<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
STAR BANC CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OHIO 6711 31-0838189
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
425 WALNUT STREET
CINCINNATI, OHIO 45202
(513) 632-4000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JENNIE CARLSON, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
STAR BANC CORPORATION
425 WALNUT STREET
CINCINNATI, OHIO 45202
(513) 632-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPY TO:
EDWARD D. HERLIHY, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
(212) 403-1000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $5.00 per share
(including attached preferred share
purchase rights)......................... 11,321,317 $59.21 $670,375,862.19 $197,760.88(2)
</TABLE>
(1) Pursuant to Rule 457 (f)(1) and 457(c) promulgated under the Securities Act
of 1933, as amended, and estimated solely for purposes of calculating the
registration fee, the proposed maximum aggregate offering price is
$670,375,862.19, which equals the average of the high and low prices of the
common stock, no par value per share ("Trans Financial Common Stock"), of
Trans Financial, Inc. ("Trans Financial") of $53.31, as reported on the
Nasdaq National Market on June 5, 1998, multiplied by 12,575,049 the total
number of shares of Trans Financial Common Stock (including shares issuable
pursuant to the exercise of outstanding options to purchase Trans Financial
Common Stock) to be canceled in the merger (the "Merger") described herein.
The proposed maximum offering price per share is equal to the proposed
maximum aggregate offering price determined in the manner described in the
preceding sentence divided by the maximum number of shares of common stock,
par value $5.00 per share, of Star Banc Corporation ("Star Banc") that could
be issued in the Merger based on an exchange ratio of 0.9003.
(2) $133,520.75 of which was paid in connection with the filing by Trans
Financial and Star Banc on May 29, 1998 of preliminary proxy materials on
Schedule 14A in connection with the Merger.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TRANS FINANCIAL, INC.
500 EAST MAIN STREET
BOWLING GREEN, KENTUCKY 42101
, 1998
Dear Stockholder:
On behalf of the Board of Directors and management, I cordially invite you
to attend the Special Meeting of Stockholders of Trans Financial, Inc. ("Trans
Financial") to be held at a.m., Central Time, on , 1998, at
(the "Special Meeting").
At this important meeting, you will be asked to consider and vote on a
proposal to approve and adopt an Agreement and Plan of Merger, dated April 9,
1998 (the "Merger Agreement"), providing for the merger (the "Merger") of Trans
Financial with and into Star Banc Corporation ("Star"). Upon consummation of the
Merger, each share of Trans Financial common stock, other than shares held by
stockholders of Trans Financial who exercise their dissenters' rights under the
Kentucky Business Corporation Act, will be converted into 0.9003 of a share of
Star common stock. A copy of the Merger Agreement is attached as Annex A to the
accompanying Proxy Statement/Prospectus and is incorporated by reference herein.
I have enclosed the following items relating to the Special Meeting and
the Merger:
1. Proxy Statement/Prospectus;
2. Proxy card; and
3. A pre-addressed return envelope to First Union National Bank, the
Transfer Agent, for the proxy card.
The Proxy Statement/Prospectus and related proxy materials set forth, or
incorporate by reference, financial data and other important information
relating to Trans Financial and Star and describe the terms and conditions of
the proposed Merger. The Board of Directors urges you to carefully review these
materials before completing the enclosed proxy card or attending the Special
Meeting.
Donaldson, Lufkin & Jenrette Securities Corporation, an investment banking
firm, has issued its opinion, dated , 1998, to your Board of
Directors regarding the fairness, from a financial point of view, of the
consideration to be paid by Star pursuant to the Merger Agreement. A copy of the
opinion is attached as Annex D to the accompanying Proxy Statement/Prospectus.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE IN THE BEST INTERESTS OF
TRANS FINANCIAL AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS OF
TRANS FINANCIAL UNANIMOUSLY RECOMMENDS THAT TRANS FINANCIAL STOCKHOLDERS VOTE
"FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
It is important that your shares be represented at the Special Meeting,
whether or not you plan to attend the Special Meeting in person. Please
complete, sign and date the enclosed proxy card and return it to First Union
National Bank in the enclosed pre-addressed envelope which requires no postage
if mailed within the United States. If you later decide to attend the Special
Meeting and vote in person, or if you wish to revoke your proxy for any reason
prior to the establishment of a quorum for purposes of taking the vote at the
Special Meeting, you may do so and your proxy will have no further effect. You
may revoke your proxy by delivering to First Union National Bank a written
notice of revocation bearing a later date than the proxy, or any later dated
proxy relating to the same shares. Attendance at the Special Meeting will not in
itself constitute the revocation of a proxy.
<PAGE>
The Board of Directors and management of Trans Financial appreciate your
continued support. If you need assistance in completing your proxy card or if
you have any questions about the accompanying Proxy Statement/Prospectus, please
feel free to contact Georgeson & Company Inc. at (800) 223-2064.
Sincerely,
_______________________________________________
Vince A. Berta
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
2
<PAGE>
TRANS FINANCIAL, INC.
500 EAST MAIN STREET
BOWLING GREEN, KENTUCKY 42101
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD
, 1998
To the Stockholders of Trans Financial, Inc.:
Notice is hereby given that the Special Meeting of Stockholders of Trans
Financial, Inc., a Kentucky corporation ("Trans Financial"), will be held at
, on , 1998, at a.m., Central Time (the "Special
Meeting"), for the following purposes:
(1) To consider and vote on a proposal to approve and adopt the
Agreement and Plan of Merger, dated April 9, 1998, by and between Star Banc
Corporation, an Ohio corporation ("Star"), and Trans Financial (the "Merger
Agreement"), pursuant to which, among other things, (i) Trans Financial will
be merged with and into Star (the "Merger"), with the result that the
business and operations of Trans Financial will be continued through Star,
and (ii) upon consummation of the Merger, each outstanding share of Trans
Financial common stock, no par value per share ("Trans Financial Common
Stock"), other than shares held by stockholders of Trans Financial who
exercise their dissenters' rights under the Kentucky Business Corporation
Act (the "KBCA") and any shares held by Trans Financial, Star or any of
their respective subsidiaries, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, will be converted
into 0.9003 of a share of Star common stock, par value $5.00 per share
("Star Common Stock"). The Merger Agreement is attached as Annex A to the
accompanying Proxy Statement/Prospectus and is incorporated by reference
herein.
(2) To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
The record date for determining the holders of Trans Financial Common Stock
entitled to receive notice of, and to vote at, the Special Meeting or any
adjournment or postponement thereof has been fixed as of the close of business
on , 1998. Approval by the Trans Financial stockholders of the
Merger Agreement requires the affirmative vote of the holders of at least a
majority of the outstanding shares of Trans Financial Common Stock entitled to
vote at the Special Meeting.
Each holder of Trans Financial Common Stock may have the right to dissent
from the Merger and to demand payment of the fair value of such stockholder's
shares in the event the Merger is approved and consummated. Any right of any
such stockholder to receive such payment would be contingent upon strict
compliance with the requirements set forth in Subtitle 13 of the KBCA, the full
text of which is attached as Annex C to the accompanying Proxy
Statement/Prospectus. For a summary of these requirements, see "THE
MERGER--Dissenters' Rights of Stockholders of Trans Financial" in the
accompanying Proxy Statement/Prospectus.
Information regarding the Merger and related matters is contained in the
accompanying Proxy Statement/Prospectus and the annexes thereto, which are
incorporated by reference herein and form a part of this Notice.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE ESTABLISHMENT OF A
QUORUM FOR PURPOSES OF TAKING THE VOTE AT THE SPECIAL MEETING BY FOLLOWING THE
PROCEDURES SET FORTH IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
THE BOARD OF DIRECTORS OF TRANS FINANCIAL HAS DETERMINED THAT THE TERMS OF
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE IN
<PAGE>
THE BEST INTERESTS OF TRANS FINANCIAL AND ITS STOCKHOLDERS. ACCORDINGLY, THE
BOARD OF DIRECTORS OF TRANS FINANCIAL UNANIMOUSLY RECOMMENDS THAT TRANS
FINANCIAL STOCKHOLDERS VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
____________________________________________
Jay B. Simmons
SECRETARY
Bowling Green, Kentucky
, 1998
2
<PAGE>
STAR BANC CORPORATION
PROSPECTUS
------------------------
TRANS FINANCIAL, INC.
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1998
------------------------
This Prospectus of Star Banc Corporation, an Ohio corporation ("Star"),
relates to up to 11,321,317 shares of common stock, par value $5.00 per share,
and attached preferred share purchase rights (the "Star Rights"), of Star (such
common stock and Star Rights, collectively, the "Star Common Stock") to be
issued to the stockholders of Trans Financial, Inc., a Kentucky corporation
("Trans Financial"), upon consummation of the proposed merger of Trans Financial
with and into Star (the "Merger"). The Merger will be consummated pursuant to
the Agreement and Plan of Merger, dated April 9, 1998, by and between Star and
Trans Financial (the "Merger Agreement"), upon the terms and subject to the
conditions thereof. This Prospectus also serves as the Proxy Statement of Trans
Financial for use in connection with the solicitation of proxies by the Board of
Directors of Trans Financial (the "Trans Financial Board") to be used at the
Special Meeting of Stockholders of Trans Financial (the "Special Meeting") to,
among other things, approve and adopt the Merger Agreement. The Merger Agreement
is attached as Annex A to this Proxy Statement/Prospectus, and is incorporated
herein by reference.
Pursuant to the Merger Agreement, Star will issue an aggregate of up to
11,321,317 shares of Star Common Stock. Upon consummation of the Merger, among
other things, each outstanding share of Trans Financial common stock, no par
value per share ("Trans Financial Common Stock"), other than shares held by
stockholders of Trans Financial who exercise their dissenters' rights under the
Kentucky Business Corporation Act (the "KBCA") and any shares held by Trans
Financial, Star or any of their respective subsidiaries, in each case other than
in a fiduciary capacity or as a result of debts previously contracted, will be
converted into 0.9003 of a share of Star Common Stock (the "Exchange Ratio").
See "THE MERGER AGREEMENT--General Description of the Merger" and "THE
MERGER--Dissenters' Rights of Stockholders of Trans Financial." No fractional
shares of Star Common Stock will be issued in the Merger, but cash will be paid
in lieu of such fractional shares. See "THE MERGER AGREEMENT--Fractional
Shares."
Star Common Stock is listed on the New York Stock Exchange, Inc. (the
"NYSE") under the symbol "STB." On April 9, 1998, the last full trading day
before public announcement of the Merger, the last sale price of Star Common
Stock as reported on the NYSE Composite Tape was $63.31. On , 1998,
the last sale price of Star Common Stock as reported on the NYSE Composite Tape
was $ . Trans Financial Common Stock is quoted on The Nasdaq National
Market ("NASDAQ") under the symbol "TRFI." On April 9, 1998, the last sale price
of Trans Financial Common Stock as reported by NASDAQ was $52.63. On
, 1998, the last sale price for Trans Financial Common Stock as reported
by NASDAQ was $ .
This Proxy Statement/Prospectus, the letter to Trans Financial stockholders,
the Notice of Special Meeting of Stockholders, and the form of proxy are first
being mailed to the stockholders of Trans Financial on or about ,
1998.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/ PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
(THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF STAR COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE
"FDIC"), THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION
INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1998.
<PAGE>
AVAILABLE INFORMATION
Each of Star and Trans Financial is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information concerning either Star or Trans
Financial can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's Regional Offices in New
York (Suite 1300, Seven World Trade Center, New York, New York 10048) and
Chicago (Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661). Copies of such material can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains an Internet world wide web site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address of
the world wide web site is http://www.sec.gov. Star Common Stock is listed on
the NYSE, and such reports, proxy statements and other information concerning
Star are available for inspection and copying at the offices of the NYSE, 20
Broad Street, New York, New York 10005. Trans Financial Common Stock is quoted
on NASDAQ, and such reports, proxy statements and other information concerning
Trans Financial are available for inspection and copying at the Public Reference
section of NASDAQ at 1735 K Street, N.W., Washington, D.C. 20006.
This Proxy Statement/Prospectus does not contain all of the information set
forth in the Registration Statement on Form S-4 and exhibits thereto (together
with any amendments thereto, the "Registration Statement") covering the
securities offered hereby which has been filed by Star with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). As permitted by
the rules and regulations of the Commission, this Proxy Statement/Prospectus
omits certain information contained or incorporated by reference in the
Registration Statement. Reference is hereby made to the Registration Statement
for further information with respect to Star and the securities offered hereby.
Such additional information may be obtained from the Commission's principal
office in Washington, D.C. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated by reference in this Proxy
Statement/Prospectus provide a fair summary of the contents of any contract or
other document referenced herein or therein but are not necessarily complete,
and, in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such reference.
i
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS
(EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED BY REFERENCE HEREIN OR IN
SUCH DOCUMENTS) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO THE FOLLOWING:
<TABLE>
<CAPTION>
STAR DOCUMENTS TRANS FINANCIAL DOCUMENTS
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Nancy Kelly Jay B. Simmons
425 Walnut Street 500 East Main Street
Cincinnati, Ohio 45202 Bowling Green, Kentucky 42101
</TABLE>
IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, A REQUEST MUST BE
RECEIVED NO LATER THAN , 1998.
The following documents filed with the Commission by Star under the Exchange
Act are incorporated herein by reference (Commission File No. 0-7601):
(i) Star's Annual Report on Form 10-K for the year ended December 31,
1997 (the "1997 Star Form 10-K").
(ii) Star's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998.
(iii) The information contained in Star's Proxy Statement, dated March 3,
1998, for its Annual Meeting of Shareholders held on April 14, 1998, that
has been incorporated by reference in the 1997 Star Form 10-K.
(iv) The description of Star Common Stock set forth in Item 1 of Star's
Registration Statement on Form 8-A, dated April 15, 1994, and any amendment
or report filed for the purpose of updating such description.
(v) The description of the Star Rights set forth in Item 1 of Star's
Registration Statement on Form 8-A, dated May 5, 1994, and any amendment or
report filed for the purpose of updating such description.
(vi) Star's Current Reports on Form 8-K filed April 15, 1998, and on
Form 8-K/A filed April 21, 1998.
The following documents filed with the Commission by Trans Financial under
the Exchange Act are incorporated herein by reference (Commission File No.
0-13030):
(i) Trans Financial's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "1997 Trans Financial Form 10-K").
(ii) Trans Financial's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998.
(iii) The information contained in Trans Financial's Proxy Statement,
dated March 3, 1998, for its Annual Meeting of Shareholders held on April
20, 1998, that has been incorporated by reference in the 1997 Trans
Financial Form 10-K.
(iv) Trans Financial's Current Report on Form 8-K filed April 15, 1998.
All documents filed with the Commission by Star and/or Trans Financial
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Proxy Statement/Prospectus and prior to the date of the Special
Meeting shall be deemed to be incorporated by reference herein and made a part
hereof from the date any such document is filed. The information relating to
Star and Trans Financial contained in this Proxy Statement/Prospectus does not
purport to be complete and should be read together with the information in the
documents incorporated by reference herein. Any statement contained herein
ii
<PAGE>
or in a document incorporated or deemed to be incorporated herein by reference
shall be deemed to be modified or superseded for all purposes to the extent that
a statement contained herein or in any other subsequently filed document
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part hereof.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS OR IN THE
DOCUMENTS INCORPORATED BY REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY STAR OR TRANS FINANCIAL. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO EXCHANGE OR SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR BUY,
ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH, OR
FROM ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN
OFFER OR PROXY SOLICITATION. THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS SPEAKS AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY
INDICATED. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF THE SECURITIES TO WHICH IT RELATES SHALL IMPLY OR CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF STAR OR TRANS
FINANCIAL OR ANY OF THEIR RESPECTIVE SUBSIDIARIES OR IN THE INFORMATION SET
FORTH OR INCORPORATED BY REFERENCE HEREIN SUBSEQUENT TO THE DATE HEREOF.
THIS PROXY STATEMENT/PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF
STAR FOLLOWING THE CONSUMMATION OF THE MERGER, INCLUDING STATEMENTS RELATING TO
THE COST SAVINGS, REVENUE ENHANCEMENTS AND FUNDING ADVANTAGES THAT ARE EXPECTED
TO BE REALIZED FROM THE MERGER AND THE EXPECTED IMPACT OF THE MERGER ON STAR'S
FINANCIAL PERFORMANCE AND EARNINGS ESTIMATES FOR THE COMBINED COMPANY. SEE "THE
COMPANIES--OPERATIONS AFTER THE MERGER," "THE MERGER--BACKGROUND OF THE MERGER,"
"--REASONS FOR THE MERGER; TRANS FINANCIAL BOARD RECOMMENDATION" AND "--OPINION
OF TRANS FINANCIAL'S FINANCIAL ADVISOR" AND "UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION." THESE FORWARD-LOOKING STATEMENTS INVOLVE
CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE,
AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) EXPECTED COST SAVINGS FROM THE
MERGER CANNOT BE FULLY REALIZED; (2) DEPOSIT ATTRITION, CUSTOMER LOSS OR REVENUE
LOSS FOLLOWING THE MERGER; (3) COMPETITIVE PRESSURE IN THE BANKING INDUSTRY
INCREASES SIGNIFICANTLY; (4) COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION OF
THE BUSINESSES OF STAR AND TRANS FINANCIAL ARE GREATER THAN EXPECTED; (5)
CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE MARGINS MORE THAN PLANNED; (6)
GENERAL ECONOMIC CONDITIONS, EITHER NATIONALLY OR REGIONALLY, ARE LESS FAVORABLE
THAN EXPECTED, RESULTING IN, AMONG OTHER THINGS, A DETERIORATION IN CREDIT
QUALITY; (7) THE IMPACT OF REGULATORY CHANGES IS OTHER THAN EXPECTED; (8)
CHANGES IN BUSINESS CONDITIONS AND INFLATION; AND (9) CHANGES IN THE SECURITIES
MARKETS.
THE FORWARD-LOOKING EARNINGS ESTIMATES INCLUDED IN THIS PROXY STATEMENT/
PROSPECTUS HAVE NOT BEEN EXAMINED OR COMPILED BY THE INDEPENDENT PUBLIC
ACCOUNTANTS OF STAR OR TRANS FINANCIAL NOR HAVE SUCH ACCOUNTANTS APPLIED ANY
PROCEDURES THERETO. ACCORDINGLY, SUCH ACCOUNTANTS DO NOT EXPRESS AN OPINION OR
ANY OTHER FORM OF ASSURANCE ON THEM.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION..................................................................................... i
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................................................... ii
SUMMARY INFORMATION....................................................................................... 1
Business of Star........................................................................................ 1
Business of Trans Financial............................................................................. 1
Special Meeting of Trans Financial Stockholders......................................................... 2
The Proposed Merger..................................................................................... 2
Fractional Shares....................................................................................... 3
Stock Option Agreement.................................................................................. 3
Recommendation of the Trans Financial Board............................................................. 4
Opinion of Trans Financial's Financial Advisor.......................................................... 4
Interests of Certain Persons in the Merger.............................................................. 4
Regulatory Approval..................................................................................... 5
Waiver and Amendment.................................................................................... 5
Accounting Treatment.................................................................................... 5
Trans Financial Stock Options........................................................................... 5
Federal Income Tax Consequences in General.............................................................. 6
Dissenters' Rights...................................................................................... 6
Certain Differences in the Rights of Shareholders....................................................... 6
Markets and Market Prices............................................................................... 7
Comparative Unaudited Per Share Data.................................................................... 8
Summary Financial Data.................................................................................. 10
THE COMPANIES............................................................................................. 13
Star.................................................................................................... 13
Trans Financial......................................................................................... 14
Operations after the Merger............................................................................. 14
INFORMATION REGARDING THE SPECIAL MEETING................................................................. 15
General................................................................................................. 15
Date, Time and Place.................................................................................... 16
Trans Financial Record Date; Vote Required.............................................................. 16
Voting Securities and Certain Holders Thereof........................................................... 16
Voting and Revocation of Proxies........................................................................ 16
Solicitation of Proxies................................................................................. 17
Dissenters' Rights...................................................................................... 17
THE MERGER................................................................................................ 18
Background of the Merger................................................................................ 18
Reasons for the Merger; Trans Financial Board Recommendation............................................ 19
Opinion of Trans Financial's Financial Advisor.......................................................... 19
Interests of Certain Persons in the Merger.............................................................. 26
Regulatory Approval..................................................................................... 28
Accounting Treatment.................................................................................... 29
Certain Federal Income Tax Consequences of the Merger................................................... 29
Dissenters' Rights of Stockholders of Trans Financial................................................... 31
Trans Financial Rights Agreement Amendment.............................................................. 33
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE MERGER AGREEMENT...................................................................................... 34
General Description of the Merger....................................................................... 34
Closing and Effective Time.............................................................................. 34
Surrender of Trans Financial Stock Certificates and Receipt of Star Common Stock........................ 34
Fractional Shares....................................................................................... 35
Conditions of the Merger................................................................................ 36
Termination of the Merger Agreement..................................................................... 37
Business Pending the Merger............................................................................. 37
Waiver and Amendment.................................................................................... 39
Employee Benefits....................................................................................... 39
Stock Option Agreement.................................................................................. 41
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION.............................................. 45
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION................................. 53
COMPARISON OF SHAREHOLDER RIGHTS.......................................................................... 56
Description of Star Common Stock and Attached Preferred Share Purchase Rights........................... 56
Restrictions on Resale of Star Capital Stock by Affiliates; Affiliate Agreements........................ 57
Comparison of Rights of Shareholders of Star and Stockholders of Trans Financial........................ 58
SUPERVISION AND REGULATION................................................................................ 65
General................................................................................................. 65
Certain Transactions with Affiliates.................................................................... 65
Payment of Dividends.................................................................................... 65
Capital Adequacy........................................................................................ 66
Support of Subsidiary Bank.............................................................................. 66
FIRREA and FDICIA....................................................................................... 67
Depositor Preference Statute............................................................................ 67
FDIC Insurance Assessments.............................................................................. 68
Interstate Banking and Other Recent Legislation......................................................... 69
LEGAL MATTERS............................................................................................. 70
EXPERTS................................................................................................... 70
OTHER MATTERS............................................................................................. 70
SHAREHOLDER PROPOSALS..................................................................................... 71
ANNEXES
Annex A -- Merger Agreement............................................................................... A-1
Annex B -- Stock Option Agreement......................................................................... B-1
Annex C -- Dissenters' Rights Provisions under the KBCA................................................... C-1
Annex D -- Fairness Opinion of Donaldson, Lufkin & Jenrette Securities Corporation........................ D-1
</TABLE>
v
<PAGE>
SUMMARY INFORMATION
THE FOLLOWING IS A SUMMARY OF CERTAIN TERMS OF THE MERGER AND RELATED
INFORMATION DISCUSSED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS AND IS NOT
INTENDED TO BE COMPLETE. IT IS QUALIFIED IN ALL RESPECTS BY THE MORE DETAILED
INFORMATION INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS, THE ACCOMPANYING
ANNEXES AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. AS USED IN THIS
PROXY STATEMENT/PROSPECTUS, THE TERMS "STAR" AND "TRANS FINANCIAL" REFER TO SUCH
CORPORATIONS, RESPECTIVELY, AND, WHERE THE CONTEXT REQUIRES, SUCH CORPORATIONS
AND THEIR RESPECTIVE SUBSIDIARIES ON A CONSOLIDATED BASIS. STOCKHOLDERS OF TRANS
FINANCIAL ARE URGED TO READ AND CONSIDER CAREFULLY ALL OF THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS AND
THE ANNEXES TO THIS PROXY STATEMENT/PROSPECTUS. ALL INFORMATION CONCERNING STAR
INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS HAS BEEN FURNISHED BY STAR AND ALL
INFORMATION CONCERNING TRANS FINANCIAL INCLUDED IN THIS PROXY
STATEMENT/PROSPECTUS HAS BEEN FURNISHED BY TRANS FINANCIAL.
BUSINESS OF STAR
Star is a bank holding company as defined by the Bank Holding Company Act of
1956, as amended (the "BHCA"), and is registered with the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"). Through its banking
subsidiary, Star Bank, N.A., Star is engaged in the commercial banking and trust
business, providing a full range of consumer, commercial and trust financial
products and investment services throughout Ohio, Kentucky and Indiana. As of
December 31, 1997, Star had assets of $11.0 billion and deposits of $8.2
billion.
Star 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 "Star Banc Corporation."
The executive offices of Star are maintained in Cincinnati, Ohio.
For additional information, see "--Summary Financial Data," "THE
COMPANIES--Star," "THE MERGER AGREEMENT," "COMPARISON OF SHAREHOLDER
RIGHTS--Description of Star Common Stock and Attached Preferred Share Purchase
Rights," "SUPERVISION AND REGULATION," "UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION" and "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
BUSINESS OF TRANS FINANCIAL
Trans Financial is a bank holding company as defined by the BHCA, and is
registered with the Federal Reserve Board. Trans Financial has two commercial
bank subsidiaries--Trans Financial Bank, National Association ("TFB-KY"),
consisting of all of Trans Financial's banking activities in Kentucky, and Trans
Financial Bank Tennessee, National Association ("TFB-TN"), consisting of
substantially all of Trans Financial's Tennessee banking activities. In
addition, Trans Financial operates as subsidiaries of TFB-KY a full-service
securities broker/dealer--Trans Financial Investment Services, Inc.
("TFIS")--and a mortgage banking company--Trans Financial Mortgage Company
("TFMC"). The executive offices of Trans Financial are maintained in Bowling
Green, Kentucky.
Through its banking subsidiaries, Trans Financial provides a full range of
corporate and retail banking services and mortgage, trust and brokerage
services. As of December 31, 1997, Trans Financial had assets of $2.1 billion
and deposits of $1.6 billion.
For additional information, see "--Summary Financial Data," "THE
COMPANIES--Trans Financial," "THE MERGER AGREEMENT," "UNAUDITED PRO FORMA
COMBINED CONDENSED
1
<PAGE>
FINANCIAL INFORMATION" and "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
SPECIAL MEETING OF TRANS FINANCIAL STOCKHOLDERS
The Special Meeting will be held at on , , 1998, at
a.m., Central Time, at which Special Meeting the stockholders of Trans Financial
will consider and vote on a proposal to approve and adopt the Merger Agreement
and will transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof. Approval by the Trans
Financial stockholders of the Merger Agreement requires the affirmative vote of
the holders of at least a majority of the outstanding shares of Trans Financial
Common Stock entitled to vote at the Special Meeting ("Stockholder Approval").
Only holders of record of Trans Financial Common Stock at the close of business
on , 1998 (the "Record Date") will be entitled to notice of, and to
vote at, the Special Meeting. At such date, there were shares of Trans
Financial Common Stock outstanding held by approximately holders of
record. See "INFORMATION REGARDING THE SPECIAL MEETING."
As of the Record Date, directors and executive officers of Trans Financial
and certain of their affiliates owned beneficially an aggregate of approximately
shares of Trans Financial Common Stock, or approximately % of the
shares entitled to vote at the Special Meeting. Each such person has advised
Trans Financial that he, she or it intends to vote in favor of approval and
adoption of the Merger Agreement. See "INFORMATION REGARDING THE SPECIAL
MEETING."
Any stockholder of Trans Financial giving a proxy may revoke it at any time
prior to the establishment of a quorum for purposes of taking the vote at the
Special Meeting. Stockholders of Trans Financial wishing to revoke a proxy may
do so by delivering to the Transfer Agent, First Union National Bank, at 1525
West W.T. Harris Blvd., 3C3, Charlotte, North Carolina 28288-1153 by mail,
courier or hand delivery, a written notice of revocation bearing a later date
than the proxy or any later dated proxy relating to the same shares. Attendance
at the Special Meeting will not in itself constitute the revocation of a proxy.
THE PROPOSED MERGER
GENERAL. Subject to the satisfaction of the terms and conditions set forth
in the Merger Agreement, which are described below, Trans Financial will merge
with and into Star. Upon consummation of the Merger, Trans Financial's corporate
existence will terminate, with Star continuing as the surviving corporation.
Simultaneously with the effectiveness of the Merger, each outstanding share
of Trans Financial Common Stock, other than shares held by stockholders of Trans
Financial who exercise their dissenters' rights under the KBCA and any shares
held by Trans Financial, Star or any of their respective subsidiaries, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, will be converted into 0.9003 of a share of Star Common Stock (the
"Merger Consideration"). See "THE MERGER AGREEMENT" and "THE MERGER--Dissenters'
Rights of Stockholders of Trans Financial."
Based on the closing price of Star Common Stock on the NYSE on ,
1998, the value of the Star Common Stock to be received in the Merger with
respect to each share of Trans Financial Common Stock would be $ . The
value of Star Common Stock to be received in the Merger with respect to each
share of Trans Financial Common Stock is subject to change due to changes in
value of Star Common Stock.
CONDITIONS. Consummation of the Merger is subject to certain terms and
conditions, including, among other things, Stockholder Approval and receipt of
all requisite regulatory approvals. See "THE MERGER AGREEMENT--Conditions of the
Merger" and "THE MERGER--Regulatory Approval."
2
<PAGE>
CLOSING AND EFFECTIVE TIME. Unless the parties otherwise agree, the closing
of the Merger (the "Closing") shall take place at 10:00 a.m., local time, on the
date on which the Effective Time of the Merger occurs (the "Closing Date"),
which shall be any such date on or after July 1, 1998 as Star shall notify Trans
Financial in writing but (i) not earlier than the receipt of Stockholder
Approval and all requisite regulatory approvals and expiration of all applicable
waiting periods under applicable law (the "Approval Date"), and (ii) not later
than the first business day of the first full calendar month commencing at least
five business days after the Approval Date. The Merger will be consummated and
become effective on the date and at the time on which appropriate documents in
respect of the Merger are filed with the Secretaries of State of the State of
Ohio and the Commonwealth of Kentucky (the "Effective Time"). Star and Trans
Financial currently anticipate that the Effective Time will occur on ,
1998. See "THE MERGER AGREEMENT--Closing and Effective Time."
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time by the mutual consent of the parties or by either party upon
the occurrence of certain events or if the Merger is not consummated by April 9,
1999. See "THE MERGER AGREEMENT--Termination of the Merger Agreement."
FRACTIONAL SHARES
No fractional shares of Star Common Stock will be issued to Trans Financial
stockholders in connection with the Merger. Upon consummation of the Merger,
each former holder of Trans Financial Common Stock who otherwise would have been
entitled to receive a fraction of a share of Star Common Stock shall be entitled
to receive in lieu thereof cash, without interest, in an amount equal to the
holder's fractional share interest multiplied by the closing stock price of Star
Common Stock on the last full trading day preceding the Effective Time. Cash
received by Trans Financial stockholders in lieu of fractional shares may give
rise to taxable income. See "THE MERGER--Certain Federal Income Tax Consequences
of The Merger."
STOCK OPTION AGREEMENT
In connection with the execution of the Merger Agreement, Star and Trans
Financial entered into the Stock Option Agreement, dated April 9, 1998 (the
"Stock Option Agreement"), pursuant to which Trans Financial has issued Star an
option (the "Option") to purchase up to 2,331,962 shares of Trans Financial
Common Stock (or 19.9% of the outstanding shares of Trans Financial Common Stock
as of the Record Date, without including any shares subject to or issued
pursuant to the Option) at an exercise price of $46.625 per share. The Option is
exercisable only upon the occurrence of certain events and provides Star the
right, under certain circumstances, to require Trans Financial to purchase for
cash the unexercised portion of the Option and all shares of Trans Financial
Common Stock purchased by Star pursuant thereto. The Option, which Star required
that Trans Financial grant as a condition to Star's entering into the Merger
Agreement, may increase the likelihood of consummation of the Merger by
discouraging competing offers for Trans Financial. Certain aspects of the Stock
Option Agreement may have the effect of discouraging persons who may now, or
prior to the Effective Time, be interested in acquiring all of or a significant
interest in Trans Financial from considering or proposing such an acquisition,
even if such persons were prepared to offer to pay consideration to stockholders
of Trans Financial which had a higher current market price than the Merger
Consideration to be received for each share of Trans Financial Common Stock
pursuant to the Merger Agreement.
The Stock Option Agreement is attached as Annex B to this Proxy
Statement/Prospectus and is incorporated herein by reference. See "THE MERGER
AGREEMENT--Stock Option Agreement."
3
<PAGE>
RECOMMENDATION OF THE TRANS FINANCIAL BOARD
THE TRANS FINANCIAL BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY. THE TRANS FINANCIAL BOARD BELIEVES THAT
THE MERGER IS IN THE BEST INTERESTS OF TRANS FINANCIAL AND ITS STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT SUCH STOCKHOLDERS VOTE "FOR" THE MATTERS TO BE VOTED
UPON BY SUCH STOCKHOLDERS IN CONNECTION WITH THE MERGER.
For a discussion of the factors considered by the Trans Financial Board in
reaching its conclusion, see "THE MERGER--Background of the Merger" and
"--Reasons for the Merger; Trans Financial Board Recommendation."
OPINION OF TRANS FINANCIAL'S FINANCIAL ADVISOR
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Trans
Financial's financial advisor, has delivered to the Trans Financial Board a
written opinion dated , 1998, to the effect that, as of such date
and based upon the procedures and subject to the assumptions made, matters
considered and limitations and qualifications described therein, the Exchange
Ratio is fair to the holders of Trans Financial Common Stock from a financial
point of view. The full text of the written opinion of DLJ dated ,
1998, is attached as Annex D to this Proxy Statement/Prospectus and holders of
Trans Financial Common Stock are urged to read carefully the opinion in its
entirety. See "THE MERGER--Opinion of Trans Financial's Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Trans Financial's management and Board of Directors have
interests in the Merger in addition to their interests as stockholders of Trans
Financial. Those interests relate to, among other things, post-merger membership
on the Board of Directors of Star (the "Star Board"), severance arrangements,
equity-based benefit plan arrangements affected by the change-in-control of
Trans Financial effected by the Merger, and post-merger insurance coverage and
indemnity.
In connection with the execution of the Merger Agreement, Star has entered
into two- to five-year employment agreements with Vince A. Berta, Chairman,
President and Chief Executive Officer of Trans Financial, Tommy W. Cole,
Executive Vice President--Private Banking of Trans Financial, Edward R.
Matthews, Executive Vice President and Chief Financial Officer of Trans
Financial, James G. Campbell, Executive Vice President and General Sales Manager
of Trans Financial, John K. Davis II, Senior Vice President and Chief
Information Officer of Trans Financial, and Michael L. Norris, President of
Trans Financial Mortgage Company, which will become effective as of the Closing
Date (the "Employment Agreements"). The Employment Agreements provide, among
other things, for Mr. Berta to receive an annual salary of at least $300,000 and
Messrs. Campbell, Cole, Davis, Norris and Matthews to receive annual salaries at
least equal to their current salaries. In addition, each of the foregoing
executives will be entitled under his Employment Agreement to receive a minimum
annual bonus consistent with peer executives of Star and its affiliates and
benefits and perquisites no less favorable than those provided to such peer
executives. The Employment Agreements also provide for associated gross-up
payments for certain taxes under certain circumstances and for certain other
payments under certain circumstances upon termination of the executive's
employment with Star.
In addition, on the Closing Date, Mr. Berta will be granted 25,000
restricted shares of Star Common Stock and an option to purchase 50,000 shares
of Star Common Stock (with an exercise price equal to the market price of Star
Common Stock as of the Closing Date); Messrs. Cole and Matthews will each be
granted 10,000 restricted shares of Star Common Stock; and Messrs. Campbell,
Davis and Norris will each be granted 5,000 restricted shares of Star Common
Stock. The restricted shares will vest in five equal
4
<PAGE>
annual installments commencing on the first anniversary of the Closing Date, and
Mr. Berta's option will vest in four equal annual installments commencing on the
first anniversary of the Closing Date.
The Trans Financial Board was aware of these interests and considered them,
among other interests and other matters, in approving the Merger Agreement and
the transactions contemplated thereby. See "THE MERGER--Interests of Certain
Persons in the Merger."
REGULATORY APPROVAL
The Merger is subject to the prior approval of the Federal Reserve Board
under the BHCA. In reviewing the Merger, the Federal Reserve Board considered
various factors, including possible anticompetitive effects of the Merger, and
examined the financial and managerial resources and future prospects of the
combined organization. Further, the Merger may not be consummated until
expiration of all applicable waiting periods.
Application for such approval was filed on April 17, 1998, and the requisite
approval of the Federal Reserve Board was obtained on May 29, 1998. All
applicable waiting periods with respect to the Merger expired as of June 13,
1998.
See "THE MERGER AGREEMENT--Conditions of the Merger" and "THE MERGER--
Regulatory Approval."
WAIVER AND AMENDMENT
Any term, condition or provision of the Merger Agreement may be waived in
writing at any time by the party which is, or whose shareholders are, entitled
to the benefits thereof. The Merger Agreement may be amended by action taken by
or on behalf of the Star Board and the Trans Financial Board at any time before
or after Stockholder Approval, including an amendment to change one or more of
the termination provisions set forth therein, by an instrument in writing signed
on behalf of each party; PROVIDED that, after Stockholder Approval, no such
modification may alter or change the amount or kind of consideration to be
received by holders of Trans Financial Common Stock in the Merger.
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for under the pooling of
interests method of accounting. Consummation of the Merger is conditioned on,
among other matters, receipt of a letter, satisfactory in form and substance,
from Arthur Andersen LLP to the effect that the Merger will qualify as a pooling
of interests transaction under generally accepted accounting principles, if
consummated in accordance with the Merger Agreement. See "THE MERGER--Accounting
Treatment."
TRANS FINANCIAL STOCK OPTIONS
At the Effective Time, all rights with respect to Trans Financial Common
Stock pursuant to options ("Trans Financial Stock Options") that are outstanding
at the Effective Time, whether or not then exercisable, will be converted into
and become rights with respect to Star Common Stock, and Star will assume each
Trans Financial Stock Option in accordance with the terms of the Trans Financial
stock option plan under which it was issued and the stock option agreement by
which it is evidenced. From and after the Effective Time, (i) each Trans
Financial Stock Option assumed by Star will be exercisable solely for shares of
Star Common Stock, (ii) the number of shares of Star Common Stock subject to
each Trans Financial Stock Option will be equal to the number of shares of Trans
Financial Common Stock subject to such Trans Financial Stock Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, rounded down to
the nearest whole share of Star Common Stock and (iii) the per share exercise
price under each Trans Financial Stock Option will be adjusted by dividing the
per share exercise price under such Trans Financial Stock Option by the Exchange
Ratio and rounding up to the nearest cent; PROVIDED,
5
<PAGE>
HOWEVER, that each Trans Financial Stock Option will, in accordance with its
terms, be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, recapitalization or other similar transaction subsequent
to the Effective Time. The foregoing assumption will be undertaken by Star in a
manner that will comply with Section 424(a) of the Internal Revenue Code of
1986, as amended (the "Code"), as to any Trans Financial Stock Option that is an
"incentive stock option." The holder of a Trans Financial Stock Option which is
converted into an option with respect to Star Common Stock will not recognize
gain or loss solely as a result of such conversion. See "THE MERGER--Certain
Federal Income Tax Consequences of The Merger."
Certain executive officers, including certain executive officers who are
directors, of Trans Financial currently hold Trans Financial Stock Options,
which will be converted into rights with respect to Star Common Stock as
described above.
FEDERAL INCOME TAX CONSEQUENCES IN GENERAL
The Merger is intended to qualify as a reorganization under Section 368(a)
of the Code. Star and Trans Financial have each received an opinion of Wachtell,
Lipton, Rosen & Katz, special counsel to Trans Financial, dated the date hereof,
based upon certain customary assumptions and upon certain representations made
by Star and Trans Financial, to the effect that, for United States federal
income tax purposes, the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and no gain or loss will be recognized by
the stockholders of Trans Financial who receive solely Star Common Stock in
exchange for shares of Trans Financial Common Stock, except with respect to cash
received in lieu of fractional shares of Star Common Stock. Trans Financial
stockholders who receive cash in lieu of fractional shares may recognize taxable
income, but not in excess of the amount of cash received. EACH TRANS FINANCIAL
STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE
THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH STOCKHOLDER. See "THE
MERGER--Certain Federal Income Tax Consequences of the Merger."
DISSENTERS' RIGHTS
Under the KBCA, a holder of shares of Trans Financial Common Stock may, in
lieu of the consideration such stockholder would otherwise receive in the
Merger, exercise such stockholder's right to dissent from the Merger Agreement
and to demand payment of the "fair value" of such shares in cash if the Merger
is consummated, by following certain procedures set forth in Subtitle 13 of the
KBCA, the text of which is attached as Annex C to this Proxy
Statement/Prospectus. A holder of shares of Trans Financial Common Stock who
receives such a payment may recognize taxable income.
Failure to follow such procedures may result in a loss of such stockholder's
dissenters' rights. Any Trans Financial stockholder returning a blank executed
proxy card will be deemed to have approved the Merger Agreement, thereby waiving
any such dissenters' rights. See "THE MERGER--Dissenters' Rights of Stockholders
of Trans Financial."
CERTAIN DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
The rights of stockholders of Trans Financial are currently governed by the
KBCA and Trans Financial's Articles of Incorporation and By-Laws. Upon
consummation of the Merger, Trans Financial stockholders who receive Star Common
Stock in the Merger will become shareholders of Star, and their rights will be
governed by the Ohio Business Corporation Law (the "Ohio Law") and Star's
Articles of Incorporation and Regulations. See "COMPARISON OF SHAREHOLDER
RIGHTS--Comparison of the Rights of Shareholders of Star and Stockholders of
Trans Financial."
6
<PAGE>
MARKETS AND MARKET PRICES
Star Common Stock is currently listed on the NYSE under the symbol "STB." On
April 9, 1998, the last full trading day preceding public announcement of the
Merger, the last sale price of Star Common Stock was $63.31 per share as
reported on the NYSE Composite Tape. The last sale price of Star Common Stock on
, 1998, the most recent practicable date prior to the mailing of
this Proxy Statement/Prospectus, was $ per share as reported on the NYSE
Composite Tape.
Trans Financial Common Stock is currently quoted on NASDAQ under the symbol
"TRFI." On April 9, 1998, the last full trading day preceding public
announcement of the Merger, the last sale price of Trans Financial Common Stock
was $52.63 per share as reported on NASDAQ. The value of Trans Financial Common
Stock at April 9, 1998, on an equivalent per share basis, was $57.00 (based upon
the Exchange Ratio). The last sale price of Trans Financial Common Stock on
, 1998, the most recent practicable date prior to the mailing of
this Proxy Statement/Prospectus, was $ per share as reported on NASDAQ.
Stockholders are advised to obtain current market quotations for Star Common
Stock and Trans Financial Common Stock. There can be no assurance as to the
market price of Star Common Stock or Trans Financial Common Stock before, at,
or, in the case of Star Common Stock, after, the Effective Time. The following
table sets forth for the periods indicated the high and low last sale prices (as
reported on the NYSE Composite Tape or on NASDAQ, as the case may be) and per
share cash dividend declared with respect to Star Common Stock and Trans
Financial Common Stock.
<TABLE>
<CAPTION>
STAR TRANS FINANCIAL
----------------------------------- -----------------------------------
COMMON STOCK (1) CASH COMMON STOCK CASH
-------------------- DIVIDEND -------------------- DIVIDEND
HIGH LOW DECLARED (1) HIGH LOW DECLARED
--------- --------- ------------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter............................ 14.21 12.08 .1333 15.25 12.75 .15
Second Quarter........................... 15.33 13.71 .1333 15.50 14.00 .15
Third Quarter............................ 18.13 15.25 .1333 17.88 15.13 .15
Fourth Quarter........................... 20.75 17.79 .1333 18.00 16.75 .15
1996
First Quarter............................ 22.21 18.71 .1567 18.00 15.50 .16
Second Quarter........................... 23.38 21.08 .1567 18.47 15.13 .16
Third Quarter............................ 28.80 21.92 .1567 20.00 17.00 .16
Fourth Quarter........................... 31.38 27.96 .1567 23.19 19.63 .16
1997
First Quarter............................ 45.25 29.70 .20 26.38 22.13 .17
Second Quarter........................... 44.75 38.88 .20 28.63 22.50 .17
Third Quarter............................ 47.06 42.63 .20 32.06 27.25 .17
Fourth Quarter........................... 58.00 46.13 .20 38.88 31.38 .17
1998
First Quarter............................ 61.25 53.13 .23 44.88 35.50 .18
Second Quarter...........................
(through , 1998)
</TABLE>
- ------------------------
(1) Reflects a 3-for-1 stock split declared December 10, 1996.
7
<PAGE>
Star will apply for the listing on the NYSE of the shares of Star Common
Stock to be issued in the Merger.
The Star Board intends to maintain its present policy of paying quarterly
cash dividends on the Star Common Stock when justified by the financial
condition of Star and its subsidiaries. The declaration and amount of future
dividends will depend on circumstances existing at the time, including Star's
earnings, financial condition and capital requirements as well as regulatory
limitations, note and indenture provisions and such other factors as the Star
Board may deem relevant. See "COMPARISON OF SHAREHOLDER RIGHTS--Description of
Star Common Stock and Attached Preferred Share Purchase Rights-- Dividends."
Pursuant to the Merger Agreement, Trans Financial has agreed that, during
the period from the date of the Merger Agreement to the Effective Time, Trans
Financial will not declare, set aside or pay any dividends or other
distributions on the Trans Financial Common Stock, except that Trans Financial
may declare and pay regular quarterly cash dividends of not more than $.18 per
share on the Trans Financial Common Stock; PROVIDED that Trans Financial may not
declare any dividends during any quarter in which its stockholders will be
entitled to receive any regular quarterly dividend on shares of Star Common
Stock to be issued in the Merger.
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for the periods indicated selected historical
per share data of Star and Trans Financial and the corresponding pro forma and
pro forma equivalent per share amounts giving effect to the Merger under the
pooling-of-interests accounting method. The data presented is based upon the
consolidated financial statements and related notes of Star and the consolidated
financial statements and related notes of Trans Financial included or
incorporated by reference in this Proxy Statement/Prospectus, and the pro forma
combined consolidated balance sheet and income statements, including the notes
thereto, appearing elsewhere herein. This information should be read in
conjunction with such historical and pro forma financial statements and related
notes thereto. The assumptions used in the preparation of this table appear in
the notes to the pro forma financial information appearing elsewhere in this
Proxy Statement/Prospectus. See "UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION."
Star and Trans Financial expect that the combined company will achieve
substantial benefits from the Merger, including operating cost savings and
revenue enhancements. However, the unaudited pro forma comparative per share
data does not reflect any direct costs, potential savings or revenue
enhancements which are expected to result from the consolidation of operations
of Star and Trans Financial, and, therefore, does not purport to be indicative
of the results of future operations.
The comparative per share data presented herein is based on and derived
from, and should be read in conjunction with, the historical consolidated
financial statements and the related notes thereto of Trans Financial and Star,
both of which are incorporated by reference herein. See "AVAILABLE INFORMATION,"
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION." Pro forma amounts are not necessarily
indicative of results of operations or the combined financial position that
would have resulted had the Merger been consummated at the beginning of the
periods indicated. All adjustments
8
<PAGE>
consisting of only normal recurring adjustments necessary for a fair statement
of results of interim periods have been included.
