based upon the financial and
market statistics for such transactions as of their respective announcement
dates. This analysis showed that the Exchange Ratio represents (i) a price
as a multiple of First USA LTM earnings of 25.1x, as compared to a high of
35.7x, a median of 23.7x and a low of 11.0x for the selected transactions
and (ii) a price as a multiple of First USA NTM earnings of 19.4x, as
compared to a high of 21.3x, a median of 16.9x and a low of 10.0x for the
selected transactions.
(f) Discounted Cash Flow Analysis. Lazard Freres and UBS Securities
performed a discounted cash flow analysis to determine the present value
per share of First USA Common Stock, including synergies giving effect to
the Merger. For purposes of this analysis, Lazard Freres and UBS Securities
assumed a growth rate of 21.0% for First USA through the year 2002. Lazard
Freres and UBS Securities utilized discount rates ranging from 12.2% to
16.2%, which Lazard Freres and UBS Securities viewed as
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the appropriate discount rate range based on historical costs of equity and
required market returns, and terminal value multiples ranging from 12.3x to
14.3x applied to projected cash earnings for 2002. The analysis showed a
range of present values per share of First USA Common Stock including
synergies from $60.88 to $83.26. The forecasts and projections furnished to
Lazard Freres and UBS Securities for BANC ONE and First USA were prepared
by the managements of BANC ONE and First USA, respectively. As a matter of
policy, BANC ONE and First USA do not publicly disclose internal management
forecasts, projections or estimates of the type furnished to Lazard Freres
and UBS Securities in connection with their analysis of the Merger, and
such forecasts, projections and estimates were not prepared with a view
towards public disclosure. These forecasts, projections and estimates were
based on numerous variables and assumptions which are inherently uncertain
and which may not be within the control of management, including, without
limitation, general economic, regulatory and competitive conditions.
Accordingly, actual results could vary materially from those set forth in
such forecasts, projections and estimates. These discounted cash flow
analyses did not purport to be indicative of actual values or expected
values of the shares of First USA Common Stock before or BANC ONE Common
Stock after the Merger.
(g) Pro Forma Pooling Acquisition Analysis. Lazard Freres and UBS
Securities analyzed certain financial aspects of the Merger on a pro forma
"pooling of interests" basis. For purposes of the pooling acquisition
analysis, Lazard Freres and UBS Securities relied on certain key
assumptions furnished by senior management of BANC ONE and First USA,
including the amount and timing of assumed cost savings to be realized
after the Merger, the amount and timing of assumed revenue enhancements to
be realized after the Merger, the amount and timing of assumed funding
advantages to be realized after the Merger, and the amount of restructuring
charges to be incurred. These assumptions were based on numerous variables
and assumptions that are inherently uncertain, including, without
limitation, factors related to general economic, market and competitive
conditions. Accordingly, actual results could vary significantly from those
set forth in such assumptions. Based on these assumptions, Lazard Freres'
and UBS Securities' pro forma pooling acquisition analysis of the Merger
from BANC ONE's perspective showed that the Merger, compared to continued
operation of BANC ONE on a stand-alone basis, would result in pro forma EPS
dilution of 7.0% and 0.0% in 1997 and 1998, respectively, and accretion of
3.3% and 4.7% in 1999 and 2000, respectively.
In connection with its opinion dated the date of this Joint Proxy
Statement-Prospectus, each of Lazard Freres and UBS Securities performed
procedures to update, as necessary, certain of the analyses described above and
reviewed the assumptions on which such analyses described above were based and
the factors considered in connection therewith (including, without limitation,
the restatement of certain financial statements of First USA). Neither Lazard
Freres nor UBS Securities performed any analyses in addition to those described
in updating its January 19, 1997 opinion.
The BANC ONE Board retained Lazard Freres and UBS Securities based upon the
recognized experience and expertise of Lazard Freres' and UBS Securities'
financial institutions groups. Lazard Freres and UBS Securities are
internationally recognized investment banking and advisory firms. Lazard Freres
and UBS Securities, as part of their investment banking and advisory businesses,
are continually engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. BANC ONE
selected Lazard Freres and UBS Securities as its financial advisers because of
their reputation and because of their substantial experience in transactions
such as the Merger. Lazard Freres and UBS Securities each have from time to time
provided investment banking and financial advisory services to BANC ONE. In
addition, UBS Securities or its affiliates have from time to time provided
lending and investment banking services to First USA for which UBS Securities or
its affiliates have received fees or other consideration for such services. In
the ordinary course of business and subject to certain restrictions, Lazard
Freres and UBS Securities and their respective affiliates may actively trade the
equity and debt securities of First USA and BANC ONE for their own accounts and
for the accounts of their customers and, accordingly, at any time may hold a
long or short position in such securities.
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BANC ONE and Lazard Freres and UBS Securities have entered into a letter
agreement, dated January 9, 1997, relating to the services to be provided by
Lazard Freres and UBS Securities in connection with the Merger (the "Lazard
Freres and UBS Engagement Letter"). BANC ONE has agreed to pay each of Lazard
Freres' and UBS Securities' fees as follows: (i) a retainer of $250,000, payable
upon execution of the Lazard Freres and UBS Engagement Letter; (ii) an
additional fee of $1,000,000, payable upon the execution of the Merger
Agreement; (iii) an additional fee of $2,000,000, payable upon the mailing of a
definitive proxy statement for the Merger; and (iv) an additional fee equal to
$6,600,000 (less any fees paid under the preceding clauses (i), (ii) and (iii)),
payable upon the consummation of the Merger. In the Lazard Freres and UBS
Engagement Letter, BANC ONE also has agreed to reimburse each of Lazard Freres
and UBS Securities for all its out-of-pocket expenses, including fees and
expenses of legal counsel. Pursuant to additional letter agreements, each dated
January 9, 1997, BANC ONE also has agreed to indemnify Lazard Freres and UBS
Securities, respectively, against certain liabilities, including liabilities
under the federal securities laws. As of April 28, 1997, $1,250,000 had been
paid to each of Lazard Freres and UBS Securities under this arrangement.
First USA. Merrill Lynch first began to act as First USA's financial
advisor in connection with the Merger in December, 1996 (and was formally
retained as First USA's financial advisor pursuant to a letter agreement dated
January 2, 1997) based upon its qualifications, experience and reputation, as
well as upon Merrill Lynch's prior investment banking relationship and general
familiarity with First USA. At the January 19, 1997 meeting of the First USA
Board, Merrill Lynch rendered an opinion to the First USA Board that, as of such
date, the proposed Exchange Ratio in the Merger was fair from a financial point
of view to the First USA Stockholders (other than BANC ONE and its affiliates).
Merrill Lynch subsequently delivered to the First USA Board a written opinion
dated as of the date of this Joint Proxy Statement-Prospectus confirming its
opinion of January 19, 1997.
The full text of Merrill Lynch's opinion dated as of the date of this Joint
Proxy Statement-Prospectus, which sets forth, among other things, assumptions
made, procedures followed, matters considered, and limitations on the scope of
review undertaken, is attached as Appendix C to this Joint Proxy Statement-
Prospectus and is incorporated herein by reference. First USA Stockholders are
urged to read the Merrill Lynch opinion dated as of this Joint Proxy
Statement-Prospectus in its entirety. This summary of the opinion of Merrill
Lynch set forth in this Joint Proxy Statement-Prospectus is qualified in its
entirety by reference to the full text of such opinion.
Merrill Lynch's opinions are directed to the First USA Board and address
only the Exchange Ratio. They do not address the underlying business decision to
proceed with the Merger and do not constitute, nor should they be construed as,
a recommendation to any First USA Stockholder as to how such Stockholder should
vote at the First USA Special Meeting or any other matter in connection
therewith.
In arriving at its opinion dated as of the date of this Joint Proxy
Statement-Prospectus, among other things, Merrill Lynch has: (i) reviewed First
USA's Annual Reports, Forms 10-K and related audited financial information for
the three fiscal years ended June 30, 1996 (as amended, in the case of the Form
10-K for the fiscal year ended June 30, 1996, by Amendment No. 1 on Form 10-K/A
filed on April 24, 1997) and First USA's Forms 10-Q and related unaudited
financial information for the quarterly periods ended September 30, 1996 and
December 31, 1996 (each as amended by the respective Amendment No. 1 on Form
10-Q/A filed on April 24, 1997); (ii) reviewed BANC ONE's Annual Reports, Forms
10-K and related audited financial information for the four fiscal years ended
December 31, 1996; (iii) reviewed certain information, including financial
forecasts, relating to the business, earnings, cash flow, assets and prospects
of First USA and BANC ONE, prepared by First USA and BANC ONE, respectively, and
furnished to Merrill Lynch by First USA and BANC ONE, respectively; (iv)
conducted discussions with members of senior management of First USA and BANC
ONE concerning the respective financial condition, business, earnings and assets
and management's respective views as to the future financial performance, growth
rates, business and prospects of First USA and BANC ONE on both a stand-alone
and a combined basis; (v) reviewed the historical market prices and trading
activity for the First USA Common Stock and the BANC ONE Common Stock and
compared them with those of certain publicly traded companies which Merrill
Lynch deemed to be relevant; (vi) compared the respective results of operations
of First USA and BANC ONE with those of certain publicly traded companies which
Merrill Lynch deemed to be relevant; (vii) compared the proposed financial terms
of the Merger with the financial terms of certain other mergers and acquisitions
which Merrill Lynch deemed to be relevant; (viii) analyzed, based on information
provided to Merrill Lynch by senior
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management of First USA and BANC ONE, the pro forma effect of the Merger on BANC
ONE's earnings and capitalization ratios; (ix) reviewed the Merger Agreement;
(x) reviewed the BANC ONE Stock Option Agreement and the First USA Stock Option
Agreement; and (xi) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other matters as
it deemed necessary to the rendering of its opinion.
In preparing its opinions, Merrill Lynch assumed and relied upon the
accuracy and completeness of all financial and other information supplied or
otherwise made available to it for purposes of its opinions, and did not assume
any responsibility for independently verifying such information or undertaking
an independent evaluation or appraisal of the assets or liabilities, contingent
or otherwise, of BANC ONE or First USA or any of their subsidiaries, nor has
Merrill Lynch undertaken or been furnished any such evaluation or appraisal.
Merrill Lynch also assumed and relied upon the senior management of BANC ONE and
First USA as to the reasonableness and achievability of the financial and
operating forecasts (and the assumptions and bases therefor) provided to Merrill
Lynch. In that regard, Merrill Lynch assumed, with First USA's consent, that
such forecasts, including, without limitation, financial forecasts, projected
cost savings and operating synergies resulting from the Merger, reflect the best
currently available estimates and judgments of management as to the future
financial performance of BANC ONE and First USA. Merrill Lynch is not an expert
in the evaluation of allowances for loan losses, and Merrill Lynch did not
undertake an independent evaluation of the adequacy of the allowance for loan
losses of BANC ONE or First USA nor did Merrill Lynch review any individual
credit files, and Merrill Lynch assumed that the aggregate allowances for loan
losses of BANC ONE and First USA are adequate to cover such losses. As a matter
of policy, First USA does not publicly disclose internal management forecasts,
projections or estimates of the type furnished to Merrill Lynch, Lazard Freres
and UBS Securities in connection with their analysis of the Merger, and such
forecasts, projections and estimates were not prepared with a view towards
public disclosure. These forecasts, projections and estimates were based on
numerous variables and assumptions which are inherently uncertain and which may
not be within the control of management, including, without limitation, general
economic, regulatory and competitive conditions. Accordingly, actual results
could vary materially from those set forth in such forecasts, projections and
estimates. See "Incorporation of Certain Documents by Reference."
Merrill Lynch's opinions are predicated on the Merger receiving the tax and
accounting treatment contemplated by the Merger Agreement. Merrill Lynch's
opinions were necessarily based upon economic, market and other conditions as in
effect on, and the information made available to it as of, the date of such
opinions. In connection with its engagement as financial advisor and the
preparation of its opinion, Merrill Lynch was not retained by First USA or the
First USA Board to solicit, and Merrill Lynch did not solicit, proposals from
third parties for the acquisition of all or any part of First USA. No
limitations were imposed by First USA on the scope of Merrill Lynch's
investigation or on the procedures followed by Merrill Lynch in rendering its
opinion.
In connection with rendering its opinion, Merrill Lynch performed a variety
of financial analyses, consisting of those summarized below. The summary set
forth below does not purport to be a complete description of the analyses
performed by Merrill Lynch in this regard, although it describes all material
analyses performed by Merrill Lynch. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial analysis and the application of these methods to the particular
circumstances, and, therefore, such an opinion is not readily susceptible to a
partial analysis or summary description. Accordingly, notwithstanding the
separate factors summarized below, Merrill Lynch believes that its analyses must
be considered in their entirety and that selecting portions of its analyses and
factors considered by it, without considering all analyses and factors, or
attempting to ascribe relative weights to some or all such analyses and factors,
could create an incomplete view of the evaluation process underlying Merrill
Lynch's opinions. The fact that any specific analysis has been referred to in
the summary below is not meant to indicate that such analysis was given more
weight than any other analysis.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, all of which are beyond the control of Merrill Lynch, First USA
and BANC ONE. The analyses performed by Merrill Lynch are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than
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suggested by such analyses. In addition, the analyses do not purport to be
appraisals or to reflect the prices at which any securities of First USA or BANC
ONE may trade at the present time or at any time in the future. Such analyses
were prepared solely as part of Merrill Lynch's analysis of the fairness of the
Exchange Ratio to the First USA Stockholders (other than BANC ONE and its
affiliates) and were provided to the First USA Board in connection with the
delivery of Merrill Lynch's opinions. With respect to the comparison of selected
companies analysis summarized below, no public company utilized as a comparison
is identical to First USA or BANC ONE, and such analyses necessarily involve
complex considerations and judgments concerning the differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading values of the companies concerned.
The following is a summary of the material analyses presented by Merrill
Lynch to the First USA Board in connection with its January 19, 1997 opinion,
which, as indicated above, was confirmed as of the date hereof.
(a) Offer Valuation. Merrill Lynch reviewed the terms of the proposed
transaction, including the Exchange Ratio and the aggregate transaction value.
Merrill Lynch reviewed the implied value of the consideration offered based upon
the closing share price of BANC ONE Common Stock on January 17, 1997 (the last
trading day prior to the announcement of the Merger), which indicated that the
implied value of the consideration offered in the BANC ONE proposal was
approximately $52.61 per share of First USA Common Stock, representing a 43.2%
premium to the January 17, 1997 First USA Common Stock closing market price of
$36.75 per share (the "First USA January 17 Closing Price"), or a total
transaction value of approximately $7.333 billion based upon 139.4 million fully
diluted shares of First USA Common Stock outstanding. In addition, Merrill Lynch
reviewed the implied value of the consideration offered based upon the average
closing share prices of BANC ONE Common Stock for each of the five-day, 10-day
and 20-day periods ending on January 17, 1997 and the First USA January 17, 1997
Closing Price as well as the high and low closing price of First USA Common
Stock for the 12-week period preceding the announcement of the Merger, which
resulted in a range of premiums of 40.3% to 83.4%. Based on the aggregate
consideration offered using the January 17, 1997 closing market price for BANC
ONE Common Stock, Merrill Lynch calculated the multiples of implied offer value
to fully diluted book value per share, implied offer value to fully diluted
tangible book value per share, implied offer value to EPS for the 12 months
ended December 31, 1996 and implied offer value to First USA management's
estimated 1997 calendar year EPS in the contemplated transaction. This analysis
resulted in the following multiples: an implied offer value to fully diluted
book value per share multiple of 6.39x; an implied offer value to fully diluted
tangible book value per share multiple of 8.68x; an implied offer value to EPS
for the 12 months ended December 31, 1996 multiple of 25.05x; and an implied
offer value to First USA management's estimated 1997 EPS multiple of 19.41x.
Merrill Lynch also calculated the pro forma dividend payable of $1.59 with
respect to each share of First USA Common Stock after giving effect to the
Merger, representing a premium of 560.7% to First USA's historical dividend per
share of $0.24, based on BANC ONE's existing dividend per share of $1.36
converted at the Exchange Ratio; the pro forma fully diluted EPS of $3.88
attributable to First USA Common Stock after giving effect to the Merger,
representing a premium of 43.2% to First USA's estimated 1997 EPS on a
stand-alone basis of $2.71, based on estimated fully diluted 1997 BANC ONE EPS
of $3.59 as published by First Call (a financial data service company); and the
pro forma fully diluted book value per share of $18.23 attributable to First USA
Common Stock after giving effect to the Merger, representing a premium of 122.1%
to First USA's book value per share as of September 30, 1996 of $8.21, based on
the fully diluted book value per share of BANC ONE as of September 30, 1996 of
$19.20.
(b) Pro Forma Merger Analysis. Based on projections provided by First USA
and BANC ONE, Merrill Lynch analyzed certain pro forma effects resulting from
the Merger. This analysis indicated that the transaction would be dilutive to
projected EPS of BANC ONE Common Stock in 1997 (before the one-time charge
associated with the Merger) and 1998 and slightly accretive in 1999, and that
the Merger was dilutive to BANC ONE's tangible book value per share.
(c) Contribution Analysis. Merrill Lynch reviewed the relative
contributions to be made by First USA and BANC ONE to the combined entity. The
financial and operating information reviewed in such analysis included total
assets, total assets including securitized receivables, managed credit card
receivables, total
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equity, twelve months' revenues through September 30, 1996, twelve months'
pre-tax income through September 30, 1996, historical net income for the
calendar years ended December 31, 1995 and 1996 and estimated net income for the
calendar years ending December 31, 1997 and 1998 (calculated as the product of
the number of fully diluted shares outstanding and First Call EPS estimates).
Merrill Lynch also analyzed the fully diluted market capitalization of the
combined entity. This analysis showed that, while the First USA Stockholders
would own approximately 26.8% of the outstanding shares of the combined entity
based upon the Exchange Ratio, First USA was contributing 9.6% of total assets,
21.4% of total assets including securitized receivables, 63.9% of managed credit
card receivables, 12.7% of total equity, 11.2% of twelve months' revenues
through September 30, 1996, 16.4% of twelve months' pre-tax income through
September 30, 1996, 14.2% and 17.1% of historical net income for the calendar
years ended December 31, 1995 and 1996, respectively, 19.3% and 21.1% of
estimated net income for the calendar years ending December 31, 1997 and 1998,
respectively, and 20.5% of the fully diluted market capitalization of the
combined entity based on January 17, 1997 closing market prices.
(d) Discounted Dividend Stream Analysis. Using a discounted dividend
stream analysis, Merrill Lynch estimated the present value of the future streams
of after-tax cash flows that First USA could produce on a stand-alone basis (and
excluding the contribution of First USA's approximately 57% interest in First
USA Paymentech to such cash flows) from 1997 through 2001 and distribute to
stockholders ("Dividendable Net Income"). In this analysis, Merrill Lynch
assumed that First USA performed in accordance with the earnings forecasts
provided to Merrill Lynch by First USA's senior management and, assuming a 20%
growth rate, projected the maximum dividends that would permit First USA's
tangible equity to tangible asset ratio to be maintained at a minimum 10.05%
level. Merrill Lynch calculated the sum of (i) the terminal values per share of
First USA Common Stock (excluding the incremental value attributable to the
operations of First USA Paymentech) based on assumed multiples of First USA's
projected 2002 net income (less amortization) ranging from 11x to 13x plus (ii)
the projected 1997-2001 five-year Dividendable Net Income streams per share, in
each case, discounted to present values at assumed discount rates ranging from
16% to 17%. This discounted dividend stream analysis indicated a reference range
of $39.87 to $47.26 per share of First USA Common Stock (excluding the
incremental value attributable to the operations of First USA Paymentech).
Together with the proportionate per share market value of First USA Paymentech
to reflect First USA's approximately 57% interest in First USA Paymentech ($4.72
as of January 17, 1997), the discounted dividend stream analysis indicates a
reference range of $44.59 to $51.98 per share of First USA Common Stock.
Merrill Lynch also estimated the present value of the Dividendable Net
Income that BANC ONE could produce on a stand-alone basis from 1997 through
2001. In this analysis, Merrill Lynch assumed that BANC ONE performed in
accordance with the earnings forecasts provided to Merrill Lynch by BANC ONE's
senior management and projected the maximum dividends that would permit BANC
ONE's tangible common equity to tangible asset ratio to be maintained at a
minimum 6.5% level. Merrill Lynch calculated the sum of (i) the terminal values
per share of BANC ONE Common Stock based on assumed multiples of BANC ONE's
projected 2002 net income (less amortization) ranging from 9.0x to 11.0x plus
(ii) the projected 1997-2001 five-year Dividendable Net Income streams per
share, in each case, discounted to present values at assumed discount rates
ranging from 14% to 15%. This discounted dividend stream analysis indicated a
reference range of $43.23 and $51.14 per share of BANC ONE Common Stock.
(e) Analysis of Selected Acquisition Transactions. Merrill Lynch reviewed
publicly available information regarding transactions involving the acquisition
of credit card portfolios in the United States with a value of greater than $15
million which had occurred since January 1, 1995. Merrill Lynch calculated the
premium of the purchase price paid in such acquisitions to the value of the
managed receivables being acquired, which Merrill Lynch determined resulted in a
relevant range of premiums of 15% to 20%. Merrill Lynch then calculated the
range of implied offer values for First USA based on such premiums, resulting in
an indicated range of $36.60 to $44.71 per share, as compared to the implied
offer value of $52.61 in the Merger.
No company or transaction used in the above analysis as a comparison is
identical to First USA, BANC ONE or the contemplated transaction. Accordingly,
an analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the value
of the companies to which they are being
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compared. Mathematical analysis (such as determining the mean or median) is not,
in itself, a meaningful method of using comparable company data.
(f) Comparison of Selected Companies. Merrill Lynch reviewed and compared
certain financial information, ratios and public market multiples relating to
First USA to the publicly available corresponding data compiled by First Call
for a group of selected credit card companies which Merrill Lynch deemed to be
relevant, consisting of MBNA, Advanta (with respect to which Merrill Lynch used
the weighted average by market capitalization of the financial information for
the Advanta Class A Common Stock and Class B Common Stock) and Capital One
(collectively, the "First USA Selected Companies"). Based on a review of such
information for the First USA Selected Companies, Merrill Lynch determined: (i)
the relevant range based on the mean and median for estimated 1996 and 1997 EPS
multiples for the First USA Selected Companies (based on January 17, 1997
closing market prices and projected EPS for the applicable year ended December
31 as reported by First Call for the First USA Selected Companies) to be 14.6x
to 16.2x and 12.1x to 13.3x, respectively, resulting in an implied valuation
range for First USA of $30.66 to $34.02 per share and $32.79 to $36.04 per
share, respectively (based on actual 1996 EPS and First USA management's
projected 1997 EPS for First USA); (ii) the relevant range based on the mean and
median for book value multiples for the First USA Selected Companies (based on
January 17, 1997 closing market prices and book value at September 30, 1996) to
be 3.2x to 4.4x, resulting in an implied valuation range for First USA of $26.27
to $36.12 per share (based on First USA's book value at September 30, 1996 of
$8.21 per share); and (iii) the relevant range based on the mean and median for
the premium to managed receivables for the First USA Selected Companies to be
12.74% to 16.58%, resulting in an implied valuation range for First USA of
$32.93 to $39.16 per share. Merrill Lynch further observed that if an assumed
premium of 20% and 40% were applied to the low- and high-end of such multiples,
respectively, to give effect to a hypothetical merger transaction, the resulting
adjusted implied valuation ranges for First USA would be as follows: a range of
$36.79 to $47.63 per share and $39.35 to $50.46 per share based on actual 1996
and projected 1997 EPS multiples, respectively; a range of $31.53 to $50.57 per
share based on book value; and a range of $39.52 to $54.83 per share based on
premium to managed receivables.
Merrill Lynch also reviewed and compared certain financial information,
ratios and public market multiples relating to BANC ONE to the publicly
available corresponding data for a group of 26 bank holding companies with
assets greater than $20 billion which Merrill Lynch deemed to be relevant
(collectively, the "BANC ONE Selected Companies").
Based on a review of such information for the BANC ONE Selected Companies,
Merrill Lynch determined: (i) the relevant range based on the mean and median
for estimated 1996 and 1997 EPS multiples for the BANC ONE Selected Companies
(based on January 17, 1997 closing market prices and EPS for the applicable year
ended December 31 as reported by First Call for the BANC ONE Selected Companies)
to be 14.2x to 14.9x and 12.9x to 13.3x, respectively, resulting in an implied
valuation range for BANC ONE of $45.72 to $47.98 per share and $46.31 to $47.75
per share, respectively (based on projected 1996 and 1997 EPS for BANC ONE as
reported by First Call); (ii) the relevant range based on the mean and median
for book value multiples for the BANC ONE Selected Companies (based on January
17, 1997 closing market prices and book value at September 30, 1996) to be 2.4x
to 2.5x, resulting in an implied valuation range for BANC ONE of $46.08 to
$48.00 per share (based on BANC ONE's book value at September 30, 1996 of $19.20
per share); and (iii) the relevant range based on the mean and median for
tangible book value multiples for the BANC ONE Selected Companies (based on
January 17, 1997 closing market prices and tangible book value at September 30,
1996) to be 2.9x to 3.1x, resulting in an implied valuation range for BANC ONE
of $50.49 to $53.97 per share (based on BANC ONE's tangible book value at
September 30, 1996 of $17.41 per share).
In connection with its opinion dated the date of this Joint Proxy
Statement -- Prospectus, Merrill Lynch performed procedures to update, as
necessary, certain of the analyses described above and reviewed the assumptions
on which such analyses described above were based and the factors considered in
connection therewith. Merrill Lynch did not perform any analyses in addition to
those described in updating its January 19, 1997 opinion.
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Merrill Lynch has been retained by the First USA Board as an independent
contractor to act as financial advisor to First USA with respect to the Merger
and will receive a fee for its services. Merrill Lynch is a nationally
recognized investment banking firm which, among other things, regularly engages
in the valuation of businesses and securities, including banking institutions,
in connection with mergers and acquisitions. Merrill Lynch has in the past two
years provided financial advisory, investment banking and other services to
First USA, First USA Paymentech and BANC ONE and has received customary fees for
the rendering of such services. In addition, in the ordinary course of its
securities business, Merrill Lynch may actively trade debt and/or equity
securities of First USA, First USA Paymentech and BANC ONE for its own account
and the accounts of its customers, and Merrill Lynch, therefore, may from time
to time hold a long or short position in such securities.
First USA and Merrill Lynch have entered into a letter agreement, dated
January 2, 1997, relating to the services to be provided by Merrill Lynch in
connection with the Merger. First USA has agreed to pay Merrill Lynch fees as
follows: (i) a cash fee of $3,000,000, which was paid immediately after
execution of the Merger Agreement, and (ii) a cash transaction fee of
$20,000,000 (less the fees paid to Merrill Lynch pursuant to (i) above) to be
paid upon the Closing. In such letter, First USA also agreed to reimburse
Merrill Lynch for its reasonable and necessary out-of-pocket expenses incurred
in connection with its advisory work, including the reasonable fees and
disbursements of its legal counsel, and to indemnify Merrill Lynch against
certain liabilities relating to or arising out of the Merger, including
liabilities which might arise under the federal securities laws. In addition to
the fees paid or payable to Merrill Lynch as described above, Merrill Lynch and
its affiliates have received an aggregate amount of $21,925,900 from First USA,
First USA Bank and First USA Paymentech from January 1, 1995 to the date of this
Joint Proxy Statement-Prospectus, consisting of underwriting and advisory fees,
and an affiliate of Merrill Lynch received $3,464,000 in March, 1995 as proceeds
from the secondary offering and sale of shares of First USA owned by it.
STRUCTURE OF THE MERGER
Subject to the terms and conditions of the Merger Agreement and in
accordance with the Ohio Law and the Delaware Law, at the Effective Time, First
USA will merge with and into BANC ONE. BANC ONE will be the Surviving
Corporation in the Merger, and will continue its corporate existence under the
laws of the State of Ohio under the name "BANC ONE CORPORATION." At the
Effective Time, the separate corporate existence of First USA will terminate.
The BANC ONE Articles of Incorporation, as in effect immediately prior to the
Effective Time, will be the articles of incorporation of the Surviving
Corporation and the BANC ONE Regulations, as in effect immediately prior to the
Effective Time, will be the code of regulations of the Surviving Corporation.
