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REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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FIRSTAR CORPORATION
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
WISCONSIN 6022 39-0711710
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or
organization) Classification Code No.) Identification No.)
</TABLE>
777 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
(414) 765-4321
(Address, including ZIP Code, and telephone number,
including area code, of registrant's principal executive officers)
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COPY TO:
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HOWARD H. HOPWOOD III, ESQ. DANIEL C. MCKAY, II, ESQ.
SENIOR VICE PRESIDENT & GENERAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
FIRSTAR CORPORATION 222 NORTH LASALLE STREET, SUITE 2600
777 EAST WISCONSIN AVENUE CHICAGO, ILLINOIS 60601
MILWAUKEE, WISCONSIN 53202 (312) 609-7762
(414) 765-5977
</TABLE>
(Name, address, including ZIP Code, and telephone number, including area code,
of agent for service)
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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. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE REGISTRATION FEE
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Common Stock ($1.25 par value)... 313,712 shares $23.95(2) $6,859,082(2) $2,365.22
Preferred Share Purchase
Rights......................... 156,856 rights (3) (3) (3)
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(1) The amount being registered represents the number of shares of Firstar
Corporation Common Stock and associated Preferred Share Purchase Rights that
will be issued in connection with the conversion and exchange of all
outstanding shares of Common Stock of First Moline Financial Corp. as
described herein.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(2) based upon the book value per share of First Moline
Financial Corp. Common Stock on September 30, 1994 ($23.95) and the 282,550
shares of First Moline Financial Corp. Common Stock that are outstanding and
which are to be received by the Registrant or cancelled in the transaction
discussed herein.
(3) The value attributable to the Preferred Share Purchase Rights is reflected
in the market price of the Firstar Common Stock to which the Rights are
attached.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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FIRSTAR CORPORATION
CROSS-REFERENCE SHEET TO
PROXY STATEMENT-PROSPECTUS PURSUANT TO
RULE 501(B) OF REGULATION S-K
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LOCATION IN PROXY
ITEM OF FORM S-4 STATEMENT-PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................. Cross Reference Sheet; Outside
Front Cover Page of Proxy
Statement-Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................... Available Information;
Incorporation of Certain
Information by Reference
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................... Summary
4. Terms of the Transaction............................. Summary; Introduction;
Proposed Merger
5. Pro Forma Financial Information...................... Pro Forma Combining Financial
Statements
6. Material Contacts with the Company Being Acquired.... Proposed Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters........ *
8. Interests of Named Experts and Counsel............... Experts; Opinions
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities....................... *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.......... Firstar Corporation;
Comparative Rights of
Stockholders
11. Incorporation of Certain Information by Reference.... Incorporation of Certain
Information by Reference
12. Information with Respect to S-2 or S-3 Registrants... *
13. Incorporation of Certain Information by Reference.... *
14. Information with Respect to Registrants other than
S-3 or S-2 Registrants............................... *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies............ *
16. Information with Respect to S-2 or S-3 Companies..... *
17. Information with Respect to Companies other than S-3
or S-2 Companies..................................... First Moline Financial Corp.;
Comparative Rights of
Shareholders
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents and Authorizations
are to be Solicited.................................. Outside Front Cover Page of
Proxy Statement-Prospectus;
Summary; Meeting Information;
Proposed Merger
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer...... *
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* Omitted because answer to item is negative or item is not applicable.
<PAGE> 3
[FIRST MOLINE LOGO]
FIRST MOLINE FINANCIAL CORP.
February , 1995
Dear Fellow Stockholder:
We are pleased to enclose materials relating to a Special Meeting of
Stockholders of First Moline Financial Corp. ("First Moline") to be held at 2:00
p.m. (local time), on Thursday, March 16, 1995, at The Moline Club, 1530 Fifth
Avenue, Moline, Illinois 61265.
The purpose of the meeting is to consider and vote on an Agreement and Plan
of Reorganization among Firstar Corporation ("Firstar"), Firstar Corporation of
Iowa ("FCI"), a subsidiary of Firstar, and First Moline, dated as of August 25,
1994, and the Plan of Merger and Agreement of Merger between FCI and First
Moline, and joined in by Firstar, dated as of August 25, 1994 (together, the
"Merger Agreements"), relating to the proposed merger (the "Merger") of First
Moline with and into FCI. Pursuant to the Merger, First Moline will become a
wholly owned subsidiary of Firstar and to consider and vote on an amendment to
the Certificate of Incorporation of First Moline (the "Articles Amendment").
Under the Merger Agreements and upon consummation of the Merger, each share
of First Moline Common Stock, $0.01 par value ("FMFC Common Stock"), outstanding
immediately prior to the Closing Date, except shares of FMFC Common Stock held
by any dissenting stockholder under Section 262 of the Delaware General
Corporation Law, will be converted into the right to receive shares of common
stock of Firstar, $1.25 par value ("Firstar Common Stock") as follows: if
Firstar Common Stock is trading between $31.00 and $35.00 per share, then each
share of FMFC Common Stock will be converted into the number of shares of
Firstar Common Stock arrived at by dividing $32.84 by the market price of
Firstar Common Stock as determined under the Merger Agreements. If Firstar
Common Stock is trading at or below $31.00 per share, then the holders of FMFC
Common Stock will receive 1.06 shares of Firstar Common Stock for each share of
FMFC Common Stock. If Firstar Common Stock is trading at or above $35.00 per
share, then the holders of FMFC Common Stock will receive 0.94 shares of Firstar
Common Stock for each share of FMFC Common Stock. The Merger Agreements also
provide for conversion of certain outstanding options for FMFC Common Stock to
shares of Firstar Common Stock, or in one instance, options for Firstar Common
Stock.
Your Board of Directors believes that the terms of the Merger are in the
best interests of First Moline stockholders, will provide significant value to
all First Moline stockholders and will enable holders of First Moline Common
Stock to participate in the expected opportunities for growth that the Merger
will make possible. In the opinion of your Board of Directors, the economic
terms of the Merger Agreements encompass two principal provisions: (a) the
exchange ratio described above and (b) the "walk-away" provision. The
"walk-away" provision provides that if during the five consecutive trading days
preceding the calendar day immediately preceding the Closing Date of the Merger
(the "Five-Day Calculation Period") the average of the daily closing prices of a
share of Firstar Common Stock during the Five-Day Calculation Period is less
than $28.00, First Moline has the right to terminate the Merger Agreements. It
is currently anticipated that the Five-Day Calculation Period will be the
business days approximately from March 9, 1995 to March 15, 1995. As of February
, 1995, the closing price of Firstar's Common Stock was $ per share.
The Board of Directors has no present intention to waive the "walk-away"
provision or, for that matter, to waive any other conditions to First Moline's
obligations to consummate the Merger. However, the Board of Directors may,
depending upon the circumstances, waive the "walk-away" provision or other
conditions and proceed to consummate the Merger. Any decision the First Moline's
Board may make regarding the "walk-away" provision will depend upon certain
factors, including: (a) the price of Firstar Common Stock during the Five-Day
Calculation Period; (b) any action Firstar may offer to take to induce First
Moline to consummate the Merger (to date Firstar has given no indication that it
will take any such action); (c) the factors the Board of Directors considered in
approving the Merger Agreement; (d) receipt of an opinion from First Moline's
financial advisors that the consideration to be received by First Moline's
stockholders in the Merger is fair
<PAGE> 4
from a financial point of view, if the average price per share of Firstar Common
Stock is less than $28.00 during the Five-Day Calculation Period; (e) the advice
of legal counsel; and (f) such other economic and non-economic factors as the
Board of Directors may deem relevant. Stockholder approval of the Merger
Agreements and the transactions contemplated thereby (including the Merger)
confers upon the First Moline Board of Directors the power, consistent with its
fiduciary duties, to elect to exercise the First Moline rights under the
"walk-away" provision to terminate the transaction or, in the alternative, to
consummate the Merger notwithstanding that the average price per share of
Firstar Common Stock calculated during the Five-Day Calculation Period may be
less than $28.00. See the section in the accompanying Proxy Statement-Prospectus
entitled "PROPOSED MERGER -- Termination, Amendment and Waiver."
The Merger is intended to be tax-free for federal income tax purposes to
First Moline stockholders who receive Firstar Common Stock in exchange for FMFC
Common Stock, except as described under "PROPOSED MERGER--Certain Federal Income
Tax Consequences of the Merger" in the accompanying Proxy Statement-Prospectus.
The enclosed Proxy Statement-Prospectus of Firstar and First Moline
contains a more complete description of the terms of the proposed Merger. You
are urged to read the Proxy Statement-Prospectus carefully.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENTS AS
BEING IN THE BEST INTERESTS OF FIRST MOLINE AND ITS STOCKHOLDERS AND RECOMMENDS
THAT HOLDERS OF FMFC COMMON STOCK VOTE IN FAVOR OF THE MERGER AND THE ARTICLES
AMENDMENT. IN MAKING THIS RECOMMENDATION, THE BOARD OF DIRECTORS HAS CONSIDERED
NUMEROUS FACTORS, INCLUDING, BUT NOT LIMITED TO, THE CONSIDERATION OFFERED BY
FIRSTAR AND THE STRUCTURE OF THE PROPOSED MERGER, WHICH IS DESIGNED TO MAKE THE
MERGER TAX-FREE FOR FEDERAL INCOME TAX PURPOSES TO STOCKHOLDERS OF FIRST MOLINE
WHO RECEIVE FIRSTAR COMMON STOCK (EXCEPT FOR CASH RECEIVED IN LIEU OF FRACTIONAL
SHARES OF FIRSTAR COMMON STOCK) AND TO ALLOW FIRST MOLINE STOCKHOLDERS TO
PARTICIPATE IN THE FUTURE OF THE COMBINED ORGANIZATION.
Whether or not you plan to attend the Special Meeting, holders of FMFC
Common Stock are asked to please fill out, sign, and date the enclosed proxy
card, and return it promptly in the accompanying envelope, which requires no
postage if mailed in the United States. If you later find that you may be
present at the Special Meeting or for any other reason desire to revoke your
proxy, you may do so at any time before it is voted.
Glenn Medhus
Chairman of the Board
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS
CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK
CERTIFICATES.
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[FIRST MOLINE LOGO]
FIRST MOLINE FINANCIAL CORP.
1616 SIXTH AVENUE
MOLINE, ILLINOIS 61265
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 16, 1995
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To the Stockholders of First Moline Financial Corp.:
NOTICE IS HEREBY GIVEN that a Special Meeting of the holders of Common
Stock of First Moline Financial Corp., a Delaware corporation ("First Moline"),
pursuant to action of the Board of Directors, will be held at The Moline Club,
1530 Fifth Avenue, Moline, Illinois 61265, on March 16, 1995, at 2:00 p.m. local
time, for the following purposes:
1. To consider and vote upon the approval and adoption of an Agreement
and Plan of Reorganization and a Plan of Merger and Agreement of Merger
(the "Merger Agreements"), each dated as of August 25, 1994, that provide
for, among other things, the merger (the "Merger") of First Moline with and
into Firstar Corporation of Iowa, a wholly owned subsidiary of Firstar
Corporation, and the conversion of the outstanding shares of FMFC Common
Stock into the right to receive shares of Firstar Corporation Common Stock
and associated Preferred Share Purchase Rights, as described in the Proxy
Statement-Prospectus accompanying this notice;
2. To consider and vote upon an amendment to the Certificate of
Incorporation (the "Articles Amendment") of First Moline which deletes, in
its entirety, Article Fourth, subparagraph C of the Certificate of
Incorporation, provided, however, that the Board of Directors of First
Moline is authorized to abandon the Articles Amendment in accordance with
the provisions of Section 242(c) of the Delaware General Corporation Law if
the Merger is not consummated, as described in the Proxy Statement-
Prospectus accompanying this notice; and
3. To transact such other business as may properly be brought before
the Special Meeting or any adjournments thereof.
The close of business on , 1995 has been fixed as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the Special Meeting and any adjournment or postponement thereof.
Holders of FMFC Common Stock have the statutory right to dissent from the
Merger and, if the Merger is consummated, to receive payment in cash for the
"fair value" of their shares of FMFC Common Stock upon compliance with the
provisions of Section 262 of the Delaware General Corporation Law. To perfect
this right, a holder of FMFC Common Stock must not vote such shares in favor of
the Merger Agreements at the Special Meeting (this may be done by marking a
proxy either to vote against the Merger Agreements or to abstain from voting
thereon or by not voting at all), must deliver written notice of dissent before
the vote on the Merger is taken and must otherwise comply with this statute. A
copy of Section 262 of the Delaware General Corporation Law is attached as
Appendix A to the Proxy Statement-Prospectus.
The Special Meeting may be postponed or adjourned from time to time without
any notice other than by announcement at the Special Meeting of any
postponements or adjournments thereof, and any and all business for which notice
is hereby given may be transacted at such postponed or adjourned Special
Meeting.
THE BOARD OF DIRECTORS OF FIRST MOLINE BELIEVES THE PROPOSED MERGER IS IN
THE BEST INTERESTS OF FIRST MOLINE AND ITS STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS OF FIRST MOLINE VOTE "FOR" PROPOSALS NUMBER (1)
AND (2) ABOVE.
<PAGE> 6
Whether or not you plan to attend the Special Meeting, holders of FMFC
Common Stock are asked to please complete, date and sign the enclosed proxy,
which is solicited by the Board of Directors of First Moline, and return it
promptly in the accompanying envelope. No postage is required if mailed in the
United States. The giving of such proxy does not affect your right to vote in
person in the event you attend the Special Meeting. You may revoke the proxy at
any time prior to its exercise in the manner described in the Proxy
Statement-Prospectus.
By Order of the Board of Directors,
Glenn Medhus, Chairman of the Board
Moline, Illinois
February , 1995
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS
CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK
CERTIFICATES.
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[FIRSTAR LOGO] [FIRST MOLINE LOGO]
PROXY STATEMENT
FIRST MOLINE FINANCIAL CORP.
1616 SIXTH AVENUE
MOLINE, ILLINOIS 61265
(309) 764-8339
SPECIAL MEETING OF COMMON STOCKHOLDERS
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PROSPECTUS
FIRSTAR CORPORATION
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This Proxy Statement-Prospectus is being furnished to the stockholders of
First Moline Financial Corp., a Delaware corporation ("First Moline" or the
"Holding Company"), in connection with the solicitation of proxies of common
stockholders of First Moline by the Board of Directors of First Moline for use
at the special meeting of stockholders of First Moline to be held on March 16,
1995, at The Moline Club, 1530 Fifth Avenue, Moline, Illinois 61265, commencing
at 2:00 p.m., local time and any adjournments or postponements thereof (the
"Special Meeting"). At the Special Meeting, holders of First Moline's common
stock, $0.01 par value ("FMFC Common Stock"), will consider and vote upon the
approval and adoption of an Agreement and Plan of Reorganization dated as of
August 25, 1994 (the "Reorganization Agreement"), among First Moline, Firstar
Corporation, a Wisconsin corporation ("Firstar"), and Firstar Corporation of
Iowa, an Iowa corporation and wholly owned subsidiary of Firstar ("FCI"), and a
related Plan of Merger and Agreement of Merger, dated as of August 25, 1994, by
and between First Moline and FCI and joined in by Firstar for certain limited
purposes (the "Plan of Merger" and, together with the Reorganization Agreement,
the "Merger Agreements"), which provide for the merger of First Moline with and
into FCI (the "Merger").
Under the Merger Agreements, each share of FMFC Common Stock outstanding
immediately prior to the Closing Date, except shares of FMFC Common Stock held
by any dissenting stockholder under Section 262 of the Delaware General
Corporation Law (the "Dissenting Shares"), will be converted into the right to
receive shares of common stock of Firstar, $1.25 par value ("Firstar Common
Stock"), as follows: if Firstar Common Stock is trading between $31.00 and
$35.00 per share, then each share of FMFC Common Stock will be converted into
the number of shares of Firstar Common Stock arrived at by dividing $32.84 by
the market price of Firstar Common Stock as determined under the Merger
Agreements. If Firstar Common Stock is trading at or below $31.00 per share,
then the holders of FMFC Common Stock will receive 1.06 shares of Firstar Common
Stock for each share of FMFC Common Stock. If Firstar Common Stock is trading at
or above $35.00 per share, then the holders of FMFC Common Stock will receive
0.94 shares of Firstar Common Stock for each share of FMFC Common Stock. The per
share trading price of Firstar Common Stock will be determined by averaging the
composite closing prices per share of Firstar Common Stock on the New York Stock
Exchange and the Chicago Stock Exchange for the five consecutive trading days
immediately preceding the calendar day immediately preceding the Closing Date of
the Merger. The Merger Agreements also provide for conversion of certain
outstanding options to purchase FMFC Common Stock into shares of Firstar Common
Stock or, in one instance, options to purchase Firstar Common Stock.
The Merger will not be taxable for federal income tax purposes to the
stockholders of First Moline who exchange their FMFC Common Stock pursuant to
the Merger Agreements, except with respect to cash received by holders of FMFC
Common Stock in lieu of fractional shares of Firstar Common Stock or as a result
of the exercise of statutory rights to dissent from the Merger. For a more
complete description of the Merger Agreements and the terms of the Merger, see
"PROPOSED MERGER."
This Proxy Statement-Prospectus also constitutes a prospectus of Firstar
with respect to shares of Firstar Common Stock to be issued in the Merger in
exchange for outstanding shares of FMFC Common Stock.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT
-- PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------------
Copies of this Proxy Statement-Prospectus are first being mailed to
stockholders of First Moline on or about February , 1995.
The date of this Proxy Statement-Prospectus is February , 1995.
------------------------------
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AVAILABLE INFORMATION
Firstar and First Moline are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the Regional Offices of the Commission
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material may also be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. In addition, Firstar Common Stock is listed on the New York Stock
Exchange and the Chicago Stock Exchange, and reports, proxy statements and other
information filed by Firstar with such exchanges may be inspected at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005
and the Chicago Stock Exchange Incorporated, 440 South LaSalle Street, Chicago,
Illinois 60605.
This Proxy Statement-Prospectus does not contain all of the information set
forth in the Registration Statement on Form S-4 and exhibits thereto (the
"Registration Statement") covering the securities offered hereby which Firstar
has filed with the Commission, certain portions of which have been omitted
pursuant to the rules and regulations of the Commission, and to which portions
reference is hereby made for further information with respect to Firstar, First
Moline and the securities offered hereby.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS AND, IF GIVEN OR MADE, THE
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY FIRSTAR, FCI OR FIRST MOLINE. THIS PROXY STATEMENT--PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE
THE SECURITIES OFFERED HEREBY, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION OF AN OFFER OR PROXY IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROXY STATEMENT--PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES TO WHICH
THIS PROXY STATEMENT-PROSPECTUS RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF FIRSTAR, FCI OR
FIRST MOLINE SINCE THE DATE OF THIS PROXY STATEMENT-PROSPECTUS.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT--PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF DOCUMENTS RELATING TO
FIRSTAR, EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED HEREIN, ARE
AVAILABLE UPON REQUEST WITHOUT CHARGE FROM MR. WILLIAM H. RISCH, SENIOR VICE
PRESIDENT--FINANCE AND TREASURER, FIRSTAR CORPORATION, 777 EAST WISCONSIN
AVENUE, MILWAUKEE, WISCONSIN 53202 (TELEPHONE (414) 765-4985).
The following documents filed with the Commission are incorporated herein
by reference:
(a) Firstar's Annual Report on Form 10-K for the year ended December
31, 1993;
(b) Firstar's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30, and September 30, 1994;
(c) the description of Firstar Common Stock (including the Preferred
Share Purchase Rights) contained in Firstar's registration statements filed
pursuant to Section 12 of the Exchange Act and any amendment or report
filed for the purpose of updating such description.
All documents filed by Firstar pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the Special
Meeting will be deemed to be incorporated by reference into this Proxy
Statement--Prospectus and to be a part hereof from the date of filing of the
documents.
2
<PAGE> 9
Any statement contained in a document incorporated by reference herein or
deemed to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained herein
(or in any subsequently filed document which also is, or is deemed to be,
incorporated by reference herein) modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.
3
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FIRSTAR CORPORATION
AND
FIRST MOLINE FINANCIAL CORP.
PROXY STATEMENT-PROSPECTUS
TABLE OF CONTENTS
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SUMMARY............................................................................... 6
The Companies.................................................................... 6
Firstar Corporation and Firstar Corporation of Iowa.............................. 6
First Moline Financial Corp. .................................................... 6
Proposed Merger.................................................................. 6
Article Amendment................................................................ 7
The Meeting...................................................................... 7
Vote Required; Voting Agreements................................................. 7
Recommendation of the Board of Directors......................................... 8
Opinion of Financial Advisor..................................................... 8
Dissenters' Rights............................................................... 8
Certain Federal Income Tax Consequences of the Merger............................ 8
Accounting Treatment............................................................. 9
Date of Merger................................................................... 9
Regulatory Approvals............................................................. 9
Dividends on First Moline Stock.................................................. 9
Management and Operations After the Merger....................................... 10
Waivers and Amendments to the Merger Agreements.................................. 10
Termination...................................................................... 10
Termination Fee.................................................................. 11
Interests of Certain Persons in the Merger....................................... 11
Resales of Firstar Common Stock by Affiliates.................................... 11
Preferred Share Purchase Rights.................................................. 11
Markets and Market Prices........................................................ 12
Comparative Per Common Share Data................................................ 13
Selected Consolidated Financial Data of Firstar.................................. 14
Selected Consolidated Financial Data of First Moline............................. 15
MEETING INFORMATION................................................................... 16
General.......................................................................... 16
Date, Place and Time............................................................. 16
Record Date; Vote Required....................................................... 16
Voting Agreements................................................................ 16
Voting and Revocation of Proxies................................................. 17
Solicitation of Proxies.......................................................... 17
PROPOSED MERGER....................................................................... 18
Background of the Merger......................................................... 18
First Moline's Reasons for the Merger and Board Recommendation................... 20
Opinion of Financial Advisor..................................................... 22
Terms of the Merger.............................................................. 26
Options.......................................................................... 26
Closing Date of the Merger....................................................... 27
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Surrender of Certificates........................................................ 27
Conditions to the Merger......................................................... 27
Articles Amendment............................................................... 28
Regulatory Approvals............................................................. 28
Business Pending the Merger...................................................... 30
Dividends........................................................................ 30
Termination, Amendment and Waiver................................................ 30
Management and Operations of First Moline After the Merger....................... 31
Interests of Certain Persons in the Merger....................................... 31
Effect on Employee Benefits...................................................... 33
Termination Fee.................................................................. 33
Certain Federal Income Tax Consequences of the Merger............................ 34
Accounting Treatment............................................................. 35
Expenses......................................................................... 35
Resale of Firstar Common Stock................................................... 35
Rights of Dissenting Stockholders................................................ 36
COMPARATIVE RIGHTS OF STOCKHOLDERS.................................................... 37
Preferred Stock.................................................................. 37
Preferred Share Purchase Rights.................................................. 37
Appraisal Rights and Dissenters' Rights.......................................... 38
Assessability; Potential Liability For Wages..................................... 38
Takeover Statutes................................................................ 38
Directors........................................................................ 39
Liability of Directors; Indemnification.......................................... 40
Action Without a Meeting......................................................... 40
FIRSTAR CORPORATION................................................................... 40
General.......................................................................... 40
Competition...................................................................... 41
Supervision...................................................................... 41
Other Acquisitions and Transactions.............................................. 43
Incorporation of Certain Information by Reference................................ 43
FIRST MOLINE FINANCIAL CORP. ......................................................... 44
Regulation....................................................................... 61
Management's Discussion and Analysis............................................. 73
OPINIONS.............................................................................. 81
EXPERTS............................................................................... 81
STOCKHOLDER PROPOSALS................................................................. 81
PRO FORMA COMBINING FINANCIAL STATEMENTS.............................................. F-1
CONSOLIDATED FINANCIAL STATEMENTS OF FIRST MOLINE FINANCIAL CORP...................... G-1
APPENDICES
Appendix A--Section 262 of the Delaware General Corporation Law
Appendix B--Merger Agreements
Appendix C--Fairness Opinion of Hovde Financial, Inc.
</TABLE>
5
<PAGE> 12
SUMMARY
The following is a brief summary of certain information with respect to
matters to be considered at the Special Meeting of holders of FMFC Common Stock.
As used in this Proxy Statement-Prospectus, the terms "Firstar" and "First
Moline" refer to such corporations, respectively, and except where the context
otherwise requires, such entities and their respective subsidiaries. All
information concerning Firstar included in this Proxy Statement-Prospectus has
been furnished by Firstar, and all information concerning First Moline has been
furnished by First Moline. This summary is not intended to be complete and is
qualified in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement of First Moline and Prospectus of
Firstar, including the appendices hereto (this "Proxy Statement-Prospectus"),
and the documents incorporated in this Proxy Statement-Prospectus by reference.
Stockholders are urged to review carefully the entire Proxy
Statement-Prospectus.
The Companies
Firstar Corporation and
Firstar Corporation
of Iowa.................. Firstar, a Wisconsin corporation, whose common
stock is listed on the New York Stock Exchange
("NYSE") and the Chicago Stock Exchange ("CSE"), is
a multi-bank holding company organized in 1929. The
principal assets of Firstar are its investments in
banks with offices located in the states of
Wisconsin, Minnesota, Illinois, Iowa and Arizona.
On September 30, 1994, Firstar had consolidated
total assets of $14.3 billion and stockholders'
equity of $1.2 billion. Firstar's principal
executive offices are located at 777 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202 (telephone:
(414) 765-4321). See "FIRSTAR CORPORATION." FCI, a
wholly owned subsidiary of Firstar, owns 11 banks
with 42 offices located in Iowa.
First Moline Financial
Corp....................... First Moline, a Delaware corporation, is a savings
and loan holding company that commenced operations
in 1992, upon completion of the conversion of First
Federal Savings and Loan Association of Moline to a
stock savings bank. The principal asset of First
Moline is its investment in First Federal Savings
Bank of Moline ("First Federal" or the "Bank"). On
September 30, 1994, First Moline had consolidated
total assets of $83 million and stockholders'
equity of $5.8 million. First Moline's principal
executive offices are located at 1616 Sixth Avenue,
Moline, Illinois 61265 (telephone: (309) 764-8339).
See "FIRST MOLINE FINANCIAL CORP."
Proposed Merger............ Firstar, First Moline and FCI have entered into an
Agreement and Plan of Reorganization dated as of
August 25, 1994 and a related Plan of Merger and
Agreement of Merger, providing, among other things,
for the merger of First Moline with and into FCI,
as a result of which Firstar will directly own 100%
of the stock of the surviving corporation, FCI.
Upon the Merger, the rights of First Moline
stockholders will be governed by Wisconsin law and
the Restated Articles of Incorporation and Bylaws
of Firstar. See "PROPOSED MERGER."
Upon consummation of the Merger, each outstanding
share of FMFC Common Stock will be converted into
the right to receive shares of Firstar Common Stock
(subject to payment of cash in lieu of fractional
shares, and except for shares as to which
dissenters' rights are perfected) as follows (the
"Exchange Ratio"): If Firstar Common Stock is
trading between $31.00 and $35.00 per share, then
each share of FMFC Common Stock will be converted
into the number of shares of Firstar Common Stock
arrived at by dividing $32.84 by the market price
of
6
<PAGE> 13
Firstar Common Stock as determined under the Merger
Agreements. If Firstar Common Stock is trading at
or below $31.00 per share, then the holders of FMFC
Common Stock will receive 1.06 shares of Firstar
Common Stock for each share of FMFC Common Stock.
If Firstar Common Stock is trading at or above
$35.00 per share, then the holders of FMFC Common
Stock will receive 0.94 shares of Firstar Common
Stock for each share of FMFC Common Stock. The per
share trading price of Firstar Common Stock will be
determined by averaging the composite closing
prices per share of Firstar Common Stock on the
NYSE and CSE for the five consecutive trading days
immediately preceding the calendar day immediately
preceding the Closing Date of the Merger. See
"PROPOSED MERGER--Terms of the Merger; Options."
Articles Amendment......... The Certificate of Incorporation of First Moline
contains a provision (Article Fourth, subparagraph
C) which provides that no person shall directly or
indirectly offer to acquire or acquire the
beneficial ownership of more than 10% of any class
of equity security of First Moline. The existence
of the provision in the First Moline Certificate of
Incorporation effectively prevents the consummation
of the Merger. The First Moline stockholders will
vote upon an amendment to the Certificate of
Incorporation (the "Articles Amendment") which
deletes, in its entirety, Article Fourth,
subparagraph C of the Certificate of Incorporation,
provided, however, that the Board of Directors of
First Moline is authorized to abandon the Articles
Amendment in accordance with the provisions of
Section 242(c) of the DGCL if the Merger is not
consummated. If the Articles Amendment is not
approved, the Merger will not be consummated
regardless of whether the Merger Agreements are
approved. See "PROPOSED MERGER -- Articles
Amendment."
The Meeting................ The Special Meeting of the holders of First Moline
Common Stock will be held at The Moline Club, 1530
Fifth Avenue, Moline, Illinois 61265, on March 16,
1995 at 2:00 p.m., local time. The close of
business on , 1995 is the record date
(the "Record Date") for determining the
stockholders of record of First Moline entitled to
notice of and, in the case of holders of FMFC
Common Stock, to vote at the Special Meeting and
any postponement or adjournments thereof. The
purpose of the Special Meeting is to consider and
vote upon a proposal to amend the Articles of
Incorporation of First Moline and a proposal to
approve the Merger Agreements. For additional
information relating to the Special Meeting, see
"MEETING INFORMATION."
Vote Required; Voting
Agreements............... The Certificate of Incorporation of First Moline
requires that the proposed amendment to the
Certificate of Incorporation be approved by a vote
of at least 80% of the votes attributable to the
outstanding shares of FMFC Common Stock. The
Delaware General Corporation Law ("DGCL") requires
that the Merger Agreements be approved by the
affirmative vote of a majority of the votes
attributable to the outstanding shares of FMFC
Common Stock. As of the Record Date, there were
outstanding 282,550 shares of FMFC Common Stock,
each of which is entitled to one vote.
As of the Record Date, directors and executive
officers of First Moline and their affiliates owned
beneficially approximately 22% of the outstanding
7
<PAGE> 14
shares of FMFC Common Stock. Seven directors and
the largest stockholder of First Moline have
entered into voting agreements ("Voting
Agreements") with Firstar, wherein each such
stockholder has agreed to vote his shares in favor
of the Merger and the Articles Amendment. The
Voting Agreements cover 86,489 shares of FMFC
Common Stock, or approximately 31% of the
outstanding shares. As of the Record Date,
directors and executive officers of First Moline
did not beneficially own any shares of Firstar
Common Stock. See "MEETING INFORMATION--Record
Date; Vote Required; Voting Agreements."
Recommendation of the Board
of Directors............... THE BOARD OF DIRECTORS OF FIRST MOLINE UNANIMOUSLY
RECOMMENDS THAT FIRST MOLINE'S STOCKHOLDERS VOTE
FOR APPROVAL OF THE ARTICLES AMENDMENTS AND THE
MERGER AGREEMENTS. The Board, after consideration
of the terms and conditions of the Merger
Agreements and other factors deemed relevant by the
Board, including the opinion of Hovde Financial,
Inc. ("Hovde"), First Moline's financial advisor,
believes that the terms of the Merger Agreements
are fair and that the Merger is in the best
interest of First Moline and its stockholders. See
"PROPOSED MERGER--First Moline Board
Recommendation; Background of and Reasons for the
Merger."
Opinion of Financial
Advisor.................... First Moline's financial advisor, Hovde, has
rendered its opinion to the Board of Directors of
First Moline to the effect that the Exchange Ratio
to be received by the stockholders of First Moline
upon consummation of the Merger is fair, from a
financial point of view, to the holders of FMFC
Common Stock. The opinion of Hovde, attached as
Appendix C to this Proxy Statement-Prospectus, sets
forth the assumptions made, the matters considered,
and the limitations in the review undertaken in
rendering such opinion. See "PROPOSED
MERGER--Opinion of Financial Advisor."
Dissenters' Rights......... Under the provisions of Delaware law, any holders
of FMFC Common Stock who assert dissenters' rights
will have a statutory right to have the value of
their shares appraised. To perfect this right, a
holder of FMFC Common Stock must not vote such
shares in favor of the Merger Agreements at the
Special Meeting (this may be done by marking the
proxy either to vote against the Merger Agreements
or to abstain from voting thereon or by not voting
at all) and must take such other action as is
required by the provisions of Section 262 of the
DGCL, including delivering written demand for
appraisal of such FMFC Common Stock. See "PROPOSED
MERGER--Rights of Dissenting Stockholders" and
Appendix A hereto.
Certain Federal Income Tax
Consequences of the
Merger................... The Merger is expected to qualify as a tax-free
reorganization for federal income tax purposes.
First Moline has received an opinion from Vedder,
Price, Kaufman & Kammholz ("Vedder Price"), counsel
to First Moline, to the effect that the Merger will
be treated as a tax-free reorganization within the
meaning of Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"),
subject to customary assumptions and
representations. Consummation of the Merger is
conditioned on such opinion not having been
withdrawn or modified in any material respect prior
to such consummation. Such opinion, however, is not
binding on the Internal Revenue Service. In the
event the Merger
8
<PAGE> 15
qualifies as a tax-free reorganization,
stockholders of First Moline will recognize no gain
or loss for federal income tax purposes as a result
of the exchange of their FMFC Common Stock for
Firstar Common Stock, except to the extent they
receive cash in lieu of fractional shares of
Firstar Common Stock or upon the receipt of cash
pursuant to the exercise of their statutory
dissenters' rights. See "PROPOSED MERGER--Certain
Federal Income Tax Consequences of the Merger."
FIRST MOLINE STOCKHOLDERS SHOULD READ CAREFULLY THE
DISCUSSION SET FORTH UNDER "PROPOSED
MERGER--CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER" AND ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF
THE MERGER UNDER FEDERAL, STATE, LOCAL AND ANY
OTHER APPLICABLE TAX LAWS.
Accounting Treatment....... Firstar anticipates that the Merger will be
accounted for as a purchase. See "PROPOSED
MERGER--Accounting Treatment."
Date of Merger............. The Merger Agreements provide that the Merger will
be consummated on a date (the "Closing Date") as
soon as practicable following, but in no event more
than ten business days following the latest to
occur of (a) expiration of the statutory 15-day to
30-day waiting period after approval of the Merger
by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), (b) approval
of the Merger by the Illinois Commissioner of Banks
and Trust Companies (the "Illinois Commissioner"),
(c) approval by the Office of the Comptroller of
the Currency ("OCC") for the conversion of First
Federal to a national bank, and (d) the Special
Meeting, or on another mutually agreed upon date.
It is presently anticipated that the Merger will be
consummated in the first quarter of 1995. See
"PROPOSED MERGER--Closing Date of the Merger;
Conditions to the Merger; Regulatory Approvals."
Regulatory Approvals....... The Merger is conditioned upon prior approval by
the Federal Reserve Board and the Illinois
Commissioner and upon approval by the OCC for
charter conversion. Firstar submitted an
application to the Federal Reserve Board seeking
approval of the Merger and related matters on
October 11, 1994, which was accepted for filing on
December 14, 1994. The Illinois Commissioner has
waived the requirement that Firstar file an
application in this matter. First Federal submitted
an application to the OCC on November 23, 1994 for
conversion to a national bank. There are no
assurances that all required regulatory approvals
will be obtained or when such required approvals
will be obtained. See "PROPOSED MERGER--Closing
Date of the Merger; Conditions to the Merger;
Regulatory Approvals."
Dividends on First Moline
Stock.................... Under the Reorganization Agreement, First Moline is
allowed to declare quarterly cash dividends on
First Moline Common Stock as if the Merger had been
consummated on August 25, 1994. The amount of the
dividends is subject to a single upward adjustment
immediately prior to the Closing Date to reflect
the difference between the value attributed to
Firstar Common Stock for the purpose of calculating
the dividend
9
<PAGE> 16
payments and the actual number of shares of Firstar
Common Stock to be received by the holders of FMFC
Common Stock on the Closing Date.
Management and Operations
After the Merger......... In the Merger, First Moline will be merged into FCI
and the separate corporate existence of First
Moline will cease. FCI, as the surviving
corporation in the Merger and a wholly owned
subsidiary of Firstar, will continue operations
under the name "Firstar Corporation of Iowa" and
will own First Federal, which will have been
converted to a national bank. The officers and
directors of FCI prior to the Merger will continue
as officers and directors of the surviving
corporation. Immediately following the Closing
Date, one or more management representatives of
Firstar will be added to the board of First
Federal. Within several months of the Closing Date,
Firstar and FCI intend to merge First Federal into
Firstar Bank Davenport, N.A., an FCI bank
subsidiary, subject to regulatory approval. At the
time of the bank-level merger, the officers of
First Federal will become officers of the surviving
bank and two current directors of First Federal
will be invited to join the Board of Directors of
the surviving bank. See "PROPOSED
MERGER--Management and Operations of First Moline
After the Merger; Interests of Certain Persons in
the Merger."
Waivers and Amendments to
the Merger Agreements...... Firstar, FCI and First Moline may amend, modify or
waive certain terms and conditions of the Merger
Agreements. Any such action taken by First Moline
following a favorable vote by its holders of First
Moline at the Special Meeting may be taken only if
the action would not have any material adverse
effect on the benefits to be received by its
stockholders. See "PROPOSED MERGER--Termination,
Amendment and Waiver."
Termination................ The Merger may be abandoned (i) by mutual consent
of Firstar and First Moline at any time before the
Merger takes place, (ii) by either Firstar or First
Moline if (a) the conditions to the Merger in the
Merger Agreements have not been substantially
satisfied or waived by June 30, 1995; (b) any
warranty or representation made by the other party
in the Merger Agreements is discovered to have
become untrue in any material respect, and which
remains uncured for ten business days; (c) the
other party commits one or more material breaches
of the Merger Agreements which remain uncured for
ten business days; or (iii) by First Moline if the
average of the daily closing prices of a share of
Firstar Common Stock during the five trading days
preceding the calendar day immediately preceding
the Closing Date (the "Five-Day Calculation
Period") is less than $28.00. Assuming the Merger
is approved by holders of First Moline Common
Stock, the First Moline Board of Directors may
elect to consummate the Merger without resoliciting
First Moline stockholders even though the average
of the daily closing prices of a share of Firstar
Common Stock during the Five-Day Calculation Period
is less than $28.00. In such a situation, in
considering whether to consummate the Merger
without the resolicitation of First Moline
stockholders, the First Moline Board of Directors
will take into account, consistent with its
fiduciary duties, all relevant facts and
circumstances that exist at such time, including,
without limitation, the advice of its financial
advisors
10
<PAGE> 17
and legal counsel. Stockholder approval of the
Merger Agreements and the transactions contemplated
thereby (including the Merger) confers upon the
First Moline Board of Directors the power,
consistent with its fiduciary duties, to elect to
consummate the Merger notwithstanding that the
average price of a share of Firstar Common Stock
calculated during the Five-Day Calculation Period
may be less than $28.00. See "PROPOSED
MERGER--Termination, Amendment and Waiver."
Termination Fee............ Under the Reorganization Agreement, upon the
occurrence of specified events ("Trigger Events"),
First Moline must pay Firstar a fee of $400,000
(the "Termination Fee"). The Trigger Events relate
generally to unopposed offers by, or transactions
or proposed transactions with, third parties,
acquisition of specified percentages of First
Moline voting stock by third parties, and
solicitation of proxies in opposition to the
Merger, none of which has occurred as of the date
hereof, to the best of Firstar's and First Moline's
knowledge. The Termination Fee may discourage
offers to acquire First Moline and is intended to
increase the likelihood that the Merger will be
consummated. See "PROPOSED MERGER--Termination Fee;
Expenses."
Interests of Certain
Persons in the Merger...... In the Merger Agreements, Firstar has agreed to
assume and to keep in full force and effect the
employment agreements by and among First Moline,
First Federal and Byrd Krumbholz. In addition, the
president, directors and secretary to the Board of
Directors of First Moline have an interest in the
consummation of the Merger under a Stock Option and
Incentive Plan, Management Recognition and
Retention Plan and Trust, Legal Services Retention
Agreement, Deferred Compensation Agreement and
provisions of the Merger Agreements relating to
indemnification and insurance for First Moline
directors and officers. See "PROPOSED
MERGER--Management and Operations of First Moline
after the Merger; Interests of Certain Persons in
the Merger."
Resales of Firstar Common
Stock by Affiliates........ Resales of Firstar Common Stock issued to
"affiliates" of First Moline in connection with the
Merger have not been registered under applicable
securities laws in connection with the Merger. Such
shares may only be sold (a) under a separate
registration for distribution (which Firstar has
not agreed to provide), (b) pursuant to Rule 145
under the Securities Act of 1933, as amended, or
(c) pursuant to some other exemption from
registration. See "PROPOSED MERGER--Resale of
Firstar Common Stock."
Preferred Share Purchase
Rights................... Firstar has adopted a Shareholder Rights Plan,
pursuant to which each share of Firstar Common
Stock, including the Firstar Common Stock to be
issued in the Merger, entitles its holder to
one-half of a right ("Preferred Share Purchase
Right") to purchase one one-hundredth of a share of
Firstar's Series C Preferred Stock under certain
limited circumstances. The Rights have certain
anti-takeover effects. The Rights will cause
substantial dilution to a person or group that
attempts to acquire Firstar without conditioning
the offer on redemption of the Rights or on a
substantial number of Rights being acquired. The
Rights should not interfere with any merger or
other business combination approved by Firstar's
Board of Directors prior to the time that the
Rights have
11
<PAGE> 18
become nonredeemable. See "COMPARATIVE RIGHTS OF
STOCKHOLDERS."
Markets and Market
Prices..................... Firstar Common Stock is listed on the NYSE and the
CSE. First Moline Common Stock is not quoted on a
national exchange, but is occasionally traded over
the counter through the national daily quotation in
the "Pink Sheets." Management of First Moline does
not have knowledge of the prices paid in all
transactions involving its shares and have not
necessarily verified the prices indicated in the
table below. Because of the lack of an established
public market for shares of FMFC Common Stock, the
prices indicated may not reflect the prices which
would be paid for such shares in an active market.
The following table sets forth the closing price
per share of Firstar Common Stock as reported on
the Consolidated Tape System for NYSE stock and the
last known sale price per share of FMFC Common
Stock on the dates set forth, which include August
25, 1994, the last trading day preceding public
announcement of the Merger, and February , 1995,
the latest practicable trading day before the
printing of this Proxy Statement-Prospectus. See
"PROPOSED MERGER--Terms of the Merger."
<TABLE>
<CAPTION>
FIRST
FIRSTAR MOLINE
COMMON COMMON
STOCK STOCK
------ ------
<S> <C> <C>
Market Value Per Share at:
December 31, 1993........................ $30.75 $14.50
August 25, 1994.......................... $32.00 $14.50
September 30, 1994....................... $31.00 $14.50
February , 1995........................ $ . $ .
</TABLE>
12
<PAGE> 19
COMPARATIVE PER COMMON SHARE DATA
The following table presents selected comparative unaudited per common
share data for Firstar Common Stock and First Moline Common Stock on a
historical and pro forma combined basis and for First Moline Common Stock on a
pro forma equivalent basis giving effect to the Merger on a purchase accounting
basis. It is assumed that Firstar repurchases as treasury stock the equivalent
number of common shares that are to be issued to First Moline stockholders.
This information is not necessarily indicative of the results of the future
operations of the combined entity or the actual results that would have occurred
had the Merger been consummated prior to the periods indicated.
<TABLE>
<CAPTION>
NINE
MONTHS YEAR
ENDED ENDED
9-30-94 12-31-93
------- --------
<S> <C> <C>
Firstar--Historical:
Net income............................................................... $ 2.36 $ 3.15
Cash dividends declared.................................................. .86 1.00
Book value (at period end)............................................... 19.37 17.96
First Moline--Historical
Net income............................................................... $ 1.12 $ 1.76
Cash dividends declared.................................................. .10 --
Book value (at period end)............................................... 20.67 22.93
Firstar-First Moline--Pro Forma Combined:
Net income(1)............................................................ $ 2.36 $ 3.15
Cash dividends declared(2)............................................... .86 1.00
Book value (at period end)(3)............................................ 19.30 17.95
First Moline Common Stock--Equivalent Pro Forma Combined(4):
Net income(1)............................................................ $ 2.50 $ 3.34
Cash dividends declared.................................................. .91 1.06
Book value (at period end)............................................... 20.46 19.03
</TABLE>
- ---------------
(1) The pro forma combined net income per common share (based on weighted
average shares outstanding) is based upon the combined historical net
income for Firstar and First Moline adjusted for purchase adjustments and
reduced for dividend payments on Firstar's outstanding Series B Preferred
Stock divided by the average pro forma common shares of the combined
entity.
(2) The pro forma combined dividends declared assume no changes in historical
dividends per share declared by Firstar.
(3) The pro forma combined book value per share of Firstar Common Stock is based
upon the historical total common equity for Firstar adjusted for the
intangible amortization and the interest income lost from funds used in the
repurchase of shares divided by the shares of Firstar Common Stock
outstanding.
(4) The equivalent pro forma combined income, dividends and book value per share
of First Moline Common Stock represent the pro forma combined amounts
multiplied by the assumed exchange ratio of 1.06, which is based on the
terms of the Merger Agreements. Using an assumed exchange ratio of .94, for
nine months ended September 30, 1994, the equivalent pro forma combined
income, dividends and book value per share of First Moline Common Stock
would have been $2.22, $0.81 and $18.14, respectively.
13
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA OF FIRSTAR
The following table sets forth in summary form certain consolidated
financial data of Firstar. This summary should be read in conjunction with the
financial review and consolidated financial statements included in the documents
incorporated by reference in this Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
-------------------- --------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Summary
(Thousands of dollars)
Net interest revenue............ $440,106 $423,108 $568,056 $539,152 $480,596 $429,954 $413,102
Provision for loan losses....... 8,274 18,451 24,567 44,821 50,276 49,161 52,362
-------- -------- -------- -------- -------- -------- --------
Net interest revenue after loan
loss provision................ 431,832 404,657 543,489 494,331 430,320 380,793 360,740
Other operating revenue......... 249,612 251,668 342,265 300,767 272,535 248,301 225,521
Other operating expense......... 454,665 434,506 587,744 557,566 515,536 464,800 429,508
-------- -------- -------- -------- -------- -------- --------
Income before income taxes...... 226,779 221,819 298,010 237,532 187,319 164,294 156,753
Provision for income tax........ 75,183 70,041 93,716 71,547 52,988 46,837 45,618
-------- -------- -------- -------- -------- -------- --------
Net income...................... $151,596 $151,778 $204,294 $165,985 $134,331 $117,457 $111,135
======== ======== ======== ======== ======== ======== ========
Per common share:
Net income.................... $ 2.36 $ 2.35 $ 3.15 $ 2.62 $ 2.14 $ 1.82 $ 1.72
Dividends..................... .86 .74 1.00 .80 .705 .635 .545
Selected Period-End Balances
(Millions of dollars)
Total assets.................... $ 14,329 $ 13,429 $ 13,794 $ 13,169 $ 12,309 $ 12,020 $ 11,163
Loans........................... 9,520 8,533 8,984 8,111 7,545 7,346 6,871
Deposits........................ 10,648 10,761 11,164 10,884 10,063 9,721 8,931
Long-term debt.................. 125 127 126 158 144 185 166
Stockholders' equity............ 1,241 1,172 1,156 1,048 916 844 790
Selected Financial Ratios
Net income as a % of average
assets........................ 1.50% 1.59% 1.59% 1.36% 1.16% 1.06% 1.07%
Net income as a % of average
common equity................. 16.84 18.81 18.61 17.43 15.85 14.83 15.65
Net interest margin %........... 5.05 5.23 5.21 5.27 5.00 4.76 4.88
Total capital to risk-adjusted
assets........................ 13.43 13.81 13.18 13.20 11.92 11.94 12.09
Nonperforming assets as a % of
period-end loans and other
real estate................... .73 .81 .72 1.09 1.43 1.87 1.61
Reserve for loan losses as a %
of period-end loans........... 1.80 2.06 1.95 2.08 2.00 1.83 1.69
Net charge-offs as a % of
average loans................. .27 .27 .25 .43 .47 .48 .66
</TABLE>
14
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA OF FIRST MOLINE
The following table sets forth in summary form certain consolidated
financial data of First Moline. This summary should be read in conjunction with
the financial review and consolidated financial statements included in this
Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
------------------ -----------------------------
1994 1993 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Income Summary
(Thousands of dollars)
Net interest income........................... $ 1,822 $ 1,866 $ 2,469 $ 2,265 $ 1,727
Provision for loan losses..................... 21 48 58 134 367
------- ------- ------- ------- -------
Net interest income after loan loss
provision................................... 1,801 1,818 2,411 2,131 1,360
Other operating revenue....................... 345 306 410 371 404
Other operating expense....................... 1,676 1,477 2,070 1,800 1,666
------- ------- ------- ------- -------
Income before income taxes.................... 470 647 751 702 98
Provision for income tax...................... 153 232 254 280 (9)
------- ------- ------- ------- -------
Net income.................................... $ 317 $ 415 $ 497 $ 422 $ 107
======= ======= ======= ======= =======
Per common share:
Net income.................................. $ 1.12 $ 1.47 $ 1.76 $ 1.49 $ n/a
Dividends................................... .10 -- -- -- --
Selected Period-End Balances
(Thousands of dollars)
Total assets.................................. $83,044 $79,765 $79,808 $80,429 $79,308
Loans......................................... 45,846 39,916 41,368 44,181 45,565
Deposits...................................... 72,181 72,486 71,238 68,039 69,910
Long-term debt................................ 687 1,600 1,303 2,364 4,115
Stockholders' equity.......................... 5,840 6,396 6,478 5,965 n/a(1)
Selected Financial Ratios
Net income as a % of average
assets...................................... .52% .69% .62% .54% .13%
Net income as a % of average common equity.... 6.39 8.94 7.99 10.54 n/a
Net interest margin %......................... 3.10 3.21 3.18 3.01 2.20
Total capital to risk-adjusted
assets...................................... 15.40 18.07 18.25 15.46 8.86
Nonperforming assets as a % of period-end
loans and other real estate................. .99 1.90 1.67 1.95 4.60
Reserve for loan losses as a % of period-end
loans....................................... .46 .52 .50 .51 .89
Net charge-offs as a % of average loans....... .06 .19 .17 .73 .33
</TABLE>
- ---------------
(1) Prior year comparisons not applicable because initial stock offering was
completed on September 30, 1992.
15
<PAGE> 22
MEETING INFORMATION
GENERAL
This Proxy Statement of First Moline and Prospectus of Firstar is being
furnished to the stockholders of First Moline in connection with the
solicitation by the Board of Directors of First Moline of proxies to be voted at
the Special Meeting of holders of FMFC Common Stock to be held on March 16,
1995, and any adjournment thereof. The purpose of the Special Meeting and of the
solicitation is to obtain approval of the holders of FMFC Common Stock of the
Merger Agreements, the Articles Amendment and the transaction of such other
business as may properly come before the meeting or any adjournments thereof.
Each copy of this Proxy Statement-Prospectus mailed to holders of FMFC Common
Stock is accompanied by a form of proxy for use at the Special Meeting.
DATE, PLACE AND TIME
The Special Meeting will be held at The Moline Club, 1530 Fifth Avenue,
Moline, Illinois 61625, on March 16, 1995, at 2:00 p.m. (local time).
RECORD DATE; VOTE REQUIRED
The close of business on [Record Date] has been fixed by the Board of
Directors of First Moline as the Record Date for the determination of
stockholders entitled to notice of, and to vote at, the Special Meeting. On that
date there were outstanding and entitled to vote 282,550 shares of FMFC Common
Stock, of which 61,994 (22%) were held by directors or executive officers of
First Moline. Neither Firstar nor any of its or FCI's directors or executive
officers own any shares of FMFC Common Stock.
Each outstanding share of FMFC Common Stock entitles the record holder
thereof to one vote on all matters to be acted upon at the Special Meeting. The
DGCL requires that the Merger Agreements be approved by the affirmative vote of
a majority of the votes attributable to the outstanding shares of FMFC Common
Stock. The affirmative vote of 80% of the votes attributable to the outstanding
shares of FMFC Common Stock is required to approve the Articles Amendment. If
the Articles Amendment is not approved, the Merger will not be consummated
regardless of whether the Merger Agreements are approved.
VOTING AGREEMENTS
On August 25, 1994, seven directors and the largest stockholder of First
Moline signed Voting Agreements with Firstar, pursuant to which each of them
agreed to vote all of his shares of FMFC Common Stock in favor of the Merger and
the Articles Amendment and not to support a competing transaction prior to
consummation of the Merger or termination of the Merger Agreements. The signing
directors and stockholder are relieved of their commitment to vote in favor of
the Merger and the Articles Amendment in the event that prior to the approval of
the Merger by First Moline's stockholders First Moline receives a proposal for a
competing transaction which, based upon the advice of counsel, the Board of
Directors of First Moline determines it must actively consider in fulfillment of
its fiduciary duty to such stockholders. In the event that the Board elects to
accept the proposal for the competing transaction, the agreement from the
signing directors and stockholder to not vote their shares of FMFC Common Stock
in favor of the competing transaction will remain in effect for 270 days after
such election.
16
<PAGE> 23
The directors and stockholder who have signed the Voting Agreements and the
number of shares presently owned by each, are listed below:
<TABLE>
<CAPTION>
NUMBER OF
NAME OF DIRECTOR/OFFICER/STOCKHOLDER SHARES(1)(2)
-------------------------------------------------------------------------- ---------
<S> <C>
Gene Blanc................................................................ 2,862
Jon Christensen........................................................... 6,362
Daniel Churchill(3)....................................................... 27,708
Kent Crippen.............................................................. 12,413
Dennis Hoffman............................................................ 10,362
Byrd Krumbholz............................................................ 6,662
Glenn Medhus.............................................................. 8,758
Michael Steffenson........................................................ 11,362
</TABLE>
- ---------------
(1) Includes all shares owned directly or indirectly through any contract,
arrangement, understanding, relationship or otherwise, which the director or
stockholder has or shares the power to vote or to direct the voting power or
to dispose of or direct dispositions.
(2) Does not include awards of shares of FMFC Common Stock granted under the
First Moline Management Recognition and Retention Plan and Trust which have
not vested at this time, but will vest at the closing of the transaction.
See "Interests of Certain Persons in the Merger."
(3) Corporate secretary who serves in a non-management capacity and is not a
director. Mr. Churchill is also general counsel to First Moline and its
subsidiaries under a Legal Services Retention Agreement. See "Interests of
Certain Persons in the Merger."
The total number of shares directly or indirectly owned by these directors
and the stockholder is 86,489, or 30.6% of the total shares outstanding and
entitled to vote at the Special Meeting.
VOTING AND REVOCATION OF PROXIES
Shares of FMFC Common Stock represented by a proxy properly signed and
received at, or prior to, the Special Meeting, unless subsequently revoked, will
be voted at the Special Meeting in accordance with the instructions thereon. If
a proxy is signed and returned without indicating any voting instructions,
shares of FMFC Common Stock represented by the Proxy will be voted FOR the
Merger Agreements and the Articles Amendment. Both broker nonvotes and
abstentions have the same effect as votes against the Merger Agreements and the
Articles Amendment. Any proxy given pursuant to this solicitation may be revoked
by the person giving it at any time before the proxy is voted by the filing of
an instrument revoking it or of a duly executed proxy bearing a later date with
the Secretary of First Moline prior to or at the Special Meeting. Attendance at
the Special Meeting will not in and of itself constitute a revocation of a
proxy.
The Board of Directors of First Moline is not aware of any business to be
acted upon at the Special Meeting other than as described herein. If, however,
other matters are properly brought before the Special Meeting, or any
adjournments thereof, the persons appointed as proxies will have discretion to
vote or act thereon according to their best judgment.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers, and employees of
First Moline, who will not be specifically compensated for such services, may
solicit proxies from the stockholders of First Moline, personally or by
telephone or telegram or other forms of communication. Brokerage houses,
nominees, fiduciaries, and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending proxy material to beneficial owners.
First Moline does not anticipate that anyone will be specially engaged to
solicit proxies or that special compensation will be paid for that purpose, but
First Moline reserves the right to do so should it conclude that such efforts
are needed. First Moline will bear its own expenses in connection with the
solicitation of proxies for the
17
<PAGE> 24
Special Meeting, except that Firstar will bear the expense of printing this
Proxy Statement-Prospectus and the expense of all Commission and other
regulatory filing fees incurred in connection therewith. See "PROPOSED
MERGER--Expenses."
HOLDERS OF FMFC COMMON STOCK ARE REQUESTED TO COMPLETE, DATE, AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO FIRST MOLINE IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
PROPOSED MERGER
The following description of the Merger is qualified in its entirety by
reference to the Merger Agreements, which are attached as Appendix B to this
Proxy Statement-Prospectus and are incorporated herein by reference. All First
Moline stockholders are urged to read the Merger Agreements in their entirety.
BACKGROUND OF THE MERGER
First Moline. First Federal Savings and Loan Association of Moline ("First
Federal Savings"), the predecessor to First Federal and First Moline, had for
decades opted to pursue a community banking philosophy emphasizing the delivery
of real estate and consumer loan products and services tailored to the financial
needs of the Quad Cities communities. After its conversion to stock form and
reorganization to a holding company structure in October, 1992, First Federal
continued to emphasize its community banking mission while identifying areas of
special opportunity for the deployment of new capital raised in the conversion
in an effort to balance its community concerns while maximizing shareholder
value.
Prior to 1992, First Federal Savings had continuously examined its
strategic alternatives as a mutual institution, and after its conversion to
stock form, renewed its strategic alternatives with the additional corporate
objective of enhancing stockholder value. To that goal, the Board of Directors
of First Moline (the "Board") appointed a formal Strategic Planning Committee on
April 19, 1993 consisting of Directors Jon Christiansen, Kent Crippen and
Michael Steffenson. The Board also consulted with and retained as special
counsel the law firm of Vedder Price, a firm with extensive experience in
representing financial institutions in mergers and affiliations, to assist the
Board by giving legal counsel in evaluating strategic planning alternatives. At
the advice of Vedder Price, the Board also retained an independent financial
advisor later in 1993 to assist the Strategic Planning Committee and First
Moline on various strategic alternatives, including the possible eventual sale
of First Moline if that course of action became desirable, and to thereby
explore possible merger candidates for First Moline.
On August 24, 1993 the Strategic Planning Committee met to review several
long-term strategic objectives such as: (1) to prudently diversify the existing
asset base and earnings stream of First Moline and First Federal; (2) to compete
more efficiently in the local and national markets for loan revenue; (3) to
offer new products and services to its customers; (4) to offer greater
professional advancement to its employees; and (5) to offer stockholders higher
and more stable dividends, greater stock value and maximum liquidity. The
Strategic Planning Committee also reviewed procedural steps which could be
followed to address the accomplishment of these goals which included: (a)
remaining independent and reviewing operational improvements, cash dividends,
stock repurchase, internal growth, de novo branching, acquisitions of existing
branches, acquisition of other financial institutions or a merger of equals; or
(b) a sale or strategic merger of First Moline involving a larger acquiring bank
or thrift holding company.
On September 7, 1993, the Strategic Planning Committee reviewed these
options and the procedural steps with the Board. The Board reviewed the issues
of remaining independent and the difficulties that would be encountered in
attempting to continue to improve performance and enhance stockholder value as
an independent organization of its size in its market. The second alternative,
being acquired by another entity, either by cash sale or in a strategic merger,
was less familiar to the Board. While the Board believed that it had some sense
of the value of First Moline in the context of an acquisition, at that time it
had no direct information other than a review of recent acquisition prices in
its market area. To assist in the review of strategic alternatives, the Board
approved the retention of Hovde, a nationally recognized investment banking
18
<PAGE> 25
firm, as its adviser to assist First Moline. The Board selected Hovde on the
basis of, among other things, Hovde's expertise in mergers and acquisitions and
its familiarity with Midwest banks and thrifts. The Board also authorized the
Chairman of the Board, Glenn Medhus, and the President, Byrd Krumbholz ("First
Moline Management"), to pursue the planning process. First Moline retained Hovde
on October 11, 1993.
During the ensuing months, First Moline Management continued to evaluate
the issues presented by remaining independent. At the same time, Hovde, with the
assistance of First Moline Management, developed a preliminary list of parties
that might have an interest in First Moline in the event that First Moline
determined that it should be acquired through a sale or merger as the most
prudent and beneficial method to maximize stockholder value. Hovde then
contacted eleven candidates which for various reasons were believed to be the
most logical candidates. In all instances, the potential candidate contacted was
informed that First Moline was considering its future options and that it had
not made any determination to sell or otherwise be acquired, but it was
exploring whether there might be an interest in acquiring First Moline if First
Moline was to determine that it would enter into such a transaction. A
confidentiality agreement was entered into with each of the potential interested
parties and certain preliminary financial information was subsequently provided
to interested parties. Each of the interested parties was asked for an
indication of value in the event that First Moline was to determine that it
would be sold for cash or merged with a strategic partner. Discussions were also
held between First Moline Management, Hovde and representatives of some of the
potentially interested parties. On March 14, 1994, the Board received an updated
status report from Hovde. No specific actions were taken at that time and no
determinations were made to sell or merge First Moline, but the Board authorized
continued exploratory discussion with potentially interested parties.
At the May 26, 1994 Board meeting, Hovde and First Moline Management
reported that indications of interest were received from six parties. The Board
reviewed this information and focused on three indications of interest from
potential acquirors who had expressed the greatest levels of interest: a stock
offer from Firstar, a cash offer from a Midwestern thrift holding company and a
stock offer from a Midwestern bank holding company. After further review and
discussion, it was determined that Firstar's proposal potentially represented
the greatest benefit and the most likely opportunity for enhancement of
stockholder value. Although the Board did not determine at this meeting that
First Moline should be sold to, or otherwise enter into any other form of
transaction with Firstar or any other acquiror, the Board continued to authorize
management to pursue discussions and negotiations with Firstar in an effort to
obtain a definitive agreement from Firstar which could be considered by the
Board for possible recommendation for adoption by the First Moline stockholders.
The Board also directed Hovde to ask the party with the next highest offer, a
cash offer from a Midwestern thrift holding company, if it would be willing to
raise its indication of value relating to First Moline. Later, the interested
party responded that it would be unwilling to increase the amount of
consideration that it might pay to acquire First Moline beyond that which it had
previously indicated.
During later discussions with Firstar, the parties agreed upon a stock
transaction in which a purchase price of approximately $32.84 per share would be
payable in Firstar Common Stock to First Moline stockholders if Firstar's stock
price ended trading prior to the merger in a "collared" range. In addition, the
mechanics of the Exchange Ratio, including the right to terminate the
transaction if the price per share of Firstar Common Stock was below $28.00 at
closing, as well as certain conditions such as the right of First Moline to
terminate the Merger under certain circumstances, were preliminarily agreed
upon. First Moline and Firstar then addressed certain nonfinancial and
accounting issues which ultimately resulted in the provisions of the Merger
Agreements which offered certain protection to the employees and officers of
First Moline. At the same time, the parties, both directly and through their
legal advisors and First Moline's financial advisor, addressed other terms of
the documentation prepared by Firstar in connection with the transaction.
On July 11, 1994, a meeting of the Board was held to consider the
negotiations with Firstar. After full discussion, the Board directed First
Moline Management to continue discussions with Firstar. On August 8, 1994 a
meeting of the Board was held to consider the Firstar proposal in detail with
First Moline's legal and financial advisors. All members of the Board were
present at the meeting. At the meeting, Vedder Price reviewed with Board members
(i) their directors' duties in connection with a proposed transaction; (ii)
certain tax and legal considerations for a publicly held company involved in
stock transaction; (iii) certain
19
<PAGE> 26
requirements of the Commission relating to mergers; and (iv) certain
requirements of "pooling of interest" accounting. Vedder Price then discussed
the future courses of action available to First Moline, including continuing
negotiations with Firstar or other potentially interested parties or stopping
the process and remaining independent.
Hovde then made a presentation to the Board addressing the fairness, from a
financial point of view, of the Exchange Ratio under the Firstar proposal. Hovde
also addressed possible courses of action and options available to First Moline
at that time. After a full and thorough discussion of these issues, the Board
authorized First Moline Management to continue negotiations with Firstar. The
Board requested that Hovde and Vedder Price review with Firstar selected issues
that were deemed necessary to be resolved based upon the drafts of the Merger
Agreements reviewed by the Board. After significant discussion and
consideration, the Board authorized management to complete due diligence and
attempt to negotiate a final definitive agreement with Firstar. On August 19,
1994, First Moline Management and its legal and financial advisors met with
representatives of Firstar at Firstar's home office to complete due diligence
and to continue negotiating the remaining terms of the transaction.
On August 22, 1994, a special meeting of the Board was held to consider the
revised forms of the definitive and related agreements. Vedder Price then
reviewed in detail the principal changes in the proposed Merger Agreements.
Hovde followed with a detailed presentation during which the terms and nature of
the fairness opinion to be issued by Hovde and the analysis which Hovde would
employ in arriving at its opinion. Vedder Price also reviewed with the Board the
intention of Firstar to submit a letter to First Moline to the effect that, as
an absolute condition to Firstar entering into the Merger Agreement, First
Moline must make certain agreements acceptable to Firstar to provide
compensation to Firstar if certain events occurred that would be inconsistent
with the consummation of its transaction and that Firstar had requested the
directors and largest shareholder to enter into the Voting Agreements. With the
assistance of Vedder Price, the nature, purpose and legal aspects of the Voting
Agreements and Termination Fee requested by Firstar were reviewed in detail by
the Board. After considering the advice of First Moline's legal advisors and
receipt of an oral opinion from Hovde that the Exchange Ratio under the Firstar
proposal was fair, from a financial point of view, the Board determined that the
best interests of First Moline stockholders would be served by a strategic
merger with FCI in accordance with the terms of the Merger Agreements and
related documents, and the Board approved the proposed acquisition of First
Moline by Firstar.
Firstar. Firstar concluded that the Merger would be in the best interests
of Firstar and its shareholders. Numerous factors were considered by the Board
of Directors of Firstar in approving the terms of the Merger. These factors
included information concerning the financial structure, results of operations,
and prospects of Firstar and First Moline; the capital adequacy of First Moline;
the compatibility of First Moline with Firstar's existing operations in the Quad
Cities market place; and the amount of consideration to be paid in the
transaction. See "PRO FORMA COMBINING FINANCIAL STATEMENTS."
The Board of Directors of Firstar believes that expansion of the Firstar's
customer base and assets in the Quad Cities will provide a wider and improved
array of financial services to its customers and those of First Moline at a
larger number of locations.
FIRST MOLINE'S REASONS FOR THE MERGER AND BOARD RECOMMENDATION
After careful study and evaluation, the Board has unanimously approved the
Merger Agreements and has determined that the Merger is fair to, and in the best
interests of, First Moline and First Moline's stockholders. The Board believes
that the Merger will enable First Moline stockholders to realize significant
value on their investment and also will enable them to participate in
opportunities for growth that First Moline believes the Merger makes possible.
20
<PAGE> 27
In reaching its determination that the Merger is fair to, and in the best
interests of, First Moline and First Moline's stockholders, the Board carefully
considered a variety of factors with the assistance of its legal and financial
advisors. Among the factors it considered were the following:
(a) First Moline's business, financial condition, results of
operations and prospects, including, but not limited to, its potential
growth, development, productivity and profitability were it to remain
independent;
(b) The current and prospective environments in which First Moline
operates, including national and local economic conditions, the competitive
environment for banks and other financial institutions generally, and the
trend toward consolidation in the financial services industry generally and
in the Quad Cities metropolitan market specifically;
(c) The historical market value, book value, earnings per share and
dividends of First Moline as compared to the historical market value, book
value, earnings per share and dividends of Firstar;
(d) The strategic and competitive advantages expected to result from
the combination of First Moline and Firstar;
(e) The anticipated tax-free nature of the Merger for federal income
tax purposes to First Moline stockholders receiving Firstar Common Stock in
exchange for shares of First Moline Common Stock;
(f) The financial terms of other recent business combinations in the
financial services industry;
(g) Information concerning the business, financial condition, results
of operations and prospects of Firstar;
(h) The review by the Board with its legal and financial advisors of
the provisions of the proposed Merger Agreements;
(i) The financial advice rendered by Hovde to the Board and the
opinion rendered by Hovde that the Exchange Ratio was fair, from a
financial point of view, to holders of FMFC Common Stock (See "Opinion of
Financial Advisor");
(j) The likelihood that the proposed transaction would be consummated;
(k) The likely beneficial effect of the proposed transaction on
customers and employees of First Moline;
(l) The expectation that Firstar will continue to provide quality
service to the communities and customers served by First Moline; and
(m) The compatibility of the respective businesses and management
philosophies of Firstar and First Moline.
The Board also determined that the Merger is preferable to the other
alternatives available to First Moline, such as being acquired by a different
company or remaining independent and growing internally.
While each member of the Board individually evaluated each of the foregoing
as well as other factors, the Board collectively did not assign any specific or
relative weights to the factors considered and did not make any determination
with respect to any individual factor. The Board collectively made its
determination with respect to the Merger based on the unanimous conclusion
reached by its members that the Merger, in light of the factors that each
director individually considered as appropriate, is fair and in the best
interests of the First Moline stockholders.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS OF FIRST MOLINE
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF FMFC COMMON STOCK VOTE "FOR" APPROVAL OF
THE MERGER, THE MERGER AGREEMENTS AND THE ARTICLES AMENDMENT.
21
<PAGE> 28
OPINION OF FINANCIAL ADVISOR
On October 11, 1993, the Board retained Hovde to render financial advisory
and investment banking services to First Moline. Hovde is a nationally
recognized investment banking firm regularly engaged in the valuation of
financial institutions and their securities in connection with mergers and
acquisitions. The Board selected Hovde on the basis of, among other things, its
expertise in mergers and acquisition transactions and its familiarity with the
most likely potential merger partners for First Moline and the regional banking
industry.
As part of its services, Hovde analyzed First Moline and its operations,
historical performance and future prospects; identified and contacted a limited
number of bank and thrift holding companies acceptable to the Board in order to
solicit indications of interest in a possible business combination with First
Moline; participated in negotiations concerning the financial aspects of the
Merger Agreements under the guidance of the Board; and provided an opinion as to
the fairness, from a financial point of view, of the number of shares of Firstar
Common Stock to be exchanged for each outstanding share of FMFC Common Stock as
calculated in Section 8 of the Plan of Merger to the holders of FMFC Common
Stock. The Board imposed no limitations upon Hovde with respect to the
investigations made or procedures followed by Hovde in rendering its opinion.
Hovde specializes in providing investment banking and financial advisory
services to commercial bank and thrift institutions. Its principals are
experienced in the independent valuation of securities in connection with
negotiated underwritings, subscription and community offerings, private
placements, merger and acquisition transactions and recapitalizations. Hovde is
familiar with First Moline, having acted as its financial advisor in connection
with, and having participated in the negotiations leading to, the Merger
Agreements.
Hovde has rendered a written opinion to the Board to the effect that, as of
the date of the mailing of this Proxy Statement-Prospectus, the Exchange Ratio
is fair, from a financial point of view, to the holders of FMFC Common Stock.
Such opinion describes the assumptions made, matters considered and the scope of
the review undertaken and procedures followed by Hovde. Hovde's opinion is
attached hereto as Appendix C and is incorporated herein by reference.
STOCKHOLDERS ARE ENCOURAGED TO READ SUCH OPINION IN ITS ENTIRETY.
Hovde's opinion is directed to the Board only and addresses only the
Exchange Ratio. Hovde has not expressed any opinion as to the prices at which
shares of Firstar Common Stock issued in the Merger may trade if and when they
are issued or at any future time, and Hovde's opinion does not constitute a
recommendation to any holder of FMFC Common Stock as to how such holder should
vote with respect to the Merger Agreements at any meeting of holders of FMFC
Common Stock.
For purposes of its opinion and in connection with its review of the
proposed transaction, Hovde, among other things, reviewed and analyzed material
bearing upon the financial and operating conditions of First Moline and Firstar
and material prepared in connection with the proposed transaction, including the
following: the Merger Agreements and this Proxy Statement-Prospectus; certain
publicly available information concerning First Moline and Firstar, including
their Annual Reports on Form 10-KSB and 10-K, respectively, for the fiscal year
ended December 31, 1993 and their Quarterly Reports on Forms 10-QSB and 10-Q,
respectively, for the quarters ended March 31, 1994, June 30, 1994, and
September 30, 1994; certain financial projections and other materials prepared
by Firstar's management regarding Firstar's pending acquisitions of First
Colonial Bankshares Corporation ("First Colonial") and Investors Bank Corp.
("Investors") (see "FIRSTAR CORPORATION--Other Acquisitions and Transactions");
the terms of recent merger and acquisition transactions involving thrifts and
thrift holding companies that Hovde considered relevant; historical price and
volume data for First Moline and Firstar common stock; and certain financial and
other information provided to Hovde by the managements of First Moline and
Firstar. Hovde also participated in discussions and negotiations among
representatives of First Moline and Firstar and their respective legal advisors
that resulted in the Merger Agreements; discussed certain aspects of the past
and current business operations, results of regulatory examinations, financial
condition and future prospects of First Moline and Firstar with certain members
of the management of First Moline and Firstar; and conducted such other studies,
analyses and examinations as Hovde deemed appropriate.
22
<PAGE> 29
In rendering its opinion, Hovde relied upon and assumed without independent
verification the accuracy and completeness of the financial and other
information and representations that were provided or made to it by First
Moline, Firstar and their respective representatives and of the publicly
available information reviewed by Hovde. Hovde also relied upon Firstar's
management as to the reasonableness and achievability of the financial and
operating forecasts provided to Hovde (and the assumptions and bases therefor)
with regard to Firstar's pending acquisitions of First Colonial and Investors.
In that regard, Hovde assumed that such forecasts, including without limitation
projected cost savings and revenue enhancements resulting from those
acquisitions, reflected the best currently available estimates and judgments of
Firstar's management and that such projections and forecasts would be realized
in the amounts and in the time periods currently estimated by Firstar's
management. Hovde did not independently verify and relied on and assumed that
the aggregate allowances for loan losses set forth in the balance sheets of each
of First Moline and Firstar at September 30, 1994 were adequate to cover such
losses and complied fully with applicable law, regulatory policy and sound
banking practices as of the date of such financial statements. Hovde was not
retained to and did not conduct a physical inspection of any of the properties
or facilities of First Moline or Firstar, nor did Hovde make any independent
evaluation or appraisal of the assets, liabilities or prospects of First Moline
or Firstar, nor was Hovde furnished with any such evaluation or appraisal, and
Hovde was not retained to and did not review any individual credit files.
Hovde assumed that the Merger is, and will be, in compliance with all laws
and regulations that are applicable to First Moline and Firstar. In rendering
its opinion, Hovde was advised by First Moline and Firstar and Hovde has assumed
that there are no factors that would impede any necessary regulatory or
governmental approval for the Merger and Hovde has further assumed that in the
course of obtaining the necessary regulatory and governmental approvals, no
restriction will be imposed on Firstar or the surviving corporation that would
have a material adverse effect on Firstar or the contemplated benefits of the
Merger. Hovde also assumed that there would not occur any change in the
applicable law or regulation that would cause a material adverse change in the
prospects or operations of Firstar or the surviving corporation after the
Merger.
Prior to rendering its written opinion to the Board dated as of the date of
the mailing of this Proxy Statement-Prospectus, Hovde rendered a written opinion
to the Board on August 26, 1994. Set forth below is a brief summary of the
analyses performed by Hovde in reaching its August 26, 1994 opinion.
Analysis of Proposals. Hovde compared the significant terms, including the
value of the consideration offered, set forth in the Merger Agreements to the
significant terms set forth in the preliminary proposals submitted by other
interested parties. This analysis showed, among other things, that the value of
the consideration offered in the Merger Agreements (not including the value of
any incremental dividends payable to First Moline's stockholders under the
Merger Agreements) was $32.84 per share (the "Collared Value") if Firstar's
Common Stock is trading between $31.00 and $35.00 per share, and $29.68 per
share (the "Walkaway Value") if Firstar's Common Stock is trading at $28.00 per
share at closing. These values exceeded the value of the consideration set forth
in each of the preliminary proposals submitted by other interested parties.
Analysis of Selected Mergers. As part of its analyses, Hovde reviewed three
sets of mergers: (i) selected mergers involving 44 thrifts headquartered
throughout the United States announced between June 30, 1993 and August 21, 1994
in which the announced total deal value was between $5 million and $30 million
(the "Nationwide Mergers I"); (ii) selected mergers involving 19 thrifts
headquartered throughout the United States announced between June 30, 1993 and
August 21, 1994 in which the announced total deal value was between $5 million
and $15 million (the "Nationwide Mergers II"); and (iii) selected mergers
involving six thrifts headquartered in the Midwest announced between June 30,
1993 and August 21, 1994 in which the announced total deal value was between $5
million and $15 million (the "Midwestern Mergers"). For each transaction, Hovde
calculated the multiple of the announced total deal value to the acquired
company's: (i) earnings per share for the twelve months preceding the
announcement date of the transaction; (ii) book value per share; and (iii)
tangible book value per share. Hovde also calculated the tangible book premium
to core deposits (i.e., the difference between the announced total deal value
and the acquired company's tangible equity, expressed as a percentage of the
acquired company's core deposits) for each transaction.
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The calculations for the Nationwide Mergers I yielded a range of multiples
of announced total deal value to earnings per share of 6.5 times to 29.5 times,
with an average of 13.6 times and a median of 11.6 times; a range of multiples
of announced total deal value to book value of 1.00 times to 2.54 times, with an
average of 1.50 times and a median of 1.48 times; a range of multiples of
announced total deal value to tangible book value of 1.00 times to 2.54 times,
with an average of 1.52 times and a median of 1.48 times; and a range of
tangible book premiums to core deposits of 0.04% to 14.33%, with an average of
5.72% and a median of 5.49%.
The calculations for the Nationwide Mergers II yielded a range of multiples
of announced total deal value to earnings per share of 6.5 times to 29.5 times,
with an average of 13.0 times and a median of 10.2 times; a range of multiples
of announced total deal value to book value of 1.07 times to 2.08 times, with an
average of 1.48 times and a median of 1.51 times; a range of multiples of
announced total deal value to tangible book value of 1.13 times to 2.08 times,
with an average of 1.50 times and a median of 1.51 times; and a range of
tangible book premiums to core deposits of 1.15% to 14.33%, with an average of
5.90% and a median of 4.25%.
The calculations for the Midwestern Mergers yielded a range of multiples of
announced total deal value to earnings per share of 9.2 times to 17.5 times,
with an average of 11.3 times and a median of 10.0 times; a range of multiples
of announced total deal value to book value of 1.22 times to 2.08 times, with an
average of 1.50 times and a median of 1.42 times; a range of multiples of
announced total deal value to tangible book value of 1.22 times to 2.08 times,
with an average of 1.51 times and a median of 1.45 times; and a range of
tangible book premiums to core deposits of 2.32% to 9.18%, with an average of
5.34% and a median of 4.39%.
Hovde compared these multiples with the corresponding multiples for the
Merger at the Collared Value of $32.84 per share and the Walkaway Value of
$29.68 per share. In calculating the multiples for the Merger, Hovde used First
Moline's earnings per share for the twelve months ended June 30, 1994 and book
value per share, tangible book value per share and core deposits as of June 30,
1994. Hovde calculated that the Collared Value represented multiples of First
Moline's earnings per share, book value per share and tangible book value per
share of 18.2 times, 1.64 times and 1.64 times, respectively, and a tangible
premium to core deposits of 5.51%. Hovde calculated that the Walkaway Value
represented multiples of First Moline's earnings per share, book value per share
and tangible book value per share of 16.4 times, 1.48 times and 1.48 times,
respectively, and a tangible book premium to core deposits of 4.14%.
No company or transaction used in the above analyses as a comparison is
identical to First Moline, Firstar 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. Hovde prepared an analysis showing the percentages
of assets, deposits, common equity, and 1992, 1993 and estimated 1994 net income
contributed to the combined company on a pro forma basis by First Moline and
Firstar, and compared these percentages to the pro forma ownership of Firstar
Common Stock by the stockholders of First Moline. This analysis showed that
First Moline, as of June 30, 1994, would on a pro forma basis contribute 0.57%
of total assets, 0.67% of total deposits, 0.50% of total equity, 0.25% of 1992
net income, 0.24% of 1993 net income and 0.21% of estimated 1994 net income. The
stockholders of First Moline would own approximately 0.50% of the pro forma
common shares outstanding of Firstar if Firstar's Common Stock was trading at or
below $31.00 per share at closing, and approximately 0.44% of the pro forma
common shares outstanding of Firstar if Firstar's Common Stock was trading at or
above $35.00 per share at closing.
Financial Implications to First Moline Stockholders. Hovde prepared an
analysis comparing the projected earnings, dividends and book value per First
Moline share for the years 1994 through 1997 if First Moline remained
independent with the same values if the Merger was completed. This analysis
indicated that if Firstar Common Stock was trading at or below $31.00 per share
at closing, the projected earnings, dividends and book value per First Moline
share would be a minimum of 136%, 536% and 129% higher, respectively, if the
Merger was completed than if First Moline remained independent. If Firstar
Common Stock was trading at or above $35.00 per share at closing, the analysis
indicated that the projected earnings, dividends and book
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value per First Moline share would be a minimum of 109%, 463% and 103% higher,
respectively, if the Merger were completed than if First Moline remained
independent.
Comparative Stockholder Returns. Hovde prepared an analysis of theoretical
returns on investment for First Moline's stockholders under several scenarios.
This analysis, which was based on the internal rate of return on projected
dividend streams and projected 1997 common stock valuations (using current
price-to-earnings multiples), indicated returns on investment of 7.03% if First
Moline remained independent, 18.94% if First Moline was acquired in 1997, and
52.20%, 57.11% and 55.44% if First Moline was acquired by Firstar pursuant to
the Merger Agreements and Firstar's Common Stock was trading at $28.00 per
share, $31.00 per share and $35.00 per share, respectively at closing.
[HOVDE TO PROVIDE LANGUAGE REGARDING UPDATED FAIRNESS OPINION AT THE TIME OF
SUCH UPDATE]
Although the summary set forth above does not purport to be a complete
description of the analyses performed by Hovde, the material analyses performed
by Hovde in rendering its opinion have been summarized above. However, the
preparation of a fairness opinion is not necessarily susceptible to partial
analysis or summary description. Hovde believes that its analyses and the
summary set forth above 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 Hovde
reached its opinion. In addition, Hovde may have given various analyses more or
less weight than other analyses, but no analysis was given materially more
weight than any other analysis. Also, Hovde may have deemed various assumptions
more or less probable than other assumptions, so that the ranges of valuations
resulting from any particular analysis described above should not be taken to be
Hovde's view of the actual value of First Moline or the combined company.
In performing its analyses, Hovde made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of First Moline and Firstar. The
analyses performed by Hovde 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
Hovde's analysis of the fairness of the Exchange Ratio, from a financial point
of view, to the holders of FMFC Common Stock. The analyses do no purport to be
appraisals or to reflect the prices at which a company might actually be sold or
the prices at which any securities may trade at the present time or at any time
in the future. Hovde used in its analyses various projections of future
performance prepared by the management's of First Moline and Firstar. The
projections are based on numerous variables and assumptions which are inherently
unpredictable and must be considered not certain of occurrence as projected.
Accordingly, actual results could vary significantly from those assumed in the
projections and any related analyses. Hovde's opinion does not address the
relative merits of the Merger as compared to any alternative business strategies
that might exist for First Moline or the effect of any other business
combination in which First Moline might engage. In addition, as described above,
Hovde's opinion to the Board was one of many factors taken into consideration by
the First Moline Board of Directors in making its determination to approve the
Merger Agreements.
Hovde has received and will receive compensation from First Moline in
connection with its services, a significant portion of which is contingent upon
the consummation of the Merger. Pursuant to the terms of a letter agreement
dated October 11, 1994 (the "Engagement Letter"), for Hovde's services in
connection with the Merger, including the rendering of its opinion, First Moline
(i) has paid Hovde $50,000 and (ii) has agreed to pay Hovde an amount equal to
2.0% of the first $6,000,000 of consideration received by First Moline's
stockholders, 3.5% of consideration received by First Moline's stockholders in
excess of $6,000,000 and less than $10,000,000, and 4.5% of consideration
received by First Moline's stockholders in excess of $10,000,000. The amount set
forth in clause (ii) above will be reduced by the amount set forth in clause (i)
above and will be due and payable in cash upon consummation of the Merger. First
Moline has also agreed under the Engagement Letter to reimburse Hovde for all
reasonable out-of-pocket expenses incurred by Hovde in connection with its
engagement up to a maximum of $7,500 without the prior approval of First Moline,
and has agreed to indemnify Hovde against certain expenses and liabilities
incurred in connection with its engagement, including liabilities under federal
securities laws. The fees payable to Hovde are an
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obligation of First Moline and will have no impact on the consideration to be
received by the holders of FMFC Common Stock.
Hovde has from time to time in the past been, and may in the future be,
considered or employed by First Moline or Firstar to provide financial advisory
and investment banking services. These relationships are considered by First
Moline and Firstar, respectively, to be in the ordinary course of business and
to be immaterial to Hovde's engagement relative to the Merger.
