<PAGE> 1
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under the Securities Act of 1933
FIRSTAR CORPORATION
(Exact name of Registrant as specified in its charter)
WISCONSIN 6022 39-0711710
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.)
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)
HOWARD H. HOPWOOD III COPY TO:
SENIOR VICE PRESIDENT & GENERAL COUNSEL THOMAS O. MARTIN, ESQ.
FIRSTAR CORPORATION DORSEY & WHITNEY
777 EAST WISCONSIN AVENUE PILLSBURY CENTER SOUTH
MILWAUKEE, WISCONSIN 53202 220 SOUTH 6TH STREET
(414) 765-5977 MINNEAPOLIS, MINNESOTA 55402-1498
(Name, address, including ZIP Code,
and telephone number, including area
code, of agent for service)
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. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT PRICE FEE
<S> <C> <C> <C> <C>
Common Stock ($1.25 par value) 3,461,841 shares $25.3573(2) $87,782,941(2) $30,271
Preferred Share Purchase Rights 1,730,921 rights (3) (3) (3)
</TABLE>
(1) Represents the maximum number of shares of Common Stock of Firstar
Corporation ("Firstar") and associated preferred Share Purchase Rights
issuable upon consummation of the merger of Investors Bank Corp.
("Investors") into Firstar Corporation of Minnesota as described herein.
Each share of Firstar Common Stock issued will have attached thereto
one-half of one Preferred Share Purchase Right.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933 based on the
average of the high and low prices for Common Stock of Investors as
reported on the Nasdaq National Market on January 6, 1995 ($22.00) and the
3,990,135 shares of Common Stock of Investors that may be outstanding at
closing of the merger and which are the maximum number to be received by
Firstar or cancelled in the merger. 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.
(3) The value attributable to the Preferred Stock Purchase Rights is reflected
in the market price of the Firstar Common Stock to which the Rights are
attached.
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.
<PAGE> 2
FIRSTAR CORPORATION
CROSS-REFERENCE SHEET TO
PROXY STATEMENT-PROSPECTUS PURSUANT TO
RULE 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
LOCATION IN PROXY
ITEM OF FORM S-4 STATEMENT-PROSPECTUS
---------------- --------------------
<S> <C> <C>
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; 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 . . . . . . . . . . . Summary; Investors Bank Corp.;
Comparative Rights of Shareholders;
Index to Investors Bank Corp.
Financial Statements
</TABLE>
__________________
* Omitted because answer to item is negative or item is not applicable.
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<TABLE>
<CAPTION>
LOCATION IN PROXY
ITEM OF FORM S-4 STATEMENT-PROSPECTUS
---------------- --------------------
<S> <C> <C>
17. Information with Respect to Companies other than S-3 or S-2 Companies *
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 . . . . . . . . . . . . . . . . . .
</TABLE>
__________________
* Omitted because answer to item is negative or item is not applicable.
<PAGE> 4
[Investors Logo]
INVESTORS BANK CORP.
February __, 1995
Dear Stockholder:
We are pleased to enclose materials relating to a Special Meeting of
Common Stockholders of Investors Bank Corp. ("Investors") to be held at _____
a.m. (local time), on ____________, March __, 1995, at
____________________________.
The purpose of the meeting is to consider and vote on an Agreement and
Plan of Reorganization among Firstar Corporation ("Firstar"), Firstar
Corporation of Minnesota ("FCM"), a subsidiary of Firstar, and Investors, dated
as of August 21, 1994, and the Plan of Merger attached thereto (together, the
"Merger Agreements"), relating to the proposed merger (the "Merger") of
Investors with and into FCM.
Under the terms of the Merger Agreements and upon consummation of the
Merger, each outstanding share of Investors' Common Stock, $0.01 par value
("Investors Common Stock"), will be converted into the right to receive .8676
of a share of Firstar Common Stock (including associated Preferred Share
Purchase Rights) and each outstanding share of Investors' Cumulative Perpetual
Preferred Stock, Series 1991, $.01 par value ("Investors Preferred Stock"),
except such shares with respect to which appraisal rights have been perfected
under Section 262 of the Delaware General Corporation Law, will be converted
into the right to receive $27.50 plus accumulated and unpaid dividends on such
stock, payable in cash.
The Merger is intended to be tax-free to holders of Investors Common
Stock for federal income tax purposes except as described under "PROPOSED
MERGER--Certain Federal Income Tax Consequences" in the accompanying Proxy
Statement-Prospectus. The Merger is expected to be taxable to holders of
Investors Preferred Stock for federal income tax purposes.
The enclosed Proxy Statement-Prospectus of Firstar and Investors
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 INVESTORS AND ITS STOCKHOLDERS AND RECOMMENDS
THAT HOLDERS OF INVESTORS COMMON STOCK VOTE IN FAVOR OF THE MERGER. IN MAKING
THIS RECOMMENDATION, THE BOARD OF DIRECTORS HAS CONSIDERED NUMEROUS FACTORS,
INCLUDING, BUT NOT LIMITED TO, THE CONSIDERATION OFFERED BY FIRSTAR, THE
STRUCTURE OF THE PROPOSED MERGER, WHICH IS DESIGNED TO MAKE THE MERGER TAX-FREE
FOR FEDERAL INCOME TAX PURPOSES TO HOLDERS OF INVESTORS COMMON STOCK AND TO
ALLOW HOLDERS OF INVESTORS COMMON STOCK TO PARTICIPATE IN THE FUTURE OF THE
COMBINED ORGANIZATION, THE OPINION OF PIPER JAFFRAY INC. AS TO THE FAIRNESS OF
THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF INVESTORS COMMON STOCK IN
THE MERGER AND THE RECENT RESULTS OF OPERATIONS AND FINANCIAL POSITION OF
INVESTORS AND FIRSTAR.
Whether or not you plan to attend the Special Meeting, holders of
Investors 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.
James M. Burkholder
Chairman of the Board, President
and Chief Executive Officer
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.
<PAGE> 5
[Investors Logo]
INVESTORS BANK CORP.
200 East Lake Street
Wayzata, Minnesota 55391
___________________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH __, 1995
___________________________
To the Stockholders of Investors Bank Corp.:
NOTICE IS HEREBY GIVEN that a special meeting of the holders
of Common Stock of Investors Bank Corp., a Delaware corporation
("Investors")(such stock, "Investors Common Stock"), will be held at
_________________________________________, on March __, 1995, at ____ a.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 (the
"Merger Agreements"), each dated as of August 21, 1994, that provide
for, among other things, the merger (the "Merger") of Investors with
and into Firstar Corporation of Minnesota, a wholly owned subsidiary of
Firstar Corporation, the conversion of the outstanding shares of
Investors Common Stock into the right to receive shares of Firstar
Corporation Common Stock and associated Preferred Share Purchase
Rights, and the conversion of the outstanding shares of Investors'
Cumulative Perpetual Preferred Stock, Series 1991, $.01 par value
("Investors Preferred Stock"), into the right to receive cash as
described in the Proxy Statement-Prospectus accompanying this notice;
and
2. 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. Please note that holders of Investors Preferred Stock are not
entitled to vote on the Merger Agreements but are entitled to receive this
notice of the Special Meeting.
Holders of Investors Preferred Stock have the statutory right,
if the Merger is consummated, to receive payment in cash for the "fair value"
of their shares of Investors Preferred Stock upon compliance with the
provisions of Section 262 of the Delaware General Corporation Law. To perfect
these appraisal rights, a holder of Investors Preferred Stock must deliver a
written demand for appraisal before the vote on the Merger by the holders of
Investors Common Stock 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 by announcement at the Special Meeting of such postponement or
adjournment, and any and all business for which notice is hereby given may be
transacted at the postponed or adjourned Special Meeting.
<PAGE> 6
THE BOARD OF DIRECTORS OF INVESTORS BELIEVES THE PROPOSED
MERGER IS IN THE BEST INTERESTS OF INVESTORS AND ITS STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT THE COMMON STOCKHOLDERS OF INVESTORS VOTE "FOR"
PROPOSAL NUMBER (1) ABOVE.
Whether or not you plan to attend the Special Meeting, holders
of Investors Common Stock are asked to please complete, date and sign the
enclosed proxy, which is solicited by the Board of Directors of Investors, and
return it promptly in the accompanying envelope. 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,
James M. Burkholder, Chairman of the
Board
Wayzata, Minnesota
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.
<PAGE> 7
[Firstar Logo] [Investors Logo]
PROXY STATEMENT
INVESTORS BANK CORP.
200 EAST LAKE STREET
WAYZATA, MINNESOTA 55391
(602) 475-8500
SPECIAL MEETING OF COMMON STOCKHOLDERS
____________________
PROSPECTUS
FIRSTAR CORPORATION
____________________
This Proxy Statement-Prospectus is being furnished to the
stockholders of Investors Bank Corp., a Delaware corporation ("Investors"), in
connection with the solicitation of proxies of common stockholders of Investors
by the Board of Directors of Investors for use at the special meeting of such
holders to be held on March __, 1995, at [place], [address], commencing at
[time], local time, and any adjournments or postponements thereof (the "Special
Meeting"). At the Special Meeting, holders of Investors' common stock, $0.01
par value ("Investors Common Stock"), will consider and vote upon the approval
and adoption of an Agreement and Plan of Reorganization dated as of August 21,
1994, among Investors, Firstar Corporation, a Wisconsin corporation
("Firstar"), and Firstar Corporation of Minnesota, a Minnesota corporation and
wholly owned subsidiary of Firstar ("FCM"), and a related Plan of Merger, dated
as of August 21, 1994, by and among Investors, FCM and Firstar, (together the
"Merger Agreements"), which provide for the merger of Investors with and into
FCM (the "Merger").
Under the Merger Agreements, each outstanding share of
Investors Common Stock will be converted into the right to receive 0.8676 of a
share of common stock of Firstar, $1.25 par value, and associated Preferred
Share Purchase Rights (collectively referred to herein as "Firstar Common
Stock"). Each outstanding share of Investors' Cumulative Perpetual Preferred
Stock, Series 1991, $.01 par value ("Investors Preferred Stock"), except shares
of Investors Preferred Stock with respect to which appraisal rights have been
perfected under Section 262 of the Delaware General Corporation Law ("DGCL"),
will be converted into the right to receive $27.50, plus accumulated and unpaid
dividends on such stock, in cash. For federal income tax purposes, the Merger
is expected to be tax-free to holders of Investors Common Stock (except with
respect to cash received in lieu of fractional shares of Firstar Common Stock)
and taxable to holders of Investors Preferred Stock. 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 Investors 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 Investors on or about February __, 1995.
The date of this Proxy Statement-Prospectus is February __, 1995.
__________________
<PAGE> 8
AVAILABLE INFORMATION
Firstar and Investors 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. Investors
Common Stock and Investors Preferred Stock are quoted on the Nasdaq National
Market. Reports, proxy statements and other information concerning Investors
may be inspected at the offices of the Nasdaq National Market, 1735 K Street,
N.W., Washington, D.C. 20006.
This Proxy Statement-Prospectus does not contain all of the
information set forth in the Registration Statement on Form S-4 and exhibits
thereto (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, Investors 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, FCM OR INVESTORS. 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,
FCM OR INVESTORS SINCE THE DATE OF THIS PROXY STATEMENT-PROSPECTUS.
2
<PAGE> 9
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).
COPIES OF DOCUMENTS RELATING TO INVESTORS, EXCLUDING EXHIBITS UNLESS
SPECIFICALLY INCORPORATED HEREIN, ARE AVAILABLE WITHOUT CHARGE FROM FRANCES M.
JACOBS, ASSISTANT VICE PRESIDENT--ADMINISTRATION, INVESTORS BANK CORP., 200
EAST LAKE STREET, WAYZATA, MINNESOTA, 55391 (TELEPHONE (612) 475-8720). IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
______________, 1995.
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;
(d) Investors' Annual Report on Form 10-K for the year
ended December 31, 1993;
(e) Investors' Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30, and September 30, 1994; and
(f) Investors' Current Report on Form 8-K filed August
25, 1994.
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.
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
<PAGE> 10
FIRSTAR CORPORATION
AND
INVESTORS BANK CORP.
PROXY STATEMENT-PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Proposed Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Vote Required; Voting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Recommendation of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Opinion of Investment Banker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Certain Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . . . . . . 7
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Date of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Dividends on Investors Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Management and Operations After the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 9
Waivers and Amendments to the Merger Agreements . . . . . . . . . . . . . . . . . . . . . . 9
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 10
Resales of Firstar Common Stock by Affiliates . . . . . . . . . . . . . . . . . . . . . . . 10
Preferred Share Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Markets and Market Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Comparative Per Common Share Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Historical and Pro Forma Selected Financial Contributions . . . . . . . . . . . . . . . . . 13
Selected Consolidated Financial Data of Firstar . . . . . . . . . . . . . . . . . . . . . . 14
Selected Consolidated Financial Data of Investors . . . . . . . . . . . . . . . . . . . . . 15
MEETING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Date, Place and Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Record Date; Voting Required and Revocation of Proxies . . . . . . . . . . . . . . . . . . . 16
Voting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PROPOSED MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Reasons for the Merger; Recommendation of Investors Board of Directors . . . . . . . . . . . 21
Opinion of Investment Banker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Surrender of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Termination, Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Management and Operations After the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
4
<PAGE> 11
<TABLE>
<CAPTION>
Page
----
<S> <C>
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 33
Effect on Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Resale of Firstar Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
COMPARATIVE RIGHTS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Preferred Share Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Appraisal Rights and Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Assessability; Potential Liability For Wages . . . . . . . . . . . . . . . . . . . . . . . . 41
Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Liability of Directors; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Action Without A Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Amendment of Corporate Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Shareholder Derivative Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
FIRSTAR CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Supervision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Other Acquisitions and Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Incorporation of Certain Information by Reference . . . . . . . . . . . . . . . . . . . . . 48
INVESTORS BANK CORP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Management's Discussion and Analysis of Financial Condition and Results of Operations . . . 53
Incorporation of Certain Information by Reference . . . . . . . . . . . . . . . . . . . . . 70
OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
PRO FORMA COMBINING FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
INDEX TO INVESTORS FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
APPENDIX A - Section 262 of the Delaware General Corporation Law
APPENDIX B - Merger Agreements
APPENDIX C - Fairness Opinion of Piper Jaffray 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
Investors Common Stock. As used in this Proxy Statement-Prospectus, the terms
"Firstar" and "Investors" 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 Investors has been furnished by Investors. 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
Investors 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 Minnesota
Firstar, a Wisconsin corporation, whose common stock is listed
on the New York Stock Exchange ("NYSE") and the Chicago Stock Exchange, is a
multi-bank holding company organized in 1929. The principal assets of Firstar
are investments in [31] 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." FCM, a wholly owned subsidiary of Firstar, owns one
bank with [24] offices located in Minnesota.
Investors Bank Corp.
Investors, a Delaware corporation, is a unitary savings and
loan holding company that commenced operations in 1984. The principal asset of
Investors is its investment in Investors Savings Bank, F.S.B. ("Investors
Bank"), a federally chartered savings bank with 12 retail banking offices in
the Minneapolis-St. Paul area. On September 30, 1994, Investors had
consolidated total assets of $1.1 billion and stockholders' equity of $54
million. Investors' principal executive offices are located at 200 East Lake
Street, Wayzata, Minnesota 55391 (telephone (612) 475-8500). See "INVESTORS
BANK CORP."
PROPOSED MERGER
Firstar, Investors and FCM have entered into an Agreement and
Plan of Reorganization dated as of August 21, 1994 and a related Plan of Merger
dated as of August 21, 1994, providing, among other things, for the merger of
Investors with and into FCM, as a result of which Firstar will directly own
100% of the stock of the surviving corporation, FCM. If the Merger is
consummated, Investors stockholders will no longer hold any interests in
Investors other than indirectly through their interests in Firstar Common
Stock. After the Merger, the rights of Investors' 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
Investors Common Stock will be converted into 0.8676 of a share of Firstar
Common Stock, subject to the payment of cash in lieu of fractional shares (such
ratio, the "Exchange Ratio"), and each outstanding share of Investors Preferred
Stock, except for shares as to which appraisal rights are perfected, will be
converted into $27.50 plus any accumulated and unpaid dividends on such stock,
payable in cash. See "PROPOSED MERGER-- Terms of the Merger"; "--Restricted
Stock"; "-- Options"; and "--Warrants."
THE MEETING
The Special Meeting of the holders of Investors Common Stock
will be held at _____________________________________, on March __, 1995 at
____ _.m., local time. The close of business
6
<PAGE> 13
on ____________, 1995 is the record date (the "Record Date") for determining
the stockholders of record of Investors entitled to notice of and, in the case
of holders of Investors 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 approve the Merger Agreements. For
additional information relating to the Special Meeting, see "MEETING
INFORMATION."
VOTE REQUIRED; VOTING AGREEMENTS
The DGCL requires that the Merger Agreements be approved by
the affirmative vote of holders of a majority of the outstanding shares of
Investors Common Stock entitled to vote at the Special Meeting. As of the
Record Date, there were outstanding __________ shares of Investors Common
Stock, each of which is entitled to one vote. Holders of Investors Preferred
Stock are entitled to notice of the Special Meeting but are not entitled to
vote on the Merger Agreements.
As of the Record Date, directors and executive officers of
Investors and their affiliates owned beneficially approximately _____% of the
outstanding shares of Investors Common Stock. Each director and executive
officer of Investors has entered into an agreement with Firstar (a "Voting
Agreement") to vote his or her shares of Investors Common Stock in favor of the
Merger. A total of ____ shares of Investors Common Stock are covered by the
Voting Agreements. As of the Record Date, directors and executive officers of
Firstar owned no shares of Investors Common Stock. See "MEETING
INFORMATION--Record Date; Voting and Revocation of Proxies"; and "--Voting
Agreements."
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF INVESTORS UNANIMOUSLY RECOMMENDS
THAT INVESTORS' COMMON STOCKHOLDERS VOTE FOR APPROVAL OF 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 Piper Jaffray Inc., believes that the terms of the Merger Agreements
are fair and that the Merger is in the best interest of Investors and its
stockholders. See "PROPOSED MERGER--Reasons for the Merger; Recommendation of
Investors Board of Directors"; and "--Background of the Merger."
OPINION OF INVESTMENT BANKER
Piper Jaffray Inc. has rendered its opinion to the Board of
Directors of Investors that, as of the date of its opinion, the consideration
to be received by the holders of Investors Common Stock upon consummation of
the Merger was fair, from a financial point of view, to such stockholders. The
opinion of Piper Jaffray Inc., 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 Investment Banker."
APPRAISAL RIGHTS
Pursuant to Section 262(b)(1) of the DGCL, holders of
Investors Common Stock will not have any rights of appraisal as a result of the
matters to be voted upon at the Special Meeting. Pursuant to Section 262 of
the DGCL, holders of Investors Preferred Stock may elect to have the "fair
value" of their shares of Investors Preferred Stock (determined in accordance
with Delaware law) individually appraised and paid to them, if the Merger is
consummated and if they comply with the requirements of Section 262 of the
DGCL, a copy of which is attached hereto as Appendix A. Any deviation from
such requirements may result in the loss of appraisal rights. See "PROPOSED
MERGER--Appraisal Rights" and Appendix A.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The Merger is expected to qualify for federal income tax
purposes as a tax-free reorganization. Investors has received an opinion from
Foley & Lardner, counsel to Firstar, to the effect that the Merger will be
treated as a tax-free reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as
7
<PAGE> 14
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 qualifies as a tax-free reorganization, (a) holders of Investors
Common Stock will generally recognize no gain or loss for federal income tax
purposes as a result of the exchange of their Investors Common Stock for
Firstar Common Stock, except that gain may be recognized in the event they
receive cash in lieu of fractional shares of Firstar Common Stock, and (b)
holders of Investors Preferred Stock will recognize gain or loss for federal
income tax purposes as a result of their receipt of cash for their shares of
stock in the Merger or pursuant to the exercise of their statutory appraisal
rights. See "PROPOSED MERGER--Certain Federal Income Tax Consequences."
INVESTORS STOCKHOLDERS SHOULD READ CAREFULLY THE DISCUSSION
SET FORTH UNDER "PROPOSED MERGER--CERTAIN FEDERAL INCOME TAX CONSEQUENCES" 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
pooling-of-interests. See "PROPOSED MERGER--Accounting Treatment."
DATE OF MERGER
The Merger Agreements provide that the Merger will be consummated on a
date (the "Closing Date") within five business days after the latest to occur
of (a) expiration of the statutory 15-day to 30-day waiting periods after
approval of the Merger by the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), and approval of the proposed merger of Investors
Bank into FCM's subsidiary, Firstar Bank of Minnesota, N.A. ("Firstar Bank")
(such bank-level merger, the "Bank Merger"), and related transactions by the
United States Comptroller of the Currency ("OCC"), (b) approval of certain
transactions related to the Bank Merger by the Office of Thrift Supervision of
the Department of the Treasury ("OTS"), and (c) the Special Meeting, or on
another mutually agreed upon date. [It is presently anticipated that the
Merger will be consummated in ___________________, 1995.] See "PROPOSED
MERGER--Effective Time of the Merger"; "--Conditions to the Merger"; and "--
Regulatory Approvals."
REGULATORY APPROVALS
The Merger is conditioned upon prior approval by the Federal
Reserve Board and prior approval of the Bank Merger and related transactions by
the OCC and in certain instances by the OTS. Firstar's application to the
Federal Reserve Board seeking approval of the Merger and related matters was
accepted for filing on December 29, 1994. Investors and Firstar submitted
applications to the OCC on January __, 1995 to approve the Bank Merger and
related transactions. Investors submitted notice filings to the OTS on January
___, 1995, in connection with certain transactions related to the Bank Merger.
There are no assurances that all required regulatory approvals will be obtained
or when such required approvals will be obtained. See "PROPOSED
MERGER--Effective Time of the Merger"; "--Conditions to the Merger"; and
"--Regulatory Approvals."
DIVIDENDS ON INVESTORS STOCK
Under the Merger Agreements, Investors is allowed to declare
regular quarterly cash dividends on Investors Common Stock at a rate not in
excess of $.125 per share (but cannot declare or pay such dividends for a
quarter in which the holders of Investors Common Stock will receive dividends
on the Firstar Common Stock they receive in the Merger), and regular quarterly
cash dividends on Investors Preferred Stock as required by Investors' currently
effective Certificate of Incorporation.
8
<PAGE> 15
MANAGEMENT AND OPERATIONS AFTER THE MERGER
In the Merger, Investors will be merged into FCM and the
separate corporate existence of Investors will cease. FCM, as the surviving
corporation in the Merger and a wholly owned subsidiary of Firstar, will
continue operations. The officers and directors of FCM prior to the Merger
will continue as the officers and directors of the surviving corporation,
except that James M. Burkholder, President and Chief Executive Officer of
Investors, will be elected to the Board of Directors of FCM and Firstar Bank.
Investors Bank will merge into Firstar Bank. After the Bank Merger, Firstar
Bank's management will be drawn from the officers of both banks and its Board
of Directors will consist of the same directors as just before the Bank Merger,
except that Mr. Burkholder will be added to the Board. Mr. Burkholder will
also become President and Chief Executive Officer of Firstar's mortgage banking
subsidiary, Firstar Home Mortgage Corporation. See "PROPOSED
MERGER--Management and Operations of Investors After the Merger"; and
"--Interests of Certain Persons in the Merger."
WAIVERS AND AMENDMENTS TO THE MERGER AGREEMENTS
Firstar, FCM and Investors may amend, modify or waive certain
terms and conditions of the Merger Agreements. Any such action taken by
Investors following a favorable vote by its holders of Investors Common Stock
at the Special Meeting may be taken only if the action would not have an
adverse effect on its stockholders, change the amount or kind of consideration
in the Merger or have a similar effect. See "PROPOSED MERGER--Termination,
Amendment and Waiver."
TERMINATION
The Merger may be abandoned (i) by mutual consent of Firstar
and Investors at any time before the Merger takes place, (ii) by either Firstar
or Investors if (a) the Merger has not taken place by August 15, 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; (c) the other party
commits one or more material breaches of the Merger Agreements; (d) any
permanent injunction preventing the consummation of the Merger shall have
become final and nonappealable; (e) the Federal Reserve Board, the OCC or the
OTS has denied approval of or objected to the Merger, the Bank Merger or
related transactions and neither Firstar nor Investors has filed a petition
seeking review of such order within 30 days; or (f) the Merger Agreements and
the Merger are not duly approved by the holders of Investors Common Stock after
a vote thereon at the Special Meeting; (iii) by Firstar if any person shall
have commenced a tender offer or exchange offer for 20% or more of the
Investors Common Stock or Investors' Board shall have withdrawn, modified or
changed its recommendation of the Merger or the Merger Agreements; (iv)
automatically after certain instances in which Investors pays Firstar the
Termination Fee defined below, or (v) by Investors (a) in the event of certain
offers to acquire Investors and payment of the Termination Fee, or (b) on
either of the two trading days occurring immediately after the ten consecutive
trading days ending at the end of the third business day preceding the date of
the Special Meeting if (1) the average of the daily closing prices of a share
of Firstar Common Stock during such ten trading days is less than $29.00 and
(2) the percentage decline in the average price of the Firstar Common Stock
since August 19, 1994 is greater than the percentage decline in the weighted
average price of a selected group of bank stocks plus .125 (the "walk-away"
provision). The average daily closing price for Firstar Common Stock for the
ten trading days ended February __, 1995 was $___, a percentage [decline]
[increase] of ___% from August 19, 1994. The percentage [decline] [increase]
in the weighted average price of the selected group of bank stocks over the
same period was approximately ___%. See "PROPOSED MERGER--Termination,
Amendment and Waiver" for important information concerning these termination
rights, including the "walk-away" provision and the enforcement or waiver
thereof by Investors.
TERMINATION FEE
Under the Merger Agreements, upon the occurrence of specified
events ("Trigger Events"), Investors must pay Firstar a fee of $4,500,000 (the
"Termination Fee"). The Trigger Events relate generally to offers by, or
transactions or proposed transactions with, third parties, acquisition of
specified percentages of Investors' 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 Investors' knowledge. The
Termination Fee may discourage offers to acquire Investors and is intended to
increase the likelihood that the Merger will be consummated. See "PROPOSED
MERGER-- Termination Fee"; and "--Expenses."
9
<PAGE> 16
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Merger Agreements provide that Firstar and Firstar Bank
will appoint James M. Burkholder as President and Chief Executive Officer of
Firstar Home Mortgage Corporation and elect Mr. Burkholder to the Board of
Directors of FCM and of Firstar Bank. Further, other directors, executive
officers and employees of Investors will have an interest in the Merger under
certain employment and severance agreements, option agreements, restricted
stock agreements and indemnification provisions assumed or executed by Firstar
and effective upon consummation of the Merger. See "PROPOSED
MERGER--Management and Operations of Investors after the Merger"; and
"--Interests of Certain Persons in the Merger."
RESALES OF FIRSTAR COMMON STOCK BY AFFILIATES
Resales of Firstar Common Stock issued to "affiliates" of
Investors 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 become nonredeemable. See "COMPARATIVE RIGHTS OF STOCKHOLDERS."
MARKETS AND MARKET PRICES
Firstar Common Stock is listed on the NYSE and the Chicago
Stock Exchange. Investors Common Stock and Investors Preferred Stock are
quoted on the Nasdaq National 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 reported sale price per share of Investors Common Stock as
reported on the Nasdaq National Market on the dates set forth, which include
August 19, 1994, the last trading day preceding public announcement of the
Merger, and _________ __, 1995, the latest practicable trading day before the
printing of this Proxy Statement-Prospectus. See "PROPOSED MERGER--Terms of
the Merger."
<TABLE>
<CAPTION>
Firstar Investors
Common Common
Stock Stock
------- -----------
<S> <C> <C>
Market Value Per Share at:
August 19, 1994 $ . $ .
September 30, 1994 $ . $ .
December 31, 1994 $ . $ .
___________, 1995 $ . $ .
</TABLE>
Because of publicity regarding the potential Merger, Investors
issued a press release on August 18, 1994 to announce that it was engaged in
negotiations with Firstar. Accordingly, Investors believes that the market
price on the 19th reflects speculation as to the likelihood of the consummation
of the Merger or a similar transaction and the anticipated price. See
"PROPOSED MERGER--Background of the Merger."
10
<PAGE> 17
No assurance can be given as to the market prices of Firstar
Common Stock or Investors Common Stock at any time before the Merger becomes
effective or as to the market price of Firstar Common Stock at any time
thereafter. Because the Exchange Ratio is fixed, it will not compensate
holders of Investors Common Stock for decreases in the market price of Firstar
Common Stock which could occur before the Merger becomes effective. As a
result, in the event the market price of Firstar Common Stock decreases, the
value of the Firstar Common Stock to be received in the Merger in exchange for
Investors Common Stock would decrease. In the event the market price of
Firstar Common Stock instead increases, the value of the Firstar Common Stock
to be received in the Merger in exchange for Investors Common Stock would
increase. Investors' stockholders should note that in certain circumstances
Investors may, at its option, terminate the Merger Agreements before they take
effect pursuant to the walk-away provision. See "PROPOSED MERGER--Termination,
Amendment and Waiver." Investors' stockholders are advised to obtain current
market quotations for Firstar Common Stock and Investors Common Stock.
Following the Merger, Investors Common Stock will no longer
exist and, as a result, will no longer be quoted on the Nasdaq National Market.
11
<PAGE> 18
COMPARATIVE PER COMMON SHARE DATA
The following table presents selected comparative unaudited
per common share data for Firstar Common Stock and Investors Common Stock as of
and for the three years ended December 31, 1993 and as of and for the nine
months ended September 30, 1994 on a historical and pro forma combined basis
and for Investors Common Stock on a pro forma equivalent basis giving effect to
the Merger accounted for as a pooling-of-interests. For a description of the
pooling-of-interests accounting basis with respect to the Merger and the
related effects on the historical financial statements of Firstar, see
"PROPOSED MERGER--Accounting Treatment." The information is derived from the
consolidated historical financial statements of Firstar and Investors,
including the related notes thereto, incorporated by reference into or included
in this Proxy Statement-Prospectus, and the pro forma financial statements,
including the notes thereto, appearing elsewhere herein. This information
should be read in conjunction with such historical and pro forma financial
statements and the related notes thereto. See "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE", "PRO FORMA COMBINING FINANCIAL STATEMENTS" and
"INDEX TO INVESTORS FINANCIAL STATEMENTS."
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 YEARS ENDED DECEMBER 31,
ENDED ----------------------------------
SEPTEMBER 30, 94 1993 1992 1991
---------------- ---- ---- ----
<S> <C> <C> <C> <C>
Firstar - Historical:
Net income . . . . . . . . . $2.36 $3.15 $2.62 $2.14
Cash dividends declared . . . .86 1.00 .80 .705
Book value (at period end) . 19.37 17.96 15.94 14.17
Investors - Historical:
Net income . . . . . . . . . $1.86 $2.49 $1.98 $1.51
Cash dividends declared . . . .38 .38 .18 -
Book value (at period end) . 13.27 11.90 9.60 7.80
Firstar-Investors - Pro Forma
Combined:
Net income(1) . . . . . . . . $ 2.34 $ 3.15 $ 2.61 $ 2.12
Cash dividends declared(2) . .86 1.00 .80 .705
Book value (at period end)(3) 19.16 17.78 15.73 13.95
Investors Bank Corp. common
stock - Equivalent Pro Forma
Combined(4):
Net income . . . . . . . . . $ 2.03 $ 2.73 $ 2.26 $ 1.84
Cash dividends declared . . .75 .87 .69 .61
Book value (at period end) . 16.62 15.43 13.65 12.10
</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 Investors reduced for dividend payments on Firstar's
outstanding series B preferred stock (which was redeemed in 1993) and
Investors 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 are
based upon the historical total common equity for Firstar and Investors
divided by total pro forma common shares of the combined entity assuming
exchange of the Investors Common Stock for Firstar Common Stock as provided
for herein.
(4) The equivalent pro forma combined income, dividends and book value per
share of Investors common stock represent the pro forma combined amounts
multiplied by the assumed exchange ratio of .8676, which is based on the
terms of the Merger Agreements.
12
<PAGE> 19
HISTORICAL AND PRO FORMA SELECTED FINANCIAL CONTRIBUTIONS
The following table sets forth certain consolidated financial
data of Firstar as of and for the nine months ended September 30, 1994 on a pro
forma combined basis after giving effect to the acquisition of Investors and
other pending Firstar acquisitions. The information is derived from the
consolidated historical financial statements of Firstar and Investors,
including the related notes thereto, incorporated by reference into or included
in this Proxy Statement-Prospectus, and the pro forma financial statements,
including the notes thereto, appearing elsewhere herein. See "INCORPORATION OF
CERTAIN INFORMATION BY REFERENCE," "PRO FORMA COMBINING FINANCIAL STATEMENTS"
and "INDEX TO INVESTORS FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
PRO FORMA
COMBINED OTHER PENDING
FIRSTAR INVESTORS FIRSTAR & ACQUISITIONS PRO FORMA
HISTORICAL HISTORICAL INVESTORS PRO FORMA COMBINED
---------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
For the nine months ended
September 30, 1994:
Total revenue:
Amount . . . . . . . $927,432 $59,498 $986,930 $127,718 $1,114,648
Percentage of total 83.20% 5.34% 88.54% 11.46% 100.00%
Net income:
Amount . . . . . . . $151,596 $6,199 $157,795 $14,527 $172,322
Percentage of total 87.97% 3.60% 91.57% 8.43% 100.00%
At September 30, 1994
Total assets:
Amount . . . . . . . $14,329,204 $1,058,677 $15,387,881 $2,282,775 $17,670,656
Percentage of total 81.09% 5.99% 87.08% 12.92% 100.00%
Stockholders' equity:
Amount . . . . . . . $1,241,011 $44,332 $1,285,343 $194,389 $1,479,732
Percentage of total 83.87% 2.99% 86.86% 13.14% 100.00%
Shares of common stock:
Amount . . . . . . . 64,054,211 3,040,982* 67,095,193 9,596,489* 76,691,682
Percentage of total 83.52% 3.97% 87.49% 12.51% 100.00%
</TABLE>
______________________
* Equivalent pro forma shares of Firstar
13
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA OF FIRSTAR
The following table sets forth in summary form certain
selected consolidated financial data of Firstar. The financial data included
for the five years ended December 31, 1993, are derived from the audited
consolidated financial statements of Firstar. The financial data included for
the nine-month periods ended September 30, 1994 and 1993, are derived from the
unaudited historical financial statements of Firstar and reflect, in the
opinion of management of Firstar, all adjustments necessary for a fair
presentation of such data. Results for the nine months ended September 30,
1994 are not necessarily indicative of the results which may be expected for
the year as a whole. This information should be read in conjunction with the
financial review and consolidated financial statements of Firstar, and the
related notes thereto, included in the documents incorporated by reference in
this Proxy Statement-Prospectus. See "INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE."
<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 INVESTORS
The following table sets forth in summary form certain
selected consolidated financial data of Investors. The financial data included
for the four years ended December 31, 1993, and the six months ended December
31, 1989, are derived from the audited consolidated financial statements of
Investors. The financial data included for the nine-month periods ended
September 30, 1994 and 1993, are derived from the unaudited historical
financial statements of Investors and reflect, in the opinion of management of
Investors, all adjustments necessary for a fair presentation of such data.
Results for the nine months ended September 30, 1994 are not necessarily
indicative of the results which may be expected for the year as a whole. This
information should be read in conjunction with the financial review and
consolidated financial statements of Investors, and the related notes thereto,
included in the documents incorporated by reference in this Proxy
Statement-Prospectus. See "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE",
"INVESTORS BANK CORP.--Management's Discussion and Anaylysis of Financial
Condition and Results of Operations" and "INDEX TO INVESTORS FINANCIAL
STATEMENTS."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SIX MONTHS
SEPTEMBER 30, YEAR ENDED DECEMBER 31, 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 . $ 19,765 $ 18,725 $ 25,117 $ 22,162 $ 18,139 $ 12,907 $ 4,166
Provision for loan
losses . . . . . . . . 334 445 631 869 1,010 803 256
-------- --------- --------- ------- -------- ------ ---------
Net interest revenue
after loan loss
provision . . . . . 19,431 18,280 24,486 21,293 17,129 12,104 3,910
Other operating revenue 14,754 13,300 18,630 14,255 9,756 8,112 4,280
Other operating expense 21,130 19,098 26,462 22,509 18,452 16,779 6,918
------- ------- ------- ------- ------- ------ -------
Income before income
taxes. . . . . . . . 13,055 12,482 16,654 13,039 8,433 3,437 1,272
Provision for income tax 5,450 5,012 6,629 5,227 3,397 1,396 516
--------- --------- -------- -------- ------- ------- --------
Net income . . . . . . $ 7,605 $ 7,470 $10,025 $ 7,812 $ 5,036 $ 2,041 $ 756
======= ======= ====== ======= ======= ======= ======
Per common share:
Net income . . . . . $ 1.86 $ 1.86 $ 2.49 $ 1.98 $ 1.51 $ .66 $1.24
Dividends . . . . . .38 .28 .38 .18 - - -
Selected Period-End
Balances
(Millions of dollars):
Total assets . . . . . $1,069 $964 $1,017 $816 $606 $610 $552
Loans . . . . . . . . . 972 867 881 713 533 542 500
Deposits . . . . . . . 613 574 603 512 510 506 471
Long-term debt . . . . 128 206 191 169 3 10 10
Stockholders' equity . 54 45 47 39 33 20 18
Selected Financial Ratios:
Net income as a % of
average assets . . . 1.03% 1.16% 1.13% 1.14% .84% .35% .28%
Net income as a % of
average common equity 21.63 26.02 25.56 24.20 22.04 10.90 8.80
Net interest margin % . 2.76 3.01 2.94 3.39 3.23 2.36 1.69
Total capital to
risk-adjusted assets 11.15 11.21 11.56 11.44 9.79 8.43 8.56
Nonperforming assets as
a % of period-end
loans and other real
estate . . . . . . . .39 .92 .97 1.29 2.07 1.86 2.39
Reserve for loan losses
as a % of period-end
loans . . . . . . . .34 .34 .34 .36 .37 .20 .09
Net charge-offs as a %
of average loans . . - .01 .03 .04 .02 .04 .13
</TABLE>
15
<PAGE> 22
MEETING INFORMATION
GENERAL
This Proxy Statement-Prospectus is being furnished to the
stockholders of Investors in connection with the solicitation by the Board of
Directors of Investors of proxies to be voted at the Special Meeting of holders
of Investors Common Stock to be held on March __, 1995, and any adjournment
thereof. The purpose of the Special Meeting and of the solicitation is (i) to
obtain approval of the holders of Investors Common Stock of the Merger
Agreements and (ii) 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 Investors 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 _____________________, on
March __, 1995, at ____ a.m. (local time).
RECORD DATE; VOTING REQUIRED AND REVOCATION OF PROXIES
The close of business on ________ __, 1995, has been fixed by
the Board of Directors of Investors 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 _______ shares of
Investors Common Stock, of which _______ (___%) were held by directors or
executive officers of Investors. Neither Firstar nor FCM or any of their
directors or executive officers own any shares of Investors Common Stock.
Each outstanding share of Investors Common Stock entitles the
record holder thereof to one vote on all matters to be acted upon at the
Special Meeting. Holders of Investors Preferred Stock are not entitled to vote
at the Special Meeting. The presence, in person or by proxy, of at least a
majority of the total number of outstanding shares of Investors Common Stock
entitled to vote at the Special Meeting is necessary to constitute a quorum at
the Special Meeting. Under Delaware law, the affirmative vote of at least a
majority of the total number of outstanding shares of Investors Common Stock
entitled to vote at the Special Meeting is required to approve and adopt the
Merger Agreements. If an executed proxy card is returned and the stockholder
has abstained from voting on any matter, the shares represented by such proxy
will be considered present at the meeting for purposes of determining a quorum
and for purposes of calculating the vote, but will not be considered to have
been voted in favor of such matter. If an executed proxy is returned by a
broker holding shares in street name which indicates that the broker does not
have discretionary authority as to certain shares to vote on one or more
matters, such shares will be considered present at the meeting for purposes of
determining a quorum, but will not be considered to be represented at the
meeting for purposes of calculating the vote with respect to such matter. If
the accompanying proxy card is properly executed and returned to Investors in
time to be voted at the Special Meeting, the shares represented thereby will be
voted in accordance with the instructions marked thereon. Executed but
unmarked proxies will be voted for approval and adoption of the Merger
Agreements and for the proposal to adjourn the Special Meeting if necessary to
permit further solicitation of proxies.
The Board of Directors of Investors does not know of any
matters other than those described in the notice of the Special Meeting that
are to come before the Special Meeting. If any other matters are properly
brought before the Special Meeting, one or more of the persons named in the
proxy card will vote the shares represented by such proxy upon such matters as
determined in their best judgment.
VOTING AGREEMENTS
As a condition to Firstar entering into the Merger
Agreements, each of the directors and executive officers of Investors has
entered into a voting agreement with Firstar. Each Voting Agreement provides
that the signing stockholder will vote all of his or her shares of Investors
Common Stock in favor of the Merger at the
16
<PAGE> 23
Special Meeting and prohibits such stockholder from voting his or her shares in
favor of any acquisition of stock or all or substantially all the assets of
Investors by, or merger or consolidation of Investors with, any party other
than Firstar or its affiliates. Further, each Voting Agreement requires that
each such stockholder make adequate provision to assure that his or her shares
of Investors Common Stock remain subject to the Voting Agreement before
transferring any shares of Investors Common Stock to a third party transferee.
Each Voting Agreement terminates upon the earlier of the Effective Time of the
Merger (as defined below) or termination of the Merger Agreements. See
"PROPOSED MERGER-- Effective Time of the Merger"; and "-- Termination,
Amendment and Waiver."
The Voting Agreements bind the signatories thereto only in
their capacity as stockholders of Investors. Accordingly, while the directors
of Investors are contractually bound to vote as stockholders in favor of the
Merger and against competing proposals, should any be presented, their
fiduciary duties as directors nevertheless required them to act, in their
capacity as directors, in the best interests of Investors when they decided to
approve and adopt the Merger Agreements and recommend that the holders of
Investors Common Stock vote for the Merger and the Merger Agreements. The
directors will continue to be bound by their fiduciary duties as directors of
Investors with respect to any decisions they may take in connection with the
Merger or otherwise.
The total number of shares of Investors Common Stock subject
to the Voting Agreements is _________, or ____% of the total shares outstanding
as of the Record Date and entitled to vote at the Special Meeting.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers, and
employees of Investors, who will not be specifically compensated for such
services, may solicit proxies from the stockholders of Investors, 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.
Investors does not anticipate that anyone will be specially engaged to solicit
proxies or that special compensation will be paid for that purpose, but
Investors reserves the right to do so should it conclude that such efforts are
needed. Investors will bear its own expenses in connection with the
solicitation of proxies for the Special Meeting, except that Firstar and
Investors have agreed to share equally in the expense of printing this Proxy
Statement-Prospectus and the expense of all SEC and other regulatory filing
fees incurred in connection therewith. See "PROPOSED MERGER- -Expenses."
HOLDERS OF INVESTORS COMMON STOCK ARE REQUESTED TO COMPLETE,
DATE, AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO INVESTORS 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 Investors stockholders are urged to read the Merger Agreements in their
entirety.
BACKGROUND OF THE MERGER
The past several years have been a period of significant
consolidation in the financial services industry. Although Investors has
examined a number of potential acquisition candidates, the size of its
operations and its lack of visibility have impeded its ability to effectively
compete in the bidding process. During this same period, all of Investors'
primary competitors have participated in the consolidation process, either as
acquiring companies or as targets of acquisition. Investors had received
indications of interest from several financial institutions prior to 1994, none
of which progressed beyond preliminary discussions.
17
<PAGE> 24
During November 1993, the Board of Directors of Investors met
to consider the long-term strategic direction of Investors. The Board
determined that, although it would entertain offers to acquire Investors that
provided significantly more appreciation potential to Investors stockholders
than continued operation as an independent company, it would not seek the sale
of Investors but would instead continue to concentrate on the high returns
Investors had historically provided to its stockholders. As part of that
process, the directors discussed in general the terms of acquisition offers
that would be necessary to entice Investors into discussions.
James Burkholder was first contacted by Richard Schoenke of
Firstar Bank in December 1993 to arrange a lunch meeting. The meeting was held
on January 11, 1994 and consisted generally of discussions regarding the
financial institution industry common to both institutions. At the close of
the meeting, Mr. Schoenke inquired whether Investors would have any interest in
discussing an alliance with Firstar. Mr. Burkholder's response was that
Investors was not for sale and that it really did not know much about Firstar.
Firstar subsequently forwarded more information to Investors regarding
Firstar's operations.
The contact from Firstar was reported at the January meeting
of the Board of Directors of Investors and information regarding Firstar was
distributed. The Board took no action but acknowledged that Firstar appeared
to be a healthy institution.
In late January, Mr. Schoenke telephoned again and there was
a general discussion of the quality of each organization. Mr. Schoenke and
Mr. Burkholder scheduled and held another meeting, which included John
Lohmann, Executive Vice President, Secretary and a director of Investors, and
Jon Stowe, Executive Vice President-Mergers and Acquisitions of Firstar, in Mr.
Schoenke's offices on March 1, 1994. Firstar inquired at this time as to
whether the Board of Directors of Investors would be receptive to discussions
with Firstar about a business combination. Investors responded that Investors
was a sound and well run organization and had no particular desire to combine
its operations with another institution, but that the Investors Board might be
receptive to further discussions. Firstar responded that it would need to
review certain information before proceeding further in discussions.
Management of Investors agreed to discuss the matter with the Investors Board
at the meeting to be held at the end of March and suggested that any
information provided would have to be preceded by a confidentiality agreement.
A confidentiality agreement was executed on March 10, 1994, and preliminary
information was provided by Investors to Firstar on March 15, 1994.
Management reported execution of the confidentiality
agreement and discussed with the Board the information contained in publicly
available reports of Firstar at the regular meeting of the Board of Directors
held March 22, 1994. Counsel was present and discussed with the Board recent
trends in law relating to duties in connection with combinations. The Board
discussion focused on the continued preliminary nature of the discussions,
information regarding Firstar and general information regarding consolidation
in the industry.
Firstar contacted Investors again by phone in early April,
requested additional nonpublic information from Investors, and scheduled a
meeting for May 4, 1994. A special meeting of the Executive Committee of
Investors was called and held April 27, 1994 to discuss the advisability of
continuing to provide information to and to discuss a combination with Firstar.
Members of the Committee discussed the potential structure a business
combination would take. The Committee advised management of the importance of
making clear to Firstar the mortgage banking capabilities and advantages of
Investors. The Committee also discussed the importance of Investors'
off-balance sheet assets, ARM portfolio, and the limited interest rate
sensitivity of its loan portfolio.
During late April, Firstar was provided additional financial
information regarding Investors, and Investors solicited and received more
detailed information regarding Firstar. During these discussions with Firstar,
very preliminary pricing was discussed.
At the regular meeting of the Board of Directors of Investors
held May 3, 1994, the Board discussed the continuing interest expressed by
Firstar and the range of pricing suggested by Firstar. Mr. Burkholder
described to the Board the information that had been provided by Investors to
Firstar. The Board examined and discussed Firstar's 1993 annual report,
several analysts' reports relating to Firstar that had been obtained by
18
<PAGE> 25
management and other information regarding the operations of Firstar. The
Board discussed at length the financial statements of Firstar, the character of
its assets and liabilities, the market area and businesses it served, and the
absence of significant redundant operations between the two institutions. The
Board also discussed the pricing parameters being used by Firstar and the
appropriate indicia of value of Investors.
Several additional phone conversations occurred between
Investors and Firstar during May regarding issues that would be presented if a
combination was considered. On June 7, 1994, the executive officers of
Investors toured Firstar's Milwaukee operations and met with Roger Fitzsimonds,
Chairman of Firstar, John Becker, President of Firstar, and several others.
The general tenor of the meetings at this point was that Firstar was interested
in a combination of Investors and Firstar's Minnesota banking operations.
Based on these discussions, the parties agreed to continue to perform due
diligence adequate to consider pricing and to consider whether an offer would
be forthcoming.
Firstar sent a team of individuals to Minneapolis to review
loan files for commercial real estate (off site) in early June 1994. Telephone
conversations continued during June 1994. On June 23, 1994, James Burkholder
met again with Roger Fitzsimonds in Minneapolis to discuss the status of the
review. Investors suggested that Firstar needed to come to some decision. At
this time, Investors was told to expect an offer by July 15, 1994.
These developments, together with comparative income
statement information for Firstar and Investors for the year ended December 31,
1993, several articles regarding Firstar and financial institution mergers, and
a summary of all first quarter thrift acquisitions published by an industry
periodical were considered by the Board of Directors of Investors at its
regular meeting on June 28, 1994. The Board discussed certain criteria that
Firstar proposed to use to evaluate Investors for pricing purposes. The Board
also discussed the expressed reasons for Firstar's interest, including
Firstar's desire to expand regionally and the similar corporate cultures
maintained by the two organizations. The Board discussed Firstar's strengths
in asset quality, data processing capability, commercial lending and trust
services, and financial performance ratios, noting the complementary nature of
Firstar's operations to those of Investors.
On July 15, 1994, Investors received a letter from Firstar
outlining the general terms upon which Firstar would be interested in
proceeding with a combination of Investors with FCM, including pricing at $28
in value of Firstar Common Stock for each share of Investors Common Stock. The
term letter was immediately transmitted to each member of the Board of
Investors. On the afternoon of July 15, 1994, counsel to Investors contacted
Piper Jaffray Inc. ("Piper Jaffray") and asked that it be prepared to make a
presentation at a scheduled July 19, 1994, Board meeting regarding Piper
Jaffray's possible retention as financial advisor in connection with the
potential combination.
The Board of Directors met on July 19, 1994, and discussed
the term letter in detail. Piper Jaffray presented information regarding the
work it would perform if engaged as financial advisor and discussed the terms
of such engagement with the Board. Counsel to Investors reviewed with members
of the Board the duties and responsibilities of Investors' directors under
corporate law and regulatory requirements. The Board considered and discussed
with members of management the provisions of the letter, focusing on pricing
and its relationship to book value and as a multiple of earnings. Based on
such discussions, the Board authorized management to continue negotiations with
Firstar and to retain Piper Jaffray to render a fairness opinion.
During the following week, James Burkholder, with input from
several directors, engaged in discussions with Jon Stowe of Firstar regarding
pricing and other specific terms of the proposed combination. As a result of
those discussions, on July 22, 1994, Firstar increased the price it was
offering for each share of Investors Common Stock.
At a special meeting held July 27, 1994, the Board of
Investors discussed the progress made through such negotiations. The
discussion focused on pricing and the financial ratios upon which such pricing
would be based. The Board discussed with Piper Jaffray such potential ratios
and the effect of Investors' leverage on the same. Based on the discussion at
such meeting, and although the parties had not reached final agreement as to
19
<PAGE> 26
pricing, Mr. Burkholder called Mr. Stowe and indicated that the parties were
close enough on terms to justify preparation of proposed Merger Agreements.
Mr. Stowe indicated that a draft of such agreements would be forthcoming on or
about August 10, 1994.
The Board of Directors held a regular meeting on August 3,
1994. At this meeting, directors discussed with management and counsel the
proposed terms of employment agreements with Investors' executive officers that
would take effect after the Merger and the conduct of Firstar's due diligence
investigation regarding Investors as well as Firstar's acquisition of First
Colonial Bankshares Corporation ("First Colonial"), which had been announced on
August 1, 1994. Piper Jaffray described to and discussed with the Board its
preliminary due diligence investigation of Firstar. The Board discussed with
management open issues regarding the proposed combination and the likely timing
of the remaining portion of the transaction.
Investors received a draft of the Merger Agreements on
August 11, 1994. Investors met with its counsel on August 12, 1994 and
such counsel prepared comments and responded to such draft on August 14, 1994.
Counsel discussed the changes with counsel to Firstar on August 15, 1994 and
Firstar submitted a revised draft on the afternoon of August 17, 1994.
Investors had additional pricing discussions with Firstar during such week but
had not reached final agreement as to pricing before August 18, 1994.
The morning issue of the Minneapolis Star and Tribune on
August 18, 1994 reported that Investors was engaged in merger discussions
with Firstar. Investors immediately met with its counsel and issued
a press release generally confirming the newspaper article.
At a previously scheduled special meeting of the Board of
Directors of Investors on August 18, 1994, the Board discussed with
management, counsel and representatives of Piper Jaffray the ongoing
negotiations regarding pricing and all of the provisions of the Merger
Agreements and associated documents. The Board discussed the most recent
exchange ratio proposed by Firstar in view of the decline in the market price
of Firstar Common Stock after announcement of the First Colonial transaction.
The Board authorized and directed management to continue such negotiations with
a view toward terminating discussions if a more favorable ratio could not be
obtained. The Board also agreed with management and counsel that a number of
provisions of the Merger Agreements required further negotiation. Because the
terms were not finalized and pricing had not been agreed to, the meeting was
adjourned and an additional Board meeting was scheduled for Saturday, August
20, 1994.
Mr. Burkholder, with the assistance of counsel and several
directors, continued to negotiate the exchange ratio and the outstanding
issues relating to the terms contained in the proposed Merger Agreements
during the evening of August 18 and morning of August 19, 1994. Mr.
Burkholder and the other executive officers of Investors also negotiated the
terms of amendments to their employment and severance agreements with
Investors (and in the case of Daniel Arrigoni, a new employment agreement),
which amendments and new agreement will take effect upon consummation of the
Merger. See "PROPOSED MERGER--Interests of Certain Persons in the Merger."
Investors and Firstar reached general agreement regarding the exchange ratio
on August 19.
At a special meeting held August 20, 1994, the Board considered
the general terms of the Merger Agreements in the context of the
exchange ratio that had been negotiated. At such meeting, members of
Investors' management, together with Investors' legal advisors and Piper
Jaffray, reviewed with the Investors Board of Directors, among other things,
the background of the transaction, the potential benefits of the transaction,
including the strategic rationale for the transaction, financial and valuation
analyses of the transaction and the status of the terms of the transaction
documents. Piper Jaffray reviewed with the Board its preliminary opinion,
based on the the draft of the Merger Agreements and the exchange ratio that had
been negotiated, that the consideration was fair from a financial point of view
to the holders of Investors Common Stock. The Board discussed with counsel
several remaining issues under the proposed Merger Agreements, and management
and counsel negotiated such provisions during a temporary adjournment of the
meeting. Because the provisions negotiated had not been reviewed by the Board,
an additional Board meeting was scheduled and held at 10:00 a.m. on August 21,
1994.
At the special meeting held August 21, 1994, the Board met
with counsel and reviewed final drafts of the Merger Agreements, voting
agreements, proposed employment agreements with management, and other
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related documents. The Board engaged directly in negotiation with
Firstar of several final revisions to such agreements. The remaining issues
under the proposed Merger Agreements were resolved through such negotiations.
The Board of Directors unanimously approved the Merger Agreements and the
transactions contemplated thereby, and authorized members of management to
execute the proposed Merger Agreements with changes therein authorized by a
special committee appointed at such meeting. The special committee met and
ratified a change in the proposed Merger Agreements during the early evening on
the same day and the Merger Agreements were then executed.
REASONS FOR THE MERGER; RECOMMENDATION OF INVESTORS BOARD OF DIRECTORS
Investors. The Board of Directors of Investors believes that
the terms of the Merger are fair and in the best interest of Investors'
stockholders. The Board of Directors consulted with its legal and financial
advisors as well as management of Investors and carefully considered a variety
of factors in evaluating the Merger. Although it did not assign any specific
weight thereto, among the factors the Board of Directors of Investors
considered were the following:
(i) Investors' recent results of operations and
financial position;
(ii) Future prospects for Investors' business, with
particular consideration of the effects of interest rate
movements and changing competition on the home finance and
mortgage banking industry in the markets that Investors serves;
(iii) The historical market value, book value,
dividends, and multiples of earnings of Investors Common Stock
as compared to the historical market value, book value,
dividends, and multiples of earnings of Firstar Common Stock;
(iv) The financial terms of recent comparable business
combinations in the financial institution industry;
(v) The results of operations and financial position
of Firstar;
(vi) The future prospects for Firstar's business, with
particular emphasis on the diversification of the financial
products offered by Firstar;
(vii) The size and market share of Firstar in light of
the concentration in the Minneapolis banking market and the
growing disparity in resources between large bank holding
companies and Investors;
(viii) The market liquidity of Firstar Common Stock;
(ix) The absence of significant redundancy between
Investors' mortgage banking expertise and Firstar's strong
commercial banking and trust operations and the potential for
expansion of both businesses through combination;
(x) The continued significant consolidation in the
financial institution industry and the competitive effects of
such consolidation; and
(xi) The opinion of Piper Jaffray that the
consideration to be received by holders of Investors Common
Stock was, as of the date of its opinion, fair from a financial
point of view.
In addition, the Board of Directors considered the impact of
the Merger on the depositors of Investors Bank, and on the employees, customers
and the communities in which it operates.
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After careful consideration and review of these factors and
other considerations, the Board of Directors concluded that the Merger is in
the best interests of Investors and its stockholders and that the Merger was
preferable to the other alternatives available to Investors, such as remaining
independent or soliciting bids through an auction process or a more limited bid
process. In the judgment of the Board of Directors, the Merger should result in
a significant cost savings and expanded operations for the combined entity,
enhance the services offered to Investors' customers and at the same time
provide holders of Investors Common Stock with the potential of increased
long-term value.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS OF INVESTORS
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF INVESTORS COMMON STOCK VOTE TO APPROVE
THE MERGER AND THE MERGER AGREEMENTS.
Firstar. Firstar concluded that the Merger would be in the
best interests of Firstar and its stockholders. 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 Investors; the capital
adequacy of the resulting entity; the composition of the businesses of the two
organizations; the overall compatibility of the management and employees of the
organizations; the outlook for both organizations in the rapidly changing
banking and financial services industry; the historical and current market
prices of each company's stock and certain other bank holding companies whose
securities are publicly traded, the relationship of the consideration to be
paid in the Merger to such market prices and the book value and earnings per
share of Investors; and the financial terms of certain other recent business
combinations in the banking industry. See "PRO FORMA COMBINING FINANCIAL
STATEMENTS."
The Board of Directors of Firstar believes that the expansion
of Firstar's customer base and assets in the Minneapolis-St. Paul area will
enable the new organization to realize certain economies of scale, to provide a
wider and improved array of financial services to its customers and those of
Investors and to achieve added flexibility in dealing with the region's
changing competitive environment. Additionally, the Board of Directors of
Firstar believes that the Merger will provide the combined company with the
market position and financial resources it needs to meet the competitive
challenges arising from changes in the banking and financial industry.
OPINION OF INVESTMENT BANKER
Piper Jaffray was retained by Investors on July 22, 1994 to
render its opinion regarding the fairness, from a financial point of view, of
the consideration proposed to be paid to the holders of Investors Common Stock
in the proposed Merger. Piper Jaffray delivered to Investors directors on
August 20, 1994, its written opinion to the effect that, as of the date of the
opinion and based on and subject to the assumptions, factors and limitations
set forth in the opinion and as described below, the consideration proposed to
be paid to the holders of Investors Common Stock in the Merger was fair, from a
financial point of view, to such stockholders. This opinion was subsequently
reaffirmed by issuance to the Investors Board of a Piper Jaffray opinion, dated
__________, 1995. Those opinions are herein individually and collectively
referred to as the "Opinion." A copy of the Opinion letter dated __________,
1995 is attached to this Proxy Statement-Prospectus as Appendix C and is
incorporated herein by reference. The August 20, 1994 Opinion is substantially
identical to the Opinion attached hereto. Holders of Investors Common Stock
are urged to read the attached Opinion in its entirety.
Piper Jaffray was not requested to and did not make any
recommendation to the Investors Board as to the form or amount of the
consideration to be received by the stockholders of Investors in the Merger,
which was determined through negotiations between Firstar and Investors. The
Opinion is directed to the Investors Board only and does not constitute a
recommendation to any Investors stockholder as to how such stockholder should
vote at the Investors Special Meeting. Piper Jaffray was not requested to
opine as to, and the Opinion does not address, (i) Investors' underlying
business decision to proceed with or effect the Merger or (ii) whether the
consideration proposed to be paid to the holders of Investors Preferred Stock
was fair from a financial point of view.
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In arriving at the Opinion, Piper Jaffray reviewed, among
other things, (i) the Merger Agreements, (ii) certain publicly available
information relative to the business, financial condition and operations of
Investors, (iii) certain internal financial planning information of Investors
furnished by management of Investors, (iv) certain financial and securities
data of Investors and companies deemed similar to Investors or representative
of the business sector in which Investors operates, (v) to the extent publicly
available, the financial terms of certain acquisition transactions, (vi)
certain publicly available information relative to Firstar, and (vii) certain
financial and securities data of Firstar and companies deemed similar to
Firstar or representative of the business sector in which Firstar operates. In
addition, Piper Jaffray engaged in discussions with members of management of
Firstar and Investors concerning the respective financial condition, current
operating results and business outlook of Firstar and Investors.
