-----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, RPvziUwY+KZ1PuY7VL1m4Gxks9iLWJ5r+evhP6REIPVAKKiQl/8NNXuNIDTJ74Bp IphSdidGRsQpu5tehXeB+g== 0000897101-97-000563.txt : 19970515 0000897101-97-000563.hdr.sgml : 19970515 ACCESSION NUMBER: 0000897101-97-000563 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST BANK SYSTEM INC CENTRAL INDEX KEY: 0000036104 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 410255900 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22363 FILM NUMBER: 97604753 BUSINESS ADDRESS: STREET 1: FIRST BANK PL STREET 2: 601 SECOND AVE S CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4302 BUSINESS PHONE: 6129731111 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANK STOCK CORP DATE OF NAME CHANGE: 19720317 10-Q 1 FORM 10-Q/MARCH 31, 1997 [LOGO] FIRST BANK SYSTEM ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM (NOT APPLICABLE) COMMISSION FILE NUMBER 1-6880 FIRST BANK SYSTEM, INC. (Exact name of registrant as specified in its charter) DELAWARE 41-0255900 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) FIRST BANK PLACE, 601 SECOND AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55402-4302 (Address of principal executive offices and Zip Code) 612-973-1111 (Registrant's telephone number, including area code) (NOT APPLICABLE) (Former name, former address and former fiscal year, if changed since last report). ----------------------- Indicate 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 twelve months and (2) has been subject to such filing requirements for the past 90 days. YES _X_ NO___ Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date. Class Outstanding as of April 30, 1997 Common Stock, $1.25 Par Value 133,483,136 shares ================================================================================ FINANCIAL SUMMARY
Three Months Ended March 31 --------------------------- (Dollars in Millions, Except Per Share Data) 1997 1996 - -------------------------------------------------------------------------------------------- Income before nonrecurring items .................. $ 171.8 $ 160.1 Nonrecurring items ................................ -- 16.7 --------------------------------- Net income ........................................ $ 171.8 $ 176.8 ================================= PER COMMON SHARE Primary income before nonrecurring items .......... $ 1.27 $ 1.16 Nonrecurring items ................................ -- .12 --------------------------------- Primary net income ................................ $ 1.27 $ 1.28 ================================= Fully diluted income before nonrecurring items .... $ 1.27 $ 1.14 Nonrecurring items ................................ -- .12 --------------------------------- Fully diluted net income .......................... $ 1.27 $ 1.26 ================================= Earnings on a cash basis before nonrecurring items* $ 1.41 $ 1.26 Nonrecurring items ................................ -- .33 --------------------------------- Earnings on a cash basis (fully diluted)* ......... $ 1.41 $ 1.59 ================================= Dividends paid .................................... $ .4650 $ .4125 Common shareholders' equity ....................... 22.51 22.92 --------------------------------- RETURN ON AVERAGE ASSETS Income before nonrecurring items .................. 2.00% 1.84% Nonrecurring items ................................ -- .19 --------------------------------- Return on average assets .......................... 2.00% 2.03% ================================= RETURN ON AVERAGE COMMON EQUITY Income before nonrecurring items .................. 23.1% 21.0% Nonrecurring items ................................ -- 2.2 --------------------------------- Return on average common equity ................... 23.1% 23.2% ================================= Net interest margin (taxable-equivalent basis) .... 4.98% 4.86% Efficiency ratio before nonrecurring items ........ 48.5 50.7 Efficiency ratio .................................. 48.5 56.7 ================================= March 31 December 31 1997 1996 --------------------------------- PERIOD END Loans ............................................. $ 27,173 $ 27,128 Allowance for credit losses ....................... 512 517 Assets ............................................ 36,000 36,489 Total shareholders' equity ........................ 3,001 3,053 Tangible common equity to total assets** .......... 6.6% 6.7% Tier 1 capital ratio .............................. 7.2 7.2 Total risk-based capital ratio .................... 12.0 12.0 Leverage ratio .................................... 6.9 6.8 ============================================================================================
* Calculated by adding amortization of goodwill and other intangible assets to net income. ** Defined as common equity less goodwill as a percentage of total assets less goodwill. Refer to Management's Discussion and Analysis on page 2 for a description of nonrecurring items.
TABLE OF CONTENTS AND FORM 10-Q CROSS-REFERENCE INDEX PART I -- FINANCIAL INFORMATION Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 2)............... 2 Financial Statements (Item 1)................................................................................ 15 PART II -- OTHER INFORMATION Submission of Matters to a Vote of Security Holders (Item 4)................................................. 27 Exhibits and Reports on Form 8-K (Item 6).................................................................... 27 Signature.................................................................................................... 27 Exhibit 2 -- Agreement and Plan of Merger, dated as of March 19, 1997, and Stock Option Agreements, dated as of March 20, 1997, by and between First Bank System, Inc. and U. S. Bancorp. Previously filed as Exhibits 2, 99.1 and 99.2 to Form 8-K filed March 20, 1997 and incorporated herein by reference....................................................................................... 27 Exhibit 10A -- First Bank System, Inc. Executive Incentive Plan, as amended.................................. *** Exhibit 10B -- First Bank System, Inc. Nonqualified Supplemental Executive Retirement Plan, as amended....... *** Exhibit 10C -- First Bank System, Inc. Executive Deferral Plan, as amended................................... *** Exhibit 10D -- First Bank System, Inc. Independent Director Retirement and Death Benefit Plan, as amended.... *** Exhibit 10E -- First Bank System, Inc. Deferred Compensation Plan for Directors, as amended.................. *** Exhibit 11 -- Computation of Primary and Fully Diluted Net Income Per Common Share........................... 29 Exhibit 12 -- Computation of Ratio of Earnings to Fixed Charges.............................................. 30 Exhibit 27 -- Article 9 Financial Data Schedule.............................................................. ***
*** Copies of this exhibit will be furnished upon request and payment of the Company's reasonable expenses in furnishing the exhibit. MANAGEMENT'S DISCUSSION AND ANALYSIS EARNINGS SUMMARY First Bank System, Inc. (the "Company") reported first quarter 1997 operating earnings (net income excluding nonrecurring items) of $171.8 million compared with $160.1 million in the first quarter of 1996. On a fully diluted per share basis, operating earnings were $1.27 in the first quarter of 1997, compared with $1.14 in the first quarter of 1996, an increase of 11 percent. Return on average assets and return on average common equity, excluding nonrecurring items, were 2.00 percent and 23.1 percent, respectively, in the first quarter of 1997, compared with returns of 1.84 percent and 21.0 percent in the first quarter of 1996. Excluding nonrecurring items, the efficiency ratio (the ratio of expenses to revenues) improved to 48.5 percent in the first quarter of 1997 from 50.7 percent in the first quarter of 1996. Operating earnings for the first quarter of 1997 reflected growth in net interest and noninterest income, lower operating expenses, and effective capital management. Net interest income on a taxable-equivalent basis was $384.8 million, an increase of $5.5 million from the first quarter of 1996. Noninterest income, excluding nonrecurring items, increased $17.7 million (9 percent) from the first quarter of 1996, despite the loss of revenue from the first quarter 1996 sale of the Company's mortgage banking operations. The increase was primarily the result of growth in credit card fee revenue and trust fees. Excluding nonrecurring items, first quarter noninterest expense decreased $1.6 million from the first quarter of 1996, reflecting both the successful integration of recent acquisitions and the continued emphasis on cost control. Several nonrecurring items affected operating results in the first quarter of 1996. The impact of these items increased net income $16.7 million ($48.6 million on a pretax basis) or $.12 per share. Nonrecurring pretax gains included $115 million, net of expenses, received for the termination of the First Interstate Bancorp merger agreement; a $45.8 million gain on the sale of the Company's mortgage banking operations; and, $14.6 million in net securities gains. Nonrecurring pretax charges included: $31.3 million in merger and integration charges associated with the acquisitions of FirsTier Financial, Inc. ("FirsTier") and the corporate trust business of BankAmerica Corporation ("BankAmerica"); $38.6 million in branch distribution resizing expenses; a $29.5 million valuation adjustment of cardholder and core deposit intangibles; $10.1 million for a one-time employee bonus; and $17.3 million to acquire software and write off miscellaneous assets. Including these nonrecurring items, net income was $176.8 million in the first quarter of 1996, or $1.26 per share on a fully diluted basis. Credit quality remained strong in the first quarter of 1997. Nonperforming assets totaled $134.6 million at March 31, 1997, down $3.1 million (2 percent) from December 31, 1996, and $22.5 million (14 percent) from March 31, 1996. The ratio of the allowance for credit losses to nonperforming loans at quarter-end was 446 percent compared with 429 percent at the end of 1996 and 461 percent at March 31, 1996. TABLE 1 SUMMARY OF CONSOLIDATED INCOME
Three Months Ended --------------------------- (Taxable-Equivalent Basis; March 31 March 31 Dollars In Millions, Except Per Share Data) 1997 1996 - ----------------------------------------------------------------------------------------- Interest income ....................................... $ 661.0 $ 659.3 Interest expense ...................................... 276.2 280.0 --------------------------- Net interest income ................................. 384.8 379.3 Provision for credit losses ........................... 37.0 31.0 --------------------------- Net interest income after provision for credit losses 347.8 348.3 Nonrecurring income ................................... -- 175.4 Other noninterest income .............................. 225.8 208.1 Nonrecurring charges .................................. -- 126.8 Other noninterest expense ............................. 296.0 297.6 --------------------------- Income before income taxes .......................... 277.6 307.4 Taxable-equivalent adjustment ......................... 4.8 4.7 Income taxes .......................................... 101.0 125.9 --------------------------- Net income .......................................... $ 171.8 $ 176.8 =========================== Return on average assets .............................. 2.00% 2.03% Return on average common equity ....................... 23.1 23.2 Net interest margin ................................... 4.98 4.86 Efficiency ratio ...................................... 48.5 56.7 Efficiency ratio before nonrecurring items ............ 48.5 50.7 --------------------------- Per Common Share: Net income ............................................ $ 1.27 $ 1.28 Dividends paid ........................................ .4650 .4125 =========================================================================================
Operating results reflect acquisition and divestiture activity. On January 31, 1997, the Company completed its acquisition of the bond indenture services and paying agency business of Comerica Incorporated ("Comerica"). This business serves approximately 860 municipal and corporate clients with 2,400 bond issues. On February 27, 1997, the Company securitized and sold $420 million of corporate charge card receivables. The five-year, fixed-rate securities were sold through the First Bank Corporate Card Master Trust, a special purpose entity. On February 16, 1996, the Company completed its acquisition of Omaha-based FirsTier which had $3.7 billion in assets, $2.9 billion in deposits, and 63 offices in Nebraska and Iowa. In the first quarter of 1996, the Company sold its residential mortgage servicing and loan production business, and during the fourth quarter of 1995 and the first quarter of 1996, the Company completed its acquisition of the corporate trust business of BankAmerica. On March 20, 1997, the Company and U. S. Bancorp ("USBC") announced that they had entered into a definitive agreement for the Company to acquire USBC. The Company will exchange .755 shares of its common stock for each share of USBC common stock. The combined institution, which will use the U. S. Bancorp name, will have approximately $70 billion in assets, and serve 3.9 million households through 995 branches and 4,565 automated teller machines ("ATMs") in 17 contiguous states. The transaction, which will qualify as a tax-free reorganization and be accounted for as a pooling-of-interests, is subject to shareholder and regulatory approvals and is expected to close in the third quarter of 1997. LINE OF BUSINESS FINANCIAL REVIEW Financial performance is measured by major lines of business, which include: Retail Banking, Payment Systems, Business Banking and Private Financial Services, Commercial Banking, and Corporate Trust and Institutional Financial Services. Business line results are derived from the Company's business unit profitability reporting system. Designations, assignments, and allocations may change from time to time as management accounting systems are enhanced or product lines change. During first quarter 1997 certain organization and methodology changes were made and 1996 results are presented on a consistent basis. RETAIL BANKING -- Retail Banking delivers products and services to the broad consumer market and small-business through branch offices, telemarketing, direct mail, and ATMs. Net income was $58.7 million in the first quarter of 1997 compared with $55.7 million in the same period of 1996. First quarter return on assets increased to 1.91 percent from 1.73 percent in the same quarter a year ago. TABLE 2 LINE OF BUSINESS FINANCIAL PERFORMANCE
Retail Payment Business Banking and Banking Systems Private Financial Services ----------------------------- --------------------------- --------------------------- For the Three Months Ended March 31 Percent Percent Percent (Dollars in Millions) 1997 1996 Change 1997 1996 Change 1997 1996 Change - ------------------------------------------------------------------------------------------------------------------------------------ CONDENSED INCOME STATEMENT: Net interest income (taxable-equivalent basis) .................. $ 192.7 $ 192.4 .2% $ 35.9 $ 38.0 (5.5)% $95.1 88.4 7.6% Provision for credit losses .................. 4.1 6.2 (33.9) 27.0 19.2 40.6 3.3 3.0 10.0 Noninterest income ........................... 39.1 40.0 (2.3) 85.9 68.7 25.0 33.5 27.8 20.5 Noninterest expense .......................... 132.8 136.4 (2.6) 54.2 49.0 10.6 52.8 45.9 15.0 Income taxes and taxable-equivalent adjustment 36.2 34.1 15.5 14.8 27.6 25.7 ---------------- -------------- --------------- Income before nonrecurring items ............. $ 58.7 $ 55.7 5.4 $ 25.1 $ 23.7 5.9 $ 44.9 $ 41.6 7.9 ================ ============== =============== Net nonrecurring items (after-tax) ........... Net income ................................. AVERAGE BALANCE SHEET DATA: Commercial loans ............................. $ 561 $ 482 16.4 $1,130 $ 935 20.9 $6,993 $6,403 9.2 Consumer loans, excluding residential mortgage ........................ 6,671 6,254 6.7 2,776 2,500 11.0 474 442 7.2 Residential mortgage loans ................... 2,873 3,762 (23.6) -- -- -- 122 109 11.9 Assets ....................................... 12,440 12,941 (3.9) 4,685 4,324 8.3 9,896 9,293 6.5 Deposits ..................................... 16,089 16,942 (5.0) 35 44 (20.5) 3,720 3,336 11.5 Common equity ................................ 961 1,034 (7.1) 354 344 2.9 918 847 8.4 ---------------- --------------- --------------- Return on average assets ..................... 1.91% 1.73% 2.17% 2.20% 1.84% 1.80% Return on average common equity ("ROCE") ..... 24.8 21.7 28.8 27.7 19.8 19.8 Net tangible ROCE** .......................... 46.5 38.1 46.7 44.3 37.3 32.3 Efficiency ratio ............................. 57.3 58.7 44.5 45.9 41.1 39.5 Efficiency ratio on a cash basis** ........... 54.5 56.2 42.7 43.3 38.7 38.0 ==================================================================================================================================
* Not meaningful ** Calculated by excluding goodwill and other intangibles and the related amortization. Note: The Company's mortgage banking operations, which were sold in first quarter 1996, and nonrecurring items are included in "Other". Net tangible return on average common equity increased to 46.5 percent compared with 38.1 percent in the first quarter of the prior year. Net interest and noninterest income remained relatively flat in the first quarter of 1997 as compared to the same period in the prior year, reflecting growth in core commercial and consumer assets offset by runoff in the residential mortgage loan portfolio. First quarter 1997 noninterest expense decreased 3 percent to $132.8 million from the first quarter of 1996, reflecting the benefits of continued streamlining of branch operations, as well as the integration of recent business combinations. The efficiency ratio on a cash basis improved to 54.5 percent in the first quarter of 1997 compared with 56.2 percent in the first quarter of 1996. PAYMENT SYSTEMS-- Payment Systems includes consumer and business credit cards, corporate and purchasing card services, card-accessed secured and unsecured lines of credit, ATM processing, and merchant processing. Net income increased 6 percent in the first quarter of 1997 to $25.1 million compared with $23.7 million in the first quarter of 1996. Return on average assets was 2.17 percent, compared with 2.20 percent in the first quarter of 1996, and net tangible return on average common equity was 46.7 percent compared with 44.3 percent for the same quarter in the previous year. Fee-based noninterest income increased 25 percent in the first quarter of 1997 compared with the same period in 1996. The increases were due to growth in the sales volume of the Corporate Card, the Purchasing Card, and the FBS WorldPerks(R) VISA(R) card. Net interest income decreased due to the change in the loan mix. Average commercial loans, which are primarily noninterest earning Corporate and Purchasing Card balances, comprised approximately 29 percent of the portfolio during the first quarter of 1997 compared with 27 percent in first quarter of 1996. The increase in the provision for credit losses reflects higher net charge-offs on credit card loans. Noninterest expense increased due to higher variable transaction costs related to increased sales volume. The efficiency ratio on a cash basis improved to 42.7 percent in the first quarter of 1997 from 43.3 percent in the first quarter of 1996. BUSINESS BANKING AND PRIVATE FINANCIAL SERVICES -- Business Banking and Private Financial Services includes middle-market banking services, private banking, and personal trust. Net income increased 8 percent to $44.9 million compared with the first quarter of 1996. Return on average assets was 1.84 percent compared with 1.80 percent in the first quarter of 1996, and net tangible return on average common equity was 37.3 percent compared with 32.3 percent in the first quarter of the prior year. (CONTINUED WIDE TABLE 2 FROM ABOVE)
Corporate Trust and Commercial Institutional Financial Consolidated Banking Services Other Company - --------------------------------- ----------------------------- ------------------ ------------------------------ Percent Percent Percent 1997 1996 Change 1997 1996 Change 1997 1996 1997 1996 Change - ----------------------------------------------------------------------------------------------------------------- $ 50.3 $ 49.3 2.0% $ 10.8 $ 7.9 36.7% $ -- $ 3.3 $ 384.8 $ 379.3 1.5% 2.6 2.6 -- -- -- -- -- -- 37.0 31.0 19.4 15.1 17.5 (13.7) 52.2 49.6 5.2 -- 4.5 225.8 208.1 8.5 19.4 19.4 -- 36.8 35.0 5.1 -- 11.9 296.0 297.6 (.5) 16.5 17.1 10.0 8.6 -- (1.6) 105.8 98.7 ---------------- -------------- --------------- ------------------- $ 26.9 $ 27.7 (2.9) $ 16.2 $ 13.9 16.5 -- (2.5) 171.8 160.1 7.3 ================ ============== -- 16.7 -- 16.7 --------------- ------------------- $ -- $ 14.2 $ 171.8 $ 176.8 (2.8) =============== =================== $ 5,308 $ 5,223 1.6 $ -- $ -- -- $ -- $ -- $13,992 $13,043 7.3 -- -- -- -- -- -- -- -- 9,921 9,196 7.9 -- -- -- -- -- -- -- 219 2,995 4,090 (26.8) 6,718 6,921 (2.9) 1,179 1,172 .6 -- 393 34,918 35,044 (.4) 1,526 1,504 1.5 1,212 892 35.9 -- 329 22,582 23,047 (2.0) 470 484 (2.9) 308 283 8.8 -- 40 3,011 3,032 (.7) ---------------- -------------- --------------- ------------------- 1.62% 1.61% * * 2.00% 1.84% 23.2 23.0 21.3% 19.8% 23.1 21.0 24.2 24.0 40.9 39.1 38.5 33.6 29.7 29.0 58.4 60.9 48.5 50.7 29.2 28.6 50.5 53.2 45.2 47.6 =================================================================================================================
Net interest income increased 8 percent, reflecting growth in average loans balances. The 21 percent increase in noninterest income resulted primarily from acquisitions. Noninterest expense increased in the first quarter of 1997, compared to the same period of 1996, reflecting the impact of acquisitions. The efficiency ratio on a cash basis was 38.7 percent, compared with 38.0 percent in the first quarter of 1996. COMMERCIAL BANKING -- Commercial Banking provides lending, treasury management, and other financial services to middle-market, large corporate and mortgage banking companies. First quarter 1997 net income was $26.9 million, compared with $27.7 million in the first quarter of 1996. First quarter 1997 return on average assets was 1.62 percent compared with 1.61 percent in the first quarter of 1996. Net tangible return on average common equity was 24.2 percent in the first quarter of 1997 compared with 24.0 percent in the first quarter of 1996. First quarter 1997 noninterest income decreased 14 percent from the first quarter of 1996. However, excluding a $3.1 millon gain on the sale of assets in the first quarter of 1996, noninterest income increased 5 percent from the first quarter of 1996. The efficiency ratio on a cash basis remained low at 29.2 percent in the first quarter of 1997 compared with 28.6 percent in the first quarter of 1996. CORPORATE TRUST AND INSTITUTIONAL FINANCIAL SERVICES -- Corporate Trust and Institutional Financial Services includes institutional and corporate trust services, investment management services, and a full-service brokerage company. Net income increased 17 percent to $16.2 million in the first quarter of 1997 compared with the same period in the prior year. The net tangible return on average common equity was 40.9 percent in the first quarter of 1997 compared with 39.1 percent in the first quarter of 1996. Net interest income increased 37 percent in the first quarter of 1997 compared with the first quarter of 1996, reflecting the acquisitions of the corporate trust businesses of BankAmerica and Comerica Incorporated. The efficiency ratio on a cash basis improved to 50.5 percent in the first quarter compared with 53.2 percent in the first quarter of 1996, reflecting the effective integration of acquisitions, process re-engineering efforts, and revenue growth. TABLE 3 ANALYSIS OF NET INTEREST INCOME Three Months Ended -------------------- March 31 March 31 (Dollars In Millions) 1997 1996 - -------------------------------------------------------------------------------- Net interest income (taxable-equivalent basis) .......... $ 384.8 $ 379.3 ==================== Average balances of earning assets supported by: Interest-bearing liabilities .......................... $24,468 $24,661 Noninterest-bearing liabilities ....................... 6,885 6,710 -------------------- Total earning assets ................................ $31,353 $31,371 ==================== Average yields and weighted average rates (taxable- equivalent basis): Earning assets yield ................................... 8.55% 8.45% Rate paid on interest-bearing liabilities .............. 4.58 4.57 -------------------- Gross interest margin ................................... 3.97% 3.88% ==================== Net interest margin ..................................... 4.98% 4.86% ==================== Net interest margin without taxable-equivalent increments 4.92% 4.80% ================================================================================ INCOME STATEMENT ANALYSIS NET INTEREST INCOME Net interest income on a taxable-equivalent basis was $384.8 million in the first quarter of 1997, an increase of $5.5 million from the first quarter of 1996. The improvement was primarily attributable to an increase in loan fees, the corporate card securitization and a more favorable mix of earning assets, including an increase in average loans of $579 million (2 percent) from the first quarter of 1996. Excluding mortgage-related loan balances and the effect of the February 1997 corporate card securitization, average loans for the first quarter were higher by $2.0 billion (10 percent) than the first quarter of 1996. This increase reflected growth in core commercial and consumer loans, as well as the February 1996 FirsTier acquisition. Average securities decreased $682 million reflecting both maturities and sales. The average cost of interest-bearing liabilities in the first quarter of 1997 was essentially unchanged from that of the first quarter of last year. Average interest-bearing deposits and short-term borrowings decreased $1.1 billion (5 percent) compared with 1996, while average long-term debt and trust preferred securities increased $916 million. The decline in average deposit balances reflects consumers moving funds into alternative investment vehicles. The change in the mix of interest-bearing liabilities was offset by an overall decrease in market interest rates in the first quarter of 1997 from the first quarter of 1996. The net interest margin in the first quarter of 1997 was 4.98 percent, compared with 4.86 percent in the first quarter of 1996, reflecting increases in loan fees, the corporate card securitization and a favorable asset mix. PROVISION FOR CREDIT LOSSES The provision for credit losses was $37.0 million in the first quarter of 1997, up $6.0 million (19 percent) from the first quarter of 1996. Net charge-offs totaled $41.3 million, up $7.8 million (23 percent) from the same quarter a year ago and up $.7 million (2 percent) from the fourth quarter of 1996. These increases resulted from increased loan volumes and higher consumer net charge-offs. Refer to "Corporate Risk Management" for further information on credit quality. NONINTEREST INCOME First quarter 1997 noninterest income was $225.8 million, an increase of $17.7 million before nonrecurring items, from the first quarter of 1996. The improvement resulted primarily from growth in trust fees and credit card fee revenue and the addition of FirsTier, partially offset by the loss of revenues from the Company's mortgage banking operations, which were sold in the first quarter of 1996. TABLE 4 NONINTEREST INCOME Three Months Ended -------------------- March 31 March 31 (Dollars In Millions) 1997 1996 - ------------------------------------------------------------------------------- Credit card fee revenue ............................ $ 77.3 $ 62.8 Trust fees ......................................... 66.0 56.2 Service charges on deposit accounts ................ 36.4 33.9 Investment products fees and commissions ........... 8.6 8.5 Trading account profits and commissions ............ 3.1 2.7 Other .............................................. 34.4 44.0 ------------------- Subtotal ......................................... 225.8 208.1 Termination fee, net ............................... -- 115.0 Gain on sale of mortgage banking operations ........ -- 45.8 Securities gains ................................... -- 14.6 ------------------- Nonrecurring gains ............................... -- 175.4 ------------------- Total noninterest income ....................... $225.8 $383.5 =============================================================================== Credit card fee revenue increased $14.5 million (23 percent) from the first quarter of 1996 as a result of higher sales volumes for Purchasing and Corporate cards and the First Bank WorldPerks VISA card. Trust fees were up over the first quarter of 1996 by $9.8 million (17 percent) due to core growth in personal, corporate and institutional trust businesses and acquisitions. Service charges on deposit accounts increased $2.5 million (7 percent) over the first quarter of 1996, reflecting the acquisition of FirsTier. Other noninterest income decreased $9.2 million (20 percent) from the first quarter of 1996 primarily due to the divestiture of the Company's mortgage banking operations. Noninterest income in first quarter 1996 included nonrecurring gains of $175.4 million, including $115 million, net of expenses, received from the termination of the First Interstate Bancorp merger agreement; a $45.8 million gain on the sale of the Company's mortgage banking operations; and $14.6 million in net securities gains. NONINTEREST EXPENSE First quarter 1997 noninterest expense was $296.0 million, a decrease of $1.6 million, before nonrecurring items, from the first quarter of 1996. The reduction in operating expenses was achieved as a result of effective acquisition integration and ongoing expense control. Excluding nonrecurring items, the Company's efficiency ratio improved to 48.5 percent for the quarter from 50.7 percent for the same quarter a year ago. Total salaries and benefits expense for the first quarter of 1997, excluding nonrecurring charges, remained relatively flat at $141.4 million, compared with $142.2 million for the first quarter of 1996. Average full-time equivalent employees decreased 5 percent, to 12,548 in the first quarter of 1997, from 13,246 in the first quarter of 1996. Amortization of goodwill and intangibles for the first quarter of 1997, excluding nonrecurring items, increased $1.9 million (11 percent), over the first quarter of last year, as a result of acquisitions. FDIC insurance expense was lower by $2.1 million in the first quarter of 1997 as a result of a rate reduction. Nonrecurring charges recorded in the first quarter of 1996 totaled $126.8 million, including: merger and integration charges of $31.3 million for the acquisitions of FirsTier and the BankAmerica corporate trust business; $38.6 million in branch distribution resizing expenses; a $29.5 million valuation adjustment to reduce the carrying value of credit card and core deposit intangibles to their estimated fair value; $10.1 million for a one-time $750 per-employee bonus to thank employees for staying focused on customers and shareholder value during the bid for First Interstate Bancorp; and, $17.3 million to acquire credit card and revolving credit software and write-off miscellaneous assets. TABLE 5 NONINTEREST EXPENSE Three Months Ended ------------------- March 31 March 31 (Dollars in Millions, Except Per Employee Data) 1997 1996 - ------------------------------------------------------------------------------ Salaries** .............................................. $ 114.9 $ 114.2 Employee benefits** ..................................... 26.5 28.0 ------------------ Total personnel expense ............................ 141.4 142.2 Net occupancy ........................................... 25.0 25.8 Furniture and equipment ................................. 21.7 23.8 Goodwill and other intangible assets** .................. 19.8 17.9 Other personnel costs ................................... 10.0 9.7 Professional services** ................................. 10.0 8.3 Advertising and marketing ............................... 8.5 6.8 Telephone ............................................... 5.9 5.8 Third party data processing ............................. 5.7 5.4 Postage ................................................. 5.6 6.2 Printing, stationery and supplies ....................... 5.1 6.0 FDIC insurance .......................................... 1.4 3.5 Other** ................................................. 35.9 36.2 ------------------ Subtotal ........................................... 296.0 297.6 Merger-related .......................................... -- 31.3 Branch distribution resizing ............................ -- 38.6 Goodwill and other intangible assets valuation adjustment -- 29.5 Special employee bonus .................................. -- 10.1 Other ................................................... -- 17.3 ------------------ Nonrecurring charges ............................... -- 126.8 ------------------ Total noninterest expense ..................... $ 296.0 $ 424.4 ================== Efficiency ratio* ....................................... 48.5% 56.7% Efficiency ratio before nonrecurring items .............. 48.5 50.7 Average number of full-time equivalent employees ........ 12,548 13,246 Annualized personnel expense per employee** ............. $45,075 $42,941 ============================================================================== * Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income net of securities gains and losses. ** Before effect of nonrecurring items. PROVISION FOR INCOME TAXES The provision for income taxes was $101.0 million in the first quarter of 1997, compared with $125.9 million in the first quarter of 1996. The decrease was primarily the result of a lower level of taxable income in the first quarter of 1997, compared to the same quarter last year, due to several nonrecurring items occurring in the first quarter of 1996, as discussed above. BALANCE SHEET ANALYSIS LOANS The Company's loan portfolio was $27.2 billion at March 31, 1997 compared with $27.1 billion at December 31, 1996. The Company's portfolio of commercial loans totaled $14.4 billion at March 31, 1997, up $285 million from December 31, 1996, despite $420 million of corporate charge card receivables securitized and sold in the first quarter of 1997. The increase was primarily attributable to growth in large corporate, middle-market business and agricultural-related business lending. Total consumer loan outstandings were $12.8 billion at March 31, 1997, compared with $13.0 billion at December 31, 1996, reflecting lower residential mortgage-related and credit card balances. SECURITIES At March 31, 1997, securities were $3.4 billion compared with $3.6 billion at December 31, 1996, reflecting both maturities and sales during the first quarter of 1997. DEPOSITS Noninterest-bearing deposits were $7.3 billion at March 31, 1997, compared with $7.9 billion at December 31, 1996. Interest-bearing deposits totaled $16.2 billion at March 31, 1997, compared with $16.5 billion at December 31, 1996. The decreases in these balances generally reflect customers moving funds into alternative investment vehicles. BORROWINGS Short-term borrowings, which include federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings, were $3.8 billion at March 31, 1997, down slightly from $4.1 billion at year-end 1996. The decrease was primarily due to the net maturity of $380 million of short-term bank notes during the first quarter of 1997. Long-term debt was $4.3 billion at March 31, 1997, up from $3.6 billion at December 31, 1996. The Company issued $846 million of medium-term debt and bank notes during the first quarter of 1997. The effect of these issuances was partially offset by the first quarter 1997 maturity of approximately $90 million of Federal Home Loan Bank Advances and $50 million of medium-term notes. CORPORATE RISK MANAGEMENT CREDIT MANAGEMENT The Company's strategy for credit risk management includes stringent, centralized credit policies, and standard underwriting criteria for specialized lending categories, such as mortgage banking, real estate construction, and consumer credit. The strategy also emphasizes diversification on both a geographic and customer level, regular credit examinations, and quarterly management reviews of large loans and loans experiencing deterioration of credit quality. The Company strives to identify potential problem loans early, take any necessary charge-offs promptly, and maintain strong reserve levels. In the Company's retail banking operations, a standard credit scoring system is used to assess consumer credit risks and to price consumer products accordingly. Commercial banking operations rely on a strong credit culture that combines prudent credit policies and individual lender accountability. In addition, the commercial lenders generally focus on middle-market companies within their regions. In evaluating its credit risk, the Company considers its loan portfolio composition, the level of allowance coverage, and macroeconomic factors. Most economic indicators in the Company's primary operating region, which includes Minnesota, Colorado, Nebraska, North Dakota, Montana, South Dakota, Illinois, Wisconsin, Iowa, Kansas, and Wyoming, compare favorably with national trends. Approximately 80 percent of the Company's loan portfolio consists of credit to businesses and consumers in this operating region. ANALYSIS OF NET CHARGE-OFFS AND ALLOWANCE FOR CREDIT LOSSES Net loan charge-offs totaled $41.3 million in the first quarter of 1997 and $33.5 million in the first quarter of 1996. Commercial loan net recoveries for the quarter were $6.8 million compared with $3.5 million in the first quarter of 1996. Consumer loan net charge-offs increased $11.1 million from the first quarter of 1996, reflecting higher average nonmortgage loan balances and higher loss ratios in several categories, including fraud and bankruptcies. Consumer loans 30 days or more past due declined to 1.87 percent of the portfolio at March 31, 1997, compared with 2.12 percent at December 31, 1996. The ratio of total net charge-offs to average loans was .62 percent in the first quarter of 1997 compared with .51 percent in the first quarter of 1996. TABLE 6 NET CHARGE-OFFS AS A PERCENTAGE OF AVERAGE LOANS OUTSTANDING Three Months Ended ------------------ March 31 March 31 1997 1996 - ------------------------------------------------------------------------------ COMMERCIAL: Commercial ......................................... .02% (.12)% Real estate: Commercial mortgage .............................. (1.12) (.12) Construction ..................................... .73 -- --------------- Total commercial ................................. (.20) (.11) CONSUMER: Residential mortgage ............................... .07 .08 Credit card ........................................ 3.86 3.01 Other .............................................. 1.20 1.05 --------------- Total consumer ................................... 1.51 1.12 --------------- Total ............................................ .62% .51% ============================================================================== TABLE 7 SUMMARY OF ALLOWANCE FOR CREDIT LOSSES Three Months Ended --------------------- March 31 March 31 (Dollars In Millions) 1997 1996 - ------------------------------------------------------------------------------- Balance at beginning of period ......................... $516.5 $473.5 CHARGE-OFFS: Commercial: Commercial ..................................... 5.3 5.7 Real estate: Commercial mortgage ........................ .8 5.5 Construction ............................... 1.2 -- ------------------- Total commercial ........................... 7.3 11.2 Consumer: Residential mortgage ........................... .6 1.0 Credit card .................................... 29.6 21.2 Other .......................................... 26.7 23.1 ------------------- Total consumer ............................. 56.9 45.3 ------------------- Total ...................................... 64.2 56.5 RECOVERIES: Commercial: Commercial ..................................... 4.8 8.3 Real estate: Commercial mortgage ........................ 9.3 6.4 Construction ............................... -- -- ------------------- Total commercial ........................... 14.1 14.7 Consumer: Residential mortgage ........................... .1 .2 Credit card .................................... 3.2 2.5 Other .......................................... 5.5 5.6 ------------------- Total consumer ............................. 8.8 8.3 ------------------- Total ...................................... 22.9 23.0 NET CHARGE-OFFS: Commercial: Commercial ..................................... .5 (2.6) Real estate: Commercial mortgage ........................ (8.5) (.9) Construction ............................... 1.2 -- ------------------- Total commercial ........................... (6.8) (3.5) Consumer: Residential mortgage ........................... .5 .8 Credit card .................................... 26.4 18.7 Other .......................................... 