-----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, VmyLBmE16UscAUuwjytw+6927zgvimR9vEeLIRD7TGOpbAHqZXrJ+YmwgDf9GtSB 35GsQyOd0SSXPFl1SQ59MA== 0000950124-97-001506.txt : 19970317 0000950124-97-001506.hdr.sgml : 19970317 ACCESSION NUMBER: 0000950124-97-001506 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970314 SROS: CSX SROS: NASD 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: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 002-28711 FILM NUMBER: 97556566 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 10-K 1 10-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1996 Commission File Number 1-2981 FIRSTAR CORPORATION WISCONSIN 39-0711710 (State of Incorporation) (I.R.S. Employer Identification No.)
777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 Telephone Number (414) 765-4321 Securities Registered Pursuant to Section 12b) of the Act:
NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ------------------------ Common Stock, $1.25 par value New York Stock Exchange, Inc. Chicago Stock Exchange, Inc. Preferred Stock, Series D Nasdaq Preferred Share Purchase Rights New York Stock Exchange, Inc. Chicago Stock Exchange, Inc.
Securities Registered Pursuant to Section 12(g) OF THE ACT: NONE Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes _ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ___ As of February 28, 1997, 144,497,866 shares of common stock were outstanding, and the aggregate market value of the shares (based upon the closing price) held by nonaffiliates was approximately $3.8 billion. Documents Incorporated by Reference: Portions of the 1997 Notice of Annual Meeting and Proxy Statement are incorporated by reference into Part III of the Form 10-K. ================================================================================ 2 FORM 10-K TABLE OF CONTENTS
PAGE ---- PART I Item 1 - Business........................................ 2 Item 2 - Properties...................................... 5 Item 3 - Legal Proceedings............................... 5 Item 4 - Submission of Matters to a Vote of Security Holders................................................ 5 PART II Item 5 - Market for the Registrant's Common Equity and Related Stockholder Matters............................ 5 Item 6 - Selected Financial Data......................... 6 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations... 7 Item 8 - Financial Statements and Supplementary Data..... 28 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............. 60 PART III Item 10 - Directors and Executive Officers of the Registrant............................................. 60 Item 11 - Executive Compensation.......................... 60 Item 12 - Security Ownership of Certain Beneficial Owners and Management......................................... 60 Item 13 - Certain Relationships and Related Transactions........................................... 60 PART IV Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K.................................... 60 Signatures................................................ 62
1 3 PART I ITEM 1. BUSINESS GENERAL Firstar Corporation is a registered bank holding company incorporated in Wisconsin in 1929. Firstar Corporation ("Firstar") is the largest bank holding company headquartered in Wisconsin. Firstar's two bank subsidiaries in Wisconsin had total assets of $10.3 billion at December 31, 1996. Its one bank and savings and loan in Iowa, one Illinois bank and one Minnesota bank had total assets of approximately $2.9 billion, $2.8 billion and $3.0 billion, respectively, as of December 31, 1996. Firstar has one bank in Phoenix, Arizona with total assets of $158 million. Firstar's principal subsidiary, Firstar Bank Milwaukee, N.A., had total assets of $6.1 billion which represented 31 percent of Firstar's consolidated assets at December 31, 1996, and is the largest commercial bank in Wisconsin. Subsidiary asset totals are net of intercompany balances. Firstar provides banking services throughout Wisconsin and Iowa and in the Chicago, Minneapolis-St. Paul and Phoenix metropolitan areas. Its Wisconsin bank subsidiaries operate in 118 locations, with offices in eight of the ten largest metropolitan population centers of the state, including 41 offices in the Milwaukee metropolitan area. Its Iowa bank subsidiary operates in 51 locations; its Illinois bank subsidiary in 40 locations; its Minnesota bank subsidiary in 31 locations; and its Arizona bank in three locations. Firstar also provides trust services in its five-state banking locations and in Florida at two locations. Firstar's bank subsidiaries provide a broad range of financial services for companies based in Wisconsin, Iowa, Illinois and Minnesota, national business organizations, governmental entities and individuals. These commercial and consumer banking activities include accepting demand, time and savings deposits; making both secured and unsecured business and personal loans; and issuing and servicing credit cards. The bank subsidiaries also engage in correspondent banking and provide trust and investment management services to individual and corporate customers. Firstar Bank Milwaukee, N.A. also conducts international banking services consisting of foreign trade financing, issuance and confirmation of letters of credit, funds collection and foreign exchange transactions. Nonbank subsidiaries provide retail brokerage services, trust and investment management services, residential mortgage banking activities, title insurance, business insurance, consumer and credit related insurance, and corporate computer and operational services. COMPETITION Banking and bank-related services is a highly competitive business. Firstar's subsidiaries compete primarily in Wisconsin and the Midwestern United States. Firstar and its subsidiaries have numerous competitors, some of which are larger and have greater financial resources. Firstar competes with other commercial banks and financial intermediaries, such as savings banks, savings and loan associations, credit unions, mortgage companies, leasing companies and a variety of financial services and advisory companies located throughout the country. SUPERVISION Firstar's business activities as a bank holding company are regulated by the Federal Reserve Board under the Bank Holding Company Act of 1956 which imposes various requirements and restrictions on its operations. The activities of Firstar and those of its banking and nonbanking subsidiaries are limited to the business of banking and activities closely related or incidental to banking. The business of banking is highly regulated, and there are various requirements and restrictions in the laws of the United States and the states in which the subsidiary banks operate including the requirement to maintain reserves against deposits and adequate capital to support their operations, restrictions on the nature and amount of loans which may be made by the banks, restrictions relating to investment (including loans to and investments in affiliates), branching and other activities of the banks. Firstar's subsidiary banks with a national charter are supervised and examined by the Comptroller of the Currency. The subsidiary banks with a state charter are supervised and examined by their respective state 2 4 banking agency and either by the Federal Reserve if a member bank of the Federal Reserve or by the FDIC if a nonmember. All of the Firstar subsidiary banks are also subject to examination by the Federal Deposit Insurance Corporation. In recent years Congress has enacted significant legislation which has substantially changed the federal deposit insurance system and the regulatory environment in which depository institutions and their holding companies operate. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of 1990 and the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") have significantly increased the enforcement powers of the federal regulatory agencies having supervisory authority over Firstar and its subsidiaries. Certain parts of such legislation, most notably those which increase deposit insurance assessments and authorize further increases to recapitalize the bank deposit insurance fund, increase the cost of doing business for depository institutions and their holding companies. FIRREA also provides that all commonly controlled FDIC insured depository institutions may be held liable for any loss incurred by the FDIC resulting from a failure of, or any assistance given by the FDIC, to any of such commonly controlled institutions. Federal regulatory agencies have implemented provisions of FDICIA with respect to taking prompt corrective action when a depository institution's capital falls to certain levels. Under the rules, five capital categories have been established which range from "critically undercapitalized" to "well capitalized". Failure of a depository institution to maintain a capital level within the top two categories will result in specific actions from the federal regulatory agencies. These actions could include the inability to pay dividends, restricting new business activity, prohibiting bank acquisitions, asset growth limitations and other restrictions on a case by case basis. In addition to the impact of regulation, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy. Changes to such monetary policies have had a significant effect on operating results of financial institutions in the past and are expected to have such an effect in the future; however, the effect of possible future changes in such policies on the business and operations of Firstar cannot be determined. 3 5 EXECUTIVE OFFICERS OF THE REGISTRANT The following is a list of all the executive officers (14) of Firstar as of December 31, 1996. All of these officers are elected annually by their respective boards of directors. All of the officers have been employed by Firstar and/or one or more of its subsidiaries during the past five years. There are no family relationships among any of the executive officers.
NAME AGE POSITION ---- --- -------- Roger L. Fitzsimonds............................... 58 Chairman of the Board and Chief Executive Officer of Firstar (Since February 1991) John A. Becker..................................... 54 President and Chief Operating Officer of Firstar (Since January 1990) Chris M. Bauer..................................... 48 Senior Executive Vice President of Firstar (Since January 1996) Richard W. Schoenke................................ 53 Senior Executive Vice President of Firstar (Since January 1996) Steven R. Parish................................... 39 Executive Vice President of Firstar (Since April 1996) Jay B. Williams.................................... 45 President of Firstar Bank Illinois (Since January 1995) Michael J. Schmitz................................. 62 Executive Vice President of Firstar (Since September 1990) Jon H. Stowe....................................... 52 Executive Vice President of Firstar (Since January 1995) Dennis R. Fredrickson.............................. 52 Senior Vice President of Firstar (Since October 1988) Larry A. Greves.................................... 49 Senior Vice President of Firstar (Since January 1992) John R. Heistad.................................... 50 Senior Vice President and Chief Credit Officer of Firstar (Since January 1992) Howard H. Hopwood III.............................. 51 Senior Vice President and General Counsel of Firstar (Since January 1986) Ronald E. Roder.................................... 48 Senior Vice President of Firstar Bank Milwaukee (Since December 1988) Jeffrey B. Weeden.................................. 40 Senior Vice President--Finance and Treasurer and Chief Financial Officer of Firstar (Since April 1996)
4 6 ITEM 2. PROPERTIES On December 31, 1996, Firstar had 243 banking locations, of which 165 were owned and 78 were leased. All of these offices are considered by management to be well maintained and adequate for the purpose intended. See Note 6 of the Notes to Consolidated Financial Statements included under Item 8 of this document for further information on properties. ITEM 3. LEGAL PROCEEDINGS Firstar and its subsidiaries are subject to various legal actions and proceedings in the normal course of business, some of which involve substantial claims for compensatory or punitive damages. Although litigation is subject to many uncertainties and the ultimate exposure with respect to these matters cannot be ascertained, management does not believe that the final outcome will have a material adverse effect on the financial condition of Firstar. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS See Item 6 of this document for information on stock price ranges and dividends. The principal markets for the quotations of stock prices are the New York Stock Exchange and Chicago Stock Exchange. There were 11,593 holders of record of Firstar's $1.25 par value Common Stock on February 28, 1997. 5 7 ITEM 6. SELECTED FINANCIAL DATA
Years Ended December 31 ---------------------------------------------------- 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- (thousands of dollars, except per share) EARNINGS AND DIVIDENDS Net interest revenue...................... $750,379 $725,947 $698,838 $659,939 $626,371 Provision for loan losses................. 42,647 36,756 23,891 29,090 50,733 Other operating revenue................... 440,452 392,197 370,619 392,918 347,936 Other operating expense................... 773,637 734,122 706,185 689,274 655,444 Net income................................ 250,177 228,913 226,673 227,938 185,999 Per common share: Net income.............................. 1.68 1.50 1.49 1.50 1.25 Dividends............................... .74 .66 .58 .50 .40 Stockholders' equity.................... 11.26 10.31 9.73 8.89 7.91 Average common shares (000's)............. 148,061 151,432 150,391 148,262 143,983 - ------------------------------------------ PERFORMANCE RATIOS Return on average assets.................. 1.31% 1.26% 1.37% 1.49% 1.29% Return on average common equity........... 15.95 15.11 15.96 17.81 16.65 Equity to assets.......................... 8.62 7.95 8.41 8.28 7.94 Total risk-based capital.................. 13.47 12.45 13.18 13.17 13.10 Net loan charge-offs as a percentage of average loans........................... .30 .27 .25 .25 .40 Nonperforming assets as a percentage of loans and foreclosed assets............. .72 .77 .69 .81 1.17 Net interest margin....................... 4.51 4.55 4.89 5.04 5.11 Efficiency ratio*......................... 58.18 61.43 61.75 63.53 65.13 Fee revenue as a percentage of average assets.................................. 2.30 2.18 2.26 2.56 2.39 - ------------------------------------------ (millions of dollars) BALANCE SHEET AT DECEMBER 31 Total assets.............................. $ 19,767 $ 19,168 $ 17,994 $ 16,412 $ 15,561 Securities................................ 4,217 4,475 3,974 3,360 3,279 Loans: Commercial loans........................ 7,312 6,966 6,710 5,996 5,472 Consumer loans.......................... 3,224 2,944 2,813 2,561 2,229 Consumer mortgage loans................. 2,660 2,723 2,383 2,268 2,115 Total loans.......................... 13,196 12,633 11,906 10,825 9,816 Earning assets............................ 17,626 17,233 16,293 14,551 13,617 Deposits: Core deposits........................... 14,369 13,403 12,818 12,689 12,311 Other deposits.......................... 845 909 591 444 445 Total deposits....................... 15,214 14,312 13,409 13,133 12,756 Short-term borrowed funds................. 1,869 2,303 2,196 1,178 900 Long-term debt............................ 547 734 574 486 426 Trust capital securities.................. 150 Stockholders' equity...................... 1,704 1,525 1,513 1,359 1,237 - ------------------------------------------ STOCK PRICE INFORMATION High............................................... $ 26 7/8 $ 20 1/2 $ 17 11/16 $ 18 5/8 $ 15 15/16 Low................................................ 18 5/16 13 1/8 12 9/16 14 11/16 11 9/16 Close.............................................. 26 1/4 19 13/16 13 7/16 15 3/8 15 3/4 - ---------------------------------------------------
* The calculation excludes nonrecurring items in 1996, 1995 and 1994. All share and per share amounts have been adjusted to reflect the two-for-one stock split completed in February 1997. 6 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING INFORMATION This review contains forward looking statements concerning Firstar's business results that are based on estimates. Actual results could differ materially due to factors such as changes in economic conditions, compression of net interest revenue due to unanticipated declines in net interest margins and outstanding loan balances, unanticipated delays in cost reduction and revenue enhancements, and the ability of the company to attract and retain qualified personnel. Therefore, there can be no assurances that actual results will correspond to these forward-looking statements. HIGHLIGHTS Firstar recorded net income in 1996 of $250.2 million, a 9.3% increase over the $228.9 million earned in 1995. On a per common share basis, 1996 net income increased to $1.68 from $1.50 earned in 1995, representing a 12.0% increase. In 1994, net income was $226.7 million, or $1.49 per common share. Return on average common equity was 15.95% in 1996 compared with 15.11% in 1995 and 15.96% in 1994. Return on average assets for 1996 was 1.31% compared with 1.26% in 1995 and 1.37% in 1994. Earnings during the past three years included unusual expenses which lowered each year's reported net income. In 1996, Firstar incurred total net special charges of $33.4 million after tax, or $.23 per share. A corporate wide restructuring program was announced in early 1996 and a charge of $53.3 million pre-tax, or $.22 per share, was taken to cover implementation costs. Also included in 1996 was the Savings Association Insurance Fund charge of $.03 per share. A gain of $.02 per share from the favorable settlement of prior years tax items was also realized in 1996. During 1995 charges were taken in connection with four completed bank acquisitions. These expenses totaled $43.0 million pre-tax and reduced net income by $.18 per share. During 1994, a $22 million pre-tax charge was recorded for a check kiting fraud which reduced net income by $.09 per share. Exclusive of these items, operating earnings per share would have shown sound growth of 13.7% in 1996 and 6.3% in 1995. Return on average common equity absent these charges would have been 18.09% in 1996 compared with 16.95% in 1995 and 16.90% in 1994. Major factors affecting underlying earning trends during the past three years were: - Net interest revenue, on a taxable equivalent basis, increased by 3.3% in 1996 following a similar increase of 3.5% during 1995. Increased average earning asset balances during these periods contributed to higher net interest revenue. - Net interest margins were further compressed, with the 1996 margin at 4.51% compared with 4.55% in 1995 and 4.89% in 1994. - Growth in major fee revenue businesses continued, with trust and investment management fees up over 10% in both 1996 and 1995. Credit card revenue was up 12.6% in 1996 and 11.2% in 1995. Overall, fee revenue grew by 10.7% in 1996 and 5.8% in 1995. - Increased credit card charge-off levels have been reflected in the higher provision for loan losses taken in 1996. - Operating expenses before special charges increased by only .2% during 1996 reflecting both cost reductions from the restructuring program and reduced FDIC insurance partially offset by expenses added through bank acquisitions completed in 1996. Total nonperforming assets were $95.0 million at the end of the year, a decrease of $2.9 million from the prior year end. Nonperforming assets now represent .72% of total loans and foreclosed assets compared with .77% a year earlier. 7 9 Stockholders' equity stood at $1.7 billion at the end of 1996. Market capitalization was $3.9 billion, an increase of 36% from a year earlier. Capital strength, by all measures, remains strong. NET INTEREST REVENUE Net interest revenue, which comprises interest and loan-related fees less interest expense, is the principal source of earnings for Firstar. Net interest revenue is affected by a number of factors including the level, pricing and maturity of earning assets and interest-bearing liabilities, interest rate fluctuations and asset quality. The net interest margin is net interest revenue expressed as a percentage of average earning assets. To permit comparisons, net interest revenue and margins in the accompanying discussion and tables have been adjusted to show tax-exempt income, such as interest on municipal securities and loans, on a taxable-equivalent basis. Table 1 shows the components of net interest revenue, net income and net interest margin for the last three years. TABLE 1 CONDENSED INCOME STATEMENTS -- TAXABLE-EQUIVALENT BASIS
Change from Prior Year -------------------------------------- 1996 vs 1995 1995 vs 1994 ---------------- ---------------- 1996 1995 1994 Amount Percent Amount Percent -------- -------- -------- ------ ------- ------ ------- (millions of dollars) Interest revenue..................... $1,383.1 $1,347.8 $1,119.7 $35.3 2.6% $228.1 20.4% Taxable-equivalent adjustment........ 33.9 33.4 35.0 0.5 1.5 (1.6) (4.6) -------- -------- -------- ----- ------ Interest revenue--taxable-equivalent...... 1,417.0 1,381.2 1,154.7 35.8 2.6 226.5 19.6 Interest expense..................... 632.7 621.8 420.9 10.9 1.8 200.9 47.7 -------- -------- -------- ----- ------ Net interest revenue -- taxable-equivalent............... 784.3 759.4 733.8 24.9 3.3 25.6 3.5 Provision for loan losses............ 42.6 36.8 23.9 5.8 15.8 12.9 54.0 Other operating revenue.............. 440.4 392.2 370.6 48.2 12.3 21.6 5.8 Other operating expense.............. 773.6 734.1 706.1 39.5 5.4 28.0 4.0 -------- -------- -------- ----- ------ Income before income taxes......... 408.5 380.7 374.4 27.8 7.3 6.3 1.7 Provision for income taxes........... 124.4 118.4 112.7 6.0 5.7 Taxable-equivalent adjustment........ 33.9 33.4 35.0 .5 (1.6) -------- -------- -------- ----- ------ Net income......................... $ 250.2 $ 228.9 $ 226.7 $21.3 9.3 $ 2.2 1.0 ======== ======== ======== ===== ====== Yield on earning assets.............. 8.14% 8.28% 7.69% (.14)% .59% Cost of interest-bearing liabilities........................ 4.48 4.59 3.51 (.11) 1.08 -------- -------- -------- ----- ------ Interest spread...................... 3.66 3.69 4.18 (.03) (.49) Impact of interest-free funds........ .85 .86 .71 (.01) .15 -------- -------- -------- ----- ------ Net interest margin................ 4.51% 4.55% 4.89% (.04)% (.34)% ======== ======== ======== ===== ======
During 1996, net interest revenue increased 3.3% to $784.3 million. This follows a similar growth of 3.5% in 1995. The growth in both years benefited from higher average earning asset balances. Average earning assets rose by 4.2% during 1996, mostly attributable to assets acquired through bank acquisitions. This compared to a 11.2% increase in average earning assets in 1995. This positive impact was somewhat offset by a reduction in the net interest margin in both years. The net interest margin for 1996 was 4.51% compared with 4.55% in 1995 and 4.89% in 1994. The margin has been relatively stable during the past two years with the margin generally trending upward on a quarterly basis during 1996. Changes in overall interest rates during the past two years were moderate and thus more predictable than was the case in 1994. During that year the prime rate rose from 6.00% to 8.50% and together with other market rate swings reduced Firstar's margin by .34% from 1994 to 1995. The rates earned on average earning assets in 1996 declined by .14%, or 14 basis points, due primarily as a result of lower commercial loan rates. The corresponding reduction in the cost of funds rate was 11 basis points, thus reducing the net interest margin in 1996. The decline in the margin from 1994 to 1995 is seen in the 108 basis point increase in the rate paid on fund sources which was matched by only a 59 basis point 8 10 increase in the earning asset rate. Also there was a shift in the earning assets mix in 1995 to securities which reduced the overall return on earning assets. Benefiting the 1995 margin was, however, the 15 basis point increase attributable to interest free funds supporting earning assets. The higher rate environment places a higher value on these interest free funds. Foregone interest on nonperforming loans and foreclosed assets reduced net interest revenue by $4.9 million in 1996, $5.4 million in 1995 and $5.7 million in 1994. This resulted in corresponding reductions in net interest margin of .03% in each of the last three years. This nominal impact is a reflection of Firstar's continued low level of nonperforming assets. Table 2 shows the components of interest revenue and expense along with changes related to volumes and rates. Total interest revenue increased by 2.6% to $1.42 billion in 1996. This resulted from an increase of 4.2% in average earning assets partially offset by the decline in the rate earned. Interest income on loans rose by 2.9% due to loan balance increases attributable to bank acquisitions partially offset by lower loan yields. Securities income rose with the higher average balance levels. During 1995, total interest revenue increased by 19.6% to $1.38 billion. This resulted from higher average earning assets, up 11.2%, and the increased yield on earning assets. Interest income on loans rose by 18.1% due to both loan growth and higher rates. Securities income increased with the higher average balance levels and interest rates. TABLE 2 ANALYSIS OF INTEREST REVENUE AND EXPENSE
1996 vs 1995 1995 vs 1994 ---------------------------- ------------------------------ Interest Due to Due to ------------------------------------ Total ------------------ Total ------------------- 1996 1995 1994 Change Volume Rate Change Volume Rate ---------- ---------- ---------- ------- ------- -------- -------- -------- -------- (thousands of dollars) Interest-bearing deposits with banks.............. $ 380 $ 967 $ 1,297 $ (587) $ (352) $ (235) $ (330) $ (537) $ 207 Federal funds sold and resale agreements....... 4,916 10,534 9,645 (5,618) (4,806) (812) 889 (2,293) 3,182 Trading securities........ 392 968 1,560 (576) (231) (345) (592) (537) (55) Securities................ 291,261 280,045 220,713 11,216 11,612 (396) 59,332 43,909 15,423 Commercial loans.......... 615,966 609,248 513,254 6,718 28,398 (21,680) 95,994 51,107 44,887 Consumer loans............ 295,508 278,236 241,152 17,272 18,350 (1,078) 37,084 20,020 17,064 Consumer mortgage loans... 208,570 201,256 167,087 7,314 8,392 (1,078) 34,169 21,057 13,112 ---------- ---------- ---------- ------- -------- Total loans........... 1,120,044 1,088,740 921,493 31,304 55,019 (23,715) 167,247 92,193 75,054 ---------- ---------- ---------- ------- -------- Total interest revenue............. 1,416,993 1,381,254 1,154,708 35,739 57,967 (22,228) 226,546 135,202 91,344 Interest-bearing demand... 21,786 23,831 21,065 (2,045) (259) (1,786) 2,766 (892) 3,658 Money market accounts..... 102,927 85,231 57,274 17,696 18,708 (1,012) 27,957 2,433 25,524 Savings passbook.......... 40,034 44,509 43,887 (4,475) (3,334) (1,141) 622 (3,034) 3,656 Certificates of deposit... 300,806 291,135 199,743 9,671 8,286 1,385 91,392 43,131 48,261 ---------- ---------- ---------- ------- -------- Total deposits........ 465,553 444,706 321,969 20,847 18,700 2,147 122,737 25,306 97,431 Short-term borrowed funds................... 123,629 133,151 67,622 (9,522) 4,675 (14,197) 65,529 34,927 30,602 Long-term debt............ 43,523 43,982 31,315 (459) 2,073 (2,532) 12,667 8,736 3,931 ---------- ---------- ---------- ------- -------- Total interest expense............. 632,705 621,839 420,906 10,866 25,104 (14,238) 200,933 59,506 141,427 ---------- ---------- ---------- ------- -------- Net interest revenue............. $ 784,288 $ 759,415 $ 733,802 $24,873 31,969 (7,096) $ 25,613 84,110 (58,497) ========== ========== ========== ======= ========
- ------------ Calculations are computed on a taxable-equivalent basis using a tax rate of 35%. The change attributable to both volume and rate has been allocated proportionately to the changes due to volume and rate. Total interest expense increased by 1.7% in 1996 to $632.7 million. Interest expense on deposits rose by 4.7% primarily due to an increase in money market account balances, which were up 22.1% for the year. Interest cost of borrowed funds declined in 1996 due to the lower rate paid for these funds. Total interest expense increased by 47.7% in 1995, to $621.8 million. Interest expense on deposits increased 38.1% in 1995 as interest rates were increased to remain competitive in the market and maturing certificates of deposits repriced at higher rates. Interest cost for short-term borrowed funds nearly doubled as increased reliance was placed upon this higher cost funding source. 9 11 OTHER OPERATING REVENUE Total other operating revenue, excluding securities gains and losses, increased by 10.7% to a level of $438.0 million in 1996. This compares with a 5.8% increase 1995. Firstar continues to emphasize growth in fee revenue. Firstar's broad customer base provides opportunities for expanded revenues as the marketplace looks to financial institutions for services beyond traditional lending and deposit activities. Table 3 shows the composition of other operating revenues. TABLE 3 ANALYSIS OF OTHER OPERATING REVENUE
Years Ended December 31 1996 vs 1995 1995 vs 1994 -------------------------------- ------------------ ------------------ 1996 1995 1994 Amount Percent Amount Percent -------- -------- -------- ------- ------- ------- ------- (thousands of dollars) Trust and investment management fees.................. $145,690 $132,377 $120,349 $13,313 10.1% $12,028 10.0% Service charges on deposit accounts......................... 91,953 81,775 82,378 10,178 12.4 (603) (.7) Credit card service revenue........ 69,945 62,106 55,867 7,839 12.6 6,239 11.2 Mortgage origination............... 26,065 15,848 17,374 10,217 64.5 (1,526) (8.8) Mortgage servicing................. 23,035 22,631 18,105 404 1.8 4,526 25.0 -------- -------- -------- ------- ------- Mortgage banking revenue......... 49,100 38,479 35,479 10,621 27.6 3,000 8.5 Data processing fees............... 19,443 17,924 20,263 1,519 8.5 (2,339) (11.5) Brokerage revenue.................. 13,093 10,874 9,505 2,219 20.4 1,369 14.4 Insurance revenue.................. 10,828 11,730 12,188 (902) (7.7) (458) (3.8) International fees................. 5,811 5,999 5,878 (188) (3.1) 121 2.1 Electronic funds transfer fees..... 5,109 5,085 5,350 24 .5 (265) (5.0) Safe deposit fees.................. 4,040 4,207 3,960 (167) (4.0) 247 6.2 Foreign exchange gains............. 2,272 2,426 2,063 (154) (6.3) 363 17.6 Municipal finance fees............. 747 936 991 (189) (20.2) (55) (5.5) Other.............................. 19,967 21,775 19,792 (1,808) (8.3) 1,983 10.0 -------- -------- -------- ------- ------- Subtotal....................... 437,998 395,693 374,063 42,305 10.7 21,630 5.8 Trading securities gains........... 2,388 2,234 139 154 6.9 2,095 Securities gains (losses).......... 66 (5,730) (3,583) 5,796 (2,147) 59.9 -------- -------- -------- ------- ------- Total other operating revenue...................... $440,452 $392,197 $370,619 $48,255 12.3 $21,578 5.8 ======== ======== ======== ======= =======
Other operating revenue now represents 36.0% of Firstar's revenue, an increase from 34.4% in 1995 and 33.8% in 1994. An industry measure of fee revenue prominence is the ratio of this revenue to average assets. During 1996 this ratio was 2.30% compared to 2.18% in 1995 and 2.26% in 1994. Firstar continues to remain in the top quartile of its peer group by this measure of fee revenue. Trust and investment management fees are the single largest source of fee revenue for the company, contributing $145.7 million, or approximately one-third of total other operating revenue. Trust fees have risen by over 10% in both of the past two years. The general rise in the market value of assets contributed to the growth achieved in both years. In addition, expanded services are being offered through Firstar's banking network and additional marketing efforts are also being directed to institutional investors beyond the Midwest. Assets under management increased by 22.2% during 1996 to a level of $22.1 billion which follows the 19.8% increase during 1995. The mix of assets under management has shifted somewhat to fixed income and money market funds where average fees are lower than equity funds, thus limiting fee growth. Assets held in custody accounts were $70.1 billion at year-end 1996, a 26.7% increase from last year. Mutual fund services, where Firstar provides custody and accounting duties have been expanding steadily. Firstar is now the sixth largest processor in the country with over 240 mutual fund accounts. 10 12 Revenue from service charges on deposit accounts rose by 12.4% to $92.0 million in 1996. This compares to a relatively level volume during the prior two years. Factors contributing to this year's growth were increased commercial analyzed service charges and revenue from newly acquired banks. Credit card service revenues are the third largest source of fee revenue and totaled $69.9 million in 1996. Credit service revenues increased by 12.6% in 1996 and 11.2% in 1995. The introduction of new credit card products, increased merchant fee revenues and the repricing of service charges have all contributed to this revenue growth. Firstar services 590,000 active card holders, has 34,000 merchant accounts and provides credit card programs to more than 800 financial institutions. This customer base, which covers the upper Midwest and includes Wisconsin, Iowa, Illinois, Minnesota, Upper Michigan, Nebraska, Montana and the Dakotas, provides a market for the sale and expansion of other financial products. Revenue from mortgage banking activities rose 27.6% in 1996 to a level of $49.1 million. This follows an 8.5% increase in 1995. Mortgage origination revenues increased 64.5% during 1996 and totaled $26.1 million. Loan origination volumes were $1.7 billion in 1996 compared to $1.4 billion in 1995 and $1.7 billion in 1994. Mortgage loan servicing revenue for 1996 was up 1.8% from last year. Included in servicing revenue were gains on the sales of servicing rights of $7.2 million in 1996, $7.1 million in 1995, and $3.6 million in 1994. Future gains on sales of servicing rights are anticipated to decline as a result of the adoption of SFAS No. 122 described below. These gains were primarily realized on pre SFAS No. 122 servicing rights where there were no capitalized asset values. Mortgage loans serviced for others were $3.1 billion at the end of 1996, compared with $3.3 billion a year earlier. Firstar adopted Financial Accounting Standards Board Statement No. 122, "Accounting for Mortgage Servicing Rights" as of January 1, 1995. This statement requires that separate assets be recognized for the rights to service mortgage loans for others whether those servicing rights were purchased or related to loans originated by the company. Firstar capitalized $17.5 million in originated service rights in 1996 and $6.3 million in 1995. Further information on mortgage servicing rights activities is included in Note 8 to the Consolidated Financial Statements. Data processing fee income increased by 8.5% in 1996 following an 11.5% decline in the previous year. One-half of the increase for 1996 was attributable to an early buyout by a customer who was acquired by another bank. A shrinking customer base due to continuing bank consolidations through mergers or acquisitions and conversions by smaller community banks to in-house data processing systems have acted to reduce revenues over the past several years. Intense price competition has also occurred due to the shrinking market for sales and has affected revenue levels through pricing changes and some loss of customers. Fee revenue in this business should remain under pressure in coming years. Brokerage services increased by 20.4% during 1996 and 14.4% in 1995. This encouraging growth in fee revenue was attributable to the general strength of the market and more focused sales efforts. Securities losses of $5.7 million and $3.6 million were realized in 1995 and 1994, respectively. These losses were generated by the partial liquidation of merged banks' portfolios to bring them in line with Firstar's investment policies. Trading securities gains have been level during the past two years. The remaining sources of other operating revenue are derived from a wide range of services and collectively totaled $48.8 million in 1996, $52.2 million in 1995 and $50.2 million in 1994. A gain on the sale of a payroll processing operation of $2.1 million was realized in 1995. 11 13 OTHER OPERATING EXPENSES Total operating expenses increased 5.4% to $773.6 million in 1996 compared with an increase of 4.0% in 1995. If special charges are excluded from the comparisons, 1996 operating expenses rose by .2% while 1995 expenses increased by 3.9%. Additionally, expenses contributed by newly acquired banks added over $20 million to total operating expenses in 1996. Information on the components of other operating expense is shown in Table 4. TABLE 4 ANALYSIS OF OTHER OPERATING EXPENSE
YEARS ENDED DECEMBER 31 1996 VS 1995 1995 VS 1994 ------------------------------ ------------------ ------------------ 1996 1995 1994 AMOUNT PERCENT AMOUNT PERCENT -------- -------- -------- -------- ------- -------- ------- (THOUSANDS OF DOLLARS) Salaries.......................... $320,239 $323,163 $312,120 $ (2,924) (.9)% $ 11,043 3.5% Employee benefits................. 71,277 72,198 68,841 (921) (1.3) 3,357 4.9 -------- -------- -------- -------- -------- Total personnel expense......... 391,516 395,361 380,961 (3,845) (1.0) 14,400 3.8 Equipment expense................. 65,615 58,700 54,556 6,915 11.8 4,144 7.6 Net occupancy expense............. 64,235 57,992 52,984 6,243 10.8 5,008 9.5 Business development.............. 27,540 29,413 26,602 (1,873) (6.4) 2,811 10.6 Stationery and supplies........... 24,696 21,284 18,087 3,412 16.0 3,197 17.7 Professional fees................. 22,244 20,491 17,937 1,753 8.6 2,554 14.2 Information processing expense.... 20,840 21,918 20,957 (1,078) (4.9) 961 4.6 Delivery.......................... 19,497 19,192 16,122 305 1.6 3,070 19.0 Amortization of intangibles....... 15,321 11,068 10,291 4,253 38.4 777 7.6 Processing and other losses....... 7,997 7,562 4,183 435 5.8 3,379 80.8 Wire communication................ 7,369 7,418 6,656 (49) (.7) 762 11.4 Employee education/recruiting..... 6,301 8,389 7,977 (2,088) (24.9) 412 5.2 Commissions and service fees...... 6,246 5,799 6,777 447 7.7 (978) (14.4) Bank processing fees.............. 5,926 5,707 5,818 219 3.8 (111) (1.9) Credit card assessment fees....... 5,890 5,011 4,209 879 17.5 802 19.1 Amortization of loan servicing rights.......................... 2,573 1,641 1,455 932 56.8 186 12.8 Published information............. 2,296 2,277 2,144 19 0.8 133 6.2 F.D.I.C. insurance................ 2,282 16,531 28,361 (14,249) (86.2) (11,830) (41.7) Insurance......................... 1,766 1,739 1,747 27 1.6 (8) (.5) Net foreclosed assets expense (income)........................ 349 (281) (553) 630 272 Other............................. 12,034 13,759 16,914 (1,725) (12.5) (3,155) (18.7) -------- -------- -------- -------- -------- Subtotal........................ 712,533 710,971 684,185 1,562 0.2 26,786 3.9 Restructuring expense............. 53,267 23,151 30,116 130.1 23,151 SAIF assessments.................. 7,837 7,837 Check kiting loss................. 22,000 (22,000) -------- -------- -------- -------- -------- Total other operating expense... $773,637 $734,122 $706,185 $ 39,515 5.4 $ 27,937 4.0 ======== ======== ======== ======== ========
Personnel costs, which include salaries and fringe benefits, are the largest component of operating expenses, representing more than one-half of operating costs. This expense declined by 1.0% in 1996 after increasing by 3.8% during 1995. The corporate wide restructuring program has reduced full-time equivalent staffing levels by 1,141 since the end of 1995 and by 1,400 since September 30, 1995, the date a hiring freeze was put in place. New bank acquisitions added 245 FTEs during 1996. Net of the impact of acquisitions and increases in temporary help staffing in 1996, personnel expense has declined by 5.0% from the level experienced in 1995. Equipment expense increased by 11.8% in 1996 compared with 7.6% in 1995. Bank acquisitions contributed approximately one-quarter of the 1996 increase. Additionally, Firstar continues to invest in upgraded data processing equipment, ensuring that its data processing capabilities are up-to-date in order to provide quality service in a cost effective manner. A new retail and teller data platform is now installed at all Firstar locations. 12 14 Net occupancy expense increased by 10.8% in 1996 compared with 9.5% in 1995. Bank acquisitions again were a factor, representing approximately one-third of the 1996 increase. These comparisons were also affected by a partial acceleration of a deferred gain on a building sale of $2.1 million in 1994. FDIC insurance is an uncontrollable cost, with the premium established by the federal regulatory agency. The FDIC sets varying premium amounts based upon capitalization levels and soundness criteria. Firstar's capital strength has permitted payments at the lowest rate levels since the inception of the current system by the FDIC. The FDIC has substantially reduced premium requirements during the past two years as can be seen in the $26 million reduction in expense from 1994 to 1996. As part of the SAIF assessment and recapitalization of deposit insurance funds, a new premium structure will be put in place for 1997. The 1997 FDIC insurance expense should remain essentially level with the current year's cost. The amortization of intangibles includes amounts associated with goodwill and core deposit intangibles. Expenses have increased during 1996 due to the creation of additional intangible assets with the bank acquisitions completed during the year. All other operating expenses, excluding the special charges described below, increased by 1.3% in 1996 and 9.1% in 1995. During the past three years, special charges and credits were recorded that effect comparability between periods. These items are detailed in Table 5. TABLE 5 RESTRUCTURING COSTS AND OTHER NONRECURRING ITEMS
Year Ended December 31, ----------------------------- 1996 1995 1994 ------- ------- ------- (thousands of dollars) Additional loan loss provisions............................. $ $13,612 $ Losses on sales of securities............................... 6,263 Restructuring expenses: Employee severance........................................ 27,129 11,899 Facilities and equipment.................................. 3,908 4,801 Other..................................................... 22,230 6,451 ------- ------- ------- 53,267 23,151 SAIF assessment............................................. 7,837 Check kiting loss........................................... 22,000 ------- ------- ------- Total pre-tax costs......................................... 61,104 43,026 22,000 Income tax benefit.......................................... 24,438 15,393 8,910 Prior years' tax settlements................................ 3,229 ------- ------- ------- Total..................................................... $33,437 $27,633 $13,090 ======= ======= ======= Per common share impact..................................... $ .23 $ .18 $ .09
During 1996 Firstar recorded a $53.3 million charge in connection with Firstar Forward, the corporate wide restructuring program which was announced by the company in January 1996. This program is expected to add $140 million to annualized pre-tax earnings when fully implemented by mid-1997. The charge included severance accruals of $27.1 million associated with staff reductions of approximately 1,500 people, fixed asset writedowns of $3.9 million, and other project costs of $22.3 million. The total charge consists of $45.4 million in anticipated cash expenditures and $7.9 million of non-cash items. Cash payments have reduced this restructuring accrual to approximately $8.1 million as of December 31, 1996. The Savings Association Insurance Fund (SAIF) charge of $7.8 million was recorded in 1996. This banking industry-wide SAIF assessment will recapitalize the savings and loan deposit insurance fund and was 13 15 based upon deposits that Firstar acquired through several savings and loan acquisitions over the past four years. Also occurring in 1996 was an income tax adjustment of $3.2 million from the favorable settlement of prior years' taxes. During 1995 certain merger and restructuring charges were taken in connection with four bank acquisitions. These charges totaled $43.0 million. Acquisition related restructuring charges totaling $23.2 million are included in other operating expenses. Included in these charges were $11.9 million of costs associated with the severance of approximately 500 employees, $4.8 million related with office closings and write-off of unusable equipment, $2.5 million of professional fees and $3.9 million of other costs associated with mergers. The restructuring charge of $23.2 million consisted of $17.3 million in anticipated cash expenditures and $5.9 million on non-cash asset write-downs. Cash payments have reduced the restructuring accrual to less than $1 million as of December 31, 1996. A $22 million check kiting loss that was recorded in 1994 involved two affiliated commercial customers who conducted fraudulent check transactions. A measure of the success in managing operating expense is expressed in the ratio of expense to revenue and is referred to as the efficiency ratio. The objective is to reduce this ratio through revenue growth, cost control or a combination of both. Excluding the special items discussed above, this ratio was 58.2% in 1996, 61.4% in 1995 and 61.7% in 1994. Further reduction in this ratio is expected in 1997 with the full implementation of the Firstar Forward initiatives. Firstar's goal is for the efficiency ratio to be 55% or better for 1997. Impacting this ratio for 1997 will be the accounting treatment of the $150 million in Trust Capital Securities issued in December 1996. These securities qualify as Tier I capital for regulatory purposes and are accounted for as minority interest. Accordingly, the cash distributions on these securities will be recorded as an other expense item in the company's income statement. PROVISIONS FOR LOAN LOSSES The provision for loan losses is used to cover actual loan losses and to adjust the size of the reserve relative to the amount and quality of loans. In determining the adequacy of the reserve, management considers the financial strength of borrowers, loan collateral, current and anticipated economic conditions and other factors. The 1996 provision for loan losses was $42.6 million, compared with $36.8 million in 1995 and $23.9 million in 1994. During 1995, additional loan loss provisions of $13.6 million were taken to increase the newly acquired banks' loan loss reserve levels to conform with Firstar's loan loss reserve policies. Exclusive of this factor, the loan loss provision increased by $19.5 million in 1996. This year-to-year increase is attributable to higher credit card losses as discussed later under "Credit Risk Management". INCOME TAXES Income tax expense was $124.4 million in 1996, compared to $118.4 million in 1995 and $112.7 million in 1994. The effective tax rate was 33.2% in 1996, 34.1% in 1995 and 33.2% in 1994. The effective tax rate declined in 1996 due to the favorable settlement of tax items from prior years. The effective tax rate rose in 1995 as compared to 1994 due to a reduction in tax-exempt municipal interest income, an increase in state tax expense and an increase in nondeductible intangible amortization expense. BALANCE SHEET ANALYSIS Changes in the balance sheet of a financial institution reflect both the forces of the marketplace and the company's response to these conditions. Firstar's strategy in managing balance sheet growth is based upon the goals of enhancing soundness, optimizing revenues and providing a broad range of services for customers. Total assets at the end of 1996 reached $19.8 billion, an increase of $599 million or 3.1% over a year earlier. Average total assets for 1996 were $19.2 billion, an increase of 5.2% over 1995. Table 6 shows the geographic distribution of Firstar's banking assets. Firstar has expanded beyond its Wisconsin base through select acquisitions. Assets outside of Wisconsin now represent 46% of consolidated assets. Firstar's acquisition activity focuses on attractive markets in the upper Midwest that complement the 14 16 existing Firstar banking network. The combination of internal growth and acquisitions provides new opportunities to build and diversify Firstar's earnings within an economically stable region. TABLE 6 SUBSIDIARY ASSETS
December 31 --------------------------------------------------------------- 1996 1995 1994 ------------------- ------------------- ------------------- Amount Percent Amount Percent Amount Percent --------- ------- --------- ------- --------- ------- (millions of dollars) Bank groups: Firstar Bank Milwaukee.............. $ 6,127.4 31.0% $ 6,166.2 32.2% $ 6,009.2 33.4% Firstar Bank Wisconsin.............. 4,196.1 21.3 4,279.8 22.3 3,950.6 21.9 Firstar Bank Iowa................... 2,534.1 12.8 2,734.8 14.3 2,677.1 14.9 Firstar Bank F.S.B.................. 320.1 1.6 Firstar Bank Minnesota.............. 2,980.7 15.1 2,381.8 12.4 2,316.0 12.9 Firstar Bank Illinois............... 2,770.2 14.0 2,884.7 15.0 2,725.1 15.1 Firstar Metropolitan AZ............. 157.9 .8 130.0 .7 102.9 .6 Firstar Bank U.S.A.................. 456.3 2.3 431.7 2.3 --------- ----- --------- ----- --------- ----- Subtotal......................... 19,542.8 98.9 19,009.0 99.2 17,780.9 98.8 Trust and investment management subsidiaries........................ 143.1 .7 82.2 .4 141.0 .8 Parent/other subsidiaries............. 81.5 .4 77.1 .4 72.3 .4 --------- ----- --------- ----- --------- ----- Total............................ $19,767.4 100.0% $19,168.3 100.0% $17,994.2 100.0% ========= ===== ========= ===== ========= =====
- ------------ Assets have been adjusted for intercompany amounts. Significant acquisition activity has occurred during the past two years. Firstar completed three mergers in 1995 and two during 1996. The acquisition of First Colonial Bankshares Corporation, a $1.8 billion bank holding company with 30 offices in the Chicago area was completed on January 31, 1995, and gives Firstar a $2.8 billion banking franchise with 40 offices in the Chicago area market. In April 1995, the acquisition of Investors Bank Corp., a $1.1 billion thrift with a large mortgage banking business in the Minneapolis/St. Paul market was completed. This transaction substantially increased Firstar's mortgage banking business. In March 1995, the acquisition of First Moline Financial Corp. added $86 million in assets to Firstar Bank Iowa. On January 26, 1996, the acquisition of Harvest Financial Corp., a $353 million thrift based in Dubuque, Iowa was completed. The acquisition of American Bancorporation, Inc., a $1.2 billion bank holding company in St. Paul, Minnesota, was completed in July 1996. This acquisition added $700 million in assets to Firstar Bank Minnesota after the sale of two of its banking subsidiaries and the liquidation of their securities portfolio. Firstar Bank Minnesota is now a $3.0 billion banking operation with 31 offices in the Minneapolis/St. Paul market. 15 17 LOANS AND INVESTMENTS Earning assets, shown in Table 7, averaged $17.4 billion, an increase of $709 million, or 4.2% over 1995. Most of this growth in earning assets was attributable to assets obtained through bank acquisitions. Exclusive of this factor, the earning asset growth rate was under 1%. Weakened commercial loan volumes were experienced during most of 1996. Additionally, Firstar is adopting a strategy of removing itself from lower yielding assets which have been funded with purchased funds. TABLE 7 AVERAGE EARNING ASSETS
1996 1995 1994 -------------------- -------------------- -------------------- Amount Percent Amount Percent Amount Percent --------- ------- --------- ------- --------- ------- (millions of dollars) Commercial and industrial.......... $ 3,228.9 18.6% $ 3,054.2 18.3% $ 2,742.1 18.3% Commercial mortgage................ 2,941.9 16.9 2,817.9 16.9 2,591.4 17.2 Other commercial................... 992.8 5.7 966.2 5.8 909.7 6.1 --------- ----- --------- ----- --------- ----- Commercial loans.............. 7,163.6 41.2 6,838.3 41.0 6,243.2 41.6 Credit card........................ 615.9 3.5 554.7 3.3 510.5 3.4 Consumer mortgage.................. 2,727.5 15.7 2,617.8 15.7 2,336.3 15.6 Home equity........................ 1,013.1 5.8 859.5 5.2 692.2 4.6 Other consumer..................... 1,402.3 8.1 1,421.4 8.5 1,433.7 9.5 --------- ----- --------- ----- --------- ----- Consumer loans................ 5,758.8 33.1 5,453.4 32.7 4,972.7 33.1 --------- ----- --------- ----- --------- ----- Total loans................... 12,922.4 74.3 12,291.7 73.7 11,215.9 74.7 Securities held to maturity........ 2,323.1 13.3 3,927.7 23.5 3,214.7 21.4 Securities available for sale...... 2,046.4 11.7 267.6 1.6 311.9 2.1 Trading securities................. 10.1 .1 14.2 .1 22.1 .1 Interest-bearing deposits with banks............................ 8.7 .1 15.7 .1 24.9 .2 Federal funds sold and resale agreements....................... 88.3 .5 173.5 1.0 219.5 1.5 --------- ----- --------- ----- --------- ----- Total $17,399.0 100.0% $16,690.4 100.0% $15,009.0 100.0% ========= ===== ========= ===== ========= =====
Loans, the largest category of earning assets, represented 74.3% of earning assets as compared with 73.7% in 1995. On average, loans totaled $12.9 billion, an increase of $631 million or 5.1% over 1995. This compares to the 9.6% growth in average loans during 1995. Excluding the impact of acquisitions, average loans rose by only .4% over 1995. Commercial loans, which account for 55% of the loan portfolio, increased by $325 million, or 4.8% on average, to $7.2 billion during 1996. Again excluding acquisitions, commercial loan growth had been essentially flat during 1996. This compares to the 9.5% growth seen in 1995. Commercial loan balances have declined in four of the past five quarters on a quarter-to-quarter basis. This trend is more evident in the Illinois and Minnesota markets where larger acquisitions have occurred and some run-off in associated loan balances has been experienced. Firstar expects that commercial loans will resume a growth rate consistent with the overall growth rate of the markets served by the company in the next year. Consumer loans, excluding residential mortgages, averaged $3.0 billion, an increase of $196 million or 6.9% over 1995. Excluding loans from bank acquisitions, consumer lending increased by 4.1% during 1996. Excluding residential mortgages, consumer loans grew 7.6% in 1995. Good growth has occurred in home equity loans and credit card loans in 1996, up 14.4% and 10.3% respectively, excluding acquisition impacts. The annualized consumer loan growth rate, excluding residential mortgages, has increased approximately 10% in each of the last two quarters of 1996. 16 18 Residential mortgage loans, exclusive of loans acquired through bank acquisitions and loans held for sale, declined by $155 million or 6.2% on average from 1995. The reduction was attributable to the normal loan amortization and prepayments partially offset by the placement in the portfolio of some shorter term variable rate mortgages. While Firstar is committed to its mortgage lending programs and originated $1.7 billion of loans in 1996, its strategy is to sell production into the secondary market or to private investors when possible. This is an example of Firstar's goal to remove lower yielding assets from its balance sheet mix. The securities portfolio increased by $174 million, or 4.2% on average during 1996 to a level of $4.4 billion. Tables 8 and 9 show the maturity range and changing mix of the securities portfolio. The portfolio is classified into two categories: securities held to maturity and securities available for sale. Securities that the company has the positive intent and ability to hold to maturity are carried at amortized cost. The designation of securities as available for sale are carried at their fair values with unrealized gains and losses recorded as a component of stockholders' equity. At year-end 1995, Firstar classified an additional $1.8 billion of securities as available for sale. While these securities are considered available for sale, it is not anticipated that any disposition of these securities will occur in the near term. The average maturity of the portfolio was 3.8 years at December 31, 1996. Short-term investments, which include interest-bearing deposits with banks, trading account securities, and federal funds sold and resale agreements, averaged $107 million during 1996, a reduction of $96 million from 1995. TABLE 8 MATURITY RANGE AND AVERAGE YIELD OF SECURITIES
Due Within Total One Year One to Five Years Five to Ten Years After Ten Years December 31, 1996 --------------- ----------------- ----------------- --------------- ----------------- Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate -------- ---- ---------- ---- --------- ----- -------- ---- ---------- ---- (thousands of dollars) Securities held to maturity: U.S. Treasury and federal agencies...... $ 756 4.79% $ % $ % $ % $ 756 4.79% Mortgage backed obligations of federal agencies.............. 166,800 7.39 471,275 7.35 299,657 7.24 154,796 6.50 1,092,528 7.21 State and political subdivisions.......... 148,525 6.94 531,739 7.06 429,847 7.63 37,276 7.50 1,147,387 7.27 Corporate debt.......... 1,240 5.50 2,776 5.88 2,322 7.26 3,689 6.72 10,027 6.46 Other................... 78 5.50 78 5.50 -------- ---------- -------- -------- ---------- Total............... $317,399 7.17 $1,005,790 7.19 $731,826 7.47 $195,761 6.69 $2,250,776 7.24 ======== ========== ======== ======== ========== Securities available for sale: U.S. Treasury and federal agencies...... $528,336 4.84% $1,093,809 6.64% $178,653 6.68% $ % $1,800,798 6.12% Mortgage backed obligations of federal agencies.............. 1,812 6.07 1,050 6.14 431 5.62 5,188 5.19 8,481 5.52 State and political subdivisions.......... 1,337 7.67 5,582 7.22 169 6.00 538 3.53 7,626 7.01 Other................... 38,370 5.24 38,370 5.24 -------- ---------- -------- -------- ---------- Total............... $569,855 4.88 $1,100,441 6.64 $179,253 6.68 $ 5,726 5.03 1,855,275 6.10 ======== ========== ======== ======== Equity securities....... 111,315 7.27 ---------- 1,966,590 6.16 ==========
- ------------ Rates are calculated on a taxable-equivalent basis using a tax rate of 35%. The maturity information on mortgage-backed obligations is based on anticipated payments. 17 19 TABLE 9 SECURITIES
December 31 ------------------------------------------------------------------ 1996 1995 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- (thousands of dollars) Securities held to maturity: U.S Treasury and federal agencies.......... $ 756 $ 2,146 $1,612,188 $1,510,216 $1,282,749 Mortgage backed obligations of federal agencies................................. 1,092,528 1,266,458 867,990 361,784 514,455 State and political subdivisions........... 1,147,387 1,141,987 1,069,755 1,036,236 1,042,376 Corporate debt............................. 10,027 15,590 79,891 108,429 276,635 Equity securities.......................... 26,422 Other...................................... 78 849 1,139 1,118 136,675 ---------- ---------- ---------- ---------- ---------- Total.................................. $2,250,776 $2,427,030 $3,630,963 $3,017,783 $3,279,312 ========== ========== ========== ========== ========== Securities available for sale: U.S Treasury and federal agencies.......... $1,800,798 $1,917,725 $ 202,435 $ 79,200 Mortgage backed obligations of federal agencies................................. 8,481 9,787 12,060 93,427 State and political subdivisions........... 7,626 7,831 7,720 33,231 Corporate debt............................. 1,196 504 3,587 Equity securities.......................... 111,315 92,767 57,621 32,122 Money market mutual funds.................. 38,370 18,542 62,313 100,402 ---------- ---------- ---------- ---------- Total.................................. $1,966,590 $2,047,848 $ 342,653 $ 341,969 ========== ========== ========== ==========
FUND SOURCES Average fund sources, consisting of deposits and borrowed funds, increased by $903 million, or 5.5%, to $17.3 billion in 1996. Total deposits averaged $14.3 billion, an increase of $794 million, or 5.9%. Bank acquisitions accounted for about two-thirds of this increase in average deposits. Table 10 shows the composition of Firstar's fund sources. TABLE 10 AVERAGE FUND SOURCES
1996 1995 1994 ------------------- ------------------- ------------------- Amount Percent Amount Percent Amount Percent --------- ------- --------- ------- --------- ------- (millions of dollars) Transaction accounts.................. $ 4,727.4 27.3% $ 4,399.0 26.8% $ 4,481.2 30.2% Savings passbook...................... 1,599.1 9.3 1,731.3 10.6 1,854.9 12.4 Money market accounts................. 2,577.5 14.9 2,110.5 12.9 2,027.5 13.7 Certificates of deposit............... 4,519.9 26.1 4,384.0 26.7 3,882.3 26.2 --------- ----- --------- ----- --------- ----- Total core deposits.............. 13,423.9 77.6 12,624.8 77.0 12,245.9 82.5 Other deposits........................ 872.4 5.1 877.6 5.4 528.6 3.6 --------- ----- --------- ----- --------- ----- Total deposits................... 14,296.3 82.7 13,502.4 82.4 12,774.5 86.1 Short-term borrowed funds............. 2,357.8 13.6 2,275.8 13.9 1,591.3 10.7 Long-term debt........................ 637.4 3.7 610.9 3.7 477.4 3.2 --------- ----- --------- ----- --------- ----- Total............................ $17,291.5 100.0% $16,389.1 100.0% $14,843.2 100.0% ========= ===== ========= ===== ========= =====
Core deposits, which include transaction accounts and other stable time deposits, are Firstar's prime source of funding. These deposits averaged $13.4 billion in 1996, an increase of $799 million or 6.3%. Excluding bank acquisitions, core deposits rose by 2.1% in 1996. Core deposits declined from 83% of fund sources in 1994 to 77% in 1995. During 1996 core deposit funding stabilized and represented 78% of fund sources for the year. Increased competition for consumer deposits and heightened consumer sensitivity to interest rates have limited Firstar's core deposit growth. 18 20 An increased reliance was placed on purchased fund sources during the last two years to support earning asset growth. Total purchased funds averaged $3.9 billion an increase of $103 million, or 2.7%, over 1995. Purchased funds represented 22% and 23% of total fund sources in 1996 and 1995, respectively. Other time deposits, primarily certificates of deposit over $100,000, remained approximately level at $872 million. Short-term borrowed funds were increased by $82 million to an average level of $2.4 billion. Long-term debt was increased by $27 million to an average level of $637 million. Continued reliance on these alternative funding sources will be necessary into the future. CREDIT RISK MANAGEMENT Since the mid-1980's, credit management has been refined through procedural and personnel changes. Emphasis on credit quality standards and diversification of risk have been key strategies. The benefits of this program are seen in the significant reductions in nonperforming assets and overall credit quality achieved during the past several years. During this period nonperforming assets as a percentage of loans and foreclosed assets have declined from over 3% in 1987 to .72% at the end of 1996. Nonperforming assets consist of loans that are not accruing interest, loans with renegotiated credit terms and collateral acquired in settlement of nonperforming loans. The composition of these assets is shown in Table 11. These nonperforming assets totaled $95.0 million at December 31, 1996 and represented .72% of Firstar's $13.2 billion of loans and foreclosed assets. This is a $2.9 million decrease from a year earlier. TABLE 11 NONPERFORMING ASSETS AND PAST DUE LOANS
December 31 ------------------------------------------------ 1996 1995 1994 1993 1992 ------- ------- ------- ------- -------- (thousands of dollars) Nonaccrual loans: Commercial.................................. $35,757 $26,239 $29,710 $24,591 $ 31,265 Commercial mortgage......................... 30,128 46,959 28,993 30,963 27,379 Consumer.................................... 19,193 16,187 9,831 10,881 13,245 ------- ------- ------- ------- -------- Total nonaccrual loans................... 85,078 89,385 68,534 66,435 71,889 Renegotiated loans: Commercial.................................. 40 71 823 1,904 Commercial mortgage......................... 1,028 1,336 674 697 741 ------- ------- ------- ------- -------- Total renegotiated loans................. 1,028 1,376 745 1,520 2,645 Foreclosed assets*............................ 8,926 7,141 13,282 19,881 40,571 ------- ------- ------- ------- -------- Total nonperforming assets............... $95,032 $97,902 $82,561 $87,836 $115,105 ======= ======= ======= ======= ======== Nonperforming assets as a percentage of: Loans and foreclosed assets................. .72% .77% .69% .81% 1.17% Total assets................................ .48 .51 .46 .54 .74 Loans past due 90 days: Commercial.................................. $24,368 $21,039 $ 7,432 $ 7,453 $ 5,445 Commercial mortgage......................... 27,352 9,287 3,760 4,441 6,893 Consumer.................................... 22,938 19,084 15,709 13,758 13,286 ------- ------- ------- ------- -------- Total loans past due 90 days............. $74,658 $49,410 $26,901 $25,652 $ 25,624 ======= ======= ======= ======= ========
- ------------ * Nonperforming loans which were included in foreclosed assets under "in substance foreclosure" accounting rules was $10.5 million at December 31, 1992. Such "in substance foreclosed" loans were reclassified to loans in 1993. 19 21 Commercial real estate related nonperforming assets totaled $40.1 million at the end of 1996, a reduction of $15.4 million from a year earlier. These nonperforming assets represented 1.34% of their respective loan category. Firstar experienced an increase in real estate related nonperforming assets several years ago, although to a much lesser extent than many other financial institutions. These assets stood at $84.0 million at the end of 1991 and represented 4.20% of their respective loan category. As can be seen in Table 11, significant progress has been made in reducing this category of nonperforming assets. The remaining commercial loan portfolio had related nonperforming assets of $35.8 and a ratio of .83% of outstanding loans compared to .64% a year earlier. This increase can be attributable to a single credit placed into nonaccrual at the end of 1996 rather than any fundamental change in asset quality trends of Firstar's commercial customers. Nonperforming consumer loans have increased over the last two years by $9.4 million to $19.2 million at the end of 1996. This represented .33% of consumer loans at December 31, 1996 compared to .29% a year earlier and .19% at the end of 1994. While consumer nonperforming loans remain at a minimal level, the increase from year-to-year reflects the impact of consumers taking on increased debt burdens in the past two years. The effect of this trend can also be seen in the increased consumer loan charge-off levels of 1996. Loans ninety days or more past due on December 31, 1996, totaled $74.7 million, compared with $49.4 million a year earlier. These loans are on a full accrual basis and are judged by management to be collectible in full. In addition, Firstar had $15 million of loans at December 31, 1996, on which interest is accruing, but, because of existing economic conditions or circumstances of the borrower, doubt exists as to the ability of the borrower to comply with the present loan terms. While these loans are identified as requiring additional monitoring, they do not necessarily represent future nonperforming assets. Additional indicators of asset quality can be found in the geographic distribution, industry diversification and type of lending represented in the loan portfolio. Credit policies have been changed over the past several years to reduce vulnerability to potential adverse economic trends. Marketing efforts have been directed to Firstar's primary market segments which are consumer, small business and middle market customers in communities where Firstar banks are located. This emphasis on smaller, locally based credits brings with it a diversified group of customers without any significant industry concentration. Firstar does not participate in any significant syndicated lending or highly leveraged transactions. 20 22 The reserve for loan losses is reviewed and adjusted quarterly, subject to evaluation of economic conditions and expectations, historical experience and risk ratings of individual loans. Table 12 shows the activity affecting the reserve for loan losses for the last five years. The reserve totaled $213.1 million at the end of 1996, compared with $195.3 million a year earlier. At December 31, 1996 the ratio of the reserve for loan losses to loans was 1.62% and the coverage of nonperforming assets was 224%. This compares with a reserve for loan losses to loans of 1.55% and to nonperforming assets of 199% a year earlier. TABLE 12 RESERVE FOR LOAN LOSSES
1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- (thousands of dollars) Balance at beginning of year.............. $195,283 $190,552 $189,714 $183,251 $163,197 Loan charge-offs: Commercial.............................. 13,328 13,417 21,300 15,090 21,461 Commercial mortgage..................... 3,696 7,246 3,374 4,611 6,488 Consumer................................ 13,099 13,915 8,040 6,763 7,782 Consumer mortgage....................... 2,814 1,671 766 1,301 1,894 Credit card............................. 30,271 16,614 14,248 15,073 17,852 -------- -------- -------- -------- -------- Total charge-offs.................... 63,208 52,863 47,728 42,838 55,477 Loan recoveries: Commercial.............................. 7,773 7,470 7,886 7,194 7,602 Commercial mortgage..................... 3,287 1,782 2,764 2,587 3,508 Consumer................................ 6,098 4,864 4,190 3,539 3,599 Consumer mortgage....................... 1,907 434 741 291 399 Credit card............................. 5,385 5,423 4,380 4,121 3,557 -------- -------- -------- -------- -------- Total recoveries..................... 24,450 19,973 19,961 17,732 18,665 -------- -------- -------- -------- -------- Net loan charge-offs...................... 38,758 32,890 27,767 25,106 36,812 Provision for loan losses................. 42,647 36,756 23,891 29,090 50,733 Reserves of acquired banks................ 13,966 865 4,714 2,479 6,133 -------- -------- -------- -------- -------- Total balance at end of year......... $213,138 $195,283 $190,552 $189,714 $183,251 ======== ======== ======== ======== ======== Reserve to year-end loans................. 1.62% 1.55% 1.60% 1.75% 1.87% Net charge-offs to average loans: Commercial.............................. .13% .15% .37% .26% *% Commercial mortgage..................... .01 .19 .02 .09 * Total commercial loans............... .08 .17 .22 .18 .33 Consumer................................ .50 .64 .27 .26 * Consumer mortgage....................... .02 .04 .04 * Credit card............................. 4.04 2.02 1.93 2.18 2.74 Total consumer loans................. .57 .39 .28 .34 .49 Total loans.......................... .30 .27 .25 .25 .40
- ------------ * Comparable data not available Total net charge-offs of $38.8 million represented .30% of average loans during 1996, up slightly from the .27% level experienced in 1995. As a regional financial institution, Firstar lends to a diversified group of Midwestern borrowers and, to a much lesser degree, to national companies with Midwest operations. Net charge-offs in this commercial segment of the portfolio were $5.6 million, or .13% of average loans. This is a consistent with the $5.9 million of net charge-offs in 1995, representing .15% of loans. This relatively low level of charge-offs reflects the general high quality of this portion of the portfolio. 21 23 Commercial mortgage loans net charge-offs were under one-half million dollars in 1996 or only .01% of average commercial mortgage loans. This was a reduction from the .19% level of the prior year. Increased recoveries of previously charged-off loans were a factor. Future charge-off levels in this area should track with the overall experience level of the other commercial lending areas of the company. Consumer lending includes loans to individuals in communities served by Firstar's banks. These loans include both open-ended credit arrangements subject to an overall limit per customer, such as credit card and home equity loans, and closed-end loans subject to specific contractual payment schedules, such as installment loans and residential mortgages. Consumer net charge-offs were $32.8 million in 1996, compared with $21.5 million in 1995 and $13.7 million in 1994. The net charge-offs of .57% in 1996 compares with .39% and .28% in 1995 and 1994, respectively. Consumer delinquency rates and bankruptcies have increased over the past several quarters as the economic cycle progresses. Increased consumer charge-offs have been the result of this trend. Credit card losses have increased from $9.9 million in 1994 to $24.9 million in 1996. The related charge-off rate has increased from 1.93% of outstanding loans to 4.04% during the same time period. Charge-off levels in the last quarter of 1996 were at an annualized rate of 5.11%. Additional credit related measures have been taken which should reverse this trend. Credit card charge-offs will most likely remain at the higher levels experienced in the second half of 1996 during most of 1997 before beginning to decline. Other consumer lending in the form of home equity loans and installment debt has seen increased charge-off levels in the past two years, but at a significantly lower rate than credit cards. These loss levels were at .50% of outstanding loans in 1996 compared to .64% in 1995 and .27% in 1994. Losses on consumer mortgages have been and should remain nominal. LIQUIDITY AND INTEREST RATE RISK MANAGEMENT Two objectives of Firstar's asset and liability management strategy include the maintenance of appropriate liquidity and management of interest rate risk. Liquidity management aligns sources and uses of funds to meet the cash flow requirements of customers and Firstar. Interest rate risk management seeks to generate growth in net interest revenue and manage exposure to risks associated with interest rate movements and provide for acceptable and predictable results. Although conceptually distinct, liquidity and interest rate sensitivity must be managed together since action taken with respect to one often influences the other. Asset liquidity is generally provided by short-term investments such as interest bearing deposits with other banks, federal funds sold and repurchase agreements. These investments totaled $213 million at December 31, 1996. Securities that have been designated as available for sale were $2.0 billion at the end of 1996 and can be sold to meet liquidity needs. The remaining securities portfolio, which is held to maturity, provides liquidity through scheduled maturities and the ability to use these securities in repurchase agreements. 22 24 TABLE 13 COMPOSITION OF LOANS