CONVERSION OF FIRST USA COMMON STOCK; TREATMENT OF FIRST USA STOCK OPTIONS
At the Effective Time, each share of First USA Common Stock outstanding,
other than shares held in First USA's treasury or held by BANC ONE or First USA
or any subsidiary thereof (except, in both cases, for shares held, directly or
indirectly, in trust accounts, managed accounts and the like or otherwise held
in a fiduciary capacity that are beneficially owned by third parties ("Trust
Account Shares") or in respect of a debt previously contracted ("DPC Shares")),
will be converted into the right to receive a number of shares of BANC ONE
Common Stock equal to the Exchange Ratio, 1.1659, subject to antidilution
adjustments as provided in the Merger Agreement. Because the Exchange Ratio is
fixed and because the market price of BANC ONE Common Stock is subject to
fluctuation, the value of the shares of BANC ONE Common Stock that holders of
First USA Common Stock will receive in the Merger may increase or decrease prior
to and following the Merger.
Pursuant to the Merger Agreement, First USA has called for redemption all
of the outstanding shares of First USA Convertible Preferred Stock on and as of
May 20, 1997, the date on which the First USA Convertible Preferred Stock
becomes convertible at the option of First USA. Upon such redemption, all such
shares of First USA Convertible Preferred Stock will be redeemed for shares of
First USA Common Stock and accordingly no shares of First USA Convertible
Preferred Stock will be outstanding at the Effective Time.
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Each outstanding share of First USA Common Stock owned by BANC ONE or its
subsidiaries or First USA or its subsidiaries (other than Trust Account Shares
or DPC Shares) or by First USA as treasury stock will be cancelled at the
Effective Time and will cease to exist, and no BANC ONE Common Stock or other
consideration will be delivered in exchange therefor. All shares of BANC ONE
Common Stock or BANC ONE Convertible Preferred Stock that are owned by First USA
(except for Trust Account Shares or DPC Shares) will become treasury stock of
BANC ONE. Except for the foregoing, shares of BANC ONE Common Stock and BANC ONE
Convertible Preferred Stock issued and outstanding immediately prior to the
Effective Time will remain issued and outstanding immediately after the Merger.
Each stock option to acquire First USA Common Stock granted under the First
USA Stock Plans which is outstanding and unexercised immediately prior to the
Effective Time will be converted automatically at the Effective Time into, and
will become, a stock option to purchase BANC ONE Common Stock and will continue
to be governed by the terms of the First USA Stock Plans, which will be assumed
by BANC ONE. In each case, (i) the number of shares of BANC ONE Common Stock
subject to the BANC ONE option will be equal to the product of the number of
shares of First USA Common Stock subject to the First USA option and the
Exchange Ratio, rounded to the nearest whole share, and (ii) the exercise price
per share of BANC ONE Common Stock subject to the BANC ONE option will be equal
to the exercise price per share of First USA Common Stock under the First USA
option divided by the Exchange Ratio, rounded down to the nearest whole cent.
The duration and other terms of each such BANC ONE option will be substantially
the same as the prior First USA option. Pursuant to the First USA Stock Plans,
each First USA option, if not already exercisable in full, will become
exercisable in full upon approval of the Merger by the First USA Stockholders at
the First USA Special Meeting.
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
First USA. At or prior to the Effective Time, BANC ONE will deposit, or
cause to be deposited, with a bank or trust company selected by BANC ONE (the
"Exchange Agent"), for the benefit of the holders of certificates of First USA
Common Stock, certificates representing the shares of BANC ONE Common Stock and
cash in lieu of any fractional shares (such certificates and cash, together with
any dividends or distributions with respect thereto, being referred to herein as
the "Exchange Fund") to be issued pursuant to the Merger Agreement in exchange
for outstanding shares of First USA Common Stock.
As soon as is practicable after the Effective Time, a form of transmittal
letter will be mailed by the Exchange Agent to the holders of First USA Common
Stock. The form of transmittal letter will contain instructions with respect to
the surrender of certificates representing First USA Common Stock.
FIRST USA STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY
AND SHOULD NOT BE FORWARDED TO THE EXCHANGE AGENT UNLESS AND UNTIL THE FIRST USA
STOCKHOLDER RECEIVES A LETTER OF TRANSMITTAL FOLLOWING THE EFFECTIVE TIME.
Until the certificates representing First USA Common Stock are surrendered
for exchange after the Effective Time, holders of such certificates or receipts
will accrue but will not be paid dividends or other distributions declared after
the Effective Time with respect to BANC ONE Common Stock into which their shares
have been converted. When such certificates or receipts are surrendered, any
unpaid dividends or other distributions will be paid, without interest. After
the Effective Time, there will be no transfers on the stock transfer books of
First USA of shares of First USA Common Stock issued and outstanding immediately
prior to the Effective Time. If certificates representing shares of First USA
Common Stock are presented after the Effective Time, they will be cancelled and
exchanged for the relevant certificate representing the applicable shares of
BANC ONE Common Stock.
No fractional shares of BANC ONE Common Stock will be issued to any holder
of First USA Common Stock upon consummation of the Merger. For each fractional
share that would otherwise be issued, BANC ONE will pay cash in an amount equal
to such fraction multiplied by the average of the closing sale prices of BANC
ONE Common Stock on the NYSE as reported by The Wall Street Journal for the five
trading days
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ending on the second to last trading day prior to the Effective Time. No
interest will be paid or accrued on the cash in lieu of fractional shares
payable to holders of such certificates.
Neither BANC ONE nor First USA nor any other person will be liable to any
former holder of First USA Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
If a certificate for First USA Common Stock has been lost, stolen or
destroyed, the Exchange Agent will issue the consideration properly payable in
accordance with the Merger Agreement upon receipt of appropriate evidence as to
such loss, theft or destruction, appropriate evidence as to the ownership of
such certificate by the claimant, and appropriate and customary indemnification.
For a description of the BANC ONE Common Stock and a description of the
differences between the rights of the holders of BANC ONE Common Stock and First
USA Common Stock, see "Comparison of Shareholder Rights."
BANC ONE. Shares of BANC ONE Capital Stock issued and outstanding
immediately prior to the Effective Time will remain issued and outstanding and
be unaffected by the Merger, and holders of such stock will not be required to
exchange the certificates representing such stock or take any other action by
reason of the consummation of the Merger.
EFFECTIVE TIME
The Effective Time will be as set forth in the certificate of merger which
will be filed with the Secretary of State of the State of Ohio (the "Ohio
Certificate of Merger") and in the certificate of merger which will be filed
with the Secretary of State of the State of Delaware (the "Delaware Certificate
of Merger") on the closing date of the Merger (the "Closing Date"). The Closing
Date will occur on a date to be specified by the parties which shall be no later
than three business days after the satisfaction or waiver (subject to applicable
law) of the latest to occur of the conditions precedent to the Merger set forth
in Article VII of the Merger Agreement. BANC ONE and First USA each anticipate
that the Merger will be consummated during the fiscal quarter ending June 30,
1997 and after the redemption of the First USA Convertible Preferred Stock,
which will be effected on May 20, 1997, the date on which the First USA
Convertible Preferred Stock becomes convertible at the option of First USA.
However, the consummation of the Merger could be delayed as a result of delays
in obtaining the Requisite Regulatory Approvals (as defined herein). There can
be no assurances as to if or when such approvals will be obtained or that the
Merger will be consummated. If the Merger is not effected on or before December
31, 1997, the Merger Agreement may be terminated by either BANC ONE or First
USA, unless the failure to effect the Merger by such date is due to the failure
of the party seeking to terminate the Merger Agreement to perform or observe the
covenants and agreements of such party set forth therein. See "-- Conditions to
the Consummation of the Merger" and "-- Regulatory Approvals Required for the
Merger."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations and warranties of BANC ONE
and First USA as to, among other things, (i) the corporate organization and
existence of each party and its subsidiaries; (ii) the capitalization of each
party and its subsidiaries; (iii) the corporate power and authority of each
party; (iv) the compliance of the Merger Agreement with (a) the charter and
by-laws of each party, (b) applicable law, and (c) certain material agreements;
(v) governmental and third-party approvals; (vi) the timely filing of required
regulatory reports; (vii) each party's financial statements and filings with the
Commission; (viii) the absence of certain changes in each party's business since
September 30, 1996; (ix) the absence of material legal proceedings; (x) the
filing and accuracy of each party's tax returns; (xi) each party's employee
benefit plans and related matters; (xii) each party's compliance with applicable
law; (xiii) the absence of material defaults under certain contracts; (xiv)
agreements between each party and regulatory agencies; (xv) the absence of
undisclosed liabilities; (xvi) in the case of First USA, the inapplicability to
the Merger of the Delaware takeover law or any other applicable state takeover
law; (xvii) "pooling of interests" accounting treatment; (xviii) the absence of
environmental liabilities; (xix) reasonably adequate insurance coverage; (xx) in
the
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case of First USA, First USA not conducting activities prohibited for a bank
holding company; (xxi) in the case of First USA, First USA's title to its
investment securities; and (xxii) in the case of First USA, the validity of
First USA's interest rate risk management instruments.
CONDUCT OF BUSINESS PENDING THE MERGER AND OTHER AGREEMENTS
Pursuant to the Merger Agreement, prior to the Effective Time, BANC ONE and
First USA have each agreed to, and to cause their respective subsidiaries to,
(i) conduct its business in the usual, regular and ordinary course consistent
with past practice, (ii) use reasonable best efforts to maintain and preserve
intact its business organization, employees and advantageous business
relationships, and, in the case of First USA, retain the services of its
officers and key employees, and (iii) take no action which would adversely
affect or delay in any material respect the ability of either BANC ONE or First
USA to obtain Requisite Regulatory Approvals required for the transactions
contemplated by the Merger Agreement or to perform its covenants and agreements
under the Merger Agreement or the First USA Option Agreement.
BANC ONE and First USA have also agreed to use their best efforts to
promptly prepare and file all necessary documentation to effect all
applications, notices, petitions and filings, and to obtain and to cooperate in
obtaining permits, consents, approvals and authorizations of all third parties
and governmental entities necessary or advisable to consummate the transactions
contemplated by the Merger Agreement and to comply with the terms and conditions
of all such permits, consents, approvals and authorizations. BANC ONE and First
USA have each agreed upon request to furnish to the other party all information
concerning themselves and their subsidiaries, directors, officers and
shareholders and such other matters as may be necessary or advisable in
connection with the Merger. BANC ONE and First USA have also agreed, subject to
the terms and conditions of the Merger Agreement, to use their best efforts to
take, or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party or its
subsidiaries and to consummate the Merger. BANC ONE also agreed to use its best
efforts to cause the shares of BANC ONE Common Stock to be issued in the Merger
to be approved for listing on the NYSE, subject to official notice of issuance.
BANC ONE and First USA have further agreed to give the other party access
to all of its properties, books, contracts, commitments and records and to
furnish information concerning its businesses, properties and personnel, subject
to the restrictions set forth in the Merger Agreement.
In addition, except as expressly contemplated by the Merger Agreement or
specified in a schedule thereto or by the First USA Stock Option Agreement,
First USA has agreed that, without the consent of BANC ONE, it will not, among
other things (it being agreed in the Merger Agreement that the following do not
restrict the conduct of the business and operations of First USA Paymentech by
its management or board of directors):
(i) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance existing short-term indebtedness and
indebtedness of First USA or any of its subsidiaries to First USA or any of
its subsidiaries and indebtedness under existing lines of credit), assume,
guarantee, endorse or otherwise as an accommodation become responsible for
the obligations of any other individual, corporation or other entity, or
make any loan or advance;
(ii) adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend (except for regular quarterly cash dividends on
First USA Capital Stock and dividends paid in the ordinary course of
business by any subsidiaries of First USA) or make any other distribution
on, or, directly or indirectly, redeem (except as provided in the Merger
Agreement) purchase or otherwise acquire, any shares of its capital stock
or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, or grant any stock appreciation rights
("SARs"); grant any individual, corporation or other entity any right to
acquire any shares of its capital stock; issue any additional shares of
capital stock except pursuant to (a) the exercise of stock options
outstanding as of the date of the Merger Agreement, or options or
restricted stock issued with BANC ONE's consent (which shall not be
unreasonably withheld) in connection with the hiring of new employees in
the ordinary course of business consistent with past
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practice, and, in an amount not to exceed 45,000 shares of First USA Common
Stock per quarter, pursuant to the First USA Dividend Reinvestment Plan
(the "First USA DRP") and, in an amount not to exceed 80,000 shares of
First USA Common Stock per quarter, pursuant to the Employee Stock Purchase
Plan of First USA, (b) the First USA Convertible Preferred Stock, (c) the
First USA Option Agreement or (d) up to 60,000 shares issuable pursuant to
the First USA Amended and Restated Outside Directors Plan, if the Closing
occurs after November 1, 1997; or enter into any agreement, understanding
or arrangement with respect to the sale or voting of its capital stock;
(iii) sell, transfer, mortgage, encumber or otherwise dispose of any
of its properties or assets, including, without limitation, capital stock
in any subsidiaries of First USA, to any individual, corporation or other
entity other than a direct or indirect wholly owned subsidiary, or cancel,
release or assign any indebtedness to any such entity or any claims held by
any such entity, except in the ordinary course of business consistent with
past practice or pursuant to contracts or agreements in force at the date
of the Merger Agreement and except for sales, transfers or dispositions of
receivables in connection with the securitization of such receivables;
(iv) except for transactions in the ordinary course of business
consistent with past practice, make any material investment either by
purchase of stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other individual,
corporation or other entity other than a wholly owned subsidiary of First
USA;
(v) except for transactions in the ordinary course of business
consistent with past practice, enter into or terminate any material lease,
contract or agreement, or make any change in any of its material leases,
contracts, or agreements other than renewals of leases, contracts or
agreements without material adverse changes of terms;
(vi) increase in any manner the compensation or fringe benefits of any
of its employees or pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees or, except as
contemplated by the Merger Agreement, become a party to, amend or commit
itself to any pension, retirement, profit-sharing or welfare benefit plan
or agreement or employment agreement with or for the benefit of any
employee other than in the ordinary course of business consistent with past
practice or accelerate the vesting of any stock options or other
stock-based compensation;
(vii) solicit, encourage or authorize any individual, corporation or
other entity to solicit from any third party any inquiries or proposals
relating to the disposition of its business or assets, or the acquisition
of its voting securities, or the merger of it or any of its subsidiaries
with any corporation or other entity other than as provided by the Merger
Agreement (and First USA will promptly notify BANC ONE of all of the
relevant details relating to all inquiries and proposals which it may
receive relating to any of such matters);
(viii) settle any material claim, action or proceeding involving money
damages or waive or release any material rights or claims, except in the
ordinary course of business consistent with past practice;
(ix) change its methods of accounting in effect at June 30, 1996,
except as required by changes in GAAP, 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 First USA
for the taxable years ending June 30, 1996 and 1995, except as required by
changes in law or regulation or as disclosed by First USA to BANC ONE;
(x) take any action that would prevent or impede the Merger from
qualifying (a) for "pooling of interests" accounting treatment or (b) as a
reorganization within the meaning of Section 368 of the Code;
(xi) adopt or implement any amendment to the First USA Certificate of
Incorporation or any plan of consolidation, merger or reorganization or any
changes to the First USA By-laws;
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(xii) other than in prior consultation with the BANC ONE, materially
restructure or materially change its investment securities portfolio or its
gap position, through purchases, sales or otherwise, or the manner in which
the portfolio is classified or reported;
(xiii) take any action that is intended or may reasonably be expected
to result in any of its representations and warranties set forth in the
Merger Agreement being or becoming untrue in any material respect at any
time prior to the Effective Time, or in any of the conditions to the Merger
not being satisfied or in a violation of any provision of the Merger
Agreement, except, in every case, as may be required by applicable law; or
(xiv) agree to, or make any commitment to, take any of the actions
listed above.
In addition, during the period from the date of the Merger Agreement to the
Effective Time, except as expressly contemplated by the Merger Agreement, BANC
ONE has agreed that it shall not, and shall not permit any of its subsidiaries
to, without the prior written consent of First USA:
(i) adopt or implement any amendment to its articles of incorporation
(other than to increase the number of shares of capital stock authorized
thereunder) or any plan of consolidation, merger or reorganization which
would affect in any manner the terms and provisions of the shares of BANC
ONE Common Stock or the rights of the holders of such shares or reclassify
any of the BANC ONE Common Stock;
(ii) change its methods of accounting in effect at December 31, 1995,
except as required by changes in GAAP as concurred with Coopers & Lybrand
L.L.P., 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, 1995 and 1994, except as required by
changes in law or regulation;
(iii) engage in any acquisition, or take any other action, that
adversely affects the ability of BANC ONE to consummate the transactions
contemplated by the Merger Agreement;
(iv) take any action that would prevent or impede the Merger from
qualifying (a) for "pooling of interests" accounting treatment or (b) as a
reorganization within the meaning of Section 368 of the Code; provided,
however, that nothing contained in the Merger Agreement will limit the
ability of BANC ONE to exercise its rights under the First USA Option
Agreement;
(v) (a) adjust, split, combine or reclassify any capital stock; or (b)
make, declare or pay any dividend (except, (1) for regular quarterly cash
dividends at a rate not in excess of $.38 per share of BANC ONE Common
Stock, (2) for regular quarterly cash dividends at a rate not in excess of
$.875 per share of BANC ONE Convertible Preferred Stock, and (3) except for
dividends paid in the ordinary course of business by any subsidiary
(whether or not wholly owned) of BANC ONE) or make any extraordinary
distribution on any shares of its capital stock;
(vi) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in the Merger
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set
forth in the Merger Agreement not being satisfied or in a violation of any
provision of the Merger Agreement, except, in every case, as may be
required by applicable law; or
(vii) agree to, or make any commitment to, take any of the actions
listed above.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Each party's obligation to effect the Merger is subject to the satisfaction
or waiver, where permissible, of the following conditions at or prior to the
Effective Time:
(i) The Merger Agreement and the transactions contemplated thereby
shall have been approved and adopted by the respective requisite
affirmative votes of the holders of First USA Common Stock and BANC ONE
Common Stock entitled to vote thereon;
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(ii) The shares of BANC ONE Common Stock which are to be issued to the
First USA Stockholders upon consummation of the Merger will have been
authorized for listing on the NYSE, subject to official notice of issuance;
(iii) All regulatory approvals required to consummate the transactions
contemplated by the Merger Agreement shall have been obtained and shall
remain in full force and effect and all statutory waiting periods with
respect to such approvals shall have expired (the "Requisite Regulatory
Approvals");
(iv) The Registration Statement of which this Joint Proxy
Statement-Prospectus forms a part shall have become effective and no stop
order suspending the effectiveness shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
Commission;
(v) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or any of the other material transactions
contemplated by the Merger Agreement will be in effect and no statute,
rule, regulation, order, injunction or decree shall have been enacted,
entered, promulgated or enforced by any court, administrative agency or
commission or other governmental authority or instrumentality which
prohibits, materially restricts or makes illegal consummation of the
Merger;
(vi) BANC ONE shall have received an opinion of Wachtell, Lipton,
Rosen & Katz, special counsel to BANC ONE, and First USA shall have
received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
First USA, in form and substance reasonably satisfactory to BANC ONE and
First USA, respectively, dated as of the Effective Time, in each case,
substantially to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion which are consistent with the
state of facts existing at the Effective Time: (a) the Merger will
constitute a reorganization under Section 368(a) of the Code and BANC ONE
and First USA will each be a party to the reorganization; (b) no gain or
loss will be recognized by BANC ONE or by First USA as a result of the
Merger; (c) no gain or loss will be recognized by the First USA
Stockholders who exchange their First USA Common Stock for BANC ONE Common
Stock pursuant to the Merger (except with respect to cash received in lieu
of a fractional share interest in BANC ONE Common Stock); (d) the tax basis
of the BANC ONE Common Stock received by First USA Stockholders who
exchange First USA Common Stock for BANC ONE Common Stock in the Merger
will generally be the same as the tax basis of the First USA Common Stock
surrendered in exchange therefor; and (e) the holding period of the BANC
ONE Common Stock received by First USA Stockholders in the Merger will
include the period during which the shares of First USA Common Stock
surrendered in exchange therefor were held, provided that such First USA
Common Stock was held as a capital asset by the holder of such First USA
Common Stock at the Effective Time;
(vii) BANC ONE and First USA shall have received a letter from Coopers
& Lybrand L.L.P. to the effect that the Merger will qualify for "pooling of
interests" accounting treatment;
(viii) The representations and warranties of the other party made in
the Merger Agreement will be true and correct in all material respects as
of the date of the Merger Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on the Closing Date;
(ix) The other party will have performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
prior to the Closing Date; and
(x) In the case of BANC ONE, each of Mr. Vague, Randy L.
Christofferson, Jack M. Antonini and Pamela H. Patsley will have executed
and delivered his or her Employment Agreement.
The approvals of the Additional Regulatory Authorities have been received,
or the Additional Regulatory Authorities have notified BANC ONE that they do not
disapprove of the Merger, as the case may be. No assurance can be provided as to
if or when the approval of the Federal Reserve Board necessary to consummate the
Merger will be obtained or whether all of the other conditions precedent to the
Merger will be satisfied or waived by the party permitted to do so. If the
Merger is not effected on or before December 31, 1997, the Merger Agreement may
be terminated by either BANC ONE or First USA, unless the failure to
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effect the Merger by such date is due to the failure of the party seeking to
terminate the Merger Agreement to perform or observe covenants and agreements of
such party set forth therein.
The Merger Agreement permits waiver of the above conditions only where such
waiver is otherwise legally permissible. See "-- Waiver and Amendment of the
Merger Agreement." The waiver of certain of these conditions, including those
relating to shareholder approval, certain regulatory approvals, the expiration
of statutory waiting periods and the effectiveness of the Registration Statement
of which this Joint Proxy Statement-Prospectus is a part, is not legally
permissible and the Merger can not be consummated unless such conditions are
satisfied. In certain other cases, conditions to the consummation of the Merger
may or may not be waived depending on the particular conditions that are not
satisfied and the anticipated effect of proceeding with the consummation of the
Merger in the absence of the satisfaction of such conditions. Accordingly,
although neither BANC ONE nor First USA has any present intention of waiving any
unfulfilled conditions to consummation of the Merger, neither has finally
determined whether it would waive any such conditions where permissible.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
BANC ONE and First USA agreed to use their best efforts to obtain the
Requisite Regulatory Approvals, which include approval from the Federal Reserve
Board and the Additional Regulatory Authorities, as well as notices to the DOJ
and the FTC. The Merger cannot proceed in the absence of the Requisite
Regulatory Approvals. The approvals of all Additional Regulatory Authorities
(including the FDIC and the requisite state banking regulatory bodies) have been
received, or such Additional Regulatory Authorities have notified BANC ONE that
they do not disapprove of the Merger. BANC ONE and First USA believe that the
approval of the Federal Reserve Board will also be granted; however, there can
be no assurance that such approval will be obtained, and, if obtained, there can
be no assurance as to the date of such approval or the absence of any litigation
challenging approval of the Federal Reserve Board or other Requisite Regulatory
Approval. There can likewise be no assurance that the DOJ or any state attorney
general will not attempt to challenge the Merger on antitrust grounds, or if
such a challenge is made, as to the result thereof.
BANC ONE and First USA are not aware of any other governmental approvals or
actions that are required prior to the parties' consummation of the Merger other
than those described below. It is presently contemplated that if any such
additional governmental approvals or actions are required, such approvals or
actions will be sought. There can be no assurance, however, that any such
additional approvals or actions will be obtained.
Federal Reserve Board. Consummation of the Merger is subject to the prior
approval of the Federal Reserve Board under Section 4(c)(8) of the Bank Holding
Company Act of 1956, as amended ("the BHCA"). In deciding whether to approve a
transaction under Section 4(c)(8) of the BHCA, the Federal Reserve Board must
consider whether performance of the proposed activity by a bank holding company
or a subsidiary of such a company can reasonably be expected to produce benefits
to the public, such as greater convenience, increased competition or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest or unsound
banking practices. Publication of notice is required and an opportunity for
public comment will be provided in connection with BANC ONE's application to the
Federal Reserve Board for approval of the Merger. The Federal Reserve Board also
must solicit comments and recommendations from the Office of Thrift Supervision
(the "OTS") with respect to BANC ONE's proposed acquisition of First USA FSB.
The Merger may not be consummated until after Federal Reserve Board approval is
obtained.
BANC ONE's and First USA's rights to exercise their respective options
under the Option Agreements are also subject to the prior approval of the
Federal Reserve Board. In considering whether to approve BANC ONE's or First
USA's right to exercise its respective option, the Federal Reserve Board would
generally apply the same statutory criteria it would apply in considering the
application for approval of the Merger in the case of the First USA Option, and
somewhat more comprehensive criteria applicable to an acquisition of control of
BANC ONE in the case of the BANC ONE Option.
Department of Justice and Federal Trade Commission. BANC ONE has filed a
copy of its application to the Federal Reserve Board with the DOJ and the FTC
pursuant to the Hart-Scott-Rodino Antitrust Improvements
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Act of 1976, as amended, and the rules and regulations thereunder. The DOJ could
file an action challenging the Merger on antitrust grounds, and could seek to
have the court enjoin the consummation of the Merger.
Federal Deposit Insurance Corporation. Because BANC ONE will acquire First
USA's insured depository institutions in the Merger, the Merger is subject to
the Change in Bank Control Act, pursuant to which BANC ONE filed appropriate
notices with the FDIC. The FDIC has approved the merger. The FDIC may disapprove
a merger if it determines that such merger would tend to result in a monopoly,
tend to lessen competition in any part of the country unless such impact is
clearly offset by other public interests, or that the financial condition of the
acquiring person might jeopardize the depository institution or jeopardize the
insurance fund or the acquiring person or persons lack the requisite competence,
experience or integrity. Applicable federal law provides for the publication of
notice and public comment on such notices filed with the FDIC.
State Banking Regulators. BANC ONE and First USA filed an Application for
Acquisition of Control of First USA's subsidiary, First USA Financial Services,
Inc., a Utah industrial loan company, with the State of Utah Department of
Financial Institutions (the "Utah Department"), and a Notice of Change of
Control with the Office of the State Bank Commissioner of Delaware (together
with the Utah Department, the "State Banking Regulators") relating to BANC ONE's
proposed acquisition of First USA's subsidiary, First USA Bank, a Delaware
banking corporation. These applications required that a public notice thereof be
published and provided an opportunity for public comment thereon. The focus of
filings with the State Banking Regulators is the financial and managerial
ability of the acquiring entity to manage the institutions being acquired. The
State Banking Regulators have approved these applications or have notified BANC
ONE that they do not disapprove of the Merger, as the case may be.
State Attorneys General. In addition, the Merger may be subject to review
by the attorneys general in the various states in which First USA and BANC ONE
transact business. There can be no assurance that no state attorney general will
file an antitrust action to enjoin the Merger or that First USA and BANC ONE
will not agree to divest assets and liabilities or take other actions to avoid
or settle any such action.
Status of Regulatory Approvals and Other Information. The Merger is
conditioned upon the receipt of all requisite regulatory approvals, including
the approvals of the Federal Reserve Board, the FDIC and the State Banking
Regulators. The FDIC and the State Banking Regulators have approved the Merger
or have notified BANC ONE that they do not disapprove of the Merger, as the case
may be. There can be no assurance that any other governmental agency will
approve or take any other required action with respect to the Merger, and, if
approvals are received or action is taken, there can be no assurance as to the
date of such approvals or action, that such approvals or action will not be
conditioned upon matters that would cause the parties to abandon the Merger or
that no action will be brought challenging such approvals or action (including a
challenge by the Department of Justice) or, if such a challenge is made, the
result thereof.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS INCLUDING THE APPROVAL OF THE FEDERAL RESERVE BOARD, WHICH APPROVAL
HAS NOT YET BEEN RECEIVED. THERE CAN BE NO ASSURANCE THAT SUCH APPROVAL WILL BE
OBTAINED OR AS TO THE DATE OF SUCH APPROVAL. THERE CAN ALSO BE NO ASSURANCE THAT
SUCH APPROVAL WILL NOT CONTAIN A CONDITION OR REQUIREMENT WHICH CAUSES SUCH
APPROVAL TO FAIL TO SATISFY THE CONDITIONS SET FORTH IN THE MERGER AGREEMENT OR
THAT WOULD CAUSE THE PARTIES TO TERMINATE THE MERGER AGREEMENT. SEE
" -- CONDITIONS TO THE CONSUMMATION OF THE MERGER." THERE CAN LIKEWISE BE NO
ASSURANCE THAT THE UNITED STATES DEPARTMENT OF JUSTICE WILL NOT CHALLENGE THE
MERGER, OR, IF SUCH A CHALLENGE IS MADE, AS TO THE RESULT THEREOF.