<TABLE>
<CAPTION>
FOR THE FOR THE YEAR ENDED DECEMBER 31,
THREE MONTHS
ENDED -------------------------------
MARCH 31, 1998 1997 1996 1995
----------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Earnings per common share (basic)-
Star:
Historical..................................................... $ 0.65 $ 2.26 $ 1.79 $ 1.52
Pro forma combined for Great Financial Corporation............. 0.65 2.08 n/a n/a
Pro forma combined for the Merger.............................. 0.64 2.10 1.67 1.51
Trans Financial:
Historical..................................................... 0.57 2.09 0.61 1.36
Pro forma equivalent for the Merger (1)........................ 0.58 1.89 1.50 1.36
Cash dividends declared per common share-
Star:
Historical..................................................... 0.23 0.80 0.63 0.53
Pro forma combined for the Merger (2).......................... 0.23 0.80 0.63 0.53
Trans Financial:
Historical..................................................... 0.18 0.68 0.64 0.60
Pro forma equivalent for the Merger (1)........................ 0.21 0.72 0.57 0.48
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
1998 1997
------------ ---------------
<S> <C> <C>
Shareholders' equity per common share (end of period)-
Star:
Historical.................................................................... $ 14.78 $ 10.62
Pro forma combined for Great Financial Corporation............................ n/a 14.37
Pro forma combined for the Merger............................................. 14.60 14.38
Trans Financial:
Historical.................................................................... 13.68 13.14
Pro forma equivalent for the Merger (1)....................................... 13.14 12.95
</TABLE>
- ------------------------
(1) Pro forma equivalent amounts for the Merger are calculated by multiplying
the pro forma combined amounts by the Exchange Ratio of 0.9003.
(2) Pro forma combined dividends per share represent historical dividends per
share paid by Star.
9
<PAGE>
SUMMARY FINANCIAL DATA
The following tables set forth for the periods indicated certain summary
historical consolidated financial information for Star and Trans Financial.
The historical balance sheet data and income statement data included in the
summary financial data for the periods indicated are derived from financial
statements of Star and Trans Financial as of and for such periods. These data
include all adjustments which are, in the opinion of the respective managements
of Star and Trans Financial, necessary to present a fair statement of the
results of these periods and all such adjustments are of a normal recurring
nature. Results for interim periods are not necessarily indicative of results
for the entire year.
The following information should be read in conjunction with the
consolidated financial statements of Star and Trans Financial, and the related
notes thereto, included in documents incorporated herein by reference and in
conjunction with the unaudited pro forma condensed combined financial
information, including the notes thereto, appearing elsewhere in this Proxy
Statement/Prospectus. See "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE"
and "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION."
10
<PAGE>
STAR BANC CORPORATION
FIVE-YEAR SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED ENDED -----------------------------------------------------
MARCH 31, 1998 MARCH 31, 1997 1997 1996 1995 1994 1993
-------------- -------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest income............... $ 240,973 $ 192,199 $ 804,552 $ 735,525 $ 710,404 $ 569,724 $ 518,167
Interest expense.............. 107,752 80,135 342,653 317,326 332,196 223,618 194,691
-------------- -------------- --------- --------- --------- --------- ---------
Net interest income........... 133,221 112,064 461,899 418,199 378,208 346,106 323,476
Taxable equivalent adjustment
(a)......................... 868 831 3,400 3,300 3,356 3,069 3,283
-------------- -------------- --------- --------- --------- --------- ---------
Taxable equivalent net
interest income............. 134,089 112,895 465,299 421,499 381,564 349,175 326,759
Noninterest income............ 61,316 45,431 204,576 170,522 138,124 117,015 112,890
-------------- -------------- --------- --------- --------- --------- ---------
Net revenue................... 195,405 158,326 669,875 592,021 519,688 466,190 439,649
Noninterest expense........... 93,593 76,179 321,763 308,211 286,214 260,311 250,849
Provision for loan losses..... 10,775 13,639 53,614 40,773 25,101 24,372 33,008
Net income.................... 59,344 45,273 194,754 158,359 136,603 116,591 100,273
PER SHARE (B)
Basic EPS..................... $ 0.65 $ 0.52 $ 2.26 $ 1.79 $ 1.52 $ 1.30 $ 1.12
Diluted EPS................... 0.63 0.51 2.19 1.75 1.50 1.28 1.10
Common stock cash dividends
declared.................... 0.23 0.20 0.80 0.63 0.53 0.47 0.39
Period-end book value......... 14.78 9.68 10.62 9.86 9.16 8.01 7.44
Period-end market value....... 59.13 39.88 57.38 30.63 19.83 12.13 11.67
AVERAGE BALANCES
Loans, net of unearned
interest.................... $9,420,121 $7,680,842 $8,012,368 $7,255,113 $6,669,806 $5,721,667 $5,146,341
Loans held for sale........... 178,242 -- -- -- -- -- --
Investment securities......... 1,660,104 1,451,476 1,321,363 1,531,349 1,901,722 1,900,290 1,592,210
Money market instruments...... 96,462 26,634 81,087 31,097 17,059 43,080 264,502
-------------- -------------- --------- --------- --------- --------- ---------
Total interest-earning
assets...................... 11,354,929 9,158,952 9,414,818 8,817,559 8,588,587 7,665,037 7,003,053
Total assets.................. 12,691,023 10,043,432 10,357,273 9,705,620 9,439,626 8,252,244 7,542,798
Noninterest-bearing
deposits.................... 1,710,588 1,432,812 1,487,192 1,345,296 1,188,364 1,065,933 1,036,141
Interest-bearing deposits..... 7,621,849 6,332,663 6,402,135 6,298,664 6,155,334 5,212,946 5,085,718
-------------- -------------- --------- --------- --------- --------- ---------
Total deposits................ 9,332,437 7,765,475 7,889,327 7,643,960 7,343,698 6,278,879 6,121,859
Short-term borrowings......... 1,395,509 989,794 1,016,900 898,025 1,014,552 995,901 621,482
Long-term debt................ 517,722 247,399 380,659 162,840 163,788 155,172 54,308
Shareholders' equity.......... 1,195,573 845,598 861,029 835,566 777,674 702,605 640,868
RATIOS
Return on average assets...... 1.90% 1.83% 1.88% 1.63% 1.45% 1.41% 1.33%
Return on average equity...... 20.13 21.71 22.62 18.95 17.57 16.59 15.65
Net interest margin........... 4.73 4.93 4.94 4.78 4.44 4.55 4.67
Noninterest expense to net
revenue..................... 47.90 48.12 48.03 52.06 55.07 55.84 57.06
Dividend payout ratio......... 37.08 37.79 35.07 34.69 35.00 35.89 34.41
Tier 1 risk-based capital..... 9.03 7.11 8.77 7.64 7.97 8.66 11.10
Total risk-based capital...... 12.57 11.26 12.61 11.88 11.23 12.16 12.41
Leverage (c).................. 8.08 6.17 8.01 6.53 6.23 6.27 8.24
Average shareholders' equity
to average total assets..... 9.42 8.42 8.31 8.61 8.24 8.51 8.50
</TABLE>
- ------------------------
(a) Taxable equivalent adjustment was calculated utilizing a marginal federal
income tax rate of 35 percent for 1993-1998.
(b) Share amounts have been restated, as applicable, to reflect a 3-for-1 stock
split in December 1996.
(c) Defined as tier 1 equity as a percent of average assets.
11
<PAGE>
TRANS FINANCIAL, INC.
FIVE-YEAR SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED ENDED -----------------------------------------------------
MARCH 31, 1998 MARCH 31, 1997 1997 1996 1995 1994(A) 1993(A)
-------------- -------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest income................ $ 42,078 $ 38,659 $ 161,411 $ 147,935 $ 134,228 $ 113,982 $ 102,819
Interest expense............... 21,748 19,359 81,200 73,066 64,599 47,375 44,250
-------------- -------------- --------- --------- --------- --------- ---------
Net interest income............ 20,330 19,300 80,211 74,869 69,629 66,607 58,569
Taxable equivalent adjustment
(b).......................... 323 365 1,355 1,658 1,666 1,597 1,527
-------------- -------------- --------- --------- --------- --------- ---------
Taxable equivalent net interest
income....................... 20,653 19,665 81,566 76,527 71,295 68,204 60,096
Noninterest income............. 10,265 7,919 34,410 29,689 24,411 17,170 17,032
-------------- -------------- --------- --------- --------- --------- ---------
Net revenue.................... 30,918 27,584 115,976 106,216 95,706 85,374 77,128
Noninterest expense............ 18,495 17,039 69,133 80,642 66,049 60,070 52,830
Provision for loan losses...... 2,220 1,950 9,500 13,914 5,260 2,212 2,794
Net income (loss).............. 6,574 5,548 23,933 6,882 15,315 14,420 14,050
PER SHARE
Basic EPS...................... $ 0.57 $ 0.49 $ 2.09 $ 0.61 $ 1.36 $ 1.29 $ 1.26
Diluted EPS.................... 0.55 0.48 2.04 0.60 1.35 1.28 1.24
Common stock cash dividends
declared..................... 0.18 0.17 0.68 0.64 0.60 0.56 0.51
Period-end book value.......... 13.68 11.77 13.14 11.55 11.49 9.96 9.96
Period-end market value........ 43.25 22.50 38.88 23.00 17.88 13.00 16.50
AVERAGE BALANCES
Loans, net of unearned
interest..................... $1,543,321 $1,453,965 $1,473,103 $1,346,754 $1,190,101 $1,073,580 $ 897,127
Loans held for sale............ 145,873 69,409 91,779 53,824 19,436 17,913 33,689
Investment securities.......... 264,957 271,685 265,544 291,853 304,672 353,875 386,674
Money market instruments....... 432 98 114 1,015 13,849 13,659 37,335
-------------- -------------- --------- --------- --------- --------- ---------
Total interest-earning
assets....................... 1,954,583 1,795,157 1,830,540 1,693,446 1,528,058 1,459,027 1,354,825
Total assets................... 2,127,907 1,947,927 1,988,814 1,857,328 1,672,932 1,588,060 1,463,834
Noninterest-bearing deposits... 226,740 201,759 219,302 213,332 172,748 168,746 145,275
Interest-bearing deposits...... 1,362,642 1,325,265 1,327,160 1,269,452 1,227,942 1,181,012 1,134,090
-------------- -------------- --------- --------- --------- --------- ---------
Total deposits................. 1,589,382 1,527,024 1,546,462 1,482,784 1,400,690 1,349,758 1,279,365
Short-term borrowings.......... 163,512 120,765 133,318 98,146 87,871 76,972 34,708
Long-term debt................. 193,515 140,895 143,882 125,593 46,840 40,756 33,974
Shareholders' equity........... 155,905 134,322 140,498 129,400 122,046 111,887 106,101
RATIOS
Return on average assets....... 1.25% 1.16% 1.20% 0.37% 0.92% 0.91% 0.96%
Return on average equity....... 17.10 16.75 17.03 5.32 12.55 12.89 13.24
Net interest margin............ 4.29 4.44 4.46 4.52 4.67 4.67 4.44
Noninterest expense to net
revenue...................... 59.82 61.77 59.61 75.92 69.01 70.36 68.50
Dividend payout ratio.......... 32.73 35.42 33.31 106.51 44.49 43.88 41.05
Tier 1 risk-based capital...... 8.66 8.08 8.48 7.63 8.64 9.47 9.36
Total risk-based capital....... 11.80 11.41 11.71 10.80 12.15 13.31 13.50
Leverage (c)................... 7.10 6.52 6.81 6.36 6.92 7.07 6.46
Average shareholders' equity to
average total assets......... 7.33 6.90 7.06 6.97 7.30 7.05 7.25
</TABLE>
- ------------------------
(a) In 1994, Trans Financial merged with three bank holding companies in
pooling-of-interests transactions. Accordingly, all financial data except
for dividends per share has been restated as if the entities were combined
for all periods applicable.
(b) Taxable equivalent adjustment was calculated utilizing a marginal federal
income tax rate of 35 percent for 1993-1998 and a Kentucky income tax rate
of 6 percent.
(c) Defined as tier 1 equity as a percent of average assets.
12
<PAGE>
THE COMPANIES
STAR
Star is a bank holding company as defined by the BHCA, and is registered
with the Federal Reserve Board. Through Star Bank, N.A., its banking subsidiary,
Star is engaged in the commercial banking and trust business, providing a full
range of consumer, commercial and trust financial products and investment
services throughout Ohio, Kentucky and Indiana. As of December 31, 1997, Star
had assets of $11.0 billion and deposits of $8.2 billion.
Star 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 "Star Banc Corporation."
The executive offices of Star are maintained in Cincinnati, Ohio.
Types of loans offered through its banking subsidiary include commercial
loans, commercial leasing, commercial and residential mortgages, real estate
construction and a variety of consumer loan products, including installment
loans, credit cards and retail leasing. Star's loan portfolio is well
diversified between wholesale and consumer loans, with none of the
above-mentioned loan types exceeding 30% of the total portfolio. Star invests in
United States Treasury and a variety of mortgage-backed securities in order to
(i) facilitate the management of interest rate risk, (ii) provide liquidity,
(iii) provide a degree of credit diversification and flexibility in the balance
sheet, and (iv) provide collateral as necessary for public deposits.
In the past five years, Star has continued to expand through strategic
business combinations and the acquisition of branch offices or other smaller
banking institutions throughout its market area of Ohio, Kentucky and Indiana.
Most recently Star completed its acquisition by merger of Great Financial
Corporation on February 7, 1998. Star also purchased seven branch offices in
southwestern Ohio from AmeriFirst Bank, N.A. and five offices in Indiana from
National City Bank in 1996 and 1997. This followed the 1995 purchase of 24
Columbus, Ohio area branch offices from Household Bank, Federal Savings Bank,
and prior purchases of branch offices in the Cleveland and Akron, Ohio areas.
Star also plans to purchase 49 branches in Ohio from Banc One in the second
quarter of 1998. Star continues to explore other acquisition opportunities in
its tri-state market area.
In 1996, Star merged its Kentucky and Indiana banks into Star Bank, N.A.,
resulting in Star wholly owning one subsidiary bank with over 260 offices in
Ohio, Kentucky and Indiana. This followed a comprehensive restructuring program
in 1993 in which Star merged its six Ohio banks in Columbus, Eaton, Hillsboro,
Ironton, Sidney and Troy with Star Bank, N.A. In addition, Star merged its two
Indiana banks in Lawrenceburg and Richmond to form Star Bank, N.A., Indiana.
Star Bank, N.A. is a national bank. See "SUPERVISION AND REGULATION."
The Miami Valley Insurance Company, a wholly-owned subsidiary of Star, 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 Star's Ohio and Indiana bank offices. In 1996,
First National Cincinnati Corporation purchased the 24.5 percent ownership of
Star's headquarters building that was held directly by Star. Also in 1996, First
National Cincinnati Corporation merged into Star Banc Center Company and became
a wholly-owned subsidiary of Star Bank, N.A. In 1995, Star formed a wholly-owned
consumer finance company, Star Banc Finance, Inc. Star Banc Finance, Inc. offers
consumers a broad mix of credit products and services, such as indirect and
direct auto loans, second mortgages and personal loans.
Star and its subsidiaries had a total of 4,099 full-time equivalent
employees at December 31, 1997. Star Bank, N.A. operated a total of 279 full
service offices at December 31, 1997.
13
<PAGE>
TRANS FINANCIAL
Trans Financial is a bank holding company as defined by the BHCA, and is
registered with the Federal Reserve Board. Trans Financial has two commercial
bank subsidiaries--Trans Financial Bank, National Association, consisting of all
of Trans Financial's banking activities in Kentucky, and Trans Financial Bank
Tennessee, National Association, consisting of substantially all of Trans
Financial's Tennessee banking activities. In addition, Trans Financial operates
as subsidiaries of TFB-KY a full-service securities broker/ dealer--Trans
Financial Investment Services, Inc.--and a mortgage banking company--Trans
Financial Mortgage Company. The executive offices of Trans Financial are
maintained in Bowling Green, Kentucky.
Through its banking subsidiaries, Trans Financial provides a full range of
corporate and retail banking services and mortgage, trust and brokerage
services. As of December 31, 1997, Trans Financial had assets of $2.1 billion
and deposits of $1.6 billion.
TFB-KY provides a wide variety of personal and corporate trust and
trust-related services, including serving as executor of estates; as trustee
under testamentary and inter-vivos trusts; as guardian of the estates of minors
and incompetents; as escrow agent under various agreements; and as financial
advisor to and custodian for individuals, corporations and others. Corporate
trust services include serving as registrar, transfer agent, and paying agent
for corporate securities and as corporate trustee under corporate trust
indentures. At December 31, 1997, approximately $519 million in assets were
managed by the trust department of TFB-KY.
TFMC originates and purchases mortgage loans for the purpose of
constructing, financing or refinancing one- to four-family dwellings. TFMC also
services mortgage loans for the banks and for others. Generally, residential
mortgage loans originated or purchased are then sold in the secondary market.
When sold, servicing may be retained by TFMC or released to the purchaser. The
portfolio of mortgage loans serviced for others totaled $3.3 billion at December
31, 1997.
TFIS offers to customers of the banks and to others a wide range of
investment products and services, including financial planning, mutual funds,
annuities, and individual stocks and bonds. TFB-KY introduced its own family of
proprietary mutual funds, the Trans Adviser Funds (the "Funds") in October,
1995. TFB-KY acted as investment adviser to the Funds. On August 29, 1997, the
Funds were transferred to the Countrywide Family of Funds. As a result of this
transfer, TFB-KY no longer serves as investment adviser to the Funds.
As of March 31, 1998, TFB-KY had 31 offices in Kentucky: six located in
Bowling Green; three in Pikeville; two in each of Glasgow, Scottsville,
Maysville and Morehead; and one in each of Auburn, Augusta, Belfry, Cave City,
Dawson Springs, Elkhorn City, Flemingsburg, Franklin, Martin, Meta,
Prestonsburg, Russellville, Tompkinsvile and Virgie. As of March 31, 1998,
TFB-TN had 16 offices in Tennessee: two in each of Cookeville and Columbia; and
one in each of Clarksville, Crossville, Franklin, Kingston, Manchester,
McMinnville, Murfreesboro, Nashville, Rockwood, Shelbyville, Tullahoma and
Winchester. As of March 31, 1998, TFMC had a mortgage operations center in
Tullahoma, Tennessee, and loan production offices in Greensboro, North Carolina;
Little Rock, Arkansas; and Cape Coral, Florida. In March 1998, Trans Financial
agreed to acquire eight branches from Banc One Corp., which would bring total
branches to 55 in Kentucky and Tennessee.
OPERATIONS AFTER THE MERGER
Following the Merger and necessary preparations for systems integration,
Star intends to combine the operations, and, subject to required regulatory
approvals (which have been obtained), to merge Star Bank, N.A. with TFB-KY and
TFB-TN and to consolidate their operations. Receipt of the necessary regulatory
approvals for the merger of TFB-KY and TFB-TN with Star Bank, N.A. is not a
condition to the Merger.
While no assurance can be given, Star believes that, approximately $20
million of potential pre-tax cost savings can be achieved on an unaudited basis
by December 31, 1999. Cost savings are expected to be
14
<PAGE>
realized primarily through the consolidation of certain staff functions, data
processing and other redundant back-office operations. Star currently
anticipates that only one branch, if any, will be closed in connection with the
proposed transaction. The extent to which cost savings will be achieved is
dependent upon various factors beyond the control of Star and Trans Financial,
including the regulatory environment, economic conditions, unanticipated changes
in business conditions and inflation. Therefore, no assurance can be given with
respect to the ultimate level or composition of cost savings to be realized, or
that such savings will be realized in the time frame currently anticipated.
It is also anticipated that Star and Trans Financial will incur one-time
Merger expenses and direct charges in connection with the Merger, estimated to
be approximately $40 million in the aggregate (see note 3 to the Unaudited Pro
Forma Condensed Combined Financial Information contained elsewhere herein), as a
result of expenses to be incurred in connection with transaction costs and
anticipated elimination of duplicate headquarters and operational facilities.
These one-time charges are expected to be paid in the third quarter of 1998. The
exact level of the merger related charges that will be taken in connection with
the Merger has not yet been determined and could vary, potentially
significantly, from the current estimate based upon a further refinement of
anticipated organizational changes to occur following the Merger.
While no assurances can be given, Star and Trans Financial also expect to
enhance revenue opportunities, which they expect will come principally from an
expansion of Trans Financial's line of banking products. The precise level of
revenue opportunities which result from the Merger will be dependent upon a
variety of financial, economic and other factors, many of which are beyond the
ability of Star to control, and no assurance can be provided as to the level of
future revenues or earnings that will be achieved by the combined company.
Although no assurances can be given, based on earnings estimates as of the date
of the Merger Agreement, the Merger is also expected to be accretive to earnings
per share (excluding Merger related charges) beginning in 1998.
Pursuant to the Merger Agreement, Star has agreed to establish promptly
following the Effective Time a charitable foundation for the benefit of the
communities served by Trans Financial as of immediately prior to the Effective
Time, which charitable foundation will be funded with a $3 million contribution
by Star.
INFORMATION REGARDING THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to holders of Trans
Financial Common Stock in connection with the solicitation of proxies by the
Trans Financial Board for use at the Special Meeting and any adjournment or
postponement thereof at which the stockholders of Trans Financial will consider
and vote on a proposal to approve and adopt the Merger Agreement and will
transact such other business as may properly come before the Special Meeting or
any adjournment or postponement thereof. Each copy of this Proxy
Statement/Prospectus is accompanied by a letter to Trans Financial stockholders,
the Notice of Special Meeting of Stockholders, a proxy card and a self-addressed
return envelope to the Transfer Agent for the proxy card.
This Proxy Statement/Prospectus is also furnished by Star to each holder of
Trans Financial Common Stock as a Prospectus in connection with the issuance by
Star of shares of Star Common Stock to Trans Financial stockholders upon the
consummation of the Merger. This Proxy Statement/Prospectus, the letter to Trans
Financial stockholders, the Notice of Special Meeting of Stockholders, and the
form of proxy are first being mailed to stockholders of Trans Financial on or
about , 1998.
THE TRANS FINANCIAL BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
15
<PAGE>
DATE, TIME AND PLACE
The Special Meeting will be held at , on , ,
1998, at a.m., Central Time.
TRANS FINANCIAL RECORD DATE; VOTE REQUIRED
The Trans Financial Board has fixed , 1998 as the Record Date for
determination of stockholders of Trans Financial entitled to notice of and to
vote at the Special Meeting. Accordingly, only holders of record of Trans
Financial Common Stock at the close of business on , 1998 will be entitled
to notice of, and to vote at, the Special Meeting. At the Record Date, there
were shares of Trans Financial Common Stock outstanding and entitled to
vote which were held by approximately holders of record. Each such share
is entitled to one vote on each matter properly brought before the Special
Meeting. The affirmative vote of the holders of at least a majority of the
outstanding shares of Trans Financial Common Stock entitled to vote at the
Special Meeting is required to approve the Merger Agreement.
VOTING SECURITIES AND CERTAIN HOLDERS THEREOF
Stockholders of record as of the close of business on , 1998 will
be entitled to one vote for each share then held on all matters brought before
the Special Meeting. As of , 1998, Trans Financial had shares
of Trans Financial Common Stock issued and outstanding.
As of the Record Date, directors and executive officers of Trans Financial
and certain of their affiliates beneficially owned an aggregate of shares
of Trans Financial Common Stock, or approximately % of the shares entitled to
vote at the Special Meeting. Each such person has advised Trans Financial that
he, she or it intends to vote in favor of approval and adoption of the Merger
Agreement.
VOTING AND REVOCATION OF PROXIES
Shares of Trans Financial Common Stock entitled to vote and which are
represented at the Special Meeting by a properly executed proxy received prior
to the vote at the Special Meeting will be voted at the Special Meeting in the
manner directed on the proxy card, unless such proxy is revoked in the manner
set forth herein in advance of the establishment of a quorum for purposes of
taking such vote. ANY TRANS FINANCIAL STOCKHOLDER RETURNING A BLANK EXECUTED
PROXY CARD WILL BE DEEMED TO HAVE VOTED "FOR" APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER. Failure to return a properly executed proxy card or to
vote in person at the Special Meeting will have the practical effect of a vote
against the Merger Agreement.
Shares subject to abstentions will be treated as shares that are present at
the Special Meeting for purposes of determining the presence of a quorum. If a
broker or other nominee holder indicates on the proxy card that it does not have
discretionary authority to vote the shares it holds of record on the proposal,
those shares will be treated as shares that are present at the Special Meeting
for purposes of determining the presence of a quorum but will not be considered
as voted for purposes of determining the approval of shareholders on a
particular proposal. Since the approval of the Merger Agreement requires the
affirmative vote of the holders of at least a majority of the outstanding shares
of Trans Financial Common Stock entitled to vote at the Special Meeting,
abstentions and broker non-votes will have the same effect as votes against the
approval of the Merger Agreement.
Any stockholder of Trans Financial giving a proxy may revoke it at any time
prior to the establishment of a quorum for purposes of taking the vote at the
Special Meeting. Stockholders of Trans Financial wishing to revoke a proxy prior
to the vote may do so by delivering to First Union National Bank, at 1525 West
W.T. Harris Blvd., 3C3, Charlotte, North Carolina 28288-1153 by mail, courier or
hand delivery, a
16
<PAGE>
written notice of revocation bearing a later date than the proxy or any later
dated proxy relating to the same shares. Attendance at the Special Meeting will
not in itself constitute the revocation of a proxy.
The Trans Financial Board is not currently aware of any business to be
brought before the Special Meeting other than that described herein. If,
however, other matters are properly brought before such Special Meeting, or any
adjournment or postponement thereof, the persons appointed as proxies will have
discretionary authority to vote the shares represented by duly executed proxies
in accordance with their discretion and judgment as to the best interest of
Trans Financial.
SOLICITATION OF PROXIES
Trans Financial will bear its own costs of soliciting proxies. Proxies will
initially be solicited by mail, but directors, officers and selected other
employees of Trans Financial may also solicit proxies in person or by telephone,
telegram or other means of communication. Directors, officers and any other
employees of Trans Financial who solicit proxies will not be specially
compensated for such services, but may be reimbursed for reasonable
out-of-pocket expenses in connection with such solicitation. Trans Financial has
retained Georgeson & Company Inc. at an estimated cost of $8,500, plus
reimbursement of expenses, to assist in its solicitation of proxies from
brokers, nominees, institutions and individuals. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward proxy materials to
beneficial owners and will be reimbursed for their reasonable expenses incurred
in connection therewith.
HOLDERS OF TRANS FINANCIAL COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
DISSENTERS' RIGHTS
Under the KBCA, a holder of shares of Trans Financial Common Stock may, in
lieu of the consideration such stockholder would otherwise receive in the
Merger, exercise such stockholder's right to dissent from the Merger Agreement
and to demand payment of the "fair value" of such shares in cash if the Merger
is consummated, by following certain procedures set forth in Subtitle 13 of the
KBCA, the text of which is attached as Annex C to this Proxy
Statement/Prospectus. A holder of shares of Trans Financial Common Stock who
receives such a payment may recognize taxable income.
Failure to follow such procedures may result in a loss of such stockholder's
dissenters' rights. Any Trans Financial stockholder returning a blank executed
proxy card will be deemed to have approved the Merger Agreement, thereby waiving
any such dissenters' rights. See "THE MERGER--Dissenters' Rights of Stockholders
of Trans Financial."
17
<PAGE>
THE MERGER
BACKGROUND OF THE MERGER
On a telephone call in mid-March 1998, Vince Berta of Trans Financial and
Jerry Grundhofer, Chairman, President and Chief Executive Officer of Star, first
discussed a possible business combination between Trans Financial and Star. On
March 31, Messrs. Berta, Grundhofer and David Moffett, Chief Financial Officer
of Star, met in Cincinnati to further discuss such a possible business
combination.
After meetings with Star personnel and considering Star's proposed plan for
the future of the combined companies, executive management of Trans Financial
concluded that further discussions with Star were appropriate. In deciding to
commence negotiations of definitive agreements with Star on the basis of Star's
expression of interest in a possible business combination, Trans Financial
management considered the issues referred to in "THE MERGER--Reasons for the
Merger; Trans Financial Board Recommendation." In particular, Trans Financial's
management noted that Star's proposal provided protection for the merger price
between the date of the execution of a definitive merger agreement and the
consummation of the proposed merger by virtue of the fact that Trans Financial
would have the right to terminate the transaction if the market price of Star
Common Stock significantly declined prior to the closing both in absolute terms
and relative to an index of bank holding companies.
From April 1 through April 7, 1998, the parties and their representatives
conducted further discussions with respect to the terms of a possible business
combination and commenced their due diligence investigations.
On April 7, 1998, the Star Board and certain members of Star senior
management reviewed the terms of a potential proposal by Star to enter into a
business combination with Trans Financial. At the meeting, Star senior
management discussed the strategic and business issues in such a potential
combination and the financial aspects of the Star proposal regarding a possible
combination with Trans Financial. At the conclusion of the meeting, the Star
Board authorized senior management of Star to make a proposal to Trans
Financial, to negotiate with Trans Financial in connection with a potential
business combination, and, subject to certain parameters, to execute a
definitive agreement. Star and its representatives also conducted a due
diligence review of Trans Financial based on publicly available information.
A special meeting of the Trans Financial Board was held on April 7, 1998, to
discuss Star's proposed business combination with Trans Financial. At the
meeting, senior management of Trans Financial, together with its legal and
financial advisors, reviewed for the Trans Financial Board the strategic
investigation they had conducted, the discussions and contacts with Star to
date, the historical performance and strategies of the companies and the
proposed terms of a possible business combination with Star. Trans Financial's
legal advisors reviewed for the Trans Financial Board its fiduciary duties in
the context of the proposed transaction. At the conclusion of the meeting, the
Board authorized management to conduct further discussions with Star and to
convene another special meeting of the Board when appropriate.
From April 7, 1998 through April 9, 1998, the parties and their
representatives negotiated the terms of a proposed Merger Agreement, including
the Exchange Ratio, a proposed Stock Option Agreement and other documentation
for the proposed merger. During this time, Star and Trans Financial each
completed its due diligence investigation of the other.
At a special meeting of the Trans Financial Board on April 9, senior
management of Trans Financial, together with its legal and financial advisors,
updated the Trans Financial Board on their strategic investigation and the
discussions and contacts with Star since the April 7 board meeting, and reviewed
the financial and legal terms of the proposed transaction with Star, including
the Exchange Ratio, and the other terms of the proposed Merger Agreement and
Stock Option Agreement. Trans Financial's financial advisor, DLJ, reviewed the
financial analyses set forth in "--Opinion of Trans Financial's Financial
Advisor." Following such discussions and questions by the Trans Financial Board
to Trans Financial senior management and its financial and legal
representatives, the members of the Trans Financial Board voted
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unanimously to approve the Merger Agreement and the transactions contemplated
thereby, including without limitation the Stock Option Agreement, and further
authorized Trans Financial's management to take all steps necessary to
consummate the Merger pursuant to the Merger Agreement.
Star and Trans Financial executed the Stock Option Agreement and the Merger
Agreement on April 9, 1998, and issued on April 10, 1998, a joint press release
announcing the Merger Agreement and the proposed Merger.
REASONS FOR THE MERGER; TRANS FINANCIAL BOARD RECOMMENDATION
In the course of reaching its determination to approve the Merger Agreement
and recommend it to the stockholders of Trans Financial, the Trans Financial
Board, without assigning any relative or specific weights, considered a number
of factors. The material factors considered were: (i) the terms of the Merger
Agreement as negotiated (including the transaction structure, the form and
amount of the Merger Consideration, and the potential impact of the proposed
Merger Agreement and the Stock Option Agreement on other institutions that might
have an interest in a business combination with Trans Financial), and the
negotiation process, (ii) the financial condition, operations and prospects of
Star and the anticipated effect thereon of the proposed transaction, (iii)
industry and economic factors, including consolidation in the banking industry,
(iv) the nature and compatibility of Star's management and business philosophy,
(v) the benefits available to the combined company's shareholders resulting from
anticipated growth and expanded products and services, and other anticipated
impact on depositors, employees, customers and communities serviced by Trans
Financial, including a reduction in the risk profile due to a more diversified
revenue base of the combined company, (vi) the financial and valuation analyses
prepared by DLJ (see "--Opinion of Trans Financial's Financial Advisor"), (vii)
the fairness opinion rendered by DLJ, and (viii) regulatory and other factors.
The Trans Financial Board unanimously recommends that the holders of Trans
Financial Common Stock vote "FOR" approval and adoption of the Merger Agreement
and the Merger.
OPINION OF TRANS FINANCIAL'S FINANCIAL ADVISOR
At a telephonic meeting of Trans Financial's Board on April 9, 1998, at
which the terms of the proposed Merger were discussed and considered, DLJ
rendered a written opinion to the Trans Financial Board that, as of the date of
such opinion, based upon and subject to the assumptions, limitations and
qualifications set forth in such opinion, the Exchange Ratio was fair to the
holders of Trans Financial Common Stock from a financial point of view. DLJ has
confirmed its April 9, 1998 opinion by delivery of a written opinion to the
Trans Financial Board dated the date of this Proxy Statement/Prospectus stating
that, as of the date hereof and based upon and subject to the assumptions,
limitations and qualifications set forth in such opinion, the Exchange Ratio is
fair to the holders of Trans Financial Common Stock from a financial point of
view.
THE FULL TEXT OF DLJ'S OPINION DATED THE DATE HEREOF IS INCLUDED AS ANNEX D
TO THIS PROXY STATEMENT/ PROSPECTUS. TRANS FINANCIAL STOCKHOLDERS ARE URGED TO
READ THE DLJ OPINION IN ITS ENTIRETY FOR ASSUMPTIONS MADE, PROCEDURES FOLLOWED,
MATTERS CONSIDERED, AND LIMITS OF THE REVIEW UNDERTAKEN BY DLJ. THE SUMMARY OF
THE DLJ OPINION SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
DLJ's opinion is limited to the fairness, from a financial point of view, of
the Exchange Ratio to the holders of Trans Financial Common Stock and does not
constitute a recommendation to any holder of Trans Financial Common Stock as to
how such holder should vote with respect to the Merger Agreement. DLJ's opinion
is based on the economic, market, financial, and other conditions as they
existed on, and on the information made available to DLJ as of, the date of the
opinion. Although subsequent developments may affect DLJ's opinion, DLJ is not
obligated to update, revise or reaffirm its opinion. DLJ's opinion
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does not address the relative merits of the Merger and the other business
strategies considered by Trans Financial's Board of Directors, nor does it
address the Board's decision to proceed with the Merger.
The Trans Financial Board selected DLJ as its financial advisor because it
is a nationally recognized investment banking firm that has substantial
experience in transactions similar to the Merger and is familiar with Trans
Financial and the financial services industry in general. DLJ, as part of its
investment banking services, is regularly engaged in the valuation of businesses
and their securities in connection with mergers, acquisitions, underwritings,
sales and distributions of listed and unlisted securities, private placements,
and valuations for corporate and other purposes.
In arriving at its opinion, DLJ reviewed the financial terms and provisions
of the April 9, 1998 draft of the Merger Agreement and the exhibits thereto,
including the Stock Option Agreement. DLJ also reviewed financial and other
information that was publicly available or furnished to DLJ by Trans Financial
and Star, including information provided during discussions with their
respective managements, which included certain financial projections of Trans
Financial for the period beginning January 1, 1998 and ending December 31, 2002
provided by the management of Trans Financial, certain financial projections of
Star for the period beginning January 1, 1998 and ending December 31, 2002
provided by the management of Star and certain pro forma financial statements
provided by the management of Trans Financial and Star reflecting the Merger and
certain operating synergies expected to result therefrom. In addition, DLJ
compared certain financial and securities data of Trans Financial and Star with
various other companies whose securities are traded in public markets, reviewed
the historical stock prices and trading volumes of Trans Financial Common Stock
and Star Common Stock, reviewed prices and premiums paid in certain other
business combinations and conducted such other financial studies, analyses and
investigations as DLJ deemed appropriate for purposes of its opinion.
In conducting its review and rendering its opinion, DLJ relied upon and
assumed the accuracy and completeness of all of the financial and other
information available to DLJ from public sources, that was provided to DLJ by
Trans Financial, Star and their respective representatives or that was otherwise
reviewed by DLJ. In particular, DLJ relied upon the estimates of the management
of Trans Financial and Star of the operating synergies achievable as a result of
the Merger and upon its discussion of such synergies with the management of
Trans Financial and Star. With respect to the financial projections used in
DLJ's analysis, DLJ assumed that such projections were reasonably prepared on
the basis reflecting the best then available estimates and judgments of the
management of Trans Financial and Star as to the future operating and financial
performance of Trans Financial and Star, respectively.
DLJ is not an expert in the evaluation of loan portfolios or allowances for
loan and real estate-owned losses, and, upon the direction of management of
Trans Financial, DLJ did not independently verify, and it assumed that, the
aggregate allowances for loan losses set forth in the balance sheets of each of
Trans Financial and Star at December 31, 1997 are adequate to cover such losses
and that they complied fully with applicable law, regulatory policy and sound
banking practice as of the date of such financial statements. DLJ was not
retained to and DLJ did not conduct a physical inspection of any of the
properties or facilities of Trans Financial or Star, and did not make any
independent evaluation or appraisal of the assets, liabilities or prospects of
Trans Financial or Star, nor was DLJ furnished with any such evaluation or
appraisal, and it did not review any individual credit files. DLJ was not
requested to, nor did it, solicit the interest of any other party in acquiring
Trans Financial. In rendering its opinion, DLJ was advised by Trans Financial
and Star and assumed that there were no other factors that would delay or
subject to adverse conditions any necessary regulatory or governmental approval
for the Merger, and that all conditions to the Merger will be satisfied and not
waived. DLJ further assumed that the Merger will qualify for treatment as a
tax-free reorganization and be accounted for as a pooling of interests.
The following is a summary of the material analyses presented by DLJ to the
Trans Financial Board on April 9, 1998 in connection with DLJ's written opinion
to the Trans Financial Board. Unless otherwise indicated, in connection with its
analysis, DLJ (i) used pro forma balance sheet data reflecting Star's and
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Trans Financial's pending major acquisitions and excluded certain nonrecurring
items from income statement data and (ii) assumed that 12,558,385 diluted shares
were outstanding, including 841,029 option shares with a weighted average
exercise price of $23.77. For purposes of this summary, "Trans Financial Peer
Group" means Area Bancshares Corporation, Community Trust Bancorp, Inc., First
Financial Bancorp, Inc., First Financial Corporation, First Midwest Bancorp,
Inc., Mid-America Bancorp, Mid Am, Inc. and Park National Corporation, and "Star
Peer Group" means AmSouth Bancorporation, Compass Bancshares, Inc., Crestar
Financial Corporation, Fifth Third Bancorp, First American Corporation, First
Tennessee National Corporation, Firstar Corporation, Huntington Bancshares
Incorporated and Old Kent Financial Corporation. In connection with its written
opinion dated the date of this Proxy Statement/ Prospectus, DLJ performed
procedures to update certain of its analyses and reviewed the assumptions on
which such analyses were based and the factors considered in connection
therewith. In updating its opinion, DLJ did not utilize any method of analysis
in addition to those described below.
HISTORICAL FINANCIAL PERFORMANCE. DLJ analyzed the historical financial
performance of Trans Financial and Star from 1993 through 1997 (without
adjustments for pending mergers and acquisitions), including analyses of each
company's return on average assets ("ROAA"); return on average equity ("ROAE");
net interest margin; noninterest income/total revenues ratio; efficiency ratio;
earnings per share ("EPS") growth rate; nonperforming assets ("NPAs") /total
loans and other real estate owned ("OREO") ratio; and leverage ratio. Trans
Financial's average performance or compounded annual growth (in the case of EPS
growth rate) for 1993 through 1997 for each of the foregoing indicators of
financial performance was: ROAA--0.92%; ROAE--13.0%; net interest margin--4.53%;
noninterest income/total revenues--25.1%; efficiency ratio--66.7%; EPS growth
rate--13.0%; NPAs/total loans and OREO--1.13%; and leverage ratio--6.54%. Star's
average performance or compounded annual growth (in the case of EPS growth rate)
for 1993 through 1997 for each of the foregoing indicators of financial
performance was: ROAA--1.54%; ROAE--18.3%; net interest margin--4.68%;
noninterest income/total revenues--27.2%; efficiency ratio--51.4%; EPS growth
rate--18.8%; NPAs/total loans and OREO-- 0.62%; and leverage ratio--7.06%.
STOCK TRADING HISTORY. DLJ examined the history of trading prices and
volume for Trans Financial Common Stock and Star Common Stock from March 31,
1993 through March 31, 1998 and the relationship between the movements of such
trading prices to movements of the Standard & Poor's Regional Bank Index and of
the trading prices of the common stock of the companies in the Trans Financial
Peer Group.
DLJ computed implied values per share of Trans Financial Common Stock by
applying the average price/last twelve months ("LTM") EPS, average price/book
value and average price/tangible book value monthly multiples of Trans Financial
Common Stock for the three year period ended March 31, 1998 to the EPS, book
value per share and tangible book value per share of Trans Financial Common
Stock, at or for the twelve months ended March 31, 1998. The implied values of
Trans Financial Common Stock derived from Trans Financial's historical trading
multiples ranged from $24.12 to $34.60 per share.
DLJ computed implied values per share of Star Common Stock by applying the
average price/LTM EPS, average price/book value and average price/tangible book
value monthly multiples of Star Common Stock of the three year period ended
March 31, 1998 to the earnings per share, book value per share and tangible book
value per share of Star Common Stock at or for the twelve months ended December
31, 1997. The implied values of Star Common Stock derived from Star's historical
trading multiples ranged from $29.33 to $47.32 per share.
DLJ also noted that the annualized historical returns on Trans Financial
Common Stock (assuming reinvestment of dividends) for the five, three and
one-year periods ending on April 6, 1998 were 20%, 54% and 110%, respectively.
The annualized historical returns on Star Common Stock (assuming reinvestment of
dividends) for the five, three and one-year periods ending on April 6, 1998 were
41%, 67% and 54%, respectively.
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COMPARISON WITH SELECTED COMPANIES. DLJ compared selected financial ratios
and trading multiples for Trans Financial and Star to the corresponding ratios
and multiples of the Trans Financial Peer Group and the Star Peer Group,
respectively. DLJ also calculated implied values for Trans Financial Common
Stock and Star Common Stock based on the median trading multiples for the Trans
Financial Peer Group and the Star Peer Group. In connection with this analysis,
DLJ used median projected earnings estimates as published by Institutional
Brokers Estimate System International Inc. ("IBES") for Trans Financial, Star,
the Trans Financial Peer Group and the Star Peer Group. IBES is a data service
which monitors and publishes a compilation of earnings estimates produced by
selected research analysts on companies of interest to investors.
The trading multiples used in calculating the implied values of Trans
Financial Common Stock were market price (as of April 6, 1998) as a multiple of:
(i) LTM EPS as of March 31, 1998 (which was 22.4x for Trans Financial as
compared to a December 31, 1997 median of 21.7x for the Trans Financial Peer
Group); (ii) estimated EPS for the fiscal year ending December 31, 1998 (which
was 20.6x for Trans Financial as compared to a median of 19.9x for the Trans
Financial Peer Group); (iii) estimated EPS for the fiscal year ending December
31, 1999 (which was 18.2x for Trans Financial as compared to a median of 18.1x
for the Trans Financial Peer Group); (iv) book value as of March 31, 1998 (which
was 3.46x for Trans Financial as compared to a December 31, 1997 median of 2.88x
for the Trans Financial Peer Group); and (v) tangible book value as of March 31,
1998 (which was 4.10x for Trans Financial as compared to a December 31, 1997
median of 3.07x for the Trans Financial Peer Group).
The implied values of Trans Financial Common Stock derived from the Trans
Financial Peer Group's earnings multiples ranged from $45.77 to $47.06 per
share. The implied values of Trans Financial Common Stock derived from the Trans
Financial Peer Group's book value multiples ranged from $35.43 to $39.40 per
share.
The trading multiples used in calculating the implied values of Star Common
Stock were market price (as of April 6, 1998) as a multiple of: (i) LTM EPS as
of December 31, 1997 (which was 27.1x for Star as compared to a median of 23.4x
for the Star Peer Group); (ii) estimated EPS for the fiscal year ending December
31, 1998 (which was 23.4x for Star as compared to a median of 20.5x for the Star
Peer Group); (iii) estimated EPS for the fiscal year ending December 31, 1999
(which was 20.0x for Star as compared to a median of 18.4x for the Star Peer
Group); (iv) book value as of December 31, 1997 (which was 4.37x for Star as
compared to a median of 3.92x for the Star Peer Group); and (v) tangible book
value as of December 31, 1997 (which was 9.43x for Star as compared to a median
of 4.44x for the Star Peer Group).
The implied values of Star Common Stock derived from the Star Peer Group's
earnings multiples ranged from $53.59 to $57.04 per share. The implied values of
Star Common Stock derived from the Star Peer Group's book value multiples ranged
from $29.26 to $55.70 per share.
DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow analysis, DLJ
estimated the future dividend streams that Trans Financial could produce over
the period from December 31, 1997 through December 31, 2002, if (i) Trans
Financial performed in accordance with forecasts provided by management of Trans
Financial; (ii) all tangible equity in excess of the minimum required tangible
equity level of 6.0% of tangible assets was distributed to shareholders and
replaced with debt; and (iii) net income in excess of minimum capital
requirements and incremental debt servicing was distributed to shareholders. DLJ
also estimated the terminal value of Trans Financial Common Stock as of December
31, 2002 by applying multiples of 19.0x to 22.0x to Trans Financial's projected
2002 earnings. DLJ selected the range of terminal multiples on the basis of past
and current trading multiples for Trans Financial and other comparable
commercial banks. The dividend streams and terminal value were discounted to
present values as of December 31, 1997 using discount rates ranging from 12.0%
to 14.0%, which reflect different assumptions regarding the required rates of
return of holders and prospective buyers of Trans Financial Common Stock. The
range of present values per fully diluted share of Trans Financial Common Stock
resulting from this analysis was $40.82 to $49.21. DLJ also performed a
discounted cash flow analysis with a sensitivity to
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differing cost savings assumptions resulting from the Merger ranging from 20% to
35% of Trans Financial's expense base. Assuming annual overhead growth rates of
3% to 5% and using a discount rate of 12%, the analysis resulted in a range of
present values per fully diluted share of Trans Financial Common Stock of $45.29
to $57.59.
Using discounted cash flow analysis, DLJ estimated future dividend streams
that Star could produce over the period from December 31, 1997 through December
31, 2002, if (i) Star performed in accordance with forecasts provided by
management of Star; (ii) all tangible equity in excess of the minimum required
tangible equity level of 6.0% of tangible assets was distributed to shareholders
and replaced with debt; and (iii) net income in excess of minimum capital
requirements and incremental debt servicing was distributed to shareholders. DLJ
also estimated the terminal value of the Star Common Stock as of December 31,
2002 by applying multiples of 19.0x to 22.0x to Star's projected 2002 earnings.
DLJ selected the range of terminal multiples on the basis of past and current
trading multiples for Star and other comparable commercial banks. The dividend
streams and terminal value were discounted to present values as of December 31,
1997 by using discount rates ranging from 12.0% to 14.0%, which reflect
different assumptions regarding the required rates of return of holders and
prospective buyers of Star Common Stock. The range of present values per fully
diluted share of Star Common Stock resulting from this analysis was $54.84 to
$66.49.
DLJ performed a pro forma discounted cash flow analysis for the combined
company to reflect the effects of the Merger on the holders of Trans Financial
Common Stock. The analysis resulted in a range of pro forma values per fully
diluted share for holders of Trans Financial Common Stock of $49.78 to $60.65,
which reflects a per-share accretion to the holders of Trans Financial Common
Stock of $8.96 to $11.44.
