UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 30, 1998
1-2981
(Commission File Number)
_________________________
FIRSTAR CORPORATION
(Exact name of Registrant as specified in its charter)
WISCONSIN 39-0711710
(State of incorporation) (I.R.S. Employer
Identification Number)
777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
(Address of Registrant's principal executive office)
414-765-4321
(Registrant's telephone number)
<PAGE>
The Registrant hereby amends and restates the Registrant's Form 8-K, dated
June 30, 1998, as filed with the Commission on July 1, 1998.
ITEM 5. OTHER EVENTS
On June 30, 1998, Firstar Corporation, a Wisconsin corporation
("Firstar"), entered into an Agreement and Plan of Reorganization (the
"Merger Agreement") with and among Star Banc Corporation, an Ohio corporation
("Star Banc"), and Foxtrot (DE) Corporation, a Delaware corporation and a
newly-formed wholly-owned subsidiary of Firstar ("Foxtrot (DE)"), providing
for, among other things, the merger of Firstar with and into Foxtrot (DE) and
the merger of Star Banc with and into Foxtrot (DE). The joint press release
of Firstar and Star Banc announcing the Merger is filed as Exhibit 99.1 to
this Form 8-K/A. The Merger Agreement is filed as Exhibit 2 to this Form
8-K/A.
In connection with the execution of the Merger Agreement, on June 30,
1998, Firstar, as issuer, and Star Banc, as grantee, entered into a Stock
Option Agreement (the "Firstar Option Agreement"), providing for, among other
things, the grant of an option to Star Banc (the "Firstar Option") to
purchase, subject to the terms of the Firstar Option Agreement, up to
28,963,830 fully paid and non-assessable shares of Firstar's common stock,
par value $1.25 per share ("Firstar Common Stock"), at a price of $39 per
share, provided, however, that in no event shall the number of
shares of Firstar Common Stock for which the Firstar Option is exercisable
exceed 19.9% of Firstar's issued and outstanding shares of Firstar Common
Stock; and Star Banc, as issuer, and Firstar, as grantee, also entered into a
substantially identical Stock Option Agreement (the "Star Banc Option
Agreement" and, together with the Firstar Option Agreement, the "Option
Agreements"), providing for, among other things, the grant of an option to
Firstar (the "Star Banc Option") to purchase, subject to the terms of the
Star Banc Option Agreement, up to 19,060,005 fully paid non-assessable shares
of Star Banc's common stock, par value $5.00 per share ("Star Banc Common
Stock"), at a price of $64 per share, provided, however, that in no event
shall the number of shares of Star Banc Common Stock for which the Star Banc
Option is exercisable exceed 19.9% of Star Banc's issued and outstanding
shares of Star Banc Common Stock. The Firstar Option Agreement is filed as
Exhibit 10.1 to this Form 8-K/A. The Star Banc Option Agreement is filed as
Exhibit 10.2 to this Form 8-K/A.
In connection with the execution of the Merger Agreement, on June 30,
1998, Firstar entered into an amendment (the "Rights Amendment") to the
Rights Agreement dated as of January 19, 1989, between Firstar and Firstar
Trust Company (formerly known as First Wisconsin Trust Company), as Rights
Agent (the "Rights Agreement"), to the effect that Star Banc and its
affiliates shall not become an Acquiring Person (as defined in the Rights
Agreement) by reason of the execution of the Merger Agreement or the
consummation of the Merger or the entering into, or exercise of, the Option
Agreements. The Rights Amendment is filed as Exhibit 10.3 to this Form 8-K/A.
The foregoing description of the Merger Agreement, the Option Agreements
and the Rights Amendment and the transactions contemplated thereby does not
purport to be complete and is qualified in its entirety by reference to the
respective agreements.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
Exhibit Title
Number
2 Agreement and Plan of Reorganization, dated as of June 30, 1998.
10.1 Firstar Option Agreement, dated as of June 30, 1998.
10.2 Star Banc Option Agreement, dated as of June 30, 1998.
10.3 First Amendment to Rights Agreement, dated as of June 30, 1998.
99.1 Press release of Firstar and Star Banc, dated July 1, 1998.
99.2 Investor presentation materials, dated as of July 1, 1998,
regarding the Merger.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRSTAR CORPORATION
By: /s/ Howard H. Hopwood, III
Name: Howard H. Hopwood, III
Title: Senior Vice President and
General Counsel
Date: July 1, 1998
<PAGE>
Exhibit Index
Exhibit Number Title
2 Agreement and Plan of Reorganization, dated as of June 30, 1998.
10.1 Firstar Option Agreement, dated as of June 30, 1998.
10.2 Star Banc Option Agreement, dated as of June 30, 1998.
10.3 First Amendment to Rights Agreement, dated as of June 30, 1998.
99.1 Press release of Firstar and Star Banc, dated July 1, 1998.
99.2 Investor presentation materials, dated as of July 1, 1998,
regarding the Merger.
EXHIBIT 2
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
among
STAR BANC CORPORATION,
FIRSTAR CORPORATION
and
FOXTROT (DE) CORPORATION
Dated as of June 30, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE REINCORPORATION MERGER . . . . . . . . . . 2
Section 1.1 The Reincorporation Merger . . . . . . . . . . . . . . . . . 2
Section 1.2 First Effective Time . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Effects of the Reincorporation Merger . . . . . . . . . . . 2
Section 1.4 Conversion of Securities . . . . . . . . . . . . . . . . . . 2
Section 1.5 Foxtrot (DE) Common Stock . . . . . . . . . . . . . . . . . 3
Section 1.6 Options . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.7 Certificate of Incorporation . . . . . . . . . . . . . . . . 3
Section 1.8 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.9 Board of Directors; Management . . . . . . . . . . . . . . . 4
ARTICLE II
THE SECOND STEP MERGER . . . . . . . . . . . 4
Section 2.1 The Second Step Merger . . . . . . . . . . . . . . . . . . . 4
Section 2.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Effects of the Second Step Merger . . . . . . . . . . . . . 4
Section 2.4 Conversion of Star Common Stock . . . . . . . . . . . . . . 4
Section 2.5 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . 5
Section 2.6 Options . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.7 Foxtrot (DE) Common Stock . . . . . . . . . . . . . . . . . 6
Section 2.8 Certificate of Incorporation . . . . . . . . . . . . . . . . 6
Section 2.9 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.10 Management . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.11 Board of Directors . . . . . . . . . . . . . . . . . . . . 6
Section 2.12 Headquarters of Surviving Corporation . . . . . . . . . . . 7
Section 2.13 Tax and Accounting Consequences . . . . . . . . . . . . . . 7
ARTICLE III
EXCHANGE OF SHARES . . . . . . . . . . . . 7
Section 3.1 Exchange Procedures . . . . . . . . . . . . . . . . . . . . 7
Section 3.2 No Fractional Shares . . . . . . . . . . . . . . . . . . . . 9
Section 3.3 Anti-Dilution Adjustments . . . . . . . . . . . . . . . . . 9
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . 10
Section 4.1 Disclosure Schedules . . . . . . . . . . . . . . . . . . . . 10
Section 4.2 Standard . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.3 Representations and Warranties . . . . . . . . . . . . . . . 10
ARTICLE V
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME . . . . 21
Section 5.1 Conduct of Businesses Prior to the Effective Time . . . . . 21
Section 5.2 Forbearances . . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
ARTICLE VI
ADDITIONAL AGREEMENTS . . . . . . . . . . . 24
Section 6.1 Access and Information . . . . . . . . . . . . . . . . . . . 24
Section 6.2 Registration Statement; Regulatory Matters . . . . . . . . . 24
Section 6.3 Stockholder Approval . . . . . . . . . . . . . . . . . . . . 25
Section 6.4 Current Information . . . . . . . . . . . . . . . . . . . . 26
Section 6.5 Agreements of Affiliates . . . . . . . . . . . . . . . . . . 26
Section 6.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.7 Securities Act and Exchange Act Filings . . . . . . . . . . 26
Section 6.8 Miscellaneous Agreements and Consents . . . . . . . . . . . 27
Section 6.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 27
Section 6.10 D&O Indemnification . . . . . . . . . . . . . . . . . . . . 28
Section 6.11 Press Releases . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.12 Pooling of Interests . . . . . . . . . . . . . . . . . . . 30
Section 6.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.14 Conforming Entries . . . . . . . . . . . . . . . . . . . . 30
Section 6.15 Additional Actions . . . . . . . . . . . . . . . . . . . . 31
Section 6.16 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.17 Issuance of Shares . . . . . . . . . . . . . . . . . . . . 31
Section 6.18 Changes in Structure . . . . . . . . . . . . . . . . . . . 31
Section 6.19 Amending Governance Documents . . . . . . . . . . . . . . . 32
ARTICLE VII
CONDITIONS . . . . . . . . . . . . . . 32
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger . 32
Section 7.2 Conditions to Obligations of Firstar to Effect the Merger . 33
Section 7.3 Conditions to Obligations of Star to Effect the Merger . . . 34
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . 34
Section 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 35
Section 8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IX
GENERAL PROVISIONS . . . . . . . . . . . . 36
Section 9.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.2 Non-Survival of Representations, Warranties and Agreements . 36
Section 9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . 37
Section 9.5 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 37
<PAGE>
EXHIBITS
Exhibit A - Form of Stock Option Agreement with respect to
option issued by Firstar Corporation
Exhibit B - Form of Stock Option Agreement with respect to
option issued by Star Banc Corporation
Exhibit C - Form of Foxtrot (DE) Restated Certificate of
Incorporation
Exhibit D - Form of Foxtrot (DE) Restated By-laws
Exhibit E - Form of Firstar Affiliate Letter
Exhibit F - Form of Star Affiliate Letter
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made and entered into on June 30, 1998 by and among Star Banc Corporation, an
Ohio corporation ("Star"), Firstar Corporation, a Wisconsin corporation
("Firstar") and Foxtrot (DE) Corporation ("Foxtrot (DE)"), a Delaware
corporation and a wholly-owned subsidiary of Firstar.
W I T N E S S E T H :
WHEREAS, the Boards of Directors of Star, Firstar and Foxtrot (DE)
have determined that it is in the best interests of their respective
companies and their stockholders to consummate the business combination
transaction provided for herein in which (i) Firstar will, subject to the
terms and conditions set forth herein, merge with and into Foxtrot (DE) (the
"Reincorporation Merger") so that Foxtrot (DE) is the surviving corporation
in the Reincorporation Merger, and (ii) immediately thereafter Star will,
subject to the terms and conditions set forth herein, merge with and into
Foxtrot (DE) (the "Second Step Merger" and, together with the Reincorporation
Merger, the "Merger"), so that Foxtrot (DE) is the surviving corporation
(hereinafter sometimes referred to in such capacity as the "Surviving
Corporation") in the Second Step Merger; and
WHEREAS, it is the intent of the respective Boards of Directors of
Star and Firstar that the Merger be structured as a "merger of equals" of
Star and Firstar in accordance with the terms and conditions of this
Agreement; and
WHEREAS, as a condition to, and simultaneously with the execution
of, this Agreement, Star and Firstar will enter into a Firstar stock option
agreement (the "Firstar Stock Option Agreement") in the form attached hereto
as Exhibit A; and
WHEREAS, as a condition to, and simultaneously with the execution
of, this Agreement, Star and Firstar will enter into a Star stock option
agreement (the "Star Stock Option Agreement" and, together with the Firstar
Stock Option Agreement, the "Option Agreements") in the form attached hereto
as Exhibit B; and
WHEREAS, the parties desire to provide for certain conditions,
representations, warranties and covenants in connection with the transactions
contemplated by this Agreement.
NOW THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, and intending to
be legally bound thereby, the parties agree as follows:
<PAGE>
ARTICLE I
THE REINCORPORATION MERGER
Section 1.1 The Reincorporation Merger. Subject to the terms and
conditions of this Agreement, Firstar shall be merged with and into Foxtrot
(DE) in accordance with the Wisconsin Business Corporation Law (the "WBCL")
and the Delaware General Corporation Law ("DGCL") and the separate corporate
existence of Firstar shall cease. Foxtrot (DE) shall be the surviving
corporation of the Reincorporation Merger, shall continue its corporate
existence under the name "Firstar Corporation" and shall be governed by the
laws of the State of Delaware.
Section 1.2 First Effective Time. The Reincorporation Merger
shall become effective on the date and at the time (the "First Effective
Time") specified in the appropriate documents in respect of the
Reincorporation Merger which are filed with the Secretary of State of the
State of Delaware and the Department of Financial Institutions of the State
of Wisconsin in such form as required by, and in accordance with, the
relevant provisions of the DGCL and the WBCL. The First Effective Time
shall occur on the same date and immediately prior to the Effective Time as
specified in Section 2.2.
Section 1.3 Effects of the Reincorporation Merger. At and after
the First Effective Time, the Reincorporation Merger shall have the effects
set forth in Sections 259 and 261 of the DGCL and Section 180.1107 of the
WBCL.
Section 1.4 Conversion of Securities. (a) At the First Effective
Time, by virtue of the Reincorporation Merger and without any action on the
part of Star, Firstar, Foxtrot (DE) or the holders of any capital stock of
Firstar, Star or Foxtrot (DE), each share of the common stock, par value
$1.25, of Firstar ("Firstar Common Stock") issued and outstanding immediately
prior to the First Effective Time shall cease to be outstanding and (other
than any shares of Firstar Common Stock held by Firstar or any of its wholly
owned Subsidiaries (as defined herein), except for Trust Account Shares (as
defined herein) and DPC Shares (as defined herein)), shall be converted into
the right to receive 0.76 (the "Exchange Ratio") shares of Foxtrot (DE)
Common Stock (as defined herein).
(b) All of the shares of Firstar Common Stock converted into the
right to receive Foxtrot (DE) Common Stock pursuant to this Article I shall
no longer be outstanding and shall automatically be cancelled and shall cease
to exist as of the First Effective Time, and each certificate (each a
"Firstar Common Certificate") previously representing any such shares of
Firstar Common Stock shall thereafter represent only the right to receive (i)
a certificate representing the number of whole shares of Foxtrot (DE) Common
Stock and (ii) cash in lieu of any fractional shares otherwise issuable
pursuant to Section 1.4(a), in accordance with Section 3.2. Firstar Common
Certificates previously representing shares of Firstar Common Stock shall be
exchanged for certificates representing whole shares of Foxtrot (DE) Common
Stock and cash in lieu of fractional shares issued in consideration therefor
upon the surrender of such Firstar Common Certificates in accordance with
Section 3.1 without any interest thereon.
(c) At the First Effective Time, all shares of Firstar Common
Stock that are owned by Firstar as treasury stock and all shares of Firstar
Common Stock that are owned, directly or indirectly, by Firstar or any of its
wholly owned Subsidiaries (other than Trust Account Shares and DPC Shares)
shall be cancelled and shall cease to exist and no stock of Foxtrot (DE) or
other consideration shall be delivered in exchange therefor.
<PAGE>
Section 1.5 Foxtrot (DE) Common Stock. At and after the First
Effective Time, each share of Foxtrot (DE) Common Stock issued and
outstanding immediately prior to the First Effective Time shall be cancelled
and retired and shall resume the status of authorized and unissued shares of
Foxtrot (DE) Common Stock, and no shares of Foxtrot (DE) Common Stock or
other securities of Foxtrot (DE) shall be issued in respect thereof.
Section 1.6 Options. Firstar shall take action to amend the
Firstar Stock Plans (as defined herein) so that, at the Effective Time, each
option granted by Firstar to purchase shares of Firstar Common Stock which is
outstanding and unexercised immediately prior thereto shall cease to
represent a right to acquire shares of Firstar Common Stock and shall be
converted automatically into an option to purchase shares of Foxtrot (DE)
Common Stock in an amount and at an exercise price determined as follows
(and otherwise subject to the terms of the appropriate Firstar Benefit Plan
(as defined herein) pursuant to which such options have been granted (such
plans collectively the "Firstar Stock Plans") and the agreements evidencing
grants thereunder): (i) the number of shares of Foxtrot (DE) Common Stock
to be subject to the new option shall be equal to the product of the number
of shares of Firstar Common Stock subject to the original option and the
Exchange Ratio, provided that any fractional shares of Foxtrot (DE) Common
Stock resulting from such multiplication shall be rounded down to the nearest
whole share and (ii) the exercise price per share of Foxtrot (DE) Common
Stock under the new option shall be equal to the exercise price per share of
Firstar Common Stock under the original option divided by the Exchange Ratio,
provided that such exercise price shall be rounded down to the nearest whole
cent. The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) shall be and is intended to be
effected in a manner which is consistent with Section 424(a) of the Code.
The duration and other terms of the new option shall be the same as the
original option except that all references to Firstar shall be deemed to be
references to Foxtrot (DE).
Section 1.7 Certificate of Incorporation. Subject to the terms
and conditions of this Agreement, at the First Effective Time, the
Certificate of Incorporation of Foxtrot (DE) shall be substantially in the
form attached hereto as Exhibit C, with such changes thereto as shall be
mutually agreed upon by Star and Firstar, until thereafter amended in
accordance with applicable law.
Section 1.8 By-Laws. Subject to the terms and conditions of this
Agreement, at the First Effective Time, the By-Laws of Foxtrot (DE) shall be
amended so as to read in their entirety substantially in the form attached
hereto as Exhibit D, with such changes thereto as shall be mutually agreed
upon by Star and Firstar, until thereafter amended in accordance with
applicable law.
Section 1.9 Board of Directors; Management. Prior to the First
Effective Time, Firstar shall elect a board of directors of Foxtrot (DE) to
be comprised of 14 persons, all of whom shall be named by Firstar, and prior
to the Effective Time Firstar shall elect a board of directors of Foxtrot
(DE) to be comprised of 32 persons, 18 of whom shall be named by the Board of
Directors of Star and 14 of whom shall be named by the Board of Directors of
Firstar, and such directors shall be allocated among the three classes of
directors in a proportionate manner. From and after the First Effective
Time, until duly changed pursuant hereto or in accordance with applicable
law, the officers of Foxtrot (DE) shall be the officers of Foxtrot (DE).
<PAGE>
ARTICLE II
THE SECOND STEP MERGER
Section 2.1 The Second Step Merger. Subject to the terms and
conditions of this Agreement, in accordance with the Ohio General Corporation
Law (the "OGCL") and the DGCL, at the Effective Time Star shall merge with
and into Foxtrot (DE). Foxtrot (DE) shall be the surviving corporation in
the Second Step Merger, and shall continue its corporate existence under the
name "Firstar Corporation" and be governed by the laws of the State of
Delaware. Upon consummation of the Second Step Merger, the separate
corporate existence of Star shall terminate.
Section 2.2 Effective Time. The Second Step Merger shall become
effective as set forth in the certificate of merger (the "Certificate of
Merger") which shall be filed with the Secretary of State of the State of
Delaware and the Secretary of State of the State of Ohio on the Closing Date
(as defined herein). The term "Effective Time" shall be the date and time
when the Second Step Merger becomes effective, as set forth in the
Certificate of Merger. Subject to the terms and conditions of this
Agreement, the Effective Time shall occur on a date to be specified by the
parties, which shall be the first day which is (i) the last business day of a
month and (ii) at least two business days after satisfaction or waiver
(subject to applicable law) of the conditions (excluding conditions that, by
their terms, cannot be satisfied until the Closing Date) set forth in Article
VII, unless another time or date is agreed to in writing by the parties
hereto.
Section 2.3 Effects of the Second Step Merger. At and after the
Effective Time, the Second Step Merger shall have the effects set forth in
Sections 259 and 261 of the DGCL and Section 1701.82 of the OGCL.
Section 2.4 Conversion of Star Common Stock. (a) At the
Effective Time, by virtue of the Second Step Merger and without any action on
the part of Star, Foxtrot (DE) or the holders of capital stock of Star or
Foxtrot (DE) , each share of the common stock, par value $5.00 per share, of
Star (the "Star Common Stock") issued and outstanding immediately prior to
the Effective Time (other than Dissenting Shares (as defined herein) and
shares of Star Common Stock held in Star's treasury or directly or indirectly
by Star or any of its wholly owned Subsidiaries or Foxtrot (DE) (except for
Trust Account Shares and DPC Shares)) shall be converted into the right to
receive one share (the "Second Merger Exchange Ratio") of the common stock,
par value $0.01, of Foxtrot (DE) (the "Foxtrot (DE) Common Stock").
(b) All of the shares of Star Common Stock converted into the
right to receive Foxtrot (DE) Common Stock pursuant to this Article II shall
no longer be outstanding and shall automatically be cancelled and shall cease
to exist as of the Effective Time, and each certificate (each a "Star Common
Certificate") previously representing any such shares of Star Common Stock
shall thereafter represent only the right to receive (i) a certificate
representing the number of whole shares of Foxtrot (DE) Common Stock and (ii)
cash in lieu of any fractional shares otherwise issuable pursuant to Section
2.4(a), in accordance with Section 3.2. Star Common Certificates previously
representing shares of Star Common Stock shall be exchanged for certificates
representing whole shares of Foxtrot (DE) Common Stock and cash in lieu of
fractional shares issued in consideration therefor upon the surrender of such
<PAGE>
Star Common Certificates in accordance with Section 3.1 without any interest
thereon.
(c) At the Effective Time, all shares of Star Common Stock that
are owned by Star as treasury stock and all shares of Star Common Stock that
are owned, directly or indirectly, by Star or any of its wholly owned
Subsidiaries or Foxtrot (DE) (other than shares of Star Common Stock held,
directly or indirectly, in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity that are beneficially owned by third
parties (any such shares, and shares of Firstar Common Stock which are
similarly held, whether held directly or indirectly by Star, Foxtrot (DE) or
Firstar, as the case may be, or any of their respective Subsidiaries being
referred to herein as "Trust Account Shares") and other than any shares of
Star Common Stock held by Star or Firstar or any of their respective
Subsidiaries or Foxtrot (DE) in respect of a debt previously contracted (any
such shares of Star Common Stock and shares of Firstar Common Stock which are
similarly held, whether held directly or indirectly by Star, Foxtrot (DE) or
Firstar, as the case may be, or any of their respective Subsidiaries, being
referred to herein as "DPC Shares")) shall be cancelled and shall cease to
exist and no stock of Foxtrot (DE) or other consideration shall be delivered
in exchange therefor.
Section 2.5 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Star Common Stock which are outstanding
immediately prior to the Effective Time and with respect to which dissenters'
rights shall have been properly demanded in accordance with Section 1701.85
of the OGCL ("Dissenting Shares") shall not be converted into the right to
receive Foxtrot (DE) Common Stock; instead, the holders thereof shall be
entitled to payment of the appraised value of such Dissenting Shares in
accordance with the provisions of Section 1701.85 of the OGCL; provided,
however, that (i) if any holder of Dissenting Shares shall subsequently
deliver a written withdrawal of his demand for appraisal of such shares, or
(ii) if any holder fails to establish his entitlement to dissenters' rights
as provided in Section 1701.85 of the OGCL, such holder or holders (as the
case may be) shall forfeit the right to appraisal of such shares of Star
Common Stock and each of such shares shall thereupon be deemed to have been
converted into the right to receive, and to have become exchangeable for, as
of the Effective Time, Foxtrot (DE) Common Stock, as provided in Section
2.4(a) hereof.