See " -- The Effective Time," " -- Conditions to the Consummation of the
Merger" and " -- Termination of the Merger Agreement."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The following is a summary description of the material U.S.
federal income tax consequences of the Merger to holders of First USA Common
Stock (including those who hold First USA Common Stock
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as a result of the conversion of their First USA Convertible Preferred Stock on
and as of May 20, 1997, at the option of First USA) who hold such stock as a
capital asset (generally, property held for investment). This summary is not a
complete description of all of the consequences of the Merger and, in
particular, may not address U.S. federal income tax considerations applicable to
shareholders subject to special treatment under U.S. federal income tax law
(including, for example, a shareholder that is not a U.S. person or is a
tax-exempt entity or an individual who acquired First USA Common Stock pursuant
to the exercise of an employee stock option or otherwise receives such stock as
compensation). In addition, no information is provided herein with respect to
the tax consequences of the Merger under applicable foreign, state or local
laws. The following discussion is based on the Code, Treasury Regulations
thereunder, and administrative rulings and court decisions, as in effect on the
date of this Joint Proxy Statement-Prospectus, without consideration of the
particular facts or circumstances of any holder of First USA Common Stock. FIRST
USA STOCKHOLDERS ARE URGED TO CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX
CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE EFFECTS OF FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.
The Merger. Each party's obligation to effect the Merger is conditioned on
delivery of an opinion to BANC ONE from Wachtell, Lipton, Rosen & Katz, its
special counsel, and an opinion to First USA from Skadden, Arps, Slate, Meagher
& Flom LLP, its counsel, each dated as of the Effective Time, based upon certain
customary representations and assumptions set forth therein, substantially to
the effect that for federal income tax purposes the Merger constitutes a
reorganization within the meaning of Section 368 of the Code, with the
consequences set forth below.
In the opinion of Wachtell, Lipton, Rosen & Katz and Skadden, Arps, Slate,
Meagher & Flom LLP, as of the date hereof, the material U.S. federal income tax
consequences of the Merger will be:
(i) No gain or loss will be recognized by BANC ONE or by First USA as a
result of the Merger;
(ii) No gain or loss will be recognized by First USA Stockholders upon
their exchange of First USA Common Stock for BANC ONE Common Stock, except
that a First USA Stockholder who receives cash proceeds in lieu of a
fractional share interest in BANC ONE Common Stock will recognize gain or
loss equal to the difference between such proceeds and the tax basis
allocated to the fractional share interest and such gain or loss will
constitute long-term capital gain or loss if the holding period for such
First USA Common Stock exceeds one year at the Effective Time;
(iii) The tax basis of the BANC ONE Common Stock received by a First
USA Stockholder who exchanges such stockholder's First USA Common Stock for
BANC ONE Common Stock will be the same as such stockholder's tax basis in
the First USA Common Stock surrendered in exchange therefor (reduced by any
amount allocated to a fractional share of BANC ONE Common Stock with
respect to which cash is received); and
(iv) The holding period of the BANC ONE Common Stock received by a
First USA Stockholder will include the period during which the First USA
Common Stock surrendered in exchange therefor was held.
In the event that BANC ONE or First USA is unable to obtain its respective
opinion of counsel, dated as of the Effective Time, substantially to the effect
set forth above, each of BANC ONE and First USA expects that it would assess the
reasons for the failure to obtain such opinion and the anticipated tax treatment
of the Merger in light of such failure, and make a determination at such time,
consistent with the fiduciary duties of its respective Board of Directors and
its obligations under applicable law, as to whether such condition should be
waived. The votes of stockholders will be resolicited in the event of such a
failure to obtain tax opinions substantially to the effect set forth above, if
the parties determine to waive such condition to the consummation of the Merger.
As of the date of this Joint Proxy Statement-Prospectus, neither BANC ONE or
First USA has any intention of waiving the condition as to the receipt of
opinions of counsel substantially to the effect set forth herein.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for using the "pooling
of interests" method of accounting. Under such method of accounting, holders of
First USA Common Stock will be deemed to have combined their existing voting
common stock interest with that of holders of BANC ONE Common Stock by
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exchanging their shares for shares of BANC ONE Common Stock. Accordingly, the
book value of the assets, liabilities and shareholders' equity of First USA, as
reported on its consolidated balance sheet, will be carried over to the
consolidated balance sheet of BANC ONE and no goodwill will be created. BANC ONE
will be able to include in its consolidated income the consolidated income of
First USA for the entire fiscal year in which the Merger occurs; however,
certain expenses incurred to effect the Merger must be treated by BANC ONE as
current charges against income rather than adjustments to its balance sheet. In
order for the Merger to qualify for "pooling of interests" accounting treatment,
among other criteria, substantially all (90% or more) of the outstanding First
USA Common Stock must be exchanged for BANC ONE Common Stock.
BANC ONE and First USA's respective obligations to consummate the Merger
are conditioned upon the receipt by BANC ONE and First USA of an opinion from
BANC ONE's independent public accountants, Coopers & Lybrand L.L.P., to the
effect that the Merger qualifies for "pooling of interests" method of
accounting.
The unaudited pro forma financial information contained in this Joint Proxy
Statement-Prospectus has been prepared using the "pooling of interests"
accounting method to account for the Merger. See "Summary -- Selected Financial
Data -- Selected Unaudited Pro Forma Financial Data" and "Unaudited Pro Forma
Condensed Combined Financial Information."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement provides that the Merger may be terminated at any time
prior to the Effective Time, whether before or after BANC ONE or First USA
Stockholder approval:
(i) by mutual consent of BANC ONE and First USA in a written
instrument if the BANC ONE Board and the First USA Board each so determines
by a vote of a majority of the members of its entire Board;
(ii) by either the BANC ONE Board or the First USA Board if any
governmental entity which must grant a Requisite Regulatory Approval has
denied approval of the Merger and such denial has become final and
non-appealable or any governmental entity of competent jurisdiction shall
have issued a final non-appealable injunction permanently enjoining or
otherwise prohibiting the consummation of the transactions contemplated by
the Merger Agreement;
(iii) by either the BANC ONE Board or the First USA Board if the
Merger shall not have been consummated on or before December 31, 1997,
unless the failure of the Closing to occur by such date shall be due to the
failure of the party seeking to terminate the Merger Agreement to perform
or observe the covenants and agreements of such party set forth therein;
(iv) by either the BANC ONE Board or the First USA Board (provided
that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained therein) if
there shall have been a material breach of any of the covenants or
agreements or any of the representations or warranties set forth in the
Merger Agreement on the part of the other party, which breach is not cured
within 45 days following written notice to the party committing such
breach, or which breach, by its nature or timing, cannot be cured prior to
the Closing; or
(v) by either BANC ONE or First USA if BANC ONE or First USA
Shareholder approvals have not been obtained by reason of the failure to
obtain the required vote at a duly held meeting of shareholders or any
adjournment or postponement thereof.
WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Waiver. At any time prior to the Effective Time, BANC ONE and First USA,
by action taken or authorized by their respective Boards of Directors, may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations or other acts of the other party; (ii) waive any inaccuracies in
the representations and warranties of the other party contained in the Merger
Agreement or in any document delivered pursuant to the Merger Agreement; and
(iii) waive compliance by the other party of any of its
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agreements or conditions contained in the Merger Agreement, except that, after
First USA Stockholder approval, no extension or waiver may reduce the amount or
change the form of consideration to be delivered to First USA Stockholders under
the Merger Agreement without further approval of First USA Stockholders.
Amendment. Subject to compliance with applicable law, the Merger Agreement
may be amended by BANC ONE and First USA by action taken or authorized by their
respective Boards of Directors, at any time, except that, after First USA
Stockholder approval, no amendment may change the amount or the form of the
consideration to be delivered to First USA Stockholders under the Merger
Agreement without further approval of First USA Stockholders, other than as
contemplated by the Merger Agreement. In addition, Delaware law prohibits any
change in any of the terms and conditions of the Merger Agreement subsequent to
stockholder approval if such change or alteration would, among other things,
adversely affect any stockholder of a constituent corporation.
EMPLOYEE BENEFITS AND PLANS
From and after the Effective Time, unless otherwise mutually determined,
the First USA Benefit Plans and BANC ONE Benefit Plans in effect as of the date
of the Merger Agreement will remain in effect with respect to employees of First
USA or BANC ONE (or their subsidiaries) covered by such plans at the Effective
Time until such time as BANC ONE, subject to applicable law, the terms of the
Merger Agreement and the terms of such plans, adopts new benefit plans with
respect to employees of BANC ONE and its subsidiaries (the "New Benefit Plans").
In the Merger Agreement, First USA and BANC ONE have agreed that, prior to the
Closing Date, they will cooperate in reviewing, evaluating and analyzing the
BANC ONE Benefit Plans and First USA Benefit Plans with a view towards
developing appropriate New Benefit Plans for the employees covered thereby
subsequent to the Merger. Such New Benefit Plans will (i) treat similarly
situated employees on a substantially equivalent basis, taking into account all
relevant factors, including, without limitation, duties, geographic location,
tenure, qualifications and abilities, and (ii) not discriminate between
employees of the Surviving Corporation who were covered by First USA Benefit
Plans, on the one hand, and those covered by BANC ONE Benefit Plans, on the
other hand, at the Effective Time. BANC ONE has agreed to provide employees of
First USA and its subsidiaries with incentive compensation consistent with First
USA's past practices and industry practice.
BANC ONE is obligated under the Merger Agreement to honor in accordance
with their terms all disclosed BANC ONE Benefit Plans, First USA Benefit Plans
and all other employee benefit plans, contracts, arrangements, commitments or
understandings, except that BANC ONE may amend, modify or terminate any BANC ONE
Benefit Plans, First USA Benefit Plans, or other employee benefit plans,
contracts, arrangements, commitments or understandings, in accordance with their
terms and applicable law. First USA and BANC ONE have further agreed that the
consummation of the Merger will constitute a "change in control" for purposes of
each First USA Benefit Plan with respect to which such concept is applicable.
First USA and BANC ONE have agreed to take all actions necessary, including
securing the consent of optionees, to amend the terms of the First USA Stock
Plans and the BANC ONE Stock Plans and any severance or other agreements that
provide for the surrender of stock options issued thereunder in exchange for a
cash payment ("LSARs") as a result of or in connection with the Merger to
provide that such LSARs will be settled in stock with a fair market value equal
to the cash that would otherwise have been payable thereunder.
STOCK EXCHANGE LISTING
BANC ONE has agreed to use its best efforts to cause the shares of BANC ONE
Common Stock to be issued in the Merger to be approved for listing on the NYSE.
It is a condition to the consummation of the Merger that such shares of BANC ONE
Common Stock be authorized for listing on the NYSE, subject to official notice
of issuance.
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EXPENSES
The Merger Agreement provides that BANC ONE and First USA will each pay its
own expenses in connection with the Merger and the transactions contemplated
thereby, provided that BANC ONE and First USA will divide equally all printing
costs, filing fees and registration fees in connection with the Merger, the
Registration Statement and this Joint Proxy Statement-Prospectus.
DIVIDENDS
The Merger Agreement provides that BANC ONE and First USA will coordinate
the declaration and payment of dividends in respect of BANC ONE Common Stock
and/or First USA Common Stock and any shares of BANC ONE Capital Stock any such
holder receives in exchange therefor in the Merger so that holders thereof will
not receive two dividends for a single quarter or fail to receive one dividend
which they would otherwise receive in the absence of the Merger.
CHANGE OF STRUCTURE OF MERGER
Under the Merger Agreement, BANC ONE may, with First USA's consent (which
will not be unreasonably withheld), at any time change the method of effecting
the acquisition of First USA by BANC ONE, and First USA has agreed that, upon
providing such consent, it shall cooperate in such efforts, if and to the extent
they deem such change to be desirable, including to provide for a merger of
First USA with and into a wholly owned subsidiary of BANC ONE, or to provide for
mergers among certain of the subsidiaries of BANC ONE and First USA to occur
substantially simultaneously with the Effective Time, provided, however, that no
such change may alter or change the amount or kind of consideration to be issued
to holders of First USA Common Stock, adversely affect the proposed accounting
treatment for the Merger or the tax treatment to the First USA Stockholders as a
result of receiving the Merger Consideration, materially delay receipt of any
Requisite Regulatory Approval or the consummation of the transactions
contemplated by the Merger Agreement or adversely affect First USA Paymentech,
Inc.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of First USA's management and the First USA Board may be
deemed to have certain interests in the Merger that are in addition to their
interests as stockholders of First USA generally. The First USA Board was aware
of these interests and considered them, among other matters, in approving the
Merger Agreement and the transactions contemplated thereby.
Outstanding Stock-Based Awards. All of the executive officers and
directors of First USA hold First USA Stock Options. Pursuant to the Merger
Agreement, at the Effective Time, each outstanding First USA Stock Option,
whether exercisable or not, will automatically be converted into an option (i)
to purchase a number of shares of BANC ONE Common Stock as the holder of such
First USA Option would have been entitled to receive in the Merger if such First
USA Option had been exercised immediately prior to the Effective Time and (ii)
having an exercise price per share of BANC ONE Common Stock based upon the
exercise price per share of First USA Common Stock under the original option
adjusted to account for the Exchange Ratio.
Pursuant to the First USA Stock Option Plans maintained by First USA for
the benefit of its officers and employees, upon approval of the Merger by First
USA Stockholders at the First USA Special Meeting, all outstanding options to
acquire shares of First USA Common Stock will become immediately exercisable in
full. As of the First USA Record Date, John C. Tolleson, the Chairman of the
Board and Chief Executive Officer of First USA, Richard W. Vague, the President
of First USA, Jack M. Antonini, the Vice Chairman and Chief Financial Officer of
First USA, Randy L. Christofferson, the President of First USA Bank, and Pamela
Patsley, the President and Chief Executive Officer of First USA Paymentech, held
unexercisable options to purchase 490,000, 400,000, 170,000, 320,000 and 62,000
shares of First USA Common Stock, respectively, which will become exercisable as
a result of such stockholder approval. In addition, as of the First USA Record
Date, all executive officers of First USA and its subsidiaries as a group held
unexercisable options to purchase an aggregate of 2,192,000 shares of First USA
Common Stock which will become
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exercisable upon approval of the Merger by First USA Stockholders at the First
USA Special Meeting. Options granted by First USA pursuant to the First USA
Stock Option Plan maintained by First USA for directors who are not also
executives were, pursuant to the terms of such plan, vested upon grant.
Pursuant to the First USA Paymentech 1996 Stock Option Plan, upon
consummation of the Merger, all outstanding options to acquire shares of First
USA Paymentech Common Stock will become immediately exercisable in full. As of
the First USA Record Date, Messrs. Tolleson, Vague, Antonini and Christofferson
and Ms. Patsley had unexercisable options to purchase 30,000, 30,000, 13,200,
13,200 and 120,000 shares of First USA Paymentech Common Stock, respectively,
which will become exercisable upon consummation of the Merger. In addition, as
of the First USA Record Date, all executive officers of First USA and its
subsidiaries as a group held unexercisable options to purchase an aggregate of
246,900 shares of First USA Paymentech Common Stock which will become
exercisable upon consummation of the Merger. Options granted by First USA
Paymentech pursuant to the First USA Paymentech 1996 Stock Option Plan to non-
officer directors of First USA Paymentech were, pursuant to the terms of such
plan, vested upon grant.
Pursuant to the First USA 1994 Restricted Stock Plan, upon approval of the
Merger by First USA Stockholders at the First USA Special Meeting, all unvested
shares of restricted First USA Common Stock will become fully vested. As of the
First USA Record Date, Messrs. Tolleson, Vague, Antonini and Christofferson and
Ms. Patsley held 90,000, 90,000, 40,000, 100,000 and 60,000 shares of restricted
First USA Common Stock, respectively, which will become vested as a result of
such stockholder approval. In addition, as of the First USA Record Date, all
executive officers of First USA and its subsidiaries as a group held 704,000
shares of restricted First USA Common Stock which will become vested as a result
of the approval of the Merger by First USA Stockholders at the First USA Special
Meeting. None of the non-officer directors of First USA or First USA Paymentech
held any shares of restricted First USA Common Stock as of such date.
Pursuant to the First USA Paymentech 1996 Restricted Stock Plan, upon
consummation of the Merger, all unvested shares of restricted First USA
Paymentech Common Stock will become fully vested. As of the First USA Record
Date, none of First USA's or First USA Paymentech's executive officers or
directors held any shares of restricted First USA Paymentech Common Stock.
Stock Loan Forgiveness. In connection with the Paymentech IPO, First USA
and First USA Paymentech made loans to employees to purchase shares of First USA
Paymentech Common Stock. Each individual's loan is secured by a pledge of the
shares of First USA Paymentech Common Stock purchased with the loan proceeds.
Upon consummation of the Merger, all of such loans will be forgiven in
accordance with their terms and all of the shares of First USA Paymentech Common
Stock pledged thereunder will be released from such pledges.
As of the First USA Record Date, an aggregate of $14,283,500 million in
principal amount of loans made by First USA and First USA Paymentech to purchase
shares of First USA Paymentech Common Stock in connection with the Paymentech
IPO was outstanding. As of the First USA Record Date, Messrs. Tolleson, Vague,
Antonini and Christofferson and Ms. Patsley had outstanding loans received in
connection with the Paymentech IPO in the aggregate principal amount of
$1,464,750, $1,464,750, $488,250, $488,250 and $1,953,000, respectively, and all
executive officers of First USA as a group had an aggregate of $7,323,750 in
outstanding loans received in connection with the Paymentech IPO. Pursuant to
the Merger Agreement, any charges to earnings by First USA Paymentech made in
connection with forgiving the loans made by First USA Paymentech in connection
with the Paymentech IPO as a result of the consummation of the Merger will be
borne by First USA.
Existing Employment Agreements. First USA is a party to an employment
agreement with Mr. Tolleson, which provides that, in the event of a "change in
control" of First USA (defined in such employment agreement to include the
approval by the First USA Board of the Merger Agreement), Mr. Tolleson may
terminate his employment and receive within 90 days of such termination a lump
sum payment equal to the sum of the base salary and bonus (calculated based upon
past practices and First USA's current performance) for the then remaining term
of such employment agreement; provided that if any payments received by Mr.
Tolleson in connection with a change in control under such employment agreement
would become subject to the excise tax under Section 4999 of the Code, such
payments would be reduced to
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the highest amount such that Mr. Tolleson would no longer be subject to such
tax, but only if such reduction results in a net increase in Mr. Tolleson's
after-tax benefit. Mr. Tolleson is expected to terminate his employment with
First USA upon consummation of the Merger. Accordingly, upon such termination
Mr. Tolleson will be entitled to receive the foregoing payments under such
employment agreement, which, assuming that the Merger occurs on June 30, 1997,
will equal an aggregate of approximately $2.8 million. First USA does not
anticipate that the payments received by Mr. Tolleson under such employment
agreement will trigger any excise tax under Section 4999 of the Code.
First USA is also a party to an employment agreement with Mr. Vague which
contains similar termination rights and is a party to agreements with certain
other executive officers which provide such executives with the right to
severance benefits in the event of certain terminations of their employment.
However, Mr. Vague and such other executive officers would waive such rights
upon entering into new employment agreements with BANC ONE and First USA at the
Effective Time. See "-- New Employment Agreements."
First USA Management Security Plan. First USA maintains for the benefit of
Messrs. Tolleson and Vague a supplemental retirement plan (the "Management
Security Plan") which provides for the payment, upon certain terminations of
employment, of a percentage of their respective base salary for a fixed period
of time. Pursuant to the Management Security Plan, upon termination of his
employment upon consummation of the Merger, Mr. Tolleson will receive a lump sum
payment equal to the Actuarial Equivalent of his Accrued Benefit (each as
defined in the Management Security Plan), which, assuming the Merger occurs on
June 30, 1997, will equal approximately $441,000. The Management Security Plan
also provides that, upon a "change in control" of First USA (defined in the
Management Security Plan to include the Merger) following which the participant
remains employed by First USA, First USA will transfer to a trust an amount
equal to such participant's Accrued Benefit, and will pay an additional amount
each following year equal to the annual increase in the value of such Accrued
Benefit. Accordingly, upon consummation of the Merger, First USA will transfer
an amount equal to Mr. Vague's Accrued Benefit to a trust created pursuant to
the Management Security Plan for the benefit of Mr. Vague, which, assuming the
Merger occurs on June 30, 1997, will equal approximately $156,000.
First USA Board of Directors. Pursuant to the terms of the First USA
Retirement Plan for Outside Directors, as amended (the "Director Retirement
Plan"), each outside director becomes a "participant" in the Director Retirement
Plan upon serving as a director of First USA for five years. Commencing on the
later of when a participant in the Director Retirement Plan attains the age of
55 or resigns from the First USA Board, each participant is entitled to a
benefit equal to five times the amount of the annual retainer payable by First
USA to the participant during the participant's last 12 consecutive months of
service as an outside director on the First USA Board (the "Benefit Amount"),
payable in equal periodic payments made not less than annually over a period of
60 months. However, pursuant to the terms of the Director Retirement Plan, upon
consummation of the Merger, each outside director of First USA will become a
"participant" in the Director Retirement Plan regardless of years of service as
a director and the Benefit Amount payable to each participant, which is expected
to be approximately $184,000 assuming the Merger occurs on June 30, 1997, will
become payable in a lump sum upon consummation of the Merger.
BANC ONE Board of Directors. It is the intention of BANC ONE and First USA
that Mr. Tolleson will be appointed to the BANC ONE Board following the
Effective Time. Mr. Tolleson will receive customary compensation for his
services as a director of BANC ONE.
New Employment Agreements. Pursuant to the Merger Agreement, Messrs.
Vague, Antonini and Christofferson and Ms. Patsley and each of the eight
Executive Vice Presidents of First USA (collectively, the "Executives") will be
offered employment agreements with BANC ONE and First USA or, in the case of Ms.
Patsley, First USA Paymentech (the "New Employment Agreements") which will
become effective at the Effective Time. The New Employment Agreements contain
the following terms and conditions: (i) a term commencing on the Effective Time
and ending on the second anniversary of the Effective Time (the "Employment
Period"); (ii) a monthly base salary equal to or greater than the highest
monthly base salary paid to the Executive by First USA (or, in the case of Ms.
Patsley, First USA Paymentech) during the twelve-month period immediately
preceding the month in which the Effective Time occurs, with future
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increases to take into account First USA's past practices and compensation
practices of other rapidly growing financial services companies, especially
monoline credit card companies ("Past Practices"); (iii) an annual bonus
opportunity consistent with Past Practices; (iv) incentive plan participation
consistent with Past Practices; (v) savings, welfare benefit, fringe benefit and
retirement plan participation comparable to similarly situated executives of
BANC ONE; and (vi) nonsolicitation, confidentiality and noncompetition covenants
by the Executive.
Pursuant to the New Employment Agreements, if the Executive's employment is
terminated (i) by BANC ONE other than for Cause or Disability (each as defined
in the New Employment Agreements), or by the Executive for Good Reason (as
defined in the New Employment Agreements), then the Executive will receive
continued employee welfare benefits for the remainder of the Employment Period,
immediate vesting of stock-based awards and a lump sum cash payment consisting
of the sum of the Executive's then base salary and the annual bonus paid for the
prior year multiplied by a fraction, the numerator of which is the number of
months remaining in the Employment Period on the date of termination and
denominator of which is 12, and (ii) by reason of the Executive's death or
Disability (as defined in the New Employment Agreements), then the Executive or
the Executive's beneficiary or estate will be paid certain obligations accrued
as of the date of termination (salary, pro rata bonus, deferred compensation,
vacation pay) under BANC ONE or First USA Paymentech plans and policies.
Pursuant to his New Employment Agreement, Mr. Vague, the current President
of First USA, will become the Chairman and Chief Executive Officer of the
combined companies' credit card operations. It is a condition to BANC ONE's
obligation to consummate the Merger that Messrs. Vague, Antonini and
Christofferson and Ms. Patsley each enter into a New Employment Agreement.
New Stock-Based Awards. Pursuant to the Merger Agreement, at the Effective
Time, Mr. Vague will be awarded an option to acquire 300,000 shares of BANC ONE
Common Stock at an exercise price per share equal to the market value of a share
of BANC ONE Common Stock on the date of grant and will also be awarded 45,455
shares of restricted BANC ONE Common Stock. In addition, pursuant to the Merger
Agreement, at the Effective Time certain other officers and key employees of
First USA or its subsidiaries will be granted options to acquire an aggregate of
1,607,704 shares of BANC ONE Common Stock at an exercise price per share equal
to the market value of a share of BANC ONE Common Stock on the date of grant and
will also be awarded an aggregate of 166,818 shares of restricted BANC ONE
Common Stock.
Pursuant to the Merger Agreement, and subject to the approval of the First
USA Paymentech Board of Directors, at the Effective Time certain officers and
key employees of First USA Paymentech will be granted options to acquire an
aggregate of 456,000 shares of First USA Paymentech Common Stock at an exercise
price per share equal to the market value of the First USA Paymentech Common
Stock on the date of the grant and will also be awarded an aggregate of 142,000
shares of restricted First USA Paymentech Common Stock.
All of the options to acquire shares of BANC ONE Common Stock or First USA
Paymentech Common Stock granted as described above will first become exercisable
on December 31, 2000, subject, in the case of grants made to certain executive
officers, to acceleration in the case of the recipient's death or disability or
in the event of certain terminations of the recipient's employment. All of the
shares of restricted BANC ONE Common Stock or restricted First USA Paymentech
Common Stock granted as described above will first vest on December 31, 2001,
subject to acceleration, in the case of grants made to certain executive
officers, upon the same terms described above with respect to the option grants.
In addition, the shares of restricted BANC ONE Common Stock granted to Mr. Vague
and certain executive officers of First USA and First USA Paymentech will be
subject to the satisfaction of certain earnings targets by the combined
company's credit card operations or by First USA Paymentech, as the case may be.
Incentive Compensation. Pursuant to the Merger Agreement, following the
Effective Time, BANC ONE has agreed to provide employees of First USA and its
subsidiaries with incentive compensation consistent with Past Practices.
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Indemnification; Directors and Officers Insurance. The Merger Agreement
provides that BANC ONE will, and will cause the Surviving Corporation to,
indemnify to the fullest extent permitted by law, the present and former
officers, directors, employees and agents of First USA or its subsidiaries in
their capacities as such (the "Indemnified Parties") after the Effective Time
against all losses, expenses, claims, damages or liabilities arising out of
actions or omissions occurring on or prior to the Effective Time. In addition,
BANC ONE will, and will cause the Surviving Corporation to, advance expenses to
the Indemnified Parties, regardless of allegations, to the fullest extent
permitted by law and the BANC ONE Articles of Incorporation and the BANC ONE
Regulations, provided that the Indemnified Party to whom such expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Indemnified Party is not entitled to indemnification for
whatever reason.
The Merger Agreement also provides that BANC ONE will, subject to the
conditions set forth in the Merger Agreement, use its best efforts to cause
directors and officers of First USA to be covered for a period of six years from
the Effective Time by the directors' and officers' liability insurance policy
maintained by First USA (or any equivalent policy therefor), provided that BANC
ONE will not be required to expend more than 200% of the current amount expended
by First USA to procure such insurance.
BANC ONE AND FIRST USA STOCK OPTION AGREEMENTS
Concurrently with the execution of the Merger Agreement, BANC ONE executed
and delivered the BANC ONE Stock Option Agreement, pursuant to which BANC ONE
granted to First USA the BANC ONE Option. At the same time, First USA executed
and delivered the First USA Stock Option Agreement, pursuant to which First USA
granted to BANC ONE the First USA Option. BANC ONE and First USA approved and
entered into the Option Agreements to induce each other to enter into the Merger
Agreement.
Except as otherwise noted below, the terms and conditions of the BANC ONE
Stock Option Agreement and the First USA Stock Option Agreement are identical in
all material respects. For purposes of this section, except as otherwise noted,
(i) the BANC ONE Stock Option Agreement or the First USA Stock Option Agreement,
as the case may be, is sometimes referred to as the "Issuer Option Agreement,"
(ii) BANC ONE, as issuer of the BANC ONE Common Stock, and First USA, as issuer
of the First USA Common Stock, upon the exercise of the BANC ONE Stock Option
and the First USA Stock Option, respectively, are sometimes individually
referred to as the "Issuer," (iii) BANC ONE and First USA, as the holder of the
First USA Stock Option and the BANC ONE Stock Option, respectively, are
sometimes individually referred to as the "Optionee," (iv) the BANC ONE Option
or the First USA Option, as the case may be, is sometimes referred to as the
"Issuer Option" and (v) the BANC ONE Common Stock and the First USA Common Stock
is referred to as "Issuer Common Stock."
The Option Agreements are intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger Agreement.