In delivering the Opinion to the Investors Board on August
20, 1994, Piper Jaffray prepared and delivered to the Investors Board certain
written materials containing various analyses and other information material to
the Opinion. The following is a summary of these materials:
STOCK TRADING ANALYSES. Piper Jaffray reviewed the stock
trading history of each of Investors and Firstar. Piper Jaffray presented the
following stock trading data:
<TABLE>
<CAPTION>
Investors Firstar
--------- -------
<S> <C> <C>
Average daily trading volume 8/8/93-
8/18/94 . . . . . . . . . . . . . . . 3,197 57,077
Closing price on 8/18/94 . . . . . . . $24.75 $32.63
Year preceding 8/18/94
High . . . . . . . . . . . . . . . . $24.75 $35.38
Low . . . . . . . . . . . . . . . . . $15.38 $29.88
Most recently declared dividend
annualized per share . . . . . . . . $.50 $1.20
Yield . . . . . . . . . . . . . . . . . 2.02% 3.68%
Pro forma equivalent dividend for
Investors at 0.8676 exchange ratio . $1.04
</TABLE>
Based on the closing price of Firstar common stock on August 18, 1994 of $32.63
and the proposed exchange ratio, Piper Jaffray calculated an implied purchase
price per share of Investors Common Stock of $28.31.
COMPARABLE PUBLIC COMPANY ANALYSIS. Piper Jaffray compared
certain financial information and valuation ratios relating to Investors and
Firstar to corresponding data and ratios from groups of selected publicly traded
companies deemed comparable to Investors (the "Investors Comparables") and to
Firstar (the "Firstar Comparables"). The Investors Comparables and the Firstar
Comparables are collectively referred to as the "Comparable Companies". The
Investors Comparables comprised six thrifts based in the Midwest and one in the
Pacific Northwest, with assets of between $600 million and $1.6 billion. The
Firstar Comparables comprised seven regional bank holding companies with assets
of between $6.5 billion and $51 billion.
Piper Jaffray calculated valuation ratios for the Investors
Comparables as follows: price to latest 12 months (LTM) earnings per share (EPS)
of 7.1x to 12.6x, with a median of 10.18x and a mean of 10.0x; price to calendar
1994 EPS estimates of 7.34x to 12.40x, with a median of 10.05x and a mean of
10.16x; price to next fiscal year EPS of 6.4x to 12.7x with a median of 10.57x
and a mean of 9.90x; price to book value of 1.08x to 1.44x, with a median of
1.10x and a mean of 1.16x; and price to tangible book value of 1.08x to 1.67x,
with a median of 1.17x and a mean of 1.25x. These compared to corresponding
ratios for Investors, based on the implied purchase price, of 11.37x, 10.76x,
10.76x, 2.22x and 2.22x, respectively.
Piper Jaffray calculated valuation ratios for the Firstar
Comparables as follows: price to LTM EPS of 10.80x to 13.58x, with a median of
11.54x and a mean of 11.72x; price to 1994 EPS estimates of 9.97x to 13.04x,
with a median of 10.72x and a mean of 10.95x; price to book value of 1.12x to
2.38x, with a median of 1.62x and a mean of 1.67x; and a price to tangible book
value of 1.31x to 3.0x, with a median of 1.79x and a
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<PAGE> 30
mean of 1.99x. These compared to corresponding ratios for Firstar, based on
the closing price of Firstar common stock on August 18, 1994, of 10.59x, 9.46x,
1.73x and 1.88x, respectively.
COMPARABLE TRANSACTION ANALYSIS. Piper Jaffray reviewed
recent merger and acquisition transactions for which information was publicly
available involving Midwest thrifts, a seller receiving consideration of between
$40 million and $200 million, consideration comprised solely of stock and an
announcement date after December 31, 1990. This review produced ten
transactions (the "Comparable Transactions") deemed relevant to the proposed
Merger. Piper Jaffray presented the following valuation multiples for the
Comparable Transactions: price to LTM EPS of 7.59x to 17.37x, with a median of
14.12x and a mean of 13.52x; price to book value of 1.23x to 1.90x, with a
median of 1.60x and a mean of 1.57x; and price to tangible book value of 1.32x
to 2.33x, with a median of 1.69x and a mean of 1.70x. These ratios were
compared by Piper Jaffray to corresponding ratios for Investors, based on the
implied purchase price, of 10.72x and 12.81x to 13.95x (as adjusted for
incremental leverage), 2.43x and 2.43x, respectively. In calculating a price to
LTM EPS ratio for Investors, Piper Jaffray adjusted EPS to remove the assumed
incremental benefit to EPS associated with Investors' leverage, as none of the
target companies included in the Comparable Transactions had such holding
company leverage. For this purpose, Piper Jaffray assumed various incremental
asset levels capable of being supported by Investors' existing subordinated debt
(which had been contributed to its banking subsidiary, thereby allowing such
subsidiary to support incremental asset levels) ranging from $70.1 million to
$116.9 million, a positive earnings spread on such assets of 2.5%, and a
resulting benefit to LTM EPS due to such subordinated debt of from $.28 to $.46.
Piper Jaffray also calculated an implied percentage premium to
holders of Investors Common Stock based on the implied purchase price and
various prices for the Investors Common Stock prior to announcement of the
transaction (assumed to be August 18, 1994); and compared these implied premiums
to those calculated for the Comparable Transactions. This analysis produced a
21.8% implied premium in the Merger over the one day prior to announcement
price, which compared to a range of 0.0% to 42.6%, a mean of 26.4% and a median
of 29.7% for the one day prior to announcement premium for the Comparable
Transactions; a 51% implied premium in the Merger over the thirty days prior to
announcement price, which compared to a range of 10.1% to 67.3%, a median of
35.3% and a mean of 36.6% for the thirty days prior to announcement premium for
the Comparable Transactions; and a 66.5% implied premium in the Merger over the
ninety days prior to announcement price, which compared to a range of 21.6% to
77.7%, a median of 43.6% and a mean of 46.2% for the ninety days prior to
announcement premium for the Comparable Transactions.
DISCOUNTED DIVIDEND ANALYSIS. Using internal financial planning
data prepared by management of Investors for the years ending December 31, 1994
through 1999, Piper Jaffray estimated the future dividend payments which could
be made to holders of Investors Common Stock assuming the maintenance of certain
capital levels. Piper Jaffray calculated terminal values based upon a range of
terminal value multiples of forecasted 1999 net income of 9.0x to 12.0x and book
value of 1.50x to 2.0x. Based upon the projected cash flows and applying a
range of discount rates of 14% to 18%, this analysis yielded ranges of estimated
present values for the Investors Common Stock of $22.85 to $33.17 (using
multiples of forecasted net income to calculate terminal value), and $20.20 to
$28.97 (using multiples of forecasted book value to calculate terminal value).
In reaching its conclusion as to fairness of the consideration
to be received in the Merger and in its presentation to the Investors Board of
Directors, Piper Jaffray did not rely on any single analysis or factor described
above, assign relative weights to the analyses or factors considered by it, or
make any conclusions as to how the results of any given analysis, taken alone,
supported its Opinion. The preparation of a fairness opinion is a complex
process and not necessarily susceptible to partial analyses or summary
description. Piper Jaffray believes that its analyses must be considered as a
whole and that selecting portions of its analyses and of the factors considered
by it, without considering all factors and analyses, would create a misleading
view of the processes underlying the Opinion. The analyses of Piper Jaffray are
not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses. Analyses
relating to the value of companies do not purport to be appraisals or valuations
or necessarily reflect the price at which companies may actually be sold. No
company or transaction used in any comparable analysis as a comparison is
identical to Firstar, Investors or the Merger. Accordingly, an analysis of the
results is not mathematical; rather, it involves complex considerations and
judgments concerning differences in the various characteristics of the
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Comparable Transactions to which the Merger was compared and in financial and
operating characteristics of the Comparable Companies and other factors that
could affect the public trading value of the Comparable Companies to which
Investors and Firstar were compared.
For purposes of the Opinion, Piper Jaffray relied upon and
assumed the accuracy, completeness and fairness of the financial and other
information made available to it and did not attempt independently to verify
such information. Piper Jaffray relied upon the assurances of Investors and
Firstar managements that the information provided by Investors and Firstar had a
reasonable basis and, with respect to financial planning data and other business
outlook information, reflected the best available estimates, and that they were
not aware of any information or fact that would make the information provided to
Piper Jaffray incomplete or misleading. In arriving at the Opinion, Piper
Jaffray did not perform, nor was it furnished, any appraisal or valuation of
specific assets or liabilities of Investors and Firstar and expressed no opinion
regarding the liquidation value of any entity. No limitations were imposed by
Investors on the scope of Piper Jaffray's investigation or the procedures to be
followed in rendering its Opinion. Piper Jaffray, however, was not authorized
by the Investors Board to solicit, and did not solicit, other entities for
purposes of a possible business combination transaction with Investors. Piper
Jaffray expressed no opinion as to the price at which shares of Firstar Common
Stock may trade at any future time. The Opinion is based upon information
available to Piper Jaffray and the facts and circumstances as they existed and
were subject to evaluation on the dates of the Opinion. Events occurring after
such dates could materially affect the assumptions used in preparing the
Opinion.
Piper Jaffray, as a customary part of its investment banking
business, is engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions, underwritings and other distributions
of securities, private placements and evaluations for estate, corporate and
other purposes. The Investors Board selected Piper Jaffray because of its
expertise, reputation and familiarity with the financial services industry in
general and the Midwestern banking market and Investors in particular.
Piper Jaffray has provided financial advisory and investment
banking services to Investors since 1989. Piper Jaffray acted as underwriter
for a public offering of subordinated debentures of Investors' principal banking
subsidiary completed in March 1989, as dealer-manager for an exchange offer of
Investors' preferred stock and warrants in October 1991, and as co-managing
underwriter for a public offering of Investors' subordinated debentures
completed in December 1992. Since Investors' initial public offering of common
stock, Piper Jaffray has made a market in Investors Common Stock, Investors
Preferred Stock, and Investors notes and warrants, and has published market
research on Investors. In the normal course of its market making activities,
Piper Jaffray may, from time to time, have a long or short position in and buy
and sell Investors' securities, which positions, on occasion, may be material in
size relative to the volume of trading activity.
For rendering its Opinion to the Investors Board of Directors
in connection with the Merger, Investors has paid Piper Jaffray a fee of $75,000
upon rendering its Opinion dated August 20, 1994 and $75,000 upon rendering its
Opinion dated________, 1995. The fees payable to Piper Jaffray are not
contingent upon consummation of the Merger. Whether or not the Merger is
consummated, Investors has agreed to pay the reasonable out-of-pocket expenses
of Piper Jaffray and to indemnify Piper Jaffray against certain liabilities
incurred (including liabilities under the federal securities laws) in connection
with the engagement of Piper Jaffray by Investors.
TERMS OF THE MERGER
At the Effective Time of the Merger, Investors will merge with
and into FCM, which will be the surviving corporation. The Articles of
Incorporation and By-laws of FCM in effect at the Effective Time will govern the
surviving corporation until amended or repealed in accordance with applicable
law. At the Effective Time, each outstanding share of Investors Common Stock
will be converted into the right to receive 0.8676 of a share of Firstar Common
Stock and each outstanding share of Investors Preferred Stock will be converted
into the right to receive $27.50 plus accumulated and unpaid dividends on such
shares of Investors Preferred Stock to the Effective Time, payable in cash.
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The Merger Agreements provide that, if between the date of the
Merger Agreements 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 a distribution on
Firstar Common Stock of any security convertible into Firstar Common Stock,
appropriate adjustment or adjustments will be made in the Exchange Ratio
applicable to Investors Common Stock.
No fractional shares of Firstar Common Stock will be issued in
the Merger. Instead, Firstar will pay to each holder of Investors 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 Investors
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 FCM issued and outstanding
immediately prior to the Effective Time will remain issued and outstanding.
The terms of the Merger were determined on the basis of arm's
length negotiations and, in the case of Investors, after consideration of the
advice of its investment banker. See "Opinion of Investment Banker."
RESTRICTED STOCK
Certain executive officers of Investors hold restricted stock
("Investors Restricted Stock") issued pursuant to Restricted Stock Award
Agreements entered into with Investors in 1992 and 1994 (the "Investors
Restricted Stock Agreements"). The restricted stock issued in 1992 vests over a
ten-year period at the rate of 10% per year and the restricted stock issued in
1994 vests over a three-year period at a rate of 33 1/3% per year. A total of
_________ shares of Investors Restricted Stock were outstanding as of February
__, 1995. [Upon consummation of the Merger, each outstanding share of Investors
Restricted Stock issued in 1992 that is not fully vested will become the right
to receive the number of shares of Firstar Common Stock with a value as of the
Effective Time equal to the "fair value " of the shares of such Investors
Restricted Stock. Investors has engaged Piper Jaffray to determine the fair
value of the Investors Restricted Stock issued in 1992, taking into account the
applicable terms and conditions, including vesting schedule, under the 1992
Investors Restricted Stock Agreements. Upon consummation of the Merger, the
Investors Restricted Stock issued in 1994 will automatically become the number
of shares of restricted stock of Firstar, without alteration of the terms of the
applicable Investors Restricted Stock Agreements, including vesting, as is equal
to the number of such shares of Investors Restricted Stock multiplied by the
Exchange Ratio.]
OPTIONS
Options to purchase Investors Common Stock ("Investors Stock
Options") are outstanding under the Investors Restated Stock Option Plan and the
Investors 1993 Stock Incentive Plan (collectively, the "Investors Stock Option
Plans"). A total of __________ Investors Stock Options were outstanding as of
February __, 1995, of which ________________ were held by Investors' directors
and officers. Upon consummation of the Merger, each Investors Stock Option that
is outstanding immediately prior to the Effective Time will automatically become
an option to purchase the number of shares of Firstar Common Stock (a "Firstar
Stock Option") as would have been received had such option been fully exercised
before the Merger. The number of shares subject to the Firstar Stock Options
will be determined by multiplying the number of shares of Investors Common Stock
subject to the Investors Stock Option by 0.8676, the Exchange Ratio. The
exercise price per share of Firstar Common Stock will be equal to the exercise
price per share of Investors Common Stock under the Investors Stock Option
divided by 0.8676. Pursuant to the terms of the agreements awarding options
under the Investors Stock Option Plans, the Investors Stock Options, to the
extent not already exercisable, become immediately exercisable upon a "change in
control" (which includes a transaction such as the Merger). Therefore, the
Firstar Stock Options that will replace the Investors Stock Options upon
consummation of the Merger will be immediately exercisable. Each Firstar Stock
Option will otherwise be exercisable on the same terms and conditions as applied
to the Investors Stock Options.
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WARRANTS
Warrants, each of which represents the right to purchase 2/3
share of Investors Common Stock (the "Investors Warrants"), are outstanding
under a Warrant Agreement dated October 15, 1991 (the "Investors Warrant
Agreement"). As of _______, 1995, Investors had outstanding Investors Warrants
that entitled the holders to purchase _____shares of Investors Common Stock.
Firstar has agreed to execute a supplement to the Investors Warrant Agreement,
effective as of the Effective Time (the "Supplemental Warrant Agreement"). Upon
consummation of the Merger and pursuant to the Supplemental Warrant Agreement,
each Investors Warrant that is outstanding immediately prior to the Effective
Time will automatically become a warrant to purchase the number of shares of
Firstar Common Stock (a "Firstar Warrant") as would have been received had such
Warrant been fully exercised before the Merger. The number of shares subject to
the Firstar Warrants will be determined by multiplying the number of shares of
Investors Common Stock subject to the Investors Warrant by 0.8676, the Exchange
Ratio. The purchase price per share of Firstar Common Stock will be equal to
the purchase price per share of Investors Common Stock under the Investors
Warrant ($11.0625) divided by 0.8676 ($12.751).
EFFECTIVE TIME OF THE MERGER
Subject to satisfaction or waiver of all other conditions to
the Merger, the closing of the Merger will take place on a date (the "Closing
Date") to be specified by Firstar and Investors which is required to be no later
than the fifth business day after the later to occur of (i) approval of the
Merger by the Federal Reserve Board and of the Bank Merger and related
transactions by the OCC and, in certain cases, the OTS and the expiration of any
waiting periods, and (ii) the date on which the Special Meeting is held. If the
closing does not take place on the date referred to in the preceding sentence
because any condition to the obligations of Firstar and FCM, on the one hand, or
Investors, on the other hand, under the Merger Agreements is not met on that
date, the other party may postpone the closing from time to time to any
designated subsequent business day not more than ten business days after the
original or postponed date on which the closing was to occur. 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 Minnesota 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 in _____________, 1995. See "Conditions to the Merger" and
"Regulatory Approvals."
SURRENDER OF CERTIFICATES
As soon as reasonably practicable after the Effective Time,
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 Investors Common Stock and Investors Preferred Stock a
letter of transmittal and instructions for use in effecting the surrender of
such holder's Investors stock certificates for certificates representing Firstar
Common Stock ("Certificates").
INVESTORS STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK
CERTIFICATES UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Common Stock. Upon surrender to the Exchange Agent of one or
more certificates for Investors 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 Investors
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
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Common Stock with a record date after the Effective Time will be paid to the
holder of any unsurrendered certificate representing Investors 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.
Preferred Stock. Upon surrender to the Exchange Agent of one
or more certificates for Investors Preferred Stock, together with a properly
completed letter of transmittal, there will be issued and mailed to the holder a
check for the amount of cash to which the holder is entitled, including
accumulated and unpaid cash dividends with a record date prior to the Effective
Time. In no event shall the person entitled to receive such cash be entitled to
receive interest on amounts payable.
CONDITIONS TO THE MERGER
The Merger will occur only if the Merger Agreements are
approved by the requisite vote by the holders of Investors 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 regulatory approvals of the
Merger, the Bank Merger and certain related transactions, including the
approvals of the Federal Reserve Board, the OCC and the OTS, with no
conditions that are not reasonably acceptable to Firstar; (ii) the
effectiveness of the Registration Statement and the absence of a stop order
suspending such effectiveness or proceedings seeking a stop order; (iii) 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; (iv) authorization for listing on
the NYSE upon official notice of issuance of the shares of Firstar Common
Stock issuable in the Merger; (v) the absence of any material adverse change
since December 31, 1993, in the financial condition, results of operations or
business of Investors and Firstar, as the case may be, other than any changes
resulting primarily by reason of changes in banking business of Investors and
Firstar; and (vi) the continued accuracy of representations and warranties by
Firstar and Investors 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. See "Termination, Amendment and Waiver" and "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.
REGULATORY APPROVALS
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
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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 depository
subsidiaries of Firstar and Investors 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 depository
institution's record of meeting the credit needs of its local communities,
including low- and moderate-income neighborhoods, consistent with safe and
sound operation.
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.
Firstar submitted an application with the Federal Reserve Bank
of Chicago (the "Federal Reserve Bank") that was accepted for filing by the
Reserve Bank on December 29, 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 will be tolled 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.
Under the Merger Agreements, the Merger is subject to prior
approval by the OCC of the Bank Merger. The Merger is also subject to prior
approval by the OCC of, and notification to the OTS concerning, a series of
transactions designed solely to facilitate the Bank Merger, all of which will
occur on the Closing Date immediately before the Merger (together, the "Related
Transactions"). First, Investors will charter two de novo national banks (the
"Interim Banks") that will never operate. Second, Investors Bank will transfer
a total of seven of its branches to the Interim Banks (the "Purchase and
Assumption Transactions"). Third, Investors Bank will convert to a national
bank (the "Conversion"). In the last Related Transaction, the Interim Banks
will merge into Investors Bank, the surviving national bank.
Investors Bank will never operate as a national bank prior to
its acquisition by Firstar and subsequent merger into Firstar Bank. Immediately
after the Related Transactions and on the same day, Firstar will acquire
Investors in the Merger between Investors and FCM and will then effect the Bank
Merger between Investors Bank and Firstar Bank.
The Bank Merger and the Related Transactions are subject to
prior approval by the OCC under the Bank Merger Act (the "BMA"), Section 5(d)(3)
of the Federal Deposit Insurance Act, 12 U.S.C. Section 1815(d)(3) (the "Oakar
Amendment"), and Section 5(d)(2)(G) of the Federal Deposit Insurance Act, 12
U.S.C. Section 1815(d)(2)(G) (the "Sasser Amendment"). The Oakar Amendment and
the Sasser Amendment require that the OCC, in reviewing any application for
transactions subject thereto, consider the factors set forth in the BMA. The
BMA requires that the OCC take into consideration the financial and managerial
resources and future prospects of the respective institutions and the
convenience and needs of the communities served. The BMA prohibits the OCC from
approving the Bank Merger and the Related Transactions if they would result in a
monopoly or be in the 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 their effect in any section of the country may be substantially to
lessen competition or tend to create a monopoly, or if they would in any other
manner be a restraint of trade, unless the OCC finds that any anticompetitive
effects are clearly outweighed in the public interest by the probable effect of
the transactions in meeting the convenience and needs of the communities to be
served. Furthermore, the OCC must also assess the records of Investors Bank
and, in the case of the Bank Merger, Firstar Bank under the CRA. The OCC has
the authority to deny an application if it concludes that the combined
organization would have an inadequate capital position.
Under the BMA, the Bank Merger may not be consummated until
up to 30 days following the date of OCC approval, during which time the United
States Department of Justice may challenge the Bank Merger
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on antitrust grounds. The commencement of an antitrust action would stay the
effectiveness of the OCC's approval unless a court specifically orders
otherwise.
Investors and Firstar submitted applications for filing with
the OCC on January __, 1995. Firstar anticipates that the OCC will act on the
applications ______________, 1995.
The Purchase and Assumption Transactions are subject to prior
approval by the OTS under the Home Owners' Loan Act, as amended. Investors Bank
submitted notice filings to the OTS concerning the Purchase and Assumption
Transactions, on January ___, 1995. If the OTS does not act on the notice
filings for the Purchase and Assumption Transactions within 30 days, the notices
will be deemed approved automatically.
The Conversion is subject to a notice filing with the OTS,
which Investors Bank submitted January ___, 1995; OTS approval of the Conversion
prior to its consummation is not required.
There can be no assurance that the requisite regulatory
approvals will be obtained, and if such approvals are obtained, there can be no
assurance as to the timing thereof. There can likewise be no assurance that the
Department of Justice will not challenge the Merger or the Bank Merger or, if
such a challenge is made, as to the result thereof.
The Merger cannot proceed in the absence of all requisite
regulatory approvals. See "Conditions to the Merger," "Effective Time of the
Merger" and "Termination, Amendment and Waiver." In the Merger Agreements,
Firstar and Investors have agreed to use all reasonable efforts and to cooperate
with each other in taking any actions necessary to obtain the requisite
regulatory approvals, including participating in any required hearings or
proceedings, without any condition not reasonably satisfactory to Firstar.
There can be no assurance that any regulatory approvals will not contain a
condition not reasonably satisfactory to Firstar.
Firstar and Investors 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 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 Merger Agreements, Investors is generally obligated
to, and obligated to cause its subsidiaries to, operate their respective
businesses only in the usual, regular and ordinary course consistent with past
practices; preserve substantially intact its business organization and assets,
maintain its rights and franchises, use its reasonable best efforts to 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 material obligations
imposed by laws. The Merger Agreements also provide that prior to the Effective
Time, without Firstar's prior written consent, Investors 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 or amend any employment or similar agreement with officers or
directors; (iii) change retirement benefits or other benefit plans, or enter
into employment or similar agreements; (iv) change or make grants under the
Investors Stock Option Plans; (v) effect any fundamental corporate acquisition
or sale of assets; (vi) issue or redeem any of its capital stock, other than (A)
repurchases of Investors Common Stock in satisfaction of Investors' obligation
under the Merger Agreements as described in the next paragraph, or (B) the
issuance of Investors Common Stock upon the exercise of Investors Stock Options
or pursuant to the Investors Warrants,(vii) propose or adopt any amendments to
its corporate charter or bylaws in any way adverse to Firstar; (viii) except in
fiduciary capacities, purchase any shares of Firstar Common Stock; (ix) change
the lending, investment, liability, management and other material policies
concerning the banking business of Investors; (x) make any additional borrowings
or renew any borrowings from the Federal Home Loan Bank of Des Moines, except in
the ordinary course; (xi) renew, extend, cancel or surrender real
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property leases without prior consultation with Firstar; or (xii) sell any
mortgage loan servicing rights, except for a sale that has been consummated.
Investors has agreed to use its best efforts, consistent with
law, pooling-of-interests accounting rules and the provisions of the Code
governing tax-free reorganizations, to repurchase enough Investors Common Stock
to satisfy anticipated future issuances of such stock upon the exercise of
Investors Stock Options or pursuant to the Investors Warrants, at an aggregate
purchase price no greater than $2.0 million.
Investors has also agreed (i) to notify Firstar immediately if
any person makes a proposal concerning a Competing Transaction, as defined
below, (ii) after the receipt of all necessary regulatory approvals of the
Merger and the Bank Merger, to sell such investment securities as Firstar may
request, (iii) to cause any subsidiary that proposes to acquire real property to
conduct an environmental assessment of such property and (iv) to redeem in full
as soon as practicable on or after January 1, 1995, its 10% subordinated
Debentures due April 1, 1996.
In addition, the Merger Agreements provide that, prior to the
Effective Time, Investors 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 Investors
or any of its subsidiaries: any merger or other business combination; a sale or
other disposition of a substantial portion of assets; a sale of capital stock or
a right to acquire capital stock constituting more than 15% of Investors capital
stock; a tender offer or exchange offer for at least 15% of the outstanding
shares of any class of its capital stock; a solicitation of proxies in
opposition to approval of the Merger by Investors stockholders; or a public
announcement of a bona fide proposal, plan or intention to do any of the
foregoing. The Merger Agreements provides, however, that the Board of Directors
of Investors is not prohibited from (i) furnishing or permitting certain persons
to furnish information to any party that requests information as to Investors if
the Board of Directors, based upon the advice of counsel, determines in good
faith that such action is required to comply with its fiduciary duties to
stockholders and, prior to furnishing information, Investors receives a
confidentiality agreement, (ii) furnishing information to, or entering into
discussions or negotiations with, any party that makes an unsolicited bona fide
written proposal to acquire Investors, if the Board, based upon written advice
from Dorsey & Whitney or other counsel acceptable to Firstar, determines in good
faith that such action is required to comply with its fiduciary duties to
stockholders and, prior to furnishing information, Investors receives a
confidentiality agreement, (iii) complying with Rule 14e-2 promulgated under the
Exchange Act, or (iv) making any public statement required by law or the Nasdaq
Stock Market.
Investors has agreed to, through its Board of Directors, (i)
unanimously 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. However, the Merger Agreements does not
prohibit the Board of Directors of Investors from failing to recommend such
approval or withdrawing, modifying or amending its recommendation as a result of
the receipt by such Board of Directors of a bona fide proposal from a third
party not affiliated with Investors to acquire control of Investors or
substantially all of the assets of Investors after August 21, 1994, if (A) the
Board of Directors of Investors, based upon written advice from Dorsey & Whitney
or other counsel acceptable to Firstar, determines in good faith that such
action is required to comply with its fiduciary duty to stockholders, (B)
Investors' Board has no reason to believe that the written proposal is not made
in good faith and (C) Investors' Board takes such action as is necessary to
allow Investors' stockholders to vote upon the Merger Agreements in accordance
with the DGCL.
DIVIDENDS
Under the Merger Agreements, Investors is allowed to declare
quarterly cash dividends on Investors Common Stock at a rate not in excess of
$.125 per share, and regular quarterly cash dividends on Investors Preferred
Stock as required by Investors' Certificate of Incorporation; provided, however,
that Investors
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cannot declare or pay any dividends on Investors Common Stock in the quarter in
which the Merger occurs if the holders of Investors Common Stock are entitled
to receive dividends on the shares of Firstar Common Stock they receive in the
Merger in that quarter.
TERMINATION, AMENDMENT AND WAIVER
The Merger Agreements provide that the Merger Agreements may
be terminated, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of Investors or Firstar, (i) by
mutual consent of Firstar and Investors; (ii) by either Firstar or Investors (A)
if there has been a material breach of a representation, warranty, covenant or
agreement on the part of the other party set forth in the Merger Agreements or
(B) if any representation or warranty of the other party shall be discovered to
have become materially untrue, in either case which breach or other condition
has not been cured within ten business days following receipt by the
nonterminating party of notice of such breach or other condition; (iii) by
either Firstar or Investors if any permanent injunction preventing the
consummation of the Merger shall have become final and non-appealable; (iv) by
either Firstar or Investors if the Merger shall not have been consummated before
August 15, 1995, for a reason other than the failure of the terminating party to
comply with its obligations under the Merger Agreements; (v) by either Firstar
or Investors if the Federal Reserve Board, the OCC or the OTS has denied
approval of the Merger, the Bank Merger or the Related Transactions and neither
Firstar nor Investors has, within 30 days after the entry of the order denying
such approval, filed a petition seeking review of such order; (vi) by either
Investors or Firstar if the Merger Agreements and the Merger are not approved
after the vote at the Special Meeting.
The Merger Agreements also provide that they may be terminated
by Investors five business days after written notice to Firstar if any person
shall have commenced a bona fide tender offer for all outstanding Investors
Common Stock or shall have made a bona fide written offer for the acquisition of
Investors, and (i) Investors' Board of Directors determines, (A) based on advice
of Investors' financial advisors, that such offer is a material economic
improvement to Investors' stockholders, and (B) based on written advice from
Dorsey & Whitney P.L.L.P. or other counsel acceptable to Firstar, that
recommending or accepting such offer is required for the Board to comply with
its fiduciary duties and (ii) Investors or the person making such offer shall
have irrevocably paid the Termination Fee.
The Merger Agreements automatically terminate upon the
irrevocable payment to Firstar of the Termination Fee following the occurrence
of a Trigger Event, unless, generally, there has been conduct by Investors that
is not permitted under the Merger Agreements based upon the Investors Board's
good faith determination of its fiduciary duties, based upon the written advice
of counsel.
The Merger Agreements may be terminated by Firstar if (i)
after August 21, 1994 any person shall have commenced a bona fide tender offer
or exchange offer to acquire at least 20% of the then outstanding shares of
Investors Common Stock, or (ii) the Board shall have withdrawn, modified or
changed its recommendation of the Merger Agreements or the Merger.
The Merger Agreements also provide that they may be terminated
by Investors on either of the two trading days occurring immediately after the
ten consecutive trading days ending at the end of the third business day
preceding the date of the Special Meeting (the "Ten-Day Calculation Period"), if
both of the following conditions are satisfied: (i) 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 the Ten-Day Calculation Period
is less than $29.00 and (ii) the percentage decline in the price of Firstar
Common Stock after August 19, 1994, determined by reference to such average of
the daily closing prices, exceeds the sum of the percentage decline in the
weighted average price of a selected group of bank stocks plus .125. This
provision is known as the "walk-away" provision. If the foregoing conditions
were applied as of _____________, 1995, the applicable average Firstar Common
Stock price would be $________ per share, representing a percentage [decline]
[increase] in the price of such stock from August 19, 1994 that [exceeded] by
approximately ______ the percentage [decline] [increase] in the weighted average
price of such group of bank stocks. The selected group of bank stocks is
identified on Exhibit 10.01 to the Merger Agreements, included as Appendix B to
this Proxy Statement- Prospectus.
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Thus, if the two conditions precedent to the "walk-away"
provision were applied as of the date of this Proxy Statement-Prospectus,
Investors would not have the right to terminate the Merger Agreements based upon
the "walk-away" provision. However, if the "walk-away" provision becomes
operative prior to the Special Meeting, then the Board of Directors of
Investors, depending upon the circumstances, may exercise Investors' rights
under the provision and terminate the Merger Agreements or, alternatively, may
waive the "walk-away" provision and proceed to consummate the Merger pursuant to
the terms and conditions of the Merger Agreements. Any decision the Board of
Directors may make regarding the "walk-away" provision may be made without the
resolicitation of the Investors stockholders or notice to such stockholders.
Investors may or may not issue a press release concerning the decision.
The Merger Agreements also gave Firstar the right to terminate
the Agreement at any time prior to September 11, 1994, if Firstar's due
diligence investigation disclosed certain adverse facts relating to Investors.
Firstar did not exercise this right.
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 Investors, but after any such approval, no
amendment may be made which would have an adverse effect on Investors'
stockholders, change the consideration to be provided to such stockholders
pursuant to the Merger Agreements or have a similar effect. 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 AFTER THE MERGER
In the Merger, Investors will be merged into FCM and the
separate corporate existence of Investors will cease. FCM, as the surviving
corporation, will continue to operate under the name "Firstar Corporation of
Minnesota." The officers and directors of FCM prior to the Merger will continue
as officers and directors of the surviving corporation, except that James M.
Burkholder, President and Chief Executive Officer of Investors, will be elected
to the Board of Directors of FCM. Immediately following the Merger, Investors
Bank will be merged into Firstar Bank, which will continue to operate as a
national bank under the name "Firstar Bank of Minnesota, N.A." Richard W.
Schoenke, Firstar Bank's current President and Chief Executive Officer, will
continue as such after the Bank Merger. The remainder of the management of
Firstar Bank will be drawn from the current officers of Firstar Bank and
Investors Bank. Firstar Bank's Board of Directors after the Bank Merger will be
comprised of its members prior to the Effective Time and Mr. Burkholder. Mr.
Burkholder will not be involved in the management of Firstar Bank but will
assume the offices of President and Chief Executive Officer of Firstar's
mortgage banking subsidiary, Firstar Home Mortgage Corporation. See "Interests
of Certain Persons in the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Agreements with Officers of Investors. The Merger Agreements
provide that Firstar and FCM will appoint James M. Burkholder as President and
Chief Executive Officer of Firstar Home Mortgage Corporation ("FHMC") and elect
Mr. Burkholder a director of FCM and of Firstar Bank. In addition, Investors
and Firstar have entered into amended employment agreements with Mr. Burkholder
and John G. Lohmann, Jr. and an amended severance agreement with Lynn V.
Bueltel, that amend the provisions of the existing agreements between Investors
and such officers, and have entered into a new employment agreement with Daniel
Arrigoni, each of which is effective upon consummation of the Merger. Mr.
Burkholder's amended employment agreement provides for his employment as
President and Chief Executive Officer of FHMC for a period of four years after
consummation of the Merger at an annual salary of $210,000, an annual bonus of
at least $100,000, participation in the other bonus, incentive compensation and
other benefit plans generally offered to Firstar's executives, and continuation
of the disability and life insurance benefits received as an officer of
Investors. Mr. Lohmann's amended employment agreement provides for his
employment as Executive Vice President of Firstar Bank for a period of one year
after the Merger, the first three months at full time and the last nine months
at not less than 20 hours per week, at an annual salary of $165,000 and with
benefits similar to those afforded Mr. Burkholder. Mr. Bueltel's amended
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severance agreement provides for continuation of his severance agreement with
Firstar on terms similar to his severance arrangement with Investors. Mr.
Arrigoni's agreement provides for his employment as Executive Vice President of
FHMC for a period of 30 months after the Merger at an annual salary of
$158,000, an annual bonus of at least $100,000, and other benefits similar to
those afforded Mr. Burkholder and Mr. Lohmann. Each of Mr. Burkholder, Mr.
Lohmann, and Mr. Arrigoni have also entered into agreements not to compete with
Firstar for periods of four years, three years and 30 months, respectively,
after the date of the Merger.
Indemnification of Officers and Directors. The Merger
Agreements require Firstar to indemnify present and former officers, directors
and employees of Investors (including its subsidiaries) against certain losses
and other expenses in connection with claims which arise out of such persons'
serving in such capacities and that pertain to matters or facts arising,
existing or occurring before the Merger becomes effective. The Merger
Agreements also require Firstar to maintain in effect, for three years after the
Merger becomes effective, officers' and directors' liability insurance with
respect to claims arising from facts or events which occurred before the Merger
became effective of at least the same coverage and amounts, and containing terms
and conditions no less advantageous, as the coverage currently provided by
Investors, subject to a stated maximum annual premium.
Restricted Stock. The Merger Agreements provide that shares
of Investors Common Stock subject to restrictions under agreements dated January
4, 1994 (which are outstanding to Mr. Burkholder, Mr. Lohmann, and Mr. Bueltel),
will become and represent the number of shares of Firstar Common Stock
determined by multiplying such shares by the Exchange Ratio and that such shares
of Firstar Common Stock shall remain subject to the restrictions set forth in
such agreements. Each share of restricted stock outstanding to Mr. Burkholder
and Mr. Lohmann under agreements dated December 31, 1992 will become the right
to receive the number of shares of Firstar Common Stock having a value as of the
effective time of the Merger equal to the fair value of such restricted stock,
as determined by an independent appraiser. See "Restricted Stock."
Options. The Merger Agreements provide that all outstanding
options under the Investors Restated Stock Option Plan and the Investors 1993
Stock Incentive Plan, including options outstanding to officers and directors of
Investors, will become options to purchase the number of shares of Firstar
Common Stock, subject to the same provisions, including vesting, as would have
been received had such options been fully exercised prior to the Effective Time
of the Merger. However, pursuant to the terms of the agreements awarding
options under the Investors Stock Option Plans, outstanding Investors Stock
Options (including those held by the directors and executive officers of
Investors), to the extent not already exercisable, become immediately
exercisable upon a "change in control" (which includes a transaction such as the
Merger). Therefore, the Firstar Stock Options that will replace the Investors
Stock Options upon consummation of the Merger will be immediately exercisable.
See "Options."
The foregoing interests of members of management of Investors
in the Merger may mean that such persons have personal interests in the Merger
which may not be identical to the interests of nonaffiliated stockholders.
EFFECT ON EMPLOYEE BENEFITS
The Merger Agreements provide that Firstar will provide on or
before the first calendar year that begins at least 90 days after the Effective
Time of the Merger to each employee of Investors or its subsidiaries 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 Investors 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. Firstar may meet its obligations to provide
benefits to Investors' employees through continuation of Investors' existing
benefit plans until transfer of such employees to Firstar's benefit plans.
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RIGHTS PLAN
Investors has adopted a stockholder rights plan in the form of
a Rights Agreement between Investors and Norwest Bank Minnesota, N.A., as rights
agent (the "Investors Rights Agreement"). Under the Investors Rights Agreement,
each share of Investors Common Stock has an associated preferred stock purchase
right ("Investors Right") that would allow the holders to purchase Investors
Common Stock at a discounted price, upon certain events. In contemplation of
execution of the Merger Agreements, Investors' Board of Directors amended the
Rights Agreement as of August 21, 1994 to provide that (i) the acquisition by
Firstar and FCM of more than 15% of the outstanding capital stock of Investors
pursuant to the Merger Agreements would not cause Firstar and FCM to be deemed
"acquiring persons" capable of triggering exercisability of the Investors
Rights, (ii) neither execution nor announcement of the Merger Agreements or the
Voting Agreements would trigger exercisability of the Rights, and (iii) the
Investors Rights Agreement will expire immediately prior to the Effective Time.
TERMINATION FEE
As a condition to Firstar's willingness to enter into the
Merger Agreements, Investors agreed to pay to Firstar a fee of $4,500,000 (the
"Termination Fee") within two days of any occurrence 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 Merger
Agreements following a wilful and material breach thereof by Investors; or (iii)
any withdrawal, modification or amendment in any respect by Investors' Board of
Directors of its approval or recommendation regarding the Merger Agreements and
stockholder vote relating thereto or Investors 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 15% of the then
outstanding shares of any class of capital stock of Investors made by any person
other than Firstar or its affiliates, (b) a merger, consolidation or other
business combination with Investors or Investors Bank is effected by an entity
or person, (c) any sale, lease, transfer, mortgage or other disposition
involving a substantial part of Investors' or Investors Bank's consolidated
assets, or any agreement to effect such a transaction, (d) the acquisition by
any person of 15% or more of the outstanding shares of any class of capital
stock of Investors or acquisition of additional shares by any entity or person
currently holding 15% or more of such shares, except for certain acquisitions
made pursuant to Investors Stock Options or Investors Warrants, (e) any
reclassification of the securities of, or recapitalization of, Investors that
has the effect of increasing the proportionate share of any class of equity
security of Investors that is owned by a person other than Firstar or its
affiliates, or any agreement to effect such a reclassification or
recapitalization, (f) any transaction having an effect similar to those
described in (a) through (e) above, or (g) a public announcement regarding a
proposal, plan or intention by Investors or another entity or person to effect
any of the foregoing transactions; provided, however, that events described in
clauses (a) and (g) of this definition and events described in clause (f) having
an effect similar to those described in clause (a) do not constitute a
"Transaction Proposal" unless either (x) the Board of Directors of Investors
takes or fails to take certain actions in connection therewith or (y) Investors
stockholders fail to approve the Merger Agreements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Firstar and Investors have received an opinion of Foley &
Lardner that the Merger will qualify as a tax-free reorganization under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code. Accordingly, Investors, Firstar and
FCM 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 by any holder of Investors
Common Stock upon the receipt of Firstar Common Stock in connection with the
Merger (except upon the receipt of cash in lieu of fractional shares of Firstar
Common Stock). The Internal Revenue Service (the "Service") has not been asked
to rule upon the tax consequences of the Merger to any person and no such
request will be made. The opinion of Foley & Lardner is based 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 will be upheld by the courts if challenged by the Service. EACH
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STOCKHOLDER OF INVESTORS IS URGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL
ADVISORS AS TO THE EFFECT OF SUCH FEDERAL INCOME TAX CONSEQUENCES 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 Foley & Lardner, which in turn is
based upon various representations and subject to various assumptions and
qualifications, the following federal income tax consequences to the Investors
stockholders will result from the Merger:
(i) Provided that the Merger of Investors with and into
FCM 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
Investors, Firstar and FCM will each be "a party to a
reorganization" within the meaning of Section 368(b) of the
Code.
(ii) No gain or loss will be recognized by the holders
of Investors Common Stock upon the exchange of Investors Common
Stock solely for Firstar Common Stock, pursuant to the Merger.
(iii) An Investors stockholder who receives cash in
lieu of a fractional share interest in Firstar Common Stock in
the Merger will be treated as if he or she actually received
such fractional share interest which was subsequently redeemed
by Firstar. Such cash will be treated as having been received
as full payment in exchange for stock redeemed as provided in
Section 302(a) of the Code. Gain or loss will be recognized
upon such exchange, and will be capital gain or loss, provided
that the Investors Common Stock was a capital asset in the hands
of the holder on the date of the Merger.
(iv) The receipt of cash by holders of Investors
Preferred Stock who own no Investors Common Stock, either
directly or through application of the constructive ownership
rules of Section 318(a) of the Code (which rules, in general
terms, treat such a holder as owning stock actually owned by
certain related individuals and entities), is a distribution in
redemption of the Investors Preferred Stock. Such holders will
recognize gain or loss from the redemption in an amount equal to
the difference, if any, between the amount received for the
Investors Preferred Stock, including the amount attributable to
accrued dividends, and the basis of the holder in such stock.
Such gain or loss will be capital gain or loss, provided that
the Investors Preferred Stock was a capital asset in the hands
of the holder on the date of the Merger.
(v) If a holder owns Investors Preferred Stock and
actually or constructively owns Investors Common Stock, gain
will be recognized on the exchange of Investors Preferred Stock
for cash in an amount equal to the excess, if any, of the amount
received for such stock, including the amount attributable to
accrued dividends, over the basis of the holder in such stock.
Such gain will be capital gain, provided that the Investors
Preferred Stock was a capital asset in the hands of the holder
on the date of the Merger, unless the exchange has the effect of
the distribution of a dividend, determined under Section
356(a)(2) of the Code. For Investors stockholders who hold
minority interests in both the Investors Common Stock and the
Investors Preferred Stock and who do not participate in the
management of Investors, the exchange should not have the effect
of the distribution of a dividend. Nevertheless, because the
determination of whether the exchange has the effect of the
distribution of a dividend under the circumstances described in
this paragraph is based on facts that may differ with each
holder, Foley & Lardner is unable to express an opinion with
respect to the conclusion described in the preceding sentence
applicable to each stockholder. No loss may be recognized by an
Investors stockholder who owns both Investors Common Stock and
Investors Preferred Stock upon the exchange of Investors Common
Stock and Investors Preferred Stock into Firstar Common Stock
and cash pursuant to the Merger.
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(vi) An Investors stockholder's aggregate basis in the
Firstar Common Stock received pursuant to the Merger (including
any fractional share interest to which he or she may be
entitled) will be the same as the aggregate basis of the
Investors Common Stock surrendered.
(vii) The holding period of the Firstar Common Stock
received by a stockholder of Investors pursuant to the Merger
(including any fractional share interest to which he or she may
be entitled) will include the period during which the Investors
Common Stock exchanged therefor was held, provided that the
Investors Common Stock surrendered was a capital asset on the
date of the Merger.
The foregoing is only a general description of certain
anticipated federal income tax consequences of the Merger for 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 stockholder of Investors. It does not discuss all of the
consequences that may be relevant to stockholders of Investors entitled to
special treatment under the Code (such as insurance companies, dealers in
securities, 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
Firstar's obligation to consummate the Merger is conditioned
upon qualification of the Merger as a pooling-of-interests for accounting
purposes as evidenced by the receipt by Firstar of an opinion from Firstar's and
Investors' independent public accountants to the effect that the Merger
qualifies for pooling-of-interests method of accounting. Under the
pooling-of-interests accounting treatment the historical basis of the assets and
liabilities of Firstar and Investors will be combined at the Effective Time and
carried forward at their previously recorded amounts and the stockholders'
equity accounts of Investors and Firstar will be combined on Firstar's
consolidated balance sheet. Income and other financial statements of Firstar
issued after consummation of the Merger will be restated retroactively to
reflect the consolidated operations of Firstar and Investors as if the Merger
had taken place prior to the periods covered by such financial statements.
For the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding Investors Common
Stock must be exchanged for Firstar Common Stock. Firstar and Investors have
agreed not to take any action which would preclude use of pooling-of-interests
accounting treatment for the Merger by Firstar. This covenant will be deemed
waived by Investors if Firstar takes such action and waives the condition that
the Merger qualify as a pooling-of-interests.
EXPENSES
If the Merger Agreements are terminated by Investors as a
result of Firstar's breach thereof, Firstar will pay Investors its out-of-pocket
expenses incurred in connection with the Merger Agreements, but not to exceed
$1.0 million. If the Merger Agreements are terminated by Firstar as a result of
a breach by Investors, Investors is obligated to pay Firstar a Termination Fee.
See "Termination Fee."
Firstar and Investors have agreed to share equally in the
expense of printing this Proxy Statement-Prospectus and the expense of all SEC
and regulatory filing fees incurred in connection therewith.
Except as provided above, the Merger Agreements provide, in
general, that Firstar and Investors 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
Investment Banker."
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RESALE OF FIRSTAR COMMON STOCK
The shares of Firstar Common Stock to be issued in the Merger to
stockholders of Investors have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and may be freely traded by
stockholders of Investors who, at the Effective Time, are not "affiliates" of
Investors (and are not affiliates of Firstar at the time of the proposed
resale). Each affiliate of Investors has delivered to Firstar a written
undertaking to the effect that (a) he or she will not sell or dispose of the
Firstar Common Stock 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; and (b) he or she will not
otherwise dispose of the Firstar Common Stock, or otherwise reduce his or her
risk relative to the Firstar Common Stock prior to the publication by Firstar
of an earnings statement covering at least 30 days of combined operations after
the Effective Time.
APPRAISAL RIGHTS
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 Investors Preferred Stock has the right to object to the Merger and
demand payment of the fair value of any of his or her shares in cash. Such
appraisal rights are not available for holders of Investors Common Stock. See
"COMPARATIVE RIGHTS OF STOCKHOLDERS -- Appraisal Rights and Dissenters'
Rights." Any holder of Investors Preferred Stock electing to assert appraisal
rights must file a written demand for appraisal with Investors, at 200 East
Lake Street, Wayzata, Minnesota 55391, before the vote on the Merger at the
Special Meeting. A stockholder may demand appraisal as to less than all of
the shares registered in the stockholder's name.
If the Merger is approved by the requisite vote of holders of
Investors Common Stock, any holder of Investors Preferred Stock seeking
appraisal rights who has preserved his or her rights of appraisal by filing a
demand for appraisal, continuously holding such stock through the Closing Date
and otherwise complying with the requirements of Section 262 ("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 Investors Preferred 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 numbers of Stockholders Seeking Appraisal Rights and
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 determine the stockholders
entitled to appraisal and will appraise the shares of Investors Preferred 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
Investors Preferred 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 Investors Preferred Stock. From and
after the Effective Time of the Merger, no Stockholder Seeking Appraisal Rights
will be entitled to vote his or her shares for any purpose or to receive payment
of dividends or other distributions on such shares (except dividends and
distributions payable to stockholders of record at a date which is prior to the
Effective Time). If no petition for an appraisal is filed within
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the time period specified above, or if the Stockholder Seeking Appraisal Rights
delivers to the surviving corporation a written withdrawal of his or her demand
for an appraisal, either within 60 days after the Effective Time (or thereafter
with the written approval of the surviving corporation), then the right of such
stockholder to an appraisal shall cease. No appraisal proceeding, however, may
be dismissed without the approval of the Court of Chancery, and the court may
assess the costs of the proceeding against the parties in any manner that the
court deems equitable.
In the event any holder of Investors Preferred 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. Any holder of Investors Preferred Stock who wishes to
object to the transaction and demand payment for the stockholder's shares of
Investors Preferred Stock should consider consulting his or her own legal
advisor.
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
in the stock records of Investors. Any beneficial owner of Investors Preferred
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. Investors
will not accept written objections or demands for payment from any party other
than the holder of record (whose name appears in the stock records of Investors)
of the shares to which the objection or demand relates.
Holders of Investors Preferred Stock should bear in mind that
the fair value of the Investors Preferred Stock determined in an appraisal
proceeding as described above could be more than, the same as or less than the
value of the consideration they will receive in the Merger if they do not
exercise such appraisal rights. 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
Investors is incorporated under the laws of the state of
Delaware, and Firstar is incorporated under the laws of the state of Wisconsin.
Stockholders of Investors, whose rights are governed by Investors' 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 Investors and the rights of shareholders of Firstar.
CAPITAL STOCK
The Certificate of Incorporation of Investors authorizes the
Board of Directors of Investors to issue up to 10,000,000 shares of common
stock, $.01 par value, and 1,000,000 shares of preferred stock, $0.01 par value,
500,000 shares of which have been designated Series A Junior Participating
Preferred Stock and 303,640 of which have been designated Cumulative Perpetual
Preferred Stock, Series 1991 (the "Investors Preferred Stock"). _____ shares of
Investors Common Stock were outstanding as of _______________, 1995. No shares
of the Series A Junior Participating Stock are outstanding. As of
_______________, 1995, 303,640 shares of Investors Preferred Stock were issued
and outstanding.
Investors common stockholders have no preemptive rights. The
outstanding shares of Investors Common Stock are fully paid and nonassessable.
Each outstanding share of Investors Common Stock includes an Investors Right.
See "PROPOSED MERGER -- Rights Plan." Investors common stockholders are
entitled to one vote for each share held on each matter submitted to a vote of
the holders of Investors Common Stock. Cumulative voting for the election of
directors is not permitted. Subject to the preferential dividend rights of any
issued and outstanding preferred stock, including the Investors Preferred Stock,
Investors' common stockholders are entitled to receive dividends as and when
declared by the Board of Directors of Investors. Under Delaware law, Investors
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may declare and pay dividends out of surplus or, if there is not surplus, out
of net profits for the fiscal year in which the dividend is declared and/or the
preceding year. No dividends may be declared, however, if the capital of
Investors has been diminished by depreciation, losses or otherwise to an amount
less than the aggregate amount of capital represented by any issued and
outstanding capital stock having a preference on distribution.
If Investors were liquidated, the holders of Investors Common
Stock would be entitled to receive, pro rata, all assets available for
distribution to them after full satisfaction of Investors' liabilities and any
payment applicable to the preferred stock then outstanding.
Holders of the Investors Preferred Stock are entitled to
receive cumulative quarterly cash dividends, when and as declared by the
Investors Board of Directors, of $.6875 per share before any payment of
dividends to holders of Investors Common Stock, and are entitled to receive $25
per share in liquidation of Investors prior to any payments on such Investors
Common Stock. The Investors Preferred Stock is redeemable at $25 per share plus
accumulated and unpaid dividends commencing October 31, 1996. The Investors
Preferred Stock does not entitle the holders thereof to vote on any matters
submitted to stockholders, except for certain matters affecting the terms or
authorization of the Investors Preferred Stock and except in the event of
failure to pay six quarterly cash dividends.
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 "FIRSTAR
CORPORATION--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 of a
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 a Right
per share of Firstar Common Stock. The description of the terms of the Rights
Plan is set forth in a Rights Agreement dated as of January 19, 1989 (the
"Rights Plan"), between Firstar and Firstar 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%.
Investors has in place a stockholder rights plan that is
similar to Firstar's, except that the acquisition threshold under the Investors
plan is 15%. See "PROPOSED MERGER--Rights Plan".
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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 National 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, unless the stockholders are required to accept in the merger
or consolidation anything except certain types of stock (including Firstar
Common Stock) or cash in lieu of fractional shares of such stock. Investors
Common Stock and Investors Preferred Stock is quoted on the Nasdaq National
Market but holders of Investors Preferred Stock are required to accept cash
pursuant to the Merger Agreements.
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. Investors' Certificate of Incorporation does not provide for
appraisal rights in the context of a sale of all or substantially all of
Investors' 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 The Nasdaq National Market 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 Chicago Stock Exchange.
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
Investors 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 (i) 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
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received by stockholders 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 stockholders,
500 or more stockholders 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 stockholders and two-thirds of
"disinterested" stockholders, which generally exclude the 10% shareholder. The
second requirement is the payment of a statutory fair price, which is intended
to insure that stockholders in the second step merger, share exchange or asset
sale receive at least what stockholders 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.
A corporation may elect in its certificate of incorporation
not to be governed by Section 203, and the restrictions imposed on interested
stockholders under Section 203 do not apply under certain limited circumstances
set forth therein, including certain business combinations proposed by an
interested stockholder following the announcement or notification of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors.
Section 203 provides that, during such three-year period, the
corporation may not merge or consolidate with an interested stockholder or any
affiliate or associate thereof, and also may not engage in certain other
transactions with an interested stockholder or any affiliate or associate
thereof, including, without limitation, (i) any merger or consolidation of the
corporation or a direct or indirect majority-owned subsidiary of the corporation
with (A) the interested stockholder, or (B) with any other corporation if the
merger or consolidation is caused by the interested stockholder and as a result
of such merger or consolidation the above limitations of
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Section 203 are not applicable to the surviving corporation; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition (except
proportionately as a stockholder of the corporation) to or with the interested
stockholder of assets having an aggregate market value equal to 10% or more of
the aggregate market value of all assets of the corporation determined on a
consolidated basis or the aggregate market value of all the outstanding stock
of a corporation; (iii) any transaction which results in the issuance or
transfer by the corporation or by any majority owned subsidiary thereof of any
stock of the corporation or such subsidiary to the interested stockholder,
except, among other things, pursuant to a transaction which effects a pro rata
distribution to all stockholders of the corporation; (iv) any transaction
involving the corporation or any majority owned subsidiary thereof which has
the effect of increasing the proportionate share of the stock of any class or
series, or securities convertible into the stock of any class or series, of the
corporation or any such subsidiary which is owned by the interested stockholder
(except, among other things, as a result of immaterial changes due to
fractional share adjustments); or (v) any receipt by the interested stockholder
of the benefit (except proportionately as a stockholder of such corporation) of
any loans, advances, guarantees, pledges or other financial benefits provided
by or through the corporation.
Investors' Certificate of Incorporation contains a "fair
price" provision which provides that, subject to certain exceptions, a "business
combination" (which is defined to include a merger, consolidation, sale or
transfer of all or substantially all of Investors' assets) involving Investors
and a "related person" (defined as a person who, together with any affiliate or
associate, beneficially owns more than 15% of the outstanding Investors Common
Stock) must be approved by holders of at least 80% of the outstanding shares
entitled to vote thereon, excluding all shares of Investors Common Stock
beneficially owned or controlled by a related person, unless (i) a majority of
the continuing directors approves the transaction, or (ii) certain price
conditions are satisfied.
The Merger is not a "business combination" as defined in
Section 203 or the fair price provision, and therefore, neither Section 203 nor
the fair price provision is applicable to the transactions contemplated by the
Merger Agreements.
DIRECTORS
The Board of Directors of Investors 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 Investors'
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 may be removed either for or without cause at
any time by the affirmative vote of the holders of a majority of all the shares
of stock outstanding and entitled to vote at a special meeting of stockholders
called for that purpose.
The Board of Directors of Firstar is also 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 Firstar'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. 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 stockholders called for that
purpose.
LIABILITY OF DIRECTORS; INDEMNIFICATION
In accordance with the DGCL, Investors has provided in its
Bylaws that it will indemnify its directors and officers to the fullest extent
provided for in the DGCL against liabilities. Under the DGCL, as currently in
effect, such indemnification would apply if the indemnified individual is or was
a director or officer and 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 was adjudged liable to the corporation unless a court of competent
jurisdiction determines that such person is entitled to indemnification despite
the adjudication of liability. Further, the DGCL allows a corporation, by
amendment to its certificate of incorporation, to eliminate or limit the
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<PAGE> 50
personal liability of a director to the corporation or its stockholders 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 stockholders, 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 stockholders made in violation of law. Investors' Certificate
of Incorporation includes a provision to eliminate personal liability of a
director for monetary damages for a breach of fiduciary duty.
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 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 stockholders entitled to vote with respect to the subject
matter.
AMENDMENT OF CORPORATE CHARTER
Under the WBCL, the Board of Directors can establish
conditions for the amendment of the Articles of Incorporation (e.g.,
super-majority vote, no more than a given percentage dissent, etc.). The WBCL
provides that certain significant amendments to articles of incorporation, but
not all amendments, must be approved by the shareholders in addition to approval
by the Board of Directors. The vote of shareholders needed to approve an
amendment depends in part on the voting groups entitled to vote separately on
the amendment. Generally, the WBCL provides that, if a quorum exists, action on
a matter other than the election of directors is approved if the votes cast
within the voting group favoring the action exceed the votes cast opposing the
action, unless the articles of incorporation or the WBCL require a greater
number of affirmative votes. Firstar's Restated Articles of Incorporation
require the affirmative vote of not less than 75% of the outstanding shares
entitled to vote for directors to amend provisions of the Restated Articles
relating to the Board of Directors.
Delaware law requires the vote of a simple majority of the
outstanding voting stock of a corporation, and the vote of a simple majority of
the outstanding stock of each class entitled to vote as a class, to amend the
Certificate of Incorporation, in addition to approval by the Board of
Directors. In addition, Investors' Certificate of Incorporation requires the
affirmative vote of not less than 80 percent of the outstanding shares of
voting stock of Investors to amend or repeal certain provisions in the
Certificate of Incorporation, including the fair price provision.
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<PAGE> 51
SHAREHOLDER DERIVATIVE PROCEEDINGS
Under Delaware law and the WBCL, before a shareholder may bring an action by
or on behalf of the corporation (a "derivative action"), a shareholder must
make a demand on the corporation's Board of Directors to remedy the situation
about which the shareholder complains. Under Delaware law, the demand
requirement may be excused if the shareholder can show that such demand would
be futile because the alleged wrongdoers comprised or controlled a majority of
the Board of Directors. Under the WBCL, the futility exception to the demand
requirement has been eliminated. Therefore, a shareholder bringing a
derivative action on behalf of a Wisconsin corporation will be required in all
instances to make a demand on the corporation's Board of Directors.
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, one Illinois bank 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.
Firstar provides banking services throughout Wisconsin and Iowa and in the
Chicago, Minneapolis-St. Paul and Phoenix metropolitan areas. Its Wisconsin
bank subsidiaries operate in 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 operate 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
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<PAGE> 52
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 if a member bank of the Federal Reserve or by the
FDIC if a nonmember. All of the Firstar subsidiary banks are also subject to
examination by the Federal Deposit Insurance Corporation.
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 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
bank 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%
</TABLE>
46
<PAGE> 53
<TABLE>
<S> <C> <C>
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%
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 Bankshares Corporation, a
multi-bank holding company located in Chicago, Illinois, with consolidated
assets of $1.8 billion as of September 30, 1994. [Up to 7.7 million 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 on _________________ of 1995.]