Section 2.6 Options. Star shall take action to amend the Star
Stock Plans (as defined herein) so that, at the First Effective Time, each
option granted by Star to purchase shares of Star Common Stock which is
outstanding and unexercised immediately prior thereto shall cease to
represent a right to acquire shares of Star Common Stock and shall be
converted automatically into an option to purchase a number of shares of
Foxtrot (DE) Common Stock equal to the number of shares of Star Common Stock
subject to such option immediately prior to the First Effective Time at an
exercise price per share of Foxtrot (DE) Common Stock equal to the exercise
price per share of Star Common Stock in effect immediately prior to the
Effective Time and otherwise subject to the terms of the appropriate Star
Benefit Plans pursuant to which such options have been granted (such plans
collectively the "Star Stock Plans") and the agreements evidencing grants
thereunder. The adjustment provided herein with respect to any options which
are "incentive stock options" (as defined in Section 422 of the Code) shall
be and is intended to be effected in a manner which is consistent with
Section 424(a) of the Code. The duration and other terms of the new option
<PAGE>
shall be the same as the original option except that all references to Star
shall be deemed to be references to Foxtrot (DE).
Section 2.7 Foxtrot (DE) Common Stock. At and after the Effective
Time, each share of Foxtrot (DE) Common Stock issued and outstanding
immediately prior to the Effective Time shall remain an issued and
outstanding share of common stock of the Surviving Corporation and shall not
be affected by the Second Step Merger.
Section 2.8 Certificate of Incorporation. Subject to the terms
and conditions of this Agreement, at the Effective Time, the Certificate of
Incorporation of the Surviving Corporation shall be the Certificate of
Incorporation of Foxtrot (DE), until thereafter amended in accordance with
applicable law.
Section 2.9 By-Laws. Subject to the terms and conditions of this
Agreement, at the Effective Time, the By-Laws of the Surviving Corporation
shall be the By-Laws of Foxtrot (DE), until thereafter amended in accordance
with applicable law.
Section 2.10 Management. (a) From and after the Effective Time,
Roger L. Fitzsimonds shall be Chairman of the Board of the Surviving
Corporation (and shall continue in such position until he becomes 62 years
old) and Jerry A. Grundhofer shall be the President and Chief Executive
Officer of the Surviving Corporation, and Mr. Grundhofer shall be designated
to succeed Mr. Fitzsimonds as Chairman.
Section 2.11 Board of Directors. (a) From and after the
Effective Time, until duly changed in compliance with applicable law and the
Certificate of Incorporation and By-Laws of the Surviving Corporation, the
Board of Directors of the Surviving Corporation shall be the Board of Direc-
tors of Foxtrot (DE) as specified in Section 1.9. The majority of the
meetings of the Board of Directors of the Surviving Corporation in any
calendar year shall be held in Milwaukee, Wisconsin.
(b) Firstar shall cause all requisite action to be taken so that,
at the Effective Time, directors of the Surviving Corporation elected
pursuant to Section 1.9 at the designation of Star and Firstar shall be
represented in proportion to the aggregate representation set forth in
Section 1.9 on all committees of the Board of Directors of the Surviving
Corporation, except that seven designees of Star and five designees of
Firstar shall be included on the Executive Committee.
Section 2.12 Headquarters of Surviving Corporation. After the
Effective Time, the location of the headquarters and principal executive
offices of the Surviving Corporation shall be that of the headquarters and
principal executive offices of Firstar as of the date of this Agreement
located in Milwaukee, Wisconsin. After the Effective Time, the banking
Subsidiaries of the Surviving Corporation shall be merged into a single bank,
the name of which shall be Firstar and the headquarters of which shall be in
Milwaukee, Wisconsin.
Section 2.13 Tax and Accounting Consequences. It is intended that
the Reincorporation Merger and the Second Step Merger shall each constitute a
reorganization within the meaning of Section 368(a) of the Code, that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Sections 354 and 361 of the Code and that the Merger be accounted for as a
<PAGE>
"pooling of interests" under generally accepted accounting principles
("GAAP").
ARTICLE III
EXCHANGE OF SHARES
Section 3.1 Exchange Procedures. (a) At or prior to the First
Effective Time, the parties shall deposit, or shall cause to be deposited,
with a bank or trust company agreed to by each of Star and Firstar (the
"Exchange Agent"), for the benefit of the holders of Certificates (as defined
herein), for exchange in accordance with this Article III, certificates
representing the shares of Foxtrot (DE) Common Stock, and cash in lieu of any
fractional shares (such cash and certificates for shares of Foxtrot (DE)
Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund"), to be issued
pursuant to Sections 1.4 and 2.4 and paid pursuant to Section 3.2 in exchange
for outstanding shares of Firstar Common Stock and Star Common Stock.
Firstar and Star shall deliver to Foxtrot (DE) a complete list of their
respective shareholders (including their respective names, addresses and TINs
to the extent reflected in the records maintained by such party or its tran-
sfer agent) as of the record date for the shareholder meetings to be called
by the parties as provided for herein and as of the First Effective Time for
Firstar and the Effective Time for Star, in each case which delivery shall be
made as soon as practicable after the respective date.
(b) As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record immediately prior to the First
Effective Time or the Effective Time, as applicable, of one or more Firstar
Common Certificates or Star Common Certificates (collectively, the
"Certificates") 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
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing the shares of Foxtrot (DE) Common
Stock issuable and any cash in lieu of fractional shares payable pursuant to
this Agreement. Upon proper surrender of a Certificate for exchange and
cancellation to the Exchange Agent, together with such properly completed
letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor, as applicable, (i) a certificate
representing that number of whole shares of Foxtrot (DE) Common Stock to
which such holder of Star Common Stock or Firstar Common Stock shall have
become entitled pursuant to the provisions of Articles I and II, as
applicable, and (ii) a check representing the amount of any cash in lieu of
fractional shares which such holder has the right to receive in respect of
the Certificate surrendered pursuant to the provisions of this Article III
and any dividend or distribution theretofore declared and not yet paid on
such shares of Foxtrot (DE) Common Stock, and the Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on any
cash in lieu of fractional shares or on any unpaid dividends and
distributions payable to holders of Certificates.
(c) If any certificate representing shares of Foxtrot (DE) Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of
the issuance thereof that the Certificate so surrendered shall be properly
endorsed (or accompanied by an appropriate instrument of transfer) and
<PAGE>
otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other
taxes required by reason of the issuance of a certificate representing shares
of Foxtrot (DE) Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or required for any other reason, or
shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable. The Surviving Corporation or the Exchange Agent
shall accept Certificates upon compliance with such other reasonable terms
and conditions as the Surviving Corporation or the Exchange Agent may impose
to effect an orderly exchange thereof in accordance with customary exchange
practices. Certificates shall be appropriately endorsed or accompanied by
such instruments of transfer as the Surviving Corporation or the Exchange
Agent may require.
(d) Any portion of the Exchange Fund, including any earnings
thereon, which remains undistributed to the holders of Certificates for six
months after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holders of Certificates who have not
theretofore complied with this Section 3.1 shall thereafter look only to the
Surviving Corporation for payment of their claim for the consideration
provided for herein and any unpaid dividends and distributions on the Foxtrot
(DE) Common Stock deliverable in respect of such Certificates.
(e) After the Effective Time, holders of Certificates shall cease
to have any rights with respect to the stock previously represented by such
Certificates, and their sole rights shall be to exchange such Certificates
for the consideration provided for in this Agreement. After the Effective
Time, there shall be no further transfers on the records of Firstar of
Firstar Common Certificates and no further transfers on the records of Star
of Star Common Certificates, and if such Certificates are presented to
Firstar or Star, as applicable, for transfer, they shall be cancelled against
delivery of the consideration provided therefor in this Agreement. Foxtrot
(DE) shall not be obligated to deliver the consideration to which any former
holder of securities is entitled as a result of the Merger until such holder
surrenders the Certificates as provided herein. No dividends declared on
Foxtrot (DE) Common Stock will be remitted to any holder of Firstar Common
Stock or the Star Common Stock entitled to receive Foxtrot (DE) Common Stock
under this Agreement until such person surrenders the Certificate
representing the right to receive such Foxtrot (DE) Common Stock, at which
time such dividends shall be remitted to such person, without interest and
less any taxes that may have been imposed thereon. Neither the Exchange
Agent nor any party to this Agreement nor any affiliate thereof shall be
liable to any holder of stock represented by any Certificate for any
consideration paid to a public official pursuant to applicable abandoned
property, escheat or similar laws. The Surviving Corporation and the
Exchange Agent shall be entitled to rely upon the stock transfer books of
Firstar and Star to establish the identity of those persons entitled to
receive consideration specified in this Agreement, which books shall be
conclusive with respect thereto. In the event of a dispute with respect to
ownership of stock represented by any Certificate, the Surviving Corporation
and the Exchange Agent shall be entitled to deposit any consideration
represented thereby in escrow with an independent third party and thereafter
be relieved with respect to any claims thereto.
(f) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if reasonably
<PAGE>
required by Foxtrot (DE), the posting by such person of a bond in such amount
as Foxtrot (DE) may determine is reasonably necessary as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Foxtrot (DE) Common Stock and any cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Agreement.
(g) Former holders of record as of the First Effective Time of
shares of Firstar Common Stock and as of the Effective Time of Star Common
Stock shall not be entitled, at and after the First Effective Time and the
Effective Time, respectively, to vote any shares of the Foxtrot (DE) Common
Stock until their Certificates shall have been surrendered in accordance with
this Article III and certificates evidencing such Foxtrot (DE) Common Stock
shall have been issued in exchange therefor.
Section 3.2 No Fractional Shares. Notwithstanding any other
provision of this Agreement, neither certificates nor scrip for fractional
shares of Foxtrot (DE) Common Stock shall be issued in the Merger. Each
holder who otherwise would have been entitled to a fraction of a share of
Foxtrot (DE) 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 sale
price of a share of Star Common Stock on the New York Stock Exchange, Inc.
("NYSE") composite tape on the last full trading day prior to the Effective
Time. No such holder shall be entitled to dividends, voting rights or any
other rights in respect of any fractional share.
Section 3.3 Anti-Dilution Adjustments. If, prior to the Effective
Time, the outstanding shares of Star Common Stock or Firstar Common Stock
shall have been increased, decreased, changed into or exchanged for a
different number or kind of shares or securities as a result of a
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split, or other similar change in capitalization (other
than solely as a result of the Reincorporation Merger), appropriate
adjustment or adjustments will be made to the Exchange Ratio or the Second
Merger Exchange Ratio, as applicable.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 4.1 Disclosure Schedules. On or prior to the date hereof,
each of Star and Firstar has delivered to the other a schedule (respectively,
its "Disclosure Schedule") setting forth, among other things, items the
disclosure of which is necessary or appropriate in relation to any or all of
its representations and warranties set forth in this Agreement; provided,
that (i) no such item is required to be set forth in a Disclosure Schedule as
an exception to a representation or warranty if its absence is not reasonably
likely to result in the related representation or warranty being deemed
untrue or incorrect under the standard established by Section 4.2, and (ii)
the mere inclusion of an item in a Disclosure Schedule shall not be deemed an
admission by a party that such item represents a material exception or fact,
event or circumstance or that such item would reasonably be expected to
result in a material adverse effect on the financial condition, results of
operations or business of such party and its Subsidiaries taken as a whole,
except as may have resulted or may result from changes to laws and
regulations or changes in economic conditions applicable to banking
<PAGE>
institutions generally or in general levels of interest rates affecting
banking institutions generally (a "Material Adverse Effect").
Section 4.2 Standard. No representation or warranty of Star or
Firstar contained in Section 4.3 shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached any such representation or
warranty, as a consequence of the existence of any fact, circumstance or
event unless such fact, circumstance or event which constitutes a breach of
any such representation or warranty after giving effect to any materiality
standards contained in any representation or warranty, individually or taken
together with all other facts, circumstances or events constituting such
breaches, has had or would reasonably be expected to have a Material Adverse
Effect on such party.
Section 4.3 Representations and Warranties. Subject to Sections
4.1 and 4.2 and except as previously disclosed in its Disclosure Schedule,
Firstar hereby represents and warrants to Star, and Star hereby represents
and warrants to Firstar, to the extent applicable, in each case with respect
to itself and its Subsidiaries, as follows:
(a) Organization and Authority. Such party and each of its
respective Subsidiaries is a corporation, bank, trust company or other entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of organization, is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and has corporate
power and authority to own its properties and assets and to carry on its
business as it is now being conducted except, in each case, where the failure
to do so would not either individually or in the aggregate reasonably be
expected to have a Material Adverse Effect on such party. Such party is duly
registered as a bank holding company with the Board of Governors of the
Federal Reserve System (the "Board") under the Bank Holding Company Act of
1956, as amended (the "Holding Company Act"). True and complete copies of
the Articles of Incorporation and By-laws or Code of Regulation as
applicable, of such party, each in effect on the date of this Agreement, have
been provided to the other party.
(b) Subsidiaries. Such party's Disclosure Schedule sets forth,
among other things, a complete and correct list of all of such party's direct
or indirect subsidiaries (each a "Subsidiary" and collectively the
"Subsidiaries") including such party's banks (the "Banks"), all outstanding
Equity Securities of each of which are owned directly or indirectly by such
party. "Equity Securities" of an issuer means capital stock or other equity
securities of such issuer, options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, shares of any capital stock or other Equity
Securities of such issuer, or contracts, commitments, understandings or
arrangements by which such issuer is or may become bound to issue additional
shares of its capital stock or other Equity Securities. All of the
outstanding shares of capital stock of the Subsidiaries of such party are
validly issued, fully paid and nonassessable (subject to Section
180.0622(2)(6) of the WBCL), and those shares owned by such party are owned
free and clear of any lien, claim, charge, option, encumbrance, agreement,
mortgage, pledge, security interest or restriction (a "Lien") with respect
thereto. Except for the Equity Securities of such party's Subsidiaries and
except for Equity Interests held in a fiduciary capacity, such party does not
own beneficially, directly or indirectly, more than 5% of any class of Equity
<PAGE>
Securities or similar interests of any corporation, bank, business trust,
association or similar organization. The Banks of such party are chartered by
the Office of the Comptroller of the Currency. The deposits of the Banks of
such party are insured by the Federal Deposit Insurance Corporation ("FDIC").
Neither such party nor any Subsidiary thereof holds any interest in a
partnership or joint venture of any kind.
(c) Capitalization. (i) The authorized capital stock of Star
consists of (A) 400,000,000 shares of Star Common Stock, of which, as of June
29, 1998, 95,778,921 shares were issued and outstanding and (B) 1,000,000
shares of preferred stock, no par value ("Star Preferred Stock"), issuable in
series, none of which, as of June 29, 1998, is issued or outstanding. Star
has designated (Y) 500,000 shares of Star Preferred Stock as "Series A
Preferred Stock" and has reserved such shares for issuance upon exercise of
Preferred Stock Purchase Rights under a Rights Agreement dated October 27,
1989 (the "Star Rights Agreement"), between Star and Star Bank, N.A., as
Rights Agent and (Z) 218,000 shares of Star Preferred Stock as "Series B
Cumulative Preferred Stock." Pursuant to the Star Rights Agreement, each
certificate representing one share of Star Common Stock also represents one
Right (as defined in the Star Rights Agreement). As of June 29, 1998 Star
had options outstanding for 7,020,988 shares of Star Common Stock for
issuance under various employee stock option and incentive plans ("Star Stock
Options"). From June 29, 1998 through the date of this Agreement, no shares
of Star Common Stock have been issued excluding not more than 500 shares
which may have been issued pursuant to stock-based, director or employee
benefit or incentive plans and programs. Except as set forth above and
except pursuant to the Star Rights Agreement, there are no other Equity
Securities of Star outstanding. All of the issued and outstanding shares of
Star Common Stock are validly issued, fully paid, and nonassessable, and have
not been issued in violation of any preemptive right of any stockholder of
Star.
(ii) The authorized capital stock of Firstar consists of (A)
240,000,000 shares of Firstar Common Stock, of which, as of June 29, 1998,
145,546,889 shares were issued and outstanding and (B) 2,500,000 shares of
preferred stock ("Firstar Preferred Stock"), issuable in series. Firstar has
designated (Y) 600,000 shares of Firstar Preferred Stock as "Series C
Preferred Stock" and has reserved such shares for issuance upon exercise of
Preferred Stock Purchase Rights under a Rights Agreement dated January 19,
1989 (the "Firstar Rights Agreement"), between Firstar and Firstar Trust
Company (formerly known as First Wisconsin Trust Company), as Rights Agent
and (Z) certain shares of Firstar Preferred Stock as "Series A Preferred
Stock," "Series B Preferred Stock" and "Series D Preferred Stock" all of
which have been redeemed. Pursuant to the Firstar Rights Agreement, each
certificate representing one share of Firstar Common Stock also represents
one-quarter Right (as defined in the Firstar Rights Agreement). As of June
29, 1998 Firstar had options outstanding for 6,037,093 shares of Firstar
Common Stock for issuance under various employee stock option and incentive
plans ("Firstar Stock Options"). From June 29, 1998 through the date of this
Agreement, no shares of Firstar Common Stock have been issued excluding not
more than 500 shares which may have been issued pursuant to stock-based,
director or employee benefit or incentive plans and programs. Except as set
forth above and except pursuant to the Firstar Rights Agreement, there are no
other Equity Securities of Firstar outstanding. All of the issued and
outstanding shares of Firstar Common Stock are validly issued, fully paid,
and nonassessable (subject to Section 180.0622(2)(b) of the WBCL), and have
<PAGE>
not been issued in violation of any preemptive right of any stockholder of
Firstar.
(d) Authorization. (i) Such party has the corporate power and
authority to execute and deliver this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this
Agreement by such party and the consummation by such party of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action of the Board of Directors of such party. The Board of
Directors of such party has directed that this Agreement and the transactions
contemplated hereby be submitted to its stockholders for approval at a
meeting of such stockholders and, except for the adoption of this Agreement
by the affirmative vote of holders of a majority of its outstanding shares,
no other corporate proceedings on the part of such party are necessary to
approve this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
such party and (assuming due authorization, execution and delivery by the
other party) constitutes a valid and binding obligation of such party,
enforceable against such party in accordance with its terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies). Firstar represents and warrants that each of Firstar, as the sole
stockholder of Foxtrot (DE), and the Board of Directors of Foxtrot (DE) has
approved this Agreement and the transactions contemplated hereby by written
consent and no other corporate proceedings on the part of Foxtrot (DE) are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby.
(ii) Neither the execution, delivery and performance by such party
of this Agreement, nor the consummation by such party of the transactions
contemplated hereby, nor compliance by such party with any of the provisions
hereof, will (A) violate, conflict with or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration of, or result in the creation of, any
Lien upon any of the properties or assets of such party or any Subsidiary of
such party under any of the terms, conditions or provisions of (I) its
articles or certificate of incorporation or bylaws or code of regulations, or
(II) any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which such party or any of the
properties or assets of such party is a party or by which it may be bound, or
to which such party may be subject (assuming no default thereunder at the
time of the Merger), except (in the case of this clause (II)) for such
violations, conflicts, breaches or defaults which, either individually or in
the aggregate, will not have a Material Adverse Effect on such party or (B)
subject to compliance with the statutes and regulations referred to in
paragraph (iii) of this Section 4.3(d), to the best knowledge of such party,
violate any judgment, ruling, order, writ, injunction, decree, statute, rule
or regulation applicable to such party or any of its Subsidiaries or any of
their respective properties or assets except for such violations which,
either individually or in the aggregate will not have a Material Adverse
Effect on such party.
(iii) Other than in connection with or in compliance with the
provisions of the WBCL, the OGCL, the DGCL, the Securities Act, the Exchange
Act of 1934, as amended, and the rules and regulations thereunder (the
"Exchange Act"), the securities or blue sky laws of the various states or
<PAGE>
filings, consents, reviews, authorizations, approvals or exemptions required
under the Holding Company Act, and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), or any required approvals of the
Office of the Controller of Currency, the Small Business Administration or
any state or foreign Regulatory Authority (as defined herein), no notice to,
filing with, exemption or review by, or authorization, consent or approval
of, any public body or authority is necessary in connection with the
execution and delivery by such party of this Agreement or the consummation by
such party of the transactions contemplated by this Agreement.
(e) Financial Statements. The consolidated balance sheets of such
party and its Subsidiaries as of December 31, 1997, 1996 and 1995 and related
consolidated statements of income, cash flows and changes in stockholders'
equity for each of the three years in the three-year period ended December
31, 1997, together with the notes thereto, audited by such party's
independent auditors and included in an annual report on Form 10-K as filed
with the Securities and Exchange Commission (the "SEC") (collectively, the
"Audited Financial Statements"), and the consolidated balance sheet of such
party and its Subsidiaries as of March 31, 1998 and related consolidated
statements of income, cash flows and changes in stockholders' equity for the
three-month period ended March 31, 1998 included in a quarterly report on
Form 10-Q as filed with the SEC (collectively, the "Unaudited Financial
Statements", and together with the Audited Financial Statements, the
"Financial Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis ("GAAP"),
present fairly the consolidated financial position of such party and its
Subsidiaries at the dates and the consolidated results of operations, changes
in stockholders' equity and cash flows of such party and its Subsidiaries for
the periods stated therein, subject, in the case of the Unaudited Financial
Statements, to normal year-end audit adjustments, and are derived from the
books and records of such party and its Subsidiaries, which are complete and
accurate in all material respects and have been maintained in all material
respects in accordance with applicable laws and regulations. Neither such
party nor any of its Subsidiaries has any material contingent liabilities
that are not described in the financial statements described above other than
liabilities incurred in the ordinary course of such party's business
consistent with past practice, or in connection with this Agreement and the
transactions contemplated hereby.
(f) Reports. Since January 1, 1995, such party and its
Subsidiaries have timely filed all material reports, registrations and
statements, together with any required material amendments thereto, that it
was required to file with (i) the SEC, including, but not limited to, Forms
10-K, Forms 10-Q, Forms 8-K and proxy statements, (ii) the Board, (iii) the
FDIC, (iv) the Office of the Controller of the Currency, (v) the Small
Business Administration and (vi) any other federal, state, municipal, local
or foreign government, securities, banking, savings and loan, insurance and
other governmental or regulatory authority and the agencies and staffs
thereof (the entities in the foregoing clauses (i) through (vi) being
referred to herein collectively as the "Regulatory Authorities" and
individually as a "Regulatory Authority") and all other reports and
statements required to be filed by such party, including, without limitation,
any report or statement required to be filed pursuant to laws, rules or
regulations of the United States, any state, or any Regulatory Authority, and
have paid all fees and assessments due and payable in connection therewith,
except where the failure to file such report, registration or statement or to
pay such fees and assessments, either individually or in the aggregate, would
<PAGE>
not reasonably be expected to have a Material Adverse Effect on such party.