Consequently, certain aspects of the Option Agreements may have the effect of
discouraging persons who might now or at any other time prior to the Effective
Time be interested in acquiring all of or a significant interest in BANC ONE or
First USA from considering or proposing such an acquisition, even if, in the
case of First USA, such persons were prepared to offer to pay consideration to
the First USA Stockholders which had a higher current market price than the
shares of BANC ONE Common Stock to be received per share of First USA Common
Stock pursuant to the Merger Agreement. The acquisition of BANC ONE or First USA
could cause the BANC ONE Option or the First USA Option, as the case may be, to
become exercisable. The existence of the Issuer Options could significantly
increase the cost to a potential acquiror of acquiring either Issuer compared to
its cost had the Option Agreements and the Merger Agreement not been entered
into. Such increased cost might discourage a potential acquiror from considering
or proposing an acquisition or might result in a potential acquiror proposing to
pay a lower per share price to acquire such Issuer than it might otherwise have
proposed to pay. Moreover, following consultation with their respective
independent accountants, First USA and BANC ONE believe that the exercise or
repurchase of either of the Issuer Options is likely to prohibit any other
acquiror of an Issuer from accounting for any acquisition of such Issuer using
the pooling of interests accounting method for a period of two years.
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<PAGE> 65
The BANC ONE Stock Option Agreement provides for the purchase by First USA
of 85,025,391 shares (the "BANC ONE Option Shares" or the "Issuer Option
Shares," as the case may be) of BANC ONE Common Stock at an exercise price of
$45.125 per share, payable in cash. The BANC ONE Option Shares, if issued
pursuant to the BANC ONE Stock Option Agreement, will in no event exceed 19.9%
of the BANC ONE Common Stock issued and outstanding without giving effect to the
issuance of any BANC ONE Common Stock subject to the BANC ONE Option.
The First USA Stock Option Agreement provides for the purchase by BANC ONE
of 24,480,231 shares (the "First USA Option Shares" or the "Issuer Option
Shares," as the case may be) of First USA Common Stock at an exercise price of
$46.50 per share, payable in cash. The First USA Option Shares, if issued
pursuant to the First USA Stock Option Agreement, will in no event exceed 19.9%
of the First USA Common Stock issued and outstanding without giving effect to
the issuance of any First USA Common Stock subject to the First USA Option.
The number of shares of Issuer Common Stock subject to the applicable
Issuer Option will be increased or decreased, as appropriate, to the extent that
additional shares of Issuer Common Stock are either (i) issued or otherwise
become outstanding (other than pursuant to an exercise of an Issuer Option or as
permitted under the Merger Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after January 19, 1997, such that, after such
issuance, the number of Issuer Option Shares will continue to equal 19.9% of the
Issuer Common Stock then issued and outstanding without giving effect to the
issuance of any Issuer Common Stock subject to such Issuer Option. In the event
of any change in, or distributions in respect of, the number of shares of Issuer
Common Stock by reason of a stock dividend, split-up, merger, recapitalization,
combination, subdivision, conversion, exchange of shares, distribution on or in
respect of such Issuer Common Stock that would be prohibited by the Merger
Agreement, or similar transaction, the type and number of Issuer Option Shares
purchasable upon exercise of the applicable Issuer Option, and the applicable
option price will also be adjusted in such a manner as will fully preserve the
economic benefits of the Option.
Each Issuer Option Agreement provides that the Optionee or any other holder
or holders of the Issuer Option (as used in this section, collectively, the
"Holder") may exercise the Issuer Option, in whole or in part, subject to
regulatory approval, if both an Initial Triggering Event (as defined below) and
a Subsequent Triggering Event (as defined below) has occurred prior to the
occurrence of an Exercise Termination Event (as defined below); provided that
the Holder has sent to the Issuer written notice of such exercise within 90 days
following such Subsequent Triggering Event (subject to extension as provided in
each Issuer Option Agreement). The terms Initial Triggering Event and Subsequent
Triggering Event generally relate to attempts by one or more third parties to
acquire a significant interest in the Issuer. Any exercise of the Issuer Option
will be deemed to occur on the date such notice is sent.
For purposes of each Issuer Option Agreement:
(i) The term "Initial Triggering Event" means the occurrence of any of
the following events or transactions after January 19, 1997: (a) the Issuer
or any subsidiary of the Issuer, without the Optionee's prior written
consent, enters into an agreement to engage in, or the Issuer's Board of
Directors recommends that shareholders of the Issuer approve or accept, an
Acquisition Transaction (as defined below) with any person or group (other
than as contemplated by the Merger Agreement); (b) the Issuer, without the
Optionee's prior written consent, authorizes, recommends, proposes or
publicly announces its intention to authorize, recommend or propose to
engage in an Acquisition Transaction, or the Issuer's Board of Directors
publicly withdraws or modifies, or publicly announces its intention to
withdraw or modify, in any manner adverse to the Optionee, its
recommendation that its shareholders approve the Merger Agreement in
anticipation of engaging in an Acquisition Transaction; (c) any person,
other than the Optionee, any subsidiary of the Optionee or any Issuer
subsidiary acting in a fiduciary capacity in the ordinary course of
business acquires beneficial ownership, or the right to acquire beneficial
ownership, of 10% or more of the outstanding shares of the Issuer's Common
Stock; (d) any person other than the Optionee or any subsidiary of the
Optionee made a bona fide proposal to the Issuer or its shareholders by
public announcement or written communication that becomes the subject of
public disclosure to engage in an Acquisition Transaction (except that,
with respect to First USA, a proposal relating solely to an
54
<PAGE> 66
acquisition of the assets or stock of First USA Paymentech will not be
deemed to be an Initial Triggering Event); (e) the Issuer breaches any
covenant or obligation in the Merger Agreement after any person, other than
the Optionee or any subsidiaries of the Optionee, has proposed an
Acquisition Transaction, and such breach (1) would entitle the Optionee to
terminate the Merger Agreement and (2) is not remedied prior to the date of
the Optionee's notice to the Issuer of the exercise of the Option; or (f)
any person other than the Optionee or any subsidiary of the Optionee, other
than in connection with a transaction to which the Optionee has given its
prior written consent, files an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(ii) For purposes of each Issuer Option Agreement, the term
"Acquisition Transaction" means (a) a merger or consolidation, or any
similar transaction with the Issuer or any of its Significant Subsidiaries
(as defined in Rule 1-02 of Regulation S-X of the Commission); (b) a
purchase, lease or other acquisition or assumption of all or substantially
all of the assets or deposits of the Issuer or any of its Significant
Subsidiaries; (c) a purchase or other acquisition of securities
representing 10% or more of the voting power of the Issuer; or (d) any
substantially similar transaction, provided, however, that in no event will
any merger, consolidation, purchase or similar transaction involving only
the Issuer and one or more of its subsidiaries or involving only any two or
more of such subsidiaries, be deemed to be an Acquisition Transaction,
provided that any such transaction is not entered into in violation of the
terms of the Merger Agreement.
(iii) The term "Subsequent Triggering Event" means the occurrence of
either of the following events or transactions after January 19, 1997: (a)
the acquisition by any person of beneficial ownership of 20% or more of the
then outstanding shares of Issuer Common Stock; or (b) the occurrence of
the Initial Triggering Event described above in clause (i)(a), except that
the percentage referred to in clause (ii)(c) of the definition of
"Acquisition Transaction" set forth above will be 20%.
Each Issuer Option will expire upon the occurrence of an "Exercise
Termination Event," which includes: (i) the Effective Time of the Merger; (ii)
termination of the Merger Agreement in accordance with the provisions thereof if
such termination occurs prior to the occurrence of an Initial Triggering Event,
except in the case of the termination of the Merger Agreement by the Optionee as
a result of an uncured material breach by the Issuer of any of its
representations, warranties, covenants or agreements unless the breach by the
Issuer is non-volitional; or (iii) the date that is 12 months after the
termination of the Merger Agreement if such termination occurs after the
occurrence of an Initial Triggering Event or is a termination by the Optionee as
a result of an uncured material breach by the Issuer of any of its
representations, warranties, covenants or agreements unless the breach by the
Issuer is non-volitional (provided that, if an Initial Triggering Event
continues or occurs beyond such termination of the Merger Agreement and prior to
the passage of such 12-month period, the Issuer Option will terminate 12 months
from the expiration of the last Initial Triggering Event to expire, but in no
event more than 18 months after such termination of the Merger Agreement).
As of the date of this Joint Proxy Statement-Prospectus, to the best
knowledge of BANC ONE and First USA, no Initial Triggering Event or Subsequent
Triggering Event has occurred.
Immediately prior to the occurrence of a Repurchase Event (as defined
below), (i) following a request of a Holder, delivered prior to an Exercise
Termination Event, the Issuer (or any successor thereto) will repurchase the
Issuer Option from the Holder at a price (the "Issuer Option Repurchase Price")
equal to the amount by which (a) the market/offer price (as defined below)
exceeds (b) the option price, multiplied by the number of shares for which the
Issuer Option may then be exercised and (ii) at the request of the owner of
Issuer Option Shares from time to time (the "Owner"), delivered within 90 days
of such occurrence (or such later period as provided in Section 10 of each of
the Option Agreements), the Issuer will repurchase such number of the Issuer
Option Shares from the Owner as the Owner will designate at a price (the "Issuer
Option Share Repurchase Price") equal to the market/offer price multiplied by
the number of Option Shares so designated.
The term "market/offer price" means the highest of (i) the price per share
of Issuer Common Stock at which a tender offer or exchange offer therefor has
been made, (ii) the price per share of Issuer Common
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<PAGE> 67
Stock to be paid by any third party pursuant to an agreement with Issuer, (iii)
the highest closing price for shares of Issuer Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the required
repurchase of the Issuer Option or the Owner gives notice of the required
repurchase of Issuer Option Shares, as the case may be, or (iv) in the event of
a sale of all or a substantial portion of the Issuer's assets, the sum of the
price paid in such sale for such assets and the current market value of the
remaining assets of the Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may be,
and the Issuer, divided by the number of shares of Issuer Common Stock
outstanding at the time of such sale. In determining the market/offer price, the
value of consideration other than cash will be determined by a nationally
recognized investment banking firm selected by the Holder or Owner, as the case
may be, and the Issuer. However, if the Issuer at any time after delivery of a
notice of repurchase as described in this paragraph is prohibited under
applicable law or regulation from delivering to the Holder and/or the Owner, as
appropriate, the Issuer Option Repurchase Price and the Issuer Option Share
Repurchase Price, respectively, in full, the Holder or Owner may revoke its
notice of repurchase of the Issuer Option or the Issuer Option Shares, either in
whole or to the extent of the prohibition, whereupon, in the latter case, the
Issuer will promptly (i) deliver to the Holder and/or the Owner, as appropriate,
that portion of the Issuer Option Repurchase Price or the Issuer Option Share
Repurchase Price that the Issuer is not prohibited from delivering and (ii)
deliver, as appropriate, (a) to the Holder, a new Issuer Option Agreement
evidencing the right of the Holder to purchase that number of shares of the
Issuer Common Stock obtained by multiplying the number of shares of the Issuer
Common Stock for which the surrendered Issuer Option Agreement was exercisable
at the time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Issuer Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Issuer
Option Repurchase Price, and (b) to the Owner, a certificate for the Issuer
Option Shares it is then so prohibited from repurchasing. A "Repurchase Event"
is deemed to have occurred (i) upon the consummation of an Acquisition
Transaction or (ii) upon the acquisition by any person of the beneficial
ownership of 50% or more of the then outstanding Issuer Common Stock, provided
that a Subsequent Triggering Event has occurred prior to an Exercise Termination
Event.
In the event that, prior to an Exercise Termination Event, the Issuer
enters into any agreement (i) to consolidate with or merge into any person,
other than the Optionee or one of its subsidiaries, such that Issuer is not the
continuing or surviving corporation of such consolidation or merger; (ii) to
permit any person, other than the Optionee or one of its subsidiaries, to merge
into the Issuer and the Issuer is the continuing or surviving corporation, but,
in connection with such consolidation or merger, the outstanding shares of the
Issuer Common Stock are changed into or exchanged for stock or other securities
of any other person or cash or any other property, or the then outstanding
shares of Issuer Common Stock after such merger will represent less than 50% of
the outstanding voting shares and voting share equivalents of the merged
corporation; or (iii) to sell or otherwise transfer all or substantially all of
its assets to any person, other than the Optionee or any of its subsidiaries,
then, and in each such case, the agreement governing such transaction must
provide that, upon consummation of such transaction and upon terms and
conditions set forth in the Issuer Option Agreement, the Option will be
converted into, or exchanged for, an option having substantially the same terms
as the Option (the "Substitute Option") to purchase securities, at the election
of the Holder, of either the acquiring person or any person that controls the
acquiring person. At the request of the Holder of the Substitute Option, the
issuer of the Substitute Option will repurchase it at a price, and subject to
such other terms and conditions, as set forth in the Issuer Option Agreement.
Within 90 days after the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Date (subject to extension as provided
in the Issuer Option Agreement), the Optionee may request the Issuer to prepare,
file and keep current with respect to the Option Shares, a registration
statement with the Commission. The Issuer is required to use its reasonable best
efforts to cause such registration statement to become effective and then to
remain effective for 180 days or such shorter time as may be reasonably
necessary to effect such sales or other disposition of Option Shares. The
Optionee has the right to demand two such registrations.
Neither the Issuer nor the Optionee may assign any of its rights and
obligations under the Issuer Option Agreements or the Issuer Option to any other
person without the express written consent of the other party,
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<PAGE> 68
except that, if a Subsequent Triggering Event occurs prior to an Exercise
Termination Event, the Optionee, subject to the terms of the Issuer Option
Agreement, may assign, in whole or in part, its rights and obligations
thereunder, within 90 days (subject to extension as provided in the Issuer
Option Agreement) of such Subsequent Triggering Event; provided that, until the
date 15 days after the date on which the Federal Reserve Board approves an
application by the Optionee to acquire the Issuer Option Shares, the Optionee
may not assign its rights under the Issuer Option except in (i) a widely
dispersed public distribution, (ii) a private placement in which no one party
acquires the right to purchase in excess of 2% of the voting shares of the
Issuer, (iii) an assignment to a single party for the purpose of conducting a
widely dispersed public distribution on the Optionee's behalf, or (iv) any other
manner approved by the Federal Reserve Board.
Certain rights and obligations of the Optionee and the Issuer under the
Option Agreement are subject to receipt of required regulatory approvals. The
approval of the Federal Reserve Board is required for the acquisition by the
Optionee of more than 5% of the outstanding shares of Issuer Common Stock.
Accordingly, the Optionee has included or will include in its applications with
the Federal Reserve Board a request for approval of the right of the Optionee to
exercise its rights under the Issuer Option Agreement, including its right to
purchase more than 5% of the outstanding shares of Issuer Common Stock. See "--
Regulatory Approvals Required for the Merger."
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of BANC ONE Common Stock to be issued to First USA Stockholders
in the Merger have been registered under the Securities Act. Such shares may be
traded freely and without restriction by those shareholders not deemed to be
"affiliates" of First USA as that term is defined under the Securities Act. An
affiliate of First USA, as defined by the rules promulgated pursuant to the
Securities Act, is a person who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
First USA. Any subsequent transfer of such shares, however, by any person who is
an affiliate of First USA at the time the Merger is submitted for vote of the
First USA Stockholders will, under existing law, require either (i) the further
registration under the Securities Act of the shares of BANC ONE stock to be
transferred, (ii) compliance with Rule 145 promulgated under the Securities Act
(permitting limited sales under certain circumstances) or (iii) the availability
of another exemption from registration. The foregoing restrictions are expected
to apply to the directors, executive officers and the holders of 10% or more of
the First USA Common Stock (and to certain relatives or the spouse of any such
person and any trusts, estates, corporations or other entities in which any such
person has a 10% or greater beneficial or equity interest). Stop transfer
instructions will be given by BANC ONE to the transfer agent with respect to the
BANC ONE stock to be received by persons subject to the restrictions described
above, and the certificates for such stock will be appropriately legended.
Commission guidelines regarding qualifying for the "pooling of interests"
method of accounting also limit sales of shares of the acquiring and acquired
company by affiliates of either company in a business combination. Commission
guidelines indicate further that the "pooling of interests" method of accounting
will generally not be challenged on the basis of sales by affiliates of the
acquiring or acquired company if such affiliates do not dispose of any of the
shares of the corporation they own or shares of a corporation they receive in
connection with a merger during the period beginning 30 days before the merger
and ending when financial results covering at least 30 days of post-merger
operations of the combined entity have been published.
Each of First USA and BANC ONE has agreed in the Merger Agreement to use
its best efforts to cause each person who is an affiliate (for purposes of Rule
145 and for purposes of qualifying the Merger for "pooling of interests"
accounting treatment) of such party to deliver to the other party a written
agreement intended to ensure compliance with the Securities Act and preserve the
ability to treat the Merger as a "pooling of interests."
BANC ONE has agreed in the Merger Agreement to use its best efforts to
publish, not later than 90 days after the end of the first month after the
Effective Time in which there are at least 30 days of post-Merger combined
operations, combined sales and net income figures as contemplated by and in
accordance with the terms of the Commission's Accounting Series Release No. 135.
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<PAGE> 69
FIRST USA DIVIDEND REINVESTMENT PLAN
Pursuant to the Merger Agreement, the First USA DRP may continue through
the Effective Time, subject to the limit that no more than 45,000 shares of
First USA Common Stock be sold to First USA DRP participants per quarter.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the Merger, BANC ONE intends to consolidate the management of its
credit card operations with those of First USA. Richard Vague, currently
President of First USA and Chairman and Chief Executive Officer of First USA
Bank, will be the Chairman and Chief Executive Officer of BANC ONE's credit card
operations. It is the intention of BANC ONE and First USA that Mr. Tolleson will
be appointed to the BANC ONE Board following the Effective Time.
BANC ONE may also consolidate the operations of certain other subsidiaries
or divisions of BANC ONE and First USA, which provide similar services, although
no final determination with respect to such matters had been made as of the date
of this Joint Proxy Statement-Prospectus. Following the Merger, BANC ONE and
First USA intend that First USA Paymentech, an approximately 57%-owned
subsidiary of First USA, will continue to pursue greater operating independence
and the strategy for growth established under First USA. BANC ONE has disclosed
that, following the Merger, it intends to reduce its ownership in First USA
Paymentech, but only in a manner that will preserve the "pooling of interests"
accounting treatment of the Merger.
First USA has traditionally produced high growth in earnings. Therefore,
while BANC ONE management estimates that the Merger will be dilutive to BANC
ONE's earnings per common share in 1997, it expects that it will be neutral in
1998 and accretive to earnings per common share thereafter. Further, given the
operational overlap of credit card operations between BANC ONE and First USA,
and the incurrence of certain costs resulting from the Merger, management
estimates a charge to earnings of $150 million; however, the actual charge could
be substantially greater.
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PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
BANC ONE Common Stock is, and the shares offered hereby will be, listed on
the NYSE and traded under the symbol "ONE." The following table sets forth, for
the periods indicated, the high and low reported sales prices per share of BANC
ONE Common Stock on the NYSE Composite Transactions List. The stock price
information has been adjusted to reflect all stock dividends and stock splits on
BANC ONE Common Stock including the 10% stock dividend paid on March 6, 1996 to
BANC ONE Shareholders of record on February 21, 1996.
<TABLE>
<CAPTION>
BANC ONE
SALES PRICES
------------------
HIGH LOW
----- -----
<S> <C> <C>
Fiscal Year Ending December 31, 1995:
First Quarter................................................. $ 27 25/64 $ 22 27/32
Second Quarter................................................ 31 15/16 26 1/64
Third Quarter................................................. 33 13/32 27 61/64
Fourth Quarter................................................ 36 31/64 30 9/16
Fiscal Year Ending December 31, 1996:
First Quarter................................................. 38 1/2 31 15/16
Second Quarter................................................ 37 3/4 32 7/8
Third Quarter................................................. 41 3/8 31 1/4
Fourth Quarter................................................ 47 7/8 40 3/8
Fiscal Year Ending December 31, 1997:
First Quarter................................................. 49 1/4 39 3/8
Second Quarter (through May 9, 1997).......................... 44 39 1/2
</TABLE>
First USA Common Stock is listed on the NYSE and traded under the symbol
"FUS" and the First USA Convertible Preferred Stock is listed on the NYSE and
traded under the symbol "FUSp." The following tables set forth, for the periods
indicated, the high and low reported sales prices per share of First USA Common
Stock and First USA Convertible Preferred Stock on the NYSE Composite
Transactions List. The stock price information has been adjusted to reflect all
stock dividends and stock splits on First USA Common Stock including a 2-for-1
stock split, paid as a 100% stock dividend, declared in the fourth calendar
quarter of 1996.
<TABLE>
<CAPTION>
FIRST USA FIRST USA
SALES PRICES SALES PRICES
(COMMON STOCK) (CONVERTIBLE
PREFERRED)
------------------ ------------------
HIGH LOW HIGH LOW
----- ----- ----- -----
<S> <C> <C> <C> <C>
Fiscal Year Ending June 30, 1995
First Quarter...................................... $ 20 3/8 $ 15 1/2 $ 40 $ 31 3/4
Second Quarter..................................... 18 3/8 13 1/4 36 1/8 27 1/2
Third Quarter...................................... 21 13/16 16 39 3/8 31 1/4
Fourth Quarter..................................... 25 3/16 20 5/16 44 1/2 37
Fiscal Year Ending June 30, 1996
First Quarter...................................... 27 9/16 20 1/8 47 1/2 38
Second Quarter..................................... 27 13/16 21 11/16 48 1/2 38 3/4
Third Quarter...................................... 29 5/8 21 3/16 50 38
Fourth Quarter..................................... 30 1/2 26 9/16 52 45
Fiscal Year Ending June 30, 1997
First Quarter...................................... 28 5/8 23 48 3/8 41
Second Quarter..................................... 35 7/8 27 11/16 60 1/2 47 1/8
Third Quarter...................................... 54 1/8 32 3/4 90 56
Fourth Quarter (through May 9, 1997)............... 49 3/4 42 3/4 83 72
</TABLE>
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<PAGE> 71
DIVIDENDS
The following tables set forth cash dividends declared per share of BANC
ONE Common Stock, First USA Common Stock and First USA Convertible Preferred
Stock, respectively, for the periods indicated. The cash dividend information
has been adjusted to reflect all stock dividends and stock splits on BANC ONE
Common Stock and First USA Common Stock, including the 10% stock dividend on
BANC ONE Common Stock paid on March 6, 1996 to BANC ONE Shareholders of record
on February 21, 1996 and a 2-for-1 stock split, paid as a 100% stock dividend,
declared on First USA Common Stock in the fourth quarter of calendar 1996. The
ability of either BANC ONE or First USA to pay cash dividends to its
shareholders is subject to certain restrictions. See "The Merger -- Conduct of
Business Pending the Merger and Other Agreements," "-- Dividends," and "Certain
Regulatory Matters -- Dividend Restrictions and Transfer of Funds." The timing
and amount of future cash dividends on BANC ONE Common Stock 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 BANC ONE Board. The Merger Agreement provides that BANC ONE and
First USA will coordinate the declaration and payment of dividends in respect of
BANC ONE Common Stock and/or First USA Common Stock and any shares of BANC ONE
Capital Stock any such holder receives in exchange therefor in the Merger so
that holders thereof will not receive two dividends for a single quarter or fail
to receive a dividend which they would otherwise receive in the absence of the
Merger. See "The Merger -- Dividends."
<TABLE>
<CAPTION>
BANC ONE
DIVIDENDS
----------
<S> <C>
Fiscal Year Ending December 31, 1995:
First Quarter.......................................................... $ .31
Second Quarter......................................................... .31
Third Quarter.......................................................... .31
Fourth Quarter......................................................... .31
Fiscal Year Ending December 31, 1996:
First Quarter.......................................................... .34
Second Quarter......................................................... .34
Third Quarter.......................................................... .34
Fourth Quarter......................................................... .34
Fiscal Year Ending December 31, 1997:
First Quarter.......................................................... .38
Second Quarter......................................................... .38
</TABLE>
<TABLE>
<CAPTION>
FIRST USA
DIVIDENDS
FIRST USA (CONVERTIBLE
DIVIDENDS PREFERRED
(COMMON STOCK) STOCK)
-------------- --------------
<S> <C> <C>
Fiscal Year Ending June 30, 1995:
First Quarter.......................................... $ .015 $ .498
Second Quarter......................................... .015 .498
Third Quarter.......................................... .015 .498
Fourth Quarter......................................... .015 .498
Fiscal Year Ending June 30, 1996:
First Quarter.......................................... .03 .498
Second Quarter......................................... .03 .498
Third Quarter.......................................... .03 .498
Fourth Quarter......................................... .03 .498
Fiscal Year Ending June 30, 1997:
First Quarter.......................................... .045 .498
Second Quarter......................................... .06 .498
Third Quarter.......................................... .06 .498
Fourth Quarter......................................... .06 .498
</TABLE>
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<PAGE> 72
INFORMATION ABOUT BANC ONE
GENERAL
BANC ONE is a multi-bank holding company which provides a full range of
consumer and commercial banking and related financial services. At March 31,
1997, BANC ONE operated approximately 1,500 banking offices in Arizona,
Colorado, Illinois, Indiana, Kentucky, Louisiana, Ohio, Oklahoma, Texas, Utah,
West Virginia and Wisconsin. At March 31, 1997, BANC ONE had consolidated total
assets of $101.6 billion, consolidated total deposits of $72.2 billion and
consolidated total shareholders' equity of $8.4 billion (8.3% of its
consolidated total assets). At December 31, 1996, BANC ONE ranked 10th among the
nation's publicly owned bank holding companies in terms of consolidated average
total assets and 9th in terms of consolidated average common equity.
Based on the S.N.L. Branch Migration Data Base dated June 30, 1996, updated
for mergers and acquisitions through February 28, 1997, at February 28, 1997,
BANC ONE's bank subsidiaries (the "affiliate banks") held the largest statewide
share of total bank deposits in Arizona and Kentucky, the second largest share
of such deposits in Indiana, Ohio and West Virginia, and the 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
March 31, 1997, 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 nonbank subsidiaries that engage in credit card and merchant
processing, consumer and education finance, mortgage banking, insurance, venture
capital, investment and merchant banking, trust, brokerage, investment
management, equipment leasing and data processing.
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 approximately 1,500. BANC ONE continues to explore
opportunities to acquire banks and nonbank companies permitted by the BHCA.
Discussions are continually being carried on relating to such acquisitions. It
is not presently known whether, or on what terms, such discussions will result
in further acquisitions.
BANC ONE is a legal entity separate and distinct from its affiliate banks
and its nonbanking subsidiaries (collectively, the "BANC ONE Affiliates").
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 BANC ONE Affiliate is necessarily subject to the prior claims of
creditors of the BANC ONE Affiliate except to the extent that claims of BANC ONE
in its capacity as a creditor may be recognized. The principal sources of BANC
ONE's revenues are dividends and fees from the BANC ONE Affiliates. See
"--Certain Regulatory Matters" for a discussion of the restrictions on the BANC
ONE Affiliates' ability to pay dividends to BANC ONE.
BANC ONE is incorporated in Ohio and has functioned as a multi-bank holding
company since 1968. Its executive offices are located at 100 East Broad Street,
Columbus, Ohio 43271, and its telephone number is (614) 248-5944.
RECENT DEVELOPMENTS
On December 28, 1996, BANC ONE, BANC ONE OKLAHOMA CORPORATION ("BANC ONE
OKLAHOMA") and Liberty Bancorp, Inc. ("LBI") entered into a merger agreement
dated as of December 28, 1996, which provides for the merger (the "LBI Merger")
of LBI with and into BANC ONE OKLAHOMA, an Oklahoma corporation and a
wholly-owned subsidiary of BANC ONE. On March 31, 1997, the requisite vote of
LBI shareholders was received in favor of the LBI Merger. Although the required
regulatory approvals have been received, the LBI Merger remains subject to other
customary conditions. Pursuant to the merger agreement relating to the LBI
Merger, each share of common stock of LBI, par value $.01 per share, will be
converted into 1.175 shares of BANC ONE Common Stock. BANC ONE expects to issue
a maximum of approximately 12.2 million shares of BANC ONE Common Stock in
connection with the LBI Merger. Although no assurances can be given, BANC ONE
currently expects that the LBI Merger will be consummated in the second quarter
of BANC ONE's 1997 fiscal year.