TERMS OF THE MERGER
On the Closing Date, First Moline will merge with and into FCI, which will
be the surviving corporation. The Certificate of Incorporation and By-laws of
FCI in effect at the Effective Time (as defined below) will govern the surviving
corporation until amended or repealed in accordance with applicable law. At the
Effective Time, each outstanding share of FMFC Common Stock will be converted
into shares of Firstar Common Stock as follows: If Firstar Common Stock is
trading between $31.00 and $35.00 per share, then each share of FMFC Common
Stock will be converted into the number of shares of Firstar Common Stock
arrived at by dividing $32.84 by the market price of Firstar Common Stock as
determined under the Merger Agreements. If Firstar Common Stock is trading at or
below $31.00 per share, then the holders of FMFC Common Stock will receive 1.06
shares of Firstar Common Stock for each share of FMFC Common Stock. If Firstar
Common Stock is trading at or above $35.00 per share, then the holders of FMFC
Common Stock will receive 0.94 shares of Firstar Common Stock for each share of
FMFC Common Stock. The foregoing conversion is subject to the statutory
dissenters' rights of the holders of FMFC Common Stock. The Merger Agreements
provide that the trading price of Firstar Common Stock will be determined by
averaging the composite closing prices per share of Firstar Common Stock on the
NYSE and CSE on the five consecutive trading days immediately preceding the
calendar day immediately preceding the Closing Date. See "Rights of Dissenting
Stockholders."
The Reorganization Agreement provides that, if between the date of the
Reorganization Agreement and the Effective Time, Firstar declares a stock
dividend or distribution upon or subdivides, splits up, reclassifies or combines
its shares of Firstar Common Stock or declares a dividend or makes distribution
on Firstar Common Stock of any security convertible into Firstar Common Stock,
appropriate adjustment or adjustments will be made in the conversion ratio
applicable to FMFC Common Stock.
No fractional shares of Firstar Common Stock will be issued in the Merger.
Instead, Firstar will pay to each holder of FMFC Common Stock who would
otherwise be entitled to a fractional share an amount of cash equal to the
fraction of a share of Firstar Common Stock to which the First Moline
stockholder would otherwise be entitled multiplied by the closing price per
share of Firstar Common Stock at the Effective Time on the NYSE. The shares of
Firstar Common Stock and shares of common stock of FCI issued and outstanding
immediately prior to the Closing Date will remain issued and outstanding.
The terms of the Merger were determined on the basis of arm's length
negotiations. See "Opinion of Financial Advisor."
OPTIONS
There are currently options outstanding for 21,944 shares of FMFC Common
Stock. Options for 19,201 shares of FMFC Common Stock will be converted into the
right to receive shares of Firstar Common Stock. If Firstar Common Stock is
trading between $31.00 and $35.00 per share, then each such option will be
converted into the right to receive the number of shares of Firstar Common Stock
arrived at by dividing $22.84 by the market price of Firstar Common Stock as
determined under the Merger Agreements. If Firstar Common Stock is trading at or
below $31.00 per share, then each such option will be converted into the right
to receive 0.74 shares of Firstar Common Stock. If Firstar Common Stock is
trading at or above $35.00 per share, then each such option will be converted
into the right to receive 0.65 shares of Firstar Common Stock.
The options for the remaining 2,743 shares of FMFC Common Stock, all of
which are held by First Moline's chief executive officer, will be converted into
options for Firstar Common Stock (a "Firstar Stock
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Option") based on the conversion formula set out in the Merger Agreements, which
formula is consistent with the Exchange Ratio. Each Firstar Stock Option will
otherwise be exercisable on the same terms and conditions as applied to the
First Moline Stock Options.
CLOSING DATE OF THE MERGER
The Closing Date of the Merger will take place as soon as practicable
following the satisfaction or waiver of the last of the conditions to the Merger
on a date to be specified by Firstar and First Moline. Such date will not be
more than ten business days after receipt of all required regulatory approvals
and the expiration of any waiting periods connected with such approvals. As soon
as practicable on or after the Closing Date, executed Articles of Merger will be
filed with the Secretary of State of the State of Iowa and an executed
Certificate of Merger will be filed with the Secretary of State of the State of
Delaware, and the Merger will become effective upon the filing of such Articles
of Merger and Certificate of Merger (the "Effective Time"). Subject to the
conditions contained in the Merger Agreements, the Closing Date is currently
expected to occur during the first quarter of 1995. See "Conditions to the
Merger" and "Regulatory Approvals."
SURRENDER OF CERTIFICATES
As soon as reasonably practicable after the Closing Date, Firstar Trust
Company, or such other bank or trust company designated as exchange agent for
Firstar (the "Exchange Agent"), is required to mail to each holder of record of
FMFC Common Stock a letter of transmittal and instructions for use in effecting
the surrender of such holder's First Moline stock certificates for certificates
representing Firstar Common Stock ("Certificates").
FIRST MOLINE STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of one or more certificates for FMFC
Common Stock, together with a properly completed letter of transmittal, there
will be issued and mailed to the holder a Certificate or Certificates to which
the holder is entitled and, where applicable, a check for the amount
representing any fractional share. A Certificate may be issued in a name other
than the name in which the surrendered certificate is registered only if a
certificate representing such FMFC Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect a transfer
to the new name and by evidence that any applicable stock transfer taxes have
been paid.
All Firstar Common Stock issued pursuant to the Merger will be deemed
issued as of the Effective Time. No dividends or other distributions declared or
made after the Effective Time with respect to Firstar Common Stock with a record
date after the Effective Time will be paid to the holder of any unsurrendered
certificate representing FMFC Common Stock with respect to the shares of Firstar
Common Stock represented thereby, and no cash payment in lieu of fractional
shares will be paid to any such holder, until the holder of record of such
certificate surrenders the certificate. Subject to the effect of applicable
laws, following surrender of any certificate, there will be paid to the record
holder of the Certificates issued in exchange, without interest, (i) at the time
of such surrender, the amount of any cash payable in lieu of a fractional share
of Firstar Common Stock and the amount of dividends or other distributions with
record and payment dates after the Effective Time and before the date of such
surrender and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to the
whole shares of Firstar Common Stock represented by the Certificates. In no
event shall the persons entitled to receive such dividends, distributions and
cash in lieu of fractional shares be entitled to receive interest on amounts
payable.
CONDITIONS TO THE MERGER
The Merger will occur only if the Merger Agreements and the Articles
Amendment are approved by the requisite votes by the holders of FMFC Common
Stock. Consummation of the Merger is subject to the satisfaction of certain
other conditions unless waived to the extent waiver is permitted by applicable
law. Such conditions include the following, which constitute all material
conditions: (i) the receipt of all necessary
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regulatory approvals, including the approval of the Federal Reserve Board and
the Illinois Commissioner (which has been waived by the Illinois Commissioner),
with no material terms or conditions that are not reasonably acceptable to
Firstar; (ii) approval by the OCC of the conversion of First Federal from a
federal savings bank to a national bank; (iii) the effectiveness of the
Registration Statement and the absence of a stop order suspending such
effectiveness or proceedings seeking a stop order; (iv) the absence of a
temporary restraining order, injunction or other order of any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger; (v) authorization for listing on the NYSE upon official notice of
issuance of the shares of Firstar Common Stock issuable in the Merger; (vi) the
receipt by Firstar of executed letter agreements in the form attached to the
Reorganization Agreement, relating to securities law matters, from affiliates of
First Moline; (vii) the absence of any material adverse change since December
31, 1993, in the financial condition, results of operations or business of First
Moline and Firstar, as the case may be, other than any changes resulting
primarily by reason of changes in the banking business of First Moline and
Firstar; (viii) the continued accuracy of representations and warranties by
Firstar and First Moline regarding, among other things, the organization of the
parties, financial statements, capitalization, pending and threatened
litigation, enforceability of the Merger Agreements, compliance with law, and
tax matters; and (ix) First Moline's consolidated allowance for loan losses
shall not be less than an amount requested by Firstar. See "Termination,
Amendment and Waiver; Regulatory Approvals."
In addition, unless waived, each party's obligation to effect the Merger is
subject to performance by the other party of its obligations under the Merger
Agreements and the receipt of certain certificates from the other party and
legal opinions.
ARTICLES AMENDMENT
The Articles Amendment amends the Certificate of Incorporation of First
Moline to delete, in its entirety, Article Fourth, subparagraph C of the
Certificate of Incorporation. Article Fourth, subparagraph C provides that no
person shall directly or indirectly offer to acquire or acquire the beneficial
ownership of more than 10% of any class of equity security of First Moline. If
approved, the Articles Amendment would ratify execution of the Merger
Agreements. If the Articles Amendment is not approved, the Merger will not be
consummated regardless of whether the Merger Agreements are approved. The
Articles Amendment provides that the Board of Directors of First Moline is
authorized to abandon the Articles Amendment in accordance with Section 242(c)
of the DGCL if the Merger is not consummated. See "MEETING INFORMATION--Record
Date; Vote Required; Voting Agreements."
REGULATORY APPROVALS
Federal. The Merger is subject to prior approval by the Federal Reserve
Board under the Bank Holding Company Act of 1956, as amended (the "BHC Act"),
which requires that the Federal Reserve Board take into consideration, among
other factors, the financial and managerial resources and future prospects of
the respective institutions and the convenience and needs of the communities to
be served. The BHC Act prohibits the Federal Reserve Board from approving the
Merger if it 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, or if its effect in any section of the country
may be substantially to lessen competition or to tend to create a monopoly, or
if it would in any other manner be 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 the transaction in
meeting the convenience and needs of the communities to be served. The Federal
Reserve Board has the authority to deny an application if it concludes that the
combined organization would have an inadequate capital position. Furthermore,
the Federal Reserve Board must also assess the records of the bank subsidiaries
of Firstar and First Moline under the Community Reinvestment Act of 1977, as
amended (the "CRA"). The CRA requires that the Federal Reserve Board analyze,
and take into account when evaluating an application, each bank's record of
meeting the credit needs of its local communities, including low- and
moderate-income neighborhoods, consistent with safe and sound operation.
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Under the BHC Act, the Merger may not be consummated until up to 30 days
following the date of Federal Reserve Board approval, during which time the
United States Department of Justice 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 BHC Act provides for the publication of notice and public comment
on the applications and authorizes the regulatory agency to permit interested
parties to intervene in the proceedings.
Firstar filed an application with the Federal Reserve Bank of Chicago (the
"Federal Reserve Bank") that was accepted for filing by the Reserve Bank on
December 14, 1994. Firstar has been advised that the Federal Reserve Bank has
accepted the application for processing under delegated authority from the
Federal Reserve Board. Under the regulations of the Federal Reserve Board, the
Federal Reserve Bank will act on the application within the 30-day period that
began on the date the application was accepted for filing (a period that may be
extended by any public comments or other circumstances that may trigger further
requests for information from the Federal Reserve Bank). There can be no
assurance that the Federal Reserve Bank will continue processing the application
under delegated authority.
[There can be no assurance that the Federal Reserve Board will approve the
Merger, and if the Merger is approved, there can be no assurance as to the date
of such approval. There can likewise be no assurance that the Department of
Justice will not challenge the Merger or, if such a challenge is made, as to the
result thereof.]
The Merger is subject to the parties having received evidence that the OCC
has approved the conversion of First Federal from a federal savings bank to a
national bank. Federal banking regulations require that First Federal give
notice to the Office of Thrift Supervision ("OTS") upon filing its letter of
intent to convert to a national bank with the OCC. It is the intent of the
parties to have First Federal complete such a charter conversion immediately
preceding the Effective Time. First Federal filed an application for the charter
conversion with the OCC on November 23, 1994 and provided the required notice to
the OTS.
There can be no assurance that the OCC will authorize the charter
conversion.
Illinois. The Merger is also subject to the prior approval by the Illinois
Commissioner under the Illinois Bank Holding Company Act of 1957, as amended
(the "Illinois Act"), which requires that the Illinois Commissioner take into
consideration whether (i) the proposed transaction will promote the safety and
soundness of the institution to be acquired, (ii) the banks already controlled
by the applicant meet the convenience and needs of the communities served by
them in accordance with the CRA, (iii) the applicant intends to adequately meet
the convenience and needs of the communities serviced by the institution to be
acquired in accordance with CRA, and (iv) the transaction will bring net new
benefits to the state of Illinois. Under the Illinois Act, the Merger may be
consummated immediately following an approval from the Illinois Commissioner.
The Illinois Commissioner has waived the filing of an application in this
transaction.
General. The Merger cannot proceed in the absence of all requisite
regulatory approvals. See "Conditions to the Merger," "Closing Date of the
Merger" and "Termination, Amendment and Waiver." In the Merger Agreements,
Firstar and First Moline have agreed to take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed with respect to
the Merger, including furnishing information to the Federal Reserve Board or in
connection with approvals or filings with other governmental entities. Firstar
has agreed to use its best efforts to obtain approvals of the Federal Reserve
Board, the OCC, the Illinois Commissioner and other governmental entities.
However, the obligation to use best efforts is not to be construed as including
an obligation to accept any terms of or conditions to an agreement or other
approval of, or any exemption by, if Firstar in good faith determines that any
material terms or conditions are not reasonably acceptable to it. There can be
no assurance that any regulatory approvals will not contain a term or condition
that causes such approvals to fail to satisfy the conditions described above
under "Conditions to the Merger."
Firstar and First Moline are not aware of any other governmental approvals
or actions that are required for consummation of the Merger except as described
above. Should any other approval or action be required, it is presently
contemplated that such approval or action would be sought. There can be no
assurance that any
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such approval or action, if needed, could be obtained and, if such approvals or
actions are obtained, there can be no assurance as to the timing thereof.
BUSINESS PENDING THE MERGER
Under the Reorganization Agreement, First Moline is generally obligated to,
and to cause its subsidiaries to, operate their respective businesses only in
the usual, regular and ordinary course consistent with past practices; use its
best efforts to preserve its business organization and assets, maintain its
rights and franchises, retain the services of employees and maintain its
relationships with customers; maintain its properties; keep in full force and
effect insurance; perform obligations under material agreements; and comply with
obligations imposed by laws. The Reorganization Agreement also provides that
prior to the Closing Date, without Firstar's prior written consent, First Moline
may not, and may not allow its subsidiaries to, among other things: (i) incur
any material liabilities or obligations, except in the ordinary course; (ii)
increase the compensation of employees, directors or officers, except in
accordance with past practice; (iii) change retirement benefits or other benefit
plans, or enter into employment or similar agreements; (iv) effect any
acquisition; (v) issue or redeem any of its capital stock; (vi) propose or adopt
any amendments to its corporate charter or bylaws; or (vii) change the lending,
investment, liability, management and other material policies concerning the
banking business of First Moline.
In addition, the Reorganization Agreement provides that prior to the
Closing Date First Moline may not initiate, solicit or encourage, or take any
other action to facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any "Competing
Transaction," or negotiate with any person in furtherance of such inquiries or
to obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize or permit any of its officers, directors, employees,
financial advisor, attorney, accountant or other representative to take any such
action. "Competing Transaction" means any of the following involving First
Moline or any of its subsidiaries with a party other than Firstar: any merger or
other business combination; the acquisition of more than ten percent (10%) of
the gross assets of First Moline or First Federal; the acquisition of any
capital stock of First Federal; or the acquisition by First Moline or First
Federal, except in the ordinary course of business, of the stock or assets of
any other person. The Reorganization Agreement provides, however, that the Board
of Directors of First Moline is not prohibited from taking such actions if the
Board of Directors is required to take such actions to comply with its fiduciary
duties to stockholders imposed by law following consultation and based upon
advice of counsel.
First Moline has agreed to, through its Board of Directors, subject to its
fiduciary duty to the stockholders of First Moline, (i) recommend to its
stockholders approval of the Merger Agreements; (ii) not withdraw, modify, or
amend such recommendation; and (iii) use its best efforts to obtain stockholder
approval.
DIVIDENDS
Under the Reorganization Agreement, First Moline is allowed to declare
quarterly cash dividends on FMFC Common Stock as if the Merger had been
consummated on August 25, 1994 and 265,112 shares of Firstar Common Stock had
been issued. If the actual number of shares of Firstar Common Stock issued on
the Closing Date is greater than 265,112, First Moline may pay a final dividend
equal to the difference between the dividends paid from August 25, 1994 to the
Closing Date and the dividends that would have been paid had that greater number
of shares of Firstar Common Stock been issued on August 25, 1994.
TERMINATION, AMENDMENT AND WAIVER
The Reorganization Agreement provides that it may be terminated, whether
before or after approval of the matters presented in connection with the Merger
by the stockholders of First Moline or FCI, (i) by mutual consent of Firstar and
First Moline; or (ii) by written notice from either party to other if (a) the
conditions to the Merger contained in the Merger Agreements have not been
substantially satisfied or waived by June 30, 1995, (b) any warranty or
representation made by the other party in the Merger Agreements is discovered to
have become untrue in any material respect or which has not been cured within
ten business
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days following notice of such breach, or (c) the other party commits one or more
material breaches of the Merger Agreements which is not cured within ten
business days following notice of such breach.
The Reorganization Agreement also provides that it may be terminated by
First Moline immediately after the five consecutive trading days preceding the
calendar day immediately preceding the Closing Date, if the average of the daily
closing prices of a share of Firstar Common Stock as reported on the
Consolidated Tape System for NYSE stocks during such Five-Day Calculation Period
is less than $28.00. As of the date of this Proxy Statement-Prospectus, the
closing price of a share of Firstar Common Stock is less than $28.00. Assuming
the Merger is approved by holders of FMFC Common Stock, the Board may elect to
consummate the Merger without resoliciting First Moline stockholders even though
the average of the daily closing prices of a share of Firstar Common Stock
during the Five-Day Calculation Period is less than $28.00. In such a situation,
in considering whether to consummate the Merger without the resolicitation of
First Moline stockholders, the Board will take into account, consistent with its
fiduciary duties, all relevant facts and circumstances that exist at such time,
including, without limitation, the advice of its financial advisors and legal
counsel. Stockholder approval of the Merger Agreements and the transactions
contemplated thereby (including the Merger) confers upon the Board the power,
consistent with its fiduciary duties, to elect to consummate the Merger
notwithstanding that the average price of a share of Firstar Common Stock
calculated during the Five-Day Calculation Period may be less than $28.00. In
the alternative, the Board may exercise its rights under the Merger Agreements
to terminate the Merger Agreements and the Merger.
The Merger Agreements may be amended by the parties at any time before or
after approval of the matters presented in connection with the Merger by the
stockholders of First Moline, but after any such approval, no amendment may be
made which would have any material adverse effect on the benefits to be received
by First Moline's stockholders. At any time prior to the Effective Time, either
party may, to the extent legally allowed, extend the time for performance of any
of the obligations of the other party, waive any inaccuracies in the
representations and warranties of the other and waive compliance with any of the
agreements or conditions to its obligations.
MANAGEMENT AND OPERATIONS OF FIRST MOLINE AFTER THE MERGER
In the Merger, First Moline will be merged into FCI and the separate
corporate existence of First Moline will cease. Firstar will thereby acquire
control of First Federal, which will have been converted to a national bank and
will continue to own its two non-bank subsidiaries. FCI, as the surviving
corporation, will continue to operate under the name "Firstar Corporation of
Iowa."
The officers and directors of FCI prior to the Merger will continue as
officers and directors of the surviving corporation. Immediately following the
Closing Date, one or more management representatives of Firstar will be added to
the board of First Federal. Within several months of the Effective Time, Firstar
and FCI intend to merge First Federal into Firstar Bank Davenport, N.A., FCI's
existing bank subsidiary in the Quad Cities market, subject to regulatory
approval. When this planned merger is completed, the officers of the First
Federal will become officers of the surviving bank and two First Federal
directors will be invited to join the Board of Directors of the surviving bank.
See "Interests of Certain Persons in the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The following directors, executive officers and corporate secretary of
First Moline hold First Moline Stock Options granted pursuant to the First
Moline Stock Option Plan: Gene Blanc, Jon Christensen, Kent Crippen, Dennis
Hoffmann, Glenn Medhus and Michael Steffenson, Byrd Krumbholz and Daniel
Churchill. Pursuant to the Stock Option Plan, each such person was granted a
stock option to purchase 2,743 shares of FMFC Common Stock at an exercise price
equal to the price per share offered at the time of the conversion of First
Federal from a mutual to stock form of ownership on October 1, 1992. Such
offering and exercise price was $10.00 per share. The expiration date for each
stock option is September 30, 2002. Pursuant to their terms, such options become
immediately exercisable upon the occurrence of a "change in control" (which
includes a transaction such as the Merger).
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In accordance with the Merger Agreements, upon the consummation of the
Merger, each option right for a share of FMFC Common Stock held by an option
holder (other than Mr. Krumbholz) will be converted into a right to receive
shares of Firstar Common Stock based upon the conversion formula set forth in
the Merger Agreements for such options. Upon the consummation of the Merger, the
option rights for 2,743 shares of First Moline Common Stock held by Mr.
Krumbholz (President of First Moline) will be converted into an option right to
purchase shares of Firstar Common Stock based upon the conversion formula set
forth in the Merger Agreements for such options. See "PROPOSED MERGER--Options".
First Moline maintains the First Moline Management Recognition and
Retention Plan and Trust (the "RRP") as a part of its strategy to retain
directors, key employees and the corporate secretary. At the time of the
conversion, First Moline granted the following awards of FMFC Common Stock under
the RRP: 1,893 shares to Mr. Medhus and 905 shares to each of Messrs. Blanc,
Christensen, Churchill, Crippen, Hoffmann, Krumbholz and Steffenson. The awards
vest at a rate of 20% per year; the first installment vested 90 days after the
calendar year 1992, and each additional installment vests or has vested 90 days
after each subsequent calendar year. Pursuant to the terms of the RRP, any award
held by a recipient whose term of service to First Moline or an affiliate
thereof terminates following a "change in control" (which includes a transaction
such as the Merger) vests as of the recipient's last day of service to First
Moline.
Pursuant to the Merger Agreements, First Moline will terminate the RRP
immediately prior to the consummation of the Merger. All outstanding unvested
awards held by recipients will vest upon the termination of the RRP and, upon
the Merger, those shares will be converted in shares of Firstar Common Stock on
the same basis as all other outstanding shares of First Moline Common Stock.
The Reorganization Agreement provides that upon consummation of the Merger,
Firstar will indemnify and obtain insurance coverage, for a period of not less
than 2 years following the Closing Date, for each officer and director of First
Moline and its subsidiaries against all losses, claims, damages, costs,
expenses, liabilities or judgments arising out of the fact that such person was
an officer or director of First Moline or one of its subsidiaries prior to the
consummation of the Merger. Firstar's obligation to obtain such insurance
coverage is limited to aggregate premiums of $60,000.
Firstar is obligated under the Merger Agreements to assume and to keep in
full force and effect the employment agreements dated September 30, 1993, by and
between First Moline and Byrd Krumbholz and by and between First Federal and
Byrd Krumbholz (the "Employment Agreements"). The term of the Employment
Agreements is for one year with automatic successive one year extensions,
subject to a 90-day notice of non-renewal, until Mr. Krumbholz attains the age
of 65. If the employment of Mr. Krumbholz is terminated without cause, First
Federal is obligated to pay Mr. Krumbholz his base salary through the term of
the Employment Agreements. Should Mr. Krumbholz be terminated for "cause," or
should he voluntarily resign, First Federal is obligated to pay Mr. Krumbholz's
base salary through the date of such termination or resignation. The Employment
Agreements also provide that if Mr. Krumbholz has not attained the age of 62 and
is terminated following a change in control (which would include a transaction
such as the Merger), he would be paid a sum equal to the lesser of (i) three
times the preceding year's base salary and (ii) a sum equal to one-twelfth of
the preceding year's base salary multiplied by the number of months from the
date of termination until attainment of the age 62. Mr. Krumbholz's current base
salary is $85,700 a year.
Mr. Krumbholz will continue to serve as President of First Federal upon
consummation of the Merger (at which time First Federal will have converted into
a national banking association). Subsequent to the acquisition, Firstar intends
to merge First Federal with Firstar Bank Davenport, N.A. and at that time Mr.
Krumbholz will become a Senior Vice President of the combined First
Federal/Firstar Bank Davenport, N.A. institution.
Mr. Krumbholz also is entitled to certain benefits under a Deferred
Compensation Agreement, as amended, by and between Mr. Krumbholz and First
Federal. In general, the Deferred Compensation Agreement provides that if Mr.
Krumbholz retires after reaching the age of 62 he will be paid $1,250 per month
for 180 months beginning at the time of his retirement. If Mr. Krumbholz retires
between the ages of 60 and 62, or is terminated between the ages of 55 and 60,
he will receive $1,250 per month for the number of months equal to the number of
months from February 1989 through his retirement times a factor of 1.25. In
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addition, should Mr. Krumbholz be terminated prior to age 62 following a change
in control (which includes a transaction such as the Merger) he will be paid
$1,250 per month for 180 months beginning at the time of his termination. In the
event of a change in control, First Federal is obligated to establish and fund a
grantor trust in favor of Mr. Krumbholz to assist First Federal in the discharge
of its obligations, which grantor trust will be established and funded at
closing. The Deferred Compensation Agreement also provides for similar benefits
in the event of Mr. Krumbholz's death or disability.
The present directors of First Federal have been invited to serve as
directors of First Federal following the Merger. In addition, the First Federal
Board of Directors will be enlarged by one or more seats which will be occupied
by representatives of Firstar. At the time First Federal is merged with Firstar
Bank Davenport, N.A., two outside members of First Federal's Board will be
invited by Firstar to serve as directors of the combined institution. It is
anticipated that Firstar will make a final decision as to which members will be
invited to sit on the combined entity's board only after the completion of the
Merger.
First Moline, First Federal and their subsidiaries receive legal services
provided by Churchill & Churchill pursuant to a Legal Services Retention
Agreement dated June 8, 1992, as amended (the "Legal Services Agreement"). The
legal services provided by Churchill & Churchill cover numerous areas, including
representing First Federal in all real estate loan closing transactions,
representing the First Federal subsidiaries and parent, general services to the
Board of Directors including serving as secretary to the Board of Directors of
First Moline and First Federal, and other legal services on an item by item
basis. The Legal Services Agreement, which expires on December 31, 1996,
provides for a review period for extensions to occur during December of each
year starting December 1995. Daniel Churchill, who is the corporate secretary of
First Moline, is a partner of Churchill & Churchill. The Legal Services
Agreement also provides that upon its early termination, a termination fee of
$263,000 will be paid to Churchill & Churchill. It is anticipated by First
Moline that the Legal Services Agreement will be terminated immediately
preceding the Merger and Churchill & Churchill will be paid the termination fee
at that time.
EFFECT ON EMPLOYEE BENEFITS
The Merger Agreements provide, among other things, that Firstar will
provide, or cause to be provided, to each employee of FCI or its subsidiaries
who was an employee of First Moline at the time of the consummation of the
Merger the opportunity to participate in Firstar's employee benefit plans on a
basis comparable to that of similarly situated employees of Firstar and its
subsidiaries, with full credit for years of employment with First Moline for
purposes of qualification and vesting. These include pension, 401(k), medical,
dental, dependent care, medical expense reimbursement, group life insurance and
long-term disability plans. The Merger Agreements also provide that Firstar will
honor the terms of the First Federal Savings Bank of Moline Amended and Restated
Employee Severance Compensation Plan ("Severance Plan"). The Severance Plan
provides certain benefits to full time employees of First Federal who are
terminated following a change in control of First Moline or First Federal (which
includes a transaction such as the Merger). In general, the terminated employee
is entitled to receive one month of severance for each full year of service up
to a maximum of 24 months of severance pay. In addition, the terminated employee
is entitled to continued life, medical and dental coverage for a period of one
year following termination.
Firstar may meet its obligations to provide benefits to First Moline
employees through continuation of existing First Moline plans until transfer of
such employees to Firstar's benefit plans. The Merger Agreements provide that
Firstar will make certain contributions to the existing First Moline profit
sharing plan on behalf of the First Moline employees, until such employees are
covered by Firstar's profit sharing plan.
TERMINATION FEE
As a condition to Firstar's willingness to enter into the Agreement, First
Moline agreed to pay to Firstar a termination fee of $400,000 within two days of
a Trigger Event. A Trigger Event means the occurrence of one or more of the
following events: (i) a Transaction Proposal (as defined below); (ii)
termination of the Reorganization Agreement following a wilful and material
breach thereof by First Moline; or (iii) any withdrawal, modification or
amendment in any respect by First Moline's Board of Directors of its approval or
recommendation regarding the Reorganization Agreement and stockholder vote
relating thereto or First
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Moline's Board of Directors adopting a resolution relating to any such
withdrawal, modification or amendment.
A "Transaction Proposal" means any of the following: (a) a bona fide tender
offer or exchange offer for at least 25% of the then outstanding shares of any
class of capital stock of First Moline made by any entity or person other than
Firstar or its subsidiaries or affiliates, (b) any entity or person filing an
application under the BHC Act, the Home Owners Loan Act, the Savings and Loan
Holding Company Act or the Change in Bank Control Act with respect to the
acquisition by such entity or person of any shares of capital stock of First
Moline, (c) a merger, consolidation or other business combination with First
Moline or First Federal is effected by an entity or person, (d) any sale, lease,
transfer, mortgage or other disposition involving a substantial part of First
Moline's or First Federal's consolidated assets, or any agreement to effect such
a transaction, (e) the acquisition by any entity or person of 10% or more of the
outstanding shares of any class of capital stock of First Moline or acquisition
of additional shares by any entity or person currently holding 10% or more of
such shares, except for certain acquisitions made pursuant to certain First
Moline benefit plans, (f) any reclassification of the securities of, or
recapitalization of, First Moline that has the effect, directly or indirectly,
of increasing the proportionate share of any class of equity security of First
Moline that is owned by an entity or person other than Firstar or its
subsidiaries or affiliates, or any agreement to effect such a reclassification
or recapitalization, (g) any transaction having an effect similar to those
described in (a) through (f) above, or (h) a public announcement regarding a
proposal, plan or intention by First Moline or another entity or person to
effect any of the foregoing transactions; provided, however, that events
described in clauses (a), (b) and (h) of this definition do not constitute a
"Transaction Proposal" unless either (x) the Board of Directors of First Moline
takes or fails to take certain actions in connection therewith or (y) First
Moline's stockholders fail to approve the Merger Agreements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Firstar and First Moline expect that the Merger will qualify as a tax-free
reorganization under Section 368(a)(1) of the Code. Accordingly, First Moline,
Firstar and FCI will recognize no gain or loss for federal income tax purposes
as a result of the Merger and no gain or loss will be recognized for federal
income tax purposes by any First Moline stockholder upon receipt of Firstar
Common Stock in exchange for FMFC Common Stock pursuant to the Merger (except
upon the receipt of cash in lieu of fractional shares of Firstar Common Stock).
This discussion of federal income tax consequences of the Merger assumes that
none of the holders of FMFC Common Stock will exercise dissenters' rights. The
Internal Revenue Service ("Service") has not been asked to rule upon the tax
consequences of the Merger and such request will not be made. Instead, First
Moline will rely upon the opinion of Vedder Price as to certain federal income
tax consequences of the Merger. The opinion of Vedder Price is based entirely
upon the Code, regulations now in effect thereunder, current administrative
rulings and practice, and judicial authority, all of which are subject to
change. Unlike a ruling from the Service, an opinion of counsel is not binding
on the Service and there can be no assurance, and none is hereby given, that the
Service will not take a position contrary to one or more positions reflected
herein or that the opinion of counsel will be upheld by the courts if challenged
by the Service. EACH STOCKHOLDER OF FIRST MOLINE IS URGED TO CONSULT HIS OR HER
OWN TAX AND FINANCIAL ADVISORS AS TO THE EFFECT OF SUCH FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER ON HIS OR HER OWN PARTICULAR FACTS AND CIRCUMSTANCES
AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES ARISING OUT
OF THE MERGER.
Based upon the opinion of Vedder Price, which in turn is based upon various
representations and subject to various assumptions and qualifications, the
following federal income tax consequences to the First Moline stockholders will
result from the Merger:
(i) Provided that the Merger of First Moline with and into FCI
qualifies as a statutory merger under applicable law, the Merger will
qualify as a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code, and First Moline, Firstar and FCI will each be "a
party to a reorganization" within the meaning of Section 368(b) of the Code
with respect to such reorganization.
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(ii) No gain or loss will be recognized by the holders of FMFC Common
Stock upon the exchange of FMFC Common Stock solely for Firstar Common
Stock pursuant to the Merger, except with respect to cash received in lieu
of fractional shares of Firstar Common Stock.
(iii) A First Moline stockholder's basis in the Firstar Common Stock
received in the exchange (including any fractional share interest to which
he or she may be entitled) will be the same as the basis of the FMFC Common
Stock exchanged therefor.
(iv) The holding period of the Firstar Common Stock received by a
stockholder of First Moline pursuant to the Merger will include the period
during which the FMFC Common Stock exchanged therefor was held, provided
that the FMFC Common Stock surrendered was held as a capital asset on the
date of the Merger.
(v) A First Moline stockholder who receives cash in lieu of fractional
share interests of Firstar Common Stock in the Merger will be treated as if
he or she actually received such fractional share interests and such
fractional share interests were subsequently redeemed by Firstar. The cash
a First Moline stockholder receives will be treated as having been received
as full payment in exchange for the stock redeemed as provided in Section
302(a) of the Code.
The foregoing is only a general description of certain material federal
income tax consequences of the Merger for First Moline stockholders who are
citizens or residents of the United States and who hold their shares as capital
assets, without regard to the particular facts and circumstances of the tax
situation of each such stockholder. It does not discuss all of the consequences
that may be relevant to First Moline stockholders entitled to special treatment
under the Code (such as insurance companies, financial institutions, dealers in
securities, tax-exempt organizations or foreign persons). The summary set forth
above does not purport to be a complete analysis of all potential tax effects of
the transactions contemplated by the Merger Agreements or the Merger itself. No
information is provided herein with respect to the tax consequences, if any, of
the Merger under state, local or foreign tax laws.
ACCOUNTING TREATMENT
The Merger Agreement provides that the consummation of the Merger by
Firstar is conditioned upon qualification of the Merger as a
pooling-of-interests for accounting purposes. Firstar has waived this condition.
It is anticipated that the acquisition of First Moline will be treated as a
purchase for accounting purposes.
EXPENSES
The Merger Agreement provides, in general, that Firstar and First Moline
will each pay its own expenses in connection with the Merger and the
transactions contemplated thereby, including fees and expenses of its own
accountants and counsel. For information with respect to financial advisory fees
incurred in connection with the Merger, see "Opinion of Financial Advisor."
Firstar has also agreed to bear the expense of printing this Proxy
Statement-Prospectus and the expense of all Commission and regulatory filing
fees incurred in connection therewith.
RESALE OF FIRSTAR COMMON STOCK
The shares of Firstar Common Stock to be issued in the Merger to
stockholders of First Moline have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and may be freely traded by
stockholders of First Moline who, at the Effective Time, are not "affiliates" of
First Moline (and are not affiliates of Firstar at the time of the proposed
resale). Pursuant to the Merger Agreements, First Moline must use its best
efforts to cause each affiliate of First Moline to deliver to Firstar a written
undertaking to the effect that he or she will not sell or dispose of the Firstar
Common, acquired by him or her in connection with the Merger other than in
accordance with the Securities Act, except under (i) a separate registration
statement for distribution (which Firstar has not agreed to provide), or (ii)
Rule 145 promulgated thereunder by the Commission, or (iii) pursuant to some
other exemption from registration.
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RIGHTS OF DISSENTING STOCKHOLDERS
Under the provisions of Section 262 of the DGCL, a copy of which is
attached to this Proxy Statement-Prospectus as Appendix A, any holder of record
of FMFC Common Stock has the right to object to the Merger and demand payment of
the fair value of any of the stockholder's shares in cash. Any such shareholder
electing to do so must file a written objection with First Moline, at 1616 Sixth
Avenue, Moline, Illinois, 61265, before the vote on the Merger at the Special
Meeting. A stockholder may object as to less than all of the shares registered
in the stockholder's name. A PROXY OR VOTE AGAINST THE MERGER WILL NOT, OF
ITSELF, BE REGARDED AS A WRITTEN OBJECTION FOR PURPOSES OF ASSERTING APPRAISAL
RIGHTS.
If the Merger is approved by the requisite vote of holders of FMFC Common
Stock, any holder of FMFC Common Stock seeking appraisal rights who has
preserved his or her rights of appraisal by filing an objection and refraining
from voting in favor of the Merger ("Stockholder Seeking Appraisal Rights"),
will, within ten days after the Closing Date, be notified by the surviving
corporation of the Closing Date. Within 120 days after the Closing Date, any
Stockholder Seeking Appraisal Rights may file a petition in the Delaware Court
of Chancery demanding a determination of the value of the FMFC Common Stock of
all Stockholders Seeking Appraisal Rights. Notwithstanding the foregoing, any
such Stockholder, within 60 days after the Closing Date, has the right to
withdraw his or her demand for appraisal and accept the terms of the Merger
Agreements. Within 120 days after the Closing Date, any Stockholder Seeking
Appraisal Rights, upon written request, will be entitled to receive from the
surviving corporation a statement setting forth the aggregate number of
Stockholders Seeking Appraisal Rights and the number of shares they hold. The
surviving corporation will mail such a statement to the Stockholder Seeking
Appraisal Rights within ten days of the request or within ten days after the
Closing Date, whichever is later.
Upon the filing of such a petition by a Stockholder Seeking Appraisal
Rights, the Delaware Court of Chancery will appraise the shares of FMFC Common
Stock as to which the stockholder has demanded appraisal rights, determining
their "fair value" exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a "fair rate of
interest," if any, to be paid on the amount determined to be the fair value. The
court may require the Stockholders Seeking Appraisal Rights to submit their
certificates of FMFC Common Stock as to which appraisal rights have been
demanded to the Delaware Register in Chancery for notation thereon that the
appraisal proceedings are pending.
The Delaware Court of Chancery will direct the payment of such fair value
and interest, if any, by the surviving corporation to the Stockholders Seeking
Appraisal Rights upon their surrender of the certificate or certificates
representing such shares of FMFC Common Stock.
In the event any holder of FMFC Common Stock fails to perfect his or her
rights of appraisal by failing to comply strictly with the applicable statutory
requirements, the stockholder will be bound by the terms of the Merger
Agreements and will not be entitled to payment for the stockholder's shares
under Section 262 of the DGCL. Any holder of FMFC Common Stock who wishes to
object to the transaction and demand payment for the stockholder's shares of
FMFC Common Stock should consider consulting his or her own legal advisor.
Because an executed proxy relating to FMFC Common Stock on which no voting
direction is made will be voted at the Special Meeting in favor of the Merger, a
Stockholder Seeking Appraisal Rights who wishes to have his or her shares of
FMFC Common Stock represented by proxy at the Special Meeting but preserve
statutory rights of appraisal must mark his or her proxy either to vote against
the Merger or to abstain from voting thereon, give the required notice of intent
to seek appraisal rights and make the required submission of stock certificates,
as described herein.
Any written objection or demand should be signed by or for the holder of
record of the shares to which it relates in the same manner indicated on the
accompanying proxy card. Any beneficial owner of FMFC Common Stock who is not
also the holder of record of the shares, and who wishes to assert statutory
rights of appraisal with respect thereto, should instruct the holder of record
to act accordingly on the beneficial owner's behalf. First Moline will not
accept written objections or demands for payment from any party other than the
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holder of record (whose name appears in the stock records of First Moline) of
the shares to which the objection or demand relates.
The foregoing is only a summary of the provisions of the DGCL and is
qualified in its entirety by reference to the text of Section 262, which is set
forth in Appendix A hereto.
COMPARATIVE RIGHTS OF STOCKHOLDERS
First Moline is incorporated under the laws of the state of Delaware, and
Firstar is incorporated under the laws of the state of Wisconsin. Stockholders
of First Moline, whose rights are governed by First Moline's Certificate of
Incorporation and By-laws and by the DGCL, will, on consummation of the Merger,
become shareholders of Firstar. Their rights as Firstar shareholders will then
be governed by Firstar's Restated Articles of Incorporation and By-laws and by
the Wisconsin Business Corporation Law (the "WBCL"). The following is a summary
of the material differences between the rights of stockholders of First Moline
and the rights of shareholders of Firstar.
PREFERRED STOCK
The Certificate of Incorporation of First Moline authorizes its Board to
issue up to 500,000 shares of preferred stock, $0.01 par value, from time to
time in one or more series with such rights, preferences, limitations and powers
as the Board may establish. As of the date hereof, no shares of First Moline
preferred stock have been issued.
The Restated Articles of Incorporation of Firstar authorize the Board of
Directors of Firstar to issue up to 2,500,000 shares of preferred stock, $1.00
par value. The Board of Directors may establish the relative rights and
preferences of preferred stock issued in the future without shareholder action
and issue such stock in series. As of the date hereof, no shares of any series
of Firstar preferred stock are issued and outstanding; however, upon
consummation of Firstar's pending acquisition of First Colonial Bankshares
Corporation, up to 38,775 shares of Firstar Series D Convertible Preferred Stock
("Firstar Preferred Stock") will be issued. See "Other Acquisitions and
Transactions." Firstar has reserved 600,000 shares of Series C Preferred Stock
for issuance upon exercise of the Preferred Share Purchase Rights, as further
described below.
PREFERRED SHARE PURCHASE RIGHTS
Firstar has adopted a Shareholder Rights Plan, pursuant to which each share
of Firstar Common Stock entitles its holder to one-half Preferred Share Purchase
Right. Under certain conditions, each Right entitles the holder to purchase one
one-hundredth of a share of Firstar's Series C Preferred Stock at a price of
$85, subject to adjustment. Recipients of Firstar Common Stock in connection
with the Merger will also receive one-half Right per share of Firstar Common
Stock. The description of the terms of the Rights Agreement is set forth in a
Rights Agreement dated as of January 19, 1989 (the "Rights Agreement"), between
Firstar and First Wisconsin Trust Company, as Rights Agent. The description of
the Rights contained herein is qualified in its entirety by reference to the
Rights Agreement. The Rights will only be exercisable if a person or group has
acquired, or announced an intention to acquire, 20% or more of the outstanding
shares of Firstar Common Stock. Under certain circumstances, including the
existence of a 20% acquiring party, each holder of a Right, other than the
acquiring party, will be entitled to purchase at the exercise price Firstar
Common Stock having a market value of two times the exercise price. In the event
of the acquisition of Firstar by another company subsequent to a party acquiring
20% or more of the Firstar Common Stock, each holder of a Right is entitled to
purchase the acquiring company's common shares having a market value of two
times the exercise price. The Rights may be redeemed at a price of $.01 per
Right prior to the existence of a 20% acquiring party, and thereafter may be
exchanged for one share of Firstar Common Stock per Right prior to the existence
of a 50% acquiring party. The Rights will expire on January 19, 1999. The Rights
do not have voting or dividend rights, and until they become exercisable, have
no dilutive effect on the earnings of Firstar. Under the Rights Agreement, the
Board of Directors of Firstar may reduce the thresholds applicable to the Rights
from 20% to not less than 10%.
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First Moline does not have a shareholder rights plan.
APPRAISAL RIGHTS AND DISSENTERS' RIGHTS
Under the DGCL, stockholders of a corporation who dissent from a merger or
consolidation of the corporation in the manner provided by Delaware law are
entitled to receive payment of the fair value of their stock, as determined by
the Court of Chancery. However, such right is not available to stockholders (i)
whose shares are listed on a national securities exchange, quoted on the Nasdaq
Stock Market or held of record by more than 2,000 stockholders, or (ii) where
the vote of such stockholders of the corporation surviving or resulting from the
merger or consolidation was not required for approval thereof. First Moline's
Common Stock is not listed on any national exchange. Delaware law does not
provide appraisal rights to stockholders who dissent from the sale of all or
substantially all of the corporation's assets unless the corporation's
certificate of incorporation provides otherwise. First Moline's Certificate of
Incorporation does not provide for appraisal rights in the context of a sale of
all or substantially all of First Moline's assets.
Under the WBCL, a shareholder of a corporation is generally entitled to
receive payment of the fair value of such shareholder's stock if such
shareholder dissents from a proposed merger or share exchange or a sale or
exchange of all or substantially all of the property and assets of the
corporation. However, dissenters' rights are not available to holders of shares,
such as shares of Firstar Common Stock, which are registered on a national
securities exchange or quoted on NASDAQ on the record date fixed to determine
shareholders entitled to notice of the meeting at which shareholders are to vote
on the proposed corporation action. Firstar Common Stock is listed on the NYSE
and the CSE.
ASSESSABILITY; POTENTIAL LIABILITY FOR WAGES
Firstar Common Stock is subject to possible assessment in certain
circumstances. Section 180.0622(2)(b) of the WBCL provides that shareholders of
Wisconsin corporations are personally liable to an amount equal to the par value
of shares owned by them (and to the consideration for which shares without par
value were issued) for debts owing to employees of the corporation for services
performed for such corporation, but not exceeding six months' service in any one
case. The liability imposed by the predecessor to this statute was interpreted
in a trial court decision to extend to the original issue price for shares,
rather than the stated par value. Although affirmed by the Wisconsin Supreme
Court, the case offers no precedential value due to the fact that the decision
was affirmed by an equally divided court. Firstar Common Stock is not otherwise
subject to call or assessment.
Shares of stock of Delaware corporations are nonassessable under the DGCL.
The DGCL does not impose personal liability on holders of FMFC Common Stock for
debts owing to employees or otherwise.
TAKEOVER STATUTES
Wisconsin law regulates a broad range of "business combinations" between a
Wisconsin corporation and an "interested stockholder." Wisconsin law defines a
"business combination" as including a merger or a share exchange, sale of
assets, issuance of stock or rights to purchase stock and certain related party
transactions. An "interested stockholder" is defined as a person who
beneficially owns, directly or indirectly, 10% of the outstanding voting stock
of a corporation or who is an affiliate or associate of the corporation and
beneficially owned 10% of the voting stock within the last three years. In
certain cases, Wisconsin law prohibits a corporation from engaging in a business
combination with an interested stockholder for a period of three years following
the date on which the person became an interested stockholder, unless the board
of directors approved the business combination or the acquisition of the stock
prior to the acquisition date, (ii) the business combination is approved by a
majority of the outstanding voting stock not owned by the interested
stockholder, (iii) the consideration to be received by shareholders meets
certain requirements of the statute with respect to form and amount or (iv) the
business combination is of a type specifically excluded from the coverage of the
statute.
Section 180.1150 of the WBCL provides that in particular circumstances the
voting of shares of a Wisconsin "issuing public corporation" (a Wisconsin
corporation which has at least 100 Wisconsin resident
38
<PAGE> 45
shareholders, 500 or more shareholders of record and total assets exceeding $1
million) held by any person in excess of 20% of the voting power is limited to
10% of the full voting power of such excess shares. Full voting power may be
restored under Section 180.1150 if a majority of the voting power of shares
represented at a meeting, including those held by the party seeking restoration,
are voted in favor of such restoration.
In addition, the WBCL sets forth certain fair price provisions which govern
mergers and share exchanges with, or sales of substantially all a Wisconsin
issuing public corporation's assets to, a 10% shareholder, mandating that any
such transaction meet one of two requirements. The first requirement is that the
transaction be approved by 80% of all shareholders and two-thirds of
"disinterested" shareholders, which generally exclude the 10% shareholder. The
second requirement is the payment of a statutory fair price, which is intended
to insure that shareholders in the second step merger, share exchange or asset
sale receive at least what shareholders received in the first step.
Further, the WBCL requires shareholder approval for certain transactions in
the context of a tender offer or similar action for in excess of 50% of a
Wisconsin corporation's stock. Shareholder approval is required for the
acquisition of more than 5% of the corporation's stock at a price above market
value, unless the corporation makes an equal offer to acquire all shares.
Shareholder approval is also required for the sale or option of assets which
amount to at least 10% of the market value of the corporation, but this
requirement does not apply if the corporation meets certain minimum outside
director standards.
DGCL Section 203 (the "Delaware Business Combination Statute") applies to
certain business combinations involving a corporation and certain of its
stockholders. The Delaware Business Combination Statute prevents an "interested
stockholder" (defined generally as a person with 15% or more of the
corporation's outstanding voting stock) from engaging in a "business
combination" (defined to include a variety of transactions, including the sale
of assets, mergers and almost any related party transaction) with a Delaware
corporation for three years following the date such person became an interested
stockholder, unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination, (ii) upon consummation of the transaction which resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by certain employee stock
ownership plans), or (iii) following the transaction in which such person became
an interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder.
DIRECTORS
The Board of Directors of First Moline is divided into three classes as
nearly equal in number as possible, with the directors in each class serving
staggered three-year terms. At each annual meeting of First Moline's
stockholders, the successors to the class of directors whose term expires at the
time of such meeting are elected by a majority of the votes cast, assuming a
quorum is present. Any director, or the entire Board may be removed from office
at any time, but only for cause and only by the affirmative vote of the holders
of at least eighty percent (80%) of the voting power of all the shares of stock
outstanding and entitled to vote generally in the election of directors, voting
together as a single class.
The Board of Directors of Firstar is divided into three classes as nearly
equal in number as possible, with the directors in each class serving for
staggered three-year terms. At each annual meeting of Firstar's shareholders,
the successors to the class of directors whose term expires at the time of such
meeting are elected by a majority of the votes cast, assuming a quorum is
present. A director of Firstar may be removed, with or without cause, only by
the affirmative vote of not less than 75% of the then issued and outstanding
shares taken at a special meeting of shareholders called for that purpose.
39
<PAGE> 46
LIABILITY OF DIRECTORS; INDEMNIFICATION
In accordance with the DGCL, First Moline has indemnified its directors and
officers against liabilities arising because the indemnified individual is or
was a director or officer if the individual acted in good faith, reasonably
believed his or her conduct was in the corporation's best interests (or in
certain cases at least not opposed to the corporation's best interests) and, in
the case of any criminal proceeding, the individual had no reasonable cause to
believe the individual's conduct was unlawful. However, under the DGCL a
corporation cannot indemnify a director or officer in connection with a
proceeding by or in the right of the corporation in which the director or
officer in connection with a proceeding by or in the right of the corporation in
which the director or officer was adjudged liable to the corporation or in
connection with any other proceeding charging improper personal benefit in which
the individual was adjudged liable on the basis that personal benefit was
improperly received. Further, the DGCL allows a corporation to eliminate or
limit the personal liability of a director to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except that the provision cannot eliminate or limit the liability of a director
for a breach of the director's duty of loyalty to the corporation or its
shareholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for a transaction from
which the director derives an improper personal benefit or with respect to
liability relating to a distribution to shareholders made in violation of law.
First Moline adopted such a provision on its Certificate of Incorporation.
Under Firstar's By-laws and the WBCL, Firstar indemnifies its directors and
officers against liability incurred by the director or officer in a proceeding
to which the indemnified person was a party because he or she is a director or
officer, unless liability was incurred because a director or officer breached or
failed to perform a duty that he or she owes to the corporation and the breach
or failure constitutes a willful failure to deal fairly with the corporation or
its shareholders in connection with a matter in which the director or officer
has a material conflict of interest, a violation of criminal law (unless the
director or officer had reasonable cause to believe that his or her conduct was
lawful or no reasonable cause to believe that his or her conduct was lawful or
no reasonable cause to believe that his or her conduct was unlawful), a
transaction from which the director or officer derived an improper personal
benefit or willful misconduct. In addition, under the WBCL, a director of
Firstar is not liable to the corporation, its shareholders or any person
asserting rights on behalf of the corporation or its shareholders for
liabilities arising from a breach of, or failure to perform, any duty resulting
solely from his or her status as a director, unless the person asserting
liability proves that the breach or failure to perform constitutes any of the
circumstances under which indemnification would not be provided.
ACTION WITHOUT A MEETING
Under the DGCL, any action required or permitted to be taken at a meeting
of stockholders may be taken without a meeting if a consent in writing, setting
forth the action taken, is signed by holders of not less than the minimum number
of shares necessary to authorize or approve such action. Under the WBCL, such
action without a meeting is allowed only if the consent is signed by all of the
shareholders entitled to vote with respect to the subject matter.
FIRSTAR CORPORATION
GENERAL
Firstar is a registered bank holding company incorporated in Wisconsin in
1929. Firstar is the largest bank holding company headquartered in Wisconsin.
Firstar's 16 bank subsidiaries in Wisconsin had total assets of $10.1 billion at
September 30, 1994. Its eleven Iowa banks, four Illinois banks and one Minnesota
bank had total assets of approximately $2.6 billion, $988 million and $1.2
billion, respectively, as of September 30, 1994. Firstar has one bank in
Phoenix, Arizona, with total assets of $96 million.
At September 30, 1994, Firstar provided banking services throughout
Wisconsin and Iowa and in the Chicago, Minneapolis-St. Paul and Phoenix
metropolitan areas. Its Wisconsin bank subsidiaries operated in
40
<PAGE> 47
111 locations, with offices in eight of the ten largest metropolitan population
centers of the state, including 47 offices in the Milwaukee metropolitan area.
Its Iowa bank subsidiaries operated in 42 locations; its Illinois bank
subsidiaries in 15 locations; its Minnesota bank subsidiary in 24 locations; and
its Arizona bank in three locations; and a trust subsidiary in Florida in two
locations. Firstar's bank subsidiaries provide a broad range of financial
services for companies based in Wisconsin, Iowa, Illinois and Minnesota,
national business organizations, governmental entities and individuals. These
commercial and consumer banking activities include accepting demand, time and
savings deposits; making both secured and unsecured business and personal loans;
and issuing and servicing credit cards. The bank subsidiaries also engage in
correspondent banking and provide trust and investment services to individual
and corporate customers. Firstar Bank Milwaukee, N.A., Firstar Bank Cedar
Rapids, N.A. and Firstar Bank Madison, N.A. also conduct international banking
services consisting of foreign trade financing, issuance and confirmation of
letters of credit, funds collection and foreign exchange transactions. Nonbank
subsidiaries provide retail brokerage services, trust and investment services,
residential mortgage banking activities, title insurance, business insurance,
consumer and credit related insurance, and corporate computer and operational
services.
At September 30, 1994, Firstar and its subsidiaries employed 7,393
full-time and 2,223 part-time employees, of which approximately 956 full-time
employees are represented by a union under a collective bargaining agreement
that expires on August 31, 1996. Management considers its relations with its
employees to be good.
COMPETITION
Banking and bank-related services is a highly competitive business.
Firstar's subsidiaries compete primarily in Wisconsin and the Midwestern United
States. Firstar and its subsidiaries have numerous competitors, some of which
are larger and have greater financial resources. Firstar competes with other
commercial banks and financial intermediaries, such as savings banks, savings
and loan associations, credit unions, mortgage companies, leasing companies and
a variety of financial services and advisory companies located throughout the
country.
SUPERVISION
Firstar's business activities as a bank holding company are regulated by
the Federal Reserve Board under the BHC Act, which imposes various requirements
and restrictions on its operations. The activities of Firstar and those of its
banking and nonbanking subsidiaries are limited to the business of banking and
activities closely related or incidental to banking.
The business of banking is highly regulated, and there are various
requirements and restrictions in the laws of the United States and the states in
which the subsidiary banks operate, including the requirement to maintain
reserves against deposits and adequate capital to support their operations,
restrictions on the nature and amount of loans which may be made by the banks,
restrictions relating to investment (including loans to and investments in
affiliates), branching and other activities of the banks.
Firstar's subsidiary banks with a national charter are supervised and
examined by the OCC. The subsidiary banks with a state charter are supervised
and examined by their respective state banking agencies and either by the
Federal Reserve Board if a member bank of the Federal Reserve System or by the
Federal Deposit Insurance Corporation ("FDIC") if a nonmember. All of the
Firstar subsidiary banks are also subject to examination by the FDIC.
In recent years Congress has enacted significant legislation which has
substantially changed the federal deposit insurance system and the regulatory
environment in which depository institutions and their holding companies
operate. The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer
Recovery Act of 1990 and the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") have significantly increased the enforcement powers of
the federal regulatory agencies having supervisory authority over Firstar and
its
41
<PAGE> 48
subsidiaries. Certain parts of such legislation, most notably those which
increase deposit insurance assessments and authorize further increases to
recapitalize the bank deposit insurance fund, increase the cost of doing
business for depository institutions and their holding companies. FIRREA also
provides that all commonly controlled FDIC insured depository institutions may
be held liable for any loss incurred by the FDIC resulting from a failure of, or
any assistance given by the FDIC, to any of such commonly controlled
institutions. Federal regulatory agencies have implemented provisions of FDICIA
with respect to taking prompt corrective action when a depository institution's
capital falls to certain levels. Under the new rules, five capital categories
have been established which range from "critically undercapitalized" to "well
capitalized." Failure of a depository institution to maintain a capital level
within the top two categories will result in specific actions from the federal
regulatory agencies. These actions could include the inability to pay dividends,
restricting new business activity, prohibiting bank acquisitions, asset growth
limitations and other restrictions on a case by case basis.
In addition to the impact of regulation, commercial banks are affected
significantly by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to influence the
economy. Changes to such monetary policies have had a significant effect on
operating results of financial institutions in the past and are expected to have
such an effect in the future; however, the effect of possible future changes in
such policies on the business and operations of Firstar cannot be determined.
The following table sets out the risk-based capital position of each of
Firstar's bank subsidiaries as of September 30, 1994. All of Firstar's
subsidiaries exceeded the risk-based capital requirements as of such date.
FIRSTAR BANK SUBSIDIARIES
RISK-BASED CAPITAL RATIOS
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
TIER 1 TOTAL
CAPITAL CAPITAL
------- -------
<S> <C> <C>
Minimum Statutory Requirement..................................... 4.00% 8.00%
Firstar Bank Milwaukee, N.A. ..................................... 9.58% 11.42%
Firstar Bank Appleton............................................. 10.25% 11.50%
Firstar Bank Eau Claire, N.A. .................................... 10.59% 11.84%
Firstar Bank Fond du Lac, N.A. ................................... 10.87% 12.12%
Firstar Bank Grantsburg, N.A. .................................... 16.30% 17.56%
Firstar Bank Green Bay............................................ 10.77% 12.02%
Firstar Bank Lake Geneva, N.A. ................................... 14.94% 16.20%
Firstar Bank Madison, N.A. ....................................... 12.58% 13.84%
Firstar Bank Manitowoc............................................ 11.25% 12.51%
Firstar Bank Minocqua............................................. 15.32% 16.58%
Firstar Bank Oshkosh, N.A. ....................................... 10.10% 11.35%
Firstar Bank Portage.............................................. 18.30% 19.56%
Firstar Bank Rice Lake, N.A. ..................................... 13.45% 14.71%
Firstar Bank Sheboygan, N.A. ..................................... 10.02% 11.27%
Firstar Bank Wausau, N.A. ........................................ 15.10% 16.39%
Firstar Bank Wisconsin Rapids, N.A. .............................. 14.17% 15.42%
Firstar Bank Ames................................................. 11.50% 12.75%
Firstar Bank Burlington, N.A. .................................... 13.18% 14.44%
Firstar Bank Cedar Falls.......................................... 10.16% 11.41%
</TABLE>
42
<PAGE> 49
<TABLE>
<CAPTION>
TIER 1 TOTAL
CAPITAL CAPITAL
------- -------
<S> <C> <C>
Firstar Bank Cedar Rapids, N.A. .................................. 9.88% 11.13%
Firstar Bank Council Bluffs....................................... 10.28% 11.53%
Firstar Bank Davenport, N.A. ..................................... 10.95% 12.20%
Firstar Bank Des Moines, N.A. .................................... 10.13% 11.39%
Firstar Bank Mount Pleasant....................................... 11.64% 12.89%
Firstar Bank Ottumwa.............................................. 12.02% 13.27%
Firstar Bank Red Oak, N.A. ....................................... 12.66% 13.91%
Firstar Bank Sioux City, N.A. .................................... 9.60% 10.85%
Firstar Bank of Minnesota, N.A. .................................. 12.94% 14.20%
Firstar Bank DuPage............................................... 15.75% 17.01%
Firstar Bank North Shore.......................................... 17.10% 18.36%
Firstar Bank Park Forest.......................................... 14.36% 15.61%
Firstar Bank West, N.A. .......................................... 11.95% 13.20%
Firstar Metropolitan Bank & Trust................................. 22.55% 23.81%
</TABLE>
OTHER ACQUISITIONS AND TRANSACTIONS
Since the enactment of interstate banking statutes by Wisconsin, Minnesota,
Illinois and Iowa, Firstar has actively acquired banks within that four-state
area. Firstar has also acquired one bank in Arizona, primarily to offer trust
services to customers in that state.
On July 31, 1994, Firstar announced that it had signed a definitive
agreement to acquire First Colonial, a multi-bank holding company located in
Chicago, Illinois, with consolidated assets of $1.8 billion as of September 30,
1994. [Up to 7,720,697 shares of Firstar Common Stock and 38,775 shares of
Firstar Preferred Stock will be issued in the transaction. It is anticipated
that this acquisition will be completed in the first quarter of 1995.]
On August 22, 1994, Firstar announced that it had signed a definitive
agreement to acquire Investors, parent company of Investors Savings Bank, FSB, a
$1 billion savings bank headquartered in Wayzata, Minnesota. Up to 3.5 million
shares of Firstar Common Stock will be issued, and $8.4 million in cash paid, in
the transaction. It is anticipated that this acquisition will be completed in
the first half of 1995.
On October 18, 1994, Firstar acquired First Southeast Banking Corp., a
two-bank holding company based in Southeastern Wisconsin with consolidated
assets of $404 million as of September 30, 1994. Firstar issued 1,801,577 shares
of Firstar Common Stock for all of the outstanding shares of common stock of
First Southeast Banking Corp.
Firstar anticipates that it will acquire additional banks in the Midwest
region in the future. Firstar may pay cash or issue common stock, debt
securities, preferred stock or combinations of the foregoing in connection with
any such acquisitions.
Firstar also will continue to monitor external markets and may raise
additional capital as needed and when financially attractive by issuing common
stock, debt securities, preferred stock or combinations of the foregoing.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Additional information concerning Firstar, including certain financial
information, information regarding voting securities of Firstar and principal
holders thereof, and information concerning directors and executive officers of
Firstar, is included in the documents filed by Firstar with the Commission under
the Exchange Act.
43
<PAGE> 50
FIRST MOLINE FINANCIAL CORP.
GENERAL
First Moline (also referred to herein as the "Holding Company") is a
savings bank holding company organized in 1992 and incorporated under the laws
of the State of Delaware. Substantially all of the Holding Company's assets are
held by, and operations conducted in, its subsidiary, First Federal (also
referred to herein as the "Bank"), a federally chartered savings bank, and its
subsidiaries.
First Federal offers traditional retail banking services to residents of
Moline, Illinois and the Quad Cities area. First Federal is principally engaged
in the business of attracting deposits from the general public and using such
deposits, together with funds generated from operations, to originate
residential loans in its primary market area. Currently, First Federal also
originates consumer, and to a lesser extent, non-residential and multi-family
loans. In addition, First Federal purchases loans, and invests in
mortgage-backed securities and investment securities.
MARKET AREA
The executive offices of the Bank are located in Moline, Illinois. The Bank
also has a branch office in a business district in southeast Moline to serve
customers beyond the immediate downtown business district.
The Quad Cities area has a population of approximately 408,000 and a
diverse economy with a manufacturing emphasis. In recent periods, the Bank's
market area has been below national averages in population growth and personal
income and has experienced an above-average unemployment rate. Some of the
nation's largest farm implement and heavy machinery firms have substantial
operations in the Quad Cities area, including Deere and Company (headquartered
in Moline) and Case I.H. Aluminum Company of America operates one of the world's
largest aluminum sheet and plate rolling mills outside Bettendorf, Iowa and Lee
Enterprises, a large newspaper publishing firm, is headquartered in Davenport,
Iowa. In addition, a major federal weapons manufacturing operation is located in
Rock Island, Illinois. Agriculture is also an important segment of the local
economy.
LENDING ACTIVITIES
General. The principal lending activity of the Bank is originating for
retention in its portfolio conventional first mortgage loans secured by owner
occupied one- to four-family residential properties located in the Quad Cities
area. When conditions merit, such as interest rate risk diversification, the
Bank sells mortgages on the secondary market. To a lesser extent, the Bank also
originates consumer, construction, non-residential and multi-family loans also
located in the Quad Cities area. The Bank also invests, to a lesser extent, in
mortgage-backed securities. At December 31, 1993, the Bank's net loan and
mortgage-backed securities portfolio totaled $68.4 million.
At December 31, 1993, the principal balance of the largest amount
outstanding to any one borrower, or group of related borrowers was $610,000. The
loans were made to an individual for construction of office buildings located in
the Bloomington-Normal, Illinois area. As of December 31, 1993, the loans were
current.
44
<PAGE> 51
Loan Portfolio Composition. The following information reflects the
composition of the Bank's loan and mortgage-backed and related securities
portfolios in dollar amounts and in percentages (before deductions for loans in
process, deferred fees and discounts and allowances for losses) as of the dates
indicated:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------
1991 1992 1993
------------------ ------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans and Mortgage-Backed Securities
Mortgage-backed and related securities and
mortgage-backed securities held for sale..... $18,521 28.50 $16,974 26.88 $27,077 38.20
------- ------- ------- ------- ------- -------
Real Estate Loans (including loans held for
sale)
One- to four-family.......................... $28,811 44.33 $28,432 45.03 $28,654 40.43
Construction and development................. 1,109 1715 2,238 3.54 3,277 4.62
Commercial/non-residential................... 6,786 10.44 5,963 9.44 4,351 6.14
Multi-family................................. 3,022 4.65 2,548 4.04 2,326 3.28
------- ------- ------- ------- ------- -------
Total real estate loans................. $39,728 61.13 $39,181 62.05 $38,608 54.47
------- ------- ------- ------- ------- -------
Other Loans:
Consumer, primarily automobile............... $ 5,002 7.70 $ 4,929 7.81 $ 3,171 4.47
Home equity.................................. 172 .27 113 .18 202 .29
Credit card.................................. 1,222 1.88 1,277 2.02 1,075 1.52
Other........................................ 340 .52 667 1.06 742 1.05
------- ------- ------- ------- ------- -------
Total consumer loans.................... 6,736 10.37 6,986 11.07 5,190 7.33
------- ------- ------- ------- ------- -------
Total Loans.................................... $46,464 71.48 $46,167 73.12 $43,798 61.80
======== ======= ======== ======= ======== =======
Total loans and mortgage-backed
securities............................ $64,985 100.00 $63,141 100.00 $70,875 100.00
------- ------- ------- ------- ------- -------
Less:
Loans in process............................. 380 1,654 2,113
Deferred fees and discounts.................. 181 98 98
Allowance for loan losses.................... 415 234 219
------- ------- -------
Total loans and mortgage-backed securities
net........................................ $64,009 $61,155 $68,445
======== ======== ========
</TABLE>
The following table reflects the composition of the Bank's loan and
mortgage-backed and related securities portfolios by fixed and adjustable rate
as of the dates indicated:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------
1991 1992 1993
------------------ ------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Fixed-Rate:
Real estate:
One- to four-family................. $20,115 30.95 $19,485 30.86 $19,482 27.49
Construction and development........ 1,109 1.71 1,251 1.98 2,531 3.57
Commercial/non-residential.......... 1,351 2.08 2,233 3.53 1,867 2.63
Multi-family........................ 1,691 2.60 1,363 2.16 1,107 1.56
Mortgage-backed and related
securities and mortgage-backed
securities held for sale.......... 13,870 21.34 14,399 22.81 13,838 19.53
------- ------- ------- ------- ------- -------
Total real estate loans and
mortgage-backed and related
securities................... 38,136 58.68 38,731 61.34 38,825 54.78
Consumer and other loans............ 5,471 8.42 5,710 9.04 4,082 5.76
------- ------- ------- ------- ------- -------
Total fixed-rate loans and
mortgage-backed and related
securities................... $43,607 67.10 $44,441 70.38 $42,907 60.54
------- ------- ------- ------- ------- -------
</TABLE>
45
<PAGE> 52
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------
1991 1992 1993
------------------ ------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Adjustable-Rate Loans:
Real estate:
One- to four-family................. $ 8,696 13.38 $ 8,947 14.17 $ 9,172 12.94
Construction and development........ -- -- 987 1.56 746 1.05
Commercial/non-residential.......... 5,435 8.36 3,730 5.91 2,484 3.50
Multi-family........................ 1,331 2.05 1,185 1.88 1,219 1.72
Mortgage-backed and related
securities and mortgage-backed and
related securities held for
sale.............................. 4,651 7.16 2,575 4.08 13,239 18.69
Consumer and other loans............ 1,265 1.95 1,276 2.02 1,108 1.56
------- ------- ------- ------- ------- -------
Total adjustable rate loans and
mortgage-backed and related
securities................... 21,378 32.90 18,700 29.62 27,968 39.46
------- ------- ------- ------- ------- -------
Total loans and mortgage-backed
and related securities....... $64,985 100.00 $63,141 100.00 $70,875 100.00
======= ====== ======= ====== ======= ======
Less:
Loans in process....................... 380 1,645 2,113
Deferred fees and discounts......... 181 98 98
Allowance for loan losses........... 415 234 219
------- ------- -------
Total loans and mortgage-backed
and related securities net... $61,155 $64,009 $68,445
======= ======= =======
</TABLE>
The schedule below illustrates the contractual maturities of the Bank's
loan and mortgage-backed securities portfolio at December 31, 1993. Mortgage
loans which have adjustable or renegotiable interest rates are shown as maturing
in the period during which the contract is due. The schedule does not reflect
the effects of possible prepayments or enforcement of due-on-sale clauses.
<TABLE>
<CAPTION>
REAL ESTATE
------------------------------------------------------
ONE- TO FOUR-
MULTI-FAMILY AND
FAMILY LOANS AND CONSTRUCTION OR
MORTGAGE-BACKED NON-RESIDENTIAL
SECURITIES REAL ESTATE DEVELOPMENT CONSUMER TOTAL
------------------ ---------------- ---------------- ---------------- -----------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
------- -------- ------ -------- ------ -------- ------ -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One year or less........ $ 7,829(1) 6.00 $1,273 9.14 $ 234 7.75 $2,408 9.57 $11,744 7.11
After one year through
five years............ 6,035 6.51 3,226 8.62 -- -- 2,595 8.97 11,856 7.62
After five years........ 41,867 7.26 2,178 9.60 3,043 6.84 187 7.70 47,275 7.34
------- --- ------ ---- ------ ---- ------ ---- ------- ----
Total............... $55,731 7.00 $6,677 9.04 $3,277 6.89 $5,190 9.20 $70,875 7.36
======== ===== ====== ===== ====== ==== ====== ==== ======= =====
</TABLE>
- ---------------
(1) Includes loans held for sale of $1,091,000.
As of December 31, 1993, the total amount of loans and mortgage-backed and
related securities maturing after December 31, 1994 which had predetermined
interest rates was approximately $42,230,000 while the total amount of loans due
after such date which had floating or adjustable interest rates was
approximately $16,901,000.
All of the Bank's lending is subject to its written, nondiscriminatory,
underwriting standards and to loan origination procedures prescribed by the
Board of Directors. Decisions on loan applications are made on the
46
<PAGE> 53
basis of detailed applications and property valuations (based upon the Bank's
written appraisal policy) by independent appraisers approved by management of
the Bank. The loan applications are designed primarily to determine the
borrower's ability to repay, and the more significant items on the application
are verified through use of credit reports, financial statements and
confirmations. The Bank's lending policies also reflect consideration of the
Interagency Guidelines for Real Estate lending as adopted by federal banking
agencies.
The Bank requires evidence of marketable title and lien position as well as
title insurance or a title opinion on all loans secured by real property and
requires fire and extended coverage casualty insurance in amounts at least equal
to the principal amount of the loan or the value of improvements on the
property, depending on the type of loan. The Bank may also require flood
insurance to protect the property securing its interest.
All proposed real estate-secured loans (both commercial and residential)
must be reviewed and approved by the Bank's Loan Committee, which consists of
the Bank's President and Vice President of Lending. Any real estate-secured loan
which would exceed $250,000 must be approved by the full Board of Directors of
the Bank.
ONE- TO FOUR-FAMILY RESIDENTIAL REAL ESTATE LENDING
The Bank's lending program has traditionally focused on the origination of
permanent loans, to be held in its portfolio, secured by mortgages on
owner-occupied one- to four-family residences. For interest rate risk
diversification, the Bank sells all qualifying fixed rate mortgages on the
secondary market. At December 31, 1993, $28,654,000 or 65% of the Bank's loan
portfolio, excluding mortgage-backed and related securities, consisted of
permanent loans on one- to four-family residences. Approximately 96% of the
residential loans originated by the Bank are secured by properties located in
the Quad Cities area.
The Bank originates a variety of different types of residential loans
including various types of fixed-rate and adjustable-rate loans with 15- and
30-year maturities. Historically, the Bank originated for retention in its own
portfolio fixed rate loans secured by one- to four-family residential real
estate. In order to reduce its exposure to changes in interest rates, the Bank
offers adjustable-rate mortgage loans. In order to meet consumer demand,
however, the Bank will originate fixed-rate residential loans for retention in
its portfolio.
The fixed-rate 15- and 30-year mortgage loans offered by the Bank conform
to secondary market standards (i.e., Federal Home Loan Mortgage Corporation
("FHLMC") standards). The interest rates charged on these fixed-rate loans are
competitively priced according to market conditions.
The Bank's current one- to four-family residential adjustable-rate mortgage
loans are fully amortizing loans with contractual maturities of up to 30 years.
The interest rates on the adjustable-rate mortgage loans originated by the Bank
are subject to adjustment at intervals. At December 31, 1993, 96.6% of the
Bank's adjustable rate mortgage loans adjust at one-year intervals and 3.4%
adjust at three-year intervals. Most of the Bank's adjustable-rate mortgage
loans carry interest rates which are reset to a stated margin over the one-year
United States Treasury Bill rate although some adjustable-rate mortgage loans
were originated utilizing other indices. At December 31, 1993, including
mortgage backed and related securities, construction or development and
nonresidential loans, the Bank had $27,968,000 of adjustable-rate mortgage
loans.
The Bank's adjustable-rate mortgage loans generally establish limits on the
amount of the periodic interest rate changes. Decreases or increases in the
interest rate of the Bank's adjustable-rate mortgage loans are generally limited
to 2% at any adjustment date, 2% annually and 5% or 6% over the life of the
loan. The Bank's delinquency experience on its adjustable-rate mortgage loans
has generally been similar to its experience on fixed-rate residential loans.
The Bank's adjustable-rate mortgage loans are convertible into fixed-rate loans
and do not provide for negative amortization. The Bank does not originate loans
with below-market introductory rates.
Generally, adjustable-rate loans pose credit risks different than the risks
inherent in fixed-rate loans, primarily because as interest rates rise, the
underlying payments of the borrower rise, thereby increasing the potential for
default. At the same time, the marketability of the underlying property may be
adversely affected
47
<PAGE> 54
by higher interest rates. The Bank attempts to reduce this credit risk by
qualifying adjustable-rate loan borrowers based on the fully indexed increase in
the interest rate.
The Bank evaluates both the borrower's ability to make principal, interest
and escrow payments and the value of the property that will secure the loan. The
Bank originates residential mortgage loans with loan-to-value ratios up to 90%.
On any mortgage loan exceeding an 80% loan-to-value ratio at the time of
origination, the Bank will generally require private mortgage insurance in an
amount intended to reduce the Bank's exposure to 80% of the appraised value of
the underlying property.
In underwriting residential real estate loans, the Bank evaluates both the
borrower's ability to make principal and interest payments and the value of the
property that will secure the loan. The Bank's fixed- and adjustable-rate
residential mortgage loans customarily include "due-on-sale" clauses, which are
provisions giving the Bank the right to declare a loan immediately due and
payable in the event the borrower sells or otherwise disposes of the real
property subject to the mortgage and the loan is not repaid. The Bank enforces
due-on-sale clauses to the extent permitted under applicable laws.
In order to take advantage of any new lending opportunities in the area,
First Federal has developed and implemented a strategy for increasing its share
of the mortgage lending market. The Bank is seeking to increase realtor and real
estate office referrals through its call program, distributing weekly updated
rate sheets to realtors' offices, and by increasing visibility in real estate
and home builder organizations and functions. First Federal's call program,
which it has used successfully in recent years, provides First Federal with an
opportunity to distinguish itself from one of its primary competitors in the
mortgage lending market, mortgage bankers, by emphasizing First Federal's quick
"turn around" time in processing loan applications, its status as a local
lender, and the availability of First Federal's other financial products.
COMMERCIAL AND MULTI-FAMILY REAL ESTATE LENDING
In order to enhance the yield on and decrease the average term to maturity
of its assets, the Bank may originate permanent loans secured by non-residential
and multi-family real estate. The Bank's multi-family loans consist primarily of
loans secured by apartment buildings. The Bank's commercial loan portfolio
includes loans secured by office, retail and professional office buildings. At
December 31, 1993, $6,677,000 or 15% of the Bank's loan portfolio, excluding
mortgage-backed and related securities, consisted of permanent loans on
non-residential and multi-family real estate.
The Bank's permanent non-residential and multi-family real estate loans
generally have terms and amortization schedules ranging from 15 to 25 years.
Rates on permanent loans generally float (subject, in some cases, to specified
interest rate caps) with changes in a specified prime rate or carry fixed rates.
Under the Bank's current loan policy, multi-family loans and non-residential
real estate loans are generally written in amounts of up to 75% of the appraised
value of the property. As of December 31, 1993, 73% of the multi-family
residential and commercial real estate loans originated by the Bank have been on
properties located in the Bank's principal market area.
Appraisals on properties securing non-residential and multi-family real
estate property loans originated by the Bank are generally performed by an
independent appraiser designated by the Bank at the time the loan is made. All
appraisals on multi-family and non-residential real estate loans are reviewed by
the Bank's management. In addition, the Bank's underwriting procedures generally
require verification of the borrower's credit history, income and financial
statements, banking relationships, references and income projections for the
property. Personal guarantees are generally obtained for all or a portion of
most of the Bank's multi-family and non-residential real estate loans. While the
Bank continues to monitor multi-family and non-residential real estate loans on
a regular basis after origination, updated appraisals are not normally obtained
after closing.
The Bank also purchases multi-family residential and commercial real estate
loans originated by other lenders. In determining whether or not to purchase a
loan, the Bank applies the same underwriting criteria utilized in originating
loans. At December 31, 1993, the Bank had $1,782,000 in multi-family residential
and commercial real estate purchased loans.
48
<PAGE> 55
At December 31, 1993, the Bank had 15 multi-family or non-residential real
estate loans with net carrying values greater than $100,000 and none with a net
carrying value over $1 million. The following table sets forth by security type
the Bank's multi-family and non-residential real estate loans with net carrying
values in excess of $100,000:
<TABLE>
<CAPTION>
BALANCE
LOAN TYPE DECEMBER 31, 1993
-------------------------------------------------------------- -----------------
<S> <C>
Multi-family.................................................. $ 1,680,000
Office Buildings.............................................. 1,510,000
Medical Offices............................................... 571,000
</TABLE>
Multi-family residential and non-residential real estate loans generally
present a higher level of risk than loans secured by one-to four-family
residences. This greater risk is due to several factors, including the
concentration of principal in a limited number of loans and borrowers and the
effects of general economic difficulty of evaluating and monitoring these types
of loans. Furthermore, the repayment of loans secured by multi-family
residential and non-residential real estate is typically dependent upon the
successful operation of the related real estate project. If the cash flow from
the project is reduced (for example, if leases are not obtained or renewed), the
borrower's ability to repay the loan may be impaired.
MORTGAGE-BACKED AND RELATED SECURITIES
In order to supplement loan demand and to enhance asset quality, the Bank
has purchased a number of mortgage-backed and related securities. Approximately
one-half of the Bank's purchased mortgage-backed and related securities carry
fixed interest rates, are long term and all are guaranteed as to the payment of
principal and interest by a government-sponsored agency or private mortgage
insurance. At December 31, 1993 the Bank had $27,077,000 or 38% of its loan and
mortgage-backed and related securities portfolio, in mortgage-backed and related
securities. The Bank will evaluate mortgage-backed and related securities
acquisitions in the future based on its asset/liability objectives, market
conditions, and its alternative investment opportunities.
Most of the Bank's mortgage-backed securities are generally acquired for
retention in its portfolio and accordingly included in its financial statements
at historical costs. However, at December 31, 1993 the Bank had $2,649,000 of
mortgage-backed securities held for sale. See the Notes to the Consolidated
Financial Statements.
The table below sets forth the contractual maturities of the Bank's
mortgage-backed and related securities at December 31, 1993. It should be noted
that, due to anticipated prepayments, the actual maturity of the Bank's long
term mortgage-backed and related securities will likely be significantly shorter
than the contractual maturities.
<TABLE>
<CAPTION>
DUE IN
---------------------------------------------------------------------------------------------------------
GREATER
WEIGHTED GREATER WEIGHTED THAN 10 WEIGHTED WEIGHTED DEC. 31, WEIGHTED
AVERAGE THAN 5 AVERAGE YEARS & AVERAGE GREATER AVERAGE 1993 AVERAGE
3 THROUGH INTEREST THROUGH INTEREST THROUGH INTEREST THAN 20 INTEREST BALANCE INTEREST
5 YEARS(1) RATE 10 YEARS RATE 20 YEARS RATE YEARS RATE OUTSTANDING RATE
---------- -------- --------- -------- --------- -------- -------- -------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal Home Loan
Mortgage
Corporation.......... $4,397 6.39% $ 1,752 7.21% $ 1,753 8.48% $ -- -- $ 7,902 7.04%
Federal National
Mortgage
Association.......... -- -- 272 8.50% -- -- 908 4.10% 1,180 5.11%
Real estate mortgage
investment
conduits............. -- -- 1,194 5.00% 3,188 4.69% 10,210 5.14% 14,592 5.03%
Government National
Mortgage
Association.......... -- -- -- -- -- -- 3,403 8.92% 3,403 8.92%
---------- --- --------- --- --------- --- -------- --- ----------- ---
Total............ $4,397 6.39% $ 3,218 6.50% $ 4,941 6.04% $14,521 5.96% $27,077 6.11%
========= ======= ======== ======= ======== ======= ======= ======= ========= =======
</TABLE>
- ---------------
(1) At December 31, 1993, the Bank had no mortgage-backed securities that
matured in less than three years.
49
<PAGE> 56
CONSUMER LENDING
The Bank originates a variety of consumer loans, including credit-card,
second mortgage, automobile, student, and savings account loans. Bank management
believes that the shorter terms and normally higher interest rates available on
various types of consumer loans can be helpful in maintaining a profitable
spread between the Bank's loan yield and its cost of funds as well as in
reducing the effective maturity of its assets. For the most part, the Bank
markets consumer loans to its existing customers as a part of its effort to
offer comprehensive consumer financial services in its community.
The Bank's consumer loans are short-term loans. Consumer loan terms vary
according to the type of collateral, length of contract and creditworthiness of
the borrower. Terms to maturity vary up to 60 months, except for second mortgage
loans which may have maturities up to 15 years. At December 31, 1993, the Bank's
consumer loan balances totaled $5,190,000, or 11.85% of its total loan
portfolio, excluding mortgage-backed and related securities.
The underwriting standards employed by the Bank for consumer loans include
a determination of the applicant's payment history on other debts and the
applicant's ability to meet existing obligations and payments on the proposed
loan. Although creditworthiness of the applicant is of primary consideration,
the underwriting process may also include a comparison of the value of the
security, if any, in relation to the proposed loan amount.
Consumer loans may entail greater credit risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured, such as
credit card receivables, or are secured by rapidly depreciable assets, such as
automobiles. In such cases, any repossessed collateral for a defaulted consumer
loan may not provide an adequate source of repayment of the outstanding loan
balance as a result of the greater likelihood of damage, loss or depreciation.
In addition, consumer loan collections are dependent on the borrower's
continuing financial stability, and thus are more likely to be affected by
adverse personal financial circumstances. Furthermore, the application of
various federal and state laws, including bankruptcy and insolvency laws, may
limit the amount which can be recovered on such loans. At December 31, 1993,
accounts 30 days past due in the Bank's consumer loan portfolio totaled $202,000
or 3.89% of the Bank's consumer loan portfolio. At December 31, 1993, accounts
over 90 days past due totaled approximately $65,000. There can be no assurance
that delinquencies will not increase in the future. During the past year, the
Bank has increased the monitoring of loans in its consumer loan portfolio as a
result of a higher delinquency rate in its consumer loan portfolio. The Bank's
provision for possible loan losses attributable to its consumer loan portfolio
for the year ended December 31, 1993 was $58,000. The Bank expects to continue
its consumer lending activities as part of its strategy to provide a wide range
of personal financial services to its customers.
CONSTRUCTION AND DEVELOPMENT LENDING
Construction and development lending represents a relatively small
(approximately 7.5% at December 31, 1993) portion of the Bank's loan portfolio.
The Bank makes construction loans to individuals for the construction of their
residences and, on occasion, loans to builders or developers for the acquisition
of land and the construction or development of small or medium sized projects.
Construction loans to individuals for their residences are structured to be
converted to permanent loans at the end of the construction phase, which
typically runs 6 months. These construction loans have rates which match rates
on one- to four-family loans offered by the Bank. The interest rate and loan
term offered on the permanent loan is established at the time the construction
loan commitment is made. Residential construction loans are generally
underwritten pursuant to the same guidelines used for originating permanent
residential loans. At December 31, 1993, approximately $2,913,000 or 89% of the
Bank's total construction or development loan portfolio consisted of loans to
borrowers intending to live in the properties upon completion of construction.
The remainder of the Bank's construction loan portfolio at December 31, 1993
consisted of three loans to residential developers in the Quad Cities area
totaling approximately $364,000.
While construction loans to builders have terms that are individually
negotiated, such loans are generally made in amounts of up to a maximum
loan-to-value ratio of 75% (as compared to 90% in the case of loans to
50
<PAGE> 57
owner occupants) based upon an independent appraisal. The Bank also obtains
personal guarantees for substantially all of its construction loans.
Although individually negotiated, the Bank's construction loan agreements
generally provide that principal repayments are required as individual units are
sold to third parties so that the remaining loan balance is in proportion to the
value of the remaining security. Loan proceeds are disbursed in increments as
construction progresses (based on submission by the general contractor of an
affidavit with respect to the progress of construction and submission of lien
waivers by the subcontractors; the Bank also inspects the property to confirm
construction progress).