December 31 ------------------------------------------------------------------ 1996 1995 1994 1993 1992 ----------- ----------- ----------- ----------- ---------- (thousands of dollars) Commercial and industrial...... $ 3,366,016 $ 3,078,148 $ 2,944,565 $ 2,641,967 $2,258,366 Commercial construction........ 418,040 387,378 329,717 262,476 290,889 Commercial mortgage............ 2,574,376 2,462,010 2,472,042 2,166,390 1,962,954 Other commercial............... 953,145 1,038,677 963,883 925,370 960,198 ----------- ----------- ----------- ----------- ---------- Commercial loans............. 7,311,577 6,966,213 6,710,207 5,996,203 5,472,407 Credit card.................... 684,619 619,868 575,278 547,769 534,697 Consumer mortgage.............. 2,660,290 2,722,531 2,382,857 2,268,470 2,115,274 Home equity.................... 1,121,580 935,907 767,540 645,002 555,370 Other consumer................. 1,417,468 1,387,994 1,469,946 1,367,377 1,138,656 ----------- ----------- ----------- ----------- ---------- Consumer loans............... 5,883,957 5,666,300 5,195,621 4,828,618 4,343,997 ----------- ----------- ----------- ----------- ---------- Total loans.................. $13,195,534 $12,632,513 $11,905,828 $10,824,821 $9,816,404 =========== =========== =========== =========== ==========
TABLE 14 MATURITY DISTRIBUTION OF LOANS
Total Due Within One to After December 31, One Year Five Years Five Years 1996 ---------- ---------- ---------- ------------ (thousands of dollars) Commercial................................... $3,217,633 $3,178,616 $ 915,328 $ 7,311,577 Consumer..................................... 1,307,251 2,853,097 1,723,609 5,883,957 ---------- ---------- ---------- ----------- Total................................... $4,524,884 $6,031,713 $2,638,937 $13,195,534 ========== ========== ========== ===========
- ------------ The maturity is based upon contractural terms, however, Firstar may extend the maturity at prevailing rates and terms in the normal course of business. Of the above loans due after one year, $4,449,119,000 have predetermined interest rates and $4,221,531,000 have floating or adjustable interest rates. TABLE 15 MATURITY RANGE OF TIME DEPOSITS
Total Due Within Three to Six to After December 31, Three Months Six Months Twelve Months Twelve Months 1996 ------------ ---------- ------------- ------------- ------------ (thousands of dollars) Certificates of deposit of $100,000 or more............. $505,062 $202,738 $144,223 $134,722 $986,745 ======== ======== ======== ======== ========
The requirement of liquidity is diminished by the predominance of core deposits, which account for 78% of Firstar's fund sources. Stable core deposits do not require significant amounts of liquidity to meet the net withdrawal demands of customers on a short or intermediate term basis. Other sources of liquidity are short-term borrowed funds, Federal Home Loan Bank borrowings and commercial time deposits which totaled $3.1 billion at the end of 1996. Firstar's ability to refinance maturing amounts and, when necessary, increase this funding base is a significant factor in its liquidity management. 23 25 Additionally, Firstar has access to capital markets through the issuance of debt or other securities. Long term debt was increased in 1995 with the issuance of $100 million of five year notes. In December 1996, a $150 million issue of Trust Capital Securities was completed. These securities were issued to fund stock repurchases, repayment of outstanding indebtedness and for other corporate purposes. Firstar also has in place a $125 million revolving credit facility. The absolute level and volatility of interest rates can have a significant impact on earnings. The objective of interest rate risk management is to identify and manage the sensitivity of net interest revenue to changing interest rates. Firstar uses computer simulation modeling as its primary method of quantifying and evaluating interest rate risk. Simulation modeling is performed at least quarterly and is used to quantify the impact on net interest revenue of various assumptions about interest rate and balance sheet changes and the use of off-balance sheet derivatives and financial instruments. The use of simulation modeling also enables Firstar to develop and test alternative asset and liability management strategies. Interest rate risk and the results of the simulation modeling is reviewed quarterly by bank, regional and corporate committees who assess the interest rate risk position and approve corresponding strategies. The objective of Firstar's asset liability management policy is to maintain adequate capital and liquidity and manage interest rate risk to produce an acceptable level of net interest revenue. Firstar's guideline is to employ an asset liability management strategy which limits the potential impact of projected interest rate changes to 5% of net income over the subsequent four quarters. In the most recent simulation, net interest revenue was forecast for 1997 under four interest rate scenarios. First, if current rates continued unchanged with a prime rate of 8.25%, and then under most likely, high and low interest rate scenarios in which prime rate changes to 7.25%, 9.75% and 6.25% respectively, by the fourth quarter of 1997. Compared to the current rate scenario, under these three other scenarios net interest revenue in 1997 is simulated to change as follows: Under the most likely and high scenarios, net interest revenue in 1997 is simulated to increase by $8 million and $2 million, respectively. Under the low scenario, net interest revenue is simulated to decline by $3 million. The result of these scenarios are well within Firstar's 5% of net income risk policy. The simulation model is supplemented with a tool used in the banking industry for measurement of interest rate risk known as the gap analysis. This measures the difference between assets and liabilities repricing or maturing within specified time periods. The gap analysis does, however, have limitations such as not reflecting the magnitude with which assets or liabilities may reprice within a given interest rate scenario. A positive gap indicates that there are more rate sensitive assets than rate sensitive liabilities repricing within a given time frame. A positive gap would generally imply a favorable impact on net income in periods of rising rates. Conversely, a negative gap indicates a liability sensitive position. Table 16 shows Firstar's interest sensitivity under a traditional gap approach. 24 26 TABLE 16 ASSET AND LIABILITY INTEREST SENSITIVITY
Non-Rate 1-30 31-90 91-180 181-366 Total Sensitive & Days Days Days Days One Year Over 1 Year Total ------ ------ ------ ------- -------- ----------- ------- (millions of dollars) Loans............................ $5,429 $ 699 $ 822 $1,283 $8,233 $ 4,963 $13,196 Securities....................... 134 177 272 318 901 3,316 4,217 Interest-bearing deposits with banks.......................... 6 6 6 Short-term investments........... 206 206 206 Other assets..................... 2,355 2,355 Less: Reserve for loan losses.... (213) (213) ------ ------ ------ ------ ------ ------- ------- Total assets................ 5,775 876 1,094 1,601 9,346 10,421 19,767 Non-interest-bearing demand deposits....................... 300 300 3,581 3,881 Interest-bearing demand accounts....................... 184 184 368 1,320 1,688 Savings Passbooks................ 166 166 332 1,186 1,518 Money market accounts............ 1,754 1,754 991 2,745 Less than one year certificates................... 156 356 322 229 1,063 1,063 Other deposits................... 1,051 488 600 975 3,114 1,205 4,319 Borrowed funds................... 2,127 11 73 82 2,293 123 2,416 Other liabilities................ 283 283 Trust capital securities......... 150 150 Stockholders' equity............. 1,704 1,704 ------ ------ ------ ------ ------ ------- ------- Total liabilities and equity.................... 5,738 1,205 995 1,286 9,224 10,543 19,767 Interest sensitive gap........... 37 (329) 99 315 122 (122) Interest rate swaps.............. (66) (6) (72) ------ ------ ------ ------ ------ Adjusted interest sensitive gap............................ $ (29) $ (335) $ 99 $ 315 $ 50 ====== ====== ====== ====== ====== Cumulative adjusted interest sensitive gap.................. $ (29) $ (364) $ (265) $ 50
Firstar seeks to manage interest rate risk by adjusting the pricing and levels of assets and liabilities with the use of off-balance sheet derivative financial instruments. Firstar enters into interest rate swaps, caps and floors as part of this process. These derivative instruments synthetically alter the repricing characteristics of designated assets and liabilities. Firstar's off-balance sheet financial derivative portfolio has a notional amount of $787 million as of December 31, 1996. Additional information on derivative financial instruments is included in Notes 18 and 19 to the Consolidated Financial Statements. Net cash flows on off-balance sheet derivative instruments used to manage interest rate risk reduced net interest revenue by $1.5 million during 1996 and $9.1 million during 1995. This compared with a contribution to net interest revenue of $1.0 million during 1994. Expressed in terms of net interest margin, the impact of the derivative portfolio reduced margin by .01% and .05% in 1996 and 1995, respectively, and increased margin by .01% in 1994. 25 27 CAPITAL Total stockholders' equity was $1.7 billion at the end of 1996. Stockholders' equity was 8.62% of total assets at the end of 1996 compared to 7.95% a year earlier. The market price of a share of Firstar common stock closed the year at $26.25, a 32% increase from a year earlier. Total market capitalization at December 31, 1996 was nearly $4 billion. Firstar's capital management plan strives to match longer term capital needs with maintaining sound capital levels. It also seeks to provide to shareholders a total return consistent with the best performing companies. Firstar has taken actions with respect to this capital management strategy. In December 1996 Firstar issued, through Firstar Capital Trust I, $150 million of Trust Capital Securities. These securities qualify as Tier I capital and are mandatorily redeemable in 30 years. The capital securities are similar to preferred stock but have the tax advantage of deductibility of the cash distributions. A two for one stock split was announced in January 1997 with the issuance of the shares occurring February 15, 1997. This action recognizes the doubling of the market price per share of Firstar stock over the past two years and returns the price to an attractive per share level with wider appeal to individual investors. All per share data included in these financial statements have been restated to give effect to this stock split. A major stock repurchase program was announced in January 1997. The program will buy back and retire up to 12 million shares of common stock representing 8% of shares outstanding. In addition, Firstar will repurchase common shares for reissue to fund employee stock plans. Firstar has sought to manage capital levels through stock repurchases. These shares have been either retired or reserved for issuance in acquisitions or for employee stock plans. Previous programs have resulted in the repurchase of 8.1 million shares in 1996 and 9.6 million shares in 1995 at a cost of $190 and $173 million in each respective year. Of these shares, 5.3 million were retired, 8.6 million were reissued in acquisitions, 3.1 million were reissued for employee stock plans, and 700 thousand were reissued in preferred stock conversions. Dividends paid to common stockholders totaled $110.3 million, or $.74 per share, a 12% increase over 1995. This represented a 44% payout of net income for 1996. It is Firstar's target to maintain a dividend payout level approximately equal to the median of its peer group which approximates 35%. Bank regulatory agencies have established capital adequacy standards which are used extensively in their monitoring and control of the industry. These standards relate capital to level of risk by assigning different weightings to assets and certain off-balance sheet activity. Capital is measured by two risk-based ratios: tier I capital and total capital, which includes tier II capital. The rules require that companies have minimum ratios of 4% and 8% for tier I and total capital, respectively. As of December 31, 1996, Firstar had tier I capital of 11.67% and total capital of 13.47%, significantly exceeding regulatory minimum standards. Firstar is considered "well capitalized" by its regulatory agency. The components of these capital levels are shown in Table 17. Additionally, a tier I leverage ratio is also used by bank regulators as another measure of capital strength. This ratio compares tier I capital to total reported assets reduced by goodwill. The regulatory minimum level of this ratio is 3%, and it acts as a constraint on the degree to which a company can leverage its equity base. Firstar's tier I leverage ratio was 8.55% at December 31, 1996. It is Firstar's intent to manage its tier I leverage ratio at the top quartile level of its peers which is currently approximately 8.00%. 26 28 TABLE 17 CAPITAL COMPONENTS AND RATIOS
December 31 ----------------------------------------------- 1996 1995 1994 ----------- ----------- ----------- (thousands of dollars) Risk-based capital: Stockholders' equity............................ $ 1,704,047 $ 1,524,820 $ 1,512,685 Trust capital securities........................ 150,000 Adjustment for unrealized (gains) losses on securities available for sale................ (19,191) (34,127) 1,054 Minority interest in subsidiaries............... 2,384 3,171 2,920 Less disallowed intangibles..................... (200,540) (107,298) (107,967) ----------- ----------- ----------- Total tier I capital......................... 1,636,700 1,386,566 1,408,692 Allowable reserve for loan losses............... 175,725 167,564 156,426 Allowable long-term debt........................ 75,668 111,336 79,705 ----------- ----------- ----------- Total tier II capital........................ 251,393 278,900 236,131 ----------- ----------- ----------- Total capital................................ $ 1,888,093 $ 1,665,466 $ 1,644,823 =========== =========== =========== Risk-adjusted assets.............................. $14,020,587 $13,377,391 $12,479,987 Tier I capital to risk-adjusted assets............ 11.67% 10.36% 11.29% Total capital to risk-adjusted assets............. 13.47 12.45 13.18 Tier I leverage ratio............................. 8.55 7.52 8.15
NEW ACCOUNTING RULES The Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", which was effective in 1996. The statement requires that long-lived assets and certain identifiable intangibles to be held and used by a company be reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. The adoption of this statement did not have any significant impact on the results of operations. The Financial Accounting Standards Board issued Statement No. 123, "Accounting for Stock Based Compensation", which was effective in 1996. The statement requires that a fair value based method be used to value employee compensation plans that include stock based awards. The statement permits a company to either recognize compensation expense under SFAS No. 123 or continue to use the prior accounting rules which did not consider the market value of stock in certain award plans. If adoption of the statement's fair value procedures are not used in the computation of compensation expense in the income statement, the company must disclose in a footnote to the financial statements the pro-forma impact of adoption. Firstar did not adopt SFAS No. 123 for purposes of calculating stock based compensation expense. The effect of adopting this statement is discussed in Note 12 to the Consolidated Financial Statements. The Financial Accounting Standards Board issued Statement No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. The statement provides consistent standards for transfers and servicing of financial assets and extinguishment of liabilities based upon a control oriented approach. Certain portions of the statement are effective for transactions occurring in 1997. Firstar does not expect that the adoption of this statement will have any significant impact on its results of operations or financial position. 27 29 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
December 31 Average Balances ------------------------- ------------------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- (thousands of dollars) ASSETS Cash and due from banks................... $ 1,449,094 $ 1,310,746 $ 1,044,706 $ 895,767 Interest-bearing deposits with banks...... 6,349 5,467 8,743 15,668 Federal funds sold and resale agreements.............................. 192,965 109,945 88,319 173,541 Trading securities........................ 13,489 10,029 10,140 14,243 Securities held to maturity............... 2,250,776 2,427,030 2,323,050 3,927,678 Securities available for sale............. 1,966,590 2,047,848 2,046,402 267,579 Loans..................................... 13,195,534 12,632,513 12,922,374 12,291,674 Reserve for loan losses................... (213,138) (195,283) (206,913) (197,181) ----------- ----------- ----------- ----------- Loans-net............................ 12,982,396 12,437,230 12,715,461 12,094,493 Bank premises and equipment............... 368,699 349,233 356,368 342,580 Customer acceptance liability............. 14,281 16,060 17,273 23,447 Other assets.............................. 522,781 454,712 548,367 460,404 ----------- ----------- ----------- ----------- Total assets......................... $19,767,420 $19,168,300 $19,158,829 $18,215,400 =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand.................................. $ 3,880,610 $ 3,461,462 $ 3,174,569 $ 2,827,623 Interest-bearing demand................. 1,687,885 1,602,350 1,552,786 1,571,378 Money market accounts................... 2,744,751 2,335,429 2,577,477 2,110,503 Savings passbook........................ 1,518,033 1,634,430 1,599,075 1,731,344 Certificates of deposit................. 5,382,918 5,277,975 5,392,430 5,261,589 ----------- ----------- ----------- ----------- Total deposits....................... 15,214,197 14,311,646 14,296,337 13,502,437 Short-term borrowed funds................. 1,868,606 2,303,159 2,357,838 2,275,739 Long-term debt............................ 547,194 734,021 637,393 610,889 Bank acceptances outstanding.............. 14,281 16,060 17,273 23,447 Other liabilities......................... 269,095 278,594 270,951 277,495 ----------- ----------- ----------- ----------- Total liabilities.................... 17,913,373 17,643,480 17,579,792 16,690,007 Trust capital securities.................. 150,000 3,689 Stockholders' equity: Preferred stock......................... 11,344 15,344 12,662 20,572 Common stock............................ 94,266 94,266 94,266 96,090 Issued: 1996, 150,826,196 shares........ 1995, 150,826,196 shares........ Capital surplus......................... 145,411 147,502 141,977 210,947 Retained earnings....................... 1,437,891 1,298,857 1,358,833 1,223,846 Treasury stock, at cost................. (4,056) (64,834) (49,339) (26,195) Held: 1996, 490,396 shares.............. 1995, 4,373,668 shares............ Restricted stock.......................... (442) (73) (875) Unrealized gains on securities available for sale................................ 19,191 34,127 17,022 1,008 ----------- ----------- ----------- ----------- Total stockholders' equity........... 1,704,047 1,524,820 1,575,348 1,525,393 ----------- ----------- ----------- ----------- Total liabilities and equity......... $19,767,420 $19,168,300 $19,158,829 $18,215,400 =========== =========== =========== ===========
- ------------ The average balances are not covered by the Independent Auditors' Report. See accompanying notes to consolidated financial statements. 28 30 FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31 ----------------------------------------------- 1996 1995 1994 ------------- ------------- ------------- (thousands of dollars, except per share data) INTEREST REVENUE Loans.................................................... $1,113,459 $1,081,685 $ 914,311 Securities: Taxable................................................ 209,396 200,465 142,029 Nontaxable............................................. 54,589 53,329 51,251 ---------- ---------- ---------- Total securities.................................... 263,985 253,794 193,280 Interest-bearing deposits with banks..................... 380 967 1,297 Federal funds sold and resale agreements................. 4,916 10,534 9,645 Trading securities....................................... 344 806 1,211 ---------- ---------- ---------- Total interest revenue.............................. 1,383,084 1,347,786 1,119,744 INTEREST EXPENSE Deposits: Interest-bearing demand................................ 21,786 23,831 21,065 Money market accounts.................................. 102,927 85,231 57,274 Savings passbook....................................... 40,034 44,509 43,887 Certificates of deposit................................ 300,806 291,135 199,743 ---------- ---------- ---------- Total deposits...................................... 465,553 444,706 321,969 Short-term borrowed funds................................ 123,629 133,151 67,622 Long-term debt........................................... 43,523 43,982 31,315 ---------- ---------- ---------- Total interest expense.............................. 632,705 621,839 420,906 ---------- ---------- ---------- NET INTEREST REVENUE..................................... 750,379 725,947 698,838 Provision for loan losses................................ 42,647 36,756 23,891 ---------- ---------- ---------- NET INTEREST REVENUE AFTER LOAN LOSS PROVISION........... 707,732 689,191 674,947 OTHER OPERATING REVENUE Trust and investment management fees..................... 145,690 132,377 120,349 Service charges on deposit accounts...................... 91,953 81,775 82,378 Credit card service revenue.............................. 69,945 62,106 55,867 Mortgage banking revenue................................. 49,100 38,479 35,479 Data processing fees..................................... 19,443 17,924 20,263 Securities gains (losses)................................ 66 (5,730) (3,583) Other revenue............................................ 64,255 65,266 59,866 ---------- ---------- ---------- Total other operating revenue....................... 440,452 392,197 370,619 OTHER OPERATING EXPENSE Salaries................................................. 320,239 323,163 312,120 Employee benefits........................................ 71,277 72,198 68,841 Equipment expense........................................ 65,615 58,700 54,556 Net occupancy expense.................................... 64,235 57,992 52,984 Restructuring expense.................................... 53,267 23,151 Other expense............................................ 199,004 198,918 217,684 ---------- ---------- ---------- Total other operating expense....................... 773,637 734,122 706,185 ---------- ---------- ---------- INCOME BEFORE INCOME TAXES............................... 374,547 347,266 339,381 Provision for income taxes............................... 124,370 118,353 112,708 ---------- ---------- ---------- NET INCOME............................................... $ 250,177 $ 228,913 $ 226,673 ========== ========== ========== Net income applicable to common stock.................... $ 249,310 $ 227,392 $ 224,450 PER COMMON SHARE Net income............................................... $ 1.68 $ 1.50 $ 1.49 Dividends................................................ .74 .66 .58
See accompanying notes to consolidated financial statements. 29 31 FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Net Unrealized Preferred Common Capital Retained Gain/ Restricted Treasury Stock Stock Surplus Earnings (Loss) Stock Stock Total --------- ------- -------- ---------- ---------- ---------- --------- ---------- (thousands of dollars, except per share data) BALANCE AT DECEMBER 31, 1993..... $28,916 $94,256 $209,234 $1,030,177 $ 1,100 $(1,335) $ (3,034) $1,359,314 Net income....................... 226,673 226,673 Cash dividends: Common stock ($.58 per share)....................... (75,081) (75,081) Pooled affiliates.............. (9,707) (9,707) Pooled affiliate converted 8,975 shares of preference stock into 179,182 shares of common stock.......................... (1,937) 112 1,825 0 Pooled affiliates (185,286) shares of net common stock activity....................... (116) (5,494) (5,610) Pooled affiliate change in unrealized loss on securities available for sale............. (1,166) (1,166) Pooled affiliate granted 48,586 shares of restricted stock..... 30 533 (563) 0 Issued 3,603,082 shares of common stock for bank acquisitions.... 2,078 22,735 4,551 29,364 Issued 170,768 shares of common stock for employee benefit plans.......................... 105 1,563 36 1,704 Purchased 748,616 shares of treasury stock................. (12,222) (12,222) Unrealized losses on securities available for sale............. (988) (988) Amortization/adjustment of restricted stock............... (113) 224 111 Pooled affiliate amortization/adjustment of restricted stock............... 170 123 293 ------- ------- -------- ---------- ------- ------- --------- ---------- BALANCE AT DECEMBER 31, 1994..... 26,979 96,465 230,453 1,172,062 (1,054) (1,551) (10,669) 1,512,685 Net income....................... 228,913 228,913 Cash dividends: Preferred stock, series D ($35.00 per share)........... (1,247) (1,247) Preferred stock ($.90 per share)....................... (274) (274) Common stock ($.66 per share)....................... (99,838) (99,838) Converted 8,087 shares of preferred stock into 347,074 shares of common stock......... (4,044) 80 (123) 4,087 0 Redemption of 303,640 shares of preferred stock................ (7,591) (759) (8,350) Retired 5,251,398 shares of common stock................... (3,283) (90,670) (93,953) Issued 627,300 shares of common stock for bank acquisitions.... 1,207 8,069 9,276 Issued 1,779,880 shares of common stock for employee benefit plans.......................... 689 5,057 12,509 18,255 Issued 503,804 shares of common stock for note conversion...... 315 1,185 1,500 Purchased 4,313,196 shares of treasury stock................. (78,830) (78,830) Unrealized gains on securities available for sale............. 35,181 35,181 Amortization/adjustment of restricted stock............... 393 1,109 1,502 ------- ------- -------- ---------- ------- ------- --------- ---------- BALANCE AT DECEMBER 31, 1995..... 15,344 94,266 147,502 1,298,857 34,127 (442) (64,834) 1,524,820 Net income....................... 250,177 250,177 Cash dividends: Preferred stock, series D ($35.00 per share)........... (867) (867) Common stock ($.74 per share)....................... (110,276) (110,276) Converted 8,000 shares of preferred stock into 343,366 shares of common stock......... (4,000) (1,083) 5,083 0 Issued 9,781,096 shares of common stock for bank acquisitions.... 4,787 215,019 219,806 Issued 1,854,724 shares of common stock for employee benefit plans.......................... (5,783) 30,984 25,201 Purchased 8,080,200 shares of treasury stock................. (189,997) (189,997) Unrealized gains on securities available for sale............. (14,936) (14,936) Amortization/adjustment of restricted stock............... (12) 442 (311) 119 ------- ------- -------- ---------- ------- ------- --------- ---------- BALANCE AT DECEMBER 31, 1996..... $11,344 $94,266 $145,411 $1,437,891 $19,191 $ 0 $ (4,056) $1,704,047 ======= ======= ======== ========== ======= ======= ========= ==========
See accompanying notes to consolidated financial statements. 30 32 FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31 ----------------------------------------- 1996 1995 1994 ----------- ----------- ----------- (thousands of dollars) CASH FLOWS FROM OPERATING ACTIVITIES Net income.............................................. $ 250,177 $ 228,913 $ 226,673 Adjustments: Provision for loan losses............................. 42,647 36,756 23,891 Depreciation, amortization and accretion.............. 70,647 50,520 44,211 Net (increase) decrease in trading securities......... (853) 19,021 (16,559) Net decrease (increase) in loans held for resale...... 173,454 (278,563) 275,326 (Gain) loss on securities and other assets............ (1,325) 3,866 (9,164) Deferred income taxes................................. (3,664) (335) 6,784 Decrease (increase) in other assets................... 60,443 6,321 25,684 (Decrease) increase in other liabilities.............. (25,740) (3,983) 30,045 Other -- net.......................................... (3,489) 3,044 (5,827) ----------- ----------- ----------- Net cash provided by operating activities........... 562,297 65,560 601,064 CASH FLOWS FROM INVESTING ACTIVITIES Net (increase) decrease in federal funds sold and resale agreements............................................ (83,020) 241,359 (58,072) Net (increase) decrease in interest-bearing deposits with banks............................................ (882) 28,065 (25,166) Sales of securities held to maturity.................... 17,541 Sales of securities available for sale.................. 253,438 270,984 131,801 Maturities of securities held to maturity............... 408,630 666,169 1,066,192 Maturities of securities available for sale............. 432,002 156,018 Purchases of securities held to maturity................ (224,488) (1,410,008) (1,662,474) Purchases of securities available for sale.............. (371,728) (90,936) (6,539) Net decrease (increase) in loans........................ 187,545 (521,197) (1,070,168) Net cash from acquisitions.............................. 64,718 294 25,884 Proceeds from sales of foreclosed assets................ 8,226 12,074 18,243 Purchases of bank premises and equipment................ (57,773) (55,369) (58,735) Proceeds from sales of bank premises and equipment...... 3,221 4,638 1,125 ----------- ----------- ----------- Net cash provided (used) in investing activities.... 619,889 (680,368) (1,637,909) CASH FLOWS FROM FINANCING ACTIVITIES Net (decrease) increase in deposits..................... (176,297) 828,503 (247,949) Net (decrease) increase in short-term borrowed funds.... (508,659) 103,908 1,094,553 Repayment of long-term debt............................. (216,491) (25,127) (31,706) Proceeds from long-term debt............................ 186,760 43,690 Proceeds from trust capital securities.................. 148,500 Cash dividends.......................................... (111,143) (101,359) (84,788) Preferred stock redemption.............................. (8,350) Common/treasury stock repurchases....................... (197,324) (165,456) (12,222) Common/treasury stock issued............................ 17,576 14,561 (5,777) ----------- ----------- ----------- Net cash (used) provided by financing activities.... (1,043,838) 833,440 755,801 ----------- ----------- ----------- Net Increase (Decrease) in Cash and Due from Banks...... 138,348 218,632 (281,044) Cash and due from banks at beginning of year............ 1,310,746 1,092,114 1,373,158 ----------- ----------- ----------- Cash and due from banks at end of year.................. $ 1,449,094 $ 1,310,746 $ 1,092,114 =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest.............................................. $ 636,493 $ 600,006 $ 407,182 Income taxes.......................................... 116,052 116,443 113,463 Transfers to foreclosed assets from loans............... 8,345 9,166 10,708 Acquisitions: Assets acquired....................................... 1,370,563 85,762 610,541 Cash paid for purchase of stock....................... $ (5,535) $ $ (29,101) Cash acquired......................................... 70,253 294 54,985 ----------- ----------- ----------- Net cash from acquisitions.......................... $ 64,718 $ 294 $ 25,884 =========== =========== ===========
See accompanying notes to consolidated financial statements. 31 33 FIRSTAR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of business--Firstar Corporation is a registered bank holding company providing financial services through 243 locations in Wisconsin, Illinois, Minnesota, Iowa and Arizona. These banking activities include accepting demand, time and savings deposits; making both secured and unsecured business and personal loans; providing trust and investment management services to individuals and corporate customers; providing correspondent banking services to other financial institutions; conducting mortgage banking activities; providing international banking services; conducting retail brokerage operations; providing mutual fund custody services; and other related banking activities. Principles of presentation--The consolidated financial statements include the accounts of Firstar and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Results of operations of companies purchased are included from the date of acquisition. Assets and liabilities of purchased companies are recorded at estimated fair value at the date of acquisition. Financial statements have been restated to include companies acquired under pooling of interests when material. Certain prior year amounts have been reclassified to conform to current year classifications. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Securities--Purchases of securities that are made with the positive intent and ability to hold them to maturity are carried at cost, adjusted for amortization of premium and accretion of discount using a level yield method. Securities to be held for indefinite periods of time and not intended to be held to maturity or on a long-term basis are classified as available for sale and carried at market value. Valuation adjustments, net of deferred tax, are recorded as a component of stockholders' equity. Securities held for indefinite periods of time may include securities that management intends to use as part of its asset/liability management strategy or have been acquired in business acquisitions and are designated to be sold. Gains or losses on sales of securities are computed on the basis of specific identification of the adjusted cost of each security. Trading account securities are carried at market. Valuation adjustments are included in other revenue in the consolidated statements of income. Loans--Loans, which include lease financing receivables, are stated at the principal amount. Interest is accrued on all loans not discounted by applying the interest rate to the amount outstanding. On discounted loans, income is recognized on a basis which results in approximately level rates of return over the term of the loans. Loan origination and commitment fees and certain direct loan origination costs are being deferred where material and the net amount amortized as an adjustment of the related loans' yield. These amounts are being amortized over the contractual life of the related loans. Where it is not reasonable to expect that income will be realized, accrual of income ceases and these loans are placed on a "cash basis" for purposes of income recognition. Loans upon which foreclosure action is commenced or for which borrowers have begun bankruptcy proceedings are reviewed individually as to continuation of interest accrual. Mortgage loans held for sale are carried at the lower of aggregate cost or market, after consideration of related loan sale commitments. Reserve for loan losses--The reserve for loan losses is maintained at a level adequate to provide for potential loan losses through charges to operating expense. The reserve is based upon a continuing review of loans which includes consideration of actual net loan loss experience, changes in the size and character of the loan portfolio, identification of problem situations which may affect the borrowers' ability to repay, estimated value of underlying collateral and evaluation of current economic conditions. With respect to loans which are deemed impaired, the calculation of reserve levels is based upon the discounted present value of expected cash 32 34 flows received from the debtor or other measures of value such as market prices or collateral values. Firstar considers all nonaccrual commercial loans to be impaired. Loan losses are recognized through charges to the reserve. Installment and credit card loan losses are charged to the reserve based upon fixed delinquency periods. All other loans are evaluated individually and charged to the reserve to the extent that outstanding principal balances are deemed uncollectible. Any subsequent recoveries are added to the reserve. Foreclosed assets--Foreclosed assets, the balance of which is included in other assets, includes primarily properties acquired through loan foreclosure proceedings or acceptance of deeds in lieu of foreclosure. These properties are recorded at the lower of the carrying value of the related loans or the fair market value of the foreclosed asset acquired less the estimated costs to sell the foreclosed asset. Initial valuation adjustments, if any, are charged against the reserve for loan losses. Subsequent reevaluations of the properties, which indicate reduced value, are recognized through charges to operating expense. Revenues and expenditures related to holding and operating these properties are included in other operating expense. Bank premises and equipment--Bank premises and equipment are stated at cost less depreciation, which has been accumulated on the straight-line basis. Maintenance and repairs are charged to expense and betterments are capitalized. Intangible assets--Intangible assets, consisting of goodwill and core deposit premium, are included in other assets in the balance sheet. Goodwill is amortized over periods of fifteen to twenty years. Core deposit intangibles are amortized over a life of up to ten years. Firstar periodically evaluates the carrying value and remaining amortization period of all long lived assets including intangible assets for impairment. Adjustments are recorded when the benefit of the asset decreases due to disposition of branches or deposits associated with the entity acquired in the purchase business combination. Mortgage servicing rights--Mortgage servicing rights associated with loans originated and sold, where servicing is retained, are capitalized and included in other assets in the balance sheet. The value of these capitalized servicing rights, along with purchased mortgage servicing rights, are amortized in relation to the servicing revenue expected to be earned. The carrying value of these rights are reviewed for impairment. For purposes of measuring impairment, the rights are stratified into certain risk characteristics including underlying loan type, note rate, prepayment trends and external market factors. Stock based compensation plans--Firstar has various stock based compensation plans that authorize the granting of stock options, restricted stock, and other stock based awards to eligible employees. Firstar has elected not to adopt the recognition provisions of SFAS No. 123, "Accounting for Stock Based Compensation" which requires a fair-value based method of accounting for stock options and equity awards and will continue to follow APB No. 25 "Accounting for Stock Issued & Employees" and related interpretations to account for its stock based compensation plans. Income taxes--Firstar and its subsidiaries file a consolidated federal income tax return. Income taxes are accounted for using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Foreign currency transactions--Monetary assets and liabilities recorded in foreign currencies are translated at the rate of exchange in effect at each year-end. Income statement items are translated monthly using the average rate for the month. Firstar enters into forward exchange contracts on behalf of its customers and hedges its risk by entering into offsetting transactions with other counterparties. The fair value of these transactions are included in other assets and liabilities and the related gain or loss is recorded in other revenue. Derivative and other financial instruments--Firstar uses interest rate swaps, caps and floors to manage its interest rate risks arising from recorded financial assets and liabilities. These instruments are accounted for on an accrual basis when the instrument can be demonstrated to effectively change the cash flows of a designated asset or liability and such asset or liability exposes Firstar to interest rate risk. 33 35 Amounts to be paid or received under interest rate swaps, caps and floors are recognized as interest income or expense of the related asset or liability. Gains and losses on early termination of these instruments are deferred and amortized as an adjustment to yield on the related asset or liability over the shorter of the remaining contract life or the maturity of the related asset or liability. If the related asset or liability is sold or otherwise liquidated, the instrument is marked to market, with resultant gains and losses recognized in other revenue. Interest rate swaps, caps and floors that do not meet this criteria are carried at market value with changes therein recognized in other revenue. Fees paid or received in connection with caps and floors are deferred and amortized to income or expense over the life of the instrument. Interest rate swaps, caps and floors entered into as an intermediary are accounted for at market value. Realized gains and losses and changes in market value are recognized in other operating revenue. Cash and cash equivalents--For purposes of the consolidated statements of cash flows, cash and cash equivalents are considered to include the balance sheet caption cash and due from banks. Income per common share--Net income per common share is based on the weighted average number of shares of common stock outstanding during each year, after giving effect to common stock splits and the amortization of restricted stock. The weighted average shares were 148,061,302 in 1996, 151,432,454 in 1995 and 150,390,910 in 1994. For calculation purposes, earnings are reduced by preferred stock dividends. Common stock equivalents are not significant in any year presented. NOTE 2. MERGERS AND ACQUISITIONS The following table summarizes completed acquisitions:
Total Method of Name of Institution Assets Acquisition Date Consideration Accounting ------------------- ------ ---------------- ------------- ---------- (millions of dollars) 1996: American Bancorporation, Inc. St. Paul, MN....................... $1,187 July 1996 Cash $38.6 Purchase 8,000,000 shares of common stock Harvest Financial Corp. Dubuque, IA........................ 353 January 1996 1,774,408 shares Purchase of common stock ------ $1,553 ====== 1995: Investors Bank Corp. Wayzata, MN........................ $1,134 April 1995 6,013,846 shares Pooling of of common stock interests First Moline Financial Corp. Moline, IL......................... 86 March 1995 627,300 shares Purchase of common stock First Colonial Bankshares Corporation Chicago, IL........................ 1,780 January 1995 15,401,534 Pooling of shares interests of common stock ------ $3,000 ====== 1994: First Southeast Banking Corp. Lake Geneva, WI.................... $ 423 October 1994 3,603,154 shares Pooling of of common stock interests ------ $ 423 ======
34 36 NOTE 3. SECURITIES The amortized cost and approximate market values of securities are as follows:
December 31, 1996 ---------------------------------------------------- Amortized Unrealized Unrealized Market Cost Gains Losses Value ---------- ---------- ---------- ---------- (thousands of dollars) Securities held to maturity: U.S. Treasury and federal agencies............. $ 756 $ $ $ 756 Mortgage backed obligations of federal agencies.................................... 1,092,528 28,511 (3,948) 1,117,091 State and political subdivisions............... 1,147,387 15,673 (3,544) 1,159,516 Corporate debt................................. 10,027 23 (43) 10,007 Other.......................................... 78 78 ---------- ------- ------- ---------- Total....................................... $2,250,776 $44,207 $(7,535) $2,287,448 ========== ======= ======= ========== Securities available for sale: U.S. Treasury and federal agencies............. $1,771,460 $32,950 $(3,612) $1,800,798 Mortgage backed obligations of federal agencies.................................... 8,624 96 (239) 8,481 State and political subdivisions............... 7,601 55 (30) 7,626 Equity securities.............................. 111,315 111,315 Money market mutual funds...................... 38,370 38,370 ---------- ------- ------- ---------- Total....................................... $1,937,370 $33,101 $(3,881) $1,966,590 ========== ======= ======= ==========
December 31, 1995 ---------------------------------------------------- Amortized Unrealized Unrealized Market Cost Gains Losses Value ---------- ---------- ---------- ---------- (thousands of dollars) Securities held to maturity: U.S. Treasury and federal agencies............. $ 2,146 $ 5 $ (5) $ 2,146 Mortgage backed obligations of federal agencies.................................... 1,266,458 46,694 (192) 1,312,960 State and political subdivisions............... 1,141,987 21,988 (3,223) 1,160,752 Corporate debt................................. 15,590 85 (36) 15,639 Other.......................................... 849 849 ---------- ------- ------- ---------- Total....................................... $2,427,030 $68,772 $(3,456) $2,492,346 ========== ======= ======= ========== Securities available for sale: U.S. Treasury and federal agencies............. $1,862,825 $59,043 $(4,143) $1,917,725 Mortgage backed obligations of federal agencies.................................... 9,891 131 (235) 9,787 State and political subdivisions............... 7,796 80 (45) 7,831 Corporate debt................................. 1,186 11 (1) 1,196 Equity securities.............................. 92,767 92,767 Money market mutual funds...................... 18,542 18,542 ---------- ------- ------- ---------- Total....................................... $1,993,007 $59,265 $(4,424) $2,047,848 ========== ======= ======= ==========
Securities with an amortized cost of $1,786,351,000 were transferred into available for sale from held to maturity on December 31, 1995. This was done in accordance with Financial Accounting Standards Board implementation guidance which permitted a one-term reassessment of securities classification under SFAS No. 115. 35 37 The amortized cost and approximate market value of securities at December 31, 1996, by contractual maturity, are shown below. Maturities of mortgage backed obligations were estimated based on anticipated payments.
Securities Securities Held to Maturity Available for Sale ------------------------ ------------------------ Amortized Market Amortized Market Cost Value Cost Value ---------- ---------- ---------- ---------- (thousands of dollars) Due in one year or less....................... $ 317,399 $ 322,178 $ 570,986 $ 569,855 Due after one year through five years......... 1,005,790 1,022,696 1,074,544 1,100,441 Due after five years through ten years........ 731,826 745,729 174,583 179,253 Due after 10 years............................ 195,761 196,845 5,942 5,726 ---------- ---------- ---------- ---------- $2,250,776 $2,287,448 1,826,055 1,855,275 ========== ========== Equity securities............................. 111,315 111,315 ---------- ---------- Total.................................... $1,937,370 $1,966,590 ========== ==========
Gross gains of $67,000, $487,000 and $718,000 and gross losses of $1,000, $6,217,000 and $4,301,000 were realized on securities sales in 1996, 1995 and 1994, respectively. The amortized cost of securities pledged to secure public or trust deposits, securities sold under repurchase agreements and for other purposes as required or permitted by law was $1,927,236,000 at December 31, 1996 and $1,823,494,000 at December 31, 1995. NOTE 4. LOANS The composition of loans, including lease financing receivables, is summarized below. Loans are presented net of unearned discount which amounted to $22,740,000 and $18,443,000 at December 31, 1996 and 1995, respectively. Commercial loans pledged to secure public deposits were $184,333,000 on December 31, 1996 and $150,657,000 on December 31, 1995. Consumer mortgage loans held for resale were $143,614,000 and $326,433,000 on December 31, 1996 and 1995, respectively.
December 31 -------------------------- 1996 1995 ----------- ----------- (thousands of dollars) Commercial and industrial................................... $ 3,366,016 $ 3,078,148 Commercial construction..................................... 418,040 387,378 Commercial mortgage......................................... 2,574,376 2,462,010 Other commercial............................................ 953,145 1,038,677 ----------- ----------- Commercial................................................ 7,311,577 6,966,213 Credit card................................................. 684,619 619,868 Consumer mortgage........................................... 2,660,290 2,722,531 Home equity................................................. 1,121,580 935,907 Other consumer.............................................. 1,417,468 1,387,994 ----------- ----------- Consumer.................................................. 5,883,957 5,666,300 ----------- ----------- Total.................................................. $13,195,534 $12,632,513 =========== ===========
36 38 Loans on which income is recognized only as cash payments are received or is accrued at less than the original contract rate are summarized below.
December 31 ------------------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Commercial.............................................. $ 66,913 $ 74,574 $ 59,448 Consumer................................................ 19,193 16,187 9,831 -------- -------- -------- Total.............................................. $ 86,106 $ 90,761 $ 69,279 ======== ======== ========
The effect of nonperforming loans on interest revenue was as follows:
Years Ended December 31 ------------------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Interest at original contract rate...................... $ 9,236 $ 8,348 $ 8,229 Interest collected...................................... 4,474 3,768 3,844 -------- -------- -------- Net reduction of interest revenue.................. $ 4,762 $ 4,580 $ 4,385 ======== ======== ========
NOTE 5. RESERVE FOR LOAN LOSSES An analysis of the reserve for loan losses is as follows:
Years Ended December 31 ------------------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Balance at beginning of year............................ $195,283 $190,552 $189,714 Provision for loan losses............................... 42,647 36,756 23,891 Loan recoveries......................................... 24,450 19,973 19,961 Loan charge-offs........................................ (63,208) (52,863) (47,728) Reserves of acquired banks.............................. 13,966 865 4,714 -------- -------- -------- Balance at end of year.................................. $213,138 $195,283 $190,552 ======== ======== ======== Charge-offs, net of recoveries, as a percentage of average loans......................................... .30% .27% .25% Reserve as a percentage of year-end loans............... 1.62 1.55 1.60
A portion of the reserve for loan losses is allocated to loans deemed impaired. All impaired loans are included in nonperforming assets. Information on these loans and their related reserve for loan losses is as follows:
December 31 ------------------------- 1996 1995 -------- -------- (thousands of dollars) Impaired loans: With reserve allocation................................... $ 41,643 $ 43,851 Without reserve allocation................................ 24,242 29,347 -------- -------- Total.................................................. $ 65,885 $ 73,198 ======== ======== Reserve allocated......................................... $ 4,914 $ 8,952 Average balance of impaired loans during year............. 69,783 67,271 Interest income recognized during year.................... 4,296 3,200
37 39 NOTE 6. BANK PREMISES AND EQUIPMENT Bank premises and equipment are summarized as follows:
December 31 ----------------------- 1996 1995 ---------- ---------- (thousands of dollars) Land........................................................ $ 45,991 $ 43,076 Bank premises............................................... 345,986 332,142 Equipment................................................... 311,979 285,605 --------- --------- Subtotal.................................................. 703,956 660,823 Accumulated depreciation.................................... (335,257) (311,590) --------- --------- Total..................................................... $ 368,699 $ 349,233 ========= =========
Depreciation charged to other operating expense amounted to $46,791,000, $42,684,000 and $40,003,000 in 1996, 1995 and 1994, respectively. Rental expense for bank premises and equipment amounted to $36,662,000, $34,057,000 and $35,804,000 in 1996, 1995 and 1994, respectively. Contingent rentals and sublease rental income amounts were not significant. Occupancy expense is net of amortization of a total of $68 million of pre-tax deferred gain on a building sale which is being amortized through 1997, at which time the related leaseback expires. This amortization was $6,240,000 in 1996, $6,240,000 in 1995 and $9,029,000 in 1994. Firstar and its subsidiaries are obligated under noncancelable operating leases for various bank premises and equipment. These leases expire intermittently over the years through 2034. The minimum rental commitments under noncancelable leases for the next five years are shown below:
Period Amount ------ ------- (thousands of dollars) Bank premises and equipment................................. 1997 $32,070 1998 28,218 1999 25,379 2000 24,192 2001 22,255
NOTE 7. INTANGIBLE ASSETS Intangible assets, net of accumulated amortization, are summarized as follows:
December 31 ------------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Goodwill.................................................... $186,462 $107,298 $107,967 Core deposit intangibles.................................... 24,438 15,161 17,538 -------- -------- -------- Total..................................................... $210,900 $122,459 $125,505 ======== ======== ======== Amortization of intangibles during year..................... $ 15,321 $ 11,068 $ 10,291
38 40 NOTE 8. MORTGAGE SERVICING RIGHTS The fair value of capitalized mortgage servicing rights was $17.0 million on December 31, 1996 and $12.7 million on December 31, 1995. Firstar serviced $3,164 million and $3,267 million of mortgage loans for other investors as of December 31, 1996 and 1995, respectively. Changes in capitalized mortgage servicing rights are summarized as follows:
Years Ended December 31 ---------------------------- 1996 1995 1994 -------- ------- ------- (thousands of dollars) Balance--beginning of year.................................. $ 9,538 $ 7,238 $ 6,810 Originated servicing rights capitalized..................... 15,356 6,308 Purchased servicing rights capitalized...................... 632 788 2,447 Excess servicing rights capitalized......................... 2,129 1,082 Amortization of servicing rights............................ (2,461) (1,641) (1,455) Sales of servicing rights................................... (12,354) (3,155) (1,646) Valuation allowance......................................... (112) -------- ------- ------- Balance--end of year........................................ $ 12,728 $ 9,538 $ 7,238 ======== ======= =======
The Financial Accounting Standard Board issued Statement No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" which is effective for transactions entered into after December 31, 1996. This statement supercedes the existing standards on accounting for mortgage servicing rights and provides accounting and reporting standards for transfers and servicing of all financial assets and extinguishments of liabilities based upon consistent application of a financial components approach that focuses on control. Firstar does not expect that the adoption of this statement will have a significant effect on its result of operations or financial position. NOTE 9. SHORT-TERM BORROWED FUNDS Short-term borrowed funds are summarized as follows:
1996 1995 1994 ---------- ---------- ---------- (thousands of dollars) Federal funds purchased and repurchase agreements: At December 31......................................... $1,223,037 $1,980,442 $2,133,709 Average during year.................................... 1,902,766 1,994,281 1,530,644 Maximum month-end balance.............................. 2,110,250 2,407,507 2,133,709 Average rate at year-end............................... 5.66% 5.44% 5.59% Average rate during year............................... 5.25 5.83 4.28
Federal funds purchased, which totaled $627 million at December 31, 1996, generally represent one-day borrowings obtained primarily from financial institutions in Firstar's marketplace in conjunction with their customer correspondent relationships with the subsidiary banks. Securities sold under repurchase agreements, which totaled $596 million at December 31, 1996, represent borrowings maturing within one year that are secured by U.S. Treasury and federal agency securities. Other short-term borrowed funds comprise primarily treasury, tax and loan notes and Federal Home Loan Bank notes. Firstar additionally has a $125 million line of credit agreement in place which expires in August 1999. The credit agreement has certain restrictive covenants and requires payment of quarterly fees based upon both the commitment amount and usage levels. $75 million in advances were outstanding under this line at the end of 1996. 39 41 NOTE 10. LONG-TERM DEBT Long-term debt is summarized as follows:
December 31 ---------------------- 1996 1995 -------- -------- (thousands of dollars) Federal Home Loan Bank notes................................ $345,946 $486,760 7.15% subordinated notes.................................... 100,000 100,000 10.25% subordinated notes................................... 78,340 78,340 10% notes................................................... 43,910 Other debt.................................................. 22,908 25,011 -------- -------- Total..................................................... $547,194 $734,021 ======== ========
Notes payable to the Federal Home Loan Bank are collateralized by Federal Home Loan Bank stock and first mortgage real estate loans. The notes mature from 1997 through 2011 and have a variable interest rate with an average of 5.67% as of December 31, 1996. Firstar issued $100,000,000 of 7.15% notes under an indenture dated as of August 28, 1995. The notes, which are subordinated to all unsubordinated indebtedness of Firstar for borrowed money, are unsecured and mature September 1, 2000. The notes may be redeemed on or after September 1, 1998. The indenture contains a provision which restricts the disposition of or subjecting to lien any common stock of certain subsidiaries. Firstar issued $100,000,000 of 10 1/4% notes under an indenture dated as of May 1, 1988. The notes, which are subordinated to all unsubordinated indebtedness of Firstar for borrowed money, are unsecured and mature May 1, 1998. The indenture contains a provision which restricts the disposition of or subjecting to lien any common stock of certain subsidiaries. Firstar issued $50,000,000 of 10% notes under an indenture dated as of June 1, 1986. The notes were unsecured and matured June 1, 1996. Other debt at December 31, 1996 includes loans sold under repurchase agreements of $5,000,000, $10,000,000 and $5,000,000, which mature in 1998, 1999 and 2002, respectively, and bearing interest at a variable LIBOR based rate, and capitalized lease obligations of $2,761,000. Long-term debt has aggregate maturities for the five years 1997 through 2001 as follows: $190,212,000 in 1997, $105,693,000 in 1998, $12,313,000 in 1999, $229,837,000 in 2000 and $848,000 in 2001. NOTE 11. STOCKHOLDERS' EQUITY AND TRUST CAPITAL SECURITIES The authorized and outstanding shares of Firstar are as follows:
DECEMBER 31 ------------------------- 1996 1995 ----------- ----------- Preferred stock, $1.00 par value Authorized-series C....................................... 2,500,000 2,500,000 Preferred stock from acquired banks: Series D Authorized............................................. 40,250 40,250 Outstanding............................................ 22,688 30,688 Common stock, $1.25 par value: Authorized................................................ 240,000,000 240,000,000 Outstanding (net of treasury stock)....................... 150,335,800 146,452,528
Under the Firstar Shareholder Rights Plan each share of common stock entitles its holder to one-quarter right. Under certain conditions, each right entitles the holder to purchase one one-hundredth of a share of 40 42 series C preferred stock at a price of $85, subject to adjustment. The rights will only be exercisable if a person or group has acquired, or announced an intention to acquire, 20% or more of the outstanding shares of Firstar common stock. Under certain circumstances, including the existence of a 20% acquiring party, each holder of a right, other than the acquiring party, will be entitled to purchase at the exercise price Firstar common shares having a market value of two times the exercise price. In the event of the acquisition of Firstar by another company subsequent to a party acquiring 20% or more of Firstar common stock, each holder of a right is entitled to receive the acquiring company's common shares having a market value of two times the exercise price. The rights may be redeemed at a price of $.01 per right prior to the existence of a 20% acquiring party, and thereafter, may be exchanged for one common share per right prior to the existence of a 50% acquiring party. The rights will expire on January 19, 1999. The rights do not have voting or dividend rights and until they become exercisable, have no dilutive effect on the earnings of Firstar. Under the rights plan, the Board of Directors of Firstar may reduce the thresholds applicable to the rights from 20% to not less than 10%. Preferred shares, when issued, rank prior to common shares both as to dividends and liquidation but have no general voting rights. The series C preferred stock, none of which is outstanding, is entitled to 100 votes per share and other rights such that the value of a one one-hundredth interest in a series C preferred share should approximate the value of one common share. On January 31, 1995, Firstar converted 38,775 shares of First Colonial Bankshares Corporation series C preference stock, represented by 775,500 depository shares, into like shares of its series D preferred stock in connection with the acquisition of First Colonial Bankshares Corporation. Each share receives annual dividends of $35 and is convertible into 42.92 shares of common stock. Shares may be redeemed after June 30, 1997 at $500 per share. Dividends deducted from net income for purposes of determining net income applicable to common stockholders were $867,000 in 1996, $1,521,000 in 1995 and $2,223,000 in 1993. A two-for-one stock split was completed on February 15, 1997 to common stockholders. All common stock and per share data included in the consolidated financial statements and in the notes to consolidated financial statements have been retroactively adjusted to reflect the split. On December 17, 1996, Firstar issued $150 million of trust capital securities through Firstar Capital Trust I, a statutory business trust, of which all common securities are owned by Firstar. The capital securities pay cumulative cash distributions semiannually at an annual rate of 8.32%. The securities are redeemable from December 23, 2006 until December 23, 2016 at a declining rate of 104.16% to 100.0% of the principal amount. After December 23, 2016 they are redeemable at par until December 15, 2026 when redemption is mandatory. Prior redemption is permitted under certain circumstances such as changes in tax or regulatory capital rules. The proceeds of the capital securities were invested by the Trust in junior subordinated debentures of Firstar. Firstar guarantees the capital securities through the combined operation of the debentures and other related documents. Firstar's obligations under the guarantee are unsecured and subordinate to senior and subordinated indebtedness of Firstar. The capital securities qualify as tier I capital for regulatory capital purposes. NOTE 12. STOCK BASED COMPENSATION PLANS Firstar has two stock based compensation plans, a stock option plan and a performance based stock plan. Firstar's incentive stock plan provides for a maximum grant of 11.2 million stock options, appreciation rights, and/or shares of stock. Stock options are granted with an exercise price equal to the stock fair market value at the date of grant. All stock options expire ten years and one month after the date of grant and vest and become fully exercisable after a period from between one to three years. At December 31, 1996, there were 5,290,000 additional shares available for grant under the Plan. Firstar in connection with bank acquisitions, converted existing options for shares of the acquired banks into an equivalent number of options for shares of Firstar common stock. As of December 31, 1996 these options totaled 796,904 with an exercise price of $2.38 to $11.81. No additional stock options will be awarded under these plans. 41 43 The following table summarizes option activity under these plans:
NUMBER OF WEIGHTED-AVERAGE SHARES EXERCISE PRICE ---------- ---------------- Options outstanding at December 31, 1993.................... 5,621,744 $ 8.89 Granted..................................................... 1,098,516 12.78 Assumed through acquisitions................................ 55,664 6.27 Exercised................................................... (524,186) 4.25 Forfeited................................................... (93,410) 6.09 ---------- Options outstanding at December 31, 1994.................... 6,158,328 10.00 Granted..................................................... 985,200 13.69 Assumed through acquisitions................................ 5,812 4.72 Exercised................................................... (1,524,979) 8.93 Forfeited................................................... (162,266) 12.88 Expired..................................................... (6,000) 15.84 ---------- Options outstanding at December 31, 1995.................... 5,456,095 10.86 Granted..................................................... 1,021,400 20.12 Assumed through acquisitions................................ 69,904 6.36 Exercised................................................... (1,744,354) 8.98 Forfeited................................................... (290,336) 16.79 Expired..................................................... (25,444) 2.09 ---------- Options outstanding at December 31, 1996.................... 4,487,258 13.30 ==========
OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------------------------------- ------------------------------- WEIGHTED-AVG. RANGE OF NUMBER REMAINING WEIGHTED-AVG. NUMBER WEIGHTED-AVG. EXERCISE PRICES OUTSTANDING CONTRACT LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE --------------- ----------- ------------- -------------- ----------- -------------- $2.38 to 3.46................. 104,127 1.54yr. $ 3.34 104,127 $ 3.34 $5.30 to 7.91................. 869,743 3.55 6.93 869,743 6.93 $8.09 to 11.83................ 545,738 2.25 9.91 545,738 9.91 $12.46 to 16.25............... 2,076,850 7.07 14.42 1,029,240 14.54 $20.00 to 22.75............... 890,800 9.19 20.12 45,200 20.00 --------- --------- Options at December 31, 1996........................ 4,487,258 2,594,048 ========= =========
Firstar's performance based stock plan grants performance shares to key executives. Estimated future payouts are predicated upon achievement of Firstar return on equity goals in relation to peer group banking companies and the market value of Firstar's common stock over a three year period. The grants are designated in shares of stock and the participant is paid the value of the earned shares one-half in cash and one-half in shares of Firstar's common stock plus a dividend equivalent for the performance period. The maximum number of performance shares awarded in 1996, 1995, and 1994 were 132,896, 178,030 and 141,646 respectively. The maximum number of common shares awardable under these plans were 66,448 at $20.00 per share in 1996, 89,015 at $13.69 per share in 1995, and 70,823 at $15.44 per share in 1994. Compensation expense recorded under this plan was $4,104,000 in 1996, $2,092,000 in 1995, and $749,000 in 1994. For purposes of providing the pro-forma disclosures required under SFAS No. 123 "Accounting for Stock Based Compensation" the fair value of stock options granted was estimated using the Black-Scholes option pricing model. The per share weighted-average fair value of stock options granted during 1996 and 1995 was $4.78 and $3.27 on the date of grant with the following weighted-average assumptions: 1996 -- expected dividend yield 3.4%, risk-free interest rate of 5.55%, an expected life of 7 years and expected volatility of 23%; 1995 -- expected dividend yield 4.4%, risk-free interest rate of 7.76%, an expected life of 7 years and expected volatility of 22%. Had compensation cost for Firstar's stock-based plans been determined in accordance with SFAS No. 123, net income would have been $248.9 million in 1996 and $228.2 million in 1995. Earnings per common share would have been $1.67 in 1996 and $1.50 in 1995. This pro-forma net income reflects only 42 44 awards granted in 1996 and 1995. Therefore, the full impact of calculating compensation cost under SFAS No. 123 is not reflected in the pro-forma net income amounts. NOTE 13. OTHER OPERATING EXPENSE A summary of other operating expense is as follows:
Years ended December 31 ------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Business development........................................ $ 27,540 $ 29,413 $ 26,602 Stationery and supplies..................................... 24,696 21,284 18,087 Professional fees........................................... 22,244 20,491 17,937 Information processing expense.............................. 20,840 21,918 20,957 Delivery.................................................... 19,497 19,192 16,122 Intangible amortization..................................... 15,321 11,068 10,291 F.D.I.C. insurance.......................................... 2,282 16,531 28,361 Net foreclosed assets expense (income)...................... 349 (281) (553) SAIF assessments............................................ 7,837 Check kiting loss........................................... 22,000 Other....................................................... 58,398 59,302 57,880 -------- -------- -------- Total..................................................... $199,004 $198,918 $217,684 ======== ======== ========
NOTE 14. EMPLOYEE BENEFIT PLANS Firstar and its subsidiaries have non-contributory defined benefit pension plans covering substantially all employees. The benefits are based upon years of service and the employee's compensation during the last five years of employment. The funding policy is to contribute annually the minimum amount necessary to satisfy federal minimum funding standards. Plan assets are primarily invested in listed stocks and U.S. Treasury and federal agency securities. The table below summarizes data relative to the plans.
December 31 ------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Actuarial present value of benefit obligations: Vested benefit obligation................................. $228,417 $216,261 $175,537 Accumulated benefit obligation............................ 233,975 221,716 179,086 Projected benefit obligation.............................. 293,128 280,328 218,660 Plan assets at fair value................................... 291,462 237,195 195,436 Plan assets less than projected benefit obligation.......... (1,666) (43,133) (23,224) Unrecognized prior service cost............................. (120) (1,791) (2,075) Unrecognized net asset...................................... (3,446) (4,680) (5,914) Unrecognized net loss....................................... 6,430 36,373 18,797 -------- -------- -------- Pension asset (liability).............................. $ 1,198 $(13,231) $(12,416) ======== ======== ======== Net pension expense comprised the following: Service cost.............................................. $ 10,319 $ 7,526 $ 7,852 Interest cost on projected benefit obligation............. 20,443 18,863 16,355 Actual loss (return) on plan assets....................... (31,086) (46,230) 8,725 Net amortization and deferral............................. (12,102) 28,519 (26,755) -------- -------- -------- Net pension expense.................................... $ 12,426 $ 8,678 $ 6,177 ======== ======== ======== Assumptions used in actuarial values: Discount rate............................................. 7.75% 7.50% 8.50% Rates of increase in compensation levels.................. 5.50 5.50 5.50 Expected rate of return on plan assets.................... 9.00 9.00 9.00
43 45 Firstar also has unfunded pension plans covering certain employees. Interest rates used in calculating the actuarial values are essentially the same as in the previously described plans. The table below summarizes data relative to the plans.
December 31 ------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Projected benefit obligation................................ $(19,681) $(12,497) $(12,238) Unrecognized prior service cost............................. 2,365 2,572 2,779 Unrecognized transition obligation.......................... 104 146 189 Unrecognized net loss....................................... 3,885 2,068 2,641 -------- -------- -------- Pension liability...................................... $(13,327) $ (7,711) $ (6,629) ======== ======== ======== Net pension expense comprised the following: Service cost.............................................. $ 478 $ 294 $ 436 Interest cost on projected benefit obligation............. 1,200 835 916 Net amortization and deferral............................. 451 260 416 -------- -------- -------- Net pension expense.................................... $ 2,129 $ 1,389 $ 1,768 ======== ======== ========
Firstar has profit sharing plans under which eligible employees can participate by contributing a portion of their salary for investment in one or more trust funds. Contributions are made to the account of each participant based upon profitability or at the discretion of the board of directors. Amounts expensed in connection with this plan were $7,013,000 in 1996, $11,370,000 in 1995, and $11,804,000 in 1994. In addition to pension benefits, certain health care benefits are made available to active and retired employees. The table below summarizes data relative to this benefit program. The program is unfunded and the transition obligation is being amortized over 20 years.