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INFORMATION ABOUT FIRST USA
First USA, incorporated in 1989, is a Delaware corporation, which, through
its principal operating subsidiaries, First USA Bank and First USA Paymentech,
is one of the nation's largest providers of Visa and MasterCard services. First
USA Bank is the fourth largest issuer of Visa and MasterCard credit cards in the
United States, with approximately 16.3 million credit cards issued and $22.9
billion in managed credit card loans outstanding at March 31, 1997. First USA
Bank's profitability is affected by loan growth, interest rate spread,
cardmember usage, credit quality and marketing expenses. First USA conducts its
business through its wholly owned subsidiary, First USA Financial, which is the
parent company of First USA Bank and the majority stockholder of First USA
Paymentech. First USA Paymentech is the third largest payment processor of
credit and debit card transactions in the United States, according to published
industry sources, with approximately $30.3 billion in sales volume processed and
approximately 940.6 million total transactions for the nine months ended March
31, 1997.
In March 1996, First USA Paymentech completed an initial public offering of
its common stock. Following the initial public offering, First USA owned
approximately 77% of the outstanding shares of common stock of First USA
Paymentech. In December, 1996 and January, 1997, First USA sold an aggregate of
approximately 4.4 million shares of First USA Paymentech common stock and First
USA Paymentech sold an aggregate of approximately 3.1 million newly issued
shares of First USA Paymentech common stock in a public offering. As a result,
First USA currently owns approximately 57% of First USA Paymentech.
First USA FSB, an indirect wholly owned subsidiary of First USA and the
newest operating unit of First USA, is focused on expanding First USA's
relationship with its cardmembers. It offers financial products related to
significant life events of the typical household by using First USA's existing
distribution system as a conduit for delivering multiple financial products.
First USA FSB's portfolio of financial products now includes mortgages, home
equity loans, auto loans, insurance and installment loans and soon is expected
to include remote banking, retail certificates of deposit and other financial
products. First USA expects that these new products will create incremental
revenue and strengthen relationships with existing customers.
First USA's other business units, conducted through other subsidiaries of
First USA Financial, provide services that complement First USA Bank's, First
USA Paymentech's and First USA FSB's business operations. The address of the
principal executive office of First USA is 1601 Elm Street, Dallas, Texas 75201
and its telephone number is (214) 849-2000.
CERTAIN REGULATORY MATTERS
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to bank holding companies and their subsidiaries
and provides certain specific information relevant to BANC ONE and First USA.
This regulatory framework is intended primarily for the protection of depositors
and the federal deposit insurance funds and not for the protection of security
holders. To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to those
provisions. A change in the statutes, regulations or regulatory policies
applicable to BANC ONE, First USA or their respective subsidiaries may have a
material effect on the business of such companies.
General. As a bank holding company, BANC ONE is subject to regulation
under the BHCA, and to inspection, examination and supervision by the Federal
Reserve Board. Under the BHCA, bank holding companies generally may not acquire
the ownership or control of more than 5% of the voting shares or substantially
all the assets of any company, including a bank, without the Federal Reserve
Board's prior approval. In addition, bank holding companies generally may
engage, directly or indirectly, only in banking and such other activities as are
determined by the Federal Reserve Board to be closely related to banking.
Most of BANC ONE's affiliate banks are national banking associations and,
as such, are subject to regulation primarily by the Office of the Comptroller of
the Currency ("OCC") and, secondarily, by the FDIC and the Federal Reserve
Board. BANC ONE's state-chartered banks also are subject to regulation by the
FDIC and the Federal Reserve Board and, in addition, by their respective state
banking departments.
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BANC ONE and its subsidiaries and the First USA Banks also are affected by the
fiscal and monetary policies of the federal government and the Federal Reserve
Board, and by various other governmental requirements and regulations.
First USA Bank and First USA Financial Services are banking organizations
chartered under state law. First USA Bank is a Delaware-chartered banking
corporation subject to comprehensive regulation and periodic examination by the
Delaware State Bank Commissioner. First USA Financial Services is an industrial
loan corporation chartered under Utah law that is subject to comprehensive
regulation and periodic examination by the Utah Department of Financial
Institutions. First USA FSB is a federal savings bank that is subject to
comprehensive regulation and periodic examination by the OTS. First USA Bank,
First USA Financial Services and First USA FSB (together, the "First USA Banks")
are also subject to regulation by the FDIC.
Holding Company Status of First USA. As a bank holding company, BANC ONE's
activities and those of its banking and nonbanking subsidiaries are limited
under the BHCA to the business of banking and activities closely related or
incidental to banking. Because each of the First USA Banks meets certain
criteria that cause it to be exempt from the definition of a "bank" under the
BHCA, First USA and the other direct and indirect parent companies of the First
USA Banks are currently not "bank holding companies" subject to provisions of
the BHCA. However, it is expected that if the Merger is completed, the resulting
status of the First USA Banks as subsidiaries of a bank holding company will not
materially restrict, curtail or eliminate their current operations or
activities, which generally conform to the requirements of the BHCA.
First USA and First USA Financial are each registered savings and loan
holding companies subject to OTS supervision as a result of their ownership of
First USA FSB. As a bank holding company subject to Federal Reserve Board
supervision, BANC ONE will be exempt from OTS supervision, although the OTS will
continue to regulate First USA FSB, and the Federal Reserve Board must consult
with the OTS on certain specified matters (including BANC ONE's proposed
acquisition of First USA FSB) and coordinate certain enforcement matters.
Liability for Bank Subsidiaries. The Federal Reserve Board has a policy to
the effect that a bank holding company is expected to act as a source of
financial and managerial strength to each of its subsidiary banks and to
maintain resources adequate to support each such subsidiary bank. This support
may be required at times when BANC ONE may not have the resources to provide it.
In addition, Section 55 of the National Bank Act permits the OCC to order the
pro rata assessment of shareholders of a national bank whose capital has become
impaired. If a shareholder fails within three months to pay such an assessment,
the OCC can order the sale of the shareholder's stock to cover the deficiency.
In the event of a bank holding company's bankruptcy, any commitment by the bank
holding company to a federal bank regulatory agency to maintain the capital of a
subsidiary bank would be assumed by the bankruptcy trustee and entitled to
priority of payment.
Any depository institution insured by the FDIC can be held liable for any
loss incurred, or reasonably expected to be incurred, by the FDIC in connection
with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to a commonly controlled
FDIC-insured depository institution in danger of default. "Default" is defined
generally as the appointment of a conservator or receiver and "in danger of
default" is defined generally as the existence of certain conditions indicating
that a "default" is likely to occur in the absence of regulatory assistance.
Also, in the event that such a default occurred with respect to a bank, any
loans to the bank from its parent holding company would be subordinate in right
of payment to payment of the bank's depositors and certain of its other
obligations.
Capital Requirements. As a bank holding company, BANC ONE is subject to
capital ratios, requirements and guidelines imposed by the Federal Reserve
Board, which are substantially similar to the ratios, requirements and
guidelines imposed by the Federal Reserve Board, the OCC, the FDIC and the OTS
on the banks within their respective jurisdictions, including the bank
affiliates of BANC ONE and the First USA Banks. These capital requirements
establish higher capital standards for banks and bank holding companies that
assume greater risks. For this purpose, a bank's or bank holding company's
assets and certain specified off-balance sheet commitments are assigned to four
risk categories, each weighted differently based on the
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level of credit risk that is ascribed to such assets or commitments. A bank's or
bank holding company's capital, in turn, is divided into two tiers: core ("Tier
1") capital, which includes common stockholders' equity, qualifying
non-cumulative perpetual preferred stock and related surplus (excluding auction
rate issues), qualifying cumulative perpetual preferred stock (in the case of a
bank holding company) and minority interests in equity accounts of consolidated
subsidiaries, less goodwill, certain identifiable intangible assets and certain
other assets; and supplementary ("Tier 2") capital, which includes, among other
items, perpetual preferred stock not meeting the Tier 1 definition, mandatory
convertible debt securities, qualifying subordinated debt and allowances for
loan and lease losses, subject to certain limitations, less certain required
deductions.
BANC ONE, like other bank holding companies, currently is required to
maintain Tier 1 and total capital (the sum of Tier 1 and Tier 2 capital) equal
to at least 4% and 8% of its total risk-weighted assets, respectively. At March
31, 1997 BANC ONE met both requirements, with Tier 1 and total capital equal to
8.77% and 12.86% of its total risk-weighted assets, respectively.
The Federal Reserve Board 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. At March 31,
1997 BANC ONE's leverage ratio was 7.90%.
The Federal Reserve Board 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 Board has not, however, imposed
any such special capital requirement on BANC ONE.
First USA Bank and First USA Financial Services are subject to capital
adequacy guidelines adopted by the FDIC. First USA FSB is subject to capital
regulations of the OTS that are substantially similar to the capital adequacy
guidelines of the Federal Reserve Board, the OCC and the FDIC. As of March 31,
1997, First USA Bank's risk-based Tier 1 capital ratio was 20.69%, its
risk-based total capital ratio was 24.56% and its leverage ratio was 12.13%. As
of March 31, 1997, First USA Financial Services' risk-based Tier 1 capital ratio
was 50.4%, its risk-based total capital ratio was 51.2% and its leverage ratio
was 39.4%, which reflects the start-up nature of its operations.
As of March 31, 1997, First USA FSB's tangible capital and core (leverage)
ratios were each 8.07%, and its risk-based total capital ratio was 17.05% and
Tier 1 capital ratio was 15.72%, which reflects the start-up nature of its
operations.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the respective Federal regulatory agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines could
also subject a banking institution to capital raising requirements. An
"undercapitalized" bank must develop a capital restoration plan and its parent
holding company must guarantee that bank's compliance with the plan. The
liability of the parent holding company under any such guarantee is limited to
the lesser of 5% of the bank's assets at the time it became "undercapitalized"
or the amount needed to comply with the plan. Furthermore, in the event of the
bankruptcy of the parent holding company, such guarantee would take priority
over the parent's general unsecured creditors. In addition, under FDICIA the
various regulatory agencies to have promulgated certain standards for safety and
soundness relating generally to operations and management, asset quality and
executive compensation. FDICIA authorizes regulatory action against a financial
institution that does not meet such standards.
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Dividend Restrictions and Transfers of Funds. 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. At December 31,
1996, $0.6 billion was available for payment of dividends to BANC ONE without
approval by the applicable regulatory authority.
The First USA Banks are subject to similar restrictions on the payment of
dividends. State laws restrict the ability of each of First USA Bank and First
USA Financial Services to pay dividends. Under both Delaware and Utah law,
directors of a state bank and industrial loan company, respectively, may declare
dividends out of net profits, subject to a requirement that the institution
replenish its surplus account until it reaches 100% of its capital stock. In
addition, First USA FSB is required to give the OTS at least 30 days' advance
notice of any proposed dividend or else such dividend will be invalid. Under OTS
regulations, other limitations also apply to First USA FSB's ability to pay
dividends, the magnitude of which depends upon the extent to which the bank
meets its regulatory capital requirements. As of March 31, 1997, total equity of
the First USA Banks approximated $1.3 billion, of which $798.0 million was
available to pay dividends without approval of applicable regulatory
authorities.
Federal bank regulatory authorities have authority to prohibit BANC ONE's
affiliate banks and the First USA 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. In addition, under federal law, none of the
banks may declare dividends or make any capital distributions if, after payment
of such dividend or other distribution, the bank would fall within any of the
three undercapitalized categories under the prompt corrective action standards
of FDICIA. The ability of BANC ONE's affiliate banks and the First USA Banks to
pay dividends in the future is presently, and could be further, influenced by
bank regulatory policies and capital guidelines.
In addition to the dividend restrictions described above, the BANC ONE
Affiliate banks and the First USA Banks are subject to Sections 23A and 23B of
the Federal Reserve Act, which limit transactions between an insured depository
institution and its nonbanking and, in limited circumstances, banking,
affiliates. For example, Section 23A limits to no more than 10% of its total
capital the aggregate outstanding amount of any bank's loans and other "covered
transactions" with any such affiliate; and limits to no more than 20% of its
total capital the aggregate outstanding amount of any bank's covered
transactions with all such affiliates. Section 23A also generally requires that
a bank's loans to such affiliates be secured, and Section 23B generally requires
that a bank's transactions with such affiliates be on arms' length terms.
Deposit Insurance Assessments. The deposits of each of BANC ONE's
affiliate banks and the First USA Banks are insured up to regulatory limits by
the FDIC and, accordingly, are subject to deposit insurance assessments to
maintain the Bank Insurance Fund ("BIF") and Savings Association Insurance Fund
("SAIF") administered by the FDIC. 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 on (a)
the bank's capitalization and (b) supervisory evaluations provided to the FDIC
by the institution's primary federal regulator. Each insured bank's insurance
assessment rate is then determined by the risk category in which it is
classified by the FDIC.
Effective January 1, 1997, the annual insurance premiums on bank deposits
insured by the BIF and SAIF vary between $0.00 per $100 of deposits for banks
classified in the highest capital and supervisory evaluation categories to $0.27
per $100 of deposits for banks classified in the lowest capital and supervisory
evaluation categories.
The Deposit Insurance Funds Act of 1996 ("DIFA") provides for assessments
to be imposed on insured depository institutions with respect to deposits
insured by the BIF and the SAIF (in addition to assessments currently imposed on
depository institutions with respect to BIF- and SAIF-insured deposits) to pay
for the
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cost of Financing Corporation ("FICO") funding. The FDIC established the FICO
assessment rates effective January 1, 1997 at $0.013 per $100 annually for
BIF-assessable deposits and $0.0648 per $100 annually for SAIF-assessable
deposits. BANC ONE's affiliate banks held approximately $5.3 billion of
SAIF-assessable deposits as of January 1, 1997. The FICO assessments do not vary
depending upon a depository institution's capitalization or supervisory
evaluations. BANC ONE currently estimates its FICO assessments may amount to $8
million after-tax in 1997 with similar assessments per year through 1999 (or
earlier if no savings associations exist prior to December 31, 1999) in
connection with such funding.
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 (i) paying an interest rate on deposits in excess of 75 basis
points over certain prevailing market rates or (ii) offering "pass through"
deposit insurance on certain employee benefit plan accounts unless it provides
certain notice to affected depositors.
Interstate Banking. Under the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 ("Riegle-Neal"), subject to certain concentration limits,
(a) bank holding companies such as BANC ONE are permitted, beginning September
29, 1995, to acquire banks and bank holding companies located in any state; (b)
any bank that is a subsidiary of a bank holding company is permitted, again
beginning September 29, 1995, to receive deposits, renew time deposits, close
loans, service loans and receive loan payments as an agent for any other bank
subsidiary of that holding company; (c) banks are permitted, beginning June 1,
1997, to acquire branch offices outside their home states by merging with
out-of-state banks, and in certain circumstances purchasing branches in other
states, provided that the host state has not adopted legislation "opting out" of
interstate mergers under Riegle-Neal, and (d) banks are permitted, effective
September 29, 1995, to establish de novo branch offices in other states,
provided that, in the case of any such opening of individual branches, the host
state has adopted legislation "opting in" to de novo interstate branching under
Riegle-Neal. BANC ONE might use Riegle-Neal to acquire banks in additional
states and to consolidate its affiliate banks under a smaller number of separate
charters.
Enforcement Powers of Federal and State Regulators. The federal banking
agencies have broad enforcement powers over the institutions they regulate,
including the power to terminate deposit insurance (in the case of the FDIC),
impose substantial fines and other civil penalties and, in the most severe
cases, to appoint a conservator or receiver. The state banking regulators also
have broad enforcement powers under state law with respect to state bank
subsidiaries of BANC ONE and First USA.
Consumer Protection Laws. The lending activities of the First USA Banks
and BANC ONE's affiliate banks are subject to regulation under various federal
consumer protection laws including, among others, the Truth-in-Lending Act, the
Fair Housing Act, the Equal Credit Opportunity Act, the Fair Credit Reporting
Act, the Electronic Funds Transfer Act and the Soldiers' and Sailors' Civil
Relief Act, as well as various other state laws. Regulators are authorized to
impose penalties for violations of these statutes and, in certain cases, to
order the banks to pay restitution to injured customers. Customers may also
bring actions for up to treble damages for certain violations. Federal and state
bankruptcy and debtor relief laws also affect the banks' ability to collect
outstanding balances owed by cardmembers who seek relief under these statutes.
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COMPARISON OF SHAREHOLDER RIGHTS
Upon the conversion of their shares of First USA Common Stock into the
right to receive shares of BANC ONE Common Stock pursuant to the Merger, the
stockholders of First USA, a Delaware corporation, will become shareholders of
BANC ONE, an Ohio corporation. The following is a description of BANC ONE
capital stock, including the BANC ONE Common Stock to be issued in the Merger,
and a summary of certain differences between the rights of holders of First USA
Common Stock and the rights of holders of BANC ONE Common Stock. These
differences arise in part from the differences between the Delaware Law and the
Ohio Law. Additional differences arise from the governing instruments of the two
companies (in the case of First USA, the First USA Certificate of Incorporation
and the First USA By-laws, and, in the case of BANC ONE, the BANC ONE Articles
of Incorporation and the BANC ONE Regulations). Although it is impractical to
compare all of the aspects in which the Delaware Law and the Ohio Law and the
companies' governing instruments differ with respect to shareholders' rights,
the following discussion summarizes certain significant differences between
them.
DESCRIPTION OF BANC ONE STOCK
General. The authorized capital stock of BANC ONE consists of (without
giving effect to the Articles Amendment) 600,000,000 shares of BANC ONE Common
Stock and 35,000,000 shares of preferred stock, without par value ("BANC ONE
Preferred Stock"), divided into 10,000,000 shares of Class A Preferred Stock
("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 Series C $3.50 Cumulative Convertible Preferred Stock,
consisting of 5,000,000 authorized shares, has been designated ("Class C
Preferred Stock"). If the BANC ONE Shareholders approve the Articles Amendment,
the number of authorized shares of BANC ONE Common Stock will be increased to
950,000,000. See "Proposed Amendment to the BANC ONE Articles of Incorporation
to Increase Authorized Common Stock." As of March 31, 1997, there were issued
and outstanding 3,774,856 shares of Class C Preferred Stock and there were
issued 433,657,210 shares of BANC ONE Common Stock (including 13,919,627 shares
of treasury stock).
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 Law and the BANC ONE Articles of
Incorporation.
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 BANC
ONE Board provided that, so long as any shares of BANC ONE 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 BANC ONE 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 A Preferred
Stock and Class B Preferred Stock. Generally, holders of Class C Preferred Stock
have no voting rights.
The issued and outstanding shares of BANC ONE Common Stock are fully paid
and nonassessable. The holders of BANC ONE Common Stock are not entitled to
preemptive rights or conversion or redemption rights. The holders of BANC ONE
Common Stock do not have 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 will 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 BANC ONE Preferred
Stock, all the remaining assets of BANC ONE available for distribution.
Preferred Stock. BANC ONE's Board has the authority to issue shares of
Class A and Class C Preferred Stock in one or more series and to fix the
designations, number of shares, dividends, redemption
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rights, sinking fund requirements, liquidation prices, conversion rights and
other rights, qualifications, limitations or restrictions thereon (except voting
rights) as the BANC ONE Board may from time to time be permitted by law to fix
or change.
Currently, no shares of BANC ONE Preferred Stock except shares of Class C
Preferred Stock are outstanding. Holders of Class 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. If full cumulative dividends on
outstanding shares of Class 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 Class C
Preferred Stock. Upon the voluntary or involuntary dissolution, liquidation or
winding up of BANC ONE, holders of Class C Preferred Stock are entitled to
receive a preferential distribution of $50 per share plus accrued and unpaid
dividends, if any. The Class C Preferred Stock ranks on a parity as to payment
of dividends and with respect to distributions upon liquidation with the Class B
Preferred Stock.
Generally, holders of shares of Class C Preferred Stock have no voting
rights. However, the approval of holders of a majority of the outstanding shares
of Class 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 Class 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 Class C Preferred
Stock. Holders of Class C Preferred Stock also have the right to elect two
additional directors during any period in which dividends on Class 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 Class 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 1.928982 shares of BANC ONE
Common Stock for each share of Class C Preferred Stock and is subject to
adjustment for stock dividends, subdivisions, splits and 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 Class C Preferred Stock may be redeemed, in whole or
in part, by BANC ONE at its election at any time 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>
1997.................................................. $ 51.40
1998.................................................. $ 51.05
1999.................................................. $ 50.70
2000.................................................. $ 50.35
2001 and thereafter................................... $ 50.00
</TABLE>
The Class C Preferred Stock is not subject to the operation of a sinking fund.
COMPARISON OF BANC ONE COMMON STOCK AND FIRST USA COMMON STOCK
Amendment of Charter Documents. The Delaware Law requires approval by
holders of a majority of the voting power of First USA Common Stock in order to
amend the First USA Certificate of Incorporation. To amend an Ohio corporation's
articles of incorporation, the Ohio Law requires the approval of shareholders
holding two-thirds of the voting power of the corporation, or, in cases in which
class voting is required, of shareholders holding two-thirds of the voting power
of such class, unless otherwise specified in such corporation's articles of
incorporation. The BANC ONE Articles of Incorporation specify that the holders
of a majority of the voting power of BANC ONE, or, when appropriate, any class
of shareholders, may amend the
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BANC ONE Articles of Incorporation, except that amendments to the "control share
acquisition" and "fair price" provisions require the affirmative vote of 85% of
the total voting power. See "-- Mergers, Acquisitions and Certain Other
Transactions."
Amendment and Repeal of By-laws and Regulations. Under the Delaware Law,
holders of a majority of the voting power of a corporation and, when provided in
the certificate of incorporation, the directors of the corporation, have the
power to adopt, amend and repeal the by-laws of a corporation. The First USA
Certificate of Incorporation grants the directors of First USA such power.
The Ohio Law provides that only shareholders of a corporation have the
power to amend and repeal a corporation's code of regulations. The BANC ONE
Regulations may only be amended 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.
Removal of Directors. The Delaware Law provides that directors may be
removed from office, with or without cause, by the holders of a majority of the
voting power of all outstanding voting stock, unless the corporation has a
classified board and its certificate of incorporation otherwise provides. The
First USA Certificate of Incorporation does provide for a classified board and
that directors may only be removed for cause.
The Ohio Law provides that, unless the governing documents of a corporation
provide otherwise, directors may be removed, with or without cause, by the
affirmative vote of the holders of a majority of the voting power of the
corporation with respect to the election of directors, except that, unless all
the directors or all the directors of a particular class are removed, no
individual director may be removed if the votes of a sufficient number of shares
are cast against such director's removal which, if cumulatively voted at an
election of all the directors, or all the directors of a particular class, as
the case may be, would be sufficient to elect at least one director. BANC ONE
does not have a classified board, with the result that directors serve for one-
year terms and the entire BANC ONE Board is elected annually. To qualify for
election to the BANC ONE Board, an individual must own a substantial number of
shares of BANC ONE Capital Stock, 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. Directors of
BANC ONE may be removed, with or without cause, by the affirmative vote of a
majority of the voting power present at a meeting of BANC ONE shareholders.
Vacancies on the Board. The Delaware Law provides that, unless the
governing documents of a corporation provide otherwise, vacancies and newly
created directorships resulting from a resignation or any increase in the
authorized number of directors elected by all of the stockholders having the
right to vote as a single class may be filled by a majority of the directors
then in office. The First USA Certificate of Incorporation provides that any
vacancy on the First USA Board that results from an increase in the number of
directors may be filled by a majority of the directors then in office, provided
that a quorum is present, and any other vacancy occurring in the First USA Board
may be filled by a majority of the directors then in office, even if less than a
quorum, or by a sole remaining director. Any director of any class elected to
fill a vacancy resulting from an increase in the number of directors shall have
a term that shall coincide with the remaining term of that class. Any directors
elected to fill a vacancy not resulting from an increase in the number of
directors shall have the same remaining term as that of his or her predecessor.
The Ohio Law provides that, unless the governing documents of a corporation
provide otherwise, vacancies on the board of directors may be filled by a
majority of the remaining directors of a corporation. The BANC ONE Regulations
provide that, except in cases where a director is removed and such director's
successor is elected by the shareholders, the remaining directors may, by a vote
of a majority of their number, fill any vacancy for the unexpired term.
Right to Call Special Meetings of Shareholders. The Delaware Law permits
special meetings of stockholders to be called by the board of directors and such
other persons, including stockholders, as the certificate of incorporation or
by-laws may provide. The Delaware Law does not require that stockholders be
given the right to call special meetings. The First USA By-laws provide that
special meetings may be called
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for any purpose or purposes by the First USA Board, the First USA Chairman of
the Board or the First USA Secretary.
Under the Ohio Law, the holders of at least 25% of the outstanding shares
of a corporation, unless the corporation's regulations specify another
percentage, which may in no case be greater than 50%, the directors, by action
at a meeting or a majority of the directors acting without a meeting, the
chairman of the board, the president or, in case of the president's death or
disability, the vice president authorized to exercise the authority of the
president have the authority to call special meetings of shareholders. The BANC
ONE Regulations expressly provide that special meetings of BANC ONE Shareholders
may be called by the BANC ONE Chief Executive Officer or, in cases of the BANC
ONE Chief Executive Officer's absence from the United States, death or
disability, such other officer, who is also a member of the BANC ONE Board, who
is authorized in such circumstances to exercise the authority of the BANC ONE
Chief Executive Officer, or by the directors by action at a meeting or a
majority of the directors acting without a meeting, or by shareholders holding
50% or more of the voting power of the then-outstanding shares entitled to vote
in an election of directors, taken together as a single class.
Shareholder Action Without a Meeting. The Delaware Law provides that,
unless otherwise provided in the certificate of incorporation, any action that
may be taken at a meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if the holders of common stock having
not less than the minimum number of votes otherwise required to approve such
action at a meeting of stockholders consent in writing. The First USA
Certificate of Incorporation provides that any action required or permitted to
be taken by the stockholders must be effected at an annual or special meeting of
stockholders, duly called and held with prior notice and a vote, and may not be
effected by any consent in writing by such stockholders. Under the Ohio Law, any
action that may be taken by shareholders at a meeting may be taken without a
meeting with the unanimous written consent of all shareholders entitled to vote
thereat.
Class Voting. The Delaware Law requires voting by separate classes only
with respect to amendments to a corporation's certificate of incorporation that
adversely affect the holders of those classes or that increase or decrease the
aggregate number of authorized shares or the par value of the shares of any of
those classes. Under the Ohio Law, holders of a particular class of shares are
entitled to vote as a separate class if the rights of that class are affected in
certain respects by mergers, consolidations or amendments to the articles of
incorporation.
Cumulative Voting. Under the Delaware Law, stockholders do not have the
right to cumulate their votes in the election of directors unless such right is
granted in the certificate of incorporation. The First USA Certificate of
Incorporation does not grant such rights. Under the Ohio Law, unless the
articles of incorporation are amended to eliminate cumulative voting for
directors following their initial filing with the Ohio Secretary of State, each
shareholder has the right to vote cumulatively in the election of directors if
certain notice requirements are satisfied. The BANC ONE Articles of
Incorporation have been amended to eliminate the rights of the BANC ONE
Shareholders to vote cumulatively in the election of directors.
Provisions Affecting Control Share Acquisitions and Business
Combinations. Section 203 of the Delaware Law provides generally that any
person who acquires 15% or more of a corporation's voting stock (thereby
becoming an "interested stockholder") may not engage in a wide range of
"business combinations" with the corporation for a period of three years
following the date the person became an interested stockholder, unless (i) the
board of directors of the corporation has approved, prior to that acquisition
date, either the business combination or the transaction that resulted in the
person becoming an interested stockholder, (ii) upon consummation of the
transaction that resulted in the person becoming an interested stockholder, that
person owns at least 85% of the corporation's voting stock outstanding at the
time the transaction commenced (excluding shares owned by persons who are
directors and also officers and shares owned by employee stock plans in which
participants do not have the right to determine confidentially whether shares
will be tendered in a tender or exchange offer), or (iii) the business
combination is approved by the board of directors and authorized by the
affirmative vote (at an annual or special meeting and not by written consent) of
at least 66 2/3% of the outstanding voting stock not owned by the interested
stockholder.
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These restrictions on interested stockholders do not apply under certain
circumstances, including, but not limited to, the following (i) if the
corporation's original certificate of incorporation contains a provision
expressly electing not to be governed by Section 203 of the Delaware Law, or
(ii) if the corporation, by action of its stockholders, adopts an amendment to
its by-laws or certificate of incorporation expressly electing not to be
governed by such section. Neither the First USA Certificate of Incorporation nor
the First USA By-laws contain a provision electing not to be governed by such
section.
Like Section 203 of the Delaware Law, Chapter 1704 of the Ohio Law
prohibits an "interested shareholder" from engaging in a wide range of "business
combinations" similar to those prohibited by Section 203 of the Delaware Law.
