-----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, MQK7UuK9/525g+VeTw/PnhQ+gjiHhbzXDZSlrEurTZATKNN2hIoniKdRg1HdCqTk D6/7c3GVWm89MXz56MYwZA== 0000950114-96-000057.txt : 19960318 0000950114-96-000057.hdr.sgml : 19960318 ACCESSION NUMBER: 0000950114-96-000057 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960315 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOATMENS BANCSHARES INC /MO CENTRAL INDEX KEY: 0000040454 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 430672260 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03750 FILM NUMBER: 96535449 BUSINESS ADDRESS: STREET 1: 800 MARKET ST STREET 2: 1 BOATMENS PLZ CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3144666000 MAIL ADDRESS: STREET 1: 800 MARKET ST STREET 2: 1 BOATMENS PLAZA CITY: ST LOUIS STATE: MO ZIP: 63101 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL BANCSHARES CORP DATE OF NAME CHANGE: 19860414 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL CONTRACT CORP DATE OF NAME CHANGE: 19691215 10-K 1 1995 FORM 10-K 1 ================================================================================ FORM 10-K [LOGO] SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ________________ to _________________________ Commission file number 1-3750 ------------------------ BOATMEN'S BANCSHARES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MISSOURI 43-0672260 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) ONE BOATMEN'S PLAZA, 800 MARKET STREET, ST. LOUIS, MISSOURI 63101 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (314) 466-6000 --------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ------------------- None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $1.00 PAR VALUE (TITLE OF CLASS) DEPOSITARY SHARES, EACH REPRESENTING A 1/16TH INTEREST IN A SHARE OF 7% CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A, STATED VALUE $100 PER SHARE LIQUIDATION PREFERENCE $400.00 PER SHARE (TITLE OF CLASS) CONVERTIBLE SUBORDINATED DEBENTURES, 6.25%, DUE 2011 (TITLE OF CLASS) ------------------------ 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 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes. X No. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / Indicate the number of shares outstanding of each of the registrant's classes of common stock:
NUMBER OF SHARES OUTSTANDING CLASS OF COMMON STOCK AS OF MARCH 8, 1996 --------------------- ---------------------------- $1 Par Value 158,083,580
The aggregate market value of registrant's common stock (based upon the closing trade price on March 8, 1996) held by non-affiliates was approximately $6,000,700,000. DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1995 (Part I, Part II, and Part IV). (2) Portions of registrant's Proxy Statement filed for its Annual Meeting of Shareholders scheduled for April 23, 1996 (Part III). ================================================================================ 2 PART I ITEM 1. BUSINESS BOATMEN'S BANCSHARES, INC. (``CORPORATION'') The Corporation was incorporated under the laws of the State of Missouri in June, 1946 and was known as General Bancshares Corporation until the time of its merger with Boatmen's Bancshares, Inc. on March 29, 1986. The Corporation's principal office is located in St. Louis, Missouri where its largest subsidiary, The Boatmen's National Bank of St. Louis (``Boatmen's Bank''), is located. As of December 31, 1995, the Corporation directly or indirectly owned substantially all of the capital stock of 55 subsidiary banks, a trust company and its subsidiaries, a mortgage banking company, a credit life insurance company, an insurance agency and a credit card bank. The subsidiary banks operate from approximately 500 banking offices and over 1,000 automated teller machine locations in Missouri, New Mexico, Oklahoma, Iowa, Texas, Illinois, Arkansas, Kansas and Tennessee. The business of the Corporation consists primarily of the ownership, supervision and control of its subsidiaries. The Corporation provides its subsidiaries with advice, counsel and specialized services in various fields of financial and banking policy and operations. The Corporation also engages in negotiations designed to lead to the acquisition of other banks and closely related businesses. Based on total assets as of December 31, 1995, the Corporation was the largest bank holding company headquartered in the State of Missouri and among the 30 largest bank holding companies in the United States. There are numerous bank holding companies and groupings of banks located throughout the Corporation's markets which offer substantial competition in the acquisition and operation of banks and non-bank financial institutions. The Corporation's subsidiaries encounter substantial competition in all of their banking and related activities, and its banking subsidiaries face increasing competition from various non-banking financial institutions that are not subject to the same geographic and other regulatory restraints applicable to banks. The information under the caption Acquisition Overview on pages 18 through 19 and Table 2 on page 18 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1995, is incorporated herein by reference. Banking Operations The following table summarizes the banking operations for each state in which the Corporation has banking locations.
12/31/95 12/31/95 12/31/95 ASSETS LOANS DEPOSITS -------- -------- -------- (DOLLARS IN MILLIONS) Missouri........................................... $17,819 $10,326 $13,153 Arkansas........................................... 4,805 2,716 3,938 New Mexico......................................... 3,508 1,447 2,767 Texas.............................................. 2,241 1,088 1,673 Oklahoma........................................... 1,875 1,044 1,563 Iowa............................................... 1,216 715 1,039 Illinois........................................... 1,080 789 1,003 Tennessee.......................................... 874 784 713 Kansas............................................. 226 113 187
Recent Developments On January 31, 1996, the Corporation completed the acquisition of Fourth Financial Corporation (``Fourth Financial''), headquartered in Wichita, Kansas. Fourth Financial had assets of approximately $7.4 billion at December 31, 1995 and operates from 143 offices in Kansas and Oklahoma. Four offices in Missouri will be divested as a condition to the regulatory approval. 3 On March 1, 1996, the Corporation completed the acquisition of Tom Green National Bank (``Tom Green''). Tom Green, headquartered in San Angelo, Texas, had assets of approximately $73 million at December 31, 1995, and operates from three offices in the San Angelo, Texas area. Tom Green was merged into Boatmen's First National Bank of Amarillo. Trust Operations The Corporation provides a wide range of trust services to both individuals and institutions through Boatmen's Trust Company and its subsidiaries, as well as the trust departments of certain of its subsidiary banks. The Corporation's trust operations rank among the 20 largest providers of trust services in the United States, with total trust assets of $77.9 billion at December 31, 1995, including $44.4 billion under management. Other Non-Bank Subsidiaries The Corporation's other non-bank subsidiaries include: (1) a mortgage banking company, whose business is the origination and servicing of real estate mortgage loans for the account of long-term investors and the servicing of real estate loans originated by its affiliate banks; (2) a credit life insurance company which insures or reinsures credit life and accident and health insurance written by the Corporation's subsidiary banks; (3) an insurance agency; and (4) a credit card bank. Regulation and Supervision As a bank holding company, the Corporation is subject to regulation pursuant to the Bank Holding Company Act of 1956 (the ``Act''), which is administered by the Board of Governors of the Federal Reserve System (the ``Board''). A bank holding company must obtain Board approval before acquiring, directly or indirectly, ownership or control of any voting shares of a bank or bank holding company if, after such acquisition, it would own or control more than 5% of such shares. Board approval must also be obtained before any bank holding company acquires all or substantially all of the assets of another bank or bank holding company or merges or consolidates with another bank holding company. In September, 1994, the Interstate Banking and Branching Efficiency Act of 1994 was enacted. Effective September 29, 1995, bank holding companies are permitted to acquire banks in any state subject to state deposit caps and a 10% nationwide cap. In addition, this law provides for full interstate branching by bank merger commencing on June 1, 1997. States may ``opt out'' of this branching provision prior to the effective date, and alternatively, states may ``opt in'' earlier than June, 1997. Texas has adopted legislation to opt out of the branching provisions. The Act also prohibits a bank holding company, with certain limited exceptions, from acquiring or retaining direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank or a bank holding company, or from engaging in any activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain activities which the Board has determined to be closely related to the business of banking or managing or controlling banks. A bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with the extension of credit, with limited exemptions. Subsidiary banks of a bank holding company are also subject to certain restrictions imposed by the Federal Reserve Act on any extensions of credit to the bank holding company or any of its subsidiaries, or investment in the stock or other securities thereof, and on the taking of such stocks or securities as collateral for loans. The Board possesses cease and desist powers over bank holding companies if their actions represent unsafe or unsound practices or violations of law. In August, 1989, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (``FIRREA'') was enacted. FIRREA allows bank holding companies to acquire healthy savings institutions, removing certain restrictions on operations of such institutions. Acquired savings institutions may now be operated as separate savings subsidiaries, converted to bank charters or merged into existing bank subsidiaries, subject to certain requirements. FIRREA also contains a ``cross-guarantee'' provision which could result in depository institutions being assessed for losses incurred by the FDIC in the assistance provided to, or the failure of, an affiliated depository institution. On December 16, 1988, the Board adopted final risk-based capital guidelines for use in its examination and supervision of bank holding companies and banks. The guidelines have three main goals: (1) to make regulatory capital requirements more sensitive to differences in risk profiles among banking organizations; (2) to take off-balance 2 4 sheet risk exposures into explicit account in assessing capital adequacy; and (3) to minimize disincentives to holding liquid, low-risk assets. A bank holding company's ability to pay dividends and expand its business through the acquisition of new banking or non-banking subsidiaries could be restricted if its capital falls below levels established by these guidelines. The risk-based capital ratios were fully implemented by the end of 1992. In 1991, the Board required bank holding companies and banks to adhere to another capital guideline referred to as the Tier 1 leverage ratio. This guideline places a constraint on the degree to which a banking institution can leverage its equity capital base. The Corporation substantially exceeds the requirements of these capital guidelines. In December, 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991 (``FDICIA'') was enacted. FDICIA, among other things, identifies the following capital standards for depository institutions: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. A depository institution is well capitalized if it significantly exceeds the minimum level required by regulation for each relevant capital measure, adequately capitalized if it meets each such measure, undercapitalized if it fails to meet any such measure, significantly undercapitalized if it is significantly below any such measure, and critically undercapitalized if it fails to meet any critical capital level set forth in the regulations. FDICIA requires a bank that is determined to be undercapitalized to submit a capital restoration plan, and the bank's holding company must guarantee that the bank will meet its capital plan, subject to certain limitations. FDICIA also prohibits banks from making any capital distribution or paying any management fee if the bank would thereafter be undercapitalized. The Corporation's bank subsidiaries currently meet the well capitalized standards. FDICIA grants the FDIC authority to impose special assessments on insured depository institutions to repay FDIC borrowings from the United States Treasury or other sources and to establish semiannual assessment rates on Bank Insurance Fund (``BIF'') member banks so as to maintain the BIF at the designated reserve ratio defined in FDICIA. FDICIA also required the FDIC to implement a risk-based insurance assessment system pursuant to which the premiums paid by a depository institution will be based on the probability that the BIF will incur a loss in respect of such institution. The FDIC has adopted a deposit insurance assessment system that places each insured institution in one of nine risk categories based on the level of its capital, evaluation of its risk by its primary state or federal supervisor, statistical analysis and other information. Effective June 1, 1995, the FDIC implemented a new assessment rate schedule for deposits insured by BIF lowering the rate paid by most banks from .23% to .04%. For the first half of 1996, the lowest rate has been reduced to the $2,000 minimum. The rates paid for deposits insured by the Savings Association Fund (the ``SAIF'') remains at a range of .23% to .31% of deposits. Congress is considering proposals to recapitalize the SAIF, including a one-time levy of $6 billion on all SAIF-insured deposits, including such deposits held by Boatmen's and Fourth Financial. The net effect of the revised FDIC fees and SAIF proposals is not expected to have a material effect on the operations of Boatmen's. The Corporation's national bank subsidiaries are subject to supervision by the Comptroller of the Currency. The Arkansas federal savings bank is subject to supervision by the Office of Thrift Supervision. The FDIC has primary federal supervisory responsibility for the Corporation's state banks, with the exception of state banks that are members of the Federal Reserve System. The Corporation's state banks and trust companies are also subject to supervision by the bank supervisory authorities in their respective states. Various federal and state laws and regulations apply to many aspects of the operations of the Corporation's subsidiary banks, including interest rates paid on deposits and loans, investments, mergers and acquisitions and the establishment of branch offices and facilities. The payment of dividends by the Corporation's subsidiary banks, which is the Corporation's principal source of income, is also subject to certain statutory restrictions and to regulation by governmental agencies. Statistical Disclosure Pages 17 through 49 and footnotes 12 and 13 on pages 60 and 61 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1995, are incorporated herein by reference. ITEM 2. PROPERTIES The Corporation's headquarters building, Boatmen's Plaza, is located in downtown St. Louis, Missouri. Through a joint venture, Boatmen's Bank owns a one-half undivided interest in two-thirds of the building. On December 31, 1981, Boatmen's Bank entered into a lease agreement for approximately 60 percent of the building for a term of 30 years. This long-term lease obligation was capitalized in accordance with Statement of Financial Accounting 3 5 Standards No. 13. The principal office of Boatmen's Trust Company, also located in downtown St. Louis, was purchased on January 4, 1994. In January, 1995, the Corporation completed construction of a technology center in Kansas City, Missouri, and moved existing data operations into this center. The Corporation's principal banking offices in Oklahoma, Iowa and Tennessee are leased under long-term leases. The principal banking offices in New Mexico, Illinois, Arkansas and Texas are owned. In the opinion of management, the physical properties of the Corporation and its subsidiaries are suitable and adequate and are being fully utilized. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS A Special Meeting of Shareholders was held on December 12, 1995. At this meeting, shareholders approved the proposed issuance of shares of Common Stock, par value $1.00 per share, of the Corporation and 7% Cumulative Convertible Preferred Stock, Series A, stated value $100 per share, liquidation preference $400 per share, of the Corporation to shareholders of Fourth Financial Corporation pursuant to the Agreement and Plan of Merger dated August 25, 1995. With respect to the proposed issuance of shares, there were 94,139,494 shares voted ``For'' and 2,304,298 shares voted ``Against'', with 417,000 shares abstaining and 2,280,119 broker non-votes. EXECUTIVE OFFICERS OF THE CORPORATION The following sets forth certain information regarding the executive officers of the Corporation:
POSITIONS WITH OFFICER NAME AGE CORPORATION SINCE ---- --- -------------- ------- Andrew B. Craig, III......................... 64 Chairman of the Board and 1985 Chief Executive Officer Samuel B. Hayes, III......................... 59 President and Director 1988 Gregory L. Curl.............................. 47 Vice Chairman and Director 1982 John M. Brennan.............................. 60 Executive Vice President 1977 Loan Administration Thomas P. Johnson, Jr........................ 55 Executive Vice President 1995 Retail Banking James W. Kienker............................. 49 Executive Vice President and 1979 Chief Financial Officer Phillip E. Peters............................ 56 Executive Vice President and 1988 Chief Investment Officer
There are no family relationships among any of the named persons. Each executive officer is elected by the Board of Directors to serve until the close of the next annual meeting of the shareholders following his election and until the election of his successor. No executive officer of the Corporation was selected to his position pursuant to any arrangement or understanding with any other person. Each executive officer has held the same position or another executive position with the Corporation or Boatmen's Bank during the past five years, except as follows: Mr. Johnson was Chief Executive, Retail Banking at Barnett Banks, Inc., Jacksonville, Florida from 1989 until joining the Corporation on December 4, 1995. 4 6 PART II ITEM 5. MARKET FOR THE CORPORATION'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Footnote number 22 on pages 67 and 68 and page 71 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1995, are incorporated herein by reference. The last trade price for the Corporation's common stock on March 8, 1996, was $38.25. ITEM 6. SELECTED FINANCIAL DATA Page 17 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1995, is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Pages 17 through 41 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1995, are incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements together with the report thereon of Ernst & Young LLP on pages 50 through 69 and the supplementary quarterly information on page 41 and pages 42 through 45 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1995, are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION The information under the item captioned Election of Directors and Information With Respect to Directors and Executive Officers in the Corporation's Proxy Statement filed for its Annual Meeting of Shareholders scheduled for April 23, 1996, is incorporated herein by reference. The required information regarding the Corporation's executive officers is contained in PART I in the item captioned Executive Officers of the Corporation. ITEM 11. EXECUTIVE COMPENSATION The information under the caption Executive Compensation on pages 10 through the graph on page 16 in the Corporation's Proxy Statement filed for its Annual Meeting of Shareholders scheduled for April 23, 1996, is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information under the table captioned Amount and Nature of Beneficial Ownership and the caption Security Ownership of Management in the Corporation's Proxy Statement filed for its Annual Meeting of Shareholders scheduled for April 23, 1996, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information under the caption Certain Transactions in the Corporation's Proxy Statement filed for its Annual Meeting of Shareholders scheduled for April 23, 1996, is incorporated herein by reference. 5 7 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The following financial statements of the Corporation and its consolidated subsidiaries, and the accountants' report thereon, are incorporated herein by reference. Consolidated Financial Statements Balance Sheets--December 31, 1995 and 1994. Statements of Income--Years ended December 31, 1995, 1994 and 1993. Statements of Changes in Stockholders' Equity--Years ended December 31, 1995, 1994 and 1993. Statements of Cash Flows--Years Ended December 31, 1995, 1994 and 1993. Notes to Consolidated Financial Statements. Financial Statement Schedules All required schedules for the Corporation and its subsidiaries have been included in the consolidated financial statements or related notes thereto. The following exhibits are incorporated herein by reference (a): Exhibit 3(a) -- Restated Articles of Incorporation of the Corporation, Exhibit 3(a) to Boatmen's Bancshares, Inc.'s S-8 Registration Statement (No. 33-61011). Exhibit 4(a) -- Rights Agreement dated as of August 14, 1990, Exhibits 1 and 2 to Registration Statement on Form 8-A. Exhibit 4(b) -- Amendment dated as of January 26, 1993 to Rights Agreement dated as of August 14, 1990, Exhibit 4(a) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1992. Note: No long-term debt instrument issued by the Corporation exceeds 10% of the consolidated total assets of the Corporation and its subsidiaries. In accordance with paragraph 4(iii) of Item 601 of Regulation S-K, the Corporation will furnish to the Commission upon request copies of long-term debt instruments and related agreements. Exhibit 10(c) -- Boatmen's Bancshares, Inc. Amended 1981 Incentive Stock Option Plan, Exhibit 10(h) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1986. Exhibit 10(i) -- Boatmen's Bancshares Inc. Deferred Compensation Plan for Directors, Exhibit 10(i) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1994. Exhibit 10(k) -- Boatmen's Supplemental Retirement Participation Agreement dated August 4, 1993, between the Corporation and Andrew B. Craig, III, Exhibit 10(w) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1993. Exhibit 10(m) -- Boatmen's Supplemental Retirement Participation Agreement dated June 22, 1994, between the Corporation and Samuel B. Hayes, III, Exhibit 10 to Boatmen's Bancshares, Inc.'s Quarterly Report to the Securities and Exchange Commission on Form 10-Q (File No. 1-3750) for the quarter ended June 30, 1994.
6 8 The following exhibits are submitted herewith: Exhibit 3(b) -- Certificate of Designation, dated January 8, 1996, for Boatmen's Bancshares, Inc. 7% Cumulative Convertible Preferred Stock, Series A, stated value $100 per share, liquidation preference $400 per share. Exhibit 3(c) -- Amended Bylaws of the Corporation. Exhibit 4(c) -- Assignment and Assumption of and Amendment #1 to Deposit Agreement (with exhibits, including Deposit Agreement dated February 24, 1992, between Fourth Financial Corporation and BANK IV Kansas, National Association), dated January 31, 1996, among Boatmen's Bancshares, Inc., Acquisition Sub, Inc., Boatmen's Trust Company and BANK IV, National Association. Exhibit 10(a) -- Employment Agreement dated January 30, 1996, between the Corporation and Andrew B. Craig, III. Exhibit 10(b) -- Employment Agreement dated January 30, 1996, between the Corporation and Samuel B. Hayes, III. Exhibit 10(d) -- Boatmen's Bancshares, Inc. Amended 1982 Long-Term Incentive Plan as of February 12, 1996. Exhibit 10(e) -- Boatmen's Bancshares, Inc. 1987 Non-Qualified Stock Option Plan. Exhibit 10(f) -- Boatmen's Bancshares, Inc. Supplemental Retirement Plan as of February 8, 1996. Exhibit 10(g) -- Employment Agreement dated January 30, 1996, between the Corporation and Gregory L. Curl. Exhibit 10(h) -- Boatmen's Bancshares, Inc. Change-in-Control Severance Plan dated January 30, 1996. Exhibit 10(j) -- Boatmen's Bancshares, Inc. Executive Deferred Compensation Plan as of February 8, 1996. Exhibit 10(l) -- Boatmen's Bancshares, Inc. 1991 Incentive Stock Option Plan. Exhibit 10(n) -- Boatmen's Bancshares, Inc. 1992 Annual Incentive Bonus Plan as of February 8, 1996. Exhibit 10(o) -- Boatmen's Bancshares, Inc. 1996 Stock Incentive Plan. Exhibit 13 -- Portions of the Annual Report to Shareholders for the year ended December 31, 1995. Exhibit 21 -- Subsidiaries of the Corporation. Exhibit 23 -- Independent Auditors' Consent of Ernst & Young LLP. Exhibit 27 -- Financial data schedule. - ------- The exhibits included under Exhibit 10 constitute all management contracts, compensatory plans and arrangements required to be filed as an exhibit to this form pursuant to Item 14(c) of this report. No Form 8-K's were filed by the Corporation in the fourth quarter of 1995.
7 9 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BOATMEN'S BANCSHARES, INC. -------------------------------------------- (Registrant) By ANDREW B. CRAIG, III -------------------------------------------- Andrew B. Craig, III, Chairman of the Board and Chief Executive Officer (principal executive officer) By JAMES W. KIENKER -------------------------------------------- James W. Kienker, Executive Vice President and Chief Financial Officer (principal financial and accounting officer) Date: March 12, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Corporation and in the capacities and on the date indicated.
SIGNATURES TITLES DATE ---------- ------ ---- ANDREW B. CRAIG, III Chairman of the Board and Chief March 12, 1996 ------------------------------------------- Executive Officer Andrew B. Craig, III SAMUEL B. HAYES, III President and Director March 12, 1996 ------------------------------------------- Samuel B. Hayes, III GREGORY L. CURL Vice Chairman and Director March 12, 1996 ------------------------------------------- Gregory L. Curl DARRELL G. KNUDSON Executive Vice President and March 12, 1996 ------------------------------------------- Director Darrell G. Knudson RICHARD L. BATTRAM Director March 12, 1996 ------------------------------------------- Richard L. Battram B. A. BRIDGEWATER, JR. Director March 12, 1996 ------------------------------------------- B. A. Bridgewater, Jr. WILLIAM E. CORNELIUS Director March 12, 1996 ------------------------------------------- William E. Cornelius Director March __, 1996 ------------------------------------------- John E. Hayes, Jr. 8 10 SIGNATURES TITLES DATE ---------- ------ ---- C. RAY HOLMAN Director March 12, 1996 ------------------------------------------- C. Ray Holman Director March __, 1996 ------------------------------------------- John Peters MacCarthy WILLIAM E. MARITZ Director March 12, 1996 ------------------------------------------- William E. Maritz RUSSELL W. MEYER, JR. Director March 12, 1996 ------------------------------------------- Russell W. Meyer, Jr. RICHARD E. PECK Director March 12, 1996 ------------------------------------------- Richard E. Peck JERRY E. RITTER Director March 12, 1996 ------------------------------------------- Jerry E. Ritter WILLIAM P. STIRITZ Director March 12, 1996 ------------------------------------------- William P. Stiritz ALBERT E. SUTER Director March 12, 1996 ------------------------------------------- Albert E. Suter DWIGHT D. SUTHERLAND Director March 12, 1996 ------------------------------------------- Dwight D. Sutherland THEODORE C. WETTERAU Director March 12, 1996 ------------------------------------------- Theodore C. Wetterau
9 11 INDEX TO EXHIBITS
NUMBER EXHIBIT PAGE ------ ------- ---- 3(a) The Corporation's Restated Articles of Incorporation, Exhibit 3(a) to Boatmen's Bancshares, Inc.'s S-8 Registration Statement (No. 33-61011) is incorporated herein by reference......................................................................... 3(b) Certificate of Designation, dated January 8, 1996, for Boatmen's Bancshares, Inc. 7% Cumulative Convertible Preferred Stock, Series A, stated value $100 per share, liquidation preference $400 per share................................................ 3(c) The Corporation's Amended By-laws as adopted by its Board of Directors on January 30, 1996................................................................................. 4(a) Conformed copy of Rights Agreement dated as of August 14, 1990, Exhibits 1 and 2 to Registration Statement on Form 8-A is incorporated herein by reference............................................................................ 4(b) Amendment dated as of January 26, 1993 to Rights Agreement dated August 14, 1990, Exhibit 4(a) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1992, is incorporated herein by reference............. 4(c) Assignment and Assumption of and Amendment #1 to Deposit Agreement (with exhibits, including Deposit Agreement dated February 24, 1992, between Fourth Financial Corporation and BANK IV Kansas, National Association), dated January 31, 1996, among Boatmen's Bancshares, Inc., Acquisition Sub, Inc., Boatmen's Trust Company and BANK IV, National Association............................................................. 10(a) Employment Agreement dated January 30, 1996, between the Corporation and Andrew B. Craig, III................................................................. 10(b) Employment Agreement dated January 30, 1996, between the Corporation and Samuel B. Hayes, III................................................................. 10(c) Boatmen's Bancshares, Inc. Amended 1981 Incentive Stock Option Plan, Exhibit 10(h) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1986, is incorporated herein by reference..................................................... 10(d) Boatmen's Bancshares, Inc. Amended 1982 Long Term Incentive Plan as of February 12, 1996................................................................................. 10(e) Boatmen's Bancshares, Inc. 1987 Non-Qualified Stock Option Plan...................... 10(f) Boatmen's Supplemental Retirement Plan as of February 8, 1996........................ 10(g) Employment Agreement dated January 30, 1996, between the Corporation and Gregory L. Curl................................................................................. 10(h) Boatmen's Bancshares, Inc. Change-in-Control Severance Plan dated January 30, 1996... 10(i) Boatmen's Bancshares, Inc. Deferred Compensation Plan for Directors, Exhibit 10(i) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1994, is incorporated herein by reference..................................................... 12 INDEX TO EXHIBITS (CONTINUED) NUMBER EXHIBIT PAGE ------ ------- ---- 10(k) Boatmen's Supplemental Retirement Participation Agreement dated August 4, 1993, between the Corporation and Andrew B. Craig, III, Exhibit 10(w) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1993, is incorporated herein by reference............................... 10(l) Boatmen's Bancshares, Inc. 1991 Incentive Stock Option Plan.......................... 10(m) Boatmen's Supplemental Retirement Participation Agreement dated June 22, 1994, between the Corporation and Samuel B. Hayes, III, Exhibit 10 to Boatmen's Bancshares, Inc.'s Quarterly Report to the Securities and Exchange Commission on Form 10-Q (File No. 1-3750) for the quarter ended June 30, 1994, is incorporated herein by reference................................... 10(n) Boatmen's Bancshares, Inc. 1992 Annual Incentive Bonus Plan as of February 8, 1996... 10(o) Boatmen's Bancshares, Inc. 1996 Stock Incentive Plan................................. 13 Portions of the Annual Report to Shareholders for the year ended December 31, 1995... GRAPHICS APPENDIX CROSS REFERENCE TO PAGE OF OMITTED CHARTS ANNUAL REPORT -------------- --------------- 1. Asset Growth.................................................. Page 19 2. Equity Growth................................................. Page 19 3. Net Interest Margin........................................... Page 21 4. Quarterly Net Interest Margin................................. Page 21 5. Average Earning Asset Mix..................................... Page 26 6. Funding Mix................................................... Page 26 7. Noninterest Income............................................ Page 30 8. Noninterest Expense........................................... Page 31 9. Loan Portfolio................................................ Page 33 10. Loan Loss Experience.......................................... Page 35 11. Loan Reserve Coverage......................................... Page 38 12. Nonperforming Assets.......................................... Page 38 13. Risk-Based Capital............................................ Page 40 The above listed charts were omitted from the EDGAR version of Exhibit 13; however, the information depicted in the charts was adequately discussed and/or displayed in tabular format within the Management's Discussion and Analysis section of the Annual Report. 21 Subsidiaries of the Corporation..................................................... 23 Independent Auditors' Consent of Ernst & Young LLP.................................. 27 Financial Data Schedule............................................................. - ------- Incorporated by reference.
