STAR BANC CORPORATION
Cross Reference Listing of Items
Annual
Report
PART I Page
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Item 1. Description of Business.............................................52
Financial Ratios....................................................51
Average Balance Sheets and Average Rates............................20
Volume/Rate Variance Analysis.......................................21
Investment Securities...............................................38
Loans...........................................................24, 39
Risk Elements of Loan Portfolio.................................27, 39
Summary of Loan Loss Experience.....................................25
Deposits............................................................29
Short-Term Borrowings...............................................40
Item 2. Properties..........................................................53
Item 3. Legal Proceedings...................................................53
Item 4. Submission of Matters to a Vote of Security Holders (b)...............
PART II
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Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters...............................................53
Item 6. Selected Financial Data.............................................51
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................19-30
Item 8. Financial Statements and Supplementary Data......................32-50
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................None
Part III
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Item 10. Directors and Executive Officers of the Registrant (a).............58
Item 11. Executive Compensation (b)...........................................
Item 12. Security Ownership of Certain Beneficial Owners and Management (b)...
Item 13. Certain Relationships and Related Transactions (b)...................
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(a) Except as set forth herein, incorporated by reference from the
corporation's
Proxy Statement for the Annual Meeting of Shareholders on April 12, 1994.
(b) Incorporated by reference from the corporation's Proxy Statement for the
Annual Meeting of Shareholders on April 12, 1994.
<PAGE>
Annual
Report
Part IV Page
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Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a)
Report of Independent Public Accounts...............................31
Consolidated Balance Sheets as of December 31, 1993 and 1992........32
Consolidated Statements of Income for the years ended
December 31, 1993, 1992 and 1991..................................33
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1993, 1992 and 1991............................34
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991..................................35
Notes to Consolidated Financial Statements.......................36-50
Exhibits:
Exhibit 3.1 Amended Articles of Incorporation of Star Banc Corporation
(previously filed as an exhibit to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1991 and
incorporated herein by reference)
Exhibit 3.2 Code of Regulations (previously filed as an exhibit to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1988, and incorporated herein by reference)
Exhibit 4 Rights Agreement (previously filed as an exhibit to the
registrant's Current Report on Form 8-K, dated October 27,
1989, and incorporated herein by reference)
Exhibit 10.1 1986 Stock Incentive Plan (previously filed as an exhibit to
Registration Statement No. 33-9494 and incorporated herein
by reference)
Exhibit 10.2 1991 Stock Incentive Plan (previously filed as an exhibit to
Registration Statement No. 33-46018 and incorporated herein
by reference)
Exhibit 10.3 1987 Deferred Compensation Plan (previously filed as an exhibit
to Registration Statement No.33-10085 and incorporated herein
by reference)
Exhibit 10.4 Severance and Employment Agreements
Exhibit 11 Computation of Earnings Per Share
Exhibit 13 Annual Report to Security Holders
Exhibit 21 Subsidiaries of the Registrant
Exhibit 23 Consent of Independent Public Accountants in regards to the
previously filed Registration Statements No. 2-94845,
No. 33-9494, No. 33-10085, No. 33-24672, No. 33-46018 and
No. 33-61308
Exhibit 24 Power of Attorney
During the fourth quarter of 1993, the corporation filed no Current Reports
on Form 8-K.
The corporation will file with the Commission its long-term debt instruments
upon request.
(a) Financial statement schedules have been omitted due to inapplicability or
because required information is shown in the consolidated financial
statements or notes thereto. Copies of exhibits may be obtained at a cost
of 30 cents per page upon written request to the chief financial officer
of the corporation.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
NAME TITLE AGE
Jerry A. Grundhofer Chairman since 1994. 49
President and Chief Executive Officer since 1993.
Director since 1993.
Jerry A. Grundhofer joined Star Banc Corporation in May 1993 as president and
was named chief executive officer in June 1993. He has served as chairman of
the board since January 1, 1994. He has served as chairman of Star Bank, N.A.
since June 1993 and has served on the board of directors of the corporation
and the bank since June 1993. Prior to joining Star, he had served as vice
chairman of the board for BankAmerica Corporation since 1992. Prior to the
merger between BankAmerica Corporation and Security Pacific Corporation, he
had served as president and chief executive officer of Security Pacific
National Bank since 1990. He has been a director of The Miami Valley Insurance
Company since 1993.
Joseph A. Campanella Member of the Managing Committee since 1991. 51
Executive Vice President since 1991.
Joseph A. Campanella served as president and chief executive officer of Star
Bank, N.A., Cleveland from its founding in 1988 to June 1991 at which time he
was elected executive vice president of Star Banc Corporation. From 1983 to
1988, he had served as director of corporate finance at The Koptis
Organization, a financial services firm.
Samuel M. Cassidy Member of the Managing Committee since 1991. 61
Executive Vice President since 1985.
Director since 1991.
Samuel M. Cassidy has served as chief executive officer of Star Bank, N.A.,
since 1988. He has served as president of the bank since 1984 and has served
on the board of directors of the bank since 1980.
Richard K. Davis Member of the Managing Committee since 1993. 35
Executive Vice President since 1993.
Richard K. Davis joined Star Banc Corporation in November 1993 as executive
vice president. Prior to joining Star, he had served as executive vice
president of BankAmerica Corporation since 1992. Prior to the merger between
BankAmerica Corporation and Security Pacific Corporation, he had served as
executive vice president at Security Pacific National Bank since 1990. He has
been president and a director of The Miami Valley Insurance Company since 1993.
David M. Moffett Member of the Managing Committee since 1993. 41
Executive Vice President and Chief Financial
Officer since 1993.
David M. Moffett joined Star Banc Corporation in September 1993 as executive
vice president and chief financial officer. Prior to joining Star, he had
served as senior vice president and assistant treasurer of BankAmerica
Corporation since 1992. Prior to the merger between BankAmerica Corporation
and Security Pacific Corporation, he had served as senior vice president and
director of corporate treasury at Security Pacific Corporation since 1990.
He has served as treasurer and a director of First National Cincinnati
Corporation and as vice president, treasurer and a director of The Miami Valley
Insurance Company since 1993.
Timothy J. Fogarty Member of the Managing Committee since 1993 36
Senior Vice President since 1987.
Timothy J. Fogarty has served as senior vice president, Residential Mortgage
Banking since 1993. Previously he had served as senior vice president,
Operations since 1989. He joined Star Banc Corporation in 1987 as senior vice
president, director of auditing.
Thomas J. Lakin Member of the Managing Committee since 1993. 51
Senior Vice President since 1992.
Thomas J. Lakin has served as senior vice president, Operations and
Administration since 1993. Previously he had served as executive vice president
of the bank since 1989 and as senior vice president and head of Trust Financial
Services since 1986. He joined Star Bank, N.A. in 1966.
Stephen E. Smith Member of the Managing Committee since 1993. 46
Senior Vice President since 1993.
Stephen E. Smith has served as senior vice president, Corporate Human Resources
since 1993. He joined Star Banc Corporation in 1991. Previously he had served
as as senior vice president, Human Resources at Ameritrust Company since 1986
and vice president since 1978.
F. Kristen Koepcke Vice President, General Counsel, and
Secretary since 1990. 58
F. Kristen Koepcke joined Star Banc Corporation in September 1990. He has
served as secretary and a director of The Miami Valley Insurance Company since
1990. He had served as vice president, general counsel and secretary of
Hillenbrand Industries, a diversified manufacturing company, from 1972 to 1990.
There is no family relationship between any of the above executive officers.
Officers are elected by and serve with the approval of the board of directors.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized as of the twenty-fourth
day of February 1994.
Star Banc Corporation
/s/ Jerry A. Grundhofer
-------------------------------------
Jerry A. Grundhofer
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities indicated as of the twenty-fourth day of February 1994.
/s/ Jerry A. Grundhofer /s/ David M. Moffett
---------------------------------- ---------------------------------
Jerry A. Grundhofer David M. Moffett
Chairman of the Board, President Executive Vice President and
and Chief Executive Officer Chief Financial Officer
James R. Bridgeland, Jr., Director* Daniel J. Meyer, Director*
Laurance L. Browning, Jr., Director* O'dell M. Owens, M.D., M.P.H.,Director*
Samuel M. Cassidy, Director* Thomas E. Petry, Director*
Raymond R. Clark, Director* William C. Portman, Director*
V. Anderson Coombe, Director* Oliver W. Waddell, Director*
John C. Dannemiller, Director* Bradley L. Warnemunde, Director*
J.P. Hayden, Jr., Director*
Roger L. Howe, Director*
Thomas J. Klinedinst Jr., Director* /s/ Jerry A. Grundhofer
---------------------------------
Charles S. Meehem, Jr., Director* Jerry A. Grundhofer
Attorney-in-fact
*Pursuant to Power of Attorney
EXHIBIT 10.4
SEVERANCE AND EMPLOYMENT AGREEMENTS
Exhibit 10.4 includes the severance and employment agreements for
executive officers.
EMPLOYMENT AGREEMENT
AGREEMENT by and between Star Banc Corporation, an Ohio
corporation (the "Company") and Jerry A. Grundhofer (the
"Executive"), dated as of the 12th day of May, 1993.
1. Certain Definitions. The "Effective Date" shall mean the
first date after the date hereof on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the
date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment
(i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such
termination of employment.
2. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act") (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act)
of 35% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the fol-
lowing acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled
by the Company or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the
election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of
the Company (a "Business Combination"), in each case, un
less, following such Business Combination, (i) all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may
be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation
which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust)
of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 35% or more of, respectively, the then out
standing shares of common stock of the corporation
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors
of the corporation resulting from such Business
Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the
action of the Board, providing for such Business
Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company subject to the terms and conditions
of this Agreement, for the period commencing on the date hereof
and ending on the third anniversary of such date (the "Employment
Period"); provided, however, that upon a Change of Control, if the
Executive is still employed by the Company, the Employment Period
shall be extended until the third anniversary of the Effective
Date, or if the Employment Period has terminated prior to the
Change of Control, a new three year Employment Period shall
commence upon a Change of Control.
4. Terms of Employment. (a) Position and Duties. (i)
Commencing on the date hereof and for the remainder of the
Employment Period, the Executive shall be President of the Company
and, commencing on June 15, 1993, the Executive shall also be
Chief Executive Officer of the Company and shall serve on the
Company's Board of Directors and shall have such duties, re-
sponsibilities and authority as shall be consistent therewith.
The Executive shall also be Chairman of Star Bank N.A. and shall
serve on its Board of Directors.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote full attention and time during normal
business hours to the business and affairs of the Company and to
use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal invest-
ments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities
to the Company.
(b) Compensation. (i) Base Salary. Commencing on June 15, 1993
and during the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary") of $550,000 until June
30, 1994, $600,000 for the period of July 1, 1994 through June 30,
1995, and $650,000 for the remainder of the Employment Period.
The Annual Base Salary shall be paid in equal monthly
installments. During the Employment Period, the Annual Base
Salary shall be reviewed at least every 12 months. Any increase
in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") pursuant
to the Company's annual incentive plans, pro rated in the case of
a bonus for any year during which the Executive was employed for
less than 12 months; provided, however, after the Effective Date,
the Annual Bonus shall be no less than 75% of the Executive's An-
nual Base Salary (the "Minimum Bonus"). Each such Annual Bonus
shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual
Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) Stock Options. The Executive shall be granted on the date
hereof a nonqualified stock option (the "Option") to acquire
200,000 shares of the Company's common stock, $5.00 par value
pursuant to the Company's 1991 Stock Incentive Plan, 100,000
shares subject to the Option will have a purchase price equal to
the opening price of the Company's common stock on NASDAQ on May
12, 1993 (the "Initial Price"), 50,000 shares subject to the
Option will have a purchase price $7 in excess of the Initial
Price, and 50,000 shares will have a purchase price of $14 in
excess of the Initial Price. The Option shall vest and become
exercisable with respect to 100,000 shares after one year, with
respect to an additional 50,000 shares after two years, and as to
the final 50,000 shares, after three years, provided that the
Option shall vest and become immediately exercisable upon a Change
of Control.
(iv) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be eligible to participate
in all incentive, savings and retirement plans, practices,
policies and programs applicable generally to other peer
executives of the Company and its affiliated companies, including,
without limitation, the Company's Non-Qualified Retirement Plan
(the "NQRP") under which, if the Executive is employed by the
Company on May 12, 1996, Executive shall be given service credit
for his service with BankAmerica Corporation, Security Pacific
Corporation and Wells Fargo N.A. (together, the "Prior
Employers"), provided that the Company's obligation under the NQRP
shall be offset by any pension benefits to which the Executive is
entitled from the Prior Employers, provided further that after the
Effective Date in no event shall such plans, practices, policies
and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is ap-
plicable), savings opportunities and retirement benefit opportuni-
ties, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies
and programs as in effect at any time during the 120-day period
immediately preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies, after taking into account the difference in
age between the Executive and the peer executives.
(v) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits
under welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and
its affiliated companies, provided that after the Effective Date
in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in
the aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of
the Company and its affiliated companies.
(vi) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable
business expenses incurred by the Executive.
(vii) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, payment of club
dues, and an automobile of his choice and payment of related
expenses.
(viii) Vacation. During the Employment Period, the Executive
shall be entitled to four weeks of paid vacation.
5. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the Company
determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition
of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement
of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of
the Executive from the Executive's duties with the Company on a
full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's
legal representative.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or
one of its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive
by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief
Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission
was in the best interests of the Company. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests
of the Company. The cessation of employment of the Executive
shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of a majority of the entire
membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the Ex-
ecutive and the Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by
the Executive for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent
with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities
as contemplated by Section 4(a) of this Agreement, or any other
action by the Company which results in a diminution in such posi-
tion, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location after the Effective Date other than where the
Executive was located immediately prior to the Effective Date
other than in connection with a change of the Company's
headquarters if the Executive is relocated to such headquarters,
or, after the Effective Date, the Company's requiring the
Executive to travel on Company business to a substantially greater
extent than required immediately prior to the Effective Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of
"Good Reason" made by the Executive shall be conclusive. Anything
in this Agreement to the contrary notwithstanding, a termination
by the Executive for any reason during the 30-day period
immediately following the first anniversary of the Effective Date
shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated
by Notice of Termination to the other party hereto given in
accordance with Section 12(b) of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment
under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall
be not more than thirty days after the giving of such notice).
The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude
the Executive or the Company, respectively, from asserting such
fact or circumstance in enforcing the Executive's or the Company's
rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or
by the Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's employment is terminated by
the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive or
the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good
Reason; Other Than for Cause, Death or Disability. If, during the
Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the Executive
shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Minimum Bonus and (II) the
Annual Bonus paid or payable, including any bonus or portion
thereof which has been earned but deferred (and annualized for any
fiscal year consisting of less than twelve full months or during
which the Executive was employed for less than twelve full
months), for the most recently completed fiscal year during the
Employment Period, if any (such higher amount being referred to as
the "Highest Annual Bonus") and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365 and (3)
any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid (the
sum of the amounts described in clauses (1), (2), and (3) shall be
hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the Highest An-
nual Bonus; and
C. if the Date of Termination is on or after the Effective Date,
an amount equal to the difference between (a) the actuarial
equivalent of the benefit (utilizing actuarial assumptions no less
favorable to the Executive than those in effect under the
Company's qualified defined benefit retirement plan (the "Re-
tirement Plan") immediately prior to the Effective Date, and any
excess or supplemental retirement plan in which the Executive
participates (together, the "SERP") which the Executive would
receive if the Executive's employment continued for three years
after the Date of Termination assuming for this purpose that all
accrued benefits are fully vested, and, assuming that the
Executive's compensation in each of the three years is that re-
quired by Section 4(b)(i) and Section 4(b)(ii), and (b) the
actuarial equivalent of the Executive's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP as of the
Date of Termination;
(i) all stock options, restricted stock and other stock-based
compensation shall become immediately exercisable or vested, as
the case may be;
(ii) for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall
continue benefits to the Executive and/or the Executive's family
at least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies
described in Section 4(b)(v) of this Agreement if the Executive's
employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible
to receive medical or other welfare benefits under another
employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such
other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commence-
ment of benefits) of the Executive for retiree benefits pursuant
to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until three years
after the Date of Termination and to have retired on the last day
of such period;
(iii) the Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider of
which shall be selected by the Executive in his sole discretion;
and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is
entitled to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies
(such other amounts and benefits shall be hereinafter referred to
as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other than
for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to
the Executive's estate or beneficiary, as applicable, in a lump
sum in cash within 30 days of the Date of Termination. With
respect to the provision of Other Benefits after the Effective
Date, the term Other Benefits as utilized in this Section 6(b)
shall include, without limitation, and the Executive's estate
and/or beneficiaries shall be entitled to receive, benefits at
least equal to the most favorable benefits provided by the Company
and affiliated companies to the estates and beneficiaries of peer
executives of the Company and such affiliated companies under such
plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day
period immediately preceding the Effective Date or, if more favor-
able to the Executive's estate and/or the Executive's
beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its af-
filiated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination. With respect to the
provision of Other Benefits after the Effective Date, the term
Other Benefits as utilized in this Section 6(c) shall include, and
the Executive shall be entitled after the Disability Effective
Date to receive, disability and other benefits at least equal to
the most favorable of those generally provided by the Company and
its affiliated companies to disabled executives and/or their
families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally
with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect
to other peer executives of the Company and its affiliated
companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment
Period, this Agreement shall terminate without further obligations
to the Executive other than the obligation to pay to the Executive
(x) his Annual Base Salary through the Date of Termination, (y)
the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent
theretofore unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a termination
for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such
case, all Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. Upon
a termination of the Executive's employment for Cause by the
Company or by the Executive without Good Reason, the Executive
shall forfeit all stock options that are not vested on the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by
the Company or any of its affiliated companies and for which the
Executive may qualify nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termina-
tion shall be payable in accordance with such plan, policy, prac-
tice or program or contract or agreement except as explicitly
modified by this Agreement.
8. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive
obtains other employment. The Company agrees to pay as incurred,
to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee
of performance thereof (including as a result of any contest by
the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at
the applicable Federal rate provided for in Section 7872(f)(2)(A)
of the Internal Revenue Code of 1986, as amended (the "Code");
provided that the Company shall have no such obligation if it is
determined by a court that the Company was not in breach of the
Agreement and that the Executive's claims were not made in good
faith.
9.Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under this
Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties
are incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes and any benefits that result
from the deductibility by the Executive of such taxes (including,
in each case, any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and
any interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and
when a Gross-Up Payment is required and the amount of such Gross-
Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by KPMG Peat Marwick or such other
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as
is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the
Company should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that
the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later
than ten business days after the Executive is informed in writing
of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties
with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 9(c), the Company shall
control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs
the Executive to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income
with respect to such advance; and further provided that any exten-
sion of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 9(a) or 9(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to
Section 9(c), a determination is made that the Executive shall not
be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
10. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the
Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive
in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not,
without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section 10 constitute
a basis for deferring or withholding any amounts otherwise payable
to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As
used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio,
without reference to principles of conflict of laws. The captions
of this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Jerry A. Grundhofer
c/o Wachtell, Lipton, Rosen & Katz
299 Park Avenue
New York, New York 10171
Attention: Adam D. Chinn, Esq.
If to the Company:
Star Banc Corporation
Star Bank Center
425 Walnut Street
Cincinnati, Ohio 45202
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision
of this Agreement or the failure to assert any right the Executive
or the Company may have hereunder, including, without limitation,
the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
13. No Prohibited Payments. Notwithstanding anything in this
Agreement to the contrary, the Company shall not make any payment
to the Executive which, according to the opinion of the Company's
outside counsel, would violate Section 2523(k) of the
Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer
Recovery Act of 1990 (codified at 12 U.S.C. 1828(k)), or any rules
or regulations promulgated thereunder.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of
Directors, the Company has caused these presents to be executed in
its name on its behalf, all as of the day and year first above
written.
JERRY A. GRUNDHOFER
STAR BANC CORPORATION
By
<PAGE>
Executive Severance Agreements
Star Banc Corporation Executive Officers
Three (3) Year Severance Agreement
1 Year Protection Period
30 day walkaway rights
Severance Payment: three (3) times highest base salary + highest
bonus
Three (3) year continuation of medical coverage
Pension Coverage includes three (3) years additional service
No 280G Provision
Gross-up Provision
Term of Agreement:three (3) year initial term of agreement and
renewal on each anniversary
Covers:
(post January 1994)
Mr. David M. Moffett, Executive Vice President and Chief
Financial Officer, Star Banc Corporation and Star Bank, N.A.
Mr. Richard K. Davis, Executive Vice President, Star Banc
Corporation and Star Bank, N.A.
(post May 1994)
Mr. Samuel M. Cassidy, President and Chief Executive
Officer of Star Bank, N.A. and Executive Vice
President and Director, Star Banc Corporation
Mr. Joseph A. Campanella, Executive Vice President, Star
Banc Corporation and Star Bank, N.A.
Two (2) Year Severance Agreement
1 Year Protection Period
30 day walkaway rights
Severance Payment: two (2) times highest base salary + highest
bonus
Two (2) year continuation of medical coverage
Pension Coverage includes two (2) years additional service
Includes 280G Provision
Term of Agreement: three (3) year initial term of agreement and
renewal on each anniversary
Covers:
Mr. Daniel B. Benhase, Executive Vice President, Star
Bank, N.A.
Mr. John M. Bullock, Executive Vice President, Star
Bank, N.A.
Mr. Jerome C. Kohlhepp, Executive Vice President,
Star Bank, N.A.
Mr. Thomas J. Lakin, Senior Vice President, Star Banc
Corporation and Executive Vice President, Star Bank, N.A.
Mr. Timothy J. Fogarty, Senior Vice President, Star Banc
Corporation and Star Bank, N.A.
Mr. Wayne J. Shircliff, Executive Vice President,
Star Bank, N.A.
Mr. Stephen E. Smith, Senior Vice President, Star Banc
Corporation and Star Bank, N.A.
<PAGE>
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement (hereinafter called the "Agreement"),
made as of the 14th day of December, 1993, between Star Banc Corporation,
an Ohio corporation (hereinafter called "Star Banc") and its Subsidiaries
(hereinafter individually and collectively called the "Company"), and
David M. Moffett (hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Company considers the recruitment and maintenance of sound
and vital management to be essential to protecting and enhancing its best
interests and those of its shareholders; and
WHEREAS, the Company recognizes that it is in an industry where there is
a strong potential for a change in control and that the potential for a
change in control may make it difficult to hire and retain strong
management personnel; and
WHEREAS, the Company recognizes that the possibility of a change in
control of Star Banc may exist and that, in the event negotiations are
commenced to bring about such a change in control, uncertainty and
questions may arise among management that could result in the distraction
or departure of management personnel to the detriment of the Company and
the shareholders; and
WHEREAS, the Company has determined that appropriate steps should be
taken to reinforce and encourage the Executive's continued attention and
dedication as an executive officer to his assigned duties without
distraction in the face of potentially disruptive circumstances arising
from the possibility of a change in control of Star Banc;
NOW THEREFORE, the Company and the Executive do hereby agree as follows:
1. Definitions The following words and terms as used herein shall have
the following meaning:
1.1 Change in Control. A "Change in Control" of Star Banc shall be
deemed to have occurred:
(a)Upon the filing with the Secretary of State of the State of Ohio of a
certificate of merger or certificate of consolidation with respect to a
merger or a consolidation in which Star Banc is a "constituent
corporation" or upon the consummation of a "combination" or "majority
share acquisition" in which Star Banc is the "acquiring corporation" (as
such terms are defined in Ohio Rev. Code Section 1701.01 as in effect on
September 26, 1989) and in which Star Banc's shareholders immediately
prior to entering into such agreement will beneficially own, immediately
after the effective time of the merger, consolidation, combination or
majority share acquisition, securities of Star Banc or any surviving or
new corporation having less than sixty-five percent (65%) of the "voting
power" of Star Banc or any surviving or new corporation, including
"voting power" exercisable on a contingent or deferred basis as well as
immediately exercisable "voting power"; or,
(b)Upon the consummation of a sale, lease, exchange or other transfer or
disposition by Star Banc of all or substantially all its assets to any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended and in effect on September
26, 1989 (hereinafter called the "Exchange Act") other than to one (1) or
more wholly owned Subsidiaries, or upon the consummation of sales, lease,
exchange or other transfer or disposition by one (1) or more of the
Subsidiaries of all or substantially all the assets of Star Banc and its
Subsidiaries, on a consolidated basis, other than to other wholly owned
Subsidiaries; provided, however, that the mortgage or pledge of all or
substantially all of Star Banc's assets or of all or substantially all
the assets of Star Banc and its Subsidiaries, on a consolidated basis, in
connection with a bona fide financing shall not constitute a "Change in
Control"; or,
(c)When any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) directly or indirectly, of thirty-five
percent (35%) or more of the combined "voting power" of Star Banc's then
outstanding securities, excluding "voting power" exercisable on a
contingent or deferred basis; or,
(d)When a tender offer, pursuant to Regulation 14D promulgated by the
Securities and Exchange Commission under the Exchange Act is consummated
resulting in a "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) becoming the beneficial owner of thirty-five percent
(35%) or more of the combined "voting power" of Star Banc's then
outstanding securities, excluding "voting power" exercisable on a
contingent or deferred basis; or,
(e)When those persons serving as Original Directors and/or their
Successors do not constitute a majority of the whole Board of Directors
of Star Banc.
1.2 Cause means conviction for the commission of a felony or removal from
office by order of the Comptroller of the Currency, Federal Reserve
Board, or other appropriate agency.
1.3 Date of Termination means the date the Executive's employment is
terminated under this Agreement whether by the Company or by the
Executive.
1.4 Disability means disability as such term is defined in the Star Banc
Salary Continuation Plan.
1.5 Effective Date means the first date after the date hereof on which a
Change in Control occurs.
1.6 Employment Agreement means an employment agreement, if any, between
the Company and the Executive.
1.7 Good Reason means:
(a) A reduction by the Company in the Executive's base salary as in
effect on the date hereof or as the same may be increased from
time-to-time or a failure by the Company to increase the Executive's base
salary each year during the Protected Period by an amount which at least
equals, on a percentage basis, the lesser of: (i) the average percentage
increase in base salary for all officers of the Company during the three
full calendar years immediately preceding the Change in Control; or (ii)
the average percentage increase in base salary for the Executive during
the three full calendar years immediately preceding the Change in
Control; or
(b) A change in the Executive's reporting responsibilities, titles, job
responsibilities or offices which in the Executive's sole opinion result
in a diminution of his status, control, or authority as in effect
immediately prior to a Change in Control; or
(c) The assignment to the Executive of any positions, duties or
responsibilities inconsistent in the sole opinion of the Executive with
the Executive's positions, duties and responsibilities or status with the
Company immediately prior to the Change in Control or that requires the
Executive to travel more than prior to the Change in Control; or
(d) A failure by the Company (i) to continue any cash bonus or other
incentive plans in substantially the same form and with the same
opportunity levels and perceived potential for obtaining performance
objectives, in effect immediately prior to the Change in Control, or (ii)
to continue the Executive as a participant in such plans on at least the
same basis as the Executive participated in accordance with the plans
immediately prior to the Change in Control; or
(e) A requirement by the Company that the Executive be based or perform
his duties anywhere other than at the Company's corporate office location
either (i) immediately prior to the Change in Control, or (ii) within one
mile of such prior corporate office location if the Company's corporate
office location is moved; or
(f) A failure by the Company to continue in effect any benefit, whether
or not qualified, or other compensation plan or the Company's failure to
provide the Executive with the number of paid vacation days to which he
is entitled in accordance with the Company's normal vacation practices
with respect to the Executive at the time of the Change in Control; or
(g) An agreement between the Board of Directors of Star Banc and the
Executive that employment should be terminated.
For purposes of this Section 1.7, any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive
for any reason during the 30-day period immediately following the first
anniversary of the Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
1.8 Original Directors means those persons serving as Directors of Star
Banc on the date of this Agreement.
1.9 Protected Period means the twelve (12) month period immediately
following each and every Change in Control.
1.10 Successors means those directors whose election by Star Banc's
shareholders has been approved by the vote of at least two-thirds of the
Original Directors and previously qualified Successors serving as
directors of Star Banc at the time of such election or nomination for
election.
1.11 Termination Benefits means those benefits described in Section 2 of
the Agreement.
1.12 Subsidiaries means any and all companies at least fifty percent
(50%) owned, directly or indirectly, by Star Banc.
2. Benefits Upon Termination of Employment.
2.1 General. If, during the Protected Period following each Change in
Control, the Executive's employment is terminated either (i) by the
Company (other than for Cause or Disability), or (ii) by the Executive
for Good Reason, then the Executive (or his estate or personal
representative), shall be entitled to the Termination Benefits provided
in this Section 2.
2.2 Base Salary and Bonus Through Date of Termination. The Company shall
promptly pay the Executive his full base salary through the Date of
Termination at the rate in effect at the time notice of termination is
given. In addition, the Company shall promptly pay the amount of any
bonus or incentive for the year in which the Date of Termination occurs
(based on the target bonus for the Executive for the year) prorated to
the Date of Termination (without application of any denial provisions
based on unsatisfactory personal performance or any other reason). The
Company shall also pay the Executive for any vacation earned but not
taken with such payment being equal to the Executive's calculated daily
base salary rate times the applicable days of such vacation.
2.3 Severance Payment. The Company shall pay the Executive a severance
payment equal to three (3) times the sum of: (a) the Executive's highest
rate of pay, on an annualized basis, established by the Company during
the last five years plus (b) the highest bonus earned by the Executive,
with respect to any single year, over the last five (5) years. The
severance payment shall be made in a lump-sum within thirty (30) days of
the Date of Termination. Should a Change of Control occur prior to
February 1, 1995, the Executive's "Highest Bonus" for purposes of Section
2.3 shall not be less than 60% of the Executive's base salary on the date
the Change of Control occurs.
2.4 Pension Payment. The Company shall pay the Executive a supplemental
pension benefit equal to the lump sum benefit which the Executive would
be entitled to receive under the Star Banc Employees' Pension Plan if the
Executive were 100% vested and had three (3) additional years of service
minus the lump sum benefit actually payable to the Executive under the
Star Banc Employees' Pension Plan. Payment of this supplemental pension
benefit shall be made within thirty (30) days of the Date of Termination.
2.5 Medical Coverage. The Company shall, at its expense, maintain the
Executive's life, health and accidental death and disability insurance
coverage with the coverages maintained at the higher level in effect
either immediately prior to the date of the Change in Control or on the
Date of Termination, for a period of three (3) years following the Date
of Termination.
2.6 Termination Which Does Not Require Payment Of Termination Benefits.
No Termination Benefits need to be provided by the Company to the
Executive under this Section 2 if the Executive's employment is
terminated:
(a) By the Executive for any reason other than for Good Reason;
(b) By the Company for Cause or Disability; or
(c) By death.
3.New Employment; Reduction of Termination Benefits.The Termination
Benefits provided under Section 2 shall not be treated as damages, but
rather shall be treated as severance compensation to which the Executive
is entitled. The Executive shall not be required to mitigate the amount
of any Termination Benefit provided under Section 2 by seeking other
employment or otherwise.
4.Certain Additional Payments by the Company.
(a)Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments
required under this Section 4) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes and any benefits that result from
the deductibility by the Executive of such taxes (including, in each
case, any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b)Subject to the provisions of Section 4(c), all determinations required
to be made under this Section 4, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be
made by KPMG Peat Marwick or such other certified public accounting firm
as may be designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 4, shall be paid by the Company to
the Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts
its remedies pursuant to Section 4(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit
of the Executive.
(c)The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on which it gives
such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify
and hold the Executive harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section
4(c), the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 4(a) or 4(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section
4(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 4(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such claim
and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
5.Notice of Termination.Any purported termination by the Company of the
Executive's employment for Cause or Disability or by the Executive for
Good Reason shall be communicated by notice of termination to the other
party. A notice of termination shall include the specific reason for
termination relied upon and shall set forth in reasonable detail, the
facts and circumstances claimed to provide a basis for termination of
employment.
Any dispute by a party hereto regarding a notice of termination delivered
to such party must be conveyed to the other party within thirty (30) days
after the notice of termination is given. If the particulars of the
dispute are not conveyed within the thirty (30) day period, then the
disputing party's claims regarding the termination shall be deemed
forever waived.
6.Successor; Binding Agreement.Star Banc will require any successor
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of
Star Banc expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place (the assumption shall be
by agreement in form and substance satisfactory to the Executive).
Failure of Star Banc to obtain such agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and shall
entitle the Executive, at his election, to Termination Benefits from the
Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which
any such election becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company
and any successor to its business and/or assets as described above or
which otherwise becomes bound by all the terms and provision of this
Agreement by operation of law.
In addition, as used in this Agreement, "Star Banc" shall mean Star Banc
and any successor to its business and/or assets as described above or
which otherwise becomes bound by all the terms and provision of this
Agreement by operation of law.
This Agreement shall insure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amount would still be payable to him hereunder if he
had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to
his designee or, if there be no such designee, to his estate.
7.Miscellaneous.
7.1Notice. All notices, elections, waiversand all other communications
provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, to such address as
either party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective
only upon receipt.
7.2No Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Chief Executive Officer of the
Company. No waiver by either party at any time of any breach by the other
party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement.
7.3Indemnification. If litigation shall be brought to enforce or
interpret any provision contained herein, the Company hereby agrees to
indemnify the Executive for his attorney's fees and disbursement incurred
in such litigation, and hereby agrees to pay prejudgment interest on any
money judgment obtained by the Executive, calculated at the prime
interest rate announced as such by the Wall Street Journal from
time-to-time, from the earliest date that payment(s) to him should have
been made under this Agreement. If the Wall Street Journal announces two
or more rates as the prime rate, then the highest rate shall be used.
7.4 Payment Obligations Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have against the
Executive or any third party. All amounts payable by the Company
hereunder shall be paid without notice or demand. Each and every payment
made hereunder by the Company shall be final and the Company will not
seek, nor permit its subsidiaries, affiliates, successors or assigns to
seek, to recover all or any part of such payment from the Executive or
from whosoever may be entitled thereto, for any reason whatsoever.
7.5 Term of Agreement. The term of this Agreement shall continue for an
initial period of three (3) years from the date of this Agreement. On
each anniversary of this Agreement, the term shall be extended for an
additional year unless prior to an anniversary date Star Banc's Board of
Directors cause a notice of nonrenewal to be sent to the Executive. Any
Termination Benefits due pursuant to this Agreement shall continue to be
an obligation of the Company and enforceable by the Executive until paid
in full.
7.6 Controlling Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
7.7 Interpretation of Agreement. In the event of any ambiguity,
vagueness or other matter involving the interpretation or meaning of this
Agreement, this Agreement shall be construed liberally so as to provide
to the Executive the full benefits set out herein.
7.8 Severability. Each section, subsection or paragraph of this
Agreement shall be deemed severable and if for any reason any portion of
this Agreement is unenforceable, invalid or contrary to any existing or
future law, such unenforceability or invalidity shall not affect the
applicability or validity of any other portion of this Agreement.
7.9 U.S. Dollars. All payments required to be made under this
Agreement shall be made in United States Dollars.
7.10 Employment Agreement. Any benefits provided to the Executive under
this Agreement will, unless specifically stated otherwise in this
Agreement, be in addition to and not in lieu of any benefits that may be
provided the Executive under an Employment Agreement, if any, with the
Company.
Nothing in this Agreement is to be deemed to give the Company the right
to take any action or engage in any omission with respect to the
Executive at any time when any such action or omission is not permissible
and proper under any Employment Agreement if then in force. Similarly,
except as provided otherwise in this Agreement, nothing in this Agreement
is to be deemed to give the Executive the right to take any action or
engage in any omission with respect to the Company at any time when any
such act or omission is not permissible and proper under any Employment
Agreement if then in force.
This Agreement shall continue in force so long as the Executive remains
employed by the Company and shall not be affected by any termination of
any Employment Agreement.