However, in contrast to Section 203 of the Delaware Law, under Chapter 1704 of
the Ohio Law an interested shareholder includes a shareholder who, directly or
indirectly, exercises or directs the exercise of 10% or more of the voting power
of the corporation. Ohio Law Chapter 1704 restrictions do not apply under
certain circumstances, including, but not limited to, the following: (i) if
directors of the corporation have approved the transactions or the interested
shareholder's acquisition of shares of the corporation prior to the date the
interested shareholder became a shareholder of the corporation, and (ii) if the
corporation, by action of its shareholders holding at least 66 2/3% of the
voting power of the corporation, adopts an amendment to its articles of
incorporation specifying that Chapter 1704 of the Ohio Law shall not be
applicable to the corporation.
Under Section 1701.831 of the Ohio Law, unless the articles of
incorporation or code of regulations of a corporation otherwise provide, any
control share acquisition of an "issuing public corporation" can only be made
with the prior approval of the corporation's shareholders. A "control share
acquisition" is defined as any acquisition of shares of a corporation that, when
added to all other shares of that corporation owned by the acquiring person,
would enable that person to exercise levels of voting power in any of the
following ranges: at least 20% but less than 33 1/3%; at least 33 1/3% but less
than 50%; or 50% or more.
Article Eleventh of the BANC ONE Articles of Incorporation 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 Ohio
Law. Article Eleventh of the BANC ONE Articles of Incorporation sets forth
procedures for obtaining shareholder consent of control share acquisitions,
subject to the right of the BANC ONE Board to screen out proposals that do not
meet certain standards set forth in Article Eleventh of the BANC ONE Articles of
Incorporation. Article Eleventh of the BANC ONE Articles of Incorporation
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:
(i) one-fifth or more but less than one-third; (ii) one-third or more but less
than a majority; and (iii) a majority or more. A bank, broker, nominee, trustee
or other person who acquires shares in the ordinary course of business for the
benefit of others in good faith and not for the purpose of circumventing Article
Eleventh of the BANC ONE Articles of Incorporation shall be deemed to have
voting power only of shares in respect of which such person would be able to
exercise or direct the exercise of votes without further instruction from others
at a meeting of shareholders called under Article Eleventh of the BANC ONE
Articles of Incorporation. A control share acquisition which meets certain
criteria set forth in Article Eleventh of the BANC ONE Articles of Incorporation
as determined by the BANC ONE Board, must be presented to a meeting of the BANC
ONE Shareholders and approved by the affirmative vote of the holders of both (i)
a majority of the voting power represented at the meeting and (ii) a majority of
that portion of such voting power excluding any "interested shares" (those
shares held by the acquiring person, executive officers of BANC ONE and
employees of BANC ONE who are also directors). Article Eleventh of the BANC ONE
Articles of Incorporation may be amended by a vote of 85% of the votes entitled
to be cast by all holders of voting stock.
Fair Price Provisions. The BANC ONE 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 (the "Acquiror") and then seeks to
acquire all or part of the remaining voting stock through a merger or other
transaction which would force a change or termination of the other shareholders'
ownership interests (a "Business Combination"), such other sharehold-
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ers 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
("Special Shareholder Vote").
This provision operates by requiring that, after an Acquiror emerges, any
Business Combination which has the effect of requiring shareholders to surrender
their shares must satisfy one of the following conditions:
(i) Fair Consideration to Shareholders. The terms of the Business
Combination must provide for payment of consideration which is at least
equivalent to the highest price paid to other shareholders by the Acquiror
in acquiring its 20% stock position and must be approved by shareholders as
otherwise required by applicable law; or
(ii) Unrelated Director Approval. The Business Combination must be
approved as fair to shareholders by a majority of the directors who are not
affiliated with the Acquiror and who were directors before the Acquiror
acquired its 20% stock position or who were nominated or elected to succeed
such directors by the other unaffiliated directors ("Unrelated Directors")
and must be approved by shareholders as otherwise required by applicable
law; or
(iii) Special Shareholder Vote. The Business Combination must be
approved by the Special Shareholder Vote.
Article Tenth of the BANC ONE Articles of Incorporation, which contains
this provision, may be amended 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 Ohio Law is similar to the "fair price" provision
contained in the BANC ONE Articles of Incorporation. The Ohio Law prohibits an
Issuing Public Corporation (as defined below) from engaging in a Chapter 1704
Transaction (as defined below) with an Interested Shareholder (as defined below)
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 which 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.
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
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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.
The Delaware Law has no comparable provision.
Mergers, Acquisitions and Certain Other Transactions. The Delaware Law
requires approval of mergers, consolidations and dispositions of all or
substantially all of a corporation's assets (other than so-called "parent-
subsidiary" mergers) by a majority of the voting power of the corporation,
unless the certificate of incorporation specifies a different percentage. The
First USA Certificate of Incorporation does not provide for a different
percentage. The Delaware Law does not require stockholder approval for majority
share acquisitions or for combinations involving the issuance of less than 20%
of the voting power of the corporation, except for "business combinations"
subject to Section 203 of the Delaware Law.
Under the Ohio Law, a merger or consolidation by an Ohio corporation
generally requires the affirmative vote of holders 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. The BANC ONE Articles of Incorporation
generally require only approval of a majority of the outstanding shares for such
transactions.
Constituencies Provisions. Section 1701.59 of the Ohio Law permits a
director, in determining what such director reasonably believes to be in the
best interests of the corporation, to consider, in addition to the interests of
the corporation's shareholders, any of the following (i) the interests of the
corporation's employees, suppliers, creditors, and customers, (ii) the economy
of the state and nation, (iii) community and societal considerations and (iv)
the long-term as well as short-term interests of the corporation and its
shareholders, including the possibility that these interests may be best served
by the continued independence of the corporation. The Delaware Law contains no
comparable provision.
Rights of Dissenting Shareholders. Under the Delaware Law, appraisal
rights are available to dissenting stockholders in connection with certain
mergers or consolidations. However, unless the certificate of incorporation
otherwise provides, the Delaware Law does not provide for appraisal rights (i)
if the shares of the corporation are listed on a national securities exchange or
designated as a national market systems security on an interdealer quotations
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 stockholders (as long as the stockholders receive in the
merger shares of the surviving corporation or of any other corporation the
shares of which are listed on a national securities exchange or designated as a
national market systems security on an interdealer quotations system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 stockholders) or (ii) if the corporation is the surviving corporation and
no vote of its stockholders is required for the merger. The First USA
Certificate of Incorporation does not provide otherwise. See "Summary
- --Appraisal Rights." The Delaware Law does not provide appraisal rights to
stockholders who dissent from the sale of all or substantially all of a
corporation's assets or an amendment to the corporation's certificate of
incorporation, although a corporation's certificate of incorporation may so
provide.
Under the Ohio Law, 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 the corporation's articles of
incorporation. Shareholders of an Ohio corporation being merged into or
consolidated with another corporation are also entitled to appraisal rights. In
addition, shareholders of an acquiring corporation are entitled to appraisal
rights in any merger, combination or majority share acquisition in which such
shareholders are entitled to voting rights. The Ohio Law provides shareholders
of an acquiring corporation with voting rights if the acquisition (a "majority
share acquisition") involves the transfer of shares of the acquiring corporation
entitling the recipients thereof to exercise one-sixth or more of the voting
power of such acquiring corporation immediately after the consummation of the
transaction. See "Rights of Dissenting Shareholders."
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Under the Delaware Law, among other procedural requirements, a
stockholder's written demand for appraisal of shares must be received before the
taking of the vote on the matter giving rise to appraisal rights. Under the Ohio
Law, a shareholder's written demand must be delivered to the corporation not
later than ten days after the taking of the vote on the matter giving rise to
appraisal rights.
Dividends. Both the Delaware Law and the Ohio Law provide that dividends
may be paid in cash, property or shares of a corporation's capital stock. The
Delaware Law provides that a corporation may pay dividends out of any surplus,
and, if it has no surplus, out of any net profits for the fiscal year in which
the dividend was declared or for the preceding fiscal year (provided that such
payment will not reduce capital below the amount of capital represented by all
classes of shares having a preference upon the distribution of assets). The Ohio
Law provides that a corporation may pay dividends out of surplus and must notify
its shareholders if a dividend is paid out of capital surplus.
Preemptive Rights of Shareholders. The Delaware Law provides that no
stockholder shall have any preemptive rights to purchase additional securities
of the corporation unless the certificate of incorporation expressly grants such
rights. The First USA Certificate of Incorporation does not provide for
preemptive rights.
The Ohio Law provides that, subject to certain limitations and conditions
contained in the Ohio Law and unless the articles of incorporation provide
otherwise, shareholders shall have preemptive rights to purchase additional
securities of the corporation. The BANC ONE Articles of Incorporation expressly
eliminate any preemptive rights.
Director Liability and Indemnification. The Delaware Law allows a Delaware
corporation to include in its certificate of incorporation, and the First USA
Certificate of Incorporation contains, a provision eliminating the liability of
a director for monetary damages for a breach of such director's fiduciary duties
as a director, except liability (i) for any breach of the director's duty of
loyalty to First USA or First USA Stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or knowing violation of
law, (iii) under Section 174 of the Delaware Law (which deals generally with
unlawful payments of dividends, stock repurchases and redemptions), and (iv) for
any transaction from which the director derived an improper personal benefit.
The First USA By-laws provide for indemnification of persons (including
First USA directors) whom it shall have power to indemnify under and to the
fullest extent permitted by the Delaware Law. The Delaware Law permits a
Delaware corporation to indemnify directors, officers, employees and agents
under certain circumstances and mandates indemnification under certain
circumstances. The Delaware Law permits a corporation to indemnify an officer,
director, employee or agent for fines, judgments or settlements, as well as for
expenses in the context of actions other than derivative actions if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation. Indemnification against
expenses incurred by a director, officer, employee or agent in connection with a
proceeding against such person for actions in such capacity is mandatory to the
extent that such person has been successful on the merits. If a director,
officer, employee or agent is determined to be liable to the corporation,
indemnification for expenses is not allowable, subject to limited exceptions
when a court deems the award of expenses appropriate. The Delaware Law grants
express power to a Delaware corporation to purchase liability insurance for its
directors, officers, employees and agents, regardless of whether any such person
is otherwise eligible for indemnification by the corporation. Advancement of
expenses is permitted, but a person receiving such advances must repay those
expenses if it is ultimately determined that such person is not entitled to
indemnification.
There is no comparable provision under the Ohio Law limiting the liability
of officers, employees or agents of the corporation, and the BANC ONE Articles
of Incorporation contain no such provision. However, Ohio Law has codified the
traditional business judgment rule. Ohio Law provides that the business judgment
presumption of good faith may only be overcome by clear and convincing evidence
that an action or failure to act was undertaken with deliberate intent to cause
injury to the corporation or with reckless disregard for the best interests of
the corporation. Further, Ohio Law provides specific statutory authority for
directors to consider, in addition to the interests of the corporation's
shareholders, other factors such as the interests of the
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corporation's employees, suppliers, creditors and customers; the economy of the
state and nation; community and societal considerations; the long-term and
short-term interests of the corporation and its shareholders; and the
possibility that these interests may be best served by the continued
independence of the corporation.
Under the Ohio Law, Ohio corporations are permitted to indemnify directors,
officers, employees and agents within prescribed limits and must indemnify them
under certain circumstances. The Ohio Law does not authorize payment by a
corporation of judgments against a director, officer, employee or 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 it is determined that a director, officer,
employee or agent acted in good faith and in a manner such person 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 of incorporation, code of regulations or by contract,
except with respect to the advancement of expenses of directors (as discussed in
the next paragraph). The statutory right to indemnification is not exclusive in
Ohio, and Ohio corporations may, among other things, purchase insurance to
indemnify those persons.
The Ohio Law provides that a director (but not an officer, employee, or
agent) is entitled to mandatory advancement of expenses, including attorneys'
fees, incurred in defending any action, including derivative actions, brought
against the director, provided that 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 such director's 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.
The BANC ONE Regulations provide that BANC ONE may indemnify directors,
officers, employees and agents to the fullest extent permitted by law against
costs incurred in connection with any threatened, pending or completed claim,
action, suit or proceeding because of such person's service as a director,
officer, employee or agent of BANC ONE.
BANC ONE has entered into indemnification contracts with its directors and
certain of its officers that, among other things, provide the contracting
director or officer with certain procedural and substantive rights to
indemnification. Such indemnification rights apply to acts or omissions of such
persons, whether such acts or omissions occurred before or after the effective
date of the contract.
Shareholder Rights Plans. Neither BANC ONE nor First USA has implemented a
shareholder rights plan, but, subject to the terms of the Merger Agreement,
either could do so without further action of its shareholders.
RIGHTS OF DISSENTING SHAREHOLDERS
BANC ONE SHAREHOLDERS
Section 1701.84 of the Ohio Law provides that all BANC ONE Shareholders
entitled to vote on the Merger Proposal may exercise dissenters' right with
respect to the Merger. The following is a summary of the principal steps a BANC
ONE Shareholder must take to perfect dissenters' rights under Section 1701.85 of
the Ohio Law. This summary does not purport to be complete and is qualified in
its entirety by reference to Section 1701.85 of the Ohio Law, a copy of which is
attached as Appendix D to this Joint Proxy Statement-Prospectus. Any BANC ONE
Shareholder contemplating the exercise of dissenters' rights is urged to review
carefully such provisions and to consult an attorney, since dissenters' rights
will be lost if the procedural requirements under Section 1701.85 of the Ohio
Law are not fully and precisely satisfied. To perfect dissenters' rights, a BANC
ONE Shareholder must satisfy each of the following conditions:
1. No Vote in Favor of the Merger Proposal. Shares of BANC ONE Common
Stock ("Dissenter's BANC ONE Shares") held by the dissenting BANC ONE
Shareholder (the "Dissenting BANC ONE Shareholder") must not be voted at the
BANC ONE Special Meeting in favor of the Merger Proposal. See "BANC ONE Special
Meeting -- Matters to Be Considered." This requirement will be satisfied if a
proxy is signed and returned with instructions to vote against the Merger
Proposal or to abstain from such vote, if no
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proxy is returned and no vote is cast at the BANC ONE Special Meeting in favor
of the Merger Proposal, or if the Dissenting BANC ONE Shareholder revokes a
proxy, and thereafter abstains from voting with respect to the Merger Proposal
or votes against the Merger Proposal at the BANC ONE Special Meeting. A vote in
favor of the Merger Proposal at the BANC ONE Special Meeting constitutes a
waiver of dissenters' rights. A proxy that is returned signed but on which no
voting preference is indicated will be voted in favor of the Merger Proposal and
will constitute a waiver of dissenters' rights. A Dissenting BANC ONE
Shareholder may revoke his proxy at any time before its exercise by filing with
BANC ONE an instrument revoking it or a duly executed proxy bearing a later
date, or by attending and giving notice of the revocation of the proxy in open
meeting (although attendance at the BANC ONE Special Meeting will not in and of
itself constitute revocation of a proxy). See "BANC ONE Special
Meeting -- Proxies" and "First USA Special Meeting -- Proxies."
2. Filing Written Demand. Not later than ten days after the taking of the
vote on the Merger Proposal, a Dissenting BANC ONE Shareholder must deliver to
BANC ONE a written demand (the "BANC ONE Demand") for payment of the fair cash
value of the Dissenter's BANC ONE Shares. The BANC ONE Demand should be
delivered to BANC ONE at 100 East Broad Street, Columbus, Ohio 43271, Attention:
Corporate Secretary. It is recommended, although not required, that the BANC ONE
Demand be sent by registered or certified mail, return receipt requested. Voting
against the Merger Proposal will not itself constitute a demand. BANC ONE will
not send any further notice to BANC ONE Shareholders as to the date on which
such ten-day period expires.
The BANC ONE Demand must identify the name and address of the holder of
record of the Dissenter's BANC ONE Shares, the number of Dissenter's BANC ONE
Shares and the amount claimed as the fair cash value thereof. A beneficial owner
must, in all cases, have the record holder submit the BANC ONE Demand in respect
of the Dissenter's BANC ONE Shares. The BANC ONE Demand must be signed by the
shareholder of record (or by the duly authorized representative of the
shareholder) exactly as the shareholder's name appears on the shareholder
records of BANC ONE. A BANC ONE Demand with respect to Dissenter's BANC ONE
Shares owned jointly by more than one person must identify and be signed by all
of the shareholders of record. Any person signing a BANC ONE Demand on behalf of
a partnership or corporation or in any other representative capacity (such as an
attorney-in-fact, executor, administrator, trustee or guardian) must indicate
the nature of the representative capacity and, if requested, must furnish
written proof of this capacity and such person's authority to sign the demand.
Because only shareholders of record on the BANC ONE Record Date may
exercise dissenters' rights, any person who beneficially owns shares that are
held of record by a broker, fiduciary, nominee or other holder and who wishes to
exercise dissenters' rights must instruct the record holder of the shares to
satisfy the conditions outlined above. If a record holder does not satisfy, in a
timely manner, all of the conditions outlined in this section, "Rights of
Dissenting Shareholders," the dissenters rights for all of the shares held by
that shareholder will be lost.
From the time the BANC ONE Demand is given until either the termination of
the rights and obligations arising from such BANC ONE Demand or the purchase of
the Dissenter's BANC ONE Shares related thereto by BANC ONE, all rights accruing
to the holder of the Dissenter's BANC ONE Shares, including voting and dividend
or distribution rights, will be suspended. If any dividend or distribution is
paid on BANC ONE Common Shares during the suspension, an amount equal to the
dividend or distribution which would have been payable on the Dissenter's BANC
ONE Shares, but for such suspension, shall be paid to the holder of record of
the Dissenter's BANC ONE Shares as a credit upon the fair cash value of the
Dissenter's BANC ONE Shares. If the right to receive the fair cash value is
terminated otherwise than by the purchase of the Dissenter's BANC ONE Shares by
BANC ONE, all rights will be restored to the Dissenting BANC ONE Shareholder and
any distribution that would have been made to the holder of record of the
Dissenter's BANC ONE Shares, but for the suspension, will be made at the time of
the termination.
3. Petitions to Be Filed in Court. Within three months after the service
of the BANC ONE Demand, if BANC ONE and the Dissenting BANC ONE Shareholder do
not reach an agreement on the fair cash value of the Dissenter's BANC ONE
Shares, the Dissenting BANC ONE Shareholder or BANC ONE may
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<PAGE> 88
file a complaint in the Court of Common Pleas of Franklin County, Ohio (the
"Common Pleas Court"), or join or be joined in an action similarly brought by
another Dissenting BANC ONE Shareholder, for a judicial determination of the
fair cash value (as defined below) of the Dissenter's BANC ONE Shares. BANC ONE
does not intend to file any complaint for a judicial determination of the fair
cash value of any Dissenter's BANC ONE Shares.
Upon motion of the complainant, the Common Pleas Court will hold a hearing
to determine whether the Dissenting BANC ONE Shareholder is entitled to be paid
the fair cash value of the Dissenter's BANC ONE Shares. If the Common Pleas
Court finds that the Dissenting BANC ONE Shareholder is so entitled, it may
appoint one or more appraisers to receive evidence by which to recommend a
decision on the amount of such value. The Common Pleas Court is required to make
a finding as to the fair cash value of the Dissenter's BANC ONE Shares and to
render a judgment against BANC ONE for the payment thereof, with interest at
such rate and from such date as the Common Pleas Court considers equitable.
Costs of the proceedings, including reasonable compensation to the appraiser or
appraisers to be fixed by the Common Pleas Court, are to be apportioned or
assessed as the Common Pleas Court considers equitable. Payment of the fair cash
value of the Dissenter's BANC ONE Shares is required to be made within 30 days
after the date of final determination of such value or the Effective Time,
whichever is later, only upon surrender to BANC ONE of the certificates
representing the Dissenter's BANC ONE Shares for which payment is made.
"Fair cash value" is the amount which a willing seller, under no compulsion
to sell, would be willing to accept, and which a willing buyer, under no
compulsion to purchase, would be willing to pay, but in no event may the fair
cash value exceed the amount specified in the BANC ONE Demand. The fair cash
value is to be determined as of the date prior to the day of the vote on the
Merger Proposal. In computing this value, any appreciation or depreciation in
the market value of the Dissenter's BANC ONE Shares resulting from the Merger is
excluded.
The dissenters' rights of any Dissenting BANC ONE Shareholder will
terminate if, among other things, (i) such Dissenting BANC ONE Shareholder has
not complied with Section 1701.85 of the Ohio Law (unless the BANC ONE Board
waives compliance), (ii) the Merger is abandoned or otherwise not carried out or
such Dissenting BANC ONE Shareholder withdraws its BANC ONE Demand with the
consent of the BANC ONE Board, or (iii) no agreement has been reached between
BANC ONE and the Dissenting BANC ONE Shareholder with respect to the fair cash
value of the Dissenter's BANC ONE Shares and no complaint has been timely filed
in the Common Pleas Court.
FIRST USA STOCKHOLDERS
First USA Stockholders will not be entitled to dissenters' appraisal rights
under Delaware law or any other statute in connection with the Merger. See
"Comparison of Shareholder Rights -- Rights of Dissenting Shareholders."
PROPOSED AMENDMENT TO THE BANC ONE ARTICLES OF INCORPORATION TO
INCREASE AUTHORIZED COMMON STOCK
BANC ONE is presently authorized to issue 635,000,000 shares of capital
stock, divided into 600,000,000 shares of BANC ONE Common Stock, without par
value, 10,000,000 shares of Class A Preferred Stock, without par value,
1,000,000 shares of Class B Preferred Stock, without par value, and 24,000,000
shares of Class C Preferred Stock, without par value. As of the BANC ONE Record
Date, 419,837,271 shares of BANC ONE Common Stock were issued and outstanding
and 3,774,856 shares of Class C Preferred Stock (issued as Series C Preferred
Stock) were issued and outstanding. No shares of Class A Preferred Stock or
Class B Preferred Stock are presently or, as of April 1, 1997 were, issued and
outstanding. As of the BANC ONE Record Date, the total number of shares of BANC
ONE Common Stock authorized but not issued or reserved for issuance was
150,400,630 shares including the not more than 7,281,629 shares of BANC ONE
Common Stock which would be required to be issued if all the presently
outstanding shares of Series C Preferred Stock were converted into BANC ONE
Common Stock at the exchange ratio of 1.928982
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<PAGE> 89
shares of BANC ONE Common Stock for each share of Series C Preferred Stock in
effect as of the date hereof.
Since its formation in 1968, BANC ONE has acquired over 100 banking
institutions, all but a few of which were acquired either through an exchange of
BANC ONE Common Stock or a combination of BANC ONE Common Stock and BANC ONE
Preferred Stock. In addition, the number of shares of BANC ONE Common Stock
presently outstanding includes shares issued as a result of fourteen 10% stock
dividends, one 1-for-1 stock split, three 3-for-2 stock splits and one 5-for-4
stock split declared and paid by BANC ONE since its formation which have
increased the number of outstanding shares of BANC ONE Common Stock numerous
times. In order to provide sufficient shares for such transactions, BANC ONE has
asked its shareholders to increase the number of authorized shares of BANC ONE
Common Stock ten times in the last thirty-two years. An increase in the
authorized number of shares of BANC ONE Common Stock is necessary in order for
BANC ONE to continue to issue shares of BANC ONE Common Stock in the future, for
some or all of the purposes described above.
In this regard, as of the date of this Proxy Statement, BANC ONE has
entered into agreements for the acquisition of (i) LBI and its subsidiaries
which include two commercial banks located in Oklahoma and (ii) First USA and
its subsidiaries which, as described elsewhere in this Joint Proxy
Statement-Prospectus, include First USA Bank, the fourth largest issuer of Visa
and MasterCard credit cards in the United States. If the Merger and the LBI
Merger are consummated, such mergers could result in the issuance of up to
approximately 175,000,000 shares of BANC ONE Common Stock. Such number of shares
exceeds the number of shares of BANC ONE Common Stock presently authorized but
not issued or reserved for issuance. Thus, an increase in the number of
authorized shares of BANC ONE Common Stock is necessary to enable BANC ONE to
complete both the Merger and the LBI Merger.
Further, although BANC ONE has no other understandings or arrangements with
respect to the issuance of a significant number of shares of BANC ONE Common
Stock at the present time, it continues to explore opportunities to acquire
banks and non-bank companies permitted by the Bank Holding Company Act of 1956.
Discussions are continually being carried on relating to the acquisitions of
banks and bank related companies across the United States. It is not presently
known whether or on what terms such discussions will result in further
acquisitions. Since acquisitions may be made by an exchange of stock, the Board
of Directors believes that an increase in the total number of authorized shares
of BANC ONE Common Stock will give BANC ONE greater flexibility in responding
quickly to advantageous business opportunities. Any additional acquisitions of
depositary institutions would be subject to the approval of one or more bank
regulatory authorities. In addition, the proposed increase will give BANC ONE
the ability to declare stock dividends or stock splits in the future without
having to seek further shareholder approval.
All shares of BANC ONE Common Stock, including those now authorized and
those which would be authorized by the proposed amendment, are equal in rank and
have the same voting, dividend and liquidation rights. Holders of BANC ONE
Common Stock do not have preemptive rights.
Since authorized shares of BANC ONE Common Stock can be issued without
further shareholder approval, the BANC ONE Board could, by issuing additional
shares of BANC ONE Common Stock to a friendly third party, dilute the voting
power of the shares of BANC ONE Common Stock purchased by a potential acquirer.
In addition, BANC ONE's Articles of Incorporation incorporate in Article
Eleventh, to a large extent, the provisions of the Ohio control share
acquisition statute (Section 1701.831 of the Ohio Law). Article Eleventh sets
forth procedures for obtaining shareholder consent of "control share
acquisitions" subject to the right of the BANC ONE Board 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 acquirer, would entitle the acquirer, alone or
with others, to exercise or direct the exercise of voting power of 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 BANC
ONE Board must be presented to a meeting of the shareholders of BANC ONE
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<PAGE> 90
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. See "Comparison of Shareholder Rights -- Comparison of BANC
ONE Common Stock and First USA Common Stock -- Provisions Affecting Control
Share Acquisitions and Business Combinations."
BANC ONE's Articles of Incorporation also include a "fair price" provision
(the "Fair Price Provision") which 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 which 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 that 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. See "Comparison of
Shareholder Rights -- Comparison of BANC ONE Common Stock and First USA Common
Stock -- Fair Price Provisions."
One effect of Article Eleventh, the Fair Price Provision and/or the
issuance of additional authorized shares of BANC ONE Common Stock may be to
discourage certain potential business combinations which some shareholders may
believe to be in their best interest and to make more difficult management
changes which may occur if the potential business combination were successful.
BANC ONE has no current intention of issuing additional shares for the purpose
of obstructing a takeover. The intended purposes for having additional shares
are those set forth above.
The BANC ONE Board, therefore, recommends that the number of authorized
shares of BANC ONE Common Stock be increased from 600,000,000 to 950,000,000
shares.
To effect the increase in authorized shares of BANC ONE Common Stock, it is
proposed that the first paragraph of Article Fourth of the BANC ONE Articles of
Incorporation be amended to read as follows:
FOURTH: The amount of the total authorized capital stock which the
Corporation shall have authority to issue is Nine Hundred Eighty Five
Million (985,000,000) shares consisting of Nine Hundred Fifty Million
(950,000,000) of Common Stock which are common shares without par value,
Ten Million (10,000,000) shares of Class A Preferred Stock which are
preferred shares without par value, One Million (1,000,000) shares of Class
B Convertible Preferred Stock (Class B Preferred Stock) which are preferred
shares without par value, and Twenty-Four Million (24,000,000) shares of
Class C Preferred Stock which are preferred shares without par value.
The affirmative vote of the holders of a majority of the outstanding shares
of BANC ONE Common Stock is required for the adoption of the proposed amendment.
THE BOARD OF DIRECTORS OF BANC ONE RECOMMENDS THAT THE SHAREHOLDERS OF BANC
ONE VOTE FOR THE AMENDMENT TO THE BANC ONE ARTICLES OF INCORPORATION. UNLESS A
CONTRARY CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL
BE VOTED FOR THE AMENDMENT.
LEGAL MATTERS
The validity of the BANC ONE Common Stock to be issued in connection with
the Merger will be passed upon by Steven Alan Bennett, Senior Vice President and
General Counsel of BANC ONE. As of the date of this Joint Proxy
Statement-Prospectus, Mr. Bennett beneficially owns shares of BANC ONE Common
Stock and options to purchase additional shares of BANC ONE Common Stock, which
in the aggregate constitute less than 0.1% of the BANC ONE Common Stock
outstanding.