December 31 ------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Accumulated postretirement benefit obligation: Retirees.................................................. $(31,178) $(40,893) $(41,029) Fully eligible active plan participants................... (5,716) (6,478) (7,340) Other active plan participants............................ (11,552) (12,641) (13,290) -------- -------- -------- Total.................................................. (48,446) (60,012) (61,659) Unrecognized transition obligation.......................... 42,590 50,194 53,146 Unrecognized net (gain) loss................................ (20,661) (7,528) (4,872) -------- -------- -------- Postretirement benefit liability....................... $(26,517) $(17,346) $(13,385) ======== ======== ======== Net postretirement benefit expense comprised the following: Service cost.............................................. $ 963 $ 787 $ 1,220 Interest cost............................................. 4,401 3,753 4,721 Net amortization and deferral............................. 2,354 2,093 2,953 Plan curtailment.......................................... 2,181 -------- -------- -------- Net postretirement benefit expense..................... $ 9,899 $ 6,633 $ 8,894 ======== ======== ========
For measurement purposes, a 9.5% annual rate of increase in the per capita cost of covered health care benefits was assumed, decreasing to 5.5% by 2004 and remaining at that level thereafter. The health care cost trend rate assumption has an effect on the amounts reported. To illustrate, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement accumulated benefit obligation by $3,100,000 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost by $223,000. The discount rate used in determining the accumulated postretirement benefit obligation was 7.75%, 7.50% and 8.50% at December 31, 1996, 1995 and 1994, respectively. 44 46 NOTE 15. INCOME TAXES The taxes applicable to income before income taxes were as follows:
Years Ended December 31 ------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Current income taxes: Federal................................................... $106,880 $ 95,797 $ 87,136 State and other........................................... 21,154 22,891 18,788 -------- -------- -------- Subtotal............................................... 128,034 118,688 105,924 Deferred income taxes: Federal................................................... (2,389) 510 6,126 State and other........................................... (1,275) (845) 658 -------- -------- -------- Subtotal............................................... (3,664) (335) 6,784 Provision for income taxes............................. $124,370 $118,353 $112,708 ======== ======== ========
Exercised stock options produced tax benefits of $7,848,000 in 1996, $3,785,000 in 1995 and $541,000 in 1994 which were allocated directly to stockholders' equity. Also, the sale of subsidiaries which were acquired in a purchase business combination produced tax expense of $4,832,000 in 1996 which was allocated directly to goodwill. The actual provision for income taxes differed from the amount computed by applying the federal statutory rate of 35% to income before income taxes as shown below:
Years Ended December 31 ------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Tax expense at statutory rate............................... $131,091 $121,543 $118,783 Increase (reduction) in taxes resulting from: Tax-exempt income......................................... (20,471) (20,456) (21,095) State and local taxes--net of federal income tax benefit................................................ 12,921 14,330 12,640 Amortization of nondeductible intangibles................. 3,988 2,748 2,558 Favorable settlement of prior years' taxes................ (3,229) Other--net................................................ 70 188 (178) -------- -------- -------- Provision for income taxes............................. $124,370 $118,353 $112,708 ======== ======== ========
The significant components of deferred income tax expense attributable to income from continuing operations are as follows:
Years Ended December 31 ------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Deferred tax expense (exclusive of the effects of other components listed below).................................. $ (4,557) $ 98 $ 6,254 Change in beginning of year valuation allowance due to effective tax planning strategies......................... (176) (1,008) (105) Change in valuation allowance due to creation/utilization of net operating losses................................... 1,069 575 635 -------- -------- -------- Total.................................................. $ (3,664) $ (335) $ 6,784 ======== ======== ========
45 47 The significant components of the net deferred tax asset were as follows:
Years Ended December 31 ------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Deferred tax liabilities: Equipment leased to customers............................. $(18,010) $(13,860) $(14,180) Acquired assets accounted for as a purchase............... (11,335) (9,491) (10,922) Securities available for sale............................. (10,019) (20,164) Bank premises and equipment............................... (9,995) (11,120) (12,383) Deferred tax assets: Reserve for loan losses................................... 85,857 78,176 76,664 Deferred compensation..................................... 15,177 8,889 7,104 Pension and post-retirement benefits...................... 14,818 11,463 11,570 State and federal net operating loss carryforwards........ 12,424 11,378 10,335 Deferred gain on sale of building......................... 2,738 5,211 7,721 Securities available for sale............................. 636 Other--net................................................ 3,794 1,544 5,297 -------- -------- -------- Subtotal............................................... 85,449 62,026 81,842 Valuation allowance......................................... (11,504) (10,611) (11,044) -------- -------- -------- Net deferred tax asset................................. $ 73,945 $ 51,415 $ 70,798 ======== ======== ========
The change in net deferred tax asset includes $10,145,000 of tax benefit in 1996, $20,800,000 of tax expense in 1995 and $1,369,000 of tax benefit in 1994 allocated directly to stockholders' equity for unrealized gains (losses) on securities available for sale recorded in accordance with SFAS No. 115. Other changes relate to acquisitions. The valuation allowance was increased $893,000 in 1996, decreased $433,000 in 1995 and increased $530,000 in 1994. The valuation allowance has been recognized primarily to offset deferred tax assets related to state net operating loss carryforwards totaling approximately $228,157,000 which expire at various times within the next 15 years. The net deferred tax asset is included in other assets. Amounts originally reported for 1995 have been reclassified to reflect actual tax return results. NOTE 16. COMMITMENTS AND CONTINGENT LIABILITIES Firstar has outstanding at any time a significant number of commitments to extend credit to its customers. These commitments include revolving credit agreements, term loan commitments, short-term borrowing agreements and standby letters of credit. These commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. Commitments to extend credit are agreements to lend to a customer as long as there is not a violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Credit card commitments are unsecured agreements to extend credit. Such commitments are reviewed periodically, at which time the commitments may be maintained, increased, decreased or canceled depending upon evaluation of the customer's credit worthiness and other considerations. Standby and commercial letters of credit are conditional commitments issued by Firstar to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. 46 48 Firstar uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Firstar evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management's credit evaluation of the party. Firstar originates and sells residential mortgage loans as a part of various mortgage-backed security programs sponsored by United States government agencies or government-sponsored agencies, such as the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association and the Government National Mortgage Association. These sales are often subject to certain recourse provisions in the event of default by the borrower. The following is a summary of such commitments at December 31, 1996 and 1995:
December 31 ---------------------- 1996 1995 ------- ------- (millions of dollars) Commitments to extend credit................................ $6,044 $4,559 Credit card lines........................................... 2,470 2,098 Standby and commercial letters of credit.................... 550 445 Mortgage loans sold with recourse........................... 220 220
Firstar and its subsidiaries are subject to various legal actions and proceedings in the normal course of business, some of which involve substantial claims for compensatory or punitive damages. Although litigation is subject to many uncertainties and the ultimate exposure with respect to these matters cannot be ascertained, management does not believe that the final outcome will have a material adverse effect on the financial condition of Firstar. NOTE 17. REGULATORY RESTRICTIONS AND CAPITAL RATIOS Federal regulations require Firstar to maintain as reserves, minimum cash balances based on deposit levels at subsidiary banks. Cash balances restricted from usage due to these requirements were $60 million and $201 million at December 31, 1996 and 1995, respectively. Firstar implemented a deposit sweep program in 1996 which reduced reservable deposits. Firstar's subsidiary banks are restricted by regulation as to the amount of funds which can be transferred to the parent in the form of loans and dividends. As of December 31, 1996, $173 million could be loaned to Firstar by the subsidiary banks subject to strict collateral requirements, and $69 million could be paid to Firstar by the subsidiary banks in the form of dividends. In addition, each subsidiary bank could pay dividends to Firstar in an amount which approximates Firstar's equity in their 1997 net income. The payment of dividends by any subsidiary bank may also be affected by other factors beyond this regulatory limitation, such as maintenance of adequate capital for each subsidiary bank. Firstar and its bank subsidiaries are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory--and possibly additional discretionary--actions by regulators that, if undertaken, could have a direct material effect on Firstar's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Firstar must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Firstar's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. 47 49 Firstar and its subsidiaries listed below have met all capital requirements necessary to be classified as "well capitalized" as of December 31, 1996 and 1995.
To Be Well Capitalized Minimum Capital Under Prompt Corrective December 31, 1996 Requirement Action Provisions ------------------- ------------------ ----------------------- Amount Ratio Amount Ratio Amount Ratio ---------- ------ ---------- ----- ------------ -------- (thousands of dollars) Total Capital (to Risk Weighted Assets): Consolidated................. $1,888,093 13.47% $1,121,647 8.00% $1,402,059 10.00% Firstar Bank Milwaukee....... 569,904 11.19% 407,573 8.00% 509,466 10.00% Firstar Bank Wisconsin....... 379,913 12.82% 237,135 8.00% 296,419 10.00% Firstar Bank Minnesota....... 291,586 13.67% 170,702 8.00% 213,377 10.00% Firstar Bank Iowa............ 244,750 12.64% 154,892 8.00% 193,615 10.00% Firstar Bank Illinois........ 223,752 14.83% 120,731 8.00% 150,914 10.00% Tier 1 Capital (to Risk Weighted Assets): Consolidated................. 1,636,700 11.67% 560,823 4.00% 841,235 6.00% Firstar Bank Milwaukee....... 482,490 9.47% 203,786 4.00% 305,680 6.00% Firstar Bank Wisconsin....... 340,363 11.48% 118,568 4.00% 177,852 6.00% Firstar Bank Minnesota....... 264,821 12.41% 85,351 4.00% 128,026 6.00% Firstar Bank Iowa............ 220,542 11.39% 77,446 4.00% 116,169 6.00% Firstar Bank Illinois........ 204,796 13.57% 60,366 4.00% 90,548 6.00% Tier 1 Leverage (to Average Assets): Consolidated................. 1,636,700 8.55% 574,425 3.00% 957,375 5.00% Firstar Bank Milwaukee....... 482,490 6.73% 215,038 3.00% 358,397 5.00% Firstar Bank Wisconsin....... 340,363 8.10% 126,113 3.00% 210,188 5.00% Firstar Bank Minnesota....... 264,821 9.22% 86,155 3.00% 143,592 5.00% Firstar Bank Iowa............ 220,542 7.91% 83,617 3.00% 139,361 5.00% Firstar Bank Illinois........ 204,796 7.46% 82,330 3.00% 137,216 5.00%
To Be Well Capitalized Minimum Capital Under Prompt Corrective December 31, 1995 Requirement Action Provisions ------------------- ------------------ ----------------------- Amount Ratio Amount Ratio Amount Ratio ---------- ------ ---------- ----- ------------ -------- (thousands of dollars) Total Capital (to Risk Weighted Assets): Consolidated................. $1,665,466 12.45% $1,070,191 8.00% $1,337,739 10.00% Firstar Bank Milwaukee....... 558,112 11.07% 403,302 8.00% 504,128 10.00% Firstar Bank Wisconsin....... 380,178 13.14% 231,425 8.00% 289,282 10.00% Firstar Bank Minnesota....... 203,902 13.82% 118,068 8.00% 147,585 10.00% Firstar Bank Iowa............ 236,354 11.84% 159,748 8.00% 199,686 10.00% Firstar Bank Illinois........ 261,266 16.20% 129,022 8.00% 161,278 10.00% Tier 1 Capital (to Risk Weighted Assets): Consolidated................. 1,386,566 10.36% 535,096 4.00% 802,643 6.00% Firstar Bank Milwaukee....... 470,050 9.32% 201,651 4.00% 302,477 6.00% Firstar Bank Wisconsin....... 339,945 11.75% 115,713 4.00% 173,569 6.00% Firstar Bank Minnesota....... 185,386 12.56% 59,034 4.00% 88,551 6.00% Firstar Bank Iowa............ 211,348 10.58% 79,874 4.00% 119,811 6.00% Firstar Bank Illinois........ 241,042 14.95% 64,511 4.00% 96,767 6.00% Tier 1 Leverage (to Average Assets): Consolidated................. 1,386,566 7.52% 553,405 3.00% 922,341 5.00% Firstar Bank Milwaukee....... 470,050 7.13% 197,759 3.00% 329,598 5.00% Firstar Bank Wisconsin....... 339,945 7.84% 130,081 3.00% 216,802 5.00% Firstar Bank Minnesota....... 185,386 7.80% 71,302 3.00% 118,837 5.00% Firstar Bank Iowa............ 211,348 7.41% 85,566 3.00% 142,610 5.00% Firstar Bank Illinois........ 241,042 8.37% 86,395 3.00% 143,992 5.00%
48 50 NOTE 18. DERIVATIVE FINANCIAL INSTRUMENTS Rate Risk Management As part of its asset and liability management, Firstar uses various types of interest rate contracts for the purpose of managing its interest rate risks. The use of interest rate contracts enables Firstar to synthetically alter the repricing characteristics of designated earning assets and interest-bearing liabilities. The following tables summarize the notional amounts of interest rate contracts at December 31, 1996, used by Firstar in its asset and liability management process:
Interest Rate Swaps ---------------------------------------- Receive Fixed Rate Total ------------------ Interest Index Receive Periodic Caps and Rate Amortizing Other Variable Caps Floors Contracts ---------- ----- -------- -------- -------- --------- (millions of dollars) December 31, 1994.......................... $ 295 $ 75 $ 76 $ 925 $ 381 $1,752 Additions................................ 5 400 405 Maturities............................... (26) (20) (44) (5) (80) (175) Terminations............................. (920) (920) ----- ---- ---- ----- ----- ------ December 31, 1995.......................... 269 55 37 0 701 1,062 Additions................................ 25 25 Maturities............................... (162) (28) (110) (300) ----- ---- ---- ----- ----- ------ December 31, 1996.......................... $ 107 $ 27 $ 62 $ 0 $ 591 $ 787 ===== ==== ==== ===== ===== ======
Index amortizing interest rate swaps are used to convert variable rate loans to a fixed rate basis. The amortizing feature of these swaps serves to extend the maturity after a predetermined mandatory period if the three-month LIBOR index rate is above a pre-established reference rate on a quarterly basis. Additionally, the notional amount of the swaps is reduced on a quarterly basis based upon pre-established rates. Interest rate swaps used to convert variable rate loans to fixed rate loans have a total notional value of $27 million. Other swaps totaling $62 million were used to convert fixed rate loans and securities to a variable rate basis. Interest rate swaps with periodic caps involve the exchange of LIBOR based variable interest payments with one party receiving a fixed basis point shim over the LIBOR index, subject to a 25 basis point cap in quarterly increases in rates receivable by Firstar. In 1995, $700 million of these swaps were terminated involving minimal cash settlements. Also in 1995, $220 million of these swaps were marked to market and reclassified as trading derivatives. Interest rate floors provide for the receipt of payments when the three month LIBOR rate is below a predetermined interest rate floor. Firstar has entered into $260 million of floors to manage interest rate risk on certain variable rate loans and has entered into $331 million of floors to manage the interest rate risk on money market fund deposits which have guaranteed minimum interest rates. Interest rate caps provide for the receipt of payments when the three-month LIBOR rate exceeds predetermined interest rate caps. Firstar had entered into $100 million in interest rate caps used to manage interest rate risk on variable rate borrowed funds which matured during 1996. 49 51 The maturity of derivative financial instruments as of December 31, 1996 is as follows:
Maturity Range of Derivative Financial Instruments -------------------------------------------------------------------------------- Market Weighted Value Average Asset 1997 1998 1999 2000 Total Maturities (Liability) ----- ----- ----- ----- ----- ---------- ----------- (millions of dollars) Interest rate swaps Receive variable................ $ 39 $ 10 $ 8 $ 5 $ 62 1.0 yr $(.6) Average receive rate......... 5.53% 5.58% 5.59% 5.50% 5.54% Average pay rate............. 7.10% 5.94% 8.59% 4.72% 6.91% Receive fixed................... $ 15 $ 12 $ 27 .8 yrs .1 Average receive rate......... 8.15% 6.30% 7.32% Average pay rate............. 5.56% 5.56% 5.56% Receive fixed -- amortizing..... $ 56 $ 32 $ 19 $ 107 1.1 yrs (.5) Average receive rate......... 4.90% 5.17% 5.45% 5.08% Average pay rate............. 5.54% 5.50% 5.43% 5.09% Interest rate floors.............. $ 50 $ 25 $ 211 $ 305 $ 591 2.7 yrs 2.4 Average floor rate.............. 4.70% 5.00% 5.09% 4.76% 4.89% ----- ----- ----- ----- ----- ---- Total...................... $ 160 $ 79 $ 238 $ 310 $ 787 2.3 yrs $1.4 ===== ===== ===== ===== ===== ====
- ------------ All interest rates represent rates in effect on December 31, 1996. Index rate for interest rate caps/floors is three month LIBOR. The notional values of derivative financial instruments represent the amounts on which interest payments are exchanged between the counterparties. Those notional values do not represent direct credit exposures. Firstar is exposed to credit-related losses in the event of nonperformance by counterparties to these instruments but does not expect any counterparty to fail to meet their obligations. Where appropriate, Firstar requires collateral based upon the positive market value of the exposure taking into account bi-lateral netting agreements with certain counterparties. Based on market values, Firstar's credit exposure was $2.6 million at December 31, 1996. Firstar enters into both mandatory and optional commitments to sell groups of residential mortgage loans that it originates or purchases as part of its mortgage banking activities. Firstar commits to sell the loans at specified prices in a future period typically within 90 days. The risk associated with these commitments consists primarily of loans not closing in sufficient volumes and at appropriate yields to meet the sale commitments. Firstar had contracts totaling $173 million and $267 million on December 31, 1996 and 1995 respectively. Gains or losses on these contracts are included in the determination of the market value of mortgages held for sale. 50 52 Trading Activities Firstar also acts as an intermediary for customers in their management of interest rate and foreign currency rate risk. In this regard, Firstar will enter into interest rate swaps, caps, floors and foreign exchange contracts with customers to minimize their exposure to market risk. Firstar enters into essentially offsetting transactions with other counterparties. Customer related derivative activity, as well as derivative contracts not used to manage interest rate risk on recorded assets and liabilities, is marked to market value. The credit exposure at year-end of $6.1 million is represented by the fair value of contracts with a positive value. Gross credit exposure amounts disregard the value of any collateral. Revenue from this intermediary activity was $2.2 million and $3.0 million in 1996 and 1995, respectively. Information on these transactions is shown below.
1996 1995 ----------------------------- ----------------------------- Estimated Estimated Fair Value Fair Value Notional ------------------ Notional ------------------ Amount Year-End Average Amount Year-End Average -------- -------- ------- -------- -------- ------- (millions of dollars) Interest rate swaps In a receivable position............... $460 $3.4 $5.4 $719 $6.8 $4.2 In a payable position.................. 311 2.5 4.5 421 4.9 3.9 Interest rate caps/floors Held................................... 77 1.2 1.5 130 1.4 1.9 Written................................ 77 1.2 1.5 130 1.4 1.9 Foreign exchange contracts In a receivable position............... 49 1.5 1.6 45 4.9 3.9 In a payable position.................. 36 .9 .9 44 3.9 3.4
NOTE 19. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments", requires that Firstar disclose estimated fair values for its financial instruments. Fair value estimates were based on relevant market data and information about the various financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time Firstar's entire holdings of a particular financial instrument. Because no market exists for a significant portion of Firstar's financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments, future expected loss experience, and other factors. These estimates are subjective and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities which are not considered financial instruments. Significant assets that are not considered financial instruments include goodwill, core deposit intangibles, certain customer relationships and fixed assets. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered. Fair value estimates, methods and assumptions are set forth below for Firstar's financial instruments. Cash and short-term investments--The carrying amounts for short-term investments (which include interest-bearing deposits with banks, federal funds sold and resale agreements) approximate fair value because they mature in 90 days or less and do not represent unanticipated credit concerns. 51 53 Securities--Estimated fair value for securities is based on quoted market prices. The fair value of certain small issues and municipal securities which are not readily available through market quotations is assumed to equal carrying value as these securities generally have short terms. These securities do not represent a significant portion of the portfolio. Loans--Fair values were estimated for loans with similar financial characteristics. The commercial loan portfolio was separated into credit risk categories by variable and fixed rate loans. The fair value of performing loans, except for internally criticized commercial and lease financing loans, was calculated by discounting cash flows using an estimated discount rate that reflects current market rates, the type of loan, credit risk inherent in the loan category and repricing characteristics. Fair value for criticized commercial loans was calculated by reducing the carrying value by an amount that reflects the estimated principal loss. This loss was based on internal credit analysis of specific borrowers taking into consideration past loan loss experience and trends in loan quality. For lease financing loans, carrying value was considered to approximate fair value. The fair value of credit card loans was estimated using the net present value method. Credit card portfolios are not actively traded and the discount rate used reflects an estimated rate of return based on the credit quality of the portfolio. This estimate does not include the value that relates to estimated cash flows from new loans generated from existing cardholders over the remaining life of the portfolio. For residential mortgages, fair value was estimated by discounting cash flows adjusted for anticipated prepayments using discount rates based on current market rates for similar loans. Deposits--The fair value of deposits with no stated maturity, such as interest bearing and non-interest bearing demand, savings and money market accounts, is equal to the amount payable on demand. The fair value of certificates of deposit is based on the discounted value of contractual cash flows using current market rates for similar types of deposits. Borrowed funds--The carrying value of short-term borrowed funds approximates fair value as they are payable within three months or less. The estimated fair value of long-term debt is based on broker quotations, when available. Debt for which quoted prices were not available was valued using cash flows discounted at a current market rate for similar types of debt. Derivative financial instruments--The fair value of interest rate swap agreements is based on the present value of the swap primarily using counter party or third party dealer quotes. Fair values for caps and floors were obtained using an option pricing model. These values represent the estimated amount Firstar would receive or pay to terminate the contracts or agreements taking into account current interest rates and market volatility. Prices obtained from counter parties or pricing models are tested by obtaining third party valuations. The fair value of commitments to extend credit and standby letters of credit is not material and is not shown here. 52 54 The estimated fair value of Firstar's financial instruments is summarized as follows:
December 31, 1996 December 31, 1995 ------------------------ ------------------------- Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value ----------- ---------- ----------- ----------- (thousands of dollars) Financial assets: Cash and short-term investments.......... $ 1,648,408 $1,648,408 $ 1,426,158 $ 1,426,158 Trading securities....................... 13,489 13,489 10,029 10,029 Securities available for sale............ 1,966,590 1,966,590 2,047,848 2,047,848 Securities held to maturity.............. 2,250,776 2,287,448 2,427,030 2,492,346 Loans, net of allowance for loan losses................................ 12,982,396 12,991,668 12,437,230 12,451,430 Financial liabilities: Deposits: Without stated maturities............. 9,831,279 9,831,279 9,033,671 9,033,671 With stated maturities................ 5,382,918 5,400,419 5,277,975 5,306,647 Short-term borrowed funds................ 1,868,606 1,868,606 2,303,159 2,303,159 Long-term debt........................... 547,194 551,879 734,021 745,825 Derivative financial instruments: Asset and liability management: Interest rate instruments Asset............................... 2,561 8,255 Liability........................... 1,199 2,870 Trading activities: Interest rate contracts Asset............................... 4,589 4,589 8,234 8,234 Liability........................... 3,700 3,700 6,311 6,311 Foreign exchange contracts Asset............................... 1,500 1,500 4,949 4,949 Liability........................... 900 900 3,899 3,899
53 55 NOTE 20. PARENT CORPORATION CONDENSED FINANCIAL STATEMENTS BALANCE SHEETS
December 31 ----------------------- 1996 1995 ---------- ---------- (thousands of dollars) Assets: Cash and due from banks................................... $ 80 $ 593 Short-term investments.................................... 161,150 46,400 Securities available for sale............................. 5,011 5,092 Commercial loans.......................................... 64 327 Loans to bank subsidiaries................................ 36,282 36,925 Loans to other subsidiaries............................... 188 Investment in bank subsidiaries........................... 1,905,505 1,659,511 Investment in other subsidiaries.......................... 25,381 16,547 Other assets.............................................. 8,124 8,942 ---------- ---------- Total assets........................................... $2,141,597 $1,774,525 ========== ========== Liabilities and stockholders' equity: Short-term borrowed funds................................. $ 75,000 $ Long-term debt............................................ 332,980 224,956 Other liabilities......................................... 29,570 24,749 Stockholders' equity...................................... 1,704,047 1,524,820 ---------- ---------- Total liabilities and stockholders' equity............. $2,141,597 $1,774,525 ========== ==========
STATEMENTS OF INCOME
Years Ended December 31 ------------------------------ 1996 1995 1994 -------- -------- -------- (thousands of dollars) Revenue: Dividends from bank subsidiaries.......................... $219,714 $145,338 $119,920 Dividends from other subsidiaries......................... 6,000 6,000 4,000 Fees from subsidiaries.................................... 29,810 26,083 22,859 Investment and loan income................................ 5,362 5,423 4,897 Other revenue............................................. 1,546 121 1,201 -------- -------- -------- Total revenue.......................................... 262,432 182,965 152,877 Expense: Interest.................................................. 23,760 15,501 12,748 Salaries and employee benefits............................ 20,336 18,795 16,003 Other expense............................................. 13,814 17,251 12,396 -------- -------- -------- Total expense.......................................... 57,910 51,547 41,147 Income before income taxes and equity in undistributed income of subsidiaries.................................... 204,522 131,418 111,730 Provision for income tax expense (benefits)................. (7,096) (6,465) (5,413) -------- -------- -------- Income before equity in undistributed income of subsidiaries.............................................. 211,618 137,883 117,143 Equity in undistributed income of subsidiaries.............. 38,559 91,030 109,530 -------- -------- -------- Net income............................................. $250,177 $228,913 $226,673 ======== ======== ========
54 56 STATEMENTS OF CASH FLOWS
Years Ended December 31 ----------------------------------- 1996 1995 1994 --------- --------- --------- (thousands of dollars) Cash flows from operating activities: Net income............................................... $ 250,177 $ 228,913 $ 226,673 Adjustments: Equity in undistributed income of subsidiaries........ (38,559) (91,030) (109,530) Depreciation, amortization and accretion.............. 789 553 813 Decrease (increase) in other assets................... 12,122 (2,585) (991) Increase in other liabilities......................... 4,269 1,516 185 --------- --------- --------- Net cash provided by operating activities........... 228,798 137,367 117,150 Cash flows from investing activities: Net (increase) decrease in short-term investments........ (114,750) 24,550 (18,465) Net (increase) in long-term investments.................. (5,011) Net decrease in commercial loans......................... 263 98 270 Net decrease (increase) in loans to subsidiaries......... 831 1,645 (5,740) Purchases of premises and equipment...................... (589) (1092) (1,031) Capital contributions to subsidiaries.................... (5,028) (400) (5,950) Net decrease (increase) in intercompany receivables...... (333) 6 622 Other net................................................ (248) 94 227 --------- --------- --------- Net cash provided by (used in) investing activities....................................... (119,854) 19,890 (30,067) Cash flows from financing activities: Repayment of long-term debt.............................. (46,616) (380) Net proceeds from long-term debt......................... 153,050 99,360 Net proceeds from short-term debt........................ 75,000 Cash dividends........................................... (111,143) (101,359) (75,081) Preferred stock redemption............................... (8,350) Common stock transactions................................ (179,748) (146,985) (11,076) --------- --------- --------- Net cash used in financing activities............... (109,457) (157,334) (86,537) --------- --------- --------- Net (decrease) increase in cash and due from banks......... (513) (77) 546 Cash and due from banks at beginning of year............... 593 670 124 --------- --------- --------- Cash and due from banks at end of year..................... $ 80 $ 593 $ 670 ========= ========= ========= Supplemental disclosures of cash flow information: Cash paid during the year for interest................... $ 23,757 $ 13,036 $ 12,753
55 57 KPMG Peat Marvick LLP logo INDEPENDENT AUDITORS' REPORT The Board of Directors Firstar Corporation: We have audited the accompanying consolidated balance sheets of Firstar Corporation and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Firstar Corporation and subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Milwaukee, Wisconsin January 15, 1997 Except for the second to last paragraph of Note 11 which is as of February 15, 1997 56 58 FIRSTAR CORPORATION AND SUBSIDIARIES SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
1996 ----------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- -------- -------- (thousands of dollars, except per share) Interest revenue.................................... $342,579 $340,901 $351,093 $348,511 Interest expense.................................... 158,243 156,636 161,152 156,674 -------- -------- -------- -------- Net interest revenue................................ 184,336 184,265 189,941 191,837 Provision for loan losses........................... 9,209 10,846 8,908 13,684 Other operating revenue............................. 105,055 106,223 113,351 115,823 Other operating expense............................. 227,922 169,530 187,012 189,173 -------- -------- -------- -------- Income before income taxes.......................... 52,260 110,112 107,372 104,803 Provision for income taxes.......................... 15,142 39,949 38,100 31,179 -------- -------- -------- -------- Net income.......................................... $ 37,118 $ 70,163 $ 69,272 $ 73,624 ======== ======== ======== ======== Per common share: Net income.......................................... $ .25 $ .48 $ .46 $ .49 Dividends........................................... .17 .19 .19 .19 Stock price ranges: High.............................................. 22 15/16 24 7/8 24 9/16 26 7/8 Low............................................... 18 5/16 21 1/16 21 7/16 23 3/4 Close............................................. 22 3/8 23 1/16 24 1/8 26 1/4
1995 ----------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- -------- -------- (thousands of dollars, except per share) Interest revenue.................................... $322,277 $339,021 $339,477 $347,011 Interest expense.................................... 143,752 159,912 158,373 159,802 -------- -------- -------- -------- Net interest revenue................................ 178,525 179,109 181,104 187,209 Provision for loan losses........................... 13,136 9,987 5,778 7,855 Other operating revenue............................. 88,215 96,615 101,054 106,313 Other operating expense............................. 199,756 184,009 174,490 175,867 -------- -------- -------- -------- Income before income taxes.......................... 53,848 81,728 101,890 109,800 Provision for income taxes.......................... 17,563 27,946 34,813 38,031 -------- -------- -------- -------- Net income.......................................... $ 36,285 $ 53,782 $ 67,077 $ 71,769 ======== ======== ======== ======== Per common share: Net income.......................................... $ .24 $ .34 $ .44 $ .48 Dividends........................................... .15 .17 .17 .17 Stock price ranges: High.............................................. 15 1/8 17 1/8 19 3/16 20 1/2 Low............................................... 13 1/8 14 1/8 16 1/4 17 1/16 Close............................................. 14 3/4 16 13/16 18 9/16 19 13/16
57 59 FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND FINANCIAL RATIOS
Years Ended December 31 -------------------------------------------------------------- 1996 1995 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- (thousands of dollars, except per share data) INTEREST REVENUE Loans................................ $1,113,459 $1,081,685 $ 914,311 $ 824,082 $ 830,227 Securities........................... 263,985 253,794 193,280 195,391 216,674 Other................................ 5,640 12,307 12,153 8,581 17,341 ---------- ---------- ---------- ---------- ---------- Total interest revenue............. 1,383,084 1,347,786 1,119,744 1,028,054 1,064,242 INTEREST EXPENSE Deposits............................. 465,553 444,706 321,969 315,858 389,989 Short-term borrowed funds............ 123,629 133,151 67,622 25,189 25,452 Long-term debt....................... 43,523 43,982 31,315 27,068 22,430 ---------- ---------- ---------- ---------- ---------- Total interest expense............. 632,705 621,839 420,906 368,115 437,871 ---------- ---------- ---------- ---------- ---------- NET INTEREST REVENUE................. 750,379 725,947 698,838 659,939 626,371 Provision for loan losses............ 42,647 36,756 23,891 29,090 50,733 ---------- ---------- ---------- ---------- ---------- NET INTEREST REVENUE AFTER LOAN LOSS PROVISION.......................... 707,732 689,191 674,947 630,849 575,638 OTHER OPERATING REVENUE Trust and investment management fees............................... 145,690 132,377 120,349 112,521 98,296 Service charges on deposit accounts........................... 91,953 81,775 82,378 83,060 75,273 Credit card service revenue.......... 69,945 62,106 55,867 53,728 51,867 Other................................ 132,864 115,939 112,025 143,609 122,500 ---------- ---------- ---------- ---------- ---------- Total other operating revenue...... 440,452 392,197 370,619 392,918 347,936 OTHER OPERATING EXPENSE Salaries and employee benefits....... 391,516 395,361 380,961 368,514 332,538 Equipment expense.................... 65,615 58,700 54,556 53,123 52,680 Net occupancy expense................ 64,235 57,992 52,984 58,328 53,514 Other................................ 252,271 222,069 217,684 209,309 216,712 ---------- ---------- ---------- ---------- ---------- Total other operating expense... 773,637 734,122 706,185 689,274 655,444 ---------- ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES........... 374,547 347,266 339,381 334,493 268,130 Provision for income taxes........... 124,370 118,353 112,708 106,555 82,131 ---------- ---------- ---------- ---------- ---------- NET INCOME........................... $ 250,177 $ 228,913 $ 226,673 $ 227,938 $ 185,999 ========== ========== ========== ========== ========== Per common share: Net income......................... $ 1.68 $ 1.50 $ 1.49 $ 1.50 $ 1.25 Dividends.......................... .74 .66 .58 .50 .40 Return on average total assets....... 1.31% 1.26% 1.37% 1.49% 1.29% Return on average common equity...... 15.95 15.11 15.96 17.81 16.65 Dividend payout ratio................ 44.05 44.00 36.02 31.75 30.53 Equity as a percentage of assets: At year-end........................ 8.62 7.95 8.41 8.28 7.94 Average for the year............... 8.22 8.37 8.67 8.67 8.02 Full-time equivalent staff (at year-end).......................... 8,367 9,263 9,895 9,831 9,349 Average common shares outstanding (000's)............................ 148,061 151,432 150,391 148,262 143,983
58 60 FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST REVENUE AND RATE ANALYSIS
1996 1995 1994 ---------------------------------- ---------------------------------- ------------------------ Average Average Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest ----------- ---------- ------- ----------- ---------- ------- ----------- ---------- (thousands of dollars) ASSETS Interest-bearing deposits with banks... $ 8,743 $ 380 4.35% $ 15,668 $ 967 6.17% $ 24,843 $ 1,297 Federal funds sold and resale agreements..... 88,319 4,916 5.57 173,541 10,534 6.07 219,521 9,645 Trading securities..... 10,140 392 3.87 14,243 968 6.80 22,123 1,560 Securities: Taxable............... 3,243,188 209,408 6.46 3,125,536 200,484 6.41 2,452,243 145,358 Nontaxable............ 1,126,264 81,853 7.27 1,069,721 79,561 7.44 1,074,371 75,355 ----------- ---------- ----------- ---------- ----------- ---------- Total securities.... 4,369,452 291,261 6.67 4,195,257 280,045 6.68 3,526,614 220,713 Loans: Commercial............ 7,163,564 615,966 8.60 6,838,277 609,248 8.91 6,243,142 513,254 Consumer.............. 3,031,369 295,508 9.75 2,835,632 278,236 9.81 2,636,378 241,152 Consumer mortgage..... 2,727,441 208,570 7.65 2,617,765 201,256 7.69 2,336,342 167,087 ----------- ---------- ----------- ---------- ----------- ---------- Total loans......... 12,922,374 1,120,044 8.67 12,291,674 1,088,740 8.86 11,215,862 921,493 ----------- ---------- ----------- ---------- ----------- ---------- Interest earning assets.............. 17,399,028 1,416,993 8.14 16,690,383 1,381,254 8.28 15,008,963 1,154,708 Reserve for loan losses................ (206,913) (197,181) (191,441) Cash and due from banks................. 1,044,706 895,767 954,489 Other assets........... 922,008 826,431 773,024 ----------- ----------- ----------- Total assets........ $19,158,829 $18,215,400 $16,545,035 =========== =========== =========== LIABILITIES AND EQUITY Interest-bearing demand................ $ 1,552,786 $ 21,786 1.40% $ 1,571,378 $ 23,831 1.52% $ 1,643,922 $ 21,065 Money market accounts.............. 2,577,477 102,927 3.99 2,110,503 85,231 4.04 2,027,485 57,274 Savings passbook....... 1,599,075 40,034 2.50 1,731,344 44,509 2.57 1,854,944 43,887 Certificates of deposit............... 5,392,430 300,806 5.56 5,261,589 291,135 5.53 4,410,873 199,743 Short-term borrowed funds................. 2,357,838 123,629 5.24 2,275,739 133,151 5.85 1,591,305 67,622 Long-term debt......... 637,393 43,523 6.83 610,889 43,982 7.20 477,405 31,315 ----------- ---------- ----------- ---------- ----------- ---------- Interest-bearing liabilities......... 14,116,999 632,705 4.48 13,561,442 621,839 4.59 12,005,934 420,906 Demand deposits........ 3,174,569 2,827,623 2,837,257 Other liabilities...... 288,224 300,942 268,098 Trust capital securities............ 3,689 Stockholders' equity... 1,575,348 1,525,393 1,433,746 ----------- ----------- ----------- Total liabilities and equity........ $19,158,829 $18,215,400 $16,545,035 =========== =========== =========== Net interest revenue/margin........ $ 784,288 4.51% $ 759,415 4.55% $ 733,802 ========== ========== ========== 1994 1993 1992 ------- ---------------------------------- ---------------------------------- Average Average Average Average Average Rate Balance Interest Rate Balance Interest Rate ------- ----------- ---------- ------- ----------- ---------- ------- (thousands of dollars) ASSETS Interest-bearing deposits with banks... 5.22% $ 64,832 $ 2,667 4.11% $ 137,383 $ 6,183 4.50% Federal funds sold and resale agreements..... 4.39 165,042 5,119 3.10 293,899 10,366 3.53 Trading securities..... 7.05 17,332 985 5.68 15,514 1,012 6.52 Securities: Taxable............... 5.93 2,313,373 144,460 6.24 2,246,893 160,767 7.16 Nontaxable............ 7.01 1,064,975 78,460 7.37 1,025,034 83,947 8.19 ----------- ---------- ----------- ---------- Total securities.... 6.26 3,378,348 222,920 6.60 3,271,927 244,714 7.48 Loans: Commercial............ 8.22 5,637,854 432,271 7.67 5,163,260 428,892 8.31 Consumer.............. 9.15 4,472,934 396,560 8.87 4,044,256 407,639 10.08 Consumer mortgage..... 7.15 * * * * * ----------- ---------- ----------- ---------- Total loans......... 8.22 10,110,788 828,831 8.20 9,207,516 836,531 9.09 ----------- ---------- ----------- ---------- Interest earning assets.............. 7.69 13,736,342 1,060,522 7.72 12,926,239 1,098,806 8.50 Reserve for loan losses................ (188,358) (174,007) Cash and due from banks................. 1,016,639 931,413 Other assets........... 744,283 745,211 ----------- ----------- Total assets........ $15,308,906 $14,428,856 =========== =========== LIABILITIES AND EQUITY Interest-bearing demand................ 1.28% $ 1,632,045 $ 29,366 1.80% $ 1,479,688 $ 39,872 2.69% Money market accounts.............. 2.82 1,960,086 49,583 2.53 1,928,842 61,727 3.20 Savings passbook....... 2.37 1,755,129 45,330 2.58 1,487,437 48,314 3.25 Certificates of deposit............... 4.53 4,290,651 191,579 4.47 4,520,152 240,076 5.31 Short-term borrowed funds................. 4.25 865,298 25,189 2.91 742,263 25,452 3.43 Long-term debt......... 6.56 421,537 27,068 6.42 296,730 22,430 7.56 ----------- ---------- ----------- ---------- Interest-bearing liabilities......... 3.51 10,924,746 368,115 3.37 10,455,112 437,671 4.19 Demand deposits........ 2,793,567 2,564,854 Other liabilities...... 263,080 252,286 Trust capital securities............ Stockholders' equity... 1,327,513 1,156,604 ----------- ----------- Total liabilities and equity........ $15,308,906 $14,428,856 =========== =========== Net interest revenue/margin........ 4.89% $ 692,407 5.04% $ 660,935 5.11% ========== ==========
- ------------ Interest and rates are calculated on a taxable equivalent basis, using a tax rate of 35% in 1996, 1995, 1994 and 1993 and 34% in 1992. The rate calculations include the effect of certain loans on which income is recognized only as cash payments are received or is accrued at less than the original contract rate. * Comparable data not available 59 61 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Notice of the 1997 Annual Meeting and Proxy Statement filed pursuant to Regulation 14A is incorporated herein by reference. The executive officers of Firstar Corporation are listed under Item 1 of this document. ITEM 11. EXECUTIVE COMPENSATION The Notice of the 1997 Annual Meeting and Proxy Statement filed pursuant to Regulation 14A is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Notice of the 1997 Annual Meeting and Proxy Statement filed pursuant to Regulation 14A is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Notice of the 1997 Annual Meeting and Proxy Statement filed pursuant to Regulation 14A is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A)1. FINANCIAL STATEMENTS The following financial statements of Firstar Corporation are filed as a part of this document under Item 8. Financial Statements and Supplementary Data. Consolidated Balance Sheets as of December 31, 1996 and 1995 Consolidated Statements of Income for the Years Ended December 31, 1996, 1995 and 1994 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements Independent Auditors' Report (A)2. FINANCIAL STATEMENT SCHEDULES All financial statement schedules have been included in the consolidated financial statements or are either not applicable or not significant. 60 62 (a)3. EXHIBITS 3.1 Articles of incorporation of Firstar Corporation 3.2 By-Laws of Firstar Corporation 4.3 Indenture dated as of May 1, 1988 between Firstar Corporation and Chemical Bank, as Trustee, relating to 10 1/4% Subordinated Notes due May 1, 1998 (incorporated by reference to Exhibit 4(a) to Amendment No. 1 to Registration No. 33-21527 of Firstar) 4.4 Shareholder Rights Plan of Firstar Corporation (incorporated by reference to Exhibit 4 of Form 8-K dated January 19, 1989 of Firstar) 4.5 Indenture dated as of August 23, 1995 between Firstar Corporation and Chemical Bank, as Trustee, relating to 7.15% Subordinated Notes Due September 1, 2000 (incorporated by reference to Exhibit 4(a) to Amendment No. 1 to Registration No. 33-61633 of Firstar) 4.6 Credit Agreement dated as of April 22, 1996 between Firstar Corporation and First National Bank of Chicago, as agent 4.9 Form of Amended and Restated Depository Agreement among Firstar Corporation, Firstar Trust Company as depository, and the holders from time-to-time of Depository Receipts issued thereunder and the Form of Depository Receipt (incorporated by reference to Exhibit 4(g) of Amendment No. 1 to Registration No. 33-57245 of Firstar) 4.10 Series A Capital Securities Guarantee Agreement dated as of December 23, 1996 between Firstar Corporation and The Chase Manhattan Bank, as Guarantee Trustee 4.11 Indenture dated as of December 23, 1996 between Firstar Corporation and The Chase Manhattan Bank, as Debenture Trustee, relating to 8.32% Series A Junior Subordinated Deferrable Interest Debentures due December 15, 2026 10.3 Directors' Deferred Compensation Plan, as amended (incorporated by reference to Exhibit 10.3 of the Annual Report Form 10-K of Firstar for the year ended December 31, 1988) 10.4* Key Executive Employment and Severance Agreement, as amended (incorporated by reference to Exhibit 10.4 of the Form 10-Q of Firstar for the quarter ended September 30, 1993) 10.5 First Colonial Bankshares Corporation 1988 Stock Option Plan, as amended, assumed by Firstar (incorporated by reference to Exhibits 4.1 to 4.10 of Registration No. 33-57521 of Firstar) 10.6 Investors Bank Corp. Stock Option Plan as amended assumed by Firstar (incorporated by reference to Exhibits 4.1 and 4.2 of Registration No. 33-58915 of Firstar) 10.7* 1988 Incentive Stock Plan, as amended (incorporated by reference to Exhibit A of the Notice of the 1994 Annual Meeting and Proxy Statement of Firstar) 10.8* Annual Executive Incentive Plan, as amended (incorporated by reference to Exhibit B of the Notice of the 1994 Annual Meeting and Proxy Statement of Firstar) 10.10 Form of Indemnity Agreement between Firstar Corporation and its directors (incorporated by reference to Exhibit 10 of the Quarterly Report on Form 10-Q of Firstar for the quarter ended September 30, 1988) 21. Subsidiaries of Firstar Corporation 23. Consent of Independent Auditors 24. Powers of Attorney 27. Financial Data Schedule
- ------------ * Executive Compensation Plans A copy of the exhibits listed herein can be obtained by writing to Mr. Jeffrey B. Weeden, Senior Vice President-Finance and Treasurer, Firstar Corporation, P.O. Box 532, Milwaukee, Wisconsin 53201. (b) Firstar filed a Form 8-K dated December 17, 1996 which announced a $150 million common stock repurchase program and the issuance of $150 million in Trust Capital Securities. 61 63 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 ROGER FITZSIMONDS -------------------------------------- Roger L. Fitzsimonds March 13, 1997 Chairman and Chief Executive Officer Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. ROGER FITZSIMONDS March 13, 1997 - ------------------------------------------------------ Roger L. Fitzsimonds Chairman and Chief Executive Officer and director JOHN A. BECKER March 13, 1997 - ------------------------------------------------------ John A. Becker President, Chief Operating Officer and director JEFFREY B. WEEDEN March 13, 1997 - ------------------------------------------------------ Jeffrey B. Weeden Senior Vice President-Finance and Treasurer (principal finance and accounting officer) DIRECTORS Michael E. Batten* Robert C. Buchanan* George M. Chester, Jr.* Roger H. Derusha* James L. Forbes* Holmes Foster* Jerry M. Hiegel* Joe F. Hladky* C. Paul Johnson James H. Keyes* Sheldon B. Lubar* Daniel F. McKeithan, Jr.* George W. Mead II* Guy A. Osborn* Judith D. Pyle* Clifford V. Smith, Jr.* William W. Wirtz* *By William J. Schulz March 13, 1997 -------------------------------------------------- William J. Schulz Attorney-in-Fact
62 EX-3.1 2 ARTICLES OF INCORPORATION 1 EXHIBIT 3.1 FIRSTAR CORPORATION RESTATED ARTICLES OF INCORPORATION This Corporation, being organized under the laws of Wisconsin and being subject to the provisions of Chapter 180 of the Wisconsin Statutes, hereby amends its restated articles of incorporation in their entirety and as so amended adopts the following Restated Articles of Incorporation, which supersede and take the place of its heretofore existing restated articles of incorporation and all amendments thereto: ARTICLE I NAME The name of the Corporation is "FIRSTAR CORPORATION". ARTICLE II PURPOSE The purposes for which the Corporation is organized are to engage in any lawful activity within the purposes for which corporations may be organized under the Wisconsin Business Corporation Law (Chapter 180, Wisconsin Statutes); provided, however, that the Corporation shall not engage in any activities prohibited by the Bank Holding Company Act of 1956, as amended. ARTICLE III CAPITAL STOCK (1) The number of shares of which the Corporation shall have authority to issue is 122,500,000, divided into the following classes: (a) 120,000,000 shares of the par value of $1.25 each, designated as "Common Stock"; and -1- 2 (b) 2,500,000 shares of the par value of $1.00 each, designated as "Preferred Stock". (2) The Preferred Stock may be issued from time to time in one or more series, with such designations, preferences, limitations, and relative rights as shall be stated and expressed in the resolution or resolutions providing for the issuance of such series and adopted by the board of directors pursuant to the authority given as provided by the Wisconsin Business Corporation Law and not inconsistent with the provisions hereof. All shares of Preferred Stock shall be identical except as to the following relative rights and preferences, in respect of any or all of which there may be variations between different series as fixed and determined by the board of directors in the resolution or resolutions providing for the issuance of such series: (a) rate of dividend; (b) price at and terms and conditions on which shares may be redeemed; (c) amount payable upon shares in event of voluntary or involuntary liquidation; (d) sinking fund provisions for the redemption or purchase of shares; (e) terms and conditions on which shares may be converted; if the shares of any series are issued with the privilege of conversion; and (f) voting rights, if any. (3) The holders of Preferred Stock shall be entitled to receive, if and when declared by the board of directors out of the funds of the Corporation legally available therefor, dividends at, but not exceeding, the rate established by the board of directors in the resolution or resolutions providing for the issuance of any series of Preferred Stock, and such dividends shall be paid or set apart before any dividends (other than dividends payable in Common Stock of the Corporation) shall be paid upon or set apart for the Common Stock. The dividends on the Preferred Stock shall be cumulative, so if at any time the full amount of dividends accrued and in arrears on the Preferred Stock shall not be paid, the deficiency (without interest) shall be payable before any dividends shall be paid upon or set apart on the Common Stock. Dividends on the Preferred Stock shall accrue and be cumulative from the date of issue and shall be without priority as between series. Any dividends paid upon the Preferred Stock in an amount less than full cumulative dividends accrued and in arrears upon all Preferred Stock shall, if more than one series be outstanding, be distributed among the different series in proportion to the aggregate amounts which would be distributed to the Preferred Stock of each series if full cumulative dividends were declared and paid thereon. Whenever all dividends accrued and in arrears on the Preferred Stock shall have been declared and shall have been paid or set apart, the board of directors may declare dividends on -2- 3 the Common Stock out of the funds of the Corporation legally available therefor. (4) In the event of the liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of Preferred Stock, shall be entitled to receive the fixed liquidation amount per share, plus accrued dividends, all as provided in the resolution or resolutions adopted by the board of directors providing for the issuance of any series of Preferred Stock, and no more, before any amount shall be paid to the holders of Common Stock. As used in this paragraph "accrued dividends" means, in respect to each share of Preferred Stock, an amount equal to the fixed dividend rate per annum for each share (without interest thereon), from the date from which dividends commence to accrue in respect of such share to the date as of which the computation is to be made, less the aggregate amount (without interest thereon) of all dividends therefore paid or declared and set aside for payment in respect thereof. If, upon any such voluntary or involuntary liquidation, the assets of the Corporation shall be insufficient to permit payment to the holders of Preferred Stock of the full preferential amounts aforesaid, then the entire assets of the Corporation available for distribution to shareholders shall be distributed ratably among the holders of Preferred Stock in proportion to the full preferential amounts to which they are respectively entitled. The holders of Preferred Stock shall not otherwise be entitled to participate in any distribution of assets of the Corporation which assets shall be divided and distributed among the holders of Common Stock according to their respective rights and preferences. No consolidation or merger of the Corporation with or into another corporation or corporations and no sale by the Corporation of all or substantially all of its assets shall be deemed a liquidation or winding up of the Corporation within the meaning of this paragraph. (5) The holders of Preferred Stock shall have only such voting rights as shall be stated in the resolution or resolutions of the board of directors providing for the issuance of any series of Preferred Stock. (6) The Common Stock shall be junior to the Preferred Stock and shall be subject to all the rights and preferences of the Preferred Stock. (7) No holder of any shares of the Corporation shall have any preemptive right to acquire any unissued shares of this Corporation, now or hereafter authorized, or other securities whether or not convertible into shares of the Corporation or carrying a right to subscribe to or acquire such shares. -3- 4 (8) The Corporation is authorized by action of the board of directors without further consent of shareholders to purchase, take, receive or otherwise acquire shares of the Corporation, subject only to the provisions of Sections 180.385(1)(a) and (b) of the Wisconsin Statutes. (9) The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the owner thereof for all purposes, and shall not be bound to recognize any equitable or other claim to or interest in any such share or shares on the part of any other person, whether or not it shall have express or other notice thereof. ARTICLE IV BOARD OF DIRECTORS (1) Subject to the terms of any series of Preferred Stock as may be issued from time to time pursuant to the provisions of Section (2) of Article III, as such terms are stated and expressed in the resolution or resolutions of the board of directors providing for the issuance of such Preferred Stock, (a) The board of directors shall consist of such number of directors as is fixed from time to time by a majority of the board of directors in the manner provided in the By-Laws. (b) The number of directors may be increased or decreased from time to time by a majority of the board of directors in the manner provided in the By-Laws, but no decrease shall have the effect of shortening the term of any incumbent director. (2) The board of directors shall be divided into three (3) classes, as nearly equal in number as possible, as shall be provided in the By-Laws. (3) Subject to the terms of any series of Preferred Stock as may be issued from time to time pursuant to the provisions of Section (2) of Article III, as such terms are stated and expressed in the resolution or resolutions of the board of directors providing for the issuance of such Preferred Stock, (a) Any vacancy occurring in the board of directors resulting from death, resignation, removal, disqualification or any other cause, including a vacancy created by an increase in the number of directors, may be filled only by the affirmative -4- 5 vote of not less than a majority of the directors then in office, although less than a quorum. (b) If there shall be no directors then in office, the shareholders shall be entitled to fill the vacancies on the board of directors. (c) Directors appointed to newly created directorships resulting from any increase in the authorized number of directors or to fill any vacancies in the board of directors resulting from death, resignation, removal, disqualification or any other cause shall hold office for a term expiring at the next annual meeting of shareholders at which the term of the class to which they have been appointed expires. (4) Subject to the terms of any series of Preferred Stock as may be issued from time to time pursuant to the provisions of Section (2) of Article III, as such terms are stated and expressed in the resolution or resolutions of the board of directors providing for the issuance of such Preferred Stock, a director may be removed from office only by the affirmative vote of not less than 75% of the outstanding shares entitled to vote for the election of such director, voting together as a single class, taken at a special meeting of shareholders called for that purpose. (5) Notwithstanding the provisions of Article VI, the affirmative vote of not less than 75% of the outstanding shares entitled to vote generally for the election of directors, voting together as a single class, shall be required to amend or repeal this Article IV, or to adopt any provision of the Restated Articles of Incorporation or By-Laws inconsistent with the purpose or intent of this Article IV. ARTICLE V REGISTERED OFFICE AND AGENT At the time of adoption of these Restated Articles of Incorporation the address of the registered office of the Corporation is 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, and the name of the registered agent at that address is Howard H. Dahms.* *The registered agent, effective July 1, 1983, is William J. Schulz. -5- 6 ARTICLE VI ELECTION OF MAJORITY AFFIRMATIVE VOTING REQUIREMENTS The Corporation expressly elects the majority affirmative voting requirements pursuant to Subsection 180.25(2) of the Wisconsin Business Corporation Law (or any successor provision to such subsection) with respect to all subjects referenced in such subsection (or such successor provision, as the case may be). -6- 7 CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES C PREFERRED STOCK Pursuant to Section 180.12(4) of the Wisconsin Business Corporation Law, We, Roger L. Fitzsimonds and William J. Schulz, President and Chief Operating Officer, and Secretary, respectively, of Firstar Corporation, a corporation organized and existing under the Wisconsin Business Corporation Law, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Restated Articles of Incorporation of the Corporation, as amended, the Board of Directors on January 19, 1989 adopted the following resolution creating a series of 600,000 shares of Preferred Stock, par value $1.00 per share, designated as Series C Preferred Stock: NOW, THEREFORE, BE IT RESOLVED, That pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of its Restated Articles of Incorporation, as amended, a series of Preferred Stock, par value $1.00 per share, of the Corporation be and it hereby is created, and that the designation and amount and relative rights, limitations and preferences thereof are as follows: Section 1. Designation and Amount. The shares of such series shall be designated as "Series C Preferred Stock"; the number of shares constituting such series shall be Six Hundred Thousand (600,000). Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series C Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation into Series C Preferred Stock. Section 2. Dividends and Distributions. (A) The holders of shares of Series C Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first business days of January, April, July and October in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or 8 fraction of a share of Series C Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all noncash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, $1.25 par value per share, of the Corporation (the "Common Stock") since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Payment Date, since the first issuance of any share or fraction of a share of Series C Preferred Stock. In the event the corporation shall at any time after January l9, 1989 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series C Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series C Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series C Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series C Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series C Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of -2- 9 which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series C Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series C Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series C Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series C Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the shareholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any other resolution of the Board of Directors creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series C Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation. (C) Except as set forth herein, holders of Series C Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. -3- 10 Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series C Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series C Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred Stock, except dividends paid ratably on the Series C Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior to or on a parity with (both as to dividends or upon dissolution, liquidation or winding up) the Series C Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series C Preferred Stock, or any shares of stock ranking on a parity with the Series C Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. -4- 11 (B) The Corporation shall not permit any corporation of which an amount of voting securities sufficient to elect at least a majority of the directors of such corporation is beneficially owned, directly or indirectly, by the Corporation or otherwise controlled by the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series C Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, par value $1.00 per share, and may be reissued as part of a new series of Preferred Stock, par value $1.00 per share, to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock unless, prior thereto, the holders of shares of Series C Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series C Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred Stock, except distributions made ratably on the Series C Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series C Preferred Stack were entitled immediately -5- 12 prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series C Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series C Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series C Preferred Stock shall not be redeemable. Section 9. Fractional Shares. Series C Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series C Preferred Stock. -6- 13 IN WITNESS WHEREOF, we have executed and subscribed this Certificate and to affirm the foregoing as true this 30th day of January, 1989. [Corporate Seal] ----------------------------- President and Chief Operating Officer Attest: William J. Schulz ------------------ Secretary This document was drafted by Harry V. Carlson, Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, and should be recorded in the Office of the Register of Deeds of Milwaukee County, Wisconsin, the County in which the registered office of Firstar Corporation is located. -7- 14 STATE OF WISCONSIN ARTICLES OF AMENDMENT FILED relating to JAN 31 1995 SERIES D CONVERTIBLE PREFERRED STOCK DOUGLAS LA FOLLETTE of SECRETARY OF STATE FIRSTAR CORPORATION -------------------------------------------- Pursuant to Sections 180.0602 and 180.1002 of the Wisconsin Business Corporation Law --------------------------------------------- I, William J. Schulz, Senior Vice President and Deputy General Counsel of Firstar Corporation, a corporation organized and existing under the Wisconsin Business Corporation Law (the "Corporation"), in accordance with the provisions of Sections 180.0602 and 180.1002 thereof, DO HEREBY CERTIFY THAT: A. Pursuant to the authority conferred upon the Board of Directors by the Restated Articles of Incorporation, as amended, of the Corporation and in accordance with Sections 180.0602 and 180.1002 of the Wisconsin Business Corporation Law, the Board of Directors of the Corporation adopted a resolution on July 29, 1994, but which was not effective until the date hereof, creating a series of shares of Preferred Stock, $1.00 par value, of the Corporation, designated as Series D Convertible Preferred Stock. B. Such resolution of the Board of Directors of the Corporation creating the series designated as Series D Convertible Preferred Stock provides that said series shall have such designation and number of shares and such preferences, limitations and relative rights as are set forth in the paragraphs below: Series D Convertible Preferred Stock 1. Designation and Amount. The shares of such series shall be designated "Series D Convertible Preferred Stock" and the number of shares constituting such series shall be limited to 38,775. The liquidation value shall be $500 per share. 2. Dividends. (a) The holders of shares of Series D Convertible Preferred Stock shall be entitled to receive, out of the assets of the Corporation legally available therefor and as and if declared by the Board of Directors, cash dividends at the rate of $35 per share per annum, payable quarterly on the last day of the months of March, June, September and December in each year, commencing March 31, 1995. Each such dividend shall be paid to the holders of record of shares of Series D Convertible Preferred Stock on the applicable record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Dividends on account of arrears for any past dividend periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date as may be fixed by the Board of Directors, which shall not exceed 45 days preceding such dividend payment date. Such dividends shall be cumulative (whether or not in any quarterly dividend period there 15 shall be funds of the Corporation legally available for the payment of such dividends), commencing on the date of original issuance. (b) No full dividends shall be declared or paid or set apart for payment on any class or series of stock of the Corporation ranking, as to dividends, on a parity with the Series D Convertible Preferred Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series D Convertible Preferred Stock for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of the Series D Convertible Preferred Stock and any class or series of stock of the Corporation ranking on a parity as to dividends with the Series D Convertible Preferred Stock, all dividends declared upon shares of the Series D Convertible Preferred Stock and any class or series of stock of the Corporation ranking on a parity as to dividends with the Series D Convertible Preferred Stock shall be declared pro rata so that the amount of dividends declared per share on the Series D Convertible Preferred Stock and such other stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of the Series D Convertible Preferred Stock and such other stock bear to each other. Holders of shares of the Series D Convertible Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Series D Convertible Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series D Convertible Preferred Stock which may be in arrears. (c) So long as any shares of the Series D Convertible Preferred Stock are outstanding, no dividend (other than a dividend in Common Stock, par value $1.25 per share, of the Corporation ("Common Stock") or in any other class or series of stock of the Corporation ranking junior to the Series D Convertible Preferred Stock as to dividends and upon liquidation and other than as provided in paragraph (b) of this Section 2) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other class or series of stock of the Corporation ranking junior to or on a parity with the Series D Convertible Preferred Stock as to dividends or upon liquidation, nor shall any Common Stock or any class or series of stock of the Corporation ranking junior to or on a parity with the Series D Convertible Preferred Stock as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Series D Convertible Preferred Stock as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of the Series D Convertible Preferred Stock shall have been paid for all past dividend payment periods. 3. Conversion. Each holder of shares of Series D Convertible Preferred Stock shall have the right, at his option, to convert all or any part of such shares into shares of Common Stock of the Corporation at any time on and subject to the following terms and conditions: -2- 16 (a) The shares of Series D Convertible Preferred Stock shall be convertible at the office of the transfer agent for such series (the "Transfer Agent"), and at such other place or places, if any, as the Board of Directors of the Corporation may designate, into fully paid and nonassessable (except as otherwise provided by the Wisconsin Business Corporation Law) shares (calculated as to each conversion to the nearest 1/100th of a share) of Common Stock. The number of shares of Common Stock issuable upon conversion of each share of Series D Convertible Preferred Stock shall be equal to $500 divided by the conversion price in effect at the time of conversion determined as hereinafter provided. The price at which shares of Common Stock shall be delivered upon conversion (herein called the "conversion price") shall be initially $23.30 per share of Common Stock; provided, however, that such conversion price shall be subject to adjustment from time to time in certain instances as hereinafter provided. No payment or adjustment shall be made in respect of dividends on Common Stock or Series D Convertible Preferred Stock upon conversion of shares of Series D Convertible Preferred Stock. Shares of Series D Convertible Preferred Stock surrendered for conversion after the record date next preceding a dividend payment date for the Series D Convertible Preferred Stock and before the dividend payment date must be accompanied by payment of an amount equal to the dividend thereon which is to be paid on such dividend payment date (unless the shares of Series D Convertible Preferred Stock surrendered for conversion have been called for redemption prior to such dividend payment date). If the Corporation calls for redemption any shares of Series D Convertible Preferred Stock such right of conversion shall cease and terminate, as to the shares designated for redemption, at the close of business on the redemption date, unless the Corporation defaults in the payment of the redemption price. No fractional shares of Common Stock will be issued, and a cash payment will be made in lieu of any fractional share in an amount equal to the same fraction of the last sale price of the Common Stock (determined as provided in sub-paragraph (c) (iv) of this Section 3) at the close of business on the business day which next precedes the day of conversion. (b) Before any holder of shares of Series D Convertible Preferred Stock shall be entitled to convert the same into Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed to the Corporation or in blank, at the office of the Transfer Agent for such series or at such other place or places, if any, as the Board of Directors of the Corporation has designated, and shall give written notice to the Corporation at said office or place that he elects to convert the same and shall state in writing therein the name or names (with addresses) in which he wishes the certificate or certificates for Common Stock to be issued. The Corporation will, as soon as practicable thereafter, issue and deliver at said office or place to such holder of shares of Series D Convertible Preferred Stock or to his nominee or nominees, certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Shares of Series D Convertible Preferred Stock shall be deemed to have been converted as of the close of business on the date of the surrender of such shares for conversion as provided above, and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock as of the close of business on such date. -3- 17 (c) The conversion price in effect at any time shall be subject to adjustment as follows: (i) In case the Corporation shall (A) declare and pay a dividend on its Common Stock in shares of its capital stock, (B) subdivide its outstanding shares of Common Stock, (C) combine its outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of its Common Stock (including any such reclassification in connection with a consolidation or merger in which the Corporation is the continuing corporation) any shares of its capital stock, the conversion price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the holder of any share of Series D Convertible Preferred Stock surrendered for conversion after such time shall be entitled to receive the kind and amount of shares which he would have owned or have been entitled to receive had such share of Series D Convertible Preferred Stock been converted immediately prior to such time. Such adjustment shall be made successively whenever any event listed above shall occur. (ii) In case the Corporation shall issue rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price (as defined below in paragraph (iv) of this Section 3(c)), on the date fixed for the determination of shareholders entitled to receive such rights or warrants the conversion price shall be reduced by multiplying the conversion price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such Current Market Price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination; provided, however, in the event that all the shares of Common Stock offered for subscription or purchase are not delivered upon the exercise of such rights or warrants, upon the expiration of such rights or warrants the conversion rate shall be readjusted to the conversion rate which would have been in effect had the numerator and the denominator of the foregoing fraction and the resulting adjustment been made based upon the number of shares of Common Stock actually delivered upon the exercise of such rights or warrants rather than upon the number of shares of Common Stock offered for subscription or purchase, such adjustment to become effective immediately after the opening of business on the day following the expiration of such rights or warrants. For the purposes of this paragraph (ii), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. (iii) In case the Corporation shall distribute to all holders of its Common Stock (including any such distribution made in connection with a consolidation or merger in which the Corporation is the continuing corporation) evidences of its -4- 18 indebtedness or assets (excluding dividends or other distributions paid out of earned surplus) or subscription rights or warrants excluding those referred to in paragraph (ii) above), the conversion price shall be adjusted so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the close of business on the date fixed for the determination of shareholders entitled to receive such distribution by a fraction of which the numerator shall be the Current Market Price per share of the Common Stock on the date fixed for such determination less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution filed with the Transfer Agent for such series) of the portion of the assets or evidences of indebtedness so distributed applicable to one share of Common Stock and the denominator shall be such Current Market Price per share of the Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such distribution. Such adjustment shall be made successively whenever any such distribution is made and shall become effective retroactively after such record date. (iv) For the purpose of any computation under paragraphs (ii) and (iii) above, the "Current Market Price" on any date shall be deemed to be the average of the daily closing prices per share of Common Stock for 30 consecutive business days selected by the Corporation commencing 45 business days before such date. The closing price for each day shall be the last sale price regular way or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange or national market system on which the Common Stock is listed or admitted to trading, or if it is not listed or admitted to trading on any national securities exchange or national market system, the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by the Corporation for that purpose. (v) All calculations under this Section 3(c) shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. (vi) In case of any consolidation or merger of the Corporation with or into any other corporation (other than a consolidation or merger in which the Corporation is the continuing corporation), or in case of any sale or transfer of all or substantially all of the assets of the Corporation, the holder of each share of Series D Convertible Preferred Stock shall, after such consolidation, merger, sale or transfer, have the right to convert such share of Series D Convertible Preferred Stock into the kind and amount of shares of stock and other securities and property which such holder would have been entitled to receive upon such consolidation, merger, sale or transfer if he had held the Common Stock issuable upon the conversion of such share of Series D Convertible Preferred Stock immediately prior to such consolidation, merger, sale or transfer. In any such event, effective provision shall be made, in the articles or certificate of incorporation of the resulting or surviving corporation or other corporation issuing or delivering such shares, other securities, cash or other property or otherwise, so that the provisions set forth herein for the protection of the conversion rights of the -5- 19 Series D Convertible Preferred Stock shall thereafter be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities, cash and other property deliverable upon conversion of the Series D Convertible Preferred Stock remaining outstanding or other convertible stock or securities received by the holders in place thereof; and any such resulting or surviving corporation or other corporation issuing or delivering such shares, other securities, cash or other property shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such shares, securities, cash or other property as the holders of the Series D Convertible Preferred Stock remaining outstanding, or other convertible stock or securities received by the holders in place thereof, shall be entitled to receive, pursuant to the provisions hereof, and to make provision for the protection of the conversion rights as above provided. (vii) In the event that at any time, as a result of an adjustment made pursuant to paragraph (i) above, the holder of any share of Series D Convertible Preferred Stock thereafter surrendered for conversion shall become entitled to receive any securities other than shares of Common Stock, thereafter the amount of such other securities so receivable upon conversion of any share of Series D Convertible Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in paragraph (i) to (vi), inclusive, above, and the provisions of this Section 3(c) with respect to the Common Stock shall apply on like terms to any such other securities. (viii) No adjustment in the conversion price shall be required unless such adjustment would require a change of at least 1% in such price; provided, however, that any adjustments which by reason of this paragraph (viii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. (d) Whenever the conversion price is adjusted as herein provided: (i) the Corporation shall promptly file with the Transfer Agent for such series a certificate of the Treasurer of the Corporation setting forth the adjusted conversion price and showing in reasonable detail the facts upon which such adjustment is based, including a statement of the consideration received or to be received by the Corporation for any shares of Common Stock issued or deemed to have been issued; and (ii) a notice stating that the conversion price has been adjusted and setting forth the adjusted conversion price shall forthwith be required, and as soon as practicable after it is required, such notice shall be mailed by the Corporation to the holders of record of Series D Convertible Preferred Stock; provided, however, that if within ten days after the mailing of such notice, an additional notice is required, such additional notice shall be deemed to be required pursuant to this paragraph (ii) as of the opening of business on the tenth day after such mailing and shall set forth the conversion price as adjusted at such opening of business, and upon the mailing of such additional notice no other notice need be given of any adjustment in the conversion price occurring at or prior to such opening of business and after the time that the next preceding notice given by mailing became required. -6- 20 (e) In case: (i) the Corporation shall authorize the distribution to all holders of its Common Stock of evidences of its indebtedness or assets (other than dividends or other distributions paid out of earned surplus); or (ii) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Corporation is a party and for which approval of any shareholders of the Corporation is required, or of the sale or transfer of all or substantially all of the assets of the company; or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then, in each case, the Corporation shall cause to be filed with the Transfer Agent for the Series D Convertible Preferred Stock and shall cause to be mailed, first class postage prepaid, to the holders of record of the outstanding shares of Series D Convertible Preferred Stock at least 10 days prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such distribution or rights, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. (f) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, solely for the purpose of effecting the conversion of the shares of Series D Convertible Preferred Stock, the full number of shares of Common Stock then issuable upon the conversion of all outstanding shares of Series D Convertible Preferred Stock. For the purpose of this Section 3(f) the full number of shares of Common Stock issuable upon the conversion of all outstanding shares of Series D Convertible Preferred Stock shall be computed as if at the time of computation of such number of shares of Common Stock all outstanding shares of Series D Convertible Preferred Stock were held by a single holder. The Corporation shall from time to time, in accordance with the Wisconsin Business Corporation Law, increase the authorized amount of its Common Stock if at any time the authorized amount of its Common Stock remaining unissued shall not be sufficient to permit the conversion of all shares of Series D Convertible Preferred Stock at the time outstanding. If any shares of Common Stock required to be reserved for issuance upon conversion of shares of Series D Convertible Preferred Stock hereunder require -7- 21 registration with or approval of any governmental authority under any Federal or State law before such shares may be issued upon such conversion, the Corporation will in good faith and as expeditiously as possible endeavor to cause such shares to be so registered or approved. (g) The Corporation will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of shares of Series D Convertible Preferred Stock pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue or transfer and delivery of shares of Common Stock in a name other than that in which the shares of Series D Convertible Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid. (h) Before taking any action which would cause an adjustment reducing the conversion price below the then par value of the Common Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable (except as otherwise provided by the Wisconsin Business Corporation Law) shares of Common Stock at the conversion price as so adjusted. 