STAR BANC
CORPORATION
425 Walnut Street
Cincinnati, Ohio 45202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 14, 1998
Dear Star Banc Corporation Shareholders:
The Annual Meeting of Shareholders of Star Banc Corporation
("Corporation") will be held in the TAFT BALLROOM ON THE THIRD FLOOR
OF THE WESTIN HOTEL, Fifth and Walnut Streets, Cincinnati,
Ohio, on Tuesday, April 14, 1998, at 11:00 a.m. The purpose of
the meeting is to consider and act on the following:
1. To elect six directors for three year terms ending in the
year 2001.
2. To amend Article Fourth of the Articles of Incorporation to
increase the number of authorized shares of common stock, $5.00
par value, from 200,000,000 to 400,000,000.
3. To transact any other business that may properly come before
the Annual Meeting.
Shareholders who are of record at the close of business on
February 19, 1998, are entitled to vote at the meeting.
Shareholders are cordially invited to attend the meeting. IF
YOU WISH TO ATTEND THE MEETING BUT YOUR SHARES ARE HELD IN THE
NAME OF A BROKER, TRUST, BANK OR OTHER NOMINEE, PLEASE BRING A PROXY
OR LETTER FROM THE BROKER, TRUSTEE, BANK OR NOMINEE WITH YOU TO CONFIRM
YOUR BENEFICIAL OWNERSHIP OF THE SHARES. Please complete, execute and
return the enclosed Proxy in the postage paid envelope whether or not you
plan to attend so that your shares may be represented at the meeting.
If you attend the meeting, you may revoke your Proxy and vote in person
if you choose.
By order of the Board of Directors,
Jennie P. Carlson
Senior Vice President,
General Counsel and Secretary
Cincinnati, Ohio
March 3, 1998
YOUR VOTE IS IMPORTANT. PLEASE EXECUTE AND RETURN THE ENCLOSED
PROXY PROMPTLY WHETHER OR NOT YOU INTEND TO ATTEND THE MEETING.
STAR BANC
CORPORATION
425 Walnut Street
Cincinnati, Ohio 45202
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is provided with the solicitation of
proxies for the Board of Directors of Star Banc Corporation,
(the "Corporation"), for use at the Annual Meeting of
Shareholders to be held on April 14, 1998. A Notice of Annual
Meeting is attached and a form of proxy is enclosed. These
proxy materials are first being mailed to shareholders of the
Corporation on or about March 3, 1998.
THE PROXY
The persons named as proxies were selected by the Board of
Directors of the Corporation.
When a proxy in the enclosed form is properly executed and
returned, the shares it represents will be voted at the meeting.
Any shareholder who gives a proxy may revoke or revise that
proxy at any time before the meeting by giving written notice to
the Corporation's Secretary, by executing and returning a later
dated proxy or by voting by ballot at the meeting.
The Corporation pays the cost to solicit proxies. In addition
to soliciting proxies by mail, directors, officers and regular
employees of the Corporation may solicit proxies by telephone or
in person without additional compensation. The Corporation may
request banks, brokerage houses or other custodians, nominees or
fiduciaries to solicit proxies and will reimburse those entities
reasonable expenses for such solicitation.
OUTSTANDING VOTING SECURITIES AND PRINCIPAL HOLDERS
94,904,304 shares of the Corporation's Common Stock, par value
$5.00, (the "Common Stock") were outstanding on the close of
business on February 19, 1998, (the "Record Date"). Each of
those shares is entitled to one vote on each matter submitted at
the meeting. Only shareholders of record at the close of
business on the Record Date are entitled to vote at the meeting.
The following table lists the holdings of the only persons
(including any "group" as that term is used in Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended) known by the
Corporation to be the beneficial owners of more than five
percent (5%) of its outstanding Common Stock on December 31,
1997.
<TABLE>
<CAPTION>
Name of Shares Beneficially
Beneficial Owner Address Owned Percent of Class
<S> <C> <C> <C>
Western Southern Life 400 Broadway 7,636,215 8.95%
Insurance Co. Cincinnati, Ohio 45202
Star Bank, N.A. (1) 425 Walnut Street 4,623,780 5.42%
Trust Division Cincinnati, Ohio 45202
(1) Star Bank, N.A., acting in its fiduciary capacity under
numerous governing instruments as sole fiduciary or
co-fiduciary, has sole or shared voting and/or investment
decision authority over a total of 4,623,780 shares, or 5.42% of
class. Star Bank, N.A. disclaims any beneficial interest in
these shares held in its fiduciary capacity.
</TABLE>
Securities and Exchange Commission Rule 13d-3 defines
"beneficial ownership" as voting or investment decision power
over shares. Beneficial ownership does not necessarily mean
that the holder enjoys any economic benefit from those shares.
The following table lists information about the beneficial
ownership of the Corporation's Common Stock by each Director,
the Chief Executive Officer and the next four highest
compensated executive officers of the Corporation in all
capacities to the Corporation and its subsidiaries during the
year ended December 31, 1997 individually, as reported to the
Corporation by those persons as of December 31, 1997.