7.11 Footnotes, Title and Captions. All footnotes or section,
subsection or paragraph titles or captions contained in this Agreement
are for convenience only and shall not be deemed part of the text of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
Attest: STAR BANC CORPORATION, on behalf of itself and each Subsidiary
By:
Name
Stephen E. Smith
Title Name
Senior Vice President
Title
<PAGE>
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement (hereinafter called the "Agreement"),
made as of the 14th day of December, 1993, between Star Banc Corporation,
an Ohio corporation (hereinafter called "Star Banc") and its Subsidiaries
(hereinafter individually and collectively called the "Company"), and
Richard K. Davis (hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Company considers the recruitment and maintenance of sound
and vital management to be essential to protecting and enhancing its best
interests and those of its shareholders; and
WHEREAS, the Company recognizes that it is in an industry where there is
a strong potential for a change in control and that the potential for a
change in control may make it difficult to hire and retain strong
management personnel; and
WHEREAS, the Company recognizes that the possibility of a change in
control of Star Banc may exist and that, in the event negotiations are
commenced to bring about such a change in control, uncertainty and
questions may arise among management that could result in the distraction
or departure of management personnel to the detriment of the Company and
the shareholders; and
WHEREAS, the Company has determined that appropriate steps should be
taken to reinforce and encourage the Executive's continued attention and
dedication as an executive officer to his assigned duties without
distraction in the face of potentially disruptive circumstances arising
from the possibility of a change in control of Star Banc;
NOW THEREFORE, the Company and the Executive do hereby agree as follows:
1. Definitions The following words and terms as used herein shall have
the following meaning:
1.1Change in Control. A "Change in Control" of Star Banc shall be deemed
to have occurred:
(a) Upon the filing with the Secretary of State of the State of Ohio of a
certificate of merger or certificate of consolidation with respect to a
merger or a consolidation in which Star Banc is a "constituent
corporation" or upon the consummation of a "combination" or "majority
share acquisition" in which Star Banc is the "acquiring corporation" (as
such terms are defined in Ohio Rev. Code Section 1701.01 as in effect on
September 26, 1989) and in which Star Banc's shareholders immediately
prior to entering into such agreement will beneficially own, immediately
after the effective time of the merger, consolidation, combination or
majority share acquisition, securities of Star Banc or any surviving or
new corporation having less than sixty-five percent (65%) of the "voting
power" of Star Banc or any surviving or new corporation, including
"voting power" exercisable on a contingent or deferred basis as well as
immediately exercisable "voting power"; or,
(b) Upon the consummation of a sale, lease, exchange or other transfer or
disposition by Star Banc of all or substantially all its assets to any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended and in effect on September
26, 1989 (hereinafter called the "Exchange Act") other than to one (1) or
more wholly owned Subsidiaries, or upon the consummation of sales, lease,
exchange or other transfer or disposition by one (1) or more of the
Subsidiaries of all or substantially all the assets of Star Banc and its
Subsidiaries, on a consolidated basis, other than to other wholly owned
Subsidiaries; provided, however, that the mortgage or pledge of all or
substantially all of Star Banc's assets or of all or substantially all
the assets of Star Banc and its Subsidiaries, on a consolidated basis, in
connection with a bona fide financing shall not constitute a "Change in
Control"; or,
(c)When any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) directly or indirectly, of thirty-five
percent (35%) or more of the combined "voting power" of Star Banc's then
outstanding securities, excluding "voting power" exercisable on a
contingent or deferred basis; or,
(d) When a tender offer, pursuant to Regulation 14D promulgated by the
Securities and Exchange Commission under the Exchange Act is consummated
resulting in a "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) becoming the beneficial owner of thirty-five percent
(35%) or more of the combined "voting power" of Star Banc's then
outstanding securities, excluding "voting power" exercisable on a
contingent or deferred basis; or,
(e) When those persons serving as Original Directors and/or their
Successors do not constitute a majority of the whole Board of Directors
of Star Banc.
1.2 Cause means conviction for the commission of a felony or removal
from office by order of the Comptroller of the Currency, Federal Reserve
Board, or other appropriate agency.
1.3 Date of Termination means the date the Executive's employment is
terminated under this Agreement whether by the Company or by the
Executive.
1.4 Disability means disability as such term is defined in the Star Banc
Salary Continuation Plan.
1.5 Effective Date means the first date after the date hereof on which a
Change in Control occurs.
1.6 Employment Agreement means an employment agreement, if any, between
the Company and the Executive.
1.7 Good Reason means:
(a) A reduction by the Company in the Executive's base salary as in
effect on the date hereof or as the same may be increased from
time-to-time or a failure by the Company to increase the Executive's base
salary each year during the Protected Period by an amount which at least
equals, on a percentage basis, the lesser of: (i) the average percentage
increase in base salary for all officers of the Company during the three
full calendar years immediately preceding the Change in Control; or (ii)
the average percentage increase in base salary for the Executive during
the three full calendar years immediately preceding the Change in
Control; or
(b) A change in the Executive's reporting responsibilities, titles, job
responsibilities or offices which in the Executive's sole opinion result
in a diminution of his status, control, or authority as in effect
immediately prior to a Change in Control; or
(c) The assignment to the Executive of any positions, duties or
responsibilities inconsistent in the sole opinion of the Executive with
the Executive's positions, duties and responsibilities or status with the
Company immediately prior to the Change in Control or that requires the
Executive to travel more than prior to the Change in Control; or
(d) A failure by the Company (i) to continue any cash bonus or other
incentive plans in substantially the same form and with the same
opportunity levels and perceived potential for obtaining performance
objectives, in effect immediately prior to the Change in Control, or (ii)
to continue the Executive as a participant in such plans on at least the
same basis as the Executive participated in accordance with the plans
immediately prior to the Change in Control; or
(e) A requirement by the Company that the Executive be based or perform
his duties anywhere other than at the Company's corporate office location
either (i) immediately prior to the Change in Control, or (ii) within one
mile of such prior corporate office location if the Company's corporate
office location is moved; or
(f) A failure by the Company to continue in effect any benefit, whether
or not qualified, or other compensation plan or the Company's failure to
provide the Executive with the number of paid vacation days to which he
is entitled in accordance with the Company's normal vacation practices
with respect to the Executive at the time of the Change in Control; or
(g) An agreement between the Board of Directors of Star Banc and the
Executive that employment should be terminated.
For purposes of this Section 1.7, any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive
for any reason during the 30-day period immediately following the first
anniversary of the Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
1.8 Original Directors means those persons serving as Directors of Star
Banc on the date of this Agreement.
1.9 Protected Period means the twelve (12) month period immediately
following each and every Change in Control.
1.10 Successors means those directors whose election by Star Banc's
shareholders has been approved by the vote of at least two-thirds of the
Original Directors and previously qualified Successors serving as
directors of Star Banc at the time of such election or nomination for
election.
1.11 Termination Benefits means those benefits described in Section 2 of
the Agreement.
1.12 Subsidiaries means any and all companies at least fifty percent
(50%) owned, directly or indirectly, by Star Banc.
2. Benefits Upon Termination of Employment.
2.1 General. If, during the Protected Period following each Change in
Control, the Executive's employment is terminated either (i) by the
Company (other than for Cause or Disability), or (ii) by the Executive
for Good Reason, then the Executive (or his estate or personal
representative), shall be entitled to the Termination Benefits provided
in this Section 2.
2.2 Base Salary and Bonus Through Date of Termination. The Company shall
promptly pay the Executive his full base salary through the Date of
Termination at the rate in effect at the time notice of termination is
given. In addition, the Company shall promptly pay the amount of any
bonus or incentive for the year in which the Date of Termination occurs
(based on the target bonus for the Executive for the year) prorated to
the Date of Termination (without application of any denial provisions
based on unsatisfactory personal performance or any other reason). The
Company shall also pay the Executive for any vacation earned but not
taken with such payment being equal to the Executive's calculated daily
base salary rate times the applicable days of such vacation.
2.3 Severance Payment. The Company shall pay the Executive a severance
payment equal to three (3) times the sum of: (a) the Executive's highest
rate of pay, on an annualized basis, established by the Company during
the last five years plus (b) the highest bonus earned by the Executive,
with respect to any single year, over the last five (5) years. The
severance payment shall be made in a lump-sum within thirty (30) days of
the Date of Termination. Should a Change of Control occur prior to
February 1, 1995, the Executive's "Highest Bonus" for purposes of Section
2.3 shall not be less than 60% of the Executive's base salary on the date
the Change of Control occurs.
2.4 Pension Payment. The Company shall pay the Executive a supplemental
pension benefit equal to the lump sum benefit which the Executive would
be entitled to receive under the Star Banc Employees' Pension Plan if the
Executive were 100% vested and had three (3) additional years of service
minus the lump sum benefit actually payable to the Executive under the
Star Banc Employees' Pension Plan. Payment of this supplemental pension
benefit shall be made within thirty (30) days of the Date of Termination.
2.5 Medical Coverage. The Company shall, at its expense, maintain the
Executive's life, health and accidental death and disability insurance
coverage with the coverages maintained at the higher level in effect
either immediately prior to the date of the Change in Control or on the
Date of Termination, for a period of three (3) years following the Date
of Termination.
2.6 Termination Which Does Not Require Payment Of Termination Benefits.
No Termination Benefits need to be provided by the Company to the
Executive under this Section 2 if the Executive's employment is
terminated:
(a) By the Executive for any reason other than for Good Reason;
(b) By the Company for Cause or Disability; or
(c) By death.
3. New Employment; Reduction of Termination Benefits.
The Termination Benefits provided under Section 2 shall not be treated as
damages, but rather shall be treated as severance compensation to which
the Executive is entitled. The Executive shall not be required to
mitigate the amount of any Termination Benefit provided under Section 2
by seeking other employment or otherwise.
4. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments
required under this Section 4) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes and any benefits that result from
the deductibility by the Executive of such taxes (including, in each
case, any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 4(c), all determinations
required to be made under this Section 4, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall
be made by KPMG Peat Marwick or such other certified public accounting
firm as may be designated by the Executive (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and
the Executive within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 4, shall be paid by the Company to
the Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts
its remedies pursuant to Section 4(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit
of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on which it gives
such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 4(c), the Company
shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority
in respect of such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute
such contest to a determination before administrative tribunal, in a
court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs
the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive harmless, on an after-
tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or
with respect to any imputed income with respect to such advance; and
further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(d)If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 4(a) or 4(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section
4(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 4(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such claim
and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
5.Notice of Termination.
Any purported termination by the Company of the Executive's employment
for Cause or Disability or by the Executive for Good Reason shall be
communicated by notice of termination to the other party. A notice of
termination shall include the specific reason for termination relied upon
and shall set forth in reasonable detail, the facts and circumstances
claimed to provide a basis for termination of employment.
Any dispute by a party hereto regarding a notice of termination delivered
to such party must be conveyed to the other party within thirty (30) days
after the notice of termination is given. If the particulars of the
dispute are not conveyed within the thirty (30) day period, then the
disputing party's claims regarding the termination shall be deemed
forever waived.
6.Successor; Binding Agreement.
Star Banc will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of Star Banc expressly to assume and agree
to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had
taken place (the assumption shall be by agreement in form and substance
satisfactory to the Executive). Failure of Star Banc to obtain such
agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive, at his
election, to Termination Benefits from the Company in the same amount and
on the same terms as the Executive would be entitled to hereunder if he
terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such election becomes
effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company and any successor to its
business and/or assets as described above or which otherwise becomes
bound by all the terms and provision of this Agreement by operation of
law.
In addition, as used in this Agreement, "Star Banc" shall mean Star Banc
and any successor to its business and/or assets as described above or
which otherwise becomes bound by all the terms and provision of this
Agreement by operation of law.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amount would still be payable to him hereunder if he
had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to
his designee or, if there be no such designee, to his estate.
7. Miscellaneous.
7.1 Notice. All notices, elections, waivers and all other communications
provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, to such address as
either party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective
only upon receipt.
7.2 No Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Chief Executive Officer of the
Company. No waiver by either party at any time of any breach by the other
party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement.
7.3 Indemnification. If litigation shall be brought to enforce or
interpret any provision contained herein, the Company hereby agrees to
indemnify the Executive for his attorney's fees and disbursement incurred
in such litigation, and hereby agrees to pay prejudgment interest on any
money judgment obtained by the Executive, calculated at the prime
interest rate announced as such by the Wall Street Journal from
time-to-time, from the earliest date that payment(s) to him should have
been made under this Agreement. If the Wall Street Journal announces two
or more rates as the prime rate, then the highest rate shall be used.
7.4 Payment Obligations Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have against the
Executive or any third party. All amounts payable by the Company
hereunder shall be paid without notice or demand. Each and every payment
made hereunder by the Company shall be final and the Company will not
seek, nor permit its subsidiaries, affiliates, successors or assigns to
seek, to recover all or any part of such payment from the Executive or
from whosoever may be entitled thereto, for any reason whatsoever.
7.5 Term of Agreement. The term of this Agreement shall continue for an
initial period of three (3) years from the date of this Agreement. On
each anniversary of this Agreement, the term shall be extended for an
additional year unless prior to an anniversary date Star Banc's Board of
Directors cause a notice of nonrenewal to be sent to the Executive. Any
Termination Benefits due pursuant to this Agreement shall continue to be
an obligation of the Company and enforceable by the Executive until paid
in full.
7.6 Controlling Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
7.7 Interpretation of Agreement. In the event of any ambiguity, vagueness
or other matter involving the interpretation or meaning of this
Agreement, this Agreement shall be construed liberally so as to provide
to the Executive the full benefits set out herein.
7.8 Severability. Each section, subsection or paragraph of this
Agreement shall be deemed severable and if for any reason any portion of
this Agreement is unenforceable, invalid or contrary to any existing or
future law, such unenforceability or invalidity shall not affect the
applicability or validity of any other portion of this Agreement.
7.9 U.S. Dollars. All payments required to be made under this Agreement
shall be made in United States Dollars.
7.10Employment Agreement. Any benefits provided to the Executive under
this Agreement will, unless specifically stated otherwise in this
Agreement, be in addition to and not in lieu of any benefits that may be
provided the Executive under an Employment Agreement, if any, with the
Company.
Nothing in this Agreement is to be deemed to give the Company the right
to take any action or engage in any omission with respect to the
Executive at any time when any such action or omission is not permissible
and proper under any Employment Agreement if then in force. Similarly,
except as provided otherwise in this Agreement, nothing in this Agreement
is to be deemed to give the Executive the right to take any action or
engage in any omission with respect to the Company at any time when any
such act or omission is not permissible and proper under any Employment
Agreement if then in force.
This Agreement shall continue in force so long as the Executive remains
employed by the Company and shall not be affected by any termination of
any Employment Agreement.
7.11 Footnotes, Title and Captions. All footnotes or section,
subsection or paragraph titles or captions contained in this Agreement
are for convenience only and shall not be deemed part of the text of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
Attest: STAR BANC CORPORATION, on behalf of itself and each Subsidiary
By:
Name
Stephen E. Smith
Title Name
Senior Vice President
<PAGE>
Title
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement (hereinafter called the "Agreement"), made
as of the 14th day of December, 1993, between Star Banc Corporation, an Ohio
corporation (hereinafter called "Star Banc") and its Subsidiaries (hereinafter
individually and collectively called the "Company"), and Samuel M. Cassidy, III
(hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Company considers the recruitment and maintenance of sound and
vital management to be essential to protecting and enhancing its best
interests and those of its shareholders; and
WHEREAS, the Company recognizes that it is in an industry where there is a
strong potential for a change in control and that the potential for a change
in control may make it difficult to hire and retain strong management
personnel; and
WHEREAS, the Company recognizes that the possibility of a change in control
of Star Banc may exist and that, in the event negotiations are commenced to
bring about such a change in control, uncertainty and questions may arise
among management that could result in the distraction or departure of
management personnel to the detriment of the Company and the shareholders; and
WHEREAS, the Company has determined that appropriate steps should be taken to
reinforce and encourage the Executive's continued attention and dedication as
an executive officer to his assigned duties without distraction in the face of
potentially disruptive circumstances arising from the possibility of a change
in control of Star Banc;
NOW THEREFORE, the Company and the Executive do hereby agree as follows:
1.Definitions
The following words and terms as used herein shall have the following meaning:
1.1Change in Control. A "Change in Control" of Star Banc shall be deemed to
have occurred:
(a)Upon the filing with the Secretary of State of the State of Ohio of a
certificate of merger or certificate of consolidation with respect to a merger
or a consolidation in which Star Banc is a "constituent corporation" or upon
the consummation of a "combination" or "majority share acquisition" in which
Star Banc is the "acquiring corporation" (as such terms are defined in Ohio
Rev. Code Section 1701.01 as in effect on September 26, 1989) and in which
Star Banc's shareholders immediately prior to entering into such agreement
will beneficially own, immediately after the effective time of the merger,
consolidation, combination or majority share acquisition, securities of Star
Banc or any surviving or new corporation having less than sixty-five percent
(65%) of the "voting power" of Star Banc or any surviving or new corporation,
including "voting power" exercisable on a contingent or deferred basis as well
as immediately exercisable "voting power"; or,
(b)Upon the consummation of a sale, lease, exchange or other transfer or
disposition by Star Banc of all or substantially all its assets to any "person"
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended and in effect on September 26, 1989 (hereinafter called
the "Exchange Act") other than to one (1) or more wholly owned Subsidiaries,
or upon the consummation of sales,lease, exchange or other transfer or
disposition by one (1) or more of the Subsidiaries of all or substantially all
the assets of Star Banc and its Subsidiaries, on a consolidated basis, other
than to other wholly owned Subsidiaries; provided, however, that the mortgage
or pledge of all or substantially all of Star Banc's assets or of all or
substantially all the assets of Star Banc and its Subsidiaries, on a
consolidated basis, in connection with a bona fide financing shall not
constitute a "Change in Control"; or,
(c)When any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) directly or indirectly, of thirty-five percent (35%)
or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(d) When a tender offer, pursuant to Regulation 14D promulgated by the
Securities and Exchange Commission under the Exchange Act is consummated
resulting in a "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becoming the beneficial owner of thirty-five percent (35%)
or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(e)When those persons serving as Original Directors and/or their Successors
do not constitute a majority of the whole Board of Directors of Star Banc.
1.2 Cause means conviction for the commission of a felony or removal from
office by order of the Comptroller of the Currency, Federal Reserve Board, or
other appropriate agency.
1.3 Date of Termination means the date the Executive's employment is terminated
under this Agreement whether by the Company or by the Executive.
1.4 Disability means disability as such term is defined in the Star Banc
Salary Continuation Plan.
1.5 Effective Date means the first date after the date hereof on which a
Change in Control occurs.
1.6 Employment Agreement means an employment agreement, if any, between the
Company and the Executive.
1.7 Good Reason means:
(a) A reduction by the Company in the Executive's base salary as in effect
on the date hereof or as the same may be increased from time-to-time or a
failure by the Company to increase the Executive's base salary each year
during the Protected Period by an amount which at least equals, on a percentage
basis, the lesser of: (i) the average percentage increase in base salary for
all officers of the Company during the three full calendar years immediately
preceding the Change in Control; or (ii) the average percentage increase in
base salary for the Executive during the three full calendar years immediately
preceding the Change in Control; or
(b) A change in the Executive's reporting responsibilities, titles, job
responsibilities or offices which in the Executive's sole opinion result in a
diminution of his status, control, or authority as in effect immediately prior
to a Change in Control; or
(c) The assignment to the Executive of any positions, duties or responsibilities
inconsistent in the sole opinion of the Executive with the Executive's
positions, duties and responsibilities or status with the Company immediately
prior to the Change in Control or that requires the Executive to travel more
than prior to the Change in Control; or
(d)A failure by the Company (i) to continue any cash bonus or other incentive
plans in substantially the same form and with the same opportunity levels and
perceived potential for obtaining performance objectives, in effect immediately
prior to the Change in Control, or (ii) to continue the Executive as a partici-
pant in such plans on at least the same basis as the Executive participated in
accordance with the plans immediately prior to the Change in Control; or
(e) A requirement by the Company that the Executive be based or perform his
duties anywhere other than at the Company's corporate office location either
(i) immediately prior to the Change in Control, or (ii) within one mile of such
prior corporate office location if the Company's corporate office location is
moved; or
(f) A failure by the Company to continue in effect any benefit, whether or not
qualified, or other compensation plan or the Company's failure to provide the
Executive with the number of paid vacation days to which he is entitled in
accordance with the Company's normal vacation practices with respect to the
Executive at the time of the Change in Control; or
(g) An agreement between the Board of Directors of Star Banc and the Executive
that employment should be terminated.
For purposes of this Section 1.7, any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
1.8 Original Directors means those persons serving as Directors of Star Banc
on the date of this Agreement.
1.9 Protected Period means the twelve (12) month period immediately following
each and every Change in Control.
1.10 Successors means those directors whose election by Star Banc's shareholders
has been approved by the vote of at least two-thirds of the Original Directors
and previously qualified Successors serving as directors of Star Banc at the
time of such election or nomination for election.
1.11 Termination Benefits means those benefits described in Section 2 of
the Agreement.
1.12 Subsidiaries means any and all companies at least fifty percent (50%)
owned, directly or indirectly, by Star Banc.
2. Benefits Upon Termination of Employment.
2.1 General. If, during the Protected Period following each Change in
Control, the Executive's employment is terminated either (i) by the
Company (other than for Cause or Disability), or (ii) by the Executive
for Good Reason, then the Executive (or his estate or personal
representative), shall be entitled to the Termination Benefits provided
in this Section 2.
2.2 Base Salary and Bonus Through Date of Termination. The Company
shall promptly pay the Executive his full base salary through the Date of
Termination at the rate in effect at the time notice of termination is given.
In addition, the Company shall promptly pay the amount of any bonus or
incentive for the year in which the Date of Termination occurs (based on the
target bonus for the Executive for the year) prorated to the Date of Termination
(without application of any denial provisions based on unsatisfactory personal
performance or any other reason). The Company shall also pay the Executive for
any vacation earned but not taken with such payment being equal to the
Executive's calculated daily base salary rate times the applicable days of
such vacation.
2.3 Severance Payment. The Company shall pay the Executive a severance payment
equal to three (3) times the sum of: (a) the Executive's highest rate of pay,
on an annualized basis, established by the Company during the last five years
plus (b) the highest bonus earned by the Executive, with respect to any single
year, over the last five (5) years. The severance payment shall be made in a
lump-sum within thirty (30) days of the Date of Termination.
2.4 Pension Payment. The Company shall pay the Executive a supplemental
pension benefit equal to the lump sum benefit which the Executive would be
entitled to receive under the Star Banc Employees' Pension Plan if the
Executive were 100% vested and had three (3) additional years of service
minus the lump sum benefit actually payable to the Executive under the Star
Banc Employees' Pension Plan. Payment of this supplemental pension benefit
shall be made within thirty (30) days of the Date of Termination.
2.5 Medical Coverage. The Company shall, at its expense, maintain the
Executive's life, health and accidental death and disability insurance coverage
with the coverages maintained at the higher level in effect either immediately
prior to the date of the Change in Control or on the Date of Termination, for a
period of three (3) years following the Date of Termination.
2.6 Termination Which Does Not Require Payment Of Termination Benefits. No
Termination Benefits need to be provided by the Company to the Executive under
this Section 2 if the Executive's employment is terminated:
(a) By the Executive for any reason other than for Good Reason;
(b) By the Company for Cause or Disability; or
(c) By death.
3. New Employment; Reduction of Termination Benefits.
The Termination Benefits provided under Section 2 shall not be treated as
damages, but rather shall be treated as severance compensation to which the
Executive is entitled. The Executive shall not be required to mitigate the
amount of any Termination Benefit provided under Section 2 by seeking other
employment or otherwise.
4.Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the event
it shall be determined that any payment or distribution by the Company to or
for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 4) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes and any benefits
that result from the deductibility by the Executive of such taxes (including,
in each case, any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 4(c), all determinations required to
be made under this Section 4, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by KPMG Peat Marwick
or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days
of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 4, shall be paid by the Company to the Executive
within five days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 4(c) and the Executive thereafter
is required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Section 4(c), the Company shall control
all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the case may be,
any otherissue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 4(a) or 4(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 4(c))
amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 4(c), a determination is
made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advances thereof, the amount of
Gross-Up Payment required to be paid.
5.Notice of Termination.
Any purported termination by the Company of the Executive's employment
for Cause or Disability or by the Executive for Good Reason shall be
communicated by notice of termination to the other party. A notice
of termination shall include the specific reason for termination relied
upon and shall set forth in reasonable detail, the facts and circumstances
claimed to provide a basis for termination of employment.
Any dispute by a party hereto regarding a notice of termination delivered
to such party must be conveyed to the other party within thirty (30) days
after the notice of termination is given. If the particulars of the dispute
are not conveyed within the thirty (30) day period, then the disputing party's
claims regarding the termination shall be deemed forever waived.
6.Successor; Binding Agreement.
Star Banc will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of Star Banc expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place (the assumption
shall be by agreement in form and substance satisfactory to the Executive).
Failure of Star Banc to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive, at his election, to Termination Benefits from the Company in the
same amount and on the same terms as the Executive would be entitled to
hereunder if he terminated his employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
election becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company and any successor
to its business and/or assets as described above or which otherwise becomes
bound by all the terms and provision of this Agreement by operation of law.
In addition, as used in this Agreement, "Star Banc" shall mean Star Banc and
any successor to its business and/or assets as described above or which
otherwise becomes bound by all the terms and provision of this Agreement by
operation of law.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amount would still be payable to him hereunder if he
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to his designee
or, if there be no such designee, to his estate.
7.Miscellaneous.
7.1 Notice. All notices, elections, waivers and all other communications
provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States certified mail,
return receipt requested, postage prepaid, to such address as either party may
have furnished to the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt.
7.2 No Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Chief Executive Officer of the Company.
No waiver by either party at any time of any breach by the other party of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party
which are not set forth expressly in this Agreement.
7.3 Indemnification. If litigation shall be brought to enforce or interpret
any provision contained herein, the Company hereby agrees to indemnify the
Executive for his attorney's fees and disbursement incurred in such litigation,
and hereby agrees to pay prejudgment interest on any money judgment obtained by
the Executive, calculated at the prime interest rate announced as such by the
Wall Street Journal from time-to-time, from the earliest date that payment(s)
to him should have been made under this Agreement. If the Wall Street Journal
announces two or more rates as the prime rate, then the highest rate shall
be used.
7.4 Payment Obligations Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have against the
Executive or any third party. All amounts payable by the Company hereunder
shall be paid without notice or demand. Each and every payment made hereunder
by the Company shall be final and the Company will not seek, nor permit its
subsidiaries, affiliates, successors or assigns to seek, to recover all or
any part of such payment from the Executive or from whosoever may be entitled
thereto, for any reason whatsoever.
7.5 Term of Agreement. The term of this Agreement shall continue for an
initial period of three (3) years from the date of this Agreement. On each
anniversary of this Agreement, the term shall be extended for an additional
year unless prior to an anniversary date Star Banc's Board of Directors cause
a notice of nonrenewal to be sent to the Executive. Any Termination Benefits
due pursuant to this Agreement shall continue to be an obligation of the
Company and enforceable by the Executive until paid in full.
7.6 Controlling Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
7.7 Interpretation of Agreement. In the event of any ambiguity, vagueness
or other matter involving the interpretation or meaning of this Agreement,
this Agreement shall be construed liberally so as to provide to the Executive
the full benefits set out herein.
7.8 Severability. Each section, subsection or paragraph of this Agreement
shall be deemed severable and if for any reason any portion of this Agreement
is unenforceable, invalid or contrary to any existing or future law, such
unenforceability or invalidity shall not affect the applicability or validity
of any other portion of this Agreement.
7.9 U.S. Dollars. All payments required to be made under this Agreement shall
be made in United States Dollars.
7.10Employment Agreement. Any benefits provided to the Executive under this
Agreement will, unless specifically stated otherwise in this Agreement, be in
addition to and not in lieu of any benefits that may be provided the Executive
under an Employment Agreement, if any, with the Company.
Nothing in this Agreement is to be deemed to give the Company the right to take
any action or engage in any omission with respect to the Executive at any time
when any such action or omission is not permissible and proper under any
Employment Agreement if then in force. Similarly, except as provided otherwise
in this Agreement, nothing in this Agreement is to be deemed to give the
Executive the right to take any action or engage in any omission with respect
to the Company at any time when any such act or omission is not permissible
and proper under any Employment Agreement if then in force.
This Agreement shall continue in force so long as the Executive remains
employed by the Company and shall not be affected by any termination of any
Employment Agreement.
7.11 Footnotes, Title and Captions. All footnotes or section, subsection
or paragraph titles or captions contained in this Agreement are for convenience
only and shall not be deemed part of the text of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
Attest: STAR BANC CORPORATION, on behalf of itself and each Subsidiary
By:
Name Stephen E. Smith
Title Name
Senior Vice President
Title
EXECUTIVE
<PAGE>
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement Thereinafter called the "Agreement"),
made as of the 14th day of December, 1993, between Star Banc Corporation,
an Ohio corporation (hereinafter called "Star Banc") and its Subsidiaries
(hereinafter individually and collectively called the "Company"), and
Joseph A. Campanella (hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Company considers the recruitment and maintenance of sound and
vital management to be essential to protecting and enhancing its best
interests and those of its shareholders; and
WHEREAS, the Company recognizes that it is in an industry where there is a
strong potential for a change in control and that the potential for a change
in control may make it difficult to hire and retain strong management
personnel; and
WHEREAS, the Company recognizes that the possibility of a change in control of
Star Banc may exist and that, in the event negotiations are commenced to bring
about such a change in control, uncertainty and questions may arise among
management that could result in the distraction or departure of management
personnel to the detriment of the Company and the shareholders; and
WHEREAS, the Company has determined that appropriate steps should be taken to
reinforce and encourage the Executive's continued attention and dedication as
an executive officer to his assigned duties without distraction in the face of
potentially disruptive circumstances arising from the possibility of a change
in control of Star Banc;
NOW THEREFORE, the Company and the Executive do hereby agree as follows:
1.Definitions
The following words and terms as used herein shall have the following meaning:
1.1 Change in Control.
A "Change in Control" of Star Banc shall be deemed to have occurred:
(a) Upon the filing with the Secretary of State of the State of Ohio of a
certificate of merger or certificate of consolidation with respect to a
merger or a consolidation in which Star Banc is a "constituent corporation"
or upon the consummation of a "combination" or "majority share acquisition"
in which Star Banc is the "acquiring corporation" (as such terms are defined
in Ohio Rev. Code Section 1701.01 as in effect on September 26, 1989) and in
which Star Banc's shareholders immediately prior to entering into such
agreement will beneficially own, immediately after the effective time of the
merger, consolidation, combination or majority share acquisition, securities
of Star Banc or any surviving or new corporation having less than sixty-five
percent (65%) of the "voting power" of Star Banc or any surviving or new
corporation, including "voting power" exercisable on a contingent or deferred
basis as well as immediately exercisable "voting power"; or,
(b) Upon the consummation of a sale, lease, exchange or other transfer or
disposition by Star Banc of all or substantially all its assets to any "person"
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended and in effect on September 26, 1989 (hereinafter called
the "Exchange Act") other than to one (1) or more wholly owned Subsidiaries,
or upon the consummation of sales, lease, exchange or other transfer or
disposition by one (1) or more of the Subsidiaries of all or substantially all
the assets of Star Banc and its Subsidiaries, on a consolidated basis, other
than to other wholly owned Subsidiaries; provided, however, that the mortgage
or pledge of all or substantially all of Star Banc's assets or of all or
substantially all the assets of Star Banc and its Subsidiaries, on a
consolidated basis, in connection with a bona fide financing shall not
constitute a "Change in Control"; or,
(c) When any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) directly or indirectly, of thirty-five percent
(35%) or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(d) When a tender offer, pursuant to Regulation 14D promulgated by the
Securities and Exchange Commission under the Exchange Act is consummated
resulting in a "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) becoming the beneficial owner of thirty-five percent
(35%) or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(e) When those persons serving as Original Directors and/or their Successors
do not constitute a majority of the whole Board of Directors of Star Banc.
1.2 Cause means conviction for the commission of a felony or removal from
office by order of the Comptroller of the Currency, Federal Reserve Board,
or other appropriate agency.
1.3 Date of Termination means the date the Executive's employment is terminated
under this Agreement whether by the Company or by the Executive.
1.4 Disability means disability as such term is defined in the Star Banc
Salary Continuation Plan.
1.5 Effective Date means the first date after the date hereof on which a Change
in Control occurs.
1.6 Employment Agreement means an employment agreement, if any, between the
Company and the Executive.
1.7 Good Reason means:
(a) A reduction by the Company in the Executive's base salary as in effect
on the date hereof or as the same may be increased from time-to-time or a
failure by the Company to increase the Executive's base salary each year
during the Protected Period by an amount which at least equals, on a percentage
basis, the lesser of: (i) the average percentage increase in base salary for
all officers of the Company during the three full calendar years immediately
preceding the Change in Control; or (ii) the average percentage increase in
base salary for the Executive during the three full calendar years immediately
preceding the Change in Control; or
(b) A change in the Executive's reporting responsibilities, titles, job
responsibilities or offices which in the Executive's sole opinion result in a
diminution of his status, control, or authority as in effect immediately prior
to a Change in Control; or
(c) The assignment to the Executive of any positions, duties or
responsibilities inconsistent in the sole opinion of the Executive with the
Executive's positions, duties and responsibilities or status with the Company
immediately prior to the Change in Control or that requires the Executive to
travel more than prior to the Change in Control; or
(d) A failure by the Company (i) to continue any cash bonus or other incentive
plans in substantially the same form and with the same opportunity levels and
perceived potential for obtaining performance objectives, in effect immediately
prior to the Change in Control, or (ii) to continue the Executive as a
participant in such plans on at least the same basis as the Executive
participated in accordance with the plans immediately prior to the Change
in Control; or
(e) A requirement by the Company that the Executive be based or perform his
duties anywhere other than at the Company's corporate office location either
(i) immediately prior to the Change in Control, or (ii) within one mile of
such prior corporate office location if the Company's corporate office location
is moved; or
(f) A failure by the Company to continue in effect any benefit, whether or not
qualified, or other compensation plan or the Company's failure to provide the
Executive with the number of paid vacation days to which he is entitled in
accordance with the Company's normal vacation practices with respect to the
Executive at the time of the Change in Control; or
(g) An agreement between the Board of Directors of Star Banc and the Executive
that employment should be terminated.
For purposes of this Section 1.7, any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
1.8 Original Directors means those persons serving as Directors of Star Banc
on the date of this Agreement.
1.9 Protected Period means the twelve (12) month period immediately following
each and every Change in Control.
1.10 Successors means those directors whose election by Star Banc's
shareholders has been approved by the vote of at least two-thirds of the
Original Directors and previously qualified Successors serving as directors of
Star Banc at the time of such election or nomination for election.
1.11 Termination Benefits means those benefits described in Section 2 of
the Agreement.
1.12 Subsidiaries means any and all companies at least fifty percent (50%)
owned, directly or indirectly, by Star Banc.
2. Benefits Upon Termination of Employment.
2.1 General. If, during the Protected Period following each Change in Control,
the Executive's employment is terminated either (i) by the Company (other
than for Cause or Disability), or (ii) by the Executive for Good Reason,
then the Executive (or his estate or personal representative), shall be
entitled to the Termination Benefits provided in this Section 2.
2.2 Base Salary and Bonus Through Date of Termination. The Company shall
promptly pay the Executive his full base salary through the Date of Termination
at the rate in effect at the time notice of termination is given. In addition,
the Company shall promptly pay the amount of any bonus or incentive for the
year in which the Date of Termination occurs (based on the target bonus for the
Executive for the year) prorated to the Date of Termination (without
application of any denial provisions based on unsatisfactory personal
performance or any other reason). The Company shall also pay the Executive for
any vacation earned but not taken with such payment being equal to the
Executive's calculated daily base salary rate times the applicable days of such
vacation.
2.3 Severance Payment. The Company shall pay the Executive a severance payment
equal to three (3) times the sum of: (a) the Executive's highest rate of pay,
on an annualized basis, established by the Company during the last five years
plus (b) the highest bonus earned by the Executive, with respect to any single
year, over the last five (5) years. The severance payment shall be made in a
lump-sum within thirty (30) days of the Date of Termination.
2.4 Pension Payment. The Company shall pay the Executive a supplemental
pension benefit equal to the lump sum benefit which the Executive would be
entitled to receive under the Star Banc Employees' Pension Plan if the
Executive were 100% vested and had three (3) additional years of service minus
the lump sum benefit actually payable to the Executive under the Star Banc
Employees' Pension Plan. Payment of this supplemental pension benefit shall be
made within thirty (30) days of the Date of Termination.
2.5 Medical Coverage. The Company shall, at its expense, maintain the
Executive's life, health and accidental death and disability insurance
coverage with the coverages maintained at the higher level in effect either
immediately prior to the date of the Change in Control or on the Date of
Termination, for a period of three (3) years following the Date of Termination.
2.6 Termination Which Does Not Require Payment Of Termination Benefits. No
Termination Benefits need to be provided by the Company to the Executive under
this Section 2 if the Executive's employment is terminated:
(a) By the Executive for any reason other than for Good Reason;
(b) By the Company for Cause or Disability; or
(c) By death.
3.New Employment; Reduction of Termination Benefits.
The Termination Benefits provided under Section 2 shall not be treated as
damages, but rather shall be treated as severance compensation to which the
Executive is entitled. The Executive shall not be required to mitigate the
amount of any Termination Benefit provided under Section 2 by seeking other
employment or otherwise.
4. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the event
it shall be determined that any payment or distribution by the Company to or
for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 4) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes and any benefits that result from the
deductibility by the Executive of such taxes (including, in each case,
any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 4(c), all determinations required to
be made under this Section 4, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by KPMG Peat Marwick
or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days
of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 4, shall be paid by the Company to the Executive
within five days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon the Company
and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its remedies
pursuant to Section 4(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively
to contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 4(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance
the amount of such payment to the Executive, on an interest-free basis and
shall indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further provided that
any extension of the statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which such contested amount
is claimed to be due is limited solely to such contested amount. Furthermore,
the Company's control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 4(a) or 4(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 4(c)) promptly
pay to the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 4(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
5. Notice of Termination.
Any purported termination by the Company of the Executive's employment for
Cause or Disability or by the Executive for Good Reason shall be communicated
by notice of termination to the other party. A notice of termination shall
include the specific reason for termination relied upon and shall set forth
in reasonable detail, the facts and circumstances claimed to provide a basis
for termination of employment.