On August 26, 1994, Firstar announced that it had signed a
definitive agreement to acquire First Moline Financial Corp., parent of the $80
million First Federal Savings Bank, of Moline, Illinois. Under the agreement,
Firstar would issue up to 314,000 shares of Firstar Common Stock in exchange
for all the common stock of First Moline Financial Corp. This acquisition is
expected to close in [March, 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 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.
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<PAGE> 54
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.
INVESTORS BANK CORP.
GENERAL
Investors is a regional thrift holding company incorporated under
Delaware law and headquartered in Minneapolis, Minnesota. Investors' principal
asset consists of all of the capital stock of Investors Bank, a federally
chartered savings bank formed in 1984, and substantially all of its business
activities are conducted through Investors Bank. At September 30, 1994,
Investors had total assets of $1.1 billion and stockholder's equity of $54
million.
Investors currently operates twelve retail banking offices and six
mortgage production offices in the Minneapolis-St. Paul area, one mortgage
production office in Duluth, Minnesota, one mortgage production office in a
Milwaukee suburb, and four mortgage production offices in the Chicago area. In
addition, Investors intends to open a thirteenth branch office in March, 1995.
Investors focuses on the retail banking business of attracting deposits
from the general public within the communities it serves, and on originating
and investing in, or selling and servicing, loans secured by mortgages on
residential properties primarily in the same communities. Investors'
operations, however, are distinguishable from many other thrift and community
banking institutions by Investors' proportionately large and active mortgage
banking organization. In its primary market, the twin cities of Minneapolis
and St. Paul, Investors is one of the largest originators of residential
mortgages. Investors has also expanded its consumer lending, primarily home
equity loans, in recent years, servicing consumer loan customers through its
retail branch offices. Through a subsidiary of Investors Bank and a networking
arrangement with an independent broker/dealer, Investors also offers fixed and
variable rate annuities, certain mutual funds, and title insurance.
The principal executive office of Investors is located at 200 East Lake
Street, Wayzata, Minnesota and its telephone number is (612) 475-8700. For
further information regarding Investors, see the Investors documents
incorporated by reference herein as described under the caption "INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE."
Lending
General. As a federally chartered savings bank, Investors Bank is
authorized by Federal law to invest without limitation in loans secured by
residential real property and by savings accounts, in government securities, in
Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage
Association (FNMA) and Government National Mortgage Association (GNMA)
securities, in deposits insured by the Federal Deposit Insurance Corporation
(FDIC), in securities of states or municipalities, and in various liquid
investments. In addition, Investors Bank may invest in loans secured by
commercial real estate to the extent of 400% of its capital; in secured and
unsecured commercial, corporate, business and agricultural loans to the extent
of 10% of its assets; in secured and unsecured consumer loans to the extent of
35% of its assets; in education loans, nonconforming loans, and unsecured
construction loans each to the extent of 5% of its assets; and in service
corporations to the extent of 2% of its assets. Investors is in compliance
with all the above requirements.
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<PAGE> 55
Despite this broad investment authority, Investors, through Investors
Bank, has historically conducted primarily the traditional savings and loan
business of originating, purchasing, holding and selling residential real
estate loans. During the past few years, Investors has also placed increasing
emphasis on consumer loans originated through its retail banking offices.
The following table sets forth the composition of Investors' loan
portfolio at the dates indicated by type of loan:
<TABLE>
<CAPTION>
December 31, June 30,
----------------------------------------------------------------------------------------- ----------------
1993 1992 1991 1990 1989 1989
---- ---- ---- ---- ---- ----
Balance % Balance % Balance % Balance % Balance % Balance %
------- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate
loans:
Residential...... $671,659 84.6% $550,117 84.7% $398,270 85.1% $448,195 88.5% $400,110 88.0% $360,014 85.6%
Commercial....... 30,630 3.9 32,722 5.1 35,226 7.6 31,623 6.2 27,106 6.0 36,648 8.7
Construction..... 1,428 .3 2,468 .5 1,510 .4
-------- ----- -------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total real estate
loans.......... 702,289 88.5 582,839 89.8 433,496 92.7 481,246 95.0 429,684 94.5 398,172 94.7
Consumer
loans.......... 91,691 11.5 66,489 10.2 34,261 7.3 25,388 5.0 25,225 5.5 22,376 5.3
-------- ----- -------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total portfolio
loans.......... $793,980 100.0% $649,328 100.0% $467,757 100.0% $506,634 100.0% $454,909 100.0% $420,548 100.0%
======== ===== ======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
Because virtually all of the loans retained by Investors are ARMs or
other loans that are prime related, 98.2% of Investor's loan portfolio adjusts
periodically in accordance with market interest rates. See "Management's
Discussion and Analysis - Asset/Liability Management and Interest Rate Risk".
Nevertheless, because most of the loans originated by Investors are 15 or 30
year residential loans with principal payments that amortize over the loan
period and are relatively young, a majority of the principal payments on
Investors' loans are due (or "mature") in more than 15 years. The following
table sets forth the principal maturities of Investors' assets at December 31,
1993:
<TABLE>
<CAPTION>
1 2 3 4-5 6-10 11-15 Over 15
Year Years Years Years Years Years Years Total
----------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage Loans:
Adjustable rate:
1-4 family residential
real estate loans.... $10,022 $10,631 $11,281 $24,668 $76,039 $269,349 $269,344 $671,334
Fixed rate:
1-4 family residential
real estate loans.... 22 24 26 60 193 325
Commercial real estate.. 1,770 1,538 984 9,684 16,456 198 30,630
------- ------- ------- ------- ------- -------- -------- --------
Total Mortgage
Loans............... 11,814 12,193 12,291 34,412 92,688 269,547 269,344 702,289
Consumer loans............ 5,359 2,819 2,939 15,326 45,626 16,990 2,632 91,691
------- ------- ------- ------- ------- -------- -------- --------
Total Loans.......... $17,173 $15,012 $15,230 $49,738 $138,314 $286,537 $271,976 $793,980
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Delinquent Loans. When a borrower fails to make a required payment on
a mortgage loan, the loan is considered delinquent and, after expiration of the
applicable cure period, the borrower is charged a late fee. Investors follows
practices customary in the savings industry in attempting to cure delinquencies
and in pursuing remedies upon default. Generally, if the borrower does not
cure the delinquency within 90 days, Investors initiates foreclosure action.
During foreclosure and the statutory redemption period, such property is
carried in the "real estate in judgment" account and included in "foreclosed
real estate". If the loan is not reinstated, paid in full or
49
<PAGE> 56
refinanced, the collateral is sold. Investors is often the purchaser. In such
instances, acquired property is carried in Investors' "real estate owned"
account, also part of "foreclosed real estate", until the property is sold.
All residential mortgage loans delinquent for 90 days or more are
considered nonaccrual. Commercial real estate loans are considered non accrual
when collection of interest is doubtful.
Investors includes in nonperforming assets all nonaccrual loans and
foreclosed real estate, both net of specific reserves.
The following table summarizes Investors' nonperforming assets at the
dates indicated:
<TABLE>
<CAPTION>
December 31, June 30,
--------------------------------------------------------------------------- --------
1993 1992 1991 1990 1989 1989
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans:
Residential real estate $1,852 $1,987 $3,509 $3,382 $1,400 $669
Commercial real estate . 1,182 205 402
Consumer . . . . . . . . 51 43 160 749 68
-------- -------- -------- -------- -------- --------
1,903 2,030 4,851 4,131 1,673 1,071
-------- -------- -------- -------- -------- --------
Real estate owned and in
judgment, net:
Residential . . . . . . 1,868 3,242 3,068 2,723 774 666
Commercial . . . . . . 4,807 3,997 3,275 3,367 9,757 1,096
-------- -------- -------- -------- -------- --------
6,675 7,239 6,343 6,090 10,531 1,762
-------- -------- -------- -------- -------- --------
Total nonperforming
assets . . . . . . . . $8,578 $9,269 $11,194 $10,221 $12,204 $2,833
===== ====== ======= ======= ======= ======
Nonperforming loans as a
percentage of net loans
held in portfolio . . . .24% .31% 1.04% .82% .37% .26%
Nonperforming assets as a
percentage of total
assets . . . . . . . . . .85 1.14 1.85 1.67 2.21 .56
</TABLE>
See "Management's Discussion and Analysis - Nonperforming Assets" for
discussion on these properties and an analysis of the changes in nonperforming
assets.
Reserves for Loan and Real Estate Losses. The reserves for losses
provide for potential losses in Investors' loan and real estate portfolios.
The reserves are increased by the provision for losses and recoveries and
decreased by charge-offs. The adequacy of the reserves is judgmental and is
based on continual evaluation of the nature and volume of the loan and real
estate portfolios, overall portfolio quality, specific problems loans,
collateral values, historical experience and current economic conditions that
may affect borrowers' ability to pay. Pursuant to regulations governing the
classification of assets, insured institutions such as Investors Bank are
required to classify troubled assets as "substandard", "doubtful", and "loss".
Institutions must establish specific loss reserves for assets classified as
doubtful and loss and the OTS through their examinations may require an
increase in the institution's reserve for loan and real estate losses if the
examiner concludes such reserves are inadequate. In December 1993, the OTS
completed a routine examination of Investors Bank. No additions to loss
reserves were required following this examination. At December 31, 1993,
Investors had classified $10.3 million and $138 thousand of its assets as
substandard and loss, respectively. No loans were classified as doubtful at
December 31, 1993. For information on interest income excluded on nonaccrual
loans see Note 4 of Notes to Investors' Consolidated Financial Statements
included below.
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<PAGE> 57
The following table sets forth information regarding Investors'
reserve for loan losses for the periods indicated:
<TABLE>
<CAPTION>
Six months
Year ended December 31, Year ended ended
--------------------------------------------------------- June 30, December 31,
1993 1992 1991 1990 1989 1989
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance . . . . . . $2,599 $1,982 $1,067 $450 $560 $796
Provisions for losses . . . . 632 869 1,009 803 307 256
Charge-offs:
Residential real estate
loans . . . . . . . . . . (103) (199) (28) (140) (45) (100)
Commercial real estate
loans . . . . . . . . . . (286) (5) (1) (435)
Consumer loans . . . . . . (35) (151) (124) (43) (25) (67)
------- ------- ------- ------ ----- -----
Total charge-offs . . . . (424) (350) (152) (188) (71) (602)
------- ------- ------- ------- ----- -----
Recoveries:
Residential real estate
loans . . . . . . . . . . 111 65 47 2
Consumer loans . . . . . . 63 33 11
------- ------- ------- --------
Total recoveries . . . . 174 98 58 2
------- ------- ------- -------- ------ ------
Ending balance . . . . . . . $2,981 $2,599 $1,982 $1,067 $796 $450
===== ====== ====== ====== ==== ====
Ratio of net charge-offs to
average loans outstanding .03% .04% .02% .04% .02% .25%
</TABLE>
As the foregoing table illustrates, Investors' reserve for loan losses
has generally increased over the periods presented as Investors' loan portfolio
has increased. The provision for loan losses over the periods presented
reflects both recent experience in charge-offs, and a reevaluation of the
methods of establishing the reserve for loan losses in 1990. In 1990, Investors
established for the first time an unallocated general reserve for unforeseen
loan losses and a general reserve for losses on performing real estate.
51
<PAGE> 58
The following tables present the separate reserves allocated for each
category of loans and those allocated reserves as a percentage of Investors'
total loan portfolio at the dates indicated:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------- June 30,
1993 1992 1991 1990 1989 1989
---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential real estate . . $591 $507 $394 $426 $90 $178
Commercial real estate . . 260 283 336 322 234 483
Consumer . . . . . . . . . 568 439 381 202 126 135
------ ------ ------ ------ ------ ------
Total allocated . . . . 1,419 1,229 1,111 950 450 796
Unallocated portion . . . . 1,562 1,370 871 117
------- ------- ------ ------ ------- -------
Total reserve . . . . . $2,981 $2,599 $1,982 $1,067 $450 $796
====== ====== ====== ====== ==== ====
</TABLE>
Allocation as a Percent of Loans Outstanding
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------- June 30,
1993 1992 1991 1990 1989 1989
---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential real estate . . .08% .08% .08% .09% .02% .04%
Commercial real estate . . .03 .04 .07 .06 .05 .12
Consumer . . . . . . . . . .07 .07 .08 .04 .03 .03
---- ---- ---- ---- ---- ----
Total allocated . . . . .18 .19 .23 .19 .10 .19
Unallocated portion . . . . .20 .21 .19 .02
---- ---- ---- ---- ---- -----
Total reserve . . . . . .38% .40% .42% .21% .10% .19%
==== ==== ==== ==== ==== =====
</TABLE>
Investors' portfolio continues to consist primarily of residential real
estate loans and the reserve for losses allocated to residential real estate
loans reflects the low loss experience associated with these loans. Residential
real estate loans are well collateralized and property values have remained
stable in the markets Investors lends in. The reserve for losses allocated to
commercial real estate loans reflects the higher credit risk associated with
commercial real estate lending. The reserve for losses allocated to consumer
loans has grown as outstandings grew. That reserve level was higher at December
31, 1990 due to the adoption in 1990 of a detailed method of categorizing loans
and related reserve levels. The increases in 1991 through 1993 are the result
of growth in the consumer loan portfolio.
The following tables present the allocation of the reserve for real
estate losses and those allocated reserves as a percentage of the foreclosed
real estate as of December 31 for the years indicated:
<TABLE>
<CAPTION>
Allocation Amount
-------------------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Residential real estate . . $35 $82 $104 $102
Commercial real estate . . 100 614 418 286 $100
----- ----- ----- ----- -----
Total Reserve . . . . . $135 $696 $522 $406 $100
=== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Allocations as a Percent of Real Estate
-------------------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Residential real estate . . .51% 1.03% 1.51% 1.85%
Commercial real estate . . 1.47 7.74 6.09 4.40 .94%
----- ----- ----- ----- ------
Total reserve . . . . . 1.98% 8.77% 7.60% 6.25% .94%
==== ==== ==== ==== ===
</TABLE>
52
<PAGE> 59
The higher reserve for real estate losses was largely due to
the continued decline in commercial real estate values in 1990 that affected
Investors' portfolio. The increase in the reserve for 1991 and 1992 is the
result of a higher specific reserve on a commercial retail property and the
decline in 1993 was the result of a charge-off as the property was disposed of.
For additional information, see Note 8 of Notes to Investors' Consolidated
Financial Statements and "Management's Discussion and Analysis - Analysis of
Reserves for Loan and Real Estate Losses".
Investment Portfolio
Although Investors has authority to make investments in a
number of government, municipal and corporate debt securities, Investors does
not have a large portfolio of investment securities. The portfolio of
investment securities Investors maintains are mostly U.S. Government agency
securities and investment grade corporate debt securities. The following table
sets forth the components of Investors' investment portfolio at the dates
indicated:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------- June 30,
1993 1992 1991 1990 1989 1989
---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Obligations of U.S. Government
corporations and agencies . . $11,626 $5,372 $4,371 $4,291 $3,113 $1,102
State and municipal obligations . 210 510 430 550 250
Investment grade corporate bonds 15,439 11,789 12,760 12,496 7,232 6,883
Other . . . . . . . . . . . . . . 504 501
-------- -------- --------- -------- -------- ---------
$27,779 $18,172 $17,561 $17,337 $10,595 $7,985
======== ======== ========= ======= ======= ======
</TABLE>
See Note 3 of Notes to Investors' Consolidated Financial Statements
for information regarding the carrying values and market values of Investors'
investment securities. The following table presents information regarding the
scheduled maturities and yields on investment securities at December 31, 1993:
<TABLE>
<CAPTION>
Due in one Due in one Due in five
year or less to five years to six years Total
----------------- ------------------- ------------------ -----------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Obligations in U.S. Government
and agencies . . . . . . . . . $2,952 8.54% $6,767 5.81% $1,907 5.35% $11,626 6.43%
State and municipal obligations 130 7.15 80 5.65 210 6.58
Investment grade corporate bonds 2,259 7.31 13,180 5.34 15,439 5.63
Other . . . . . . . . . . . . . . 504 3.99 504 3.99
------ ----- --------- ----- -------- ----- -------- -----
$5,845 7.64% $20,027 5.50% $1,907 5.35% $27,779 5.94%
====== ==== ======= ==== ====== ==== ======= ====
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1993
Results of Operations. Investors' net earnings were $2.5 million for
the three months ended September 30, 1994, compared to $2.4 million for the
third quarter of 1993. Net earnings for common shareholders were $2.3 million
for the third quarter of 1994 and $2.2 million for the 1993 third quarter.
Earnings per share were $.60 for both the 1994 and 1993 third quarter on 136
thousand fewer average outstanding shares in the same quarter of 1993. For the
first nine months of 1994, Investors' net earnings before cumulative effect of
accounting change were $7.6 million, a 4% increase from the $7.3 million for
the same period in 1993. Earnings per share were $1.86 for both nine month
periods. The 1994 third quarter and nine month net earnings were reduced by
approximately $176
53
<PAGE> 60
thousand or $.05 per share from expenses related to negotiation of the Merger
Agreements. The nine month 1993 period included $.03 per share from
recognition of the cumulative effect of a change in accounting method to comply
with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes". Comparing the third quarters of 1994 and 1993, an increase
in net interest income in the 1994 quarter was partially offset by increases in
noninterest expenses. For the nine month periods ending September 30, 1994 and
1993, net interest income and noninterest income both increased and were
partially offset by increased noninterest expense.
Net interest income for the third quarter of 1994 was $6.7 million
compared to $6.3 million for the 1993 quarter and increased due to a 12%
increase in average interest-earning assets to $996 million from $890 million.
The additional interest income generated by the larger amount of
interest-earning assets in the 1994 quarter was offset somewhat by a decline in
the interest margin from 2.87% in the 1993 quarter to 2.72% in the 1994
quarter. For the nine months ended September 30, 1994, net interest income was
$19.8 million, up 6% from the same period in 1993. Average interest-earning
assets increased 15% to $953 million for the first nine months of 1994 compared
to $829 million for the same period in 1993. The additional interest income
generated by the increased average interest-earning assets was more than enough
to offset the decline in interest margin from 3.01% to 2.76% between the 1993
and 1994 periods.
Growth in average interest-earning assets was due primarily to
increases in adjustable rate mortgage loans (ARMs) and consumer loans partially
offset by a reduction in mortgage loans held for sale. Investors' mortgage
banking operation originated significant amounts of ARMs in the latter months
of 1993 and during the first nine months of 1994 because of increased demand
for these products. The demand for ARM loans has remained high in 1994 as
interest rates on fixed rate long term mortgages have increased. Investors'
average ARM portfolio increased $134 million to $767 million between the third
quarters of 1993 and 1994. Between the same periods, average consumer home
equity loans increased $28 million through promotional efforts by Investors.
Offsetting a portion of the ARM and consumer loan growth was a drop in average
mortgage loans held for sale of $52 million. The current interest rate
environment supports demand for ARM loans and Investors expects additional
growth in ARMs in the next few months as well as continued growth in consumer
loans from planned promotional efforts while the amount of mortgage loans held
for sale is expected to continue to be low.
The reduction in net interest margin between the third quarters of
1994 and 1993 was the result of the costs of interest-bearing liabilities
increasing more rapidly than yields on interest-earning assets between the
periods. Asset yields increased 29 basis points between quarters reflecting
the repricing of ARM and consumer loans indexed to market rates. However
liability costs increased 46 basis points between the periods. Deposit costs
increased 15 basis points, and the cost of Federal Home Loan Bank (FHLB)
borrowings, which were used to fund a substantial portion of the loan growth,
increased 122 basis points because of annual repricings of borrowings indexed
to market rates and the replacement of matured fixed rate borrowings with
higher rate borrowings.
The decrease in net interest margin in the nine months ended September
30, 1994 compared to the same 1993 period was primarily from a 29 basis point
reduction in yields on loans while the total costs of interest-bearing
liabilities were down only 1 basis point. The new ARMs originated during 1994
were generally priced below market rates for the first one or two years which
is customary for these types of loans. Also, older ARM loans which are
repricing are limited by annual 2% caps on the amount their interest rates can
increase which is less than the increase in market interest rates over the last
year. Deposit costs decreased 13 basis points between the nine month periods
but FHLB borrowing costs increased 41 basis points from the same factors
discussed above. A substantial portion of the FHLB borrowings now reprices
daily or will mature within several months so Investors expects the cost of
these funds to vary with market interest rates.
The provision for loan losses was $110 thousand in the third quarter
of 1994 compared to $84 thousand for the same quarter a year ago. For the nine
months ended September 30, 1994 and 1993, the provisions were $334 thousand and
$444 thousand, respectively. Based on management's review of the loan
portfolio, the 1994 provisions were required only to increase general reserves
to accommodate for Investors' loan growth.
Noninterest income for the third quarters of 1994 and 1993 were almost
the same at $4.8 million. Loan servicing fees were greater in the 1994 quarter
but were largely offset by reduced mortgage banking income and
54
<PAGE> 61
title insurance sales commissions. For the nine months ended September 30,
1994 noninterest income was $14.8 million, a 11% increase from the $13.3
million for the first nine months of 1993. The increase for the nine month
period resulted primarily from increased loan servicing fee income.
Mortgage banking, the most significant source of noninterest income,
decreased 8% between the September quarters to $3.0 million, and was down 1% to
$9.2 million for the first nine months of 1994 compared to the same period last
year. Mortgage banking income consists primarily of gain on sale of mortgage
loans and gain on sale of loan servicing rights.
Gain on sales of mortgage loans declined substantially to $441
thousand in the 1994 third quarter from $2.6 million in the 1993 third quarter.
For the first nine months of 1994 the gain on sales of mortgage loans was $2.8
million compared to $6.5 million for the same 1993 period. The decreases in
income reflect the significantly reduced amounts of mortgage loans sold in the
1994 periods which in turn result from reduced mortgage originations as market
interest rates have risen since 1993. In addition, pricing gains on refinanced
loans were significantly higher for the prior year periods.
To compensate for the reduced income from gain on sales of mortgage
loans, Investors sold increased amounts of loan servicing rights. During the
September 1994 quarter, $140 million of servicing rights were sold for a gain
of $2.4 million compared to the same quarter in 1993 when $37 million in
servicing rights were sold for a gain of $505 thousand. For the first nine
months of 1993, Investors sold $176 million of loan servicing rights for a gain
of $2.3 million. For the same period in 1994, Investors sold $481 million of
loan servicing rights for a gain of $6.0 million. Although Investors has sold
more servicing rights in 1994, market pricing for these rights has been less
favorable than in 1993. The sale in the September 1994 quarter was made to
Firstar at market terms. Under the terms of the Merger Agreements, Investors
has agreed not to sell mortgage loan servicing rights in the fourth quarter of
1994.
While Investors' strategy is to continue generating mortgage banking
income, the amounts of such income are affected by external factors such as
market pricing, general demand for mortgage products and the competitive
environment in the markets in which it originates mortgages. Because of the
increase in market interest rates in 1994, mortgage refinancing activity has
declined to a very low level and has significantly reduced the amount of loans
generated by Investors' mortgage banking activity. As a result, Investors has
experienced and continues to expect reduced amounts of sales of mortgage loans
and reduced gross additions to its portfolio of loans serviced for others.
Investors' servicing fee income was $1.3 million in the September 1994
quarter compared to $802 thousand in the September 1993 quarter. The 1993
servicing fee income was adjusted by $333 thousand for higher than anticipated
prepayments. Servicing fee income for the first nine months of 1994 was $3.9
million, a 78% increase from the $2.2 million of servicing fee income in the
first nine months of 1993. The increase results both from a 16% increase in
year-to-date average loans serviced for others to $1.3 billion and elimination
of the need to adjust servicing fee income for higher than anticipated
prepayments. In the first nine months of 1993 servicing fee income was reduced
$950 thousand by such adjustments. Because of the significantly reduced
mortgage refinancing activity in 1994, Investors does not anticipate that
significant adjustments to its servicing fee income will be required during the
remainder of 1994. Because of the continued sales of loan servicing rights and
the reduced level of mortgage originations, Investors' the portfolio of loans
serviced for others decreased during the September 1994 quarter to end the
quarter at $1.1 billion.
In the other categories of noninterest income, commissions on title
insurance sales were down $206 thousand between the September 1994 and 1993
quarters and decreased $259 thousand between the nine month periods. Income
from commissions on title insurance sales was reduced because of Investors'
reduced mortgage originations. Commissions on annuity sales for the quarter
and nine months ended September 30, 1994 were greater by $41 thousand and $62
thousand than the respective periods in 1993 as customer demand increased along
with the rise in market interest rates.
55
<PAGE> 62
Noninterest expense was $7.0 million for the September 1994 quarter, a
4% increase compared to the same quarter last year. Employee compensation and
benefits were $307 thousand less between quarters because of reductions in
compensation related to production volumes in the mortgage banking operation
and staff reductions. Occupancy and equipment increased $81 thousand from the
costs of three banking offices opened in late 1993 and a new mortgage banking
office opened in early 1994. Advertising increased $126 thousand from
increased promotion of consumer lending and retail banking products. The
federal deposit insurance premium expense was $35 thousand greater in the 1994
quarter because of growth in deposits since the 1993 quarter. Other expenses
were $358 thousand higher from $176 thousand of expenses related to negotiating
of the Merger Agreements, increased data processing expenses and greater than
normal foreclosure expenses on commercial real estate.
Financial Condition. Total assets of Investors were $1.07 billion at
September 30, 1994, which was up $52 million from December 31, 1993. Cash and
cash equivalents declined $38 million reflecting reduced liquidity levels at
September 30, 1994. During the nine months ended September 30, 1994, $72
million was provided by operating activities primarily by the reduction in
mortgage loans held for sale which in turn was the result of reduced mortgage
banking originations. Cash was applied in investing activities to fund a $157
million increase in loans. Of the increase, $134 million was in ARM loans, $22
million was in consumer home equity loans and $1 million was in commercial real
estate loans. Financing activities provided $44 million in cash. FHLB
advances increased by $40 million. Maximum FHLB borrowings were $365 million
during the period and were incurred during September 1994. Deposits increased
by $8 million primarily in certificates of deposits as customers responded to
promotional efforts. As part of its continuing effort to increase deposits,
Investors has acquired land in the St. Paul area and plans to build and open a
branch in early 1995. Additional cash was used to repay $2.4 million in
subordinated notes prior to its original maturity. The current market interest
rate environment has increased demand for Investors' ARM loan products and
Investors expects increases during the next few months in its ARM portfolio.
While Investors continues to promote its deposit products and expects deposit
growth from its twelve existing offices, it plans to continue using advances
from the FHLB as a funding source when necessary.
Nonperforming assets were $3.8 million at September 30, 1994, down
from $8.6 million at December 31, 1993. Investors has disposed of
approximately $4.8 million in properties including several commercial real
estate properties for $2.8 million. Nonperforming residential real estate
assets were at a very low $1.8 million at September 30, 1994. Through sales
anticipated in the last quarter of 1994, Investors expects additional reduction
of nonperforming commercial real estate assets, which were $1.9 million at
September 30, 1994.
Investors intends to support Investors Bank's efforts to maintain a
capital level adequate to support its projected growth as well as maintain its
"well capitalized" status. Approximately $3.0 million in funds attained during
the $23 million December 1992 subordinated debt offering remains in the parent
company and is available for future capital needs. During the September 1994
quarter, Investors Bank paid a common stock dividend of $4 million to
Investors. The annual dividend, which was approved by Investors Bank's
regulators, the OTS, is intended to provide Investors with the cash needed for
interest and dividend payments.
At September 30, 1994, Investors Bank met each of the three regulatory
capital standards to continue to be classified as a "well capitalized"
institution. The following is a summary of Investors Bank's capital position:
56
<PAGE> 63
<TABLE>
<S> <C>
Tier 1 leverage (core) capital standard:
Adjusted total assets . . . . . . . . . . . $1,068,422,949
Tier 1 capital . . . . . . . . . . . . . . . 68,461,777
Tier 1 capital ratio . . . . . . . . . . . . 6.41%
Tier 1 risk based capital standard:
Risk adjusted total assets . . . . . . . . . $641,801,083
Tier 1 capital . . . . . . . . . . . . . . . 68,461,777
Tier 1 risk based capital ratio . . . . . . 10.67%
Risk based capital standard:
Risk adjusted assets . . . . . . . . . . . . $641,801,083
Risk based capital . . . . . . . . . . . . . 71,582,183
Risk based capital ratio . . . . . . . . . . 11.15%
</TABLE>
Management believes Bank will continue to meet all three "well
capitalized" standards in 1994.
In 1993, the OTS issued its final regulations on interest rate risk.
Under this rule, effective January 1, 1994, institutions deemed to have an
"above normal" level of interest rate risk as calculated by the OTS based on
quarterly reports submitted by Investors Bank are subject to a capital charge
and must deduct a portion of that risk from total risk based regulatory
capital. At June 30, 1994, Investors Bank had, for the first time, incurred an
interest rate risk capital component of $4.0 million. Investors Bank has not
yet been notified by the OTS as to the impact of the rule on its September 30,
1994 risk based capital. The rules require that the June 30, 1994, component
would first impact Investors Bank's risk based capital in the first quarter of
1995. At that time Investors Bank would be required to adjust its risk based
capital by the lowest of the interest rate risk components for the preceding
three quarters. Management believes Investors Bank will continue to have some
amount of interest rate risk component during the next six months.
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Results Of Operations
Performance Summary. Investors reported record net earnings for the
third consecutive year. Earnings were $10.0 million for 1993, compared to the
previous highs of $7.8 million for 1992 and $5.0 million for 1991. Earnings
per common share were $2.49 for 1993, compared to $1.98 for 1992 and $1.51 for
1991. Investors' record performances are attributable to the continued
strength of its core operations of retail banking and mortgage banking. In
addition to the record earnings performance in 1993, total assets grew 24.7%
during the year to exceed $1 billion at December 31, 1993.
Return on average assets was 1.13% in 1993, compared to 1.14% in 1992
and .84% in 1991. Return on average common equity increased to 25.6% in 1993
from 24.2% in 1992 and 22.0% in 1991.
Investors' interest-earning asset base continued to grow significantly
in 1993 causing net interest income to increase $3.0 million or 13.3% despite a
decline in the net interest margin from 3.39% in 1992 to 2.94% in 1993.
Average interest-earning assets, primarily loans, were $855 million in 1993
compared to $653 million in 1992. Interest-earning assets reached $982 million
at December 31, 1993 and are expected to support a strong net interest income
level in 1994. This growth in interest-earning assets was made possible
because of Investors' ability to internally generate loans. Investors'
residential lending activity originated $276 million in new adjustable rate
mortgage loans, increasing mortgage loans $120 million during 1993. Through
Investors' retail banking network, consumer loans were increased $25.1 million
during the year.
In order to support the rapid growth in assets, Investors implemented
strategies to generate deposit growth both in the near term and over the long
term. As a result, deposits grew $91.1 million or 17.8% during the current
year to $603 million at December 31, 1993. This growth follows a number of
years of minimum deposit growth.
57
<PAGE> 64
Beginning in late 1992 and throughout 1993, Investors was more competitive in
the pricing and promotion of special deposit accounts designed to attract
depositors. In addition, Investors has become more aggressive in expanding its
retail banking network by the opening of new offices. One new retail banking
office was opened in December 1992 and three additional offices were opened in
the December quarter of 1993. Investors plans on continuing the efforts to
grow deposits in order to fund its asset growth.
As a result of the increased level of mortgage banking activity in
1993, noninterest income increased $4.4 million or 30.7% compared to 1992. In
1993, Investors closed $838 million of loans for sale in the secondary market,
also a record performance. An additional $115 million of loans for sale were
purchased from correspondent lenders. This level of loan originations was made
possible by the strength of Investors' expanding mortgage lending capability
and the continued low interest rate environment in 1993 which kept refinancing
activity at a high level. Mortgage banking income increased $2.1 million or
19.1% in 1993 compared to 1992. In addition, the portfolio of loans serviced
for others grew $376 million during 1993 to $1.4 billion at year end. This is
expected to result in a significant increase in servicing fee income in 1994.
The low interest rate environment in 1993 not only caused a higher level of new
loans to be originated, but also resulted in significant prepayment of higher
rate loans in Investors' loan servicing portfolio. Loan servicing fees were
negatively impacted for the year because of this high prepayment experience
which resulted in adjustments being made to capitalized servicing rights. To
adjust for the high prepayment activity, Investors charged off $1.4 million in
capitalized servicing rights in 1993 compared to $1.5 million in 1992. If
adjustments for prepayments would be required in the future, Investors would
expect them to be at lower levels because of the reduced amount of higher
interest rate loans remaining in its portfolio of loans serviced for others as
of December 31, 1993.
The significantly higher earnings in 1992 as compared to 1991 also
resulted from strong retail banking and mortgage banking performance. Net
interest income increased $4.0 million or 22.2% from $18.1 million in 1991 to
$22.2 million in 1992, while noninterest income increased $4.5 million or 46.1%
from $9.8 million in 1991 to $14.3 million in 1992. The increased net interest
income for 1992 was due to the higher level of interest-earning assets.
Average interest-earning assets, primarily loans, were $653 million in 1992
compared to $562 million in 1991. The higher noninterest income was primarily
the result of the increase in mortgage banking income. Loans originated for
sale in 1992 increased 57.9% over originations in 1991.
Net Interest Incom. A significant portion of Investors' earnings is
derived from net interest income. Net interest income is the difference
between interest earned on interest-earning assets and interest paid on
interest-bearing liabilities. Net interest income, when divided by average
interest-earning assets, is referred to as the net interest margin. The net
interest rate spread is the difference between the yield on interest-earning
assets and the cost of interest-bearing liabilities.
Net interest income was $25.1 million in 1993, up $3.0 million or
13.3% from 1992. As shown in the volume/rate analysis table, an increase in
average interest-earning assets contributed $5.5 million to increasing net
interest income during 1993. The positive contribution from the increased
volume of interest-earning assets was partially offset by a $2.5 million
decrease in net interest income due to a lower net interest rate spread in 1993
than in 1992. Net interest income in 1992 had increased $4.0 million or 22.2%
from 1991 caused by an increase in average interest-earning assets in 1992 over
1991.
During 1993, Investors' average interest-earning assets were $855
million, a 31.0% increase over 1992. This increase was primarily in loans
which averaged $798 million in 1993 compared to $612 million in 1992. A
continuation of the strong mortgage loan market experienced in 1992, together
with the addition of mortgage production offices and consumer lending staff,
enabled the company to increase its mortgage loans held in portfolio $120
million and its consumer loan portfolio $25.1 million during 1993.
Interest-earning assets were $982 million at the current year end compared to
$780 million at the end of 1992. This growth is expected to have a positive
impact on net interest income in 1994. Average interest-earning assets grew
16.3% in 1992 as average loans increased 16.1%. As a result of the significant
lending activity during 1992, the mortgage loans held in portfolio increased
$149 million and consumer loan portfolio increased $32.2 million.
58
<PAGE> 65
In 1993, Investors funded the asset growth with increases in deposits
and FHLB advances. Average interest-bearing liabilities increased 28.8%
compared to 1992. Average interest-bearing deposits increased $40.1 million
and average FHLB advances increased $118 million. The increase in deposits in
1993 was due to special deposit promotions and to the opening of new retail
bank offices. Investors intends to continue to stimulate deposit growth with
deposit promotions. Investors also expects additional deposit growth from
three new retail bank offices opened in late 1993 and the continued expansion
of its retail bank network. During 1992, average interest-bearing liabilities
increased 13.4% compared to 1991. The increase occurred in FHLB advances which
were used to fund the growth in interest-earning assets. FHLB advances
averaged $132 million in 1992 compared to $40.9 million in 1991. Average
interest-bearing deposits were down $13.8 million in 1992 compared to 1991.
The net interest rate spread decreased to 2.70% for 1993 from 3.19%
during 1992 and 3.12% in 1991. The interest rate maturity of Investors'
interest-bearing liabilities has historically been shorter than its
interest-earning assets. The increased spread in 1992 and 1991 was due to
deposits and FHLB advances repricing at lower rates and decreasing the overall
cost of funds while asset yields decreased at a slower rate. With short term
interest rates remaining relatively flat in 1993, asset yield repricings caught
up with liability repricings by declining at a more rapid rate causing the net
interest rate spread to decline. In addition, adjustable rate mortgage loans
originated in 1993 were at lower initial rates and the more aggressive deposit
pricing in 1993 combined to further reduce the net interest rate spread.
The net interest margin was 2.94% for 1993, compared to 3.39% for 1992
and 3.23% in 1991. The majority of the changes in margin were the result of
the changes in net interest rate spread previously explained. The difference
between net interest margin and net interest spread widened in 1993 and 1992 as
the ratio of average interest-earning assets to average interest-bearing
liabilities increased. The increase in this ratio was largely due to the
increase in equity and decrease in liabilities resulting from the exchange of
capital notes for preferred stock in November of 1991 and from the retention of
earnings for both years. In addition, noninterest bearing deposits have
increased during 1993 and 1992.
NET INTEREST INCOME VOLUME/RATE ANALYSIS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended December 31, 1993 versus Year ended December 31, 1992 versus same
same period in 1992 period in 1991
------------------------------------ ----------------------------------------
Increase (decrease) due to Increase (decrease) due to
------------------------------------ ----------------------------------------
Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C>
Interest Income on:
Loans . . . . . . . . . . $13,474 $(8,673) $4,801 $7,619 $ (9,898) $(2,279)
Cash and investments . . 713 (579) 134 190 (488) (298)
Other assets . . . . . . 361 (43) 318 400 (100) 300
Total interest income . . . 14,548 (9,295) 5,253 8,209 (10,486) (2,277)
Interest expense on:
Deposits:
Interest-bearing (170) (1,692) (1,862) (329) (4,264) (4,593)
accounts . . . . . . .
Certificates . . . . . 2,351 (4,239) (1,888) (481) (3,885) (4,366)
Total deposits . . . . 2,181 (5,931) (3,750) (810) (8,149) (8,959)
FHLB advances . . . . . . 4,671 (821) 3,850 5,224 (1,974) 3,250
Other borrowings . . . . 2,212 (15) 2,197 (353) (238) (591)
Total interest expense . . 9,064 (6,767) 2,297 4,061 (10,361) (6,300)
Net interest income . . . $5,484 $(2,528) $2,956 $4,148 $ (125) $4,023
</TABLE>
59
<PAGE> 66
NET INTEREST INCOME YIELD ANALYSIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------------------------------------
1993 1992
------------------------------------ -------------------------------------
Average Yield/ Average Yield/
balance Interest rate3 balance Interest rate3
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans1 . . . . . . . . . . . $797,895 $54,250 6.80% $611,772 $49,449 8.08%
Cash and investments . . . . 43,400 2,397 5.52 31,769 2,263 7.12
Other assets . . . . . . . . 14,146 1,122 7.93 9,621 804 8.36
-------- ------- ---- ------- -------- ----
Total interest-earning
assets . . . . . . . . . . 855,441 $57,769 6.75% 653,162 $52,516 8.04%
------ ---- ------ ----
Other assets2 . . . . . . . . . 33,984 32,628
-------- -------
Total assets . . . . . . . $889,425 $685,790
======= =======
Liabilities and Stockholders'
Equity:
Noninterest-bearing deposits . $31,294 $15,686
Interest-bearing deposits:
Checking, savings, money
market . . . . . . . . . . 183,973 $4,771 2.59% 188,939 $6,633 3.51%
Certificates . . . . . . . . 343,478 15,226 4.43 298,400 17,114 5.74
------- ------- ---- ------- ------- ----
Total interest-bearing
deposits . . . . . . . 527,451 19,997 3.79 487,339 23,747 4.87
FHLB advances . . . . . . . . . 249,370 9,713 3.89 131,547 5,863 4.46
Other borrowings . . . . . . . 29,697 2,941 9.90 7,361 744 10.09
-------- ------- ---- -------- ------ -----
Total interest-bearing
deposits . . . . . . . 806,518 $32,651 4.05% 626,247 $30,354 4.85%
------ ---- ------ ----
Other liabilities2 . . . . . . 8,500 7,990
-------- --------
Total liabilities . . . . 846,312 649,923
Stockholders' equity2 . . . . . 43,113 35,867
-------- -------
Total liabilities and
stockholders' equity . $889,425 $685,790
======= =======
Net interest income . . . . . . $25,118 $22,162
====== ======
Net interest rate spread . . . 2.70% 3.19%
==== ====
Net interest margin . . . . . . 2.94% 3.39%
==== ====
<CAPTION>
----------------------------------
1991
----------------------------------
Average Yield/
balance Interest rate3
------- -------- ----
<S> <C> <C> <C>
Assets:
Interest-earning assets:
Loans1 . . . . . . . . . . . $526,952 $51,728 9.82%
Cash and investments . . . . 29,384 2,561 8.72
Other assets . . . . . . . . 5,202 504 9.69
-------- ------- ----
Total interest-earning
assets . . . . . . . . . . 561,538 $54,793 9.76%
------ ----
Other assets2 . . . . . . . . . 40,365
--------
Total assets . . . . . . . $601,903
=======
Liabilities and Stockholders'
Equity:
Noninterest-bearing deposits . $ 10,047
Interest-bearing deposits:
Checking, savings, money
market . . . . . . . . . . 195,482 $11,226 5.74%
Certificates . . . . . . . . 305,690 21,480 7.03
------- ------- ----
Total interest-bearing
deposits . . . . . . . 501,172 32,706 6.53
FHLB advances . . . . . . . . . 40,888 2,613 6.39
Other borrowings . . . . . . . 10,294 1,335 12.97
-------- ------- -----
Total interest-bearing
deposits . . . . . . . 552,354 $36,654 6.64%
------ ----
Other liabilities2 . . . . . . 15,958
--------
Total liabilities . . . . 578,359
Stockholders' equity2 . . . . . 23,544
--------
Total liabilities and
stockholders' equity . $601,903
=======
Net interest income . . . . . . $18,139
======
Net interest rate spread . . . 3.12%
====
Net interest margin . . . . . . 3.23%
====
</TABLE>
1 Nonaccrual loans are included in average loan balances
2 Average balance is based on month-end balances for 1991.
3 Changes attributable to the combined impact of volume and rate have been
allocated proportionately to the change due to volume and the change due to
rate.
60
<PAGE> 67
Noninterest Income. Noninterest income is a significant source of
revenue for Investors and has a major impact on operating results. An active
mortgage banking operation is an integral part of Investors' strategy to
supplement net interest income with a significant amount of noninterest income.
Mortgage banking generates income primarily through the sale of loan servicing
rights and the sale of mortgage loans. This mortgage banking activity also
adds to the portfolio of loans serviced for others, generating continuing
noninterest income from loan servicing fees. Through mortgage banking,
Investors originates government insured loans and fixed-rate conventional loans
and sells such loans in the secondary market or pools the loans and sells the
resulting mortgage-backed securities, generating a gain on sale of mortgage
loans. For most of these sales Investors retains the servicing rights.
Investors also regularly engages in the sale of portions of servicing rights it
creates, generating significant gains on such sales. Historically, the amount
of loans Investors has originated for sale has been significant and Investors
intends to continue to originate loans for sale to create mortgage banking
income from gains on sale of loans and loan servicing rights.
NONINTEREST INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Mortgage banking . . . . . . . . . . . . . . $13,313 $11,178 $6,399
Loan servicing fees . . . . . . . . . . . . . 2,830 1,491 2,201
Commissions on title insurance sales . . . . 935 135
Commissions on annuity sales . . . . . . . . 561 575 511
Other 991 876 645
------- ------- -------
$18,630 $14,255 $9,756
======= ======= =======
</TABLE>
Investors' mortgage banking income is highly dependent on the amount of
mortgage loans originated for sale. Most of its loans are originated through
loan closings by its mortgage loan offices, but loans are also purchased from
correspondents. Investors has six Twin Cities offices, a Duluth office, three
offices in the Chicago market and an office in the Milwaukee area which opened
in late 1993. During the latter part of 1991, two experienced senior level
mortgage production managers joined Investors. Their presence, along with a
staff of experienced and high performing lending officers, has been a factor in
the improved production. During 1993 and 1992 Investors benefited from the
strong mortgage demand generated by reduced market interest rates as well as the
strengthened production staff. Mortgage refinancings increased to 49.0% and
46.5% of the total loans closed during 1993 and 1992, respectively. As a result
of the increased mortgage loan originations, mortgage banking income increased
$2.1 million or 19.1% in 1993 from the prior year and $4.8 million or 74.7% in
1992 compared to 1991. The increase in 1993 was from a higher gain on sales of
mortgage loans which was partially offset by a lower gain on sales of loan
servicing rights. Most of the increase in mortgage banking income for 1992 was
from higher gains on sales of mortgage loans and loan servicing rights.
Investors closed $838 million loans for sale in 1993, 26.4% more than in 1992.
Also in 1993, loan purchases were up 25.9% to $115 million. In 1992, loans
originated for sale totaled $663 million which was a 61.8% increase from 1991
and loan purchases were up 34.2% to $91.3 million. Refinancing activity is
highly dependent on market interest rates. If rates increase, refinancing
activity could decrease substantially in 1994 and Investors would experience a
reduction in loans originated for sale. This reduction should be partially
offset by Investors' continued mortgage lending expansion, primarily in the
Chicago and Wisconsin markets.
61
<PAGE> 68
MORTGAGE BANKING ACTIVITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Loans originated for sale:
Loans closed . . . . . . . . . . . . . . . . . . . $838,097 $663,275 $409,852
Loans purchased . . . . . . . . . . . . . . . . . . 114,986 91,346 68,070
------- ------- -------
. . . . . . . . . . . . . . . . . . . . . . . $953,083 $754,621 $477,922
======= ======= =======
Mortgage loans sold . . . . . . . . . . . . . . . . . . $982,764 $799,703 $512,620
Gain on sales of mortgage
loans . . . . . . . . . . . . . . . . . . . . . . . 9,391 6,329 2,447
Loan servicing rights sold . . . . . . . . . . . . . . 252,178 301,642 298,840
Gain on sales of loan
servicing rights . . . . . . . . . . . . . . . . . . . 3,331 4,232 3,511
Other lending fees . . . . . . . . . . . . . . . . . . 591 617 441
</TABLE>
Gain on sales of mortgage loans increased $3.1 million in 1993 and $3.9
million in 1992. The increased gain was due to 22.9% and 56.0% increases in the
amount of loans sold for 1993 and 1992, respectively, and to higher cash gains
as a result of the higher level of refinancing activity in 1993 and 1992. If the
refinancing activity decreases, the gain on sales of mortgage loans is likely to
decrease.
Gain on sales of loan servicing rights was $3.3 million in 1993, a 21.3%
decrease from the gain earned in the previous year. Because of the larger gains
realized on the sales of mortgage loans in 1993, Investors reduced the amount of
loan servicing rights sold in the current year by 16.4% to $252 million. Gain
on sales of loan servicing rights was $4.2 million for 1992, a 20.5% increase
from the gain earned in 1991. The increased gain in 1992 reflects more
favorable market pricing for loan servicing rights as the volume sold was
approximately the same as in the prior year. Loan servicing rights sales
continue to generate substantial mortgage banking income. The amount of loan
servicing rights sold annually by Investors and the resulting gain may vary
because of market fluctuations in the pricing of loan servicing rights. In
addition, Investors may reduce sales of servicing rights in periods when gains
on sales of mortgage loans are higher than normal or increase sales of servicing
rights when gains on sales of mortgage loans are reduced to more normal levels.
Loan servicing fees were $2.8 million in 1993 compared to $1.5 million
in 1992 and $2.2 million in 1991. Loan servicing fees were negatively impacted
in 1993 and 1992 by adjustments of $1.4 million and $1.5 million, respectively,
made to capitalized servicing rights. These adjustments were necessary to
reflect the high prepayment activity in the low interest rate environment and to
conform with accounting and regulatory guidelines adopted in 1992 which take a
more conservative approach to accounting for capitalized servicing rights.
Because of the high level of new originations in 1993 and 1992, the servicing
portfolio experienced a net growth during 1993 of $376 million and in 1992 of
$321 million to increase the portfolio to $1.4 billion at December 31, 1993. If
the above adjustments would not have been required, loan servicing fees would
have been $4.2 million in 1993 and $3.0 million in 1992 or increases of 40.4%
and 36.3%, respectively. If adjustments for prepayments would be required in
the future, Investors would expect them to be at lower levels because of the
reduction in high rate loans in its portfolio of loans serviced for others as of
the 1993 year end.
Commissions on title insurance sales were $935 thousand in 1993 compared
to $135 thousand in 1992. This activity began in late 1992 with 1993 being the
first full year of operation. During 1993 title insurance was sold on 2,894
loans compared to 476 loans in 1992.
62
<PAGE> 69
Commissions on annuity sales were $561 thousand on sales of $11.4
million in 1993, down 2.4% from $575 thousand on annuity sales of $11.0 million
in 1992. Investors earned $511 thousand on annuity sales of $9.4 million in
1991. In early 1992, there were proposals to Congress that certain tax
benefits enjoyed by the insurance industry be eliminated. This had the effect
of increasing sales during 1992. During 1993, sales remained strong due to the
continued strength of Investors' sales staff. Investors has an experienced
staff of licensed agents who regularly promote these products and customer
acceptance is good, but uncertainty or change in the market interest rates or
regulatory environment could affect sales of annuities in the future.
Other income increased to $991 thousand for 1993 from $876 thousand in
1992 and $645 thousand in 1991. Investors began selling mutual funds in 1992
and earned fees of $163 thousand in 1993 and $80 thousand in 1992. The
remaining increases in other income were caused by gains on the disposal of
foreclosed residential properties.
Noninterest Expense. Noninterest expense increased 17.6% to $26.5
million for the year ended December 31, 1993 compared to $22.5 million for the
same period in 1992. Noninterest expense grew 22.0% in 1992 from the $18.5
million in 1991. The increase in noninterest expense over the three year period
was generally attributable to Investors' continued expansion of both its
mortgage banking and retail banking activities.
NONINTEREST EXPENSE
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Employee compensation
and benefits . . . . . . . . . . . . . . . $15,430 $ 12,650 $ 9,612
Occupancy and equipment . . . . . . . . . . 3,814 3,407 2,981
Advertising . . . . . . . . . . . . . . . . 926 667 582
Federal deposit insurance
premiums . . . . . . . . . . . . . . . . . 1,224 1,173 1,169
Other . . . . . . . . . . . . . . . . . . . 5,068 4,612 4,108
------ ------ ------
$26,462 $22,509 $18,452
====== ======= =======
</TABLE>
Employee compensation and benefits for 1993 were 22.0% more than 1992
primarily because of an 18.2% increase in staffing to support the high level of
growth. During 1993, three retail banks and two mortgage production offices
were opened. In addition, mortgage production, title insurance, consumer
lending, mortgage servicing and marketing increased staff to support the higher
level of activity. Benefits increased in step with compensation and were also
affected by higher health insurance costs. Employee compensation and benefits
increased 31.6% in 1992 compared to 1991 due to increased staffing and
commissions paid to support the much higher level of mortgage loan production,
increased consumer lending activity and the establishment of builder finance and
title insurance divisions.
The new offices opened in 1993 were also largely responsible for the
11.9% increase in occupancy and equipment expenses from 1992. Occupancy expense
was up 7.9% due to rents on the new offices. Equipment expenses rose 20.2% from
increased depreciation on new office equipment and equipment purchased to create
or enhance computer networking capabilities among offices. Occupancy and
equipment expenses were 14.3% higher in 1992 than in 1991. This increase was
the result of a write-off of unamortized leasehold improvements on a retail bank
office replaced by a new facility, higher real estate taxes on Investors' new
headquarters which Investors occupied in December 1990, and greater depreciation
on equipment.
Advertising expense increased 38.8% to $926 thousand in 1993 from $667
thousand in 1992. In 1993, as part of its strategy to increase deposits and
consumer loans, Investors increased both its advertising of retail products and
targeted marketing efforts such as promotions for the new retail banks and point
of sale materials. From 1991 to 1992, advertising expense rose by 14.6% as
Investors increased expenditures for advertisement of deposit products, partly
in response to a decrease in deposits.
63
<PAGE> 70
Federal deposit insurance premiums increased 4.3% in 1993 from 1992
along with increased deposits. Investors Bank's insurance premium rate was .23%
of the deposit base for both 1993 and 1992 due to Investors Bank being
categorized by the FDIC as "well capitalized". The increase in insurance
expense was less than the percent of deposit increase because the premiums are
based on deposit levels of the prior six month periods. Between 1992 and 1991,
there was almost no change in deposit insurance premium expense because deposits
did not increase.
Other expenses were up 9.9% in 1993 over 1992 primarily due to the
record production level and Investors' growth and new product lines. Decreases
in expenses associated with holding foreclosed real estate were offset by
increases in other categories. These included telephone expenses, which grew to
support new offices and enhanced computer network capabilities, supplies,
postage, data processing and professional fees. Other expenses increased 12.3%
for the year ended December 31, 1992 compared to 1991. Approximately $200
thousand of the increase was due to variable costs such as supplies, postage and
service fees rising with the higher mortgage loan production. There was also
$199 thousand of additional foreclosed real estate expenses and a $49 thousand
increase in charitable contributions.
Income Taxes. Effective January 1, 1993, Investors adopted the new
accounting standard for income taxes, Statement of Financial Accounting
Standards No. 109. A $125 thousand cumulative effect of adopting the new
standard was recognized in the first quarter of 1993. Income tax expense was
$6.8 million for 1993 compared to $5.2 million for 1992 and $3.4 million for
1991. Income tax expense has been between 40.1% and 40.6% of earnings before
income tax expense for all three years. For additional information on income
taxes, refer to Note 12 of Notes to Consolidated Financial Statements.
Financial Condition
Investors' assets grew 24.7% to $1 billion between December 31, 1993
and 1992. This growth was primarily the result of origination of significant
amounts of adjustable rate residential mortgage loans and, to a lesser extent,
of consumer home equity loans. This reflects Investors' strategy to grow with
high quality, interest-rate sensitive assets. Residential real estate loans
continue to make up the largest portion of Investors' permanent loan portfolio.
These loans were 84.6% of portfolio loans at December 31, 1993, nearly identical
with the composition at December 31, 1992. Investors has increased its emphasis
on supplementing its residential loan portfolio by increasing its consumer
lending capability, primarily through home equity loans. Although Investors has
made consumer loans through its private banking department since commencement of
operations, consumer lending is now an active part of retail banking
operations. Continued marketing and exposure to the loans in the retail bank
offices caused consumer loans to grow to 11.5% of the permanent loan portfolio
at December 31, 1993 from 10.2% at December 31, 1992. Investors maintains a
small commercial real estate loan portfolio originated in prior years and is
not actively seeking new commercial real estate loans.
Fair Value of Financial Instruments. In the accompanying financial
statements, Investors has disclosed the estimated fair values of all on and
off-balance sheet financial instruments in accordance with Statement of
Financial Accounting Standards (SFAS) No. 107, "Disclosure About Fair Value of
Financial Instruments". See Note 17 of Notes to Consolidated Financial
Statements. At December 31, 1993 and 1992, total financial assets had estimated
fair values in excess of their carrying amounts of $51.4 million and $39.1
million, respectively. These excess amounts were primarily due to mortgage
loans and excess servicing rights. Total financial liabilities had estimated
fair values in excess of their carrying amounts of $3.5 million and $1.8 million
at December 31, 1993 and 1992, respectively. These excess amounts were
primarily due to deposits.
The estimated fair values of mortgage loans were $32.1 million and $25.8
million greater than the respective carrying amounts at December 31, 1993 and
1992. Investors' mortgage loans are predominately ARM loans which are generally
sold in the marketplace at a premium because the currently indexed rates on the
underlying loans are higher than initial market yields. The increase in
estimated fair values in excess of the carrying amounts between years was mostly
due to the increased amounts of mortgage loans. Excess servicing rights had
estimated fair values greater than carrying amounts by $17.4 million at year end
1993 and $12.1 million at year end 1992. This increase was due to the increased
amount of mortgage loans serviced for others between years. Excess
64
<PAGE> 71
servicing rights relate to servicing that Investors has created and retained
from its own origination activities. Carrying amounts represent only the
discounted present value of future service fee income in excess of a normal
market rate servicing fee. Estimated fair values are significantly greater
than these amounts.
Deposits had estimated fair values greater than carrying amounts of
$4.3 million and $1.5 million at December 31, 1993 and 1992, respectively.
These amounts result from certificates of deposits which have interest rates
somewhat higher than Investors' rates offered for deposits with maturities
similar to the remaining maturities of the existing deposits at December 31,
1993 and 1992,
Nonperforming Assets. Nonperforming assets include all nonaccrual
loans and real estate acquired through foreclosure net of specific reserves.
Nonperforming assets were $8.6 million at December 31, 1993, down 7.5% from
year end 1992. The decline is primarily the net of a $1.4 million decrease in
foreclosed residential real estate and an $810 thousand increase in foreclosed
commercial real estate. Investors believes the decline in foreclosed
residential real estate is the result of its quality underwriting standards and
improving economic conditions. Foreclosed commercial real estate had a net
increase because two properties, valued at about $2.1 million, were added while
a $1.3 million property was sold during 1993. Nonperforming assets were $9.3
million at December 31, 1992, down 17.2% from December 31, 1991. The decline
resulted primarily from a $1.5 million decrease in nonperforming residential
real estate loans. Total nonperforming commercial real estate assets declined
$460 thousand in 1992 with a $1.1 million asset moving from the nonperforming
loan category to the real estate in judgment category. Nonperforming loans as
a percentage of loans held in portfolio continued decreasing and were .24% at
December 31, 1993 compared to .31% and 1.04% at December 31, 1992 and 1991,
respectively. Nonperforming assets as a percentage of total assets also
continued to decline and were .85% at December 31, 1993 compared to 1.14% at
December 31, 1992 and 1.85% at December 31, 1991. The improvement in these
ratios was both the result of the decline in nonperforming assets along with
the increase in loans held in portfolio and total assets during 1993 and 1992.
NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Loans:
Residential real estate . . . . . . . . $1,852 $1,987 $3,509
Commercial real estate . . . . . . . . . 1,182
Consumer . . . . . . . . . . . . . . . . 51 43 160
------ ------ ------
1,903 2,030 4,851
------ ------ ------
Real estate owned and
in judgment, net:
Residential . . . . . . . . . . . . . . 1,868 3,242 3,068
Commercial . . . . . . . . . . . . . . . 4,807 3,997 3,275
------ ------ ------
6,675 7,239 6,343
------ ------ ------
Total nonperforming assets . . . . . $ 8,578 $ 9,269 $11,194
====== ======= =======
Nonperforming loans as a
percentage of net loans held
in portfolio . . . . . . . . . . . . . . . 24% .31% 1.04%
Nonperforming assets as a
percentage of total assets . . . . . . . . .85 1.14 1.85
</TABLE>
In accordance with generally accepted accounting principles, real
estate owned and in judgment is carried at the lower of cost or fair value less
estimated cost to sell. At December 31, 1993, commercial real estate owned
included $3.8 million in properties acquired through foreclosure of four loans
and commercial real estate in judgment consisted of one property for $1.0
million. In January, 1994, Investors completed foreclosure on this
65
<PAGE> 72
property, a combination office and warehouse in a western suburb of
Minneapolis. Since October 1991, Investors has owned a 59 unit apartment
complex in Brooklyn Park, Minnesota which has a carrying value of $1.3 million.
A complex sale agreement, including a portion of public financing, has been
pending during 1993. In the event the sale is not completed, Investors will
work to increase the occupancy level and remarket the property. In April 1993,
Investors received title to seven fully leased retail and convenience store
properties located in the Minneapolis-St. Paul area which originally secured a
$1.1 million loan. Investors is actively marketing these properties. In
November of 1993, Investors acquired a $1.0 million 48 unit apartment property.
This property will require some minor repairs and, after occupancy is
increased, will be listed for sale later in 1994. No other nonperforming asset
had a carrying value exceeding $500 thousand at December 31, 1993.
Analysis of Reserves for Loan and Real Estate Losses. The reserves
for losses provide for potential losses in Investors' loan and real estate
portfolios. The reserves are increased by the provision for losses and by
recoveries and are decreased by charge-offs. The adequacy of the reserves is
judgmental and based on the continued evaluation of the nature and volume of
the loan and real estate portfolios, overall portfolio quality, specific
problem loans, collateral values, historical experience and current economic
conditions that may affect the borrowers' ability to pay.
The reserve for loan losses was $3.0 million at December 31, 1993,
$2.6 million at December 31, 1992, and $2.0 million at December 31, 1991. The
increases over the three year period are a result of increased provisions to
cover larger residential and consumer loan portfolios as well as a
determination by Investors to increase the size of its unallocated general
reserve which was established to cover unforeseen loan losses. The provision
for loan losses was $631 thousand in 1993, $869 thousand in 1992 and $1.0
million in 1991. Of these provisions, $192 thousand, $499 thousand and $754
thousand, respectively, were allocated to the unallocated general reserve.