21.2 17.5 ------------------- Total consumer ............................. 48.1 37.0 ------------------- Total ...................................... 41.3 33.5 Provision charged to operating expense ................. 37.0 31.0 Additions related to acquisitions and other ............ -- 59.1 ------------------- Balance at end of period ............................... $512.2 $530.1 =================== Allowance as a percentage of period-end loans .......... 1.88% 1.97% Allowance as a percentage of nonperforming loans ....... 446 461 Allowance as a percentage of nonperforming assets ...... 381 337 =============================================================================== TABLE 8 DELINQUENT LOAN RATIOS* March 31 December 31 90 days or more past due 1997 1996 - ----------------------------------------------------------------------------- COMMERCIAL: Commercial ................................... .39% .50% Real estate: Commercial mortgage ....................... .94 1.00 Construction .............................. 1.74 1.56 ------------------- Total commercial .......................... .54 .63 CONSUMER: Residential mortgage ......................... 1.25 1.28 Credit card .................................. .58 .61 Other ........................................ .36 .35 ------------------- Total consumer ........................... .61 .63 ------------------- Total .................................... .58% .63% ============================================================================= * Ratios include nonperforming loans and are expressed as a percent of ending loan balances. ANALYSIS OF NONPERFORMING ASSETS Nonperforming assets include all nonaccrual loans, restructured loans, other real estate and other nonperforming assets owned by the Company. At March 31, 1997, nonperforming assets totaled $134.6 million, down $3.1 million (2 percent) from December 31, 1996 and $22.5 million (14 percent) from March 31, 1996. The ratio of nonperforming assets to loans and other real estate was .50 percent at March 31, 1997, down slightly from .51 percent at December 31, 1996, and .58 percent at March 31, 1996. Accruing loans 90 days or more past due totaled $41.5 million at March 31, 1997, compared with $49.6 million at December 31, 1996. These loans are not included in nonperforming assets and continue to accrue interest because they are secured by collateral and/or are in the process of collection and are reasonably expected to result in repayment or restoration to current status. Consumer loans 30 days or more past due were 1.87 percent of the consumer loan portfolio at March 31, 1997, compared with 2.12 percent at December 31, 1996. The percentage of consumer loans 90 days or more past due of the total consumer loan portfolio totaled .61 percent at March 31, 1997, compared with .63 percent at December 31, 1996. TABLE 9 NONPERFORMING ASSETS* March 31 December 31 (Dollars In Millions) 1997 1996 - ------------------------------------------------------------------------------- COMMERCIAL: Commercial .......................................... $ 36.2 $ 44.5 Real estate: Commercial mortgage ............................. 28.7 30.8 Construction .................................... 11.8 10.2 ------------------- Total commercial ................................ 76.7 85.5 CONSUMER: Residential mortgage ................................ 33.1 31.2 Other ............................................... 5.1 3.7 ------------------- Total consumer .................................. 38.2 34.9 ------------------- Total nonperforming loans ....................... 114.9 120.4 OTHER REAL ESTATE ........................................ 14.5 13.5 OTHER NONPERFORMING ASSETS ............................... 5.2 3.8 ------------------- Total nonperforming assets ...................... $134.6 $137.7 =================== Accruing loans 90 days or more past due .................. $ 41.5 $ 49.6 Nonperforming loans to total loans ....................... .42% .44% Nonperforming assets to total loans plus other real estate .50 .51 =============================================================================== * Throughout this document, nonperforming assets and related ratios do not include loans more than 90 days past due and still accruing. INTEREST RATE RISK MANAGEMENT The Company's policy is to maintain a low interest rate risk position. The Company limits the exposure of net interest income to risks associated with interest rate movements through asset/liability management strategies. The Company's Asset and Liability Management Committee ("ALCO") uses three methods for measuring and managing interest rate risk: Net Interest Income Simulation Modeling, Market Value/Duration Analysis, and Repricing Mismatch Analysis. The Company is in compliance with Board-approved guidelines, established by ALCO, relating to the above methods for measuring and managing interest rate risk. NET INTEREST INCOME SIMULATION: The Company has developed a net interest income simulation model to measure near-term (next 12 months) risk due to changes in interest rates. The model is particularly useful because it incorporates substantially all the Company's assets and liabilities and off-balance sheet instruments, together with forecasted changes in the balance sheet mix and assumptions that reflect the current interest rate environment. The balance sheet changes are based on forecasted prepayments of loans and securities, loan and deposit growth, and historical pricing spreads. The model is updated monthly with the current balance sheet structure and the current forecast of expected balance sheet changes. ALCO uses the model to simulate the effect of immediate and sustained parallel shifts in the yield curve of 1 percent, 2 percent and 3 percent as well as the effect of immediate and sustained flattening and steepening of the yield curve. ALCO also calculates the sensitivity of the simulation results to changes in the key assumptions, such as the Prime/LIBOR spread. The results from the simulation are reviewed by ALCO monthly and are used to guide ALCO's hedging strategies. ALCO has established guidelines, approved by the Company's Board of Directors, that limit the estimated change in net interest income over the succeeding 12 months to 2 percent of forecasted net interest income, assuming static Prime/LIBOR spreads and modest changes in deposit pricing lags, given a 1 percent change in interest rates. MARKET VALUE/DURATION ANALYSIS: One of the limiting factors of the net interest income simulation model is its dependence upon accurate forecasts of future business activity and the resulting effect on balance sheet assets and liabilities. As a result, its usefulness is greatly diminished for periods beyond one to two years. The Company measures this longer-term component of interest rate risk (referred to as market value or duration risk) by modeling the effect of interest rate changes on the estimated discounted future cash flows of the Company's assets, liabilities and off-balance sheet instruments. The amount of market value risk is subject to limits approved by the Company's Board of Directors. REPRICING MISMATCH ANALYSIS: A traditional gap analysis provides a point-in-time measurement of the relationship between the repricing amounts of the interest rate sensitive assets and liabilities. While the analysis provides a useful snapshot of interest rate risk, it does not capture all aspects of interest rate risk. As a result, ALCO uses the repricing mismatch analysis primarily for managing interest rate risk beyond one year and has established limits, approved by the Company's Board of Directors, for gap positions in the one- to three-year time periods. USE OF DERIVATIVES TO MANAGE INTEREST RATE RISK: While each of the interest rate risk measurements has limitations, taken together they represent a comprehensive view of the magnitude of the Company's interest rate risk over various time intervals. The Company manages its interest rate risk by entering into off-balance sheet transactions (primarily interest rate swaps), investing in fixed rate assets or issuing variable rate liabilities. To a lesser degree, the Company also uses interest rate caps and floors to hedge this risk. The Company does not enter into derivative contracts for speculative purposes. TABLE 10 INTEREST RATE SWAP HEDGING PORTFOLIO NOTIONAL BALANCES AND YIELDS BY MATURITY DATE At March 31, 1997 (Dollars in Millions) - ---------------------------------------------------------------------------- Weighted Weighted Average Average Receive Fixed Swaps* Notional Interest Rate Interest Rate Maturity Date Amount Received Paid - ---------------------------------------------------------------------------- 1997 (remaining nine months) . $ 125 7.45% 5.47% 1998 ......................... 681 5.97 5.49 1999 ......................... 530 6.42 5.52 2000 ......................... 175 6.59 5.50 2001 ......................... 205 6.56 5.46 After 2001** ................. 955 6.95 5.51 ------ Total ........................ $2,671 6.57% 5.50% ============================================================================ * At March 31, 1997, the Company had no hedging swaps in its portfolio that required it to pay fixed-rate interest. ** Of the amount maturing after the year 2001, $925 million hedges fixed-rate subordinated notes. As of March 31, 1997, the Company received payments on $2.7 billion notional amount of interest rate swap agreements based on fixed interest rates, and made payments based on variable interest rates. These swaps had an average fixed rate of 6.57 percent and an average variable rate, which is tied to various LIBOR rates, of 5.50 percent. The remaining maturity of these agreements ranges from four months to 10.5 years with an average remaining maturity of 4.07 years. Swaps increased net interest income for the quarters ended March 31, 1997 and 1996 by $6.4 million and $7.9 million, respectively. The Company also purchases interest rate caps and floors to minimize the impact of fluctuating interest rates on earnings. The total notional amount of cap agreements purchased as of March 31, 1997, was $100 million. To hedge against falling interest rates, the Company uses interest rate floors. The total notional amount of floor agreements purchased as of March 31, 1997, was $1.1 billion. LIBOR-based floors totaled $800 million and Constant Maturity Treasury floors totaled $300 million. The impact of caps and floors on net interest income was not material for the quarters ended March 31, 1997 and 1996. CAPITAL MANAGEMENT At March 31, 1997, total tangible common equity was $2.3 billion, or 6.6 percent of assets, compared with 6.7 percent at December 31, 1996. Tier 1 and total risk-based capital ratios were 7.2 percent and 12.0 percent at March 31, 1997, and December 31, 1996. The March 31, 1997 leverage ratio increased to 6.9 percent from 6.8 percent at year-end 1996. On February 21, 1996, the Board of Directors authorized the repurchase of up to 25.4 million common shares through December 1997. The Company purchased 17.0 million shares under this authorization, including 1.9 million in the first quarter of 1997. The Board of Directors rescinded this authorization on March 19, 1997, due to the announcement of the USBC acquisition. ACCOUNTING CHANGES ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS Effective January 1, 1997, the Company adopted Statement of Financial Accounting Standards No. ("SFAS") 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." The Statement uses a "financial components" approach which focuses on control to determine whether the assets have been sold. If the entity has surrendered control over the transferred assets, the transaction is considered a sale. Control is considered surrendered only if the seller has no legal rights to the assets, even in bankruptcy; the buyer has the right to pledge or exchange the assets; and the seller does not maintain effective control over the assets through an agreement to repurchase or redeem them. If control is retained, the transaction is then considered to be a financing. The adoption of SFAS 125 did not have a material effect on the Company. SFAS 125 has been amended (SFAS 127), deferring for one year its adoption in the accounting for securities lending, repurchase agreements and other secured financing transactions. The eventual adoption of SFAS 125 relating to these transaction types is not expected to have a material effect on the Company. TABLE 11 CAPITAL RATIOS March 31 December 31 (Dollars in Millions) 1997 1996 - ---------------------------------------------------------------------------- Tangible common equity* .......................... $2,342 $2,385 As a percent of assets ........................ 6.6% 6.7% Tier 1 capital ................................... $2,326 $2,355 As a percent of risk-adjusted assets .......... 7.2% 7.2% Total risk-based capital ......................... $3,898 $3,943 As a percent of risk-adjusted assets .......... 12.0% 12.0% Leverage ratio ................................... 6.9 6.8 ============================================================================ * Defined as common equity less goodwill. EARNINGS PER SHARE SFAS 128, "Earnings per Share," supercedes APB Opinion 15 "Earnings per Share," by replacing the method currently used to compute earnings per share with basic and diluted earnings per share. Under the new requirements, the dilutive effect of stock options will be excluded from the calculation of basic earnings per share. Diluted earnings per share will be calculated similarly to the current fully diluted earnings per share. SFAS 128 is effective for periods ending after December 15, 1997, with earlier application prohibited. After the effective date, all prior period earnings per share data presented shall be restated to conform to the provisions of this statement. The adoption of SFAS 128 is not expected to have a material impact on the calculation of earnings per share. DERIVATIVE FINANCIAL INSTRUMENTS "Disclosure of Accounting Policies for Derivative Financial Instruments," a final rule issued by the Securities and Exchange Commission, is intended to clarify and expand existing disclosure requirements for derivative financial instruments, other financial instruments and derivative commodity instruments. Specifically, the rule requires descriptions of accounting policies for derivatives and quantitative and qualitative information about market risk for derivatives that is to be presented outside of the financial statements. These disclosure requirements are effective with the 1997 year-end financial statements. CONSOLIDATED BALANCE SHEET March 31 December 31 (In Millions, Except Shares) 1997 1996 - ------------------------------------------------------------------------------- (Unaudited) ASSETS Cash and due from banks ............................... $ 2,483 $ 2,413 Federal funds sold .................................... 54 32 Securities purchased under agreements to resell ....... 531 795 Trading account securities ............................ 105 146 Available-for-sale securities ......................... 3,373 3,555 Loans ................................................. 27,173 27,128 Less allowance for credit losses ................... 512 517 --------------------- Net loans .......................................... 26,661 26,611 Bank premises and equipment ........................... 393 404 Interest receivable ................................... 200 202 Customers' liability on acceptances ................... 188 169 Other assets .......................................... 2,012 2,162 --------------------- Total assets ................................... $36,000 $36,489 ===================== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing ................................ $ 7,254 $ 7,871 Interest-bearing ................................... 16,169 16,508 --------------------- Total deposits ................................. 23,423 24,379 Federal funds purchased ............................... 1,498 1,204 Securities sold under agreements to repurchase ........ 534 819 Other short-term funds borrowed ....................... 1,762 2,074 Long-term debt ........................................ 4,257 3,553 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely the junior subordinated debentures of FBS ................ 300 300 Acceptances outstanding ............................... 188 169 Other liabilities ..................................... 1,037 938 --------------------- Total liabilities .............................. 32,999 33,436 Shareholders' equity: Common stock, par value $1.25 a share-authorized 200,000,000 shares; issued: 3/31/97 and 12/31/96 -- 141,747,738 shares ............................. 177 177 Capital surplus .................................... 1,162 1,154 Retained earnings .................................. 2,256 2,165 Unrealized (loss) gain on securities, net of tax ... (26) 3 Less cost of common stock in treasury: 3/31/97 -- 8,411,715 shares; 12/31/96 -- 6,877,497 shares .................................. (568) (446) --------------------- Total shareholders' equity ..................... 3,001 3,053 --------------------- Total liabilities and shareholders' equity ..... $36,000 $36,489 =============================================================================== CONSOLIDATED STATEMENT OF INCOME Three Months Ended ---------------------- (In Millions, Except Per-Share Data) March 31 March 31 (Unaudited) 1997 1996 - ------------------------------------------------------------------------------- INTEREST INCOME Loans ............................................ $586.2 $574.7 Securities: Taxable ....................................... 51.4 63.8 Exempt from federal income taxes .............. 6.0 4.9 Other interest income ............................ 12.6 11.2 ------------------------- Total interest income .................. 656.2 654.6 INTEREST EXPENSE Deposits ......................................... 158.6 167.0 Federal funds purchased and repurchase agreements 31.0 31.4 Other short-term funds borrowed .................. 23.9 32.1 Long-term debt ................................... 56.6 49.5 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely the junior subordinated debentures of FBS ........... 6.1 -- ------------------------- Total interest expense ................. 276.2 280.0 ------------------------- Net interest income .............................. 380.0 374.6 Provision for credit losses ...................... 37.0 31.0 ------------------------- Net interest income after provision for credit losses .......................................... 343.0 343.6 NONINTEREST INCOME Credit card fee revenue .......................... 77.3 62.8 Trust fees ....................................... 66.0 56.2 Service charges on deposit accounts .............. 36.4 33.9 Securities gains ................................. -- 14.6 Termination fee .................................. -- 115.0 Gain on sale of mortgage banking operations ...... -- 45.8 Other ............................................ 46.1 55.2 ------------------------- Total noninterest income ............... 225.8 383.5 NONINTEREST EXPENSE Salaries ......................................... 114.9 123.4 Employee benefits ................................ 26.5 28.9 Net occupancy .................................... 25.0 25.8 Furniture and equipment .......................... 21.7 23.8 Goodwill and other intangible assets ............. 19.8 47.4 Other personnel costs ............................ 10.0 9.7 Professional services ............................ 10.0 8.3 Merger, integration, and resizing ................ -- 69.9 Other ............................................ 68.1 87.2 ------------------------- Total noninterest expense .............. 296.0 424.4 ------------------------- Income before income taxes ....................... 272.8 302.7 Applicable income taxes .......................... 101.0 125.9 ------------------------- Net income ....................................... $171.8 $176.8 ========================= Net income applicable to common equity ........... $171.8 $175.1 ========================= EARNINGS PER COMMON SHARE Average common and common equivalent shares ...... 135,525,339 137,020,911 Net income ....................................... $1.27 $1.28 =============================================================================== CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Unrealized Common Gains/(Losses) (In Millions, Except Shares) Shares Preferred Common Capital Retained on Securities, Treasury (Unaudited) Outstanding* Stock Stock Surplus Earnings Net of Tax Stock** Total - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE DECEMBER 31, 1995 ..... 127,334,568 $103.2 $169.5 $ 909.3 $1,918.2 $ 22.5 $(397.8) $2,724.9 Net income .................... 176.8 176.8 Dividends declared: Preferred ................ (1.7) (1.7) Common ................... (59.5) (59.5) Purchase of treasury stock .... (3,713,727) (217.0) (217.0) Issuance of common stock: Acquisitions ............. 16,460,215 10.7 361.7 (44.4) 384.2 712.2 Dividend reinvestment .... 53,514 3.1 3.1 Stock option and stock purchase plans .......... 694,819 .2 4.4 (13.1) 23.2 14.7 Conversion of preferred stock . 253,306 (7.3) (7.4) 14.7 -- Change in unrealized gains/(losses) ............... (24.0) (24.0) ------------------------------------------------------------------------------------------------- BALANCE MARCH 31, 1996 ........ 141,082,695 $ 95.9 $180.4 $1,275.4 $1,968.9 $ (1.5) $(189.6) $3,329.5 =================================================================================================================================== BALANCE DECEMBER 31, 1996 ..... 134,870,241 $ -- $177.2 $1,153.9 $2,164.9 $ 2.5 $(445.9) $3,052.6 Net income .................... 171.8 171.8 Common dividends declared ..... (62.0) (62.0) Purchase of treasury stock .... (1,914,700) (142.0) (142.0) Issuance of common stock: Dividend reinvestment .... 42,051 .5 2.8 3.3 Stock option and stock purchase plans .......... 338,431 7.8 (19.2) 17.3 5.9 Change in unrealized gains/(losses) ............... (28.6) (28.6) ------------------------------------------------------------------------------------------------- BALANCE MARCH 31, 1997 ........ 133,336,023 $ -- $177.2 $1,162.2 $2,255.5 $(26.1) $(567.8) $3,001.0 ===================================================================================================================================
* Defined as total common shares less common stock held in treasury. ** Ending treasury shares were 8,411,715 at March 31, 1997; 6,877,497 at December 31, 1996; 3,277,809 at March 31, 1996; and 8,297,756 at December 31, 1995. CONSOLIDATED STATEMENT OF CASH FLOWS Three Months Ended --------------------- March 31 March 31 (Unaudited, In Millions) 1997 1996 - ------------------------------------------------------------------------------- OPERATING ACTIVITIES Net cash provided by operating activities .... $ 537.8 $ 189.6 --------------------- INVESTING ACTIVITIES Net cash (used) provided by: Loans outstanding ................................... (472.3) 483.4 Securities purchased under agreements to resell ..... 264.3 (285.3) Available-for-sale securities: Sales ............................................... 288.5 921.4 Maturities .......................................... 172.6 432.7 Purchases ........................................... (325.8) (371.1) Proceeds from sales of other real estate ............... 4.9 6.1 Net purchases of bank premises and equipment ........... (7.0) (16.7) Securitization of corporate charge card balances ....... 418.1 -- Cash and cash equivalents of acquired subsidiaries ..... -- 116.5 Acquisitions, net of cash received ..................... (23.3) (31.2) Sales of subsidiary operations ......................... -- 53.5 Other -- net ........................................... (14.6) (42.6) --------------------- Net cash provided by investing activities .... 305.4 1,266.7 --------------------- FINANCING ACTIVITIES Net cash (used) provided by: Deposits ............................................ (956.1) (936.2) Federal funds purchased and securities sold under agreements to repurchase ..................... 9.7 (260.9) Short-term borrowings ............................... (312.8) (86.8) Long-term debt transactions: Proceeds ............................................ 846.6 499.0 Principal payments .................................. (142.9) (205.7) Proceeds from issuance of common stock ................. 9.2 17.8 Purchase of treasury stock ............................. (142.0) (217.0) Cash dividends ......................................... (62.0) (61.2) --------------------- Net cash used by financing activities ........ (750.3) (1,251.0) --------------------- Change in cash and cash equivalents .......... 92.9 205.3 Cash and cash equivalents at beginning of period ....... 2,444.3 1,871.6 --------------------- Cash and cash equivalents at end of period ... $2,537.2 $2,076.9 =============================================================================== NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flow activity required under generally accepted accounting principles. In the opinion of management of the Company, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of results have been made and the Company believes such presentation is adequate to make the information presented not misleading. For further information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Certain amounts in prior periods have been reclassified to conform to the current presentation. NOTE B ACCOUNTING CHANGES ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES Effective January 1, 1997, the Company adopted Statement of Financial Accounting Standards No. ("SFAS") 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." The Statement uses a "financial components" approach which focuses on control to determine whether assets have been sold. If the entity has surrendered control over the transferred assets, the transaction is considered a sale. Control is considered surrendered only if the seller has no legal right to the assets, even in bankruptcy; the buyer has the right to pledge or exchange the assets; and the seller does not maintain effective control over the assets through an agreement to repurchase or redeem them. If control is retained, the transaction is then considered a financing. The adoption of SFAS 125 did not have a material effect on the Company. SFAS 125 has been amended (SFAS 127), deferring for one year its adoption in the accounting for securities lending, repurchase agreements and other secured financing transactions. The eventual adoption of SFAS 125 relating to these transaction types is not expected to have a material effect on the Company. EARNINGS PER SHARE SFAS 128, "Earnings per Share," supercedes APB Opinion 15, "Earnings per Share," by replacing the method currently used to compute earnings per share with basic and diluted earnings per share. Under the new requirements, the dilutive effect of stock options will be excluded from the calculation of basic earnings per share. Diluted earnings per share will be calculated similarly to the current fully diluted earnings per share. SFAS 128 is effective for periods ending after December 15, 1997, with earlier application prohibited. After the effective date, all prior period earnings per share data presented shall be restated to conform to the provisions of this statement. The adoption of SFAS 128 is not expected to have a material impact on the calculation of earnings per share. DERIVATIVE FINANCIAL INSTRUMENTS "Disclosure of Accounting Policies for Derivative Financial Instruments," a final rule issued by the Securities and Exchange Commission, is intended to clarify and expand existing disclosure requirements for derivative financial instruments, other financial instruments and derivative commodity instruments. Specifically, the rule requires descriptions of accounting policies for derivatives and quantitative and qualitative information about market risk for derivatives that is to be presented outside of the financial statements. These disclosure requirements are effective with the 1997 year-end financial statements. NOTE C BUSINESS COMBINATIONS AND DIVESTITURES U. S. BANCORP On March 20, 1997, the Company and U. S. Bancorp ("USBC") announced that they had entered into a definitive agreement whereby the Company will exchange .755 shares of its common stock for each share of USBC common stock. The combined institution, which will use the U. S. Bancorp name, will have approximately $70 billion in assets, and serve 3.9 million households through 995 branches and 4,565 ATM's in 17 contiguous states. The transaction, which will qualify as a tax-free reorganization and be accounted for as a pooling-of-interests, is subject to shareholder and regulatory approvals and is expected to close in the third quarter of 1997. COMERICA CORPORATE TRUST BUSINESS On January 31, 1997, the Company completed its acquisition of the bond indenture services and paying agency business of Comerica Incorporated. This business serves approximately 860 municipal and corporate clients with about 2,400 bond issues. FIRSTIER FINANCIAL, INC. On February 16, 1996, the Company issued 16.5 million shares to complete its acquisition of Omaha-based FirsTier Financial, Inc. ("FirsTier"). FirsTier had $3.7 billion in assets, $2.9 billion in deposits, and 63 offices in Nebraska and Iowa. Under terms of the purchase agreement, the Company exchanged .8829 shares of its common stock for each common share of FirsTier. In addition, FirsTier's outstanding stock options were converted into stock options for the Company's common stock. The acquisition of FirsTier was accounted for under the purchase method of accounting, and accordingly, the purchase price of $717 million was allocated to assets acquired and liabilities assumed based on their fair market values at the date of acquisition. The excess of the purchase price over the fair market values of net assets acquired was recorded as goodwill. Goodwill of $286 million will be amortized over an average of 24 years and core deposit intangibles of $63 million will be amortized over the estimated lives of the deposits of approximately 10 years. The results of operations of FirsTier have been included in the Company's Consolidated Statement of Income since the date of acquisition. The following pro forma operating results of the Company assume that the FirsTier acquisition had occurred at the beginning of each period presented. In addition to combining the historical results of operations of the two companies, the pro forma results include adjustments for the estimated effect of purchase accounting on the Company's results. Three Months Ended (In Millions, Except Per-Share Amounts) March 31, 1996 - ------------------------------------------------------------------------------- Net interest income ............................ $389.3 Net income ..................................... 174.6 Net income per share ........................... 1.22 - ------------------------------------------------------------------------------- The pro forma information may not be indicative of the results that actually would have occurred if the combination had been in effect on the dates indicated or which may be obtained in the future. NOTE D SECURITIES The detail of the amortized cost and fair value of available-for-sale securities consisted of the following: March 31, 1997 December 31, 1996 ------------------- --------------------- Amortized Fair Amortized Fair (In Millions) Cost Value Cost Value - -------------------------------------------------------------------------------- U.S. Treasury ...................... $ 355 $ 342 $ 553 $ 545 Mortgage-backed .................... 2,539 2,511 2,454 2,464 Other U.S. agencies ................ 30 30 42 41 State and political ................ 459 455 466 465 Other .............................. 32 35 36 40 -------------------------------------- Total ..................... $3,415 $3,373 $3,551 $3,555 ================================================================================ NOTE E LOANS The composition of the loan portfolio was as follows: March 31 December 31 (In Millions) 1997 1996 - ----------------------------------------------------------------------------- COMMERCIAL: Commercial ..................................... $ 9,720 $ 9,456 Financial institutions ......................... 928 905 Real estate: Commercial mortgage ......................... 3,062 3,090 Construction ................................ 680 654 --------------------- Total commercial ........................ 14,390 14,105 --------------------- CONSUMER: Residential mortgage ........................... 2,906 3,019 Residential mortgage held for sale ............. 43 42 Home equity and second mortgage ................ 3,295 3,263 Credit card .................................... 2,647 2,858 Automobile ..................................... 1,985 1,991 Revolving credit ............................... 747 737 Installment .................................... 607 607 Student* ....................................... 553 506 --------------------- Total consumer .......................... 12,783 13,023 --------------------- Total loans ............................. $27,173 $27,128 ============================================================================= * All or part of the student loan portfolio may be sold when the repayment period begins. At March 31, 1997, the Company had $77 million in loans considered impaired under SFAS 114 included in its nonaccrual loans. The carrying value of the impaired loans was less than or equal to the present value of expected future cash flows and, accordingly, no allowance for credit losses was specifically allocated to impaired loans. For the quarter ended March 31, 1997, the average recorded investment in impaired loans was approximately $81 million. No interest income was recognized on these impaired loans during the quarter. NOTE F LONG-TERM DEBT Long-term debt (debt with original maturities of more than one year) consisted of the following: March 31 December 31 (In Millions) 1997 1996 - ----------------------------------------------------------------------------- Fixed-rate subordinated notes (6.00% to 8.35%) - maturities to September 2007 ............. $1,050 $1,050 Step-up subordinated notes - due August 15, 2005 ................................... 100 100 Floating-rate subordinated notes - due November 30, 2010 ................................. 107 107 Federal Home Loan Bank advances (4.93% to 7.34%) - maturities to March 2011 ....................................... 915 1,005 Medium-term notes (5.45% to 5.67%) - maturities to January 2001 ...................... 577 406 Bank notes (5.36% to 6.38%) - maturities to March 2001 ..................................... 1,425 800 Other ............................................... 83 85 -------------------- Total ...................................... $4,257 $3,553 ============================================================================= NOTE G COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY THE JUNIOR SUBORDINATED DEBENTURES OF FBS On November 26, 1996, FBS Capital I (the "Trust"), a Delaware business trust wholly owned by the Company, completed the sale of $300 million of 8.09 percent Preferred Securities (the "Preferred Securities"). The Trust used the net proceeds from the offering to purchase $309 million aggregate principle amount of 8.09 percent Junior Subordinated Deferrable Interest Debentures (the "Debentures") of the Company. The Debentures are the sole assets of the Trust and are eliminated, along with the related income statement effects, in the consolidated financial statements. The Company used the proceeds from the sale of the Debentures for general corporate purposes. The Preferred Securities accrue and pay distributions semi-annually at an annual rate of 8.09 percent of the stated liquidation amount of $1,000 per Preferred Security. The Company's obligations under the Debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the Trust. The guarantee covers the semi-annual distributions and payments on liquidation or redemption of the Preferred Securities, but only to the extent of funds held by the Trust. The Preferred Securities are mandatorily redeemable upon the maturity of the Debentures, on November 15, 2026, or upon earlier redemption as provided in the Indenture. The Company has the right to redeem the Debentures, in whole (but not in part), on or after November 15, 2006, at a redemption price specified in the Indenture plus any accrued but unpaid interest to the redemption date. NOTE H SHAREHOLDERS' EQUITY On February 21, 1996, the Board of Directors authorized the repurchase of up to 25.4 million common shares through December 1997. The Company purchased 17.0 million shares under this authorization, including 1.9 million in the first quarter of 1997. The Board of Directors rescinded this authorization on March 19, 1997, due to the announcement of the U. S. Bancorp acquisition. Refer to Note C for further information about the U. S. Bancorp acquisition. NOTE I MERGER, INTEGRATION AND RESIZING CHARGES In the first quarter of 1996, the Company recorded merger, integration and resizing charges of $69.9 million. Merger and integration charges of $31.3 million were associated with the acquisitions of FirsTier and the BankAmerica corporate trust business. Resizing charges of $38.6 million were associated with the Company's streamlining of the branch distribution network and trust operations as the Company expands its alternative distribution channels, including telemarketing, automated teller machines and in-store branches. NOTE J INCOME TAXES The components of income tax expense were: Three Months Ended --------------------- March 31 March 31 (In Millions) 1997 1996 - ----------------------------------------------------------------------------- FEDERAL: Current tax ......................................... $ 80.1 $115.9 Deferred tax provision .............................. 10.3 1.8 ------------------- Federal income tax .............................. 90.4 117.7 STATE: Current tax ......................................... 8.9 8.4 Deferred tax provision (credit) ..................... 1.7 (.2) ------------------- State income tax ................................ 10.6 8.2 ------------------- Total income tax provision ...................... $101.0 $125.9 ============================================================================= The reconciliation between income tax expense and the amount computed by applying the statutory federal income tax rate was as follows: Three Months Ended ---------------------- March 31 March 31 (In Millions) 1997 1996 - ----------------------------------------------------------------------------- Tax at statutory rate (35%) ......................... $ 95.5 $105.9 State income tax, at statutory rates, net of federal tax benefit ......................... 6.9 5.3 Tax effect of: Tax-exempt interest: Loans ...................................... (1.0) (1.2) Securities ................................. (2.1) (1.7) Amortization of goodwill ........................ 4.6 16.5 Other items ..................................... (2.9) 1.1 -------------------- Applicable income taxes ............................. $101.0 $125.9 ============================================================================= The Company's net deferred tax asset was $221.7 million at March 31, 1997, and $216.2 million at December 31, 1996. NOTE K COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE SHEET FINANCIAL INSTRUMENTS In the normal course of business, the Company uses various off-balance sheet financial instruments to meet the financing needs of its customers and to manage its interest rate risk. These instruments carry varying degrees of credit, interest rate or liquidity risk. The contract or notional amounts of these financial instruments were as follows: March 31 December 31 (In Millions) 1997 1996 - ------------------------------------------------------------------------------ Commitments to extend credit: Commercial ...................................... $ 8,899 $ 8,944 Corporate and purchasing cards .................. 14,927 13,820 Consumer credit card ............................ 10,443 10,245 Other consumer .................................. 3,116 3,066 Letters of credit: Standby ......................................... 1,510 1,447 Commercial ...................................... 264 182 Interest rate swap contracts: Hedges .......................................... 2,671 2,656 Intermediated ................................... 194 174 Options contracts: Hedge interest rate floors purchased ............ 1,100 1,250 Hedge interest rate caps purchased .............. 100 100 Intermediated interest rate and foreign exchange caps and floors purchased ............ 116 122 Intermediated interest rate and foreign exchange caps and floors written .............. 116 122 Liquidity support guarantees ........................ 81 81 Forward contracts ................................... 29 22 Commitments to sell loans ........................... 4 3 Mortgages sold with recourse ........................ 110 114 Foreign currency commitments: Commitments to purchase ......................... 845 870 Commitments to sell ............................. 844 867 ============================================================================== Activity for the three months ended March 31, 1997, with respect to interest rate swaps which the Company uses to hedge subordinated debt, bank notes, certificates of deposit, deposit accounts, and savings certificates was as follows: (In Millions) - ------------------------------------------------------------------------------ Notional amount outstanding at December 31, 1996 .................. $2,656 Additions ......................................................... 165 Maturities ........................................................ (150) ------ Notional amount outstanding at March 31, 1997 ................ $2,671 ============================================================================== Weighted average interest rates paid .............................. 5.50% Weighted average interest rates received .......................... 6.57% ============================================================================== The Company received fixed rate interest and paid floating rate interest on all swap hedges as of March 31, 1997. Net unamortized deferred gains, which amortize through the year 2000, were $5.7 million at March 31, 1997. LIBOR-based interest rate floors totaling $800 million with an average remaining maturity of 11 months at March 31, 1997, and $950 million with an average remaining maturity of 12 months at December 31, 1996, hedged floating rate commercial loans. The strike rate on these LIBOR-based floors ranged from 3.25 percent to 4.00 percent at March 31, 1997, and December 31, 1996. Constant Maturity Treasury (CMT) interest rate floors totaling $300 million with an average remaining maturity of 16 months at March 31, 1997, and 18 months at December 31, 1996, hedged the pre-payment risk of fixed rate residential mortgage loans. The strike rate on these CMT floors ranged from 5.60 percent to 5.70 percent at March 31, 1997, and December 31, 1996. The total notional amount of interest rate cap agreements purchased was $100 million with a 3-month LIBOR strike rate of 6.00 percent at March 31, 1997, and December 31, 1996. NOTE L SUPPLEMENTAL DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET -- Time certificates of deposit in denominations of $100,000 or more totaled $853 million and $866 million at March 31, 1997, and December 31, 1996, respectively. CONSOLIDATED STATEMENT OF CASH FLOWS -- Listed below are supplemental disclosures to the Consolidated Statement of Cash Flows. Three Months Ended ---------------------- March 31 March 31 (In Millions) 1997 1996 - ------------------------------------------------------------------------------ Income taxes paid ................................. $ 7.9 $ 43.5 Interest paid ..................................... 296.2 270.2 Net noncash transfers to foreclosed property ......................................... 4.3 9.7 Change in unrealized gain (loss) on available-for-sale securities, net of taxes of $17.5 in 1997 and $14.7 in 1996 .......................................... (28.6) (24.0) ====================== Cash acquisitions of businesses: Fair value of noncash assets acquired ......... $ 23.3 $ 31.2 Liabilities assumed ........................... -- -- ---------------------- Net ....................................... $ 23.3 $ 31.2 ====================== Stock acquisitions of businesses: Fair value of noncash assets acquired ......... $ -- $3,627.9 Net cash acquired ............................. -- 116.5 Liabilities assumed ........................... -- (3,032.2) ---------------------- Net value of common stock issued .......... $ -- $ 712.2 ============================================================================== CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES
For the Three Months Ended March 31 1997 1996 - -------------------------------------------------------------------------- ---------------------------- ------------------------ Yields Yields %Change (Dollars in Millions) and and Average (Unaudited) Balance Interest Rates Balance Interest Rates Balance - -------------------------------------------------------------------------------------------------------------------------------- ASSETS Securities: U.S. Treasury ...................... $ 441 $ 6.4 5.89% $ 896 $14.0 6.28% (50.8)% Mortgage-backed .................... 2,502 43.6 7.07 2,514 43.3 6.93 (.5) State and political ................ 460 9.6 8.46 344 7.9 9.24 33.7 U.S. agencies and other ............ 65 1.0 6.24 396 6.1 6.20 (83.6) ------------------- -------------------- Total securities ................ 3,468 60.6 7.09 4,150 71.3 6.91 (16.4) Unrealized (loss) gain on available-for-sale securities ....... (11) 33 ** ------- ------- Net securities ................ 3,457 4,183 (17.4) Trading account securities ........... 91 1.3 5.79 108 1.3 4.84 (15.7) Federal funds sold and resale agreements .......................... 534 7.1 5.39 490 6.4 5.25 9.0 Loans: Commercial: Commercial ....................... 9,444 186.2 8.00 8,667 174.0 8.07 9.0 Financial institutions ........... 803 8.9 4.49 1,029 11.7 4.57 (22.0) Real estate: Commercial mortgage .............. 3,075 67.1 8.85 2,904 66.2 9.17 5.9 Construction ..................... 670 14.4 8.72 443 10.4 9.44 51.2 ------------------- -------------------- Total commercial ................. 13,992 276.6 8.02 13,043 262.3 8.09 7.3 Consumer: Residential mortgage ............. 2,963 58.2 7.97 3,870 74.1 7.70 (23.4) Residential mortgage held for sale 32 .6 7.60 220 4.0 7.31 (85.5) Home equity and second mortgage .. 3,270 77.1 9.56 2,879 68.8 9.61 13.6 Credit card ...................... 2,776 77.3 11.29 2,500 73.3 11.79 11.0 Other ............................ 3,875 98.0 10.26 3,817 94.3 9.94 1.5 ------------------- -------------------- Total consumer ................ 12,916 311.2 9.77 13,286 314.5 9.52 (2.8) ------------------- -------------------- Total loans ................... 26,908 587.8 8.86 26,329 576.8 8.81 2.2 Allowance for credit losses ........ 517 501 3.2 ------- ------- Net loans ........................ 26,391 25,828 2.2 Other earning assets ............... 352 4.2 4.84 294 3.5 4.79 19.7 -------------------- -------------------- Total earning assets* ......... 31,353 661.0 8.55 31,371 659.3 8.45 (.1) Cash and due from banks ............ 1,760 1,725 2.0 Other assets ....................... 2,333 2,416 (3.4) ------- ------- Total assets .................. $34,918 $35,044 (.4)% ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest-bearing deposits ....... $ 6,306 $ 6,148 2.6% Interest-bearing deposits: Interest checking ................ 2,868 9.3 1.32 3,000 10.2 1.37 (4.4) Money market accounts ............ 4,414 39.9 3.67 4,078 36.3 3.58 8.2 Other savings accounts ........... 1,555 8.1 2.11 1,648 8.9 2.17 (5.6) Savings certificates ............. 6,628 89.3 5.46 7,272 97.6 5.40 (8.9) Certificates over $100,000 ....... 811 12.0 6.00 901 14.0 6.25 (10.0) ------------------- -------------------- Total interest-bearing deposits 16,276 158.6 3.95 16,899 167.0 3.97 (3.7) Short-term borrowings ................ 4,012 54.9 5.55 4,498 63.5 5.68 (10.8) Long-term debt ....................... 3,880 56.6 5.92 3,264 49.5 6.10 18.9 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely the junior subordinated debentures of FBS 300 6.1 8.09 -- -- -- ** ------------------- -------------------- Total interest-bearing liabilities ................. 24,468 276.2 4.58 24,661 280.0 4.57 (.8) Other liabilities .................... 1,133 1,102 2.8 Preferred equity ..................... -- 101 ** Common equity ........................ 3,018 3,012 .2 Unrealized (loss) gain on available-for-sale securities, net of tax .............................. (7) 20 ** ------- ------- Total liabilities and shareholders' equity ........ $34,918 $35,044 (.4)% ======= ======= ===== Net interest income .................. $384.8 $379.3 ====== ====== Gross interest margin ................ 3.97% 3.88% ===== ===== Gross interest margin without taxable-equivalent increments ....... 3.91% 3.82% ===== ===== Net interest margin .................. 4.98% 4.86% ===== ===== Net interest margin without taxable-equivalent increments ....... 4.92% 4.80% ================================================================================================================== Interest and rates are presented on a fully taxable-equivalent basis under a tax rate of 35 percent. Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances. * Before deducting the allowance for credit losses and excluding the unrealized gain (loss) on available-for-sale securities. ** Not meaningful
PART II -- OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -- The 68th Annual Meeting of Shareholders of First Bank System, Inc. was held on Thursday, April 24, 1997, at the Minneapolis Convention Center. John F. Grundhofer, Chairman, President and Chief Executive Officer, presided. The holders of 118,099,501 shares of common stock, 88.5 percent of the 133,422,201 outstanding shares entitled to vote as of the record date, were represented at the meeting in person or by proxy. The candidates for election as Class II Directors listed in the proxy statement were elected to serve three-year terms expiring at the 2000 annual shareholders' meeting. The proposal to ratify the appointment of Ernst & Young LLP as the Company's independent auditors for the year ending December 31, 1997, was approved. The proposal to amend the Company's Executive Incentive Plan to change the maximum payment a participant may receive thereunder was approved. The tabulation for each nominee for office and each proposal is listed in the table below. SUMMARY OF MATTERS VOTED UPON BY SHAREHOLDERS
Number of Shares ---------------------------------------------------------- For Withheld ----------- --------- Election of Class II Directors: Peter H. Coors 117,010,391 1,089,110 Norman M. Jones 117,042,948 1,056,553 S. Walter Richey 117,043,373 1,056,128 Richard L. Robinson 117,033,084 1,066,417 Walter Scott, Jr. 116,901,276 1,198,225 For Against Abstain Non-Vote ----------- ---------- --------- -------- Other Matters: Ratification of appointment of Ernst & Young LLP as independent auditors 117,255,887 249,538 594,076 0 Amendment to Executive Incentive Plan 110,717,502 5,853,958 1,528,041 0
For a copy of the meeting minutes, please write to the Office of the Secretary, First Bank System, P.O. Box 522, Minneapolis, Minnesota 55480. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 2 Agreement and Plan of Merger, dated as of March 19, 1997, and Stock Option Agreements, dated as of March 20, 1997, by and between First Bank System, Inc. and U. S. Bancorp. Previously filed as Exhibits 2, 99.1 and 99.2 to Form 8-K filed March 20, 1997 and incorporated herein by reference 10A First Bank System, Inc. Executive Incentive Plan, as amended* 10B First Bank System, Inc. Nonqualified Supplemental Executive Retirement Plan, as amended* 10C First Bank System, Inc. Executive Deferral Plan, as amended* 10D First Bank System, Inc. Independent Director Retirement and Death Benefit Plan, as amended* 10E First Bank System, Inc. Deferred Compensation Plan for Directors, as amended* 11 Computation of Primary and Fully Diluted Net Income Per Common Share 12 Computation of Ratio of Earnings to Fixed Charges 27 Article 9 Financial Data Schedule* * Copies of this exhibit will be furnished upon request and payment of the Company's reasonable expenses in furnishing the exhibit. (b) REPORTS ON FORM 8-K During the three months ended March 31, 1997, the Company filed the following Current Reports on Form 8-K. Form 8-K filed March 20, 1997, relating to the announcement of the Company's agreement to acquire U. S. Bancorp, and the analyst presentation made in connection with the announcement. Form 8-K filed March 20, 1997, which includes the merger and stock option agreements between the Company and U. S. Bancorp. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST BANK SYSTEM, INC. By: /s/ David J. Parrin David J. Parrin Senior Vice President and Controller (Chief Accounting Officer and Duly Authorized Officer) DATE: May 14, 1997 [LOGO] FIRST BANK SYSTEM --------------- First Class P.O. Box 522 U.S. Postage Minneapolis, Minnesota PAID 55480 Permit No. 2440 Minneapolis, MN http://www.fbs.com --------------- SHAREHOLDER INQUIRIES COMMON STOCK TRANSFER AGENT AND REGISTRAR First Chicago Trust Company of New York acts as transfer agent and registrar, dividend paying agent, and dividend reinvestment plan agent for First Bank System ("FBS") and maintains all shareholder records for the corporation. For information about First Bank System stock, or if you have questions regarding your stock certificates (including transfers), address or name changes, lost dividend checks, lost stock certificates, or Form 1099s, please call First Chicago's Shareholder Services Center at (800) 446-2617, weekdays, 8:00 a.m. to 10:00 p.m. EST, and Saturdays, 8:00 a.m. to 3:30 p.m. EST. The TDD telephone number for the hearing impaired is (201) 222-4955. First Chicago Trust Company of New York, P.O. Box 2500, Jersey City, New Jersey 07303-2500. Telephone: (201) 324-0498 Fax: (201) 222-4892 Internet address: http://www.fctc.com E-mail address: fctc@em.fcnbd.com COMMON STOCK LISTING AND TRADING First Bank System Common Stock is listed and traded on the New York Stock Exchange under the ticker symbol FBS and also may be found under FtBkSy. DIVIDENDS First Bank System currently pays quarterly dividends on its Common Stock on or about the 15th of March, June, September and December, subject to prior Board approval. Shareholders may choose to have dividends electronically deposited directly into their bank accounts. For enrollment information, please call First Chicago at (800) 446-2617. DIVIDEND REINVESTMENT PLAN First Bank System shareholders can take advantage of a plan that provides automatic reinvestment of dividends and/or optional cash purchases of additional shares of FBS Common Stock up to $5,000 per calendar quarter. If you would like more information, please contact First Chicago Trust Company of New York, P.O. Box 2598, Jersey City, New Jersey 07303-2598, (800) 446-2617. INVESTMENT COMMUNITY CONTACTS John R. Danielson Senior Vice President, Investor and Corporate Relations (612) 973-2261 General Information, Investor and Corporate Relations (612) 973-2263 First Bank System, Inc. P.O. Box 522 Minneapolis, MN 55480 FINANCIAL INFORMATION FBS news and financial results are available by fax, mail and the internet. FAX. To access our fax-on-demand service, call (800) 758-5804. When asked, enter FBS's extension number, "312402." Enter "1" for the most current news release or "2" for a menu of recent releases. Enter your fax and telephone numbers as directed. The information will be faxed to you promptly. MAIL. On your request we will mail to you our quarterly earnings news releases. To be added to FBS's mailing list, please contact Investor and Corporate Relations, First Bank System, First Bank Place, 601 Second Avenue South, Minneapolis, Minnesota 55402-4302, (612) 973-2434. INTERNET. For information about FBS, including news and financial results, product information, and service locations, access FBS's home page on the World Wide Web. The address is http://www.fbs.com. EX-10.A 2 EXECUTIVE INCENTIVE PLAN FIRST BANK SYSTEM, INC. EXECUTIVE INCENTIVE PLAN (including amendments effective February 19, 1997) 1. ESTABLISHMENT. On February 15, 1995, the Board of Directors of FIRST BANK SYSTEM, INC., upon recommendation by the Compensation and Human Resources Committee of the Board of Directors, approved an executive incentive plan for executives as described herein, which plan shall be known as the "FIRST BANK SYSTEM, INC. EXECUTIVE INCENTIVE PLAN." This Plan shall be submitted for approval by the stockholders of First Bank System, Inc. at the 1995 Annual Meeting of Stockholders. This Plan shall be effective as of January 1, 1995, subject to its approval by the stockholders, and no benefits shall be issued pursuant thereto until after this Plan has been approved by the stockholders. 2. PURPOSE. The purpose of this Plan is to advance the interests of First Bank System, Inc. and its stockholders by attracting and retaining key employees, and by stimulating the efforts of such employees to contribute to the continued success and growth of the business of the Company. 3. DEFINITIONS. When the following terms are used herein with initial capital letters, they shall have the following meanings: 3.1. BASE SALARY - a Participant's annualized base salary, as determined by the Committee, as of the last day of a Performance Period. 3.2. CODE - the Internal Revenue Code of 1986, as it may be amended from time to time, and any proposed, temporary or final Treasury Regulations promulgated thereunder. 3.3. COMMITTEE - the Compensation and Human Resources Committee of the Board of Directors of the Company designated by such Board to administer the Plan which shall consist of members appointed from time to time by the Board of Directors. Each member of the Committee shall be an "outside director" within the meaning of Section 162(m) of the Code. 3.4. COMPANY - First Bank System, Inc. a Delaware corporation, and any of its subsidiaries or affiliates, whether now or hereafter established. 3.5. MAXIMUM AWARD - a dollar amount equal to thirty five one-hundredths of one percent (0.35%) of the Company's Operating Earnings for the Performance Period. 3.6. OPERATING EARNINGS - the Company's net income computed in accordance with generally accepted accounting principles as reported in the Company's consolidated financial statements for the applicable Performance Period, adjusted to eliminate (1) the cumulative effect of changes in generally accepted accounting principles; (2) gains and losses from discontinued operations; (3) extraordinary gains or losses; and (4) any other unusual or nonrecurring gains or losses which are separately identified and quantified in the Company's financial statements, including merger related charges. 3.7. PARTICIPANT - any executive officer of the Company who is also an "officer" within the meaning of Section 16(a) of the Securities Exchange Act of 1934 and who is designated by the Committee, as provided for herein, to participate with respect to a Performance Period as a Participant in this Plan. Directors of the Company who are not also employees of the Company are not eligible to participate in the Plan. 3.8. PERFORMANCE THRESHOLD - the preestablished, objective performance goals selected by the Committee with respect to each Performance Period and which shall be based solely on ROA. 3.9. PERFORMANCE PERIOD - each consecutive twelve-month period commencing on January 1 of each year during the term of this Plan and coinciding with the Company's fiscal year. 3.10. PLAN - this FIRST BANK SYSTEM, INC. EXECUTIVE INCENTIVE PLAN. 3.11. RETURN ON ASSETS OR ROA - a percentage computed as the Company's Operating Earnings for its fiscal year divided by the Company's consolidated total average assets for such fiscal year. The Company's Return on Assets shall be computed in accordance with generally accepted accounting principles, as in effect from time to time, as reported in the Company's consolidated financial statements for the applicable Performance Period, adjusted in the same fashion that Operating Earnings are to be adjusted as provided in Section 3.6 hereof. 3.12. TARGET AWARD - a percentage, which may be greater or less than 100%, as determined by the Committee with respect to each Performance Period. 4. ADMINISTRATION. 4.1. POWER AND AUTHORITY OF COMMITTEE. The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to all the applicable provisions of the Plan and applicable law, to (a) establish, amend, suspend or waive such rules and regulations and appoint such agents as it deems necessary or advisable for the proper administration of the Plan, (b) construe, interpret and administer the Plan and any instrument or agreement relating to the Plan, and (c) make all other determinations and take all other actions necessary or advisable for the administration of the Plan. Unless otherwise expressly provided in the Plan, each determination made and each action taken by the Committee pursuant to the Plan or any instrument or agreement relating to the Plan (x) shall be within the sole discretion of the Committee, (y) may be made at any time and (z) shall be final, binding and conclusive for all purposes on all persons, including, but not limited to, Participants and their legal representatives and beneficiaries, and employees of the Company. 4.2. DETERMINATIONS MADE PRIOR TO EACH PERFORMANCE PERIOD. At any time ending on or before the 90th day of each Performance Period, the Committee shall: (a) designate all Participants and their Target Awards for such Performance Period; and (b) establish one or more Performance Thresholds (including a minimum level of achievement), based solely on ROA. 4.3. CERTIFICATION. Following the close of each Performance Period and prior to payment of any amount to any Participant under the Plan, the Committee must certify in writing the Company's Operating Earnings and ROA for that Performance Period and certify as to the attainment of all other factors upon which any payments to a Participant for that Performance Period are to be based. 4.4. STOCKHOLDER APPROVAL. The material terms of this Plan shall be disclosed to and approved by stockholders of the Company in accordance with Section 162(m) of the Code. No amount shall be paid to any Participant under this Plan unless such stockholder approval has been obtained. 5. INCENTIVE PAYMENT. 5.1. FORMULA. Each Participant shall receive a bonus payment for each Performance Period in an amount not greater than: (a) the Participant's Base Pay for the Performance Period, multiplied by (b) the Participant's Target Award for the Performance Period; provided, however, that in the event that the Company's ROA for a Performance Period is equal to or in excess of a designated Performance Threshold for that Performance Period, then each Participant shall be entitled to a bonus payment for that Performance Period which is not greater than the Maximum Award for that Performance Period. 5.2. LIMITATIONS. (a) MINIMUM ROA ACHIEVEMENT. In no event shall any Participant receive any payment hereunder unless the Company's ROA for a Performance Period is at least equal to a minimum percentage as determined by the Committee for that Performance Period. (b) DISCRETIONARY REDUCTION. The Committee shall retain sole and full discretion to reduce by any amount the incentive payment otherwise payable to any Participant under this Plan. (c) CONTINUED EMPLOYMENT. Except as otherwise provided by the Committee, no incentive payment under this Plan with respect to a Performance Period shall be paid or owed to a Participant whose employment terminates prior to the last day of such Performance Period. (d) MAXIMUM PAYMENTS. No Participant shall receive a payment under this Plan for any Performance Period in excess of the Maximum Award for that Performance Period. 6. BENEFIT PAYMENTS. 6.1. TIME AND FORM OF PAYMENTS. Subject to any deferred compensation election pursuant to any such plans of the Company applicable hereto, benefits shall be paid to the Participant in a single lump sum cash payment as soon as administratively feasible upon the completion of a Performance Period, after the Committee has certified that the Company Performance Threshold has been attained, determined the Maximum Award for that Performance Period and made the other certifications provided for in Section 4.3 hereof. 6.2. NONTRANSFERABILITY. Participants and beneficiaries shall not have the right to assign, encumber or otherwise anticipate the payments to be made under this Plan, and the benefits provided hereunder shall not be subject to seizure for payment of any debts or judgments against any Participant or any beneficiary. 6.3. TAX WITHHOLDING. In order to comply with all applicable federal or state income, social security, payroll, withholding or other tax laws or regulations, the Committee may establish such policy or policies as it deems appropriate with respect to such laws and regulations, including without limitation, the establishment of policies to ensure that all applicable federal or state income, social security, payroll, withholding or other taxes, which are the sole and absolute responsibility of the Participant, are withheld or collected from such Participant. 7. AMENDMENT AND TERMINATION; ADJUSTMENTS. Except to the extent prohibited by applicable law and unless otherwise expressly provided in the Plan: (a) AMENDMENTS TO THE PLAN. The Committee may amend this Plan prospectively at any time and for any reason deemed sufficient by it without notice to any person affected by this Plan and may likewise terminate or curtail the benefits of this Plan both with regard to persons expecting to receive benefits hereunder in the future and persons already receiving benefits at the time of such action. (b) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent it shall deem desirable to carry the Plan into effect. 8. MISCELLANEOUS. 8.1. EFFECTIVE DATE. This Plan shall be deemed effective, subject to stockholder approval, as of January 1, 1995. 8.2. HEADINGS. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. 8.3. APPLICABILITY TO SUCCESSORS. This Plan shall be binding upon and inure to the benefit of the Company and each Participant, the successors and assigns of the Company, and the beneficiaries, personal representatives and heirs of each Participant. If the Company becomes a party to any merger, consolidation or reorganization, this Plan shall remain in full force and effect as an obligation of the Company or its successors in interest. 8.4. EMPLOYMENT RIGHTS AND OTHER BENEFIT PROGRAMS. The provisions of this Plan shall not give any Participant any right to be retained in the employment of the Company. In the absence of any specific agreement to the contrary, this Plan shall not affect any right of the Company, or of any affiliate of the Company, to terminate, with or without cause, any Participant's employment at any time. This Plan shall not replace any contract of employment, whether oral or written, between the Company and any Participant, but shall be considered a supplement thereto. This Plan is in addition to, and not in lieu of, any other employee benefit plan or program in which any Participant may be or become eligible to participate by reason of employment with the Company. No compensation or benefit awarded to or realized by any Participant under the Plan shall be included for the purpose of computing such Participant's compensation under any compensation-based retirement, disability, or similar plan of the Company unless required by law or otherwise provided by such other plan. 8.5. NO TRUST OR FUND CREATED. This Plan shall not create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any affiliate pursuant to this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company or of any affiliate. 8.6. GOVERNING LAW. The validity, construction and effect of the Plan or any incentive payment payable under the Plan shall be determined in accordance with the laws of the State of Minnesota. 8.7. SEVERABILITY. If any provision of the Plan is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan, such provision shall be stricken as to such jurisdiction, and the remainder of the Plan shall remain in full force and effect. 8.8. QUALIFIED PERFORMANCE-BASED COMPENSATION. All of the terms and conditions of the Plan shall be interpreted in such a fashion as to qualify all compensation paid hereunder as "qualified performance-based compensation" within the meaning of Section 162(m) of the Code. EX-10.B 3 EXECUTIVE RETIREMENT PLAN COMPOSITE COPY FIRST BANK SYSTEM, INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Effective January 1, 1992 And As Amended By The FIRST AMENDMENT Adopted October 21, 1991 But Effective January 1, 1992 The SECOND AMENDMENT Adopted January 20, 1993 But Effective January 1, 1992 The THIRD AMENDMENT Adopted January 18, 1995 But Effective January 1, 1992 and January 1, 1995 The FOURTH AMENDMENT Adopted July 17, 1996 And Effective July 17, 1996 NOTE: Material added or modified by the First, Second, Third and Fourth Amendments is shown in italics. Appendix B was added by the Fourth Amendment effective July 17, 1996 but is not shown in italics. Modified section numbers are not generally shown in italics. FIRST BANK SYSTEM, INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Effective January 1, 1992 TABLE OF CONTENTS PAGE SECTION 1. INTRODUCTION ................................................. 1 1.1. History 1.2. Definitions 1.2.1. Accrual Percentage 1.2.2. Accrued SERP Benefit 1.2.3. Actuarial Equivalent 1.2.4. Affiliate 1.2.5. Average Compensation 1.2.6. Beneficiary 1.2.7. CAP 1.2.8. Change in Control 1.2.9. Compensation 1.2.10. Effective Date 1.2.11. Employer 1.2.12. FBS 1.2.13. Normal Retirement Age 1.2.14. Organization Committee 1.2.15. Participant 1.2.16. Plan 1.2.17. Plan Statement 1.2.18. PRA 1.2.19. Principal Sponsor 1.2.20. Prior Plans' Offset 1.2.21. Projected Average Compensation 1.2.22. Projected Compensation 1.2.23. Projected PIA 1.2.24. Projected PRA Account 1.2.25. Projected PRA Annuity 1.2.26. SERP Benefit 1.2.27. Service 1.2.28. Social Security Benefit 1.2.29. Survivor Benefit 1.2.30. Termination of Employment 1.3. Rules of Interpretation SECTION 2. ELIGIBILITY AND PARTICIPATION ................................ 9 2.1. General Eligibility Rule 2.2. Specific Exclusion SECTION 3. PARTICIPANT'S BENEFIT ........................................ 10 3.1. SERP Benefit 3.2. Suspension of Benefits 3.3. Change in Control Distributions 3.3.1. Accelerated Determination of Participant Status 3.3.2. Accelerated Payment Upon Request 3.3.3. Forfeitures 3.4. Other Accelerated Distributions 3.4.1. When Available 3.4.2. Amount 3.4.3. Forfeitures 3.5. Effect on Service SECTION 4. FORM OF PAYMENT .............................................. 13 4.1. Optional Forms of Payment 4.2. Payments in Case of Incompetency or Disability 4.3. Small Benefits SECTION 5. DEATH BENEFITS ............................................... 14 5.1. Death Benefits 5.1.1. Death Before SERP Benefit Commencement 5.1.2. Death After SERP Benefit Commencement 5.2. Designation of Beneficiaries 5.2.1. Right to Designate 5.2.2. Failure of Designation 5.2.3. Disclaimers by Beneficiaries 5.2.4. Definitions 5.2.5. Special Rules 5.2.6. No Spousal Rights 5.3. Death Prior to Full Distribution SECTION 6. FUNDING OF PLAN .............................................. 17 6.1. Unfunded Agreement 6.2. Spendthrift Provision SECTION 7. AMENDMENT AND TERMINATION ................................... 18 SECTION 8. DETERMINATIONS-- RULES AND REGULATIONS ...................... 19 8.1. Determinations 8.2. Rules and Regulations 8.3. Method of Executing Instruments 8.4. Claims Procedure 8.4.1. Original Claim 8.4.2. Claims Review Procedure 8.4.3. General Rules 8.5. Information Furnished by Participants SECTION 9. PLAN ADMINISTRATION .......................................... 21 9.1. Principal Sponsor 9.1.1. Officers 9.1.2. Chief Executive Officer 9.1.3. Board of Directors 9.2. Conflict of Interest 9.3. Administrator 9.4. Service of Process 9.5. IRC and ERISA Status SECTION 10. DISCLAIMERS .................................................. 23 10.1. Term of Employment 10.2. Source of Payment 10.3. Delegation SCHEDULE I .............................................................. SI-1 SCHEDULE II ............................................................. SII-1 APPENDIX A -- ACTUARIALLY EQUIVALENT BENEFITS ........................... A-1 APPENDIX B -- CHANGE IN CONTROL DEFINITIONS ............................. B-1 FIRST BANK SYSTEM, INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN SECTION 1 INTRODUCTION FOURTH AMENDMENT-EFFECTIVE JULY 17, 1996 1.1. HISTORY. First Bank System, Inc., a Delaware corporation (hereinafter "Principal Sponsor") and certain subsidiaries of the Principal Sponsor have heretofore adopted and currently maintain a tax qualified defined benefit ("cash balance") pension plan known as the "First Bank System, Inc. Personal Retirement Account" (hereinafter "PRA") and a tax qualified defined contribution profit sharing plan (including a qualified cash or deferred arrangement, sometimes called a ss.401(k) feature) known as the First Bank System, Inc. CapitaL Accumulation Plan (hereinafter "CAP") for the purpose of developing retirement benefits for employees. PRA and CAP are subject to the Employee Retirement Income Security Act of 1974, as amended (hereinafter "ERISA") and they are intended to qualify under section 401(a) of the Internal Revenue Code of 1986, as amended (hereinafter "Code"). By operation of section 401(a) of the Code, benefits which may be paid under PRA are restricted so that they do not exceed certain maximum limitations established under section 415 of the Code. For benefits accruing under PRA during plan years beginning after December 31, 1988, the maximum amount of annual compensation which may be taken into account for any employee may not exceed a fixed dollar amount which is established under section 401(a)(17) of the Code. Regulations issued under section 401(a)(4) of the Code limit the amounts and types of remuneration that can be taken into account under PRA without engaging in discrimination in favor of highly compensated employees which is prohibited for tax qualified plans under the Code. ERISA authorizes the establishment of an unfunded, nonqualified plan of deferred compensation maintained by an employer solely for the purpose of providing benefits for employees which are in excess of the limitations on benefits imposed on qualified defined benefit plans by section 415 of the Code. ERISA also authorizes the establishment of an unfunded, nonqualified plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. To make provision for such benefits, effective January 1, 1984, the Principal Sponsor adopted the "First Bank System, Inc. Excess Benefit Plan" to provide benefits not otherwise available under PRA. Effective January 1, 1989, that Plan was amended and restated by the adoption of the "First Bank System, Inc. Excess Benefit Plan (1989 Restatement)." It is in the interest of this corporation to provide benefits to certain executive employees in excess of those available under PRA, to provide the full allocations for those certain employees under PRA without regard to the limitations on benefits imposed by section 415, 401(a)(17) and 401(a)(4) of the Code, to coordinate the benefits provided to them under PRA and the Excess Plan and that an unfunded nonqualified deferred compensation plan be maintained for those purposes. Therefore, this corporation does hereby establish this Plan, the terms and conditions of which are as follows. 1.2. DEFINITIONS. Words used herein with initial capital letters which are also defined in Section 1 of PRA shall have the meanings assigned in PRA unless a contrary intention is expressed herein. When used herein with initial capital letters, the following words have the following meanings: 1.2.1. ACCRUAL PERCENTAGE -- a number not greater than one (expressed as either a decimal or a percentage) determined as of a specified date which is equal to (a) divided by (b) divided by (c): (a) Fifty-five percent (55%) of the Participant's Projected Average Compensation determined as of such specified date, minus the total of: (i) The Participant's Projected PRA Annuity determined as of such specified date, and (ii) Seventy-five percent (75%) of the Participant's Projected PIA determined as of such specified date, and (iii) The Participant's Prior Plans' Offset determined as of such specified date. (b) The Participant's Projected Average Compensation determined as of such specified date. SECOND AMENDMENT-EFFECTIVE JANUARY 1, 1992 (c) The number (never less than one) of total possible years of continuous and full time service with the Employer which the Participant could have completed from his or her most recent date of hire to his or her Normal Retirement Age. TO THE SAME EXTENT THAT THE ORGANIZATION COMMITTEE DETERMINES UNDER SECTION 1.2.11 OF THE PLAN STATEMENT THAT A BUSINESS ENTITY WAS AN EMPLOYER PRIOR TO THE DATE ON WHICH THE BUSINESS ENTITY FIRST BECAME AN EMPLOYER, THE BUSINESS ENTITY SHALL BE CONSIDERED AN EMPLOYER FOR THE PURPOSES OF THIS SUBPARAGRAPH. The Accrual Percentage may decrease from time to time. THIRD AMENDMENT-EFFECTIVE JANUARY 1, 1995 FOURTH AMENDMENT-EFFECTIVE JULY 17, 1996 1.2.2. ACCRUED SERP BENEFIT -- A DOLLAR AMOUNT DETERMINED AS OF A SPECIFIED DATE WHICH IS EQUAL TO THE PRODUCT OF (a) MULTIPLIED BY (b) MULTIPLIED BY (c): (a) THE PARTICIPANT'S ACCRUAL PERCENTAGE DETERMINED AS OF SUCH SPECIFIED DATE. (b) THE PARTICIPANT'S AVERAGE COMPENSATION DETERMINED AS OF SUCH SPECIFIED DATE. (c) THE NUMBER (WHICH MAY BE LESS THAN ONE, BUT MAY NOT EXCEED THE NUMBER OF YEARS DETERMINED UNDER SECTION 1.2.1(c)) OF TOTAL YEARS OF CONTINUOUS AND FULL-TIME SERVICE WITH THE EMPLOYER WHICH THE PARTICIPANT HAS COMPLETED FROM HIS OR HER MOST RECENT DATE OF HIRE TO THE DATE THE ACCRUED SERP BENEFIT IS DETERMINED; PROVIDED, HOWEVER, THAT A PARTICIPANT MAY RECEIVE CREDIT FOR ADDITIONAL YEARS OF SERVICE, SOLELY FOR PURPOSES OF THIS SECTION 1.2.2(c), UNDER SUBPARAGRAPH (i), (ii) OR (iii) BELOW, USING THE GREATEST NUMBER IF MORE THAN ONE APPLIES, BUT NOT UNDER MORE THAN ONE SUBPARAGRAPH: (i) IF A PARTICIPANT ATTAINS AGE 60 WHILE EMPLOYED BY AN EMPLOYER, FIVE ADDITIONAL YEARS OF SERVICE SHALL BE ADDED TO THE YEARS OF CONTINUOUS AND FULL-TIME SERVICE OF SUCH PARTICIPANT. (ii) IF A PARTICIPANT IS ENTITLED TO RECEIVE SEVERANCE PAYMENTS UNDER A SEVERANCE PAY PLAN MAINTAINED BY AN EMPLOYER AND SUCH PAYMENTS ARE MADE ON ACCOUNT OF A CHANGE IN CONTROL, THERE SHALL BE INCLUDED WITHIN THE YEARS OF CONTINUOUS AND FULL-TIME SERVICE OF SUCH PARTICIPANT THE NUMBER OF YEARS AND FRACTIONS OF YEARS OF SUCH PAYMENTS (EVEN IF SUCH PAYMENTS ARE PAID IN A LUMP SUM OR OTHER ACCELERATED MANNER). (iii) A PARTICIPANT WHO TERMINATES EMPLOYMENT SHALL BE CREDITED WITH ADDITIONAL YEARS OF SERVICE TO THE EXTENT SUCH CREDIT IS EXPRESSLY PROVIDED UNDER THE TERMS OF AN EMPLOYMENT AGREEMENT OR A CHANGE IN CONTROL SEVERANCE PLAN OR AGREEMENT BETWEEN THE PARTICIPANT AND AN EMPLOYER. THE ACCRUED SERP BENEFIT MAY DECREASE FROM TIME TO TIME. TO THE SAME EXTENT THAT THE ORGANIZATION COMMITTEE DETERMINES UNDER SECTION 1.2.11 OF THE PLAN STATEMENT THAT A BUSINESS ENTITY WAS AN EMPLOYER PRIOR TO THE DATE ON WHICH THE BUSINESS ENTITY FIRST BECAME AN EMPLOYER, THE BUSINESS ENTITY SHALL BE CONSIDERED AN EMPLOYER FOR THE PURPOSES OF THIS SUBPARAGRAPH. 1.2.3. ACTUARIAL EQUIVALENT -- a benefit of equivalent value computed on the basis of actuarial tables, factors and assumptions set forth in the Appendix A to this Plan Statement. 1.2.4. AFFILIATE -- a business entity which is affiliated in ownership with the Principal Sponsor or an Employer and is recognized as an Affiliate by the Principal Sponsor for the purposes of this Plan. 1.2.5. AVERAGE COMPENSATION -- a dollar amount which is the annual average of the Participant's Compensation for each of the thirty-six (36) calendar months ending with the last day of the calendar month immediately before the date the Average Compensation is determined. Average Compensation may decrease from time to time. For this purpose, short term annual incentive compensation which has been determined in fact by the Employer before the date as of which the Average Compensation is determined shall be treated as if paid in fact before such event. If it is not so determined before such date, it shall be wholly disregarded for the purposes of this Plan. For this purpose, short term annual incentive compensation, although paid less frequently, shall be evenly allocated to the calendar months with respect to which it is paid. Notwithstanding anything apparently to the contrary, in determining Average Compensation, there shall be taken into account the short term annual incentive compensation attributable to the thirty-six (36) calendar months preceding the date as of which the Average Compensation is determined or, if it would produce a greater Average Compensation, the short term annual incentive compensation attributable to the thirty-six (36) calendar months ending with the December 31 preceding the date as of which the Average Compensation is determined. 1.2.6. BENEFICIARY -- a person designated by a Participant (or automatically by operation of this Plan Statement) to receive the Survivor Benefit in the event of the Participant's death under circumstances when such benefit is payable under Section 5. A person so designated shall not be considered a Beneficiary until the death of the Participant. 1.2.7. CAP -- the tax-qualified defined contribution ("ss.401(k)") profit sharing plan known as the FIRST BANK SYSTEM, INC. CAPITAL ACCUMULATION PLAN, as the same is existing and may be amended from time to time. FOURTH AMENDMENT-EFFECTIVE JULY 17, 1996 1.2.8. CHANGE IN CONTROL -- THE DEFINITION OF CHANGE IN CONTROL, AS WELL AS CERTAIN OTHER DEFINITIONS RELATING TO CHANGE IN CONTROL USED HEREIN, APPEAR IN APPENDIX B TO THIS PLAN STATEMENT. 1.2.9. COMPENSATION -- a dollar amount which is the annual amount of base salary and short term annual incentive compensation paid to the Participant for services rendered as an employee of the Employer. Compensation may decrease from time to time. (a) CAP INCOME. Compensation shall include amounts which the Participant would have received and would have been included as Compensation but for section 402(a)(8) of the Code. (b) CAFETERIA PLAN CONTRIBUTIONS. Compensation shall include amounts which the Participant would have received and which would have been included as Compensation but for section 125 of the Code. (c) DEFERRED COMPENSATION. Notwithstanding the foregoing, Compensation shall include amounts of base salary and short term annual incentive compensation which were deferred at the election of the Participant or otherwise under a nonqualified plan of deferred compensation at the time such amounts would have been paid but for such election to defer and not at the time actually received by the Participant. 