<TABLE>
<CAPTION>
Shares Shares Held Pursuant to
Beneficially Deferred Compensation Percentage
Name Owned (1) Plan(4) of Ownership
<S> <C> <C> <C>
James R. Bridgeland, Jr. 14,748(2) 57,572 0.08%
Laurance L. Browning 21,100 - 0.02%
Victoria B. Buyniski 13,611(2) 798 0.02%
Joseph A. Campanella 265,035(2)(3) - 0.31%
Samuel M. Cassidy 362,059(2) - 0.42%
V. Anderson Coombe 166,104 77,359 0.29%
John C. Dannemiller 5,400(2) 11,912 0.02%
Richard K. Davis 249,768(2)(3) 5,502 0.30%
Jerry A. Grundhofer 1,050,248(2)(3) 54,577 1.30%
J. P. Hayden, Jr. 998,178(5) - 1.17%
Roger L. Howe 154,740(2) - 0.18%
Thomas J. Klinedinst, Jr. 54,316(2)(6) - 0.06%
Jerome C. Kohlhepp 184,723(3) 9,087 0.23%
Charles S. Mechem, Jr. 21,255(2) - 0.02%
Daniel J. Meyer 5,700(2) 15,585 0.02%
David M. Moffett 192,483(2)(3) 13,767 0.24%
David B. O'Maley 263,700(2)(7) 763 0.31%
O'dell M. Owens, M.D. 1,500 12,132 0.02%
Thomas E. Petry 6,900(2) 51,831 0.07%
Oliver W. Waddell 364,800(2) - 0.43%
Total 4,396,368 310,885 5.52%
(1) Listed shares may include shares held in the name of a
person's spouse, minor children, other relatives and trusts and
estates as to which beneficial ownership is disclaimed.
(2) Includes shares which may be purchased upon exercise of
presently exercisable options or options exercisable in 60 days
in the following amounts: Mr. Bridgeland, 4,500 shares; Ms.
Buyniski, 4,500 shares; Mr. Campanella, 225,982 shares; Mr.
Cassidy, 4,500 shares; Mr. Dannemiller, 4,500 shares; Mr. Davis,
243,750 shares; Mr. Grundhofer, 918,216 shares; Mr. Howe, 4,500
shares; Mr. Klinedinst, 4,500 shares; Mr. Mechem, 4,500 shares;
Mr. Meyer, 4,500 shares; Mr. Moffett, 174,566 shares; Mr.
O'Maley, 4,500 shares; Mr. Petry, 4,500 shares and Mr. Waddell,
750 shares.
(3) Includes the following shares which are held for the
individual's account in the Corporation's Thrift Savings 401(k)
Plan: Mr. Campanella, 11,790 shares; Mr. Davis, 1,166 shares;
Mr. Grundhofer, 4,316 shares; Mr. Kohlhepp, 14,028 shares; and
Mr. Moffett, 2,607 shares.
(4) Listed shares are those held pursuant to the Star Banc
Corporation Deferred Compensation Plan (the "Deferred
Compensation Plan"); under the terms of the trust in which they
are held such shares are subject to creditors of the Corporation
and may not be voted until released to the individual
participants.
(5) Includes shares which are owned by companies for which Mr.
Hayden serves as Chairman, CEO and Director in the following
amounts: The Midland Company, 41,943 shares; American Family
Home Insurance Company, 452,400 shares; American Modern Home
Insurance Company, 192,000 shares; American Western Home
Insurance Company, 108,600 shares; and American Modern Life
Insurance Company of Ohio, 25,200 shares.
(6) Includes 4,500 shares which are owned by Thomas E. Wood,
Inc., for which Mr. Klinedinst serves as Chairman and Chief
Executive Officer.
(7) Includes 240,000 shares which are owned by Ohio National
Life Insurance Company, for which Mr. O'Maley serves as
Chairman, President and Chief Executive Officer.
</TABLE>
ELECTION OF DIRECTORS
The Corporation's Articles of Incorporation provide that the
number of directors constituting the Board of Directors shall be
not less than nine nor more than twenty-five as determined in
accordance with the Code of Regulations from time to time. The
Board of Directors is divided into three classes: Class I
(terms expire in 1999), Class II (terms expire in 2000) and
Class III (terms expire in 1998). The Articles of Incorporation
provide that nominees for each Class of the Board of Directors
are to be elected to serve for a term of three years. The Board
of Directors currently consists of seventeen members, with Class
I containing six directors, Class II containing five directors
and Class III containing six directors.
At the 1998 Annual Meeting, six directors in Class III are to
be elected to hold office until the Annual Meeting in the year
2001 and until their successors are duly elected and qualified.
All of the nominees are current directors. The persons named in
the Proxy intend to vote for the election of these nominees. If
any nominee becomes unable to serve, which is not anticipated,
the proxies will be voted for any substitute nominee that
Management recommends.
The following information concerns the nominees and continuing
directors:
CLASS I DIRECTORS
(TERMS EXPIRE IN 1999)
JAMES R. BRIDGELAND, JR.: born 1929, Director since 1975. Mr.
Bridgeland has been a partner in the law firm of Taft,
Stettinius & Hollister for more than five years.
SAMUEL M. CASSIDY: born 1932, Director since 1991. Mr.