ANALYSIS OF SELECTED MERGERS. As part of its analyses, DLJ reviewed 14
mergers and acquisitions of commercial banks announced from July 1, 1996 to
February 23, 1998 in which the total assets of the acquired company were between
$1.0 billion and $7.1 billion. The 14 transactions involved the following pairs
of institutions (acquiror/acquiree): Union Planters Corporation/Magna Group,
Inc.; Regions Financial Corporation/First Commercial Corporation; Mercantile
Bancorporation Inc./Firstbank of Illinois Co.; Mercantile Bancorporation
Inc./CBT Corporation; National City Corporation/Fort Wayne National Corporation;
First American Corporation/Deposit Guaranty Corp.; Union Planters
Corporation/Peoples First Corporation; CNB Bancshares, Inc./Pinnacle Financial
Services, Inc.; Wachovia Corporation /Jefferson Bankshares, Inc.; Huntington
Bancshares Incorporated/First Michigan Bank Corporation; Banc One
Corporation/Liberty Bancorp, Inc.; BB&T Corporation/United Carolina Bancshares
Corporation; Mercantile Bancorporation Inc./Mark Twain Bancshares, Inc.; and
Crestar Financial Corporation/Citizens Bancorp. For each transaction, DLJ
calculated the multiple of the nominal purchase price offered to the acquired
company's (i) market price per share one month prior to the announcement of the
Merger; (ii) LTM EPS for the most recent four quarters preceding the day on
which the announcement of the transaction occurred; (iii) estimated EPS for the
fiscal year in which the announcement of the transaction occurred ("FY estimated
EPS"); (iv) estimated EPS for the fiscal year following the year in which the
announcement of the transaction occurred ("FY+1 estimated EPS"); (v) book value
per share; and (vi) tangible book value per share. DLJ also calculated the
nominal purchase price offered as a percentage of the acquired company's total
assets and total deposits, and calculated the tangible book premium of the offer
as a percentage of core deposits.
The calculations for the foregoing 14 transactions yielded a range of
multiples of offer value to (i) market price per share of 1.06x to 1.69x with a
mean of 1.33x and a median of 1.26x compared to 1.20x for the Merger (as of
April 6, 1998), (ii) LTM EPS of 16.0x to 29.8x, with a mean of 22.5x and a
median of 21.1x compared to 27.0x (based on Trans Financial's reported LTM EPS
as of March 31, 1998) for the Merger, (iii) FY estimated EPS of 15.7x to 28.2x,
with a mean of 20.7x and a median of 19.5x compared to 24.8x for the Merger,
(iv) FY+1 estimated EPS of 14.1x to 25.5x, with a mean of 18.7x and a median of
18.0x compared to 21.9x for the Merger, (v) book value of 1.82x to 4.19x, with a
mean of 2.90x and a median of 2.87x compared to 4.17x for the Merger and (vi)
tangible book value of 1.87x to 5.41x, with a
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mean of 3.25x and a median of 3.09x compared to 4.94x for the Merger. The
calculations for the 14 transactions yielded a range of percentages of offer
value to (i) total assets of 18.1% to 39.4% with a mean of 27.4% and a median of
26.1% compared to 30.9% for the Merger, and (ii) total deposits of 22.1% to
51.0% with a mean of 34.5% and a median of 34.9% compared to 39.1% for the
Merger. In addition, the calculations for the 14 transactions yielded a range of
percentages of tangible book premiums to core deposits of 13.0% to 45.6% with a
mean of 26.9% and a median of 25.8% compared to 39.8% for the Merger.
DLJ used these comparable transaction multiples and percentages to calculate
implied values for Trans Financial Common Stock in the Merger based on the
median multiples and percentages of the 14 transactions set forth above. In
calculating the implied median valuation, DLJ used the closing price per share
of Trans Financial Common Stock on April 6, 1998, Trans Financial's EPS for the
twelve months ended March 31, 1998, estimated EPS for the year ending December
31, 1998, estimated EPS for the year ending December 31, 1999, book value per
share and tangible book value per share as of March 31, 1998, total assets as of
March 31, 1998, total deposits as of March 31, 1998, and core deposits as of
March 31, 1998. DLJ calculated that the implied value per share of Trans
Financial Common Stock, based on the 14 comparable transactions set forth above,
was $44.52 based on Trans Financial's LTM EPS as of March 31, 1998, $44.85 based
on Trans Financial's 1998 estimated EPS, $46.80 based on Trans Financial's 1999
estimated EPS, $39.26 based on Trans Financial's book value per share, $35.66
based on Trans Financial's tangible book value per share, $52.05 based on Trans
Financial's market price per share on March 6, 1998, $48.44 based on Trans
Financial's total assets, and $51.00 based on Trans Financial's total deposits.
DLJ compared the Merger to three recent Kentucky transactions. These
transactions were Mercantile Bancorporation Inc./CBT Corporation; Union Planters
Corporation/Peoples First Corporation; and Star/ Great Financial Corporation.
The aggregate value of such transactions ranged from approximately $276 million
to approximately $655 million with a median of approximately $372 million
compared to approximately $696 million for the Merger. The value of such
transactions as a multiple of market price 30 days prior to the announcement of
the transaction ranged from 1.14x to 1.32x with a median of 1.22x compared to
1.20x for the Merger based on Trans Financial's market price on April 6, 1998.
The value of such transactions as a multiple of LTM EPS ranged from 20.3x to
28.2x with a median of 21.3x compared to 27.0x (based on Trans Financial's
reported LTM EPS) for the Merger. The value of such transactions as a multiple
of FY estimated EPS ranged from 17.5x to 19.5x with a median of 18.9x compared
to 24.8x for the Merger. The value of such transactions as a multiple of FY+1
estimated EPS ranged from 16.1x to 17.5x with a median of 17.0x compared to
21.9x for the Merger. The value of such transactions as a multiple of book value
ranged from 2.16x to 2.35x with a median of 2.30x compared to 4.17x for the
Merger. The value of such transactions as a multiple of tangible book value
ranged from 2.25x to 2.56x with a median of 2.43x compared to 4.94x for the
Merger. The value of such transactions as a multiple of normalized book value
(assuming a normalized equity to assets ratio of 7.11%) ranged from 2.73x to
3.14x with a median of 3.09x compared to 4.17x for the Merger. The value of such
transactions as a percentage of assets ranged from 21.5% to 26.4% with a median
of 25.3% compared to 30.9% for the Merger. The value of such transactions as a
percentage of total deposits ranged from 31.7% to 37.2 % with a median of 34.6%
compared to 39.1% for the Merger.
DLJ compared the Merger to three recent national transactions of
approximately the same size. These transactions were CNB Bancshares,
Inc./Pinnacle Financial Services, Inc.; Mercantile Bancorporation,
Inc./Firstbank of Illinois Co.; and National City Corporation/Fort Wayne
National Corporation. The aggregate value of these transactions ranged from
approximately $584 million to approximately $847 million with a national median
of approximately $821 million and a median for selected regional transactions of
$681 compared to approximately $696 million for the Merger. The value of such
transactions as a multiple of market price 30 days prior to the announcement of
the transaction ranged from 1.06x to 1.33x with a national median of 1.26x and a
median for selected regional franchises of 1.14x compared to 1.20x for the
Merger based on Trans Financial's market price on April 6, 1998. The value of
such
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transactions as a multiple of LTM EPS ranged from 22.7x to 27.1x with a national
median of 21.1x and a median for selected regional franchises of 23.4x compared
to 27.0x (based on Trans Financial's reported LTM EPS) for the Merger. The value
of such transactions as a multiple of FY estimated EPS ranged from 21.1x to
24.0x with a national median of 19.5x and a median for selected regional
franchises of 21.8x compared to 24.8x for the Merger. The value of such
transactions as a multiple of FY+1 estimated EPS ranged from 18.1x to 21.5x with
a national median of 18.0x and a median for selected regional franchises of
19.7x compared to 21.9x for the Merger. The value of such transactions as a
multiple of book value ranged from 2.90x to 3.46x with a national median of
2.87x and a median for selected regional franchises of 3.00x compared to 4.17x
for the Merger. The value of such transactions as a multiple of tangible book
value ranged from 3.26x to 4.11x with a national median of 3.09x and a median
for selected regional franchises of 3.76x compared to 4.94x for the Merger. The
value of such transactions as a multiple of normalized book value (assuming a
normalized equity to assets ratio of 7.11%) ranged from 3.38x to 3.94x with a
national median of 3.40x and a median for selected regional franchises of 3.67x
compared to 4.17x for the Merger. The value of such transactions as a percentage
of assets ranged from 25.7% to 31.4% with a national median of 26.1% and a
median for selected regional franchises of 27.3% compared to 30.9% for the
Merger. The value of such transactions as a percentage of total deposits ranged
from 34.5% to 39.7% with a national median of 34.9% and median for selected
regional franchises of 36.1% compared to 39.1% for the Merger.
No company or transaction used in the above analyses as a comparison is
identical to Trans Financial, Star or the Merger. Accordingly, an analysis of
the results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other facts that could affect the public
trading value of the companies to which they are being compared.
CONTRIBUTION ANALYSIS. DLJ computed Trans Financial's and Star's respective
contribution to the combined entity's pro forma balance sheet and income
statement at or for the year ended December 31, 1997. The computation showed,
among other things, that Trans Financial and Star contributed to the combined
entity approximately 12.2% and 87.8%, respectively, of total assets; 12.8% and
87.2%, respectively, of total loans; 13.2% and 86.8%, respectively, of total
deposits; 10.1% and 89.9%, respectively, of total equity; 16.7% and 83.3%,
respectively, of tangible equity; 14.9% and 85.1%, respectively, of LTM net
interest income (on a fully-taxable equivalent basis); 13.6% and 86.4%,
respectively, of LTM noninterest revenue (excluding nonrecurring items); 17.7%
and 82.3%, respectively, of LTM noninterest expense (excluding nonrecurring
items); 10.9% and 89.1%, respectively, of LTM net income (excluding nonrecurring
items); 10.7% and 89.3%, respectively, of LTM cash flow (defined as net income
plus amortization of goodwill from pending transactions, but excluding
nonrecurring items); 10.4% and 90.6%, respectively, of pro forma 1998 net
income; 10.0% and 90.0%, respectively, of pro forma 1999 net income; 9.7% and
91.2%, respectively, of pro forma 1998 cash flow (defined as net income plus
amortization of goodwill from pending transactions, but excluding nonrecurring
items); 9.5% and 91.3%, respectively, of pro forma 1999 cash flow (defined as
net income plus amortization of goodwill from pending transactions, but
excluding nonrecurring items); 8.6% and 91.4%, respectively, of market
capitalization; and 10.9% and 89.1%, respectively, of the pro forma ownership of
the combined company based on the implied price per share of the combined
company.
The summary set forth above describes the material analyses performed by DLJ
and presented to the Trans Financial Board on April 9, 1998, in connection with
the preparation of its opinion and does not purport to be a complete description
of such analyses. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Each of the analyses conducted by DLJ was carried out in order to
provide a different perspective on the transaction and add to the total mix of
information available. DLJ did not form a conclusion as to whether any
individual analysis considered in isolation supported or failed
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to support an opinion as to fairness from a financial point of view. Rather, in
reaching its conclusion, DLJ considered the results of the analyses in light of
each other and ultimately reached its opinion based on the results of all
analyses taken as a whole. DLJ did not place particular reliance or weight on
any individual analysis, but instead concluded that its analyses taken as a
whole supported its determination. Accordingly, notwithstanding the separate
facts summarized above, DLJ believes that its analyses must be considered as a
whole and that selecting portions of its analyses, without considering all
factors and analyses, would create an incomplete view of the process underlying
the analyses by which DLJ reached its opinions. The ranges of valuations
resulting from any particular analysis described above should not be taken to be
DLJ's view of the actual value of Trans Financial, Star or the combined company.
The analyses performed by DLJ are not necessarily indicative of actual value
or actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of DLJ's
analysis of the fairness of the Exchange Ratio to the holders of Trans Financial
Common Stock from a financial point of view. The analyses do not purport to be
appraisals or to reflect the prices at which a company or its securities may
actually be bought or sold. DLJ used in its analyses various projections
prepared in consultation with the managements of Trans Financial and Star.
Neither Trans Financial nor Star publicly discloses internal management
projections of the type prepared in consultation with DLJ in connection with its
review. Such projections were not prepared for, or with a view toward, public
disclosure. In addition, such projections were based on numerous variables and
assumptions that are inherently uncertain, including, without limitation,
factors related to general economic and competitive conditions, many of which
are beyond the control of the managements of Trans Financial and Star.
Accordingly, actual results could vary significantly from those set forth in
such projections.
Pursuant to the terms of a letter agreement dated April 7, 1998 (the
"Engagement Letter"), for DLJ's services in connection with the Merger,
including the rendering of its opinions, Trans Financial (i) paid DLJ $250,000
at the time the Engagement Letter was executed, (ii) paid DLJ $1,000,000 at the
time DLJ notified Trans Financial that it was prepared to deliver its opinion to
the Board of Directors of Trans Financial, which payment was not conditioned on
the conclusions reached in the opinion, and (iii) is obligated to pay DLJ upon
consummation of the Merger additional cash compensation in an amount equal to
0.47% of the aggregate value of outstanding Trans Financial Common Stock
(treating any shares issuable upon exercise of options, warrants or other rights
of conversion as outstanding) (which was estimated to be $ as of ,
1998) less the amounts paid by Trans Financial described in the immediately
preceding clauses (i) and (ii) of this paragraph. Trans Financial has also
agreed under the Engagement Letter to reimburse DLJ for all reasonable
out-of-pocket expenses, including reasonable fees and expenses of counsel, and
has agreed to indemnify DLJ against certain expenses and liabilities incurred in
connection with its engagement, including liabilities under federal securities
law.
DLJ, in the ordinary course of its business, actively trades debt and equity
securities of Trans Financial and Star for its own account or for the accounts
of customers and thus may hold long or short positions in such securities at any
time.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Trans Financial's executive officers and members of its Board of Directors
have interests in the Merger in addition to their interests as stockholders of
Trans Financial. Those interests relate to, among other things, post-merger
membership on the Star Board, severance arrangements, equity-based benefit plan
arrangements affected by a change-in-control of Trans Financial, and post-merger
insurance coverage and indemnity.
In connection with the execution of the Merger Agreement, Star has entered
into the Employment Agreements with Messrs. Berta, Campbell, Cole, Davis, Norris
and Matthews. The terms of the Employment Agreements run from the Closing Date
through (i) the fifth anniversary of the Closing Date, in the
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case of Mr. Berta, (ii) the third anniversary thereof, in the case of Messrs.
Cole and Matthews, and (iii) the second anniversary thereof, in the case of
Messrs. Campbell, Davis and Norris (in each case, the "Employment Period").
Pursuant to his Employment Agreement, Mr. Berta will serve as the most senior
officer with direct responsibility for Star's banking operations in Tennessee
and Western Kentucky and will report to Jerry A. Grundhofer, Chairman, President
and Chief Executive Officer of Star. During the term of the Employment
Agreements, Mr. Berta will be entitled to receive a base salary of at least
$300,000 and Messrs. Campbell, Cole, Davis, Norris and Matthews will be entitled
to receive base salaries at least equal to their current salaries. In addition,
each of the foregoing executives will be entitled to receive a minimum annual
bonus consistent with peer executives of Star and its affiliates. During the
term of the Employment Agreements, Star will provide the executives with
benefits and perquisites no less favorable than those provided to peer
executives of Star and its affiliates.
On the Closing Date, Mr. Berta will be granted 25,000 restricted shares of
Star Common Stock and an option to purchase 50,000 shares of Star Common Stock
(with an exercise price equal to the market price of Star Common Stock as of the
Closing Date); Messrs. Cole and Matthews will each be granted 10,000 restricted
shares of Star Common Stock; and Messrs. Campbell, Davis and Norris will each be
granted 5,000 restricted shares of Star Common Stock. The restricted shares will
vest in five equal annual installments commencing on the first anniversary of
the Closing Date, and Mr. Berta's option will vest in four equal installments
commencing on the first anniversary of the Closing Date.
In the event the employment of the executive is terminated by Star without
"Cause" or by the executive for "Good Reason" (as such terms are defined in the
executive's Employment Agreement), Star will (i) pay the executive a lump sum in
cash equal to the sum of (x) the aggregate amount of base salary payable to the
executive for the entire Employment Period (less amounts theretofore paid to the
executive) and (y) an amount equal to an annual bonus for the year of
termination plus annual bonuses for each year remaining in the Employment
Period, in each case calculated using a specified percentage of an annual base
salary of the executive (60%, or 100% if the termination occurs on or after the
second anniversary of the Closing Date, in the case of Mr. Berta; and 50%, in
the case of Messrs. Campbell, Cole, Davis, Norris and Matthews), (ii) vest the
option (in the case of Mr. Berta) and restricted stock grants, and (iii) provide
the executive with continued welfare benefits for the remainder of the
Employment Period. If the executive terminates his employment without Good
Reason or is terminated by Star for Cause, he will only be entitled to receive
amounts and benefits owing by Star through the date of termination.
The Employment Agreements provide for a gross-up payment to be made to the
executive, if necessary, to eliminate the effects of the imposition of the
excise tax under Section 4999 of the Code on payments made to, and the benefits
provided to, the executive and of the imposition of income and excise taxes on
such gross-up payment.
Mr. Berta and the other five executives have agreed that while employed by
Star under the Employment Agreements and for one year (in the case of Mr. Berta)
or six months (in the case of the other five executives) after termination of
employment (other than a termination by Star without Cause or by the executive
for Good Reason), they will not engage in any banking business in Kentucky or
Tennessee which is in competition with the banking business conducted by Star or
its affiliates in such States, and will not solicit for employment employees of
Star or its affiliates.
Pursuant to the Merger Agreement, promptly following the Effective Time, a
current member of the Trans Financial Board will be invited to serve as an
additional member of the Star Board of Directors.
Trans Financial directors and officers hold options to purchase Trans
Financial Common Stock under the Trans Financial stock option plans. As
described in "THE MERGER AGREEMENT--Employee Benefits--TRANS FINANCIAL STOCK
OPTIONS," all such stock options will be, at the election of the option holder,
exercised or converted into stock options for Star Common Stock. As a result of
the acceleration provisions of the terms of such options and the Merger
Agreement, each Trans Financial executive officer will enjoy acceleration as of
July 9, 1998 of exercise rights as to such executive's options, including
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accelerated vesting of options covering: 62,000 shares--Vince A. Berta; 54,500
shares--James G. Campbell; 51,842 shares--Tommy W. Cole; 18,000 shares--John K.
Davis II; 34,758 shares--Michael L. Norris; and 50,000 shares--Edward R.
Matthews.
Star has agreed that the Merger will not affect or diminish any of Trans
Financial's duties and obligations of indemnification existing as of the
Effective Time in favor of employees, agents, directors or officers of Trans
Financial or its subsidiaries arising by virtue of its Articles of Incorporation
or By-Laws in the form in effect at the date of the Merger Agreement or arising
by operation of law or arising by virtue of any contract, resolution or other
agreement or document existing at the date of the Merger Agreement, and such
duties and obligations will continue in full force and effect and be honored by
Star for so long as they would (but for the Merger) otherwise survive and
continue in full force and effect. Star will also provide, or cause to be
provided, for a period of not less than two years from the Effective Time, a
"tail" insurance and indemnification policy that provides the officers and
directors of Trans Financial immediately prior to the Effective Time coverage no
less favorable, in the aggregate, than as currently provided by Star to its
officers and directors.
Star and Trans Financial have agreed to establish a supplemental employee
severance program prior to the Effective Time to provide up to $4 million of
supplemental severance (in addition to any severance provided for under Star's
or Trans Financial's general severance policies) for current employees of Trans
Financial not party to an Employment Agreement as described above.
See "THE MERGER AGREEMENT--Employee Benefits."
REGULATORY APPROVAL
The obligations of the parties to effect the Merger are subject to prior
approval of the Federal Reserve Board and any other necessary regulatory
authority.
The Merger is subject to the prior approval of the Federal Reserve Board
under the BHCA. Under the BHCA, the Federal Reserve Board is required, in
approving transactions such as the Merger, to take into consideration the
financial and managerial resources and future prospects of the existing and
proposed institutions and the convenience and needs of the communities to be
served. In considering financial resources and future prospects, the Federal
Reserve Board, among other things, evaluated the adequacy of the capital levels
of Star and its bank subsidiary following the Merger.
The BHCA prohibits the Federal Reserve Board from approving the Merger if
the Merger would result in a monopoly, or be in furtherance of any combination
or conspiracy to monopolize or to attempt to monopolize, the business of banking
in any part of the United States, if the effect of the Merger in any section of
the country may be substantially to lessen competition or to tend to create a
monopoly, or if the Merger would in any other manner result in a restraint of
trade, unless the Federal Reserve Board finds that the anticompetitive effects
of the Merger are clearly outweighed in the public interest by the probable
effect of transactions in meeting the convenience and needs of the communities
to be served. In addition, under the Community Reinvestment Act of 1977, as
amended, the Federal Reserve Board must take into account the record of
performance of the existing institutions in meeting the credit needs of the
entire community, including low- and moderate-income neighborhoods, served by
such institutions.
Under the BHCA, the Merger may not be consummated until the 30th day
following the date of Federal Reserve Board approval (or, if the United States
Department of Justice (the "DOJ") has not submitted adverse comments with
respect to competitive factors, the 15th day), during which time the DOJ may
challenge the Merger on antitrust grounds. The commencement of an antitrust
action would stay the effectiveness of the Federal Reserve Board's approval
unless a court specifically orders otherwise.
The BHCA provides for the publication of notice and public comment on the
applications and authorizes the Federal Reserve Board to permit interested
parties to intervene in the proceedings. If an
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interested party is permitted to intervene, such intervention would delay the
regulatory approvals required for consummation of the Merger.
Star and Trans Financial filed as of April 17, 1998 all applications and
notices, and have taken other appropriate action with respect to any requisite
approvals or other action of any regulatory authority. On May 29, 1998, the
requisite approval of the Federal Reserve Board was obtained, and all requisite
waiting periods with respect to the Merger expired as of June 13, 1998. Star and
Trans Financial are not aware of any governmental approvals or actions that may
be required for consummation of the Merger other than as described above. Should
any other approval or action be required, it is presently contemplated that such
approval or action would be sought.
See "THE MERGER AGREEMENT--Closing and Effective Time," "--Conditions of the
Merger," "--Waiver and Amendment" and "--Termination of the Merger Agreement,"
and "SUPERVISION AND REGULATION."
ACCOUNTING TREATMENT
The Merger will be accounted for under the pooling of interests method of
accounting. Consummation of the Merger is conditioned on, among other matters,
receipt of a letter, satisfactory in form and substance, from Arthur Andersen
LLP to the effect that the Merger will qualify as a pooling of interests
transaction under generally accepted accounting principles, if consummated in
accordance with the Merger Agreement. See "THE MERGER AGREEMENT--Conditions of
the Merger."
Under the pooling-of-interests method of accounting, the recorded assets and
liabilities of Star and Trans Financial will be carried forward to the combined
company at their historical recorded amounts, income of the combined company
will include income of Star and Trans Financial for the entire fiscal year in
which the combination occurs and the reported income, assets, liabilities and
shareholders' equity of the separate companies for previous periods will be
combined and restated as income, assets, liabilities and shareholders' equity of
the combined company. See "SUMMARY INFORMATION--Comparative Unaudited Per Share
Data" and "--Summary Financial Data," and "UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION."
Trans Financial has agreed to deliver to Star a letter identifying all
persons whom Trans Financial believes to be, at the time the Merger Agreement is
submitted to a vote of the stockholders of Trans Financial, "affiliates" of
Trans Financial for purposes of Rule 145 under the Securities Act or for
determining the qualification of the Merger as a pooling of interests for
accounting and financial reporting purposes. Trans Financial has agreed to use
its reasonable best efforts to cause each person who is so identified as such an
"affiliate" to deliver to Star a written agreement providing, among other
things, that within the 30 days prior to the Effective Time, such person will
not sell, transfer or otherwise dispose of any shares of Trans Financial Common
Stock or Star Common Stock or options to acquire Trans Financial Common Stock
beneficially owned thereby, whether owned on the date of such agreement or
thereafter acquired, and that such person will not sell, transfer or otherwise
dispose of any Star Common Stock or options to acquire Star Common Stock (or
shares issuable upon exercise thereof) beneficially owned thereby as a result of
the Merger or otherwise until after such time as Star shall have publicly
released a report in the form of a quarterly earnings report, registration
statement filed with the Commission, a report filed with the Commission on Form
10-K, 10-Q or 8-K or any other public filing, statement or announcement which
includes the combined financial results (including combined sales and net
income) of Star and Trans Financial for a period of at least 30 days of combined
operations of Star and Trans Financial following the Effective Time.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material United States federal
income tax consequences of the Merger. The discussion does not address all
aspects of United States federal taxation that may be
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relevant to particular Trans Financial stockholders, and it may not be
applicable to Trans Financial stockholders who, for United States federal income
tax purposes, are nonresident alien individuals, foreign corporations, foreign
partnerships, foreign trusts or foreign estates, or who acquired their Trans
Financial Common Stock pursuant to the exercise of Trans Financial Stock Options
or otherwise as compensation. The discussion does not address the effect of any
applicable state, local or foreign tax laws or any United States federal tax
laws other than those pertaining to the income tax, or to persons who exercise
Appraisal Rights. EACH TRANS FINANCIAL STOCKHOLDER SHOULD CONSULT SUCH
STOCKHOLDER'S OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE
MERGER TO SUCH STOCKHOLDER.
This discussion is based on the Code, regulations and rulings now in effect
or proposed thereunder, current administrative rulings and practice, and
judicial precedent, all of which are subject to change. Any such change, which
may or may not be retroactive, could alter the tax consequences to Trans
Financial stockholders discussed herein. This discussion assumes that Trans
Financial stockholders hold their Trans Financial Common Stock as a capital
asset within the meaning of Section 1221 of the Code.
Each of Star and Trans Financial has received an opinion of Wachtell,
Lipton, Rosen & Katz, special counsel to Trans Financial, dated the date hereof,
based upon certain customary assumptions and certain representations made by
Star and Trans Financial, to the effect that, for United States federal income
tax purposes, under currently applicable law, (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, and (ii) no
gain or loss will be recognized by the stockholders of Trans Financial who
receive solely Star Common Stock in exchange for shares of Trans Financial
Common Stock, except with respect to cash received in lieu of fractional shares
of Star Common Stock. In addition, the obligations of each party to consummate
the Merger are conditioned upon the receipt, by each of Star and Trans
Financial, from counsel reasonably satisfactory to it, of an opinion to the
foregoing effect reasonably satisfactory to the recipient in form and substance.
Based upon such opinions, the following will be the material federal income
tax consequences of the Merger:
(i) No gain or loss will be recognized by the stockholders of Trans
Financial who receive solely Star Common Stock in exchange for shares of
Trans Financial Common Stock, except with respect to cash received in lieu
of fractional shares of Star Common Stock.
(ii) The aggregate adjusted tax basis of the shares of Star Common Stock
received by each Trans Financial stockholder in the Merger (including any
fractional share of Star Common Stock deemed to be received, as described in
paragraph (iv) below), will be equal to the aggregate adjusted tax basis of
the shares of Trans Financial Common Stock surrendered therefor.
(iii) The holding period of the shares of Star Common Stock received by
each Trans Financial Stockholder in the Merger (including any fractional
share of Star Common Stock deemed to be received, as described in paragraph
(iv) below) will include the holding period of the shares of Trans Financial
Common Stock exchanged therefor.
(iv) A Trans Financial stockholder who receives cash in the Merger in
lieu of a fractional share of Star Common Stock will be treated as if the
fractional share had been received in the Merger and then redeemed by Star
in return for the cash. The receipt of such cash will generally cause the
recipient to recognize capital gain or loss equal to the difference between
the amount of cash received and the portion of such holder's adjusted tax
basis in the shares of Star Common Stock allocable to the fractional share.
THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND IS INCLUDED FOR GENERAL INFORMATION
ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE PARTICULAR FACTS
AND CIRCUMSTANCES OF EACH STOCKHOLDER'S
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TAX STATUS AND ATTRIBUTES. AS A RESULT, THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES ADDRESSED IN THE FOREGOING DISCUSSION MAY NOT APPLY TO EACH
STOCKHOLDER. IN VIEW OF THE INDIVIDUAL NATURE OF INCOME TAX CONSEQUENCES, EACH
STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE
THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH STOCKHOLDER, INCLUDING THE
APPLICATION AND EFFECT OF UNITED STATES FEDERAL, STATE, LOCAL AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL AND OTHER TAX LAWS.
DISSENTERS' RIGHTS OF STOCKHOLDERS OF TRANS FINANCIAL
Under Kentucky law, a stockholder entitled to vote on the Merger may dissent
and demand payment of the "fair value" of his or her shares in cash if the
Merger is consummated. Generally, dissenters' rights are a stockholder's sole
remedy for objecting to the Merger Agreement. The following summary is not
intended to and does not constitute a complete statement or summary of each
provision of the KBCA relating to the rights of dissenting stockholders and is
qualified in its entirety by reference to Subtitle 13 of the KBCA which is
attached as Annex C hereto. Accordingly, any holder of Trans Financial Common
Stock intending to exercise dissenters' rights is urged to review Annex C
carefully and to consult his or her own legal counsel. Each step must be taken
in strict compliance with the applicable provisions of the statutes in order for
a holder of Trans Financial Common Stock to perfect dissenters' rights.
A stockholder wishing to exercise dissenters' rights must deliver to Trans
Financial, prior to the vote on the Merger at the Special Meeting, a written
notice of intent to demand payment for his or her shares if the Merger is
consummated and must refrain from voting in favor of the Merger. The written
notice of intent must be given in addition to and separate from any vote, in
person or by proxy, against approval of the Merger Agreement; a vote, in person
or by proxy, against approval of the Merger Agreement will not constitute such a
written notice. The written notice of intent should be sent to Trans Financial,
Inc., 500 East Main Street, Bowling Green, Kentucky 42101, Attention: Jay B.
Simmons, Secretary. It is recommended that all required documents to be
delivered by mail be sent registered or certified mail with return receipt
requested.
TRANS FINANCIAL STOCKHOLDERS ELECTING TO EXERCISE THEIR DISSENTERS' RIGHTS
UNDER SUBTITLE 13 OF THE KBCA MUST NOT VOTE FOR APPROVAL OF THE MERGER
AGREEMENT. A VOTE BY A STOCKHOLDER AGAINST APPROVAL OF THE MERGER AGREEMENT IS
NOT REQUIRED IN ORDER FOR THAT STOCKHOLDER TO EXERCISE DISSENTERS' RIGHTS.
HOWEVER, IF A STOCKHOLDER RETURNS A SIGNED PROXY FORM BUT DOES NOT SPECIFY A
VOTE AGAINST APPROVAL OF THE MERGER AGREEMENT OR A DIRECTION TO ABSTAIN, THE
PROXY FORM, IF NOT REVOKED, WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT,
WHICH WILL HAVE THE EFFECT OF WAIVING THAT STOCKHOLDER'S DISSENTERS' RIGHTS.
If the Merger is approved, within ten days after the Special Meeting (or any
adjournment thereof), Trans Financial will send to all stockholders exercising
their dissenters' rights a dissenters' notice which states where the stockholder
must send a demand for payment and where and when his or her share certificates
must be deposited; encloses a form for demanding payment to be completed by the
dissenter and returned to Trans Financial; informs holders of uncertificated
shares to what extent transfer of the shares will be restricted after the
payment demand is received; establishes the date (not less than 30 nor more than
60 days after the delivery of the dissenters' notice) by which Trans Financial
must receive the demand for payment from the stockholder; and encloses a copy of
Subtitle 13 of the KBCA. After a stockholder receives the dissenters' notice, he
or she must deliver the demand for payment to Trans Financial and deposit his or
her shares in accordance with the dissenters' notice.
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Upon its receipt of the demand for payment, Trans Financial will send to
each dissenting stockholder a statement containing an estimate by Trans
Financial of the fair value of the dissenter's shares as of the day before the
date of the Special Meeting (excluding any appreciation or depreciation in
anticipation of the Merger unless exclusion would be inequitable), and payment
based on that estimate plus accrued interest. The payment will be accompanied by
an explanation of how interest was calculated along with the balance sheet of
Trans Financial as of the end of the most recent fiscal year, an income
statement, a statement of changes in stockholders' equity and the latest
available interim financial statement, if any. In addition, the dissenter will
be informed of his or her right to demand payment according to the dissenter's
own estimate of the fair value.
Trans Financial is not required to send payment with the statement of its
estimate of fair value to a dissenter who was not a beneficial owner of the
shares at the time of the first public announcement of the Merger Agreement, but
rather may offer to purchase the shares based on the estimate. Any such owner
must either accept that amount in full satisfaction or proceed with the exercise
of his or her dissenters' rights.
Within 30 days after Trans Financial has delivered its estimate of fair
value, a dissenting stockholder may notify Trans Financial of his or her own
estimate of the fair value of the shares and demand payment of the balance due
under such estimate.
If an agreement is not reached as to the fair value of the shares, then
within 60 days after receiving the dissenter's payment demand, Trans Financial
must file a petition in the appropriate county circuit court in Kentucky
requesting the court to determine the fair value of the shares and the accrued
interest. If Trans Financial fails to institute such a proceeding, it will be
required to pay each dissenter whose demand remains unsettled the amount
demanded.
Each dissenting Trans Financial stockholder who is a party to the proceeding
is entitled to the amount, if any, by which the court finds the fair value of
his or her shares, plus interest, exceeds the amount paid by Trans Financial. In
an appraisal proceeding, the county circuit court will determine all costs of
the proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court.
The court will assess costs against Trans Financial, except that the court
may assess costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment. The court may also assess
the fees and expenses of counsel and experts for the respective parties, in
amounts the court finds equitable as follows: (i) against Trans Financial and in
favor of any or all dissenters, if the court finds Trans Financial did not
substantially comply with the statutory requirements set forth in Sections
271B.13-200 through 271B.13-280 of the KBCA; or (ii) against either Trans
Financial or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted arbitrarily,
vexatiously or not in good faith with respect to the rights provided by Subtitle
13 of the KBCA. If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against Trans
Financial, the court may award to such counsel reasonable fees to be paid out of
the amounts awarded the dissenters who benefited.
If Trans Financial does not consummate the Merger within 60 days after the
deadline for demanding payment and depositing certificates, it must return all
deposited shares and release any transfer restrictions imposed on uncertificated
shares. If Trans Financial fails to do so, the dissenter may nevertheless
proceed with the exercise of his or her dissenters' rights, and Trans Financial
will have no further right to terminate the dissenters' rights by returning
deposited shares.
A record stockholder may dissent as to less than all of the shares
registered in his or her name only if he or she dissents with respect to all of
the shares beneficially owned by any one person and notifies Trans Financial in
writing of the name and address of each person on whose behalf the stockholder
is asserting dissenters' rights. In that event, such dissenters' rights shall be
determined as if the shares as to which the
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stockholder has dissented and the stockholder's other shares were registered in
the names of different stockholders.
A beneficial stockholder may assert dissenters' rights as to shares held on
his or her behalf only if he or she submits to Trans Financial the record
stockholder's written consent to the dissent no later than the time such
beneficial stockholder asserts his or her dissenters' rights, and he or she
dissents as to all shares of which he or she is the beneficial owner or over
which he or she has the power to direct the vote.
STOCKHOLDERS OF TRANS FINANCIAL SHOULD BE AWARE THAT FAILURE TO PROCEED IN
ACCORDANCE WITH THE PROVISIONS OF SUBTITLE 13 OF THE KBCA MAY RESULT IN A LOSS
OF ALL DISSENTERS' RIGHTS AND RESULT IN THEIR BEING BOUND BY THE MERGER
AGREEMENT AND THE MERGER.
TRANS FINANCIAL RIGHTS AGREEMENT AMENDMENT
In connection with the execution of the Merger Agreement, Trans Financial
executed an Amendment to Rights Agreement, dated as of April 9, 1998 (the
"Rights Agreement Amendment"), amending the Rights Agreement, dated January 20,
1992 (as amended, the "Trans Financial Rights Agreement"), between Trans
Financial and the Rights Agent party thereto, so as to provide (i) that none of
Star and its affiliates will become an "Acquiring Person" or "Adverse Person"
and that no "Distribution Date" (as such terms are defined in the Trans
Financial Rights Agreement) will occur as a result of the execution of the
Merger Agreement or the Stock Option Agreement or the consummation of the Merger
or the other transactions contemplated thereby and (ii) that the rights (the
"Trans Financial Rights") issued under the Trans Financial Rights Agreement
shall not become exercisable following consummation of the Merger. Trans
Financial has agreed under the Merger Agreement that the Trans Financial Rights
Agreement will remain so amended. See "COMPARISON OF SHAREHOLDER
RIGHTS--Comparison of Rights of Shareholders of Star and Stockholders of Trans
Financial."
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THE MERGER AGREEMENT
THE FOLLOWING SUMMARY OF CERTAIN TERMS AND PROVISIONS OF THE MERGER
AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT,
WHICH IS ATTACHED AS ANNEX A TO THIS PROXY STATEMENT/ PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE.
GENERAL DESCRIPTION OF THE MERGER
The Merger Agreement provides that Trans Financial will merge at the
Effective Time with and into Star, subject to Stockholder Approval and the
satisfaction or waiver of the other conditions to the Merger. Upon consummation
of the Merger, Trans Financial's corporate existence will terminate, with Star
continuing as the surviving corporation or a combination thereof continuing its
existence under the name "Star Banc Corporation."
Simultaneously with the effectiveness of the Merger, each outstanding share
of Trans Financial Common Stock, other than shares held by stockholders of Trans
Financial who exercise their dissenters' rights under the KBCA and any shares
held by Trans Financial, Star or any of their respective subsidiaries, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, will be converted into the Merger Consideration.
The shares of Star Common Stock to be issued pursuant to the Merger will be
freely transferable except by certain stockholders of Trans Financial who are
deemed to be "affiliates" (as such term is defined under the Securities Act) of
Trans Financial. The shares of Star Common Stock issued to such affiliates will
be restricted in their transferability in accordance with the rules and
regulations promulgated by the Commission and pursuant to agreements entered
into with Star. See "COMPARISON OF SHAREHOLDER RIGHTS--Restrictions on Resale of
Star Capital Stock by Affiliates; Affiliate Agreements."
CLOSING AND EFFECTIVE TIME
Unless the parties otherwise agree, the Closing of the Merger will take
place at 10:00 a.m., local time, on the date on which the Effective Time occurs,
which shall be any such date on or after July 1, 1997 as Star notifies Trans
Financial in writing but not earlier than the Approval Date, and not later than
the first business day of the first full calendar month commencing at least five
business days after the Approval Date. The Effective Time will occur upon the
filing of the appropriate documents in respect of the Merger with the
Secretaries of State of the State of Ohio and the Commonwealth of Kentucky. Star
and Trans Financial currently anticipate that the Effective Time will occur on
, 1998.
SURRENDER OF TRANS FINANCIAL STOCK CERTIFICATES AND RECEIPT
OF STAR COMMON STOCK
Holders of record of certificates formerly representing shares of Trans
Financial Common Stock (the "Certificates") will be instructed to tender such
Certificates to Star Bank, N.A., as exchange agent (the "Exchange Agent"),
pursuant to a letter of transmittal that Star will deliver or cause to be
delivered to such holders. The letter of transmittal will specify that risk of
loss and title to Certificates will pass only upon delivery of such Certificates
to the Exchange Agent.
Each holder of a Certificate that surrenders such Certificate together with
duly executed transmittal materials to the Exchange Agent will, after the
Effective Time and upon acceptance thereof by the Exchange Agent, be entitled to
a certificate or certificates representing the number of full shares of Star
Common Stock into which the Certificate so surrendered will have been converted
pursuant to the Merger Agreement, any cash in lieu of a fractional share of Star
Common Stock and any distribution theretofore declared and not yet paid with
respect to such shares of Star Common Stock, without interest.
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The Exchange Agent will accept Certificates upon compliance with such
reasonable terms and conditions as Star or the Exchange Agent may impose to
effect an orderly exchange thereof in accordance with customary exchange
practices. Certificates shall be appropriately endorsed or accompanied by such
instruments of transfer as Star or the Exchange Agent may require. See "THE
MERGER AGREEMENT--General Description of the Merger."
Each outstanding Certificate will, until duly surrendered to the Exchange
Agent, be deemed to evidence ownership of the Merger Consideration into which
the Trans Financial Common Stock previously represented by such Certificate will
have been converted in the Merger. After the Effective Time, holders of
Certificates will cease to have rights with respect to the Trans Financial
Common Stock previously represented by such Certificates, and their sole rights
shall be to exchange such Certificates for the Merger Consideration provided for
in the Merger Agreement. After the Effective Time, there will be no further
transfer on the records of Trans Financial of Certificates, and, if such
Certificates are presented to Trans Financial for transfer, they will be
cancelled against delivery of the Merger Consideration.
Star will not be obligated to deliver the Merger Consideration to which any
former holder of Trans Financial Common Stock is entitled as a result of the
Merger until such holder surrenders the Certificates as provided in the Merger
Agreement. No dividends declared will be remitted to any person entitled to
receive Star Common Stock under the Merger Agreement until such person
surrenders the Certificate representing the right to receive such Star Common
Stock, at which time such dividends will be remitted to such person, without
interest and less any taxes that may have been imposed thereon.
The shares of Star Common Stock to be issued pursuant to the Merger will be
freely transferable except by certain stockholders of Trans Financial who are
deemed to be "affiliates" (as such term is defined under the Securities Act) of
Trans Financial. The shares of Star Common Stock issued to such affiliates will
be restricted in their transferability in accordance with the rules and
regulations promulgated by the Commission and pursuant to agreements entered
into thereby and delivered to Star. See "COMPARISON OF SHAREHOLDER
RIGHTS--Restrictions on Resale of Star Capital Stock by Affiliates; Affiliate
Agreements."
Neither the Exchange Agent nor any party to the Merger Agreement nor any
affiliate thereof will be liable to any holder of Trans Financial Common Stock
represented by any Certificate for any Merger Consideration paid to a public
official pursuant to applicable abandoned property, escheat or similar laws.
Star and the Exchange Agent will be entitled to rely upon the stock transfer
books of Trans Financial to establish the identity of those persons entitled to
receive Merger Consideration, which books will be conclusive with respect
thereto. In the event of a dispute with respect to ownership of Trans Financial
Common Stock represented by any Certificate, Star and the Exchange Agent shall
be entitled to deposit any Merger Consideration represented thereby in escrow
with an independent third party and thereafter be relieved with respect to any
claims thereto.
At or prior to the Effective Time of the Merger, Star will deposit the
aggregate Merger Consideration with the Exchange Agent. Any portion of the
Merger Consideration, including any earnings thereon, which remains
undistributed six months following the Effective Time of the Merger will be
returned to Star, and thereafter holders of Certificates shall look only to Star
for payment of the Merger Consideration (and any related dividends) to which
they may be entitled.
FRACTIONAL SHARES
No fractional shares of Star Common Stock will be issued to the former
stockholders of Trans Financial in connection with the Merger. Each former
holder of Trans Financial Common Stock who otherwise would have been entitled to
receive a fraction of a share of Star Common Stock will receive cash in lieu
thereof, without interest, in an amount equal to the holder's fractional share
interest multiplied by the closing stock price of Star Common Stock on the NYSE
Composite Tape on the last full trading day preceding the Effective Time. No
shareholder of Trans Financial entitled to receive cash in lieu of
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fractional shares will be entitled to dividends, voting rights or any other
rights in respect of such fractional shares. Cash received by Trans Financial
shareholders in lieu of fractional shares may give rise to taxable income. See
"THE MERGER--Certain Federal Income Tax Consequences of the Merger."
CONDITIONS OF THE MERGER
The respective obligations of Star and Trans Financial to consummate the
Merger are subject to the fulfillment or waiver at or prior to the Effective
Time of the following conditions:
(i) The Merger Agreement shall have received the requisite approval of
stockholders of Trans Financial.
(ii) All requisite approvals of the Merger Agreement and the
transactions contemplated thereby shall have been received from the Federal
Reserve Board, (which have been heretofore received) and any other necessary
governmental or regulatory authority or agency, and all applicable waiting
periods shall have expired under applicable law (and have so expired).
(iii) The Registration Statement shall have been declared effective and
shall not be subject to a stop order or any threatened stop order.
(iv) Neither Star nor Trans Financial shall be subject to any order,
decree or injunction, and there shall be no pending or threatened order,
decree or injunction, of a court or agency of competent jurisdiction which
enjoins or prohibits, or seeks to enjoin or prohibit, the consummation of
the Merger.
(v) There shall be no legislative, statutory or regulatory action
(whether United States federal or state) pending which prohibits or
threatens to prohibit consummation of the Merger or which otherwise
materially adversely affects the Merger.
(vi) Each of Star and Trans Financial shall have received, from counsel
reasonably satisfactory to it, an opinion reasonably satisfactory in form
and substance to it to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and that no
gain or loss will be recognized by the stockholders of Trans Financial to
the extent they receive Star Common Stock solely in exchange for shares of
Trans Financial Common Stock, except with respect to cash received in lieu
of fractional shares of Star Common Stock.
(vii) The shares of Star Common Stock which shall be issued to the
holders of Trans Financial Common Stock (and where applicable, Trans
Financial Stock Options) upon consummation of the Merger shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
(viii) Arthur Andersen LLP shall have issued a letter, satisfactory in
form and substance, dated the date of this Proxy Statement/Prospectus and
confirmed in writing at the Effective Time, to the effect that the Merger
will qualify as a pooling of interests transaction under generally accepted
accounting principles, if consummated in accordance with the Merger
Agreement.
Trans Financial's obligation to effect the Merger is subject to the
fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:
(i) The representations and warranties of Star set forth in Article III
of the Merger Agreement shall be true and correct in all material respects
as of April 9, 1998 and as of the Effective Time (as though made on and as
of the Effective Time except (a) to the extent such representations and
warranties are by their express provisions made as of a specified date or
period and (b) for the effect of transactions contemplated by the Merger
Agreement).
(ii) Star shall have performed in all material respects all obligations
required to be performed by it under the Merger Agreement prior to the
Effective Time.
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(iii) Trans Financial shall have received a certificate of the Chief
Financial Officer of Star as to the satisfaction of the conditions set forth
in clauses (i) and (ii).
Star's obligation to effect the Merger is subject to the fulfillment or
waiver at or prior to the Effective Time of the following additional conditions:
(i) The representations and warranties of Trans Financial set forth in
Article II of the Merger Agreement shall be true and correct in all material
respects as of April 9, 1998 and as of the Effective Time (as though made on
and as of the Effective Time except (a) to the extent such representations
and warranties are by their express provisions made as of a specified date
or period and (b) for the effect of transactions contemplated by the Merger
Agreement).
(ii) Trans Financial shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement prior
to the Effective Time.
(iii) Star shall have received a certificate of the Chairman or
President of Trans Financial as to the satisfaction of the conditions set
forth in clauses (i) and (ii).