1.2.10. EFFECTIVE DATE -- January 1, 1992. SECOND AMENDMENT-EFFECTIVE JANUARY 1, 1992 1.2.11. EMPLOYER -- the Principal Sponsor and any business entity affiliated with the Principal Sponsor that employs persons who are designated for participation in this Plan. UNLESS THE ORGANIZATION COMMITTEE DETERMINES OTHERWISE, NO BUSINESS ENTITY SHALL BE CONSIDERED AN EMPLOYER FOR ANY PERIOD OF TIME PRIOR TO THE DATE ON WHICH THE BUSINESS ENTITY FIRST BECAME AN EMPLOYER. 1.2.12. FBS -- FIRST BANK SYSTEM, INC., a Delaware corporation. 1.2.13. NORMAL RETIREMENT AGE -- a date determined as of a specified date: (a) for a Participant who is not yet age sixty-five (65) years as of the specified date, the last day of the calendar month in which the Participant will attain age sixty-five (65) years, or (b) for a Participant who is age sixty-five (65) years or older as of the specified date, the last day of the calendar month immediately preceding the date as of which the Normal Retirement Age is being determined. 1.2.14. ORGANIZATION COMMITTEE -- the committee of that name constituted by the Board of Directors of the Principal Sponsor. 1.2.15. PARTICIPANT -- an employee of an Employer who becomes a Participant in the Plan in accordance with the provisions of Section 2. An employee who has become a Participant shall be considered to continue as a Participant in the Plan until the date of the Participant's death or, if earlier, the date when the Participant is no longer employed by an Employer and upon which the Participant no longer has any SERP Benefit under the Plan (that is, the Participant has received a distribution of all of the Participant's SERP Benefit or the Participant's SERP Benefit has been forfeited). 1.2.16. PLAN -- the nonqualified deferred compensation plan of the Employer established for the benefit of employees eligible to participate therein, as first set forth in this Plan Statement. (As used herein, "Plan" refers to the legal entity established by an Employer and not to the document pursuant to which the Plan is maintained. That document is referred to herein as the "Plan Statement.") The Plan shall be referred to as the "FIRST BANK SYSTEM, INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN." 1.2.17. PLAN STATEMENT -- this document entitled "FIRST BANK SYSTEM, INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN," as adopted by the Principal Sponsor effective as of January 1, 1992, as the same may be amended from time to time thereafter. 1.2.18. PRA -- the tax-qualified defined benefit ("cash balance") pension plan known as the FIRST BANK SYSTEM, INC. PERSONAL RETIREMENT ACCOUNT, as the same is existing and amended from time to time. FOURTH AMENDMENT-EFFECTIVE JULY 17, 1996 1.2.19. PRINCIPAL SPONSOR -- FIRST BANK SYSTEM, INC., a Delaware corporation, OR ANY SUCCESSOR THERETO. SECOND AMENDMENT-EFFECTIVE JANUARY 1, 1992 1.2.20. PRIOR PLANS' OFFSET -- a dollar amount equal to the product of the Participant's Projected Average Compensation multiplied by the factor for that Participant determined from Schedule II to this Plan Statement. The factor for the participant shall be determined by reference to the Participant's age at his or her most recent date of hire by the Employer. TO THE SAME EXTENT THAT THE ORGANIZATION COMMITTEE DETERMINES UNDER SECTION 1.2.11 OF THE PLAN STATEMENT THAT A BUSINESS ENTITY WAS AN EMPLOYER PRIOR TO THE DATE ON WHICH THE BUSINESS ENTITY FIRST BECAME AN EMPLOYER, THE BUSINESS ENTITY SHALL BE CONSIDERED AN EMPLOYER FOR THE PURPOSES OF THIS PARAGRAPH. 1.2.21. PROJECTED AVERAGE COMPENSATION -- a dollar amount which is the average of the Participant's Compensation or Projected Compensation or both for each of the three (3) calendar years ending with: (a) if the date as of which the Projected Average Compensation is determined is before the Participant's Normal Retirement Age, the calendar year in which the Participant would attain Normal Retirement Age, or (b) if the date as of which the Projected Average Compensation is determined is on or after the Participant's Normal Retirement Age, the Plan Year in which the Participant's SERP Benefit is determined. Projected Average Compensation may decrease from time to time. 1.2.22. PROJECTED COMPENSATION -- a separate dollar amount determined for each Plan Year commencing after the date as of which Projected Compensation is determined, assuming: (a) the Participant continues to earn short-term incentive payments at the target levels, and (b) the annual rate of the Participant's Compensation as of the first day of the Plan Year in which it is determined increased at four percent (4%) per annum, compounded annually, on the first day of each successive Plan Year. Projected Compensation may decrease from time to time. 1.2.23. PROJECTED PIA -- the dollar amount of annual old age Social Security benefit expected to be paid to the Participant at the Participant's Normal Retirement Age, assuming: (a) that the Participant has had and continues to have taxable wages at or above the taxable wage base for Social Security purposes, (b) that the maximum Social Security taxable wage base increases at the rate at which Projected Compensation is deemed to increase under this Plan Statement, FIRST AMENDMENT-EFFECTIVE JANUARY 1, 1992 (c) THAT THE CONSUMER PRICE INDEX INCREASES AT ONE PERCENTAGE POINT LESS THAN THE RATE AT WHICH PROJECTED COMPENSATION IS DEEMED TO INCREASE UNDER THIS PLAN STATEMENT. 1.2.24. PROJECTED PRA ACCOUNT -- a dollar amount equal to the Account balance the Participant would be expected to have under PRA at his or her Normal Retirement Age based on the following assumptions: (a) The initial account balance shall be the balance determined under PRA as of the last day of the Plan Year immediately preceding the date as of which the Projected PRA Account is determined (together with such amounts as would have been included in such balance if there were no limitations on benefits under section 415 of the Internal Revenue Code and no limitations on compensation under section 401(a)(17) of the Internal Revenue Code). (b) The Participant shall receive increases in recognized compensation at the rate Projected Compensation is deemed to increase under this Plan Statement. (c) Compensation credits under PRA shall be made under the terms of PRA as they exist on the last day of the Plan Year immediately preceding the date as of which the Projected PRA Account is determined. (d) Interest credits under PRA shall be made at an annual rate that is 3 percentage points greater than the rate at which Projected Compensation is deemed to increase under this Plan Statement. (e) Compensation credits and interest credits under PRA have been and shall be made as if there were no limitations on benefits under section 415 of the Internal Revenue Code and no limitations on compensation under section 401(a)(17) of the Internal Revenue Code. SECOND AMENDMENT-EFFECTIVE JANUARY 1, 1992 (f) SUBJECT TO THE FOLLOWING, THE PARTICIPANT'S INITIAL ACCOUNT BALANCE SHALL NOT INCLUDE ANY AMOUNTS ATTRIBUTABLE TO SERVICE WITH A BUSINESS ENTITY PRIOR TO THE DATE THE BUSINESS ENTITY FIRST BECAME AN EMPLOYER. TO THE SAME EXTENT THAT THE ORGANIZATION COMMITTEE DETERMINES UNDER SECTION 1.2.11 OF THE PLAN STATEMENT THAT A BUSINESS ENTITY WAS AN EMPLOYER PRIOR TO THE DATE ON WHICH THE BUSINESS ENTITY FIRST BECAME AN EMPLOYER, AMOUNTS ATTRIBUTABLE TO SERVICE WITH THE BUSINESS ENTITY SHALL BE INCLUDED IN THE PARTICIPANT'S INITIAL ACCOUNT BALANCE. (g) Projected PRA Account may decrease from time to time. 1.2.25. PROJECTED PRA ANNUITY -- a dollar amount equal to the Actuarial Equivalent amount of single life annuity payable at Normal Retirement Age which the Projected PRA Account will produce. THIRD AMENDMENT-EFFECTIVE JANUARY 1, 1995 1.2.26. SERP BENEFIT -- A SINGLE, LUMP SUM, DOLLAR AMOUNT WHICH IS EQUAL TO THE ACTUARIAL EQUIVALENT PRESENT VALUE OF THE PARTICIPANT'S ACCRUED SERP BENEFIT PAYABLE AS A SINGLE LIFE ANNUITY COMMENCING AT THE PARTICIPANT'S NORMAL RETIREMENT AGE. THE SERP BENEFIT MAY DECREASE FROM TIME TO TIME. THE SERP BENEFIT MAY BE PAID IN ANY OF THE OPTIONAL FORMS OF PAYMENT WHICH ARE PERMITTED UNDER SECTION 4.1. THIRD AMENDMENT-EFFECTIVE JANUARY 1, 1992 1.2.27. SERVICE -- a measure of an employee's service with all Employers and all Affiliates (stated as a number of years) which is equal to the number of years of "Vesting Service" determined under the rules of PRA (or any similar successor plan) as those rules may exist at the time the Participant's Service is being determined. For this purpose, however, there shall be taken into account only years of continuous and full time service with the Employer which the Participant has completed from his or her most recent date of hire. UNLESS THE ORGANIZATION COMMITTEE DETERMINES OTHERWISE, SERVICE WITH AN EMPLOYER PRIOR TO THE DATE ON WHICH THE EMPLOYER FIRST BECAME AN EMPLOYER SHALL NOT BE TAKEN INTO ACCOUNT FOR THIS PURPOSE. ANY DETERMINATION BY THE ORGANIZATION COMMITTEE UNDER THIS SECTION 1.2.27 SHALL BE INDEPENDENT OF ANY DETERMINATION BY THE ORGANIZATION COMMITTEE UNDER SECTION 1.2.11 OF THE PLAN STATEMENT. 1.2.28. SOCIAL SECURITY BENEFIT -- the approximate monthly amount available for the benefit of the Participant at age sixty-five (65) years, (including amounts available for spouses but excluding amounts available for other dependents), as an old age or disability insurance benefit under the provisions of Title II of the Federal Social Security Act in effect on the date of the Participant's Termination of Employment (or his or her sixty-fifth birthday if the Termination of Employment is later than the sixty-fifth birthday) whether or not payment of such amount in delayed, suspended or forfeited because of failure to apply, accepting other work, or any other similar reason within the control of the Participant (and determined without any increases in cost of living, legislated changes or any other similar factors). For this purpose, the Participant's spouse, if any, shall be deemed to be the same age as the Participant. Unless the Participant shall have furnished verified proof of wages before the earlier of his or her Termination of Employment or death, he or she shall be deemed to have had taxable wages at or above the taxable wage base in all years prior to the year of his or her Termination of Employment or death. The determination by the Principal Sponsor of the Social Security Benefit shall be final and binding upon all parties interested in this Plan. THIRD AMENDMENT-EFFECTIVE JANUARY 1, 1995 1.2.29. SURVIVOR BENEFIT -- the lump sum benefit OR SINGLE LIFE ANNUITY payable to the Beneficiary of a deceased Participant pursuant to Section 5.1. 1.2.30. TERMINATION OF EMPLOYMENT -- a complete severance of an employee's employment relationship with the Principal Sponsor, all Employers and all Affiliates, if any, for any reason other than the employee's death. A transfer from employment with an Employer to employment with an Affiliate of an Employer shall not constitute a Termination of Employment. If an Employer who is an Affiliate ceases to be an Affiliate because of a sale of substantially all the stock or assets of an Employer, then Participants who are employed by that Employer and who cease to be employed by the Principal Sponsor or that Employer on account of the sale of substantially all the stock or assets of that Employer shall be deemed to have thereby had a Termination of Employment for the purpose of making distributions from this Plan. 1.3. RULES OF INTERPRETATION. An individual shall be considered to have attained a given age on the individual's birthday for that age (and not on the day before). The birthday of any individual born on a February 29 shall be deemed to be February 28 in any year that is not a leap year. Notwithstanding any other provision of this Plan Statement or any election or designation made under the Plan, any individual who feloniously and intentionally kills a Participant shall be deemed for all purposes of this Plan and all elections and designations made under this Plan to have died before such Participant. A final judgment of conviction of felonious and intentional killing is conclusive for the purposes of this Section. In the absence of a conviction of felonious and intentional killing, the Principal Sponsor shall determine whether the killing was felonious and intentional for the purposes of this Section. Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine; and the words "hereof," "herein" or "hereunder" or other similar compounds of the word "here" shall mean and refer to the entire Plan Statement and not to any particular paragraph or Section of this Plan Statement unless the context clearly indicates to the contrary. The titles given to the various Sections of this Plan Statement are inserted for convenience of reference only and are not part of this Plan Statement, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof. Any reference in this Plan Statement to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation. This instrument has been executed and delivered in the State of Minnesota and has been drawn in conformity to the laws of that State and shall, except to the extent that federal law is controlling, be construed and enforced in accordance with the laws of the State of Minnesota. SECTION 2 ELIGIBILITY AND PARTICIPATION 2.1. GENERAL ELIGIBILITY RULE. The status of an employee as a Participant in this Plan shall be determined only as of Termination of Employment or death. Each employee who: (a) has not less than five (5) years of Service with FIRST BANK SYSTEM, INC. and its subsidiaries at Termination of Employment or death; and FIRST AMENDMENT-EFFECTIVE JANUARY 1, 1992 (b) WAS ACTIVELY EMPLOYED AT GRADE 18 OR ABOVE FOR AT LEAST ONE YEAR IMMEDIATELY PRIOR TO TERMINATION OF EMPLOYMENT OR DEATH; AND (c) is a "highly compensated employee" as defined in Code section 414(q) at the time of Termination of Employment or death; and (d) was actively employed by an Employer on or after January 1, 1992, shall be a Participant in this Plan at his or her Termination of Employment or death (subject to Section 2.2 and all other rules of this Plan Statement). Notwithstanding the foregoing, the Chief Executive Officer of the Principal Sponsor may exclude any individual who would otherwise be Participant from being a Participant and such determination shall be effective if such person receives notice of such determination in writing before his or her Termination of Employment. 2.2. SPECIFIC EXCLUSION. Notwithstanding anything apparently to the contrary in this Plan or in any written communication, summary, resolution or document or oral communication, no individual shall be a Participant in this Plan, develop benefits under this Plan or be entitled to receive benefits under this Plan (either for himself or his or her survivors) unless such individual is a member of a select group of management or highly compensated employees (as that expression is used in ERISA). If a court of competent jurisdiction, any representative of the U.S. Department of Labor or any other governmental, regulatory or similar body makes any direct or indirect, formal or informal, determination that an individual is not a member of a select group of management or highly compensated employees (as that expression is used in ERISA), such individual shall not be (and shall not have ever been) a Participant in this Plan at any time. If any person not so defined has been erroneously treated as a Participant in this Plan, upon discovery of such error such person's erroneous participation shall immediately terminate AB INITIO and upon demand such person shall be obligated to reimburse the Principal Sponsor for all amounts erroneously paid to him or her. SECTION 3 PARTICIPANT'S BENEFIT THIRD AMENDMENT-EFFECTIVE JANUARY 1, 1995 3.1. SERP BENEFIT. UPON TERMINATION OF EMPLOYMENT, THE PARTICIPANT SHALL RECEIVE A SERP BENEFIT DETERMINED AS OF THE DATE OF THE TERMINATION OF EMPLOYMENT. THE SERP BENEFIT SHALL BE PAID IN A SINGLE LUMP SUM UNLESS AN ELECTION OF AN OPTIONAL FORM OF PAYMENT IS IN EFFECT UNDER SECTION 4.1. PAYMENT SHALL BE MADE OR COMMENCED AS SOON AS MAY BE PRACTICABLE ON OR AFTER THE FIFTEENTH DAY OF THE SECOND CALENDAR MONTH FOLLOWING TERMINATION OF EMPLOYMENT. SUCH PAYMENT SHALL BE IN FULL AND COMPLETE DISCHARGE OF ALL BENEFITS PAYABLE TO, OR WITH RESPECT TO, THE PARTICIPANT UNDER THIS AGREEMENT INCLUDING, BUT NOT LIMITED TO, ANY SURVIVOR BENEFIT TO WHICH HIS OR HER BENEFICIARY MIGHT OTHERWISE HAVE BEEN ENTITLED. THE CONSENT OF A SPOUSE OR BENEFICIARY SHALL NOT BE REQUIRED BEFORE MAKING THE SINGLE LUMP SUM PAYMENT OR OPTIONAL FORM OF PAYMENT HEREIN DESCRIBED. 3.2. SUSPENSION OF BENEFITS. The SERP Benefit shall not be paid during employment, reemployment or continued employment under rules adopted by the Principal Sponsor. Until such rules are adopted, the suspension of benefits rules of PRA shall apply. FIRST AMENDMENT-EFFECTIVE JANUARY 1, 1992 FOURTH AMENDMENT-EFFECTIVE JULY 17, 1996 3.3. CHANGE IN CONTROL DISTRIBUTIONS. 3.3.1. ACCELERATED DETERMINATION OF PARTICIPANT STATUS. NOTWITHSTANDING ANYTHING APPARENTLY TO THE CONTRARY IN THIS PLAN STATEMENT, UPON THE OCCURRENCE OF A FULL CHANGE IN CONTROL ALL EMPLOYEES WHO WOULD BE CONSIDERED PARTICIPANTS IF THEY HAD A TERMINATION OF EMPLOYMENT ON THE DATE OF THE FULL CHANGE IN CONTROL SHALL BE CONSIDERED PARTICIPANTS; AND NOTWITHSTANDING ANYTHING APPARENTLY TO THE CONTRARY IN THIS PLAN STATEMENT, UPON THE OCCURRENCE OF A QUALIFYING TERMINATION ANY EMPLOYEE WHO WOULD BE CONSIDERED A PARTICIPANT IF SUCH EMPLOYEE HAD A TERMINATION OF EMPLOYMENT ON THE DATE OF SUCH QUALIFYING TERMINATION SHALL BE A PARTICIPANT. THIS DETERMINATION SHALL BE MADE WITHOUT REGARD TO WHETHER SUCH EMPLOYEES HAVE FIVE (5) OR MORE YEARS OF SERVICE WITH FIRST BANK SYSTEM, INC. AND ITS SUBSIDIARIES AT THE DATE OF SUCH FULL CHANGE IN CONTROL OR QUALIFYING TERMINATION AND WITHOUT REGARD TO WHETHER SUCH EMPLOYEES WERE ACTIVELY EMPLOYED AT GRADE 18 OR ABOVE FOR AT LEAST ONE YEAR IMMEDIATELY PRIOR TO THE DATE OF SUCH FULL CHANGE IN CONTROL OR QUALIFYING TERMINATION (IF SUCH EMPLOYEES WERE ACTIVELY EMPLOYED AT GRADE 18 OR ABOVE IMMEDIATELY PRIOR TO THE DATE OF SUCH FULL CHANGE IN CONTROL OR QUALIFYING TERMINATION). THIRD AMENDMENT-EFFECTIVE JANUARY 1, 1995 FOURTH AMENDMENT-EFFECTIVE JULY 17, 1996 3.3.2. ACCELERATED PAYMENT UPON REQUEST. A PARTICIPANT WHO HAS NOT YET COMMENCED TO RECEIVE PAYMENTS OF THE SERP BENEFIT MAY RECEIVE A DISTRIBUTION OF HIS OR HER ENTIRE SERP BENEFIT (AFTER REDUCTION FOR THE FORFEITURE DESCRIBED IN SECTION 3.4.3) IF A FULL CHANGE IN CONTROL OR A QUALIFYING TERMINATION HAS OCCURRED. FIRST AMENDMENT-EFFECTIVE JANUARY 1, 1992 3.3.3. FORFEITURES. UPON THE APPROVAL OF A CHANGE IN CONTROL DISTRIBUTION, THERE SHALL BE IRREVOCABLY FORFEITED FROM THE SERP BENEFIT OF THE PARTICIPANT AN AMOUNT EQUAL TO FIVE PERCENT (5%) OF THE SERP BENEFIT. A PARTICIPANT RECEIVING THIS DISTRIBUTION OF THE SERP BENEFIT ON ACCOUNT OF A CHANGE IN CONTROL SHALL NOT THEREAFTER EVER BE A PARTICIPANT IN THE PLAN AGAIN. THIRD AMENDMENT-EFFECTIVE JANUARY 1, 1995 3.4. OTHER ACCELERATED DISTRIBUTIONS. 3.4.1. WHEN AVAILABLE. AT ANY TIME FOLLOWING THE PARTICIPANT'S TERMINATION OF EMPLOYMENT, THE PARTICIPANT OR THE BENEFICIARY OF A DECEASED PARTICIPANT WHO HAS ELECTED AN OPTIONAL FORM OF PAYMENT UNDER SECTION 4.1 MAY ELECT TO RECEIVE AN ACCELERATED DISTRIBUTION OF THE SERP BENEFIT IN A LUMP SUM PAYMENT DETERMINED UNDER THIS SECTION 3.4 PAYABLE SIXTY (60) DAYS AFTER GIVING THE PRINCIPAL SPONSOR WRITTEN NOTICE OF THE ELECTION ON A FORM FURNISHED BY AND FILED WITH THE PRINCIPAL SPONSOR. IN THE EVENT OF THE SEVERE FINANCIAL HARDSHIP OF A PARTICIPANT FOLLOWING TERMINATION OF EMPLOYMENT OR OF A BENEFICIARY, THE PARTICIPANT OR BENEFICIARY MAY ELECT TO RECEIVE AN ACCELERATED DISTRIBUTION OF PART OF THE SERP BENEFIT IN A LUMP SUM PAYMENT DETERMINED UNDER THIS SECTION 3.4. THE PRINCIPAL SPONSOR SHALL DETERMINE WHETHER A SEVERE FINANCIAL HARDSHIP EXISTS IN ITS SOLE DISCRETION, IN GOOD FAITH, AND ON A UNIFORM, NONDISCRIMINATORY AND REASONABLE BASIS. 3.4.2. AMOUNT. SUBJECT TO PENALTIES UNDER SECTION 3.4.3, THE AMOUNT OF ANY ACCELERATED LUMP SUM DISTRIBUTION SHALL BE DETERMINED AS FOLLOWS: (a) BEFORE THE COMMENCEMENT OF PAYMENT OF THE SERP BENEFIT, THE LUMP SUM PAYMENT TO A PARTICIPANT SHALL EQUAL THE LUMP SUM VALUE OF THE PARTICIPANT'S ACCRUED SERP BENEFIT. (b) AFTER THE COMMENCEMENT OF PAYMENT OF THE SERP BENEFIT, THE LUMP SUM PAYMENT TO A PARTICIPANT SHALL EQUAL THE DIFFERENCE BETWEEN (i) MINUS (ii) BELOW, DETERMINED AS OF THE DATE FOR THE COMMENCEMENT OF SERP BENEFIT PAYMENTS (THE "COMMENCEMENT DATE") AND ACCUMULATED TO THE DATE OF THE LUMP SUM PAYMENT USING THE SAME INTEREST RATE THAT IS USED IN CALCULATING THE AMOUNTS UNDER (i) AND (ii): (i) THE LUMP SUM VALUE OF THE PARTICIPANT'S ACCRUED SERP BENEFIT DETERMINED AS OF THE PARTICIPANT'S COMMENCEMENT DATE, (ii) THE LUMP SUM VALUE OF THE SERP BENEFIT PAYMENTS PREVIOUSLY PAID TO THE PARTICIPANT DISCOUNTED TO THE PARTICIPANT'S COMMENCEMENT DATE. THE LUMP SUM VALUE OF THE SERP BENEFIT PAYMENTS PREVIOUSLY PAID TO THE PARTICIPANT SHALL BE CALCULATED BASED ON THE MONTHLY PAYMENTS WHICH WOULD HAVE BEEN MADE IF THE PARTICIPANT HAD ELECTED TO RECEIVE THE SERP BENEFIT AS A SINGLE LIFE ANNUITY, IRRESPECTIVE OF THE OPTIONAL FORM OF PAYMENT OF THE SERP BENEFIT ACTUALLY ELECTED BY THE PARTICIPANT. (c) THE LUMP SUM PAYMENT TO A BENEFICIARY OF A DECEASED PARTICIPANT SHALL BE DETERMINED IN A MANNER SIMILAR TO THAT USED FOR A PARTICIPANT, EXCEPT THAT THE LUMP SUM PAYMENT SHALL ONLY REFLECT THE VALUE OF THE REMAINING PAYMENTS OF THE SERP BENEFIT WHICH WOULD BE MADE TO THE BENEFICIARY UNDER THE OPTIONAL FORM OF PAYMENT ELECTED BY THE PARTICIPANT ASSUMING THAT THE BENEFICIARY DIES UPON REACHING HIS OR HER ORIGINAL LIFE EXPECTANCY DETERMINED AS OF THE PARTICIPANT'S COMMENCEMENT DATE. (d) FOR AN ACCELERATED DISTRIBUTION TO A PARTICIPANT OR BENEFICIARY ON ACCOUNT OF A SEVERE FINANCIAL HARDSHIP, THE LUMP SUM PAYMENT SHALL NOT EXCEED THE AMOUNT NECESSARY TO RELIEVE THE HARDSHIP, AND SUBSEQUENT PAYMENTS OF THE SERP BENEFIT SHALL BE REDUCED ACCORDING TO THE RATIO OF (i) TO (ii) BELOW: (i) THE AMOUNT OF THE HARDSHIP DISTRIBUTION PAID TO THE PARTICIPANT OR BENEFICIARY, (ii) THE ENTIRE LUMP SUM PAYMENT WHICH THE PARTICIPANT OR BENEFICIARY COULD HAVE ELECTED TO RECEIVE ON THE DATE OF THE HARDSHIP DISTRIBUTION. FOR EXAMPLE, IF THE HARDSHIP DISTRIBUTION REPRESENTS FORTY PERCENT (40%) OF THE ENTIRE LUMP SUM DISTRIBUTION WHICH COULD HAVE BEEN RECEIVED, SUBSEQUENT PAYMENTS TO THE PARTICIPANT OR BENEFICIARY WILL EACH BE REDUCED BY FORTY PERCENT (40%). (e) ALL CALCULATIONS UNDER THIS SECTION 3.4. SHALL BE BASED ON THE TABLES, FACTORS (INCLUDING INTEREST RATE), AND ASSUMPTIONS THAT ARE SET FORTH IN APPENDIX A TO THIS PLAN STATEMENT FOR DETERMINING ACTUARIALLY EQUIVALENT BENEFITS. (f) ALL CALCULATIONS UNDER THIS SECTION 3.4 SHALL BE MADE BY THE PRINCIPAL SPONSOR, AND ITS DETERMINATIONS WITH RESPECT TO ACCELERATED DISTRIBUTIONS SHALL BE FINAL AND BINDING ON ALL PARTIES. 3.4.3. FORFEITURES. ANY LUMP SUM PAYMENT UNDER THIS SECTION 3.4, EXCEPT ANY HARDSHIP DISTRIBUTION, SHALL BE REDUCED BY A PENALTY EQUAL TO TEN PERCENT (10%) OF SUCH PAYMENT WHICH SHALL BE FORFEITED TO THE PRINCIPAL SPONSOR; PROVIDED, HOWEVER, THAT IF ANY SUCH PAYMENT IS MADE WITHIN 24 MONTHS AFTER A CHANGE IN CONTROL HAS OCCURRED, THE PENALTY SHALL BE EQUAL TO FIVE PERCENT (5%). NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS PLAN, NO PENALTY SHALL APPLY IF THE PRINCIPAL SPONSOR DETERMINES, BASED ON THE ADVICE OF COUNSEL OR A FINAL DETERMINATION BY THE INTERNAL REVENUE SERVICE OR ANY COURT OF COMPETENT JURISDICTION, THAT BY REASON OF THE ELECTIVE PROVISIONS OF THIS SECTION 3.4, ANY PARTICIPANT OR BENEFICIARY HAS RECOGNIZED OR WILL RECOGNIZE GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES UNDER THIS PLAN IN ADVANCE OF PAYMENT TO HIM OR HER OF THE SERP BENEFIT. THE PRINCIPAL SPONSOR MAY ALSO REDUCE OR ELIMINATE THE PENALTY IF IT DETERMINES THAT THIS ACTION WILL NOT CAUSE ANY PARTICIPANT OR BENEFICIARY TO RECOGNIZE GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES UNDER THIS PLAN IN ADVANCE OF PAYMENT OF THE SERP BENEFIT. 3.5. EFFECT ON SERVICE. IF A PARTICIPANT RECEIVES A LUMP SUM DISTRIBUTION OR COMMENCES TO RECEIVE ANY OPTIONAL FORM OF PAYMENT OF THE PARTICIPANT'S SERP BENEFIT, THE PLAN SHALL THEREAFTER DISREGARD THE PARTICIPANT'S SERVICE AND THE PARTICIPANT'S YEARS OF CONTINUOUS AND FULL-TIME SERVICE USED IN DETERMINING THE SERP BENEFIT WITH RESPECT TO WHICH THE PARTICIPANT RECEIVED OR COMMENCED TO RECEIVE SUCH DISTRIBUTION. SECTION 4 FORM OF PAYMENT THIRD AMENDMENT-EFFECTIVE JANUARY 1, 1995 4.1. OPTIONAL FORMS OF PAYMENT. AN EMPLOYEE WHO HAS FOUR (4) OR MORE YEARS OF SERVICE WITH FIRST BANK SYSTEM, INC., IS ACTIVELY EMPLOYED AT GRADE 18 OR ABOVE, AND IS A "HIGHLY COMPENSATED EMPLOYEE" AS DEFINED IN CODE SECTION 414(q) MAY ELECT AT ANY TIME MORE THAN 12 MONTHS PRECEDING TERMINATION OF EMPLOYMENT TO HAVE THE SERP BENEFIT PAID IN MONTHLY PAYMENTS AS A SINGLE LIFE ANNUITY, 50% OR 100% JOINT AND SURVIVOR ANNUITY, OR SINGLE LIFE ANNUITY WITH 10 OR 15 YEAR CERTAIN PAYMENTS. ALL OPTIONAL FORMS OF PAYMENT SHALL HAVE THE SAME ACTUARIAL EQUIVALENT PRESENT VALUE AS THE LUMP SUM PAYMENT. AN ELECTION OF AN OPTIONAL FORM OF PAYMENT MUST BE MADE BY THE PARTICIPANT IN WRITING ON A FORM FURNISHED BY AND FILED WITH THE PRINCIPAL SPONSOR AND MAY BE CHANGED AT ANY TIME MORE THAN 12 MONTHS PRECEDING TERMINATION OF EMPLOYMENT. ANY ELECTION WHICH IS NOT TIMELY MADE WILL BE DISREGARDED. NOTWITHSTANDING SUCH AN ELECTION, AN OPTIONAL FORM OF PAYMENT OF THE SERP BENEFIT (OTHER THAN A LUMP SUM PAYMENT) WILL ONLY BE MADE TO A PARTICIPANT WHO HAS A TERMINATION OF EMPLOYMENT (A) AFTER ATTAINING AGE 65 OR (B) AFTER ATTAINING AGE 55, WHEN THE SUM OF THE PARTICIPANT'S AGE AND YEARS OF CONTINUOUS AND FULL-TIME SERVICE WITH THE EMPLOYER EQUALS OR EXCEEDS 65. 4.2. PAYMENTS IN CASE OF INCOMPETENCY OR DISABILITY. In case of legal incompetency or disability, (including minority), of a person entitled to receive any payment under this Plan, payment may be made, if the Principal Sponsor has been advised of the existence of such condition: (a) to the duly appointed guardian, conservator or other legal representative of such incompetent or disabled person; or (b) to a person or institution entrusted with the care or maintenance of the incompetent or disabled person, provided such person or institution has satisfied the Principal Sponsor that the payment will be used for the best interest and assist in the care of such disabled or incompetent person or, provided further, that no prior claim for said payment has been made by a duly appointed guardian, conservator or other legal representative of such disabled or incompetent person. Any payment made in accordance with this Section shall constitute a complete discharge of any liability or obligation of this Plan, the Principal Sponsor and all Employers therefor. THIRD AMENDMENT-EFFECTIVE JANUARY 1, 1995 4.3. SMALL BENEFITS. NOTWITHSTANDING ANY OTHER PROVISION OF THIS PLAN STATEMENT TO THE CONTRARY, THE PRINCIPAL SPONSOR, IN ITS DISCRETION, MAY PAY ANY BENEFIT WHICH IS PAYABLE UNDER THE PLAN TO A PARTICIPANT OR BENEFICIARY IN A LUMP SUM PAYMENT IF THE LUMP SUM AMOUNT WHICH IS PAYABLE IS LESS THAN $50,000. SECTION 5 DEATH BENEFITS THIRD AMENDMENT-EFFECTIVE JANUARY 1, 1995 5.1. DEATH BENEFITS. 5.1.1. DEATH BEFORE SERP BENEFIT COMMENCEMENT. UPON THE DEATH OF A PARTICIPANT WHO AT HIS OR HER DEATH HAD NOT YET COMMENCED TO RECEIVE PAYMENT OF THE SERP BENEFIT UNDER THE PLAN, THERE SHALL BE PAID TO THE PARTICIPANT'S BENEFICIARY THE SINGLE LUMP SUM WHICH THE PARTICIPANT WOULD HAVE RECEIVED UNDER SECTION 3.1 IF THE PARTICIPANT HAD NOT DIED, BUT HAD INSTEAD HAD A TERMINATION OF EMPLOYMENT ON THE DATE OF HIS OR HER DEATH; PROVIDED, HOWEVER, THAT AN EMPLOYEE WHO IS ELIGIBLE TO MAKE AN ELECTION UNDER SECTION 4.1 MAY ELECT AT ANY TIME PRIOR TO HIS OR HER DEATH TO HAVE THE DEATH BENEFIT WHICH IS PAYABLE UPON HIS OR HER DEATH BEFORE COMMENCEMENT OF PAYMENT OF THE SERP BENEFIT PAID AS A SINGLE LIFE ANNUITY FOR THE LIFE OF THE BENEFICIARY. SUCH SINGLE LIFE ANNUITY SHALL HAVE THE SAME ACTUARIAL EQUIVALENT PRESENT VALUE AS THE LUMP SUM PAYMENT WHICH WOULD OTHERWISE BE MADE TO THE BENEFICIARY. AN ELECTION TO HAVE THE DEATH BENEFIT PAID AS A SINGLE LIFE ANNUITY MUST BE MADE BY THE EMPLOYEE ELIGIBLE TO MAKE SUCH AN ELECTION IN WRITING ON A FORM FURNISHED BY AND FILED WITH THE PRINCIPAL SPONSOR AND MAY BE CHANGED AT ANY TIME DURING SUCH EMPLOYEE'S LIFETIME BEFORE COMMENCEMENT OF PAYMENT OF THE SERP BENEFIT. PAYMENT TO THE BENEFICIARY SHALL BE MADE OR COMMENCED AS SOON AS MAY BE PRACTICABLE ON OR AFTER THE FIFTEENTH DAY OF THE SECOND CALENDAR MONTH AFTER THE DEATH OF THE PARTICIPANT. 5.1.2. DEATH AFTER SERP BENEFIT COMMENCEMENT. IF PAYMENT TO A PARTICIPANT OF THE SERP BENEFIT HAS BEEN MADE IN A LUMP SUM OR COMMENCED AS A SINGLE LIFE ANNUITY, NO DEATH BENEFIT WILL BE PAYABLE UPON THE DEATH OF THE PARTICIPANT. IF PAYMENT TO A PARTICIPANT OF THE SERP BENEFIT HAS COMMENCED AS A 50% OR 100% JOINT AND SURVIVOR ANNUITY OR AS A SINGLE LIFE ANNUITY WITH 10 OR 15 YEAR CERTAIN PAYMENTS, PAYMENTS WILL BE MADE FOLLOWING THE DEATH OF THE PARTICIPANT ONLY IN ACCORDANCE WITH THE TERMS OF THE OPTIONAL FORM OF PAYMENT OF THE SERP BENEFIT WHICH WAS ELECTED BY THE PARTICIPANT. 5.2. DESIGNATION OF BENEFICIARIES. THIRD AMENDMENT-EFFECTIVE JANUARY 1, 1995 5.2.1. RIGHT TO DESIGNATE. EACH EMPLOYEE WHO IS ELIGIBLE TO MAKE AN ELECTION UNDER SECTION 4.1 MAY DESIGNATE, UPON FORMS TO BE FURNISHED BY AND FILED WITH THE PRINCIPAL SPONSOR, ONE OR MORE PRIMARY BENEFICIARIES OR ALTERNATE BENEFICIARIES TO RECEIVE ALL OR A SPECIFIED PART OF SUCH EMPLOYEE'S SURVIVOR BENEFIT IN THE EVENT OF HIS OR HER DEATH. SUCH EMPLOYEE MAY CHANGE OR REVOKE ANY SUCH DESIGNATION FROM TIME TO TIME BEFORE COMMENCEMENT OF PAYMENT OF THE SERP BENEFIT WITHOUT NOTICE TO OR CONSENT FROM ANY BENEFICIARY OR SPOUSE. NO SUCH DESIGNATION, CHANGE OR REVOCATION SHALL BE EFFECTIVE UNLESS EXECUTED BY THE EMPLOYEE ELIGIBLE TO MAKE SUCH DESIGNATION AND RECEIVED BY THE PRINCIPAL SPONSOR DURING SUCH EMPLOYEE'S LIFETIME AND PRIOR TO COMMENCEMENT OF PAYMENT OF THE SERP BENEFIT. 5.2.2. FAILURE OF DESIGNATION. If a Participant: (a) fails to designate a Beneficiary, (b) designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or (c) designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Participant, such Participant's Survivor Benefit, or the part thereof as to which such Participant's designation fails, as the case may be, shall be payable to the first class of the following classes of automatic Beneficiaries with a member surviving the Participant and (except in the case of surviving issue) in equal shares if there is more than one member in such class surviving the Participant: Participant's surviving spouse Participant's surviving issue per stirpes and not per capita Participant's surviving parents Participant's surviving brothers and sisters Representative of Participant's estate. 5.2.3. DISCLAIMERS BY BENEFICIARIES. A Beneficiary entitled to a distribution of all or a portion of a deceased Participant's Survivor Benefit may disclaim an interest therein subject to the following requirements. To be eligible to disclaim, a Beneficiary must be a natural person, must not have received a distribution of all or any portion of the lump sum death benefit at the time such disclaimer is executed and delivered, and must have attained at least age twenty-one (21) years as of the date of the Participant's death. Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public. A disclaimer shall state that the Beneficiary's entire interest in the undistributed Survivor Benefit is disclaimed or shall specify what portion thereof is disclaimed. To be effective, duplicate original executed copies of the disclaimer must be both executed and actually delivered to the Principal Sponsor after the date of the Participant's death but not later than one hundred eighty (180) days after the date of the Participant's death. A disclaimer shall be irrevocable when delivered to the Principal Sponsor. A disclaimer shall be considered to be delivered to the Principal Sponsor only when actually received by the Principal Sponsor. The Principal Sponsor shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Participant as to the interest disclaimed. A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of the provisions of Section 6 and shall not be considered to be an assignment or alienation of benefits in violation of federal law prohibiting the assignment or alienation of benefits under this Plan. No other form of attempted disclaimer shall be recognized by the Principal Sponsor. 5.2.4. DEFINITIONS. When used herein and, unless the Participant has otherwise specified in the Participant's Beneficiary designation, when used in a Beneficiary designation, "issue" means all persons who are lineal descendants of the person whose issue are referred to, including legally adopted descendants and their descendants but not including illegitimate descendants and their descendants; "child" means an issue of the first generation; "per stirpes" means in equal shares among living children of the person whose issue are referred to and the issue (taken collectively) of each deceased child of such person, with such issue taking by right of representation of such deceased child; and "survive" and "surviving" mean living after the death of the Participant. 5.2.5. SPECIAL RULES. Unless the Participant has otherwise specified in the Participant's Beneficiary designation, the following rules shall apply: (a) If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant. (b) The automatic Beneficiaries specified in Section 5.2.2 and the Beneficiaries designated by the Participant shall become fixed at the time of the Participant's death so that, if a Beneficiary survives the Participant but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary's estate. (c) If the Participant designates as a Beneficiary the person who is the Participant's spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Participant and such person shall automatically revoke such designation. (The foregoing shall not prevent the Participant from designating a former spouse as a Beneficiary on a form executed by the Participant and received by the Principal Sponsor after the date of the legal termination of the marriage between the Participant and such former spouse, and during the Participant's lifetime.) (d) Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Participant shall be given effect without regard to whether the relationship to the Participant exists either then or at the Participant's death. (e) Any designation of a Beneficiary only by statement of relationship to the Participant shall be effective only to designate the person or persons standing in such relationship to the Participant at the Participant's death. A Beneficiary designation is permanently void if it either is executed or is filed by a Participant who, at the time of such execution or filing, is then a minor under the law of the state of the Participant's legal residence. The Principal Sponsor shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation. 5.2.6. NO SPOUSAL RIGHTS. No spouse or surviving spouse of a Participant and no person designated to be a Beneficiary shall have any rights or interest in the benefits accumulated under this Plan including, but not limited to, the right to be the sole Beneficiary or to consent to the designation of Beneficiaries (or the changing of designated Beneficiaries) by the Participant. 5.3. DEATH PRIOR TO FULL DISTRIBUTION. If, at the death of the Participant, any payment to the Participant was due or otherwise pending but not actually paid, the amount of such payment shall be included in the Survivor Benefit which are payable to the Beneficiary (and shall not be paid to the Participant's estate). SECTION 6 FUNDING OF PLAN 6.1. UNFUNDED AGREEMENT. The obligation of the Employers to make payments under this Plan constitutes only the unsecured (but legally enforceable) promise of the Employers to make such payments. The Participant shall have no lien, prior claim or other security interest in any property of any Employer. If a fund is established by the Employers in connection with this Plan, the property therein shall remain the sole and exclusive property of the Employers. The Employers will pay the cost of this Plan out of their general assets. If the Principal Sponsor elects to finance all or a portion of its costs in connection with this Plan through the purchase of life insurance or other similar investments, the Participant agrees, as a condition of participation in this Plan, to cooperate with the Principal Sponsor in the purchase of such investment to any extent reasonably required by the Principal Sponsor and relinquishes any claim he or she may have either for himself or herself or any beneficiary to the proceeds of any such investment or any other rights or interests in such investment. If a Participant fails or refuses to cooperate, then notwithstanding any other provision of this Plan Statement (including, without limiting the generality of the foregoing, Section 4) the Principal Sponsor shall immediately and irrevocably terminate and forfeit the Participant's entitlement to benefits under the Plan. 6.2. SPENDTHRIFT PROVISION. No Participant or Beneficiary shall have any interest under this Plan which can be transferred nor shall any Participant or Beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while in the possession or control of the Employers, nor shall the Principal Sponsor recognize any assignment thereof, either in whole or in part, nor shall any benefit under this Plan be subject to attachment, garnishment, execution following judgment or other legal process while in the possession or control of the Employers. The power to designate Beneficiaries to receive the Survivor Benefit of a Participant in the event of such Participant's death shall not permit or be construed to permit such power or right to be exercised by the Participant so as thereby to anticipate, pledge, mortgage or encumber such Participant's SERP Benefit or any part thereof, and any attempt of a Participant so to exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by the Principal Sponsor. FIRST AMENDMENT-EFFECTIVE JANUARY 1, 1992 FOURTH AMENDMENT-EFFECTIVE JULY 17, 1996 SECTION 7 AMENDMENT AND TERMINATION THE PRINCIPAL SPONSOR RESERVES THE POWER TO AMEND THE PLAN STATEMENT OR TERMINATE THE PLAN PRIOR TO A FULL CHANGE IN CONTROL. NO SUCH AMENDMENT OF THE PLAN STATEMENT OR TERMINATION OF THE PLAN, HOWEVER, SHALL REDUCE A PARTICIPANT'S SERP BENEFIT EARNED AS OF THE DATE OF SUCH AMENDMENT UNLESS THE PARTICIPANT SO AFFECTED CONSENTS IN WRITING TO THE AMENDMENT. AFTER A FULL CHANGE IN CONTROL, THE PLAN CANNOT BE AMENDED OR TERMINATED (AS APPLIED TO PARTICIPANTS WHO ARE PARTICIPANTS ON THE DATE OF THE FULL CHANGE IN CONTROL) UNLESS: (a) ALL SERP BENEFITS OF ALL PARTICIPANTS AS OF THE DATE OF THE FULL CHANGE IN CONTROL HAVE BEEN PAID, OR (b) EIGHTY PERCENT (80%) OF ALL THE PARTICIPANTS AS OF THE DATE OF THE FULL CHANGE IN CONTROL GIVE WRITTEN CONSENT TO SUCH AMENDMENT OR TERMINATION. NOTWITHSTANDING THE RULES OF SECTION 2, FOR THE PURPOSES OF THE RULES OF THIS SECTION 7, EACH EMPLOYEE WHO WOULD BE A PARTICIPANT AT THE TIME OF THE FULL CHANGE IN CONTROL IF HE OR SHE: (i) HAD A TERMINATION OF EMPLOYMENT COINCIDENT WITH THE FULL CHANGE IN CONTROL, AND (ii) HAD NOT LESS THAN FIVE (5) YEARS OF SERVICE WITH FIRST BANK SYSTEM, INC. AND ITS SUBSIDIARIES AND AT LEAST ONE YEAR ACTIVE EMPLOYMENT AT GRADE 18 OR ABOVE AT THE TIME OF THE FULL CHANGE IN CONTROL, SHALL BE CONSIDERED A PARTICIPANT (ASSUMING THAT SUCH EMPLOYEES WERE ACTIVELY EMPLOYED AT GRADE 18 OR ABOVE IMMEDIATELY PRIOR TO THE TIME OF THE FULL CHANGE IN CONTROL). NO MODIFICATION OF THE TERMS OF THIS PLAN STATEMENT SHALL BE EFFECTIVE UNLESS IT IS IN WRITING AND SIGNED ON BEHALF OF THE PRINCIPAL SPONSOR BY A PERSON AUTHORIZED TO EXECUTE SUCH WRITING. NO ORAL REPRESENTATION CONCERNING THE INTERPRETATION OR EFFECT OF THIS PLAN STATEMENT SHALL BE EFFECTIVE TO AMEND THE PLAN STATEMENT. SECTION 8 DETERMINATIONS -- RULES AND REGULATIONS 8.1. DETERMINATIONS. The Principal Sponsor shall make such determinations as may be required from time to time in the administration of the Plan. The Principal Sponsor shall have the discretionary authority and responsibility to interpret and construe the Plan Statement and to determine all factual and legal questions under the Plan, including but not limited to the entitlement of Participants and Beneficiaries, and the amounts of their respective interests. Each interested party may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary. 8.2. RULES AND REGULATIONS. Any rule not in conflict or at variance with the provisions hereof may be adopted by the Principal Sponsor. The Principal Sponsor shall adopt rules regarding the computation of continuous and full time service with the Employer including, without limiting the generality of the foregoing, rules regarding the exclusion of periods of employment with respect to which benefits may have been previously paid under this Plan, the exclusion of periods of employment at levels or in positions not covered by this Plan, the computation of continuous and full time service upon the reemployment of a former employee and the exclusion of periods of employment when disabled (under the Employer's separate plan of long term disability benefits or otherwise). Such rules shall also prescribe the effect of loss of eligibility, deemed Termination of Employment upon loss of eligibility, the computation of continuous and full time service upon reemployment and the method for computing the Projected PRA Account when the period benefits accrued under PRA does not match the period of continuous and full time service under this Plan. 8.3. METHOD OF EXECUTING INSTRUMENTS. Information to be supplied or written notices to be made or consents to be given by the Principal Sponsor pursuant to any provision of this Plan Statement may be signed in the name of the Principal Sponsor by any officer who has been authorized to make such certification or to give such notices or consents. FOURTH AMENDMENT-EFFECTIVE JULY 17, 1996 8.4. CLAIMS PROCEDURE. The claims procedure set forth in this Section 8.4 shall be the exclusive procedure for the disposition of claims for benefits arising under the Plan until such time as a FULL Change in Control occurs. 