13 BOATMEN'S BANCSHARES EX-3.(B) 2 CERTIFICATE OF DESIGNATION OF CUMULATIVE CONVERTIBLE STOCK 1 No. 00068086 EXHIBIT 3(b) STATE OF MISSOURI SEAL OF THE SECRETARY OF STATE MISSOURI REBECCA McDOWELL COOK SECRETARY OF STATE CORPORATION DIVISION CERTIFICATE OF DESIGNATION I, REBECCA McDOWELL COOK, SECRETARY OF STATE OF THE STATE OF MISSOURI, DO HEREBY CERTIFY THAT DUPLICATE COPIES OF A RESOLUTION OF BOATMEN'S BANCSHARES, INC. A MISSOURI CORPORATION RELATING TO DESIGNATION OF PREFERRED STOCK, HAVE BEEN RECEIVED IN THIS OFFICE. THE SUBSTANCE THEREOF IS: DESIGNATING 250,000 SHARES OF PREFERRED STOCK AS "CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A", WITH A STATED VALUE OF $100.00. SAID RESOLUTION IS FOUND TO CONFORM TO LAW. ACCORDINGLY, I, BY THE VIRTUE OF THE AUTHORITY VESTED IN ME BY LAW, HEREBY ISSUE THIS CERTIFICATE OF DESIGNATION. THE GREAT SEAL OF THE IN TESTIMONY WHEREOF, I HAVE SET MY STATE OF MISSOURI HAND AND IMPRINTED THE GREAT SEAL OF THE STATE OF MISSOURI, ON THIS, THE 10TH DAY OF JANUARY, 1996. /s/ Rebecca McDowell Cook --------------------------- Secretary of State $25.00 2 CERTIFICATE OF DESIGNATION OF CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A OF BOATMEN'S BANCSHARES, INC. ---------------------------------------------------- BOATMEN'S BANCSHARES, INC., a corporation organized and existing under the laws of the State of Missouri (herein referred to as the "Corporation"), in accordance with the provisions of Section 381.180 of The General and Business Corporation Law of Missouri and Article III of the Corporation's Restated Articles of Incorporation, does hereby CERTIFY: I. The Restated Articles of Incorporation of the Corporation fix the total number of shares of all classes of capital stock which the Corporation shall have the authority to issue as Two Hundred Ten Million Three Hundred Thousand (210,300,000) shares, of which Ten Million Three Hundred Thousand (10,300,000) shares shall be shares of preferred stock without par value ("Preferred Stock") and Two Hundred Million (200,000,000) shares shall be shares of common stock of the par value of $1.00 per share ("Common Stock"). II. The Restated Articles of Incorporation of the Corporation expressly grant to the Board of Directors of the Corporation the authority to cause such shares of Preferred Stock to be issued from time to time, by resolution adopted prior to such issue, fixing and determining the designations, preferences, qualifications, limitations, restrictions and special or relative rights applicable to such shares. III. Pursuant to the authority conferred upon the Board of Directors of the Corporation by the Restated Articles of Incorporation of the Corporation, the Board of Directors, by actions duly taken on November 14, 1995, authorized and adopted the following resolutions providing for an issue of a series of its Preferred Stock to be designated as the Cumulative Convertible Preferred Stock, Series A, $100 stated value, of the Corporation: BE IT RESOLVED, that the Board of Directors of Boatmen's Bancshares, Inc. (the "Corporation"), in accordance with the provisions of the Restated Articles of Incorporation of the Corporation, hereby approves the issuance of a series of Cumulative Convertible Preferred Stock, Series A, $100 stated value, of the Corporation and hereby fixes and determines the designations, preferences, qualifications, limitations, restrictions and special or relative rights thereof in addition to those set forth in the Restated Articles of Incorporation of the Corporation, as follows: 1. DESIGNATION. The designation of the series of ----------- Preferred Stock created by this resolution shall be Cumulative Convertible Preferred Stock, Series A, $100 stated value, of the Corporation (hereinafter referred to as "Series A Preferred Stock"), and the number of shares constituting such series shall be 250,000, which number may be increased (but not above the total number of shares of Preferred Stock of the Corporation then authorized by the Restated Articles of Incorporation, as amended from time to time) or decreased (but not below the number of shares then outstanding) from time to time by the Board of Directors. The Series A Preferred Stock shall rank prior to the Common Stock and the 7% Cumulative Redeemable Preferred Stock, Series B, $100 stated value per share, and the Junior Participating Preferred Stock, Series C, $1 stated value per share of the Corporation with respect to the payment of dividends and the distribution of assets. 3 2. DIVIDEND RIGHTS. --------------- (a) The holders of shares of Series A Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available therefor, cash dividends, accruing from the date of initial issuance, at the annual rate of 7.00% of the liquidation preference per annum, and no more, payable, when and as declared by the Board of Directors, quarterly on March 1, June 1, September 1, and December 1 of each year (each quarterly period ending on any such date being hereinafter referred to as a "dividend period"), commencing on the first March 1, June 1, September 1, or December 1 to occur after the Issue Date (as hereafter defined), at such annual rate. Each dividend will be payable to holders of record as they appear on the stock books of the Corporation on such record dates as shall be fixed by the Board of Directors of the Corporation. The date of initial issuance of shares of Series A Preferred Stock is hereinafter referred to as the "Issue Date". Dividends payable on the Series A Preferred Stock (i) for any period other than a full dividend period shall be computed on the basis of a 360-day year consisting of twelve 30-day months and (ii) for each full dividend period shall be computed by dividing the annual dividend rate by four. (b) Dividends on shares of Series A Preferred Stock shall be cumulative from the Issue Date whether or not there shall be funds legally available for the payment thereof. If there shall be outstanding shares of any other series of Preferred Stock ranking junior to or on a parity with the Series A Preferred Stock as to dividends, no dividends shall be declared or paid or set apart for payment on any such other series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment on the Series A Preferred Stock for all dividend periods terminating on or prior to the date of payment of such dividends. If dividends on the Series A Preferred Stock and on any other series of Preferred Stock ranking on a parity as to dividends with the Series A Preferred Stock are in arrears, in making any dividend payment on account of such arrears, the Corporation shall make payments ratably upon all outstanding shares of the Series A Preferred Stock and shares of such other series of Preferred Stock in proportion to the respective amounts of dividends in arrears on the Series A Preferred Stock and on such other series of Preferred Stock to the date of such dividend payment. Holders of shares of the Series A Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends on such shares. No interest or sum of money in lieu of interest shall be payable in respect of any dividend payment or payments which may be in arrears. (c) Unless full cumulative dividends on all outstanding shares of the Series A Preferred Stock shall have been paid or declared and set aside for payment for all past dividend periods, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to the Series A Preferred Stock as to dividends and the distribution of assets upon liquidation, dissolution or winding up) shall be declared upon the Common Stock or upon any other stock ranking junior to the Series A Preferred Stock as to dividends and the distribution of assets upon liquidation, dissolution, or winding up, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with the Series A Preferred Stock as to dividends or upon the distribution of assets upon liquidation, dissolution or winding up be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Series A Preferred Stock as to dividends and the distribution of assets upon liquidation, dissolution or winding up). 2 4 3. LIQUIDATION PREFERENCES. ----------------------- (a) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders an amount equal to $400.00 per share plus an amount equal to any accrued and unpaid dividends thereon to and including the date of such distribution, and no more, before any distribution shall be made to the holders of Common Stock or any other class of stock of the Corporation ranking junior to the Series A Preferred Stock as to the distribution of assets. After payment of such liquidating distributions, the holders of shares of Series A Preferred Stock will not be entitled to any further participation in any distribution of assets by the Corporation. (b) In the event the assets of the Corporation available for distribution to stockholders upon any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full the amounts payable with respect to the Series A Preferred Stock and any other shares of Preferred Stock ranking on a parity with the Series A Preferred Stock as to the distribution of assets, the holders of Series A Preferred Stock and the holders of such other Preferred Stock shall share ratably in any distribution of assets of the Corporation in proportion to the full respective preferential amounts to which they are entitled. (c) The merger or consolidation of the Corporation into or with any other corporation, the merger or consolidation of any other corporation into or with the Corporation or the sale of the assets of the Corporation substantially as an entirety shall not be deemed a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of this Section 3. 4. REDEMPTION. ---------- (a) Subject to obtaining the prior approval of the Board of Governors of the Federal Reserve System, the Corporation, at its option, may redeem any or all shares of Series A Preferred Stock, at any time or from time to time, on or after March 1, 1997 at a redemption price of $400.00 per share, plus an amount equal to accrued and unpaid dividends thereon to and including the date of redemption (the "Redemption Price"). (b) If less than all the outstanding shares of Series A Preferred Stock are to be redeemed, the shares to be redeemed shall be selected pro rata as nearly as practicable or by lot, or by such other method as the Board of Directors may determine to be fair and appropriate. (c) Notice of any redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the date fixed for redemption to the holders of record of the shares of Series A Preferred Stock to be redeemed, at their respective addresses appearing on the books of the Corporation. Notice so mailed shall be conclusively presumed to have been duly given whether or not actually received. Such notice shall state: (i) the date fixed for redemption; (ii) the Redemption Price; (iii) that the holder has the right to convert such shares into Common Stock until the close of business on the tenth day preceding the redemption date; (iv) the then-effective conversion price and the place where certificates for such shares may be surrendered for conversion; (v) the number of shares of Series A Preferred Stock to be redeemed and if less than all the shares held by such holder are to be redeemed, the number of such shares to be so redeemed from such holder; (vi) the place where certificates for such shares are to be surrendered for payment of the Redemption Price; and (vii) that after 3 5 such date fixed for redemption the shares to be redeemed shall not accrue dividends. If such notice is mailed as aforesaid, and if on or before the date fixed for redemption funds sufficient to redeem the shares called for redemption are set aside by the Corporation in trust for the account of the holders of the shares to be redeemed, notwithstanding the fact that any certificate for shares called for redemption shall not have been surrendered for cancellation, on and after the redemption date the shares represented thereby so called for redemption shall be deemed to be no longer outstanding, dividends thereon shall cease to accrue and all rights of the holders of such shares as stockholders of the Corporation shall cease (except the right to receive the Redemption Price, without interest, upon surrender of the certificate representing such shares). Upon surrender in accordance with the aforesaid notice of the certificate for any shares so redeemed (duly endorsed or accompanied by appropriate instruments of transfer, if so required by the Corporation in such notice), the holders of record of such shares shall be entitled to receive the Redemption Price, without interest. Notwithstanding the foregoing, however, as and to the extent that the Corporation is required or permitted under the abandoned property laws of any jurisdiction to escheat any redemption funds held in trust for the benefit of any holder, the Corporation shall be absolved of any further obligation or liability to such holder to the full extent provided by any such law. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (d) At the option of the Corporation, if notice of redemption is mailed as aforesaid, and if prior to the date fixed for redemption funds sufficient to pay in full the Redemption Price are deposited in trust, for the account of the holders of the shares to be redeemed, with a bank or trust company named in such notice doing business in the State of Kansas, the State of Missouri or the Borough of Manhattan, The City of New York, State of New York, and having capital and surplus of at least $50 million (which bank or trust company also may be the transfer agent and/or paying agent for the Series A Preferred Stock) notwithstanding the fact that any certificate(s) for shares called for redemption shall not have been surrendered for cancellation, on and after such date of deposit the shares represented thereby so called for redemption shall be deemed to be no longer outstanding, and all rights of the holders of such shares as shareholders of the Corporation shall cease, except the right of the holders thereof to convert such shares in accordance with the provisions of Section 5 at any time prior to the close of business on the tenth day preceding the redemption date and the right of the holders thereof to receive out of the funds so deposited in trust the Redemption Price, without interest, upon surrender of the certificate(s) representing such shares. Any funds so deposited with such bank or trust company in respect of shares of Series A Preferred Stock converted before the close of business on the tenth day preceding the redemption date shall be returned to the Corporation upon such conversion. Unless otherwise required by law, any funds so deposited with such bank or trust company which shall remain unclaimed by the holders of shares called for redemption at the end of two years after the redemption date shall be repaid to the Corporation, on demand, and thereafter the holder of any such shares shall look only to the Corporation for the payment, without interest, of the Redemption Price. Notwithstanding the foregoing, however, as and to the extent that the Corporation is required or permitted under the abandoned property laws of any jurisdiction to escheat any redemption funds held in trust for the benefit of any holder, the Corporation shall be absolved of any further obligation or liability to such holder to the full extent provided by any such laws. (e) Any provision of this Section 4 to the contrary notwithstanding, in the event that any quarterly dividend payable on the Series A Preferred Stock shall be in arrears and until all such dividends in arrears shall have been paid or declared and set apart for payment, the Corporation shall not redeem any shares of Series A Preferred Stock unless all outstanding shares of Series A Preferred Stock are simultaneously redeemed and shall not purchase or otherwise acquire any shares of Series A Preferred 4 6 Stock except in accordance with a purchase or exchange offer made on the same terms to all holders of record of Series A Preferred Stock for the purchase of all outstanding shares thereof. 