One- to four-family construction loans are obtained principally through
continued business from builders who have previously borrowed from the Bank as
well as walk-in customers, and broker referrals and direct solicitations of
builders. The application process includes a submission to the Bank of accurate
plans, specifications, and costs of the project to be constructed/developed.
These items are used as a basis to determine the appraised value of the subject
property. Loans are based on the current appraised value of the property to be
constructed and/or the costs of construction (land plus building). As of
December 31, 1993, the Bank's total investment in construction and development
loans was $3,277,000; the collateral securing these loans consisted of
single-family residences totalling $4,707,000.
Construction lending generally affords the Bank an opportunity to receive
interest at rates higher than those obtainable from residential lending and to
receive higher origination and other loan fees. In addition, construction loans
are generally made with adjustable rates of interest and for relatively short
terms. Nevertheless, construction lending is generally considered to involve a
higher level of credit risk than one- to four-family residential lending due to
the concentration of principal in a limited number of loans and borrowers and
the effects of general economic conditions on development projects, real estate
developers and managers.
ORIGINATIONS, PURCHASES AND SALES OF LOANS
The Bank originates real estate and other loans through marketing efforts,
the Bank's existing customer base, walk-in customers and referrals from real
estate brokers and builders. Its ability to originate loans is dependent upon
the relative customer demand for loans in the origination market, which is
affected by the term structure (short term compared to long term) of interest
rates as well as the current and expected future level of interest rates.
The Bank also purchases loans, and since 1982, has purchased both
residential and non-residential real estate loans secured by first liens on
properties located both within and outside of the State of Illinois. All of the
loans purchased by the Bank were evaluated under the Bank's standard
underwriting guidelines. At December 31, 1993 the Bank had approximately
$2,363,000 of purchased loans.
51
<PAGE> 58
The following table sets forth first mortgage loans purchased by the Bank
by state and area:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1993,
---------------------------
AMOUNT PURCHASED PERCENT
---------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ILLINOIS
Quad Cities
Metropolitan Area................................ $ 75 3.17
IOWA
Quad Cities
Metropolitan Area................................ 133 5.63
COLORADO
Denver Area......................................... 337 14.26
Boulder Area........................................ 689 29.16
Other Areas......................................... 3 .13
------- -------
Total Colorado.............................. 1,029 43.55
======= ======
ARIZONA
Scottsdale.......................................... 564 23.87
Phoenix............................................. 538 22.77
------- -------
Total Arizona............................... 1,102 46.64
======= ======
MISSISSIPPI........................................... 24 1.01
------- -------
Total....................................... $2,363 100.00
======= ======
</TABLE>
In periods of rising interest rates and economic uncertainty, the Bank's
ability to originate large volumes of real estate loans may be substantially
reduced or restricted, with an attendant decrease in related loan origination
fees, other fee income and net income.
As part of the Bank's policy to manage interest rate risk, the Bank will
sell fixed rate loans. Some of the loans sold contain recourse provisions which
may require the Bank to repurchase a loan in the event of nonperformance by the
borrower or if the Bank does not comply with all of the terms and conditions of
the loan sale agreement. As of December 31, 1993 the outstanding balance of
loans sold under recourse agreements totalled approximately $1,602,000. In
addition, as of December 31, 1993, the Bank has classified $1,091,000 of loans
as held for sale.
The following table shows the loan origination, purchase and repayment
activities of the Bank for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1991 1992 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Originations by type:
Adjustable rate:
Real estate
--one- to four-family..................................... $ 715 $ 1,600 $ 1,709
--multi-family............................................ 145 -- --
--construction............................................ -- 1,515 1,043
------- ------- -------
Total adjustable-rate................................ 860 3,115 2,752
------- ------- -------
Fixed rate:
Real estate
--one- to four-family..................................... 4,566 8,316 10,009
--non-residential......................................... 16 558 333
</TABLE>
52
<PAGE> 59
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1991 1992 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
--multi-family............................................ 4 4 --
--construction............................................ 1,585 1,706 4,185
Consumer..................................................... 2,356 3,855 4,125
------- ------- -------
Total fixed-rate..................................... 8,523 14,439 18,652
------- ------- -------
Total loans originated............................... 9,383 17,554 21,404
------- ------- -------
Purchases:
Real estate
--one- to four-family..................................... -- 340 475
--non-residential......................................... -- -- --
------- ------- -------
-- 340 475
------- ------- -------
Mortgage-backed and related securities held for sale and
investment................................................ 3,568 9,975 17,925
------- ------- -------
Total purchased...................................... 3,568 10,315 18,400
------- ------- -------
Total additions...................................... 12,951 27,869 39,804
------- ------- -------
Sales:
Real estate loans, one to four family........................ -- 3,640 8,105
Mortgage-backed and related securities held for sale and
investment................................................ -- 5,302 --
------- ------- -------
Total sales.......................................... -- 8,942 8,105
Principal repayments........................................... 15,079 20,771 23,965
------- ------- -------
Total reductions..................................... 15,079 29,713 32,070
------- ------- -------
Net increase (decrease)................................... $(2,128) $(1,844) $ 7,734
======= ======= =======
</TABLE>
DELINQUENCIES AND NON-PERFORMING ASSETS
Delinquency Procedures. When a borrower fails to make a required payment on
a loan, the Bank attempts to cause the deficiency to be cured by contacting the
borrower. In most cases, deficiencies are cured promptly. Notices are mailed to
the borrower after the 10th day of each month. A penalty of 5% is assessed after
15 days on loans on which interest is paid in arrears and after the end of the
month on loans on which interest is paid in advance. After a payment is 30 days
past due, the Bank contacts the borrower by telephone and letter. In the event a
loan becomes delinquent for 60 to 90 days, it is classified as a delinquent or
slow loan. In such cases, the Bank regularly reviews the loan status, the
condition of the property and circumstances of the borrower. Based upon the
results of its review, the Bank may negotiate and accept a repayment program
with the borrower, accept a voluntary deed in lieu of foreclosure or, when
deemed necessary, initiate foreclosure proceedings. Real estate acquired through
foreclosure is sold at a public sale and the Bank may bid on the property to
protect its interest. A decision as to whether and when to initiate foreclosure
proceedings is based on such factors as the amount of the outstanding loan in
relation to the original indebtedness, the extent of delinquency, the borrower's
ability and willingness to cure delinquencies and the current appraisal and
market value of property securing the loan.
Real estate acquired by the Bank as a result of foreclosure or by deed in
lieu of foreclosure is classified as real estate owned until it is sold. When
property is acquired, it is recorded at the lower of cost or estimated fair
value (net of estimated costs to sell) at the date of acquisition and any
write-down resulting therefrom is charged to the allowance for losses on loans.
After acquisition, all costs incurred in maintaining the property are expensed.
However, costs relating to the development and improvement of the property are
capitalized to the extent of net realizable value.
The table below sets forth information concerning delinquent mortgage and
other loans at December 31, 1993 in dollar amounts and as a percentage of the
Bank's total loan and mortgage-backed securities portfolio.
53
<PAGE> 60
The amounts presented represent the total remaining principal balances of the
related loans, rather than the actual payment amounts which are overdue and are
reflected as a percentage of total loans.
<TABLE>
<CAPTION>
LOANS DELINQUENT FOR:
-----------------------------------------------------------------------------------------
60-89 DAYS 90 DAYS AND OVER TOTAL
--------------------------- --------------------------- ---------------------------
NUMBER AMOUNT PERCENT NUMBER AMOUNT PERCENT NUMBER AMOUNT PERCENT
------ ------ ------- ------ ------ ------- ------ ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate:
One- to
four-family...... 4 $ 45 .10% 6 $124 .28% 10 $169 .38%
Non-residential..... 1 121 .28 -- -- -- 1 121 .28%
Construction and
development...... -- -- -- -- -- -- -- -- --
Consumer.............. 12 62 .14 10 65 .15 22 127 .29
-- ------ ------- -- ------ ------- -- ------ -------
Total.......... 17 $228 .52% 16 $189 .43% 33 $417 .95%
====== ====== ===== ====== ====== ===== ====== ====== =====
</TABLE>
Classification of Assets. Federal regulations require that each savings
Bank classify its own assets on a regular basis. In addition, in connection with
examinations of federal savings banks, OTS and FDIC examiners have authority to
identify problem assets and, if appropriate, require them to be classified.
Problem assets are designated as one of three classifications: Substandard,
Doubtful or Loss. Substandard assets have one or more defined weaknesses and are
characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of Substandard assets, with the additional characteristics that
the weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified Loss is considered uncollectible and of
such little value that continuance as an asset of the institution is not
warranted. Applicable regulations have also created a Special Mention category,
consisting of assets which do not currently expose a savings bank to a
sufficient degree of risk to warrant classification, but do possess credit
deficiencies or potential weaknesses deserving management's close attention.
Assets classified as Substandard or Doubtful require the Bank to establish
prudent general allowances for loan losses. If an asset or portion thereof is
classified as Loss, the Bank must either establish specific allowances for loan
losses in the amount of 100% of the portion of the asset classified Loss, or
charge off such amount. If an Bank does not agree with an examiner's
classification of an asset, it may appeal this determination to the District
Director of the OTS.
In connection with the filing of its periodic reports with the OTS and in
accordance with its classification of assets policy, the Bank regularly reviews
the problem loans in its portfolio to determine whether any loans require
classification in accordance with applicable regulations. On the basis of
management's review of the Bank's assets, at December 31, 1993, on a net basis,
the Bank had classified $658,000 of its assets as Substandard, and $10,000 as
Loss. Of this amount, classified assets approximating $566,000 are considered
non-performing and are included in the discussion below. The Bank's classified
assets consist of the non-performing loans and loans of concern discussed below.
As of December 31, 1993, these asset classifications were consistent with those
of the OTS and FDIC.
Non-Performing Assets. The table below sets forth the amounts and
categories of non-performing assets in the Bank's loan portfolio. Loans are
placed on non-accrual status if management determines that the borrower is no
longer able to make timely payments. Interest accrued and unpaid at the time a
loan is placed on non-accrual status is charged against interest income.
Subsequent payments are either applied to the outstanding principal balance or
recorded as interest income, depending on the assessment of the ultimate
collectibility of the loan. For all years presented, the Bank has had no
troubled debt restructurings (which
54
<PAGE> 61
involve forgiving a portion of interest or principal on any loans or making
loans at a rate materially less than market rates) other than one purchased loan
in Denver, Colorado in which the Bank wrote off $191,702 in 1991. Foreclosed
assets include assets acquired in settlement of loans.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1991 1992 1993
------ ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Non-accrual loans:
One- to four-family................................. $ -- $ -- $ --
Construction or development......................... -- -- --
Consumer and other.................................. 383 82 35
------ ---- ----
Total.......................................... $ 383 $ 82 $ 35
------ ---- ----
Accruing loans greater than 90 days delinquent:
One- to four-family................................. 21 186 124
Construction or development......................... 96 96 --
Commercial.......................................... 853 -- --
Consumer and other.................................. 150 67 65
------ ---- ----
Total.......................................... 1,120 349 189
------ ---- ----
Non-accruing securities............................... -- -- --
------ ---- ----
Foreclosed assets:.................................... 621 441 474
------ ---- ----
Total non-performing assets........................... $2,124 $872 $698
====== ==== ====
Total as a percentage of total assets................. 2.68% .99% .88%
</TABLE>
A description of the Bank's major non-performing assets as of December 31,
1993, is set forth below.
In 1978, the Bank made a loan to a developer to finance a residential
development in the Bank's primary market area. The loan was secured by property
consisting of residential building lots. In 1984, the Bank acquired the property
by deed-in-lieu of foreclosure. The property was subsequently transferred to
First Moline Real Estate Corp. ("Real Estate Corp."), a wholly-owned subsidiary
of the Bank formed for the purpose of retaining the property. At December 31,
1993, the property consisted of two residential lots which had no assigned
value. Real Estate Corp. is actively marketing the lots for sale and sold eleven
lots during 1993. As of September 30, 1994 Real Estate Corp. held two remaining
lots the value of which has been reduced to zero on the books of First Moline.
In 1985, the Bank purchased from First Mississippi Bank a loan secured by a
seven-building rental complex located in Jasper County, Mississippi. The Bank
acquired the property by Trustee's deed in March 1988. An April, 1991 appraisal
values the property at $437,000. The property is carried on the Bank's books for
$376,000 as of December 31, 1993. At December 31, 1993, the complex was 95%
leased and the current income from the property exceeded expenses related to
maintenance of the property. The Bank is actively marketing the property for
sale.
Allowance for Possible Loan Losses. Bank management evaluates the need to
establish allowances for losses on loans and other assets each year based on
estimated losses on specific loans and on any real estate held for sale when a
finding is made that a loss is estimable and probable. In addition to specific
reserves, the Bank also established general valuation reserves based upon the
portfolio's inherent risk and changes in the nature and volume of activity. Such
evaluation includes a regular review of all loans for which full collectibility
may not be reasonably assured and considers, among other matters, the estimated
market value of the underlying collateral of problem loans, historical loan loss
experience, economic conditions, overall portfolio quality and other factors
that warrant recognition in providing for an adequate loan allowance. These
provisions for losses are charged against earnings in the year they are
established. At December 31, 1993, the
55
<PAGE> 62
Bank had an allowance for loan losses of $219,000 which represented 31.4% of
non-performing assets. Based on past experience and future expectations,
management believes that loan loss reserves are adequate.
As a result of the declines in real estate market values and the
significant losses experienced by many financial institutions, there has been a
greater level of scrutiny by regulatory authorities of the loan portfolios of
financial institutions nationwide, undertaken as part of the examination of the
institution by the FDIC, OTS or other federal or state regulators. Results of
recent examinations indicate that these regulators may be applying more
conservative criteria in evaluating real estate values, requiring significantly
increased provisions for potential loan losses. While the Bank believes it has
established its existing allowance for loan losses in accordance with GAAP,
there can be no assurance that regulators, in reviewing the Bank's loan
portfolio, will not request the Bank to significantly increase its allowance for
loan losses, negatively affecting the Bank's financial condition and earnings.
In making loans, the Bank recognizes that credit losses will be experienced
and that the risk of loss will vary with, among other things, the type of loan
being made, the creditworthiness of the borrower over the term of the loan and,
in the case of a secured loan, the quality of the security for the loan.
Although management believes it uses the best information available to make
such determinations, future adjustments to reserves may be necessary, and net
income could be affected, if circumstances differ substantially from the
assumptions used in making the initial determinations.
The following table summarizes the distribution of the Bank's allowance for
loan losses at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------------------------
1991 1992 1993
--------------------------- --------------------------- ---------------------------
PERCENT OF LOANS PERCENT OF LOANS PERCENT OF LOANS
IN EACH IN EACH IN EACH
AMOUNT CATEGORY TO TOTAL AMOUNT CATEGORY TO TOTAL AMOUNT CATEGORY TO TOTAL
------ ----------------- ------ ----------------- ------ -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real Estate............. $301 86% $ 90 86% $ 89 88%
Consumer................ $114 14% $144 14% $130 12%
------ ------ ------ ------ ------ ------
Total............ $415 100% $234 100% $219 100%
====== ============= ====== ============= ====== =============
</TABLE>
56
<PAGE> 63
The following table sets forth an analysis of the Bank's allowance for loan
losses for the years indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1991 1992 1993
----- ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period.................................... $ 200 $ 415 $ 234
Additions charged to operations:
Real estate..................................................... 211 (15) --
Consumer........................................................ 156 149 58
----- ----- -----
367 134 58
----- ----- -----
Recoveries........................................................ 71 35 24
----- ----- -----
Charge-offs:
Real estate..................................................... (4) (191) (2)
Consumer........................................................ (219) (159) (95)
----- ----- -----
(223) (350) (97)
----- ----- -----
Net charge-offs................................................... (152) (315) (73)
----- ----- -----
Balance at end of period.......................................... $ 415 $ 234 $ 219
===== ===== =====
Ratio of net charge-offs during the period to average loans
outstanding
during the period............................................... .33% .73% .17%
Ratio of allowance for loan losses to total non-performing assets
at the end of period............................................ 19.54% 26.83% 31.38%
Ratio of allowance for loan losses to non-performing loans at end
of period....................................................... 27.61% 54.29% 97.77%
Ratio of allowance for loan losses to total loans excluding
mortgage-backed
and related securities.......................................... .89% .51% .50%
</TABLE>
Management believes that the present allowance for possible loan losses are
adequate as of December 31, 1993.
INVESTMENT ACTIVITIES
As part of its asset/liability management strategy, the Bank invests in
short-term investments such as U.S. Treasury securities and investment grade
corporate obligations.
The Bank is required by federal regulations to maintain a minimum amount of
liquid assets that may be invested in specified securities and is also permitted
to make certain other securities investments. Cash flow projections are
regularly reviewed and updated to assure that adequate liquidity is provided. As
of December 31, 1993, the Bank's liquidity ratio (liquid assets as a percentage
of net withdrawable savings and current borrowings) was 13.36% as compared to
the OTS minimum requirement of 5%.
57
<PAGE> 64
The following table sets forth the composition of the Bank's investment
portfolio and securities held for sale at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------------------
1991 1992 1993
------------------------- ------------------------- -------------------------
BOOK VALUE % OF TOTAL BOOK VALUE % OF TOTAL BOOK VALUE % OF TOTAL
---------- ----------- ---------- ----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Investment securities:
U.S. Treasury and agency
obligations................. $ 4,502 45.00% $10,020 61.49% $3,497 44.26%
Corporate debt securities,
fixed rate.................. 954 9.54% 514 3.15% 515 6.52%
-------- ------ ------- ------ ------ -------
Subtotal.................. $ 5,456 54.54% $10,534 64.64% $4,012 50.78%
Securities held for sale:
U.S. Government Agency
Obligations................. -- -- 1,000 6.14% 1,000 12.66%
Equity securities,
mortgage-backed mutual
fund........................ 4,021 40.19% 4,213 25.85% 2,332 29.52%
-------- ------ ------- ------ ------ -------
Subtotal.................. $ 5,032 40.19% $ 5,213 31.99% $3,332 42.18%
-------- ------ ------- ------ ------ -------
FHLB stock...................... $ 527 5.27% $ 549 3.37% $ 556 7.04%
-------- ------ ------- ------ ------ -------
Total investment securities,
securities held for sale and
FHLMC and FHLB stock........ $10,004 100.00% $16,296 100.00% $7,900 100.00%
======== ====== ======= ====== ====== =======
Average remaining life term to
repricing, excluding FHLB
stock, FHLMC stock and
mortgage-backed mutual
fund........................ 3.95 years 1.58 years 3.50 years
</TABLE>
The composition and maturities of the investment securities portfolio,
excluding FHLB of Chicago stock and a mortgage-backed mutual fund, are indicated
in the following table:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------------------
GREATER THAN
1 THROUGH 5 YEARS
LESS THAN 5 THROUGH GREATER THAN TOTAL INVESTMENT
1 YEAR YEARS 10 YEARS 10 YEARS SECURITIES
---------- ---------- ------------ ------------ --------------------------
BOOK VALUE BOOK VALUE BOOK VALUE BOOK VALUE BOOK VALUE MARKET VALUE
---------- ---------- ------------ ------------ ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and agency
obligations............ -- $2,997 $1,500 $ -- $4,497 $4,538
Corporate debt
securities, fixed
rate................... -- -- -- 515 515 585
--- -------- ---------- ---------- -------- ----------
Total investment in debt
securities............. -- $2,997 $1,500 $ 515 $5,012 $5,123
======== ======== ========== ========== ======== ==========
Weighted average yield... -- 5.51% 5.08% 11.42% 5.99%
======== ======== ========== ========== ========
</TABLE>
At December 31, 1993 the Bank held $2.3 million in a mortgage-backed mutual
fund which had a yield of 4.09% at that time. With the mortgage-backed mutual
fund included, the weighted average yield on investments at December 31, 1993
was 5.39%.
The Bank's investment securities portfolio at December 31, 1993 contained
one corporate debt security, Occidental Petroleum, with a book value of $515,000
and a market value of $585,000. At September 30, 1994 the Occidental Petroleum
debt security had a book value of $514,000 and a market value of $552,000.
58
<PAGE> 65
SOURCES OF FUNDS
General. Deposit accounts have traditionally been the principal source of
the Bank's funds for use in lending and for other general business purposes. In
addition to deposits, the Bank derives funds from loan repayments and cash flows
generated from operations. Scheduled loan payments are a relatively stable
source of funds, while deposit inflows and outflows and the related cost of such
funds have varied. The Bank also utilizes borrowings as a mechanism to raise
additional funds without altering the Bank's deposit pricing structure.
Deposits. The Bank attracts both short term and long term deposits from the
Bank's primary market area by offering a variety of accounts and rates. The Bank
offers passbook accounts, NOW accounts, money market accounts and fixed interest
rate certificates of deposits with varying maturities.
Deposit account terms vary, according to the minimum balance required, the
time period the funds must remain on deposit and the interest rate, among other
factors. The Bank generally has not actively sought deposits outside of its
primary market area.
In setting rates, the Bank regularly evaluates (i) its internal costs of
funds, (ii) the rates offered by competing institutions, (iii) its investment
and lending opportunities and (iv) its liquidity position. In order to decrease
the volatility of its deposits, the Bank imposes stringent penalties on early
withdrawal on its certificates of deposit.
The following table sets forth the balances of savings deposits in the
various types of deposit programs offered by the Bank at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------
1991 1992 1993
------------------- ------------------- -------------------
PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
------- -------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Checking and Passbook Accounts:
Passbook accounts.................... $ 7,907 11.28% $ 8,758 12.83% $ 8,959 12.54%
Money market......................... 6,323 9.02 6,146 9.00 6,136 8.59
NOW and checking accounts............ 6,518 9.30 5,593 8.19 4,947 6.92
------- -------- ------- -------- ------- --------
Total non-certificates....... 20,748 29.60 20,497 30.02 20,042 28.05
------- -------- ------- -------- ------- --------
Certificates:
<4.00%........................... -- -- 10,292 15.08 20,702 28.97
4.00 - 5.99%......................... 16,361 23.26 25,138 36.83 27,224 38.41
6.00 - 7.99%......................... 32,605 45.35 11,996 17.57 2,998 4.19
8.00 - 9.99%......................... 384 1.79 342 .50 272 .38
------- -------- ------- -------- ------- --------
Total certificates........... 49,350 70.40 47,768 69.99 51,196 71.95
------- -------- ------- -------- ------- --------
Total deposits............... $70,098 100.00% $68,265 100.00% $71,238 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
The following table sets forth the savings flows at the Bank during the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1991 1992 1993
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Opening balance............................ $ 74,041 $ 69,910 $ 68,039
Deposits................................... 45,761 57,030 34,423
Withdrawals................................ (53,720) (61,851) (33,489)
Interest credited.......................... 3,828 2,950 2,265
-------- -------- --------
Ending balance............................. $ 69,910 $ 68,039 $ 71,238
======== ======== ========
Net increase (decrease).................... $ (4,131) $ (1,871) $ 3,199
======== ======== ========
Percent increase (decrease)................ (5.58)% (2.68)% 4.70%
======== ======== ========
</TABLE>
59
<PAGE> 66
The following table shows rate and maturity information for the Bank's
certificates of deposit as of December 31, 1993:
<TABLE>
<CAPTION>
0.00 - 4.00 - 6.00 - 8.00- PERCENT
3.99% 5.99% 7.99% 9.99% TOTAL OF TOTAL
------- ------- ------ ----- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Certificate accounts maturing in quarter
ending:
March 31, 1994............................. $ 5,018 $ 1,996 $1,245 $ 0 $ 8,259 16%
June 30, 1994.............................. 6,988 769 654 0 8,411 16
September 30, 1994......................... 4,523 4,481 48 130 9,182 18
December 31, 1994.......................... 3,009 3,489 401 25 6,924 14
March 31, 1995............................. 589 3,325 210 81 4,205 8
June 30, 1995.............................. 575 2,410 142 0 3,127 6
September 30, 1995......................... 0 1,246 61 26 1,333 3
December 31, 1995.......................... 0 2,372 122 10 2,504 5
March 31, 1996............................. 0 1,719 50 0 1,769 3
Thereafter................................. 0 5,417 65 0 5,482 11
------- ------- ------ ----- ------- ---
Total................................. $20,702 $27,224 $2,998 $ 272 $51,196 100%
======= ======= ====== ==== ======= ======
Percent of Total...................... 40% 53% 6% 1% 100%
</TABLE>
The following table indicates the amount of the Bank's certificates of
deposit by time remaining until maturity as of December 31, 1993:
<TABLE>
<CAPTION>
MATURITY
---------------------------------------------------------------
OVER OVER
3 MONTHS 3 THROUGH 6 6 THROUGH 12 OVER
OR LESS MONTHS MONTHS 12 MONTHS TOTAL
-------- ----------- ------------ --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Certificates of deposit less than
$100,000................................ $7,659 $ 6,706 $ 13,023 $17,314 $44,702
Certificates of deposit of $100,000 or
more.................................... 600 1,705 3,083 1,106 6,494
-------- ----------- ------------ --------- -------
Total certificates of deposit........ $8,259 $ 8,411 $ 16,106 $18,420 $51,196
======= ======== ========= ======== =======
</TABLE>
Borrowings. At December 31, 1993, the Bank had borrowings of $1.303
million, which consisted of collateralized mortgage obligation notes payable.
The maximum amount borrowed under the notes payable was $1,303,000; $2,364,000;
and $3,906,000 as of December 31, 1993, 1992, and 1991, respectively. As a
member of the FHLB of Chicago, the Bank is required to own capital stock in the
FHLB of Chicago and is authorized to apply for advances from the FHLB of
Chicago. As of December 31, 1993 the Bank had no outstanding advances from the
FHLB of Chicago. As of September 30, 1994 the Bank had $3,450,000 of outstanding
advances from the FHLB of Chicago.
SUBSIDIARY ACTIVITIES
The Bank is permitted by OTS regulations to invest up to 2% of its assets,
or $1,596,000 at December 31, 1993, in the stock of, or in unsecured loans to,
service corporation subsidiaries. As of such date, the net book value of the
Bank's investment in its service corporations was $452,000. The Bank may invest
an additional 1% of its assets in service corporations where such additional
funds are used for inner-city or community development purposes.
The Bank has two wholly owned subsidiaries. The following is a description
of the subsidiaries' principal activities.
First Moline Real Estate Corp. Real Estate Corp. was established in 1984 to
hold, manage and market Byron Woods, a 280-acre land development property
located in Port Byron, Illinois. Byron Woods was at one time real estate owned
by the Bank, and was subsequently deeded to Real Estate Corp. Two lots with no
60
<PAGE> 67
assigned value remain to be sold as of December 31, 1993. At December 31, 1993,
the Bank had an equity investment of negative $203,000 in and an advance of
$220,000 to Real Estate Corp.
The Bank is required to deduct from capital, in determining the Bank's
capital requirements, over a five-year period, its net investment in and
advances to Real Estate Corp.
FFM-CMO, Inc. FFM-CMO, Inc. ("FFM-CMO") was established in 1985 for the
purpose of participating in the issuance of collateralized mortgage obligations.
The Bank, after pooling outstanding mortgages to obtain FHLMC participation
certificates, funded FFM-CMO with approximately $13,000,000 of the FHLMC
participation certificates. FFM-CMO pledged the participation certificates as
collateral for money borrowed from Salomon Capital Access for Savings
Institutions, Inc. ("Salomon Capital"), an affiliate of Salomon Brothers, Inc.
Salomon Capital used the note from FFM-CMO as partial collateral for
collateralized mortgage obligations issued by Salomon Capital. The proceeds from
the issuance of the collateralized mortgage obligations (approximately
$11,200,000) were remitted to the Bank and were originally invested in
mortgage-backed securities and corporate bonds. At December 31, 1993, the Bank
had an equity investment of $655,000 in FFM-CMO. At December 31, 1993, FFM-CMO's
retained earnings totalled $655,000. This amount represents net income less
payment of dividends since the entity's inception. For the year ended December
31, 1993, FFM-CMO incurred a loss approximating $100,000. The loss reflects the
excess in the rate paid on the outstanding obligations to Salomon Capital above
the yield presently being earned on the certificates collateralizing the
obligation. At September 30, 1994 the Bank had an equity investment of $627,000
in FFM-CMO. At September 30, 1994 FFM-CMO's retained earnings totaled $627,000.
For the nine months ended September 30, 1994, FFM-CMO incurred a loss of
approximately $28,000.
COMPETITION
The Bank faces strong competition both in originating real estate and other
loans and in attracting deposits. Competition in originating real estate loans
comes primarily from other savings institutions, commercial banks and mortgage
bankers who also make loans secured by real estate located in the Bank's primary
market area. Other savings institutions, commercial banks and credit unions
provide competition in consumer lending. The Bank competes for loans principally
on the basis of the interest rates and loan fees charged by the Bank, types of
loans offered by the Bank, and quality of customer services.
The Bank attracts all of its deposits through its offices, primarily from
the community in which the Bank's offices are located; competition for deposits
comes principally from other savings institutions and commercial banks located
in the same community. The Bank competes for these deposits by offering a
variety of deposit accounts at competitive rates, convenient business hours and
a customer oriented staff.
EMPLOYEES
At December 31, 1993, the Bank and its subsidiaries had a total of 21
full-time and 5 part-time employees. None of the Bank's employees are
represented by any collective bargaining group. Management considers its
employee relations to be good.
REGULATION
GENERAL
As a federally chartered and federally insured savings bank, the Bank
operates in a highly regulated business environment. The Bank is a member of the
FHLB System and its deposit accounts are insured up to applicable limits by the
Savings Association Insurance Fund ("SAIF"), which is administered by the FDIC.
The Bank is subject to extensive regulation by the OTS and the FDIC. The Bank
must file reports with the OTS and the FDIC concerning its activities and
financial condition, in addition to obtaining regulatory approvals prior to
entering into certain transactions such as mergers with or acquisitions of other
savings institutions. Periodic examinations are conducted by the OTS and the
FDIC to test the Bank's compliance with various regulatory requirements. The
most recent examination by the OTS was completed in April 1993.
61
<PAGE> 68
The most recent examination by the FDIC was completed in December 1991. This
regulation and supervision is intended primarily for the protection of the
insurance fund and depositors. The regulatory structure also gives regulatory
authorities extensive discretion in connection with their supervisory and
enforcement activities and examination policies, including policies with respect
to the classification of assets and the establishment of adequate loan loss
reserves for regulatory purposes. The Holding Company, as a savings and loan
holding company, is also required to file certain reports, and otherwise comply
with the rules and regulations of the OTS and of the SEC under the federal
securities laws. Certain of the regulatory requirements applicable to the Bank
and the Holding Company are referred to below or elsewhere herein.
REGULATORY AGENCIES AFFECTING THE BANK AND THE HOLDING COMPANY
OTS. The OTS has extensive authority over the operations of savings
associations. As part of this authority, First Federal is required to file
periodic reports with the OTS and is subject to periodic examinations by the
OTS. Upon examination of the Bank, the OTS examiners may require the Bank to
provide for higher general or specific loan loss reserves. Financial
institutions in various regions of the United States have been called upon by
examiners to write down assets and to establish reserves as a result of
perceived weaknesses in real estate values and a more restrictive regulatory
climate.
The OTS has established a schedule for the assessment of fees upon all
savings associations to fund the operations of the OTS. A schedule of fees has
also been established for the various types of applications and filings made by
savings associations with the OTS. The general assessment, to be paid on a
semi-annual basis, is computed upon the savings association's total assets,
including consolidated subsidiaries, as reported in the association's latest
quarterly thrift financial report. The Bank's OTS assessment for 1993 was
$27,000.
The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including the Bank and the Holding
Company, and their "institution affiliated" parties such as directors, officers,
agents and other persons providing services to the institution or holding
company. This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease-and-desist or removal orders and to
initiate injunctive actions. In general, these enforcement actions may be
initiated for violations of laws and regulations and unsafe or unsound
practices. Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with the OTS. Except
under certain circumstances, public disclosure of final enforcement actions by
the OTS is required.
The investment and lending authority of the Bank is prescribed by federal
laws and regulations, and the Bank is prohibited from engaging in any activities
not permitted by such laws and regulations. For instance, no savings institution
may invest in corporate debt securities not rated in one of the four highest
rating categories by a nationally recognized rating organization. In addition,
the permissible level of investment by federal associations in loans secured by
non-residential real property may not exceed 400% of regulatory capital. At
September 30, 1994, the Bank was in compliance with each of these restrictions.
Loans to One Borrower Limitation. The Financial Institutions Reform,
Recovery and Enforcement Act of 1989 imposed a more stringent loans to one
borrower limitation on savings institutions. The limitation parallels the
lending limit for national banks, which is generally 15% of unimpaired capital
and surplus. In general, the revised loans to one borrower limitation applies
only to loans originated after the enactment of FIRREA.
FDIC. First Federal is a member of the SAIF, which is administered by the
FDIC. Savings deposits are insured up to $100,000 per insured member (as defined
by law and regulation) by the FDIC and such insurance is backed by the full
faith and credit of the United States Government. As insurer, the FDIC imposes
deposit insurance premiums and is authorized to conduct examinations of and to
require reporting by FDIC-insured institutions. It also may prohibit any
FDIC-insured institution from engaging in any activity the FDIC determines by
regulation or order to pose a serious risk to the FDIC. The FDIC also has the
authority to initiate enforcement actions against savings associations, after
giving the OTS an opportunity to take such action, and may terminate deposit
insurance if it determines that the institution has engaged or is engaging in
unsafe or unsound practices, or is in an unsafe or unsound condition.
62
<PAGE> 69
Assessments. Pursuant to FDICIA a permanent risk-based premium schedule
became effective on January 1, 1994. Under the risk-based schedule, an
institution is assigned to an assessment classification based on its capital
ratios and supervisory evaluations; institutions assigned to higher-risk
classifications pay deposit insurance premiums at a higher rate than
institutions assigned to lower-risk classifications.
Federal Reserve System. Federal Reserve Board Regulation D requires savings
institutions, including the Bank, to maintain reserves against their transaction
accounts (such as NOW and checking accounts). Under Regulation D, effective
December 20, 1994, an institution must maintain average daily reserves equal to
3% on the first $54 million of transaction accounts, and $1,620,000 plus 10% of
the remainder. These percentages are subject to adjustment by the Federal
Reserve Board. Prior to December 20, 1994, Regulation D required an institution
to maintain daily reserves equal to 3% on the first $51.9 million of transaction
accounts and $1,557,000 plus 10% of the remainder. As of December 31, 1993, the
Bank met applicable reserve requirements. The balances maintained to meet the
reserve requirements imposed by the Federal Reserve Board may be used to satisfy
liquidity requirements that may be imposed by the OTS. See "--Liquidity."
Savings associations are authorized to borrow from the Federal Reserve Bank
"discount window," but Federal Reserve Board regulations require associations to
exhaust other reasonable alternative sources of funds, including FHLB
borrowings, before borrowing from the Federal Reserve Bank.
FHLB System. The Bank is a member of the FHLB of Chicago, which is one of
12 regional FHLBs that administers the home financing credit function of savings
associations. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with applicable policies and procedures.
All advances from the FHLB are required to be fully secured by sufficient
collateral as determined by the FHLB. In addition, all long-term advances are
required to provide funds for only residential home financing.
As a member, First Federal is required to purchase and maintain stock in
the FHLB of Chicago. At December 31, 1993, First Federal had $556,000 in FHLB
stock, which was in compliance with this requirement. In past years, the Bank
has received dividends on its FHLB stock. Over the past five years such
dividends have averaged approximately $36,000 and were approximately $33,000 for
the year ended December 31, 1993. No assurance can be given as to the amount or
continuation of such dividends.
As a result of FIRREA, the FHLBs are required to provide funds for the
resolution of troubled savings associations and to contribute to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of the Bank's FHLB stock may result in a corresponding
reduction in the Bank's capital.
REGULATORY RESTRICTIONS AND REQUIREMENTS
FIRREA. On August 9, 1989, FIRREA was enacted into law. FIRREA
substantially changed the regulatory structure and oversight of all savings
associations and their holding companies including First Federal and the Holding
Company. Prior to FIRREA, First Federal was regulated by the Federal Home Loan
Bank Board (the "FHLBB") and its deposits were insured by and regulated by the
Federal Savings and Loan Insurance Corporation (the "FSLIC"). Under FIRREA, the
FHLBB was abolished and its regulatory authority over First Federal was
transferred to the OTS. In addition, the FSLIC was abolished and its function
was transferred to the FDIC. FIRREA revised many substantive requirements and
limitations to which the Bank is subject. Overall, these changes imposed
increased restrictions on the Bank's investment and lending activities. FIRREA
revised the structure of the FHLB System, including the requirements for
obtaining advances from the FHLB.
FDICIA. The Federal Deposit Insurance Corporation Improvement Act of 1991
imposes a number of new mandatory supervisory measures on savings associations,
such as the Bank. FDICIA requires financial institutions to take certain actions
relating to their internal operations, including: providing annual reports on
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financial condition and management to the appropriate federal banking
regulators, having an annual independent audit of financial statements performed
by an independent public accountant and establishing an independent audit
committee comprised solely of outside directors. As of December 31, 1993, based
on its asset level, First Federal was not required to comply with the management
reporting requirement. FDICIA also imposes certain operational and managerial
standards on financial institutions relating to internal controls, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, fees and benefits. FDICIA also required the FDIC to assess deposit
insurance premiums based on risk. Final regulations implementing these became
effective on January 1, 1994.
FDICIA also establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective December 19, 1992, the banking regulators are required to take certain
supervisory actions against undercapitalized institutions, the severity of which
depends upon the institution's degree of capitalization.
Under FDICIA, five supervisory categories are established based upon
capital adequacy. These categories consist of "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." An institution becomes subject to greater
supervision and restrictions on activities as the institution moves toward
"critically undercapitalized." Generally, an "undercapitalized" institution is
subject to increased monitoring by the supervisory agency and must submit a
capital plan specifying the method by which the institution will increase
capital. Holding companies of undercapitalized institutions must guarantee such
institution's compliance with the capital plan in an amount up to the lesser of
5% of the institution's assets or the amount needed to attain capital adequacy.
Undercapitalized institutions are also subject to restrictions on growth,
acquisitions, branching and new business activities.
The supervisory agency must require "significantly undercapitalized"
institutions, and "undercapitalized" institutions without an approved capital
plan to increase capital or be acquired by another institution. Such
institutions are also subject to restrictions on affiliate transactions, the
rate of interest paid on deposits, asset growth and higher risk activities. In
addition, the supervisory agency may remove directors or officers of the
institution, restrict senior officer compensation, prohibit the acceptance of
correspondent deposits, or require divestiture of the institution by its holding
company. A "critically undercapitalized" institution is subject to more
stringent restrictions on activities and may not make payments on subordinated
indebtedness 60 days after becoming critically undercapitalized. In addition,
the regulatory agency must appoint a receiver or conservator within 90 days of
an institution becoming critically undercapitalized or take such other action as
such agency determines with the concurrence of the FDIC. In addition, subject to
a narrow exception, FDICIA requires the banking regulators to appoint a receiver
or conservator for an institution that becomes critically undercapitalized and
requires that this ratio be less than 2% of assets.
Regulatory Capital Requirements. Federally insured savings associations,
such as the Bank, are required to maintain minimum levels of regulatory capital.
The OTS has established capital standards consisting of (i) a leverage ratio (or
core capital), (ii) a tangible capital requirement, and (iii) a risk-based
capital requirement. FIRREA mandated that these capital requirements generally
be as stringent as comparable capital requirements for national banks. The OTS
is also authorized to impose capital requirements in excess of these standards
on individual associations on a case-by-case basis. Savings associations must
meet all of the standards in order to comply with capital requirements. As of
December 31, 1993, the Bank was in compliance with all three capital
requirements. Failure to meet capital requirements may render a savings
association subject to certain restrictions, including restrictions on asset
growth. See "Sanctions for Failure to Meet Capital Requirements."
The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained income, and certain
noncumulative perpetual preferred stock and related income. In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights, must be deducted from tangible capital for this purpose. At December 31,
1993, First Federal had no unamortized purchased mortgage servicing rights.
The OTS regulations establish special capitalization requirements for
savings associations that own service corporations and other subsidiaries,
including subsidiary savings associations. According to these
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regulations, certain subsidiaries are consolidated for capital purposes and
others are excluded from assets and capital. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities permissible
for national banks, engaged solely in mortgage-banking activities, or engaged in
certain other activities solely as agent for its customers are "includable"
subsidiaries that are consolidated for capital purposes in proportion to the
association's level of ownership, including the assets of includable
subsidiaries in which the association has a minority interest that is not
consolidated for GAAP purposes. For excludable subsidiaries the debt and equity
investments in such subsidiaries are deducted from assets and capital, with a
five-year transition period beginning on July 1, 1990, for investments made
before April 12, 1989. As of December 31, 1993, the Bank had an investment of
approximately $10,000 in investments in and advances to subsidiaries that will
be excluded from capital on a phased-out basis pursuant to this transition rule.
At December 31, 1993, the Bank had tangible capital of $6.282 million, or
7.87% of adjusted total assets, which is approximately $5.085 million above the
minimum requirement of 1.5% of adjusted total assets in effect on that date.
The capital standards also require core capital equal to at least 3% of
adjusted total assets (as defined by regulation). Core capital generally
consists of tangible capital plus certain intangible assets, including goodwill
(which is phased-out over a five-year period) and specified percentages of other
intangibles which meet certain separate salability and market valuation tests.
At December 31, 1993, First Federal had no purchased mortgage servicing rights.
At December 31, 1993, the Bank had core capital equal to $6.282 million, or
7.87% of adjusted total assets, which is $3,889,000 above the minimum
requirement of 3% in effect on that date.
Pursuant to FDICIA, in 1993 the OTS issued a regulation adding an interest
rate risk (IRR) capital component to its risk-based capital rule. The component
became effective July 1, 1994, and is based on an institution's financial data
as reported in Schedule CMR. Only institutions required to file Schedule CMR are
potentially subject to an IRR capital component; voluntary CMR filers are
generally exempt. The Bank is a voluntary filer, and therefore is exempt from
the requirement. FDICIA, also requires the OTS to revise its capital regulations
to account for risk associated with concentrations of credit and nontraditional
activities. In December 1994, the federal banking agencies, including the OTS,
issued a final rule implementing these statutory provisions. Management cannot
predict at this time the effect, if any, of such rule on the Bank's capital
requirements.
In April, 1991, the OTS proposed a revision of the core capital
requirement. The OTS proposal is to establish a 3.0% core capital ratio (defined
as the ratio of core capital to adjusted total assets) for institutions in the
strongest financial and managerial condition, with a 1 "MACRO" rating. For all
other institutions, the minimum core capital ratio would be at least 4.0% and
possibly as high as 5.0% of adjusted total assets. No assurance can be given as
to the final form of any such regulation, the date of its effectiveness or the
requirement applicable to the Bank.
The FDIC has adopted a rule which provides that any insured depository
institution, including a savings association, with a ratio of Tier 1 or core
capital (which in general reflects those capital components recognized by the
OTS for its core capital standard) to total assets of less than 2% will be
deemed to be operating in an unsafe or unsound condition. Depository
institutions with a Tier 1 or core capital ratio of at least 2% may still be
considered by the FDIC, under appropriate circumstances, to be in an unsafe and
unsound condition. In determining whether a savings association is in an unsafe
and unsound condition under this rule the FDIC will consider, among other
things, whether the association meets the minimum capital requirements of the
OTS. See "--FDIC."
The OTS risk-based requirement requires savings associations to have total
capital of at least 8.0% of risk-weighted assets. Total capital consists of core
capital, as defined above, and supplementary capital. Supplementary capital
consists generally of certain permanent and maturing capital instruments and
general valuation loan and lease loss allowances up to a maximum of 1.25% of
risk-weighted assets. Supplementary capital may be used to satisfy the
risk-based requirement only to the extent of core capital. At December 31, 1993
First Federal had approximately $207,000 of general loss reserves, which was
less than 1.25% of risk-weighted assets.
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Certain exclusions from capital and assets are required to be made for the
purpose of calculating total capital, in addition to the adjustments required
for calculating core capital. Such exclusions consist of equity investments (as
defined by regulation) and that portion of land loans and nonresidential
construction loans in excess of an 80% loan-to-value ratio (these items were
excluded on a sliding scale through June 30, 1994, after which they must be
excluded in their entirety) and reciprocal holdings of qualifying capital
instruments. First Federal had no such exclusions from capital and assets at
December 31, 1993.
In determining the amount of risk-weighted assets, all assets, including
certain off-balance sheet items, are multiplied by a risk weight based on the
risks inherent in the type of assets. The risk weights assigned by the OTS for
principal categories of assets are (i) 0% for cash and securities issued by the
U.S. Government or unconditionally backed by the full faith and credit of the
U.S. Government; (ii) 20% for securities (other than equity securities) issued
by U.S. Government sponsored agencies and mortgage-backed securities issued by,
or fully guaranteed as to principal and interest by, the Federal National
Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation
except for collateralized mortgage obligation residual classes; (iii) 50% for
qualifying residential mortgage loans and qualifying residential construction
loans; and (iv) 100% for consumer loans, commercial loans, one- to four-family
residential real estate loans more than 90 days delinquent, repossessed assets
or those more than 90 days past due.
On December 31, 1993, the Bank had total capital (as calculated for
risk-weighted asset compliance) of $6.489 million (including $6.282 million in
core capital) and risk-weighted assets of $35.6 million; or total capital of
18.25% of risk-weighted assets. This amount was $3.6 million above the 8.0%
requirement in effect on that date.
SANCTIONS FOR FAILURE TO MEET CAPITAL REQUIREMENTS.
The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against any association that fails to meet its
capital requirements (an "undercapitalized association"). The OTS may grant to
associations exemptions from the various sanctions or penalties for failure to
meet their capital requirements (other than appointment of a conservator or
receiver and the mandatory growth restrictions) through the association's
submission of and compliance with an approved capital plan. If the plan is not
approved, the association will be prohibited from making capital distributions,
generally increasing its assets or making any loans and investments without OTS
approval and must comply with other limits imposed by the OTS.
Any undercapitalized association is subject to possible enforcement actions
by the OTS or the FDIC. Such actions may include a capital directive, a
cease-and-desist order, civil money penalties and the establishment of
restrictions on all aspects of a savings association's operations. The OTS also
may impose harsher measures such as the appointment of a receiver or conservator
or a forced merger into another institution. The grounds for appointment of a
conservator or receiver include substantially insufficient capital and losses or
likely losses that will deplete substantially all capital with no reasonable
prospect for replenishment of capital without federal assistance.
Effective one year after the enactment of the Improvement Act, the federal
banking agencies, including the OTS, have been given additional enforcement
authority over undercapitalized depository institutions. The OTS is generally
required to take action to restrict the activities of an undercapitalized
association. Any such association must submit a capital restoration plan and
until such plan is approved by the OTS may not increase its assets, acquire
another institution, establish a branch or engage in any new activities. In
addition, an undercapitalized institution generally may not make capital
distributions and the OTS is authorized to impose the additional restrictions,
discussed below, that are applicable to significantly undercapitalized
associations. Any company controlling an undercapitalized association must
agree, as a condition to the approval of the capital restoration plan, that it
will guarantee that the association will comply with the plan, including the
achievement of its capital requirements, until the association has been
adequately capitalized for four consecutive quarters. The company's aggregate
liability cannot exceed the lesser of (i) 5% of the association's assets at the
time it became undercapitalized or (ii) the amount of capital necessary to
achieve adequate capitalization at the time the institution fails to comply with
the plan.
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Any savings association that fails to comply with its capital plan or is
"significantly undercapitalized" (i.e., its capital level is significantly below
the required levels as defined by the OTS) must be subject to one or more of the
specified actions and operating restrictions mandated by the Improvement Act.
These actions and restrictions, in addition to those applicable to
undercapitalized associations, include requiring the issuance of additional
voting securities; limitations on asset growth; mandated asset reduction;
changes in senior management; divestiture, merger or acquisition of the
association; restrictions on executive compensation; and any other action the
OTS deems appropriate.
An association that becomes "critically undercapitalized" is subject to
restrictions on its activities in addition to those applicable to significantly
undercapitalized associations. The FDIC must restrict the activities of a
critically undercapitalized association and, among other things, prohibit any
material transaction outside the ordinary course of business or engaging in
certain transactions with affiliates, without the approval of the FDIC. An
association will be considered critically undercapitalized if its tangible
equity ratio is less than an amount to be established by the OTS. This amount
cannot be less than 2% of total assets or more than 65% of the core capital
ratio requirement for savings associations. The OTS must be appointed as a
receiver (or conservator with the concurrence of the FDIC) for a savings
association within 90 days after it becomes critically undercapitalized unless
it determines, with the concurrence of the FDIC, that other action will better
protect the SAIF. A redetermination of this decision must be made every 90 days.
A receiver must be appointed for the savings association during the calendar
quarter beginning 270 days after becoming critically undercapitalized unless the
OTS, with the concurrence of the FDIC, determines that the association, among
other things, is in substantial compliance with its capital plan and has
positive net worth, and the Director of the OTS and the Chairman of the FDIC
certify that the association is viable and not expected to fail. The FDIC is
authorized to appoint itself as conservator or receiver for a savings
association after giving prior notice to the OTS (and any state supervisor).
If the OTS determines that an association is in an unsafe or unsound
condition or is engaged in an unsafe or unsound practice, it is authorized to
reclassify a well-capitalized association (i.e., significantly exceeds its
capital requirements as defined by the OTS) as an adequately capitalized
association and if the association is adequately capitalized, to impose the
restrictions applicable to an undercapitalized association. If the association
is undercapitalized, the OTS is authorized to impose the restrictions applicable
to a significantly undercapitalized association.
At December 31, 1993, the Bank was in compliance with all applicable
current and fully phased-in capital requirements. There can be no assurance that
the Bank will continue to meet capital standards in the future. The imposition
by the OTS of any of the above measures on the Bank may have a substantial
adverse effect on the Bank's and Holding Company's operations and profitability
and the value of the Common Stock. Stockholders do not have preemptive rights,
and therefore, if the Holding Company is directed by the OTS or the FDIC to
issue additional shares of common stock, such issuance may result in the
dilution in the percentage of ownership of the Holding Company's stockholders.
Limitations on Dividends and Other Capital Distributions. OTS regulations
impose various restrictions or requirements on associations with respect to
their ability to pay dividends or make other distributions of capital. OTS
regulations prohibit an association from declaring or paying any dividends or
from repurchasing any of its stock if, as a result, the regulatory (or total)
capital of the association would be reduced below the amount required to be
maintained for the liquidation account established in connection with its mutual
to stock conversion.
The OTS utilizes a three-tiered approach to permit associations, based on
their capital level and supervisory condition, to make capital distributions
which include dividends, stock redemptions or repurchases, cash-out mergers,
interest payments on certain convertible debt and other transactions charged to
the capital account.
Generally, Tier 1 associations, which are associations that before and
after the proposed distribution meet or exceed their fully phased-in capital
requirements, may make capital distributions during any calendar year equal to
100% of net income for the year-to-date plus the amount that would reduce by
one-half its surplus capital ratio at the beginning of the calendar year or 75%
of its net income over the most recent four-quarter
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period. The OTS has proposed amending its capital distributions regulation to
conform to the prompt corrective action system established by FDICIA. Management
cannot predict the final form of any such amendment, the date of its
effectiveness (if adopted) or its effect on the Bank. A Tier 1 association
deemed to be in need of more than normal supervision by the OTS may be
downgraded to a Tier 2 or Tier 3 association as a result of such a
determination. First Federal has been assigned a Tier 1 designation and has not
been notified of a need for more than normal supervision. In the event that
First Federal's capital falls below the capital requirement, First Federal's
ability to make capital distributions could be restricted.
Tier 2 associations, which are associations that before and after the
proposed distribution meet or exceed their current minimum capital requirements,
may make capital distributions up to a specified percentage of their net income
for the most recent four quarter period. Tier 2 associations that meet the
risk-based capital requirement in effect as of January 1, 1993 are permitted to
make distributions not exceeding 75% of net income over such four quarter
period. Tier 2 associations that meet their current risk-based capital
requirements applicable as of January 1, 1991, are permitted to make
distributions not exceeding 50% of net income over the most recent four quarter
period.
Tier 3 associations (which are associations that do not meet current
minimum capital requirements) that propose to make any capital distribution and
Tier 2 associations that propose to make a capital distribution in excess of the
noted safe harbor levels must obtain OTS approval prior to making such
distributions. Tier 2 associations proposing to make a capital distribution
within the safe harbor provisions and Tier 1 associations proposing to make any
capital distribution need only submit written notice to the OTS 30 days prior to
such distribution. Any dividends declared without giving notice are
characterized as "invalid" and confers no rights or benefits upon the holder of
such stock. The OTS may object to the distribution during that 30-day period
based on safety and soundness concerns.
Liquidity. All savings associations, including First Federal, are required
to maintain an average daily balance of liquid assets equal to a certain
percentage of the sum of its average daily balance of net withdrawable deposit
accounts and borrowings payable in one year or less. For a discussion of what
the Bank includes in liquid assets, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION--Liquidity and Capital Resources." This liquid asset ratio
requirement may vary from time to time (between 4% and 10%) depending upon
economic conditions and savings flows of all savings associations. At December
31, 1993, the minimum liquid asset ratio was 5%.
In addition, short-term liquid assets (e.g., cash, certain time deposits,
certain bankers acceptances, certain short-term corporate debt obligations and
commercial paper, and short-term United States Treasury obligations) currently
must constitute at least 1% of the association's average daily balance of net
withdrawable deposit accounts and current borrowings. Penalties may be imposed
upon associations for violations of either liquid asset ratio requirement. At
December 31, 1993, the Bank was in compliance with both requirements, with an
overall liquid asset ratio of 13.36% and a short-term liquid assets ratio of
5.2%.
Qualified Thrift Lender Test. All savings associations, including the Bank,
are required to meet a qualified thrift lender ("QTL") test to avoid certain
restrictions on their operations. At December 31, 1993, the Bank met the QTL
test.
The Qualified Thrift Lender test requires a savings association to maintain
at least 65% of its total tangible assets in "qualified thrift investments"
(primarily residential mortgages and related investments, including certain
mortgage-backed securities) on a monthly average basis in nine out of every
twelve months. A savings association that fails to become or maintain its status
as a QTL must either become a bank (other than a savings bank) or be subject to
certain restrictions on activities including making any new investment or
engaging in any new activities that would not be permissible for national banks,
establishing any new branch office where a national bank located in the savings
institution's home state would not be able to establish a branch office,
obtaining new advances from any FHLB, and the payment of dividends. Also,
beginning three years after the date on which the savings association ceases to
be a QTL, the savings association would be prohibited from retaining any
investment or engaging in any activity not permissible for a national bank and
would be required to repay any outstanding advances to FHLB. A savings
institution may requalify as a QTL
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if it thereafter complies with the QTL test. As of December 31, 1993, the Bank
was in compliance with the QTL test. The Bank's percentage of qualified thrift
investments as of December 31, 1993 was 100.60%.
Transactions with Affiliates. Federal savings associations, including the
Bank, are subject to Sections 23A and 23B of the Federal Reserve Act. Generally,
transactions between a savings association and its affiliates are required to be
on terms as favorable to the association as transactions with non-affiliates. In
addition, certain of these transactions are restricted to a percentage of the
association's capital. Affiliates of First Federal include the Holding Company.
In addition, a savings association may not lend to any affiliate engaged in
activities not permissible for a bank holding company or acquire the securities
of most affiliates.
Certain of these transactions are also subject to conflict of interest
regulations enforced by the OTS. These regulations require regulatory approval
for transactions by the Bank and its subsidiaries with affiliated persons
involving the sale, purchase or lease of property. Affiliated persons include
officers, directors and controlling stockholders. These conflict of interest
regulations and other statutes also impose restrictions on loans to affiliated
persons. Among other things, such loans must be made on terms substantially the
same as for loans to unaffiliated individuals.
As of December 31, 1993, the Bank was in compliance with all applicable
restrictions on transactions with affiliates.
Holding Company Regulation. The Holding Company is a unitary savings and
loan holding company subject to regulatory oversight and examinations by the
OTS. The Holding Company is also registered and files reports with the OTS. In
addition, the OTS has enforcement authority over the Holding Company and its
non-savings association subsidiaries, if any, which also permits the OTS to
restrict or prohibit activities that are determined to be a serious risk to the
subsidiary savings association (such as the Bank).
As a unitary savings and loan holding company, the Holding Company
generally is not subject to activity restrictions. If the Holding Company
acquires control of another savings association as a separate subsidiary, it
would become a multiple savings and loan holding company, and the activities of
the Holding Company and any of its subsidiaries (other than the Bank or any
other SAIF-insured savings association) would become subject to such
restrictions unless each of such other associations qualifies as a QTL and was
acquired in a supervisory acquisition.
If the Bank fails the QTL test, the Holding Company must obtain the
approval of the OTS prior to continuing after such failure, directly or through
its other subsidiaries, any business activity other than those approved for
multiple savings and loan holding companies or their subsidiaries. In addition,
within one year of such failure the Holding Company must register as, and
subject to, the restrictions applicable to bank holding companies. The
activities authorized for a bank holding company are more limited than are the
activities authorized for a unitary or multiple savings and loan holding
company. See "--Qualified Thrift Lender Test."
The Holding Company must obtain approval from the OTS before acquiring
control of any other SAIF-insured association. Such acquisitions are generally
prohibited if they result in a multiple savings and loan holding company
controlling savings associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in a supervisory acquisition of a failing savings association.
Community Reinvestment. Under the Community Reinvestment Act, as
implemented by OTS regulations, a savings institution has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions, nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the OTS, in connection with its examination of a savings institution,
to assess the institution's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications
by such institution. The CRA requires that the OTS provide a written evaluation
of an institution's CRA performance utilizing a four-tiered descriptive rating
system.
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The CRA and implementing regulations require that the federal banking
regulators, including the OTS, take into account a financial institution's
record and performance under the CRA in determining whether to grant
applications for charters, branches, and other deposit facilities, relocations,
mergers, consolidations, acquisitions of assets or assumptions of liabilities,
and savings and loan holding company acquisitions. The regulators' assessment of
an applicant's performance under the CRA may be the basis for the regulators to
deny an application of the type described above.
The federal banking agencies, including the OTS, have proposed amendments
to regulations implementing the CRA. The proposed regulations would revise the
methods of evaluating a financial institution's CRA performance and subject a
financial institution to enforcement action based solely on its CRA rating.
Management of First Federal cannot predict the final form or effective date of
such regulations, if any.
The OTS also reviews a savings institution's performance under other
consumer regulations, including the OTS nondiscrimination regulations and
regulations promulgated pursuant to the Equal Credit Opportunity Act, the Bank
Secrecy Act, the Truth in Lending Act, the Electronic Funds Transfer Act, and
the Real Estate Settlement Procedures Act.
Federal Securities Law. The Common Stock is registered with the Commission
under the Securities Exchange Act of 1934, as amended. The Holding Company is
subject to the information, proxy solicitation, insider trading restrictions and
other requirements of the Commission under the Exchange Act.
Common Stock held by persons who are affiliates (generally officers,
directors and principal stockholders) of the Holding Company may not be resold
without registration or unless sold in accordance with certain resale
restrictions. If the Holding Company meets specified current public information
requirements, each affiliate of the Holding Company is able to sell in the
public market without registration, a limited number of shares in any
three-month period.
FEDERAL AND STATE TAXATION
Federal Taxation. Savings associations such as the Bank that meet certain
definitional tests relating to the composition of assets and other conditions
prescribed by the Internal Revenue Code of 1986, as amended, are permitted to
establish reserves for bad debts and to make annual additions thereto which may,
within specified formula limits, be taken as a deduction in computing taxable
income for federal income tax purposes. The amount of the bad debt reserve
deduction for "non-qualifying loans" is computed under the experience method.
The amount of the bad debt reserve deduction for "qualifying real property
loans" (generally loans secured by improved real estate) may be computed under
either the experience method or the percentage of taxable income method (based
on an annual election).
Under the experience method, the bad debt deduction is an amount determined
under a formula based generally upon the bad debts actually sustained by a
savings association over a period of years.
The percentage of specially computed taxable income that is used to compute
a savings association's bad debt reserve deduction under the percentage of
taxable income method (the "percentage bad debt deduction") is 8%. The
percentage bad debt deduction thus computed is reduced by the amount permitted
as a deduction for nonqualifying loans under the experience method. The
availability of the percentage of taxable income method permits a qualifying
savings association to be taxed at a lower effective federal income tax rate
than that applicable to corporations generally (approximately 31.3% assuming the
maximum percentage bad debt deduction).
If an association's specified assets (generally, loans secured by
residential real estate or deposits, educational loans, cash and certain
government obligations) constitute less than 60% of its total assets, the
association may not deduct any addition to a bad debt reserve and generally must
include existing reserves in income over a four-year period. No representation
can be made as to whether the Bank will meet the 60% test for subsequent taxable
years.
Under the percentage of taxable income method, the percentage bad debt
deduction cannot exceed the amount necessary to increase the balance in the
reserve for "qualifying real property loans" to an amount
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equal to 6% of such loans outstanding at the end of the taxable year or the
greater of (i) the amount deductible under the experience method or (ii) the
amount which when added to the bad debt deduction for "non-qualifying loans"
equals the amount by which 12% of the amount comprising savings accounts at
year-end exceeds the sum of surplus, undivided profits and reserve, at the
beginning of the year. At December 31, 1993, the 6% and 12% limitations did not
restrict the percentage bad debt deduction available to the Bank. It is not
expected that these limitations would be a limiting factor in the foreseeable
future.
In addition to the regular income tax, corporations, including savings
associations such as the Bank, generally are subject to a minimum tax. An
alternative minimum tax is imposed at a minimum tax rate of 20% on alternative
minimum taxable income, which is the sum of a corporation's regular taxable
income (with certain adjustments) and tax preference items, less any available
exemption. The alternative minimum tax is imposed to the extent it exceeds the
corporation's regular income tax and net operating losses can offset no more
than 90% of alternative minimum taxable income. For taxable years beginning
after 1986 and before 1996, corporations, including savings associations such as
the Bank, are also subject to an environmental tax equal to 0.12% of the excess
of alternative minimum taxable income for the taxable year (determined without
regard to net operating losses and the deduction for the environmental tax) over
$2 million.
To the extent earnings appropriated to a savings association's bad debt
reserves for "qualifying real property loans" and deducted for federal income
tax purposes exceed the allowable amount of such reserves computed under the
experience method and to the extent of the institution's supplemental reserves
for losses on loans (the "Excess"), such Excess may not, without adverse tax
consequences, be utilized for payment of cash dividends or other distributions
to a stockholder (including distributions on redemption, dissolution or
liquidation) or for any other purpose (except to absorb bad debt losses). As of
December 31, 1993, the Bank's Excess for tax purposes totaled approximately
$1,900,000.
The Holding Company and the Bank and its subsidiaries file consolidated
federal income tax returns on a calendar year basis using the accrual method of
accounting. Thrift institutions, such as the Bank, that file federal income tax
returns as part of a consolidated group are required by applicable Treasury
regulations to reduce their taxable income for purposes of computing the
percentage bad debt deduction for losses attributable to activities of the
non-savings association members of the consolidated group that are functionally
related to the activities of the savings association member.
The Bank and its consolidated subsidiaries have not been audited by the IRS
with respect to consolidated federal income tax returns for the last five years.
Illinois Taxation. The Holding Company and its subsidiary file a combined
Illinois income tax return. For Illinois income tax purposes, the Holding
Company and its subsidiary will be taxed at an effective rate equal to 7.3% of
Illinois taxable income. For these purposes, "Illinois Taxable Income" generally
means federal taxable income, subject to certain adjustments (including the
addition of interest income on state and municipal obligations and the exclusion
of interest income on United States Treasury obligations). The exclusion of
income on United States Treasury obligations has the effect of reducing
significantly the Illinois taxable income of savings associations subject to
Illinois taxation.
Delaware Taxation. As a Delaware holding company, the Holding Company is
exempted from Delaware corporate income tax but is required to file an annual
report with and pay an annual fee to the State of Delaware. The Holding Company
is also subject to an annual franchise tax imposed by the State of Delaware
based on the number of authorized shares of Holding Company capital stock.
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<PAGE> 78
DESCRIPTION OF PROPERTY
The table below sets forth information relating to each of the Bank's
current offices, both of which are owned by the Bank. The total net book value
of the Bank's premises and equipment at December 31, 1993 was $1,030,000.
<TABLE>
<CAPTION>
NET BOOK VALUE AT
LOCATION DATE ACQUIRED DECEMBER 31, 1993
-------------------------------------------- ------------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Home Office: 1974 $641
1616 6th Avenue
Moline, Illinois
Branch Office: 1981 $210
4701 22nd Avenue
Moline, Illinois
</TABLE>
The Bank's accounting and record keeping activities are maintained on an
on-line basis with an independent service bureau. The net book value of the data
processing and computer equipment utilized by the Bank at December 31, 1993 was
approximately $67,000.
LEGAL PROCEEDINGS
From time to time, the Bank and the Holding Company are parties to certain
legal proceedings arising in the ordinary course of business. The Bank and the
Holding Company believe that none of these legal proceedings would, if adversely
determined, have a material adverse effect on their financial condition.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
First Moline's stock is traded over the counter through the national daily
quotation in the "Pink Sheets". As of December 31, 1993 there were 175
registered owners of FMFC Common Stock.
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<PAGE> 79
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Holding Company's results of operations consist primarily of earnings
from the Bank's results of operations, which are primarily dependent on net
interest income, which is the difference between the interest income earned on
its loan, mortgage-backed and related securities, and investment securities and
its cost of funds, consisting of the interest paid on its deposits and
borrowings. In addition, to a lesser extent, the Bank's operating results are
affected by fees paid by borrowers, customer service charges, and other income.
The Bank's operating results in the past have been affected by the gains or
losses on the sale of investment securities and mortgage-backed securities.
Finally, non-interest expense, such as employee salaries and benefits, office
occupancy, equipment costs, federal insurance premiums, marketing, and other
expenses affect results of operations.
Operational results are also affected by general economic conditions
(particularly changes in interest rates), competition, government policies and
actions of regulatory agencies. Legislation enacted in recent years, including
FIRREA and FDICIA, has significantly changed the regulation of all savings
associations including the Bank, by, among other things, increasing the capital
requirements and deposit insurance premiums applicable to savings associations,
limiting the permissible dollar amount of loans to one borrower, and
implementing a more stringent qualified thrift lender test. The Bank's Board of
Directors believes that these and other provisions of FIRREA and FDICIA have
significantly affected and will continue to affect the operations of the Bank.
RETAIL BANKING STRATEGY
The Bank's business strategy is to provide traditional thrift financial
products and services to meet the needs of present and potential customers in
the Bank's community. The bank has stressed mortgage lending as its primary
business for the past few years, increasing originations from $5.6 million in
1990 to $17.3 million in 1993. Continuing its efforts of increased
communications with realtors and builders, the bank appointed Assistant Vice
President--Mortgage Lending, Cheryl Bean to a newly created position of
Assistant Vice President--Marketing. She emphasizes personal calls on realtors
and builders' offices to create more exposure in the market.
ASSET/LIABILITY MANAGEMENT
The interest rate sensitivity gap is defined as the difference between the
amount of interest-earning assets anticipated, based upon certain assumptions,
to mature or reprice within a specific time period, and the amount of
interest-bearing liabilities anticipated, based upon certain assumptions, to
mature or reprice within that same time period. A gap is considered positive
when the amount of interest rate sensitive assets exceeds the amount of interest
rate sensitive liabilities. During a period of rising interest rates, a positive
gap would tend to result in an increase in net interest income. During a period
of falling interest rates, a negative gap would tend to result in an increase in
net interest income, while a positive gap would tend to adversely affect net
interest income.
The Bank's asset/liability management strategy emphasizes maintaining an
adequate level of liquid assets (primarily interest-bearing deposits at
financial institutions) and the origination and retention in its portfolio of
adjustable-rate loans. The Bank's ability to originate such loans, however,
depends upon market interest rates and borrowers' preferences. In lower interest
rate environments, borrowers often prefer to obtain fixed-rate loans.
Accordingly, the Bank has continued to originate fixed-rate mortgage loans in
response to customer demand. The Bank has been approved as a FHLMC
seller-servicer and commenced selling fixed-rate loans to FHLMC during 1993
while retaining the servicing. The Bank also originates consumer loans, which
have shorter maturity terms, but also entail greater credit risk.
Although the Bank has sought to increase its adjustable-rate loan
portfolio, the level of the Bank's portfolio of fixed-rate mortgages of longer
maturities continues to affect the Bank's "gap" position. At December 31, 1993
total interest bearing liabilities maturing or repricing within one year
exceeded total
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<PAGE> 80
interest earning assets maturing or repricing in the same time period by
$9,000,000, representing a cumulative one year gap ratio of negative 11.28% of
total assets. Thus, during periods of rising interest rates, it is expected that
the cost of the Bank's interest bearing liabilities would rise more quickly than
the yield on its interest earning assets, which would adversely affect the
Bank's net interest income.
The following table sets forth the interest rate sensitivity of the Bank's
assets and liabilities at December 31, 1993 on the basis of OTS assumptions for
prepayments and deposit account decay:
<TABLE>
<CAPTION>
MATURING OR REPRICING
------------------------------------------------------------------------------
GREATER THAN
6 MONTHS 1 YEAR AND 3 YEARS AND 5 YEARS AND
6 MONTHS TO ONE LESS THAN 3 LESS THAT 5 GREATER THAN
OR LESS YEAR YEARS YEARS 5 YEARS TOTAL
-------- -------- ------------ ----------- ------------ -------
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
-------- -------- ------------ ----------- ------------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Fixed rate one- to four-family
including mortgage-backed and
related securities, multi-family,
non-residential real estate and
construction loans................ $15,226 $ 6,595 $ 11,574 $ 6,173 $ 10,661 $50,229
Adjustable rate including mortgage-
backed and related securities,
one- to four-family, multi-family,
non-residential real estate and
construction loans................ 5,000 6,067 1,710 566 -- 13,343
Consumer loans...................... 1,932 188 1,012 1,575 483 5,190
Investment securities and securities
held for sale..................... 3,256 -- 1,000 1,997 2,015 8,268
-------- ------------ -------
Total interest-earning
assets..................... $25,414 $12,850 $ 15,296 $10,311 $ 13,159 $77,030
-------- -------- ------------ ----------- ------------ -------
Passbook............................ $ 795 $ 723 $ 2,304 $ 1,500 $ 3,637 $ 8,959
Demand deposits..................... 4,612 2,519 1,983 749 1,220 11,083
Certificates........................ 24,167 13,883 11,312 1,834 -- 51,196
-------- -------- ------------ ----------- ------------ -------
Total deposits................ 29,574 17,125 15,599 4,083 4,857 71,238
Borrowed money...................... 341 224 695 43 -- 1,303
-------- -------- ------------ ----------- ------------ -------
Total interest-bearing
liabilities................ 29,915 17,349 16,294 4,126 4,857 72,541
-------- -------- ------------ ----------- ------------ -------
Interest-earning assets less
interest-bearing liabilities...... $(4,501) $(4,499) $ (998) $ 6,185 $ 8,302 $ 4,489
========= ======== =========== =========== =========== ========
Difference as a percent of interest-
earning assets.................... (17.71)% (35.01)% (6.52)% 59.98% 63.09% 5.83%
Cumulative interest rate sensitivity
gap............................... $(4,501) $(9,000) $ (9,998) $(3,813) $ 4,489
========= ======== =========== =========== ===========
Cumulative interest rate sensitivity
gap as a percent of total assets
at December 31, 1993.............. (5.64)% (11.28)% (12.53)% (4.78)% 5.62%
</TABLE>
The previous table does not necessarily indicate the impact of general
interest rate movements on the Bank's net interest income because the repricing
of certain categories of assets and liabilities is subject to competitive and
other pressures beyond the Bank's control. Moreover, in the event of an increase
in interest rates, the credit risk of many types of financial assets (including
loans) may increase. As a result, certain assets and liabilities indicated as
maturing or otherwise repricing within a stated period may in fact mature or
reprice at different times and at different volumes.
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<PAGE> 81
RESULTS OF OPERATIONS
The Bank's results of operations depend primarily on the level of its net
interest income and non-interest income and the level of its operating expenses.
Net interest income depends upon the volume of interest-earning assets and
interest-bearing liabilities and the interest rate earned or paid on them.
Management's policy is to hold most securities until maturity. However, the
Bank may dispose of a particular security in response to changes in market
conditions. In instances where management believes that the sale of particular
securities may be in the best interest of the Bank, those securities are
classified on the Bank's financial statements as securities held for sale.
During 1993 the Bank sold $8,105,000 of fixed-rate mortgage loans. The Bank
realized a gain of $97,000 on the sale of these loans. The Bank as part of its
management of assets and liabilities, will sell whole and/or participating
interests in real estate loans.
The table below presents for the periods indicated the total dollar amount
of interest income from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. No tax equivalent adjustments were made.
All average balances are daily average balances. Non-accrual loans are included
with average loans. Loan fees are not material and are included in loan income
consistent with FAS 91.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
1991 1992 1993
------------------------------ ------------------------------ ------------------------------
AVERAGE INTEREST AVERAGE INTEREST AVERAGE INTEREST
OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/
BALANCE PAID RATE BALANCE PAID RATE BALANCE PAID RATE
----------- ------- ------ ----------- ------- ------ ----------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable............. $45,743 $4,608 10.07 % $43,218 $4,232 9.79 % $42,013 $3,689 8.78 %
Mortgage-backed and related
securities held for sale
and investment............. 20,247 1,738 8.59 15,718 1,238 7.88 21,777 1,343 6.17 %
Investment securities and
securities held for sale... 6,914 502 7.26 8,610 530 6.15 8,181 472 5.77 %
Interest-bearing deposits.... 5,102 294 5.76 7,302 309 4.23 5,066 189 3.73 %
FHLB stock................... 504 33 6.55 538 29 5.39 556 33 5.94 %
----------- ------- ------ ----------- ------- ------ ----------- ------- ------
Total interest-earning
assets..................... 78,510 7,175 9.14 75,386 6,338 8.41 77,593 5,726 7.38 %
----------- ------- ------ ----------- ------- ------ ----------- ------- ------
Other non-interest earning
assets..................... 3,131 3,000 2,525
$81,641 $78,586 $80,118
========= ========= =========
Interest-bearing liabilities:
Passbooks.................... 7,580 382 5.04 8,308 288 3.47 8,860 253 2.86 %
Demand deposits.............. 11,752 619 5.27 12,168 428 3.52 11,176 302 2.70 %
Certificates of deposit...... 53,520 3,877 7.24 49,045 2,898 5.91 50,478 2,377 4.71 %
----------- ------- ------ ----------- ------- ------ ----------- ------- ------
Total deposits............... 72,852 4,878 6.70 69,521 3,614 5.20 70,514 2,932 4.16 %
Borrowed money............... 4,512 570 12.63 3,559 459 12.90 2,809 325 11.57 %
----------- ------- ------ ----------- ------- ------ ----------- ------- ------
Total interest-bearing
liabilities................ 77,364 5,448 7.04 73,080 4,073 5.57 73,323 3,257 4.44 %
Other non-interest-bearing
liabilities................ 896 1,304 573
----------- ----------- -----------
Stockholders' Equity......... 3,381 4,002 6,222
----------- ----------- -----------
$81,641 $78,386 $80,118
========= ========= =========
Net interest income/interest
rate spread.................. $1,727 2.10 % $2,265 2.84 % $2,469 2.94 %
===== ===== =====
Net earning assets/net yield on
average interest-earning
assets....................... 2.20 % 3.01 % 3.18 %
===== ===== =====
Average interest-earning assets
to average interest-bearing
liabilities.................. 1.01 1.03 1.06
===== ===== =====
</TABLE>
The schedule below presents the dollar amount of changes in interest income
and interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between the increase related to
higher outstanding balances and that due to the unprecedented levels and
volatility of
75
<PAGE> 82
interest rates. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii)
changes in rate (i.e., changes in rate multiplied by old volume). For purposes
of this table, changes attributable to both rate and volume which cannot be
segregated have been allocated proportionately to the change due to volume and
the change due to rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1991 VS. 1992 1992 VS. 1993
--------------------------------- -------------------------------
INCREASE INCREASE
(DECREASE) (DECREASE)
DUE TO TOTAL DUE TO TOTAL
------------------ INCREASE ---------------- INCREASE
VOLUME RATE (DECREASE) VOLUME RATE (DECREASE)
------ ------- ---------- ------ ----- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable................. $(250) $ (126) $ (376) $(114) $(429) $ (543)
Mortgage-backed and related
securities held for sale and
investment.................... (365) (135) (500) 411 (306) 105
Investment securities and
securities held for sale...... 111 (83) 28 (26) (32) (58)
Interest-bearing deposits........ 150 (90) 15 (86) (34) (120)
FHLB Stock....................... 2 (6) (4) 1 3 4
----- ------- ---------- ----- ----- ----------
Total interest-earning
assets................... $(397) $ (440) $ (837) $ 186 $(798) $ (612)
Interest-bearing liabilities:
Passbook......................... $ 33 $ (127) $ (94) $ 18 $ (53) $ (35)
Demand deposits.................. 21 (212) (191) (33) (93) (126)
Certificates..................... (306) (673) (979) 83 (604) (521)
----- ------- ---------- ----- ----- ----------
Total deposits................... (252) (1,012) (1,264) 68 (750) (682)
Borrowing........................ (123) 12 (111) (89) (45) (134)
----- ------- ---------- ----- ----- ----------
Total interest-bearing
liabilities.............. $(375) $(1,000) $ (1,375) $ (21) $(795) $ (816)
----- ------- ---------- ----- ----- ----------
Net interest income.............. $ (22) $ 560 $ 538 $ 207 $ (3) $ 204
===== ======= ======== ===== ===== ========
</TABLE>
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1993
Net income for the nine month period ended September 30, 1994 was $317,000
compared to $415,000 for the nine month period ended September 30, 1993, a
decrease of $98,000. The decline in net income is in part due to the decrease in
net interest income of $44,000 for the nine months ended September 30, 1994
compared to the same period in the prior year. The decrease in net interest
income is due primarily to a decrease in interest income from loans partially
offset by a decline in the interest paid on deposits. The decline in interest
income is due to low rates during the first and second quarter with gradually
increasing rates during the third quarter. The decline in interest expense is
due to lower rates during the first quarter with leveling during the second
quarter and increasing during the third quarter.
Total other income increased $39,000 for the nine months ended September
30, 1994, compared to the same period in the prior year. The increase was due to
gains on the sale of Mortgage Backed Securities with low principal balances.
Total other expenses increased by $199,000 for the nine month period ended
September 30, 1994, compared to the same period in the prior year. This increase
was due to increases in compensation and employee benefits of $27,000, an
increase in occupancy expenses of $20,000 and an increase in professional fees
of $130,000. The provision for loan losses at September 30, 1994 was $21,000
compared to $48,000 at September 30, 1993.
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<PAGE> 83
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994
COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1993
Net income for the three months ended September 30, 1994, was $29,000
compared to $179,000 for the same period in the prior year. The decrease of
$150,000 was due primarily to additional professional fees related to the
proposed transaction with Firstar. The Bank realized a $19,000 reduction in
provision for loan losses due to the recovery of a portion of a previous
write-off.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1993 AND
DECEMBER 31, 1992
General. The Bank had net income of $497,000 for the year ended December
31, 1993, compared with $422,000 for the year ended December 31, 1992. The
increase in net income was due to an increase in net interest income of
$204,000, a decrease in provision for possible loan losses of $76,000, an
increase in other income of $39,000, offset by an increase in non-interest
expense of $270,000, and a decrease in income tax expense of $26,000.
Interest Income. Interest income decreased from $6,338,000 in 1992 to
$5,726,000 in 1993. The decrease in interest income on loans of $543,000 was due
to a decline in the average yield on loans from 9.79% in 1992 to 8.78% in 1993,
as many customers continued to take advantage of declining rates to refinance
existing mortgages. Interest income on investment securities, mortgage-backed
and related securities, securities held for sale and other interest-bearing
assets decreased by $69,000 from 1992 to 1993, due primarily to declining
interest rates.
Interest Expense. Interest expense decreased from $4,073,000 in 1992 to
$3,257,000 in 1993. The decrease was due to falling interest rates paid on
deposits in 1993. The average rate paid on interest-bearing liabilities declined
from 5.57% in 1992 to 4.44% in 1993.
Provision for Loan Losses. The provision for loan losses decreased from
$134,000 in 1992 to $58,000 in 1993. Management continues to stress monitoring
of past due and problem credits, and feels the allowance for loan losses as of
December 31, 1993 is adequate to cover potential losses in the portfolio. There
can be no assurance that future losses will not exceed the estimated amounts
thereby adversely affecting future results of operations. Future additions to
the Bank's allowance for loan losses and any change in the related ratio of the
allowance for loan losses to non-performing loans are dependent upon the
economy, changes in real estate values and interest rates, the view of the
regulatory authorities toward adequate reserve levels, and inflation.
Other Income. Other income increased from $371,000 in 1992 to $410,000 in
1993. Gains on sales of investment, mortgage backed and related securities and
securities held for sale increased by $33,000 from 1992. Foreclosed real estate
and other income decreased by $70,000 due to fewer gains realized on the sales
of lots by First Moline Real Estate Corp. and a reduction in other income during
1993.
Non Interest Expense. Non interest expense increased from $1,800,000 in
1992 to $2,070,000 in 1993, due primarily to increases in compensation and
employee benefits, professional fees and mortgage loan expenses during the year.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1992 AND
DECEMBER 31, 1991
General. The Bank had net income of $422,000 for the year ended December
31, 1992, compared with $107,000 for the year ended December 31, 1991. The
increase in net income was primarily due to an increase in net interest income
of $204,000 and a decrease in provision for possible loan losses of $233,000,
offset by a decrease in other income of $33,000, an increase in non-interest
expense of $134,000, and an increase in income tax expense of $289,000.
Interest Income. Interest income decreased from $7,175,000 in 1991 to
$6,338,000 in 1992. The decrease in interest income on loans of $376,000 was due
primarily to a decline in the average yield on loans from 10.07% in 1991 to
9.79% in 1992, as many customers continued to take advantage of declining rates
to refinance existing mortgages. Interest income on investment securities,
mortgage-backed and related
77
<PAGE> 84
securities, securities held for sale and other interest-bearing assets decreased
by $461,000 from 1991 to 1992, due primarily to declining interest rates.
Interest Expense. Interest expense decreased from $5,448,000 in 1991 to
$4,073,000 in 1991. The decrease was due to a combination of falling interest
rates paid on deposits and a decline in the amount of deposits outstanding in
1992. The average rate paid on interest-bearing liabilities declined from 7.04%
in 1991 to 5.57% in 1992. Because of falling rates, some customers moved funds
from certificates of deposit to other financial intermediaries, in hopes of
seeking higher rates of return.
Provision for Loan Losses. The provision for loan losses decreased from
$367,000 in 1991 to $134,000 in 1992. In 1991, the Bank set up a $200,00
specific reserve on a loan in Colorado that was sold in the first quarter of
1992 without further loss to the Bank. Management continues to stress monitoring
of past due and problem credits, and feels the allowance for loan losses as of
December 31, 1992 is adequate to cover potential losses in the portfolio. There
can be no assurance that future losses will not exceed the estimated amounts
thereby adversely affecting future results of operations. Future additions to
the Bank's allowance for loan losses and any change in the related ratio of the
allowance for loan losses to non-performing loans are dependent upon the
economy, changes in real estate values and interest rates, the view of the
regulatory authorities toward adequate reserve levels, and inflation.
Other Income. Other income decreased from $404,000 in 1991 to $371,000 in
1992. Gains on sales of investment, mortgage backed and related securities and
securities held for sale declined by $80,000 from 1991. Foreclosed real estate
income increased by $39,000 due to gains realized on the sales of lots by First
Moline Real Estate Corp. during 1992.
Non Interest Expense. Non interest expense increased from $1,666,000 in
1991 to $1,800,000 in 1992, due primarily to increases in employee benefits and
professional fees during the year.
FINANCIAL CONDITION
Total assets at September 30, 1994 were $83,044,000 as compared to
$79,808,000 at December 31, 1993. Deposits increased $943,000 from December 31,
1993 primarily as a result of the addition of capitalized interest. An increase
of $4,478,000 in the balance of net loans receivable was due mainly to heavy
mortgage originations in the 15 and 30 year mortgages. $1,225,000 of the
$4,478,000 were end loans for customers building new homes.
Stockholders' equity at September 30, 1994 was $5,840,000, a decrease of
$638,000 from December 31, 1993. The decrease in stockholders' equity is due to
a $928,000 unrealized loss on securities available for sale, (mandated by FASB
115, which classifies investment securities as available for sale or held to
maturity and those securities identified as available for sale must be marked to
market and the gain or loss shown as an adjustment to equity net of tax (see
Impact of New Accounting Standards)), and a stock dividend payment of $27,000,
offset by net income as of September 30, 1994 of $317,000.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are deposits, proceeds from principal
and interest payments on loans and mortgage-backed securities and other
investments. While maturities and scheduled amortization of loans and
mortgage-backed securities are a predictable source of funds, deposit flows and
mortgage prepayments are greatly influenced by general interest rates, economic
conditions and competition.
The Bank's primary investing activity is the origination of mortgage loans.
At December 31, 1993, mortgage loans accounted for approximately 44% of the
Bank's total assets.
The Bank is required to maintain minimum levels of liquid assets as defined
by OTS regulations. This requirement, which may be varied at the direction of
the OTS, depending upon economic conditions and deposit flows, is based upon the
percentage of deposits and short term Borrowing. The required ratio is currently
5%. The Bank's liquidity ratios were 13.36% at December 31, 1993, 29.22% at
December 31, 1992, and 15.73% at September 30, 1994.
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<PAGE> 85
The Bank's most liquid assets are cash and cash equivalents, which include
investments in highly liquid, short term investments. The levels of these assets
are dependent upon the Bank's operating, financing, and investing activities
during any given period. At December 31, 1993 and 1992, cash and cash
equivalents totaled $1,242,000 and $640,000, respectively. At September 30,
1994, cash and cash equivalents totaled $688,000.