8.4.1. ORIGINAL CLAIM. Any employee, former employee or beneficiary of such employee or former employee may, if he or she so desires, file with the Principal Sponsor a written claim for benefits under the Plan. Within ninety (90) days after the filing of such a claim, the Principal Sponsor shall notify the claimant in writing whether the claim is upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred eighty days from the date the claim was filed) to reach a decision on the claim. If the claim is denied in whole or in part, the Principal Sponsor shall state in writing: (a) the specific reasons for the denial; (b) the specific references to the pertinent provisions of this Plan Statement on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation of the claims review procedure set forth in this section. 8.4.2. CLAIMS REVIEW PROCEDURE. Within sixty (60) days after receipt of notice that the claim has been denied in whole or in part, the claimant may file with the Principal Sponsor a written request for a review and may, in conjunction therewith, submit written issues and comments. Within sixty (60) days after the filing of such a request for review, the Principal Sponsor shall notify the claimant in writing whether, upon review, the claim was upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred twenty days from the date the request for review was filed) to reach a decision on the request for review. 8.4.3. GENERAL RULES. (a) No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the claims procedure. The Principal Sponsor may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by the Principal Sponsor upon request. (b) All decisions on claims and on requests for a review of denied claims shall be made by the Principal Sponsor. (c) the Principal Sponsor may, in its discretion, hold one or more hearings on a claim or a request for a review of a denied claim. (d) A claimant may be represented by a lawyer or other representative (at the claimant's own expense), but the Principal Sponsor reserves the right to require the claimant to furnish written authorization. A claimant's representative shall be entitled to copies of all notices given to the claimant. (e) The decision of the Principal Sponsor on a claim and on a request for a review of a denied claim shall be served on the claimant in writing. If a decision or notice is not received by a claimant within the time specified, the claim or request for a review of a denied claim shall be deemed to have been denied. (f) Prior to filing a claim or a request for a review of a denied claim, the claimant or his or her representative shall have a reasonable opportunity to review a copy of this Plan Statement and all other pertinent documents in the possession of the Principal Sponsor. 8.5. INFORMATION FURNISHED BY PARTICIPANTS. The Principal Sponsor shall not be liable or responsible for any error in the computation of the SERP Benefit of a Participant resulting from any misstatement of fact made by the Participant, directly or indirectly, to the Principal Sponsor, and used by it in determining the Participant's SERP Benefit. The Principal Sponsor shall not be obligated or required to increase the SERP Benefit of such Participant which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Participant. However, the SERP Benefit of any Participant which are overstated by reason of any such misstatement shall be reduced to the amount appropriate in view of the truth. SECTION 9 PLAN ADMINISTRATION 9.1. PRINCIPAL SPONSOR. 9.1.1. OFFICERS. Except as hereinafter provided, functions generally assigned to the Principal Sponsor shall be discharged by its officers or delegated and allocated as provided herein. 9.1.2. CHIEF EXECUTIVE OFFICER. Except as hereinafter provided, the Chief Executive Officer of the Principal Sponsor may delegate or redelegate and allocate and reallocate to one or more persons or to a committee of persons jointly or severally, and whether or not such persons are directors, officers or employees, such functions assigned to the Principal Sponsor generally hereunder as the Chief Executive Officer may from time to time deem advisable. 9.1.3. BOARD OF DIRECTORS. Notwithstanding the foregoing, the Organization Committee of the Board of Directors of the Principal Sponsor shall have the exclusive authority, which may not be delegated, to act for the Principal Sponsor to amend this Plan Statement, to terminate this Plan, and to determine eligibility to participate in the Plan under Section 2. 9.2. CONFLICT OF INTEREST. If any officer or employee of the Principal Sponsor or any Employer, or any member of the Organization Committee of the Board of Directors of the Principal Sponsor or any Employer to whom authority has been delegated or redelegated hereunder shall also be a Participant in the Plan, such Participant shall have no authority as such officer, employee or member with respect to any matter specially affecting such Participant's individual interest hereunder or the interest of a person superior to him or her in the organization (as distinguished from the interests of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to the other officers, employees or members as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant's individual capacity in connection with any such matter. 9.3. ADMINISTRATOR. FIRST BANK SYSTEM, INC. shall be the administrator for purposes of section 3(16)(A) of the Employee Retirement Income Security Act of 1974. 9.4. SERVICE OF PROCESS. In the absence of any designation to the contrary by the Principal Sponsor, the Secretary of FIRST BANK SYSTEM, INC. is designated as the appropriate and exclusive agent for the receipt of service of process directed to the Plan in any legal proceeding, including arbitration, involving the Plan. 9.5. IRC AND ERISA STATUS. This Plan is intended to be a nonqualified deferred compensation arrangement. The rules of section 401(a) et. seq. of the Code shall not apply to this Plan. This Plan is adopted with the understanding that it is in part an unfunded excess benefit plan within the meaning of section 3(36) ERISA and is in part an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as provided in sections 201(2), 301(3) and 401(a)(1) of ERISA. Each provision hereof shall be interpreted and administered accordingly. This Plan shall not alter, enlarge or diminish any person's employment rights or obligations or rights or obligations under PRA or any other plan. It is specifically contemplated that PRA and the Excess Plan will, from time to time, be amended and possibly terminated. All such amendments and termination shall be given effect under this Plan (it being expressly intended that this Plan shall not lock in the benefit structures of PRA and the Excess Plan as they exist at the adoption of this Plan or upon the commencement of participation, or commencement of benefits by any Participant). This Plan will not provide any excess benefits with respect to any profit sharing plan, stock bonus plan, employee stock ownership plan or PAYSOP. This Plan shall be construed to prevent the duplication of benefits provided under any other plan or arrangement, whether qualified or nonqualified, funded or unfunded, to the extent that such other benefits are provided directly or indirectly by an Employer. SECTION 10 DISCLAIMERS 10.1. TERM OF EMPLOYMENT. Neither the terms of this Plan Statement nor the benefits hereunder nor the continuance thereof shall be a term of the employment of any employee. The Principal Sponsor and the Employers shall not be obliged to continue the Plan. The terms of this Plan Statement shall not give any employee the right to be retained in the employment of any Employer. 10.2. SOURCE OF PAYMENT. Neither the Principal Sponsor, any Employer nor any of its officers nor any member of their Boards of Directors in any way secure or guarantee the payment of any benefit or amount which may become due and payable hereunder to any Participant or to any Beneficiary or to any creditor of a Participant or a Beneficiary. Each Participant, Beneficiary or other person entitled at any time to payments hereunder shall look solely to the assets of the Employers for such payments or to the benefits distributed to any Participant or Beneficiary, as the case may be, for such payments. In each case where benefits shall have been distributed to a former Participant or a Beneficiary or to the person or any one of a group of persons entitled jointly to the receipt thereof and which purports to cover in full the benefit hereunder, such former Participant or Beneficiary, or such person or persons, as the case may be, shall have no further right or interest in the other assets of the Employers. Neither the Employers nor any of their officers nor any member of their Boards of Directors shall be under any liability or responsibility for failure to effect any of the objectives or purposes of the Plan by reason of the insolvency of any of the Employers. 10.3. DELEGATION. The Employers and their officers and the members of their Boards of Directors shall not be liable for an act or omission of another person with regard to a responsibility that has been allocated to or delegated to such other person pursuant to the terms of this Plan Statement or pursuant to procedures set forth in this Plan Statement. SCHEDULE I PARTICIPATING EMPLOYERS Effective as of January 1, 1995 NAME EMPLOYER ID NUMBER - ---- ------------------ Boulevard Bank National Association 36-1521230 Boulevard Technical Services, Inc., Chicago, IL 36-3610403 Colorado Capital Advisors, Inc., Denver, CO 84-1072892 Colorado National Bank, Denver, CO 84-0165025 Colorado National Bank Aspen, Aspen, CO 84-0671596 Colorado National Bankshares, Inc., Denver, CO 84-0571505 Colorado National Leasing, Inc., Denver, CO 84-0636453 Colorado National Service Corporation, Denver, CO 84-1041820 FBS Ag. Credit, Inc., Englewood, CO 84-0818505 FBS Business Finance Corporation, Minneapolis, MN 41-0832663 FBS Card Services, Inc., Minneapolis, MN 41-1558798 FBS Information Services Corporation, St. Paul, MN 41-0880291 FBS Investment Services, Inc., Denver, CO 84-1019337 FBS Mortgage Corporation, Minneapolis, MN 58-1025135 First Bank (N.A.), Milwaukee, WI 39-0152428 First Bank Montana, National Association, Billings, MT 81-0166295 First Bank National Association, Minneapolis, MN 41-0256895 First Bank of North Dakota, National Association, Fargo, ND 45-0164355 First Bank of South Dakota, National Association, Sioux Falls, SD 46-0168855 First Bank System, Inc., Minneapolis, MN 41-0255900 First National Bank of East Grand Forks, East Grand Forks, MN 41-0417860 First System Agencies, Inc., Minneapolis, MN 41-0831328 First System Services, Inc., Minneapolis, MN 41-0257030 First Trust National Association, St. Paul, MN 41-0257700 First Trust Company of Montana, National Association, Billings, MT 81-0259015 First Trust Company of North Dakota, Fargo, ND 45-0342631 First Trust of California, National Association, San Francisco, CA 94-3160100 First Trust of New York, National Association, New York, NY 13-3781471 First Trust Washington, Seattle, WA 91-1587893 Republic Acceptance Corporation, Minneapolis, MN 41-1753837 Rocky Mountain BankCard System, Inc., Denver, CO 84-1010148 SCHEDULE II PRIOR PLANS' OFFSET AGE WHEN FIRST EMPLOYED FACTOR ----------------------- ------ 36 0.45% 37 0.94% 38 1.47% 39 2.06% 40 2.71% 41 3.41% 42 4.18% 43 5.01% 44 5.92% 45 6.91% 46 7.98% 47 9.14% 48 10.40% 49 11.76% 50 13.23% 51 14.82% 52 16.53% 53 18.38% 54 20.37% 55 22.51% 56 24.82% 57 27.30% 58 29.97% 59 32.83% 60 35.91% 61 39.21% 62 42.76% 63 46.56% 64 50.63% 65 55.00% APPENDIX A ACTUARIALLY EQUIVALENT BENEFITS Section 1. GENERAL RULES. The point of reference for determining the Actuarially Equivalent single lump sum benefit is the monthly benefit amount expressed in the single life annuity form. When, under the terms of the Plan, the monthly amount of the SERP Benefit or other benefit has been determined in the single life annuity form, reference to the following factors and tables will determine the Actuarially Equivalent single lump sum benefit: INTEREST: The interest rate used by the Pension Benefit Guaranty Corporation to value immediate annuities (for participants who are age 65 years) in the event of plan terminations occurring on the first day of the Plan Year in which occurs the date as of which the Actuarially Equivalent single lump sum benefit is being determined MORTALITY: 1971 Group Annuity Mortality Table, assuming all Participants are male. The single life annuity benefit to be converted to the single lump sum benefit shall be the benefit commencing on the first day of the calendar month following the attainment of age sixty-five (65) years or if later the first day of the calendar month after Termination of Employment. APPENDIX B CHANGE IN CONTROL DEFINITIONS SECTION 1 1.1. ACQUIRING PERSON -- shall mean any Person who or which, together with all Affiliates (CIC) and Associates of such person, is the Beneficial Owner, directly or indirectly, of securities of the Principal Sponsor representing 20% or more of the combined voting power of the Principal Sponsor's then outstanding securities, but shall not include any Principal Sponsor Entity. 1.2. AFFILIATE (CIC) -- shall have the meaning ascribed to the term "Affiliate" in Rule 12b-2 promulgated under the Exchange Act. 1.3. ASSOCIATE -- shall have the meaning ascribed to such term in Rule 12b-2 promulgated under the Exchange Act. 1.4. BENEFICIAL OWNER -- shall have the meaning ascribed to such term in Rule 13d-3 promulgated under the Exchange Act. 1.5. BOARD OF DIRECTORS -- shall mean the board of directors of the Principal Sponsor. 1.6. CHANGE IN CONTROL -- shall mean a Full Change in Control or a Partial Change in Control. 1.7. CONTINUING DIRECTOR -- shall mean any person who is a member of the Board of Directors, while such person is a member of the Board of Directors, who is not an Acquiring Person or an Affiliate (CIC) or Associate of an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate (CIC) or Associate, and who (x) was a member of the Board of Directors as of July 17, 1996 or (y) subsequently becomes a member of the Board of Directors, if such person's initial nomination for election or initial election to the Board of Directors has been approved in advance by the Continuing Directors; provided that any director designated by or on behalf of a Person who has entered into an agreement with the Principal Sponsor (or who is contemplating entering into such an agreement) to effect a consolidation or merger of the Principal Sponsor or a Principal Sponsor Entity, or other reorganization, with or into one or more entities which are not Principal Sponsor Entities, and any director that serves in connection with the act of the Board of Directors of increasing the number of directors and filling vacancies in connection with, or in contemplation of, any such transaction, shall not be deemed to have received such advance approval for initial nomination or election, and any such director shall not be deemed to be a Continuing Director; provided, further, that any such director shall subsequently become a Continuing Director at such time as a new term of office as a director is approved by the Principal Sponsor's shareholders at an annual meeting of shareholders occurring subsequent to the completion of any such transaction (and excluding any annual meeting at which the shareholders approve any such transaction); and, provided, further, that in the case of a Permitted Transaction, any such director shall not become a Continuing Director until the later of (i) the end of the three-year period following consummation of such Permitted Transaction or (ii) such time as a new term of office as a director is approved by the Principal Sponsor's shareholders at an annual meeting of shareholders occurring subsequent to the completion of such Permitted Transaction. 1.8. EXCHANGE ACT -- shall mean the Securities Exchange Act of 1934, as amended. 1.9. FULL CHANGE IN CONTROL -- shall mean: (a) the public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Principal Sponsor or any Person that a Person (other than a Principal Sponsor Entity) has become the Beneficial Owner, directly or indirectly, of securities of the Principal Sponsor (x) representing 20% or more, but not more than 50%, of the combined voting power of the Principal Sponsor's then outstanding securities unless the transaction resulting in such ownership has been approved in advance by the Continuing Directors or (y) representing more than 50% of the combined voting power of the Principal Sponsor's then outstanding securities (regardless of any approval by the Continuing Directors); or (b) the Continuing Directors cease to constitute a majority of the Board of Directors of the Principal Sponsor or the Resulting Corporation, except in accordance with the terms of a Permitted Transaction and except as a result of the death, retirement or disability of one or more Continuing Directors (unless any such death, retirement or disability occurs following a Permitted Transaction and any vacancies created thereby are not filled in accordance with the terms of the written agreement governing such Permitted Transaction); or (c) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the consolidated assets of the Principal Sponsor and its subsidiaries or the adoption of any plan of liquidation or dissolution of the Principal Sponsor. 1.10. PARTIAL CHANGE IN CONTROL -- shall mean: (a) a consolidation or merger of the Principal Sponsor or a Principal Sponsor Entity, or other reorganization, with or into one or more entities which are not Principal Sponsor Entities, as a result of which less than 60% of the outstanding voting securities of the Resulting Corporation are, or are to be, owned by former shareholders of the Principal Sponsor as determined immediately prior to consummation of such transaction (excluding voting securities of the Resulting Corporation owned, or to be owned, by such shareholders by reason of their ownership prior to such transaction of securities of any entity other than the Principal Sponsor) and as a result of which the Continuing Directors constitute (i) more than 50% of the Board of Directors of the Resulting Corporation or (ii) exactly 50% of the Board of Directors of the Resulting Corporation if the transaction resulting in such event is a Permitted Transaction; or (b) the public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Principal Sponsor or any Person that a Person (other than a Principal Sponsor Entity) has become the Beneficial Owner, directly or indirectly, of securities of the Principal Sponsor representing 20% or more, but not more than 50%, of the combined voting power of the Principal Sponsor's then outstanding securities if the transaction resulting in such ownership has been approved in advance by the Continuing Directors. 1.11. PERMITTED TRANSACTION -- shall mean a transaction in which, pursuant to a written agreement between the Principal Sponsor and all Persons who have entered into an agreement with the Principal Sponsor to effect a transaction described in paragraph (A)of the definition of Partial Change in Control, it is agreed that (w) the Chief Executive Officer of the Principal Sponsor immediately prior to the consummation of such transaction shall be the Chief Executive Officer of the Resulting Corporation for not less than three years following consummation of such transaction, (x) upon termination of service of any Continuing Director for any reason, including upon death, disability or retirement, prior to the expiration of such director's term during such three-year period, the vacancy thereby created shall be filled by a nominee selected solely by the Continuing Directors, (y) upon expiration of the term of any such director during such three-year period, the nominee to succeed such director shall be selected solely by the Continuing Directors and (z) the parties will take other appropriate steps to ensure that the Board of Directors of the Resulting Corporation will be evenly divided between Continuing Directors and all directors designated by other parties to the transaction during such three-year period. 1.12. PERSON -- shall have the meaning ascribed to such term as such term is used in Sections 13(d) and 14(d) of the Exchange Act. 1.13. PRINCIPAL SPONSOR ENTITY -- shall mean the Principal Sponsor, any subsidiary of the Principal Sponsor or any employee benefit plan of the Principal Sponsor or of any subsidiary of the Principal Sponsor or any entity holding shares of the voting capital stock of the Principal Sponsor organized, appointed or established for, or pursuant to the terms of, any such plan. 1.14. QUALIFYING TERMINATION -- shall mean a termination of employment of a Participant prior to a Full Change in Control or prior to or following a Partial Change in Control that results in such Participant becoming entitled to receive change in control related severance payments pursuant to the terms of the change in control provisions of an employment contract, an individual change in control severance agreement or the First Bank System, Inc. Senior Management Change in Control Severance Pay Plan (including any successor plan thereto). 1.15. RESULTING CORPORATION -- shall mean the surviving corporation in any consolidation, merger or other reorganization to which the Principal Sponsor is a party; provided, however, that if the surviving corporation in any such transaction is a subsidiary of another corporation, then the Resulting Corporation is the ultimate parent corporation of such surviving corporation; and provided, further, that in the event of a consolidation, merger or other reorganization to which a Principal Sponsor Entity (other than the Principal Sponsor) is a party, then the Principal Sponsor shall be deemed the Resulting Corporation. EX-10.C 4 EXECUTIVE DEFERRAL PLAN COMPOSITE COPY FIRST BANK SYSTEM, INC. EXECUTIVE DEFERRAL PLAN (1992 STATEMENT) First Effective January 1, 1992 AND As Amended By The FIRST AMENDMENT Adopted October 20, 1993 But Effective January 1, 1994 The SECOND AMENDMENT Adopted October 20, 1993 But Effective January 1, 1992 The THIRD AMENDMENT Adopted July 17, 1996 But Effective July 17, 1996 NOTE: Material added or modified by the First, Second and Third Amendments is shown in italics. Appendix A was added by the Third Amendment effective July 17, 1996 but is not shown in italics. Modified section numbers are not generally shown in italics. FIRST BANK SYSTEM, INC. EXECUTIVE DEFERRAL PLAN (1992 STATEMENT) TABLE OF CONTENTS PAGE SECTION 1. INTRODUCTION ................................................. 1 1.1. Statement of Plan 1.2. Definitions 1.2.1. Account 1.2.2. Affiliate 1.2.3. Annual Valuation Date 1.2.4. Beneficiary 1.2.5. Change in Control 1.2.6. Earliest Retirement Age 1.2.7. Effective Date 1.2.8. Employer 1.2.9. Event of Maturity 1.2.10. FBS 1.2.11. Normal Retirement Age 1.2.12. Participant 1.2.13. Plan 1.2.14. Plan Statement 1.2.15. Plan Year 1.2.16. Principal Sponsor 1.2.17. Termination of Employment 1.2.18. Valuation Date 1.2.19. Service 1.3. Rules of Interpretation SECTION 2. PARTICIPATION ................................................ 3 2.1. Participation 2.2. Enrollment 2.3. Specific Exclusion SECTION 3. ADJUSTMENT OF ACCOUNTS ....................................... 4 3.1. Establishment of Accounts 3.2. Adjustments of Accounts 3.2.1. Intermediate Distributions Subtraction 3.2.2. Investment Addition 3.2.3. Deferral Addition 3.2.4. Final Distributions Subtraction SECTION 4. VESTING OF ACCOUNT ........................................... 5 SECTION 5. MATURITY ..................................................... 5 5.1. Events of Maturity 5.2. Effect of Maturity upon Further Participation in Plan SECTION 6. DISTRIBUTION ................................................. 6 6.1. Form of Distribution 6.1.1. Form of Distribution 6.1.2. Time of Payment 6.1.3. Installment Amounts 6.1.4. Default 6.2. Previously Scheduled Distribution 6.2.1. Enrolling for the Distribution 6.2.2. Scheduled Distribution 6.3. Hardship Distributions 6.3.1. When Available 6.3.2. Purposes 6.3.3. Limitations 6.3.4. Forfeiture 6.4. Change in Control Distributions 6.4.1. When Available 6.4.2. Limitations 6.4.3. Forfeiture 6.5. Acceleration of Annual Installments 6.5.1. When Available 6.5.2. Forfeiture 6.6. Designation of Beneficiaries 6.6.1. Right to Designate 6.6.2. Failure of Designation 6.6.3. Disclaimers by Beneficiaries 6.6.4. Definitions 6.6.5. Special Rules 6.6.6. No Spousal Rights 6.7. Death Prior to Full Distribution 6.8. Facility of Payment SECTION 7. FUNDING OF PLAN .............................................. 11 7.1. Unfunded Agreement 7.2. Spendthrift Provision SECTION 8. AMENDMENT AND TERMINATION .................................... 12 SECTION 9. DETERMINATIONS-- RULES AND REGULATIONS ....................... 12 9.1. Determinations 9.2. Rules and Regulations 9.3. Method of Executing Instruments 9.4. Claims Procedure 9.4.1. Original Claim 9.4.2. Claims Review Procedure 9.4.3. General Rules 9.5. Information Furnished by Participants SECTION 10. PLAN ADMINISTRATION .......................................... 14 10.1. Employer 10.1.1. Officers 10.1.2. Chief Executive Officer 10.1.3. Board of Directors 10.2. Conflict of Interest 10.3. Administrator 10.4. Service of Process SECTION 11. DISCLAIMERS .................................................. 15 11.1. Term of Employment 11.2. Source of Payment 11.3. Delegation APPENDIX A -- CHANGE IN CONTROL DEFINITIONS ................................A-1 FIRST BANK SYSTEM, INC. EXECUTIVE DEFERRAL PLAN (1992 STATEMENT) SECTION 1 INTRODUCTION 1.1. STATEMENT OF PLAN. Effective January 1, 1992, FIRST BANK SYSTEM, INC., a Delaware corporation (hereinafter sometimes referred to as "Principal Sponsor") hereby creates a nonqualified, unfunded, elective deferral plan for the purpose of allowing a select group of management and highly compensated employees of the Principal Sponsor and other Employers to defer the receipt of incentive compensation which would otherwise be paid to those employees. 1.2. DEFINITIONS. When the following terms are used herein with initial capital letters, they shall have the following meanings: 1.2.1. ACCOUNT -- the separate bookkeeping account representing the unfunded and unsecured general obligation of Principal Sponsor established with respect to each Participant to which is credited the dollar amounts specified in Section 3 and from which are subtracted payments and forfeitures made pursuant to Section 6. To the extent necessary to accommodate and effect the distribution elections made by Participants pursuant to Section 2, separate bookkeeping sub-accounts shall be established with respect to each of the several annual deferral elections made by Participants. 1.2.2. AFFILIATE -- a business entity which is affiliated in ownership with the Principal Sponsor or an Employer and is recognized as an Affiliate by the Principal Sponsor for the purposes of this Plan. 1.2.3. ANNUAL VALUATION DATE -- each December 31. 1.2.4. BENEFICIARY -- a person designated by a Participant (or automatically by operation of this Plan Statement) to receive all or a part of the Participant's Account in the event of the Participant's death prior to full distribution thereof. A person so designated shall not be considered a Beneficiary until the death of the Participant. THIRD AMENDMENT-EFFECTIVE JULY 17, 1996 1.2.5. CHANGE IN CONTROL -- THE DEFINITION OF CHANGE IN CONTROL, AS WELL AS CERTAIN OTHER DEFINITIONS RELATING TO CHANGE IN CONTROL USED HEREIN, APPEAR IN APPENDIX A TO THIS PLAN STATEMENT. 1.2.6. EARLIEST RETIREMENT AGE -- the earlier of: (i) the earliest date that a Participant who is at least age fifty-five (55) years has a sum of his or her age (in whole years) and Service (also in whole years) that equals at least sixty-five (65), or (ii) the date a Participant attains Normal Retirement Age. 1.2.7. EFFECTIVE DATE -- January 1, 1992. 1.2.8. EMPLOYER -- the Principal Sponsor and any business entity affiliated with the Principal Sponsor that employs persons who are designated for participation in this Plan. 1.2.9. EVENT OF MATURITY-- any of the occurrences described in Section 5 by reason of which a Participant or Beneficiary may become entitled to a distribution from the Plan. THIRD AMENDMENT-EFFECTIVE JULY 17, 1996 1.2.10. FBS -- FIRST BANK SYSTEM, INC., A DELAWARE CORPORATION, OR ANY SUCCESSOR THERETO. 1.2.11. NORMAL RETIREMENT AGE-- the last day of the calendar month in which a Participant attains age sixty-five (65) years. 1.2.12. PARTICIPANT -- an employee of the Employer who is designated as eligible to participate in this Plan by the Organization Committee of the Board of Directors and elects to participate in accordance with the terms of this Plan and becomes a Participant in the Plan in accordance with the provisions of Section 2. An employee shall not be eligible to become a Participant unless the employee is a member of a select group of management or highly compensated employees. No employee is presumed or automatically eligible to participate in this Plan. An employee who has become a Participant shall be considered to continue as a Participant in the Plan until the date of the Participant's death or, if earlier, the date when the Participant is no longer employed by an Employer or an Affiliate and upon which the Participant no longer has any Account under the Plan (that is, the Participant has received a distribution of all of the Participant's Account). 1.2.13. PLAN -- the nonqualified, income deferral program maintained by the Principal Sponsor established for the benefit of Participants eligible to participate therein, as set forth in this Plan Statement. (As used herein, "Plan" does not refer to the documents pursuant to which the Plan is maintained. Those documents are referred to herein as the "Plan Statement"). The Plan shall be referred to as the "FIRST BANK SYSTEM, INC. EXECUTIVE DEFERRAL PLAN." 1.2.14. PLAN STATEMENT -- this document entitled "FIRST BANK SYSTEM, INC. EXECUTIVE DEFERRAL PLAN (1992 Statement)" as adopted by the Organization Committee of the Board of Directors of FIRST BANK SYSTEM, INC. effective as of January 1, 1992, as the same may be amended from time to time thereafter. 1.2.15. PLAN YEAR -- the twelve (12) consecutive month period ending on any Annual Valuation Date. 1.2.16. PRINCIPAL SPONSOR -- FIRST BANK SYSTEM, INC., a Delaware corporation. 1.2.17. TERMINATION OF EMPLOYMENT -- a complete severance of an employee's employment relationship with the Employer and all Affiliates, if any, for any reason other than the employee's death. A transfer from employment with the Employer to employment with an Affiliate of the Employer shall not constitute a Termination of Employment. If an Employer who is an Affiliate ceases to be an Affiliate because of a sale of substantially all the stock or assets of the Employer, then Participants who are employed by that Employer and who cease to be employed by the Principal Sponsor or an Employer on account of the sale of substantially all the stock or assets of the Employer shall be deemed to have thereby had a Termination of Employment for the purpose of commencing distributions from this Plan. 1.2.18. VALUATION DATE -- the last day of each calendar month of the Plan Year. 1.2.19. SERVICE -- a measure of an employee's service with the Employer and all Affiliates (stated as a number of years) which is equal to the number of years of "Vesting Service" determined under the rules of the "First Bank System Personal Retirement Account" (or any similar successor plan) as those rules may exist at the time the Participant's Service is being determined. 1.3. RULES OF INTERPRETATION. An individual shall be considered to have attained a given age on such individual's birthday for that age (and not on the day before). Individuals born on February 29 in a leap year shall be considered to have their birthdays on February 28 in each year that is not a leap year. Notwithstanding any other provision of this Plan Statement or any election or designation made under the Plan, any individual who feloniously and intentionally kills a Participant or Beneficiary shall be deemed for all purposes of this Plan and all elections and designations made under this Plan to have died before such Participant or Beneficiary. A final judgment of conviction of felonious and intentional killing is conclusive for the purposes of this section. In the absence of a conviction of felonious and intentional killing, the Principal Sponsor shall determine whether the killing was felonious and intentional for the purposes of this section. Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine; and the words "hereof," "herein" or "hereunder" or other similar compounds of the word "here" shall mean and refer to this entire Plan Statement and not to any particular paragraph or section of this Plan Statement unless the context clearly indicates to the contrary. The titles given to the various sections of this Plan Statement are inserted for convenience of reference only and are not part of this Plan Statement, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof. This Plan Statement shall be construed and this Plan shall be administered to create an unfunded plan providing deferred compensation to a select group of management or highly compensated employees so that it is exempt from the requirements of Parts 2, 3 and 4 of Title I of ERISA and qualifies for a form of simplified, alternative compliance with the reporting and disclosure requirements of Part 1 of Title I of ERISA. Any reference in this Plan Statement to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation. This document has been executed and delivered in the State of MINNESOTA and has been drawn in conformity to the laws of that State and shall be construed and enforced in accordance with the laws of the State of MINNESOTA. SECTION 2 PARTICIPATION 2.1. PARTICIPATION. Each employee of the Employer designated by the Organization Committee of the Board of Directors as eligible to enroll in this Plan shall be a participant in the Plan as of the first day of the Plan Year with respect to which the employee first enrolls as Participant. Employees shall be designated as eligible to enroll on a Plan Year by Plan Year basis. Eligibility to enroll one Plan Year does not entitle the employee to enroll the next Plan Year. 2.2. ENROLLMENT. Prior to the first day of any Plan Year, an employee who has been designated as eligible to enroll may make an enrollment for that Plan Year. A separate enrollment shall be made for each Plan Year. Each such enrollment: (a) Shall be irrevocable for the remainder of the Plan Year with respect to which it is made once it has been accepted by the Principal Sponsor. FIRST AMENDMENT-EFFECTIVE JANUARY 1, 1994 (b) SHALL DESIGNATE THE AMOUNT OR PORTION OF THE PARTICIPANT'S INCENTIVE COMPENSATION OR BASE COMPENSATION OR BOTH WHICH IS EARNED DURING THAT PLAN YEAR (WITHOUT REGARD TO WHETHER IT WOULD BE PAID DURING THAT OR A SUBSEQUENT PLAN YEAR) WHICH SHALL NOT BE PAID TO THE PARTICIPANT BUT INSTEAD SHALL BE ACCUMULATED IN THIS PLAN UNDER SECTION 3 AND DISTRIBUTED FROM THIS PLAN UNDER SECTION 6. THE AMOUNT OR PORTION MAY BE DESIGNED AS A DOLLAR AMOUNT OR A PERCENTAGE. THE AMOUNT OR PORTION OF THE BASE COMPENSATION THAT CAN BE DESIGNATED SHALL NOT EXCEED FIFTY PERCENT (50%) OF THE PARTICIPANT'S BASE COMPENSATION. (c) Shall specify the form in which distribution of the portion of the Account attributable to that enrollment shall be made under Section 6 upon the occurrence of an Event of Maturity (and if such designation is not clearly made to the contrary shall be deemed to have been an election of a single lump sum distribution). (d) Shall specify whether and what amount of the Account attributable to that enrollment shall be distributed before an Event of Maturity in accordance with Section 6.2. (e) Shall be made upon forms furnished by the Principal Sponsor, shall be made at such time as the Principal Sponsor shall determine, shall be made before the beginning of the Plan Year with respect to which it is made and shall conform to such other procedural and substantive rules as the Principal Sponsor shall make. 2.3. SPECIFIC EXCLUSION. Notwithstanding anything apparently to the contrary in this Plan Statement or in any written communication, summary, resolution or document or oral communication, no individual shall be a Participant in this Plan, develop benefits under this Plan or be entitled to receive benefits under this Plan (either for himself or herself or his or her survivors) unless such individual is a member of a select group of management or highly compensated employees (as that expression is used in ERISA). If a court of competent jurisdiction, any representative of the U.S. Department of Labor or any other governmental, regulatory or similar body makes any direct or indirect, formal or informal, determination that an individual is not a member of a select group of management or highly compensated employees (as that expression is used in ERISA), such individual shall not be (and shall not have ever been) a Participant in this Plan at any time. If any person not so defined has been erroneously treated as a Participant in this Plan, upon discovery of such error such person's erroneous participation shall immediately terminate ab initio and the Employer shall distribute the individual's Account immediately. SECTION 3 ADJUSTMENT OF ACCOUNTS 3.1. ESTABLISHMENT OF ACCOUNTS. There shall be established for each Participant an unfunded, bookkeeping Account which shall be adjusted each Valuation Date. 3.2. ADJUSTMENTS OF ACCOUNTS. As of each Valuation Date (the "current Valuation Date"), the value of each Account determined as of the immediately preceding Valuation Date (the "initial Account value") shall be increased (or decreased) by the following adjustments made in the following sequence: 3.2.1. INTERMEDIATE DISTRIBUTIONS SUBTRACTION. The initial Account value shall be reduced by the total amount distributed in fact to (or with respect to) the Participant (or forfeited in connection with a distribution) from such Account as of a date subsequent to the immediately preceding Valuation Date but prior to the current Valuation Date. 3.2.2. INVESTMENT ADDITION. The initial Account value (as adjusted above) shall be increased by interest. (a) The rate shall be determined from time to time by the Principal Sponsor. Except as provided in Section 8, the rate may be changed by the Principal Sponsor by amendment of the Plan Statement without notice to or the consent of any Participant, former Participant or any Beneficiary. (b) Beginning January 1, 1992, the rate for each month shall be determined annually for each Plan Year and shall be equal to the monthly equivalent of one hundred percent (100%) of the 10-year Treasury Note 120 month rolling average (as established on the September 30 of the preceding Plan Year). (c) This rate shall be uniform for all Participants for the same Valuation Date but may change from Valuation Date to Valuation Date. 3.2.3. DEFERRAL ADDITION. The initial Account value (as adjusted above) shall be increased by the total amount of incentive compensation, if any, which would have been paid to the Participant as of a date subsequent to the immediately preceding Valuation Date but prior to or coincident with the current Valuation Date but for the enrollment agreement signed by the Participant pursuant to Section 2. 3.2.4. FINAL DISTRIBUTIONS SUBTRACTION. The initial Account value (as adjusted above) shall be reduced by the total amount distributed in fact to (or with respect to) the Participant (or forfeited in connection with a distribution) from such Account as of the current Valuation Date. SECTION 4 VESTING OF ACCOUNT Except as provided in Section 6.2 and Section 6.4 (relating to the forfeiture for hardship or Change in Control distributions) and Section 8 (relating to the ability to amend the Plan Statement and terminate the Plan), the Account of each Participant shall be fully (100%) vested and nonforfeitable at all times. SECTION 5 MATURITY 5.1. EVENTS OF MATURITY. A Participant's Account shall mature and shall become distributable in accordance with Section 6 upon the earliest occurrence of any of the following events while in the employment of the Employer or an Affiliate: (a) his or her death, or (b) his or her Termination of Employment from the Employer, or (c) termination of the Plan; provided, however, that a termination of the opportunity to make an enrollment by action of the Organization Committee of the Board of Directors pursuant to Section 2 or a transfer of employment to an Affiliate that is not an Employer shall not constitute an Event of Maturity. 