Additions to the unallocated reserve have been reduced recently because of the
continuing high quality of Investors' assets, the favorable rate of net
charge-offs and improving economic conditions. Offsetting the provision were
net charge-offs of $250 thousand, $252 thousand, and $94 thousand in 1993, 1992
and 1991, respectively. For a summary of the reserve for loan losses, see Note
4 of Notes to Investors Consolidated Financial Statements included herein.
The reserve for real estate losses was $135 thousand, $696 thousand,
and $522 thousand at December 31, 1993, 1992 and 1991, respectively. The
provision for real estate losses (included in other expenses) was $120
thousand, $286 thousand and $428 thousand in 1993, 1992, and 1991,
respectively. During 1993, the reserve declined because of the charge-off of
a $599 thousand loss that had been previously reserved for on a commercial
property first acquired in late 1989. The decline in commercial property
values since the late 1980's has largely abated. Accordingly, Investors'
foreclosures have been at a significantly lower level in the last three years
and the property values have generally been closer to the related loan values.
As a result, less loss reserve is required on commercial real estate. While
Investors has experienced occasional losses on foreclosed residential real
estate, its experience has generally been favorable. For a summary of the
reserve for real estate losses, see Note 8 of Notes to Investors' Consolidated
Financial Statements included elsewhere herein.
Asset/Liability Management and Interest Rate Risk. Investors'
continuing objective is to minimize the sensitivity of its earnings to interest
rate fluctuations by matching the repricing characteristics of its assets and
liabilities at a profitable interest rate spread. In order to achieve such
matching, Investors has emphasized the origination and retention of ARMs and
prime-rate related consumer lending for its own loan portfolio which have
interest rates that adjust periodically in accordance with market interest
rates. At December 31, 1993, loans that adjust with market interest rates
constituted 98.2% of Investors' permanent loan portfolio. Investors sells
substantially all of the long-term fixed-rate mortgages it originates.
Investors monitors its interest rate risk primarily through analysis
of the match between the repricing characteristics of its assets and
liabilities and the potential impact on net interest income from possible
interest rate movements. Investors has not utilized hedging techniques such as
financial futures or interest rate swaps.
The accompanying table sets forth Investors' interest rate sensitive
assets and interest rate sensitive liabilities at December 31, 1993 and the
related "gap" (the difference between the interest-earning assets and the
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<PAGE> 73
interest-bearing liabilities that reprice during such period) for each
repricing period. Loans are shown based on the repricing date or contractual
maturity date, if applicable, and then adjusted for scheduled amortization and
prepayment assumptions based on historical experience. Mortgage loans held for
sale are shown in the "6 months or less" category. All fixed rate and
noninterest-bearing checking and savings accounts have been adjusted for an
annual decay rate based on industry experience. While management believes this
assumption to be reasonable, these balances could decrease in a period of
generally rising interest rates. Certain advances and loan payments from
borrowers held under escrow (escrow accounts) are included in transaction
accounts while other escrow accounts are included in other borrowings depending
on the nature of the escrow deposit. These escrow accounts have been adjusted
for annual decay rates. Other borrowings also include subordinated debt.
Investors' cumulative one year gap was a positive $125 million or
12.3% of assets at December 31, 1993 versus a positive 4.4% at December 31,
1992. During 1993, assets in the "one year or less" categories increased $197
million while liabilities in the same categories increased $108 million. The
increase in assets for such categories was due to an increase in one year ARM
loans and prime rate related consumer loans originated and to a higher cash
position at year end. The increase in liabilities for these categories was due
to a $110 million increase in FHLB advances that had an initial rate maturity
of one year or less, matching up with the rate maturity of the corresponding
asset growth. The cumulative three year gap was $92.4 million or 9.1% of
assets at December 31, 1993. The three year gap was slightly less positive
than the 8.9% at December 31, 1992. Although Investors had a positive one
year gap at December 31, 1993, a rapid increase in market interest rates could
cause a decline in net interest rate spread because the adjustments on some ARM
loans may be limited by interest rate caps.
The recorded value of capitalized servicing rights is susceptible to
interest rate risk. At December 31, 1993, capitalized servicing rights were
$4.4 million. The capitalized amounts and the amortization is based partly on
prepayment assumptions of the underlying loans. Increased levels of
prepayments generally occur in a declining interest rate environment. When a
loan is prepaid, Investors ceases to collect servicing income on such loan. If
actual prepayments exceed Investors' assumptions in the future, adjustments to
the carrying value of servicing rights may be required. During 1993, 1992 and
1991, adjustments of $1.4 million, $1.5 million and $158 thousand,
respectively, were made to capitalized servicing rights on loans because of the
higher prepayments experienced in the related periods. For additional
information on these adjustments, see the discussion on loan servicing fees
included in the "Noninterest Income" section.
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<PAGE> 74
ASSET/LIABILITY MATURITIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, 1993
---------------------------------------------------------------------------------------
6 months 6 months 1 to 3 3 to 5 More than
or less to 1 year years years 5 years Total
-------- --------- ------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Mortgage loans . . . . . . . . $431,121 $264,199 $ 90,689 $ 295 $ 944 $787,248
Consumer loans . . . . . . . . 65,939 13,419 4,451 5,869 1,446 91,124
Cash and investment
securities . . . . . . . . 76,626 3,091 13,119 6,908 1,907 101,651
------- -------- ------- ------ ----- -------
Total rate sensitive
assets . . . . . . . . . . $573,686 $280,709 $108,259 $ 13,072 $ 4,297 $980,023
======= ======== ======== ======== ======== ========
Liabilities:
Fixed maturity deposits . . . $107,315 $138,882 $100,635 $ 22,657 $369,489
Transaction accounts . . . . . 11,166 9,822 24,828 12,117 $ 27,208 85,141
Money market accounts . . . . 146,132 146,132
FHLB advances . . . . . . . . 210,000 102,000 13,000 325,000
Other borrowings . . . . . . . 738 3,079 2,629 1,632 26,599 34,677
-------- -------- -------- ------ ------- -------
Total rate sensitive
liabilities . . . . . . . . $475,351 $253,783 $141,092 $ 36,406 $ 53,807 $960,439
======= ======= ======= ====== ====== =======
Gap . . . . . . . . . . . $ 98,335 $ 26,926 $(32,833) $(23,334) $(49,510) $19,584
Cumulative gap . . . . . . . . $125,261 $ 92,428 $69,094 $19,584
Cumulative gap to
total assets . . . . . . . 9.7% 12.3% 9.1% 6.8% 1.9%
</TABLE>
Liquidity. Cash and cash equivalents increased $18.1 million during 1993
to $58.3 million at December 31, 1993. The increase resulted from $191
million in net cash provided by financing activities less $159 million in net
cash used by investing activities and $14.4 million in net cash used by
operating activities.
Because of the success in significantly increasing deposits through more
competitive pricing during 1993, Investors reduced the reliance on FHLB
advances to fund lending activities. Investors expects continued asset growth
in the future and plans to continue funding this growth with deposits and FHLB
advances. Increases in retail deposits are expected from new retail bank
locations opened in late 1993, the opening of additional retail bank locations
in 1994, and by continued competitive deposit pricing. Based on discussions
with the FHLB, Investors has additional borrowing capacity from the FHLB and
will use advances as needed or appropriate.
Cash and cash equivalents totaled $40.2 million at December 31, 1992, an
increase of $22.4 million from December 31, 1991. This increase was the result
of $12.9 million in net cash provided from operating activities and $200
million in net cash provided by financing activities less $191 million in net
cash used by investing activities. Cash and cash equivalents increased $4.1
million during 1991. This increase resulted from $36.8 million in net cash
provided by investing activities less $24.9 million in net cash used by
operating activities and $7.7 million in net cash used by financing activities.
Net cash provided by operating activities was from a number of sources in
1993 and 1992 as detailed in the Statement of Cash Flows. Net cash used by
operating activities in 1991 was primarily due to the $26.8 million net
increase in mortgage loans held for sale.
During 1993, $148 million of the net cash used by investing activities
funded an increase in loans. Of this growth, $120 million was in mortgage
loans as customer demand continued. Consumer loans made up the
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<PAGE> 75
remainder of the increase. Funds were also invested in investment securities
for a net increase of $9.6 million to help Investors meet its growing liquidity
requirement caused by the asset growth. Of the net cash used by investing
activities in 1992, $185 million was used to fund a net increase in loans.
Approximately $149 million of this growth was in mortgage loans with consumer
loans causing the remaining increase. In 1991, $33.1 million of the net cash
provided from investing activities was from a net decrease in loans. This was
the result of a decline in Investors' ARM portfolio due to prepayments and
conversions to fixed rate loans. These converted loans were then sold in the
secondary market.
During 1993, the net cash provided by financing activities was from a $91
million increase in deposits and a $100 million net increase in FHLB advances.
These funds were used to fund loan growth during the year. The net cash
provided by financing activities in 1992 was due to a net increase of $175
million in FHLB advances used to fund loan growth and the $22.1 million of net
proceeds from the issuance of subordinated notes. Deposits increased only $3.1
million as Investors had difficulty attracting deposits in the low interest
rate environment. The net cash used by financing activities in 1991 was the
result of a net decrease in FHLB advances of $15 million which was partially
offset by a $4.7 million increase in deposits. The increase in deposits was
low due to Investors limiting its asset growth in 1991 to increase capital
ratios and to continue to comply with regulatory capital requirements. FHLB
advances provided funding not met by other sources. FHLB borrowings were $325
million at December 31, 1993 and $225 million at December 31, 1992. The
maximum FHLB borrowings were $325 million in 1993 compared to $243 million and
$75 million for 1992 and 1991, respectively.
At December 31, 1993, Investors had aggregate loan funding commitments
(including committed lines of credit) of $94.5 million and aggregate
commitments for the sale of loans of $126 million. Investors' expected
proceeds from loan sales and its ability to obtain advances from the FHLB
exceeded its funding commitments at December 31, 1993.
Investors Bank is required by the OTS to maintain "liquidity" (cash and
eligible investments) in an amount equal to a certain percentage of its
deposits and short-term borrowings to assure its ability to meet demands for
withdrawals and repayment of short-term borrowings. The percentage, which may
be changed at any time by the OTS, is currently 5%. Management believes that
the liquidity maintained by the Bank, together with the sources of funds
discussed above, is adequate to meet contingencies.
Capital Management. Investors' stockholders' equity increased 20.7% to
$47.2 million at December 31, 1993 from $39.1 million at December 31, 1992.
This increase was primarily the result of net earnings retained of $7.8
million. Investors began paying quarterly common dividends in the second
quarter of 1992 at the annual rate of $.24 per share. For 1993, Investors
increased the dividend rate 56.3% to $.375 per share and has declared that the
1994 dividend will increase 33.3% to an annual rate of $.50 per share. Book
value per common share was $11.90 at December 31, 1993 compared to $9.60 at
December 31, 1992.
Investors further increased its capital position in 1992 by issuing $23.0
million of 10-year subordinated notes. Of the net proceeds of $22.1 million,
$12.0 million was contributed to Investors Bank's paid in capital during 1992
and an additional $5.0 million in 1993. The balance of the net proceeds
remains at Investors to support further growth of Investors Bank's operations.
As a result of the additional capital received in 1992 and 1993,
Investors Bank is categorized by regulations as a "well capitalized"
institution, the highest level obtainable. This categorization will allow
Investors' Bank to have a lower deposit insurance premium cost and to have more
operational flexibility. For additional information on capital requirements,
see Note 11 of Notes to Consolidated Financial Statements of this report.
Accounting for Impaired Loans. In May 1993, the Financial Accounting
Standards Board (FASB) issued statement of Financial Accounting Standards
(SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan". SFAS No.
114 requires that expected loss of interest income on impaired loans be taken
into account when calculating loan loss reserves. SFAS No. 114 requires that
specified impaired loans be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or the fair
value of collateral for secured loans. SFAS No. 114 does not apply to large
groups of small balance, homogeneous loans
69
<PAGE> 76
that are collectively evaluated for impairment. SFAS No. 114 is effective for
years beginning after December 15, 1994. Management does not expect the
adoption of SFAS No. 114 to have a material effect on Investors' consolidated
financial statements.
Accounting for Investments. In May 1993, the FASB issued SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". SFAS No.
115 requires debt and equity securities to be classified into one of three
categories: held to maturity, held for trading, or available for sale.
Securities held to maturity are limited to debt securities that the holder has
the positive intent and ability to hold to maturity; these securities are
reported at amortized cost. Securities held for trading are limited to debt
and equity securities that are held principally to be sold in the near term;
these securities are reported at fair value, and unrealized gains and losses
are reflected in earnings. Securities held as available for sale consist of
all other securities; these securities are reported at fair value, and
unrealized gains and losses, net of taxes, are not reflected in earnings but
are reflected as a separate component of stockholders' equity. Under SFAS No.
115, securities that could be sold in the future because of changes in interest
rates or other factors may not be classified as held to maturity. SFAS No. 115
is effective for years beginning after December 15, 1993. Management does not
expect the adoption of SFAS No. 115 to have a material effect on Investors'
consolidated financial statements.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Additional information concerning Investors, including certain
information regarding voting securities of Investors and principal holders
thereof, and information concerning directors and executive officers of
Investors, is included in the documents filed by Investors with the Commission
under the Exchange Act.
OPINIONS
The validity of the securities offered hereby will be passed upon for
Firstar by Howard H. Hopwood III, Senior Vice President and General Counsel of
Firstar. 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. The opinion of counsel described
under the caption "PROPOSED MERGER--Certain Federal Income Tax Consequences"
has been rendered by Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, WI
53202.
EXPERTS
The consolidated financial statements of Firstar Corporation 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 Investors Bank Corp. and
subsidiary 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
included elsewhere in the registration statement, have been incorporated by
reference and included herein in reliance upon the report of KMPG Peat Marwick
LLP, independent certified public accountants and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick
LLP refers to a change in the method of accounting for income taxes.
STOCKHOLDER PROPOSALS
If the Merger has not been consummated, pursuant to Rule 14a-8 under the
Exchange Act, Investors stockholders may present proper proposals for inclusion
in Investors' proxy statement for consideration at the next annual meeting of
its stockholders by submitting their proposals to Investors in a timely manner.
As noted in Investors' proxy statement relating to the 1994 annual meeting of
Investors stockholders, in order to be so included
70
<PAGE> 77
for the 1995 annual meeting stockholder proposals must have been received by
Investors no later than December 2, 1994.
Pursuant to Rule 14a-8 under the Exchange Act, Firstar stockholders may
present proper proposals for inclusion in Firstar's proxy statement for
consideration at the next annual meeting of its stockholders 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 stockholders, 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.
71
<PAGE> 78
PRO FORMA COMBINING FINANCIAL STATEMENTS
The following unaudited pro forma combining capitalization, balance sheet
and statement of income are based upon the historical results of Firstar
Corporation and Investors giving effect to the acquisition accounted for as a
pooling of interests. Pro forma adjustments, and the assumptions on which they
are based, are described in the accompanying footnotes to the pro forma
combining financial statements. The other pending acquisitions refers to and
includes the historical results and pro forma adjustments to effect the
acquisitions of three additional companies as described in the accompanying
footnotes. These financial statements should be read in conjunction with the
historical financial statements of Firstar and Investors, [incorporated by
reference into] this Proxy Statement-Prospectus. The pro forma combining
financial statements are not necessarily indicative of the results that would
have occurred had the companies constituted a single entity during the
respective periods, nor are they indicative of future results of operations.
FIRSTAR CORPORATION
PRO FORMA COMBINING CAPITALIZATION
SEPTEMBER 30, 1994
(UNAUDITIED)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED OTHER PENDING
FIRSTAR INVESTORS PRO FORMA FIRSTAR & ACQUISITIONS PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS INVESTORS PRO FORMA (3) COMBINED
---------- --------- ----------- --------- ------------- --------
(thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Long-term Debt:*
10.25% notes due 5-1-98 . . $78,405 $ $ $78,405 $ $78,405
10% notes due 6-1-96 . . . 43,950 43,950 43,950
11.5% notes due 1-5-96 . . 2,706 2,706 2,706
14% notes due 10-17-96 . . 1,500 1,500
9.25% notes due 12-15-02 . 23,000 23,000 23,000
10% notes due 4-1-96 . . . 391 391 391
Other . . . . . . . . . . . 57 57 57
--------- --------- --------- --------- --------- --------
Total . . . . . . . . . . 125,118 23,391 0 148,509 1,500 150,009
Stockholders' Equity:
Preferred stock . . . . . . 3 (3)(1) 19,713 19,713
Common stock . . . . . . . 81,233 35 3,766(1) 85,034 11,723 96,757
Capital surplus . . . . . . 150,729 20,722 (12,113)(1) 159,338 53,171 212,509
Retained earnings . . . . . 1,024,825 34,363 (1,406)(2) 1,057,782 100,942 1,158,724
Net unrealized losses
on securites available
for sale . . . . . . . . (2,971) (2,971)
Treasury stock . . . . . . (15,221) (15,221) 11,811 (3,410)
Restricted stock . . . . . (555) (1,035) (1,590) (1,590)
---------- --------- ---------- ---------- -------- ---------
Total stockholders' equity 1,241,011 54,088 (9,756) 1,285,343 194,389 1,479,732
--------- --------- ---------- --------- ------- ---------
Total capital . . . . . . $ 1,366,129 $77,479 $(9,756) $ 1,433,852 $ 195,889 $ 1,629,741
========== ====== ======= ========== ======== ==========
</TABLE>
* Qualifying as secondary capital.
72
<PAGE> 79
FIRSTAR CORPORATION
PRO FORMA COMBINING BALANCE SHEET
SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA OTHER
COMBINED PENDING
FIRSTAR INVESTORS PRO FORMA FIRSTAR & ACQUISITIONS PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS INVESTORS PRO FORMA(3) COMBINED
---------- ---------- ----------- --------- ------------ --------
(thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash and due from banks . . . . . . $945,890 $ 20,328 $(8,899)(1,2) $957,319 $115,837 $1,073,156
Short-term investments . . . . . . 362,833 0 0 362,833 13,719 376,552
Securities available for sale . . . 5,502 0 0 5,502 279,044 284,546
Securities held to maturity . . . . 3,006,724 45,204 0 3,051,928 407,840 3,459,768
Total loans . . . . . . . . . . . . 9,520,174 972,388 0 10,492,562 1,358,202 11,850,764
Less reserve for loan losses . . . (171,734) (3,349) 0 (175,083) (19,308) (194,391)
-------- ---------- ----------- ---------- ---------- ----------
Loans - net . . . . . . . . . . . . 9,348,440 969,039 0 10,317,479 1,338,894 11,656,373
Bank premises and equipment . . . . 273,988 15,962 0 289,950 39,161 329,111
Other assets . . . . . . . . . . . 293,842 14,914 (1,864)(2) 306,892 45,234 352,126
Deposit base intangible . . . . . . 18,092 0 0 18,092 0 18,092
Goodwill . . . . . . . . . . . . . 70,812 0 0 70,812 43,046 113,858
Mortgage servicing rights . . . . . 3,081 3,993 0 7,074 0 7,074
----------- ----------- ---------- ----------- ---------- -----------
Total assets . . . . . . . . . . $14,329,204 $1,069,440 $ (10,763) $15,387,881 $ 2,282,775 $17,670,656
========== ========= ========= ========== ========== ==========
Liabilities and Equity:
Deposits . . . . . . . . . . . . . $10,647,946 $ 612,849 $ 0 $11,260,795 $ 1,974,784 $13,235,579
Short-term borrowed funds . . . . . 2,071,589 260,000 0 2,331,589 78,710 2,410,299
Long-term debt - secured capital . 125,118 23,391 0 148,509 1,500 150,009
- other . . . . . . . 150 105,000 0 105,150 19,333 124,483
Other liabilities . . . . . . . . . 240,853 14,112 (1,007)(2) 253,958 13,812 267,770
Minority interest . . . . . . . . . 2,537 0 0 2,537 247 2,784
------------ ------------- ------------- ------------ ----------- -----------
Total liabilities . . . . . . . 13,088,193 1,015,352 (1,007) 14,102,538 2,088,386 16,190,924
Preferred stock . . . . . . . . . . 3 (3)(1) 0 19,713 19,713
Common stock . . . . . . . . . . . 81,233 35 3,766(1) 85,034 11,723 96,757
Capital surplus . . . . . . . . . . 150,729 20,722 (12,113)(1) 159,338 53,171 212,509
Retained earnings . . . . . . . . . 1,024,825 34,363 (1,406)(2) 1,057,782 100,942 1,158,724
Net unrealized losses on securities
available for sale . . . . . . . 0 0 0 (2,971) (2,971)
Treasury stock . . . . . . . . . . (15,221) 0 0 (15,221) 11,811 (3,410)
Restricted stock . . . . . . . . . (555) (1,035) 0 (1,590) 0 (1,590)
------------ ---------- ------------ ---------- --------- ---------
Total stockholders' equity . . . 1,241,011 54,088 (9,756) 1,285,343 194,389 1,479,732
----------- --------- --------- ----------- ---------- -----------
Total liabilities and
stockholders' equity . . . . . $14,329,204 $1,069,440 $ (10,763) $15,387,881 $2,282,775 $17,670,656
========== ========= ========= ========== ========= ==========
</TABLE>
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<PAGE> 80
FIRSTAR CORPORATION
PRO FORMA COMBINING STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
OTHER
PRO FORMA PENDING
COMBINED ACQUISITION
FIRSTAR INVESTORS PRO FORMA FIRSTAR & S PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS(2) INVESTORS PRO FORMA COMBINED
---------- ---------- -------------- --------- --------- --------
(thousands of dollars, except per share)
<S> <C> <C> <C> <C> <C> <C>
Interest revenue:
Loans . . . . . . . . . . . . . . . $549,760 $44,270 $ $594,030 $82,982 $677,012
Investment securities . . . . . . . 121,091 1,861 122,952 23,994 146,946
Other . . . . . . . . . . . . . . . 6,969 1,026 7,995 454 8,449
--------- -------- ----------- -------- -------- ---------
Total interest revenue . . . . . 677,820 47,157 724,977 107,430 832,407
Interest Expense:
Deposits . . . . . . . . . . . . . 186,242 16,027 202,269 36,538 238,807
Short-term borrowed funds . . . . . 41,832 6,478 48,310 2,328 50,638
Long-term debt . . . . . . . . . . 9,640 4,887 14,527 1,172 15,699
--------- --------- ------------ ---------- --------- ----------
Total interest expense . . . . . 237,714 27,392 265,106 40,038 305,144
--------- --------- ------------ ---------- --------- ----------
Net interest revenue . . . . . . . 440,106 19,765 459,871 67,392 527,263
Provision for loan losses . . . . . 8,274 334 8,608 1,754 10,362
--------- --------- ------------ ---------- --------- ----------
Net interest revenue after loan
loss provision . . . . . . . . 431,832 19,431 451,263 65,638 516,901
Other Operating Revenue:
Trust and investment management fees 88,928 0 88,928 2,115 91,043
Service charges on deposit accounts 54,716 288 55,004 7,976 62,980
Credit card service revenue . . . . 39,622 0 39,622 0 39,622
Mortgage banking . . . . . . . . . 12,090 9,197 (2,413) 18,874 799 19,673
Gains on the sales of securities . 77 0 77 1,910 1,987
Other revenue . . . . . . . . . . . 54,179 5,269 59,448 7,488 66,936
--------- -------- ------------ ---------- -------- ---------
Total other operating revenue . 249,612 14,754 (2,413) 261,953 20,288 282,241
Other Operating Expense:
Salaries and employee benefits . . 243,726 11,624 255,350 29,961 285,311
Net occupancy and equipment expenses 71,795 3,040 74,835 10,313 85,148
Other operating expense . . . . . . 139,144 6,466 145,610 22,993 168,603
--------- ---------- ------------ --------- --------- ---------
Total other operating expense . 454,665 21,130 475,795 63,267 539,062
--------- ---------- ------------ --------- --------- ---------
Income before income taxes . . . . . . 226,779 13,055 (2,413) 237,421 22,659 260,080
Applicable income taxes . . . . . . . . 75,183 5,450 (1,007) 79,626 8,132 87,758
--------- ---------- ----------- --------- --------- ---------
Net income . . . . . . . . . . . . . . $ 151,596 $ 7,605 $ (1,406) $ 157,795 $ 14,527 $ 172,322
========= ========== ========== ========= ========= =========
Net income applicable to common . . . . $151,596 $6,979 (1,406) $157,169 $13,478 $170,647
Net income per common share . . . . . . $2.36 $2.34 $2.22
Average number of common shares
outstanding (4) . . . . . . . . . . 64,299,467 2,990,279 67,289,746 9,452,227 76,741,973
</TABLE>
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<PAGE> 81
FIRSTAR CORPORATION
PRO FORMA COMBINING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED OTHER PENDING
FIRSTAR INVESTORS FIRSTAR & ACQUISITIONS PRO FORMA
HISTORICAL HISTORICAL INVESTORS PRO FORMA COMBINED
---------- ---------- --------- --------- --------
(thousands of dollars, except per share)
<S> <C> <C> <C> <C> <C>
Interest Revenue:
Loans . . . . . . . . . . . . . . . $685,630 $54,250 $739,780 $106,682 $846,462
Securities . . . . . . . . . . . . 174,652 2,397 177,049 26,756 203,805
Other . . . . . . . . . . . . . . . 6,772 1,122 7,894 879 8,773
--------- -------- -------- -------- ---------
Total interest revenue . . . . . 866,954 57,769 924,723 134,317 1,059,040
Interest Expense:
Deposits . . . . . . . . . . . . . 261,634 19,997 281,631 48,241 329,872
Short-term borrowed funds . . . . . 23,811 5,062 28,873 1,392 30,265
Long-term debt . . . . . . . . . . 13,453 7,592 21,045 2,241 23,286
--------- --------- ---------- --------- ----------
Total interest expense . . . . . 298,898 32,651 331,549 51,874 383,423
--------- --------- ---------- --------- ----------
Net interest revenue . . . . . . . 568,056 25,118 593,174 82,443 675,617
Provision for loan losses . . . . . 24,567 632 25,199 8,750 33,949
--------- --------- ---------- --------- ----------
Net interest revenue after loan
loss provision . . . . . . . . 543,489 24,486 567,975 73,693 641,668
Other Operating Revenue:
Trust and investment management fees 110,185 0 110,185 2,585 112,770
Service charges on deposit accounts 74,071 296 74,367 10,794 85,161
Credit card service revenue . . . . 53,316 0 53,316 0 53,316
Mortgage banking revenue . . . . . 26,774 13,313 40,087 2,491 42,578
Gains on the sales of securities . 182 0 182 287 469
Other revenue . . . . . . . . . . . 77,737 5,021 82,758 9,449 92,207
--------- -------- ---------- -------- ---------
Total other operating revenue . 342,265 18,630 360,895 25,606 386,501
Other Operating Expense:
Salaries and employee benefits . . 316,848 15,430 332,278 36,274 368,552
Net occupancy and equipment expense 96,870 3,814 100,684 13,027 113,711
Other operating expenses . . . . . 174,026 7,218 181,244 31,755 212,999
--------- ---------- --------- --------- ---------
Total other operating expense . 587,744 26,462 614,206 81,056 695,262
--------- ---------- --------- --------- ---------
Income before income taxes . . . . . . 298,010 16,654 314,664 18,243 332,907
Applicable income taxes . . . . . . . . 93,716 6,629 100,345 4,984 105,329
--------- ---------- --------- --------- ---------
Net income . . . . . . . . . . . . . . $ 204,294 $ 10,025 $ 214,319 $ 13,259 $ 227,578
========= ========== ========= ========= =========
Net income applicable to common . . . . $201,028 $9,080 $210,108 $11,464 $221,572
Net income per common share . . . . . . $3.15 $3.15 $2.92
Average number of common shares
outstanding (4) . . . . . . . . . . 63,746,924 2,864,083 66,611,007 9,334,272 79,945,279
</TABLE>
75
<PAGE> 82
FIRSTAR CORPORATION
PRO FORMA COMBINING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1992
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED OTHER PENDING
FIRSTAR INVESTORS FIRSTAR & ACQUISITIONS PRO FORMA
HISTORICAL HISTORICAL INVESTORS PRO FORMA COMBINED
---------- ---------- --------- --------- --------
(thousands of dollars, except per share)
<S> <C> <C> <C> <C> <C>
Interest Revenue:
Loans . . . . . . . . . . . . . . . $693,594 $49,449 $743,043 $114,458 $857,501
Securities . . . . . . . . . . . . 191,736 2,263 193,999 32,009 226,008
Other . . . . . . . . . . . . . . . 13,191 804 13,995 3,348 17,343
--------- -------- -------- -------- ---------
Total interest revenue . . . . . 898,521 52,516 951,037 149,815 1,100,852
Interest Expense:
Deposits . . . . . . . . . . . . . 321,405 23,747 345,152 63,586 408,738
Short-term borrowed funds . . . . . 23,423 2,841 26,264 2,065 28,329
Long-term debt . . . . . . . . . . 14,541 3,766 18,307 2,863 21,170
--------- --------- ---------- --------- ----------
Total interest expense . . . . . 359,369 30,354 389,723 68,514 458,237
--------- --------- ---------- --------- ----------
Net interest revenue . . . . . . . 539,152 22,162 561,314 81,301 642,615
Provision for loan losses . . . . . 44,821 869 45,690 5,777 51,467
--------- --------- ---------- --------- ----------
Net interest revenue after loan
loss provision . . . . . . . . 494,331 21,293 515,624 75,524 591,148
Other Operating Revenue:
Trust and investment management fees 95,926 0 95,926 2,548 98,474
Service charges on deposit accounts 66,301 220 66,521 10,844 77,365
Credit card service revenue . . . . 51,867 0 51,867 0 51,867
Mortgage banking revenue . . . . . 13,058 11,178 24,236 2,354 26,590
Gains on the sales of securities . 981 0 981 3,714 4,695
Other revenue . . . . . . . . . . . 72,634 2,857 75,491 9,060 84,551
--------- -------- ---------- -------- ---------
Total other operating revenue . 300,767 14,255 315,022 28,520 343,542
Other Operating Expense:
Salaries and employee benefits . . 287,607 12,651 300,258 33,495 333,753
Net occupancy and equipment expense 93,128 3,407 96,535 12,311 108,846
Other operating expenses . . . . . 176,831 6,451 183,282 35,666 218,948
--------- ---------- --------- --------- ---------
Total other operating expense . 587,566 22,509 580,075 81,472 661,547
--------- ---------- --------- --------- ---------
Income before income taxes . . . . . . 237,532 13,039 250,571 22,572 273,143
Applicable income taxes . . . . . . . . 71,547 5,227 76,774 6,515 83,289
--------- ---------- --------- --------- ---------
Net income . . . . . . . . . . . . . . $ 165,985 $ 7,812 $ 173,797 $ 16,057 $ 189,854
========= ========== ========= ========= =========
Net income applicable to common . . . . $162,238 $6,844 $169,082 $14,625 $183,707
Net income per common share . . . . . . $2.62 $2.61 $2.49
Average number of common shares
outstanding (4) . . . . . . . . . . 61,879,175 2,794,713 64,673,888 9,119,399 73,793,287
</TABLE>
76
<PAGE> 83
FIRSTAR CORPORATION
PRO FORMA COMBINING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1991
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED OTHER PENDING
FIRSTAR INVESTORS FIRSTAR & ACQUISITIONS PRO FORMA
HISTORICAL HISTORICAL INVESTORS PRO FORMA COMBINED
---------- ---------- --------- --------- --------
(thousands of dollars, except per share)
<S> <C> <C> <C> <C> <C>
Interest Revenue:
Loans . . . . . . . . . . . . . . . $757,069 $51,728 $808,797 $129,930 $938,727
Securities . . . . . . . . . . . . 206,577 2,561 209,138 39,078 248,216
Other . . . . . . . . . . . . . . . 18,033 504 18,537 5,508 24,045
--------- -------- -------- -------- ---------
Total interest revenue . . . . . 981,679 54,793 1,036,472 174,516 1,210,988
Interest Expense:
Deposits . . . . . . . . . . . . . 438,799 32,706 471,505 94,716 566,221
Short-term borrowed funds . . . . . 45,434 3,553 48,897 3,780 52,767
Long-term debt . . . . . . . . . . 16,850 395 17,245 3,741 20,986
--------- --------- ---------- --------- ----------
Total interest expense . . . . . 501,083 36,654 537,737 102,237 639,974
--------- --------- ---------- --------- ----------
Net interest revenue . . . . . . . 480,596 18,139 498,735 72,279 571,014
Provision for loan losses . . . . . 50,276 1,010 51,286 4,902 56,188
--------- --------- ---------- --------- ----------
Net interest revenue after loan
loss provision . . . . . . . . 430,320 17,129 447,449 67,377 514,826
Other Operating Revenue:
Trust and investment management fees 80,813 0 80,813 2,382 83,195
Service charges on deposit accounts 59,368 174 59,542 10,283 69,825
Credit card service revenue . . . . 54,594 0 54,594 0 54,594
Mortgage banking revenue . . . . . 7,922 6,399 14,321 2,412 16,733
Gains on the sales of securities . 1,619 0 1,619 1,230 2,849
Other revenue . . . . . . . . . . . 68,219 3,183 71,402 7,412 78,814
--------- -------- ---------- -------- ---------
Total other operating revenue . 272,535 9,756 282,291 23,719 306,010
Other Operating Expense:
Salaries and employee benefits . . 266,757 9,612 276,369 32,887 309,256
Net occupancy and equipment expense 84,735 2,981 87,716 11,742 99,458
Other operating expenses . . . . . 164,044 5,859 169,903 26,976 196,879
--------- ---------- --------- --------- ---------
Total other operating expense . 515,536 18,452 533,988 71,605 605,593
--------- ---------- --------- --------- ---------
Income before income taxes . . . . . . 187,319 8,433 195,752 19,491 215,243
Applicable income taxes . . . . . . . . 52,988 3,377 56,385 4,938 61,323
--------- ---------- --------- --------- ---------
Net income . . . . . . . . . . . . . . $ 134,331 $ 5,036 $ 139,367 $ 14,553 $ 153,920
========= ========== ========= ========= =========
Net income applicable to common . . . . $130,277 $4,931 $135,208 $14,072 $149,280
Net income per common share . . . . . . $2.14 $2.12 $2.06
Average number of common shares
outstanding (4) . . . . . . . . . . 60,997,625 2,648,605 63,646,230 8,988,346 72,634,576
</TABLE>
77
<PAGE> 84
FIRSTAR CORPORATION
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
(UNAUDITED)
1) The acquisition of Investors will be accounted for as a pooling of
interests. Firstar will issue 3,040,982 shares of common stock in
exchange for all the outstanding shares of Investors Common Stock
based on the .8676 Exchange Ratio. Firstar will pay $8,350,000 for
the Investors Preferred Stock at completion of the Merger, which
payment is reflected in the pro forma balance sheet.
2) Represents the elimination of the gain realized by Investors from the
sale of mortgage servicing rights to a subsidiary of Firstar.
Anticipated nonrecurring expenses associated with the transaction
totaling $7.9 million, or $4.7 million after tax, are not included in
the pro forma financial statements.
3) [The acquisition of First Colonial Bankshares Corporation will be
accounted for as a pooling of interests. Firstar will issue 7,720,696
shares of common stock in exchange for all the outstanding shares of
First Colonial Bankshares Corporation Common Stock. Firstar will also
issue up to 39,700 shares of a new series D convertible preferred
stock for all the outstanding preference shares of First Colonial.]
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 common stock for all the
outstanding shares of First Southeast Banking Corp.
The acquisition of First Moline Financial Corp. will be accounted for
as a purchase. Firstar will issue 313,712 shares of common stock in
exchange for all the outstanding shares of First Moline Financial
Corp. 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 Financial Corp. 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 nonrecurring expenses associated with these transactions
totaling $28.1 million, or $17.3 million after tax, are not included
in the pro forma financial statements.
4) Pro forma combined and average shares outstanding data reflects the
exchange ratio of .8676 shares of Firstar Common Stock for each share
of Investors 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 .7725 shares of Firstar Common Stock for
each share of First Colonial common stock.
78
<PAGE> 85
INDEX TO INVESTORS FINANCIAL STATEMENTS
<TABLE>
Page
----
<S> <C>
AUDITED ANNUAL FINANCIAL STATEMENTS
Consolidated Statements of Earnings for the years ended December 31, 1993,
1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets at December 31, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1993, 1992 and 1991 . . . . F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1993,
1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Report of KPMG Peat Marwick LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-29
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Statements of Earnings for each of the nine month and three month periods ended
September 30, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-30
Consolidated Balance Sheets at September 30, 1994 and December 31, 1993 . . . . . . . . . . . . . . . . . . . . F-31
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-33
</TABLE>
<PAGE> 86
INVESTORS BANK CORP. AND SUBSIDIARY
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Interest Income:
Interest on loans $54,250,037 $49,449,041 $51,727,598
Interest on cash and investments 2,396,639 2,262,820 2,560,860
Interest and dividends on other assets 1,122,410 803,998 504,014
----------- ----------- -----------
TOTAL INTEREST INCOME 57,769,086 52,515,859 54,792,472
---------- ---------- ----------
Interest Expense:
Interest on deposits (Note 9) 19,997,333 23,747,373 32,705,935
Interest on borrowings (Note 10) 12,654,143 6,606,392 3,947,856
---------- ----------- -----------
TOTAL INTEREST EXPENSE 32,651,476 30,353,765 36,653,791
---------- ---------- ----------
NET INTEREST INCOME 25,117,610 22,162,094 18,138,681
PROVISION FOR LOAN LOSSES (NOTE 4) 631,446 868,758 1,009,513
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES 24,486,164 21,293,336 17,129,168
---------- ---------- ----------
Noninterest Income:
Mortgage banking (Note 5) 13,313,359 11,178,090 6,399,077
Loan servicing fees (Note 6) 2,829,749 1,490,797 2,201,121
Commissions on title insurance sales 935,681 135,081
Commissions on annuity sales 560,733 575,053 510,482
Other 990,761 875,571 644,860
----------- ----------- -----------
TOTAL NONINTEREST INCOME 18,630,283 14,254,592 9,755,540
---------- ---------- -----------
Noninterest Expense:
Employee compensation and benefits 15,429,639 12,650,501 9,611,891
Occupancy and equipment 3,813,908 3,406,693 2,981,123
Advertising 926,178 666,779 582,329
Federal deposit insurance premiums 1,224,472 1,172,908 1,168,851
Other 5,067,996 4,611,767 4,108,272
----------- ----------- -----------
TOTAL NONINTEREST EXPENSE 26,462,193 22,508,648 18,452,466
---------- ---------- ----------
EARNINGS BEFORE INCOME TAX EXPENSE AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 16,654,254 13,039,280 8,432,242
INCOME TAX EXPENSE (NOTE 12) 6,753,835 5,227,251 3,396,603
------------ ------------ ------------
EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 9,900,419 7,812,029 5,035,639
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (NOTE 2) 125,000
----------- ------------- ------------
NET EARNINGS $10,025,419 $7,812,029 $5,035,639
========== ========= =========
NET EARNINGS AVAILABLE FOR COMMON STOCKHOLDERS $9,079,707 $6,844,175 $4,930,788
========= ========= =========
EARNINGS PER COMMON SHARE:
BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $2.46 $1.98 $1.51
CUMULATIVE EFFECT OF ACCOUNTING CHANGE .03
------ ----- ----
NET EARNINGS $2.49 $1.98 $1.51
==== ==== ====
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 87
INVESTORS BANK CORP. AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------
1993 1992
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $58,314,515 $40,179,006
Investment securities (market value of $28,021,177 and
$18,596,590, respectively) (Note 3) 27,778,989 18,171,509
Mortgage loans held for sale (Note 5) 88,351,696 64,662,326
Mortgage loans (Note 4) 698,895,887 579,393,797
Consumer loans (Note 4) 91,124,400 66,049,661
Federal Home Loan Bank stock (Notes 10 and 11) 16,250,000 12,413,800
Capitalized servicing rights (Note 6) 4,425,281 5,794,837
Office properties and equipment (Note 7) 15,731,333 14,192,534
Accrued interest receivable (Notes 3, 4 and 5) 3,653,453 3,475,023
Foreclosed real estate (Note 8) 6,674,799 7,238,396
Other assets 5,884,713 4,273,206
------------ ------------
Total assets $1,017,085,066 $815,844,095
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits (Note 9) $603,412,708 $512,352,295
Notes payable (Note 10) 325,000,000 225,000,000
Advances and loan payments from borrowers held under
escrow 8,409,797 6,163,340
Income taxes (Note 12) 549,263 1,098,207
Subordinated debt (Note 10) 25,800,000 25,800,000
Other liabilities 6,760,035 6,362,069
------------ ------------
Total liabilities 969,931,803 776,775,911
------------ ------------
Stockholders' Equity (Note 13):
Preferred stock, par value $.01, 1,000,000 shares
authorized, 303,640 shares issued and outstanding 3,036 3,036
Common stock, par value $.01, 5,000,000 shares
authorized, 3,325,522 and 2,458,846 shares issued and
outstanding, respectively 33,255 24,589
Additional paid-in capital 19,111,504 18,650,901
Unamortized restricted stock (675,808) (449,964)
Retained earnings 28,681,276 20,839,622
---------- ----------
Total stockholders' equity 47,153,263 39,068,184
---------- ----------
Total liabilities and stockholders' equity $1,017,085,066 $815,844,095
============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 88
INVESTORS BANK CORP. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
ADDITIONAL UNAMORTIZED
PREFERRED COMMON PAID-IN RESTRICTED RETAINED
STOCK STOCK CAPITAL STOCK EARNINGS TOTAL
----- ----- ------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1990 $22,740 $10,098,256 $9,644,561 $19,765,557
Issuance of 303,640
preferred shares $3,036 6,769,685 6,772,721
Dividends on preferred stock (104,851) (104,851)
Exercise of options 328 145,278 145,606
Exercise of warrants 1,042 858,917 859,959
Installment payments on
common stock issued to
employees 179,793 179,793
Net earnings 5,035,639 5,035,639
-------- -------- ---------- ---------- ----------- -----------
Balances at December 31 , 1991 3,036 24,110 18,051,929 14,575,349 32,654,424
Issuance of 45,973
restricted shares 345 499,615 $(499,960)
Amortization of restricted
stock 49,996 49,996
Dividends on preferred stock (967,854) (967,854)
Dividends on common stock (579,902) (579,902)
Exercise of options 134 60,321 60,455
Installment payments on
common stock issued to
employees 39,036 39,036
Net earnings 7,812,029 7,812,029
--------- -------- ---------- --------- ----------- -----------
Balances at December 31, 1992 3,036 24,589 18,650,901 (449,964) 20,839,622 39,068,184
Remeasurement of restricted
stock 310,320 (310,320)
Amortization of restricted
stock 84,476 84,476
Dividends on preferred stock (945,712) (945,712)
Dividends on common stock (1,238,053) (1,238,053)
Exercise of options 351 155,648 155,999
Exercise of warrants 2 2,948 2,950
Net earnings 10,025,419 10,025,419
Four-for-three stock split 8,313 (8,313)
------ ------- ----------- --------- ----------- -----------
Balances at December 31, 1993 $3,036 $33,255 $19,111,504 $(675,808) $28,681,276 $47,153,263
====== ======= =========== ========= =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 89
INVESTORS BANK CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings $10,025,419 $7,812,029 $5,035,639
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation and amortization 3,799,572 3,732,627 2,162,230
Amortization of deferred loan fees and
discounts (1,723,350) (1,402,410) (1,543,256)
Gain on sales of mortgage loan servicing
rights (3,330,642) (4,231,620) (3,510,828)
Proceeds from the sales of mortgage loan
servicing rights 4,676,016 6,471,360 5,250,489
Gain on sales of mortgage loans (9,391,057) (6,328,687) (2,447,172)
Provision for loan and real estate losses 751,623 1,154,743 1,437,301
Prepaid income taxes (401,241) (863,075) (544,991)
Change in:
Capitalized servicing rights (2,639,546) (3,826,393) (2,225,076)
Accrued interest receivable (178,430) 254,809 398,045
Interest payable on deposit accounts 60,405 (1,288,251) (91,243)
Mortgage loans held for sale (14,298,313) 8,407,745 (26,846,314)
Other, net (1,769,027) 2,971,738 (1,992,472)
------------ ---------- -----------
Net cash provided (used) by operating
activities (14,418,571) 12,864,615 (24,917,648)
------------ ---------- -----------
Cash Flows from Investing Activities:
Net decrease (increase) in loans (147,846,650) (185,108,155) 33,100,744
Purchase of investment securities (16,632,480) (5,560,543) (4,473,981)
Maturities of investment securities 7,025,000 4,950,000 3,998,409
Sale of investment security 251,750
Purchase of FHLB stock (3,321,800) (6,142,100) (303,600)
Sales of foreclosed real estate 4,805,145 3,679,461 5,716,083
Increase in office properties and equipment (2,674,643) (2,492,026) (1,538,565)
------------ ------------ ----------
Net cash provided (used) by investing
activities (158,645,428) (190,673,363) 36,750,840
------------ ------------ ----------
Cash Flows from Financing Activities:
Net increase in deposits 91,000,008 3,091,344 4,672,336
Proceeds from FHLB advances 412,000,000 420,000,000 220,000,000
Repayment of FHLB advances (312,000,000) (245,000,000) (235,000,000)
Net proceeds from issuance of subordinated
debt 22,133,514
Net proceeds from common stock transactions 158,949 99,491 1,185,358
Dividends on preferred stock (967,853) (911,395)
Dividends on common stock (1,238,053) (579,902)
Net increase in advances and loan payments
from borrowers held under escrow 2,246,457 1,329,221 1,399,579
----------- ----------- ----------
Net cash provided (used) by financing
activities 191,199,508 200,162,273 (7,742,727)
----------- ----------- ----------
Net increase in cash and cash equivalents 18,135,509 22,353,525 4,090,465
Cash and cash equivalents at beginning of year 40,179,006 17,825,481 13,735,016
----------- ---------- ----------
Cash and cash equivalents at end of year $58,314,515 $40,179,006 $17,825,481
========== ========== ==========
Supplemental Disclosures:
Cash paid during the year for:
Interest $32,408,299 $31,627,990 $36,652,651
Income taxes 7,190,000 5,700,000 3,710,000
Non-cash transfer of loans to foreclosed real
estate 4,361,725 4,860,867 6,396,711
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 90
INVESTORS BANK CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Years ended December 31, 1993, 1992 and 1991
NOTE 1. DESCRIPTION OF THE BUSINESS
Investors Bank Corp., formerly Investors Savings Corp., (the Company)
is a holding company for a subsidiary engaged in the retail banking and
mortgage banking businesses.
The subsidiary, Investors Savings Bank, F.S.B. (the Bank), is a
federally chartered savings bank with deposits insured by the Federal Deposit
Insurance Corporation through the Savings Association Insurance Fund. The Bank
is subject to the regulations of certain federal agencies and undergoes
periodic examinations by those regulatory authorities.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
balance sheet and revenues and expenses for the period. Actual results could
differ significantly from those estimates or assumptions.
Material estimates that are particularly susceptible to significant
change in the near term relate to the determination of the reserve for loan
losses and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans. In connection with the determination
of the reserves for loan and real estate losses, management obtains independent
appraisals for significant properties.
Principles of Consolidation
The consolidated financial statements include the accounts of Investors
Bank Corp. and its wholly owned subsidiary, Investors Savings Bank, F.S.B. All
material intercompany balances and transactions have been eliminated in
consolidation.
Investment Securities
Investment securities, consisting primarily of investment grade
corporate bonds and U.S. Government agency obligations, are stated at cost,
adjusted for amortization of premiums and accretion of discounts on purchase,
as the Company has the intention and ability to hold the securities until
maturity. Premiums and discounts are amortized using the interest method over
the term of the securities.
Mortgage Loans
The Bank originates and purchases both adjustable rate mortgage (ARM)
and fixed interest rate mortgage loans. Substantially all conventional ARM
loans are held for portfolio investment while substantially all government
insured ARM loans and all fixed interest rate loans are sold in the secondary
market. Mortgage loans held for sale are carried at the lower of cost or market
determined on an aggregate loan basis.
F-6
<PAGE> 91
Interest is accrued monthly on outstanding principal balances unless
management considers collection to be doubtful, which generally occurs when
principal or interest payments are three months or more past due. Interest is
subsequently recognized as income only to the extent cash is received.
Loan Origination Fees and Discounts
Loan origination fees and certain other fees and certain direct loan
origination costs are deferred and amortized to interest income as an
adjustment of yield using the level yield interest method, or recognized as a
portion of gain on sales when the loans are sold. Loan discounts representing
a return of yield are deferred and amortized to income using the interest
method over the related periods required to achieve a level yield.
Mortgage Banking Income
Included in mortgage banking income are gain on sales of mortgage
loans, gain on sales of loan servicing rights, and other lending fees.
Gain on sales of mortgage loans are recognized when the loans are sold.
Gain on sales include any discounts or premiums and the excess value of
servicing rights retained. The excess value of servicing rights retained
represents the discounted present value of future service fee income in excess
of a normal market rate servicing fee.
The Company engages in the sale of loan servicing rights. Gain on
sales of servicing rights is recognized when the servicing rights are sold.
Gains on sale result from net cash proceeds less the carrying value of
capitalized servicing rights on the servicing pools sold.
Loan Servicing Fees
The Company derives loan servicing fees by collecting loan payments and
performing certain escrow services for mortgage investors. Amortization of
excess servicing rights and purchased servicing rights are recorded as a
reduction to loan servicing fees.
Capitalized Servicing Rights
Included in capitalized servicing rights is the unamortized balance of
excess servicing rights capitalized. The amounts capitalized and the
amortization thereon is based, in part, on certain prepayment assumptions of
the underlying loans. If, in the future, actual prepayments exceed the
Company's assumptions, adjustments to the carrying value of servicing rights
may be required. Excess servicing rights are being amortized over the
estimated remaining life of the related loans sold in proportion to estimated
net servicing income.
The Company has engaged in bulk purchases of loan servicing rights.
The cost of these rights is capitalized and amortized over the estimated
remaining life of the related loans in proportion to estimated net servicing
income. Loan servicing rights are also purchased from correspondents in
connection with the purchase of mortgage loans. Service release premiums are
paid to acquire these rights. These amounts are amortized over the estimated
life of the related loans or are offset against gain on sales of mortgage loans
when the related loans are sold.
Forward Contracts
The Company uses mandatory, optional and standby forward contracts as
part of its overall interest rate risk management strategy for its mortgage
banking operations. Outstanding contracts represent future commitments and are
not included in the consolidated balance sheets. Gains and losses on forward
contracts used as hedges in mortgage banking operations are deferred and
recognized when the related mortgages or commitments are sold or
F-7
<PAGE> 92
when a loss adjustment is recognized on an aggregate basis to reduce the Bank's
unsold loans and loan commitments to the lower of cost or market. Forward
contracts which are no longer needed to hedge specific assets or commitments
are valued at market and the resulting gains or losses are recognized
immediately.
Loan Losses
The reserve for loan losses provides for potential losses in the loan
portfolio. The reserve is increased by the provision for loan losses and by
recoveries and is decreased by charge-offs. The adequacy of the reserve is
judgmental and is based on continual evaluation of the nature and volume of the
loan portfolio, overall portfolio quality, specific problem loans, collateral
values, historical experience and current economic conditions that may affect
the borrowers' ability to pay.
Management believes that the reserves for losses on loans are adequate.
While management uses available information to recognize losses on loans,
future additions to the reserves may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the reserves for losses on
loans. Such agencies may require additions to the reserves based on their
judgments of information available to them at the time of their examination.
Foreclosed Real Estate
Real estate in judgment and acquired through foreclosure is initially
recorded at the lower of cost or estimated fair value less selling costs.
Provisions for possible losses on real estate are charged to earnings when
necessary to reduce carrying values to estimated fair value less selling costs.
Depreciation and Amortization
Depreciation is computed on a straight-line basis over three to twelve
years for office furniture and equipment and over forty years for buildings.
Leasehold improvements are amortized using the straight-line method over the
life of the asset or the term of the lease, whichever is less.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes". the Company adopted SFAS No. 109 as of January 1, 1993 and
applied the provisions prospectively as of that date. SFAS No. 109 requires a
change from the deferred method of accounting for income taxes to the asset and
liability method. Under SFAS No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. The cumulative effect of the application of SFAS
No. 109 as of January 1, 1993 increased net income for the year ended December
31, 1993 by $125,000.
Earnings Per Common Share
Net earnings are adjusted for preferred stock dividends in the
computation of earnings per common share. Earnings per common share are
computed on the basis of the weighted average number of common and common
equivalent shares outstanding during the year and have been restated for the
effects of the four-for-three common stock split on December 31, 1993. See
Note 13 for additional information on the stock split. Common equivalent
shares represent the dilutive effect of outstanding stock options and warrants.
F-8
<PAGE> 93
Statement of Cash Flows
For purposes of the statement of cash flows, cash equivalents include
investments in certificates of deposit with maturities of three months or less.
Reclassifications
Certain reclassifications have been made to the financial statements of
prior periods to conform to the current presentation. The reclassifications
had no effect on net earnings or stockholders' equity as previously reported.
NOTE 3. INVESTMENTS
Investments consisted of the following:
<TABLE>
<CAPTION>
AMORTIZED GROSS UNREALIZED GROSS UNREALIZED ESTIMATED MARKET
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
December 31, 1993:
Obligations of U.S. Government
corporations and agencies $11,625,812 $174,746 $35,747 $11,764,811
State and municipal obligations 210,000 1,150 211,150
Investment grade corporate bonds 15,439,296 127,314 25,275 15,541,335
Other 503,881 503,881
---------- ------- ------ ----------
$27,778,989 $303,210 $61,022 $28,021,177
========== ======= ====== ==========
December 31, 1992:
Obligations of U.S. Government
corporations and agencies $5,372,260 $223,802 $6,949 $5,589,113
State and municipal obligations 510,000 300 509,700
Investment grade corporate bonds 11,788,627 222,585 14,057 11,997,155
Other 500,622 500,622
---------- ---------- ----------- ----------
$18,171,509 $446,387 $21,306 $18,596,590
========== ======= ====== ==========
</TABLE>
During 1991, a security was sold for $251,750 which resulted in a gain
of $1,750.
The amortized cost and estimated market value of investment securities
at December 31, 1993, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because obligors may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST MARKET VALUE
---- ------------
<S> <C> <C>
Due in one year or less $5,844,920 $5,940,024
Due after one year through five years 20,027,078 20,192,853
Due after five years through six years 1,906,991 1,888,300
----------- -----------
$27,778,989 $28,021,177
========== ==========
</TABLE>
Included in accrued interest receivable at December 31, 1993 and 1992 is
interest receivable on investments of $315,587 and $311,516, respectively.
F-9
<PAGE> 94
NOTE 4. LOANS HELD IN PORTFOLIO
Mortgage loans consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------
1993 1992
---- ----
<S> <C> <C>
Adjustable rate first mortgage $656,402,702 $530,816,022
Adjustable rate commercial real estate 30,629,989 32,722,484
Adjustable rate second mortgage 13,567,815 16,542,276
Other mortgage 1,688,696 2,758,594
----------- -----------
702,289,202 582,839,376
Less:
Unearned discount and fees 979,061 1,285,079
Reserve for losses 2,414,254 2,160,500
--------- ---------
$698,895,887 $579,393,797
=========== ===========
Consumer loans consisted of the following:
<CAPTION>
DECEMBER 31
-----------------------------------
1993 1992
---- ----
<S> <C> <C>
Home equity $80,025,235 $56,216,872
Other consumer 6,324,975 7,118,560
Business purpose 5,340,521 3,153,121
----------- -----------
91,690,731 66,488,553
Less reserve for losses 566,331 438,892
----------- -----------
$91,124,400 $66,049,661
========== ==========
</TABLE>
The Company originates consumer and residential real estate loans in the
metropolitan area of Minneapolis/St. Paul. The Company also originates
residential real estate loans in Duluth, Minnesota and the Chicago and Milwaukee
metropolitan areas. The Company maintains a small commercial real estate loan
portfolio originated in prior years and is not actively seeking new commercial
real estate loans. The commercial real estate portfolio consists mainly of
loans secured by apartment complexes and small retail shopping malls in the
Minneapolis/St. Paul metropolitan area. Although the Company has a diversified
loan portfolio, a substantial portion of its borrowers' ability to honor their
loans is dependent on the economic strength of the metropolitan areas of
Minneapolis/St. Paul, Duluth, Chicago and Milwaukee.
F-10
<PAGE> 95
Following is a summary of the reserve for losses on loans:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Beginning balance $2,599,392 $1,982,274 $1,066,645
Provision for losses 631,446 868,758 1,009,513
Charge-offs:
Residential real estate (103,430) (199,456) (27,983)
Commercial real estate (285,651)
Consumer (34,575) (150,568) (123,609)
--------- -------- --------
Total charge-offs (423,656) (350,024) (151,592)
Recoveries 173,403 98,384 57,708
---------- ---------- ----------
Ending balance $2,980,585 $2,599,392 $1,982,274
========= ========= =========
</TABLE>
At December 31, 1993 and 1992 the Company had approximately $1,903,000
and $2,089,000, respectively, of loans in a nonaccrual status. Had nonaccrual
loans been accruing interest in accordance with original terms, interest income
would have been increased by approximately $40,000, $54,000 and $129,000 for the
years ended December 31, 1993, 1992 and 1991, respectively. The Company's loan
portfolio as of December 31, 1993 includes no restructured loans. There are no
commitments to lend additional funds to customers whose loans were in a
nonaccrual status at December 31, 1993.
Included in accrued interest receivable at December 31, 1993 and 1992 is
interest receivable on loans of $3,237,750 and $3,079,869, respectively.
The aggregate amount of loans to executive officers and directors of the
Company and executive officers of the Bank were $243,000 and $341,000 at
December 31, 1993 and 1992, respectively. During the year ended December 31,
1993, approximately $87,000 of new loans were made and reductions totaled
$185,000. Such loans were made in the ordinary course of business at the normal
credit terms and collateralization and do not represent more than normal risk of
collection.
NOTE 5. MORTGAGE BANKING
Mortgage loans held for sale consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------
1993 1992
---- ----
<S> <C> <C>
Loans held for sale $88,636,117 $65,155,829
Less unearned discount and fees 284,421 493,503
------------- -------------
$88,351,696 $64,662,326
========== ==========
</TABLE>
F-11
<PAGE> 96
Mortgage banking income consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Gain on sales of mortgage loans $9,391,057 $6,328,687 $2,447,172
Gain on sales of loan servicing rights 3,330,642 4,231,620 3,510,828
Other lending fees 591,660 617,783 441,077
---------- ---------- ----------
$13,313,359 $11,178,090 $6,399,077
========== ========== =========
</TABLE>
Mortgage banking activity is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------
1993 1992 1991
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Loans originated for sale:
Loans closed $838,097 $663,275 $409,852
Loans purchased 114,986 91,346 68,070
---------- ---------- ----------
$953,083 $754,621 $477,922
======= ======= =======
Mortgage loans sold $982,764 $799,703 $512,620
Loan servicing rights sold 252,178 301,642 298,840
</TABLE>
Included in accrued interest receivable at December 31, 1993 and 1992 is
interest receivable on loans held for sale of $100,116 and $83,638,
respectively.
NOTE 6. LOAN SERVICING
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The mortgage loans serviced for others consisted
of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------------
1993 1992 1991
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Outstanding principal balance $1,357,204 $981,468 $660,051
Number of loans 16,510 12,361 8,712
</TABLE>
Included in the consolidated balance sheets are the following amounts of
capitalized servicing rights:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------
1993 1992
---- ----
<S> <C> <C>
Excess servicing rights $2,958,834 $3,199,739
Purchased servicing rights 1,466,447 2,595,098
--------- ---------
$4,425,281 $5,794,837
========= =========
</TABLE>
During the years ended December 31, 1993, 1992 and 1991, the excess
value of servicing rights retained included in gain on sales of mortgage loans
was $2,287,592, $3,503,556 and $1,994,986, respectively.
F-12
<PAGE> 97
Amortization of capitalized servicing rights recorded as a reduction to loan
servicing fees was $2,663,727, $2,733,520, and $1,296,140 during the years
ended December 31, 1993, 1992 and 1991, respectively.