All such reports and statements filed with any such Regulatory Authority are
collectively referred to herein as the "Star Reports" and the "Firstar
Reports," as applicable. As of its respective date, each of the Star Reports
and the Firstar Reports, as applicable, of such party complied in all
material respects with all the rules and regulations promulgated by the
applicable Regulatory Authority and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) Material Adverse Change. Since December 31, 1997, no event
has occurred or circumstances arisen that, individually or taken together
with all other events and circumstances, has had or is reasonably expected to
have a Material Adverse Effect on such party.
(h) Compliance with Laws. Such party and its Subsidiaries have
complied with all laws, regulations, and orders (including without limitation
zoning ordinances, building codes, ERISA (as defined herein), and securities,
tax, environmental, civil rights, and occupational health and safety laws and
regulations and including without limitation in the case of any Subsidiary of
such party that is a bank, banking organization, banking corporation or trust
company, all statutes, rules and regulations pertaining to the conduct of a
banking, deposit-taking or lending or related business or to the exercise of
trust powers) and governing instruments applicable to them and to the conduct
of their business, and to the knowledge of such party all applicable listing
requirements and policies of the NYSE, except where such failure to comply
would not have a Material Adverse Effect on such party, and neither such
party nor any Subsidiary of such party is in default under, and no event has
occurred which, with the lapse of time or notice or both, could result in the
default under, the terms of any judgment, order, writ, decree, permit, or
license of any Regulatory Authority or court, whether federal, state,
municipal, or local and whether at law or in equity, except where such
default would not reasonably be expected to have a Material Adverse Effect on
such party. Neither such party nor any Subsidiary of such party is subject
to or reasonably likely to incur a liability as a result of its ownership,
operation, or use of any Property (as defined herein) of such party (whether
directly or, to the best knowledge of such party, as a consequence of such
Property being part of the investment portfolio of such party or any
Subsidiary of such party) (i) that is contaminated by or contains any Toxic
Substance (as defined herein) or (ii) on which any Toxic Substance has been
stored, disposed of, placed, or used in the construction thereof; and which,
in each case, reasonably could be expected to have a Material Adverse Effect
on such party. "Property" of a person shall include all property (real or
personal, tangible or intangible) owned or controlled by such person,
including, without limitation, property under foreclosure, property held by
such person or any subsidiary of such person in its capacity as a trustee and
property in which any venture capital or similar unit of such person or any
subsidiary of such person has an interest. A "Toxic Substance" is anything
that is contaminated by or contains any hazardous waste, toxic substance, or
related materials, including, without limitation, asbestos, PCBs, pesticides,
herbicides and any other substance or waste that is hazardous to human health
or the environment. Except for statutory or regulatory restrictions of
general application, no Regulatory Authority has placed any restriction on
the business of such party or any Subsidiary of such party which reasonably
could be expected to have a Material Adverse Effect on such party.
<PAGE>
(i) Registration Statement, etc. None of the information
regarding such party or any of its Subsidiaries supplied or to be supplied by
such party for inclusion or included in (i) the registration statement on
Form S-4 to be filed with the SEC for the purposes of registering the shares
of Foxtrot (DE) Common Stock to be issued pursuant to this Agreement (the
"Registration Statement"), (ii) the proxy or information statement to be
mailed to Star's stockholders and Firstar's stockholders in connection with
the transactions contemplated by this Agreement (the "Proxy Statement"), or
(iii) any other documents to be filed with any Regulatory Authority in
connection with the transactions contemplated hereby will, at the respective
times such documents are filed with any Regulatory Authority and, in the case
of the Registration Statement, when it becomes effective and, with respect to
the Proxy Statement, when mailed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make
the statements therein not misleading or, in the case of the Proxy Statement
or any amendment thereof or supplement thereto, at the time of the meeting of
Star's stockholders (the "Star Meeting") and the meeting of Firstar's
stockholders (the "Firstar Meeting") referred to in Section 6.3, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for the Meeting. All documents
which such party or any of its Subsidiaries are responsible for filing with
any Regulatory Authority in connection with the Merger will comply as to form
in all material respects with the provisions of applicable law.
(j) Brokers and Finders. Except as set forth in the engagement
letter agreement between Firstar and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a true and complete copy of which has been provided to Star
prior to the date hereof, and the engagement letter agreement between Star
and CS First Boston, a true and complete copy of which has been provided to
Firstar prior to the date hereof, neither such party nor any of its
Subsidiaries nor any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker or
finder has acted directly or indirectly for such party or any of its
Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
(k) Litigation and Other Proceedings. (i) Neither such party nor
any of its Subsidiaries is a party to any, and there are no pending or, to
the knowledge of such party, threatened, legal, administrative, arbitral or
other proceedings, claims, actions or governmental or regulatory
investigations of any nature against such party or any of its Subsidiaries or
challenging the validity or propriety of the transactions contemplated by
this Agreement as to which, in any such case, there is a reasonable
probability of an adverse determination and which, if adversely determined
either individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect on such party.
(ii) There is no injunction, order, judgment, decree or regulatory
restriction (other than those that apply to similarly situated bank holding
companies or banks) imposed upon such party, any of its Subsidiaries or the
assets of such party or any of its Subsidiaries that has had or would
reasonably be expected to have a Material Adverse Effect on such party or the
Surviving Corporation.
<PAGE>
(l) Taxes. Such party and each Subsidiary have timely filed or
will timely file (including extensions) all material tax returns required to
be filed at or prior to the Closing Date ("Returns"). Each of such party and
its Subsidiaries has paid, or set up adequate reserves on its respective
Financial Statements for the payment of, all taxes required to be paid in
respect of the periods covered by the Financial Statements and has paid or
set up adequate reserves on the most recent financial statements such party
has filed under the Exchange Act for the payment of all taxes anticipated to
be payable in respect of the periods covered by such financial statements.
No material deficiencies for any tax, assessment or governmental charge have
been proposed, asserted or assessed in writing by any governmental or taxing
authority against such party or any Subsidiary of such party which have not
been settled or would not be covered by existing reserves. To the knowledge
of such party, neither such party nor any Subsidiary of such party is
delinquent in the payment of any material tax, assessment or governmental
charge shown to be due on any Return (taking into account extensions properly
obtained), and no waiver of the time to assess or collect any tax granted in
writing by such party or any Subsidiary of such party is pending. The
federal and state income tax returns of such party and the Subsidiaries of
such party have been audited and finally settled by the IRS or appropriate
state tax authorities or the relevant statute of limitations has expired for
all periods ended through December 31, 1991, or the period for assessment of
taxes in respect of such periods has expired.
(m) Employee Benefit Plans; ERISA. (i) Such party's Disclosure
Schedule sets forth a true and complete list of each material employee or
director benefit plan, arrangement or agreement (including, without
limitation, stock purchase, stock option, severance, employment, change in
control, fringe benefit, collective bargaining, bonus, incentive, deferred
compensation and all other employee benefit plans, agreements, programs,
policies or other arrangements, whether or not subject to ERISA) that is
maintained, or contributed to, as of the date of this Agreement (the "Benefit
Plans") by such party or any of its Subsidiaries or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), all of which together
with such party would be deemed a "single employer" within the meaning of
Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(ii) Such party has made available to the other party true and
complete copies of each of such party's Benefit Plans and certain related
documents, including, but not limited to, (A) the actuarial report for such
party's Benefit Plans (if applicable) for each of the last two years, and (B)
the most recent determination letter from the IRS (as defined herein) (if
applicable) for such plan.
(iii) Except as would not reasonably be expected to have a
Material Adverse Effect (A) each of such party's Benefit Plans has been
operated and administered in all material respects in accordance with their
terms and with applicable laws, including, but not limited to, ERISA and the
Code, (B) each of such party's Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a favorable
determination letter with respect to such qualified status, or such Benefit
Plans shall be submitted for such determination in a timely fashion and there
are no existing circumstances or events that have occurred that could
reasonably be expected to adversely affect the qualified status of any such
plan, (C) with respect to each Benefit Plan of such party which is subject to
Title IV of ERISA, the present value of accrued benefits under such Plan,
<PAGE>
based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such Plan's actuary with respect to such
Plan, did not, as of its latest valuation date, exceed the then current value
of the assets of such Plan allocable to such secured benefits, (D) no Benefit
Plan of such party provides benefits, including, without limitation, death or
medical benefits (whether or not insured), with respect to current or former
employees or directors of such party or its Subsidiaries beyond their
retirement or other termination of service, other than (1) coverage mandated
by applicable law, (2) death benefits or retirement benefits under any
"employee pension plan" (as such term is defined in Section 3(2) of ERISA),
(3) deferred compensation benefits accrued as liabilities on the books of
such party or its Subsidiaries or (4) benefits the full cost of which is
borne by the current or former employee or director (or his beneficiary), (E)
no material liability under Title IV of ERISA has been incurred by such
party, its Subsidiaries or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that could reasonably be expected to present a
material risk to such party, its Subsidiaries or any ERISA Affiliate of such
party incurring a material liability thereunder (other than the payment of
premiums and funding obligations in the ordinary course of business), (F) no
Benefit Plan is a "multiemployer pension plan" (as such term is defined in
Section 3(37) of ERISA), (G) all contributions or other amounts payable by
such party or its Subsidiaries as of the Effective Time with respect to each
Benefit Plan in respect of current or prior plan years have been paid or
accrued in accordance with GAAP and Section 412 of the Code, (H) neither such
party nor its Subsidiaries has engaged in a transaction with respect to such
party's Benefit Plans in connection with which such party or its Subsidiaries
reasonably could be subject to either a material civil penalty accessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant
to Section 4975 or 4976 of the Code, and (I) to the best knowledge of such
party, there are no pending, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the Benefit
Plans of such party or any trusts related thereto.
(iv) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (A) result in any
material payment (including, without limitation, severance, unemployment
compensation, "excess parachute payment" (within the meaning of Section 280G
of the Code), forgiveness of indebtedness or otherwise) becoming due to any
director or any employee of such party or any of its Subsidiaries under any
Benefit Plan of such party or otherwise, (B) materially increase any benefits
otherwise payable under any Benefit Plan of such party or (C) result in any
acceleration of the time of payment or vesting of any such benefits to any
material extent. Notwithstanding the foregoing, neither the execution of
this Agreement nor the consummation of the transactions contemplated hereby
will constitute or be deemed a "Change of Control" within the meaning of the
Firstar Supplemental Retirement Plan for Key Executives and the Firstar
Corporation Pension Plan.
(n) Accounting, Tax and Regulatory Matters. Neither such party
nor any Subsidiary of such party has taken or agreed to take any action or
has any knowledge of any fact or circumstance that would (i) prevent the
Reincorporation Merger or the Second Step Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code, (ii)
prevent the transactions contemplated hereby from qualifying as a "pooling of
interests" for accounting and financial reporting purposes or (iii)
materially impede or delay receipt of any approval referred to in Section
<PAGE>
7.1(b) or the consummation of the transactions contemplated by this
Agreement.
(o) State Takeover Statutes; Articles of Incorporation; Rights
Agreement. (i) The transactions contemplated by this Agreement are not
subject to, or have been exempted from, any applicable state law which
purports to limit or restrict business combinations or the ability to acquire
or to vote shares.
(ii) The transactions contemplated by this Agreement and the
agreements contemplated hereby are not, and will not be, prohibited by, or
have been exempted from, such party's Articles of Incorporation.
(iii) Such party has taken all necessary steps (A) to render the
Star Rights Agreement or the Firstar Rights Agreement, as applicable,
inapplicable to the Merger and the transactions contemplated by this
Agreement and by the Star Stock Option Agreement and the Firstar Stock Option
Agreement, as applicable (including, such that the Rights related thereto
will not be distributed, become exercisable or be triggered in any way as a
result of the execution of this Agreement or the applicable stock option
agreement or the consummation of the transactions contemplated hereby or
thereby) and (B) to cause the Rights issued under the applicable Rights
Agreement to expire immediately prior to the First Effective Time.
(p) Conduct of Such Party to Date. From and after January 1, 1998
through the date of this Agreement, except as would not reasonably be
expected to have a Material Adverse Effect on such party or as reflected in
such party's Financial Statements: (i) such party and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
consistent with past practices; (ii) such party has not issued, sold,
granted, conferred or awarded any of its Equity Securities, or any corporate
debt securities which would be classified under GAAP as long-term debt on the
balance sheets of such party; (iii) such party has not effected any stock
split or adjusted, combined, reclassified or otherwise changed its
capitalization (other than, with respect to Firstar, the redemption of its
Series D Preferred Stock); (iv) such party has not declared, set aside or
paid any dividend (other than its regular quarterly or regular semi-annual
common dividends or, with respect to Firstar, regular dividends paid on its
Series D Preferred Stock prior to the redemption thereof) or other
distribution in respect of its capital stock, or purchased, redeemed,
retired, repurchased, or exchanged, or otherwise acquired or disposed of,
directly or indirectly, any of its Equity Securities, whether pursuant to the
terms of such Equity Securities or otherwise (other than, with respect to
Firstar, the redemption of its Series D Preferred Stock); (v) neither such
party nor any Subsidiary has incurred any obligation or liability (absolute
or contingent), except normal trade or business obligations or liabilities
incurred in the ordinary course of business, or subjected to Lien any of its
assets or properties other than in the ordinary course of business consistent
with past practice; (vi) neither such party nor any Subsidiary has discharged
or satisfied any Lien or paid any obligation or liability (absolute or
contingent), other than in the ordinary course of business; (vii) neither
such party nor any Subsidiary has sold, assigned, transferred, leased,
exchanged, or otherwise disposed of any of its properties or assets other
than for a fair consideration in the ordinary course of business; (viii)
except as required by contract or law, neither such party nor any Subsidiary
has (A) increased the rate of compensation of, or paid any bonus to, any of
its directors, officers, or other employees, except merit or promotion
<PAGE>
increases in accordance with existing policy, (B) entered into any new, or
amended or supplemented any existing, employment, management, consulting,
deferred compensation, severance, or other similar contract, (C) entered
into, terminated, or substantially modified any of its Benefit Plans or (D)
agreed to do any of the foregoing; (ix) neither such party nor any Subsidiary
has suffered any damage, destruction, or loss, whether as the result of fire,
explosion, earthquake, accident, casualty, labor trouble, requisition, or
taking of property by any Regulatory Authority, flood, windstorm, embargo,
riot, act of God or the enemy, or other casualty or event, and whether or not
covered by insurance; (x) neither such party nor any Subsidiary has cancelled
or compromised any debt, except for debts charged off or compromised in
accordance with the past practice of such party and its Subsidiaries; and
(xi) neither such party nor any Subsidiary of such party has entered into any
transaction, contract or commitment outside the ordinary course of its
business.
(q) Year 2000 Compliant. None of such party or any of its
Subsidiaries has received, or reasonably expects to receive, a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR 98-3(SUP), dated March 4,
1998). Such party has disclosed to the other party a complete and accurate
copy of such party's plan for addressing the issues set forth in the
statements of the Federal Financial Institutions Examination Council, dated
May 5, 1997, entitled "Year 2000 Project Management Awareness," and December
1997, entitled "Safety and Soundness Guidelines Concerning the Year 2000
Business Risk," as such issues affect such party and its Subsidiaries.
Between the date of this Agreement and the Effective Time, such party shall
use commercially practicable efforts to implement such plan.
(r) Investment Securities. Except as would not reasonably be
expected to have a Material Adverse Effect on such party, each of such party
and its Subsidiaries has good and marketable title to all securities held by
it (except securities sold under repurchase agreements or held in a fiduciary
or agency capacity), free and clear of any Lien, except to the extent such
securities are pledged in the ordinary course of business consistent with
prudent banking practices to secure obligations of such party or any of its
Subsidiaries. Such securities are valued on the books of such party in
accordance with GAAP.
(s) Interest Rate Risk Management Instruments. Except as would
not reasonably be expected to have a Material Adverse Effect on such party,
all interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements, whether entered into for the
account of such party or for the account of a customer of such party or one
of its Subsidiaries, were entered into in the ordinary course of business
and, to such party's knowledge, in accordance with prudent banking practice
and applicable rules, regulations and policies of any Regulatory Authority
and with counterparties believed to be financially responsible at the time
and are legal, valid and binding obligations of such party or one of its
Subsidiaries enforceable in accordance with their terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies), and are in full force and effect. Except as would not reasonably
be expected to have a Material Adverse Effect on such party, such party and
each of its Subsidiaries have duly performed in all respects all of their
obligations thereunder to the extent that such obligations to perform have
<PAGE>
accrued; and, to such party's knowledge, there are no breaches, violations or
defaults or allegations or assertions of such by any party thereunder.
(t) Insurance. Except as would not reasonably be expected to have
a Material Adverse Effect on such party, such party and its Subsidiaries have
in effect insurance coverage with reputable insurers which, in respect of
amounts, premiums, types and risks insured, constitutes reasonably adequate
coverage against all risks customarily insured against by bank holding
companies and their subsidiaries comparable in size and operations to such
party and its Subsidiaries.
(u) Agreements with Bank Regulators. Neither such party nor any
of its Subsidiaries is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of, any Regulatory Authority which restricts
materially the conduct of its business, or in any manner relates to its
capital adequacy, its credit policies or its management, nor has such party
been advised by any Regulatory Authority that is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission, or any such
board resolutions.
ARTICLE V
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
Section 5.1 Conduct of Businesses Prior to the Effective Time.
Except as provided for in Section 5.2 of this Agreement, during the period
from the date of this Agreement to the Effective Time, each of Star and
Firstar shall, and shall cause each of their respective Subsidiaries to,
conduct its business according to the ordinary and usual course consistent
with past practices and shall, and shall cause each such Subsidiary to, use
its reasonable best efforts to maintain and preserve its business
organization, employees and advantageous business relationships and retain
the services of its officers and key employees.
Section 5.2 Forbearances. Except as set forth on Schedule 5.2, as
otherwise contemplated or permitted by this Agreement (including the
Disclosure Schedules) and the Option Agreements or as referred to in any Star
Reports or Firstar Reports publicly filed with the SEC prior to the date
hereof, during the period from the date of this Agreement to the Effective
Time, Firstar shall not and shall not permit its Subsidiaries to, without the
prior written consent of Star (which consent shall not be unreasonably
withheld), and Star shall not and shall not permit any of its Subsidiaries
to, without the prior written consent of Firstar (which consent shall not be
unreasonably withheld):
(a) declare, set aside or pay any dividends or other
distributions, directly or indirectly, in respect of its capital stock
(other than dividends from a wholly owned Subsidiary of such party to
such party or another wholly owned Subsidiary of such party), except
that (i) Star may pay quarterly cash dividends on Star Common Stock in
an amount not to exceed the rate payable on such Star Common Stock as of
<PAGE>
the date hereof, and (ii) Firstar may pay quarterly cash dividends on
Firstar Common Stock in an amount not to exceed the rate payable on such
Firstar Common Stock as of the date hereof (together with any rate
increase consistent with past practice); or
(b) except as disclosed on such party's Disclosure Schedule, enter
into or amend any employment, severance or similar agreement or
arrangement with any director or officer or employee or collective
bargaining agreement, or materially modify any of its Benefit Plans or
grant any salary or wage increase or materially increase any employee
benefit (including incentive or bonus payments), except normal
individual increases in compensation to employees consistent with past
practice or (ii) as required by law or contract; or
(c) authorize, recommend, propose, or announce an intention to
authorize, so recommend or propose, or enter into an agreement in
principle with respect to, any merger, consolidation or business
combination, any acquisition or disposition of a material amount of
assets, including mortgage servicing rights, loans or securities as well
as any release or relinquishment of any material contract rights (except
in the usual course of business consistent with past practices)
provided, however, that the foregoing shall not prohibit internal
reorganizations or consolidations involving existing Subsidiaries; or
(d) except for transactions in the ordinary course of business
consistent with past practice, enter into or terminate any material
contract or agreement, or make any change in any of its material leases
or contracts, other than renewals of contracts and leases without
material adverse changes of terms;
(e) settle any material claim, action or proceeding involving
money damages, except in the ordinary course of business consistent with
past practice;
(f) propose or adopt any amendments to its articles of
incorporation, association or other charter document or bylaws or code
of regulations; or
(g) issue, sell, grant, confer or award any of its Equity
Securities or any debt securities having the right to vote on matters on
which stockholders may vote or purchase, redeem, retire, repurchase, or
exchange, or otherwise acquire or dispose of, directly or indirectly,
any of its Equity Securities, whether pursuant to the terms of such
Equity Securities or otherwise (except for (i) shares of Firstar Common
Stock or Star Common Stock, as applicable, issued upon exercise of
Firstar Stock Options or Star Stock Options, respectively, outstanding
on the date of this Agreement or issued in accordance with this
paragraph (g), (ii) pursuant to the Option Agreements, (iii) any such
transactions between a wholly-owned Subsidiary and its parent, (iv) in
accordance with the Firstar and Star Stock Plans consistent with past
practice, (v) as agent for stockholders reinvesting dividends pursuant
to a dividend reinvestment plan in accordance with the terms thereof as
in effect on the date of this Agreement, (vi) for the acquisition of
Trust Account Shares and DPC Shares, (vii) with respect to Firstar, any
repurchases of Firstar Common Stock to maintain a pool of up to 500,000
shares in the form of treasury shares for the purpose of reissuing upon
the exercise of Firstar Stock Options, or (viii) in the ordinary course
<PAGE>
of business consistent with past practice (such party agreeing to
promptly notify the other party of any such transactions)) or effect any
stock split or adjust, combine, reclassify or otherwise change its
equity capitalization as it existed on the date of this Agreement; or
(h) solicit, encourage or authorize any individual, corporation or
other entity to solicit or encourage from any third party any inquiries
or proposals relating to the disposition of its business or assets, or
the acquisition of its voting securities, or the merger of it or any of
its Subsidiaries with any corporation or other entity other than as
provided by this Agreement (and each party shall promptly notify the
other of all of the relevant details relating to all inquiries and
proposals which it may receive relating to any of such matters); or
(i) take any action that would (i) materially adversely affect,
impede or delay the consummation of the transactions contemplated by
this Agreement and the Option Agreements or the ability of Star or
Firstar to obtain any approval of any Regulatory Authority required for
the transactions contemplated by this Agreement and the Option
Agreements or to perform its covenants and agreements under this
Agreement and the Option Agreements, (ii) prevent the Reincorporation
Merger or the Second Step Merger from qualifying as a "reorganization"
within the meaning of Section 368(a) of the Code or (iii) prevent the
transactions contemplated hereby from qualifying as a "pooling of
interests" for accounting and financial reporting purposes; or
(j) other than in the ordinary course of business consistent with
past practice and other than indebtedness of up to $800 million incurred
by Firstar and its Subsidiaries to fund Firstar's purchase from Cargill
Corporation of Cargill Leasing and to redeem Firstar's $100 million
aggregate principal amount of 7.15% Notes due September 1, 2000, and
indebtedness of up to $100 million under Firstar's bank facilities for
liquidity purposes incur any indebtedness for borrowed money (other than
short-term indebtedness incurred to refinance short-term indebtedness
and indebtedness of Star or any of its wholly-owned Subsidiaries to Star
or any of its wholly-owned Subsidiaries, on the one hand, or of Firstar
or any of its wholly-owned Subsidiaries to Firstar or any of its wholly-
owned Subsidiaries, on the other hand), assume, guarantee, endorse or
otherwise as an accommodation become responsible or liable for the
obligations of any other individual, corporation or other entity (it
being understood and agreed that incurrence of indebtedness in the
ordinary course of business shall include, without limitation, the
creation of deposit liabilities, purchases of Federal funds, sales of
certificates of deposit and entering into repurchase agreements); or
(k) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by GAAP or
regulatory guidelines; or
(l) other than the sale of up to $250 million of treasury
securities by Firstar and its Subsidiaries, materially restructure or
materially change its investment securities portfolio, through
purchases, sales or otherwise, or the manner in which the portfolio is
classified or reported as of the date of the Agreement; or
(m) except as required by applicable law or regulation, (i)
implement or adopt, any material change in its interest rate and other
<PAGE>
risk management policies, procedures or practices, (ii) fail to follow
in any material respect its existing policies or practices with respect
to managing its exposure to interest rate and other risk or (iii) fail
to use commercially reasonable means to avoid any material increase in
its aggregate exposure to interest rate risk; or
(n) take any action or make any determination the effect of which
would result in the transactions contemplated by this Agreement
constituting or being deemed to be a "Change in Control" within the
meaning of the Firstar Supplemental Retirement Plan for Key Executives
and the Firstar Corporation Pension Plan or
(o) agree in writing or otherwise to take any of the foregoing
actions.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Access and Information. Upon reasonable notice and
subject to applicable laws relating to the exchange of information, Star and
its Subsidiaries, on the one hand, and Firstar and its Subsidiaries, on the
other hand, shall each afford to each other, and to the other's accountants,
counsel and other representatives, access during normal business hours,
during the period prior to the Effective Time, to all their respective
employees, properties, books, contracts, commitments and records and, during
such period, each shall furnish reasonably promptly to the other (i) a copy
of each report, schedule and other document filed or received by it during
such period pursuant to the requirements of federal and state securities and
banking laws (other than any such documents which such party is not permitted
to disclose under applicable laws) and including, but not limited to, copies
of internal quarterly reserve analyses, credit quality assessments and credit
information as set forth in Schedule 6.1 (ii) all other existing or regularly
produced information concerning its business, properties and personnel, in
the case of (i) and (ii) as such other party may reasonably request. Neither
Star nor Firstar nor any of their respective Subsidiaries shall be required
to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of Star's or Firstar's, as
the case may be, customers, jeopardize the attorney-client privilege of the
institution in possession or control of such information or contravene any
law, rule, regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The parties
hereto will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
Section 6.2 Registration Statement; Regulatory Matters. (a) The
parties shall prepare and file with the SEC as soon as is reasonably
practicable the Registration Statement (or the equivalent in the form of
preliminary proxy material) with respect to the shares of Foxtrot (DE) Common
Stock to be issued in the Reincorporation Merger and the Second Step Merger
and shall apply to the NYSE to list the shares of Foxtrot (DE) Common Stock
to be issued in connection with the transactions contemplated by this
Agreement. The parties shall prepare and file a notice with the Board as
soon as reasonably practicable. The parties shall use all reasonable efforts
to cause the Registration Statement to become effective. The parties shall
also take any action required to be taken under any applicable state blue sky
<PAGE>
or securities laws in connection with the issuance of such shares, and
Firstar and Star shall furnish all information concerning their respective
Subsidiaries and the stockholders thereof as may reasonably be requested in
connection with any such action.