Any dispute by a party hereto regarding a notice of termination delivered to
such party must be conveyed to the other party within thirty (30) days after
the notice of termination is given. If the particulars of the dispute are
not conveyed within the thirty (30) day period, then the disputing party's
claims regarding the termination shall be deemed forever waived.
6.Successor; Binding Agreement.
Star Banc will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Star Banc expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken place (the
assumption shall be by agreement in form and substance satisfactory to the
Executive). Failure of Star Banc to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement
and shall entitle the Executive, at his election, to Termination Benefits
from the Company in the same amount and on the same terms as the Executive
would be entitled to hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such election becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company and any successor to
its business and/or assets as described above or which otherwise becomes bound
by all the terms and provision of this Agreement by operation of law.
In addition, as used in this Agreement, "Star Banc" shall mean Star Banc and
any successor to its business and/or assets as described above or which
otherwise becomes bound by all the terms and provision of this Agreement by
operation of law.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amount would still be payable to him hereunder if he
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to his designee
or, if there be no such designee, to his estate.
7.Miscellaneous.
7.1 Notice. All notices, elections, waivers and all other communications
provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, to such address as either
party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
7.2 No Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Chief Executive Officer of the
Company. No waiver by either party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement.
7.3 Indemnification. If litigation shall be brought to enforce or interpret
any provision contained herein, the Company hereby agrees to indemnify the
Executive for his attorney's fees and disbursement incurred in such litigation,
and hereby agrees to pay prejudgment interest on any money judgment obtained by
the Executive, calculated at the prime interest rate announced as such by the
Wall Street Journal from time-to-time, from the earliest date that payment(s)
to him should have been made under this Agreement. If the Wall Street Journal
announces two or more rates as the prime rate, then the highest rate shall be
used.
7.4 Payment Obligations Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein shall
be absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the Executive or any third
party. All amounts payable by the Company hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the Company
shall be final and the Company will not seek, nor permit its subsidiaries,
affiliates, successors or assigns to seek, to recover all or any part of
such payment from the Executive or from whosoever may be entitled thereto,
for any reason whatsoever.
7.5 Term of Agreement. The term of this Agreement shall continue for an
initial period of three (3) years from the date of this Agreement. On
each anniversary of this Agreement, the term shall be extended for an
additional year unless prior to an anniversary date Star Banc's Board of
Directors cause a notice of nonrenewal to be sent to the Executive.
Any Termination Benefits due pursuant to this Agreement shall continue to
be an obligation of the Company and enforceable by the Executive until
paid in full.
7.6 Controlling Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
7.7 Interpretation of Agreement. In the event of any ambiguity, vagueness
or other matter involving the interpretation or meaning of this Agreement,
this Agreement shall be construed liberally so as to provide to the Executive
the full benefits set out herein.
7.8 Severability. Each section, subsection or paragraph of this Agreement
shall be deemed severable and if for any reason any portion of this Agreement
is unenforceable, invalid or contrary to any existing or future law, such
unenforceability or invalidity shall not affect the applicability or
validity of any other portion of this Agreement.
7.9 U.S. Dollars. All payments required to be made under this Agreement
shall be made in United States Dollars.
7.10 Employment Agreement. Any benefits provided to the Executive under this
Agreement will, unless specifically stated otherwise in this Agreement, be in
addition to and not in lieu of any benefits that may be provided the Executive
under an Employment Agreement, if any, with the Company.
Nothing in this Agreement is to be deemed to give the Company the right to take
any action or engage in any omission with respect to the Executive at any time
when any such action or omission is not permissible and proper under any
Employment Agreement if then in force. Similarly, except as provided
otherwise in this Agreement, nothing in this Agreement is to be deemed
to give the Executive the right to take any action or engage in any omission
with respect to the Company at any time when any such act or omission is not
permissible and proper under any Employment Agreement if then in force.
This Agreement shall continue in force so long as the Executive remains
employed by the Company and shall not be affected by any termination of
any Employment Agreement.
7.11 Footnotes, Title and Captions. All footnotes or section, subsection or
paragraph titles or captions contained in this Agreement are for convenience
only and shall not be deemed part of the text of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
Attest: STAR BANC CORPORATION, on behalf of itself and each Subsidiary
By:
Name
Stephen E. Smith
Title Name
Senior Vice President
Title
EXECUTIVE
<PAGE>
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement (hereinafter called the "Agreement"), made
as of the 14th day of December, 1993, between Star Banc Corporation, an Ohio
corporation (hereinafter called "Star Banc") and its Subsidiaries
(hereinafter individually and collectively called the "Company"), and Daniel
B. Benhase (hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Company considers the recruitment and maintenance of sound and
vital management to be essential to protecting and enhancing its best
interests and those of its shareholders; and
WHEREAS, the Company recognizes that it is in an industry where there is a
strong potential for a change in control and that the potential for a change
in control may make it difficult to hire and retain strong management
personnel; and
WHEREAS, the Company recognizes that the possibility of a change in control
of Star Banc may exist and that, in the event negotiations are commenced to
bring about such a change in control, uncertainty and questions may arise
among management that could result in the distraction or departure of
management personnel to the detriment of the Company and the shareholders;
and
WHEREAS, the Company has determined that appropriate steps should be taken to
reinforce and encourage the Executive's continued attention and dedication as
an executive officer to his assigned duties without distraction in the face
of potentially disruptive circumstances arising from the possibility of a
change in control of Star Banc;
NOW THEREFORE, the Company and the Executive do hereby agree as follows:
1.Definitions
The following words and terms as used herein shall have the following
meaning:
1.1Change in Control. A "Change in Control" of Star Banc shall be deemed to
have occurred:
(a)
Upon the filing with the Secretary of State of the State of Ohio of a
certificate of merger or certificate of consolidation with respect to a
merger or a consolidation in which Star Banc is a "constituent corporation"
or upon the consummation of a "combination" or "majority share acquisition"
in which Star Banc is the "acquiring corporation" (as such terms are defined
in Ohio Rev. Code Section 1701.01 as in effect on September 26, 1989) and in
which Star Banc's shareholders immediately prior to entering into such
agreement will beneficially own, immediately after the effective time of the
merger, consolidation, combination or majority share acquisition, securities
of Star Banc or any surviving or new corporation having less than sixty-five
percent (65%) of the "voting power" of Star Banc or any surviving or new
corporation, including "voting power" exercisable on a contingent or deferred
basis as well as immediately exercisable "voting power"; or,
(b)
Upon the consummation of a sale, lease, exchange or other transfer or
disposition by Star Banc of all or substantially all its assets to any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended and in effect on September 26, 1989
(hereinafter called the "Exchange Act") other than to one (1) or more wholly
owned Subsidiaries, or upon the consummation of sales, lease, exchange or
other transfer or disposition by one (1) or more of the Subsidiaries of all
or substantially all the assets of Star Banc and its Subsidiaries, on a
consolidated basis, other than to other wholly owned Subsidiaries; provided,
however, that the mortgage or pledge of all or substantially all of Star
Banc's assets or of all or substantially all the assets of Star Banc and its
Subsidiaries, on a consolidated basis, in connection with a bona fide
financing shall not constitute a "Change in Control"; or,
(c)
When any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) directly or indirectly, of thirty-five percent (35%)
or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(d)
When a tender offer, pursuant to Regulation 14D promulgated by the Securities
and Exchange Commission under the Exchange Act is consummated resulting in a
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) becoming the beneficial owner of thirty-five percent (35%) or more of
the combined "voting power" of Star Banc's then outstanding securities,
excluding "voting power" exercisable on a contingent or deferred basis; or,
(e)
When those persons serving as Original Directors and/or their Successors do
not constitute a majority of the whole Board of Directors of Star Banc.
1.2
Cause means conviction for the commission of a felony or removal from office
by order of the Comptroller of the Currency, Federal Reserve Board, or other
appropriate agency.
1.3
Date of Termination means the date the Executive's employment is terminated
under this Agreement whether by the Company or by the Executive.
1.4
Disability means disability as such term is defined in the Star Banc Salary
Continuation Plan.
1.5
Effective Date means the first date after the date hereof on which a Change
in Control occurs.
1.6
Employment Agreement means an employment agreement, if any, between the
Company and the Executive.
1.7
Good Reason means:
(a)
A reduction by the Company in the Executive's base salary as in effect on the
date hereof or as the same may be increased from time-to-time or a failure by
the Company to increase the Executive's base salary each year during the
Protected Period by an amount which at least equals, on a percentage basis,
the lesser of: (i) the average percentage increase in base salary for all
officers of the Company during the three full calendar years immediately
preceding the Change in Control; or (ii) the average percentage increase in
base salary for the Executive during the three full calendar years
immediately preceding the Change in Control; or
(b)
A change in the Executive's reporting responsibilities, titles, job
responsibilities or offices which in the Executive's sole opinion result in a
diminution of his status, control, or authority as in effect immediately
prior to a Change in Control; or
(c)
The assignment to the Executive of any positions, duties or responsibilities
inconsistent in the sole opinion of the Executive with the Executive's
positions, duties and responsibilities or status with the Company immediately
prior to the Change in Control or that requires the Executive to travel more
than prior to the Change in Control; or
(d)
A failure by the Company (i) to continue any cash bonus or other incentive
plans in substantially the same form and with the same opportunity levels and
perceived potential for obtaining performance objectives, in effect
immediately prior to the Change in Control, or (ii) to continue the Executive
as a participant in such plans on at least the same basis as the Executive
participated in accordance with the plans immediately prior to the Change in
Control; or
(e)
A requirement by the Company that the Executive be based or perform his
duties anywhere other than at the Company's corporate office location either
(i) immediately prior to the Change in Control, or (ii) within one mile of
such prior corporate office location if the Company's corporate office
location is moved; or
(f)
A failure by the Company to continue in effect any benefit, whether or not
qualified, or other compensation plan or the Company's failure to provide the
Executive with the number of paid vacation days to which he is entitled in
accordance with the Company's normal vacation practices with respect to the
Executive at the time of the Change in Control; or
(g)
An agreement between the Board of Directors of Star Banc and the Executive
that employment should be terminated.
For purposes of this Section 1.7, any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first
anniversary of the Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
1.8
Original Directors means those persons serving as Directors of Star Banc on
the date of this Agreement.
1.9
Protected Period means the twelve (12) month period immediately following
each and every Change in Control.
1.10
Successors means those directors whose election by Star Banc's shareholders
has been approved by the vote of at least two-thirds of the Original
Directors and previously qualified Successors serving as directors of Star
Banc at the time of such election or nomination for election.
<PAGE>
1.11
Termination Benefits means those benefits described in Section 2 of the
Agreement.
1.12 Subsidiaries means any and all companies at least fifty percent (50%)
owned, directly or indirectly, by Star Banc.
2.
Benefits Upon Termination of Employment.
2.1
General. If, during the Protected Period following each Change in Control,
the Executive's employment is terminated either (i) by the Company (other
than for Cause or Disability), or (ii) by the Executive for Good Reason, then
the Executive (or his estate or personal representative), shall be entitled
to the Termination Benefits provided in this Section 2.
2.2
Base Salary and Bonus Through Date of Termination. The Company shall promptly
pay the Executive his full base salary through the Date of Termination at the
rate in effect at the time notice of termination is given. In addition, the
Company shall promptly pay the amount of any bonus or incentive for the year
in which the Date of Termination occurs (based on the target bonus for the
Executive for the year) prorated to the Date of Termination (without
application of any denial provisions based on unsatisfactory personal
performance or any other reason). The Company shall also pay the Executive
for any vacation earned but not taken with such payment being equal to the
Executive's calculated daily base salary rate times the applicable days of
such vacation.
2.3
Severance Payment. The Company shall pay the Executive a severance payment
equal to two (2) times the sum of: (a) the Executive's highest rate of pay,
on an annualized basis, established by the Company during the last five years
plus (b) the highest bonus earned by the Executive, with respect to any
single year, over the last five (5) years. The severance payment shall be
made in a lump-sum within thirty (30) days of the Date of Termination.
2.4
Pension Payment. The Company shall pay the Executive a supplemental pension
benefit equal to the lump sum benefit which the Executive would be entitled
to receive under the Star Banc Employees' Pension Plan if the Executive were
100% vested and had two (2) additional years of service minus the lump sum
benefit actually payable to the Executive under the Star Banc Employees'
Pension Plan. Payment of this supplemental pension benefit shall be made
within thirty (30) days of the Date of Termination.
<PAGE>
2.5
Medical Coverage. The Company shall, at its expense, maintain the
Executive's life, health and accidental death and disability insurance
coverage with the coverages maintained at the higher level in effect either
immediately prior to the date of the Change in Control or on the Date of
Termination, for a period of two (2) years following the Date of Termination.
2.6
Limitations on Amount of Termination Benefits. In the event that the total
value of benefits to the Executive would constitute Excess Parachute Payments
within the meaning of Section 280G of the Internal Revenue Code, as amended,
when added to payments pursuant to this Section 2, then the payment pursuant
to this Section 2 shall be reduced by the amount necessary to cause the
Executive to receive one thousand dollars less than 300% of the Executive's
Base Amount (as that term is defined in Section 280G of the Internal Revenue
Code of 1986) from all payments to the Executive from the Company. In the
event the amount of the payments exceeds the amount subsequently determined
to have been due, the excess benefits over three times the Base Amount shall
constitute a loan by the Company to the Executive, payable on demand by the
Company, with interest at a rate equal to 120 percent of the applicable
federal rate determined under Section 1274(d) of the Internal Revenue Code of
1986, as amended, compounded semi-annually. If the Termination Benefits are
to be reduced, pursuant to the limitation described in this Section 2.6, then
the determination of which benefit is to be reduced shall be made solely by
the Executive.
2.7
Termination Which Does Not Require Payment Of Termination Benefits. No
Termination Benefits need to be provided by the Company to the Executive
under this Section 2 if the Executive's employment is terminated:
(a)
By the Executive for any reason other than for Good Reason;
(b)
By the Company for Cause or Disability; or
(c)
By death.
3.New Employment; Reduction of Termination Benefits.
The Termination Benefits provided under Section 2 shall not be treated as
damages, but rather shall be treated as severance compensation to which the
Executive is entitled. The Executive shall not be required to mitigate the
amount of any Termination Benefit provided under Section 2 by seeking other
employment or otherwise.
<PAGE>
4.Notice of Termination.
Any purported termination by the Company of the Executive's employment for
Cause or Disability or by the Executive for Good Reason shall be communicated
by notice of termination to the other party. A notice of termination shall
include the specific reason for termination relied upon and shall set forth
in reasonable detail, the facts and circumstances claimed to provide a basis
for termination of employment.
Any dispute by a party hereto regarding a notice of termination delivered to
such party must be conveyed to the other party within thirty (30) days after
the notice of termination is given. If the particulars of the dispute are
not conveyed within the thirty (30) day period, then the disputing party's
claims regarding the termination shall be deemed forever waived.
5.Successor; Binding Agreement.
Star Banc will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of Star Banc expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place
(the assumption shall be by agreement in form and substance satisfactory to
the Executive). Failure of Star Banc to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive, at his election, to Termination Benefits from
the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such election becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company and any successor to
its business and/or assets as described above or which otherwise becomes
bound by all the terms and provision of this Agreement by operation of law.
In addition, as used in this Agreement, "Star Banc" shall mean Star Banc and
any successor to its business and/or assets as described above or which
otherwise becomes bound by all the terms and provision of this Agreement by
operation of law.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amount would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to his designee or, if
there be no such designee, to his estate.
6.Miscellaneous.
6.1Notice. All notices, elections, waivers and all other communications
provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, to such address as either
party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
6.2No Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Chief Executive Officer of the
Company. No waiver by either party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
6.3Indemnification. If litigation shall be brought to enforce or interpret
any provision contained herein, the Company hereby agrees to indemnify the
Executive for his attorney's fees and disbursement incurred in such
litigation, and hereby agrees to pay prejudgment interest on any money
judgment obtained by the Executive, calculated at the prime interest rate
announced as such by the Wall Street Journal from time-to-time, from the
earliest date that payment(s) to him should have been made under this
Agreement. If the Wall Street Journal announces two or more rates as the
prime rate, then the highest rate shall be used.
6.4Payment Obligations Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein shall
be absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the Executive or any third
party. All amounts payable by the Company hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the Company shall
be final and the Company will not seek, nor permit its subsidiaries,
affiliates, successors or assigns to seek, to recover all or any part of such
payment from the Executive or from whosoever may be entitled thereto, for any
reason whatsoever.
6.5Term of Agreement. The term of this Agreement shall continue for an
initial period of three (3) years from the date of this Agreement. On each
anniversary of this Agreement, the term shall be extended for an additional
year unless prior to an anniversary date Star Banc's Board of Directors cause
a notice of nonrenewal to be sent to the Executive. Any Termination Benefits
due pursuant to this Agreement shall continue to be an obligation of the
Company and enforceable by the Executive until paid in full.
6.6Controlling Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
6.7Interpretation of Agreement. In the event of any ambiguity, vagueness or
other matter involving the interpretation or meaning of this Agreement, this
Agreement shall be construed liberally so as to provide to the Executive the
full benefits set out herein.
6.8Severability. Each section, subsection or paragraph of this Agreement
shall be deemed severable and if for any reason any portion of this Agreement
is unenforceable, invalid or contrary to any existing or future law, such
unenforceability or invalidity shall not affect the applicability or validity
of any other portion of this Agreement.
6.9U.S. Dollars. All payments required to be made under this Agreement shall
be made in United States Dollars.
6.10Employment Agreement. Any benefits provided to the Executive under this
Agreement will, unless specifically stated otherwise in this Agreement, be in
addition to and not in lieu of any benefits that may be provided the
Executive under an Employment Agreement, if any, with the Company.
Nothing in this Agreement is to be deemed to give the Company the right to
take any action or engage in any omission with respect to the Executive at
any time when any such action or omission is not permissible and proper under
any Employment Agreement if then in force. Similarly, except as provided
otherwise in this Agreement, nothing in this Agreement is to be deemed to
give the Executive the right to take any action or engage in any omission
with respect to the Company at any time when any such act or omission is not
permissible and proper under any Employment Agreement if then in force.
This Agreement shall continue in force so long as the Executive remains
employed by the Company and shall not be affected by any termination of any
Employment Agreement.
6.11Footnotes, Title and Captions. All footnotes or section, subsection or
paragraph titles or captions contained in this Agreement are for convenience
only and shall not be deemed part of the text of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
Attest: STAR BANC CORPORATION, on behalf of itself and each Subsidiary
By:
Name
Stephen E. Smith
Title Name
<PAGE>
Senior Vice President
EXECUTIVE
Name
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement (hereinafter called the "Agreement"),
made as of the 14th day of December, 1993, between Star Banc Corporation, an
Ohio corporation (hereinafter called "Star Banc") and its Subsidiaries
(hereinafter individually and collectively called the "Company"), and John M.
Bullock (hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Company considers the recruitment and maintenance of sound
and vital management to be essential to protecting and enhancing its best
interests and those of its shareholders; and
WHEREAS, the Company recognizes that it is in an industry where there is
a strong potential for a change in control and that the potential for a
change in control may make it difficult to hire and retain strong management
personnel; and
WHEREAS, the Company recognizes that the possibility of a change in
control of Star Banc may exist and that, in the event negotiations are
commenced to bring about such a change in control, uncertainty and questions
may arise among management that could result in the distraction or departure
of management personnel to the detriment of the Company and the shareholders;
and
WHEREAS, the Company has determined that appropriate steps should be
taken to reinforce and encourage the Executive's continued attention and
dedication as an executive officer to his assigned duties without distraction
in the face of potentially disruptive circumstances arising from the
possibility of a change in control of Star Banc;
NOW THEREFORE, the Company and the Executive do hereby agree as follows:
1.Definitions
The following words and terms as used herein shall have the following
meaning:
1.1Change in Control. A "Change in Control" of Star Banc shall be deemed to
have occurred:
(a) Upon the filing with the Secretary of State of the State of Ohio of a
certificate of merger or certificate of consolidation with respect to a
merger or a consolidation in which Star Banc is a "constituent corporation"
or upon the consummation of a "combination" or "majority share acquisition"
in which Star Banc is the "acquiring corporation" (as such terms are defined
in Ohio Rev. Code Section 1701.01 as in effect on September 26, 1989) and in
which Star Banc's shareholders immediately prior to entering into such
agreement will beneficially own, immediately after the effective time of the
merger, consolidation, combination or majority share acquisition, securities
of Star Banc or any surviving or new corporation having less than sixty-five
percent (65%) of the "voting power" of Star Banc or any surviving or new
corporation, including "voting power" exercisable on a contingent or deferred
basis as well as immediately exercisable "voting power"; or,
(b) Upon the consummation of a sale, lease, exchange or other transfer or
disposition by Star Banc of all or substantially all its assets to any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended and in effect on September 26, 1989
(hereinafter called the "Exchange Act") other than to one (1) or more wholly
owned Subsidiaries, or upon the consummation of sales, lease, exchange or
other transfer or disposition by one (1) or more of the Subsidiaries of all
or substantially all the assets of Star Banc and its Subsidiaries, on a
consolidated basis, other than to other wholly owned Subsidiaries; provided,
however, that the mortgage or pledge of all or substantially all of Star
Banc's assets or of all or substantially all the assets of Star Banc and its
Subsidiaries, on a consolidated basis, in connection with a bona fide
financing shall not constitute a "Change in Control"; or,
(c) When any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) directly or indirectly, of thirty-five percent
(35%) or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(d) When a tender offer, pursuant to Regulation 14D promulgated by the
Securities and Exchange Commission under the Exchange Act is consummated
resulting in a "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becoming the beneficial owner of thirty-five percent (35%)
or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(e) When those persons serving as Original Directors and/or their Successors
do not constitute a majority of the whole Board of Directors of Star Banc.
1.2 Cause means conviction for the commission of a felony or removal from
office by order of the Comptroller of the Currency, Federal Reserve Board, or
other appropriate agency.
1.3 Date of Termination means the date the Executive's employment is
terminated under this Agreement whether by the Company or by the Executive.
1.4 Disability means disability as such term is defined in the Star Banc
Salary Continuation Plan.
1.5 Effective Date means the first date after the date hereof on which a
Change in Control occurs.
1.6 Employment Agreement means an employment agreement, if any, between the
Company and the Executive.
1.7 Good Reason means:
(a) A reduction by the Company in the Executive's base salary as in effect
on the date hereof or as the same may be increased from time-to-time or a
failure by the Company to increase the Executive's base salary each year
during the Protected Period by an amount which at least equals, on a
percentage basis, the lesser of: (i) the average percentage increase in base
salary for all officers of the Company during the three full calendar years
immediately preceding the Change in Control; or (ii) the average percentage
increase in base salary for the Executive during the three full calendar
years immediately preceding the Change in Control; or
(b) A change in the Executive's reporting responsibilities, titles, job
responsibilities or offices which in the Executive's sole opinion result in a
diminution of his status, control, or authority as in effect immediately
prior to a Change in Control; or
(c) The assignment to the Executive of any positions, duties or
responsibilities inconsistent in the sole opinion of the Executive with the
Executive's positions, duties and responsibilities or status with the Company
immediately prior to the Change in Control or that requires the Executive to
travel more than prior to the Change in Control; or
(d) A failure by the Company (i) to continue any cash bonus or other
incentive plans in substantially the same form and with the same opportunity
levels and perceived potential for obtaining performance objectives, in
effect immediately prior to the Change in Control, or (ii) to continue the
Executive as a participant in such plans on at least the same basis as the
Executive participated in accordance with the plans immediately prior to the
Change in Control; or
(e) A requirement by the Company that the Executive be based or perform his
duties anywhere other than at the Company's corporate office location either
(i) immediately prior to the Change in Control, or (ii) within one mile of
such prior corporate office location if the Company's corporate office
location is moved; or
(f) A failure by the Company to continue in effect any benefit, whether or
not qualified, or other compensation plan or the Company's failure to provide
the Executive with the number of paid vacation days to which he is entitled
in accordance with the Company's normal vacation practices with respect to
the Executive at the time of the Change in Control; or
(g) An agreement between the Board of Directors of Star Banc and the
Executive that employment should be terminated.
For purposes of this Section 1.7, any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first
anniversary of the Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
1.8 Original Directors means those persons serving as Directors of Star Banc
on the date of this Agreement.
1.9 Protected Period means the twelve (12) month period immediately
following each and every Change in Control.
1.10 Successors means those directors whose election by Star Banc's
shareholders has been approved by the vote of at least two-thirds of the
Original Directors and previously qualified Successors serving as directors
of Star Banc at the time of such election or nomination for election.
<PAGE>
1.11 Termination Benefits means those benefits described in Section 2 of the
Agreement.
1.12 Subsidiaries means any and all companies at least fifty percent (50%)
owned, directly or indirectly, by Star Banc.
2. Benefits Upon Termination of Employment.
2.1 General. If, during the Protected Period following each Change in
Control, the Executive's employment is terminated either (i) by the Company
(other than for Cause or Disability), or (ii) by the Executive for Good
Reason, then the Executive (or his estate or personal representative), shall
be entitled to the Termination Benefits provided in this Section 2.
2.2 Base Salary and Bonus Through Date of Termination. The Company shall
promptly pay the Executive his full base salary through the Date of
Termination at the rate in effect at the time notice of termination is given.
In addition, the Company shall promptly pay the amount of any bonus or
incentive for the year in which the Date of Termination occurs (based on the
target bonus for the Executive for the year) prorated to the Date of
Termination (without application of any denial provisions based on
unsatisfactory personal performance or any other reason). The Company shall
also pay the Executive for any vacation earned but not taken with such
payment being equal to the Executive's calculated daily base salary rate
times the applicable days of such vacation.
2.3 Severance Payment. The Company shall pay the Executive a severance
payment equal to two (2) times the sum of: (a) the Executive's highest rate
of pay, on an annualized basis, established by the Company during the last
five years plus (b) the highest bonus earned by the Executive, with respect
to any single year, over the last five (5) years. The severance payment
shall be made in a lump-sum within thirty (30) days of the Date of
Termination.
2.4 Pension Payment. The Company shall pay the Executive a supplemental
pension benefit equal to the lump sum benefit which the Executive would be
entitled to receive under the Star Banc Employees' Pension Plan if the
Executive were 100% vested and had two (2) additional years of service minus
the lump sum benefit actually payable to the Executive under the Star Banc
Employees' Pension Plan. Payment of this supplemental pension benefit shall
be made within thirty (30) days of the Date of Termination.
<PAGE>
2.5 Medical Coverage. The Company shall, at its expense, maintain the
Executive's life, health and accidental death and disability insurance
coverage with the coverages maintained at the higher level in effect either
immediately prior to the date of the Change in Control or on the Date of
Termination, for a period of two (2) years following the Date of Termination.
2.6 Limitations on Amount of Termination Benefits. In the event that the
total value of benefits to the Executive would constitute Excess Parachute
Payments within the meaning of Section 280G of the Internal Revenue Code, as
amended, when added to payments pursuant to this Section 2, then the payment
pursuant to this Section 2 shall be reduced by the amount necessary to cause
the Executive to receive one thousand dollars less than 300% of the
Executive's Base Amount (as that term is defined in Section 280G of the
Internal Revenue Code of 1986) from all payments to the Executive from the
Company. In the event the amount of the payments exceeds the amount
subsequently determined to have been due, the excess benefits over three
times the Base Amount shall constitute a loan by the Company to the
Executive, payable on demand by the Company, with interest at a rate equal to
120 percent of the applicable federal rate determined under Section 1274(d)
of the Internal Revenue Code of 1986, as amended, compounded semi-annually.
If the Termination Benefits are to be reduced, pursuant to the limitation
described in this Section 2.6, then the determination of which benefit is to
be reduced shall be made solely by the Executive.
2.7 Termination Which Does Not Require Payment Of Termination Benefits. No
Termination Benefits need to be provided by the Company to the Executive
under this Section 2 if the Executive's employment is terminated:
(a) By the Executive for any reason other than for Good Reason;
(b) By the Company for Cause or Disability; or
(c) By death.
3. New Employment; Reduction of Termination Benefits.
The Termination Benefits provided under Section 2 shall not be treated as
damages, but rather shall be treated as severance compensation to which the
Executive is entitled. The Executive shall not be required to mitigate the
amount of any Termination Benefit provided under Section 2 by seeking other
employment or otherwise.
<PAGE>
4. Notice of Termination.
Any purported termination by the Company of the Executive's employment for
Cause or Disability or by the Executive for Good Reason shall be communicated
by notice of termination to the other party. A notice of termination shall
include the specific reason for termination relied upon and shall set forth
in reasonable detail, the facts and circumstances claimed to provide a basis
for termination of employment.
Any dispute by a party hereto regarding a notice of termination delivered
to such party must be conveyed to the other party within thirty (30) days
after the notice of termination is given. If the particulars of the dispute
are not conveyed within the thirty (30) day period, then the disputing
party's claims regarding the termination shall be deemed forever waived.
5.Successor; Binding Agreement.
Star Banc will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of Star Banc expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place
(the assumption shall be by agreement in form and substance satisfactory to
the Executive). Failure of Star Banc to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive, at his election, to Termination Benefits from
the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such election becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company and any successor to
its business and/or assets as described above or which otherwise becomes
bound by all the terms and provision of this Agreement by operation of law.
In addition, as used in this Agreement, "Star Banc" shall mean Star Banc
and any successor to its business and/or assets as described above or which
otherwise becomes bound by all the terms and provision of this Agreement by
operation of law.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amount would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to his designee or, if
there be no such designee, to his estate.
6. Miscellaneous.
6.1 Notice. All notices, elections, waivers and all other communications
provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, to such address as either
party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
6.2 No Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Chief Executive Officer of the
Company. No waiver by either party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
6.3 Indemnification. If litigation shall be brought to enforce or interpret
any provision contained herein, the Company hereby agrees to indemnify the
Executive for his attorney's fees and disbursement incurred in such
litigation, and hereby agrees to pay prejudgment interest on any money
judgment obtained by the Executive, calculated at the prime interest rate
announced as such by the Wall Street Journal from time-to-time, from the
earliest date that payment(s) to him should have been made under this
Agreement. If the Wall Street Journal announces two or more rates as the
prime rate, then the highest rate shall be used.
6.4 Payment Obligations Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein shall
be absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the Executive or any third
party. All amounts payable by the Company hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the Company shall
be final and the Company will not seek, nor permit its subsidiaries,
affiliates, successors or assigns to seek, to recover all or any part of such
payment from the Executive or from whosoever may be entitled thereto, for any
reason whatsoever.
6.5 Term of Agreement. The term of this Agreement shall continue for an
initial period of three (3) years from the date of this Agreement. On each
anniversary of this Agreement, the term shall be extended for an additional
year unless prior to an anniversary date Star Banc's Board of Directors cause
a notice of nonrenewal to be sent to the Executive. Any Termination Benefits
due pursuant to this Agreement shall continue to be an obligation of the
Company and enforceable by the Executive until paid in full.
6.6 Controlling Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
6.7 Interpretation of Agreement. In the event of any ambiguity, vagueness
or other matter involving the interpretation or meaning of this Agreement,
this Agreement shall be construed liberally so as to provide to the Executive
the full benefits set out herein.
6.8 Severability. Each section, subsection or paragraph of this Agreement
shall be deemed severable and if for any reason any portion of this Agreement
is unenforceable, invalid or contrary to any existing or future law, such
unenforceability or invalidity shall not affect the applicability or validity
of any other portion of this Agreement.
6.9 U.S. Dollars. All payments required to be made under this Agreement
shall be made in United States Dollars.
6.10 Employment Agreement. Any benefits provided to the Executive under
this Agreement will, unless specifically stated otherwise in this Agreement,
be in addition to and not in lieu of any benefits that may be provided the
Executive under an Employment Agreement, if any, with the Company.
Nothing in this Agreement is to be deemed to give the Company the right to
take any action or engage in any omission with respect to the Executive at
any time when any such action or omission is not permissible and proper under
any Employment Agreement if then in force. Similarly, except as provided
otherwise in this Agreement, nothing in this Agreement is to be deemed to
give the Executive the right to take any action or engage in any omission
with respect to the Company at any time when any such act or omission is not
permissible and proper under any Employment Agreement if then in force.
This Agreement shall continue in force so long as the Executive remains
employed by the Company and shall not be affected by any termination of any
Employment Agreement.
6.11 Footnotes, Title and Captions. All footnotes or section, subsection or
paragraph titles or captions contained in this Agreement are for convenience
only and shall not be deemed part of the text of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
Attest:STAR BANC CORPORATION, on behalf of itself and each Subsidiary
BY:
Name
Stephen E. Smith
Title
Name Senior Vice President
Title
EXECUTIVE
Name
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement (hereinafter called the "Agreement"), made
as of the 14th day of December, 1993, between Star Banc Corporation, an Ohio
corporation (hereinafter called "Star Banc") and its Subsidiaries
(hereinafter individually and collectively called the "Company"), and Timothy
J. Fogarty (hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Company considers the recruitment and maintenance of sound and
vital management to be essential to protecting and enhancing its best
interests and those of its shareholders; and
WHEREAS, the Company recognizes that it is in an industry where there is a
strong potential for a change in control and that the potential for a change
in control may make it difficult to hire and retain strong management
personnel; and
WHEREAS, the Company recognizes that the possibility of a change in control
of Star Banc may exist and that, in the event negotiations are commenced to
bring about such a change in control, uncertainty and questions may arise
among management that could result in the distraction or departure of
management personnel to the detriment of the Company and the shareholders;
and
WHEREAS, the Company has determined that appropriate steps should be taken to
reinforce and encourage the Executive's continued attention and dedication as
an executive officer to his assigned duties without distraction in the face
of potentially disruptive circumstances arising from the possibility of a
change in control of Star Banc;
NOW THEREFORE, the Company and the Executive do hereby agree as follows:
1. Definitions
The following words and terms as used herein shall have the following
meaning:
1.1 Change in Control. A "Change in Control" of Star Banc shall be deemed
to have occurred:
(a) Upon the filing with the Secretary of State of the State of Ohio of a
certificate of merger or certificate of consolidation with respect to a
merger or a consolidation in which Star Banc is a "constituent corporation"
or upon the consummation of a "combination" or "majority share acquisition"
in which Star Banc is the "acquiring corporation" (as such terms are defined
in Ohio Rev. Code Section 1701.01 as in effect on September 26, 1989) and in
which Star Banc's shareholders immediately prior to entering into such
agreement will beneficially own, immediately after the effective time of the
merger, consolidation, combination or majority share acquisition, securities
of Star Banc or any surviving or new corporation having less than sixty-five
percent (65%) of the "voting power" of Star Banc or any surviving or new
corporation, including "voting power" exercisable on a contingent or deferred
basis as well as immediately exercisable "voting power"; or,
(b) Upon the consummation of a sale, lease, exchange or other transfer or
disposition by Star Banc of all or substantially all its assets to any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended and in effect on September 26, 1989
(hereinafter called the "Exchange Act") other than to one (1) or more wholly
owned Subsidiaries, or upon the consummation of sales, lease, exchange or
other transfer or disposition by one (1) or more of the Subsidiaries of all
or substantially all the assets of Star Banc and its Subsidiaries, on a
consolidated basis, other than to other wholly owned Subsidiaries; provided,
however, that the mortgage or pledge of all or substantially all of Star
Banc's assets or of all or substantially all the assets of Star Banc and its
Subsidiaries, on a consolidated basis, in connection with a bona fide
financing shall not constitute a "Change in Control"; or,
(c) When any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) directly or indirectly, of thirty-five percent
(35%) or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(d) When a tender offer, pursuant to Regulation 14D promulgated by the
Securities and Exchange Commission under the Exchange Act is consummated
resulting in a "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becoming the beneficial owner of thirty-five percent (35%)
or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(e) When those persons serving as Original Directors and/or their Successors
do not constitute a majority of the whole Board of Directors of Star Banc.
1.2 Cause means conviction for the commission of a felony or removal from
office by order of the Comptroller of the Currency, Federal Reserve Board, or
other appropriate agency.
1.3 Date of Termination means the date the Executive's employment is
terminated under this Agreement whether by the Company or by the Executive.
1.4 Disability means disability as such term is defined in the Star Banc
Salary Continuation Plan.
1.5 Effective Date means the first date after the date hereof on which a
Change in Control occurs.
1.6 Employment Agreement means an employment agreement, if any, between the
Company and the Executive.