The concept of liquidity comprises the ability of an enterprise to maintain
sufficient cash flow to meet its needs and obligations on a timely basis.
Liquidity must thus be considered in terms of the nature and mix of the
institution's sources and uses of funds.
As shown in the statements of cash flows, the Bank provided $5,890,000;
$4,044,000; and $954,000 of cash from operating activities for the years ended
December 31, 1991, 1992 and 1993 respectively. In addition, liquidity is
provided from both assets and liabilities. The asset side provides liquidity
through regular maturities of investment securities and loans. Cash, securities
held for sale and loans held for sale are also a primary source of asset
liquidity. As of December 31, 1993, these categories totaled $8,314,000, or
10.81% of earning assets.
As of December 31, 1993, investment securities included $75,000 of gross
unrealized gains and $3,000 of gross unrealized losses on securities which
management intends to hold for the foreseeable future. Such amounts are not
expected to have a material effect on future earnings beyond the usual
amortization of premium or discount, because no significant sale of such
investment securities is currently foreseen.
In addition, as of December 31, 1993, the Bank had $5,981,000 of securities
held for sale which is comprised of a mortgage-backed mutual fund, U.S.
Government Agency, GNMA and FHLMC mortgage-backed obligations. These securities
had gross unrealized gains of $183,000 and $7,000 of gross unrealized losses at
December 31, 1993.
Liquidity management for the Bank is both a daily and long term function of
the Bank's management strategy. The Bank maintains a level of liquidity that is
adequate for operational purposes and to meet increases in loan demand. The
Bank's highly liquid investments primarily include securities issued by the
federal government and its agencies. These types of investments tend to have
lower yields than other types of investments, but generally involve a lower
degree of risk. Excess funds are generally invested in highly liquid debt or
equity securities or adjustable and fixed mortgage backed securities that meet
our interest rate risk strategies. In the event that the Bank should require
funds beyond its ability to generate them internally, additional sources of
funds are available through the use of FHLB advances and other financing
transactions. At December 31, 1993, the Bank had no outstanding FHLB advances.
The Bank anticipates that it will have sufficient funds available to meet
commitments to buy or fund loans. At December 31, 1993, the Bank had
approximately $2,625,000 in outstanding commitments to originate loans, all of
which are to be funded by internally generated funds. The Bank has sold mortgage
loans to the Federal Home Loan Mortgage Corporation under recourse agreements.
The outstanding principal balance on these loans as of December 31, 1993 was
$1,602,000. The Bank would be required to repurchase these loans in the event of
nonperformance by the borrower. The Bank does not anticipate a material impact
on liquidity and capital resources as a result of borrower nonperformance.
Under FIRREA, the capital requirements applicable to all savings
institutions, including the Bank, have been substantially increased. However,
the Bank is in full compliance with the fully phased-in capital requirements as
set forth in the following table.
<TABLE>
<CAPTION>
BANK'S CAPITAL LEVEL AT
OTS REQUIREMENT DECEMBER 31, 1993
---------------- -----------------------------
% OF % OF AMOUNT
CAPITAL STANDARD ASSETS AMOUNT ASSETS AMOUNT OF EXCESS
--------------------------------------- ------ ------ ------ ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Tangible capital....................... 1.50% $1,197 7.87% $6,282 $ 5,085
Core capital........................... 3.00 2,393 7.87 6,282 3,889
Risk-based capital..................... 8.00 2,844 18.25 6,489 3,645
</TABLE>
79
<PAGE> 86
On September 30, 1994, the Bank had a core capital requirement of
approximately $2,488,000 (3% of tangible assets) and actual core capital of
$5,670,000 (6.84% of tangible assets). This exceeded the requirement by
$3,182,000. The Bank's minimum tangible capital requirement is 1.5% of tangible
assets. At September 30, 1994 the Bank's tangible capital was approximately
$5,670,000 or 6.84% of tangible assets. This exceeded the tangible capital
requirement by $4,426,000. The Bank's risk-based capital requirement is 8% of
the value of risk weighted assets. At September 30, 1994 the Bank had a
risk-based capital requirement of approximately $3,053,000. The Bank's total at
this date was $5,878,000 (15.40% of risk weighted assets) which was $2,825,000
more than the requirement.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and notes thereto presented herein
have been prepared in accordance with GAAP, which requires the measurement of
financial position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increased cost of the
Bank's operations. Unlike most industrial companies, nearly all of the assets
and liabilities of the Bank are monetary in nature. As a result, interest rates
have a greater impact on the Bank's performance than do the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.
IMPACT OF NEW ACCOUNTING STANDARDS.
In May 1993, the FASB issued Statement No. 114, Accounting by Creditors for
Impairment of a Loan. This Statement addresses the accounting by creditors for
impairment of certain loans. It requires that impaired loans that are within the
scope of this Statement be measured based on the present value of expected cash
flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The Bank will be required to
adopt this Statement for fiscal years beginning after December 15, 1994. The
financial impact of implementing this Statement is not anticipated to have a
material effect on the consolidated financial statements of the Company.
In December 1991, the FASB issued a statement which will require the Bank,
for years ending after December 15, 1995, to disclose, in a footnote, the fair
value of certain financial instruments. The adoption of this Statement will have
no effect on the consolidated financial statements of the Company.
The Financial Accounting Standards Board has issued Statement No. 115,
Accounting for Certain Investments in Debt and Equity Securities, which
significantly changes the classification and accounting for all investment
securities that have a readily determinable fair value. Statement No. 115
requires that those investment securities be classified in three categories and
accounted for as follows: 1) Investment securities that the Bank has the
positive intent and ability to hold to maturity are classified as
Held-to-Maturity and are reported at amortized cost; 2) Investment securities
that are purchased and held for sale in the near term are classified as Trading
and reported at fair value, with unrealized gains and losses included in
earnings; and 3) Investment securities not classified as either Held-to-Maturity
or Trading are classified as Available-for-Sale and reported at fair value, with
unrealized gains and losses excluded from earnings and reported as a separate
component of stockholder's equity, net of applicable deferred taxes.
The Bank was required to adopt FASB 115 effective January 1, 1994. The
effect of the adoption was to classify $3,947,000 of investment securities as
held-to-maturity and $30,474,000 of investment securities as available for sale.
The investment securities classified as available for sale have a fair value of
$30,718,000 as of December 31, 1993 which results in an addition to equity of
$161,000, net of related deferred tax liabilities of $83,000. As of September
30, 1994 the Bank had an unrealized loss of $927,800 due to the mark-to-market
of the investment securities Available for Sale.
80
<PAGE> 87
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There have been no changes in or disagreements with First Moline's
accountants on accounting or financial disclosure.
OPINIONS
Certain legal matters in connection with the Merger will be passed upon for
First Moline by Vedder Price, 222 North LaSalle Street, Chicago, Illinois
60601-1003, and Churchill & Churchill, 1610 5th Avenue, Moline, Illinois 61265,
and for Firstar by Howard H. Hopwood III, Senior Vice President and General
Counsel of Firstar. Daniel Churchill, a partner in Churchill & Churchill, at
September 30, 1994 owned approximately 27,708 shares of FMFC Common Stock and
held 2,743 options to acquire FMFC Common Stock pursuant to the First Moline
Stock Option Plan. Mr. Hopwood is a full-time employee of Firstar and at
September 30, 1994, directly or beneficially owned approximately 20,048 shares
of Firstar Common Stock. He also holds 34,800 options to acquire Firstar Common
Stock under Firstar's 1988 Incentive Stock Plan.
EXPERTS
The consolidated financial statements of Firstar and subsidiaries as of
December 31, 1993 and 1992, and for each of the years in the three-year period
ended December 31, 1993, incorporated by reference herein and elsewhere in the
registration statement have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of First Moline and subsidiaries as
of December 31, 1993 and 1992, and for each of the years in the three-year
period ended December 31, 1993 included herein and elsewhere in the registration
statement have been included herein and in the registration statement in
reliance upon the report of McGladrey & Pullen LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
STOCKHOLDER PROPOSALS
If the Merger has not been consummated, pursuant to Rule 14a-8 under the
Exchange Act, First Moline stockholders may present proper proposals for
inclusion in First Moline's proxy statement for consideration at First Moline's
next annual meeting of its stockholders by submitting their proposals to First
Moline in a timely manner. As noted in First Moline's proxy statement relating
to the 1994 annual meeting of First Moline stockholders, in order to be so
included for the 1995 annual meeting stockholder proposals must have been
received by First Moline no later than December 31, 1994.
Pursuant to Rule 14a-8 under the Exchange Act, Firstar shareholders may
present proper proposals for inclusion in Firstar's proxy statement for
consideration at the next annual meeting of its shareholders by submitting their
proposals to Firstar in a timely manner. As noted in Firstar's proxy statement
relating to the 1994 annual meeting of Firstar shareholders, in order to be so
included for the 1995 annual meeting shareholder proposals must have been
received by Firstar no later than November 29, 1994.
81
<PAGE> 88
FIRSTAR CORPORATION
PRO FORMA COMBINING BALANCE SHEET
SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA
MOLINE COMBINED OTHER
FIRSTAR FINANCIAL FIRSTAR & PENDING
CORPORATION CORP. PRO FORMA FIRST ACQUISITIONS PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS(1) MOLINE PRO FORMA(2) COMBINED
----------- ----------- -------------- ----------- ------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks..... $ 945,890 $ 284 $ (2,457) $ 943,717 $ 129,439 $ 1,073,156
Short-term investments...... 362,833 404 0 363,237 13,315 376,552
Securities available for
sale...................... 5,502 28,521 0 34,023 250,523 284,546
Securities held to
maturity.................. 3,006,724 5,294 0 3,012,018 447,750 3,459,768
Total loans................. 9,520,174 46,054 0 9,566,228 2,284,536 11,850,764
Less reserve for loan
losses.................. (171,734) (208) 0 (171,942) (22,449) (194,391)
----------- ----------- -------------- ----------- ------------ -----------
Loans--net.................. 9,348,440 45,846 0 9,394,286 2,262,087 11,656,373
Bank premises and
equipment................. 273,988 992 0 274,980 54,131 329,111
Other assets................ 293,842 1,703 0 295,545 56,581 352,126
Deposit base intangible..... 18,092 0 0 18,092 0 18,092
Goodwill.................... 70,812 0 3,940 74,752 39,106 113,858
Mortgage servicing rights... 3,081 0 0 3,081 3,993 7,074
----------- ----------- -------------- ----------- ------------ -----------
Total assets............ $14,329,204 $83,044 $ 1,483 $14,413,731 $3,256,925 $17,670,656
============ =========== ============== ============ ============= ============
LIABILITIES AND EQUITY
Deposits.................... $10,647,946 $72,181 $ 0 $10,720,127 $2,515,452 $13,235,579
Short-term borrowed funds... 2,071,589 2,450 0 2,074,039 336,260 2,410,299
Long-term debt--secondary
capital................... 125,118 0 0 125,118 24,891 150,009
--other....... 150 1,687 0 1,837 122,646 124,483
Other liabilities........... 240,853 886 63 241,802 25,968 267,770
Minority interest........... 2,537 0 0 2,537 247 2,784
----------- ----------- -------------- ----------- ------------ -----------
Total liabilities....... 13,088,193 77,204 63 13,165,460 3,025,464 16,190,924
Preferred stock............. 0 19,713 19,713
Common stock................ 81,233 3 (3) 81,233 15,524 96,757
Capital surplus............. 150,729 2,134 (2,134) 150,729 61,780 212,509
Retained earnings........... 1,024,825 4,631 (3,703) 1,025,753 132,971 1,158,724
Net unrealized losses on
securities available for
sale...................... (928) 0 (928) (2,043) (2,971)
Treasury stock.............. (15,221) 0 7,260 (7,961) 4,551 (3,410)
Restricted stock............ (555) 0 0 (555) (1,035) (1,590)
----------- ----------- -------------- ----------- ------------ -----------
Total stockholders'
equity................ 1,241,011 5,840 (1,420) 1,248,271 231,461 1,479,732
----------- ----------- -------------- ----------- ------------ -----------
Total liabilities and
stockholders'
equity................ $14,329,204 $83,044 $ 1,483 $14,413,731 $3,256,905 $17,670,656
============ =========== ============== ============ ============= ============
</TABLE>
F-1
<PAGE> 89
FIRSTAR CORPORATION
PRO FORMA COMBINING STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA
MOLINE COMBINED OTHER
FIRSTAR FINANCIAL FIRSTAR & PENDING
CORPORATION CORP. PRO FORMA FIRST ACQUISITIONS PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS(1) MOLINE PRO FORMA(2) COMBINED
----------- ---------- -------------- ---------- ------------ ----------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
Interest revenue
Loans............................. $ 549,760 $2,535 $ 0 $ 552,295 $ 124,717 $ 677,012
Investment securities............. 121,091 1,503 0 122,594 24,352 146,946
Other............................. 6,969 44 (301) 6,712 1,737 8,449
----------- ---------- ------ ---------- ------------ ----------
Total interest revenue........ 677,820 4,082 (301) 681,601 150,806 832,407
Interest expense
Deposits.......................... 186,242 2,101 0 188,343 50,464 238,807
Short-term borrowed funds......... 41,832 121 0 41,953 9,815 51,768
Long-term debt.................... 9,640 38 0 9,678 4,891 14,569
----------- ---------- ------ ---------- ------------ ----------
Total interest expense........ 237,714 2,260 0 239,974 65,170 305,144
----------- ---------- ------ ---------- ------------ ----------
Net interest revenue................ 440,106 1,822 (301) 441,627 85,636 527,263
Provision for loan losses........... 8,274 21 0 8,295 2,067 10,362
----------- ---------- ------ ---------- ------------ ----------
Net interest revenue after
loan loss provision........ 431,832 1,801 (301) 433,332 83,569 516,901
Other operating revenue
Trust and investment management
fees............................ 88,928 0 88,928 2,115 91,043
Service charges on deposit
accounts........................ 54,716 123 0 54,839 7,853 62,692
Credit card service revenue....... 39,622 0 0 39,622 0 39,622
Mortgage banking.................. 12,090 44 0 12,134 7,539 19,673
Gains on the sales of
securities...................... 77 122 0 199 1,788 1,987
Other revenue..................... 54,179 56 0 54,235 12,989 67,224
----------- ---------- ------ ---------- ------------ ----------
Total other operating
revenue.................... 249,612 345 0 249,957 32,284 282,241
Other operating expense
Salaries and employee benefits.... 243,726 673 0 244,399 40,912 285,311
Net occupancy and equipment
expenses........................ 71,795 173 0 71,968 13,180 85,148
Other operating expense........... 139,144 830 197 140,171 28,432 168,603
----------- ---------- ------ ---------- ------------ ----------
Total other operating
expense.................... 454,665 1,676 197 456,538 82,524 539,062
----------- ---------- ------ ---------- ------------ ----------
Income before income taxes.......... 226,779 470 (498) 226,751 33,329 260,080
Applicable income taxes............. 75,183 153 (99) 75,237 12,521 87,758
----------- ---------- ------ ---------- ------------ ----------
Net income.......................... $ 151,596 $ 317 $ (399) $ 151,514 $ 20,808 $ 172,322
=========== ========= ============== ========== ============= ==========
Net income applicable to common..... $ 151,596 $ 317 $ (399) $ 151,514 $ 19,133 $ 170,647
Net income per common share......... $2.36 $2.36 $2.22
Average number of common shares
outstanding(3).................... 64,299,467 64,299,467 12,442,506 76,741,973
</TABLE>
F-2
<PAGE> 90
FIRSTAR CORPORATION
PRO FORMA COMBINING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA
MOLINE COMBINED OTHER
FIRSTAR FINANCIAL FIRSTAR & PENDING
CORPORATION CORP. PRO FORMA FIRST ACQUISITIONS PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS(1) MOLINE PRO FORMA(2) COMBINED
----------- ---------- -------------- ---------- ------------ ----------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
Interest revenue
Loans............................. $ 685,530 $3,689 $ 0 $ 689,219 $ 157,243 $ 846,462
Securities........................ 174,652 1,873 0 176,525 27,280 203,805
Other............................. 6,772 164 (304) 6,632 2,141 8,773
----------- ---------- ------ ---------- ------------ ----------
Total interest revenue........ 866,954 5,726 (304) 872,376 186,664 1,059,040
Interest expense
Deposits.......................... 261,634 2,932 0 264,566 65,306 329,872
Short-term borrowed funds......... 23,811 0 0 23,811 1,751 25,562
Long-term debt.................... 13,453 325 0 13,778 14,211 27,989
----------- ---------- ------ ---------- ------------ ----------
Total interest expense........ 298,898 3,257 0 302,155 81,268 383,423
----------- ---------- ------ ---------- ------------ ----------
Net interest revenue................ 568,056 2,469 (304) 570,221 105,396 675,617
Provision for loan losses........... 24,567 58 0 24,625 9,324 33,949
----------- ---------- ------ ---------- ------------ ----------
Net interest revenue after
loan loss provision........ 543,489 2,411 (304) 545,596 96,072 641,668
Other operating revenue
Trust and investment management
fees............................ 110,185 0 0 110,185 2,585 112,770
Service charges on deposit
accounts........................ 74,071 151 0 74,222 10,939 85,161
Credit card service revenue....... 53,316 0 0 53,316 0 53,316
Mortgage banking revenue.......... 26,774 149 0 26,923 15,655 42,578
Gains on the sales of
securities...................... 182 0 0 182 287 469
Other revenue..................... 77,737 110 0 77,847 14,360 92,207
----------- ---------- ------ ---------- ------------ ----------
Total other operating
revenue.................... 342,265 410 0 342,675 43,826 386,501
Other operating expense
Salaries and employee benefits.... 316,848 915 0 317,763 50,789 368,552
Net occupancy and equipment
expense......................... 96,870 216 0 97,086 16,625 113,711
Other operating expenses.......... 174,026 939 263 175,228 37,771 212,999
----------- ---------- ------ ---------- ------------ ----------
Total other operating
expense.................... 587,744 2,070 263 590,077 105,185 695,262
----------- ---------- ------ ---------- ------------ ----------
Income before income taxes.......... 298,010 751 (567) 298,194 34,713 332,907
Applicable income taxes............. 93,716 254 (94) 93,876 11,453 105,329
----------- ---------- ------ ---------- ------------ ----------
Net income.......................... $ 204,294 $ 497 $ (473) $ 204,318 $ 23,260 $ 227,578
=========== ========= ============== ========== ============= ==========
Net income applicable to common
stock............................. $ 201,028 $ 497 $ (473) $ 201,052 $ 20,520 $ 221,572
Net income per common share......... $3.15 $3.15 $2.92
Average number of common shares
outstanding(3).................... 63,746,924 63,746,924 12,198,355 75,945,279
</TABLE>
F-3
<PAGE> 91
FIRSTAR CORPORATION
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
(UNAUDITED)
(1) The acquisition of First Moline will be accounted for as a purchase. Based
upon the market price of Firstar Common Stock at September 30, 1994 Firstar
would have issued 313,712 shares of Firstar Common Stock in exchange for all
the outstanding shares of First Moline for a total purchase price of
$9,780,000. Firstar will repurchase Firstar Common Stock on the open market
equal to the shares issued to acquire First Moline. As of September 30,
1994, Firstar had repurchased 234,200 shares which are shown as being
reissued in the pro forma financial statements. The excess of the purchase
price over the net assets acquired of $3,940,000 is allocated to goodwill
for these statements. Net income has been reduced for the amortization of
the excess purchase price over a 15 year period and adjustments have been
made to interest income on short-term investments assumed to have been used
to fund the repurchase of shares issued in the transaction. Anticipated 1995
nonrecurring expenses associated with the transaction totaling $3 million,
or $1.8 million after tax are not included in the pro forma financial
statements.
(2) The acquisition of First Colonial Bankshares Corporation will be accounted
for as a pooling of interests. Firstar will issue 7,720,696 shares of
Firstar Common Stock in exchange for all the outstanding shares of First
Colonial Bankshares Corporation Common Stock based on the .7725 exchange
ratio. Firstar will also issue up to 39,700 shares of Firstar Preferred
Stock for all the outstanding First Colonial Bankshares Corporation Series C
Preference Stock.
The acquisition of First Southeast Banking Corp. was completed on October
18, 1994 and was accounted for as a pooling of interests. Firstar issued
1,801,577 shares of Firstar Common Stock, which included 139,508 shares of
reissued treasury stock, for all the outstanding shares of First Southeast
Banking Corp. based on the 16.91844 exchange ratio.
The acquisition of Investors Bank Corp. will be accounted for as a pooling
of interests. Firstar will issue 3,040,482 shares of Firstar Common Stock in
exchange for all the outstanding shares of Investors Bank Corp. based on the
.8676 exchange ratio. Investors Bank Corp. will redeem its preferred stock
at completion of the merger for a payment of $8,350,000 and is reflected in
the pro forma balance sheet.
Anticipated 1995 nonrecurring expenses associated with these transactions
totaling $33 million, or $20.2 million after tax, are not included in the
pro forma financial statements.
(3) Pro forma combined and average shares outstanding data reflects the exchange
ratio of .7725 shares of Firstar Common Stock for each share of First
Colonial Common Stock; the exchange ratio of 16.91844 shares of Firstar
Common Stock for each share of First Southeast Common Stock; and the
exchange ratio of .8676 shares of Firstar Common Stock for each share of
Investors Common Stock.
F-4
<PAGE> 92
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF
FIRST MOLINE FINANCIAL CORP.
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
AUDITED FINANCIAL STATEMENTS
Independent Auditor's Report.................................................... G-2
Consolidated Statements of Financial Condition as of December 31, 1993, 1992 and
1991.......................................................................... G-3
Consolidated Statements of Income for the Three Years ended December 31, 1993,
1992 and 1991................................................................. G-4
Consolidated Statements of Stockholders' Equity for the Three Years ended
December 31, 1993, 1992 and 1991.............................................. G-5
Consolidated Statements of Cash Flows for the Three Years ended December 31,
1993, 1992, and 1991.......................................................... G-6 - G-7
Notes to Consolidated Financial Statements for years ended December 31, 1993,
1992 and 1991................................................................. G-8 - G-24
UNAUDITED FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition as of September 30, 1994 and
December 31, 1993............................................................. G-25
Consolidated Statements of Income for the Three Months and Nine Months ended
September 30, 1994 and 1993................................................... G-26
Consolidated Statement of Stockholders' Equity for the Nine Months ended
September 30, 1994............................................................ G-27
Consolidated Statements of Cash Flows for the Nine Months ended September 30,
1994 and 1993................................................................. G-28 - G-29
Notes to Unaudited Consolidated Financial Statements............................ G-30
</TABLE>
G-1
<PAGE> 93
[MCGLADREY & PULLEN LOGO]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
First Moline Financial Corp.
Moline, Illinois
We have audited the accompanying consolidated statements of financial
condition of First Moline Financial Corp. and subsidiaries as of December 31,
1993, 1992 and 1991, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1993. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First Moline
Financial Corp. and subsidiaries as of December 31, 1993, 1992 and 1991, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993, in conformity with generally accepted
accounting principles.
[signature]
Moline, Illinois
February 11, 1994
G-2
<PAGE> 94
FIRST MOLINE FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents:
Noninterest-bearing................................. $ 318,000 $ 147,000 $ 440,000
Interest-bearing.................................... 924,000 493,000 2,202,000
----------- ----------- -----------
$ 1,242,000 $ 640,000 $ 2,642,000
Investment securities (approximate market value 1993
$4,084,000; 1992 $10,657,000; 1991 $5,539,000)...... 4,012,000 10,534,000 5,456,000
Mortgage-backed and related securities (approximate
market value 1993 $24,591,000; 1992 $15,397,000;
1991 $14,409,000)................................... 24,428,000 15,043,000 13,833,000
Securities held for sale (approximate market value
1993 $6,157,000; 1992 $7,235,000; 1991
$8,872,000)......................................... 5,981,000 7,144,000 8,709,000
Loans held for sale................................... 1,091,000 1,501,000 --
Loans receivable, net................................. 40,277,000 42,680,000 45,565,000
Accrued interest receivable........................... 434,000 531,000 612,000
Foreclosed real estate................................ 470,000 441,000 572,000
Premises and equipment, net........................... 1,030,000 1,031,000 1,068,000
Federal Home Loan Bank stock.......................... 556,000 549,000 527,000
Prepaid expenses and other assets..................... 184,000 224,000 227,000
Deferred income taxes................................. 103,000 111,000 97,000
----------- ----------- -----------
$79,808,000 $80,429,000 $79,308,000
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits............................................ $71,238,000 $68,039,000 $69,910,000
Borrowed funds...................................... -- 3,030,000 --
Collateralized mortgage obligation notes payable.... 1,303,000 2,364,000 4,115,000
Due to Broker for investment security purchases..... -- -- 1,007,000
Advance payments by borrowers for taxes and
insurance........................................ 202,000 233,000 254,000
Accrued interest payable............................ 83,000 118,000 204,000
Accrued expenses and other liabilities.............. 433,000 431,000 309,000
Income taxes payable................................ 71,000 249,000 21,000
----------- ----------- -----------
Total liabilities........................... $73,330,000 $74,464,000 $75,820,000
----------- ----------- -----------
COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01; authorized 500,000
shares; no shares issued or outstanding.......... $ -- $ -- $ --
Common stock, par value $.01; authorized 2,000,000
shares; issued and outstanding 1993 and 1992
282,550 shares; 1991 none........................ 3,000 3,000 --
Additional paid-in capital.......................... 2,134,000 2,134,000 --
Retained earnings, substantially restricted......... 4,407,000 3,910,000 3,488,000
Unearned stock grant compensation................... (66,000) (82,000) --
----------- ----------- -----------
Total stockholders' equity.................. $ 6,478,000 $ 5,965,000 $ 3,488,000
========== ========== ==========
$79,808,000 $80,429,000 $79,308,000
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
G-3
<PAGE> 95
FIRST MOLINE FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Interest on loans.................................. $3,689,000 $4,232,000 $4,608,000
Interest on mortgage-backed and related
securities...................................... 1,343,000 1,238,000 1,738,000
Interest on investment securities and securities
held for sale................................... 530,000 738,000 502,000
Other interest and dividend income................. 164,000 130,000 327,000
---------- ---------- ----------
Total interest income...................... $5,726,000 $6,338,000 $7,175,000
---------- ---------- ----------
Interest expense:
Interest on deposits............................... $2,932,000 $3,614,000 $4,878,000
Interest on borrowed funds and collateralized
mortgage obligation notes payable............... 325,000 459,000 570,000
---------- ---------- ----------
Total interest expense..................... $3,257,000 $4,073,000 $5,448,000
---------- ---------- ----------
Net interest income........................ $2,469,000 $2,265,000 $1,727,000
Provision for loan losses............................ 58,000 134,000 367,000
---------- ---------- ----------
Net interest income after provision for
loan losses.............................. $2,411,000 $2,131,000 $1,360,000
---------- ---------- ----------
Other income:
Service charges and commissions.................... $ 151,000 $ 172,000 $ 204,000
Gain on sale of loans held for sale................ 97,000 -- --
Gain on sale of investment securities,
mortgage-backed and related securities, and
securities held for sale, net................... 52,000 19,000 92,000
Gain on sale of trading securities................. -- -- 7,000
Foreclosed real estate income, net................. 95,000 108,000 69,000
Other.............................................. 15,000 72,000 32,000
---------- ---------- ----------
$ 410,000 $ 371,000 $ 404,000
---------- ---------- ----------
Other expenses:
Compensation and employee benefits................. $ 915,000 $ 818,000 $ 745,000
Occupancy.......................................... 216,000 195,000 210,000
Data processing.................................... 122,000 120,000 104,000
Federal insurance premiums......................... 164,000 178,000 186,000
Professional fees.................................. 218,000 156,000 133,000
Advertising........................................ 70,000 36,000 32,000
Real estate loan expense........................... 99,000 42,000 36,000
Other.............................................. 266,000 255,000 220,000
---------- ---------- ----------
$2,070,000 $1,800,000 $1,666,000
---------- ---------- ----------
Income before income taxes (credits)....... $ 751,000 $ 702,000 $ 98,000
Income tax expense (credits)......................... 254,000 280,000 (9,000)
---------- ---------- ----------
Net income................................. $ 497,000 $ 422,000 $ 107,000
========= ========= =========
Average number of common shares outstanding.......... 282,550 282,550 N/A
---------- ---------- ----------
Net income per share................................. $ 1.76 $ 1.49 N/A
---------- ---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
G-4
<PAGE> 96
FIRST MOLINE FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
RETAINED UNEARNED
ADDITIONAL EARNINGS STOCK
PAID-IN SUBSTANTIALLY GRANT
COMMON CAPITAL RESTRICTED COMPENSATION TOTAL
------ ---------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1990................ $ -- $ -- $ 3,381,000 $ -- $3,381,000
Net Income............................... -- -- 107,000 -- 107,000
------ ---------- ----------- -------- ----------
Balances, December 31, 1991................ $ -- $ -- $ 3,488,000 $ -- $3,488,000
Net Income............................... -- -- 422,000 -- 422,000
Proceeds from the issuance of 282,550
shares of common stock................. 3,000 2,134,000 -- -- 2,137,000
Unearned stock grant compensation -- -- -- (82,000) (82,000)
------ ---------- ----------- -------- ----------
Balances, December 31, 1992................ $3,000 $2,134,000 $ 3,910,000 $(82,000) $5,965,000
Net income............................... -- -- 497,000 -- 497,000
Earned stock grant compensation.......... -- -- -- 16,000 16,000
------ ---------- ----------- -------- ----------
Balances, December 31, 1993................ $3,000 $2,134,000 $ 4,407,000 $(66,000) $6,478,000
====== ========== =========== ======== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
G-5
<PAGE> 97
FIRST MOLINE FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................ $ 497,000 $ 422,000 $ 107,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................... 77,000 71,000 67,000
Provision for loan losses...................... 58,000 134,000 367,000
(Gain) on sale of investment securities,
mortgage-backed and related securities, and
securities held for sale, net................ (52,000) (19,000) (92,000)
(Gain) on sale of loans held for sale.......... (97,000) -- --
Loss on sale of premises and equipment......... -- -- 35,000
(Gain) on sale of foreclosed real estate....... (49,000) (65,000) --
Amortization of premiums and accretion of
discounts on investment and mortgage-backed
and related securities and securities held
for sale, net................................ 70,000 77,000 70,000
Proceeds from sale of loans held for sale...... 8,202,000 3,112,000 --
Loans originated for sale...................... (7,695,000) -- --
Stock dividends on Federal Home Loan Bank
stock........................................ (7,000) (22,000) --
Deferred income taxes.......................... 8,000 (14,000) (47,000)
Stock grant compensation....................... 16,000 -- --
Decrease in:
Trading securities........................... -- -- 5,000,000
Accrued interest receivable.................. 97,000 81,000 108,000
Prepaid expenses and other assets............ 40,000 3,000 78,000
Increase (decrease) in:
Accrued interest payable..................... (35,000) (86,000) (32,000)
Accrued expenses and other liabilities....... 2,000 122,000 208,000
Income taxes payable......................... (178,000) 228,000 21,000
------------ ------------ -----------
Net cash provided by operating
activities........................... $ 954,000 $ 4,044,000 $ 5,890,000
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investment securities....... $ -- $ -- $ 405,000
Proceeds from maturity and call of investment
securities..................................... 3,500,000 4,912,000 3,000,000
Purchase of investment securities................. (2,497,000) (10,057,000) (6,001,000)
Proceeds from sale of mortgage-backed and
related securities............................. -- 1,147,000 --
Principal repayments received on mortgage-backed
and related securities......................... 7,837,000 5,209,000 5,641,000
Purchase of mortgage-backed and related
securities..................................... (17,939,000) (8,024,000) (3,568,000)
Purchase of securities held for sale.............. (119,000) (9,712,000) --
Proceeds from sale of securities held for sale.... 7,500,000 10,737,000 --
(Loan originations) principal payments received on
loans, net..................................... 2,333,000 (1,738,000) 956,000
Purchase of premises and equipment................ (76,000) (34,000) (22,000)
Proceeds from sale of foreclosed real estate...... 32,000 72,000 157,000
Purchase Federal Home Loan Bank stock............. -- -- (85,000)
------------ ------------ -----------
Net cash provided by (used in)
investing activities................. $ 571,000 $ (7,488,000) $ 483,000
------------ ------------ -----------
</TABLE>
G-6
<PAGE> 98
FIRST MOLINE FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS -- CONTINUED
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits............... $ 3,199,000 $ (1,871,000) $(4,319,000)
Net increase (decrease) in borrowings with
original maturities less than three months:
Reverse repurchase agreements.................. (1,030,000) 1,030,000 --
Advances from the Federal Home Loan Bank....... (2,000,000) 2,000,000 --
Payments on collateralized mortgage obligation
notes payable.................................. (1,061,000) (1,751,000) (721,000)
Increase (decrease) on advance payments by
borrowers for taxes and insurance.............. (31,000) (21,000) 19,000
Proceeds from issuance of common stock, net of
unearned stock grant compensation.............. -- 2,055,000 --
------------ ------------ -----------
Net cash provided by (used in) financing
activities........................... $ (923,000) $ 1,442,000 $(5,021,000)
------------ ------------ -----------
Increase (decrease) in cash and cash
equivalents.......................... $ 602,000 $ (2,002,000) $ 1,352,000
Cash and cash equivalents, beginning................ 640,000 2,642,000 1,290,000
------------ ------------ -----------
Cash and cash equivalents, ending................... $ 1,242,000 $ 640,000 $ 2,642,000
=========== =========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION,
cash payments (refunds) for:
Interest....................................... $ 3,292,000 $ 4,159,000 $ 5,480,000
------------ ------------ -----------
Income taxes................................... $ 424,000 $ 66,000 $ (77,000)
------------ ------------ -----------
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING AND
INVESTING ACTIVITIES
Loans originated in connection with sales of
foreclosed real estate......................... $ 82,000 $ 124,000 $ 43,000
------------ ------------ -----------
Real estate acquired in settlement of loans....... $ 94,000 $ -- $ --
------------ ------------ -----------
Transfers of loans to loans held for sale......... $ -- $ 4,613,000 $ --
------------ ------------ -----------
Securities in transit............................. $ -- $ -- $ 1,007,000
------------ ------------ -----------
Transfers of investment securities to securities
held for sale.................................. $ 5,495,000 $ -- $ --
------------ ------------ -----------
Transfers of mortgage-backed securities to
securities held for sale....................... $ 1,249,000 $ -- $ --
------------ ------------ -----------
</TABLE>
See Notes to Consolidated Financial Statements.
G-7
<PAGE> 99
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS:
First Moline Financial Corp. is a Savings Bank Holding Company whose
subsidiaries provide retail financial services.
SIGNIFICANT ACCOUNTING POLICIES:
Principles of consolidation:
The consolidated financial statements include the accounts of First Moline
Financial Corp. (Company) and its wholly-owned subsidiary, First Federal Savings
Bank of Moline (Bank) and its wholly-owned subsidiaries, First Moline Real
Estate Corp. (formerly First Moline Financial Corporation) and FFM-CMO, Inc. All
significant intercompany balances and transactions have been eliminated in
consolidation. During the year ended December 31, 1992 the Bank converted from a
federally chartered mutual institution to a federally chartered stock savings
bank. The Bank issued all of its outstanding shares of stock to the holding
company formed in the conversion. The conversion was accounted for as a pooling
of interests.
Cash and cash equivalents:
For purposes of reporting cash flows, the Company considers all highly
liquid investments with an original maturity of three months or less to be cash
equivalents. Transactions related to deposits and loans are reported on a net
basis.
Investment securities, mortgage-backed and related securities and
securities held for sale:
Investment securities and mortgage-backed and related securities held for
investment are carried at cost adjusted for amortization of premiums and
accretion of discounts using the interest method. Equity securities are carried
at the lower of aggregate cost or estimated market value in aggregate.
Securities held for sale are carried at the lower of aggregate cost or market.
Realized gains and losses on the sale of investment securities, securities held
for sale and mortgage-backed and related securities are computed by the specific
identification method and are reported as gains on sale of investment
securities, securities held for sale and mortgage-backed and related securities.
Management has the ability and intends to hold investment securities for the
foreseeable future. In determining whether securities can be held until
maturity, management considers whether there are conditions, such as liquidity
or regulatory requirements, which would impair its ability to hold such
securities until maturity. At present, management is not aware of any such
conditions and, therefore, no provision for any excess of cost over market
values on investment securities or mortgage-backed and related securities has
been provided.
The Financial Accounting Standards Board has issued Statement No. 115,
Accounting for Certain Investments in Debt and Equity Securities, which
significantly changes the classification and accounting for all investment
securities that have a readily determinable fair value. Statement No. 115
requires that those investment securities be classified in three categories and
accounted for as follows: 1) Investment securities that the Bank has the
positive intent and ability to hold to maturity are classified as
Held-to-Maturity and are reported at amortized cost; 2) Investment securities
that are purchased and held for sale in the near term are classified as Trading
and reported at fair value, with unrealized gains and losses included in
earnings; and 3) Investment securities not classified as either Held-to-Maturity
or Trading are classified as Available-for-Sale and reported at fair value, with
unrealized gains and losses excluded from earnings and reported as a separate
component of stockholder's equity, net of applicable deferred taxes.
The Bank is required to adopt Statement 115 effective January 1, 1994. The
effect of the adoption will be to classify $3,947,000 of investment securities
as Held-to-Maturity and $30,474,000 of investment securities as Available for
Sale. The investment securities classified as Available for Sale have a fair
value of $30,718,000
G-8
<PAGE> 100
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
as of December 31, 1993 which results in an addition to equity of $161,000, net
of related deferred tax liabilities of $83,000.
Loans held for sale:
As part of its management of assets and liabilities, the Bank periodically
sells whole and/or participating interests in real estate loans. Loans which are
expected to be sold prior to maturity have been classified as held for sale in
the statement of financial condition and are carried at the lower of aggregate
cost or market value by category. Gains or losses on such sales are recognized
at the time of settlement. Loans sold are adjusted for any yield differential,
servicing fees, and servicing cost applicable to future years.
Loans receivable:
Loans receivable are stated at unpaid principal balances, less loans in
process, net deferred loan origination fees and discounts and allowances for
loan losses.
Loan origination and commitment fees and certain direct loan origination
costs are being deferred and the net amount is amortized over the lives of the
related loans using the interest method.
The allowance for loan losses is maintained at a level considered adequate
to provide for losses that can be reasonably anticipated. The allowance is
increased by provisions charged to expense and reduced by net charge-offs. The
Bank makes continuous credit reviews of the loan portfolio and considers current
economic conditions, historical loan loss experience and other factors in
determining the adequacy of the balance.
Uncollectible interest on loans that are 90 days past due is charged off,
or an allowance is established based on management's periodic evaluation. The
allowance is established by a charge to interest income equal to all interest
previously accrued, and income is subsequently recognized only to the extent
that cash payments are received until, in management's judgment, the borrower's
ability to make periodic interest and principal payments is no longer in doubt,
in which case the loan is returned to accrual status.
Foreclosed real estate:
Foreclosed real estate is initially recorded at the lower of cost (loan
value of foreclosed real estate plus incidental expenses) or estimated fair
value. Based on periodic evaluations by management, the carrying values are
reduced when they exceed the fair value. Costs relating to the development and
improvement of the property are capitalized, whereas those relating to holding
the property are expensed.
Premises and equipment:
Premises and equipment is stated at cost less accumulated depreciation
computed by the straight-line method over the estimated useful life of the
assets.
Federal Home Loan Bank stock:
Federal Home Loan Bank stock is carried at cost, which is equal to its
redemption value.
Deferred income taxes:
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets
G-9
<PAGE> 101
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
and liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment. Reference should also be made to Note 8 regarding a
change in the method of accounting for income taxes.
Deferred compensation contracts:
The Bank is accruing the cost of deferred compensation contracts with its
President over the estimated period of active employment.
Reclassifications:
Certain items in the 1992 and 1991 financial statements have been
reclassified, with no effect on net income or stockholders' equity, to be
consistent with the classifications adopted for 1993.
NOTE 2. INVESTMENT SECURITIES, MORTGAGE-BACKED AND RELATED SECURITIES AND
SECURITIES HELD FOR SALE
The amortized cost and approximate market value of investment securities as
of December 31, 1993, 1992 and 1991 are as follows:
<TABLE>
<CAPTION>
1993
------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and agency
obligations.................... $ 3,497,000 $ 5,000 $ (3,000) $ 3,499,000
Corporate debt securities........ 515,000 70,000 -- 585,000
----------- ---------- ---------- -----------
$ 4,012,000 $ 75,000 $ (3,000) $ 4,084,000
========== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
1992
------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and agency
obligations.................... $10,020,000 $ 91,000 $ (36,000) $10,075,000
Corporate debt securities........ 514,000 68,000 -- 582,000
----------- ---------- ---------- -----------
$10,534,000 $ 159,000 $ (36,000) $10,657,000
========== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
1991
------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and agency
obligations.................... $ 4,502,000 $ 29,000 $ -- $ 4,531,000
Corporate debt securities........ 954,000 75,000 (21,000) 1,008,000
----------- ---------- ---------- -----------
$ 5,456,000 $ 104,000 $ (21,000) $ 5,539,000
========== ======== ======== ==========
</TABLE>
G-10
<PAGE> 102
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The amortized cost and approximate market value of mortgage-backed and
related securities held for investment as of December 31, 1993, 1992 and 1991
are summarized as follows:
<TABLE>
<CAPTION>
1993
---------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
FNMA........................ $ 6,091,000 $ 26,000 $ (20,000) $ 6,097,000
FHLMC....................... 14,582,000 154,000 (69,000) 14,667,000
GNMA........................ 3,169,000 85,000 (14,000) 3,240,000
Other....................... 586,000 1,000 -- 587,000
----------- ---------- ---------- -----------
$24,428,000 $ 266,000 $ (103,000) $24,591,000
========== ======== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
1992
---------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
FNMA........................ $ 1,522,000 $ 12,000 $ -- $ 1,534,000
FHLMC....................... 8,840,000 158,000 (41,000) 8,957,000
GNMA........................ 4,681,000 270,000 (45,000) 4,906,000
----------- ---------- ---------- -----------
$15,043,000 $ 440,000 $ (86,000) $15,397,000
========== ======== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
1991
---------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
FNMA........................ $ 1,531,000 $ 37,000 $ -- $ 1,568,000
FHLMC....................... 7,432,000 204,000 (9,000) 7,627,000
GNMA........................ 4,870,000 344,000 -- 5,214,000
----------- ---------- ---------- -----------
$13,833,000 $ 585,000 $ (9,000) $14,409,000
========== ======== ========= ==========
</TABLE>
Mortgage-backed and related securities are composed of certificates
representing interests in pools of fixed and variable interest rate single
family mortgage loans originated for terms of 15 to 30 years. However, very few
of these loans remain outstanding for their entire term. Generally, scheduled
repayments gradually reduce the outstanding balance until the underlying
property is sold and the loan paid off.
The amortized cost and approximate market value of securities held for sale
as of December 31, 1993, 1992 and 1991 are summarized as follows:
<TABLE>
<CAPTION>
1993
------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. government agency
obligations.................... $ 1,000,000 $ 39,000 $ -- $ 1,039,000
Equity securities,
mortgage-backed mutual fund.... 2,332,000 -- (7,000) 2,325,000
FHLMC............................ 1,400,000 54,000 -- 1,454,000
GNMA............................. 1,249,000 90,000 -- 1,339,000
----------- ---------- ---------- -----------
$ 5,981,000 $ 183,000 $ (7,000) $ 6,157,000
========== ======== ======== ==========
</TABLE>
G-11
<PAGE> 103
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
1992
------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. government agency
obligations.................... $ 1,000,000 $ 47,000 $ -- $ 1,047,000
Equity securities,
mortgage-backed mutual fund.... 4,213,000 -- -- 4,213,000
FHLMC............................ 1,931,000 44,000 -- 1,975,000
----------- ---------- ---------- -----------
$ 7,144,000 $ 91,000 $ -- $ 7,235,000
========== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
1991
------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Equity securities,
mortgage-backed mutual funds... $ 4,021,000 $ -- $ -- $ 4,021,000
FNMA............................. 4,688,000 163,000 -- 4,851,000
----------- ---------- ---------- -----------
$ 8,709,000 $ 163,000 $ -- $ 8,872,000
========== ======== ======== ==========
</TABLE>
The amortized cost and approximate market value of securities held for
investment as of December 31, 1993, by contractual maturity, is shown below.
Expected maturities may differ from contractual maturities because the
mortgage-backed and related securities may be called or prepaid without any
penalties. Therefore, these securities are not included in the following
maturity summary.
<TABLE>
<CAPTION>
DECEMBER 31, 1993
--------------------------
APPROXIMATE
AMORTIZED MARKET
COST VALUE
----------- -----------
<S> <C> <C>
Due in one year or less............................................ $ 1,000,000 $ 1,004,000
Due after one year through five years.............................. 1,997,000 1,998,000
Due after five years through ten years............................. 500,000 498,000
Due after ten years................................................ 515,000 584,000
----------- -----------
$ 4,012,000 $ 4,084,000
Mortgage-backed and related securities............................. 24,428,000 24,591,000
----------- -----------
$28,440,000 $28,675,000
========== ==========
</TABLE>
Proceeds, gross gains and gross losses from sales and calls of investment
securities, mortgage-backed and related securities and securities held for sale
are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1992 1991
----------- ---------- --------
<S> <C> <C> <C>
Proceeds.................................................. $10,694,000 $7,796,000 $405,000
Gross gains............................................... 72,000 44,000 92,000
Gross losses.............................................. (20,000) (25,000) --
</TABLE>
G-12
<PAGE> 104
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 3. LOANS RECEIVABLE
Loans receivable as of December 31, 1993, 1992 and 1991 consist of the
following:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
First mortgage loans (principally conventional),
principal balances:
Secured by one-to-four family residences............ $27,563,000 $26,931,000 $28,811,000
Secured by other properties......................... 6,677,000 8,511,000 9,808,000
Construction loans.................................. 3,277,000 2,238,000 1,109,000
----------- ----------- -----------
$37,517,000 $37,680,000 $39,728,000
----------- ----------- -----------
Consumer and other loans, principal balances:
Consumer, primarily automobile...................... $ 3,171,000 $ 4,929,000 $ 5,002,000
Home equity......................................... 202,000 113,000 172,000
Credit card......................................... 1,075,000 1,277,000 1,222,000
Other............................................... 742,000 667,000 340,000
----------- ----------- -----------
$ 5,190,000 $ 6,986,000 $ 6,736,000
----------- ----------- -----------
Less:
Loans in process.................................... $(2,113,000) $(1,654,000) $ (380,000)
Deferred fees and discounts......................... (98,000) (98,000) (104,000)
----------- ----------- -----------
$(2,211,000) $(1,752,000) $ (484,000)
----------- ----------- -----------
Less allowance for loan losses........................ $ (219,000) $ (234,000) $ (415,000)
----------- ----------- -----------
$40,277,000 $42,680,000 $45,565,000
========== ========== ==========
</TABLE>
The Bank has both adjustable and fixed interest rate loans. As of December
31, 1993, adjustable interest rate loans aggregated $14,729,000 and fixed
interest rate loans aggregated $27,978,000.
Activity in the allowance for loan losses for the years ended December 31,
1993, 1992 and 1991 is summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- --------- ---------
<S> <C> <C> <C>
Balance, beginning of year.................................. $234,000 $ 415,000 $ 200,000
Provision charged to income............................... 58,000 134,000 367,000
Charge-offs............................................... (97,000) (350,000) (223,000)
Recoveries................................................ 24,000 35,000 71,000
-------- --------- ---------
Balance, end of year........................................ $219,000 $ 234,000 $ 415,000
======== ========= =========
</TABLE>
Mortgage loans serviced for others are not included in the accompanying
statements of consolidated financial condition. Servicing loans for others
generally consists of collecting mortgage payments, maintaining escrow accounts,
disbursing payments to investors and foreclosure processing. Loan servicing
income is recorded on the accrual basis and includes servicing fees from
investors and certain charges collected from
G-13
<PAGE> 105
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
borrowers, such as late payment fees. The unpaid principal balances and
borrowers' escrow balances as of December 31, 1993, 1992 and 1991 are summarized
as follows:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ---------- -----------
<S> <C> <C> <C>
Mortgage loan portfolios serviced for:
FHLMC.............................................. $10,676,000 $5,448,000 $ 8,288,000
Others............................................. 1,486,000 2,093,000 2,462,000
----------- ---------- -----------
$12,162,000 $7,541,000 $10,750,000
========== ========= ==========
Borrower's escrow balances on mortgage loans serviced
for others......................................... $ 125,000 $ 113,000 $ 154,000
========== ========= ==========
</TABLE>
The Bank offers loans to its executive officers, and directors for the
financing of their personal residences and other purposes. These loans were made
in the ordinary course of business and were made on the same terms prevailing at
the time as comparable transactions with other customers. During 1991, the Bank
adopted the policy of no longer offering loans to its executive officers.
Management does not believe these loans involve more than the normal risk of
collectibility or present other unfavorable features. The following is a
reconciliation of loans outstanding in excess of $60,000 for executive officers
and directors:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
Balance, beginning of period.............................. $ 914,000 $ 286,000 $318,000
New loans............................................... 195,000 792,000 --
Repayments.............................................. (246,000) (164,000) (32,000)
--------- --------- --------
Balance, end of period.................................... $ 863,000 $ 914,000 $286,000
========= ========= ========
</TABLE>
NOTE 4. ACCRUED INTEREST RECEIVABLE
Accrued interest receivable as of December 31, 1993, 1992 and 1991 is
summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Investment securities....................................... $ 70,000 $134,000 $147,000
Mortgage-backed and related securities and securities held
for sale.................................................. 151,000 134,000 165,000
Loans receivable............................................ 213,000 263,000 300,000
-------- -------- --------
$434,000 $531,000 $612,000
======== ======== ========
</TABLE>
NOTE 5. PREMISES AND EQUIPMENT
Premises and equipment as of December 31, 1993, 1992 and 1991 consists of
the following:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Land................................................... $ 406,000 $ 406,000 $ 406,000
Buildings.............................................. 1,203,000 1,189,000 1,179,000
Furniture and equipment................................ 473,000 411,000 384,000
---------- ---------- ----------
$2,082,000 $2,006,000 $1,969,000
Less accumulated depreciation.......................... 1,052,000 975,000 901,000
---------- ---------- ----------
$1,030,000 $1,031,000 $1,068,000
========= ========= =========
</TABLE>
G-14
<PAGE> 106
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 6. DEPOSITS
Deposits as of December 31, 1993, 1992 and 1991 are summarized as follows:
<TABLE>
<CAPTION>
1993
------------------------
AMOUNT PERCENT
----------- -------
<S> <C> <C>
NOW accounts........................................... $ 3,175,000 4.44%
Money market........................................... 6,136,000 8.59
Flex fund.............................................. 1,772,000 2.48
Passbook savings....................................... 8,959,000 12.54
----------- -------
$20,042,000 28.05%
----------- -------
Certificates of deposit:
Less than 4.00%...................................... $20,702,000 28.97%
4.00% to 5.99%....................................... 27,224,000 38.41
6.00% to 7.99%....................................... 2,998,000 4.19
8.00% to 9.99%....................................... 272,000 .38
----------- -------
$51,196,000 71.95%
----------- -------
$71,238,000 100.00%
========== ======
</TABLE>
<TABLE>
<CAPTION>
1992
------------------------
AMOUNT PERCENT
----------- -------
<S> <C> <C>
NOW accounts........................................... $ 3,567,000 5.23%
Money market........................................... 6,146,000 9.00
Flex fund.............................................. 2,026,000 2.97
Passbook savings....................................... 8,758,000 12.83
----------- -------
$20,497,000 30.03%
----------- -------
Certificates of deposit:
Less than 4.00%...................................... $10,292,000 15.08%
4.00% to 5.99%....................................... 24,912,000 36.82
6.00% to 7.99%....................................... 11,996,000 17.57
8.00% to 9.99%....................................... 342,000 .50
----------- -------
$47,542,000 69.97%
----------- -------
$68,039,000 100.00%
========== ======
</TABLE>
<TABLE>
<CAPTION>
1991
------------------------
AMOUNT PERCENT
----------- -------
<S> <C> <C>
NOW accounts........................................... $ 3,516,000 5.03%
Money market........................................... 6,323,000 9.04
Flex fund.............................................. 3,002,000 4.29
Passbook savings....................................... 7,907,000 11.32
----------- -------
$20,748,000 29.68%
----------- -------
Certificates of deposit:
Less than 4.00%...................................... $ -- .00%
4.00% to 5.99%....................................... 16,361,000 23.40
6.00% to 7.99%....................................... 32,417,000 46.37
8.00% to 9.99%....................................... 384,000 .55
----------- -------
$49,162,000 70.32%
----------- -------
$69,910,000 100.00%
========== ======
</TABLE>
G-15
<PAGE> 107
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The aggregate amount of certificates of deposit in denominations of
$100,000 or more was $6,494,000, $4,348,000 and $3,115,000 as of December 31,
1993, 1992 and 1991, respectively.
The following table shows rate and maturity information for the Bank's
certificates of deposit as of December 31, 1993:
<TABLE>
<CAPTION>
PERCENT
0.00-3.99% 4.00-5.99% 6.00-7.99% 8.00-9.99% TOTAL OF TOTAL
----------- ----------- ---------- ---------- ----------- --------
Certificate accounts maturing:
<S> <C> <C> <C> <C> <C> <C>
Quarter ending:
March 31, 1994......... $ 5,018,000 $ 1,996,000 $1,245,000 $ -- $ 8,259,000 16%
June 30, 1994.......... 6,988,000 769,000 654,000 -- 8,411,000 16
September 30, 1994..... 4,523,000 4,481,000 48,000 130,000 9,182,000 18
December 31, 1994...... 3,009,000 3,489,000 401,000 25,000 6,924,000 14
March 31, 1995......... 589,000 3,325,000 210,000 81,000 4,205,000 8
June 30, 1995.......... 575,000 2,410,000 142,000 -- 3,127,000 6
September 30, 1995..... -- 1,246,000 61,000 26,000 1,333,000 3
December 31, 1995...... -- 2,372,000 122,000 10,000 2,504,000 5
March 31, 1996......... -- 1,719,000 50,000 -- 1,769,000 3
Thereafter............. -- 5,417,000 65,000 -- 5,482,000 11
----------- ----------- ---------- ---------- ----------- ---
Total............. $20,702,000 $27,224,000 $2,998,000 $ 272,000 $51,196,000 100%
========== ========== ========= ======== ========== ======
Percent of
total.......... 40% 53% 6% 1% 100%
========== ========== ========= ======== ==========
</TABLE>
Interest expense on deposits consists of the following for the years ended
December 31, 1993, 1992 and 1991:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
NOW accounts............................... $ 51,000 $ 92,000 $ 128,000
Money market and flex fund accounts........ 251,000 336,000 491,000
Passbook savings........................... 253,000 288,000 382,000
Certificates of deposit.................... 2,377,000 2,898,000 3,877,000
---------- ---------- ----------
$2,932,000 $3,614,000 $4,878,000
========= ========= =========
</TABLE>
NOTE 7. BORROWED FUNDS AND COLLATERALIZED MORTGAGE OBLIGATION NOTES PAYABLE
Borrowed funds and collateralized mortgage obligation notes payable as of
December 31, 1993, 1992 and 1991 are summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Borrowing under reverse repurchase
agreements............................... $ -- $1,030,000 $ --
Advances from the Federal Home Loan Bank... -- 2,000,000 --
---------- ---------- ----------
$ -- $3,030,000 $ --
Collateralized mortgage obligation notes
payable.................................. 1,303,000 2,364,000 4,115,000
---------- ---------- ----------
$1,303,000 $5,394,000 $4,115,000
========= ========= =========
</TABLE>
Mortgage-backed securities with a carrying value of $1,910,000 as of
December 31, 1993 are pledged as collateral on the collateralized mortgage
obligation notes payable. The notes payable have stated interest rates
G-16
<PAGE> 108
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
ranging from 7.90% to 9.35%. The obligations were originally sold at a discount
resulting in effective interest rates ranging from 11.15% to 11.88%. The notes
payable, net of related discounts, mature as follows:
<TABLE>
<S> <C>
During the year ending December 31:
1994............................................................ $ 528,000
1995............................................................ 387,000
1996............................................................ 349,000
1997............................................................ 39,000
----------
$1,303,000
=========
</TABLE>
Interest expense on borrowed funds and collateralized mortgage obligation
notes payable for the years ended December 31, 1993, 1992 and 1991 is summarized
as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Fixed-coupon dollar reverse repurchase and other repurchase
agreements................................................ $ -- $ 3,000 $ --
Advances from the FHLB...................................... 31,000 1,000 --
Collateralized mortgage obligation notes payable............ 294,000 455,000 570,000
-------- -------- --------
$325,000 $459,000 $570,000
======== ======== ========
</TABLE>
NOTE 8. ACCOUNTING CHANGE AND INCOME TAX MATTERS
The Company and its subsidiaries file consolidated federal income tax
returns. Under the existing provisions of the Internal Revenue Code and similar
sections of the Illinois income tax law, the Bank is allowed a special bad debt
deduction based on a percentage of taxable income (presently 8%) or on specified
experience formulas. The Bank used the percentage of taxable income method in
1993 and the specified experience formula in 1992 and 1991.
The availability of the bad-debt deduction has resulted in the creation,
for tax purposes, of sizable bad-debt reserves, to which losses can be charged
when realized. As a result, there is a possibility that part of the Bank's
retained earnings effectively have not been taxed. If the reserve included in
retained earnings is used for any purpose other than to absorb losses, the
amount must first be reduced for taxes not previously paid. This effectively
results in a restriction on retained earnings. Retained earnings as of December
31, 1993 include approximately $1,900,000 for which no provision for income
taxes has been made.
Effective January 1, 1993, the Company adopted FASB Statement No. 109,
Accounting for Income Taxes. The adoption of Statement 109 changes the Bank's
method of accounting for income taxes from the deferred method to a liability
method. Under the deferred method, the Bank deferred the past tax effects of
timing differences between financial reporting and taxable income. As explained
in Note 1, the liability method requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of temporary
differences between the reported amounts of assets and liabilities and their tax
bases. The cumulative effect of adopting this Statement as of the beginning of
1993 is not material to the consolidated financial statements.
G-17
<PAGE> 109
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The components of income tax expense for the years ended December 31, 1993,
1992, and 1991 are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Current..................................................... $246,000 $294,000 $ 38,000
Deferred.................................................... 8,000 (14,000) (47,000)
-------- -------- --------
$254,000 $280,000 $ (9,000)
======== ======== ========
</TABLE>
A reconciliation of the expected federal income tax expense to the income
tax expense (credits) included in the statements of income for the years ended
December 31, 1993, 1992 and 1991 is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------------- ------------------- -------------------
PRE-TAX PRE-TAX PRE-TAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Expected provision.................... $263,000 35.0% $239,000 34.0% $ 21,000 21.4%
Effects of lower tax rates............ (8,000) (1.0) -- -- -- --
Tax exempt interest................... (4,000) (.5) (6,000) (.8) (6,000) (6.1)
Alternative minimum tax (credits)..... -- -- -- -- (4,000) (4.1)
Provision for loan losses............. -- -- 9,000 1.3 17,000 17.3
Over (under) accrual of provision,
net................................. 3,000 .3 38,000 5.4 (37,000) (37.7)
-------- ------- -------- ------- -------- -------
$254,000 33.8% $280,000 39.9% $ (9,000) (9.2)%
======== ====== ======== ====== ======== ======
</TABLE>
The net deferred income taxes on the consolidated balance sheet as of
December 31, 1993 includes the following:
<TABLE>
<S> <C>
Deferred tax assets:............................................... $ 76,000
Deferred directors fees.......................................... 49,000
Deferred loan fees............................................... 25,000
Deferred compensation............................................ 19,000
Accrued pension cost............................................. 14,000
--------
Other............................................................ $183,000
--------
Deferred tax liabilities:
Federal Home Loan Bank
Stock dividends.................................................. $ 10,000
--------
Premises and equipment........................................... 70,000
--------
$ 80,000
Net deferred income taxes................................... $103,000
========
</TABLE>
NOTE 9. EMPLOYEE BENEFITS
The Bank has a defined benefit pension plan covering substantially all of
its employees. The benefits are based on years of service and the compensation
of the employees. The Bank's funding policy is to annually contribute an amount
necessary to fund the plan as determined by an actuary. Contributions are
intended to provide not only for benefits attributed to service to date but also
for those expected to be earned in the future.
G-18
<PAGE> 110
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table sets forth the plan's funded status and amounts
recognized in the accompanying balance sheets as of December 31, 1993, 1992, and
1991 respectively:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Actuarial present value of accumulated benefit obligation,
including vested benefits of $387,000, $358,000 and
$285,000, respectively.................................... $416,000 $390,000 $309,000
======== ======== ========
Projected benefit obligation................................ $630,000 $586,000 $473,000
Plan assets at fair value................................... 538,000 559,000 493,000
-------- -------- --------
Plan assets in excess of (less than) projected benefit
obligation................................................ $(92,000) $(27,000) $ 20,000
Unrecognized net loss....................................... 102,000 68,000 43,000
Deferred transition asset................................... (66,000) (73,000) (79,000)
-------- -------- --------
(Accrued) pension cost.................................... $(56,000) $(32,000) $(16,000)
======== ======== ========
</TABLE>
The actuarial assumptions used in determining the actuarial present value
of benefit obligations as of December 31, 1993, 1992 and 1991 are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Discount rate............................................... 5.75% 6.50% 6.75%
Long-term rate of return.................................... 7.75 7.75 7.75
Annual salary increase...................................... 5.33 6.00 6.00
</TABLE>
The net pension expense for the years ended December 31, 1993, 1992 and
1991 included the following components:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Service cost................................................ $ 35,000 $ 29,000 $ 24,000
Interest cost on projected benefit obligation............... 38,000 32,000 28,000
Actual return on plan assets................................ (41,000) (65,000) (67,000)
Net amortization and deferral............................... (8,000) 20,000 24,000
-------- -------- --------
$ 24,000 $ 16,000 $ 9,000
======== ======== ========
</TABLE>
The Bank also has a profit-sharing plan for those employees who meet the
eligibility requirements set forth in the plan. The amount of the contribution
to the plan is at the discretion of the Board of Directors. The Bank contributed
$35,000, $22,000 and $13,000 to the plan for the years ended December 31, 1993,
1992 and 1991, respectively.
The Company established a Recognition and Retention Plan and Trust (RRP),
for designated participants during the year ended December 31, 1992. Under the
terms of the RRP, awards can be granted to directors and key officers in the
form of shares of common stock held by the RRP. The awards will vest at a rate
of 20% per year, ninety days after the end of the calendar year and subject to
continued service and performance criteria. As of December 31, 1993, unearned
stock grant compensation totaled $66,000.
In addition to the RRP, the Company established a Stock Option Plan (SOP),
for designated participants. Under the terms of the SOP, a participant may be
awarded an option to purchase shares of restricted stock. Such award may be
subject to terms and conditions as determined by the Committee appointed by the
Board of Directors of the Company responsible for administering the plan. The
SOP provides for up to 27,432 shares of common stock to be issued to
participants. Options with respect to 21,944 shares were granted during the year
ended December 31, 1992 at an option price of $10.00 per share. The option price
of any options granted may not be less than the market value of the common stock
on the date of the grant. There were no additional grants of options during the
year ended December 31, 1993.
G-19
<PAGE> 111
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 10. FINANCIAL INSTITUTIONS REFORM, RECOVERY AND ENFORCEMENT ACT (FIRREA) OF
1989 AND FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT
(FDICIA) OF 1991
FIRREA was signed into law on August 9, 1989; regulations for savings
institutions' minimum capital requirements went into effect on December 7, 1989.
In addition to the capital requirements, FIRREA includes provisions for changes
in the federal regulatory structure for institutions, including a new deposit
insurance system, increased deposit insurance premiums, and restricted
investment activities with respect to noninvestment-grade corporate debt and
certain other investments. FIRREA also increases the required ratio of
housing-related assets needed to qualify as a savings institution. The
regulations require institutions to have, as of December 31, 1993, minimum
regulatory tangible capital equal to 1.50% of total assets, a 3.00% core capital
ratio, and an 8.00% risk-based capital ratio. As of December 31, 1993, the Bank
exceeded all three of the aforementioned capital requirements.
The following is a reconciliation of the Bank's GAAP capital to regulatory
capital as of December 31, 1993:
<TABLE>
<CAPTION>
GAAP TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL CAPITAL
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
GAAP capital............................... $6,395,000 $ 6,395,000 $ 6,395,000 $ 6,395,000
=========
Nonallowable assets:
Deferred income taxes...................... (103,000) (103,000) (103,000)
Equity investments......................... (10,000) (10,000) (10,000)
Additional capital items:
General valuation allowances-limited..... -- -- 207,000
----------- ----------- -----------
Regulatory capital--computed............... $ 6,282,000 $ 6,282,000 $ 6,489,000
Minimum capital requirement................ (1,197,000) (2,393,000) (2,844,000)
----------- ----------- -----------
Regulatory capital--excess................. $ 5,085,000 $ 3,889,000 $ 3,645,000
========== ========== ==========
</TABLE>
FDICIA, which was signed by the President on December 19, 1991, will result
in extensive changes to the federal banking laws. The primary purpose of the law
is to authorize additional borrowings by the FDIC in order to provide funds for
the resolution of failing financial institutions. FDICIA institutes certain
changes to the supervisory process and contains various provisions that may
affect the operations of depository institutions like First Federal Savings Bank
of Moline.
Effective January 1, 1994, the Office of Thrift Supervision (OTS) adopted a
final rule that adds interest rate risk to the risk-based capital requirement
for thrift institutions. Those institutions with a greater than normal interest
rate exposure must take a deduction from the total capital available to meet
their risk-based capital requirement. That deduction is equal to one-half of the
difference between the institution's actual measured exposure and the normal
level of exposure. The institution's actual measured interest rate risk is
expressed as the change that occurs in its net portfolio value (NPV) as a result
of a hypothetical 200 basis point increase or decrease in interest rates
(whichever leads to a lower NPV) divided by the estimated economic value of its
assets. An above normal decline in NPV is one that exceeds two percent of an
institution's assets expressed in terms of economic value. The OTS, through the
use of its computer model, will calculate changes in each institution's NPV
based on financial data the institution submits in its Thrift Financial Report.
The OTS will then advise each institution of its interest rate risk capital
requirement.
NOTE 11. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend
G-20
<PAGE> 112
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
credit and unused lines of credit on credit cards. Those instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the statements of financial position.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
credit card lines of credit is represented by the contractual amounts of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments.
Financial instruments whose contractual amounts represent credit risk are
as follows as of December 31, 1993, 1992 and 1991:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Commitments to extend credit............................. $2,625,000 $ 565,000 $ 499,000
Credit card and other unused lines-of-credit............. 3,772,000 3,534,000 3,033,000
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based upon
management's credit evaluation of the counter-party. Collateral primarily
consists of real estate mortgages.
Credit card and other unused lines-of-credit are issued primarily to
support consumer purchases. The credit risk involved in issuing credit card
extension is essentially that of an unsecured loan.
In addition to loan commitments the Bank has undisbursed loan funds of
$2,113,000, $1,654,000 and $380,000 as of December 31, 1993, 1992 and 1991,
respectively.
The Bank has sold real estate mortgage loans to the Federal Home Loan
Mortgage Corporation under recourse agreements. The outstanding principal
balances on these loans as of December 31, 1993, 1992 and 1991 were $1,602,000,
$2,721,000 and $4,485,000, respectively. None of these loans were sold during
the periods identified above. These agreements would require that the Bank
repurchase the loans from the Federal Home Loan Mortgage Corporation in the
event the Bank does not comply with all the terms and conditions of the original
sales agreement or in the event of nonperformance by the borrower.
NOTE 12. CONCENTRATION OF CREDIT RISK
The Bank grants primarily residential and consumer loans to customers
throughout the Bank's market area, which is primarily the Quad Cities area.
Although the Bank has a diversified loan portfolio, a substantial portion of its
debtors' ability to honor their contracts is dependent upon the agribusiness and
industrial economic sectors. The Bank's policy for requiring collateral is
consistent with prudent lending practice and anticipates the potential for
economic fluctuations. Collateral varies but consists mostly of real estate and
personal property. It is the Bank's policy to file financing statements and
mortgages covering collateral pledged.
NOTE 13. RESTRICTIONS ON STOCKHOLDERS' EQUITY
At the time of conversion from a mutual to a stock savings bank, the Bank
established a liquidation account in an amounted equal to the retained earnings
of First Federal as of the latest practicable date prior to conversion, which
amounted to approximately $3,610,000 as of December 31, 1992. The liquidation
account was established to provide a limited priority claim to the assets of the
Bank to qualifying depositors ("eligible account holders") as of September 30,
1991 who continue to maintain deposits in the Bank after conversion. In the
unlikely event of a complete liquidation of the Bank, and only in such event,
each eligible account holder would receive from the liquidation account a
liquidation distribution based on their proportionate share of the then
remaining qualifying deposits.
G-21
<PAGE> 113
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Current regulations allow the Bank to pay dividends on its stock if its
regulatory capital would not thereby be reduced below the amount then required
for the aforementioned liquidation account. Also capital distribution
regulations limit the Bank's ability to make capital distributions which include
dividends, stock redemptions, and repurchases, cash-out mergers, interest
payments on certain convertible debt and other transactions charged to the
capital account based on their capital level and supervisory condition. Federal
regulations also preclude any repurchase of the stock of the Company for three
years after conversion except for purchases of qualifying shares of a director
and repurchases pursuant to an offer made on a pro rata basis to all
stockholders and with prior approval of the Office of Thrift Supervision or
pursuant to an open-market stock repurchase program with certain regulatory
criteria.
The Bank is a tier two institution. Tier two institutions are institutions
that before and after the proposed distribution meet or exceed their current
minimum capital requirements, may make capital distributions up to a specified
percentage of their net income for the most recent four quarter period. Tier two
institutions that meet the risk-based capital requirement in effect on January
1, 1993 are permitted to make distributions not exceeding 75% of net income over
such four quarter period. Tier two institutions that meet their current
risk-based capital requirements are permitted to make distributions not
exceeding 50% of net income over the most recent four quarter period.
NOTE 14. PROPOSED FASB STATEMENTS AND REGULATIONS
In May 1993, the FASB issued Statement No. 114, Accounting by Creditors for
Impairment of a Loan. This Statement addresses the accounting by creditors for
impairment of certain loans. It requires that impaired loans that are within the
scope of this Statement be measured based on the present value of expected cash
flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The Bank will be required to
adopt this Statement for fiscal years beginning after December 15, 1994. The
financial impact of implementing this Statement is not anticipated to have a
material effect on the consolidated financial statements of the Company.
In December 1991, the FASB issued a Statement which will require the Bank,
for years ending after December 15, 1995, to disclose, in a footnote, the fair
value of certain financial instruments. The adoption of this Statement will have
no effect on the consolidated financial statements of the Company.
NOTE 15. PARENT ONLY CONDENSED FINANCIAL INFORMATION
Following is condensed financial information of First Moline Financial
Corp. (parent company only) as of December 31, 1993 and 1992 and for the year
ended December 31, 1993. The Company having been formed in late 1992 had no
significant results of operations during 1992.
G-22
<PAGE> 114
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
ASSETS
Cash................................................................. $ 38,000 $ 50,000
Investment in First Federal Savings Bank of Moline................... 6,395,000 5,915,000
Income tax refund receivable......................................... 52,000 --
---------- ----------
$6,485,000 $5,965,000
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities.......................................................... $ 7,000 $ --
---------- ----------
Stockholders' equity:
Common stock....................................................... $ 3,000 $ 3,000
Additional paid-in capital......................................... 2,134,000 2,134,000
Retained earnings.................................................. 4,407,000 3,910,000
Unearned stock grant compensation.................................. (66,000) (82,000)
---------- ----------
Total stockholders' equity.................................... $6,478,000 $5,965,000
---------- ----------
$6,485,000 $5,965,000
========= =========
</TABLE>
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
Operating income, interest....................................................... $ 1,000
---------
Operating expenses:
Professional fees.............................................................. $ 155,000
Stock grant compensation....................................................... 16,000
Other.......................................................................... 20,000
---------
$ 191,000
---------
(Loss) before equity in undistributed earnings of First Federal Savings Bank
of Moline and income tax (credits)......................................... $(190,000)
---------
Equity in undistributed earnings of First Federal Savings Bank of Moline......... $ 635,000
---------
Income before income tax (credits).......................................... $ 445,000
Income tax (credits)............................................................. (52,000)
---------
Net income.................................................................. $ 497,000
=========
</TABLE>
G-23
<PAGE> 115
FIRST MOLINE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................................... $ 497,000
Adjustments to reconcile net income to net cash (used in) operating activities:
Equity in undistributed net income of subsidiary, net of dividends.......... (480,000)
Stock grant compensation.................................................... 16,000
(Increase) in other assets.................................................. (52,000)
Increase in other liabilities............................................... 7,000
---------
Net cash (used in) operating activities................................... $ (12,000)
---------
Net (decrease) in cash.................................................... $ (12,000)
Cash, beginning of year.......................................................... 50,000
---------
Cash, end of year................................................................ $ 38,000
=========
</TABLE>
G-24
<PAGE> 116
FIRST MOLINE FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Noninterest-bearing........................................... $ 284,000 $ 318,000
Interest-bearing.............................................. 404,000 924,000
Investment and mortgage backed securities held to maturity....... 4,882,000 28,440,000
Investment and mortgage backed securities available for sale..... 28,521,000 5,981,000
Loans held for sale.............................................. -- 1,091,000
Loans receivable, net............................................ 45,846,000 40,277,000
Foreclosed real estate........................................... 376,000 470,000
Premises and equipment, net...................................... 992,000 1,030,000
Federal Home Loan Bank stock..................................... 412,000 556,000
Accrued interest receivable...................................... 494,000 434,000
Prepaid expenses and other assets................................ 253,000 184,000
Deferred income taxes............................................ 580,000 103,000
------------- ------------
Total Assets............................................. $ 83,044,000 $ 79,808,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits......................................................... $ 72,181,000 $ 71,238,000
FHLB advances.................................................... 3,450,000 --
CMO notes payable................................................ 687,000 1,303,000
Advance payments by borrowers.................................... 139,000 202,000
Accrued interest payable......................................... 105,000 83,000
Accrued expenses and other liabilities........................... 530,000 433,000
Income taxes payable............................................. 112,000 71,000
------------- ------------
Total Liabilities........................................ $ 77,204,000 $ 73,330,000
============ ============
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01; authorized 500,000 shares;
no shares issued or outstanding............................... $ -- $ --
Common stock 2,000,000 shares authorized, 282,550 issued and
outstanding; $.01 par value................................... 3,000 3,000
Additional paid-in capital....................................... 2,134,000 2,134,000
Retained earnings................................................ 4,697,000 4,407,000
Unrealized loss on securities available for sale................. (928,000) --
Unearned stock grant compensation................................ (66,000) (66,000)
------------- ------------
Total Stockholders' Equity............................... 5,840,000 6,475,000
------------- ------------
Total Liabilities and Stockholders Equity................ $ 83,044,000 $ 79,808,000
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
G-25
<PAGE> 117
FIRST MOLINE FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income:
Loans................................................ $ 868,000 $ 913,000 $2,535,000 $ 2,832,00
Interest on securities held to maturity.............. 82,000 443,000 236,000 1,297,000
Interest on securities available for sale............ 432,000 48,000 1,267,000 151,000
Other interest and dividends......................... 8,000 23,000 44,000 66,000
---------- ---------- ---------- ----------
Total Interest Income.............................. $1,390,000 $1,427,000 $4,082,000 $4,346,000
Interest Expense:
Deposits............................................. $ 724,000 $ 729,000 $2,101,000 $2,218,000
Other................................................ 59,000 74,000 159,000 262,000
---------- ---------- ---------- ----------
Total Interest Expenses.......................... $ 783,000 $ 803,000 $2,260,000 $2,480,000
---------- ---------- ---------- ----------
Net Interest Income........................... $ 607,000 $ 624,000 $1,822,000 $1,866,000
Provision for loan losses.............................. (19,000) 11,000 21,000 48,000
---------- ---------- ---------- ----------
Net Interest Income After Provision for Loan
Losses........................................... $ 626,000 $ 613,000 $1,801,000 $1,818,000
Other Income:
Service charges and commissions...................... $ 44,000 $ 38,000 $ 123,000 $ 115,000
Gain on sale of mortgage loans....................... 0 36,000 122,000 30,000
Foreclosed real estate income, net................... 0 39,000 44,000 74,000
Other................................................ 18,000 34,000 48,000 74,000
2,000 3,000 8,000 13,000
---------- ---------- ---------- ----------
Total Other Income................................. $ 64,000 $ 150,000 $ 345,000 $ 306,000
---------- ---------- ---------- ----------
Other expenses:
Compensation and employee benefits................... $ 225,000 $ 219,000 $ 673,000 $ 646,000
Occupancy............................................ 55,000 52,000 173,000 153,000
Data processing...................................... 33,000 28,000 99,000 91,000
Federal deposit insurance premiums................... 48,000 37,000 143,000 118,000
Professional fees.................................... 189,000 57,000 292,000 162,000
Other................................................ 96,000 107,000 296,000 307,000
---------- ---------- ---------- ----------
Total Other Expenses............................... $ 646,000 $ 500,000 $1,676,000 $1,477,000
---------- ---------- ---------- ----------
Income before Income Taxes....................... $ 44,000 $ 263,000 $ 470,000 $ 647,000
Income taxes........................................... 15,000 84,000 153,000 232,000
---------- ---------- ---------- ----------
Net Income....................................... $ 29,000 $ 179,000 $ 317,000 $ 415,000
---------- ---------- ---------- ----------
Earnings Per Share..................................... $0.10 $0.63 $1.12 $1.47
</TABLE>
See Notes to Consolidated Financial Statements.
G-26
<PAGE> 118
FIRST MOLINE FINANCIAL CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
UNREALIZED
RETAINED LOSS ON UNEARNED
ADDITIONAL EARNINGS SECURITIES STOCK
COMMON PAID-IN SUBSTANTIALLY AVAILABLE GRANT
STOCK CAPITAL RESTRICTED FOR SALE COMPENSATION TOTAL
------ ---------- ------------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993...................... $3,000 $2,134,000 $ 4,407,000 $ -- $(66,000) $6,478,000
Net Income.................. -- -- 317,000 -- -- 317,000
Cash Dividends Paid
($.10 per share).......... -- -- (27,000) -- -- (27,000)
Unrealized Loss on
Securities Available For
Sale...................... -- -- (928,000) -- (928,000)
------ ---------- ------------- --------- ------------ ----------
Balance, September 30,
1994...................... $3,000 $2,134,000 $ 4,697,000 $(928,000) $(66,000) $5,840,000
====== ========= ========= ========= ========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
G-27
<PAGE> 119
FIRST MOLINE FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1994 1993
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................................... $ 317,000 $ 415,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation................................................. 56,000 54,000
Amortization of stock grant compensation..................... -- 16,000
Provision possible loan losses............................... 21,000 48,000
(Gain) on sale of mortgage loans............................. (44,000) (74,000)
(Gain) on sale of securities available for sale.............. (122,000) (30,000)
(Gain) on sale of foreclosed real estate..................... -- (41,000)
Amortization of premiums and accretion of discounts on
securities, net............................................. 29,000 56,000
Interest added to securities available for sale.............. (77,000) (100,000)
Stock dividends on Federal Home Loan Bank stock.............. -- (7,000)
Deferred income taxes........................................ -- (21,000)
(Increase) decrease in:
Accrued interest receivable................................ 60,000 89,000
Prepaid expenses and other assets.......................... 69,000 (32,000)
Increase (decrease) in:
Accrued interest payable................................... 22,000 (4,000)
Accrued expenses and other liabilities..................... 97,000 8,000
Income taxes payable....................................... 41,000 (171,000)
----------- ------------
Net cash provided by operating activities............. $ 469,000 $ 206,000
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investment securities and securities
available for sale........................................... $ 1,000,000 $ 6,993,000
Proceeds from maturity of investment securities................. -- 2,000,000
Purchase of investment securities............................... (4,000,000) (500,000)
Proceeds from sale of mortgage-backed securities................ 1,875,000 1,068,000
Principal repayments received on mortgage-backed securities and
securities available for sale................................ 5,250,000 3,620,000
Purchase of mortgage-backed securities.......................... (4,342,000) (15,462,000)
Proceeds from sale of loans..................................... 4,056,000 4,995,000
Loan originations, net.......................................... (8,675,000) (434,000)
Purchase of premises and equipment.............................. (18,000) (56,000)
Proceeds from sale of foreclosed real estate.................... -- 41,000
Proceeds from redemption of Federal Home Loan Bank stock........ 144,000 --
----------- ------------
Net cash provided by (used in) investing activities........ $(4,710,000) $ 2,265,000
----------- ------------
</TABLE>
G-28
<PAGE> 120
FIRST MOLINE FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS -- CONTINUED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1994 1993
---------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits.......................................... $ 943,000 $ 2,983,000
Net increase (decrease) in borrowings:
Reverse repurchase agreements less than three months........... -- (1,030,000)
Advances from the FHLB......................................... 3,450,000 (2,000,000)
Payments on collateralized mortgage obligation notes payable...... (616,000) (764,000)
Cash dividends paid............................................... (27,000) --
(Decrease) on advance payments by borrowers....................... (63,000) (117,000)
---------- -----------
Net cash provided by (used in) financing activities.......... $3,687,000 $ (928,000)
---------- -----------
Increase (decrease) in cash and cash equivalents............. $ (554,000) $ 1,543,000
Cash and cash equivalents, beginning................................ 1,242,000 640,000
---------- -----------
Cash and cash equivalents, ending................................... $ 688,000 $ 2,183,000
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION, cash paid during
the period for:
Interest....................................................... $2,238,000 $ 2,484,000
---------- -----------
Income taxes................................................... $ 100,000 $ 424,000
---------- -----------
SUPPLEMENTAL DISCLOSURE ON NONCASH OPERATING AND INVESTING
ACTIVITIES
Loans originated in connection with sales of foreclosed real
estate......................................................... $ 50,000 $ 95,000
---------- -----------
Net change in unrealized (loss) on securities available for
sale........................................................... $ (928,000) $ --
---------- -----------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
G-29
<PAGE> 121
FIRST MOLINE FINANCIAL CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with Regulation S-B, and therefore, do not include
information or footnotes necessary for fair presentation of financial position,
results of operations and changes in financial condition in conformity with
generally accepted accounting principles for complete financial statements.
However, all adjustments which are, in the opinion of management, necessary for
a fair presentation have been included. The results of operations for the nine
month period ended September 30, 1994, are not necessarily indicative of the
results which may be expected for the entire fiscal year.
NOTE 2. PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated condensed financial statements include the
accounts of First Moline Financial Corp. (the "Holding Company") and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
G-30
<PAGE> 122
APPENDIX A
SECTION 262 OF THE
DELAWARE GENERAL CORPORATION LAW
SECTION 262. Appraisal Rights. (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock which, at
the record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a national
securities exchange or designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc. or (ii) held of record by more than 2,000 stockholders; and
further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger
did not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of Section 251 of this
title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to Section
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation;
b. Shares of stock of any other corporation which at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000
stockholders;
c. Cash in lieu of fractional shares of the corporations described
in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock and cash in lieu of
fractional shares described in the foregoing subparagraphs a., b. and c.
of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
A-1
<PAGE> 123
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or 253 of this title, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by
A-2
<PAGE> 124
publication shall be approved by the Court, and the costs thereof shall be borne
by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and in the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
A-3
<PAGE> 125
APPENDIX B
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
FIRSTAR CORPORATION,
FIRSTAR CORPORATION OF IOWA
AND
FIRST MOLINE FINANCIAL CORP.