(b) The parties hereto shall cooperate with each other and use
their reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Regulatory Authorities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Reincorporation Merger and the
Second Step Merger), and to comply with the terms and conditions of all such
permits, consents, approvals and authorizations of all such Regulatory
Authorities. Star and Firstar shall have the right to review in advance,
and, to the extent practicable, each will consult with the other on, in each
case subject to applicable laws relating to the exchange of information, all
the information relating to Star or Firstar, as the case may be, and any of
their respective Subsidiaries, which appear in any filing made with, or
written materials submitted to, any third party or any Regulatory Authority
in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto shall act
reasonably and as promptly as practicable. The parties hereto agree that
they will consult with each other with respect to the obtaining of all
permits, consents, approvals and authorizations of all third parties and
Regulatory Authorities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other apprised of
the status of matters relating to the completion of the transactions
contemplated herein.
(c) Star and Firstar shall, upon request, furnish each other with
all information concerning themselves, their Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement, the
Registration Statement or any other statement, filing, notice or application
made by or on behalf of Star, Firstar or any of their respective Subsidiaries
to any Regulatory Authority in connection with the Reincorporation Merger and
the Second Step Merger and the other transactions contemplated by this
Agreement.
(d) Star and Firstar shall promptly advise each other upon
receiving any communication from any Regulatory Authority whose consent or
approval is required for consummation of the transactions contemplated by
this Agreement which causes such party to believe that there is a reasonable
likelihood that any requisite approval of any Regulatory Authority will be
denied or materially delayed.
Section 6.3 Stockholder Approval. In accordance with applicable
law and stock exchange rules and its respective Articles of Incorporation and
By-Laws or Code of Regulations, each of the parties shall call a meeting of
their respective stockholders to be held as soon as practicable after the
Registration Statement is declared effective for the purpose of voting upon
the Reincorporation Merger and the Second Step Merger, as applicable, and to
take any other action for stockholders to authorize the transactions
contemplated by this Agreement (each, a "Meeting"). In connection therewith,
the parties shall prepare the Proxy Statement and, with the approval of each
of Star and Firstar, the Proxy Statement shall be filed with the SEC and
<PAGE>
mailed to the respective stockholders of the parties. The parties'
respective Boards of Directors shall submit for approval of their respective
stockholders the matters to be voted upon in order to authorize the Merger.
The respective Board of Directors of the parties shall use their reasonable
best efforts to obtain any vote of their respective stockholders that is
necessary for the approval and adoption of this Agreement and consummation of
the transactions contemplated hereby.
Section 6.4 Current Information. During the period from the date
of this Agreement to the Effective Time, each party shall promptly furnish
the other with copies of all monthly and other interim financial statements
as the same become available and shall cause one or more of its designated
representatives to confer on a regular and frequent basis with
representatives of the other party. Each party shall promptly notify the
other party of any material change in its business or operations and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or, to its
knowledge, the threat of material litigation involving such party, and shall
keep the other party fully informed of such events.
Section 6.5 Agreements of Affiliates. (a) Not later than the
15th day prior to the mailing of the Proxy Statement, Firstar shall deliver
to Star and Star shall deliver to Firstar, a schedule of each person that, to
the best of its knowledge, is or is reasonably likely to be, as of the date
of the relevant Meeting, deemed to be an "affiliate" of it (each, an
"Affiliate") as that term is used in SEC Accounting Series Releases 130 and
135 and Rule 145 under the Securities Act.
(b) Firstar and Star shall each use its respective reasonable best
efforts to cause each person who may be deemed to be an Affiliate of Firstar
or Star, as the case may be, to execute and deliver to Firstar and Star on or
before the date of their respective Meetings an agreement to comply with SEC
Accounting Series Releases 130 and 135 and with Rule 145 under the Securities
Act. Such agreements shall be in the forms set forth in Exhibit E (in the
case of Firstar) and Exhibit F (in the case of Star).
(c) The Surviving Corporation shall use its reasonable best
efforts to publish as promptly as reasonably practical, but in no event later
than 45 days after the end of the first month after the Effective Time in
which there are at least 30 days of post-Merger combined operations (which
month may be the month in which the Effective Time occurs), combined sales
and net income figures as contemplated by and in accordance with the terms of
SEC Accounting Series Release No. 135.
Section 6.6 Expenses. Each party hereto shall bear its own
expenses incident to preparing, entering into and carrying out this Agreement
and to consummating the Merger provided that the expenses of Foxtrot (DE)
related to the preparation, filing and mailing of the Proxy Statement and the
Registration Statement shall be shared equally by the parties.
Section 6.7 Securities Act and Exchange Act Filings. (a) The
Surviving Corporation shall make all filings with the SEC that are described
in Section (c) of Rule 144 under the Securities Act for a period of two years
following the Effective Time.
(b) The parties shall cause Foxtrot (DE) to take all corporate
action necessary to reserve for issuance a sufficient number of shares of
<PAGE>
Foxtrot (DE) Common Stock for delivery upon exercise of Star Stock Options
and Firstar Stock Options assumed by it in accordance with Sections 1.6 and
2.6. As soon as practicable after the Effective Time, the parties shall
cause Foxtrot (DE) to file a registration statement on Form S-3 or Form S-8,
as the case may be (or any successor or other appropriate forms), or another
appropriate form with respect to the shares of Foxtrot (DE) Common Stock
subject to such options and to use its reasonable best efforts 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 options remain outstanding. With respect to
those individuals who subsequent to the Merger will be subject to the
reporting requirements under Section 16(a) of the Exchange Act, where
applicable, the parties shall cause Foxtrot (DE) to administer the Star Stock
Plans and Firstar Stock Plans assumed pursuant to Sections 1.6 and 2.6 in a
manner that complies with Rule 16b-3 promulgated under the Exchange Act to
the extent such plans complied with such rule prior to the Merger.
Section 6.8 Miscellaneous Agreements and Consents. (a) Subject
to the terms and conditions herein provided, each of the parties hereto
agrees to use its respective reasonable best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement as
expeditiously as possible, including, without limitation, using its
respective reasonable best efforts to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby. Each party
shall, and shall cause each of its respective Subsidiaries to, use its
reasonable best efforts to obtain consents of all third parties necessary or,
as agreed to by the parties, desirable for the consummation of the
transactions contemplated by this Agreement.
(b) The parties shall, prior to the Effective Time, (i) consult
and cooperate with each other regarding the implementation of those policies
and procedures to be established by Foxtrot (DE) for its operations,
including, without limitation, policies and procedures pertaining to the
accounting, asset/liability management, audit, credit, human resources,
treasury and legal functions, and (ii) shall make such modifications or
changes to their policies and practices, if any, and at such date prior to or
as of the Effective Time, as may be mutually agreed upon. Star and Firstar
shall also consult with respect to the character, amount and timing of
restructuring charges to be taken by each of them in connection with the
transactions contemplated hereby and shall take such charges in accordance
with GAAP, as may be mutually agreed upon. No party's representations,
warranties and covenants contained in this Agreement shall be determined to
be untrue or breached in any respect for any purpose as a consequence of any
modifications or changes to such policies and practices which may be
undertaken on account of this Section 6.8(b).
Section 6.9 Employee Benefit Plans. (a) From and after the
Effective Time, unless otherwise mutually determined, the Firstar Benefit
Plans and Star Benefit Plans in effect as of the date of this Agreement shall
remain in effect with respect to employees of Firstar or Star (or their
Subsidiaries), respectively, covered by such Plans at the Effective Time
until such time as the Surviving Corporation shall, subject to applicable
law, the terms of this Agreement and the terms of such Plans, adopt new
benefits with respect to employees of the Surviving Corporation and its
<PAGE>
Subsidiaries (the "New Benefit Plans"). Prior to the Closing Date, Firstar
and Star shall cooperate in reviewing, evaluating and analyzing the Star
Benefit Plans and Firstar Benefit Plans with a view towards developing
appropriate New Benefit Plans for the employees covered thereby subsequent to
the consummation of the Merger. It is the intention of Firstar and Star to
develop New Benefit Plans, as soon as reasonably practicable after the
Effective Time, which, among other things, (i) treat similarly situated
employees on a substantially equivalent basis, taking into account all
relevant factors, including, without limitation, duties, geographic location,
tenure, qualifications and abilities, and (ii) do not discriminate between
employees of the Surviving Corporation who were covered by Firstar Benefit
Plans, on the one hand, and those covered by Star Benefit Plans, on the
other, at the Effective Time.
(b) The foregoing not withstanding, the Surviving Corporation
agrees to honor in accordance with their terms all benefits vested as of the
date hereof under the Star Benefit Plans or the Firstar Benefit Plans or
under other contracts, arrangements, commitments, or understandings described
in the Star Disclosure Schedule and the Firstar Disclosure Schedule.
(c) Nothing in this Section 6.9 shall be interpreted as preventing
the Surviving Corporation from amending, modifying or terminating any Star
Benefit Plans, Firstar Benefit Plans, or other contracts, arrangements,
commitments or understandings, in accordance with their terms and applicable
law.
Section 6.10 D&O Indemnification. (a) In the event of any
threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without limitation, any
such claim, action, suit, proceeding or investigation in which any individual
who is now, or has been at any time prior to the date of this Agreement, or
who becomes prior to the Effective Time, a director or officer of Star,
Firstar, Foxtrot (DE) or any of their respective Subsidiaries, including any
entity specified in the Star Disclosure Schedule or the Firstar Disclosure
Schedule (the "Indemnified Parties"), is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director or officer of Star,
Firstar, Foxtrot (DE) or any of their respective Subsidiaries or any entity
specified in the Star Disclosure Schedule or the Firstar Disclosure Schedule
or any of their respective predecessors or (ii) this Agreement, the Option
Agreements or any of the transactions contemplated hereby or thereby, whether
in any case asserted or arising before or after the Effective Time, the
parties hereto agree to cooperate and use their best efforts to defend
against and respond thereto. It is understood and agreed that after the
Effective Time, Foxtrot (DE) shall indemnify and hold harmless, as and to the
fullest extent permitted by law, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable
attorney's fees and expenses), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claims, action,
suit, proceeding or investigation, and in the event of any such threatened or
actual claim, action, suit, proceeding or investigation (whether asserted or
arising before or after the Effective Time); and Foxtrot (DE), after
consultation with an Indemnified Party, shall retain counsel and direct the
defense thereof, provided, however, that by virtue of the obligations herein
set forth, (A) Foxtrot (DE) shall not be liable to any Indemnified Party for
any legal expenses of other counsel or any other expenses incurred by any
Indemnified Party in connection with the defense thereof, except that if
<PAGE>
Foxtrot (DE) fails or elects not to assume such defense or counsel for the
Indemnified Parties reasonably advises the Indemnified Parties that there are
issues which raise conflicts of interest between Foxtrot (DE) and the
Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with Foxtrot (DE), and Foxtrot (DE)
shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received, (B) Foxtrot
(DE) shall be obligated pursuant to this paragraph to pay for only one firm
of counsel (in addition to local counsel in each applicable jurisdiction) for
all Indemnified Parties, unless an Indemnified Party shall have reasonably
concluded, based on the advice of counsel and after consultation with Foxtrot
(DE), that in order to be adequately represented, separate counsel is
necessary for such Indemnified Party, in which case, Foxtrot (DE) shall be
obligated to pay for such separate counsel, (C) Foxtrot (DE) shall not be
liable for any settlement effected without its prior written consent (which
consent shall not be unreasonably withheld) and (D) Foxtrot (DE) shall have
no obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination
shall have become final and nonappealable, that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by
applicable law. Foxtrot (DE) shall, to the fullest extent permitted by law,
advance expenses to such Indemnified Parties prior to final disposition of
any claim, suit, proceeding, or investigation upon receipt of an undertaking
to repay any such advances of fees and expenses if such person is ultimately
found not to be entitled to indemnification therefor. Any Indemnified Party
wishing to claim Indemnification under this Section 6.10, upon learning of
any such claim, action, suit, proceeding or investigation, shall notify
Foxtrot (DE) thereof, provided that the failure to so notify shall not affect
the obligations of Foxtrot (DE) under this Section 6.10 except to the extent
such failure to notify materially prejudices Foxtrot (DE). Foxtrot (DE)'s
obligations under this Section 6.10 shall continue in full force and effect
for a period of six years from the Effective Time (or the period of the
applicable statute of limitations, if longer); provided, however, that all
rights to indemnification in respect of any claim (a "Claim") asserted or
made within such period shall continue until the final disposition of such
Claim.
(b) From and after the Effective Time, the parties shall cause
Foxtrot (DE) to cause the individuals serving as officers and directors of
Star and Firstar, their respective Subsidiaries or any entity specified in
the Star Disclosure Schedule or the Firstar Disclosure Schedule immediately
prior to the Effective Time to be covered for a period for six (6) years from
the Effective Time (or the period of the applicable statute of limitations,
if longer) by the directors' and officers' liability insurance policies
maintained by Star and Firstar, as applicable (provided that Foxtrot (DE) may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than either
of such policies) with respect to acts or omissions occurring prior to the
Effective Time which were committed by such officers and directors in their
capacity as such; provided, however, that in no event shall Foxtrot (DE) be
required to expend more than 200% of the current amount expended by Star and
Firstar (the "Insurance Amount") to maintain or procure insurance coverage
pursuant hereto and provided further that if Foxtrot (DE) is unable to
maintain or obtain the insurance called for in this Section 6.10(b), Foxtrot
(DE) shall use its reasonable best efforts to obtain as much comparable
insurance as available for the Insurance Amount).
<PAGE>
(c) In the event Foxtrot (DE) or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of Foxtrot (DE) assume the obligations set forth in this section.
(d) The provisions of this Section 6.10 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
Section 6.11 Press Releases. Except as may be required by law,
Firstar and Star shall consult and agree with each other as to the form,
substance and timing of any proposed press release relating to this Agreement
or any of the transactions contemplated hereby.
Section 6.12 Pooling of Interests. Each of Star and Firstar
undertakes and agrees to use its reasonable best efforts to cause (i) each of
the Reincorporation Merger and the Second Step Merger to qualify as a
"reorganization" within the meaning of Section 368(a) of the Code, (ii) the
Merger to qualify as a "pooling of interests" for accounting and financial
reporting purposes (in the case of both clause (i) and clause (ii),
including, if necessary, to take reasonable steps to restructure the
transactions contemplated by this Agreement to so qualify and, in the case of
qualification as a "pooling of interests," including, if necessary, seeking
any necessary third party consents) and (iii) the Merger to occur as soon as
practicable.
Section 6.13 Insurance. Each of Star and shall, and Firstar shall
cause its respective Subsidiaries to, use its reasonably best efforts to
maintain its existing insurance.
Section 6.14 Conforming Entries. (a) From and after the date of
this Agreement, Firstar and Star shall consult and cooperate with each other
with respect to conforming the loan, accrual and reserve policies of Firstar
and the Firstar Subsidiaries and such policies of Star and the Star
Subsidiaries to each other.
(b) In addition, from and after the date of this Agreement to the
Effective Time, Firstar and Star shall consult and cooperate with each other
with respect to determining appropriate Firstar and Star accruals, reserves
and charges to establish and take in respect of excess equipment write-off or
write-down of various assets and other appropriate charges and accounting
adjustments taking into account the parties' business plans following the
Merger, based upon such consultation and as hereinafter provided.
(c) Firstar and Star shall consult and cooperate with each other
with respect to determining, based upon such consultation and as hereinafter
provided, the amount and the timing for recognizing for financial accounting
purposes each party's expenses of the Merger and the restructuring charges
relating to or to be incurred in connection with the Merger.
(d) To the extent permissible under applicable laws, regulations,
and requirements of Regulatory Authorities, and provided further, that
neither Firstar nor Star shall be required to take any such action that, in
the opinion of its independent auditors, is not consistent with GAAP and
<PAGE>
regulatory accounting principles if after consultation Firstar and Star
agree, Firstar and Star shall (i) establish and take such reserves and
accruals at such time as are agreed to conform Firstar's and Star's loan,
accrual and reserve policies to the other party's policies, and (ii)
establish and take such accruals, reserves and charges in order to implement
such policies in respect of excess facilities and equipment capacity,
severance costs, litigation matters, write-off or write-down of various
assets and other appropriate accounting adjustments, and to recognize for
financial accounting purposes such expenses of the Merger and restructuring
charges related to or to be incurred in connection with the Merger.
Section 6.15 Additional Actions. In case at any time after the
First Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of any of the parties to the Reincorporation Merger or the Second
Step Merger, as the case may be, the proper officers and directors of each
party to this Agreement and their respective Subsidiaries shall take all such
action as may be reasonably necessary.
Section 6.16 Dividends. (a) After the date of this Agreement,
each of Star and Firstar shall coordinate with the other the payment of
dividends with respect to the Star Common Stock and the Firstar Common Stock
and the record dates and payment dates relating thereto, it being the
intention of the parties hereto that holders of Star Common Stock and Firstar
Common Stock shall not receive two dividends, or fail to receive one
dividend, in any single calendar quarter with respect to their shares of Star
Common Stock and/or Firstar Common Stock or any shares of Foxtrot (DE) Common
Stock that any such holder receives in exchange for such shares of Star
Common Stock or Firstar Common Stock in the Merger.
(b) It is the intention of the parties that the initial post-
closing quarterly dividend rate per share of Foxtrot (DE) Common Stock shall
be equal to the quarterly dividend rate per share of Firstar immediately
prior to Closing divided by 0.76.
Section 6.17 Issuance of Shares. If and to the extent necessary
to reduce the aggregate number of "tainted treasury shares" to a number that
is consistent with the accounting of the Merger as a "pooling of interests"
under GAAP each of Star and Firstar shall, prior to the First Effective Time,
coordinate with the other party with respect to the issuance of, and pursuant
thereto shall issue, shares of Star Common Stock or Firstar Common Stock, as
may be appropriate, in such manner, and limited to such number, as is
necessary.
Section 6.18 Changes in Structure. The parties agree to revise
the structure of the Reincorporation Merger at the request of either Star or
Firstar to provide for a merger of Foxtrot (DE) with and into Firstar, with
Firstar as the surviving corporation in such Merger continuing its corporate
existence under the name "Firstar Corporation" and to be governed by the laws
of the State of Wisconsin provided that such change in structure does not
change the Exchange Rate, the tax consequences or any of the other
substantive terms of the transactions contemplated by this Agreement. In the
event of any such change in structure appropriate adjustments shall be made
to the terms of Exhibits C and D to conform to the requirements of Wisconsin
law.
<PAGE>
Section 6.19 Amending Governance Documents. The parties agree
that they will take whatever action is necessary to amend the Certificate of
Incorporation and By-Laws of Foxtrot (DE) to conform such documents to the
requirements of the DGCL or the WBCL, as applicable.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall
be subject to the fulfillment at or prior to the First Effective Time of the
following conditions:
(a) This Agreement and the transactions contemplated hereby,
including the Second Step Merger, and, in the case of the holders of
Firstar Common Stock, the Reincorporation Merger, shall have been
approved and adopted by the respective requisite affirmative votes of
the holders of Star Common Stock and Firstar Common Stock entitled to
vote thereon.