5. CONVERSION RIGHTS. The holders of shares of Series A ----------------- Preferred Stock shall have the right, at their option, to convert such shares into shares of Common Stock on the following terms and conditions: (a) Shares of Series A Preferred Stock shall be convertible at any time into fully paid and nonassessable shares of Common Stock at a conversion price of $29.00 per share of Common Stock (the "Conversion Price"). For purposes of this Section 5, references to shares of Series A Preferred Stock shall apply equally to fractional shares thereof, but only to the extent that such fractional shares are integral multiples of 1/16 of one share. The Conversion Price shall be subject to adjustment from time to time as hereinafter provided. For purposes of such conversion, each share of Series A Preferred Stock will be valued at $400. No payment or adjustment shall be made on account of any accrued and unpaid dividends on shares of Series A Preferred Stock surrendered for conversion prior to the record date for the determination of stockholders entitled to such dividends or on account of any dividends on the shares of Common Stock issued upon such conversion subsequent to the record date for the determination of stockholders entitled to such dividends. If any shares of Series A Preferred Stock shall be called for redemption, the right to convert the shares designated for redemption shall terminate at the close of business on the tenth day preceding the date fixed for redemption unless default is made in the payment of the Redemption Price. In the event of default in the payment of the Redemption Price, the right to convert the shares designated for redemption shall terminate at the close of business on the business day immediately preceding the date that such default is cured. (b) In order to convert shares of Series A Preferred Stock into Common Stock, the holder thereof shall surrender the certificates therefor, duly endorsed if the Corporation shall so require, or accompanied by appropriate instruments of transfer satisfactory to the Corporation, at the office of the transfer agent for the Series A Preferred Stock, or at such other office as may be designated by the Corporation, together with written notice that such holder irrevocably elects to convert such shares or any fraction of a share of Series A Preferred Stock having a denominator of 16, each such fractional interest, measured in 1/16 of a share, being valued for purposes of conversion at $25; references in this Section 5 to the conversion of any share of Series A Preferred Stock shall also apply, mutatis mutandis, to ------- -------- such fractional interests. Such notice shall also state the name and address in which such holder wishes the certificate for the shares of Common Stock issuable upon conversion to be issued. As soon as practicable after receipt of the certificates representing the shares of Series A Preferred Stock to be converted and the notice of election to convert the same, the Corporation shall issue and deliver at said office a certificate for the number of whole shares of Common Stock issuable upon conversion of the shares of Series A Preferred Stock surrendered for conversion, together with a cash payment in lieu of any fraction of a share, as hereinafter provided, to the person entitled to receive the same. If more than one stock certificate for Series A Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares represented by all the certificates so surrendered. Shares of Series A Preferred Stock shall be deemed to have been converted immediately prior to the close of business on the date such shares are surrendered for conversion and notice of election to convert the same is received by the Corporation in accordance with the foregoing provision, and the person entitled to receive the Common Stock issuable upon such conversion shall be deemed for all purposes as the record holder of such Common Stock as of such date. 5 7 (c) In the case of any share of Series A Preferred Stock which is converted after any record date with respect to the payment of a dividend on the Series A Preferred Stock and on or prior to the date on which such dividend is payable by the Corporation (the "Dividend Due Date"), the dividend due on such Dividend Due Date shall be payable on such Dividend Due Date to the holder of record of such shares as of such preceding record date notwithstanding such conversion. Shares of Series A Preferred Stock surrendered for conversion during the period from the close of business on any record date with respect to the payment of a dividend on the Series A Preferred Stock next preceding any Dividend Due Date to the opening of business on such Dividend Due Date shall (except in the case of shares of Series A Preferred Stock which have been called for redemption on a redemption date within such period) be accompanied by payment in New York Clearing House funds or other funds acceptable to the Corporation of an amount equal to the dividend payable on such Dividend Due Date on the shares of Series A Preferred Stock being surrendered for conversion. The dividend with respect to a share of Series A Preferred Stock called for redemption on a redemption date during the period from the close of business on any record date with respect to the payment of a dividend on the Series A Preferred Stock next preceding any Dividend Due Date to the opening of business on such Dividend Due Date shall be payable on such Dividend Due Date to the holder of record of such share on such dividend record date, notwithstanding the conversion of such share of Series A Preferred Stock after such record date and prior to such Dividend Due Date, and the holder converting such share of Series A Preferred Stock called for redemption need not include a payment of such dividend amount upon surrender of such share of Series A Preferred Stock for conversion. Except as provided in this subsection, no payment or adjustment shall be made upon any conversion on account of any dividends accrued on shares of Series A Preferred Stock surrendered for conversion or on account of any dividends on the shares of Common Stock issued upon conversion. (d) No fractional shares of Common Stock shall be issued upon conversion of any shares of Series A Preferred Stock. If more than one share of Series A Preferred Stock is surrendered at one time by the same holder, the number of full shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares so surrendered. If the conversion of any shares of Series A Preferred Stock results in a fractional share of Common Stock, the Corporation shall pay cash in lieu thereof in an amount equal to such fraction multiplied by the closing price, determined as provided in subsection (vi) of Section 5(e) below, on the date on which the shares of Series A Preferred Stock were duly surrendered for conversion, or if such date is not a trading date, on the next succeeding trading date. (e) The Conversion Price shall be adjusted from time to time as follows: (i) In case the Corporation shall pay or make a dividend or other distribution on shares of Common Stock in Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For purposes of this subsection, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Corporation. 6 8 (ii) In case the Corporation shall issue additional rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the then current market price per share (determined as provided in subsection (vi) below) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights or warrants (other than pursuant to a dividend reinvestment plan), the Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price (determined as provided in subsection (vi) below) and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subsection (ii), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation will not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Corporation during the period so held. (iii) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (iv) In case the Corporation shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness or assets (including securities, but excluding (1) any rights or warrants referred to in subsection (ii) above, (2) any dividend or distribution paid in cash out of the retained earnings of the Corporation and (3) any dividend or distribution referred to in subsection (i) above), the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be the current market price per share (determined as provided in subsection (vi) below) of the Common Stock on the date fixed for such determination less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive and shall be described in a statement filed with the transfer agent for the Series A Preferred Stock) of the portion of the evidences of indebtedness or assets so distributed applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. 7 9 (v) For the purposes of this Section 5, the reclassification of Common Stock into securities including securities other than Common Stock (other than any reclassification upon a consolidation or merger to which Section 5(g) below applies) shall be deemed to involve (A) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and the "date fixed for such determination" within the meaning of subsection (iv) above), and (B) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision became effective" or "the day upon which such combination becomes effective" as the case may be, and "the day upon which such subdivision or combination becomes effective" within the meaning of subsection (iii) above). (vi) For the purpose of any computation under subsections (ii) and (iv) above, the current market price per share of Common Stock on any day shall be deemed to be the average of the daily closing prices for the 30 consecutive trading days commencing 45 trading days before the day in question. The closing price for each day shall be the reported last sale price or, in case no such reported sale takes place on such day, the average of the reported closing bid and asking prices, in either case on the National Association of Securities Dealers Automated Quotations National Market System or, if the Common Stock is no longer quoted to trading on such system, on the principal national securities exchange on which the Common Stock is then listed or admitted to trading or, if the Common Stock is not quoted on such National Market System or listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices in the over-the- counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose. (vii) Notwithstanding the foregoing, no adjustment in the Conversion Price for the Series A Preferred Shares shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by -------- ------- reason of this subsection (vii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section shall be made to the nearest cent or to the nearest one- hundredth of a share, as the case may be. (f) Whenever the Conversion Price shall be adjusted as herein provided (i) the Corporation shall forthwith make available at the office of the transfer agent for the Series A Preferred Stock a statement describing in reasonable detail the adjustment, the facts requiring such adjustment and the method of calculation used; and (ii) the Corporation shall cause to be mailed by first class mail, postage prepaid, as soon as practicable to each holder of record of shares of Series A Preferred Stock a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price. (g) In the event of any consolidation of the Corporation with or merger of the Corporation into any other corporation (other than a merger in which the Corporation is the surviving corporation) or a sale, lease or conveyance of the assets of the Corporation as an entirety or substantially as an entirety, or any statutory exchange of securities with another corporation, the holder of each share of Series A Preferred Stock shall have the right, after such consolidation, merger, sale or exchange to convert such share into the number and kind of shares of stock or other securities and the amount and 8 10 kind of property which such holder would have been entitled to receive upon such consolidation, merger, sale or exchange of the number of shares of Common Stock that would have been issued to such holder had such shares of Series A Preferred Stock been converted immediately prior to such consolidation, merger or sale. The provisions of this Section 5(g) shall similarly apply to successive consolidations, mergers, sales or exchanges. (h) The Corporation shall pay any taxes that may be payable in respect of the issuance of shares of Common Stock upon conversion of shares of Series A Preferred Stock, but the Corporation shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance of shares of Common Stock in the name other than that in which the shares of Series A Preferred Stock so converted are registered, and the Corporation shall not be required to issue or deliver any such shares unless and until the person requesting such issuance shall have paid to the Corporation the amount of any such taxes, or shall have established to the satisfaction of the Corporation that such taxes have been paid. (i) The Corporation may (but shall not be required to) make such reductions in the Conversion Price, in addition to those required by subsections (i) through (iv) of Section 5(e) above, as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (j) The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock the full number of shares of Common Stock issuable upon the conversion of all shares of Series A Preferred Stock then outstanding. (k) In the event that: (i) the Corporation shall declare a dividend or any other distribution on its Common Stock, payable otherwise than in cash out of retained earnings; or (ii) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (iii) any capital reorganization of the Corporation, reclassification of the capital stock of the Corporation, consolidation or merger of the Corporation with or into another corporation (other than a merger in which the Corporation is the surviving corporation), or sale, lease or conveyance of the assets of the Corporation as an entirety or substantially as an entirety to another corporation occurs; or (iv) the voluntary or involuntary dissolution, liquidation or winding up of the Corporation occurs, the Corporation shall cause to be mailed to the holders of record of Series A Preferred Stock at least 15 days prior to the applicable date hereinafter specified a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution of rights or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined or (y) the date on which such reorganization, reclassification, consolidation, merger, sale, lease, conveyance, dissolution, liquidation or winding up is expected to take place, and the date, if any is to be fixed, as of which holders of Common Stock of record shall be entitled to exchange their shares 9 11 of Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, lease, conveyance, dissolution, liquidation or winding up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reorganization, reclassification, consolidation, merger, sale, lease, conveyance, dissolution, liquidation or winding up. 6. VOTING RIGHTS. Other than as required by applicable ------------- law, the Series A Preferred Stock shall not have any voting powers either general or special, except that: (a) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series A Preferred Stock, and any one or more other series of preferred stock of the Corporation similarly affected, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of the Series A Preferred Stock and any such other series of preferred stock shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Restated Articles of Incorporation, as amended, or of any amendment or supplement thereto (including any certificate of designation or any similar document relating to any series of preferred stock) of the Corporation, which would adversely affect the preferences, rights, powers or privileges, qualifications, limitations and restrictions of the Series A Preferred Stock. (b) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series A Preferred Stock and any other series of preferred stock of the Corporation ranking on a parity with shares of the Series A Preferred Stock, either as to dividends or the distribution of assets upon liquidation, dissolution or winding up, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of the Series A Preferred Stock and any such other series of preferred stock of the Corporation shall vote together as a single class without regard to series, shall be necessary to create, authorize or issue, or reclassify any authorized stock of the Corporation into, or create, authorize or issue any obligation or security convertible into or evidencing a right to purchase, any shares of any class of stock of the Corporation ranking prior to the Series A Preferred Stock or ranking prior to any other series of preferred stock of the Corporation which ranks on a parity with the Series A Preferred Stock as to dividends or upon the distribution of assets upon liquidation, dissolution or winding up. Subject to the foregoing, the Corporation's Restated Articles of Incorporation, as amended, may be amended to increase the number of authorized shares of preferred stock without the vote of the holders of preferred stock, including the Series A Preferred Stock. (c) Whenever, at any time or times, dividends payable on the shares of Series A Preferred Stock shall be in arrears in an amount equal to at least six full quarterly dividends on shares of the Series A Preferred Stock at the time outstanding, the holders of the outstanding shares of Series A Preferred Stock shall have the exclusive right, voting separately as a class together with holders of shares of any one or more other series of preferred stock ranking on a parity with the Series A Preferred Stock either as to dividends or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable, to elect two directors of the Corporation for one-year terms at the Corporation's next annual meeting of stockholders and at each subsequent annual meeting of stockholders. At elections for such directors, each holder of Series A Preferred Stock shall be entitled to one vote for each share held (the holders of shares of any other series of preferred 10 12 stock ranking on such a parity being entitled to such number of votes, if any, for each share of stock held as may be granted to them). Upon the vesting of such right of the holders of Series A Preferred Stock, the maximum authorized number of members of the Board of Directors shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of the outstanding shares of Series A Preferred Stock (either alone or together with the holders of shares of any one or more other series of preferred stock ranking on such a parity) as hereinafter set forth. The right of the holders of Series A Preferred Stock, voting separately as a class to elect (either alone or together with the holders of shares of any one or more other series of preferred stock ranking on such a parity) members of the Board of Directors of the Corporation as aforesaid shall continue until such time as all dividends accumulated on the Series A Preferred Stock shall have been paid in full or declared and set apart for payment, at which time such right shall immediately terminate, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned. (d) Upon termination of such special voting rights attributable to all holders of the Series A Preferred Stock and any other series or preferred stock ranking on a parity with the Series A Preferred Stock as to dividends or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable, the term of office of each director elected by the holders of shares of Series A Preferred Stock and such parity preferred stock (a "Preferred Stock Director") pursuant to such special voting rights shall immediately terminate and the number of directors constituting the entire Board of Directors shall be reduced by the number of Preferred Stock Directors. Any Preferred Stock Director may be removed by, and shall not be removed otherwise than by, the vote of the holders of record of a majority of the outstanding shares of Series A Preferred Stock and all other series of preferred stock ranking on a parity with the Series A Preferred Stock with respect to dividends who were entitled to participate in such Preferred Stock Director's election, voting as a separate class, at a meeting called for such purposes. If the office of any Preferred Stock Director becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, the remaining Preferred Stock Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred. 7. REACQUIRED SHARES. Shares of Series A Preferred Stock ----------------- converted, redeemed, or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of Series A Preferred Stock without designation as to series. 