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after any Stockholder Approval: (i) by mutual consent of
the Executive Committee of the Star Board (the "Star Executive Committee") and
the Trans Financial Board; (ii) by the Star Executive Committee or the Trans
Financial Board (a) at any time after April 9, 1999, if the Merger shall not
theretofore have been consummated (PROVIDED that the terminating party is not
then in material breach of the Merger Agreement), (b) if the Federal Reserve
Board has denied approval of the Merger and such denial has become final and
nonappealable or (c) if stockholders of Trans Financial shall not have approved
the Merger Agreement at the Special Meeting, PROVIDED that Trans Financial has
not breached its obligation, subject to certain exceptions, to recommend the
proposal; (iii) by the Trans Financial Board in the event of a material breach
by Star of the Merger Agreement, which breach is not cured within 30 days after
written notice thereof is given to Star by Trans Financial; (iv) by the Star
Executive Committee in the event of a material breach by Trans Financial of the
Merger Agreement, which breach is not cured within 30 days after written notice
thereof is given to Trans Financial by Star; or (v) by the Trans Financial
Board, upon written notice to Seller at any time during the ten-day period
commencing two days after the date on which the approval of the Federal Reserve
Board required for consummation of the Merger shall be received (the
"Determination Date") if both of the following conditions are satisfied: (a) the
average of the daily closing prices of Star Common Stock as reported on the NYSE
Composite Tape for the ten consecutive full trading days in which such shares
are traded on the NYSE ending at the close of trading on the Determination Date
(the "Average Closing Price") shall be less than $49.60, and (b) the Average
Closing Price shall have fallen from $62.00 (the closing price of Star Common
Stock on April 8, 1998, the last full trading day on which the NYSE was open for
trading prior to the execution of the Merger Agreement) by 15% more than the
weighted average of the closing prices of an index group comprised of publicly
traded bank holding companies has fallen between April 8, 1998 and the
Determination Date.
No assurance can be given that the Merger will be consummated, that Star and
Trans Financial will not mutually agree to terminate the Merger Agreement, or
that Star or Trans Financial will not elect to terminate the Merger Agreement if
the Merger has not been consummated on or before April 9, 1999.
BUSINESS PENDING THE MERGER
From April 9, 1998 to the Effective Time, each of Star and Trans Financial
agreed to, and agreed to cause each of their respective subsidiaries to, conduct
its business according to the ordinary and usual course consistent with past
practices, and agreed to, and agreed to cause each such subsidiary to, use its
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reasonable best efforts to maintain and preserve its business organization,
employees and advantageous business relationships and retain the services of its
officers and key employees.
From April 9, 1998 to the Effective Time, the Merger Agreement provides
that, except as provided in the Merger Agreement, Trans Financial has agreed not
to, and to cause each of its subsidiaries not to, without the prior written
consent of Star:
(i) declare, set aside or pay any dividends or other distributions,
directly or indirectly, in respect of its capital stock (other than
dividends from a subsidiary of Trans Financial to Trans Financial or another
subsidiary of Trans Financial), except that Trans Financial may declare and
pay cash dividends on the Trans Financial Common Stock of not more than $.18
per share per quarterly period; PROVIDED that Trans Financial shall not
declare any dividends on Trans Financial Common Stock during any quarter in
which its stockholders will be entitled to receive any regular quarterly
dividend on the shares of Star Common Stock to be issued in the Merger;
(ii) enter into or amend any employment, severance or similar agreement
or arrangement with any director or officer or employee, or materially
modify any of Trans Financial's employee benefit plans specified in the
Merger Agreement or grant any salary or wage increase or materially increase
any employee benefit (including incentive or bonus payments), except normal
individual increases in compensation to employees consistent with past
practice, or as required by law or contract;
(iii) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in principle
with respect to, any merger, consolidation or business combination (other
than the Merger), any acquisition or disposition of a material amount of
assets (except in the usual course of business consistent with past
practices), including mortgage servicing rights, loans or securities as well
as any release or relinquishment of any material contract rights;
(iv) propose or adopt any amendments to its articles of incorporation,
association or other charter document or by-laws;
(v) issue, sell, grant, confer or award any of its Equity Securities (as
defined in the Merger Agreement) (except shares of Trans Financial Common
Stock issued upon exercise of Trans Financial Stock Options outstanding on
April 9, 1998) (Trans Financial agreeing to promptly notify Star of any such
issuance of treasury or previously unissued shares) or effect any stock
split or adjust, combine, reclassify or otherwise change its capitalization
as it existed on April 9, 1998;
(vi) purchase, redeem, retire, repurchase, or exchange, or otherwise
acquire or dispose of, directly or indirectly, any of its Equity Securities,
whether pursuant to the terms of such Equity Securities or otherwise;
(vii) directly or indirectly (including through its officers, directors,
employees or other representatives), initiate, solicit, engage in or
encourage any discussions, inquiries or proposals with any third party
relating to the disposition of any significant portion of the business or
assets of Trans Financial or any Trans Financial subsidiary or the
acquisition of Equity Securities of Trans Financial or any Trans Financial
subsidiary or the merger of Trans Financial or any Trans Financial
subsidiary with any person (other than Star) or any similar transaction or
provide any such person with information or assistance or negotiate with any
such person with respect to such a transaction, and Trans Financial will
notify Star orally of all the relevant details relating to all inquiries,
indications of interest and proposals which it may receive with respect to
such a transaction within 24 hours of the receipt of any such inquiry,
indication or proposal;
(viii) take any action that would (a) materially impede or delay the
consummation of the transactions contemplated by the Merger Agreement or the
ability of Star or Trans Financial to obtain any approval of any Regulatory
Authority required for the transactions contemplated by the Merger Agreement
or to perform its covenants and agreements under the Merger Agreement or (b)
prevent
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the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code or as a pooling of interests for accounting and financial
reporting purposes;
(ix) other than in the ordinary course of business consistent with past
practice (but not pursuant to any outstanding letter of credit), incur any
indebtedness for borrowed money, assume, guarantee, endorse or otherwise as
an accommodation become responsible or liable for the obligations of any
other individual, corporation or other entity;
(x) materially restructure or materially change its investment
securities portfolio, through purchases, sales or otherwise, or the manner
in which the portfolio is classified or reported as of the date of the
Agreement; or
(xi) agree in writing or otherwise to take any of the foregoing actions
or engage in any activity, enter into any transaction or take or omit to
take any other act which would make any of the representations and
warranties of Trans Financial in the Merger Agreement untrue or incorrect in
any material respect if made anew after engaging in such activity, entering
into such transaction, or taking or omitting such other act.
WAIVER AND AMENDMENT
Any term, condition or provision of the Merger Agreement may be waived in
writing at any time by the party which is, or whose shareholders are, entitled
to the benefits thereof. The Merger Agreement may be amended by or on behalf of
the Star Board and the Trans Financial Board at any time before or after
Stockholder Approval, by an instrument in writing signed on behalf of each
party; PROVIDED that, after Stockholder Approval, no such modification may alter
or change the amount or kind of consideration to be received by holders of Trans
Financial Common Stock in the Merger.
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS. Pursuant to the Merger Agreement, Star will take such
steps as are necessary or required to integrate the employees of Trans Financial
and the Trans Financial subsidiaries in Star's employee benefit plans available
to similarly situated employees of Star and Star subsidiaries as soon as
practicable after the Effective Time, (i) with full credit for prior service
with Trans Financial or any of the Trans Financial subsidiaries for all purposes
other than determining benefit accruals under any tax-qualified defined benefit
plan, (ii) without any waiting periods, evidence of insurability or application
of any pre-existing condition limitation, and (iii) with full credit for claims
arising prior to the Effective Time for purposes of deductibles, out-of-pocket
maximums, benefit maximums and all other similar limitations for the applicable
plan year during which the Merger is consummated. Each of Star and Trans
Financial will use all reasonable efforts to insure that no amounts paid or
payable by Trans Financial, Trans Financial Subsidiaries or Star to or with
respect to any employee or former employee of Trans Financial or any Trans
Financial Subsidiary will fail to be deductible for United States federal income
tax purposes by reason of Section 280G of the Code.
Pursuant to the Merger Agreement, for a period of one (1) year from and
after the Effective Time, Star will continue Trans Financial's severance plans
and policies (or plans or policies no less favorable) with respect to the
employees of Trans Financial and Trans Financial subsidiaries immediately prior
to the Effective Time, as such severance plans and policies are in effect
immediately prior to the Effective Time, and will honor all obligations of Trans
Financial thereunder. Further, Star and Trans Financial have agreed to establish
a supplemental employee severance program prior to the Effective Time to provide
up to $4 million of supplemental severance (in addition to any severance
provided for under Star's or Trans Financial's general severance policies) for
current employees of Trans Financial not party to an Employment Agreement as
described above.
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EMPLOYMENT AGREEMENTS. In connection with the execution of the Merger
Agreement, Star has entered into the Employment Agreements with Messrs. Berta,
Campbell, Cole, Davis, Norris and Matthews, which agreements are described
herein under the caption "THE MERGER--Interests of Certain Persons in the
Merger."
TRANS FINANCIAL STOCK OPTIONS. At the Effective Time, all rights with
respect to Trans Financial Stock Options that are outstanding at the Effective
Time, whether or not then exercisable, will be converted into and become rights
with respect to Star Common Stock, and Star will assume each Trans Financial
Stock Option in accordance with the terms of the Trans Financial stock option
plan under which it was issued and the stock option agreement by which it is
evidenced. From and after the Effective Time, (i) each Trans Financial Stock
Option assumed by Star will be exercisable solely for shares of Star Common
Stock, (ii) the number of shares of Star Common Stock subject to each Trans
Financial Stock Option will be equal to the number of shares of Trans Financial
Common Stock subject to such Trans Financial Stock Option immediately prior to
the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole share of Star Common Stock and (iii) the per share exercise price under
each Trans Financial Stock Option shall be adjusted by dividing the per share
exercise price under such Trans Financial Stock Option by the Exchange Ratio and
rounding up to the nearest cent; PROVIDED, HOWEVER, that each Trans Financial
Stock Option shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction subsequent to the Effective Time.
The foregoing assumption shall be undertaken by Star in a manner that will
comply with Section 424(a) of the Code, as to any Trans Financial Stock Option
that is an "incentive stock option." The holder of a Trans Financial Stock
Option which is converted into an option with respect to Star Common Stock will
not recognize gain or loss solely as a result of such conversion.
Pursuant to the Merger Agreement, Star has agreed to file within 30 days
after the Effective Time a registration statement on Form S-3 or Form S-8, as
the case may be (or any successor or other appropriate forms), with respect to
the shares of Star Common Stock subject to the Trans Financial Stock Options
assumed as described above, and shall use its reasonable efforts to maintain the
effectiveness of such registration statements (and maintain the current status
of the prospectus or prospectuses contained therein) for so long as such options
remain outstanding.
Certain executive officers of Trans Financial, including certain executive
officers who are directors, currently hold Trans Financial Stock Options which
will be converted into rights with respect to Star Common Stock as described
above. See "THE MERGER--Interests of Certain Persons in the Merger."
TRANS FINANCIAL EMPLOYEE STOCK OWNERSHIP PLAN. Pursuant to the Merger
Agreement Trans Financial may cause the Employee Stock Ownership Plan of Trans
Financial (the "Trans Financial ESOP") to allocate, prior to the Effective Time,
to participants in the Trans Financial ESOP the maximum number of currently
unallocated shares of Trans Financial Common Stock allowable under Section 415
of the Code. Except as provided in the following paragraph, Trans Financial will
not take any action which would cause the Trans Financial ESOP to be
disqualified under Section 401(a) of the Code or to lose its status as an
employee stock ownership plan under Section 4975 of the Code.
On or before the Effective Time, Trans Financial will take steps reasonably
necessary to cause the Trans Financial ESOP to be terminated as of the Effective
Time. Any indebtedness of the Trans Financial ESOP shall be repaid from the
trust associated with the Trans Financial ESOP. A final allocation will be
prepared, and a request for a favorable determination letter on the termination
of the Trans Financial ESOP will be filed with the Internal Revenue Service. To
the maximum extent permitted by the rules and regulations of the Internal
Revenue Service, upon receipt of the favorable determination letter, the assets
of the Trans Financial ESOP will be distributed to the participants in due
course. At and after the Effective Time, no additional employees will become
eligible to participate in the Trans Financial ESOP and the assets of the Trans
Financial ESOP will be applied in accordance with its terms and the rules and
regulations of the Internal Revenue Service and the United States Department of
Labor.
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INDEMNIFICATION AND INSURANCE. Star has agreed that the Merger will not
affect or diminish any of Trans Financial's duties and obligations of
indemnification existing as of the Effective Time in favor of employees, agents,
directors or officers of Trans Financial or its subsidiaries arising by virtue
of its Certificate of Incorporation or Bylaws in the form in effect at the date
of the Merger Agreement or arising by operation of law or arising by virtue of
any contract, resolution or other agreement or document existing at the date of
the Merger Agreement, and such duties and obligations will continue in full
force and effect and be honored by Star for so long as they would (but for the
Merger) otherwise survive and continue in full force and effect. Star will
provide, or cause to be provided, for a period of not less than two years from
the Effective Time, a "tail" insurance and indemnification policy that provides
the officers and directors of Trans Financial immediately prior to the Effective
Time coverage no less favorable, in the aggregate, than as currently provided by
Star to its officers and directors.
STOCK OPTION AGREEMENT
Concurrently with the execution of the Merger Agreement, Trans Financial
executed and delivered the Stock Option Agreement, pursuant to which Trans
Financial granted to Star the Option. Trans Financial approved and entered into
the Stock Option Agreement to induce Star to enter into the Merger Agreement.
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger Agreement.
Consequently, certain aspects of the Stock Option Agreement may have the effect
of discouraging persons who might now or at any other time prior to the
Effective Time be interested in acquiring all of or a significant interest in
Trans Financial from considering or proposing such an acquisition, even if such
persons were prepared to offer to pay consideration to the Trans Financial
stockholders which had a higher current market price than the Merger
Consideration. The acquisition of Trans Financial (other than by Star) could
cause the Option to become exercisable. The existence of the Option could
significantly increase the cost to a potential acquiror of acquiring Trans
Financial compared to its cost had the Stock Option Agreement and the Merger
Agreement not been entered into. Such increased cost might discourage a
potential acquiror from considering or proposing an acquisition or might result
in a potential acquiror proposing to pay a lower per share price to acquire
Trans Financial than it might otherwise have proposed to pay. Moreover,
following consultation with their respective independent accountants, Trans
Financial and Star believe that the exercise or repurchase of the Option may
prohibit any other acquiror of Trans Financial from accounting for any
acquisition of Trans Financial using the pooling of interests accounting method
for a period of two years.
The Stock Option Agreement provides for the purchase by Star of 2,331,962
shares (the "Option Shares") of Trans Financial Common Stock at an exercise
price of $46.625 per share, payable in cash. The Option Shares, if issued
pursuant to the Stock Option Agreement, will in no event exceed 19.9% of the
Trans Financial Common Stock issued and outstanding without giving effect to the
issuance of any Trans Financial Common Stock subject to the Option.
The number of shares of Trans Financial Common Stock subject to the Option
will be increased or decreased, as appropriate, to the extent that additional
shares of Trans Financial Common Stock are either (i) issued or otherwise become
outstanding (other than pursuant to an exercise of the Option or as permitted
under the Merger Agreement) or (ii) redeemed, repurchased, retired or otherwise
cease to be outstanding after April 9, 1998, such that, after such issuance, the
number of Trans Financial Option Shares will continue to equal 19.9% of the
Trans Financial Common Stock then issued and outstanding without giving effect
to the issuance of Trans Financial Common Stock subject to the Option. In the
event of any change in, or distributions in respect of, the number of shares of
Trans Financial Common Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, subdivision, conversion, exchange of shares,
distribution on or in respect of such Trans Financial Common Stock that would be
prohibited by the Merger Agreement, or similar transaction, the type and number
of Option Shares
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purchasable upon exercise of the Option, and the applicable option price will
also be adjusted in such a manner as will fully preserve the economic benefits
of the Option.
The Stock Option Agreement provides that Star or any other holder or holders
of the Option (as used in this section, collectively, the "Holder") may exercise
the Option, in whole or in part, subject to regulatory approval, if both an
Initial Triggering Event (as defined herein) and a Subsequent Triggering Event
(as defined herein) has occurred prior to the occurrence of an Exercise
Termination Event (as defined herein); provided that the Holder has sent to
Trans Financial written notice of such exercise within 90 days following such
Subsequent Triggering Event (subject to extension as provided in the Option
Agreement). The terms Initial Triggering Event and Subsequent Triggering Event
generally relate to attempts by one or more third parties to acquire a
significant interest in Trans Financial. Any exercise of the Option will be
deemed to occur on the date such notice is sent.
(i) The term "Initial Triggering Event" means the occurrence of any of
the following events or transactions after April 9, 1998: (a) Trans
Financial or any subsidiary of Trans Financial, without Star's prior written
consent, enters into an agreement to engage in, or the Trans Financial Board
recommends that shareholders of the Trans Financial approve or accept, an
Acquisition Transaction (as defined herein) with any person or group; (b)
Trans Financial, without the Star's prior written consent, authorizes,
recommends, proposes or publicly announces its intention to authorize,
recommend or propose to engage in an Acquisition Transaction, or, other than
as permitted by the Merger Agreement, the Trans Financial Board publicly
withdraws or modifies, or publicly announces its intention to withdraw or
modify, in any manner adverse to the Star, its recommendation that its
shareholders approve the Merger Agreement in anticipation of engaging in an
Acquisition Transaction; (c) any person, other than Star, any subsidiary of
the Star or any Trans Financial subsidiary acting in a fiduciary capacity in
the ordinary course of business acquires beneficial ownership, or the right
to acquire beneficial ownership, of 10% or more of the outstanding shares of
Trans Financial Common Stock; (d) any person other than Star or any
subsidiary of Star makes a BONA FIDE proposal to Trans Financial or its
shareholders by public announcement or written communication that becomes
the subject of public disclosure to engage in an Acquisition Transaction;
(e) Trans Financial breaches any covenant or obligation in the Merger
Agreement after any person, other than Star or any subsidiaries of Star, has
proposed an Acquisition Transaction, and such breach (1) would entitle the
Star to terminate the Merger Agreement and (2) is not remedied prior to the
date of the Star's notice to Trans Financial of the exercise of the Option;
or (f) any person other than Star or any subsidiary of Star, other than in
connection with a transaction to which Star has given its prior written
consent, files an application or notice with the Federal Reserve Board, or
other United States federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(ii) For purposes of the Stock Option Agreement, the term "Acquisition
Transaction" means (a) a merger or consolidation, or any similar transaction
with Trans Financial or any of its Significant Subsidiaries (as defined in
Rule 1-02 of Regulation S-X of the Commission); (b) a purchase, lease or
other acquisition or assumption of all or substantially all of the assets or
deposits of Trans Financial or any of its Significant Subsidiaries; (c) a
purchase or other acquisition of securities representing 10% or more of the
voting power of Trans Financial; or (d) any substantially similar
transaction, PROVIDED, HOWEVER, that in no event will any merger,
consolidation, purchase or similar transaction involving only Trans
Financial and one or more of its subsidiaries or involving only any two or
more of such subsidiaries, be deemed to be an Acquisition Transaction,
PROVIDED that any such transaction is not entered into in violation of the
terms of the Merger Agreement.
(iii) The term "Subsequent Triggering Event" means the occurrence of
either of the following events or transactions after April 9, 1998: (a) the
acquisition by any person of beneficial ownership of 20% or more of the then
outstanding shares of Trans Financial Common Stock; or (b) the occurrence
42
<PAGE>
of the Initial Triggering Event described above in clause (i)(a), except
that the percentage referred to in clause (ii)(c) of the definition of
"Acquisition Transaction" set forth above will be 20%.
The Option will expire upon the occurrence of an "Exercise Termination
Event," which includes: (i) the Effective Time of the Merger; (ii) termination
of the Merger Agreement in accordance with the provisions thereof if such
termination occurs prior to the occurrence of an Initial Triggering Event,
except in the case of the termination of the Merger Agreement by Star as a
result of an uncured material breach by Trans Financial of any of its
representations, warranties, covenants or agreements unless the breach by Trans
Financial is non-volitional; or (iii) the date that is 12 months after the
termination of the Merger Agreement if such termination occurs after the
occurrence of an Initial Triggering Event or is a termination by Star as a
result of an uncured material breach by Trans Financial of any of its
representations, warranties, covenants or agreements unless the breach by Trans
Financial is non-volitional (provided that, if an Initial Triggering Event
continues or occurs beyond such termination of the Merger Agreement and prior to
the passage of such 12-month period, the Option will terminate 12 months from
the expiration of the last Initial Triggering Event to expire, but in no event
more than 18 months after such termination of the Merger Agreement).
As of the date of this Proxy Statement/Prospectus, to the best knowledge of
Star and Trans Financial, no Initial Triggering Event or Subsequent Triggering
Event has occurred.
Immediately prior to the occurrence of a Repurchase Event (as defined
herein), (i) following a request of a Holder, delivered prior to an Exercise
Termination Event, Trans Financial (or any successor thereto) will repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
the amount by which (a) the market/offer price (as defined herein) exceeds (b)
the option price, multiplied by the number of shares for which the Option may
then be exercised and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within 90 days of such occurrence (or such
later period as provided in Section 10 of the Stock Option Agreement), Trans
Financial will repurchase such number of the Option Shares from the Owner as the
Owner will designate at a price (the "Option Share Repurchase Price") equal to
the market/offer price multiplied by the number of Option Shares so designated.
The term "market/offer price" means the highest of (i) the price per share
of Trans Financial Common Stock at which a tender offer or exchange offer
therefor has been made, (ii) the price per share of Trans Financial Common Stock
to be paid by any third party pursuant to an agreement with Trans Financial,
(iii) the highest closing price for shares of Trans Financial Common Stock
within the six-month period immediately preceding the date the Holder gives
notice of the required repurchase of the Option or the Owner gives notice of the
required repurchase of Option Shares, as the case may be, or (iv) in the event
of a sale of all or a substantial portion of Trans Financial's assets, the sum
of the price paid in such sale for such assets and the current market value of
the remaining assets of Trans Financial as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may be,
and reasonably acceptable to Trans Financial, divided by the number of shares of
Trans Financial Common Stock outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
will be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Trans
Financial. However, if Trans Financial at any time after delivery of a notice of
repurchase as described in this paragraph is prohibited under applicable law or
regulation from delivering to the Holder and/or the Owner, as appropriate, the
Option Repurchase Price and the Option Share Repurchase Price, respectively, in
full, the Holder or Owner may revoke its notice of repurchase of the Option or
the Option Shares, either in whole or to the extent of the prohibition,
whereupon, in the latter case, Trans Financial will promptly (i) deliver to the
Holder and/or the Owner, as appropriate, that portion of the Option Repurchase
Price or the Option Share Repurchase Price that Trans Financial is not
prohibited from delivering and (ii) deliver, as appropriate, (a) to the Holder,
a new Stock Option Agreement evidencing the right of the Holder to purchase that
number of shares of Trans Financial Common Stock obtained by
43
<PAGE>
multiplying the number of shares of Trans Financial Common Stock for which the
surrendered Stock Option Agreement was exercisable at the time of delivery of
the notice of repurchase by a fraction, the numerator of which is the Option
Repurchase Price less the portion thereof theretofore delivered to the Holder
and the denominator of which is the Option Repurchase Price, and (b) to the
Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing. A "Repurchase Event" is deemed to have occurred (i) upon the
consummation of an Acquisition Transaction or (ii) upon the acquisition by any
person of the beneficial ownership of 50% or more of the then outstanding Trans
Financial Common Stock, PROVIDED that a Subsequent Triggering Event has occurred
prior to an Exercise Termination Event.
In the event that, prior to an Exercise Termination Event, Trans Financial
enters into any agreement (i) to consolidate with or merge into any person,
other than Star or one of its subsidiaries, such that Trans Financial is not the
continuing or surviving corporation of such consolidation or merger; (ii) to
permit any person, other than Star or one of its subsidiaries, to merge into
Trans Financial and Trans Financial is the continuing or surviving corporation,
but, in connection with such consolidation or merger, the outstanding shares of
Trans Financial Common Stock are changed into or exchanged for stock or other
securities of any other person or cash or any other property, or the then
outstanding shares of Trans Financial Common Stock after such merger will
represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged corporation; or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Star or any of
its subsidiaries, then, and in each such case, the agreement governing such
transaction must provide that, upon consummation of such transaction and upon
terms and conditions set forth in the Stock Option Agreement, the Option will be
converted into, or exchanged for, an option having substantially the same terms
as the Option (the "Substitute Option") to purchase securities, at the election
of the Holder, of either the acquiring person or any person that controls the
acquiring person. At the request of the Holder of the Substitute Option, the
issuer of the Substitute Option will repurchase it at a price, and subject to
such other terms and conditions, as set forth in the Stock Option Agreement.
Within 90 days after the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Date (subject to extension as provided
in the Stock Option Agreement), Star may request Trans Financial to prepare,
file and keep current with respect to the Option Shares, a registration
statement with the Commission. Trans Financial is required to use its reasonable
best efforts to cause such registration statement to become effective and then
to remain effective for 180 days or such shorter time as may be reasonably
necessary to effect such sales or other disposition of Option Shares. Star has
the right to demand two such registrations.
Neither Trans Financial nor Star may assign any of its rights and
obligations under the Stock Option Agreement or the Stock Option to any other
person without the express written consent of the other party, except that, if a
Subsequent Triggering Event occurs prior to an Exercise Termination Event, Star,
subject to the terms of the Stock Option Agreement, may assign, in whole or in
part, its rights and obligations thereunder, within 90 days (subject to
extension as provided in the Stock Option Agreement) of such Subsequent
Triggering Event; PROVIDED that, until the date 15 days after the date on which
the Federal Reserve Board approves an application by Star to acquire Option
Shares, Star may not assign its rights under the Option except in (i) a widely
dispersed public distribution, (ii) a private placement in which no one party
acquires the right to purchase in excess of 2% of the voting shares of Trans
Financial, (iii) an assignment to a single party for the purpose of conducting a
widely dispersed public distribution on Star's behalf, or (iv) any other manner
approved by the Federal Reserve Board.
Certain rights and obligations of Star and Trans Financial under the Stock
Option Agreement are subject to receipt of required regulatory approvals. The
approval of the Federal Reserve Board is required for the acquisition by Star of
more than 5% of the outstanding shares of Trans Financial Common Stock.
Accordingly, Star has included or will include in its applications with the
Federal Reserve Board a request for approval of the right of Star to exercise
its rights under the Stock Option Agreement, including its right to purchase
more than 5% of the outstanding shares of Trans Financial Common Stock. See "THE
MERGER--Regulatory Approval."
44
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited Pro Forma Condensed Combined Financial Information
and explanatory notes are presented to show the impact on the historical
financial position and results of operations of Star for the proposed
combination with Trans Financial and should be read in conjunction with the
consolidated financial statements, including the notes thereto, of Star and
Trans Financial which are either included or incorporated by reference in this
Proxy Statement/Prospectus. The unaudited Pro Forma Condensed Combined Financial
Information is presented for illustration purposes only in accordance with the
assumptions set forth below, and is not necessarily indicative of the operating
results or financial position that would have occurred if the Merger had been
consummated nor is it necessarily indicative of future operating results or
financial position of the combined enterprise.
In accordance with the terms of the Merger Agreement, each share of Trans
Financial Common Stock outstanding immediately prior to the Effective Time will
be converted into the right to receive 0.9003 of a share of Star Common Stock.
The unaudited Pro Forma Condensed Combined Financial Information reflects
the Merger using the pooling of interests method of accounting. Star's
acquisition of Great Financial Corporation ("Great Financial") was completed on
February 7, 1998 and is reflected in Star's March 31, 1998 unaudited balance
sheet. The unaudited Pro Forma Condensed Combined Balance Sheet assumes the
Merger was consummated on March 31, 1998. The unaudited Pro Forma Condensed
Combined Income Statements for the three months ended March 31, 1998 and the
year ended December 31, 1997 present the combined results of operations of Star,
Great Financial and Trans Financial as if the Merger and the Great Financial
acquisition had been effective January 1, 1997, after the effect of certain
adjustments described in the Notes to the unaudited Pro Forma Condensed Combined
Financial Information. The unaudited Pro Forma Condensed Combined Income
Statements for the years ended December 31, 1996 and 1995, present the combined
results of operations of only Star and Trans Financial as if the merger had
occurred at the beginning of each period presented.
The Great Financial acquisition was accounted for as a purchase and
accordingly, the results of the transaction and the operations have been
reflected in the financial statements of Star from the date of acquisition.
Under the purchase method, the purchase price is allocated to the assets and
liabilities acquired based on their estimated fair values at the time of the
acquisition. The allocation of the purchase price for Great Financial is
preliminary and may change as certain estimates and contingencies are finalized,
although any adjustments are not expected to be material.
The combined company expects to achieve substantial merger benefits
including operating cost savings and revenue enhancements. The pro forma
earnings, which do not reflect any potential savings or revenue enhancements
which are expected to result from the consolidation of operations of Star and
Trans Financial, are not indicative of the results of future operations. No
assurances can be given with respect to the ultimate level of expense savings
and revenue enhancements to be realized.
45
<PAGE>
STAR BANC CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TRANS PRO FORMA
STAR BANC FINANCIAL, PRO FORMA STAR BANC
CORPORATION INC. ADJUSTMENTS CORPORATION
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Cash and Due from Banks........................... $ 572,507 $ 84,651 $ -- $ 657,158
Money Market Instruments.......................... 42,574 99 -- 42,673
Loans Held for Sale............................... 290,496 189,511 -- 480,007
Investment Securities:
Available-for-Sale.............................. 2,052,273 262,465 -- 2,314,738
Held-to-Maturity................................ 146,007 -- -- 146,007
----------- ---------- ----------- -----------
Total Securities.............................. 2,198,280 262,465 -- 2,460,745
Loans Net of Unearned Interest.................... 9,666,629 1,556,665 -- 11,223,294
Allowance for Loan Losses................. 151,193 22,777 12,000(3) 185,970
----------- ---------- ----------- -----------
Net Loans..................................... 9,515,436 1,533,888 (12,000) 11,037,324
Bank Premises and Equipment....................... 176,435 38,843 (5,660)(3) 209,618
Acceptances--Customers' Liability................. 11,113 -- -- 11,113
Intangibles....................................... 578,515 8,806 -- 587,321
Mortgage Servicing Rights......................... 67,425 45,180 -- 112,605
Other Assets...................................... 403,222 40,361 -- 443,583
----------- ---------- ----------- -----------
Total Assets.................................. $13,856,003 $2,203,804 $ (17,660) $16,042,147
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
LIABILITIES:
Deposits:
Noninterest Bearing Deposits.................... $ 1,944,618 $ 254,151 $ -- $ 2,198,769
Interest Bearing Deposits....................... 8,430,980 1,370,282 -- 9,801,262
----------- ---------- ----------- -----------
Total Deposits................................ 10,375,598 1,624,433 -- 12,000,031
Short-Term Borrowings............................. 1,277,976 195,391 -- 1,473,367
Long-Term Debt.................................... 371,808 195,125 (1,679)B 565,254
Trust Preferred Securities........................ 148,593 -- -- 148,593
Acceptances Outstanding........................... 11,113 -- -- 11,113
Other Liabilities................................. 258,141 28,521 8,340(3) 295,002
----------- ---------- ----------- -----------
Total Liabilities............................. 12,443,229 2,043,470 6,661 14,493,360
----------- ---------- ----------- -----------
SHAREHOLDERS' EQUITY:
Common Stock...................................... 480,901 21,970 30,775A 533,646
Surplus........................................... 354,225 50,723 (30,775) A 374,173
Retained Earnings................................. 577,635 88,422 (26,000)(3) 640,057
Treasury Stock, at cost........................... (9,076) -- -- (9,076)
ESOP Shares Purchased with Debt................... -- (1,679) 1,679B --
Net Unrealized Gain/(Loss) on Securities
Available-for-Sale.............................. 9,089 898 -- 9,987
----------- ---------- ----------- -----------
Total Shareholders' Equity.................... 1,412,774 160,334 (24,321) 1,548,787
----------- ---------- ----------- -----------
Total Liabilities and Shareholders' Equity.... $13,856,003 $2,203,804 $ (17,660) $16,042,147
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>
- ------------------------
A Entry to adjust common stock and surplus for Star Banc Corporation shares
issued.
B Entry to reflect termination of the Trans Financial ESOP and retirement of
associated debt.
See accompanying notes to the unaudited pro forma condensed combined financial
information.
46
<PAGE>
STAR BANC CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
GREAT PRO FORMA
STAR BANC FINANCIAL PRO FORMA STAR BANC
CORPORATION CORPORATION ADJUSTMENTS CORPORATION
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans........................ $208,180 $ 16,386 $ (187)(4) $224,379
Interest and Fees on Loans Held For Sale.......... 3,269 -- -- 3,269
Interest on Investment Securities................. 28,188 4,950 (194)(4) 32,944
Other............................................. 1,336 29 -- 1,365
----------- ----------- ----------- -----------
Total Interest Income........................... 240,973 21,365 (381) 261,957
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest on Deposits.............................. 82,156 9,682 (419)(4) 91,419
Interest on Borrowings............................ 25,596 3,677 842(4) 30,115
----------- ----------- ----------- -----------
Total Interest Expense.......................... 107,752 13,359 423 121,534
----------- ----------- ----------- -----------
Net Interest Income........................... 133,221 8,006 (804) 140,423
Provision for Loan Losses......................... 10,775 2,333 -- 13,108
----------- ----------- ----------- -----------
Net Interest Income after Provision for Loan
Losses...................................... 122,446 5,673 (804) 127,315
----------- ----------- ----------- -----------
NONINTEREST INCOME:
Trust Income...................................... 16,078 -- -- 16,078
Service Charges on Deposits....................... 16,386 353 -- 16,739
Credit Card Income................................ 5,506 -- -- 5,506
Electronic Banking Income......................... 3,859 -- -- 3,859
Mortgage Banking Income........................... 8,441 2,506 (24)(4) 10,923
Investment Securities
Gains/(Losses)--Net............................. 176 -- -- 176
All Other Income.................................. 10,870 925 -- 11,795
----------- ----------- ----------- -----------
Total Noninterest Income........................ 61,316 3,784 (24) 65,076
----------- ----------- ----------- -----------
NONINTEREST EXPENSE:
Salaries.......................................... 36,582 3,215 -- 39,797
Pension and Other Employee Benefits............... 6,392 1,438 -- 7,830
Equipment Expense................................. 5,832 1,149 -- 6,981
Occupancy Expense--Net............................ 6,388 -- -- 6,388
All Other Expense................................. 38,399 3,848 1,262(4) 43,509
----------- ----------- ----------- -----------
93,593 9,650 1,262 104,505
Merger Related Charges............................ -- 28,844 (28,844)(5) --
----------- ----------- ----------- -----------
Total Noninterest Expense....................... 93,593 38,494 (27,582) 104,505
----------- ----------- ----------- -----------
INCOME BEFORE TAXES............................... 90,169 (29,037) 26,754 87,886
Income Tax........................................ 30,825 (8,048) 5,732(4)(5) 28,509
----------- ----------- ----------- -----------
NET INCOME...................................... $ 59,344 $(20,989) $ 21,022 $ 59,377
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic earnings per common share................... $ 0.65 $ 0.65
Diluted earnings per common share................. 0.63 0.63
Average common shares--basic...................... 91,834 91,834
Average common shares--diluted.................... 94,707 94,707
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined financial
information.
47
<PAGE>
STAR BANC CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
STAR BANC
PRO FORMA TRANS CORPORATION
STAR BANC FINANCIAL, PRO FORMA AND TRANS
CORPORATION INC. ADJUSTMENTS FINANCIAL, INC.
---------------- -------------- ----------- ----------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans.................... $ 224,379 $ 35,786 $ -- $ 260,165
Interest and Fees on Loans Held For Sale...... 3,269 2,468 -- 5,737
Interest on Investment Securities............. 32,944 3,817 -- 36,761
Other......................................... 1,365 7 -- 1,372
-------- ------- ----------- --------
Total Interest Income....................... 261,957 42,078 -- 304,035
-------- ------- ----------- --------
INTEREST EXPENSE:
Interest on Deposits.......................... 91,419 16,466 -- 107,885
Interest on Borrowings........................ 30,115 5,282 -- 35,397
-------- ------- ----------- --------
Total Interest Expense...................... 121,534 21,748 -- 143,282
-------- ------- ----------- --------
Net Interest Income....................... 140,423 20,330 -- 160,753
Provision for Loan Losses..................... 13,108 2,220 -- 15,328
-------- ------- ----------- --------
Net Interest Income after Provision for
Loan Losses............................. 127,315 18,110 -- 145,425
-------- ------- ----------- --------
NONINTEREST INCOME:
Trust Income.................................. 16,078 617 -- 16,695
Service Charges on Deposits................... 16,739 2,471 -- 19,210
Credit Card Income............................ 5,506 237 -- 5,743
Electronic Banking Income..................... 3,859 167 -- 4,026
Mortgage Banking Income....................... 10,923 4,610 -- 15,533
Investment Securities Gains/(Losses)--Net..... 176 150 -- 326
All Other Income.............................. 11,795 2,013 -- 13,808
-------- ------- ----------- --------
Total Noninterest Income.................... 65,076 10,265 -- 75,341
-------- ------- ----------- --------
NONINTEREST EXPENSE:
Salaries...................................... 39,797 7,939 -- 47,736
Pension and Other Employee Benefits........... 7,830 1,480 -- 9,310
Equipment Expense............................. 6,981 1,809 -- 8,790
Occupancy Expense--Net........................ 6,388 1,160 -- 7,548
All Other Expense............................. 43,509 6,107 -- 49,616
-------- ------- ----------- --------
104,505 18,495 -- 123,000
Merger Related Charges........................ -- -- -- --
-------- ------- ----------- --------
Total Noninterest Expense................... 104,505 18,495 -- 123,000
-------- ------- ----------- --------
INCOME BEFORE TAXES........................... 87,886 9,880 -- 97,766
Income Tax.................................... 28,509 3,306 -- 31,815
-------- ------- ----------- --------
NET INCOME.................................. $ 59,377 $ 6,574 $ -- $ 65,951
-------- ------- ----------- --------
-------- ------- ----------- --------
Basic earnings per common share............... $ 0.65 $ 0.57 $ 0.64
Diluted earnings per common share............. 0.63 0.55 0.62
Average common shares--basic.................. 91,834 11,597 102,383
Average common shares--diluted................ 94,707 11,910 105,538
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined financial
information.
48
<PAGE>
STAR BANC CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
STAR BANC GREAT FINANCIAL PRO FORMA STAR BANC
CORPORATION CORPORATION ADJUSTMENTS CORPORATION
----------- --------------- -------------- ----------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans........................ $709,196 $163,586 $ (2,264)(4) $ 870,518
Interest on Investment Securities................. 90,750 51,825 (2,333)(4) 140,242
Other............................................. 4,606 445 -- 5,051
----------- --------------- -------------- ----------------
Total Interest Income........................... 804,552 215,856 (4,597) 1,015,811
----------- --------------- -------------- ----------------
INTEREST EXPENSE:
Interest on Deposits.............................. 268,355 92,103 (5,023)(4) 355,435
Interest on Borrowings............................ 74,298 40,835 10,103(4) 125,236
----------- --------------- -------------- ----------------
Total Interest Expense.......................... 342,653 132,938 5,080 480,671
----------- --------------- -------------- ----------------
Net Interest Income........................... 461,899 82,918 (9,677) 535,140
Provision for Loan Losses......................... 53,614 5,823 -- 59,437
----------- --------------- -------------- ----------------
Net Interest Income after Provision for Loan
Losses...................................... 408,285 77,095 (9,677) 475,703
----------- --------------- -------------- ----------------
NONINTEREST INCOME:
Trust Income...................................... 56,661 -- -- 56,661
Service Charges on Deposits....................... 61,252 2,921 -- 64,173
Credit Card Income................................ 24,427 -- -- 24,427
Electronic Banking Income......................... 15,377 -- -- 15,377
Mortgage Banking Income........................... 12,832 26,488 (292)(4) 39,028
Investment Securities Gains/(Losses)--Net......... (4,239) 1,499 -- (2,740)
All Other Income.................................. 38,266 7,218 -- 45,484
----------- --------------- -------------- ----------------
Total Noninterest Income........................ 204,576 38,126 (292) 242,410
----------- --------------- -------------- ----------------
NONINTEREST EXPENSE:
Salaries and Benefits............................. 147,072 37,154 -- 184,226
Equipment Expense................................. 19,892 9,652 -- 29,544
Occupancy Expense--Net............................ 23,523 -- -- 23,523
All Other Expense................................. 131,276 28,063 15,140(4) 174,479
----------- --------------- -------------- ----------------
Total Noninterest Expense....................... 321,763 74,869 15,140 411,772
----------- --------------- -------------- ----------------
INCOME BEFORE TAXES............................... 291,098 40,352 (25,109) 306,341
Income Tax........................................ 96,344 14,054 (3,489)(4) 106,909
----------- --------------- -------------- ----------------
NET INCOME...................................... $194,754 $ 26,298 $(21,620) $ 199,432
----------- --------------- -------------- ----------------
----------- --------------- -------------- ----------------
Basic earnings per common share................... $ 2.26 $ 2.03 $ 2.08
Diluted earnings per common share................. 2.19 1.88 2.03
Average common shares--basic...................... 86,160 12,974 95,745
Average common shares--diluted.................... 88,877 13,997 98,462
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined financial
information.
49
<PAGE>
STAR BANC CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
STAR BANC
PRO FORMA TRANS CORPORATION
STAR BANC FINANCIAL, PRO FORMA AND TRANS
CORPORATION INC. ADJUSTMENTS FINANCIAL, INC.
------------ ------------- ----------- -------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans....................... $ 870,518 $ 146,284 $ -- $ 1,016,802
Interest on Investment Securities................ 140,242 15,117 -- 155,359
Other............................................ 5,051 10 -- 5,061
------------ ------------- ----------- -------------------
Total Interest Income.......................... 1,015,811 161,411 -- 1,177,222
------------ ------------- ----------- -------------------
INTEREST EXPENSE:
Interest on Deposits............................. 355,435 64,389 -- 419,824
Interest on Borrowings........................... 125,236 16,811 -- 142,047
------------ ------------- ----------- -------------------
Total Interest Expense......................... 480,671 81,200 -- 561,871
------------ ------------- ----------- -------------------
Net Interest Income.......................... 535,140 80,211 -- 615,351
Provision for Loan Losses........................ 59,437 9,500 -- 68,937
------------ ------------- ----------- -------------------
Net Interest Income after Provision for Loan
Losses..................................... 475,703 70,711 -- 546,414
------------ ------------- ----------- -------------------
NONINTEREST INCOME:
Trust Income..................................... 56,661 2,475 -- 59,136
Service Charges on Deposits...................... 64,173 10,154 -- 74,327
Credit Card Income............................... 24,427 869 -- 25,296
Electronic Banking Income........................ 15,377 515 -- 15,892
Mortgage Banking Income.......................... 39,028 13,509 -- 52,537
Investment Securities Gains/(Losses)--Net........ (2,740) (356) -- (3,096)
All Other Income................................. 45,484 7,244 -- 52,728
------------ ------------- ----------- -------------------
Total Noninterest Income....................... 242,410 34,410 -- 276,820
------------ ------------- ----------- -------------------
NONINTEREST EXPENSE:
Salaries and Benefits............................ 184,226 34,931 -- 219,157
Equipment Expense................................ 29,544 6,799 -- 36,343
Occupancy Expense--Net........................... 23,523 4,660 -- 28,183
All Other Expense................................ 174,479 22,743 -- 197,222
------------ ------------- ----------- -------------------
Total Noninterest Expense...................... 411,772 69,133 -- 480,905
------------ ------------- ----------- -------------------
INCOME BEFORE TAXES.............................. 306,341 35,988 -- 342,329
Income Tax....................................... 106,909 12,055 -- 118,964
------------ ------------- ----------- -------------------
NET INCOME..................................... $ 199,432 $ 23,933 $ -- $ 223,365
------------ ------------- ----------- -------------------
------------ ------------- ----------- -------------------
Basic earnings per common share.................. $ 2.08 $ 2.09 $ 2.10
Diluted earnings per common share................ 2.03 2.04 2.04
Average common shares--basic..................... 95,745 11,432 106,294
Average common shares--diluted................... 98,462 11,722 109,272
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined financial
information.
50
<PAGE>
STAR BANC CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
STAR BANC
TRANS CORPORATION
STAR BANC FINANCIAL, PRO FORMA AND TRANS
CORPORATION INC. ADJUSTMENTS FINANCIAL, INC.
----------- -------------- ----------- ----------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans......................... $ 635,619 $ 131,466 $ -- $ 767,085
Interest on Investment Securities.................. 98,206 16,403 -- 114,609
Other.............................................. 1,700 66 -- 1,766
----------- -------------- ----------- --------
Total Interest Income............................ 735,525 147,935 -- 883,460
----------- -------------- ----------- --------
INTEREST EXPENSE:
Interest on Deposits............................... 262,675 59,795 -- 322,470
Interest on Borrowings............................. 54,651 13,271 -- 67,922
----------- -------------- ----------- --------
Total Interest Expense........................... 317,326 73,066 -- 390,392
----------- -------------- ----------- --------
Net Interest Income............................ 418,199 74,869 -- 493,068
Provision for Loan Losses.......................... 40,773 13,914 -- 54,687
----------- -------------- ----------- --------
Net Interest Income after Provision for Loan
Losses....................................... 377,426 60,955 -- 438,381
----------- -------------- ----------- --------
NONINTEREST INCOME:
Trust Income....................................... 46,917 1,955 -- 48,872
Service Charges on Deposits........................ 55,983 9,541 -- 65,524
Credit Card Income................................. 19,183 949 -- 20,132
Electronic Banking Income.......................... 10,231 207 -- 10,438
Mortgage Banking Income............................ 7,556 10,728 -- 18,284
Investment Securities Gains/(Losses)--Net.......... (2,451) 20 -- (2,431)
All Other Income................................... 33,103 6,289 -- 39,392
----------- -------------- ----------- --------
Total Noninterest Income......................... 170,522 29,689 -- 200,211
----------- -------------- ----------- --------
NONINTEREST EXPENSE:
Salaries and Benefits.............................. 141,271 38,509 -- 179,780
Equipment Expense.................................. 17,329 7,005 -- 24,334
Occupancy Expense--Net............................. 22,019 5,206 -- 27,225
All Other Expense.................................. 122,592 27,237 -- 149,829
----------- -------------- ----------- --------
303,211 77,957 -- 381,168
SAIF special assessment............................ 5,000 2,685 -- 7,685
----------- -------------- ----------- --------
Total Noninterest Expense........................ 308,211 80,642 -- 388,853
----------- -------------- ----------- --------
INCOME BEFORE TAXES................................ 239,737 10,002 -- 249,739
Income Tax......................................... 81,378 3,120 -- 84,498
----------- -------------- ----------- --------
NET INCOME....................................... $ 158,359 $ 6,882 $ -- $ 165,241
----------- -------------- ----------- --------
----------- -------------- ----------- --------
Basic earnings per common share.................... $ 1.79 $ 0.61 $ 1.67
Diluted earnings per common share.................. 1.75 0.60 1.64
Average common shares--basic....................... 88,544 11,347 99,093
Average common shares--diluted..................... 90,238 11,453 100,882
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined financial
information.
51
<PAGE>
STAR BANC CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
STAR BANC
TRANS CORPORATION
STAR BANC FINANCIAL, PRO FORMA AND TRANS
CORPORATION INC. ADJUSTMENTS FINANCIAL, INC.