NOTE 7. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------
1993 1992
---- ----
<S> <C> <C>
Land $2,009,464 $2,009,464
Office buildings 7,919,911 7,407,569
Furniture and equipment 8,017,352 6,936,454
Leasehold improvements 2,458,410 1,700,785
--------- ---------
20,405,137 18,054,272
Less accumulated depreciation and
amortization 4,673,804 3,861,738
--------- ---------
$15,731,333 $14,192,534
========== ==========
</TABLE>
NOTE 8. FORECLOSED REAL ESTATE
Foreclosed real estate consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------
1993 1992
---- ----
<S> <C> <C>
Real estate in judgment, subject to redemption $2,275,596 $3,244,974
Real estate acquired through foreclosure 4,534,303 4,689,613
--------- ---------
6,809,899 7,934,587
Less reserve for losses 135,100 696,191
--------- ---------
$6,674,799 $7,238,396
========= =========
</TABLE>
The following is a summary of the reserve for losses on real estate:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Beginning balance $696,191 $521,842 $406,320
Provisions 120,177 285,985 427,788
Charge-offs:
Residential real estate (88,426) (32,990) (133,419)
Commercial real estate (598,757) (124,804) (178,847)
-------- -------- --------
Total charge-offs (687,183) (157,794) (312,266)
Recoveries 5,915 46,158
--------- -------- --------
Ending balance $135,100 $696,191 $521,842
======== ======== ========
</TABLE>
F-13
<PAGE> 98
NOTE 9. DEPOSITS
Deposits are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE RATE AT
DECEMBER 31 DECEMBER 31
----------- -------------------------------------------
1993 1993 1992
---- ---- ----
<S> <C> <C> <C>
Checking and savings accounts:
Noninterest-bearing checking accounts $46,456,372 $17,505,571
Interest-bearing checking accounts 1.53% 24,941,059 21,481,490
Savings accounts 1.99 13,744,563 10,123,837
Money market savings accounts 2.52 146,131,513 159,775,423
----------- -----------
1.88 231,273,507 208,886,321
----------- -----------
Certificate accounts:
1.50% to 2.00% 486,041
2.01% to 3.00% 7,947,456 3,521,123
3.01% to 4.00% 156,870,882 107,644,196
4.01% to 5.00% 162,431,985 104,594,007
5.01% to 6.00% 28,379,596 31,263,658
6.01% to 7.00% 5,493,667 29,773,156
7.01% to 8.00% 7,359,800 23,234,182
8.01% to 9.00% 519,082 845,365
------------- -------------
4.28 369,488,509 300,875,687
----------- -----------
Accrued interest payable 2,650,692 2,590,287
------------ -------------
Total deposits 3.35 $603,412,708 $512,352,295
=========== ===========
</TABLE>
At December 31, 1993 and 1992 the Bank had $38,675,442 and $26,195,523,
respectively, of certificate accounts with balances of $100,000 or more.
Scheduled maturities and related weighted average rates of certificate
accounts at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31
-----------
<S> <C> <C>
1994 4.09% $246,197,072
1995 4.31 88,951,693
1996 5.55 11,682,721
1997 5.85 10,838,952
1998 5.38 11,818,071
----------
4.28 $369,488,509
===========
</TABLE>
F-14
<PAGE> 99
Interest expense on deposits for the years presented are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Checking and savings accounts $663,526 $750,100 $675,740
Money market savings accounts 4,107,465 5,882,888 10,550,438
Certificate accounts 15,226,342 17,114,385 21,479,757
---------- ---------- ----------
$19,997,333 $23,747,373 $32,705,935
========== ========== ==========
</TABLE>
NOTE 10. BORROWINGS
Notes payable to Federal Home Loan Bank (FHLB) of Des Moines consisted
of the following:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
RATE AT DECEMBER 31 DECEMBER 31
------------------- ----------------------------------
1993 1993 1992
---- ---- ----
<S> <C> <C> <C>
Due in 1993 $202,000,000
1994 3.56% $220,000,000 10,000,000
1995 6.00 6,000,000 6,000,000
1996 5.68 7,000,000 7,000,000
1997 3.50 45,000,000
1998 3.37 20,000,000
2000 3.36 27,000,000
------------ ------------
$325,000,000 $225,000,000
=========== ===========
</TABLE>
The interest rates on notes due in 1997, 1998 and 2000 are reset by the
FHLB on the anniversary dates to a rate indexed to the current rate charged by
the FHLB for one year borrowings. The Company also has the option of repaying
each such note at its anniversary date without penalty.
Notes payable to the FHLB are collateralized by FHLB stock and first
mortgage real estate loans. At December 31, 1993, the Company had a collateral
requirement on first mortgage real estate loans of $406,000,000 and had pledged
specific collateral with an aggregate carrying value of approximately
$477,000,000.
Subordinated debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------
1993 1992
---- ----
<S> <C> <C>
9.25% Subordinated notes due December 15, 2002 $23,000,000 $23,000,000
12.75% Subordinated capital notes due March 15, 1999 2,409,000 2,409,000
10% Subordinated debentures due April 1, 1996 391,000 391,000
---------- ----------
$25,800,000 $25,800,000
========== ==========
</TABLE>
The subordinated debt is unsecured. At the option of the Company, the
9.25% notes may be redeemed at par on or after December 15, 1995, and the 10%
debentures on or after January 1, 1995. On January 25, 1994,
F-15
<PAGE> 100
the Company elected to exercise the right to redeem at par the 12.75% capital
notes on April 1, 1994. During 1991, $7,591,000 of the 12.75% capital notes
were exchanged by the capital note holders for preferred stock (see Note 13).
Covenants for the 9.25% notes provide that the Company must maintain at
least $1 million in certain investments with a maturity of one year or less, of
which no more than $500 thousand may be placed on account at the Bank.
The interest is payable monthly for the 9.25% notes, semiannually for
the 12.75% capital notes and quarterly for the 10% debentures. The notes,
capital notes and debentures are subordinated in payment of principal and
interest to all customer deposits and other indebtedness of the Bank for
borrowed money as defined in the note, capital note and debenture agreements.
Unamortized debt issue costs of $852,248 and $883,219 are included in
other assets at December 31, 1993 and 1992, respectively.
Interest expense for borrowings for the periods presented are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Notes payable to FHLB $ 9,712,763 $5,863,469 $2,612,570
Subordinated debt 2,582,741 483,635 1,243,014
Other borrowings 358,639 259,288 92,272
----------- ----------- ----------
$12,654,143 $6,606,392 $3,947,856
========== ========= =========
</TABLE>
NOTE 11. FEDERAL HOME LOAN BANK STOCK, LIQUIDITY AND CAPITAL
REQUIREMENTS
The Bank, as a member of the FHLB, is required to hold a specified
number of shares of capital stock, which is carried at cost, in the FHLB of Des
Moines. In addition, under regulations currently in effect, the Bank is required
to maintain cash and other liquid assets in an amount equal to 5% of its deposit
accounts and other obligations due within one year. The Bank has met these
requirements.
Effective December 19, 1992, the Bank became subject to capital
standards established by the Federal Deposit Insurance Corporation Improvement
Act of 1991 which defines five capital tiers, the highest of which is "well
capitalized". Under the regulations a "well capitalized" institution must have
a leverage ratio of at least 5%, a tier 1 risk based capital ratio of at least
6% and a total risk based capital ratio of at least 10%.
At December 31, 1993, the Bank exceeded each of these requirements and
is categorized as a "well capitalized" institution.
F-16
<PAGE> 101
The following is a summary of the Bank's capital ratios (unaudited):
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------
1993 1992
---- ----
<S> <C> <C>
Leverage:
Adjusted total assets $1,015,633,415 $813,920,729
Tier 1 Capital 63,839,691 50,264,185
Leverage ratio 6.29% 6.18%
Tier 1 risk based capital:
Risk weighted assets $591,320,941 $478,775,027
Tier 1 Capital 63,839,691 50,264,185
Tier 1 risk based capital ratio 10.80% 10.50%
Total risk based capital:
Risk weighted assets $591,320,941 $478,775,027
Total risk based capital 68,383,760 54,753,855
Total risk based capital ratio 11.56% 11.44%
</TABLE>
Management believes the Bank will continue to meet the requirements to
be categorized as a "well capitalized" institution in 1994.
The Bank is also required by federal regulations to maintain minimum
levels of capital that are measured by three ratios: a tangible capital ratio
of at least 1.5% of tangible assets, a core capital ratio of at least 3%, and a
risk based capital ratio of at least 8%. The Bank exceeded all three ratios
during 1993 and management believes the Bank will continue to do so in 1994. In
August 1993, the Office of Thrift Supervision (OTS) issued its final regulations
on interest rate risk. Under the final rule, institutions deemed to have an
"above normal" level of interest rate risk are subject to a capital charge and
must deduct a portion of that risk from total capital for regulatory capital
purposes. Management believes that as of December 31, 1993 the Bank's required
regulatory capital will not be impacted by the interest rate risk rule.
NOTE 12. INCOME TAXES
The Company and the Bank file consolidated federal income tax returns.
Federal income taxes are allocated to the Company and the Bank based on their
contributions to consolidated taxable income.
F-17
<PAGE> 102
The components of income tax expense for the years ended December 31
consist of the following:
<TABLE>
<CAPTION>
ASSET/LIABILITY
METHOD DEFERRED METHOD
------ --------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $5,525,886 $4,700,907 $3,042,834
State 1,629,190 1,389,419 898,760
---------- ---------- ----------
7,155,076 6,090,326 3,941,594
---------- ---------- ----------
Deferred (prepaid):
Federal (310,106) (666,177) (418,440)
State (91,135) (196,898) (126,551)
---------- ---------- ----------
(401,241) (863,075) (544,991)
---------- ---------- ----------
$6,753,835 $5,227,251 $3,396,603
========= ========= =========
</TABLE>
A reconciliation of the statutory federal income tax rate with the
actual rate provided on earnings is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 34.0% 34.0%
State income taxes, net of
federal tax benefits 6.0 6.0 6.0
Other (0.4) 0.1 0.3
----- ----- -----
40.6% 40.1% 40.3%
==== ==== ====
</TABLE>
The Bank qualifies under various provisions of the Internal Revenue Code
which permit it to deduct from taxable income an allowance for bad debts which
differs from the provision for such losses charged to income for financial
statement purposes. Accordingly, retained earnings at December 31, 1993
includes approximately $1,072,000 for which no provision for income taxes has
been made. If, in the future, this portion of retained earnings is used for any
purpose other than to absorb bad debt losses, income taxes may be imposed at the
then applicable rates. It is not contemplated that any portion of retained
earnings will be used in a manner that will result in additional taxable income.
Deferred income taxes for 1992 and 1991 related primarily to the
difference in recognition of components of gains on sales of mortgage loans and
depreciation for financial reporting and income tax purposes.
F-18
<PAGE> 103
The tax effects of temporary differences that give rise to the deferred
tax assets and deferred tax liabilities at December 31, 1993 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Reserve for loan losses $700,050
Deferred loan fees 504,428
Other 216,382
---------
1,420,860
---------
Deferred tax liabilities:
Federal Home Loan Bank stock 623,474
Office properties and equipment 916,094
Other 116,462
---------
1,656,030
---------
Net deferred tax liability $235,170
=======
</TABLE>
No valuation allowance was required for deferred tax assets at January
1, 1993 or December 31, 1993.
NOTE 13. STOCKHOLDERS' EQUITY
Preferred Stock
On November 22, 1991 the Company issued 303,640 shares of preferred
stock in exchange for $7,591,000 of the Bank's 12.75% subordinated capital notes
due 1999. The preferred stock was issued in units consisting of one share of
preferred stock and one warrant to purchase two-thirds share of the Company's
common stock (See "Stock Warrants"). Dividends on the preferred stock were at
an annual rate of $3.1875 per share until October 31, 1993 and are at an annual
rate of $2.75 per share thereafter. Dividends are cumulative from the date of
original issue and are payable quarterly. The preferred stock has a liquidation
preference of $25.00 per share plus accumulated and unpaid dividends. The
preferred stock is redeemable at the option of the Company, in whole or in part,
at any time on or after October 31, 1996, at $25.00 per share plus accumulated
and unpaid dividends.
Common Stock Split
On November 4, 1993, the Board of Directors of the Company declared a
four-for-three split of its common stock payable on December 31, 1993 to all
holders of record as of December 1, 1993. The split was effected by means of a
stock dividend. No fractional shares were issued. A total of 831,294 shares of
common stock were issued in connection with the split. The par value of each
share was not changed from $.01. All information relating to number of shares,
per share amounts, stock option data, stock warrants, and restricted stock have
been restated to reflect the split.
Stockholder Rights Plan
On May 7, 1991 the Company's Board of Directors adopted a stockholder
rights plan under which each share of common stock has an associated preferred
stock purchase right. The rights are exercisable only under certain
circumstances and allow holders of such rights to purchase common stock of the
Company at a discounted price which would be the equivalent number of shares of
common stock having a fair market value equal to $80. The Company has reserved
55,000 shares of preferred stock for the stockholder rights plan.
F-19
<PAGE> 104
Dividend Restrictions
The Company is limited in its ability to declare dividends by the
dividend restrictions imposed on its savings bank subsidiary. Under applicable
regulations of the OTS, the Bank could declare dividends to the Company without
regulatory approval in an amount equal to accumulated net income for the current
calendar year plus 50% of the amount by which its capital exceeded its capital
requirements at the beginning of the year. However, the Bank could not declare
dividends that would cause it to fall below its capital requirement without OTS
approval.
Stock Options
The Company has a stock option plan under which 531,415 shares of common
stock are reserved for issuance to employees and directors of the Company at
December 31, 1993.
Incentive stock options are to be granted at not less than 100% of the
fair market value of the common stock at the date of grant (110% of market value
for options granted to 10% or greater stockholders). Options which do not
qualify as incentive stock options may be granted at less than 100% of the fair
market value of the common stock at the date of grant. No option may extend
more than ten years from the date of grant (five years for 10% stockholders).
At December 31, 1993, the exercise of options granted for purchase of 6,666
shares of common stock are contingent on attainment of certain performance
goals.
The following is a summary of activity in the plan:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDER OPTION PRICE
OPTION PER SHARE
------------- ------------
<S> <C> <C>
December 31, 1990 398,667 Average $3.74
Exercised (43,737) $2.50-4.50
Granted 64,000 $6.00-9.38
Canceled (21,545) $3.94-4.50
--------
December 31, 1991 397,385 Average $4.22
Exercised (17,764) $2.50-4.50
Granted 33,333 $9.19-9.66
Canceled (444) $4.13
--------
December 31, 1992 412,510 Average $4.68
Exercised (48,898) $2.50-9.66
Granted 42,667 $10.69-15.00
Canceled (1,779) $4.50
--------
December 31, 1993 404,500 Average $5.52
========
Exercisable at December 31, 1993 302,977
Available for grant at December 31, 126,915
1993
</TABLE>
Stock Warrants
At December 31, 1990 the Company had outstanding common stock warrants
which entitled the holders to purchase 139,000 shares of the Company's common
stock at a price of $6.25 per share through April 1, 1991, the expiration date.
On March 19, 1991 the Board of Directors of the Company extended the expiration
date of the warrants to December 31, 1991. All of these warrants were exercised
during 1991.
F-20
<PAGE> 105
In conjunction with the issuance of preferred stock on November 22, 1991
the Company issued warrants to purchase 202,427 shares of common stock at a
price of approximately $11.06 per share on or after February 11, 1992. The
warrants expire on November 13, 1996. The Company has reserved 202,160 shares
of common stock for the remaining outstanding warrants.
Restricted Stock Award Agreement
The Company entered into a Restricted Stock Award Agreement in 1992.
Under the terms of the agreement, 45,973 shares of restricted stock were granted
to two executive officers of the Company. Such shares vest over a ten-year
period at the rate of 10% per year. Compensation expense for the shares vesting
in 1993 and 1992 was $84,476 and $49,996, respectively.
NOTE 14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company 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 and to reduce its own exposure to fluctuations in interest rates.
These financial instruments include commitments to extend credit, mortgage loan
purchase commitments and forward mortgage loan sales commitments. These
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the balance sheet. The contract or
notional amounts of these instruments reflect the extent of involvement the
Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit and
purchase mortgage loans is represented by the contract or notional amount of
these commitments. The Company uses the same credit policies in making
commitments as it does for on-balance-sheet instruments. For forward mortgage
loan sales commitments, the contract or notional amounts do not represent
exposure to credit loss. The Company controls the credit risk of forward
mortgage loan sales commitments through credit approvals, credit limits and
monitoring procedures.
The contract or notional amounts of these financial instruments were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1993 1992
---- ----
(In thousands)
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit:
Loans held for sale $24,507 $13,093
Portfolio loans 9,261 12,345
Purchased loans held for sale 14,941 15,950
Purchased portfolio loans 309 6,190
Available lines of credit 45,531 37,301
Financial instruments whose notional or contract
amounts do not represent credit risk:
Forward mortgage loan sales commitments $125,525 $101,525
</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. Since a portion of the commitments are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company
F-21
<PAGE> 106
evaluates each customer's creditworthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on the loan type and on management's credit evaluation of the
borrower. Collateral consists primarily of residential real estate and
personal property.
Forward mortgage loan sales commitments are contracts for the delivery of
securities backed by mortgage loans in which the Company agrees to make
delivery at a specified future date of a specified instrument, at a specified
price or yield. Risks arise from the possible inability of the counterparties
to meet the terms of their contracts and from movements in mortgage loan values
and interest rates.
NOTE 15. COMMITMENTS
The Company has several noncancelable operating lease agreements for its
office properties which have remaining lease terms of up to fifteen years. In
addition, one retail banking office is under a capital lease which has a
remaining term of seven years. Future minimum payments under these leases are
as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31 CAPITAL OPERATING
----------- ------- ---------
<S> <C> <C>
1994 $95,000 $1,101,000
1995 95,000 1,092,000
1996 95,000 810,000
1997 95,000 606,000
1998 95,000 570,000
Thereafter 191,000 3,690,000
------- ---------
Total minimum lease payments 666,000 $7,869,000
=========
Less amounts representing interest 200,000
-------
Present value of net minimum obligations $466,000
=======
</TABLE>
In addition, the Company has several renewal options on its retail
banking office leases and some of its mortgage office leases ranging from two-
to five-year periods. At present, the Company intends to exercise most options
on its retail banking offices when the original leases expire. If this occurs,
total future minimum payments (estimated using original lease term costs) under
these leases, as shown above, would increase by approximately $4,596,000.
The Company previously sold two retail banking office properties to
third parties under sale/leaseback arrangements. These lease agreements
include purchase options at market value at certain points during the lease
terms.
Total rent expense for the years ended December 31, 1993, 1992 and
1991 was approximately $1,509,000, $1,007,000 and $1,290,000, respectively.
NOTE 16. EMPLOYEE BENEFITS
The Company currently offers a 401(k) plan which is available to all
permanent employees who have attained age twenty-one and have met the one year
eligibility requirement, as defined. Under the 401(k) plan, an employee may
defer up to 15% of his or her compensation as defined, with discretionary
matching Company contributions. The 401(k) plan was amended effective January
1, 1991 to provide for the Company to make discretionary profit sharing
contributions to be invested in common stock of the Company. Total expense
under the plan for the years ended December 31, 1993, 1992 and 1991 was
$541,579, $403,294 and $227,362, respectively.
F-22
<PAGE> 107
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 (SFAS No. 107)
requires disclosure of estimated fair values of a company's financial
instruments, including assets, liabilities and off-balance sheet items, for
which it is practicable to estimate fair value. These fair values are
estimates made as of December 31, 1993 and 1992 based on relevant market
information, if available, and upon characteristics of the financial
instruments themselves. Because no market exists for a significant portion of
the Company's financial instruments, many of the fair value estimates are based
on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments and other
factors. Thus, the estimates are subjective in nature, involving uncertainties
and requiring judgment, and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based only on existing financial instruments.
The Company has not attempted to estimate the value of anticipated future
business or assets, liabilities or activities that are not considered financial
instruments. For example, the Company has a substantial mortgage banking
operation that contributes significant amounts of noninterest income annually.
The mortgage banking operation is not a financial instrument and its value has
not been incorporated into the fair value estimates. In addition, the tax
effects of unrealized gains or losses implied in the fair value estimates have
not been considered in the estimates nor have costs necessary to consummate a
sale been considered. Accordingly, the aggregate fair value amounts do not
represent an estimate of the underlying fair value of the Company.
The estimated fair values of the Company's financial instruments are
shown below. Following the table, there is an explanation of the methods and
assumptions used to estimate the fair values of each class of financial
instrument.
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------------------
1993 1992
---- ----
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------ ---------- ------ ----------
(In thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $58,315 $58,315 $40,179 $40,179
Investment securities 27,779 28,021 18,172 18,597
Mortgage loans held for sale 88,352 88,767 64,662 64,804
Mortgage loans 698,896 731,017 579,394 605,235
Consumer loans 91,124 92,335 66,050 66,628
Federal Home Loan Bank stock 16,250 16,250 12,414 12,414
Excess servicing rights 2,959 20,353 3,200 15,821
Accrued interest receivable 3,653 3,653 3,475 3,475
Financial liabilities:
Deposits 603,413 607,743 512,352 513,828
Notes payable 325,000 323,589 225,000 225,175
Subordinated debt 25,800 26,379 25,800 25,900
</TABLE>
Cash and Cash Equivalents
The carrying amounts of cash and cash equivalents approximate their
fair values.
F-23
<PAGE> 108
Investment Securities
The fair values of investment securities are based on quoted market
prices. See Note 3 for the carrying amounts and fair values of the various
components of the Company's investment portfolio.
Mortgage Loans Held for Sale
In order to manage the market exposure on its residential loans held
for sale and its commitments to extend credit for residential loans, the
Company enters into forward mandatory, optional and standby mortgage loan sales
commitments. Therefore, the estimated fair values of mortgage loans held for
sale are based on the committed sales prices.
Mortgage Loans
The fair values of mortgage loans were estimated for groups of loans
with similar characteristics. See Note 4 for the descriptions and amounts of
these groups. Nonperforming loans were subtracted and discounted by the
average historical rate of loss that the Company has experienced on these types
of loans.
The largest group, adjustable first mortgage loans, has experienced no
significant change in credit risk. Its fair values were estimated by
subtracting nonperforming loans, classifying the loans into segments with
similar characteristics which determine saleability and obtaining market quotes
for each of the segments.
The fair values of the commercial real estate loans were estimated
using discounted cash flow analysis. The discount rates used were estimated
market rates for similar types of loans adjusted upward to reflect the decline
in the collateral market values of commercial real estate properties over the
last few years. In addition, certain loans have experienced increased credit
risk since origination. The discount rate for these loans was further adjusted
upward to compensate for this additional risk.
The credit risk of the adjustable second mortgage loans and other
mortgages has not changed appreciably. Discounted cash flow analysis of
scheduled payments applying a discount rate based on an estimated market rate
appropriate for each type of loan was used to estimate the fair values of these
loans.
Consumer Loans
Consumer loans consist primarily of loans secured by residential real
estate. See Note 4 for the classifications of such loans. The Company
believes the credit risk of these loans has not changed significantly since
origination. Nonperforming loans were removed from the totals and discounted
to reduce them to estimated fair value. The remaining loans were segmented
into groups with similar characteristics and the fair values were estimated by
discounting the expected cash flows using discount rates that equaled the
Company's origination rates for similar loans as of December 31, 1993 and 1992.
Federal Home Loan Bank Stoc
The carrying amount of FHLB stock approximates its fair value.
Excess Servicing Right
Excess servicing rights are included in capitalized servicing rights
on the balance sheet. The fair values of excess servicing rights were
estimated by discounting the expected cash flows associated with the servicing
of the underlying loans. The mortgages serviced for others were sorted into
groups with characteristics similar to loan pools for which servicing is
typically bought or sold. An estimated market rate of return was assumed for
each pool and these rates were used as the discount rates in the analysis.
F-24
<PAGE> 109
Accrued Interest Receivable
The carrying amount of accrued interest receivable approximates its
fair value since it is short term in nature and does not present unanticipated
credit concerns.
Deposits
Under SFAS No. 107, the fair value of deposits with no stated
maturity, such as checking, savings and money market accounts, is equal to the
amounts payable on demand as of December 31, 1993 and 1992. See Note 9 for
deposit classifications. The fair values of certificates of deposit are based
on the discounted value of contractual cash flows using as discount rates the
rates that were offered by the Company as of December 31, 1993 and 1992 for
deposits with maturities similar to the remaining maturities of the existing
certificates of deposit.
The fair value estimates for deposits do not include the benefit that
results from the low-cost funding provided by the Company's existing deposits
and long-term customer relationships compared to the cost of obtaining
different sources of funding. This benefit, generally referred to as core
deposit intangible, has not been quantified by the Company.
Notes Payable
Notes payable consist of FHLB advances. The carrying amount of notes
payable which may be repaid at any time without penalty at the Company's
discretion approximates their fair value. The fair values of the notes payable
with fixed maturities are estimated based on discounted cash flow analyses
using as discount rates interest rates charged by the FHLB at December 31, 1993
and 1992 for borrowings of similar remaining maturities.
Subordinated Debt
There are three separate subordinated debt instruments that have been
issued by the Company. See Note 10 for more information. The fair values of
the 9.25% notes due 2002 were estimated based on the bid market prices as of
December 31, 1993 and 1992. The fair value at December 31, 1993 of the 12.75%
capital notes due 1999 approximates its carrying amount because the market
anticipated the Company's redemption of the capital notes at par on April 1,
1994. At December 31, 1992, the fair value of the 12.75% capital notes was
estimated based on the bid market price. The fair values of the 10% debentures
due 1996 were based upon estimated market prices taking into account the
instrument's rate, maturity and risk in relation to the other two issues.
Commitments to Extend Credit
At December 31, 1993 and 1992, the Company had commitments to extend
credit with total notional amounts of $94,549,000 and $84,879,000,
respectively. See Note 14 for the type and amounts of commitments as well as
related discussion. The fair values of commitments to extend credit are not
based on the notional amounts, but rather are estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counter parties. For commitments to extend credit for residential mortgage
loans and for commercial development of residential property, the fair values
are based on the fees charged for these commitments. Because of the short term
nature of the commitments, no adjustment was necessary for changes in
creditworthiness or changes in market interest rates for 1993 or 1992. The
Company does not charge fees for commitments to retail customers to extend
credit under available lines of credit. Accordingly, no fair values were
assigned to these commitments. The estimated fair values of commitments to
extend credit at December 31, 1993 and 1992 were $73,000 and $41,000,
respectively.
F-25
<PAGE> 110
NOTE 18. PARENT COMPANY FINANCIAL INFORMATION
The Investors Bank Corp. (parent company only) condensed financial
statements are as follows:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
DECEMBER 31
----------------------------------------
1993 1992
---- ----
<S> <C> <C>
Assets:
Cash and cash equivalents $ 5,168,198 $10,108,552
Investment securities 503,881 500,622
Investment in subsidiary 63,938,647 50,824,464
Other assets 901,179 62,360,157
------------ -----------
Total assets $70,511,905 $62,360,157
=========== ===========
Liabilities and stockholders' equity:
Liabilities:
Subordinated debt $23,000,000 $23,000,000
Other liabilities 358,642 291,973
------------ ------------
Total liabilities 23,358,642 23,291,973
----------- -----------
Stockholders' equity:
Preferred stock 3,036 3,036
Common stock 33,255 24,589
Additional paid-in capital 19,111,504 18,650,901
Unamortized restricted stock (675,808) (449,964)
Retained earnings 28,681,276 20,839,622
----------- -----------
Total stockholders' equity 47,153,263 39,068,184
----------- ----------
Total liabilities and stockholders' equity $70,511,905 $62,360,157
=========== ===========
</TABLE>
CONDENSED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Interest income $ 254,165 $ 34,118 $ 17,044
Interest expense 2,221,593 124,122
Operating expenses 224,494 154,401 143,930
----------- ----------- -----------
Loss before income tax benefit and equity
in earnings of subsidiary (2,191,922) (244,405) (126,886)
Income tax benefit 753,158 82,439 43,099
----------- ----------- ------------
Loss before equity in earnings of
subsidiary (1,438,764) (161,966) (83,787)
Equity in earnings of subsidiary 11,464,183 7,973,995 5,119,426
----------- ---------- -----------
Net earnings $10,025,419 $7,812,029 $5,035,639
=========== ========== ==========
</TABLE>
F-26
<PAGE> 111
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $10,025,419 $ 7,812,029 $5,035,639
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Equity in earnings of subsidiary (11,464,183) (7,973,995) (5,119,426)
Increase (decrease) in other assets and
liabilities, net 195,367 10,016 (533,079)
---------- --------- ----------
Net cash used by operating activities (1,243,397) (151,950) (616,866)
---------- --------- ----------
Cash flows from investing activities:
Capital contributed to subsidiary (5,000,000) (12,000,000) (700,000)
Dividends received from subsidiary 3,350,000 1,491,297 400,000
Purchase of investment security (500,000)
---------- ---------- ----------
Net cash used by investing activities (1,650,000) (11,008,703) (300,000)
---------- ---------- ----------
Cash flows from financing activities:
Net proceeds from common stock transactions 158,949 99,491 1,185,358
Net proceeds from issuance of subordinated debt 22,133,514
Dividends on preferred stock (967,853) (911,395)
Dividends on common stock (1,238,053) (579,902)
---------- ---------- ----------
Net cash provided (used) by financing
activities (2,046,957) 20,741,708 1,185,358
---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents (4,940,354) 9,581,055 268,492
Cash and cash equivalents at beginning of year 10,108,552 527,497 259,005
---------- ---------- -----------
Cash and cash equivalents at end of year $ 5,168,198 $10,108,552 $ 527,497
========== ========== ==========
</TABLE>
F-27
<PAGE> 112
NOTE 19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly data for 1993 and 1992 follows:
(in thousands except per share data)
<TABLE>
<CAPTION>
1993 1992
------------------------------------------- -------------------------------------------
DEC. 31 SEPT. 30 JUNE 30 MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31
------- -------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $15,042 $14,677 $14,546 $13,504 $13,871 $13,471 $12,996 $12,178
Interest expense 8,649 8,345 7,999 7,659 7,848 7,713 7,535 7,258
------- -------- -------- -------- -------- -------- -------- --------
Net interest income 6,393 6,332 6,547 5,845 6,023 5,758 5,461 4,920
Provision for loan losses 187 84 171 189 177 277 227 188
------- -------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses 6,206 6,248 6,376 5,656 5,846 5,481 5,234 4,732
Mortgage banking income 4,037 3,281 2,987 3,008 3,518 2,665 2,549 2,446
Other noninterest income 1,293 1,487 1,181 1,356 152 893 1,014 1,018
Noninterest expense 7,364 6,748 6,470 5,880 6,107 5,703 5,597 5,102
------- -------- -------- -------- -------- -------- -------- --------
Earnings before income tax expense
and cumulative effect of
accounting change 4,172 4,268 4,074 4,140 3,409 3,336 3,200 3,094
Income tax expense 1,617 1,844 1,634 1,659 1,367 1,337 1,283 1,240
Cumulative effect of accounting
change 125
------- ------- ------- ------- ------- ------- ------- --------
Net earnings $ 2,555 $ 2,424 $ 2,440 $ 2,606 $ 2,042 $ 1,999 $ 1,917 $ 1,854
====== ====== ====== ====== ====== ====== ====== ======
Net earnings available for common
stockholders $ 2,336 $ 2,182 $ 2,198 $2,364 $ 1,800 $ 1,757 $ 1,675 $ 1,612
====== ====== ====== ===== ====== ====== ====== ======
Earnings per common share $.63 $.60 $.61 $.66 $.52 $.51 $.49 $.47
</TABLE>
F-28
<PAGE> 113
Independent Auditors' Report
The Board of Directors
Investors Bank Corp.:
Wayzata, Minnesota:
We have audited the accompanying consolidated balance sheets of
Investors Bank Corp. and subsidiary as of December 31, 1993 and 1992 and the
related consolidated statements of earnings, 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
Investors Bank Corp. and subsidiary as of December 31, 1993 and 1992 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.
As discussed in Note 2 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes".
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 27, 1994
F-29
<PAGE> 114
INVESTORS BANK CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
------------------------ ------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest on loans $16,155,502 $13,755,444 $44,269,345 $40,143,704
Interest on cash and investments 633,461 618,441 1,861,326 1,763,677
Interest and dividends on other assets 357,118 302,903 1,026,111 819,901
---------- ---------- ----------- ----------
TOTAL INTEREST INCOME 17,146,081 14,676,788 47,156,782 42,727,282
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on deposits 5,702,190 4,968,151 16,026,720 14,855,578
Interest on borrowings 4,724,782 3,376,352 11,365,600 9,146,885
----------- ----------- ---------- -----------
TOTAL INTEREST EXPENSE 10,426,972 8,344,503 27,392,320 24,002,463
---------- ----------- ---------- ----------
NET INTEREST INCOME 6,719,109 6,332,285 19,764,462 18,724,819
PROVISION FOR LOAN LOSSES 110,000 84,156 333,800 444,481
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES 6,609,109 6,248,129 19,430,662 18,280,338
NONINTEREST INCOME:
Mortgage banking 3,004,068 3,280,717 9,196,772 9,276,498
Loan servicing fees 1,288,789 801,904 3,903,977 2,193,460
Commissions on title insurance sales 67,106 273,367 370,277 629,116
Commissions on annuity sales 120,976 79,769 470,368 407,989
Other 312,149 331,825 812,437 792,916
---------- ---------- ---------- ----------
TOTAL NONINTEREST INCOME 4,793,088 4,767,582 14,753,831 13,299,979
----------- ----------- ---------- ----------
NONINTEREST EXPENSE:
Employee compensation and benefits 3,671,678 3,978,544 11,624,058 11,065,665
Occupancy and equipment 1,044,025 962,877 3,039,584 2,754,947
Advertising 287,392 161,344 908,020 647,034
Federal deposit insurance premiums 353,864 318,693 1,038,866 905,778
Other 1,684,359 1,325,993 4,519,021 3,724,878
----------- ----------- ----------- -----------
TOTAL NONINTEREST EXPENSE 7,041,318 6,747,451 21,129,549 19,098,302
----------- ----------- ---------- ----------
EARNINGS BEFORE INCOME TAX EXPENSE AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 4,360,879 4,268,260 13,054,944 12,482,015
INCOME TAX EXPENSE 1,868,577 1,844,356 5,450,101 5,136,787
----------- ----------- ----------- -----------
EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 2,492,302 2,423,904 7,604,843 7,345,228
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 125,000
------------ ------------ ----------- ----------
NET EARNINGS $2,492,302 $2,423,904 $7,604,843 $7,470,228
========= ========= ========= =========
NET EARNINGS AVAILABLE FOR COMMON STOCKHOLDERS $2,283,550 $2,181,941 $6,978,586 $6,744,339
========= ========= ========= =========
EARNINGS PER COMMON SHARE:
BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $0.60 $0.60 $1.86 $1.83
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 0.00 0.00 0.00 0.03
---- ---- ---- ----
NET EARNINGS $0.60 $0.60 $1.86 $1.86
==== ==== ==== ====
AVERAGE COMMON AND COMMON EQUIVALENT SHARES 3,779,970 3,644,177 3,748,682 3,623,773
========= ========= ========== =========
</TABLE>
See Notes to Consolidated Financial Statements
F-30
<PAGE> 115
INVESTORS BANK CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
-------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $20,328,079 $58,314,515
Investment securities 26,954,348 27,778,989
Mortgage loans held for sale 21,976,565 88,351,696
Mortgage loans 833,774,781 698,895,887
Consumer loans 113,287,541 91,124,400
Federal Home Loan Bank stock 18,250,000 16,250,000
Capitalized servicing rights 3,993,381 4,425,281
Office properties and equipment 15,961,703 15,731,333
Accrued interest receivable 4,956,436 3,653,453
Foreclosed real estate 2,390,219 6,674,799
Other assets 7,567,660 5,884,713
------------- --------------
TOTAL ASSETS $1,069,440,713 $1,017,085,066
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits 612,849,574 603,412,708
Notes payable 365,000,000 325,000,000
Advances and loan payments from borrowers held under 7,741,745 8,409,797
escrow
Income taxes payable 1,225,767 549,263
Subordinated debt 23,391,000 25,800,000
Other liabilities 5,144,629 6,760,035
------------- -------------
TOTAL LIABILITIES 1,015,352,715 969,931,803
------------- -------------
STOCKHOLDERS' EQUITY:
Preferred stock 3,036 3,036
Common stock 35,043 33,255
Additional paid-in capital 20,722,264 19,111,504
Unamortized restricted stock (1,035,076) (675,808)
Retained earnings 34,362,731 28,681,276
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 54,087,998 47,153,263
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,069,440,713 $1,017,085,066
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
F-31
<PAGE> 116
INVESTORS BANK CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30
----------------------------------
1994 1993
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $7,604,843 $7,470,228
Adjustments to reconcile net earnings to net cash provided (used)
by operating activities:
Depreciation and amortization 1,522,420 2,574,803
Amortization of deferred loan fees and discounts (1,214,915) (1,295,403)
Gain on sales of loan servicing rights (5,978,140) (2,278,559)
Proceeds from sales of loan servicing rights 7,893,153 3,250,899
Gain on sales of mortgage loans (2,754,539) (6,546,946)
Provision for loan and real estate losses 402,166 562,823
Deferred (prepaid) income taxes 2,417,942 (76,782)
Change in:
Capitalized servicing rights (2,058,542) (1,693,410)
Accrued interest receivable (1,302,983) (442,231)
Interest payable on deposit accounts 1,014,757 318,045
Mortgage loans held for sale 69,129,670 (34,058,285)
Other, net (4,835,560) (1,560,837)
------------- -------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 71,840,272 (33,775,655)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (156,780,742) (114,572,103)
Purchase of investment securities (3,915,358) (8,943,484)
Maturities of investment securities 4,740,000 5,825,000
Purchase of FHLB stock (2,000,000) (2,071,800)
Sale of foreclosed real estate 4,836,036 4,510,799
Increase in office properties and equipment (1,177,361) (1,882,755)
------------- --------------
NET CASH USED BY INVESTING ACTIVITIES (154,297,425) (117,134,343)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 8,422,109 61,257,290
Proceeds from FHLB advances 245,000,000 322,000,000
Repayment of FHLB advances (205,000,000) (252,000,000)
Redemption of subordinated capital notes (2,409,000)
Net proceeds from common stock transactions 1,049,048 105,863
Dividends on preferred stock (626,257) (725,889)
Dividends on common stock (1,297,131) (926,791)
Net increase (decrease) in advances and loan payments from (668,052) 10,508,839
borrowers held under escrow ------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 44,470,717 140,219,312
------------ -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (37,986,436) (10,690,686)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 58,314,515 40,179,006
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $20,328,079 $29,488,320
========== ==========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Interest $26,437,600 $23,580,965
Income taxes 4,047,000 5,585,000
Noncash transfer of loans to foreclosed real estate 619,822 1,668,724
</TABLE>
See Notes to Consolidated Financial Statements.
F-32
<PAGE> 117
INVESTORS BANK CORP.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Basis of Presentation
The consolidated financial statements include the accounts of Investors Bank
Corp., a Delaware corporation (the Company) and its wholly owned subsidiary
Investors Savings Bank, F.S.B. (the Bank), a federally chartered savings bank
with deposits insured by the Federal Deposit Insurance Corporation (FDIC)
through the Savings Association Insurance Fund. The statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for a complete presentation of
financial position, results of operations, and changes in cash flows. The data
presented herein is unaudited, but in the opinion of management of the Company,
includes all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of the financial position of the Company and
its subsidiary and the results of their operations and cash flows. The Company
believes such presentation of the financial position is adequate to make the
information presented not misleading. Results for the interim periods are not
necessarily indicative of results for the entire year.
Note 2. Merger Agreement
On August 21, 1994, the Company, Firstar Corporation ("Firstar") and Firstar
Corporation of Minnesota ("Firstar Minnesota") entered into an Agreement and
Plan of Reorganization (the "Agreement"), pursuant to which the Company will be
merged (the "Merger") with and into Firstar Minnesota. Pursuant to the Merger,
each outstanding share of Common Stock of the Company would become .8676 shares
of Firstar Common Stock and each outstanding share of the Company's Cumulative
Perpetual Preferred Stock, Series 1991 would become the right to receive $27.50
(plus accumulated and unpaid dividends) in cash (subject to dissenters'
rights). The Company's outstanding warrants and options to purchase shares of
the Company Common Stock would become warrants and options to purchase an
equivalent .8676 shares of Firstar Common Stock. The Agreement also calls for
the merger of the Bank with and into Firstar Bank Minnesota, N.A., on the date
of, and immediately after the Merger becomes effective. The Merger is intended
to be accounted for as a pooling of interests.
The Merger is subject to a number of conditions including regulatory
approval. The Agreement requires the Company to use its best efforts to
repurchase shares of the Company Common Stock to be held in treasury for
issuance upon exercise of outstanding options and warrants to the extent such
repurchases do not exceed $2,000,000. Subsequent to the Agreement it was
determined such a repurchase plan would violate a covenant in the Company's
9.25% Subordinated Notes. Presently the Company is attempting to obtain
consent of the holders of at least a majority in principal amount of the
outstanding Notes to waive the covenant. The approval and announcement of the
Merger is exempt from the provisions of the Company Shareholder Rights Plan.
To make this clear, the Company has amended its Shareholder Rights Agreement.
A special meeting of the Company's stockholders will be called to vote on
the Merger. All of the executive officers and directors of the Company have
entered into agreements that require them to vote for the Merger. The Company
may terminate the Agreement if the trading price of Firstar Common Stock during
the ten trading days ending three days before the special stockholders' meeting
to approve the Merger is below $29 per share and at least 12.5% below an index
composed of certain commercial banks.
F-33
<PAGE> 118
Note 3. Investment Securities
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities, as of January 1, 1994. Under SFAS No. 115, the Company must
classify its debt and marketable equity securities in one of three categories:
trading, available for sale, or held to maturity. Trading securities are
bought and held principally for the purpose of selling them in the near term.
Securities available for sale include securities that management intends to use
as part of its asset/liability strategy or that may be sold in response to
changes in interest rate, changes in prepayment risk, the need to increase
regulatory capital, or similar factors. The Company has the ability and intent
to hold its securities to maturity. Accordingly, there are no securities held
in a trading account or available for sale and the adoption of SFAS No. 115 had
no impact on the Company's consolidated financial statements as of January 1,
1994.
Note 4. Impaired Loans
The Company adopted the provisions of SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan", as of January 1, 1994. SFAS No. 114 specifies how
reserves for losses related to "impaired" loans should be measured. A loan is
considered impaired if it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. When a loan is impaired, the Company will measure the amount of
impairment based on the present value of expected future cash flows, the loan's
observable market price or the fair value of any collateral. If foreclosure is
probable, the Company shall measure impairment based on the fair value of the
collateral. SFAS No. 114 does not apply to large groups of small balance,
homogeneous loans that are collectively evaluated for impairment. The adoption
of SFAS No. 114 had no effect on the consolidated financial statements as of
January 1, 1994.
Note 5. Reserves for Loan Losses
Included in mortgage loans are reserves for losses of $2,812,554 and
$2,414,254 at September 30, 1994 and December 31, 1993, respectively. Included
in consumer loans are reserves for losses of $536,884 and $566,332 at September
30, 1994 and December 31, 1993.
F-34
<PAGE> 119
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 Sections
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.
A-1
<PAGE> 120
(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.
(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
A-2
<PAGE> 121
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 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
A-3
<PAGE> 122
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-4
<PAGE> 123
APPENDIX B
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
FIRSTAR CORPORATION,
FIRSTAR CORPORATION OF MINNESOTA
AND
INVESTORS BANK CORP.
<PAGE> 124
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
1.02. Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
1.03. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
1.04. Form of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
1.05. Bank Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
ARTICLE II
EFFECT OF THE MERGER ON INVESTORS CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
2.01. Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
2.02. Effect on Options to Purchase Investors Common Stock . . . . . . . . . . . . . . B-4
2.03. Effect on Warrants to Purchase Investors Common Stock . . . . . . . . . . . . . . B-4
2.04. Effect on Investors Restricted Stock . . . . . . . . . . . . . . . . . . . . . . B-4
2.05. Adjustment to Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . B-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5
3.01. Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . B-5
3.02. Investors Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-6
3.03. Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
3.04. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
3.05. Investors Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . B-9
3.06. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
3.07. Authorizations; Compliance with Applicable Laws . . . . . . . . . . . . . . . . . B-11
3.08. Litigation and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-13
3.09. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-13
3.10. Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14
3.11. Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15
3.12. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16
3.13. Conduct of Investors to Date . . . . . . . . . . . . . . . . . . . . . . . . . . B-16
3.14. Properties, Leases and Other Agreements . . . . . . . . . . . . . . . . . . . . . B-18
3.15. Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . B-18
3.16. Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-18
3.17. Accounting and Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . B-18
3.18. Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19
3.19. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19
3.20. Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19
3.21. Interest Rate Risk Management Instruments . . . . . . . . . . . . . . . . . . . . B-19
3.22. Regulatory Impediments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20
3.23. Amendments to Employment and Severance Agreements; Noncompetition Agreements . . . B-20
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3.24. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20
3.25. No Discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FIRSTAR AND SUB . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20
4.01. Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . B-20
4.02. Firstar Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-21
4.03. Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-21
4.04. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-22
4.05. Firstar Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . B-23
4.06. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-23
4.07. Authorizations; Compliance with Applicable Laws . . . . . . . . . . . . . . . . . B-23
4.08. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24
4.09. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24
4.10. Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24
4.11. Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
4.12. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . B-25
4.13. Properties, Leases and Other Agreements . . . . . . . . . . . . . . . . . . . . . B-25
4.14. Accounting and Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26
4.15. Regulatory Impediments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26
ARTICLE V
COVENANTS OF INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26
5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26
5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-27
5.03. Letter of Investors' Accountants . . . . . . . . . . . . . . . . . . . . . . . . B-31
5.04. Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31
5.05. Update Disclosure; Breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
5.06. Affiliates; Accounting and Tax Treatment; Stock Repurchases . . . . . . . . . . . B-32
5.07. Dissent Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
5.08. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
5.09. Delivery of Stockholder List . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
5.10. Audited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
5.11. Bank-Level Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
5.12. Sale of Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . B-34
5.13. Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-34
5.14. Servicing Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-34
5.15. Stockholder Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-34
5.16. Acquisitions of Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . B-34
5.17. Debt Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-35
5.18. Investors Warrants Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . B-35
ARTICLE VI
COVENANTS OF FIRSTAR AND SUB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-35
6.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-35
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6.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-35
6.03. Firstar Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-36
6.04. Breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-36
6.05. Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-36
6.06. Firstar Bank Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-36
6.07. Supplemental Warrant Agreement . . . . . . . . . . . . . . . . . . . . . . . . . B-36
6.08 Supplemental Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-36
6.09. Accounting and Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . B-37
6.10. Bank Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-37
6.11. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-37
ARTICLE VII
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-37
7.01. Filings and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-37
7.02. Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38
7.03. Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . B-39
7.04. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41
7.05. Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41
7.06. Additional Agreements; Reasonable Efforts . . . . . . . . . . . . . . . . . . . . B-41
7.07. Environmental Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-42
7.08. Firstar Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-42
ARTICLE VIII
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-43
8.01. Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . B-43
8.02. Conditions of Obligations of Firstar and Sub . . . . . . . . . . . . . . . . . . B-44
8.03. Conditions of Obligations of Investors . . . . . . . . . . . . . . . . . . . . . B-46
ARTICLE IX
INDUCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-48
9.01. Inducement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-48
ARTICLE X
TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-50
10.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-50
10.02. Investigation and Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-53
10.03. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-54
10.04. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-54
10.05. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-54
ARTICLE XI
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-54
11.01. Nonsurvival of Representations, Warranties and Agreements . . . . . . . . . . . . B-54
11.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-55
11.03. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-56
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11.04. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-56
11.05. Entire Agreement; No Third Party Beneficiaries; Rights of Ownership . . . . . . . B-56
11.06. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-56
11.07. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-56
11.08. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-56
11.09. Knowledge of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-57
EXHIBIT A Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-58
EXHIBIT B Bank Merger Agreement [not included in Appendix]
EXHIBIT 5.06 Affiliate Letter [not included in Appendix]
EXHIBIT 7.07 Certain Properties [not included in Appendix]
EXHIBIT 10.01 Index Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-67
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INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
SECTION
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<S> <C>
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page B-1
Articles of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.02
Audited Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.07
Bank Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page B-1
Bank Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page B-1
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.11(a)
BHC Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.02
Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.03(a)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09(a)
Competing Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.02(f)
Comptroller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03
Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.04
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.01
EDP Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.10
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.02
Environmental Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.07
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.07(b)
Environmental Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.07
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.11(a)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(a)
Excused Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01(a)(ix)
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.08(b)
FDI Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02
Federal Reserve Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03
FHLB Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13
Final Index Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01(b)(iv)
Final Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01(b)(iii)
Firstar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page B-1
Firstar Average Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01(a)(vi)(1)
Firstar Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page B-1
Firstar Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11
Firstar Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.02
Firstar Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(a)
Firstar Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.02
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Firstar Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.05
Firstar Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.01
Firstar Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07
Firstar Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.06
Firstar Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
Firstar Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(a)
Firstar Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(a)
Firstar Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.02
Firstar Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.02
Firstar Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04
HOLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04
Indemnified Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.03(a)
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.03(a)
Index Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01(b)(i)
Initial Index Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01(b)(ii)
Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01(d)
Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page B-1
Investors Authorized Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03
Investors Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05(b)
Investors Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page B-1
Investors Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.11(a)
Investors Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.01
Investors Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
Investors Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02
Investors Environmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.07(b)
Investors Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05(a)
Investors Interested Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.07(b)
Investors Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.01
Investors Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03(b)
Investors Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.07(a)
Investors Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
Investors Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.07(b)
Investors Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.06
Investors Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03(b)
Investors Restricted Stock Award Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03(b)
Investors Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03(d)
Investors Rights Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03(g)
Investors Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03(b)
Investors Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03(b)
Investors 1993 Stock Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03(b)
Investors Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02
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<CAPTION>
SECTION
-------
<S> <C>
Investors Warrant Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03(b)
Investors Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03(b)
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09(a)
Latest Statement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05(a)
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.07(a)
MBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.01
Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.02(a)
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page B-1
Merger Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page B-1
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
OTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.01(c)
Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page B-1
Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.08
Prospectus/Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.02(a)
REO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05(c)
Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.02(f)
S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.02(a)
SAIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04
SLHC Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.01
Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page B-1
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.01
Superior Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.02(f)
Supplemental Warrant Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09(a)
Ten-Day Calculation Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01(b)(v)
Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.01
Toxic Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.07(b)
Transaction Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.01(c)
Trigger Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.01(b)
Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04
Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03(d)
WBCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.02
</TABLE>
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of August 21, 1994
("Agreement"), among FIRSTAR CORPORATION, a Wisconsin corporation ("Firstar"),
FIRSTAR CORPORATION OF MINNESOTA, a Minnesota corporation and a wholly-owned
subsidiary of Firstar ("Sub"), and INVESTORS BANK CORP., a Delaware corporation
("Investors").
WHEREAS, the respective Boards of Directors of Firstar, Sub and
Investors have approved the merger of Investors with and into Sub (the
"Merger") in accordance with the terms and conditions hereof and of the Plan of
Merger in the form attached hereto as Exhibit A executed concurrently herewith
between Sub and Investors, and joined in by Firstar for certain limited
purposes (the "Plan of Merger");
WHEREAS, Investors owns all of the issued and outstanding capital
stock of Investors Savings Bank, F.S.B. ("Investors Bank") and Sub owns all of
the issued and outstanding capital stock of Firstar Bank of Minnesota, N.A.
("Firstar Bank"); and the parties hereto have agreed to cause Investors Bank
and Firstar Bank to execute an Agreement of Merger substantially to the effect
of Exhibit B (the "Bank Merger Agreement"), whereby Investors Bank will be
merged into Firstar Bank (the "Bank Merger") immediately after the Effective
Time (as defined in Section 1.02 hereof);
WHEREAS, the respective Boards of Directors of Firstar, Sub and
Investors believe that such proposed Merger, the exchange of shares of Firstar
Common Stock (as defined in Section 2.01(a) hereof) for shares of Investors
Common Stock (as defined in Section 2.01 hereof) and the payment of cash for
shares of Investors Preferred Stock (as defined in Section 2.01 hereof),
pursuant and subject to the terms of this Agreement and the Plan of Merger
(collectively, the "Merger Agreements"), is desirable and in the best interests
of their respective corporations and stockholders; and
WHEREAS, Firstar, Sub and Investors desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.01. The Merger. Subject to the terms and conditions of this
Agreement, Firstar, Sub and Investors agree to effect the Merger of Investors
with and into Sub in accordance with the Minnesota Business Corporation Act
(the "MBCA") and the Delaware General Corporation Law (the "DGCL").
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1.02. Effective Time of the Merger. Subject to the provisions of
the Merger Agreements, (a) articles of merger (the "Articles of Merger") shall
be duly prepared and executed by Sub and Investors and thereafter delivered to
the Secretary of State of the State of Minnesota for filing, as provided in the
MBCA, on the Closing Date (as defined in Section 1.03) and (b) a certificate of
merger (the "Certificate of Merger") shall be duly prepared and executed by Sub
and Investors and thereafter delivered to the Secretary of State of the State
of Delaware for filing, as provided in the DGCL, on the Closing Date. The
Merger shall become effective upon the filing of the Articles of Merger with
the Secretary of State of the State of Minnesota and the Certificate of Merger
with the Secretary of State of the State of Delaware or at such time on the
Closing Date as is provided in the Articles of Merger and the Certificate of
Merger (the "Effective Time").
1.03. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date (the "Closing Date") to be specified by the
parties, which shall be no later than the fifth business day after the latest
to occur of (i) receipt of all necessary regulatory approvals of the Merger,
the Bank Merger and, if desired by Firstar, the Conversion (as defined in
Section 1.04) from the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), the Office of Thrift Supervision of the Department of
the Treasury (the "OTS") and the United States Comptroller of the Currency (the
"Comptroller") and the expiration of any waiting periods imposed by law and
(ii) the date on which the stockholders of Investors approve the Merger. The
Closing will take place at the offices of Firstar, unless another place is
agreed to in writing by the parties hereto. Notwithstanding the foregoing, if
the Closing does not take place on the date referred to in the first sentence
of this Section because any condition to the obligations of Firstar and Sub, on
the one hand, or Investors, on the other hand, under this Agreement is not met
on that date, the other party may postpone the Closing from time to time to any
designated subsequent business day not more than ten business days after the
original or postponed date on which the Closing was to occur by delivering
notice of such postponement on the date the Closing was to occur.
1.04. Form of Transaction. Firstar at its reasonable discretion may
restructure the Merger and/or the Bank Merger provided that, as a result of
such change, there is no (a) effect upon the consideration to be delivered
pursuant to Article II or change in the tax treatment to the recipients of
Firstar Common Stock to be delivered in the Merger, the holders of options or
warrants to purchase shares of Investors or any other holder of a security of
Investors, or change in the accounting treatment of the transactions
contemplated hereby as a pooling-of-interests, (b) increase in the obligations
of Investors or any Investors Subsidiary pursuant to this Agreement, except for
the obligations set forth in Section 7.01 and Section 7.06 of this Agreement,
or (c) decrease in the obligations of Firstar to Investors, any Investors
Subsidiary or any officer, director, employee, representative or agent of any
of them set forth in this Agreement. Such restructuring may include (i)
changing the Firstar Subsidiaries (as defined in Section 4.02) that are parties
to the Merger and/or the Bank Merger and/or the party surviving either of such
transactions and/or (ii) converting Investors Bank to a national banking
association (the "Conversion") immediately after the Effective Time and prior
to merging the resulting bank into Firstar Bank. At the request of Firstar,
the parties each will take or perform any necessary or advisable steps to
restructure the transaction. In the event the merger between Firstar Bank
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and Investors Bank is restructured as provided in this Section 1.04, references
in this Agreement to the Bank Merger shall be deemed to include references to
the restructured transaction and references to the Bank Merger Agreement shall
be deemed to include references to the documents effecting the restructured
transaction.
1.05. Bank Merger. Firstar and Sub agree to cause Firstar Bank and
Investors agrees to cause Investors Bank to execute the Bank Merger Agreement
within ten days from the date hereof, and Sub, as the sole shareholder of
Firstar Bank, and Investors, as the sole shareholder of Investors Bank, agree
to consent to the Bank Merger.
ARTICLE II
EFFECT OF THE MERGER ON INVESTORS CAPITAL STOCK
2.01. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Investors' common stock, $.01 par value ("Investors Common Stock"), or
Investors' Cumulative Perpetual Preferred Stock, Series 1991, $.01 par value
("Investors Preferred Stock"), but subject to the provisions of Section 262 of
the DGCL with respect to the rights of dissenting holders of Investors
Preferred Stock:
(a) Conversion of Investors Common Stock. Subject to adjustment
pursuant to Section 2.01(e) and Section 2.05, each then issued and outstanding
share of Investors Common Stock shall be converted into the right to receive
0.8676 (the "Exchange Ratio") fully paid and nonassessable shares of common
stock, $1.25 par value, of Firstar ("Firstar Common Stock"), including with
each such share one-half of one Firstar Preferred Share Purchase Right
("Firstar Right") issued pursuant to the Rights Agreement dated as of January
20, 1989, between Firstar and Firstar Trust Company, as Rights Agent (the
"Firstar Rights Agreement"). Prior to the Distribution Date (as defined in the
Firstar Rights Agreement), all references in this Agreement to the Firstar
Common Stock to be received pursuant to the Merger shall be deemed to include
the Firstar Rights.
(b) Conversion of Investors Preferred Stock. Each then issued and
outstanding share of Investors Preferred Stock shall be converted into the
right to receive $27.50 plus accumulated and unpaid dividends on such shares of
Investors Preferred Stock to the Effective Time, payable in cash.
(c) Stock Held by Investors. Each then issued and outstanding
share of Investors Common Stock or Investors Preferred Stock owned by Investors
or any direct or indirect subsidiary of Investors (other than shares held in a
fiduciary capacity) and each share of Investors Common Stock or Investors
Preferred Stock issued and held in Investors' treasury will be cancelled and
retired.
(d) Cancellation of Shares. All shares of Investors Common Stock
and Investors Preferred Stock issued and outstanding immediately prior to the
Effective Time shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
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respect thereto, except the right to receive the shares of Firstar Common Stock
or cash, as the case may be, to be issued in consideration therefor upon the
surrender of such certificate in accordance with the Plan of Merger, without
interest.
(e) Adjustment. If prior to the Effective Time Firstar shall
declare a stock dividend or distribution upon or subdivide, split up,
reclassify or combine its shares of Firstar Common Stock or declare a dividend
or make a distribution on Firstar Common Stock of any security convertible into
Firstar Common Stock or exercisable to purchase Firstar Common Stock
(including, without limitation, distribution of any Firstar Rights after a
Distribution Date), appropriate adjustment or adjustments will be made in the
Exchange Ratio.
2.02. Effect on Options to Purchase Investors Common Stock. Each
Investors Stock Option (as defined in Section 3.03(b)) which is outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, become and represent an
option (a "Firstar Stock Option") to purchase, for the aggregate price payable
by such option holder on exercise of the Investors Stock Option, the number of
shares of Firstar Common Stock which he or she would have received pursuant to
the Merger if such option had been exercised in full immediately prior to the
Effective Time. Firstar shall pay cash to holders of Investors Stock Options
in lieu of issuing fractional shares of Firstar Common Stock upon exercise of a
Firstar Stock Option. After the Effective Time, each Firstar Stock Option
shall be exercisable on the same terms and conditions as were applicable under
the Investors Stock Option as of the Effective Time.
2.03. Effect on Warrants to Purchase Investors Common Stock. Each
Investors Warrant (as defined in Section 3.03(b)) which is outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
pursuant to the Supplemental Warrant Agreement (as defined in Section 6.07) and
without any action on the part of the holder thereof, become and represent a
warrant (a "Firstar Warrant") to acquire, on the same terms and conditions as
were applicable under such Investors Warrant, the same number of shares of
Firstar Common Stock as the holder of such Investors Warrant would have been
entitled to receive pursuant to the Merger had such holder exercised such
warrant in full immediately prior to the Effective Time, at a price per share
equal to (x) the aggregate purchase price under the Investors Warrant for the
shares of Investors Common Stock otherwise purchasable pursuant to such
Investors Warrant immediately prior to the Effective Time divided by (y) the
number of full shares of Firstar Common Stock deemed purchasable pursuant to
such Warrant. Firstar shall pay cash to holders of Investors Warrants in lieu
of issuing fractional shares of Firstar Common Stock upon exercise of a Firstar
Warrant. After the Effective Time, each Firstar Warrant shall be exercisable
on the same terms and conditions as were applicable under the Investors Warrant
as of the Effective Time.
2.04. Effect on Investors Restricted Stock. Each share of Investors
Restricted Stock (as defined in Section 3.03(b)) which is not fully vested at
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, become and represent the right to receive a number
of shares of Firstar Common Stock (not to exceed the Exchange Ratio) with a
value as of the Effective Time equal to the "fair value" of such Investors
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<PAGE> 135
Restricted Stock as determined by an independent third party expert selected by
Inventors taking into account the terms and conditions (other than any rights
to a tax offset bonus), including vesting schedule, as were applicable under
the Investors Restricted Stock Award Agreement (as defined in Section 3.03(b))
as of the Effective Time, and Firstar shall, as of the Effective Time, issue
the appropriate number of shares of Firstar Common Stock (decreased to the
nearest full share) to each holder of Investors Restricted Stock.