8. RANKING. Any class or classes of stock of the ------- Corporation shall be deemed to rank: (i) prior to the Series A Preferred Stock, as to dividends or as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of the Series A Preferred Stock; (ii) on a parity with the Series A Preferred Stock, as to dividends or as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Series A Preferred Stock, if the holders of such class of stock and the Series A Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective 11 13 amounts of accrued and unpaid dividends per share or liquidation prices, without preference or priority one over the other; and (iii) junior to the Series A Preferred Stock, as to dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such stock shall be Common Stock or if the holders of Series A Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such stock. 9. NO SINKING FUND. Shares of Series A Preferred Stock --------------- are not subject to the operation of a sinking fund or other obligation of the Corporation to redeem or retire the Series A Preferred Stock. FURTHER RESOLVED, that the officers of the Corporation, and each of them, are hereby authorized, for and on behalf of and in the name of the Corporation, to file a copy of the foregoing resolution with the Secretary of State of the State of Missouri in accordance with the provisions of Section 381.180 of The General and Business Corporation Law of Missouri. IN WITNESS WHEREOF, BOATMEN'S BANCSHARES, INC. has caused this Certificate of Designation to be signed by Andrew B. Craig III, its Chairman of the Board and Chief Executive Officer, and attested by David L. Foulk, its Secretary, this 8th day of January, 1996. BOATMEN'S BANCSHARES, INC. By: /s/ A. B. Craig, III --------------------------- Andrew B. Craig III Chairman of the Board and Chief Executive Officer Attest: /s/ David L. Foulk ----------------------- David L. Foulk Secretary FILED AND CERTIFICATE ISSUED JANUARY 10, 1996 /s/ Rebecca McDowell Cook SECRETARY OF STATE 12 14 ACKNOWLEDGMENT -------------- STATE OF MISSOURI ) ) ss. CITY OF ST. LOUIS ) I do hereby certify that on this 8th day of January, 1996, before me, a Notary Public within and for the City and State aforesaid, came Andrew B. Craig III, Chairman of the Board and Chief Executive Officer, and David L. Foulk, Secretary, of Boatmen's Bancshares, Inc., a Missouri corporation, who are personally known to me and known to me to be the same persons who executed the foregoing Certificate of Designation as Chairman of the Board and Chief Executive Officer and Secretary, and said persons duly acknowledged to me their execution of the same as and for their free and voluntary act and deed, for the uses and purposes therein set forth. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal at St. Louis, Missouri, the day, month, and year last above written. /s/ Susan M. Hill ----------------------------- Notary Public My Appointment Expires: 9-9-98 - ---------------------------- 13 EX-3.(C) 3 AMENDMENT BYLAWS 1 Exhibit 3(c) Adopted as of January 31, 1996 AMENDED BYLAWS OF BOATMEN'S BANCSHARES, INC. ARTICLE I Offices The general offices of the Corporation shall be in the City of St. Louis, State of Missouri, unless the Board of Directors shall otherwise determine. The Corporation may also have other offices, both within and without the State of Missouri. ARTICLE II Shareholders Meetings Section 1. Annual Meeting. The annual meeting of the -------------- shareholders of the Corporation for the election of Directors and for the transaction of such other business as may properly come before the meeting shall be held on the fourth Tuesday in April, in each year, if not a legal holiday, and if a legal holiday, then on the next succeeding business day. The annual meeting of shareholders shall be held at the general offices of the Corporation in St. Louis, Missouri, and shall be convened at ten o'clock A.M. unless the Board of Directors shall specify a different place or time at which the meeting shall be convened. Section 2. Special Meetings. Special meetings of the ---------------- shareholders may be called by the Chairman of the Board or the President or by resolution of the Board of Directors whenever deemed necessary. The business transacted at any special meeting of the shareholders shall be confined to the purpose or purposes specified in the notice therefor and to matters germane thereto. Section 3. Notice. Notice of each meeting of the share- ------ holders stating the place, the date and the hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called shall be mailed or caused to be mailed not less than ten (10) days nor more than fifty (50) days before the date of the meeting by or at the direction of the Secretary (otherwise as permitted by law) to each shareholder of record entitled to vote at such meeting at his address as it appears on the records of the Corporation. Notice may be waived by a writing signed by the shareholder, or by his duly authorized attorney, either before or after the time of such meeting, and the presence of any shareholder in person or by proxy at any meeting shall constitute a waiver of notice of such meeting except where a shareholder attends a meeting for 1 2 the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. In order for any nomination for Director to be entertained at any meeting or for any business to be transacted at any annual meeting of the shareholders, other than nominations or business made or proposed by or at the direction of the Board of Directors, notice thereof must be received from the nominating or proposing shareholder by the Secretary of the Corporation, accompanied or promptly followed by such supporting information as he shall reasonably request, not less than seventy-five (75) days prior to the date of any annual meeting or more than seven (7) days after the mailing of notice of any special meeting. Section 4. Quorum. A majority of the outstanding shares ------ entitled to vote at a meeting represented in person or by proxy shall constitute a quorum at a meeting of the shareholders. Every decision of a majority of the shares present, in person or by proxy, entitled to vote, provided a quorum is present, shall be valid as a corporate act unless by reason of the particular nature of such action a different vote is required by law or by the Articles of Incorporation of the Corporation. Section 5. Adjournment. Any meeting of shareholders may ----------- adjourn from time to time until its business is completed. In the absence of a quorum, a majority of the shares represented, in person or by proxy, shall have the right successively to adjourn the meeting to a specified date not more than ninety (90) days after such adjournment. Any business which may have been transacted at the meeting at which the adjournment is taken may be transacted at the adjourned meeting. No notice need be given of an adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. Section 6. Voting. At all meetings of the shareholders, ------ subject to the provisions of the Articles of Incorporation of the Corporation and these Bylaws, each outstanding share shall be entitled to one vote on each matter submitted to a vote, but no share belonging or hypothecated to the Corporation shall be voted. In all elections for Directors of the Corporation, each shareholder shall have the right to cast as many votes in the aggregate as shall equal the number of voting shares held by him or her in the Corporation, multiplied by the number of Directors to be elected by the class to which he or she belongs at such election, and each shareholder may cast the whole number of votes, either in person or by proxy, for one candidate or distribute them among two or more candidates. Section 7. Proxies. A shareholder may vote either in ------- person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Every proxy must be filed with the Secretary of the Corporation at the meeting at which the same is to be used, and until so filed, it cannot be used at such meeting. No proxy shall be valid after the expiration of eleven (11) months from its date unless the person executing it shall have specified therein the length of time for which said proxy is to continue in force. 2 3 Section 8. List of Shareholders. At least ten (10) days -------------------- before each meeting of the shareholders, the Secretary of the Corporation shall make a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be kept on file for a period of ten (10) days prior to such meeting in the registered office of the Corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting during the whole time thereof and may be inspected by any shareholder who is present. Section 9. Inspectors. At any meeting of the shareholders ---------- at which Directors are to be elected or a vote of the shareholders is to be taken on any proposition, the Chairman of the meeting may appoint not less than two persons, who are not Directors, inspectors to receive and canvass the votes given at such meeting, and certify the results to him. In all cases where the right to vote upon any share or shares shall be questioned, it shall be the duty of the inspectors, if any, or persons conducting the vote to require the transfer books of the Corporation as evidence of shares held and the question shall be determined in accordance with said transfer books. Section 10. Presiding Officer. The Chairman of the Board ----------------- shall preside at all meetings of the shareholders and shall act as Chairman thereof. In his absence, the Board of Directors may designate a substitute Chairman to preside at any meeting of shareholders. At any meeting of shareholders, the Chairman of such meeting may, from time to time during such meeting, appoint a temporary Chairman to preside at such meeting. ARTICLE III Board of Directors Section 1. Powers and Number. The property and business of ----------------- the Corporation shall be controlled and managed by the Board of Directors. The number of Directors to constitute the Board of Directors shall be eighteen (18); provided, however, that such number may be fixed, from time to time, at not less than a minimum of fifteen (15) nor more than a maximum of twenty-seven (27), by amendment of these Bylaws, and any such change shall be reported to the Secretary of State of the State of Missouri within thirty (30) calendar days of such change. Section 2. Classes of Directors, Election and Term of Office. ------------------------------------------------- The Directors shall be divided into three classes: Class I, Class II and Class III. Such classes shall be as nearly equal in number as possible. The term of office of the initial Class I Directors expired at the annual meeting of shareholders of the Corporation in 1985; the term of office of the initial Class II Directors expired at the annual meeting of shareholders of the Corporation in 1986; and the term of office of the initial Class III Directors expired at the annual meeting of shareholders of the Corporation in 1987. At each annual election, the Directors chosen to succeed those whose terms then expire shall be identified as being of the same class as the Directors they succeed and shall be elected for a term of three (3) years expiring at the third succeeding annual meeting or thereafter 3 4 when their respective successors are elected and have qualified. If the number of Directors is changed, any increase or decrease in Directors shall be apportioned among the classes so as to maintain all classes as nearly equal in number as possible, and any additional Director elected to any class shall hold office for a term which shall expire with the term of the Directors in such class. Section 3. Removal of Directors. At a meeting called -------------------- expressly for that purpose, a Director of the Corporation or the entire Board of Directors may be removed without cause only upon the affirmative vote of the holders of not less than eighty percent (80%) of the shares entitled to vote generally in the election of Directors; provided, however, that, if less than the entire Board of Directors is to be so removed without cause, no one of the Directors may be removed if the votes cast against such Director's removal would be sufficient to elect such Director if then cumulatively voted at an election of the class of Directors of which such Director is a part. At a meeting called expressly for the purpose, a Director may be removed by the shareholders for cause by the affirmative vote of the holders of a majority of the shares entitled to vote upon his election. Section 4. Vacancies. In case of vacancies occurring on --------- the Board of Directors, any such vacancy may be filled by a vote of a majority of the surviving or remaining Directors then in office. Such Director as may be elected by the Board of Directors to fill a vacancy shall hold office for the unexpired term of the Director whose place shall be vacated or until the election and qualification of his successor. Section 5. Annual Meeting. The annual meeting of the -------------- Directors for the purpose of electing officers and transacting such other business as may come before the meeting shall be held immediately following the annual meeting of shareholders or at such time as shall be fixed by the vote of the shareholders at the annual meeting or at any special meeting at which an election of Directors shall occur. Alternatively, the annual meeting shall be at such time as shall be fixed by the consent in writing of all the Directors or at such time as shall be fixed by an officer authorized to call special meetings of the Board of Directors. Section 6. Regular Meetings. A regular meeting of the ---------------- Board of Directors shall be held during each calendar quarter of each year on such day thereof as shall be determined by the Chairman of the Board. Section 7. Special Meetings. Special meetings of the Board ---------------- of Directors may be called by the Chairman of the Board or the acting chief executive officer. Section 8. Notice of Meetings. No notice shall be required ------------------ to be given of the annual meeting of the Board of Directors if it is held immediately following the annual meeting of shareholders or if a majority of the whole Board shall have been present at the meeting of shareholders. Otherwise, notice of the annual meeting of the Board of Directors shall be given as is provided below for regular or special meetings. Notice of every regular or special meeting of 4 5 the Board of Directors, stating the date, time, and place of the meeting, shall be given by or at the direction of the Secretary to each Director by mailing, or sending by telegraph or other electronic means, a written notice to the Director, addressed to his last known place of business, not less than three days before the date of the meeting, in the case of mailing, or twenty-four hours before the hour of the meeting, in the case of such other sending, or by contacting the Director in person or by telephone not less than six hours before the hour of the meeting. Section 9. Waiver of Notice. Any Director may waive notice ---------------- of any meeting of the Board of Directors by a writing signed by him, either before or after the time of such meeting. Any Director present in person at any meeting shall be deemed to have thereby waived notice of such meeting except where such attendance is for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Section 10. Quorum. A majority of the full Board of Directors ------ as prescribed by these Bylaws shall be required to be present at any meeting to constitute a quorum for the transaction of business and, except as otherwise specifically provided in these Bylaws, the concurring vote of at least a majority of the Directors at a meeting at which a quorum is present shall be required to determine all questions coming before the Board. In the absence of a quorum, the Directors present shall have the right successively to adjourn the meeting to a specified date and no notice need be given of such adjournment. Section 11. Presiding Officer. The Chairman of the Board ----------------- shall preside at all meetings of the Board of Directors. In his absence, the Board of Directors may designate a substitute Chairman to preside at any meeting of the Board of Directors. At a meeting of the Board of Directors, the presiding officer may, from time to time during such meeting, appoint a temporary Chairman to preside at such meeting. Section 12. Minutes and Statements. The Board of Directors ---------------------- shall cause to be kept a complete record of their meetings and acts, and of the proceedings of the shareholders. The business and proceedings of the Board shall, however, be kept confidential. Section 13. Powers of the Board. In addition to the power ------------------- and authority conferred upon them by law, the Board of Directors may exercise all such powers of the Corporation and do all such lawful things as are not by law prohibited or limited. Section 14. Advisory Directors. The Board of Directors of ------------------ the Corporation shall have the power at any time, and from time to time, to appoint one or more advisory directors (hereinafter referred to as "Advisory Directors"), who shall advise and counsel the Board. Advisory Directors shall not be, nor shall they have any of the duties, responsibilities or liabilities of, Directors of the Corporation or members of the Board of Directors or of any committees thereof, but may attend meetings of the Board with no right to vote at such meetings. 