----------- -------------- ----------- ----------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans......................... $ 586,416 $ 115,757 $ -- $ 702,173
Interest on Investment Securities.................. 122,939 17,650 -- 140,589
Other.............................................. 1,049 821 -- 1,870
----------- -------------- ----------- --------
Total Interest Income............................ 710,404 134,228 -- 844,632
----------- -------------- ----------- --------
INTEREST EXPENSE:
Interest on Deposits............................... 265,972 56,465 -- 322,437
Interest on Borrowings............................. 66,224 8,134 -- 74,358
----------- -------------- ----------- --------
Total Interest Expense........................... 332,196 64,599 -- 396,795
----------- -------------- ----------- --------
Net Interest Income............................ 378,208 69,629 -- 447,837
Provision for Loan Losses.......................... 25,101 5,260 -- 30,361
----------- -------------- ----------- --------
Net Interest Income after Provision for Loan
Losses....................................... 353,107 64,369 -- 417,476
----------- -------------- ----------- --------
NONINTEREST INCOME:
Trust Income....................................... 41,512 1,392 -- 42,904
Service Charges on Deposits........................ 43,870 8,472 -- 52,342
Credit Card Income................................. 15,118 1,001 -- 16,119
Electronic Banking Income.......................... 7,652 306 -- 7,958
Mortgage Banking Income............................ 2,362 7,853 -- 10,215
Investment Securities Gains/(Losses)--Net.......... 1,910 200 -- 2,110
All Other Income................................... 25,700 5,187 -- 30,887
----------- -------------- ----------- --------
Total Noninterest Income......................... 138,124 24,411 -- 162,535
----------- -------------- ----------- --------
NONINTEREST EXPENSE:
Salaries and Benefits.............................. 133,196 31,341 -- 164,537
Equipment Expense.................................. 16,284 6,126 -- 22,410
Occupancy Expense--Net............................. 22,059 4,836 -- 26,895
All Other Expense.................................. 114,675 23,746 -- 138,421
----------- -------------- ----------- --------
Total Noninterest Expense........................ 286,214 66,049 -- 352,263
----------- -------------- ----------- --------
INCOME BEFORE TAXES................................ 205,017 22,731 -- 227,748
Income Tax......................................... 68,414 7,416 -- 75,830
----------- -------------- ----------- --------
NET INCOME....................................... $ 136,603 $ 15,315 $ -- $ 151,918
----------- -------------- ----------- --------
----------- -------------- ----------- --------
Basic earnings per common share.................... $ 1.52 $ 1.36 $ 1.51
Diluted earnings per common share.................. 1.50 1.35 1.49
Average common shares--basic....................... 90,086 11,246 100,635
Average common shares--diluted..................... 91,247 11,356 101,895
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined financial
information.
52
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1--BASIS OF PRESENTATION
The unaudited Pro Forma Condensed Combined Financial Information has been
prepared assuming the Merger will be accounted for under the pooling of
interests method and is based on the historical consolidated financial
statements of Star and Trans Financial. Star and Trans Financial are in the
process of reviewing their respective accounting policies. As a result of this
review, it might be necessary to restate certain amounts in Star's or Trans
Financial's financial statements to conform to those accounting policies that
are most appropriate. Any such restatements are not expected to be material.
On February 7, 1998 Star completed the purchase of Great Financial for 70
percent stock and 30 percent cash. Star issued 9.5 million shares of Star Common
Stock and paid out $190 million in cash for a total value of $648 million for
this transaction. This transaction is structured as a tax-free exchange and has
been accounted for as a purchase. The pro forma adjustments for Great Financial
represent management's best estimates based on available information at this
time. The actual adjustments may differ from those reflected in the unaudited
Pro Forma Condensed Combined Financial Information as estimates are finalized,
although any adjustments are not expected to be material.
NOTE 2--SHAREHOLDERS' EQUITY
In the Merger, Star will exchange 0.9003 of a share of Star Common Stock for
each share of Trans Financial Common Stock. Trans Financial had 11,717,356
shares of common stock outstanding at March 31, 1998, which will be exchanged
for approximately 10,549,000 shares of Star Common Stock. The common stock in
the unaudited Pro Forma Condensed Combined Balance Sheet has been adjusted to
reflect the par value amount of the Star shares issued. Pro forma retained
earnings reflects an adjustment for estimated Merger related charges as
described in Note 3 below.
NOTE 3--MERGER RELATED CHARGES
In connection with the Merger, Star and Trans Financial expect to incur
pre-tax Merger related charges of approximately $40 million. These are expected
to include approximately $9 million in severance, change of control and
relocation payments, $4 million in occupancy and equipment charges (lease
termination costs, elimination of duplicate facilities and write-off of
equipment), $4 million in conversion costs and contract terminations, a $3
million commitment to establish a Foundation and $8 million in other Merger
costs (including legal and investment banking fees). Star currently intends to
provide up to an additional $12 million in allowance for loan losses as a charge
to earnings at the effective date. This additional loan loss provision is being
recorded in connection with a change in the management of Trans Financial
problem loans. These amounts and the related tax effect have been reflected in
the unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 1998
and have not been reflected in the unaudited Pro Forma Condensed Combined Income
Statements as they are not expected to have a continuing impact on the
operations of the combined company.
NOTE 4--GREAT FINANCIAL ACQUISITION
The historical balance sheet of Star as of March 31, 1998 includes the
acquisition of Great Financial, which occurred on February 7, 1998 and was
accounted for as a purchase transaction. The $190 million cash portion of the
purchase price represents 30 percent of the purchase price and was funded with
short-term borrowings. The unaudited Pro Forma Condensed Combined Income
Statements for the three months ended March 31, 1998 and the year ended December
31, 1997 reflect Great Financial's operating
53
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 4--GREAT FINANCIAL ACQUISITION (CONTINUED)
results and the impact of purchase accounting adjustments as if the transaction
occurred on January 1, 1997.
The purchase accounting and pro forma adjustments related to the merger with
Great Financial reflected in the unaudited Pro Forma Condensed Combined Income
Statements are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
--------------- -----------------
<S> <C> <C>
Interest income-
Amortization of investment securities....................................... $ (194) $ (2,333)
Amortization of loans....................................................... (187) (2,264)
Interest expense-
Amortization of CDs......................................................... (419) (5,023)
Amortization of long-term debt.............................................. (31) (372)
Interest expense on short-term borrowings to fund cash portion of purchase
price..................................................................... 873 10,475
Noninterest income-
Amortization of mortgage servicing rights................................... (24) (292)
Noninterest expense-
Amortization of identifiable intangibles and goodwill....................... 1,262 15,140
</TABLE>
Income tax expense on the pro forma adjustments is reflected using a 35% tax
rate.
The following assumptions were used in establishing the purchase accounting
adjustments for Great Financial included in the unaudited Pro Forma Condensed
Combined Income Statements.
SECURITIES--The securities premium is assumed to be amortized into interest
income on an effective interest method basis over the remaining estimated
maturities of the securities, approximately 9 years.
LOANS--The fair value adjustments are being amortized on a straight-line
basis over the estimated remaining maturities of the various loan types, ranging
from 3 to 13 years.
MORTGAGE SERVICING RIGHTS--The excess of fair value over carrying value is
amortized on an accelerated basis over the estimated maturity of the underlying
mortgages.
INTANGIBLES--Identifiable intangibles are amortized on a straight-line basis
over an average of 11 years based on the estimated lives of the deposits
acquired. Goodwill is amortized on a straight-line basis over 25 years.
CERTIFICATES OF DEPOSIT AND LONG-TERM DEBT--The fair value adjustments are
amortized on an effective interest method over the remaining maturities of the
deposits and debt.
54
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 5--MERGER RELATED CHARGES OF GREAT FINANCIAL
Included in Great Financial's results for January 1, 1998 through February
6, 1998, as shown in the unaudited Pro Forma Condensed Combined Income Statement
for the three months ended March 31, 1998, were the following merger related
charges incurred directly by Great Financial:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Severance and benefit payments......................................................................... $ 4,301
Contract termination payments.......................................................................... 4,847
Payout of nonqualified stock options................................................................... 14,244
Investment banking and legal fees...................................................................... 4,235
Other direct merger charges............................................................................ 1,217
---------
Total merger related charges......................................................................... $ 28,844
---------
---------
</TABLE>
Noninterest expense (and the related tax effect) in the unaudited Pro Forma
Condensed Combined Income Statement for March 31, 1998 was adjusted to exclude
the above one-time merger charges in the pro forma operating results.
55
<PAGE>
COMPARISON OF SHAREHOLDER RIGHTS
Upon the conversion of their shares of Trans Financial Common Stock into the
right to receive shares of Star Common Stock pursuant to the Merger, the
stockholders of Trans Financial, a Kentucky corporation, will become
shareholders of Star, an Ohio corporation. The following is a description of
Star capital stock, including the Star Common Stock to be issued in the Merger,
and a summary of the material differences between the rights of holders of Trans
Financial Common Stock and the rights of holders of Star Common Stock. These
differences arise in part from the differences between the KBCA and the Ohio
Law. Additional differences arise from the governing instruments of the two
companies (in the case of Trans Financial, the Trans Financial Articles of
Incorporation and the Trans Financial By-Laws, and, in the case of Star, the
Star Articles of Incorporation and the Star Regulations). Although it is
impractical to compare all of the aspects in which the KBCA and the Ohio Law and
the companies' governing instruments differ with respect to shareholders'
rights, the following discussion summarizes certain significant differences
between them.
DESCRIPTION OF STAR COMMON STOCK AND ATTACHED PREFERRED SHARE
PURCHASE RIGHTS
GENERAL. Star has authorized 200,000,000 shares of Star Common Stock and
1,000,000 shares of preferred stock, no par value ("Star Preferred Stock"). At
the Record Date, Star had shares of Star Common Stock issued and
outstanding and no shares of Star Preferred Stock issued and outstanding. Under
the Ohio Law, the Star Board may generally approve the issuance of authorized
shares of Star Common Stock and Star Preferred Stock without shareholder
approval.
The Star Board is also authorized to fix the number of shares and determine
the designation of any series of Star Preferred Stock and to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any series of Star Preferred Stock. The Star Board has designated and reserved
Series A Preferred Stock pursuant to the Star Preferred Share Purchase Rights
Plan defined and described below.
The existence of a substantial number of unissued and unreserved shares of
Star Common Stock and undesignated shares of Star Preferred Stock may enable the
Star Board to issue shares to such persons and in such manner as may be deemed
to have an antitakeover effect.
DIVIDENDS. The holders of the Star Common Stock are entitled to share
ratably in dividends when, as and if declared by the Star Board from funds
legally available therefor, after full cumulative dividends have been paid or
declared, and funds sufficient for the payment thereof set apart, on all series
of Star Preferred Stock ranking superior as to dividends to the Star Common
Stock.
The Star Board intends to maintain its present policy of paying quarterly
cash dividends on the Star Common Stock when justified by the financial
condition of Star and its subsidiaries. The declaration and amount of future
dividends will depend on circumstances existing at the time, including Star's
earnings, financial condition and capital requirements as well as regulatory
limitations, note and indenture provisions and such other factors as the Star
Board may deem relevant. The payment of dividends to Star by Star Bank, N.A. is
subject to extensive regulation by various state and federal regulatory
agencies. See "SUPERVISION AND REGULATION."
VOTING RIGHTS. Each holder of Star Common Stock has one vote for each share
held on matters presented for consideration by the shareholders. Holders of Star
Common Stock do not have a right to cumulate votes.
PREEMPTIVE RIGHTS. The holders of Star Common Stock have no preemptive
right to acquire any additional unissued shares or treasury shares of Star.
56
<PAGE>
LIQUIDATION RIGHTS. In the event of liquidation, dissolution or winding-up
of Star, whether voluntary or involuntary, the holders of Star Common Stock will
be entitled to share ratably in any of its assets or funds that are available
for distribution to its shareholders after the satisfaction of its liabilities
(or after adequate provision is made therefor) and after preferences on any
outstanding Star Preferred Stock.
ASSESSMENT AND REDEMPTION. Shares of Star Common Stock issuable in the
Merger will be, when issued, fully paid and nonassessable. Such shares do not
have any redemption provisions.
PREFERRED SHARE PURCHASE RIGHTS PLAN. One Star Right is attached to each
share of Star Common Stock. The Star Rights trade automatically with shares of
Star Common Stock, and become exercisable and will trade separately from the
Star Common Stock only if a person or group has acquired, or has the right to
acquire, beneficial ownership of 20% or more of the outstanding shares of Star
Common Stock, or upon commencement or announcement, or notice to Star, of intent
to make a tender offer for 30% or more of the outstanding shares of Star Common
Stock, or a holder of 10% or more of the outstanding shares of Star Common Stock
is declared an "Adverse Person" by the Star Board. Star is entitled to redeem
the Star Rights at a price of one cent per Star Right at any time before the
twentieth day following the occurrence of an event making such Star Right
exercisable. When exercisable, each Star Right will entitle the holder to buy
1/100 of a share of Star Series A Preferred Stock at an exercise price of
$100.00 per Star Right. In the event a person or group acquires beneficial
ownership of 20% or more of Star Common Stock, holders of Star Rights (other
than the acquiring person or group) may purchase Star Common Stock having a
market value of twice the then current exercise price of each Star Right. If
Star is acquired by any person or group after the Star Rights become
exercisable, each Star Right will entitle its holder to purchase stock of the
acquiring company having a market value of twice the current exercise price of
each Star Right. The Star Rights are designed to protect the interests of Star
and its shareholders against coercive takeover tactics. The purpose of the Star
Rights is to encourage potential acquirors to negotiate with the Star Board
prior to attempting a takeover and to give the Star Board leverage in
negotiating on behalf of all shareholders the terms of any proposed takeover.
The Star Rights may deter certain takeover proposals. The Star Rights, which can
be redeemed by the Star Board in certain circumstances, expire by their terms on
October 20, 1999.
CLASSIFICATION OF THE STAR BOARD. The Star Board is divided into three
classes, and the directors are elected by classes to three-year terms, so that
one of the three classes of the directors of Star will be elected at each annual
meeting of the shareholders. While this provision promotes stability and
continuity of the Star Board, classification of the Star Board may also have the
effect of decreasing the number of directors that could otherwise be elected at
each annual meeting of shareholders by a person who obtains a controlling
interest in the Star Common Stock and thereby could impede a change in control
of Star.
OTHER MATTERS. Star's Articles of Incorporation and Regulations also
contain provisions which: (i) require the affirmative vote of the holders of at
least 80% of the outstanding Star Common Stock and 50% of outstanding Star
Common Stock by shareholders other than the "related person" to approve certain
"business combinations" with "related persons" unless the Star Board first
approves such business combinations; and (ii) require an affirmative vote of at
least 80% of the outstanding Star Common Stock for the amendment, alteration,
change or repeal of any of the above provision; PROVIDED, HOWEVER, that, if
there is a "related person", such 80% vote must include the affirmative vote of
at least 50% of the outstanding Star Common Stock held by shareholders other
than the related person. Such provisions may be deemed to have an antitakeover
effect.
RESTRICTIONS ON RESALE OF STAR CAPITAL STOCK BY AFFILIATES;
AFFILIATE AGREEMENTS
STAR COMMON STOCK. Under Rule 145 of the Securities Act, certain of the
executive officers and all of the directors of Trans Financial, by virtue of
being affiliates of Trans Financial, will be limited in their right to resell
the stock so received in the Merger. Such officers and directors who desire to
resell the Star
57
<PAGE>
Common Stock so received must sell such stock either pursuant to an effective
registration statement under the Securities Act or in accordance with an
applicable exemption. In addition, officers and directors of Trans Financial who
become "affiliates" of Star following the Merger will be limited in their right
to resell the Star Common Stock received in the Merger.
Rule 145(d) under the Securities Act provides that persons deemed to be
affiliates of a company such as Star solely by virtue of having been affiliates
of a company such as Trans Financial prior to a transaction such as the Merger
may resell their stock pursuant to certain of the requirements of Rule 144 under
the Securities Act if such stock is sold within the first year after the receipt
thereof. After one year, if such person is not an affiliate of Star and if Star
is current with respect to its required public filings, a former affiliate of
Trans Financial may freely resell the stock received in the Merger without
limitation. Star has agreed to comply with the current information requirements
of Rule 144 for a period of two years following the Merger. After two years from
the issuance of the stock, if such person is not an affiliate of Star at the
time of sale and for at least three months prior to such sale, such person may
freely resell such stock, without limitation, regardless of the status of Star's
required public filings.
Trans Financial has agreed to deliver to Star a letter identifying all
persons whom Trans Financial believes to be, at the time the Merger Agreement is
submitted to a vote of the stockholders of Trans Financial, "affiliates" of
Trans Financial for purposes of Rule 145 under the Securities Act or for
determining the qualification of the Merger as a pooling of interests for
accounting and financial reporting purposes. Trans Financial has agreed to use
its reasonable best efforts to cause each person who is so identified as such an
"affiliate" to deliver to Star a written agreement providing, among other
things, that such person will not make any sale, transfer or other disposition
of such person's shares of Star Common Stock in violation of the Securities Act
or the rules and regulations promulgated thereunder. Further, the certificates
representing shares of Star Common Stock to be received by affiliates of Trans
Financial in the Merger will be legended as to the restrictions imposed upon
resale of such stock.
COMPARISON OF RIGHTS OF SHAREHOLDERS OF STAR AND STOCKHOLDERS
OF TRANS FINANCIAL
AMENDMENT OF CHARTER DOCUMENTS. The KBCA requires approval by holders of a
majority of the voting power of Trans Financial Common Stock in order to amend
the Trans Financial Articles of Incorporation to the extent such amendment would
create dissenters' rights, and a majority of votes cast with respect to all
other amendments. To amend an Ohio corporation's articles of incorporation, the
Ohio Law requires the approval of shareholders holding two-thirds of the voting
power of the corporation, or, in cases in which class voting is required, of
shareholders holding two-thirds of the voting power of such class, unless
otherwise specified in such corporation's articles of incorporation. The Star
Articles of Incorporation specify that the holders of a majority of the voting
power of Star may amend the Star Articles of Incorporation, except that
amendments to the number of and classification of directors, the indemnification
of officers and directors, business combination, nomination of directors and
requirement that shareholder action be taken at a shareholder meeting provisions
require the affirmative vote of 80% of the total voting power. The Trans
Financial Articles of Incorporation contain a similar 80% vote of of outstanding
capital stock to amend provisions relating to certain business combinations and
the number, classification and removal of directors. See "--Merger, Acquisitions
and Certain Other Transactions."
AMENDMENT AND REPEAL OF BY-LAWS AND REGULATIONS. Under the KBCA, a majority
of the votes cast by stockholders of a corporation and, except as provided in
the articles of incorporation or by stockholder action, the directors of the
corporation have the power to adopt, amend and repeal the by-laws of a
corporation. The Trans Financial Articles of Incorporation do not otherwise
provide.
The Ohio Law provides that only shareholders of a corporation have the power
to amend and repeal a corporation's code of regulations. The Star Regulations
may only be amended by the affirmative vote of a
58
<PAGE>
majority of the voting power represented by the outstanding voting stock of Star
present in person or by proxy at an annual or special meeting called for such
purpose.
CLASSIFICATION AND REMOVAL OF DIRECTORS. The KBCA provides that, unless the
articles of incorporation of a corporation provide otherwise, directors may be
removed from office, with or without cause, by a majority of the votes cast by
stockholders, except that no director may be removed if the votes of a
sufficient number of shares are cast against such director's removal, which, if
voted at an election of directors, would be sufficient to elect such director.
The Trans Financial Articles of Incorporation provides for a classified board of
nine to twenty directors (as determined by the Trans Financial Board, which is
not permitted to increase the total number of directors by more then two
directors in any year), with the result that directors serve for three year
terms and one third of the Trans Financial Board is elected annually, and that
directors may only be removed, with or without cause, by affirmative vote of at
least 80% of the voting power of all then-outstanding shares of capital stock of
Trans Financial entitled to vote in the election of directors.
The Ohio Law provides that, unless the governing documents of a corporation
provide otherwise, directors may be removed, with or without cause, by the
affirmative vote of the holders of a majority of the voting power of the
corporation with respect to the election of directors, except that, unless all
the directors or all the directors of a particular class are removed, no
individual director may be removed if the votes of a sufficient number of shares
are cast against such director's removal which, if voted at an election of all
the directors, or all the directors of a particular class, as the case may be,
would be sufficient to elect at least one director. Star has a classified board,
with the result that directors serve for three year terms and one-third of the
Star Board is elected annually. Directors of Star may be removed only for cause
by the affirmative vote of a majority of the voting power present at a meeting
of Star shareholders.
VACANCIES ON THE BOARD. The KBCA provides that, unless the articles of
incorporation of a corporation provide otherwise, vacancies and newly created
directorships resulting from a resignation or any increase in the authorized
number of directors may be filled by a majority of the directors then in office,
even though less than a quorum, or by the stockholders. The Trans Financial
Articles of Incorporation provide that any vacancy on the Trans Financial Board
that results from an increase in the number of directors may be filled only by
the vote of 80% of the directors then in office, even though less than a quorum.
Any director of any class elected to fill a vacancy shall have a term that shall
expire at the next annual meeting at which directors are elected.
The Ohio Law provides that, unless the governing documents of a corporation
provide otherwise, vacancies on the board of directors may be filled by a
majority of the remaining directors of a corporation. The Star Articles of
Incorporation provide that the remaining directors of the class may or in the
event that no directors of such class remain by the remaining directors of the
other two classes, in either case by a vote of majority of their number, fill
any vacancy for the unexpired term.
RIGHT TO CALL SPECIAL MEETINGS OF SHAREHOLDERS. The KBCA permits special
meetings of stockholders to be called by the board of directors, such other
persons, including stockholders, as the articles of incorporation or by-laws may
provide or by holders of at least 33 1/3% (or such higher or lower percentage as
is contained in the articles of incorporation) of the votes entitled to be cast
on any issue proposed to be considered at the special meeting. The Trans
Financial Articles of Incorporation provide that special meetings may be called
only by a majority of the directors then in office or by holders of not less
than 50% of all shares entitled to cast votes at the special meeting.
Under the Ohio Law, the holders of at least 25% of the outstanding shares of
a corporation, unless the corporation's regulations specify another percentage,
which may in no case be greater than 50%, the directors, by action at a meeting
or a majority of the directors acting without a meeting, the Chairman of the
Board, the President or, in the case of the President's death or disability, the
Vice President authorized to exercise the authority of the President have the
authority to call special meetings of shareholders. The
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Star Articles of Incorporation expressly provide that special meetings of Star
shareholders may be called by the Star Chief Executive Officer or by
shareholders holding 50% or more of the voting power of the then-outstanding
shares entitled to vote in an election of directors, taken together as a single
class.
SHAREHOLDER ACTION WITHOUT A MEETING. Under the KBCA and the Ohio Law,
unless otherwise provided in the governing documents, any action that may be
taken by shareholders at a meeting may be taken without a meeting with the
unanimous written consent of all shareholders entitled to vote thereat. The
Trans Financial Articles of Incorporation do not otherwise provide and the Star
Articles of Incorporation provide that action by shareholders may not be
effected by a consent in writing without a meeting.
CLASS VOTING. Under the KBCA and the Ohio Law, holders of a particular
class of shares are entitled to vote as a separate class if the rights of that
class are affected in certain respects by mergers, consolidations or amendments
to the articles of incorporation.
CUMULATIVE VOTING. Under the KBCA, stockholders have the right to vote
cumulatively in the election of directors, permitting each stockholder to vote
the number of shares owned thereby on the record date multiplied by the number
of directors to be elected, which votes may be cast for one or more of the
candidates as determined by the stockholder. Under the Ohio Law, unless the
articles of incorporation are amended to eliminate cumulative voting for
directors following their initial filing with the Ohio Secretary of State, each
shareholder has the right to vote cumulatively in the election of directors if
certain notice requirements are satisfied. The Star Articles of Incorporation
have been amended to eliminate the rights of the Star shareholders to vote
cumulatively in the election of directors.
PROVISIONS AFFECTING CONTROL SHARE ACQUISITIONS AND BUSINESS
COMBINATIONS. Chapter 1704 of the Ohio Law prohibits an interested shareholder
from engaging in a wide range of "business combinations." Under Chapter 1704 of
the Ohio Law an interested shareholder includes a shareholder who, directly or
indirectly, exercises or directs the exercise of 10% or more of the voting power
of the corporation. Chapter 1704 of the Ohio Law restrictions does not apply
under certain circumstances, including, but not limited to, the following: (i)
if directors of the corporation have approved the transactions or the interested
shareholder's acquisition of shares of the corporation prior to the date the
interested shareholder became a shareholder of the corporation, and (ii) if the
corporation, by action of its shareholders holding at least 66 2/3% of the
voting power of the corporation, adopts an amendment to its articles of
incorporation specifying that Chapter 1704 of the Ohio Law shall not be
applicable to the corporation.
Under Section 1701.831 of the Ohio Law, unless the articles of incorporation
or code of regulations of a corporation otherwise provide, any control share
acquisition of an "Issuing Public Corporation" can only be made with the prior
approval of the corporation's shareholders. A "control share acquisition" is
defined as any acquisition of shares of a corporation that, when added to all
other shares of that corporation owned by the acquiring person, would enable
that person to exercise levels of voting power in any of the following ranges:
at least 20% but less than 33 1/3%; at least 33 1/3 but less than 50%; or 50% or
more.
FAIR PRICE PROVISIONS. The Star Articles of Incorporation also include a
"fair price" provision that is designed to provide reasonable assurances to
shareholders that, in the event any shareholder or group of shareholders
acquires 20% or more of outstanding Star Common Stock (the "Acquiror") and then
seeks to acquire all or part of the remaining voting stock through a merger or
other transaction which would force a change or termination of the other
shareholders' ownership interests (a "Business Combination"), such other
shareholders must receive consideration not less than the greater of (i) the
highest price paid by the Acquiror in acquiring any of its 20% stock interest
and (ii) an amount which bears the same or a greater percentage relationship to
the market price of Star Common Stock immediately prior to the announcement of
such business combination as the highest per share price determined in clause
(i) above bears to the market price of Star Common Stock immediately prior to
the commencement of acquisition of Star Common Stock by such related person,
unless the Business Combination is approved either (a) by a majority of
directors, if prior to such acquisition, or by 75% of the directors, if after
such acquisition, or (b)
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by the affirmative vote of 80% of all the votes entitled to be cast by all
outstanding Star Common Stock and 50% of the votes entitled to be cast by all
holders of Star Common Stock held by shareholders other than the Acquiror (the
"Special Shareholder Vote").
This provision operates by requiring that, after an Acquiror emerges, any
Business Combination which has the effect of requiring shareholders to surrender
their shares must satisfy one of the following conditions:
(i) Fair Consideration to Shareholders. The terms of the Business
Combination must provide for payment of consideration which is the greater
of (i) the highest price paid to other shareholders by the Acquiror in
acquiring any of its 20% stock position and (ii) an amount which bears the
same or a greater percentage relationship to the market price of Star Common
Stock immediately prior to the announcement of such business combination as
the highest per share price determined in clause (i) above bears to the
market price of Star Common Stock immediately prior to the commencement of
acquisition of Star Common Stock by such related person, and must be
approved by shareholders as otherwise required by applicable law; or
(ii) Unrelated Director Approval. The Business Combination must be
approved as fair to shareholders by a majority of the directors who are not
affiliated with the Acquiror, if prior to such acquisition, 75% of the
directors who were directors before the Acquiror acquired its 20% stock
position or who were nominated or elected to succeed such directors by the
other unaffiliated directors and must be approved by shareholders as
otherwise required by applicable law, if after such acquisitions; or
(iii) Special Shareholder Vote. The Business Combination must be
approved by the Special Shareholder Vote.
Article Seventh of the Star Articles of Incorporation, which contains this
provision, may be amended by a vote of 80% of the votes entitled to be cast by
all holders of voting stock; PROVIDED, HOWEVER, that such vote must include at
least 50% of the outstanding Star Common Stock not owned by a "related person."
Chapter 1704 of the Ohio Law is similar to the "fair price" provision
contained in the Star Articles of Incorporation. The Ohio Law prohibits an
Issuing Public Corporation from engaging in a Chapter 1704 Transaction (as
defined herein) with an Interested Shareholder (as defined herein) for a period
of three years following the date on which the person becomes an Interested
Shareholder unless, prior to such date, the directors of the Issuing Public
Corporation approve either the Chapter 1704 Transaction or the acquisition of
shares pursuant to which such person became an Interested Shareholder. After the
initial three-year moratorium has expired, an Issuing Public Corporation may
engage in a Chapter 1704 Transaction if (i) the acquisition of shares pursuant
to which the person became an Interested Shareholder received the prior approval
of the board of directors of the Issuing Public Corporation, (ii) the Chapter
1704 Transaction is approved by the affirmative vote of the holders of shares
representing at least two-thirds of the voting power of the Issuing Public
Corporation and by the holders of at least a majority of voting shares which are
not beneficially owned by an Interested Shareholder or an affiliate or associate
of an Interested Shareholder or (iii) the Chapter 1704 Transaction meets certain
statutory tests designed to ensure that it be economically fair to all
shareholders.
For this purpose, an "Issuing Public Corporation" is any Ohio corporation
with 50 or more shareholders that has its principal place of business, principal
executive offices or substantial assets within the State of Ohio. Star currently
is an Issuing Public Corporation. An "Interested Shareholder" is any person who
is the beneficial owner of a sufficient number of shares to allow such person,
directly or indirectly, alone or with others, including affiliates and
associates, to exercise or direct the exercise of 10% of the voting power of the
Issuing Public Corporation. A "Chapter 1704 Transaction" includes any merger,
consolidation, combination or majority share acquisition (as defined herein)
between or involving an Issuing Public Corporation and an Interested Shareholder
or an affiliate or associate of an Interested Shareholder. A
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Chapter 1704 Transaction also includes certain transfers of property, dividends
and issuance or transfers of shares, from or by an Issuing Public Corporation or
a subsidiary of an Issuing Public Corporation to, with or for the benefit of an
Interested Shareholder or an affiliate or associated of an Interested
Shareholder unless such transaction is in the ordinary course of business of the
Issuing Public Corporation on terms no more favorable to the Interested
Shareholder than those acceptable to third parties as demonstrated by
contemporaneous transactions. Finally, Chapter 1704 Transactions include certain
transactions which (i) increase the proportionate share ownership of an
Interested Shareholder, (ii) result in the adoption of a plan or proposal for
the dissolution, winding up of the affairs or liquidation of the Issuing Public
Corporation if such plan is proposed by or on behalf of the Interested
Shareholder or (iii) pledge or extend the credit or financial resources of the
Issuing Public Corporation to or for the benefit of the Interested Shareholder.
MERGERS, ACQUISITIONS AND CERTAIN OTHER TRANSACTIONS. Other than as
required under Section 271B.12-210 of the KBCA, the KBCA requires approval of
mergers (other than so-called "parent-subsidiary" mergers), consolidations,
dispositions of all or substantially all of a corporation's assets and certain
other corporate actions by a majority of voting power of the corporation, unless
the articles of incorporation specify a different percentage. The Trans
Financial Articles of Incorporation do not provide for a different percentage,
except as provided under the "fair price" provision contained therein. The KBCA
does not require stockholder approval for majority share acquisitions, except
for "business combinations" subject to Section 27B.12-210 of the KBCA.
Under Ohio law, a merger or consolidation by an Ohio corporation generally
requires the affirmative vote of holders of shares representing at least
two-thirds of the shareholder voting power of the corporation unless the
corporation's articles of incorporation provide for approval by a different
proportion not less than a majority. The Star Articles of Incorporation
generally require only approval of a majority of the outstanding shares for such
transactions.
CONSTITUENCIES PROVISIONS. Section 1701.59 of the Ohio Law permits a
director, in determining what such director reasonably believes to be in the
best interests of the corporation, to consider, in addition to the interests of
the corporation's shareholders, any of the following: (i) the interests of the
corporation's employees, suppliers, creditors, and customers, (ii) the economy
of the state and nation, (iii) community and societal considerations, and (iv)
the long-term as well as short-term interests of the corporation and its
shareholders, including the possibility that these interests may be best served
by the continued independence of the corporation. The KBCA contains no
comparable provision.
RIGHTS OF DISSENTING SHAREHOLDERS. Under the KBCA, stockholders are
entitled to dissent and demand payment of the value of their shares of capital
stock as described herein under the caption "THE MERGER--Dissenters' Rights of
Stockholders of Trans Financial" and as set forth in Subtitle 13 of the KBCA, a
copy of which is attached as Annex C to this Proxy Statement/Prospectus.
Under the Ohio Law, dissenting shareholders are entitled to appraisal rights
in connection with the lease, sale, exchange, transfer or other disposition of
all or substantially all of the assets of a corporation and in connection with
certain amendments to the corporation's articles of incorporation. Shareholders
of an Ohio corporation being merged into or consolidated with another
corporation are also entitled to appraisal rights. In addition, shareholders of
an acquiring corporation are entitled to appraisal rights in any merger,
combination or majority share acquisition in which such shareholders are
entitled to voting rights. The Ohio Law provides shareholders of an acquiring
corporation with voting rights if the acquisition (a "majority share
acquisition") involves the transfer of shares of the acquiring corporation
entitling the recipients thereof to exercise one-sixth or more of the voting
power of such acquiring corporation immediately after the consummation of the
transaction. Under the Ohio Law, a shareholder's written demand must be
delivered to the corporation not later than ten days after the taking of the
vote on the matter giving rise to appraisal rights.
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DIVIDENDS. Both the KBCA and the Ohio Law provide that dividends may be
paid in cash, property or shares of a corporation's capital stock. The KBCA
provides that, subject to any restrictions contained in the articles of
incorporation, a Kentucky corporation may make distributions to its shareholders
so long as, after giving effect thereto, the corporation would be able to pay
its debts as they become due in the usual course of business and the
corporation's total assets are equal to or greater than the sum of its total
liabilities plus the amount that would be needed, if the corporation were to be
dissolved, to satisfy the preferential rights upon dissolution of shareholders
whose preferential rights are superior to those receiving the distribution.
The Ohio Law provides that a corporation may pay dividends out of surplus
and must notify its shareholders if a dividend is paid out of capital surplus.
PREEMPTIVE RIGHTS OF SHAREHOLDERS. The KBCA provides that no stockholder
shall have any preemptive rights to purchase additional securities of the
corporation unless the articles of incorporation expressly grant such rights.
The Trans Financial Articles of Incorporation do not provide for preemptive
rights.
The Ohio Law provides that, subject to certain limitations and conditions
contained in the Ohio Law and unless the articles of incorporation provide
otherwise, shareholders shall have preemptive rights to purchase additional
securities of the corporation. The Star Articles of Incorporation expressly
eliminate any preemptive rights.
DIRECTOR LIABILITY AND INDEMNIFICATION. As permitted by the KBCA, Trans
Financial's Articles of Incorporation limit the liability of a director to Trans
Financial and its stockholders for monetary damages for a breach of his duties
as a director, except for liability with respect to the following actions: (i)
for any transaction in which the director's personal financial interest is in
conflict with the financial interest of the corporation or its stockholders;
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or are known by the director to violate law; (iii) actions involving
an improper distribution in violation of Section 271B.8-330; and (iv) for any
transaction from which the director derived an improper personal benefit.
Under the KBCA, a corporation has broad powers of indemnification. A person
may be indemnified for judgments, penalties, fines, settlement, and reasonable
expenses incurred by that person in proceedings in connection with the person's
official capacity in the corporation. Indemnification against reasonable legal
expenses incurred by a person in such a proceeding is mandatory when the person
is wholly successful in the defense of the proceeding. Trans Financial's By-Laws
require Trans Financial to indemnify its directors and officers (and permit by
action of the Trans Financial Board indemnification of employees and agents) to
the fullest extent permitted under the KBCA.
There is no comparable provision under the Ohio Law limiting the liability
of officers, employees or agents of the corporation, and the Star Articles of
Incorporation contain no such provision. However, Ohio Law has codified the
traditional business judgment rule. Ohio Law provides that the business judgment
presumption of good faith may only be overcome by clear and convincing evidence
that an action or failure to act was undertaken with deliberate intent to cause
injury to the corporation or with reckless disregard for the best interests of
the corporation. Further, Ohio Law provides specific statutory authority for
directors to consider, in addition to the interests of the corporation's
shareholders, other factors such as the interests of the corporation's
employees, suppliers, creditors and customers; the economy of the state and
nation; community and societal considerations; the long-term and short-term
interests of the corporation and its shareholders; and the possibility that
these interests may be best served by the continued independence of the
corporation.
Under the Ohio Law, Ohio corporations are permitted to indemnify directors,
officers, employees and agents within prescribed limits and must indemnify them
under certain circumstances. The Ohio Law does not authorize payment by a
corporation of judgments against a director, officer, employee or agent after a
finding of negligence or misconduct in a derivative suit absent a court order.
Indemnification is required,
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however, to the extent such person succeeds on the merits. In all other cases,
if it is determined that a director, officer, employee or agent acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation, indemnification is discretionary, except
as otherwise provided by a corporation's articles of incorporation, code of
regulations or by contract, except with respect to the advancement of expenses
of directors (as discussed in the next paragraph). The statutory right to
indemnification is not exclusive in Ohio, and Ohio corporation may, among other
things, purchase insurance to indemnify those persons.
The Ohio Law provides that a director (but not an officer, employee, or
agent) is entitled to mandatory advancement of expenses, including attorneys'
fees, incurred in defending any action, including derivative actions, brought
against the director, provided that the director agrees to cooperate with the
corporation concerning the matter and to repay the amount advanced if it is
proved by clear and convincing evidence that such director's act or failure to
act was done with deliberate intent to cause injury to the corporation or with
reckless disregard for the corporation's best interests.
The Star Regulations provide that Star shall indemnify directors, officers,
employees and agents to the fullest extent permitted by law against costs
incurred in connection with any threatened, pending or completed claim, action,
suit or proceeding because of such person's service as a director, officer,
employee or agent of Star.
SHAREHOLDER RIGHTS PLANS. Each of Star and Trans Financial has implemented
a shareholder rights plan with substantially similar terms. See "--Description
of Star Common Stock and Attached Preferred Share Purchase Rights."
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SUPERVISION AND REGULATION
GENERAL
As a bank holding company, Star is subject to regulation under the BHCA and
its examination and reporting requirements. Under the BHCA, a bank holding
company may not, directly or indirectly, acquire the ownership or control of
more than 5% of the voting shares or substantially all of the assets of any
company without the prior approval of (or, in the case of certain non-bank
companies, prior notice to) the Federal Reserve Board. In addition, bank holding
companies are generally prohibited under the BHCA from engaging in nonbanking
activities, subject to certain exceptions.
Star and its banking subsidiary are subject to supervision and examination
by applicable United States federal and state banking and other agencies. The
earnings of Star's banking subsidiary, and therefore the earnings of Star, are
affected by general economic conditions, management policies and the legislative
and governmental actions of various Regulatory Authorities, including the
Federal Reserve Board, the FDIC, the Comptroller of the Currency (the
"Comptroller") and various state financial institution regulatory agencies. In
addition, there are numerous governmental requirements and regulations that
affect the activities of Star and its banking subsidiary, Star Bank, N.A.
CERTAIN TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to which a bank holding
company, such as Star and certain of its nonbank subsidiaries, can borrow or
otherwise obtain credit from its bank subsidiaries. In general, these
restrictions require that any such extensions of credit must be on
non-preferential terms and secured by designated amounts of specified collateral
and be limited, as to any one of the holding company or such nonbank
subsidiaries, to 10% of the lending bank's capital stock and surplus, and as to
the holding company and all such nonbank subsidiaries in the aggregate, to 20%
of such capital stock and surplus.
PAYMENT OF DIVIDENDS
Star is a legal entity separate and distinct from its wholly-owned financial
institution and other subsidiaries. The principal source of Star's revenues is
dividends from its banking subsidiary. Various United States federal and state
statutory provisions limit the amount of dividends the banking subsidiary can
pay to Star without regulatory approval. The approval of United States federal
bank regulatory agencies, as appropriate, is required for any dividend if the
total of all dividends declared in any calendar year would exceed the total of
the institution's net profits, as defined by regulatory agencies, for such year
combined with its retained net profits for the preceding two years. In addition,
a national bank may not pay a dividend in an amount greater than its net profits
then on hand. The payment of dividends by Star Bank, N.A. may also be affected
by other factors, such as the maintenance of adequate capital.
In addition, if, in the opinion of the applicable United States federal bank
regulatory agency, a depository institution under its jurisdiction is engaged in
or is about to engage in an unsafe and unsound practice (which, depending on the
financial condition of the institution, could include the payment of dividends),
such agency may require, after notice and hearing, that the institution in
question cease and desist from such practice. The Comptroller has indicated that
paying dividends that would deplete a depository institution's capital base to
an inadequate level would be an unsafe and unsound practice. Moreover, an
insured depository institution may not pay any dividends if such payment would
cause it to become undercapitalized or once it is undercapitalized. See
"--Capital Adequacy." Also, the United States federal bank regulatory agencies
have issued policy statements which provide that depository institutions and
their holding companies should generally pay dividends only out of current
operating earnings.
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CAPITAL ADEQUACY
The Federal Reserve Board has issued standards for measuring capital
adequacy for bank holding companies. These standards are designed to provide
risk-responsive capital guidelines and to incorporate a consistent framework for
use by financial institutions operating in major international financial
markets. The banking regulators have issued standards for banks that are similar
to, but not identical with, the standards for bank holding companies.
In general, the risk-related standards require financial institutions and
financial institution holding companies to maintain certain capital levels based
on "risk-adjusted" assets, so that categories of assets with potentially higher
credit risk will require more capital backing than categories with lower credit
risk. In addition, banks and bank holding companies are required to maintain
capital to support off-balance-sheet activities such as loan commitments.
Under the risk-based capital standard, the minimum consolidated ratio of
total capital to risk-adjusted assets (including certain off-balance sheet
items, such as standby letters of credits) required by the Federal Reserve Board
for bank holding companies is currently 8%. At least one-half of the total
capital must be comprised of common equity, retained earnings, qualifying
noncumulative perpetual preferred stock, a limited amount of qualifying
cumulative perpetual preferred stock and minority interest in the equity
accounts of consolidated subsidiaries, less certain items such as goodwill and
certain other intangible assets ("Tier I Capital"). The remainder may consist of
qualifying hybrid capital instruments, perpetual debt, mandatory convertible
debt securities, a limited amount of subordinated debt, preferred stock that
does not qualify as Tier I Capital, and a limited amount of loan and lease loss
reserves. As of March 31, 1998, Star's Tier I Capital and total capital to risk
adjusted assets ratios were 9.03% and 12.57%, respectively. At March 31, 1998,
on a pro forma combined basis after giving effect to the Merger, Star's
estimated consolidated Tier I Capital and total capital to risk-adjusted assets
ratios would be 8.98% and 12.47%, respectively.
In addition to the risk-based standard, the Federal Reserve Board has
established minimum leverage ratio guidelines for bank holding companies. These
guidelines provide for a minimum ratio of Tier 1 Capital to adjusted average
total assets less goodwill and certain other intangibles (the "Leverage Ratio")
of 3% for bank holding companies that meet certain specified criteria, including
having the highest regulatory rating. Other bank holding companies generally are
required to maintain a Leverage Ratio of at least 4% to 5%.
The guidelines also provide that bank holding companies experiencing
internal growth or making acquisitions are expected to maintain strong capital
positions substantially above the minimum supervisory levels without significant
reliance on intangible assets. Furthermore, the Federal Reserve Board has
indicated that it will consider a "tangible Tier I Capital Leverage Ratio"
(deducting all intangibles) and other indicia of capital strength in evaluating
proposals for expansion or new activities.
As of March 31, 1998, Star's Leverage Ratio was 8.08%. At March 31, 1998, on
a pro forma combined basis after giving effect to the Merger, Star's estimated
consolidated Leverage Ratio would be 7.94%.
SUPPORT OF SUBSIDIARY BANK
Under Federal Reserve Board policy, Star is expected to act as a source of
financial strength to Star Bank, N.A. and to commit resources to support each of
the subsidiaries in circumstances where it may not choose to do so absent such a
policy. This support may be required at times when Star may not find itself able
to provide it. In addition, any capital loans by Star to any of its subsidiaries
would also be subordinate in right of payment to deposits and certain other
indebtedness of such subsidiary.
Consistent with the policy regarding bank holding companies serving as a
source of financial strength for their subsidiary banks, the Federal Reserve
Board has stated that, as a matter of prudent banking, a bank holding company
generally should not maintain a rate of cash dividends unless its net income
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available to common shareholders has been sufficient to fully fund the
dividends, and the prospective rate of earnings retention appears consistent
with the bank holding company's capital needs, asset quality and overall
financial condition.
FIRREA AND FDICIA
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") contains a cross-guarantee provision which could result, if Star were
to own an insured depository in addition to Star Bank, N.A., in insured
depository institutions owned by Star being assessed for losses incurred by the
FDIC in connection with assistance provided to, or the failure of, any other
insured depository institution owned by Star. Under FIRREA, failure to meet the
capital guidelines could subject a banking institution to a variety of
enforcement remedies available to United States federal regulatory authorities,
including the termination of deposit insurance by the FDIC.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
made extensive changes to the federal banking laws. FDICIA instituted certain
changes to the supervisory process, including provisions that mandate certain
regulatory agency actions against undercapitalized institutions within specified
time limits. FDICIA contains various other provisions that may affect the
operations of banks and savings institutions.
The prompt corrective action provision of FDICIA requires the United States
federal banking regulators to assign each insured institution to one of five
capital categories ("well capitalized," "adequately capitalized" or one of three
"undercapitalized" categories) and to take progressively more restrictive
actions based on the capital categorization, as specified below. Under FDICIA,
capital requirements would include a leverage limit, a risk-based capital
requirement and any other measure of capital deemed appropriate by the United
States federal banking regulators for measuring the capital adequacy of an
insured depository institution. All institutions, regardless of their capital
levels, are restricted from making any capital distribution or paying any
management fees that would cause the institution to fail to satisfy the minimum
levels for any relevant capital measure.
The FDIC and the Federal Reserve Board adopted capital-related regulations
under FDICIA. Under those regulations, a bank will be well capitalized if it:
(i) has a risk-based capital ratio of 10% or greater; (ii) has a ratio of Tier I
Capital to risk-adjusted assets of 6% or greater; (iii) has a ratio of Tier I
Capital to average assets of 5% or greater; and (iv) was not subject to an
order, written agreement, capital directive, or prompt corrective action
directive to meet and maintain a specific capital level for any capital measure.
An institution will be adequately capitalized if it was not well capitalized
and: (i) has a risk-based capital ratio of 8% or greater; (ii) has a ratio of
Tier I Capital to risk-adjusted assets of 4% or greater; and (iii) has a ratio
of Tier I Capital to average assets of 4% or greater (except that certain
associations rated "Composite 1" under the United States federal banking
agencies' CAMEL rating system may be adequately capitalized if their ratios of
core capital to average assets were 3% or greater). Star's subsidiary bank as of
December 31, 1997 was categorized as well capitalized.
FDICIA made extensive changes in existing rules regarding audits,
examinations and accounting. It generally requires annual on-site, full scope
examinations by each bank's primary United States federal regulatory. It also
imposed new responsibilities on management, the independent audit committee and
outside accountants to develop or approve reports regarding the effectiveness of
internal controls, legal compliance and off-balance-sheet liabilities and
assets.
DEPOSITOR PREFERENCE STATUTE
Legislation enacted in August 1993 provides a preference for deposits and
certain claims for administrative expenses and employee compensation against an
insured depository institution in the liquidation or other resolution of such an
institution by any receiver. Such obligations would be afforded
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priority over other general unsecured claims against such an institution,
including federal funds and letters of credit, as well as any obligation to
shareholders of such an institution in their capacity as such.