Notwithstanding the foregoing, if treatment in accordance with this sentence
does not prevent the delivery of the opinions contemplated by Section 8.02(d),
then each share of Investors Restricted Stock under agreements dated January 4,
1994 which is not fully vested at the Effective Time shall not be converted as
provided in the preceding sentence, but instead shall, by virtue of the Merger
and without any action on the holder thereof, become and represent the number
of shares of Firstar Common Stock ("Firstar Restricted Stock") determined by
multiplying such share of Investors Restricted Stock by the Exchange Ratio,
subject to the same terms and conditions, including vesting schedule, as were
applicable under the Investors Restricted Award Agreement (as defined in
Section 3.03(b)) as of the Effective Time.
2.05. Adjustment to Exchange Ratio. If the Environmental Reports
delivered pursuant to Section 7.07 indicate that any cleanup, removal, remedial
action or other response is required and if the estimated costs of such
remediation as set forth in the Environmental Reports and/or actual costs of
such remediation are greater than $500,000, then, in addition to any other
rights that Firstar may have pursuant to this Agreement, Firstar shall have the
right to adjust the Exchange Ratio otherwise provided in Section 2.01(a) with
the effect that the aggregate market value of Firstar Common Stock (based upon
an assumed price per share of Firstar Common Stock of $32.125 otherwise to be
delivered to the holders of Investors Common Stock as of the Effective Time
(including any fractional shares) shall be reduced dollar-for-dollar by the
total costs of remediation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Investors represents and warrants to Firstar and Sub as follows:
3.01. Organization, Standing and Power. Investors is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to have such power or authority would not
have a material adverse effect on the business, operations, prospects or
financial condition of Investors and its Subsidiaries (as hereinafter defined),
taken as a whole (an "Investors Material Adverse Effect"). Investors is
qualified to do business and is in good standing in each other state or foreign
jurisdiction where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and where the failure to be so
qualified would have an Investors Material Adverse Effect. Investors is
registered as a savings and loan holding company with the OTS under the Savings
and Loan Holding Company Act, as amended (the "SLHC Act"). Investors has
delivered to Firstar true, accurate and complete copies of the currently
effective certificate of incorporation (the "Investors Certificate") and
by-laws of
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Investors, including all amendments thereto. As used in this Agreement, the
word "Subsidiary" means any corporation or other organization, whether
incorporated or unincorporated (i) of which such party or any other Subsidiary
of such party is a general partner (excluding partnerships, the general
partnership interest of which held by such party or any Subsidiary of such
party does not have a majority of the voting interest in such partnership) or
(ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
3.02. Investors Subsidiaries. Except as set forth in the Investors
Disclosure Letter (which is a letter delivered by Investors to Firstar and Sub
on the date hereof, the receipt thereof having been acknowledged by Firstar and
Sub executing a copy thereof, that identifies, as to each matter disclosed
therein, the section of this Agreement to which the matter relates), Investors
beneficially owns, directly or indirectly, all of the shares of the outstanding
capital stock of each of the Subsidiaries listed on such letter (herein called
collectively the "Investors Subsidiaries" or individually an "Investors
Subsidiary"), which constitute Investors' sole Subsidiaries. No equity
securities of any of the Investors Subsidiaries are or may become required to
be issued by reason of any option, warrants, calls, rights or agreements of any
character whatsoever; there are outstanding no securities or rights convertible
into or exchangeable for shares of any capital stock of any Investors
Subsidiary; and there are no other contracts, commitments, understandings or
arrangements by which any Investors Subsidiary is bound to issue additional
shares of its capital stock or options, warrants, calls, rights or agreements
to purchase or acquire any additional shares of its capital stock. Except as
provided for under any applicable savings institution statute, all of the
shares of capital stock of each of the Investors Subsidiaries owned by
Investors are fully paid and nonassessable and are owned by it free and clear
of any claim, lien, encumbrance or agreement with respect thereto. Each
Investors Subsidiary is a savings institution or a corporation, in each case
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has the corporate power and authority to own
or lease its properties and assets and to carry on its business as it is now
being conducted, except in the case of Investors Subsidiaries other than
Investors Bank where the failure to have such power or authority would not have
an Investors Material Adverse Effect. Investors Bank is a savings institution
organized under the laws of the United States, and a member in good standing of
the Federal Home Loan Bank of Des Moines. The deposits of Investors Bank are
insured by the Savings Association Insurance Fund ("SAIF") of the Federal
Deposit Insurance Corporation ("FDIC") to the extent provided by law.
Investors Bank is a qualified seller and servicer for the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation. Investors
has delivered to Firstar true, accurate and complete copies of the currently
effective charter, certificate or articles of incorporation and by-laws of the
Investors Subsidiaries, including all amendments thereto. Except as set forth
in the Investors Disclosure Letter and except for securities held in its
capacity as fiduciary, Investors does not own beneficially, directly or
indirectly, more than 5% of any class of equity securities or similar interests
of any corporation, bank, business trust, association or similar organization.
There are no obligations, contingent or otherwise, of Investors or any
Investors Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock of any Investors Subsidiary or to provide funds (in the form of a
loan,
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capital contribution or otherwise) to any Investors Subsidiary or to make an
investment in any Investors Subsidiary or any other entity, other than pursuant
to commercial loan arrangements and similar obligations arising in the ordinary
course of the business of the Investors Subsidiaries.
3.03. Capital Structure. (a) As of the date hereof, the authorized
capital stock of Investors consists of 11,000,000 shares divided into
10,000,000 shares of Investors Common Stock and 1,000,000 shares of "Preferred
Stock" (the "Investors Authorized Preferred").
(b) As of the date hereof, (i) 3,500,604 shares of Investors
Common Stock are issued and outstanding, including 64,778 shares of restricted
stock (the "Investors Restricted Stock") issued pursuant to Restricted Stock
Award Agreements dated December 31, 1992 or January 4, 1994 between Investors
and certain of its employees (the "Investors Restricted Stock Award
Agreements"), (ii) 242,041 shares of Investors Common Stock are reserved for
issuance pursuant to Investors' Stock Option Plan (the "Investors Option
Plan"), and options to purchase 242,041 shares of Investors Common Stock are
outstanding under the Investors Option Plan, (iii) 322,000 shares of Investors
Common Stock are reserved for issuance under the Investors 1993 Incentive Stock
Plan (the "Investors 1993 Stock Plan" and, together with the Investors Option
Plan, the "Investors Stock Plans"), and options to purchase 45,330 shares of
Investors Common Stock are outstanding under the Investors 1993 Stock Plan
(such options, together with options outstanding under the Investors Stock
Option Plan, hereafter referred to as "Investors Stock Options"), (iv) 202,160
shares of Investors Common Stock are reserved for issuance pursuant to 303,240
outstanding warrants (the "Investors Warrants"), each of which represents the
right to purchase 2/3 share of Investors Common Stock, issued under a Warrant
Agreement dated October 15, 1991 (the "Investors Warrant Agreement"), and (v)
no shares of Investors Common Stock are held in treasury. As of the date
hereof, pursuant to the Investors Warrant Agreement, the price at which the
Investors Warrants are exercisable is $11.0625 per share of Investors Common
Stock, and the Investors Warrants expire on November 13, 1996. There is no
adjustment in the Purchase Price (as defined in the Investors Warrant
Agreement) that was not required to be made by virtue of Section 10(E) of the
Investors Warrant Agreement, but which is required to be carried forward and
taken into account in any subsequent adjustment. The Merger will have the
effect on Investors Stock Options and Investors Warrants described in Section
2.02 and Section 2.03, respectively. The Investors Disclosure Letter sets
forth the number of holders of record of Investors Warrants as of a recent
date. The Investors Disclosure Letter identifies any rights that any holder of
Investors Stock Options and/or Investors Restricted Stock has to a tax offset
bonus under Section 8(b) of the Investors 1993 Stock Plan or otherwise.
(c) As of the date hereof, (i) 303,640 shares of Investors
Preferred Stock are issued and outstanding, (ii) a series of Investors
Authorized Preferred, consisting of 500,000 shares designated as "Series A
Junior Participating Preferred Stock," is authorized and reserved for issuance
under the Investors Rights Agreement, as defined in Section 3.03(d), no shares
of which have been issued, and (iii) no other shares of Investors Authorized
Preferred are authorized or issued.
(d) As of the date hereof, neither Investors nor any Subsidiary of
Investors has issued and outstanding bonds, debentures, notes or other
indebtedness having the right to vote (or
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convertible into securities having the right to vote) on any matters on which
stockholders may vote ("Voting Debt"). All outstanding shares of Investors
capital stock are validly issued, fully paid and nonassessable and not subject
to or issued in violation of any preemptive rights. As of the date of this
Agreement, except pursuant to this Agreement, the Investors Stock Plans, the
Investors Preferred Stock, the Investors Warrants, and the Rights Agreement
dated as of May 7, 1991 between Investors and Norwest Bank Minnesota, N.A., as
Rights Agent (the "Investors Rights Agreement"), there are no options,
warrants, calls, rights, or agreements of any character whatsoever to which
Investors or any Subsidiary of Investors is a party or by which it is bound
obligating Investors or any such Subsidiary to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or any
Voting Debt of Investors or of any Subsidiary of Investors or obligating
Investors or any Subsidiary of Investors to grant, extend or enter into any
such option, warrant, call, right or agreement. Immediately after the
Effective Time, there will be no option, warrant, call, right or agreement
obligating Investors or any Subsidiary of Investors to issue, deliver or sell,
or cause to be issued, delivered or sold, any shares of capital stock or any
Voting Debt of Investors or any Subsidiary of Investors, or obligating
Investors or any Subsidiary of Investors to grant, extend or enter into any
such option, warrant, call, right or agreement.
(e) Investors has not purchased, redeemed, canceled or otherwise
acquired any of its capital stock or Voting Debt during the two years preceding
the date hereof. Except as provided in this Agreement, there are no
obligations, contingent or otherwise, of Investors or any Investors Subsidiary
to repurchase, redeem or otherwise acquire any shares of Investors Common
Stock, Investors Preferred Stock or Voting Debt.
(f) As a result of the execution and delivery by Investors of the
amendment, dated of even date herewith, to the Investors Rights Agreement (the
"Investors Rights Amendment"), (i) Firstar will not become an "Acquiring
Person" (as defined in the Investors Rights Amendment) by virtue of the
announcement or consummation of the Merger and (ii) the Investors Rights
Agreement will expire at the Effective Time.
3.04. Authority. Investors has all requisite corporate power and
authority to enter into this Agreement, the Plan of Merger and the Investors
Rights Amendment and to consummate the transactions contemplated hereby and
thereby, subject only to approval of this Agreement and the Plan of Merger by
the stockholders of Investors. Investors Bank has all requisite corporate
power and authority to enter into the Bank Merger Agreement and to consummate
the transactions contemplated thereby. The execution and delivery of this
Agreement, the Plan of Merger and the Investors Rights Amendment and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Investors
(including unanimous approval by the Board of Directors of Investors), subject
to such approval of this Agreement and the Plan of Merger by the stockholders
of Investors. Such approval by the Board of Directors of Investors is all
action necessary to insure that the restrictions set forth in Section 203 of
the DGCL do not or will not apply to the transactions contemplated herein. The
execution and delivery of the Bank Merger Agreement and the consummation of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of Investors Bank. This Agreement, the Plan of
Merger
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and the Investors Rights Amendment have been duly executed and delivered by
Investors, and each constitutes a valid and binding obligation of Investors
enforceable in accordance with its terms. Upon execution and delivery thereof
by Investors Bank and Firstar Bank, the Bank Merger Agreement will have been
duly executed and delivered by Investors Bank and will constitute a valid and
binding obligation of Investors Bank enforceable in accordance with its terms.
The execution and delivery of this Agreement, the Plan of Merger and the
Investors Rights Amendment do not, and the execution and delivery of the Bank
Merger Agreement and the consummation of the transactions contemplated hereby
and thereby will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any material obligation
or the loss of a material benefit under, or the creation of a material lien,
pledge, security interest or other encumbrance on assets (any such conflict,
violation, default, right of termination, cancellation or acceleration loss or
creation, a "Violation"), pursuant to any provision of (a) the Investors
Certificate, the by-laws of Investors or the charter, certificate or articles
of incorporation or by-laws of any Investors Subsidiary or (b) except (i) as
set forth in the Investors Disclosure Letter or (ii) as contemplated by the
next sentence hereof, any loan or credit agreement, note, mortgage, indenture,
lease, Investors Benefit Plan (as defined in Section 3.11) or other agreement,
obligation, instrument, permit, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Investors or any
Subsidiary of Investors or their respective properties or assets which
Violation pursuant to this clause (b) would have an Investors Material Adverse
Effect. Other than in connection or in compliance with the provisions of the
DGCL or the MBCA, the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act"), the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the "Exchange
Act"), the securities or "blue sky" laws of the various states, and consents,
authorizations, approvals, notices or exemptions required under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"), the SLHC Act, the
Federal Deposit Insurance Act, as amended (the "FDI Act"), the Home Owners Loan
Act, as amended (the "HOLA"), and the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), no consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required on
the part of Investors or any of the Investors Subsidiaries in connection with
the execution and delivery of this Agreement, the Plan of Merger and the Bank
Merger Agreement by Investors or Investors Bank, as the case may be, or the
consummation by Investors or Investors Bank, as the case may be, of the
transactions contemplated hereby and thereby, the failure to obtain which would
have an Investors Material Adverse Effect.
3.05. Investors Financial Statements. (a) The consolidated balance
sheets of Investors as of December 31, 1993 and 1992 and the related
consolidated statements of income, consolidated statements of cash flows and
consolidated statements of changes in stockholders' equity for the three years
in the period ended December 31, 1993 (the "Latest Statement Date"),
accompanied by the unqualified opinion of KPMG Peat Marwick, copies of which
have been furnished by Investors to Firstar; the unaudited consolidated balance
sheet of Investors as of June 30, 1994 and the related consolidated statement
of income, consolidated statement of changes in stockholders' equity and
consolidated statements of cash flows for the six months then ended, in
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the form prepared for Investors' internal use, copies of which have been
furnished by Investors to Firstar; and like financial information included in
Forms 10-Q filed with the SEC subsequent to the Latest Statement Date
(collectively, the "Investors Financial Statements"), have been prepared in
accordance with generally accepted accounting principles as utilized in the
Investors Financial Statements applied on a consistent basis (except as may be
indicated therein or in the notes thereto), and present fairly the consolidated
financial condition of Investors at the dates, and the consolidated results of
operations, changes in stockholders' equity and cash flows for the periods,
stated therein. In the case of interim fiscal periods, all adjustments,
consisting only of normal recurring items, which management of Investors
believes necessary for a fair presentation of such financial information, have
been made, subject to year-end audit adjustments, none of which could
reasonably be expected to have a material adverse effect on the consolidated
financial position or results of operations of Investors.
(b) Except as and to the extent set forth on the consolidated balance
sheet of Investors and its Subsidiaries as of December 31, 1993, or in the
notes thereto (the "Investors Balance Sheet"), neither Investors nor any
Investors Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet, or in the notes thereto, prepared in accordance
with generally accepted accounting principles, except (i) for liabilities or
obligations incurred in the ordinary course of business since the Latest
Statement Date that would not, individually or in the aggregate, have an
Investors Material Adverse Effect or (ii) as otherwise reflected in the
Investors Reports filed prior to the date of this Agreement. Except as
disclosed in the Investors Disclosure Letter, neither Investors nor any
Investors Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that are not required to be
reflected on a balance sheet, or in the notes thereto, except for liabilities
or obligations that do not, individually or in the aggregate, have an Investors
Material Adverse Effect.
(c) Without limitation to the foregoing, Investors' consolidated
reserve for losses on loans included in the Investors Financial Statements as
of June 30, 1994 was $3,198,338, representing .36% of total consolidated loans
held in portfolio, and Investors' consolidated reserve for losses on real
estate was $120,043, representing 2.27% of total consolidated real estate owned
as a result of foreclosure ("REO") reflected on such statements. The aggregate
amount of such reserve for losses on loans and reserve for losses on REO was
adequate to absorb reasonably expectable losses in the loan and REO portfolios
of Investors and Investors Bank. To the knowledge of Investors, there are no
facts which would cause it to increase the level of such reserve for losses on
loans and REO. The loan portfolio and REO portfolio of Investors Bank as of
June 30, 1994 in excess of such reserves is, to the best knowledge and belief
of the executive officers of Investors and Investors Bank after due inquiry as
to potential losses, and based on past loan loss experience, fully realizable
on REO and fully collectible in accordance with the terms of the documentation
relating to the loans in such portfolio. The documentation relating to loans
made by Investors Bank and relating to all security interests, mortgages and
other liens with respect to all collateral for such loans, taken as a whole, is
adequate for the enforcement of the material terms of such loans and of the
related security interests, mortgages and other liens. The terms of such loans
and of the related security interests, mortgages and other liens comply in all
material respects with all applicable laws, rules and regulations (including
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without limitation laws, rules and regulations relating to the extension of
credit). Except as set forth in the Investors Disclosure Letter, (A) as of
June 30, 1994, there are no loans, leases, other extensions of credit or
commitments to extend credit of Investors Bank that have been or, to Investors'
knowledge, should have been classified by Investors Bank as nonaccrual, as
restructured, as 90 days past due, as still accruing and doubtful of collection
or any comparable classification and (B) no material information with respect
to the loan portfolios of Investors Bank has been withheld from Firstar. Not
later than three days after the date hereof, Investors will have provided
Firstar with access to true, correct and complete in all material respects
written information concerning the loan portfolios of Investors Bank.
3.06. Reports. Since January 1, 1991, Investors and the Investors
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, (iii) the FDIC, and
(iv) any other applicable federal or state securities, or savings institution
authorities (all such reports and statements are collectively referred to
herein as the "Investors Reports"). As of their respective dates, the
Investors 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 (including,
to the extent applicable, Rule 10b-5 promulgated under the Exchange Act) and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein.
3.07. Authorizations; Compliance with Applicable Laws. (a)
Investors and its Subsidiaries hold all authorizations, permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities which
are material to the operations of the businesses of Investors and the Investors
Subsidiaries (the "Investors Permits"), including appropriate authorizations
from the OTS. Investors and the Investors Subsidiaries are in compliance with
the terms of the Investors Permits, except where the failure so to comply could
not reasonably be expected to have an Investors Material Adverse Effect.
Except as disclosed in the Investors Reports filed prior to the date of this
Agreement or in the Investors Disclosure Letter, the businesses of Investors
and the Investors Subsidiaries are not being, and have not been, conducted in
violation of any domestic (federal, state or local) or foreign law, statute,
ordinance or regulation of any Governmental Entity (collectively "Laws"),
except for possible violations which individually or in the aggregate do not
and, insofar as reasonably can be foreseen, in the future will not, have an
Investors Material Adverse Effect. Except (i) as set forth in the Investors
Disclosure Letter, (ii) for regular, periodic reviews and examinations by
Governmental Entities, and (iii) for investigations or reviews by Governmental
Entities other than savings institution regulatory authorities where the
outcome thereof will not have an Investors Material Adverse Effect, as of the
date hereof, no investigation or review by any Governmental Entity with respect
to Investors, any of the Investors Subsidiaries or any Investors' Property (as
defined below) is pending or, to the knowledge of Investors, threatened, nor
has any Governmental Entity indicated an intention to conduct the same.
(b) The Investors Disclosure Letter identifies each parcel of real
estate currently owned, leased or otherwise possessed or controlled by
Investors or any Investors Subsidiary on
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the date of this Agreement, including, without limitation, REO and properties
managed or controlled by Investors Bank in connection with its lending or
fiduciary operations (collectively, the "Investors Property"), except that the
Investors Disclosure Letter need not identify residential real estate owned as
a result of foreclosures having an appraised value of less than $500,000.
Except as set forth in the Investors Disclosure Letter, neither Investors nor
any Investors Subsidiary nor any of the Investors Property owned or leased by
them for use in the operation of their respective businesses is in violation of
any applicable zoning ordinance or other law, regulation or requirement
relating to the operation of any properties used, including, without
limitation, applicable environmental protection laws, rules and regulations
(collectively, "Environmental Laws"), other than violations that, in the
aggregate with any other conditions described in this Section 3.07(b), would
not result in costs that would be material to Investors and the Investors
Subsidiaries taken as a whole; and neither Investors nor any Investors
Subsidiary has received any notice of any such violation, or the existence of
any condemnation proceeding with respect to any Investors Property. Except as
set forth in the Investors Disclosure Letter, no Toxic Substances (as defined
below) have been deposited or disposed of in, on or under any Investors
Property during the period in which Investors or any of the Investors
Subsidiaries has owned, occupied, managed, controlled or operated such
properties, except to the extent the same, in the aggregate with any other
conditions described in this Section 3.07(b), would not result in costs that
would be material to Investors and the Investors Subsidiaries taken as a whole.
Except as set forth in the Investors Disclosure Letter, Investors has no
knowledge (A) that prior owners, occupants or operators of all or any part of
the Investors Property ever used such properties as a dump or gasoline service
station, (B) that prior owners, occupants or operators of all or part of the
Investors Property ever deposited or disposed of or allowed to be deposited or
disposed of in, on or under such properties any Toxic Substances or (C) that
any past, present or known future event, condition, circumstances, plans,
errors or omissions have existed or occurred, are existing or occurring or are
reasonably expected to exist or occur on or with respect to any Investors
Property, or any other property as to which Investors or any Investors
Subsidiary has held or currently holds ownership or indicia of ownership
("Investors Interested Property"), except as to the matters in clauses (B) and
(C) to the extent the same, in the aggregate with any other conditions
described in this Section 3.07(b), would not result in costs that would be
material to Investors and the Investors Subsidiaries taken as a whole. To the
best knowledge of Investors, there are no conditions or circumstances in
connection with the Investors Property that could reasonably be anticipated to
(i) cause any Investors Property to be subject to any restrictions on
ownership, occupancy, use or transferability under any applicable Environmental
Laws or (ii) materially reduce the value of any Investors Property. To the
best knowledge of Investors and its Subsidiaries, neither Investors nor any
Investors Subsidiary has been identified as a potentially responsible party by
any Governmental Entity in a matter arising under any Environmental Laws. For
purposes of this Agreement, (1) "Toxic Substances" shall mean petroleum or
petroleum-based substance or waste, solid waste, PCBs, pesticides, herbicides,
lead, radioactive materials, urea formaldehyde foam insulation, or substances
defined as "hazardous substances" or "toxic substances" in any Environmental
Laws; (2) materials will be considered to be deposited or disposed of in, on or
under any real property if such materials have been stored, treated, recycled,
used or accidentally or intentionally spilled, released, dumped, emitted or
otherwise placed, deposited or disposed of, or used in any construction, in, on
or under such property; and (3) costs of violations or conditions shall take
into account, without limitation,
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liabilities, damages, penalties, injunctive relief or removal, remediation or
other costs under any applicable Environmental Law.
3.08. Litigation and Claims. Except as disclosed in the Investors
Reports filed prior to the date of this Agreement or in the Investors
Disclosure Letter: (a) none of Investors, any of the Investors Subsidiaries or
any Investors' Property is subject to any continuing order of, or written
agreement or memorandum of understanding with any federal or state savings
institution or insurance authority or other Governmental Entity, or any
judgment, order, writ, injunction, decree or award of any Governmental Entity
or arbitrator, including, without limitation, cease-and-desist or other orders
of any savings institution regulatory authority, (b) there is no action, suit,
litigation, proceeding or arbitration ("Proceeding") against or affecting
Investors or any Subsidiary of Investors or, to the knowledge of Investors, any
directors, officers, employees or agents of Investors or any Subsidiary of
Investors (in their respective capacities as directors, officers, employees or
agents) pending or, to the knowledge of Investors, threatened, which would, if
adversely determined, have an Investors Material Adverse Effect or, to the
knowledge of Investors, any basis therefor, and (c) there are no uncured
material violations, or violations with respect to which material refunds or
restitutions may be required, cited in any compliance report to Investors or
any Investors Subsidiary as a result of the examination by any savings
institution regulatory authority.
3.09. Taxes. Investors and each Investors Subsidiary has filed all
tax returns required to be filed by them and has paid (or Investors has paid on
its behalf), or has set up an adequate reserve for the payment of, all taxes
required to be paid as shown on such returns, except to the extent such
nonpayment did not result in a liability material to Investors and its
Subsidiaries taken as a whole, and the most recent Investors financial
statements contained in the Investors Reports reflect an adequate reserve for
all taxes payable by Investors and its Subsidiaries accrued through the date of
such financial statements. The Investors Disclosure Letter sets forth, as of
the date hereof, the following information with respect to Investors and each
Subsidiary of Investors: (a) the most recent tax year for which the United
States Internal Revenue Service ("IRS") has completed its examination of such
corporation, (b) whether there is an examination pending by the IRS with
respect to such corporation and, if so, the tax years involved, (c) whether
such corporation has executed or filed with the IRS any agreement which is
still in effect extending the period for assessment and collection of any
federal tax and, if so, the tax years covered by such agreement and the
expiration date of such extension, and (d) whether there are any existing
material disputes as to foreign, state, or local taxes. There are no liens for
taxes upon the assets of Investors or of any Investors Subsidiary, except for
statutory liens for taxes not yet delinquent or the validity of which is being
contested in good faith by appropriate proceedings and, in either case, only if
adequate reserves therefor have been established on Investors' books in
accordance with generally accepted accounting principles. Except as disclosed
in the Investors Disclosure Letter, neither Investors nor any Investors
Subsidiary is a party to any action or proceeding by any governmental authority
for assessment and collection of taxes, and no claim for assessment and
collection of taxes has been asserted against any of them. For the purpose of
this Agreement, the term "tax" (including, with correlative meaning, the terms
"taxes" and "taxable") shall include all federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
personal and
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real property, withholding, excise and other taxes, duties or assessments of
any nature whatsoever, together with all interest, penalties and additions
imposed with respect to such amounts. Investors and each Investors Subsidiary
has withheld from its employees (and timely paid to the appropriate
governmental agency) amounts which are proper and accurate in all material
respects for all periods through the date hereof in material compliance with
all tax withholding provisions of applicable federal, state, foreign and local
laws (including without limitation income, social security and employment tax
withholding for all types of compensation). Except as disclosed in the
Investors Disclosure Letter, and except that prior to March 1984 Investors was
part of the affiliated group for which Interregional Financial Group, Inc. was
the parent, neither Investors nor any Investors Subsidiary has ever been a
member of an affiliated group of corporations (within the meaning of Section
1504(a) of the Internal Revenue Code of 1986, as amended (the "Code")) filing
consolidated federal income tax returns, other than the affiliated group of
which Investors is the common parent. To the best knowledge of Investors,
neither Investors nor any Investors Subsidiary has made any payments, or been a
party to an agreement that under any circumstances could obligate it to make
payments based upon the consummation of the transactions contemplated hereby
constituting a change of the nature described in Section 280G(b)(2)(A)(i) of
the Code, that are or will not be deductible because of Section 280G of the
Code.
3.10. Certain Agreements. Except as discussed in the Investors
Reports filed prior to the date of this Agreement or as disclosed in the
Investors Disclosure Letter, and except for this Agreement, as of the date
hereof, neither Investors nor any Investors Subsidiary is a party to any oral
or written (i) consulting agreement not terminable on 60 days' or less notice
or employment agreement or other agreement providing any term of employment,
compensation guarantee, or severance benefit, (ii) union, guild or collective
bargaining agreement, (iii) agreement or plan, including any stock option plan,
stock appreciation right plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of the transactions contemplated by this
Agreement, (iv) contract, agreement or understanding to repurchase assets
previously sold (or to indemnify or otherwise compensate the purchaser in
respect of such assets), (v) contract containing covenants which limit the
ability of Investors or any Investors Subsidiary to compete in any line of
business or with any person or which involve any restriction of the
geographical area in which, or method by which, Investors or any Investors
Subsidiary may carry on its business (other than as may be required by law or
applicable regulatory authorities), (vi) any contract, agreement or other
instrument or undertaking which is not terminable by Investors or any Investors
Subsidiary without additional payment or penalty within 60 days and obligates
Investors or any Investors Subsidiary for payments or other consideration with
a value in excess of $100,000, other than loan agreements entered into in the
ordinary course of business, or (vii) other executory material agreement as
defined by the instructions to Exhibit 10 under Item 601 of SEC Regulation S-K.
Except as set forth in the Investors Disclosure Letter, neither Investors nor
any of the Investors Subsidiaries is in Violation of any loan or credit
agreement, note, mortgage, indenture or other agreement, obligation or
instrument applicable to Investors or any Investors Subsidiary or their
respective properties or assets, except for any such Violations that would not,
individually or in the aggregate, have an
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Investors Material Adverse Effect. Investors has delivered a valid and
effective notice of termination pursuant to Section 3.3 of the Electronic Data
Processing and Management Information Service Agreement (the "EDP Agreement")
between Investors and Financial Information Trust (n/k/a Newtrend), dated April
30, 1990, as a result of which the EDP Agreement will terminate without penalty
in February 1996.
3.11. Benefit Plans. (a) The Investors Disclosure Letter lists (i)
each employee bonus, incentive, deferred compensation, stock purchase, stock
appreciation right, stock option and severance pay plan, (ii) each pension,
profit sharing, stock bonus, thrift, savings and employee stock ownership plan,
and (iii) every other employee benefit plan (within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
(collectively "Benefit Plans"), which Investors or any Investors Subsidiary
maintains or to which Investors or any Investors Subsidiary contributes on
behalf of current or former employees. Except as disclosed in the Investors
Disclosure Letter, all of the plans and programs listed in the Investors
Disclosure Letter (collectively, "Investors Benefit Plans") comply with all
applicable requirements of ERISA and all other applicable federal and state
laws, including without limitation the reporting and disclosure requirements of
Part 1 of Title I of ERISA. Each of the Investors 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 IRS to qualify under Section 401(a) of the
Code, and, except as disclosed in Investors Disclosure Letter, there exist no
circumstances that would adversely affect the qualified status of any such
Investors Benefit Plan under that section. No Investors Benefit Plan is a
defined benefit pension plan covered by Title IV of ERISA, and no such Plan is
a "multi-employer plan" within the meaning of Section 3(37) of ERISA. Except
as set forth in the Investors Disclosure Letter, there is no pending or, to the
knowledge of Investors, threatened litigation, governmental proceeding or
investigation against or relating to any Investors Benefit Plan, and to the
knowledge of Investors there is no reasonable basis for any material
proceedings, claims, actions or proceedings against any Plan. Except as set
forth in the Investors Disclosure Letter, no Investors 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, and no Investors Benefit Plan has engaged in a transaction involving
the purchase or sale of employer securities by such Plan from or to a
"disqualified person" (within the meaning of Section 4975 of the Code).
Neither Investors nor any Subsidiary of Investors has incurred any "accumulated
funding deficiency" (within the meaning of Section 412 of the Code), whether or
not waived, with respect to any Investors Benefit Plan. All Investors Benefit
Plans that are group health plans, within the meaning of 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.
(b) Investors has delivered to Firstar copies of (i) each
Investors Benefit Plan, (ii) current summary plan descriptions of each
Investors Benefit Plan for which they are required, (iii) each trust agreement,
insurance policy or other instrument relating to the funding of any Investors
Benefit Plan, (iv) the most recent Annual Reports (Form 5500 series) and
accompanying schedules filed with the IRS or United States Department of Labor
with respect to each Investors
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Benefit Plan for which they are required, (v) the most recent determination
letter issued by the IRS with respect to each Investors Benefit Plan that is
intended to qualify under Section 401 of the Code, (vi) the most recent
available financial statements for each Investors Benefit Plan that has assets,
and (vii) the most recent audited financial statements for each Investors
Benefit Plan for which audited financial statements are required by ERISA.
(c) The Investors Disclosure Letter describes any obligation that
Investors and/or any Subsidiaries of Investors has to provide health and
welfare benefits to retirees and other former employees or their dependents
(other than rights arising solely under Section 601 of ERISA or Section 4980B
of the Code or under Minnesota statutes requiring continuation of life
insurance) including information as to the number of retirees, other former
employees and dependents entitled to such coverage and their ages.
3.12. Insurance. Investors and each Investors Subsidiary is
presently insured, and during each of the past five calendar years has been
insured, for reasonable amounts with financially sound and reputable insurance
companies against such risks as, to the best knowledge of Investors, companies
engaged in a similar business would, in accordance with good business practice,
customarily be insured. Investors has delivered to Firstar correct and
complete copies of all material policies of insurance of Investors and the
Investors Subsidiaries currently in effect. Neither Investors nor any
Investors Subsidiary has any liability for material unpaid premiums or premium
adjustments not properly reflected on the Investors Financial Statements and no
notice of cancellation or termination has been received by Investors or any
Investors Subsidiary with respect to any material insurance policy currently in
effect. Within the last three years, neither Investors nor any Subsidiary of
Investors has been refused any insurance with respect to any assets or
operations, nor has any coverage been limited in any material respect as to any
assets or operations, by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance during the last five
years.
3.13. Conduct of Investors to Date. Except as disclosed in
Investors Reports filed prior to the date of this Agreement or in the Investors
Disclosure Letter, and except as contemplated by this Agreement, the Plan of
Merger and the Bank Merger Agreement, from and after January 1, 1994 through
the date of this Agreement: (a) Investors and the Investors Subsidiaries have
carried on their respective businesses in the ordinary and usual course
consistent with past practices; (b) Investors has not amended the Investors
Certificate or the Investors Rights Agreement, issued or sold any of its
capital stock or made grants of its capital stock, or issued or sold any
corporate debt securities or otherwise incurred debt which would be classified
as long-term debt on the balance sheet of Investors; (c) Investors has not
granted any option for the purchase of its capital stock, effected any stock
split, or otherwise changed its capitalization; (d) Investors has not declared,
set aside, or paid any dividend or other distribution in respect of its capital
stock, except for regular quarterly cash dividends of $.125 per share of
Investors Common Stock and regular quarterly cash dividends on shares of
Investors Preferred Stock as required by the Investors Certificate, in each
case with usual record and payment dates or, directly or indirectly, redeemed
or otherwise acquired any of its capital stock; (e) neither Investors nor any
Investors Subsidiary has (1) incurred any material obligation or liability
(absolute or contingent), except borrowings from the Federal Home Loan Bank of
Des Moines in the ordinary course of
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business consistent with Investors' past practices ("FHLB Borrowings") and
other obligations or liabilities incurred in the ordinary course of business,
or (2) except in connection with FHLB Borrowings, mortgaged, pledged, or
subjected to lien, claim, security interest, charge, encumbrance or restriction
any of its assets or properties; (f) neither Investors nor any Investors
Subsidiary has discharged or satisfied any material lien, mortgage, pledge,
claim, security interest, charge, encumbrance, or restriction or paid any
material obligation or liability (absolute or contingent), other than in the
ordinary course of business or in connection with FHLB Borrowings; (g) neither
Investors nor any Investors Subsidiary has sold, assigned, transferred, leased,
exchanged, or otherwise disposed of (1) any mortgage servicing rights or (2)
any of its other properties or assets, in the case of this clause (2) other
than in the ordinary course of business; (h) neither Investors nor any
Investors Subsidiary has increased the rate of compensation of, or paid any
bonus to, any of its directors or officers, except merit or promotion increases
in accordance with existing policy; entered into any new, or amended or
supplemented any existing, employment, management, consulting, deferred
compensation, severance, or other similar contract not heretofore provided to
Firstar; adopted, entered into, terminated, amended or modified any Investors
Benefit Plan in respect of any of present or former directors, officers or
other employees; amended, modified or taken any other action in respect of the
terms of any Investors Stock Options; made any adjustment pursuant to the
Investors Option Plan or Section 4(a) of the Investors 1993 Stock Plan; or
agreed to do any of the foregoing; (i) neither Investors nor any Investors
Subsidiary has suffered any material damage, destruction or loss as the result
of fire, explosion, earthquake, accident, casualty, labor trouble, requisition
or taking of property by any government or any agency of any government, flood,
windstorm, embargo, riot, act of God or the enemy, or other similar or
dissimilar casualty or event or otherwise, and whether or not covered by
insurance; (j) neither Investors nor any Investors Subsidiary has cancelled or
compromised any debt to an extent exceeding $100,000 owed to Investors or any
Investors Subsidiary or claim to an extent exceeding $100,000 asserted by
Investors or any Investors Subsidiary; (k) neither Investors nor any Investors
Subsidiary has entered, or agreed to enter, into any agreement or arrangement
granting any right of refusal or other preferential right to purchase any of
its material assets, properties or rights or requiring the consent of any party
to the transfer and assignment of any such material assets, properties or
rights; (l) there has not been any other transaction, commitment, dispute or
other event or condition of any character (whether or not in the ordinary
course of business) individually or in the aggregate having or which, insofar
as reasonably can be foreseen, in the future is reasonably likely to have, an
Investors Material Adverse Effect, other than any changes resulting primarily
by reason of changes in savings institution laws or regulations (or
interpretations thereof), changes in the general level of interest rates or
changes in economic, financial or market conditions affecting the savings
institution industry generally in the regions in which Investors and the
Investors Subsidiaries operate; and (m) there has not been any change in the
method of accounting or accounting practices of Investors or any of the
Investors Subsidiaries. Except as set forth in the Investors Disclosure
Letter, none of Investors' President and Chief Executive Officer, any Executive
Vice President of Investors, the Senior Vice President and Chief Financial
Officer of Investors or the senior personnel administrator of Investors has any
knowledge of the announced or anticipated resignation of (1) any officer or key
employee of Investors or any of the Investors Subsidiaries or (2) other
employees of Investors or any Investors Subsidiary, in the case of this clause
(2) at a rate substantially higher than the historical resignation rate for
such employees of Investors or
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the Investors Subsidiaries, other than, in either case, resignations that,
individually or in the aggregate, are not reasonably likely to have an
Investors Material Adverse Effect. From and after January 1, 1994 through the
date of this Agreement, no customers of Investors or any Investors Subsidiary
have indicated that they will stop or decrease the rate of business done with
Investors or any Investors Subsidiary (except for changes in the ordinary
course of business) that would, individually or in the aggregate, have an
Investors Material Adverse Effect.
3.14. Properties, Leases and Other Agreements. Except as may be
reflected in the Investors Financial Statements, for any lien for current taxes
not yet delinquent, for pledges to secure deposits and for such other liens,
security interests, claims, charges, options or other encumbrances and
imperfections of title which do not materially affect the value of personal or
real property reflected in the Investors Financial Statements or acquired since
the date of such Statements and which do not materially interfere with or
impair the present and continued use of such property, Investors and its
Subsidiaries have good title, free and clear of any liens, security interests,
claims, charges, options or other encumbrances, to all of the personal and real
property reflected in the Investors Financial Statements, and all personal and
real property acquired since the date of such Statements, except such personal
and real property as has been disposed of in the ordinary course of business.
The Investors Disclosure Letter lists all acquisitions or dispositions of
capital assets planned as of the date of this Agreement by Investors or any
Investors Subsidiary, other than individual transactions with a value not in
excess of $100,000. Substantially all Investors' and each Investors
Subsidiary's buildings and equipment in regular use (including such buildings
and equipment as are leased) have been well maintained and are in good and
serviceable condition, reasonable wear and tear excepted. The Investors
Disclosure Letter contains a brief description, including terms, of each lease
for real and personal property to which Investors or any Investors Subsidiary
is a party. Investors or the applicable Investors Subsidiary, as lessee, has a
valid and existing leasehold interest under each of such leases, true and
correct copies of which Investors has delivered to Firstar. There is not,
under any of such leases relating to real property or any other material
leases, any material existing default by Investors, its Subsidiaries or, to the
knowledge of Investors, any other party thereto, or any event with notice or
lapse of time or both would constitute such a material default.
3.15. Opinion of Financial Advisor. Investors has received the
opinion of Piper Jaffray Inc. dated the date hereof to the effect that, as of
the date hereof, the consideration to be received in the Merger by Investors'
stockholders is fair to Investors' stockholders from a financial point of view.
3.16. Vote Required. The affirmative vote of holders of a majority
of the outstanding shares of Investors Common Stock is the only vote of the
holders of any class or series of Investors capital stock necessary to approve
this Agreement and the transactions contemplated hereby. Without limitation,
the voting requirements of Article 9 of the Investors Certificate will not
apply to any of the transactions contemplated by this Agreement.
3.17. Accounting and Tax Matters. Neither Investors nor, to the
knowledge of Investors, any of its affiliates has 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
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interests or would prevent the Merger from qualifying as a reorganization under
Section 368(a)(1) of the Code.
3.18. Dissenters' Rights. Shares of Investors Common Stock are
currently quoted on the Nasdaq National Market of the Nasdaq Stock Market.
Assuming Firstar Common Stock is listed on the New York Stock Exchange, holders
of shares of Investors Common Stock will not be entitled to assert dissenters'
rights granted under Section 262 of the DGCL. Holders of shares of Investors
Preferred Stock will be entitled to assert dissenters' rights under such
Section 262.
3.19. Affiliates. The Investors Disclosure Letter identifies
persons who are now "Affiliates" of Investors for purposes of Rule 145 under
the Securities Act ("Affiliates"). Investors has advised such persons of the
restrictions imposed by applicable securities laws upon the resale of Firstar
Common Stock delivered in connection with the Merger. Each person identified
in such letter has executed a written agreement substantially in the form
attached as Exhibit 5.06 hereto.
3.20. Affiliate Transactions. Except as set forth in the Investors
Disclosure Letter, neither Investors nor any of its Subsidiaries, nor any
executive officer or director of Investors, nor any member of the immediate
family of any such officer or director (which for the purposes hereof shall
mean a spouse, minor child or adult child living at the home of any such
officer or director), nor any entity which any of such person "controls"
(within the meaning of Regulation O of the Federal Reserve Board), has any loan
agreement, note or borrowing arrangement or any other agreement with Investors
or any of its Subsidiaries (other than normal employment arrangements) or any
interest in any property, real, personal or mixed, tangible or intangible, used
in or pertaining to the business of Investors or any of its Subsidiaries
pursuant to which the amount outstanding thereunder exceeds $60,000.
3.21. Interest Rate Risk Management Instruments.
(a) The Investors Disclosure Letter sets forth a true, correct and
complete list of all interest rate swaps, caps, floors and option agreements
and other interest rate risk management arrangements to which Investors or any
of its Subsidiaries is a party or by which any of their properties or assets
may be bound. Investors has delivered or made available to Firstar true,
correct and complete copies of all such interest rate risk management
agreements and arrangements.
(b) All interest rate swaps, caps, floors and option agreements to
which Investors is subject and other interest rate risk management arrangements
to which Investors or any of its Subsidiaries is a party or by which any of
their properties or assets may be bound were entered into in the ordinary
course of business and, to the best of Investors' knowledge, in accordance with
prudent banking practice and applicable rules, regulations and policies of the
regulators to which Investors is subject and with counterparties believed to be
financially responsible at the time, are legal, valid and binding obligations
enforceable in accordance with their terms, and are in full force and effect.
Investors and each of its Subsidiaries has duly
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performed in all material respects all of its obligations thereunder to the
extent that such obligations to perform have accrued; and to Investors'
knowledge, there are no breaches, violations or defaults or allegations or
assertions of such by any party thereunder.
3.22. Regulatory Impediments. As of the date hereof, Investors is
not aware of the existence of any factor that would materially delay or
materially hinder the issuance of any of the required regulatory approvals
necessary to consummate the Merger, the Bank Merger and the transactions
contemplated hereby, other than any protests by any nongovernmental parties and
information contained in the Firstar Disclosure Letter (as defined in Section
4.02).
3.23. Amendments to Employment and Severance Agreements;
Noncompetition Agreements. The Second Amended and Restated Employment
Agreement among James M. Burkholder, Investors and Firstar, the Noncompetition
Agreement between James M. Burkholder and Firstar, the Second Amended and
Restated Employment Agreement among John G. Lohmann, Jr., Investors and
Firstar, the Noncompetition Agreement between John G. Lohmann, Jr. and
Firstar, the Second Amended and Restated Employment Agreement among Daniel A.
Arrigoni, Investors and Firstar, and the Noncompetition Agreement between
Daniel A. Arrigoni and Firstar, each dated as of August 21, 1994, and the
Amendment to Severance Pay Agreement between Investors Bank and Lynn V.
Bueltel, dated as of August 1, 1994 (a true and correct copy of which has been
delivered to Firstar), have been duly executed and delivered by the parties
thereto other than Firstar. Each such agreement constitutes a valid and
binding obligation of the parties thereto other than Firstar, enforceable in
accordance with its terms.
3.24. Full Disclosure. The representations and warranties of
Investors contained in this Agreement do not omit any material fact necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading. There is no fact known to Investors
which has not been disclosed to Firstar pursuant to this Agreement, the
Investors Disclosure Letter and the Investors Reports, all taken together as a
whole, which would have or would reasonably be expected to have an Investors
Material Adverse Effect or a material adverse effect on the ability of
Investors to consummate the transactions contemplated hereby.
3.25. No Discussions. As of the date of this Agreement, neither
Investors nor any Investors Subsidiary, nor any of its or their Representatives
(as defined in Section 5.02(f)), are, directly or indirectly, soliciting,
initiating or engaged in any discussions or other negotiations with, or
providing any information to, any third party concerning any possible proposal
regarding a Competing Transaction.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FIRSTAR AND SUB
Firstar and Sub, jointly and severally, represent and warrant to
Investors as follows:
4.01. Organization, Standing and Power. Firstar is a corporation
duly organized, validly existing and in active status under the laws of the
State of Wisconsin and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business
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as now being conducted, except where the failure to have such power or
authority would not have a material adverse effect on the business, operations,
prospects or financial condition of Firstar and its Subsidiaries taken as a
whole (a "Firstar Material Adverse Effect"). Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Minnesota and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to have such power or authority would not have a
Firstar Material Adverse Effect. Each of Firstar and Sub is qualified to do
business and is in good standing in each other state or foreign jurisdiction
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and where the failure to be so qualified would
have a Firstar Material Adverse Effect. Each of Firstar and Sub is registered
as a bank holding company with the Federal Reserve Board under the BHC Act.
Firstar has delivered to Investors true, accurate and complete copies of the
currently effective Restated Articles of Incorporation and By-laws of Firstar,
including all amendments thereto.
4.02. Firstar Subsidiaries. Except as set forth in the Firstar
Disclosure Letter (which is a letter delivered by Firstar and Sub to Investors
on the date hereof, the receipt thereof having been acknowledged by Investors
executing a copy thereof), Firstar beneficially owns, directly or indirectly,
all of the shares of the outstanding capital stock of Sub and each of the
Subsidiaries listed in the Firstar Disclosure Letter (herein, including Sub,
called collectively the "Firstar Subsidiaries" or individually a "Firstar
Subsidiary"), which constitute Firstar's principal operating subsidiaries as of
the date of this Agreement. No equity securities of any of the Firstar
Subsidiaries are or may become required to be issued by reason of any option,
warrants, calls, rights or agreements of any character whatsoever; there are
outstanding no securities or rights convertible into or exchangeable for shares
of any capital stock of any Firstar Subsidiary; and there are no other
contracts, commitments, understandings or arrangements by which any Firstar
Subsidiary is bound to issue additional shares of its capital stock or options,
warrants, calls, rights or agreements to purchase or acquire any additional
shares of its capital stock. Except as provided for under any applicable
banking statute and except as set forth in the Firstar Disclosure Letter, all
of the shares of capital stock of each of the Firstar Subsidiaries owned by
Firstar are fully paid and nonassessable (except as provided in Section
180.0622(2)(b) of the Wisconsin Business Corporation Law ("WBCL")) and are
owned by it free and clear of any claim, lien, encumbrance or agreement with
respect thereto. Each Firstar Subsidiary is a banking association or a
corporation, in each case duly organized, validly existing and in good standing
or in active status under the laws of its jurisdiction of incorporation, and
has the corporate power and authority to own or lease its properties and assets
and to carry on its business as it is now being conducted, except where the
failure to have such power or authority would not have a Firstar Material
Adverse Effect. Each Firstar Subsidiary that is a national bank is a member of
the Federal Reserve System. The deposits of each Firstar Subsidiary that is a
banking institution and accepts deposits are insured by the FDIC to the extent
provided by law. Firstar has delivered to Investors true, accurate and
complete copies of the currently effective Articles of Incorporation and
By-laws of Sub.
4.03. Capital Structure. As of the date hereof, the authorized
capital stock of Firstar consists of 120,000,000 shares of Firstar Common Stock
and 2,500,000 shares of preferred
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stock, par value $1.00. No shares of preferred stock are issued and
outstanding on the date hereof. Except as contemplated in the Merger
Agreements, as set forth in the Firstar Disclosure Letter or as set forth in
the most recent report of Firstar filed with the SEC on Form 10-K, there are,
as of the date of the Merger Agreements, no outstanding options, warrants,
calls, rights, commitments or agreements of any character whatsoever to which
Firstar or any Firstar Subsidiary is a party or by which it is bound obligating
Firstar or any Firstar Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or any Voting
Debt securities of Firstar or of any Firstar Subsidiary or obligating Firstar
or any Firstar Subsidiary to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. All outstanding shares of
Firstar capital stock are, and the shares of Firstar Common Stock to be issued
pursuant to or as specifically contemplated by the Merger Agreements will be,
validly issued, fully paid and nonassessable (except as provided in WBCL
Section 180.0622(2)(b)) and not subject to preemptive rights. As of the date
hereof, the authorized capital stock of Sub consists of 10,000 shares of common
stock, $1.00 par value, 1,000 of which are validly issued, fully paid and
nonassessable; all of the issued shares are owned by Firstar.
4.04. Authority. Firstar and Sub have all requisite corporate power
and authority to enter into this Agreement and the Plan of Merger and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Plan of Merger and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Firstar and Sub. Approval of this
Agreement and the Plan of Merger by stockholders of Firstar is not required
under the WBCL, the rules of the New York Stock Exchange or otherwise. This
Agreement and the Plan of Merger have been duly executed and delivered by
Firstar and Sub, and each constitutes a valid and binding obligation of Firstar
and Sub enforceable in accordance with its terms. Upon execution and delivery
thereof by Investors Bank and Firstar Bank, the Bank Merger Agreement will have
been duly executed and delivered by Firstar Bank and will constitute a valid
and binding obligation of Firstar Bank enforceable in accordance with its
terms. The execution and delivery of this Agreement and the Plan of Merger do
not, and the execution and delivery of the Bank Merger Agreement and the
consummation of the transactions contemplated hereby and thereby will not,
result in any Violation pursuant to any provision of (a) the Restated Articles
of Incorporation or By-laws of Firstar or any Firstar Subsidiary or (b) except
(i) as set forth in the Firstar Disclosure Letter or (ii) as contemplated by
the next sentence hereof, any loan or credit agreement, note, mortgage,
indenture, lease, Firstar Benefit Plan (as defined in Section 4.11) or other
agreement, obligation, instrument, permit, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Firstar or
any Firstar Subsidiary or their respective properties or assets which Violation
would have a Firstar Material Adverse Effect. Other than in connection or in
compliance with the provisions of the WBCL and the MBCA, the Securities Act,
the Exchange Act, the securities or blue sky laws of the various states, and
consents, authorizations, approvals, notices or exemptions required under the
BHC Act, the SLHC Act, the FDI Act, the HOLA and the HSR Act, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required on the part of Firstar or any Firstar
Subsidiary in connection with the execution and delivery of this Agreement, the
Plan of Merger and the Bank Merger Agreement by Firstar or Firstar Bank, as the
case may be, or the consummation by Firstar or Firstar Bank, as the case may
be, of the transactions
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contemplated hereby and thereby, the failure to obtain which would have a
Firstar Material Adverse Effect.
4.05. Firstar Financial Statements. The consolidated balance sheets
of Firstar as of December 31, 1993 and 1992 and the related consolidated
statements of income, consolidated statements of cash flows and consolidated
statements of shareholders' equity for the three years in the period ended
December 31, 1993, accompanied by the unqualified opinion of KPMG Peat Marwick,
copies of which have been furnished by Firstar to Investors; the unaudited
consolidated balance sheet of Firstar as of June 30, 1994 and the related
consolidated statement of income, consolidated statement of cash flows and
consolidated statement of shareholders' equity for the six months then ended,
in the form prepared for Firstar's internal use, copies of which have been
furnished by Firstar to Investors; and like financial information included in
Forms 10-Q filed with the SEC subsequent to the Latest Statement Date
(collectively, the "Firstar Financial Statements"), have been prepared in
accordance with generally accepted accounting principles as utilized in the
Firstar Financial Statements applied on a consistent basis (except as may be
indicated therein or in the notes thereto), and present fairly the consolidated
financial condition of Firstar at the dates, and the consolidated results of
operations, changes in stockholders' equity and cash flows for the periods,
stated therein. In the case of interim fiscal periods, all adjustments,
consisting only of normal recurring items, which management of Firstar believes
necessary for a fair presentation of such financial information, have been
made, subject to year-end audit adjustments, none of which could reasonably be
expected to have a material adverse effect on the consolidated financial
position or results of operations of Firstar.
4.06. Reports. Since January 1, 1991, Firstar and the Firstar
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 Federal Reserve Board,
(iii) the Comptroller, (iv) the FDIC and (v) any applicable federal or state
securities or banking 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
and will comply in all material respects with all of the statutes, rules and
regulations enforced or promulgated by the regulatory authority with which they
were filed (including, to the extent applicable, Rule 10b-5 promulgated under
the Exchange Act) and did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein.
4.07. Authorizations; Compliance with Applicable Laws. Firstar and
the Firstar Subsidiaries hold all authorizations, permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities which are
material to the operation of the businesses of Firstar and the Firstar
Subsidiaries taken as a whole (the "Firstar Permits"), including appropriate
authorizations from the Federal Reserve Board and Comptroller, except where the
failure to hold the same could not reasonably be expected to have a Firstar
Material Adverse Effect. Firstar and the Firstar Subsidiaries are in
compliance with the terms of the Firstar Permits, except where the failure so
to comply could not reasonably be expected to have a Firstar Material Adverse
Effect. Except as disclosed in the Firstar Reports filed prior to the date of
this Agreement, the businesses of Firstar and the Firstar Subsidiaries are not
being conducted in violation of any Law, except
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for possible violations which individually or in the aggregate do not, and,
insofar as reasonably can be foreseen, in the future will not, have a Firstar
Material Adverse Effect. Except as disclosed in the Firstar Reports filed
prior to the date hereof or set forth in the Firstar Disclosure Letter and
except for regular, periodic reviews and examinations by Governmental Entities,
as of the date of this Agreement, no investigation or review by any
Governmental Entity with respect to Firstar or any of the Firstar Subsidiaries
is pending or, to the knowledge of Firstar, threatened, nor has any
Governmental Entity indicated an intention to conduct the same, other than, in
each case, those the outcome of which, as far as reasonably can be foreseen,
will not have a Firstar Material Adverse Effect.
4.08. Litigation. Except as disclosed in the Firstar Reports filed
prior to the date of this Agreement or in the Firstar Disclosure Letter, there
is no Proceeding pending or, to the knowledge of Firstar, threatened against or
affecting Firstar or any Firstar Subsidiary which is reasonably likely to have
a Firstar Material Adverse Effect, nor is there any judgment, order, writ,
injunction, decree or award of any Governmental Entity or arbitrator
outstanding against Firstar or any Firstar Subsidiary having, or which, insofar
as reasonably can be foreseen, in the future could have, any such effect.
4.09. Taxes. Firstar and each of the Firstar Subsidiaries has filed
all tax returns required to be filed by them and has paid (or Firstar has paid
on its behalf), or has set up an adequate reserve for the payment of, all taxes
required to be paid as shown on such returns, and the most recent financial
statements contained in the Firstar Reports reflect an adequate reserve for all
taxes payable by Firstar and the Firstar Subsidiaries accrued through the date
of such financial statements; provided, however, that the foregoing
representation is made only to the best of Firstar's knowledge with respect to
each Firstar Subsidiary that has been, directly or indirectly, acquired by
Firstar subsequent to July 1, 1989. No material deficiencies for any taxes
have been proposed, asserted or assessed against Firstar or any Firstar
Subsidiary.
4.10. Certain Agreements. Except as disclosed in the Firstar
Reports filed prior to the date of this Agreement, and except for this
Agreement, as of the date of this Agreement, neither Firstar nor any Firstar
Subsidiary is a party to any oral or written (i) agreement with any executive
officer or other key employee of Firstar or any Firstar Subsidiary the benefits
of which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Firstar or any Firstar Subsidiary of the
nature contemplated by this Agreement, (ii) agreement or plan, including any
stock option plan, stock appreciation right plan, restricted stock plan or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement, (iii) contract containing covenants that limit
the ability of Firstar or any Firstar Subsidiary to compete in any line of
business or with any person or which involve any restriction on the
geographical area in which, or method by which, Firstar or any Firstar
Subsidiary may carry on its business (other than as required by law or
applicable regulatory authority), or (iv) other executory agreement as defined
by the instructions to Exhibit 10 under Rule 601 of the SEC. Except as set
forth in the Firstar Disclosure Letter, neither Firstar nor any Firstar
Subsidiary is in Violation of any loan or credit
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agreement, note, mortgage, indenture or other agreement, obligation or
instrument applicable to Firstar or any Firstar Subsidiary or their respective
properties or assets, except for any Violation that would not, individually or
in the aggregate, have a Firstar Material Adverse Effect.
4.11. Benefit Plans. (i) With respect to the Benefit Plans
maintained by Firstar and any Firstar Subsidiary or to which Firstar or any
Firstar Subsidiary contributes on behalf of current or former employees as of
the date of this Agreement (the "Firstar Benefit Plans"), individually and in
the aggregate, no event has occurred, and to the knowledge of Firstar or any of
its Subsidiaries, there exists no condition or set of circumstances in
connection with which Firstar or any of its Subsidiaries could be subject to
any liability that is reasonably likely to have a Firstar Material Adverse
Effect (except liability for benefits claims and funding obligations payable in
the ordinary course) under ERISA, the Code or any other applicable law.
(ii) Except as disclosed in the Firstar Reports filed prior to the
date hereof or as set forth in the Firstar Disclosure Letter, with respect to
the Firstar Benefit Plans, individually and in the aggregate, there are no
funded benefit obligations for which contributions have not been made or
properly accrued and there are no unfunded benefit obligations which have not
been accounted for by reserves, or otherwise properly footnoted in accordance
with generally accepted accounting principles, on the financial statements of
Firstar, which obligations are reasonably likely to have a Firstar Material
Adverse Effect.
4.12. Absence of Certain Changes or Events. Except as disclosed in
the Firstar Reports filed prior to the date of this Agreement or in the Firstar
Disclosure Letter, and except as contemplated by this Agreement, the Plan of
Merger and the Bank Merger Agreement, from and after January 1, 1994 and to the
date of this Agreement: (a) Firstar and the Firstar Subsidiaries have
conducted their respective businesses only in the ordinary and usual course
consistent with past practice, (b) Firstar has not declared, set aside or paid
any dividend or other distribution in respect to any of Firstar's capital
stock, except for regular quarterly cash dividends not exceeding $.30 per share
on Firstar Common Stock with usual record and payment dates for such dividends,
(c) other than any changes resulting primarily by reason of changes in banking
laws or regulations (or interpretations thereof), changes in the general level
of interest rates or changes in economic, financial or market conditions
affecting the banking industry generally in the regions in which Firstar and
the Firstar Subsidiaries operate, there has not been any transaction,
commitment, dispute or other event or condition of any character (whether or
not in the ordinary course of business) individually or in the aggregate having
or which, insofar as reasonably can be foreseen, in the future is reasonably
likely to have, a Firstar Material Adverse Effect and (d) there has not been
any material change in the method of accounting or accounting practices of
Firstar and the Firstar Subsidiaries.
4.13. Properties, Leases and Other Agreements. Except as may be
reflected in the Firstar Financial Statements, for any lien for current taxes
not yet delinquent, for pledges to secure deposits and for such other liens,
security interests, claims, charges, options or other encumbrances and
imperfections of title which do not materially affect the value of personal or
real property reflected in the Firstar Financial Statements or acquired since
the date of such Statements and which do not materially interfere with or
impair the present and continued use
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of such property, Firstar and the Firstar Subsidiaries have good title, free
and clear of any liens, security interests, claims, charges, options or other
encumbrances to all of the personal and real property reflected in the Firstar
Financial Statements, and all personal and real property acquired since the
date of such Statements, except such personal and real property as has been
disposed of in the ordinary course of business. All leases material to Firstar
and the Firstar Subsidiaries pursuant to which Firstar or any of the Firstar
Subsidiaries, as lessee, leases real or personal property are valid and
effective in accordance with their respective terms and there is not, under any
of such leases, any material existing default by Firstar, any of the Firstar
Subsidiaries or, to the best knowledge of Firstar, any other party thereto, or
any event with notice or lapse of time or both would constitute such a material
default.