4. Liquidation Rights. (a) Upon the voluntary dissolution, liquidation or winding-up of the Corporation, the holders of the shares of Series D Convertible Preferred Stock then outstanding shall be entitled to receive out of the assets of the Corporation (whether representing capital or surplus), before any payment or distribution shall be made on the Common Stock or any other class or series of stock of the Corporation ranking junior to the Series D Convertible Preferred Stock as to dividends or as to distribution upon liquidation, dissolution or winding-up, cash in an amount of $500 per share, plus an amount equal to all dividends cumulated and unpaid thereon, to the date of final distribution to the holders of the Series D Convertible Preferred Stock. (b) Upon the involuntary dissolution, liquidation or winding-up of the Corporation, the holders of the shares of the Series D Convertible Preferred Stock then outstanding shall be entitled to receive out of the assets of the Corporation (whether representing capital or surplus), before any payment or distribution shall be made on the Common Stock or any other class or series of stock of the Corporation ranking junior to the Series D Convertible Preferred Stock as to dividends or as to distribution upon liquidation dissolution or winding-up, cash in the amount equal to $500 per share, plus an amount equal to all dividends cumulated and unpaid thereon, to the date of final distribution to the holders of the Series D Convertible Preferred Stock. (c) After the payment to the holders of the shares of the Series D Convertible Preferred Stock of the full preferential amounts provided for in this Section 4, the holders of the Series D Convertible Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation. -8- 22 (d) In the event the assets of the Corporation available for distribution to the holders of shares of the Series D Convertible Preferred Stock upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (a) or (b) of this Section 4, no distribution shall be made on account of any shares of any class or series of stock of the Corporation ranking on a parity with the shares of the Series D Convertible Preferred Stock upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of the Series D Convertible Preferred Stock, ratably, in proportion to the full distributable amounts to which such holders and the holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (e) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of the Series D Convertible Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (a) or (b) of this Section 4 before any payment shall be made to the holders of any class or series of stock of the Corporation ranking junior upon liquidation to the Series D Convertible Preferred Stock. (f) Upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, cumulated dividends shall not include fractional periods between records dates. 5. Optional Redemption. The shares of Series D Convertible Preferred Stock are not redeemable prior to June 30, 1997. Thereafter the shares of Series D Convertible Preferred Stock are redeemable in whole at any time or in part from time to time at the option of the Corporation at a redemption price of $500 per share, plus an amount equal to any arrearage in dividends thereon. In the case of a redemption in part of the shares of Series D Convertible Preferred Stock, the shares to be redeemed shall be selected pro rata or by lot or in such other manner as the Board of Directors may determine. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each holder of record of shares of Series D Convertible Preferred Stock to be redeemed at the address shown on the stock books of the Corporation (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to the holder to whom the Corporation has failed to mail such notice or except as to the holder whose notice was defective). On and after the redemption date, dividends shall cease to accumulate on shares of Series D Convertible Preferred Stock called for redemption (unless the Corporation defaults in the payment of the redemption price). 6. Voting Rights. (a) Holders of shares of Series D Convertible Preferred Stock shall not be entitled to vote on any matter, except as otherwise provided by law or by the Restated Articles of Incorporation, as amended, and except that: -9- 23 (i) The affirmative vote of the holders of a majority of the outstanding shares of Series D Convertible Preferred Stock, voting separately as a single class, shall be required to amend the Restated Articles of Incorporation of the Corporation to create or authorize, or increase the authorized amount of, any class or series of stock ranking prior to the Series D Convertible Preferred Stock in respect of dividends or distribution of assets on liquidation, dissolution or winding up of the Corporation or otherwise alter or abolish the liquidation preferences or any other preferential right of the Series D Convertible Preferred Stock, alter or abolish the conversion rights of the Series D Convertible Preferred Stock, reduce the redemption price or otherwise alter any redemption rights of the Series D Convertible Preferred Stock, alter or abolish any right of the Series D Convertible Preferred Stock to receive dividends, or exclude or limit the voting rights as to these matters. (ii) If at any time the Corporation falls in arrears in the payment of dividends on the Series D Convertible Preferred Stock in an aggregate amount at least equal to the full accrued dividends for six (6) quarterly dividend periods (a "voting event"), the number of directors of the Corporation shall be increased by two and the holders of the Series D Convertible Preferred Stock, voting separately as a single class, shall have the right to elect two directors to fill the positions so created. Until such voting event shall have been terminated by payment of all dividends for all past dividend periods, any director who has been so elected by the holders of Series D Convertible Preferred Stock may be removed at any time, either with or without cause, only by the affirmative vote of the holders of a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may only be filled by the vote of such holders. If and when such voting event shall have been terminated, the holders of Series D Convertible Preferred Stock shall be divested of the foregoing special voting rights, subject to revesting upon the further occurrence of a voting event. Upon termination of such voting event, the terms of office of all persons who may have been elected directors by vote of the holders of Series D Convertible Preferred Stock pursuant to the foregoing special voting rights shall immediately terminate. Upon the occurrence of a voting event, the Corporation shall immediately call special meeting of the holders of Series D Convertible Preferred Stock entitled to vote upon the occurrence of such voting event by mailing, by first-class mail, postage prepaid, to each holder of record of such shares, at such holder's address as the same appears on the books of the Corporation, a notice of special meeting to be held not less than 20 days nor more than 60 days after the date such notice is given. If the Corporation does not call such special meeting, such special meeting may be called by any holder or holders of 10 percent or more of such class, on like notice. The record date for determining the holders entitled to notice of and to vote at such meeting shall be the business day immediately preceding the day on which such notice is mailed. The holders of the Series D Convertible Preferred Stock, at the time entitled to cast one-third of the votes entitled to be cast for the election of directors at such special meeting, present in person or by proxy, shall constitute a quorum for the election of directors at such special meeting. At any such meeting or adjournment thereof in the absence of a quorum, subject to the provisions of any applicable law, the holders of a majority of the shares of Series D Convertible Preferred Stock, present in person or by proxy at such meeting, shall have the power to adjourn the meeting for the election of such directors without notice, other than an announcement at the meeting, until a quorum is present. -10- 24 If such voting event shall have been terminated after the notice of a special meeting provided for in this paragraph has been given but before such special meeting shall have been held, the Corporation shall, as soon as practicable after such termination, mail notice of such termination to the holders of the Series D Convertible Preferred Stock that would have been entitled to vote at such special meeting. (b) The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such voting would otherwise be required shall be effected, all outstanding Series D Convertible Preferred Stock shall have been (i) redeemed or called for redemption and sufficient funds shall have been deposited, in trust, to effect such redemption in accordance with the provisions hereof, or (ii) purchased or otherwise acquired by the Corporation and cancelled, or converted into Common Stock of the Corporation. 7. Rank. The Series D Convertible Preferred Stock shall, as to dividends and distributions upon liquidation, dissolution (whether voluntary or involuntary) or winding up of the Corporation: (a) rank in parity with any class or series of Preferred Stock of the Corporation, without preference or priority as among holders of such stock and the Series D Convertible Preferred Stock; and (b) have preference and priority in ranking to the Common Stock and any other class or series of common stock of the Corporation. * * * C. None of the shares of Series D Convertible Preferred Stock have been issued. D. The amendment creating the Series D Convertible Preferred Stock was adopted by the Board of Directors of the Corporation in accordance with section 180.1002 of the Wisconsin Business Corporation Law and shareholder action was not required. These Articles of Amendment shall be effective as of 3:29 P.M. on the date hereof. IN WITNESS WHEREOF, the undersigned has executed and subscribed these Articles of Amendment on behalf of the Corporation and does affirm the foregoing as true this 31st day of January, 1995. STATE OF WISCONSIN William J. Schulz FILED By:------------------------ JAN 31 1995 William J. Schulz DOUGLAS LA FOLLETTE Senior Vice President and Deputy SECRETARY OF STATE General Counsel --------------- This instrument was drafted by, and should be returned to, William J. Schulz, Senior Vice President and Deputy General Counsel, Firstar Corporation, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. -11- 25 RECEIVED - DEPT OF ARTICLES OF AMENDMENT STATE OF WISCONSIN FINANCIAL INSTITUTIONS TO FILED STATE OF WISCONSIN RESTATED ARTICLES OF INCORPORATION JAN 21 1997 OF DEPARTMENT OF 97 JAN 17 P4:09 FIRSTAR CORPORATION FINANCIAL INSTITUTIONS ----------------------------------- Pursuant to Section 180.1002 of the Wisconsin Business Corporation Law ----------------------------------- I, William J. Schulz, Senior Vice President and Secretary of Firstar Corporation, a corporation organized and existing under the Wisconsin Business Corporation Law (the "Corporation"), in accordance with the provisions of Section 180.1002 thereof, DO HEREBY CERTIFY THAT: 1. Pursuant to Subsection (6) of Section 180.1002 of the Wisconsin Business Corporation Law, at a meeting of the Board of Directors of the Corporation, which was duly called and at which a quorum was present and acting throughout, the Board of Directors adopted a resolution on January 16, 1997, but which was not effective until the date hereof, to effect a change of each share, whether issued or unissued, of the Corporation's Common Stock into two shares of Common Stock by amending Section (1) of Article III of the Corporation's Restated Articles of Incorporation (the "Amendment") to read as follows: "(1) The number of shares of which the Corporation shall have authority to issue is 242,500,000, divided into the following classes: (a) 240,000,000 shares of the par value of $1.25 each, designated as "Common Stock"; and (b) 2,500,000 shares of the par value of $1.00 each, designated as "Preferred Stock." On the effective date of this Amendment, each share of Common Stock, $1.25 par value, of the Corporation outstanding or held in treasury immediately prior to the effective time of this Amendment, shall be changed into two shares of said Common Stock, $1.25 par value. One-half of the total issue of Common Stock, $1.25 par value, resulting from such change initially shall be evidenced by the outstanding stock certificates (until such time as they may be exchanged by the holders thereof) and the additional one-half of the total issue of Common Stock, $1.25 par value, shall be evidenced by certificates in the $1.25 par value form which shall be distributed to 26 persons who are at the close of business on the effective date of this Amendment the holders of record of Common Stock." 2. The Amendment was adopted by the Board of Directors of the Corporation in accordance with Section 180.1002 of the Wisconsin Business Corporation Law and shareholder action was not required. These Articles of Amendment shall be effective as of the close of business on January 27, 1997. The distribution to the holders of Common Stock of record at the close of business on the effective date of the Amendment of certificates evidencing the additional number of shares resulting from the Amendment shall be made on or as soon as practicable after February 15, 1997. IN WITNESS WHEREOF, the undersigned has executed these Articles of Amendment on behalf of the Corporation and does hereby affirm the foregoing as true this 17th day of January, 1997. By: William J. Schulz ---------------------- William J. Schulz, Senior Vice President and Secretary - ----------- This instrument was drafted by, and should be returned to, William J. Schulz, Senior Vice President and Secretary, Firstar Corporation, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. STATE OF WISCONSIN FILED JAN 21 1997 DEPARTMENT OF FINANCIAL INSTITUTIONS 2 EX-3.2 3 BY-LAW OF FIRSTAR CORPORATION 1 EXHIBIT 3.2 FIRSTAR CORPORATION BY - LAWS (As amended to April 1, 1997) 2 ARTICLE I OFFICES Amended: 4/18/74 Section 1.01. Principal Office. The principal office of the Corporation in the State of Wisconsin shall be located at 777 East Wisconsin Avenue, Milwaukee, Wisconsin. The Corporation may have such other offices, either within or without the State of Wisconsin, as the board of directors may designate or as the business of the Corporation may require from time to time. Section 1.02. Registered Office. The registered office of the Corporation required by the Wisconsin Business Corporation Law to be maintained in the State of Wisconsin shall be the same as the principal office, except as the board of directors may change the address of the registered office from time to time. ARTICLE II Restated: 1/23/92 SHAREHOLDERS Section 2.01. Annual Meeting. (a) The annual meeting of the shareholders of the Corporation (the "Annual Meeting") shall be held on the third Thursday in the month of April in each year (or on such other day as may be fixed by the board of directors) at such time and place as may be designated by the board of directors or, in the absence of designation by the board of directors, then by the chairman of the board or the president, for the purpose of transacting only such business as is properly brought before the Annual Meeting in accordance with this Section 2.01. If the day fixed for the Annual Meeting shall be a legal holiday in the State of Wisconsin, then such meeting shall be held on the next succeeding Business Day (as hereinafter defined). In fixing a meeting date for any Annual Meeting, the board of directors may consider such factors as it deems relevant within the good faith exercise of its business judgment. (b) The proposal of business to be considered by the shareholders and, subject to the terms of any series of the Preferred Stock as may be issued by the Corporation from time to time (as such terms are stated and expressed in the resolution or resolutions of the board of directors providing for the issuance of such Preferred Stock), nominations of persons for election to the board of directors of the Corporation may be made at an Annual Meeting only (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the board of directors (or, in the case of nominations, by the committee on directors of the board of directors or, if such committee does not exist, any other committee of the board of directors serving a similar function) or (iii) by any shareholder of the Corporation who is a shareholder of record at the time of the giving of the notice provided for in this Section 2.01, who is entitled to vote at the Annual Meeting and who complies with the notice procedures set forth in this Section 2.01. (c) For nominations or other business to be properly brought before an Annual Meeting by a shareholder pursuant to clause (iii) of paragraph (b) of this Section 2.01, the shareholder must have given timely notice thereof in writing to the secretary of the Corporation. To be timely, a 1 3 shareholder's notice must be received by the secretary of the Corporation at the principal executive offices of the Corporation not later than 50 days in advance of the third Thursday in the month of April next succeeding the last Annual Meeting held; provided, however, that if the Annual Meeting is held earlier than the third Thursday in the month of April, to be timely, a shareholder's notice must be so received not later than the close of business on the later of (x) the date 50 days prior to the earlier date of the Annual Meeting and (y) the date 10 Business Days (as defined below) after the first public announcement of the earlier date of such Annual Meeting. Such shareholder's notice shall be signed by the shareholder of record who intends to make the nomination or introduce the other business (or his or her duly authorized proxy or other representative), shall bear the date of signature of such shareholder (or proxy or other representative) and shall set forth: (i) the name and address, as they appear on the Corporation's books, of such shareholder and the beneficial owner or owners, if any, on whose behalf the nomination or proposal is made; (ii) the class and number of shares of the Corporation which are beneficially owned by such shareholder and any such beneficial owner or owners; (iii) a representation that such shareholder is a holder of record of shares of the Corporation entitled to vote at such Annual Meeting and intends to appear in person or by proxy at such Annual Meeting to make the nomination or introduce the other business specified in such shareholder's notice; (iv) in the case of any proposed nomination for election or re-election as a director, (A) the name and residence address of the person or persons to be nominated, (B) a description of all arrangements or understandings between such shareholder, any such beneficial owner or owners and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by such shareholder, (C) such other information regarding each nominee proposed by such shareholder as would be required to be disclosed in solicitations of proxies for elections of directors, or would be otherwise required to be disclosed, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including any information that would be required to be included in a proxy statement filed pursuant to Regulation 14A had the nominee been nominated by the board of directors and (D) the written consent of each nominee to be named in a proxy statement and to serve as a director of the Corporation if so elected; and (v) in the case of any other business that such shareholder proposes to bring before the meeting, (A) a brief description of the business desired to be brought before such Annual Meeting and, if such business includes a proposal to amend these by-laws, the language of the proposed amendment, (B) such shareholder's and any such beneficial owner's or owners' reasons for conducting such business at such Annual Meeting and (C) and material interest in such business of such shareholder and any such beneficial owner or owners. (d) Only persons who are nominated in accordance with the procedures set forth in this Section 2.01 shall be eligible to be elected as directors by shareholder vote at an Annual Meeting. Only such business shall be conducted at an Annual Meeting as shall have been brought before such Annual Meeting in accordance with the procedures set forth in this Section 2.01. If the chairman of the 2 4 Annual Meeting shall determine that a nomination or any business proposed to be brought before the meeting was not properly made or brought in accordance with the procedures set forth in this Section 2.01, then the chairman shall so declare to the meeting and such nomination or business shall not be considered. (e) For purposes of Section 2.01 and Section 2.02 of these by-laws, "public announcement" shall mean disclosure in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15 (d) of the Exchange Act or in a press release reported by the Dow Jones News Service, Reuters Economic Services, Associated Press, United Press International or comparable national news service. For purposes of these by-laws, "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of Wisconsin are authorized or obligated by law or executive order to close. (f) Notwithstanding the foregoing provisions of this Section 2.01, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.01. Nothing in this Section 2.01 shall be deemed to limit the Corporation's obligation to include shareholder proposals in its proxy statement if such inclusion is required by Rule 14a-8 under the Exchange Act. (g) In the event of failure, through oversight or otherwise, to hold the Annual Meeting in any year on the date herein provided, a subsequent deferred Annual Meeting upon due notice may be held in lieu thereof and any election had or business done at such Annual Meeting shall be as valid and effectual as if had or done at the Annual Meeting of the date herein provided. Section 2.02. Special Meetings. (a) A special meeting of the shareholders of the Corporation (a "Special Meeting") may be called only by (i) the chairman of the board, (ii) the president or (iii) a majority of the board of directors then in office, and shall be called by the chairman of the board or the president upon the demand, in accordance with this Section 2.02, of the holders of record of shares of the Corporation representing at least 10% of all the votes entitled to be cast on any issue proposed to be considered at the Special Meeting. (b) In order that the Corporation may determine the shareholders entitled to demand a Special Meeting, the board of directors may fix a record date to determine the shareholders entitled to make such a demand (the "Demand Record Date"). The Demand Record Date shall not precede the date upon which the resolution fixing the Demand Record Date is adopted by the board of directors and shall not be more than 10 days after the date upon which the resolution fixing the Demand Record Date is adopted by the board of directors. Any shareholder or record seeking to have shareholders demand a Special Meeting shall, by sending written notice to the secretary of the Corporation by hand or by certified or registered mail, return receipt requested, request the board of directors to fix a Demand Record Date. The board of directors shall promptly, but in all events within 10 days after the date on which a valid request to fix a Demand Record Date is received by the secretary of the Corporation, adopt a resolution fixing the Demand Record Date and shall make a public announcement of such Demand Record Date. If no Demand Record has been fixed by the board of directors within 10 days after the date on which such valid request is received by the secretary, the Demand Record Date shall be the 10th day after the first date on which a valid written request to set a 3 5 Demand Record Date is received by the secretary. To be valid, such written request shall set forth the purpose or purposes for which the Special Meeting is to be held, shall be signed by one or more shareholders of record (or their duly authorized proxies or other representative), shall bear the date of signature of each such shareholder (or proxy or other representative) and shall set forth all information about each such shareholder and about the beneficial owner or owners, if any, on whose behalf the request is made that would be required to be set forth in a shareholder's notice described in paragraph (c) of Section 2.01 of these by-laws. (c) In order for a shareholder or shareholders to demand a Special Meeting, a written demand or demands for a Special Meeting by the holders of record as of the Demand Record Date of shares of the Corporation representing at least 10% of all the votes entitled to be cast on each issue proposed to be considered at the Special Meeting must be delivered to the Corporation on or after the Demand Record Date. To be valid, each written demand by a shareholder for a Special Meeting shall set forth the specific purpose or purposes for which the Special Meeting is to be held (which purpose or purposes shall be limited to the purpose or purposes set forth in the written request to set a Demand Record Date, received by the secretary pursuant to paragraph (b) of this Section 2.02), shall be signed by one or more persons who as of the Demand Record Date are shareholders of record (or their duly authorized proxies or other representatives), and shall set forth the name and address, as they appear in the Corporation's books, of each shareholder signing such demand and the class and number of shares of the Corporation which are owned of recorded and beneficially by each such shareholder, shall be sent to the secretary by hand or by certified or registered mail, return receipt requested, and must be received by the secretary within 70 days after the Demand Record Date. (d) The Corporation shall not be required to call a Special Meeting upon shareholder demand unless, in addition to the documents required by paragraph (c) of this Section 2.02, the secretary receives a written agreement signed by each Soliciting Shareholder (as defined herein) pursuant to which each Soliciting Shareholder, jointly and severally, agrees to pay the Corporation's costs of holding the Special Meeting, including the costs of preparing and mailing proxy materials for the Corporation's own solicitation, provided that if each of the resolutions introduced by a Soliciting Shareholder at such meeting is adopted, then the Soliciting Shareholders shall not be required to pay such costs. For purposes of this paragraph (d), the following terms shall have the meanings set forth below: (i) "Affiliate" of any Person shall mean any Person controlling, controlled by or under common control with such first Person. (ii) "Participant" shall have the meaning assigned to such term in Rule 14a-11 promulgated under the Exchange Act. (iii) "Person" shall mean any individual, firm, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity. (iv) "Proxy" shall have the meaning assigned to such term in Rule 14a-1 promulgated under the Exchange Act. (v) "Solicitation" shall have the meaning assigned to such term in Rule 14a-1 promulgated under the Exchange Act. 4 6 (vi) "Soliciting Shareholder" shall mean, with respect to any Special Meeting demanded by a shareholder or shareholders, any of the following Persons: (A) if the number of shareholders signing the demand or demands for a meeting delivered to the Corporation pursuant to paragraph (c) of this Section 2.02 is ten or fewer, each shareholder signing any such demand; (B) if the number of shareholders signing the demand or demands for a meeting delivered to the Corporation pursuant to paragraph (c) of this Section 2.02 is more than ten, each Person who either (I) was a Participant in any Solicitation of such demand or demands or (II) at the time of the delivery to the Corporation of the documents described in paragraph (c) of this Section 2.02, had engaged or intended to engage in any Solicitation of Proxies for use at such Special Meeting (other than a Solicitation of Proxies on behalf of the Corporation); or (C) any affiliate of a Soliciting Shareholder, if a majority of the directors then in office determines, reasonably and in good faith, that such Affiliate should be required to sign the written notice described in paragraph (c) of this Section 2.02 and/or the written agreement described in this paragraph (d) in order to prevent the purposes of this Section 2.02 from being evaded. (e) Except as provided in the following sentence, any Special Meeting shall be held at such hour and day as may be designated by, or designated in the manner provided by, whichever of the chairman of the board, the president or the board of directors shall have called such meeting. In the case of any Special Meeting called by the chairman of the board or the president upon the demand of shareholders (a "Demand Special Meeting"), such meeting shall be at such hour and day as may be designated by the board of directors; provided, however, that the date of any Demand Special Meeting shall be not more than 70 days after the Meeting Record Date (as defined in Section 2.05 of these by-laws); and provided further that if the directors then in office fail to designate an hour and date for a Demand Special Meeting within 10 days after the date that valid written demands for such Demand Special Meeting by the holders of record as of the Demand Record Date of shares representing at least 10% of all the votes entitled to be cast on any issue proposed to be considered at the Special Meeting are received by the Corporation (the "Delivery Date"), then such meeting shall be held at 2:00 P.M. (local time) on the 100th day after the Delivery Date or, if such 100th day is not a Business Day, on the first Business Day preceding such 100th day. In fixing a meeting date for any Special Meeting, the chairman of the board, the president or the board of directors may consider such factors as they deem relevant within the good faith exercise of their business judgment, including, without limitation, the nature of the action proposed to be taken, the facts and circumstances surrounding any demand for such meeting, and any plan of the board of directors to call an Annual Meeting or a Special Meeting for the conduct of related business. (f) The Corporation may engage nationally recognized independent inspectors of elections to act as an agent of the Corporation for the purpose of promptly performing a ministerial review of the validity of any purported written demand or demands for a Special Meeting received by the secretary. For the purpose of permitting the inspectors to perform such review, no purported demand shall be deemed to have been received by the Corporation until the earlier of (i) five Business Days following receipt by the secretary of such purported demand and (ii) such date as the independent inspectors certify to the 5 7 Corporation that the valid demands received by the secretary represent at least 10% of all the votes entitled to be cast on each issue proposed to be considered at the Special Meeting. Nothing contained in this paragraph shall in any way be construed to suggest or imply that the board of directors or any shareholder shall not be entitled to contest the validity of any demand, whether during or after such five Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto). (g) Only such business shall be conducted at a Special Meeting as shall have been described in the notice of meeting sent to shareholders pursuant to Section 2.04 of these by-laws. Subject to the terms of any series of Preferred Stock as may be issued by the Corporation from time to time (as such terms are stated and expressed in the resolution or resolutions of the board of directors providing for the issuance of such Preferred Stock), nominations of persons for election to the board of directors to fill any vacancy on the board of directors may be made at a Special Meeting called in accordance with this Section 2.02 for the purpose of electing directors as provided in Section 3.03 of these by-laws (i) by or at the direction of the board of directors, (ii) by the committee on directors of the board of directors (or, if such committee does not exist, any other committee of the board of directors serving a similar function) or (iii) by any shareholder of the Corporation who (A) is a shareholder of record at the time of giving of such notice of meeting, (B) is entitled to vote at such Special Meeting and (C) complies with the notice procedures set forth in this Section 2.02. Any shareholder desiring to nominate persons for election to the board of directors at such a Special Meeting shall cause a written notice to be received by the secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the later of (x) the date 50 days prior to such Special Meeting and (y) the date 10 Business Days after the first public announcement of such Special Meeting and of the nominees proposed by the board of directors to be elected at such Special Meeting. Such written notice shall be signed by the shareholder of record who intends to make the nomination (or his or her duly authorized proxy or other representative), shall bear the date of signature of such shareholder (or proxy or other representative) and shall set forth: (A) the name and address, as they appear on the Corporation's books, of such shareholder and the beneficial owner or owners, if any, on whose behalf the nomination is made; (B) the class and number of shares of the Corporation which are beneficially owned by such shareholder and any such beneficial owner or owners; (C) a representation that such shareholder is a holder of record of shares of the Corporation entitled to vote at such Special Meeting and intends to appear in person or by proxy at such Special Meeting to make the nomination specified in the notice; (D) the name and residence address of the person or persons to be nominated; (E) a description of all arrangements or understandings between such shareholder, any such beneficial owner or owners and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by such shareholder; (F) such other information regarding each nominee proposed by such shareholder as would be required to be disclosed in solicitations of proxies for elections or directors, or would be otherwise required to be disclosed, in each case pursuant to Regulation 14A under the Exchange Act, including any information that would be required to be included in a proxy statement filed pursuant to Regulation 14A had the nominee been nominated by the board of directors; and (G) the written consent of each nominee to be named in a proxy statement and to serve as a director of the Corporation if so elected. (b) Only persons who are nominated in accordance with the procedures set forth in this Section 2.02 shall be eligible to be elected as directors by shareholder vote at a Special Meeting. Only such 6 8 business shall be conducted at a Special Meeting as shall have been brought before such meeting in accordance with the procedures set forth in this Section 2.02. If the chairman of the meeting shall determine that a nomination or any business proposed to be brought before the Special Meeting was not properly made or brought in accordance with the procedures set forth in this Section 2.02, then the chairman shall so declare to the meeting and such nomination or business shall not be considered. (i) Notwithstanding the foregoing provisions of this Section 2.02, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.02. Nothing in this Section 2.02 shall be deemed to limit the Corporation's obligation to include shareholder proposals in its proxy statement if such inclusion is required by Rule 14a-8 under the Exchange Act. Section 2.03. Place of Meeting. The board of directors (or, in the absence of designation by the board of directors, then the officer calling a meeting) may designate any place within the State of Wisconsin as the place of meeting for any Annual Meeting, and Special Meeting or any postponement thereof. If no designation is made, the place of the meeting shall be at the address of the registered office of the Corporation in the State of Wisconsin. The room location for initially convening any meeting at the address of the registered office, if not designated by the board of directors, may be fixed by the secretary and shall be set forth in the notice of meeting. Any adjourned meeting may be reconvened at any place designated by vote of the board of directors or by the chairman of the board or the president. Section 2.04. Notice of Meeting. The Corporation shall send written notice stating the place, day and hour of any Annual Meeting or Special Meeting not less than 10 days nor more than 70 days before the date of such meeting either personally or by mail to each shareholder of record entitled to vote at such meeting and to other shareholders of record as may be required by the Wisconsin Business Corporation Law or the Restated Articles of Incorporation. In the event of any Demand Special Meeting, such notice of meeting shall be sent not more than 30 days after the Delivery Date (as defined in Section 2.02 (e) of these by-laws). If mailed, such notice of meeting shall be addressed to each shareholder at his or her address as it appears on the stock record books of the Corporation. Unless otherwise required by law or the Restated Articles of Incorporation, a notice of an Annual Meeting need not include a description of the purpose or purposes for which the meeting is called. In the case of any Special Meeting, the notice of meeting shall describe any business that the board of directors shall have theretofore determined to bring before the meeting, and in the case of a Demand Special Meeting, the notice of meeting shall also describe any business set forth in the statement of purpose of the demands received by the Corporation in accordance with Section 2.02 of these by-laws. If an Annual Meeting or Special Meeting is adjourned to a different date, time or place, the Corporation shall not be required to give notice of the new date, time or place if the new date, time or place is announced at the meeting before adjournment; provided, however, that if a new Meeting Record Date for an adjourned meeting is or must be fixed, the Corporation shall give notice of the adjourned meeting to persons who are shareholders as of the new Meeting Record Date. A shareholder's attendance at a meeting, in person or by proxy, waives objection to the following: (A) lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting or promptly upon arrival objects to holding the meeting or transacting business at the meeting; and (B) consideration of a particular matter at the meeting that is not within the purpose 7 9 described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. Section 2.05. Fixing of Record Date. The board of directors may fix, or provide the manner of fixing, a future date not less than 10 days nor more than 70 days prior to the date of any Annual Meeting or Special Meeting as the record date for the determination of shareholders entitled to notice of, or to vote at, such meeting (the "Meeting Record Date"). In the case of any Demand Special Meeting, (i) the Meeting Record Date shall be not later than the 30th day after the Delivery Date and (ii) if the board of directors fails to fix the Meeting Record Date within 30 days after the Delivery Date, then the close of business on such 30th day shall be the Meeting Record Date. The shareholders of record on the Meeting Record Date shall be the shareholders entitled to notice of and to vote at the meeting. Except as provided by the Wisconsin Business Corporation Law for a court-ordered adjournment, a determination of shareholders entitled to notice of or to vote at any Annual Meeting or Special Meeting is effective for any postponement or adjournment of such meeting unless the board of directors fixes a new Meeting Record Date, which it shall do if the meeting is postponed or adjourned to a date more than 120 days after the date fixed for the original meeting. The board of directors may also fix a future date as the record date for the purpose of determining shareholders entitled to take any other action or determining shareholders for any other purpose. Section 2.06. Voting Lists. After a Meeting Record Date has been fixed, the Corporation shall prepare a list of names of all of the shareholders entitled to notice of the meeting. The list shall be arranged by class or series of shares, if any, and show the address of and number of shares held by each shareholder. Such list shall be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing to the date of the meeting, at the Corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. The Corporation shall make the shareholders' list available at the meeting and any shareholder or his or her agent or attorney may inspect the list at any time during the meeting or any adjournment thereof. Refusal or failure to prepare or make available the shareholders' list shall not affect the validity of any action taken at a meeting of shareholders. Section 2.07. Quorum and Voting Requirements; Postponements; Adjournments. (a) Shares entitled to vote as a separate voting group may take action on a matter at any Annual Meeting or Special Meeting only if a quorum of those shares exists with respect to that matter. If the Corporation has only one class of stock outstanding, such class shall constitute a separate voting group for purposes of this Section 2.07. Except as otherwise provided in the Restated Articles of Incorporation or the Wisconsin Business Corporation Law, a majority of the votes entitled to be cast on a matter shall constitute a quorum of the voting group for action on that matter. Once a share is represented for any purpose at any Annual Meeting or Special Meeting, other than for the purpose of objecting to holding the meeting or transacting business at the meeting, it is considered present for purposes of determining whether a quorum exists for the remainder of the meeting and for any adjournment of that meeting unless a new Meeting Record Date is or must be set for the adjourned meeting. If a quorum exists, except in the case of the election of directors, action on a matter shall be approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the Restated Articles of Incorporation, these by-laws, or the Wisconsin Business Corporation Law requires a greater number of affirmative votes. Unless otherwise provided in the Restated Articles of Incorporation, directors are elected by a plurality of the votes cast by the shares 8 10 entitled to vote in the election of directors at any Annual Meeting, or Special Meeting called for the purpose of electing directors, at which a quorum is present. (b) The board of directors acting by resolution may postpone and reschedule any previously scheduled Annual Meeting or Special Meeting; provided, however, that a Demand Special Meeting shall not be postponed beyond the 100th day following the Delivery Date. Any Annual Meeting or Special Meeting may be adjourned from time to time, whether or not there is a quorum, (i) at any time, upon a resolution of shareholders if the votes cast in favor of such resolution by the holders of shares of each voting group entitled to vote on any matter theretofore properly brought before the meeting exceed the number of votes cast against such resolution by the holders of shares of each such voting group or (ii) at any time prior to the transaction of any business at such meeting, by the chairman of the board of the president or pursuant to resolution of the board of directors. No notice of the time and place of adjourned meetings need be given except as required by the Wisconsin Business Corporation Law. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 2.08. Proxies. At all meetings of shareholders, a shareholder entitled to vote may vote his or her shares in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder by signing an appointment form, either personally or by his or her attorney-in-fact. An appointment of a proxy is effective when received by the secretary or other officer or agent of the Corporation authorized to tabulate votes. An appointment is valid for eleven months from the date of its signing unless a different period is expressly provided in the appointment form. Section 2.09. Voting of Shares. (a) Each outstanding share, regardless of class, shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders, except to the extent that the voting rights of the shares of any class or classes are enlarged, limited, or denied by the Restated Articles of Incorporation of the Corporation or by the Wisconsin Business Corporation Law. (b) Shares held by another corporation, if a sufficient number of shares entitled to elect a majority of the directors of such other corporation is held directly or indirectly by the Corporation, shall not be entitled to vote at the meeting, but shares held in a fiduciary capacity may be voted. Section 2.10. Acceptance of Instruments Showing Shareholder Action. If the name signed on a vote, waiver or proxy appointment corresponds to the name of a shareholder, the Corporation, if acting in good faith, may accept the vote, waiver or proxy appointment and give it effect as the act of a shareholder. If the name signed on a vote, waiver or proxy appointment does not correspond to the name of a shareholder, the Corporation, if acting in good faith, may accept the vote, waiver or proxy appointment and give it effect as the act of the shareholder if any of the following apply: (a) The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity. 9 11 (b) The name purports to be that of a personal representative, administrator, executor, guardian or conservator representing the shareholder and, if the Corporation requests, evidence of fiduciary status acceptable to the Corporation is presented with respect to the vote, waiver or proxy appointment. (c) The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the Corporation requests, evidence of this status acceptable to the Corporation is presented with respect to the vote, waiver or proxy appointment. (d) The name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the Corporation requests, evidence acceptable to the Corporation of the signatory's authority to sign for the shareholder is presented with respect to the vote, waiver or proxy appointment. (e) Two or more persons are the shareholders as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all co-owners. The Corporation may reject a vote, waiver or proxy appointment if the secretary or other officer or agent of the Corporation who is authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder. Section 2.11. Conduct of Meeting. The chairman of the board, and in his or her absence, the president, and in his or her absence, any officer or director designated by the chairman of the board, and in his or her absence or in the absence of any such designation, a vice president in the order provided under Section 4.07 of these by-laws, and in their absence, any person chosen by the shareholders present shall call any Annual Meeting or Special Meeting to order and shall act as chairman of the meeting, and secretary of the Corporation shall act as secretary of all meetings of the shareholders, but in the absence of the secretary, the chairman of the meeting may appoint any other person to act as secretary of the meeting. ARTICLE III WORD OF DIRECTORS Restated: 7/21/66; 4/20/67 Section 3.01. General Powers, Number and Qualifications. Amended: 1/18/66; 1/22/76; 4/19/90; 7/19/90; 1/17/91; 7/18/91; 1/23/92; 4/22/93; 10/20/94; 1/19/95; 9/30/95; 4/1/96, 4/1/97 (a) All corporate powers of the Corporation shall be exercised by or under the authority of, and the business affairs of the Corporation shall be managed under the direction of, its board of directors. The number of directors of the Corporation shall be seventeen (17). No person shall be eligible to be elected or re-elected as a member of the board of directors if he or she shall have attained seventy (70) years of age and any director who attains the age of seventy (70) years shall resign from the 10 12 board of directors as of the last day of the calendar quarter in which such director's seventieth birthday falls. The board of directors shall be divided into three (3) classes consisting of six (6) directors in Class I, six (6) directors in Class II and five (5) directors in Class III. At each Annual Meeting, the successors to the class of directors whose term expires at the time of such meeting shall be elected to hold office until the third succeeding Annual Meeting and until their successors have been elected and, if necessary, qualified, or until there is a decrease in the number of directors which takes effect after the expiration of his or her term. (b) Subject to the terms of any series of Preferred Stock as may be issued by the Corporation from time to time, as such terms are stated and expressed in the resolution or resolutions of the board of directors providing for the issuance of such Preferred Stock, the number of directors is subject to increase or decrease at any time or from time to time by amending subsection (a) of this by-law in the manner provided in Section 3.12 of these by-laws, but no decrease shall have the effect of shortening the term of any incumbent director. Any increase or decrease in the number of directors shall be distributed over the three classes of directors in such manner after giving effect to such increase or decrease the number of directors in each class is as nearly equal as possible. Amended: 4/19/90; 1/23/92 Section 3.02. Removal, Resignation. Subject to the terms of any series of Preferred Stock as may be issued by the Corporation from time to time, as such terms are stated and expressed in the resolution or resolutions of the board of directors providing for the issuance of such Preferred Stock, a director may be removed from office by the affirmative vote of not less than 75 % of the shares entitled to vote for the election of such director, voting together as a single class, taken at a Special Meeting called for that purpose. A director may resign at any time by delivering his or her written resignation to the board of directors, to the chairman of the board, to the president or to the secretary of the Corporation. A director's resignation is effective when the notice is delivered unless the notice specifies a later effective date. Amended: 4/19/90; 1/23/92 Section 3.03. Vacancies. Subject to the terms of any series of Preferred Stock as may be issued by the Corporation from time to time, as such terms are stated and expressed in the resolution or resolutions of the board of directors providing for the issuance of such Preferred Stock, (a) any vacancy occurring in the board of directors, including a vacancy created by an increase in the number of directors may be filled only by the affirmative vote of a majority of the directors then in office, although less than a quorum; (b) if there shall be no directors then in office, the shareholders shall be entitled to fill the vacancies on the board of directors; and (c) directors appointed to newly created directorships resulting from any increase in the authorized number of directors or to fill any vacancies in the board of directors resulting from death, resignation, removal, disqualification or any other cause shall hold office for a term expiring at the next annual meeting of shareholders at which the term of the class to which they have been appointed expires. If the vacant office was held by a director elected by a voting group of shareholders, then only the holders of shares of that voting group may vote to fill the vacancy if it is filled by the shareholders, and only the remaining directors elected by that voting group may vote to fill the vacancy if it is filled by the directors. A vacancy that will occur at a specific later date, because of a resignation effective at a later date or otherwise, may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs. 11 13 Amended: 10/19/72 Section 3.04. Regular Meetings. The board of directors may provide, by resolution, the time and place within the State of Wisconsin for the holding of regular meetings without other notice than such resolution. Amended: 1/20/77; 1/23/92 Section 3.05. Special Meetings. Special meetings of the board of directors may be called by or at the request of the chairman of the board, the president, secretary, or any ten (10) of the directors. The person or persons authorized to call special meetings may fix any place, either within or without the State of Wisconsin, as the place for holding any special meeting called by them. Amended: 7/17/86; 1/23/92 Section 3.06. Notice. Notice of any special meeting and of any regular meeting (except as provided in Section 3.04) shall be given either (a) not later than three (3) days prior thereto by mailing written notice to such director at his or her business address or (b) not later than two (2) days prior thereto by sending written notice by private carrier that guarantees delivery on the next day to such director at his or her business address, and (c) not later than the day prior thereto by written or oral notice given by other means to each director either personally or to his or her business address. Whenever any notice whatever is required to be given to any director under the Restated Articles of Incorporation or by-laws, or any provision of law, a waiver thereof in writing signed at any time, whether before or after the time of meeting, by the director entitled to such notice, and retained by the Corporation shall be deemed equivalent to the giving of such notice. The attendance of a director at or participation in a meeting shall constitute a waiver of notice of such meeting unless the director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. Amended: 1/23/92 Section 3.07. Quorum. One-third of the number of directors fixed by Section 3.01 shall constitute a quorum for the transaction of business at any meeting. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present shall be the act of the board of directors, unless the act of a greater number is required by law, by the Restated Articles of Incorporation or these by-laws. Amended: 1/23/92 Section 3.08. Compensation. The board of directors, irrespective of any personal interest of any of its members, may establish compensation of all directors for services to the Corporation as directors, officers or otherwise, or may delegate such authority to an appropriate committee. The board of directors also shall have authority to provide for or to delegate authority to an appropriate committee to provide for reasonable pensions, disability or death benefits, and other benefits or payments to directors, officers and employees and to their estates, families, dependents, or beneficiaries, on account of prior services rendered by such directors, officers and employees to the Corporation. 12 14 Amended: 1/23/92 Section 3.09. Informal Action. Any action required or permitted by the Restated Articles of Incorporation or by-laws or any provision of the Wisconsin Business Corporation Law to be taken by the board of directors or a committee thereof at a meeting or by resolution may be taken without a meeting if the action is taken by all members of the board of directors or of the committee. The action shall be evidenced by one or more written consents describing the action taken, signed by each director or committee member and retained by the Corporation. Such action shall be effective when the last director or committee member signs the consent, unless the consent specifies a different effective date. Amended: 7/17/86; 1/23/92 Section 3.10. Committees. The board of directors by resolution approved by a majority of all directors then in office may designate one or more committees, including an executive committee, each committee to consist of two (2) or more directors elected by the board of directors, which to the extent provided in said resolution as initially adopted, and as thereafter amended by further resolution adopted by a like vote, shall have and may exercise when the board of directors is not in session, the authority of the board of directors in the management of the business and affairs of the Corporation, except that a committee may not do any of the following: (a) authorize distributions; (b) approve or propose to shareholders action that the Wisconsin Business Corporation Law requires to be approved by shareholders; (c) fill vacancies on the board of directors or, unless the board of directors provides by resolution that vacancies on a committee shall be filled by the affirmative vote of the remaining committee members, on any board committee; (d) amend the Corporation's Restated Articles of Incorporation; (e) adopt, amend or repeal these by-laws; (f) approve a plan of merger not requiring shareholder approval; (g) authorize or approve reacquisition of shares, except according to a formula or method prescribed by the board of directors; and (h) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the board of directors may authorize a committee to do so within limits prescribed by the board of directors. Unless otherwise provided by the board of directors in creating the committee, a committee may employ counsel, accountants and other consultants to assist it in the exercise of its authority. The board of directors may elect one or more of its members as alternate members of any such committee who may take the place of any absent member or members at any meeting of such committee, upon request of the chairman of such meeting. Subject to any provision of law and these by-laws, each such committee shall fix its own rules governing the conduct of its activities and shall make such reports to the board of directors of its activities as the board of directors may request. Notice of any meeting of committee shall be given either (i) as provided Section 3.06 or (ii) as provided by rules fixed by such committee. Except as otherwise provided by the Wisconsin Business Corporation Law or by the Restated Articles of Incorporation or by these by-laws, (1) a quorum of any committee of the board of directors having at least four members shall consist of one-third of the number of directors appointed to serve on the committee and (2) a quorum of any committee of the board of directors having three or two members shall consist of a majority of the number of members appointed to serve on the committee. Adopted: 1/18/90 Restated: 1/23/92 Section 3.11. Nominations. Nominations for the election of directors at any Annual Meeting or any Special Meeting may be made only in accordance with Sections 2.01 and 2.02 of these by-laws. 13 15 Adopted: 4/19/90 Section 3.12. Amendments. Notwithstanding the provisions of Article IX of these by-laws, Sections 3.01, 3.02, 3.03 and 3.12 of these by-laws have been adopted by the shareholders of the Corporation and may be amended only by (a) the affirmative vote of not less than a majority of the board of directors or (b) the affirmative vote of not less than 75 % of the outstanding shares entitled to vote generally for the election of directors, voting together as a single class. Adopted: 7/19/90 Amended: 1/23/92 Section 3.13. Telephonic and Electronic. (a) Notwithstanding any place specified in any notice of a regular or special meeting of the board of directors as provided in Sections 3.04 and 3.05 of these by-laws, or in any notice of any meeting of a committee of the board of directors in accordance with Section 3.10 of the by-laws, any or all directors may participate in a regular or special meeting or in a committee meeting of the board of directors by, or may conduct the meeting through the use of, any means of communication by which (i) all participating directors may simultaneously hear each other during the meeting or (ii) all communication during the meeting is immediately transmitted to each participating director, and each participating director is able to immediately send messages to all other participating directors. (b) If any meeting is conducted through the use of any means described in paragraph (a) above, all participating directors shall be informed that a meeting is taking place at which official business may be transacted. A director participating in a meeting by any means described in paragraph (a) above is deemed to be present in person at the meeting. If requested by a director, minutes of the meeting shall be prepared and distributed to each director. Adopted: 1/23/92 Section 3.14. Presumption of Assent. A director who is present and is announced as present at a meeting of the board of directors or any committee thereof when corporate action is taken assents to the action taken unless any of the following occurs: (a) the director objects at the beginning of the meeting or promptly upon his or her arrival to holding the meeting or transacting business at the meeting; (b) the director dissents or abstains from an action taken and minutes of the meeting are prepared that show the director's dissent or abstention from the action taken; (c) the director delivers written notice of his or her dissent or abstention to the presiding officer of the meeting before its adjournment or to the Corporation immediately after adjournment of the meeting; or (d) the director dissents or abstains from an action taken, minutes of the meeting are prepared that fail to show the director's dissent or abstention from the action taken, and the director delivers to the Corporation a written notice of that failure promptly after receiving the minutes. Such right of dissent or abstention shall not apply to a director who votes in favor of the action taken. 14 16 ARTICLE IV Restated: 1/20/77 OFFICERS Amended: 4/17/86; 1/23/92 Section 4.01. Number. The principal officers of the Corporation shall be a president, one or more vice presidents, a secretary, and a treasurer, each of whom shall be elected by the board of directors. Such other officers, including a chairman of the board of directors, and assistant officers as may be deemed necessary may be elected or appointed by the board of directors. The chairman of the board of directors, if one is elected, shall be chosen by the board of directors from among its membership, but the remaining officers may or may not be directors. Any two or more offices may be held by the same person. Except to the extent such power is limited by the board of directors, any officer authorized by these by-laws or the board of directors to appoint officers may appoint one or more other officers or assistant officers, and any officer making such an appointment shall report the appointment to the board of directors at its next regular meeting. Amended: 1/23/92 Section 4.02. Election and Term of Office. The officers of the Corporation to be elected by the board of directors shall be elected annually at the first meeting of the board of directors held after each Annual Meeting. The board of directors may elect additional officers at any time during the year. Each officer shall hold office until his or her successor shall have been duly elected or until his or her prior death, resignation, or removal. The board of directors may remove any officer and, unless restricted by the board of directors or these by-laws, an officer may remove any officer or assistant officer appointed by that officer, at any time, with or without cause and notwithstanding the contract rights, if any, of the officer removed. The appointment of an officer does not of itself create contract rights. An officer may resign at any time by delivering notice to the Corporation. The resignation shall be effective when the notice is delivered, unless the notice specifies a later effective date and the Corporation accepts the later effective date. Amended: 1/23/92 Section 4.03. Vacancy. A vacancy in any principal office because of death, resignation, removal or otherwise may be filled by the board of directors for the unexpired portion of the term. If a resignation of an officer is effective at a later date as contemplated by Section 4.02 hereof, the board of directors may fill the pending vacancy before the effective date if the board of directors provides that the successor may not take office until the effective date. Amended: 1/23/92 Section 4.04. Chief Executive Officer. The president shall be the chief executive officer of the Corporation unless the board of directors shall have chosen a chairman of the board of directors and designated such chairman of the board of directors as chief executive officer. Subject to the control of the board of directors, the chief executive officer shall in general supervise and control all of the business and affairs of the Corporation. The chief executive officer shall preside at all meetings of the shareholders and of the board of directors. The chief executive officer shall have authority, subject to such rules as may be prescribed by the board of directors, to appoint such agents, employees and, in accordance with Section 4.01 of these by-laws, other officers of the Corporation as he or she shall deem necessary, to prescribe their powers, duties and compensation, and to delegate authority to 15 17 them. Such agents, employees and officers shall hold office at the discretion of the chief executive officer. The chief executive officer shall have authority to sign, execute and acknowledge, on behalf of the Corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports, and all other documents or instruments necessary or proper to be executed in the course of the Corporation's regular business, or which shall be authorized by resolution of the board of directors; and except as otherwise provided by law or the board of directors, he or she may authorize the president, any vice president or other officer or agent of the Corporation to sign, execute and acknowledge such documents or instruments in his or her place and stead. In general, he or she shall perform all duties incident to the chief executive officer of the Corporation and such other duties as may be prescribed by the board of directors from time to time. Section 4.05. Chairman of the Board of Directors. The chairman of the board of directors, if one be chosen by the board of directors, shall perform all duties incident to the office of the chairman of the board and such other duties as may be prescribed by the board of directors. Section 4.06. President. The president shall perform all duties incident to the office of the president and such other duties as may be prescribed by the board of directors from time to time; provided, however, that should the board of directors elect a chairman of the board of directors any or all of the powers customarily incidental to the office of president may be assigned by the board of directors to such chairman of the board of directors. If the chairman of the board of directors is designated as the chief executive officer, the president shall be the chief administrative officer of the Corporation. Unless the board of directors otherwise provides, in the absence of the chairman of the board of directors or in the event of his or her inability or refusal to act, or in the event of a vacancy in the office of the chairman of the board of directors, the president shall perform the duties of the chairman of the board, and when so acting shall have all the powers of and be subject to all the restrictions upon the chairman of the board of directors. The president may sign with the secretary or any other proper officer of the Corporation thereunto authorized by the board of directors certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed, except in case where the signing and execution thereof shall be expressly delegated by the board of directors or by these by-laws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed. Amended: 1/23/92 Section 4.07. Vice Presidents. In the absence of the president, or in the event of his or her death, inability, or refusal to act, or in the event for any reason it shall be impracticable for the president to act personally, the vice presidents (in descending order of classes of vice presidents and, within any class, by the order of election to such class, unless otherwise provided by the board of directors) shall perform the duties of the president, and when so acting, shall have all the power of and be subject to all the restrictions upon the president. Each vice president shall perform such other duties and have such authority as from time to time may be assigned to him or her by the chairman of the board of directors, the president or by the board of directors. The execution of any instrument of the Corporation by any vice president shall be conclusive evidence, as to third-parties, of his or her authority to act in the stead of the chairman of the board of directors or the president. 16 18 Amended: 1/23/92 Section 4.08. Secretary. The secretary shall: (a) keep as permanent records of the Corporation any of the following that has been prepared: the minutes of the shareholders' and of the board of directors' meetings; records of actions taken by the board of directors without a meeting; and records of actions taken by a committee of the board of directors in place of the board of directors and on behalf of the Corporation; (b) see that all notices are duly given in accordance with these by-laws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is duly authorized; (d) maintain or cause an authorized agent to maintain a record of the shareholders of the Corporation, in a form that permits preparation of a list of the names and addresses of all shareholders, by class or series of shares and showing the number and the class or series of shares held by each shareholder; (e) have general charge of the stock transfer books of the Corporation; (f) tabulate, or cause an authorized agent to tabulate, votes cast at meetings of shareholders; and (g) in general perform all duties incident to the office of secretary and have such other duties and exercise such authority as from time to time may be delegated or assigned to him or her by the chairman of the board of directors, the president or by the board of directors. Section 4.09. Treasurer. The treasurer shall: (a) have charge and custody of all funds and securities of the Corporation; (b) pay such dividends as may be declared from time to time by the board of directors; (c) keep or arrange for the keeping of correct books of account and exhibit said books and accounts at the offices of the Corporation at any reasonable time when called upon to do so by the board of directors, and furnish statements when required by the chairman of the board of directors, the president or by the board of directors; and (d) in general perform all of the duties incident to the office of treasurer, and have such other duties and exercise such other authority as from time to time may be designated or assigned to him by the chairman of the board of directors, the president or by the board of directors. Amended: 1/23/92 Section 4.10. Assistants and Acting Officers. The board of directors and any officer authorized by the board of directors or these by-laws shall have the power to appoint any person to act as assistant to any officer or as agent for the Corporation in his or her stead, and such assistant or acting officer or other agent so appointed by the board of directors or any such officer shall have the power to perform all the duties of the office to which he or she is so appointed to be assistant or as to which he or she is so appointed to act, subject to such limitations as the board of directors or the appointing officer shall prescribe. ARTICLE V CONTRACTS, LOANS, CHECKS, DEPOSITS AND ASSIGNMENTS OF SECURITIES Section 5.01. Contracts. The board of directors may authorize any officer or officers, agent or agents, to enter any contract or execute or deliver any instrument in the name of and on behalf of the Corporation, and such authorization may be general or confined to specific instances. 17 19 Section 5.02. Loans. No loans shall be contracted on behalf of the Corporation and no evidences of indebtedness shall be issued in its name unless authorized by or under the authority of a resolution of the board of directors. Such authorization may be general or confined to specific instances. Section 5.03. Checks, Drafts, etc. All checks, drafts, or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents, and in such manner as shall from time to time be determined by or under the authority of a resolution of the board of directors. Section 5.04. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies, or other depositories as may be selected by or under the authority of a resolution of the board of directors. Amended: 1/20/77 Section 5.05. Assignment of Securities. The chairman of the board of directors, the president or a vice president together with the treasurer or secretary, are authorized and empowered to sell, assign, pledge or hypothecate any and all shares of stock and all securities or interest in stock or securities owned or held by the Corporation at any time, including deposit certificates for stock or securities and warrants or rights which entitle the holder thereof to subscribe for shares of stock, and to make and execute to the purchaser or purchasers, pledgee or pledgees, on behalf and in the name of the Corporation, any assignment of stock certificates or securities owned or held by the Corporation, including any deposit certificates for stock or securities and any certificates representing any right to subscribe for shares of stock. ARTICLE VI CERTIFICATES FOR SHARES AND THEIR TRANSFER Amended: 1/23/92 Section 6.01. Certificates for Shares. Certificates representing shares of the Corporation shall be in such form as shall be determined by the board of directors. Such certificates shall be signed by the chairman of the board, the president or a vice president and by the secretary or an assistant secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate, a new one may be issued therefor upon such terms and indemnity to the Corporation as may be satisfactory to the secretary. Amended: 1/23/92 Section 6.02. Facsimile Signatures and Seal. The seal of the Corporation on any certificates for shares may be a facsimile. The signatures of the chairman of the board, president or vice president and the secretary or assistant secretary upon a certificate may be facsimiles if the certificate is countersigned 18 20 by a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation. In case any officer has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issue. Amended: 10/21/71 Section 6.03. Transfer of Shares. Transfer of shares of the Corporation shall be made by the holder of record thereof or by his or her legal representative, who shall, if so required, furnish proper evidence of incumbency or appointment and of authority to transfer, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the secretary or transfer agent of the Corporation, and on surrender for cancellation of the certification for such shares. The person in whose name shares stand shall be deemed by the Corporation to be the owner thereof for all purposes. Section 6.04. Stock Regulations. The board of directors shall have the power and authority to make all such further rules and regulations not inconsistent with the statutes of the State of Wisconsin as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation. Adopted: 1/23/92 Section 6.05. Uncertificated Shares. The board of directors may authorize the issuance of any shares of any of the Corporation's classes or series without certificates. The authorization does not affect shares already represented by certificates until the certificates are surrendered to the Corporation. Adopted: 1/23/92 Section 6.06. No Nominee Procedures. The Corporation has not established, and nothing in these by-laws shall be deemed to establish, any procedure by which a beneficial owner of the Corporation's shares that are registered in the name of a nominee is recognized by the Corporation as the shareholder under Section 180.0723 of the Wisconsin Business Corporation Law. ARTICLE VII CORPORATE SEAL. NOTICES Section 7.01. Seal. The board of directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the Corporation and the words "Corporate Seal." Adopted: 1/23/92 Section 7.02. Notices. Except as otherwise required by law or these by-laws, any notice required to be given by these by-laws may be given orally or in writing and notice may be communicated in person, by telephone, telegraph, teletype, facsimile or other form of wire or wireless communication, or by mail or private carrier. Except where these by-laws require a notice to be delivered to or received by a recipient, written notice to be given by these by-laws is effective at the earliest of the following: (a) when received, (b) if communicated by mail, when deposited in the United States mail, if mailed postpaid and correctly addressed, (c) if communicated by private carrier, when delivered to 19 21 the carrier and (d) if communicated by telegraph, when the telegram is delivered to the telegraph company. Oral notice is effective when communicated. ARTICLE VIII INDEMNIFICATION Amended: (stat. ref.) 1/23/92 Section 8.01. Certain Definitions. All capitalized terms used in this Article VIII and not otherwise hereinafter defined in this Section 8.01 shall have the meaning set forth in Section 180.0850 of the Statute. The following capitalized terms (including any plural forms thereof) used in this Article VIII shall be defined as follows: (a) "Affiliate" shall include, without limitation, any corporation, partnership, joint venture, employee benefit plan, trust or other enterprise that directly or indirectly through one or more intermediaries, controls is controlled by, or is under common control with, the Corporation. (b) "Authority" shall mean the entity selected by the Director or Officer to determine his or her right to indemnification pursuant to Section 8.04. (c) "Board" shall mean the entire then elected and serving board of directors of the Corporation, including all members thereof who are Parties to the subject Proceeding or any related Proceeding. (d) "Breach of Duty" shall mean the Director or Officer breached or failed to perform his or her duties to the Corporation and his or her breach of or failure to perform those duties is determined, in accordance with Section 8.04, to constitute misconduct under Section 180.0851 (2) (a) 1, 2, 3 or 4 of the Statute. (e) "Controlled Banking Subsidiary" shall mean any subsidiary of the Corporation, at least 80% of the outstanding voting stock of which is owned directly or indirectly by the Corporation, chartered as a bank or trust company under federal or state law. (f) "Corporation" as used herein and as defined in the Statute and incorporated by reference into the definitions of certain other capitalized terms used herein, shall mean this Corporation, including, without limitation, any successor corporation or entity to this Corporation by way of merger, consolidation or acquisition of all or substantially all of the capital stock or assets of this Corporation. (g) "Director or Officer" shall have the meaning set forth in the Statute; provided, that, for purposes of this Article VIII, it shall be conclusively presumed that any Director or Officer serving as a director, officer, partner, trustee, member of any governing or decision-making committee, employee or agent of an Affiliate shall be so serving at the request of the Corporation. (b) "Disinterested Quorum" shall mean a quorum of the Board who are not Parties to the subject Proceeding or any related Proceeding. 