<PAGE> 126
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
ARTICLE I
Undertakings of the Parties
1.1 The Merger.................................................................. B-1
1.2 Articles Amendments; Approval of the Agreements............................. B-1
1.3 Preparation of Registration Statement....................................... B-1
1.4 Issuance of Firstar Common Stock............................................ B-2
1.5 Preparation of Bank Regulatory Applications................................. B-2
1.6 Closing..................................................................... B-3
1.7 Confidential Information.................................................... B-3
1.8 No Covenant as to Tax Consequences.......................................... B-3
1.9 Release of Information...................................................... B-3
1.10 Employment Agreement and Other Transitional Matters......................... B-3
1.11 Board of Directors; Officers and Employees.................................. B-4
1.12 Dissenters' Rights.......................................................... B-4
ARTICLE II
Representations and Warranties of Firstar
2.1 Corporate Organization...................................................... B-4
2.2 Capitalization.............................................................. B-4
2.3 Authorization............................................................... B-4
2.4 No Violation................................................................ B-5
2.5 Financial Statements........................................................ B-5
2.6 Registration Statement...................................................... B-5
2.7 Shares to be Issued......................................................... B-6
2.8 Accuracy of Information..................................................... B-6
2.9 No Material Adverse Change.................................................. B-6
2.10 Matters Concerning Regulatory Approvals..................................... B-6
2.11 Litigation.................................................................. B-6
2.12 Reports..................................................................... B-6
2.13 Employee and Employee Benefit Matters....................................... B-6
ARTICLE III
Representations and Warranties of FCI
3.1 Corporate Organization...................................................... B-7
3.2 Capitalization.............................................................. B-7
3.3 Authorization............................................................... B-7
3.4 No Violation................................................................ B-8
3.5 Accuracy of Information..................................................... B-8
ARTICLE IV
Representations and Warranties of First Moline
4.1 Corporate Organization...................................................... B-8
4.2 Capitalization.............................................................. B-8
4.3 Organization of the Subsidiaries............................................ B-9
4.4 Capitalization of the Subsidiaries.......................................... B-9
4.5 Authorization............................................................... B-9
4.6 No Violation................................................................ B-10
4.7 Financial Statements........................................................ B-10
4.8 Absence of Certain Changes.................................................. B-10
4.9 Employee and Employee Benefit Matters....................................... B-11
4.10 Litigation.................................................................. B-12
4.11 Tax Matters................................................................. B-12
4.12 Registration Statement...................................................... B-13
</TABLE>
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<TABLE>
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<S> <C> <C>
4.13 Title and Condition......................................................... B-13
4.14 Insurance................................................................... B-14
4.15 Compliance with Laws and Orders............................................. B-14
4.16 Governmental Regulation..................................................... B-15
4.17 Contracts and Commitments................................................... B-15
4.18 Shareholders and Undertakings from Affiliates............................... B-15
4.19 Matters Relating to Directors, Officers and Shareholders.................... B-15
4.20 Absence of Adverse Agreements............................................... B-16
4.21 Accuracy of Information..................................................... B-16
4.22 Allowance for Loan Losses................................................... B-16
4.23 No Undisclosed Liabilities.................................................. B-16
4.24 Pooling and Tax-Free Status Matters......................................... B-16
4.25 Reports..................................................................... B-16
4.26 Opinion of Financial Advisor................................................ B-16
ARTICLE V
Conduct of Business by Firstar
5.1 Approval by Firstar......................................................... B-17
5.2 Subsequent SEC Filings...................................................... B-17
5.3 Conduct of Business; Certain Covenants...................................... B-17
5.4 Employee Benefits........................................................... B-17
5.5 Access to Information....................................................... B-18
5.6 First Moline Pension Plan................................................... B-18
5.7 Indemnification............................................................. B-18
5.8 No Adverse Action........................................................... B-18
ARTICLE VI
Conduct of Business by First Moline Until Merger
6.1 Dividends................................................................... B-19
6.2 Capitalization.............................................................. B-19
6.3 Ordinary Course of Business................................................. B-19
6.4 Contact with Third Parties; No Board Recommendation......................... B-20
6.5 Corporate Structure......................................................... B-20
6.6 Accounting and Tax Reporting................................................ B-20
6.7 Full Disclosure............................................................. B-20
6.8 Reports to Firstar.......................................................... B-20
6.9 Solicitation of First Moline Shareholders................................... B-20
6.10 Supplement to First Moline Letter........................................... B-21
6.11 Employee Benefit Plans...................................................... B-21
6.12 Bank-Level Transactions..................................................... B-21
6.13 Classification of Certain Assets............................................ B-21
6.14 Allowance for Loan Losses................................................... B-21
6.15 Termination of Data Processing Agreement.................................... B-21
6.16 Environmental Audits........................................................ B-21
6.17 Recapture of Tax Bad Debt Reserve........................................... B-21
ARTICLE VII
Conditions to Obligations of Firstar and FCI
7.1 No Material Adverse Change.................................................. B-22
7.2 Representations and Warranties.............................................. B-22
7.3 Performance and Compliance.................................................. B-22
7.4 No Proceeding or Litigation................................................. B-22
7.5 Review or Audit by Firstar and Accountants.................................. B-22
7.6 Audit of Plans.............................................................. B-22
7.7 Pooling Letter.............................................................. B-22
</TABLE>
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<TABLE>
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<S> <C> <C>
7.8 Opinion of Counsel for First Moline......................................... B-23
7.9 Certificate of Chief Executive Officer...................................... B-23
7.10 Corporate Certificates...................................................... B-23
7.11 Bills for Certain Fees of First Moline or the Bank.......................... B-23
7.12 Tax Opinion................................................................. B-23
7.13 Termination of Pension Plan................................................. B-23
7.14 Charter Conversion.......................................................... B-23
ARTICLE VIII
Conditions to the Obligations of First Moline
8.1 No Material Adverse Change.................................................. B-23
8.2 Representations and Warranties.............................................. B-23
8.3 Performance and Compliance.................................................. B-24
8.4 No Proceeding or Litigation................................................. B-24
8.5 Opinion of Counsel for Firstar and FCI...................................... B-24
8.6 Certificate of Executive Officer............................................ B-24
8.7 Tax Opinion................................................................. B-24
8.8 Listing..................................................................... B-24
8.9 Opinion of Financial Advisor................................................ B-24
ARTICLE IX
Conditions to the Obligations of all Parties
9.1 Governmental Approvals...................................................... B-24
9.2 Securities Law Compliance................................................... B-24
9.3 Shareholder Approval........................................................ B-25
ARTICLE X
Inducement
10.1 Inducement.................................................................. B-25
ARTICLE XI
Termination
11.1 Reasons for Termination..................................................... B-26
11.2 Liability................................................................... B-27
ARTICLE XII
Miscellaneous
12.1 Brokers..................................................................... B-27
12.2 Expenses.................................................................... B-27
12.3 Waivers; Amendments......................................................... B-28
12.4 Assignment.................................................................. B-28
12.5 Entire Agreement............................................................ B-28
12.6 Captions and Counterparts................................................... B-28
12.7 Governing Law............................................................... B-28
12.8 Nonsurvival................................................................. B-28
12.9 Knowledge of the Parties.................................................... B-28
12.10 Notices..................................................................... B-28
</TABLE>
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization dated as of August 25, 1994 (the
"Reorganization Agreement"), is entered into by and among Firstar Corporation, a
Wisconsin corporation ("Firstar"), First Moline Financial Corp., a Delaware
corporation ("First Moline"), and Firstar Corporation of Iowa, an Iowa
corporation and a wholly-owned subsidiary of Firstar ("FCI").
WHEREAS, this Reorganization Agreement provides for the merger of First
Moline with and into FCI (the "Merger") and for the conversion at the Closing
Date, as such term is defined herein, of all the outstanding shares of common
stock of First Moline, $.01 par value ("First Moline Common Stock"), into the
right to receive shares of common stock of Firstar, $1.25 par value ("Firstar
Common Stock"), in accordance with the terms and conditions hereof and of the
Plan of Merger and Agreement of Merger (the "Plan of Merger") executed
concurrently herewith between FCI and First Moline, and joined in by Firstar for
certain limited purposes (the "Plan of Merger" and together with this
Reorganization Agreement, the "Agreements");
WHEREAS, the respective Boards of Directors of First Moline, Firstar and
FCI deem the Merger desirable and in the best interests of their respective
shareholders;
WHEREAS, the parties hereto desire and intend that the Merger qualify as a
tax-free reorganization under the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, the parties hereto desire and intend that the Merger be accounted
for as a "pooling of interests" in accordance with generally accepted accounting
principles;
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations, warranties, and agreements herein contained, and in order to
set forth the conditions upon which the foregoing reorganization will be carried
out, the parties agree as follows:
ARTICLE I
UNDERTAKINGS OF THE PARTIES
1.1 The Merger. Subject to the terms and conditions of this Reorganization
Agreement, on the Closing Date, First Moline will merge with and into FCI, which
will be the surviving corporation.
1.2 Articles Amendments; Approval of the Agreements. (a) The Agreements and
the proposed amendments to the Certificate of Incorporation of First Moline, in
the form of Exhibit 1.2 hereto, or an alternate form of amendments to First
Moline's Certificate of Incorporation to permit the Merger and the other
transactions contemplated by the Agreements (the "Certificate Amendments") will
be submitted as soon as reasonably practicable to the shareholders of First
Moline for ratification, confirmation and adoption at a meeting to be duly
called and held in accordance with law and the Certificate of Incorporation and
Bylaws of First Moline. The Agreements have been submitted to Firstar, as the
sole shareholder of FCI, for ratification, confirmation and adoption by consent
in accordance with law and the Articles of Incorporation and Bylaws of Firstar
and FCI, respectively, and have been so ratified, confirmed and adopted by
Firstar.
(b) Prior to Closing (as defined below), First Moline will amend its
Certificate of Incorporation as set forth in the Certificate Amendments.
1.3 Preparation of Registration Statement. Firstar will use its best
efforts to file, within 45 days after the date hereof, and subsequently
prosecute the filing of a registration statement and amendments thereto
(hereinafter the registration statement and amendments thereto are referred to
as the "Registration Statement") with the Securities and Exchange Commission
(the "SEC") covering the Firstar Common Stock to be issued in the Merger with a
view toward permitting the Registration Statement to become effective as soon as
reasonably practicable. First Moline, its directors, officers, agents and
representatives shall use their best efforts in providing to Firstar the
information referred to in the next sentence. First Moline will furnish to
Firstar all information concerning First Moline required to be set forth in the
Registration Statement and Firstar will furnish to First Moline such information
concerning Firstar as is reasonably
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required by First Moline in connection with the preparation of proxy
solicitation materials for use in soliciting proxies in connection with the
meeting of First Moline's stockholders called for the purpose of voting on the
Merger. Firstar will provide First Moline and its counsel the opportunity to
review and approve the Proxy Statement portions of the Registration Statement.
Firstar shall promptly advise First Moline and its counsel, and provide them
with copies, of all filings with the SEC regarding the Registration Statement
and any material communication received by Firstar or its counsel from the SEC
with respect to the Registration Statement. Firstar will bear the cost of
preparation, filing and duplication of the Registration Statement, including the
information or proxy statement and the prospectus included therein (the "Proxy
Statement-Prospectus"). The date on which the Registration Statement becomes
effective is referred to herein as the "Registration Effective Date". Firstar
and First Moline will each render to the other its full cooperation in
preparing, filing, prosecuting the filing of, and amending the Registration
Statement such that it comports at all times with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Specifically, but
without limitation, each will promptly advise the other if at any time before
the Closing Date any information provided by it for inclusion in the
Registration Statement appears to have been, or shall have become, incorrect or
incomplete and will furnish the information necessary to correct such
misstatements or omissions. As promptly as practicable after the Registration
Effective Date, First Moline will mail or deliver to its shareholders (i) the
Proxy Statement-Prospectus and (ii) as promptly as practicable after approval
thereof by Firstar, such other supplementary proxy materials as may be necessary
to make the Proxy Statement-Prospectus comply with the requirements of the
Securities Act. Except as provided above and except with the prior written
consent of Firstar, First Moline will not mail or otherwise furnish or publish
to its shareholders any proxy solicitation material or other material relating
to the Merger that might constitute a "prospectus" within the meaning of the
Securities Act. Firstar shall, as soon as practicable, make all filings required
to obtain any Blue Sky permits, authorizations, consents or approvals required
for the issuance of the Firstar Common Stock to be issued in the Merger. In the
event of the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceeding for that
purpose, Firstar will make every reasonable effort to prevent the issuance of
any stop order and, if any stop order is issued, to obtain the lifting of such
order at the earliest possible moment.
1.4 Issuance of Firstar Common Stock. Upon the occurrence of the Closing
(as that term is defined below), Firstar shall issue or make available such
shares of Firstar Common Stock as are necessary to complete the transactions
contemplated in the Agreements. If, during the period beginning on the date
hereof and ending upon the consummation of the Merger, the outstanding shares of
Firstar Common Stock shall have been changed into a different number of shares
or a different class by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares, readjustment, stock dividend or
similar transaction, or a distribution shall be made on the Firstar Common Stock
in any security convertible into Firstar Common Stock, or a declaration of, or a
record date for, such a change or distribution shall occur within that period,
then appropriate adjustment or adjustments will be made in the conversion rate
set forth in sec. 8 of the Plan of Merger and to the price protection mechanism
in sec. 11.1(c)(iv) of this Agreement. Firstar shall give prompt written notice
to First Moline of any event requiring such an adjustment.
1.5 Preparation of Bank Regulatory Applications. Firstar, FCI and First
Moline will cooperate in the preparation by Firstar and FCI of applications, and
Firstar and FCI will use their best efforts to submit for filing, within 45 days
after the date hereof, applications to (i) the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") pursuant to the Bank Holding
Company Act of 1956, as amended (the "BHCA"), for approval of Firstar's and
FCI's acquisition of control of First Moline and its subsidiary, First Federal
Savings Bank of Moline ("Bank"), (ii) the Illinois Commissioner of Banks and
Trust Companies (the "Illinois Commissioner") pursuant to the Illinois Banking
Holding Company Act of 1957, as amended, (the "Illinois BHCA") for approval of
the transactions contemplated in the Agreements, (iii) to the Office of Thrift
Supervision of the Department of the Treasury (the "OTS"), (iv) to the Office of
the Comptroller of the Currency (the "OCC") regarding the matters discussed in
Sections 6.12 and 7.14 hereof and (v) any other federal or state bank or thrift
regulatory agency the approval of which may be necessary or appropriate. Firstar
will provide First Moline and its counsel with an opportunity to review the
parts of the drafts of all such applications that contain information about
First Moline. Firstar will provide First Moline and its counsel with copies of
all the non-confidential portions of such applications as filed, together with
the
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non-confidential portions of related correspondence to or from the regulatory
authorities. Firstar will use its best efforts to obtain such regulatory
approvals. The obligation to use such best efforts shall not be construed as
including an obligation to continue pursuing any approval after it has become
apparent that the approval is likely to contain material terms or conditions
that are not reasonably acceptable to Firstar. First Moline will furnish such
information, appropriate representations and documents as may be necessary in
connection therewith and as the parties may mutually agree. First Moline, its
directors, officers, agents and representatives shall use their best efforts in
providing the information and performing the reviews described in this Section
1.5.
1.6 Closing. Subject to the terms and conditions herein set forth, the
closing of the transactions contemplated by this Reorganization Agreement
("Closing") will be effected as soon as practicable following the satisfaction
or waiver of the last of the conditions set forth in Articles VII, VIII and IX
hereof and the expiration of any waiting periods in connection with necessary
regulatory approvals, or on such other date as may be mutually agreed upon by
the parties, but in no event shall the Closing take place more than ten business
days after receipt of all required regulatory approvals and the expiration of
any waiting periods in connection with such regulatory approvals ("Closing
Date"). Each of the parties hereto agrees to pursue with reasonable diligence
the satisfaction of such conditions. It is anticipated that the Closing will
take place on the Closing Date at the offices of Firstar, or at such other place
as shall be mutually agreeable to Firstar and First Moline.
1.7 Confidential Information. All information that has been or will be
furnished by any party to another party in connection with the Agreements that
is regarded by such furnishing party as confidential (and is so designated at
the time of delivery or the date of this Agreement, whichever is later) will be
kept confidential by such other party and will be used only in connection with
the Agreements and the transactions contemplated thereby, except to the extent
that (i) such information is or thereafter becomes lawfully obtainable from
other public sources; (ii) is already known to such other party when received;
or (iii) disclosure is required by a law, regulation or order of a court or
regulatory agency of competent jurisdiction or authority. In the event the
Agreements are terminated as provided in Article XI hereof, all documents or
materials provided by either party shall be either destroyed or returned
promptly to the supplying party, the receiving party shall not retain any copies
thereof and shall destroy any notes which have been prepared from such documents
or materials. The parties agree that the terms and conditions of this Section
shall supersede any previously executed and delivered confidentiality agreements
between the parties. The term "party" in this Section 1.7 shall include all
officers, directors, employees, agents, advisors or representatives.
1.8 No Covenant as to Tax Consequences. It is understood and agreed that
Firstar, FCI and First Moline and all of their respective officers or agents
have not made any warranty or agreement, expressed or implied, as to the tax
consequences of the transactions contemplated by the Agreements or the tax
consequences of any action pursuant to or growing out of the Agreements;
provided, however, that neither Firstar, FCI nor First Moline shall willfully
take any action to prevent, or omit to take any action necessary for, the
qualification of the Merger as a tax-free reorganization under the Code.
Following the Closing, Firstar shall make such filings with the Internal Revenue
Service as are required by the regulations promulgated under sec. 368 of the
Code.
1.9 Release of Information. Neither Firstar nor First Moline shall, nor
shall either of them permit its directors, officers, employees or agents to,
issue or cause the publication of any initial formal announcement with respect
to the Agreements or the Merger without the prior consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that such
consent shall not be required where such release, announcement or disclosure is
required by applicable law or the rules or regulations of a securities exchange,
other self-regulatory authority or governmental agency. First Moline and Firstar
will each use their best efforts to cooperate in coordinating the public release
of information concerning the transactions contemplated by the Agreements.
1.10 Employment Agreement and Other Transitional Matters. Firstar shall,
and shall cause its subsidiaries to, keep in full force and effect those certain
Employment Agreements, dated as of September 30, 1993, by
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and between First Moline and Byrd Krumbholz ("Krumbholz") and by and between the
Bank and Krumbholz, as discussed more fully in that certain transitional matters
letter (the "Transitional Matters Letter") between Firstar and First Moline of
even date herewith.
1.11 Board of Directors; Officers and Employees. Except as disclosed in
writing to First Moline prior to the Closing Date hereof, the directors,
officers and employees of the Bank immediately prior to the Closing Date shall
be directors, officers and employees of the Bank, or any of its subsequent
successors or assigns, immediately following the Closing Date.
1.12 Dissenters' Rights. Holders of First Moline Common Stock who do not
vote their shares in favor of the Merger and otherwise perfect applicable
dissenters' rights will be entitled to dissenters' or appraisal rights pursuant
to applicable provisions of the Delaware General Corporation Law. Firstar shall
have the opportunity to participate in any discussions or negotiations arising
out of this Section.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FIRSTAR
Firstar represents and warrants to First Moline as follows:
2.1 Corporate Organization. Firstar is a corporation duly organized,
validly existing and in active status under the laws of the state of Wisconsin
with full power and authority to engage in the activities and business now
conducted by it. Firstar possesses and is in compliance in all material respects
with all licenses, franchise, permits and other governmental authorizations that
are legally required except where the lack of any such license, franchise,
permit or authorization or the failure to be in such compliance would not
reasonably be expected to have a material adverse effect on the financial
condition, assets or business operations of Firstar and its subsidiaries, taken
as a whole. Firstar is registered and is in good standing with the Federal
Reserve Board as a bank holding company under the Bank Holding Company Act of
1956, as amended. Firstar has delivered to First Moline true, accurate and
complete copies of the currently effective Articles of Incorporation and Bylaws
of Firstar, including all amendments thereto. Neither Firstar nor any of its
subsidiaries is subject to any formal or informal agreement or understanding
with, nor are any of them subject to, any order of any bank regulatory authority
restricting or prohibiting or attempting to restrict or prohibit any activities
or conduct of Firstar or any of its subsidiaries.
2.2 Capitalization. As of March 31, 1994, the authorized capital stock of
Firstar consisted of (i) 120,000,000 shares of Common Stock, $1.25 par value,
64,318,011 shares of which were validly issued and outstanding, and (ii)
2,500,000 shares of Preferred Stock, $1.00 par value, of which 600,000 shares of
Series C are reserved for issuance in connection with Firstar's Shareholder
Rights Plan approved January 19, 1989 (as used herein, the term "Firstar Common
Stock" includes one half of a Preferred Stock Purchase Right issued pursuant to
the Rights Agreement dated as of January 29, 1989, between Firstar and Firstar
Trust Company, as Rights Agent). All of such issued and outstanding shares of
capital stock are fully paid and nonassessable, except as provided in Section
180.0622(2)(b) of the Wisconsin Statutes and judicial interpretations thereof.
None of the issued and outstanding shares of Firstar Common Stock has been
issued in violation of any preemptive rights. Except as contemplated in the
Agreements or as set forth in the most recent report of Firstar filed with the
SEC on Form 10-K, or as required in any publicly announced acquisition
transaction or in the ordinary course of business in connection with Firstar's
currently existing stock option plans, there are, as of the date of the
Agreements, no outstanding warrants, options, rights, calls or other commitments
of any nature relating to the authorized but unissued shares of Firstar Common
Stock or concerning the authorization, issuance or sale of any other class of
equity or debt securities of Firstar or any of its subsidiaries.
2.3 Authorization. The Interstate Banking and Acquisitions Committee of the
Board of Directors of Firstar has approved the transactions contemplated by the
Agreements and has authorized the execution, delivery and performance by Firstar
of the Agreements and which such Committee has full power and authority to
approve and authorize such matters, except the issuance of the securities
contemplated in this Reorganization Agreement, on Firstar's behalf; the Board of
Directors of Firstar has ratified, adopted and approved the Committee's actions
and has authorized the issuance of the securities contemplated hereunder.
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Firstar has full corporate power and authority to enter into the Agreements and
to consummate the transactions contemplated thereby. The Agreements are valid
and binding obligations of Firstar, enforceable in accordance with their terms,
subject to (i) all applicable bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally, and (ii)
the application of equitable principles if equitable remedies are sought.
Firstar has, as sole shareholder of FCI, approved the Agreements in accordance
with law and the Articles of Incorporation and Bylaws of Firstar and FCI,
respectively.
2.4 No Violation. Provided that the requisite approvals from the Federal
Reserve Board, the OTS, the OCC, Illinois Commissioner and any other regulatory
agencies are obtained and the offering of Firstar Common Stock to be issued
hereunder is duly registered pursuant to the Securities Act, and, to the extent
applicable, under state securities or blue sky laws, neither the execution and
delivery of the Agreements nor the consummation of the transactions contemplated
therein will conflict with, result in the breach of, constitute a default under
or accelerate the performance provided by the terms of any law, or any rule or
regulation of any governmental agency or authority, or any judgment, order or
decree of any court or other governmental agency to which Firstar may be
subject, or any contract, agreement or instrument to which Firstar is a party or
by which Firstar is bound or committed, or the Articles of Incorporation or
Bylaws of Firstar, or constitute an event that with the lapse of time or action
by a third party, could, to the best of Firstar's knowledge, result in a default
under any of the foregoing or result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of Firstar or its subsidiaries
or the capital stock of Firstar. Firstar is an "out of state bank holding
company" within the meaning of sec. 2(p) of the Illinois BHCA and consummation
of the transactions contemplated in the Agreements will not violate the Illinois
BHCA. Subject only to obtaining the required regulatory approvals, Firstar is,
and at all times after the date of this Agreement, through and including the
Closing Date will be, authorized to effect the Merger under applicable law.
2.5 Financial Statements. Firstar has heretofore delivered to First Moline
copies of the following financial statements and information relating to Firstar
and its consolidated subsidiaries: (i) the Consolidated Statements of Condition
of Firstar as of December 31, 1992 and 1993, and the Consolidated Statements of
Income, Shareholders' Equity and Changes in Financial Position for each of the
years in the three-year period ended December 31, 1993, together with the notes
thereto, as certified by KPMG Peat Marwick, Firstar's independent auditors, (ii)
Firstar's 1993 and 1994 Proxy Statements in connection with its annual
shareholders meetings, (iii) Firstar's 1992 and 1993 Form 10-Ks filed with the
SEC, (iv) Firstar's Form 10-Qs for the first quarter of 1993 and 1994, and (v)
that certain press release dated June 8, 1994. Each of the aforementioned
financial statements has, where necessary, been filed in a timely manner with
the SEC and all other federal or state regulatory agencies as necessary, is true
and correct in all material respects and together they fairly present, in
accordance with applicable laws and regulations, and generally accepted
accounting principles (applied on a consistent basis except as disclosed in the
footnotes thereto and except that the unaudited statements for 1994 are subject
to adjustments which might be required as a result of audit of the independent
auditors of Firstar for its fiscal year ending December 31, 1994), the financial
position and results of operations of Firstar as of the dates and for the
periods therein set forth. Such financial statements do not, as of the date
thereof, include any material assets or omit to state any material liability,
absolute or contingent, or other facts, the inclusion or omission of which
renders such financial statements, in light of the circumstances under which
they were made, misleading in any material respect.
2.6 Registration Statement. The Registration Statement and the Proxy
Statement-Prospectus included therein (i) will comply in all material respects
with the requirements of the Securities Act, and (ii) will not, at the date the
Proxy Statement-Prospectus is first mailed or delivered to First Moline
shareholders, or at the date or dates of the meeting or consents of First
Moline's shareholders referred to in Section 6.9 hereof, as then amended or
supplemented, contain any statement that is, at the time at which, and in the
light of the circumstances under which, it is made, false or misleading with
respect to any material facts or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not false or
misleading. Notwithstanding the foregoing, Firstar and FCI make no
representation or warranty and shall have no responsibility for the truth or
accuracy of any information with respect to First Moline or its affiliates or
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associates contained in the Registration Statement or the Proxy
Statement-Prospectus and which was provided by First Moline, its affiliates or
associates.
2.7 Shares to be Issued. The shares of Firstar Common Stock to be issued
pursuant to the Agreements will, upon issuance, be validly issued, fully paid
and nonassessable, except insofar as statutory liability may be imposed under
Section 180.0622(2)(b) of the Wisconsin Statutes and judicial interpretations
thereof, are not subject to any preemptive rights and will have been registered
under the Securities Act and listed on the New York Stock Exchange ("NYSE") and
the Chicago Stock Exchange ("CSE"). The shares of Firstar Common Stock have been
registered pursuant to sec. 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Firstar will use its best efforts to maintain such
registration, and to file all required reports on a timely basis. The shares of
Firstar Common Stock to be issued in the Merger will be freely transferable by
the recipients thereof, subject to any limitations on transfer required under
Rule 144 or 145 of the Securities Act or such rules or regulations of the SEC
related to pooling-of-interest accounting treatment for transactions such as the
Merger. Notwithstanding the immediately preceding sentence, nothing in this
Section 2.7 is intended to adversely effect the intended tax treatment of
transactions contemplated in the Agreements.
2.8 Accuracy of Information. The statements contained in the Agreements and
in any other written documents executed and/or delivered by or on behalf of
Firstar pursuant to the terms of the Agreements are true and correct in all
material respects and do not omit any material fact necessary to make the
statements contained herein or therein not materially misleading.
2.9 No Material Adverse Change. Since March 31, 1994, there has been no
material adverse change in the financial condition, assets, liabilities, results
of operation or business of Firstar.
2.10 Matters Concerning Regulatory Approvals. To the best knowledge of
Firstar, there are no matters likely to cause denial of the regulatory approvals
contemplated in Section 1.5.
2.11 Litigation. There is no litigation, action, suit, investigation or
proceeding pending or, to the best of the knowledge of Firstar, overtly
threatened, against or affecting Firstar or any of its subsidiaries or involving
any of their respective properties or assets, at law or in equity, before any
federal, state, municipal, local or other governmental authority, which is
reasonably likely to be resolved adversely to the interest of Firstar or its
subsidiaries and, if so resolved, would have a material adverse effect on the
financial condition, assets, liabilities, results of operation or business of
Firstar, or would materially impair its ability, or that of FCI, to perform
under this Agreement.
2.12 Reports. Since January 1, 1991, Firstar and its subsidiaries have
filed all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that were and are required to be filed
with (i) the SEC, including but not limited to Forms 10-K, Forms 10-Q, Forms 8-K
and proxy statements, (ii) the Office of the Comptroller of the Currency and
Board of Governors of the Federal Reserve System and (iii) any other applicable
state securities and regulatory authorities (all such reports and statements are
collectively referred to herein as the "Firstar Reports"). As of their
respective dates, the Firstar Reports filed prior to the date hereof complied in
all material respects with all of the statutes, rules and regulations enforced
or promulgated by the regulatory authority with which they were filed 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.
2.13 Employee and Employee Benefit Matters. (a) The term "Firstar Benefit
Plan(s)," as used in this Agreement, shall mean (i) each pension, profit
sharing, stock bonus, thrift, savings, employee stock ownership or other plan,
program or arrangement, that constitutes an "employee pension benefit plan"
within the meaning of Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), that is maintained by Firstar or FCI or to
which Firstar or FCI contributes for the benefit of any current or former
employee, (ii) each plan, program or arrangement for the provision of medical,
surgical or, hospital care or benefits, benefits in the event of sickness,
accident, disability, death, unemployment, severance, vacation, apprenticeship,
day care, scholarship, prepaid legal services or other benefits which constitute
an
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"employee welfare benefit plan" within the meaning of Section 3(1) of ERISA,
that is maintained by Firstar or FCI or to which Firstar or FCI contributes for
the benefit of any current or former employee, and (iii) every other retirement
or deferred compensation plan, bonus or incentive compensation plan or
arrangement, stock option plan, stock purchase plan, severance or vacation pay
arrangement, or other fringe benefit plan, program or arrangement through which
Firstar or FCI provides benefits for or on behalf of any current or former
employee, officer, director, consultant or agent.
(b) All of the Firstar Benefit Plans are in material compliance with all
applicable requirements of ERISA and all other applicable federal and state
laws, including the reporting and disclosure requirements of Part 1 of Title I
of ERISA, except for instances where non-compliance would not result in material
liability to Firstar, FCI or the Firstar Benefit Plans. Each of the Firstar
Benefit Plans that is intended to be a pension, profit sharing, stock bonus,
thrift, savings or employee stock ownership plan that is qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service to
qualify under Section 401(a) of the Code, and, to the best knowledge of Firstar
and FCI, there exist no circumstances that would adversely affect the qualified
status of any such Firstar Benefit Plan under that section for which the
remedial amendment period has expired. Each Firstar Benefit Plan that is a
defined benefit pension plan has assets with an aggregate value that exceeds the
actuarially determined present value of its liability for accrued benefits as
determined on the basis of the actuarial assumptions used for the most recent
actuarial valuation of such Plan. There is no pending or, to Firstar's
knowledge, threatened litigation, against or relating to any Firstar Benefit
Plan and there is no reasonable basis for any material proceedings, claims,
actions or proceedings against any Firstar Benefit Plan. No "reportable event"
(as defined in Section 4043(b) of ERISA) has occurred with respect to any
Firstar Benefit Plan and no Firstar Benefit Plan has engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA and Section 4975(c) of the
Code), since the date on which said sections became applicable to such Plan.
Neither Firstar nor FCI has incurred any "accumulated funding deficiency"
(within the meaning of Section 412 of the Code), whether or not waived, with
respect to any Firstar Benefit Plan. There have been no acts or omissions by
Firstar or FCI which have given rise to or may give rise to any material fines,
penalties, taxes or related charges under Section 502(c), 502(i) or 4071 of
ERISA or Chapter 43 of the Code, for which Firstar or FCI may be liable. All
group health plans of Firstar and FCI, including any plans of current and former
affiliates of Firstar or FCI which must be taken into account under Section
4980B of the Code or Section 601 of ERISA, have been operated in material
compliance with the group health plan continuation coverage requirements of
Section 4980B of the Code and Section 601 of ERISA to the extent such
requirements are applicable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FCI
Firstar and FCI hereby jointly and severally represent and warrant to First
Moline as follows:
3.1 Corporate Organization. FCI is a corporation duly organized, validly
existing and in active status under the laws of Iowa with full power and
authority to engage in the activities and business now conducted by it. FCI is
registered and in good standing with the Federal Reserve Board as a bank holding
company under the Bank Holding Company Act of 1956, as amended. FCI has
delivered to First Moline true, accurate and complete copies of the currently
effective Articles of Incorporation and Bylaws of FCI, including all amendments
thereto.
3.2 Capitalization. The authorized capital stock of FCI consists of 1,000
shares of common stock, no par value, 1,000 of which are validly issued and
outstanding, fully paid and nonassessable. All of such issued shares are owned
by Firstar, free and clear of all liens, security interests or other
encumbrances.
3.3 Authorization. The Board of Directors of FCI has approved the
transactions contemplated by the Agreements and has authorized the execution,
delivery and performance by FCI of the Agreements and no other corporate action
by the Board of Directors or shareholder of FCI is necessary for such approval
and authorization. FCI has full corporate power and authority to enter into the
Agreements, and to consummate the transactions contemplated thereby. The
Agreements are valid and binding obligations of FCI, enforceable
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in accordance with their terms, subject to (i) all applicable bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and (ii) the application of equitable principles if
equitable remedies are sought.
3.4 No Violation. Provided that the requisite approvals from the Federal
Reserve Board, the OTS, the OCC, Illinois Commissioner and any other regulatory
agencies are obtained and the offering of Firstar Common Stock to be issued
hereunder is duly registered pursuant to the Securities Act, and, to the extent
applicable, under state securities or blue sky laws, neither the execution and
delivery of the Agreements nor the consummation of the transactions contemplated
in the Agreements will conflict with, result in the breach of, constitute a
default under or accelerate the performance provided by the terms of any law, or
any rule or regulation of any governmental agency or authority, or any judgment,
order or decree of any court or other governmental agency to which FCI may be
subject, or any contract, agreement or instrument to which FCI is a party or by
which FCI is bound or committed, or the Articles of Incorporation or Bylaws of
FCI, or constitute an event that with the lapse of time or action by a third
party, could, to the knowledge of FCI, result in a default under any of the
foregoing or result in the creation of any lien, charge or encumbrance upon any
of the assets, properties, or capital stock of FCI. FCI is an "out of state bank
holding company" within the meaning of Section 2(p) of the Illinois BHCA, and
consummation of the transactions contemplated by the Agreements will not violate
the Illinois BHCA. Subject only to obtaining the required regulatory approvals,
FCI is, and at all times after the date of this Agreement through and including
the Closing Date will be, authorized to effect the Merger under applicable law.
3.5 Accuracy of Information. The statements contained in the Agreements and
in any other written documents executed and/or delivered by or on behalf of FCI
pursuant to the terms of the Agreements are true and correct in all material
respects, and do not omit any material fact necessary to make the statements
contained herein or therein not materially misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FIRST MOLINE
First Moline represents and warrants to Firstar and FCI as follows:
4.1 Corporate Organization. First Moline is a corporation duly organized,
validly existing and in active status under the laws of Delaware with all
necessary power and authority to engage in the activities and business now
conducted by it. First Moline possesses and is in full compliance with all
licenses, franchises, permits and other governmental authorizations that are
legally required, except, where the failure not to be in full compliance would
reasonably be expected to have a material adverse effect on the financial
condition, assets or business operations of First Moline and the Bank taken as a
whole. First Moline is registered and in good standing with the OTS as a savings
and loan holding company under the Home Owners' Loan Act, as amended (the
"HOLA"). First Moline has delivered to Firstar, by letter from the Chief
Executive Officer of First Moline and delivered by First Moline to Firstar on
the date hereof (the "First Moline Letter") true, accurate and complete copies
of the currently effective Certificate of Incorporation and Bylaws of First
Moline, including any amendments thereto. The minute books of First Moline and
the Bank contain complete and accurate records of all meetings and other
corporate actions of their respective shareholders and Boards of Directors.
First Moline has no subsidiaries, direct or indirect, except the Bank, FFM-CMO,
Inc. and First Moline Real Estate Corp.
4.2 Capitalization. The authorized capital stock of First Moline consists
of 2,500,000 shares; 500,000 shares have been designated as Preferred Stock,
$0.01 par value ("Preferred Stock") and 2,000,000 shares have been designated as
Common Stock, $0.01 par value ("First Moline Common Stock"). There are no shares
of Preferred Stock outstanding and 282,550 shares of First Moline Common Stock
are validly issued and outstanding. All of such issued and outstanding shares of
First Moline capital stock are fully paid and non-assessable and not issued in
violation of any preemptive rights of any shareholder. First Moline does not
have any arrangements or commitments obligating First Moline to issue or sell or
otherwise dispose of, or to purchase or redeem shares of its capital stock or
any securities convertible into or having the right to purchase
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shares of its capital stock, except for the stock options (the "Stock Options")
for 21,944 shares of Common Stock issued at the dates, for the exercise prices
and to the recipients set forth in Section 4.2 of the First Moline Letter.
4.3 Organization of the Subsidiaries. (a) The Bank is a federal savings
bank duly organized, validly existing and in good standing under the laws of the
United States. First Moline has delivered to Firstar, as an exhibit to the First
Moline Letter, true, accurate and complete copies of the currently effective
Charter and Bylaws of the Bank, including all amendments thereto. The Bank (i)
is duly authorized to conduct a general banking business, subject to the
supervision of the OTS, at its offices identified in Section 4.3(a) of the First
Moline Letter, (ii) is an insured depository institution as defined in the
Federal Deposit Insurance Act, (iii) has full power and authority to engage in
the business and activities now conducted by it, and (iv) possesses and is in
compliance in all material respects with all licenses, franchises, permits and
other governmental authorizations that are legally required except where the
lack of such license, franchise, permit or other governmental authorization or
failure be in such compliance would not reasonably be expected to have a
material adverse effect on the financial condition of First Moline and the Bank,
taken as a whole. The Bank has no interest in any subsidiaries, direct or
indirect, except FFM-CMO, Inc. and First Moline Real Estate Corp.
(b) Each of FFM-CMO, Inc. and First Moline Real Estate Corp. (the "Bank
Subsidiaries") is a corporation duly organized, validly existing and in good
standing under the laws of Illinois with full power and authority to engage in
the activities and business now conducted by it. First Moline has delivered to
Firstar, as exhibits to the First Moline Letter, true, accurate and complete
copies of the currently effective Articles of Incorporation and Bylaws of each
of the Bank Subsidiaries. Each such corporation possesses and is in compliance
in all material respects with all licenses, franchises, permits and other
governmental authorizations that are legally required except where the lack of
such license, franchise, permit or other governmental authorization or failure
be in such compliance would not reasonably be expected to have a material
adverse effect on the financial condition of First Moline and Bank, taken as a
whole.
4.4 Capitalization of the Subsidiaries. (a) The authorized capital stock of
the Bank consists of 2,500,000 shares, 2,000,000 of Common Stock, $0.01 par
value ("First Moline Stock"), of which 100 are validly issued and outstanding,
all of which are owned by First Moline free and clear of all liens, pledges,
assignments and security interests and 500,000 shares of serial preferred stock,
$0.01 par value, none of which is issued or outstanding. All of the shares of
the capital stock of the Bank are fully paid and nonassessable and not issued in
violation of the preemptive rights of any shareholder.
(b) The authorized capital stock of FFM-CMO, Inc. consists of 500,000
shares of Common Stock, no par value, of which 50,000 are validly issued and
outstanding and owned by the Bank free and clear of all liens, pledges,
assignments and security interests. All of such shares of capital stock are
fully paid and nonassessable and not issued in violation of the preemptive
rights of any shareholder. Neither the Bank nor FFM-CMO, Inc. is a party to or
bound by any commitment or obligation to issue or sell or otherwise dispose of,
or to purchase or redeem, any capital stock or any other security convertible
into or having the right to purchase capital stock of the corporation.
(c) The authorized capital stock of First Moline Real Estate Corp. consists
of 100,000 shares of Common Stock, no par value, of which 25,000 are validly
issued and outstanding and owned by the Bank free and clear of all liens,
pledges, assignments and security interests. All of such shares of capital stock
are fully paid and nonassessable and not issued in violation of the preemptive
rights of any shareholder. Neither the Bank nor First Moline Real Estate Corp.
is a party to or bound by any commitment or obligation to issue or sell or
otherwise dispose of, or to purchase or redeem, any capital stock or any other
security convertible into or having the right to purchase capital stock of the
corporation.
4.5 Authorization. The Board of Directors of First Moline has approved the
Agreements and the transactions contemplated thereby and has authorized the
execution, delivery and performance by First Moline of the Agreements. First
Moline has full corporate power and authority to enter into the Agreements and,
upon approval of its shareholders in accordance with law and subject to the
conditions set forth in Article IX of this Reorganization Agreement, to
consummate the transactions contemplated thereby. The
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Agreements are valid and binding obligations of First Moline, enforceable in
accordance with their terms, subject to (i) all applicable bankruptcy,
insolvency, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally, and (ii) the application of equitable principles if
equitable remedies are sought.
4.6 No Violation. Provided that the requisite approvals from the Federal
Reserve Board, the OTS, the OCC, the Illinois Commissioner and any other
regulatory agencies are obtained and the offering of the Firstar Common Stock to
be issued hereunder is duly registered under the Securities Act, and, to the
extent applicable, under state securities or blue sky laws, neither the
execution and delivery of the Agreements nor the consummation of the
transactions contemplated therein will conflict with, result in the breach of,
constitute a default under or accelerate the performance provided by the terms
of any law, or any rule or regulation of any governmental agency or authority,
or any judgment, order or decree of any court or other governmental agency to
which First Moline or the Bank may be subject, or any contract, agreement or
instrument to which First Moline or the Bank is a party or by which First Moline
or the Bank is bound or committed, or the Certificate of Incorporation or Bylaws
of First Moline, or the Charter of the Bank, or constitute an event that with
the lapse of time or action by a third party or both, would, to the best of
First Moline's knowledge, result in a material default under any of the
foregoing or result in the creation of any lien, charge or encumbrance upon any
of the assets, properties or stock of First Moline or the Bank other than (i) as
set forth in the First Moline Letter; (ii) as would not reasonably be expected
to have a material adverse effect on the financial condition of First Moline and
the Bank, taken as a whole; or (iii) in the case of contracts, agreements or
instruments, such conflicts, breaches or defaults which will be cured or waived
prior to the Closing Date.
4.7 Financial Statements. First Moline has furnished to Firstar copies of
the following financial statements:
(i) Audited consolidated balance sheets of First Moline as of December
31, 1993 and 1992, and the related audited statements of income and
stockholders' equity for each of the years then ended, accompanied by the
audit report thereon of McGladrey & Pullen;
(ii) Statement of Condition of the Bank as of March 31, 1994, together
with the related Report of Income for the period then ended, as included in
the Thrift Financial Report of the Bank as of said dates as filed with the
OTS.
Each of the financial statements referred to in this Section 4.7 hereof is
true and correct in all material respects and together they fairly present, the
financial position and results of operation of First Moline and the Bank as of
the dates and for the periods therein set forth. Each of the financial
statements referred to in clause (i) of this Section 4.7 has been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis. Each of the financial statements referred to in clause (ii) of this
Section 4.7 has been prepared in accordance with the applicable regulations and
standards of the OTS. Each of the financial statements referred to in this
Section 4.7 do not, as of the date thereof, include any material assets or omit
to state any material liability, absolute or contingent, or other facts, the
inclusion or omission of which renders such financial statements, in light of
the circumstances under which they were made, misleading in any material
respect. Since December 31, 1993, there has been no material adverse change in
the financial condition, results of operation, business or prospects of First
Moline or the Bank (other than changes in the ordinary course of business, none
of which, individually or in the aggregate, has been materially adverse or
changes outside the control of management resulting primarily by reason of
changes in banking laws or regulations or interpretations thereof, or changes in
the general level of interest rates or changes in economic, financial, or market
conditions affecting the banking industry generally in the region in which First
Moline and the Bank operate) and no fact or condition exists that First Moline
or the Bank believes will cause such a material change in the future.
4.8 Absence of Certain Changes. Since December 31, 1993, neither First
Moline nor the Bank has, except as set forth in the First Moline Letter, (i)
issued or sold any corporate debt securities (except certificates of deposit,
letters of credit, cashier's checks, and other documents and instruments issued
in the ordinary course of the banking business of the Bank); (ii) granted any
option for the purchase of its capital
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stock; (iii) declared or set aside or paid any dividend or other distribution in
respect of its capital stock except a dividend paid on April 1, 1994 to
shareholders of record on March 14, 1994 and a dividend declared and payable
September 8, 1994 to shareholders of record on August 8, 1994, or as otherwise
provided for in this Reorganization Agreement; (iv) incurred any material
obligation or liability (absolute or contingent) except obligations or
liabilities incurred in the ordinary course of business, or mortgaged, pledged
or subjected to lien or encumbrance (other than statutory liens for taxes not
yet delinquent) any of its assets or properties except pledges to secure
government deposits and in connection with repurchase or reverse repurchase
agreements; (v) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities
included in the respective Bank's balance sheet as of March 31, 1994, and
current liabilities incurred since the date thereof in the ordinary course of
business; (vi) sold, exchanged or otherwise disposed of any of its capital
assets other than in the ordinary course of business and sales of mortgage loans
in the secondary market, consistent with past practice; (vii) made or modified
any general wage or salary increase exceeding 5% annually in the aggregate;
(viii) suffered any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting its business, property or assets
or waived any rights of value that are material in the aggregate; (ix) except in
the ordinary course of business, entered, or agreed to enter, into any agreement
or arrangement granting any preferential right to purchase any of its assets,
properties or rights or requiring the consent of any party to the transfer and
assignment of any such assets, properties or rights; (x) entered into any
transaction outside the ordinary course of its business, except in each case as
expressly contemplated by this Reorganization Agreement; or (xi) except in the
ordinary course of business or as reflected in the financial statements of First
Moline or the Bank, sold or otherwise disposed of any of its investment
securities.
4.9 Employee and Employee Benefit Matters. (a) Neither First Moline nor the
Bank is a party to or is bound by any written or oral (i) employment or
consulting contract that is not terminable without penalty by First Moline or
the Bank, as the case may be, on notice of 60 days or less, except as set forth
in the First Moline Letter, or (ii) any collective bargaining agreement covering
employees.
(b) The First Moline Letter lists (i) each pension, profit sharing, stock
bonus, thrift, savings, employee stock ownership or other plan, program or
arrangement, that constitutes an "employee pension benefit plan" within the
meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that is maintained by First Moline or the Bank or to which
First Moline or the Bank contributes for the benefit of any current or former
employee, (ii) each plan, program or arrangement for the provision of medical,
surgical, or hospital care or benefits, benefits in the event of sickness,
accident, disability, death, unemployment, severance, vacation, apprenticeship,
day care, scholarship, prepaid legal services or other benefits which constitute
an "employee welfare benefit plan" within the meaning of ERISA, that is
maintained by First Moline or the Bank or to which First Moline or the Bank
contributes for the benefit of any current or former employee, and (iii) every
other retirement or deferred compensation plan, bonus or incentive compensation
plan or arrangement, stock option plan, stock purchase plan, severance or
vacation pay arrangement, or other fringe benefit plan, program or arrangement
through which First Moline or the Bank provides benefits for or on behalf of any
current or former employee, officer, director, consultant or agent.
(c) All of the plans, programs and arrangements described in this section
and listed in the First Moline Letter (hereinafter referred to as the "Plans")
are in material compliance with all applicable requirements of ERISA and all
other applicable federal and state laws, including the reporting and disclosure
requirements of Part 1 of Title I of ERISA, except for instances where
non-compliance would not result in material liability to First Moline, the Bank
or the Plans. Except as set forth in the First Moline letter, each of the Plans
that is intended to be a pension, profit sharing, stock bonus, thrift, savings
or employee stock ownership plan that is qualified under Section 401(a) of the
Code has been determined by the Internal Revenue Service to qualify under
Section 401(a) of the Code, and, to the best of First Moline's knowledge, there
exist no circumstances that would adversely affect the qualified status of any
such Plan under that section for which the remedial amendment period has
expired. Except as set forth in the First Moline Letter, each Plan that is a
defined benefit pension plan has assets with an aggregate value that exceeds the
actuarially determined present value of its liability for accrued benefits as
determined on the basis of the actuarial assumptions used for the most recent
actuarial valuation of such Plan. Except as set forth in the First Moline
Letter, there is no pending or, to
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First Moline's knowledge, threatened litigation, governmental proceeding or
investigation against or relating to any Plan and there is no reasonable basis
for any material proceedings, claims, actions or proceedings against any Plan.
To the best of First Moline's knowledge, no "reportable event" (as defined in
Section 4043(b) of ERISA) has occurred with respect to any Plan and no Plan has
engaged in a "prohibited transaction" (as defined in Section 406 of ERISA and
Section 4975(c) of the Code) since the date on which said sections became
applicable to such Plan. Neither First Moline nor the Bank has incurred any
"accumulated funding deficiency" (within the meaning of Section 412 of the
Code), whether or not waived, with respect to any Plan. To the best of First
Moline's knowledge, there have been no acts or omissions by First Moline or the
Bank which have given rise to or may give rise to any material fines, penalties,
taxes or related charges under Section 502(c), 502(i) or 4071 of ERISA or
Chapter 43 of the Code, for which First Moline or the Bank may be liable. Except
as set forth in the First Moline Letter, none of the payments contemplated by
the Plans would, in the aggregate, constitute excess parachute payments as
defined in Section 280G of the Code. All group health plans of First Moline and
the Bank, including any plans of current and former affiliates of First Moline
or the Bank which must be taken into account under Section 4980B of the Code or
Section 601 of ERISA, have been operated in material compliance with the group
health plan continuation coverage requirements of Section 4980B of the Code and
Section 601 of ERISA to the extent such requirements are applicable.
(d) First Moline has delivered to Firstar as attachments to the First
Moline Letter (i) a true and complete copy of each Plan (or, in the case of any
Plan that is not in written form, a complete and accurate description of the
material provisions of the Plan), (ii) complete and current copies of summary
plan descriptions of each Plan that is subject to ERISA, (iii) each trust
agreement, insurance policy or other instrument relating to the funding of any
Plan, (iv) the two most recent Annual Reports (Form 5500 series) and
accompanying schedules filed with the Internal Revenue Service or United States
Department of Labor with respect to each Plan that is subject to ERISA and for
which Annual Reports are required, (v) the most recent determination letter
issued by the Internal Revenue Service with respect to each Plan that is
intended to qualify under Section 401(a) of the Code, (vi) the most recent
available financial statements for each Plan that has assets, (vii) the most
recent audited financial statements for each Plan for which audited financial
statements are required by ERISA, and (viii) the most recent actuarial report
for each Plan that is a defined benefit pension plan.
(e) No Plan has engaged in a transaction involving the purchase or sale by
the Plan of employer securities from or to a "disqualified person" (within the
meaning of Section 4975 of the Code).
4.10 Litigation. Except as disclosed in the First Moline Letter, no claims
have been asserted and no relief has been sought against First Moline or the
Bank in any pending litigation or governmental proceedings or otherwise. To
First Moline's knowledge, there are no circumstances, conditions, events or
arrangements, contractual or otherwise, which may hereafter give rise to any
proceedings, claims, actions or government investigations involving First Moline
or the Bank which would reasonably be expected to have a material adverse effect
on the financial condition of First Moline and the Bank, taken as a whole, nor
are any such proceedings, claims, actions or government investigations, to First
Moline's knowledge, threatened involving First Moline or the Bank. Except as set
forth in the First Moline Letter, neither First Moline nor the Bank is a party
to any order, judgment or decree which would reasonably be expected to have a
material adverse effect on the financial condition, assets or business of First
Moline and the Bank taken as a whole, and neither First Moline nor the Bank (i)
is the subject of any cease and desist order, or other formal or informal
enforcement action by any regulatory authority or (ii) has made any commitment
to or entered into any agreement with any regulatory authority that currently
restricts or adversely affects its operations or financial condition. First
Moline will make available to Firstar copies of all correspondence with or
memoranda of other communications with any regulatory authority since January 1,
1991, relating to the operation or condition, financial or otherwise, of First
Moline or the Bank. Upon receipt of written permission from its and the Bank's
regulators, First Moline will deliver to Firstar copies of all regulatory
examination reports issued since January 1, 1990 relating to it or the Bank.
4.11 Tax Matters. First Moline and the Bank have filed with the appropriate
governmental agencies all federal, state and local income, franchise, excise,
real and personal property and other tax returns and reports
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that are required to be filed, and neither First Moline nor the Bank is
delinquent in the payment of any taxes shown on such returns or reports or on
any assessments for any such taxes received by First Moline or the Bank except
for assessments being contested by First Moline or the Bank. To First Moline's
knowledge, there is no pending Internal Revenue Service or Illinois Department
of Revenue examination with respect to First Moline or the Bank. There are
included in the First Moline consolidated balance sheet as of December 31, 1993,
and to the best of First Moline's knowledge there are included the Bank's
balance sheet as of March 31, 1994, adequate reserves for the payment of all
accrued but unpaid federal, state and local taxes of First Moline and the Bank,
including interest and penalties, whether or not disputed for such fiscal years
and all fiscal years prior thereto. Neither First Moline nor the Bank has
executed or filed with the Internal Revenue Service or the Illinois Department
of Revenue any agreement extending the period for assessment and collection of
any federal or state tax, nor is First Moline or the Bank a party to any action
or proceeding by any governmental authority for assessment or collection of
taxes, except tax liens or levies against customers of the Bank. First Moline
has not received notice that any claim for assessment or collection of taxes has
been asserted against First Moline or the Bank.
Neither First Moline nor the Bank has, during the past ten years, except as
disclosed in the First Moline Letter, received any notice of deficiency,
proposed deficiency or assessment from the Internal Revenue Service or any other
governmental agency, with respect to any federal, state, county or local taxes.
To First Moline's knowledge, no federal or state income tax return of First
Moline or the Bank is currently the subject of any audit by the Internal Revenue
Service or any other governmental agency. No material deficiencies have been
asserted in connection with the federal and state income tax returns of each of
First Moline and the Bank for all periods through and including December 31,
1990, and to First Moline's knowledge, no circumstances exist which reasonably
could be expected to result in a material assessment for subsequent periods.
Except as set forth in the First Moline Letter, neither First Moline nor the
Bank is a party to any agreement providing for allocation or sharing of taxes.
4.12 Registration Statement. The parts of the Registration Statement and
the Proxy Statement-Prospectus that relate to First Moline or the Bank and any
of their affiliates or associates which were provided by First Moline will not,
at the date the Proxy Statement-Prospectus is first mailed or delivered to
shareholders of First Moline, and will not, at the date or dates of the meeting
of First Moline's shareholders referred to in Section 6.9 hereof, as then
amended or supplemented, contain any statement that is, at the time at which,
and in light of the circumstances under which, it is made, false or misleading
with respect to any material facts or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
false or misleading. Notwithstanding the foregoing, First Moline makes no
representation or warranty regarding and shall have no responsibility for the
truth or accuracy of any information with respect to Firstar or FCI or any of
their affiliates or associates contained in the Registration Statement or the
Proxy Statement-Prospectus.
4.13 Title and Condition. (a) First Moline or the Bank or a Bank Subsidiary
has good and marketable title to all assets and properties, whether real or
personal, tangible or intangible, that it purports to own, including without
limitation all assets and properties reflected in the unaudited balance sheet of
the Bank as of March 31, 1994 and the audited consolidated balance sheets of
First Moline as of December 31, 1993, or acquired subsequent thereto (except to
the extent that such assets and properties have been disposed of for fair value
in the ordinary course of business since the dates of such balance sheets)
subject to no liens, mortgages, security interests, encumbrances or charges of
any kind, except (i) as noted in said balance sheets or the notes thereto; (ii)
statutory liens for taxes not yet delinquent; (iii) security interests granted
to secure deposits of funds by federal, state or other governmental agencies;
and (iv) minor defects and irregularities in title and encumbrances that do not
materially impair the use thereof for the purposes for which they are held, and
such liens, mortgages, security interests, encumbrances and charges as are not
in the aggregate material to the assets and properties of First Moline and the
Bank taken as a whole. First Moline or the Bank, as lessee, has the right under
valid and subsisting leases to occupy, use, possess and control all property
leased by First Moline or the Bank, qualified only by the written terms of such
leases, true and complete copies of which have been provided to Firstar as an
attachment to the First Moline Letter. A legal description of all real property
owned by First Moline, the Bank, or a Bank Subsidiary, including properties held
by the Bank as a result of
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foreclosure or repossession or carried on the Bank's books as "other real estate
owned," or which for purposes of any Environmental Law, as hereinafter defined,
First Moline has received notice that such property is alleged to be under the
control of First Moline, the Bank or a Bank Subsidiary (the "Real Properties"),
has been provided in Section 4.13(a) of the First Moline Letter. Except as
disclosed in the First Moline Letter, or to the extent any failure to comply
with the American with Disabilities Act of 1990 ("ADA") will not have a material
adverse effect on the financial condition of First Moline and the Bank, taken as
a whole, each of the Real Properties is in material compliance with the ADA and
the regulations promulgated thereunder to the extent such ADA and regulations
require compliance for public accommodations by readily achievable barrier
removal, or compliance following alterations to existing facilities to the
maximum extent feasible, all as such Real Properties exist at Closing. Terms
used in the preceding sentence are as defined under the ADA.
(b) The Real Properties are in generally good condition and have been well
maintained in accordance with reasonable and prudent business practices
applicable to like facilities, reasonable wear and tear excepted. To First
Moline's knowledge at the time of execution of this Agreement, the Real
Properties are in material compliance with all Environmental Laws and there are
no conditions in connection with the Real Properties, including the presence of
lead or asbestos, which would be likely to subject First Moline, the Bank or a
Bank Subsidiary to damages, penalties, injunctive relief or cleanup costs under
any Environmental Laws, or which would, if known, be likely to materially reduce
the value of any Real Property or which would require or be likely to require
cleanup, removal, remedial action or other response pursuant to Environmental
Laws by First Moline, the Bank or a Bank Subsidiary. To First Moline's knowledge
at the time of execution of this Agreement, neither First Moline nor the Bank
nor either Bank Subsidiary is a party to any litigation or administrative
proceeding alleging First Moline's, the Bank's or such Bank Subsidiary's
violation of Environmental Laws, nor has First Moline, the Bank or such Bank
Subsidiary's violated Environmental Laws nor is First Moline, the Bank or a Bank
Subsidiary required by any governmental agency to clean up, remove or take
remedial or other responsive action due to the disposal, depositing, discharge,
leaking or other release of any hazardous substances or hazardous materials. To
First Moline's knowledge at the time of execution of this Agreement, neither the
Real Properties nor First Moline nor the Bank nor either Bank Subsidiary are
subject to any judgment, decree, order or citation related to or arising out of,
or listed as a potentially responsible party by any governmental body or agency
in a matter arising under, any Environmental Laws. The term "Environmental Laws"
shall mean all federal, state and local laws, including statutes, regulations,
ordinances, codes and rules relating to the discharge of air pollutants, water
pollutants or process waste water or substances, in effect now or as of the
Closing Date, including, but not limited to, the Federal Solid Waste Disposal
Act, the Federal Hazardous Materials Transportation Act, the Federal Clean Air
Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery
Act of 1976, the Federal Comprehensive Environmental Responsibility Cleanup and
Liability Act of 1980, as amended, regulations of the Environmental Protection
Agency, and any so-called "Superfund" or "Superlien" laws, and the Illinois
Responsible Property Transfer Act.
4.14 Insurance. First Moline has delivered to Firstar as exhibits to the
First Moline Letter, true, accurate and complete copies of all insurance
policies of First Moline and the Bank. First Moline and the Bank have in effect
insurance coverage with reputable insurers, which, with respect to amounts,
premiums, types and risks insured, constitutes reasonably adequate coverage
against all risks customarily insured against by savings and loan holding
companies and their subsidiaries comparable in size and operations to First
Moline and the Bank. Neither First Moline nor the Bank have received any notice
of any premium deficiency relating to any insurance coverage in force at the
date of this Agreement. First Moline will use its best efforts to maintain the
coverage provided in each of such policies through the Closing Date.
4.15 Compliance with Laws and Orders. First Moline and the Bank have
complied with all laws, regulations and orders (including zoning ordinances)
applicable to them and to the conduct of their businesses, including without
limitation, all statutes, rules and regulations pertaining to the conduct of the
Bank's banking activities except where the failure to so comply would not have a
material adverse effect on First Moline and the Bank, taken as a whole. Except
where the failure to so comply would not have a material adverse effect on First
Moline and the Bank, taken as a whole, neither First Moline nor the Bank is in
default under, and no event has occurred that, with the lapse of time or action
by a third party or both, could result in
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the default under the terms of any judgment, decree, order, writ, rule or
regulation of any governmental authority or court, whether federal, state or
local and whether at law or in equity.
4.16 Governmental Regulation. First Moline and the Bank hold all licenses,
certificates, permits, franchises and rights from all appropriate Federal, state
and other public authorities necessary for the conduct of their businesses, and,
between the date hereof and the Closing Date, First Moline will, and will cause
the Bank to use its best efforts to, maintain all such licenses, certificates,
permits, franchises and rights in effect. The Bank is a member of the Savings
Association Insurance Fund administered by the FDIC. Except as disclosed in the
First Moline Letter, neither First Moline nor the Bank is a party or subject to
any agreement with, or directive or order issued by, the OTS or any other bank
regulatory authority, which imposes any restrictions or requirements not
applicable generally to savings and loan holding companies (in the case of First
Moline), or federal savings banks (in the case of the Bank), with respect to the
conduct of its business.
4.17 Contracts and Commitments. Except as set forth in the First Moline
Letter, neither First Moline nor the Bank is a party to or bound by any written
or oral (i) lease or license with respect to any property, real or personal,
with a value in excess of $25,000, whether as lessor, lessee, licensor or
licensee; (ii) contract or commitment for capital expenditures in excess of
$25,000 for any one project or $100,000 in the aggregate; (iii) contract or
commitment for total expenses in excess of $25,000 made in the ordinary course
of business for the purchase of materials, supplies or for the performance of
services for a period of more than 60 days from the date of this Reorganization
Agreement, except for any outstanding legal services agreements; (iv) contract
or option for the purchase or sale of any real or personal property other than
in the ordinary course of business; (v) contract, commitment or agreement made
outside the ordinary course of business; or (vi) union contract or collective
bargaining agreement. First Moline and the Bank have performed all obligations
required to be performed by them to date, and are not in default under, and no
event has occurred which, with the lapse of time or action by a third party or
both, could result in a default (except to the extent such default will not have
a material adverse effect on First Moline or the Bank, taken as a whole) under
any outstanding mortgage, lease, contract, commitment or agreement to which
First Moline or the Bank is a party or by which First Moline or Bank is bound or
under any provision of their respective charter documents or Bylaws, and each
such outstanding mortgage, lease, contract, commitment or agreement is a valid
and legally binding obligation of First Moline or the relevant Bank, subject to
(i) all applicable bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and (ii) the
application of equitable principles if equitable remedies are sought.
4.18 Shareholders and Undertakings from Affiliates. First Moline will
furnish to Firstar prior to the filing of the bank regulatory applications
contemplated in Section 1.5 (i) a current list which identifies each officer or
director of First Moline or the Bank or holder of ten percent (10%) or more of
the outstanding First Moline Common Stock, as determined under the rules and
regulations of the SEC, and sets out the number of shares owned by each such
person; and (ii) First Moline will use all reasonable efforts to cause each
person named on the affiliates list delivered to Firstar to execute prior to the
filing of the bank regulatory applications contemplated in Section 1.5 written
undertakings, in the form attached hereto as Exhibit 4.18(ii) ("Affiliates'
Undertakings").
4.19 Matters Relating to Directors, Officers and Shareholders. Except as
set forth in the First Moline Letter, no director, executive officer, or holder
of ten percent (10%) or more of the outstanding capital stock of First Moline,
as determined under the rules and regulations of the SEC, nor any director or
executive officer of the Bank nor any "associate" of any such person (as such
term is defined in the general rules and regulations under the Securities Act)
(a "Company or Bank Principal") (i) is or has during the period subsequent to
December 31, 1990, been a party (other than as a depositor) to any transaction
with First Moline or the Bank, whether as a borrower or otherwise, which (x) was
made other than in the ordinary course of business, (y) was made on other than
substantially the same terms, including interest rate and collateral, as those
prevailing at the time for comparable transactions for other persons, or (z)
involves more than the normal risk of collectibility or presents other
unfavorable features, or (ii) is a party to any loan or loan commitment, whether
written or oral, from First Moline or the Bank involving an amount in excess of
$10,000.
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4.20 Absence of Adverse Agreements. Neither First Moline nor the Bank, is a
party to any agreement, option or contract (other than the Agreements, the
Voting Agreements dated of the date hereof between Firstar and certain
shareholders of First Moline), the subject of which involves or relates to the
merger, consolidation, or sale of assets or stock of First Moline or the Bank.
4.21 Accuracy of Information. The statements of First Moline contained in
the First Moline Letter and in any other written documents executed and/or
delivered by or on behalf of First Moline pursuant to the terms of the
Agreements are true and correct in all material respects and the First Moline
Letter and such other documents do not omit any material fact necessary to make
the statements contained therein not materially misleading. The statements
contained in the First Moline Letter and such other documents will be deemed to
constitute representations and warranties of First Moline under this
Reorganization Agreement to the same extent as if set forth herein in full.
4.22 Allowance for Loan Losses. To the knowledge of First Moline, the
reserve for possible loan losses shown on the March 31, 1994 Consolidated
Balance Sheet of First Moline and its subsidiaries is adequate in all material
respects under the requirements of generally accepted accounting principles to
provide for possible losses, net of recoveries relating to loans previously
charged off, on loans outstanding (including, without limitation, accrued
interest receivable) as of March 31, 1994.
4.23 No Undisclosed Liabilities. Neither First Moline nor the Bank nor any
of their respective properties is subject to any material liability or
obligation (absolute, accrued, contingent or otherwise) known to First Moline,
including without limitation, any lease, contract, commitment or purchase or
sale agreement, except:
(a) as specifically disclosed in this Agreement or the financial
statements of First Moline delivered pursuant to Section 4.7 hereof;
(b) as disclosed in the First Moline Letter; or
(c) liabilities or obligations arising or incurred in the ordinary
course of business of First Moline or the Bank since December 31, 1993 and
consistent with past practices including, without limitation, any taxes; or
(d) expenses related to the Merger or as contemplated in this
Agreement.
4.24 Pooling and Tax-Free Status Matters. To the knowledge of First Moline,
neither First Moline nor any of its affiliates has through the date hereof taken
or agreed to take any action that would prevent Firstar from accounting for the
business combination to be effected by the Merger as a pooling of interests or
would prevent the Merger from qualifying as a tax-free reorganization under
Section 368 of the Code.
4.25 Reports. Since January 1, 1993, First Moline, the Bank and the Bank
Subsidiaries have filed all reports, registrations and statements, together with
any amendments required to be made with respect thereto, that were and are
required to be filed with (i) the SEC, including but not limited to Forms 10-K,
Forms 10-Q, Forms 8-K and proxy statements, (ii) the OTS and (iii) any other
applicable state securities authorities (all such reports and statements are
collectively referred to herein as the "First Moline Reports"). As of their
respective dates, the First Moline Reports filed prior to the date hereof
complied in all material respects with all of the statutes, rules and
regulations enforced or promulgated by the regulatory authority with which they
were filed 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.
4.26 Opinion of Financial Advisor. First Moline has received the opinion of
Hovde Financial, Inc. on the date hereof to the effect that, as of the date
hereof, in the opinion of such firm, the consideration to be received in the
Merger by First Moline's stockholders is fair to First Moline's stockholders
from a financial point of view (the "Fairness Opinion").
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ARTICLE V
CONDUCT OF BUSINESS BY FIRSTAR
5.1 Approval by Firstar. Firstar will give its consent or approval on such
matters as may be appropriate or required in connection with the transactions
contemplated by the Agreements.
5.2 Subsequent SEC Filings. Promptly after filing, Firstar will furnish
First Moline and its counsel copies of all Firstar's periodic reports on Forms
10-K, 10-Q and 8-K filed with the SEC subsequent to the date hereof. Such
reports shall be prepared in compliance with laws applicable to Firstar.
5.3 Conduct of Business; Certain Covenants. From and after the execution
and delivery of this Agreement and until the Closing Date, Firstar will, except
insofar as deviations from the following covenants would not reasonably be
expected to have a material adverse impact on Firstar and its subsidiaries,
taken as a whole:
(a) conduct its business and operate and cause its subsidiaries to conduct
their respective businesses only in accordance with sound banking and/or
business practices; and
(b) maintain its corporate existence and that of FCI in good standing and
file all material required reports with all applicable regulatory authorities.
5.4 Employee Benefits. (a) No later than the first day of the first
calendar year that begins at least three months after the Closing Date, Firstar
shall provide, or shall cause to be provided to each employee of Firstar or any
Firstar subsidiary who was an employee of First Moline or any of its
subsidiaries on the Closing Date (the "First Moline Employees") the opportunity
to participate in the following Firstar Benefit Plans on a basis comparable to
that applicable to other similarly-situated employees of Firstar and its
subsidiaries: the Firstar Pension Plan (and the related non-qualified excess
benefit/"top hat" plan known as the Benefit Equalization Plan), Thrift and
Sharing Plan (including cash payment with respect thereto made in lieu of
matching contributions precluded by applicable limitations of the Code),
Comprehensive Medical Plan, Dental Plan, Dependent Care and Medical Expense
Reimbursement Plan, Group Life Insurance Plan, and Long-Term Disability Plan.
(b) With respect to the participation of the First Moline Employees in the
Firstar Benefit Plans, Firstar shall provide, or cause to be provided, that:
(i) the service credited to each First Moline Employee for purposes of
determining eligibility and vesting under each of the Firstar Benefit
Plans, including eligibility for greater matching contributions under the
Firstar Thrift and Sharing Plan (and related cash payment program), and
also under any vacation, short-term disability or similar salary
continuation policy or plan for which they may be eligible, shall include
all such First Moline Employee's service with First Moline, FCI (as
successor to First Moline) or Bank; and
(ii) at the time the Firstar Benefit Plans are first extended to the
First Moline Employees, the First Moline Employees shall not be subject to
any waiting periods or pre-existing condition exclusions under such Firstar
Benefit Plans to the extent such periods are longer or such exclusions
impose a greater limitation than such periods or exclusions under the terms
of the corresponding First Moline Benefit Plan immediately prior to the
extension of coverage under the Firstar Benefit Plans.
(c) Neither Firstar nor FCI shall be obligated to provide benefits under
any Firstar Benefit Plan which is duplicative to benefits provided to any First
Moline Employee under any Plan with respect to the period from the Closing Date
to the date that participation in the Firstar Benefit Plan is extended to the
First Moline Employees (such period hereafter referred to as the "First Moline
Interim Period").
(d) During the First Moline Interim Period, Firstar shall maintain or shall
cause to be maintained the First Moline Group Medical Plan, Group Life Insurance
Plan, Group Dental Plan, Group Long Term Disability Plan, and Profit Sharing
Plan as in effect immediately prior to the Closing Date, without substantive
change, except as may be required by applicable law, or as replaced by a Firstar
Benefit Plan. With respect to each calendar year during which the First Moline
Interim Period occurs, Firstar shall make or shall cause to
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be made to the First Moline Profit Sharing Plan profit sharing contributions for
the benefit of eligible First Moline Employees at a rate of no less than 5% of
eligible compensation for such calendar year (or portion thereof prior to the
date such Plan was replaced by the Firstar Thrift and Profit Sharing Plan).
(e) During the First Moline Interim Period, First Moline Employees shall
continue to accrue benefits under the First Moline Retirement Plan pursuant to
the terms thereof until such date as such Employees become eligible to accrue
benefits under the Firstar Corporation Pension Plan, in which case such benefits
accrued under the Firstar Corporation Pension Plan shall be in addition to the
benefits accrued under the First Moline Retirement Plan as of such date.
(f) First Moline and Firstar shall use all reasonable efforts and will
cause their respective subsidiaries to use all reasonable efforts to effect the
substitution of and assumption by Firstar or a Firstar subsidiary as the
sponsoring employers for the Plans and to amend such plans to the extent
necessary to accomplish such substitution and assumption, and such other actions
contemplated by the Plans and this Agreement. Except as otherwise provided in
any Plan or Firstar Benefit Plan, the power of Firstar or any of its
subsidiaries to amend or terminate any employee benefit plan or program after
the Closing Date, shall not be altered or affected by this Section 5.4.
(g) Firstar shall honor or cause to be honored, in accordance with its
terms as amended as of the date of this Agreement, the First Moline Employee
Severance Compensation Plan, provided that Firstar shall not be obligated to
apply said Plan to anyone other than the First Moline Employees.
5.5 Access to Information. After the date hereof and prior to the Closing
Date, upon reasonable notice, Firstar shall (and shall cause FCI and Firstar
Bank Davenport, N.A. to) afford to the officers, employees, agents and
representatives of First Moline, access during normal business hours to all its
properties, books, contracts, commitments and records.
5.6 First Moline Pension Plan. Firstar shall use its best efforts to notify
First Moline, within 45 days of the date of this Agreement, of its decision to
either terminate or merge the Retirement Plan for Employees of First Federal
Savings and Loan Association of Moline. Firstar's duty hereunder shall be
conditioned upon its receiving all information reasonably necessary to make its
decision.
5.7 Indemnification. Firstar agrees that all indemnification now existing
in favor of the directors and officers of First Moline and the Bank, as provided
in the Certificate of Incorporation, Charter and By-Laws of First Moline and the
Bank and applicable regulations, with respect to matters occurring prior to the
Closing, shall survive the Merger and shall continue in full force and effect
for two (2) years following Closing. Firstar shall provide or shall cause to be
provided, for a period of not less than two (2) years from the Closing Date,
Directors and Officers insurance and indemnification policies that provide First
Moline's and the Bank's Directors and Officers coverage for events occurring
prior to the Closing Date and that is in the aggregate, no less favorable than
First Moline's and the Bank's currently existing policies; provided, however,
that Firstar shall not be required to pay total premiums for the directors and
officers insurance required under this Section 5.7 in excess of $60,000, but in
such case shall purchase as much coverage as possible for such amount.
5.8 No Adverse Action. Except as specifically contemplated by this
Agreement, from the date hereof until the Closing Date, Firstar shall not, or
agree or commit to, or permit any of its subsidiaries to, without the prior
written consent of First Moline (which shall not be unreasonably withheld) take
any action which would (i) materially and adversely affect the ability of either
Firstar or First Moline to obtain any necessary approvals of governmental
authorities required for the transactions contemplated hereby, on the terms and
conditions set forth in Sections 1.5 and 9.1; (ii) materially and adversely
affect First Moline's ability to perform its covenants and agreements under the
Agreements; or (iii) result in any of the conditions to the Merger set forth in
this Agreement not being satisfied.
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ARTICLE VI
CONDUCT OF BUSINESS BY FIRST MOLINE UNTIL MERGER
First Moline agrees that from the date of this Reorganization Agreement
until the Closing Date:
6.1 Dividends. First Moline will not declare or pay any dividends or make
any distributions on First Moline Common Stock other than quarterly cash
dividends in amounts not to exceed in the aggregate per calendar quarter an
amount equal to the cash dividends that the shareholders of First Moline would
have received from Firstar had they owned, after August 25, 1994 265,112 shares
of Firstar Common Stock on the record dates in such quarters for the
determination of Firstar shareholders entitled to receive dividends. Prior to
closing and after calculation of the "Market Value of Firstar Common Stock at
the Closing Date" pursuant to Section 8 of the Plan of Merger, if the actual
number of shares of Firstar Common Stock to be issued in the Merger is greater
than 265,112, First Moline shall, in addition, pay a final dividend equal to the
difference between the dividends paid pursuant to the first sentence of this
Section 6.1 and the amount that would have been paid pursuant to such sentence
had it referred to the actual number of shares of Firstar Common Stock to be
issued in the Merger. First Moline will not permit the Bank to declare or pay
any dividends or make any distributions on its common stock other than cash
dividends necessary to fund such dividends of First Moline, pay expenses
expressly contemplated by this Reorganization Agreement and pay ordinary and
necessary operating expenses of First Moline on a basis consistent with prior
years. In the event that the Closing Date occurs at such a time as to cause the
shareholders of First Moline to not receive a dividend either as a holder of
First Moline Common Stock or as a holder of Firstar Common Stock for a given
calendar quarter, First Moline may pay a dividend for such quarter to its
shareholders, calculated in the same manner as such other dividends paid after
the date of this Reorganization Agreement.
6.2 Capitalization. First Moline will not, nor will it permit the Bank to,
issue, sell or otherwise dispose of, grant an option for, or acquire for value
any shares of capital stock of First Moline or the Bank or otherwise effect any
change in connection with its capitalization or that of the Bank.
6.3 Ordinary Course of Business. First Moline will, and will cause the Bank
to, carry on its business in substantially the same manner as heretofore and use
its best efforts to maintain and preserve its business organization intact,
retain its present employees and maintain its relationships with customers.
Except with the prior written consent of Firstar, First Moline will not, and
will not permit the Bank to (i) enter into any transaction other than in the
ordinary course of business or incur or agree to incur any obligation or
liability, except (a) liabilities incurred and obligations entered into in the
ordinary course of business, (b) with respect to an agreement with Vedder,
Price, Kaufman & Kammholz for fair and reasonable legal services in connection
with the Agreements and the transactions contemplated thereby providing for
payment based solely upon the number of hours spent by such firm in performing
such services, at the maximum hourly rate set forth in the First Moline Letter,
(c) with respect to any agreement for fees with McGladrey & Pullen for fair and
reasonable services in connection with preparation of the Registration Statement
and proxy solicitation materials and other activities contemplated by the
Agreements, and (d) with respect to an agreement with Hovde Financial, Inc. for
investment banking services in connection with the transactions contemplated in
the Agreements, for an aggregate amount not to exceed the amount set forth in
the agreement between First Moline and Hovde Financial, Inc.; (ii) except as
recommended by a regulatory authority and reported to Firstar, change its
lending, investment, liability management and other material policies concerning
its or either Bank's banking business, unless required by statute, regulation or
order; (iii) grant any bonus or increase in the rates of pay of employees or
directors except normal salary and bonus increases to employees, based on past
practice, not to exceed ten percent (10%) in the aggregate; (iv) except pursuant
to the contracts or commitments disclosed in the First Moline Letter or in the
ordinary course of business, incur or commit to any capital expenditure which
exceeds $25,000; (v) except in the ordinary course of business or as expressly
contemplated by this Reorganization Agreement, and, in the case of sales for
more than $50,000, after prior notice to Firstar, sell any loans made prior to
the date hereof, or sell any investment securities from their respective
investment portfolios, or sell or otherwise dispose of any assets; or (vi) agree
to any of the foregoing actions.
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6.4 Contact with Third Parties; No Board Recommendation. First Moline will
not initiate, solicit or encourage and will not permit the Bank to initiate,
solicit or encourage, or take any other affirmative action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably be
expected to lead to, any Competing Transaction (as such term is defined below),
or, subject to the fiduciary obligations of the Board of Directors of First
Moline following consultation with and based upon the advice of counsel,
negotiate with any person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize or permit any of its officers, directors or employees or any financial
advisor, attorney, accountant or other representative retained by First Moline
or the Bank to take any such action. For purposes of this Agreement, "Competing
Transaction" shall mean any of the following: (i) the merger or consolidation of
First Moline or the Bank with any person or entity other than Firstar or its
subsidiaries, (ii) the acquisition of more than ten percent (10%) of the
consolidated gross assets of First Moline by any person or entity other than
Firstar or its subsidiaries, (iii) the acquisition of any of the capital stock
of the Bank by any person or entity other than Firstar or its subsidiaries, or
(iv) the acquisition by First Moline or the Bank, except in the ordinary course
of business, of the stock or the assets of any other person or entity. Promptly
upon receiving any oral or written offer relating to any such event or proposed
event, First Moline shall notify Jon H. Stowe, Executive Vice President of
Firstar, or counsel for Firstar, by telephone, confirmed by letter, giving all
relevant details of such oral or written offer. The Board of Directors of First
Moline, subject to its fiduciary obligations, will not recommend that it or its
shareholders vote in favor of any Competing Transaction.
6.5 Corporate Structure. First Moline will not, nor will it permit the Bank
to, without the prior written consent of Firstar, which consent shall not be
unreasonably withheld, create or acquire any subsidiary. Except for the Articles
Amendments, there will be no change in the Certificate of Incorporation or
Bylaws of First Moline or the Articles of Incorporation or Bylaws of the Bank,
without the prior written consent of Firstar.
6.6 Accounting and Tax Reporting. First Moline will not, nor will it permit
the Bank to, change any of its methods of accounting in effect at the end of its
last fiscal year, or change any of its methods of reporting income or deductions
for federal income tax purposes from those employed in the preparation of the
federal income tax returns of First Moline or the Bank for its last taxable
year, except as may be required by law or generally accepted accounting
principles. First Moline will promptly notify Firstar of receipt of any notice
of assessment received from any taxing authority by First Moline or the Bank.
6.7 Full Disclosure. First Moline will afford Firstar, its officers,
accountants, counsel and other authorized representatives, such access to all
books, records, tax returns, leases, contracts and documents of First Moline and
the Bank and to the buildings, structures, fixtures and appurtenances of First
Moline and the Bank for purposes of inspecting their condition, and will furnish
to Firstar such information with respect to the assets and business of First
Moline and the Bank as Firstar may from time to time reasonably request in
connection with the Agreements and the transactions contemplated hereby and as
permitted by law, provided that such access or investigation shall not
unnecessarily interfere with the normal operations of First Moline and the Bank.
6.8 Reports to Firstar. First Moline will promptly advise Firstar in
writing of all actions taken by the directors and shareholders of First Moline
at meetings or in connection with written consents filed with First Moline and
furnish Firstar with copies of all monthly and other interim financial
statements of First Moline and the Bank as they become available. First Moline
will use its best efforts to keep Firstar fully informed concerning all trends
and developments of which it becomes aware that may have a material effect upon
the business, properties or condition (either financial or otherwise) of First
Moline and the Bank taken as a whole.
6.9 Solicitation of First Moline Shareholders. First Moline will take such
action as may be necessary in accordance with applicable law, including causing
a special meeting of its shareholders to be held as soon as practicable after
the effective date of the Registration Statement, to solicit, and will use its
best efforts to obtain, the requisite ratification, confirmation and adoption of
the Agreements and approval of the Merger by its shareholders and the approval
of its shareholders on such other matters as may be appropriate or required in
connection with the transactions contemplated by the Agreements. The Board of
Directors of First Moline shall, subject to its fiduciary obligations following
consultation with and based upon the advice of counsel,
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(i) recommend to its shareholders approval of the Merger; (ii) not withdraw,
modify or amend such recommendation; and (iii) use its best efforts to obtain
such shareholder approval. First Moline and Firstar shall coordinate and
cooperate with respect to the timing of such meeting and shall use their best
efforts to hold such meeting as soon as practicable after the date hereof.
6.10 Supplement to First Moline Letter. First Moline will promptly
supplement or amend the First Moline Letter with respect to any matter hereafter
arising that, if existing or occurring at the date of this Reorganization
Agreement, would have been required to be set forth or described in the First
Moline Letter. No supplement or amendment to the First Moline Letter will have
any effect for the purpose of determining satisfaction of the condition set
forth in Section 7.2 hereof.
6.11 Employee Benefit Plans. Except as required by law or provided by this
Agreement or disclosed in the First Moline Letter, First Moline will not make
any material change in any Plan. First Moline will cooperate fully with Firstar
and FCI and will take all steps necessary in the joint judgment of Firstar and
its counsel and First Moline and its counsel to cause the termination of any
Plan, other than any deferred compensation arrangement described in the First
Moline Letter, or the merger thereof, effective on or after the Closing Date,
into one or more employee benefit plans maintained by Firstar or FCI in
compliance with Section 7.13 of this Agreement. Without limitation of the
foregoing, if requested by Firstar or FCI, First Moline will cause the trustee
of any Plan to value the assets of such Plan and, effective on or after the
Closing Date, transfer all Plan assets and liabilities to a successor trustee
designated by Firstar or FCI, all in the manner specified by Firstar or FCI.
6.12 Bank-Level Transactions. First Moline and the Bank will cooperate with
Firstar and FCI in the preparation by Firstar or FCI of applications to the
appropriate regulatory authorities to effect, contingent on consummation of the
Merger, effective contemporaneously therewith, the conversion of the Bank to a
national banking association or the transfer of certain Bank assets and
liabilities to and/or a merger of the Bank with one or more bank subsidiaries of
Firstar or FCI.
6.13 Classification of Certain Assets. First Moline will, not later than as
of the month-end immediately preceding the Closing Date, classify as "held for
sale" all fixed rate mortgage loans in its portfolio, which Firstar shall
identify, and cause to be made such accounting entries as are required under
generally accepted accounting principles to reflect such a classification.
6.14 Allowance for Loan Losses. Not later than as of the month-end
immediately preceding the Closing Date, the allowance for loan losses of the
Bank after all anticipated loan losses shall have been charged off shall not be
less than an amount requested by Firstar.
6.15 Termination of Data Processing Agreement. First Moline will give
notice, not later than January 20, 1995, or such earlier date as Firstar may
reasonably request, of its intent to terminate its agreement with BISYS, Inc.
for data processing services at a date not later than July 20, 1995.
6.16 Environmental Audits. First Moline has engaged an entity to perform
environmental site assessments of the Real Properties carried on the books of
the Bank or any Bank Subsidiary (the "Environmental Audit") and render a Phase I
report of the Environmental Audit (the "Environmental Report"), to determine if
such properties have indications of or give evidence that any violations of
Environmental Laws have occurred on any such properties. The Environmental Audit
shall be completed within 60 days of the date hereof; Firstar shall receive a
complete copy of the Environmental Report within 75 days of the date hereof. The
Environmental Report or such subsequent investigation as is indicated in the
Environmental Report, shall indicate whether any cleanup, removal, remedial
action or other response is required in order to bring the Real Properties into
material compliance with Environmental Laws. Nothing contained in the
Environmental Report shall diminish or expand First Moline's obligations with
respect to the representations and warranties in Section 4.13 hereof or affect
the consequences of any such representation or warranty proving to have been
untrue, incomplete or misleading in any material respect.
6.17 Recapture of Tax Bad Debt Reserve. Not later than as of the month-end
immediately preceding the Closing Date, First Moline will record in its
financial records the recapture of its tax bad debt reserve and will
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cause to be made such accounting entries as are required under generally
acceptable accounting principles to reflect such recapture.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF FIRSTAR AND FCI
The obligations of Firstar and FCI under the Agreements to cause the
transactions contemplated therein to be consummated shall be subject to the
satisfaction of the following conditions:
7.1 No Material Adverse Change. There shall not have been any material
adverse change, or discovery of a condition or the occurrence of any event that
has or is likely to result in such a change, in the financial condition, assets,
liabilities, results of operation or business of First Moline and the Bank,
taken as a whole, from the date hereof to the Closing Date, except for such
changes as may occur as a consequence of the transactions contemplated by this
Agreement or changes outside the control of management resulting primarily by
reason of changes in banking laws or regulations or interpretations thereof, or
changes in the general level of interest rates or changes in economic,
financial, or market conditions affecting the banking industry generally in the
region in which First Moline and the Bank operate.
7.2 Representations and Warranties. All representations and warranties by
First Moline contained in this Reorganization Agreement shall be true and
correct in all material respects at, or as of, the Closing Date as though such
representations and warranties were made on and as of said date, except with
respect to (a) changes expressly contemplated in this Reorganization Agreement,
(b) representations or warranties as of a specified time other than the Closing
Date, which shall be true in all material respects at such specified time, or
(c) breaches that are not reasonably likely to have a material adverse impact on
First Moline or the Bank or on the benefits to have been received by Firstar or
FCI from consummation of the transactions contemplated by the Agreements.