(b) All requisite approvals of this Agreement and the transactions
contemplated hereby shall have been received from the Board and any
other Regulatory Authority, and all applicable waiting periods shall
have expired under applicable law (other than any such approvals or the
expiration of any such waiting periods which the failure to obtain or
satisfy, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the consummation of the
Merger or a Material Adverse Effect on the Surviving Corporation).
(c) The Registration Statement shall have been declared effective
and shall not be subject to a stop order or any threatened stop order.
(d) None of Firstar, Star nor Foxtrot (DE) shall be subject to any
order, decree injunction, of a court or agency of competent jurisdiction
which enjoins or prohibits the consummation of the Merger.
Reincorporation Merger, the Second Step Merger or any of the other
transactions contemplated by this Agreement. No statute, rule,
regulation, order, injunction or decree shall have been enacted,
entered, promulgated or enforced by any Regulatory Authority which
prohibits, materially restricts or makes illegal consummation of the
Reincorporation Merger or the Second Step Merger.
(e) Star shall have received an opinion of Wachtell, Lipton, Rosen
& Katz and Firstar shall have received an opinion of Simpson Thacher &
Bartlett, in form and substance reasonably satisfactory to Star and
Firstar, respectively, dated the Closing Date, substantially to the
effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts
existing at the Effective Time:
(i) Each of the Reincorporation Merger and the Second
Step Merger will constitute a reorganization under Section 368(a)
of the Code; Firstar and Foxtrot (DE) will each be a party to the
reorganization in respect of the Reincorporation Merger; and
Foxtrot (DE) and Star will each be a party to the reorganization in
respect of the Second Step Merger;
<PAGE>
(ii) No gain or loss will be recognized by Firstar or
Foxtrot (DE) as a result of the Reincorporation Merger or by
Foxtrot (DE) or Star as a result of the Second Step Merger;
(iii) No gain or loss will be recognized by stockholders
of Firstar who receive solely Foxtrot (DE) Common Stock for their
Firstar Common Stock pursuant to the Reincorporation Merger (except
with respect to cash received in lieu of a fractional share
interest in Foxtrot (DE) Common Stock); and
(iv) No gain or loss will be recognized by the
stockholders of Star who exchange their Star Common Stock solely
for Foxtrot (DE) Common Stock pursuant to the Second Step Merger.
In rendering such opinion, counsel may require and rely upon representations
contained in certificates of officers of Firstar, Foxtrot (DE), Star and
others.
(f) The shares of Foxtrot (DE) Common Stock which shall be issued
to the holders of Star Common Stock and Firstar Common Stock (and, where
applicable, Foxtrot (DE) Stock Options) upon consummation of the Merger shall
have been authorized for listing on the NYSE, subject to official notice of
issuance.
(g) Star and Firstar shall have received letters, in form and
substance reasonably satisfactory to each, from Arthur Andersen LLP and KPMG
Peat Marwick LLP, respectively, dated the date of the Proxy Statement and
confirmed in writing at the Effective Time, stating that the Reincorporation
Merger and Second Step Merger, taken together, will qualify as a "pooling of
interests" transaction under Opinion 16 of the Accounting Principles Board,
the interpretive releases issued pursuant thereto and the pronouncements of
the SEC thereon.
Section 7.2 Conditions to Obligations of Firstar to Effect the
Merger. The obligations of Firstar to effect the Merger shall be subject to
the fulfillment or waiver by Firstar at or prior to the First Effective Time
of the following additional conditions:
(a) Representations and Warranties The representations and
warranties of Star set forth in Article IV of this Agreement shall be true
and correct, subject to the standard of Section 4.2, as of the date of this
Agreement and as of the Closing Date (as though made on and as of the Closing
Date except (i) to the extent such representations and warranties are by
their express provisions made as of a specified date or period and (ii) for
the effect of transactions contemplated by this Agreement) and Firstar shall
have received a certificate of the chairman or president of Star, on behalf
of Star, to that effect.
(b) Performance of Obligations. Star shall have performed, in all
material respects, all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Firstar shall have received a
certificate of the chairman or president of Star, on behalf of Star, to that
effect.
Section 7.3 Conditions to Obligations of Star to Effect the
Merger. The obligations of Star to effect the Merger shall be subject to the
<PAGE>
fulfillment or waiver by Star at or prior to the First Effective Time of the
following additional conditions:
(a) Representations and Warranties. The representations and
warranties of Firstar set forth in Article IV of this Agreement shall be true
and correct, subject to the standard of Section 4.2, as of the date of this
Agreement and as of the Closing Date (as though made on and as of the Closing
Date except (i) to the extent such representations and warranties are by
their express provisions made as of a specific date or period and (ii) for
the effect of transactions contemplated by this Agreement) and Star shall
have received a certificate of the chairman or president of Firstar, on
behalf of Firstar, to that effect.
(b) Performance of Obligations. Firstar shall have performed, in
all material respects, all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and Star shall have received
a certificate of the chairman or president of Firstar, on behalf of Firstar,
to that effect.
(c) Consummation of the Reincorporation Merger. The First
Effective Time shall have occurred and the Reincorporation Merger shall have
been consummated.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated at any
time prior to the First Effective Time, whether before or after any requisite
stockholder approval:
(a) by mutual written consent by the Board of Directors of Star,
the Board of Directors of Firstar and the Board of Directors of Foxtrot (DE);
(b) by the Board of Directors of Star or the Board of Directors of
Firstar at any time after the date that is twelve months after the date of
this Agreement if the Merger shall not theretofore have been consummated
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein which
has resulted in the delay in performance of this Agreement);
(c) by the Board of Directors of Star or the Board of Directors of
Firstar if (i) the Board has denied approval of the Merger and such denial
has become final and nonappealable, (ii) stockholders of Firstar shall not
have approved the Merger and the other actions contemplated by this Agreement
at the Meeting provided that Firstar has not breached its obligation under
Section 6.3 or (iii) stockholders of Star shall not have approved the Merger
and the other transactions contemplated by this Agreement at the Meeting
provided that Star has not breached its obligation under Section 6.3;
(d) by the Board of Directors of Star in the event of a breach by
Firstar of any representation or warranty (subject to the standard of Section
4.2), or any covenant or other agreement (in any material respect), contained
in this Agreement which breach is not cured within 90 days after written
notice thereof to Firstar by Star; or
<PAGE>
(e) by the Board of Directors of Firstar in the event of a breach
by Star of any representation or warranty (subject to the standard of Section
4.2), or any covenant or other agreement (in any material respect), contained
in this Agreement which breach is not cured within 90 days after written
notice thereof is given to Star by Firstar.
Section 8.2 Effect of Termination. In the event of termination of
this Agreement pursuant to this Article VIII, this Agreement shall forthwith
become void and there shall be no liability or obligation of any nature
whatsoever hereunder, or in connection with the transactions contemplated
hereby, on the part of Star, Firstar or their respective Subsidiaries or
their respective officers or directors except (i) as set forth in the second
sentence of Section 6.1 and in Section 4.3(j), 6.6, 8.2 and 9.3, (ii) that
termination will not relieve a breaching party from liability for any willful
breach of this Agreement giving rise to such termination and (iii) each of
the Option Agreements shall be governed by its own terms as to termination.
Section 8.3 Amendment. This Agreement and the Schedules hereto
may be amended by the parties hereto, by action taken by or on behalf of
their respective Boards of Directors, at any time before or after approval of
this Agreement by the stockholders of Firstar, Star, and Foxtrot (DE);
provided, however, that after any such approval no such amendment which under
applicable law requires further stockholder approval may be made without such
stockholder approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of Star, Firstar and Foxtrot
(DE).
Section 8.4 Severability. Any term, provision, covenant or
restriction contained in this Agreement held by a court or a Regulatory
Authority of competent jurisdiction or the Board to be invalid, void or
unenforceable shall be ineffective to the extent of such invalidity, voidness
or unenforceability, but neither the remaining terms, provisions, covenants
or restrictions contained in this Agreement nor the validity or
enforceability thereof in any other jurisdiction shall be affected or
impaired thereby. Any term, provision, covenant or restriction contained in
this Agreement that is so found to be so broad as to be unenforceable shall
be interpreted to be as broad as is enforceable.
Section 8.5 Waiver. Any term, condition or provision of this
Agreement may be waived in writing at any time by the party which is, or
whose stockholders are, entitled to the benefits thereof.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Closing. The closing (the "Closing") of the Merger
shall take place at 10:00 a.m., local time, on the date that the Effective
Time (as defined in Section 2.2) occurs, or at such other time, and at such
place, as Star and Firstar shall agree (the "Closing Date").
Section 9.2 Non-Survival of Representations, Warranties and
Agreements. No investigation by the parties hereto made heretofore or
hereafter shall affect the representations and warranties of the parties
which are contained herein and each such representation and warranty shall
survive such investigation. Except as set forth below in this Section 9.2,
all representations, warranties and agreements in this Agreement of Star and
<PAGE>
Firstar or in any instrument delivered by Star or Firstar pursuant to or in
connection with this Agreement shall expire at the Effective Time or upon
termination of this Agreement in accordance with its terms or, in the case of
any other such instrument, in accordance with the terms of such instrument;
provided that, in the event of consummation of the Merger, the covenants and
agreements contained in or referred to in Sections 6.6 and 6.10 and those
covenants and agreements contained herein which by their terms apply in whole
or in part after the Effective Time shall survive the Effective Time.
Section 9.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to be duly received (i) on
the date given if delivered personally, (ii) upon confirmation of receipt, if
by facsimile transmission, (iii) on the date received if mailed by registered
or certified mail (return receipt requested), or (iv) on the business date
after being delivered to a reputable overnight delivery service, if by such
service, to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(i) if to Star:
Star Banc Corporation
425 Walnut Street
Cincinnati, Ohio 45202
ATTN: David Moffett
Telecopier: (513) 6332-4279
Copies to:
Craig M. Wasserman
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopier: (212) 403-2000
(ii) if to Firstar:
Firstar Corporation
Firstar Center
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ATTN: Howard H. Hopwood, III
Telecopier: (414) 765-6111
Copies to:
Gary I. Horowitz
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopier: (212) 465-2502
Henry Carlson
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Telecopier: (414) 297-4900
<PAGE>
Section 9.4 Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of or Exhibit or Schedule to 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". No provision of this
Agreement shall be construed to require Firstar, Star, Foxtrot (DE) or any of
their respective Subsidiaries or affiliates to take or fail to take any
action, including, without limitation, the disclosure or non-disclosure by
either party of any information to its stockholders, which would (or its
failure to have been taken would) reasonably be expected to violate any
applicable law, legal duty, rule or regulation.
Section 9.5 Miscellaneous. This Agreement (including the
Disclosure Schedules and Schedules and other written documents referred to
herein or provided hereunder) (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof, other than any confidentiality agreement between the parties hereto,
(ii) except with respect to Section 6.10 is not intended to confer upon any
person not a party hereto any rights or remedies hereunder, (iii) shall not
be assigned by operation of law or otherwise, (iv) may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each of the
parities and delivered to the other parties, it being understood that all
parties need not sign the same counterparts, and (v) shall be governed in all
respects by the laws of the State of New York, except as otherwise
specifically provided herein or required by the DGCL, the OGCL or the WBCL.
This Agreement may be delivered by facsimile. Subject to the preceding
clause (iii), this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and
assigns.
IN WITNESS WHEREOF, Star, Firstar and Foxtrot (DE) have caused this
Agreement to be signed as of the date first written above.
STAR BANC CORPORATION
By: /s/ Jerry A. Grundhofer
--------------------------------------
Name: Jerry A. Grundhofer
Title: Chairman of the Board, President and
Chief Executive Officer
FIRSTAR CORPORATION
By: /s/ Roger Fitzsimonds
--------------------------------------
Name: Roger L. Fitzsimonds
Title: Chairman and Chief Executive Officer
FOXTROT (DE) CORPORATION
By: /s/ Roger Fitzsimonds
--------------------------------------
Name: Roger L. Fitzsimonds
Title: Chairman and Chief Executive Officer
EXHIBIT 10.1
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated June 30, 1998, between Firstar
Corporation, a Wisconsin corporation ("Issuer"), and Star Banc Corporation,
an Ohio corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan
of Reorganization of even date herewith (the "Merger Agreement"), which
agreement has been executed by the parties hereto immediately prior to this
Stock Option Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee
the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof,
up to 28,963,830 fully paid and non-assessable (subject to Section
180.0622(2)(b) of the Wisconsin statutes) shares of Issuer's Common Stock,
par value $1.25 per share ("Common Stock"), at a price of $39.00 per share
(the "Option Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable exceed 19.9% of
the Issuer's issued and outstanding shares of Common Stock without giving
effect to any shares subject to or issued pursuant to the Option. The number
of shares of Common Stock that may be received upon the exercise of the
Option and the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
either (i) issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of
the Agreement, the number of shares of Common Stock subject to the Option
shall be increased or decreased, as appropriate, so that, after such
issuance, such number equals 19.9% of the number of shares of Common Stock
then issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, both an
Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering
Event (as hereinafter defined) shall have occurred prior to the occurrence of
an Exercise Termination Event (as hereinafter defined), provided that the
Holder shall have sent the written notice of such exercise (as provided in
<PAGE>
subsection (e) of this Section 2) within 90 days following such Subsequent
Triggering Event. Each of the following shall be an "Exercise Termination
Event": (i) the Effective Time (as defined in the Merger Agreement) of the
Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event except a termination by Grantee pursuant to Section
8.1(d) of the Merger Agreement (unless the breach by Issuer giving rise to
such right of termination is non-volitional); or (iii) the passage of 12
months after termination of the Merger Agreement if such termination follows
the occurrence of an Initial Triggering Event or is a termination by Grantee
pursuant to Section 8.1(d)of the Merger Agreement (unless the breach by
Issuer giving rise to such right of termination is non-volitional) (provided
that if an Initial Triggering Event continues or occurs beyond such
termination and prior to the passage of such 12-month period, the Exercise
Termination Event shall be 12 months from the expiration of the Last
Triggering Event but in no event more than 18 months after such termination).
The "Last Triggering Event" shall mean the last Initial Triggering Event to
expire. The term "Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Significant Subsidiaries (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC"))(each an "Issuer Subsidiary"), without having
received Grantee's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the rules and regulations thereunder) other than Grantee or
any of its subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the stockholders of
Issuer approve or accept any Acquisition Transaction. For purposes of
this Agreement, "Acquisition Transaction" shall mean (w) a merger or
consolidation, or any similar transaction, involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC")) of
Issuer, (x) a purchase, lease or other acquisition or assumption of 25%
or more of the assets or deposits of Issuer and its Significant
Subsidiaries taken as a whole, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise)
of securities representing 10% or more of the voting power of Issuer, or
(z) any substantially similar transaction; provided, however, that in no
event shall any merger, consolidation, purchase or similar transaction
(I) involving only the Issuer and one or more of its Subsidiaries, or
involving only any two or more of such Subsidiaries, be deemed to be an
Acquisition Transaction, provided that any such transaction is not
entered into in violation of the terms of the Merger Agreement or (II)
permitted by Article V or Article VI of the Merger Agreement be deemed
to be an Acquisition Transaction;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended or
proposed, or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary, or the Board of Directors of
<PAGE>
Issuer shall have publicly withdrawn or modified, or publicly announced
its intention to withdraw or modify, in any manner adverse to Grantee,
its recommendation that the stockholders of Issuer approve the
transactions contemplated by the Merger Agreement in anticipation of
engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary where the Issuer subsidiary is acting in a fiduciary
capacity in the ordinary course of its business shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 10%
or more of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the 1934 Act, and the rules and regulations
thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement
and such breach (x) would entitle Grantee to terminate the Merger
Agreement and (y) shall not have been cured prior to the Notice Date (as
defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice with
the Federal Reserve Board, or other federal or state bank regulatory
authority, which application or notice has been accepted for processing,
for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of
the following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 20% or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event of
which it has notice (together, a "Triggering Event"), it being understood
that the giving of such notice by Issuer shall not be a condition to the
right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided
<PAGE>
that if prior notification to or approval of the Federal Reserve Board or any
other regulatory agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval
and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date
on which any required notification periods have expired or been terminated or
such approvals have been obtained and any requisite waiting period or periods
shall have passed. Any exercise of the Option shall be deemed to occur on
the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section
2, the Holder shall pay to Issuer the aggregate purchase price for the shares
of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer, provided that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the
Option should be exercised in part only, a new Option evidencing the rights
of the Holder thereof to purchase the balance of the shares purchasable
hereunder, and the Holder shall deliver to Issuer a copy of this Agreement
and a letter agreeing that the Holder will not offer to sell or otherwise
dispose of such shares in violation of applicable law or the provisions of
this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of
such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy of
a letter from the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that such legend
is not required for purposes of the 1933 Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery
of substitute certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of written notice of
exercise of the Option provided for under subsection (e) of this Section 2
<PAGE>
and the tender of the applicable purchase price in immediately available
funds, the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered
to the Holder. Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges, that may be payable in
connection with the preparation, issue and delivery of stock certificates
under this Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it will not, by charter amendment or
through reorganization, consolidation, merger, dissolution or sale of assets,
or by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer; (ii) promptly to take all action
as may from time to time be required (including (x) complying with all
premerger notification, reporting and waiting period requirements specified
in 15 U.S.C. Section 18a and regulations promulgated thereunder and (y) in
the event, under the Bank Holding Company Act of 1956, as amended (the
"BHCA"), or the Change in Bank Control Act of 1978, as amended, or any state
banking law, prior approval of or notice to the Federal Reserve Board or to
any state regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such applications
or notices and providing such information to the Federal Reserve Board or
such state regulatory authority as they may require) in order to permit the
Holder to exercise the Option and Issuer duly and effectively to issue shares
of Common Stock pursuant hereto; (iii) that if both an Initial Triggering
Event and a Subsequent Triggering Event shall have occurred prior to the
occurrence of an Exercise Termination Event, the Issuer shall use its
reasonable best efforts to obtain additional authorized but unissued shares
which are free of preemptive rights so that the Option may be exercised
without additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights to purchase
Common Stock and (iv) promptly to take all actions to protect the rights of
the Holder (as set forth in Section 1(b)) against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Stock Option Agreements and related
Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Agreement, and (in the
case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Agreement, if
mutilated, Issuer will execute and deliver a new Agreement of like tenor and
date. Any such new Agreement executed and delivered shall constitute an
additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
<PAGE>
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1
of this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment
from time to time as provided in this Section 5. In the event of any change
in, or distributions in respect of, the Common Stock by reason of stock
dividends, splitups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect of the
Common Stock that would be prohibited under the terms of the Merger
Agreement, the type and number of shares of Common Stock purchasable upon
exercise hereof and the Option Price shall be appropriately adjusted in such
manner as shall fully preserve the economic benefits provided hereunder and
proper provision shall be made in any agreement governing any such
transaction to provide for such proper adjustment and the full satisfaction
of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request
of Grantee delivered within 90 days of such Subsequent Triggering Event
(whether on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current a shelf registration
statement under the 1933 Act covering this Option and any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of this Option and any shares
of Common Stock issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any plan of disposition requested by Grantee.
Issuer will use its reasonable best efforts to cause such registration
statement first to become effective and then to remain effective for such
period not in excess of 180 days from the day such registration statement
first becomes effective or such shorter time as may be reasonably necessary
to effect such sales or other dispositions. Grantee shall have the right to
demand two such registrations. The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the inclusion of
the Holder's Option or Option Shares would interfere with the successful
marketing of the shares of Common Stock offered by Issuer, the number of
Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; and provided, however, that after any
such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the aggregate;
and provided further, however, that if such reduction occurs, then the Issuer
shall file a registration statement for the balance as promptly as practical
and no reduction shall thereafter occur. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in
connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in secondary offering
underwriting agreements for the Issuer. Upon receiving any request under
this Section 6 from any Holder, Issuer agrees to send a copy thereof to any
<PAGE>
other person known to Issuer to be entitled to registration rights under this
Section 6, in each case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as
a result of any assignment or division of this Agreement.
7. (a) From and after a Repurchase Event (as defined below), (i)
following a request of the Holder, delivered prior to an Exercise Termination
Event, Issuer (or any successor thereto) shall repurchase the Option from the
Holder at a price (the "Option Repurchase Price") equal to the amount by
which (A) the Market/Offer Price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which this Option may then be
exercised (provided that, notwithstanding anything to the contrary, if the
Issuer shall not have sufficient additional authorized but unissued shares or
treasury shares of Common Stock so that the Option may be exercised in full,
the Option Repurchase Price shall be calculated as if there were sufficient
shares which were authorized but unissued so that the Option could be
exercised in full) and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within 90 days of such occurrence (or
such later period as provided in Section 10), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the Market/Offer Price
multiplied by the number of Option Shares so designated. The term
"Market/Offer Price" shall mean the highest of (i) the price per share of
Common Stock at which a tender offer or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock within the six-month period immediately preceding the
date the Holder gives notice of the required repurchase of this Option or the
Owner gives notice of the required repurchase of Option Shares, as the case
may be, or (iv) in the event of a sale of 25% or more of the assets of the
Issuer and its Significant Subsidiaries taken as a whole, the sum of the
price paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may
be, and reasonably acceptable to the Issuer, divided by the number of shares
of Common Stock of Issuer outstanding at the time of such sale. In
determining the Market/Offer Price, the value of consideration other than
cash shall be determined by a nationally recognized investment banking firm
selected by the Holder or Owner, as the case may be, and reasonably
acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. Within the latter to occur of (x) five
business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto and (y) the time that is immediately prior to the occurrence of a
Repurchase Event, Issuer shall deliver or cause to be delivered to the Holder
the Option Repurchase Price and/or to the Owner the Option Share Repurchase
<PAGE>
Price therefor or the portion thereof, if any, that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law
or regulation from repurchasing the Option and/or the Option Shares in full,
Issuer shall immediately so notify the Holder and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to the Holder and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer prohibited
from delivering, within five business days after the date on which Issuer is
no longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this Section
7 is prohibited under applicable law or regulation from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices, in each case
as promptly as practicable in order to accomplish such repurchase), the
Holder or Owner may revoke its notice of repurchase of the Option or the
Option Shares either in whole or to the extent of the prohibition, whereupon,
in the latter case, Issuer shall promptly (i) deliver to the Holder and/or
the Owner, as appropriate, that portion of the Option Repurchase Price or the
Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock
Option Agreement evidencing the right of the Holder to purchase that number
of shares of Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Stock Option Agreement was exercisable
at the time of delivery of the notice of repurchase by a fraction, the
numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the
Option Repurchase Price, or (B) to the Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase, lease
or other acquisition of 25% or more of the assets of Issuer and its
Significant Subsidiaries taken as a whole, other than any such transaction
which would not constitute an Acquisition Transaction pursuant to the
provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any person
of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not
terminate upon the occurrence of an Exercise Termination Event unless no
Subsequent Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement other than the Merger Agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than Grantee
or one of its Subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding shares of Common Stock shall be changed into or exchanged
<PAGE>
for stock or other securities of any other person or cash or any other
property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting
share equivalents of the merged company, or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the
terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing
or surviving person, or (iii) the transferee of all or substantially all
of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no event
higher than the closing price of the shares of Substitute Common Stock
on the day preceding such consolidation, merger or sale; provided that
if Issuer is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to the Holder. The issuer of the
Substitute Option shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option, upon surrender
of this Agreement.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is
then exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction, the numerator of which shall be
the number of shares of Common Stock for which the Option is then exercisable
and the denominator of which shall be the number of shares of Substitute
Common Stock for which the Substitute Option is exercisable.