1.7 Good Reason means:
(a) A reduction by the Company in the Executive's base salary as in effect
on the date hereof or as the same may be increased from time-to-time or a
failure by the Company to increase the Executive's base salary each year
during the Protected Period by an amount which at least equals, on a
percentage basis, the lesser of: (i) the average percentage increase in base
salary for all officers of the Company during the three full calendar years
immediately preceding the Change in Control; or (ii) the average percentage
increase in base salary for the Executive during the three full calendar
years immediately preceding the Change in Control; or
(b) A change in the Executive's reporting responsibilities, titles, job
responsibilities or offices which in the Executive's sole opinion result in a
diminution of his status, control, or authority as in effect immediately
prior to a Change in Control; or
(c) The assignment to the Executive of any positions, duties or
responsibilities inconsistent in the sole opinion of the Executive with the
Executive's positions, duties and responsibilities or status with the Company
immediately prior to the Change in Control or that requires the Executive to
travel more than prior to the Change in Control; or
(d) A failure by the Company (i) to continue any cash bonus or other
incentive plans in substantially the same form and with the same opportunity
levels and perceived potential for obtaining performance objectives, in
effect immediately prior to the Change in Control, or (ii) to continue the
Executive as a participant in such plans on at least the same basis as the
Executive participated in accordance with the plans immediately prior to the
Change in Control; or
(e) A requirement by the Company that the Executive be based or perform his
duties anywhere other than at the Company's corporate office location either
(i) immediately prior to the Change in Control, or (ii) within one mile of
such prior corporate office location if the Company's corporate office
location is moved; or
(f) A failure by the Company to continue in effect any benefit, whether or
not qualified, or other compensation plan or the Company's failure to provide
the Executive with the number of paid vacation days to which he is entitled
in accordance with the Company's normal vacation practices with respect to
the Executive at the time of the Change in Control; or
(g) An agreement between the Board of Directors of Star Banc and the
Executive that employment should be terminated.
For purposes of this Section 1.7, any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first
anniversary of the Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
1.8 Original Directors means those persons serving as Directors of Star Banc
on the date of this Agreement.
1.9 Protected Period means the twelve (12) month period immediately
following each and every Change in Control.
1.10 Successors means those directors whose election by Star Banc's
shareholders has been approved by the vote of at least two-thirds of the
Original Directors and previously qualified Successors serving as directors
of Star Banc at the time of such election or nomination for election.
<PAGE>
1.11 Termination Benefits means those benefits described in Section 2 of the
Agreement.
1.12 Subsidiaries means any and all companies at least fifty percent (50%)
owned, directly or indirectly, by Star Banc.
2. Benefits Upon Termination of Employment.
2.1 General. If, during the Protected Period following each Change in
Control, the Executive's employment is terminated either (i) by the Company
(other than for Cause or Disability), or (ii) by the Executive for Good
Reason, then the Executive (or his estate or personal representative), shall
be entitled to the Termination Benefits provided in this Section 2.
2.2 Base Salary and Bonus Through Date of Termination. The Company shall
promptly pay the Executive his full base salary through the Date of
Termination at the rate in effect at the time notice of termination is given.
In addition, the Company shall promptly pay the amount of any bonus or
incentive for the year in which the Date of Termination occurs (based on the
target bonus for the Executive for the year) prorated to the Date of
Termination (without application of any denial provisions based on
unsatisfactory personal performance or any other reason). The Company shall
also pay the Executive for any vacation earned but not taken with such
payment being equal to the Executive's calculated daily base salary rate
times the applicable days of such vacation.
2.3 Severance Payment. The Company shall pay the Executive a severance
payment equal to two (2) times the sum of: (a) the Executive's highest rate
of pay, on an annualized basis, established by the Company during the last
five years plus (b) the highest bonus earned by the Executive, with respect
to any single year, over the last five (5) years. The severance payment
shall be made in a lump-sum within thirty (30) days of the Date of
Termination.
2.4 Pension Payment. The Company shall pay the Executive a supplemental
pension benefit equal to the lump sum benefit which the Executive would be
entitled to receive under the Star Banc Employees' Pension Plan if the
Executive were 100% vested and had two (2) additional years of service minus
the lump sum benefit actually payable to the Executive under the Star Banc
Employees' Pension Plan. Payment of this supplemental pension benefit shall
be made within thirty (30) days of the Date of Termination.
<PAGE>
2.5 Medical Coverage. The Company shall, at its expense, maintain the
Executive's life, health and accidental death and disability insurance
coverage with the coverages maintained at the higher level in effect either
immediately prior to the date of the Change in Control or on the Date of
Termination, for a period of two (2) years following the Date of Termination.
2.6 Limitations on Amount of Termination Benefits. In the event that the
total value of benefits to the Executive would constitute Excess Parachute
Payments within the meaning of Section 280G of the Internal Revenue Code, as
amended, when added to payments pursuant to this Section 2, then the payment
pursuant to this Section 2 shall be reduced by the amount necessary to cause
the Executive to receive one thousand dollars less than 300% of the
Executive's Base Amount (as that term is defined in Section 280G of the
Internal Revenue Code of 1986) from all payments to the Executive from the
Company. In the event the amount of the payments exceeds the amount
subsequently determined to have been due, the excess benefits over three
times the Base Amount shall constitute a loan by the Company to the
Executive, payable on demand by the Company, with interest at a rate equal to
120 percent of the applicable federal rate determined under Section 1274(d)
of the Internal Revenue Code of 1986, as amended, compounded semi-annually.
If the Termination Benefits are to be reduced, pursuant to the limitation
described in this Section 2.6, then the determination of which benefit is to
be reduced shall be made solely by the Executive.
2.7 Termination Which Does Not Require Payment Of Termination Benefits. No
Termination Benefits need to be provided by the Company to the Executive
under this Section 2 if the Executive's employment is terminated:
(a) By the Executive for any reason other than for Good Reason;
(b) By the Company for Cause or Disability; or
(c) By death.
3.New Employment; Reduction of Termination Benefits.
The Termination Benefits provided under Section 2 shall not be treated as
damages, but rather shall be treated as severance compensation to which the
Executive is entitled. The Executive shall not be required to mitigate the
amount of any Termination Benefit provided under Section 2 by seeking other
employment or otherwise.
4.Notice of Termination.
Any purported termination by the Company of the Executive's employment for
Cause or Disability or by the Executive for Good Reason shall be communicated
by notice of termination to the other party. A notice of termination shall
include the specific reason for termination relied upon and shall set forth
in reasonable detail, the facts and circumstances claimed to provide a basis
for termination of employment.
Any dispute by a party hereto regarding a notice of termination delivered to
such party must be conveyed to the other party within thirty (30) days after
the notice of termination is given. If the particulars of the dispute are
not conveyed within the thirty (30) day period, then the disputing party's
claims regarding the termination shall be deemed forever waived.
5.Successor; Binding Agreement.
Star Banc will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of Star Banc expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place
(the assumption shall be by agreement in form and substance satisfactory to
the Executive). Failure of Star Banc to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive, at his election, to Termination Benefits from
the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such election becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company and any successor to
its business and/or assets as described above or which otherwise becomes
bound by all the terms and provision of this Agreement by operation of law.
In addition, as used in this Agreement, "Star Banc" shall mean Star Banc and
any successor to its business and/or assets as described above or which
otherwise becomes bound by all the terms and provision of this Agreement by
operation of law.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amount would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to his designee or, if
there be no such designee, to his estate.
6. Miscellaneous.
6.1 Notice. All notices, elections, waivers and all other communications
provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, to such address as either
party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
6.2 No Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Chief Executive Officer of the
Company. No waiver by either party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
6.3 Indemnification. If litigation shall be brought to enforce or interpret
any provision contained herein, the Company hereby agrees to indemnify the
Executive for his attorney's fees and disbursement incurred in such
litigation, and hereby agrees to pay prejudgment interest on any money
judgment obtained by the Executive, calculated at the prime interest rate
announced as such by the Wall Street Journal from time-to-time, from the
earliest date that payment(s) to him should have been made under this
Agreement. If the Wall Street Journal announces two or more rates as the
prime rate, then the highest rate shall be used.
6.4 Payment Obligations Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein shall
be absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the Executive or any third
party. All amounts payable by the Company hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the Company shall
be final and the Company will not seek, nor permit its subsidiaries,
affiliates, successors or assigns to seek, to recover all or any part of such
payment from the Executive or from whosoever may be entitled thereto, for any
reason whatsoever.
6.5 Term of Agreement. The term of this Agreement shall continue for an
initial period of three (3) years from the date of this Agreement. On each
anniversary of this Agreement, the term shall be extended for an additional
year unless prior to an anniversary date Star Banc's Board of Directors cause
a notice of nonrenewal to be sent to the Executive. Any Termination Benefits
due pursuant to this Agreement shall continue to be an obligation of the
Company and enforceable by the Executive until paid in full.
6.6 Controlling Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
6.7 Interpretation of Agreement. In the event of any ambiguity, vagueness or
other matter involving the interpretation or meaning of this Agreement, this
Agreement shall be construed liberally so as to provide to the Executive the
full benefits set out herein.
6.8 Severability. Each section, subsection or paragraph of this Agreement
shall be deemed severable and if for any reason any portion of this Agreement
is unenforceable, invalid or contrary to any existing or future law, such
unenforceability or invalidity shall not affect the applicability or validity
of any other portion of this Agreement.
6.9 U.S. Dollars. All payments required to be made under this Agreement
shall be made in United States Dollars.
6.10 Employment Agreement. Any benefits provided to the Executive under this
Agreement will, unless specifically stated otherwise in this Agreement, be in
addition to and not in lieu of any benefits that may be provided the
Executive under an Employment Agreement, if any, with the Company.
Nothing in this Agreement is to be deemed to give the Company the right to
take any action or engage in any omission with respect to the Executive at
any time when any such action or omission is not permissible and proper under
any Employment Agreement if then in force. Similarly, except as provided
otherwise in this Agreement, nothing in this Agreement is to be deemed to
give the Executive the right to take any action or engage in any omission
with respect to the Company at any time when any such act or omission is not
permissible and proper under any Employment Agreement if then in force.
This Agreement shall continue in force so long as the Executive remains
employed by the Company and shall not be affected by any termination of any
Employment Agreement.
6.11 Footnotes, Title and Captions. All footnotes or section, subsection or
paragraph titles or captions contained in this Agreement are for convenience
only and shall not be deemed part of the text of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
Attest: STAR BANC CORPORATION, on behalf of itself and each Subsidiary
By:
Name
Stephen E. Smith
Title Name
Senior Vice President
Title
<PAGE>
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement (hereinafter called the "Agreement"), made
as of the 14th day of December, 1993, between Star Banc Corporation, an Ohio
corporation (hereinafter called "Star Banc") and its Subsidiaries
(hereinafter individually and collectively called the "Company"), and Jerome
C. Kohlhepp (hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Company considers the recruitment and maintenance of sound and
vital management to be essential to protecting and enhancing its best
interests and those of its shareholders; and
WHEREAS, the Company recognizes that it is in an industry where there is a
strong potential for a change in control and that the potential for a change
in control may make it difficult to hire and retain strong management
personnel; and
WHEREAS, the Company recognizes that the possibility of a change in control
of Star Banc may exist and that, in the event negotiations are commenced to
bring about such a change in control, uncertainty and questions may arise
among management that could result in the distraction or departure of
management personnel to the detriment of the Company and the shareholders;
and
WHEREAS, the Company has determined that appropriate steps should be taken to
reinforce and encourage the Executive's continued attention and dedication as
an executive officer to his assigned duties without distraction in the face
of potentially disruptive circumstances arising from the possibility of a
change in control of Star Banc;
NOW THEREFORE, the Company and the Executive do hereby agree as follows:
1. Definitions
The following words and terms as used herein shall have the following
meaning:
1.1 Change in Control. A "Change in Control" of Star Banc shall be deemed to
have occurred:
(a) Upon the filing with the Secretary of State of the State of Ohio of a
certificate of merger or certificate of consolidation with respect to a
merger or a consolidation in which Star Banc is a "constituent corporation"
or upon the consummation of a "combination" or "majority share acquisition"
in which Star Banc is the "acquiring corporation" (as such terms are defined
in Ohio Rev. Code Section 1701.01 as in effect on September 26, 1989) and in
which Star Banc's shareholders immediately prior to entering into such
agreement will beneficially own, immediately after the effective time of the
merger, consolidation, combination or majority share acquisition, securities
of Star Banc or any surviving or new corporation having less than sixty-five
percent (65%) of the "voting power" of Star Banc or any surviving or new
corporation, including "voting power" exercisable on a contingent or deferred
basis as well as immediately exercisable "voting power"; or,
(b) Upon the consummation of a sale, lease, exchange or other transfer or
disposition by Star Banc of all or substantially all its assets to any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended and in effect on September 26, 1989
(hereinafter called the "Exchange Act") other than to one (1) or more wholly
owned Subsidiaries, or upon the consummation of sales, lease, exchange or
other transfer or disposition by one (1) or more of the Subsidiaries of all
or substantially all the assets of Star Banc and its Subsidiaries, on a
consolidated basis, other than to other wholly owned Subsidiaries; provided,
however, that the mortgage or pledge of all or substantially all of Star
Banc's assets or of all or substantially all the assets of Star Banc and its
Subsidiaries, on a consolidated basis, in connection with a bona fide
financing shall not constitute a "Change in Control"; or,
(c) When any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) directly or indirectly, of thirty-five percent
(35%) or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(d) When a tender offer, pursuant to Regulation 14D promulgated by the
Securities and Exchange Commission under the Exchange Act is consummated
resulting in a "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becoming the beneficial owner of thirty-five percent (35%)
or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(e) When those persons serving as Original Directors and/or their Successors
do not constitute a majority of the whole Board of Directors of Star Banc.
1.2 Cause means conviction for the commission of a felony or removal from
office by order of the Comptroller of the Currency, Federal Reserve Board, or
other appropriate agency.
1.3 Date of Termination means the date the Executive's employment is
terminated under this Agreement whether by the Company or by the Executive.
1.4 Disability means disability as such term is defined in the Star Banc
Salary Continuation Plan.
1.5 Effective Date means the first date after the date hereof on which a
Change in Control occurs.
1.6 Employment Agreement means an employment agreement, if any, between the
Company and the Executive.
1.7 Good Reason means:
(a) A reduction by the Company in the Executive's base salary as in effect on
the date hereof or as the same may be increased from time-to-time or a
failure by the Company to increase the Executive's base salary each year
during the Protected Period by an amount which at least equals, on a
percentage basis, the lesser of: (i) the average percentage increase in base
salary for all officers of the Company during the three full calendar years
immediately preceding the Change in Control; or (ii) the average percentage
increase in base salary for the Executive during the three full calendar
years immediately preceding the Change in Control; or
(b) A change in the Executive's reporting responsibilities, titles, job
responsibilities or offices which in the Executive's sole opinion result in a
diminution of his status, control, or authority as in effect immediately
prior to a Change in Control; or
(c) The assignment to the Executive of any positions, duties or
responsibilities inconsistent in the sole opinion of the Executive with the
Executive's positions, duties and responsibilities or status with the Company
immediately prior to the Change in Control or that requires the Executive to
travel more than prior to the Change in Control; or
(d) A failure by the Company (i) to continue any cash bonus or other
incentive plans in substantially the same form and with the same opportunity
levels and perceived potential for obtaining performance objectives, in
effect immediately prior to the Change in Control, or (ii) to continue the
Executive as a participant in such plans on at least the same basis as the
Executive participated in accordance with the plans immediately prior to the
Change in Control; or
(e) A requirement by the Company that the Executive be based or perform his
duties anywhere other than at the Company's corporate office location either
(i) immediately prior to the Change in Control, or (ii) within one mile of
such prior corporate office location if the Company's corporate office
location is moved; or
(f) A failure by the Company to continue in effect any benefit, whether or
not qualified, or other compensation plan or the Company's failure to provide
the Executive with the number of paid vacation days to which he is entitled
in accordance with the Company's normal vacation practices with respect to
the Executive at the time of the Change in Control; or
(g) An agreement between the Board of Directors of Star Banc and the
Executive that employment should be terminated.
For purposes of this Section 1.7, any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first
anniversary of the Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
1.8 Original Directors means those persons serving as Directors of Star Banc
on the date of this Agreement.
1.9 Protected Period means the twelve (12) month period immediately
following each and every Change in Control.
1.10 Successors means those directors whose election by Star Banc's
shareholders has been approved by the vote of at least two-thirds of the
Original Directors and previously qualified Successors serving as directors
of Star Banc at the time of such election or nomination for election.
<PAGE>
1.11 Termination Benefits means those benefits described in Section 2 of the
Agreement.
1.12 Subsidiaries means any and all companies at least fifty percent (50%)
owned, directly or indirectly, by Star Banc.
2. Benefits Upon Termination of Employment.
2.1 General. If, during the Protected Period following each Change in
Control, the Executive's employment is terminated either (i) by the Company
(other than for Cause or Disability), or (ii) by the Executive for Good
Reason, then the Executive (or his estate or personal representative), shall
be entitled to the Termination Benefits provided in this Section 2.
2.2 Base Salary and Bonus Through Date of Termination. The Company shall
promptly pay the Executive his full base salary through the Date of
Termination at the rate in effect at the time notice of termination is given.
In addition, the Company shall promptly pay the amount of any bonus or
incentive for the year in which the Date of Termination occurs (based on the
target bonus for the Executive for the year) prorated to the Date of
Termination (without application of any denial provisions based on
unsatisfactory personal performance or any other reason). The Company shall
also pay the Executive for any vacation earned but not taken with such
payment being equal to the Executive's calculated daily base salary rate
times the applicable days of such vacation.
2.3 Severance Payment. The Company shall pay the Executive a severance
payment equal to two (2) times the sum of: (a) the Executive's highest rate
of pay, on an annualized basis, established by the Company during the last
five years plus (b) the highest bonus earned by the Executive, with respect
to any single year, over the last five (5) years. The severance payment
shall be made in a lump-sum within thirty (30) days of the Date of
Termination.
2.4 Pension Payment. The Company shall pay the Executive a supplemental
pension benefit equal to the lump sum benefit which the Executive would be
entitled to receive under the Star Banc Employees' Pension Plan if the
Executive were 100% vested and had two (2) additional years of service minus
the lump sum benefit actually payable to the Executive under the Star Banc
Employees' Pension Plan. Payment of this supplemental pension benefit shall
be made within thirty (30) days of the Date of Termination.
<PAGE>
2.5 Medical Coverage. The Company shall, at its expense, maintain the
Executive's life, health and accidental death and disability insurance
coverage with the coverages maintained at the higher level in effect either
immediately prior to the date of the Change in Control or on the Date of
Termination, for a period of two (2) years following the Date of Termination.
2.6 Limitations on Amount of Termination Benefits. In the event that the
total value of benefits to the Executive would constitute Excess Parachute
Payments within the meaning of Section 280G of the Internal Revenue Code, as
amended, when added to payments pursuant to this Section 2, then the payment
pursuant to this Section 2 shall be reduced by the amount necessary to cause
the Executive to receive one thousand dollars less than 300% of the
Executive's Base Amount (as that term is defined in Section 280G of the
Internal Revenue Code of 1986) from all payments to the Executive from the
Company. In the event the amount of the payments exceeds the amount
subsequently determined to have been due, the excess benefits over three
times the Base Amount shall constitute a loan by the Company to the
Executive, payable on demand by the Company, with interest at a rate equal to
120 percent of the applicable federal rate determined under Section 1274(d)
of the Internal Revenue Code of 1986, as amended, compounded semi-annually.
If the Termination Benefits are to be reduced, pursuant to the limitation
described in this Section 2.6, then the determination of which benefit is to
be reduced shall be made solely by the Executive.
2.7 Termination Which Does Not Require Payment Of Termination Benefits. No
Termination Benefits need to be provided by the Company to the Executive
under this Section 2 if the Executive's employment is terminated:
(a) By the Executive for any reason other than for Good Reason;
(b) By the Company for Cause or Disability; or
(c) By death.
3. New Employment; Reduction of Termination Benefits.
The Termination Benefits provided under Section 2 shall not be treated as
damages, but rather shall be treated as severance compensation to which the
Executive is entitled. The Executive shall not be required to mitigate the
amount of any Termination Benefit provided under Section 2 by seeking other
employment or otherwise.
<PAGE>
4.Notice of Termination.
Any purported termination by the Company of the Executive's employment for
Cause or Disability or by the Executive for Good Reason shall be communicated
by notice of termination to the other party. A notice of termination shall
include the specific reason for termination relied upon and shall set forth
in reasonable detail, the facts and circumstances claimed to provide a basis
for termination of employment.
Any dispute by a party hereto regarding a notice of termination delivered to
such party must be conveyed to the other party within thirty (30) days after
the notice of termination is given. If the particulars of the dispute are
not conveyed within the thirty (30) day period, then the disputing party's
claims regarding the termination shall be deemed forever waived.
5. Successor; Binding Agreement.
Star Banc will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of Star Banc expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place
(the assumption shall be by agreement in form and substance satisfactory to
the Executive). Failure of Star Banc to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive, at his election, to Termination Benefits from
the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such election becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company and any successor to
its business and/or assets as described above or which otherwise becomes
bound by all the terms and provision of this Agreement by operation of law.
In addition, as used in this Agreement, "Star Banc" shall mean Star Banc and
any successor to its business and/or assets as described above or which
otherwise becomes bound by all the terms and provision of this Agreement by
operation of law.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amount would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to his designee or, if
there be no such designee, to his estate.
6. Miscellaneous.
6.1 Notice. All notices, elections, waivers and all other communications
provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, to such address as either
party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
6.2 No Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Chief Executive Officer of the
Company. No waiver by either party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
6.3 Indemnification. If litigation shall be brought to enforce or interpret
any provision contained herein, the Company hereby agrees to indemnify the
Executive for his attorney's fees and disbursement incurred in such
litigation, and hereby agrees to pay prejudgment interest on any money
judgment obtained by the Executive, calculated at the prime interest rate
announced as such by the Wall Street Journal from time-to-time, from the
earliest date that payment(s) to him should have been made under this
Agreement. If the Wall Street Journal announces two or more rates as the
prime rate, then the highest rate shall be used.
6.4 Payment Obligations Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein shall
be absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the Executive or any third
party. All amounts payable by the Company hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the Company shall
be final and the Company will not seek, nor permit its subsidiaries,
affiliates, successors or assigns to seek, to recover all or any part of such
payment from the Executive or from whosoever may be entitled thereto, for any
reason whatsoever.
6.5 Term of Agreement. The term of this Agreement shall continue for an
initial period of three (3) years from the date of this Agreement. On each
anniversary of this Agreement, the term shall be extended for an additional
year unless prior to an anniversary date Star Banc's Board of Directors cause
a notice of nonrenewal to be sent to the Executive. Any Termination Benefits
due pursuant to this Agreement shall continue to be an obligation of the
Company and enforceable by the Executive until paid in full.
6.6 Controlling Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
6.7 Interpretation of Agreement. In the event of any ambiguity, vagueness
or other matter involving the interpretation or meaning of this Agreement,
this Agreement shall be construed liberally so as to provide to the Executive
the full benefits set out herein.
6.8 Severability. Each section, subsection or paragraph of this Agreement
shall be deemed severable and if for any reason any portion of this Agreement
is unenforceable, invalid or contrary to any existing or future law, such
unenforceability or invalidity shall not affect the applicability or validity
of any other portion of this Agreement.
6.9 U.S. Dollars. All payments required to be made under this Agreement
shall be made in United States Dollars.
6.10 Employment Agreement. Any benefits provided to the Executive under this
Agreement will, unless specifically stated otherwise in this Agreement, be in
addition to and not in lieu of any benefits that may be provided the
Executive under an Employment Agreement, if any, with the Company.
Nothing in this Agreement is to be deemed to give the Company the right to
take any action or engage in any omission with respect to the Executive at
any time when any such action or omission is not permissible and proper under
any Employment Agreement if then in force. Similarly, except as provided
otherwise in this Agreement, nothing in this Agreement is to be deemed to
give the Executive the right to take any action or engage in any omission
with respect to the Company at any time when any such act or omission is not
permissible and proper under any Employment Agreement if then in force.
This Agreement shall continue in force so long as the Executive remains
employed by the Company and shall not be affected by any termination of any
Employment Agreement.
6.11 Footnotes, Title and Captions. All footnotes or section, subsection or
paragraph titles or captions contained in this Agreement are for convenience
only and shall not be deemed part of the text of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
Attest:STAR BANC CORPORATION, on behalf of itself and each Subsidiary
By:
Name
Stephen E. Smith
Title Name
Senior Vice President
Title
EXECUTIVE
<PAGE>
Name
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement (hereinafter called the "Agreement"), made
as of the 14th day of December, 1993, between Star Banc Corporation, an Ohio
corporation (hereinafter called "Star Banc") and its Subsidiaries
(hereinafter individually and collectively called the "Company"), and Thomas
J. Lakin (hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Company considers the recruitment and maintenance of sound and
vital management to be essential to protecting and enhancing its best
interests and those of its shareholders; and
WHEREAS, the Company recognizes that it is in an industry where there is a
strong potential for a change in control and that the potential for a change
in control may make it difficult to hire and retain strong management
personnel; and
WHEREAS, the Company recognizes that the possibility of a change in control
of Star Banc may exist and that, in the event negotiations are commenced to
bring about such a change in control, uncertainty and questions may arise
among management that could result in the distraction or departure of
management personnel to the detriment of the Company and the shareholders;
and
WHEREAS, the Company has determined that appropriate steps should be taken to
reinforce and encourage the Executive's continued attention and dedication as
an executive officer to his assigned duties without distraction in the face
of potentially disruptive circumstances arising from the possibility of a
change in control of Star Banc;
NOW THEREFORE, the Company and the Executive do hereby agree as follows:
1. Definitions
The following words and terms as used herein shall have the following
meaning:
1.1 Change in Control. A "Change in Control" of Star Banc shall be deemed
to have occurred:
(a) Upon the filing with the Secretary of State of the State of Ohio of a
certificate of merger or certificate of consolidation with respect to a
merger or a consolidation in which Star Banc is a "constituent corporation"
or upon the consummation of a "combination" or "majority share acquisition"
in which Star Banc is the "acquiring corporation" (as such terms are defined
in Ohio Rev. Code Section 1701.01 as in effect on September 26, 1989) and in
which Star Banc's shareholders immediately prior to entering into such
agreement will beneficially own, immediately after the effective time of the
merger, consolidation, combination or majority share acquisition, securities
of Star Banc or any surviving or new corporation having less than sixty-five
percent (65%) of the "voting power" of Star Banc or any surviving or new
corporation, including "voting power" exercisable on a contingent or deferred
basis as well as immediately exercisable "voting power"; or,
(b) Upon the consummation of a sale, lease, exchange or other transfer or
disposition by Star Banc of all or substantially all its assets to any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended and in effect on September 26, 1989
(hereinafter called the "Exchange Act") other than to one (1) or more wholly
owned Subsidiaries, or upon the consummation of sales, lease, exchange or
other transfer or disposition by one (1) or more of the Subsidiaries of all
or substantially all the assets of Star Banc and its Subsidiaries, on a
consolidated basis, other than to other wholly owned Subsidiaries; provided,
however, that the mortgage or pledge of all or substantially all of Star
Banc's assets or of all or substantially all the assets of Star Banc and its
Subsidiaries, on a consolidated basis, in connection with a bona fide
financing shall not constitute a "Change in Control"; or,
(c) When any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) directly or indirectly, of thirty-five percent
(35%) or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(d) When a tender offer, pursuant to Regulation 14D promulgated by the
Securities and Exchange Commission under the Exchange Act is consummated
resulting in a "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becoming the beneficial owner of thirty-five percent (35%)
or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(e) When those persons serving as Original Directors and/or their Successors
do not constitute a majority of the whole Board of Directors of Star Banc.
1.2 Cause means conviction for the commission of a felony or removal from
office by order of the Comptroller of the Currency, Federal Reserve Board, or
other appropriate agency.
1.3 Date of Termination means the date the Executive's employment is
terminated under this Agreement whether by the Company or by the Executive.
1.4 Disability means disability as such term is defined in the Star Banc
Salary Continuation Plan.
1.5 Effective Date means the first date after the date hereof on which a
Change in Control occurs.
1.6 Employment Agreement means an employment agreement, if any, between the
Company and the Executive.
1.7 Good Reason means:
(a) A reduction by the Company in the Executive's base salary as in effect on
the date hereof or as the same may be increased from time-to-time or a
failure by the Company to increase the Executive's base salary each year
during the Protected Period by an amount which at least equals, on a
percentage basis, the lesser of: (i) the average percentage increase in base
salary for all officers of the Company during the three full calendar years
immediately preceding the Change in Control; or (ii) the average percentage
increase in base salary for the Executive during the three full calendar
years immediately preceding the Change in Control; or
(b) A change in the Executive's reporting responsibilities, titles, job
responsibilities or offices which in the Executive's sole opinion result in a
diminution of his status, control, or authority as in effect immediately
prior to a Change in Control; or
(c) The assignment to the Executive of any positions, duties or
responsibilities inconsistent in the sole opinion of the Executive with the
Executive's positions, duties and responsibilities or status with the Company
immediately prior to the Change in Control or that requires the Executive to
travel more than prior to the Change in Control; or
(d) A failure by the Company (i) to continue any cash bonus or other
incentive plans in substantially the same form and with the same opportunity
levels and perceived potential for obtaining performance objectives, in
effect immediately prior to the Change in Control, or (ii) to continue the
Executive as a participant in such plans on at least the same basis as the
Executive participated in accordance with the plans immediately prior to the
Change in Control; or
(e) A requirement by the Company that the Executive be based or perform his
duties anywhere other than at the Company's corporate office location either
(i) immediately prior to the Change in Control, or (ii) within one mile of
such prior corporate office location if the Company's corporate office
location is moved; or
(f) A failure by the Company to continue in effect any benefit, whether or
not qualified, or other compensation plan or the Company's failure to provide
the Executive with the number of paid vacation days to which he is entitled
in accordance with the Company's normal vacation practices with respect to
the Executive at the time of the Change in Control; or
(g) An agreement between the Board of Directors of Star Banc and the
Executive that employment should be terminated.
For purposes of this Section 1.7, any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first
anniversary of the Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
1.8 Original Directors means those persons serving as Directors of Star
Banc on the date of this Agreement.
1.9 Protected Period means the twelve (12) month period immediately
following each and every Change in Control.
1.10 Successors means those directors whose election by Star Banc's
shareholders has been approved by the vote of at least two-thirds of the
Original Directors and previously qualified Successors serving as directors
of Star Banc at the time of such election or nomination for election.
<PAGE>
1.11 Termination Benefits means those benefits described in Section 2 of the
Agreement.
1.12 Subsidiaries means any and all companies at least fifty percent (50%)
owned, directly or indirectly, by Star Banc.
2. Benefits Upon Termination of Employment.
2.1 General. If, during the Protected Period following each Change in
Control, the Executive's employment is terminated either (i) by the Company
(other than for Cause or Disability), or (ii) by the Executive for Good
Reason, then the Executive (or his estate or personal representative), shall
be entitled to the Termination Benefits provided in this Section 2.
2.2 Base Salary and Bonus Through Date of Termination. The Company shall
promptly pay the Executive his full base salary through the Date of
Termination at the rate in effect at the time notice of termination is given.
In addition, the Company shall promptly pay the amount of any bonus or
incentive for the year in which the Date of Termination occurs (based on the
target bonus for the Executive for the year) prorated to the Date of
Termination (without application of any denial provisions based on
unsatisfactory personal performance or any other reason). The Company shall
also pay the Executive for any vacation earned but not taken with such
payment being equal to the Executive's calculated daily base salary rate
times the applicable days of such vacation.
2.3 Severance Payment. The Company shall pay the Executive a severance
payment equal to two (2) times the sum of: (a) the Executive's highest rate
of pay, on an annualized basis, established by the Company during the last
five years plus (b) the highest bonus earned by the Executive, with respect
to any single year, over the last five (5) years. The severance payment
shall be made in a lump-sum within thirty (30) days of the Date of
Termination.
2.4 Pension Payment. The Company shall pay the Executive a supplemental
pension benefit equal to the lump sum benefit which the Executive would be
entitled to receive under the Star Banc Employees' Pension Plan if the
Executive were 100% vested and had two (2) additional years of service minus
the lump sum benefit actually payable to the Executive under the Star Banc
Employees' Pension Plan. Payment of this supplemental pension benefit shall
be made within thirty (30) days of the Date of Termination.
<PAGE>
2.5 Medical Coverage. The Company shall, at its expense, maintain the
Executive's life, health and accidental death and disability insurance
coverage with the coverages maintained at the higher level in effect either
immediately prior to the date of the Change in Control or on the Date of
Termination, for a period of two (2) years following the Date of Termination.
2.6 Limitations on Amount of Termination Benefits. In the event that the
total value of benefits to the Executive would constitute Excess Parachute
Payments within the meaning of Section 280G of the Internal Revenue Code, as
amended, when added to payments pursuant to this Section 2, then the payment
pursuant to this Section 2 shall be reduced by the amount necessary to cause
the Executive to receive one thousand dollars less than 300% of the
Executive's Base Amount (as that term is defined in Section 280G of the
Internal Revenue Code of 1986) from all payments to the Executive from the
Company. In the event the amount of the payments exceeds the amount
subsequently determined to have been due, the excess benefits over three
times the Base Amount shall constitute a loan by the Company to the
Executive, payable on demand by the Company, with interest at a rate equal to
120 percent of the applicable federal rate determined under Section 1274(d)
of the Internal Revenue Code of 1986, as amended, compounded semi-annually.
If the Termination Benefits are to be reduced, pursuant to the limitation
described in this Section 2.6, then the determination of which benefit is to
be reduced shall be made solely by the Executive.
2.7 Termination Which Does Not Require Payment Of Termination Benefits. No
Termination Benefits need to be provided by the Company to the Executive
under this Section 2 if the Executive's employment is terminated:
(a) By the Executive for any reason other than for Good Reason;
(b) By the Company for Cause or Disability; or
(c) By death.
3. New Employment; Reduction of Termination Benefits.
The Termination Benefits provided under Section 2 shall not be treated as
damages, but rather shall be treated as severance compensation to which the
Executive is entitled. The Executive shall not be required to mitigate the
amount of any Termination Benefit provided under Section 2 by seeking other
employment or otherwise.
<PAGE>
4. Notice of Termination.
Any purported termination by the Company of the Executive's employment for
Cause or Disability or by the Executive for Good Reason shall be communicated
by notice of termination to the other party. A notice of termination shall
include the specific reason for termination relied upon and shall set forth
in reasonable detail, the facts and circumstances claimed to provide a basis
for termination of employment.
Any dispute by a party hereto regarding a notice of termination delivered to
such party must be conveyed to the other party within thirty (30) days after
the notice of termination is given. If the particulars of the dispute are
not conveyed within the thirty (30) day period, then the disputing party's
claims regarding the termination shall be deemed forever waived.
5.Successor; Binding Agreement.
Star Banc will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of Star Banc expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place
(the assumption shall be by agreement in form and substance satisfactory to
the Executive). Failure of Star Banc to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive, at his election, to Termination Benefits from
the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such election becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company and any successor to
its business and/or assets as described above or which otherwise becomes
bound by all the terms and provision of this Agreement by operation of law.
In addition, as used in this Agreement, "Star Banc" shall mean Star Banc and
any successor to its business and/or assets as described above or which
otherwise becomes bound by all the terms and provision of this Agreement by
operation of law.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amount would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to his designee or, if
there be no such designee, to his estate.
6.Miscellaneous.
6.1 Notice. All notices, elections, waivers and all other communications
provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, to such address as either
party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
6.2 No Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Chief Executive Officer of the
Company. No waiver by either party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
6.3 Indemnification. If litigation shall be brought to enforce or interpret
any provision contained herein, the Company hereby agrees to indemnify the
Executive for his attorney's fees and disbursement incurred in such
litigation, and hereby agrees to pay prejudgment interest on any money
judgment obtained by the Executive, calculated at the prime interest rate
announced as such by the Wall Street Journal from time-to-time, from the
earliest date that payment(s) to him should have been made under this
Agreement. If the Wall Street Journal announces two or more rates as the
prime rate, then the highest rate shall be used.
6.4 Payment Obligations Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein shall
be absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the Executive or any third
party. All amounts payable by the Company hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the Company shall
be final and the Company will not seek, nor permit its subsidiaries,
affiliates, successors or assigns to seek, to recover all or any part of such
payment from the Executive or from whosoever may be entitled thereto, for any
reason whatsoever.
6.5 Term of Agreement. The term of this Agreement shall continue for an
initial period of three (3) years from the date of this Agreement. On each
anniversary of this Agreement, the term shall be extended for an additional
year unless prior to an anniversary date Star Banc's Board of Directors cause
a notice of nonrenewal to be sent to the Executive. Any Termination Benefits
due pursuant to this Agreement shall continue to be an obligation of the
Company and enforceable by the Executive until paid in full.
6.6 Controlling Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
6.7 Interpretation of Agreement. In the event of any ambiguity, vagueness or
other matter involving the interpretation or meaning of this Agreement, this
Agreement shall be construed liberally so as to provide to the Executive the
full benefits set out herein.
6.8 Severability. Each section, subsection or paragraph of this Agreement
shall be deemed severable and if for any reason any portion of this Agreement
is unenforceable, invalid or contrary to any existing or future law, such
unenforceability or invalidity shall not affect the applicability or validity
of any other portion of this Agreement.