7.3 Performance and Compliance. First Moline shall have performed or
complied with all covenants, agreements and conditions required by the
Agreements to be performed and satisfied by it on or prior to the Closing Date
unless waived by Firstar.
7.4 No Proceeding or Litigation. At the Closing Date, (i) no suit, action
or proceeding shall be pending or overtly threatened before any court or other
governmental agency by the federal or any state government in which it is sought
to restrain or prohibit the consummation of the Merger and, (ii) there is no
suit, action or proceeding pending or, to the knowledge of First Moline,
threatened against or affecting First Moline or the Bank which is likely to have
a material adverse effect on First Moline or the Bank, taken as a whole.
7.5 Review or Audit by Firstar and Accountants. Upon reasonable advance
notice, but no case later than three business days prior to the Closing Date,
Firstar and KPMG Peat Marwick shall have had an adequate opportunity to conduct
such a complete review, in accordance with standards established by the American
Institute of Certified Public Accountants, or audit, in accordance with
generally accepted auditing standards, of the financial condition, assets,
liabilities, results of operation, and business of First Moline and the Bank as
Firstar shall deem prudent. Any such audit or review shall be performed at
Firstar's sole expense.
7.6 Audit of Plans. Upon reasonable advance notice, but in no case later
than three business days prior to the Closing Date, Firstar shall have had the
opportunity to conduct, or to have conducted by an entity of its choosing, at
its expense, an audit of any Plans.
7.7 Pooling Letter. Firstar shall have received confirmation from KPMG Peat
Marwick that the Merger will be accounted for as a "pooling of interests" in
accordance with generally accepted accounting principles, as of a date no more
than five business days prior to the Closing Date; provided, however, that this
condition shall be deemed to have been waived by Firstar if the inability to
obtain such opinion arises out of, or results directly or indirectly from, any
action taken by Firstar, FCI or any of their respective subsidiaries contrary to
that contemplated by this Agreement.
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7.8 Opinion of Counsel for First Moline. Firstar and FCI shall have
received an opinion from Vedder, Price, Kaufman & Kammholz, counsel for First
Moline, dated the Closing Date, substantially to the effect set forth in Exhibit
7.8 hereto.
7.9 Certificate of Chief Executive Officer. First Moline shall have
furnished Firstar a certificate, signed by its Chief Executive Officer, dated
the Closing Date, to the effect that the conditions described in Sections 7.1,
7.2, 7.3, 7.4, 7.14 and 9.3 as it relates to First Moline of this Reorganization
Agreement have been fully satisfied, to the best of the knowledge of such Chief
Executive Officer.
7.10 Corporate Certificates. Firstar and FCI shall have received (i) a
statement of the State of Delaware, certifying that First Moline is a
corporation in good standing in Delaware, and (ii) a certificate of corporate
existence from the OTS relating to the Bank, each dated within five business
days prior to the Closing Date.
7.11 Bills for Certain Fees of First Moline or the Bank. (a) Firstar shall
have received a copy of the bills from Vedder, Price, Kaufman & Kammholz to
First Moline or the Bank for services performed in connection with the
transactions contemplated in the Agreements, through two (2) business days prior
to the Closing Date, which in the case of Vedder, Price, Kaufman & Kammholz, are
accompanied by information as to the number of hours spent by such counsel on
such services and the fees charged for such services; (b) Firstar shall have
received a copy of the statement for fees from McGladrey & Pullen to First
Moline for services performed in connection with the transactions contemplated
in the Agreements; and (c) Firstar shall have received a copy of the statement
for fees from Hovde Financial, Inc. for services performed in connection with
the transactions contemplated in the Agreements.
7.12 Tax Opinion. Firstar and FCI shall have received an opinion from an
accounting or law firm reasonably acceptable to Firstar and FCI, dated the
Closing Date, opining that the Merger will be treated as a tax-free
reorganization under the Code. Firstar or FCI shall request such an opinion
within ten days of the date of this Reorganization Agreement. The failure to
obtain such opinion due to an act or omission of Firstar or FCI shall constitute
a waiver of such condition.
7.13 Termination of Pension Plan. First Moline shall have taken all actions
necessary to cause the termination or merger into a Plan maintained by Firstar
or FCI of the Retirement Plan for Employees of First Federal Savings and Loan
Association of Moline and the Recognition and Retention Plan and Trust.
7.14 Charter Conversion. Firstar and FCI shall have received evidence of an
approval from the Office of the Comptroller of the Currency and any other
appropriate regulatory agencies for the conversion of the Bank to a national
banking association on the Closing Date.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF FIRST MOLINE
The obligations of First Moline under the Agreements to cause the
transactions contemplated herein to be consummated shall be subject to the
satisfaction of the following conditions unless waived by First Moline:
8.1 No Material Adverse Change. There shall not have been any material
adverse change, or discovery of a condition or the occurrence of any event that
has or is likely to result in such a change, in the consolidated financial
condition, assets, liabilities, results of operation or business of Firstar from
the date hereof to the Closing Date.
8.2 Representations and Warranties. All representations and warranties of
Firstar and FCI contained in this Reorganization Agreement shall be true and
correct in all material respects at, or as of, the Closing Date as though such
representations were made at and as of said date, except with respect to (y)
changes expressly contemplated in this Reorganization Agreement, or (z) breaches
that are not reasonably likely to have a material adverse impact on Firstar or
FCI or on the benefits to have been received by First Moline or its shareholders
from consummation of the transactions contemplated by the Agreements.
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8.3 Performance and Compliance. Firstar shall have performed or complied
with all covenants, agreements and conditions required by the Agreements to be
performed and satisfied by it at or prior to the Closing Date.
8.4 No Proceeding or Litigation. At the Closing Date, (i) no suit, action
or proceeding shall be pending or overtly threatened before any court or other
governmental agency by the federal or any state government in which it is sought
to restrain or prohibit the consummation of the Merger and, (ii) there is no
suit, action or proceeding pending or, to the knowledge of Firstar, threatened
against or affecting Firstar which is likely to have a material adverse effect
on Firstar.
8.5 Opinion of Counsel for Firstar and FCI. Firstar and FCI shall have
delivered to First Moline an opinion of Firstar's General Counsel, dated the
Closing Date, substantially to the effect set forth in Exhibit 8.5 hereto.
8.6 Certificate of Executive Officer. Firstar shall have furnished to First
Moline a certificate, signed by any one of its executive officers and dated the
Closing Date, to the effect that the conditions described in Sections 8.1, 8.2,
8.3, 8.4 and 9.3, as it relates to FCI of this Reorganization Agreement have
been fully satisfied.
8.7 Tax Opinion. First Moline shall have received an opinion from Vedder,
Price, Kaufman & Kammholz dated the Closing Date, opining that the Merger will
be treated as a tax-free reorganization under the Code. First Moline shall
request such an opinion within ten days of the date of this Reorganization
Agreement and shall provide such law firm (as well as the accounting or law firm
referred to in Section 7.13) with such representations as are true, accurate and
complete with respect to First Moline, its shareholders and the Merger as are
reasonably necessary to enable such law firm (as well as the accounting or law
firm referred to in Section 7.13) to deliver such opinion (and the opinion
referred to in Section 7.13). The failure to obtain such opinion due to an
affirmative act or omission of First Moline shall constitute a waiver of such
condition.
8.8 Listing. The shares of Firstar Common Stock to be issued in the Merger
to holders of First Moline Common Stock shall be listed on the NYSE.
8.9 Opinion of Financial Advisor. As of the date of the mailing of the
Proxy Statement-Prospectus, the Fairness Opinion may not be included in the
Proxy Statement-Prospectus because Hovde Financial, Inc. shall have withdrawn or
modified in any material respect the Fairness Opinion due to a determination by
such firm that the Fairness Opinion was erroneous.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES
In addition to the provisions of Articles VII and VIII hereof, the
obligations of First Moline, Firstar and FCI to cause the transactions
contemplated herein to be consummated, shall be subject to the satisfaction of
the following conditions.
9.1 Governmental Approvals. The parties hereto shall have received all
necessary approvals of governmental agencies and authorities, which do not
contain material terms or conditions that are not reasonably acceptable to
Firstar, of the transactions contemplated by the Agreements including the
conversion of the Bank to a national banking association and each of such
approvals shall remain in full force and effect at the Closing Date and such
approvals and the transactions contemplated thereby shall not have been
contested by any federal or state governmental authority nor by any other third
party by formal proceeding. Firstar shall promptly notify First Moline upon
receipt of all necessary governmental approvals. If any contest as aforesaid is
brought by formal proceedings, any party may, but shall not be obligated to,
answer and defend such contest.
9.2 Securities Law Compliance. The Registration Statement shall have become
effective by an order of the SEC, the Firstar Common Stock to be issued in the
Merger shall have been qualified or exempted under all applicable state
securities or blue sky laws, and there shall have been no stop order issued or
threatened by
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the SEC that suspends the effectiveness of the Registration Statement, and no
proceeding shall have been commenced, pending or overtly threatened for such
purpose.
9.3 Shareholder Approval. The Agreements and the Merger shall have been
duly approved by the requisite affirmative votes of the shareholders of First
Moline and FCI.
ARTICLE X
INDUCEMENT
10.1. Inducement. (a) Subject to subsection (d), As a condition and
inducement to Firstar's willingness to enter into and perform this
Reorganization Agreement, in the event that a Trigger Event (as hereinafter
defined) has occurred, then First Moline shall pay to Firstar a fee of $400,000.
Such fee shall be payable in immediately available funds within two days
following the occurrence of a Trigger Event.
(b) As used herein, "Trigger Event" shall mean the occurrence of one or
more of the following events:
(i) A Transaction Proposal (as defined below) shall have occurred;
(ii) Termination of this Agreement following a wilful and material
breach thereof by First Moline; or
(iii) (A) the Board of Directors of First Moline (1) shall have
withdrawn, modified or amended in any respect its approval or
recommendation of this Agreement or the transactions contemplated thereby,
or (2) shall not at the appropriate time have recommended or shall have
withdrawn, modified or amended in any respect its recommendation that its
stockholders vote in favor of this Agreement, or (3) shall not have
included such recommendation in the Proxy Statement, or (B) the Board of
Directors of First Moline shall have resolved to do any of the foregoing.
(c) As used in this Agreement, "Person" shall mean any individual, firm,
corporation, or other entity and shall include any syndicate or group of persons
deemed to be a "person" by Section 13(d)(3)(e) of the Exchange Act. As used in
this Agreement,
(i) "Transaction Proposal" shall mean (A) a bona fide tender offer or
exchange offer for at least 25% of the then outstanding shares of any class
of capital stock of First Moline shall have been made by any Person
(excluding Firstar or any of its subsidiaries or affiliates), (B) any
Person (other than Firstar or any subsidiary or Affiliate thereof) shall
have filed an application under the BHCA, the HOLA, the Savings and Loan
Holding Company Act, as amended, the Federal Deposit Insurance Act, as
amended or the Change in Bank Control Act, as amended, with respect to the
acquisition by such person of any shares of the capital stock of First
Moline, (C) a merger, consolidation or other business combination with
First Moline, or the Bank, shall have been effected by any Person, or an
agreement relating to any such transaction shall have been entered into,
(D) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (whether in one transaction or a series of related
transactions) involving more than ten percent (10%) of First Moline's
consolidated assets (including stock of the Bank), or all or a substantial
part of the assets of the Bank, to any Person shall have been effected, or
any agreement relating to such transaction shall have been entered into,
(E) the acquisition by any Person, other than (1) Firstar or any subsidiary
or Affiliate of Firstar (other than in a fiduciary capacity) or (2) the
Bank in a fiduciary capacity for third parties, of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act, which will be
deemed for purposes hereof to provide that such Person beneficially owns
any shares of First Moline Common Stock that may be acquired by such person
pursuant to any right, option, warrant or other agreement, regardless of
when such acquisition would be permitted by the terms thereof) of 10% or
more of the outstanding shares of First Moline Common Stock (including
capital stock currently beneficially owned by such Person) or, if such
Person currently beneficially owns 10% or more of the outstanding shares of
First Moline Common Stock, of any additional shares of First Moline Common
Stock (other than pursuant to such Person's rights and obligations as of
the date hereof related to the Stock Options and the Management Recognition
and Retention Plan and Trust), (F) any reclassification of securities or
recapitalization of First Moline or other transaction that has the effect,
directly or
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indirectly, of increasing the proportionate share of any class of equity
security (including securities convertible into equity securities) of First
Moline which is owned by any Person (excluding Firstar or any of its
subsidiaries or Affiliates) shall have been effected, or any agreement
relating to such transaction shall have been entered into or plan with
respect thereto adopted, (G) any transaction having an effect similar to
those described in (A) through (F) above, or (H) a public announcement with
respect to a proposal, plan or intention by First Moline or another person
(excluding Firstar or any of its subsidiaries or affiliates) to effect any
of the foregoing transactions; provided, however, that in the case of the
events described in clauses (A), (B) and (H) in this definition, and events
described in clause (G) having an effect similar to those described in
clauses (A) and (B) (the "Events"), such Events shall not constitute a
"Transaction Proposal" hereunder unless after the occurrence of any such
Event, either (x) the Board of Directors of First Moline (1) recommends
such Event to its stockholders for acceptance; (2) fails to undertake such
acts as Firstar reasonably requests to oppose such Event (provided that
First Moline not incur significant legal expense); or (3) fails to
recommend approval of this Agreement to First Moline's stockholders; or (y)
First Moline's stockholders shall have failed to approve this Agreement at
a meeting duly called for such purpose; and provided, further, that any
transaction contemplated by this Agreement (other than transactions
contemplated by Section 6.4 or Section 6.9) shall be specifically exempt
from the definition of "Transaction Proposal"; and
(ii) "Affiliate" shall mean a person that directly or indirectly,
through one or more intermediaries, (A) owns beneficially, directly or
indirectly, in excess of 10% of the voting capital stock of any other
Person or (B) controls, is controlled by, or is under common control with,
another person.
(d) The rights of Firstar hereunder shall terminate upon the earliest to
occur of (i) the Closing Date, (ii) the termination of this Agreement by First
Moline pursuant to Sections 11.1(c)(ii) or 11.1(c)(iii), (iii) the termination
of this Agreement by mutual agreement of the parties or (iv) the expiration of
one year after the termination of this Agreement (other than terminations
described in clause (ii) or (iii)).
ARTICLE XI
TERMINATION
11.1 Reasons for Termination. The Agreements may be terminated and the
Merger abandoned at any time before the Closing Date, notwithstanding the
approval or adoption of the Agreements by the shareholders of First Moline
and/or FCI:
(a) By mutual written consent of the Board of Directors of First
Moline and the Board of Directors or the Interstate Banking and
Acquisitions Committee of Firstar;
(b) By written notice from Firstar to First Moline if:
(i) any condition set forth in Articles VII or IX of this
Reorganization Agreement has not been substantially satisfied or waived
in writing by June 30, 1995, unless the failure to satisfy such
condition is due to a breach of the Agreements by Firstar;
(ii) any warranty or representation made by First Moline shall be
discovered to be or to have become untrue, incomplete or misleading
where any such breach, individually or in the aggregate, (a) is
reasonably likely to have a material adverse impact on First Moline and
the Bank, taken as a whole, or on the benefits to have been received by
Firstar or FCI from consummation of the transactions contemplated by the
Agreements, and (b) has not been cured within ten business days
following receipt by First Moline of notice of such discovery, provided,
however, that Firstar shall have no such termination right in respect of
any matter known to it as of the date of this Reorganization Agreement;
or
(iii) First Moline shall have breached one or more covenants of
this Reorganization Agreement in any material respect considering all
such breaches in the aggregate, where such breach has not been cured
within ten business days following receipt by First Moline of written
notice of such
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breach, provided, however, that Firstar shall have no such termination
right in respect of any matter known to it as of the date of this
Reorganization Agreement; or
(c) By written notice from First Moline to Firstar, if:
(i) any condition set forth in Articles VIII or IX of this
Reorganization Agreement has not been substantially satisfied or waived
in writing by June 30, 1995, unless the failure to satisfy such
condition is due to a breach of the Agreements by First Moline;
(ii) any warranty or representation made by Firstar shall be
discovered to be or to have become untrue, incomplete or misleading
where any such breach, individually or in the aggregate, (a) is
reasonably likely to have a material adverse impact on Firstar or on the
benefits to have been received by First Moline or its shareholders from
consummation of the transactions contemplated by the Agreements, and (b)
has not been cured within ten business days following receipt by Firstar
of written notice of such discovery, provided, however, that First
Moline shall have no such termination right in respect of any matter
known to it as of the date of this Reorganization Agreement;
(iii) Firstar shall have breached one or more covenants of this
Reorganization Agreement in any material respect considering all such
breaches in the aggregate, where such breach has not been cured within
ten business days following receipt by Firstar of notice of such breach,
provided, however, that First Moline shall have no such termination
right in respect of any matter known to it as of the date of this
Reorganization Agreement.
(iv) on the date on which the Market Value of Firstar Common Stock
is calculated pursuant to the Plan of Merger, if the Market Value of
Firstar Common Stock on the Closing Date is less than $28.00.
11.2 Liability. In the event of termination of this Reorganization
Agreement caused (a) otherwise than by breach of a party hereto or (b) by any
willful breach or misrepresentation by a party hereto not covered by the next
sentence, there shall be no liability on the part of First Moline, Firstar or
FCI of any nature whatsoever, except that each party shall pay its own fees and
expenses pursuant to Section 12.2 of this Reorganization Agreement and continue
to comply with the obligations set forth in Section 1.7 of this Reorganization
Agreement. In the event of termination of this Reorganization Agreement caused
by (i) willful breach by a party of any agreement, covenant, or undertaking of
such party contained herein or in any exhibit hereto; (ii) any material
misrepresentations or breach of warranty in any material respect by a party
herein, which at the date hereof was known to be a misrepresentation or breach
of warranty by such party; or (iii) the failure of any condition set forth in
Articles VII, VIII or IX hereof which has failed because a party did not
exercise good faith and best efforts towards the fulfillment of such condition;
then the other party shall be entitled to all its legal and equitable remedies.
ARTICLE XII
MISCELLANEOUS
12.1 Brokers. Firstar and First Moline agree that no third person or
entity, except Hovde Financial, Inc., has in any way brought the parties
together or been instrumental in the making of the Agreements. Each such party
agrees to indemnify the other against any claim by any third person or entity
other than Hovde Financial, Inc. for any commission, brokerage or finder's fee,
or other payment with respect to the Agreements or the transactions contemplated
thereby based on any alleged agreement or misunderstanding between such party
and such third person or entity, whether express or implied from the actions of
such party.
12.2 Expenses. Each party to the Agreements will pay its respective fees
and expenses incurred in connection with the preparation and performance of the
Agreements, including fees and expenses of its counsel, accountants, and other
experts and advisors, except that Firstar agrees to reimburse First Moline and
the Bank for any out-of-pocket fees and expenses they incur at the request and
direction of Firstar (not to include fees paid or payable for the environmental
audits referred to in Section 6.14 hereof).
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12.3 Waivers; Amendments. At any time prior to the Closing Date, either
Firstar, by action taken by its Board of Directors or Interstate Banking and
Acquisitions Committee or officers thereunto authorized, or First Moline, by
action taken by its Board of Directors or officers thereunto authorized, may
waive the performance of any of the obligations of the other or waive compliance
by the other with any of the covenants or conditions contained in the Agreements
or agree to the amendment or modification of the Agreements by an agreement in
writing executed in the same manner as the Agreements.
12.4 Assignment. This Reorganization Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assigned by the parties hereto without the prior
written consent of the other parties, except that Firstar or FCI may assign its
rights hereunder to any wholly owned direct or indirect subsidiary of Firstar;
provided, however, that in the event Firstar or FCI or any of their successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, proper provision shall be
made so that the successors and assigns of Firstar or FCI, as the case may be,
assume the obligations set forth in this Agreement.
12.5 Entire Agreement. This Reorganization Agreement, the Plan of Merger,
the Voting Agreements and the Affiliates' Undertakings supersede any other
agreement, whether written or oral, that may have been made or entered into by
First Moline or Firstar or FCI or by any officer or officers of such parties
relating to the acquisition of the business or the capital stock of First Moline
by Firstar or FCI. The aforementioned agreements constitute the entire agreement
by the respective parties, and there are no agreements or commitments except as
set forth herein and therein.
12.6 Captions and Counterparts. The captions in this Reorganization
Agreement are for convenience only and shall not be considered a part of or
affect the construction or interpretation of any provision of this
Reorganization Agreement. This Reorganization Agreement may be executed in
several counterparts, each of which shall constitute one and the same
instrument.
12.7 Governing Law. The Reorganization Agreement shall be construed and
interpreted in accordance with the laws of the State of Wisconsin and federal
law except as the Delaware General Corporation Law and the Iowa Business
Corporation Act is expressly applicable to the Merger.
12.8 Nonsurvival. No representations, warranties or covenants in this
Reorganization Agreement shall survive, (a) the Merger, other than the
obligations set forth in Sections 1.4, 1.7, 1.9, 1.10, 5.4 and 5.7, and the
representations set forth in Section 4.24, of this Reorganization Agreement, and
(b) the termination under Article XI hereof, other than the obligations set
forth in Sections 1.7, 1.9, 10.1 and 12.2, and the representations set forth in
Section 4.24, of this Reorganization Agreement.
12.9 Knowledge of the Parties. Whenever in this Agreement any
representation or warranty is made upon the knowledge of a party hereto, such
knowledge shall mean and include (i) with respect to First Moline, the actual
knowledge of its Chief Executive Officer or its Board of Directors or any facts
that upon due inquiry, would have been known to such person, and (ii) with
respect to Firstar, the actual knowledge of its Chairman, President or any other
executive officer or the Board of Directors of such parties or any facts that
upon due inquiry, would have been known to such person.
12.10 Notices. All notices given hereunder shall be in writing and shall be
mailed by first class mail, postage prepaid or by nationally recognized
overnight delivery service, addressed as follows:
(a) If to Firstar or FCI, to:
Firstar Corporation
[or Firstar Corporation of Iowa]
Attn: Jon H. Stowe
Executive Vice President
777 East Wisconsin Avenue
Milwaukee, WI 53202
B-28
<PAGE> 157
with a copy to:
Firstar Corporation
Law Department
Attn: Howard H. Hopwood, III
Senior Vice President and General Counsel
777 East Wisconsin Avenue
Milwaukee, WI 53202
(b) If to First Moline, to:
First Moline Financial Corp.
Attention: Byrd Krumbholz
President and Chief Executive Officer
1616 Sixth Avenue
Moline, IL 61265
with additional copies to:
First Moline Financial Corp.
Attention: Glenn Medhus
Chairman of the Board
1616 Sixth Avenue
Moline, IL 61265
and
Daniel C. McKay, II
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, IL 60601
B-29
<PAGE> 158
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Reorganization to be duly executed as of the date first above written.
<TABLE>
<S> <C>
FIRSTAR CORPORATION
(SEAL) By: /s/ JON H. STOWE
--------------------------------------------
Its: Executive Vice President
Attest: /s/ JOHN A. KIELICH
- ---------------------------------------------
Its: First Vice President
FIRST MOLINE FINANCIAL CORP.
(SEAL) By: /s/ BYRD KRUMBHOLZ
--------------------------------------------
Its: President
Attest: /s/ GLENN MEDHUS
- ---------------------------------------------
Its: Chairman
FIRSTAR CORPORATION OF IOWA
(SEAL) By: /s/ JAMES R. LANG
--------------------------------------------
Its: President
Attest: /s/ JEFFREY B. WEEDEN
- ---------------------------------------------
Its: Senior Vice President
</TABLE>
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<PAGE> 159
EXHIBIT 1.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
First Moline Financial Corp. (the "Company"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Company held on
[ ], 1994, resolutions were duly adopted setting forth a proposed
amendment of the Certificate of Incorporation of the Company, declaring said
amendment to be advisable and calling a meeting of the stockholders of the
Company for consideration thereof. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Company's Certificate of Incorporation be amended by
deleting Article Fourth Section C in its entirety.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a
special meeting of the stockholders of the Company was duly called and held on
[ ], upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Byrd Krumbholz, its President and Chief Executive Officer, and Daniel Churchill,
its Secretary, this day of , 199 .
By:
------------------------------------
Byrd Krumbholz
President and Chief Executive
Officer
Attest:
----------------------------------
Daniel Churchill
Secretary
B-31
<PAGE> 160
EXHIBIT 4.18(II)
[FORM OF FIRST MOLINE AFFILIATE'S UNDERTAKING]
, 1994
Firstar Corporation
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
I have been advised that as of the date hereof I may be deemed an
"affiliate" of First Moline Financial Corp., a Delaware corporation ("First
Moline"), as that term is defined for purposes of paragraphs (c) and (d) of Rule
145 of the rules and regulations (the "Rules and Regulations") under the
Securities Act of 1933, as amended (the "Act") ("Affiliate"). Pursuant to the
terms of the Agreement and Plan of Reorganization among Firstar Corporation, a
Wisconsin corporation ("Firstar"), Firstar Corporation of Iowa, an Iowa
corporation ("FCI"), and First Moline (the "Reorganization Agreement"), and the
related Plan of Merger and Agreement of Merger by and between First Moline and
FCI joined in by Firstar for certain limited purposes, both dated as of August
25, 1994 (together with the Reorganization Agreement, the "Agreements"), First
Moline will be merged with and into FCI (the "Merger"), and as a result of the
Merger, I may receive shares of common stock of Firstar, $1.25 par value
("Firstar Common Stock").
In connection with the above transactions, I represent and warrant to
Firstar and agree that:
A. I will not make any sale, transfer or other disposition of the shares of
Firstar Common Stock in violation of the Act or the Rules and Regulations.
B. I have no present plan or intent to dispose of the Firstar Common Stock
acquired by me pursuant to the Merger.
C. I have been advised that the offering, sale and delivery of the shares
of Firstar Common Stock to me pursuant to the Merger will be registered under
the Act on a Registration Statement on Form S-4. I have also been advised,
however, that, since I may be deemed to be an Affiliate of First Moline at the
time the Agreements are submitted for a vote of the shareholders of First
Moline, the shares of Firstar Common Stock must be held by me indefinitely
unless (i) such shares of Firstar Common Stock have been registered for
distribution under the Act, (ii) a sale of the shares of Firstar Common Stock is
made in conformity with the volume and other limitations of Rule 145, or (iii)
in the opinion of counsel acceptable to Firstar, some other exemption from
registration under the Act is available with respect to any such proposed sale,
transfer or other disposition of the shares of Firstar Common Stock.
D. I have carefully read this Agreement and the Agreements and have
discussed their requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of the shares of Firstar Common Stock, to
the extent I felt necessary, with my counsel or counsel for First Moline.
E. I understand that Firstar is under no obligation to register the sale,
transfer or other disposition of the shares of Firstar Common Stock for sale,
transfer or other disposition by me to make compliance with an exemption from
registration available.
F. I understand that stop transfer instructions will be given to the
registrar of the certificates for the shares of Firstar Common Stock and that
there will be placed on the certificates for the shares of Firstar Common Stock,
or any substitutions therefore, a legend stating in substance:
"The shares represented by this certificate were issued in a transaction
(the acquisition of First Moline Banking Corp.) to which Rule 145
promulgated under the Securities Act of 1933, as amended (the "Act"),
applies and may be sold or otherwise transferred only in compliance with
the limitations of such Rule 145, or upon receipt by Firstar Corporation of
an opinion of counsel acceptable to it that some other exemption from
registration under the Act is available, or pursuant to a registration
statement under the
B-32
<PAGE> 161
Firstar Corporation
[Date]
Page 2
Act. The shares represented by this certificate may not be sold or
otherwise transferred prior to the publication by Firstar Corporation of an
earnings statement covering at least 30 days of operations subsequent to
[the effective date of the Merger]."
G. I hereby agree that, for a period of two (2) years following the
effective date of the Merger, I will
obtain an agreement similar to this agreement from each transferee of the shares
of Firstar Common Stock sold or otherwise transferred by me, but only if such
transfer is effected other than in a transaction involving a registered public
offering or as a sale pursuant to Rule 145.
H. Notwithstanding the other provisions hereof, I agree not to sell,
pledge, transfer, or otherwise dispose of the shares of Firstar Common Stock, or
reduce my risk relative to the Firstar Common Stock in any other way, from the
date hereof until such time as financial results covering at least 30 days of
combined operations of the parties to the Merger have been published within the
meaning of Section 201.01 of the Securities and Exchange Commission's
Codification of Financial Reporting Policies. I have not reduced my risk
relative to the Firstar Common Stock to date.
It is understood and agreed that this Agreement will terminate and be of no
further force and effect and the legend set forth in Paragraph F above will be
removed by delivery of substitute certificates without such legend, and the
related transfer restrictions shall be lifted forthwith, if the period of time
specified in Paragraph H of this Agreement has passed and (i) my shares of
Firstar Common Stock shall have been registered under the Act for sale, transfer
or other disposition by me or on my behalf, (ii) I am not at the time an
Affiliate of Firstar and have held the shares of Firstar Common Stock for at
least two (2) years (or such other period as may be prescribed by the Act and
the Rules and Regulations) and Firstar has filed with the Securities and
Exchange Commission ("SEC") all of the reports it is required to file under the
Securities Exchange Act of 1934, as amended, during the preceding twelve (12)
months, (iii) I am not and have not been for at least three (3) months an
Affiliate of Firstar and I have held the shares of Firstar Common Stock for at
least three (3) years, or (iv) Firstar shall have received a letter from the
staff of the SEC, or an opinion of Firstar's General Counsel or other counsel
acceptable to Firstar, to the effect that the stock transfer restrictions and
the legend are not required.
This Agreement shall be binding on my heirs, legal representatives and
successors.
Very truly yours,
--------------------------------------
Accepted as of the day of , 1994.
FIRSTAR CORPORATION
By:
----------------------------------
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<PAGE> 162
EXHIBIT 7.8
[SELLER'S COUNSEL'S LETTERHEAD]
[Closing Date]
Firstar Corporation
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
We have acted as counsel to First Moline Financial Corp. ("First Moline"),
a Delaware corporation and a registered savings and loan holding company in
connection with the merger of First Moline with and into Firstar Corporation of
Iowa, an Iowa corporation ("FCI"), pursuant to an Agreement and Plan of
Reorganization dated as of August 25, 1994 (the "Reorganization Agreement"), by
and among First Moline, FCI, and Firstar Corporation, a Wisconsin corporation
("Firstar"). This letter is furnished to you pursuant to Section 7.8 of the
Reorganization Agreement. Unless the context clearly requires otherwise,
capitalized terms used herein shall have the meanings ascribed thereto in the
Reorganization Agreement.
As special counsel for First Moline, we have also examined and relied upon
such corporate records of First Moline, the Bank and the Bank Subsidiaries and
such other documents, and certificates provided by their officers, including
certificates supplied to Firstar in connection with this transaction, and
certificates of public officials as we considered necessary or appropriate for
purposes of this legal opinion, but have also relied upon factual
representations made by First Moline in Section 4 of the Reorganization
Agreement as well as a legal opinion from First Moline's local counsel.
Furthermore, in regard to the matters stated in numbered paragraph 6, we
wish to advise you that we have not been engaged to give substantive attention
to any legal or governmental proceedings, orders or third party agreements
(other than the Agreements) to which First Moline the Bank or either Bank
Subsidiary may be a party. We have not searched the dockets of any court or any
governmental agency to determine if any such proceedings are pending or orders
entered involving First Moline, the Bank or either Bank Subsidiary or the
Merger.
Based upon the foregoing and subject to the qualifications set forth in
subsequent portions of this letter, it is our opinion that:
1. First Moline is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with all necessary power
and authority to engage in the activities and businesses now conducted by it.
First Moline is registered with the Office of Thrift Supervision as a savings
and loan holding company under the Home Owners' Loan Act, as amended. First
Moline has no direct or indirect subsidiaries except the Bank and the Bank
Subsidiaries.
2. (a) First Federal Savings Bank of Moline is a federal savings bank duly
organized and validly existing under the laws of the United States. The Bank (i)
is duly authorized to conduct a banking business in its offices subject to the
supervision of the Office of Thrift Supervision; (ii) is an "insured depository
institution" as defined in Section 3(c)(2) of the Federal Deposit Insurance Act,
12 U.S.C. Section 1813(c)(2); and (iii) has full power and authority, corporate
or otherwise (including all necessary licenses, franchises, permits and other
governmental authorizations) to engage in the banking business.
(b) The Bank Subsidiaries are each corporations duly organized, validly
existing and in good standing under the laws of the State of Illinois, with full
power and authority, corporate or otherwise to engage in their respective
activities.
3. The authorized capital stock of First Moline consists of 2,500,000
shares of stock, $0.01 par value, 2,000,000 of which are designated Common Stock
("First Moline Common Stock") and 500,000 of which are designated Preferred
Stock. There are no shares of Preferred Stock issues or outstanding and there
are 282,550 shares of First Moline Common Stock are validly issued and
outstanding. All of such shares are fully paid and nonassessable. To our
knowledge, First Moline does not have any arrangements or commitments obligating
it to issue or sell or otherwise dispose of, or to purchase or redeem shares of
its capital stock or any securities
B-34
<PAGE> 163
Firstar Corporation
[Closing Date]
Page 2
convertible into or having the right to purchase shares of its capital stock
other than as set forth in the Reorganization Agreement, Plan of Merger or the
First Moline Letter.
4. (a) The authorized capital stock of First Federal Savings Bank of Moline
consists of 2,500,000 shares, 2,000,000 common stock, $0.01 par value, 100 of
which are validly issued and outstanding, fully paid and nonassessable and
500,000 shares of Serial Preferred Stock, $0.01 par value, none of which is
issued or outstanding. First Moline is the registered holder of all of such
shares of the outstanding capital stock of the Bank. To our knowledge, neither
First Moline nor the Bank has any arrangements or commitments obligating it to
issue or sell or otherwise dispose of, or to purchase or redeem shares of the
Bank's capital stock or any securities convertible into or having the right to
purchase shares of the Bank's capital stock. To our knowledge, First Federal
Savings Bank of Moline has no subsidiaries, except FFM-CMO, Inc. and First
Moline Real Estate Corp.
(b) The authorized capital stock of FFM-CMO, Inc. consists of 500,000
shares of common stock, no par value, 50,000 of which are validly issued and
outstanding, fully paid and nonassessable and owned by First Bank Moline, N.A.
To our knowledge, neither the Bank nor FFM-CMO, Inc. has any arrangements or
commitments obligating it to issue or sell or otherwise dispose of, or to
purchase or redeem shares of FFM-CMO, Inc. capital stock or any securities
convertible into or having the right to purchase shares of the Bank's capital
stock.
(c) The authorized capital stock of First Moline Real Estate Corp. consists
of 100,000 shares of common stock, no par value, 25,000 of which are validly
issued and outstanding, fully paid and nonassessable and owned by the Bank. To
our knowledge, neither the Bank nor First Moline Real Estate Corp. has any
arrangements or commitments obligating it to issue or sell or otherwise dispose
of, or to purchase or redeem shares of First Moline Real Estate Corp.'s capital
stock or any securities convertible into or having the right to purchase shares
of the Bank's capital stock.
5. The execution, delivery and performance of the Reorganization Agreement,
the Plan of Merger and the Investment Agreement by First Moline have been duly
authorized and approved by all requisite action of the Board of Directors and
shareholders of First Moline and each has been duly executed and delivered by
First Moline and constitutes a valid and binding obligation of First Moline
enforceable in accordance with its terms.
6. Except as set forth in the First Moline Letter, as updated through the
date hereof, we have not been made aware of (i) any material claims having been
asserted or relief having been sought against or affecting First Moline, the
Bank or either Bank Subsidiary in any pending litigation or governmental
proceedings; (ii) there being any proceedings, claims, actions or governmental
investigations threatened against First Moline or either Bank; (iii) First
Moline or the Bank being a party to any order, judgment or decree, other than
any order, judgment or decree to which the Bank may be subject or a party in the
ordinary course of its business; (iv) First Moline or the Bank being the subject
of any cease and desist order, or other formal enforcement action, or any
memorandum of understanding with any bank regulatory authority; and (v) First
Moline or the Bank making any commitment to or entering into any agreement with
any bank regulatory authority that restricts or adversely affects its or their
operations or financial condition.
7. In the course of the preparation of the S-4 and the Proxy Statement, we
have considered the information set forth therein in light of the matters
required to be set forth therein, and have participated in conferences with
officers and representatives of First Moline and Firstar, including their
respective counsel and independent public accountants, during the course of
which the contents of the S-4 and the Proxy Statement and related matters were
discussed. We have not independently checked the accuracy or completeness of, or
otherwise verified, and accordingly are not passing upon, and do not assume
responsibility for, the accuracy, completeness or fairness of the statements
contained in the S-4 or the Proxy Statement; and we have relied as to
materiality, to a large extent, upon the judgment of officers and
representatives of First Moline and Firstar. However, as a result of such
consideration and participation, nothing has come to our attention which causes
B-35
<PAGE> 164
Firstar Corporation
[Closing Date]
Page 3
us to believe that the S-4 (other than the financial statements, financial data,
statistical data and supporting schedules included therein, and information
relating to or supplied by Firstar as to which we express no belief), at the
time it became effective, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Proxy Statement (other
than the financial statements, financial data, statistical data and supporting
schedules included therein, and information relating to or supplied by Firstar,
as to which we express no belief), at the time the S-4 became effective,
included any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
8. To our knowledge, there is no suit, action or proceeding pending or
overtly threatened before any court or other governmental agency by the federal
or state government in which it is or will be sought to restrain or prohibit the
consummation of the Merger.
The opinions expressed in this letter are subject to the following
qualifications:
(a) We have assumed without independent investigation (i) the
authenticity of all documents submitted to us as originals, (ii) the
genuineness of all signatures and proper delivery of all documents, and
(iii) the conformity to the originals of all documents submitted to us as
copies.
(b) Our opinions expressed herein that the Reorganization Agreement,
the Plan of Merger and the Investment Agreement constitute the valid and
binding obligations of First Moline are legally enforceable against them in
accordance with their terms, are expressly subject to:
i) limitations on the availability of specific enforcement and
other equitable remedies based upon the application of equitable
principles; and
ii) bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance and other similar state and federal
laws affecting the enforcement of creditors' rights generally.
(c) We have assumed that you have obtained any and all required
federal and state banking approvals for the transactions described herein
and that any necessary waiting periods have elapsed.
(d) Our review of the corporate records of First Moline, the Bank and
the Bank Subsidiaries has been limited to the Articles of Incorporation,
the Bylaws, and minutes of the Boards of Directors and shareholders of such
organizations for the last five years.
(e) We have assumed that you have performed (and will perform) all of
your obligations under, and are in full compliance with, the Reorganization
Agreement, the Plan of Merger, and the Investment Agreement.
The opinions contained in this letter are limited to the laws of the United
States and of the States of Delaware and Illinois. We express no opinion as to
the applicability or effect of the laws of any other state or country.
This letter is being delivered to you solely for your benefit pursuant to
Section 7.8 of the Reorganization Agreement and may not be relied upon by any
other person or for any other purpose. This letter is not to be used,
circulated, quoted or otherwise referred to by any other person or for any other
purpose without our prior express written permission.
Very truly yours,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
By:
--------------------------------------
Daniel C. McKay, II, Partner
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<PAGE> 165
EXHIBIT 8.5
[GENERAL COUNSEL LETTERHEAD]
[Closing Date]
First Moline Financial Corp.
1616 6th Avenue
Moline, IL 61265
Gentlemen:
As Senior Vice President and General Counsel of Firstar Corporation
("Firstar"), I am familiar with the Agreement and Plan of Reorganization (the
"Reorganization Agreement") dated as of August 25, 1994, by and among Firstar,
First Moline Financial Corp., a Delaware corporation ("First Moline"), and
Firstar Corporation of Iowa, an Iowa corporation ("FCI"), and the Plan of Merger
and Agreement of Merger dated of even date therewith by and between First Moline
and FCI and joined in by Firstar for certain limited purposes (the "Plan of
Merger"). Section 8.5 of the Reorganization Agreement requires as a condition to
your obligation to consummate the transactions contemplated by the
Reorganization Agreement and the Plan of Merger that you receive an opinion as
of this date as to certain matters. Any capitalized term used, but not defined
herein, shall have the meaning ascribed to it in the Reorganization Agreement or
the Plan of Merger.
As counsel for Firstar, I have examined or caused to be examined such
corporate records, certificates and other documents and have examined such
matters of law as I considered necessary or appropriate for purposes of this
opinion.
Based upon the foregoing, it is my opinion that:
1. Firstar and FCI are corporations duly organized, validly existing and in
active status under the laws of Wisconsin and Iowa, respectively, with full
power and authority to engage in the activities and business now conducted by
them. Firstar and FCI are registered with the Federal Reserve Board as bank
holding companies under the Bank Holding Company Act of 1956, as amended.
2. The authorized capital stock of Firstar consists of (i) 120,000,000
shares of Common Stock, $1.25 par value, shares of which were validly
issued and outstanding as of , 1994, and (ii) 2,500,000 shares of
Preferred Stock, $1.00 par value, of which 600,000 shares of Series C were
reserved for issuance in connection with Firstar's Shareholder Rights Plan
approved January 19, 1989, as of , 1994. All of the issued and
outstanding shares of capital stock of both Firstar and FCI are fully paid and
non-assessable, except as provided in sec. 180.0622(2)(b) of the Wisconsin
Business Corporation Law and judicial interpretations thereof, and not issued in
violation of the preemptive rights of any shareholder.
3. The execution, delivery and performance of the Reorganization Agreement
and the Plan of Merger have been duly authorized and approved by all requisite
action of the boards of directors and shareholders of Firstar and FCI, and the
Reorganization Agreement and the Plan of Merger have been duly executed and
delivered by Firstar and FCI and each constitutes a valid and binding obligation
of Firstar and FCI, enforceable in accordance with their terms, subject to (a)
all applicable bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (b) the application
of equitable principles if equitable remedies are sought.
4. The Registration Statement referred to in Section 1.3 of the
Reorganization Agreement is effective under the Securities Act of 1933, as
amended, and no stop order suspending the effectiveness of the Registration
Statement has been instituted.
5. The Proxy Statement/Prospectus referred to in Section 1.3 of the
Reorganization Agreement, as of the date it was disseminated to holders of
common stock of First Moline, and the Registration Statement, as of the date on
which the Registration Statement became effective (the "Registration Effective
Date"), and any amendment thereto that subsequently become effective, complied
in all material respects with the requirements of the Securities Act of 1933, as
amended; provided, however, that in this connection (a) I have
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<PAGE> 166
First Moline Financial Corp.
[Closing Date]
Page 2
relied upon First Moline and the Bank and their counsel as to the accuracy of
the descriptions included in the Proxy Statement/Prospectus and the Registration
Statement relating to First Moline and the Bank and their business operations;
and (b) I did not participate in the preparation of financial statements and
financial data for First Moline and the Bank included in the Proxy
Statement/Prospectus and the Registration Statement, and I therefore express no
opinion as to such matters.
6. On the basis of information developed and made available to me in the
course of the preparation of the Proxy Statement/Prospectus and the Registration
Statement, but without independently verifying the accuracy, completeness or
fairness of the statements contained therein, nothing has come to my attention
that leads me to believe that (a) the portions of the Proxy Statement/Prospectus
and Registration Statement relating to Firstar and FCI and their affiliates
(other than financial statements and other financial data included therein as to
which I express no opinion) contained, on the Registration Effective Date and at
this date, any untrue statement of a material fact or omitted any material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading, and (b) any event has occurred as a result of which the Proxy
Statement/Prospectus and Registration Statement should be supplemented or
amended to correct any statement regarding Firstar and FCI or their affiliates
made therein or to supplement or amend the statements to include additional
statements.
7. Neither the execution and delivery of the Reorganization Agreement and
the Plan of Merger nor the consummation of the Merger will conflict with, result
in the breach of, constitute a default under or accelerate the performance
provided by the terms of any law, or any rule or regulation of any governmental
agency or authority, or any judgment, order or decree of any court or other
governmental agency to which Firstar may be subject, or any contract, agreement
or instrument to which Firstar is a party or by which Firstar is bound or
committed, or the Articles of Incorporation or Bylaws of Firstar, or constitute
an event that, with the lapse of time or action by a third party, could result
in a default under any of the foregoing or result in the creation of any lien,
charge or encumbrance upon any of the assets, properties or stock of Firstar.
8. The shares of common stock of Firstar to be issued pursuant to the
Reorganization Agreement and the Plan of Merger will be validly issued, fully
paid and non-assessable, except insofar as liability may be imposed under sec.
180.0622(2)(b) of the Wisconsin Business Corporation Law and judicial
interpretations thereof.
9. The Merger, when consummated in accordance with the Reorganization
Agreement and the Plan of Merger, will be valid and effective in accordance with
law.
10. To my knowledge after due investigation, there is no suit, action or
proceeding pending or overtly threatened before any court or other governmental
agency by the federal or state government in which it is or will be sought to
restrain or prohibit the consummation of the Merger.
Very truly yours,
Howard H. Hopwood III
Senior Vice President
and General Counsel
B-38
<PAGE> 167
PLAN OF MERGER
AND
AGREEMENT OF MERGER
This Plan of Merger and Agreement of Merger dated as of August 25, 1994, is
entered into by and between Firstar Corporation of Iowa, an Iowa corporation
("FCI"), and First Moline Financial Corp., a Delaware corporation ("First
Moline"), and joined in by Firstar Corporation, a Wisconsin corporation
("Firstar"), for certain limited purposes.
First Moline is a corporation duly organized and existing under the laws of
Delaware with authorized common stock of 2,000,000 shares, $.01 par value, of
which 282,550 shares are validly issued and outstanding.
FCI is a corporation duly organized and existing under the laws of Iowa
with authorized capital stock of 1,000 shares of Common Stock, no par value
("FCI Common Stock"), of which 1,000 shares are validly issued and outstanding,
and are owned by Firstar.
Firstar is a corporation duly organized and existing under the laws of
Wisconsin with 120,000,000 shares of authorized Common Stock, $1.25 par value
("Firstar Common Stock"), of which 64,318,011 shares were validly issued and
outstanding on March 31, 1994.
Contemporaneous with the execution and delivery of this Plan of Merger and
Agreement of Merger, Firstar, FCI and First Moline, have entered into an
Agreement and Plan of Reorganization (the "Reorganization Agreement" and,
together with this Plan of Merger and Agreement of Merger, the "Agreements")
that contemplates the merger of First Moline with and into FCI (the "Merger"),
on the "Closing Date", as hereinafter defined, upon the terms and conditions
provided in this Plan of Merger.
The Boards of Directors of First Moline and FCI deem it fair and equitable
to, and in the best interests of, their respective shareholders, that First
Moline be merged with and into FCI with FCI being the Surviving Corporation (as
hereinafter defined), on the terms and conditions herein set forth and pursuant
to the Iowa Business Corporation Law and the Delaware General Corporation Law.
Each such Board of Directors has approved this Plan of Merger, has authorized
its execution and delivery and has directed that this Plan of Merger and the
Merger be submitted to its respective shareholders for approval.
The Board of Directors of Firstar has authorized the execution and delivery
of this Plan of Merger and the issuance of the Firstar Common Stock and payment
of the cash provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
provisions and covenants herein contained, the parties hereto adopt and agree to
the following agreements, terms and conditions relating to the Merger and the
mode of carrying the same into effect.
1. Merger. First Moline will be merged with and into FCI, which will be the
surviving corporation (hereinafter called the "Surviving Corporation" whenever
reference is made to it as of the Closing Date or thereafter). Such Merger will
be pursuant to the provisions of and with the effect provided in the Iowa
Business Corporation Law. The date when the Merger will be consummated is
hereinafter referred to as the "Closing Date" as defined in Section 15 below.
2. Name. The name of the Surviving Corporation will be the name of FCI in
effect at the Closing Date.
3. Board of Directors; Officers. The Board of Directors of the Surviving
Corporation at the Closing Date will consist of all the persons who are
directors of FCI immediately prior to the Closing Date. Such directors will
serve as directors of the Surviving Corporation until the next annual meeting of
the Surviving Corporation or until such time as their successors have been
elected and have qualified. The officers of FCI immediately prior to the Closing
Date will be the officers of the Surviving Corporation until their successors
are elected or appointed in accordance with the Bylaws of the Surviving
Corporation.
4. Articles of Incorporation. The Articles of Incorporation of FCI as in
effect immediately prior to the Closing Date will, from and after the Closing
Date, be and continue to be the Articles of Incorporation of the Surviving
Corporation until further amended as provided by law.
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5. Bylaws. The Bylaws of FCI as in effect immediately prior to the Closing
Date will, from and after the Closing Date, be and continue to be the Bylaws of
the Surviving Corporation until the same are altered, amended or rescinded as
therein provided or as provided in the Articles of Incorporation of the
Surviving Corporation.
6. Effect of the Merger. At the Closing Date, First Moline will merge into
FCI which will be the Surviving Corporation, and the separate existence of First
Moline shall cease as provided in sec. 490.1106 of the Iowa Business Corporation
Law. The title to all property owned by each corporation shall be vested in the
Surviving Corporation without reversion or impairment and all liabilities of
each corporation shall become those of the Surviving Corporation. Any civil,
criminal, administrative or investigatory proceeding pending against either
corporation may be continued as if the merger did not occur or the Surviving
Corporation may be substituted in the proceeding.
7. Conversion of Common Stock of FCI. At the Closing Date, the shares of
FCI Common Stock validly issued and outstanding immediately prior to the Closing
Date will, by virtue of the Merger and without any action by the holder thereof,
be converted into 1,000 shares of Common Stock, no par value, of the Surviving
Corporation so that all shares of Common Stock of the Surviving Corporation will
be owned by Firstar. The outstanding certificates representing shares of Common
Stock of FCI will, after the Closing Date, be deemed to represent the number of
shares of the Surviving Corporation into which they have been converted and may
be exchanged for new certificates of the Surviving Corporation upon the request
of the holder thereof.
8. Conversion of Common Stock of First Moline. (a) On the Closing Date,
each share of First Moline Common Stock validly issued and outstanding
immediately prior to the Closing Date (and not held by a dissenting shareholder
under sec. 262 of the Delaware General Corporation Law) will, by virtue of the
Merger and without any action by the holder thereof, be converted into the right
to receive at the times described below the number of shares of Firstar Common
Stock that is equal to (i) the quotient produced by dividing the Dollar Purchase
Price Per Share (as hereinafter defined) by the Market Value of Firstar Common
Stock on the Closing Date (as hereinafter defined), if such Market Value is
between $31.00 and $35.00, (ii) the quotient produced by dividing the Dollar
Purchase Price Per Share by $31.00, if the Market Value of Firstar Common Stock
on the Closing Date is equal to or less than $31.00, or (iii) the quotient
produced by dividing the Dollar Purchase Price Per Share by $35.00, if the
Market Value of Firstar Common Stock on the Closing Date is equal to or greater
than $35.00 (the result of any of the foregoing calculations, the "Exchange
Ratio").
(b) On the Closing Date, the option rights for 2,743 shares of First Moline
Common Stock held by the President of First Moline on the date hereof, will by
virtue of the Merger and without any action by the holder thereof, become and
represent an option right to purchase the number of shares of Firstar Common
Stock (rounded down to the nearest full share) determined by multiplying (x) the
Exchange Ratio, times (y) 2,743, at an exercise price per share of Firstar
Common Stock (rounded up to the nearest whole cent) equal to the quotient
produced by dividing the exercise price per share of the option rights for First
Moline Common Stock by the Exchange Ratio. After the Closing Date, and except as
provided in this Section 8, each option for a share of Firstar Common Stock
shall be exercisable on the same terms and conditions as were applicable under
the First Moline Stock Option and Incentive Plan.
(c) On the Closing Date, each option right for a share of First Moline
Common Stock held by an optionholder on the date hereof, other than Option
rights covered by Section 8(b) above, will, by virtue of the Merger and without
any action by the holder thereof, be converted into the right to receive at the
times described below the number of shares of Firstar Common Stock that is equal
to (i) the quotient produced by dividing the Dollar Purchase Price Per Share (as
hereinafter defined) minus $10.00, by the Market Value of Firstar Common Stock
on the Closing Date (as hereinafter defined), if such Market Value is between
$31.00 and $35.00, (ii) the quotient produced by dividing the Dollar Purchase
Price Per Share minus $10.00 by $31.00, if the Market Value of Firstar Common
Stock on the Closing Date is equal to or less than $31.00, or (iii) the quotient
produced by dividing the Dollar Purchase Price Per Share minus $10.00 by $31.00,
if the Market Value of Firstar Common Stock on the Closing Date is equal to or
greater than $31.00.
For the purposes of this Section 8, the "Market Value of Firstar Common
Stock at the Closing Date" will be equal to the average composite closing prices
per share of Firstar Common Stock on the New York Stock
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Exchange and the Chicago Stock Exchange on the five (5) consecutive trading days
immediately preceding the calendar day immediately preceding the Closing Date.
For the purposes of this Section 8, the "Dollar Purchase Price Per Share" means
(a) $10,000,000 divided by (b) 304,494.
If, during the period beginning on August 25, 1994 and ending upon the
consummation of the Merger, the outstanding shares of Firstar Common Stock shall
have been changed into a different number of shares or a different class by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares, readjustment, stock dividend or similar transaction, or a
distribution shall be made on the Firstar Common Stock in any security
convertible into Firstar Common Stock, or a declaration of, or a record date
for, such a change or distribution shall occur within that period, then
appropriate adjustment or adjustments will be made in the conversion rate set
forth in this sec. 8. Firstar shall give prompt written notice to First Moline
of any event requiring such an adjustment.
On and after the Closing Date, the holder of each such share of First
Moline Common Stock or option right for a share of First Moline Common Stock
will be treated as the record holder of such number of shares of Firstar Common
Stock, subject, however, to the provisions of this Section 8 as to fractional
interests in one share of Firstar Common Stock and to the provisions of Section
9 as to delivery of certificates for, and dividends payable upon, such shares of
Firstar Common Stock. Notwithstanding the foregoing, no stockholder or
optionholder of First Moline will become the holder of any fractional share of
Firstar Common Stock, and neither certificates nor scrip for fractional shares
of Firstar Common Stock will be issued for any fractional interests otherwise
payable upon the Merger. In lieu thereof, each holder of shares of First Moline
Common Stock or option right for a share of First Moline Common Stock who
otherwise would have been entitled to a fractional share of Firstar Common Stock
will be paid the value of such fraction in cash in an amount determined by
multiplying the fractional share interest to which such holder would otherwise
be entitled by the closing price per share of Firstar Common Stock on the
Closing Date on the New York Stock Exchange Composite Transaction Tape. In the
case of any holder of First Moline Common Stock who did not vote for the Merger
and who gives notice of objection with respect to any or all of his shares of
First Moline Common Stock as provided in sec. 262 of the Delaware General
Corporation Law, each such share of First Moline Common Stock will be converted
into the right to receive the fair value of the share as provided in such
statute. At the Closing Date, the holders of First Moline Common Stock or option
right for a share of First Moline Common Stock will cease to have any rights
with respect to such stock other than the rights to receive Firstar Common Stock
as provided herein, cash in lieu of fractional shares or the fair value of the
stock as provided herein or as provided by law.
9. Surrender of First Moline Common Stock Certificates Upon Merger. Each
holder of a certificate or certificates that prior to the Closing Date
represented shares of First Moline Common Stock (other than holders exercising
their rights to dissent in accordance with sec. 262 of the Delaware General
Corporation Law) or option rights for shares of First Moline Common Stock will
surrender the same to Firstar together with instructions for the issuance of
shares of Firstar Common Stock and any payment by Firstar, in lieu of a
fractional interest, to which the holder is entitled pursuant to this Plan of
Merger and Agreement of Merger. Immediately following the Closing Date and after
receipt of such certificates and such instructions in form satisfactory to
Firstar, Firstar will mail, in accordance with such instructions and this Plan
of Merger and Agreement of Merger, a check for any cash payment in lieu of
fractional shares to which the holder is entitled and a certificate or
certificates for any shares of Firstar Common Stock to which the holder is
entitled. Firstar shall provide the form of Letter of Transmittal acceptable to
it, to First Moline at least 15 days prior to the Closing. Until receipt of such
certificates and instructions from a holder of First Moline Common Stock,
Firstar will withhold (i) delivery of any such cash payment and (ii) delivery of
any cash dividends distributed upon shares of Firstar Common Stock into which
such holder's shares or option rights were converted. No interest will be paid
or accrued on any cash payable upon the surrender of such certificates and
Firstar will assume no responsibility for any delay not within Firstar's control
in connection with the payment of any part of such funds. After the Closing Date
and until surrendered for exchange, each outstanding certificate which, prior to
the Closing Date represented shares of First Moline Common Stock, shall be
deemed for all purposes to evidence ownership of and to represent the number of
whole shares of Firstar Common Stock into which such shares of First Moline
Common Stock or option rights for shares of First Moline Common Stock shall
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<PAGE> 170
have been converted, and the record holder of such shares or option rights
shall, after the Closing Date, be entitled to vote the shares of Firstar Common
Stock in to which such shares of First Moline Common Stock or option rights for
shares of First Moline Common Stock shall have been converted on any matters in
which the holders of record of Firstar Common Stock, as of any date subsequent
to the Closing Date, shall be entitled to vote.
10. Shareholder Approval. This Plan of Merger and Agreement of Merger will
be submitted to the respective shareholders of First Moline and FCI for
ratification and confirmation by consent or at meetings to be called and held in
accordance with the applicable provisions of law and the respective Articles of
Incorporation and Bylaws of First Moline and FCI. First Moline and FCI will
proceed expeditiously and cooperate fully in the procurement of any other
consents and approvals and in the taking of any other action, and the
satisfaction of all other requirements prescribed by law or otherwise, necessary
for consummation of the Merger, and the other transactions contemplated hereby
and by the Reorganization Agreement on the terms herein and therein provided.
11. Consummation of the Merger. Consummation of the Merger is conditional
upon the fulfillment or waiver of the conditions precedent set forth in Articles
VII, VIII, and IX of the Reorganization Agreement.
12. Termination. This Plan of Merger and Agreement of Merger may be
terminated and the Merger abandoned by mutual consent of the respective Boards
of Directors of First Moline and FCI at any time prior to the Closing Date or as
otherwise provided in Article XI of the Reorganization Agreement. If the
Reorganization Agreement is terminated in accordance with Article XI thereof,
then this Plan of Merger and Agreement of Merger will terminate simultaneously
and the Merger will be abandoned without further action by First Moline or FCI.
13. Waivers; Amendments. Either First Moline or FCI may, at any time prior
to the Closing Date, by action taken by its Board of Directors or officers
thereunto authorized, waive the performance of any of the obligations of the
other or waive compliance by the other with any of the covenants or conditions
contained in this Plan of Merger and Agreement of Merger or agree to the
amendment or modification of this Plan of Merger and Agreement of Merger by an
agreement in writing executed in the same manner as this Plan of Merger and
Agreement of Merger; provided, however, that after a favorable vote by or
consent of the shareholders of First Moline any such action will be taken by
First Moline only if, in the opinion of its Board of Directors, such waiver,
amendment or modification will not have any material adverse effect on the
benefits intended under this Plan of Merger and Agreement of Merger for the
shareholders of First Moline.
14. Closing Date. The Merger will become effective on the day (the "Closing
Date") on which and at the time at which the Articles of Merger filed by First
Moline and FCI with the Iowa Secretary of State are effective, as provided in
sec. 490.1105 of the Iowa Business Corporation Law.
15. Captions; Counterparts. The captions in this Plan of Merger and
Agreement of Merger are for convenience only and will not be considered a part
of or affect the construction or interpretation of any provision of this Plan of
Merger and Agreement of Merger. This Plan of Merger and Agreement of Merger may
be executed in several counterparts, each of which will constitute one and the
same instrument.
16. Governing Law. This Plan of Merger is to be construed and interpreted
in accordance with the laws of the State of Iowa, except insofar as the laws of
the State of Delaware shall mandatorily apply to the Merger.
17. Notices. All notices given hereunder shall be in writing and shall be
mailed by first-class mail, postage prepaid, or sent by facsimile transmission
or by nationally recognized overnight delivery service, addressed as follows:
(a) If to Firstar or FCI, to:
Firstar Corporation
Attention: Jon H. Stowe,
Executive Vice President
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
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<PAGE> 171
with a copy to:
Firstar Corporation
Law Department
Attn: Howard H. Hopwood, III
Senior Vice President and General Counsel
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(b) If to First Moline, to:
First Moline Financial Corp.
Attention: Byrd Krumbholz
President and Chief Executive Officer
1616 Sixth Avenue
Moline, IL 61265
with a copy to:
Daniel C. McKay, II
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, IL 60601
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<PAGE> 172
18. Consent to Service of Process. FCI shall (a) file with the Secretary of
State of the state of Delaware an agreement that it may be served with process
in the state of Delaware in any proceeding for the enforcement of any obligation
of First Moline and in any proceeding for the enforcement of the rights of a
dissenting shareholder of First Moline against FCI, together with an irrevocable
appointment of said Secretary of State as FCI's agent to accept service of
process in any such proceeding, and (b) specify the address to which a copy of
any such process shall be mailed by the Secretary of State.
[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
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IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger and
Agreement of Merger to be duly executed as of the date first above written.
<TABLE>
<S> <C>
FIRSTAR CORPORATION
[SEAL] By: /s/ JON H. STOWE
--------------------------------------------
Title: Executive Vice President
Attest: /s/ JOHN A. KIELICH
--------------------------------------------
Title: First Vice President
FIRSTAR CORPORATION OF IOWA
[SEAL] By: /s/ JAMES R. LANG
--------------------------------------------
Title: President
Attest: /s/ JEFFREY B. WEEDEN
--------------------------------------------
Title: Senior Vice President
FIRST MOLINE FINANCIAL CORP.
[SEAL] By: /s/ BYRD KRUMBHOLZ
--------------------------------------------
Title: President
Attest: /s/ GLENN MEDHUS
--------------------------------------------
Title: Chairman
</TABLE>
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<PAGE> 174
CERTIFICATE
I, , hereby certify that I am the duly
elected Secretary of First Moline Financial Corp., presently serving pursuant to
the Certificate of Incorporation and Bylaws of the Corporation and, further,
that at a special meeting of the shareholders of the Corporation, held upon due
notice given, a majority of the shares entitled to be votes, were voted in favor
of this Agreement.
--------------------------------------
Secretary
CERTIFICATE
I, , hereby certify that I am a duly elected
Assistant Secretary of Firstar Corporation of Iowa, presently serving pursuant
to the Articles of Incorporation and Bylaws of the Corporation and, further,
that the sole shareholder of the Corporation has consented in writing, in lieu
of a special meeting of the shareholders, to this Agreement.
--------------------------------------
Assistant Secretary
B-46
<PAGE> 175
Appendix C
[HOVDE FINANCIAL, INC. LETTERHEAD]
[INSERT DATE]
Board of Directors
First Moline Financial Corp.
1616 Sixth Avenue
Moline, Illinois 61265-2102
Members of the Board:
First Moline Financial Corp. ("First Moline"), Firstar Corporation of Iowa
("FCI"), a wholly owned subsidiary of Firstar Corporation, and Firstar
Corporation ("Firstar") have entered into an Agreement and Plan of
Reorganization (the "Reorganization Agreement") dated August 26, 1994 and a
Plan of Merger and Agreement of Merger (the "Plan of Merger") dated August 26,
1994 (the Reorganization Agreement and Plan of Merger, collectively, the
"Merger Agreements") which contemplate the merger of First Moline with and into
FCI (the "Merger"). As is set forth in the Merger Agreements, each outstanding
share of First Moline common stock will be exchanged for the number of shares
of Firstar common stock as calculated in Section 8 of the Plan of Merger (the
"Exchange Ratio"). In connection therewith, you have requested our opinion as
to the fairness, from a financial point of view, of the Exchange Ratio to the
shareholders of First Moline.
Hovde Financial, Inc. ("Hovde") specializes in providing investment
banking and financial advisory services to commercial bank and thrift
institutions. Our principals are experienced in the independent valuation of
securities in connection with negotiated underwritings, subscription and
community offerings, private placements, merger and acquisition transactions
and recapitalizations. We are familiar with First Moline, having acted as its
financial advisor in connection with, and having participated in the
negotiations leading to, the Merger Agreements.
We have received and will receive compensation from First Moline in
connection with our services, a significant portion of which is contingent upon
the consummation of the Merger. At your direction, we solicited the interest
of third parties regarding a possible business combination with First Moline.
The Merger Agreements are the result of this solicitation.
[LETTERHEAD]
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<PAGE> 176
Board of Directors
First Moline Financial Corp.
{INSERT DATE}
Page Two
During the course of our engagement, we reviewed and analyzed material bearing
upon the financial and operating conditions of First Moline and Firstar and
material prepared in connection with the proposed transaction, including the
following: the Merger Agreements and this Proxy Statement-Prospectus; certain
publicly available information concerning First Moline and Firstar, including
their Annual Reports on Form 10-KSB and 10-K, respectively, for the fiscal year
ended December 31, 1993 and their Quarterly Reports on Forms 10-QSB and 10-Q,
respectively, for the quarters ended March 31, 1994, June 30, 1994, and
September 30, 1994; certain financial projections and other materials prepared
by Firstar's management regarding Firstar's pending acquisitions of First
Colonial Bankshares Corporation ("First Colonial") and Investors Bank Corp.
("Investors"); the terms of recent merger and acquisition transactions
involving thrifts and thrift holding companies that we considered relevant;
historical price and volume data for First Moline and Firstar common stock; and
certain financial and other information provided to us by the managements of
First Moline and Firstar.
In addition, we have conducted meetings with members of the senior
management of First Moline and Firstar for the purpose of reviewing the future
prospects of First Moline and Firstar. We also evaluated the pro forma
ownership of Firstar common stock by First Moline's shareholders relative to
the pro forma contribution of First Moline's assets, liabilities, equity and
earnings to the pro forma company, and conducted such other studies, analyses
and examinations as we deemed appropriate. We also took into account our
assessment of general economic, market and financial conditions and our
experience in other transactions, as well as our knowledge of the thrift
industry and our general experience in securities valuations.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information and representations that were provided or made to us by
First Moline, Firstar and their respective representatives and of the publicly
available information reviewed by us. We also relied upon Firstar's management
as to the reasonableness and achievability of the financial and operating
forecasts provided to us (and the assumptions and bases therefor) with regard
to Firstar's pending acquisitions of First Colonial and Investors. In that
regard, we assumed that such forecasts, including without limitation projected
cost savings and revenue enhancements resulting from those acquisitions,
reflected the best currently available estimates and judgments of Firstar's
management and that such projections and forecasts would be realized in the
amounts and in the time periods currently estimated by Firstar's management.
We did not independently verify and have relied on and assumed that the
aggregate allowances for loan losses set forth in balance sheets of each of
First Moline and Firstar at September 30, 1994 were adequate to cover such
losses and complied fully with applicable law, regulatory policy and sound
banking practices as
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<PAGE> 177
Board of Directors
First Moline Financial Corp.
[INSERT DATE]
Page Three
of the date of such financial statements. We were not retained to and did not
conduct a physical inspection of any of the properties or facilities of First
Moline or Firstar, nor did we make any independent evaluation or appraisal of
the assets, liabilities or prospects of First Moline or Firstar, nor were we
furnished with any such evaluation or appraisal, and we were not retained to
and did not review any individual credit files.
We have assumed that the Merger is, and will be, in compliance with all
laws and regulations that are applicable to First Moline and Firstar. In
rendering this opinion, we have been advised by First Moline and Firstar and we
have assumed that there are no factors that would impede any necessary
regulatory or governmental approval for the Merger and we have further
assumed that in the course of obtaining the necessary regulatory and
governmental approvals, no restriction will be imposed on Firstar or the
surviving corporation that would have a material adverse effect on Firstar or
the contemplated benefits of the Merger. We have also assumed that there would
not occur any change in the applicable law or regulation that would cause a
material adverse change in the prospects or operations of Firstar or the
surviving corporation after the Merger.
Our opinion is based solely upon the information available to us and the
economic, market and other circumstances as they exist as of the date hereof.
Events occurring after and information that becomes available after the date
hereof could materially affect the assumptions and analyses used in preparing
this opinion. We have not undertaken to reaffirm or revise this opinion or
otherwise comment upon any events occurring or information that becomes
available after the date hereof.
We are not expressing any opinion herein as to the prices at which shares
of Firstar Common Stock issued in the Merger may trade if and when they are
issued or at any future time, nor does our opinion constitute a recommendation
to any holder of First Moline Common Stock as to how such holder should vote
with respect to the Merger Agreements at any meeting of holders of First Moline
Common Stock.
This letter is solely for the information of the Board of Directors of
First Moline and is not to be used, circulated, quoted or otherwise referred
to for any other purpose, nor is it to be filed with, included in or referred
to in whole or in part in any registration statement, proxy statement or any
other document, except in each case in accordance with our prior written
consent which shall not be unreasonably withheld; provided, however, that we
hereby consent to the inclusion and reference to this letter in any
registration statement, proxy statement, information statement or tender offer
document to be delivered to the holders of First Moline
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Board of Directors
First Moline Financial Corp.
{INSERT DATE}
Page Four
Common Stock in connection with the Merger if and only if this letter is quoted
in full or attached as an exhibit to such document and this letter has not been
withdrawn prior to the date of such document.
Subject to the foregoing and based on our experience as investment
bankers, our activities and assumptions as described above, and other factors
we have deemed relevant, we are of the opinion as of the date hereof that the
Exchange Ratio is fair, from a financial point of view, to the shareholders of
First Moline.
Sincerely,
HOVDE FINANCIAL, INC.
By: ____________________________
David J. Brush
Senior Vice President
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<PAGE> 179
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the provisions of Wisconsin Business Corporation Law, Sections
180.0850 through 180.0859, inclusive, directors and officers of Firstar are
entitled to mandatory indemnification from Firstar against certain liabilities
and expenses (i) to the extent such officers or directors are successful in the
defense of a proceeding; and (ii) in proceedings in which the director or
officer is not successful in defense thereof, unless it is determined that the
director or officer breached or failed to perform his or her duties to Firstar
and such breach or failure constituted: (a) a willful failure to deal fairly
with Firstar or its shareholders in connection with a matter in which the
director or officer had a material conflict of interest; (b) a violation of the
criminal law unless the director or officer had reasonable cause to believe his
or her conduct was lawful or had no reasonable cause to believe his or her
conduct was unlawful; (c) a transaction from which the director or officer
derived an improper personal profit; or (d) willful misconduct. Additionally,
under Section 180.0828 of the Wisconsin Business Corporation Law, directors of
Firstar are not subject to personal liability to Firstar, its shareholders or
any person asserting rights on behalf thereof for certain breaches or failures
to perform any duty resulting solely from their status as directors, except in
circumstances paralleling those outlined above.
Firstar's Bylaws contain similar indemnification provisions as to directors
and officers of Firstar. In addition, Firstar has entered into individual
indemnity agreements with all of its current directors. The indemnity agreements
are virtually identical in all substantive respects to Firstar's Bylaws.
Expenses for the defense of any action for which indemnification may be
available may be advanced by Firstar under certain circumstances.
Firstar maintains a liability insurance policy for officers and directors
which extends to, among other things, liability arising under the Securities Act
of 1933, as amended.
In addition, Firstar's Pension Plan and Thrift and Sharing Plan provide for
indemnification of members of the plan committees and directors of Firstar as
follows:
The Company shall indemnify each member of the Plan Committee and the Board
and hold each of them harmless from the consequences of his acts or conduct
in his official capacity, if he acted in good faith and in a manner he
reasonably believed to be solely in the best interests of the Participants
and their Beneficiaries, and with respect to any criminal action or
proceeding had no reasonable cause to believe his conduct was unlawful.
Such indemnification shall cover any and all attorneys' fees and expenses,
judgments, fines and amounts paid in settlement, but only to the extent
such amounts are not paid to such person(s) under the Company's fiduciary
insurance policy and to the extent that such amounts are actually and
reasonably incurred by such person(s).
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits have been filed (except where otherwise
indicated) as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- --------- -------
<S> <C>
2(a) Agreement and Plan of Reorganization dated as of August 25, 1994, among Firstar
Corporation, Firstar Corporation of Iowa and First Moline Financial Corp.
2(b) Plan of Merger and Agreement of Merger dated as of August 25, 1994, between First
Moline Financial Corp. and Firstar Corporation of Iowa and joined in by Firstar
Corporation for certain limited purposes
2(c) Voting Agreement[s] between Firstar Corporation and Gene Blanc, Jon Christensen,
Daniel Churchill, Kent Crippen, Dennis Hoffman, Byrd Krumbholz, Glenn Medhus, and
Michael Steffenson, dated as of August 25, 1994
</TABLE>
S-1
<PAGE> 180
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- --------- ----------------------------------------------------------------------------------
<S> <C>
3(a) Restated Articles of Incorporation, as amended, of Firstar (Exhibit to ;
incorporated herein by reference)
3(b) By-laws of Firstar (Exhibit to ; incorporated herein by reference)
4(a) Indenture dated as of June 1, 1986, between Firstar Corporation and Chemical Bank,
as Trustee, relating to Firstar Corporation's 10% Notes due 1996 (Exhibit 4(b) to
Amendment No. 1 to Registration No. 33-5932; incorporated herein by reference)
4(b) Indenture dated as of May 1, 1988, between Firstar Corporation and Chemical Bank,
as Trustee, relating to Firstar Corporation's 10 1/4% Notes due 1998 (Exhibit 4(a)
to Amendment No. 1 to Registration No. 33-21527; incorporated herein by reference)
4(c) Shareholder Rights Plan of Firstar Corporation (Exhibit 4 of Form 8-K dated
January 19, 1989; incorporated herein by reference)
5 Opinion of Howard H. Hopwood III, Esq.
8 Tax Opinion of Vedder, Price, Kaufman & Kammholz
13(a) Firstar Corporation's Annual Report on Form 10-K for the year ended December 31,
1993 (incorporated herein by reference)
13(b) Firstar Corporation's Quarterly Reports on Form 10-Q for the quarters ended March
31, June 30, and September 30, 1994 (incorporated herein by reference)
15 Letter from KPMG Peat Marwick LLP regarding unaudited interim financial
information (included in consent)
23(a) Consent of McGladrey & Pullen LLP addressed to Board of Directors of First Moline
Financial Corp.
23(b) Consent of KPMG Peat Marwick LLP addressed to Board of Directors of Firstar
Corporation
23(c) Consent of Howard H. Hopwood III, Esq. (included in opinion)
23(d) Consent of Vedder, Price, Kaufman & Kammholz (included in opinion)
23(e) Consent of Hovde Financial, Inc. (included in opinion)
24 Powers of Attorney
99 Form of Proxy for the First Moline Special Meeting of Shareholders
</TABLE>
(b) No financial statement schedules are required to be filed with regard
to Firstar or First Moline.
ITEM 22. UNDERTAKINGS.
(1) Firstar hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended, each filing of the
Registrant's Special report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended, 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.
(2) Firstar 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.
(3) Firstar undertakes that every Prospectus (i) that is filed pursuant to
paragraph (2) immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the 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 of 1933, as amended, each such post-effective amendment
S-2
<PAGE> 181
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.
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of Firstar pursuant to the foregoing provisions, or otherwise, Firstar
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Firstar of expenses incurred or paid
by a director, officer or controlling person or Firstar in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered,
Firstar 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 is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
(5) Firstar hereby undertakes to respond to requests for information that
is incorporated by reference into the Prospectus pursuant to Items 4, 10(b), 11
or 13 of this Form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding to
the request.
(6) Firstar 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.
(7) Firstar hereby undertakes 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.
S-3
<PAGE> 182
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 Milwaukee and State of
Wisconsin on January 10, 1995.
FIRSTAR CORPORATION
By: /s/ ROGER L. FITZSIMONDS
--------------------------------------
Roger L. Fitzsimonds
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- -------------------------------- -----------------
<S> <C> <C>
/s/ ROGER L. FITZSIMONDS Chairman of the Board,
- ---------------------------------------- Chief Executive Officer
Roger L. Fitzsimonds and Director January 10, 1995
/s/ JOHN A. BECKER* President, Chief Operating
- ---------------------------------------- Officer
John A. Becker and Director January 10, 1995
/s/ WILLIAM H. RISCH* Senior Vice President-Finance
- ---------------------------------------- and Treasurer
William H. Risch January 10, 1995
/s/ MICHAEL E. BATTEN* Director
- ----------------------------------------
Michael E. Batten January 10, 1995
Director
- ----------------------------------------
Robert C. Buchanan January , 1995
/s/ GEORGE M. CHESTER, JR.* Director
- ----------------------------------------
George M. Chester, Jr. January 10, 1995
/s/ ROGER H. DERUSHA* Director
- ----------------------------------------
Roger H. Derusha January 10, 1995
/s/ JAMES L. FORBES* Director
- ----------------------------------------
James L. Forbes January 10, 1995
/s/ HOLMES FOSTER* Director
- ----------------------------------------
Holmes Foster January 10, 1995
/s/ JOSEPH F. HEIL, JR.* Director
- ----------------------------------------
Joseph F. Heil, Jr. January 10, 1995
/s/ JOHN H. HENDEE, JR.* Director
- ----------------------------------------
John H. Hendee, Jr. January 10, 1995
/s/ JERRY M. HIEGEL* Director
- ----------------------------------------
Jerry M. Hiegel January 10, 1995
</TABLE>
<PAGE> 183
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- -------------------------------- -----------------
<S> <C> <C>
/s/ JOSEPH F. HLADKY, III* Director
- ----------------------------------------
Joseph F. Hladky, III January 10, 1995
/s/ JAMES H. KEYES* Director
- ----------------------------------------
James H. Keyes January 10, 1995
/s/ SHELDON B. LUBAR* Director
- ----------------------------------------
Sheldon B. Lubar January 10, 1995
/s/ DANIEL F. MCKEITHAN, JR.* Director
- ----------------------------------------
Daniel F. McKeithan, Jr. January 10, 1995
/s/ GEORGE W. MEAD, II* Director
- ----------------------------------------
George W. Mead, II January 10, 1995
/s/ GUY A. OSBORN* Director
- ----------------------------------------
Guy A. Osborn January 10, 1995
/s/ JUDITH D. PYLE* Director
- ----------------------------------------
Judith D. Pyle January 10, 1995
/s/ CLIFFORD V. SMITH, JR.* Director
- ----------------------------------------
Clifford V. Smith, Jr. January 10, 1995
/s/ WILLIAM W. WIRTZ* Director
- ----------------------------------------
William W. Wirtz January 10, 1995
</TABLE>
By: /s/ HOWARD H. HOPWOOD III
--------------------------------------
Howard H. Hopwood III
Attorney-in-Fact
- -------------------------
* Pursuant to authority granted by powers of attorney filed with the
Registration Statement.
<PAGE> 184
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. EXHIBIT PAGE NUMBER
- --------- ---------------------------------------------------------------------- -----------
<S> <C> <C>
2(a) Agreement and Plan of Reorganization dated as of August 25, 1994,
among Firstar Corporation, Firstar Corporation of Iowa and First
Moline Financial Corp.
2(b) Plan of Merger and Agreement of Merger dated as of August 25, 1994,
between First Moline Financial Corp. and Firstar Corporation of Iowa
and joined in by Firstar Corporation for certain limited purposes
2(c) Voting Agreement[s] between Firstar Corporation and Gene Blanc, Jon
Christensen, Daniel Churchill, Kent Crippen, Dennis Hoffman, Byrd
Krumbholz, Glenn Medhus, and Michael Steffenson, dated as of August
25, 1994
3(a) Restated Articles of Incorporation, as amended, of Firstar (Exhibit
to ; incorporated herein by reference)
3(b) By-laws of Firstar (Exhibit to ; incorporated herein by reference)
4(a) Indenture dated as of June 1, 1986, between Firstar Corporation and
Chemical Bank, as Trustee, relating to Firstar Corporation's 10% Notes
due 1996 (Exhibit 4(b) to Amendment No. 1 to Registration No. 33-5932;
incorporated herein by reference)
4(b) Indenture dated as of May 1, 1988, between Firstar Corporation and
Chemical Bank, as Trustee, relating to Firstar Corporation's 10 1/4%
Notes due 1998 (Exhibit 4(a) to Amendment No. 1 to Registration No.
33-21527; incorporated herein by reference)
4(c) Shareholder Rights Plan of Firstar Corporation (Exhibit 4 of Form 8-K
dated January 19, 1989; incorporated herein by reference)
5 Opinion of Howard H. Hopwood III, Esq.
8 Tax Opinion of Vedder, Price, Kaufman & Kammholz
13(a) Firstar Corporation's Annual Report on Form 10-K for the year ended
December 31, 1993 (incorporated herein by reference)
13(b) Firstar Corporation's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 1994 (incorporated herein
by reference)
15 Letter from KPMG Peat Marwick LLP regarding unaudited interim
financial information (included in consent)
23(a) Consent of McGladrey & Pullen LLP addressed to Board of Directors of
First Moline Financial Corp.
23(b) Consent of KPMG Peat Marwick LLP addressed to Board of Directors of
Firstar Corporation
23(c) Consent of Howard H. Hopwood III, Esq. (included in opinion)
23(d) Consent of Vedder, Price, Kaufman & Kammholz (included in opinion)
23(e) Consent of Hovde Financial, Inc. (included in opinion)
24 Powers of Attorney
99 Form of Proxy for the First Moline Special Meeting of Shareholders
</TABLE>
<PAGE> 1
EXHIBIT 2(A)
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
FIRSTAR CORPORATION,
FIRSTAR CORPORATION OF IOWA
AND
FIRST MOLINE FINANCIAL CORP.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
ARTICLE I
Undertakings of the Parties
1.1 The Merger.................................................................. 1
1.2 Articles Amendments; Approval of the Agreements............................. 1
1.3 Preparation of Registration Statement....................................... 1
1.4 Issuance of Firstar Common Stock............................................ 2
1.5 Preparation of Bank Regulatory Applications................................. 2
1.6 Closing..................................................................... 3
1.7 Confidential Information.................................................... 3
1.8 No Covenant as to Tax Consequences.......................................... 3
1.9 Release of Information...................................................... 3
1.10 Employment Agreement and Other Transitional Matters......................... 3
1.11 Board of Directors; Officers and Employees.................................. 4
1.12 Dissenters' Rights.......................................................... 4
ARTICLE II
Representations and Warranties of Firstar
2.1 Corporate Organization...................................................... 4
2.2 Capitalization.............................................................. 4
2.3 Authorization............................................................... 4
2.4 No Violation................................................................ 5
2.5 Financial Statements........................................................ 5
2.6 Registration Statement...................................................... 5
2.7 Shares to be Issued......................................................... 6
2.8 Accuracy of Information..................................................... 6
2.9 No Material Adverse Change.................................................. 6
2.10 Matters Concerning Regulatory Approvals..................................... 6
2.11 Litigation.................................................................. 6
2.12 Reports..................................................................... 6
2.13 Employee and Employee Benefit Matters....................................... 6
ARTICLE III
Representations and Warranties of FCI
3.1 Corporate Organization...................................................... 7
3.2 Capitalization.............................................................. 7
3.3 Authorization............................................................... 7
3.4 No Violation................................................................ 8
3.5 Accuracy of Information..................................................... 8
ARTICLE IV
Representations and Warranties of First Moline
4.1 Corporate Organization...................................................... 8
4.2 Capitalization.............................................................. 8
4.3 Organization of the Subsidiaries............................................ 9
4.4 Capitalization of the Subsidiaries.......................................... 9
4.5 Authorization............................................................... 9
4.6 No Violation................................................................ 10
4.7 Financial Statements........................................................ 10
4.8 Absence of Certain Changes.................................................. 10
4.9 Employee and Employee Benefit Matters....................................... 11
4.10 Litigation.................................................................. 12
4.11 Tax Matters................................................................. 12
4.12 Registration Statement...................................................... 13
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
4.13 Title and Condition......................................................... 13
4.14 Insurance................................................................... 14
4.15 Compliance with Laws and Orders............................................. 14
4.16 Governmental Regulation..................................................... 15
4.17 Contracts and Commitments................................................... 15
4.18 Shareholders and Undertakings from Affiliates............................... 15
4.19 Matters Relating to Directors, Officers and Shareholders.................... 15
4.20 Absence of Adverse Agreements............................................... 16
4.21 Accuracy of Information..................................................... 16
4.22 Allowance for Loan Losses................................................... 16
4.23 No Undisclosed Liabilities.................................................. 16
4.24 Pooling and Tax-Free Status Matters......................................... 16
4.25 Reports..................................................................... 16
4.26 Opinion of Financial Advisor................................................ 16
ARTICLE V
Conduct of Business by Firstar
5.1 Approval by Firstar......................................................... 17
5.2 Subsequent SEC Filings...................................................... 17
5.3 Conduct of Business; Certain Covenants...................................... 17
5.4 Employee Benefits........................................................... 17
5.5 Access to Information....................................................... 18
5.6 First Moline Pension Plan................................................... 18
5.7 Indemnification............................................................. 18
5.8 No Adverse Action........................................................... 18
ARTICLE VI
Conduct of Business by First Moline Until Merger
6.1 Dividends................................................................... 19
6.2 Capitalization.............................................................. 19
6.3 Ordinary Course of Business................................................. 19
6.4 Contact with Third Parties; No Board Recommendation......................... 20
6.5 Corporate Structure......................................................... 20
6.6 Accounting and Tax Reporting................................................ 20
6.7 Full Disclosure............................................................. 20
6.8 Reports to Firstar.......................................................... 20
6.9 Solicitation of First Moline Shareholders................................... 20
6.10 Supplement to First Moline Letter........................................... 21
6.11 Employee Benefit Plans...................................................... 21
6.12 Bank-Level Transactions..................................................... 21
6.13 Classification of Certain Assets............................................ 21
6.14 Allowance for Loan Losses................................................... 21
6.15 Termination of Data Processing Agreement.................................... 21
6.16 Environmental Audits........................................................ 21
6.17 Recapture of Tax Bad Debt Reserve........................................... 21
ARTICLE VII
Conditions to Obligations of Firstar and FCI
7.1 No Material Adverse Change.................................................. 22
7.2 Representations and Warranties.............................................. 22
7.3 Performance and Compliance.................................................. 22
7.4 No Proceeding or Litigation................................................. 22
7.5 Review or Audit by Firstar and Accountants.................................. 22
7.6 Audit of Plans.............................................................. 22
7.7 Pooling Letter.............................................................. 22
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
7.8 Opinion of Counsel for First Moline......................................... 23
7.9 Certificate of Chief Executive Officer...................................... 23
7.10 Corporate Certificates...................................................... 23
7.11 Bills for Certain Fees of First Moline or the Bank.......................... 23
7.12 Tax Opinion................................................................. 23
7.13 Termination of Pension Plan................................................. 23
7.14 Charter Conversion.......................................................... 23
ARTICLE VIII
Conditions to the Obligations of First Moline
8.1 No Material Adverse Change.................................................. 23
8.2 Representations and Warranties.............................................. 23
8.3 Performance and Compliance.................................................. 24
8.4 No Proceeding or Litigation................................................. 24
8.5 Opinion of Counsel for Firstar and FCI...................................... 24
8.6 Certificate of Executive Officer............................................ 24
8.7 Tax Opinion................................................................. 24
8.8 Listing..................................................................... 24
8.9 Opinion of Financial Advisor................................................ 24
ARTICLE IX
Conditions to the Obligations of all Parties
9.1 Governmental Approvals...................................................... 24
9.2 Securities Law Compliance................................................... 24
9.3 Shareholder Approval........................................................ 25
ARTICLE X
Inducement
10.1 Inducement.................................................................. 25
ARTICLE XI
Termination
11.1 Reasons for Termination..................................................... 26
11.2 Liability................................................................... 27
ARTICLE XII
Miscellaneous
12.1 Brokers..................................................................... 27
12.2 Expenses.................................................................... 27
12.3 Waivers; Amendments......................................................... 28
12.4 Assignment.................................................................. 28
12.5 Entire Agreement............................................................ 28
12.6 Captions and Counterparts................................................... 28
12.7 Governing Law............................................................... 28
12.8 Nonsurvival................................................................. 28
12.9 Knowledge of the Parties.................................................... 28
12.10 Notices..................................................................... 28
</TABLE>
iii
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization dated as of August 25, 1994 (the
"Reorganization Agreement"), is entered into by and among Firstar Corporation, a
Wisconsin corporation ("Firstar"), First Moline Financial Corp., a Delaware
corporation ("First Moline"), and Firstar Corporation of Iowa, an Iowa
corporation and a wholly-owned subsidiary of Firstar ("FCI").