20 22 (i) "Party" shall have the meaning set forth in the Statute; provided, that, for purposes of this Article VIII, the term "Party" shall also include any Director or Officer who is or was a witness in a Proceeding at a time when he or she has not otherwise been formally named a Party thereto (j) "Proceeding" shall have the meaning set forth in the Statute; provided, that, in accordance with Section 180.0859 of the Statute and for purposes of this Article VIII, the term "Proceeding" shall also include all Proceedings (i) brought under (in whole or in part) the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, their respective state counterparts, and/or any rule or regulation promulgated under any of the foregoing; (ii) brought before an Authority or otherwise to enforce rights hereunder; (iii) any appeal from a Proceeding; and (iv) any Proceeding in which the Director or Officer is a plaintiff or petitioner because he or she is a Director or Officer; provided, however, that any such Proceeding under this subsection (iv) must be authorized by a majority vote of a Disinterested Quorum. (k) "Statute" shall mean Sections 180.0850 through 180.0859, inclusive, of the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes, as the same shall then be in effect, including any amendments thereto, but, in the case of any such amendment, only to the extent such amendment permits or requires the Corporation to provide broader indemnification rights than the Statute permitted or required the Corporation to provide prior to such amendment. Section 8.02. Mandatory Indemnification. To the fullest extent permitted or required by the Statute, the Corporation shall indemnify a Director or Officer against all Liabilities incurred by or on behalf of such Director or Officer in connection with a Proceeding in which the Director or Officer is a Party because he or she is or was a Director or Officer. Section 8.03. Procedural Requirements. (a) A Director or Officer who seeks indemnification under Section 8.02 shall make a written request therefor to the Corporation. Subject to Section 8.03(b), within sixty days of the Corporation's receipt of such request, the Corporation shall pay or reimburse the Director or Officer for the entire amount of Liabilities incurred by the Director or Officer in connection with the subject Proceeding (net of any Expenses previously advanced pursuant to Section 8.05). (b) No indemnification shall be required to be paid by the Corporation pursuant to Section 8.02 if, within such sixty-day period, (i) a Disinterested Quorum, by a majority vote thereof, determines that the Director or Officer requesting indemnification engaged in misconduct constituting a Breach of Duty or (ii) a Disinterested Quorum cannot be obtained. (c) In either case of nonpayment pursuant to Section 8.03(b), the Board shall immediately authorize by resolution that an Authority, as provided in Section 8.04, determine whether the Director's or Officer's conduct constituted a Breach of Duty and, therefore, whether indemnification should be denied hereunder. (d) (i) If the Board does not authorize an Authority to determine the Director's or Officer's right to indemnification hereunder within such sixty-day period and/or (ii) if indemnification of the requested amount of Liabilities is paid by the Corporation, then it shall be conclusively presumed for all purposes that a Disinterested Quorum has affirmatively determined that the Director or Officer did not 21 23 engage in misconduct constituting a Breach of Duty and, in the case of subsection (i) above (but not subsection (ii)), indemnification by the Corporation of the requested amount of Liabilities shall be paid to the Director or Officer immediately. Amended: (stat. ref.) 1/23/92 Section 8.04. Determination of Indemnification. (a) If the Board authorizes an Authority to determine a Director's or Officer's right to indemnification pursuant to Section 8.03, then the Director or Officer requesting indemnification shall have the absolute discretionary authority to select one of the following as such Authority: (i) An independent legal counsel; provided, that such counsel shall be mutually selected by such Director or Officer and by a majority vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, then by a majority vote of the Board; (ii) A panel of three arbitrators selected from the panels of arbitrators of the American Arbitration Association in Milwaukee, Wisconsin; provided, that (A) one arbitrator shall be selected by such Director or Officer, the second arbitrator shall be selected by a majority vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, then by a majority vote of the Board, and the third arbitrator shall be selected by the two previously selected arbitrators, and (B) in all other respects, such panel shall be governed by the American Arbitration Association's then existing Commercial Arbitration Rules; or (iii) A court pursuant to and in accordance with Section 180.0854 of the Statute. (b) In any such determination by the selected Authority there shall exist a rebuttable presumption that the Director's or Officer's conduct did not constitute a Breach of Duty and that indemnification against the requested amount of Liabilities is required. The burden of rebutting such a presumption by clear and convincing evidence shall be on the Corporation or such other party asserting that such indemnification should not be allowed. (c) The Authority shall make its determination within sixty days of being selected and shall submit a written opinion of its conclusion simultaneously to both the Corporation and the Director or Officer. (d) If the Authority determines that indemnification is required hereunder, the Corporation shall pay the entire requested amount of Liabilities (net of any Expenses previously advanced pursuant to Section 8.05), including interest thereon at a reasonable rate, as determined by the Authority, within ten days of receipt of the Authority's opinion; provided, that, if it is determined by the Authority that a Director or Officer is entitled to indemnification against Liabilities incurred in connection with some claims, issues or matters, but not as to other claims, issues or matters, involved in the subject Proceeding, the Corporation shall be required to pay (as set forth above) only the amount of such requested Liabilities as the Authority shall deem appropriate in light of all of the circumstances of such Proceeding. (e) The determination by the Authority that indemnification is required hereunder shall be binding upon the Corporation regardless of any prior determination that the Director or Officer engaged in a Breach of Duty. 22 24 (f) All expenses incurred in the determination process under this Section 8.04 by either the Corporation or the Director or Officer, including, without limitation, all Expenses of the selected Authority, shall be paid by the Corporation. Section 8.05. Mandatory Allowance of Expenses. (a) The Corporation shall pay or reimburse from time to time or at any time, within ten days after the receipt of the Director's or Officer's written request therefor, the reasonable Expenses of the Director or Officer as such Expenses are incurred; provided, the following conditions are satisfied: (i) The Director or Officer furnishes to the Corporation an executed written certificate affirming his or her good faith belief that he or she has not engaged in misconduct which constitutes a Breach of Duty; and (ii) The Director or Officer furnishes to the Corporation an unsecured executed written agreement to repay any advances made under this Section 8.05 if it is ultimately determined by an Authority that he or she is not entitled to be indemnified by the Corporation for such Expenses pursuant to Section 8.04. (b) If the Director or Officer must repay any previously advanced Expenses pursuant to this Section 8.05, such Director or Officer shall not be required to pay interest on such amounts. Amended: 1/23/92 Section 8.06. Indemnification and Allowance of Expenses of Certain Others. (a) The Corporation shall indemnify a director or officer of any Controlled Banking Subsidiary (who is not otherwise serving as a Director or Officer) against all Liabilities, and shall advance the reasonable Expenses, incurred by such director or officer in a Proceeding, but only to the extent such Proceeding is based on acts or omissions alleged to have occurred after the Controlled Banking Subsidiary has become a subsidiary of the Corporation to the same extent hereunder as if such director or officer incurred such Liabilities because he or she was a Director or Officer, if such director or officer is a Party thereto because he or she is or was a director or officer of the Banking Subsidiary. (b) The Board may, in its sole and absolute discretion as it deems appropriate, pursuant to a majority vote thereof, indemnify a director or officer of an Affiliate (who is not otherwise serving as a Director or Officer or a director or officer of a Controlled Banking Subsidiary) against all Liabilities, and shall advance the reasonable Expenses, incurred by such director or officer in a Proceeding to the same extent hereunder as if such director or officer incurred such Liabilities because he or she was a Director or Officer, if such director or officer is a Party thereto because he or she is or was a director or officer of the Affiliate. (c) The Board may, in its sole and absolute discretion it deems appropriate, pursuant to a majority vote thereof, indemnify against Liabilities incurred by, and/or provide for the advance of reasonable Expenses of, an employee or authorized agent of the Corporation acting within the scope of his or her duties as such and who is not otherwise a Director or Officer. Notwithstanding the foregoing, the Corporation shall indemnify an employee who is not a Director or Officer of the Corporation, to the 23 25 extent that he or she has been successful on the merits or otherwise in defense of a proceeding, for all reasonable expenses incurred in the proceeding if the employee was a party because he or she was an employee of the Corporation. Section 8.07. Insurance. The Corporation may purchase and maintain insurance on behalf of a Director or Officer or any individual who is or was an employee or authorized agent of the Corporation against any Liability asserted against or incurred by such individual in his or her capacity as such or arising from his or her status as such, regardless of whether the Corporation is required or permitted to indemnify against any such Liability under this Article VIII. Section 8.08. Notice to the Corporation. A Director or Officer shall promptly notify the Corporation in writing when he or she has actual knowledge of a Proceeding which may result in a claim of indemnification against Liabilities or allowance of Expenses hereunder, but the failure to do so shall not relieve the Corporation of any Liability to the Director or Officer hereunder unless the Corporation shall have been irreparably prejudiced by such failure (as determined by an Authority selected pursuant to Section 8.04 (a)). Section 8.09. Severability. If any provision of this Article VIII shall be deemed invalid or inoperative, or if a court of competent jurisdiction determines that any of the provisions of this Article VIII contravene public policy, this Article VIII shall be construed so that the remaining provisions shall not be affected, but shall remain in full force and effect, and any such provisions which are invalid or inoperative or which contravene public policy shall be deemed, without further action or deed by or on behalf of the Corporation, to be modified, amended and/or limited, but only to the extent necessary to render the same valid and enforceable; it being understood that it is the Corporation's intention to provide the Directors and Officers with the broadest possible protection against personal liability allowable under the Statute. Section 8.10. Nonexclusivity of Article VIII. The rights of a Director or Officer (or any other person) granted hereunder shall not be deemed exclusive of any other rights to indemnification against Liabilities or allowance of Expenses which the Director or Officer (or such other person) may be entitled to under any written agreement, Board resolution, vote of stockholders of the Corporation or otherwise, including, without limitation, under the Statute. Nothing contained in this Article VIII shall be deemed to limit the Corporation's obligations to indemnify against Liabilities or allow Expenses to a Director or Officer under the Statute. Section 8.11. Amendment. (a) This Article VIII may only be altered, amended or repealed by the affirmative vote of a majority of the shareholders of the Corporation represented at a meeting at which a quorum is present and entitled to vote; provided, however, that the Board may alter or amend this Article VIII without such shareholder approval if any such alteration or amendment is (i) made in order to conform to any amendment or revision of the Wisconsin Business Corporation Law, including, without limitation, the Statute, which (x) expands or permits the expansion of a Director's or Officer's right to indemnification thereunder; (y) limits or eliminates, or permits the limitation or elimination, of the liability of a Director or Officer; or (z) is otherwise beneficial to the Directors and Officers or (ii) an alteration or amendment which is otherwise deemed by the Board to be an immaterial modification. 24 26 (b) This Article VIII shall be deemed to be a contract between the Corporation and each Director and Officer and any repeal or other limitation of this Article VIII or any repeal or limitation of the Statute or any other applicable law shall not limit any rights of indemnification against Liabilities or allowance of Expenses then existing or arising out of events, acts or omissions occurring prior to such repeal or limitation, including, without limitation, the right to indemnification against Liabilities or allowance of Expenses for Proceedings commenced after such repeal or limitation to enforce this Article VIII with regard to acts, omissions or events arising prior to such repeal or limitation. ARTICLE IX Restated: 4/20/72 AMENDMENTS Amended: 1/23/92 Section 9.01. By Shareholders. These by-laws may be altered, amended or repealed and new by-laws may be adopted by the shareholders by affirmative vote of not less than a majority of the shares present or represented at any Annual Meeting or Special Meeting at which a quorum is in attendance. Amended: 1/23/92 Section 9.02. By Directors. These by-laws may be altered, amended or repealed, and new by-laws may be adopted by the board of directors by affirmative vote of a majority of the number of directors present at any meeting at which a quorum is in attendance, but any by-law so adopted may be subsequently altered, amended or repealed by the shareholders. Any by-law adopted, altered or amended by shareholders may be subsequently altered, amended or repealed by the board of directors unless such by-law as adopted, altered or amended by shareholders expressly denies such authority to the board of directors. 25 EX-4.6 4 CREDIT AGREEMENT DATE APRIL 22 1 [EXECUTION COPY] FOUR YEAR FACILITY CREDIT AGREEMENT dated as of April 22, 1996 among FIRSTAR CORPORATION THE LENDERS NAMED HEREIN THE FIRST NATIONAL BANK OF CHICAGO, as Agent and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION CHEMICAL BANK and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Co-Agents 2 TABLE OF CONTENTS ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.1. Description of Facility . . . . . . . . . . . . . . . . . . . . . . . 13 2.2. Availability of Facility . . . . . . . . . . . . . . . . . . . . . . 13 2.3. Committed Advances. . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.3.1. Commitment . . . . . . . . . . . . . . . . . . . . . . . 13 2.3.2. Ratable Loans; Types of Advances. . . . . . . . . . . . . . . . . . . . . . . 13 2.3.3. Minimum Amount of Each Committed Advance. . . . . . . . . . . . . . . . . . . . 14 2.3.4. Applicable Margin. . . . . . . . . . . . . . . . . . . . 14 2.3.5. Method of Selecting Types and Interest Periods for New Committed Advances . . . . . . . . . . . 15 2.3.6. Conversion and Continuation of Outstanding Committed Advances . . . . . . . . . . . . . 15 2.4. Competitive Bid Advances . . . . . . . . . . . . . . . . . . . . . . 16 2.4.1. Competitive Bid Option; Repayment of Competitive Bid Advances . . . . . . . . . . . . . . . . 16 2.4.2. Competitive Bid Quote Request. . . . . . . . . . . . . . 16 2.4.3. Invitation for Competitive Bid Quotes. . . . . . . . . . 17 2.4.4. Submission and Contents of Competitive Bid Quotes . . . . . . . . . . . . . . . . . 17 2.4.5. Notice to Borrower . . . . . . . . . . . . . . . . . . . 19 2.4.6. Acceptance and Notice by Borrower. . . . . . . . . . . . 19 2.4.7. Allocation by the Agent . . . . . . . . . . . . . . . . 20 2.4.8. Administration Fee . . . . . . . . . . . . . . . . . . . 20 2.5. Method of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . 20 2.6. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.6.1. Facility Fee . . . . . . . . . . . . . . . . . . . . . . 21 2.6.2. Usage Fee . . . . . . . . . . . . . . . . . . . . . . . 21 2.6.3. Agent's Fees . . . . . . . . . . . . . . . . . . . . . . 21 2.7. Reductions in Aggregate Commitment; Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.7.1. Reductions in Aggregate Commitment . . . . . . . . . . . 21 2.7.2. Principal Payments . . . . . . . . . . . . . . . . . . . 21 2.8. Changes in Interest Rate, etc. . . . . . . . . . . . . . . . . . . . 22 2.9. Rates Applicable After Default . . . . . . . . . . . . . . . . . . . 22 2.10. Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.11. Notes; Telephonic Notices . . . . . . . . . . . . . . . . . . . . . . 23 2.12. Interest Payment Dates; Interest and Fee Basis . . . . . . . . . . . 23 2.13. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions . . . . . . . . . . . . 24 2.14. Lending Installations . . . . . . . . . . . . . . . . . . . . . . . . 24 2.15. Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . . . . . 24 2.16. Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . 24 2.17. Extension of Termination Date . . . . . . . . . . . . . . . . . . . . 25
Page i 3 2.17.1. Extension Procedures . . . . . . . . . . . . 25 2.17.2. Termination of Lenders . . . . . . . . . . . 25 2.17.3. Successor Lenders. . . . . . . . . . . . . . 26 3.1. Yield Protection . . . . . . . . . . . . . . . . . . 27 3.2. Changes in Capital Adequacy Regulations . . . . . . 28 3.3. Availability of Types of Advances . . . . . . . . . 28 3.4. Funding Indemnification . . . . . . . . . . . . . . 28 3.5. Lender Statements; Survival of Indemnity . . . . . . 29 ARTICLE IV CONDITIONS PRECEDENT . . . . . . . . . . . . . . . 29 4.1. Initial Advance . . . . . . . . . . . . . . . . . . 29 4.2. Each Advance . . . . . . . . . . . . . . . . . . . . 30 ARTICLE V REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 31 5.1. Corporate Existence and Standing . . . . . . . . . . 31 5.2. Authorization and Validity . . . . . . . . . . . . . 31 5.3. No Conflict; Government Consent . . . . . . . . . . 31 5.4. Financial Statements . . . . . . . . . . . . . . . . 32 5.5. Material Adverse Change . . . . . . . . . . . . . . 32 5.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . 32 5.7. Litigation and Contingent Obligations . . . . . . . 32 5.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . 33 5.9. ERISA . . . . . . . . . . . . . . . . . . . . . . . 33 5.10. Accuracy of Information . . . . . . . . . . . . . . 33 5.11. Regulation U . . . . . . . . . . . . . . . . . . . . 33 5.12. Material Agreements . . . . . . . . . . . . . . . . 33 5.13. Compliance With Laws . . . . . . . . . . . . . . . . 33 5.14. Ownership of Properties . . . . . . . . . . . . . . 34 5.15. Investment Company Act . . . . . . . . . . . . . . . 34 5.16. Public Utility Holding Company Act . . . . . . . . . 34 ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . 34 6.1. Financial Reporting . . . . . . . . . . . . . . . . 34 6.2. Use of Proceeds . . . . . . . . . . . . . . . . . . 37 6.3. Notice of Default . . . . . . . . . . . . . . . . . 37 6.4. Conduct of Business . . . . . . . . . . . . . . . . 38 6.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . 38 6.6. Insurance . . . . . . . . . . . . . . . . . . . . . 38 6.7. Compliance with Laws . . . . . . . . . . . . . . . . 38 6.8. Maintenance of Properties . . . . . . . . . . . . . 38 6.9. Inspection . . . . . . . . . . . . . . . . . . . . . 38 6.10. Merger . . . . . . . . . . . . . . . . . . . . . . . 39 6.11. Sale of Assets . . . . . . . . . . . . . . . . . . . 39 6.12. Acquisitions . . . . . . . . . . . . . . . . . . . . 39 6.13. Liens . . . . . . . . . . . . . . . . . . . . . . . 40 6.14. Capitalization . . . . . . . . . . . . . . . . . . . 42
Page ii 4 6.15. Consolidated Non-Performing Assets to Total Equity Capital . . . . . . . . . . . . . . . 42 6.16. Debt to Total Equity Capital. . . . . . . . . . . . . 42 ARTICLE VII DEFAULTS. . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES . . . . . . . . . . . . . . . . . . 45 8.1. Acceleration . . . . . . . . . . . . . . . . . . . . 45 8.2. Amendments . . . . . . . . . . . . . . . . . . . . . 45 8.3. Preservation of Rights . . . . . . . . . . . . . . . 46 ARTICLE IX GENERAL PROVISIONS . . . . . . . . . . . . . . . . 46 9.1. Survival of Representations . . . . . . . . . . . . . 46 9.2. Governmental Regulation . . . . . . . . . . . . . . . 46 9.3. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 47 9.4. Headings . . . . . . . . . . . . . . . . . . . . . . 47 9.5. Entire Agreement . . . . . . . . . . . . . . . . . . 47 9.6. Several Obligations; Benefits of this Agreement . . . . . . . . . . . . . . . . . . 47 9.7. Expenses; Indemnification . . . . . . . . . . . . . . 47 9.8. Numbers of Documents . . . . . . . . . . . . . . . . 48 9.9. Accounting . . . . . . . . . . . . . . . . . . . . . 48 9.10. Severability of Provisions . . . . . . . . . . . . . 48 9.11. Nonliability of Lenders . . . . . . . . . . . . . . . 48 9.12. CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . 48 9.13. CONSENT TO JURISDICTION . . . . . . . . . . . . . . . 48 9.14. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . 49 9.15. Confidentiality . . . . . . . . . . . . . . . . . . . 49 ARTICLE X THE AGENT . . . . . . . . . . . . . . . . . . . . . 49 10.1. Appointment . . . . . . . . . . . . . . . . . . . . . 49 10.2. Powers. . . . . . . . . . . . . . . . . . . . . . . . 49 10.3. General Immunity. . . . . . . . . . . . . . . . . . . 50 10.4. No Responsibility for Loans, Recitals, etc. . . . . . 50 10.5. Action on Instructions of Lenders . . . . . . . . . . 50 10.6. Employment of Agents and Counsel . . . . . . . . . . 50 10.7. Reliance on Documents, Counsel. . . . . . . . . . . . 51 10.8. Agent's Reimbursement and Indemnification . . . . . . 51 10.9. Rights as a Lender. . . . . . . . . . . . . . . . . . 51 10.10. Lender Credit Decision. . . . . . . . . . . . . . . . 51 10.11. Successor Agent . . . . . . . . . . . . . . . . . . . 52 10.12. Co-Agents . . . . . . . . . . . . . . . . . . . . . . 52
Page iii 5 ARTICLE XI SETOFF; RATABLE PAYMENTS . . . . . . . . . . . 53 11.1. Setoff . . . . . . . . . . . . . . . . . . . . . 53 11.2. Ratable Payments . . . . . . . . . . . . . . . . 53 ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS . . . . . . . . . . . . . . . . 53 12.1. Successors and Assigns . . . . . . . . . . . . . 53 12.2. Participations . . . . . . . . . . . . . . . . . 54 12.2.1. Permitted Participants; Effect . . . . 54 12.2.2. Voting Rights. . . . . . . . . . . . . 54 12.2.3. Benefit of Setoff. . . . . . . . . . . 54 12.3. Assignments. . . . . . . . . . . . . . . . . . . 55 12.3.1. Permitted Assignments. . . . . . . . . 55 12.3.2. Effect; Effective Date . . . . . . . . 55 12.4. Dissemination of Information . . . . . . . . . . 56 12.5. Tax Treatment. . . . . . . . . . . . . . . . . . 56 ARTICLE XIII NOTICES. . . . . . . . . . . . . . . . . . . . 56 13.1. Giving Notice. . . . . . . . . . . . . . . . . . 56 13.2. Change of Address. . . . . . . . . . . . . . . . 56 ARTICLE XIV COUNTERPARTS . . . . . . . . . . . . . . . . . 56
Page iv 6 FOUR YEAR FACILITY CREDIT AGREEMENT This Four Year Facility Credit Agreement, dated as of April 22, 1996, is among Firstar Corporation, the Lenders, Bank of America National Trust and Savings Association, Chemical Bank and Morgan Guaranty Trust Company of New York, as Co-Agents and The First National Bank of Chicago, as Agent. The parties hereto agree as follows: ARTICLE I DEFINITIONS As used in this Agreement: "Absolute Rate" means, with respect to a Loan made by a given Lender for the relevant Absolute Rate Interest Period, the rate of interest per annum (rounded to the nearest 1/100 of 1%) offered by such Lender and accepted by the Borrower pursuant to Section 2.4.6. "Absolute Rate Advance" means a borrowing hereunder consisting of the aggregate amount of the several Absolute Rate Loans made by some or all of the Lenders to the Borrower at the same time and for the same Absolute Rate Interest Period. "Absolute Rate Auction" means a solicitation of Competitive Bid Quotes setting forth Absolute Rates pursuant to Section 2.4. "Absolute Rate Interest Period" means, with respect to an Absolute Rate Advance or an Absolute Rate Loan, a period of not less than 7 and not more than 180 days commencing on a Business Day selected by the Borrower pursuant to this Agreement, but in no event extending beyond the Termination Date. If such Absolute Rate Interest Period would end on a day which is not a Business Day, such Absolute Rate Interest Period shall end on the next succeeding Business Day. "Absolute Rate Loan" means a Loan which bears interest at an Absolute Rate. "Acquisition" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership, association, joint venture or similar business organization. 7 "Adequately Capitalized" means "adequately capitalized" for purposes of 12 U.S.C. 1831(o) and any rules and regulations issued thereunder (including, without limitation, 12 C.F.R. 565.4), as amended, supplemented or otherwise modified from time to time. "Advance" means a borrowing hereunder consisting of the aggregate amount of the several Loans made by some or all of the Lenders to the Borrower of the same Type (or on the same interest basis in the case of Competitive Bid Advances) and, in the case of Fixed Rate Advances, for the same Interest Period and includes both a Committed Advance and a Competitive Bid Advance. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Agent" means The First National Bank of Chicago in its capacity as agent for the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X. "Aggregate Commitment" means the aggregate of the Commitments of all the Lenders, as reduced from time to time pursuant to the terms hereof. "Agreement" means this Four Year Facility Credit Agreement, as it may be amended or modified and in effect from time to time. "Agreement Accounting Principles" means generally accepted accounting principles as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.4. "Alternate Base Rate" means, for any day, a rate of interest per annum equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum of Federal Funds Effective Rate for such day plus 1/2% per annum. "Applicable Margin" means, at any date of determination thereof with respect to any Eurodollar Committed Advance and the facility fees payable pursuant to Section 2.6.1, the respective rates per annum for such Eurodollar Committed Advance and facility fees calculated in accordance with the terms of Section 2.3.4. "Article" means an article of this Agreement unless another document is specifically referenced. Page 2 8 "Authorized Officer" means any of the Chairman of the Board, President, or Senior Vice President - Finance and Treasurer of the Borrower, acting singly. "Banking Subsidiary" means any insured depository institution (within the meaning of 12 U.S.C. 1813(c), as amended, supplemented or otherwise modified from time to time), which is controlled (within the meaning of 12 U.S.C. 1841, as amended, supplemented or otherwise modified from time to time) by the Borrower. "Borrower" means Firstar Corporation, a Wisconsin corporation, and its successors and assigns. "Borrowing Date" means a date on which an Advance is made hereunder. "Business Day" means (i) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago and New York for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago for the conduct of substantially all of their commercial lending activities. "Closing Date" means the date upon which all of the conditions set forth in Section 4.1 have been satisfied or waived. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Commitment" means, for each Lender, the obligation of such Lender to make Loans not exceeding the amount set forth opposite its signature below or as set forth in any Notice of Assignment relating to any assignment that has become effective pursuant to Section 12.3.2, as such amount may be modified from time to time pursuant to the terms hereof. "Committed Advance" means a borrowing hereunder consisting of the aggregate amount of the several Committed Loans made by the Lenders to the Borrower at the same time, of the same Type and, in the case of Eurodollar Committed Advances, for the same Interest Period. "Committed Borrowing Notice" is defined in Section 2.3.5. "Committed Loan" means a Loan made by a Lender pursuant to Section 2.3. Page 3 9 "Committed Note" means a promissory note in substantially the form of Exhibit "A-1" hereto, with appropriate insertions, duly executed and delivered to the Agent by the Borrower for the account of a Lender and payable to the order of such Lender in the amount of its Commitment, including any amendment, modification, renewal or replacement of such promissory note. "Competitive Bid Advance" means a borrowing hereunder consisting of the aggregate amount of the several Competitive Bid Loans made by some or all of the Lenders to the Borrower at the same time, at the same interest basis, and for the same Interest Period. "Competitive Bid Acceptance Notice" is defined in Section 2.4.6. "Competitive Bid Loan" means a Eurodollar Bid Rate Loan or an Absolute Rate Loan, as the case may be. "Competitive Bid Margin" means the margin above or below the applicable Eurodollar Base Rate offered for a Eurodollar Bid Rate Loan, expressed as a percentage (rounded to the nearest 1/100 of 1%) to be added or subtracted from such Eurodollar Base Rate. "Competitive Bid Note" means a promissory note in substantially the form of Exhibit "A-2" hereto, with appropriate insertions, duly executed and delivered to the Agent by the Borrower for the account of a Lender and payable to the order of such Lender, including any amendment, modification, renewal or replacement of such promissory note. "Competitive Bid Quote" means a Competitive Bid Quote substantially in the form of Exhibit "D" hereto completed and delivered by a Lender to the Agent in accordance with Section 2.4.4. "Competitive Bid Quote Request" means a Competitive Bid Quote Request substantially in the form of Exhibit "B" hereto completed and delivered by the Borrower to the Agent in accordance with Section 2.4.2. "Consolidated Financial Statements" means the Consolidated Financial Statements for Bank Holding Companies With Total Consolidated Assets of $150 Million or More, or With More Than One Subsidiary Bank--FR Y-9 C, as such report may be amended or modified from time to time, and any similar report required to be filed by the Borrower. "Consolidated Reports of Condition and Income" means the Consolidated Reports of Condition and Income for A Bank With Domestic and Foreign Offices--FFIEC 031, Consolidated Reports of Condition and Income for A Bank With Domestic Offices Only and Page 4 10 Total Assets of $300 Million or More--FFIEC 032, Consolidated Reports of Condition and Income for A Bank With Domestic Offices Only and Total Assets of $100 Million or More But Less Than $300 Million--FFIEC 033, and Consolidated Reports of Condition and Income for A Bank With Domestic Offices Only and Total Assets of Less Than $100 Million--FFIEC 034, as such reports may be amended or modified from time to time, and any similar report required to be filed by any Banking Subsidiary. "Conversion/Continuation Notice" is defined in Section 2.3.6. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Corporate Base Rate" means a rate per annum equal to the corporate base rate of interest announced by First Chicago from time to time, changing when and as said corporate base rate changes. "Default" means an event described in Article VII. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder. "Eurodollar Advance" means a Eurodollar Committed Advance or a Eurodollar Bid Rate Advance, as applicable. "Eurodollar Auction" means a solicitation of Competitive Bid Quotes setting forth Competitive Bid Margins pursuant to Section 2.4. "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the relevant Eurodollar Interest Period, the rate determined by the Agent to be the rate at which deposits in U.S. dollars are offered by First Chicago to first-class banks in the London interbank market at approximately 11 a.m. (London time) two Business Days prior to the first day of such Eurodollar Interest Period, (i) in the case of a Eurodollar Committed Advance, in the approximate amount of First Chicago's relevant Eurodollar Committed Loan, or (ii) in the case of a Eurodollar Bid Rate Advance, in the approximate amount of such Eurodollar Bid Rate Advance requested by the Borrower, and in each case having a maturity approximately equal to such Interest Period. "Eurodollar Bid Rate" means, with respect to a Eurodollar Bid Rate Loan made by a given Lender for the relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by Page 5 11 (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Eurodollar Interest Period, plus (ii) the Competitive Bid Margin offered by such Lender and accepted by the Borrower pursuant to Section 2.4.6. "Eurodollar Bid Rate Advance" means a Competitive Bid Advance which bears interest at a Eurodollar Bid Rate. "Eurodollar Bid Rate Loan", means a Competitive Bid Loan which bears interest at a Eurodollar Bid Rate. "Eurodollar Committed Advance" means an Advance which bears interest at a Eurodollar Rate requested by the Borrower pursuant to Section 2.3. "Eurodollar Committed Loan" means a Loan which bears interest at a Eurodollar Rate requested by the Borrower pursuant to Section 2.3. "Eurodollar Interest Period" means, with respect to a Eurodollar Advance or a Eurodollar Loan, a period of one, two, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. Such Eurodollar Interest Period shall end on (but exclude) the day which corresponds numerically to such date one, two, three or six months thereafter, provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Eurodollar Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If a Eurodollar Interest Period would otherwise end on a day which is not a Business Day, such Eurodollar Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Eurodollar Interest Period shall end on the immediately preceding Business Day. In no event shall any Eurodollar Interest Period extend beyond the Termination Date. "Eurodollar Loan" means a Eurodollar Committed Loan or a Eurodollar Bid Rate Loan, as applicable. "Eurodollar Rate" means, with respect to a Eurodollar Committed Advance or a Eurodollar Committed Loan for the relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Eurodollar Interest Period, plus (ii) the Applicable Margin. The Eurodollar Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate is not such a multiple. "Federal Funds Effective Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on Page 6 12 overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10 a.m. (Chicago time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "First Chicago" means The First National Bank of Chicago in its individual capacity, and its successors. "Fixed Rate" means the Eurodollar Rate, the Eurodollar Bid Rate or the Absolute Rate. "Fixed Rate Advance" means an Advance which bears interest at a Fixed Rate. "Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate. "Floating Rate" means, for any day, a rate per annum equal to the Alternate Base Rate for such day, changing when and as the Alternate Base Rate changes. "Floating Rate Advance" means an Advance which bears interest at the Floating Rate. "Floating Rate Loan" means a Loan which bears interest at the Floating Rate. "Indebtedness" means (i) total deposits, (ii) securities sold under agreements to repurchase, (iii) borrowings with an original maturity of one year or less, (iv) other borrowed funds with an original maturity of greater than one year, (v) mandatory convertible securities, (vi) subordinated notes and debentures, and (vii) other liabilities, in each case determined for the Borrower only in a manner consistent with that used in preparing the Borrower's December 31, 1995 Parent Company Only Financial Statements. "Interest Period" means a Eurodollar Interest Period or an Absolute Rate Interest Period. "Invitation for Competitive Bid Quotes" means an Invitation for Competitive Bid Quotes substantially in the form of Exhibit "C" hereto, completed and delivered by the Agent to the Lenders in accordance with Section 2.4.3. Page 7 13 "Lenders" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. "Lending Installation" means, with respect to a Lender or the Agent, any office, branch, subsidiary or affiliate of such Lender or the Agent. "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "Loan" means, with respect to a Lender, such Lender's portion of any Advance. "Loan Documents" means this Agreement and the Notes. "Material Adverse Effect" means a material adverse effect on (i) the business, Property, condition (financial or otherwise), results of operations, or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its obligations under the Loan Documents, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent or the Lenders thereunder. "Material Banking Subsidiary" means, at any time, any one or more Banking Subsidiaries having aggregate consolidated assets equal to or greater than 5% of the consolidated assets of the Borrower and its Subsidiaries at such time. "Moody's" means Moody's Investors Service Inc. or any successor corporation thereto. "Multiemployer Plant" means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions. "Non-Performing Assets" means the total of (i) Non-Performing Loans, (ii) Other Real Estate Owned and (iii) without duplication for amounts included as Other Real Estate Owned, property acquired pursuant to in substance foreclosures. Page 8 14 "Non-Performing Loans" means (i) the total of loans which are placed on a nonaccrual status, (ii) the total of loans which are past due 90 days or more and are still accruing, and (iii) the total of loans and leases restructured and in compliance with modified terms, in each case determined for the Borrower and its Subsidiaries on a consolidated basis in a manner consistent with that used in preparing the Borrower's December 31, 1995 Consolidated Financial Statements. "Notes" means, collectively, the Committed Notes and the Competitive Bid Notes; and "Note" means any one of such Notes. "Notice of Assignment" is defined in Section 12.3.2. "Obligations" means all unpaid principal of and accrued and unpaid interest on the Notes, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Agent or any indemnified party hereunder arising under the Loan Documents. "Other Real Estate Owned" means Other Real Estate Owned as defined in 12 C.F.R. Section 7.3025 (1989), as such regulation may be amended or supplemented from time to time, determined for the Borrower and its Subsidiaries on a consolidated basis in a manner consistent with that used in preparing the Borrower's December 31, 1995 Consolidated Financial Statements. "Parent Company Only Financial Statements" means the Parent Company Only Financial Statements for Bank Holding Companies With Total Consolidated Assets of $150 Million or More, or With More Than One Subsidiary Bank--FR Y-9 LP, as such report may be amended or modified from time to time, and any similar report required to be filed by the Borrower. "Participants" is defined in Section 12.2.1. "Payment Date" means the last day of each March, June, September and December. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Permitted Banking Subsidiary Indebtedness" means obligations incurred by any Banking Subsidiary in the ordinary course of business in such circumstances as may be incidental or usual in carrying on the banking or trust business of a bank or trust company, including, without limitation, obligations incurred in connection with (i) any deposits with or funds collected by such Subsidiary, (ii) any banker's acceptance credit of such Subsidiary, (iii) any check, note, certificate of deposit, instrument, money or Letter of Credit issued by such Subsidiary, (iv) any check, note, certificate of deposit, money order, traveler's check, draft or Page 9 15 bill of exchange issued, accepted or endorsed by such Subsidiary, (v) any discount with, borrowing from, or other obligation to, any Federal Reserve Bank or any Federal Home Loan Bank, (vi) any agreement made by such Subsidiary to purchase or repurchase securities, loans or Federal funds or any interest or participation in any thereof, (vii) any guarantee or similar obligation incurred by such Subsidiary in the ordinary course of its banking or trust business, (viii) any transaction in the nature of an extension of credit, whether in the form of a commitment or otherwise, undertaken by such Subsidiary for the account of a third party with the application of the same banking considerations and legal lending limits that would be applicable if the transaction were a loan to such party, (ix) any transaction in which such Subsidiary acts solely in the fiduciary or agency capacity, (x) Rate Hedging Obligations incurred in the ordinary course of business, and (xi) other short-term liabilities similar to those enumerated in clauses (i) and (vi) above, including United States Treasury tax and loan borrowings. "Person" means any natural person, corporation, firm, joint venture, partnership, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Purchasers" is defined in Section 12.3.1. Rate Hedging Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts and warrants, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any of the foregoing. Page 10 16 "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, and excluding any event described in Section 4043(b)(3) of ERISA. "Required Lenders" means Lenders in the aggregate having at least 66 2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least 66 2/3% of the aggregate unpaid principal amount of the outstanding Advances. "Reserve Requirement" means, with respect to a Eurodollar Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Single Employer Plan" means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group. "Standard & Poor's" means Standard & Poor's Ratings Services or any successor corporation thereto. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Notwithstanding the foregoing, "Subsidiary" of the Borrower shall also mean any Banking Subsidiary. Unless otherwise Page 11 17 expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower. "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which (i) represents more than 10% of the consolidated assets of the Borrower and its Subsidiaries as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the beginning of the twelve-month period ending with the month in which such determination is made, or (ii) is responsible for more than 10% of the consolidated net sales or of the consolidated net income of the Borrower and its Subsidiaries as reflected in the financial statements referred to in clause (i) above. "Termination Date" means the earlier of (i) April 21, 2000 or such later date as shall have been agreed to by the Lenders pursuant to Section 2.17, and (ii) the date on which the Commitments shall have been reduced to zero or terminated pursuant to Section 2.7.1 or 8.1. "Thrift Financial Report" means the Thrift Financial Report, as such report may be amended or modified from time to time, and any similar report required to be filed by any Banking Subsidiary. "Total Equity Capital" means total equity capital determined for the Borrower and its Subsidiaries on a consolidated basis in a manner consistent with that used in preparing the Borrower's December 31, 1995 Consolidated Financial Statements. "Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance or Loan, its nature as an Alternate Base Rate Advance or Loan, Eurodollar Committed Advance or Loan, Eurodollar Bid Rate Advance or Loan or Absolute Rate Advance or Loan. "Unfunded Liabilities" means the amount (if any) by which the present value of all vested nonforfeitable benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Well-Capitalized" means "well-capitalized" for purposes of 12 U.S.C. 1831(o) and any rules and regulations issued thereunder (including, without limitation, 12 C.F.R. 565.4), as amended, supplemented or otherwise modified from time to time. "Wholly-Owned Subsidiary of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time Page 12 18 be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, association, joint venture or similar ordinary voting power of which shall at the time be so owned or controlled. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II THE CREDITS 2.1. Description of Facility. Upon the terms and subject to the conditions set forth in this Agreement, the Lenders hereby grant to the Borrower a revolving credit facility pursuant to which: (i) each Lender severally agrees to make Committed Loans to the Borrower in accordance with Section 2.3; and (ii) each Lender may, in its sole discretion, make bids to make Competitive Bid Loans to the Borrower in accordance with Section 2.4; provided, however, that in no event may the aggregate principal amount of all outstanding Advances (including both Committed Advances and Competitive Bid Advances) exceed the Aggregate Commitment. 2.2. Availability of Facility. Subject to all of the terms and conditions of this Agreement, the facility is available from the Closing Date to the Termination Date, and the Borrower may borrow, repay and reborrow at any time prior to the Termination Date. 2.3. Committed Advances. 2.3.1. Commitment. From and including the Closing Date and prior to the Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Committed Loans to the Borrower from time to time in amounts not to exceed in the aggregate at any one time outstanding the amount of its commitment. The Commitments to lend hereunder shall expire on the Termination Date. 2.3.2. Ratable Loans; Types of Advances. Each Committed Advance hereunder shall consist of Loans made from the several Lenders ratably in proportion to the ratio that their respective Commitments bear to the Aggregate Commitment. The Committed Advances may be Floating Rate Advances or Eurodollar Committed Advances, or a combination thereof, selected by the Borrower in accordance with Sections 2.3.5 and 2.3.6. The Committed Advances shall be evidenced by the Committed Notes. Page 13 19 2.3.3. Minimum Amount of Each Committed Advance. Each Committed Advance shall be in the minimum amount of $5,000,000 (and in multiples of $500,000 in excess thereof); provided, however, that any Floating Rate Advance may be in the aggregate amount of the unused Aggregate Commitment. 2.3.4. Applicable Margin. (i) The Applicable Margin for Eurodollar Committed Advances and for facility fees payable pursuant to Section 2.6.1 hereunder, shall be subject to adjustment (upwards or downwards, as appropriate) based on the Borrower's Rating and shall be determined in accordance with the table set forth below. The Applicable Margin shall be adjusted on the earlier of the date of announcement or the date of publication by the respective rating agencies of a change in the Rating or, in the absence of such announcement or publication, on the effective date of such changed Rating (the "Adjustment Date"), and shall apply to all outstanding Eurodollar Committed Advances and the facility fees from and after such Adjustment Date to the next Adjustment Date. In the event that the Borrower shall at any time cease to be rated by Standard & Poor's and Moody's, the maximum Applicable Margin shall apply.
Applicable Margin (basis points per annum) Eurodollar Committed Rating Advances Facility Fees --------- -------------------- ------------- Level I 20.00 b.p. 10.00 b.p. Level II 25.00 b.p. 12.50 b.p. Level III 30.00 b.p. 15.00 b.p. Level IV 41.25 b.p. 18.75 b.p. Level V 45.00 b.p. 25.00 b.p.
(ii) For purposes of this Agreement, the Borrower's Rating shall be determined in accordance with the following definitions: "Level I" means the level applicable at any time when the Borrower's Rating from Standard & Poor's is at least A or better or at least A2 or better from Moody's. "Level II" means the level applicable at any time when the Borrower's Rating from Standard & Poor's is A- or A3 from Moody's. "Level III" means the level applicable at any time when the Borrower's Rating from Standard & Poor's is BBB+ or Baal from Moody's. Page 14 20 "Level IV" means the level applicable at any time when the Borrower's Rating from Standard & Poor's is BBB or Baa2 from Moody's. "Level V" means the level applicable at any time when the Borrower's Rating from Standard & Poor's is BBB- or less or Baa3 or less from Moody's. "Rating" means the rating assigned by Standard & Poor's or Moody's to the Borrower's senior unsecured debt or if the Borrower ceases to have such a rating, then the Rating shall be the Borrower's implied long-term senior debt rating (i.e., the rating that is one rating level higher than the rating assigned by Standard & Poor's or Moody's to the Borrower's publicly issued subordinated debt). The Rating shall be based on the applicable Level I, Level II, Level III, Level IV or Level V; provided, however, that if (i) such rating is received from one such rating agency, then that rating will be the Rating, (ii) such rating is received from both rating agencies, then the higher rating will be the Rating, and (iii) if there is a difference of two or more levels between such Ratings, then the Rating which is one below the higher Rating will be the Rating. 2.3.5. Method of Selecting Types and Interest Periods for New Committed Advances. The Borrower shall select the Type of Committed Advance, and in the case of each Eurodollar Committed Advance the Eurodollar Interest Period applicable thereto, for each such Committed Advance. The Borrower shall give the Agent irrevocable notice (a "Committed Borrowing Notice") not later than 10:00 a.m. (Chicago time) on the Borrowing Date for each Floating Rate Advance and three Business Days before the Borrowing Date for each Eurodollar Committed Advance, specifying: (i) the Borrowing Date, which shall be a Business Day, of such Committed Advance, (ii) the aggregate amount of such Committed Advance, (iii) the Type of Committed Advance selected, and (iv) in the case of each Eurodollar Committed Advance, the Eurodollar Interest Period applicable thereto. 2.3.6. Conversion and Continuation of Outstanding Committed Advances. Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Committed Advances. Each Eurodollar Committed Advance shall continue as a Eurodollar Committed Advance until the end of the then applicable Eurodollar Interest Period therefor, at which time such Eurodollar Committed Advance shall be automatically converted into a Floating Rate Advance unless such Page 15 21 Eurodollar Committed Advance is paid by the Borrower or the Borrower shall have given the Agent a Conversion/Continuation Notice requesting that, at the end of such Eurodollar Interest Period, such Eurodollar Committed Advance continue as a Eurodollar Committed Advance for the same or another Eurodollar Interest Period. Subject to the terms of Section 2.3.3, the Borrower may elect from time to time to convert all or any part of an Floating Rate Advance into a Eurodollar Committed Advance. The Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of Floating Rate Advance or continuation of a Eurodollar Committed Advance not later than 10:00 a.m. (Chicago time) at least three Business Days prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation; (ii) the aggregate amount and Type of the Committed Advance which is to be converted or continued; and (iii) the amount and Type(s) of Committed Advance(s) into which such Committed Advance is to be converted or continued and, in the case of a conversion into or continuation of a Eurodollar Committed Advance, the duration of the Eurodollar Interest Period applicable thereto. 2.4. Competitive Bid Advances. 2.4.1. Competitive Bid Option; Repayment of Competitive Bid Advances. In addition to Committed Advances pursuant to Section 2.3, but subject to all of the terms and conditions of this Agreement (including, without limitation, the limitation set forth in Section 2.1 as to the maximum aggregate principal amount of all outstanding Advances hereunder), the Borrower may, as set forth in this Section 2.4, request the Lenders, prior to the Termination Date, to make offers to make Competitive Bid Advances to the Borrower. Each Lender may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section 2.4. The Competitive Bid Advances shall be evidenced by the Competitive Bid Notes. Each Competitive Bid Advance shall be repaid in full by the Borrower on the last day of the Interest Period applicable thereto. 2.4.2. Competitive Bid Quote Request. When the Borrower wishes to request offers to make Competitive Bid Loans under this Section 2.4, the Borrower shall transmit to the Agent by telecopy a Competitive Bid Quote Request so as to be received no later than (x) 10:00 a.m. (Chicago time) at least five Business Days prior to the Borrowing Date proposed therein, in the case of a Eurodollar Auction, or (y) 9:00 a.m. (Chicago time) at least one Page 16 22 Business Day prior to the Borrowing Date proposed therein, in the case of an Absolute Rate Auction, specifying in accordance with all of the terms of this Agreement: (i) the proposed Borrowing Date, which shall be a Business Day, for the proposed Competitive Bid Advance; (ii) the aggregate principal amount of such Competitive Bid Advance; (iii) whether the Competitive Bid Quotes requested are to set forth a Competitive Bid Margin or an Absolute Rate, or both; and (iv) the Interest Period applicable thereto. The Borrower may request offers to make Competitive Bid Loans for more than one Interest Period and for a Eurodollar Auction and an Absolute Rate Auction in a single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be given within five Business Days (or upon reasonable prior notice to the Lenders, such other number of days as the Borrower and the Agent may agree) of any other Competitive Bid Quote Request. Each Competitive Bid Quote Request shall be in a minimum amount of $5,000,000 (and in multiples of $500,000 in excess thereof). A Competitive Bid Quote Request that does not conform substantially to the format of Exhibit "B" hereto shall be rejected, and the Agent shall promptly notify the Borrower of such rejection by telecopy. 2.4.3. Invitation for Competitive Bid Quotes. Promptly upon receipt of a Competitive Bid Quote Request that is not rejected pursuant to Section 2.4.2, the Agent shall send to each of the Lenders by telecopy an Invitation for Competitive Bid Quotes which shall constitute an invitation by the Borrower to each Lender to submit Competitive Bid Quotes offering to make the Competitive Bid Loans to which such Competitive Bid Quote Request relates in accordance with this Section 2.4. 2.4.4. Submission and Contents of Competitive Bid Quotes. (a) Each Lender may, in its sole discretion, submit a Competitive Bid Quote containing an offer or offers to make Competitive Bid Loans in response to any Invitation for Competitive Bid Quotes. Each Competitive Bid Quote must comply with the requirements of this Section 2.4.4 and must be submitted to the Agent by telecopy at its offices specified in or pursuant to Article XIII not later than (i) (A) 12:45 p.m. (Chicago time) in the case of First Chicago and (B) 1:00 p.m. (Chicago time) in the case of each other Lender, at least four Business Days prior to the proposed Borrowing Date in the case of a Page 17 23 Eurodollar Auction, or (ii) (A) 8:45 a.m. (Chicago time) in the case of First Chicago and (B) 9:00 a.m. (Chicago time) in the case of each other Lender, on the proposed Borrowing Date in the case of an Absolute Rate Auction (or, in either such case upon reasonable prior notice to the Lenders, such other time and date as the Borrower and the Agent may agree; provided that First Chicago shall always be required to submit its Competitive Bid Quotes not less than fifteen minutes prior to the other Lenders). Subject to Articles IV and VIII, any Competitive Bid Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (b) Each Competitive Bid Quote shall in any case specify: (i) the proposed Borrowing Date, which shall be the same as that set forth in the applicable Invitation for Competitive Bid Quotes; (ii) the principal amount of the Competitive Bid Loan for which each such offer is being made, (1) which principal amount may be greater than, less than or equal to the Commitment of the quoting Lender, but in no case greater than the unutilized Aggregate Commitment, (2) which principal amount must be at least $5,000,000 (and in multiples of $500,000 in excess thereof) and (3) which principal amount may not exceed the principal amount of Competitive Bid Loans for which offers were requested; (iii) in the case of a Eurodollar Auction, the Competitive Bid Margin offered for each such Competitive Bid Loan; (iv) the minimum or maximum amount, if any, of the Competitive Bid Loan which may be accepted by the Borrower and/or the limit, if any, as to the aggregate principal amount of the Competitive Bid Loans from such Lender which may be accepted by the Borrower; (v) in the case of an Absolute Rate Auction, the Absolute Rate offered for each such Competitive Bid Loan; (vi) the applicable Interest Period; and (vii) the identity of the quoting Lender. Page 18 24 (c) The Agent shall reject any Competitive Bid Quote that: (i) is not substantially in the form of Exhibit "D" hereto or does not specify all of the information required by Section 2.4.4(b): (ii) contains qualifying, conditional or similar language, other than any such language contained in Exhibit "D" hereto; (iii) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bid Quotes; or (iv) arrives after the time set forth in Section 2.4.4(a). (d) If any Competitive Bid Quote shall be rejected pursuant to Section 2.4.4(c), then the Agent shall notify the relevant Lender of such rejection as soon as practicable. 2.4.5. Notice to Borrower. The Agent shall promptly notify the Borrower of the terms (i) of any Competitive Bid Quote submitted by a Lender that is in accordance with Section 2.4.4 and (ii) of any Competitive Bid Quote that is in accordance with Section 2.4.4 and amends, modifies or is otherwise inconsistent with a previous Competitive Bid Quote submitted by such Lender with respect to the same Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall be disregarded by the Agent unless such subsequent Competitive Bid Quote specifically states that it is submitted solely to correct a manifest error in such former Competitive Bid Quote. The Agent's notice to the Borrower shall specify the aggregate principal amount of Competitive Bid Loans for which offers have been received for each Interest Period specified in the related Competitive Bid Quote Request and the respective principal amounts and Competitive Bid Margins or Absolute Rates, as the case may be, so offered. 2.4.6. Acceptance and Notice by Borrower. Subject to the receipt of the notice from the Agent referred to in Section 2.4.5, not later than (i) 10:00 a.m. (Chicago time) at least three Business Days prior to the proposed Borrowing Date, in the case of a Eurodollar Auction or (ii) 10:00 a.m. (Chicago time) on the proposed Borrowing Date, in the case of an Absolute Rate Auction, the Borrower shall notify the Agent of the Borrower's acceptance or rejection of the offers so notified to it pursuant to Section. 2.4.5; provided, however, that the failure by the Borrower to give such notice to the Agent shall be deemed to be a rejection by the Borrower of all such offers. In the case of acceptance, such notice (a "Competitive Bid Acceptance Notice") shall specify the aggregate principal amount of offers for each Interest Period that Page 19 25 are accepted. The Borrower may accept or reject any Competitive Bid Quote in whole or in part (subject to the terms of Section 2.4.4(b)(iv)); provided that: (i) the aggregate principal amount of each Competitive Bid Advance may not exceed the applicable amount set forth in the related Competitive Bid Quote Request; (ii) acceptance of offers may only be made on the basis of ascending Competitive Bid Margins or Absolute Rates, as the case may be; and (iii) the Borrower may not accept any offer of the type described in Section 2.4.4(c) or that otherwise fails to comply with the requirements of this Agreement for the purpose of obtaining a Competitive Bid Loan under this Agreement. 2.4.7. Allocation by the Agent. Subject to Section 2.4.6, if offers are made by two or more Lenders with the same Competitive Bid Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which offers are permitted to be accepted for the related Interest Period, the principal amount of Competitive Bid Loans in respect of which such offers are accepted shall be allocated by the Agent among such Lenders as nearly as possible (in such multiples as the Agent may deem appropriate) in proportion to the aggregate principal amount of such offers; provided, however, that no Lender shall be allocated a portion of any Competitive Bid Advance which is less than the minimum amount which such Lender has indicated that it is willing to accept. Allocations by the Agent of the amounts of Competitive Bid Loans shall be conclusive in the absence of manifest error. The Agent shall promptly, but in any event on the same Business Day in the case of Eurodollar Bid Rate Advances, and by 11:00 a.m. (Chicago time) on the same Business Day in the case of Absolute Rate Advances, notify each Lender of its receipt of a Competitive Bid Acceptance Notice and the aggregate principal amount of each Competitive Bid Advance allocated to each participating Lender. 2.4.8. Administration Fee. The Borrower hereby agrees to pay to the Agent, for its sole account, an administration fee of $1,000 per Competitive Bid Quote Request transmitted by the Borrower to the Agent pursuant to Section 2.4.2. Such administration fee shall be payable in arrears on each Payment Date and on the Termination Date for any period then ending for which such fee, if any, shall not have been theretofore paid. 2.5. Method of Borrowing. Not later than 12:00 noon (Chicago time) on each Borrowing Date, each Lender shall make available its Loan or Loans, if any, in funds immediately available to the Agent, in Chicago, Illinois at its address specified Page 20 26 pursuant to Article XIII. The Agent will make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. Notwithstanding the foregoing provisions of this Section 2.5, to the extent that a Loan made by a Lender matures on the Borrowing Date of a requested Loan, such Lender shall apply the proceeds of the Loan it is then making to the repayment of principal of the maturing Loan. 2.6. Fees. The Borrower agrees to pay the following fees: 2.6.1. Facility Fee. The Borrower agrees to pay to the Agent for the account of each Lender, for the period from the Closing Date to and including the Termination Date, a facility fee equal to the product of (i) such Lender's Commitment (whether used or unused), and (ii) the amount (expressed in basis points per annum) specified as the Applicable Margin for facility fees pursuant to Section 2.3.4(i), payable on each Payment Date and on the Termination Date. 2.6.2. Usage Fee. In the event that during any calendar quarter, the average daily principal amount of the Loans outstanding is greater than $62,500,000, the Borrower agrees to pay to the Agent for the account of each Lender a usage fee equal to 5 basis points per annum on the average daily principal amount of the Committed Loans outstanding during such quarter, payable on each Payment Date and on the Termination Date. 2.6.3. Agent's Fees. The Borrower agrees to pay to the Agent, for its own account, the fees agreed to by the Borrower and the Agent pursuant to that certain Letter Agreement dated February 16, 1996. 2.7. Reductions in Aggregate Commitment; Principal Payments. 2.7.1. Reductions in Aggregate Commitment. The Borrower may permanently reduce the Aggregate Commitment in whole, or in part, ratably among the Lenders in a minimum aggregate amount of $5,000,000 (and multiples of $500,000 in excess thereof), upon at least three Business Days' written notice to the Agent, which notice shall specify the amount of any such reduction; provided, however, that the amount of the Aggregate Commitment may not be reduced below the aggregate principal amount of the outstanding Advances. 2.7.2. Principal Payments. (i) Optional Payments. The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances, or, in a minimum aggregate amount of $5,000,000 (and multiples of $500,000 in excess thereof), any portion of the outstanding Floating Rate Advances upon one Business Days' Page 21 27 prior notice to the Agent. A Fixed Rate Advance may not be paid prior to the last day of the applicable Interest Period. (ii) Termination. Any outstanding Advances and all other unpaid Obligations shall be paid in full by the Borrower on the Termination Date. 2.8. Changes in Interest Rate. etc. Each Floating Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is converted from a Eurodollar Committed Advance into a Floating Rate Advance pursuant to Section 2.3.6 to but excluding the date it becomes due or is converted into a Eurodollar Committed Advance pursuant to Section 2.3.6 hereof, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Fixed Rate Advance shall bear interest from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Fixed Rate Advance. No Interest Period may end after the Termination Date. 2.9. Rates Applicable After Default. Notwithstanding anything to the contrary contained in Section 2.3.5 or 2.3.6, during the continuance of a Default or Unmatured Default, the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Advance may be made as, converted into or continued as a Eurodollar Committed Advance. During the continuance of a Default, the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each Fixed Rate Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum and (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate plus 2% per annum. 2.10. Method of Payment. Subject to the last sentence of Section 2.5, all payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower, by noon (local time) on the date when due and shall be applied ratably by the Agent among all Lenders in the case of fees and payments in respect of Committed Advances and ratably among the applicable Lenders in respect of Competitive Bid Advances. Each payment Page 22 28 delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge the account of the Borrower maintained with First Chicago for each payment of principal, interest and fees as it becomes due hereunder. 2.11. Notes: Telephonic Notices. Each Lender is hereby authorized to record the principal amount of each of its Loans and each repayment on the schedule attached to its Notes; provided, however, that the failure to so record shall not affect the Borrowers obligations under any Loan Document. The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances, transfer funds and submit Competitive Bid Quotes, in each case based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrower. The Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error. 2.12. Interest Payment Dates: Interest and Fee Basis. Interest accrued on each Floating Rate Advance shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof, on any date on which the Floating Rate Advance is prepaid, whether due to acceleration or otherwise, and at maturity. Interest accrued on each Fixed Rate Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Fixed Rate Advance is prepaid, whether due to acceleration or otherwise, and at maturity. Interest accrued on each Fixed Rate Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval (in the case of Eurodollar Committed Advances or Eurodollar Bid Rate Advances) or 90-day interval (in the case of Absolute Rate Advances) during such Interest Period. Interest and fees shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. Page 23 29 2.13. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Committed Borrowing Notice, Competitive Bid Acceptance Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. The Agent will notify each Lender of the interest rate applicable to each Fixed Rate Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate. 2.14. Lending Installations. Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Notes shall be deemed held by each Lender for the benefit of such Lending Installation. Each Lender may, by written or telex notice to the Agent and the Borrower, designate a Lending Installation through which Loans will be made by it and for whose account Loan payments are to be made. 2.15. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (i) in the case of payment by a Lender, the Federal Funds Effective Rate for such day or (ii) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan. 2.16. Withholding Tax Exemption. At least five Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Lender, each Lender that is not incorporated under the laws of the United States of America, or a state thereof, agrees that it will deliver to each of the Borrower and the Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 (or a successor form), certifying in either case that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Lender which so delivers a Form 1001 or 4224 further undertakes to deliver to each Page 24 30 of the Borrower and the Agent two additional copies of such form (or a successor form) on or before the date that such form expires (currently, three successive calendar years for Form 1001 and one calendar year for Form 4224) or becomes obsolete or after the occurrence of any event requiring a change in the most recent forms so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrower or the Agent, in each case certifying that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. 2.17. Extension of Termination Date. 2.17.1. Extension Procedures. The Commitment of each Lender, and this Agreement as between such Lender and the Borrower, may be extended for one period of one year upon mutual agreement of such Lender and the Borrower in the manner provided in this Section 2.17, to the effect that the Termination Date with respect to such Lender for all purposes under this Agreement and the Notes shall be extended by one year to April 20, 2001. The request for such an extension shall be made by the Borrower in writing and delivered to the Agent no later than 60 days but not sooner than 90 days prior to the second anniversary of this Agreement. Promptly following the Agent's receipt of any such request, the Agent shall notify each Lender thereof. Each Lender may, in its sole discretion, agree to such extension by giving written notice of such agreement to the Agent and the Borrower within 30 days following the Borrower's request for such extension (each Lender which so consents to a requested extension is herein called a "Consenting Lender" and each Lender which does not so consent to a requested extension is herein called a "Non-consenting Lender"). If any Lender fails to respond to any such request, such Lender shall be deemed to be a Non-consenting Lender. If Consenting Lenders hold 66 2/3% or more of the Aggregate Commitment, then the Termination Date of each Consenting Lender shall be so extended and the Termination Date of each Nonconsenting Lender, if any, shall remain unchanged. If Consenting Lenders hold less than 66 2/3% of the Aggregate commitment, then the termination date shall not be extended for any of the Lenders. 2.17.2. Termination of Lenders. If there are any Non-consenting Lenders pursuant to Section 2.17.1 and an extension has occurred for Consenting Lenders, the Borrower may, at its option, terminate the Commitment of a Non-consenting Lender and pay or Page 25 31 prepay all outstanding Loans of such Non-consenting Lender (each a "Terminated Lender"). The Borrower shall, by giving written notice thereof to the Terminated Lender and to the Agent, specify the proposed effective date of termination of the Terminated Lender's Commitment (the "Lender Termination Date"), which date shall not in any event be less than five nor more than thirty days following the date of such notice of termination. The Borrower may not elect to terminate and prepay any Lender under this Section 2.17.2 if a Default or Unmatured Default exists. On the Lender Termination Date (i) the Borrower shall pay or prepay all outstanding Loans of such Terminated Lender, together with accrued interest thereon and all fees due such Terminated Lender under this Agreement, in each case accrued through the Lender Termination Date, together with all amounts, if any, payable under Section 3.4 in connection with prepayment of such Loans, and (ii) the Terminated Lender shall have no further Commitment under this Agreement and shall no longer be a "Lender" under this Agreement for any purpose except insofar as it shall be entitled to any payment or indemnification, or be obligated to make any indemnification, on account of any event which shall have occurred, or any right or liability which shall have arisen, on or prior to the date of repayment in full of such Loans. The termination of any Terminated Lender's Commitment and the prepayment of a Terminated Lender's Loans pursuant to this Section 2.17.2 shall not relieve or satisfy the obligations of the Borrower to make any such prepayments free and clear of all taxes, to reimburse such Terminated Lender for all increased costs pursuant to Section 3.4, or to comply with all other terms and conditions of this Agreement (including, without limitation, Section 9.7). 2.17.3. Successor Lenders. If, from time to time, any Non-consenting Lender's Commitment is terminated pursuant to Section 2.17.2, the Borrower may, at its option, specify one or more commercial banks (including any Lender) (each a "Successor Lender"), each of which Successor Lenders (i) shall be acceptable to the Agent, (ii) have a combined capital, surplus (or its equivalent) and undivided profits in an amount not less than U.S. $250,000,000 (or its equivalent in another currency), and (iii) shall have agreed, in the aggregate, to succeed to the entire Commitment of such Terminated Lender on the applicable Lender Termination Date. Effective as of such Lender Termination Date, the Borrower, the Agent and such Successor Lender shall enter into an appropriate Assignment Agreement to so assign the entire Commitment of the applicable Terminated Lender to the Successor Lender. Page 26 32 ARTICLE III CHANGE IN CIRCUMSTANCES 3.1. Yield Protection. If any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any interpretation thereof, or the compliance of any Lender therewith, (i) subjects any Lender or any applicable Lending Installation to any tax, duty, charge or withholding on or from payments due from the Borrower (excluding federal taxation of the overall net income of any Lender or applicable Lending Installation, income taxes imposed on any Lender in the jurisdiction in which such Lender's home office is located, and the Illinois personal property replacement tax), or changes the basis of taxation of payments to any Lender in respect of its Loans or other amounts due it hereunder, or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Fixed Rate Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining loans or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with loans, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of loans held or interest received by it, by an amount deemed material by such Lender, then, within 15 days of demand by such Lender pursuant to the written statement required under Section 3.5, the Borrower shall pay such Lender that portion of such increased expense incurred or reduction in an amount received which such Lender determines is attributable to making, funding and maintaining its Loans and its Commitment. Each Lender will notify the Borrower of any event occurring after the date of this Agreement which will entitle such Lender to compensation pursuant to this Section 3.1, as promptly as practicable after such Lender obtains knowledge thereof and determines to request such compensation. Page 27 33 3.2. Changes in Capital Adequacy Regulations. If a Lender reasonably determines the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a Change, then, within 15 days of demand by such Lender pursuant to the written statement required under Section 3.5, the Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender reasonably determines is attributable to this Agreement, its Loans or its obligation to make Loans hereunder (after taking into account such Lender's policies as to capital adequacy). "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines, or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. Each Lender will notify the Borrower of any event occurring after the date of this Agreement which will entitle such Lender to compensation pursuant to this Section 3.2, as promptly as practicable after such Lender obtains knowledge thereof and determines to request such compensation. 3.3. Availability of Types of Advances. If any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders (or in the case of any Competitive Bid Loan, the Lender making such Loan) determine that (i) deposits of a type and maturity appropriate to match fund Fixed Rate Advances are not available or (ii) the interest rate applicable to a Type of Advance does not accurately reflect the cost of making or maintaining such Advance, then the Agent shall suspend the availability of the affected Type of Advance and require any Fixed Rate Advances of the affected Type to be repaid. 3.4. Funding Indemnification. If any payment of a Fixed Rate Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Fixed Rate Advance is not made, continued or converted on the date specified by the Borrower for Page 28 34 any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain the Fixed Rate Advance. 3.5. Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Fixed Rate Loans to reduce any liability of the Borrower to such Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of Advance under Section 3.3, so long as such designation is not disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender as to the amount due, if any, under Sections 3.1, 3.2 or 3.4. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Fixed Rate Loan shall be calculated as though each Lender funded its Fixed Rate Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Fixed Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement shall be payable on demand after receipt by the Borrower of the written statement. The obligations of the Borrower under Sections 3.1, 3.2 and 3.4 shall survive payment of the Obligations and termination of this Agreement. ARTICLE IV CONDITIONS PRECEDENT 4.1. Initial Advance. 