<PAGE>
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the shares
of Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for
more than 19.9% of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option
after giving effect to the limitation in this clause (e). This difference in
value shall be determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to (x) the amount by which (i)
the Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise
price of the Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then be exercised
plus (y) Grantee's reasonable out-of-pocket expenses (to the extent not
previously reimbursed), and at the request of the owner (the "Substitute
Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"),
the Substitute Option Issuer shall repurchase the Substitute Shares at a
price (the "Substitute Share Repurchase Price") equal to (x) the Highest
Closing Price multiplied by the number of Substitute Shares so designated
plus (y) Grantee's reasonable Out-of-Pocket Expenses (to the extent not
previously reimbursed). The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within the six-
month period immediately preceding the date the Substitute Option Holder
gives notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner,
as the case may be, may exercise its respective right to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such purpose
to the Substitute Option Issuer, at its principal office, the agreement for
such Substitute Option (or, in the absence of such an agreement, this
Agreement) and certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the Substitute
Share Owner, as the case may be, elects to require the Substitute Option
Issuer to repurchase the Substitute Option and/or the Substitute Shares in
accordance with the provisions of this Section 9. As promptly as
practicable, and in any event within five business days after the surrender
of the Substitute Option and/or certificates representing Substitute Shares
and the receipt of such notice or notices relating thereto, the Substitute
Option Issuer shall deliver or cause to be delivered to the Substitute Option
Holder the Substitute Option Repurchase Price and/or to the Substitute Share
Owner the Substitute Share Repurchase Price therefor or, in either case, the
<PAGE>
portion thereof which the Substitute Option Issuer is not then prohibited
under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing the Substitute Option
and/or the Substitute Shares in part or in full, the Substitute Option Issuer
following a request for repurchase pursuant to this Section 9 shall
immediately so notify the Substitute Option Holder and/or the Substitute
Share Owner and thereafter deliver or cause to be delivered, from time to
time, to the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Share Repurchase Price,
respectively, which it is no longer prohibited from delivering, within five
business days after the date on which the Substitute Option Issuer is no
longer so prohibited; provided, however, that if the Substitute Option Issuer
is at any time after delivery of a notice of repurchase pursuant to
subsection (b) of this Section 9 prohibited under applicable law or
regulation from delivering to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and
the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as
practicable in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, the Substitute Option
Issuer shall promptly (i) deliver to the Substitute Option Holder or
Substitute Share Owner, as appropriate, that portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price that the Substitute
Option Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substitute Option Holder to purchase that
number of shares of the Substitute Common Stock obtained by multiplying the
number of shares of the Substitute Common Stock for which the surrendered
Substitute Option was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute
Option Repurchase Price, or (B) to the Substitute Share Owner, a certificate
for the Substitute Common Shares it is then so prohibited from repurchasing.
10. The 90-day period for exercise of certain rights under
Sections 2, 6, 7 and 13 shall be extended: (i) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, and for the
expiration of all statutory waiting periods; (ii) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such
exercise and (iii) during any period in which Grantee is precluded from
exercising such rights due to an injunction or other legal restriction, plus
in each case such additional period as is reasonably necessary for the
exercise of such rights promptly following the obtaining of such approvals or
the expiration of such periods.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
<PAGE>
validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Issuer.
(b) Subject to Section 3, Issuer has taken all necessary corporate
action to authorize and reserve and to permit it to issue, and at all
times from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon the
exercise of the Option, that number of shares of Common Stock equal to
the maximum number of shares of Common Stock at any time and from time
to time issuable hereunder, and all such shares, upon issuance pursuant
hereto, will be duly authorized, validly issued, fully paid,
nonassessable (subject to Section 180.0622(2)(b) of the WGBL), and will
be delivered free and clear of all claims, liens, encumbrance and
security interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including amending the Rights
Agreement) so that the entering into of this Option Agreement, the
acquisition of shares of Common Stock hereunder and the other
transactions contemplated hereby do not and will not result in the grant
of any rights to any person under the Rights Agreement or enable or
require the Rights to be exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option will
not be, acquired with a view to the public distribution thereof and will
not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to
any other person, without the express written consent of the other party,
except that in the event a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and obligations
hereunder within 90 days following such Subsequent Triggering Event (or such
later period as provided in Section 10); provided, however, that until the
date 15 days following the date on which the Federal Reserve Board approves
an application by Grantee under the BHCA to acquire the shares of Common
Stock subject to the Option, Grantee may not assign its rights under the
Option except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of
2% of the voting shares of Issuer, (iii) an assignment to a single party
(e.g., a broker or investment banker) for the purpose of conducting a widely
dispersed public distribution on Grantee's behalf, or (iv) any other manner
approved by the Federal Reserve Board.
<PAGE>
14. Each of Grantee and Issuer will use its reasonable best
efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including without limitation
making application to list the shares of Common Stock issuable hereunder on
the New York Stock Exchange upon official notice of issuance and applying to
the Federal Reserve Board under the BHCA for approval to acquire the shares
issuable hereunder, but Grantee shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common Stock
issuable hereunder until such time, if ever, as it deems appropriate to do
so.
15.(a) Grantee in its sole discretion may, at any time during
which Issuer would be required to repurchase the Option or any Option Shares
pursuant to Section 7, surrender the Option (together with any Option Shares
issued to and then owned by the Holder) to Issuer in exchange for a cash
payment equal to the Surrender Price (as defined herein); provided, however,
that Grantee may not exercise its rights pursuant to this Section 15 if
Issuer has previously repurchased the Option (or any portion thereof) or any
Option Shares pursuant to Section 7. The "Surrender Price" shall be equal to
(i) $300 million, plus (ii) if applicable, the aggregate purchase price
previously paid pursuant hereto by Grantee with respect to any Option Shares,
minus (iii) if applicable, the excess of (A) the net cash, if any, received
by Grantee pursuant to the arm's-length sale of Option Shares (or any other
securities into which such Option Shares were converted or exchanged) to any
party not affiliated with Grantee, over (B) the purchase price paid by
Grantee with respect to such Option Shares.
(b) Grantee may exercise its right to surrender the Option and any
Option Shares pursuant to this Section 15 by surrendering for such purchase
to Issuer, at its principal office, this Agreement, together with
certificates for Option Shares, if any, accompanied by a written notice
stating (i) that Grantee elects to surrender the Option and Option Shares, if
any, in accordance with the provisions of this Section 15 and (ii) the
Surrender Price. Within two business days after the surrender of the Option
and the Option Shares, if applicable, Issuer shall deliver or cause to be
delivered to Grantee the Surrender Price.
(c) To the extent that the Issuer is prohibited under applicable
law or regulation from paying the Surrender Price to Grantee in full, Issuer
shall immediately so notify Grantee and thereafter deliver, or cause to be
delivered, from time to time, to Grantee, that portion of the Surrender Price
that Issuer is not or no longer prohibited from paying, within two business
days after the date on which Issuer is no longer so prohibited; provided,
however, that if Issuer at any time after delivery of a notice of Surrender
pursuant to Section 15(b) is prohibited under applicable law or regulation
from paying to Grantee the Surrender Price in full, (i) Issuer shall (A) use
its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in
order to make such payments, (B) within two business days of the submission
or receipt of any documents relating to any such regulatory and legal
approvals, provide Grantee with copies of the same, and (C) keep Grantee
advised of both the status of any such request for regulatory and legal
approvals and any discussions with any relevant regulatory or other third
party reasonably related to the same, and (ii) Grantee may revoke such notice
of surrender by delivery of a notice of revocation, the Exercise Termination
Event shall be extended to a date six months from the date on which the
<PAGE>
Exercise Termination Event would have occurred if not for the provisions of
this Section 15(c) (during which period Grantee may exercise any of its
rights hereunder, including any and all rights pursuant to this Section 15).
(d) Grantee shall have rights substantially identical to those set
forth in paragraphs (a), (b) and (c) of this Section 15 with respect to the
Substitute Option and the Substitute Option Issuer during any period in which
the Substitute Option Issuer would be required to repurchase the Substitute
Option pursuant to Section 9.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to acquire, or
Issuer is not permitted to repurchase pursuant to Section 7, the full number
of shares of Common Stock provided in Section 1(a) hereof (as adjusted
pursuant to Section 1(b) or 5 hereof), it is the express intention of Issuer
(which shall be binding on the Substitute Option Issuer) to allow the Holder
to acquire or to require Issuer or Substitute Option Issuer to repurchase
such lesser number of shares as may be permissible, without any amendment or
modification hereof.
18. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when
delivered in person, by telecopy or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof (except to the extent that mandatory provisions of federal law
apply).
20. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
21. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
<PAGE>
be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly
provided herein.
23. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized, all
as of the date first above written.
FIRSTAR CORPORATION STAR BANC
CORPORATION
By: /s/ Roger Fitzsimonds By: /s/ Jerry A. Grundhofer
---------------------- -----------------------
Name: Roger L. Fitzsimonds Name: Jerry A. Grundhofer
Title: Chairman and Chief Title: Chairman of the Board,
Executive Officer President and Chief
Executive Officer
EXHIBIT 10.2
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated June 30, 1998, between Star Banc
Corporation, an Ohio corporation ("Issuer"), and Firstar Corporation, a
Wisconsin corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan
of Reorganization of even date herewith (the "Merger Agreement"), which
agreement has been executed by the parties hereto immediately prior to this
Stock Option Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee
the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof,
up to 19,060,005 fully paid and non-assessable shares of Issuer's Common
Stock, par value $5.00 per share ("Common Stock"), at a price of $64.00 per
share (the "Option Price"); provided, however, that in no event shall the
number of shares of Common Stock for which this Option is exercisable exceed
19.9% of the Issuer's issued and outstanding shares of Common Stock without
giving effect to any shares subject to or issued pursuant to the Option. The
number of shares of Common Stock that may be received upon the exercise of
the Option and the Option Price are subject to adjustment as herein set
forth.
(b) In the event that any additional shares of Common Stock are
either (i) issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of
the Agreement, the number of shares of Common Stock subject to the Option
shall be increased or decreased, as appropriate, so that, after such
issuance, such number equals 19.9% of the number of shares of Common Stock
then issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, both an
Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering
Event (as hereinafter defined) shall have occurred prior to the occurrence of
an Exercise Termination Event (as hereinafter defined), provided that the
<PAGE>
Holder shall have sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within 90 days following such Subsequent
Triggering Event. Each of the following shall be an "Exercise Termination
Event": (i) the Effective Time (as defined in the Merger Agreement) of the
Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event except a termination by Grantee pursuant to Section
8.1(d) of the Merger Agreement (unless the breach by Issuer giving rise to
such right of termination is non-volitional); or (iii) the passage of 12
months after termination of the Merger Agreement if such termination follows
the occurrence of an Initial Triggering Event or is a termination by Grantee
pursuant to Section 8.1(d) of the Merger Agreement (unless the breach by
Issuer giving rise to such right of termination is non-volitional) (provided
that if an Initial Triggering Event continues or occurs beyond such
termination and prior to the passage of such 12-month period, the Exercise
Termination Event shall be 12 months from the expiration of the Last
Triggering Event but in no event more than 18 months after such termination).
The "Last Triggering Event" shall mean the last Initial Triggering Event to
expire. The term "Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Significant Subsidiaries (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC"))(each an "Issuer Subsidiary"), without having
received Grantee's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the rules and regulations thereunder) other than Grantee or
any of its subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the stockholders of
Issuer approve or accept any Acquisition Transaction. For purposes of
this Agreement, "Acquisition Transaction" shall mean (w) a merger or
consolidation, or any similar transaction, involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC")) of
Issuer, (x) a purchase, lease or other acquisition or assumption of 25%
or more of the assets or deposits of Issuer and its Significant
Subsidiaries taken as a whole, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise)
of securities representing 10% or more of the voting power of Issuer, or
(z) any substantially similar transaction; provided, however, that in no
event shall any merger, consolidation, purchase or similar transaction
(I) involving only the Issuer and one or more of its Subsidiaries, or
involving only any two or more of such Subsidiaries, be deemed to be an
Acquisition Transaction, provided that any such transaction is not
entered into in violation of the terms of the Merger Agreement or (II)
permitted by Article V or Article VI of the Merger Agreement be deemed
to be an Acquisition Transaction;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended or
proposed, or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other
<PAGE>
than Grantee or a Grantee Subsidiary, or the Board of Directors of
Issuer shall have publicly withdrawn or modified, or publicly announced
its intention to withdraw or modify, in any manner adverse to Grantee,
its recommendation that the stockholders of Issuer approve the
transactions contemplated by the Merger Agreement in anticipation of
engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary where the Issuer subsidiary is acting in a fiduciary
capacity in the ordinary course of its business shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 10%
or more of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the 1934 Act, and the rules and regulations
thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement
and such breach (x) would entitle Grantee to terminate the Merger
Agreement and (y) shall not have been cured prior to the Notice Date (as
defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice with
the Federal Reserve Board, or other federal or state bank regulatory
authority, which application or notice has been accepted for processing,
for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of
the following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 20% or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event of
which it has notice (together, a "Triggering Event"), it being understood
that the giving of such notice by Issuer shall not be a condition to the
right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from the
<PAGE>
Notice Date for the closing of such purchase (the "Closing Date"); provided
that if prior notification to or approval of the Federal Reserve Board or any
other regulatory agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval
and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date
on which any required notification periods have expired or been terminated or
such approvals have been obtained and any requisite waiting period or periods
shall have passed. Any exercise of the Option shall be deemed to occur on
the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section
2, the Holder shall pay to Issuer the aggregate purchase price for the shares
of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer, provided that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the
Option should be exercised in part only, a new Option evidencing the rights
of the Holder thereof to purchase the balance of the shares purchasable
hereunder, and the Holder shall deliver to Issuer a copy of this Agreement
and a letter agreeing that the Holder will not offer to sell or otherwise
dispose of such shares in violation of applicable law or the provisions of
this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and Issuer
and to resale restrictions arising under the Securities
Act of 1933, as amended. A copy of such agreement is on
file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy of
a letter from the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that such legend
is not required for purposes of the 1933 Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery
of substitute certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
<PAGE>
(i) Upon the giving by the Holder to Issuer of written notice of
exercise of the Option provided for under subsection (e) of this Section 2
and the tender of the applicable purchase price in immediately available
funds, the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered
to the Holder. Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges, that may be payable in
connection with the preparation, issue and delivery of stock certificates
under this Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it will not, by charter amendment or
through reorganization, consolidation, merger, dissolution or sale of assets,
or by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer; (ii) promptly to take all action
as may from time to time be required (including (x) complying with all
premerger notification, reporting and waiting period requirements specified
in 15 U.S.C. Section 18a and regulations promulgated thereunder and (y) in
the event, under the Bank Holding Company Act of 1956, as amended (the
"BHCA"), or the Change in Bank Control Act of 1978, as amended, or any state
banking law, prior approval of or notice to the Federal Reserve Board or to
any state regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such applications
or notices and providing such information to the Federal Reserve Board or
such state regulatory authority as they may require) in order to permit the
Holder to exercise the Option and Issuer duly and effectively to issue shares
of Common Stock pursuant hereto; (iii) that if both an Initial Triggering
Event and a Subsequent Triggering Event shall have occurred prior to the
occurrence of an Exercise Termination Event, the Issuer shall use its
reasonable best efforts to obtain additional authorized but unissued shares
which are free of preemptive rights so that the Option may be exercised
without additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights to purchase
Common Stock and (iv) promptly to take all actions to protect the rights of
the Holder (as set forth in Section 1(b)) against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Stock Option Agreements and related
Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Agreement, and (in the
case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Agreement, if
mutilated, Issuer will execute and deliver a new Agreement of like tenor and
date. Any such new Agreement executed and delivered shall constitute an
additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
<PAGE>
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1
of this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment
from time to time as provided in this Section 5. In the event of any change
in, or distributions in respect of, the Common Stock by reason of stock
dividends, splitups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect of the
Common Stock that would be prohibited under the terms of the Merger
Agreement, the type and number of shares of Common Stock purchasable upon
exercise hereof and the Option Price shall be appropriately adjusted in such
manner as shall fully preserve the economic benefits provided hereunder and
proper provision shall be made in any agreement governing any such
transaction to provide for such proper adjustment and the full satisfaction
of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request
of Grantee delivered within 90 days of such Subsequent Triggering Event
(whether on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current a shelf registration
statement under the 1933 Act covering this Option and any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of this Option and any shares
of Common Stock issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any plan of disposition requested by Grantee.
Issuer will use its reasonable best efforts to cause such registration
statement first to become effective and then to remain effective for such
period not in excess of 180 days from the day such registration statement
first becomes effective or such shorter time as may be reasonably necessary
to effect such sales or other dispositions. Grantee shall have the right to
demand two such registrations. The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the inclusion of
the Holder's Option or Option Shares would interfere with the successful
marketing of the shares of Common Stock offered by Issuer, the number of
Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; and provided, however, that after any
such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the aggregate;
and provided further, however, that if such reduction occurs, then the Issuer
shall file a registration statement for the balance as promptly as practical
and no reduction shall thereafter occur. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in
connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in secondary offering
underwriting agreements for the Issuer. Upon receiving any request under
this Section 6 from any Holder, Issuer agrees to send a copy thereof to any
<PAGE>
other person known to Issuer to be entitled to registration rights under this
Section 6, in each case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as
a result of any assignment or division of this Agreement.
7. (a) From and after a Repurchase Event (as defined below), (i)
following a request of the Holder, delivered prior to an Exercise Termination
Event, Issuer (or any successor thereto) shall repurchase the Option from the
Holder at a price (the "Option Repurchase Price") equal to the amount by
which (A) the Market/Offer Price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which this Option may then be
exercised (provided that, notwithstanding anything to the contrary, if the
Issuer shall not have sufficient additional authorized but unissued shares or
treasury shares of Common Stock so that the Option may be exercised in full,
the Option Repurchase Price shall be calculated as if there were sufficient
shares which were authorized but unissued so that the Option could be
exercised in full) and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within 90 days of such occurrence (or
such later period as provided in Section 10), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the Market/Offer Price
multiplied by the number of Option Shares so designated. The term
"Market/Offer Price" shall mean the highest of (i) the price per share of
Common Stock at which a tender offer or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock within the six-month period immediately preceding the
date the Holder gives notice of the required repurchase of this Option or the
Owner gives notice of the required repurchase of Option Shares, as the case
may be, or (iv) in the event of a sale of 25% or more of the assets of the
Issuer and its Significant Subsidiaries taken as a whole, the sum of the
price paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may
be, and reasonably acceptable to the Issuer, divided by the number of shares
of Common Stock of Issuer outstanding at the time of such sale. In
determining the Market/Offer Price, the value of consideration other than
cash shall be determined by a nationally recognized investment banking firm
selected by the Holder or Owner, as the case may be, and reasonably
acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. Within the latter to occur of (x) five
business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto and (y) the time that is immediately prior to the occurrence of a
Repurchase Event, Issuer shall deliver or cause to be delivered to the Holder
the Option Repurchase Price and/or to the Owner the Option Share Repurchase
<PAGE>
Price therefor or the portion thereof, if any, that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law
or regulation from repurchasing the Option and/or the Option Shares in full,
Issuer shall immediately so notify the Holder and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to the Holder and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer prohibited
from delivering, within five business days after the date on which Issuer is
no longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this Section
7 is prohibited under applicable law or regulation from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices, in each case
as promptly as practicable in order to accomplish such repurchase), the
Holder or Owner may revoke its notice of repurchase of the Option or the
Option Shares either in whole or to the extent of the prohibition, whereupon,
in the latter case, Issuer shall promptly (i) deliver to the Holder and/or
the Owner, as appropriate, that portion of the Option Repurchase Price or the
Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock
Option Agreement evidencing the right of the Holder to purchase that number
of shares of Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Stock Option Agreement was exercisable
at the time of delivery of the notice of repurchase by a fraction, the
numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the
Option Repurchase Price, or (B) to the Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase, lease
or other acquisition of 25% or more of the assets of Issuer and its
Significant Subsidiaries taken as a whole, other than any such transaction
which would not constitute an Acquisition Transaction pursuant to the
provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any person
of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not
terminate upon the occurrence of an Exercise Termination Event unless no
Subsequent Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement other than the Merger Agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than Grantee
or one of its Subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding shares of Common Stock shall be changed into or exchanged
<PAGE>
for stock or other securities of any other person or cash or any other
property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting
share equivalents of the merged company, or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the
terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing
or surviving person, or (iii) the transferee of all or substantially all
of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no event
higher than the closing price of the shares of Substitute Common Stock
on the day preceding such consolidation, merger or sale; provided that
if Issuer is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to the Holder. The issuer of the
Substitute Option shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option, upon surrender
of this Agreement.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is
then exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction, the numerator of which shall be
the number of shares of Common Stock for which the Option is then exercisable
and the denominator of which shall be the number of shares of Substitute
Common Stock for which the Substitute Option is exercisable.