FDIC INSURANCE ASSESSMENTS
The Star Bank, N.A. is subject to FDIC deposit insurance assessments. The
FDIC has adopted a risk-based premium schedule. Each financial institution is
assigned to one of three capital groups--well capitalized, adequately
capitalized or undercapitalized--and further assigned to one of three subgroups
within a capital group on the basis of supervisory evaluations by the
institution's primary United States federal and, if applicable, state
supervisors, and on the basis of other information relevant to the institution's
financial condition and the risk posed to the applicable insurance fund. The
actual assessment rate applicable to a particular institution will, therefore,
depend, in part, upon the risk assessment classification so assigned to the
institution by the FDIC. See "--FIRREA and FDICIA."
FIRREA, adopted in August 1989 to provide for the resolution of insolvent
savings associations, required the FDIC to establish separate deposit insurance
funds--the Bank Insurance Fund (the "BIF") for banks and the Savings Association
Insurance Fund (the "SAIF") for savings associations. FIRREA also required the
FDIC to set deposit insurance assessments at such levels as would cause the BIF
and the SAIF to reach their "designated reserve ratios" of 1.25% of the deposits
insured by them within a reasonable period of time. Due to low costs of
resolving bank insolvencies in the last few years, BIF reached its designated
reserve ratio in May 1995. As a result, effective January 1, 1996, the FDIC
eliminated deposit insurance assessments (except for the minimum $2,000 payment
required by law) for banks that are well capitalized and well managed and
reduced the deposit insurance assessments for all other banks. As of January 1,
1996, the SAIF had not reached the designated reserve ratio. Star, which has
acquired substantial amounts of SAIF-insured deposits during the years from 1989
to the present, is required to pay the SAIF deposit insurance premiums on these
SAIF-insured deposits.
The Deposit Insurance Funds Act of 1996 (the "Funds Act"), enacted as part
of the Omnibus Appropriations Bill on September 30, 1996, required the FDIC to
take immediate steps to recapitalize the SAIF and to change the basis on which
funds are raised to make the scheduled payments on the FICO bonds issued in 1987
to replenish the Federal Savings and Loan Insurance Corporation. The new
legislation, combined with regulations issued by the FDIC immediately after
enactment of the Funds Act, provided for a special assessment in the amount of
65.7 basis points on SAIF-insured deposits held by depository institutions on
March 31, 1995 (the special assessment was required by the Funds Act to
recapitalize the SAIF to the designated reserve ratio of 1.25% of the deposits
insured by SAIF). Payments of this assessment were made in November 1996, but
were accrued by financial institutions in the third calendar quarter of 1996.
Institutions, such as Star and Trans Financial, that have deposits insured by
both the BIF and the SAIF ("Oakar Banks") were required to pay the special
assessment on 80% of their "adjusted attributable deposit amounts ("AADA"). In
addition, for purposes of future regular deposit insurance assessments, the
AADA, on which Oakar Banks pay assessments to the SAIF, was also reduced by 20%.
Commencing January 1, 1997, BIF-insured institutions will be responsible for a
portion of the annual carrying costs of the FICO bonds. Such institutions will
be assessed at 80% of the rate applicable to SAIF-insured institutions until
December 31, 1999. Effective January 1, 1997, the Funds Act also reduced ongoing
SAIF deposit insurance assessment rates to a range from $.064 to $.23 (from
previous rates of $.23 to $.31) per $100 of insured deposits and increased
ongoing BIF deposit insurance assessment rates to a range from $0 to $.013 per
$100 of insured deposits. Additionally, pursuant to the Funds Act, if the
reserves in BIF at the end of any semiannual assessment period exceed 1.25% of
insured deposits, the FDIC is required to refund the excess to the BIF-insured
institutions.
The Funds Act contemplates the merger of the SAIF and the BIF by 1999,
provided the consolidation/ merger of federal bank and thrift charters under
applicable law and regulation has been achieved by that time. Until such time,
however, depository institutions will continue to be prohibited from shifting
deposits from SAIF insurance coverage to BIF insurance coverage in an attempt to
avoid the higher SAIF
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assessments. The FDIC is required to issue regulations to guard against the
shifting of deposits from the SAIF to the BIF.
As of March 31, 1998, approximately 34% of Star Bank, N.A. deposits were
insured by the SAIF. On a pro forma combined basis, approximately 33% of Star's
banking subsidiaries' deposits would be insured by the SAIF.
INTERSTATE BANKING AND OTHER RECENT LEGISLATION
In September 1994, legislation was enacted that is expected to have a
significant effect in restructuring the banking industry in the United States.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Riegle-Neal") facilitates the interstate expansion and consolidation of
banking organizations by permitting (i) bank holding companies that are
adequately capitalized and managed, one year after enactment of the legislation,
to acquire banks located in states outside their home states regardless of
whether such acquisitions are authorized under the law of the host state, (ii)
the interstate merger of banks after June 1, 1997, subject to the right of
individual states to "opt in" or to "opt out" of this authority before that
date, (iii) banks to establish new branches on an interstate basis provided that
such action is specifically authorized by the law of the host state, (iv)
foreign banks to establish, with approval of the regulators in the United
States, branches outside their home states to the same extent that national or
state banks located in the home state would be authorized to do so, and (v)
banks to receive deposits, renew time deposits, close loans, service loans and
receive payments on loans and other obligations as agent for any bank or thrift
affiliate, whether the affiliate is located in the same state or a different
state. One effect of Riegle-Neal is to permit Star to acquire banks located in
any state and to permit bank holding companies located in any state to acquire
banks and bank holding companies in Ohio, including Star. Overall, Riegle-Neal
may have the effect of increasing competition and promoting geographic
diversification in the banking industry.
In addition, the Funds Act contains a variety of regulatory relief measures
affecting banks and thrifts, including provisions modifying some of the more
onerous requirements imposed under federal banking laws passed in the late 1980s
and early 1990s. Among the measures are provisions reducing certain regulatory
burdens imposed upon bank holding companies. For example, the Funds Act
eliminates the requirement that a bank holding company seeking to acquire
control of a thrift must file an application with the OTS and for approval to
become a unitary savings and loan holding company as a result of such
acquisition. The Funds Act also provides that a bank holding company owning or
controlling a thrift will no longer be subject to the supervision and regulation
of the OTS. The OTS will continue to regulate and supervise all thrifts acquired
in such transactions.
There also have been a number of recent legislative and regulatory proposals
designed to strengthen the United States federal deposit insurance system and to
improve the overall financial stability of the United States banking system, and
to provide for other changes in the bank regulatory structure, including
proposals to reduce regulatory burdens on banking organizations and to expand
the nature of products and services banks and bank holding companies may offer.
It is not possible to predict whether or in what form these proposals may be
adopted in the future, and, if adopted, what their effect will be on Star.
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LEGAL MATTERS
The validity of the Star Common Stock to be issued in the Merger will be
passed upon by Jennie Carlson, Esq., General Counsel and Secretary of Star who,
as of the Record Date, beneficially owned shares of Star Common Stock and
held options to acquire additional shares of Star Common Stock.
EXPERTS
The audited consolidated financial statements of Star as of December 31,
1997 and 1996, and for each of the three years in the period ended December 31,
1997, included in its Annual Report on Form 10-K, which statements are
incorporated by reference in this Proxy Statement/Prospectus, have been audited
by Arthur Andersen LLP, independent public accountants, as indicated by their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
The consolidated financial statements of Trans Financial, incorporated in
this Proxy Statement/ Prospectus by reference from the Annual Report on Form
10-K of Trans Financial for the year ended December 31, 1997, have been audited
by KPMG Peat Marwick LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Special Meeting of Stockholders of Trans Financial, will have the opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions.
OTHER MATTERS
The Trans Financial Board, at the date hereof, is not aware of any business
to be presented at the Special Meeting other than that referred to in the Notice
of Special Meeting of Stockholders and discussed herein. If any other matter
should properly come before the Special Meeting, the persons named as proxies
will have discretionary authority to vote the shares represented by proxies in
accordance with their discretion and judgment as to the best interests of Trans
Financial.
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SHAREHOLDER PROPOSALS
If the Merger is consummated, stockholders of Trans Financial who receive
Star Common Stock will become shareholders of Star at the Effective Time. Star
shareholders may submit to Star proposals for formal consideration at Star's
1999 Annual Meeting of Shareholders and inclusion in Star's Proxy Statement and
proxy for such meeting. All such proposals must be received in writing by the
Corporate Secretary at Star Banc Corporation, 425 Walnut Street, Cincinnati,
Ohio 45202, by November 2, 1998 in order to be considered for inclusion in
Star's Proxy Statement and proxy for Star's 1999 Annual Meeting of Stockholders.
In the event the Merger is not consummated, in order to be eligible for
inclusion in Trans Financial's proxy materials for Trans Financial's next Annual
Meeting of Stockholders, any stockholder proposal to take action at such meeting
must be in writing and received at Trans Financial's main office, 500 East Main
Street, Bowling Green, Kentucky 42101, no later than November 3, 1998. Any such
proposals shall be subject to the requirements of the proxy rules adopted under
the Exchange Act.
BY ORDER OF THE BOARD OF DIRECTORS
Jay B. Simmons
Secretary
Bowling Green, Kentucky
, 1998
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
STAR BANC CORPORATION
AS BUYER,
AND
TRANS FINANCIAL, INC.
AS SELLER
------------------------
DATED APRIL 9, 1998
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
1.1 The Merger..................................................................... A-1
1.2 Closing........................................................................ A-1
1.3 Effective Time................................................................. A-1
1.4 Additional Actions............................................................. A-2
1.5 Articles of Incorporation and Regulations...................................... A-2
1.6 Boards of Directors and Officers............................................... A-2
1.7 Conversion of Securities....................................................... A-2
1.8 Exchange Procedures............................................................ A-2
1.9 Dissenting Shares.............................................................. A-3
1.10 No Fractional Shares........................................................... A-4
1.11 Anti-Dilution Adjustments...................................................... A-4
1.12 Reservation of Right to Revise Transaction..................................... A-4
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
2.1 Organization and Authority..................................................... A-5
2.2 Subsidiaries................................................................... A-5
2.3 Capitalization................................................................. A-5
2.4 Authorization.................................................................. A-6
2.5 Seller Financial Statements.................................................... A-6
2.6 Seller Reports................................................................. A-7
2.7 Properties and Leases.......................................................... A-7
2.8 Taxes.......................................................................... A-7
2.9 Material Adverse Change........................................................ A-8
2.10 Commitments and Contracts...................................................... A-8
2.11 Litigation and Other Proceedings............................................... A-8
2.12 Insurance...................................................................... A-8
2.13 Compliance with Laws........................................................... A-9
2.14 Labor.......................................................................... A-10
2.15 Material Interests of Certain Persons.......................................... A-10
2.16 Allowance for Loan and Lease Losses; Nonperforming Assets...................... A-10
2.17 Employee Benefit Plans......................................................... A-11
2.18 Conduct of Seller to Date...................................................... A-12
2.19 Proxy Statement, etc........................................................... A-12
2.20 Registration Obligations....................................................... A-13
State Takeover Statutes; Seller's Articles of Incorporation; Seller Rights
2.21 Agreement...................................................................... A-13
2.22 Accounting, Tax and Regulatory Matters......................................... A-13
2.23 Brokers and Finders............................................................ A-13
2.24 Other Activities............................................................... A-13
2.25 Interest Rate Risk Management Instruments...................................... A-14
2.26 Accuracy of Information........................................................ A-14
2.27 Year 2000 Compliant............................................................ A-14
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
3.1 Organization and Authority..................................................... A-15
3.2 Capitalization of Buyer........................................................ A-15
3.3 Authorization.................................................................. A-15
3.4 Buyer Financial Statements..................................................... A-16
3.5 Buyer Reports.................................................................. A-16
3.6 Material Adverse Change........................................................ A-16
3.7 Compliance with Laws........................................................... A-16
3.8 Registration Statement, etc.................................................... A-17
3.9 Brokers and Finders............................................................ A-17
3.10 Litigation and Other Proceedings............................................... A-17
3.11 Taxes.......................................................................... A-18
3.12 Accounting, Tax and Regulatory Matters......................................... A-18
3.13 Accuracy of Information........................................................ A-18
3.14 Year 2000 Compliant............................................................ A-18
ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Businesses Prior to the Effective Time.............................. A-18
4.2 Forbearances................................................................... A-19
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access and Information......................................................... A-20
5.2 Registration Statement; Regulatory Matters..................................... A-20
5.3 Stockholder Approval........................................................... A-21
5.4 Current Information............................................................ A-21
5.5 Agreements of Affiliates....................................................... A-21
5.6 Expenses....................................................................... A-21
5.7 Securities Act and Exchange Act Filings........................................ A-21
5.8 Miscellaneous Agreements and Consents.......................................... A-21
5.9 Employee Benefits.............................................................. A-22
5.10 Seller Stock Options........................................................... A-22
5.11 Seller Employee Stock Ownership Plan........................................... A-23
5.12 D&O Indemnification............................................................ A-23
5.13 Press Releases................................................................. A-23
State Takeover Statutes; Seller's Articles of Incorporation; Seller Rights
5.14 Agreement...................................................................... A-23
5.15 Best Efforts................................................................... A-24
5.16 Insurance...................................................................... A-24
5.17 Conforming Entries............................................................. A-24
5.18 Charitable Foundation.......................................................... A-25
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation To Effect the Merger..................... A-25
6.2 Conditions to Obligations of Seller To Effect the Merger....................... A-26
6.3 Conditions to Obligations of Buyer To Effect the Merger........................ A-26
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination.................................................................... A-26
7.2 Effect of Termination.......................................................... A-28
7.3 Amendment...................................................................... A-28
7.4 Severability................................................................... A-29
7.5 Waiver......................................................................... A-29
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements..................... A-29
8.2 Notices........................................................................ A-29
8.3 Miscellaneous.................................................................. A-30
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EXHIBITS
Exhibit A Form of Stock Option Agreement
Exhibit B Form of Affiliate Letter
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into on April 9, 1998 by and between Star Banc Corporation, an Ohio corporation
("Buyer"), and Trans Financial, Inc., a Kentucky corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Buyer is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "Holding Company Act"); and
WHEREAS, Seller is a registered bank holding company under the Holding
Company Act; and
WHEREAS, the Board of Directors of Seller and the Executive Committee of the
Board of Directors of Buyer have approved the merger (the "Merger") of Seller
with and into Buyer pursuant to the terms and subject to the conditions of this
Agreement; and
WHEREAS, the parties intend the transactions contemplated hereby to qualify
as a "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), and as a
"pooling of interests" for accounting and financial reporting purposes; and
WHEREAS, as a condition to, and immediately prior to execution of this
Agreement, Buyer and Seller will enter into a stock option agreement (the "Stock
Option Agreement") in the form attached hereto as Exhibit A; and
WHEREAS, the parties desire to provide for certain undertakings, conditions,
representations, warranties and covenants in connection with the transactions
contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1. THE MERGER. Subject to the terms and conditions of this
Agreement, Seller shall be merged with and into Buyer in accordance with the
Kentucky Business Corporation Act (the "KBCA") and the Ohio General Corporation
Law (the "OGCL") and the separate corporate existence of Seller shall cease.
Buyer shall be the surviving corporation of the Merger (sometimes referred to
herein as the "Surviving Corporation") and shall continue its existence under
the name "Star Banc Corporation" and to be governed by the laws of the State of
Ohio.
Section 1.2. CLOSING. The closing (the "Closing") of the Merger shall take
place at 10:00 a.m., local time, on the date that the Effective Time (as defined
in Section 1.3) occurs, or at such other time, and at such place, as Buyer and
Seller shall agree (the "Closing Date").
Section 1.3. EFFECTIVE TIME. The Merger shall become effective on the date
and at the time (the "Effective Time") on which appropriate documents in respect
of the Merger are filed with the Secretaries of State of the State of Ohio and
the Commonwealth of Kentucky in such form as required by, and in accordance
with, the relevant provisions of the KBCA and OGCL. Subject to the terms and
conditions of this Agreement, the Effective Time shall occur on any such date on
or after July 1, 1998 as Buyer shall notify Seller in writing (such notice to be
at least five business days in advance of the Effective Time) but (i) not
earlier than the satisfaction of all conditions set forth in Section 6.1(a) and
6.1(b) (the "Approval Date") and (ii) subject to clause (i), not later than the
first business day of the first full calendar month commencing at least five
business days after the Approval Date. As soon as practicable following the
Effective Time, Buyer and Seller shall cause a certificate/articles or plan of
merger reflecting the terms of this Agreement to be delivered for filing and
recordation with other appropriate state or local officials in the State of Ohio
and the Commonwealth of Kentucky in accordance with the OGCL and the KBCA,
respectively.
<PAGE>
Section 1.4. ADDITIONAL ACTIONS. If, at any time after the Effective Time,
Buyer or the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances or any other acts are necessary or desirable to
(a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Seller or Buyer or (b) otherwise carry out the purposes
of this Agreement, Seller and Buyer and each of their respective officers and
directors, shall be deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such deeds, assignments
or assurances and to do all acts necessary or desirable to vest, perfect or
confirm title and possession to such rights, properties or assets in the
Surviving Corporation and otherwise to carry out the purposes of this Agreement,
and the officers and directors of the Surviving Corporation are authorized in
the name of Seller or otherwise to take any and all such action.
Section 1.5. ARTICLES OF INCORPORATION AND REGULATIONS. The Articles of
Incorporation and Regulations of Buyer in effect immediately prior to the
Effective Time shall be the Articles of Incorporation and Regulations of the
Surviving Corporation following the Merger until otherwise amended or repealed.
Section 1.6. BOARDS OF DIRECTORS AND OFFICERS. At the Effective Time, the
directors and officers of Buyer immediately prior to the Effective Time shall be
directors and officers, respectively, of the Surviving Corporation following the
Merger; such directors and officers shall hold office in accordance with the
Surviving Corporation's Articles of Incorporation and Regulations and applicable
law. Promptly following the Effective Time, one member of Seller's current Board
of Directors, to be mutually agreed upon by the parties prior to the Effective
Time, shall be invited to serve as an additional member of the Buyer's Board of
Directors.
Section 1.7. CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of Buyer, Seller or the holder of
any of the following securities:
(i) Each share of the common stock, par value $5.00 per share, of Buyer
("Buyer Common Stock") that is issued and outstanding immediately prior to the
Effective Time shall remain outstanding and shall be unchanged after the Merger
and thereafter shall together with shares of Buyer Common Stock issued in the
Merger constitute all of the issued and outstanding capital stock of the
Surviving Corporation; and
(ii) Each share of the common stock, no par value per share, of Seller
("Seller Common Stock") issued and outstanding immediately prior to the
Effective Time shall cease to be outstanding and, other than any Dissenting
Shares (as defined in Section 1.9) and any shares of Seller Common Stock held by
Seller, Buyer or any of their respective Subsidiaries, in each case other than
in a fiduciary capacity or as a result of debts previously contracted, shall be
converted into and become the right to receive 0.9003 (the "Exchange Ratio")
shares of Buyer Common Stock (the "Per Share Consideration").
Section 1.8. EXCHANGE PROCEDURES. (a) At or prior to the Effective Time,
Buyer shall deposit with Star Bank, N.A., as exchange agent (the "Exchange
Agent"), for the benefit of holders of certificates the Merger Consideration (as
defined below) (the Merger Consideration so deposited with the Exchange Agent
being the "Exchange Fund"). Seller shall deliver to Buyer, in a form reasonably
acceptable to Buyer, a complete list of Seller's shareholders (including their
respective names, addresses and TINs to the extent reflected in the records
maintained by Seller or its transfer agent) as of the record date for the
shareholder meeting to be called by Seller pursuant to Section 5.3 hereof and as
of the Effective Time, in each case which delivery shall be made as soon as
practicable after the respective date.
(b) Holders of record of certificates formerly representing shares of Seller
Common Stock (the "Certificates") shall be instructed to tender such
Certificates to Buyer pursuant to a letter of transmittal that Buyer shall
deliver or cause to be delivered to such holders. Such letters of transmittal
shall specify that risk of loss and title to Certificates shall pass only upon
delivery of such Certificates to Buyer.
(c) Subject to Section 1.10, after the Effective Time, each previous holder
of a Certificate that surrenders such Certificate with a duly executed letter of
transmittal to the Exchange Agent will be entitled
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to a certificate or certificates representing the number of full shares of Buyer
Common Stock into which the Certificate so surrendered shall have been converted
pursuant to this Agreement and any distribution theretofore declared and not yet
paid with respect to such shares of Buyer Common Stock, without interest.
(d) Buyer or the Exchange Agent shall accept Certificates upon compliance
with such reasonable terms and conditions as Buyer or the Exchange Agent may
impose to effect an orderly exchange thereof in accordance with customary
exchange practices. Certificates shall be appropriately endorsed or accompanied
by such instruments of transfer as Buyer or the Exchange Agent may require.
(e) Each outstanding Certificate shall until duly surrendered to Buyer or
the Exchange Agent be deemed to evidence ownership of the consideration into
which the stock previously represented by such Certificate shall have been
converted pursuant to this Agreement.
(f) Any portion of the Exchange Fund, including any earnings thereon, which
remains undistributed to the holders of Certificates for six months after the
Effective Time shall be delivered to Buyer, upon demand, and any holders of
Certificates who have not theretofore complied with this Section 1.8 shall
thereafter look only to Buyer for payment of their claim for the Merger
Consideration.
(g) After the Effective Time, holders of Certificates shall cease to have
rights with respect to the stock previously represented by such Certificates,
and their sole rights shall be to exchange such Certificates for the
consideration provided for in this Agreement. After the Effective Time, there
shall be no further transfer on the records of Seller of Certificates, and if
such Certificates are presented to Seller for transfer, they shall be cancelled
against delivery of the consideration provided therefor in this Agreement. Buyer
shall not be obligated to deliver the consideration to which any former holder
of Seller Common Stock is entitled as a result of the Merger until such holder
surrenders the Certificates as provided herein. No dividends declared will be
remitted to any person entitled to receive Buyer Common Stock under this
Agreement until such person surrenders the Certificate representing the right to
receive such Buyer Common Stock, at which time such dividends shall be remitted
to such person, without interest and less any taxes that may have been imposed
thereon. Certificates surrendered for exchange by any person constituting an
"affiliate" of Seller for purposes of Rule 145 of the Securities Act of 1933, as
amended (together with the rules and regulations thereunder, the "Securities
Act"), shall not be exchanged for certificates representing Buyer Common Stock
until Buyer has received a written agreement from such person in the form
attached as Exhibit B. Neither the Exchange Agent nor any party to this
Agreement nor any affiliate thereof shall be liable to any holder of stock
represented by any Certificate for any consideration paid to a public official
pursuant to applicable abandoned property, escheat or similar laws. Buyer and
the Exchange Agent shall be entitled to rely upon the stock transfer books of
Seller to establish the identity of those persons entitled to receive
consideration specified in this Agreement, which books shall be conclusive with
respect thereto. In the event of a dispute with respect to ownership of stock
represented by any Certificate, Buyer and the Exchange Agent shall be entitled
to deposit any consideration represented thereby in escrow with an independent
third party and thereafter be relieved with respect to any claims thereto.
Section 1.9. DISSENTING SHARES. (a) "Dissenting Shares" means any shares
of Seller Common Stock held by any holder who becomes entitled to payment of the
fair value of such shares under the KBCA. Any holders of Dissenting Shares shall
be entitled to payment for such shares only to the extent permitted by and in
accordance with the provisions of the KBCA; PROVIDED, HOWEVER, that if, in
accordance with the KBCA, any holder of Dissenting Shares shall forfeit such
right to payment of the fair value of such shares, such shares shall thereupon
be deemed to have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive the consideration provided in this
Article I.
(b) Seller shall give Buyer (i) prompt notice of any written objections to
the Merger and any written demands for the payment of the fair value of any
shares, withdrawals of such demands, and any other instruments served pursuant
to the KBCA received by Seller and (ii) the opportunity to direct all
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negotiations and proceedings with respect to such demands under the KBCA. Seller
shall not voluntarily make any payment with respect to any demands for payment
of fair value and shall not, except with the prior written consent of Buyer,
settle or offer to settle any such demands.
Section 1.10. NO FRACTIONAL SHARES. Notwithstanding any other provision of
this Agreement, neither certificates nor scrip for fractional shares of Buyer
Common Stock shall be issued in the Merger. Each holder who otherwise would have
been entitled to a fraction of a share of Buyer Common Stock shall receive in
lieu thereof cash (without interest) in an amount determined by multiplying the
fractional share interest to which such holder would otherwise be entitled by
the closing price of a share of Buyer Common Stock on the New York Stock
Exchange, Inc. ("NYSE") composite tape on the last full trading day prior to the
Effective Time. No such holder shall be entitled to dividends, voting rights or
any other rights in respect of any fractional share.
Section 1.11. ANTI-DILUTION ADJUSTMENTS. If prior to the Effective Time
Buyer shall declare a stock dividend or make distributions upon or subdivide,
split up, reclassify or combine or make similar changes to Buyer Common Stock or
exchange Buyer Common Stock for a different number or kind of shares or
securities or declare a dividend or make a distribution on Buyer Common Stock or
on any security convertible into Buyer Common Stock, or is involved in any
transaction resulting in any of the foregoing (including any exchange of Buyer
Common Stock for a different number or kind of shares or securities),
appropriate adjustment or adjustments will be made to the Exchange Ratio.
Section 1.12. RESERVATION OF RIGHT TO REVISE TRANSACTION. Buyer may with
Seller's consent (which will not be unreasonably withheld) at any time change
the method of effecting the acquisition of Seller or Seller's Subsidiaries by
Buyer and Seller shall cooperate in such efforts (including without limitation
(a) modifying the provisions of this Article I and (b) causing the merger of
Trans Financial Bank, National Association and/or Trans Financial Bank
Tennessee, National Association, each a national association and a wholly owned
subsidiary of Seller (the "Seller Banks") with any depository institution which
is a Subsidiary of Buyer (any such merger or other method of effecting the
acquisition, together with the Merger, being referred to herein as the
"Transactions")) if and to the extent Buyer deems such change to be desirable,
including without limitation to provide for a merger of Seller into a
wholly-owned subsidiary of Buyer in which such subsidiary of Buyer is the
surviving corporation; PROVIDED, HOWEVER, that no such change shall (A) alter or
change the amount or kind of consideration to be issued to holders of Seller
Common Stock as provided for in this Agreement (the "Merger Consideration"), (B)
adversely affect the tax treatment to Seller's stockholders as a result of
receiving the Merger Consideration, or (C) materially impede or delay the
consummation of the transactions contemplated by this Agreement.
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ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
Seller represents and warrants to and covenants with Buyer as follows:
Section 2.1. ORGANIZATION AND AUTHORITY. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Kentucky, is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified and has corporate power
and authority to own its properties and assets and to carry on its business as
it is now being conducted. Seller is registered as a bank holding company with
the Board of Governors of the Federal Reserve System (the "Board") under the
Holding Company Act. True and complete copies of the Articles of Incorporation
and the Bylaws of Seller and, to the extent requested in writing by Buyer, of
the articles of incorporation and bylaws of the Seller Subsidiaries (as defined
in Section 2.2), each as in effect on the date of this Agreement, have been
provided to Buyer.
Section 2.2. SUBSIDIARIES. Schedule 2.2 sets forth, among other things, a
complete and correct list of all of Seller's Subsidiaries (each a "Seller
Subsidiary" and collectively the "Seller Subsidiaries"), all outstanding Equity
Securities of each of which are owned directly or indirectly by Seller. "Equity
Securities" of an issuer means capital stock or other equity securities of such
issuer, options, warrants, scrip, rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities or rights convertible
into, shares of any capital stock or other Equity Securities of such issuer, or
contracts, commitments, understandings or arrangements by which such issuer is
or may become bound to issue additional shares of its capital stock or other
Equity Securities of such issuer, or options, warrants, scrip or rights to
purchase, acquire, subscribe to, calls on or commitments for any shares of its
capital stock or other Equity Securities. All of the outstanding shares of
capital stock of the Seller Subsidiaries are validly issued, fully paid and
nonassessable, and those shares owned by Seller are owned free and clear of any
lien, claim, charge, option, encumbrance, agreement, mortgage, pledge, security
interest or restriction (a "Lien") with respect thereto. Each of the Seller
Subsidiaries is a corporation or association duly incorporated or organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation or organization, and has corporate power and authority to own or
lease its properties and assets and to carry on its business as it is now being
conducted. Each of the Seller Subsidiaries is duly qualified to do business in
each jurisdiction where its ownership or leasing of property or the conduct of
its business requires it so to be qualified, except where the failure to so
qualify would not have a material adverse effect on the financial condition,
results of operations or business (collectively, the "Condition") of Seller and
its Subsidiaries, taken as a whole. Except for the Equity Securities of the
Seller Banks of which Seller owns 100%, Seller does not own beneficially,
directly or indirectly, more than 5% of any class of Equity Securities or
similar interests of any corporation, bank, business trust, association or
similar organization. The Seller Banks are chartered by the Office of the
Comptroller of the Currency. The deposits of Seller Bank are insured by the
Federal Deposit Insurance Corporation ("FDIC"). Neither Seller nor any Seller
Subsidiary holds any interest in a partnership or joint venture of any kind.
Section 2.3. CAPITALIZATION. The authorized capital stock of Seller
consists of (i) 50,000,000 shares of Seller Common Stock, of which, as of April
8, 1998, 11,718,405 shares were issued and outstanding, (ii) 50,000 shares of
Class A Preferred Stock, no par value ("Seller Class A Preferred Stock"), of
which, as of April 8, 1998, no shares were issued or outstanding, and (iii)
5,000,000 shares of Class B Preferred Stock, no par value ("Seller Class B
Preferred Stock" and, together with the Seller Class A Preferred Stock, the
"Seller Preferred Stock"), of which, as of April 8, 1998, no shares were issued
and outstanding. Seller has reserved the shares of Seller Class B Preferred
Stock for issuance upon exercise of Preferred Stock Purchase Rights under a
Rights Agreement, dated January 20, 1992 (the "Seller Rights Agreement"),
between Seller and Manufacturers Hanover, as Rights Agent. Pursuant to the
Seller Rights Agreement, each certificate representing one share of Seller
Common Stock also represents one Right (as defined in the Seller Rights
Agreement). As of April 8, 1998, Seller had reserved 173,118 shares of Seller
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Common Stock for issuance under Seller's stock option and incentive plans, a
list of which is set forth on Schedule 2.3 (the "Seller Stock Plans"), pursuant
to which options ("Seller Stock Options") covering 839,980 shares of Seller
Common Stock were outstanding as of April 8, 1998. Since April 1, 1998, no
Equity Securities of Seller have been issued other than shares of Seller Common
Stock which may have been issued upon the exercise of Seller Stock Options.
Except as set forth above and except pursuant to the Seller Rights Agreement,
there are no other Equity Securities of Seller outstanding. All of the issued
and outstanding shares of Seller Common Stock are validly issued, fully paid,
and nonassessable, and have not been issued in violation of any preemptive right
of any stockholder of Seller. Seller maintains a dividend reinvestment plan or
similar plan.
Section 2.4. AUTHORIZATION. (a) Seller has the corporate power and
authority to enter into this Agreement and, subject to the approval of this
Agreement by the stockholders of Seller, to carry out its obligations hereunder.
The only stockholder vote required for Seller to approve this Agreement is the
affirmative vote of the holders of at least a majority of the shares of Seller
Common Stock entitled to vote at a meeting called for such purpose. The
execution, delivery and performance of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby have been duly
authorized by the Board of Directors of Seller. Subject to approval by the
stockholders of Seller, this Agreement is a valid and binding obligation of
Seller enforceable against Seller in accordance with its terms.
(b) Except as set forth on Schedule 2.4B, neither the execution nor delivery
nor performance by Seller of this Agreement, nor the consummation by Seller of
the transactions contemplated hereby, nor compliance by Seller with any of the
provisions hereof, will (i) violate, conflict with, or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of, any material Lien
upon any of the material properties or assets of Seller or any Seller Subsidiary
under any of the terms, conditions or provisions of (x) its articles or
certificate of incorporation or bylaws or (y) any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Seller or any Seller Subsidiary is a party or by which it
may be bound, or to which Seller or any Seller Subsidiary or any of the material
properties or assets of Seller or any Seller Subsidiary may be subject, or (ii)
subject to compliance with the statutes and regulations referred to in paragraph
(c) of this Section 2.4, to the best knowledge of Seller, violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or regulation applicable
to Seller or any Seller Subsidiary or any of their respective material
properties or assets.
(c) Other than as set forth on Schedule 2.4C or in connection or compliance
with the provisions of the KBCA, the OGCL, the Securities Act, the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Exchange Act"), the securities or blue sky laws of the various states or
filings, consents, reviews, authorizations, approvals or exemptions required
under the Holding Company Act, and the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"), or any required approvals or filings pursuant to
any state statutes or regulations applicable to the Seller Banks with respect to
the transactions contemplated by this Agreement, no notice to, filing with,
exemption or review by, or authorization, consent or approval of, any public
body or authority is necessary for the consummation by Seller of the
transactions contemplated by this Agreement.
Section 2.5. SELLER FINANCIAL STATEMENTS. The consolidated balance sheets
of Seller and its Subsidiaries as of December 31, 1997, 1996 and 1995 and
related consolidated statements of income, cash flows and changes in
stockholders' equity for each of the three years in the three-year period ended
December 31, 1997, together with the notes thereto, audited by KPMG Peat Marwick
LLP and included in an annual report on Form 10-K as filed with the Securities
and Exchange Commission (the "SEC") (collectively, the "Seller Financial
Statements") have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP"), present fairly the
consolidated financial position of Seller and its Subsidiaries at the dates and
the consolidated results of operations, cash flows and changes in
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stockholders' equity of Seller and its Subsidiaries for the periods stated
therein and are derived from the books and records of Seller and its
Subsidiaries, which are complete and accurate in all material respects and have
been maintained in all material respects in accordance with applicable laws and
regulations. Neither Seller nor any of its Subsidiaries has any material
contingent liabilities that are not described in the financial statements
described above.
Section 2.6. SELLER REPORTS. Except as set forth in Schedule 2.6, since
January 1, 1995 each of Seller and the Seller Subsidiaries has filed all
material reports, registrations and statements, together with any required
material amendments thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy
statements, (ii) the Board, (iii) the FDIC, and (iv) any other federal, state,
municipal, local or foreign government, securities, banking, savings and loan,
insurance and other governmental or regulatory authority and the agencies and
staffs thereof (the entities in the foregoing clauses (i) through (iv) being
referred to herein collectively as the "Regulatory Authorities" and individually
as a "Regulatory Authority"). All such reports and statements filed with any
such Regulatory Authority are collectively referred to herein as the "Seller
Reports." As of its respective date, each Seller Report complied in all material
respects with all the rules and regulations promulgated by the applicable
Regulatory Authority and did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
Section 2.7. PROPERTIES AND LEASES. Except as may be reflected in the
Seller Financial Statements, except for any Lien for current taxes not yet
delinquent and except with respect to assets classified as real estate owned,
Seller and its Subsidiaries have good title free and clear of any material Lien
to all the real and personal property reflected in Seller's consolidated balance
sheet as of December 31, 1997 included in the most recent Seller Form 10-K and,
in each case, all real and personal property acquired since such date, except
such real and personal property as has been disposed of in the ordinary course
of business. All leases material to Seller or any Seller Subsidiary pursuant to
which Seller or any Seller Subsidiary, as lessee, leases real or personal
property, are valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any material existing default by Seller
or any Seller Subsidiary or any event which, with notice or lapse of time or
both, would constitute such a material default. All of Seller's and Seller
Subsidiaries' buildings, structures and equipment in regular use have been well
maintained and are in good and serviceable condition, normal wear and tear
excepted.
Section 2.8. TAXES. Seller and each Seller Subsidiary have timely filed or
will timely (including extensions) file all material tax returns required to be
filed at or prior to the Closing Date ("Seller Returns"). Each of Seller and its
Subsidiaries has paid, or set up adequate reserves on the Seller Financial
Statements for the payment of, all taxes required to be paid in respect of the
periods covered by such returns and has set up adequate reserves on the most
recent financial statements Seller has filed under the Exchange Act for the
payment of all taxes anticipated to be payable in respect of all periods up to
and including the latest period covered by such financial statements. Neither
Seller nor any Seller Subsidiary will have any material liability for any such
taxes in excess of the amounts so paid or reserves so established and no
material deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or definitely) against any of Seller
or any Seller Subsidiary which would not be covered by existing reserves.
Neither Seller nor any Seller Subsidiary is delinquent in the payment of any
material tax, assessment or governmental charge, nor, except as previously
disclosed, has it requested any extension of time within which to file any tax
returns in respect of any fiscal year which have not since been filed and no
requests for waivers of the time to assess any tax are pending. The federal and
state income tax returns of Seller and the Seller Subsidiaries have been audited
and finally settled by the Internal Revenue Service (the "IRS") or appropriate
state tax authorities or the relevant statute of limitations has expired for all
periods ended through December 31, 1993. There is no deficiency or refund
litigation or matter in controversy with respect to Seller Returns. Neither
Seller nor any Seller Subsidiary has extended or waived any statute of
limitations on the assessment of any tax due that is currently in effect.
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Section 2.9. MATERIAL ADVERSE CHANGE. Since December 31, 1997, there has
been no material adverse change in the Condition of Seller and its Subsidiaries,
taken as a whole, except as may have resulted or may result from changes to laws
and regulations or changes in economic conditions applicable to banking
institutions generally or in general levels of interest rates affecting banking
institutions generally.
Section 2.10. COMMITMENTS AND CONTRACTS. (a) Except as set forth on
Schedule 2.10A, neither Seller nor any Seller Subsidiary is a party or subject
to any of the following (whether written or oral, express or implied):
(i) any material agreement, arrangement or commitment (A) not made in
the ordinary course of business or (B) pursuant to which Seller or any of
its Subsidiaries is or may become obligated to invest in or contribute
capital to any Seller Subsidiary;
(ii) any agreement, indenture or other instrument not disclosed in the
Seller Financial Statements relating to the borrowing of money by Seller or
any Seller Subsidiary or the guarantee by Seller or any Seller Subsidiary of
any such obligation (other than trade payables or instruments related to
transactions entered into in the ordinary course of business by any Seller
Subsidiary, such as deposits and Fed Funds or similar borrowings);
(iii) any contract, agreement or understanding with any labor union or
collective bargaining organization;
(iv) any contract containing covenants which limit the ability of Seller
or any Seller Subsidiary to compete in any line of business or with any
person or which involve any restriction of the geographical area in which,
or method by which, Seller or any Seller Subsidiary may carry on its
business (other than as may be required by law or any applicable Regulatory
Authority);
(v) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K promulgated by the
SEC and which is not listed in the Seller Reports filed with the SEC; or
(vi) any lease with annual rental payments aggregating $500,000 or more.
(b) Neither Seller nor any Seller Subsidiary is in violation of its charter
documents or bylaws or in default under any material agreement, commitment,
arrangement, lease, insurance policy, or other instrument, whether entered into
in the ordinary course of business or otherwise and whether written or oral, and
there has not occurred any event that, with the lapse of time or giving of
notice or both, would constitute such a default, except, in all cases, where
such default would not have a material adverse effect on the Condition of Seller
and its Subsidiaries, taken as a whole.
Section 2.11. LITIGATION AND OTHER PROCEEDINGS. Except as set forth on
Schedule 2.11, neither Seller nor any Seller Subsidiary is a party to any
pending or, to the best knowledge of Seller, threatened claim, action, suit,
investigation or proceeding, or is subject to any order, judgment or decree,
except for matters which, in the aggregate, will not have, or reasonably could
not be expected to have, a material adverse effect on the Condition of Seller
and its Subsidiaries, taken as a whole, or which purports or seeks to enjoin or
restrain the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, there are no actions, suits, or proceedings pending
or, to the best knowledge of Seller, threatened against Seller or any Seller
Subsidiary or any of their respective officers or directors by any stockholder
of Seller or any Seller Subsidiary (or any former stockholder of Seller or any
Seller Subsidiary) or involving claims under the Securities Act, the Exchange
Act, the Community Reinvestment Act of 1977, as amended, or the fair lending
laws.
Section 2.12. INSURANCE. Each of Seller and its Subsidiaries has taken all
requisite action (including without limitation the making of claims and the
giving of notices) pursuant to its directors' and officers' liability insurance
policy or policies in order to preserve all rights thereunder with respect to
all matters (other than matters arising in connection with this Agreement and
the transactions contemplated hereby)
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occurring prior to the Effective Time that are known to Seller, except for such
matters which, individually or in the aggregate, will not have and reasonably
could not be expected to have a material adverse effect on the Condition of
Seller and its Subsidiaries, taken as a whole.
Section 2.13. COMPLIANCE WITH LAWS. (a) Seller and each of its Subsidiaries
have all permits, licenses, authorizations, orders and approvals of, and have
made all filings, applications and registrations with, all Regulatory
Authorities that are required in order to permit them to own or lease their
properties and assets and to carry on their business as presently conducted and
that are material to the business of Seller and its Subsidiaries; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect and, to the best knowledge of Seller, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current.
(b) Except for failures to comply or defaults which individually or in the
aggregate would not have a material adverse effect on the Condition of Seller
and its Subsidiaries, taken as a whole, (i) each of Seller and its Subsidiaries
has complied with all laws, regulations and orders (including without limitation
zoning ordinances, building codes, the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and securities, tax, environmental, civil rights,
and occupational health and safety laws and regulations and including without
limitation in the case of any Seller Subsidiary that is a bank or savings
association, banking organization, banking corporation or trust company, all
statutes, rules, regulations and policy statements pertaining to the conduct of
a banking, deposit-taking, lending or related business, or to the exercise of
trust powers) and governing instruments applicable to them and to the conduct of
their business, and (ii) neither Seller nor any Seller Subsidiary is in default
under, and no event has occurred which, with the lapse of time or notice or
both, could result in the default under, the terms of any judgment, order, writ,
decree, permit, or license of any Regulatory Authority or court, whether
federal, state, municipal, or local and whether at law or in equity. Except as
set forth in Schedule 2.13B, neither Seller nor any Seller Subsidiary is subject
to or reasonably likely to incur a liability as a result of its ownership,
operation, or use of any Property (as defined below) of Seller (whether directly
or, to the best knowledge of Seller, as a consequence of such Property being
part of the investment portfolio of Seller or any Seller Subsidiary) (A) that is
contaminated by or contains any hazardous waste, toxic substance, or related
materials, including without limitation asbestos, PCBs, pesticides, herbicides,
and any other substance or waste that is hazardous to human health or the
environment (collectively, a "Toxic Substance"), or (B) on which any Toxic
Substance has been stored, disposed of, placed, or used in the construction
thereof. "Property" of a person shall include all property (real or personal,
tangible or intangible) owned or controlled by such person, including without
limitation property under foreclosure, property held by such person or any
Subsidiary of such person in its capacity as a trustee and property in which any
venture capital or similar unit of such person or any Subsidiary of such person
has an interest. Except as set forth in Schedule 2.13B, no claim, action, suit,
or proceeding is pending against Seller or any Seller Subsidiary relating to
Property of Seller before any court or other Regulatory Authority or arbitration
tribunal relating to hazardous substances, pollution, or the environment, and
there is no outstanding judgment, order, writ, injunction, decree, or award
against or affecting Seller or any Seller Subsidiary with respect to the same.
Except for statutory or regulatory restrictions of general application, no
Regulatory Authority has placed any restriction on the business of Seller or any
Seller Subsidiary which reasonably could be expected to have a material adverse
effect on the Condition of Seller and its Subsidiaries, taken as a whole.
(c) From and after January 1, 1995, neither Seller nor any Seller Subsidiary
has received any notification or communication which has not been resolved from
any Regulatory Authority (i) asserting that any Seller or any Subsidiary of
Seller, is not in substantial compliance with any of the statutes, regulations
or ordinances that such Regulatory Authority enforces, except with respect to
matters which (A) are set forth on Schedule 2.13C or in any writing previously
furnished to Buyer and (B) reasonably could not be expected to have a material
adverse effect on the Condition of Seller and its Subsidiaries, taken as a
whole, (ii) threatening to revoke any license, franchise, permit or governmental
authorization
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that is material to the Condition of Seller and its Subsidiaries, taken as a
whole, including without limitation such company's status as an insured
depository institution under the Federal Deposit Insurance Act, or (iii)
requiring or threatening to require Seller or any of its Subsidiaries, or
indicating that Seller or any of its Subsidiaries may be required, to enter into
a cease and desist order, agreement or memorandum of understanding or any other
agreement restricting or limiting or purporting to direct, restrict or limit in
any manner the operations of Seller or any of its Subsidiaries, including
without limitation any restriction on the payment of dividends. No such cease
and desist order, agreement or memorandum of understanding or other agreement is
currently in effect.
(d) Neither Seller nor any Seller Subsidiary is required by Section 32 of
the Federal Deposit Insurance Act to give prior notice to any federal banking
agency of the proposed addition of an individual to its board of directors or
the employment of an individual as a senior executive officer.
Section 2.14. LABOR. No work stoppage involving Seller or any Seller
Subsidiary, is pending or, to the best knowledge of Seller, threatened. Neither
Seller nor any Seller Subsidiary is involved in, or, to the best knowledge of
Seller, threatened with or affected by, any labor dispute, arbitration, lawsuit
or administrative proceeding which reasonably could be expected to have a
material adverse affect on the Condition of Seller and its Subsidiaries, taken
as a whole. Employees of neither Seller nor any Seller Subsidiary are
represented by any labor union or any collective bargaining organization.
Section 2.15. MATERIAL INTERESTS OF CERTAIN PERSONS. (a) Except as set
forth in Seller's Proxy Statement for its 1998 Annual Meeting of Stockholders,
to the best knowledge of Seller, no officer or director of Seller or any
Subsidiary of Seller, or any "associate" (as such term is defined in Rule 14a-1
under the Exchange Act) of any such officer or director, has any material
interest in any material contract or property (real or personal, tangible or
intangible), used in, or pertaining to the business of, Seller or any Subsidiary
of Seller, which in the case of Seller is required to be disclosed by Item 404
of Regulation S-K promulgated by the SEC or in the case of any such Subsidiary
would be required to be so disclosed if such Subsidiary had a class of
securities registered under Section 12 of the Exchange Act.
(b) Each outstanding loan from Seller or any Seller Subsidiary to any
present officer, director, employee or any associate or related interest of any
such person which was or would be required under any rule or regulation to be
approved by or reported to Seller's or Seller Subsidiary's Board of Directors
("Insider Loans") was approved by or reported to the appropriate board of
directors in accordance with applicable law and regulations. Except as set forth
on Schedule 2.15B, no Insider Loan has a principal balance as of the date hereof
in excess of $250,000 or a line of credit in excess of $100,000.
Section 2.16. ALLOWANCE FOR LOAN AND LEASE LOSSES; NONPERFORMING ASSETS.
(a) The allowances for loan and lease losses contained in the Seller Financial
Statements were established in accordance with the past practices and
experiences of Seller and its Subsidiaries, and the allowance for loan losses
shown on the consolidated condensed balance sheet of Seller and its Subsidiaries
contained in the most recent Seller Report filed with the SEC is adequate in all
material respects under the requirements of GAAP to provide for possible losses
on loans (including without limitation accrued interest receivable) and credit
commitments (including without limitation stand-by letters of credit)
outstanding as of the date of such balance sheet.
(b) The aggregate amount of all Nonperforming Assets (as defined below) on
the books of Seller and its Subsidiaries did not exceed $25,543,000 as of
December 31, 1997. "Nonperforming Assets" shall mean (i) all loans and leases
(A) that are contractually past due 90 days or more in the payment of principal
and/ or interest, (B) that are on nonaccrual status, and (C) where the interest
rate terms have been reduced and/or the maturity dates have been extended and/or
otherwise restructured by Seller's Subsidiary subsequent to the agreement under
which the loan was originally created due to concerns regarding the borrower's
ability to pay in accordance with such initial terms, and (ii) all assets
classified as real estate acquired through foreclosure or repossession and other
assets acquired through foreclosure or repossession.