6.9 U.S. Dollars. All payments required to be made under this Agreement
shall be made in United States Dollars.
6.10Employment Agreement. Any benefits provided to the Executive under this
Agreement will, unless specifically stated otherwise in this Agreement, be in
addition to and not in lieu of any benefits that may be provided the
Executive under an Employment Agreement, if any, with the Company.
Nothing in this Agreement is to be deemed to give the Company the right to
take any action or engage in any omission with respect to the Executive at
any time when any such action or omission is not permissible and proper under
any Employment Agreement if then in force. Similarly, except as provided
otherwise in this Agreement, nothing in this Agreement is to be deemed to
give the Executive the right to take any action or engage in any omission
with respect to the Company at any time when any such act or omission is not
permissible and proper under any Employment Agreement if then in force.
This Agreement shall continue in force so long as the Executive remains
employed by the Company and shall not be affected by any termination of any
Employment Agreement.
6.11 Footnotes, Title and Captions. All footnotes or section, subsection or
paragraph titles or captions contained in this Agreement are for convenience
only and shall not be deemed part of the text of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
Attest: STAR BANC CORPORATION, on behalf of itself and each Subsidiary
By:
Name Stephen E. Smith
Title
Name
Senior Vice President
Title
<PAGE>
EXECUTIVE
Name
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement (hereinafter called the "Agreement"), made
as of the 14th day of December, 1993, between Star Banc Corporation, an Ohio
corporation (hereinafter called "Star Banc") and its Subsidiaries
(hereinafter individually and collectively called the "Company"), and Wayne
J. Shircliff (hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Company considers the recruitment and maintenance of sound and
vital management to be essential to protecting and enhancing its best
interests and those of its shareholders; and
WHEREAS, the Company recognizes that it is in an industry where there is a
strong potential for a change in control and that the potential for a change
in control may make it difficult to hire and retain strong management
personnel; and
WHEREAS, the Company recognizes that the possibility of a change in control
of Star Banc may exist and that, in the event negotiations are commenced to
bring about such a change in control, uncertainty and questions may arise
among management that could result in the distraction or departure of
management personnel to the detriment of the Company and the shareholders;
and
WHEREAS, the Company has determined that appropriate steps should be taken to
reinforce and encourage the Executive's continued attention and dedication as
an executive officer to his assigned duties without distraction in the face
of potentially disruptive circumstances arising from the possibility of a
change in control of Star Banc;
NOW THEREFORE, the Company and the Executive do hereby agree as follows:
1.Definitions
The following words and terms as used herein shall have the following
meaning:
1.1Change in Control. A "Change in Control" of Star Banc shall be deemed to
have occurred:
(a) Upon the filing with the Secretary of State of the State of Ohio of a
certificate of merger or certificate of consolidation with respect to a
merger or a consolidation in which Star Banc is a "constituent corporation"
or upon the consummation of a "combination" or "majority share acquisition"
in which Star Banc is the "acquiring corporation" (as such terms are defined
in Ohio Rev. Code Section 1701.01 as in effect on September 26, 1989) and in
which Star Banc's shareholders immediately prior to entering into such
agreement will beneficially own, immediately after the effective time of the
merger, consolidation, combination or majority share acquisition, securities
of Star Banc or any surviving or new corporation having less than sixty-five
percent (65%) of the "voting power" of Star Banc or any surviving or new
corporation, including "voting power" exercisable on a contingent or deferred
basis as well as immediately exercisable "voting power"; or,
(b) Upon the consummation of a sale, lease, exchange or other transfer or
disposition by Star Banc of all or substantially all its assets to any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended and in effect on September 26, 1989
(hereinafter called the "Exchange Act") other than to one (1) or more wholly
owned Subsidiaries, or upon the consummation of sales, lease, exchange or
other transfer or disposition by one (1) or more of the Subsidiaries of all
or substantially all the assets of Star Banc and its Subsidiaries, on a
consolidated basis, other than to other wholly owned Subsidiaries; provided,
however, that the mortgage or pledge of all or substantially all of Star
Banc's assets or of all or substantially all the assets of Star Banc and its
Subsidiaries, on a consolidated basis, in connection with a bona fide
financing shall not constitute a "Change in Control"; or,
(c) When any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) directly or indirectly, of thirty-five percent
(35%) or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(d) When a tender offer, pursuant to Regulation 14D promulgated by the
Securities and Exchange Commission under the Exchange Act is consummated
resulting in a "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becoming the beneficial owner of thirty-five percent (35%)
or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(e) When those persons serving as Original Directors and/or their Successors
do not constitute a majority of the whole Board of Directors of Star Banc.
1.2 Cause means conviction for the commission of a felony or removal from
office by order of the Comptroller of the Currency, Federal Reserve Board, or
other appropriate agency.
1.3 Date of Termination means the date the Executive's employment is
terminated under this Agreement whether by the Company or by the Executive.
1.4 Disability means disability as such term is defined in the Star Banc
Salary Continuation Plan.
1.5 Effective Date means the first date after the date hereof on which a
Change in Control occurs.
1.6 Employment Agreement means an employment agreement, if any, between the
Company and the Executive.
1.7 Good Reason means:
(a) A reduction by the Company in the Executive's base salary as in effect on
the date hereof or as the same may be increased from time-to-time or a
failure by the Company to increase the Executive's base salary each year
during the Protected Period by an amount which at least equals, on a
percentage basis, the lesser of: (i) the average percentage increase in base
salary for all officers of the Company during the three full calendar years
immediately preceding the Change in Control; or (ii) the average percentage
increase in base salary for the Executive during the three full calendar
years immediately preceding the Change in Control; or
(b) A change in the Executive's reporting responsibilities, titles, job
responsibilities or offices which in the Executive's sole opinion result in a
diminution of his status, control, or authority as in effect immediately
prior to a Change in Control; or
(c) The assignment to the Executive of any positions, duties or
responsibilities inconsistent in the sole opinion of the Executive with the
Executive's positions, duties and responsibilities or status with the Company
immediately prior to the Change in Control or that requires the Executive to
travel more than prior to the Change in Control; or
(d) A failure by the Company (i) to continue any cash bonus or other
incentive plans in substantially the same form and with the same opportunity
levels and perceived potential for obtaining performance objectives, in
effect immediately prior to the Change in Control, or (ii) to continue the
Executive as a participant in such plans on at least the same basis as the
Executive participated in accordance with the plans immediately prior to the
Change in Control; or
(e) A requirement by the Company that the Executive be based or perform his
duties anywhere other than at the Company's corporate office location either
(i) immediately prior to the Change in Control, or (ii) within one mile of
such prior corporate office location if the Company's corporate office
location is moved; or
(f) A failure by the Company to continue in effect any benefit, whether or
not qualified, or other compensation plan or the Company's failure to provide
the Executive with the number of paid vacation days to which he is entitled
in accordance with the Company's normal vacation practices with respect to
the Executive at the time of the Change in Control; or
(g) An agreement between the Board of Directors of Star Banc and the
Executive that employment should be terminated.
For purposes of this Section 1.7, any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first
anniversary of the Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
1.8 Original Directors means those persons serving as Directors of Star Banc
on the date of this Agreement.
1.9 Protected Period means the twelve (12) month period immediately
following each and every Change in Control.
1.10 Successors means those directors whose election by Star Banc's
shareholders has been approved by the vote of at least two-thirds of the
Original Directors and previously qualified Successors serving as directors
of Star Banc at the time of such election or nomination for election.
<PAGE>
1.11 Termination Benefits means those benefits described in Section 2 of the
Agreement.
1.12 Subsidiaries means any and all companies at least fifty percent (50%)
owned, directly or indirectly, by Star Banc.
2. Benefits Upon Termination of Employment.
2.1 General. If, during the Protected Period following each Change in
Control, the Executive's employment is terminated either (i) by the Company
(other than for Cause or Disability), or (ii) by the Executive for Good
Reason, then the Executive (or his estate or personal representative), shall
be entitled to the Termination Benefits provided in this Section 2.
2.2 Base Salary and Bonus Through Date of Termination. The Company shall
promptly pay the Executive his full base salary through the Date of
Termination at the rate in effect at the time notice of termination is given.
In addition, the Company shall promptly pay the amount of any bonus or
incentive for the year in which the Date of Termination occurs (based on the
target bonus for the Executive for the year) prorated to the Date of
Termination (without application of any denial provisions based on
unsatisfactory personal performance or any other reason). The Company shall
also pay the Executive for any vacation earned but not taken with such
payment being equal to the Executive's calculated daily base salary rate
times the applicable days of such vacation.
2.3 Severance Payment. The Company shall pay the Executive a severance
payment equal to two (2) times the sum of: (a) the Executive's highest rate
of pay, on an annualized basis, established by the Company during the last
five years plus (b) the highest bonus earned by the Executive, with respect
to any single year, over the last five (5) years. The severance payment
shall be made in a lump-sum within thirty (30) days of the Date of
Termination.
2.4 Pension Payment. The Company shall pay the Executive a supplemental
pension benefit equal to the lump sum benefit which the Executive would be
entitled to receive under the Star Banc Employees' Pension Plan if the
Executive were 100% vested and had two (2) additional years of service minus
the lump sum benefit actually payable to the Executive under the Star Banc
Employees' Pension Plan. Payment of this supplemental pension benefit shall
be made within thirty (30) days of the Date of Termination.
<PAGE>
2.5 Medical Coverage. The Company shall, at its expense, maintain the
Executive's life, health and accidental death and disability insurance
coverage with the coverages maintained at the higher level in effect either
immediately prior to the date of the Change in Control or on the Date of
Termination, for a period of two (2) years following the Date of Termination.
2.6 Limitations on Amount of Termination Benefits. In the event that the
total value of benefits to the Executive would constitute Excess Parachute
Payments within the meaning of Section 280G of the Internal Revenue Code, as
amended, when added to payments pursuant to this Section 2, then the payment
pursuant to this Section 2 shall be reduced by the amount necessary to cause
the Executive to receive one thousand dollars less than 300% of the
Executive's Base Amount (as that term is defined in Section 280G of the
Internal Revenue Code of 1986) from all payments to the Executive from the
Company. In the event the amount of the payments exceeds the amount
subsequently determined to have been due, the excess benefits over three
times the Base Amount shall constitute a loan by the Company to the
Executive, payable on demand by the Company, with interest at a rate equal to
120 percent of the applicable federal rate determined under Section 1274(d)
of the Internal Revenue Code of 1986, as amended, compounded semi-annually.
If the Termination Benefits are to be reduced, pursuant to the limitation
described in this Section 2.6, then the determination of which benefit is to
be reduced shall be made solely by the Executive.
2.7 Termination Which Does Not Require Payment Of Termination Benefits. No
Termination Benefits need to be provided by the Company to the Executive
under this Section 2 if the Executive's employment is terminated:
(a) By the Executive for any reason other than for Good Reason;
(b) By the Company for Cause or Disability; or
(c) By death.
3. New Employment; Reduction of Termination Benefits.
The Termination Benefits provided under Section 2 shall not be treated as
damages, but rather shall be treated as severance compensation to which the
Executive is entitled. The Executive shall not be required to mitigate the
amount of any Termination Benefit provided under Section 2 by seeking other
employment or otherwise.
<PAGE>
4. Notice of Termination.
Any purported termination by the Company of the Executive's employment for
Cause or Disability or by the Executive for Good Reason shall be communicated
by notice of termination to the other party. A notice of termination shall
include the specific reason for termination relied upon and shall set forth
in reasonable detail, the facts and circumstances claimed to provide a basis
for termination of employment.
Any dispute by a party hereto regarding a notice of termination delivered to
such party must be conveyed to the other party within thirty (30) days after
the notice of termination is given. If the particulars of the dispute are
not conveyed within the thirty (30) day period, then the disputing party's
claims regarding the termination shall be deemed forever waived.
5. Successor; Binding Agreement.
Star Banc will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of Star Banc expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place
(the assumption shall be by agreement in form and substance satisfactory to
the Executive). Failure of Star Banc to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive, at his election, to Termination Benefits from
the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such election becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company and any successor to
its business and/or assets as described above or which otherwise becomes
bound by all the terms and provision of this Agreement by operation of law.
In addition, as used in this Agreement, "Star Banc" shall mean Star Banc and
any successor to its business and/or assets as described above or which
otherwise becomes bound by all the terms and provision of this Agreement by
operation of law.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amount would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to his designee or, if
there be no such designee, to his estate.
6. Miscellaneous.
6.1 Notice. All notices, elections, waivers and all other communications
provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, to such address as either
party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
6.2 No Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Chief Executive Officer of the
Company. No waiver by either party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
6.3 Indemnification. If litigation shall be brought to enforce or interpret
any provision contained herein, the Company hereby agrees to indemnify the
Executive for his attorney's fees and disbursement incurred in such
litigation, and hereby agrees to pay prejudgment interest on any money
judgment obtained by the Executive, calculated at the prime interest rate
announced as such by the Wall Street Journal from time-to-time, from the
earliest date that payment(s) to him should have been made under this
Agreement. If the Wall Street Journal announces two or more rates as the
prime rate, then the highest rate shall be used.
6.4 Payment Obligations Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein shall
be absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the Executive or any third
party. All amounts payable by the Company hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the Company shall
be final and the Company will not seek, nor permit its subsidiaries,
affiliates, successors or assigns to seek, to recover all or any part of such
payment from the Executive or from whosoever may be entitled thereto, for any
reason whatsoever.
6.5 Term of Agreement. The term of this Agreement shall continue for an
initial period of three (3) years from the date of this Agreement. On each
anniversary of this Agreement, the term shall be extended for an additional
year unless prior to an anniversary date Star Banc's Board of Directors cause
a notice of nonrenewal to be sent to the Executive. Any Termination Benefits
due pursuant to this Agreement shall continue to be an obligation of the
Company and enforceable by the Executive until paid in full.
6.6 Controlling Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
6.7 Interpretation of Agreement. In the event of any ambiguity, vagueness
or other matter involving the interpretation or meaning of this Agreement,
this Agreement shall be construed liberally so as to provide to the Executive
the full benefits set out herein.
6.8 Severability. Each section, subsection or paragraph of this Agreement
shall be deemed severable and if for any reason any portion of this Agreement
is unenforceable, invalid or contrary to any existing or future law, such
unenforceability or invalidity shall not affect the applicability or validity
of any other portion of this Agreement.
6.9 U.S. Dollars. All payments required to be made under this Agreement
shall be made in United States Dollars.
6.10 Employment Agreement. Any benefits provided to the Executive under this
Agreement will, unless specifically stated otherwise in this Agreement, be in
addition to and not in lieu of any benefits that may be provided the
Executive under an Employment Agreement, if any, with the Company.
Nothing in this Agreement is to be deemed to give the Company the right to
take any action or engage in any omission with respect to the Executive at
any time when any such action or omission is not permissible and proper under
any Employment Agreement if then in force. Similarly, except as provided
otherwise in this Agreement, nothing in this Agreement is to be deemed to
give the Executive the right to take any action or engage in any omission
with respect to the Company at any time when any such act or omission is not
permissible and proper under any Employment Agreement if then in force.
This Agreement shall continue in force so long as the Executive remains
employed by the Company and shall not be affected by any termination of any
Employment Agreement.
6.11 Footnotes, Title and Captions. All footnotes or section, subsection or
paragraph titles or captions contained in this Agreement are for convenience
only and shall not be deemed part of the text of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
Attest:
STAR BANC CORPORATION, on behalf of itself and each Subsidiary
By:
Name
Stephen E. Smith
Title Name
Senior Vice President
Title
EXECUTIVE
Name
<PAGE>
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement (hereinafter called the "Agreement"), made
as of the 14th day of December, 1993, between Star Banc Corporation, an Ohio
corporation (hereinafter called "Star Banc") and its Subsidiaries
(hereinafter individually and collectively called the "Company"), and Stephen
E. Smith (hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Company considers the recruitment and maintenance of sound and
vital management to be essential to protecting and enhancing its best
interests and those of its shareholders; and
WHEREAS, the Company recognizes that it is in an industry where there is a
strong potential for a change in control and that the potential for a change
in control may make it difficult to hire and retain strong management
personnel; and
WHEREAS, the Company recognizes that the possibility of a change in control
of Star Banc may exist and that, in the event negotiations are commenced to
bring about such a change in control, uncertainty and questions may arise
among management that could result in the distraction or departure of
management personnel to the detriment of the Company and the shareholders;
and
WHEREAS, the Company has determined that appropriate steps should be taken to
reinforce and encourage the Executive's continued attention and dedication as
an executive officer to his assigned duties without distraction in the face
of potentially disruptive circumstances arising from the possibility of a
change in control of Star Banc;
NOW THEREFORE, the Company and the Executive do hereby agree as follows:
1. Definitions
The following words and terms as used herein shall have the following
meaning:
1.1 Change in Control. A "Change in Control" of Star Banc shall be deemed to
have occurred:
(a) Upon the filing with the Secretary of State of the State of Ohio of a
certificate of merger or certificate of consolidation with respect to a
merger or a consolidation in which Star Banc is a "constituent corporation"
or upon the consummation of a "combination" or "majority share acquisition"
in which Star Banc is the "acquiring corporation" (as such terms are defined
in Ohio Rev. Code Section 1701.01 as in effect on September 26, 1989) and in
which Star Banc's shareholders immediately prior to entering into such
agreement will beneficially own, immediately after the effective time of the
merger, consolidation, combination or majority share acquisition, securities
of Star Banc or any surviving or new corporation having less than sixty-five
percent (65%) of the "voting power" of Star Banc or any surviving or new
corporation, including "voting power" exercisable on a contingent or deferred
basis as well as immediately exercisable "voting power"; or,
(b) Upon the consummation of a sale, lease, exchange or other transfer or
disposition by Star Banc of all or substantially all its assets to any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended and in effect on September 26, 1989
(hereinafter called the "Exchange Act") other than to one (1) or more wholly
owned Subsidiaries, or upon the consummation of sales, lease, exchange or
other transfer or disposition by one (1) or more of the Subsidiaries of all
or substantially all the assets of Star Banc and its Subsidiaries, on a
consolidated basis, other than to other wholly owned Subsidiaries; provided,
however, that the mortgage or pledge of all or substantially all of Star
Banc's assets or of all or substantially all the assets of Star Banc and its
Subsidiaries, on a consolidated basis, in connection with a bona fide
financing shall not constitute a "Change in Control"; or,
(c) When any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) directly or indirectly, of thirty-five percent
(35%) or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(d) When a tender offer, pursuant to Regulation 14D promulgated by the
Securities and Exchange Commission under the Exchange Act is consummated
resulting in a "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becoming the beneficial owner of thirty-five percent (35%)
or more of the combined "voting power" of Star Banc's then outstanding
securities, excluding "voting power" exercisable on a contingent or deferred
basis; or,
(e) When those persons serving as Original Directors and/or their Successors
do not constitute a majority of the whole Board of Directors of Star Banc.
1.2 Cause means conviction for the commission of a felony or removal from
office by order of the Comptroller of the Currency, Federal Reserve Board, or
other appropriate agency.
1.3 Date of Termination means the date the Executive's employment is
terminated under this Agreement whether by the Company or by the Executive.
1.4 Disability means disability as such term is defined in the Star Banc
Salary Continuation Plan.
1.5 Effective Date means the first date after the date hereof on which a
Change in Control occurs.
1.6 Employment Agreement means an employment agreement, if any, between the
Company and the Executive.
1.7 Good Reason means:
(a) A reduction by the Company in the Executive's base salary as in effect on
the date hereof or as the same may be increased from time-to-time or a
failure by the Company to increase the Executive's base salary each year
during the Protected Period by an amount which at least equals, on a
percentage basis, the lesser of: (i) the average percentage increase in base
salary for all officers of the Company during the three full calendar years
immediately preceding the Change in Control; or (ii) the average percentage
increase in base salary for the Executive during the three full calendar
years immediately preceding the Change in Control; or
(b) A change in the Executive's reporting responsibilities, titles, job
responsibilities or offices which in the Executive's sole opinion result in a
diminution of his status, control, or authority as in effect immediately
prior to a Change in Control; or
(c) The assignment to the Executive of any positions, duties or
responsibilities inconsistent in the sole opinion of the Executive with the
Executive's positions, duties and responsibilities or status with the Company
immediately prior to the Change in Control or that requires the Executive to
travel more than prior to the Change in Control; or
(d) A failure by the Company (i) to continue any cash bonus or other
incentive plans in substantially the same form and with the same opportunity
levels and perceived potential for obtaining performance objectives, in
effect immediately prior to the Change in Control, or (ii) to continue the
Executive as a participant in such plans on at least the same basis as the
Executive participated in accordance with the plans immediately prior to the
Change in Control; or
(e) A requirement by the Company that the Executive be based or perform his
duties anywhere other than at the Company's corporate office location either
(i) immediately prior to the Change in Control, or (ii) within one mile of
such prior corporate office location if the Company's corporate office
location is moved; or
(f) A failure by the Company to continue in effect any benefit, whether or
not qualified, or other compensation plan or the Company's failure to provide
the Executive with the number of paid vacation days to which he is entitled
in accordance with the Company's normal vacation practices with respect to
the Executive at the time of the Change in Control; or
(g) An agreement between the Board of Directors of Star Banc and the
Executive that employment should be terminated.
For purposes of this Section 1.7, any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first
anniversary of the Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
1.8 Original Directors means those persons serving as Directors of Star Banc
on the date of this Agreement.
1.9 Protected Period means the twelve (12) month period immediately following
each and every Change in Control.
1.10 Successors means those directors whose election by Star Banc's
shareholders has been approved by the vote of at least two-thirds of the
Original Directors and previously qualified Successors serving as directors
of Star Banc at the time of such election or nomination for election.
<PAGE>
1.11 Termination Benefits means those benefits described in Section 2 of the
Agreement.
1.12 Subsidiaries means any and all companies at least fifty percent (50%)
owned, directly or indirectly, by Star Banc.
2. Benefits Upon Termination of Employment.
2.1 General. If, during the Protected Period following each Change in
Control, the Executive's employment is terminated either (i) by the Company
(other than for Cause or Disability), or (ii) by the Executive for Good
Reason, then the Executive (or his estate or personal representative), shall
be entitled to the Termination Benefits provided in this Section 2.
2.2Base Salary and Bonus Through Date of Termination. The Company shall
promptly pay the Executive his full base salary through the Date of
Termination at the rate in effect at the time notice of termination is given.
In addition, the Company shall promptly pay the amount of any bonus or
incentive for the year in which the Date of Termination occurs (based on the
target bonus for the Executive for the year) prorated to the Date of
Termination (without application of any denial provisions based on
unsatisfactory personal performance or any other reason). The Company shall
also pay the Executive for any vacation earned but not taken with such
payment being equal to the Executive's calculated daily base salary rate
times the applicable days of such vacation.
2.3Severance Payment. The Company shall pay the Executive a severance
payment equal to two (2) times the sum of: (a) the Executive's highest rate
of pay, on an annualized basis, established by the Company during the last
five years plus (b) the highest bonus earned by the Executive, with respect
to any single year, over the last five (5) years. The severance payment
shall be made in a lump-sum within thirty (30) days of the Date of
Termination.
2.4Pension Payment. The Company shall pay the Executive a supplemental
pension benefit equal to the lump sum benefit which the Executive would be
entitled to receive under the Star Banc Employees' Pension Plan if the
Executive were 100% vested and had two (2) additional years of service minus
the lump sum benefit actually payable to the Executive under the Star Banc
Employees' Pension Plan. Payment of this supplemental pension benefit shall
be made within thirty (30) days of the Date of Termination.
<PAGE>
2.5 Medical Coverage. The Company shall, at its expense, maintain the
Executive's life, health and accidental death and disability insurance
coverage with the coverages maintained at the higher level in effect either
immediately prior to the date of the Change in Control or on the Date of
Termination, for a period of two (2) years following the Date of Termination.
2.6 Limitations on Amount of Termination Benefits. In the event that the
total value of benefits to the Executive would constitute Excess Parachute
Payments within the meaning of Section 280G of the Internal Revenue Code, as
amended, when added to payments pursuant to this Section 2, then the payment
pursuant to this Section 2 shall be reduced by the amount necessary to cause
the Executive to receive one thousand dollars less than 300% of the
Executive's Base Amount (as that term is defined in Section 280G of the
Internal Revenue Code of 1986) from all payments to the Executive from the
Company. In the event the amount of the payments exceeds the amount
subsequently determined to have been due, the excess benefits over three
times the Base Amount shall constitute a loan by the Company to the
Executive, payable on demand by the Company, with interest at a rate equal to
120 percent of the applicable federal rate determined under Section 1274(d)
of the Internal Revenue Code of 1986, as amended, compounded semi-annually.
If the Termination Benefits are to be reduced, pursuant to the limitation
described in this Section 2.6, then the determination of which benefit is to
be reduced shall be made solely by the Executive.
2.7 Termination Which Does Not Require Payment Of Termination Benefits. No
Termination Benefits need to be provided by the Company to the Executive
under this Section 2 if the Executive's employment is terminated:
(a) By the Executive for any reason other than for Good Reason;
(b) By the Company for Cause or Disability; or
(c) By death.
3.New Employment; Reduction of Termination Benefits.
The Termination Benefits provided under Section 2 shall not be treated as
damages, but rather shall be treated as severance compensation to which the
Executive is entitled. The Executive shall not be required to mitigate the
amount of any Termination Benefit provided under Section 2 by seeking other
employment or otherwise.
<PAGE>
4.Notice of Termination.
Any purported termination by the Company of the Executive's employment for
Cause or Disability or by the Executive for Good Reason shall be communicated
by notice of termination to the other party. A notice of termination shall
include the specific reason for termination relied upon and shall set forth
in reasonable detail, the facts and circumstances claimed to provide a basis
for termination of employment.
Any dispute by a party hereto regarding a notice of termination delivered to
such party must be conveyed to the other party within thirty (30) days after
the notice of termination is given. If the particulars of the dispute are
not conveyed within the thirty (30) day period, then the disputing party's
claims regarding the termination shall be deemed forever waived.
5.Successor; Binding Agreement.
Star Banc will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of Star Banc expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place
(the assumption shall be by agreement in form and substance satisfactory to
the Executive). Failure of Star Banc to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive, at his election, to Termination Benefits from
the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such election becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company and any successor to
its business and/or assets as described above or which otherwise becomes
bound by all the terms and provision of this Agreement by operation of law.
In addition, as used in this Agreement, "Star Banc" shall mean Star Banc and
any successor to its business and/or assets as described above or which
otherwise becomes bound by all the terms and provision of this Agreement by
operation of law.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amount would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to his designee or, if
there be no such designee, to his estate.
6.Miscellaneous.
6.1 Notice. All notices, elections, waivers and all other communications
provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, to such address as either
party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
6.2 No Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Chief Executive Officer of the
Company. No waiver by either party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
6.3 Indemnification. If litigation shall be brought to enforce or interpret
any provision contained herein, the Company hereby agrees to indemnify the
Executive for his attorney's fees and disbursement incurred in such
litigation, and hereby agrees to pay prejudgment interest on any money
judgment obtained by the Executive, calculated at the prime interest rate
announced as such by the Wall Street Journal from time-to-time, from the
earliest date that payment(s) to him should have been made under this
Agreement. If the Wall Street Journal announces two or more rates as the
prime rate, then the highest rate shall be used.
6.4 Payment Obligations Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein shall
be absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the Executive or any third
party. All amounts payable by the Company hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the Company shall
be final and the Company will not seek, nor permit its subsidiaries,
affiliates, successors or assigns to seek, to recover all or any part of such
payment from the Executive or from whosoever may be entitled thereto, for any
reason whatsoever.
6.5 Term of Agreement. The term of this Agreement shall continue for an
initial period of three (3) years from the date of this Agreement. On each
anniversary of this Agreement, the term shall be extended for an additional
year unless prior to an anniversary date Star Banc's Board of Directors cause
a notice of nonrenewal to be sent to the Executive. Any Termination Benefits
due pursuant to this Agreement shall continue to be an obligation of the
Company and enforceable by the Executive until paid in full.
6.6 Controlling Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
6.7 Interpretation of Agreement. In the event of any ambiguity, vagueness
or other matter involving the interpretation or meaning of this Agreement,
this Agreement shall be construed liberally so as to provide to the Executive
the full benefits set out herein.
6.8 Severability. Each section, subsection or paragraph of this Agreement
shall be deemed severable and if for any reason any portion of this Agreement
is unenforceable, invalid or contrary to any existing or future law, such
unenforceability or invalidity shall not affect the applicability or validity
of any other portion of this Agreement.
6.9 U.S. Dollars. All payments required to be made under this Agreement
shall be made in United States Dollars.
6.10 Employment Agreement. Any benefits provided to the Executive under this
Agreement will, unless specifically stated otherwise in this Agreement, be in
addition to and not in lieu of any benefits that may be provided the
Executive under an Employment Agreement, if any, with the Company.
Nothing in this Agreement is to be deemed to give the Company the right to
take any action or engage in any omission with respect to the Executive at
any time when any such action or omission is not permissible and proper under
any Employment Agreement if then in force. Similarly, except as provided
otherwise in this Agreement, nothing in this Agreement is to be deemed to
give the Executive the right to take any action or engage in any omission
with respect to the Company at any time when any such act or omission is not
permissible and proper under any Employment Agreement if then in force.
This Agreement shall continue in force so long as the Executive remains
employed by the Company and shall not be affected by any termination of any
Employment Agreement.
6.11Footnotes, Title and Captions. All footnotes or section, subsection or
paragraph titles or captions contained in this Agreement are for convenience
only and shall not be deemed part of the text of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
Attest: STAR BANC CORPORATION, on behalf of itself and each Subsidiary
BY:
Name
Jerry A. Grundhofer
Title Name
Chairman, President and CEO
Title
EXECUTIVE
<PAGE>
Name
<TABLE> EXHIBIT 11
<CAPTION>
COMPUTATION OF EARNINGS PER SHARE
(Dollars in thousands except per share data)
Twelve Months
1993 1992 1991
<S> <C> <C> <C>
Net income. . . . . . . . . . . . . . .$ 100,273 $ 76,119 $ 65,832
Preferred dividends . . . . . . . . . . 1,084 1,146 651
Income available to common
shareholders. . . . . . . . . . . . .$ 99,189 $ 74,973 $ 65,181
Weighted average of common
stock equivalents . . . . . . . . . . 29,549 29,227 29,086
Weighted average of preferred
stock convertible to common
stock equivalents . . . . . . . . . . 823 884 498
Weighted average of fully
diluted common stock equivalents. . .$ 30,372 $ 30,111 $ 29,584
Primary earnings per share
(income available to common
shareholders divided by weighted
average of common stock
equivalents). . . . . . . . . . . . $ 3.36 $ 2.57 $ 2.24
Fully diluted earnings per share
(net income divided by weighted
average of fully diluted
common stock equivalents) . . . . . .$ 3.30 $ 2.53 $ 2.23
/TABLE
<PAGE>
Financial Highlights
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
1993 % change 1992 % change 1991
<S> <C> <C> <C> <C> <C>
For The Year:
Net income $100,273 31.7% $ 76,119 15.6% $ 65,832
Per Share:
Primary earnings $ 3.36 30.9% $ 2.57 14.5% $ 2.24
Fully diluted earnings 3.30 30.6 2.53 13.6 2.23
Common dividends declared 1.16 11.5 1.04 4.0 1.00
Preferred dividends declared 6.00 - 6.00 - 3.00
Year-end book value per
common share outstanding 22.33 11.1 20.09 8.1 18.58
Year-end market value per
common share 35.00 (2.8) 36.00 44.0 25.00
Average Balances:
Total assets $7,542,798 5.2% $7,171,898 13.2% $6,336,096
Earning assets 7,003,053 5.3 6,652,072 13.4 5,865,153
Loans, net of
unearned interest 5,146,341 4.5 4,926,900 4.4 4,718,795
Deposits 6,121,859 4.1 5,880,471 13.3 5,192,155
Shareholders equity 640,868 10.6 579,486 9.5 529,312
At Year-End:
Common shares issued and
outstanding 29,606,665 29,216,453 28,902,688
Number of common
shareholders 7,901 8,008 7,501
Number of employees 3,540 3,696 3,786
Ratios:
Return on average assets 1.33% 1.06% 1.04%
Return on average equity 15.65 13.14 12.44
Average shareholders equity
to average total assets 8.50 8.08 8.35
Risk-based capital ratios:(a)
Tier 1 11.10 10.64 10.70
Total 12.41 11.99 12.10
Leverage ratio 8.23 7.42 7.90
Net interest margin 4.67 4.70 4.69
Noninterest expense to
net revenue 57.06 61.34 60.33
Noninterest income as a
percent of net revenue 25.68 24.16 22.95
- -----------------------------------------------------------------------------------------
Excluding Restructuring Charge:
Net income $100,273 25.2% $ 80,079 21.6% $ 65,832
Primary earnings per share 3.36 24.3 2.70 20.5 2.24
Fully diluted earnings
per share 3.30 24.1 2.66 19.5 2.23
Return on average assets 1.33% 1.12% 1.04%
Return on average equity 15.65 13.82 12.44
Noninterest expense to
net revenue 57.06 59.88 60.33
- -----------------------------------------------------------------------------------------
(a) Risk-based capital ratios for 1991 have been restated based on 1992 final guidelines.
</TABLE>
-1-
<PAGE>
<PAGE>
5 YEAR LINE CHARTS OF NET INCOME, EPS, DIVIDENDS, AVERAGE BALANCES AND
VARIOUS RATIOS:
1989 1990 1991 1992 1993
Return on Average Equity 12.95% 13.39% 12.44% 13.14% 15.65%
(In Percents)
Return on Average Assets 1.02 1.08 1.04 1.06 1.33
(In Percents)
Net Interest Margin 4.52 4.58 4.69 4.70 4.67
(In Percents)
Noninterest Expense to
Net Revenue 59.70 57.49 60.33 61.34 57.06
(In Percents)
Net Charge-Offs to
Average Loans 0.74 0.73 0.79 0.74 0.56
(In Percents)
Average Shareholders Equity
to Average Total Assets 7.88 8.04 8.35 8.08 8.50
(In Percents)
Earnings Per Share
Fully Diluted $2.01 $2.23 $2.23 $2.53 $3.30
(In Dollars)
Common Dividends Declared
Per Share 0.88 0.96 1.00 1.04 1.16
(In Dollars)
Average Shareholders Equity 448.1 484.5 529.3 579.5 640.9
(In Millions of Dollars)
Average Total Asset 5.69 6.02 6.34 7.17 7.54
(In Billions of Dollars)
Dividend Payout Rati 43.57 42.67 44.33 40.35 34.41
(In Percents)
-2-
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
OVERVIEW
Net income of Star Banc Corporation ("the corporation") totaled
$100,273,000 in 1993, increasing from $76,119,000 in 1992 and $65,832,000 in
1991. Primary and fully diluted earnings per share in 1993 amounted to $3.36
and $3.30, respectively. This compares favorably to primary earnings per share
of $2.57 in 1992 and $2.24 in 1991 and fully diluted earnings per share of $2.53
in 1992 and $2.23 in 1991.
The corporation's return on average assets increased to 1.33 percent in 1993,
compared to 1.06 percent in 1992 and 1.04 percent in 1991. Return on average
shareholders' equity was 15.65 percent in 1993, 13.14 percent in 1992 and 12.44
percent in 1991.
1992 results were adversely impacted by a one-time restructuring charge of
$6,000,000 pre-tax or $3,960,000 after tax. This charge was a result of a
comprehensive restructuring program which began in 1992 and was designed to
evaluate and examine every aspect of the organization in an effort to enhance
revenues, as well as control costs by eliminating duplication of efforts, low
value activities and costs, unprofitable products and non-productive systems.
In 1993, as part of the restructuring program, the corporation merged its ten
subsidiary banks into three, Star Bank, N.A. (Ohio), Star Bank, N.A., Kentucky
and Star Bank, N.A., Indiana. In addition, the back office operations for most
departments were centralized into Star Bank, N.A., the corporation's lead bank.
On June 19, 1992, the corporation's largest subsidiary, Star Bank, N.A.,
("the bank") purchased 28 Cleveland area branch offices from Ameritrust Company
National Association. This transaction was accounted for as a purchase, and
accordingly, all assets acquired and liabilities assumed were recorded at fair
value. In this transaction the bank acquired $263 million in securities, $111
million in loans and $937 million in deposits. The difference between the
amounts of securities, loans and deposits, less amounts for fixed assets and
the purchase premium, was received in the form of $557 million in cash. The
cash received was invested in U.S. Government Agency issued mortgage-backed
securities.
On July 1, 1991, the corporation acquired all of the outstanding common
shares of Kentucky Bancorporation, Inc. ("KBI"), a multi-bank holding company
with total assets of $393 million headquartered in Covington, Kentucky. As the
acquisition of KBI was accounted for as a purchase, aacquired and
liabilities assumed were recorded at fair value, the corporation's
financial statements include KBI's operating results only from the date of
acquisition.