5 6 Section 15. Compensation of Directors and Advisory Directors. ------------------------------------------------ The Compensation to be paid the Directors of the Corporation and Advisory Directors for services at all meetings of the Board of Directors shall be determined from time to time by the Board of Directors. ARTICLE IV Committees Section 1. Committees. The Board of Directors may, upon ---------- recommendation of the Chairman of the Board, by resolution adopted by a majority of the whole Board, designate two or more Directors to constitute such Committee or Committees as the Board shall deem advisable and shall designate Directors to constitute the Committees provided for in the following Sections of this Article IV. Each such Committee, to the extent provided in such resolution, shall have and exercise all of the authority of the Board of Directors in the management of the Corporation; provided that the designation of such Committee or Committees and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law. Section 2. Executive Committee. The Board of Directors may ------------------- designate five or more Directors to constitute an Executive Committee, which Committee shall have and exercise all of the authority of the Board of Directors in the management of the Corporation. The Chairman of the Board shall be a member of such Committee and shall act as Chairman thereof; at least three other members of such Committee shall be Directors who are not officers or employees of the Corporation. Section 3. Audit Committee. The Board of Directors shall --------------- designate three or more Directors to constitute an Audit Committee, of which no officer or employee of the Corporation shall be a member, and who shall be appointed by the Board annually or more often. The Audit Committee shall have and exercise all of the authority of the Board of Directors with respect to the review and examination of the financial affairs of the Corpora- tion and its subsidiaries. It shall also be the duty of the Audit Committee to nominate the independent auditors of the Corporation for appointment by the Board of Directors; to arrange for and review the Corporation's annual audit; to ratify all accountants' fees rendered during the year; to review the scope and results of internal audit controls and procedures; and to provide for independent review of the adequacy of the Corporation's system of internal control. Section 4. Compensation Committee. The Board of Directors ---------------------- shall designate three or more Directors to constitute a Compensa- tion Committee, of which no officer or employee of the Corpora- tion shall be a member, and who shall be appointed by the Board annually or more often. The Compensation Committee shall have and exercise all of the authority of the Board of Directors with respect to the selection and review of the competency and effectiveness of management of the Corporation and its subsidiaries; the review of the soundness and adequacy of compensation programs, including fringe programs, compliance with regulations and the like; the approval of salaries of Corporation officers and the review of salaries of senior top management 6 7 of its subsidiaries; and the formulation of policy on and administration of special Corporation programs such as stock option plans, executive incentive plans, stock purchase plans for employees and the like. Section 5. Nominating Committee. The Board of Directors -------------------- shall designate three or more Directors to constitute a Nominating Committee, of which no officer or employee of the Corporation shall be a member, and who shall be appointed by the Board annually or more often. The Nominating Committee shall recommend to the Board a slate of nominees for directors to be presented on behalf of the Board for election by shareholders at each annual meeting of the Corporation and shall recommend to the Board persons to fill vacancies on the Board. Section 6. Compensation of Committee Members. The Board of --------------------------------- Directors shall determine the compensation to be paid to each member of any Committee appointed by it for service on such committee. Section 7. Notice of Meetings. Notice of Committee meetings ------------------ shall be given in the same manner as notices of meetings of the Board of Directors. ARTICLE V Officers Section 1. Required Officers. The Corporation shall have a ----------------- Chairman of the Board, a President and a Secretary, all of whom shall be chosen by the Board of Directors. The Chairman of the Board and President shall be chosen from among the Directors. Any two offices may be held by the same person. Section 2. Other Officers. The Board of Directors may, -------------- upon the recommendation of the Chairman of the Board or otherwise, appoint such other officers as it may deem necessary, who shall have such authority and perform such duties as from time to time may be prescribed by the Chairman of the Board or the Board of Directors. Section 3. Tenure of Office and Removal. The tenure of ---------------------------- office of each of the officers of the Corporation, subject to prior removal, shall be until the close of the next annual meeting of the shareholders following his election and until the election of his successor. Any officer may be removed at any time prior to the expiration of his term by affirmative vote of a majority of the Directors. If the office of any officer of the Corporation becomes vacant, the Board of Directors may choose a successor for such officer who shall hold office for such term as may be prescribed by the Board of Directors but no longer than the unexpired portion of the term of the officer whose place is vacant and until his successor shall have been duly elected. Section 4. Powers and Duties. The Chairman of the Board ----------------- shall be the chief executive officer of the Corporation. Such chief executive officer shall have general executive powers in 7 8 conducting the affairs of the Corporation, as well as the specific powers conferred by these Bylaws. He shall have the power to suspend any officer and to dismiss any other employee of the Corporation when he shall deem it proper. He shall exercise all powers of the Board of Directors pertaining to the management of the business of the Corporation between meetings of the Board of Directors and the Executive Committee and such further powers and duties as may be conferred upon him by these Bylaws and the Board of Directors or the Executive Committee from time to time. He shall have the power to appoint an acting chief executive officer to serve between meetings of the Board of Directors and the Executive Committee in the event that he is unable to serve. The Chairman of the Board shall be a member of all Committees appointed by the Board of Directors, except the Audit Committee, the Compensation Committee, and the Nominating Committee, unless excused by the Board from being a member thereof. The President shall have such powers and duties as may be assigned to him by the Chairman of the Board or the Board of Directors or the Executive Committee from time to time. The Secretary shall keep accurate minutes of all meetings of the shareholders and of the Board of Directors and shall attend to the giving of all notices required to be given under these Bylaws. He shall be custodian of the corporate records and seal of the Corporation and he or an Assistant Secretary shall have the authority to affix the seal to any documents requiring such and to attest the same. He shall also perform such other duties as may be assigned to him from time to time by the Chairman of the Board or the Board of Directors or any Committee thereof. Otherwise, all other officers shall have such powers and duties in the management of the business, property and affairs of the Corporation as generally pertain to their respective offices, as well as such powers and duties as may from time to time be conferred by the Chairman of the Board or the Board of Directors or any Committee thereof. Section 5. Compensation. The compensation of all senior ------------ officers of the Corporation shall be fixed by or pursuant to the authority of the Board of Directors. Section 6. Officers' Bonds. The Board of Directors may --------------- require any officer or officers to furnish the Corporation a bond in such sum and in form and with security satisfactory to the Board of Directors for the faithful performance of the duties of the offices. ARTICLE VI Certificate of Stock and Transfers Section 1. Forms and Execution of Certificates. The shares ----------------------------------- of stock of the Corporation shall be represented by certificates (except fractional shares which may be represented by certifi- cates or, in the discretion of the Board of Directors, scrip) and shall be signed by the Chairman of the Board, the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with the seal of the Corporation. Any and all such 8 9 signatures may be facsimile and such seal may be facsimile, engraved or printed. In case any such officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any such certificate shall cease to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were such officer, transfer agent or registrar at the date of its issue. Section 2. Transfer of Stock. Shares of stock, after certificates ----------------- thereof have been issued, shall be transferable only on the stock transfer books of the Corporation which shall be in the possession of the Secretary or a transfer agent or registrar for the Corporation. No transfer shall be valid against the Corporation until the same is so entered upon its books and the old certificate is surrendered for cancellation. Section 3. Transfer and Registration Agents. The Board of -------------------------------- Directors may appoint a transfer agent or agents who shall have and exercise supervision over the transfer of shares of stock and the issuance of stock certificates, subject to such conditions and regulations as the Board of Directors may prescribe; and the Board of Directors may appoint a registrar who shall register all transfers of shares of stock and the issuance of stock certificates, subject to such conditions and regulations as the Board may prescribe. Section 4. Fixing of Record Date. The Board of Directors --------------------- shall have power to fix in advance a date, not exceeding seventy (70) days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment or rights, or the date when any change or conversion or exchange of shares shall go into effect, as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting, and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of shares, and in such case such shareholders and only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of, and to vote at, such meeting, and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. If the Board of Directors does not set a record date for the determination of the stockholders entitled to notice of, and to vote at, a meeting of shareholders, only the shareholders who are shareholders of record at the close of business on the twentieth day preceding the date of the meeting shall be entitled to notice of, and to vote at, the meeting, and any adjournment of the meeting. ARTICLE VII Miscellaneous Provisions Section 1. Fiscal Year. The fiscal year of the Corporation ----------- shall cover such period of twelve calendar months as the Board of Directors may determine. In the absence of any such determination, the accounts of the Corporation shall be kept on a calendar year basis. 9 10 Section 2. Consents. Any action which is required to be or -------- may be taken at a meeting of the Directors or by the Executive Committee or any other Committee of the Directors may be taken without a meeting if consents in writing, setting forth the action so taken, are signed by all of the Directors or by all members of the Committee as the case may be. The consent shall have the same force and effect as a unanimous vote at a meeting duly held and may be stated as such in any certificate or document filed under the General and Business Corporation Law of Missouri. The Secretary shall file the consents with the minutes of the meetings of the Board of Directors or of the Committee as the case may be. Section 3. Tele-participation at Meetings. Members of the ------------------------------ Board of Directors or any Committee designated by the Board of Directors may participate in a meeting of the Board of Directors or of any Committee by means of a conference telephone or similar communications equipment whereby all persons participating in the meeting can hear each other, and participation in the meeting in this manner shall constitute presence in person at the meeting. Section 4. Amendments to Bylaws. The Board of Directors -------------------- shall have the power to make, alter, amend or repeal the Bylaws of the Corporation from time to time.ao 10 EX-4.(C) 4 ASSIGNMENT AND ASSUMPTION OF AND AMENDMENT TO DEPOSIT AGR. 1 EXHIBIT 4(c) ASSIGNMENT AND ASSUMPTION OF AND AMENDMENT #1 TO THE DEPOSIT AGREEMENT This Assignment and Assumption of and Amendment #1 to the Deposit Agreement (this "Agreement") is made as of this 31st day of January, 1996, by and among Boatmen's Bancshares, Inc., a corporation duly organized and existing under the laws of the State of Missouri ("Boatmen's"), Acquisition Sub, Inc., a corporation duly organized and existing under the laws of the State of Kansas and wholly-owned subsidiary of Boatmen's ("Acquisition Sub"), Boatmen's Trust Company, a corporation duly organized and existing under the laws of the State of Missouri and wholly-owned subsidiary of Boatmen's (the "New Depositary") and BANK IV, National Association, a national banking association and wholly-owned subsidiary of Acquisition Sub (the "Old Depositary"). W I T N E S S E T H: WHEREAS, Fourth Financial Corporation, a corporation formerly duly organized and existing under the laws of the State of Kansas ("Fourth"), the Old Depositary and the holders of Receipts (as defined in the Deposit Agreement) were the original parties to that certain Deposit Agreement, dated February 24, 1992 (the "Deposit Agreement"), a copy of which is attached hereto as Exhibit A, which provides for the deposit with the Old Depositary of shares of Class A Cumulative Convertible Preferred Stock, $100 par value, of Fourth and for the issuance of Receipts and under which the Old Depositary acts as Registrar, Transfer Agent and Depositary (as such terms are defined in the Deposit Agreement) with respect to said Receipts, all subject to the terms and conditions set forth in the Deposit Agreement; and WHEREAS, effective as of the date hereof, Fourth merged (the "Merger") with and into Acquisition Sub pursuant to that certain Agreement and Plan of Merger, dated August 25, 1995, by and among Boatmen's, Acquisition Sub and Fourth (the "Merger Agreement"), under which Merger Acquisition Sub by operation of law assumed the Deposit Agreement and pursuant to which Merger Agreement the Class A Cumulative Convertible Preferred Stock, $100 par value, of Fourth was converted into the right to a like number of shares of Cumulative Convertible Preferred Stock, Series A, $100 stated value, of Boatmen's; and WHEREAS, the parties hereto desire that Acquisition Sub assign and Boatmen's assume the rights, privileges, duties and obligations that Acquisition Sub acquired from Fourth under the Merger by operation of law which arise or accrue after the date of this Agreement and which are set forth in the Deposit Agreement, as amended herein; and WHEREAS, the Old Depositary desires to resign as Registrar, Transfer Agent and Depositary with respect to said Receipts and Boatmen's desires to appoint the New Depositary as Registrar, Transfer Agent and Depositary with respect to said Receipts, all subject to the terms and conditions set forth in the Deposit Agreement; and WHEREAS, the parties hereto desire to amend the Deposit Agreement as set forth herein. NOW, THEREFORE, in consideration of the premises, the parties hereto hereby agree as follows: 2 ASSIGNMENT, ASSUMPTION, RESIGNATION AND APPOINTMENT SECTION 1.01. ASSIGNMENT. Acquisition Sub hereby assigns ---------- to Boatmen's all of the rights, privileges, duties and obligations that Acquisition Sub acquired from Fourth under the Merger by operation of law which arise or accrue after the date of this Agreement and which are set forth in the Deposit Agreement, as amended herein. SECTION 1.02. ASSUMPTION. Boatmen's hereby assumes from ---------- Acquisition Sub all of the rights, privileges, duties and obligations that Acquisition Sub acquired from Fourth under the Merger by operation of law which arise or accrue after the date of this Agreement and which are set forth in the Deposit Agreement, as amended herein. SECTION 1.03. RESIGNATION. Pursuant to Section 5.04 of the ----------- Deposit Agreement, the Old Depositary hereby resigns, effective immediately, as Registrar, Transfer Agent and Depositary under the Deposit Agreement. SECTION 1.04. APPOINTMENT AND ACCEPTANCE. Pursuant to -------------------------- Section 5.04 of the Deposit Agreement, (i) Boatmen's hereby appoints the New Depositary, effective immediately, as Registrar, Transfer Agent and Depositary under the Deposit Agreement, (ii) the New Depositary hereby accepts such appointment, and (iii) the Old Depositary hereby (a) transfers to the New Depositary all rights and powers of the Old Depositary under the Deposit Agreement, as amended herein, (b) delivers to the New Depositary a list of the record holders of all outstanding Receipts, and (c) assigns, transfers and delivers all of its right, title and interest in the Deposited Stock (as defined in the Deposit Agreement) and any moneys or property held by the Old Depositary under the Depositary Agreement. AMENDMENT #1 The Deposit Agreement is hereby amended as follows: SECTION 2.01. AMENDED DEFINITIONS. Article I of the ------------------- Deposit Agreement is hereby amended as follows: a. The definition of "Common Stock" is hereby amended to read as follows: "The term "Common Stock" shall mean the common stock, par value $1.00 per share, of the Company or any security into which the Common Stock may be converted." b. The definition of "Company" is hereby amended to read as follows: "The term "Company" shall mean Boatmen's Bancshares, Inc., incorporated under the laws of the State of Missouri and its successors." c. The definition of "Depositary" is hereby amended to read as follows: 2 3 "The term "Depositary" shall mean Boatmen's Trust Company, incorporated under the laws of the State of Missouri, and any successor