4.1.1. The Lenders shall not be required to make the initial Advance hereunder and this Agreement shall not become effective unless the Borrower has furnished to the Agent with sufficient copies for the Lenders: (i) Copies of the articles of incorporation of the Borrower, together with all amendments, and a certificate of status, both certified by the appropriate governmental officer in its jurisdiction of incorporation. (ii) Copies, certified by the Secretary or Assistant Secretary of the Borrower, of its by-laws and of its Board of Directors' resolutions (and resolutions of Page 29 35 other bodies, if any are deemed necessary by counsel for any Lender) authorizing the execution of the Loan Documents. (iii) An incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower, which shall identify by name and title and bear the signature of the officers of the Borrower authorized to sign the Loan Documents and to make borrowings hereunder, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower. (iv) A certificate, signed by the chief financial officer of the Borrower, stating that on the initial Borrowing Date no Default or Unmatured Default has occurred and is continuing. (v) A written opinion of the Borrower's counsel, addressed to the Lenders in substantially the form of Exhibit "E" hereto. (vi) Notes payable to the order of each of the Lenders. (vii) Written money transfer instructions, in substantially the form of Exhibit "G" hereto, addressed to the Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Agent may have reasonably requested. (viii) Such other documents as any Lender or its counsel may have reasonably requested. 4.1.2. The Lenders shall not be required to make the initial Advance hereunder, unless prior to or concurrently with the making of the initial Advance hereunder, the Credit Agreement, dated as of August 8, 1995, among the Borrower, the lenders named therein and The First National Bank of Chicago, as agent shall have been terminated and the Borrower shall have paid to the lenders and the agent thereunder any and all unpaid principal of and accrued and unpaid interest on the notes evidencing the obligations thereunder, and any and all other obligations of the Borrower thereunder arising under or in connection with such Credit Agreement. 4.2. Each Advance. No Lender shall be required to make any Advance (other than a Committed Advance that, after giving effect thereto and to the application of the proceeds thereof, does not increase the aggregate amount of outstanding Committed Advances), unless on the applicable Borrowing Date: (i) There exists no Default or Unmatured Default. Page 30 36 (ii) The representations and warranties contained in Article V are true and correct as of such Borrowing Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall be true and correct on and as of such earlier date. (iii) All legal matters incident to the making of such Advance shall be satisfactory to the Lenders and their counsel. Each Committed Borrowing Notice and Competitive Bid Quote Request with respect to each such Advance shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(i) and (ii) have been satisfied. Any Lender may require a duly completed compliance certificate in substantially the form of Exhibit "F" hereto as a condition to making an Advance. ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders that: 5.1. Corporate Existence and Standing. Each of the Borrower and its Subsidiaries is a corporation or a national or state banking association duly incorporated or organized, as applicable, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where such failure to obtain all requisite authority would not, with respect to any individual failure or any failures in the aggregate, have a Material Adverse Effect. 5.2. Authorization and Validity. The Borrower has the corporate power and authority and legal right to execute and deliver the Loan Documents and to perform its obligations thereunder. The execution and delivery by the Borrower of the Loan Documents and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. 5.3. No Conflict; Government Consent. Neither the execution and delivery by the Borrower of the Loan Documents, nor Page 31 37 the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries or the Borrower's or any Subsidiary's articles of incorporation or by-laws or the provisions of any indenture, instrument or agreement to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, any of the Loan Documents. 5.4. Financial Statements. The December 31, 1995 consolidated financial statements of the Borrower and its Subsidiaries heretofore delivered to the Lenders were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Borrower and its Subsidiaries at such date and the consolidated results of their operations for the period then ended. 5.5. Material Adverse Change. Since December 31, 1995 through and including the Closing Date, there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries which could have a Material Adverse Effect. 5.6. Taxes. The Borrower and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. The United States income tax returns of the Borrower and its Subsidiaries have been audited by the Internal Revenue Service through the fiscal year ended December 31, 1991. No tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any taxes or other governmental charges are adequate. 5.7. Litigation and Contingent Obligations. Except as set forth on Schedule "1" hereto, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened Page 32 38 against or affecting the Borrower or any of its Subsidiaries which could have a Material Adverse Effect. Other than any liability incident to such litigation, arbitration or proceedings, the Borrower has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4. 5.8. Subsidiaries. Schedule "2" hereto contains an accurate list of all of the existing Subsidiaries of the Borrower as of the date hereof, setting forth their respective jurisdictions of incorporation and the percentage of their respective capital stock owned by the Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock of such Subsidiaries have been duly authorized and issued and are fully paid and non-assessable, except as provided in Wisconsin Business Corporation Law Section 130.0622(2)(b). 5.9. ERISA. The Unfunded Liabilities of all Single Employer Plans do not in the aggregate exceed $50,000,000. Each Plan complies in all material respects with all applicable requirements of law and regulations and no Reportable Event has occurred with respect to any Plan. Neither the Borrower nor any other member of the Controlled Group has incurred or reasonably expects to incur any liability under Title IV of ERISA with respect to any Plan (other than premiums due under Section 4007 of ERISA). 5.10. Accuracy of Information. No information, exhibit or report furnished by the Borrower or any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading. 5.11. Regulation U. Margin stock (as defined in Regulation U) constitutes less than 25% of those assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder. 5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could have a Material Adverse Effect. Neither the Borrower nor any subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement to which it is a party, which default could have a Material Adverse Effect or (ii) any agreement or instrument evidencing or governing Indebtedness. 5.13. Compliance With Laws. The Borrower and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof, having Page 33 39 jurisdiction over the conduct of their respective businesses or the ownership of their respective Property, except where any individual noncompliance or any noncompliance in the aggregate would not have a Material Adverse Effect. Neither the Borrower nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable federal, state and local environmental, health and safety statutes and regulations or the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could have a Material Adverse Effect. 5.14. Ownership of Properties. On the date of this Agreement, the Borrower and its Subsidiaries will have good title, free of all Liens other than those permitted by Section 6.13, to all of the Property and assets reflected in the financial statements as owned by it. 5.15. Investment Company Act. Neither the Borrower nor any Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 5.16. Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. ARTICLE VI COVENANTS During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing: 6.1. Financial Reporting. The Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish to the Lenders: (i) Within 90 days after the close of each of its fiscal years, an unqualified audit report certified by independent certified public accountants, acceptable to the Lenders, prepared in accordance with Agreement Accounting Principles on a consolidated and consolidating basis (consolidating statements need not be certified by such accountants) for itself and the Page 34 40 Subsidiaries, including balance sheets as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows, accompanied by (a) any management letter prepared by said accountants, and (b) a certificate of said accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof (for purposes of this Section 6.1(i), Form 10-K filed with the Securities and Exchange Commission and delivered by the Borrower to the Lenders hereunder in respect of each such fiscal year shall be deemed to satisfy the financial statements required hereby). (ii) Within 45 days after the close of the first three quarterly periods of each of its fiscal years, for itself and the Subsidiaries, consolidated and consolidating unaudited balance sheets as at the close of each such period and consolidated and consolidating profit and loss and reconciliation of surplus statements and a statement of cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer (for purposes of this Section 6.1(ii), Form 10-Q filed with the Securities and Exchange Commission and delivered to the Lenders hereunder in respect of each such quarterly period shall be deemed to satisfy the financial statements required hereby). (iii) Together with the financial statements required hereunder, a compliance certificate in substantially the form of Exhibit "F" hereto signed by its chief financial officer showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof. (iv) Simultaneously with the preparation thereof, and not more than 45 days after the close of each of the first three fiscal quarters of the Borrower and not more than 90 days after the close of the last fiscal quarter of the Borrower in each fiscal year (a) call reports for Firstar Bank Milwaukee N.A. in the form delivered to the Federal Reserve District Bank, the Comptroller of the Currency or The Federal Deposit Insurance Corporation, as the case may be, such reports to include the Consolidated Reports of Page 35 41 Condition and Income and all schedules thereto, and (b) the Consolidated Financial Statements and the Parent Company Only Financial Statements of the Borrower as at the end of such quarter, each in the form delivered to the appropriate Federal Reserve District Bank and each to include all schedules thereto. (v) Within 270 days after the close of each fiscal year, a statement of the Unfunded Liabilities of each Single Employer Plan, certified by an actuary enrolled under ERISA. (vi) As soon as possible and in any event within 10 days after the Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the chief financial officer of the Borrower, describing said Reportable Event and the action which the Borrower proposes to take with respect thereto. (vii) As soon as possible and in any event within 10 days after receipt by the Borrower, a copy of (a) any notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Borrower, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by the Borrower or any of its Subsidiaries, which, in either case, could have a Material Adverse Effect. (viii) Promptly upon the furnishing thereof to the shareholders of the Borrower, copies of all financial statements, reports and proxy statements so furnished. (ix) Promptly upon the filing thereof (and in the case of any registration statement, upon the effectiveness thereof), copies of all registration statements (excluding S-8 registration statements) and annual, quarterly, monthly or other regular reports which the Borrower files with the Securities and Exchange Commission (including, without limitation, reports on Forms 10-K, 10-Q and 8-K or their equivalents). (x) Promptly after the Borrower's or any Subsidiary's receipt thereof, unless disclosure is prohibited by the terms thereof and after the Borrower or such Subsidiary has in good faith attempted to obtain the consent of the relevant regulatory authority and such authority will not consent to the disclosure thereof, Page 36 42 copies of any (i) notice of charges, (ii) notice of intent to revoke deposit insurance, (iii) cease and desist order, (iv) suspension or removal order, (v) memorandum of understanding, (vi) assessment of civil money penalties, (vii) directive relating to holding company activities constituting a risk to any Bank Subsidiary, (viii) directive, order or disapproval of any exception or exemption request, plan or proposal related to capital requirements, (ix) request that the Borrower guarantee any capital restoration plan of any Banking Subsidiary, (x) notification that any Bank Subsidiary is, or is to be treated as if it were, not Well-Capitalized or Adequately Capitalized; or (xi) request or directive from any regulatory authority requiring any Banking Subsidiary to submit a capital restoration plan or restricting the payment of dividends by any Subsidiary to the Borrower or any other Subsidiary. (xi) Promptly after the later to occur of the creation of any new Subsidiary and the consummation of any Acquisition (if applicable), the Borrower shall furnish an updated schedule of Subsidiaries to the Agent and the Lenders in the form of Schedule "2" hereto, which schedule shall set forth the respective jurisdictions of incorporation of the Subsidiaries and the percentage of their respective capital stock owned by the Borrower or other Subsidiaries. (xii) Such other information (including non-financial information) as the Agent or any Lender may from time to time reasonably request. 6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary to, use the proceeds of the Advances for general corporate purposes, including, without limitation, working capital needs; the funding of investments in, or extensions of credit to, Subsidiaries, Acquisitions (subject to clause (y) of the next sentence) of other financial institutions or other businesses or their assets; the reduction or repayment of outstanding Indebtedness; the repurchase of outstanding equity securities of the Borrower; and pending such uses, temporary investments in investment grade securities. The Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds of the Advances (x) to purchase or carry any "margin stock's (as defined in Regulation U) in violation of Regulation U, or (y) to make any Acquisition which has not been approved by the board of directors of the entity being acquired. 6.3. Notice of Default. The Borrower will, and will cause each Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of any Default or Unmatured Default and Page 37 43 of any other development, financial or otherwise, which could have a Material Adverse Effect. 6.4. Conduct of Business. The Borrower will, and will cause each Subsidiary to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted or as permitted by its regulators and to do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where such failure to obtain all requisite authority would not, with respect to any individual failure or any failures in the aggregate, have a Material Adverse Effect. 6.5. Taxes. The Borrower will, and will cause each Subsidiary to, pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside. 6.6. Insurance. The Borrower will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts and covering such risks as is consistent with sound business practice, and the Borrower will furnish to any Lender upon request full information as to the insurance carried. 6.7. Compliance with Laws. The Borrower will, and will cause each Subsidiary to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where any individual noncompliance or any noncompliance in the aggregate would not have a Material Adverse Effect. 6.8. Maintenance of Properties. The Borrower will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times. 6.9. Inspection. The Borrower will, and will cause each Subsidiary to, permit the Lenders, by their respective representatives and agents, and upon five Business Days' written notice to the Agent, to inspect any of the Property, corporate books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Page 38 44 Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Lenders may designate; provided, however, that, unless a Default or Unmatured Default has occurred and is continuing, the Borrower shall not be required to discuss any matter if the Borrower determines, in its reasonable judgment, that such discussion would adversely affect the competitive position of the Borrower or any Subsidiary. 6.10. Merger. The Borrower will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person, except that: (i) any Subsidiary may merge with the Borrower or a Wholly-Owned Subsidiary provided that the Borrower or such Wholly-Owned Subsidiary is the continuing or surviving corporation; or (ii) the Borrower may merge with another Person; provided that (x) the Borrower is the continuing or surviving corporation; and (y) immediately after the consummation of the transaction, and after giving effect thereto, no Default or Unmatured Default exists. 6.11. Sale of Assets. The Borrower will not, nor will it permit any Subsidiary to, lease, sell or otherwise dispose of its Property, to any other Person except for (i) sales of loans, sales of receivables in connection with asset securitization financings and sales of other similar assets, in each case in the ordinary course of business and (ii) leases, sales or other dispositions of its Property that, together with all other Property of the Borrower and its Subsidiaries previously leased, sold or disposed of (other than as permitted in clause (i) of this Section 6.11) as permitted by this Section during the twelve-month period ending with the month in which any such lease, sale or other disposition occurs, do not constitute a Substantial Portion of the Property of the Borrower and its Subsidiaries. 6.12. Acquisitions. If, at any time, any Material Banking Subsidiary of the Borrower ceases to be Well-Capitalized, then the Borrower will not, nor will it permit any Subsidiary to, make any Acquisition of any Person, except: (i) if such Acquisition is of a (w) bank holding company and one or more banks, such bank holding company shall have a composite BOPEC rating of 3 or better, (x) bank only, such bank shall have a composite CAMEL rating of 3 or better, (y) savings and loan association or a branch thereof, either (1) such savings and loan association or branch thereof has a composite MACRO rating of 3 or better, or (2) such Acquisition is being made from the Federal Deposit Insurance Corporation, the Resolution Page 39 45 Trust Corporation or any successor thereof and is being assisted by any such regulatory agency; or (ii) Acquisitions which do not satisfy the foregoing rating requirements in an aggregate amount not to exceed 10% of the consolidated assets of the Borrower and its Subsidiaries, calculated during the twelve-month period ending with the month in which any such Acquisition is consummated. Notwithstanding the foregoing, immediately after the consummation of any Acquisition by the Borrower or any Subsidiary, and after giving effect thereto, no Default or Unmatured Default shall exist. 6.13. Liens. The Borrower will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except: (i) Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with generally accepted principles of accounting shall have been set aside on its books. (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books. (iii) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation. (iv) Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or the Subsidiaries. (v) Liens on Property of the Borrower and its Subsidiaries (other than the capital stock of any Subsidiary) existing on the date hereof and securing Indebtedness Page 40 46 in an aggregate principal amount not to exceed $10,000,000. (vi) Liens granted by a Banking Subsidiary in the ordinary course of its banking and trust business in connection with any Permitted Banking Subsidiary Indebtedness. (vii) Liens to secure public funds or other pledges of funds required by law to secure deposits. (viii) Repurchase agreements, reverse repurchase agreements and other similar transactions entered into by any Banking Subsidiary in the ordinary course of its banking or trust business. (ix) Liens granted by (1) any Subsidiary to the Borrower or any other Subsidiary, or (2) the Borrower to any Subsidiary, in each case as required pursuant to 12 U.S.C. 371c, as amended, supplemented or otherwise modified from time to time. (x) Liens securing Indebtedness incurred after the date of this Agreement to finance the cost of Acquisition, construction or improvement of any Property useful and intended to be used in carrying out the business of the Borrower or any Subsidiary; provided, however, that (1) any such Lien shall attach solely to the Property acquired, constructed or improved or to substantially unimproved real property on which real property so acquired, constructed or improved is located, and (2) any such Lien attaches within 90 days of the date such Property was acquired, constructed or improved. (xi) Liens on Property useful and intended to be used in carrying out the business of the Borrower or any Subsidiary which were existing at the time of Acquisition of such property, or at the time of Acquisition by the Borrower or any Subsidiary of any business entity then owning such Property; provided, however, that (1) any such Lien was not incurred, extended or renewed in the contemplation of or in connection with such Acquisition by the Borrower or any Subsidiary, and (2) any such Lien shall attach solely to the Property acquired. (xii) Extensions or renewals of Liens permitted by clauses (x) and (xi) above; provided, however, that at the time of such transaction and after giving effect thereto and to the application of the proceeds thereof, (1) the aggregate unpaid principal amount of Indebtedness of the Borrower and its Subsidiaries Page 41 47 which is secured pursuant to this clause (xii) and clauses (x) and (xi) above shall be no greater than the aggregate unpaid principal amount of such Indebtedness secured pursuant to such clauses immediately preceding such transaction, and (2) any such Lien shall attach solely to the Property which was subject thereto immediately preceding such transaction. (xiii) Liens securing Rate Hedging Obligations incurred by the Borrower and any Subsidiary in the ordinary course of business solely for asset/liability management purposes and not for speculative purposes. (xiv) Liens arising in the ordinary course of business on assets sold in connection with the transactions permitted under Section 6.11(i). 6.14. Capitalization. The Borrower will ensure that each Banking Subsidiary will at all times be, and will at all times be treated by the relevant regulatory authorities as if they were, Well-Capitalized or Adequately Capitalized. The Borrower and its Banking Subsidiaries shall comply at all times with any and all minimum risk-based capital guidelines, leverage measure capital guidelines and any other capital guidelines now or hereafter published by any federal or state regulatory authorities having jurisdiction over them. 6.15. Consolidated Non-Performing Assets to Total Equity Capital. The Borrower will maintain as at the last day of each fiscal quarter a ratio of (i) Non-Performing Assets to (ii) Total Equity Capital of not greater than 0.65 to 1.00. 6.16. Debt to Total Equity Capital. The Borrower will maintain as at the last day of each fiscal quarter a ratio of (i) Indebtedness to (ii) total equity capital (determined for the Borrower only in a manner consistent with that used in preparing the Borrower's December 31, 1995 Parent Company Only Financial Statements) which is less than 0.45 to 1.00. ARTICLE VII DEFAULTS The occurrence of any one or more of the following events shall constitute a Default: 7.1. Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement, Page 42 48 any Loan, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made or deemed made. 7.2. Nonpayment of principal of any Note when due, or nonpayment of interest upon any Note or of any fee or other obligations under any of the Loan Documents within five days after the same becomes due. 7.3. The breach by the Borrower of any of the terms or provisions of Section 6.2 and Sections 6.10 through and including 6.16. 7.4. The breach by the Borrower (other than a breach which constitutes a Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this Agreement which is not remedied within thirty days after written notice from the Agent or any Lender. 7.5. Failure of the Borrower or any of its Subsidiaries to pay any Indebtedness in excess of $10,000,000 when due; or the default by the Borrower or any of its Subsidiaries in the performance of any term, provision or condition contained in any agreement under which any Indebtedness in excess of $10,000,000 was created or is governed, or any other event shall occur or condition exist, the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any Indebtedness of the Borrower or any of its Subsidiaries in excess of $10,000,000 shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the stated maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they become due. 7.6. The Borrower or any of its Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate action to authorize or effect any of the foregoing actions set forth in this Page 43 49 Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7. 7.7. Without the application, approval or consent of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 30 consecutive days. 7.8. The Borrower or any of its Subsidiaries shall fail within 30 days to pay, bond or otherwise discharge any judgment or order for the payment of money in excess of $25,000,000, which is not stayed on appeal or otherwise being appropriately contested in good faith. 7.9. The Unfunded Liabilities of all Single Employer Plans shall exceed in the aggregate $50,000,000 or any Reportable Event shall occur in connection with any Plan. 7.10. The Borrower or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that it has incurred withdrawal liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Borrower or any other member of the Controlled Group as withdrawal liability (determined as of the date of such notification), exceeds $10,000,000 or requires payments exceeding $1,000,000 per annum. 7.11. The Borrower or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and the other members of the Controlled Group (taken as a whole) to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years of each such Multiemployer Plan immediately preceding the plan year in which the reorganization or termination occurs by an amount exceeding $1,000,000. 7.12. Any Banking Subsidiary shall cease to be insured under the Federal Deposit Insurance Act and any rules and regulations issued thereunder, as amended, supplemented or otherwise modified from time to time; or a cease and desist order shall be issued against the Borrower or any Subsidiary pursuant to 12 U.S.C. 1818(b) or (c) or any similar applicable provision of state law and any rules and regulations issued thereunder, as Page 44 50 amended, supplemented or otherwise modified from time to time; or there shall occur, with respect to any Banking Subsidiary, any event which is grounds for the required submission of a capital restoration plan under 12 U.S.C. Section 1831(o)(e)(2) and any rules and regulations issued thereunder, as amended, supplemented or otherwise modified from time to time, or for seeking the appointment of a receiver or conservator under 12 U.S.C. 1821(c) and any rules and regulations issued thereunder, as amended, supplemented or otherwise modified from time to time; or any conservator or receiver shall be appointed for any Banking Subsidiary under any such provisions or any other state or federal law. ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 8.1. Acceleration. If any Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to make Loans hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent or any Lender. If any other Default occurs, the Required Lenders may terminate or suspend the obligations of the Lenders to make Loans hereunder, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives. If, within fourteen (14) days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination. 8.2. Amendments. Subject to the provisions of this Article VIII, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of each Lender affected thereby: Page 45 51 (i) Extend the maturity of any Loan or Note or forgive all or any portion of the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon. (ii) Reduce the percentage specified in the definition of Required Lenders. (iii) Extend the Termination Date, or increase the amount of the Commitment of any Lender hereunder, or permit the Borrower to assign its rights or obligations under this Agreement. (iv) Amend this Section 8.2. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent. The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement. 8.3. Preservation of Rights. No delay or omission of the Lenders or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Loan notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Loan shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent and the Lenders until the Obligations have been paid in full. ARTICLE IX GENERAL PROVISIONS 9.1. Survival of Representations. All representations and warranties of the Borrower contained in this Agreement shall survive delivery of the Notes and the making of the Loans herein contemplated. 9.2. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any Page 46 52 limitation or prohibition provided by any applicable statute or regulation. 9.3. Taxes. Any taxes (excluding federal income taxes on the overall net income of any Lender, income taxes imposed on any Lender in the jurisdiction in which such Lender's home office is located, and the Illinois personal property replacement tax) or other similar assessments or charges made by any governmental or revenue authority in respect of the Loan Documents shall be paid by the Borrower, together with interest and penalties, if any. 9.4. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 9.5. Entire Agreement. The Loan Documents embody the entire agreement and understanding among the Borrower, the Agent and the Lenders and supersede all prior agreements and understandings among the Borrower, the Agent and the Lenders relating to the subject matter thereof. 9.6. Several Obligations: Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns. 9.7. Expenses: Indemnification. Subject to the Letter Agreement, dated February 16, 1996, between the Borrower and the Agent, the Borrower shall reimburse the Agent for any costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent in connection with the preparation, negotiation, execution, delivery, review, amendment, modification, and administration of the Loan Documents. The Borrower also agrees to reimburse the Agent and the Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent and the Lenders, which attorneys may be employees of the Agent or the Lenders) paid or incurred by the Agent or any Lender in connection with the collection and enforcement of the Loan Documents. The Borrower further agrees to indemnify the Agent and each Lender, its directors, officers and employees (each an "Indemnified Party") against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent or any Lender is a party thereto) which Page 47 53 any Indemnified Party may pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Loan hereunder, except that any such Indemnified Party shall not be indemnified for any such losses, claims, damages, penalties, judgments, liabilities and expenses to the extent that they arise from the gross negligence or willful misconduct of such Indemnified Party. The obligations of the Borrower under this Section shall survive the termination of this Agreement. 9.8. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders. 9.9. Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles; provided, however, that compliance with Sections 6.15 and 6.16 shall be interpreted and all determinations thereunder shall be made in accordance with regulatory accounting principles as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements and reports referred to in Section 6.1(iv) for the fiscal quarter ended December 31, 1995. 9.10. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 9.11 Nonliability of Lenders. The relationship between the Borrower and the Lenders and the Agent shall be solely that of borrower and lender. Neither the Agent nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Agent nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. 9.12. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 9.13. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED Page 48 54 STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS. 9.14. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. 9.15. Confidentiality. Each Lender agrees to hold any confidential information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to other Lenders and their respective Affiliates, (ii) to legal counsel, accountants, and other professional advisors to that Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as requested pursuant to or as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which that Lender is a party, and (vi) permitted by Section 12.4. ARTICLE X TEE AGENT 10.1. Appointment. The First National Bank of Chicago is hereby appointed Agent hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the Agent of such Lender. The Agent agrees to act as such upon the express conditions contained in this Article X. The Agent shall not have a fiduciary relationship in respect of the Borrower or any Lender by reason of this Agreement. 10.2. Powers. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers Page 49 55 as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent. 10.3. General Immunity. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except for its or their own gross negligence or willful misconduct. 10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (i) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of any obliger under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (iii) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered to the Agent; (iv) the validity, effectiveness or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; or (v) the value, sufficiency, creation, perfection or priority of any interest in any collateral security. The Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Borrower to the Agent at such time, but is voluntarily furnished by the Borrower to the Agent (either in its capacity as Agent or in its individual capacity). 10.5. Action on Instructions of Lenders. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders and on all holders of Notes. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 10.6. Employment of Agents and Counsel. The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent Page 50 56 shall be entitled to advice of counsel concerning all matters pertaining to the agency hereby created and its duties hereunder and under any other Loan Document. 10.7. Reliance on Documents: Counsel. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent 10.8. Agent's Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Agent ratably in proportion to their respective Commitments (i) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby, or the enforcement of any of the terms thereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Agent. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement. 10.9. Rights as a Lender. In the event the Agent is a Lender, the Agent shall have the same rights and powers hereunder and under any other Loan Document as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. The Agent, in its individual capacity, is not obligated to remain a Lender. 10.10. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to Page 51 57 enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. 10.11. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. Upon any such resignation, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent. If the Agent has resigned and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $250,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent. Upon the effectiveness of the resignation of the Agent, the resigning Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation of an Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. 10.12. Co-Agents. None of the Lenders identified in this Agreement or any other loan document as a "Co-Agent" shall have any right, power, obligation, liability, responsibility or duty under this agreement or any other loan document other than those applicable to all Lenders as such. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or any other Loan Document or in taking or refraining from taking any action hereunder or thereunder or pursuant hereto or thereto. Page 52 58 ARTICLE XI SETOFF; RATABLE PAYMENTS 11.1. Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default or Unmatured Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part hereof, shall then be due. 11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Loans (other than payments received pursuant to Sections 3.1, 3.2 or 3.4) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Loans held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their Loans. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 12.1. Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in compliance with Section 12.3. Notwithstanding clause (ii) of this Section, any Lender may at any time, without the consent of the Borrower or the Agent, assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank; provided, however, that no such assignment shall release the transferor Lender from its obligations hereunder. The Agent may treat the payee of any Note as the owner thereof for all purposes hereof unless and until such payee complies with Section 12.3 in the case of an assignment Page 53 59 thereof or, in the case of any other transfer, a written notice of the transfer is filed with the Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the holder of any Note, shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange therefor. 12.2. Participations. 12.2.1 Permitted Participants: Effect. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the holder of any such Note for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. 12.2.2. Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan or Commitment in which such Participant has an interest which forgives principal, interest or fees or reduces the interest rate or fees payable with respect to any such loan or Commitment, postpones any date fixed for any regularly-scheduled payment of principal of, or interest or fees on, any such Loan or Commitment, releases any guarantor of any such Loan or releases any substantial portion of collateral, if any, securing any such Loan. 12.2.3. Benefit of Setoff. The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of Page 54 60 participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. 12.3. Assignments. 12.3.1. Permitted Assignments. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents. Such assignment shall be substantially in the form of Exhibit "H" hereto or in such other form as may be agreed to by the parties thereto. The consent of the Borrower and the Agent, which consent in each case shall not be unreasonably withheld, shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof; provided, however, that if a Default has occurred and is continuing, the consent of the Borrower shall not be required. 12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent of a notice of assignment, substantially in the form attached as Exhibit "I" to Exhibit "H" hereto (a "Notice of Assignment"), together with any consents required by Section 12.3.1, and (ii) payment of a $2,500 fee to the Agent for processing such assignment, such assignment shall become effective on the effective date specified in such Notice of Assignment. The Notice of Assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Loans under the applicable assignment agreement are "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. on and after the effective date of such assignment, such purchaser shall for all purposes be a lender party to this Agreement and any other Loan Document executed by the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Borrower, the Lenders or the Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Commitment and Loans assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Agent and the Borrower shall make appropriate arrangements so that replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, Page 55 61 replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their Commitment, as adjusted pursuant to such assignment. 12.4. Dissemination of Information. The Borrower authorizes each Lender to disclose to any Participant or Purchaser, which, if required pursuant to Section 12.3.1, the Borrower has consented to in accordance with the terms thereof, or any other Person acquiring an interest in the Loan Documents by operation of law (each a "'Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.15 of this Agreement. 12.5. Tax Treatment. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 2.16. ARTICLE XIII NOTICES 13.1. Giving Notice. Except as otherwise permitted by Section 2.11 with respect to borrowing notices, all notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by telex or by facsimile and addressed or delivered to such party at its address set forth below its signature hereto or at such other address as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid, shall be deemed given when received; any notice, if transmitted by telex or facsimile, shall be deemed given when transmitted (answerback confirmed in the case of telexes). 13.2. Change of Address. The Borrower, the Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. ARTICLE XIV COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Borrower, the Agent and the Lenders and each party has notified the Agent by telex or telephone, that it has taken such action. Page 56 62 IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed this Agreement as of the date first above written. FIRSTAR CORPORATION By: Jeffrey B. Weeden -------------------------------- Jeffrey B. Weeden Senior Vice President- Finance and Treasurer 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: Mr. Jeffrey B. Weeden Senior Vice President- Finance and Treasurer Ph: 414-765-4768 Fx: 414-765-4349 Page 57 63 Commitment $22,222,222.22 THE FIRST NATIONAL BANK OF CHICAGO, Individually and as Agent By: R. C. English ------------------------------ Print Name: Robert C. English ---------------------- Title: Authorized Agent --------------------------- One First National Plaza Suite 0162 Chicago, Illinois 60670 Attention: Mr. Robert C. English Ph: 312-732-1504 Fx: 312-732-6222 Page 58 64 $19,444,444.44 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, Individually and as Co-Agent By: Jennings F. Werner -------------------------------- Print Name: Jennings F. Werner ------------------------ Title: Vice President ----------------------------- 231 South LaSalle Street Chicago, Illinois 60697 Attention: Mr. Jennings F. Werner Vice President Ph: 312-828-4682 Fx: 312-987-6982 Page 59 65 $19,444,444.44 CHEMICAL BANK, Individually and as Co-Agent By: Roger A. Parker ------------------------- Print Name: Roger A. Parker ----------------- Title: Vice President ---------------------- 270 Park Avenue 10th Floor New York, New York 10017 Attention: Mr. Roger Parker Ph: 212-270-3751 Fx: 212-270-1789 Page 60 66 $19,444,444.44 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, Individually and as Co-Agent By: Andrew D. Brown ---------------------------- Print Name: Andrew Brown -------------------- Title: Vice President ------------------------- 60 Wall Street 23rd Floor New York, New York 10260 Attention: Mr. Henry Hsiao Ph: 212-648-7077 Fx: 212-648-5548 Page 61 67 $9,722,222.22 THE BANK OF NEW YORK By: [sig] ----------------------------- Print Name: [sig] --------------------- Title: Vice President -------------------------- Financial Institution Division One Wall Street 17th Floor New York, New York 10286 Attention: Mr. David G. Dobbins Vice President Ph: 212-635-7908 Fx: 212-809-9520 Page 62 68 $9,722,222.22 DEUTSCHE BANK AG - NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By Gayma Shivnarain ------------------------------------- Print Name Gayma Z. Shivnarain ----------------------------- Title: Vice President --------------------------------- By: Robert M. Powers ------------------------------------ Print Name Robert M. Powers ------------------------------ Title: Associate --------------------------------- 31 West 52nd Street 23rd Floor New York, New York 10019 Attention: Ms. Elizabeth Gutweniger Ph: 212-474-7060 Fx: 212-474-8108 Page 63 69 $9,722,222.22 MELLON BANK, N.A. By: Michael Schuster -------------------------------- Print Name: Michael Schuster ------------------------- Title: Vice President ------------------------------ One Mellon Bank Center Room 400 Pittsburgh, Pennsylvania 15258-0001 Attention: Mr. Michael Shuster Vice President Ph: 412-234-1699 Fx: 412-234-9047 Page 64 70 $9,722,222.22 SUNTRUST BANK, ATLANTA By: [sig] -------------------------- Print Name: [sig] ------------------ Title: [sig] ----------------------- MC:121-19TH Floor 25 Park Place, N.E. Atlanta, GA 30303 Attention: Mr. Luther J. Glass Senior Vice President Ph: 404-588-7374 Fx: 404-581-1775 By: Chris Gruehn -------------------------- Print Name: Chris Gruehn ------------------ Title: Vice President ----------------------- Ph: 404-588-8329 Fx: 404-581-1775 Page 65 71 $5,555,555.56 FLEET NATIONAL BANK By: [sig] ------------------------ Print Name: [sig] ------------------------ Title: Vice President ------------------------ 50 Kennedy Plaza Providence, Rhode Island 02903 Attention: Ms. Julie A. Miller Vice President Ph: 401-278-5878 Fx: 401-278-3044 $125.000.000.00 Page 66 72 EXHIBIT "A-1" COMMITTED NOTE $_________________ April 22, 1996 Firstar Corporation, a Wisconsin corporation (the "Borrower"), promises to pay to the order of (the "Lender") the lesser of the principal sum of Dollars or the aggregate unpaid principal amount of all Committed Loans made by the Lender to the Borrower pursuant to Section 2.3 of the Four Year Facility Credit Agreement (as the same may be amended, supplemented or otherwise modified from time to time, the ''Agreement'') hereinafter referred to, in immediately available funds at the main office of The First National Bank of Chicago in Chicago, Illinois, as Agent, or as otherwise directed by the Agent pursuant to the terms of the Agreement, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay the principal of and accrued and unpaid interest on all Committed Loans in full on the Termination Date. The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Committed Loan and the date and amount of each principal payment hereunder, provided, however, that any failure to so record shall not affect the Borrower's obligations under any Loan Document. This Committed Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Four Year Facility Credit Agreement, dated as of April 22, 1996, among the Borrower, Bank of America National Trust and Savings Association, Chemical Bank and Morgan Guaranty Trust Company of New York, as Co-Agents, The First National Bank of Chicago, individually and as Agent, and the lenders named therein, including the Lender, to which Agreement, as it may be amended from time to time, reference is hereby made for a statement of the terms and conditions governing this Committed Note, including the terms and conditions under which this committed note may be prepaid or its maturity date accelerated. Capitalized terms used and not otherwise defined herein are used with the meanings attributed to them in the Agreement. FIRSTAR CORPORATION By:_______________________________ Print Name:_______________________ Title:____________________________ Page 67 73 SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO COMMITTED NOTE OF FIRSTAR CORPORATION DATED APRIL 22, 1996 Principal Maturity Principal Amount of Interest Amount Unpaid Date of Loan Period Paid Balance - ---- --------- ----------- --------- ------- Page 68 74 EXHIBIT "A-2" COMPETITIVE BID NOTE April 22, 1996 Firstar Corporation, a Wisconsin corporation (the "Borrower"), promises to pay to the order of ___________ (the "Lender") the aggregate unpaid principal amount of all Competitive Bid Loans made by the Lender to the Borrower pursuant to Section 2.4 of the Four Year Facility Credit Agreement (as the same may be amended, supplemented or otherwise modified from time to time, the "Agreement") hereinafter referred to, in immediately available funds at the main office of The First National Bank of Chicago in Chicago, Illinois, as Agent, or as otherwise directed by the Agent pursuant to the terms of the Agreement, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay each Competitive Bid Loan in full on the last day of the Interest Period applicable to such Competitive Bid Loan. The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Competitive Bid Loan and the date and amount of each principal payment hereunder, provided, however, that any failure to so record shall not affect the Borrower's obligations under any Loan Document. This Competitive Bid Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Four Year Facility Credit Agreement, dated as of April 22, 1996, among the Borrower, Bank of America National Trust and Savings Association, Chemical Bank and Morgan Guaranty Trust Company of New York, as Co-Agents, The First National Bank of Chicago, individually and as Agent, and the lenders named therein, including the Lender, to which Agreement, as it may be amended from time to time, reference is hereby made for a statement of the terms and conditions governing this Competitive Bid Note, including the terms and conditions under which this Competitive Bid Note may be prepaid or its maturity date accelerated. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement. FIRSTAR CORPORATION By:____________________________ Print Name:____________________ Title:_________________________ Page 69 75 SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO COMMITTED NOTE OF FIRSTAR CORPORATION DATED APRIL 22, 1996 Principal Maturity Principal Amount of Interest Amount Unpaid Date of Loan Period Paid Balance - ---- --------- ----------- --------- ------- Page 70 76 EXHIBIT "B" COMPETITIVE BID QUOTE REQUEST (Section 2.4.2) ____________, 19__ To: The First National Bank of Chicago, as agent (the "Agent") From: Firstar Corporation (the "Borrower") Re: Four Year Facility Credit Agreement dated as of April 22, 1996 among the Borrower, the lenders from time to time party thereto, Bank of America National Trust and Savings Association, Chemical Bank and Morgan Guaranty Trust Company of New York, as Co-Agents and The First National Bank of Chicago, as Agent for such lenders (as amended, supplemented or otherwise modified from time to time through the date hereof, the "Agreement") 1. Capitalized terms used herein have the meanings assigned to them in the Agreement. 2. We hereby give notice pursuant to Section 2.4.2 of the Agreement that we request Competitive Bid Quotes for the following proposed Competitive Bid Advance(s): Borrowing Date: __________, 19__ Principal Amount(1) Interest Period(2) 3. Such Competitive Bid Quotes should offer [a Competitive Bid Margin] [an Absolute Rate]. - --------------- (1) Amount must be at least $5.000,000 (and multiples of $20,000 in excess thereof). (2) One, two, three, or six months (Eurodollar Auction) or at least 7 and not more than 180 days (Absolute Rate Auction), subject to the provisions of the definitions of Eurodollar Interest Period and Absolute Rate Interest Period. Page 71 77 4. Upon acceptance by the undersigned of any or all of the Competitive Bid Advances offered by Lenders in response to this request, the undersigned shall be deemed to affirm as of the Borrowing Date thereof the representations and warranties made in Article IV of the Agreement. FIRSTAR CORPORATION By:___________________ Title:________________ Page 72 78 EXHIBIT "C" INVITATION FOR COMPETITIVE BID QUOTES (Section 2.4.3) ___________, 19__ To: Each of the Lenders party to the Agreement referred to below Re: Invitation for Competitive Bid Quotes to Firstar Corporation (the "Borrower") Pursuant to Section 2.4.3 of the Four Year Facility Credit Agreement dated as of April 22, 1996 among the Borrower, the lenders from time to time party thereto, Bank of America National Trust and Savings Association, Chemical Bank and Morgan Guaranty Trust Company of New York, as Co-Agents and The First National Bank of Chicago, as Agent for such lenders (as amended, supplemented or otherwise modified from time to time through the date hereof, the "Agreement"), we are pleased on behalf of the Borrower to invite you to submit Competitive Bid Quotes to the Borrower for the following proposed Competitive Bid Advance(s): Borrowing Date: ___________, 19__ Principal Amount Interest Period Such Competitive Bid Quotes should offer [a Competitive Bid Margin] [an Absolute Rate]. Your Competitive Bid Quote must comply with Section 2.4.4 of the Agreement and the foregoing. Capitalized terms used herein have the meanings assigned to them in the Agreement. Please respond to this invitation by no later than [1:00 p.m.] [9:00 a.m.] (Chicago time) on __________, 19__. THE FIRST NATIONAL BANK OF CHICAGO, as Agent By:_____________________________ Title:__________________________ Page 73 79 EXHIBIT "D" COMPETITIVE BID QUOTE (Section 2.4.4) _________, 19__ To: The First National Bank of Chicago, as Agent Re: Competitive Bid Quote to Firstar Corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated _______, 19__, we hereby make the following Competitive Bid Quote pursuant to Section 2.4.4 of the Agreement hereinafter referred to and on the following terms: 1. Quoting Lender: ______________________________________________________ 2. Person to contact at Quoting Lender: _________________________________ 3. Borrowing Date: ______________________________________________________ 4. We hereby offer to make Competitive Bid Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest [Competitive [Absolute Minimum Amount(2) Period(3) Bid Margin(4)] Rate (5)] Amount(6) --------- --------- -------------- ---------- --------- - ----------------------- (1)As specified in the related Invitation For Competitive Bid Quotes. (2)Principal amount bid for each Interest Period may not exceed the principal amount requested. Bids must be made for at least $5,000,000 (and multiples of $500,000 in excess thereof). (3)One, two, three or six months or at least 7 and not more than 180 days, as specified in the related Invitation For Competitive Bid Quotes. (4)Competitive Bid Margin over or under the Eurodollar Base Rate determined for the applicable Interest Period. Specify percentage (rounded to the nearest 1/100 of 1%) and specify whether "PLUS" or "MINUS". (5)Specify rate of interest per annum (rounded to the nearest 1/100 of 1%). (6)Specify minimum or maximum amount, if any, which the Borrower may accept (see Section 2.4.4(b)(iv)). Page 74 80 We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Four Year Facility Credit Agreement dated as of April 22, 1996 among the Borrower, the lenders from time to time party thereto, Bank of America National Trust and Savings Association, Chemical Bank and Morgan Guaranty Trust Company of New York, as Co-Agents and The First National Bank of Chicago, as Agent for such lenders (as amended, supplemented or otherwise modified from time to time through the date hereof, the "Agreement"), irrevocably obligates us to make the Competitive Bid Loan(s) for which any offer(s) are accepted, in whole or in part. Capitalized terms used herein and not otherwise defined herein shall have their meanings as defined in the Agreement. Very truly yours, [NAME OF LENDER] By:______________________ Title:___________________ Page 75 81 EXHIBIT "E" FORM OF OPINION April 22, 1996 To: The Agent and the Lenders who are parties to the Credit Agreement described below. Gentlemen/Ladies: I am counsel for Firstar Corporation (the "Borrower"), and have represented the Borrower in connection with its execution and delivery of a Four Year Facility Credit Agreement among the Borrower, The First National Bank of Chicago, individually and as Agent, Bank of America National Trust and Savings Association, Chemical Bank and Morgan Guaranty Trust Company of New York, as Co-Agents and the Lenders named therein, providing for Advances in an aggregate principal amount not exceeding $125,000,000 at any one time outstanding and dated as of April 22, 1996 (the "Agreement"). All capitalized terms used in this opinion and not otherwise defined shall have the meanings attributed to them in the Agreement. I have examined the Borrower's articles of incorporation, by-laws, resolutions, the Loan Documents and such other matters of fact and law which I deem necessary in order to render this opinion. Based upon the foregoing, it is my opinion that: 1. Each of the Borrower and its Subsidiaries is a corporation or a national or state banking association duly incorporated or organized, as applicable, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where such failure to obtain all requisite authority would not, with respect to any individual failure or any failures in the aggregate, have a Material Adverse Effect. 2. The execution and delivery of the Loan Documents by the Borrower and the performance by the Borrower of the Obligations have been duly authorized by all necessary corporate action and proceedings on the part of the Borrower and will not: (a) require any consent of the Borrower's shareholders; (b) violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries or the Borrower's or any Subsidiary's articles of incorporation or by-laws or any Page 76 82 indenture, instrument or agreement binding upon the Borrower or any of its Subsidiaries; or (c) result in, or require, the creation or imposition of any Lien pursuant to the provisions of any indenture, instrument or agreement binding upon the Borrower or any of its Subsidiaries. 3. The Loan Documents have been duly executed and delivered by the Borrower and constitute legal, valid and binding obligations of the Borrower enforceable in accordance with their terms except to the extent the enforcement thereof may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and subject also to the availability of equitable remedies if equitable remedies are sought. 4. There is no litigation or proceeding against the Borrower or any of its Subsidiaries which, if adversely determined, could have a Material Adverse Effect. 5. No approval, authorization, consent, adjudication or order of any governmental authority, which has not been obtained by the Borrower or any of its Subsidiaries, is required to be obtained by the Borrower or any of its Subsidiaries in connection with the execution and delivery of the Loan Documents, the borrowings under the Agreement or in connection with the payment by the Borrower of the Obligations. This opinion may be relied upon by the Agent, the Lenders and their participants, assignees and other transferees. Very truly yours, __________________ Page 77 83 EXHIBIT "F" COMPLIANCE CERTIFICATE To: The Lenders who are parties to the Credit Agreement described below. This Compliance Certificate is furnished pursuant to that certain Four Year Facility Credit Agreement dated as of April 22, 1996 (as amended, modified, renewed or extended from time to time, the "Agreement") among Firstar Corporation (the "Borrower"), the lenders party thereto, Bank of America National Trust and Savings Association, Chemical Bank and Morgan Guaranty Trust Company of New York, as Co-Agents and The First National Bank of Chicago, as Agent for the Lenders. Unless otherwise defined herein, capitalized terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement. THE UNDERSIGNED HEREBY CERTIFIES THAT: 1. I am the duly elected _____________________________ of the Borrower; 2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Borrower and its Subsidiaries during the accounting period covered by the attached financial statements; 3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Default or Unmatured Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below; and 4. Schedule I attached hereto sets forth financial data and computations evidencing the Borrower's compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking, or proposes to take with respect to each such condition or event: Page 78 84 __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this _____ day of__________ , 19___. _____________ Page 79 85 SCHEDULE I TO COMPLIANCE CERTIFICATE Schedule of Compliance as of _________________________ with Sections 6.15 and 6.16 of the Agreement Section 6.15. Consolidated Non-Performing Assets to Total Equity Capital: A. Consolidated Non-Performing Assets 1. Loans on nonaccrual status $__________ 2. Loans 90 days or more past $__________ due and still accruing 3. Loans and leases restructured and in compliance with modified terms $__________ 4. Other Real Estate Owned $__________ 5. Property acquired pursuant to in substance foreclosures $__________ 6. Total Consolidated Non-Performing Assets (1 + 2 + 3 + 4 + 5) $__________ B. Total Equity Capital $__________ C. Ratio (A6/B) :1.00 ---------- D. Maximum Permitted 0.65:1.00 ---------- Section 6.16. Debt to Total Equity Capital: A. Total Indebtedness (Borrower-only) 1. Total deposits $__________ 2. Securities sold under agreements to repurchase $__________ 3. Borrowings with an original maturity of one year or less $__________ 4. Other borrowed funds with an original maturity of greater than one year $__________ 5. Mandatory convertible securities $__________ 6. Subordinated notes and debentures $__________ Page 80 86 7. Other liabilities $ --------------------- 8. Total debt (1 + 2 + 3 + 4 + 5 + 6 + 7) $ --------------------- B. Total equity capital (Borrower-only) $ --------------------- C. Ratio A/B :1.00 --------------------- D. Maximum Permitted 0.45:1.00 --------------------- Page 81 87 EXHIBIT "G" LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION To: The First National Bank of Chicago, as Agent (the "Agent") under the Credit Agreement Described Below. Re: Four Year Facility Credit Agreement, dated as of April 22, 1996 (as the same may be amended or modified, the "Credit Agreement"), among Firstar Corporation (the "Borrower"), the Agent, Bank of America National Trust and Savings Association, Chemical Bank and Morgan Guaranty Trust Company of New York, as Co-Agents and the Lenders named therein. Capitalized terms used and not otherwise defined herein shall have the meanings assigned thereto in the Credit Agreement. The Agent is specifically authorized and directed to act upon the following standing money transfer instructions with respect to the proceeds of Advances or other extensions of credit from time to time until receipt by the Agent of a specific written revocation of such instructions by the Borrower; provided, however, that the Agent may otherwise transfer funds as hereafter directed in writing by the Borrower in accordance with Section 13.1 of the Credit Agreement or based on any telephonic notice made in accordance with Section 2.11 of the Credit Agreement. Facility Identification Number(s)___________________________________________ Customer/Account Name_______________________________________________________ Transfer Funds To___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ For Account No._____________________________________________________________ Reference/Attention To _____________________________________________________ Authorized Officer (Customer Representative) Date __________________________ ________________________ ___________________________ (Please Print) Signature Bank Officer Name Date ______________________ ________________________ ___________________________ (Please Print) Signature (Deliver Completed Form to Credit Support Staff For Immediate Processing) Page 82 88 EXHIBIT "H" ASSIGNMENT AGREEMENT This Assignment Agreement (this "Assignment Agreement") between (the ___________________________"Assignor") and ____________________________ (the "Assignee') is dated as of _________________, 19__. The parties hereto agree as follows: 1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement (which, as it may be amended, modified, renewed or extended from time to time is herein called the "Credit Agreement") described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement. 2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement such that after giving effect to such assignment the Assignee shall have purchased pursuant to this Assignment Agreement the percentage interest specified in Item 3 of Schedule 1 of all outstanding rights and obligations under the Credit Agreement relating to the facilities listed in Item 3 of Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if the applicable Commitment has been terminated) purchased by the Assignee hereunder is set forth in Item 4 of Schedule 1. 3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the "Effective Date") shall be the later of the date specified in Item 5 of Schedule 1 or two Business Days (or such shorter period agreed to by the Agent) after a Notice of Assignment substantially in the form of Exhibit "I" attached hereto has been delivered to the Agent. Such Notice of Assignment must include any consents required to be delivered to the Agent by Section [12.3.1] of the Credit Agreement. In no event will the Effective Date occur if the payments required to be made by the Assignee to the Assignor on the Effective Date under Sections 4 and 5 hereof are not made on the proposed Effective Date. The Assignor will notify the Assignee of the proposed Effective Date no later than the Business Day prior to the proposed Effective Date. As of the Effective Date, (i) the Assignee shall have the rights and obligations of a Lender under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder and (ii) the Assignor shall relinquish its rights and be released from its corresponding obligations under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder. 4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee shall be entitled to receive from the Agent all payments of principal, interest and fees with respect to the interest assigned hereby. The Assignee shall advance funds directly to the Agent with respect to all Loans and reimbursement payments made on or after the Effective Date with respect to the interest assigned hereby. [In consideration for the sale and assignment Page 83 89 of Loans hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date, an amount equal to the principal amount of the portion of all Floating Rate Loans assigned to the Assignee hereunder and (ii) with respect to each Fixed Rate Loan made by the Assignor and assigned to the Assignee hereunder which is outstanding on the Effective Date, (a) on the last day of the Interest Period therefor or (b) on such earlier date agreed to by the Assignor and the Assignee or (c) on the date on which any such Fixed Rate Loan either becomes due (by acceleration or otherwise) or is prepaid (the date as described in the foregoing clauses (a), (b) or (c) being hereinafter referred to as the "Payment Date"), the Assignee shall pay the Assignor an amount equal to the principal amount of the portion of such Fixed Rate Loan assigned to the Assignee which is outstanding on the Payment Date. If the Assignor and the Assignee agree that the Payment Date for such Fixed Rate Loan shall be the Effective Date, they shall agree to the interest rate applicable to the portion of such Loan assigned hereunder for the period from the Effective Date to the end of the existing Interest Period applicable to such Fixed Rate Loan (the "Agreed Interest Rate") and any interest received by the Assignee in excess of the Agreed Interest Rate shall be remitted to the Assignor. In the event interest for the period from the Effective Date to but not including the Payment Date is not paid by the Borrower with respect to any Fixed Rate Loan sold by the Assignor to the Assignee hereunder, the Assignee shall pay to the Assignor interest for such period on the portion of such Fixed Rate Loan sold by the Assignor to the Assignee hereunder at the applicable rate provided by the Credit Agreement. In the event a prepayment of any Fixed Rate Loan which is existing on the Payment Date and assigned by the Assignor to the Assignee hereunder occurs after the Payment Date but before the end of the Interest Period applicable to such Fixed Rate Loan, the Assignee shall remit to the Assignor the excess of the prepayment penalty paid with respect to the portion of such Fixed Rate Loan assigned to the Assignee hereunder over the amount which would have been paid if such prepayment penalty was calculated based on the Agreed Interest Rate. The Assignee will also promptly remit to the Assignor (i) any principal payments received from the Agent with respect to Fixed Rate Loans prior to the Payment Date and (ii) any amounts of interest on Loans and fees received from the Agent which relate to the portion of the Loans assigned to the Assignee hereunder for periods prior to the Effective Date, in the case of Floating Rate Loans or fees, or the Payment Date, in the case of Fixed Rate Loans, and not previously paid by the Assignee to the Assignor.] ******* In the event that either party hereto receives any payment to which the other party hereto is entitled under this Assignment Agreement, then the party receiving such amount shall promptly remit it to the other party hereto. 5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the Assignor a fee on each day on which a payment of interest or [commitment] fees is made under the Credit Agreement with respect to the amounts assigned to the Assignee hereunder (other than a payment of interest or facility fees for the period prior to the Effective Date or, in the case of Fixed Rate Loans, the Payment Date, which the Assignee is obligated to deliver to the Assignor pursuant to Section 4 hereof). The amount of such fee shall be the difference between (i) the interest or fee, as applicable, paid with respect ________________________ ******* Each Assignor may insert its standard payment provisions in lieu of the payment terms included in this Exhibit. Page 84 90 to the amounts assigned to the Assignee hereunder and (ii) the interest or fee, as applicable, which would have been paid with respect to the amounts assigned to the Assignee hereunder if each interest rate was _____ of 1% less than the interest rate paid by the Borrower or if the facility fee was _____ of 1% less than the facility fee paid by the Borrower, as applicable. In addition, the Assignee agrees to pay ____% of the recordation fee required to be paid to the Agent in connection with this Assignment Agreement. 6. REPRESENTATIONS OF THE ASSIGNOR: LIMITATIONS ON THE ASSIGNOR'S LIABILITY. The Assignor represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim created by the Assignor. It is understood and agreed that the assignment and assumption hereunder are made without recourse to the Assignor and that the Assignor makes no other representation or warranty of any kind to the Assignee. Neither the Assignor nor any of its officers, directors, employees, agents or attorneys shall be responsible for (i) the due execution, legality, validity, enforceability, genuineness, sufficiency or collectability of any Loan Document, including without limitation, documents granting the Assignor and the other Lenders a security interest in assets of the Borrower or any guarantor, (ii) any representation, warranty or statement made in or in connection with any of the Loan Documents, (iii) the financial condition or creditworthiness of the Borrower or any guarantor, (iv) the performance of or compliance with any of the terms or provisions of any of the Loan Documents, (v) inspecting any of the Property, books or records of the Borrower, (vi) the validity, enforceability, perfection, priority, condition, value or sufficiency of any collateral securing or purporting to secure the Loans or (vii) any mistake, error of judgment, or action taken or omitted to be taken in connection with the Loans or the Loan Documents. 7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements requested by the Assignee and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement, (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information at it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender, (v) agrees that its payment instructions and notice instructions are as set forth in the attachment to Schedule 1, (vi) confirms that none of the funds, monies, assets or other consideration being used to make the purchase and assumption hereunder are "plan assets" as defined under ERISA and that its rights, benefits and interests in and under the Loan Documents will not be "plan assets" under ERISA, [and (vii) attaches the forms prescribed by the Internal Revenue Service of the United States certifying that the Assignee is entitled to receive payments under the Page 85 91 Loan Documents without deduction or withholding of any United States federal income taxes].* 8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor harmless against any and all losses, costs and expenses (including, without limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor in connection with or arising in any manner from the Assignee's non-performance of the obligations assumed under this Assignment Agreement. 9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall have the right pursuant to Section [12.3.1] of the Credit Agreement to assign the rights which are assigned to the Assignee hereunder to any entity or person, provided that (i) any such subsequent assignment does not violate any of the terms and conditions of the Loan Documents or any law, rule, regulation, order, writ, judgment, injunction or decree and that any consent required under the terms of the Loan Documents has been obtained and (ii) unless the prior written consent of the Assignor is obtained, the Assignee is not thereby released from its obligations to the Assignor hereunder, if any remain unsatisfied, including, without limitation, its obligations under [Sections 4, 5 and 8] hereof. 10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the Aggregate Commitment occurs between the date of this Assignment Agreement and the Effective Date, the percentage interest specified in Item 3 of Schedule 1 shall remain the same, but the dollar amount purchased shall be recalculated based on the reduced Aggregate Commitment. 11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice of Assignment embody the entire agreement and understanding between the parties hereto and supersede all prior agreements and understandings between the parties hereto relating to the subject matter hereof. 12. GOVERNING LAW. This Assignment Agreement shall be governed by the internal law, and not the law of conflicts, of the State of Illinois. 13. NOTICES. Notices shall be given under this Assignment Agreement in the manner set forth in the Credit Agreement. For the purpose hereof, the addresses of the parties hereto (until notice of a change is delivered) shall be the address set forth in the attachment to Schedule 1. IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement by their duly authorized officers as of the date first above written. [NAME OF ASSIGNOR] _____________ * to be inserted if the Assignee is not incorporated under the laws of the United States, or a state thereof. Page 86 92 By : _________________________ Title:________________________ _________________________ _________________________ [NAME OF ASSIGNEE] By: _________________________ Title:_______________________ _________________________ _________________________ Page 87 93 SCHEDULE 1 to Assignment Agreement 1. Description and Date of Credit Agreement: Four Year Facility Credit Agreement, dated as of April 22, 1996, among Firstar Corporation, the Lenders, Bank of America National Trust and Savings Association, Chemical Bank and Morgan Guaranty Trust Company of New York, as Co- Agents and The First National Bank of Chicago, as Agent 2. Date of Assignment Agreement: ____________, 19__ 3. Amounts (As of Date of Item 2 above): Facility Facility Facility Facility 1* 2* *3 *4 ________ ________ ________ ________ a. Total of Commitments (Loans)** under Credit Agreement $_____ $_____ $_____ $______ b. Assignee's Percentage of each Facility purchased under the Assignment Agreement*** _____% _____% ______% ______% c. Amount of Assigned Share in each Facility purchased under the Assignment Agreement $_____ $_____ $_____ $______ 4. Assignee's aggregate (Loan Amount)** Commitment amount purchased hereunder: $_____ 5. Proposed Effective Date: ______ Accepted and Agreed: [NAME OF ASSIGNOR] [NAME OF ASSIGNEE] By: ________________________ By: ______________________ Title: _____________________ Title: ___________________ * Insert specific facility names per Credit Agreement ** If a Commitment has been terminated, insert outstanding Loans in place of Commitment *** Percentage taken to 10 decimal places Page 88 94 Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT Attach Assignor's Administrative Information Sheet, which must include notice address for the Assignor and the Assignee Page 89 95 EXHIBIT "I" to Assignment Agreement NOTICE OF ASSIGNMENT _____________, 19 __ To: [NAME OF BORROWER]* ______________ ______________ [NAME OF AGENT] ______________ ______________ From: [NAME OF ASSIGNOR] (the "Assignor") [NAME OF ASSIGNEE] (the "Assignee") 1. We refer to that Credit Agreement (the "Credit Agreement") described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement. 2. This Notice of Assignment (this "Notice") is given and delivered to ****[the Borrower and]**** the Agent pursuant to Section 12.3.2 of the Credit Agreement. 3. The Assignor and the Assignee have entered into an Assignment Agreement, dated as of _____, 19 _ (the "Assignment"), pursuant to which, among other things, the Assignor has sold, assigned, delegated and transferred to the Assignee, and the Assignee has purchased, accepted and assumed from the Assignor the percentage interest specified in Item 3 of Schedule 1 of all outstandings, rights and obligations under the Credit Agreement relating to the facilities listed in Item 3 of Schedule 1. The Effective Date of the Assignment shall be the later of the date specified in Item 5 of Schedule 1 or two Business Days (or such shorter period as agreed to by the Agent) after this Notice of Assignment and any consents and fees required by Sections 12.3.1 and 12.3.2 of the Credit Agreement have been delivered to the Agent, provided that the Effective Date shall not occur if any condition precedent agreed to by the Assignor and the Assignee has not been satisfied. - ------------------ *To be included only if consent must be obtained from the Borrower pursuant to Section 12.3.1 of the Credit Agreement. 4. The Assignor and the Assignee hereby give to the Borrower and the Agent notice of the assignment and delegation referred to herein. The Page 90 96 Assignor will confer with the Agent before the date specified in Item 5 of Schedule 1 to determine if the Assignment Agreement will become effective on such date pursuant to Section 3 hereof, and will confer with the Agent to determine the Effective Date pursuant to Section 3 hereof if it occurs thereafter. The Assignor shall notify the Agent if the Assignment Agreement does not become effective on any proposed Effective Date as a result of the failure to satisfy the conditions precedent agreed to by the Assignor and the Assignee. At the request of the Agent, the Assignor will give the Agent written confirmation of the satisfaction of the conditions precedent. 5. The Assignor or the Assignee shall pay to the Agent on or before the Effective Date the processing fee of $2,500 required by Section 12.3.2 of the Credit Agreement. 6. If Notes are outstanding on the Effective Date, the Assignor and the Assignee request and direct that the Agent prepare and cause the Borrower to execute and deliver new Notes or, as appropriate, replacements notes, to the Assignor and the Assignee. The Assignor and, if applicable, the Assignee each agree to deliver to the Agent the original Note received by it from the Borrower upon its receipt of a new Note in the appropriate amount. 7. The Assignee advises the Agent that notice and payment instructions are set forth in the attachment to Schedule 1. 8. The Assignee hereby represents and warrants that none of the funds, monies, assets or other consideration being used to make the purchase pursuant to the Assignment are "plan assets" as defined under ERISA and that its rights, benefits, and interests in and under the Loan Documents will not be "plan assets" under ERISA. 9. The Assignee authorizes the Agent to act as its agent under the Loan Documents in accordance with the terms thereof. The Assignee acknowledges that the Agent has no duty to supply information with respect to the Borrower or the Loan Documents to the Assignee until the Assignee becomes a party to the Credit Agreement.* - ----------------- *May be eliminated if Assignee is a party to the Credit Agreement prior to the Effective Date. Page 91 97 NAME OF ASSIGNOR NAME OF ASSIGNEE By:_____________________________ By:_____________________________ Title:__________________________ Title:__________________________ ACKNOWLEDGED [AND CONSENTED TO] ACKNOWLEDGED [AND CONSENTED TO] BY [NAME OF AGENT] BY [NAME OF BORROWER] By: ________________________ By: _________________________ Title: ________________________ Title: _________________________ [Attach photocopy of Schedule 1 to Assignment] Page 92 98 SCHEDULE "1" LITIGATION (See Section 5.7) None. Page 93 99 Schedule 2 to Credit Agreement among Firstar Corporations The First National Bank of Chicago as Agent ant Lenders named therein.