Cassidy served as an Executive Vice President of the Corporation
from 1985 to his retirement in 1994. He was President of Star
Bank, N.A., the Corporation's primary subsidiary, from 1984 and
its Chief Executive Officer from 1988 to his 1994 retirement.
V. ANDERSON COOMBE: born 1926, Director since 1963. Mr.
Coombe is Chairman of the Board, Treasurer and a Director of Wm.
Powell Co. and has served in that capacity for more than five
years. He is a Director of The Union Central Life Insurance Co.
CHARLES S. MECHEM, JR.: born 1930, Director since 1968. Mr.
Mechem is Chairman of Cincinnati Bell, Inc. He was
Commissioner of the LPGA from 1991 through 1995. Mr. Mechem was
also Chairman of the Board of U.S. Shoe Corporation from April,
1993 to May, 1995. Mr. Mechem is the retired Chairman and CEO
of the former Taft Broadcasting Company. He is a Director
of AGCO Corporation, Cincinnati Bell, Mead Corporation, Ohio
National Life Insurance Company and J.M. Smucker Company.
O'DELL M. OWENS, M.D.: born 1947, Director since 1991. Dr.
Owens has been Director of Reproductive Endocrinology and
Infertility for the Christ Hospital of Cincinnati since 1986.
From 1982 to 1986, Dr. Owens was Assistant Professor of
Obstetrics and Gynecology, Director of the Division of
Reproductive Endocrinology and Infertility and Assistant
Professor of Orthopedics at the University of Cincinnati Medical
Center.
THOMAS E. PETRY: born 1939, Director since 1987. Mr. Petry is
Chairman and Chief Executive Officer of Eagle-Picher Industries,
Inc., which he has served in an executive capacity for more than
five years. Mr. Petry is also a Director of CINergy, Wm. Powell
Co., Union Central Life Insurance Company and Insilco
Corporation.
CLASS II DIRECTORS
(TERMS EXPIRE IN 2000)
LAURANCE L. BROWNING, JR.: born 1929, Director since 1970.
Mr. Browning was formerly Vice Chairman of Emerson Electric Co.,
a manufacturer of electrical equipment and controls. Prior to
his retirement, he served Emerson Electric Co. in an executive
capacity for more than five years. He is a Director of Emerson
Electric Co.
VICTORIA B. BUYNISKI: born 1951, Director since 1991. Ms.
Buyniski is Founder, President and Chief Executive Officer of
United Medical Resources, Inc. and has served that company in an
executive capacity since 1983. Ms. Buyniski is a Director of
The Health Alliance and Ohio National Life Insurance Company.
JERRY A. GRUNDHOFER: born 1944, Director since 1993. Mr.
Grundhofer is Chairman, President and CEO of the Corporation and
of Star Bank, N.A. and has served Star in an executive capacity
since 1993. Mr. Grundhofer is a Director of Arete Associates,
the Hennegan Company, Visa U.S.A., Inc. and Visa International.
J. P. HAYDEN, JR.: born 1929, Director since 1973. Mr. Hayden
is Chairman of the Board, Chief Executive Officer and a Director
of The Midland Company and has served that company in an
executive capacity for more than five years.
DANIEL J. MEYER: born 1936, Director since 1988. Mr. Meyer is
Chairman, President, Chief Executive Officer and a Director of
Cincinnati Milacron, Inc. and has served that company in an
executive capacity for more than five years. Mr. Meyer is a
Director of E. W. Scripps Co. and Hubbell, Incorporated.
CLASS III DIRECTORS
(NOMINEES FOR TERMS TO EXPIRE IN 2001)
PAUL M. BAKER: born 1947, Director since 1998. Prior to its
acquisition by Star Banc Corporation, Mr. Baker served as Vice
Chairman and Chief Executive Officer of Great Financial
Corporation in Louisville, Kentucky. He served Great Financial
in various positions since 1982.
JOHN C. DANNEMILLER: born 1938, Director since 1990. Mr.
Dannemiller is Chairman, Chief Executive Officer and President
of Applied Industrial Technologies, formerly known as Bearings,
Inc. and has served in that capacity for more than five years.
Mr. Dannemiller is a Director of Lamson & Sessions Co.
ROGER L. HOWE: born 1935, Director since 1985. Mr. Howe,
prior to his retirement September 1, 1997, was Chairman of the
Board of U. S. Precision Lens, Inc. Mr. Howe is a Director of
Cincinnati Bell, Inc., Cintas Corporation, Eagle-Picher
Industries, Inc. and Baldwin Piano and Organ Company.
THOMAS J. KLINEDINST, JR.: born 1942, Director since 1993.
Mr. Klinedinst is Chairman and Chief Executive Officer of Thomas
E. Wood, Inc. and has served that company in an executive
capacity for more than five years. Mr. Klinedinst is Director
and Chairman of Franciscan Health Systems of Ohio Valley and
Director and Treasurer of the Better Business Bureau of
Cincinnati.
DAVID B. O'MALEY: born 1946, Director since 1995. Mr. O'Maley
is Chairman, President and Chief Executive Officer of Ohio
National Life Insurance Company and serves several affiliated
affiliates and subsidiaries similarly, and has served in that
capacity since 1994. From 1993 to 1994, he was President and
Chief Operating Officer and from 1992 to 1993, he was Executive
Vice President and Chief Marketing Officer of Ohio National Life
Insurance Company.
