-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IVgPaU+4I/Zsu2HH0fPY69opcJNrxNiUKU2edOmmOXW/ym4AghK7exc8ng9+asVw lnM37R0ZP9KOK28Lzh/Ekg== 0000893750-98-000207.txt : 19980703 0000893750-98-000207.hdr.sgml : 19980703 ACCESSION NUMBER: 0000893750-98-000207 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980630 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980702 SROS: CSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTAR CORP /WI/ CENTRAL INDEX KEY: 0000037076 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 390711710 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 002-28711 FILM NUMBER: 98660089 BUSINESS ADDRESS: STREET 1: 777 E WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4147655977 MAIL ADDRESS: STREET 1: 777 EAST WISCONSIN AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53202 FORMER COMPANY: FORMER CONFORMED NAME: FIRST WISCONSIN CORP DATE OF NAME CHANGE: 19890124 FORMER COMPANY: FORMER CONFORMED NAME: FIRST WISCONSIN BANKSHARES CORP DATE OF NAME CHANGE: 19750204 8-K/A 1 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) 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. 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. 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 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. EX-2 2 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 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 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 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 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: 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. 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). 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 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 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 "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 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 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 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 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 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 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 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. (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. (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, 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 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 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 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 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 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 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 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 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 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 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 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). (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 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. 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; (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 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 (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 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 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 EX-10.1 3 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 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 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 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 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. 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 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 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 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. (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 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 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. 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 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 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. 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 EX-10.2 4 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 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 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 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. (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. 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 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 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 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. (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 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 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. 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 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 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. 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 EX-10.3 5 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. 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 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. * * * * * 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 EX-99.1 6 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 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. "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 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. EX-99.2 7 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. 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:
Transaction Multiple Transaction Star As % of Star's Multiples Multiples Multiple --------------------- --------------------- ------------------------ Price as a Multiple to: 1998E EPS . . . . . . . . . . . . . . . . . . . . . 23.3x 24.1x 97% 1999E EPS . . . . . . . . . . . . . . . . . . . . . 21.4 20.0 107 1999E EPS Adjusted for Synergies . . . . . . . . 14.9 20.0 75 Book Value . . . . . . . . . . . . . . . . . . . . . 4.1 4.3 95 Based on Star's price of $63.88 as of June 30, 1998. Assumes full synergies are added to Firstar's 1999E net income. Note: EPS estimates based on First Call.
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 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. Pro forma company well positioned to continue record of revenue growth and superior financial performance:
Star Banc Firstar Combined ------------------- ------------------- ------------------- 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 . . . . . . . . . . . . . . . . . . 8th 9th 2nd States Served . . . . . . . . . . . . . . . . . . . . . . . . . 4 5 9 Includes IA, KY, MN, OH and WI. Excludes trust operations in Florida. Includes full phase-in of synergies.
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... Star Banc Firstar Ohio (6) Wisconsin (2) Indiana Illinois Kentucky (3) Iowa (3) Tennessee Minnesota (4) () Denotes market rank. Transaction Enhances Top Ten Performance...
Star Firstar Combined ------------------- ------------------- ------------------- 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% Includes full phase-in of synergies. Includes effect of restructuring charge.
... Capable of Achieving Industry Leading Financial Returns. 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% 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...
For the Year Ended Dec. 31, --------------------------------------------------------------- CAGR 1994 1995 1996 1997 1994-1997 -------------- -------------- -------------- -------------- -------------- (Dollars in Millions) 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 --
Based on Transitioning to Higher Yielding Loans... Star Banc Loan Portfolio
As of December 31, ----------------------------------------------------------------------- CAGR 1993 1994 1995 1996 1997 1993 to 1997 ------------ ------------ ------------ ------------ ------------ ------------- (Dollars in Billions) 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%
... Is Replicable in the Context of Firstar's Franchise... Loan Portfolio Composition
Star (Year End) Firstar ------------------------------------------ Year End 1997 1993 1997 -------------------- -------------------- -------------------- Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . 57% 54% 50% Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 27 36 Residential Mortgage . . . . . . . . . . . . . . . . . . . . . 18 19 14 ---- ---- ---- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% 100%
... Since Firstar Operates in Similar Markets.
Star Firstar Markets Markets Combined -------------------- -------------------- -------------------- 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 Includes impact of pending acquisitions. Source: SNL Securities.
New Firstar to Benefit from Achieving Critical Mass in Key Business Lines...
Star Firstar Combined At March 31, 1998 -------------------- -------------------- -------------------- (Dollars in Billions) 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 . . . . . . . . . . . . . . . . . . . . . $ 2.7 $ 1.9 $ 4.6 - -- Servicing . . . . . . . . . . . . . . . . . . . . . . . . 14.4 5.7 20.1 For the year ended December 31, 1997 pro forma for acquisitions.
... Enhanced Distribution Channels...
Star Firstar Combined -------------------- -------------------- -------------------- Branches 436 240 676 ATMs 992 451 1,443 -- Phone Alternative Distribution Channels banking -- PC/Internet banking
... 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: - 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
1998 1999 2000 -------------------- -------------------- -------------------- (Dollars in Millions) Projected Star Banc Net Income . . . . . . . . . . . . . . . . $ 294 $ 355 $ 407 Projected Firstar Net Income . . . . . . . . . . . . . . . . . 307 336 369 Cost Savings . . . . . . . . . . . . . . . . . . . . . . . -- 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% 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.
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 Expected Cost Savings
Total ------------------------------- (Dollars in Millions) Major Business Lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60 Systems and Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 G&A/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 ----- Annual Savings $174 ===== Savings to be realized 50% in 1999 and 100% in 2000.
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 - -- 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
Total ------------------------------- (Dollars in Millions) Conversion Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 79 Employee Related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 Systems/Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Occupancy/Equipment Writedowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 ----- Total Pre-Tax Merger-Related Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $325 =====
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 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 Appendix Comparative Performance Data For the Quarter ended March 31, 1998
Star Firstar Combined -------------------- -------------------- -------------------- (Dollars in Millions) 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 Includes full effect of synergies.
Loan Composition At March 31, 1998
Star(1) Firstar(2) Combined --------------------------- --------------------------- --------------------------- % of % of % of Balance Total Balance Total Balance Total ------------ ------------ ------------ ------------ ------------ ------------- (Dollars in Millions) 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% ======= ==== ======= ==== ======= ==== Pro forma for Trans Financial and Banc One branches. Pro forma for Cargill.
Deposit Composition At March 31, 1998
Star Firstar Combined --------------------------- --------------------------- --------------------------- % of % of % of Balance Total Balance Total Balance Total ------------ ------------ ------------ ------------ ------------ ------------- (Dollars in Millions) 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% ======= ====== ======= ====== ======= ====== Pro forma for Trans Financial, and Banc One branches.
Credit Quality At or for the Quarter ended March 31, 1998
Star Firstar Combined -------------------- -------------------- -------------------- (Dollars in Millions) 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
Note: Data before Star's acquisition of Banc One branches and Firstar's acquisition of Cargill leasing. Expanded Market Area
Pro Forma Number of Deposits Market Share Branches -------------------- -------------------- -------------------- (Dollars in Millions) 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
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
Total Market Deposits Share of MSA Branches MSA -------------------- -------------------- -------------------- 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 . . . . . . . . . . . . . . . . . . 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. Indicates market share in Federal Banking Market.
-----END PRIVACY-ENHANCED MESSAGE-----