5.2. EFFECT OF MATURITY UPON FURTHER PARTICIPATION IN PLAN. On the occurrence of an Event of Maturity, a Participant shall cease to have any interest in the Plan other than the right to receive payment of his or her Account as provided in Section 6 hereof, adjusted from time to time as provided in Section 3. SECTION 6 DISTRIBUTION 6.1. FORM OF DISTRIBUTION. Upon the occurrence of an Event of Maturity effective as to a Participant, the Principal Sponsor shall commence payment of such Participant's Account (reduced by the amount of any applicable payroll, withholding and other taxes) in the form designated by the Participant in his or her enrollment. A Participant shall not be required to make application to receive payment. Distribution shall not be made to any Beneficiary, however, until such Beneficiary shall have filed a written application for benefits in a form acceptable to the Principal Sponsor and such application shall have been approved by the Principal Sponsor. SECOND AMENDMENT-EFFECTIVE JANUARY 1, 1992 6.1.1. FORM OF DISTRIBUTION. DISTRIBUTION SHALL BE MADE IN WHICHEVER OF THE FOLLOWING FORMS AS THE PARTICIPANT SHALL HAVE DESIGNATED IN WRITING AT THE TIME OF HIS OR HER ENROLLMENT (TO THE EXTENT THAT SUCH ELECTION IS CONSISTENT WITH THE RULES OF THIS PLAN STATEMENT): (a) TERM CERTAIN INSTALLMENTS TO PARTICIPANT. IF THE DISTRIBUTEE IS A PARTICIPANT, THE ACCOUNT AT THE TERMINATION OF EMPLOYMENT IS AT LEAST TWENTY THOUSAND DOLLARS ($20,000) AND THE PARTICIPANT HAD ATTAINED EARLIEST RETIREMENT AGE AT THE TERMINATION OF EMPLOYMENT, IN A SERIES OF ANNUAL INSTALLMENTS PAYABLE OVER FIFTEEN (15) YEARS. (FOR THE PURPOSE OF APPLYING THIS DOLLAR LIMITATION, ALL PORTIONS OF THE ACCOUNT DISTRIBUTABLE IN FIFTEEN ANNUAL INSTALLMENTS SHALL BE CONSIDERED TOGETHER NOTWITHSTANDING THAT SUCH AMOUNTS MAY HAVE BEEN ATTRIBUTABLE TO ENROLLMENTS RELATING TO MORE THAN ONE PLAN YEAR.) (b) CONTINUED TERM CERTAIN INSTALLMENTS TO BENEFICIARY. IF THE DISTRIBUTEE IS A BENEFICIARY OF A DECEASED PARTICIPANT AND DISTRIBUTION HAD COMMENCED TO THE DECEASED PARTICIPANT BEFORE HIS OR HER DEATH OVER A FIFTEEN (15) YEAR PERIOD AS SPECIFIED IN PARAGRAPH (a) ABOVE, IN A SERIES OF ANNUAL INSTALLMENTS PAYABLE OVER THE REMAINDER OF THE FIFTEEN (15) YEAR PERIOD. (c) LUMP SUM. IF THE DISTRIBUTEE IS A PARTICIPANT, IN A SINGLE LUMP SUM. IF THE DISTRIBUTEE IS A BENEFICIARY OF A DECEASED PARTICIPANT AND DISTRIBUTION HAD NOT COMMENCED TO THE DECEASED PARTICIPANT BEFORE HIS OR HER DEATH, IN A SINGLE LUMP SUM PAYMENT. 6.1.2. TIME OF PAYMENT. Payment shall be made or commenced to a Participant in accordance with the following rules: (a) RETIREMENT. If the Participant's Termination of Employment is on a date on or after the Participant's Earliest Retirement Age, payment shall be made or commenced as of the Annual Valuation Date coincident with or immediately following the Participant's Termination of Employment and shall be made or commenced as soon as practicable after such Annual Valuation Date. (b) DEATH. If the payment is made or commenced on account of the Participant's death, payment shall be made or commenced as of the Annual Valuation Date coincident with or immediately following the Participant's Termination of Employment and shall be made or commenced as soon as practicable after such Annual Valuation Date. (c) OTHER. In all other cases, payment to the Participant shall be made as of the second Valuation Date subsequent to the Participant's Termination of Employment and shall be made as soon as practicable after such second Valuation Date. SECOND AMENDMENT-EFFECTIVE JANUARY 1, 1992 (d) CODE SS.162(m) DELAY. IF THE PRINCIPAL SPONSOR DETERMINES THAT DELAYING THE TIME OF THE INITIAL PAYMENTS ARE MADE OR COMMENCED WOULD INCREASE THE PROBABILITY THAT SUCH PAYMENTS WOULD BE FULLY DEDUCTIBLE FOR FEDERAL OR STATE INCOME TAX PURPOSES, THE PRINCIPAL SPONSOR MAY UNILATERALLY DELAY THE TIME OF THE MAKING OR COMMENCEMENT OF PAYMENTS FOR UP TO TWENTY-FOUR (24) MONTHS AFTER THE DATE SUCH PAYMENTS WOULD OTHERWISE BE PAYABLE. 6.1.3. INSTALLMENT AMOUNTS. The amount of the annual installments shall be determined by dividing the amount of the Account as of the Annual Valuation Date as of which the installment is being paid by the number of remaining installment payments to be made (including the payment being determined). 6.1.4. DEFAULT. If for any reason a Participant shall have failed to make a timely written designation of form for distribution (including reasons entirely beyond the control of the Participant), the distribution shall be made in a single lump sum. No spouse, former spouse, Beneficiary or other person shall have any right to participate in the Participant's selection of a form of benefit. 6.2. PREVIOUSLY SCHEDULED DISTRIBUTION. 6.2.1. ENROLLING FOR THE DISTRIBUTION. At the time of enrollment for each Plan Year, each enrolling Participant shall have the opportunity to elect to cause the Plan to make a scheduled distribution to the Participant from the Account of a fixed dollar amount or percentage of Account (not less than $2,000) as of an Annual Valuation Date designated by the Participant in the enrollment which distribution shall be made as soon as practicable after such Annual Valuation Date. The failure to make such a scheduled distribution election one Plan Year shall not preclude an election in a subsequent Plan Year. Making a scheduled distribution election for one Plan Year shall not require any such election in a subsequent Plan Year. The scheduled distribution election that is made with each Plan Year's enrollment shall relate only to the portion of the Account that is attributable to that Plan Year's deferrals. 6.2.2. SCHEDULED DISTRIBUTION. As of the Annual Valuation Date designated by the Participant in his or her enrollment, there shall be distributed from the Account to the Participant such amount as the Participant shall have elected to receive from the Account when the Participant enrolled. Notwithstanding the dollar amount designated by the Participant in his or her enrollment, if a scheduled distribution is required as of an Annual Valuation Date and the value of the portion of the Account that is attributable to the Plan Year's deferrals on such Annual Valuation Date is less than Five Thousand Dollars ($5,000) the entire Account attributable to that Plan Year's deferrals shall be distributed. In no event shall such scheduled distributions occur after the death of the Participant or after any other Event of Maturity with respect to the Participant. In no event shall such scheduled distributions made pursuant to an enrollment for a Plan Year exceed the Account attributable to that Plan Year. 6.3. HARDSHIP DISTRIBUTIONS. 6.3.1. WHEN AVAILABLE. A Participant may receive a hardship distribution from his or her Account if the Principal Sponsor determines that such hardship distribution is for a purpose described in Section 6.3.2 and the conditions in Section 6.3.3 and Section 6.3.4 have been fulfilled. To receive such a distribution, the Participant must file a written hardship distribution application with the Principal Sponsor and furnish such documentation as the Principal Sponsor may require. In the application, the Participant shall specify the basis for the distribution and the dollar amount to be distributed. If such hardship distribution is approved by the Principal Sponsor, distribution shall be made as of the Valuation Date coincident with or next following the approval of a completed application by the Principal Sponsor and such hardship distribution shall be made in a lump sum cash payment as soon as administratively feasible after such Valuation Date. The amount of each hardship distribution shall be taken from the portion of the Account attributable to the earliest enrollment (including related earnings) first. 6.3.2. PURPOSES. Hardship distributions shall be allowed under Section 6.3.1 only if the Participant establishes that the hardship distribution is to be made on account of an immediate and heavy financial need of the Participant for which the Participant does not have other available resources. 6.3.3. LIMITATIONS. The amount of the hardship distribution shall not exceed the amount of the Participant's proven immediate and heavy financial need. A hardship distribution shall not be made after the death of the Participant or after the occurrence of any other Event of Maturity. The amount of approved hardship distribution (and the forfeiture described below) shall not exceed the value of the Account. 6.3.4. FORFEITURE. Upon the approval of a hardship distribution, there shall be irrevocably forfeited from the Account of the Participant an amount equal to ten percent (10%) of the amount approved for distribution. 6.4. CHANGE IN CONTROL DISTRIBUTIONS. THIRD AMENDMENT-EFFECTIVE JULY 17, 1996 6.4.1. WHEN AVAILABLE. A PARTICIPANT OR BENEFICIARY MAY RECEIVE A DISTRIBUTION OF HIS OR HER ENTIRE ACCOUNT (AFTER REDUCTION FOR THE FORFEITURE DESCRIBED IN SECTION 6.4.3) IF A FULL CHANGE IN CONTROL OR A QUALIFYING TERMINATION HAS OCCURRED AND THE CONDITION IN SECTION 6.4.2 HAS BEEN FULFILLED (A "CHANGE IN CONTROL DISTRIBUTION"). TO RECEIVE SUCH A DISTRIBUTION, THE PARTICIPANT OR BENEFICIARY MUST FILE A WRITTEN DISTRIBUTION APPLICATION WITH THE PRINCIPAL SPONSOR. THE PRINCIPAL SPONSOR SHALL APPROVE THE CHANGE IN CONTROL DISTRIBUTION IF SUCH APPLICATION HAS BEEN FILED AND A FULL CHANGE IN CONTROL OR A QUALIFYING TERMINATION HAS OCCURRED. DISTRIBUTION OF THE ENTIRE ACCOUNT (AFTER REDUCTION FOR THE FORFEITURE DESCRIBED IN SECTION 6.4.3) SHALL BE MADE AS OF THE VALUATION DATE COINCIDENT WITH OR NEXT FOLLOWING THE APPROVAL OF A COMPLETED APPLICATION BY THE PRINCIPAL SPONSOR. SUCH DISTRIBUTION SHALL BE MADE IN A LUMP SUM CASH PAYMENT AS SOON AS ADMINISTRATIVELY FEASIBLE AFTER SUCH VALUATION DATE. 6.4.2. LIMITATIONS. THE AMOUNT OF APPROVED CHANGE IN CONTROL DISTRIBUTION (AND THE FORFEITURE DESCRIBED BELOW) SHALL NOT EXCEED THE VALUE OF THE ACCOUNT. 6.4.3. FORFEITURE. UPON THE APPROVAL OF A CHANGE IN CONTROL DISTRIBUTION, THERE SHALL BE IRREVOCABLY FORFEITED FROM THE ACCOUNT OF THE PARTICIPANT OR BENEFICIARY AN AMOUNT EQUAL TO FIVE PERCENT (5%) OF THE ACCOUNT. 6.5. ACCELERATION OF ANNUAL INSTALLMENTS. 6.5.1. WHEN AVAILABLE. A Participant or Beneficiary who is receiving annual installments may receive an accelerated payment of his or her entire Account (after reduction for the forfeiture described in Section 6.5.2). To receive such an accelerated payment, the Participant or Beneficiary must file a written payment application with the Principal Sponsor. Payment of the accelerated payment (after reduction for the forfeiture described in Section 6.5.2) shall be made as of the Annual Valuation Date coincident with or next following the approval of a completed application by the Principal Sponsor. Such accelerated payment shall be made in a lump sum cash payment as soon as administratively feasible after such Valuation Date. The amount of the accelerated payment shall be equal to the value of the Account as of such Annual Valuation Date (after reduction for the forfeiture described below). 6.5.2. FORFEITURE. Upon the approval of an accelerated payment, there shall be irrevocably forfeited from the Account of the Participant or Beneficiary an amount equal to ten percent (10%) of the Account. 6.6. DESIGNATION OF BENEFICIARIES. 6.6.1. RIGHT TO DESIGNATE. Each Participant may designate, upon forms to be furnished by and filed with the Principal Sponsor, one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified part of such Participant's Account in the event of such Participant's death. The Participant may change or revoke any such designation from time to time without notice to or consent from any Beneficiary. No such designation, change or revocation shall be effective unless executed by the Participant and received by the Principal Sponsor during the Participant's lifetime. 6.6.2. FAILURE OF DESIGNATION. If a Participant: (a) fails to designate a Beneficiary, (b) designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or (c) designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Participant, such Participant's Account, or the part thereof as to which such Participant's designation fails, as the case may be, shall be payable to the first class of the following classes of automatic Beneficiaries with a member surviving the Participant and (except in the case of surviving issue) in equal shares if there is more than one member in such class surviving the Participant: Participant's surviving spouse Participant's surviving issue per stirpes and not per capita Participant's surviving parents Participant's surviving brothers and sisters Representative of Participant's estate. 6.6.3. DISCLAIMERS BY BENEFICIARIES. A Beneficiary entitled to a distribution of all or a portion of a deceased Participant's Account may disclaim an interest therein subject to the following requirements. To be eligible to disclaim, a Beneficiary must be a natural person, must not have received a distribution of all or any portion of the Account at the time such disclaimer is executed and delivered, and must have attained at least age twenty-one (21) years as of the date of the Participant's death. Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public. A disclaimer shall state that the Beneficiary's entire interest in the undistributed Account is disclaimed or shall specify what portion thereof is disclaimed. To be effective, duplicate original executed copies of the disclaimer must be both executed and actually delivered to the Principal Sponsor after the date of the Participant's death but not later than one hundred eighty (180) days after the date of the Participant's death. A disclaimer shall be irrevocable when delivered to the Principal Sponsor. A disclaimer shall be considered to be delivered to the Principal Sponsor only when actually received by the Principal Sponsor. The Principal Sponsor shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Participant as to the interest disclaimed. A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of the provisions of Section 6 and shall not be considered to be an assignment or alienation of benefits in violation of federal law prohibiting the assignment or alienation of benefits under this Plan. No other form of attempted disclaimer shall be recognized by the Principal Sponsor. 6.6.4. DEFINITIONS. When used herein and, unless the Participant has otherwise specified in the Participant's Beneficiary designation, when used in a Beneficiary designation, "issue" means all persons who are lineal descendants of the person whose issue are referred to, including legally adopted descendants and their descendants but not including illegitimate descendants and their descendants; "child" means an issue of the first generation; "per stirpes" means in equal shares among living children of the person whose issue are referred to and the issue (taken collectively) of each deceased child of such person, with such issue taking by right of representation of such deceased child; and "survive" and "surviving" mean living after the death of the Participant. 6.6.5. SPECIAL RULES. Unless the Participant has otherwise specified in the Participant's Beneficiary designation, the following rules shall apply: (a) If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant. (b) The automatic Beneficiaries specified in Section 6.6.2 and the Beneficiaries designated by the Participant shall become fixed at the time of the Participant's death so that, if a Beneficiary survives the Participant but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary's estate. (c) If the Participant designates as a Beneficiary the person who is the Participant's spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Participant and such person shall automatically revoke such designation. (The foregoing shall not prevent the Participant from designating a former spouse as a Beneficiary on a form executed by the Participant and received by the Principal Sponsor after the date of the legal termination of the marriage between the Participant and such former spouse, and during the Participant's lifetime.) (d) Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Participant shall be given effect without regard to whether the relationship to the Participant exists either then or at the Participant's death. (e) Any designation of a Beneficiary only by statement of relationship to the Participant shall be effective only to designate the person or persons standing in such relationship to the Participant at the Participant's death. A Beneficiary designation is permanently void if it either is executed or is filed by a Participant who, at the time of such execution or filing, is then a minor under the law of the state of the Participant's legal residence. The Principal Sponsor shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation. 6.6.6. NO SPOUSAL RIGHTS. No spouse or surviving spouse of a Participant and no person designated to be a Beneficiary shall have any rights or interest in the benefits accumulated under this Plan including, but not limited to, the right to be the sole Beneficiary or to consent to the designation of Beneficiaries (or the changing of designated Beneficiaries) by the Participant. 6.7. DEATH PRIOR TO FULL DISTRIBUTION. If, at the death of the Participant, any payment to the Participant was due or otherwise pending but not actually paid, the amount of such payment shall be included in the Account which are payable to the Beneficiary (and shall not be paid to the Participant's estate). 6.8. FACILITY OF PAYMENT. In case of the legal disability, including minority, of a Participant or Beneficiary entitled to receive any distribution under the Plan, payment shall be made, if the Principal Sponsor shall be advised of the existence of such condition: (a) to the duly appointed guardian, conservator or other legal representative of such Participant or Beneficiary, or (b) to a person or institution entrusted with the care or maintenance of the incompetent or disabled Participant or Beneficiary, provided such person or institution has satisfied the Principal Sponsor that the payment will be used for the best interest and assist in the care of such Participant or Beneficiary, and provided further, that no prior claim for said payment has been made by a duly appointed guardian, conservator or other legal representative of such Participant or Beneficiary. Any payment made in accordance with the foregoing provisions of this section shall constitute a complete discharge of any liability or obligation of the Principal Sponsor therefor. SECTION 7 FUNDING OF PLAN 7.1. UNFUNDED AGREEMENT. The obligation of the Employer to make payments under this Plan constitutes only the unsecured (but legally enforceable) promise of the Employer to make such payments. The Participant shall have no lien, prior claim or other security interest in any property of the Employer. The Employer is not required to establish or maintain any fund, trust or account (other than a bookkeeping account or reserve) for the purpose of funding or paying the benefits promised under this Plan. If such a fund is established, the property therein shall remain the sole and exclusive property of the Employer. The Employer will pay the cost of this Plan out of its general assets. All references to accounts, accruals, gains, losses, income, expenses, payments, custodial funds and the like are included merely for the purpose of measuring the Employer's obligation to Participants in this Plan and shall not be construed to impose on the Employer the obligation to create any separate fund for purposes of this Plan. If the Employer elects to finance all or a portion of its costs in connection with this Plan through the purchase of life insurance or other similar investments, the Participant agrees, as a condition of participation in this Plan, to cooperate with the Employer in the purchase of such investment to any extent reasonably required by the Employer and relinquishes any claim he or she may have either for himself or herself or any beneficiary to the proceeds of any such investment or any other rights or interests in such investment. If a Participant fails or refuses to cooperate, then notwithstanding any other provision of this Plan Statement (including, without limiting the generality of the foregoing, Section 4) the Employer shall distribute the individual's Account immediately and the Participant shall not be eligible to enroll in the Plan again. 7.2. SPENDTHRIFT PROVISION. No Participant or Beneficiary shall have any interest in any Account which can be transferred nor shall any Participant or Beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while in the possession or control of the Employer, nor shall the Employer recognize any assignment thereof, either in whole or in part, nor shall any Account be subject to attachment, garnishment, execution following judgment or other legal process while in the possession or control of the Employer. The power to designate Beneficiaries to receive the Account of a Participant in the event of such Participant's death shall not permit or be construed to permit such power or right to be exercised by the Participant so as thereby to anticipate, pledge, mortgage or encumber such Participant's Account or any part thereof, and any attempt of a Participant so to exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by the Employer. This section shall not prevent the Employer from exercising, in its discretion, any of the applicable powers and options granted to it upon the occurrence of an Event of Maturity, as such powers may be conferred upon it by any applicable provision hereof. THIRD AMENDMENT-EFFECTIVE JULY 17, 1996 SECTION 8 AMENDMENT AND TERMINATION THE PRINCIPAL SPONSOR RESERVES THE POWER TO AMEND THE PLAN STATEMENT OR TERMINATE THE PLAN PRIOR TO A FULL CHANGE IN CONTROL. NO SUCH AMENDMENT OF THE PLAN STATEMENT OR TERMINATION OF THE PLAN, HOWEVER, SHALL REDUCE A PARTICIPANT'S ACCOUNT EARNED AS OF THE DATE OF SUCH AMENDMENT UNLESS THE PARTICIPANT SO AFFECTED CONSENTS IN WRITING TO THE AMENDMENT. AFTER A FULL CHANGE IN CONTROL, THE PLAN CANNOT BE AMENDED OR TERMINATED (AS APPLIED TO PARTICIPANTS WHO ARE PARTICIPANTS ON THE DATE OF THE FULL CHANGE IN CONTROL) UNLESS: (a) ALL ACCOUNTS OF ALL PARTICIPANTS AS OF THE DATE OF THE FULL CHANGE IN CONTROL HAVE BEEN PAID, OR (b) EIGHTY PERCENT (80%) OF ALL THE PARTICIPANTS AS OF THE DATE OF THE FULL CHANGE IN CONTROL GIVE WRITTEN CONSENT TO SUCH AMENDMENT OR TERMINATION. SECTION 9 DETERMINATIONS -- RULES AND REGULATIONS 9.1. DETERMINATIONS. The Principal Sponsor shall make such determinations as may be required from time to time in the administration of the Plan. The Principal Sponsor shall have the discretionary authority and responsibility to interpret and construe the Plan Statement and to determine all factual and legal questions under the Plan, including but not limited to the entitlement of Participants and Beneficiaries, and the amounts of their respective interests. Each interested party may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary. 9.2. RULES AND REGULATIONS. Any rule not in conflict or at variance with the provisions hereof may be adopted by the Principal Sponsor. 9.3. METHOD OF EXECUTING INSTRUMENTS. Information to be supplied or written notices to be made or consents to be given by the Principal Sponsor pursuant to any provision of this Plan Statement may be signed in the name of the Principal Sponsor by any officer who has been authorized to make such certification or to give such notices or consents. THIRD AMENDMENT-EFFECTIVE JULY 17, 1996 9.4. CLAIMS PROCEDURE. THE CLAIMS PROCEDURE SET FORTH IN THIS SECTION 9.4 SHALL BE THE EXCLUSIVE PROCEDURE FOR THE DISPOSITION OF CLAIMS FOR BENEFITS ARISING UNDER THE PLAN UNTIL SUCH TIME AS A FULL CHANGE IN CONTROL OCCURS. 9.4.1. ORIGINAL CLAIM. Any employee, former employee or beneficiary of such employee or former employee may, if he or she so desires, file with the Principal Sponsor a written claim for benefits under the Plan. Within ninety (90) days after the filing of such a claim, the Principal Sponsor shall notify the claimant in writing whether the claim is upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred eighty days from the date the claim was filed) to reach a decision on the claim. If the claim is denied in whole or in part, the Principal Sponsor shall state in writing: (a) the specific reasons for the denial; (b) the specific references to the pertinent provisions of this Plan Statement on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation of the claims review procedure set forth in this section. 9.4.2. CLAIMS REVIEW PROCEDURE. Within sixty (60) days after receipt of notice that the claim has been denied in whole or in part, the claimant may file with the Principal Sponsor a written request for a review and may, in conjunction therewith, submit written issues and comments. Within sixty (60) days after the filing of such a request for review, the Principal Sponsor shall notify the claimant in writing whether, upon review, the claim was upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred twenty days from the date the request for review was filed) to reach a decision on the request for review. 9.4.3. GENERAL RULES. (a) No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the claims procedure. The Principal Sponsor may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by the Principal Sponsor upon request. (b) All decisions on claims and on requests for a review of denied claims shall be made by the Principal Sponsor. (c) the Principal Sponsor may, in its discretion, hold one or more hearings on a claim or a request for a review of a denied claim. (d) A claimant may be represented by a lawyer or other representative (at the claimant's own expense), but the Principal Sponsor reserves the right to require the claimant to furnish written authorization. A claimant's representative shall be entitled to copies of all notices given to the claimant. (e) The decision of the Principal Sponsor on a claim and on a request for a review of a denied claim shall be served on the claimant in writing. If a decision or notice is not received by a claimant within the time specified, the claim or request for a review of a denied claim shall be deemed to have been denied. (f) Prior to filing a claim or a request for a review of a denied claim, the claimant or his or her representative shall have a reasonable opportunity to review a copy of this Plan Statement and all other pertinent documents in the possession of the Principal Sponsor. 9.5. INFORMATION FURNISHED BY PARTICIPANTS. The Principal Sponsor shall not be liable or responsible for any error in the computation of the Account of a Participant resulting from any misstatement of fact made by the Participant, directly or indirectly, to the Principal Sponsor, and used by it in determining the Participant's Account. The Principal Sponsor shall not be obligated or required to increase the Account of such Participant which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Participant. However, the Account of any Participant which are overstated by reason of any such misstatement shall be reduced to the amount appropriate in view of the truth. SECTION 10 PLAN ADMINISTRATION 10.1. EMPLOYER. 10.1.1. OFFICERS. Except as hereinafter provided, functions generally assigned to the Principal Sponsor shall be discharged by its officers or delegated and allocated as provided herein. 10.1.2. CHIEF EXECUTIVE OFFICER. Except as hereinafter provided, the Chief Executive Officer of the Principal Sponsor may delegate or redelegate and allocate and reallocate to one or more persons or to a committee of persons jointly or severally, and whether or not such persons are directors, officers or employees, such functions assigned to the Employer generally hereunder as the Chief Executive Officer may from time to time deem advisable. 10.1.3. BOARD OF DIRECTORS. Notwithstanding the foregoing, the Organization Committee of the Board of Directors of the Principal Sponsor shall have the exclusive authority, which may not be delegated, to act for the Principal Sponsor to amend this Plan Statement, to terminate this Plan, and to determine eligibility to participate in the Plan under Section 2. 10.2. CONFLICT OF INTEREST. If any officer or employee of the Employer, or any member of the Organization Committee of the Board of Directors of the Employer to whom authority has been delegated or redelegated hereunder shall also be a Participant in the Plan, such Participant shall have no authority as such officer, employee or member with respect to any matter specially affecting such Participant's individual interest hereunder or the interest of a person superior to him or her in the organization (as distinguished from the interests of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to the other officers, employees or members as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant's individual capacity in connection with any such matter. 10.3. ADMINISTRATOR. FIRST BANK SYSTEM, INC. shall be the administrator for purposes of section 3(16)(A) of the Employee Retirement Income Security Act of 1974. 10.4. SERVICE OF PROCESS. In the absence of any designation to the contrary by the Employer, the Secretary of FIRST BANK SYSTEM, INC. is designated as the appropriate and exclusive agent for the receipt of service of process directed to the Plan in any legal proceeding, including arbitration, involving the Plan. SECTION 11 DISCLAIMERS 11.1. TERM OF EMPLOYMENT. Neither the terms of this Plan Statement nor the benefits hereunder nor the continuance thereof shall be a term of the employment of any employee. The Employer shall not be obliged to continue the Plan. The terms of this Plan Statement shall not give any employee the right to be retained in the employment of the Employer. 11.2. SOURCE OF PAYMENT. Neither the Employer nor any of its officers nor any member of its Organization Committee of the Board of Directors in any way secure or guarantee the payment of any benefit or amount which may become due and payable hereunder to any Participant or to any Beneficiary or to any creditor of a Participant or a Beneficiary. Each Participant, Beneficiary or other person entitled at any time to payments hereunder shall look solely to the assets of the Employer for such payments or to the Accounts distributed to any Participant or Beneficiary, as the case may be, for such payments. In each case where Accounts shall have been distributed to a former Participant or a Beneficiary or to the person or any one of a group of persons entitled jointly to the receipt thereof and which purports to cover in full the benefit hereunder, such former Participant or Beneficiary, or such person or persons, as the case may be, shall have no further right or interest in the other assets of the Employer. Neither the Employer nor any of its officers nor any member of its Board of Directors shall be under any liability or responsibility for failure to effect any of the objectives or purposes of the Plan by reason of the insolvency of the Employer. 11.3. DELEGATION. The Employer and its officers and the members of its Board of Directors shall not be liable for an act or omission of another person with regard to a responsibility that has been allocated to or delegated to such other person pursuant to the terms of this Plan Statement or pursuant to procedures set forth in this Plan Statement. _________________, 1991 FIRST BANK SYSTEM, INC. By ----------------------------------- Its ------------------------------- APPENDIX A CHANGE IN CONTROL DEFINITIONS SECTION 1 1.1. ACQUIRING PERSON -- any Person who or which, together with all Affiliates (CIC) and Associates of such person, is the Beneficial Owner, directly or indirectly, of securities of FBS representing 20% or more of the combined voting power of FBS's then outstanding securities, but shall not include any Company Entity. 1.2. AFFILIATE (CIC) -- shall have the meaning ascribed to the term "Affiliate" in Rule 12b-2 promulgated under the Exchange Act. 1.3. ASSOCIATE -- shall have the meaning ascribed to such term in Rule 12b-2 promulgated under the Exchange Act. 1.4. BENEFICIAL OWNER -- shall have the meaning ascribed to such term in Rule 13d-3 promulgated under the Exchange Act. 1.5. BOARD OF DIRECTORS -- the board of directors of FBS. 1.6. COMPANY ENTITY -- FBS, any subsidiary of FBS or any employee benefit plan of FBS or of any subsidiary of FBS or any entity holding shares of the voting capital stock of FBS organized, appointed or established for, or pursuant to the terms of, any such plan. 1.7. CONTINUING DIRECTOR -- any person who is a member of the Board of Directors, while such person is a member of the Board of Directors, who is not an Acquiring Person or an Affiliate (CIC) or Associate of an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate (CIC) or Associate, and who (x) was a member of the Board of Directors as of July 17, 1996 or (y) subsequently becomes a member of the Board of Directors, if such person's initial nomination for election or initial election to the Board of Directors has been approved in advance by the Continuing Directors; provided that any director designated by or on behalf of a Person who has entered into an agreement with FBS (or who is contemplating entering into such an agreement) to effect a consolidation or merger of FBS or a Company Entity, or other reorganization, with or into one or more entities which are not Company Entities, and any director that serves in connection with the act of the Board of Directors of increasing the number of directors and filling vacancies in connection with, or in contemplation of, any such transaction, shall not be deemed to have received such advance approval for initial nomination or election, and any such director shall not be deemed to be a Continuing Director; provided, further, that any such director shall subsequently become a Continuing Director at such time as a new term of office as a director is approved by FBS's shareholders at an annual meeting of shareholders occurring subsequent to the completion of any such transaction (and excluding any annual meeting at which the shareholders approve any such transaction); and, provided, further, that in the case of a Permitted Transaction, any such director shall not become a Continuing Director until the later of (i) the end of the three-year period following consummation of such Permitted Transaction or (ii) such time as a new term of office as a director is approved by FBS's shareholders at an annual meeting of shareholders occurring subsequent to the completion of such Permitted Transaction. 1.8. EXCHANGE ACT -- the Securities Exchange Act of 1934, as amended. 1.9. FULL CHANGE IN CONTROL -- shall mean: (a) the public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by FBS or any Person that a Person (other than a Company Entity) has become the Beneficial Owner, directly or indirectly, of securities of FBS (x) representing 20% or more, but not more than 50%, of the combined voting power of FBS's then outstanding securities unless the transaction resulting in such ownership has been approved in advance by the Continuing Directors or (y) representing more than 50% of the combined voting power of FBS's then outstanding securities (regardless of any approval by the Continuing Directors); or (b) the Continuing Directors cease to constitute a majority of the Board of Directors of FBS or the Resulting Corporation, except in accordance with the terms of a Permitted Transaction and except as a result of the death, retirement or disability of one or more Continuing Directors (unless any such death, retirement or disability occurs following a Permitted Transaction and any vacancies created thereby are not filled in accordance with the terms of the written agreement governing such Permitted Transaction); or (c) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the consolidated assets of FBS and its subsidiaries or the adoption of any plan of liquidation or dissolution of FBS. 1.10. PARTIAL CHANGE IN CONTROL -- shall mean: (a) a consolidation or merger of FBS or a Company Entity, or other reorganization, with or into one or more entities which are not Company Entities, as a result of which less than 60% of the outstanding voting securities of the Resulting Corporation are, or are to be, owned by former shareholders of FBS as determined immediately prior to consummation of such transaction (excluding voting securities of the Resulting Corporation owned, or to be owned, by such shareholders by reason of their ownership prior to such transaction of securities of any entity other than FBS) and as a result of which the Continuing Directors constitute (i) more than 50% of the Board of Directors of the Resulting Corporation or (ii) exactly 50% of the Board of Directors of the Resulting Corporation if the transaction resulting in such event is a Permitted Transaction; or (b) the public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by FBS or any Person that a Person (other than a Company Entity) has become the Beneficial Owner, directly or indirectly, of securities of FBS representing 20% or more, but not more than 50%, of the combined voting power of FBS's then outstanding securities if the transaction resulting in such ownership has been approved in advance by the Continuing Directors. 1.11. PERMITTED TRANSACTION -- a transaction in which, pursuant to a written agreement between FBS and all Persons who have entered into an agreement with FBS to effect a transaction described in paragraph (a)of the definition of Partial Change in Control, it is agreed that (w) the Chief Executive Officer of FBS immediately prior to the consummation of such transaction shall be the Chief Executive Officer of the Resulting Corporation for not less than three years following consummation of such transaction, (x) upon termination of service of any Continuing Director for any reason, including upon death, disability or retirement, prior to the expiration of such director's term during such three-year period, the vacancy thereby created shall be filled by a nominee selected solely by the Continuing Directors, (y) upon expiration of the term of any such director during such three-year period, the nominee to succeed such director shall be selected solely by the Continuing Directors and (z) the parties will take other appropriate steps to ensure that the Board of Directors of the Resulting Corporation will be evenly divided between Continuing Directors and all directors designated by other parties to the transaction during such three-year period. 1.12. PERSON-- shall have the meaning ascribed to such term as such term is used in Sections 13(d) and 14(d) of the Exchange Act. 1.13. QUALIFYING TERMINATION -- a termination of employment of a Participant prior to a Full Change in Control or prior to or following a Partial Change in Control that results in such Participant becoming entitled to receive change in control related severance payments pursuant to the terms of the change in control provisions of an employment contract, an individual change in control severance agreement, the First Bank System, Inc. Senior Management Change in Control Severance Pay Plan (including any successor plan thereto), the First Bank System, Inc. Middle Management Change in Control Severance Pay Program (including any successor program thereto) or the First Bank System, Inc. Broad-Based Change in Control Severance Pay Program (including any successor program thereto). 1.14. RESULTING CORPORATION -- the surviving corporation in any consolidation, merger or other reorganization to which FBS is a party; provided, however, that if the surviving corporation in any such transaction is a subsidiary of another corporation, then the Resulting Corporation is the ultimate parent corporation of such surviving corporation; and provided, further, that in the event of a consolidation, merger or other reorganization to which a Company Entity (other than FBS) is a party, then FBS shall be deemed the Resulting Corporation. EX-10.D 5 RETIREMENT AND DEATH BENEFIT PLAN COMPOSITE COPY FIRST BANK SYSTEM, INC. INDEPENDENT DIRECTOR RETIREMENT AND DEATH BENEFIT PLAN (1991 RESTATEMENT) First Effective January 1, 1987 As Amended and Restated Effective May 15, 1991 AND As Amended By The FIRST AMENDMENT Adopted February 15, 1995 But Effective January 1, 1995 The SECOND AMENDMENT Adopted July 17, 1996 But Effective January 1, 1996 The THIRD AMENDMENT Adopted July 17, 1996 But Effective July 17, 1996 NOTE: Material added or modified by the First, Second and Third Amendments is shown in italics. Modified section numbers are not generally shown in italics. Material deleted without replacement is indicated by a (triangle symbol). FIRST BANK SYSTEM, INC. INDEPENDENT DIRECTOR RETIREMENT AND DEATH BENEFIT PLAN (1991 RESTATEMENT) TABLE OF CONTENTS PAGE SECTION 1. INTRODUCTION ................................................. 1 1.1. Restatement of Plan 1.2. Definitions 1.2.1. Accrued Benefit 1.2.2. Beneficiary 1.2.3. Change in Control Definitions (a) Acquiring Person (b) Affiliate (c) Associate (d) Beneficial Owner (e) Board of Directors (f) Change in Control (g) Company Entity (h) Continuing Director (i) Exchange Act (j) Full Change In Control (k) Partial Change in Control (l) Permitted Transaction (m) Person (n) Resulting Corporation 1.2.4. Director 1.2.5. Director Service 1.2.6. FBS 1.2.7. Plan 1.2.8. Plan Statement 1.2.9. Present Value 1.2.10. Prior Plan Statement (triangle symbol) 1.2.12. Supplemental Retirement Pension 1.2.13. Termination of Service 1.3. Rules of Interpretation SECTION 2. ELIGIBILITY .................................................. 6 SECTION 3. SUPPLEMENTAL RETIREMENT BENEFITS ............................. 7 3.1. Supplemental Retirement Pension 3.1.1. When Available 3.1.2. Amount 3.1.3. Form of Pension 3.2. Change in Control 3.3. Facility of Payment SECTION 4. DEATH BENEFITS ............................................... 