Total assets at December 31, 1993 were $7.64 billion, down slightly from
$7.72 billion a year earlier. Total loans, net of unearned interest, amounted
to $5.29 billion at the end of 1993, compared to $4.99 billion at the end of
1992. Deposits totaled $6.02 billion and $6.40 billion at December 31, 1993 and
1992, respectively. Despite the effects of a sluggish economy, the corporation
experienced increases in loan volume throughout 1993, led by the real estate
and consumer loan areas.
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income, the difference between total interest income and total
interest expense, is the corporation's principal source of earnings. The amount
of net interest income is determined by the volume of interest-earning assets,
the level of rates earned on those interest-earning assets, and the cost of
supporting funds. The difference between rates earned on interest-earning
assets (with an adjustment made to tax-exempt income to provide comparability
with taxable income) and the cost of supporting funds, is measured by the net
interest margin.
Net interest income increased 4.9 percent in 1993 and 14.5 percent in 1992.
The increase in 1993 was due to an increase in interest-earning assets, which
resulted from increased loan volume and a full year's effect of the Ameritrust
branch purchase. The 1992 increase was due primarily to an increase in interest-
earning assets, which was a result of the purchase of the Ameritrust branch
offices noted above. The average amount of interest-earning assets held by the
corporation increased 5.3 percent in 1993 and 13.4 percent in 1992. The net
interest margin amounted to 4.67 percent in 1993, 4.70 percent in 1992, and
4.69 percent in 1991.
The slight decline in net interest margin in 1993 was a result of the
Ameritrust branch office acquisition, which contributed positively to net
interest income in 1993, but reduced net interest margin due to the earning
asset growth being supported solely by deposits. The full year's effect of the
Ameritrust purchase had a greater impact on net interest margin in 1993 as
compared to 1992. Partially offsetting this negative impact was an increase in
the spread between rates earned on interest-earning assets and rates paid on
supporting funds, in addition to a larger percentage of earning assets being
supported by noninterest-bearing deposits in 1993. The improvement in net
interest margin in 1992 was primarily due to the widening of interest rate
spreads and a change in mix of funding sources with a greater reliance on lower
cost savings, NOW, money market deposit accounts and short-term borrowings. The
improvement in 1992 was somewhat limited by the Ameritrust branch office
acquisition.
In the fourth quarter of 1993, the corporation reduced its investments in
money market instruments and reinvested these funds in investment securities.
In addition, the corporation entered into interest rate swap agreements with a
notional value of $490 million. These changes were implemented to reduce the
corporation's exposure to adverse changes in interest rates and as a result
improve the net interest margin.
Table 1 provides detailed information as to average balances, interest income
and expense, and rates earned or paid by major balance sheet category for the
years 1991 through 1993. Table 2 provides an analysis of the changes in net
interest income attributable to changes in volume of interest-earning assets or
interest-bearing liabilities and to changes in rates earned or paid.
To minimize the volatility of net interest income that may result from
fluctuating interest rates, the corporation controls its exposure to adverse
changes in interest rates by striving to maintain a balance between amounts of
interest-earning assets and interest-bearing liabilities which are expected to
mature or be subject to repricing at any point in time. Table 3 demonstrates
that, as of December 31, 1993, the corporation's exposure to changes in interest
rates was minimal.
-19-
<PAGE>
<TABLE>
Table 1-AVERAGE BALANCE SHEETS AND AVERAGE RATES- For the years ended December 31.
(dollars in thousands)
<CAPTION>
1993 1992 1991
Daily Average Daily Average Daily Average
Average Interest Rate Average Interest Rate Average Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Commercial loans $1,740,501 $130,477 7.50% $1,732,481 $136,960 7.91% $1,739,000 $169,597 9.75%
Real estate loans 2,045,011 166,225 8.13 1,903,523 171,086 8.99 1,725,952 173,540 10.05
Retail loans 1,360,829 127,392 9.36 1,290,896 138,401 10.72 1,253,843 151,515 12.08
Total loans 5,146,341 424,094 8.24 4,926,900 446,447 9.06 4,718,795 494,652 10.48
Federal funds sold and
securities purchased
under agreements
to resell 258,416 8,094 3.13 324,641 11,568 3.56 249,016 14,409 5.79
Taxable investment
securities 1,554,028 85,996 5.53 1,282,084 81,001 6.32 810,251 65,908 8.13
Non-taxable investment
securities 38,182 3,029 7.93 59,833 4,710 7.86 73,160 6,713 9.17
Interest-bearing
deposits in banks 6,086 237 3.90 58,614 2,174 3.71 13,931 935 6.71
Total interest-
earning assets 7,003,053 521,450 7.45 6,652,072 545,900 8.21 5,865,153 582,617 9.93
Cash and due
from banks 349,096 309,408 288,161
Allowance for
loan losses (84,754) (77,809) (71,681)
Other assets 275,403 288,227 254,463
Total assets $7,542,798 $7,171,898 $6,336,096
Liabilities and Shareholders' Equity:
Savings and
NOW deposits $1,773,360 $ 45,673 2.58% $1,233,843 $ 39,752 3.22% $ 784,465 $ 35,889 4.57%
Money market
deposit accounts 958,987 24,992 2.61 1,176,956 38,184 3.24 960,246 49,249 5.13
Time deposits $100,000
and over 433,412 16,540 3.82 506,359 23,961 4.73 628,525 43,086 6.86
Time deposits under
$100,000 1,919,959 83,717 4.36 2,037,975 108,442 5.32 2,052,967 149,188 7.27
Short-term borrowings 621,482 17,752 2.86 498,014 16,883 3.39 463,024 25,282 5.46
Long-term debt 54,308 6,017 11.08 59,906 5,816 9.71 45,937 4,639 10.10
Total interest
bearing liabilities 5,761,508 194,691 3.38 5,513,053 233,038 4.23 4,935,164 307,333 6.23
Noninterest-bearing
deposits 1,036,141 925,338 765,952
Other liabilities 104,281 154,021 105,668
Shareholders' equity 640,868 579,486 529,312
Total liabilities
and shareholders
equity $7,542,798 $7,171,898 $6,336,096
- ---------------------------------------------------------------------------------------------------------------------
Net interest margin 4.67% 4.70% 4.69%
Interest rate spread 4.07 3.98 3.70
- ---------------------------------------------------------------------------------------------------------------------
Note: Interest and average rate are presented on a fully-taxable equivalent basis. Taxable equivalent amounts are
calculated utilizing the marginal federal income tax rate of 35 percent for 1993 and 34 percent for 1992 and 1991.
The total of nonaccrual loans is included in the daily average balance.
</TABLE>
-20-
<PAGE>
<PAGE>
<TABLE>
Table 2 -VOLUME/RATE VARIANCE ANALYSIS-
<CAPTION>
(dollars in thousands) Change from 1992 to 1993 Change from 1991 to 1992
Volume Rate Total Volume Rate Total
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in:
Interest income:
Commercial loans $ 210 $ (6,693) $ (6,483) $ (636) $(32,001) $(32,637)
Real estate loans 11,561 (16,422) (4,861) 16,856 (19,310) (2,454)
Retail loans 6,103 (17,112) (11,009) 4,364 (17,478) (13,114)
Total loans 17,874 (40,227) (22,353) 20,584 (68,789) (48,205)
Taxable investment securities 15,888 (10,893) 4,995 32,138 (17,045) 15,093
Non-taxable investment securities (1,722) 41 (1,681) (1,123) (880) (2,003)
Federal funds sold and securities
purchased under agreements
to resell (2,182) (1,292) (3,474) 3,644 (6,485) (2,841)
Interest-bearing deposits in banks (2,043) 106 (1,937) 1,821 (582) 1,239
Total 27,815 (52,265) (24,450) 57,064 (93,781) (36,717)
Interest expense:
Savings and NOW deposits 14,929 (9,008) 5,921 16,522 (12,659) 3,863
Money market deposit accounts (6,435) (6,757) (13,192) 9,585 (20,650) (11,065)
Time deposits $100,000 and over (3,177) (4,244) (7,421) (7,363) (11,762) (19,125)
Time deposits under $100,000 (6,006) (18,719) (24,725) (1,080) (39,666) (40,746)
Short-term borrowings 3,477 (2,608) 869 1,790 (10,189) (8,399)
Long-term debt (574) 775 201 1,362 (185) 1,177
Total 2,214 (40,561) (38,347) 20,816 (95,111) (74,295)
- --------------------------------------------------------------------------------------------------------
Net variance $25,601 $(11,704) $ 13,897 $36,248 $ 1,330 $ 37,578
- --------------------------------------------------------------------------------------------------------
Note: Interest on non-taxable loans and securities is computed on a fully-taxable equivalent basis.
The change in interest due to both volume and rate has been allocated to volume and rate changes in
proportion to the relationship of the absolute dollar amounts of the change in each.
</TABLE>
<TABLE>
TABLE 3 -INTEREST RATE SENSITIVITY (Gap Analysis)-
<CAPTION>
0-90 91-180 181-270 271-365 Over 1
As of December 31, 1993 (dollars in millions) Total Days Days Days Days Year
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Loans $5,294 $2,277 $382 $349 $341 $1,945
Investment securities 1,600 277 300 237 115 671
Money market instruments 173 173 - - - -
Total 7,067 2,727 682 586 456 2,616
Interest-Bearing Liabilities:
Deposits:
Savings and NOW 1,822 152 152 152 152 1,214
Other interest-bearing deposits 2,993 1,263 338 425 207 760
Short-term borrowings 816 816 - - - -
Long-term debt 52 5 3 2 - 42
Total 5,683 2,236 493 579 359 2,016
Interest rate swap position - (295) (195) - - 490
Total gap 1,384 196 (6) 7 97 1,090
Cumulative gap $ - $ 196 $190 $197 $294 $1,384
- --------------------------------------------------------------------------------------------------------------
Note: Savings and NOW accounts are subject to immediate withdrawal. However, for the purpose of the above
analysis these accounts are reported based on a historical analysis of Star Bank accounts.
</TABLE>
-21-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
NONINTEREST INCOME
Noninterest income is a growing source of revenue, representing 25.7 percent of
the corporation's tax-equivalent net revenues in 1993, compared to 24.2 percent
in 1992 and 23.0 percent in 1991. Noninterest income, exclusive of the effects
of securities transactions, increased 14.0 percent in 1993, following a 18.2
percent increase in 1992. Growth occurred in several areas, led by trust income,
service charges on deposits and fees from other banking services.
Trust income increased 8.5 percent to $35.8 million in 1993, following a 4.6
percent increase in 1992. The increase in 1993 revenue was attributable to
expansion of Star Bank, N.A.'s proprietary mutual funds, continued expansion of
the customer base and fee adjustments in certain product lines. The 1992 growth
in revenue was attributable to expansion of the customer base and continued
implementation of a new fee schedule established in 1991. At year-end 1993,
total trust assets (both discretionary and non-discretionary) amounted to $13.0
billion, compared to $11.6 billion at the end of 1992 and $11.1 billion at the
end of 1991.
Service charges on deposits increased $6.6 million or 23.1 percent in 1993,
following a 23.2 percent increase in 1992. The 1993 increase was due to
increases in deposit levels and activity, additional charges on particular
product lines and a full year's impact of the purchase of the Ameritrust branch
offices in 1992. The 1992 increase was related in part to the Ameritrust branch
purchase which contributed to a 17.9 percent increase in total deposits for the
year. All other service charges and fees increased 10.4 percent in 1993,
following a 20.4 percent increase in 1992. The increase in service charges and
fees was reduced approximately $1.1 million due to accelerated amortization and
write-downs of excess servicing fees, which resulted from the unprecedented
level of refinancing activity that has taken place as mortgage rates declined
in 1993. Excluding the accelerated amortization and write-down of excess
servicing fees, mortgage servicing income increased $1.0 million or 34.9 percent
in 1993.
All other income amounted to $9.9 million in 1993, $8.5 million in 1992 and
$5.0 million in 1991. Gains on sales of residential real estate loans were $3.6
million in 1993, $3.2 million in 1992, and $.8 million in 1991. The continued
increases in gains on sales of residential real estate loans are due to the
extremely high volume of loan originations and resulting expansion of the
mortgage loan servicing portfolio, which the corporation has experienced in
1992 and 1993. Future gains on sales of residential real estate loans on the
secondary market are a function of changes in the rate environment and origin-
ation volume and, therefore, difficult to project.
Table 4 provides a summary of changes in noninterest income for the last
three years.
<TABLE>
TABLE 4 -NONINTEREST INCOME-
<CAPTION>
% Increase/ % Increase/
(decrease) (decrease)
As of December 31 (dollars in thousands) 1993 1992 1991 1993/1992 1992/1991
<S> <C> <C> <C> <C> <C>
Trust $ 35,768 $32,963 $31,517 8.51% 4.59%
Service charges on deposits 35,460 28,817 23,400 23.05 23.15
Credit card fees 10,848 10,092 10,442 7.49 (3.35)
Mortgage banking(a) 6,587 5,994 1,672 9.89 258.49
Other service charges and fees 17,812 15,769 12,496 12.96 26.19
Investment securities gains/(losses)-net 157 719 (1,738) (78.16) -
All other noninterest income 6,258 5,290 4,192 18.30 26.19
- ------------------------------------------------------------------------------------------------
Total noninterest income $112,890 $99,644 $81,981 13.29% 21.55%
- ------------------------------------------------------------------------------------------------
(a) Mortgage banking income consists of mortgage loan servicing fees and gains on sales of
residential real estate loans.
</TABLE>
- --------------------------------------------------------------------------------
NONINTEREST EXPENSE
Total noninterest expense, excluding the one-time restructuring charge in 1992,
increased slightly to $250.8 million in 1993, compared to $247.0 million in
1992, and $215.5 million in 1991. The acquisition of the 28 branch offices in
Cleveland from Ameritrust Company, N.A. increased noninterest expenses by
approximately $9.0 million in 1993. Despite this increase, noninterest expense
grew only $3.8 million or 1.6 percent in 1993. In 1992, noninterest expense
increased $31.5 million or 14.6 percent, of which approximately $13.2 million
was attributable to the acquisition of the Ameritrust branch offices. In
addition, 1992 expense reflected a full year's effect of the 1991 mid-year
acquisition of KBI.
In 1993, noninterest expense levels have begun to reflect the positive impact
created by implementation of the corporation's restructuring program. As part
of the restructuring program the corporation has continued to centralize and
-22-
<PAGE>
<PAGE>
streamline operations, including merging its ten subsidiary banks into three
banks, Star Bank, N.A. (Ohio), Star Bank, N.A., Kentucky and Star Bank, N.A.,
Indiana. Lower noninterest expense levels contributed to the improvement in
the corporation's noninterest expense ratio which declined to 57.1 percent in
1993, compared to 59.9 percent in 1992 (excluding the restructuring charge),
and 60.3 percent in 1991.
Salary expense declined 2.6 percent in 1993, following a 13.0 percent
increase in 1992. Pension and other employee benefits increased 4.3 percent in
1993 and 16.4 percent in 1992. Salary expense declined as a result of a
decrease in the number of full time equivalent employees in 1993. Benefits
increased in 1993 as a result of the change to accrual basis for recognition of
postretirement benefits expense as required by SFAS No. 106, which is described
further below. Increases in salaries and benefits for 1992 were due in part to
the purchase of the Ameritrust branch offices.
In December 1990, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 106 (SFASNo. 106) related to employer's
accounting for postretirement benefits other than pension. Although it applies
to all forms of postretirement benefits, the Statement principally focuses on
postretirement health care benefits and requires companies to accrue, during
the period that the employee renders service to the company, the expense of
providing such benefits. The corporation adopted SFAS No. 106 in 1993. The
accumulated postretirement benefit obligation of approximately $5.5 million
as of the date of adoption is being amortized on a straight-line basis over
the expected future lifetime of the retirees under the plan of 14 years. The
net periodic postretirement benefit expense recognized by the corporation was
$789,000 in 1993.
Equipment expense declined 2.7 percent in 1993, following a 8.9 percent
increase in 1992. The decline in equipment expense in 1993 is a result of a
reduction in equipment lease expense as the corporation purchased various types
of equipment which had been leased previously. Occupancy expense increased 12.3
percent in 1993 and 22.7 percent in 1992. The occupancy expense increases were
due to the purchase of the former Ameritrust branch offices in 1992 and a full
year's effect of the acquisition of KBI on 1992 expense levels.
All other expenses, excluding the one-time restructuring charge in 1992,
increased $4.1 million or 4.3 percent in 1993, following a 15.8 percent
increase in 1992. The 1993 increase was due in part to a $3.7 million increase
in amortization of purchased mortgage servicing rights (PMSR's), in addition to
a full year's effect of the Ameritrust transaction. Amortization of PMSR's
increased as a result of a 40.3 percent increase in the mortgage servicing
portfolio and an acceleration of amortization due to the unprecendented level
of refinancing activity previously described. The 1992 increase is largely due
to increases in FDIC insurance, marketing expenses and amortization of
intangible assets related to the purchase of the former Ameritrust branch
offices. FDIC insurance premiums increased $1.1 million in 1993, following a
$1.8 million increase in 1992. The 16.6 percent increase in FDIC insurance
premiums in 1992 is the result of a 17.9 percent increase in deposits.
Table 5 provides a summary of changes in noninterest expense for the last
three years.
<TABLE>
TABLE 5 -NONINTEREST EXPENSE-
<CAPTION>
% Increase/ % Increase/
(decrease) (decrease)
As of December 31 (dollars in thousands) 1993 1992 1991 1993/1992 1992/1991
<S> <C> <C> <C> <C> <C>
Salaries $ 97,347 $ 99,900 $ 88,416 (2.56)% 12.99%
Pension and other employee benefits 19,237 18,438 15,835 4.33 16.44
Equipment expense 16,629 17,098 15,704 (2.74) 8.88
Occupancy expense-net 17,717 15,781 12,866 12.27 22.66
FDIC insurance 13,987 12,933 11,091 8.15 16.61
State taxes 9,052 8,676 7,463 4.32 16.25
All other noninterest expense 76,880 74,185 64,153 3.63 15.64
- -------------------------------------------------------------------------------------------------
250,849 247,011 215,528 1.55 14.61
Restructuring charge - 6,000 - - -
- -------------------------------------------------------------------------------------------------
Total noninterest expense $250,849 $253,011 $215,528 (0.85)% 17.39%
- -------------------------------------------------------------------------------------------------
</TABLE>
-23-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INCOME TAXES
The corporation's effective tax rate was 34.3 percent in 1993, compared to 33.3
percent in 1992 and 31.4 percent in 1991. The increase in 1993 is due primarily
to the Budget Reconciliation Act passed by Congress in 1993. Under this new law,
the corporate income tax rate increased from 34 percent to 35 percent, effective
January 1, 1993. This increase in the corporate income tax rate, resulted in a
$1.4 million increase in the corporation's income tax expense in 1993, net of a
slight adjustment to deferred taxes.
The remaining increases in the corporation's effective tax rate were due to a
shift in recent years from non-taxable sources of income toward taxable sources
of income. This change was initiated by management due to current tax law which
discourages investment in certain tax-exempt loans and securities.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109 (SFAS No. 109) "Accounting for Income
Taxes." SFAS No. 109 supersedes SFAS No. 96, which was adopted by the
corporation in 1988. The adoption of SFAS No. 109 in 1993 did not impact the
financial condition or results of operations of the corporation. Additional
disclosures of deferred taxes required by SFAS No. 109 are shown in Note 9 in
the Notes to Consolidated Financial Statements.
- -------------------------------------------------------------------------------
BALANCE SHEET
LOANS
Loans, net of unearned interest, amounted to $5.29 billion at December 31, 1993,
compared to $4.99 billion at December 31, 1992, an increase of $301 million.
Despite the continued sluggish economic conditions, the corporation experienced
increases in loan volumes throughout 1993, led by the retail and real estate
loan areas.
Table 6 provides a summary of loans by type at year-end for each of the past
five years. Table 7 provides maturity distribution data for selected types of
loans.
In 1991, the corporation formed a mortgage banking department to manage
originations, secondary market sales and servicing of residential mortgages on
a corporatewide basis. Due to the continued decline in market interest rates in
1993, originations of residential real estate loans were extremely heavy. During
1993, the corporation sold $618 million of residential mortgage loans into the
secondary market, this increase in loan servicing led to an increase in service
fee income. As of December 31, 1993, the corporation serviced $1.4 billion in
mortgage loans for outside investors, an increase of 40.3 percent from 1992.
<TABLE>
TABLE 6 -LOANS BY TYPE-
<CAPTION>
As of December 31 (dollars in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Commercial $1,789,695 $1,731,181 $1,685,188 $1,798,784 $1,703,183
Real estate construction and development 180,470 192,975 192,220 211,315 229,697
Commercial real estate mortgage 909,084 801,490 644,657 483,520 459,317
Residential real estate mortgage 997,747 969,512 1,063,809 875,536 738,818
Credit cards 172,534 173,271 173,161 161,078 151,716
Other retail 1,290,281 1,170,948 1,152,852 1,094,639 1,062,645
- ----------------------------------------------------------------------------------------------------
Total loans $5,339,811 $5,039,377 $4,911,887 $4,624,872 $4,345,376
Percent of total loans by type
Commercial 33.52% 34.35% 34.31% 38.89% 39.20%
Real estate construction and development 3.38 3.83 3.91 4.57 5.29
Commercial real estate mortgage 17.02 15.90 13.12 10.46 10.57
Residential real estate mortgage 18.69 19.24 21.66 18.93 17.00
Credit cards 3.23 3.44 3.53 3.48 3.49
Other retail 24.16 23.24 23.47 23.67 24.45
- ----------------------------------------------------------------------------------------------------
Total loans 100.00% 100.00% 100.00% 100.00% 100.00%
- ----------------------------------------------------------------------------------------------------
</TABLE>
-24-
<PAGE>
<PAGE>
<TABLE>
TABLE 7 -SELECTED LOAN MATURITY DISTRIBUTION-
<CAPTION>
Over One Over
One Year Through Five Five
As of December 31, 1993 (dollars in thousands) or Less Years Years Total
<S> <C> <C> <C> <C>
Commercial $1,062,248 $629,764 $ 97,683 $1,789,695
Real estate construction and development 90,657 82,381 7,432 180,470
Total $1,152,905 $712,145 $105,115 $1,970,165
- -----------------------------------------------------------------------------------------------------
Total of these selected loans due after one year with:
Predetermined interest rate $319,133
Floating interest rate 498,127
- -----------------------------------------------------------------------------------------------------
</TABLE>
ASSET QUALITY
As of December 31, 1993, the allowance for loan losses was $83.2 million or
1.57 percent of total loans, net of unearned interest. This is comparable to
$79.0 million or 1.58 percent of total loans, net of unearned interest, as of
December 31, 1992. The provision for loan losses totaled $33.0 million in 1993,
$40.9 million in 1992 and $39.9 million in 1991.
Table 8 provides a summary of activity in the allowance for loan losses
account by type of loan. As shown in Table 8, net charge-offs as a percentage
of average outstanding loans improved significantly in 1993 to 0.56 percent,
compared to 0.74 percent in 1992 and 0.79 percent in 1991. Net charge-offs in
1993 declined significantly in the retail loan portfolio due in part to a
strengthening in underwriting in the installment and credit card areas. The
corporation also experienced declines in the levels of charge-offs in the
commercial real estate and real estate construction areas.
<TABLE>
TABLE 8 -SUMMARY OF LOAN LOSS EXPERIENCE-
<CAPTION>
As of December 31 (dollars in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Average loans-net of unearned interest $5,146,341 $4,926,900 $4,718,795 $4,452,993 $4,054,382
- -----------------------------------------------------------------------------------------------------
Allowance for loan losses:
Balance-beginning of year $ 78,953 $ 73,805 $ 65,938 $ 57,433 $ 51,931
Charge-offs:
Commercial (20,752) (19,529) (17,718) (15,298) (11,628)
Real estate (2,516) (4,465) (3,064) (4,091) (6,083)
Retail (16,854) (23,890) (24,265) (19,946) (18,240)
Total charge-offs (40,122) (47,884) (45,047) (39,335) (35,951)
Recoveries:
Commercial 3,372 3,083 1,769 1,126 1,484
Real estate 633 252 208 67 77
Retail 7,312 8,020 6,000 5,462 4,474
Total recoveries 11,317 11,355 7,977 6,655 6,035
Net charge-offs (28,805) (36,529) (37,070) (32,680) (29,916)
Provision charged to earnings 33,008 40,898 39,913 40,417 35,418
Net allowances of banks or offices
acquired/sold - 779 5,024 768 -
- -----------------------------------------------------------------------------------------------------
Balance-end of year $ 83,156 $ 78,953 $ 73,805 $ 65,938 $ 57,433
- -----------------------------------------------------------------------------------------------------
Ratio of net charge-offs to average loans 0.56% 0.74% 0.79% 0.73% 0.74%
Ratio of allowance for loan
losses to end of year loans,
net of unearned interest 1.57 1.58 1.52 1.45 1.35
- -----------------------------------------------------------------------------------------------------
</TABLE>
Tables 9 and 10 provide information related to nonperforming assets and loans
90 days or more past-due. Due to reductions in nonaccrual loans and other real
estate owned, nonperforming assets declined $16.9 million at December 31, 1993,
compared to the level a year earlier. Nonperforming assets as a percentage of
total loans and other real estate owned decreased to 1.04 percent at December
31, 1993, compared to 1.44 percent a year earlier. Nonperforming loans as a
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<PAGE>
percentage of total loans decreased to 0.96 percent at December 31, 1993,
compared to 1.27 percent at December 31, 1992. The majority of the decrease in
nonperforming loans was achieved in the commercial loan and real estate
construction areas.
Other real estate owned, which is recorded at the lower of cost or fair value,
represents real estate of which the corporation has taken ownership in partial
or total satisfaction of loans or where a loan has been reclassified as an in-
substance foreclosure. Other real estate owned was $4.0 million at December 31,
1993, a decrease of $4.3 million from December 31, 1992. This was achieved
primarily through the sale of property held. There were no significant
additions to other real estate owned in 1993. Due to the uncertainty of economic
conditions, it is difficult to project future levels of nonperforming assets.
Management is not aware of any material amounts of loans outstanding, not
disclosed in Tables 9 and 10, where there is significant uncertainty as to the
ability of the borrower to comply with present payment terms. In addition, as
of December 31, 1993, there were no significant other interest-earning assets
classified as nonperforming or past-due 90 days or more. The corporation's
credit exposure to foreign countries is not significant.
Responsibility for the establishment of policy and direction of the loan
portfolio lies with the Credit Policy Management Group. Composed of members of
senior management, this group determines and oversees the execution of
strategies for the growth and development of the loan portfolio. To maintain
the level of credit risk at an appropriate level, the group sets underwriting
standards and internal lending limits and provides for proper diversification
by monitoring and placing constraints on concentrations of credit within the
portfolio on a consolidated basis.
In monitoring the level of credit risk within the loan portfolio, the
corporation utilizes a corporatewide loan tracking program. As part of this
program, risk ratings are individually assigned to each commercial and
commercial real estate loan within the portfolio and reported to management on
a monthly basis. Risk ratings are independently reviewed for propriety by the
corporation's loan review department. The system provides for the proper
measurement of the level of risk within the portfolio and facilitates
appropriate management and control.
Management does not allocate the allowance for loan losses to specific
categories of loans. The amount of the provision for loan losses necessary to
maintain the adequacy of the allowance is based on management's evaluation of
several key factors: the current loan portfolio, current economic conditions,
evaluation of significant problem loans, changes in the mix and levels of the
various types of loans, past charge-off experience and other pertinent informa-
tion. The allowance for loan losses is based on estimates, and ultimate losses
may vary from current estimates. These estimates are reviewed continually and,
as adjustments become necessary, they are reported in earnings in the periods
in which they become known. It is management's opinion that the allowance for
loan losses at December 31, 1993 was adequate to absorb all anticipated losses
in the loan portfolio as of that date.
<TABLE>
TABLE 9 -NONPERFORMING ASSETS-
<CAPTION>
As of December 31 (dollars in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Loans on nonaccrual status $50,687 $62,299 $55,473 $53,365 $29,033
Loans which have been renegotiated 249 1,223 1,852 2,077 1,027
Total nonperforming loans 50,936 63,522 57,325 55,442 30,060
Other real estate owned 3,984 8,327 28,753 27,734 14,618
Total nonperforming assets $54,920 $71,849 $86,078 $83,176 $44,678
- ------------------------------------------------------------------------------------------
Percentage of nonperforming loans
to loans, net of unearned interest 0.96% 1.27% 1.18% 1.22% 0.70%
Percentage of nonperforming assets
to loans, net of unearned interest
and other real estate owned 1.04 1.44 1.76 1.81 1.04
Percentage of allowance for loan
losses to nonperforming loans 163.26 124.29 128.75 118.93 191.06
Loans past-due 90 days or more $15,200 $15,529 $22,302 $17,464 $26,964
- ------------------------------------------------------------------------------------------
</TABLE>
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114 (SFAS No. 114) related to accounting by
creditors for impairment of a loan. SFAS No. 114 requires that impaired loans
as defined by the statement be measured based on (1) the present value of the
-26-
<PAGE>
<PAGE>
expected future cash flows discounted at the loan's effective interest rate, or
as a practical expedient, at the loan's observable market price or (2) the fair
value of the collateral if the loan is collateral dependent.
Adoption of SFAS No. 114 is required for fiscal years beginning after December
15, 1994. Management has not yet determined the date on which it will adopt the
provisions of SFAS No. 114; however, it does not expect adoption of SFAS No. 114
to have a material impact on the corporation's financial condition and results
of operations. However, because any adjustments for the impairment of loans are
measured at the time of adoption of the statement, management cannot at this
time measure the future impact of SFAS No. 114.
<TABLE>
TABLE 10 - COMPOSITION OF NONPERFORMING LOANS-
<CAPTION>
----------------December 31, 1993----------------- ---------------December 31, 1992----------------
Nonperforming Loans 90 Days Nonperforming Loans 90 Days
--------------------------------------- or -------------------------------------- or
Non- Restruc- Percentage More Non- Restruc- Percentage More
(dollars in thousands) accrual tured Total of Loans Past-Due accrual tured Total of Loans Past-Due
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial loans:
Corporate $24,688 $249 $24,937 1.69% $ 5,199 $28,217 $ 938 $29,155 2.00% $ 4,347
Asset-based lending 9,371 - 9,371 5.96 - 13,114 - 13,114 8.85 -
Commercial leasing 33 - 33 0.03 - 439 - 439 0.42 8
Total commercial loans 34,092 249 34,341 1.94 5,199 41,770 938 42,708 2.50 4,355
Real estate loans:
Residential 4,793 - 4,793 0.48 3,016 3,158 - 3,158 0.32 3,345
Commercial mortgage 9,931 - 9,931 1.09 5,533 6,677 231 6,908 0.87 3,332
Construction/land
development 363 - 363 0.20 53 8,689 - 8,689 4.46 1,686
Total real estate loans 15,087 - 15,087 0.72 8,602 18,524 231 18,755 0.95 8,363
Retail loans:
Other retail 1,185 - 1,185 0.11 576 1,738 54 1,792 0.17 1,616
Credit cards 260 - 260 0.15 823 205 - 205 0.12 1,187
Retail leasing 63 - 63 0.04 - 62 - 62 0.09 8
Total retail loans 1,508 - 1,508 0.10 1,399 2,005 54 2,059 0.16 2,811
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans $50,687 $249 $50,936 0.96% $15,200 $62,299 $1,223 $63,522 1.27% $15,529
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT SECURITIES
The corporation's investment portfolio decreased $47 million to $1,600 million
at December 31, 1993, from $1,647 million a year earlier. This decrease is due
to the acceleration of prepayments in the mortgage-backed securities portfolio,
which has occurred as a result of the continued decline in mortgage rates in
1993.
The corporation has continued to shift, as securities mature, a greater
portion of the investment securities portfolio toward mortgage-backed U.S.
Agency securities and collateralized mortgage obligations and away from U.S.
Treasury obligations due to the availability of enhanced yields. This is
evidenced by a $179 million increase in mortgage-backed securities at December
31, 1993, compared to December 31, 1992, while U.S. Treasury and Agency secur-
ities decreased $219 million. Credit risk is minimized by restricting purchases
to U.S. Agency-backed securities. To reduce interest rate risks associated with
these securities, purchases are restricted to securities with relatively short
maturities.
Table 11 provides information as to the composition of the corporation's
investment securities portfolio as of December 31, 1993.
-27-
<PAGE>
<PAGE>
<TABLE>
TABLE 11 -INVESTMENT SECURITIES-
<CAPTION>
Fully-Taxable
Equivalent
Carrying Market Average Weighted
As of December 31, 1993 (dollars in thousands) Value Value Maturity Average Yield
<S> <C> <C> <C> <C>
U.S. Treasury and agencies:
Within one year $ 266,427 $ 268,486 0.4 yrs. 5.34%
One through five years 118,733 120,447 1.5 yrs. 4.71
Five through ten years 656 753 6.0 yrs. 6.10
Over ten years 1,499 1,502 17.8 yrs. 5.16
Total 387,315 391,188 0.8 yrs. 5.15
Mortgage-backed securities:
Within one year 139,305 138,298 0.6 yrs. 5.47
One through five years 973,013 973,915 3.1 yrs. 5.33
Five through ten years 49,136 49,649 5.7 yrs. 4.85
Over ten years 10,269 10,341 13.6 yrs. 9.44
Total 1,171,723 1,172,203 3.0 yrs. 5.37
Obligations of states and political
subdivisions:
Within one year 15,086 15,193 0.4 yrs. 6.01
One through five years 14,865 15,251 2.2 yrs. 5.90
Five through ten years 1,648 1,869 6.9 yrs. 7.66
Over ten years - - - -
Total 31,599 32,313 1.6 yrs. 6.05
Other debt securities:
Within one year 622 622 0.3 yrs. 3.71
One through five years 10 35 4.2 yrs. 5.50
Five through ten years 125 100 7.1 yrs. 7.20
Over ten years - - - -
Total 757 757 1.4 yrs. 4.31
Federal Reserve Bank stock
and other equity securities 8,881 8,881
- ----------------------------------------------------------------------------------------------------
Total investment securities $1,600,275 $1,605,342
- ----------------------------------------------------------------------------------------------------
Note: Information related to mortgage-backed securities included above is presented based upon weighted
average maturities anticipating future prepayments.
</TABLE>
The corporation's debt securities portfolio is held with the intent and ability
to hold each security to maturity considering all foreseeable events and
conditions. Therefore, all investment securities are carried at historical cost
adjusted for amortization of premiums and accretion of discounts.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115 (SFAS No. 115) related to accounting for
certain investments in debt and equity securities. SFAS No. 115 addresses the
accounting and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. Those
investments are to be classified in three categories and accounted for as
follows:
(1) Debt securities that the corporation has the positive intent and ability to
hold to maturity will be classified as held-to-maturity and measured at
amortized cost.
(2) Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term will be classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
(3) Investments not classified as trading securities or held-to-maturity will
be classified as available-for-sale securities and reported at fair value.
Unrealized gains and losses for these securities are excluded from earnings
and reported as a net amount in a separate component of shareholders'
equity.
The initial adoption of SFAS No. 115 in 1994 will result in an increase to
shareholders' equity and investment securities of approximately $4.2 million and
$6.5 million, respectively. Management anticipates that the initial adoption of
SFAS No. 115 will not effect 1994 earnings.
-28-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
DEPOSITS
Total deposits decreased slightly to $6.02 billion at December 31, 1993,
compared to $6.40 billion a year earlier. However, noninterest-bearing
deposits increased to $1.20 billion at December 31, 1993, a 5.6 percent
increase over December 31, 1992. In addition, savings and NOW accounts
increased to $1.82 billion, a 16.7 percent increase over the prior year. These
increases were offset by decreases in money market deposit accounts and other
time deposits of $546 million and $91 million, respectively.
Rates offered on deposit products, as all market interest rates, continued to
decline throughout 1993 due to efforts of the Federal Reserve to stimulate
economic growth. The low rate environment has prompted many customers to
increase their liquidity by increasing funds in immediately accessible deposit
vehicles and reducing the amount in longer term instruments such as certificates
of deposit. The corporation has also noted a shift by customers out of
traditional bank products to other nonbank financial instruments or investments.
Table 12 provides a summary of total deposits by type at year-end for each of
the last five years. Table 13 provides maturity distribution for time deposits
$100,000 and over.