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Section 2.17. EMPLOYEE BENEFIT PLANS. (a) Except as set forth in Schedule
2.17A, neither Seller nor any Seller Subsidiary is a party to any existing
employment, management, consulting, deferred compensation, change-in-control or
other similar contract. Schedule 2.17A lists all pension, retirement,
supplemental retirement, savings, profit sharing, stock option, stock purchase,
stock ownership, stock appreciation right, deferred compensation, consulting,
bonus, medical, disability, workers' compensation, vacation, group insurance,
severance and other material employee benefit, incentive and welfare policies,
contracts, plans and arrangements, and all trust agreements related thereto,
maintained (currently or at any time in the last five years) by or contributed
to by Seller or any Seller Subsidiary in respect of any of the present or former
directors, officers, or other employees of and/or consultants to Seller or any
Seller Subsidiary (collectively, "Seller Employee Plans"). Seller has furnished
or made available to Buyer the following documents with respect to each Seller
Employee Plan: (i) a true and complete copy of all written documents comprising
such Seller Employee Plan (including amendments and individual agreements
relating thereto) or, if there is no such written document, an accurate and
complete description of the Seller Employee Plan; (ii) the most recent Form 5500
or Form 5500-C (including all schedules thereto), if applicable; (iii) the most
recent financial statements and actuarial reports, if any; (iv) the summary plan
description currently in effect and all material modifications thereof, if any;
and (v) the most recent Internal Revenue Service determination letter, if any.
Without limiting the generality of the foregoing, Seller has furnished or made
available to Buyer true and complete copies of each form of stock option grant
or stock option agreement that is outstanding under any stock option plan of
Seller or any Seller Subsidiary.
(b) All Seller Employee Plans have been maintained and operated materially
in accordance with their terms and with the material requirements of all
applicable statutes, orders, rules and final regulations, including without
limitation ERISA and the Internal Revenue Code. All contributions required to be
made to Seller Employee Plans have been made.
(c) With respect to each of the Seller Employee Plans which is a pension
plan (as defined in Section 3(2) of ERISA) (the "Pension Plans"): (i) each
Pension Plan which is intended to be "qualified" within the meaning of Section
401(a) of the Internal Revenue Code has been determined to be so qualified by
the Internal Revenue Service and, to the knowledge of Seller, such determination
letter may still be relied upon, except as disclosed in Schedule 2.17A, and each
related trust is exempt from taxation under Section 501(a) of the Internal
Revenue Code; (ii) the present value of all benefits vested and all benefits
accrued under each Pension Plan which is subject to Title IV of ERISA, valued
using the assumptions in the most recent actuarial report, did not, in each
case, as of the last applicable annual valuation date, exceed the value of the
assets of the Pension Plan allocable to such vested or accrued benefits; (iii)
to the best knowledge of Seller, there has been no "prohibited transaction," as
such term is defined in Section 4975 of the Internal Revenue Code or Section 406
of ERISA, which could subject any Pension Plan or associated trust, or the
Seller or any Seller Subsidiary, to any material tax or penalty; (iv) except as
set forth on Schedule 2.17C, no Pension Plan or any trust created thereunder has
been terminated, nor have there been any "reportable events" with respect to any
Pension Plan, as that term is defined in Section 4043 of ERISA on or after
January 1, 1985; and (v) no Pension Plan or any trust created thereunder has
incurred any "accumulated funding deficiency," as such term is defined in
Section 302 of ERISA (whether or not waived), except as disclosed in Schedule
2.17A. No Pension Plan is a "multiemployer plan" as that term is defined in
Section 3(37) of ERISA. Seller has no Pension Plan that is described in Section
4063(a) of ERISA (a "Multiple Employer Plan").
(d) Except as disclosed in Schedule 2.17D, neither Seller nor any Seller
Subsidiary has any liability for any post-retirement health, medical or similar
benefit of any kind whatsoever, except as required by statute or regulation.
(e) Neither Seller nor any Seller Subsidiary has any material liability
under ERISA or the Internal Revenue Code as a result of its being a member of a
group described in Sections 414(b), (c), (m) or (o) of the Internal Revenue
Code.
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(f) Except as set forth on Schedule 2.17F, neither the execution nor
delivery of this Agreement, nor the consummation of any of the transactions
contemplated hereby, will (i) result in any material payment (including without
limitation severance, unemployment compensation or golden parachute payment)
becoming due to any director or employee of Seller or any Seller Subsidiary from
any of such entities, (ii) materially increase any benefit otherwise payable
under any of the Seller Employee Plans or (iii) result in the acceleration of
the time of payment of any such benefit. Except as set forth in Schedule 2.17F,
no holder of an option to acquire stock of Seller has or will have at any time
through the Effective Time the right to receive any cash or other payment (other
than the issuance of stock of Seller) in exchange for or with respect to all or
any portion of such option. Seller shall use its best efforts to insure that no
amounts paid or payable by Seller, Seller Subsidiaries or Buyer to or with
respect to any employee or former employee of Seller or any Seller Subsidiary
will fail to be deductible for federal income tax purposes by reason of Section
280G of the Internal Revenue Code. No Seller Stock Option has an associated
"additional option right" or similar "re-load" feature.
Section 2.18. CONDUCT OF SELLER TO DATE. From and after January 1, 1998
through the date of this Agreement, except as set forth on Schedule 2.18 or
reflected in Seller Financial Statements: (i) Seller and the Seller Subsidiaries
have conducted their respective businesses in the ordinary and usual course
consistent with past practices; (ii) Seller has not issued, sold, granted,
conferred or awarded any of its Equity Securities (except shares of Seller
Common Stock upon exercise of Seller Stock Options), or any corporate debt
securities which would be classified under GAAP as long-term debt on the balance
sheets of Seller; (iii) Seller has not effected any stock split or adjusted,
combined, reclassified or otherwise changed its capitalization; (iv) Seller has
not declared, set aside or paid any dividend (other than its regular quarterly
or regular semi-annual common dividends) or other distribution in respect of its
capital stock, or purchased, redeemed, retired, repurchased, or exchanged, or
otherwise acquired or disposed of, directly or indirectly, any of its Equity
Securities, whether pursuant to the terms of such Equity Securities or
otherwise; (v) neither Seller nor any Seller Subsidiary has incurred any
material obligation or liability (absolute or contingent), except normal trade
or business obligations or liabilities incurred in the ordinary course of
business, or subjected to Lien any of its assets or properties other than in the
ordinary course of business consistent with past practice; (vi) neither Seller
nor any Seller Subsidiary has discharged or satisfied any material Lien or paid
any material obligation or liability (absolute or contingent), other than in the
ordinary course of business; (vii) neither Seller nor any Seller Subsidiary has
sold, assigned, transferred, leased, exchanged, or otherwise disposed of any of
its properties or assets other than for a fair consideration in the ordinary
course of business; (viii) except as required by contract or law, neither Seller
nor any Seller Subsidiary has (A) increased the rate of compensation of, or paid
any bonus to, any of its directors, officers, or other employees, except merit
or promotion increases in accordance with existing policy, (B) entered into any
new, or amended or supplemented any existing, employment, management,
consulting, deferred compensation, severance, or other similar contract, (C)
entered into, terminated, or substantially modified any of the Seller Employee
Plans or (D) agreed to do any of the foregoing; (ix) neither Seller nor any
Seller Subsidiary has suffered any material damage, destruction, or loss,
whether as the result of fire, explosion, earthquake, accident, casualty, labor
trouble, requisition, or taking of property by any Regulatory Authority, flood,
windstorm, embargo, riot, act of God or the enemy, or other casualty or event,
and whether or not covered by insurance; (x) neither Seller nor any Seller
Subsidiary has cancelled or compromised any debt, except for debts charged off
or compromised in accordance with the past practice of Seller and its
Subsidiaries; and (xi) neither Seller nor any Seller Subsidiary has entered into
any material transaction, contract or commitment outside the ordinary course of
its business.
Section 2.19. PROXY STATEMENT, ETC. None of the information regarding
Seller or any Seller Subsidiary supplied or to be supplied by Seller for
inclusion in (i) the registration statement on Form S-4 to be filed with the SEC
by Buyer for the purpose of registering the shares of Buyer Common Stock to be
exchanged for shares of Seller Common Stock pursuant to the provisions of this
Agreement (the "Registration Statement"), (ii) the proxy or information
statement (the "Proxy Statement") to be mailed to Seller's stockholders in
connection with the transactions contemplated by this Agreement or (iii) any
other
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documents to be filed with any Regulatory Authority in connection with the
transactions contemplated hereby will, at the respective times such documents
are filed with any Regulatory Authority and, in the case of the Registration
Statement, when it becomes effective and, with respect to the Proxy Statement,
when mailed, be false or misleading with respect to any material fact, or omit
to state any material fact necessary in order to make the statements therein not
misleading or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the meeting of Seller's stockholders referred
to in Section 5.3 (the "Meeting") (or, if no Meeting is held, at the time the
Proxy Statement is first furnished to Seller's stockholders), be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Meeting. All documents which Seller or any
Seller Subsidiary is responsible for filing with any Regulatory Authority in
connection with the Merger will comply as to form in all material respects with
the provisions of applicable law.
Section 2.20. REGISTRATION OBLIGATIONS. Neither Seller nor any Seller
Subsidiary is under any obligation, contingent or otherwise to register any of
its securities under the Securities Act.
Section 2.21. STATE TAKEOVER STATUTES; SELLER'S ARTICLES OF INCORPORATION;
SELLER RIGHTS AGREEMENT. (a) The transactions contemplated by this Agreement are
not subject to, or have been exempted from, any applicable state law which
purports to limit or restrict business combinations or the ability to acquire or
to vote shares.
(b) The transactions contemplated by this Agreement and the agreements
contemplated hereby are not, and will not be, prohibited by, or subject to, or
have been exempted from, Article X of the Seller's Articles of Incorporation.
(c) Seller has taken all necessary steps to render the Seller Rights
Agreement inapplicable to the Merger and the transactions contemplated by this
Agreement and by the Stock Option Agreement (including, such that the Rights
related thereto will not be distributed, become exercisable or be triggered in
any way as a result of the execution of this Agreement or the Stock Option
Agreement or the consummation of the transactions contemplated hereby or
thereby).
Section 2.22. ACCOUNTING, TAX AND REGULATORY MATTERS. Neither Seller nor
any Seller Subsidiary has taken or agreed to take any action or has any
knowledge of any fact or circumstance that would (i) prevent the transactions
contemplated hereby from qualifying as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code or as a pooling of interests for
accounting and financial reporting purposes or (ii) materially impede or delay
receipt of any approval referred to in Section 6.1(b) or the consummation of the
transactions contemplated by this Agreement.
Section 2.23. BROKERS AND FINDERS. Except for Donaldson, Lufkin & Jenrette
("DLJ") and Chartwell Capital Limited ("CCL"), neither Seller nor any Seller
Subsidiary nor any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker or
finder has acted directly or indirectly for Seller or any Seller Subsidiary in
connection with this Agreement or the transactions contemplated hereby. Seller
has furnished Buyer with a copy of any written contractual arrangement with DLJ
and CCL.
Section 2.24. OTHER ACTIVITIES. (a) Except as disclosed in Schedule 2.24A,
neither Seller nor any of its Subsidiaries engages in any insurance activities
other than acting as a principal, agent or broker for insurance that is directly
related to an extension of credit by Seller or any of its Subsidiaries and
limited to assuring the repayment of the balance due on the extension of credit
in the event of the death, disability or involuntary unemployment of the debtor.
(b) To the knowledge of Seller's management: each Subsidiary that is a
national bank that performs personal trust, corporate trust and other fiduciary
activities ("Trust Activities") is doing so with requisite authority under
applicable law of Regulatory Authorities and in material accordance with the
agreements
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and instruments governing such Trust Activities, sound fiduciary principles and
applicable law and regulation (specifically including but not limited to Section
9 of Title 12 of the Code of Federal Regulations); there is no investigation or
inquiry by any governmental entity pending or threatened against Seller or any
of its Subsidiaries thereof relating to the compliance by Seller or any of its
Subsidiaries with sound fiduciary principles and applicable law and regulations;
and each employee of any such bank had the authority to act in the capacity in
which such employee acted with respect to Trust Activities in each case in which
such employee was held out as a representative of such bank; and such bank has
established policies and procedures for the purpose of complying with applicable
laws of governmental entities relating to Trust Activities, has followed such
policies and procedures in all material respects and has performed appropriate
internal audit reviews of Trust Activities, which audits have disclosed no
material violations of applicable laws of governmental entities or such policies
and procedures.
Section 2.25. INTEREST RATE RISK MANAGEMENT INSTRUMENTS. (a) Set forth on
Schedule 2.25A is a list of all interest rate swaps, caps, floors, and option
agreements to which Seller or any of its Subsidiaries is a party or by which any
of their properties or assets may be bound.
(b) All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements to which Seller or any of its
Subsidiaries is a party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business and in accordance
with prudent banking practice and applicable rules, regulations and policies of
Regulatory Authorities and with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations and are in
full force and effect. Seller and each of its Subsidiaries has duly performed in
all material respects all of its obligations thereunder to the extent that such
obligations to perform have accrued, and there are no material breaches,
violations or defaults or allegations or assertions of such by any party
thereunder.
Section 2.26. ACCURACY OF INFORMATION. The statements of Seller contained
in this Agreement, the Schedules and any other written document executed and
delivered by or on behalf of Seller pursuant to the terms of this Agreement are
true and correct in all material respects, and such statements and documents do
not omit any material fact necessary to make the statements contained therein
not misleading.
Section 2.27. YEAR 2000 COMPLIANT. None of Seller or any of the Seller
Subsidiaries has received, or reasonably expects to receive, a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR 98-3(SUP), dated March 4,
1998). Seller has disclosed to Buyer a complete and accurate copy of Seller's
plan for addressing the issues set forth in the statements of the Federal
Financial Institutions Examination Council, dated May 5, 1997, entitled "Year
2000 Project Management Awareness," and December 1997, entitled "Safety and
Soundness Guidelines Concerning the Year 2000 Business Risk," as such issues
affect Seller and its Subsidiaries. Between the date of this Agreement and the
Effective Time, Seller shall use commercially practicable efforts to implement
such plan.
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer represents and warrants to and covenants with Seller as follows:
Section 3.1. ORGANIZATION AND AUTHORITY. Buyer and each of its
Subsidiaries is a corporation, bank, trust company or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of organization, is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified and has corporate power
and authority to own its properties and assets and to carry on its business as
it is now being conducted, except, in the case of the Buyer Subsidiaries, where
the failure to be so qualified would not have a material adverse effect on the
Condition of Buyer and its Subsidiaries, taken as a whole. Buyer is registered
as a bank holding company with the Board under the Holding Company Act. True and
complete copies of the Articles of Incorporation and Regulations of Buyer, each
in effect on the date of this Agreement, have been provided to Seller.
Section 3.2. CAPITALIZATION OF BUYER. The authorized capital stock of
Buyer consists of (i) 200,000,000 shares of Buyer Common Stock, of which, as of
April 1, 1998, 95,567,122 shares were issued and outstanding and (ii) 1,000,000
shares of preferred stock, no par value ("Buyer Preferred Stock"), issuable in
series, none of which, as of April 1, 1998, is issued or outstanding. Buyer has
designated (i) 500,000 shares of Buyer Preferred Stock as "Series A Preferred
Stock" and has reserved such shares for issuance upon exercise of Preferred
Stock Purchase Rights under a Rights Agreement dated October 27, 1989 (the
"Buyer Rights Agreement"), between Buyer and Star Bank, N.A., as Rights Agent
and (ii) 218,000 shares of Buyer Preferred Stock as "Series B Cumulative
Preferred Stock." Pursuant to the Buyer Rights Agreement, each certificate
representing one share of Buyer Common Stock also represents one Rights (as
defined in the Buyer Rights Agreement). As of December 31, 1997 Buyer had
options outstanding for 6,586,501 shares of Buyer Common Stock for issuance
under various employee stock option and incentive plans ("Buyer Stock Options").
From April 1, 1998 through the date of this Agreement, no shares of Buyer Common
Stock or other Equity Securities of Buyer have been issued excluding any such
shares which may have been issued pursuant to stock-based employee benefit or
incentive plans and programs. Buyer continually evaluates possible acquisitions
and may prior to the Effective Time enter into one or more agreements providing
for, and may consummate, the acquisition by it of another bank, association,
bank holding company, savings and loan holding company or other company (or the
assets thereof) for consideration that may include Equity Securities. In
addition, prior to the Effective Time, Buyer may, depending on market conditions
and other factors, otherwise determine to issue equity, equity-linked or other
securities for financing purposes. Notwithstanding the foregoing, Buyer will not
take any action that would (i) prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code or as a pooling of interests for accounting and financial
reporting purposes or (ii) materially impede or delay receipt of any approval
referred to in Section 6.1(b) or the consummation of the transactions
contemplated by this Agreement. Except as set forth above and except pursuant to
the Buyer Rights Agreement, there are no other Equity Securities of Buyer
outstanding. All of the issued and outstanding shares of Buyer Common Stock are
validly issued, fully paid, and nonassessable, and have not been issued in
violation of any preemptive right of any stockholder of Buyer. At the Effective
Time, the Buyer Common Stock, including associated Rights, to be issued in the
Merger will be duly authorized, validly issued, fully paid and non-assessable,
and will not be issued in violation of any preemptive right of any stockholder
of Buyer.
Section 3.3. AUTHORIZATION. (a) Buyer has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. No stockholder vote is required for Buyer to approve this Agreement.
The execution, delivery and performance of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby have been duly
authorized by all
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requisite corporate action of Buyer. This Agreement is a valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms.
(b) Neither the execution, delivery and performance by Buyer of this
Agreement, nor the consummation by Buyer of the transactions contemplated
hereby, nor compliance by Buyer with any of the provisions hereof, will (i)
violate, conflict with or result in a breach of any provisions of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration of,
or result in the creation of, any Lien upon any of the material properties or
assets of Buyer or any Buyer Subsidiary under any of the terms, conditions or
provisions of (x) its articles or certificate of incorporation or bylaws, or (y)
any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Buyer or any of the
material properties or assets of Buyer is a party or by which it may be bound,
or to which Buyer may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in paragraph (c) of this Section 3.3, to
the best knowledge of Buyer, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Buyer or any of
its Subsidiaries or any of their respective material properties or assets.
(c) Other than in connection with or in compliance with the provisions of
the KBCA, the OGCL, the Securities Act, the Exchange Act, the securities or blue
sky laws of the various states or filings, consents, reviews, authorizations,
approvals or exemptions required under the Holding Company Act, and the HSR Act,
or any required approvals of any other Regulatory Authority, no notice to,
filing with, exemption or review by, or authorization, consent or approval of,
any public body or authority is necessary for the consummation by Buyer of the
transactions contemplated by this Agreement.
Section 3.4. BUYER FINANCIAL STATEMENTS. The supplemental consolidated and
parent company only balance sheets of Buyer and its Subsidiaries as of December
31, 1997, 1996 and 1995 and related supplemental consolidated and parent company
only statements of income, cash flows and changes in stockholders' equity for
each of the three years in the three-year period ended December 31, 1997,
together with the notes thereto, audited by Arthur Andersen LLP ("Buyer
Auditors") (collectively, the "Buyer Financial Statements"), have been prepared
in accordance with GAAP, present fairly the consolidated financial position of
Buyer and its Subsidiaries at the dates and the consolidated results of
operations, changes in stockholders' equity and cash flows of Buyer and its
Subsidiaries for the periods stated therein and are derived from the books and
records of Buyer and its Subsidiaries, which are complete and accurate in all
material respects and have been maintained in all material respects in
accordance with applicable laws and regulations. Neither Buyer nor any of its
Subsidiaries has any material contingent liabilities that are not described in
the financial statements described above.
Section 3.5. BUYER REPORTS. Since January 1, 1995, each of Buyer and the
Buyer Subsidiaries has filed all material reports, registrations and statements,
together with any required material amendments thereto, that it was required to
file with any Regulatory Authority. All such reports and statements filed with
any such Regulatory Authority are collectively referred to herein as the "Buyer
Reports." As of its respective date, each Buyer Report complied in all material
respects with all the rules and regulations promulgated by the applicable
Regulatory Authority and did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
Section 3.6. MATERIAL ADVERSE CHANGE. Since December 31, 1997, there has
been no material adverse change in the Condition of Buyer and its Subsidiaries,
taken as a whole, except as may have resulted or may result from changes to laws
and regulations or changes in economic conditions applicable to banking
institutions generally or in general levels of interest rates affecting banking
institutions generally.
Section 3.7. COMPLIANCE WITH LAWS. Each of Buyer and its Subsidiaries has
complied with all laws, regulations, and orders (including without limitation
zoning ordinances, building codes, ERISA, and
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securities, tax, environmental, civil rights, and occupational health and safety
laws and regulations and including without limitation in the case of any Buyer
Subsidiary that is a bank, banking organization, banking corporation or trust
company, all statutes, rules and regulations, pertaining to the conduct of a
banking, deposit-taking or lending or related business or to the exercise of
trust powers) and governing instruments applicable to them and to the conduct of
their business, and to the knowledge of Buyer all applicable listing
requirements and policies of the NYSE, except where such failure to comply would
not have a material adverse effect on the Condition of Buyer and its
Subsidiaries, taken as a whole, and (ii) neither Buyer nor any Buyer Subsidiary
is in default under, and no event has occurred which, with the lapse of time or
notice or both, could result in the default under, the terms of any judgment,
order, writ, decree, permit, or license of any Regulatory Authority or court,
whether federal, state, municipal, or local and whether at law or in equity,
except where such default would not have a material adverse effect on the
Condition of Buyer and its Subsidiaries, taken as a whole. Neither Buyer nor any
Buyer Subsidiary is subject to or reasonably likely to incur a liability as a
result of its ownership, operation, or use of any Property of Buyer (whether
directly or, to the best knowledge of Buyer, as a consequence of such Property
being part of the investment portfolio of Buyer or any Buyer Subsidiary) (A)
that is contaminated by or contains any Toxic Substance, or (B) on which any
Toxic Substance has been stored, disposed of, placed, or used in the
construction thereof; and which, in each case, reasonably could be expected to
have a material adverse effect on the Condition of Buyer and its Subsidiaries,
taken as a whole. Except for statutory or regulatory restrictions of general
application, no Regulatory Authority has placed any restriction on the business
of Buyer or any Buyer Subsidiary which reasonably could be expected to have a
material adverse effect on the Condition of Buyer and its Subsidiaries, taken as
a whole.
Section 3.8. REGISTRATION STATEMENT, ETC. None of the information
regarding Buyer or any of its Subsidiaries supplied or to be supplied by Buyer
for inclusion or included in (i) the Registration Statement, (ii) the Proxy
Statement, or (iii) any other documents to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby will, at the
respective times such documents are filed with any Regulatory Authority and, in
the case of the Registration Statement, when it becomes effective and, with
respect to the Proxy Statement, when mailed (or furnished to stockholders of
Seller), be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
misleading or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Meeting, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of any proxy for the Meeting. All documents which Buyer or any of
its Subsidiaries are responsible for filing with any Regulatory Authority in
connection with the Merger will comply as to form in all material respects with
the provisions of applicable law.
Section 3.9. BROKERS AND FINDERS. Except for Credit Suisse First Boston,
neither Buyer nor any of its Subsidiaries nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
Buyer or any of its Subsidiaries in connection with this Agreement or the
transactions contemplated hereby.
Section 3.10. LITIGATION AND OTHER PROCEEDINGS. Neither Buyer nor any
Buyer Subsidiary is a party to any pending or, to the best knowledge of Buyer,
threatened claim, action, suit, investigation or proceeding, or is subject to
any order, judgment or decree, except for matters which, in the aggregate, will
not have, or reasonably could not be expected to have, a material adverse effect
on the Condition of Buyer and its Subsidiaries, taken as a whole. Without
limiting the generality of the foregoing, as of the date of this Agreement,
there are no actions, suits, or proceedings pending or, to the best knowledge of
Buyer, threatened against Buyer or any Buyer Subsidiary or any of their
respective officers or directors by any stockholder of Buyer or any Buyer
Subsidiary (or any former stockholder of Buyer or any Buyer Subsidiary) or
involving claims under the Securities Act, the Exchange Act, the Community
Reinvestment
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Act of 1977, as amended, or the fair lending laws or which purport or seek to
enjoin or restrain the transactions contemplated by this Agreement.
Section 3.11. TAXES. Buyer and each Buyer Subsidiary have timely filed or
will timely file (including extensions) all material tax returns required to be
filed at or prior to the Closing Date ("Buyer Returns"). Each of Buyer and its
Subsidiaries has paid, or set up adequate reserves on the Buyer Financial
Statements for the payment of, all taxes required to be paid in respect of the
periods covered by the Buyer Financial Statements and has paid or set up
adequate reserves on the most recent financial statements Buyer has filed under
the Exchange Act for the payment of, all taxes anticipated to be payable in
respect of the periods covered by such financial statements. No material
deficiencies for any tax, assessment or governmental charge have been proposed,
asserted or assessed in writing by any governmental or taxing authority against
any of Buyer or any Buyer Subsidiary which have not been settled or would not be
covered by existing reserves. To the knowledge of Buyer, neither Buyer nor any
Buyer Subsidiary is delinquent in the payment of any material tax, assessment or
governmental charge shown to be due on any Buyer Return (taking into account
extensions properly obtained), and no waiver of the time to assess any tax
granted in writing by Buyer or any Buyer Subsidiary is pending. The federal and
state income tax returns of Buyer and the Buyer Subsidiaries have been audited
and finally settled by the IRS or appropriate state tax authorities or the
relevant statute of limitations has expired for all periods ended through
December 31, 1994, or the period for assessment of taxes in respect of such
periods has expired.
Section 3.12. ACCOUNTING, TAX AND REGULATORY MATTERS. Neither Buyer nor
any Buyer Subsidiary has taken or agreed to take any action or has any knowledge
of any fact or circumstance that would (i) prevent the transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code or as a pooling of interests for accounting and
financial reporting purposes or (ii) materially impede or delay receipt of any
approval referred to in Section 6.1(b) or the consummation of the transactions
contemplated by this Agreement.
Section 3.13. ACCURACY OF INFORMATION. The statements of Buyer contained
in this Agreement, the Schedules and in any other written document executed and
delivered by or on behalf of Buyer pursuant to the terms of this Agreement are
true and correct in all material respects, and such statements and documents do
not omit any material fact necessary to make the statements contained herein or
therein not misleading.
Section 3.14. YEAR 2000 COMPLIANT. None of Buyer or any of the Buyer
Subsidiaries has received, or reasonably expects to receive, a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR 98-3(SUP), dated March 4,
1998). Buyer has disclosed to Seller a complete and accurate copy of Buyer's
plan for addressing the issues set forth in the statements of the Federal
Financial Institutions Examination Council, dated May 5, 1997, entitled "Year
2000 Project Management Awareness," and December 1997, entitled "Safety and
Soundness Guidelines Concerning the Year 2000 Business Risk," as such issues
affect Buyer and its Subsidiaries. Between the date of this Agreement and the
Effective Time, Buyer shall use commercially practicable efforts to implement
such plan.
ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
Section 4.1. CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME. During the
period from the date of this Agreement to the Effective Time, each of Buyer and
Seller shall, and shall cause each of their respective Subsidiaries to, conduct
its business according to the ordinary and usual course consistent with past
practices and shall, and shall cause each such Subsidiary to, use its reasonable
best efforts to maintain
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and preserve its business organization, employees and advantageous business
relationships and retain the services of its officers and key employees.
Section 4.2. FORBEARANCES. Except as set forth on Schedule 4.2 or as
otherwise contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, Seller shall not and shall not permit any
of its Subsidiaries to, without the prior written consent of Buyer:
(a) declare, set aside or pay any dividends or other distributions, directly
or indirectly, in respect of its capital stock (other than dividends from a
Subsidiary of Seller to Seller or another Subsidiary of Seller), except that
Seller may declare and pay cash dividends on the Seller Common Stock of not more
than $.18 per share per quarterly period; provided, that Seller shall not
declare any dividends on Seller Common Stock or Seller Preferred Stock during
any quarter in which its stockholders will be entitled to receive any regular
quarterly dividend on the shares of Buyer Common Stock to be issued in the
Merger; or
(b) enter into or amend any employment, severance or similar agreement or
arrangement with any director or officer or employee, or materially modify any
of the Seller Employee Plans or grant any salary or wage increase or materially
increase any employee benefit (including incentive or bonus payments), except
normal individual increases in compensation to employees consistent with past
practice, or as required by law or contract; or
(c) authorize, recommend, propose or announce an intention to authorize, so
recommend or propose, or enter into an agreement in principle with respect to,
any merger, consolidation or business combination (other than the Transactions),
any acquisition or disposition of a material amount of assets (except in the
usual course of business consistent with past practices), including mortgage
servicing rights, loans or securities as well as any release or relinquishment
of any material contract rights; or
(d) propose or adopt any amendments to its articles of incorporation,
association or other charter document or bylaws; or
(e) issue, sell, grant, confer or award any of its Equity Securities (except
shares of Seller Common Stock issued upon exercise of Seller Stock Options
outstanding on the date of this Agreement (Seller agreeing to promptly notify
Buyer of any such issuance of treasury or previously unissued shares)) or effect
any stock split or adjust, combine, reclassify or otherwise change its
capitalization as it existed on the date of this Agreement; or
(f) purchase, redeem, retire, repurchase, or exchange, or otherwise acquire
or dispose of, directly or indirectly, any of its Equity Securities, whether
pursuant to the terms of such Equity Securities or otherwise; or
(g) directly or indirectly (including through its officers, directors,
employees or other representatives) initiate, solicit, engage in or encourage
any discussions, inquiries or proposals with any third party relating to the
disposition of any significant portion of the business or assets of Seller or
any Seller Subsidiary or the acquisition of Equity Securities of Seller or any
Seller Subsidiary or the merger of Seller or any Seller Subsidiary with any
person (other than Buyer) or any similar transaction (each such transaction
being referred to herein as an "Acquisition Transaction"), or provide any such
person with information or assistance or negotiate with any such person with
respect to an Acquisition Transaction, and Seller shall notify Buyer orally of
all the relevant details relating to all inquiries, indications of interest and
proposals which it may receive with respect to any Acquisition Transaction
within 24 hours of the receipt of any such inquiry, indication, or proposal; or
(h) take any action that would (A) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the ability
of Buyer or Seller to obtain any approval of any Regulatory Authority required
for the transactions contemplated by this Agreement or to perform its covenants
and agreements under this Agreement or (B) prevent the transactions contemplated
hereby from qualifying as
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a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code or as a pooling of interests for accounting and financial reporting
purposes; or
(i) other than in the ordinary course of business consistent with past
practice (but not pursuant to any outstanding letters of credit), incur any
indebtedness for borrowed money, assume, guarantee, endorse or otherwise as an
accommodation become responsible or liable for the obligations of any other
individual, corporation or other entity; or
(j) materially restructure or materially change its investment securities
portfolio, through purchases, sales or otherwise, or the manner in which the
portfolio is classified or reported as of the date of the Agreement; or
(k) agree in writing or otherwise to take any of the foregoing actions or
engage in any activity, enter into any transaction or take or omit to take any
other act which would make any of the representations and warranties in Article
II of this Agreement untrue or incorrect in any material respect if made anew
after engaging in such activity, entering into such transaction, or taking or
omitting such other act.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1. ACCESS AND INFORMATION. Buyer and its Subsidiaries, on the
one hand, and Seller and its Subsidiaries, on the other hand, shall each afford
to each other, and to the other's accountants, counsel and other
representatives, full access during normal business hours, during the period
prior to the Effective Time, to all their respective properties, books,
contracts, commitments and records and, during such period, each shall furnish
promptly to the other (i) a copy of each report, schedule and other document
filed or received by it during such period pursuant to the requirements of
federal and state securities laws and (ii) all other existing or regularly
produced information concerning its business, properties and personnel as such
other party may reasonably request. Each party hereto shall, and shall cause its
advisors and representatives to, (A) hold confidential all information obtained
in connection with any transaction contemplated hereby with respect to the other
party which is not otherwise public knowledge, (B) return all documents
(including copies thereof) obtained hereunder from the other party to such other
party and (C) use its reasonable best efforts to cause all information obtained
pursuant to this Agreement or in connection with the negotiation of this
Agreement to be treated as confidential and not use, or knowingly permit others
to use, any such information unless such information becomes generally available
to the public without breach of either party's confidentiality obligation.
Section 5.2. REGISTRATION STATEMENT; REGULATORY MATTERS. (a) Buyer shall
prepare and, subject to the review and consent of Seller with respect to matters
relating to Seller, file with the SEC as soon as is reasonably practicable the
Registration Statement (or the equivalent in the form of preliminary proxy
material) with respect to the shares of Buyer Common Stock to be issued in the
Merger and shall apply to the NYSE to list the shares of Buyer Common Stock to
be issued in connection with the transactions contemplated by this Agreement.
Buyer shall prepare and file a notice with the Board as soon as reasonably
practicable. Buyer shall use all reasonable efforts to cause the Registration
Statement to become effective. Buyer shall also take any action required to be
taken under any applicable state blue sky or securities laws in connection with
the issuance of such shares, and Seller and its Subsidiaries shall furnish Buyer
all information concerning Seller and its Subsidiaries and the stockholders
thereof as Buyer may reasonably request in connection with any such action.
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(b) Seller and Buyer shall cooperate and use their respective best efforts
to prepare all documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties and Regulatory
Authorities necessary to consummate the transactions contemplated by this
Agreement and, as and if directed by Buyer, to consummate such other mergers,
consolidations or asset transfers or other transactions by and among Buyer's
Subsidiaries and Seller's Subsidiaries concurrently with or following the
Effective Time.
Section 5.3. STOCKHOLDER APPROVAL. Seller shall call a meeting of its
stockholders to be held as soon as practicable after the Registration Statement
is declared effective for the purpose of voting upon the Merger or take other
action for stockholders to authorize the Merger. In connection therewith, Buyer
shall prepare the Proxy Statement and, with the approval of each of Buyer and
Seller, the Proxy Statement shall be filed with the SEC and mailed to the
stockholders of Seller. The Board of Directors of Seller shall submit for
approval of Seller's stockholders the matters to be voted upon in order to
authorize the Merger. The Board of Directors of Seller hereby does and (subject
to the fiduciary duty of Seller's Board of Directors, as advised in writing by
outside counsel) will recommend this Agreement and the transactions contemplated
hereby to stockholders of Seller and will use its best efforts to obtain any
vote of Seller's stockholders that is necessary for the approval and adoption of
this Agreement and consummation of the transactions contemplated hereby.
Section 5.4. CURRENT INFORMATION. During the period from the date of this
Agreement to the Effective Time, each party shall promptly furnish the other
with copies of all monthly and other interim financial statements as the same
become available and shall cause one or more of its designated representatives
to confer on a regular and frequent basis with representatives of the other
party. Each party shall promptly notify the other party of any material change
in its business or operations and of any governmental complaints, investigations
or hearings (or communications indicating that the same may be contemplated), or
the institution or the threat of material litigation involving such party, and
shall keep the other party fully informed of such events.
Section 5.5. AGREEMENTS OF AFFILIATES. As soon as practicable after the
date of this Agreement, Seller shall deliver to Buyer a letter identifying all
persons whom Seller believes to be, at the time this Agreement is submitted to a
vote of the stockholders of Seller, "affiliates" of Seller for purposes of Rule
145 under the Securities Act or for determining the qualification of the Merger
as a pooling of interests for accounting and financial reporting purposes.
Seller shall use its reasonable best efforts to cause each person who is so
identified as such an "affiliate" to deliver to Buyer as soon as practicable
thereafter, and in any event no later than the publication of notice in the
Federal Register of Buyer's notice to the Board referred to in Section 5.2, a
written agreement in the form attached hereto as Exhibit B. Prior to the
Effective Time, Seller shall amend and supplement such letter and use its
reasonable best efforts to cause each additional person who is identified as an
"affiliate" to execute a written agreement as set forth in this Section 5.5.
Section 5.6. EXPENSES. Each party hereto shall bear its own expenses
incident to preparing, entering into and carrying out this Agreement and to
consummating the Merger.
Section 5.7. SECURITIES ACT AND EXCHANGE ACT FILINGS. Buyer shall make all
filings with the SEC that are described in Section (c) of Rule 144 under the
Securities Act for a period of two years following the Effective Time. Buyer
shall within 30 days after the Effective Time file a registration statement on
Form S-3 or Form S-8, as the case may be (or any successor or other appropriate
forms), with respect to the shares of Buyer Common Stock subject to the options
issued pursuant to Section 5.10 and shall use its reasonable efforts to maintain
the effectiveness of such registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
Section 5.8. MISCELLANEOUS AGREEMENTS AND CONSENTS. (a) Subject to the
terms and conditions herein provided, each of the parties hereto agrees to use
its respective reasonable best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under
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applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as expeditiously as possible,
including without limitation using its respective reasonable best efforts to
lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
hereby. Each party shall, and shall cause each of its respective Subsidiaries
to, use its reasonable best efforts to obtain consents of all third parties and
Regulatory Authorities necessary or, in the opinion of Buyer, desirable for the
consummation of the transactions contemplated by this Agreement.
(b) Seller, prior to the Effective Time, shall (i) consult and cooperate
with Buyer regarding the implementation of those policies and procedures
established by Buyer for its governance and that of its Subsidiaries and not
otherwise referenced in Section 5.17 hereof, including, without limitation,
policies and procedures pertaining to the accounting, asset/liability
management, audit, credit, human resources, treasury and legal functions, and
(ii) at the request of Buyer, effective not later than the Effective Time
conform Seller's existing policies and procedures in respect of such matters to
Buyer's policies and procedures or, in the absence of any existing Seller policy
or procedure regarding any such function, introduce Buyer's policies or
procedures in respect thereof, unless to do so would cause Seller or any of the
Seller Subsidiaries to be in violation of any law, rule or regulation of any
Regulatory Authority having jurisdiction over Seller and/or the Seller
Subsidiary affected thereby.
Section 5.9. EMPLOYEE BENEFITS. (a) Subject to Section 5.10, the
provisions of the Seller Stock Plans and of any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of Seller or any Seller Subsidiary shall be deleted and
terminated as of the Effective Time, and Seller shall ensure that following the
Effective Time no holder of Seller Stock Options or any participant in any
Seller Stock Plan shall have any right thereunder to acquire any securities of
Seller or any Seller Subsidiary.
(b) Buyer shall take such steps as are necessary or required to integrate
the employees of Seller and the Seller Subsidiaries in Buyer's employee benefit
plans available to similarly situated employees of Buyer and Buyer Subsidiaries
as soon as practicable after the Effective Time, (i) with full credit for prior
service with Seller or any of the Seller Subsidiaries for all purposes other
than determining benefit accruals under any tax-qualified defined benefit plan,
(ii) without any waiting periods, evidence of insurability or application of any
pre-existing condition limitation, and (iii) with full credit for claims arising
prior to the Effective Time for purposes of deductibles, out-of-pocket maximums,
benefit maximums and all other similar limitations for the applicable plan year
during which the Merger is consummated. Each of Buyer and Seller shall use all
reasonable efforts to insure that no amounts paid or payable by Seller, Seller
Subsidiaries or Buyer to or with respect to any employee or former employee of
Seller or any Seller Subsidiary will fail to be deductible for federal income
tax purposes by reason of Section 280G of the Internal Revenue Code.
(c) Prior to the Effective Time, Buyer and Seller agree to establish a
supplemental employee severance program in accordance with the terms outlined in
Schedule 5.9C to provide supplemental severance for the employees of Seller.
(d) Buyer agrees to enter into Employment Agreements with the individuals
identified in Schedule 5.9D in the forms previously provided to Seller.
(e) For a period of one (1) year from and after the Effective Time, the
Buyer will continue the Seller's severance plans and policies with respect to
the employees of the Seller and the Seller Subsidiaries immediately prior to the
Effective Time, as such severance plans and policies are in effect immediately
prior to the Effective Time, and will honor all obligations of the Seller
thereunder.
Section 5.10. SELLER STOCK OPTIONS. At the Effective Time, all rights with
respect to Seller Common Stock pursuant to Seller Stock Options that are
outstanding at the Effective Time, whether or not then exercisable, shall be
converted into and become rights with respect to Buyer Common Stock, and Buyer
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shall assume each Seller Stock Option in accordance with the terms of the stock
option plan governing outstanding Seller Stock Options. From and after the
Effective Time, (i) each Seller Stock Option assumed by Buyer shall be exercised
solely for shares of Buyer Common Stock, (ii) the number of shares of Buyer
Common Stock subject to each Seller Stock Option shall be equal to the number of
shares of Seller Common Stock subject to such Seller Stock Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, rounded down to
the nearest whole share of Buyer Common Stock and (iii) the per share exercise
price under each Seller Stock Option shall be adjusted by dividing the per share
exercise price under such Seller Stock Option by the Exchange Ratio and rounding
up to the nearest cent; PROVIDED, HOWEVER, that the terms of each Seller Stock
Option shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend, recapitalization or
other similar transaction subsequent to the Effective Time. The foregoing
assumption shall be undertaken by Buyer in a manner that will comply with
Section 424(a) of the Internal Revenue Code, as to any Seller Stock Option that
is an "incentive stock option."
Section 5.11. SELLER EMPLOYEE STOCK OWNERSHIP PLAN. Seller may cause the
Employee Stock Ownership Plan of the Seller Banks (the "Seller ESOP") to
allocate, prior to the Effective Time, to participants in the Seller ESOP the
maximum number of currently unallocated shares of Seller Common Stock allowable
under Section 415 of the Internal Revenue Code. Except as provided in the
following paragraph, Seller shall not take any action which would cause the
Seller ESOP to be disqualified under Section 401(a) of the Internal Revenue Code
or to lose its status as an employee stock ownership plan under Section 4975 of
the Internal Revenue Code.
On or before the Effective Time, Seller will take steps reasonably necessary
to cause the Seller ESOP to be terminated as of the Effective Time. Any
indebtedness of the ESOP shall be repaid from the Trust associated with the
Seller ESOP. A final allocation will be prepared, and a request for a favorable
determination letter on the termination of the Seller ESOP will be filed with
the Internal Revenue Service. To the maximum extent permitted by the rules and
regulations of the Internal Revenue Service, upon receipt of the favorable
determination letter, the assets of the Seller ESOP will be distributed to the
participants in due course. At and after the Effective Time, no additional
employees will become eligible to participate in the Seller ESOP and the assets
of the Seller ESOP will be applied in accordance with its terms and the rules
and regulations of the Internal Revenue Service and the Department of Labor.
Section 5.12. D&O INDEMNIFICATION. Buyer agrees that the Merger shall not
affect or diminish any of Seller's duties and obligations of indemnification
existing as of the Effective Time in favor of employees, agents, directors or
officers of Seller or its Subsidiaries arising by virtue of its Certificate of
Incorporation or Bylaws in the form in effect at the date of this Agreement or
arising by operation of law or arising by virtue of any contract, resolution or
other agreement or document existing at the date of this Agreement, and such
duties and obligations shall continue in full force and effect and be honored by
Buyer for so long as they would (but for the Merger) otherwise survive and
continue in full force and effect. Buyer will provide, or cause to be provided,
for a period of not less than two years from the Effective Time, a "tail"
insurance and indemnification policy that provides the officers and directors of
Seller Subsidiaries immediately prior to the Effective Time coverage no less
favorable, in the aggregate, than as currently provided by Buyer to its officers
and directors.
Section 5.13. PRESS RELEASES. Except as may be required by law, Seller and
Buyer shall consult and agree with each other as to the form, substance and
timing of any proposed press release relating to this Agreement or any of the
transactions contemplated hereby.
Section 5.14. STATE TAKEOVER STATUTES; SELLER'S ARTICLES OF INCORPORATION;
SELLER RIGHTS AGREEMENT. (a) Seller will take all steps necessary to exempt the
transactions contemplated by this Agreement and any agreement contemplated
hereby from, and if necessary challenge the validity of, any applicable state
takeover law.
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(b) Seller will take all steps necessary to exempt the transactions
contemplated by this Agreement and any agreement contemplated hereby from the
provisions of Article X of Seller's Articles of Incorporation.
(c) Seller shall take all action (including, if required, redeeming all of
the outstanding Rights related to the Seller Rights Agreement or amending or
terminating the Seller Rights Agreement) so that the entering into of this
Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby shall not result in the grant of
any rights to any person under the Seller Rights Agreement to purchase or
receive additional shares of capital stock of Seller, Buyer or any affiliate of
the foregoing or enable or require the Rights related thereto to be exercised,
distributed or triggered in any way.
Section 5.15. BEST EFFORTS. Each of Buyer and Seller undertakes and agrees
to use its best efforts to cause the Merger (i) to qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code and as a
pooling of interests for accounting and financial reporting purposes (in each
case, including, if necessary, to take reasonable steps to restructure the
transactions contemplated by this Agreement to so qualify) and (ii) to occur as
soon as practicable. Each of Buyer and Seller agrees to not take any action that
would materially impede or delay the consummation of the transactions
contemplated by this Agreement or the ability of Buyer or Seller to obtain any
approval of any Regulatory Authority required for the transactions contemplated
by this Agreement or to perform its covenants and agreements under this
Agreement.
Section 5.16. INSURANCE. Seller shall, and Seller shall cause its
Subsidiaries to, use its best efforts to maintain its existing insurance.
Section 5.17. CONFORMING ENTRIES. (a) Notwithstanding that Seller believes
that Seller and the Seller Subsidiaries have established all reserves and taken
all provisions for possible loan losses required by GAAP and applicable laws,
rules and regulations, Seller recognizes that Buyer may have adopted different
loan, accrual and reserve policies (including loan classifications and levels of
reserves for possible loan losses). From and after the date of this Agreement,
Seller and Buyer shall consult and cooperate with each other with respect to
conforming the loan, accrual and reserve policies of Seller and the Seller
Subsidiaries to those policies of Buyer, as specified in each case in writing to
Seller, based upon such consultation and as hereinafter provided.
(b) In addition, from and after the date of this Agreement to the Effective
Time, Seller and Buyer shall consult and cooperate with each other with respect
to determining appropriate Seller accruals, reserves and charges to establish
and take in respect of excess equipment write-off or write-down of various
assets and other appropriate charges and accounting adjustments taking into
account the parties' business plans following the Merger, as specified in each
case in writing to Seller, based upon such consultation and as hereinafter
provided.
(c) Seller and Buyer shall consult and cooperate with each other with
respect to determining, as specified in a written notice from Buyer to Seller,
based upon such consultation and as hereinafter provided, the amount and the
timing for recognizing for financial accounting purposes Seller's expenses of
the Merger and the restructuring charges relating to or to be incurred in
connection with the Merger.