8 4.1. Death Before Benefit Commencement 4.1.1. When Available 4.1.2. Amount 4.1.3. Form of Benefit 4.2. Death After Benefit Commencement 4.3. Designation of Beneficiaries 4.3.1. Right To Designate 4.3.2. Failure of Designation 4.3.3. Disclaimers by Beneficiaries 4.3.4. Definitions 4.3.5. Special Rules 4.3.6. No Spousal Rights SECTION 5. FUNDING OF PLAN .............................................. 11 5.1. Unfunded Agreement 5.2. Spendthrift Provision SECTION 6. AMENDMENT AND TERMINATION .................................... 11 SECTION 7. DETERMINATIONS-- RULES AND REGULATIONS ....................... 12 7.1. Determinations 7.2. Rules and Regulations 7.3. Method of Executing Instruments 7.4. Information Furnished by Directors SECTION 8. PLAN ADMINISTRATION .......................................... 12 8.1. FBS 8.2. Conflict of Interest SECTION 9. DISCLAIMERS .................................................. 13 FIRST BANK SYSTEM, INC. INDEPENDENT DIRECTOR RETIREMENT AND DEATH BENEFIT PLAN (1991 RESTATEMENT) SECTION 1 INTRODUCTION 1.1. RESTATEMENT OF PLAN. Effective February 18, 1987, FIRST BANK SYSTEM, INC., a Delaware corporation (hereinafter sometimes referred to as "FBS"), adopted the "First Bank System, Inc. Independent Director retirement and Death Benefit Plan" for the purpose of establishing a supplemental retirement and death benefit plan for the benefit of certain eligible members of its Board of Directors (hereinafter referred to as the "Plan"). FBS reserved the right to amend and terminate that Prior Plan Statement from time to time. FBS now desires to exercise that reserved power of amendment by the adoption of this Plan Statement effective as of May 15,1991. 1.2. DEFINITIONS. When used herein with initial capital letters, the following words have the following meanings: 1.2.1. ACCRUED BENEFIT-- the aggregate amount determined for the Director as of a specified date equal to: (a) the annualized amount of the base director retainer (exclusive of committee attendance and similar extra fees) in effect on the date on which occurs the earlier of: (i) the Director's Termination of Service, or (ii) the Director's death; multiplied by (b) the number of full years, and fractions of years, of the Director's Director Service (not to exceed ten years). For this purpose, fractions of years shall be recorded in twelfths (1/12) and one-twelfth of a year of Director Service shall be credited only for each full calendar month of Director Service. 1.2.2. BENEFICIARY -- a person designated by a Director (or automatically by operation of this Plan Statement) to receive all or a part of the Director's benefit in the event of the Director's death prior to full distribution thereof. A person so designated shall not be considered a Beneficiary until the death of the Director. THIRD AMENDMENT-EFFECTIVE JULY 17, 1996 1.2.3. CHANGE IN CONTROL DEFINITIONS. WHEN USED HEREIN WITH INITIAL CAPITAL LETTERS, THE FOLLOWING WORDS RELATING TO THE "CHANGE IN CONTROL" DEFINITION HAVE THE FOLLOWING MEANINGS: (a) ACQUIRING PERSON -- SHALL MEAN ANY PERSON WHO OR WHICH, TOGETHER WITH ALL AFFILIATES AND ASSOCIATES OF SUCH PERSON, IS THE BENEFICIAL OWNER, DIRECTLY OR INDIRECTLY, OF SECURITIES OF FBS REPRESENTING 20% OR MORE OF THE COMBINED VOTING POWER OF FBS'S THEN OUTSTANDING SECURITIES, BUT SHALL NOT INCLUDE ANY COMPANY ENTITY. (b) AFFILIATE-- SHALL HAVE THE MEANING ASCRIBED TO THE TERM "AFFILIATE" IN RULE 12b-2 PROMULGATED UNDER THE EXCHANGE ACT. (c) ASSOCIATE-- SHALL HAVE THE MEANING ASCRIBED TO SUCH TERM IN RULE 12b-2 PROMULGATED UNDER THE EXCHANGE ACT. (d) BENEFICIAL OWNER-- SHALL HAVE THE MEANING ASCRIBED TO SUCH TERM IN RULE 13d-3 PROMULGATED UNDER THE EXCHANGE ACT. (e) BOARD OF DIRECTORS -- SHALL MEAN THE BOARD OF DIRECTORS OF FBS. (f) CHANGE IN CONTROL-- SHALL MEAN A FULL CHANGE IN CONTROL OR A PARTIAL CHANGE IN CONTROL. (g) COMPANY ENTITY-- SHALL MEAN FBS, ANY SUBSIDIARY OF FBS OR ANY EMPLOYEE BENEFIT PLAN OF FBS OR OF ANY SUBSIDIARY OF FBS OR ANY ENTITY HOLDING SHARES OF THE VOTING CAPITAL STOCK OF FBS ORGANIZED, APPOINTED OR ESTABLISHED FOR, OR PURSUANT TO THE TERMS OF, ANY SUCH PLAN. (h) CONTINUING DIRECTOR-- SHALL MEAN ANY PERSON WHO IS A MEMBER OF THE BOARD OF DIRECTORS, WHILE SUCH PERSON IS A MEMBER OF THE BOARD OF DIRECTORS, WHO IS NOT AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON, OR A REPRESENTATIVE OF AN ACQUIRING PERSON OR OF ANY SUCH AFFILIATE OR ASSOCIATE, AND WHO (x) WAS A MEMBER OF THE BOARD OF DIRECTORS AS OF JULY 17, 1996 OR (y) SUBSEQUENTLY BECOMES A MEMBER OF THE BOARD OF DIRECTORS, IF SUCH PERSON'S INITIAL NOMINATION FOR ELECTION OR INITIAL ELECTION TO THE BOARD OF DIRECTORS HAS BEEN APPROVED IN ADVANCE BY THE CONTINUING DIRECTORS; PROVIDED THAT ANY DIRECTOR DESIGNATED BY OR ON BEHALF OF A PERSON WHO HAS ENTERED INTO AN AGREEMENT WITH FBS (OR WHO IS CONTEMPLATING ENTERING INTO SUCH AN AGREEMENT) TO EFFECT A CONSOLIDATION OR MERGER OF FBS OR A COMPANY ENTITY, OR OTHER REORGANIZATION, WITH OR INTO ONE OR MORE ENTITIES WHICH ARE NOT COMPANY ENTITIES, AND ANY DIRECTOR THAT SERVES IN CONNECTION WITH THE ACT OF THE BOARD OF DIRECTORS OF INCREASING THE NUMBER OF DIRECTORS AND FILLING VACANCIES IN CONNECTION WITH, OR IN CONTEMPLATION OF, ANY SUCH TRANSACTION, SHALL NOT BE DEEMED TO HAVE RECEIVED SUCH ADVANCE APPROVAL FOR INITIAL NOMINATION OR ELECTION, AND ANY SUCH DIRECTOR SHALL NOT BE DEEMED TO BE A CONTINUING DIRECTOR; PROVIDED, FURTHER, THAT ANY SUCH DIRECTOR SHALL SUBSEQUENTLY BECOME A CONTINUING DIRECTOR AT SUCH TIME AS A NEW TERM OF OFFICE AS A DIRECTOR IS APPROVED BY FBS'S SHAREHOLDERS AT AN ANNUAL MEETING OF SHAREHOLDERS OCCURRING SUBSEQUENT TO THE COMPLETION OF ANY SUCH TRANSACTION (AND EXCLUDING ANY ANNUAL MEETING AT WHICH THE SHAREHOLDERS APPROVE ANY SUCH TRANSACTION); AND, PROVIDED, FURTHER, THAT IN THE CASE OF A PERMITTED TRANSACTION, ANY SUCH DIRECTOR SHALL NOT BECOME A CONTINUING DIRECTOR UNTIL THE LATER OF (i) THE END OF THE THREE-YEAR PERIOD FOLLOWING CONSUMMATION OF SUCH PERMITTED TRANSACTION OR (ii) SUCH TIME AS A NEW TERM OF OFFICE AS A DIRECTOR IS APPROVED BY FBS'S SHAREHOLDERS AT AN ANNUAL MEETING OF SHAREHOLDERS OCCURRING SUBSEQUENT TO THE COMPLETION OF SUCH PERMITTED TRANSACTION. (i) EXCHANGE ACT -- SHALL MEAN THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. (j) FULL CHANGE IN CONTROL -- SHALL MEAN: (i) THE PUBLIC ANNOUNCEMENT (WHICH, FOR PURPOSES OF THIS DEFINITION, SHALL INCLUDE, WITHOUT LIMITATION, A REPORT FILED PURSUANT TO SECTION 13(d) OF THE EXCHANGE ACT) BY FBS OR ANY PERSON THAT A PERSON (OTHER THAN A COMPANY ENTITY) HAS BECOME THE BENEFICIAL OWNER, DIRECTLY OR INDIRECTLY, OF SECURITIES OF FBS (x) REPRESENTING 20% OR MORE, BUT NOT MORE THAN 50%, OF THE COMBINED VOTING POWER OF FBS'S THEN OUTSTANDING SECURITIES UNLESS THE TRANSACTION RESULTING IN SUCH OWNERSHIP HAS BEEN APPROVED IN ADVANCE BY THE CONTINUING DIRECTORS OR (y) REPRESENTING MORE THAN 50% OF THE COMBINED VOTING POWER OF FBS'S THEN OUTSTANDING SECURITIES (REGARDLESS OF ANY APPROVAL BY THE CONTINUING DIRECTORS); OR (ii) THE CONTINUING DIRECTORS CEASE TO CONSTITUTE A MAJORITY OF THE BOARD OF DIRECTORS OF FBS OR THE RESULTING CORPORATION, EXCEPT IN ACCORDANCE WITH THE TERMS OF A PERMITTED TRANSACTION AND EXCEPT AS A RESULT OF THE DEATH, RETIREMENT OR DISABILITY OF ONE OR MORE CONTINUING DIRECTORS (UNLESS ANY SUCH DEATH, RETIREMENT OR DISABILITY OCCURS FOLLOWING A PERMITTED TRANSACTION AND ANY VACANCIES CREATED THEREBY ARE NOT FILLED IN ACCORDANCE WITH THE TERMS OF THE WRITTEN AGREEMENT GOVERNING SUCH PERMITTED TRANSACTION); OR (iii) ANY SALE, LEASE, EXCHANGE OR OTHER TRANSFER (IN ONE TRANSACTION OR A SERIES OF RELATED TRANSACTIONS) OF ALL OR SUBSTANTIALLY ALL OF THE CONSOLIDATED ASSETS OF FBS AND ITS SUBSIDIARIES OR THE ADOPTION OF ANY PLAN OF LIQUIDATION OR DISSOLUTION OF FBS. (k) PARTIAL CHANGE IN CONTROL -- SHALL MEAN: (i) A CONSOLIDATION OR MERGER OF FBS OR A COMPANY ENTITY, OR OTHER REORGANIZATION, WITH OR INTO ONE OR MORE ENTITIES WHICH ARE NOT COMPANY ENTITIES, AS A RESULT OF WHICH LESS THAN 60% OF THE OUTSTANDING VOTING SECURITIES OF THE RESULTING CORPORATION ARE, OR ARE TO BE, OWNED BY FORMER SHAREHOLDERS OF FBS AS DETERMINED IMMEDIATELY PRIOR TO CONSUMMATION OF SUCH TRANSACTION (EXCLUDING VOTING SECURITIES OF THE RESULTING CORPORATION OWNED, OR TO BE OWNED, BY SUCH SHAREHOLDERS BY REASON OF THEIR OWNERSHIP PRIOR TO SUCH TRANSACTION OF SECURITIES OF ANY ENTITY OTHER THAN FBS) AND AS A RESULT OF WHICH THE CONTINUING DIRECTORS CONSTITUTE (i) MORE THAN 50% OF THE BOARD OF DIRECTORS OF THE RESULTING CORPORATION OR (ii) EXACTLY 50% OF THE BOARD OF DIRECTORS OF THE RESULTING CORPORATION IF THE TRANSACTION RESULTING IN SUCH EVENT IS A PERMITTED TRANSACTION; OR (ii) THE PUBLIC ANNOUNCEMENT (WHICH, FOR PURPOSES OF THIS DEFINITION, SHALL INCLUDE, WITHOUT LIMITATION, A REPORT FILED PURSUANT TO SECTION 13(d) OF THE EXCHANGE ACT) BY FBS OR ANY PERSON THAT A PERSON (OTHER THAN A COMPANY ENTITY) HAS BECOME THE BENEFICIAL OWNER, DIRECTLY OR INDIRECTLY, OF SECURITIES OF FBS REPRESENTING 20% OR MORE, BUT NOT MORE THAN 50%, OF THE COMBINED VOTING POWER OF FBS'S THEN OUTSTANDING SECURITIES IF THE TRANSACTION RESULTING IN SUCH OWNERSHIP HAS BEEN APPROVED IN ADVANCE BY THE CONTINUING DIRECTORS. (l) PERMITTED TRANSACTION-- SHALL MEAN A TRANSACTION IN WHICH, PURSUANT TO A WRITTEN AGREEMENT BETWEEN FBS AND ALL PERSONS WHO HAVE ENTERED INTO AN AGREEMENT WITH FBS TO EFFECT A TRANSACTION DESCRIBED IN PARAGRAPH (i)OF THE DEFINITION OF PARTIAL CHANGE IN CONTROL, IT IS AGREED THAT (w) THE CHIEF EXECUTIVE OFFICER OF FBS IMMEDIATELY PRIOR TO THE CONSUMMATION OF SUCH TRANSACTION SHALL BE THE CHIEF EXECUTIVE OFFICER OF THE RESULTING CORPORATION FOR NOT LESS THAN THREE YEARS FOLLOWING CONSUMMATION OF SUCH TRANSACTION, (x) UPON TERMINATION OF SERVICE OF ANY CONTINUING DIRECTOR FOR ANY REASON, INCLUDING UPON DEATH, DISABILITY OR RETIREMENT, PRIOR TO THE EXPIRATION OF SUCH DIRECTOR'S TERM DURING SUCH THREE-YEAR PERIOD, THE VACANCY THEREBY CREATED SHALL BE FILLED BY A NOMINEE SELECTED SOLELY BY THE CONTINUING DIRECTORS, (y) UPON EXPIRATION OF THE TERM OF ANY SUCH DIRECTOR DURING SUCH THREE-YEAR PERIOD, THE NOMINEE TO SUCCEED SUCH DIRECTOR SHALL BE SELECTED SOLELY BY THE CONTINUING DIRECTORS AND (z) THE PARTIES WILL TAKE OTHER APPROPRIATE STEPS TO ENSURE THAT THE BOARD OF DIRECTORS OF THE RESULTING CORPORATION WILL BE EVENLY DIVIDED BETWEEN CONTINUING DIRECTORS AND ALL DIRECTORS DESIGNATED BY OTHER PARTIES TO THE TRANSACTION DURING SUCH THREE-YEAR PERIOD. (m) PERSON-- SHALL HAVE THE MEANING ASCRIBED TO SUCH TERM AS SUCH TERM IS USED IN SECTIONS 13(d) AND 14(d) OF THE EXCHANGE ACT. (n) RESULTING CORPORATION-- SHALL MEAN THE SURVIVING CORPORATION IN ANY CONSOLIDATION, MERGER OR OTHER REORGANIZATION TO WHICH FBS IS A PARTY; PROVIDED, HOWEVER, THAT IF THE SURVIVING CORPORATION IN ANY SUCH TRANSACTION IS A SUBSIDIARY OF ANOTHER CORPORATION, THEN THE RESULTING CORPORATION IS THE ULTIMATE PARENT CORPORATION OF SUCH SURVIVING CORPORATION; AND PROVIDED, FURTHER, THAT IN THE EVENT OF A CONSOLIDATION, MERGER OR OTHER REORGANIZATION TO WHICH A COMPANY ENTITY (OTHER THAN FBS) IS A PARTY, THEN FBS SHALL BE DEEMED THE RESULTING CORPORATION. 1.2.4. DIRECTOR -- an individual serving on the Board of Directors of FBS who is not at the same time a common law employee of FBS or any of its subsidiary corporations. SECOND AMENDMENT-EFFECTIVE JANUARY 1, 1996 1.2.5. DIRECTOR SERVICE -- A MEASURE OF A DIRECTOR'S SERVICE AS A DIRECTOR (STATED AS A NUMBER OF MONTHS) WHICH IS EQUAL TO THE TOTAL COMPLETED MONTHS OF THE INDIVIDUAL'S SERVICE AS A DIRECTOR (IRRESPECTIVE OF ANY TERMINATION OF SERVICE AND SUBSEQUENT REENTRY INTO SERVICE AS A DIRECTOR); SUBJECT, HOWEVER, TO THE FOLLOWING: (a) PRE-EFFECTIVE SERVICE. DIRECTOR SERVICE SHALL BE CREDITED FOR ANY PERIOD OF SERVICE COMPLETED BEFORE JANUARY 1, 1991, AS IF THIS PLAN STATEMENT WERE THEN IN EFFECT. (b) SUBSIDIARY SERVICE. IN THE CASE OF A DIRECTOR WHO HAS PERFORMED AT LEAST ONE (1) MONTH OF ACTUAL DIRECTOR SERVICE, DIRECTOR SERVICE SHALL BE CREDITED FOR SERVICES PERFORMED AS A MEMBER OF THE BOARD OF DIRECTORS OF ANY CORPORATION WHICH IS AN EIGHTY PERCENT (80%) OR GREATER SUBSIDIARY OF FBS (WHILE SUCH CORPORATION WAS AT LEAST AN EIGHTY PERCENT SUBSIDIARY OF FBS) AS IF SUCH SERVICE WERE PERFORMED AS A DIRECTOR FOR FBS. (c) ACQUIRED ENTITIES SERVICE. IN THE CASE OF A DIRECTOR WHO HAS PERFORMED AT LEAST ONE (1) MONTH OF ACTUAL DIRECTOR SERVICE, DIRECTOR SERVICE SHALL BE CREDITED FOR PRE-ACQUISITION SERVICES PERFORMED AS A MEMBER OF THE BOARD OF DIRECTORS OF ANY CORPORATION IF NOT LESS THAN NINETY-FIVE PERCENT (95%) OF ITS CAPITAL STOCK OF THAT CORPORATION IS DIRECTLY OR INDIRECTLY ACQUIRED BY FBS AS IF SUCH PRE-ACQUISITION SERVICES WERE PERFORMED AS A DIRECTOR FOR FBS; PROVIDED, HOWEVER, THAT SUCH SERVICE SHALL BE CREDITED ONLY IF THE DIRECTOR AGREES TO HAVE OFFSET FROM BENEFITS DUE UNDER THIS PLAN THE VALUE OF BENEFITS ATTRIBUTABLE SUCH SERVICE IN A FAIR AND EQUITABLE MANNER AS DETERMINED BY THE ORGANIZATION COMMITTEE OF THE BOARD OF DIRECTORS. (d) ADVISORY BOARDS SERVICE. IN THE CASE OF A DIRECTOR WHO HAS PERFORMED AT LEAST ONE (1) MONTH OF ACTUAL DIRECTOR SERVICE, DIRECTOR SERVICE SHALL BE CREDITED FOR SERVICES PERFORMED AS A MEMBER OF AN ADVISORY BOARD OF ANY SUBSIDIARY DESCRIBED IN (b) ABOVE OR ANY ACQUIRED ENTITY DESCRIBED IN (c) ABOVE AS IF SUCH SERVICE WERE PERFORMED AS A DIRECTOR FOR FBS; PROVIDED, HOWEVER, THAT SUCH SERVICE SHALL BE CREDITED ONLY IF THE DIRECTOR AGREES TO HAVE OFFSET FROM BENEFITS DUE UNDER THIS PLAN THE VALUE OF BENEFITS ATTRIBUTABLE SUCH SERVICE IN A FAIR AND EQUITABLE MANNER AS DETERMINED BY THE ORGANIZATION COMMITTEE OF THE BOARD OF DIRECTORS. (e) EXCLUDED SERVICE. DIRECTOR SERVICE SHALL NOT BE CREDITED FOR ANY PERIOD OF SERVICE DURING WHICH THE DIRECTOR IS A COMMON LAW EMPLOYEE OF FBS OR ANY OF ITS SUBSIDIARY CORPORATIONS OR ACQUIRED ENTITIES. THIRD AMENDMENT-EFFECTIVE JULY 17, 1996 1.2.6. FBS -- FIRST BANK SYSTEM, INC., a Delaware corporation, OR ANY SUCCESSOR THERETO. 1.2.7. PLAN -- the supplemental retirement and death benefit program maintained by FBS for the Board of Directors eligible to participate therein, as first set forth in the Prior Plan Statement effective February 18, 1987, and as amended and restated in the Plan Statement. (As used herein, "Plan" does not refer to the documents pursuant to which the Plan is maintained. Those documents are referred to herein as the "Prior Plan Statement" and the "Plan Statement.") The Plan shall be referred to as the "FIRST BANK SYSTEM, INC. INDEPENDENT DIRECTOR RETIREMENT AND DEATH BENEFIT PLAN." 1.2.8. PLAN STATEMENT -- this document entitled "FIRST BANK SYSTEM, INC. INDEPENDENT DIRECTOR RETIREMENT AND DEATH BENEFIT PLAN (1991 Restatement)," as adopted by FBS effective as of May 15, 1991 as the same may be amended from time to time thereafter. 1.2.9. PRESENT VALUE -- the actuarially equivalent single sum value of the unpaid installments of the Supplemental Retirement Pension determined as of a specified date assuming: (a) that the installments would have commenced on the earliest date when the installments benefit could have commenced; and (b) the interest rate used by the Pension Benefit Guaranty Corporation to value annuities (for participants who are the same age) in the event of plan terminations occurring on the first day of the calendar year in which occurs the date as of which the actuarially equivalent single sum is being determined. The number of unpaid installments of the Supplemental Retirement Pension shall never be greater than ten (10) minus the number of annual installments already paid and shall never be less than zero (0). 1.2.10. PRIOR PLAN STATEMENT -- the series of documents pursuant to which this Plan was established as of January 1, 1987, and operated thereafter until May 15, 1991. (triangle symbol) 1.2.12. SUPPLEMENTAL RETIREMENT PENSION -- the pension benefit described in Section 3.1. 1.2.13. TERMINATION OF SERVICE -- the termination of the Director's service as a Director for any of the following reasons: (a) The Director retires as required under the terms of the FBS Directors' Retirement Policy then in effect. (b) The Director resigns voluntarily. (c) The Director is not reelected to a succeeding term as a member of the Board of Directors when his or her term expires. (d) The Director terminates after he or she is determined by FBS to be disabled and is, therefore, unable to fulfill the duties of a member of the Board of Directors because of that disability, however caused. When necessary, FBS shall determine the date of the Termination of Service. The death of the Director is not a Termination of Service. 1.3. RULES OF INTERPRETATION. An individual shall be considered to have attained a given age on his birthday for that age (and not on the day before). The birthday of any individual born on a February 29 shall be deemed to be February 28 in any year that is not a leap year. Notwithstanding any other provision of this Plan Statement or any election or designation made under the Plan, any individual who feloniously and intentionally kills a Director or Beneficiary shall be deemed for all purposes of this Plan and all elections and designations made under this Plan to have died before such Director or Beneficiary. A final judgment of conviction of felonious and intentional killing is conclusive for the purposes of this section. In the absence of a conviction of felonious and intentional killing, FBS shall determine whether the killing was felonious and intentional for the purposes of this section. Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine; and the words "hereof," "herein" or "hereunder" or other similar compounds of the word "here" shall mean and refer to this entire Plan Statement and not to any particular paragraph or section of this Plan Statement unless the context clearly indicates to the contrary. The titles given to the various sections of this Plan Statement are inserted for convenience of reference only and are not part of this Plan Statement, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof. Any reference in this Plan Statement to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation. This document has been executed and delivered in the State of Minnesota and has been drawn in conformity to the laws of that State and shall be construed and enforced in accordance with the laws of the State of Minnesota. SECTION 2 ELIGIBILITY Each Director shall be a participant in the Plan as of the first day the Director first becomes a Director. A Director shall not be required to enroll as a condition of participation in this Plan. SECTION 3 SUPPLEMENTAL RETIREMENT BENEFITS 3.1. SUPPLEMENTAL RETIREMENT PENSION. 3.1.1. WHEN AVAILABLE. Upon the later of: (i) the Director's Termination of Service, or (ii) the Director's attainment of age sixty-five (65) years, the Director who has completed at least sixty (60) months of Director Service shall receive a Supplemental Retirement Pension. (No benefits shall be payable under this Plan to, or with respect to, any Director who dies or has a Termination of Service before completing sixty months of Director Service.) 3.1.2. AMOUNT. The annual amount of the Director's Supplemental Retirement Pension shall be the amount of the Director's Accrued Benefit determined as of the date of the Director's Termination of Service divided by ten (10). SECOND AMENDMENT-EFFECTIVE JANUARY 1, 1996 3.1.3. FORM OF PENSION. THE FORM OF THE SUPPLEMENTAL RETIREMENT PENSION IS AN ANNUITY PAYABLE ANNUALLY ON OR ABOUT EACH MAY 1. (a) IF, AT THE DIRECTOR'S TERMINATION OF SERVICE, THE DIRECTOR WAS AT LEAST AGE SIXTY-SEVEN (67) YEARS OR HAD COMPLETED ONE HUNDRED FORTY-FOUR (144) MONTHS OF DIRECTOR SERVICE (i.e., THE DIRECTOR IS ENTITLED TO A LIFETIME ANNUITY), (i) THE FIRST PAYMENT SHALL BE DUE ON THE MAY 1 COINCIDENT WITH OR NEXT FOLLOWING THE LATER OF THE DIRECTOR'S TERMINATION OF SERVICE, OR THE DIRECTOR'S ATTAINMENT OF AGE SIXTY-SEVEN (67) YEARS, AND (ii) THE LAST PAYMENT TO THE DIRECTOR SHALL BE DUE ON THE MAY 1 IMMEDIATELY PRECEDING THE DATE ON WHICH THE DIRECTOR DIES. (b) IN ALL OTHER CASES, (i) THE FIRST PAYMENT SHALL BE DUE ON THE MAY 1 COINCIDENT WITH OR NEXT FOLLOWING THE LATER OF THE DIRECTOR'S TERMINATION OF SERVICE OR THE DIRECTOR'S ATTAINMENT OF AGE SIXTY-FIVE (65) YEARS, AND (ii) THE LAST PAYMENT TO THE DIRECTOR SHALL BE DUE ON THE DATE ON WHICH THE TENTH ANNUAL PAYMENT IS MADE OR, IF EARLIER, ON THE MAY 1 IMMEDIATELY PRECEDING THE DATE ON WHICH THE DIRECTOR DIES. PROVIDED, HOWEVER, IF THE PAYMENT OF THE SUPPLEMENTAL RETIREMENT PENSION IS ON ACCOUNT OF THE DISABILITY OF THE DIRECTOR, THE FIRST PAYMENT SHALL BE DUE ON THE MAY 1 COINCIDENT WITH OR NEXT FOLLOWING THE DIRECTOR'S TERMINATION OF SERVICE. THIRD AMENDMENT-EFFECTIVE JULY 17, 1996 3.2. CHANGE IN CONTROL. FOR THE PURPOSE OF THIS SECTION 3, ALL DIRECTORS SHALL BE DEEMED TO HAVE HAD A TERMINATION OF SERVICE ON THE DATE OF A FULL CHANGE IN CONTROL IF THEY HAVE NOT PREVIOUSLY HAD A TERMINATION OF SERVICE. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS PLAN STATEMENT, IN THE EVENT OF A FULL CHANGE IN CONTROL, THE REMAINING BENEFITS PAYABLE HEREUNDER (WHETHER PAYABLE TO DIRECTORS WHO ARE DEEMED TO HAVE HAD A TERMINATION OF SERVICE, PAYABLE TO DIRECTORS WHO HAVE PREVIOUSLY HAD A TERMINATION OF SERVICE, WITHOUT REGARD TO WHETHER PAYMENT OF THEIR BENEFITS HAS BEGUN, OR PAYABLE WITH RESPECT TO DIRECTORS WHO HAVE PREVIOUSLY DIED) SHALL BE COMMUTED TO THEIR PRESENT VALUE AS OF THE DATE OF SUCH FULL CHANGE IN CONTROL. THE COMMUTED BENEFITS SHALL BE PAID IN A SINGLE LUMP SUM PAYMENT WITHIN THIRTY (30) DAYS FOLLOWING THE DATE OF SUCH FULL CHANGE IN CONTROL. 3.3. FACILITY OF PAYMENT. In case of the legal disability of a Director entitled to receive any distribution under the Plan, payment shall be made, if the Board of Directors shall be advised of the existence of such condition: (a) to the duly appointed guardian, conservator or other legal representative of such Director, or (b) to a person or institution entrusted with the care or maintenance of the incompetent or disabled Director, provided such person or institution has satisfied the Board of Directors that the payment will be used for the best interest and assist in the care of such Director, and provided further, that no prior claim for said payment has been made by a duly appointed guardian, conservator or other legal representative of such Director. Any payment made in accordance with the foregoing provisions of this section shall constitute a complete discharge of any liability or obligation of FBS and the Board of Directors. SECTION 4 DEATH BENEFITS 4.1. DEATH BEFORE BENEFIT COMMENCEMENT. 4.1.1. WHEN AVAILABLE. If, upon the death of a Director who: (a) has not begun to receive any payment of any supplemental retirement benefits under this Plan; (triangle symbol) (b) has completed sixty (60) months of Director Service; a death benefit shall be payable to the Director's Beneficiary. (If any benefit is payable under this Section 4.1, no benefit shall be payable under Section 4.2.) 4.1.2. AMOUNT. The amount of the death benefit payment shall be the Present Value of an annuity of ten (10) annual payments each payment of which is equal to one-tenth (1/10) of the Director's Accrued Benefit. The Accrued Benefit and the Present Value shall be determined as of the date of the Director's death. The annuity will be deemed to commence on the May 1 coincident with or next following the Director's death. 4.1.3. FORM OF BENEFIT. The death benefit payable hereunder shall be paid in a single lump sum payment as soon as administratively practicable following the Director's death. 4.2. DEATH AFTER BENEFIT COMMENCEMENT. The only death benefits which shall be payable under the Plan upon the death of a Director after payment of the Supplemental Retirement Pension has commenced to the Director shall be: (a) the payment of any unpaid installments of the Supplemental Retirement Pension to the Director's Beneficiary at the same times and in the same amount as would have been paid if the Director had not died; or (b) if the Director has so elected in writing prior to the date of his or her Termination of Service, the payment to the Beneficiary in a single lump sum of the Present Value of any unpaid installments of the Supplemental Retirement Pension to the Director's Beneficiary as soon as administratively practicable after the Director's death. For this purpose, the number of any unpaid installments of the Supplemental Retirement Pension and the Present Value of such unpaid installments shall be determined as of the date of the Director's death. The number of unpaid installments of the Supplemental Retirement Pension shall never be greater than ten (10) minus the number of annual installments paid before the Director's death and shall never be less than zero (0). 4.3. DESIGNATION OF BENEFICIARIES. 4.3.1. RIGHT TO DESIGNATE. Each Director may designate, upon forms to be furnished by and filed with FBS, one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified part of such Director's benefit in the event of such Director's death. The Director may change or revoke any such designation from time to time without notice to or consent from any Beneficiary. No such designation, change or revocation shall be effective unless executed by the Director and received by FBS during the Director's lifetime. 4.3.2. FAILURE OF DESIGNATION. If a Director: (a) fails to designate a Beneficiary, (b) designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or (c) designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Director, such Director's benefit, or the part thereof as to which such Director's designation fails, as the case may be, shall be payable to the first class of the following classes of automatic Beneficiaries with a member surviving the Director and (except in the case of surviving issue) in equal shares if there is more than one member in such class surviving the Director: Director's surviving spouse Director's surviving issue per stirpes and not per capita Director's surviving parents Director's surviving brothers and sisters Representative of Director's estate. 4.3.3. DISCLAIMERS BY BENEFICIARIES. A Beneficiary entitled to a distribution of all or a portion of a deceased Director's benefit may disclaim an interest therein subject to the following requirements. To be eligible to disclaim, a Beneficiary must be a natural person, must not have received a distribution of all or any portion of the benefit at the time such disclaimer is executed and delivered, and must have attained at least age twenty-one (21) years as of the date of the Director's death. Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public. A disclaimer shall state that the Beneficiary's entire interest in the undistributed benefit is disclaimed or shall specify what portion thereof is disclaimed. To be effective, duplicate original executed copies of the disclaimer must be both executed and actually delivered to FBS after the date of the Director's death but not later than one hundred eighty (180) days after the date of the Director's death. A disclaimer shall be irrevocable when delivered to FBS. A disclaimer shall be considered to be delivered to FBS only when actually received by FBS. FBS shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Director as to the interest disclaimed. A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of the provisions of Section 5. No other form of attempted disclaimer shall be recognized by FBS. 4.3.4. DEFINITIONS. When used herein and, unless the Director has otherwise specified in the Director's Beneficiary designation, when used in a Beneficiary designation, "issue" means all persons who are lineal descendants of the person whose issue are referred to, including legally adopted descendants and their descendants but not including illegitimate descendants and their descendants; "child" means an issue of the first generation; "per stirpes" means in equal shares among living children of the person whose issue are referred to and the issue (taken collectively) of each deceased child of such person, with such issue taking by right of representation of such deceased child; and "survive" and "surviving" mean living after the death of the Director. 4.3.5. SPECIAL RULES. Unless the Director has otherwise specified in the Director's Beneficiary designation, the following rules shall apply: (a) If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Director, it shall be deemed that the Beneficiary was not living at the time of the death of the Director. (b) The automatic Beneficiaries specified in Section 4.3.2 and the Beneficiaries designated by the Director shall become fixed at the time of the Director's death so that, if a Beneficiary survives the Director but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary's estate. (c) If the Director designates as a Beneficiary the person who is the Director's spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Director and such person shall automatically revoke such designation. (The foregoing shall not prevent the Director from designating a former spouse as a Beneficiary on a form executed by the Director and received by FBS after the date of the legal termination of the marriage between the Director and such former spouse, and during the Director's lifetime.) (d) Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Director shall be given effect without regard to whether the relationship to the Director exists either then or at the Director's death. (e) Any designation of a Beneficiary only by statement of relationship to the Director shall be effective only to designate the person or persons standing in such relationship to the Director at the Director's death. FBS shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation. 4.3.6. NO SPOUSAL RIGHTS. No spouse or surviving spouse of a Director and no person designated to be a Beneficiary shall have any rights or interest in the benefits accumulated under this Plan including, but not limited to, the right to be the sole Beneficiary or to consent to the designation of Beneficiaries (or the changing of designated Beneficiaries) by the Director. SECTION 5 FUNDING OF PLAN 5.1. UNFUNDED AGREEMENT. The obligation of FBS to make payments under this Plan constitutes only the unsecured (but legally enforceable) promise of FBS to make such payments. The Director shall have no lien, prior claim or other security interest in any property of FBS. FBS is not required to establish or maintain any fund, trust or account for the purpose of funding or paying the benefits promised under this Plan. If such a fund is established, the property therein shall remain the sole and exclusive property of FBS. FBS will pay the cost of this Plan out of its general assets. 5.2. SPENDTHRIFT PROVISION. No Director or Beneficiary shall have any transmissible interest in any benefit under this Plan nor shall any Director or Beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while in the possession or control of FBS, nor shall FBS recognize any assignment thereof, either in whole or in part, nor shall any benefit be subject to attachment, garnishment, execution following judgment or other legal process while in the possession or control of FBS. The power to designate Beneficiaries to receive the benefit of a Director in the event of such Director's death shall not permit or be construed to permit such power or right to be exercised by the Director so as thereby to anticipate, pledge, mortgage or encumber such Director's benefit or any part thereof, and any attempt of a Director so to exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by FBS. THIRD AMENDMENT-EFFECTIVE JULY 17, 1996 SECTION 6 AMENDMENT AND TERMINATION FBS RESERVES THE POWER TO AMEND OR TERMINATE THE PLAN PRIOR TO A FULL CHANGE IN CONTROL. NO AMENDMENT OF THE PLAN, HOWEVER, SHALL REDUCE A DIRECTOR'S BENEFITS EARNED AS OF THE DATE OF SUCH AMENDMENT UNLESS THE DIRECTOR SO AFFECTED CONSENTS IN WRITING TO THE AMENDMENT. BENEFITS EARNED AS OF THE DATE OF AN AMENDMENT SHALL BE DETERMINED AS IF THE DIRECTOR HAD A TERMINATION OF SERVICE ON THAT DATE. AFTER A FULL CHANGE IN CONTROL, THE PLAN CANNOT BE AMENDED OR TERMINATED (AS APPLIED TO DIRECTORS WHO ARE DIRECTORS ON THE DATE OF THE FULL CHANGE IN CONTROL) UNLESS: (a) ALL BENEFITS EARNED BY ALL DIRECTORS AS OF THE DATE OF THE FULL CHANGE IN CONTROL HAVE BEEN PAID, OR (b) A MAJORITY OF THE CONTINUING DIRECTORS (AS DEFINED IN SECTION 1.2.3) AS OF THE DATE OF THE FULL CHANGE IN CONTROL GIVE WRITTEN CONSENT TO SUCH AMENDMENT OR TERMINATION. THE FOREGOING RESTRICTIONS AND LIMITATIONS ON THE ABILITY TO AMEND AND TERMINATE THE PLAN SHALL NOT BE EFFECTIVE, HOWEVER, IF, WITHIN TEN (10) BUSINESS DAYS FOLLOWING THE DATE OF THE FULL CHANGE IN CONTROL, A MAJORITY OF THE MEMBERS OF THE ORGANIZATION COMMITTEE OF THE BOARD OF DIRECTORS DETERMINES IN ITS SOLE DISCRETION THAT SUCH RESTRICTIONS AND LIMITATIONS SHALL NOT APPLY WITH RESPECT TO SUCH FULL CHANGE IN CONTROL. SECTION 7 DETERMINATIONS -- RULES AND REGULATIONS 7.1. DETERMINATIONS. FBS shall make such determinations as may be required from time to time in the administration of the Plan. FBS shall have the authority and responsibility to interpret and construe the Plan Statement and to determine all factual and legal questions under the Plan, including but not limited to the entitlement of Directors and Beneficiaries, and the amounts of their respective interests. Each interested party may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary. 7.2. RULES AND REGULATIONS. Any rule not in conflict or at variance with the provisions hereof may be adopted by FBS. 7.3. METHOD OF EXECUTING INSTRUMENTS. Information to be supplied or written notices to be made or consents to be given by FBS pursuant to any provision of this Plan Statement may be signed in the name of FBS by any officer or director thereof who has been authorized to make such certification or to give such notices or consents. 7.4. INFORMATION FURNISHED BY DIRECTORS. FBS shall not be liable or responsible for any error in the computation of the benefit of a Director resulting from any misstatement of fact made by the Director, directly or indirectly, to FBS, and used by it in determining the Director's benefit. FBS shall not be obligated or required to increase the benefit of such Director which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Director. However, the benefit of any Director which are overstated by reason of any such misstatement shall be reduced to the amount appropriate in view of the truth. SECTION 8 PLAN ADMINISTRATION 8.1. FBS. Except as hereinafter provided, functions generally assigned to FBS shall be discharged by the Organization Committee of the Board of Directors or delegated and allocated as provided herein. 8.2. CONFLICT OF INTEREST. If any member of the Board of Directors of FBS to whom authority has been delegated or redelegated hereunder shall have an benefit in the Plan, such Director shall have no authority as such Director with respect to any matter specially affecting such Director's individual interest hereunder (as distinguished from the interests of all Directors and Beneficiaries or a broad class of Directors and Beneficiaries), all such authority being reserved exclusively to the other Directors, to the exclusion of such Director, and such Director shall act only in such Director's individual capacity in connection with any such matter. SECTION 9 DISCLAIMERS Neither FBS nor any of its officers nor any member of its Board of Directors in any way secure or guarantee the payment of any benefit or amount which may become due and payable hereunder to any Director or to any Beneficiary or to any creditor of a Director or a Beneficiary. Each Director, Beneficiary or other person entitled at any time to payments hereunder shall look solely to the assets of FBS for such payments or to the benefit distributed to any Director or Beneficiary, as the case may be, for such payments. In each case where benefit shall have been distributed to a former Director or a Beneficiary or to the person or any one of a group of persons entitled jointly to the receipt thereof and which purports to cover in full the benefit hereunder, such former Director or Beneficiary, or such person or persons, as the case may be, shall have no further right or interest in the other assets of FBS. Neither FBS nor any of its officers nor any member of its Board of Directors shall be under any liability or responsibility for failure to effect any of the objectives or purposes of the Plan by reason of the insolvency of FBS. FBS and its officers and the members of its Board of Directors shall not be liable for an act or omission of another person with regard to a responsibility that has been allocated to or delegated to such other person pursuant to the terms of this Plan Statement or pursuant to procedures set forth in this Plan Statement. EX-10.E 6 DIRECTORS' DEFERRAL PLAN COMPOSITE COPY FIRST BANK SYSTEM, INC. DIRECTORS' DEFERRAL PLAN (1991 RESTATEMENT) First Effective January 1, 1988 As Amended and Restated Effective January 1, 1991 AND As Amended By The FIRST AMENDMENT Adopted July 17, 1996 But Effective July 17, 1996 NOTE: Material added or modified by the First Amendment is shown in italics. Modified section numbers are not generally shown in italics. FIRST BANK SYSTEM, INC. DIRECTORS' DEFERRAL PLAN (1991 RESTATEMENT) TABLE OF CONTENTS PAGE SECTION 1. INTRODUCTION ................................................. 1 1.1. Restatement of Plan 1.2. Definitions 1.2.1. Account 1.2.2. Annual Valuation Date 1.2.3. Beneficiary 1.2.4. Director 1.2.5. Event of Maturity 1.2.6. FBS 1.2.7. Plan 1.2.8. Plan Statement 1.2.9. Plan Year 1.2.10. Prior Plan Statement 1.2.11. Valuation Date 1.3. Rules of Interpretation 1.4. Additional Definitions 1.4.1. Acquiring Person 1.4.2. Affiliate 1.4.3. Associate 1.4.4. Beneficial Owner 1.4.5. Board of Directors 1.4.6. Company Entity 1.4.7. Continuing Director 1.4.8. Exchange Act 1.4.9. Full Change In Control 1.4.10. Partial Change in Control 1.4.11. Permitted Transaction 1.4.12. Person 1.4.13. Resulting Corporation SECTION 2. PARTICIPATION ................................................ 5 2.1. Participation 2.2. Enrollment 2.3. Prior Years' Enrollments SECTION 3. ADDITIONS TO ACCOUNTS ........................................ 5 SECTION 4. ESTABLISHMENT AND ADJUSTMENT OF ACCOUNTS ..................... 6 4.1. Establishment of Accounts 4.2. Valuation of Accounts 4.2.1. Intermediate Distributions Adjustment 4.2.2. Investment Adjustment for Account 4.2.3. Contribution Adjustment 4.2.4. Final Distributions Adjustment SECTION 5. VESTING OF ACCOUNT ........................................... 6 SECTION 6. MATURITY ..................................................... 6 6.1. Events of Maturity 6.2. Determination of Account 6.3. Effect of Maturity upon Further Participation in Plan SECTION 7. DISTRIBUTION ................................................. 7 7.1. Time of Distribution 7.1.1. Form of Distribution 7.1.2. Time of Distribution 7.1.3. Substantially Equal 7.1.4. Default 7.1.5. Change In Control 7.2. Designation of Beneficiaries 7.2.1. Right To Designate 7.2.2. Failure of Designation 7.2.3. Disclaimers by Beneficiaries 7.2.4. Definitions 7.2.5. Special Rules 7.2.6. No Spousal Rights 7.3. Death Prior to Full Distribution 7.4. Facility of Payment SECTION 8. FUNDING OF PLAN .............................................. 11 8.1. Unfunded Agreement 8.2. Spendthrift Provision SECTION 9. AMENDMENT AND TERMINATION .................................... 11 SECTION 10. DETERMINATIONS-- RULES AND REGULATIONS ....................... 12 10.1. Determinations 10.2. Rules and Regulations 10.3. Method of Executing Instruments 10.4. Claims Procedure 10.4.1. Original Claim 10.4.2. Claims Review Procedure 10.4.3. General Rules 10.5. Information Furnished by Directors SECTION 11. PLAN ADMINISTRATION .......................................... 13 11.1. FBS 11.2. Conflict of Interest SECTION 12. DISCLAIMERS .................................................. 14 FIRST BANK SYSTEM, INC. DIRECTORS' DEFERRAL PLAN (1991 RESTATEMENT) SECTION 1 INTRODUCTION 1.1. RESTATEMENT OF PLAN. Effective January 1, 1988, FIRST BANK SYSTEM, INC., a Delaware corporation (hereinafter sometimes referred to as "FBS") authorized the creation of a nonqualified, unfunded, directors' deferral plan for the purpose of allowing Directors who are not full-time salaried employees of FBS to defer the receipt of directors' fees which would otherwise be paid to the Director. FBS created and established a series of substantially identical annual directors' deferral plans, effective as of January 1, 1988. They were set forth in documents referred to collectively as the "Prior Plan Statement." FBS has reserved the power to amend and terminate the Prior Plan Statement from time to time. FBS now desires to exercise that reserved power of amendment by the adoption of this Plan Statement effective as January 1, 1991. 1.2. DEFINITIONS. When the following terms are used herein with initial capital letters, they shall have the following meanings: 1.2.1. ACCOUNT -- the separate bookkeeping account representing the unfunded and unsecured general obligation of FBS established with respect to each Director to which is credited the dollar amounts specified in Section 3 and Section 4 and from which are subtracted payments made pursuant to Section 5 and Section 7. To the extent necessary to accommodate different distribution elections made pursuant to Section 2, the Account shall be maintained as separate sub-accounts in sufficient number to accommodate each such distribution election. 1.2.2. ANNUAL VALUATION DATE -- each December 31. 