OLIVER W. WADDELL: born 1930, Director since 1982. Prior to
his retirement December 31, 1993, Mr. Waddell was Chairman of
the Board of the Corporation and Vice Chairman of Star Bank,
N.A. Mr. Waddell is a Director of CINergy, Ohio National Life
Insurance Company, and Chiquita Brands International, Inc.
Several of the nominees and continuing directors served as
directors of The First National Bank of Cincinnati (now known as
Star Bank, N.A.,) prior to the formation of the Corporation as a
bank holding company in 1973 and as directors of the
Corporation's predecessor Delaware corporation from the dates
listed.
PROPOSAL TO AMEND ARTICLE FOURTH OF THE ARTICLES OF
INCORPORATION OF THE CORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors asks you to vote to increase the number
of authorized shares of common stock to provide additional
shares which can be issued for corporate purposes without
further stockholder approval unless required by applicable law,
the New York Stock Exchange or any other stock exchange on which
the Corporation's shares are traded. The Board asks for this
increase in part to compensate for the shares issued in the
stock split declared in December, 1996. The purposes for which
shares may be issued include the payment of stock dividends,
subdivision of outstanding shares through stock splits,
effecting future acquisitions or meeting requirements for
working capital or capital expenditures. No such transactions
are planned by the Corporation at present.
To the extent that additional shares may be issued on other
than a pro rata basis to current shareholders, the present
ownership position of current shareholders may be diluted.
Holders of shares of common stock have no rights of appraisal
or similar rights of dissenting shareholders with respect to the
proposed increase in the number of authorized shares of common
stock.
THE BOARD OF DIRECTORS INTENDS TO SUBMIT THE FOLLOWING
RESOLUTION TO SHAREHOLDERS FOR ACTION AT THE ANNUAL MEETING:
RESOLVED: THAT ARTICLE FOURTH, PARAGRAPH A. OF THE
ARTICLES OF INCORPORATION OF THE CORPORATION AS PRESENTLY IN
EFFECT BE AND IS AMENDED AND RESTATED AS FOLLOWS:
FOURTH: A. THE TOTAL NUMBER OF SHARES OF STOCK WHICH THE
CORPORATION SHALL HAVE AUTHORITY TO ISSUE IS FOUR HUNDRED ONE
MILLION (401,000,000), OF WHICH ONE MILLION (1,000,000) SHARES
SHALL BE SHARES OF PREFERRED STOCK WITHOUT PAR VALUE (HEREINAFTER
SOMETIMES REFERRED TO AS "PREFERRED STOCK") AND FOUR HUNDRED
MILLION (400,000,000) SHARES SHALL BE SHARES OF COMMON STOCK OF
THE PAR VALUE OF FIVE DOLLARS ($5.00) PER SHARE (HEREINAFTER
SOMETIMES REFERRED TO AS "COMMON STOCK").
The affirmative vote of the holders of a majority of the
outstanding shares of common stock entitled to vote at the
meeting is required for adoption. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" ADOPTION OF THE AMENDMENT.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of Star Banc Corporation is composed
entirely of independent outside directors and is responsible for
setting corporate compensation policy. The goal of the
Corporation's compensation program is to attract, motivate,
reward and retain the management talent required to achieve
corporate objectives and increase shareholder value.
Base salaries of all executives except Mr. Grundhofer were
determined by the Compensation Committee using senior
management's recommendations. Salaries were decided based on
individual performance and industry standards as determined in
the Hewitt Associates Compensation Survey and information from
regional bank holding companies.
The Compensation Committee administers the Executive Bonus
Plan, the purpose of which is to reward the achievement of
corporate financial objectives established in advance by the
Compensation Committee. The performance measures for determining
plan awards include fully diluted earnings per share (EPS),
return on average equity (ROE), return on average assets (ROA),
credit quality, and individual performance against established
objectives. The plan provides awards, however, only if the
Corporation's EPS and ROE reach specified thresholds established
by the Compensation Committee and approved by the Board of
Directors at the beginning of each plan year. The opportunity
for a bonus award for the Named Executives in 1997 ranged from
20% to 125% of base salary depending on the individual's
position, and the amount by which actual EPS and ROE exceeded
the thresholds set. The initial threshold for a bonus award was
$1.92 EPS and 15.5% ROE, which would have resulted in record net
income for the Corporation. Reported EPS was $2.19 and reported
ROE was 22.6%. Bonuses were paid 75% in cash and 25% in the
Corporation's common stock.
The Compensation Committee also administers the Corporation's
Stock Incentive Plan, the purpose of which is to encourage
long-term growth in the Corporation's shareholder value. Stock
options and restricted stock are granted pursuant to the plan,
using guidelines which include corporate performance, individual
responsibilities and performance, and competitive indices
including the Hewitt Associates Compensation Survey and
information from regional bank holding companies. 1997 options
are subject to a vesting schedule with full vesting four years
from the date of grant.