(d) To the extent permissible under applicable laws, regulations, and
requirements of Regulatory Authorities, and provided further, that Seller shall
not be required to take any such action that, in the opinion of Seller's
independent auditors, is not consistent with GAAP and regulatory accounting
principles, Seller shall (i) establish and take such reserves and accruals at
such time as Buyer shall reasonably request to conform Seller's loan, accrual
and reserve policies to Buyer's policies, and (ii) establish and take such
accruals, reserves and charges in order to implement such policies in respect of
excess facilities and equipment capacity, severance costs, litigation matters,
write-off or write-down of various assets and other appropriate accounting
adjustments, and to recognize for financial accounting purposes such expenses of
the Merger and restructuring charges related to or to be incurred in connection
with the Merger, in each
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case at such times as are reasonably requested by Buyer; PROVIDED, HOWEVER, that
on the date such reserves, accruals and charges are to be taken, Buyer shall
certify to Seller that Buyer's representations and warranties are true and
correct as of such date, that the approval conditions to its obligations
contemplated by Section 6.1(b) have been satisfied or waived (except to the
extent that any waiting period associated therewith may then have commenced but
not expired) and that Buyer is otherwise in compliance with this Agreement and
is prepared to proceed with the Closing; and provided, further, that Seller
shall not be required to take any such action that is not consistent with GAAP
and regulatory accounting principles.
Section 5.18. CHARITABLE FOUNDATION. Promptly following the Effective
Time, Buyer shall establish a charitable foundation for the benefit of the
communities served by Seller as of immediately prior to the Effective Time,
which charitable foundation will be initially funded with a $300,000
contribution by Buyer and thereafter funded annually with such amounts
determined by Buyer as will aggregate no less than $3,000,000 during the six
years immediately following the Effective Time.
ARTICLE VI
CONDITIONS
Section 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment or waiver at or prior to the Effective Time of the
following conditions:
(a) This Agreement shall have received the requisite approval of
stockholders of Seller.
(b) All requisite approvals of this Agreement and the transactions
contemplated hereby shall have been received from the Board and any other
Regulatory Authority, and all applicable waiting periods shall have expired
under applicable law.
(c) The Registration Statement shall have been declared effective and shall
not be subject to a stop order or any threatened stop order.
(d) Neither Seller nor Buyer shall be subject to any order, decree or
injunction, and there shall be no pending or threatened order, decree or
injunction, of a court or agency of competent jurisdiction which enjoins or
prohibits, or seeks to enjoin or prohibit, the consummation of any of the
Transactions.
(e) There shall be no legislative, statutory or regulatory action (whether
federal or state) pending which prohibits or threatens to prohibit consummation
of the Transactions or which otherwise materially adverse affect the
Transactions.
(f) Each of Buyer and Seller shall have received, from counsel reasonably
satisfactory to it, an opinion reasonably satisfactory in form and substance to
it to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and that no gain or loss
will be recognized by the stockholders of Seller who receive solely Buyer Common
Stock in exchange for shares of Seller Common Stock, except with respect to cash
received in lieu of fractional shares of Buyer Common Stock.
(g) The shares of Buyer Common Stock which shall be issued to the holders of
Seller Common Stock (and where applicable, Seller Stock Options) upon
consummation of the Merger shall have been authorized for listing on the NYSE,
subject to official notice of issuance.
(h) Buyer and Seller shall have received a letter, in form and substance
reasonably satisfactory to each, from the Buyer Auditors, dated the date of the
Proxy Statement and confirmed in writing at the Effective Time, stating that the
Merger will qualify as a pooling of interests transaction under Opinion 16 of
the Accounting Principles Board, the interpretive releases issued pursuant
thereto and the pronouncements of the SEC thereon.
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Section 6.2. CONDITIONS TO OBLIGATIONS OF SELLER TO EFFECT THE MERGER. The
obligations of Seller to effect the Merger shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Buyer set forth in Article III of this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Effective
Time (as though made on and as of the Effective Time except (i) to the extent
such representations and warranties are by their express provisions made as of a
specified date or period and (ii) for the effect of transactions contemplated by
this Agreement) and Seller shall have received a certificate of the chief
financial officer of Buyer to that effect.
(b) PERFORMANCE OF OBLIGATIONS. Buyer shall have performed in all material
respects all obligations required to be performed by it under this Agreement
prior to the Effective Time, and Seller shall have received a certificate of the
chief financial officer of Buyer to that effect.
Section 6.3. CONDITIONS TO OBLIGATIONS OF BUYER TO EFFECT THE MERGER. The
obligations of Buyer to effect the Merger shall be subject to the fulfillment or
waiver at or prior to the Effective Time of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Seller set forth in Article II of this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Effective
Time (as though made on and as of the Effective Time except (i) to the extent
such representations and warranties are by their express provisions made as of a
specific date or period and (ii) for the effect of transactions contemplated by
this Agreement) and Buyer shall have received a certificate of the chairman or
president of Seller to that effect.
(b) PERFORMANCE OF OBLIGATIONS. Seller shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and Buyer shall have received a
certificate of the chairman or president of Seller to that effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after any requisite stockholder
approval:
(a) by mutual consent by the Executive Committee of the Board of Directors
of Buyer and the Board of Directors of Seller;
(b) by the Executive Committee of the Board of Directors of Buyer or the
Board of Directors of Seller at any time after the date that is twelve months
after the date of this Agreement if the Merger shall not theretofore have been
consummated (provided that the terminating party is not then in material breach
of any representation, warranty, covenant or other agreement contained herein
which has resulted in the delay in performance of this Agreement);
(c) by the Executive Committee of the Board of Directors of Buyer or the
Board of Directors of Seller if (i) the Board has denied approval of the Merger
and such denial has become final and nonappealable or (ii) stockholders of
Seller shall not have approved this Agreement at the Meeting provided that
Seller has not breached its obligation under Section 5.3;
(d) by the Executive Committee of the Board of Directors of Buyer in the
event of a material breach by Seller of any representation, warranty, covenant
or other agreement contained in this Agreement, which breach is not cured within
30 days after written notice thereof to Seller by Buyer;
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(e) by the Board of Directors of Seller in the event of a material breach by
Buyer of any representation, warranty, covenant or other agreement contained in
this Agreement, which breach is not cured within 30 days after written notice
thereof is given to Buyer by Seller; or
(f) by the Board of Directors of Seller, upon written notice to Buyer at any
time during the ten-day period commencing two days after the Determination Date
(as defined below), if both of the following conditions are satisfied:
(i) the Average Closing Price shall be less than the product of 0.80 and the
Starting Price; and
(ii) (A) the quotient obtained by dividing the Average Closing Price by the
Starting Price shall be less than (B) the quotient obtained by dividing
the Average Index Price by the Index Price on the Starting Date and
subtracting 0.15 from the quotient in this clause (ii)(B);
subject, however, to the following provisions. If Seller elects to exercise its
termination right pursuant to the immediately preceding sentence, it shall give
prompt written notice to Buyer; PROVIDED, HOWEVER, that such notice of election
to termination may be withdrawn at any time within the aforementioned ten-day
period.
For purposes of this Section 7.1(f), the following terms shall have the
meanings indicated:
"Average Closing Price" means the average of the daily closing prices of
Buyer Common Stock as reported on the NYSE composite tape (as reported in THE
WALL STREET JOURNAL or, if not reported therein, in another mutually agreed upon
authoritative source) for the ten consecutive full trading days in which such
shares are traded on the NYSE ending at the close of trading on the
Determination Date.
"Average Index Price" means the average of the Index Prices for the ten
consecutive full trading days ending at the close of trading on the
Determination Date.
"Determination Date" means the date on which the approval of the Board
required for consummation of the Merger shall be received.
"Index Group" means the 22 bank holding companies listed below, the common
stocks of all of which shall be publicly traded and as to which there shall not
have been, since the Starting Date and before the Determination Date, an
announcement of a proposal for such company to be acquired or for such company
to acquire another company or companies in transactions with a value exceeding
25% of the acquiror's market capitalization as of the Starting Date. In the
event that the common stock of any such company ceases to be publicly traded or
any such announcement is made with respect to any such company, such company
shall be removed from the Index Group, and the weights (which have been
determined based on the number of outstanding shares of common stock)
redistributed proportionately
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for purposes of determining the Index Price. The 22 bank holding companies and
the weights attributed to them are as follows:
<TABLE>
<CAPTION>
HOLDING COMPANY WEIGHTING (%)
- ------------------------------------------------------------------------------- -------------
<S> <C>
NationsBank Corp............................................................... 11.576
BankAmerica Corp............................................................... 9.676
Chase Manhattan Corp........................................................... 9.615
Banc One Corp.................................................................. 6.422
First Union Corp............................................................... 5.924
Norwest Corp................................................................... 5.110
US Bancorp..................................................................... 4.958
Wells Fargo & Co............................................................... 4.918
First Chicago NBD.............................................................. 4.401
J.P. Morgan.................................................................... 4.022
National City Corp............................................................. 3.938
Bank New York.................................................................. 3.883
Fleet Financial Group.......................................................... 3.729
PNC Bank Corp.................................................................. 3.003
Mellon Bank Corp............................................................... 2.833
Wachovia Corp.................................................................. 2.803
KeyCorp........................................................................ 2.769
BankBoston Corp................................................................ 2.639
SunTrust Banks................................................................. 2.551
Bankers Trust New York......................................................... 2.027
Comerica Inc................................................................... 1.765
Summit Bancorp................................................................. 1.438
</TABLE>
"Index Price" on a given date means the weighted average (weighted in
accordance with the factors listed above) of the closing prices on such date of
the companies comprising the Index Group.
"Starting Date" means the last full day on which the NYSE was open for
trading prior to the execution of this Agreement.
"Starting Price" shall mean the closing price per share of Buyer Common
Stock on the Starting Date, as reported on the NYSE composite tape (as reported
in THE WALL STREET JOURNAL or, if not reported therein, in another mutually
agreed upon authoritative source).
If Buyer or any company belonging to the Index Group declares or effects a
stock dividend, reclassification, recapitalization, slit-up, combination,
exchange of shares or similar transaction between the Starting Date and the
Determination Date, the prices for the common stock of such company shall be
appropriately adjusted for the purposes of applying this Section 7.1(f).
Section 7.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Sections 7.1(a) through 7.1(c) and Section 7.1(f)
above, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Buyer or Seller or their respective
officers or directors except as set forth in the second sentence of Section 5.1
and in Section 5.6.
Section 7.3. AMENDMENT. This Agreement and the Schedules hereto may be
amended by the parties hereto, by action taken by or on behalf of their
respective Boards of Directors, at any time before or after approval of this
Agreement by the stockholders of Seller; PROVIDED, HOWEVER, that after any such
approval by the stockholders of Seller no such modification shall alter or
change the amount or kind of consideration to be received by holders of Seller
Common Stock as provided in this Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of Buyer and Seller.
A-28
<PAGE>
Section 7.4. SEVERABILITY. Any term, provision, covenant or restriction
contained in this Agreement held by a court or a Regulatory Authority of
competent jurisdiction or the Board to be invalid, void or unenforceable, shall
be ineffective to the extent of such invalidity, voidness or unenforceability,
but neither the remaining terms, provisions, covenants or restrictions contained
in this Agreement nor the validity or enforceability thereof in any other
jurisdiction shall be affected or impaired thereby. Any term, provision,
covenant or restriction contained in this Agreement that is so found to be so
broad as to be unenforceable shall be interpreted to be as broad as is
enforceable.
Section 7.5. WAIVER. Any term, condition or provision of this Agreement
may be waived in writing at any time by the party which is, or whose
stockholders are, entitled to the benefits thereof.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. No investigation by the parties hereto made heretofore or hereafter
shall affect the representations and warranties of the parties which are
contained herein and each such representation and warranty shall survive such
investigation. Except as set forth below in this Section 8.1, all
representations, warranties and agreements in this Agreement of Buyer and Seller
or in any instrument delivered by Buyer or Seller pursuant to or in connection
with this Agreement shall expire at the Effective Time or upon termination of
this Agreement in accordance with its terms or, in the case of any other such
instrument, in accordance with the terms of such instrument. In the event of
consummation of the Merger, the agreements contained in or referred to in
Sections 5.2(b), 5.7, 5.9, 5.10, 5.11, 5.12 and 5.18 shall survive the Effective
Time. In the event of termination of this Agreement in accordance with Sections
7.1(a), 7.1(b), 7.1(c) or 7.1(f), the agreements contained in or referred to in
the second sentence of Section 5.1, Section 5.6 and Section 7.2 shall survive
such termination.
Section 8.2. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to be duly received (i) on the date given if
delivered personally or (ii) upon confirmation of receipt, if by facsimile
transmission or (iii) on the date received if mailed by registered or certified
mail (return receipt requested), or (iv) on the business date after being
delivered to a reputable overnight delivery service, if by such service, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to Buyer:
Star Banc Corporation
425 Walnut Street
Cincinnati, Ohio 45202
Attention: David Moffett
Telecopy: (513) 632-4279
Copies to:
Star Banc Corporation
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Jennie Carlson
Telecopy: (513) 632-4279
A-29
<PAGE>
(ii) if to Seller:
Trans Financial, Inc.
500 East Main Street
Bowling Green, Kentucky 42101
Attention: Vince A Berta
Telecopy: (502) 782-4912
Copies to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy, Esq.
Telecopy: (212) 403-2000
Section 8.3. MISCELLANEOUS. This Agreement (including the Schedules and
other written documents referred to herein or provided hereunder) (i)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof, including any confidentiality agreement
between the parties hereto, (ii) except with respect to Sections 5.9(c) and 5.12
is not intended to confer upon any person not a party hereto any rights or
remedies hereunder, (iii) shall not be assigned by operation of law or otherwise
and (iv) shall be governed in all respects by the laws of the State of Ohio,
except as otherwise specifically provided herein or required by the KBCA. This
Agreement may be executed in counterparts which together shall constitute a
single agreement and may be delivered by facsimile.
IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be signed
as of the date first written above.
<TABLE>
<S> <C> <C>
STAR BANC CORPORATION
By: /s/ JERRY A. GRUNDHOFER
-----------------------------------------
Name: Jerry A. Grundhofer
Title: Chairman, President and Chief
Executive Officer
TRANS FINANCIAL, INC.
By: /s/ VINCE A. BERTA
-----------------------------------------
Name: Vince A. Berta
Title:President and Chief
Executive Officer
</TABLE>
A-30
<PAGE>
ANNEX B
STOCK OPTION AGREEMENT, dated April 9, 1998, between Trans Financial, Inc.,
a Kentucky corporation ("Issuer"), and Star Banc Corporation, an Ohio
corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Stock Option Agreement
(the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 2,331,962 fully
paid and nonassessable shares of Issuer's Common Stock, no par value per share
("Common Stock"), at a price of $46.625 per share (the "Option Price");
PROVIDED, HOWEVER, that in no event shall the number of shares of Common Stock
for which this Option is exercisable exceed 19.9% of the Issuer's issued and
outstanding shares of Common Stock without giving effect to any shares subject
to or issued pursuant to the Option. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are either (i)
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement or as permitted under the terms of the Merger
Agreement) or (ii) redeemed, repurchased, retired or otherwise cease to be
outstanding after the date of the Agreement, the number of shares of Common
Stock subject to the Option shall be increased or decreased, as appropriate, so
that, after such issuance, such number equals 19.9% of the number of shares of
Common Stock then issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. Nothing contained in this Section 1(b)
or elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole
or part, and from time to time, if, but only if, both an Initial Triggering
Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Exercise Termination
Event (as hereinafter defined), PROVIDED that the Holder shall have sent the
written notice of such exercise (as provided in subsection (e) of this Section
2) within 90 days following such Subsequent Triggering Event. Each of the
following shall be an "Exercise Termination Event": (i) the Effective Time (as
defined in the Merger Agreement) of the Merger; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event except a termination by
Grantee pursuant to Section 7.1(d) of the Merger Agreement (unless the breach by
Issuer giving rise to such right of termination is non-volitional); or (iii) the
passage of 12 months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering Event or is a
termination by Grantee pursuant to Section 7.1(d) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional) (PROVIDED that if an Initial Triggering Event continues or
occurs beyond such termination and prior to the passage of such 12-month period,
the Exercise Termination Event shall be 12 months from the expiration of the
Last Triggering Event but in no event more than 18 months after such
termination). The "Last Triggering Event" shall mean the last Initial Triggering
Event to expire. The term "Holder" shall mean the holder or holders of the
Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
<PAGE>
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules
and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer shall have
recommended that the stockholders of Issuer approve or accept any
Acquisition Transaction. For purposes of this Agreement, "Acquisition
Transaction" shall mean (w) a merger or consolidation, or any similar
transaction, involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (x) a purchase, lease or other
acquisition or assumption of all or a substantial portion of the assets or
deposits of Issuer or any Significant Subsidiary of Issuer, (y) a purchase
or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the voting
power of Issuer, or (z) any substantially similar transaction; PROVIDED,
HOWEVER, that in no event shall any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or more of its
Subsidiaries or involving only any two or more of such Subsidiaries, be
deemed to be an Acquisition Transaction, provided that any such transaction
is not entered into in violation of the terms of the Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received Grantee's
prior written consent, shall have authorized, recommended, proposed or
publicly announced its intention to authorize, recommend or propose, to
engage in an Acquisition Transaction with any person other than Grantee or a
Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly
withdrawn or modified, or publicly announced its intention to withdraw or
modify, in any manner adverse to Grantee, its recommendation that the
stockholders of Issuer approve the transactions contemplated by the Merger
Agreement in anticipation of engaging in an Acquisition Transaction;
(iii) Any person other than Grantee or a trustee holding on behalf of an
employee benefit plan of the Issuer, any Grantee Subsidiary or any Issuer
Subsidiary acting in a fiduciary capacity in the ordinary course of its
business shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement having
the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules
and regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall have
made a BONA FIDE proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below);
or
(vi) Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20% or more
of the then outstanding Common Stock; or
B-2
<PAGE>
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event of which it has notice
(together, a "Triggering Event"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to exercise
the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); PROVIDED that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, PROVIDED that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the Securities Act of 1933,
as amended. A copy of such agreement is on file at the principal office of
Issuer and will be provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
B-3
<PAGE>
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. ' 18a and regulations promulgated
thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as
amended (the "BHCA"), or the Change in Bank Control Act of 1978, as amended, or
any state banking law, prior approval of or notice to the Federal Reserve Board
or to any state regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such applications or
notices and providing such information to the Federal Reserve Board or such
state regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5. In the event of any change in, or distributions
in respect of, the Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, option
exercise, exchanges of shares, distributions on or in respect of the Common
Stock that would be prohibited under the terms of the Merger Agreement, or the
like, the type and number of shares of Common Stock purchasable upon exercise
hereof and the Option Price shall be appropriately adjusted in such manner as
shall fully preserve the economic benefits provided hereunder and proper
provision shall be made in any agreement governing any such transaction to
provide for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
B-4
<PAGE>
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee delivered
within 90 days of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a shelf registration statement under the 1933 Act covering this
Option and any shares issued and issuable pursuant to this Option and shall use
its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and PROVIDED, HOWEVER,that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and PROVIDED FURTHER, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agreements for the Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as defined
below), (i) following a request of the Holder, delivered prior to an Exercise
Termination Event, Issuer (or any successor thereto) shall repurchase the Option
from the Holder at a price (the "Option Repurchase Price") equal to the amount
by which (A) the Market/Offer Price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which this Option may then be
exercised and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered within 90 days of such occurrence (or such later
period as provided in Section 10), Issuer shall repurchase such number of the
Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the Market/Offer Price multiplied by
the number of Option Shares so designated. The term "Market/Offer Price" shall
mean the highest of (i) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made and not withdrawn prior to
acceptance of such shares, (ii) the price per share of Common Stock to be paid
by any third party pursuant to an agreement with Issuer, (iii) the highest
closing price for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of Option Shares, as
the case may be, or (iv) in the event of a sale of all or a substantial portion
of Issuer's assets, the sum of the price paid in such sale for such assets and
the current
B-5
<PAGE>
market value of the remaining assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to the Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the Market/Offer Price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to the
Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7. Within
the latter to occur of (x) five business days after the surrender of the Option
and/or certificates representing Option Shares and the receipt of such notice or
notices relating thereto and (y) the time that is immediately prior to the
occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered
to the Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof, if any, that Issuer is not
then prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; PROVIDED, HOWEVER, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal approvals and to file
any required notices, in each case as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred (i) upon the consummation of any merger, consolidation or similar
transaction involving Issuer or any purchase, lease or other acquisition of all
or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
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<PAGE>
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than Issuer),
(ii) Issuer in a merger in which Issuer is the continuing or surviving
person, and (iii) the transferee of all or substantially all of Issuer's
assets.
(ii) "Substitute Common Stock" shall mean the common stock issued by the
issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as defined in
Section 7.
(4) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; PROVIDED that if Issuer is the issuer of
the Substitute Option, the Average Price shall be computed with respect to a
share of common stock issued by the person merging into Issuer or by any
company which controls or is controlled by such person, as the Holder may
elect.
(c) The Substitute Option shall have the same terms as the Option, PROVIDED,
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference
B-7
<PAGE>
in value shall be determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to (x) the amount by which (i) the Highest
Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common Stock
for which the Substitute Option may then be exercised plus (y) Grantee's
reasonable out-of-pocket expenses (to the extent not previously reimbursed), and
at the request of the owner (the "Substitute Share Owner") of shares of
Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer
shall repurchase the Substitute Shares at a price (the "Substitute Share
Repurchase Price") equal to (x) the Highest Closing Price multiplied by the
number of Substitute Shares so designated plus (y) Grantee's reasonable
Out-of-Pocket Expenses (to the extent not previously reimbursed). The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding the
date the Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the case
may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer following a
request for repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; PROVIDED, HOWEVER, that
if the Substitute Option Issuer is at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute
B-8
<PAGE>
Share Owner, as appropriate, that portion of the Substitute Option Repurchase
Price or the Substitute Share Repurchase Price that the Substitute Option Issuer
is not prohibited from delivering; and (ii) deliver, as appropriate, either (A)
to the Substitute Option Holder, a new Substitute Option evidencing the right of
the Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day period for exercise of certain rights under Sections 2, 6, 7
and 13 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and reserve
and to permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms will have reserved
for issuance upon the exercise of the Option, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and from
time to time issuable hereunder, and all such shares, upon issuance pursuant
hereto, will be duly authorized, validly issued, fully paid, nonassessable, and
except for limitations on voting rights contained in the certificate of
incorporation, will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); PROVIDED, HOWEVER, that until the date 15 days
following the date on which the Federal Reserve Board approves an application by
Grantee under the BHCA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option
B-9
<PAGE>
except in (i) a widely dispersed public distribution, (ii) a private placement
in which no one party acquires the right to purchase in excess of 2% of the
voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker
or investment banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf, or (iv) any other manner approved by the
Federal Reserve Board.
14. Each of Grantee and Issuer will use its best efforts to make all filings
with, and to obtain consents of, all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement, including without limitation making notification or application to
list the shares of Common Stock issuable hereunder on the Nasdaq National Market
System upon official notice of issuance and applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with the
laws of the State of Ohio, regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
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<PAGE>
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
<TABLE>
<S> <C> <C>
STAR BANC CORPORATION
BY: /S/ JERRY A. GRUNDHOFER
-----------------------------------------
Name: Jerry A. Grundhofer
Title: Chairman, President and Chief
Executive Officer
TRANS FINANCIAL, INC.
By: /s/ VINCE A. BERTA
-----------------------------------------
Name: Vince A. Berta
Title:President and Chief
Executive Officer
</TABLE>
B-11
<PAGE>
ANNEX C
DISSENTERS' RIGHTS PROVISIONS UNDER THE
KENTUCKY BUSINESS CORPORATION ACT
SUBTITLE 13. DISSENTERS' RIGHTS
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
271B.13-010. DEFINITIONS.--As used in this subtitle:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under KRS 271B.13-020 and who exercises that right when and in
the manner required by KRS 271B.13-200 to 271B.13-280.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable. In
any transaction subject to the requirements of KRS 271B.12-210 or exempted by
KRS 271B.12-220(2), "fair value" shall be at least an amount required to be paid
under KRS 271B.12-220(2) in order to be exempt from the requirements of KRS
271B.12-210.
(4) "Interest" means from the effective date of the corporate action until
the date of payment, at the average rate currently paid by the corporation on
its principal bank loans or, if none, at a rate that is fair and equitable under
all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
271B.13-020. RIGHT TO DISSENT.
(1) A shareholder shall be entitled to dissent from, and obtain payment of
the fair value of his shares in the event of, any of the following corporate
actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If shareholder approval is required for the merger by KRS
271B.11-040 or the articles of incorporation and the shareholder is
entitled to vote on the merger; or
2. If the corporation is a subsidiary that is merged with its parent
under KRS 271B.11-040;
(b) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one (1) year after the date of sale;
(d) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
1. Alters or abolishes a preferential right of the shares to a
distribution or in dissolution;
<PAGE>
2. Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
3. Excludes or limits the right of the shares to vote on any matter
other than a limitation by dilution through issuance of shares or other
securities with similar voting rights; or
4. Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under KRS 271B.6-040;
(e) Any transaction subject to the requirements of KRS 271B.12-210 or
exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for his shares
under this chapter shall not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
271B.13-030. DISSENT BY NOMINEE AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he shall dissent with respect to all
shares beneficially owned by any one (1) person and notify the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter, under this subsection
shall be determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if:
(a) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(b) He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
PROCEDURES FOR EXERCISE OF DISSENTERS' RIGHTS
271B.13-200. NOTICE OF DISSENTERS' RIGHTS.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this subtitle and the corporation shall undertake to provide a copy
of this subtitle to any shareholder entitled to vote at the shareholders'
meeting upon request of that shareholder.
(2) If corporate action creating dissenters' rights under KRS 271B.13-020 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in KRS 271B.13-220.
271B.13-210. NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(a) Shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action
is effectuated; and
(b) Shall not vote his shares in favor of the proposed action.
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<PAGE>
(2) A shareholder who does not satisfy the requirements of subsection (1) of
this section shall not be entitled to payment for his shares under this chapter.
[(Enact. Acts 1988, ch. 23, sec. 127, effective January 1, 1989.)]
271B.13-220. DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of KRS 271B.13-210.
(2) The dissenters' notice shall be sent no later than ten (10) days after
the date the proposed corporation action was authorized by the shareholders, or,
if no shareholder authorization was obtained, by the board of directors, and
shall:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not he acquired beneficial ownership of the shares
before that date;
(d) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty (30), nor more than sixty (60) days
after the date the notice provided in subsection (1) of this section is
delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230. DUTY TO DEMAND PAYMENT.
(1) A shareholder who is sent a dissenters' notice described in KRS
271B.13-220 shall demand payment, certify whether he acquired beneficial
ownership of the shares before the date required to be set forth in the
dissenters' notice pursuant to subsection (2)(c) of KRS 271B.13-220, and deposit
his certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his share certificates
under subsection (1) of this section shall retain all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(3) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
shall not be entitled to payment for his shares under this subtitle.
271B.13-240. SHARE RESTRICTIONS.
(1) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under KRS 271B.13-260.
(2) The person for whom dissenters' rights are asserted as to uncertificated
shares shall retain all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
C-3
<PAGE>
271B.13-250. PAYMENT.
(1) Except as provided in KRS 271B.13-270, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with KRS 271B.13-230 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
(2) The payment shall be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial statements,
if any;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment under KRS
271B.13-280.
271B.13-260. FAILURE TO TAKE ACTION.
(1) If the corporation does not take the proposed action within sixty (60)
days after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under KRS 271B.13-220 and repeat the payment demand
procedure.
271B.13-270. AFTER-ACQUIRED SHARES.
(1) A corporation may elect to withhold payment required by KRS 271B.13-250
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenters' right to demand payment under KRS
271B.13-280.
271B.13-280. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate (less any payment under KRS 271B.13-250), or reject the
corporation's offer under KRS 271B.13-270 and demand payment of the fair value
of his shares and interest due, if:
(a) The dissenter believes that the amount paid under KRS 271B.13-250 or
offered under KRS 271B.13-270 is less than the fair value of his shares or
that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.13-250 within
sixty (60) days after the date set for demanding payment; or
(c) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date set
for demanding payment.
C-4
<PAGE>
(2) A dissenter waives his right to demand payment under this section unless
he shall notify the corporation of his demand in writing under subsection (1) of
this section within thirty (30) days after the corporation made or offered
payment for his shares.
JUDICIAL APPRAISAL OF SHARES
271B.13-300. COURT ACTION.
(1) If a demand for payment under KRS 271B.13-280 remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the sixty (60) day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of
the county where a corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(3) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced under
subsection (2) of this section shall be plenary and exclusive. The court may
appoint one (1) or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters shall be
entitled to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding shall be entitled to
judgment:
(a) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under KRS
271B.13-270.
271B.13-310. COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under KRS 271B.13-300
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters, if
the court finds the corporation did not substantially comply with the
requirements of KRS 271B.13-200 to 271B.13-280; or
(b) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this subtitle.
C-5
<PAGE>
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
C-6
<PAGE>
ANNEX D
[LETTERHEAD OF DONALDSON, LUFKIN & JENRETTE]
, 1998
Board of Directors
Trans Financial, Inc.
500 East Main Street
P.O. Box 90001
Bowling Green, KY 42101
Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock, no par value per
share (the "Trans Financial Common Stock"), of Trans Financial, Inc. ("Trans
Financial" or the "Company") of the Exchange Ratio (as defined below) set forth
in the Agreement and Plan of Merger, dated April 9, 1998 (the "Agreement"), by
and between Star Banc Corporation ("Star") and the Company pursuant to which
Trans Financial will be merged (the "Merger") with and into Star.
Pursuant to the Agreement, each share of Trans Financial Common Stock will
be converted, subject to certain exceptions, into the right to receive 0.9003
shares (the "Exchange Ratio") of common stock, $5 par value per share (the "Star
Common Stock"), of Star. We understand that the Merger is conditioned upon,
among other things, receipt of opinions to the effect that the Merger will
qualify for treatment as a tax-free reorganization and as a pooling of interests
for accounting purposes. The terms of the Merger are more fully set forth in the
Agreement. In connection with the Merger, the parties have also proposed to
enter into an agreement (the "Stock Option Agreement") pursuant to which Trans
Financial will irrevocably grant Star an option to purchase a number of shares
representing up to 19.9% of the outstanding shares of Trans Financial Common
Stock, at a price and on terms and conditions set forth in the Stock Option
Agreement.
In arriving at our opinion, we have reviewed the financial terms and
provisions of the draft dated April 9, 1998 of the Agreement and the exhibits
thereto, and the draft dated April 9, 1998 of the Stock Option Agreement. We
also have reviewed financial and other information that was publicly available
or furnished to us by Trans Financial and Star including information provided
during discussions with their respective managements. Included in the
information provided during discussions with the respective managements were
certain financial projections of the Company for the period beginning January 1,
1998 and ending December 31, 2002 prepared by the management of the Company and
certain financial projections of Star for the period beginning January 1, 1998
and ending December 31, 2002 prepared by the management of Star. We have also
reviewed certain pro forma financial statements prepared by the management of
the Company and Star reflecting the Merger and certain operating synergies
expected to result therefrom. In addition, we have compared certain financial
and securities data of the Company and Star with various other companies whose
securities are traded in public markets, reviewed the historical stock prices
and trading volumes of Trans Financial Common Stock and Star Common Stock,
reviewed prices and premiums paid in certain other business combinations and
conducted such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion. We were not requested to, nor did we,
solicit the interest of any other party in acquiring the Company.
In rendering our opinion, we have relied upon and assumed without
independent verification the accuracy and completeness of all of the financial
and other information that was available to us from public sources, that was
provided to us by the Company and Star or their respective representatives, or
that was otherwise reviewed by us. In particular, we have relied upon the
estimates of the management of the Company and Star of the operating synergies
achievable as a result of the Merger and upon our discussion
<PAGE>
Board of Directors
Trans Financial, Inc.
Page 2 , 1998
of such synergies with the management of the Company and Star. With respect to
the financial projections used in our analysis, we have assumed that they have
been reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company and Star as to the
future operating and financial performance of the Company and Star,
respectively.
We are not experts in the evaluation of loan portfolios or allowances for
loan and real estate owned losses and, upon the direction of management of the
Company, we have not independently verified and have assumed that the aggregate
allowances for loan losses set forth in the balance sheets of each of Trans
Financial and Star at March 31, 1998 are adequate to cover such losses and
complied fully with applicable law, regulatory policy and sound banking practice
as of the date of such balance sheets. We were not retained to and we did not
conduct a physical inspection of any of the properties or facilities of Trans
Financial or Star, and we did not make any independent evaluation or appraisal
of the assets, liabilities or prospects of Trans Financial or Star, were not
furnished with any such evaluation or appraisal, and did not review any
individual credit files. In rendering our opinion, we have been advised by Trans
Financial and Star and have assumed that there are no other factors that would
delay or subject to adverse conditions any necessary regulatory or governmental
approval for the Merger, and we have assumed that all conditions to the Merger
will be satisfied and not waived. We have relied as to certain legal matters on
advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which shares of Star Common Stock will actually trade at any time. Our
opinion does not address the relative merits of the Merger and the other
business strategies being considered by the Company's Board of Directors, nor
does it address the Board's decision to proceed with the Merger. Our opinion
does not constitute a recommendation to any stockholder as to how such
stockholder should vote with respect to the Agreement.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connect with mergers, acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the ordinary course of our
business we actively trade the debt and equity securities of companies,
including Trans Financial and Star, for our own account and for the accounts of
customers and may hold a long or short position in such securities at any time.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair to the holders of Trans Financial
Common Stock from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
--------------------------------------
David D. Olson
Managing Director
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is incorporated under the laws of Ohio. Section 1701.13 of
the Ohio General Corporation Law prescribes the conditions under which
indemnification may be obtained by a present or former director or officer of
the Registrant who incurs expenses or liability as a consequence of certain
proceedings arising out of his or her activities as a director or officer.
Article SIXTH of the Registrant's Articles of Incorporation and Article IV of
the Registrant's Regulations provide for indemnification of directors and
officers under certain circumstances. The Registrant has purchased a standard
liability policy, which, subject to any limitations set forth in the policy,
indemnifies the Registrant's directors and officers for damages that they become
legally obligated to pay as a result of any negligent act, error or omission
committed while serving in their official capacity.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed herewith or incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, by and between Trans Financial, Inc. and Star Banc Corporation, dated as
of April 9, 1998, included as Annex A to the Proxy Statement/Prospectus included as part of this
Registration Statement.
5.1 Opinion of Jennie Carlson Esq., Senior Vice President and General Counsel of Star Banc Corporation.
8.1 Opinion of Wachtell, Lipton, Rosen & Katz.
23.1 Consent of Donaldson, Lufkin & Jenrette Securities Corporation.
23.2 Consent of Jennie Carlson, Esq., Senior Vice President and General Counsel of Star Banc Corporation,
included in Exhibit 5.1 to this Registration Statement.
23.3 Consent of Wachtell, Lipton, Rosen & Katz, included in Exhibit 8.1 to this Registration Statement.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Arthur Andersen LLP.
24.1 Power of Attorney.
99.1 Stock Option Agreement, dated as of April 9, 1998, by and between Star Banc Corporation (as issuer) and
Trans Financial, Inc. (as grantee), included as Annex B to the Proxy Statement/ Prospectus included as
part of this Registration Statement.
99.2 Form of Proxy for Special Meeting of Stockholders of Trans Financial, Inc.
</TABLE>
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The undersigned Registrant hereby undertakes that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(d) The undersigned Registrant hereby undertakes that every prospectus (i)
that is filed pursuant to paragraph (c) immediately preceding, or (ii) that
purports to meet the requirements of Sections 10(a)(3) of the Securities Act and
is used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other that the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in
II-2
<PAGE>
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cincinnati, State of
Ohio, this 12th day of June, 1998.
STAR BANC CORPORATION
BY: /S/ JERRY A. GRUNDHOFER
-----------------------------------------
Jerry A. Grundhofer
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 12th day of June, 1998.
SIGNATURE CAPACITY
- ------------------------------ ---------------------------
Chairman of the Board,
/s/ JERRY A. GRUNDHOFER President Chief Executive
- ------------------------------ Officer and Director
Jerry A. Grundhofer (Principal Executive
Officer)
Executive Vice President
/s/ DAVID M. MOFFETT and Chief Financial
- ------------------------------ Officer (Principal
David M. Moffett Financial Officer)
/s/ JAMES D. HOGAN Controller (Principal
- ------------------------------ Accounting Officer)
James D. Hogan
* Director
- ------------------------------
Paul M. Baker
* Director
- ------------------------------
James R. Bridgeland, Jr.
Director
- ------------------------------
Laurance L. Browning, Jr.
* Director
- ------------------------------
Victoria B. Buyniski
Director
- ------------------------------
Samuel M. Cassidy
* Director
- ------------------------------
V. Anderson Coombe
II-4
<PAGE>
SIGNATURE CAPACITY
- ------------------------------ ---------------------------
* Director
- ------------------------------
John C. Dannemiller
* Director
- ------------------------------
J.P. Hayden, Jr.
* Director
- ------------------------------
Roger L. Howe
* Director
- ------------------------------
Thomas J. Klinedinst, Jr.
* Director
- ------------------------------
Charles S. Mechem, Jr.
* Director
- ------------------------------
Daniel J. Meyer
* Director
- ------------------------------
David B. O'Maley
* Director
- ------------------------------
O'dell M. Owens
Director
- ------------------------------
Thomas E. Petry
Director
- ------------------------------
Oliver W. Waddell
<TABLE>
<S> <C> <C>
*By: /s/ JERRY A. GRUNDHOFER
-----------------------------------------
Jerry A. Grundhofer
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------- ----------------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger, by and between Trans Financial, Inc. and Star Banc Corporation, dated
as of April 9, 1998, included as Annex A to the Proxy Statement/ Prospectus included as part of this
Registration Statement.
5.1 Opinion of Jennie Carlson Esq., Senior Vice President and General Counsel of Star Banc Corporation.
8.1 Opinion of Wachtell, Lipton, Rosen & Katz.
23.1 Consent of Donaldson, Lufkin & Jenrette Securities Corporation.
23.2 Consent of Jennie Carlson, Esq., Senior Vice President and General Counsel of Star Banc Corporation,
included in Exhibit 5.1 to this Registration Statement.
23.3 Consent of Wachtell, Lipton, Rosen & Katz, included in Exhibit 8.1 to this Registration Statement.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Arthur Andersen LLP.
24.1 Power of Attorney.
99.1 Stock Option Agreement, dated as of April 9, 1998, by and between Star Banc Corporation (as issuer)
and Trans Financial, Inc. (as grantee), included as Annex B to the Proxy Statement/Prospectus
included as part of this Registration Statement.
99.2 Form of Proxy for Special Meeting of Stockholders of Trans Financial, Inc.
</TABLE>
<PAGE>
EXHIBIT 5.1
[Letterhead of Star Banc Corporation]
June 12, 1998
Star Banc Corporation
425 Walnut Street
Cincinnati, Ohio 45202
Re: Registration Statement on Form S-4 Related to the Acquisition of Trans
Financial, Inc.
Ladies and Gentlemen:
I and other members of my staff have acted as counsel to Star Banc
Corporation, an Ohio corporation (the "Corporation"), in connection with the
preparation and filing of a Registration Statement on Form S-4 (the
"Registration Statement") relating to the issuance of up to 11,321,317 shares
of the Corporation's Common Stock and attached preferred share purchase
rights (collectively, the "Common Stock") to be issued by the Corporation in
connection with the merger of Trans Financial, Inc. with and into the
Corporation.
In rendering this opinion, I have examined such corporate records and
other documents, and I have reviewed such matters of law, as I have deemed
necessary or appropriate. Based on the foregoing, I am of the opinion that
the Common Stock is legally authorized and, when the Registration Statement
has been declared effective by order of the Securities and Exchange
Commission and the Common Stock have been issued and paid for upon the terms
and conditions set forth in the Registration Statement, the Common Stock will
be validly issued, fully paid and nonassessable.
I hereby consent to be named in the Registration Statement and in the
related proxy statement/prospectus contained therein as the attorney who
passed upon the legality of the securities being registered, and to the filing
of a copy of this opinion as Exhibit 5.1 to the Registration Statement.
Very truly yours,
/s/ Jennie P. Carlson
-----------------------------
JENNIE P. CARLSON
Senior Vice President
and General Counsel
<PAGE>
Exhibit 8.1
[Letterhead of Wachtell, Lipton, Rosen & Katz]
June 12, 1998
Trans Financial, Inc.
500 East Main Street
Bowling Green, Kentucky 42101
Star Banc Corporation
425 Walnut Street
Cincinnati, Ohio 45202
Ladies and Gentlemen:
We have acted as special counsel to Trans Financial, Inc., a Kentucky
corporation ("TRANS FINANCIAL"), in connection with the proposed merger (the
"MERGER") of Trans Financial with and into Star Banc Corporation, an Ohio
corporation ("STAR"), pursuant to the Agreement and Plan of Merger (the
"AGREEMENT") dated as of April 9, 1998, by and between Star and Trans Financial.
At your request and for purposes of the Registration Statement on Form S-4 of
Star (the "REGISTRATION STATEMENT"), we are rendering our opinion concerning
certain federal income tax consequences of the Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of Star and the consent of Trans Financial, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of Star and Trans Financial
dated the date hereof, and have assumed that such statements and representations
will be complete and accurate as of the Effective Time and that all such
statements and representations made to the knowledge of any person or entity or
with similar qualification are and will be true and correct as if made without
such qualification. We have also relied upon the accuracy of the Registration
Statement and the Proxy Statement/Prospectus of Star and Trans Financial as
<PAGE>
amended or supplemented to the date hereof (the "PROXY STATEMENT/PROSPECTUS"),
filed with the Securities and Exchange Commission in connection with the Merger.
Any capitalized term used and not defined herein has the meaning given to it in
the Joint Proxy Statement/Prospectus or the appendices thereto (including the
Agreement).
We have also assumed that: (i) the transactions contemplated by the
Agreement will be consummated in accordance therewith and as described in the
Proxy Statement/Prospectus (and no transaction or condition described therein
and affecting this opinion will be waived by any party); (ii) the Merger will
qualify as a statutory merger under the applicable laws of the States of
Kentucky and Ohio; and (iii) the Merger will be reported by Star and Trans
Financial on their respective federal income tax returns in a manner consistent
with the opinion set forth below.
Based upon and subject to the foregoing, it is our opinion, under
currently applicable United States federal income tax law, that (i) the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, and (ii) no gain or loss will be recognized by the
stockholders of the Trans Financial who receive solely Star Common Stock in
exchange for shares of Trans Financial Common Stock, except with respect to cash
received in lieu of fractional shares of Star Common Stock.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement, and to the
reference to this opinion under the captions "SUMMARY INFORMATION--Federal
Income Tax Consequences in General" and "THE MERGER--Certain Federal Income Tax
Consequences of the Merger." In giving such consent, we do not hereby admit
that we are in the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended.
This opinion relates solely to certain federal income tax consequences
of the Merger and no opinion is expressed as to the tax consequences under any
foreign, state or local tax law.
We are furnishing this opinion to you solely in connection with the
filing of the Registration Statement and this opinion is not to be relied upon,
circulated, quoted or otherwise referred to by other persons for any purpose.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
ADC/bng
-2-
<PAGE>
Exhibit 23.1
CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
We hereby consent to (i) the inclusion of our opinion letter to the
Board of Directors of Trans Financial, Inc. (the "Company") as Annex D to the
Proxy Statement/Prospectus filed as part of the Registration Statement on
Form S-4 of Star Banc Corporation relating to the merger of the Company with
Star Banc Corporation and (ii) the use of our name and the description of our
opinion in the Company's letter to its stockholders and in the sections
captioned "Summary Information -- Opinion of Trans Financial's Financial
Advisor," "The Merger -- Background of the Merger," "The Merger -- Reasons
for the Merger; Trans Financial Board Recommendation" and "The Merger --
Opinion of Trans Financial's Financial Advisor" of such Proxy
Statement/Prospectus. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under, and we do not
admit that we are "experts" for purposes of, the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Greg Smith
---------------------------
New York, New York
June 12, 1998
<PAGE>
Exhibit 23.4
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Trans Financial, Inc.:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Louisville, Kentucky
June 12, 1998
<PAGE>
Exhibit 23.5
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 12, 1998
incorporated by reference in Star Banc Corporation's Form 10-K for the year
ended December 31, 1997 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
June 12, 1998
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
We, the undersigned directors and officers of Star Banc Corporation,
appoint Jerry A. Grundhofer, David M. Moffett and Jennie P. Carlson, or any
of them, our true and lawful attorneys and agents, to do any and all acts and
things in our names and on our behalf in our capacities as directors and
officers, which said attorneys and agents, or each of them, deem necessary or
advisable to enable the Corporation to comply with the Securities Act of
1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with a Registration
Statement on Form S-4 to be filed for the registration of Star Banc
Corporation common stock to be used to purchase Trans Financial, Inc.,
including, without limitation, power and authority to sign for us, or any of
us, in our names in the capacities indicated below, any and all amendments to
such Registration Statement, and we ratify and confirm all that said
attorneys and agents, or each of them, does or causes to be done by virtue of
their power.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Power of Attorney has been signed by the following persons as of the
29th day of May, 1998 in the capacities indicated:
Signature Title
- --------- -----
/s/ Jerry A. Grundhofer Chairman of the Board, President, Chief
- ------------------------------ Executive Officer and Director
Jerry A. Grundhofer
/s/ David M. Moffett Executive Vice President and Chief
- ------------------------------ Financial Officer
David M. Moffett
/s/ James D. Hogan Controller
- ------------------------------
James D. Hogan
/s/ Paul M. Baker Director
- ------------------------------
Paul M. Baker
/s/ James R. Bridgeland, Jr. Director
- ------------------------------
James R. Bridgeland, Jr.
Director
- ------------------------------
Laurance L. Browning, Jr.
/s/ Victoria B. Buyniski Director
- ------------------------------
Victoria B. Buyniski
<PAGE>
Director
- ------------------------------
Samuel M. Cassidy
/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
/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/ David B. O'Maley Director
- ------------------------------
David B. O'Maley
/s/ O'dell M. Owens Director
- ------------------------------
O'dell M. Owens
Director
- ------------------------------
Thomas E. Petry
Director
- ------------------------------
Oliver W. Waddell
<PAGE>
EXHIBIT 99.2
TRANS FINANCIAL, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE TRANS FINANCIAL
SPECIAL
MEETING OF STOCKHOLDERS TO BE HELD ON , 1998
The undersigned hereby appoints Rodger E. Lundin and Gregg Hall, and either
of them, with full power to act alone, the true and lawful attorneys-in-fact and
proxies of the undersigned to vote all shares of Common Stock of TRANS
FINANCIAL, INC., a Kentucky corporation (the "Company"), held by the
undersigned, with full power of substitution and revocation, with the same force
and effect as the undersigned would be entitled to vote if personally present at
the Special Meeting of Stockholders of the Company to be held at
, on , 1998, at a.m. (Central Time),
and at any adjournment or postponement thereof, as follows:
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<S> <C> <C> <C>
1. Approval and adoption of the Agreement and Plan of Merger, dated April 9, FOR AGAINST ABSTAIN
1998 (the "Merger Agreement"), by and between Star Banc Corporation, an / / / / / /
Ohio corporation, and the Company.
2. OTHER MATTERS: Discretionary authority is hereby granted to transact such
other business as may properly come before the meeting or any adjournment
or postponement thereof.
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See reverse side for important information.
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THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF THIS PROXY IS SUBMITTED, BUT NO DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED
"FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
The undersigned hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and the Proxy Statement/Prospectus, each dated , 1998,
furnished herewith.
Dated:______________________, 1998
Signature:________________________
Signature(s) (if held jointly):___
Title or Authority:_______________
IMPORTANT: Please sign your
name exactly as it appears hereon.
When signing as attorney, agent,
executor, administrator, trustee,
guardian or corporate officer,
please give your full title as
such. Each joint owner should sign
the proxy. If executed by a
partnership, this proxy should be
signed by an authorized partner.