<TABLE>
TABLE 12 -DEPOSITS BY TYPE-
<CAPTION>
As of December 31 (dollars in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Noninterest-bearing deposits $1,200,609 $1,137,024 $ 935,732 $ 879,735 $ 845,629
Interest-bearing deposits:
Savings 878,119 758,412 331,308 264,323 268,203
NOW 943,750 802,311 581,650 449,711 408,364
Money market deposit accounts 714,752 1,261,217 1,028,306 882,513 819,175
Time deposits $100,000 and over 351,095 425,128 539,923 642,588 725,531
All other time deposits 1,927,241 2,018,664 2,011,629 2,010,886 1,906,152
Total deposits $6,015,566 $6,402,756 $5,428,548 $5,129,756 $4,973,054
Percent of total deposits by type
Noninterest-bearing deposits 19.96% 17.76% 17.24% 17.15% 17.01%
Interest-bearing deposits:
Savings 14.60 11.84 6.10 5.15 5.39
NOW 15.69 12.53 10.71 8.77 8.21
Money market deposit accounts 11.88 19.70 18.94 17.20 16.47
Time deposits $100,000 and over 5.83 6.64 9.95 12.53 14.59
All other time deposits 32.04 31.53 37.06 39.20 38.33
Total deposits 100.00% 100.00% 100.00% 100.00% 100.00%
- ----------------------------------------------------------------------------------------------------
</TABLE>
TABLE 13 -MATURITY OF TIME DEPOSITS $100,000 AND OVER-
As of December 31, 1993 (dollars in thousands)
- ---------------------------------------------------------------------------
3 months or less $153,725
Over 3 months through 6 months 64,219
Over 6 months through 12 months 77,999
Over 12 months 55,152
Total $351,095
- ---------------------------------------------------------------------------
LIQUIDITY
By far the most important factor in the preservation of liquidity is the
maintenance of public confidence as this facilitates the retention and growth
of a large, stable supply of core deposits and funds. Ultimately, public
confidence is generated through profitable operations and a strong capital
position. The corporation's strong record in both of these areas has enabled it
to succeed in developing a large and reliable base of core funding from within
its local market areas.
The corporation's internal policy requires it to project over a rolling
30-day period the funding uses and sources on a daily basis. This tactical
liquidity allows the corporation to avoid any excessive stacking of liability
maturities. The limits established on the amount the corporation's subsidiary
banks can borrow are subject to the corporation's ability to borrow funds in
the capital markets in an efficient and cost effective manner.
In addition, the corporation's strategic liquidity and contingent planning
are subject to the amount of asset liquidity present in the balance sheet.
Monthly, each subsidiary bank reviews its ability to meet funding losses due to
-29-
<PAGE>
<PAGE>
adverse business events. These funding needs are then matched up with specific
asset-based sources in which each bank is able either to borrow against or
liquidate. Also, the strategic liquidity policy requires the corporation to
diversify its national market funding sources so as to avoid concentration in
any one market. Over the past three months, Star Bank, N.A. has joined the
Federal Home Loan Bank of Cincinnati and is in the process of reopening its
Grand Cayman office. In addition to these funding alternatives, the corporation
has maintained a presence in the national fed funds and certificate of deposit
markets.
The corporation's lead bank (Star Bank, N.A.) currently has its uninsured
deposits rated by Standard & Poors and Fitch Investor Services. Within the
first quarter of 1994, Star Bank, N.A. will also obtain a rating from Moody's
Investors Service. These ratings assist the bank in its ability to gather funds
from the capital markets.
The parent company obtains cash to meet its obligations from assessments and
dividends collected from its banks. Federal and state banking laws regulate
the amount of dividends that may be declared by banking subsidiaries. During
1993, the corporation's subsidiary banks could have provided an additional $134
million in dividends to the parent company.
The parent company can obtain funding on a short-term basis through the
issuance of short-term notes or by drawing upon lines of credit issued by other
banking institutions. At December 31, 1993, the corporation has not drawn upon
these bank lines of credit, which amount to $10 million. Longer term sources of
funding are provided by the corporation's access to both the debt and equity
markets.
The corporation's consolidated long-term debt, consisting of a mortgage
payable and senior and promissory notes, decreased $5 million to $51.7 million
at December 31, 1993. The decrease in long-term borrowings was due to scheduled
amortization and principal payments. In addition, on January 3, 1994, the
corporation made a $5 million prepayment of one of its promissory notes.
- -------------------------------------------------------------------------------
CAPITAL RESOURCES
The corporation's total shareholders' equity increased $73.4 million or 12.2
percent to $675.8 million at December 31, 1993, compared to $602.3 million at
December 31, 1992. The increase is due to the retention of net income after
dividends on preferred and common shares. The corporation increased its annual
dividend rate per common share from $1.04 in 1992 to $1.16 in 1993. The dividend
payout ratio for 1993 was 34.41 percent, following 40.35 percent in 1992 and
44.33 percent in 1991.
In 1991, in connection with the acquisition of KBI, the corporation issued
217,800 shares of Series B Cumulative Preferred Stock with a stated value of
$100 per share. The preferred stock, which had an original recorded value of
$18 million, is convertible into shares of the corporation's common stock at a
rate of 4.545 shares of common stock for each share of preferred stock. In 1993,
9,470 shares of preferred stock were converted to 43,042 shares of common stock.
The preferred stock pays a quarterly dividend at an annual rate of $6 per share
and is callable at the corporation's option at a price of $103 per share start-
ing in July 1996 with the call price declining ratably to $100 per share in
July 2001 and thereafter.
Banking industry regulators define minimum capital requirements for banks and
bank holding companies. The corporation's tier 1 and total risk-based capital
ratios as of December 31, 1993 amounted to 11.10 and 12.41 percent, respective-
ly, well above the minimum requirements of 4.00 percent for tier 1 and 8.00
percent for total risk-based capital. Regulatory authorities have also estab-
lished a minimum tier 1 equity-to-total assets ("leverage") ratio of 3.00
percent. At December 31, 1993, the corporation's leverage ratio was 8.23
percent, compared to 7.42 percent a year earlier.
In 1992, the FDIC adopted new regulations which group banks into three
categories, "well capitalized," "adequately capitalized" and "under
capitalized," based on certain capital ratios. Based on the regulatory
definition of these categories, at December 31, 1993, the corporation and each
of its subsidiary banks are considered "well capitalized" from a risk-based
capital standpoint. The "well capitalized" category requires tier 1 and total
risk-based capital ratios of at least 6.00 percent and 10.00 percent, respec-
tively, and a minimum leverage ratio of 5.00 percent.
TABLE 14 -REGULATORY CAPITAL RATIOS-
Minimum
December 31, 1993 1992 1991 Requirement
- ----------------------------------------------------------------------------
Risk-based capital:
Tier 1 11.10% 10.64% 10.70% 4.00%(a)
Total 12.41 11.99 12.10 8.00 (a)
Leverage 8.23 7.42 7.90 3.00
- ----------------------------------------------------------------------------
1991 risk-based capital ratios have been restated based on 1992 final rules.
(a) Minimum requirement under the final 1992 rules. For 1991 the minimum
requirements under the transitional rules were 3.625 percent for tier 1 and
7.25 percent for total risk-based capital.
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<PAGE>
<PAGE>
RESPONSIBILITY FOR FINANCIAL STATEMENTS OF STAR BANC CORPORATION
Responsibility for the financial information presented in the Annual Report
rests with Star Banc Corporation's management. The corporation believes that
the consolidated financial statements reflect fairly the substance of trans-
actions and present fairly the corporation's financial position and results of
operations in conformity with generally accepted accounting principles
appropriate in the circumstances applying certain estimates and judgments as
required.
In meeting its responsibilities for the reliability of the financial state-
ments, the corporation depends on its system of internal accounting controls.
The system is designed to provide reasonable assurance that assets are
safeguarded and transactions are executed in accordance with the appropriate
corporate authorization and recorded properly to permit the preparation of
financial statements in accordance with generally accepted accounting
principles. Although accounting control procedures are designed to achieve
these objectives, it must be recognized that errors or irregularities may
nevertheless occur. Also, estimates and judgments are required to assess and
balance the relative cost and expected benefits of the controls. The corpora-
tion believes that its accounting controls provide reasonable assurance that
errors or irregularities that could be material to the financial statements are
prevented or would be detected within a timely period by employees in the
normal course of performing their assigned functions. An important element of
the system is a continuing and extensive internal audit program.
The board of directors of the corporation has an audit committee composed of
five directors who are not officers or employees of the corporation. The
committee meets periodically and privately with management, the internal
auditors and the independent public accountants to consider audit results and
to discuss internal accounting control, auditing and financial reporting
matters.
Arthur Andersen & Co., independent public accountants, have been engaged to
render an independent professional opinion on the corporation's financial
statements. Their audit is conducted in accordance with generally accepted
auditing standards and forms the basis for their report as to the fair
presentation, in the financial statements, of the corporation's financial
position, operating results and cash flows.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Star Banc Corporation:
We have audited the accompanying consolidated balance sheets of STAR BANC
CORPORATION (an Ohio corporation) and subsidiaries as of December 31, 1993 and
1992 and the related consolidated statements of income, changes in shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1993. These financial statements are the responsibility of the corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Star Banc Corporation and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen & Co.
Cincinnati, Ohio
January 11, 1994
-31-
<PAGE>
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
As of December 31 (dollars in thousands) 1993 1992
- -------------------------------------------------------------------------------
Assets:
Cash and due from banks $ 387,759 $ 434,845
Interest-bearing deposits in banks 100 150,100
Federal funds sold and securities purchased
under agreements to resell 172,675 297,825
Investment securities (market value of $1,605,342
in 1993 and $1,658,299 in 1992) 1,600,275 1,647,041
Loans:
Commercial loans 1,789,695 1,731,181
Real estate loans 2,087,301 1,963,977
Retail loans 1,462,815 1,344,219
Total loans 5,339,811 5,039,377
Less: Unearned interest 45,404 46,293
5,294,407 4,993,084
Allowance for loan losses 83,156 78,953
Net loans 5,211,251 4,914,131
Premises and equipment 104,305 102,237
Acceptances-customers' liability 3,026 10,115
Other assets 157,366 159,151
- -------------------------------------------------------------------------------
Total assets $7,636,757 $7,715,445
- -------------------------------------------------------------------------------
Liabilities:
Deposits:
Noninterest-bearing deposits $1,200,609 $1,137,024
Interest-bearing deposits:
Savings and NOW 1,821,869 1,560,723
Time deposits $100,000 and over 351,095 425,128
All other deposits 2,641,993 3,279,881
Total deposits 6,015,566 6,402,756
Short-term borrowings 816,706 577,193
Long-term debt 51,700 56,822
Acceptances outstanding 3,026 10,115
Other liabilities 73,960 66,226
- -------------------------------------------------------------------------------
Total liabilities 6,960,958 7,113,112
Shareholders' Equity:
Preferred stock:
Shares authorized- 1,000,000 in 1993 and 1992
Shares issued- 176,164 in 1993 and 185,634 in 1992 14,622 15,408
Common stock:
Shares authorized-50,000,000 in 1993 and 1992
Shares issued- 29,753,378 in 1993 and
29,381,936 in 1992 148,767 146,910
Surplus 80,038 72,826
Retained earnings 435,724 370,666
Treasury stock, at cost (146,713 shares in 1993
and 165,483 shares in 1992) (3,352) (3,477)
- -------------------------------------------------------------------------------
Total shareholders' equity 675,799 602,333
- -------------------------------------------------------------------------------
Total liabilities and shareholders' equity $7,636,757 $7,715,445
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
-32-
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31
(Amounts in thousands except per share data) 1993 1992 1991
- -------------------------------------------------------------------------------
Interest Income:
Interest and fees on loans $421,826 $443,460 $490,865
Interest on investment securities:
Taxable 85,996 81,001 65,908
Non-taxable 2,014 3,218 4,636
Interest on federal funds sold and securities
purchased under agreements to resell 8,094 11,568 14,409
Interest on deposits in banks 237 2,174 935
Total interest income 518,167 541,421 576,753
Interest Expense:
Interest on savings and NOW 45,673 39,752 35,889
Interest on time deposits $100,000 and over 16,540 23,961 43,086
Interest on other deposits 108,709 146,626 198,437
Interest on short-term borrowings 17,752 16,883 25,282
Interest on long-term debt 6,017 5,816 4,639
Total interest expense 194,691 233,038 307,333
Net interest income 323,476 308,383 269,420
Provision for loan losses 33,008 40,898 39,913
Net interest income after provision
for loan losses 290,468 267,485 229,507
Noninterest Income:
Trust income 35,768 32,963 31,517
Service charges on deposits 35,460 28,817 23,400
Other service charges and fees 31,630 28,646 23,800
Investment securities gains/(losses)-net 157 719 (1,738)
All other income 9,875 8,499 5,002
Total noninterest income 112,890 99,644 81,981
Noninterest Expense:
Salaries 97,347 99,900 88,416
Pension and other employee benefits 19,237 18,438 15,835
Equipment expense 16,629 17,098 15,704
Occupancy expense-net 17,717 15,781 12,866
All other expense 99,919 95,794 82,707
250,849 247,011 215,528
Restructuring charge - 6,000 -
Total noninterest expense 250,849 253,011 215,528
Income before income tax 152,509 114,118 95,960
Income tax 52,236 37,999 30,128
- -------------------------------------------------------------------------------
Net income $100,273 $ 76,119 $ 65,832
- -------------------------------------------------------------------------------
Per Share:
Primary earnings $3.36 $2.57 $2.24
Fully diluted earnings 3.30 2.53 2.23
Dividends declared on common stock 1.16 1.04 1.00
Dividends declared on preferred stock 6.00 6.00 3.00
- -------------------------------------------------------------------------------
Weighted average common stock outstanding 29,549 29,227 29,086
Weighted average fully diluted
common stock equivalents 30,372 30,111 29,584
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
-33-
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
Series B Common
Preferred Stock Stock Retained Treasury
(dollars in thousands) $100 Stated Value $5 Par Surplus Earnings Stock Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1991 $ - $145,334 $68,490 $289,658 $(3,433) $500,049
Acquisition of Kentucky Bancorporation, Inc. 18,077 - - - - 18,077
Net income - - - 65,832 - 65,832
Cash dividends declared on common stock - - - (28,897) - (28,897)
Cash dividends declared on
Series B Preferred Stock - - - (651) - (651)
Conversion of Series B Preferred
Stock into common stock (73) 20 53 - - -
Issuance of shares upon exercise
of options on common stock - 166 406 - - 572
Purchase of treasury stock - - - - (667) (667)
Treasury shares issued to meet
deferred compensation obligations - - (191) - 191 -
Shares reserved to meet deferred
compensation obligations - - 667 - - 667
- -----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 18,004 145,520 69,425 325,942 (3,909) 554,982
Net income - - - 76,119 - 76,119
Cash dividends declared on common stock - - - (30,249) - (30,249)
Cash dividends declared on
Series B Preferred Stock - - - (1,146) - (1,146)
Conversion of Series B Preferred
Stock into common stock (2,596) 711 1,885 - - -
Issuance of shares upon exercise
of options on common stock - 617 1,740 - - 2,357
Issuance of common stock - 62 208 - - 270
Purchase of treasury stock - - - - (654) (654)
Treasury shares issued to meet
deferred compensation obligations - - (1,086) - 1,086 -
Shares reserved to meet deferred
compensation obligations - - 654 - - 654
- ------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 15,408 146,910 72,826 370,666 (3,477) 602,333
Net income - - - 100,273 - 100,273
Cash dividends declared on common stock - - - (34,131) - (34,131)
Cash dividends declared on
Series B Preferred Stock - - - (1,084) - (1,084)
Conversion of Series B Preferred
Stock into common stock (786) 215 571 - - -
Issuance of shares upon exercise
of options on common stock - 1,642 6,766 - - 8,408
Purchase of treasury stock - - - - (665) (665)
Treasury shares issued to meet
deferred compensation obligations - - (790) - 790 -
Shares reserved to meet deferred
compensation obligations - - 665 - - 665
- ------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 $14,622 $148,767 $80,038 $435,724 $(3,352) $675,799
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
-34-
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the years ended December 31 (dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $100,273 $ 76,119 $ 65,832
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 33,571 26,264 19,632
Provision for loan losses 33,008 40,898 39,913
Provision for deferred taxes (2,873) (3,690) (2,662)
(Gain)/loss on sale of premises and equipment-net (55) (73) 252
(Gain)/loss on sale of securities-net (157) (719) 1,738
Net change in mortgages held for sale 42,721 (47,714) (13,666)
Net change in acceptances-customers' liability 7,089 13,479 4,845
Net change in acceptances outstanding (7,089) (13,479) (4,845)
Net change in other assets (4,857) 8,371 23,775
Net change in other liabilities 6,761 (23,626) (13,726)
Total adjustments 108,119 (289) 55,256
Net cash provided by operating activities 208,392 75,830 121,088
Cash Flows from Investing Activities:
Proceeds from maturities of investment securities 593,955 668,026 303,812
Proceeds from sales of investment securities 6,537 1,190 154,214
Purchase of investment securities (566,736) (1,115,814) (479,361)
Net change in loans (385,608) (31,221) (110,359)
Proceeds from sales of loans 11,766 2,344 3,970
Proceeds from sales of premises and equipment 1,153 883 395
Purchase of premises and equipment (13,065) (6,649) (17,088)
Acquisition of Kentucky Bancorporation, Inc. - - (36,062)
Proceeds from sale of subsidiary - 3,210 -
Net change due to acquisitions/sales of banks or offices - 556,578 29,820
Net cash provided by (used in) investing activities (351,998) 78,547 (150,659)
Cash Flows from Financing Activities:
Net change in deposits (387,190) 69,420 (43,088)
Net change in short-term borrowings 239,513 68,935 (37,710)
Principal payments on long-term debt (5,122) (6,046) (10,388)
Proceeds from issuance of long-term debt - - 22,500
Proceeds from issuance of common stock 8,408 2,627 572
Proceeds from issuance of preferred stock - - 18,077
Purchase of treasury stock (665) (654) (667)
Shares reserved to meet deferred compensation obligations 665 654 667
Issuance of treasury stock 790 1,086 191
Shares issued to satisfy deferred compensation obligations (790) (1,086) (191)
Dividends paid (34,239) (31,071) (28,930)
Net cash provided by (used in) financing activities (178,630) 103,865 (78,967)
Net change in cash and cash equivalents (322,236) 258,242 (108,538)
Cash and cash equivalents at beginning of year 882,770 624,528 733,066
Cash and cash equivalents at end of year $ 560,534 $882,770 $624,528
- ----------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
For the years ended December 31 (dollars in thousands) 1993 1992 1991
Cash Paid During the Year for:
Interest $198,640 $244,238 $316,639
Income taxes 48,987 43,922 33,169
Noncash transfer of loans to other real estate owned 704 4,266 15,358
- ----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
-35-
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies The accounting and
reporting policies of Star Banc Corporation and subsidiaries ("the
corporation"), are based on generally accepted accounting principles
and conform to general practices within the banking industry. The
following is a description of the more significant accounting policies
followed by the corporation.
Consolidation
The consolidated financial statements include the accounts of the
corporation and all of its subsidiaries. All significant intercompany
accounts and transactions have been eliminated. The excess of the
corporation's cost over the fair value of net assets acquired
(goodwill) is being amortized using the straight-line method over
periods of twenty-five to forty years. Certain amounts within the
consolidated financial statements as of and for the years ended
December 31, 1992 and 1991 have been restated to conform to the 1993
presentation.
Investment Securities
Debt securities held in the investment securities portfolio are
carried at historical cost, adjusted for amortization of premiums
and accretion of discounts to maturity. Management has the intent and
ability to hold these investment securities to maturity considering
all foreseeable events and conditions.
In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115 (SFAS No. 115)
related to accounting for certain investments in debt and equity
securities. SFAS No. 115 addresses the accounting and reporting for
investments in equity securities that have readily determinable fair
values and for all investments in debt securities.
Adoption of SFAS No. 115 is required in 1994. Initial adoption
will not affect 1994 results of operations; however, it will result in
a fair market value increase to investment securities of $6.5 million
and an increase to shareholders' equity of $4.2 million, net of tax.
Loans
Loans are stated at the principal amount outstanding, net of
unearned interest and unamortized origination fees and costs.
Interest income on loans is recognized using the interest method.
Loans are placed on nonaccrual status when, in the opinion of
management, there is a reasonable doubt as to future collectibility of
interest or principal. Loans are generally placed on nonaccrual status
when they are past due 90 days as to either principal or interest.
However, loans that are well secured and in the process of collection
may not be placed on nonaccrual status, at the judgment of senior
management.
Allowance for Loan Losses
The allowance for loan losses, which is reported as a deduction
from loans, is available for loan charge-offs. This allowance is
increased by provisions charged to earnings and recoveries of loans
previously charged-off and is reduced by loan charge-offs. The
adequacy of the allowance is based on management's evaluation of
several key factors: the current loan portfolio, current economic
conditions, evaluation of significant problem loans, changes in the
mix and levels of the various types of loans, past charge-off
experience and other pertinent information. The allowance for loan
losses is based on estimates, and ultimate losses may vary from
current estimates. These estimates are reviewed continually and, as
adjustments become necessary, they arereported in earnings in the
periods in which they become known. Charge-offs are made against the
allowance for loan losses when management concludes that loan amounts
are likely to be uncollectible.
In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 114 (SFAS No. 114)
related to accounting by creditors for impairment of a loan. SFAS No.
114 requires that impaired loans as defined by the statement be
measured based on (1) the present value of the expected future cash
flows discounted at the loan's effective interest rate, or as a
practical expedient, at the loan's observable market price or (2) the
fair value of the collateral if the loan is collateral dependent.
Adoption of SFAS No. 114 is required for fiscal years beginning
after December 15, 1994. Management has not yet determined the
date on which it will adopt the provisions of SFAS No. 114; however,
it does not expect the adoption of SFAS No. 114 to have a material
impact on the corporation's financial condition and results of
operations. However, because any adjustments for the impairment of
loans are measured at the time of adoption of the statement,
management cannot at this time measure the future impact of SFAS No.
114.
Premises and Equipment
Premises and equipment are reported at cost, less accumulated
depreciation and amortization.
36
<PAGE>
<PAGE>
Expenditures for major additions and improvements are capitalized, and
maintenance and repair costs are charged to operating expense.
Depreciation and amortization of premises and equipment are computed
on a straight-line basis over the estimated useful lives of the
individual assets.
Other Real Estate Owned
Other real estate owned represents real estate of which the
corporation has taken ownership in partial or total satisfaction
of loans or where a loan has been reclassified as an in-substance
foreclosure. In-substance foreclosure occurs when management
determines that, although legal title to the collateral securing
the loan remains with the borrower, there is little or no borrower
equity in the collateral; repayment of the loan can be expected to
come from the sale or operation of the collateral; and the borrower
has either effectively abandoned control of the collateral or it is
doubtful that theborrower will be able to establish equity in the
collateral in the foreseeable future.
Other real estate owned is carried at the lower of cost or fair
value and is included in other assets in the consolidated balance
sheets. Losses at the time property is classified as other real
estate owned are charged to the allowance for loan losses. Subsequent
gains and losses, as well as operating income or expense related to
other real estate owned, are recorded in noninterest expense.
Income Taxes
The corporation files a consolidated federal income tax return.
Certain income and expense items are accounted for differently
for financial reporting purposes than for income tax purposes. The
primary differences relate to lease financing, depreciation on
premises and equipment and the allowance for loan losses. Provisions
for deferred taxes are made in recognition of such differences in
accordance with Statement of Financial Accounting Standards No. 109.
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109 (SFAS No. 109)
related to accounting for income taxes, which supersedes SFAS No. 96,
which was adopted by the corporation in 1988. Adoption of SFAS No. 109
in 1993 did not impact the financial condition or results of
operations of the corporation. Disclosures required by SFAS No. 109
are shown in Note 9.
Restructuring Charge
During the fourth quarter of 1992, the corporation recognized a
nonrecurring restructuring charge of $6,000,000 as part of a
comprehensive restructuring program. The restructuring charge was
comprised of estimates of severance pay and benefits, outplacement
services, professional fees and occupancy expenses related to the
consolidation of support operations and subsidiary banks. The majority
of these expenses were incurred in 1993 with the scheduled
implementation of the program and have not been significantly
different from the initial estimates.
Interest Rate Swap Agreements
Interest rate swap agreements are used as hedges to reduce the
corporation's exposure to adverse changes in interest rates. The
income or expense related to these transactions is recognized, on
an accrual basis, over the life of the hedged instrument as an
adjustment to interest income or expense.
Postemployment Benefits
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112 (SFAS No.
112) related to employer's accounting for postemployment benefits. The
statement requires companies to accrue, during the period that an
employee renders service to the company, the expense of providing
postemployment benefits. Types of benefits include, but are not
limited to, salary continuation, severance benefits, job training and
counseling, and continuation of health care and life insurance
coverage. Currently, the corporation recognizes the expense of such
benefits at the time payment is deemed probable.
Adoption of SFAS No. 112 is required in 1994. Management believes
its adoption will not have a material impact on the corporation's
financial condition or results of operations.
Statement of Cash Flows
For purposes of reporting cash flows on the consolidated statements of
cash flows, cash and cash equivalents include cash on hand, amounts
due from banks, federal funds sold and securities purchased under
agreements to resell.
37
<PAGE>
<PAGE>
Earnings Per Share
Primary earnings per share is computed by dividing net income,
reduced by dividends on preferred stock, by the weighted average
number of common share equivalents outstanding for each period
presented. Fully diluted earnings per share is computed by dividing
net income by common share equivalents adjusted for the assumed
conversion of the preferred stock into common stock. The dilutive
effects of unexercised stock options are not material and therefore
not included in earnings per share.
Note 2 - Reserve Balance Requirements
Banking regulations require the corporation's banking subsidiaries to
maintain cash reserves which are unavailable for investment. The
amounts of such reserves, which are included in cash and due from
banks in the consolidated balance sheets, were $185,401,000 and
$140,268,000 at December 31, 1993 and 1992, respectively.
Note 3 - Investment Securities
The following table provides information related to investment
securities as of December 31.
</TABLE>
<TABLE>
<CAPTION>
(dollars in thousands)
1993 1992
Carrying Unrealized Market Carrying Unrealized Market
Value Gains Losses Value Value Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
& agencies $387,315 $3,874 $ 1 $391,188 $606,702 $8,848 $ 171 $615,379
Mortgage- backed
securities 1,171,723 8,053 7,573 1,172,203 992,337 6,267 4,681 993,923
Obligations of
states and
political
subdivisions 31,599 722 8 32,313 40,037 938 76 40,899
Other debt
securities 757 - - 757 141 - - 141
Federal Reserve
Bank stock and
other equity
securities 8,881 - - 8,881 7,824 135 2 7,957
Total
investment
securities
$1,600,275 $12,649 $ 7,582 $1,605,342 $1,647,041 $16,188 $4,930 $1,658,299
</TABLE>
The following table presents the carrying value and market value
of debt securities at December 31, 1993 based upon the weighted
average maturities, reflecting anticipated future prepayments.
<TABLE>
<CAPTION> Carrying Market
(dollars in thousands) Value Value
<S> <C> <C>
One year or less $ 421,440 $ 422,599
After one year through five years 1,106,621 1,109,623
After five years through ten years 51,565 52,396
After ten years 11,768 11,843
Total $1,591,394 $1,596,461
</TABLE>
The following table provides information as to the amount of
gross gains andlosses realized through the sales of investment
securities.
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
Debt securities
Gross gains $ 42 $ 231 $ 2,013
Gross (losses) - - (3,952)
Equity securities net gains 115 488 201
Net securities gains (losses)$ 157 $ 719 $(1,738)
</TABLE>
Securities with a carrying value of $1,329,854,000 at December
31, 1993 and $1,062,724,000 at December 31, 1992, were pledged to
secure deposits and for other purposes.
38
<PAGE>
<PAGE>
Note 4 - Loans
The following table lists loans by type as of December 31.
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992
<S> <C> <C>
Commercial $1,789,695 $1,731,181
Real estate construction and development 180,470 192,975
Commercial real estate mortgage 909,084 801,490
Residential real estate mortgage 997,747 969,512
Credit cards 172,534 173,271
Other retail 1,290,281 1,170,948
Total loans $5,339,811 $5,039,377
</TABLE>
Loans on nonaccrual status amounted to $50,687,000 and $62,299,000 at
December 31, 1993 and 1992, respectively.
The terms of some loans have been restructured to provide a
reduction or deferral of interest or principal because of a
deterioration in the financial position of the borrower. Loans which
have been restructured totaled $249,000 and $1,223,000 at December 31,
1993 and 1992, respectively.
Interest income of $6,157,000, related to loans that were on
nonaccrual status or restructured at December 31, 1993, would have
been recognized in the corporation's 1993 consolidated statement of
income if those loans had been current and performing in accordance
with their original terms. The amount of interest income actually
recorded in 1993 related to these loans was $848,000.
Most of the corporation's business activity is with customers
located in the immediate market areas of its subsidiary banks in
Ohio,Kentucky and Indiana. As of December 31, 1993, loans to customers
engaged in similar activities and having similar economic
characteristics, as defined by standard industrial classifications,
did not exceed 10 percent of total loans.
At December 31, 1993, residential real estate loans held for
sale, included in total loans, amounted to $43 million, compared to
$61 million at December 31, 1992.
The corporation evaluates the credit risk of each customer on
an individual basis and, where deemed appropriate, collateral is
obtained. Collateral varies by individual loan customer, but may
include accounts receivable, inventory, real estate, equipment,
deposits, personal and government guaranties and general security
agreements. Access to collateral is dependent on the type of
collateral obtained. On an ongoing basis, the corporation monitors its
collateral and the collateral value related to the loan balance
outstanding.
The aggregate amount of loans in excess of $60,000 outstanding
to directors and executive officers (including their related
interests) of the parent company and its wholly-owned subsidiary, Star
Bank, N.A., amounted to $29,759,000 and $24,036,000 at December 31,
1993 and 1992, respectively. During 1993, new loans and repayments
related to outstanding loans amounted to $8,194,000 and $3,009,000,
respectively. Changes in the composition of the board of directors and
executive management resulted in an increase in such loans of $538,000
in 1993. These loans were made on substantially the same terms,
including interest rate and collateral, as those prevailing at
the same time for comparable transactions with other persons.
39
<PAGE>
<PAGE>
Note 5 - Allowance for Loan Losses
A summary of the activity in the allowance for loan losses is
shown in the following table.
<TABLE>
<S> <C> <C> <C>
(dollars in thousands) 1993 1992 1991
Balance-beginning of year $78,953 $73,805 $65,938
Loans charged off (40,122) (47,884) (45,047)
Recoveries on loans previously
charged off 11,317 11,355 7,977
Net charge-offs (28,805) (36,529) (37,070)
Provision charged to earnings 33,008 40,898 39,913
Net allowances of banks or
offices acquired/sold - 779 5,024
Balance-end of year $83,156 $78,953 $73,805
</TABLE>
Note 6 - Premises and Equipment
Premises and equipment as of December 31 are summarized in the
following table.
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992
<S> <C> <C>
Land $ 14,754 $14,767
Bank buildings 86,307 84,987
Furniture, fixtures & equipment 41,791 42,016
Leasehold improvements 16,587 15,214
Construction in progress 1,589 348
Total premises and equipment 161,028 157,332
Less: Accumulated depreciation and amortization 56,723 55,095
Net premises and equipment $104,305 $102,237
</TABLE>
Depreciation and amortization expense related to premises and
equipment amounted to $9,899,000 in 1993, $8,982,000 in 1992 and
$7,671,000 in 1991.
Total rental expense was $15,635,000 in 1993, $14,852,000 in
1992 and $12,146,000 in 1991.
Future minimum rental payments related to noncancelable
operating leases having initial terms in excess of one year are
$12,300,000 in 1994, $10,034,000 in 1995, $8,640,000 in 1996,
$8,320,000 in 1997, $7,675,000 in 1998 and $49,150,000 in later years.
Note 7 - Short-Term Borrowings
The following table is a summary of short-term borrowings at
December 31.
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992
<S> <C> <C>
Federal funds purchased $279,655 $ 11,216
Securities sold under agreements to repurchase 392,052 236,803
Other short-term borrowings 144,999 29,174
Total short-term borrowings $816,706 77,193
</TABLE>
The following table is a summary of selected information
regarding short-term borrowings for the years ended December 31.
<TABLE>
<CAPTION>
(dollars in millions) 1993 1992 1991
<S> <C> <C> <C>
Maximum amount outstanding
at any month-end $875.8 $577.2 $498.1
Average amount outstanding 621.5 498.0 463.0
Average interest rate during the year 2.9% 3.4% 5.5%
Approximate average interest rate
on year-end balance 2.8 3.1 4.3
</TABLE>
40
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Note 8 - Parent Company Financial Information Balance Sheets
As of December 31 (dollars in thousands) 1993 1992
<S> <C> <C>
Assets:
Investment in subsidiaries:
Banking subsidiaries $682,479 $623,724
Nonbank subsidiaries 5,347 4,742
Total investment in subsidiaries 687,826 628,466
Cash and cash equivalents 7,074 3,097
Other investments 1,220 682
Receivables from subsidiaries 15,292 14,282
Premises and equipment 10,471 15,810
Other assets 903 6,349
Total assets $722,786 $668,686
Liabilities and Shareholders' Equity:
Short-term borrowings $ - $12,000
Long-term debt 33,792 38,619
Other liabilities 13,195 15,734
Shareholders' equity 675,799 602,333
Total liabilities and shareholders' equity $722,786 $668,686
</TABLE>
<TABLE>
<CAPTION>
Statements of Income
For the years ended December 31 1993 1992 1991
(dollars in thousands)
<S> <C> <C> <C>
Revenue:
Dividends from subsidiaries:
Banking subsidiaries $ 50,561 $43,588 $41,419
Nonbank subsidiaries - - 143
Fees and assessments from subsidiaries 1,388 43,376 40,234
Net gain/(loss) on sale of securities - - (775)
Other income 231 (1,286) 425
Total revenue 52,180 85,678 81,446
Expense:
Interest on short-term borrowings 129 661 457
Interest on long-term debt 4,003 4,189 3,088
Salaries and benefits - 28,560 25,614
Other operating expense 1,905 28,712 22,096
Total expense 6,037 62,122 51,255
Income before income tax benefit 46,143 23,556 30,191
Income tax benefit (1,496) (6,696) (3,808)
Equity in undistributed
income of subsidiaries 52,634 45,867 31,833
Net income $100,273 $76,119 $65,832
</TABLE>
The above statements of income reflect substantial decreases in
fees and assessments from subsidiaries, salaries and benefits, and
other operating expense in 1993. These decreases were the result of
the parent company's various operations and administration departments
being transferred to the corporation's lead subsidiary bank in 1993.
</page> 41
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Cash Flows
For the years ended
December 31 (dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $100,273 $76,119 $65,832
Adjustments to reconcile net income
to net cash provided by operating
activities:
Equity in undistributed income
of subsidiaries (52,634) (45,867) (31,833)
Depreciation and amortization 313 1,972 786
Net (gain)/loss on sale of securities - - 775
Net change in receivables from
subsidiaries (1,010) 8,703 (12,811)
Net change in other assets 3,964 326 (1,516)
Net change in other liabilities (3,515) 259 1,280
Net cash provided by operating
activities 47,391 41,512 22,513
Cash Flows from Investing Activities:
Acquisition of Kentucky Bancorporation, Inc. - - (36,062)
Purchase of premises and equipment (218) (2,353) (7,060)
Other investing activity (538) (373) (938)
Net cash used in investing activities (756) (2,726) (44,060)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt - - 22,500
Net change in short-term borrowings (12,000) (2,500) 12,700
Principal payments on long-term debt (4,827) (5,657) (3,338)
Dividends paid (34,239) (31,071) (28,930)
Proceeds from issuance of common stock 8,408 2,627 572
Proceeds from issuance of preferred stock - - 18,077
Net cash provided by (used in)
financing activities (42,658) (36,601) 21,581
Net change in cash and cash equivalents 3,977 2,185 34
Cash and cash equivalents at beginning
of year 3,097 912 878
Cash and cash equivalents at end of year $ 7,074 $ 3,097 $ 912
</TABLE>
<TABLE>
<CAPTION>
Supplemental Disclosure of Cash Flow Information
For the years ended December 31
(dollars in thousands) 1993 1992 1991
Cash Paid (Received) During the Year for:
<S> <C> <C> <C>
Interest expense $ 3,938 $ 5,067 $2,696
Income taxes, net of tax payments
received from subsidiaries (1,790) (6,353) (3,446)
</TABLE>
Note 9 - Income Taxes
At December 31, 1993, in accordance with SFAS No. 109, included
in the corporation's consolidated balance sheet was a net deferred tax
asset of $3,601,000, reflecting the benefit expected to be realized
from net deductible temporary differences. The corporation has not
recorded a valuation reserve related to deferred tax assets. The
components of the net deferred tax asset at December 31, 1993 and 1992
were as follows:
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992
<S> <C> <C>
Allowance for loan losse $ 28,566 $26,003
Deferred loan fees 2,930 3,010
Leased assets (20,187) (16,710)
Intangible assets/purchase
accounting adjustments (2,367) (6,242)
Depreciation of fixed assets (4,076) (3,887)
Pension liabilities (4,314) (3,195)
Other-net 3,049 1,749
Net deferred tax asset $ 3,601 $ 728
</TABLE>
42
<PAGE>
<PAGE>
Income tax expense for the last three years consisted of the
following:
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
Current payable:
Federal $54,349 $40,918 $32,071
State 760 771 719
Total current income tax 55,109 41,689 32,790
Deferred federal income tax resulting from:
Allowance for loan losses (2,563) (1,609) (1,270)
Leasing 3,477 (1,253) (1,434)
Intangible assets (3,875) - -
Change in tax rate (107) - -
Other-net 195 (828) 42
Total deferred federal income tax (2,873) (3,690) (2,662)
Income tax $52,236 $37,999 $30,128
</TABLE>
A reconciliation of the statutory tax rate to the effective tax
rate is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Statutory tax rate 35.0% 34.0% 34.0%
Adjustments to statutory tax rate:
Tax-exempt interest income (1.4) (2.6) (4.0)
Other-net 0.7 1.9 1.4
Effective tax rate 34.3% 33.3% 31.4%
</TABLE>
Note 10 - Long-Term Debt
The following is a summary of the corporation's long-term debt as
of December 31.