WHEREAS, this Reorganization Agreement provides for the merger of First
Moline with and into FCI (the "Merger") and for the conversion at the Closing
Date, as such term is defined herein, of all the outstanding shares of common
stock of First Moline, $.01 par value ("First Moline Common Stock"), into the
right to receive shares of common stock of Firstar, $1.25 par value ("Firstar
Common Stock"), in accordance with the terms and conditions hereof and of the
Plan of Merger and Agreement of Merger (the "Plan of Merger") executed
concurrently herewith between FCI and First Moline, and joined in by Firstar for
certain limited purposes (the "Plan of Merger" and together with this
Reorganization Agreement, the "Agreements");
WHEREAS, the respective Boards of Directors of First Moline, Firstar and
FCI deem the Merger desirable and in the best interests of their respective
shareholders;
WHEREAS, the parties hereto desire and intend that the Merger qualify as a
tax-free reorganization under the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, the parties hereto desire and intend that the Merger be accounted
for as a "pooling of interests" in accordance with generally accepted accounting
principles;
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations, warranties, and agreements herein contained, and in order to
set forth the conditions upon which the foregoing reorganization will be carried
out, the parties agree as follows:
ARTICLE I
UNDERTAKINGS OF THE PARTIES
1.1 The Merger. Subject to the terms and conditions of this Reorganization
Agreement, on the Closing Date, First Moline will merge with and into FCI, which
will be the surviving corporation.
1.2 Articles Amendments; Approval of the Agreements. (a) The Agreements and
the proposed amendments to the Certificate of Incorporation of First Moline, in
the form of Exhibit 1.2 hereto, or an alternate form of amendments to First
Moline's Certificate of Incorporation to permit the Merger and the other
transactions contemplated by the Agreements (the "Certificate Amendments") will
be submitted as soon as reasonably practicable to the shareholders of First
Moline for ratification, confirmation and adoption at a meeting to be duly
called and held in accordance with law and the Certificate of Incorporation and
Bylaws of First Moline. The Agreements have been submitted to Firstar, as the
sole shareholder of FCI, for ratification, confirmation and adoption by consent
in accordance with law and the Articles of Incorporation and Bylaws of Firstar
and FCI, respectively, and have been so ratified, confirmed and adopted by
Firstar.
(b) Prior to Closing (as defined below), First Moline will amend its
Certificate of Incorporation as set forth in the Certificate Amendments.
1.3 Preparation of Registration Statement. Firstar will use its best
efforts to file, within 45 days after the date hereof, and subsequently
prosecute the filing of a registration statement and amendments thereto
(hereinafter the registration statement and amendments thereto are referred to
as the "Registration Statement") with the Securities and Exchange Commission
(the "SEC") covering the Firstar Common Stock to be issued in the Merger with a
view toward permitting the Registration Statement to become effective as soon as
reasonably practicable. First Moline, its directors, officers, agents and
representatives shall use their best efforts in providing to Firstar the
information referred to in the next sentence. First Moline will furnish to
Firstar all information concerning First Moline required to be set forth in the
Registration Statement and Firstar will furnish to First Moline such information
concerning Firstar as is reasonably
<PAGE> 6
required by First Moline in connection with the preparation of proxy
solicitation materials for use in soliciting proxies in connection with the
meeting of First Moline's stockholders called for the purpose of voting on the
Merger. Firstar will provide First Moline and its counsel the opportunity to
review and approve the Proxy Statement portions of the Registration Statement.
Firstar shall promptly advise First Moline and its counsel, and provide them
with copies, of all filings with the SEC regarding the Registration Statement
and any material communication received by Firstar or its counsel from the SEC
with respect to the Registration Statement. Firstar will bear the cost of
preparation, filing and duplication of the Registration Statement, including the
information or proxy statement and the prospectus included therein (the "Proxy
Statement-Prospectus"). The date on which the Registration Statement becomes
effective is referred to herein as the "Registration Effective Date". Firstar
and First Moline will each render to the other its full cooperation in
preparing, filing, prosecuting the filing of, and amending the Registration
Statement such that it comports at all times with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Specifically, but
without limitation, each will promptly advise the other if at any time before
the Closing Date any information provided by it for inclusion in the
Registration Statement appears to have been, or shall have become, incorrect or
incomplete and will furnish the information necessary to correct such
misstatements or omissions. As promptly as practicable after the Registration
Effective Date, First Moline will mail or deliver to its shareholders (i) the
Proxy Statement-Prospectus and (ii) as promptly as practicable after approval
thereof by Firstar, such other supplementary proxy materials as may be necessary
to make the Proxy Statement-Prospectus comply with the requirements of the
Securities Act. Except as provided above and except with the prior written
consent of Firstar, First Moline will not mail or otherwise furnish or publish
to its shareholders any proxy solicitation material or other material relating
to the Merger that might constitute a "prospectus" within the meaning of the
Securities Act. Firstar shall, as soon as practicable, make all filings required
to obtain any Blue Sky permits, authorizations, consents or approvals required
for the issuance of the Firstar Common Stock to be issued in the Merger. In the
event of the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceeding for that
purpose, Firstar will make every reasonable effort to prevent the issuance of
any stop order and, if any stop order is issued, to obtain the lifting of such
order at the earliest possible moment.
1.4 Issuance of Firstar Common Stock. Upon the occurrence of the Closing
(as that term is defined below), Firstar shall issue or make available such
shares of Firstar Common Stock as are necessary to complete the transactions
contemplated in the Agreements. If, during the period beginning on the date
hereof and ending upon the consummation of the Merger, the outstanding shares of
Firstar Common Stock shall have been changed into a different number of shares
or a different class by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares, readjustment, stock dividend or
similar transaction, or a distribution shall be made on the Firstar Common Stock
in any security convertible into Firstar Common Stock, or a declaration of, or a
record date for, such a change or distribution shall occur within that period,
then appropriate adjustment or adjustments will be made in the conversion rate
set forth in sec. 8 of the Plan of Merger and to the price protection mechanism
in sec. 11.1(c)(iv) of this Agreement. Firstar shall give prompt written notice
to First Moline of any event requiring such an adjustment.
1.5 Preparation of Bank Regulatory Applications. Firstar, FCI and First
Moline will cooperate in the preparation by Firstar and FCI of applications, and
Firstar and FCI will use their best efforts to submit for filing, within 45 days
after the date hereof, applications to (i) the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") pursuant to the Bank Holding
Company Act of 1956, as amended (the "BHCA"), for approval of Firstar's and
FCI's acquisition of control of First Moline and its subsidiary, First Federal
Savings Bank of Moline ("Bank"), (ii) the Illinois Commissioner of Banks and
Trust Companies (the "Illinois Commissioner") pursuant to the Illinois Banking
Holding Company Act of 1957, as amended, (the "Illinois BHCA") for approval of
the transactions contemplated in the Agreements, (iii) to the Office of Thrift
Supervision of the Department of the Treasury (the "OTS"), (iv) to the Office of
the Comptroller of the Currency (the "OCC") regarding the matters discussed in
Sections 6.12 and 7.14 hereof and (v) any other federal or state bank or thrift
regulatory agency the approval of which may be necessary or appropriate. Firstar
will provide First Moline and its counsel with an opportunity to review the
parts of the drafts of all such applications that contain information about
First Moline. Firstar will provide First Moline and its counsel with copies of
all the non-confidential portions of such applications as filed, together with
the
2
<PAGE> 7
non-confidential portions of related correspondence to or from the regulatory
authorities. Firstar will use its best efforts to obtain such regulatory
approvals. The obligation to use such best efforts shall not be construed as
including an obligation to continue pursuing any approval after it has become
apparent that the approval is likely to contain material terms or conditions
that are not reasonably acceptable to Firstar. First Moline will furnish such
information, appropriate representations and documents as may be necessary in
connection therewith and as the parties may mutually agree. First Moline, its
directors, officers, agents and representatives shall use their best efforts in
providing the information and performing the reviews described in this Section
1.5.
1.6 Closing. Subject to the terms and conditions herein set forth, the
closing of the transactions contemplated by this Reorganization Agreement
("Closing") will be effected as soon as practicable following the satisfaction
or waiver of the last of the conditions set forth in Articles VII, VIII and IX
hereof and the expiration of any waiting periods in connection with necessary
regulatory approvals, or on such other date as may be mutually agreed upon by
the parties, but in no event shall the Closing take place more than ten business
days after receipt of all required regulatory approvals and the expiration of
any waiting periods in connection with such regulatory approvals ("Closing
Date"). Each of the parties hereto agrees to pursue with reasonable diligence
the satisfaction of such conditions. It is anticipated that the Closing will
take place on the Closing Date at the offices of Firstar, or at such other place
as shall be mutually agreeable to Firstar and First Moline.
1.7 Confidential Information. All information that has been or will be
furnished by any party to another party in connection with the Agreements that
is regarded by such furnishing party as confidential (and is so designated at
the time of delivery or the date of this Agreement, whichever is later) will be
kept confidential by such other party and will be used only in connection with
the Agreements and the transactions contemplated thereby, except to the extent
that (i) such information is or thereafter becomes lawfully obtainable from
other public sources; (ii) is already known to such other party when received;
or (iii) disclosure is required by a law, regulation or order of a court or
regulatory agency of competent jurisdiction or authority. In the event the
Agreements are terminated as provided in Article XI hereof, all documents or
materials provided by either party shall be either destroyed or returned
promptly to the supplying party, the receiving party shall not retain any copies
thereof and shall destroy any notes which have been prepared from such documents
or materials. The parties agree that the terms and conditions of this Section
shall supersede any previously executed and delivered confidentiality agreements
between the parties. The term "party" in this Section 1.7 shall include all
officers, directors, employees, agents, advisors or representatives.
1.8 No Covenant as to Tax Consequences. It is understood and agreed that
Firstar, FCI and First Moline and all of their respective officers or agents
have not made any warranty or agreement, expressed or implied, as to the tax
consequences of the transactions contemplated by the Agreements or the tax
consequences of any action pursuant to or growing out of the Agreements;
provided, however, that neither Firstar, FCI nor First Moline shall willfully
take any action to prevent, or omit to take any action necessary for, the
qualification of the Merger as a tax-free reorganization under the Code.
Following the Closing, Firstar shall make such filings with the Internal Revenue
Service as are required by the regulations promulgated under sec. 368 of the
Code.
1.9 Release of Information. Neither Firstar nor First Moline shall, nor
shall either of them permit its directors, officers, employees or agents to,
issue or cause the publication of any initial formal announcement with respect
to the Agreements or the Merger without the prior consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that such
consent shall not be required where such release, announcement or disclosure is
required by applicable law or the rules or regulations of a securities exchange,
other self-regulatory authority or governmental agency. First Moline and Firstar
will each use their best efforts to cooperate in coordinating the public release
of information concerning the transactions contemplated by the Agreements.
1.10 Employment Agreement and Other Transitional Matters. Firstar shall,
and shall cause its subsidiaries to, keep in full force and effect those certain
Employment Agreements, dated as of September 30, 1993, by
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and between First Moline and Byrd Krumbholz ("Krumbholz") and by and between the
Bank and Krumbholz, as discussed more fully in that certain transitional matters
letter (the "Transitional Matters Letter") between Firstar and First Moline of
even date herewith.
1.11 Board of Directors; Officers and Employees. Except as disclosed in
writing to First Moline prior to the Closing Date hereof, the directors,
officers and employees of the Bank immediately prior to the Closing Date shall
be directors, officers and employees of the Bank, or any of its subsequent
successors or assigns, immediately following the Closing Date.
1.12 Dissenters' Rights. Holders of First Moline Common Stock who do not
vote their shares in favor of the Merger and otherwise perfect applicable
dissenters' rights will be entitled to dissenters' or appraisal rights pursuant
to applicable provisions of the Delaware General Corporation Law. Firstar shall
have the opportunity to participate in any discussions or negotiations arising
out of this Section.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FIRSTAR
Firstar represents and warrants to First Moline as follows:
2.1 Corporate Organization. Firstar is a corporation duly organized,
validly existing and in active status under the laws of the state of Wisconsin
with full power and authority to engage in the activities and business now
conducted by it. Firstar possesses and is in compliance in all material respects
with all licenses, franchise, permits and other governmental authorizations that
are legally required except where the lack of any such license, franchise,
permit or authorization or the failure to be in such compliance would not
reasonably be expected to have a material adverse effect on the financial
condition, assets or business operations of Firstar and its subsidiaries, taken
as a whole. Firstar is registered and is in good standing with the Federal
Reserve Board as a bank holding company under the Bank Holding Company Act of
1956, as amended. Firstar has delivered to First Moline true, accurate and
complete copies of the currently effective Articles of Incorporation and Bylaws
of Firstar, including all amendments thereto. Neither Firstar nor any of its
subsidiaries is subject to any formal or informal agreement or understanding
with, nor are any of them subject to, any order of any bank regulatory authority
restricting or prohibiting or attempting to restrict or prohibit any activities
or conduct of Firstar or any of its subsidiaries.
2.2 Capitalization. As of March 31, 1994, the authorized capital stock of
Firstar consisted of (i) 120,000,000 shares of Common Stock, $1.25 par value,
64,318,011 shares of which were validly issued and outstanding, and (ii)
2,500,000 shares of Preferred Stock, $1.00 par value, of which 600,000 shares of
Series C are reserved for issuance in connection with Firstar's Shareholder
Rights Plan approved January 19, 1989 (as used herein, the term "Firstar Common
Stock" includes one half of a Preferred Stock Purchase Right issued pursuant to
the Rights Agreement dated as of January 29, 1989, between Firstar and Firstar
Trust Company, as Rights Agent). All of such issued and outstanding shares of
capital stock are fully paid and nonassessable, except as provided in Section
180.0622(2)(b) of the Wisconsin Statutes and judicial interpretations thereof.
None of the issued and outstanding shares of Firstar Common Stock has been
issued in violation of any preemptive rights. Except as contemplated in the
Agreements or as set forth in the most recent report of Firstar filed with the
SEC on Form 10-K, or as required in any publicly announced acquisition
transaction or in the ordinary course of business in connection with Firstar's
currently existing stock option plans, there are, as of the date of the
Agreements, no outstanding warrants, options, rights, calls or other commitments
of any nature relating to the authorized but unissued shares of Firstar Common
Stock or concerning the authorization, issuance or sale of any other class of
equity or debt securities of Firstar or any of its subsidiaries.
2.3 Authorization. The Interstate Banking and Acquisitions Committee of the
Board of Directors of Firstar has approved the transactions contemplated by the
Agreements and has authorized the execution, delivery and performance by Firstar
of the Agreements and which such Committee has full power and authority to
approve and authorize such matters, except the issuance of the securities
contemplated in this Reorganization Agreement, on Firstar's behalf; the Board of
Directors of Firstar has ratified, adopted and approved the Committee's actions
and has authorized the issuance of the securities contemplated hereunder.
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Firstar has full corporate power and authority to enter into the Agreements and
to consummate the transactions contemplated thereby. The Agreements are valid
and binding obligations of Firstar, enforceable in accordance with their terms,
subject to (i) all applicable bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally, and (ii)
the application of equitable principles if equitable remedies are sought.
Firstar has, as sole shareholder of FCI, approved the Agreements in accordance
with law and the Articles of Incorporation and Bylaws of Firstar and FCI,
respectively.
2.4 No Violation. Provided that the requisite approvals from the Federal
Reserve Board, the OTS, the OCC, Illinois Commissioner and any other regulatory
agencies are obtained and the offering of Firstar Common Stock to be issued
hereunder is duly registered pursuant to the Securities Act, and, to the extent
applicable, under state securities or blue sky laws, neither the execution and
delivery of the Agreements nor the consummation of the transactions contemplated
therein will conflict with, result in the breach of, constitute a default under
or accelerate the performance provided by the terms of any law, or any rule or
regulation of any governmental agency or authority, or any judgment, order or
decree of any court or other governmental agency to which Firstar may be
subject, or any contract, agreement or instrument to which Firstar is a party or
by which Firstar is bound or committed, or the Articles of Incorporation or
Bylaws of Firstar, or constitute an event that with the lapse of time or action
by a third party, could, to the best of Firstar's knowledge, result in a default
under any of the foregoing or result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of Firstar or its subsidiaries
or the capital stock of Firstar. Firstar is an "out of state bank holding
company" within the meaning of sec. 2(p) of the Illinois BHCA and consummation
of the transactions contemplated in the Agreements will not violate the Illinois
BHCA. Subject only to obtaining the required regulatory approvals, Firstar is,
and at all times after the date of this Agreement, through and including the
Closing Date will be, authorized to effect the Merger under applicable law.
2.5 Financial Statements. Firstar has heretofore delivered to First Moline
copies of the following financial statements and information relating to Firstar
and its consolidated subsidiaries: (i) the Consolidated Statements of Condition
of Firstar as of December 31, 1992 and 1993, and the Consolidated Statements of
Income, Shareholders' Equity and Changes in Financial Position for each of the
years in the three-year period ended December 31, 1993, together with the notes
thereto, as certified by KPMG Peat Marwick, Firstar's independent auditors, (ii)
Firstar's 1993 and 1994 Proxy Statements in connection with its annual
shareholders meetings, (iii) Firstar's 1992 and 1993 Form 10-Ks filed with the
SEC, (iv) Firstar's Form 10-Qs for the first quarter of 1993 and 1994, and (v)
that certain press release dated June 8, 1994. Each of the aforementioned
financial statements has, where necessary, been filed in a timely manner with
the SEC and all other federal or state regulatory agencies as necessary, is true
and correct in all material respects and together they fairly present, in
accordance with applicable laws and regulations, and generally accepted
accounting principles (applied on a consistent basis except as disclosed in the
footnotes thereto and except that the unaudited statements for 1994 are subject
to adjustments which might be required as a result of audit of the independent
auditors of Firstar for its fiscal year ending December 31, 1994), the financial
position and results of operations of Firstar as of the dates and for the
periods therein set forth. Such financial statements do not, as of the date
thereof, include any material assets or omit to state any material liability,
absolute or contingent, or other facts, the inclusion or omission of which
renders such financial statements, in light of the circumstances under which
they were made, misleading in any material respect.
2.6 Registration Statement. The Registration Statement and the Proxy
Statement-Prospectus included therein (i) will comply in all material respects
with the requirements of the Securities Act, and (ii) will not, at the date the
Proxy Statement-Prospectus is first mailed or delivered to First Moline
shareholders, or at the date or dates of the meeting or consents of First
Moline's shareholders referred to in Section 6.9 hereof, as then amended or
supplemented, contain any statement that is, at the time at which, and in the
light of the circumstances under which, it is made, false or misleading with
respect to any material facts or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not false or
misleading. Notwithstanding the foregoing, Firstar and FCI make no
representation or warranty and shall have no responsibility for the truth or
accuracy of any information with respect to First Moline or its affiliates or
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associates contained in the Registration Statement or the Proxy
Statement-Prospectus and which was provided by First Moline, its affiliates or
associates.
2.7 Shares to be Issued. The shares of Firstar Common Stock to be issued
pursuant to the Agreements will, upon issuance, be validly issued, fully paid
and nonassessable, except insofar as statutory liability may be imposed under
Section 180.0622(2)(b) of the Wisconsin Statutes and judicial interpretations
thereof, are not subject to any preemptive rights and will have been registered
under the Securities Act and listed on the New York Stock Exchange ("NYSE") and
the Chicago Stock Exchange ("CSE"). The shares of Firstar Common Stock have been
registered pursuant to sec. 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Firstar will use its best efforts to maintain such
registration, and to file all required reports on a timely basis. The shares of
Firstar Common Stock to be issued in the Merger will be freely transferable by
the recipients thereof, subject to any limitations on transfer required under
Rule 144 or 145 of the Securities Act or such rules or regulations of the SEC
related to pooling-of-interest accounting treatment for transactions such as the
Merger. Notwithstanding the immediately preceding sentence, nothing in this
Section 2.7 is intended to adversely effect the intended tax treatment of
transactions contemplated in the Agreements.
2.8 Accuracy of Information. The statements contained in the Agreements and
in any other written documents executed and/or delivered by or on behalf of
Firstar pursuant to the terms of the Agreements are true and correct in all
material respects and do not omit any material fact necessary to make the
statements contained herein or therein not materially misleading.
2.9 No Material Adverse Change. Since March 31, 1994, there has been no
material adverse change in the financial condition, assets, liabilities, results
of operation or business of Firstar.
2.10 Matters Concerning Regulatory Approvals. To the best knowledge of
Firstar, there are no matters likely to cause denial of the regulatory approvals
contemplated in Section 1.5.
2.11 Litigation. There is no litigation, action, suit, investigation or
proceeding pending or, to the best of the knowledge of Firstar, overtly
threatened, against or affecting Firstar or any of its subsidiaries or involving
any of their respective properties or assets, at law or in equity, before any
federal, state, municipal, local or other governmental authority, which is
reasonably likely to be resolved adversely to the interest of Firstar or its
subsidiaries and, if so resolved, would have a material adverse effect on the
financial condition, assets, liabilities, results of operation or business of
Firstar, or would materially impair its ability, or that of FCI, to perform
under this Agreement.
2.12 Reports. Since January 1, 1991, Firstar and its subsidiaries have
filed all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that were and are required to be filed
with (i) the SEC, including but not limited to Forms 10-K, Forms 10-Q, Forms 8-K
and proxy statements, (ii) the Office of the Comptroller of the Currency and
Board of Governors of the Federal Reserve System and (iii) any other applicable
state securities and regulatory authorities (all such reports and statements are
collectively referred to herein as the "Firstar Reports"). As of their
respective dates, the Firstar Reports filed prior to the date hereof complied in
all material respects with all of the statutes, rules and regulations enforced
or promulgated by the regulatory authority with which they were filed 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.
2.13 Employee and Employee Benefit Matters. (a) The term "Firstar Benefit
Plan(s)," as used in this Agreement, shall mean (i) each pension, profit
sharing, stock bonus, thrift, savings, employee stock ownership or other plan,
program or arrangement, that constitutes an "employee pension benefit plan"
within the meaning of Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), that is maintained by Firstar or FCI or to
which Firstar or FCI contributes for the benefit of any current or former
employee, (ii) each plan, program or arrangement for the provision of medical,
surgical or, hospital care or benefits, benefits in the event of sickness,
accident, disability, death, unemployment, severance, vacation, apprenticeship,
day care, scholarship, prepaid legal services or other benefits which constitute
an
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"employee welfare benefit plan" within the meaning of Section 3(1) of ERISA,
that is maintained by Firstar or FCI or to which Firstar or FCI contributes for
the benefit of any current or former employee, and (iii) every other retirement
or deferred compensation plan, bonus or incentive compensation plan or
arrangement, stock option plan, stock purchase plan, severance or vacation pay
arrangement, or other fringe benefit plan, program or arrangement through which
Firstar or FCI provides benefits for or on behalf of any current or former
employee, officer, director, consultant or agent.
(b) All of the Firstar Benefit Plans are in material compliance with all
applicable requirements of ERISA and all other applicable federal and state
laws, including the reporting and disclosure requirements of Part 1 of Title I
of ERISA, except for instances where non-compliance would not result in material
liability to Firstar, FCI or the Firstar Benefit Plans. Each of the Firstar
Benefit Plans that is intended to be a pension, profit sharing, stock bonus,
thrift, savings or employee stock ownership plan that is qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service to
qualify under Section 401(a) of the Code, and, to the best knowledge of Firstar
and FCI, there exist no circumstances that would adversely affect the qualified
status of any such Firstar Benefit Plan under that section for which the
remedial amendment period has expired. Each Firstar Benefit Plan that is a
defined benefit pension plan has assets with an aggregate value that exceeds the
actuarially determined present value of its liability for accrued benefits as
determined on the basis of the actuarial assumptions used for the most recent
actuarial valuation of such Plan. There is no pending or, to Firstar's
knowledge, threatened litigation, against or relating to any Firstar Benefit
Plan and there is no reasonable basis for any material proceedings, claims,
actions or proceedings against any Firstar Benefit Plan. No "reportable event"
(as defined in Section 4043(b) of ERISA) has occurred with respect to any
Firstar Benefit Plan and no Firstar Benefit Plan has engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA and Section 4975(c) of the
Code), since the date on which said sections became applicable to such Plan.
Neither Firstar nor FCI has incurred any "accumulated funding deficiency"
(within the meaning of Section 412 of the Code), whether or not waived, with
respect to any Firstar Benefit Plan. There have been no acts or omissions by
Firstar or FCI which have given rise to or may give rise to any material fines,
penalties, taxes or related charges under Section 502(c), 502(i) or 4071 of
ERISA or Chapter 43 of the Code, for which Firstar or FCI may be liable. All
group health plans of Firstar and FCI, including any plans of current and former
affiliates of Firstar or FCI which must be taken into account under Section
4980B of the Code or Section 601 of ERISA, have been operated in material
compliance with the group health plan continuation coverage requirements of
Section 4980B of the Code and Section 601 of ERISA to the extent such
requirements are applicable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FCI
Firstar and FCI hereby jointly and severally represent and warrant to First
Moline as follows:
3.1 Corporate Organization. FCI is a corporation duly organized, validly
existing and in active status under the laws of Iowa with full power and
authority to engage in the activities and business now conducted by it. FCI is
registered and in good standing with the Federal Reserve Board as a bank holding
company under the Bank Holding Company Act of 1956, as amended. FCI has
delivered to First Moline true, accurate and complete copies of the currently
effective Articles of Incorporation and Bylaws of FCI, including all amendments
thereto.
3.2 Capitalization. The authorized capital stock of FCI consists of 1,000
shares of common stock, no par value, 1,000 of which are validly issued and
outstanding, fully paid and nonassessable. All of such issued shares are owned
by Firstar, free and clear of all liens, security interests or other
encumbrances.
3.3 Authorization. The Board of Directors of FCI has approved the
transactions contemplated by the Agreements and has authorized the execution,
delivery and performance by FCI of the Agreements and no other corporate action
by the Board of Directors or shareholder of FCI is necessary for such approval
and authorization. FCI has full corporate power and authority to enter into the
Agreements, and to consummate the transactions contemplated thereby. The
Agreements are valid and binding obligations of FCI, enforceable
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in accordance with their terms, subject to (i) all applicable bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and (ii) the application of equitable principles if
equitable remedies are sought.
3.4 No Violation. Provided that the requisite approvals from the Federal
Reserve Board, the OTS, the OCC, Illinois Commissioner and any other regulatory
agencies are obtained and the offering of Firstar Common Stock to be issued
hereunder is duly registered pursuant to the Securities Act, and, to the extent
applicable, under state securities or blue sky laws, neither the execution and
delivery of the Agreements nor the consummation of the transactions contemplated
in the Agreements will conflict with, result in the breach of, constitute a
default under or accelerate the performance provided by the terms of any law, or
any rule or regulation of any governmental agency or authority, or any judgment,
order or decree of any court or other governmental agency to which FCI may be
subject, or any contract, agreement or instrument to which FCI is a party or by
which FCI is bound or committed, or the Articles of Incorporation or Bylaws of
FCI, or constitute an event that with the lapse of time or action by a third
party, could, to the knowledge of FCI, result in a default under any of the
foregoing or result in the creation of any lien, charge or encumbrance upon any
of the assets, properties, or capital stock of FCI. FCI is an "out of state bank
holding company" within the meaning of Section 2(p) of the Illinois BHCA, and
consummation of the transactions contemplated by the Agreements will not violate
the Illinois BHCA. Subject only to obtaining the required regulatory approvals,
FCI is, and at all times after the date of this Agreement through and including
the Closing Date will be, authorized to effect the Merger under applicable law.
3.5 Accuracy of Information. The statements contained in the Agreements and
in any other written documents executed and/or delivered by or on behalf of FCI
pursuant to the terms of the Agreements are true and correct in all material
respects, and do not omit any material fact necessary to make the statements
contained herein or therein not materially misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FIRST MOLINE
First Moline represents and warrants to Firstar and FCI as follows:
4.1 Corporate Organization. First Moline is a corporation duly organized,
validly existing and in active status under the laws of Delaware with all
necessary power and authority to engage in the activities and business now
conducted by it. First Moline possesses and is in full compliance with all
licenses, franchises, permits and other governmental authorizations that are
legally required, except, where the failure not to be in full compliance would
reasonably be expected to have a material adverse effect on the financial
condition, assets or business operations of First Moline and the Bank taken as a
whole. First Moline is registered and in good standing with the OTS as a savings
and loan holding company under the Home Owners' Loan Act, as amended (the
"HOLA"). First Moline has delivered to Firstar, by letter from the Chief
Executive Officer of First Moline and delivered by First Moline to Firstar on
the date hereof (the "First Moline Letter") true, accurate and complete copies
of the currently effective Certificate of Incorporation and Bylaws of First
Moline, including any amendments thereto. The minute books of First Moline and
the Bank contain complete and accurate records of all meetings and other
corporate actions of their respective shareholders and Boards of Directors.
First Moline has no subsidiaries, direct or indirect, except the Bank, FFM-CMO,
Inc. and First Moline Real Estate Corp.
4.2 Capitalization. The authorized capital stock of First Moline consists
of 2,500,000 shares; 500,000 shares have been designated as Preferred Stock,
$0.01 par value ("Preferred Stock") and 2,000,000 shares have been designated as
Common Stock, $0.01 par value ("First Moline Common Stock"). There are no shares
of Preferred Stock outstanding and 282,550 shares of First Moline Common Stock
are validly issued and outstanding. All of such issued and outstanding shares of
First Moline capital stock are fully paid and non-assessable and not issued in
violation of any preemptive rights of any shareholder. First Moline does not
have any arrangements or commitments obligating First Moline to issue or sell or
otherwise dispose of, or to purchase or redeem shares of its capital stock or
any securities convertible into or having the right to purchase
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shares of its capital stock, except for the stock options (the "Stock Options")
for 21,944 shares of Common Stock issued at the dates, for the exercise prices
and to the recipients set forth in Section 4.2 of the First Moline Letter.
4.3 Organization of the Subsidiaries. (a) The Bank is a federal savings
bank duly organized, validly existing and in good standing under the laws of the
United States. First Moline has delivered to Firstar, as an exhibit to the First
Moline Letter, true, accurate and complete copies of the currently effective
Charter and Bylaws of the Bank, including all amendments thereto. The Bank (i)
is duly authorized to conduct a general banking business, subject to the
supervision of the OTS, at its offices identified in Section 4.3(a) of the First
Moline Letter, (ii) is an insured depository institution as defined in the
Federal Deposit Insurance Act, (iii) has full power and authority to engage in
the business and activities now conducted by it, and (iv) possesses and is in
compliance in all material respects with all licenses, franchises, permits and
other governmental authorizations that are legally required except where the
lack of such license, franchise, permit or other governmental authorization or
failure be in such compliance would not reasonably be expected to have a
material adverse effect on the financial condition of First Moline and the Bank,
taken as a whole. The Bank has no interest in any subsidiaries, direct or
indirect, except FFM-CMO, Inc. and First Moline Real Estate Corp.
(b) Each of FFM-CMO, Inc. and First Moline Real Estate Corp. (the "Bank
Subsidiaries") is a corporation duly organized, validly existing and in good
standing under the laws of Illinois with full power and authority to engage in
the activities and business now conducted by it. First Moline has delivered to
Firstar, as exhibits to the First Moline Letter, true, accurate and complete
copies of the currently effective Articles of Incorporation and Bylaws of each
of the Bank Subsidiaries. Each such corporation possesses and is in compliance
in all material respects with all licenses, franchises, permits and other
governmental authorizations that are legally required except where the lack of
such license, franchise, permit or other governmental authorization or failure
be in such compliance would not reasonably be expected to have a material
adverse effect on the financial condition of First Moline and Bank, taken as a
whole.
4.4 Capitalization of the Subsidiaries. (a) The authorized capital stock of
the Bank consists of 2,500,000 shares, 2,000,000 of Common Stock, $0.01 par
value ("First Moline Stock"), of which 100 are validly issued and outstanding,
all of which are owned by First Moline free and clear of all liens, pledges,
assignments and security interests and 500,000 shares of serial preferred stock,
$0.01 par value, none of which is issued or outstanding. All of the shares of
the capital stock of the Bank are fully paid and nonassessable and not issued in
violation of the preemptive rights of any shareholder.
(b) The authorized capital stock of FFM-CMO, Inc. consists of 500,000
shares of Common Stock, no par value, of which 50,000 are validly issued and
outstanding and owned by the Bank free and clear of all liens, pledges,
assignments and security interests. All of such shares of capital stock are
fully paid and nonassessable and not issued in violation of the preemptive
rights of any shareholder. Neither the Bank nor FFM-CMO, Inc. is a party to or
bound by any commitment or obligation to issue or sell or otherwise dispose of,
or to purchase or redeem, any capital stock or any other security convertible
into or having the right to purchase capital stock of the corporation.
(c) The authorized capital stock of First Moline Real Estate Corp. consists
of 100,000 shares of Common Stock, no par value, of which 25,000 are validly
issued and outstanding and owned by the Bank free and clear of all liens,
pledges, assignments and security interests. All of such shares of capital stock
are fully paid and nonassessable and not issued in violation of the preemptive
rights of any shareholder. Neither the Bank nor First Moline Real Estate Corp.
is a party to or bound by any commitment or obligation to issue or sell or
otherwise dispose of, or to purchase or redeem, any capital stock or any other
security convertible into or having the right to purchase capital stock of the
corporation.
4.5 Authorization. The Board of Directors of First Moline has approved the
Agreements and the transactions contemplated thereby and has authorized the
execution, delivery and performance by First Moline of the Agreements. First
Moline has full corporate power and authority to enter into the Agreements and,
upon approval of its shareholders in accordance with law and subject to the
conditions set forth in Article IX of this Reorganization Agreement, to
consummate the transactions contemplated thereby. The
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Agreements are valid and binding obligations of First Moline, enforceable in
accordance with their terms, subject to (i) all applicable bankruptcy,
insolvency, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally, and (ii) the application of equitable principles if
equitable remedies are sought.
4.6 No Violation. Provided that the requisite approvals from the Federal
Reserve Board, the OTS, the OCC, the Illinois Commissioner and any other
regulatory agencies are obtained and the offering of the Firstar Common Stock to
be issued hereunder is duly registered under the Securities Act, and, to the
extent applicable, under state securities or blue sky laws, neither the
execution and delivery of the Agreements nor the consummation of the
transactions contemplated therein will conflict with, result in the breach of,
constitute a default under or accelerate the performance provided by the terms
of any law, or any rule or regulation of any governmental agency or authority,
or any judgment, order or decree of any court or other governmental agency to
which First Moline or the Bank may be subject, or any contract, agreement or
instrument to which First Moline or the Bank is a party or by which First Moline
or the Bank is bound or committed, or the Certificate of Incorporation or Bylaws
of First Moline, or the Charter of the Bank, or constitute an event that with
the lapse of time or action by a third party or both, would, to the best of
First Moline's knowledge, result in a material default under any of the
foregoing or result in the creation of any lien, charge or encumbrance upon any
of the assets, properties or stock of First Moline or the Bank other than (i) as
set forth in the First Moline Letter; (ii) as would not reasonably be expected
to have a material adverse effect on the financial condition of First Moline and
the Bank, taken as a whole; or (iii) in the case of contracts, agreements or
instruments, such conflicts, breaches or defaults which will be cured or waived
prior to the Closing Date.
4.7 Financial Statements. First Moline has furnished to Firstar copies of
the following financial statements:
(i) Audited consolidated balance sheets of First Moline as of December
31, 1993 and 1992, and the related audited statements of income and
stockholders' equity for each of the years then ended, accompanied by the
audit report thereon of McGladrey & Pullen;
(ii) Statement of Condition of the Bank as of March 31, 1994, together
with the related Report of Income for the period then ended, as included in
the Thrift Financial Report of the Bank as of said dates as filed with the
OTS.
Each of the financial statements referred to in this Section 4.7 hereof is
true and correct in all material respects and together they fairly present, the
financial position and results of operation of First Moline and the Bank as of
the dates and for the periods therein set forth. Each of the financial
statements referred to in clause (i) of this Section 4.7 has been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis. Each of the financial statements referred to in clause (ii) of this
Section 4.7 has been prepared in accordance with the applicable regulations and
standards of the OTS. Each of the financial statements referred to in this
Section 4.7 do not, as of the date thereof, include any material assets or omit
to state any material liability, absolute or contingent, or other facts, the
inclusion or omission of which renders such financial statements, in light of
the circumstances under which they were made, misleading in any material
respect. Since December 31, 1993, there has been no material adverse change in
the financial condition, results of operation, business or prospects of First
Moline or the Bank (other than changes in the ordinary course of business, none
of which, individually or in the aggregate, has been materially adverse or
changes outside the control of management resulting primarily by reason of
changes in banking laws or regulations or interpretations thereof, or changes in
the general level of interest rates or changes in economic, financial, or market
conditions affecting the banking industry generally in the region in which First
Moline and the Bank operate) and no fact or condition exists that First Moline
or the Bank believes will cause such a material change in the future.
4.8 Absence of Certain Changes. Since December 31, 1993, neither First
Moline nor the Bank has, except as set forth in the First Moline Letter, (i)
issued or sold any corporate debt securities (except certificates of deposit,
letters of credit, cashier's checks, and other documents and instruments issued
in the ordinary course of the banking business of the Bank); (ii) granted any
option for the purchase of its capital
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stock; (iii) declared or set aside or paid any dividend or other distribution in
respect of its capital stock except a dividend paid on April 1, 1994 to
shareholders of record on March 14, 1994 and a dividend declared and payable
September 8, 1994 to shareholders of record on August 8, 1994, or as otherwise
provided for in this Reorganization Agreement; (iv) incurred any material
obligation or liability (absolute or contingent) except obligations or
liabilities incurred in the ordinary course of business, or mortgaged, pledged
or subjected to lien or encumbrance (other than statutory liens for taxes not
yet delinquent) any of its assets or properties except pledges to secure
government deposits and in connection with repurchase or reverse repurchase
agreements; (v) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities
included in the respective Bank's balance sheet as of March 31, 1994, and
current liabilities incurred since the date thereof in the ordinary course of
business; (vi) sold, exchanged or otherwise disposed of any of its capital
assets other than in the ordinary course of business and sales of mortgage loans
in the secondary market, consistent with past practice; (vii) made or modified
any general wage or salary increase exceeding 5% annually in the aggregate;
(viii) suffered any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting its business, property or assets
or waived any rights of value that are material in the aggregate; (ix) except in
the ordinary course of business, entered, or agreed to enter, into any agreement
or arrangement granting any preferential right to purchase any of its assets,
properties or rights or requiring the consent of any party to the transfer and
assignment of any such assets, properties or rights; (x) entered into any
transaction outside the ordinary course of its business, except in each case as
expressly contemplated by this Reorganization Agreement; or (xi) except in the
ordinary course of business or as reflected in the financial statements of First
Moline or the Bank, sold or otherwise disposed of any of its investment
securities.
4.9 Employee and Employee Benefit Matters. (a) Neither First Moline nor the
Bank is a party to or is bound by any written or oral (i) employment or
consulting contract that is not terminable without penalty by First Moline or
the Bank, as the case may be, on notice of 60 days or less, except as set forth
in the First Moline Letter, or (ii) any collective bargaining agreement covering
employees.
(b) The First Moline Letter lists (i) each pension, profit sharing, stock
bonus, thrift, savings, employee stock ownership or other plan, program or
arrangement, that constitutes an "employee pension benefit plan" within the
meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that is maintained by First Moline or the Bank or to which
First Moline or the Bank contributes for the benefit of any current or former
employee, (ii) each plan, program or arrangement for the provision of medical,
surgical, or hospital care or benefits, benefits in the event of sickness,
accident, disability, death, unemployment, severance, vacation, apprenticeship,
day care, scholarship, prepaid legal services or other benefits which constitute
an "employee welfare benefit plan" within the meaning of ERISA, that is
maintained by First Moline or the Bank or to which First Moline or the Bank
contributes for the benefit of any current or former employee, and (iii) every
other retirement or deferred compensation plan, bonus or incentive compensation
plan or arrangement, stock option plan, stock purchase plan, severance or
vacation pay arrangement, or other fringe benefit plan, program or arrangement
through which First Moline or the Bank provides benefits for or on behalf of any
current or former employee, officer, director, consultant or agent.
(c) All of the plans, programs and arrangements described in this section
and listed in the First Moline Letter (hereinafter referred to as the "Plans")
are in material compliance with all applicable requirements of ERISA and all
other applicable federal and state laws, including the reporting and disclosure
requirements of Part 1 of Title I of ERISA, except for instances where
non-compliance would not result in material liability to First Moline, the Bank
or the Plans. Except as set forth in the First Moline letter, each of the Plans
that is intended to be a pension, profit sharing, stock bonus, thrift, savings
or employee stock ownership plan that is qualified under Section 401(a) of the
Code has been determined by the Internal Revenue Service to qualify under
Section 401(a) of the Code, and, to the best of First Moline's knowledge, there
exist no circumstances that would adversely affect the qualified status of any
such Plan under that section for which the remedial amendment period has
expired. Except as set forth in the First Moline Letter, each Plan that is a
defined benefit pension plan has assets with an aggregate value that exceeds the
actuarially determined present value of its liability for accrued benefits as
determined on the basis of the actuarial assumptions used for the most recent
actuarial valuation of such Plan. Except as set forth in the First Moline
Letter, there is no pending or, to
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First Moline's knowledge, threatened litigation, governmental proceeding or
investigation against or relating to any Plan and there is no reasonable basis
for any material proceedings, claims, actions or proceedings against any Plan.
To the best of First Moline's knowledge, no "reportable event" (as defined in
Section 4043(b) of ERISA) has occurred with respect to any Plan and no Plan has
engaged in a "prohibited transaction" (as defined in Section 406 of ERISA and
Section 4975(c) of the Code) since the date on which said sections became
applicable to such Plan. Neither First Moline nor the Bank has incurred any
"accumulated funding deficiency" (within the meaning of Section 412 of the
Code), whether or not waived, with respect to any Plan. To the best of First
Moline's knowledge, there have been no acts or omissions by First Moline or the
Bank which have given rise to or may give rise to any material fines, penalties,
taxes or related charges under Section 502(c), 502(i) or 4071 of ERISA or
Chapter 43 of the Code, for which First Moline or the Bank may be liable. Except
as set forth in the First Moline Letter, none of the payments contemplated by
the Plans would, in the aggregate, constitute excess parachute payments as
defined in Section 280G of the Code. All group health plans of First Moline and
the Bank, including any plans of current and former affiliates of First Moline
or the Bank which must be taken into account under Section 4980B of the Code or
Section 601 of ERISA, have been operated in material compliance with the group
health plan continuation coverage requirements of Section 4980B of the Code and
Section 601 of ERISA to the extent such requirements are applicable.
(d) First Moline has delivered to Firstar as attachments to the First
Moline Letter (i) a true and complete copy of each Plan (or, in the case of any
Plan that is not in written form, a complete and accurate description of the
material provisions of the Plan), (ii) complete and current copies of summary
plan descriptions of each Plan that is subject to ERISA, (iii) each trust
agreement, insurance policy or other instrument relating to the funding of any
Plan, (iv) the two most recent Annual Reports (Form 5500 series) and
accompanying schedules filed with the Internal Revenue Service or United States
Department of Labor with respect to each Plan that is subject to ERISA and for
which Annual Reports are required, (v) the most recent determination letter
issued by the Internal Revenue Service with respect to each Plan that is
intended to qualify under Section 401(a) of the Code, (vi) the most recent
available financial statements for each Plan that has assets, (vii) the most
recent audited financial statements for each Plan for which audited financial
statements are required by ERISA, and (viii) the most recent actuarial report
for each Plan that is a defined benefit pension plan.
(e) No Plan has engaged in a transaction involving the purchase or sale by
the Plan of employer securities from or to a "disqualified person" (within the
meaning of Section 4975 of the Code).
4.10 Litigation. Except as disclosed in the First Moline Letter, no claims
have been asserted and no relief has been sought against First Moline or the
Bank in any pending litigation or governmental proceedings or otherwise. To
First Moline's knowledge, there are no circumstances, conditions, events or
arrangements, contractual or otherwise, which may hereafter give rise to any
proceedings, claims, actions or government investigations involving First Moline
or the Bank which would reasonably be expected to have a material adverse effect
on the financial condition of First Moline and the Bank, taken as a whole, nor
are any such proceedings, claims, actions or government investigations, to First
Moline's knowledge, threatened involving First Moline or the Bank. Except as set
forth in the First Moline Letter, neither First Moline nor the Bank is a party
to any order, judgment or decree which would reasonably be expected to have a
material adverse effect on the financial condition, assets or business of First
Moline and the Bank taken as a whole, and neither First Moline nor the Bank (i)
is the subject of any cease and desist order, or other formal or informal
enforcement action by any regulatory authority or (ii) has made any commitment
to or entered into any agreement with any regulatory authority that currently
restricts or adversely affects its operations or financial condition. First
Moline will make available to Firstar copies of all correspondence with or
memoranda of other communications with any regulatory authority since January 1,
1991, relating to the operation or condition, financial or otherwise, of First
Moline or the Bank. Upon receipt of written permission from its and the Bank's
regulators, First Moline will deliver to Firstar copies of all regulatory
examination reports issued since January 1, 1990 relating to it or the Bank.
4.11 Tax Matters. First Moline and the Bank have filed with the appropriate
governmental agencies all federal, state and local income, franchise, excise,
real and personal property and other tax returns and reports
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<PAGE> 17
that are required to be filed, and neither First Moline nor the Bank is
delinquent in the payment of any taxes shown on such returns or reports or on
any assessments for any such taxes received by First Moline or the Bank except
for assessments being contested by First Moline or the Bank. To First Moline's
knowledge, there is no pending Internal Revenue Service or Illinois Department
of Revenue examination with respect to First Moline or the Bank. There are
included in the First Moline consolidated balance sheet as of December 31, 1993,
and to the best of First Moline's knowledge there are included the Bank's
balance sheet as of March 31, 1994, adequate reserves for the payment of all
accrued but unpaid federal, state and local taxes of First Moline and the Bank,
including interest and penalties, whether or not disputed for such fiscal years
and all fiscal years prior thereto. Neither First Moline nor the Bank has
executed or filed with the Internal Revenue Service or the Illinois Department
of Revenue any agreement extending the period for assessment and collection of
any federal or state tax, nor is First Moline or the Bank a party to any action
or proceeding by any governmental authority for assessment or collection of
taxes, except tax liens or levies against customers of the Bank. First Moline
has not received notice that any claim for assessment or collection of taxes has
been asserted against First Moline or the Bank.
Neither First Moline nor the Bank has, during the past ten years, except as
disclosed in the First Moline Letter, received any notice of deficiency,
proposed deficiency or assessment from the Internal Revenue Service or any other
governmental agency, with respect to any federal, state, county or local taxes.
To First Moline's knowledge, no federal or state income tax return of First
Moline or the Bank is currently the subject of any audit by the Internal Revenue
Service or any other governmental agency. No material deficiencies have been
asserted in connection with the federal and state income tax returns of each of
First Moline and the Bank for all periods through and including December 31,
1990, and to First Moline's knowledge, no circumstances exist which reasonably
could be expected to result in a material assessment for subsequent periods.
Except as set forth in the First Moline Letter, neither First Moline nor the
Bank is a party to any agreement providing for allocation or sharing of taxes.
4.12 Registration Statement. The parts of the Registration Statement and
the Proxy Statement-Prospectus that relate to First Moline or the Bank and any
of their affiliates or associates which were provided by First Moline will not,
at the date the Proxy Statement-Prospectus is first mailed or delivered to
shareholders of First Moline, and will not, at the date or dates of the meeting
of First Moline's shareholders referred to in Section 6.9 hereof, as then
amended or supplemented, contain any statement that is, at the time at which,
and in light of the circumstances under which, it is made, false or misleading
with respect to any material facts or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
false or misleading. Notwithstanding the foregoing, First Moline makes no
representation or warranty regarding and shall have no responsibility for the
truth or accuracy of any information with respect to Firstar or FCI or any of
their affiliates or associates contained in the Registration Statement or the
Proxy Statement-Prospectus.
4.13 Title and Condition. (a) First Moline or the Bank or a Bank Subsidiary
has good and marketable title to all assets and properties, whether real or
personal, tangible or intangible, that it purports to own, including without
limitation all assets and properties reflected in the unaudited balance sheet of
the Bank as of March 31, 1994 and the audited consolidated balance sheets of
First Moline as of December 31, 1993, or acquired subsequent thereto (except to
the extent that such assets and properties have been disposed of for fair value
in the ordinary course of business since the dates of such balance sheets)
subject to no liens, mortgages, security interests, encumbrances or charges of
any kind, except (i) as noted in said balance sheets or the notes thereto; (ii)
statutory liens for taxes not yet delinquent; (iii) security interests granted
to secure deposits of funds by federal, state or other governmental agencies;
and (iv) minor defects and irregularities in title and encumbrances that do not
materially impair the use thereof for the purposes for which they are held, and
such liens, mortgages, security interests, encumbrances and charges as are not
in the aggregate material to the assets and properties of First Moline and the
Bank taken as a whole. First Moline or the Bank, as lessee, has the right under
valid and subsisting leases to occupy, use, possess and control all property
leased by First Moline or the Bank, qualified only by the written terms of such
leases, true and complete copies of which have been provided to Firstar as an
attachment to the First Moline Letter. A legal description of all real property
owned by First Moline, the Bank, or a Bank Subsidiary, including properties held
by the Bank as a result of
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foreclosure or repossession or carried on the Bank's books as "other real estate
owned," or which for purposes of any Environmental Law, as hereinafter defined,
First Moline has received notice that such property is alleged to be under the
control of First Moline, the Bank or a Bank Subsidiary (the "Real Properties"),
has been provided in Section 4.13(a) of the First Moline Letter. Except as
disclosed in the First Moline Letter, or to the extent any failure to comply
with the American with Disabilities Act of 1990 ("ADA") will not have a material
adverse effect on the financial condition of First Moline and the Bank, taken as
a whole, each of the Real Properties is in material compliance with the ADA and
the regulations promulgated thereunder to the extent such ADA and regulations
require compliance for public accommodations by readily achievable barrier
removal, or compliance following alterations to existing facilities to the
maximum extent feasible, all as such Real Properties exist at Closing. Terms
used in the preceding sentence are as defined under the ADA.
(b) The Real Properties are in generally good condition and have been well
maintained in accordance with reasonable and prudent business practices
applicable to like facilities, reasonable wear and tear excepted. To First
Moline's knowledge at the time of execution of this Agreement, the Real
Properties are in material compliance with all Environmental Laws and there are
no conditions in connection with the Real Properties, including the presence of
lead or asbestos, which would be likely to subject First Moline, the Bank or a
Bank Subsidiary to damages, penalties, injunctive relief or cleanup costs under
any Environmental Laws, or which would, if known, be likely to materially reduce
the value of any Real Property or which would require or be likely to require
cleanup, removal, remedial action or other response pursuant to Environmental
Laws by First Moline, the Bank or a Bank Subsidiary. To First Moline's knowledge
at the time of execution of this Agreement, neither First Moline nor the Bank
nor either Bank Subsidiary is a party to any litigation or administrative
proceeding alleging First Moline's, the Bank's or such Bank Subsidiary's
violation of Environmental Laws, nor has First Moline, the Bank or such Bank
Subsidiary's violated Environmental Laws nor is First Moline, the Bank or a Bank
Subsidiary required by any governmental agency to clean up, remove or take
remedial or other responsive action due to the disposal, depositing, discharge,
leaking or other release of any hazardous substances or hazardous materials. To
First Moline's knowledge at the time of execution of this Agreement, neither the
Real Properties nor First Moline nor the Bank nor either Bank Subsidiary are
subject to any judgment, decree, order or citation related to or arising out of,
or listed as a potentially responsible party by any governmental body or agency
in a matter arising under, any Environmental Laws. The term "Environmental Laws"
shall mean all federal, state and local laws, including statutes, regulations,
ordinances, codes and rules relating to the discharge of air pollutants, water
pollutants or process waste water or substances, in effect now or as of the
Closing Date, including, but not limited to, the Federal Solid Waste Disposal
Act, the Federal Hazardous Materials Transportation Act, the Federal Clean Air
Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery
Act of 1976, the Federal Comprehensive Environmental Responsibility Cleanup and
Liability Act of 1980, as amended, regulations of the Environmental Protection
Agency, and any so-called "Superfund" or "Superlien" laws, and the Illinois
Responsible Property Transfer Act.
4.14 Insurance. First Moline has delivered to Firstar as exhibits to the
First Moline Letter, true, accurate and complete copies of all insurance
policies of First Moline and the Bank. First Moline and the Bank have in effect
insurance coverage with reputable insurers, which, with respect to amounts,
premiums, types and risks insured, constitutes reasonably adequate coverage
against all risks customarily insured against by savings and loan holding
companies and their subsidiaries comparable in size and operations to First
Moline and the Bank. Neither First Moline nor the Bank have received any notice
of any premium deficiency relating to any insurance coverage in force at the
date of this Agreement. First Moline will use its best efforts to maintain the
coverage provided in each of such policies through the Closing Date.
4.15 Compliance with Laws and Orders. First Moline and the Bank have
complied with all laws, regulations and orders (including zoning ordinances)
applicable to them and to the conduct of their businesses, including without
limitation, all statutes, rules and regulations pertaining to the conduct of the
Bank's banking activities except where the failure to so comply would not have a
material adverse effect on First Moline and the Bank, taken as a whole. Except
where the failure to so comply would not have a material adverse effect on First
Moline and the Bank, taken as a whole, neither First Moline nor the Bank is in
default under, and no event has occurred that, with the lapse of time or action
by a third party or both, could result in
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the default under the terms of any judgment, decree, order, writ, rule or
regulation of any governmental authority or court, whether federal, state or
local and whether at law or in equity.
4.16 Governmental Regulation. First Moline and the Bank hold all licenses,
certificates, permits, franchises and rights from all appropriate Federal, state
and other public authorities necessary for the conduct of their businesses, and,
between the date hereof and the Closing Date, First Moline will, and will cause
the Bank to use its best efforts to, maintain all such licenses, certificates,
permits, franchises and rights in effect. The Bank is a member of the Savings
Association Insurance Fund administered by the FDIC. Except as disclosed in the
First Moline Letter, neither First Moline nor the Bank is a party or subject to
any agreement with, or directive or order issued by, the OTS or any other bank
regulatory authority, which imposes any restrictions or requirements not
applicable generally to savings and loan holding companies (in the case of First
Moline), or federal savings banks (in the case of the Bank), with respect to the
conduct of its business.
4.17 Contracts and Commitments. Except as set forth in the First Moline
Letter, neither First Moline nor the Bank is a party to or bound by any written
or oral (i) lease or license with respect to any property, real or personal,
with a value in excess of $25,000, whether as lessor, lessee, licensor or
licensee; (ii) contract or commitment for capital expenditures in excess of
$25,000 for any one project or $100,000 in the aggregate; (iii) contract or
commitment for total expenses in excess of $25,000 made in the ordinary course
of business for the purchase of materials, supplies or for the performance of
services for a period of more than 60 days from the date of this Reorganization
Agreement, except for any outstanding legal services agreements; (iv) contract
or option for the purchase or sale of any real or personal property other than
in the ordinary course of business; (v) contract, commitment or agreement made
outside the ordinary course of business; or (vi) union contract or collective
bargaining agreement. First Moline and the Bank have performed all obligations
required to be performed by them to date, and are not in default under, and no
event has occurred which, with the lapse of time or action by a third party or
both, could result in a default (except to the extent such default will not have
a material adverse effect on First Moline or the Bank, taken as a whole) under
any outstanding mortgage, lease, contract, commitment or agreement to which
First Moline or the Bank is a party or by which First Moline or Bank is bound or
under any provision of their respective charter documents or Bylaws, and each
such outstanding mortgage, lease, contract, commitment or agreement is a valid
and legally binding obligation of First Moline or the relevant Bank, subject to
(i) all applicable bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and (ii) the
application of equitable principles if equitable remedies are sought.
4.18 Shareholders and Undertakings from Affiliates. First Moline will
furnish to Firstar prior to the filing of the bank regulatory applications
contemplated in Section 1.5 (i) a current list which identifies each officer or
director of First Moline or the Bank or holder of ten percent (10%) or more of
the outstanding First Moline Common Stock, as determined under the rules and
regulations of the SEC, and sets out the number of shares owned by each such
person; and (ii) First Moline will use all reasonable efforts to cause each
person named on the affiliates list delivered to Firstar to execute prior to the
filing of the bank regulatory applications contemplated in Section 1.5 written
undertakings, in the form attached hereto as Exhibit 4.18(ii) ("Affiliates'
Undertakings").
4.19 Matters Relating to Directors, Officers and Shareholders. Except as
set forth in the First Moline Letter, no director, executive officer, or holder
of ten percent (10%) or more of the outstanding capital stock of First Moline,
as determined under the rules and regulations of the SEC, nor any director or
executive officer of the Bank nor any "associate" of any such person (as such
term is defined in the general rules and regulations under the Securities Act)
(a "Company or Bank Principal") (i) is or has during the period subsequent to
December 31, 1990, been a party (other than as a depositor) to any transaction
with First Moline or the Bank, whether as a borrower or otherwise, which (x) was
made other than in the ordinary course of business, (y) was made on other than
substantially the same terms, including interest rate and collateral, as those
prevailing at the time for comparable transactions for other persons, or (z)
involves more than the normal risk of collectibility or presents other
unfavorable features, or (ii) is a party to any loan or loan commitment, whether
written or oral, from First Moline or the Bank involving an amount in excess of
$10,000.
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4.20 Absence of Adverse Agreements. Neither First Moline nor the Bank, is a
party to any agreement, option or contract (other than the Agreements, the
Voting Agreements dated of the date hereof between Firstar and certain
shareholders of First Moline), the subject of which involves or relates to the
merger, consolidation, or sale of assets or stock of First Moline or the Bank.
4.21 Accuracy of Information. The statements of First Moline contained in
the First Moline Letter and in any other written documents executed and/or
delivered by or on behalf of First Moline pursuant to the terms of the
Agreements are true and correct in all material respects and the First Moline
Letter and such other documents do not omit any material fact necessary to make
the statements contained therein not materially misleading. The statements
contained in the First Moline Letter and such other documents will be deemed to
constitute representations and warranties of First Moline under this
Reorganization Agreement to the same extent as if set forth herein in full.
4.22 Allowance for Loan Losses. To the knowledge of First Moline, the
reserve for possible loan losses shown on the March 31, 1994 Consolidated
Balance Sheet of First Moline and its subsidiaries is adequate in all material
respects under the requirements of generally accepted accounting principles to
provide for possible losses, net of recoveries relating to loans previously
charged off, on loans outstanding (including, without limitation, accrued
interest receivable) as of March 31, 1994.
4.23 No Undisclosed Liabilities. Neither First Moline nor the Bank nor any
of their respective properties is subject to any material liability or
obligation (absolute, accrued, contingent or otherwise) known to First Moline,
including without limitation, any lease, contract, commitment or purchase or
sale agreement, except:
(a) as specifically disclosed in this Agreement or the financial
statements of First Moline delivered pursuant to Section 4.7 hereof;
(b) as disclosed in the First Moline Letter; or
(c) liabilities or obligations arising or incurred in the ordinary
course of business of First Moline or the Bank since December 31, 1993 and
consistent with past practices including, without limitation, any taxes; or
(d) expenses related to the Merger or as contemplated in this
Agreement.
4.24 Pooling and Tax-Free Status Matters. To the knowledge of First Moline,
neither First Moline nor any of its affiliates has through the date hereof taken
or agreed to take any action that would prevent Firstar from accounting for the
business combination to be effected by the Merger as a pooling of interests or
would prevent the Merger from qualifying as a tax-free reorganization under
Section 368 of the Code.
4.25 Reports. Since January 1, 1993, First Moline, the Bank and the Bank
Subsidiaries have filed all reports, registrations and statements, together with
any amendments required to be made with respect thereto, that were and are
required to be filed with (i) the SEC, including but not limited to Forms 10-K,
Forms 10-Q, Forms 8-K and proxy statements, (ii) the OTS and (iii) any other
applicable state securities authorities (all such reports and statements are
collectively referred to herein as the "First Moline Reports"). As of their
respective dates, the First Moline Reports filed prior to the date hereof
complied in all material respects with all of the statutes, rules and
regulations enforced or promulgated by the regulatory authority with which they
were filed 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.
4.26 Opinion of Financial Advisor. First Moline has received the opinion of
Hovde Financial, Inc. on the date hereof to the effect that, as of the date
hereof, in the opinion of such firm, the consideration to be received in the
Merger by First Moline's stockholders is fair to First Moline's stockholders
from a financial point of view (the "Fairness Opinion").
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ARTICLE V
CONDUCT OF BUSINESS BY FIRSTAR
5.1 Approval by Firstar. Firstar will give its consent or approval on such
matters as may be appropriate or required in connection with the transactions
contemplated by the Agreements.
5.2 Subsequent SEC Filings. Promptly after filing, Firstar will furnish
First Moline and its counsel copies of all Firstar's periodic reports on Forms
10-K, 10-Q and 8-K filed with the SEC subsequent to the date hereof. Such
reports shall be prepared in compliance with laws applicable to Firstar.
5.3 Conduct of Business; Certain Covenants. From and after the execution
and delivery of this Agreement and until the Closing Date, Firstar will, except
insofar as deviations from the following covenants would not reasonably be
expected to have a material adverse impact on Firstar and its subsidiaries,
taken as a whole:
(a) conduct its business and operate and cause its subsidiaries to conduct
their respective businesses only in accordance with sound banking and/or
business practices; and
(b) maintain its corporate existence and that of FCI in good standing and
file all material required reports with all applicable regulatory authorities.
5.4 Employee Benefits. (a) No later than the first day of the first
calendar year that begins at least three months after the Closing Date, Firstar
shall provide, or shall cause to be provided to each employee of Firstar or any
Firstar subsidiary who was an employee of First Moline or any of its
subsidiaries on the Closing Date (the "First Moline Employees") the opportunity
to participate in the following Firstar Benefit Plans on a basis comparable to
that applicable to other similarly-situated employees of Firstar and its
subsidiaries: the Firstar Pension Plan (and the related non-qualified excess
benefit/"top hat" plan known as the Benefit Equalization Plan), Thrift and
Sharing Plan (including cash payment with respect thereto made in lieu of
matching contributions precluded by applicable limitations of the Code),
Comprehensive Medical Plan, Dental Plan, Dependent Care and Medical Expense
Reimbursement Plan, Group Life Insurance Plan, and Long-Term Disability Plan.
(b) With respect to the participation of the First Moline Employees in the
Firstar Benefit Plans, Firstar shall provide, or cause to be provided, that:
(i) the service credited to each First Moline Employee for purposes of
determining eligibility and vesting under each of the Firstar Benefit
Plans, including eligibility for greater matching contributions under the
Firstar Thrift and Sharing Plan (and related cash payment program), and
also under any vacation, short-term disability or similar salary
continuation policy or plan for which they may be eligible, shall include
all such First Moline Employee's service with First Moline, FCI (as
successor to First Moline) or Bank; and
(ii) at the time the Firstar Benefit Plans are first extended to the
First Moline Employees, the First Moline Employees shall not be subject to
any waiting periods or pre-existing condition exclusions under such Firstar
Benefit Plans to the extent such periods are longer or such exclusions
impose a greater limitation than such periods or exclusions under the terms
of the corresponding First Moline Benefit Plan immediately prior to the
extension of coverage under the Firstar Benefit Plans.
(c) Neither Firstar nor FCI shall be obligated to provide benefits under
any Firstar Benefit Plan which is duplicative to benefits provided to any First
Moline Employee under any Plan with respect to the period from the Closing Date
to the date that participation in the Firstar Benefit Plan is extended to the
First Moline Employees (such period hereafter referred to as the "First Moline
Interim Period").
(d) During the First Moline Interim Period, Firstar shall maintain or shall
cause to be maintained the First Moline Group Medical Plan, Group Life Insurance
Plan, Group Dental Plan, Group Long Term Disability Plan, and Profit Sharing
Plan as in effect immediately prior to the Closing Date, without substantive
change, except as may be required by applicable law, or as replaced by a Firstar
Benefit Plan. With respect to each calendar year during which the First Moline
Interim Period occurs, Firstar shall make or shall cause to
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be made to the First Moline Profit Sharing Plan profit sharing contributions for
the benefit of eligible First Moline Employees at a rate of no less than 5% of
eligible compensation for such calendar year (or portion thereof prior to the
date such Plan was replaced by the Firstar Thrift and Profit Sharing Plan).
(e) During the First Moline Interim Period, First Moline Employees shall
continue to accrue benefits under the First Moline Retirement Plan pursuant to
the terms thereof until such date as such Employees become eligible to accrue
benefits under the Firstar Corporation Pension Plan, in which case such benefits
accrued under the Firstar Corporation Pension Plan shall be in addition to the
benefits accrued under the First Moline Retirement Plan as of such date.
(f) First Moline and Firstar shall use all reasonable efforts and will
cause their respective subsidiaries to use all reasonable efforts to effect the
substitution of and assumption by Firstar or a Firstar subsidiary as the
sponsoring employers for the Plans and to amend such plans to the extent
necessary to accomplish such substitution and assumption, and such other actions
contemplated by the Plans and this Agreement. Except as otherwise provided in
any Plan or Firstar Benefit Plan, the power of Firstar or any of its
subsidiaries to amend or terminate any employee benefit plan or program after
the Closing Date, shall not be altered or affected by this Section 5.4.
(g) Firstar shall honor or cause to be honored, in accordance with its
terms as amended as of the date of this Agreement, the First Moline Employee
Severance Compensation Plan, provided that Firstar shall not be obligated to
apply said Plan to anyone other than the First Moline Employees.
5.5 Access to Information. After the date hereof and prior to the Closing
Date, upon reasonable notice, Firstar shall (and shall cause FCI and Firstar
Bank Davenport, N.A. to) afford to the officers, employees, agents and
representatives of First Moline, access during normal business hours to all its
properties, books, contracts, commitments and records.
5.6 First Moline Pension Plan. Firstar shall use its best efforts to notify
First Moline, within 45 days of the date of this Agreement, of its decision to
either terminate or merge the Retirement Plan for Employees of First Federal
Savings and Loan Association of Moline. Firstar's duty hereunder shall be
conditioned upon its receiving all information reasonably necessary to make its
decision.
5.7 Indemnification. Firstar agrees that all indemnification now existing
in favor of the directors and officers of First Moline and the Bank, as provided
in the Certificate of Incorporation, Charter and By-Laws of First Moline and the
Bank and applicable regulations, with respect to matters occurring prior to the
Closing, shall survive the Merger and shall continue in full force and effect
for two (2) years following Closing. Firstar shall provide or shall cause to be
provided, for a period of not less than two (2) years from the Closing Date,
Directors and Officers insurance and indemnification policies that provide First
Moline's and the Bank's Directors and Officers coverage for events occurring
prior to the Closing Date and that is in the aggregate, no less favorable than
First Moline's and the Bank's currently existing policies; provided, however,
that Firstar shall not be required to pay total premiums for the directors and
officers insurance required under this Section 5.7 in excess of $60,000, but in
such case shall purchase as much coverage as possible for such amount.
5.8 No Adverse Action. Except as specifically contemplated by this
Agreement, from the date hereof until the Closing Date, Firstar shall not, or
agree or commit to, or permit any of its subsidiaries to, without the prior
written consent of First Moline (which shall not be unreasonably withheld) take
any action which would (i) materially and adversely affect the ability of either
Firstar or First Moline to obtain any necessary approvals of governmental
authorities required for the transactions contemplated hereby, on the terms and
conditions set forth in Sections 1.5 and 9.1; (ii) materially and adversely
affect First Moline's ability to perform its covenants and agreements under the
Agreements; or (iii) result in any of the conditions to the Merger set forth in
this Agreement not being satisfied.
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ARTICLE VI
CONDUCT OF BUSINESS BY FIRST MOLINE UNTIL MERGER
First Moline agrees that from the date of this Reorganization Agreement
until the Closing Date:
6.1 Dividends. First Moline will not declare or pay any dividends or make
any distributions on First Moline Common Stock other than quarterly cash
dividends in amounts not to exceed in the aggregate per calendar quarter an
amount equal to the cash dividends that the shareholders of First Moline would
have received from Firstar had they owned, after August 25, 1994 265,112 shares
of Firstar Common Stock on the record dates in such quarters for the
determination of Firstar shareholders entitled to receive dividends. Prior to
closing and after calculation of the "Market Value of Firstar Common Stock at
the Closing Date" pursuant to Section 8 of the Plan of Merger, if the actual
number of shares of Firstar Common Stock to be issued in the Merger is greater
than 265,112, First Moline shall, in addition, pay a final dividend equal to the
difference between the dividends paid pursuant to the first sentence of this
Section 6.1 and the amount that would have been paid pursuant to such sentence
had it referred to the actual number of shares of Firstar Common Stock to be
issued in the Merger. First Moline will not permit the Bank to declare or pay
any dividends or make any distributions on its common stock other than cash
dividends necessary to fund such dividends of First Moline, pay expenses
expressly contemplated by this Reorganization Agreement and pay ordinary and
necessary operating expenses of First Moline on a basis consistent with prior
years. In the event that the Closing Date occurs at such a time as to cause the
shareholders of First Moline to not receive a dividend either as a holder of
First Moline Common Stock or as a holder of Firstar Common Stock for a given
calendar quarter, First Moline may pay a dividend for such quarter to its
shareholders, calculated in the same manner as such other dividends paid after
the date of this Reorganization Agreement.
6.2 Capitalization. First Moline will not, nor will it permit the Bank to,
issue, sell or otherwise dispose of, grant an option for, or acquire for value
any shares of capital stock of First Moline or the Bank or otherwise effect any
change in connection with its capitalization or that of the Bank.
6.3 Ordinary Course of Business. First Moline will, and will cause the Bank
to, carry on its business in substantially the same manner as heretofore and use
its best efforts to maintain and preserve its business organization intact,
retain its present employees and maintain its relationships with customers.
Except with the prior written consent of Firstar, First Moline will not, and
will not permit the Bank to (i) enter into any transaction other than in the
ordinary course of business or incur or agree to incur any obligation or
liability, except (a) liabilities incurred and obligations entered into in the
ordinary course of business, (b) with respect to an agreement with Vedder,
Price, Kaufman & Kammholz for fair and reasonable legal services in connection
with the Agreements and the transactions contemplated thereby providing for
payment based solely upon the number of hours spent by such firm in performing
such services, at the maximum hourly rate set forth in the First Moline Letter,
(c) with respect to any agreement for fees with McGladrey & Pullen for fair and
reasonable services in connection with preparation of the Registration Statement
and proxy solicitation materials and other activities contemplated by the
Agreements, and (d) with respect to an agreement with Hovde Financial, Inc. for
investment banking services in connection with the transactions contemplated in
the Agreements, for an aggregate amount not to exceed the amount set forth in
the agreement between First Moline and Hovde Financial, Inc.; (ii) except as
recommended by a regulatory authority and reported to Firstar, change its
lending, investment, liability management and other material policies concerning
its or either Bank's banking business, unless required by statute, regulation or
order; (iii) grant any bonus or increase in the rates of pay of employees or
directors except normal salary and bonus increases to employees, based on past
practice, not to exceed ten percent (10%) in the aggregate; (iv) except pursuant
to the contracts or commitments disclosed in the First Moline Letter or in the
ordinary course of business, incur or commit to any capital expenditure which
exceeds $25,000; (v) except in the ordinary course of business or as expressly
contemplated by this Reorganization Agreement, and, in the case of sales for
more than $50,000, after prior notice to Firstar, sell any loans made prior to
the date hereof, or sell any investment securities from their respective
investment portfolios, or sell or otherwise dispose of any assets; or (vi) agree
to any of the foregoing actions.
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6.4 Contact with Third Parties; No Board Recommendation. First Moline will
not initiate, solicit or encourage and will not permit the Bank to initiate,
solicit or encourage, or take any other affirmative action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably be
expected to lead to, any Competing Transaction (as such term is defined below),
or, subject to the fiduciary obligations of the Board of Directors of First
Moline following consultation with and based upon the advice of counsel,
negotiate with any person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize or permit any of its officers, directors or employees or any financial
advisor, attorney, accountant or other representative retained by First Moline
or the Bank to take any such action. For purposes of this Agreement, "Competing
Transaction" shall mean any of the following: (i) the merger or consolidation of
First Moline or the Bank with any person or entity other than Firstar or its
subsidiaries, (ii) the acquisition of more than ten percent (10%) of the
consolidated gross assets of First Moline by any person or entity other than
Firstar or its subsidiaries, (iii) the acquisition of any of the capital stock
of the Bank by any person or entity other than Firstar or its subsidiaries, or
(iv) the acquisition by First Moline or the Bank, except in the ordinary course
of business, of the stock or the assets of any other person or entity. Promptly
upon receiving any oral or written offer relating to any such event or proposed
event, First Moline shall notify Jon H. Stowe, Executive Vice President of
Firstar, or counsel for Firstar, by telephone, confirmed by letter, giving all
relevant details of such oral or written offer. The Board of Directors of First
Moline, subject to its fiduciary obligations, will not recommend that it or its
shareholders vote in favor of any Competing Transaction.
6.5 Corporate Structure. First Moline will not, nor will it permit the Bank
to, without the prior written consent of Firstar, which consent shall not be
unreasonably withheld, create or acquire any subsidiary. Except for the Articles
Amendments, there will be no change in the Certificate of Incorporation or
Bylaws of First Moline or the Articles of Incorporation or Bylaws of the Bank,
without the prior written consent of Firstar.
6.6 Accounting and Tax Reporting. First Moline will not, nor will it permit
the Bank to, change any of its methods of accounting in effect at the end of its
last fiscal year, or change any of its methods of reporting income or deductions
for federal income tax purposes from those employed in the preparation of the
federal income tax returns of First Moline or the Bank for its last taxable
year, except as may be required by law or generally accepted accounting
principles. First Moline will promptly notify Firstar of receipt of any notice
of assessment received from any taxing authority by First Moline or the Bank.
6.7 Full Disclosure. First Moline will afford Firstar, its officers,
accountants, counsel and other authorized representatives, such access to all
books, records, tax returns, leases, contracts and documents of First Moline and
the Bank and to the buildings, structures, fixtures and appurtenances of First
Moline and the Bank for purposes of inspecting their condition, and will furnish
to Firstar such information with respect to the assets and business of First
Moline and the Bank as Firstar may from time to time reasonably request in
connection with the Agreements and the transactions contemplated hereby and as
permitted by law, provided that such access or investigation shall not
unnecessarily interfere with the normal operations of First Moline and the Bank.
6.8 Reports to Firstar. First Moline will promptly advise Firstar in
writing of all actions taken by the directors and shareholders of First Moline
at meetings or in connection with written consents filed with First Moline and
furnish Firstar with copies of all monthly and other interim financial
statements of First Moline and the Bank as they become available. First Moline
will use its best efforts to keep Firstar fully informed concerning all trends
and developments of which it becomes aware that may have a material effect upon
the business, properties or condition (either financial or otherwise) of First
Moline and the Bank taken as a whole.
6.9 Solicitation of First Moline Shareholders. First Moline will take such
action as may be necessary in accordance with applicable law, including causing
a special meeting of its shareholders to be held as soon as practicable after
the effective date of the Registration Statement, to solicit, and will use its
best efforts to obtain, the requisite ratification, confirmation and adoption of
the Agreements and approval of the Merger by its shareholders and the approval
of its shareholders on such other matters as may be appropriate or required in
connection with the transactions contemplated by the Agreements. The Board of
Directors of First Moline shall, subject to its fiduciary obligations following
consultation with and based upon the advice of counsel,
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(i) recommend to its shareholders approval of the Merger; (ii) not withdraw,
modify or amend such recommendation; and (iii) use its best efforts to obtain
such shareholder approval. First Moline and Firstar shall coordinate and
cooperate with respect to the timing of such meeting and shall use their best
efforts to hold such meeting as soon as practicable after the date hereof.
6.10 Supplement to First Moline Letter. First Moline will promptly
supplement or amend the First Moline Letter with respect to any matter hereafter
arising that, if existing or occurring at the date of this Reorganization
Agreement, would have been required to be set forth or described in the First
Moline Letter. No supplement or amendment to the First Moline Letter will have
any effect for the purpose of determining satisfaction of the condition set
forth in Section 7.2 hereof.
6.11 Employee Benefit Plans. Except as required by law or provided by this
Agreement or disclosed in the First Moline Letter, First Moline will not make
any material change in any Plan. First Moline will cooperate fully with Firstar
and FCI and will take all steps necessary in the joint judgment of Firstar and
its counsel and First Moline and its counsel to cause the termination of any
Plan, other than any deferred compensation arrangement described in the First
Moline Letter, or the merger thereof, effective on or after the Closing Date,
into one or more employee benefit plans maintained by Firstar or FCI in
compliance with Section 7.13 of this Agreement. Without limitation of the
foregoing, if requested by Firstar or FCI, First Moline will cause the trustee
of any Plan to value the assets of such Plan and, effective on or after the
Closing Date, transfer all Plan assets and liabilities to a successor trustee
designated by Firstar or FCI, all in the manner specified by Firstar or FCI.
6.12 Bank-Level Transactions. First Moline and the Bank will cooperate with
Firstar and FCI in the preparation by Firstar or FCI of applications to the
appropriate regulatory authorities to effect, contingent on consummation of the
Merger, effective contemporaneously therewith, the conversion of the Bank to a
national banking association or the transfer of certain Bank assets and
liabilities to and/or a merger of the Bank with one or more bank subsidiaries of
Firstar or FCI.
6.13 Classification of Certain Assets. First Moline will, not later than as
of the month-end immediately preceding the Closing Date, classify as "held for
sale" all fixed rate mortgage loans in its portfolio, which Firstar shall
identify, and cause to be made such accounting entries as are required under
generally accepted accounting principles to reflect such a classification.
6.14 Allowance for Loan Losses. Not later than as of the month-end
immediately preceding the Closing Date, the allowance for loan losses of the
Bank after all anticipated loan losses shall have been charged off shall not be
less than an amount requested by Firstar.
6.15 Termination of Data Processing Agreement. First Moline will give
notice, not later than January 20, 1995, or such earlier date as Firstar may
reasonably request, of its intent to terminate its agreement with BISYS, Inc.
for data processing services at a date not later than July 20, 1995.
6.16 Environmental Audits. First Moline has engaged an entity to perform
environmental site assessments of the Real Properties carried on the books of
the Bank or any Bank Subsidiary (the "Environmental Audit") and render a Phase I
report of the Environmental Audit (the "Environmental Report"), to determine if
such properties have indications of or give evidence that any violations of
Environmental Laws have occurred on any such properties. The Environmental Audit
shall be completed within 60 days of the date hereof; Firstar shall receive a
complete copy of the Environmental Report within 75 days of the date hereof. The
Environmental Report or such subsequent investigation as is indicated in the
Environmental Report, shall indicate whether any cleanup, removal, remedial
action or other response is required in order to bring the Real Properties into
material compliance with Environmental Laws. Nothing contained in the
Environmental Report shall diminish or expand First Moline's obligations with
respect to the representations and warranties in Section 4.13 hereof or affect
the consequences of any such representation or warranty proving to have been
untrue, incomplete or misleading in any material respect.
6.17 Recapture of Tax Bad Debt Reserve. Not later than as of the month-end
immediately preceding the Closing Date, First Moline will record in its
financial records the recapture of its tax bad debt reserve and will
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cause to be made such accounting entries as are required under generally
acceptable accounting principles to reflect such recapture.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF FIRSTAR AND FCI
The obligations of Firstar and FCI under the Agreements to cause the
transactions contemplated therein to be consummated shall be subject to the
satisfaction of the following conditions:
7.1 No Material Adverse Change. There shall not have been any material
adverse change, or discovery of a condition or the occurrence of any event that
has or is likely to result in such a change, in the financial condition, assets,
liabilities, results of operation or business of First Moline and the Bank,
taken as a whole, from the date hereof to the Closing Date, except for such
changes as may occur as a consequence of the transactions contemplated by this
Agreement or changes outside the control of management resulting primarily by
reason of changes in banking laws or regulations or interpretations thereof, or
changes in the general level of interest rates or changes in economic,
financial, or market conditions affecting the banking industry generally in the
region in which First Moline and the Bank operate.
7.2 Representations and Warranties. All representations and warranties by
First Moline contained in this Reorganization Agreement shall be true and
correct in all material respects at, or as of, the Closing Date as though such
representations and warranties were made on and as of said date, except with
respect to (a) changes expressly contemplated in this Reorganization Agreement,
(b) representations or warranties as of a specified time other than the Closing
Date, which shall be true in all material respects at such specified time, or
(c) breaches that are not reasonably likely to have a material adverse impact on
First Moline or the Bank or on the benefits to have been received by Firstar or
FCI from consummation of the transactions contemplated by the Agreements.
7.3 Performance and Compliance. First Moline shall have performed or
complied with all covenants, agreements and conditions required by the
Agreements to be performed and satisfied by it on or prior to the Closing Date
unless waived by Firstar.
7.4 No Proceeding or Litigation. At the Closing Date, (i) no suit, action
or proceeding shall be pending or overtly threatened before any court or other
governmental agency by the federal or any state government in which it is sought
to restrain or prohibit the consummation of the Merger and, (ii) there is no
suit, action or proceeding pending or, to the knowledge of First Moline,
threatened against or affecting First Moline or the Bank which is likely to have
a material adverse effect on First Moline or the Bank, taken as a whole.
7.5 Review or Audit by Firstar and Accountants. Upon reasonable advance
notice, but no case later than three business days prior to the Closing Date,
Firstar and KPMG Peat Marwick shall have had an adequate opportunity to conduct
such a complete review, in accordance with standards established by the American
Institute of Certified Public Accountants, or audit, in accordance with
generally accepted auditing standards, of the financial condition, assets,
liabilities, results of operation, and business of First Moline and the Bank as
Firstar shall deem prudent. Any such audit or review shall be performed at
Firstar's sole expense.
7.6 Audit of Plans. Upon reasonable advance notice, but in no case later
than three business days prior to the Closing Date, Firstar shall have had the
opportunity to conduct, or to have conducted by an entity of its choosing, at
its expense, an audit of any Plans.
7.7 Pooling Letter. Firstar shall have received confirmation from KPMG Peat
Marwick that the Merger will be accounted for as a "pooling of interests" in
accordance with generally accepted accounting principles, as of a date no more
than five business days prior to the Closing Date; provided, however, that this
condition shall be deemed to have been waived by Firstar if the inability to
obtain such opinion arises out of, or results directly or indirectly from, any
action taken by Firstar, FCI or any of their respective subsidiaries contrary to
that contemplated by this Agreement.
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7.8 Opinion of Counsel for First Moline. Firstar and FCI shall have
received an opinion from Vedder, Price, Kaufman & Kammholz, counsel for First
Moline, dated the Closing Date, substantially to the effect set forth in Exhibit
7.8 hereto.
7.9 Certificate of Chief Executive Officer. First Moline shall have
furnished Firstar a certificate, signed by its Chief Executive Officer, dated
the Closing Date, to the effect that the conditions described in Sections 7.1,
7.2, 7.3, 7.4, 7.14 and 9.3 as it relates to First Moline of this Reorganization
Agreement have been fully satisfied, to the best of the knowledge of such Chief
Executive Officer.