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<PAGE> 91
EXPERTS
The consolidated financial statements of BANC ONE and its subsidiaries
incorporated in this Joint Proxy Statement-Prospectus by reference to the BANC
ONE Annual Report on Form 10-K (as amended by the Form 10-K/A filed March 21,
1997) for the year ended December 31, 1996 have been so incorporated in reliance
on the report dated February 21, 1997 of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of First USA included in Amendment
No. 1 on Form 10-K/A, dated April 24, 1997, to First USA's Annual Report (Form
10-K) for the year ended June 30, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
Any financial statements and schedules hereinafter incorporated by
reference in the Registration Statement of which this Joint Proxy
Statement-Prospectus forms a part that have been audited and are the subject of
a report by independent accountants will be so incorporated by reference in
reliance upon such reports and upon the authority of such firms as experts in
accounting and auditing to the extent covered by consents filed with the
Commission.
SHAREHOLDER PROPOSALS
Shareholders of BANC ONE may submit proposals to be considered for
shareholder action at the 1998 Annual Meeting of shareholders of BANC ONE if
they do so in accordance with applicable regulations of the Commission. Any such
proposals must be submitted to the Secretary of BANC ONE no later than November
4, 1997 in order to be considered for inclusion in BANC ONE's 1998 proxy
materials.
First USA will hold a 1997 Annual Meeting of stockholders only if the
Merger is not consummated before the time of such meeting. In the event that
such a meeting is held, any proposals of shareholders intended to be presented
at the 1997 Annual Meeting must have been received by the Secretary of First USA
no later than May 30, 1997 in order to be considered for inclusion in the First
USA 1997 proxy materials.
OTHER MATTERS
As of the date of this Joint Proxy Statement-Prospectus, the First USA
Board and the BANC ONE Board know of no matters that will be presented for
consideration at the BANC ONE Special Meeting or the First USA Special Meeting
other than as described in this Joint Proxy Statement-Prospectus. If any other
matters shall properly come before either such meeting or any adjournments or
postponements thereof and be voted upon, the enclosed proxies will be deemed to
confer discretionary authority on the individuals named as proxies therein to
vote the shares represented by such proxies as to any such matters. The persons
named as proxies intend to vote or not to vote in accordance with the
recommendation of the respective managements of First USA and BANC ONE.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Coopers & Lybrand L.L.P. will be present at the BANC ONE
Special Meeting, and representatives of Ernst & Young LLP are expected to be
present at the First USA Special Meeting. In each case, such representatives
will have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
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<PAGE> 92
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information
and explanatory notes are presented to show the impact on the historical
financial position and results of operations of BANC ONE of the Merger under the
"pooling of interests" method of accounting. The unaudited pro forma condensed
combined financial information combines the historical financial information of
BANC ONE for the fiscal years ended December 31, 1996, 1995 and 1994 with the
historical financial information of First USA for the twelve-month periods ended
December 31, 1996, 1995 and 1994, respectively, as amended, in the case of First
USA, by Amendment No. 1 on Form 10-K/A to First USA's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996, Amendment No. 1 on Form 10-Q/A to First
USA's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and
Amendment No. 1 on Form 10-Q/A to First USA's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1996.
The pro forma condensed combined financial information for each of the
three years ended December 31, 1996 is based on and derived from, and should be
read in conjunction with, (a) the historical consolidated financial statements
and the related notes thereto of BANC ONE, which are incorporated by reference
herein, and (b) the historical consolidated financial statements and the related
notes thereto of First USA, as amended, in the case of First USA, by Amendment
No. 1 on Form 10-K/A to First USA's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996, Amendment No. 1 on Form 10-Q/A to First USA's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and
Amendment No. 1 on Form 10-Q/A to First USA's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1996, which are incorporated by reference herein.
Certain pro forma adjustments have been made to the condensed combined financial
information to conform significant accounting policy differences identified by
BANC ONE and First USA. See "Available Information" and "Incorporation of
Certain Documents by Reference."
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<PAGE> 93
BANC ONE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AT DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
BANC ONE FIRST USA ADJUSTMENTS PRO FORMA
------------ ----------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks..................... $ 6,350,803 $ 173,626 $ 6,524,429
Short-term investments and interest bearing
deposits in other banks................... 348,717 332,673 681,390
Loans held for sale......................... 1,473,756 1,473,756
Securities held to maturity................. 887,431 3,608,418 $(3,608,418)(b) 887,431
Securities available for sale............... 14,635,199 3,611,310 (b) 18,246,509
Loans & leases.............................. 74,193,936 5,195,859 79,389,795
Less reserve.............................. (1,075,092) (122,587) (1,197,679)
Bank premises and equipment, net............ 1,673,384 113,322 1,786,706
Intangibles................................. 692,485 42,830 735,315
Other assets................................ 2,667,468 934,438 3,601,906
------------ ----------- ----------- ------------
Total assets......................... $101,848,087 $10,278,579 $ 2,892 $112,129,558
============ =========== =========== ============
Liabilities:
Deposits:
Demand -- non-interest bearing............ $ 16,195,105 $ 16,195,105
Interest bearing.......................... 56,178,022 $ 1,705,124 57,883,146
------------ ----------- ------------
Total deposits....................... 72,373,127 1,705,124 74,078,251
Short-term borrowings....................... 14,105,576 4,914,685 19,020,261
Long-term borrowings........................ 4,189,513 1,743,448 5,932,961
Other liabilities........................... 2,532,911 436,972 $ 1,012 (b) 2,970,895
------------ ----------- ----------- ------------
Total liabilities:............................ 93,201,127 8,800,229 1,012 102,002,368
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust
holding solely subordinated debentures...... 200,000 200,000
Preferred stock............................... 207,016 58 (58)(a) 207,016
Common stock.................................. 2,165,466 1,231 771,870 (a) 2,938,567
Capital in excess of aggregate stated value of
common stock................................ 4,453,330 608,629 (771,812)(a) 4,290,147
Retained earnings............................. 2,013,930 668,432 2,682,362
Net unrealized holding gains on securities
available for sale, net of tax.............. 20,286 1,880 (b) 22,166
Treasury shares............................... (213,068) (213,068)
------------ ----------- ----------- ------------
Total stockholders' equity.................... 8,646,960 1,278,350 1,880 9,927,190
------------ ----------- ----------- ------------
Total liabilities and stockholders' equity.... $101,848,087 $10,278,579 $ 2,892 $112,129,558
============ =========== =========== ============
</TABLE>
- ---------------
(a) The pro forma amount (including the conversion of First USA Convertible
Preferred Stock which is expected to occur prior to the Merger) assumes
154,620,189 shares of BANC ONE Common Stock are issued in the Merger, based
on the Exchange Ratio of 1.1659 shares of BANC ONE Common Stock for each
share of First USA Common Stock outstanding as of December 31, 1996. The
actual number of shares of BANC ONE Common Stock to be issued will be
determined at the time the Merger is consummated.
(b) To transfer securities from securities held to maturity to securities
available for sale and related tax effect, consistent with BANC ONE's
interest rate risk position under its asset-liability management policy.
See Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
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<PAGE> 94
BANC ONE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1996 FOR BANC ONE AND
TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1996 FOR FIRST USA
<TABLE>
<CAPTION>
BANC ONE FIRST USA PRO FORMA
----------- ---------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Interest income...................................... $ 8,044,852 $ 564,626 $ 8,609,478
Interest expense..................................... (3,189,398) (407,586) (3,596,984)
----------- ---------- -----------
Net interest income.................................. 4,855,454 157,040 5,012,494
Provision for loan and lease losses.................. (788,087) (154,627) (942,714)
----------- ---------- -----------
Net interest income after provision for loan and
lease losses....................................... 4,067,367 2,413 4,069,780
Other income......................................... 2,227,504 1,309,936 3,537,440
Other expenses....................................... (4,184,159) (878,822) (5,062,981)
----------- ---------- -----------
Income before income taxes........................... 2,110,712 433,527 2,544,239
Income taxes......................................... (684,179) (157,195) (841,374)
----------- ---------- -----------
Income from continuing operations before
distributions on preferred securities of subsidiary
trust.............................................. 1,426,533 276,332 1,702,865
Distributions on preferred securities of subsidiary
trust, net of taxes................................ (370) (370)
----------- ---------- -----------
Income from continuing operations.................... $ 1,426,533 $ 275,962 $ 1,702,495
=========== ========== ===========
Income from continuing operations per common
share(a)........................................... $ 3.23 $ 2.83
=========== ===========
Weighted average common shares outstanding (000)..... 436,927 594,848
=========== ===========
</TABLE>
- ---------------
(a) The calculation of income from continuing operations per common share for
the pro forma financial statements uses the weighted average number of
outstanding shares of BANC ONE Common Stock and First USA Common Stock,
adjusted to equivalent shares of BANC ONE Common Stock.
See Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
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<PAGE> 95
BANC ONE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1995 FOR BANC ONE AND
TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1995 FOR FIRST USA
<TABLE>
<CAPTION>
BANC ONE FIRST USA PRO FORMA
----------- --------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Interest income...................................... $ 7,100,918 $ 464,408 $ 7,565,326
Interest expense..................................... (2,971,468) (365,286) (3,336,754)
----------- --------- ---------
Net interest income.................................. 4,129,450 99,122 4,228,572
Provision for loan and lease losses.................. (457,499) (68,638) (526,137)
----------- --------- ---------
Net interest income after provision for loan and
lease losses....................................... 3,671,951 30,484 3,702,435
Other income......................................... 1,869,970 963,886 2,833,856
Other expenses....................................... (3,631,639) (700,539) (4,332,178)
----------- --------- ---------
Income before income taxes........................... 1,910,282 293,831 2,204,113
---------
Income taxes......................................... (632,419) (108,620) (741,039)
----------- --------- ---------
Income from continuing operations.................... $ 1,277,863 $ 185,211 $ 1,463,074
=========== ========= =========
Income from continuing operations per common share
(a)................................................ $ 2.91 $ 2.46
=========== =========
Weighted average common shares outstanding (000)..... 433,323 587,781
=========== =========
</TABLE>
- ---------------
(a) The calculation of income from continuing operations per common share for
the pro forma financial statements uses the weighted average number of
outstanding shares of BANC ONE Common Stock and First USA Common Stock,
adjusted to equivalent shares of BANC ONE Common Stock.
See Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
84
<PAGE> 96
BANC ONE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1994 FOR BANC ONE AND
TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1994 FOR FIRST USA
<TABLE>
<CAPTION>
BANC ONE FIRST USA PRO FORMA
----------- --------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Interest income...................................... $ 6,448,416 $ 426,555 $ 6,874,971
Interest expense..................................... (2,248,841) (249,942) (2,498,783)
----------- ---------- -------
Net interest income.................................. 4,199,575 176,613 4,376,188
Provision for loan and lease losses.................. (242,269) (49,954) (292,223)
----------- ---------- -------
Net interest income after provision for loan and
lease losses....................................... 3,957,306 126,659 4,083,965
Other income......................................... 1,329,525 573,120 1,902,645
Other expenses....................................... (3,767,979) (401,512) (4,169,491)
----------- ---------- -------
Income before income taxes........................... 1,518,852 298,267 1,817,119
Income taxes......................................... (513,743) (108,946) (622,689)
----------- ---------- -------
Income from continuing operations.................... $ 1,005,109 $ 189,321 $ 1,194,430
=========== ========== =======
Income from continuing operations per common share
(a)................................................ $ 2.20 $ 1.96
=========== =======
Weighted average common shares outstanding (000)..... 448,118 601,548
=========== =======
</TABLE>
- ---------------
(a) The calculation of income from continuing operations per common share for
the pro forma financial statements uses the weighted average number of
outstanding shares of BANC ONE Common Stock and First USA Common Stock,
adjusted to equivalent shares of BANC ONE Common Stock.
See Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
85
<PAGE> 97
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined financial information reflects
the Merger using the "pooling of interests" method of accounting. The unaudited
Pro Forma Condensed Combined Balance Sheet assumes that the Merger was
consummated on December 31, 1996.
BANC ONE has a fiscal year ending December 31 and First USA has a fiscal
year ending June 30. Accordingly, the unaudited Pro Forma Condensed Combined
Statements of Income combine BANC ONE's historical results for the fiscal years
ended December 31, 1996, 1995 and 1994 with First USA's historical results for
the twelve-month periods ended December 31, 1996, 1995 and 1994, respectively,
giving effect to the Merger as if it had occurred on January 1, 1994.
Certain pro forma adjustments have been made to these condensed combined
financial statements to conform significant accounting policy differences
identified by BANC ONE and First USA.
NOTE 2. MERGER-RELATED EFFECTS
The pro forma data does not, given the operational overlap of credit card
operations between BANC ONE and First USA, reflect the incurrence of certain
costs relating to or resulting from the Merger. Such costs are expected to
result in an estimated charge to earnings of $150 million; however, the actual
costs could be substantially greater. Furthermore, the pro forma data does not
reflect any benefits from potential cost savings or synergies expected to be
achieved following the Merger.
NOTE 3. ADDITIONAL TRANSACTION
The pro forma financial data does not give effect to the pending
acquisition of Liberty Bancorp, Inc., an Oklahoma corporation, as the
acquisition is not material to BANC ONE individually or in the aggregate since
it represents less than 3% of BANC ONE's consolidated assets as of December 31,
1996. See "Information about BANC ONE -- Recent Developments -- Proposed Merger
with Liberty Bancorp, Inc."
NOTE 4. DELINQUENT LOAN CHARGE-OFF
The pro forma data does not reflect adjustments to conform BANC ONE and
First USA delinquent loan charge-off policies. BANC ONE's policy is to
charge-off credit card and certain consumer finance loans delinquent greater
than 180 days while First USA's policy is to charge-off loans delinquent greater
than 209 days. Consideration is being given as to which policy is most
appropriate. Such change will impact accounting for both the on-balance-sheet
portfolios and securitized portfolios. Delinquent loans included in the managed
portfolio greater than 180 days but less than 210 days for BANC ONE (all of
which have been charged-off) were approximately $56 million, $32 million and $19
million at December 31, 1996, 1995, and 1994, respectively. Delinquent loans
included in the managed portfolio greater than 180 days but less than 210 days
for First USA were approximately $97 million, $49 million and $20 million at
December 31, 1996, 1995, and 1994, respectively.
86
<PAGE> 98
APPENDIX A
[LAZARD FRERES LETTERHEAD]
May 12, 1997
The Board of Directors
BANC ONE CORPORATION
100 East Broad Street
Columbus, Ohio 43271
Dear Members of the Board:
We understand that BANC ONE CORPORATION ("BANC ONE") and First USA, Inc.
("First USA") have entered into an Agreement and Plan of Merger, dated as of
January 19, 1997, as amended as of April 23, 1997 (the "Merger Agreement"),
pursuant to which First USA proposes to merge with and into BANC ONE (the
"Merger"). As more fully set forth in the Merger Agreement, at the effective
time of the Merger (the "Effective Time"), each share of Common Stock, par value
$.01 per share, of First USA (the "First USA Common Stock") issued and
outstanding immediately prior to the Effective Time will be converted into the
right to receive 1.1659 shares of Common Stock, without par value (the "BANC ONE
Common Stock"), of BANC ONE (the "Common Exchange Ratio"). At the Effective
Time, each share of 6 1/4% Convertible Preferred Stock of First USA (the "First
USA 6 1/4% Convertible Preferred Stock") issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive one
share of 6 1/4% convertible preferred stock of BANC ONE (the "New Preferred
Stock"). The terms of the New Preferred Common Stock shall be substantially the
same as the terms of the First USA 6 1/4% Convertible Preferred Stock, except
that it shall be convertible into BANC ONE Common Stock instead of First USA
Common Stock as adjusted to reflect the Common Exchange Ratio.
You have requested our opinion as to the fairness to BANC ONE, from a
financial point of view, of the Common Exchange Ratio. In connection with this
opinion, we have:
(i) Reviewed the financial terms and conditions of the Merger
Agreement;
(ii) Analyzed certain historical business and financial information
relating to BANC ONE and First USA;
(iii) Reviewed various financial forecasts and other data provided to
us by (x) BANC ONE relating to its businesses, prospects and strategic
objectives and to the businesses, prospects and strategic objectives of
First USA, and (y) First USA relating to its businesses, prospects and
strategic objectives. We have also reviewed possible financial benefits
projected by BANC ONE to be realized in connection with the Merger;
(iv) Participated in discussions with members of the senior
managements of BANC ONE and First USA with respect to the businesses and
prospects of BANC ONE and First USA, respectively, the strategic objectives
of each, and possible financial benefits which might be realized in
connection with the Merger;
(v) Reviewed public information with respect to certain other
companies which we believe to be relevant or comparable to BANC ONE and
First USA, the securities of which are publicly traded;
(vi) Reviewed the financial terms of certain business combinations or
other financial transactions which we believe to be relevant or comparable
to First USA;
(vii) Reviewed the historical stock prices and trading volumes of
shares of BANC ONE Common Stock and First USA Common Stock; and
A-1
<PAGE> 99
LOGO
(viii) Conducted such other financial studies, analyses and
investigations as we deemed appropriate, including with respect to First
USA Paymentech, Inc. ("Paymentech"), an approximately 57%-owned subsidiary
of First USA.
We have relied upon the accuracy and completeness of the foregoing
financial and other information, and have not assumed any responsibility for any
independent verification of such information. With respect to financial
forecasts (including projected cost savings, revenue enhancements, operating
synergies and other possible operating and financial benefits), we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of management of BANC ONE, First USA and
Paymentech as to the future financial performance of BANC ONE, First USA and
Paymentech, respectively, and we have assumed that such forecasts and
projections will be realized in the amounts and at the times contemplated
thereby. We assume no responsibility for and express no view as to such
forecasts and projections or the assumptions on which they are based. We are not
experts in the evaluation of loan portfolios or the allowances for loan losses
with respect thereto and have assumed, with your consent, that such allowances
for First USA are in the aggregate adequate to cover such losses. In addition,
we have not reviewed individual credit files nor have we made or obtained any
independent evaluation or appraisal of the assets and liabilities of BANC ONE or
First USA or any of their respective subsidiaries, and we have not been
furnished with any such evaluation or appraisal. Finally, you have informed us
and we have assumed, with your consent, that the Merger will be recorded as a
pooling of interests in accordance with generally accepted accounting
principles.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Merger Agreement, without any waiver
of any material terms or conditions by BANC ONE and that obtaining the necessary
regulatory approvals for the Merger will not have an adverse effect on BANC ONE,
First USA or the combined company.
Lazard Freres & Co. LLC is acting as financial advisor to BANC ONE in
connection with the Merger and will receive fees for our services, a substantial
portion of which is contingent upon the closing of the Merger. Also, as you are
aware, we have from time to time provided investment banking and financial
advisory services to BANC ONE.
Our engagement and the opinion expressed herein are for the benefit of the
Board of Directors of BANC ONE, and our opinion is rendered to BANC ONE's Board
of Directors in connection with its consideration of the Merger. Moreover, this
letter, and the opinion expressed herein, is not intended to and does not
constitute a recommendation to any stockholder of BANC ONE as to whether such
stockholder should vote for the Merger. It is understood that this letter may
not be disclosed or otherwise referred to without our prior written consent,
except as may otherwise be required by law or by a court of competent
jurisdiction.
Based on and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Common Exchange Ratio is fair to BANC ONE from a financial
point of view.
Very truly yours,
LAZARD FRERES & CO. LLC
/s/ KENDRICK R. WILSON III
Kendrick R. Wilson III
Managing Director
A-2
<PAGE> 100
APPENDIX B
[UBS SECURITIES LETTERHEAD]
May 12, 1997
The Board of Directors
BANC ONE CORPORATION
100 East Broad Street
Columbus, Ohio 43271
Dear Members of the Board:
We understand that BANC ONE CORPORATION ("BANC ONE") and First USA, Inc.
("First USA") have entered into an Agreement and Plan of Merger, dated as of
January 19, 1997, as amended as of April 23, 1997 (the "Merger Agreement"),
pursuant to which First USA proposes to merge with and into BANC ONE (the
"Merger"). As more fully set forth in the Merger Agreement, at the effective
time of the Merger (the "Effective time"), each share of Common Stock, par value
$.01 per share, of First USA (the "First USA Common Stock") issued and
outstanding immediately prior to the Effective Time will be converted into the
right to receive 1.1659 shares of Common Stock, without par value (the "BANC ONE
Common Stock"), of BANC ONE (the "Common Exchange Ratio"). At the Effective
Time, each share of 6 1/4% Convertible Preferred Stock, of First USA (the "First
USA 6 1/4% Convertible Preferred Stock") issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive one
share of 6 1/4% convertible preferred stock of BANC ONE (the "New Preferred
Stock"). The terms of the New Preferred Common Stock shall be substantially the
same as the terms of the First USA 6 1/4% Convertible Preferred Stock, except
that it shall be convertible into BANC ONE Common Stock instead of First USA
Common Stock as adjusted to reflect the Common Exchange Ratio.
You have requested our opinion as to the fairness to BANC ONE, from a
financial point of view, of the Common Exchange Ratio. In connection with this
opinion, we have:
(i) Reviewed the financial terms and conditions of the Merger
Agreement;
(ii) Analyzed certain historical business and financial information
relating to BANC ONE and First USA;
(iii) Reviewed various financial forecasts and other data provided to
us by (x) BANC ONE relating to its businesses, prospects and strategic
objectives and to the businesses, prospects and strategic objectives of
First USA, and (y) First USA relating to its businesses, prospects and
strategic objectives. We have also reviewed possible financial benefits
projected BANC ONE to be realized in connection with the Merger;
(iv) Participated in discussions with members of the senior
managements of BANC ONE and First USA with respect to the businesses and
prospects of BANC ONE and First USA, respectively, the strategic objectives
of each, and possible financial benefits which might be realized in
connection with the Merger;
(v) Reviewed public information with respect to certain other
companies which we believe to be relevant or comparable to BANC ONE and
First USA, the securities of which are publicly traded;
(vi) Reviewed the financial terms of certain business combinations or
other financial transactions which we believe to be relevant or comparable
to First USA;
(vii) Reviewed the historical stock prices and trading volumes of
shares of BANC ONE Common Stock and First USA Common Stock; and
B-1
LOGO
<PAGE> 101
(viii) Conducted such other financial studies, analyses and
investigations as we deemed appropriate, including with respect to First
USA Paymentech, Inc. ("Paymentech"), and approximately 57%-owned subsidiary
of First USA.
We have relied upon the accuracy and completeness of the foregoing
financial and other information, and have not assumed any responsibility for any
independent verification of such information. With respect to financial
forecasts (including projected cost savings, revenue enhancements, operating
synergies and other possible operating and financial benefits), we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of management of BANC ONE, First USA and
Paymentech as to the future financial performance of BANC ONE, First USA and
Paymentech, respectively, and we have assumed that such forecasts and
projections will be realized in the amounts and at the times contemplated
thereby. We assume no responsibility for and express no view as to such
forecasts and projections or the assumptions on which they are based. We are not
experts in the evaluation of loan portfolios or the allowances for loan losses
with respect thereto and have assumed, with your consent, that such allowances
for First USA are in the aggregate adequate to cover such losses. In addition,
we have not reviewed individual credit files nor have we made or obtained any
independent evaluation or appraisal of the assets and liabilities of BANC ONE or
First USA or any of their respective subsidiaries, and we have not been
furnished with any such evaluation or appraisal. Finally, you have informed us
and we have assumed, with your consent, that the Merger will be recorded as a
pooling of interests in accordance with generally accepted accounting
principles.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Merger Agreement, without any waiver
of any material terms or conditions by BANC ONE and that obtaining the necessary
regulatory approvals for the Merger will not have an adverse effect on BANC ONE,
First USA or the combined company.
UBS Securities LLC is acting as financial advisor to BANC ONE in connection
with the Merger and will receive fees for our services, a substantial portion of
which is contingent upon the closing of the Merger. Also, as you are aware, we
have from time to time provided investment banking and financial advisory
services to BANC ONE. In addition, as you are aware, we or our affiliates have
from time to time provided lending and investment banking services to First USA
for which we or our affiliates have received fees or other consideration for
such services.
Our engagement and the opinion expressed herein are for the benefit of the
Board of Directors of BANC ONE, and our opinion is rendered to BANC ONE's Board
of Directors in connection with its consideration of the Merger. Moreover, this
letter, and the opinion expressed herein, is not intended to and does not
constitute a recommendation to any stockholder of BANC ONE as to whether such
stockholder should vote for the Merger. It is understood that this letter may
not be disclosed or otherwise referred to without our prior written consent,
except as may otherwise be required by law or by a court of competent
jurisdiction.
Based on and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Common Exchange Ratio is fair to BANC ONE from a financial
point of view.
UBS SECURITIES LLC
/s/ GERARD L. SMITH
Gerard L. Smith
Managing Director
/s/ ROBERT A. NAU
Robert A. Nau
Managing Director
<PAGE> 102
APPENDIX C
<TABLE>
<S> <C>
[Merrill Lynch Letterhead] [address]
</TABLE>
May 12, 1997
Board of Directors
First USA, Inc.
1601 Elm Street
Dallas, Texas 75201
Attention: Mr. John C. Tolleson
Chairman and Chief Executive Officer
Members of the Board:
First USA, Inc. (the "Company") and BANC ONE CORPORATION (the "Acquiror")
have entered into an Agreement and Plan of Merger dated as of January 19, 1997
and amended as of April 23, 1997 (as amended, the "Agreement"), pursuant to
which the Company will be merged with and into the Acquiror in a transaction
(the "Merger") in which each outstanding share of the Company's common stock,
par value $.01 per share (the "Shares"), will be converted into the right to
receive 1.1659 shares (the "Exchange Ratio") of the common stock, no par value,
of the Acquiror (the "Acquiror Shares"), all as set forth more fully in the
Agreement. In connection with the Merger, the parties have also entered into
agreements dated January 19, 1997 (the "Option Agreements") pursuant to which
the Company and the Acquiror each have granted to the other an option to
acquire, under certain circumstances, approximately 19.9% of their respective
shares of common stock outstanding (without giving effect to any shares issuable
pursuant to the Option Agreements), all as set forth more fully in the Option
Agreements. The Merger is expected to be considered by the shareholders of the
Company at a special shareholders' meeting and consummated on or shortly after
the receipt of shareholder and all regulatory approvals.
You have asked us whether, in our opinion, the proposed Exchange Ratio in
the Merger is fair to the holders of the Shares (other than the Acquiror and its
affiliates) from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended June 30, 1996 (and,
in the case of the fiscal year ended June 30, 1996, Amendment No. 1 on Form
10-K/A filed on April 24, 1997) and the Company's Forms 10-Q and related
unaudited financial information for the quarterly periods ended September
30 and December 31, 1996 (each as amended by the respective Amendment No. 1
on Form 10-Q/A filed on April 24, 1997);
(2) Reviewed the Acquiror's Annual Reports, Forms 10-K and related
financial information for the four fiscal years ended December 31, 1996;
(3) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects of the
Company and the Acquiror prepared by the Company and the Acquiror,
respectively, and furnished to us by the Company and the Acquiror,
respectively;
(4) Conducted discussions with members of senior management of the
Company and the Acquiror concerning the respective financial condition,
business, earnings and assets and managements' respective views as to the
future financial performance, growth rates, business and prospects of the
Company and the Acquiror on both a stand alone and a combined basis;
(5) Reviewed the historical market prices and trading activity for the
Shares and the Acquiror Shares and compared them with those of certain
publicly traded companies which we deemed to be relevant;
C-1
<PAGE> 103
[MERRILL LYNCH LETTERHEAD]
(6) Compared the respective results of operations of the Company and
the Acquiror with those of certain public companies which we deemed to be
relevant;
(7) Compared the proposed financial terms of the Merger with the
financial terms of certain other mergers and acquisitions which we deemed
to be relevant;
(8) Analyzed, based on information provided to us by senior management
of the Company and the Acquiror, the pro forma effect of the Merger on the
Acquiror's earnings and capitalization ratios;
(9) Reviewed the Agreement;
(10) Reviewed the Option Agreements; and
(11) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary to the rendering of this opinion.
In preparing our opinion, we have assumed and relied upon the accuracy and
completeness of all financial and other information supplied or otherwise made
available to us for purposes of this opinion, and we have not assumed any
responsibility for independently verifying such information or undertaking an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of the Acquiror or the Company or any of their subsidiaries, nor have
we undertaken or been furnished any such evaluation or appraisal. We have also
assumed and relied upon the senior management of the Acquiror and the Company as
to the reasonableness and achievability of the financial and operating forecasts
(and the assumptions and bases therefor) provided to us. In that regard, we have
assumed with your consent that such forecasts, including without limitation
financial forecasts, projected cost savings and operating synergies resulting
from the Merger, reflect the best currently available estimates and judgments of
management as to the future financial performance of the Acquiror and the
Company. We are not experts in the evaluation of allowances for loan losses, and
we have not made an independent evaluation of the adequacy of the allowances for
loan losses of the Acquiror or the Company nor have we reviewed any individual
credit files, and we have assumed that the aggregate allowance for loan losses
of the Acquiror and the Company are adequate to cover such losses. Our opinion
is predicated on the Merger receiving the tax and accounting treatment
contemplated by the Agreement. Our opinion is necessarily based on economic,
market and other conditions as in effect on, and the information made available
to us as of, the date hereof.