Mr. Grundhofer's compensation was determined by the
Compensation Committee and approved by the Board. His year-end
1997 base salary of $750,000 was established under the terms of
his employment agreement with the Corporation, and is consistent
with industry standards as determined from the Hewitt Associates
Compensation Survey. His bonus was based on the same criteria as
that described previously for the other Executive Officers. He
was granted options for 180,000 shares on December 9, 1997
exercisable pursuant to a 4-year vesting schedule at a grant
price of $56.75.
Compensation Committee of
Star Banc Corporation Board of Directors
Laurance L. Browning, Jr. Roger L. Howe Charles S. Mechem, Jr.
Daniel J. Meyer David B. O'Maley Thomas E. Petry
The following tables list information on compensation received
for services by the Chief Executive Officer and the next four
highest compensated executive officers of the Corporation in all
capacities to the Corporation and its subsidiaries during the
year ended December 31, 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation All Other
Name and Salary Bonus Other Options Stock Compensation
Principal Position Year ($)(1) ($)(2) ($) (#) Award($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Jerry A. Grundhofer 1997 750,000 937,500 -- 180,000 -- 12,262(4)
Chairman, President, Chief 1996 700,000 875,000 -- 180,000 -- 12,130
Executive Officer and 1995 625,000 781,250 86,354 180,000 1,826,250(3) 11,423
Director
Richard K. Davis 1997 300,000 306,000 -- 75,000 -- 10,085(5)
Executive Vice President 1996 275,000 280,500 -- 75,000 -- 9,285
1995 250,000 255,000 -- 60,000 -- 8,373
David M. Moffett 1997 300,000 306,000 -- 75,000 -- 10,087(6)
Executive Vice President and 1996 300,000 280,500 -- 75,000 -- 9,286
Chief Financial Officer 1995 250,000 255,000 -- 60,000 -- 8,393
Joseph A. Campanella 1997 225,000 220,320 -- 20,000 -- 7,713(7)
Executive Vice President 1996 225,000 229,500 -- 22,500 -- 7,667
1995 220,000 224,400 -- 22,500 -- 7,473
Jerome C. Kohlhepp 1997 196,000 184,240 -- 30,000 -- 5,880(8)
Executive Vice President 1996 190,000 178,600 -- 30,000 -- 5,700
1995(9) -- -- -- -- -- --
(1) Includes amounts deferred at the direction of the executive
officer pursuant to the Star Banc Corporation Thrift Savings
401(k) Plan and the Star Banc Corporation Deferred Compensation
Plan, as amended and restated through January 1, 1997.
(2) Reflects bonus earned during the fiscal year. In some
instances all or a portion of the bonus was paid during the next
year.
(3) Shares will be issued on the fifth anniversary of the award
date of 12/12/95. Dividend equivalents are paid to the grantee.
As of December 31, 1997 a total of 90,000 shares of stock were
reserved for Mr. Grundhofer, and the value of said shares (based
upon the closing market value of $57.375 per share on said date)
was $5,163,750.
(4) Includes $9,500 Corporate contribution to the Star Banc
Corporation Thrift Savings 401(k) Plan and $2,762 split dollar
life insurance premium. Split dollar insurance premiums are
based on the cost of equivalent group term insurance.
(5) Includes $9,000 Corporate contribution to the Star Banc
Corporation Thrift Savings 401(k) Plan and $1,085 split dollar
life insurance premium. Split dollar insurance premiums are
based on the cost of equivalent group term insurance.
(6) Includes $9,000 Corporate contribution to the Star Banc
Corporation Thrift Savings 401(k) Plan and $1,087 split dollar
life insurance premium. Split dollar insurance premiums are
based on the cost of equivalent group term insurance.
(7) Includes $6,750 Corporate contribution to the Star Banc
Corporation Thrift Savings 401(k) Plan and $963 split dollar
life insurance premium. Split dollar insurance premiums are
based on the cost of equivalent group term insurance.
(8) Includes $5,880 Corporate contribution to the Star Banc
Corporation Thrift Savings 401(k) Plan.
(9) Mr. Kohlhepp was not listed in the Summary Compensation
Table in 1995.
</TABLE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
(a) (b) (c) (d) (e) (f)(1)
% of Total Options
Individual Grants Options Granted to Employees Exercise or Expiration Grant date
Name Granted (#) in Fiscal Year base price ($) Date present value ($)
<S> <C> <C> <C> <C> <C>
Jerry A. Grundhofer 180,000 15.9 56.75 12/09/07 $2,762,460
Richard K. Davis 75,000 6.6 56.75 12/09/07 1,151,025
David M. Moffett 75,000 6.6 56.75 12/09/07 1,151,025
Joseph A. Campanella 20,000 1.8 56.75 12/09/07 306,940
Jerome C. Kohlhepp 30,000 2.6 56.75 12/09/07 460,410
(1) Grant date option values calculated through use of the
"Black Scholes" option pricing model. Values are calculated
assuming a risk free rate of return of 5.88%, dividend growth
rate of 10.52% annually, volatility rate of 22.20%, quarterly
reinvestment of dividends, and an average term of five years.
No adjustments have been made for nontransferability or risk of
forfeiture.