in its role as Depositary, Registrar and Transfer Agent hereunder." d. The definition of "Registrar" is hereby amended to read as follows: "The term "Registrar" shall mean Boatmen's Trust Company, incorporated under the laws of the State of Missouri, or any bank or trust company which shall be appointed to register ownership and transfers of Receipts as herein provided." e. The definition of "Registration Statement" is hereby amended to read as follows: "The term "Registration Statement" shall mean the Registration Statement on Form S-4 of the Company (Registration No. 33-64087), declared effective on November 9, 1995 relating to, among other things, the offering of the Depositary Shares." f. The definition of "Securities Division" is hereby amended to read as follows: "The term "Securities Division" shall mean the principal office of the Depositary in St. Louis, Missouri, at which at any particular time its corporate trust business shall have the responsibilities for the administration of this Agreement and obligations hereunder." g. The definition of "Stock" is hereby amended to read as follows: "The term "Stock" shall mean shares of the Company's Cumulative Convertible Preferred Stock, Series A, stated value $100 per share." h. The definition of "Transfer Agent" is hereby amended to read as follows: "The term "Transfer Agent" shall mean Boatmen's Trust Company, incorporated under the laws of the State of Missouri, or any bank or trust company which shall be appointed to transfer the Receipts as herein provided." SECTION 2.02. AMENDED NOTICE PROVISION. Article VII, ------------------------ Section 7.04, paragraph 1, of the Deposit Agreement is hereby amended to read as follows: "Any and all notices to be given to the Company hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail or by telegram or telex confirmed by letter, addressed to the Company at One Boatmen's Plaza, 800 Market Street, St. Louis, Missouri 63101, attention Corporate Secretary, 3 4 or at any other place of which the Company has notified the Depositary in writing." SECTION 2.03. AMENDED FORM OF CERTIFICATE OF DESIGNATION. ------------------------------------------ The Company's Form of Certificate of Designation, attached to the original Deposit Agreement as Exhibit A, is hereby replaced as set forth in Exhibit B attached hereto. SECTION 2.04. AMENDED FORM OF RECEIPTS. The Form of ------------------------ Receipts, attached to the original Deposit Agreement as Exhibit B, is hereby replaced as set forth in Exhibit C attached hereto. IN WITNESS WHEREOF, Boatmen's, Acquisition Sub, the New Depositary and the Old Depositary have duly executed this Agreement as of the day and year first set forth above. BOATMEN'S BANCSHARES, INC. By: /s/ Gregory L. Curl --------------------------- Name: Gregory L. Curl Title: Vice Chairman ACQUISITION SUB, INC. By: /s/ Gregory L. Curl --------------------------- Name: Gregory L. Curl Title: President BOATMEN'S TRUST COMPANY By: /s/ H. E. Bradford ---------------------------- Name: H. Eugene Bradford -------------------------- Title: Senior Vice President ------------------------- BANK IV, NATIONAL ASSOCIATION By: /s/ K. Gordon Greer ---------------------------- Name: K. Gordon Greer -------------------------- Title: Chairman ------------------------- 4 5 EXHIBIT A --------- ORIGINAL DEPOSIT AGREEMENT DEPOSIT AGREEMENT dated as of February 24, 1992, among Fourth Financial Corporation, a corporation duly organized and existing under the laws of the State of Kansas (the "Company"), BANK IV Kansas, National Association, a national banking association, as depositary (the "Depositary"), and the holders from time to time of Depositary Receipts issued hereunder. W I T N E S S E T H: WHEREAS, the parties hereto desire to provide for the deposit with the Depositary of shares of Class A Cumulative Convertible Preferred Stock, $100 par value, of the Company, and for the issuance of receipts evidencing fractional interests in such shares; and WHEREAS, the parties further desire that the Depositary act as registrar, transfer agent and depositary with respect to the said receipts. NOW, THEREFORE, in consideration of the premises, it is agreed by and among the parties hereto as follows: ARTICLE I DEFINITIONS The following definitions shall for all purposes, unless otherwise indicated, apply to the respective terms used in this Deposit Agreement and the Receipts: The term "Certificate of Designation" shall mean the Certificate of Designation adopted by the Company's Board of Directors or a duly authorized committee thereof setting forth the number, terms, powers, designations, rights, preferences, qualifications, restrictions and limitations of the Stock, attached hereto as Exhibit A. The term "Articles of Incorporation" shall mean the Restated Articles of Incorporation, as amended from time to time, of the Company. The term "Common Stock" shall mean the common stock, value $5.00 per share, of the Company or any security into which the Common Stock may be converted. The term "Company" shall mean Fourth Financial Corporation, incorporated under the laws of the State of Kansas and its successors. The term "Deposit Agreement" shall mean this Agreement, as amended or supplemented from time to time. Ex. A-1 6 The term "Depositary" shall mean BANK IV Kansas, National Association, a national banking association, and any successor in its role as Depositary, Registrar and Transfer Agent hereunder. The term "Depositary Shares" shall mean the Depositary Shares evidenced by the Receipts. Each Depositary Share shall, as provided herein, represent a 1/16th interest in a share of Stock. Subject to the terms of this Deposit Agreement, each owner of a Depositary Share is entitled, proportionate to the fractional interest in a share of Deposited Stock underlying such Depositary Share, to all the rights and preferences of the Stock represented thereby, including dividend, voting, conversion, redemption and liquidation rights. The term "Depositary's Agent" shall mean an agent appointed by the Depositary as provided, and for the purpose specified, in Section 7.05. The term "Deposited Stock" shall mean the shares of Stock which are at the time of determination held by the Depositary hereunder. The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as from time to time amended. The term "Receipt" shall mean one or more of the depositary receipts issued hereunder, whether in definitive or temporary form, substantially in the form of Exhibit B hereto. The term "record date" shall mean the date fixed pursuant to Section 4.04. The term "record holder," as applied to a Receipt shall mean the person in whose name a Receipt is registered on the books of the Depositary maintained for such purpose. The term "Redemption Date" shall have the meaning set forth in Section 2.03 hereof. The term "Registrar" shall mean BANK IV Kansas, National Association, or any bank or trust company which shall be appointed to register ownership and transfers of Receipts as herein provided. The term "Registration Statement" shall mean the Registration Statement on Form S-3 of the Company (Registration No. 33-45414), as amended by Amendment No. 1, declared effective on February 13, 1992 relating to the offering of the Depositary Shares. The term "Securities Act" shall mean the Securities Act of 1933, as from time to time amended. The term "Securities Division" shall mean the principal office of the Depositary in Wichita, Kansas, at which at any particular time its corporate trust business shall have responsibilities for the administration of this Agreement and obligations hereunder. The term "Stock" shall mean shares of the Company's Class A Cumulative Convertible Preferred Stock, par value $100 per share. The term "Transfer Agent" shall mean BANK IV Kansas, National Association, or any bank or trust company which shall be appointed to transfer the Receipts as herein provided. Ex. A-2 7 ARTICLE II DEPOSIT OF STOCK; FORM, EXECUTION, DELIVERY, TRANSFER, SURRENDER AND REDEMPTION OF RECEIPTS SECTION 2.01. DEPOSIT OF STOCK: EXECUTION AND DELIVERY OF ------------------------------------------- RECEIPTS IN RESPECT THEREOF. Concurrently with the execution and - --------------------------- delivery of this Deposit Agreement, the Company is delivering to the Depositary a certificate or certificates, registered in the name of the Depositary and evidencing 250,000 shares of the Stock, together with (i) all such certifications as may be required by the Depositary in accordance with the provisions of this Deposit Agreement, and (ii) a written order of the Company directing the Depositary to execute and deliver to, or upon the written order of, the person or persons stated in such order a Receipt or Receipts for the 4,000,000 Depositary Shares representing such Deposited Stock. The certificate or certificates evidencing the Deposited Stock shall be held by the Depositary, at its Securities Division or at such other place or places as the Depositary shall determine. The Company hereby authorizes the Depositary, in its capacity as Transfer Agent and Registrar for the Stock, to reflect changes in the number of shares (including any fractional shares) of Deposited Stock from time to time held by the Depositary by notation, book entry or other appropriate method and the Depositary, in its capacity as aforesaid, agrees to furnish the Company with regular reports as to the number of shares of Deposited Stock from time to time held under this Deposit Agreement. Subject to the terms and conditions of this Deposit Agreement, Stock may also be deposited hereunder in connection with the delivery of Receipts to represent distributions under Section 4.02 and upon exercise of the rights to subscribe referred to in Section 4.03. The Depositary hereby acknowledges delivery of the Deposited Stock together with the other documents required as above specified and, concurrently with such delivery, has caused to be delivered, to or upon the order of the Company, one or more Receipts evidencing the 4,000,000 Depositary Shares which represent all of the fractional interests in the Deposited Stock, in such denominations and registered in such name or names as are specified in such Company order. SECTION 2.02. FORM AND TRANSFERABILITY OF RECEIPTS. The ------------------------------------ definitive Receipts shall be substantially in the form set forth in Exhibit B annexed to this Deposit Agreement, with appropriate insertions, modifications and omissions, as hereinafter provided and shall be engraved or otherwise prepared so as to comply with applicable rules of the National Association of Securities Dealers Automated Quotation National Market System ("NASDAQ/NMS") or any securities exchange upon which the Stock, the Depositary Shares or the Receipts may be included for quotation or listed. Pending the preparation of definitive Receipts, the Depositary, upon the written order of the Company delivered in compliance with Section 2.01, shall issue, execute and deliver temporary Receipts substantially in the form set forth in Exhibit B annexed to this Deposit Agreement which may be printed, lithographed, typewritten, mimeographed or otherwise substantially of the tenor of the definitive Receipts in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the Depositary may determine. If temporary Receipts are issued, the Company and the Depositary will cause definitive Receipts to be prepared without unreasonable delay. After the preparation of definitive Receipts, the temporary Receipts shall be exchangeable for definitive Receipts upon surrender of the temporary Receipts at the office or agency of the Depositary maintained for such purpose, without charge to the holder. Upon surrender for cancellation of any one or more temporary Receipts, the Depositary shall issue, execute and deliver in exchange therefor definitive Receipts representing the same number of Depositary Shares as represented by the surrendered temporary Receipt or Receipts. Such exchange Ex. A-3 8 shall be made at the Company's expense and without any charge therefor. Until so exchanged, the holders of temporary Receipts shall in all respects be entitled to the same benefits under this Deposit Agreement, and with respect to the Stock, as holders of definitive Receipts. Receipts shall be executed by the Depositary by the manual or facsimile signature of a duly authorized officer of the Depositary. No Receipt shall be entitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose, unless it shall have been executed manually or by facsimile by a duly authorized officer of the Depositary or, if a Registrar for the Receipts (other than the Depositary) shall have been appointed, by manual or facsimile signature of a duly authorized officer of the Depositary and countersigned manually by a duly authorized officer of such Registrar. Receipts executed as provided in this section may be issued notwithstanding the fact that any authorized officer of the Depositary authenticating such Receipts shall have ceased to hold office at the time of issuance of such Receipts. The Depositary shall record on its books each Receipt so signed and delivered as hereafter provided. Receipts shall be in denominations of any number of Depositary Shares representing fractional interests in the Stock in even multiples of 1/16th of a share of Stock. All Receipts shall be dated the date of their issuance. Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Deposit Agreement as may be required by the Depositary, or by the rules and regulations of the NASDAQ/ NMS or any securities exchange upon which the Stock, the Depositary Shares or the Receipts may be included for quotation or listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts are subject. Title to the Depositary Shares evidenced by a Receipt which is properly endorsed or accompanied by a properly executed instrument of transfer shall be transferable by delivery with the same effect as in the case of a negotiable instrument; provided, however, that until transfer of a Receipt shall be registered on the books of the Depositary as provided in Section 2.05, the Depositary may, notwithstanding any notice to the contrary, treat the record holder thereof at such time as the absolute owner thereof for the purpose of determining the person entitled to distribution of dividends or other distributions, the exercise of conversion rights or to any notice provided for in this Deposit Agreement and for all other purposes. SECTION 2.03. REDEMPTION OF STOCK. The Company agrees that ------------------- whenever it shall elect to redeem shares of Stock in accordance with the provisions of the Articles of Incorporation and Certificate of Designation, it shall (unless otherwise agreed in writing with the Depositary) give the Depositary at least 60 days' notice of the date of such proposed redemption of Stock (the "Redemption Date") and of the number of shares of Deposited Stock to be so redeemed and the applicable redemption price, as set forth in the Articles of Incorporation and Certificate of Designation, including the amount, if any, of accrued and unpaid dividends to the date of such redemption on the Redemption Date, provided that the Company shall then have paid in full to the Depositary the redemption price of the Stock to be redeemed (including any accrued and unpaid dividends to the date of redemption), the Depositary shall redeem, as of the Redemption Date, the number of Depositary Shares representing the shares of Deposited Stock so called for redemption by the Company. The Depositary shall mail notice of such redemption and the proposed simultaneous redemption of the number of Depositary Shares representing the Deposited Stock to be redeemed, first-class postage prepaid, not less than 30 and not more than 60 days prior to the Redemption Date, to the holders of record (determined pursuant to Section 4.04) of the Receipts Ex. A-4 9 evidencing the Depositary Shares representing the Deposited Stock to be so redeemed, at the addresses of such holders as they appear on the records of the Depositary; but neither failure to mail any such notice to one or more such holders nor any defect in any notice to one or more such holders shall affect the sufficiency of the proceedings for redemption as to other holders. Each such notice provided to the Depositary by the Company shall state the Redemption Date; that the right to convert Stock into shares of Common Stock will expire at the close of business on the 10th day preceding the Redemption Date; the number of Depositary Shares to be redeemed; the redemption price; the place or places where Receipts evidencing Depositary Shares to be redeemed are to be surrendered for payment of the redemption price; and that dividends in respect of the Deposited Stock and the Depositary Shares to be redeemed will cease to accumulate at the close of business on the Redemption Date. In case less than all the outstanding Depositary Shares are to be redeemed, the Depositary Shares to be so redeemed shall be selected by lot or pro rata (as nearly as may be) as may be determined by the Depositary. Notice having been mailed by the Depositary as aforesaid (a) after the 10th day preceding the Redemption Date (unless the Company shall fail to redeem the shares of Stock to be redeemed by it as set forth in the Company's notice provided for in the preceding paragraph) the conversion rights in respect of the shares of Stock called for redemption on such Redemption Date will terminate, and (b) all dividends in respect of the shares of Stock so called for redemption shall cease to accrue, the Depositary Shares being redeemed shall be deemed no longer to be outstanding, all rights of the holders of Receipts evidencing such Depositary Shares (except the right to receive the redemption price and any money or other property to which the holders of such Depositary Shares were entitled upon such redemption) shall cease and terminate and, upon surrender in accordance with said notice of the Receipts evidencing such Depositary Shares (properly endorsed or assigned for transfer, if the Depositary shall so require or if required by law), such Depositary Shares shall be redeemed by the Depositary at a redemption price per Depositary Share equal to 1/16th (as such fraction may from time to time be adjusted, in certain events, so as to equal at