<PAGE>
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the shares
of Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for
more than 19.9% of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option
after giving effect to the limitation in this clause (e). This difference in
value shall be determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to (x) the amount by which (i)
the Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise
price of the Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then be exercised
plus (y) Grantee's reasonable out-of-pocket expenses (to the extent not
previously reimbursed), and at the request of the owner (the "Substitute
Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"),
the Substitute Option Issuer shall repurchase the Substitute Shares at a
price (the "Substitute Share Repurchase Price") equal to (x) the Highest
Closing Price multiplied by the number of Substitute Shares so designated
plus (y) Grantee's reasonable Out-of-Pocket Expenses (to the extent not
previously reimbursed). The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within the six-
month period immediately preceding the date the Substitute Option Holder
gives notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner,
as the case may be, may exercise its respective right to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such purpose
to the Substitute Option Issuer, at its principal office, the agreement for
such Substitute Option (or, in the absence of such an agreement, this
Agreement) and certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the Substitute
Share Owner, as the case may be, elects to require the Substitute Option
Issuer to repurchase the Substitute Option and/or the Substitute Shares in
accordance with the provisions of this Section 9. As promptly as
practicable, and in any event within five business days after the surrender
of the Substitute Option and/or certificates representing Substitute Shares
and the receipt of such notice or notices relating thereto, the Substitute
Option Issuer shall deliver or cause to be delivered to the Substitute Option
Holder the Substitute Option Repurchase Price and/or to the Substitute Share
Owner the Substitute Share Repurchase Price therefor or, in either case, the
<PAGE>
portion thereof which the Substitute Option Issuer is not then prohibited
under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing the Substitute Option
and/or the Substitute Shares in part or in full, the Substitute Option Issuer
following a request for repurchase pursuant to this Section 9 shall
immediately so notify the Substitute Option Holder and/or the Substitute
Share Owner and thereafter deliver or cause to be delivered, from time to
time, to the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Share Repurchase Price,
respectively, which it is no longer prohibited from delivering, within five
business days after the date on which the Substitute Option Issuer is no
longer so prohibited; provided, however, that if the Substitute Option Issuer
is at any time after delivery of a notice of repurchase pursuant to
subsection (b) of this Section 9 prohibited under applicable law or
regulation from delivering to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and
the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as
practicable in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, the Substitute Option
Issuer shall promptly (i) deliver to the Substitute Option Holder or
Substitute Share Owner, as appropriate, that portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price that the Substitute
Option Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substitute Option Holder to purchase that
number of shares of the Substitute Common Stock obtained by multiplying the
number of shares of the Substitute Common Stock for which the surrendered
Substitute Option was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute
Option Repurchase Price, or (B) to the Substitute Share Owner, a certificate
for the Substitute Common Shares it is then so prohibited from repurchasing.
10. The 90-day period for exercise of certain rights under
Sections 2, 6, 7 and 13 shall be extended: (i) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, and for the
expiration of all statutory waiting periods; (ii) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such
exercise and (iii) during any period in which Grantee is precluded from
exercising such rights due to an injunction or other legal restriction, plus
in each case such additional period as is reasonably necessary for the
exercise of such rights promptly following the obtaining of such approvals or
the expiration of such periods.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
<PAGE>
validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Issuer.
(b) Subject to Section 3, Issuer has taken all necessary corporate
action to authorize and reserve and to permit it to issue, and at all
times from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon the
exercise of the Option, that number of shares of Common Stock equal to
the maximum number of shares of Common Stock at any time and from time
to time issuable hereunder, and all such shares, upon issuance pursuant
hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims,
liens, encumbrance and security interests and not subject to any
preemptive rights.
(c) Issuer has taken all action (including amending the Rights
Agreement) so that the entering into of this Option Agreement, the
acquisition of shares of Common Stock hereunder and the other
transactions contemplated hereby do not and will not result in the grant
of any rights to any person under the Rights Agreement or enable or
require the Rights to be exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option will
not be, acquired with a view to the public distribution thereof and will
not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to
any other person, without the express written consent of the other party,
except that in the event a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and obligations
hereunder within 90 days following such Subsequent Triggering Event (or such
later period as provided in Section 10); provided, however, that until the
date 15 days following the date on which the Federal Reserve Board approves
an application by Grantee under the BHCA to acquire the shares of Common
Stock subject to the Option, Grantee may not assign its rights under the
Option except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of
2% of the voting shares of Issuer, (iii) an assignment to a single party
(e.g., a broker or investment banker) for the purpose of conducting a widely
dispersed public distribution on Grantee's behalf, or (iv) any other manner
approved by the Federal Reserve Board.
<PAGE>
14. Each of Grantee and Issuer will use its reasonable best
efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including without limitation
making application to list the shares of Common Stock issuable hereunder on
the New York Stock Exchange upon official notice of issuance and applying to
the Federal Reserve Board under the BHCA for approval to acquire the shares
issuable hereunder, but Grantee shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common Stock
issuable hereunder until such time, if ever, as it deems appropriate to do
so.
15.(a) Grantee in its sole discretion may, at any time during
which Issuer would be required to repurchase the Option or any Option Shares
pursuant to Section 7, surrender the Option (together with any Option Shares
issued to and then owned by the Holder) to Issuer in exchange for a cash
payment equal to the Surrender Price (as defined herein); provided, however,
that Grantee may not exercise its rights pursuant to this Section 15 if
Issuer has previously repurchased the Option (or any portion thereof) or any
Option Shares pursuant to Section 7. The "Surrender Price" shall be equal to
(i) $300 million, plus (ii) if applicable, the aggregate purchase price
previously paid pursuant hereto by Grantee with respect to any Option Shares,
minus (iii) if applicable, the excess of (A) the net cash, if any, received
by Grantee pursuant to the arm's-length sale of Option Shares (or any other
securities into which such Option Shares were converted or exchanged) to any
party not affiliated with Grantee, over (B) the purchase price paid by
Grantee with respect to such Option Shares.
(b) Grantee may exercise its right to surrender the Option and any
Option Shares pursuant to this Section 15 by surrendering for such purchase
to Issuer, at its principal office, this Agreement, together with
certificates for Option Shares, if any, accompanied by a written notice
stating (i) that Grantee elects to surrender the Option and Option Shares, if
any, in accordance with the provisions of this Section 15 and (ii) the
Surrender Price. Within two business days after the surrender of the Option
and the Option Shares, if applicable, Issuer shall deliver or cause to be
delivered to Grantee the Surrender Price.
(c) To the extent that the Issuer is prohibited under applicable
law or regulation from paying the Surrender Price to Grantee in full, Issuer
shall immediately so notify Grantee and thereafter deliver, or cause to be
delivered, from time to time, to Grantee, that portion of the Surrender Price
that Issuer is not or no longer prohibited from paying, within two business
days after the date on which Issuer is no longer so prohibited; provided,
however, that if Issuer at any time after delivery of a notice of Surrender
pursuant to Section 15(b) is prohibited under applicable law or regulation
from paying to Grantee the Surrender Price in full, (i) Issuer shall (A) use
its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in
order to make such payments, (B) within two business days of the submission
or receipt of any documents relating to any such regulatory and legal
approvals, provide Grantee with copies of the same, and (C) keep Grantee
advised of both the status of any such request for regulatory and legal
approvals and any discussions with any relevant regulatory or other third
party reasonably related to the same, and (ii) Grantee may revoke such notice
of surrender by delivery of a notice of revocation, the Exercise Termination
Event shall be extended to a date six months from the date on which the
<PAGE>
Exercise Termination Event would have occurred if not for the provisions of
this Section 15(c) (during which period Grantee may exercise any of its
rights hereunder, including any and all rights pursuant to this Section 15).
(d) Grantee shall have rights substantially identical to those set
forth in paragraphs (a), (b) and (c) of this Section 15 with respect to the
Substitute Option and the Substitute Option Issuer during any period in which
the Substitute Option Issuer would be required to repurchase the Substitute
Option pursuant to Section 9.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to acquire, or
Issuer is not permitted to repurchase pursuant to Section 7, the full number
of shares of Common Stock provided in Section 1(a) hereof (as adjusted
pursuant to Section 1(b) or 5 hereof), it is the express intention of Issuer
(which shall be binding on the Substitute Option Issuer) to allow the Holder
to acquire or to require Issuer or Substitute Option Issuer to repurchase
such lesser number of shares as may be permissible, without any amendment or
modification hereof.
18. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when
delivered in person, by telecopy or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof (except to the extent that mandatory provisions of federal law
apply).
20. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
21. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
<PAGE>
be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly
provided herein.
23. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized, all
as of the date first above written.
STAR BANC CORPORATION FIRSTAR CORPORATION
By: /s/ Jerry A. Grundhofer By: /s/ Roger Fitzsimonds
Name: Jerry A. Grundhofer Name: Roger L. Fitzsimonds
Title: Chairman of the Board, Title: Chairman and Chief
President and Chief Executive Officer
Executive Officer
EXHIBIT 10.3
FIRST AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT made and entered into as of the 30th day of June, 1998,
between Firstar Corporation, a Wisconsin corporation (the "Company"), and
Firstar Trust Company (f/k/a First Wisconsin Trust Company) (the "Rights
Agent"), under the Rights Agreement, dated as of January 19, 1989, between
the Company and the Rights Agent (the "Rights Agreement").
WHEREAS, the Company and the Rights Agent have heretofore executed
and entered into the Rights Agreement; and
WHEREAS, pursuant to Section 27 of the Rights Agreement, the
Company may from time to time prior to such time as any Person (as defined in
the Rights Agreement) becomes an Acquiring Person (as defined in the Rights
Agreement) supplement or amend the Rights Agreement in accordance with the
provisions of such Section 27; and
WHEREAS, the Company proposes to enter into (i) an Agreement and
Plan of Reorganization (the "Merger Agreement") with Star Banc Corporation,
an Ohio corporation ("Star"), and Foxtrot (DE) Corporation, a Delaware
corporation, and (ii) a Stock Option Agreement under which the Company may
under certain circumstances be obligated to issue Common Shares (as defined
in the Rights Agreement) of the Company (the "Stock Option Agreement") with
Star; and
WHEREAS, the Board of Directors of the Company has determined that
it is in the best interests of the Company and its shareholders to amend the
Rights Agreement as set forth herein in connection with the foregoing, and
the Company and the Rights Agent desire to evidence such amendment in
writing.
NOW, THEREFORE, the Company and the Rights Agent hereby amend the
Rights Agreement as follows:
Section 1(a) of the Rights Agreement is hereby amended by adding
the following at the end of such section:
Notwithstanding anything to the contrary contained in this
Agreement, for purposes of this Agreement, Star Banc Corporation,
an Ohio corporation ("Star"), shall not be deemed to be an
Acquiring Person solely by virtue of (i) the execution of that
certain Agreement and Plan of Reorganization (as such agreement may
be amended from time to time, the "Merger Agreement"), dated as of
June 30, 1998, among the Company, Star and Foxtrot (DE)
Corporation, a Delaware corporation; (ii) the execution of that
certain Stock Option Agreement (as such agreement may be amended
from time to time, the "Option Agreement"), dated as of June 30,
1998, among the Company as "Issuer" and Star as "Grantee"; (iii)
the consummation of the Merger (as defined in the Merger
Agreement); or (iv) the consummation of the other transactions
contemplated in the Merger Agreement and/or the Stock Option
Agreement.
<PAGE>
Section 3(a) of the Rights Agreement is hereby amended by adding
the following at the end of such section:
Notwithstanding anything to the contrary contained in this
Agreement, a Distribution Date shall not occur solely as a result
of (i) the execution of the Merger Agreement or the Stock Option
Agreement; (ii) the consummation of the Merger (as defined in the
Merger Agreement); or (iii) the consummation of the other
transactions contemplated in the Merger Agreement and/or the Stock
Option Agreement.
Section 7(a) of the Rights Agreement is amended and restated to
read in its entirety as follows:
The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in
whole or in part at any time after the Distribution Date upon
surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights
Agent at the principal office of the Rights Agent, together with
payment of the Purchase Price for each one one-hundredth of a
Preferred Share as to which the Rights are exercised, at or prior
to the earliest of (i) January 19, 1999 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided
in Section 23 hereof (the "Redemption Date"), (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof,
and (iv) the consummation of the Merger.
Section 13(a) of the Rights Agreement is hereby amended by adding
the following at the end of such section:
Notwithstanding anything to the contrary contained in this
Agreement, the execution of the Merger Agreement and the Stock
Option Agreement, the consummation of the Merger (as defined in the
Merger Agreement) and the consummation of the other transactions
contemplated in the Merger Agreement and/or the Stock Option
Agreement shall not be deemed to be events of the type described in
the first sentence of this Section 13(a) and shall not cause the
Rights to be adjusted or exercisable in accordance with, or any
other action to be taken or obligation to arise pursuant to, this
Section 13.
Section 29 of the Rights Agreement is amended and restated to read
in its entirety as follows:
Nothing in this Agreement shall be construed to give to any Person other
than the Company, the Rights Agent and the registered holders of the
Right Certificates (and, prior to the Distribution Date, the Common
Shares) any legal or equitable right, remedy or claim under this
Agreement, by virtue of the consummation of the Merger, or by virtue of
the execution of the Merger Agreement or the Stock Option Agreement; but
this agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares).
This Amendment shall be deemed to be a contract made under the laws
of the State of Wisconsin and for all purposes shall be governed by and
<PAGE>
construed in accordance with the laws of such state applicable to contracts
to be made and performed entirely within such state.
This Amendment may be executed in any number of counterparts, each
of which shall for all purposes be deemed an original, and all of which
together shall constitute but one and the same instrument.
Except as expressly set forth herein, this Amendment shall not by
implication or otherwise alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants or agreements contained in the
Rights Agreement, all of which are ratified and affirmed in all respects and
shall continue in full force and effect.
If any provision, covenant or restriction of this Amendment is held
by a court of competent jurisdiction or other authority to be invalid,
illegal or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Amendment shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
duly executed as of the date first above written.
FIRSTAR CORPORATION
By: /s/ Roger Fitzsimonds
Name: Roger L. Fitzsimonds
Title: Chairman and Chief
Executive Officer
FIRSTAR TRUST COMPANY
By: /s/ Steven R. Parish
Name: Steven R. Parish
Title: Executive Vice President
and Director
Exhibit 99.1
CONTACT: Steve Dale (Star Media)
(513) 632-4524
David Moffett (Star Analysts)
(513) 632-4008
Patrick Strickler (Firstar Media)
(414) 765-4235
Jeff Weeden (Firstar Analysts)
(414) 287-3222
STAR BANC CORPORATION, FIRSTAR CORPORATION AGREE TO
MERGE, CREATING $38 BILLION MIDWEST BANKING FRANCHISE
$7.2 billion transaction will provide 12 percent EPS
accretion in 2000
CINCINNATI and MILWAUKEE (July 1, 1998) - Star Banc Corporation
(NYSE:STB) and Firstar Corporation (NYSE:FSR) today announced that they have
signed a definitive agreement to merge through an exchange of shares valued
at approximately $7.2 billion.
The merger would create the 21st largest bank holding company in
the United States, with assets of more than $38 billion, and deposits of $28
billion. The combined company will provide a full line of consumer banking,
commercial banking and trust and investment management services and products
to more than 3 million customers through its 14,000 employees and 720 branch
locations in eight Midwest states and Arizona, plus trust operations in
Florida.
Under the terms of the agreement, Firstar shareholders will receive
a tax-free exchange of 0.76 shares of common stock of the combined company
for each share of Firstar common stock. Shareholders of Star Banc will
retain one share of common stock in the combined company for each Star Banc
share. Based on Star Banc's closing stock price on June 30, 1998, this
represents a price of $48.55 for each Firstar share.
The combined company will be known as Firstar Corporation. Its
corporate headquarters will be located in Milwaukee, and its consumer banking
and specialized lending operations will be headquartered in Cincinnati.
Roger L. Fitzsimonds, chairman and chief executive officer of Firstar, will
become chairman of the board of the new company, and Jerry A. Grundhofer,
chairman, president and chief executive officer of Star Banc, will become
president and chief executive officer. The board of directors will comprise
18 representatives of Star Banc and 14 representatives of Firstar.
"Star Banc and Firstar are two successful banks with long and proud
histories that will now move up to the next plateau in financial services.
Together, that's what we will do," said Grundhofer. "Putting together these
two first-class banks creates a leading provider of financial services in the
Midwest region, with the opportunity to offer greater financial strength, a
<PAGE>
broader range of products and services, stronger technology and greater
efficiency to our customers and communities. This merger will provide
unmatched economic benefits for shareholders of both companies and will
position the combined company strategically to operate on a new and higher
level of banking going forward."
"We are delighted to be partnering with a bank so completely
compatible with our own," says Fitzsimonds. "Firstar and Star Banc have
strong community orientations, complementary high-tech quality products, and
a shared commitment to outstanding customer service. Each of us has
products, skills and resources to bring to the other. We look forward to a
seamless integration of our two companies into a single regional banking
leader and corporate citizen."
The transaction provides Firstar shareholders a premium of 27
percent over the value of their shares on June 30, 1998. It is estimated
that the combined company expects to incur pre-tax merger-related
restructuring charges of $325 million in 1998. The transaction, which will
be accounted for as a pooling of interests, is expected to be 5 percent
accretive to the combined company's earnings per share in 1999, and 12
percent accretive in 2000.
After the closing, the combined company expects to pay dividends at
an annual rate of $1.20 per common share. This approximates a continuation
of the current dividend rate paid on Firstar shares, adjusted for the
exchange ratio, which would represent an increase of 30 percent on the
current dividend rate paid on Star Banc shares.
Star Banc and Firstar estimate that they will reduce their expenses
by $174 million, with half of this saving achieved in 1999, and the remainder
in 2000. This cost saving represents 15 percent of the two companies'
current expense base, and would bring the combined company into line with
Star Banc's current efficiency ratio. The cost saving opportunities include
centralization of corporate activities, consolidation of data processing and
operations, optimization of commercial banking, retail branches and
alternative delivery channels for bank products and services, improvements in
technology, and reconfiguration of mortgage, credit card and asset management
businesses.
Additionally, the companies believe there is significant
opportunity for revenue synergies resulting from product cross-selling,
accelerated consumer loan growth, new product introduction, and
implementation of Star Banc's highly successful incentive-based compensation
program throughout the combined company. This program provides all employees
with incentive pay linked to selected measures of shareholder value. The
companies project these revenue enhancements at $42 million annually, with
one-half to be realized in 1999 and the rest in 2000.
The two companies have no geographical overlap, and no merger-
related branch closings are planned. As with any merger of this magnitude,
some job loss at both organizations will be unavoidable, primarily in
redundant headquarters and administrative positions. Customer-contact
positions will be virtually unaffected. The companies plan to minimize
actual job loss through normal attrition, voluntary separation programs and
redeployment of employees into other positions and locations.
<PAGE>
"When companies merge, customers must come first," said
Fitzsimonds. "Together, we have significant, successful experience in
business integration that minimizes disruption to customers. We will make
this transition a smooth and comfortable one." Customers of the merged
company will have access to 720 branches, more than 1,400 ATM's and a broad
range of electronic banking, PC banking and Internet banking products and
services.
"These banks have deep roots in both Cincinnati and Milwaukee, and
we intend to be leading corporate citizens in both cities long after our
merger is complete," said Grundhofer. "In this decade, Star Banc has become
synonymous with superior service and active community participation in
Cincinnati and all the communities we serve. We intend to maintain our
strong physical presence in our historical home town, to continue to improve
the breadth and quality of our service to customers, and to maintain our
commitment to community reinvestment, civic involvement and corporate
philanthropy."
The new company will have three vice chairmen who will all report
to Grundhofer: John A. Becker, currently president and chief operating
officer of Firstar, who will be the chief operating officer of the combined
company; David M. Moffett, currently executive vice president and chief
financial officer of Star Banc, who will be the chief financial officer of
the combined company; and Richard K. Davis, currently executive vice
president of Star Banc, who will be responsible for consumer banking.
The combined company's consumer banking operations, headed by
Davis, will be headquartered in Cincinnati. Davis will also be responsible
for all banking operations in the Greater Cincinnati market.
Star currently holds an outstanding Community Reinvestment Act
(CRA) rating, while Firstar Bank Milwaukee, N.A., is rated satisfactory.
Star and Firstar have committed to achieving an outstanding rating after the
merger. Star has also reconfirmed its new $5.15 billion community
development initiative, which was announced February 1998.
The transaction, which was approved by the boards of both
companies, is subject to normal shareholder and regulatory approvals. In
connection with the merger agreement, Star Banc and Firstar have each granted
the other an option for 19.9 percent of its common shares. The transaction
is expected to close in the fourth quarter of 1998 or early in the first
quarter of 1999.
Star Banc was advised in this transaction by the investment bank of
Credit Suisse/First Boston and the law firm of Wachtell, Lipton, Rosen &
Katz. Firstar was advised by the investment bank of Merrill Lynch and the
law firm of Simpson Thacher & Bartlett.
Founded in 1863, Star Banc is the parent corporation of Star Bank
and operates full-service banking locations in Ohio, Kentucky and Indiana, in
addition to Star Banc Finance Inc., a consumer finance company. Star will
enter the Tennessee market upon the completion of its previously announced
acquisition of Trans Financial, Inc. in August, 1998. Star a "Five Star
Service Guarantee," which pays them for inconvenience if they fail to receive
certain key banking benefits. Star Banc was the first U.S. bank to introduce
a "24 Hour Banking System," a fully integrated customer service and banking
convenience package that includes branch banking, voice-activated phone
<PAGE>
banking, PC banking, Super ATMs, video kiosk banking, and Internet banking.
For more information on Star Banc Corporation and its products and services,
visit its home page at http://www.starbank.com.
Firstar Corporation, (www.firstar.com) is a $20.4 billion financial
services company, headquartered in Milwaukee. Firstar distributes banking,
trust, insurance, securities brokerage and other financial services through
more than 240 banking offices in Wisconsin, Iowa, Minnesota, Illinois,
Arizona, and Florida, and an extensive correspondent banking network in the
Upper Midwest. Firstar has a significant investment management business;
through various affiliates it has more than $27 billion of assets under
management including those of the Firstar family of mutual funds. In
addition to its network of local bank offices, Firstar provides around the
clock telephone banking services known as Firstar Express, automated teller
machines, personal computer banking via Firstar Online and access to a broad
array of corporate information on the company's Internet home page.
# # #
This news release contains forward looking statements with respect to the
financial condition, results of operations and business of Star Banc
Corporation and assuming the consummation of the merger, a combined Firstar
and Star Banc, including statements relating to: the cost savings and
revenue enhancements and accretion to reported earnings that will be realized
from the merger; and the restructuring charges expected to be incurred in
connection with the merger. These forward looking statements involve certain
risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward looking statements
include, among other things, the following possibilities: expected cost
savings from the merger cannot be fully realized or realized within the
expected time; revenues following the merger are lower than expected;
competitive pressure among depository institutions increases significantly;
costs of the difficulties related to the integration of the business of
Firstar and Star Banc are greater than expected; changes in the interest rate
environment reduce interest margins; general economic conditions, either
nationally or in the states in which the combined company will be doing
business, are less favorable than expected; legislation or regulatory
requirements or changes adversely affect the business in which the combined
company will be engaged; and changes may occur in the securities market.