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
AND YEAR END OPTION VALUE
(a) (b) (c) (d) (e)
Number of Value of unexercised
unexercised in the money options
Shares acquired Value realized options 12/31/97(#) 12/31/97($)
Name on exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Jerry A. Grundhofer 86,783 2,861,601 918,216/495,001 38,930,144/11,186,820
Richard K. Davis -- -- 243,750/176,250 10,586,719/3,371,981
David M. Moffett 69,184 2,106,681 174,566/176,250 7,398,120/3,371,981
Joseph A. Campanella 1,700 58,702 225,982/55,625 10,430,194/1,231,728
Jerome C. Kohlhepp 124,377 4,492,913 0/75,000 0/1,529,175
</TABLE>
Stock Performance Chart. The following chart compares the
yearly percentage change in the cumulative total shareholder
return on the Corporation's common stock during the five years
ended December 31, 1997 with the cumulative total return on the
Keefe, Bruyette & Woods, Inc. 50 Bank Stock Index and the
Standard & Poor's 500 Stock Index. The comparison assumes $100
was invested on January 1, 1993 in the Corporation's Common
Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Star Banc Corp. $100.00 $100.35 $108.21 $182.87 $289.46 $551.65
KBW 50 Index $100.00 105.54 100.16 160.41 226.91 331.73
S&P 500 $100.00 110.13 111.56 153.53 188.47 251.35
</TABLE>
Defined Benefit Pension Plan. Compensation in the form of
payments from the Corporation's non-contributory, defined
benefit pension plan is not included in the previous
compensation tables. Substantially all employees are eligible
to receive benefits from this pension plan, which are based upon
average base salary during the five consecutive calendar years
in which compensation was the highest and upon the employee's
years of service, with a normal retirement age of 65 and five
years of plan participation. The 1998 total of annual payments
as a life annuity with 120 guaranteed payments (exclusive of
Social Security) from the pension plan may be individually
estimated using the following information.
<TABLE>
<CAPTION>
YEARS OF SERVICE
Current
Annual
Earnings 10 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C>
125,000 15,547 23,321 31,095 38,868 46,642 54,416
150,000 18,957 28,435 37,913 47,392 56,870 66,348
175,000 22,366* 33,549* 44,732* 55,916* 67,099* 78,282*
200,000 25,776* 38,664* 51,551* 64,439* 77,327* 90,215*
225,000 29,185* 43,778* 58,370* 72,963* 87,556* 102,148*
250,000 32,595* 48,892* 65,189* 81,486* 97,784* 114,081*
300,000 39,414* 59,120* 78,827* 98,534* 118,241* 137,947*
400,000 53,051* 79,577* 106,103* 132,628* 159,154* 185,679*
500,000 66,689* 100,034* 133,378* 166,723* 200,067* 233,412*
600,000 80,327* 120,491* 160,654* 200,818* 240,981* 281,145*
700,000 93,965* 140,947* 187,930* 234,912* 281,895* 328,877*
800,000 107,603* 161,404* 215,206* 269,007* 322,808* 376,610*
900,000 121,241* 181,861* 242,481* 303,102* 363,722* 424,342*
1,000,000 134,879* 202,318* 269,757* 337,196* 404,636* 472,075*
1,100,000 148,516* 222,775* 297,033* 371,291* 445,549* 519,807*
1,200,000 162,154* 243,231* 324,308* 405,386* 486,463* 567,540*
1,300,000 175,792* 263,688* 351,584* 439,480* 527,376* 615,272*
1,400,000 189,430* 284,145* 378,860* 473,575* 568,290* 663,005*
1,500,000 203,068* 304,602* 406,136* 507,669* 609,203* 710,737*
*These benefits (The benefits in the shaded area) do not
reflect the $160,000 compensation limit or the $120,454 annual
benefit limit which apply under Federal law. The actual benefits
payable from the qualified pension plan will take into account
these limits, and will be adjusted accordingly as the limits are
adjusted each year. Also, these benefits were estimated using a
five year average of compensation determined from the "Current Annual
Earnings" shown above.
</TABLE>
For purposes of computing benefits under this Plan, on December
31, 1997, Mr. Grundhofer had 5 years of credited service; Mr.
Campanella, 10; Mr. Davis, 4; Mr. Kohlhepp, 11; and Mr.
Moffett, 4.
Non-Qualified Retirement Plan. Compensation in the form of
payments from the Corporation's non-contributory, non-qualified
retirement plan to the extent that it replaces income lost due
to legislated limits on benefits and compensation is included in
the above table. The plan provides vested supplemental
retirements to certain officers of the Corporation so that
participants receive a combined pension benefit under the
qualified and non-qualified plans at one of two levels.
Participants approved for the first level receive benefits equal
to those which would have been payable in the absence of
legislated limits on compensation and benefits, and include Mr.
Kohlhepp. Participants eligible for the second level of
augmented combined benefits under the qualified, non-qualified
and certain other prior employer plans as a percentage of final
average compensation (base plus bonus) include Messrs.
Grundhofer, Campanella, Davis, Moffett and certain other
executive officers. Eligibility for such augmented benefits is
determined by the Compensation Committee of the Board of
Directors based on individual performances and level of
responsibility. The 1998 total of annual payments as a life
annuity with 120 guaranteed payments at the augmented level
(less benefits replaced due to the application of legislated
limits) may be individually estimated using the following table.