Percentage Jurisdiction in which Name of Subsidiary Ownership Incorporated or Organized - ------------------ ---------- ------------------------- 1 Firstar Bank Milwaukee, N.A. 100% United States 1 Firstar Bank Appleton 100% Wisconsin 1 Firstar Bank Fond du Lac, N.A. 100% United States 4 Firstar Bank, F.S.B. 100% United States 1 Firstar Bank Green Bay 100% Wisconsin 1 Firstar Bank Wisconsin 100% Wisconsin 1 Firstar Bank Oshkosh, N.A. 100% United States 1 Firstar Bank Sheboygan, N.A. 100% United States 1 Firstar Bank Wausau, N.A. 100% United States 4 Firstar Bank Iowa, N.A. 100% United States 4 Firstar Bank Burlington, N.A. 100% United States 2 Firstar Bank of Minnesota, N.A. 100% United States 1 Firstar Bank Illinois 100% Illinois 1 Firstar Credit Card Bank, N.A. 100% United States 1 FCSB Bank 100% Illinois 3 Firstar Metropolitan Bank & Trust 100% Arizona 6 Firstar Corporation of Wisconsin 100% Wisconsin 6 Firstar Corporation of Minnesota 100% Minnesota 6 Firstar Corporation of Arizona 100% Arizona 6 Firstar Corporation of Iowa 100% Iowa 1 Firstar Trust Company 99.95% Wisconsin 1 Firstar Trust Company of Florida, N.A. 100% United States 6 Firstar Investment Research & Management Company 100% Wisconsin 6 Firstar Insurance Services, Inc. 100% Wisconsin 5 Elan Investment Services, Inc. 100% Wisconsin 6 Elan Life Insurance Company, Inc. 79.00% Arizona 6 Elan Title Services. Inc. 100% Wisconsin 5 Firstar Community Investment Corporation 100% Wisconsin
Page 94 100 6 Firstar Development Corporation 100% Delaware 5 Firstar Leasing Services Corporation 100% Wisconsin 5 FM Properties of Wisconsin, Inc. 100% Wisconsin 5 CSFM Corporation 100% Wisconsin 5 Firstar Home Mortgage Corporation l00% Wisconsin 5 Firstar Information Services Corporation 100% Wisconsin 4 Banks of Iowa Capital Corporation 100% Iowa 5 DPC of Milwaukee, Inc. 100% Wisconsin 5 Mid States Financial Corp. 100% Illinois 1 First Colonial Mortgage Corporation 100% Illinois Appleton Capital Corporation 100% Nevada Fond du Lac Capital Corporation 100% Nevada Green Bay Capital Corporation 100% Nevada Milwaukee Capital Corporation 100% Nevada Oshkosh Capital Corporation 100% Nevada Sheboygan Capital Corporation 100% Nevada Wisconsin Capital Corporation 100% Nevada Notes 1 Subsidiary of Firstar Corporation of Wisconsin 2 Subsidiary of Firstar Corporation of Minnesota 3 Subsidiary of Firstar Corporation of Arizona 4 Subsidiary of Firstar Corporation of Iowa 5 Subsidiary of Firstar Bank Milwaukee, N.A. 6 Subsidiary of Firstar Corporation All Capital Corporations are subsidiaries of their respective banks. Page 95 EX-4.10 5 SERIES A CAPITAL SECURITIES 1 EXHIBIT 4.10 ======================================= SERIES A CAPITAL SECURITIES GUARANTEE AGREEMENT Firstar Corporation Dated as of December 23, 1996 ======================================= 2 TABLE OF CONTENTS ----------------- Page ---- ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation . . . . . . . . . . 2 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application . . . . . . . . . 6 SECTION 2.2 Lists of Holders of Securities . . . . . . . . . . 6 SECTION 2.3 Reports by the Capital Securities Guarantee Trustee. . . . . . . . . . . . . . . . . . . . . . 7 SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee. . . . . . . . . . . . . . . . . 7 SECTION 2.5 Evidence of Compliance with Conditions Precedent. . . . . . . . . . . . . . . . . . . . . 7 SECTION 2.6 Events of Default; Waiver. . . . . . . . . . . . . 7 SECTION 2.7 Event of Default; Notice . . . . . . . . . . . . . 8 SECTION 2.8 Conflicting Interests. . . . . . . . . . . . . . . 8 ARTICLE III POWERS, DUTIES AND RIGHTS OF CAPITAL SECURITIES GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee . . . . . . . . . . . . . . . . 8 SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee. . . . . . . . . . . . . . . . . 11 SECTION 3.3 Not Responsible for Recitals or Issuance of Series A Capital Securities Guarantee . . . . . 13 ARTICLE IV CAPITAL SECURITIES GUARANTEE TRUSTEE SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility. . . . . . . . . . . . . . . . . . . . 13 SECTION 4.2 Appointment, Removal and Resignation of Capital Securities Guarantee Trustee . . . . . . . . . . . 14 ARTICLE V GUARANTEE SECTION 5.1 Guarantee. . . . . . . . . . . . . . . . . . . . . 15 SECTION 5.2 Waiver of Notice and Demand. . . . . . . . . . . . 15 SECTION 5.3 Obligations Not Affected . . . . . . . . . . . . . 15 SECTION 5.4 Rights of Holders. . . . . . . . . . . . . . . . . 16 SECTION 5.5 Guarantee of Payment . . . . . . . . . . . . . . . 17 3 Page ---- SECTION 5.6 Subrogation . . . . . . . . . . . . . . . . . . 17 SECTION 5.7 Independent Obligations . . . . . . . . . . . . 17 ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions. . . . . . . . . . . 18 SECTION 6.2 Ranking . . . . . . . . . . . . . . . . . . . . 19 ARTICLE VII TERMINATION SECTION 7.1 Termination . . . . . . . . . . . . . . . . . . 19 ARTICLE VIII INDEMNIFICATION SECTION 8.1 Exculpation . . . . . . . . . . . . . . . . . . 19 SECTION 8.2 Indemnification . . . . . . . . . . . . . . . . 20 ARTICLE IX MISCELLANEOUS SECTION 9.1 Successors and Assigns. . . . . . . . . . . . . 20 SECTION 9.2 Amendments. . . . . . . . . . . . . . . . . . . 21 SECTION 9.3 Notices . . . . . . . . . . . . . . . . . . . . 21 SECTION 9.4 Exchange Offer. . . . . . . . . . . . . . . . . 22 SECTION 9.5 Benefit . . . . . . . . . . . . . . . . . . . . 22 SECTION 9.6 Governing Law . . . . . . . . . . . . . . . . . 22 ii 4 SERIES A CAPITAL SECURITIES GUARANTEE AGREEMENT This GUARANTEE AGREEMENT (the "Series A Capital Securities Guarantee"), dated as of December [ ], 1996, is executed and delivered by Firstar Corporation, a Wisconsin corporation (the "Guarantor"), and Chase Manhattan Bank, a New York banking corporation, as trustee (the "Capital Securities Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Series A Capital Securities (as defined herein) of Firstar Capital Trust I, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of December [ ], 1996, among the trustees of the Issuer, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof 150,000 capital securities, having an aggregate liquidation amount of $150,000,000, such capital securities being designated the [ ]% Series A Capital Securities (collectively the "Series A Capital Securities") and, in connection with an Exchange Offer (as defined in the Declaration) to execute and deliver the Series B Capital Securities Guarantee (as defined in the Declaration) for the benefit of holders of the Series B Capital Securities (as defined in the Declaration). WHEREAS, as incentive for the Holders to purchase the Series A Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Series A Capital Securities Guarantee, to pay to the Holders the Guarantee Payments (as defined below). The Guarantor agrees to make certain other payments on the terms and conditions set forth herein. WHEREAS, the Guarantor is executing and delivering a guarantee agreement (the "Common Securities Guarantee"), with substantially identical terms to this Series A Capital Securities Guarantee, for the benefit of the holders of the Common Securities (as defined herein), except that if an Event of Default (as defined in the Declaration) has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated, to the extent and in the manner set forth in the Common Securities Guarantee, to the rights of holders of Series A Capital Securities and the Series B Capital Securities to receive Guarantee Payments under this Series A Capital Securities Guarantee and the Series B Capital Securities Guarantee, as the case may be. NOW, THEREFORE, in consideration of the purchase by each Holder, which purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the Guarantor executes and delivers 5 this Series A Capital Securities Guarantee for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation In this Series A Capital Securities Guarantee, unless the context otherwise requires: (a) Capitalized terms used in this Series A Capital Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) Terms defined in the Declaration as at the date of execution of this Series A Capital Securities Guarantee have the same meaning when used in this Series A Capital Securities Guarantee unless otherwise defined in this Series A Capital Securities Guarantee; (c) a term defined anywhere in this Series A Capital Securities Guarantee has the same meaning throughout; (d) all references to "the Series A Capital Securities Guarantee" or "this Series A Capital Securities Guarantee" are to this Series A Capital Securities Guarantee as modified, supplemented or amended from time to time; (e) all references in this Series A Capital Securities Guarantee to Articles and Sections are to Articles and Sections of this Series A Capital Securities Guarantee, unless otherwise specified; (f) a term defined in the Trust Indenture Act has the same meaning when used in this Series A Capital Securities Guaranteee, unless otherwise defined in this Series A Capital Securities Guarantee or unless the context otherwise requires; and (g) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 under the Securities Act of 1933, as amended, or any successor rule thereunder. 2 6 "Business Day" means any day other than a Saturday or a Sunday, or a day on which banking institutions in The City of New York or Milwaukee, Wisconsin are authorized or required by law or executive order to close. "Capital Securities Guarantee Trustee" means Chase Manhattan Bank, a New York banking corporation, until a Successor Capital Securities Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Series A Capital Securities Guarantee and thereafter means each such Successor Capital Securities Guarantee Trustee. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer. "Corporate Trust Office" means the office of the Capital Securities Guarantee Trustee at which the corporate trust business of the Capital Securities Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53201. "Covered Person" means any Holder or beneficial owner of Series A Capital Securities. "Debentures" means the series of subordinated debt securities of the Guarantor designated the [ ]% Series A Junior Subordinated Deferrable Interest Debentures due January 15, 2027 held by the Property Trustee (as defined in the Declaration) of the Issuer. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Series A Capital Securities Guarantee. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Series A Capital Securities, to the extent not paid or made by the Issuer: (i) any accumulated and unpaid Distributions (as defined in the Declaration) that are required to be paid on such Series A Capital Securities to the extent the Issuer has funds on hand legally available therefor at such time, (ii) the redemption price, including all accumulated and unpaid Distributions to the date of redemption (the "Redemption Price") to the extent the Issuer has funds on hand legally available therefor at such time, with respect to any Series A Capital Securities called for redemption by the Issuer; and (iii) upon a voluntary or involuntary termination and liquidation of the Issuer (other than in connection with the distribution of Debentures to the Holders in exchange for Series A Capital Securities as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all 3 7 accumulated and unpaid Distributions on the Series A Capital Securities to the date of payment, to the extent the Issuer has funds on hand legally available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer. If an Event of Default has occurred and is continuing, no Guarantee Payments under the Common Securities Guarantee with respect to the Common Securities or any guarantee payment under any Other Common Securities Guarantees shall be made until the Holders shall be paid in full the Guarantee Payments to which they are entitled under this Series A Capital Securities Guarantee. "Holder" shall mean any holder, as registered on the books and records of the Issuer, of any Series A Capital Securities; provided, however, that, in determining whether the holders of the requisite percentage of Series A Capital Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Indemnified Person" means the Capital Securities Guarantee Trustee, any Affiliate of the Capital Securities Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Capital Securities Guarantee Trustee. "Indenture" means the Indenture dated as of December [ ], 1996, among the Guarantor (the "Debenture Issuer") and Chase Manhattan Bank, as trustee, pursuant to which the Debentures are to be issued to the Property Trustee of the Issuer. "Majority in liquidation amount of the Series A Capital Securities" means, except as provided by the Trust Indenture Act, a vote by the Holder(s), voting separately as a class, of more that 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of all Series A Capital Securities. "Officers' Certificate" means, with respect to any person, a certificate signed by the Chairman, a Vice Chairman, the Chief Executive Officer, the President, a Vice President, the Comptroller, the Secretary or an Assistant Secretary, the Secretary or an Assistant Secretary of the Guarantor. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Series A Capital Securities Guarantee shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; 4 8 (b) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (c) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Other Common Securities Guarantees" shall have the same meaning as "Other Guarantees" in the Common Securities Guarantee. "Other Debentures" means all junior subordinated debentures issued by the Guarantor from time to time and sold to trusts to be established by the Guarantor (if any), in each case similar to the Issuer. "Other Guarantees" means all guarantees to be issued by the Guarantor with respect to capital securities (if any) similar to the Series A Capital Securities issued by other trusts to be established by the Guarantor (if any), in each case similar to the Issuer. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of December [ ], 1996, by and among the Guarantor, the Issuer and the Initial Purchasers named therein as such agreement may be amended, modified or supplemented from time to time. "Responsible Officer" means, with respect to the Capital Securities Guarantee Trustee, and officer within the [Corporate Trust Office] of the Capital Securities Guarantee Trustee, including any vice president, any assistant vice president, any assistant secretary, the treasurer, any assistant treasurer of other officer of the [Corporate Trust Office] of the Capital Securities Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Capital Securities Guarantee Trustee" means a successor Capital Securities Guarantee Trustee possessing the 5 9 qualifications to act as Capital Securities Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. "Trust Securities" means the Common Securities and the Series A Capital Securities and Series B Capital Securities, collectively. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application (a) This Series A Capital Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Series A Capital Securities Guarantee and shall, to the extent applicable, be governed by such provisions; and (b) if and to the extent that any provision of this Series A Capital Securities Guarantee limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2 Lists of Holders of Securities (a) The Guarantor shall provide the Capital Securities Guarantee Trustee (unless the Capital Securities Guarantee Trustee is otherwise the registrar of the Capital Securities) with a list, in such form as the Capital Securities Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of such date, (i) within one Business Day after June 1 and December 1 of each year, and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more that 14 days before such List of Holders is given to the Capital Securities Guarantee Trustee provided, that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Capital Securities Guarantee Trustee by the Guarantor. The Capital Securities Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Capital Securities Guarantee Trustee shall comply with its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. 6 10 SECTION 2.3 Reports by the Capital Securities Guarantee Trustee Within 60 days after December 15 of each year, commencing December 15, 1997, the Capital Securities Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Capital Securities Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee The Guarantor shall provide to the Capital Securities Guarantee Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Delivery of such reports, information and documents to the Capital Securities Guarantee Trustee is for informational purposes only and the Capital Securities Guarantee Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Guarantor's compliance with any of its covenants hereunder (as to which the Capital Securities Guarantee Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 2.5 Evidence of Compliance with Conditions Precedent The Guarantor shall provide to the Capital Securities Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Series A Capital Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c) (1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver The Holders of a Majority in liquidation amount of Series A Capital Securities may, by vote, on behalf of all the Holders, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Series A Capital Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. 7 11 SECTION 2.7 Event of Default; Notice (a) The Capital Securities Guarantee Trustee shall, within 90 days after the occurrence of a default with respect to this Capital Securities Guarantee, mail by first class postage prepaid, to all Holders, notices of all defaults actually known to a Responsible Officer of the Capital Securities Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, that, except in the case of default in the payment of any Guarantee Payment, the Capital Securities Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Capital Securities Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the holders of the Series A Capital Securities. (b) The Capital Securities Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Capital Securities Guarantee Trustee shall have received written notice, or a Responsible Officer of the Capital Securities Guarantee Trustee charged with the administration of the Declaration shall have obtained actual knowledge, of such Event of Default. SECTION 2.8 Conflicting Interests The Declaration shall be deemed to be specifically described in this Series A Capital Securities Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF CAPITAL SECURITIES GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee (a) This Series A Capital Securities Guarantee shall be held by the Capital Securities Guarantee Trustee for the benefit of the Holders, and the Capital Securities Guarantee Trustee shall not transfer this Series A Capital Securities Guarantee to any Person except a Holder exercising his or her rights pursuant to Section 5.4(b) or to a Successor Capital Securities Guarantee Trustee on acceptance by such Successor Capital Securities Guarantee Trustee of its appointment to act as Successor Capital Securities Guarantee Trustee. The right, title and interest of the Capital Securities Guarantee Trustee shall automatically vest in any Successor Capital Securities Guarantee Trustee, and such vesting and succession of title shall be effective whether or not 8 12 conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Capital Securities Guarantee Trustee. (b) If an Event of Default actually known to a Responsible Officer of the Capital Securities Guarantee Trustee has occurred and is continuing, the Capital Securities Guarantee Trustee shall enforce this Series A Capital Securities Guarantee for the benefit of the Holders. (c) The Capital Securities Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Series A Capital Securities Guarantee, and no implied covenants shall be read into this Series A Capital Securities Guarantee against the Capital Securities Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Capital Securities Guarantee Trustee, the Capital Securities Guarantee Trustee shall exercise such of the rights and powers vested in it by this Series A Capital Securities Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Series A Capital Securities Guarantee shall be construed to relieve the Capital Securities Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Capital Securities Guarantee Trustee shall be determined solely by the express provisions of this Series A Capital Securities Guarantee, and the Capital Securities Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Series A Capital Securities Guarantee, and no implied covenants or obligations shall be read into this Series A Capital Securities Guarantee against the Capital Securities Guarantee Trustee; and (B) in the absence of bad faith on the part of the Capital Securities Guarantee Trustee, the Capital Securities Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of 9 13 the opinions expressed therein, upon any certificates or opinions furnished to the Capital Securities Guarantee Trustee and conforming to the requirements of this Series A Capital Securities Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Capital Securities Guarantee Trustee, the Capital Securities Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Series A Capital Securities Guarantee; (ii) the Capital Securities Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Capital Securities Guarantee Trustee, unless it shall be proved that the Capital Securities Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Capital Securities Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a Majority in liquidation amount of the Series A Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Capital Securities Guarantee Trustee, or exercising any trust or power conferred upon the Capital Securities Guarantee Trustee under this Series A Capital Securities Guarantee; and (iv) no provision of this Series A Capital Securities Guarantee shall require the Capital Securities Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Capital Securities Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Series A Capital Securities Guarantee or indemnity, reasonably satisfactory to the capital Securities guarantee Trustee, against such risk or liability is not reasonably assured to it. SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee (a) Subject to the provisions of Section 3.1: (i) The Capital Securities Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, 10 14 direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Series A Capital Securities Guarantee may be sufficiently evidenced by an Officers' Certificate. (iii) Whenever, in the administration of this Series A Capital Securities Guarantee, the Capital Securities Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Capital Securities guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Capital Securities Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof). (v) The Capital Securities Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Capital Securities Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Series A Capital Securities Guarantee from any court of competent jurisdiction. (vi) The Capital Securities Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Series A Capital Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Capital Securities Guarantee Trustee such security and indemnity, reasonably satisfactory to the Capital Securities Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Capital Securities Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Capital Securities Guarantee Trustee; provided that, nothing contained in this Section 3.2(a) (vi) 11 15 shall be taken to relieve the Capital Securities Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Series A Capital Securities Guarantee. (vii) The Capital Securities Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Capital Securities Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Capital Securities Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Capital Securities Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Capital Securities Guarantee Trustee or its agents hereunder shall bind the Holders, and the signature of the Capital Securities guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Capital Securities Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Series A Capital Securities Guarantee, both of which shall be conclusively evidenced by the Capital Securities Guarantee Trustee's or its agent's taking such action. (x) Whenever in the administration of this Series A Capital Securities Guarantee the Capital Securities Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Capital Securities Guarantee Trustee (i) may request instructions form the Holders of a Majority in liquidation amount of the Series A Capital Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions. (xi) The Capital Securities Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence, and reasonably believed by it to be authorized or within the dis- 12 16 cretion or rights or powers conferred upon it by this Series A Capital Securities Guarantee. (b) No provision of this Series A Capital Securities Guarantee shall be deemed to impose any duty or obligation on the Capital Securities Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Capital Securities Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Capital Securities Guarantee Trustee shall be construed to be a duty. SECTION 3.3 Not Responsible for Recitals or Issuance of Series A Capital Securities Guarantee The recitals contained in this Series A Capital Securities Guarantee shall be taken as the statements of the Guarantor, and the Capital Securities Guarantee Trustee does not assume any responsibility for their correctness. The Capital Securities Guarantee Trustee makes no representation as to the validity or sufficiency of this Series A Capital Securities Guarantee. ARTICLE IV CAPITAL SECURITIES GUARANTEE TRUSTEE SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility (a) There shall at all times be a Capital Securities Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a) (ii), the combined capital and surplus of such corporation shall be 13 17 deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Capital Securities Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Capital Securities Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Capital Securities Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Capital Securities Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 Appointment, Removal and Resignation of Capital Securities Guarantee Trustee (a) Subject to Section 4.2(b), the Capital Securities Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default. (b) The Capital Securities Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Capital Securities Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Capital Securities Guarantee Trustee and delivered to the Guarantor. (c) The Capital Securities Guarantee Trustee shall hold office until a Successor Capital Securities Guarantee Trustee shall have been appointed or until its removal or resignation. The Capital Securities Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Capital Securities Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Capital Securities Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Capital Securities Guarantee Trustee and delivered to the Guarantor and the resigning Capital Securities Guarantee Trustee. (d) If no Successor Capital Securities Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery of an instrument of removal or resignation, the Capital Securities Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Capital Securities Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Capital Securities Guarantee Trustee. 14 18 (e) No Capital Securities Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Capital Securities Guarantee Trustee. (f) Upon termination of this Series A Capital Securities Guarantee or removal or resignation of the Capital Securities Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Capital Securities Guarantee Trustee all amounts due to the Capital Securities Guarantee Trustee accrued to the date of such termination, removal or resignation. ARTICLE V GUARANTEE SECTION 5.1 Guarantee The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.2 Waiver of Notice and Demand The Guarantor hereby waives notice of acceptance of this Series A Capital Securities Guarantee and of any liability to which its applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3 Obligations Not Affected The obligations, covenants, agreements and duties of the Guarantor under this Series A Capital Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Series A Capital Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under 15 19 the terms of the Series A Capital Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Series A Capital Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Series A Capital Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Series A Capital Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; (g) the consummation of the Exchange Offer; or (h) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor with respect to the Guarantee Payments shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4 Rights of Holders (a) The Holders of a Majority in liquidation amount of the Series A Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Capital Securities Guarantee Trustee in respect of this Series A Capital Securities Guarantee or exercising any trust or power conferred upon the Capital Securities Guarantee Trustee under this Series A Capital Securities Guarantee. 16 20 (b) If the Capital Securities Guarantee Trustee fails to enforce such Series A Capital Securities Guarantee, any Holder may institute a legal proceeding directly against the Guarantor to enforce the Capital Securities Guarantee Trustee's rights under this Series A Capital Securities Guarantee, without first instituting a legal proceeding against the Issuer, the Capital Securities Guarantee Trustee or any other person or entity. The Guarantor waives any right or remedy to require that any action be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor. SECTION 5.5 Guarantee of Payment This Series A Capital Securities Guarantee creates a guarantee of payment and not of collection. SECTION 5.6 Subrogation The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Series A Capital Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Series A Capital Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Series A Capital Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the holders and to pay over such amount to the Holders. SECTION 5.7 Independent Obligations The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Series A Capital Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Series A Capital Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (h), inclusive, of Section 5.3 hereof. ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions So long as any Capital Securities remain outstanding, the Guarantor shall not (i) declare or pay any dividends or 17 21 distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Guarantor's capital stock (which includes common and preferred stock) or (ii) make any payment of principal, interest or premium, if any, on or repay or repurchase or redeem any debt securities of the Guarantor (including any Other Debentures) that rank pari passu with or junior in right of payment to the Debentures or (iii) make any guarantee payments with respect to any guarantee by the Guarantor of any securities of any subsidiary of the Guarantor (including Other Guarantees) if such guarantee ranks pari passu or junior in right of payment to the Debentures (other than (a) dividends or distributions in shares of, or options, warrants, rights to subscribe for or purchase shares of, common stock of the Guarantor, (b) any declaration of a dividend in connection with the implementation of a stockholder's rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the Capital Securities Guarantee, (d) as a direct result of, and only to the extent required in order to avoid the issuance of fractional shares of capital stock following, a reclassification of the Guarantor's capital stock or the exchange or the conversion of one class or series of the Guarantor's capital stock for another class or series of the Guarantor's capital stock, (e) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, and (f) purchases of common stock related to the issuance of common stock or rights under any of the Guarantor's benefit plans for its directors, officers or employees of any of the Guarantor's dividend reinvestment plans) if at such time (i) there shall have occurred any event of which the Guarantor has actual knowledge that (a) is, or with the giving of notice or the lapse of time, or both, would be an Event of Default and (b) in respect of which the Guarantor shall not have taken reasonable steps to cure, (ii) if such Debentures are held by the Property Trustee, the Guarantor shall be in default with respect to its payment of any obligations under this Series A Capital Securities Guarantee or (iii) the Guarantor shall have given notice of its election of the exercise of its right to extend the interest payment period pursuant to Section 16.01 of the Indenture and any such extension shall be continuing. SECTION 6.2 Ranking This Series A Capital Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to Senior Indebtedness (as defined in the Indenture), to the same extent and in the same manner that the Debentures are subordinated to Senior Indebtedness pursuant to the Indenture, it being understood that the terms of Article XV of the Indenture shall apply to the obligations of the Guarantor under this Series A Capital Securi- 18 22 ties Guarantee as if (x) such Article XV were set forth herein in full and (y) such obligations were substituted for the term "Securities" appearing in such Article XV, (ii) pari passu with the Debentures [and with the most senior preferred or preference stock now or hereafter issued by the Guarantor] and with any Other Guarantee (as defined herein) [and any Other Common Securities Guarantee and any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock]. ARTICLE VII TERMINATION SECTION 7.1 Termination This Series A Capital Securities Guarantee shall terminate (i) upon full payment of the Redemption Price (as defined in the Declaration) of all Series A Capital Securities, or (ii) upon liquidation of the Issuer, the full payment of the amounts payable in accordance with the Declaration or the distribution of the Debentures to the Holders of all of the Series A Capital Securities. Notwithstanding the foregoing, this Series A Capital Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid under the Series A Capital Securities or under this Series A Capital Securities Guarantee. ARTICLE VIII INDEMNIFICATION SECTION 8.1 Exculpation (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Series A Capital Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Series A Capital Securities Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person 19 23 reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders might properly be paid. SECTION 8.2 Indemnification The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability, damage, claim or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.2 shall survive the termination of this Series A Capital Securities Guarantee. ARTICLE IX MISCELLANEOUS SECTION 9.1 Successors and Assigns All guarantees and agreements contained in this Series A Capital Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders then outstanding. SECTION 9.2 Amendments Except with respect to any changes that do not materially adversely affect the rights of Holders (in which case no consent of Holders will be required), this Series A Capital Securities Guarantee may only be amended with the prior approval of the Holders of a Majority in liquidation amount of the Securities (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined). The provisions of Section 12.2 of the Declaration with respect to meetings of Holders apply to the giving of such approval. SECTION 9.3 Notices All notices provided for in this Series A Capital Securities Guarantee shall be in writing, duly signed by the 20 24 party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) If given to the Issuer, in care of the Administrative Trustee at the Issuer's mailing address set forth below (or such other address as the Issuer may give notice of to the Holders): Firstar Capital Trust I c/o Firstar Corporation 777 East Wisconsin Avenue Milwaukee, Wisconsin 53201 Attention: Chief Financial Officer Telecopy: [ ] (b) If given to the Capital Securities Guarantee Trustee, at the Capital Securities Guarantee Trustee's mailing address set forth below (or such other address as the Capital Securities Guarantee Trustee may give notice of to the Holders): Chase Manhattan Bank [ ] Attention: [ ] Telecopy: [ ] (c) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Series A Capital Securities): Firstar Corporation 777 East Wisconsin Avenue Milwaukee, Wisconsin 53201 Attention: Chief Financial Officer Telecopy: [ ] (d) If given to any Holder of Series A Capital Securities, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. 21 25 SECTION 9.4 Exchange Offer In the event an Exchange Offer Registration Statement (as defined in the Registration Rights Agreement) becomes effective and the Issuer issues any Series B Capital Securities in the Exchange Offer, the Guarantor will enter into a new capital securities guarantee agreement, in substantially the same form as this Series A Capital Securities Guarantee, with respect to the Series B Capital Securities. SECTION 9.5 Benefit This Series A Capital Securities Guarantee is solely for the benefit of the Holders and, subject to Section 3.1(a), is not separately transferable from the Series A Capital Securities. SECTION 9.6 Governing Law THIS SERIES A CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. 22 26 THIS SERIES A CAPITAL SECURITIES GUARANTEE is executed as of the day and year first above written. FIRSTAR CORPORATION, as Guarantor By: ---------------------------------- Name: Title: CHASE MANHATTAN BANK, as Capital Securities Guarantee Trustee By: ---------------------------------- Name: Title: 23 27 EXHIBIT 4.11 FIRSTAR CORPORATION ______________________________ ______________________________ INDENTURE DATED AS OF DECEMBER 23, 1996 ______________________________ THE CHASE MANHATTAN BANK AS TRUSTEE ______________________________ JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES ______________________________________________________________ 28 TIE-SHEET of provisions of Trust Indenture Act of 1939 with Indenture dated as of December 23, 1996 between Firstar Corporation and Chase Manhattan Bank, as Trustee:
ACT SECTION INDENTURE SECTION 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09 310(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A (a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 310(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10, 6.11 310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.13 311(a) and (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.01, 4.02(a) 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.02 312(b) and (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 313(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 313(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03 314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 314(c)(1) and (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07 314(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07 314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 315(a)(c) and (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01 315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.08 315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.09 316(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.07 316(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 316(a) last sentence . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.09 316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.02 317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.05 317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.08
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Page ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . 1 SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1 Additional Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Adjusted Treasury Rate . . . . . . . . . . . . . . . . . . . . . . . . . 2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Allocable Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Bankruptcy Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Capital Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Capital Securities Guarantee . . . . . . . . . . . . . . . . . . . . . . 3 Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Common Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Common Securities Guarantee . . . . . . . . . . . . . . . . . . . . . . . 4 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Company Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Comparable Treasury Issue . . . . . . . . . . . . . . . . . . . . . . . . 4 Comparable Treasury Price . . . . . . . . . . . . . . . . . . . . . . . . 5 Compounded Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Deferred Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Definitive Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Dissolution Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Extended Interest Payment Period . . . . . . . . . . . . . . . . . . . . 6 Federal Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Firstar Capital Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Indebtedness for Money Borrowed . . . . . . . . . . . . . . . . . . . . . 6 Indebtedness Ranking Junior to the Securities . . . . . . . . . . . . . . 6
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Indebtedness Ranking on a Parity with the Securities . . . . . . . . . . . . . . . 7 Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Initial Optional Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . 7 Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Issue Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Non Book-Entry Capital Securities . . . . . . . . . . . . . . . . . . . . . . . . . 7 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Optional Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Other Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Other Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Principal Office of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Property Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Quotation Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Reference Treasury Dealer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Reference Treasury Dealer Quotations . . . . . . . . . . . . . . . . . . . . . . . 9 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Regulatory Capital Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Restricted Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Securityholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 holder of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Security Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Series A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Series B Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Special Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Special Event Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Tax Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Trust Indenture Act of 1939 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Trust Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE II SECURITIES . . . . . . . . . . . . . . . . . . . . 13
ii EX-4.11 6 INDENTURE DATED DECEMBER 23, 1996 1 EXHIBIT 4.11 FIRSTAR CORPORATION ______________________________ ______________________________ INDENTURE DATED AS OF DECEMBER 23, 1996 ______________________________ THE CHASE MANHATTAN BANK AS TRUSTEE ______________________________ JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES ______________________________________________________________ 2 TIE-SHEET of provisions of Trust Indenture Act of 1939 with Indenture dated as of December 23, 1996 between Firstar Corporation and Chase Manhattan Bank, as Trustee:
ACT SECTION INDENTURE SECTION 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09 310(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A (a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 310(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10, 6.11 310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.13 311(a) and (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.01, 4.02(a) 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.02 312(b) and (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 313(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 313(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03 314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 314(c)(1) and (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07 314(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07 314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 315(a)(c) and (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01 315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.08 315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.09 316(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.07 316(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 316(a) last sentence . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.09 316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.02 317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.05 317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.08
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Page ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . 1 SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1 Additional Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Adjusted Treasury Rate . . . . . . . . . . . . . . . . . . . . . . . . . 2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Allocable Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Bankruptcy Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Capital Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Capital Securities Guarantee . . . . . . . . . . . . . . . . . . . . . . 3 Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Common Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Common Securities Guarantee . . . . . . . . . . . . . . . . . . . . . . . 4 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Company Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Comparable Treasury Issue . . . . . . . . . . . . . . . . . . . . . . . . 4 Comparable Treasury Price . . . . . . . . . . . . . . . . . . . . . . . . 5 Compounded Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Deferred Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Definitive Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Dissolution Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Extended Interest Payment Period . . . . . . . . . . . . . . . . . . . . 6 Federal Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Firstar Capital Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Indebtedness for Money Borrowed . . . . . . . . . . . . . . . . . . . . . 6 Indebtedness Ranking Junior to the Securities . . . . . . . . . . . . . . 6
- ------------- * THIS TABLE OF CONTENTS SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE A PART OF THE INDENTURE. i 4
Indebtedness Ranking on a Parity with the Securities . . . . . . . . . . . . . . . 7 Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Initial Optional Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . 7 Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Issue Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Non Book-Entry Capital Securities . . . . . . . . . . . . . . . . . . . . . . . . . 7 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Optional Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Other Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Other Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Principal Office of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Property Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Quotation Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Reference Treasury Dealer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Reference Treasury Dealer Quotations . . . . . . . . . . . . . . . . . . . . . . . 9 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Regulatory Capital Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Restricted Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Securityholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 holder of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Security Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Series A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Series B Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Special Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Special Event Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Tax Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Trust Indenture Act of 1939 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Trust Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE II SECURITIES . . . . . . . . . . . . . . . . . . . . 13
ii 5 SECTION 2.01. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . 13 SECTION 2.03. Form and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 2.04. Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 2.05. Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 2.06 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 2.07. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 2.08. Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 2.09. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 2.10. Temporary Securities. . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 2.13. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE III PARTICULAR COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . 22 SECTION 3.01. Payment of Principal, Premium and Interest . . . . . . . . . . . . . . 22 SECTION 3.02. Offices for Notices and Payments, etc. . . . . . . . . . . . . . . . . 22 SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office . . . . . . . . . . 23 SECTION 3.04. Provision as to Paying Agent . . . . . . . . . . . . . . . . . . . . . 23 SECTION 3.05. Certificate to Trustee . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 3.06. Compliance with Consolidation Provisions . . . . . . . . . . . . . . . 25 SECTION 3.07. Limitation on Dividends . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 3.08. Covenants as to Firstar Capital Trust . . . . . . . . . . . . . . . . 26 SECTION 3.09. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 3.10. Payment Upon Resignation or Removal . . . . . . . . . . . . . . . . . 27 ARTICLE IV SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE . . . . . . . . . . . . . . . . . . 27 SECTION 4.01. Securityholders' Lists . . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 4.02. Preservation and Disclosure of Lists . . . . . . . . . . . . . . . . . 28 SECTION 4.03. Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 4.04. Reports by the Trustee . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE V REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . 31 SECTION 5.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 5.02. Payment of Securities on Default; Suit Therefor . . . . . . . . . . . 34 SECTION 5.03. Application of Moneys Collected by Trustee . . . . . . . . . . . . . . 36
iii 6 SECTION 5.04. Proceedings by Securityholders . . . . . . . . . . . . . . . . . . 36 SECTION 5.05. Proceedings by Trustee . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 5.06. Remedies Cumulative and Continuing . . . . . . . . . . . . . . . . 38 SECTION 5.07. Direction of Proceedings and Waiver of Defaults by Majority of Securityholders . . . . . . . . . . . . . . . . . . . 38 SECTION 5.08. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 5.09. Undertaking to Pay Costs . . . . . . . . . . . . . . . . . . . . 39 ARTICLE VI CONCERNING THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 6.01. Duties and Responsibilities of Trustee . . . . . . . . . . . . . 40 SECTION 6.02. Reliance on Documents, Opinions, etc. . . . . . . . . . . . . . 41 SECTION 6.03. No Responsibility for Recitals, etc. . . . . . . . . . . . . . . 43 SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Securities . . . . . . . . . 43 SECTION 6.05. Moneys to be Held in Trust . . . . . . . . . . . . . . . . . . . . 44 SECTION 6.06. Compensation and Expenses of Trustee . . . . . . . . . . . . . . . 44 SECTION 6.07. Officers' Certificate as Evidence . . . . . . . . . . . . . . . . 45 SECTION 6.08. Conflicting Interest of Trustee . . . . . . . . . . . . . . . . . 45 SECTION 6.09. Eligibility of Trustee . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 6.10. Resignation or Removal of Trustee . . . . . . . . . . . . . . . . 46 SECTION 6.11. Acceptance by Successor Trustee . . . . . . . . . . . . . . . . . 47 SECTION 6.12. Succession by Merger, etc. . . . . . . . . . . . . . . . . . . . . 48 SECTION 6.13. Limitation on Rights of Trustee as a Creditor . . . . . . . . . . 49 SECTION 6.14. Authenticating Agents . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE VII CONCERNING THE SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . 50 SECTION 7.01. Action by Securityholders . . . . . . . . . . . . . . . . . . . . 50 SECTION 7.02. Proof of Execution by Securityholders . . . . . . . . . . . . . . 51 SECTION 7.03. Who Are Deemed Absolute Owners . . . . . . . . . . . . . . . . . . 51 SECTION 7.04. Securities Owned by Company Deemed Not Outstanding . . . . . . . . 52 SECTION 7.05. Revocation of Consents; Future Holders Bound . . . . . . . . . . . 52 ARTICLE VIII SECURITYHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 8.01. Purposes of Meetings . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 8.02. Call of Meetings by Trustee . . . . . . . . . . . . . . . . . . . 53 SECTION 8.03. Call of Meetings by Company or Securityholders . . . . . . . . . . 54 SECTION 8.04. Qualifications for Voting . . . . . . . . . . . . . . . . . . . . 54
iv 7 SECTION 8.05. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 8.06. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE IX AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 9.01. Without Consent of Securityholders . . . . . . . . . . . . . . . . . . 56 SECTION 9.02. With Consent of Securityholders . . . . . . . . . . . . . . . . . . . 58 SECTION 9.03. Compliance with Trust Indenture Act; Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . 59 SECTION 9.04. Notation on Securities . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be Furnished Trustee . . . . . . . . . . . . . . . . . . 60 ARTICLE X CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE . . . . . . . . . . . . 60 SECTION 10.01. Company May Consolidate, etc., on Certain Terms . . . . . . . . . . . 60 SECTION 10.02. Successor Corporation to be Substituted for Company . . . . . . . . . 61 SECTION 10.03. Opinion of Counsel to be Given Trustee . . . . . . . . . . . . . . . . 62 ARTICLE XI SATISFACTION AND DISCHARGE OF INDENTURE . . . . . . . . . . . . . . . . . 62 SECTION 11.01. Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 11.02. Deposited Moneys and U.S. Government Obligations to be Held in Trust by Trustee . . . . . . . . . . . . . . . . . . . . 63 SECTION 11.03. Paying Agent to Repay Moneys Held . . . . . . . . . . . . . . . . . . 63 SECTION 11.04. Return of Unclaimed Moneys . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 11.05. Defeasance Upon Deposit of Moneys or U.S. Government Obligations. . . . . . . . . . . . . . . . . . . . . . 64 ARTICLE XII IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 12.01. Indenture and Securities Solely Corporate Obligations . . . . . . . . . . . . . . . . . . . . . . . . 65 ARTICLE XIII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 13.01. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
v 8 SECTION 13.02. Official Acts by Successor Corporation . . . . . . . . . . . . . . 66 SECTION 13.03. Surrender of Company Powers . . . . . . . . . . . . . . . . . . . 66 SECTION 13.04. Addresses for Notices, etc. . . . . . . . . . . . . . . . . . . . 66 SECTION 13.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 67 SECTION 13.06. Evidence of Compliance with Conditions Precedent . . . . . . . . . 67 SECTION 13.07. Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 13.08. Trust Indenture Act to Control . . . . . . . . . . . . . . . . . . 68 SECTION 13.09. Table of Contents, Headings, etc . . . . . . . . . . . . . . . . . 68 SECTION 13.10. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . 68 SECTION 13.11. Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 13.12. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 13.13. Acknowledgement of Rights . . . . . . . . . . . . . . . . . . . . 69 ARTICLE XIV REDEMPTION OF SECURITIES -- MANDATORY AND OPTIONAL SINKING FUND . . . . . . . . . . . . . . . . . . . . . . . . 69 SECTION 14.01. Special Event Redemption . . . . . . . . . . . . . . . . . . . . . 69 SECTION 14.02. Optional Redemption by Company . . . . . . . . . . . . . . . . . . 70 SECTION 14.03. No Sinking Fund . . . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 14.04. Notice of Redemption; Selection of Securities . . . . . . . . . . 71 SECTION 14.05. Payment of Securities Called for Redemption . . . . . . . . . . . 72 ARTICLE XV SUBORDINATION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 73 SECTION 15.01. Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . 73 SECTION 15.02. Default on Senior Indebtedness . . . . . . . . . . . . . . . . . . 73 SECTION 15.03. Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . . . 74 SECTION 15.04. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 SECTION 15.05. Trustee to Effectuate Subordination . . . . . . . . . . . . . . . 76 SECTION 15.06. Notice by the Company . . . . . . . . . . . . . . . . . . . . . . 76 SECTION 15.07. Rights of the Trustee; Holders of Senior Indebtedness . . . . . . 78 SECTION 15.08. Subordination May Not Be Impaired . . . . . . . . . . . . . . . . 78 ARTICLE XVI EXTENSION OF INTEREST PAYMENT PERIOD . . . . . . . . . . . . . . . . . . 79 SECTION 16.01. Extension of Interest Payment Period . . . . . . . . . . . . . . . 79 SECTION 16.02. Notice of Extension . . . . . . . . . . . . . . . . . . . . . . . 80 EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1 Testimonium
vi 9 Signatures Acknowledgements vii 10 THIS INDENTURE, dated as of December 23, 1996, between Firstar Corporation, a Wisconsin corporation (hereinafter sometimes called the "Company"), and The Chase Manhattan Bank, a New York banking corporation, as trustee (hereinafter sometimes called the "Trustee"), W I T N E S S E T H : In consideration of the premises, and the purchase of the Securities by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Securities, as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture shall have the respective meanings specified in this Section 1.01. All other terms used in this Indenture which are defined in the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), or which are by reference therein defined in the Securities Act, shall (except as herein otherwise expressly provided or unless the context otherwise requires) have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of this Indenture as originally executed. The following terms have the meanings given to them in the Declaration: (i) Clearing Agency; (ii) Delaware Trustee; (iii) Property Trustee; (iv) Administrative Trustees; (v) Direct Action; (vi) Purchase Agreement; (vii) Distributions; (viii) Series A Capital Securities; and (ix) Series B Capital Securities. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles and the term "generally accepted accounting principles" means such accounting principles as are generally accepted at the time of any computation. The words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Headings are used for convenience of reference only and do not affect interpretation. The singular includes the plural and vice versa. "Additional Interest" shall have the meaning set forth in Section 2.06(c). "Adjusted Treasury Rate" means, with respect to any 11 redemption date, the rate per annum equal to (i) the yield, under the heading which represents the average for the immediately prior week, appearing in the most recently published statistical release designated "H.15 (519)" or any successor publication which is published weekly by the Federal Reserve and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Initial Optional Redemption Date (if no maturity is within three months before or after the Initial Optional Redemption Date, yields for the two published maturities most closely corresponding to the Initial Optional Redemption Date shall be interpolated, and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date plus, in each case, (a) 1.35% if such redemption date occurs on or prior to December 31, 1997, and (b) .50% in all other cases. "Affiliate" means, with respect to a specified Person, (a) any Person directly or indirectly owning, controlling or holding the power to vote 10% or more of the outstanding voting securities or other ownership interests of the specified Person, (b) any Person 10% or more of whose outstanding voting securities or other ownership interests are directly or indirectly owned, controlled or held with power to vote by the specified Person, (c) any Person directly or indirectly controlling, controlled by, or under common control with the specified Person, (d) a partnership in which the specified Person is a general partner, (e) any officer or director of the specified Person, and (f) if the specified Person is an individual, any entity of which the specified Person is an officer, director or general partner. "Allocable Amounts," when used with respect to any Senior Indebtedness, means all amounts due or to become due on such Senior Indebtedness less, if applicable, any amount which would have been paid to, and retained by, the holders of such Senior Indebtedness (whether as a result of the receipt of payments by the holders of such Senior Indebtedness from the Company or any other obligor thereon or from any holders of, or trustee in respect of, other indebtedness that is subordinate and junior in right of payment to such Senior Indebtedness pursuant to any provision of such indebtedness for the payment over of amounts received on account of such indebtedness to the holders of such Senior Indebtedness or otherwise) but for the fact that 2 12 such Senior Indebtedness is subordinate or junior in right of payment to (or subject to a requirement that amounts received on such Senior Indebtedness be paid over to obligees on) trade accounts payable or accrued liabilities arising in the ordinary course of business. "Authenticating Agent" shall mean any agent or agents of the Trustee which at the time shall be appointed and acting pursuant to Section 6.14. "Bankruptcy Law" shall mean Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. "Board of Directors" shall mean either the Board of Directors of the Company or any duly authorized committee of that board. "Board Resolution" shall mean a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" shall mean, with respect to any series of Securities, any day other than a Saturday or a Sunday or a day on which banking institutions in The City of New York or Milwaukee, Wisconsin are authorized or required by law or executive order to close. "Capital Securities" shall mean undivided beneficial interests in the assets of Firstar Capital Trust which rank pari passu with the Common Securities issued by Firstar Capital Trust; provided, however, that if an Event of Default has occurred and is continuing, no payments in respect of Distributions on, or payments upon liquidation, redemption or otherwise with respect to, the Common Securities shall be made until the holders of the Capital Securities shall be paid in full the Distributions and the liquidation, redemption and other payments to which they are entitled. References to "Capital Securities" shall include collectively any Series A Capital Securities and Series B Capital Securities. "Capital Securities Guarantee" shall mean any guarantee that the Company may enter into with The Chase Manhattan Bank or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of Firstar Capital Trust and shall include a Series A Capital Securities Guarantee and a Series B Capital Securities Guarantee with respect to the Series A Capital Securities and the Series B Capital Securities, respectively. 3 13 "Commission" shall mean the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Securities" shall mean undivided beneficial interests in the assets of Firstar Capital Trust which rank pari passu with Capital Securities issued by Firstar Capital Trust; provided, however, that if an Event of Default has occurred and is continuing, no payments in respect of Distributions on, or payments upon liquidation, redemption or otherwise with respect to, the Common Securities shall be made until the holders of the Capital Securities shall be paid in full the Distributions and the liquidation, redemption and other payments to which they are entitled. "Common Securities Guarantee" shall mean any guarantee that the Company may enter into with any Person or Persons that operates directly or indirectly for the benefit of holders of Common Securities of Firstar Capital Trust. "Common Stock" shall mean the Common Stock, par value $1.25 per share, of the Company or any other class of stock resulting from changes or reclassifications of such Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. "Company" shall mean Firstar Corporation, a Wisconsin corporation, and, subject to the provisions of Article X, shall include its successors and assigns. "Company Request" or "Company Order" shall mean a written request or order signed in the name of the Company by the Chairman, the Chief Executive Officer, the President, a Vice Chairman, a Vice President, the Comptroller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity date corresponding to the Initial Optional Redemption Date that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities with a maturity date corresponding to the Initial Optional Redemption Date. If no United States Treasury security has a maturity date which is within three months before or after the Initial Optional Redemption Date, the two most closely corresponding United States Treasury securities shall be used as the Comparable Treasury Issue, and the Adjusted Treasury Rate shall be interpolated or extrapolated 4 14 on a straight-line basis, rounding to the nearest month. "Comparable Treasury Price" means, with respect to any redemption date pursuant to Section 14.01, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the average of five Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations. "Compounded Interest" shall have the meaning set forth in Section 16.01. "Custodian" shall mean any receiver, trustee, assignee, liquidator, or similar official under any Bankruptcy Law. "Declaration" means the Amended and Restated Declaration of Trust of Firstar Capital Trust, dated as of the Issue Date. "Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default. "Deferred Interest" shall have the meaning set forth in Section 16.01. "Definitive Securities" shall mean those securities issued in fully registered certificated form not otherwise in global form. "Depositary" shall mean, with respect to Securities of any series, for which the Company shall determine that such Securities will be issued as a Global Security, The Depository Trust Company, New York, New York, another clearing agency, or any successor registered as a clearing agency under the Exchange Act or other applicable statute or regulation, which, in each case, shall be designated by the Company pursuant to Section 2.05(d). "Dissolution Event" means the liquidation of the Trust pursuant to the Declaration, and the distribution of the Securities held by the Property Trustee to the holders of the Trust 5 15 Securities issued by the Trust pro rata in accordance with the Declaration. "Event of Default" shall mean any event specified in Section 5.01, continued for the period of time, if any, and after the giving of the notice, if any, therein designated. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Exchange Offer" means the offer that may be made pursuant to the Registration Rights Agreement (i) by the Company to exchange Series B Securities for Series A Securities and to exchange a Series B Capital Securities Guarantee for a Series A Capital Securities Guarantee and (ii) by Firstar Capital Trust to exchange Series B Capital Securities for Series A Capital Securities. "Extended Interest Payment Period" shall have the meaning set forth in Section 16.01. "Federal Reserve" shall mean the Board of Governors of the Federal Reserve System. "Firstar Capital Trust" shall mean Firstar Capital Trust I, a Delaware business trust created for the purpose of issuing its undivided beneficial interests in connection with the issuance of Securities under this Indenture. "Global Security" means, with respect to the Securities, a Security executed by the Company and delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction, all in accordance with the Indenture, which shall be registered in the name of the Depositary or its nominee. "Indebtedness for Money Borrowed" shall mean (i) any obligation of, or any obligation guaranteed by, the Company for the repayment of borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments and any deferred obligation for the payment of the purchase price of property or assets acquired other than in the ordinary course of business, and (ii) all indebtedness of the Company for claims in respect of derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements, whether outstanding on the date of execution of the Indenture or thereafter created, assumed or incurred. For purposes of this definition, "claim" shall have the meaning assigned in Section 101(5) of the Bankruptcy Code of 1978, as amended and in effect on the date of the execution of this Indenture. "Indebtedness Ranking Junior to the Securities" shall 6 16 mean any Indebtedness for Money Borrowed, whether outstanding on the date of execution of this Indenture or hereafter created, assumed or incurred, which specifically by its terms ranks junior to and not equally with or prior to the Securities (and any other Indebtedness Ranking on a Parity with the Securities) in right of payment upon the happening of any dissolution or winding up or liquidation or reorganization of the Company. The securing of any Indebtedness for Money Borrowed of the Company, otherwise constituting Indebtedness Ranking Junior to the Securities, shall not be deemed to prevent such Indebtedness for Money Borrowed from constituting Indebtedness Ranking Junior to the Securities. "Indebtedness Ranking on a Parity with the Securities" shall mean Indebtedness for Money Borrowed, whether outstanding on the date of execution of this Indenture or hereafter created, assumed or incurred, which specifically by its terms ranks equally with and not prior to the Securities in the right of payment upon the happening of any dissolution or winding up or liquidation or reorganization of the Company. The securing of any Indebtedness for Money Borrowed of the Company, otherwise constituting Indebtedness Ranking on a Parity with the Securities, shall not be deemed to prevent such Indebtedness for Money Borrowed from constituting Indebtedness Ranking on a Parity with the Securities. "Indenture" shall mean this instrument as originally executed or, if amended as herein provided, as so amended. "Initial Optional Redemption Date" means December 23, 2006. "Interest Payment Date" shall have the meaning set forth in Section 2.06. "Issue Date" means December 23, 1996. "Liquidated Damages" shall have the meaning set forth in the Registration Rights Agreement. "Maturity Date" shall mean December 15, 2026. "Mortgage" shall mean and include any mortgage, pledge, lien, security interest, conditional sale or other title retention agreement or other similar encumbrance. "Non Book-Entry Capital Securities" shall have the meaning set forth in Section 2.05. "Officers" shall mean any of the Chairman, a Vice Chairman, the Chief Executive Officer, the President, a Vice President, the Comptroller, the Group Director, the Secretary or 7 17 an Assistant Secretary of the Company. "Officers' Certificate" shall mean a certificate signed by two Officers and delivered to the Trustee. "Opinion of Counsel" shall mean a written opinion of counsel, who may be an employee of the Company, and who shall be acceptable to the Trustee. "Optional Redemption Price" shall have the meaning set forth in Section 14.02. "Other Debentures" means all junior subordinated debentures issued by the Company from time to time and sold to trusts to be established by the Company (if any), in each case similar to the Trust. "Other Guarantees" means all guarantees issued by the Company with respect to capital securities (if any) and issued to other trusts established by the Company (if any), in each case similar to the Trust. The term "outstanding" when used with reference to Securities, shall, subject to the provisions of Section 7.04, mean, as of any particular time, all Securities authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except (a) Securities theretofore cancelled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent); provided that, if such Securities, or portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as in Article XIV provided or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Securities in lieu of or in substitution for which other Securities shall have been authenticated and delivered pursuant to the terms of Section 2.08 unless proof satisfactory to the Company and the Trustee is presented that any such Securities are held by bona fide holders in due course. 8 18 "Person" shall mean any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt and as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 2.08 in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Security. "Principal Office of the Trustee", or other similar term, shall mean the office of the Trustee, at which at any particular time its corporate trust business shall be principally administered. "Purchase Agreement" shall mean the Purchase Agreement dated December 17, 1996 among the Company, Firstar Capital Trust and the initial purchasers named therein. "Property Trustee" shall have the same meaning as set forth in the Declaration. "Quotation Agent" means the Reference Treasury Dealer appointed by the Company. "Redemption Price" means the Special Event Redemption Price or the Optional Redemption Price, as the context requires. "Reference Treasury Dealer" means (i) Merrill Lynch Government Securities, Inc. and its successors; provided, however, that if the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer, and (ii) any other Primary Treasury Dealer selected by the Trustee after consultation with the Company. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date pursuant to Section 14.01, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. New York City time on the third Business Day preceding such redemption date. 9 19 "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the Issue Date, by and among the Company, the Trust and the Initial Purchasers named therein as such agreement may be amended, modified or supplemented from time to time. "Regulatory Capital Event" means that the Company shall have received an opinion of independent bank regulatory counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any rules, guidelines or policies of the Federal Reserve or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such pronouncement or decision is announced on or after the Issue Date, the Capital Securities do not constitute, or within 90 days of the date thereof, will not constitute, Tier I Capital (or its then equivalent); provided, however, that a Regulatory Capital Event shall not occur by reason of the use of the proceeds of the Securities in the manner contemplated by the Offering Memorandum dated December 17, 1996 relating to the Capital Securities. "Responsible Officer", when used with respect to the Trustee, shall mean the chairman or any vice chairman of the board of directors, the chairman or any vice chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the cashier, any assistant cashier, the secretary, any assistant secretary, the treasurer, any assistant treasurer or senior trust officer, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Security" shall mean Securities that bear or are required to bear the Securities Act legends set forth in Exhibit A hereto. "Rule 144A" means Rule 144A under the Securities Act, as such Rule may be amended from time to time, or under any similar rule or regulation hereafter adopted by the Commission. "Securities" means, collectively, the Series A Securities and the Series B Securities. "Securities Act" shall mean the Securities Act of 1933, as amended. 10 20 "Securityholder", "holder of Securities", or other similar terms, shall mean any person in whose name at the time a particular Security is registered on the register kept by the Company or the Trustee for that purpose in accordance with the terms hereof. "Security Register" shall mean (i) prior to a Dissolution Event, the list of holders provided to the Trustee pursuant to Section 4.01, and (ii) following a Dissolution Event, any security register maintained by a security registrar for the Securities appointed by the Company following the execution of a supplemental indenture providing for transfer procedures as provided for in Section 2.07(a). "Senior Indebtedness" shall mean all Indebtedness for Money Borrowed, whether outstanding on the date of execution of this Indenture or thereafter created, assumed or incurred, except Indebtedness Ranking on a Parity with the Securities or Indebtedness Ranking Junior to the Securities, and any deferrals, renewals or extensions of such Senior Indebtedness. "Series A Securities" means the Company's 8.32% Series A Junior Subordinated Deferrable Interest Debentures due December 15, 2026, as authenticated and issued under this Indenture. "Series B Securities" means the Company's Series B 8.32% Junior Subordinated Deferrable Interest Debentures due December 15, 2026, as authenticated and issued under this Indenture. "Special Event" means a Tax Event or a Regulatory Capital Event, as the case may be. "Special Event Redemption Price" shall mean, with respect to any redemption of the Securities pursuant to Section 14.01 hereof, an amount in cash equal to the greater of (i) 100% of the principal amount to be redeemed or (ii) the sum, as determined by a Quotation Agent, of the present values of the principal amount and premium payable with respect to an optional redemption pursuant to Section 14.02 on the Initial Optional Redemption Date, together with scheduled payments of interest on the Securities from the redemption date to and including the Initial Optional Redemption Date, discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, any accrued and unpaid interest thereon, including Compounded Interest and Additional Interest, if any, to the date of such redemption. 11 21 "Subsidiary" shall mean with respect to any Person, (i) any corporation at least a majority of whose outstanding voting stock is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of whose outstanding partnership or similar interests shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, "voting stock" means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency. "Tax Event" shall mean the receipt by Firstar Capital Trust and the Company of an opinion of a nationally recognized tax counsel experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the Issue Date, there is more than an insubstantial risk that (i) Firstar Capital Trust is, or will be within 90 days of the date of such opinion, subject to United States Federal income tax with respect to income received or accrued on the Securities, (ii) interest payable by the Company on the Securities is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes, or (iii) Firstar Capital Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Trustee" shall mean the Person identified as "Trustee" in the first paragraph hereof, and, subject to the provisions of Article VI hereof, shall also include its successors and assigns as Trustee hereunder. The term "Trustee" as used with respect to a particular series of the Securities shall mean the trustee with respect to that series. "Trust Indenture Act of 1939" shall mean the Trust Indenture Act of 1939 as in force at the date of execution of this Indenture, except as provided in Section 9.03. 12 22 "Trust Securities" shall mean the Capital Securities and the Common Securities, collectively. "U.S. Government Obligations" shall mean securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case under clauses (i) or (ii) are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. ARTICLE II SECURITIES SECTION 2.01. Forms Generally. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, the terms of which are incorporated in and made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject or usage. Each Security shall be dated the date of its authentication. The Securities shall be issued in denominations of $1,000 and integral multiples thereof. SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature in the manner set forth in Exhibit A. If an Officer whose signature is on a Security no longer holds that office at the time the Security is authenticated, the Security shall nevertheless be valid. A Security shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee. The signature of the Trustee shall be conclusive evidence that 13 23 the Security has been authenticated under this Indenture. The form of Trustee's certificate of authentication to be borne by the Securities shall be substantially as set forth in Exhibit A hereto. The Trustee shall, upon a Company Order, authenticate for original issue up to, and the aggregate principal amount of Securities outstanding at any time may not exceed the sum of $154,640,000 aggregate principal amount of the Securities, except as provided in Sections 2.07, 2.08, 2.10 and 14.05. The series of Securities to be initially issued hereunder shall be the Series A Securities. SECTION 2.03. Form and Payment. Except as provided in Section 2.05, the Securities shall be issued in fully registered certificated form without interest coupons. Principal of, premium, if any, and interest on the Securities issued in certificated form will be payable, the transfer of such Securities will be registrable and such Securities will be exchangeable for Securities bearing identical terms and provisions at the office or agency of the Company maintained for such purpose under Section 3.02; provided, however, that payment of interest with respect to the Securities may be made at the option of the Company (i) by check mailed to the holder at such address as shall appear in the Security Register or (ii) by transfer to an account maintained by the Person entitled thereto, provided that proper transfer instructions have been received in writing by the relevant record date. Notwithstanding the foregoing, so long as the holder of any Securities is the Property Trustee, the payment of the principal of, premium, if any, and interest (including Compounded Interest and Additional Interest, if any) on such Securities held by the Property Trustee will be made at such place and to such account as may be designated by the Property Trustee. SECTION 2.04. Legends. (a) Except as permitted by subsection (b) of this Section 2.04 or as otherwise determined by the Company in accordance with applicable law, each Security shall bear the applicable legends relating to restrictions on transfer pursuant to the securities laws in substantially the form set forth on Exhibit A hereto. (b) The Company shall issue and the Trustee shall authenticate Series B Securities in exchange for Series A Securities accepted for exchange in the Exchange Offer, which Series B Securities shall not bear the legends required by subsection (a) above, in each case unless the holder of such Series A Securities is either (A) a broker-dealer who purchased such Series A Securi- 14 24 ties directly from the Company for resale pursuant to Rule 144A or any other available exemption under the Securities Act, (B) a Person participating in the distribution of the Series A Securities or (C) a Person who is an affiliate (as defined in Rule 144 under the Securities Act) of the Company. SECTION 2.05. Global Security. (a) In connection with a Dissolution Event, (i) if any Capital Securities are held in book-entry form, the related Definitive Securities shall be presented to the Trustee (if an arrangement with the Depositary has been maintained) by the Property Trustee in exchange for one or more Global Securities (as may be required pursuant to Section 2.07) in an aggregate principal amount equal to the aggregate principal amount of all outstanding Securities, to be registered in the name of the Depositary, or its nominee, and delivered by the Trustee to the Depositary for crediting to the accounts of its participants pursuant to the instructions of the Administrative Trustees; the Company upon any such presentation shall execute one or more Global Securities in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with this Indenture; and payments on the Securities issued as a Global Security will be made to the Depositary; and (ii) if any Capital Securities are held in certificated form, the related Definitive Securities may be presented to the Trustee by the Property Trustee and any Capital Security certificate which represents Capital Securities other than Capital Securities in book-entry form ("Non Book-Entry Capital Securities") will be deemed to represent beneficial interests in Securities presented to the Trustee by the Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Capital Securities until such Capital Security certificates are presented to the Security Registrar for transfer or reissuance, at which time such Capital Security certificates will be cancelled and a Security, registered in the name of the holder of the Capital Security certificate or the transferee of the holder of such Capital Security certificate, as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Capital Security certificate cancelled, will be executed by the Company and delivered to the Trustee for authentication and delivery in accordance with the Indenture. Upon the issuance of such Securities, Securities with an equivalent aggregate principal amount that were presented by the Property Trustee to the Trustee will be deemed to 15 25 have been cancelled. (b) The Global Securities shall represent the aggregate amount of outstanding Securities from time to time endorsed thereon; provided, that the aggregate amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Security to reflect the amount of any increase or decrease in the amount of outstanding Securities represented thereby shall be made by the Trustee, in accordance with instructions given by the Company as required by this Section 2.05. (c) The Global Securities may be transferred, in whole but not in part, only to the Depositary, another nominee of the Depositary, or to a successor Depositary selected or approved by the Company or to a nominee of such successor Depositary. (d) If at any time the Depositary notifies the Company that it is unwilling or unable to continue as Depositary or the Depositary has ceased to be a clearing agency registered under the Exchange Act, and a successor Depositary is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, as the case may be, the Company will execute, and the Trustee, upon written notice from the Company, will authenticate and make available for delivery the Definitive Securities, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Security in exchange for such Global Security. If there is an Event of Default, the Depositary shall have the right to exchange the Global Securities for Definitive Securities. In addition, the Company may at any time determine that the Securities shall no longer be represented by a Global Security. In the event of such an Event of Default or such a determination, the Company shall execute, and subject to Section 2.07, the Trustee, upon receipt of an Officers' Certificate evidencing such determination by the Company, will authenticate and make available for delivery the Definitive Securities, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Security in exchange for such Global Security. Upon the exchange of the Global Security for such Definitive Securities, in authorized denominations, the Global Security shall be cancelled by the Trustee. Such Definitive Securities issued in exchange for the Global Security shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Definitive Securities to the Depositary for delivery to the Persons in whose names such Definitive Securities are so registered. 16 26 SECTION 2.06 Interest. (a) Each Security will bear interest at the rate of 8.32% per annum (the "Coupon Rate") from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from the Issue Date, until the principal thereof becomes due and payable, and at the Coupon Rate on any overdue principal (and premium, if any) and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest, compounded semi-annually, payable (subject to the provisions of Article XVI) semi-annually in arrears on June 15 and December 15 of each year (each, an "Interest Payment Date") commencing on June 15, 1997, to the Person in whose name such Security or any predecessor Security is registered, at the close of business on the regular record date for such interest installment, which shall be the first day of the month in which the relevant Interest Payment Date falls. (b) Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months and, for any period of less than a full calendar month, the number of days lapsed in such month. In the event that any Interest Payment Date falls on a day that is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), with the same force and effect as if made on such date. (c) During such time as the Property Trustee is the holder of any Securities, the Company shall pay any additional amounts on the Securities as may be necessary in order that the amount of Distributions then due and payable by the Firstar Capital Trust on the outstanding Securities shall not be reduced as a result of any additional taxes, duties and other governmental charges to which the Firstar Capital Trust has become subject as a result of a Tax Event ("Additional Interest"). 17 27 SECTION 2.07. Transfer and Exchange. (a) Transfer Restrictions. The Series A Securities, and those Series B Securities with respect to which any Person described in Section 2.04(b)(A), (B) or (C) is the beneficial owner, may not be transferred except in compliance with the legend contained in Exhibit A unless otherwise determined by the Company in accordance with applicable law. Upon any distribution of the Securities following a Dissolution Event, the Company and the Trustee shall enter into a supplemental indenture pursuant to Section 9.01 to provide for the transfer restrictions and procedures with respect to the Securities substantially similar to those contained in the Declaration to the extent applicable in the circumstances existing at such time. (b) General Provisions Relating to Transfers and Exchanges. Upon surrender for registration of transfer of any Security at the office or agency of the Company maintained for the purpose pursuant to Section 3.02, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount. At the option of the holder, Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the holder making the exchange is entitled to receive. Every Security presented or surrendered for registration of transfer or exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security registrar duly executed, by the holder thereof or his attorney duly authorized in writing. All Definitive Securities and Global Securities issued upon any registration of transfer or exchange of Definitive Securities or Global Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Definitive Securities or Global Securities surrendered upon such registration of transfer or exchange. No service charge shall be made to a holder for any registration of transfer or exchange, but the Company may require 18 28 payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith. The Company shall not be required to (i) issue, register the transfer of or exchange Securities during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption or any notice of selection of Securities for redemption under Article XIV hereof and ending at the close of business on the day of such mailing; or (ii) register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. (c) Exchange of Series A Securities for Series B Securities. The Series A Securities may be exchanged for Series B Securities pursuant to the terms of the Exchange Offer. The Trustee shall make the exchange as follows: The Company shall present the Trustee with an Officers' Certificate certifying the following: (A) upon issuance of the Series B Securities, the transactions contemplated by the Exchange Offer have been consummated; and (B) the principal amount of Series A Securities properly tendered in the Exchange Offer that are represented by a Global Security and the principal amount of Series A Securities properly tendered in the Exchange Offer that are represented by Definitive Securities, the name of each holder of such Definitive Securities, the principal amount properly tendered in the Exchange Offer by each such holder and the name and address to which Definitive Securities for Series B Securities shall be registered and sent for each such holder. The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an Opinion of Counsel (x) to the effect that the Series B Securities have been registered under Section 5 of the Securities Act and the Indenture has been qualified under the Trust Indenture Act and (y) with respect to the matters set forth in Section 3(p) of the Registration Rights Agreement and (iii) a Company Order, shall authenticate (A) a Global Security for Series B Securities in aggregate principal amount equal to the aggregate principal amount of Series A Securities represented by a Global Security indicated in such Officers' Certificate as having been properly tendered and (B) Definitive Securities representing Series B Securities registered in the names of, and in the principal amounts indicated in, such Officers' Certificate. 19 29 If the principal amount of the Global Security for the Series B Securities is less than the principal amount of the Global Security for the Series A Securities, the Trustee shall make an endorsement on such Global Security for Series A Securities indicating a reduction in the principal amount represented thereby. The Trustee shall deliver such Definitive Securities for Series B Securities to the holders thereof as indicated in such Officers' Certificate. SECTION 2.08. Replacement Securities. If any mutilated Security is surrendered to the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, the Company shall issue and the Trustee shall authenticate a replacement Security if the Trustee's requirements for replacements of Securities are met. An indemnity bond must be supplied by the holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any agent thereof or any authenticating agent from any loss that any of them may suffer if a Security is replaced. The Company or the Trustee may charge for its expenses in replacing a Security. Every replacement Security is an obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement of mutilated, destroyed, lost or stolen Securities. SECTION 2.09. [Intentionally Omitted] SECTION 2.10. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and make available for delivery, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise reproduced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. 20 30 If temporary Securities are issued, the Company shall cause definitive Securities to be prepared without unreasonable delay. The definitive Securities shall be printed, lithographed or engraved, or provided by any combination thereof, or in any other manner permitted by the rules and regulations of any applicable securities exchange, all as determined by the officers executing such definitive Securities. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency maintained by the Company for such purpose pursuant to Section 3.02 hereof, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute, and the Trustee shall authenticate and make available for delivery, in exchange therefor the same aggregate principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 2.11. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Trustee and no one else shall cancel all Securities surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall retain or dispose of cancelled Securities in accordance with its normal practices (subject to the record retention requirement of the Exchange Act) unless the Company directs them to be returned to it. The Company may not issue new Securities to replace Securities that have been redeemed or paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. Defaulted Interest. Any interest on any Security that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the holder on the relevant regular record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Company, at its election, as provided in clause (a) or clause (b) below: (a) The Company may make payment of any Defaulted Interest on Securities to the Persons in whose names such Securities (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Security and the date of the proposed payment, and at the same time the Company shall 21 31 deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at his or her address as it appears in the Security Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Securities (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable pursuant to the following clause (b). (b) The Company may make payment of any Defaulted Interest on any Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. SECTION 2.13. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Securityholders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers. 22 32 ARTICLE III PARTICULAR COVENANTS OF THE COMPANY SECTION 3.01. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of the holders of the Securities that it will duly and punctually pay or cause to be paid the principal of and premium, if any, and interest on the Securities at the place, at the respective times and in the manner provided herein. Except as provided in Section 2.03, each installment of interest on the Securities may be paid by mailing checks for such interest payable to the order of the holder of Security entitled thereto as they appear in the Security Register. The Company further covenants to pay any and all amounts including, without limitation, Liquidated Damages, if any, on the dates and in the manner required under the Registration Rights Agreement. SECTION 3.02. Offices for Notices and Payments, etc. So long as any of the Securities remain outstanding, the Company will maintain in the Borough of Manhattan, The City of New York, an office or agency where the Securities may be presented for payment, an office or agency where the Securities may be presented for registration of transfer and for exchange as in this Indenture provided and an office or agency where notices and demands to or upon the Company in respect of the Securities or of this Indenture may be served. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Company in a notice to the Trustee, any such office or agency for all of the above purposes shall be the Principal Office of the Trustee. In case the Company shall fail to maintain any such office or agency in the Borough of Manhattan, The City of New York, or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Trustee. In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside the Borough of Manhattan, The City of New York, where the Securities may be presented for payment, registration of transfer and for exchange in the manner provided in this Indenture, and the Company may from time to time rescind such designation, as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency in the Borough of Manhattan, The City of New York, for 23 33 the purposes above mentioned. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof. SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.10, a Trustee, so that there shall at all times be a Trustee hereunder. SECTION 3.04. Provision as to Paying Agent. (a) If the Company shall appoint a paying agent other than the Trustee with respect to the Securities, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provision of this Section 3.04, (1) that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest on the Securities (whether such sums have been paid to it by the Company or by any other obligor on the Securities of such series) in trust for the benefit of the holders of the Securities; (2) that it will give the Trustee notice of any failure by the Company (or by any other obligor on the Securities) to make any payment of the principal of and premium or interest on the Securities when the same shall be due and payable; and (3) that it will at any time during the continuance of any such failure, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by it as such paying agent. (b) If the Company shall act as its own paying agent, it will, on or before each due date of the principal of and premium, if any, or interest on the Securities, set aside, segregate and hold in trust for the benefit of the holders of the Securities a sum sufficient to pay such principal, premium or interest so becoming due and will notify the Trustee of any failure to take such action and of any failure by the Company (or by any other obli- 24 34 gor under the Securities) to make any payment of the principal of and premium, if any, or interest on the Securities when the same shall become due and payable. (c) Anything in this Section 3.04 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Securities hereunder, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust for any such series by the Trustee or any paying agent hereunder, as required by this Section 3.04, such sums to be held by the Trustee upon the trusts herein contained. (d) Anything in this Section 3.04 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.04 is subject to Sections 11.03 and 11.04. SECTION 3.05. Certificate to Trustee. The Company will deliver to the Trustee on or before 120 days after the end of each fiscal year in each year, commencing with the first fiscal year ending after the date hereof, so long as Securities are outstanding hereunder, an Officers' Certificate, one of the signers of which shall be the principal executive, principal financial or principal accounting officer of the Company stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any default by the Company in the performance of any covenants contained herein, stating whether or not they have knowledge of any such default and, if so, specifying each such default of which the signers have knowledge and the nature thereof. SECTION 3.06. Compliance with Consolidation Provisions. The Company will not, while any of the Securities remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article X hereof are complied with. SECTION 3.07. Limitation on Dividends. The Company will not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital 25 35 stock (which includes common and preferred stock) or (ii) make any payment of principal, interest or premium, if any, on or repay or repurchase or redeem any debt securities of the Company (including any Other Debentures) that rank pari passu with or junior in right of payment to the Securities or (iii) make any guarantee payments with respect to any guarantee by the Company of any securities of any Subsidiary of the Company (including Other Guarantees) if such guarantee ranks pari passu or junior in right of payment to the Securities (other than (a) dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock of the Company; (b) any declaration of a dividend in connection with the implementation of a stockholder's rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto; (c) payments under the Capital Securities Guarantee; (d) as a direct result of, and only to the extent required in order to avoid the issuance of fractional shares of capital stock following a reclassi- fication of the Company's capital stock or the exchange or the conversion of one class or series of the Company's capital stock for another class or series of the Company's capital stock; (e) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; and (f) purchases of Common Stock related to the issuance of Common Stock or rights under any of the Company's benefit plans for its directors, officers or employees or any of the Company's dividend reinvestment plans) if at such time (i) an Event of Default shall have occurred and be continuing, (ii) there shall have occurred any event of which the Company has actual knowledge that (a) is, or with the giving of notice or the lapse of time, or both, would constitute an Event of Default and (b) in respect of which the Company shall not have taken reasonable steps to cure, (iii) if the Securities are held by the Property Trustee, the Company shall be in default with respect to its payment obligations under the Capital Securities Guarantee or (iv) the Company shall have given notice of its election of the exercise of its right to extend the interest payment period pursuant to Section 16.01 and any such extension shall be continuing. 26 36 SECTION 3.08. Covenants as to Firstar Capital Trust. In the event Securities are issued to Firstar Capital Trust or a trustee of such trust in connection with the issuance of Trust Securities by Firstar Capital Trust, for so long as such Trust Securities remain outstanding, the Company will (i) maintain 100% direct ownership of the Common Securities of Firstar Capital Trust; provided, however, that any successor of the Company, permitted pursuant to Article X, may succeed to the Company's ownership of such Common Securities, (ii) use its reasonable efforts to cause Firstar Capital Trust (a) to remain a business trust, except in connection with a distribution of Securities, the redemption of all of the Trust Securities of Firstar Capital Trust or certain mergers, consolidations or amalgamations, each as permitted by the Declaration of Firstar Capital Trust, and (b) to otherwise continue to be treated as a grantor trust and not an association taxable as a corporation for United States federal income tax purposes and (iii) to use its reasonable efforts to cause each holder of Trust Securities to be treated as owning an individual beneficial interest in the Securities. SECTION 3.09. Payment of Expenses. In connection with the offering, sale and issuance of the Securities to the Firstar Capital Trust and in connection with the sale of the Trust Securities by the Firstar Capital Trust, the Company, in its capacity as borrower with respect to the Securities, shall: (a) pay all costs and expenses relating to the offering, sale and issuance of the Securities, including commissions to the initial purchasers payable pursuant to the Purchase Agreement, fees and expenses in connection with any exchange offer or other action to be taken pursuant to the Registration Rights Agreement and compensation of the Trustee in accordance with the provisions of Section 6.06; (b) pay all costs and expenses of the Firstar Capital Trust (including, but not limited to, costs and expenses relating to the organization of the Firstar Capital Trust, the offering, sale and issuance of the Trust Securities (including commissions to the initial purchasers in connection therewith), the fees and expenses of the Property Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Firstar Capital Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications 27 37 expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of assets of the Firstar Capital Trust; (c) be primarily and fully liable for any indemnification obligations arising with respect to the Declaration; (d) pay any and all taxes (other than United States withholding taxes attributable to the Firstar Capital Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Firstar Capital Trust; and (e) pay all other fees, expenses, debts and obligations (other than payments of principal of, premium, if any, or interest on the Trust Securities) related to Firstar Capital Trust. SECTION 3.10. Payment Upon Resignation or Removal. Upon termination of this Indenture or the removal or resignation of the Trustee, unless otherwise stated, the Company shall pay to the Trustee all amounts accrued and owing to the date of such termination, removal or resignation. Upon termination of the Declaration or the removal or resignation of the Delaware Trustee or the Property Trustee, as the case may be, pursuant to Section 5.7 of the Declaration, the Company shall pay to the Delaware Trustee or the Property Trustee, as the case may be, all amounts accrued and owing to the date of such termination, removal or resignation. ARTICLE IV SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SECTION 4.01. Securityholders' Lists. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee: (a) on a semi-annual basis on each regular record date for the Securities, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Securityholders as of such record date; and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company, of any such request, a list of similar form and content as of a date not more than 15 28 38 days prior to the time such list is furnished, except that, no such lists need be furnished so long as the Trustee is in possession thereof by reason of its acting as Security registrar. SECTION 4.02. Preservation and Disclosure of Lists. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of the Securities (1) contained in the most recent list furnished to it as provided in Section 4.01 or (2) received by it in the capacity of Securities registrar (if so acting) hereunder. The Trustee may destroy any list furnished to it as provided in Section 4.01 upon receipt of a new list so furnished. (b) In case three or more holders of Securities (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Securities or with holders of all Securities with respect to their rights under this Indenture and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall within 5 Business Days after the receipt of such application, at its election, either: (1) afford such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.02, or (2) inform such applicants as to the approximate number of holders of all Securities, whose names and addresses appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.02, and as to the approximate cost of mailing to such Securityholders the form of proxy or other commu- nication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee 29 39 shall, upon the written request of such applicants, mail to each Securityholder whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.02 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the holders of Securities of such series or all Securities, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Each and every holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any paying agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Securities in accordance with the provisions of subsection (b) of this Section 4.02, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b). 30 40 SECTION 4.03. Reports by Company. (a) The Company covenants and agrees to file with the Trustee, within 15 days after the date on which the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as said Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations. (b) The Company covenants and agrees to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by said Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations. (c) The Company covenants and agrees to transmit by mail to all holders of Securities, as the names and addresses of such holders appear upon the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 4.03 as may be required by rules and regulations prescribed from time to time by the Commission. (d) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information 31 41 contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). (e) So long as is required for an offer or sale of the Securities to qualify for an exemption under Rule 144A under the Securities Act, the Company shall, upon request, provide the information required by clause (d)(4) thereunder to each Holder and to each beneficial owner and prospective purchaser of Securities identified by any holder of Restricted Securities, unless such information is furnished to the Commission pursuant to Section 13 or 15(d) of the Exchange Act. SECTION 4.04. Reports by the Trustee. (a) The Trustee shall transmit to Securityholders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within sixty days after each November 15 following the date of this Indenture, commencing November 15, 1997, deliver to Securityholders a brief report, dated as of such November 15, which complies with the provisions of such Section 313(a). (b) A copy of each such report shall, at the time of such transmission to Securityholders, be filed by the Trustee with each stock exchange, if any, upon which the Securities are listed, with the Commission and with the Company. The Company will promptly notify the Trustee when the Securities are listed on any stock exchange. 32 42 ARTICLE V REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT SECTION 5.01. Events of Default. One or more of the following events of default shall constitute an Event of Default hereunder (whatever the reason for such Event of Default and whether it shall be voluntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of any interest upon any Security or any Other Debentures when it becomes due and payable, and continuance of such default for a period of 30 days; provided, however, that a valid extension of an interest payment period by the Company in accordance with the terms hereof shall not constitute a default in the payment of interest for this purpose; or (b) default in the payment of all or any part of the principal of (or premium, if any, on) any Security or any Other Debentures as and when the same shall become due and payable either at maturity, upon redemption, by declaration or otherwise; or (c) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the outstanding Securities a written notice specifying such default or breach and re- quiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (d) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a 33 43 receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or (e) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due. If an Event of Default with respect to Securities at the time outstanding occurs and is continuing, then in every such case the Trustee or the holders of not less than 25% in aggregate principal amount of the Securities then outstanding may declare the principal amount of all Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the holders of the outstanding Securities), and upon any such declaration the same shall become immediately due and payable. The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Securities shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, (i) the Company shall pay or shall deposit with the Trustee a sum sufficient to pay (A) all matured installments of interest upon all the Securities and the principal of and premium, if any, on any and all Securities which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest, at the same rate as the rate of interest specified in the Securities to the date of such payment or deposit) and (B) such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith, and (ii) any and all Events of Default under the Indenture, other than the non-payment 34 44 of the principal of the Securities which shall have become due solely by such declaration of acceleration, shall have been cured, waived or otherwise remedied as provided herein, then, in every such case, the holders of a majority in aggregate principal amount of the Securities then outstanding, by written notice to the Company and to the Trustee, may rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the holders of the Securities shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the holders of the Securities shall continue as though no such proceeding had been taken. SECTION 5.02. Payment of Securities on Default; Suit Therefor. The Company covenants that (a) in case default shall be made in the payment of any installment of interest upon any of the Securities as and when the same shall become due and payable, and such default shall have continued for a period of 30 days, or (b) in case default shall be made in the payment of the principal of or premium, if any, on any of the Securities as and when the same shall have become due and payable, whether at maturity of the Securities or upon redemption or by declaration or otherwise, then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Securities, the whole amount that then shall have become due and payable on all such Securities for principal and premium, if any, or interest, or both, as the case may be, with interest upon the overdue principal and premium, if any, and (to the extent that payment of such interest is enforceable under applicable law and, if the Securities are held by Firstar Capital Trust or a trustee of such trust, without duplication of any other amounts paid by Firstar Capital Trust or a trustee in respect thereof) upon the overdue installments of interest at the rate borne by the Securities; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any expenses or liabilities incurred by the Trustee hereunder other than through its negligence or bad faith. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as 35 45 trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on the Securities and collect in the manner provided by law out of the property of the Company or any other obligor on the Securities wherever situated the moneys adjudged or decreed to be payable. In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Securities under Title 11, United States Code, or any other applicable law, or in case a receiver or trustee shall have been appointed for the property of the Company or such other obligor, or in the case of any other similar judicial proceedings relative to the Company or other obligor upon the Securities, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.02, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Securities and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of negligence or bad faith) and of the Securityholders allowed in such judicial proceedings relative to the Company or any other obligor on the Securities, or to the creditors or property of the Company or such other obligor, unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Securities in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of its charges and expenses; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor 36 46 Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith. Nothing herein contained shall be construed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. All rights of action and of asserting claims under this Indenture, or under any of the Securities, may be enforced by the Trustee without the possession of any of the Securities, or the production thereof on any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the holders of the Securities. In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the holders of the Securities, and it shall not be necessary to make any holders of the Securities parties to any such proceedings. SECTION 5.03. Application of Moneys Collected by Trustee. Any moneys collected by the Trustee shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the Securities in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid: First: To the payment of costs and expenses of collection applicable to the Securities and reasonable compensation to the Trustee, its agents, attorneys and counsel, and of all other expenses and liabilities incurred, and all advances made, by the Trustee except as a result of its negligence or bad faith; Second: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XV; Third: To the payment of the amounts then due and unpaid upon Securities for principal of (and premium, if any) and interest on the Securities, in respect of which or for the 37 47 benefit of which money has been collected, ratably, without preference of priority of any kind, according to the amounts due on such Securities for principal (and premium, if any) and interest, respectively; and Fourth: To the Company. SECTION 5.04. Proceedings by Securityholders. No holder of any Security shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless such holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof with respect to the Securities specifying such Event of Default, as hereinbefore provided, and unless also the holders of not less than 25% in aggregate principal amount of the Securities then outstanding shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding, it being understood and intended, and being expressly covenanted by the taker and holder of every Security with every other taker and holder and the Trustee, that no one or more holders of Securities shall have any right in any manner whatever by virtue of or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other holder of Securities, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Securities. Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Security to receive payment of the principal of (premium, if any) and interest on such Security, on or after the same shall have become due and payable, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder and by accepting a Security hereunder it is expressly understood, intended and covenanted by the taker and holder of every Security with every other such taker and holder and the Trustee, that no one or more holders of Securities shall have any right in any manner whatsoever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other Securities, or to obtain or 38 48 seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Securities. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. The Company and the Trustee acknowledge that pursuant to the Declaration, the holders of Capital Securities are entitled, in the circumstances and subject to the limitations set forth therein, to commence a Direct Action with respect to any Event of Default under this Indenture and the Securities. SECTION 5.05. Proceedings by Trustee. In case an Event of Default occurs with respect to Securities and is continuing, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. SECTION 5.06. Remedies Cumulative and Continuing. Except as provided in the last paragraph of Section 2.08, all powers and remedies given by this Article V to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Securities, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Securities, and no delay or omission of the Trustee or of any holder of any of the Securities to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.04, every power and remedy given by this Article V or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders. SECTION 5.07. Direction of Proceedings and Waiver of Defaults by Majority of Securityholders. 39 49 The holders of a majority in aggregate principal amount of the Securities at the time outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee; provided, however, that (subject to the provisions of Section 6.01) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction or if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith by its board of directors or trustees, executive committee, or a trust committee of directors or trustees and/or Responsible Officers shall determine that the action or proceedings so directed would involve the Trustee in personal liability. Prior to any declaration accelerating the maturity of the Securities, the holders of a majority in aggregate principal amount of the Securities at the time outstanding may on behalf of the holders of all of the Securities waive any past default or Event of Default and its consequences except a default (a) in the payment of principal of or premium, if any, or interest on any of the Securities or (b) in respect of covenants or provisions hereof which cannot be modified or amended without the consent of the holder of each Security affected; provided, however, that if the Securities are held by the Property Trustee, such waiver or modification to such waiver shall not be effective until the holders of a majority in aggregate liquidation amount of Trust Securities shall have consented to such waiver or modification to such waiver; provided further, that if the consent of the holder of each outstanding Security is required, such waiver shall not be effective until each holder of the Trust Securities shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Securities shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section 5.07, said default or Event of Default shall for all purposes of the Securities and this Indenture be deemed to have been cured and to be not continuing. 40 50 SECTION 5.08. Notice of Defaults. The Trustee shall, within 90 days after the occurrence of a default with respect to the Securities mail to all Securityholders, as the names and addresses of such holders appear upon the Security register, notice of all defaults known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purpose of this Section 5.08 being hereby defined to be the events specified in clauses (a), (b), (c), (d) and (e) of Section 5.01, not including periods of grace, if any, provided for therein, and irrespective of the giving of written notice specified in clause (c) of Section 5.01); and provided that, except in the case of default in the payment of the principal of or premium, if any, or interest on any of the Securities, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders; and provided further, that in the case of any default of the character specified in Section 5.01(c) no such notice to Securityholders shall be given until at least 60 days after the occurrence thereof but shall be given within 90 days after such occurrence. SECTION 5.09. Undertaking to Pay Costs. All parties to this Indenture agree, and each holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.09 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in aggregate principal amount of the Securities outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security against the Company on or after the same shall have become due and payable. 41 51 ARTICLE VI CONCERNING THE TRUSTEE SECTION 6.01. Duties and Responsibilities of Trustee. With respect to the holders of the Securities issued hereunder, the Trustee, prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default has occurred (which has not been cured or waived) the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that (a) prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default which may have occurred (1) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Inden- 42 52 ture; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith, in accordance with the direction of the Securityholders pursuant to Section 5.07, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Indenture or adequate indemnity against such risk is not reasonably assured to it. SECTION 6.02. Reliance on Documents, Opinions, etc. Except as otherwise provided in Section 6.01: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction, order or demand of the Company mentioned herein may be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company; (c) the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered omitted by 43 53 it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default (that has not been cured or waived), to exercise such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, coupon or other paper or document, unless requested in writing to do so by the holders of a majority in aggregate principal amount of the outstanding Securities; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents (including any Authenticating Agent) or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent 44 54 or attorney appointed by it with due care. SECTION 6.03. No Responsibility for Recitals, etc. The recitals contained herein and in the Securities (except in the certificate of authentication of the Trustee or the Authenticating Agent) shall be taken as the statements of the Company and the Trustee and the Authenticating Agent assume no responsibility for the correctness of the same. The Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any Securities or the proceeds of any Securities authenticated and delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture. The Trustee shall not be charged with knowledge of any default or Event of Default under Section 5.01(a) or (b) relating to Other Debentures unless (i) a Responsible Officer of the Trustee assigned to its Principal Office shall have actual knowledge thereof or (ii) the Company, any Securityholder or the holder of any Other Debenture shall have given the Trustee written notice thereof in accordance with Section 13.04. SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Securities. The Trustee or any Authenticating Agent or any paying agent or any transfer agent or any Security registrar, in its individual or any other capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not Trustee, Authenticating Agent, paying agent, transfer agent or Security registrar. SECTION 6.05. Moneys to be Held in Trust. Subject to the provisions of Section 11.04, all moneys received by the Trustee or any paying agent shall, until used or applied as herein provided, be held in trust for the purpose for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee and any paying agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Company, signed by the Chairman of the Board of Directors, the President or a Vice President or the Treasurer or an Assistant Treasurer of the Company. 45 55 SECTION 6.06. Compensation and Expenses of Trustee. The Company, as borrower, covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as shall be agreed to in writing between the Company and the Trustee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and the Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Company also covenants to indemnify each of the Trustee or any predecessor Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Trustee) incurred without negligence or bad faith on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability in the premises. The obligations of the Company under this Section 6.06 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Securities. Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.01(d) or Section 5.01(e), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the termination of this Indenture. 46 56 SECTION 6.07. Officers' Certificate as Evidence. Except as otherwise provided in Sections 6.01 and 6.02, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof is herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof. SECTION 6.08. Conflicting Interest of Trustee. If the Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the Company shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act, subject to the penultimate paragraph thereof. SECTION 6.09. Eligibility of Trustee. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia or a corporation or other Person permitted to act as trustee by the Commission authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000) and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.09 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.09, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.10. 47 57 SECTION 6.10. Resignation or Removal of Trustee. (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof to the holders of the Securities at their addresses as they shall appear on the Security register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee or trustees by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 60 days after the mailing of such notice of resignation to the Securityholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Securityholder who has been a bona fide holder of a Security for at least six months may, subject to the provisions of Section 5.09, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) In case at any time any of the following shall occur -- (1) the Trustee shall fail to comply with the provisions of Section 6.08 after written request therefor by the Company or by any Securityholder who has been a bona fide holder of a Security or Securities for at least six months, or (2) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.09 and shall fail to resign after written request therefor by the Company or by any such Securityholder, or (3) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the 48 58 purpose of rehabilitation, conservation or liquidation, then, in any such case, the Company may remove the Trustee and appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 5.09, any Securityholder who has been a bona fide holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The holders of a majority in aggregate principal amount of the Securities at the time outstanding may at any time remove the Trustee and nominate a successor trustee, which shall be deemed appointed as successor trustee unless within 10 days after such nomination the Company objects thereto or if no successor trustee shall have been so appointed and shall have accepted appointment within 30 days after such removal, in which case the Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.10 provided, may petition any court of competent jurisdiction for an appointment of a successor trustee. (d) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section 6.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 6.11. SECTION 6.11. Acceptance by Successor Trustee. Any successor trustee appointed as provided in Section 6.10 shall execute, acknowledge and deliver to the Company and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the retiring trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written 49 59 request of the Company or of the successor trustee, the trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 6.06, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act and shall duly assign, transfer and deliver to such successor trustee all property and money held by such retiring trustee thereunder. Upon request of any such successor trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Section 6.06. No successor trustee shall accept appointment as provided in this Section 6.11 unless at the time of such acceptance such successor trustee shall be qualified under the provisions of Section 6.08 and eligible under the provisions of Section 6.09. Upon acceptance of appointment by a successor trustee as provided in this Section 6.11, the Company shall mail notice of the succession of such trustee hereunder to the holders of Securities at their addresses as they shall appear on the Security register. If the Company fails to mail such notice within 10 days after the acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Company. SECTION 6.12. Succession by Merger, etc. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor trustee; and in all such cases such certificates shall have the full force which the 50 60 Securities or this Indenture elsewhere provides that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Securities in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 6.13. Limitation on Rights of Trustee as a Creditor. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship described in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent included therein. SECTION 6.14. Authenticating Agents. There may be one or more Authenticating Agents appointed by the Trustee upon the request of the Company with power to act on its behalf and subject to its direction in the authentication and delivery of Securities issued upon exchange or transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Securities; provided, that the Trustee shall have no liability to the Company for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Securities. Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any state or territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of at least $5,000,000 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 6.14 the combined capital and surplus of such corporation shall be deemed to be its com- bined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section. Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such 51 61 successor corporation is otherwise eligible under this Section 6.14 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.14, the Trustee may, and upon the request of the Company shall, promptly appoint a successor Authenticating Agent eligible under this Section 6.14, shall give written notice of such appointment to the Company and shall mail notice of such appointment to all Securityholders as the names and addresses of such holders appear on the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein. The Company, as borrower, agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services. Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Trustee. ARTICLE VII CONCERNING THE SECURITYHOLDERS SECTION 7.01. Action by Securityholders. Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Securities may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action) the fact that at the time of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Securities voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders. 52 62 If the Company shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action, the Company may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action or to revoke any such action, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action or revocation may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action, and for that purpose the Outstanding Securities shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. SECTION 7.02. Proof of Execution by Securityholders. Subject to the provisions of Section 6.01, 6.02 and 8.05, proof of the execution of any instrument by a Securityholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The ownership of Securities shall be proved by the Security Register or by a certificate of the Security registrar. The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary. The record of any Securityholders' meeting shall be proved in the manner provided in Section 8.06. 53 63 SECTION 7.03. Who Are Deemed Absolute Owners. Prior to due presentment for registration of transfer of any Security, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Security registrar may deem the person in whose name such Security shall be registered upon the Security Register to be, and may treat him as, the absolute owner of such Security (whether or not such Security shall be overdue) for the purpose of receiving payment of or on account of the principal of and premium, if any, and (subject to Section 2.06) interest on such Security and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Security registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Security. SECTION 7.04. Securities Owned by Company Deemed Not Outstanding. In determining whether the holders of the requisite aggregate principal amount of Securities have concurred in any direction, consent or waiver under this Indenture, Securities which are owned by the Company or any other obligor on the Securities or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Securities shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Securities which the Trustee actually knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.04 if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Securities and that the pledgee is not the Company or any such other obligor or person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. SECTION 7.05. Revocation of Consents; Future Holders Bound. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.01, of the taking of any 54 64 action by the holders of the percentage in aggregate principal amount of the Securities specified in this Indenture in connection with such action, any holder of a Security (or any Security issued in whole or in part in exchange or substitution therefor), subject to Section 7.01, the serial number of which is shown by the evidence to be included in the Securities the holders of which have consented to such action may, by filing written notice with the Trustee at its principal office and upon proof of holding as provided in Section 7.02, revoke such action so far as concerns such Security (or so far as concerns the principal amount represented by any exchanged or substituted Security). Except as aforesaid any such action taken by the holder of any Security shall be conclusive and binding upon such holder and upon all future holders and owners of such Security, and of any Security issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon such Security or any Security issued in exchange or substitution therefor. ARTICLE VIII SECURITYHOLDERS' MEETINGS SECTION 8.01. Purposes of Meetings. A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes: (a) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V; (b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article VI; (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.02; or (d) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Securities under any other provision of this Indenture or under applicable law. SECTION 8.02. Call of Meetings by Trustee. 55 65 The Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.01, to be held at such time and at such place in the Borough of Manhattan, The City of New York, as the Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Securities at their addresses as they shall appear on the Securities Register. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting. SECTION 8.03. Call of Meetings by Company or Securityholders. In case at any time the Company pursuant to a resolution of the Board of Directors, or the holders of at least 10% in aggregate principal amount of the Securities then outstanding, shall have requested the Trustee to call a meeting of Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or such Securityholders may determine the time and the place in said Borough of Manhattan for such meeting and may call such meeting to take any action authorized in Section 8.01, by mailing notice thereof as provided in Section 8.02. SECTION 8.04. Qualifications for Voting. To be entitled to vote at any meeting of Securityholders a person shall (a) be a holder of one or more Securities or (b) a person appointed by an instrument in writing as proxy by a holder of one or more Securities. The only persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. SECTION 8.05. Regulations. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Securities and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit. 56 66 The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 8.03, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting. Subject to the provisions of Section 8.04, at any meeting each holder of Securities or proxy therefor shall be entitled to one vote for each $1,000 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Securities held by him or instruments in writing as aforesaid duly designating him as the person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.02 or 8.03 may be adjourned from time to time by a majority of those present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice. The Persons entitled to vote a majority in principal amount of the outstanding Securities shall constitute a quorum for a meeting of Holders of Securities; provided, however, that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or other action which may be given by the holders of not less than a specified percentage in principal amount of the outstanding Securities, the Persons holding or representing such specified percentage in principal amount of the outstanding Securities will constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of holders of Securities, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.02, except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the 57 67 outstanding Securities which shall constitute a quorum. Except as limited by the first proviso to the first paragraph of Section 9.02, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the holders of a majority in principal amount of the outstanding Securities; provided, however, that, except as limited by the first proviso to the first paragraph of Section 9.02, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action which this Indenture expressly provides may be given by the holders of not less than a specified percentage in principal amount of the outstanding Securities may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the holders of not less than such specified percentage in principal amount of the outstanding Securities. Any resolution passed or decision taken at any meeting of Holders of Securities duly held in accordance with this Section shall be binding on all the Holders of Securities whether or not present or represented at the meeting. SECTION 8.06. Voting. The vote upon any resolution submitted to any meeting of holders of Securities shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Securities held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.02. The record shall show the serial numbers of the Securities voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. The holders of the Series A Capital Securities and the Series B Capital Securities shall vote for all purposes as a single class. 58 68 Any record so signed and verified shall be conclusive evidence of the matters therein stated. ARTICLE IX AMENDMENTS SECTION 9.01. Without Consent of Securityholders. The Company and the Trustee may from time to time and at any time amend the Indenture, without the consent of the Securityholders, for one or more of the following purposes: (a) to evidence the succession of another corporation to the Company, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Company pursuant to Article X hereof; (b) to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the Securityholders as the Board of Directors and the Trustee shall consider to be for the protection of the Securityholders, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a default or an Event of Default permitting the enforcement of all or any of the remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant, restriction or condition such amendment may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default; (c) to provide for the issuance under this Indenture of Securities in coupon form (including Securities registrable as to principal only) and to provide for exchangeability of such Securities with the Securities issued hereunder in fully registered form and to make all appropriate changes for such purpose; (d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supple- 59 69 mental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture; provided that any such action shall not materially adversely affect the interests of the holders of the Securities; (e) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Securities; (f) to make provision for transfer procedures, certification, book-entry provisions, the form of restricted securities legends, if any, to be placed on Securities, minimum denominations and all other matters required pursuant to Section 2.07 or otherwise necessary, desirable or appropriate in connection with the issuance of Securities to holders of Capital Securities in the event of a distribution of Securities by Firstar Capital Trust following a Dissolution Event; (g) to qualify or maintain qualification of this Indenture under the Trust Indenture Act; or (h) to make any change that does not adversely affect the rights of any Securityholder in any material respect. The Trustee is hereby authorized to join with the Company in the execution of any supplemental indenture to effect such amendment, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any amendment to the Indenture authorized by the provisions of this Section 9.01 may be executed by the Company and the Trustee without the consent of the holders of any of the Securities at the time outstanding, notwithstanding any of the provisions of Section 9.02. 60 70 SECTION 9.02. With Consent of Securityholders. With the consent (evidenced as provided in Section 7.01) of the holders of a majority in aggregate principal amount of the Securities at the time outstanding, the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time amend the Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the holders of the Securities; provided, however, that no such amendment shall without the consent of the holders of each Security then outstanding and affected thereby (i) extend the Maturity Date of any Security, or reduce the rate or extend the time of payment of interest thereon (except as contemplated by Article XVI), or reduce the principal amount thereof, or reduce any amount payable on redemption thereof, or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Securities, or impair or affect the right of any Securityholder to institute suit for payment thereof, or (ii) reduce the aforesaid percentage of Securities the holders of which are required to consent to any such amendment to the Indenture, provided, however, that if the Securities are held by Firstar Capital Trust, such amendment shall not be effective until the holders of a majority in liquidation amount of Trust Securities shall have consented to such amendment; provided, further, that if the consent of the holder of each outstanding Security is required, such amendment shall not be effective until each holder of the Trust Securities shall have consented to such amendment. Upon the request of the Company accompanied by a copy of a resolution of the Board of Directors certified by its Secretary or Assistant Secretary authorizing the execution of any supplemental indenture affecting such amendment, and upon the filing with the Trustee of evidence of the consent of Securityholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, prepared by the Company, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Security Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way 61 71 impair or affect the validity of any such supplemental indenture. It shall not be necessary for the consent of the Securityholders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. SECTION 9.03. Compliance with Trust Indenture Act; Effect of Supplemental Indentures. Any supplemental indenture executed pursuant to the provisions of this Article IX shall comply with the Trust Indenture Act. Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Securities shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.04. Notation on Securities. Securities authenticated and delivered after the execution of any supplemental indenture affecting such series pursuant to the provisions of this Article IX may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee or the Authenticating Agent and delivered in exchange for the Securities then outstanding. SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be Furnished Trustee. The Trustee, subject to the provisions of Sections 6.01 and 6.02, may receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article IX. The Trustee may receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article is authorized or permitted by, and conforms to, the terms of this Article and that it is proper for 62 72 the Trustee under the provisions of this Article to join in the execution thereof. ARTICLE X CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE SECTION 10.01. Company May Consolidate, etc., on Certain Terms. Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Company with or into any other Person (whether or not affiliated with the Company, as the case may be), or successive consolidations or mergers in which the Company, or its successor or successors, as the case may be, shall be a party or parties, or shall prevent any sale, conveyance, transfer or lease of the property of the Company, or its successor or successors, as the case may be, as an entirety, or substantially as an entirety, to any other Person (whether or not affiliated with the Company, or its successor or successors, as the case may be) authorized to acquire and operate the same; provided, that (a) the Company is the surviving Person, or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, conveyance, transfer or lease of property is made is a Person organized and existing under the laws of the United States or any State thereof or the District of Columbia, and (b) upon any such consolidation, merger, sale, conveyance, transfer or lease, the due and punctual payment of the principal of (and premium, if any) and interest on the Securities according to their tenor and the due and punctual performance and obser- vance of all the covenants and conditions of this Indenture to be kept or performed by the Company shall be expressly assumed, by supplemental indenture (which shall conform to the provisions of the Trust Indenture Act, as then in effect) satisfactory in form to the Trustee executed and delivered to the Trustee by the Person formed by such consolidation, or into which the Company, shall have been merged, or by the Person which shall have acquired such property, as the case may be, (c) after giving effect to such consolidation, merger, sale, conveyance, transfer or lease, no Default or Event of Default shall have occurred and be continuing and (d) such consolidation, merger, sale, conveyance, transfer or lease does not cause the Securities to be downgraded by a nationally recognized statistical rating organization. SECTION 10.02. Successor Corporation to be Substituted for Company. In case of any such consolidation, merger, conveyance or transfer and upon the assumption by the successor corporation, 63 73 by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and premium, if any, and interest on all of the Securities and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, such successor Person shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the party of the first part, and the Company thereupon shall be relieved of any further liability or obligation hereunder or upon the Securities. Such successor Person thereupon may cause to be signed, and may issue either in its own name or in the name of Firstar Corporation, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or the Authenticating Agent; and, upon the order of such successor Person instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee or the Authenticating Agent for authentication, and any Securities which such successor Person thereafter shall cause to be signed and delivered to the Trustee or the Authenticating Agent for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Indentures had been issued at the date of the execution hereof. SECTION 10.03. Opinion of Counsel to be Given Trustee. The Trustee, subject to the provisions of Sections 6.01 and 6.02, may receive an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or lease, and any assumption, permitted or required by the terms of this Article X complies with the provisions of this Article X. 64 74 ARTICLE XI SATISFACTION AND DISCHARGE OF INDENTURE SECTION 11.01. Discharge of Indenture. When (a) the Company shall deliver to the Trustee for cancellation all Securities theretofore authenticated (other than any Securities which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.08) and not theretofore cancelled, or (b) all the Securities not theretofore cancelled or delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee, in trust, funds sufficient to pay on the Maturity Date or upon redemption all of the Securities (other than any Securities which shall have been destroyed, lost or stolen and which shall have been replaced as provided in Section 2.08) not theretofore cancelled or delivered to the Trustee for cancellation, including principal and premium, if any, and interest due or to become due to the Maturity Date or redemption date, as the case may be, but excluding, however, the amount of any moneys for the payment of principal of or premium, if any, or interest on the Securities (1) theretofore repaid to the Company in accordance with the provisions of Section 11.04, or (2) paid to any State or to the District of Columbia pursuant to its unclaimed property or similar laws, and if in either case the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.02, 2.07, 2.08, 3.01, 3.02, 3.04, 6.06, 6.10 and 11.04 hereof, which shall survive until such Securities shall mature and be paid. Thereafter, Sections 6.06, 6.10 and 11.04 shall survive, and the Trustee, on demand of the Company accompanied by any Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture, the Company, however, hereby agreeing to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture or the Securities. SECTION 11.02. Deposited Moneys and U.S. Government Obligations to be Held in Trust by Trustee. Subject to the provisions of Section 11.04, all moneys 65 75 and U.S. Government Obligations deposited with the Trustee pursuant to Sections 11.01 or 11.05 shall be held in trust and applied by it to the payment, either directly or through any paying agent (including the Company if acting as its own paying agent), to the holders of the particular Securities for the payment of which such moneys or U.S. Government Obligations have been deposited with the Trustee, of all sums due and to become due thereon for principal, premium, if any, and interest. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 11.05 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the holders of outstanding Securities. SECTION 11.03. Paying Agent to Repay Moneys Held. Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent of the Securities (other than the Trustee) shall, upon written demand of the Company, be repaid to it or paid to the Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys. SECTION 11.04. Return of Unclaimed Moneys. Any moneys deposited with or paid to the Trustee or any paying agent for payment of the principal of or premium, if any, or interest on Securities and not applied but remaining unclaimed by the holders of Securities for two years after the date upon which the principal of or premium, if any, or interest on such Securities, as the case may be, shall have become due and payable, shall be repaid to the Company by the Trustee or such paying agent on Company Request; and the holder of any of the Securities shall thereafter look only to the Company for any payment which such holder may be entitled to collect and all liability of the Trustee or such paying agent with respect to such moneys shall thereupon cease. SECTION 11.05. Defeasance Upon Deposit of Moneys or U.S. Government Obligations. The Company shall be deemed to have been Discharged (as defined below) from its obligations with respect to the Securities on the 91st day after the conditions set forth below have been satisfied: (1) The Company shall have deposited or caused to be deposited irrevocably with the Trustee or the Defeasance Agent (as defined below) as trust funds 66 76 in trust, specifically pledged as security for, and dedicated solely to, the benefit of the holders of the Securities (i) money in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (iii) a combination of (i) and (ii), sufficient, in the opinion (with respect to (ii) and (iii)) of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee and the Defeasance Agent, if any, to pay and discharge each installment of principal of and interest and premium, if any, on the outstanding Securities on the dates such installments of principal, interest or premium are due; (2) if the Securities are then listed on any national securities exchange, the Company shall have delivered to the Trustee and the Defeasance Agent, if any, an Opinion of Counsel to the effect that the exercise of the option under this Section 11.05 would not cause such Securities to be delisted from such exchange; (3) no Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit; and (4) the Company shall have delivered to the Trustee and the Defeasance Agent, if any, an Opinion of Counsel to the effect that holders of the Securities will not recognize income, gain or loss for United States federal income tax purposes as a result of the exercise of the option under this Section 11.05 and will be subject to United States federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised, and such opinion shall be based on a statute so providing or be accompanied by a private letter ruling to that effect received from the United States Internal Revenue Service or a revenue ruling pertaining to a comparable form of transaction to that effect published by the United States Internal Revenue Service. "Discharged" means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by, 67 77 and obligations under, the Securities and to have satisfied all the obligations under this Indenture relating to the Securities (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except (A) the rights of holders of Securities to receive, from the trust fund described in clause (1) above, payment of the principal of and the interest and premium, if any, on the Securities when such payments are due; (B) the Company's obligations with respect to the Securities under Sections 2.02, 2.07, 2.08, 3.02, 3.04, 6.10 and 11.04; and (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder. "Defeasance Agent" means another financial institution which is eligible to act as Trustee hereunder and which assumes all of the obligations of the Trustee necessary to enable the Trustee to act under this Article. In the event such a Defeasance Agent is appointed pursuant to this Section, the following conditions shall apply: (1) The Trustee shall have approval rights over the document appointing such Defeasance Agent and the document setting forth such Defeasance Agent's rights and responsibilities; (2) The Defeasance Agent shall provide verification to the Trustee acknowledging receipt of sufficient money and/or U. S. Government Obligations to meet the applicable conditions set forth in this Section 11.05. ARTICLE XII IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SECTION 12.01. Indenture and Securities Solely Corporate Obligations. No recourse for the payment of the principal of or premium, if any, or interest on any Security, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture, or in any Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor Person to the Company, either directly or through the Company or any successor Person to the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly 68 78 understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Securities. ARTICLE XIII MISCELLANEOUS PROVISIONS SECTION 13.01. Successors. All the covenants, stipulations, promises and agreements in this Indenture contained by the Company shall bind its successors and assigns whether so expressed or not. SECTION 13.02. Official Acts by Successor Corporation. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any corporation that shall at the time be the lawful sole successor of the Company. SECTION 13.03. Surrender of Company Powers. The Company by instrument in writing executed by authority of 2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company, and thereupon such power so surrendered shall terminate both as to the Company, as the case may be, and as to any successor Person. SECTION 13.04. Addresses for Notices, etc. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Securities on the Company may be given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company with the Trustee for the purpose) to the Company, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53201, Attention: Howard Hopwood. Any notice, direction, request or demand by any Securityholder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the office of the Trustee, 450 W. 33rd Street, New York, NY 10001, Attention: Corporate Trustee Administration Department (unless another address is provided by the Trustee to the Company for the purpose). 69 79 Any notice or communication to a Holder shall be mailed by first class mail to his or her address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. SECTION 13.05. Governing Law. This Indenture and each Security shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be governed by and construed in accordance with the laws of said State, without regard to conflicts of laws principles thereof. SECTION 13.06. Evidence of Compliance with Conditions Precedent. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture (except pursuant to Section 3.05) shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. SECTION 13.07. Business Days. In any case where the date of payment of principal of or premium, if any, or interest on the Securities will not be a Business Day, the payment of such principal of or premium, if any, or interest on the Securities need not be made on such date but may be made on the next succeeding Business Day, with the same force and effect as if made on the date of payment and no interest shall accrue for the period from and after such date. 70 80 SECTION 13.08. Trust Indenture Act to Control. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939, such imposed duties shall control. SECTION 13.09. Table of Contents, Headings, etc. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 13.10. Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. SECTION 13.11. Separability. In case any one or more of the provisions contained in this Indenture or in the Securities shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of the Securities, but this Indenture and the Securities shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. SECTION 13.12. Assignment. The Company will have the right at all times to assign any of its respective rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided that, in the event of any such assignment, the Company will remain primarily liable for all its obligations. Subject to the foregoing, the Indenture is binding upon and inures to the benefit of the parties thereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties thereto. SECTION 13.13. Acknowledgement of Rights. The Company acknowledges that, with respect to any Securities held by Firstar Capital Trust or a trustee of such trust, if the Property Trustee of such Trust fails to enforce its rights under this Indenture as the holder of the Securities held 71 81 as the assets of Firstar Capital Trust any holder of Capital Securities may institute legal proceedings directly against the Company to enforce such Property Trustee's rights under this Indenture without first instituting any legal proceedings against such Property Trustee or any other person or entity. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay principal of or premium, if any, or interest on the Securities when due, the Company acknowledges that a holder of Capital Securities may directly institute a proceeding for enforcement of payment to such holder of the principal of or premium, if any, or interest on the Securities having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such holder on or after the respective due date specified in the Securities. ARTICLE XIV REDEMPTION OF SECURITIES -- MANDATORY AND OPTIONAL SINKING FUND SECTION 14.01. Special Event Redemption. If a Special Event has occurred and is continuing then, notwithstanding Section 14.02(a) but subject to Section 14.02(c), the Company shall have the right at any time prior to the Initial Optional Redemption Date, upon (i) not less than 45 days written notice to the Trustee, which notice shall be accompanied by an Officers' Certificate certifying that a Special Event entitling the Company to redeem the Securities pursuant to this Section, has occurred and (ii) not less than 30 days nor more than 60 days written notice to the Securityholders, to redeem the Securities, in whole (but not in part), within 90 days following the occurrence of such Special Event at the Special Event Redemption Price. Following a Special Event, the Company shall take such action as is necessary to promptly determine the Special Event Redemption Price, including without limitation the appointment by the Company of a Quotation Agent. The Special Event Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or such earlier time as the Company determines, provided that the Company shall deposit with the Trustee an amount sufficient to pay the Special Event Redemption Price by 10:00 a.m., New York time, on the date such Special Event Prepayment Price is to be paid. The Company shall provide the Trustee with written notice of the Special Event Redemption Price promptly after the calculation thereof, which notice shall include any calculation made by the Quotation Agent in connection with the determination of the Special Event Redemption Price. SECTION 14.02. Optional Redemption by Company. 72 82 (a) Subject to the provisions of this Article XIV, the Company shall have the right to redeem the Securities, in whole or in part, from time to time, on or after Initial Optional Redemption Date at the optional redemption prices set forth below (expressed as percentages of principal) plus accrued and unpaid interest thereon (including Additional Interest and Compounded Interest, if any) to the applicable date of redemption (the "Optional Redemption Price"): if redeemed during the 12-month period beginning December 23 of the years indicated below. Year Percentage 2006 104.160% 2007 103.744% 2008 103.328% 2009 102.912% 2010 102.496% 2011 102.080% 2012 101.664% 2013 101.248% 2014 100.832% 2015 100.416% 2016 and thereafter 100.000% If the Securities are only partially redeemed pursuant to this Section 14.02, the Securities will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided, that if at the time of redemption the Securities are registered as a Global Security, the Depositary shall determine, in accordance with its procedures, the principal amount of such Securities held for the account of its participants to be redeemed. The Optional Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company determines, provided that the Company shall deposit with the Trustee an amount sufficient to pay the Optional Redemption Price by 10:00 a.m., New York time, on the date such Optional Redemption Price is to be paid. (b) Notwithstanding the first sentence of Section 14.02, upon the entry of an order for dissolution of the Firstar Capital Trust by a court of competent jurisdiction, the Securities thereafter will be subject to optional redemption, in whole only, but not in part, on or after January 15, 2007, at the optional redemption prices set forth in Section 14.02 and otherwise in accordance with this Article XIV. (c) Any redemption of Securities pursuant to Section 14.01 or Section 14.02 shall be subject to the receipt by the Company of any required regulatory approval. 73 83 SECTION 14.03. No Sinking Fund. The Securities are not entitled to the benefit of any sinking fund. SECTION 14.04. Notice of Redemption; Selection of Securities. In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Securities in accordance with their terms, it shall fix a date for redemption and shall mail a notice of such redemption at least 30 and not more than 60 days prior to the date fixed for redemption to the holders of Securities so to be redeemed as a whole or in part at their last addresses as the same appear on the Security Register. Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. Each such notice of redemption shall specify the CUSIP number of the Securities to be redeemed, the date fixed for redemption, the redemption price at which the Securities are to be redeemed (or the method by which such redemption price is to be calculated), the place or places of payment, that payment will be made upon presentation and surrender of the Securities, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Securities are to be redeemed the notice of redemption shall specify the numbers of the Securities to be redeemed. In case any Security is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion thereof will be issued. By 10:00 a.m. New York time on the redemption date specified in the notice of redemption given as provided in this Section, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the redemption date all the Securities so called for redemption at the appropriate Redemption Price, together with accrued interest to the date fixed for redemption. 74 84 The Company will give the Trustee notice not less than 45 days prior to the redemption date as to the aggregate principal amount of Securities to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Securities or portions thereof (in integral multiples of $1,000, except as otherwise set forth in the applicable form of Security) to be redeemed. SECTION 14.05. Payment of Securities Called for Redemption. If notice of redemption has been given as provided in Section 14.04, the Securities or portions of Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price, together with interest accrued to the date fixed for redemption (subject to the rights of holders of Securities on the close of business on a regular record date in respect of an Interest Payment Date occurring on or prior to the redemption date), and on and after said date (unless the Company shall default in the payment of such Securities at the Redemption Price, together with interest accrued to said date) interest on the Securities or portions of Securities so called for redemption shall cease to accrue. On presentation and surrender of such Securities at a place of payment specified in said notice, the said Securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price, together with interest accrued thereon to the date fixed for redemption (subject to the rights of holders of Securities on the close of business on a regular record date in respect of an Interest Payment Date occurring on or prior to the redemption date). Upon presentation of any Security redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Security or Securities of authorized denominations, in principal amount equal to the unredeemed portion of the Security so presented. 75 85 ARTICLE XV SUBORDINATION OF SECURITIES SECTION 15.01. Agreement to Subordinate. The Company covenants and agrees, and each holder of Securities issued hereunder likewise covenants and agrees, that the Securities shall be issued subject to the provisions of this Article XV; and each holder of a Security, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of, premium, if any, and interest on all Securities issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Allocable Amounts with respect to Senior Indebtedness, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article XV shall prevent the occurrence of any Default or Event of Default hereunder. SECTION 15.02. Default on Senior Indebtedness. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness, or in the event that the maturity of any Senior Indebtedness has been accelerated because of a default, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption payments) of or premium, if any, or interest on the Securities. In the event of the acceleration of the maturity of the Securities, then no payment shall be made by the Company with respect to the principal (including redemption payments) of or premium, if any, or interest on the Securities until the holders of all Senior Indebtedness outstanding at the time of such acceleration shall receive payment in full of all Allocable Amounts due in respect of such Senior Indebtedness (including any amounts due upon acceleration). In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraphs of this Section 15.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness 76 86 or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing, within 90 days of such payment of the Allocable Amounts then due and owing on such Senior Indebtedness and only the Allocable Amounts specified in such notice to the Trustee shall be paid to the holders of such Senior Indebtedness. SECTION 15.03. Liquidation; Dissolution; Bankruptcy. Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all Allocable Amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company on account of the principal (and premium, if any) or interest on the Securities; and upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Securityholders or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XV, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Trustee under the Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Company (pro rata to such holders on the basis of the respective Allocable Amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all Allocable Amounts in respect of such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Allocable Amounts in respect of Senior Indebtedness is paid in 77 87 full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Allocable Amounts in respect of such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness. For purposes of this Article XV, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XV with respect to the Securities to the payment of Senior Indebtedness that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the sale, conveyance, transfer or lease of its property as an entirety, or substantially as an entirety, to another Person upon the terms and conditions provided for in Article X of this Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 15.03 if such other Person shall, as a part of such consolidation, merger, sale, conveyance, transfer or lease, comply with the conditions stated in Article X of this Indenture. 78 88 SECTION 15.04. Subrogation. Subject to the payment in full of all Allocable Amounts in respect of Senior Indebtedness, the rights of the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, as the case may be, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders or the Trustee would be entitled except for the provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Securities, be deemed to be a payment by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XV are and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of such Senior Indebtedness on the other hand. Nothing contained in this Article XV or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness of the Company, and the holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Securities and creditors of the Company, as the case may be, other than the holders of Senior Indebtedness of the Company, as the case may be, nor shall anything herein or therein prevent the Trustee or the holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under the Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, as the case may be, received upon the exercise of any such remedy. SECTION 15.05. Trustee to Effectuate Subordination. Each Securityholder by such Securityholder's acceptance thereof authorizes and directs the Trustee on such Securityholder's behalf to take such action as may be necessary 79 89 or appropriate to effectuate the subordination provided in this Article XV and appoints the Trustee such Securityholder's attorney-in-fact for any and all such purposes. SECTION 15.06. Notice by the Company. The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article XV, unless and until a Responsible Officer of the Trustee assigned to its Principal Office shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 15.06 at least two Business Days prior to the date (i) upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Security), or (ii) moneys and/or U.S. Government Obligations are deposited in trust pursuant to Article XI then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and U.S. Government Obligations and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. The Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness of the Company (or a trustee or representative on behalf of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such 80 90 payment or distribution and any other facts pertinent to the rights of such Person under this Article XV, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee and the Securityholders shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or to the Securityholders, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV. SECTION 15.07. Rights of the Trustee; Holders of Senior Indebtedness. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and, subject to the provisions of Article VI of this Indenture, the Trustee shall not be liable to any holder of Senior Indebtedness if it shall pay over or deliver to Securityholders, the Company or any other Person money or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise. Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.06. 81 91 SECTION 15.08. Subordination May Not Be Impaired. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Securityholders, without incurring responsibility to the Securityholders and without impairing or releasing the subordination provided in this Article XV or the obligations hereunder of the holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. 82 92 ARTICLE XVI EXTENSION OF INTEREST PAYMENT PERIOD SECTION 16.01. Extension of Interest Payment Period. So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of the Securities, to defer payments of interest by extending the interest payment period of such Securities for a period not exceeding 10 consecutive semi-annual periods, including the first such semi-annual period during such extension period (the "Extended Interest Payment Period"), during which Extended Interest Payment Period no interest shall be due and payable; provided that no Extended Interest Payment Period shall end on a date other than an Interest Payment Date or extend beyond the Maturity Date. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 16.01, will bear interest thereon at the Coupon Rate compounded semi-annually for each semi-annual period of the Extended Interest Payment Period ("Compounded Interest"). At the end of the Extended Interest Payment Period, the Company shall pay all interest accrued and unpaid on the Securities, including any Additional Interest and Compounded Interest (together, "Deferred Interest") that shall be payable to the holders of the Securities in whose names the Securities are registered in the Security Register on the first record date preceding the end of the Extended Interest Payment Period. Before the termination of any Extended Interest Payment Period, the Company may further defer payments of interest by further extending such period, provided that such period, together with all such previous and further extensions within such Extended Interest Payment Period, shall not exceed 10 consecutive semi-annual periods, including the first such semi-annual period during such Extended Interest Payment Period, or extend beyond the Maturity Date. Upon the termination of any Extended Interest Payment Period and the payment of all Deferred Interest then due, the Company may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof, but the Company may prepay at any time all or any portion of the interest accrued during an Extended Interest Payment Period. SECTION 16.02. Notice of Extension. (a) If the Property Trustee is the only registered holder of the Securities at the time the Company selects an Extended Interest Payment Period, the Company shall give written 83 93 notice to the Administrative Trustees, the Property Trustee and the Trustee of its selection of such Extended Interest Payment Period five Business Days before the earlier of (i) the next succeeding date on which Distributions on the Trust Securities issued by Firstar Capital Trust are payable, or (ii) the date Firstar Capital Trust is required to give notice of the record date, or the date such Distributions are payable, to any national securities exchange or to holders of the Capital Securities issued by Firstar Capital Trust, but in any event at least five Business Days before such record date. (b) If the Property Trustee is not the only holder of the Securities at the time the Company selects an Extended Interest Payment Period, the Company shall give the holders of the Securities and the Trustee written notice of its selection of such Extended Interest Payment Period at least 10 Business Days before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to any national securities exchange. (c) The semi-annual period in which any notice is given pursuant to paragraphs (a) or (b) of this Section 16.02 shall be counted as one of the 10 semi-annual periods permitted in the maximum Extended Interest Payment Period permitted under Section 16.01. 84 EX-21 7 SUBSIDIARIES OF FIRSTAR CORPORATION 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Firstar Corporation has no parents. The following list shows the name of each subsidiary of Firstar and the percentage of ownership as of January 1, 1997.
Percentage Jurisdiction in which Name of Subsidiary Ownership Incorporated or Organized ------------------ --------- ------------------------- 1 Firstar Bank Milwaukee, N.A. 100% United States 4 Firstar Bank, F.S.B. 100% United States 1 Firstar Bank Wisconsin 100% Wisconsin 1 Firstar Bank Wausau, N.A. 100% United States 4 Firstar Bank Iowa, N.A. 100% United States 4 Firstar Bank Burlington, N.A. 100% United States 2 Firstar Bank of Minnesota, N.A. 100% United States 1 Firstar Bank Illinois 100% Illinois 1 Firstar Bank U.S.A., N.A. 100% United States 1 FCSB Bank 100% Illinois 3 Firstar Metropolitan Bank & Trust 100% Arizona 6 Firstar Corporation of Wisconsin 100% Wisconsin 6 Firstar Corporation of Minnesota 100% Minnesota 6 Firstar Corporation of Arizona 100% Arizona 6 Firstar Corporation of Iowa 100% Iowa 1 Firstar Trust Company 99.95% Wisconsin 1 Firstar Trust Company of Florida, N.A. 100% United States 6 Firstar Investment Research & Management Company 100% Wisconsin 6 Firstar Insurance Services, Inc. 100% Wisconsin 5 Elan Investment Services, Inc. 100% Wisconsin 6 Elan Life Insurance Company, Inc. 79.00% Arizona 6 Elan Title Services, Inc. 100% Wisconsin 5 Firstar Community Investment Corporation 100% Wisconsin 6 Firstar Development Corporation 100% Delaware 5 Firstar Leasing Services Corporation 100% Wisconsin
2
5 CSFM Corporation 100% Wisconsin 5 Firstar Home Mortgage Corporation 100% Wisconsin 5 Firstar Information Services Corporation 100% Wisconsin 4 Banks of Iowa Capital Corporation 100% Iowa 5 DPC of Milwaukee, Inc. 100% Wisconsin 5 Firstar Trade Services Corporation (not funded) 100% Wisconsin 5 Elan Credit Reporting Agency, Inc. 100% Wisconsin 7 Firstar Dubuque Investment Corporation 100% Iowa 5 Milwaukee REL Corporation 100% Wisconsin 8 Minocqua REL Corporation 100% Wisconsin 5 Milwaukee Capital Corporation 100% Nevada 8 Wisconsin Capital Corporation 100% Nevada 2 American Credit Corporation 100% Minnesota
Notes ----- 1 Subsidiary of Firstar Corporation of Wisconsin 2 Subsidiary of Firstar Corporation of Minnesota 3 Subsidiary of Firstar Corporation of Arizona 4 Subsidiary of Firstar Corporation of Iowa 5 Subsidiary of Firstar Bank Milwaukee, N.A. 6 Subsidiary of Firstar Corporation 7 Subsidiary of Firstar Bank, F.S.B. 8 Subsidiary of Firstar Bank Wisconsin 9 Subsidiary of Firstar Bank of Minnesota, N.A. EX-23 8 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23 CONSENT OF KPMG PEAT MARWICK LLP The Board of Directors Firstar Corporation We consent to incorporation by reference in the Registration Statements Nos 33-38830, 33-41030, 33-19830, 33-57523, 33-57521, 33-58559, 33-58913, 33-58915 and 33-59207 on Form S-8 of Firstar Corporation of our report dated January 15, 1997, relating to the consolidated balance sheets of Firstar Corporation and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996, which report appears in the December 31, 1996 annual report on Form 10-K of Firstar Corporation. KPMG Peat Marwick Milwaukee, Wisconsin March 13, 1997 EX-24 9 POWERS OF ATTORNEY 1 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 26 day of February, 1997. /s/ Michael E. Batten --------------------- 2 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 12 day of February, 1997. /s/ Robert L. Buchanan SEAL ------------------ 3 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 28th day of January, 1997. /s/ George M. Chester, Jr ------------------------- 4 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 28th day of January, 1997. /s/ Roger H. Derusha ------------------- 5 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 27th day of January, 1997. /s/ James L. Forbes -------------------- 6 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 6th day of February, 1997. /s/ Holmes Foster ------------------ 7 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 1 day of February, 1997. /s/ Jerry M. Hiegel SEAL --------------------- 8 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 29th day of January, 1997. /s/ Joe F. Hladley --------------------- 9 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 6th day of February, 1997. /s/ James H. Keyes ------------------ 10 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this ____ day of _______________, 1997. /s/ Sheldon B. Lubar ------------------- 11 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSMONDS, JEFFERY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 31st day of January, 1997. /s/ D. F. McKeithan Jr. SEAL -------------------- 12 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 27th day of January, 1997. /s/ George W. Mead --------------------- 13 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 30th day of January, 1997. /s/ Guy A. Osborn --------------------- 14 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 4th day of March, 1997. /s/ Judith D. Pyle --------------------- 15 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 31 day of January, 1997. /s/ Clifford V. Smith, Jr ------------------------- 16 FIRSTAR CORPORATION (Commission File No. 1-2981) POWER OF ATTORNEY Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1996; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, JEFFREY B. WEEDEN AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 13th day of February, 1997. /s/ William W. Wirtz --------------------- EX-27 10 FDS
9 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 1,449,094 6,349 192,965 13,489 1,966,590 2,250,776 2,287,448 13,195,634 213,138 19,767,420 15,214,197 1,868,606 283,376 547,194 0 11,344 94,266 1,598,437 19,767,420 1,113,459 263,985 5,640 1,383,084 465,553 632,705 750,379 42,647 66 773,637 374,547 250,177 0 0 250,177 1.68 1.68 8.14 85,078 74,659 1,028 15,192 195,283 63,208 24,450 213,138 212,657 481 0
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