Exhibit 99.2
STAR BANC
CORPORATION
Merges with
FIRSTAR
July 1, 1998
Forward Looking Information
This presentation contains forward looking statements with respect to the
financial condition, results of operations and business of Star Banc
Corporation and Firstar Corporation assuming the consummation of the merger,
a combined Firstar and Star Banc, including statements relating to: (i) the
cost savings and revenue enhancements and accretion to reported earnings that
will be realized from the merger; and (ii) the restructuring charges expected
to be incurred in connection with the merger. These forward looking
statements involve certain risks and uncertainties. Factors that may cause
actual results to differ materially from those contemplated by such forward
looking statements include, among other things, the following possibilities:
(i) expected cost savings from the merger cannot be fully realized or
realized within the expected time; (ii) revenues following the merger are
lower than expected; (iii) competitive pressure among depository institutions
increase significantly; (iv) costs of the difficulties related to the
integration of the business of Firstar and Star are greater than expected;
(v) changes in the interest rate environment reduces interest margins; (vi)
general economic conditions, either nationally or in the states in which the
combined company will be doing business, are less favorable than expected;
(vii) legislation or regulatory requirements or changes adversely affect the
business in which the combined company will be engaged; and (viii) changes
may occur in the securities market.
<PAGE>
Transaction Summary
Name: Firstar Corporation
Headquarters: Milwaukee, Wisconsin
Structure: Pooling-of-interests
Tax-free exchange
Fixed Exchange Ratio: 0.76 share for each Firstar share
Price: $48.55 per share (Based on STB close on June
30)
$7.2 Billion Aggregate Transaction Value
Cross Option: 19.9% cross option agreements in place
Dividend: New Company intends to increase dividend
post-closing to provide Firstar shareholders
with a comparable dividend -- a 30% increase
to STB dividend
Timing: Subject to regulatory and shareholder
approvals Targeted to close fourth quarter
1998 or early first quarter 1999
Due Diligence: Completed, including year 2000 review
Senior Management: Chairman Roger Fitzsimonds
President & CEO Jerry Grundhofer
Vice Chairmen John Becker (COO)
Richard Davis
David Moffett (CFO)
Board of Directors: 18 members from Star Banc
14 members from Firstar
Transaction Pricing
Transaction multiples at $48.55 per share compare favorably to Star's trading
multiples:
<PAGE>
<TABLE>
<CAPTION>
Transaction Multiple
Transaction Star As % of Star's
Multiples<F1> Multiples<F1> Multiple
--------------------- --------------------- ------------------------
<S> <C> <C> <C>
Price as a Multiple to:
1998E EPS . . . . . . . . . . . . . . . . . . . . . 23.3x 24.1x 97%
1999E EPS . . . . . . . . . . . . . . . . . . . . . 21.4 20.0 107
1999E EPS Adjusted for Synergies<F2> . . . . . . . . 14.9 20.0 75
Book Value . . . . . . . . . . . . . . . . . . . . . 4.1 4.3 95
<FN>
<F1> Based on Star's price of $63.88 as of June 30, 1998.
<F2> Assumes full synergies are added to Firstar's 1999E net income.
Note: EPS estimates based on First Call.
</TABLE>
Transaction financially attractive to both sets of shareholders:
- Conservative assumptions yield immediate and meaningful accretion
- Increases Star Banc's EPS growth rate
Transaction financially attractive to both sets of shareholders:
Conservative assumptions yield immediate and meaningful accretion
Increases Star Banc's EPS growth rate
<PAGE>
Star Banc Stand Alone EPS - 19.6% CAGR
1994A - $1.28
1995A - $1.50
1996A - $1.79
1997A - $2.19
Star Banc Stand Alone EPS - 23.9% CAGR
1998E - $2.65
1999E - $3.20
2000E - $3.68
Pro Forma EPS - 23.9% CAGR
1998E - $2.69
1999E - $3.38
2000E - $4.13
Note: The difference between Star Banc Stand Alone EPS and Pro Forma EPS for
1999E is 6%; the difference for 2000E is 12%.
Note: Earnings estimates per First Call, June 30 1998.
<PAGE>
Pro forma company well positioned to continue record of revenue growth and
superior financial performance:
<TABLE>
<CAPTION>
Star Banc Firstar Combined<F3>
------------------- ------------------- -------------------
<S> <C> <C> <C>
Market Capitalization . . . . . . . . . . . . . . . . . . . . . $7BN $6BN $14BN
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 21 38
ROA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.90% 1.51% 2.12%
ROE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.1 17.2 23.8
Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . 47.9 59.2 45.4
Midwestern Deposit Ranking . . . . . . . . . . . . . . . . . . 15th 11th 4th
Ranking in Core Markets<F1> . . . . . . . . . . . . . . . . . . 8th 9th 2nd
States Served . . . . . . . . . . . . . . . . . . . . . . . . . 4 5<F2> 9<F2>
<FN>
<F1> Includes IA, KY, MN, OH and WI.
<F2> Excludes trust operations in Florida.
<F3> Includes full phase-in of synergies.
</TABLE>
Strategic Rationale
- -- Financially compelling for shareholders of both companies
- -- Merges proven revenue growth strategies with significantly enhanced
Midwestern footprint
- -- Diversifies geographic and business line concentrations while providing
critical mass in key business lines
A Unique Investment Opportunity
The Transaction Creates the 4th Largest Franchise in the Midwest...
<PAGE>
Star Banc Firstar
Ohio (6) Wisconsin (2)
Indiana Illinois
Kentucky (3) Iowa (3)
Tennessee Minnesota (4)
() Denotes market rank.
Transaction Enhances Top Ten Performance...
<TABLE>
<CAPTION>
Star Firstar Combined<F1>
------------------- ------------------- -------------------
<S> <C> <C> <C>
At March 31, 1998:
Efficiency Ratio . . . . . . . . . . . . . . . . . . . . . . . 48% 59% 45%
Non Interest Income/Revenue . . . . . . . . . . . . . . . . . . 31 40 38
ROA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.90 1.51 2.11
ROE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.1 17.2 23.8
NPAs/Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 0.39 0.39 0.39
At Close (12/31/98):
Tangible Equity/Tangible Assets . . . . . . . . . . . . . . . . 6.2% 7.7% 6.5%<F2>
<FN>
<F1> Includes full phase-in of synergies.
<F2> Includes effect of restructuring charge.
</TABLE>
... Capable of Achieving Industry Leading Financial Returns.
<PAGE>
ROE
Bank of New York 25%
PRO FORMA 24%
Norwest 23%
US Bancorp 22%
Comerica 22%
Suntrust 22%
Citicorp 22%
Mellon 21%
Bank Boston 21%
PNC Bank 21%
ROA
PRO FORMA 2.1%
Fifth Third 2.0%
Bank of New York 2.05%
US Bancorp 1.9%
Mellon 1.85%
Banc One 1.8%
Norwest 1.75%
Fleet 1.6%
Comerica 1.6%
National City 1.6%
Efficiency
Fifth Third 40%
PRO FORMA 45%
<PAGE>
US Bancorp 50%
Bank of New York 50%
BB&T 51%
Summit 51%
Mercantile 52%
Comerica 52%
Regions 53%
Citicorp 54%
Note: Rank among all regional banks greater than $25 BN assets, as of March
31, 1998 - which includes 29 banks. Based upon pro forma with full phase in
of projected synergies.
Star's Proven Growth Strategy...
<TABLE>
<CAPTION>
For the Year Ended Dec. 31,
--------------------------------------------------------------- CAGR
1994 1995 1996 1997 1994-1997
-------------- -------------- -------------- -------------- --------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Net Interest Income (FTE) . . . . . . . . . . . $349.2 $381.6 $421.5 $465.3 10.0%
Non-Interest Income . . . . . . . . . . . . . . 117.0 138.1 170.5 204.6 20.5
------ ------ ------ ------
Revenues . . . . . . . . . . . . . . . . . . 466.2 519.7 592.0 669.9 12.8
Non-Interest Expenses . . . . . . . . . . . . . 260.3 286.2 303.2 321.8 7.3
Net Income . . . . . . . . . . . . . . . . . 116.6 136.6 158.4 194.8 18.7
Net Interest Margin . . . . . . . . . . . . . . 4.55% 4.44% 4.78% 4.94% --
Efficiency Ratio . . . . . . . . . . . . . . . 55.8 55.1 51.2 48.0 --
Non-Interest Income/Total Revenue . . . . . . . 25.1 26.6 28.8 30.5 --
</TABLE>
Based on Transitioning to Higher Yielding Loans...
<PAGE>
Star Banc Loan Portfolio
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------------------------------- CAGR
1993 1994 1995 1996 1997 1993 to 1997
------------ ------------ ------------ ------------ ------------ -------------
(Dollars in Billions)
<S> <C> <C> <C> <C> <C> <C>
Commercial . . . . . . . . . . . . . . . $2.9 $3.3 $3.5 $3.8 $4.2 10.2%
Consumer . . . . . . . . . . . . . . . . 1.4 1.8 2.2 2.6 3.0 20.3
Residential Mortgage . . . . . . . . . . 1.0 1.2 1.2 1.2 1.2 5.1
---- ---- ---- ---- ---- ----
Total Loans . . . . . . . . . . . . . $5.3 $6.2 $6.9 $7.6 $8.4 12.4%
</TABLE>
... Is Replicable in the Context of Firstar's Franchise...
Loan Portfolio Composition
<TABLE>
<CAPTION>
Star (Year End)
Firstar ------------------------------------------
Year End 1997 1993 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . 57% 54% 50%
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 27 36
Residential Mortgage . . . . . . . . . . . . . . . . . . . . . 18 19 14
---- ---- ----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% 100%
</TABLE>
... Since Firstar Operates in Similar Markets.
<PAGE>
<TABLE>
<CAPTION>
Star Firstar
Markets<F1> Markets Combined
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Number of Households (MM) . . . . . . . . . . . . . . . . . . . 7.5 8.1 15.6
Average Household Income . . . . . . . . . . . . . . . . . . . $46,884 $53,441 $50,396
Projected Household Growth . . . . . . . . . . . . . . . . . . 3.4% 3.5% 3.4%
Avg. MSA Share . . . . . . . . . . . . . . . . . . . . . . . . 8.3 11.3 9.9
<FN>
<F1> Includes impact of pending acquisitions.
Source: SNL Securities.
</TABLE>
New Firstar to Benefit from Achieving Critical Mass in Key Business Lines...
<TABLE>
<CAPTION>
Star Firstar Combined
At March 31, 1998 -------------------- -------------------- --------------------
(Dollars in Billions)
<S> <C> <C> <C>
Consumer Lending . . . . . . . . . . . . . . . . . . . . . . . $ 3.3 $ 3.5 $ 6.8
Commercial Lending . . . . . . . . . . . . . . . . . . . . . . 6.2 8.5 14.7
Asset Management
- -- Total AUM . . . . . . . . . . . . . . . . . . . . . . . . $11.0 $27.1 $38.1
- -- Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . 3.0 5.6 8.6
Mortgage Banking
- -- Originations<F1> . . . . . . . . . . . . . . . . . . . . . $ 2.7 $ 1.9 $ 4.6
- -- Servicing . . . . . . . . . . . . . . . . . . . . . . . . 14.4 5.7 20.1
<FN>
<F1> For the year ended December 31, 1997 pro forma for acquisitions.
</TABLE>
<PAGE>
... Enhanced Distribution Channels...
<TABLE>
<CAPTION>
Star Firstar Combined
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Branches 436 240 676
ATMs 992 451 1,443
-- Phone
Alternative Distribution Channels banking
-- PC/Internet
banking
</TABLE>
... Making The New Firstar a Truly Unique Investment Opportunity.
- -- Proven record of quality revenue/profitability growth
- -- Unique opportunity to extend proven combined management skills across an
enhanced operating platform
- -- Industry leading financial performance
Transaction Economics
- -- Significant EPS accretion based on conservative assumptions:
- 12% accretion does not include any earnings from excess capital
reinvestment
- -- Conservative expense savings assumptions -- $174 million pre-tax, 23% of
Firstar or 15% of combined expense base:
<PAGE>
- Compares to average of 27%, based on comparable transactions
- Brings Firstar's efficiency ratio in line with Star's
- -- Revenue enhancements equal to $42 million pre-tax, representing 2% of
New Firstar's total revenue
- -- Restructuring charge of $325 million pre-tax
Pro Forma Income Statement
Based on Street Estimates -- Fully Diluted, Before
Non-Recurring Items
<TABLE>
<CAPTION>
1998 1999 2000
-------------------- -------------------- --------------------
(Dollars in Millions)
<S> <C> <C> <C>
Projected Star Banc Net Income . . . . . . . . . . . . . . . . $ 294 $ 355 $ 407
Projected Firstar Net Income . . . . . . . . . . . . . . . . . 307 336 369
Cost Savings<F1> . . . . . . . . . . . . . . . . . . . . . . . -- 51 118
Revenue Enhancements . . . . . . . . . . . . . . . . . . . . . -- 14 29
------ ------ ------
Projected Net Income . . . . . . . . . . . . . . . . . . . . . $ 601 $ 756 $ 923
Projected Shares for Calculation of EPS (millions) . . . . . . 223.8 223.8 223.8
Original Star FD EPS . . . . . . . . . . . . . . . . . . . . . $ 2.65 $ 3.20 $ 3.68
Pro Forma FD EPS . . . . . . . . . . . . . . . . . . . . . . . 2.69 3.38 4.13
Accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4% 5.5% 12.1%
<FN>
<F1> Net of cost of financing restructuring charge.
Note: Earnings estimates based on First Call as of June 30, 1998. Synergies
phased-in 50% in 1999 and 100% in 2000.
</TABLE>
<PAGE>
Cost Savings Opportunities
- -- Corporate activities
- Centralized staff units
- Single bank charter
- -- Data processing/operations consolidation and outsourcing
- -- Delivery system optimization
- Commercial/branch rationalization/reconfiguration
- Alternative delivery channels (call centers, PC banking, ATMs)
- -- Improved processes and staffing models
- -- Mortgage, credit card, and asset management business line consolidations
- -- Vendor leverage
<PAGE>
Expected Cost Savings
<TABLE>
<CAPTION>
Total<F1>
-------------------------------
(Dollars in Millions)
<S> <C>
Major Business Lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60
Systems and Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
G&A/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-----
Annual Savings $174
=====
<FN>
<F1> Savings to be realized 50% in 1999 and 100% in 2000.
</TABLE>
Revenue Opportunities
- -- Implementation of Star's incentive based compensation program
- -- Product cross-selling opportunities
- -- Accelerated consumer loan growth
- -- New product introduction
Revenue Opportunities -- Incentive Compensation
Implementation of Star's "Pay-for-Performance" philosophy
<PAGE>
- -- All employees receive some incentive-based pay linked to shareholder
value
- -- Aligns management and employee goals
- -- Promotes selling, while encouraging efficiency and cost control
Revenues/FTE's vs. Incentive Comp Ratio
Revenues/FTE's ICR
1994 $126 6.3%
1995 $135 12.5%
1996 $148 14.3%
1997 $163 13.0%
Efficiency Ratio vs. Incentive Comp Ratio
Efficiency ICR
1994 55.8% 6.3%
1995 55.1% 12.5%
1996 51.2% 14.3%
1997 48.0% 13.0%
Merger Related Charges
<PAGE>
<TABLE>
<CAPTION>
Total
-------------------------------
(Dollars in Millions)
<S> <C>
Conversion Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 79
Employee Related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Systems/Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Occupancy/Equipment Writedowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----
Total Pre-Tax Merger-Related Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $325
=====
</TABLE>
Proven Management Experience
- -- Significant management experience
- -- Successful acquisition history
- -- Proven integration capabilities
Title at Years of
New Firstar Bank Experience
----------- ------ ------------
Roger L. Fitzsimonds Chairman Firstar 33
Jerry A. Grundhofer Pres. & CEO Wells Fargo, 30
Security Pacific/
BankAmerica, Star
John A. Becker VC, COO Firstar 31
Richard K. Davis VC Security Pacific/ 22
BankAmerica, Star
David M. Moffett VC, CFO Security Pacific/ 23
BankAmerica, Star
<PAGE>
Summary
Consistent With Strategy of the Companies
- -- Enhances long term growth prospects
- -- Stronger strategic position of franchise
Financially Compelling
- -- Double digit accretion based on conservative assumptions
- -- Strong capital ratios
- -- Top tier financial performance
Low Risk Transaction
- -- Proven management track records
- -- Achievable assumptions
- -- Significant integration experience
<PAGE>
Appendix
Comparative Performance Data
For the Quarter ended March 31, 1998
<TABLE>
<CAPTION>
Star Firstar Combined<F1>
-------------------- -------------------- --------------------
(Dollars in Millions)
<S> <C> <C> <C>
Net Interest Income, FTE . . . . . . . . . . . . . . . . . . . $614 $771 $1,385
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 63 115
Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . 297 516 855
Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . 428 762 1,016
1998E Net Income . . . . . . . . . . . . . . . . . . . . . . . 294 307 748
Return on Assets . . . . . . . . . . . . . . . . . . . . . . . 1.90% 1.51% 2.12%
Return on Common Equity . . . . . . . . . . . . . . . . . . . . 20.1 17.2 23.8
Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . 4.73 4.37 4.50
Efficiency Ratio . . . . . . . . . . . . . . . . . . . . . . . 47.9 59.2 45.4
Fee Income/Total Revenue . . . . . . . . . . . . . . . . . . . 31.4 40.0 38.2
<FN>
<F1> Includes full effect of synergies.
</TABLE>
<PAGE>
Loan Composition
At March 31, 1998
<TABLE>
<CAPTION>
Star(1) Firstar(2) Combined
--------------------------- --------------------------- ---------------------------
% of % of % of
Balance Total Balance Total Balance Total
------------ ------------ ------------ ------------ ------------ -------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C> <C>
Commercial & Commercial RE . . . . . . . $ 6,165 52% $ 8,473 59% $14,639 55%
1-4 Family RE . . . . . . . . . . . . . . 2,099 18 2,497 17 4,596 18
Retail and Other . . . . . . . . . . . . 3,592 30 3,380 24 6,972 27
------- ---- ------- ---- ------- ----
Total loans . . . . . . . . . . . . . $11,856 100% $14,350 100% $26,207 100%
======= ==== ======= ==== ======= ====
<FN>
<F1> Pro forma for Trans Financial and Banc One branches.
<F2> Pro forma for Cargill.
</TABLE>
<PAGE>
Deposit Composition
At March 31, 1998
<TABLE>
<CAPTION>
Star<F1> Firstar Combined
--------------------------- --------------------------- ---------------------------
% of % of % of
Balance Total Balance Total Balance Total
------------ ------------ ------------ ------------ ------------ -------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing . . . . . . . . . . $ 2,346 18.0% $ 3,883 25.7% $ 6,229 22.1
Interest bearing
Money market . . . . . . . . . . . . . 2,196 16.8 3,170 21.0 5,366 19.0%
Other savings . . . . . . . . . . . . 2,626 20.1 3,128 20.7 5,754 20.4
Certificates . . . . . . . . . . . . . 5,886 45.1 4,944 32.7 10,830 38.4
------- ------ ------- ------ ------- ------
Total interest bearing . . . . . . . . 10,707 82.0 11,242 74.3 21,949 77.9
------- ------ ------- ------ ------- ------
Total deposits . . . . . . . . . . . . $13,053 100.0% $15,125 100.0% $28,178 100.0%
======= ====== ======= ====== ======= ======
<F1> Pro forma for Trans Financial, and Banc One branches.
</TABLE>
<PAGE>
Credit Quality
At or for the Quarter ended March 31, 1998
<TABLE>
<CAPTION>
Star Firstar Combined
-------------------- -------------------- --------------------
(Dollars in Millions)
<S> <C> <C> <C>
Total Loans . . . . . . . . . . . . . . . . . . . . . . . . . . $11,223 $13,827 $25,050
Nonperforming Loans . . . . . . . . . . . . . . . . . . . . . . 51 73 124
Nonperforming Assets . . . . . . . . . . . . . . . . . . . . . 58 80 138
Loan Loss Reserve . . . . . . . . . . . . . . . . . . . . . . . 174 219 393
NPLs/Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 0.46% 0.53% 0.50%
NPAs/Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 0.39 0.39 0.39
NCOs/Avg. Loans . . . . . . . . . . . . . . . . . . . . . . . . 0.42 0.46 0.44
Reserves/Loans . . . . . . . . . . . . . . . . . . . . . . . . 1.55 1.58 1.57
Reserves/NPLs 339.18 300.82 316.68
Reserves/NPAs 302.61 273.75 285.82
</TABLE>
Note: Data before Star's acquisition of Banc One branches and Firstar's
acquisition of Cargill leasing.
<PAGE>
Expanded Market Area
<TABLE>
<CAPTION>
Pro Forma Number of
Deposits Market Share Branches
-------------------- -------------------- --------------------
(Dollars in Millions)
<S> <C> <C> <C>
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,040 5.4% 279
Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,951 12.1 118
Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,716 8.2 109
Iowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,311 5.8 49
Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,138 1.0 43
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,973 3.4 32
Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433 0.7 22
Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 0.7 16
Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 0.4 4
</TABLE>
Source: SNL Securities. Data as of 6/30/97, adjusted for announced
transactions.
Creates Leading Midwest Banking Franchise -- Top MSA Markets
- -- Ranks among the top 5 in 11 of the 15 largest MSAs in which it operates
<PAGE>
<TABLE>
<CAPTION>
Total Market
Deposits Share of MSA Branches
MSA -------------------- -------------------- --------------------
<S> <C> <C> <C>
1. Milwaukee, WI . . . . . . . . . . . . . . . . . . . . . . $4.3 18.6% 41
2. Cincinnati, OH . . . . . . . . . . . . . . . . . . . . . . 3.3 14.4 87
3. Chicago, IL . . . . . . . . . . . . . . . . . . . . . . . 2.1 1.4 41
4. Minneapolis-St. Paul, MN . . . . . . . . . . . . . . . . . 2.0 5.7 32
5. Cleveland, OH . . . . . . . . . . . . . . . . . . . . . . 1.8 4.5 59
6. Columbus, OH . . . . . . . . . . . . . . . . . . . . . . . 1.0 4.4 34
7. Louisville, KY . . . . . . . . . . . . . . . . . . . . . . 0.9 6.2 21
8. Madison, WI . . . . . . . . . . . . . . . . . . . . . . . 0.8 15.8 9
9. Cedar Rapids, IA . . . . . . . . . . . . . . . . . . . . . 0.5 23.7 5
10. Dayton-Springfield, OH . . . . . . . . . . . . . . . . . . 0.5 5.5 28
11. Bowling Green, KY<F1> . . . . . . . . . . . . . . . . . . 0.4 36.4 6
12. Sheboygan, WI . . . . . . . . . . . . . . . . . . . . . . 0.4 31.4 2
13. Des Moines, IA . . . . . . . . . . . . . . . . . . . . . . 0.4 6.2 6
14. Hamilton-Middletown, OH . . . . . . . . . . . . . . . . . 0.3 13.4 17
15. Owensboro, KY . . . . . . . . . . . . . . . . . . . . . . 0.3 27.9 7
16. Lexington, KY . . . . . . . . . . . . . . . . . . . . . . 0.3 6.0 11
Source: SNL Securities. Data as of 6/30/97, adjusted for announced
transactions.
<FN>
<F1> Indicates market share in Federal Banking Market.
</TABLE>