1.2.3. BENEFICIARY -- a person designated by a Director (or automatically by operation of this Plan Statement) to receive all or a part of the Director's Account in the event of the Director's death prior to full distribution thereof. A person so designated shall not be considered a Beneficiary until the death of the Director. 1.2.4. DIRECTOR -- an individual serving on the Board of Directors of FBS who is not at the same time a common law employee of FBS or any of its subsidiary corporations. 1.2.5. EVENT OF MATURITY-- any of the occurrences described in Section 6 by reason of which a Director or Beneficiary may become entitled to a distribution from the Plan. FIRST AMENDMENT-EFFECTIVE JULY 17, 1996 1.2.6. FBS -- FIRST BANK SYSTEM, INC., a Delaware corporation, OR ANY SUCCESSOR THERETO. 1.2.7. PLAN -- the income deferral program maintained by FBS established for the benefit of Directors eligible to participate therein, as first set forth in the Prior Plan Statement and as amended and restated in this Plan Statement. (As used herein, "Plan" does not refer to the documents pursuant to which the Plan is maintained. Those documents are referred to herein as the "Prior Plan Statement" and the "Plan Statement"). The Plan shall be referred to as the "FIRST BANK SYSTEM, INC. DIRECTORS' DEFERRAL PLAN." 1.2.8. PLAN STATEMENT -- this document entitled "FIRST BANK SYSTEM, INC. DIRECTORS' DEFERRAL PLAN (1991 Restatement)" as adopted by the Board of Directors of FIRST BANK SYSTEM, INC. effective as of January 1, 1991, as the same may be amended from time to time thereafter. 1.2.9. PLAN YEAR -- the twelve (12) consecutive month period ending on any Annual Valuation Date. 1.2.10. PRIOR PLAN STATEMENT -- the series of documents pursuant to which the Plan was established effective as of January 1, 1988, and operated thereafter until January 1,1991. 1.2.11. VALUATION DATE -- the Annual Valuation Date and such other dates as FBS, in its discretion, shall determine. 1.3. RULES OF INTERPRETATION. Notwithstanding any other provision of this Plan Statement or any election or designation made under the Plan, any individual who feloniously and intentionally kills a Director or Beneficiary shall be deemed for all purposes of this Plan and all elections and designations made under this Plan to have died before such Director or Beneficiary. A final judgment of conviction of felonious and intentional killing is conclusive for the purposes of this section. In the absence of a conviction of felonious and intentional killing, FBS shall determine whether the killing was felonious and intentional for the purposes of this section. Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine; and the words "hereof," "herein" or "hereunder" or other similar compounds of the word "here" shall mean and refer to this entire Plan Statement and not to any particular paragraph or section of this Plan Statement unless the context clearly indicates to the contrary. The titles given to the various sections of this Plan Statement are inserted for convenience of reference only and are not part of this Plan Statement, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof. Any reference in this Plan Statement to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation. This document has been executed and delivered in the State of MINNESOTA and has been drawn in conformity to the laws of that State and shall be construed and enforced in accordance with the laws of the State of MINNESOTA. FIRST AMENDMENT-EFFECTIVE JULY 17, 1996 1.4. ADDITIONAL DEFINITIONS. WHEN THE FOLLOWING TERMS ARE USED HEREIN WITH INITIAL CAPITAL LETTERS, THEY SHALL HAVE THE FOLLOWING MEANINGS: 1.4.1. ACQUIRING PERSON -- ANY PERSON WHO OR WHICH, TOGETHER WITH ALL AFFILIATES AND ASSOCIATES OF SUCH PERSON, IS THE BENEFICIAL OWNER, DIRECTLY OR INDIRECTLY, OF SECURITIES OF FBS REPRESENTING 20% OR MORE OF THE COMBINED VOTING POWER OF FBS'S THEN OUTSTANDING SECURITIES, BUT SHALL NOT INCLUDE ANY COMPANY ENTITY. 1.4.2. AFFILIATE -- SHALL HAVE THE MEANING ASCRIBED TO THE TERM "AFFILIATE" IN RULE 12b-2 PROMULGATED UNDER THE EXCHANGE ACT. 1.4.3. ASSOCIATE -- SHALL HAVE THE MEANING ASCRIBED TO SUCH TERM IN RULE 12b-2 PROMULGATED UNDER THE EXCHANGE ACT. 1.4.4. BENEFICIAL OWNER -- SHALL HAVE THE MEANING ASCRIBED TO SUCH TERM IN RULE 13d-3 PROMULGATED UNDER THE EXCHANGE ACT. 1.4.5. BOARD OF DIRECTORS -- THE BOARD OF DIRECTORS OF FBS. 1.4.6. COMPANY ENTITY -- FBS, ANY SUBSIDIARY OF FBS OR ANY EMPLOYEE BENEFIT PLAN OF FBS OR OF ANY SUBSIDIARY OF FBS OR ANY ENTITY HOLDING SHARES OF THE VOTING CAPITAL STOCK OF FBS ORGANIZED, APPOINTED OR ESTABLISHED FOR, OR PURSUANT TO THE TERMS OF, ANY SUCH PLAN. 1.4.7. CONTINUING DIRECTOR -- ANY PERSON WHO IS A MEMBER OF THE BOARD OF DIRECTORS, WHILE SUCH PERSON IS A MEMBER OF THE BOARD OF DIRECTORS, WHO IS NOT AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON, OR A REPRESENTATIVE OF AN ACQUIRING PERSON OR OF ANY SUCH AFFILIATE OR ASSOCIATE, AND WHO (x) WAS A MEMBER OF THE BOARD OF DIRECTORS AS OF JULY 17, 1996 OR (y) SUBSEQUENTLY BECOMES A MEMBER OF THE BOARD OF DIRECTORS, IF SUCH PERSON'S INITIAL NOMINATION FOR ELECTION OR INITIAL ELECTION TO THE BOARD OF DIRECTORS HAS BEEN APPROVED IN ADVANCE BY THE CONTINUING DIRECTORS; PROVIDED THAT ANY DIRECTOR DESIGNATED BY OR ON BEHALF OF A PERSON WHO HAS ENTERED INTO AN AGREEMENT WITH FBS (OR WHO IS CONTEMPLATING ENTERING INTO SUCH AN AGREEMENT) TO EFFECT A CONSOLIDATION OR MERGER OF FBS OR A COMPANY ENTITY, OR OTHER REORGANIZATION, WITH OR INTO ONE OR MORE ENTITIES WHICH ARE NOT COMPANY ENTITIES, AND ANY DIRECTOR THAT SERVES IN CONNECTION WITH THE ACT OF THE BOARD OF DIRECTORS OF INCREASING THE NUMBER OF DIRECTORS AND FILLING VACANCIES IN CONNECTION WITH, OR IN CONTEMPLATION OF, ANY SUCH TRANSACTION, SHALL NOT BE DEEMED TO HAVE RECEIVED SUCH ADVANCE APPROVAL FOR INITIAL NOMINATION OR ELECTION, AND ANY SUCH DIRECTOR SHALL NOT BE DEEMED TO BE A CONTINUING DIRECTOR; PROVIDED, FURTHER, THAT ANY SUCH DIRECTOR SHALL SUBSEQUENTLY BECOME A CONTINUING DIRECTOR AT SUCH TIME AS A NEW TERM OF OFFICE AS A DIRECTOR IS APPROVED BY FBS'S SHAREHOLDERS AT AN ANNUAL MEETING OF SHAREHOLDERS OCCURRING SUBSEQUENT TO THE COMPLETION OF ANY SUCH TRANSACTION (AND EXCLUDING ANY ANNUAL MEETING AT WHICH THE SHAREHOLDERS APPROVE ANY SUCH TRANSACTION); AND, PROVIDED, FURTHER, THAT IN THE CASE OF A PERMITTED TRANSACTION, ANY SUCH DIRECTOR SHALL NOT BECOME A CONTINUING DIRECTOR UNTIL THE LATER OF (i) THE END OF THE THREE-YEAR PERIOD FOLLOWING CONSUMMATION OF SUCH PERMITTED TRANSACTION OR (ii) SUCH TIME AS A NEW TERM OF OFFICE AS A DIRECTOR IS APPROVED BY FBS'S SHAREHOLDERS AT AN ANNUAL MEETING OF SHAREHOLDERS OCCURRING SUBSEQUENT TO THE COMPLETION OF SUCH PERMITTED TRANSACTION. 1.4.8. EXCHANGE ACT -- THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 1.4.9. FULL CHANGE IN CONTROL -- SHALL MEAN: (a) THE PUBLIC ANNOUNCEMENT (WHICH, FOR PURPOSES OF THIS DEFINITION, SHALL INCLUDE, WITHOUT LIMITATION, A REPORT FILED PURSUANT TO SECTION 13(d) OF THE EXCHANGE ACT) BY FBS OR ANY PERSON THAT A PERSON (OTHER THAN A COMPANY ENTITY) HAS BECOME THE BENEFICIAL OWNER, DIRECTLY OR INDIRECTLY, OF SECURITIES OF FBS (x) REPRESENTING 20% OR MORE, BUT NOT MORE THAN 50%, OF THE COMBINED VOTING POWER OF FBS'S THEN OUTSTANDING SECURITIES UNLESS THE TRANSACTION RESULTING IN SUCH OWNERSHIP HAS BEEN APPROVED IN ADVANCE BY THE CONTINUING DIRECTORS OR (y) REPRESENTING MORE THAN 50% OF THE COMBINED VOTING POWER OF FBS'S THEN OUTSTANDING SECURITIES (REGARDLESS OF ANY APPROVAL BY THE CONTINUING DIRECTORS); OR (b) THE CONTINUING DIRECTORS CEASE TO CONSTITUTE A MAJORITY OF THE BOARD OF DIRECTORS OF FBS OR THE RESULTING CORPORATION, EXCEPT IN ACCORDANCE WITH THE TERMS OF A PERMITTED TRANSACTION AND EXCEPT AS A RESULT OF THE DEATH, RETIREMENT OR DISABILITY OF ONE OR MORE CONTINUING DIRECTORS (UNLESS ANY SUCH DEATH, RETIREMENT OR DISABILITY OCCURS FOLLOWING A PERMITTED TRANSACTION AND ANY VACANCIES CREATED THEREBY ARE NOT FILLED IN ACCORDANCE WITH THE TERMS OF THE WRITTEN AGREEMENT GOVERNING SUCH PERMITTED TRANSACTION); OR (c) ANY SALE, LEASE, EXCHANGE OR OTHER TRANSFER (IN ONE TRANSACTION OR A SERIES OF RELATED TRANSACTIONS) OF ALL OR SUBSTANTIALLY ALL OF THE CONSOLIDATED ASSETS OF FBS AND ITS SUBSIDIARIES OR THE ADOPTION OF ANY PLAN OF LIQUIDATION OR DISSOLUTION OF FBS. 1.4.10. PARTIAL CHANGE IN CONTROL -- SHALL MEAN: (a) A CONSOLIDATION OR MERGER OF FBS OR A COMPANY ENTITY, OR OTHER REORGANIZATION, WITH OR INTO ONE OR MORE ENTITIES WHICH ARE NOT COMPANY ENTITIES, AS A RESULT OF WHICH LESS THAN 60% OF THE OUTSTANDING VOTING SECURITIES OF THE RESULTING CORPORATION ARE, OR ARE TO BE, OWNED BY FORMER SHAREHOLDERS OF FBS AS DETERMINED IMMEDIATELY PRIOR TO CONSUMMATION OF SUCH TRANSACTION (EXCLUDING VOTING SECURITIES OF THE RESULTING CORPORATION OWNED, OR TO BE OWNED, BY SUCH SHAREHOLDERS BY REASON OF THEIR OWNERSHIP PRIOR TO SUCH TRANSACTION OF SECURITIES OF ANY ENTITY OTHER THAN FBS) AND AS A RESULT OF WHICH THE CONTINUING DIRECTORS CONSTITUTE (i) MORE THAN 50% OF THE BOARD OF DIRECTORS OF THE RESULTING CORPORATION OR (ii) EXACTLY 50% OF THE BOARD OF DIRECTORS OF THE RESULTING CORPORATION IF THE TRANSACTION RESULTING IN SUCH EVENT IS A PERMITTED TRANSACTION; OR (b) THE PUBLIC ANNOUNCEMENT (WHICH, FOR PURPOSES OF THIS DEFINITION, SHALL INCLUDE, WITHOUT LIMITATION, A REPORT FILED PURSUANT TO SECTION 13(d) OF THE EXCHANGE ACT) BY FBS OR ANY PERSON THAT A PERSON (OTHER THAN A COMPANY ENTITY) HAS BECOME THE BENEFICIAL OWNER, DIRECTLY OR INDIRECTLY, OF SECURITIES OF FBS REPRESENTING 20% OR MORE, BUT NOT MORE THAN 50%, OF THE COMBINED VOTING POWER OF FBS'S THEN OUTSTANDING SECURITIES IF THE TRANSACTION RESULTING IN SUCH OWNERSHIP HAS BEEN APPROVED IN ADVANCE BY THE CONTINUING DIRECTORS. 1.4.11. PERMITTED TRANSACTION -- A TRANSACTION IN WHICH, PURSUANT TO A WRITTEN AGREEMENT BETWEEN FBS AND ALL PERSONS WHO HAVE ENTERED INTO AN AGREEMENT WITH FBS TO EFFECT A TRANSACTION DESCRIBED IN PARAGRAPH (A)OF THE DEFINITION OF PARTIAL CHANGE IN CONTROL, IT IS AGREED THAT (w) THE CHIEF EXECUTIVE OFFICER OF FBS IMMEDIATELY PRIOR TO THE CONSUMMATION OF SUCH TRANSACTION SHALL BE THE CHIEF EXECUTIVE OFFICER OF THE RESULTING CORPORATION FOR NOT LESS THAN THREE YEARS FOLLOWING CONSUMMATION OF SUCH TRANSACTION, (x) UPON TERMINATION OF SERVICE OF ANY CONTINUING DIRECTOR FOR ANY REASON, INCLUDING UPON DEATH, DISABILITY OR RETIREMENT, PRIOR TO THE EXPIRATION OF SUCH DIRECTOR'S TERM DURING SUCH THREE-YEAR PERIOD, THE VACANCY THEREBY CREATED SHALL BE FILLED BY A NOMINEE SELECTED SOLELY BY THE CONTINUING DIRECTORS, (y) UPON EXPIRATION OF THE TERM OF ANY SUCH DIRECTOR DURING SUCH THREE-YEAR PERIOD, THE NOMINEE TO SUCCEED SUCH DIRECTOR SHALL BE SELECTED SOLELY BY THE CONTINUING DIRECTORS AND (z) THE PARTIES WILL TAKE OTHER APPROPRIATE STEPS TO ENSURE THAT THE BOARD OF DIRECTORS OF THE RESULTING CORPORATION WILL BE EVENLY DIVIDED BETWEEN CONTINUING DIRECTORS AND ALL DIRECTORS DESIGNATED BY OTHER PARTIES TO THE TRANSACTION DURING SUCH THREE-YEAR PERIOD. 1.4.12. PERSON-- SHALL HAVE THE MEANING ASCRIBED TO SUCH TERM AS SUCH TERM IS USED IN SECTIONS 13(d) AND 14(d) OF THE EXCHANGE ACT. 1.4.13. RESULTING CORPORATION -- THE SURVIVING CORPORATION IN ANY CONSOLIDATION, MERGER OR OTHER REORGANIZATION TO WHICH FBS IS A PARTY; PROVIDED, HOWEVER, THAT IF THE SURVIVING CORPORATION IN ANY SUCH TRANSACTION IS A SUBSIDIARY OF ANOTHER CORPORATION, THEN THE RESULTING CORPORATION IS THE ULTIMATE PARENT CORPORATION OF SUCH SURVIVING CORPORATION; AND PROVIDED, FURTHER, THAT IN THE EVENT OF A CONSOLIDATION, MERGER OR OTHER REORGANIZATION TO WHICH A COMPANY ENTITY (OTHER THAN FBS) IS A PARTY, THEN FBS SHALL BE DEEMED THE RESULTING CORPORATION. SECTION 2 PARTICIPATION 2.1. PARTICIPATION. Each Director of FBS shall be a participant in the Plan as of the first day the Director first becomes a Director. 2.2. ENROLLMENT. Prior to the first day of participation, the Director may enroll in the Plan for the remainder of that Plan Year. Prior to the first day of any subsequent Plan Year, a Director may make a new enrollment for that Plan Year. Once made, the enrollment shall be irrevocable for the remainder of the Plan Year with respect to which it is made. Each such enrollment, whether for the initial Plan Year or for a subsequent Plan Year, shall: (a) designate in writing the amount or portion of the Director's fees which shall not be paid to the Director but instead shall be accumulated in this Plan under Section 3 and Section 4 and distributed from this Plan under Section 6 and Section 7; and (b) designate in writing the time and form in which the Account or portion of Account attributable to such Plan Year's accumulation shall be paid to the Director in accordance with Section 7. 2.3. PRIOR YEARS' ENROLLMENTS. Notwithstanding the forgoing, elections made by Directors about the payment of benefits under the Prior Plan Statement attributable to accumulations for Plan Years ending before January 1, 1991, shall not be modified by the adoption of this Plan Statement. SECTION 3 ADDITIONS TO ACCOUNTS FBS shall credit annually to the Account of each Director such amount as the Director in his or her sole discretion shall have determined in accordance with Section 2.2. The amount shall be separately determined by each Director and need not be equal or bear a uniform relationship to the deferrals of other Directors. The amount so allocated to a Director shall be credited to such Director's Account as of the Annual Valuation Date in the Plan Year for which it is made. SECTION 4 ESTABLISHMENT AND ADJUSTMENT OF ACCOUNTS 4.1. ESTABLISHMENT OF ACCOUNTS. There shall be established for each Director a bookkeeping Account which shall be valued each Valuation Date. 4.2. VALUATION OF ACCOUNTS. As of each Valuation Date (the "current Valuation Date"), the value of each Account determined as of the immediately preceding Valuation Date (the "initial Account value") shall be increased (or decreased) by the following adjustments made in the following sequence: 4.2.1. INTERMEDIATE DISTRIBUTIONS ADJUSTMENT. The initial Account value shall be reduced by the total amount distributed in fact to (or with respect to) the Director from such Account as of a date subsequent to the immediately preceding Valuation Date but prior to the current Valuation Date. 4.2.2. INVESTMENT ADJUSTMENT FOR ACCOUNT. The initial Account value of each Director's Account (as adjusted above) shall be increased by interest. The rate shall be determined from time to time by FBS. The rate may be changed by FBS without amendment of the Plan Statement and without the consent of any Director, former Director or any Beneficiary. Beginning January 12, 1991, the rate for each quarter of the year shall be equal to the weekly average for the one year Treasury constant maturity rate reported by the Federal Reserve Statistical Release (H-15) as published immediately following January 1, April 1, July 1 and October 1. This percentage shall be uniform for all Directors for the same Valuation Date but may change from Valuation Date to Valuation Date. 4.2.3. CONTRIBUTION ADJUSTMENT. The initial Account value (as adjusted above) shall be increased by the total amount, if any, credited to such Account under Section 3 as of the current Valuation Date. 4.2.4. FINAL DISTRIBUTIONS ADJUSTMENT. The initial Account value (as adjusted above) shall be reduced by the total amount distributed in fact to (or with respect to) the Director from such Account as of the current Valuation Date. SECTION 5 VESTING OF ACCOUNT The Account of each Director shall be fully (100%) vested at all times. SECTION 6 MATURITY 6.1. EVENTS OF MATURITY. A Director's Account shall mature and shall become distributable in accordance with Section 7 upon the earliest occurrence of any of the following events while in the employment of FBS or an Affiliate: (a) his or her death, or (b) his or her removal or resignation from the Board of Directors of FBS, whether voluntary or involuntary, or (c) his or her Disability, or (d) termination of the Plan. 6.2. DETERMINATION OF ACCOUNT. Upon the occurrence of an Event of Maturity effective as to a Director, the value of such Director's Account as of the Valuation Date coincident with or next following the Event of Maturity shall be determined. 6.3. EFFECT OF MATURITY UPON FURTHER PARTICIPATION IN PLAN. On the occurrence of an Event of Maturity, a Director shall cease to have any interest in the Plan other than the right to receive payment of his or her Account as provided in Section 7 hereof, adjusted from time to time as provided in Section 4. SECTION 7 DISTRIBUTION 7.1. TIME OF DISTRIBUTION. Upon the occurrence of an Event of Maturity effective as to a Director, FBS shall commence payment of such Director's Account (reduced by the amount of any applicable payroll, withholding and other taxes) in the form and at the time designated by the Director in his or her enrollment. 7.1.1. FORM OF DISTRIBUTION. Distribution shall be made in whichever of the following forms as the Director shall have designated in writing: (a) TERM CERTAIN INSTALLMENTS TO DIRECTOR. If the Distributee is a Director, in a series of substantially equal annual installments payable over a designated term not exceeding ten (10) years. (b) CONTINUED TERM CERTAIN INSTALLMENTS TO BENEFICIARY. If the Distributee is a Beneficiary of a deceased Director and distribution had commenced to the deceased Director over a ten (10) year period as specified in paragraph (a) above, in a series of substantially equal annual installments payable over the remainder of the designated ten (10) year (or less) period. (c) INSTALLMENTS TO BENEFICIARIES. If the Distributee is a Beneficiary of a deceased Director and distribution had not commenced prior to the Director's death, in a series of substantially equal annual installments payable over a designated term not exceeding ten (10) years. (d) LUMP SUM. If the Distributee is either a Director or a Beneficiary of a deceased Director, in a single, lump sum payment. 7.1.2. TIME OF DISTRIBUTION. Distribution shall be made (in the case of a single lump sum) or commenced (in the case of installments) at whichever of the following dates as the Director shall have designated in writing: (i) within thirty (30) days after the Director shall have had an Event of Maturity; (ii) during the January following the date the Director shall have had an Event of Maturity; (iii) during the January following the date the Director shall have attained age fifty-five (55) years or, if later, had an Event of Maturity; (iv) during the January following the date the Director shall have attained age sixty-two (62) years or, if later, had an Event of Maturity; (v) during the January following the date the Director shall have attained age sixty-five (65) years or, if later, had an Event of Maturity; (vi) within thirty (30) days after the date designated by the Director in writing or, if later, within thirty (30) days after the Director shall have had an Event of Maturity. 7.1.3. SUBSTANTIALLY EQUAL. Distributions shall be considered to be substantially equal if the amount of the distribution required to be made for each calendar year (the "distribution year") is determined by dividing the amount of the Account as of the last Valuation Date in the calendar year immediately preceding the distribution year (such preceding calendar year being the "valuation year") by the number of remaining installment payments to be made (including the distribution being determined). The amount of the Account as of such Valuation Date shall be decreased by the amount of any distributions made in the valuation year and after such Valuation Date. 7.1.4. DEFAULT. If for any reason a Director shall have failed to make a written designation of form and time for distribution (including reasons entirely beyond the control of the Director), the distribution shall be made in a single lump sum during the January following the date the Director shall have had an Event of Maturity. No spouse, former spouse, Beneficiary or other person shall have any right to participate in the Director's selection of a form and time of benefit. FIRST AMENDMENT-EFFECTIVE JULY 17, 1996 7.1.5. CHANGE IN CONTROL. NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION OR ANY DESIGNATION MADE BY A DIRECTOR IN THE EVENT OF A FULL CHANGE IN CONTROL, THE PLAN SHALL BE AUTOMATICALLY TERMINATED AND EVERY ACCOUNT SHALL BE PAID IN A SINGLE LUMP SUM DISTRIBUTION TO THE DIRECTOR OR BENEFICIARY, AS THE CASE MAY BE, WITHIN THIRTY (30) DAYS AFTER THE FULL CHANGE IN CONTROL. 7.2. DESIGNATION OF BENEFICIARIES. 7.2.1. RIGHT TO DESIGNATE. Each Director may designate, upon forms to be furnished by and filed with FBS, one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified part of such Director's Account in the event of such Director's death. The Director may change or revoke any such designation from time to time without notice to or consent from any Beneficiary. No such designation, change or revocation shall be effective unless executed by the Director and received by FBS during the Director's lifetime. 7.2.2. FAILURE OF DESIGNATION. If a Director: (a) fails to designate a Beneficiary, (b) designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or (c) designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Director, such Director's Account, or the part thereof as to which such Director's designation fails, as the case may be, shall be payable to the first class of the following classes of automatic Beneficiaries with a member surviving the Director and (except in the case of surviving issue) in equal shares if there is more than one member in such class surviving the Director: Director's surviving spouse Director's surviving issue per stirpes and not per capita Director's surviving parents Director's surviving brothers and sisters Representative of Director's estate. 7.2.3. DISCLAIMERS BY BENEFICIARIES. A Beneficiary entitled to a distribution of all or a portion of a deceased Director's Account may disclaim an interest therein subject to the following requirements. To be eligible to disclaim, a Beneficiary must be a natural person, must not have received a distribution of all or any portion of the Account at the time such disclaimer is executed and delivered, and must have attained at least age twenty-one (21) years as of the date of the Director's death. Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public. A disclaimer shall state that the Beneficiary's entire interest in the undistributed Account is disclaimed or shall specify what portion thereof is disclaimed. To be effective, duplicate original executed copies of the disclaimer must be both executed and actually delivered to FBS after the date of the Director's death but not later than one hundred eighty (180) days after the date of the Director's death. A disclaimer shall be irrevocable when delivered to FBS. A disclaimer shall be considered to be delivered to FBS only when actually received by FBS. FBS shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Director as to the interest disclaimed. A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of the provisions of Section 8 and shall not be considered to be an assignment or alienation of benefits in violation of federal law prohibiting the assignment or alienation of benefits under this Plan. No other form of attempted disclaimer shall be recognized by FBS. 7.2.4. DEFINITIONS. When used herein and, unless the Director has otherwise specified in the Director's Beneficiary designation, when used in a Beneficiary designation, "issue" means all persons who are lineal descendants of the person whose issue are referred to, including legally adopted descendants and their descendants but not including illegitimate descendants and their descendants; "child" means an issue of the first generation; "perstirpes" means in equal shares among living children of the person whose issue are referred to and the issue (taken collectively) of each deceased child of such person, with such issue taking by right of representation of such deceased child; and "survive" and "surviving" mean living after the death of the Director. 7.2.5. SPECIAL RULES. Unless the Director has otherwise specified in the Director's Beneficiary designation, the following rules shall apply: (a) If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Director, it shall be deemed that the Beneficiary was not living at the time of the death of the Director. (b) The automatic Beneficiaries specified in Section 7.2.2 and the Beneficiaries designated by the Director shall become fixed at the time of the Director's death so that, if a Beneficiary survives the Director but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary's estate. (c) If the Director designates as a Beneficiary the person who is the Director's spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Director and such person shall automatically revoke such designation. (The foregoing shall not prevent the Director from designating a former spouse as a Beneficiary on a form executed by the Director and received by FBS after the date of the legal termination of the marriage between the Director and such former spouse, and during the Director's lifetime.) (d) Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Director shall be given effect without regard to whether the relationship to the Director exists either then or at the Director's death. (e) Any designation of a Beneficiary only by statement of relationship to the Director shall be effective only to designate the person or persons standing in such relationship to the Director at the Director's death. A Beneficiary designation is permanently void if it either is executed or is filed by a Director who, at the time of such execution or filing, is then a minor under the law of the state of the Director's legal residence. FBS shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation. 7.2.6. NO SPOUSAL RIGHTS. No spouse or surviving spouse of a Director and no person designated to be a Beneficiary shall have any rights or interest in the benefits accumulated under this Plan including, but not limited to, the right to be the sole Beneficiary or to consent to the designation of Beneficiaries (or the changing of designated Beneficiaries) by the Director. 7.3. DEATH PRIOR TO FULL DISTRIBUTION. If a Director dies after an Event of Maturity but before distribution of such Director's Account has been completed, the remaining undistributed Account shall be distributed in the same manner as hereinbefore provided in the Event of Maturity by reason of death. If, at the death of the Director, any payment to the Director was due or otherwise pending but not actually paid, the amount of such payment shall be included in the Account which are payable to the Beneficiary (and shall not be paid to the Director's estate). 7.4. FACILITY OF PAYMENT. In case of the legal disability, including minority, of a Director or Beneficiary entitled to receive any distribution under the Plan, payment shall be made, if FBS shall be advised of the existence of such condition: (a) to the duly appointed guardian, conservator or other legal representative of such Director or Beneficiary, or (b) to a person or institution entrusted with the care or maintenance of the incompetent or disabled Director or Beneficiary, provided such person or institution has satisfied FBS that the payment will be used for the best interest and assist in the care of such Director or Beneficiary, and provided further, that no prior claim for said payment has been made by a duly appointed guardian, conservator or other legal representative of such Director or Beneficiary. Any payment made in accordance with the foregoing provisions of this section shall constitute a complete discharge of any liability or obligation of FBS therefor. SECTION 8 FUNDING OF PLAN 8.1. UNFUNDED AGREEMENT. The obligations of FBS to make payments under this Plan constitutes only the unsecured (but legally enforceable) promise of FBS to make such payments. The Director shall have no lien, prior claim or other security interest in any property of FBS. FBS is not required to establish or maintain any fund, trust or account (other than a bookkeeping account or reserve) for the purpose of funding or paying the benefits promised under this Plan. If such a fund is established, the property therein shall remain the sole and exclusive property of FBS. FBS will pay the cost of this Plan out of its general assets. All references to accounts, accruals, gains, losses, income, expenses, payments, custodial funds and the like are included merely for the purpose of measuring FBS's obligation to Directors in this Plan and shall not be construed to impose on FBS the obligation to create any separate fund for purposes of this Plan. 8.2. SPENDTHRIFT PROVISION. No Director or Beneficiary shall have any transmissible interest in any Account nor shall any Director or Beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while in the possession or control of FBS, nor shall FBS recognize any assignment thereof, either in whole or in part, nor shall any Account be subject to attachment, garnishment, execution following judgment or other legal process while in the possession or control of FBS. The power to designate Beneficiaries to receive the Account of a Director in the event of such Director's death shall not permit or be construed to permit such power or right to be exercised by the Director so as thereby to anticipate, pledge, mortgage or encumber such Director's Account or any part thereof, and any attempt of a Director so to exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by FBS. This section shall not prevent FBS from exercising, in its discretion, any of the applicable powers and options granted to it upon the occurrence of an Event of Maturity, as such powers may be conferred upon it by any applicable provision hereof. FIRST AMENDMENT-EFFECTIVE JULY 17, 1996 SECTION 9 AMENDMENT AND TERMINATION FBS RESERVES THE POWER TO AMEND OR TERMINATE THE PLAN PRIOR TO A FULL CHANGE IN CONTROL. NO AMENDMENT OF THE PLAN, HOWEVER, SHALL REDUCE A DIRECTOR'S ACCOUNT EARNED AS OF THE DATE OF SUCH AMENDMENT UNLESS THE DIRECTOR SO AFFECTED CONSENTS IN WRITING TO THE AMENDMENT. A DIRECTOR'S ACCOUNT EARNED AS OF THE DATE OF AN AMENDMENT SHALL BE DETERMINED AS IF THE DIRECTOR HAD AN EVENT OF MATURITY ON THAT DATE. AFTER A FULL CHANGE IN CONTROL, THE PLAN CANNOT BE AMENDED OR TERMINATED (AS APPLIED TO DIRECTORS WHO ARE DIRECTORS ON THE DATE OF THE FULL CHANGE IN CONTROL) UNLESS: (a) ALL ACCOUNTS OF ALL DIRECTORS AS OF THE DATE OF THE FULL CHANGE IN CONTROL HAVE BEEN PAID, OR (b) EIGHTY PERCENT (80%) OF ALL THE DIRECTORS AS OF THE DATE OF THE FULL CHANGE IN CONTROL GIVE WRITTEN CONSENT TO SUCH AMENDMENT OR TERMINATION. SECTION 10 DETERMINATIONS -- RULES AND REGULATIONS 10.1. DETERMINATIONS. FBS shall make such determinations as may be required from time to time in the administration of the Plan. FBS shall have the authority and responsibility to interpret and construe the Plan Statement and to determine all factual and legal questions under the Plan, including but not limited to the entitlement of Directors and Beneficiaries, and the amounts of their respective interests. Each interested party may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary. 10.2. RULES AND REGULATIONS. Any rule not in conflict or at variance with the provisions hereof may be adopted by FBS. 10.3. METHOD OF EXECUTING INSTRUMENTS. Information to be supplied or written notices to be made or consents to be given by FBS pursuant to any provision of this Plan Statement may be signed in the name of FBS by any officer or director thereof who has been authorized to make such certification or to give such notices or consents. FIRST AMENDMENT-EFFECTIVE JULY 17, 1996 10.4. CLAIMS PROCEDURE. THE CLAIMS PROCEDURE SET FORTH IN THIS SECTION 10.4 SHALL BE THE EXCLUSIVE PROCEDURE FOR THE DISPOSITION OF CLAIMS FOR BENEFITS ARISING UNDER THE PLAN UNTIL SUCH TIME AS A FULL CHANGE IN CONTROL (AS DEFINED IN SECTION 1.4.9) OCCURS. 10.4.1. ORIGINAL CLAIM. Any Director, former Director or Beneficiary of such Director or former Director may, if he or she so desires, file with FBS a written claim for benefits under the Plan. Within ninety (90) days after the filing of such a claim, FBS shall notify the claimant in writing whether the claim is upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred eighty days from the date the claim was filed) to reach a decision on the claim. If the claim is denied in whole or in part, FBS shall state in writing: (a) the specific reasons for the denial; (b) the specific references to the pertinent provisions of this Plan Statement on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation of the claims review procedure set forth in this section. 10.4.2. CLAIMS REVIEW PROCEDURE. Within sixty (60) days after receipt of notice that the claim has been denied in whole or in part, the claimant may file with FBS a written request for a review and may, in conjunction therewith, submit written issues and comments. Within sixty (60) days after the filing of such a request for review, FBS shall notify the claimant in writing whether, upon review, the claim was upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred twenty days from the date the request for review was filed) to reach a decision on the request for review. 10.4.3. GENERAL RULES. (a) No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the claims procedure. FBS may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by FBS upon request. (b) All decisions on claims and on requests for a review of denied claims shall be made by FBS. (c) FBS may, in its discretion, hold one or more hearings on a claim or a request for a review of a denied claim. (d) A claimant may be represented by a lawyer or other representative (at the claimant's own expense), but FBS reserves the right to require the claimant to furnish written authorization. A claimant's representative shall be entitled to copies of all notices given to the claimant. (e) The decision of FBS on a claim and on a request for a review of a denied claim shall be served on the claimant in writing. If a decision or notice is not received by a claimant within the time specified, the claim or request for a review of a denied claim shall be deemed to have been denied. (f) Prior to filing a claim or a request for a review of a denied claim, the claimant or his representative shall have a reasonable opportunity to review a copy of this Plan Statement and all other pertinent documents in the possession of FBS. 10.5. INFORMATION FURNISHED BY DIRECTORS. FBS shall not be liable or responsible for any error in the computation of the Account of a Director resulting from any misstatement of fact made by the Director, directly or indirectly, to FBS, and used by it in determining the Director's Account. FBS shall not be obligated or required to increase the Account of such Director which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Director. However, the Account of any Director which are overstated by reason of any such misstatement shall be reduced to the amount appropriate in view of the truth. SECTION 11 PLAN ADMINISTRATION 11.1. FBS. Except as hereinafter provided, functions generally assigned to FBS shall be discharged by the Committee on Director Affairs of the Board of Directors or delegated and allocated as provided herein. 11.2. CONFLICT OF INTEREST. If any member of the Board of Directors of FBS to whom authority has been delegated or redelegated hereunder shall have an Account in the Plan, such Director shall have no authority as such Director with respect to any matter specially affecting such Director's individual interest hereunder (as distinguished from the interests of all Directors and Beneficiaries or a broad class of Directors and Beneficiaries), all such authority being reserved exclusively to the other Directors, to the exclusion of such Director, and such Director shall act only in such Director's individual capacity in connection with any such matter. SECTION 12 DISCLAIMERS Neither the terms of this Plan Statement nor the benefits hereunder nor the continuance thereof shall be an obligation to any Director. FBS shall not be obliged to continue the Plan. The terms of this Plan Statement shall not give any Director the right to be retained on the Board of Directors of FBS. Neither FBS nor any of its officers nor any member of its Board of Directors in any way secure or guarantee the payment of any benefit or amount which may become due and payable hereunder to any Director or to any Beneficiary or to any creditor of a Director or a Beneficiary. Each Director, Beneficiary or other person entitled at any time to payments hereunder shall look solely to the assets of FBS for such payments or to the Account distributed to any Director or Beneficiary, as the case may be, for such payments. In each case where Account shall have been distributed to a former Director or a Beneficiary or to the person or any one of a group of persons entitled jointly to the receipt thereof and which purports to cover in full the benefit hereunder, such former Director or Beneficiary, or such person or persons, as the case may be, shall have no further right or interest in the other assets of FBS. Neither FBS nor any of its officers nor any member of its Board of Directors shall be under any liability or responsibility for failure to effect any of the objectives or purposes of the Plan by reason of the insolvency of FBS. FBS and its officers and the members of its Board of Directors shall not be liable for an act or omission of another person with regard to a responsibility that has been allocated to or delegated to such other person pursuant to the terms of this Plan Statement or pursuant to procedures set forth in this Plan Statement. EX-11 7 EXHIBIT 11 COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME PER COMMON SHARE Three Months Ended March 31 --------------------------- (Dollars in Millions, Except Per Share Data) 1997 1996 - -------------------------------------------------------------------------------- PRIMARY: Average shares outstanding ....................... 133,387,042 134,586,125 Net effect of the assumed purchase of stock under the stock option and stock purchase plans--based on the treasury stock method using average market price ...................... 2,138,297 2,434,786 ------------------------ 135,525,339 137,020,911 ======================== Net income ....................................... $171.8 $176.8 Preferred dividends .............................. -- (1.7) ------------------------ Net income applicable to common equity ........... $171.8 $175.1 ======================== Net income per common share ...................... $ 1.27 $ 1.28 ======================== FULLY DILUTED:* Average shares outstanding ....................... 133,387,042 134,586,125 Net effect of the assumed purchase of stock under the stock option and stock purchase plans--based on the treasury stock method using average market price or period-end market price, whichever is higher ............... 2,150,128 2,693,688 Assumed conversion of Series 1991A Preferred Stock -- 3,443,702 ------------------------ 135,537,170 140,723,515 ======================== Net income........................................ $171.8 $176.8 Preferred dividends, excluding 1991A Preferred Stock ................................. -- -- ------------------------ Net income applicable to common equity ........... $171.8 $176.8 ======================== Net income per common share ...................... $ 1.27 $ 1.26 ================================================================================ * This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 17 of APB Opinion No. 15 because it results in dilution of less than 3%. EX-12 8 EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Three Months Ended March 31 --------------------------- (Dollars in Millions) 1997 - -------------------------------------------------------------------------------- EARNINGS 1. Net income .................................................... $171.8 2. Applicable income taxes ....................................... 101.0 ------ 3. Net income before taxes (1 + 2) ............................... $272.8 ====== 4. Fixed charges: a. Interest expense excluding interest on deposits .......... $117.6 b. Portion of rents representative of interest and amortization of debt expense ............................ 6.2 ------ c. Fixed charges excluding interest on deposits (4a + 4b) ... 123.8 d. Interest on deposits ..................................... 158.6 ------ e. Fixed charges including interest on deposits (4c + 4d) ... $282.4 ====== 5. Amortization of interest capitalized .......................... $ -- 6. Earnings excluding interest on deposits (3 + 4c + 5) .......... 396.6 7. Earnings including interest on deposits (3 + 4e + 5) .......... 555.2 8. Fixed charges excluding interest on deposits (4c) ............. 123.8 9. Fixed charges including interest on deposits (4e) ............. 282.4 RATIO OF EARNINGS TO FIXED CHARGES 10. Excluding interest on deposits (line 6/line 8) ................ 3.20 11. Including interest on deposits (line 7/line 9) ................ 1.97 =============================================================================== EX-27 9 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST BANK SYSTEM, INC. MARCH 31, 1997, 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 2,483,000 0 585,000 105,000 3,373,000 0 0 27,173,000 512,200 36,000,000 23,423,000 3,794,000 1,037,000 4,257,000 0 0 177,000 2,824,000 36,000,000 586,200 57,400 12,600 656,200 158,600 276,200 380,000 37,000 0 296,000 272,800 171,800 0 0 171,800 1.27 1.27 4.98 114,800 41,500 100 0 516,500 64,200 22,900 512,200 0 0 0
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