7.10 Corporate Certificates. Firstar and FCI shall have received (i) a
statement of the State of Delaware, certifying that First Moline is a
corporation in good standing in Delaware, and (ii) a certificate of corporate
existence from the OTS relating to the Bank, each dated within five business
days prior to the Closing Date.
7.11 Bills for Certain Fees of First Moline or the Bank. (a) Firstar shall
have received a copy of the bills from Vedder, Price, Kaufman & Kammholz to
First Moline or the Bank for services performed in connection with the
transactions contemplated in the Agreements, through two (2) business days prior
to the Closing Date, which in the case of Vedder, Price, Kaufman & Kammholz, are
accompanied by information as to the number of hours spent by such counsel on
such services and the fees charged for such services; (b) Firstar shall have
received a copy of the statement for fees from McGladrey & Pullen to First
Moline for services performed in connection with the transactions contemplated
in the Agreements; and (c) Firstar shall have received a copy of the statement
for fees from Hovde Financial, Inc. for services performed in connection with
the transactions contemplated in the Agreements.
7.12 Tax Opinion. Firstar and FCI shall have received an opinion from an
accounting or law firm reasonably acceptable to Firstar and FCI, dated the
Closing Date, opining that the Merger will be treated as a tax-free
reorganization under the Code. Firstar or FCI shall request such an opinion
within ten days of the date of this Reorganization Agreement. The failure to
obtain such opinion due to an act or omission of Firstar or FCI shall constitute
a waiver of such condition.
7.13 Termination of Pension Plan. First Moline shall have taken all actions
necessary to cause the termination or merger into a Plan maintained by Firstar
or FCI of the Retirement Plan for Employees of First Federal Savings and Loan
Association of Moline and the Recognition and Retention Plan and Trust.
7.14 Charter Conversion. Firstar and FCI shall have received evidence of an
approval from the Office of the Comptroller of the Currency and any other
appropriate regulatory agencies for the conversion of the Bank to a national
banking association on the Closing Date.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF FIRST MOLINE
The obligations of First Moline under the Agreements to cause the
transactions contemplated herein to be consummated shall be subject to the
satisfaction of the following conditions unless waived by First Moline:
8.1 No Material Adverse Change. There shall not have been any material
adverse change, or discovery of a condition or the occurrence of any event that
has or is likely to result in such a change, in the consolidated financial
condition, assets, liabilities, results of operation or business of Firstar from
the date hereof to the Closing Date.
8.2 Representations and Warranties. All representations and warranties of
Firstar and FCI contained in this Reorganization Agreement shall be true and
correct in all material respects at, or as of, the Closing Date as though such
representations were made at and as of said date, except with respect to (y)
changes expressly contemplated in this Reorganization Agreement, or (z) breaches
that are not reasonably likely to have a material adverse impact on Firstar or
FCI or on the benefits to have been received by First Moline or its shareholders
from consummation of the transactions contemplated by the Agreements.
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8.3 Performance and Compliance. Firstar shall have performed or complied
with all covenants, agreements and conditions required by the Agreements to be
performed and satisfied by it at or prior to the Closing Date.
8.4 No Proceeding or Litigation. At the Closing Date, (i) no suit, action
or proceeding shall be pending or overtly threatened before any court or other
governmental agency by the federal or any state government in which it is sought
to restrain or prohibit the consummation of the Merger and, (ii) there is no
suit, action or proceeding pending or, to the knowledge of Firstar, threatened
against or affecting Firstar which is likely to have a material adverse effect
on Firstar.
8.5 Opinion of Counsel for Firstar and FCI. Firstar and FCI shall have
delivered to First Moline an opinion of Firstar's General Counsel, dated the
Closing Date, substantially to the effect set forth in Exhibit 8.5 hereto.
8.6 Certificate of Executive Officer. Firstar shall have furnished to First
Moline a certificate, signed by any one of its executive officers and dated the
Closing Date, to the effect that the conditions described in Sections 8.1, 8.2,
8.3, 8.4 and 9.3, as it relates to FCI of this Reorganization Agreement have
been fully satisfied.
8.7 Tax Opinion. First Moline shall have received an opinion from Vedder,
Price, Kaufman & Kammholz dated the Closing Date, opining that the Merger will
be treated as a tax-free reorganization under the Code. First Moline shall
request such an opinion within ten days of the date of this Reorganization
Agreement and shall provide such law firm (as well as the accounting or law firm
referred to in Section 7.13) with such representations as are true, accurate and
complete with respect to First Moline, its shareholders and the Merger as are
reasonably necessary to enable such law firm (as well as the accounting or law
firm referred to in Section 7.13) to deliver such opinion (and the opinion
referred to in Section 7.13). The failure to obtain such opinion due to an
affirmative act or omission of First Moline shall constitute a waiver of such
condition.
8.8 Listing. The shares of Firstar Common Stock to be issued in the Merger
to holders of First Moline Common Stock shall be listed on the NYSE.
8.9 Opinion of Financial Advisor. As of the date of the mailing of the
Proxy Statement-Prospectus, the Fairness Opinion may not be included in the
Proxy Statement-Prospectus because Hovde Financial, Inc. shall have withdrawn or
modified in any material respect the Fairness Opinion due to a determination by
such firm that the Fairness Opinion was erroneous.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES
In addition to the provisions of Articles VII and VIII hereof, the
obligations of First Moline, Firstar and FCI to cause the transactions
contemplated herein to be consummated, shall be subject to the satisfaction of
the following conditions.
9.1 Governmental Approvals. The parties hereto shall have received all
necessary approvals of governmental agencies and authorities, which do not
contain material terms or conditions that are not reasonably acceptable to
Firstar, of the transactions contemplated by the Agreements including the
conversion of the Bank to a national banking association and each of such
approvals shall remain in full force and effect at the Closing Date and such
approvals and the transactions contemplated thereby shall not have been
contested by any federal or state governmental authority nor by any other third
party by formal proceeding. Firstar shall promptly notify First Moline upon
receipt of all necessary governmental approvals. If any contest as aforesaid is
brought by formal proceedings, any party may, but shall not be obligated to,
answer and defend such contest.
9.2 Securities Law Compliance. The Registration Statement shall have become
effective by an order of the SEC, the Firstar Common Stock to be issued in the
Merger shall have been qualified or exempted under all applicable state
securities or blue sky laws, and there shall have been no stop order issued or
threatened by
24
<PAGE> 29
the SEC that suspends the effectiveness of the Registration Statement, and no
proceeding shall have been commenced, pending or overtly threatened for such
purpose.
9.3 Shareholder Approval. The Agreements and the Merger shall have been
duly approved by the requisite affirmative votes of the shareholders of First
Moline and FCI.
ARTICLE X
INDUCEMENT
10.1. Inducement. (a) Subject to subsection (d), As a condition and
inducement to Firstar's willingness to enter into and perform this
Reorganization Agreement, in the event that a Trigger Event (as hereinafter
defined) has occurred, then First Moline shall pay to Firstar a fee of $400,000.
Such fee shall be payable in immediately available funds within two days
following the occurrence of a Trigger Event.
(b) As used herein, "Trigger Event" shall mean the occurrence of one or
more of the following events:
(i) A Transaction Proposal (as defined below) shall have occurred;
(ii) Termination of this Agreement following a wilful and material
breach thereof by First Moline; or
(iii) (A) the Board of Directors of First Moline (1) shall have
withdrawn, modified or amended in any respect its approval or
recommendation of this Agreement or the transactions contemplated thereby,
or (2) shall not at the appropriate time have recommended or shall have
withdrawn, modified or amended in any respect its recommendation that its
stockholders vote in favor of this Agreement, or (3) shall not have
included such recommendation in the Proxy Statement, or (B) the Board of
Directors of First Moline shall have resolved to do any of the foregoing.
(c) As used in this Agreement, "Person" shall mean any individual, firm,
corporation, or other entity and shall include any syndicate or group of persons
deemed to be a "person" by Section 13(d)(3)(e) of the Exchange Act. As used in
this Agreement,
(i) "Transaction Proposal" shall mean (A) a bona fide tender offer or
exchange offer for at least 25% of the then outstanding shares of any class
of capital stock of First Moline shall have been made by any Person
(excluding Firstar or any of its subsidiaries or affiliates), (B) any
Person (other than Firstar or any subsidiary or Affiliate thereof) shall
have filed an application under the BHCA, the HOLA, the Savings and Loan
Holding Company Act, as amended, the Federal Deposit Insurance Act, as
amended or the Change in Bank Control Act, as amended, with respect to the
acquisition by such person of any shares of the capital stock of First
Moline, (C) a merger, consolidation or other business combination with
First Moline, or the Bank, shall have been effected by any Person, or an
agreement relating to any such transaction shall have been entered into,
(D) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (whether in one transaction or a series of related
transactions) involving more than ten percent (10%) of First Moline's
consolidated assets (including stock of the Bank), or all or a substantial
part of the assets of the Bank, to any Person shall have been effected, or
any agreement relating to such transaction shall have been entered into,
(E) the acquisition by any Person, other than (1) Firstar or any subsidiary
or Affiliate of Firstar (other than in a fiduciary capacity) or (2) the
Bank in a fiduciary capacity for third parties, of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act, which will be
deemed for purposes hereof to provide that such Person beneficially owns
any shares of First Moline Common Stock that may be acquired by such person
pursuant to any right, option, warrant or other agreement, regardless of
when such acquisition would be permitted by the terms thereof) of 10% or
more of the outstanding shares of First Moline Common Stock (including
capital stock currently beneficially owned by such Person) or, if such
Person currently beneficially owns 10% or more of the outstanding shares of
First Moline Common Stock, of any additional shares of First Moline Common
Stock (other than pursuant to such Person's rights and obligations as of
the date hereof related to the Stock Options and the Management Recognition
and Retention Plan and Trust), (F) any reclassification of securities or
recapitalization of First Moline or other transaction that has the effect,
directly or
25
<PAGE> 30
indirectly, of increasing the proportionate share of any class of equity
security (including securities convertible into equity securities) of First
Moline which is owned by any Person (excluding Firstar or any of its
subsidiaries or Affiliates) shall have been effected, or any agreement
relating to such transaction shall have been entered into or plan with
respect thereto adopted, (G) any transaction having an effect similar to
those described in (A) through (F) above, or (H) a public announcement with
respect to a proposal, plan or intention by First Moline or another person
(excluding Firstar or any of its subsidiaries or affiliates) to effect any
of the foregoing transactions; provided, however, that in the case of the
events described in clauses (A), (B) and (H) in this definition, and events
described in clause (G) having an effect similar to those described in
clauses (A) and (B) (the "Events"), such Events shall not constitute a
"Transaction Proposal" hereunder unless after the occurrence of any such
Event, either (x) the Board of Directors of First Moline (1) recommends
such Event to its stockholders for acceptance; (2) fails to undertake such
acts as Firstar reasonably requests to oppose such Event (provided that
First Moline not incur significant legal expense); or (3) fails to
recommend approval of this Agreement to First Moline's stockholders; or (y)
First Moline's stockholders shall have failed to approve this Agreement at
a meeting duly called for such purpose; and provided, further, that any
transaction contemplated by this Agreement (other than transactions
contemplated by Section 6.4 or Section 6.9) shall be specifically exempt
from the definition of "Transaction Proposal"; and
(ii) "Affiliate" shall mean a person that directly or indirectly,
through one or more intermediaries, (A) owns beneficially, directly or
indirectly, in excess of 10% of the voting capital stock of any other
Person or (B) controls, is controlled by, or is under common control with,
another person.
(d) The rights of Firstar hereunder shall terminate upon the earliest to
occur of (i) the Closing Date, (ii) the termination of this Agreement by First
Moline pursuant to Sections 11.1(c)(ii) or 11.1(c)(iii), (iii) the termination
of this Agreement by mutual agreement of the parties or (iv) the expiration of
one year after the termination of this Agreement (other than terminations
described in clause (ii) or (iii)).
ARTICLE XI
TERMINATION
11.1 Reasons for Termination. The Agreements may be terminated and the
Merger abandoned at any time before the Closing Date, notwithstanding the
approval or adoption of the Agreements by the shareholders of First Moline
and/or FCI:
(a) By mutual written consent of the Board of Directors of First
Moline and the Board of Directors or the Interstate Banking and
Acquisitions Committee of Firstar;
(b) By written notice from Firstar to First Moline if:
(i) any condition set forth in Articles VII or IX of this
Reorganization Agreement has not been substantially satisfied or waived
in writing by June 30, 1995, unless the failure to satisfy such
condition is due to a breach of the Agreements by Firstar;
(ii) any warranty or representation made by First Moline shall be
discovered to be or to have become untrue, incomplete or misleading
where any such breach, individually or in the aggregate, (a) is
reasonably likely to have a material adverse impact on First Moline and
the Bank, taken as a whole, or on the benefits to have been received by
Firstar or FCI from consummation of the transactions contemplated by the
Agreements, and (b) has not been cured within ten business days
following receipt by First Moline of notice of such discovery, provided,
however, that Firstar shall have no such termination right in respect of
any matter known to it as of the date of this Reorganization Agreement;
or
(iii) First Moline shall have breached one or more covenants of
this Reorganization Agreement in any material respect considering all
such breaches in the aggregate, where such breach has not been cured
within ten business days following receipt by First Moline of written
notice of such
26
<PAGE> 31
breach, provided, however, that Firstar shall have no such termination
right in respect of any matter known to it as of the date of this
Reorganization Agreement; or
(c) By written notice from First Moline to Firstar, if:
(i) any condition set forth in Articles VIII or IX of this
Reorganization Agreement has not been substantially satisfied or waived
in writing by June 30, 1995, unless the failure to satisfy such
condition is due to a breach of the Agreements by First Moline;
(ii) any warranty or representation made by Firstar shall be
discovered to be or to have become untrue, incomplete or misleading
where any such breach, individually or in the aggregate, (a) is
reasonably likely to have a material adverse impact on Firstar or on the
benefits to have been received by First Moline or its shareholders from
consummation of the transactions contemplated by the Agreements, and (b)
has not been cured within ten business days following receipt by Firstar
of written notice of such discovery, provided, however, that First
Moline shall have no such termination right in respect of any matter
known to it as of the date of this Reorganization Agreement;
(iii) Firstar shall have breached one or more covenants of this
Reorganization Agreement in any material respect considering all such
breaches in the aggregate, where such breach has not been cured within
ten business days following receipt by Firstar of notice of such breach,
provided, however, that First Moline shall have no such termination
right in respect of any matter known to it as of the date of this
Reorganization Agreement.
(iv) on the date on which the Market Value of Firstar Common Stock
is calculated pursuant to the Plan of Merger, if the Market Value of
Firstar Common Stock on the Closing Date is less than $28.00.
11.2 Liability. In the event of termination of this Reorganization
Agreement caused (a) otherwise than by breach of a party hereto or (b) by any
willful breach or misrepresentation by a party hereto not covered by the next
sentence, there shall be no liability on the part of First Moline, Firstar or
FCI of any nature whatsoever, except that each party shall pay its own fees and
expenses pursuant to Section 12.2 of this Reorganization Agreement and continue
to comply with the obligations set forth in Section 1.7 of this Reorganization
Agreement. In the event of termination of this Reorganization Agreement caused
by (i) willful breach by a party of any agreement, covenant, or undertaking of
such party contained herein or in any exhibit hereto; (ii) any material
misrepresentations or breach of warranty in any material respect by a party
herein, which at the date hereof was known to be a misrepresentation or breach
of warranty by such party; or (iii) the failure of any condition set forth in
Articles VII, VIII or IX hereof which has failed because a party did not
exercise good faith and best efforts towards the fulfillment of such condition;
then the other party shall be entitled to all its legal and equitable remedies.
ARTICLE XII
MISCELLANEOUS
12.1 Brokers. Firstar and First Moline agree that no third person or
entity, except Hovde Financial, Inc., has in any way brought the parties
together or been instrumental in the making of the Agreements. Each such party
agrees to indemnify the other against any claim by any third person or entity
other than Hovde Financial, Inc. for any commission, brokerage or finder's fee,
or other payment with respect to the Agreements or the transactions contemplated
thereby based on any alleged agreement or misunderstanding between such party
and such third person or entity, whether express or implied from the actions of
such party.
12.2 Expenses. Each party to the Agreements will pay its respective fees
and expenses incurred in connection with the preparation and performance of the
Agreements, including fees and expenses of its counsel, accountants, and other
experts and advisors, except that Firstar agrees to reimburse First Moline and
the Bank for any out-of-pocket fees and expenses they incur at the request and
direction of Firstar (not to include fees paid or payable for the environmental
audits referred to in Section 6.14 hereof).
27
<PAGE> 32
12.3 Waivers; Amendments. At any time prior to the Closing Date, either
Firstar, by action taken by its Board of Directors or Interstate Banking and
Acquisitions Committee or officers thereunto authorized, or First Moline, by
action taken by its Board of Directors or officers thereunto authorized, may
waive the performance of any of the obligations of the other or waive compliance
by the other with any of the covenants or conditions contained in the Agreements
or agree to the amendment or modification of the Agreements by an agreement in
writing executed in the same manner as the Agreements.
12.4 Assignment. This Reorganization Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assigned by the parties hereto without the prior
written consent of the other parties, except that Firstar or FCI may assign its
rights hereunder to any wholly owned direct or indirect subsidiary of Firstar;
provided, however, that in the event Firstar or FCI or any of their successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, proper provision shall be
made so that the successors and assigns of Firstar or FCI, as the case may be,
assume the obligations set forth in this Agreement.
12.5 Entire Agreement. This Reorganization Agreement, the Plan of Merger,
the Voting Agreements and the Affiliates' Undertakings supersede any other
agreement, whether written or oral, that may have been made or entered into by
First Moline or Firstar or FCI or by any officer or officers of such parties
relating to the acquisition of the business or the capital stock of First Moline
by Firstar or FCI. The aforementioned agreements constitute the entire agreement
by the respective parties, and there are no agreements or commitments except as
set forth herein and therein.
12.6 Captions and Counterparts. The captions in this Reorganization
Agreement are for convenience only and shall not be considered a part of or
affect the construction or interpretation of any provision of this
Reorganization Agreement. This Reorganization Agreement may be executed in
several counterparts, each of which shall constitute one and the same
instrument.
12.7 Governing Law. The Reorganization Agreement shall be construed and
interpreted in accordance with the laws of the State of Wisconsin and federal
law except as the Delaware General Corporation Law and the Iowa Business
Corporation Act is expressly applicable to the Merger.
12.8 Nonsurvival. No representations, warranties or covenants in this
Reorganization Agreement shall survive, (a) the Merger, other than the
obligations set forth in Sections 1.4, 1.7, 1.9, 1.10, 5.4 and 5.7, and the
representations set forth in Section 4.24, of this Reorganization Agreement, and
(b) the termination under Article XI hereof, other than the obligations set
forth in Sections 1.7, 1.9, 10.1 and 12.2, and the representations set forth in
Section 4.24, of this Reorganization Agreement.
12.9 Knowledge of the Parties. Whenever in this Agreement any
representation or warranty is made upon the knowledge of a party hereto, such
knowledge shall mean and include (i) with respect to First Moline, the actual
knowledge of its Chief Executive Officer or its Board of Directors or any facts
that upon due inquiry, would have been known to such person, and (ii) with
respect to Firstar, the actual knowledge of its Chairman, President or any other
executive officer or the Board of Directors of such parties or any facts that
upon due inquiry, would have been known to such person.
12.10 Notices. All notices given hereunder shall be in writing and shall be
mailed by first class mail, postage prepaid or by nationally recognized
overnight delivery service, addressed as follows:
(a) If to Firstar or FCI, to:
Firstar Corporation
[or Firstar Corporation of Iowa]
Attn: Jon H. Stowe
Executive Vice President
777 East Wisconsin Avenue
Milwaukee, WI 53202
28
<PAGE> 33
with a copy to:
Firstar Corporation
Law Department
Attn: Howard H. Hopwood, III
Senior Vice President and General Counsel
777 East Wisconsin Avenue
Milwaukee, WI 53202
(b) If to First Moline, to:
First Moline Financial Corp.
Attention: Byrd Krumbholz
President and Chief Executive Officer
1616 Sixth Avenue
Moline, IL 61265
with additional copies to:
First Moline Financial Corp.
Attention: Glenn Medhus
Chairman of the Board
1616 Sixth Avenue
Moline, IL 61265
and
Daniel C. McKay, II
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, IL 60601
29
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Reorganization to be duly executed as of the date first above written.
<TABLE>
<S> <C>
FIRSTAR CORPORATION
(SEAL) By: /s/ JON H. STOWE
-------------------------------------
Its: Executive Vice President
Attest: /s/ JOHN A. KIELICH
-------------------------------------
Its: First Vice President
FIRST MOLINE FINANCIAL CORP.
(SEAL) By: /s/ BYRD KRUMBHOLZ
-------------------------------------
Its: President
Attest: /s/ GLENN MEDHUS
-------------------------------------
Its: Chairman
FIRSTAR CORPORATION OF IOWA
(SEAL) By: /s/ JAMES R. LANG
-------------------------------------
Its: President
Attest: /s/ JEFFREY B. WEEDEN
-------------------------------------
Its: Senior Vice President
</TABLE>
30
<PAGE> 35
EXHIBIT 1.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
First Moline Financial Corp. (the "Company"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Company held on
[ ], 1994, resolutions were duly adopted setting forth a proposed
amendment of the Certificate of Incorporation of the Company, declaring said
amendment to be advisable and calling a meeting of the stockholders of the
Company for consideration thereof. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Company's Certificate of Incorporation be amended by
deleting Article Fourth Section C in its entirety.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a
special meeting of the stockholders of the Company was duly called and held on
[ ], upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Byrd Krumbholz, its President and Chief Executive Officer, and Daniel Churchill,
its Secretary, this day of , 199 .
By:
------------------------------------
Byrd Krumbholz
President and Chief Executive
Officer
Attest:
----------------------------------
Daniel Churchill
Secretary
<PAGE> 36
EXHIBIT 4.18(II)
[FORM OF FIRST MOLINE AFFILIATE'S UNDERTAKING]
, 1994
Firstar Corporation
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
I have been advised that as of the date hereof I may be deemed an
"affiliate" of First Moline Financial Corp., a Delaware corporation ("First
Moline"), as that term is defined for purposes of paragraphs (c) and (d) of Rule
145 of the rules and regulations (the "Rules and Regulations") under the
Securities Act of 1933, as amended (the "Act") ("Affiliate"). Pursuant to the
terms of the Agreement and Plan of Reorganization among Firstar Corporation, a
Wisconsin corporation ("Firstar"), Firstar Corporation of Iowa, an Iowa
corporation ("FCI"), and First Moline (the "Reorganization Agreement"), and the
related Plan of Merger and Agreement of Merger by and between First Moline and
FCI joined in by Firstar for certain limited purposes, both dated as of August
25, 1994 (together with the Reorganization Agreement, the "Agreements"), First
Moline will be merged with and into FCI (the "Merger"), and as a result of the
Merger, I may receive shares of common stock of Firstar, $1.25 par value
("Firstar Common Stock").
In connection with the above transactions, I represent and warrant to
Firstar and agree that:
A. I will not make any sale, transfer or other disposition of the shares of
Firstar Common Stock in violation of the Act or the Rules and Regulations.
B. I have no present plan or intent to dispose of the Firstar Common Stock
acquired by me pursuant to the Merger.
C. I have been advised that the offering, sale and delivery of the shares
of Firstar Common Stock to me pursuant to the Merger will be registered under
the Act on a Registration Statement on Form S-4. I have also been advised,
however, that, since I may be deemed to be an Affiliate of First Moline at the
time the Agreements are submitted for a vote of the shareholders of First
Moline, the shares of Firstar Common Stock must be held by me indefinitely
unless (i) such shares of Firstar Common Stock have been registered for
distribution under the Act, (ii) a sale of the shares of Firstar Common Stock is
made in conformity with the volume and other limitations of Rule 145, or (iii)
in the opinion of counsel acceptable to Firstar, some other exemption from
registration under the Act is available with respect to any such proposed sale,
transfer or other disposition of the shares of Firstar Common Stock.
D. I have carefully read this Agreement and the Agreements and have
discussed their requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of the shares of Firstar Common Stock, to
the extent I felt necessary, with my counsel or counsel for First Moline.
E. I understand that Firstar is under no obligation to register the sale,
transfer or other disposition of the shares of Firstar Common Stock for sale,
transfer or other disposition by me to make compliance with an exemption from
registration available.
F. I understand that stop transfer instructions will be given to the
registrar of the certificates for the shares of Firstar Common Stock and that
there will be placed on the certificates for the shares of Firstar Common Stock,
or any substitutions therefore, a legend stating in substance:
"The shares represented by this certificate were issued in a transaction
(the acquisition of First Moline Banking Corp.) to which Rule 145
promulgated under the Securities Act of 1933, as amended (the "Act"),
applies and may be sold or otherwise transferred only in compliance with
the limitations of such Rule 145, or upon receipt by Firstar Corporation of
an opinion of counsel acceptable to it that some other
<PAGE> 37
Firstar Corporation
[Date]
Page 2
exemption from registration under the Act is available, or pursuant to a
registration statement under the Act. The shares represented by this
certificate may not be sold or otherwise transferred prior to the
publication by Firstar Corporation of an earnings statement covering at
least 30 days of operations subsequent to [the effective date of the
Merger]."
G. I hereby agree that, for a period of two (2) years following the
effective date of the Merger, I will obtain an agreement similar to this
agreement from each transferee of the shares of Firstar Common Stock sold or
otherwise transferred by me, but only if such transfer is effected other than in
a transaction involving a registered public offering or as a sale pursuant to
Rule 145.
H. Notwithstanding the other provisions hereof, I agree not to sell,
pledge, transfer, or otherwise dispose of the shares of Firstar Common Stock, or
reduce my risk relative to the Firstar Common Stock in any other way, from the
date hereof until such time as financial results covering at least 30 days of
combined operations of the parties to the Merger have been published within the
meaning of Section 201.01 of the Securities and Exchange Commission's
Codification of Financial Reporting Policies. I have not reduced my risk
relative to the Firstar Common Stock to date.
It is understood and agreed that this Agreement will terminate and be of no
further force and effect and the legend set forth in Paragraph F above will be
removed by delivery of substitute certificates without such legend, and the
related transfer restrictions shall be lifted forthwith, if the period of time
specified in Paragraph H of this Agreement has passed and (i) my shares of
Firstar Common Stock shall have been registered under the Act for sale, transfer
or other disposition by me or on my behalf, (ii) I am not at the time an
Affiliate of Firstar and have held the shares of Firstar Common Stock for at
least two (2) years (or such other period as may be prescribed by the Act and
the Rules and Regulations) and Firstar has filed with the Securities and
Exchange Commission ("SEC") all of the reports it is required to file under the
Securities Exchange Act of 1934, as amended, during the preceding twelve (12)
months, (iii) I am not and have not been for at least three (3) months an
Affiliate of Firstar and I have held the shares of Firstar Common Stock for at
least three (3) years, or (iv) Firstar shall have received a letter from the
staff of the SEC, or an opinion of Firstar's General Counsel or other counsel
acceptable to Firstar, to the effect that the stock transfer restrictions and
the legend are not required.
This Agreement shall be binding on my heirs, legal representatives and
successors.
Very truly yours,
--------------------------------------
Accepted as of the day of , 1994.
FIRSTAR CORPORATION
By:
----------------------------------
<PAGE> 38
EXHIBIT 7.8
[SELLER'S COUNSEL'S LETTERHEAD]
[Closing Date]
Firstar Corporation
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
We have acted as counsel to First Moline Financial Corp. ("First Moline"),
a Delaware corporation and a registered savings and loan holding company in
connection with the merger of First Moline with and into Firstar Corporation of
Iowa, an Iowa corporation ("FCI"), pursuant to an Agreement and Plan of
Reorganization dated as of August 25, 1994 (the "Reorganization Agreement"), by
and among First Moline, FCI, and Firstar Corporation, a Wisconsin corporation
("Firstar"). This letter is furnished to you pursuant to Section 7.8 of the
Reorganization Agreement. Unless the context clearly requires otherwise,
capitalized terms used herein shall have the meanings ascribed thereto in the
Reorganization Agreement.
As special counsel for First Moline, we have also examined and relied upon
such corporate records of First Moline, the Bank and the Bank Subsidiaries and
such other documents, and certificates provided by their officers, including
certificates supplied to Firstar in connection with this transaction, and
certificates of public officials as we considered necessary or appropriate for
purposes of this legal opinion, but have also relied upon factual
representations made by First Moline in Section 4 of the Reorganization
Agreement as well as a legal opinion from First Moline's local counsel.
Furthermore, in regard to the matters stated in numbered paragraph 6, we
wish to advise you that we have not been engaged to give substantive attention
to any legal or governmental proceedings, orders or third party agreements
(other than the Agreements) to which First Moline the Bank or either Bank
Subsidiary may be a party. We have not searched the dockets of any court or any
governmental agency to determine if any such proceedings are pending or orders
entered involving First Moline, the Bank or either Bank Subsidiary or the
Merger.
Based upon the foregoing and subject to the qualifications set forth in
subsequent portions of this letter, it is our opinion that:
1. First Moline is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with all necessary power
and authority to engage in the activities and businesses now conducted by it.
First Moline is registered with the Office of Thrift Supervision as a savings
and loan holding company under the Home Owners' Loan Act, as amended. First
Moline has no direct or indirect subsidiaries except the Bank and the Bank
Subsidiaries.
2. (a) First Federal Savings Bank of Moline is a federal savings bank duly
organized and validly existing under the laws of the United States. The Bank (i)
is duly authorized to conduct a banking business in its offices subject to the
supervision of the Office of Thrift Supervision; (ii) is an "insured depository
institution" as defined in Section 3(c)(2) of the Federal Deposit Insurance Act,
12 U.S.C. Section 1813(c)(2); and (iii) has full power and authority, corporate
or otherwise (including all necessary licenses, franchises, permits and other
governmental authorizations) to engage in the banking business.
(b) The Bank Subsidiaries are each corporations duly organized, validly
existing and in good standing under the laws of the State of Illinois, with full
power and authority, corporate or otherwise to engage in their respective
activities.
3. The authorized capital stock of First Moline consists of 2,500,000
shares of stock, $0.01 par value, 2,000,000 of which are designated Common Stock
("First Moline Common Stock") and 500,000 of which are designated Preferred
Stock. There are no shares of Preferred Stock issues or outstanding and there
are 282,550 shares of First Moline Common Stock are validly issued and
outstanding. All of such shares are fully paid and nonassessable. To our
knowledge, First Moline does not have any arrangements or commitments obligating
it to issue or sell or otherwise dispose of, or to purchase or redeem shares of
its capital stock or any securities
<PAGE> 39
Firstar Corporation
[Closing Date]
Page 2
convertible into or having the right to purchase shares of its capital stock
other than as set forth in the Reorganization Agreement, Plan of Merger or the
First Moline Letter.
4. (a) The authorized capital stock of First Federal Savings Bank of Moline
consists of 2,500,000 shares, 2,000,000 common stock, $0.01 par value, 100 of
which are validly issued and outstanding, fully paid and nonassessable and
500,000 shares of Serial Preferred Stock, $0.01 par value, none of which is
issued or outstanding. First Moline is the registered holder of all of such
shares of the outstanding capital stock of the Bank. To our knowledge, neither
First Moline nor the Bank has any arrangements or commitments obligating it to
issue or sell or otherwise dispose of, or to purchase or redeem shares of the
Bank's capital stock or any securities convertible into or having the right to
purchase shares of the Bank's capital stock. To our knowledge, First Federal
Savings Bank of Moline has no subsidiaries, except FFM-CMO, Inc. and First
Moline Real Estate Corp.
(b) The authorized capital stock of FFM-CMO, Inc. consists of 500,000
shares of common stock, no par value, 50,000 of which are validly issued and
outstanding, fully paid and nonassessable and owned by First Bank Moline, N.A.
To our knowledge, neither the Bank nor FFM-CMO, Inc. has any arrangements or
commitments obligating it to issue or sell or otherwise dispose of, or to
purchase or redeem shares of FFM-CMO, Inc. capital stock or any securities
convertible into or having the right to purchase shares of the Bank's capital
stock.
(c) The authorized capital stock of First Moline Real Estate Corp. consists
of 100,000 shares of common stock, no par value, 25,000 of which are validly
issued and outstanding, fully paid and nonassessable and owned by the Bank. To
our knowledge, neither the Bank nor First Moline Real Estate Corp. has any
arrangements or commitments obligating it to issue or sell or otherwise dispose
of, or to purchase or redeem shares of First Moline Real Estate Corp.'s capital
stock or any securities convertible into or having the right to purchase shares
of the Bank's capital stock.
5. The execution, delivery and performance of the Reorganization Agreement,
the Plan of Merger and the Investment Agreement by First Moline have been duly
authorized and approved by all requisite action of the Board of Directors and
shareholders of First Moline and each has been duly executed and delivered by
First Moline and constitutes a valid and binding obligation of First Moline
enforceable in accordance with its terms.
6. Except as set forth in the First Moline Letter, as updated through the
date hereof, we have not been made aware of (i) any material claims having been
asserted or relief having been sought against or affecting First Moline, the
Bank or either Bank Subsidiary in any pending litigation or governmental
proceedings; (ii) there being any proceedings, claims, actions or governmental
investigations threatened against First Moline or either Bank; (iii) First
Moline or the Bank being a party to any order, judgment or decree, other than
any order, judgment or decree to which the Bank may be subject or a party in the
ordinary course of its business; (iv) First Moline or the Bank being the subject
of any cease and desist order, or other formal enforcement action, or any
memorandum of understanding with any bank regulatory authority; and (v) First
Moline or the Bank making any commitment to or entering into any agreement with
any bank regulatory authority that restricts or adversely affects its or their
operations or financial condition.
7. In the course of the preparation of the S-4 and the Proxy Statement, we
have considered the information set forth therein in light of the matters
required to be set forth therein, and have participated in conferences with
officers and representatives of First Moline and Firstar, including their
respective counsel and independent public accountants, during the course of
which the contents of the S-4 and the Proxy Statement and related matters were
discussed. We have not independently checked the accuracy or completeness of, or
otherwise verified, and accordingly are not passing upon, and do not assume
responsibility for, the accuracy, completeness or fairness of the statements
contained in the S-4 or the Proxy Statement; and we have relied as to
materiality, to a large extent, upon the judgment of officers and
representatives of First Moline and Firstar. However, as a result of such
consideration and participation, nothing has come to our attention which causes
<PAGE> 40
Firstar Corporation
[Closing Date]
Page 3
us to believe that the S-4 (other than the financial statements, financial data,
statistical data and supporting schedules included therein, and information
relating to or supplied by Firstar as to which we express no belief), at the
time it became effective, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Proxy Statement (other
than the financial statements, financial data, statistical data and supporting
schedules included therein, and information relating to or supplied by Firstar,
as to which we express no belief), at the time the S-4 became effective,
included any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
8. To our knowledge, there is no suit, action or proceeding pending or
overtly threatened before any court or other governmental agency by the federal
or state government in which it is or will be sought to restrain or prohibit the
consummation of the Merger.
The opinions expressed in this letter are subject to the following
qualifications:
(a) We have assumed without independent investigation (i) the
authenticity of all documents submitted to us as originals, (ii) the
genuineness of all signatures and proper delivery of all documents, and
(iii) the conformity to the originals of all documents submitted to us as
copies.
(b) Our opinions expressed herein that the Reorganization Agreement,
the Plan of Merger and the Investment Agreement constitute the valid and
binding obligations of First Moline are legally enforceable against them in
accordance with their terms, are expressly subject to:
i) limitations on the availability of specific enforcement and
other equitable remedies based upon the application of equitable
principles; and
ii) bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance and other similar state and federal
laws affecting the enforcement of creditors' rights generally.
(c) We have assumed that you have obtained any and all required
federal and state banking approvals for the transactions described herein
and that any necessary waiting periods have elapsed.
(d) Our review of the corporate records of First Moline, the Bank and
the Bank Subsidiaries has been limited to the Articles of Incorporation,
the Bylaws, and minutes of the Boards of Directors and shareholders of such
organizations for the last five years.
(e) We have assumed that you have performed (and will perform) all of
your obligations under, and are in full compliance with, the Reorganization
Agreement, the Plan of Merger, and the Investment Agreement.
The opinions contained in this letter are limited to the laws of the United
States and of the States of Delaware and Illinois. We express no opinion as to
the applicability or effect of the laws of any other state or country.
This letter is being delivered to you solely for your benefit pursuant to
Section 7.8 of the Reorganization Agreement and may not be relied upon by any
other person or for any other purpose. This letter is not to be used,
circulated, quoted or otherwise referred to by any other person or for any other
purpose without our prior express written permission.
Very truly yours,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
By:
--------------------------------------
Daniel C. McKay, II, Partner
<PAGE> 41
EXHIBIT 8.5
[GENERAL COUNSEL LETTERHEAD]
[Closing Date]
First Moline Financial Corp.
1616 6th Avenue
Moline, IL 61265
Gentlemen:
As Senior Vice President and General Counsel of Firstar Corporation
("Firstar"), I am familiar with the Agreement and Plan of Reorganization (the
"Reorganization Agreement") dated as of August 25, 1994, by and among Firstar,
First Moline Financial Corp., a Delaware corporation ("First Moline"), and
Firstar Corporation of Iowa, an Iowa corporation ("FCI"), and the Plan of Merger
and Agreement of Merger dated of even date therewith by and between First Moline
and FCI and joined in by Firstar for certain limited purposes (the "Plan of
Merger"). Section 8.5 of the Reorganization Agreement requires as a condition to
your obligation to consummate the transactions contemplated by the
Reorganization Agreement and the Plan of Merger that you receive an opinion as
of this date as to certain matters. Any capitalized term used, but not defined
herein, shall have the meaning ascribed to it in the Reorganization Agreement or
the Plan of Merger.
As counsel for Firstar, I have examined or caused to be examined such
corporate records, certificates and other documents and have examined such
matters of law as I considered necessary or appropriate for purposes of this
opinion.
Based upon the foregoing, it is my opinion that:
1. Firstar and FCI are corporations duly organized, validly existing and in
active status under the laws of Wisconsin and Iowa, respectively, with full
power and authority to engage in the activities and business now conducted by
them. Firstar and FCI are registered with the Federal Reserve Board as bank
holding companies under the Bank Holding Company Act of 1956, as amended.
2. The authorized capital stock of Firstar consists of (i) 120,000,000
shares of Common Stock, $1.25 par value, shares of which were validly
issued and outstanding as of , 1994, and (ii) 2,500,000 shares of
Preferred Stock, $1.00 par value, of which 600,000 shares of Series C were
reserved for issuance in connection with Firstar's Shareholder Rights Plan
approved January 19, 1989, as of , 1994. All of the issued and
outstanding shares of capital stock of both Firstar and FCI are fully paid and
non-assessable, except as provided in sec. 180.0622(2)(b) of the Wisconsin
Business Corporation Law and judicial interpretations thereof, and not issued in
violation of the preemptive rights of any shareholder.
3. The execution, delivery and performance of the Reorganization Agreement
and the Plan of Merger have been duly authorized and approved by all requisite
action of the boards of directors and shareholders of Firstar and FCI, and the
Reorganization Agreement and the Plan of Merger have been duly executed and
delivered by Firstar and FCI and each constitutes a valid and binding obligation
of Firstar and FCI, enforceable in accordance with their terms, subject to (a)
all applicable bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (b) the application
of equitable principles if equitable remedies are sought.
4. The Registration Statement referred to in Section 1.3 of the
Reorganization Agreement is effective under the Securities Act of 1933, as
amended, and no stop order suspending the effectiveness of the Registration
Statement has been instituted.
5. The Proxy Statement/Prospectus referred to in Section 1.3 of the
Reorganization Agreement, as of the date it was disseminated to holders of
common stock of First Moline, and the Registration Statement, as of the date on
which the Registration Statement became effective (the "Registration Effective
Date"), and any amendment thereto that subsequently become effective, complied
in all material respects with the requirements of the Securities Act of 1933, as
amended; provided, however, that in this connection (a) I have
<PAGE> 42
First Moline Financial Corp.
[Closing Date]
Page 2
relied upon First Moline and the Bank and their counsel as to the accuracy of
the descriptions included in the Proxy Statement/Prospectus and the Registration
Statement relating to First Moline and the Bank and their business operations;
and (b) I did not participate in the preparation of financial statements and
financial data for First Moline and the Bank included in the Proxy
Statement/Prospectus and the Registration Statement, and I therefore express no
opinion as to such matters.
6. On the basis of information developed and made available to me in the
course of the preparation of the Proxy Statement/Prospectus and the Registration
Statement, but without independently verifying the accuracy, completeness or
fairness of the statements contained therein, nothing has come to my attention
that leads me to believe that (a) the portions of the Proxy Statement/Prospectus
and Registration Statement relating to Firstar and FCI and their affiliates
(other than financial statements and other financial data included therein as to
which I express no opinion) contained, on the Registration Effective Date and at
this date, any untrue statement of a material fact or omitted any material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading, and (b) any event has occurred as a result of which the Proxy
Statement/Prospectus and Registration Statement should be supplemented or
amended to correct any statement regarding Firstar and FCI or their affiliates
made therein or to supplement or amend the statements to include additional
statements.
7. Neither the execution and delivery of the Reorganization Agreement and
the Plan of Merger nor the consummation of the Merger will conflict with, result
in the breach of, constitute a default under or accelerate the performance
provided by the terms of any law, or any rule or regulation of any governmental
agency or authority, or any judgment, order or decree of any court or other
governmental agency to which Firstar may be subject, or any contract, agreement
or instrument to which Firstar is a party or by which Firstar is bound or
committed, or the Articles of Incorporation or Bylaws of Firstar, or constitute
an event that, with the lapse of time or action by a third party, could result
in a default under any of the foregoing or result in the creation of any lien,
charge or encumbrance upon any of the assets, properties or stock of Firstar.
8. The shares of common stock of Firstar to be issued pursuant to the
Reorganization Agreement and the Plan of Merger will be validly issued, fully
paid and non-assessable, except insofar as liability may be imposed under sec.
180.0622(2)(b) of the Wisconsin Business Corporation Law and judicial
interpretations thereof.
9. The Merger, when consummated in accordance with the Reorganization
Agreement and the Plan of Merger, will be valid and effective in accordance with
law.
10. To my knowledge after due investigation, there is no suit, action or
proceeding pending or overtly threatened before any court or other governmental
agency by the federal or state government in which it is or will be sought to
restrain or prohibit the consummation of the Merger.
Very truly yours,
Howard H. Hopwood III
Senior Vice President
and General Counsel
<PAGE> 1
EXHIBIT 2(B)
PLAN OF MERGER
AND
AGREEMENT OF MERGER
This Plan of Merger and Agreement of Merger dated as of August 25, 1994, is
entered into by and between Firstar Corporation of Iowa, an Iowa corporation
("FCI"), and First Moline Financial Corp., a Delaware corporation ("First
Moline"), and joined in by Firstar Corporation, a Wisconsin corporation
("Firstar"), for certain limited purposes.
First Moline is a corporation duly organized and existing under the laws of
Delaware with authorized common stock of 2,000,000 shares, $.01 par value, of
which 282,550 shares are validly issued and outstanding.
FCI is a corporation duly organized and existing under the laws of Iowa
with authorized capital stock of 1,000 shares of Common Stock, no par value
("FCI Common Stock"), of which 1,000 shares are validly issued and outstanding,
and are owned by Firstar.
Firstar is a corporation duly organized and existing under the laws of
Wisconsin with 120,000,000 shares of authorized Common Stock, $1.25 par value
("Firstar Common Stock"), of which 64,318,011 shares were validly issued and
outstanding on March 31, 1994.
Contemporaneous with the execution and delivery of this Plan of Merger and
Agreement of Merger, Firstar, FCI and First Moline, have entered into an
Agreement and Plan of Reorganization (the "Reorganization Agreement" and,
together with this Plan of Merger and Agreement of Merger, the "Agreements")
that contemplates the merger of First Moline with and into FCI (the "Merger"),
on the "Closing Date", as hereinafter defined, upon the terms and conditions
provided in this Plan of Merger.
The Boards of Directors of First Moline and FCI deem it fair and equitable
to, and in the best interests of, their respective shareholders, that First
Moline be merged with and into FCI with FCI being the Surviving Corporation (as
hereinafter defined), on the terms and conditions herein set forth and pursuant
to the Iowa Business Corporation Law and the Delaware General Corporation Law.
Each such Board of Directors has approved this Plan of Merger, has authorized
its execution and delivery and has directed that this Plan of Merger and the
Merger be submitted to its respective shareholders for approval.
The Board of Directors of Firstar has authorized the execution and delivery
of this Plan of Merger and the issuance of the Firstar Common Stock and payment
of the cash provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
provisions and covenants herein contained, the parties hereto adopt and agree to
the following agreements, terms and conditions relating to the Merger and the
mode of carrying the same into effect.
1. Merger. First Moline will be merged with and into FCI, which will be the
surviving corporation (hereinafter called the "Surviving Corporation" whenever
reference is made to it as of the Closing Date or thereafter). Such Merger will
be pursuant to the provisions of and with the effect provided in the Iowa
Business Corporation Law. The date when the Merger will be consummated is
hereinafter referred to as the "Closing Date" as defined in Section 15 below.
2. Name. The name of the Surviving Corporation will be the name of FCI in
effect at the Closing Date.
3. Board of Directors; Officers. The Board of Directors of the Surviving
Corporation at the Closing Date will consist of all the persons who are
directors of FCI immediately prior to the Closing Date. Such directors will
serve as directors of the Surviving Corporation until the next annual meeting of
the Surviving Corporation or until such time as their successors have been
elected and have qualified. The officers of FCI immediately prior to the Closing
Date will be the officers of the Surviving Corporation until their successors
are elected or appointed in accordance with the Bylaws of the Surviving
Corporation.
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<PAGE> 2
4. Articles of Incorporation. The Articles of Incorporation of FCI as in
effect immediately prior to the Closing Date will, from and after the Closing
Date, be and continue to be the Articles of Incorporation of the Surviving
Corporation until further amended as provided by law.
5. Bylaws. The Bylaws of FCI as in effect immediately prior to the Closing
Date will, from and after the Closing Date, be and continue to be the Bylaws of
the Surviving Corporation until the same are altered, amended or rescinded as
therein provided or as provided in the Articles of Incorporation of the
Surviving Corporation.
6. Effect of the Merger. At the Closing Date, First Moline will merge into
FCI which will be the Surviving Corporation, and the separate existence of First
Moline shall cease as provided in sec. 490.1106 of the Iowa Business Corporation
Law. The title to all property owned by each corporation shall be vested in the
Surviving Corporation without reversion or impairment and all liabilities of
each corporation shall become those of the Surviving Corporation. Any civil,
criminal, administrative or investigatory proceeding pending against either
corporation may be continued as if the merger did not occur or the Surviving
Corporation may be substituted in the proceeding.
7. Conversion of Common Stock of FCI. At the Closing Date, the shares of
FCI Common Stock validly issued and outstanding immediately prior to the Closing
Date will, by virtue of the Merger and without any action by the holder thereof,
be converted into 1,000 shares of Common Stock, no par value, of the Surviving
Corporation so that all shares of Common Stock of the Surviving Corporation will
be owned by Firstar. The outstanding certificates representing shares of Common
Stock of FCI will, after the Closing Date, be deemed to represent the number of
shares of the Surviving Corporation into which they have been converted and may
be exchanged for new certificates of the Surviving Corporation upon the request
of the holder thereof.
8. Conversion of Common Stock of First Moline. (a) On the Closing Date,
each share of First Moline Common Stock validly issued and outstanding
immediately prior to the Closing Date (and not held by a dissenting shareholder
under sec. 262 of the Delaware General Corporation Law) will, by virtue of the
Merger and without any action by the holder thereof, be converted into the right
to receive at the times described below the number of shares of Firstar Common
Stock that is equal to (i) the quotient produced by dividing the Dollar Purchase
Price Per Share (as hereinafter defined) by the Market Value of Firstar Common
Stock on the Closing Date (as hereinafter defined), if such Market Value is
between $31.00 and $35.00, (ii) the quotient produced by dividing the Dollar
Purchase Price Per Share by $31.00, if the Market Value of Firstar Common Stock
on the Closing Date is equal to or less than $31.00, or (iii) the quotient
produced by dividing the Dollar Purchase Price Per Share by $35.00, if the
Market Value of Firstar Common Stock on the Closing Date is equal to or greater
than $35.00 (the result of any of the foregoing calculations, the "Exchange
Ratio").
(b) On the Closing Date, the option rights for 2,743 shares of First Moline
Common Stock held by the President of First Moline on the date hereof, will by
virtue of the Merger and without any action by the holder thereof, become and
represent an option right to purchase the number of shares of Firstar Common
Stock (rounded down to the nearest full share) determined by multiplying (x) the
Exchange Ratio, times (y) 2,743, at an exercise price per share of Firstar
Common Stock (rounded up to the nearest whole cent) equal to the quotient
produced by dividing the exercise price per share of the option rights for First
Moline Common Stock by the Exchange Ratio. After the Closing Date, and except as
provided in this Section 8, each option for a share of Firstar Common Stock
shall be exercisable on the same terms and conditions as were applicable under
the First Moline Stock Option and Incentive Plan.
(c) On the Closing Date, each option right for a share of First Moline
Common Stock held by an optionholder on the date hereof, other than Option
rights covered by Section 8(b) above, will, by virtue of the Merger and without
any action by the holder thereof, be converted into the right to receive at the
times described below the number of shares of Firstar Common Stock that is equal
to (i) the quotient produced by dividing the Dollar Purchase Price Per Share (as
hereinafter defined) minus $10.00, by the Market Value of Firstar Common Stock
on the Closing Date (as hereinafter defined), if such Market Value is between
$31.00 and $35.00, (ii) the quotient produced by dividing the Dollar Purchase
Price Per Share minus $10.00 by $31.00, if the Market Value of Firstar Common
Stock on the Closing Date is equal to or less than $31.00, or
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<PAGE> 3
(iii) the quotient produced by dividing the Dollar Purchase Price Per Share
minus $10.00 by $31.00, if the Market Value of Firstar Common Stock on the
Closing Date is equal to or greater than $31.00.
For the purposes of this Section 8, the "Market Value of Firstar Common
Stock at the Closing Date" will be equal to the average composite closing prices
per share of Firstar Common Stock on the New York Stock Exchange and the Chicago
Stock Exchange on the five (5) consecutive trading days immediately preceding
the calendar day immediately preceding the Closing Date. For the purposes of
this Section 8, the "Dollar Purchase Price Per Share" means (a) $10,000,000
divided by (b) 304,494.
If, during the period beginning on August 25, 1994 and ending upon the
consummation of the Merger, the outstanding shares of Firstar Common Stock shall
have been changed into a different number of shares or a different class by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares, readjustment, stock dividend or similar transaction, or a
distribution shall be made on the Firstar Common Stock in any security
convertible into Firstar Common Stock, or a declaration of, or a record date
for, such a change or distribution shall occur within that period, then
appropriate adjustment or adjustments will be made in the conversion rate set
forth in this sec. 8. Firstar shall give prompt written notice to First Moline
of any event requiring such an adjustment.
On and after the Closing Date, the holder of each such share of First
Moline Common Stock or option right for a share of First Moline Common Stock
will be treated as the record holder of such number of shares of Firstar Common
Stock, subject, however, to the provisions of this Section 8 as to fractional
interests in one share of Firstar Common Stock and to the provisions of Section
9 as to delivery of certificates for, and dividends payable upon, such shares of
Firstar Common Stock. Notwithstanding the foregoing, no stockholder or
optionholder of First Moline will become the holder of any fractional share of
Firstar Common Stock, and neither certificates nor scrip for fractional shares
of Firstar Common Stock will be issued for any fractional interests otherwise
payable upon the Merger. In lieu thereof, each holder of shares of First Moline
Common Stock or option right for a share of First Moline Common Stock who
otherwise would have been entitled to a fractional share of Firstar Common Stock
will be paid the value of such fraction in cash in an amount determined by
multiplying the fractional share interest to which such holder would otherwise
be entitled by the closing price per share of Firstar Common Stock on the
Closing Date on the New York Stock Exchange Composite Transaction Tape. In the
case of any holder of First Moline Common Stock who did not vote for the Merger
and who gives notice of objection with respect to any or all of his shares of
First Moline Common Stock as provided in sec. 262 of the Delaware General
Corporation Law, each such share of First Moline Common Stock will be converted
into the right to receive the fair value of the share as provided in such
statute. At the Closing Date, the holders of First Moline Common Stock or option
right for a share of First Moline Common Stock will cease to have any rights
with respect to such stock other than the rights to receive Firstar Common Stock
as provided herein, cash in lieu of fractional shares or the fair value of the
stock as provided herein or as provided by law.
9. Surrender of First Moline Common Stock Certificates Upon Merger. Each
holder of a certificate or certificates that prior to the Closing Date
represented shares of First Moline Common Stock (other than holders exercising
their rights to dissent in accordance with sec. 262 of the Delaware General
Corporation Law) or option rights for shares of First Moline Common Stock will
surrender the same to Firstar together with instructions for the issuance of
shares of Firstar Common Stock and any payment by Firstar, in lieu of a
fractional interest, to which the holder is entitled pursuant to this Plan of
Merger and Agreement of Merger. Immediately following the Closing Date and after
receipt of such certificates and such instructions in form satisfactory to
Firstar, Firstar will mail, in accordance with such instructions and this Plan
of Merger and Agreement of Merger, a check for any cash payment in lieu of
fractional shares to which the holder is entitled and a certificate or
certificates for any shares of Firstar Common Stock to which the holder is
entitled. Firstar shall provide the form of Letter of Transmittal acceptable to
it, to First Moline at least 15 days prior to the Closing. Until receipt of such
certificates and instructions from a holder of First Moline Common Stock,
Firstar will withhold (i) delivery of any such cash payment and (ii) delivery of
any cash dividends distributed upon shares of Firstar Common Stock into which
such holder's shares or option rights were converted. No interest will be paid
or accrued on any cash payable upon the surrender of such certificates and
Firstar will assume no responsibility for any delay not within Firstar's control
in connection with the payment of any part
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<PAGE> 4
of such funds. After the Closing Date and until surrendered for exchange, each
outstanding certificate which, prior to the Closing Date represented shares of
First Moline Common Stock, shall be deemed for all purposes to evidence
ownership of and to represent the number of whole shares of Firstar Common Stock
into which such shares of First Moline Common Stock or option rights for shares
of First Moline Common Stock shall have been converted, and the record holder of
such shares or option rights shall, after the Closing Date, be entitled to vote
the shares of Firstar Common Stock in to which such shares of First Moline
Common Stock or option rights for shares of First Moline Common Stock shall have
been converted on any matters in which the holders of record of Firstar Common
Stock, as of any date subsequent to the Closing Date, shall be entitled to vote.
10. Shareholder Approval. This Plan of Merger and Agreement of Merger will
be submitted to the respective shareholders of First Moline and FCI for
ratification and confirmation by consent or at meetings to be called and held in
accordance with the applicable provisions of law and the respective Articles of
Incorporation and Bylaws of First Moline and FCI. First Moline and FCI will
proceed expeditiously and cooperate fully in the procurement of any other
consents and approvals and in the taking of any other action, and the
satisfaction of all other requirements prescribed by law or otherwise, necessary
for consummation of the Merger, and the other transactions contemplated hereby
and by the Reorganization Agreement on the terms herein and therein provided.
11. Consummation of the Merger. Consummation of the Merger is conditional
upon the fulfillment or waiver of the conditions precedent set forth in Articles
VII, VIII, and IX of the Reorganization Agreement.
12. Termination. This Plan of Merger and Agreement of Merger may be
terminated and the Merger abandoned by mutual consent of the respective Boards
of Directors of First Moline and FCI at any time prior to the Closing Date or as
otherwise provided in Article XI of the Reorganization Agreement. If the
Reorganization Agreement is terminated in accordance with Article XI thereof,
then this Plan of Merger and Agreement of Merger will terminate simultaneously
and the Merger will be abandoned without further action by First Moline or FCI.
13. Waivers; Amendments. Either First Moline or FCI may, at any time prior
to the Closing Date, by action taken by its Board of Directors or officers
thereunto authorized, waive the performance of any of the obligations of the
other or waive compliance by the other with any of the covenants or conditions
contained in this Plan of Merger and Agreement of Merger or agree to the
amendment or modification of this Plan of Merger and Agreement of Merger by an
agreement in writing executed in the same manner as this Plan of Merger and
Agreement of Merger; provided, however, that after a favorable vote by or
consent of the shareholders of First Moline any such action will be taken by
First Moline only if, in the opinion of its Board of Directors, such waiver,
amendment or modification will not have any material adverse effect on the
benefits intended under this Plan of Merger and Agreement of Merger for the
shareholders of First Moline.
14. Closing Date. The Merger will become effective on the day (the "Closing
Date") on which and at the time at which the Articles of Merger filed by First
Moline and FCI with the Iowa Secretary of State are effective, as provided in
sec. 490.1105 of the Iowa Business Corporation Law.
15. Captions; Counterparts. The captions in this Plan of Merger and
Agreement of Merger are for convenience only and will not be considered a part
of or affect the construction or interpretation of any provision of this Plan of
Merger and Agreement of Merger. This Plan of Merger and Agreement of Merger may
be executed in several counterparts, each of which will constitute one and the
same instrument.
16. Governing Law. This Plan of Merger is to be construed and interpreted
in accordance with the laws of the State of Iowa, except insofar as the laws of
the State of Delaware shall mandatorily apply to the Merger.
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<PAGE> 5
17. Notices. All notices given hereunder shall be in writing and shall be
mailed by first-class mail, postage prepaid, or sent by facsimile transmission
or by nationally recognized overnight delivery service, addressed as follows:
(a) If to Firstar or FCI, to:
Firstar Corporation
Attention: Jon H. Stowe,
Executive Vice President
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
with a copy to:
Firstar Corporation
Law Department
Attn: Howard H. Hopwood, III
Senior Vice President and General Counsel
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(b) If to First Moline, to:
First Moline Financial Corp.
Attention: Byrd Krumbholz
President and Chief Executive Officer
1616 Sixth Avenue
Moline, IL 61265
with a copy to:
Daniel C. McKay, II
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, IL 60601
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<PAGE> 6
18. Consent to Service of Process. FCI shall (a) file with the Secretary of
State of the state of Delaware an agreement that it may be served with process
in the state of Delaware in any proceeding for the enforcement of any obligation
of First Moline and in any proceeding for the enforcement of the rights of a
dissenting shareholder of First Moline against FCI, together with an irrevocable
appointment of said Secretary of State as FCI's agent to accept service of
process in any such proceeding, and (b) specify the address to which a copy of
any such process shall be mailed by the Secretary of State.
[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger and
Agreement of Merger to be duly executed as of the date first above written.
<TABLE>
<S> <C>
FIRSTAR CORPORATION
[SEAL] By: /s/ JON H. STOWE
--------------------------------------------
Title: Executive Vice President
Attest: /s/ JOHN A. KIELICH
--------------------------------------------
Title: First Vice President
FIRSTAR CORPORATION OF IOWA
[SEAL] By: /s/ JAMES R. LANG
--------------------------------------------
Title: President
Attest: /s/ JEFFREY B. WEEDEN
--------------------------------------------
Title: Senior Vice President
FIRST MOLINE FINANCIAL CORP.
[SEAL] By: /s/ BYRD KRUMBHOLZ
--------------------------------------------
Title: President
Attest: /s/ GLENN MEDHUS
--------------------------------------------
Title: Chairman
</TABLE>
7
<PAGE> 8
CERTIFICATE
I, , hereby certify that I am the duly
elected Secretary of First Moline Financial Corp., presently serving pursuant to
the Certificate of Incorporation and Bylaws of the Corporation and, further,
that at a special meeting of the shareholders of the Corporation, held upon due
notice given, a majority of the shares entitled to be votes, were voted in favor
of this Agreement.
--------------------------------------
Secretary
CERTIFICATE
I, , hereby certify that I am a duly elected
Assistant Secretary of Firstar Corporation of Iowa, presently serving pursuant
to the Articles of Incorporation and Bylaws of the Corporation and, further,
that the sole shareholder of the Corporation has consented in writing, in lieu
of a special meeting of the shareholders, to this Agreement.
--------------------------------------
Assistant Secretary
8
<PAGE> 1
EXHIBIT 2(C)
VOTING AGREEMENT
THIS VOTING AGREEMENT dated as of August 25, 1994 (this "Agreement"), is
entered into by and between Firstar Corporation ("Firstar"), a Wisconsin
corporation, and Gene Blanc ("Stockholder"), and joined in by First Moline
Financial Corp. ("First Moline"), a Delaware corporation, for certain limited
purposes.
WITNESSETH:
WHEREAS, as of the date hereof, Stockholder is the owner of 2,862 shares of
the common stock of First Moline, $0.01 par value ("First Moline Common Stock"),
which represents approximately 1.01% of the issued and outstanding shares of the
capital stock of First Moline;
WHEREAS, Firstar is contemplating the acquisition of First Moline by means
of a merger (the "Merger") of First Moline with and into Firstar Corporation of
Iowa, an Iowa corporation and a wholly-owned subsidiary of Firstar, pursuant to
an Agreement and Plan of Reorganization and Plan of Merger and Agreement of
Merger, each dated of even date herewith (the "Merger Agreements");
WHEREAS, Firstar is unwilling to expend the substantial time, effort and
expense necessary to implement the proposed acquisition of First Moline,
including applying for and obtaining necessary approvals of federal banking
authorities, unless Stockholder enters into this Agreement with Firstar; and
WHEREAS, Stockholder believes it is in his/her best interest as well as the
best interest of First Moline for Firstar to consummate the Merger;
NOW, THEREFORE, in consideration of the covenants and agreements of the
parties herein contained and as an inducement to Firstar to incur the expenses
associated with the Merger, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Representations and Warranties. Stockholder represents and warrants that
as of the date hereof Stockholder owns beneficially and of record 2,862 shares
of First Moline Common Stock (the "Subject Shares"), all of which shares are
free and clear of all liens, pledges, security interests, claims, encumbrances,
options and agreements to sell. Stockholder represents and warrants that
Stockholder has the sole voting power with respect to the Subject Shares.
2. Voting Agreement. Stockholder shall vote all the Subject Shares in favor
of the Merger at any meeting of stockholders of First Moline called for the
purpose of approving the Merger and shall, if his consent is solicited by First
Moline, consent to the Merger. Stockholder shall not vote in favor of or consent
to any acquisition of stock or all or substantially all of the assets of First
Moline by any party other than Firstar or its affiliates prior to the
termination of this Agreement. None of the Subject Shares shall be transferred
while this Agreement is in effect. At Firstar's request and provided that
Firstar is then in compliance with the Merger Agreements, Stockholder shall use
his best efforts to cause any necessary meeting of stockholders of First Moline
to be duly called and held or any necessary consents of stockholders to be
obtained for the purpose of approving the Merger.
3. No Ownership Interest. Nothing contained in this Agreement shall be
deemed to vest in Firstar any direct or indirect ownership or incidence of
ownership of or with respect to any shares of First Moline Common Stock. All
rights, ownership and economic benefits of and relating to the shares of First
Moline Common Stock shall remain and belong to Stockholder and Firstar shall
have no authority to manage, direct, superintend, restrict, regulate, govern or
administer any of the policies or operations of First Moline or exercise any
power or authority to direct Stockholder in the voting of any of the shares of
First Moline Common Stock, or the performance of his duties or responsibilities
as a Stockholder of First Moline, except as otherwise expressly provided herein.
<PAGE> 2
4. Amendment and Modification. This Agreement may be amended, modified or
supplemented at any time by the written approval of such amendment, modification
or supplement by First Moline, Stockholder and Firstar.
5. Entire Agreement. This Agreement evidences the entire agreement among
the parties hereto with respect to the matters provided for herein and there are
no agreements, representations or warranties with respect to the matters
provided for herein other than those set forth herein and in the Merger
Agreements and their related written agreements. This Agreement supersedes any
agreements among First Moline and its stockholders, concerning the acquisition,
disposition or control of the stock of First Moline.
6. Severability. The parties agree that if any provision of this Agreement
shall under any circumstances be deemed invalid or inoperative, this Agreement
shall be construed with the invalid or inoperative provisions deleted and the
rights and obligations of the parties shall be construed and enforced
accordingly.
7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
8. Governing Law. The validity, construction, enforcement and effect of
this Agreement shall be governed by the internal laws of the State of Delaware.
9. Headings. The headings for the paragraphs of this Agreement are inserted
for convenience only and shall not constitute a part hereof or affect the
meaning or interpretation of this Agreement.
10. Successors. This Agreement shall be binding upon and inure to the
benefit of First Moline and Firstar, and their successors, and Stockholder and
Stockholder's spouse and their respective executors, personal representatives,
administrators, heirs, legatees, guardians and other legal representatives. This
Agreement shall survive the death or incapacity of Stockholder. This Agreement
may be assigned by Firstar only to an affiliate of Firstar.
11. Term of Agreement; Termination. The term of this Agreement shall
commence on the date hereof and such term and this Agreement shall terminate
upon the earlier to occur of (i) the Closing Date (as defined in the
Reorganization Agreement), or (ii) the date on which the Reorganization
Agreement is terminated in accordance with its terms. Not withstanding the
foregoing, a) the Stockholder's covenants in the first and last sentences of
Section 2 of this Agreement shall terminate if prior to the approval of the
Merger by First Moline's stockholders, First Moline receives a proposal for a
Competing Transaction (as defined in the Reorganization Agreement) in connection
with which the Board of Directors, in the exercise of its fiduciary obligations
to the First Moline Stockholders, after consultation with its financial advisor
and based upon the advice of counsel, decides to accept such Competing
Transaction; and b) in the event the Board elects to accept the proposal for the
Competing Transaction as set forth in clause a above, the remainder of this
Agreement shall continue in full force and effect for a period of 270 days after
such election is made at which time this entire Agreement shall terminate. Upon
termination of this Agreement, no party shall have any further obligations or
liabilities hereunder; provided, that such termination shall not relieve any
party from liability for any breach of this Agreement prior to such termination.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
<TABLE>
<S> <C>
FIRST MOLINE FINANCIAL CORP.
[SEAL] By: /s/ BYRD KRUMBHOLZ
--------------------------------------------
Title: President
FIRSTAR CORPORATION
[SEAL] By: /s/ JON H. STOWE
--------------------------------------------
Title: Executive Vice President
Stockholder
/s/ GENE M. BLANC
---------------------------------------------
Gene Blanc
</TABLE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
<TABLE>
<S> <C>
FIRST MOLINE FINANCIAL CORP.
[SEAL] By: /s/ BYRD KRUMBHOLZ
--------------------------------------------
Title: President
FIRSTAR CORPORATION
[SEAL] By: /s/ JON H. STOWE
--------------------------------------------
Title: Executive Vice President
Stockholder
/s/ JON CHRISTIANSEN
---------------------------------------------
Jon Christiansen
</TABLE>
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
<TABLE>
<S> <C>
FIRST MOLINE FINANCIAL CORP.
[SEAL] By: /s/ BYRD KRUMBHOLZ
-----------------------------------------
Title: President
FIRSTAR CORPORATION
[SEAL] By: /s/ JON H. STOWE
-----------------------------------------
Title: Executive Vice President
Stockholder
/s/ KENT CRIPPEN
---------------------------------------------
Kent Crippen
</TABLE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
<TABLE>
<S> <C>
FIRST MOLINE FINANCIAL CORP.
[SEAL] By: /s/ BYRD KRUMBHOLZ
-----------------------------------------
Title: President
FIRSTAR CORPORATION
[SEAL] By: /s/ JON H. STOWE
-----------------------------------------
Title: Executive Vice President
Stockholder
/s/ DENNIS HOFFMANN
---------------------------------------------
Dennis Hoffmann
</TABLE>
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
<TABLE>
<S> <C>
FIRST MOLINE FINANCIAL CORP.
[SEAL] By: /s/ BYRD KRUMBHOLZ
-----------------------------------------
Title: President
FIRSTAR CORPORATION
[SEAL] By: /s/ JON H. STOWE
-----------------------------------------
Title: Executive Vice President
Stockholder
/s/ BYRD KRUMBHOLZ
---------------------------------------------
Byrd Krumbholz
</TABLE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
<TABLE>
<S> <C>
FIRST MOLINE FINANCIAL CORP.
[SEAL] By: /s/ BYRD KRUMBHOLZ
-----------------------------------------
Title: President
FIRSTAR CORPORATION
[SEAL] By: /s/ JON H. STOWE
-----------------------------------------
Title: Executive Vice President
Stockholder
/s/ GLENN MEDHUS
---------------------------------------------
Glenn Medhus
</TABLE>
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
<TABLE>
<S> <C>
FIRST MOLINE FINANCIAL CORP.
[SEAL] By: /s/ BYRD KRUMBHOLZ
-----------------------------------------
Title: President
FIRSTAR CORPORATION
[SEAL] By: /s/ JON H. STOWE
-----------------------------------------
Title: Executive Vice President
Stockholder
/s/ MICHAEL STEFFENSON
---------------------------------------------
Michael Steffenson
</TABLE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
<TABLE>
<S> <C>
FIRST MOLINE FINANCIAL CORP.
[SEAL] By: /s/ BYRD KRUMBHOLZ
-----------------------------------------
Title: President
FIRSTAR CORPORATION
[SEAL] By: /s/ JON H. STOWE
-----------------------------------------
Title: Executive Vice President
Stockholder
/s/ DANIEL CHURCHILL
---------------------------------------------
Daniel Churchill
</TABLE>
6
<PAGE> 1
EXHIBIT 5
January 10, 1995
Firstar Corporation
777 East Wisconsin Avenue
Milwaukee, WI 53202
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") to be filed by Firstar Corporation (the "Corporation")
with the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
shares of Common Stock of the Corporation, $1.25 par value ("Common Stock"), the
associated rights to purchase Series C Preferred Stock of the Corporation (the
"Preferred Share Purchase Rights"), issuable in connection with the merger (the
"Merger") of Firstar Corporation of Iowa ("FCI"), and First Moline Financial
Corp. ("First Moline"), as described in the Proxy Statement-Prospectus included
in the Registration Statement.
As Senior Vice President and General Counsel of the Corporation, I am
familiar with the restated Articles of Incorporation and the Bylaws of the
Corporation and with its affairs. I also have examined, or caused to be
examined, such other documents and instruments and have made, or caused to be
made, such further investigation as I have deemed necessary or appropriate to
enable me to render this opinion.
Based upon the foregoing, it is my opinion that:
(1) The Corporation is duly incorporated and validly existing as a
corporation under the laws of the State of Wisconsin.
(2) The shares of Common Stock of the Corporation when issued upon the
effectiveness of the Merger and delivered to the holders of common stock of
First Moline will be legally issued, fully-paid and non-assessable, except
that Section 180.0622 of the Wisconsin Business Corporation Law, and
judicial interpretations thereof, impose liability upon shareholders for
unpaid wage claims of the Corporation's employees, not exceeding six
months' service in any one case.
(3) The issuance of the Preferred Share Purchase Rights with the
Common Stock as set forth above has been duly and validly authorized by all
necessary corporate action.
I hereby consent to the use of this opinion as Exhibit 5 to the
Registration Statement, and I further consent to the use of my name in the
Registration Statement under the caption "OPINIONS." In giving this consent, I
do not admit that I am in the category of persons whose consent is required
under Section 7 of the Securities Act or the Rules and Regulations of the
Commission issued thereunder.
Very truly yours,
Howard H. Hopwood III
Senior Vice President
and General Counsel
<PAGE> 1
EXHIBIT 8
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, Illinois 60601-1003
312/609-7500
<TABLE>
<S> <C> <C>
Vedder, Price, Kaufman, Kammholz & Day Vedder, Price, Kaufman & Kammholz Vedder, Price, Kaufman, Kammholz & Day
805 Third Avenue 4615 East State Street, Suite 201 1600 M Street, N.W.
New York, New York 10022-2203 Rockford, Illinois 61108-2100 Washington, D.C. 20036-3208
212/407-7700 815/226-7700 202/296-0500
</TABLE>
, 1994
[Form of Tax Opinion]
Board of Directors Board of Directors
First Moline Financial Corp. Firstar Corporation of Iowa
1616 Sixth Avenue c/o Firstar Corporation
Moline, Illinois 61265 777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Board of Directors
Firstar Corporation
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
In connection with the solicitation of proxies relating to the proposed
merger ("Merger") of First Moline Financial Corp., a Delaware corporation
("First Moline"), into Firstar Corporation of Iowa, an Iowa corporation ("FCI")
and a wholly-owned subsidiary of Firstar Corporation, a Wisconsin corporation
("Firstar"), you have requested our opinion with respect to certain federal
income tax consequences of the Merger. The Merger contemplates the acquisition
by FCI of all the assets and liabilities of First Moline in exchange for common
stock, $1.25 par value, of Firstar, and associated Firstar preferred share
purchase rights, pursuant to an Agreement and Plan of Reorganization, dated as
of August 25, 1994 (the "Agreement"), and a related Plan of Merger and Agreement
of Merger, dated as of August 25, 1994 (together with the Agreement referred to
herein as the "Merger Agreements"), entered into by First Moline, Firstar and
FCI.
The opinion expressed in this letter is based on the Internal Revenue Code
of 1986, as amended (the "Code"), the Income Tax Regulations promulgated by the
Treasury Department thereunder and judicial authority reported as of the date
hereof. We have also considered the position of the Internal Revenue Service
(the "Service") reflected in published and private rulings. Although we are not
aware of any pending changes to these authorities that would alter our opinions,
there can be no assurance that future legislative or administrative changes,
court decisions or Service interpretations will not significantly modify the
statements or opinions expressed herein. Although the discussion herein is based
upon our best interpretation of existing sources of law and expresses what we
believe a court would properly conclude if presented with these issues, no
assurance can be given that such interpretations would be followed if they were
to become the subject of judicial or administrative proceedings. We express no
opinion herein as to any issue of federal law other than those specifically
considered herein. We also do not express any opinion as to any issue of state
or local law.
For the purposes indicated above, and based upon our review, the conditions
set forth below, and representations made to us by First Moline, Firstar and
FCI, it is our opinion that:
Provided the Merger qualifies as a statutory merger under applicable
law, the Merger of First Moline into FCI, pursuant to the Merger
Agreements, will constitute a reorganization within the
<PAGE> 2
Board of Directors
, 1994
Page 2
meaning of section 368(a)(1)(A) and section 368(a)(2)(D) of the Code.
First Moline, FCI and Firstar will each be considered "a party to a
reorganization" within the meaning of section 368(b) of the Code for
purposes of this reorganization.
In rendering this opinion, we have examined the Merger Agreements and such
other documents as we have deemed necessary or appropriate. We have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as copies, the authenticity
of the originals of such copies, and that the Merger will be consummated
pursuant to the applicable states' laws in the manner set forth in the Merger
Agreements. We have also assumed that any written representations and covenants
of First Moline, Firstar and FCI made in connection with rendering our opinion
will be accurate and complete in all respects as of the time they are provided
to us and as of the closing of the Merger. Any changes in these facts, or in the
accuracy of these assumptions, representations or covenants, may necessitate
reconsideration of our opinion and possibly result in a different conclusion.
Our opinion is limited to those federal income tax issues specifically
considered herein and is addressed to and is only for the benefit of First
Moline, Firstar and FCI. The opinion is furnished to you pursuant to sections
7.12 and 8.7 of the Agreement and may not be used or relied upon for any other
purpose, and may not be circulated or otherwise referred to for any other
purpose, without our express written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Merger and to the use of our name under
the captions "Proposed Merger--Certain Federal Income Tax Consequences of the
Merger" and "Opinions" in the Joint Proxy Statement-Prospectus contained in such
Registration Statement. In giving such consent, we do not thereby concede that
we are within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
<PAGE> 1
EXHIBIT 23(a)
[MCGLADREY & PULLEN LOGO]
Independent Auditor's Consent
-----------------------------
We consent to the incorporation by reference in the Registration
Statement on Form S-4 of Firstar Corporation of our report dated February 11,
1994, on the consolidated financial statements incorporated by reference in the
Form 10-K Annual Report of First Moline Financial Corp. for the year ended
December 31, 1993.
Moline, Illinois
January 6, 1995
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Firstar Corporation:
We consent to use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Proxy
Statement-Prospectus.
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
January 10, 1995
<PAGE> 1
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
17th day of October, 1994.
/s/ JOHN A BECKER
----------------------
John A. Becker
<PAGE> 2
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
17th day of October, 1994.
/s/ WILLIAM H. RISCH
----------------------
William H. Risch
<PAGE> 3
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to and
in accordance with an Agreement and Plan of Reorganization and related Plan of
Merger entered into by Firstar Corporation, including specifically but without
limitation thereto, power and authority to sign his or her name (whether on
behalf of Firstar Corporation, or as an officer or director of Firstar
Corporation or by attesting the seal of Firstar Corporation, or otherwise) to
such Registration Statement and to such amendments (including post-effective
amendments) to the Registration Statement to be filed with the Securities and
Exchange Commission, or any of the exhibits, financial statements and
schedules, or the Proxy Statements-Prospectuses, filed therewith, and to file
the same with the Securities and Exchange Commission; and the undersigned does
hereby ratify and confirm all that said attorneys and agents, and each of them,
shall do or cause to be done by virtue hereof. Any one of said attorneys and
agents shall have, and may exercise, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
24th day of October, 1994.
/s/ MICHAEL E. BATTEN
----------------------
Michael E. Batten
<PAGE> 4
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
18th day of October, 1994.
/s/ GEORGE M. CHESTER, JR.
----------------------
George M. Chester, Jr.
<PAGE> 5
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
18th day of October, 1994.
/s/ ROGER H. DERUSHA
----------------------
Roger H. Derusha
<PAGE> 6
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
17th day of October, 1994.
/s/ JAMES L. FORBES
----------------------
James L. Forbes
<PAGE> 7
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
20th day of October, 1994.
/s/ HOLMES FOSTER
----------------------
Holmes Foster
<PAGE> 8
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
16th day of October, 1994.
/s/ JOSEPH F. HEIL, JR.
----------------------
Joseph F. Heil, Jr.
<PAGE> 9
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
16th day of October, 1994.
/s/ JOHN H. HENDEE, JR.
----------------------
John A. Hendee, Jr.
<PAGE> 10
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
18th day of October, 1994.
/s/ JERRY M. HIEGEL
----------------------
Jerry M. Hiegel
<PAGE> 11
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
17th day of October, 1994.
/s/ JOSEPH F. HLADKY
----------------------
Joseph F. Hladky, III
<PAGE> 12
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
20th day of October, 1994.
/s/ JAMES H. KEYES
----------------------
James H. Keyes
<PAGE> 13
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
18th day of October, 1994.
/s/ SHELDON B. LUBAR
----------------------
Sheldon B. Lubar
<PAGE> 14
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
25th day of October, 1994.
/s/ DANIEL F. McKEITHAN, JR.
----------------------------
Daniel F. McKeithan, Jr.
<PAGE> 15
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to
and in accordance with an Agreement and Plan of Reorganization and related Plan
of Merger entered into by Firstar Corporation, including specifically but
without limitation thereto, power and authority to sign his or her name
(whether on behalf of Firstar Corporation, or as an officer or director of
Firstar Corporation or by attesting the seal of Firstar Corporation, or
otherwise) to such Registration Statement and to such amendments (including
post-effective amendments) to the Registration Statement to be filed with the
Securities and Exchange Commission, or any of the exhibits, financial
statements and schedules, or the Proxy Statements-Prospectuses, filed
therewith, and to file the same with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said attorneys and agents shall have, and may exercise, all the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
17th day of October, 1994.
/s/ GEORGE W. MEAD, II
----------------------
George W. Mead, II
<PAGE> 16
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to and
in accordance with an Agreement and Plan of Reorganization and related Plan of
Merger entered into by Firstar Corporation, including specifically but without
limitation thereto, power and authority to sign his or her name (whether on
behalf of Firstar Corporation, or as an officer or director of Firstar
Corporation or by attesting the seal of Firstar Corporation, or otherwise) to
such Registration Statement and to such amendments (including post-effective
amendments) to the Registration Statement to be filed with the Securities and
Exchange Commission, or any of the exhibits, financial statements and
schedules, or the Proxy Statements-Prospectuses, filed therewith, and to file
the same with the Securities and Exchange Commission; and the undersigned does
hereby ratify and confirm all that said attorneys and agents, and each of them,
shall do or cause to be done by virtue hereof. Any one of said attorneys and
agents shall have, and may exercise, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
18th day of October, 1994.
/s/ GUY A. OSBORN
------------------
Guy A. Osborn
<PAGE> 17
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to and
in accordance with an Agreement and Plan of Reorganization and related Plan of
Merger entered into by Firstar Corporation, including specifically but without
limitation thereto, power and authority to sign his or her name (whether on
behalf of Firstar Corporation, or as an officer or director of Firstar
Corporation or by attesting the seal of Firstar Corporation, or otherwise) to
such Registration Statement and to such amendments (including post-effective
amendments) to the Registration Statement to be filed with the Securities and
Exchange Commission, or any of the exhibits, financial statements and
schedules, or the Proxy Statements-Prospectuses, filed therewith, and to file
the same with the Securities and Exchange Commission; and the undersigned does
hereby ratify and confirm all that said attorneys and agents, and each of them,
shall do or cause to be done by virtue hereof. Any one of said attorneys and
agents shall have, and may exercise, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
20th day of October, 1994.
/s/ JUDITH D. PYLE
------------------
Judith D. Pyle
<PAGE> 18
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp. pursuant to and
in accordance with an Agreement and Plan of Reorganization and related Plan of
Merger entered into by Firstar Corporation, including specifically but without
limitation thereto, power and authority to sign his or her name (whether on
behalf of Firstar Corporation, or as an officer or director of Firstar
Corporation or by attesting the seal of Firstar Corporation, or otherwise) to
such Registration Statement and to such amendments (including post-effective
amendments) to the Registration Statement to be filed with the Securities and
Exchange Commission, or any of the exhibits, financial statements and
schedules, or the Proxy Statements-Prospectuses, filed therewith, and to file
the same with the Securities and Exchange Commission; and the undersigned does
hereby ratify and confirm all that said attorneys and agents, and each of them,
shall do or cause to be done by virtue hereof. Any one of said attorneys and
agents shall have, and may exercise, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
18th day of October, 1994.
/s/ CLIFFORD V. SMITH, JR.
---------------------------
Clifford V. Smith, Jr.
<PAGE> 19
EXHIBIT 24
FIRST MOLINE FINANCIAL CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENT
COVERING COMMON STOCK OF
FIRSTAR CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director
of FIRSTAR CORPORATION, does hereby constitute and appoint Roger L.
Fitzsimonds, John A. Becker, Howard H. Hopwood, William H. Risch and William J.
Schulz, and each of them, severally, his or her true and lawful attorney and
agent at any time and from time to time to do any and all acts and things and
execute, in his or her name (whether on behalf of Firstar Corporation, or as an
officer or director of Firstar Corporation, or otherwise) any and all
instruments which said attorney and agent may deem necessary, appropriate or
desirable to enable Firstar Corporation to comply with the Securities Act of
1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement and
any and all amendments (including post-effective amendments) to the
Registration Statement relating to the issuance of Common Stock, $1.25 par
value, of Firstar Corporation and associated preferred stock purchase rights in
connection with the acquisition of First Moline Financial Corp.
pursuant to and in accordance with an Agreement and Plan of Reorganization and
related Plan of Merger entered into by Firstar Corporation, including
specifically but without limitation thereto, power and authority to sign his or
her name (whether on behalf of Firstar Corporation, or as an officer or
director of Firstar Corporation or by attesting the seal of Firstar
Corporation, or otherwise) to such Registration Statement and to such
amendments (including post-effective amendments) to the Registration Statement
to be filed with the Securities and Exchange Commission, or any of the
exhibits, financial statements and schedules, or the Proxy
Statements-Prospectuses, filed therewith, and to file the same with the
Securities and Exchange Commission; and the undersigned does hereby ratify and
confirm all that said attorneys and agents, and each of them, shall do or cause
to be done by virtue hereof. Any one of said attorneys and agents shall have,
and may exercise, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his or her name hereto on the
28th day of October, 1994.
/s/ WILLIAM W. WIRTZ
----------------------
William W. Wirtz
<PAGE> 1
EXHIBIT 99
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PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
FIRST MOLINE FINANCIAL CORP.
1616 SIXTH AVENUE, MOLINE, ILLINOIS 61265
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Glenn Medhus, Jon Christiansen and
Byrd Krumbholz, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote as
designated below all the shares of common stock of First Moline
Financial Corp. held of record by the undersigned on January , 1995
at the special meeting of stockholders to be held on March 16, 1995,
or any adjournment thereof.
/X/ Please mark your votes as in this example.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If no direction is
made, this proxy will be voted FOR Proposal #1 and Proposal #2.
1. Proposal to approve and adopt an Agreement and Plan of
Reorganization and Plan of Merger and Agreement of Merger, each
dated as of August 25, 1994, that provide for, among other
things, the merger of First Moline Financial Corp. with and
into Firstar Corporation of Iowa, a wholly owned subsidiary of
Firstar Corporation.
/ / FOR / / AGAINST / / ABSTAIN
2. Proposal to amend the Certificate of Incorporation of First
Moline Financial Corp. to delete, in its entirety, Article
Fourth, subparagraph C and thereby ratify execution of the
Agreement and Plan of Reorganization and Plan of Merger and
Agreement of Merger referred to in Proposal #1, provided,
however, that the Board of Directors of First Moline is
authorized to abandon the Articles Amendment in accordance with
the provisions of Section 242(c) of the Delaware General
Corporation Law if the Merger is not consummated.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
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Please sign exactly as name(s)
appears to the left. When
shares are held by joint
tenants, both should sign.
When signing as attorney, as
executor, administrator,
trustee or guardian, please
give full title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
------------------------------
------------------------------
SIGNATURE(S) DATE
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