<TABLE>
<CAPTION>
YEARS OF SERVICE
CURRENT
ANNUAL
EARNINGS 10 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C>
125,000 52,642 44,868 37,094 29,321 21,547 13,773
150,000 62,870 53,392 43,914 34,435 24,957 15,479
175,000 73,099 61,916 50,733 39,549 28,366 17,183
200,000 83,327 70,439 57,552 44,664 31,776 18,888
225,000 93,556 78,963 64,371 49,778 35,185 20,593
250,000 103,783 87,486 71,189 54,892 38,594 22,297
300,000 124,240 104,534 84,827 65,120 45,413 25,707
400,000 165,154 138,628 112,102 85,577 59,051 32,526
500,000 206,067 172,722 139,378 106,033 72,689 39,344
600,000 246,981 206,817 166,654 126,490 86,327 46,163
700,000 287,895 240,913 193,930 146,948 99,965 52,983
800,000 328,808 275,007 221,205 167,404 113,603 59,801
900,000 369,722 309,102 248,482 187,861 127,241 66,621
1,000,000 410,635 343,196 275,757 208,318 140,878 73,439
1,100,000 451,549 377,290 303,032 228,774 154,516 80,258
1,200,000 492,463 411,386 330,309 249,231 168,154 87,077
1,300,000 533,376 445,480 357,584 269,688 181,792 93,896
1,400,000 574,290 479,575 384,860 290,145 195,430 100,715
1,500,000 615,203 513,669 412,135 310,602 209,068 107,534
</TABLE>
Employment Agreements. The Corporation has entered into
employment agreements with severance benefits with Messrs.
Grundhofer, Davis, Moffett, Campanella and Kohlhepp. The
agreements are designed to enhance the Corporation's ability to
attract and retain high caliber senior management at a time when
mergers and acquisitions are common in the financial services
industry. In general, the agreements provide for the payment of
a lump sum benefit to the officer, including a gross-up for
federal excise tax purposes if necessary pursuant to Section
280G of the Internal Revenue Code, plus the continuation of
certain medical and insurance benefits, in the event that the
officer's employment is terminated involuntarily by the
Corporation, or voluntarily by the officer for good reason,
following a Change in Control of the Corporation during the
officer's protected period. Change in Control is defined in the
document and includes certain mergers, sales of assets or tender
offers.
Among other things, Mr. Grundhofer's agreement provides for
severance benefits of three times salary and bonus in the event
of a qualified termination during his Employment Period (either
before or following a Change in Control). In addition, Mr.
Grundhofer's agreement provides for the granting of past
employer service credit for vesting purposes under the
Non-Qualified Retirement Plan upon three years of service. Mr.
Grundhofer's rights in the Non-Qualified Retirement Plan are
fully vested. Messrs. Davis, Moffett and Campanella have
agreements which provide for lump sum benefits of three times
salary and bonus in the event of a qualified termination
following a Change in Control during the officer's protected
period. Mr. Kohlhepp has a similar agreement providing for lump
sum benefits of two times salary and bonus.
Retention Agreements. The Corporation has entered into
retention agreements with Messrs. Davis, Moffett, Campanella,
and Kohlhepp. The agreements are designed to allow the
Corporation to maintain, reward and encourage continuity and
excellence in senior management. The agreements provide for a
lump sum payment in the event that the executive remains in good
standing in his position with the Corporation for a specified
period of time. The agreements provide, respectively, for
payments of $350,000 to Mr. Davis, $350,000 to Mr. Moffett,
$250,000 to Mr. Kohlhepp, and $200,000 to Mr. Campanella if each
executive is actively employed with the Corporation on January
1, 2000.
COMPENSATION OF DIRECTORS
In 1997 each Director of the Corporation other than Mr.
Grundhofer received an annual retainer fee of $15,000 plus a fee
of $1,500 for each Board meeting attended and a fee of $850 for
each Committee meeting attended. In addition, the Audit,
Community Outreach and Fair Lending, Compensation and Governance
Committee Chairpersons receive an annual retainer fee of $2,500.
Each director of the Corporation also received an option to
purchase 6,000 shares of Star Banc Corporation stock, subject to
a four-year vesting schedule.
CORPORATE GOVERNANCE INFORMATION
The Board of Directors held eight meetings in 1997.
The Board of Directors has an Executive Committee, an Audit
Committee, a Compensation Committee, a Community Outreach and
Fair Lending Committee and a Governance Committee.
The Executive Committee held eleven meetings in 1997. The
Committee has the authority to exercise all powers of the Board
of Directors between regularly scheduled Board meetings. The
current members of the Executive Committee are Messrs.
Bridgeland, Cassidy, Grundhofer, Hayden, Howe, Petry and Waddell.
The Audit Committee held two meetings in 1997 and reviewed the
work of Arthur Andersen LLP, the Corporation's outside
independent auditor for 1997. The Committee reviews
recommendations on various matters made by Arthur Andersen LLP
and action taken by management and the Corporation's internal
auditor to implement these recommendations. The Committee also
considers the proposals of Arthur Andersen LLP for the scope of
the audit to be performed for the Corporation and its
subsidiaries and their proposed fees for this work. The
Committee recommends action to the Board of Directors of the
Corporation in connection with all the above matters. The
current members of the Audit Committee are Ms. Buyniski and
Messrs. Coombe, Hayden, Howe, Klinedinst and Petry.