4.14. Accounting and Tax Matters. To the knowledge of Firstar,
neither Firstar 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 reorganization under Section
368(a)(1)(A) of the Code.
4.15. Regulatory Impediments. As of the date hereof, except as set
forth in the Firstar Disclosure Letter, Firstar is not aware of the existence
of any factor that would materially delay or materially hinder issuance of any
of the required regulatory approvals necessary to consummate the Merger, the
Bank Merger and the transactions contemplated hereby, other than any protests
by nongovernmental parties.
ARTICLE V
COVENANTS OF INVESTORS
5.01. Affirmative Covenants. Investors hereby covenants and agrees
with Firstar that prior to the Effective Time or until the earlier termination
or abandonment of this Agreement is accordance with its terms, unless the prior
written consent of Firstar shall have been obtained and except as otherwise
contemplated herein, it will and it will cause its respective Subsidiaries to:
(a) operate its business only in the usual, regular and ordinary
course consistent with past practices;
(b) preserve substantially intact its business organization and
assets (except for acquisitions and dispositions of assets in the ordinary
course of business consistent with past practices, unless otherwise required by
the terms of this Agreement), and maintain its rights and franchises, and use
its reasonable best efforts to retain the services of its officers and key
employees (except that it shall have the right to terminate the employment of
any officer or key employee in accordance with established employment
procedures) and maintain its relationships with customers;
(c) maintain and keep its properties in as good repair and
condition as at present, except for depreciation due to ordinary wear and tear;
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(d) keep in full force and effect, to the extent consistent with
types and amounts thereof used by companies in a similar business, insurance
and bonds comparable in amount and scope of coverage to that now maintained by
it;
(e) perform in all material respects all obligations required to
be performed by it under all material contracts, leases, and documents relating
to or affecting its assets, properties, and business;
(f) comply with and perform in all material respects all material
obligations and duties imposed upon it by all Laws; and
(g) notify Firstar immediately by telephone, and thereafter
promptly confirm in writing, if any of the matters described in Section 5.02(f)
occurs, whether as a result of action by Investors, any Investors Subsidiary or
any Representatives (as defined therein) of Investors, or if any person makes
any offer or other proposal concerning a Competing Transaction (as defined in
Section 5.02(f)); such notice shall include the name of any person other than
Investors, an Investors Subsidiary and their Representatives involved in such
matter and, after receipt of any written offer or proposal from such person, a
copy of any written offers, proposals, agreements or other documents with
respect to such offer or proposal.
5.02. Negative Covenants. Except as specifically contemplated by
this Agreement, from the date hereof until the Effective Time, Investors shall
not do, or permit any of its Subsidiaries to do, without the prior written
consent of Firstar, any of the following:
(a) incur any material liabilities or material obligations,
whether directly or by way of guaranty, including any obligation for borrowed
money whether or not evidenced by a note, bond, debenture or similar
instrument, except in the ordinary course of business consistent with past
practice (which exception shall include, without limitation, insured accounts
established and FHLB Borrowings);
(b)(i) grant any general increase in compensation to its employees as
a class, or to its officers or directors, except in accordance with past
practice or as required by law, or increases which are not material, (ii)
effect any change in retirement benefits to any class of employees or officers
(unless any such change shall be required by applicable law) which would
increase its retirement benefit liabilities, (iii) adopt, enter into, amend or
modify any Investors Benefit Plan, make any adjustments pursuant to the
Investors Stock Option Plan or Section 4C of the Investors 1993 Stock Plan or
make any grants pursuant to the Investors Stock Option Plan or the Investors
1993 Stock Plan, or (iv) enter into or amend any employment, severance or
similar agreements or arrangements with any directors or officers or former
directors or officers;
(c)(i) declare or pay any dividend on, or make any other distribution
in respect of, its outstanding shares of capital stock, except for (A) regular
quarterly cash dividends on the Investors Common Stock at a rate not in excess
of $.125 per share, and regularly quarterly cash dividends on the Investors
Preferred Stock as contemplated by the Investors Certificate, in each
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case with usual record and payment dates for such dividends, and (B) dividends
by a wholly-owned Subsidiary of Investors;
(ii) except as hereinbelow provided, declare or pay any dividends
or make any distributions in any amount on Investors Common Stock in the
quarter in which the Effective Time shall occur and in which the stockholders
of Investors Common Stock are entitled to receive dividends on the shares of
Firstar Common Stock into which the shares of Investors Common Stock have been
converted; it is the intent of this clause (ii) to provide that the holders of
Investors Common Stock will receive either the payment of cash dividends on
their shares of Investors Common Stock or the payment of cash dividends as the
holders of shares of Firstar Common Stock received in exchange for the shares
of Investors Common Stock for the calendar quarter during which the Effective
Time shall occur, but will not receive and will not become entitled to receive
for the same calendar quarter both the payment of a cash dividend as holders of
Investors Common Stock and the payment of a cash dividend as holders of the
shares of Firstar Common Stock received in exchange for the shares of Investors
Common Stock; and if Investors does not declare and pay cash dividends in a
particular calendar quarter because of Investors' reasonable expectation that
the Effective Time was to have occurred in such calendar quarter wherein the
holders of Investors Common Stock would have become entitled to receive cash
dividends for such calendar quarter on the shares of Firstar Common Stock to
have been exchanged for the shares of Investors Common Stock, and the Effective
Time does not in fact occur in such calendar quarter, then, as a result
thereof, Investors shall be entitled to declare and pay a cash dividend (within
the limitations of this Section 5.02) on such shares of Investors Common Stock
for such calendar quarter by the declaration and payment of such cash dividends
as soon as reasonably practicable;
(d)(i) except as provided in Section 5.06 and Section 5.17, redeem,
purchase or otherwise acquire any shares of its capital stock or any securities
or obligations convertible into or exchangeable for any shares of its capital
stock, or any options, warrants, conversion or other rights to acquire any
shares of its capital stock or any such securities or obligations (except
pursuant to the exercise of the Investors Options and/or Investors Warrants in
accordance with their terms); (ii) merge with or into, or permit Investors Bank
to merge with or into, any other corporation or savings institution or bank,
permit any other corporation or savings institution or bank to merge into it or
Investors Bank or consolidate with, or permit Investors Bank to consolidate
with, any other corporation or savings institution or bank, or effect any
reorganization or recapitalization; (iii) purchase or otherwise acquire any
substantial portion of the assets, or more than 5% of any class of stock, of
any corporation, bank, savings institution or other business; (iv) liquidate,
sell, dispose of, or encumber any assets or acquire any assets, except in the
ordinary course of its business consistent with past practice (which exception
shall include, without limitation, dispositions or acquisitions of "real estate
owned" properties of Investors or any Investors Subsidiary and loans (with
servicing rights retained) consistent with past practices); or (v) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock;
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(e) issue, deliver, award, grant or sell, or authorize or propose
the issuance, delivery, award, grant or sale of, any shares of its capital
stock of any class (including shares held in treasury), any Voting Debt or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, Voting Debt or convertible securities, other than (i) the issuance
of Investors Common Stock pursuant to the Investors Options or the Investors
Warrants, in each case in accordance with their present terms, and (ii)
issuances by a wholly-owned Subsidiary of its capital stock to its parent;
(f) initiate, solicit or encourage (including by way of furnishing
information or assistance), 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 (as such term is defined below),
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 or employees or any
investment banker, financial advisor (including the firm named in Section
3.15), attorney, accountant or other representative retained by it or any of
the Investors Subsidiaries ("Representatives") to take any such action;
provided, however, that nothing contained in this subsection (f) shall prohibit
the Board of Directors of Investors from (i) furnishing information to or
permitting any of its Representatives to furnish information to any party that
requests information as to Investors and its Subsidiaries if (A) the Board of
Directors of Investors, based upon the advice of counsel, determines in good
faith that such action is required for the Board of Directors of Investors to
comply with its fiduciary duties to stockholders imposed by law and (B) prior
to furnishing such information to such party, Investors receives from such
party an executed confidentiality agreement in reasonably customary form, (ii)
furnishing information to, or entering into discussions or negotiations with,
any person or entity that makes an unsolicited bona fide written proposal to
acquire Investors pursuant to a merger, consolidation, tender offer, share
exchange, business combination, stock or asset purchase or other similar
transaction if (A) the Board of Directors, after consultation with and based
upon receipt of written advice from Dorsey & Whitney (a copy of which Investors
shall promptly deliver to Firstar), or other counsel acceptable to Firstar,
determines in good faith that such action is required for the Board of
Directors to comply with its fiduciary duties to Investors' stockholders under
applicable law, (B) the Board of Directors of Investors has no reason to
believe that the written proposal is not made in good faith, and (C) prior to
furnishing such information to such person or entity, Investors receives from
such person or entity an executed confidentiality agreement in reasonably
customary form, (iii) complying with Rule 14e-2 under the Exchange Act, or (iv)
making any public statement required by law or the requirements of the Nasdaq
Stock Market. For purposes of this Agreement, "Competing Transaction" shall
mean any of the following involving Investors or any of the Investors
Subsidiaries: any merger, consolidation, share exchange or other business
combination; a sale, lease, exchange, mortgage, pledge, transfer or other
disposition of a substantial portion of the consolidated assets of Investors
and its Subsidiaries; a sale of shares of voting capital stock constituting
more than 15% of the voting capital stock of Investors (or securities
convertible or exchangeable into or otherwise evidencing, or any agreement or
instrument evidencing, the right to acquire such voting capital stock); a
tender offer or exchange offer for at least 15% of the outstanding shares of
Investors Common Stock; a solicitation of proxies in opposition to approval of
the Merger by Investors'
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stockholders; or a public announcement of a bona fide proposal, plan or
intention to do any of the foregoing;
(g) propose or adopt any amendments to its corporate charter,
by-laws or the Investors Rights Agreement in any way adverse to Firstar;
(h) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in principle with
respect to any acquisition of a material amount of assets or securities or any
release or relinquishment of any material contract rights not in the ordinary
course of business;
(i) except in their fiduciary capacities, purchase any shares of
Firstar Common Stock;
(j) change any of its methods of accounting in effect at December
31, 1993, 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 for the taxable year ending December 31, 1993,
except as may be required by law or generally accepted accounting principles;
(k) take action which would or is reasonably likely to (i)
adversely affect the ability of either of Firstar or Investors to obtain any
necessary approvals of governmental authorities required for the transactions
contemplated hereby; (ii) adversely affect Investors' ability to perform its
covenants and agreements under this Agreement; or (iii) result in any of the
conditions to the Merger set forth in Article VIII not being satisfied or in a
violation of any provision of the Bank Merger Agreement;
(l) change the lending, investment, liability management and other
material policies concerning the banking business of Investors and the
Investors Subsidiaries, unless required by Law or order or unless such change
does not cause a materially adverse effect on Investors or any of its
Subsidiaries;
(m) make any additional borrowings from the Federal Home Loan Bank
of Des Moines or renew any current such borrowings, in each case other than in
the ordinary course of business consistent with Investors' past practices (it
being understood that Investors increases, renews, extends, borrows, pays,
grants security and other interests with respect to, and otherwise deals with,
FHLB Borrowings in the ordinary course of its business);
(n) pay any fees of any legal counsel or tax adviser retained in
connection with the Merger, including Dorsey & Whitney and KPMG Peat Marwick,
calculated on a basis other than an hourly basis at the maximum rates per hour
set forth in the Investors Disclosure Letter, with bills detailing such hours
and hourly charges to be submitted to Investors prior to the Effective Time;
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(o) with respect to properties leased by Investors or any of the
Investors Subsidiaries, renew, exercise an option to extend, cancel or
surrender any lease of real property or allow any such lease to lapse, without
prior consultation with Firstar; or
(p) agree in writing or otherwise to do any of the foregoing.
5.03. Letter of Investors' Accountants. At the request of Firstar,
Investors shall use its best efforts to cause to be delivered to Firstar "cold
comfort" letters of KPMG Peat Marwick, Investors' independent public
accountants, dated the date on which the S-4 shall become effective and the
Effective Time, respectively, and addressed to Firstar, in form and substance
reasonably satisfactory to Firstar and reasonably customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the S-4 and transactions such as those
contemplated by the Merger Agreements.
5.04. Access and Information. Except where prohibited by law, upon
reasonable notice, Investors shall (and shall cause its Subsidiaries to) afford
to Firstar's officers, employees, accountants, counsel and other
representatives, access, during normal business hours during the period prior
to the Effective Time, to all books, papers and records relating to the assets,
stock, properties, operations, obligations and liabilities of Investors and the
Investors Subsidiaries, including without limitation all books of account, tax
records, minute books of directors' and stockholders' meetings, contracts and
agreements, filings with any regulatory authority, accountants' work papers,
litigation files (other than attorney work product or materials protected by
any attorney-client privilege), documents relating to assets and title thereto,
plans affecting employees, securities transfer records and stockholder lists,
and any books, papers and records relating to other assets, business activities
or prospects in which Firstar may have a reasonable interest, including without
limitation, its interest in planning for integration and transition with
respect to the business of Investors and the Investors Subsidiaries. During
such period, Investors will cause one or more of its representatives to confer
on a regular and frequent basis with representatives of Firstar, to report on
the general status of its ongoing operations and to consult as to the making of
any decisions or the taking of any actions in matters other than in the
ordinary course of business. During such period, Investors shall (and shall
cause each of its Subsidiaries to), except where prohibited by law, furnish
promptly to Firstar (i) a copy of each Investors Report filed or received by it
during such period pursuant to the requirements of federal securities laws, the
SLHC Act and any other federal or state banking or savings institution laws
promptly after such documents are available, (ii) the monthly financial
statements of Investors and the Investors Subsidiaries (as prepared by
Investors in accordance with its normal accounting procedures) promptly after
such financial statements are available, (iii) a summary of any action taken by
the Board of Directors, or any committee thereof, of Investors, (iv) the
reports of management of Investors and each of the Subsidiaries of Investors
customarily provided to their respective Boards of Directors, and (v) all other
information concerning its business, properties and personnel as Firstar may
reasonably request. During such period, Investors shall, and shall cause the
Investors Subsidiaries to, instruct its officers, employees, counsel and
accountants to be available for, and respond to any questions of, Firstar's
officers, employees, accountants, counsel and other representatives at
reasonable hours and with reasonable notice by Firstar to
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such individuals, and to cooperate fully with Firstar in planning for the
integration of the business of Investors and the Investors Subsidiaries with
the business of Firstar and its Subsidiaries.
5.05. Update Disclosure; Breaches.
(a) From and after the date hereof until the Effective Time,
Investors shall periodically, but not less frequently than monthly, update the
Investors Disclosure Letter by notice to Firstar to reflect any matters which
have occurred from and after the date hereof which, if existing on the date
hereof, would have been required to be described therein; provided, however,
that no such update shall affect the conditions to the obligation of Firstar
and Sub to consummate the transactions contemplated hereby, and any and all
changes contained in any such update shall be considered in determining whether
such conditions have been satisfied.
(b) Investors shall, in the event it becomes aware of the
impending or threatened occurrence of any event or condition which would cause
or constitute a material breach (or would have caused or constituted a breach
had such event occurred or been known prior to the date hereof) of any of its
representations or agreements contained or referred to herein or which would
cause any of the conditions to the obligations of any party set forth in
Article VIII not to be satisfied, give prompt written notice thereof to Firstar
and use its best efforts to prevent or promptly remedy the same.
5.06. Affiliates; Accounting and Tax Treatment; Stock Repurchases.
(a) Investors shall cause any person who becomes an Affiliate of Investors
after the date hereof, by virtue of becoming a director or officer of Investors
or any Investors Subsidiary, and shall use its best efforts to cause any other
person who becomes an Affiliate of Investors after the date hereof, and on or
prior to the Closing Date, to deliver to Firstar a written agreement
substantially in the form attached as Exhibit 5.06 hereto as soon as
practicable after attaining such status and advise such person of the
restrictions imposed by applicable securities laws upon the resale of Firstar
Common Stock delivered in connection with the Merger. Investors will use its
best efforts to cause the Merger to qualify (i) for pooling-of-interests
accounting treatment and (ii) as a reorganization under Section 368(a)(1) of
the Code.
(b) Prior to the Closing, Investors shall use its best efforts to
repurchase Investors Common Stock in amounts sufficient to satisfy reasonably
anticipated future issuances of shares of Investors Common Stock prior to the
Effective Time upon the exercise of Investors Stock Options or pursuant to the
Investors Warrants, which repurchases will be made, and Investors will be
required to make such repurchases only to the extent that they are made, (i) in
compliance with applicable law, (ii) in a manner that will not adversely affect
the ability of the Merger to qualify for such accounting and tax treatment and
(iii) in a manner that will not result in Investors having "tainted" stock for
purposes of pooling-of-interests accounting treatment in connection with the
Merger. As soon as practicable after the date hereof, Investors shall use its
best efforts to obtain any consents necessary to enable it to make such
repurchases of Investors Common Stock. Notwithstanding the foregoing,
Investors shall have no obligation to repurchase Investors Common Stock from
and after such time as Investors has repurchased Investors Common Stock at an
aggregate purchase price equal to or greater than $2.0 million.
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5.07. Dissent Process. Investors will give to Firstar prompt notice
of its receipt of any written notice relating to the exercise of dissenters'
rights granted under Section 262 of the DGCL including the name of the
dissenting stockholder and the number of shares of Investors Preferred Stock to
which the dissent relates. Firstar will have the right to participate in all
negotiations and proceedings with Investors stockholders relating to any such
notice or the exercise of such rights, and except as required by law, Investors
will not make any payment with respect to, or settle or offer to settle, any
dissent demands without the prior written consent of Firstar.
5.08. Expenses. (a) "Expenses" as used in this Agreement shall
include all reasonable out-of-pocket expenses (including all fees and expenses
of counsel, accountants, investment bankers, experts and consultants to the
party and its affiliates) incurred by a party or on its behalf in connection
with the consummation of the transactions contemplated by this Agreement.
(b) Except as otherwise provided herein, all Expenses incurred by
Firstar (or Sub) and Investors in connection with or related to the
authorization, preparation and execution of this Agreement, the Plan of Merger,
the Bank Merger Agreement, the solicitation of stockholder approval and all
other matters related to the closing of the transactions contemplated hereby,
including, without limitation of the generality of the foregoing, all fees and
expenses of agents, representatives, counsel and accountants employed by either
such party or its affiliates, shall be borne solely and entirely by the party
which has incurred the same, except that the parties shall share equally in the
expense of printing the S-4 and Prospectus/Proxy Statement and the expense of
all SEC and other regulatory filing fees incurred in connection herewith.
5.09. Delivery of Stockholder List. Investors shall arrange to have
its transfer agent deliver to Firstar or its designee, from time to time prior
to the Closing Date, a true and complete list setting forth the names and
addresses of all holders of record of Investors Common Stock and Investors
Preferred Stock, their holdings of such stock as of the latest practicable
date, and such other stockholder information as is reasonably available to
Investors that Firstar may reasonably request.
5.10. Audited Financial Statements. Investors shall use its best
efforts to cause its independent public accountants to deliver to Firstar, by
February 15, 1995, an audited consolidated financial report of Investors as of
and for the period ended December 31, 1994, and to make available to Firstar
and its independent public accountants for their review the working papers of
Investors' independent public accountants prepared in connection with such
audit prior to and after January 31, 1995.
5.11. Bank-Level Transactions. Investors will, and will cause
Investors Subsidiaries to, cooperate with Firstar and Sub in the preparation by
Firstar or Sub of applications to the Federal Reserve Board, the Comptroller,
the OTS and other appropriate regulatory authorities to effect, contingent on
and immediately after consummation of the Merger, the Bank Merger and such
other transactions as are contemplated by Section 1.04, including the
Conversion.
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5.12. Sale of Investment Securities. After the receipt of all
necessary regulatory approvals of the Merger and the Bank Merger and prior to
the Effective Time, Investors shall cause its Subsidiaries to sell such
financial instruments in its investment securities portfolio as Firstar may
identify from time to time.
5.13. Accounting Matters. Immediately prior to and on the Closing
Date, after all anticipated loan losses have been charged off, Investors shall
increase its consolidated reserve for losses on loans to no less than an amount
requested by Firstar.
5.14. Servicing Rights. Prior to the Effective Time, Investors will
not sell any mortgage loan servicing rights, except for a sale of servicing
rights relating to loans having a value up to $150.0 million to be consummated
by September 30, 1994.
5.15. Stockholder Meeting. (a) Investors shall call a meeting of
its stockholders for the purpose of voting upon the Merger Agreements and
related matters and deliver notice of such meeting, as part of the
Prospectus/Proxy Statement (as defined in Section 7.02(a)), to Investors
stockholders in accordance with applicable law and the Investors Certificate.
Investors shall coordinate and cooperate with Firstar with respect to the
timing of such meeting and shall use its best efforts to hold such meeting as
soon as practicable after the date hereof, but in no event later than the later
of (i) December 31, 1994 and (ii) thirty-five days after the S-4 becomes
effective under the Securities Act. Unless otherwise required by law,
Investors shall not, at such stockholders' meeting, submit any other matter for
approval of its stockholders (except with the prior written consent of
Firstar).
(b) Investors will, through its Board of Directors, (i)
unanimously recommend to its stockholders approval of such matters, (ii) not
withdraw, modify or amend such recommendations, and (iii) use its best efforts
to obtain such stockholder approval; provided, however, that nothing contained
in this sentence shall prohibit the Board of Directors of Investors from
failing to recommend such approval or withdrawing, modifying or amending its
recommendation as a result of the receipt of an unsolicited bona fide written
proposal to acquire Investors pursuant to a merger, consolidation, tender
offer, share exchange, business combination, stock or asset purchase or other
similar transaction if (A) the Board of Directors, after consultation with and
based upon receipt of written advice from Dorsey & Whitney (a copy of which
Investors shall promptly deliver to Firstar), or other counsel acceptable to
Firstar, determines in good faith that such action is required for the Board of
Directors to comply with its fiduciary duties to Investors' stockholders under
applicable law and (B) the Board of Directors of Investors has no reason to
believe that the written proposal is not made in good faith. Notwithstanding
the foregoing, to the extent permitted by applicable law, the Board of
Directors of Investors must take such action as is necessary to allow the
stockholders of Investors to vote upon the Merger Agreements in accordance with
the DGCL.
5.16. Acquisitions of Real Estate. During the period prior to the
Effective Time, Investors shall cause each Investors Subsidiary that proposes
to acquire ownership or possession of any real property (other than single
family residential real property), through foreclosure or repossession or
otherwise, to conduct an environmental assessment of such property meeting the
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requirements described in Section 7.07 and any further environmental
investigation, sampling or analysis reasonably required to ensure that such
Investors Subsidiary shall not acquire ownership or possession of any real
property that is reasonably likely to cause the Investors Subsidiary to be
subject to or incur any liabilities, damages, penalties or removal, remediation
or other costs as a result of its ownership or control of the property that
will exceed the value of the property.
5.17. Debt Redemption. As soon as practicable on or after January
1, 1995, and in any event prior to the Effective Time, Investors will redeem in
full its 10% Subordinated Debentures due April 1, 1996 without premium in
accordance with the terms of such debentures.
5.18. Investors Warrants Notices. Prior to the Effective Time,
Investors shall deliver to holders of Investors Warrants any and all notices
required under the Investors Warrant Agreement.
ARTICLE VI
COVENANTS OF FIRSTAR AND SUB
6.01. Affirmative Covenants. Firstar hereby covenants and agrees
with Investors that prior to the Effective Time, unless the prior written
consent of Investors shall have been obtained (which consent shall not be
unreasonably withheld) and except as otherwise contemplated herein, it will:
(a) maintain its corporate existence in good standing and maintain
all books and records in accordance with accounting principles and practices as
utilized in the Firstar Financial Statements applied on a consistent basis,
except as may be required to implement changes in generally accepted accounting
principles; and
(b) conduct its business in a manner that does not violate any
Law, except for possible violations which individually or in the aggregate do
not, and, insofar as reasonably can be foreseen, in the future will not, have a
Firstar Material Adverse Effect.
6.02. Negative Covenants. Except as specifically contemplated by
this Agreement, from the date hereof until the Effective Time, Firstar shall
not do, or agree or commit to do, or permit any of its Subsidiaries to do,
without the prior written consent of Investors (which shall not be unreasonably
withheld) any of the following:
(a) propose or adopt any amendments to its corporate charter or
by-laws in any way adverse to Investors; provided, however, that any amendment
to the bylaws of Firstar to increase the size of its Board of Directors shall
not be deemed adverse to Investors and any amendment to the Restated Articles
of Incorporation of Firstar effected solely by action of the Board of Directors
of Firstar shall not be deemed adverse to Investors;
(b) take action which would or is reasonably likely to (i)
adversely affect the ability of either of Firstar or Investors to obtain any
necessary approvals of governmental authorities required for the transactions
contemplated hereby; (ii) adversely affect Firstar's ability
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to perform its covenants and agreements under this Agreement; or (iii) result
in any of the conditions to the Merger set forth in Article VIII not being
satisfied; or
(c) agree in writing or otherwise to do any of the foregoing.
6.03. Firstar Rights Plan. Nothing herein shall be deemed to
prohibit Firstar from (a) redeeming the Firstar Rights or (b) if the Firstar
Rights are so redeemed, entering into a new rights agreement similar to the
Firstar Rights Agreement; provided that, as to this clause (b), holders of
Investors Common Stock become entitled to any benefits thereof by virtue of the
Merger or the Exchange Ratio is appropriately adjusted.
6.04. Breaches. Firstar shall, in the event it becomes aware of the
impending or threatened occurrence of any event or condition which would cause
or constitute a material breach (or would have caused or constituted a breach
had such event occurred or been known prior to the date hereof) of any of its
representations or agreements contained or referred to herein or which would
cause any of the conditions to the obligations of any party set forth in
Article VIII not to be satisfied, give prompt written notice thereof to
Investors and use its best efforts to prevent or promptly remedy the same.
6.05. Stock Exchange Listing. Firstar shall use its best efforts to
cause the shares of Firstar Common Stock to be issued in the Merger to be
approved for listing on the New York Stock Exchange ("NYSE"), subject to
official notice of issuance, prior to the Closing Date.
6.06. Firstar Bank Board. Promptly after the Effective Time,
Firstar and Sub shall cause Sub and Firstar Bank to increase the number of
directors on each of its Boards of Directors by one and the vacancy thus
created to be filled by the election of James M. Burkholder.
6.07. Supplemental Warrant Agreement. Effective as of the Effective
Time, Firstar shall execute a supplemental warrant agreement to the Investors
Warrant Agreement as provided in Section 10(H) of the Investors Warrant
Agreement (the "Supplemental Warrant Agreement").
6.08 Supplemental Indenture; Registration Relating to Options and
Warrants. Effective as of the Effective Time, Sub will execute a Supplemental
Indenture pursuant to Section 801 of the Indenture between Investors and
Norwest Bank Minnesota, N.A., as trustee governing Investors' 9.25%
Subordinated Notes due 2002. Firstar shall take all corporate action necessary
to reserve for issuance a sufficient number of shares of Firstar Common Stock
for delivery upon exercise of the Firstar Warrants and the Firstar Stock
Options. Firstar shall use its best efforts to register the Firstar Common
Stock underlying the Firstar Warrants and the Firstar Common Stock issuable
upon exercise of the Firstar Stock Options under the Securities Act of 1933 as
of the Effective Time and to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such Firstar
Warrants and Firstar Stock Options remain outstanding.
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6.09. Accounting and Tax Treatment. Firstar will use its best
efforts to cause the Merger to qualify (i) for pooling-of-interests accounting
treatment and (ii) as a reorganization under Section 368(a)(1) of the Code.
6.10. Bank Merger Agreement. Within ten days after the date hereof,
Firstar and Sub shall cause the Board of Directors of Firstar Bank to duly
authorize the execution and delivery of the Bank Merger Agreement and the
consummation of the transactions contemplated thereby.
6.11. Expenses. Firstar agrees that if this Agreement or the
transactions contemplated hereby are terminated by Investors pursuant to
Section 10.01(a)(ii), Firstar shall promptly (and in any event within two days
after such termination) pay Investors all Expenses of Investors, but not to
exceed $1.0 million.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01. Filings and Approvals.
(a) Each party will use all reasonable efforts and will
cooperate with the other in the preparation and filing, as soon as practicable,
of all applications or other documents required to obtain regulatory approvals
and consents required from the Federal Reserve Board, the OTS and the
Comptroller and from any other applicable regulatory authorities and provide
copies of nonconfidential portions of such applications, filings and related
correspondence to the other parties. Prior to filing each application,
registration statement or other documents with the applicable regulatory
authority, each party will provide the other party with an opportunity to
review and comment on the nonconfidential portions of each such application,
registration statement or other document. Each of Firstar and Investors shall
ensure that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in any documents to be filed with the
Federal Reserve Board, the OTS, the Comptroller or any other regulatory agency
in connection with the transactions contemplated hereby will, at the time of
filing, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein. Each party will use all
reasonable efforts and will cooperate with the other parties in taking any
other actions necessary to obtain such regulatory or other approvals and
consents, including participating in any required hearings or proceedings.
Subject to the terms and conditions herein provided, each party will use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to cause the
conditions set forth in Article VIII to be satisfied and to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement. Notwithstanding the foregoing, in the event the Federal Reserve
Board, OTS, Comptroller or other regulatory agency requests information
pertaining to Investors or Investors Bank, to the extent permitted by the
agency, Investors shall have the right to submit such information directly to
the regulatory agency making such request, and Investors shall provide copies
of such information to Firstar. Firstar shall keep Investors advised of all
material regulatory developments in a timely manner.
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(b) In the event of a restraining order or injunction
which prevents the Closing by reason of the operation of Section 8.01(d),
Investors, Firstar and Sub shall use their respective best efforts to cause
such order or injunction to be lifted and the Closing consummated as soon as
reasonably practicable.
7.02. Registration Statement.
(a) For the purposes (i) of holding a meeting of the
stockholders of Investors to approve this Agreement and the Merger (the
"Meeting") and (ii) of registering the Firstar Common Stock to be issued to
holders of Investors Common Stock in connection with the Merger with the SEC
and with applicable state securities authorities, the parties hereto shall
cooperate in the preparation of an appropriate registration statement (such
registration statement, together with all and any amendments and supplements
thereto, being herein referred to as the "S-4"), which shall include a
prospectus/proxy statement satisfying all applicable requirements of the
Securities Act, the Exchange Act, applicable state securities laws and the
rules and regulations thereunder (such prospectus/proxy statement, together
with any and all amendments or supplements thereto, being herein referred to as
the "Prospectus/Proxy Statement").
(b) Firstar shall furnish such information concerning
Firstar as is necessary in order to cause the Prospectus/Proxy Statement,
insofar as it relates to Firstar, to be prepared in accordance with Section
7.02(a). Firstar agrees promptly to advise Investors if any time prior to the
Meeting any information provided by Firstar in the Prospectus/Proxy Statement
becomes incorrect or incomplete in any material respect, and to provide the
information needed to correct such inaccuracy or omission. At the time the S-4
becomes effective and at the time the Prospectus/Proxy Statement is mailed to
the stockholders of Investors and at all times subsequent to such mailing up to
and including the time of the Meeting, the S-4 and such Prospectus/Proxy
Statement (including any amendments or supplements thereto), with respect to
all information set forth therein relating to Firstar (including the Firstar
Subsidiaries) and the Firstar Common Stock, this Agreement, the Merger and all
other transactions contemplated hereby, will (a) comply in all material
respects with applicable provisions of the Securities Act and the Exchange Act,
and (b) not contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they are made, not
misleading.
(c) Investors shall furnish Firstar with such information
concerning Investors and the Investors Subsidiaries as is necessary in order to
cause the Prospectus/Proxy Statement, insofar as it relates to Investors and
the Investors Subsidiaries, to be prepared in accordance with Section 7.02(a).
Investors agrees promptly to advise Firstar if at any time prior to the Meeting
any information provided by Investors in the Prospectus/Proxy Statement becomes
incorrect or incomplete in any material respect, and to provide Firstar with
the information needed to correct such inaccuracy or omission. At the time the
S-4 becomes effective and at the time the Prospectus/Proxy Statement is mailed
to the stockholders of Investors and at all times subsequent to such mailing up
to and including the time of the Meeting, the S-4 and such Prospectus/Proxy
Statement (including any supplements thereto), with respect to all information
set forth therein relating to Investors (including the Investors Subsidiaries)
and its stockholders, Investors Common
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Stock, this Agreement, the Merger and all other transactions contemplated
hereby will (a) comply in all material respects with applicable provisions of
the Securities Act and the Exchange Act, and (b) not contain any untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they are made, not misleading.
(d) Firstar shall promptly file the S-4 with the SEC and
applicable state securities agencies. Firstar shall use reasonable efforts to
cause the S-4 to become effective under the Securities Act and applicable state
securities laws at the earliest practicable date. Investors authorizes Firstar
to utilize in the S-4 the information concerning Investors and its Subsidiaries
provided to Firstar for the purpose of inclusion in the Prospectus/Proxy
Statement. Investors shall have the right to review and comment on the form of
proxy statement included in the S-4. Firstar shall advise Investors promptly
when the S-4 has become effective and of any supplements or amendments thereto,
and Firstar shall furnish Investors with copies of all such documents. Prior
to the Effective Time or the termination of this Agreement, each party shall
consult with the other with respect to any material (other than the
Prospectus/Proxy Statement) that might constitute a "prospectus" relating to
the Merger within the meaning of the Securities Act.
7.03. Indemnification and Insurance.
(a) From and after the Effective Time, Firstar shall
indemnify, defend and hold harmless each person who is now, or has been at any
time to the date hereof or who becomes prior to the Effective Time, an officer
or director of Investors or any of the Investors Subsidiaries (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses (including
reasonable attorneys' fees), liabilities or judgments or amounts that are paid
in settlement (which settlement shall require the prior written consent of
Firstar, which consent shall not be unreasonably withheld) of or in connection
with any claim, action, suit, proceeding or investigation (a "Claim") in which
an Indemnified Party is, or is threatened to be made, a party or a witness
based in whole or in part on or arising in whole or in part out of the fact
that such person is or was a director or officer of Investors or any of its
Subsidiaries if such Claim pertains to any matter or fact arising, existing or
occurring prior to the Effective Time (including, without limitation, the
Merger and other transactions contemplated by this Agreement), regardless of
whether such Claim is asserted or claimed prior to, at or after the Effective
Time (the "Indemnified Liabilities") to the full extent permitted under
applicable Delaware or federal law as of the date hereof or as amended prior to
the Effective Time and under the Investors Certificate and Investors' bylaws as
in effect on the date hereof (and Firstar shall pay expenses in advance of the
final disposition of any such action or proceeding to each Indemnified Party to
the full extent permitted by law and under the Investors Certificate or such
bylaws, upon receipt of any undertaking contemplated by Section 8.05(a) of the
Bylaws of Firstar). Any Indemnified Party wishing to claim indemnification
under this Section 7.03(a), upon learning of any Claim, shall notify Firstar
(but the failure to so notify Firstar shall not relieve Firstar from any
liability which Firstar may have under this Section 7.03(a) except to the
extent Firstar is prejudiced thereby) and shall deliver to Firstar any
undertaking contemplated by Section 8.05(a) of the bylaws of Firstar.
Notwithstanding the foregoing, the Indemnified Parties as a group may retain
only one law firm to represent them with respect to each matter under this
Section 7.03(a)
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unless there is, under applicable standards of professional conduct, a conflict
on any one significant issue between the positions of any two or more
Indemnified Parties. Firstar shall use its best efforts to assure, to the
extent permitted under applicable law, that all limitations of liability
existing in favor of the Indemnified Parties as provided in the Investors
Certificate and Investors' bylaws, as in effect as of the date hereof, with
respect to claims or liabilities arising from facts or events existing or
occurring prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), shall survive the Merger. The
obligations of Firstar described in this Section 7.03(a) shall continue in full
force and effect, without any amendment thereto, for a period of not less than
five years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Claim asserted or made within such period
shall continue until the final disposition of such Claim. Nothing in this
Section 7.03(a) shall affect the obligations to be assumed in the Merger by
Firstar to indemnify former directors and officers of Investors or Investors
Bank pursuant to the terms of the indemnification agreements in effect as of
the date hereof and as disclosed to Firstar in the Investors Disclosure Letter.
(b) From and after the Effective Time, the directors,
officers, and employees of Investors and the Investors Subsidiaries who become
directors, officers or employees of Firstar or any of its Subsidiaries, except
for the indemnification rights set forth in Section 7.03(a), shall have
indemnification rights with prospective application only. The prospective
indemnification rights shall consist of such rights to which directors,
officers and employees of Firstar are entitled under the provisions of the
Restated Articles of Incorporation of Firstar or similar governing documents of
Firstar and its Subsidiaries, as in effect from time to time after the
Effective Time, as applicable, and provisions of applicable law as in effect
from time to time after the Effective Date.
(c) The obligations of Firstar provided under Sections
7.03(a) are intended to benefit, and be enforceable against Firstar directly
by, the Indemnified Parties, and shall be binding on all respective successors
of Firstar.
(d) For three years from and after the Effective Time,
Firstar will maintain or cause Sub to maintain Investors' current insurance
policy for directors' and officers' liabilities or an equivalent policy having
terms and conditions no less favorable to all present and former directors and
officers of Investors and the Investors Subsidiaries who are covered by such
current insurance policy than those in effect for such persons on the date of
this Agreement; provided, however, that (i) Firstar's obligation under this
subsection (d) shall be satisfied as to any year at such time as Firstar and/or
Sub shall have incurred annual costs to maintain insurance in accordance with
this subsection equal to 150% of the annual premium charge heretofore paid by
Investors and (ii) such directors and officers may be required to make
application and provide customary representations and warranties to Firstar's
insurance carrier for the purpose of obtaining such coverage.
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7.04. Reports.
(a) Prior to the Effective Time, (i) Investors shall
prepare and file as and when required all Investors Reports and (ii) Firstar
shall prepare and file as and when required all Firstar Reports.
(b) Investors and Firstar shall prepare such Investors
Reports and Firstar Reports, respectively, such that (i) they comply in all
material respects with all of the statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they are filed and do 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, and (ii) with respect to any Investors Reports or Firstar Reports
containing financial information of the type included in the Investors
Financial Statements or the Firstar Financial Statements, respectively, the
financial information (A) is prepared in accordance with generally accepted
accounting principles as utilized in the Investors Financial Statements or the
Firstar Financial Statements, as the case may be, applied on a consistent basis
(except as stated therein or in the notes thereto), (B) presents fairly the
consolidated financial condition of Investors or Firstar, as the case may be,
at the dates, and the consolidated results of operations and cash flows for the
periods, stated therein and (C) in the case of interim fiscal periods, reflects
all adjustments, consisting only of normal recurring items, subject to year-end
audit adjustments.
7.05. Brokers or Finders. Each of Firstar and Investors
represents, as to itself, its Subsidiaries and its affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement,
except Piper Jaffray Inc., whose fees and expenses will be paid by Investors in
accordance with Investors' agreement with such firm (a copy of which has been
delivered by Investors to Firstar prior to the date of this Agreement), and
each of Firstar and Investors respectively agree to indemnify and hold the
other harmless from and against any and all claims, liabilities or obligations
with respect to any other fees, commissions or expenses asserted by any person
on the basis of any act or statement alleged to have been made by such party or
its affiliate. Investors represents that neither it nor its Subsidiaries has
paid or agreed to pay any fee to its legal counsel, Dorsey & Whitney, or its
certified public accountants, KPMG Peat Marwick, other than on the basis set
forth in Section 5.03(n) in connection with the transactions contemplated by
this Agreement.
7.06. Additional Agreements; Reasonable Efforts. Subject
to the terms and conditions of this Agreement, each of the parties hereto
agrees to use all reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement and the Bank Merger Agreement,
subject to the appropriate vote of stockholders of Investors described in
Section 8.01(a), including cooperating fully with the other party. In case at
any time after the Effective Time any further action is reasonably necessary or
desirable to carry out the purposes of this Agreement or to vest Sub with
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full title to all properties, assets, rights, approvals, immunities and
franchises of either of Sub or Investors, the proper officers and directors of
each party to this Agreement shall take all such necessary action.
7.07. Environmental Audits. Firstar shall engage, at
Investors' expense, an environmental consulting engineering firm, reasonably
acceptable to Investors, to perform environmental site assessments of parcels
of the Investors Property comprising all operating facilities of Investors and
the Investors Subsidiaries (whether owned or leased) or otherwise carried on
the books of Investors or any Investors Subsidiary (other than single family
residential real property) including, but not limited to, "real estate owned"
properties of Investors or any Investors Subsidiary (collectively, the "Audited
Properties") which shall satisfy the American Society of Testing and Materials
"Standard Practice for Environmental Site Assessments: Phase I Environmental
Site Assessment Process" (ASTM Designation: E-1527-93) (the "Environmental
Audits") and render reports of the Environmental Audits (the "Environmental
Reports") to determine, to Firstar's satisfaction, whether there are any
indications or evidence that (i) any Toxic Substance has been stored,
deposited, treated, recycled, used or accidentally or intentionally disposed
of, discharged, spilled, released, dumped, emitted or otherwise placed on,
under or at, or used in any construction on, any such Audited Property, (ii)
any such Audited Property is contaminated by or contains any Toxic Substance or
(iii) any violations of Environmental Laws have occurred or are likely to occur
on any Audited Property. The scope of the Environmental Audits shall include
any testing or sampling of materials to determine, to Firstar's satisfaction,
whether any cleanup, removal, remedial action or other response is required to
bring the Audited Properties into material compliance with Environmental Laws
or to eliminate any condition that could result in a material liability as a
result of the ownership, lease, operation or use of any Audited Property and
the estimated cost of such cleanup, removal, remedial action or other response.
Firstar will use reasonable efforts to engage an environmental consulting
engineering firm within 10 days of the date hereof and Firstar and Investors
will use reasonable efforts to cause the Environmental Audits to be completed
within 45 days of the date hereof. Nothing contained in the Environmental
Reports shall diminish or expand Investors' obligations with respect to the
representations and warranties in Section 3.07 or affect the consequences of
any such representation or warranty proving to have been untrue, incomplete or
misleading in any respect. Notwithstanding the foregoing, (i) if this
Agreement and the transactions contemplated hereby are terminated, then Firstar
shall reimburse Investors for expenses incurred pursuant to this Section 7.07
and (ii) this Section 7.07 shall not apply to the Investor Properties
identified on Exhibit 7.07.
7.08. Firstar Benefit Plans. On or before the first
January 1 that is at least 90 days after the Effective Time, Firstar shall
provide to retained employees of Investors or of any Investors Subsidiary all
corporate-wide employee retirement, health, dental, life and long-term
disability benefits that Firstar and its subsidiaries provide to their
similarly situated employees, subject to the age and eligibility requirements
for such benefits. Each such employee's last continuous period of service
prior to the Effective Time with Investors or any Investors Subsidiary shall
count for purposes of determining eligibility and vesting (but not benefit
amounts) for all such benefits. If such coverage under the Firstar benefits is
not provided immediately after the Effective Time, Firstar shall continue the
Investors' plans until the
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comparable coverage is effective under Firstar's plans so that no lapse in
benefit occurs. Without limiting the generality of the foregoing, no
preexisting condition limits shall be applied to participants in Investors
Benefit Plans upon their eligibility for such Firstar benefits (except for
continuation of any such limits that were in effect under the respective
Investors Benefit Plans).
ARTICLE VIII
CONDITIONS PRECEDENT
8.01. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Corporate Approval. The Merger Agreements shall have
been approved and adopted by the requisite vote of the holders of the
outstanding shares of Investors Common Stock.
(b) Regulatory Approvals. The Merger Agreements and the
transactions contemplated hereby and either the Bank Merger Agreement and the
transactions contemplated thereby or the acquisition of all of Investors Bank's
assets by two de novo national banking associations to be chartered by Sub
shall have been approved by the Federal Reserve Board, the Comptroller and the
OTS without any condition not reasonably satisfactory to Firstar, all
conditions required to be satisfied prior to the Effective Time imposed by the
terms of such approvals shall have been satisfied and all waiting periods
relating to such approvals shall have expired.
(c) S-4; Securities Laws. The S-4 shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order. Firstar shall have received all
state securities or "blue sky" permits, exemptions or permits under applicable
takeover laws and other authorizations necessary to issue the Firstar Common
Stock in exchange for the Investors Common Stock and to consummate the Merger.
(d) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect.
(e) Listing of Firstar Common Stock. The Firstar Common
Stock issuable in the Merger shall have been authorized for listing on the New
York Stock Exchange, upon official notice of issuance.
(f) Tax Opinion. An opinion of Foley & Lardner, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that
Firstar, Sub and Investors will each be a party to that reorganization within
the meaning of Section 368(b) of the Code, dated on or about the date that is
two business days prior to the date the Prospectus/Proxy Statement is first
mailed to stockholders of Investors,
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shall have been delivered to Investors and to Firstar and shall not have been
withdrawn or modified in any material respect.
(g) Fairness Opinion. Investors shall have received, in
form reasonably satisfactory to Investors, an opinion of Piper Jaffray, Inc.,
dated as of the date of the Prospectus/Proxy Statement, substantially to the
effect that the consideration to be received in the Merger by Investors'
stockholders is fair to such stockholders from a financial point of view, which
opinion may be included in the Prospectus/Proxy Statement. Notwithstanding the
foregoing, this condition shall be deemed waived if the Prospectus/Proxy
Statement is mailed to Investors' stockholders without such opinion.
8.02. Conditions of Obligations of Firstar and Sub. The
obligations of Firstar and Sub to effect the Merger are subject to the
satisfaction of the following conditions unless waived in writing by Firstar
and Sub:
(a) Representations and Warranties. (i) Each of the
representations and warranties of Investors set forth in this Agreement,
without giving effect to any update to the Investors Disclosure Letter or
notice to Firstar under Section 5.05, shall be true and correct in all material
respects as of the date of this Agreement, (ii) in the aggregate, such
representations and warranties, without giving effect to any update to the
Investors Disclosure Letter or notice to Firstar under Section 5.05, shall be
true and correct in all material respects as of the Closing Date as though made
on and as of the Closing Date (except to the extent such representations and
warranties speak as of an earlier date), except for changes expressly
contemplated by this Agreement, and (iii) Firstar and Sub shall have received a
certificate signed on behalf of Investors by the chief executive officer and by
the chief financial officer of Investors to such effect.
(b) Performance of Obligations of Investors. Investors
shall have performed in all material respects each of the obligations required
to be performed by it under this Agreement, the Plan of Merger and the Bank
Merger Agreement at or prior to the Closing Date, and Firstar and Sub shall
have received a certificate signed on behalf of Investors by the chief
executive officer and by the chief financial officer of Investors to such
effect.
(c) Consents Under Agreements. Investors shall have
obtained the consent or approval of each person whose consent or approval shall
be required in order to permit the succession by Sub pursuant to the Merger to
any obligation, right or interest of Investors or any Investors Subsidiary
under any loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument, except those for which failure to obtain such consents
and approvals would not, individually or in the aggregate, have an Investors
Material Adverse Effect, whether prior to or following the consummation of the
transactions contemplated hereby.
(d) Pooling Opinions. Firstar shall have received an
opinion from KPMG Peat Marwick, as independent public accountants of Firstar,
and an opinion from KPMG Peat Marwick, as independent public accountants of
Investors, to the effect that the Merger qualifies for pooling-of-interests
accounting treatment if consummated in accordance with the Merger Agreements.
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(e) No Amendments to Resolutions. Neither the Board of
Directors of Investors nor any committee thereof shall have (i) amended,
modified, rescinded or repealed the resolutions adopted by the Board of
Directors of Investors at a meeting duly called and held on August 21, 1994
(accurate and complete copies of which have been provided to Firstar) in any
manner that adversely affects Firstar or (ii) adopted any other resolutions in
connection with this Agreement and the transactions contemplated hereby
inconsistent with such resolutions in any manner that adversely affects
Firstar.
(f) No Material Adverse Change. There shall have been no
material adverse change since the date of this Agreement in the business,
operations, prospects or financial condition of Investors and the Investors
Subsidiaries taken as a whole, other than any changes resulting primarily by
reason of changes in savings institution laws or regulations (or
interpretations thereof), changes in the general level of interest rates or
changes in economic, financial or market conditions affecting the savings
institution industry generally in the regions in which Investors and the
Investors Subsidiaries operate, and Firstar and Sub shall have received a
certificate signed on behalf of Investors by the chief executive officer and by
the chief financial officer of Investors to such effect.
(g) No Proceeding or Litigation. No material action,
suit or proceeding before any court or any governmental or regulatory authority
shall be pending against Firstar, Investors or any affiliate, associate,
officer or director of either of them (other than litigation commenced by
Firstar or any of its affiliates so long as no order or injunction of a court
of competent jurisdiction is in effect in such litigation on the Closing Date
that does restrain, enjoin or prevent the Closing), seeking to restrain,
enjoin, prevent, change or rescind the transactions contemplated hereby or
questioning the validity or legality of any such transactions.
(i) Accountant's Review Letters. Firstar shall have
received the letters described in Section 5.03 regarding the financial
statements of Investors.
(j) Opinion of Counsel. Investors shall have delivered
to Firstar an opinion of its counsel, Dorsey & Whitney, dated as of the Closing
Date and in form and substance satisfactory to the counsel of Firstar, to the
effect that: (i) Investors is a corporation validly existing and in good
standing under the laws of its jurisdiction of incorporation with full
corporate power and authority to enter into this Agreement and the Plan of
Merger and to consummate the transactions contemplated thereby; (ii) Investors
is registered as a savings and loan holding company under the SLHC Act; (iii)
Investors Bank is a federally chartered savings bank duly organized, validly
existing and in good standing under the laws of the United States; (iv)
Investors has the corporate power to consummate the transactions on its part
contemplated by this Agreement; (v) Investors Bank has the corporate power to
consummate the transactions on its part contemplated by the Bank Merger
Agreement; (vi) this Agreement and the Plan of Merger have been duly and
validly authorized, executed and delivered on behalf of Investors and
constitute (subject to
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standard exceptions to enforceability arising from the bankruptcy laws and
rules of equity and to claims relating to conformance with fiduciary
obligations) valid and binding agreements of Investors; (vii) the Bank Merger
Agreement has been duly and validly authorized, executed and delivered on
behalf of Investors Bank and constitutes (subject to standard exceptions to
enforceability arising from the bankruptcy laws and rules of equity) a valid
and binding agreement of Investors Bank; (viii) the execution of the Articles
of Merger and Certificate of Merger by Investors has been duly and validly
authorized; (ix) neither the execution and delivery of this Agreement and the
Plan of Merger by Investors and the consummation of the transactions
contemplated hereby, nor the execution and delivery of the Bank Merger
Agreement by Investors Bank and the consummation of the transactions
contemplated thereby, result in a Violation pursuant to any provision of the
Investors Certificate, the by-laws of Investors, the charter, certificate or
articles of incorporation or by-laws of any Investors Subsidiary, the DGCL, to
the knowledge of such counsel, any agreement included in a certificate
delivered to such counsel and Firstar by the chief executive officer and the
chief financial officer of Investors setting forth all agreements to which
Investors or any Investors Subsidiary is a party that are material to Investors
and its Subsidiaries taken as a whole; and (x) in the course of the preparation
of the S-4 and the Prospectus/Proxy Statement such counsel has considered the
information set forth therein relating to Investors in light of the matters
required to be set forth therein, and has participated in conferences with
officers and representatives of Investors and Firstar, including their
respective counsel and independent public accountants, during the course of
which the contents of the S-4 and the Prospectus/Proxy Statement and related
matters relating to Investors were discussed. Such counsel has not
independently checked the accuracy or completeness of, or otherwise verified,
and accordingly is not passing upon, and does not assume responsibility for,
the accuracy, completeness or fairness of the statements contained in the S-4
or the Prospectus/Proxy Statement; and such counsel has relied as to
materiality, to a large extent, upon the judgment of officers and
representative of Investors and Firstar. However, as a result of such
consideration and participation, nothing has come to such counsel's attention
which causes such counsel 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 such
counsel expresses 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 Prospectus/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 such
counsel expresses 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 the light of the
circumstances under which they were made, not misleading.
(l) Reserve for Losses on Loans. As of and on the
Closing Date, Investors' consolidated reserve for losses on loans after all
anticipated loan losses have been charged off shall not be less an amount
requested by Firstar.
8.03. Conditions of Obligations of Investors. The
obligation of Investors to effect the Merger is subject to the satisfaction of
the following conditions unless waived by Investors:
(a) Representations and Warranties. (i) Each of the
representations and warranties of Firstar and Sub set forth in this Agreement,
without giving effect to any notice to Investors pursuant to Section 6.04,
shall be true and correct in all material respects as of the date of this
Agreement, (ii) in the aggregate, such representations and warranties, without
giving effect
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to any update to the Firstar Disclosure Letter or notice to Investors under
Section 6.04, shall be true and correct in all material respects as of the
Closing Date as though made on and as of the Closing Date (except to the extent
such representations speak as of an earlier date) except for changes expressly
contemplated by this Agreement, and (iii) Investors shall have received a
certificate signed on behalf of Firstar by the Chief Executive Officer and by
the chief financial officer of Firstar to such effect.
(b) Performance of Obligations of Firstar and Sub.
Firstar and Sub shall have performed in all material respects each of the
obligations required to be performed by them under this Agreement and the Plan
of Merger at or prior to the Closing Date, and Investors shall have received a
certificate signed on behalf of Firstar by the Chief Executive Officer and by
the chief financial officer of Firstar to such effect.
(c) Consents Under Agreements. Firstar shall have
obtained the consent or approval of each person (other than the Federal Reserve
Board) whose consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease or other agreement or instrument, except those for
which failure to obtain such consents and approvals would not, in the
reasonable opinion of Investors, individually or in the aggregate, have a
Firstar Material Adverse Effect or upon the consummation of the transactions
contemplated hereby.
(d) No Amendments to Resolutions. Neither the Board of
Directors of Firstar nor any committee thereof shall have amended, modified,
rescinded or repealed the resolutions adopted by the Board of Directors of
Firstar at a meeting duly called and held on July 21, 1994 and shall not have
adopted any other resolutions in connection with this Agreement and the
transactions contemplated hereby inconsistent with such resolutions.
(e) Opinion of Counsel. Firstar shall have delivered to
Investors an opinion of Howard H. Hopwood III, Senior Vice President and
General Counsel of Firstar, dated as of the Closing Date and in form and
substance reasonably satisfactory to the counsel of Investors, to the effect
that: (i) each of Firstar and Sub is a corporation validly existing under the
laws of its jurisdiction of incorporation with full corporate power and
authority to enter into this Agreement and the Plan of Merger and to consummate
the transactions contemplated thereby; (ii) all corporate proceedings on the
part of Firstar and Sub necessary to be taken in connection with the Merger and
(except for the filing of the Articles of Merger and Certificate of Merger)
necessary to make same effective have been duly and validly taken; (iii) this
Agreement has been duly and validly authorized, executed and delivered on
behalf of Firstar and constitutes (subject to standard exceptions to
enforceability arising from the bankruptcy laws and rules of equity) a valid
and binding agreement of Firstar; (iv) the execution of the Articles of Merger
and Certificate of Merger by Firstar and Sub has been duly and validly
authorized; (v) the shares of Firstar Common Stock to be issued in the Merger
will, when issued, be duly authorized, validly issued, fully paid and
non-assessable (except as provided in Section 180.0622(2)(b) of the WBCL); and
(vi) in the course of the preparation of the S-4 and the Prospectus/Proxy
Statement such counsel has considered the information set forth therein
relating to Firstar in light of the matters required to be set forth therein,
and has participated in conferences with officers and
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representatives of Investors and Firstar, including their respective counsel
and independent public accountants, during the course of which the contents of
the S-4 and the Prospectus/Proxy Statement and related matters relating to
Firstar were discussed. Such counsel has not independently checked the
accuracy or completeness of, or otherwise verified, and accordingly is not
passing upon, and does not assume responsibility for, the accuracy,
completeness or fairness of the statements contained in the S-4 or the
Prospectus/Proxy Statement; and such counsel has relied as to materiality, to a
large extent, upon the judgment of officers and representative of Investors and
Firstar. However, as a result of such consideration and participation, nothing
has come to such counsel's attention which causes such counsel 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 Investors as to which such counsel expresses 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 Prospectus/Proxy
Statement (other than the financial statements, financial data, statistical
data and supporting schedules included therein, and information relating to or
supplied by Investors, as to which such counsel expresses 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 the light of the circumstances under which they were made, not
misleading.
(f) No Material Adverse Change. There shall have been no
material adverse change since the date of this Agreement in the business,
operations, prospects or financial condition of Firstar and the Firstar
Subsidiaries taken as a whole, other than any changes resulting primarily by
reason of changes in banking laws or regulations (or interpretations thereof),
changes in the general level of interest rates or changes in economic,
financial or market conditions affecting the banking industry generally in the
regions in which Firstar and the Firstar Subsidiaries operate, and Investors
shall have received a certificate signed on behalf of Firstar by the Chief
Executive Officer and by the chief financial officer of Firstar to such effect.
(g) No Proceeding or Litigation. No material action,
suit or proceeding before any court or any governmental or regulatory authority
shall be pending against any officer or director of Investors (other than
litigation commenced by Investors or any of its affiliates so long as no order
or injunction of a court of competent jurisdiction is in effect in such
litigation on the Closing Date that does restrain, enjoin or prevent the
Closing), seeking to restrain, enjoin, prevent, change or rescind the
transactions contemplated hereby or questioning the validity or legality of any
such transactions, where such action, suit or proceeding is reasonably likely
to result in material personal liability to such officer(s) or director(s)
(other than liability reasonably likely to be covered by indemnification and/or
insurance).
ARTICLE IX
INDUCEMENT
9.01. Inducement. (a) Subject to subsection (d), as a
condition and inducement to Firstar's willingness to enter into and perform
this Agreement, in the event that a Trigger Event (as hereinafter defined) has
occurred, then Investors shall pay to Firstar a fee of $4,500,000
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(the "Termination Fee"). 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 Investors;
(iii) (A) The Board of Directors of Investors (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
Prospectus/Proxy Statement, or (B) the Board of Directors of Investors
shall have resolved to do any of the foregoing; or
(iv) The condition described in Section 8.01(g)
shall not have been satisfied and Investors' stockholders shall have
failed to approve this Agreement at a meeting duly called and held.
(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, "Transaction Proposal" shall mean (A)
a bona fide tender offer or exchange offer for at least 15% of the then
outstanding shares of any class of voting capital stock of Investors shall have
been made by any Person (excluding Firstar or any of its Subsidiaries or
Affiliates), (B) a merger, consolidation or other business combination with
Investors or with Investors Bank shall have been effected by any Person, or an
agreement relating to any such transaction shall have been entered into, (C)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition
(whether in one transaction or a series of related transactions) involving a
substantial part of Investors' consolidated assets (including stock of
Investors Bank), or all or a substantial part of the assets of Investors Bank,
to any Person shall have been effected, or any agreement relating to such
transaction shall have been entered into, (D) the acquisition by any Person,
other than (1) Firstar or any Subsidiary or Affiliate of Firstar (other than in
a fiduciary capacity) or (2) any of Investors' Subsidiaries 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 the capital stock of
Investors 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 15% or more of the outstanding shares of any
class of the voting capital stock of Investors (including capital stock
currently beneficially owned by
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such Person) or, if such Person currently beneficially owns 15% or more of the
outstanding shares of any class of voting capital stock of Investors, of any
additional shares of the voting capital stock of Investors (other than pursuant
to such Person's rights and obligations as of the date hereof under Investors
Options and/or Investors Warrants), (E) any reclassification of securities or
recapitalization of Investors or other transaction that has the effect,
directly or indirectly, of increasing the proportionate share of any class of
equity security (including securities convertible into equity securities) of
Investors 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, (F) any transaction having an effect similar to those described in (A)
through (E) above, or (G) a public announcement with respect to a proposal,
plan or intention by Investors or another Person (excluding Firstar or any of
its Subsidiaries or Affiliates) to effect any of the foregoing transactions
(which may include publication of notice of the filing of an application under
the BHC Act, the HOLA, the SLHC Act, the FDI Act or the Change in Bank Control
Act, as amended); provided, however, that in the case of the events described
in clauses (A) and (G) in this definition, and events described in clause (F)
having an effect similar to those described in clause (A) (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 Investors
(1) recommends such Event to its stockholders for acceptance or (2) fails to
undertake such acts as Firstar reasonably requests to oppose such Event
(provided that Investors not incur significant legal expense); or (y)
Investors' stockholders shall have failed to approve this Agreement at a
meeting duly called for such purpose.