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992
<S> <C> <C>
Parent company:
12 3/4% Promissory note-quarterly payments
of interest, annual principal payments of
$2,500,000 through 1995 $ 5,000 $7,500
10.17% Promissory note-prepaid January 3, 1994 5,000 5,000
9.25% Senior note-semiannual payments of interest
and annual principal payments of $2,250,000
through 2001 18,000 20,250
8 7/8% Mortgage due 2016 5,792 5,869
Total parent company long-term debt 33,792 38,619
Other companies:
6 3/4% Industrial revenue bonds due through 1994 60 115
8 7/8% Mortgage due 2016 17,848 18,088
Total long-term debt $51,700 $56,822
</TABLE>
Each of the above parent company notes contains certain
limitations on funded debt, dividends and other matters. These
limitations are not materially restrictive to the corporation. The
parent company has lines of credit amounting to $10,000,000 available,
none of which is currently in use.
43
<PAGE>
<PAGE>
The following table presents the scheduled payments of the
corporation's long-term debt.
<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
1994 $10,156
1995 5,129
1996 2,663
1997 2,701
1998 2,744
Later years 28,307
Total $51,700
</TABLE>
Note 11 - Pension and Other Postretirement Benefits
The corporation has a non-contributory defined benefit pension
plan covering substantially all employees. The benefits are based on
years of service and the employee's compensation while employed. The
corporation's funding policy is to make an annual contribution to the
plan which at least equals the minimum required contribution.
The following table sets forth the plan's funded status and
amounts recognized in the corporation's consolidated balance sheets at
December 31, 1993 and 1992.
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992
<S> <C> <C>
Projected benefit obligation:
Vested benefits $38,216 $32,648
Nonvested benefits 1,993 608
Accumulated benefit obligation 40,209 33,256
Effect of projected future compensation levels 9,786 12,993
Projected benefit obligation 49,995 46,249
Plan assets 72,249 66,548
Plan assets in excess of projected
benefit obligation 22,254 20,299
Unrecognized net loss due to past experience
different from assumptions made 1,623 2,374
Unrecognized net asset being recognized
over 16 years (10,117) (11,033)
Prepaid pension cost in consolidated
balance sheets $13,760 $11,640
</TABLE>
Plan assets primarily consist of listed stocks, corporate bonds
and United States Treasury notes. Included in plan assets at December
31, 1993 and 1992 were shares of the corporation's stock with a value
of $8,246,000 and $8,481,600, respectively.
Net pension cost, which amounted to a credit for 1991 through
1993, included the following components:
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
Service cost-benefits earned
during the period $ 2,388 $ 2,243 $2,035
Interest cost of projected
benefit obligation 3,782 3,434 3,395
Actual total return on plan
assets (6,045) (6,882) (11,157)
Curtailment gain (595) - -
Net amortization and deferral (1,250) (75) 3,818
Net periodic pension
(credit) $(1,720) $(1,280) $(1,909)
</TABLE>
In determining the projected benefit obligation, the following
weighted average rates were used.
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Discount rate 7.75% 8.50% 9.00%
Future salary increases 4.00 6.00 5.25
Long-term return on assets 9.58 9.51 9.51
</TABLE>
The corporation recognized a curtailment gain in 1993 due to staff
reductions which resulted from the implementation of the corporation's
restructuring program.
44
<PAGE>
<PAGE>
The corporation provides employer-sponsored health care benefits
to current retirees, and their spouses, who had retired prior to
January 1, 1993. Employees who retired after January 1, 1993 can
obtain health care benefits under the corporation's health care plan;
however, the total amount of the premiums are paid by the retiree.
The corporation adopted Statement of Financial Accounting
Standards No. 106 (SFAS No. 106) "employers' accounting for
postretirement benefits other than pensions" in 1993. The statement
requires companies to accrue, during the period that the employee
renders service to the company, the expense of providing
postretirement benefits (principally health care benefits). In prior
years the corporation recognized this cost on a cash basis. The
accumulated postretirement benefit obligation of $5.5 million at date
of adoption, is being amortized on a straight-line basis over an
expected future lifetime of the retirees under the plan of 14 years.
The following table sets forth the amount of the accumulated
benefit obligation recognized in the corporation's consolidated
balance sheet at date of adoption of SFAS No. 106 and December 31,
1993:
<TABLE>
<CAPTION>
December 31, January 1,
(dollars in thousands) 1993 1993
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $5,751 $5,473
Fully eligible active participants - -
Total $5,751 $5,473
Unrecognized net loss (150) -
Unrecognized transition obligation being
amortized over 14 years (5,082) (5,473)
Accrued postretirement obligation in
consolidated balance sheets $ 519 $ -
</TABLE>
The components of the net periodic costs of postretirement
benefits for 1993 were as follows:
(dollars in thousands) 1993
Interest cost of projected benefit obligation $ 398
Amortization of the unrecognized transition obligation 391
Net periodic postretirement benefit $ 789
The weighted average discount rates used in determining the
amount of the accumulated benefit obligation were 7.50 percent as of
January 1, 1993 and 6.75 percent as of December 31, 1993. The
measurement of the accumulated benefit obligation assumed a health
care cost trend rate of 13.00 percent for 1994, which gradually
decreases to an ultimate rate of 5.80 percent by 2012 and thereafter.
The health care cost trend assumption has a significant effect on
the amounts reported. To illustrate, a one percent increase in
each future year would increase the accumulated postretirement benefit
obligation at December 31, 1993 by $511,000 and increase the aggregate
of the service and interest costs components of the net periodic
benefit cost for the year by $35,000.
Note 12 - Stock Options and Compensation Plans
In 1992, the shareholders of the corporation approved the
adoption of the Star Banc Corporation 1991 Stock Incentive Plan ("the
Plan") replacing the 1986 plan. The Plan provides for the grant to
selected key managerial personnel of options to purchase shares of
common stock generally at the stock's fair market value at the date of
grant. In addition, the Plan provides for the grant to selected key
managerial personnel of shares of common stock which are subject
to restriction on transfer and to a right of repurchase by the
corporation and of shares of common stock as performance awards. Not
more than 1,000,000 authorized and unissued shares of common stock, in
the aggregate, are available for issue under the Plan. The Plan will
terminate on January 7, 2001.
In 1993, the corporation adopted the StarShare Stock Option
Plan for employees. The StarShare Plan provided a one-time grant to
all eligible employees of options to purchase shares of common stock
at the stock's fair market value at the grant date. This one-time
grant to purchase shares of common stock of the corporation was made
to all active employees (not currently eligible under the 1991
Incentive Plan) as a performance award following the corporation's
restructuring program. Not more than 125,000 shares were authorized
and available under the StarShare Plan. The StarShare Plan has no
expressed termination date; however, it may be terminated or modified
by the board of directors at any time.
45
<PAGE>
<PAGE>
The following is a summary of options outstanding and exercised
under the 1991 Plan, the 1986 Stock Incentive Plan and the StarShare
Option Plan.
<TABLE>
<CAPTION>
1993 1992
Number of Number of
Shares Option Price Shares Option Price
<S> <C> <C> <C> <C>
Stock Incentive Plans:
Options outstanding
at beginning of
year 893,867 $16.75-33.75 744,381 $16.75-25.63
Granted 435,400 34.25-50.75 323,300 28.75-33.75
Exercised (327,240) 16.75-33.75 (173,814) 16.75-25.63
Cancelled - - - -
Options outstanding
at end of year 1,002,027 16.75-50.75 893,867 16.75-33.75
Exercisable
at end
of year 570,527 $16.75-38.75 893,867 $16.75-33.75
Available for
future grant under
the Stock Incentive
Plans 40,489 475,889
StarShare Stock
Option Plan:
Options
outstanding at
beginning of
year - $ - - $ -
Granted 114,152 35.25-36.00 - -
Exercised (992) 35.25 - -
Cancelled (14,957) 35.25-36.00 - -
Options outstanding
at end ofyear 98,203 35.25-36.00 - -
Exercisable at end
of year 97,303 $35.25-36.00 - -
Available for future
grant under the
1993 StarShare
stock option plan 10,848 -
</TABLE>
An additional 196,250 shares were granted in 1993 at $34.75,
subject to shareholder approval of an amendment to the 1991 plan.
Directors and selected senior officers of the corporation and
its banking subsidiaries may participate in the corporation's Deferred
Compensation Plan through which they may postpone the receipt of
compensation. Amounts deferred under the plan may be valued on the
basis of an interest index or be used to purchase shares of the
corporation's common stock. Although the plan is unfunded for tax
purposes, the shares of treasury stock held at December 31,
1993 and 1992 were acquired to meet obligations arising from this
plan and are considered common stock equivalents for the purpose of
computing earnings per share.
The corporation has entered into severance agreements with
certain officers of the corporation. In general, the agreements
provide for the payment of a lump sum benefit to the officer, plus the
continuation of certain medical and insurance benefits, in the event
that the officer's employment is terminated involuntarily by the
corporation, or voluntarily by the officer for good reason, following
a change in control of the corporation during the officer's protected
period. The benefits payable under the agreements do not exceed three
times the base amount of the officer's compensation, as defined by
applicable tax regulations. The aggregate amount payable if all
officers exercise their right to receive payment under these
agreements is $14.0 million.
Note 13 - Shareholders' Equity
Each share of common stock outstanding (and each share issued by
the corporation prior to the occurrence of certain events) carries
with it one Preferred Stock Purchase Right to purchase, at a price of
$100, one-hundredth of a share of Series A Preferred Stock. The
Preferred Stock Purchase Rights are exercisable only if a person or
group acquires or obtains the right to acquire ownership of 20 percent
or more of the corporation's common stock, commences a tender or
exchange offer for 30 percent or more of the common stock, or a holder
of 10 percent or more of common stock is declared an "Adverse Person"
by the corporation's Board of Directors. The corporation is entitled
to redeem the Preferred Stock Purchase Rights at a price of one cent
per Preferred Stock Purchase Right at any time before the twentieth
day following the date a 20 percent position has been acquired.
46
<PAGE>
<PAGE>
If the corporation is acquired in a merger or other business
combination transaction, each Preferred Stock Purchase Right entitles
its holder to purchase, at the Preferred Stock Purchase Right's then
current exercise price, a number of the acquiring company's common
shares having a market value at that time of twice the Preferred Stock
Purchase Right's exercise price. The Preferred Stock Purchase Rights
also provide a similar right for holders (other than an Acquiring
Person or Adverse Person as defined in the Preferred Stock Purchase
Rights Agreement) to purchase the corporation's common stock having a
market value at that time of twice the Preferred Stock Purchase
Right's exercise price under certain circumstances where a
person or group has acquired a 30 percent block of the corporation's
common stock or been declared an "Adverse Person" by a majority of the
corporation's outside directors.
In connection with the shareholder rights plan, 500,000 shares
of the corporation's 1,000,000 authorized shares of Preferred Stock
have been designated as Series A Preferred Stock; no shares of Series
A Preferred Stock have been issued.
In 1991, in connection with the acquisition of Kentucky
Bancorporation, Inc., the corporation issued 217,800 shares of Series
B Cumulative Preferred Stock with a stated value of $100 per share.
This series of preferred stock, which had an original recorded value
of $18 million, is convertible into shares of the corporation's common
stock at a rate of 4.545 shares of common stock for each share of
preferred stock. Series B Cumulative Preferred Stock pays a quarterly
dividend at an annual rate of $6 per share and is callable at the
corporation's optionat a price of $103 per share starting in July
1996 with the call price declining ratably to $100 per share in July
2001 and thereafter.
Note 14 - Financial Instruments with Off-Balance-Sheet Risk
The corporation becomes a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments include
commitments to extend credit, standby letters of credit, interest rate
swap agreements, interest rate caps and floors, and commitments to
purchase or sell foreign currencies. These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess
of the amount recognized on the corporation's consolidated balance
sheet. The contract or notional amounts of those instruments reflect
the extent of involvement the corporation has in particular classes of
financial instruments.
The corporation's exposure to credit loss for commitments to
extend credit, standby letters of credit and commercial letters of
credit is represented by the contract amount of those instruments. The
corporation uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
The need for collateral is assessed on a case-by-case basis, based
upon management's credit evaluation of the other party. As of December
31, 1993, the total contract amount of commitments to extend credit,
standby letters of credit, and commercial letters of credit amounted
to $1,698 million, $153 million and $18 million, respectively. The
corporation utilizes interest rate caps and floors, commitments to
purchase or sell foreign currencies and commitments to sell
residential real estate loans to hedge positions taken in transactions
with customers. In addition, the corporation utilizes interest rate
swap segments as hedge instruments to reduce exposure to adverse
changes in interest rates. The notional amounts of these instruments
do not represent exposure to credit loss. Risks associated with these
types of financial instruments arise from the movement of interest
rates or foreign exchange rates and failure of the other party to the
transaction to meet its obligation. The corporation controls the risk
of such instruments through approvals, limits, and monitoring
procedures. As of December 31, 1993, the total notional amounts of
interest rate swaps and interest rate caps and floors were $490
million and $3 million, respectively; foreign currency purchase and
sale commitments were $11 million, and commitments to sell residential
real estate loans amounted to $38 million.
Note 15 - Litigation
Various legal claims have arisen during the normal course of business
which, in the opinion of management, will not result in material
liability to the corporation.
Note 16 - Dividend Restriction
Bank regulatory agencies limit the amount of dividends a subsidiary
bank can declare to the parent company in any calendar year without
obtaining prior approval. The limitations of all subsidiary banks
combined for 1993 were approximately $186,158,000.
47
<PAGE>
<PAGE>
Note 17 - Acquisitions
On June 19, 1992, the corporation's largest subsidiary, Star
Bank, N.A., ("the bank") purchased 28 Cleveland area branch offices
from Ameritrust Company National Association. This transaction has
been accounted for as a purchase, and accordingly, all assets acquired
and liabilities assumed have been recorded at estimated fair value. In
purchasing these branches, the bank acquired a $263 million
participation in a pool of mortgage loans made by Ameritrust and
Society National Bank which is recorded as an investment security,
$111 million in loans and $937 million in deposits for a premium of
2.19 percent of the deposits. The core deposit intangible assigned
through the allocation of the purchase price amounted to $19 million.
On July 1, 1991, the corporation acquired all of the outstanding
shares of Kentucky Bancorporation, Inc. ("KBI") for cash and preferred
stock valued at a total of $36 million. KBI was a bank holding company
which operated six banks doing business as Kentucky National Bank in
Northern and Central Kentucky and Southern Ohio. At the date of
acquisition, KBI had total assets of $393 million. As the transaction
has been accounted for as a purchase, only the results of operations
of KBI since the date of acquisition are included in the consolidated
financial statements. The excess of the total purchase price over
the fair value of net assets acquired was $9.3 million. This amount is
being amortized on a straight-line basis over 25 years.
Note 18 - Intangible Assets
The following is a summary of intangible assets as of December 31
which are included in other assets in the consolidated balance sheets.
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992
<S> <C> <C>
Excess of cost over fair value of
assets acquired (goodwill) $30,530 $32,042
Core deposit benefits 20,850 24,521
Purchased mortgage servicing rights 8,451 4,983
Purchased credit card relationships 91 115
Total intangible assets $59,922 $61,661
</TABLE>
Note 19 - Noninterest Income and Other Noninterest Expense
The following are included in other service charges and fees and
all other income for the years ended December 31.
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
Credit cards $10,848 $10,092 $10,442
Mortgage banking income 6,587 5,994 1,672
</TABLE>
The following are included in all other expense for the years
ended December 31.
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
FDIC insurance $13,987 $12,933 $11,091
State taxes 9,052 8,676 7,463
Marketing 7,219 6,129 4,695
</TABLE>
Note 20 - Fair Value of Financial Instruments
In December 1991, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 107 (SFAS No.
107)"Disclosures about Fair Value of Financial Instruments" which
requires disclosure of fair value information about both on and
off-balance-sheet financial instruments for which it is practicable to
estimate that value. For many of the corporation's financial
instruments, however, an available trading market does not
exist; therefore, significant estimations and present value
calculations were used to determine fair values as described below.
Changes in estimates and assumptions could have a significant impact
on these fair values.
Cash and Cash Equivalents
For cash and due from banks, federal funds sold, securities purchased
under agreement to resell and interest-bearing deposits in banks, the
carrying value is a reasonable estimate of fair value.
48
<PAGE>
<PAGE>
Investment Securities
Fair values for investment securities are based on quoted market
prices, where available. If quoted market prices are not available,
fair values are based on quoted market prices of comparable
instruments or estimated current replacement cost of the instrument.
Loans
For variable rate loans which reprice frequently or are based on
market changes, with no significant changes in credit risk, fair
values are based on carrying values. Fair values for residential real
estate loans are estimated based on quoted market prices for
securities backed by similar loans. The fair values for other types of
loans are estimated by discounting the future cash flows using current
rates being offered for loans of similar terms to borrowers of similar
credit quality.
Deposit Liabilities
The fair values of noninterest-bearing deposits, savings, NOW and
money market deposit accounts are, by definition, equal to the amount
payable on demand at the reporting date. The carrying value of
variable rate, fixed-term time deposits and certificates of deposit
approximate their fair values. For fixed-rate certificates of deposit,
fair values are estimated using a discounted cash flow analysis based
on rates currently offered for deposits of similar remaining
maturities.
Short-Term Borrowings
The carrying amounts of federal funds purchased, securities sold
under agreements to repurchase and other short-term borrowings
approximate their fair values.
Long-Term Debt
Fair values of the corporation's long-term debt is estimated by
using discounted cash flow analyses, based on current market rates for
debt with similar terms and remaining maturities.
Off-Balance-Sheet Instruments
The fair values of interest rate caps and floors, forward commitments
to purchase or sell foreign currency and to sell real estate loans
are based upon quoted market prices for similar instruments. The fair
value of commitments to extend credit and standby and commercial
letters of credit is estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms
of the agreements and the counterparties' creditworthiness. The fair
value of interest rate swap agreements is the estimated amount that
the corporation would receive or pay to terminate the swap agreement
at the reporting date, taking into account current interest rates and
the creditworthiness of the counterparties.
The following table summarizes the estimated fair values of the
corporation's financial instruments at December 31.
<TABLE>
<CAPTION>
(dollars in thousands)
1993 1992
Carrying Amount Fair Value Carrying Amount Fair Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash
equivalents $ 560,534 $ 560,534 $ 882,770 $ 882,770
Investment
securities 1,600,275 1,605,342 1,647,041 1,658,299
Net loans 5,211,251 5,291,965 4,914,131 5,011,765
Financial
liabilities:
Deposits (6,015,566) (6,025,225) (6,402,756) (6,417,579)
Short-term
borrowings (816,706) (816,706) (577,193) (577,193)
Long-term debt (51,700) (57,195) (56,822) (62,957)
Off-balance-sheet
instruments:(1)
Commitments to
extend credit (4) (4) (61) (61)
Standby letters
of credit (434) (434) (557) (557)
Interest rate caps
and floors/foreign
currency - 27 - 34
Interest rate swap
agreements 1,085 (1,759) - -
Forward commitments - (21) - (819)
</TABLE>
(1)The amounts shown under "carrying amount" represent accruals
or unamortized fees remaining from those unrecognized financial
instruments.
49
<PAGE>
<PAGE>
Due to the wide range of permitted valuation techniques and
numerous estimates and assumptions which must be made for financial
instruments which lack available secondary markets, management is
concerned that reasonable comparability of estimated fair value
disclosures between financial institutions may not be likely.
Note 21 - Summary of Quarterly Financial Information (unaudited)
The following is a summary of quarterly results of operations for
1993 and 1992.
<TABLE>
<CAPTION>
(amounts in thousands, except per share data)
Quarter Ended 1993
Dec. 31 Sept. 30 June 30 Mar. 31
<S> <C> <C> <C> <C>
Net interest income $84,230 $80,705 $79,322 $79,219
Provision for loan losses 7,224 9,039 8,291 8,454
Net interest income after
provision for loan losses 77,006 71,666 71,031 70,765
Income taxes 14,113 12,780 12,806 12,537
Net income 26,490 23,536 25,344 24,903
Per share:
Primary earnings 0.89 0.78 0.85 0.84
Fully diluted earnings 0.87 0.77 0.84 0.82
Cash dividends declared on
common stock 0.29 0.29 0.29 0.29
Weighted average common stock
outstanding 29,710 29,626 29,457 29,397
Weighted average fully diluted
common stock equivalents 30,510 30,435 30,298 30,239
1992
Net interest income $81,292 $79,849 $73,600 $73,642
Provision for loan losses 9,424 9,542 9,239 12,693
Net interest income after
provision for loan losses 71,868 70,307 64,361 60,949
Income taxes 9,847 10,201 9,495 8,456
Net income 18,661 20,217 19,603 17,638
Per share:
Primary earnings 0.63 0.68 0.67 0.59
Fully diluted earnings 0.62 0.67 0.65 0.59
Cash dividends declared on
common stock 0.26 0.26 0.26 0.26
Weighted average common stock
outstanding 29,297 29,276 29,215 29,124
Weighted average fully diluted
common stock equivalents 30,141 30,121 30,098 30,090
</TABLE>
50
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Six Year Selected Financial Data
(dollars in thousands except per share data)
1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C>
Results of Operations
Interest income $ 518,167 $ 541,421 $ 576,753 $ 586,829 $ 563,938 $467,091
Interest expense 194,691 233,038 307,333 340,205 336,299 261,538
Net interest income 323,476 308,383 269,420 246,624 227,639 205,553
Taxable equivalent
adjustment(a) 3,283 4,479 5,864 7,305 8,770 9,953
Taxable equivalent
net interest income 326,759 312,862 275,284 253,929 236,409 215,506
Noninterest
income 112,890 99,644 81,981 76,347 72,144 65,440
Net revenue 439,649 412,506 357,265 330,276 308,553 280,946
Noninterest expense 250,849 253,011 215,528 189,880 184,219 171,354
Provision for loan
losses 33,008 40,898 39,913 40,417 35,418 25,935
Income before
cumulative effect
of change in
accounting
principle 100,273 76,119 65,832 64,889 58,003 55,430
Net income 100,273 76,119 65,832 64,889 58,003 58,496
Per Share(b)
Primary earnings
before changes
in accounting
principles $3.36 $2.57 $2.24 $2.23 $ 2.01 $1.92
Primary earnings 3.36 2.57 2.24 2.23 2.01 2.03
Fully diluted
earnings before
change in
accounting
principle 3.30 2.53 2.23 2.23 2.01 1.92
Fully diluted
earnings 3.30 2.53 2.23 2.23 2.01 2.03
Common stock cash
dividends declared 1.16 1.04 1.00 0.96 0.88 0.82
Average Balances
Loans, net of
unearned interest $ 5,146,341 $4,926,900 $4,718,795 $4,452,993 $4,054,382 $3,689,429
Investment
securities 1,592,210 1,341,917 883,411 826,943 847,048 817,764
Money market
instruments 264,502 383,255 262,947 269,047 325,127 247,272
Total interest
-earning assets 7,003,053 6,652,072 5,865,153 5,548,983 5,226,557 4,754,465
Total assets 7,542,798 7,171,898 6,336,096 6,024,108 5,686,410 5,214,341
Noninterest
-bearing deposits 1,036,141 925,338 765,952 742,189 719,003 757,591
Interest-bearing
deposits 5,085,718 4,955,133 4,426,203 4,219,659 3,990,511 3,526,196
Total deposits 6,121,859 5,880,471 5,192,155 4,961,848 4,709,514 4,283,787
Short-term
borrowings 621,482 498,014 463,024 416,690 356,025 352,323
Long-term debt 54,308 59,906 45,937 35,476 36,025 33,819
Shareholders'
equity 640,868 579,486 529,312 484,504 448,071 415,320
Ratios
Return on
average assets 1.33% 1.06% 1.04% 1.08% 1.02% 1.12%
Return on average
equity 15.65 13.14 12.44 13.39 12.95 14.08
Net interest margin 4.67 4.70 4.69 4.58 4.52 4.53
Noninterest expense
to net revenue 57.06 61.34 60.33 57.49 59.70 60.99
Dividend payout
ratio 34.41 40.35 44.33 42.67 43.57 39.86
Average
shareholders' equity
to average total
assets 8.50 8.08 8.35 8.04 7.88 7.96
</TABLE>
(a) Taxable equivalent adjustment was calculated utilizing a
marginal federal income tax rate of 35 percent for 1993 and 34 percent
for the years 1988-1992.
(b) Per share amounts have been restated to reflect a 2-for-1
stock split in 1989.
51
<PAGE>
<PAGE>
Description of Business
Star Banc Corporation ("the corporation") was organized as a
Delaware corporation in 1973 under the name First National Cincinnati
Corporation. In 1988, it was reincorporated under the laws of the
State of Ohio and in 1989 changed its name to the current form.
Executive offices are maintained in Cincinnati, Ohio.
The corporation is a bank holding company as defined by the
Bank Holding Company Act of 1956, as amended, and is registered with
the Board of Governors of the Federal Reserve System. As such, it is
subject to regulation and examination by the Federal Reserve.
Through its banking subsidiaries, the corporation is engaged in
commercial banking and trust business, providing a full range of
consumer, commercial and trust financial products and investment
services throughout Ohio, Kentucky and Indiana. The corporation
competes for loans and/or deposits with numerous other banks and
financial institutions throughout its market area, as well as with
mutual funds, brokerage firms and other types of financial service
providers.
In the past six years the corporation has continued to expand
through the acquisition of other smaller banking institutions
throughout its market area of Ohio, Kentucky and Indiana. These
institutions included Aurora First National Bancorp (Aurora, Indiana),
First Sidney Banc Corp. (Sidney, Ohio), Peoples Liberty Bancorporation
(Covington, Kentucky), First National Bancorp (Miamisburg,
Ohio),Fir-Ban Inc. (Verona, Kentucky) and Kentucky Bancorporation
Inc. (Covington, Kentucky). Most recently the corporation
purchased 28 branches in the Cleveland, Ohio area from Ameritrust,
N.A. The Corporation continues to explore other acquisition
opportunities in its tri-state market area.
In 1993, as part of a comprehensive restructuring program, the
corporation merged its six Ohio banks in Columbus, Eaton, Hillsboro,
Ironton, Sidney and Troy with Star Bank, N.A. In addition, the
corporation merged its two Indiana banks in Lawrenceburg and Richmond
to form Star Bank, N.A., Indiana. This resulted in the corporation
wholly owning three bank subsidiaries either directly or through its
one subsidiary bank holding company in Kentucky. All bank subsidiaries
are national banks. The primary regulator of all national banks is the
Office of Comptroller of the Currency. As federally insured
institutions and members of the Federal Reserve System, the
corporation's national banks are also subject to regulation by the
Federal Deposit Insurance Corporation ("FDIC") and the Federal
Reserve.
The Miami Valley Insurance Company, a wholly-owned subsidiary
of the corporation, is incorporated under the laws of the State of
Arizona and is engaged solely in the business of issuing credit life
and accident and health insurance in connection with the lending
activities of the corporation's Ohio bank subsidiary. First National
Cincinnati Corporation is a wholly-owned subsidiary which holds a 75.5
percent ownership of the corporation's headquarters building. The
remaining 24.5 percent ownership is held directly by the corporation.
A tabulation of pertinent financial and operational data of all
Star Banc Corporation banking subsidiaries as of December 31, 1993, is
shown in the following table.
52
<PAGE>
<TABLE>
<CAPTION>
Banking Subsidiaries
(dollars in thousands)
As of December 31,1993
Total Employee
Total Total Total Equity (Full-time) Banking
Assets Loans Deposits Capital Equivalent) Offices
<S> <C> <C> <C> <C> <C> <C>
Star Bank, N.A. $6,629,918 $4,556,148 $5,032,283 $557,738 3,116 151
Star Banc Corporation,
Kentucky 726,072 448,809 623,682 77,356 246 27
Star Bank, N.A.,
Indiana 452,153 289,583 392,820 43,937 178 20
</TABLE>
The corporation had a total of 3,540 full-time equivalent
employees at December 31, 1993. The corporation's banking subsidiaries
operated a total of 198 full service offices at December 31, 1993.
Properties
Star Banc Corporation and Star Bank, N.A. maintain their offices
in Star Bank Center, a 26-story office tower in downtown Cincinnati,
wholly-owned by the corporation. This office building contains
approximately 562,000 square feet of space of which the corporation
and Star Bank, N.A. occupy approximately 250,000 square feet or 44
percent of the space in the building.
The corporation's banking subsidiaries operate 198 banking
offices throughout their market areas. Of those, 108 are owned and 90
are leased.
Legal Proceedings
Neither the corporation nor any of its subsidiaries presently is
involved in litigation which in the opinion of management will result
in a material effect upon the corporation's consolidated financial
position or results of operations. See Note 15 to the consolidated
financial statements for additional information.
Market and Dividend Information
The corporation's common stock (symbol: "STRZ") is traded on the
National Association of Securities Dealers Automated Quotation
System-National Market System. The following table sets forth the high
and low sales prices of the common stock for each quarterly period
during 1993 and 1992 as reported by the National Association of
Securities Dealers, Inc., as well as dividends per share which have
been declared on a quarterly basis.
<TABLE>
<CAPTION>
Cash Dividends
1993 1992 Declared Per
Share
High Low High Low 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Fourth Quarter $37.25 $33.00 $37.00 $29.50 $0.29 $0.26
Third Quarter 37.25 34.00 33.25 29.25 0.29 0.26
Second Quarter 39.38 34.75 39.50 26.50 0.29 0.26
First Quarter 38.50 34.50 31.75 24.25 0.29 0.26
</TABLE>
At December 31, 1993, there were 7,901 holders of record of the
corporation's common stock.
53
<PAGE>
<PAGE>
Corporation Information
Annual Meeting
The Annual Meeting of Shareholders of Star Banc Corporation will
be held at 11:00 a.m. (EDT), Tuesday, April 12, 1994, on the Ninth
Floor at Star Bank Center, 425 Walnut Street, Cincinnati, Ohio 45202.
Additional financial or general information, including copies of this
annual report which includes Form 10-K filed with the Securities and
Exchange Commission, and interim reports published quarterly during
the year may be obtained by contacting David M. Moffett, executive
vice president and chief financial officer, at the executive office
address listed below or by calling (513) 632-4008.
Stock Listing
Star Banc Corporation common stock is listed under the symbol
"STRZ" on the NASDAQ National Market System.
Transfer Agent
Inquiries relating to shareholder records, stock transfers,
changes of ownership, changes of address and dividend payment should
be sent to the transfer agent at the following address:
Star Bank, N.A.
Securities Transfer Department
425 Walnut Street
Mail Location #6125
Cincinnati, OH 45202
Dividend Reinvestment
Star Banc Corporation offers its shareholders an automatic
dividend reinvestment program. The program enables shareholders to
reinvest their dividends in shares at the prevailing market price. For
more information, write to Star Bank, N.A., Securities Transfer
Department, 425 Walnut Street, Mail location #6125, Cincinnati, OH
45202 or call (513) 632-4610.
Independent Public Accountants
The independent public accountants of Star Banc Corporation are
Arthur Andersen & Co., Cincinnati, OH.
Executive Offices
Star Bank Center
425 Walnut Street
Cincinnati, OH 45202
Mutual funds are not FDIC insured, not deposits or obligations of
Star Bank, nor are they guaranteed by Star Bank. Investments in mutual
funds involve investment risk, including possible loss of principal.
Federated Securities Corp., Distributor Star Bank is Investment
Adviser to the Star Funds.
InveStar is the trade name used to denote the program of life
insurance, annuities and securities products offered at Star Bank.
Insurance and annuities are offered through Financial Horizons
Distributors Agency of Ohio, Inc., an independent insurance agency.
Securities products and services are offered through Financial
Horizons Securities Corp., a registered broker dealer, member
NASD/SIPC and Financial Horizons Discount Brokerage, Inc., a
registered broker dealer, member NASD/SPIC. None of the Financial
Horizons companies are affiliated with Star Bank.
The financial section of this annual report has been produced on
recycled paper.
60
<PAGE>
<PAGE>
Corporate Directors
Column 1 (Top to Bottom)
James R. Bridgeland, Jr.
Partner, Taft, Stettinius & Hollister
Laurance L. Browning, Jr.
Formerly Vice Chairman, Emerson Electric Co.
Victoria B. Buyniski
President and Chief Executive Officer,
United Medical Resources, Inc.
Samuel M. Cassidy
President and Chief Executive Officer,
Star Bank, N.A. and Executive Vice President, Star Banc
Corporation
Raymond R. Clark
President and Chief Executive Officer,
Cincinnati Bell Telephone
V. Anderson Coombe
Chairman, The Wm. Powell Co.
Column 2 (Top to Bottom)
John C. Dannemiller
Chairman and Chief Executive Officer,
Bearings, Inc.
Jerry A. Grundhofer
Chairman, President and Chief Executive Officer, Star Banc
Corporation and Chairman, Star Bank, N.A.
J.P. Hayden, Jr.
Chairman and Chief Executive Officer,
The Midland Company
Roger L. Howe
Chairman,
U.S. Precision Lens, Inc.
Thomas J. Klinedinst, Jr.
President,
Thos. E. Wood, Inc.
Charles S. Mechem, Jr.
Commissioner, Ladies Professional Golf Association and Chairman,
U.S.ShoeCorporation
Column 3 (Top to Bottom)
Daniel J. Meyer
Chairman and Chief Executive Officer Cincinnati Milacron, Inc.
O'dell M. Owens, M.D., M.P.H.
Director of Reproductive Endocrinology and Infertility,
The Christ Hospital
Thomas E. Petry
Chairman and Chief Executive Officer,
Eagle-Picher Industries, Inc.
William C. Portman
Chairman,Portman Equipment Company
Oliver W. Waddell
Formerly Chairman,Star Banc Corporation and Vice Chairman, Star Bank,
N.A.
Bradley L. Warnemunde
Formerly Chairman, President and Chief Executive Officer,
Ohio National Life Insurance Company
61
EXHIBIT 21
STAR BANC CORPORATION
LIST OF SUBSIDIARIES
Star Bank, N.A. (A)
Star Banc Corporation Kentucky (C)
Star Bank, N.A., Kentucky (C)
Star Bank, N.A., Indiana (D)
First National Cincinnati Corporation (A)
The Miami Valley Insurance Company (B)
P.N.B. Insurance Agency (D)*
First-In-Leasing, Inc. (D)*
(A) Ohio Corporation
(B) Arizona Corporation
(C) Kentucky Corporation
(D) Indiana Corporation
* Inactive
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report incorporated by reference in this
Form 10-K, into the Company's previously filed Registration
Statement Files No. 2-94845, No. 33-9494, No. 33-10085, No. 33-
24672, No. 33-46018 and 33-61308.
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
Cincinnati, Ohio
March 28, 1994
Exhibit 24
POWER OF ATTORNEY
We, the undersigned Directors of Star Banc Corporation,
hereby appoint Jerry A. Grundhofer, our true and lawful attorney
and agent, to do any and all acts and things in our name and on
our behalf as Directors of the Corporation, which said attorney
and agent may deem necessary or advisable to enable the
Corporation to comply with the Securities Exchange Act of 1934,
as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission, in connection with the filing
of the corporation's annual report on Form 10-K for the year
1993, including, without limitation, signing for us, or any of
us, in our names as Directors of the Corporation, such Form 10-K
and any and all amendments thereto, and we hereby ratify and
confirm all that said attorney and agent shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act
of 1934, and the rules and regulations thereunder, this Power of
Attorney has been signed below by the following persons as
Directors of the Corporation as of the 14th day of December 1993.
/s/ James R. Bridgeland, Jr. Director
James R. Bridgeland, Jr.
/s/ Laurance L. Browning, Jr. Director
Laurance L. Browning, Jr.
/s/ Samuel M. Cassidy Director
Samuel M. Cassidy
/s/ Raymond R. Clark Director
Raymond R. Clark
/s/ V. Anderson Coombe Director
V. Anderson Coombe
/s/ John C. Dannemiller Director
John C. Dannemiller
/s/ J.P. Hayden, Jr. Director
J.P. Hayden, Jr.
/s/ Roger L. Howe Director
Roger L. Howe
<PAGE>
/s/ Thomas J. Klinedinst, Jr. Director
Thomas J. Klinedinst, Jr.
/s/ Charles S. Mechem, Jr. Director
Charles S. Mechem, Jr.
/s/ Daniel J. Meyer Director
Daniel J. Meyer
/s/ O'dell M. Owens, M.D. Director
O'dell M. Owens, M.D.
/s/ Thomas E. Petry Director
Thomas E. Petry
/s/ William C. Portman Director
William C. Portman
/s/ Oliver W. Waddell Director
Oliver W. Waddell
/s/ Bradley L. Warnemunde Director
Bradley L. Warnemunde