In connection with our advisory assignment, we were not retained by the
Company or its Board of Directors to solicit, nor have we solicited, proposals
from third parties for the acquisition of all or any part of the Company. Our
opinion does not address nor should it be construed to address the relative
merits of the Merger and alternative business strategies. In addition, this
opinion does not in any manner address the price at which the Acquiror Shares
will actually trade following consummation of the Merger.
We have been retained by the Board of Directors of the Company as an
independent contractor to act as financial advisor to the Company with respect
to the Merger and will receive a fee for our services. We have within the past
two years provided financial advisory, investment banking and other services to
the Company and the Acquiror and have received customary fees for the rendering
of such services. In addition, in the ordinary course of our securities
business, we may actively trade debt and/or equity securities of the Company and
the Acquiror and their respective affiliates for our own account and the
accounts of our customers, and we therefore may, from time to time, hold a long
or short position in such securities.
Our opinion is directed to the Board of Directors of the Company and does
not constitute a recommendation to any shareholder of the Company as to how such
shareholder should vote or as to any other action such shareholder should take
in connection with the Merger.
C-2
<PAGE> 104
[MERRILL LYNCH LETTERHEAD]
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed Exchange Ratio in the Merger is fair to the holders of the Shares
(other than the Acquiror and its affiliates) from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: [EDWARD V. BLANCHARD SIGNATURE]
-------------------------------------
Edward V. Blanchard
Managing Director
C-3
<PAGE> 105
APPENDIX D
OHIO REVISED CODE
TITLE XVII. CORPORATIONS -- PARTNERSHIPS
CHAPTER 1701. GENERAL CORPORATION LAW
MERGER AND CONSOLIDATION
SECTION.1701.85 RELIEF FOR DISSENTING SHAREHOLDERS; QUALIFICATION;
PROCEDURES. -- (A)(1) A shareholder of a domestic corporation is entitled to
relief as a dissenting shareholder in respect of the proposals described in
sections 1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance
with this section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date on
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directs. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph, by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
D-1
<PAGE> 106
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the court may
appoint one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such power
and authority as is specified in the order of their appointment. The court there
upon shall make a finding as to the fair cash value of a share and shall render
judgment against the corporation for the payment of it, with interest at such
rate and from such date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by
the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505. of the
Revised Code. If, during the pendency of any proceeding instituted under this
section, a suit or proceeding is or has been instituted to enjoin or otherwise
to prevent the carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be stayed until
the final determination of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value of the shares
that is agreed upon by the parties or fixed under this section shall be paid
within thirty days after the date of final determination of such value under
this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken, and,
in the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller
who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.
(D) (1) The right and obligation of a dissenting shareholder to receive
such fair cash value and to sell such shares as to which he seeks relief, and
the right and obligation of the corporation to purchase such shares and to pay
fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
D-2
<PAGE> 107
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind
their adoption, of the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder
nor the corporation filed or joined in a complaint under division (B) of
this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
D-3
<PAGE> 108
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 1701.13(E) of the Ohio General Corporation Law 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 the 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. The
Registrant has entered into indemnification agreements with its directors and
executive offers that provide for indemnification unless the indemnitee's
conduct is finally adjudged by a court to be knowingly fraudulent, deliberately
dishonest or willful misconduct. The 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 which are
incorporated herein by reference.
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated January 19, 1997, between the Registrant and First
USA, Inc. (incorporated by reference from Exhibit 2 to the First USA, Inc. Current
Report on Form 8-K dated January 28, 1997 (file No. 1-11-3030)).
2.2 Stock Option Agreement, dated January 19, 1997, between First USA, Inc., as issuer,
and the Registrant, as grantee (incorporated by reference from Exhibit 99.1 to the
First USA, Inc. Current Report on Form 8-K dated January 28, 1997 (file No.
1-11-3030)).
2.3 Stock Option Agreement, dated January 19, 1997, between the Registrant, as issuer, and
First USA, Inc. as grantee (incorporated by reference from Exhibit 99.2 to the First
USA, Inc. Current Report on Form 8-K dated January 28, 1997 (file No. 1-11-3030)).
2.4 Amendment, dated April 23, 1997, to Agreement and Plan of Merger, dated January 19,
1997, between the Registrant and First USA (incorporated herein by reference to the
Registrant's Current Report on Form 8-K dated April 24, 1997 (file no. 1-8552)).
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 Form of Certificate of Amendment of the Amended Articles of Incorporation of the
Registrant.
3.3 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).
5.1 Opinion of Steven Alan Bennett, Esq., Senior Vice President and General Counsel for
the Registrant, regarding the legality of securities being offered, including consent.
8.1 Opinion of Wachtell, Lipton, Rosen & Katz regarding the federal income tax
consequences of the Merger, including consent.
8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, regarding the federal income tax
consequences of the Merger, including consent.
23.1 Consent of Coopers & Lybrand L.L.P. relating to the audited financial statements of
the Registrant.
23.2 Consent of Ernst & Young LLP relating to the audited financial statements of First
USA, Inc.
23.3 Consent of Steven Alan Bennett, Esq., Senior Vice president and General Counsel for
the Registrant (included in Exhibit 5.1 hereto).
</TABLE>
<PAGE> 109
<TABLE>
<C> <S>
23.4 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.1 hereto).
23.5 Consent of Skadden Arps, Slate, Meagher & Flom LLP (included in Exhibit 8.2 hereto).
23.6 Consent of Lazard Freres & Co. LLC
23.7 Consent of UBS Securities LLC
23.8 Consent of Merrill Lynch & Co.
24.1 Powers of Attorney (included elsewhere in Part II of this Registration Statement).
99.1 Form of Proxy to be used by the Registrant
99.2 Form of Proxy to be used by First USA, Inc.
</TABLE>
ITEM 22. UNDERTAKINGS
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 (notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement); and (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.
(4) 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 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in this 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.
(5) 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 Registrant 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.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
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 this
registration statement and will not be used until such amendment has become
effective, and that for the purpose of determining liabilities 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.
<PAGE> 110
(7) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 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.
(8) 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.
(9) 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 this registration statement when it
became effective.
<PAGE> 111
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing this Registration Statement and 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 May 12, 1997.
BANC ONE CORPORATION
By: /s/ STEVEN ALAN BENNETT
------------------------------------
Steven Alan Bennett
Senior Vice President and General
Counsel
<PAGE> 112
POWER OF ATTORNEY
We, the undersigned officers and directors of BANC ONE CORPORATION, hereby
severally constitute and appoint Steven Alan Bennett, William P. Boardman, Bobby
L. Doxey, Richard D. Lodge or Michael J. McMennamin and each of them 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 any subsequent registration
statement filed by BANC ONE CORPORATION pursuant to Rule 462(b) of the
Securities Act of 1933, 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 (Principal May 12, 1997
- ------------------------------------- Executive Officer and Director)
John B. McCoy
/s/ RICHARD J. LEHMANN President and Director May 12, 1997
- -------------------------------------
Richard J. Lehmann
/s/ MICHAEL J. MCMENNAMIN Executive Vice President (Principal May 12, 1997
- ------------------------------------- Financial Officer)
Michael J. McMennamin
/s/ BOBBY L. DOXEY Controller (Principal Accounting May 12, 1997
- ------------------------------------- Officer)
Bobby L. Doxey
/s/ BENNETT DORRANCE Director May 12, 1997
- -------------------------------------
Bennett Dorrance
/s/ C.E. EXLEY, JR. Director May 12, 1997
- -------------------------------------
Charles E. Exley, Jr.
/s/ E. GORDON GEE Director May 12, 1997
- -------------------------------------
E. Gordon Gee
/s/ JOHN R. HALL Director May 12, 1997
- -------------------------------------
John R. Hall
/s/ LABAN P. JACKSON, JR. Director May 12, 1997
- -------------------------------------
Laban P. Jackson, Jr.
/s/ JOHN W. KESSLER Director May 12, 1997
- -------------------------------------
John W. Kessler
/s/ JOHN G. MCCOY Director May 12, 1997
- -------------------------------------
John G. McCoy
</TABLE>
<PAGE> 113
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- --------------------------------------- ---------------
<S> <C> <C>
/s/ THEKLA R. SHACKELFORD Director May 12, 1997
- -------------------------------------
Thekla R. Shackelford
/s/ ALEX SHUMATE Director May 12, 1997
- -------------------------------------
Alex Shumate
/s/ FREDERICK P. STRATTON, JR. Director May 12, 1997
- -------------------------------------
Frederick P. Stratton, Jr.
/s/ R. D. WALTER Director May 12, 1997
- -------------------------------------
Robert D. Walter
</TABLE>
<PAGE> 114
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit 2.1 Agreement and Plan of Merger, dated January 19, 1997, between the Registrant
and First USA, Inc. (incorporated by reference from Exhibit 2 to the First
USA, Inc. Current Report on Form 8-K dated January 28, 1997 (file No.
1-11-3030)).
Exhibit 2.2 Stock Option Agreement, dated January 19, 1997, between First USA, Inc., as
issuer, and the Registrant, as grantee (incorporated by reference from Exhibit
2 to the First USA, Inc. Current Report on Form 8-K dated January 28, 1997
(file No. 1-11-3030)).
Exhibit 2.3 Stock Option Agreement, dated January 19, 1997, between the Registrant, as
issuer, and First USA, Inc., as grantee (incorporated by reference from
Exhibit 2 to the First USA, Inc. Current Report on Form 8-K dated January 28,
1997 (file No. 1-11-3030)).
Exhibit 2.4 Amendment, dated April 23, 1997, to Agreement and Plan of Merger, dated
January 19, 1997, between the Registrant and First USA (incorporated herein by
reference to the Registrant's Current Report on Form 8-K dated April 24, 1997
(file no. 1-8552))
Exhibit 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).
Exhibit 3.2 Form of Certificate of Amendment of the Amended Articles of Incorporation of
the Registrant.
Exhibit 3.3 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).
Exhibit 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).
Exhibit 5.1 Opinion of Steven Alan Bennett, Esq., Senior Vice President and General
Counsel for the Registrant, regarding the legality of securities being
offered, including consent.
Exhibit 8.1 Opinion of Wachtell, Lipton, Rosen & Katz regarding the federal income tax
consequences of the Merger, including consent.
Exhibit 8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, regarding the federal
income tax consequences of the Merger, including consent.
Exhibit 23.1 Consent of Coopers & Lybrand L.L.P. relating to the audited financial
statements of the Registrant.
Exhibit 23.2 Consent of Ernst & Young LLP relating to the audited financial statements of
First USA, Inc.
Exhibit 23.3 Consent of Steven Alan Bennett, Esq., Senior Vice President and General
Counsel for the Registrant (included in Exhibit 5.1 hereto).
Exhibit 23.4 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.1 hereto).
Exhibit 23.5 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 8.2
hereto).
Exhibit 23.6 Consent of Lazard Freres & Co. LLC
Exhibit 23.7 Consent of UBS Securities LLC
Exhibit 23.8 Consent of Merrill Lynch & Co.
Exhibit 24.1 Powers of Attorney (included elsewhere in Part II of this Registration
Statement)
Exhibit 99.1 Form of Proxy to be used by the Registrant
Exhibit 99.2 Form of Proxy to be used by First USA, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 3.2
FORM OF
CERTIFICATE OF AMENDMENT
TO
AMENDED ARTICLES OF INCORPORATION
OF
BANC ONE CORPORATION
The undersigned Executive Vice President and Assistant Secretary of BANC ONE
CORPORATION (the "Corporation"), an Ohio corporation, do hereby certify that at
a meeting of the shareholders duly called and held on June 26, 1997 at which
meeting a quorum of the shareholders was present in person or by proxy, by the
affirmative vote of the holders of shares entitling them to exercise a majority
of the voting power of the Corporation, the following resolution was adopted to
amend the Articles of Incorporation:
RESOLVED, That the Amended Articles of Incorporation of BANC ONE
CORPORATION be and the same are hereby amended so that the first
paragraph of Article FOURTH shall henceforth be and read as follows:
FOURTH: The amount of the total authorized capital stock which
the Corporation shall have authority to issue is Nine Hundred
Eighty-Five Million (985,000,000) shares consisting of Nine
Hundred Fifty Million (950,000,000) shares of Common Stock
which are common shares without par value, Ten Million
(10,000,000) shares of Class A Preferred Stock which are
preferred shares without par value, One Million (1,000,000)
shares of Class B Convertible Preferred Stock (Class B
Preferred Stock) which are preferred shares without par value,
and Twenty-Four Million (24,000,000) shares of Class C
Preferred Stock which are preferred shares without par value.
IN WITNESS WHEREOF, the undersigned officers of the Corporation, acting
for and on behalf of said Corporation, have hereunto subscribed their
respective names on _______________, 1997.
BANC ONE CORPORATION
By: _____________________________________
Roman J. Gerber
Executive Vice President
By: _____________________________________
Charles F. Andrews
Assistant Secretary
<PAGE> 1
Exhibit 5.1
May 12, 1997
To: The Board of Directors of
BANC ONE CORPORATION
This opinion is being provided by the undersigned, as General Counsel of BANC
ONE CORPORATION ("BANC ONE"). In such capacity I, or attorneys under my
supervision, have represented 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. The Registration Statement relates to the issuance of up to
162,246,644 shares of common stock, no par value ($5 stated value) per share, of
BANC ONE (the "Shares") in connection with the proposed merger (the "Merger")
of First USA, Inc. ("First USA") with and into BANC ONE pursuant to the terms
of the Merger Agreement dated as of January 19, 1997, as amended, between BANC
ONE and First USA (the "Merger Agreement").
In rendering the opinions set forth below, I or attorneys under my supervision
have examined originals, or copies certified or otherwise identified to my
satisfaction, of such documents, corporate records and other instruments as I
have deemed necessary or appropriate for the purposes of this opinion,
including without limitation the Merger Agreement.
Based upon and subject to the foregoing and after examination of such matters
of law as I have deemed applicable or relevant to this opinion, I am of the
opinion that, upon effectiveness of the Registration Statement and 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.
The opinions expressed herein are limited to the laws of the State of Ohio and
the federal laws of the United States of America. I hereby consent to (i) the
use and filing of this opinion as an exhibit to the Registration Statement and
to the reference to this opinion under the heading "Legal Matters" in any
prospectus filed in connection with the Registration Statement and (ii) the
incorporation by reference of this opinion into a subsequent registration
statement filed by BANC ONE pursuant to Rule 462(b) under the Securities Act
relating to the offering covered by the Registration Statement. In giving such
consent, I do not thereby admit that I come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933 or the General
Rules and Regulations thereunder.
Very truly yours,
/s/ Steven Alan Bennett
Steven Alan Bennett
Senior Vice President and General Counsel
<PAGE> 1
Exhibit 8.1
[WACHTELL, LIPTON, ROSEN & KATZ LETTERHEAD]
May 12, 1997
BANC ONE CORPORATION
100 East Broad Street
Columbus, Ohio 43271-0158
Ladies and Gentlemen:
We have acted as special counsel to BANC ONE CORPORATION, an Ohio
corporation ("BANC ONE"), in connection with the proposed merger (the "Merger")
of First USA, Inc., a Delaware corporation ("First USA") with and into BANC ONE,
upon the terms and conditions set forth in the Agreement and Plan of Merger,
dated as of January 19, 1997, as amended as of April 23, 1997, by and between
BANC ONE and First USA (the "Agreement"). At your request, in connection with
the Filing of the Registration Statement on Form S-4 (the "Registration
Statement"), we are rendering our opinion concerning certain federal income tax
consequences of the Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of BANC ONE and the consent of First USA, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of BANC ONE and First USA
(copies of which are attached hereto and which are incorporated herein by
reference), and have assumed that such certificates will be complete and
accurate as of the Effective Time. We have also relied upon the accuracy of the
Registration Statement and the Joint Proxy Statement-Prospectus (together, the
"Proxy Statement") filed with the Securities and Exchange Commission, as amended
through the date hereof, in connection with the Merger. Any capitalized term
used and not defined herein has the meaning
<PAGE> 2
BANC ONE CORPORATION
May 12, 1997
Page 2
given to it in the Proxy Statement or the Agreement, as the case may be.
We have also assumed that the transactions contemplated by the
Agreement will be consummated in accordance therewith and as described in the
Proxy Statement and that the Merger will qualify as a statutory merger under
the applicable laws of the States of Delaware and Ohio.
Based upon and subject to the foregoing, the discussion contained in
the Proxy Statement under the caption "The Merger -- Certain Federal Income Tax
Consequences", except as otherwise indicated, represents our opinion as to the
material federal income tax consequences of the Merger under currently
applicable law.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
reference to this opinion under the caption "Summary -- Certain Federal Income
Tax Consequences", under the caption "The Merger -- Certain Federal Income Tax
Consequences" and elsewhere in the Proxy Statement. In giving such consent, we
do not hereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
<PAGE> 1
Exhibit 8.2
May 12, 1997
First USA, Inc.
1601 Elm Street
Dallas, Texas 75201
Ladies and Gentlemen:
We have acted as counsel to First USA, Inc., a Delaware corporation
("First USA"), in connection with the contemplated merger (the "Merger") of
First USA with and into BANC ONE CORPORATION, an Ohio corporation ("BANC ONE"),
pursuant to the Agreement and Plan of Merger, dated as of January 19, 1997, as
amended as of April 23, 1997, by and between BANC ONE and First USA (the
"Merger Agreement").(1) The delivery by Skadden, Arps, Slate, Meagher & Flom
LLP of an opinion as of the Effective Time, in substantially the form hereof,
is a condition to the obligation of First USA to consummate the Merger pursuant
to Section 7.1(f) of the Merger Agreement.
In rendering our opinion, we have examined the Merger Agreement, the
Joint Proxy Statement-Prospectus which is included in the Registration Statement
on Form S-4 (the "Registration Statement") filed on May 12, 1997 with the
Securities and Exchange Commission, under the Securities Act of 1933, as amended
(the "Securities Act"), and such other documents as we deemed relevant for
purposes of this opinion.
In rendering our opinion, we have relied, with the consent of First USA
and BANC ONE, upon the accuracy and completeness of the information, statements
and representations (which we have neither investigated nor verified) contained
in the respective certificates of the officers of First USA and BANC ONE dated
as of the date hereof (the "Tax Certificates"), and have assumed that the Tax
Certificates will be complete and accurate, and
- ----------------
(1) Unless otherwise indicated, all defined terms used herein shall have the
meanings assigned to them in the Merger Agreement.
<PAGE> 2
First USA, Inc.
May 12, 1997
Page 2
will be re-executed by appropriate officers of First USA and BANC ONE, as of
the Effective Time.
In rendering our opinion, we have assumed that the Merger will be
consummated in accordance with the terms of the Merger Agreement and as
described in the Registration Statement and that none of the terms and
conditions contained therein will have been waived or modified in any respect
prior to the Effective Time. We have also assumed that the Registration
Statement reflects all the material facts relating to the Merger, First USA and
BANC ONE. Our opinion is expressly conditioned on, among other things, the
accuracy as of the date hereof, and the continuing accuracy, of all of such
facts, information, covenants, statements and representations. Any material
changes in the facts referred to, set forth or assumed herein, in the
Registration Statement or in the Tax Certificates may affect the conclusions
stated herein.
We have assumed the genuineness of all signatures, the legal capacity
of all natural persons, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such documents. We have also assumed that the Merger will qualify as a
statutory merger under the laws of the States of Delaware and Ohio.
In rendering our opinion, we have considered applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations promulgated thereunder (the "Regulations"), pertinent judicial
authorities, rulings of the Internal Revenue Service (the "Service") and such
other authorities as we have considered relevant. It should be noted that such
laws, Code, Regulations, judicial decisions and administrative interpretations
are subject to change at any time and, in some circumstances, with retroactive
effect. A material change in any of the authorities upon which our opinion is
based could affect our conclusions herein.
Based solely upon and subject to the foregoing, the discussion contained
in the Registration Statement under the caption "The Merger -- Certain Federal
Income
2
<PAGE> 3
First USA, Inc.
May 12, 1997
Page 3
Tax Consequences" represents our opinion as to the material federal income tax
consequences of the Merger.
Except as expressly set forth above, we express no other opinion. We
disclaim any undertaking to advise you of any subsequent changes of the facts
stated or assumed herein or any subsequent changes in applicable law. This
opinion is for your benefit and is not to be used, circulated, quoted or
otherwise referred to for any purpose, except that we consent to the filing of
this opinion as Exhibit 8.2 of the Registration Statement and to the reference
to this opinion under the caption "Summary -- Certain Federal Income Tax
Consequences", under the caption "The Merger -- Certain Federal Income Tax
Consequences" and elsewhere in the Registration Statement. In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher
& Flom LLP
<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 dated February 21, 1997 on our
audits of the consolidated financial statements of BANC ONE CORPORATION as of
December 31, 1996 and 1995, and for the years ended December 31, 1996, 1995, and
1994, included in BANC ONE CORPORATION's Annual Report on Form 10-K for the year
ended December 31, 1996, as amended by Form 10-K/A filed on March 21, 1997. We
also consent to the reference to our Firm under the caption of "Experts" on
Form S-4.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
May 12, 1997
<PAGE> 1
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 17, 1996, except for Notes D and A as to which the
dates are August 19, 1996 and April 22, 1997, respectively, incorporated by
reference in the Joint Proxy Statement of Banc One Corporation and First USA,
Inc. that is made a part of the Registration Statement (Form S-4) and
Prospectus of Banc One Corporation for the registration of 162,246,644 shares
of its common stock.
/s/ Ernst & Young LLP
Dallas, Texas
May 9, 1997
<PAGE> 1
Exhibit 23.6
May 12, 1997
Board of Directors
BANC ONE CORPORATION
100 East Broad Street
Columbus, OH 43271
Gentlemen and Madam:
We hereby consent to the references to our firm and to the inclusion of an
opinion of our firm to be dated the date of the Joint Proxy
Statement/Prospectus of BANC ONE CORPORATION and First USA, Inc. constituting a
part of the Registration Statement on Form S-4 of BANC ONE CORPORATION filed
with the Securities and Exchange Commission on May 12, 1997. In giving the
foregoing consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1993, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
LAZARD FRERES & CO. LLC
By: /s/ Kendrick R. Wilson III
---------------------------
Kendrick R. Wilson III
Managing Director
<PAGE> 1
Exhibit 23.7
May 12, 1997
Board of Directors
BANC ONE CORPORATION
100 East Broad Street
Columbus, Ohio 43271
Gentlemen and Madam:
We hereby consent to the references to our firm and to the inclusion
of an opinion of our firm to be dated the date of the Joint Proxy
Statement/Prospectus of BANC ONE CORPORATION and First USA, Inc. constituting a
part of the Registration Statement on Form S-4 of BANC ONE CORPORATION filed
with the Securities and Exchange Commission on May 12, 1997. In giving the
foregoing consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
UBS SECURITIES LLC
By: /s/ Richard J. Barrett
----------------------------
Name: Richard J. Barrett
Title: Managing Director
By: /s/ Robert A. Nau
----------------------------
Name: Robert A. Nau
Title: Managing Director
<PAGE> 1
Exhibit 23.8
May 12, 1997
First USA, Inc.
1601 Elm Street
47th Floor
Dallas, Texas 75201
Dear Sirs:
We hereby consent to the use of our opinion letter to the Board of
Directors of First USA, Inc. included as appendix C to the Joint Proxy
Statement-Prospectus which forms a part of the Registration Statement on Form
S-4 relating to the proposed merger of First USA, Inc. with BANC ONE
CORPORATION, and to the references to such opinion in such Joint Proxy
Statement-Prospectus under the captions "Summary - Opinion of First USA's
Financial Advisor," "The Merger - Background of the Merger," "The Merger -
Reasons for the Merger - Recommendation of the First USA Board and Reasons for
the Merger" and "The Merger - Fairness Opinions of Financial Advisors - First
USA." In giving such consent, we do not admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we thereby admit that we are experts with respect
to any part of such Registration Statement within the meaning of the term
"experts" as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Edward V. Blanchard
-------------------------
Edward V. Blanchard
Managing Director
<PAGE> 1
EXHIBIT 99.1
PROXY BANC ONE CORPORATION PROXY
This Proxy is solicited on behalf of the Board of Directors
SPECIAL MEETING OF SHAREHOLDERS, June 26, 1997
The undersigned shareholder of BANC ONE CORPORATION hereby appoints
Richard R. Murphey, Jr., Karl E. Case and George R.L. Meiling and each of
them, Proxies, with power of substitution to each, for and in the name of the
undersigned to vote, as designated on the reverse side hereof, all the shares
of BANC ONE CORPORATION Common Stock held of record by the undersigned as of
May 6, 1997 at the Special Meeting of Shareholders to be held on June 26,
1997 or any adjournment thereof. This Proxy, when properly executed, will be
voted in the manner directed herein by the undersigned shareholder. If no
direction is made, this Proxy will be voted FOR Proposals 1 and 2 and
according to the judgment of the proxies with respect to any other business
that may come before the meeting or any adjournment thereof.
The shares represented by this proxy will be voted as directed by the
shareholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR" Proposals 1 and 2.
PLEASE VOTE, SIGN AND DATE, AND RETURN THIS PROXY CARD
PROMPTLY IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on reserve side)
<PAGE> 2
BANC ONE CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
(This Proxy is continued from other side)
1. Approval and adoption of the Merger Agreement and the transactions
contemplated thereby, including the Merger of First USA, Inc. and BANC ONE
CORPORATION.
For Against Abstain
/ / / / / /
2. Adoption of the Amendment to the Amended Articles of Incorporation of
BANC ONE CORPORATION to increase to 950,000,000 the number of authorized
shares of Common Stock of BANC ONE CORPORATION.
For Against Abstain
/ / / / / /
The undersigned hereby acknowledges receipt of the Notice of Special Meeting and
the Joint Proxy Statement-Prospectus, each dated May 12, 1997.
Please mark, date and sign exactly as your name appears above and return in the
enclosed envelope. Joint owners should each sign personally. Where applicable,
indicate your official position or representation capacity. If acting as
executor, administrator, trustee, guardian, etc., you should so indicate when
signing. If the signer is a corporation, please sign in full corporate name by
duly authorized officer.
Dated: __________________________________________________________________, 1997
_______________________________________________________________________________
Signature
________ ________
<PAGE> 1
Exhibit 99.2
FIRST USA, INC.
P R O X Y
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON
JUNE 27, 1997
The undersigned hereby appoints JOHN C. TOLLESON and RICHARD W. VAGUE,
and each of them, the true and lawful agents and proxies with full power of
substitution, to represent the undersigned at the Special Meeting of
Stockholders of First USA, Inc., to be held on the 48th Floor of 1601 Elm
Street, Dallas, Texas, on June 27, 1997 at 9:00 a.m., local time, and at any
adjournments thereof, for the transaction of the business described on the
opposite side of this card.
The shares of common stock, $.01 par value, of First USA, Inc. and
6-1/4% Convertible Preferred Stock of First USA, Inc. (the "Shares") represented
by this proxy will be voted as indicated on the opposite side of this card. If
no indication has been made, the Shares represented by this proxy will be voted
in favor of Proposal 1 and as the named proxies deem advisable on such other
business as may properly come before the meeting.
Please sign, date and return this proxy promptly, using the enclosed
return envelope.
FIRST USA, INC.
P.O. BOX 11093
NEW YORK, N.Y. 10203-0083
<PAGE> 2
[ ] The Board of Directors recommends a vote FOR Item 1.
1. Approval and adoption of the Merger
Agreement and the transactions contemplated
thereby, including the Merger of FIRST USA,
INC. with and into BANC ONE CORPORATION.
For [ ] Against [ ] Abstain [ ]
2. The proxy is authorized to transact
such other business as may properly
come before the meeting.
Change of Address
Mark Here [ ]
(Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee,
guardian or other fiduciary, please add that title.)
DATED:_____________________________________________________, 1997
_________________________________________________________________
Signature of Stockholder
_________________________________________________________________
Signature of Stockholder
Votes MUST be indicated
(x) in Black or Blue Ink. [x]
Please Mark, Date, Sign and Mail Your Proxy Promptly in the Envelope Provided.