(d) The rights of Firstar under this Section 9.01 shall
terminate upon the earliest to occur of (1) the Effective Time, (2) the
termination of this Agreement by Investors pursuant to Section 10.01(a)(ii),
(3) the termination of this Agreement by mutual agreement of the parties, (4)
the expiration of six months after the termination of this Agreement pursuant
to Section 10.01(a)(iv), (5) the termination of this Agreement pursuant to
Section 10.01(a)(iii), Section 10.01(a)(v) or Section 10.01(a)(vii), (6) the
expiration of six months after the termination of this Agreement pursuant to
Section 10.01(a)(vi) other than such a termination where nonapproval by
stockholders of Investors was preceded by a Transaction Proposal, (7) the
expiration of one year after the termination of this Agreement (other than
terminations described in clauses (2) - (6)), or (8) the irrevocable payment of
a Termination Fee to Firstar.
ARTICLE X
TERMINATION AND AMENDMENT
10.01. Termination. (a) This Agreement and the Plan of
Merger may be terminated at any time prior to the Effective Time, whether
before or after approval of the matters presented in connection with the Merger
by the stockholders of Investors:
(i) by mutual consent of the Board of Directors of
Firstar and the Board of Directors of Investors;
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(ii) by either Firstar or Investors (A) if there has been
a breach in any material respect of any representation, warranty,
covenant or agreement on the part of Investors, on the one hand, or
Firstar and Sub, on the other hand, respectively, set forth in this
Agreement, or (B) if the representations and warranties of Investors,
on the one hand, or Firstar and Sub, on the other hand, respectively,
shall be discovered to have become materially untrue in the aggregate,
in either case which breach or other condition has not been cured
within 10 business days following receipt by the nonterminating party
of notice of such breach or other condition;
(iii) by either Firstar or Investors if any permanent
Injunction preventing the consummation of the Merger shall have become
final and nonappealable;
(iv) by either the Board of Directors of Firstar or the Board
of Directors of Investors if the Merger shall not have been
consummated before August 15, 1995, for a reason other than the
failure of the terminating party to comply with its obligations under
this Agreement;
(v) by the Board of Directors of either of Firstar or
Investors if the Federal Reserve Board, the Comptroller or the OTS has
denied approval of the Merger or the Bank Merger and neither Firstar
nor Investors has, within 30 days after the entry of the order denying
such approval, filed a petition seeking review of such order as
provided by applicable law;
(vi) by either Investors or Firstar, if this Agreement and
the Merger are not duly approved by the stockholders of Investors
after a vote thereon at a meeting of stockholders (or any adjournment
thereof) duly called and held for such purpose;
(vii) by Investors, on either of the two trading days
immediately after the Ten-Day Calculation Period, as defined below, if
both of the following conditions are satisfied:
(1) the average of the daily closing prices of a
share of Firstar Common Stock as reported on the consolidated
tape of the NYSE during the Ten-Day Calculation Period (the
"Firstar Average Price") is less than $29.00; and
(2) the number obtained by dividing the Firstar
Average Price by the closing price of Firstar Common Stock as
reported on the consolidated tape of the NYSE on the trading
day immediately preceding the public announcement of this
Agreement is less than the number obtaining by dividing the
Final Index Price (as defined in subsection (b) below) by the
Initial Index Price (as defined in subsection (b) below) and
subtracting .125 from such quotient;
(viii) by Investors, if (1) any Person (other than Firstar
or any affiliate of Firstar) shall have commenced (as such term is
used in Rule 14d-2(b) under the Exchange Act) a bona fide tender offer
for all outstanding shares of Investors Common Stock or any Person
shall have made a bona fide written offer involving a merger or
consolidation of
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Investors or the acquisition of all or substantially all of its
assets, (2) Investors' Board of Directors shall determine, based on
advice of Investors' independent financial advisors, that such offer
is a material economic improvement to Investors' stockholders when
compared to the Merger, (3) Investors' Board of Directors, after
consultation with and based upon receipt of written advice from Dorsey
& Whitney (a copy of which Investors shall promptly deliver to
Firstar), or other counsel acceptable to Firstar, determines in good
faith that recommending such tender offer or accepting such written
offer is required for the Board of Directors to comply with its
fiduciary duties to Investors' stockholders under applicable law, and
(4) Investors or the Person commencing such tender offer or submitting
such written offer shall have irrevocably paid the Termination Fee to
Firstar; provided, however, that Investors may not terminate the
Agreement pursuant to this Section 10.01(a)(viii) until the expiration
of five business days after written notice of any such offer
referenced in this Section 10.01(a)(viii) has been delivered to
Firstar, together with a summary of the terms of any such offer;
(ix) without further action of either party
hereto, upon the irrevocable payment to Firstar of the Termination Fee
following the occurrence of a Trigger Event, unless (A) prior to the
Trigger Event there has been a wilful and material breach of this
Agreement by Investors other than a breach resulting from an Excused
Action (as defined below), or (B) such Trigger Event is the occurrence
of a Transaction Proposal caused by an action or inaction by Investors
that is a wilful breach of any covenant in this Agreement, except an
Excused Action, or (C) such Trigger Event is an action or inaction by
Investors described inSection 9.01(b)(iii) or (iv) that is not the
result of an action that the Board of Directors of Investors, after
consultation with counsel, determines in good faith is required to
comply with its fiduciary duties to stockholders under applicable law.
For purposes of this Section 10.01(a)(ix, "Excused Action" shall mean
any action, or the failure to act, by Investors where the Board of
Directors of Investors, after consultation with and based on the
written advice of counsel (a copy of which is furnished to Firstar),
determines in good faith that such actions or inactions are required
by the Board of Directors of Investors to comply with its fiduciary
duties to Investors' stockholders under applicable law to facilitate a
Transaction Proposal or a Competing Transaction with a party other
than Investors or any of its Representatives; or
(x) by Firstar, if, after the date hereof, any Person
shall have commenced (as such term is used in Rule 14d-2(b) under the
Exchange Act) abona fide tender offer or exchange offer to acquire at
least 20% of the then outstanding shares of Investors Common Stock, or
if the Board of Directors of Investors shall have withdrawn, modified
or changed its recommendation of this Agreement or the Merger.
(b) For purposes of this Section 10.01:
(i) The "Index Group" shall mean all of those companies
listed on Exhibit 10.01 the common stock of which is publicly traded
and as to which there is no pending publicly announced proposal at any
time during the Ten-Day Calculation Period for such company to acquire
another company or companies in transactions with a value exceeding
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10% of the acquiror's market capitalization or for such company to be
acquired. In the event that any such company or companies are so
removed from the Index Group, the weights attributed to the remaining
companies shall be adjusted proportionately.
(ii) The "Initial Index Price" shall mean the weighted
average (weighted in accordance with the factors listed on Exhibit
10.01) of the per share closing prices of the common stock of the
companies comprising the Index Group, as reported on the consolidated
transactions reporting system for the market or exchange on which such
common stock is principally traded, on the trading day immediately
preceding the public announcement of this Agreement.
(iii) The "Final Price" of any company belonging to the Index
Group shall mean the average of the daily closing sale prices of a
share of common stock of such company, as reported in the consolidated
transaction reporting system for the market or exchange on which such
common stock is principally traded, during the Ten-Day Calculation
Period.
(iv) The "Final Index Price" shall mean the weighted average
(weighted in accordance with the factors listed on Exhibit 10.01) of
the Final Prices for all of the companies comprising the Index Group.
(v) The "Ten-Day Calculation Period" shall mean the ten (10)
consecutive trading days ending at the end of the third business day
preceding the date of the Meeting specified in the Prospectus/Proxy
Statement.
If Firstar or any company belonging to the Index Group declares a stock
dividend or effects a reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the date of this
Agreement and the Meeting Date, the closing prices for the common stock of such
company shall be appropriately adjusted for the purposes of the definitions
above so as to be comparable to the price on the date of this Agreement.
10.02. Investigation and Review. Subject to the next
following sentence, at any time prior to the 21st day following the date of
this Agreement, Firstar may, by action of the Interstate Banking and
Acquisitions Committee of the Board of Directors of Firstar (the "Firstar
Committee"), elect to terminate this Agreement on behalf of Firstar and Sub as
a result of any information obtained in the course of its investigation and
review of (i) Investors' portfolios of consumer loans, commercial real estate
loans, second mortgage loans and other mortgage loans, (ii) all non-accrual and
restructured loans, (iii) all REO or real estate in judgment and (iv) the
underwriting of fixed rate and adjustable rate first mortgage loans, which, in
the good faith opinion of the Firstar Committee, indicates circumstances or
events that (a) have, or are reasonably likely to have, an Investors Material
Adverse Effect or (b) materially detract from the value of Investors and its
Subsidiaries to Firstar. Notwithstanding the foregoing, Firstar may pursuant
to a written instrument signed by it (which shall not be deemed to be an
amendment or modification to this Agreement) terminate its rights to terminate
this Agreement pursuant to this Section as of any date prior to such 21st day
which is specified in such written instrument.
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Nothing in this Section shall be construed (i) to limit the period of time
during which Firstar may conduct its investigation and review of Investors,
(ii) to limit any duty of Investors otherwise to cooperate with the
investigation and review by Firstar subsequent to the period established
pursuant to the first sentence of this section, or (iii) to limit or qualify in
any respect the representations and warranties of Investors to Firstar set
forth in this Agreement as a result of any such investigation and review.
10.03. Effect of Termination. In the event of termination
of this Agreement by either Investors or Firstar as provided in Section 10.01
or Section 10.02, this Agreement and the Plan of Merger shall forthwith become
void and there shall be no liability or obligation on the part of Firstar or
Investors or their respective officers or directors except (a) with respect to
Sections 5.08, 6.11, 7.05, 7.07, and 9.01, and (b) to the extent that such
termination (other than a termination in accordance with Section 10.01(a)(ix))
results from the willful breach by a party hereto of any of its
representations, warranties, covenants or agreements set forth in this
Agreement; provided, however, that actions by Investors that are reasonably
required to facilitate a transaction that entitles Investors to terminate this
Agreement pursuant to Section 10.01(a)(viii) and for the Board of Directors of
Investors to comply with its fiduciary duties to Investors' stockholders under
applicable law (as such duties are determined in accordance with Section
10.01(a)(viii)(3)) shall not constitute a willful breach by Investors of any of
its representations, warranties, covenants or agreements set forth in this
Agreement for purposes of this clause (b).
10.04. Amendment. Subject to the next following sentence,
this Agreement and the Plan of Merger may be amended by the parties hereto by
action taken or authorized by their respective Boards of Directors (or, in the
case of Firstar, the Firstar Committee) at any time before or after approval of
the matters presented in connection with the Merger by the stockholders of
Investors, but after any such approval by the stockholders of Investors, no
amendment shall be made which has any of the effects described in Section
251(d) of the DGCL. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
10.05. Extension; Waiver. At any time prior to the
Effective Time, Firstar and Sub, on the one hand, and Investors, on the other
hand, by action taken or authorized by their respective Boards of Directors
(or, in the case of Firstar, the Firstar Committee), may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties of the other contained herein or in any document
delivered by the other pursuant hereto, and (iii) waive compliance by the other
with any of the agreements or conditions contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such party.
ARTICLE XI
GENERAL PROVISIONS
11.01. Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered
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pursuant to this Agreement shall survive the Effective Time, except for the
agreements contained in Sections 2.01, 2.02, 2.03, 2.04, 6.05, 6.06, 6.07,
6.08, 7.03 and 7.06, the last sentence of Section 10.04 and Article XI, and the
agreements delivered pursuant to Section 3.20, Section 5.06, Section 6.07 and
Section 6.08.
11.02. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (with receipt confirmed) or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Firstar and/or Sub, to
Firstar Corporation
Attention: Jon H. Stowe,
Executive Vice President
777 East Wisconsin Avenue
Milwaukee, WI 53202
Telecopy: (414) 765-4349
with a copy to:
Firstar Corporation
Attention: Howard H. Hopwood III,
Senior Vice President and General Counsel
777 East Wisconsin Avenue
Milwaukee, WI 53202
Telecopy: (414) 765-6111
(b) if to Investors, to
Investors Bank Corp.
Attention: James M. Burkholder
President and Chief Executive Officer
200 East Lake Street
Wayzata, Minnesota 55391
Telecopy: (612) 475-8727
with a copy to:
Dorsey & Whitney
Attention: Thomas O. Martin, Esq.
220 South 6th Street
Minneapolis, Minnesota 55402-1498
Telecopy: (612) 340-8738
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11.03. Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." The phrase "made available" in
this Agreement shall mean that the information referred to has been made
available if requested by the party to whom such information is to be made
available.
11.04. Counterparts. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
11.05. Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership. This Agreement (including the documents and the
instruments referred to herein, including the Bank Merger Agreement and the
Plan of Merger) (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, except for the rights and obligations of
Firstar and Investors under the confidentiality letter agreement, dated March
10, 1994, and (b) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder. The parties hereby
acknowledge that no party shall have the right to acquire or shall be deemed to
have acquired shares of common stock of the other party pursuant to the Merger
until consummation thereof.
11.06. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Wisconsin, except as the
MBCA and the DGCL are expressly applicable to the Merger.
11.07. Publicity. The parties hereto agree that they will
consult with each other concerning any proposed press release or public
announcement pertaining to the Merger and use their best efforts to agree upon
the text of such press release or public announcement prior to the publication
of such press release or the making of such public announcement.
11.08. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
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11.09. Knowledge of the Parties. Wherever in this
Agreement any representation or warranty is made upon the knowledge of a party
hereto that is not an individual, such knowledge shall include the actual
knowledge, after due inquiry, of any executive officer of such party or an
executive officer of any Subsidiary thereof.
IN WITNESS WHEREOF, Firstar, Sub and Investors have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
FIRSTAR CORPORATION
By: /s/ John A. Kielich
------------------------------
Its: First Vice President
Attest:
/s/ William J. Schulz
---------------------
Its: First Vice President
and Secretary
FIRSTAR CORPORATION OF MINNESOTA
By: /s/ John A. Kielich
------------------------
Its: Vice President
Attest:
/s/ Joan M. Fagan
- -------------------------
Its: Assistant Secretary
INVESTORS BANK CORP.
By: /s/ John G. Lohmann, Jr.
----------------------------------
Its: Executive Vice President
Attest:
/s/ Daniel A. Arrigoni
-----------------------------
Its: Executive Vice President
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EXHIBIT A
PLAN OF MERGER
PLAN OF MERGER, dated as of August 21, 1994 ("Plan of
Merger"), by and between Firstar Corporation of Minnesota, a Minnesota
corporation ("Sub"), and Investors Bank Corp., a Delaware corporation
("Investors"), and joined in by Firstar Corporation, a Wisconsin corporation
("Firstar"), for certain limited purposes.
WHEREAS, Investors is a corporation with authorized capital
stock consisting of (i) 5,000,000 shares of common stock, $.01 par value
("Investors Common Stock"), of which 3,500,604 shares are validly issued and
outstanding on the date hereof; and (ii) 1,000,000 shares of preferred stock,
$.01 par value, of which 400,000 shares have been designated "Cumulative
Perpetual Preferred Stock, Series 1991" ("Investors Preferred Stock"), in
respect of which there are issued and outstanding 303,640 shares;
WHEREAS, Sub is a corporation with authorized capital stock of
10,000 shares of common stock, $1.00 par value ("Sub Common Stock"), 1,000 of
which are validly issued and outstanding and are owned by Firstar;
WHEREAS, Firstar is a corporation duly organized and existing
under the laws of Wisconsin;
WHEREAS, concurrently with the execution and delivery of this
Plan of Merger, Firstar, Sub and Investors have entered into an Agreement and
Plan of Reorganization (the "Agreement" and, together with this Plan of Merger,
the "Merger Agreements") that contemplates the merger of Investors with and
into Sub (the "Merger") upon the terms and conditions provided in this Plan of
Merger and the Agreement and pursuant to the Minnesota Business Corporation Act
(the "MBCA") and the Delaware General Corporation Law (the "DGCL");
WHEREAS, the Boards of Directors of Sub and Investors deem it
fair and equitable to, and in the best short-term and long-term interests of,
their respective corporations and stockholders that Investors be merged with
and into Sub with Sub being the surviving corporation, and 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 stockholders for approval; and
WHEREAS, the Board of Directors of Firstar has authorized the
execution and delivery of this Plan of Merger and the issuance of Firstar
Common Stock (as defined in Section 2.01(a)) and the payment of cash pursuant
hereto.
NOW, THEREFORE, in consideration of the premises and the
agreements 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:
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ARTICLE I
THE MERGER
1.01. The Merger. Subject to the terms and conditions of
the Merger Agreements, Investors will be merged with and into Sub, which will
be the surviving corporation, in accordance with and with the effect provided
in the MBCA and the DGCL.
1.02. Effective Time of the Merger. Subject to the
provisions of the Merger Agreements, (a) articles of merger (the "Articles of
Merger") shall be duly prepared and executed by Sub and Investors and
thereafter delivered to the Secretary of State of the State of Minnesota for
filing, as provided in the MBCA, as soon as practicable on or after the Closing
Date (as defined in the Agreement) and (b) a certificate of merger (the
"Certificate of Merger") shall be duly prepared and executed by Sub and
Investors and thereafter delivered to the Secretary of State of the State of
Delaware for filing, as provided in the DGCL, as soon as practicable on or
after the Closing Date. The Merger shall become effective upon the filing of
the Articles of Merger with the Secretary of State of the State of Minnesota
and the Certificate of Merger with the Secretary of State of the State of
Delaware or at such time within two business days thereafter as is provided in
the Articles of Merger and the Certificate of Merger (the "Effective Time").
1.03. Effects of the Merger. (a) At the Effective Time,
(i) the separate existence of Investors shall cease and Investors shall be
merged with and into Sub as provided in Section 302A.651 of the MBCA and
Sections 251 and 252 of the DGCL (Sub and Investors are sometimes referred to
herein as the "Constituent Corporations" and Sub is sometimes referred to
herein as the "Surviving Corporation"), (ii) the Articles of Incorporation of
Sub in effect as of the Effective Time (the "Articles") shall be the Articles
of Incorporation of the Surviving Corporation, (iii) the By-laws of Sub in
effect as of the Effective Time (the "By-laws") shall be the By-laws of the
Surviving Corporation and (iv) the members of the Board of Directors and
committees thereof and the officers of Sub immediately prior to the Effective
Time shall be the members of the Board of Directors and committees thereof and
the officers of the Surviving Corporation, respectively.
(b) At and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of
a public as well as of a private nature, and be subject to all the
restrictions, disabilities and duties of each of the Constituent Corporations;
and all and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed and all
debts due to either of the Constituent Corporations on whatever account, as
well as for stock subscriptions and all other things in action or belonging to
each of the Constituent Corporations, shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers and franchises, and
all and every other interest shall be thereafter as effectually the property of
the Surviving Corporation as they were of the Constituent Corporations, and the
title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth attach
to the Surviving Corporation, and may be enforced against it to the same extent
as if said debts and liabilities had been incurred by it. Any action or
proceeding, whether civil, criminal or administrative, pending by or against
either Constituent Corporation shall be
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<PAGE> 190
prosecuted as if the Merger had not taken place, and the Surviving Corporation
may be substituted as a party in such action or proceeding in place of any
Constituent Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
2.01. Effect on Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holder of any
shares of Investors Common Stock or Investors Preferred Stock, but subject to
the provisions of Section 262 of the DGCL with respect to the rights of
dissenting holders of Investors Preferred Stock:
(a) Conversion of Investors Common Stock. Subject to
adjustment pursuant to Section 2.01(e) hereof and Section 2.05 of the
Agreement, each then issued and outstanding share of Investors Common Stock
shall be converted into the right to receive 0.8676 fully paid and
nonassessable shares of common stock, $1.25 par value, of Firstar ("Firstar
Common Stock"), including with each such share one-half of one Firstar
Preferred Share Purchase Right ("Right") issued pursuant to the Rights
Agreement dated as of January 20, 1989, between Firstar and Firstar Trust
Company, as Rights Agent (the "Rights Agreement"). Prior to the Distribution
Date (as defined in the Rights Agreement), all references in this Plan of
Merger to the Firstar Common Stock to be received pursuant to the Merger shall
be deemed to include the Rights.
(b) Conversion of Investors Preferred Stock. Each then
issued and outstanding share of Investors Preferred Stock shall be converted
into the right to receive $27.50 plus accumulated and unpaid dividends on such
shares of Investors Preferred Stock to the Effective Time, payable in cash.
(c) Stock Held by Investors. Each then issued and
outstanding share of Investors Common Stock or Investors Preferred Stock owned
by Investors or any direct or indirect subsidiary of Investors (other than
shares held in a fiduciary capacity) and each share of Investors Common Stock
or Investors Preferred Stock issued and held in Investors' treasury will be
cancelled and retired.
(d) Cancellation of Shares. All shares of Investors
Common Stock and Investors Preferred Stock issued and outstanding immediately
prior to the Effective Time shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the shares of Firstar
Common Stock or cash, as the case may be, to be issued or paid in consideration
therefor upon the surrender of such certificate in accordance with the Plan of
Merger, without interest.
(e) If prior to the Effective Time Firstar shall declare
a stock dividend or distribution upon or subdivide, split up, reclassify or
combine its shares of Firstar Common Stock or declare a dividend or make a
distribution on Firstar Common Stock of any security convertible into Firstar
Common Stock or exercisable to purchase Firstar Common Stock (including,
without limitation, distribution of any Firstar Rights after a Distribution
Date), appropriate adjustment or adjustments will be made in the conversion
rate set forth in subsection (a).
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<PAGE> 191
(f) Each outstanding share of Investors Preferred Stock
as to which dissenters' rights have been asserted in accordance with the
procedures of the DGCL and not withdrawn shall be accorded the rights provided
by the DGCL and shall not be converted into or represent rights to receive the
cash hereunder unless and until the holder shall have failed to perfect or
effectively withdrawn or lost such dissenters' rights.
2.02. Exchange of Certificates. (a) Exchange Agent. As
of the Effective Time, Firstar shall deposit with Firstar Trust Company or such
other bank or trust company designated by Firstar (and reasonably acceptable to
Investors) (the "Exchange Agent") for the benefit of the holders of shares of
Investors Common Stock and Investors Preferred Stock, for exchange in
accordance with this Article II through the Exchange Agent, certificates
representing the shares of Firstar Common Stock and cash (such shares of
Firstar Common Stock, together with any dividends or distributions with respect
thereto, and such cash being hereinafter referred to as the "Exchange Fund")
issuable pursuant to Section 2.01 in exchange for shares of Investors Common
Stock and Investors Preferred Stock outstanding immediately prior to the
Effective Time. The Exchange Agent may invest the cash deposited with it in
such manner as Firstar directs. Any net profit resulting from, or interest or
income produced by, such investment shall be payable to the Surviving
Corporation. Firstar shall replace any monies lost through any investment made
at its direction pursuant to this Section 2.02(a). To the extent Firstar owns
shares of Firstar Common Stock as treasury stock, such shares may be deposited
into the Exchange Fund.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of Investors Common Stock and
Investors Preferred Stock (the "Certificates") whose shares were converted into
the right to receive shares of Firstar Common Stock or cash pursuant to Section
2.01 (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form
and have such other provisions as Firstar and Investors may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Firstar Common Stock or cash,
as the case may be. Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by Firstar,
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Firstar Common Stock, or the amount
of cash, as the case may be, which such holder has the right to receive
pursuant to the provisions of this Article II, and the Certificate so
surrendered shall forthwith be cancelled. Notwithstanding the foregoing,
certificates surrendered for exchange by any person deemed an "affiliate" of
Investors (as defined in Section 3.22 of the Agreement) shall not be exchanged
for the consideration deliverable pursuant to the provisions of this Article II
until Firstar has received a written agreement from such person as provided in
Section 5.06 of the Agreement. In the event of a transfer of ownership of
Investors Common Stock or Investors Preferred Stock which is not registered in
the transfer records of Investors, a certificate representing the proper number
of shares of Firstar Common Stock may be issued or the proper amount of cash
may be paid to a transferee if the Certificate representing such Investors
Common Stock or Investors Preferred Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.02, each Certificate shall be
deemed at any
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time after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Firstar Common Stock and cash
in lieu of any fractional shares of Firstar Common Stock, or cash, as the case
may be, as contemplated by this Section 2.02.
(c) Distributions with Respect to Unexchanged Shares.
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 shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Firstar Common Stock represented thereby, and no cash payment
in lieu of fractional shares of Firstar Common Stock shall be paid to any such
holder pursuant to Section 2.02(e), until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Firstar Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, (A) the amount of any cash payable in lieu of a
fractional share of Firstar Common Stock to which such holder is entitled
pursuant to Section 2.02(e) and (B) the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Firstar Common Stock, 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 such whole shares of Firstar
Common Stock.
(d) No Further Ownership Rights in Investors Stock. All
shares of Firstar Common Stock and all cash issued or paid upon the surrender
for exchange or payment of shares of Investors Common Stock or Investors
Preferred Stock in accordance with the terms hereof (including any cash paid
pursuant to Section 2.02(c) or 2.02(e)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Investors Common
Stock or Investors Preferred Stock, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been declared or
made by Investors on such shares of Investors Common Stock or Investors
Preferred Stock in accordance with the terms of the Agreement or prior to the
date hereof and which remain unpaid at the Effective Time, and there shall be
no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Investors Common Stock or Investors
Preferred Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation or Firstar for any reason, they shall be cancelled and exchanged as
provided in this Plan of Merger.
(e) No Fractional Shares. Notwithstanding any other
provision of this Plan of Merger to the contrary, neither certificates nor
scrip representing fractional shares of Firstar Common Stock shall be issued
upon the surrender for exchange of Certificates, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Firstar. Each holder of shares of Investors Common Stock who
would otherwise have been entitled to a fraction of a share of Firstar Common
Stock shall receive in lieu thereof cash (without interest) in an amount
determined by multiplying the fractional share interest to which such holder
would otherwise be entitled by the closing price per share of Firstar Common
Stock at the Effective Time on the New York Stock Exchange Composite
Transaction Tape. From time to time at the request of the Exchange Agent after
the determination of amounts of
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<PAGE> 193
cash to be paid to holders of Investors Common Stock in lieu of any fractional
share interests, Firstar shall make available such amounts to the Exchange
Agent.
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the stockholders of Investors for
six months after the Effective Time shall be delivered to Firstar, upon demand,
and any stockholders of Investors who have not theretofore complied with this
Section 2.02 shall thereafter look only to Firstar for payment of their claim
for Firstar Common Stock or cash, including cash in lieu of fractional shares
of Firstar Common Stock and any dividends or distributions with respect to
Firstar Common Stock.
(g) No Liability. None of Firstar, Sub and Investors
shall be liable to any holder of shares of Investors Common Stock or Investors
Preferred Stock or Firstar Common Stock, as the case may be, for such shares
(or dividends or distributions with respect thereto) or cash from the Exchange
Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) Withholding Rights. Firstar and Sub shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to the Agreements to any former holder of shares of Investors Common
Stock or Investors Preferred Stock such amounts as Firstar or Sub is required
to deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Firstar or Sub,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the former holder of the shares of Investors Common Stock
or Investors Preferred Stock in respect of which such deduction and withholding
was made by Firstar or Sub.
2.03. Effect on Common Stock of Sub. At the Effective
Time, the shares of Sub Common Stock validly issued and outstanding immediately
prior to the Effective Time will continue to evidence 1,000 shares of common
stock, $1.00 par value, of the Surviving Corporation so that all shares of
capital stock of the Surviving Corporation will continue to be owned by
Firstar. The outstanding certificates representing shares of Sub Common Stock
will, after the Effective Time, continue to represent the same number of shares
of the Surviving Corporation.
ARTICLE III
CONDITIONS; TERMINATION; AMENDMENT
3.01. Conditions to the Merger. Consummation of the
Merger is conditional upon the fulfillment or waiver of the conditions
precedent set forth in Article VIII of the Agreement.
3.02. Termination. This Plan of Merger may be terminated
and the Merger abandoned by mutual consent of the respective Boards of
Directors of Investors and Sub at any time prior to the Effective Time. If the
Agreement is terminated in accordance with Article X thereof, then this Plan of
Merger will terminate simultaneously and the Merger will be abandoned without
further action by Investors or Sub.
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3.03. Amendment. Subject to the next following sentence,
this Plan of Merger may be amended by the parties hereto by action taken or
authorized by their respective Boards of Directors (or, in the case of Firstar,
the Interstate Banking and Acquisitions Committee of its Board of Directors) at
any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Investors or of Sub, but after any such
approval by the stockholders of Investors, no amendment shall be made which has
any of the effects described in Section 251(d) of the DGCL. This Plan of
Merger may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
3.04. Extension; Waiver. At any time prior to the
Effective Time, Firstar and Sub, on the one hand, and Investors, on the other
hand, by action taken or authorized by their respective Board of Directors (or,
in the case of Firstar, the Interstate Banking and Acquisitions Committee of
its Board of Directors), may, to the extent legally allowed, (i) extend the
time for the performance of any of the obligations or other acts of the other
party hereto and (ii) waive compliance by the other with any of the agreements
or conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument on behalf of such party.
ARTICLE IV
GENERAL PROVISIONS
4.01. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (with receipt confirmed) or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Firstar and/or Sub, to
Firstar Corporation
Attention: Jon H. Stowe,
Executive Vice President
777 East Wisconsin Avenue
Milwaukee, WI 53202
Telecopy: (414) 765-4349
with a copy to:
Firstar Corporation
Attention: Howard H. Hopwood III,
Senior Vice President and General Counsel
777 East Wisconsin Avenue
Milwaukee, WI 53202
Telecopy: (414) 765-6111
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<PAGE> 195
(b) if to Investors, to
Investors Bank Corp.
Attention: James M. Burkholder
President and Chief Executive Officer
200 East Lake Street
Wayzata, Minnesota 55391
Telecopy: (612) 475-8727
with a copy to:
Dorsey & Whitney
Attention: Thomas O. Martin, Esq.
220 South 6th Street
Minneapolis, Minnesota 55402-1498
Telecopy: (612) 340-2860
4.02. Interpretation. When a reference is made in this
Plan of Merger to Sections, such reference shall be to a Section of this Plan
of Merger unless otherwise indicated. The headings contained in this Plan of
Merger are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Plan of Merger.
4.03. Counterparts. This Plan of Merger may be executed
in two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
4.04. Governing Law. This Plan of Merger shall be
governed and construed in accordance with the laws of the State of Wisconsin,
except as the MBCA and DGCL are expressly applicable to the Merger.
IN WITNESS WHEREOF, Sub, Investors and Firstar have caused
this Plan of Merger to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
FIRSTAR CORPORATION
By: /s/ John A. Kielich
------------------------------
Its: First Vice President
Attest:
/s/ William J. Schulz
-----------------------------
Its: First Vice President and
Secretary
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<PAGE> 196
FIRSTAR CORPORATION OF MINNESOTA
By: /s/ John A. Kielich
------------------------
Its: Vice President
Attest:
/s/ Joan M. Fagan
------------------------
Its: Assistant Secretary
INVESTORS BANK CORP.
By: /s/ John G. Lohman, Jr.
----------------------------------
Its: Executive Vice President
Attest:
/s/ Daniel A. Arrigoni
-----------------------------
Its: Executive Vice President
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<PAGE> 197
EXHIBIT 10.01
<TABLE>
<CAPTION>
INDEX
INSTITUTION WEIGHTING
----------- ---------
<S> <C>
Banc One Corporation 12.59815%
Norwest Corporation 10.38056%
KeyCorp 8.03616%
NBD Bancorp, Inc. 5.22383%
National City Corporation 4.93813%
Huntington Bancshares Inc. 4.26593%
Comerica Incorporated 3.89681%
First Bank System, Inc. 3.75595%
Boatmen's Bancshares, Inc. 3.44556%
U.S. Bancorp 3.28950%
Marshall & Ilsley Corporation 3.13368%
First Chicago Corporation 2.85252%
SouthTrust Corporation 2.63009%
State Street Boston Corp. 2.51473%
Fifth Third Bancorp 2.03344%
First of America Bank Corp. 1.94685%
AmSouth Bancorporation 1.93871%
Meridian Bancorp, Inc. 1.90182%
Signet Banking Corporation 1.87102%
Northern Trust Corporation 1.77871%
Midlantic Corporation 1.72427%
UJB Financial Corp. 1.71271%
First Security Corporation 1.61802%
Mercantile Bancorporation Inc. 1.41962%
Bancorp Hawaii, Inc. 1.39491%
Regions Financial Corp. 1.37926%
Old Kent Financial Corporation 1.33621%
Crestar Financial Corporation 1.24096%
Union Bank 1.16680%
Integra Financial Corp. 1.10311%
BanPonce Corporation 1.07868%
First Tennessee National Corp. 1.04879%
BayBanks, Inc. 0.61971%
Michigan National Corporation 0.50318%
First Empire State Corporation 0.22159%
</TABLE>
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<PAGE> 198
APPENDIX C
PIPER JAFFRAY COMPANIES INC.
222 South Ninth Street
Minneapolis, MN 55402-3804
August 20, 1994
The Board of Directors
Investors Bank Corp.
200 E. Lake Street
Wayzata, Minnesota 55391
Members of the Board:
In connection with the proposed merger transaction (the "Merger") pursuant to
an Agreement and Plan of Reorganization to be dated August 21, 1994 (the
"Agreement"), whereby Investors Bank Corp. ("Investors") shall be merged with
and into Firstar Corporation of Minnesota ("Firstar Minnesota"), a wholly-owned
subsidiary of Firstar Corporation ("Firstar"), you have requested our opinion
as to the fairness, from a financial point of view, to the holders (the
"Shareholders") of Investors' common stock of the consideration to be received
in the Merger. Pursuant to the Agreement, the consideration to be received by
the Shareholders will consist of Firstar common stock to be issued in a
transaction which we have been advised by management of the parties will be
accounted for as a pooling of interests transaction.
Piper Jaffray Inc. ("Piper Jaffray"), as a customary part of its investment
banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, underwriting and
secondary distributions of securities, private placements and valuations for
estate, corporate and other purposes. We make a market in Investors common
stock and preferred stock and provide research coverage on Investors. We acted
as manager of a public offering of Investors subordinated capital notes in 1989
and a public exchange offering of Investors preferred stock in 1991 and as a
co-manager of a public offering of Investors subordinated notes in 1992. For
our services in rendering this opinion, Investors will pay Piper Jaffray a fee
which is not contingent upon the consummation of the Merger. Investors will
also indemnify Piper Jaffray against certain liabilities in connection with its
engagement.
In arriving at our opinion, we have undertaken such reviews, analyses and
inquiries as we deemed necessary and appropriate under the circumstances.
Among other things, we have reviewed a draft of the Agreement dated August 19,
1994, audited consolidated financial statements for Investors for the five
years ended December 31, 1993, unaudited consolidated financial statements for
Investors for the three and six month periods ended March 31 and June 30, 1994,
respectively, audited consolidated financial statements for Firstar for the
five years ended December 31, 1992, unaudited consolidated financial statements
for Firstar for the three and six month periods ended March 31 and June 30,
1994, respectively, certain internal financial planning information of
Investors prepared by its management, certain publicly available information
relative to Investors and Firstar, certain other financial and securities data
of Investors and Firstar, certain financial and securities data of companies
deemed similar
<PAGE> 199
The Board of Directors
August 20, 1994
Page 2
to Investors and Firstar or representative of the business sectors in which
they operate, and the financial terms, to the extent publicly available, of
certain merger transactions. We have had discussions regarding the financial
condition, current operating results, business outlook and prospects for
Investors and Firstar with members of their respective managements.
We have relied upon and assumed the accuracy, completeness and fairness of the
financial statements and other information provided by Investors and Firstar or
otherwise made available to us and have not attempted independently to verify
such information. We have further relied upon the assurances of Investors and
Firstar management that the information provided has been prepared on a
reasonable basis and, with respect to financial planning data, reflects the
best currently available estimates, and that Investors and Firstar management
are not aware of any information or facts that would make the information
provided to us incomplete or misleading.
In arriving at our opinion, we have not performed any appraisals or valuations
of specific assets of Investors and Firstar, and we express no opinion
regarding the liquidation value of any entity. We have not been authorized by
the Board of Directors of Investors to solicit, and did not solicit, other
entities for purposes of a business combination with Investors.
This opinion is based upon the information available to us and facts and
circumstances as they exist and are subject to evaluation on the date hereof.
We are not expressing any opinion herein as to the prices at which shares of
Investors common stock or Firstar common stock have traded or at which such
shares might trade at any future time.
This opinion is for the benefit of the Board of Directors of Investors and
shall not be relied upon by others, and shall not be published or otherwise
used, nor shall any public references to us be made, without our written
consent. However, notwithstanding the foregoing, Piper Jaffray does consent to
inclusion of the opinion in the proxy statement/prospectus to be issued in
connection with the Special Meeting of Shareholders of Investors. This opinion
is not intended to be and does not constitute a recommendation to any
Shareholder as to how such Shareholder should vote with respect to the Merger.
Based upon and subject to the foregoing and based upon such other factors as we
consider relevant, it is our opinion that the consideration to be received by
the Shareholders pursuant to the Agreement is fair, from a financial point of
view, to the Shareholders as of the date hereof.
Sincerely,
PIPER JAFFRAY INC.
<PAGE> 200
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 stockholders 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 stockholders 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).
II-1
<PAGE> 201
Item 21. Exhibits and Financial Statement Schedules.
(a) The following exhibits have been filed (except where
otherwise indicated) as part of this Registration Statement:
Exhibit No. Exhibit
2(a) Agreement and Plan of Reorganization dated as of August 21,
1994, among Firstar Corporation, Firstar Corporation of
Minnesota and Investors Bank Corp. (included as Appendix B of
the Proxy Statement- Prospectus; Registrant agrees to furnish
supplementally a copy of any omitted schedule to the
Commission upon request)
2(b) Plan of Merger dated as of August 21, 1994, between Investors
Bank Corp. and Firstar Corporation of Minnesota and joined in
by Firstar Corporation for certain limited purposes (included
as Exhibit A to Appendix B of the Proxy Statement-Prospectus)
2(c) Merger Agreement dated as of August 21, 1994, between Firstar
Bank of Minnesota, N.A. and Investors Savings Bank, F.S.B.
2(d) Form of Voting Agreement between Firstar Corporation and
directors and executive officers of Investors Bank Corp.,
dated as of August 21, 1994
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)
4(d) Warrant Agreement dated October 15, 1991 between Investors
Bank Corp. and Norwest Bank Minnesota, National Association
(Exhibit 4.7 to Registration No. 33-42684; incorporated herein
by reference)
4(e) Form of Supplemental Warrant Agreement between Firstar
Corporation and Norwest Bank Minnesota, National Association
(to be filed by amendment)
5 Opinion of Howard H. Hopwood III, Esq.
8 Tax Opinion of Foley & Lardner (to be filed by amendment)
23(a) Consent of KPMG Peat Marwick LLP addressed to Board of
Directors of Investors Bank Corp.
23(b) Consent of KPMG Peat Marwick LLP addressed to Board of
Directors of Firstar Corporation
II-2
<PAGE> 202
23(c) Consent of Howard H. Hopwood III, Esq. (included in Exhibit 5)
23(d) Consent of Foley & Lardner (included in Exhibit 8)
23(e) Consent of Piper Jaffray Inc. (to be filed by amendment)
24 Powers of Attorney
99 Form of Proxy for the Investors Special Meeting of
Stockholders
(b) No financial statement schedules are required to be
filed with regard to Firstar or Investors.
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 annual 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 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
II-3
<PAGE> 203
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.
II-4
<PAGE> 204
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 12, 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 January 12, 1995
---------------------------------- Executive Officer and
Roger L. Fitzsimonds Director
/s/ John A. Becker * President, Chief Operating January 12, 1995
--------------------------------- Officer and Director
John A. Becker
/s/ William H. Risch * Senior Vice President-Finance January 12, 1995
--------------------------------- and Treasurer
William H. Risch
/s/ Michael E. Batten * Director January 12, 1995
---------------------------------
Michael E. Batten
Director
----------------------------------
Robert C. Buchanan
/s/ George M. Chester, Jr. * Director January 12, 1995
---------------------------------
George M. Chester, Jr.
/s/ Roger H. Derusha * Director January 12, 1995
---------------------------------
Roger H. Derusha
/s/ James L. Forbes * Director January 12, 1995
---------------------------------
James L. Forbes
/s/ Holmes Foster * Director January 12, 1995
---------------------------------
Holmes Foster
/s/ Joseph F. Heil, Jr. * Director January 12, 1995
---------------------------------
Joseph F. Heil, Jr.
/s/ John H. Hendee, Jr. * Director January 12, 1995
---------------------------------
John H. Hendee, Jr.
</TABLE>
II-5
<PAGE> 205
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jerry M. Hiegel * Director January 12, 1995
---------------------------------
Jerry M. Hiegel
/s/ Joseph F. Hladky, III * Director January 12, 1995
---------------------------------
Joseph F. Hladky, III
/s/ James H. Keyes * Director January 12, 1995
---------------------------------
James H. Keyes
/s/ Sheldon B. Lubar * Director January 12, 1995
---------------------------------
Sheldon B. Lubar
/s/ Daniel F. McKeithan, Jr. * Director January 12, 1995
---------------------------------
Daniel F. McKeithan, Jr.
/s/ George W. Mead, II * Director January 12, 1995
---------------------------------
George W. Mead, II
/s/ Guy A. Osborn * Director January 12, 1995
---------------------------------
Guy A. Osborn
Director
----------------------------------
Judith D. Pyle
/s/ Clifford V. Smith, Jr. * Director January 12, 1995
---------------------------------
Clifford V. Smith, Jr.
/s/ William W. Wirtz * Director January 12, 1995
---------------------------------
William W. Wirtz
</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.
II-6
<PAGE> 206
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit No. Exhibit Page Number
- ----------- ------- -----------
<S> <C> <C>
2(a) Agreement and Plan of Reorganization dated as of August 21, 1994,
among Firstar Corporation, Firstar Corporation of Minnesota and
Investors Bank Corp. (included as Appendix B of the Proxy Statement-
Prospectus; Registrant agrees to furnish supplementally a copy of any
omitted schedule to the Commission upon request)
2(b) Plan of Merger dated as of August 21, 1994, between Investors Bank
Corp. and Firstar Corporation of Minnesota and joined in by Firstar
Corporation for certain limited purposes (included as Exhibit A to
Appendix B of the Proxy Statement-Prospectus)
2(c) Merger Agreement dated as of August 21, 1994, between Firstar Bank of
Minnesota, N.A. and Investors Savings Bank, F.S.B.
2(d) Form of Voting Agreement between Firstar Corporation and directors and
executive officers of Investors Bank Corp., dated as of August 21,
1994
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)
4(d) Warrant Agreement dated October 15, 1991 between Investors Bank Corp.
and Norwest Bank Minnesota, National Association (Exhibit 4.7 to
Registration No. 33-42684; incorporated herein by reference)
4(e) Form of Supplemental Warrant Agreement between Firstar Corporation and
Norwest Bank Minnesota, National Association (to be filed by
amendment)
5 Opinion of Howard H. Hopwood III, Esq.
8 Tax Opinion of Foley & Lardner (to be filed by amendment)
23(a) Consent of KPMG Peat Marwick LLP addressed to Board of Directors of
Investors Bank Corp.
</TABLE>
<PAGE> 207
<TABLE>
<CAPTION>
Sequential
Exhibit No. Exhibit Page Number
- ----------- ------- -----------
<S> <C> <C>
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 Exhibit 5)
23(d) Consent of Foley & Lardner (included in Exhibit 8)
23(e) Consent of Piper Jaffray Inc. (to be filed by amendment)
24 Powers of Attorney
99 Form of Proxy for the Investors Special Meeting of Stockholders
</TABLE>
<PAGE> 1
EXHIBIT 2(C)
MERGER AGREEMENT
INVESTORS SAVINGS BANK, F.S.B.
WITH AND INTO
FIRSTAR BANK OF MINNESOTA, NATIONAL ASSOCIATION
MERGER AGREEMENT ("Bank Merger Agreement") dated as of August 21, 1994,
adopted and made by and between Firstar Bank of Minnesota, National Association
("Firstar Bank"), a national banking association having its principal office at
Bloomington, Minnesota, acting pursuant to resolutions adopted by the vote of a
majority of its board of directors in accordance with applicable provisions of
12 C.F.R. Section 5.33, and Investors Savings Bank, F.S.B. ("Investors FSB"),
a federal savings bank having its principal office at Wayzata, Minnesota,
acting pursuant to resolutions adopted by the vote of two-thirds of its entire
board of directors in accordance with applicable provisions of 12 C.F.R.
Section 552.13.
W I T N E S S E T H
WHEREAS, Firstar Bank is a national banking association organized and
existing under the laws of the United States, the authorized capital stock of
which consists of 7,146,000 shares of common stock, par value of $5.00 per
share ("Firstar Bank Common Stock"), of which at the date hereof 7,146,000
shares are issued and outstanding; and
WHEREAS, Investors FSB is a federal savings bank organized and existing
under the laws of the United States, the authorized capital stock of which
consists of 200,000 shares of common stock, par value $2.50 per share
("Investors FSB Common Stock"), all of which at the date hereof are issued and
outstanding; and
WHEREAS, Firstar Bank's parent corporations, Firstar Corporation of
Minnesota and Firstar Corporation, and Investors FSB's parent corporation,
Investors Bank Corp., have entered into an Agreement and Plan of Reorganization
("Reorganization Agreement") that contemplates the merger of Investors FSB with
and into Firstar Bank; and
WHEREAS, the respective Boards of Directors of Investors FSB and Firstar
Bank deem the merger of Investors FSB with and into Firstar Bank, under and
pursuant to the terms and conditions herein set forth or referred to, desirable
and in the best interests of the respective institutions and their respective
shareholders, and the respective Boards of Directors of Firstar Bank and
Investors FSB have adopted resolutions approving this Bank Merger Agreement and
each of the Boards of Directors of Firstar Bank and Investors FSB has directed
that this Bank Merger Agreement be submitted to their respective shareholders
for approval; and
WHEREAS, approval of this Bank Merger Agreement requires the affirmative
vote of the holders of at least two-thirds of the outstanding shares of
Investors FSB Common Stock and the holders of at least two-thirds of the
outstanding shares of the Firstar Bank Common Stock; and
<PAGE> 2
WHEREAS, the sole shareholder of Firstar Bank has approved this Bank Merger
Agreement; and
WHEREAS, the sole shareholder of Investors FSB has approved this Bank Merger
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and intending to be legally bond hereby, the
parties hereto do hereby agree as follows:
ARTICLE I
BANK MERGER
Subject to the terms and conditions of this Bank Merger Agreement, on the
Effective Date (as hereinafter defined), Investors FSB shall be merged with and
into Firstar Bank pursuant to the provisions of, and with the effect provided
in, 12 U.S.C. Section 215c, 12 U.S.C. Section 1467a(s), 12 C.F.R. Section
5.33 and 12 C.F.R. Section 552.13 (said transaction being hereinafter referred
to as the "Bank Merger"). On the Effective Date, the separate existence of
Investors FSB shall cease and Firstar Bank, as the surviving entity, shall
continue its existence under the name "Firstar Bank of Minnesota, National
Association" unaffected and unimpaired by the Bank Merger, and shall be liable
for all of the liabilities of Investors FSB existing at the Effective Date,
including without limitation liabilities with respect to savings accounts of
Investors FSB (Firstar as existing on and after the Effective Date being
hereinafter sometimes referred to as the "Surviving Bank"). The main office of
Firstar Bank at Bloomington, Minnesota shall be the main office of the Surviving
Bank and the branch offices thereof will be located at the locations set forth
on the attached Schedule A.
ARTICLE II
ARTICLES OF ASSOCIATION AND BY-LAWS
The Articles of Association and the By-Laws of Firstar Bank in effect
immediately prior to the Effective Date shall be the Articles of Association
and the By-Laws of the Surviving Bank, in each case until amended in accordance
with applicable law.
ARTICLE III
BOARD OF DIRECTORS
On the Effective Date, the Board of Directors of the Surviving Bank shall
consist of those persons named in the attached Schedule B.
-2-
<PAGE> 3
ARTICLE IV
CAPITAL
The shares of capital stock of Firstar Bank issued and outstanding
immediately prior to the Effective Date shall, on the Effective Date, continue
to be issued and outstanding.
ARTICLE V
CANCELLATION OF INVESTORS FSB SHARES
1. On the Effective Date, each share of Investors FSB Common Stock
outstanding immediately prior to the Effective Date shall by virtue of the Bank
Merger be canceled and no cash, stock or other property shall be delivered in
exchange therefor.
2. On the Effective Date, the stock transfer books of Investors FSB shall
be closed and no transfer of Investors FSB Common Stock shall thereafter be
made or recognized.
ARTICLE VI
EFFECTIVE DATE OF THE BANK MERGER
The Bank Merger shall be effective at the later of the time and on the date
upon which the Bank Merger is permitted to occur by the Office of the
Comptroller of the Currency or at the time and on the date upon which the Bank
Merger is permitted to occur by the Office of Thrift Supervision (such date and
time being herein referred to as the "Effective Date").
ARTICLE VII
FURTHER ASSURANCES
If at any time the Surviving Bank shall consider or be advised that any
further assignments, conveyances or assurances are necessary or desirable to
vest, perfect or confirm in the Surviving Bank title to any property or rights
of Investors FSB, or otherwise carry out the provisions hereof, the proper
officers and directors of Investors FSB, as of the Effective Date, and
thereafter the officers of the Surviving Bank acting on behalf of Investors
FSB, shall execute and deliver any and all proper assignments, conveyances and
assurances, and do all things necessary or desirable to vest, perfect or
confirm title to such property or rights in the Surviving Bank and otherwise
carry out the provisions hereof.
ARTICLE VIII
CONDITIONS PRECEDENT
The obligations of Investors FSB and Firstar Bank to effect the Bank Merger
as herein provided shall be subject to satisfaction, unless duly waived, of the
conditions set forth in the Reorganization Agreement and the prior
effectiveness of the merger between Firstar Corporation of Minnesota and
Investors Bank Corp. contemplated thereby.
-3-
<PAGE> 4
ARTICLE IX
TERMINATION
Anything contained in this Bank Merger Agreement to the contrary
notwithstanding, and notwithstanding adoption hereof by the shareholders of
Investors FSB or Firstar Bank, this Bank Merger Agreement may be terminated and
the Bank Merger abandoned as provided in the Reorganization Agreement. In the
event the Reorganization Agreement is terminated pursuant to the terms thereof,
this Bank Merger Agreement shall become void and have no effect.
ARTICLE X
MISCELLANEOUS
1. This Bank Merger Agreement may be amended or supplemented at any time by
mutual agreement of Investors FSB and Firstar Bank. Any such amendment or
supplement must be in writing and approved by their respective Boards of
Directors.
2. The headings of the several Articles herein are inserted for convenience
of reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Bank Merger Agreement.
3. This Bank Merger Agreement may be executed in several counterparts, each
of which shall be deemed the original, but all of which together shall
constitute one and the same instrument.
4. This Bank Merger Agreement shall be governed by and construed in
accordance with the laws of Minnesota, except to the extent federal law may be
applicable.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Bank Merger Agreement to be executed in counterparts
by their duly authorized officers and their corporate seals to be hereunto
affixed and attested by their officers thereunto duly authorized, all as of the
day and year first above written.
ATTEST INVESTORS SAVINGS BANK, F.S.B.
/s/ Daniel A. Arrigoni By: /s/ John G. Lohmann, Jr.
- ----------------------------------- -----------------------------
Name: Daniel A. Arrigoni Name: John G. Lohmann, Jr.
Title: Executive Vice President Title: Executive Vice
President and Secretary
(SEAL)
-4-
<PAGE> 5
ATTEST FIRSTAR BANK OF MINNESOTA,
NATIONAL ASSOCIATION
/s/ Jeffrey S. Smith By: /s/ Richard W. Schoenke
- ----------------------------------- -----------------------------
Name: Jeffrey S. Smith Name: Richard W. Schoenke
Title: First Vice President Title: President and CEO
-5-
<PAGE> 1
EXHIBIT 2(D)
FORM OF
VOTING AGREEMENT
THIS VOTING AGREEMENT dated as of August 21, 1994 (this "Agreement"), is
entered into by and between Firstar Corporation ("Firstar"), a Wisconsin
corporation, and ___________________ ("Stockholder").
W I T N E S S E T H :
WHEREAS, as of the date hereof, Stockholder is the owner of certain
shares of the common stock of Investors Bank Corp. ("Investors"), $.01 par
value (Investors Common Stock");
WHEREAS, Firstar is contemplating the acquisition of Investors by means
of a merger (the "Merger") of Investors with and into Firstar Corporation of
Minnesota ("Sub"), a Minnesota corporation and a wholly-owned subsidiary of
Firstar, pursuant to an Agreement and Plan of Reorganization (the
"Reorganization Agreement") and a Plan of Merger, each dated of even date
herewith (together, the "Merger Agreements");
WHEREAS, Firstar is unwilling to expend the substantial time, effort and
expense necessary to implement the proposed acquisition of Investors, including
applying for and obtaining necessary approvals of federal banking and savings
and loan institution authorities, unless Stockholder enters into this Agreement
with Firstar; and
WHEREAS, Stockholder believes it is in his best interest as well as the
best interest of Investors 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 enter into the
Merger Agreements, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Definitions. All capitalized terms not otherwise defined herein
are as defined in the Reorganization Agreement.
2. Representations and Warranties. Stockholder represents and
warrants that as of the date hereof, Stockholder (a) owns beneficially the
number of shares of Investors Common Stock set forth on the signature page
hereto, all of which shares are free and clear of all liens, pledges, security
interests, claims, encumbrances, options and agreements to sell or otherwise
transfer, except as disclosed in the Investors Disclosure Letter or pledges
pursuant to margin accounts; (b) has the sole voting power with respect to such
shares; and (c) has the right to acquire (i) the number of shares of Investors
Common Stock pursuant to Investors Stock Options set forth on the signature page
hereto, (ii) the number of shares of Investors Common Stock pursuant to
Investors Restricted Stock Award Agreements between him and Investors set
<PAGE> 2
forth on the signature page hereto, and (iii) the number of shares of Investors
Common Stock pursuant to Investors Warrants he holds set forth on the signature
page hereto.
3. Voting Agreement. Stockholder shall vote all the shares of
Investors Common Stock he now owns or hereafter acquires (the "Subject Shares")
in favor of the Merger at the meeting of stockholders of Investors called for
the purpose of approving 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
Investors by, or merger or consolidation of Investors with, any party other than
Firstar, Sub or their affiliates, prior to the termination of this Agreement.
Stockholder shall not sell, assign, pledge (or materially increase borrowings
under any existing pledge) or otherwise transfer the Subject Shares prior to the
termination of this Agreement unless adequate provision is made to assure that
any Subject Shares remain subject to this Agreement. Stockholder authorizes
Firstar to deliver a copy of this Agreement to Investors to provide notice to
Investors of the foregoing restriction on transfer. At Firstar's request,
Stockholder shall use his best efforts to cause the meeting of stockholders of
Investors for the purpose of approving the Merger to be duly called and held.
4. 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 Investors Common Stock. All
rights to and ownership and economic benefits of the Subject Shares shall remain
with 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 Investors or exercise any power or authority to direct
Stockholder in the voting of any of the shares of Investors Common Stock, or the
performance of his duties or responsibilities as a stockholder of Investors,
except as otherwise expressly provided herein.
5. Evaluation of Investment. Stockholder, by reason of his knowledge
and experience in financial and business matters and through serving as an
officer or director of a financial institution, believes himself capable of
evaluating the merits and risks of the investment in common stock of Firstar,
$1.25 par value ("Firstar Common Stock"), contemplated by the Merger Agreements.
6. Documents Delivered. Stockholder acknowledges receipt of copies of
the following documents:
a. Merger Agreements and all exhibits thereto;
b. Firstar's 1993 Annual Report (including Annual Report on Form
10-K for the year ended December 31, 1993);
c. Notice of 1994 Annual Meeting of Stockholders and Proxy Statement
dated April 21, 1994 of Firstar;
d. Firstar's Quarterly Reports on Form 10-Q for the periods ended
March 31 and June 30, 1994.
-2-
<PAGE> 3
7. 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 Investors, Stockholder and Firstar.
8. 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 Investors and its stockholders, concerning the acquisition,
disposition or control of the stock of Investors, except the Investors
Restricted Stock Award Agreements, the agreements relating to Investors Stock
Options and the Investors Warrants.
9. 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.
10. 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.
11. Governing Law. The validity, construction, enforcement and effect
of this Agreement shall be governed by the internal laws of the State of
Minnesota, except that the Delaware General Corporation Law shall apply as to
matters arising under such law.
12. 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.
13. Successors. This Agreement shall be binding upon and inure to the
benefit of Investors 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.
14. Termination. This Agreement shall terminate upon the earliest to
occur of (1) the Effective Time or (2) the termination of the Reorganization
Agreement pursuant to its terms.
-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.
FIRSTAR CORPORATION
Attested by: _____________________ By: ______________________
Its: Its:
STOCKHOLDER
__________________________________ __________________________
Shares of Investors Common [Name]
Stock owned
Shares of Investors Common Stock that __________________________
Stockholder has a right to acquire: [Spouse]
___________________________________
Pursuant to Investors Stock Options
___________________________________
Pursuant to Investors Restricted
Stock Award Agreements
___________________________________
Pursuant to Investors Warrants
-4-
<PAGE> 1
EXHIBIT 5
January 11, 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 Minnesota ("FCM"), and
Investors Bank Corp., 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 Colonial 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
<PAGE> 2
Firstar Corporation
November 21, 1994
Page 2
"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,
/s/ Howard H. Hopwood III
Howard H. Hopwood III
Senior Vice President
and General Counsel
-2-
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Investors Bank Corp.:
We consent to incorporation by reference and the inclusion in the Registration
Statement on Form S-4 of Firstar Corporation of our report dated January 27,
1994, relating to the consolidated balance sheets of Investors Bank Corp. and
subsidiary as of December 31, 1993 and 1992, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1993, which report appears in
the December 31, 1993 annual report on Form 10-K of Investors Bank Corp. and to
the reference to our firm under the heading "Experts" in the Proxy
Statement-Prospectus. Our report refers to a change in the method of
accounting for income taxes.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 11, 1995
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Firstar Corporation:
We consent to incorporation by reference in the Registration Statement on Form
S-4 of Firstar Corporation of our report dated January 20, 1994, relating to
the consolidated balance sheets of Firstar Corporation and subsidiaries as of
December 31, 1993 and 1992, 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, which report appears in the December 31, 1993
annual report on Form 10-K of Firstar Corporation and to the reference to our
firm under the heading "Experts" in the Proxy Statement-Prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
January 11, 1995
<PAGE> 1
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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
----------------------------------
<PAGE> 2
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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
----------------------------------
<PAGE> 3
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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
----------------------------------
<PAGE> 4
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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.
----------------------------------
<PAGE> 5
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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
----------------------------------
<PAGE> 6
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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
----------------------------------
<PAGE> 7
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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
----------------------------------
<PAGE> 8
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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.
----------------------------------
<PAGE> 9
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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.
----------------------------------
<PAGE> 10
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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
----------------------------------
<PAGE> 11
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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, III
----------------------------------
<PAGE> 12
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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
----------------------------------
<PAGE> 13
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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
----------------------------------
<PAGE> 14
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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.
----------------------------------
<PAGE> 15
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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
----------------------------------
<PAGE> 16
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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
----------------------------------
<PAGE> 17
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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.
----------------------------------
<PAGE> 18
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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
----------------------------------
<PAGE> 19
EXHIBIT 24
INVESTORS BANK CORP.
POWER OF ATTORNEY WITH RESPECT TO
REGISTRATION STATEMENTS
COVERING SECURITIES 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 by Firstar Corporation (or a subsidiary
thereof) of Investors Bank 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/ Roger L. Fitzsimonds
----------------------------------
<PAGE> 1
EXHIBIT 99
[FRONT]
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
INVESTORS BANK CORP.
200 EAST LAKE STREET
WAYZATA, MINNESOTA 55391
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints __________________, _________________ and
_________________, 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, $.01 par value, of Investors Bank Corp. held of record
by the undersigned on ________ __, 1995 at the special meeting of stockholders
to be held on __________, 1995, or any adjournment thereof.
---------------------------------------------------------------------------
[BACK]
[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.
1. Proposal to approve and adopt an Agreement and Plan of Reorganization and
a Plan of Merger, each dated as of August 21, 1994, that provide for,
among other things, the merger of Investors Bank Corp. with and into
Firstar Corporation of Minnesota, a wholly owned subsidiary of Firstar
Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
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