The Compensation Committee sets policy for compensation,
reviews the recommendations of the Chief Executive Officer as
for compensation of officers, establishes the compensation of
the Chief Executive Officer and approves eligibility for
benefits under the Corporation's non-qualified retirement plan.
It also administers the Corporation's Stock Incentive Plans.
The Compensation Committee held four meetings in 1997. The
current members of the Compensation Committee are Messrs.
Browning, Howe, Mechem, Meyer, O'Maley and Petry.
The Community Outreach and Fair Lending Committee held four
meetings in 1997. The Committee is responsible for reviewing
the Corporation's activities with respect to community
development and compliance with the Community Reinvestment Act
and fair lending regulations. The current members of the
Community Outreach and Fair Lending Committee are Ms. Buyniski
and Messrs. Dannemiller, Klinedinst and Dr. Owens.
The Governance Committee held two meetings in 1997. The
Committee administers the affairs of the Board of Directors,
evaluates current directors, and nominates new directors. The
current members of the Governance Committee are Messrs.
Bridgeland, Browning, Dannemiller and Hayden. Shareholders who
wish to suggest director nominees should contact the Committee
by mail at the Corporate Headquarters.
All Directors except Mr. Coombe attended at least 75% of the
aggregate of the number of regular and special meetings of the
Board of Directors held during 1997 and all committees of the
Board on which the director served during the 1997 calendar year.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Corporation's directors and named
executive officers to file with the Securities and Exchange
Commission and the New York Stock Exchange reports of ownership
and changes in ownership of common stock of the Corporation.
Officers and directors are required by SEC regulation to furnish
the Corporation with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such reports furnished
to the Corporation or written representations that no other
reports were required, the Corporation believes that, during the
1997 year, all filing requirements applicable to its officers
and directors were complied with except that one report,
covering one transaction, was filed late by Andrew Randall,
Executive Vice President and Regional Chairman, Northeast Ohio.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Under Rule 14a-8 of the Securities Exchange Act of 1934, as
amended, any shareholder who wishes to include a proposal for
shareholder action in next year's Proxy Statement must submit
such proposal to the Corporation (along with other information
called for in Rule 14a-8) no later than October 31, 1998. The
Corporation will determine whether or not the proposal is proper
for inclusion in the Proxy Statement at the time of any such
submission.
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Several of the Directors of the Corporation and the entities
with which they are associated were customers of and had various
transactions with the Corporation's subsidiary bank in the
ordinary course of business during 1997. All loans, loan
commitments and sales of notes included in these transactions
were made in the ordinary course of business, on substantially
the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with
other persons and did not involve more than the normal risk of
collectability or present other unfavorable features.
Mr. Bridgeland, a Director of the Corporation, is a partner in
the law firm of Taft, Stettinius & Hollister, which provides
legal counsel to the Corporation.
Ms. Buyniski, a Director of the Corporation, is President and
Chief Executive Officer of United Medical Resources, Inc., which
acts as third party administrator for some of the medical plans
offered by the Corporation and its subsidiaries.
Mr. Hayden, a Director of the Corporation, is Chairman of the
Board, Chief Executive Officer, and a Director of the Midland
Company, a subsidiary of which provides insurance to a
subsidiary of the Corporation.
Mr. Klinedinst, a Director of the Corporation, is Chairman and
Chief Executive Officer of Thomas E. Wood, Inc., which provides
insurance brokerage services to the Corporation.
Mr. O'Maley, a Director of the Corporation, is Chairman,
President and Chief Executive Officer of Ohio National Life
Insurance Company, which provides life insurance for the
Corporation's employees.
INDEPENDENT AUDITORS
The Board of Directors appointed Arthur Andersen LLP as
independent auditors of the Corporation and its subsidiaries for
the year 1997. The Corporation anticipates that Arthur Andersen
LLP will be appointed independent auditors for 1998 at the
regular meeting of the Board of Directors to be held in April.
Representatives of Arthur Andersen LLP will be present at the
Annual Meeting serving as inspectors of election. They will
have the opportunity to make statements if they wish to do so,
and they will also be available to respond to questions raised
at the meeting.
OTHER BUSINESS
The Board of Directors knows of no other matters to be
presented at the Annual Meeting. If any other matters arise
before the meeting, the Board of Directors intends for the
holders of the proxies to vote in accordance with the
recommendations of Management.
By order of the Board of Directors,
Jennie P. Carlson
Senior Vice President,
General Counsel and Secretary
Cincinnati, Ohio
March 3, 1998
YOU MAY REQUEST A COPY OF THE FORM lO-K ANNUAL REPORT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION (LESS EXHIBITS) BY
CALLING (513) 632-4008 OR WRITING TO DAVID M. MOFFETT, EXECUTIVE
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, STAR BANC
CORPORATION, 425 WALNUT STREET, CINCINNATI, OHIO 45201.