all times the fraction of an interest represented by one Depositary Share in one share of Stock) of the redemption price per share plus all money and other property, if any (including amounts in respect of accrued and unpaid dividends) has been paid in respect of the shares of Stock represented by such Depositary Shares. If less than all the Depositary Shares evidenced by a Receipt are called for redemption, the Depositary will deliver to the holder of such Receipt, without service charge, upon its surrender to the Depositary, a new Receipt, together with the redemption payment, evidencing the Depositary Shares evidenced by such prior Receipt that were not called for redemption. SECTION 2.04. CONVERSION OF STOCK INTO COMMON STOCK. The ------------------------------------- Company hereby agrees to accept the delivery of Receipts for purposes of effecting conversions of the Deposited Stock utilizing the same procedures as those provided for delivery of certificates for the Stock to effect such conversions in accordance with the terms and conditions of the Stock as provided in the Certificate of Designation. Any whole number of Depositary Shares (whether or not evenly divisible by 16) represented by a Receipt may be surrendered for conversion. If the Depositary Shares represented by a Receipt are to be converted in part only, a new Receipt or Receipts will be issued by the Depositary for the Depositary Shares not to be converted. No fractional shares of Common Stock will be issued upon conversion, and if such conversion will result in a fractional share being issued, an amount will be paid in cash by the Company equal to the value of the fractional interest based upon the closing price of the Common Stock on the last business day prior to the conversion. For this purpose, a holder of a Receipt or Receipts must surrender such Receipt or Receipts to the Company, together with a duly completed and executed Notice of Conversion in the form included in the Receipt. In all cases the foregoing shall be conditioned upon Ex. A-5 10 compliance in full by the holders with the applicable terms and conditions of the Stock as provided in the Certificate of Designation and of this Deposit Agreement. The Company and the Depositary will thereafter effect the cancellation of each Receipt surrendered for such conversion and of the related Deposited Stock so converted. In the event that the conversion of Depositary Shares results in issuance of a fraction of a share of Stock, the Depositary will make appropriate adjustment in its records (as contemplated in Section 2.01) to reflect such issuance and, if appropriate, the combination of any fractions of shares into one or more whole shares of Stock. Upon conversion no adjustments will be made for accrued dividends and, therefore, Depositary Shares surrendered for conversion after the record date next preceding a dividend payment date for the Deposited Stock and prior to such dividend payment date must be accompanied by payment of an amount equal to the applicable fraction of the dividend thereon which is to be paid on such dividend payment date (unless the Depositary Shares surrendered for conversion have been called for redemption prior to such dividend payment date). No adjustment of the conversion price will be required to be made in any case until cumulative adjustment amounts to 1% or more of the conversion price. SECTION 2.05. REGISTRATION OF TRANSFER OF RECEIPTS. ------------------------------------ Subject to the terms and conditions of this Deposit Agreement, the Depositary, as Registrar and Transfer Agent for the Depositary Shares, shall register on its books from time to time transfers of Receipts upon any surrender thereof by the holder in person or by duly authorized attorney, properly endorsed or accompanied by a properly executed instrument of transfer, and duly stamped as may be required by law. Thereupon the Depositary shall execute a new Receipt or Receipts evidencing the same aggregate number of Depositary Shares as those evidenced by the Receipt or Receipts surrendered. SECTION 2.06. COMBINATIONS AND SPLIT-UPS OF RECEIPTS. Upon -------------------------------------- surrender of a Receipt or Receipts at the Depositary's Securities Division or at such other offices as it may designate for the purpose of effecting a split-up or combination of such Receipt or Receipts, and subject to the terms and conditions of this Deposit Agreement, the Depositary shall execute and deliver a new Receipt or Receipts in the authorized denominations requested evidencing the same aggregate number of Depositary Shares evidenced by the Receipt or Receipts surrendered. SECTION 2.07. SURRENDER OF RECEIPTS AND WITHDRAWAL OF -------------------------------------- DEPOSITED STOCK. Unless the related Depositary Shares have - --------------- previously been called for redemption, any holder of a Receipt or Receipts representing any number of whole shares of Stock may withdraw the Deposited Stock and all money and other property, if any, represented thereby by surrendering such Receipt or Receipts, at the Depositary's Securities Division. Thereafter, without unreasonable delay, the Depositary shall deliver to such holder, or to the person or persons designated by such holder as hereinafter provided, the number of whole shares of Stock and all money, if any, and other property, if any, represented by the Receipt or Receipts so surrendered for withdrawal. If a Receipt delivered by the holder to the Depositary in connection with such withdrawal shall evidence a number of Depositary Shares in excess of the number of Depositary Shares representing the number of whole shares of Deposited Stock to be so withdrawn, the Depositary shall at the same time, in addition to such number of whole shares of Stock and such money, if any, and other property, if any, to be so withdrawn, deliver to such holder, or (subject to Section 2.05) upon his order, a new Receipt evidencing such excess number of Depositary Shares. In no event will fractional shares of Stock (except as represented by Depositary Shares) be distributed by the Depositary. Delivery of the Stock and money being withdrawn may be made by the delivery of such certificates, documents of title and other instruments as the Depositary may deem appropriate, which, if required by law, shall be properly endorsed or accompanied by proper instruments of transfer. Ex. A-6 11 HOLDERS ACKNOWLEDGE THAT THERE WILL BE NO MARKET FOR THE UNDERLYING DEPOSITED STOCK AND THAT UPON WITHDRAWAL OF THE DEPOSITED STOCK HOLDERS THEREOF WILL NOT BE ENTITLED THEREAFTER TO DEPOSIT SUCH STOCK UNDER THIS DEPOSIT AGREEMENT. If the Stock and the money and other property being withdrawn are to be delivered to a person or persons other than the record holder of the Receipt or Receipts being surrendered for withdrawal of Deposited Stock, such holder shall execute and deliver to the Depositary a written order so directing the Depositary and the Depositary may require that the Receipt or Receipts surrendered by such holder for withdrawal of such shares of Deposited Stock be properly endorsed in blank or accompanied by a properly executed instrument of transfer in blank. Delivery of the Stock and the money and other property, if any, represented by Receipts surrendered for withdrawal shall be made by the Depositary at its Securities Division, except that, at the request, risk and expense of the holder surrendering such Receipt or Receipts and for the account of the holder thereof, such delivery may be made at such other place as may be designated by such holder. SECTION 2.08. LIMITATIONS ON EXECUTION AND DELIVERY OF ---------------------------------------- RECEIPTS. As a condition precedent to the execution and - -------- delivery, registration of transfer, split-up, combination, surrender or redemption of any Receipt, or the exercise of any conversion right, the Depositary, any of the Depositary's Agents or the Company may require payment to it of a sum sufficient for the payment (or, in the event that the Depositary or the Company shall have made such payment, the reimbursement to it) of any charge or expenses payable by the holder of a Receipt pursuant to Section 5.07, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with such regulations, if any, as the Depositary or the Company may establish consistent with the provisions of this Deposit Agreement as may be required by the rules and regulations of the NASDAQ/NMS or any securities exchange upon which the Stock, the Depositary Shares or the Receipts may be included for quotation or listed. The exercise of any conversion right may be suspended, or the registration of transfer, surrender or redemption of outstanding Receipts may be suspended (a) during any period when the register of holders of the Stock or of the Common Stock of the Company is closed, or (b) if any such action is deemed reasonably necessary or advisable by the Depositary, any of the Depositary's Agents or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission or under any provision of this Deposit Agreement. SECTION 2.09. LOST RECEIPTS, ETC. In case any Receipt ------------------ shall be mutilated, destroyed, lost or stolen, the Depositary in its discretion may execute and deliver a Receipt of like form and tenor in exchange and substitution for such destroyed, lost or stolen Receipt, upon (i) the filing by the holder thereof with the Depositary of evidence of such destruction or loss or theft of such Receipt, of the authenticity thereof and of his ownership thereof, such evidence being reasonably satisfactory to both the Depositary and the Company, and (ii) the furnishing to the Depositary of an indemnity in accordance with the Depositary's ordinary standard practice. SECTION 2.10. CANCELLATION AND DESTRUCTION OF SURRENDERED ------------------------------------------- RECEIPTS. All Receipts surrendered to the Depositary or any - -------- Depositary's Agent shall be cancelled by the Depositary. The Depositary is authorized to turn over such cancelled Receipts to the Company unless the Company instructs the Depositary to destroy such Receipts. Ex. A-7 12 ARTICLE III CERTAIN OBLIGATIONS OF HOLDERS OF RECEIPTS AND THE COMPANY SECTION 3.01. FILING PROOFS, CERTIFICATES AND OTHER ------------------------------------- INFORMATION. Any holder of a Receipt may be required from time - ----------- to time to file such proof of residence, or other matters or other information, and to execute such certificates and to make such representations and warranties as the Depositary or the Company may reasonably deem necessary and proper. The Depositary or the Company may withhold the delivery or delay the registration of transfer, redemption or exchange, of any Receipt or the withdrawal of the Deposited Stock represented by the Depositary Shares evidenced by any Receipt or the distribution of any dividend or other distribution or the sale of any rights or of the proceeds thereof or the exercise of any conversion right until such proof or other information is filed or such certificates are executed or such representations and warranties are made. SECTION 3.02. PAYMENT OF TAXES OR OTHER GOVERNMENTAL -------------------------------------- CHARGES. As and to the extent required by the Certificate of - ------- Designation, Holders of Receipts shall be obligated to make payments to the Depositary of certain charges and expenses, as further provided in Section 5.07. Registration of transfer of any Receipt or any withdrawal of Deposited Stock and all money or other property, if any, represented by the Depositary Shares evidenced by such Receipt may be refused until any such payment due is made, and any dividends, interest payments or other distributions may be withheld, and any conversion right may be refused, or any part or all of the Deposited Stock or other property represented by the Depositary Shares evidenced by such Receipt and not theretofore sold may be sold for the account of the holder thereof (after attempting by reasonable means to notify such holder prior to such sale), and such dividends, interest payments or other distributions or the proceeds of any such sale may be applied to any payment of such charges or expenses, the holder of such Receipt remaining liable for any deficiency. SECTION 3.03. WARRANTY AS TO STOCK. The Company represents -------------------- and warrants that the Stock is validly issued, fully paid and nonassessable. Such representation and warranty shall survive the deposit of the Stock and the issuance of Receipts. SECTION 3.04. COVENANTS AND WARRANTIES AS TO COMMON STOCK. ------------------------------------------- The Company covenants that it will keep reserved or otherwise available a sufficient number of authorized and unissued shares of Common Stock to meet conversion requirements in respect of the Deposited Stock and that it will give written notice to the Depositary of any adjustments in the conversion price made pursuant to the Certificate of Designation. The Company represents and warrants that the Common Stock issued upon conversion of the Deposited Stock will be validly issued, fully paid and non-assessable. ARTICLE IV THE DEPOSITED STOCK; NOTICES SECTION 4.01. CASH DISTRIBUTIONS. Whenever the Depositary ------------------ shall receive any cash dividend or other cash distribution on the Deposited Stock, the Depositary shall, subject to Section 3.02, distribute to record holders of Receipts on the record date fixed pursuant to Section 4.04 such amounts of such sum as are, as nearly as practicable, in proportion to the respective numbers of Depositary Shares evidenced by the Receipts held by such holders; provided, however, that, in case the Company or the Depositary Ex. A-8 13 shall be required to withhold and shall withhold from any cash dividend or other cash distribution in respect of the Deposited Stock an amount on account of taxes, the amount made available for distribution or distributed in respect of Depositary Shares shall be reduced accordingly. In the event such withholding is required as to only a portion but not all of the holders of Depositary Shares, the reduced amount available for distribution shall be chargeable only to those holders requiring such withholding. The Depositary shall distribute or make available for distribution, as the case any be, only such amount, however, as can be distributed without attributing to any holder of Depositary Shares a fraction of one cent, and any balance not so distributable shall be held by the Depositary (without liability for interest thereon) and shall be added to and be treated as part of the next sum received by the Depositary for distribution to record holders of Receipts then outstanding. SECTION 4.02. DISTRIBUTIONS OTHER THAN CASH. Whenever the ----------------------------- Depositary shall receive any distribution other than cash on the Deposited Stock, the Depositary shall, subject to Section 3.02, distribute to record holders of Receipts on the record date fixed pursuant to Section 4.04 such amounts of such distribution received by it as are, as nearly as practicable, in proportion to the respective numbers of Depositary Shares evidenced by the Receipts held by such holders, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution. If in the opinion of the Depositary such distribution cannot be made proportionately among such record holders, or if for any other reason (including any requirement that the Depositary or the Company withhold an amount on account of taxes) the Depositary deems, after consultation with the Company, such distribution not to be feasible, the Depositary may, with the approval of the Company, adopt such method as it deems equitable and practicable for the purpose of effecting such distribution, including the sale (at public or private sale) of such distribution thus received, or any part thereof, at such place or places and upon such terms as it may deem proper. The net proceeds of any such sale shall, subject to section 3.02, be distributed or made available for distribution, as the case may be, by the Depositary to record holders of Receipts as provided by Section 4.01 in the case of a distribution received in cash. The Company shall not make any distribution of securities on or in respect of the Stock to holders of Depositary Shares unless the Company shall have provided to the Depositary an opinion of counsel (which may be in-house counsel) stating that such securities have been registered under the Securities Act or are to be issued in a transaction which is exempt from the registration requirements thereof. SECTION 4.03. SUBSCRIPTION RIGHTS, PREFERENCES OR ----------------------------------- PRIVILEGES. If the Company shall at any time offer or cause to - ---------- be offered to the persons in whose names Stock is registered on the books of the Company any rights, preferences or privileges to subscribe for or to purchase any securities or any rights, preferences or privileges of any other nature, such rights, preferences or privileges shall in each such instance be made available by the Depositary to the record holders of Receipts in such manner as the Company shall instruct, either by the issue to such record holders of warrants representing such rights, preferences or privileges or by such other method as may be directed by the Company; provided, however, that (a) if at the time of issue or offer of any such rights, preferences or privileges the Depositary determines upon advice of its legal counsel that it is not lawful or (after consultation with the Company) feasible to make such rights, preferences or privileges available to holders of Receipts by the issue of warrants or otherwise, or (b) if and to the extent so instructed by holders of Receipts who do not desire to exercise such rights, preferences or privileges, then the Depositary, (with the approval of the Company, in any case where the Depositary has determined that it is not feasible to make such rights, preferences or privileges available) may, if applicable laws or the terms of such rights, preferences or privileges permit such transfer, sell such rights preferences or privileges at public or private sale at such place or places and upon such terms as it may deem proper. The net proceeds of any such sale shall be, subject to Sections 3.01 and 3.02, distributed by the Depositary to the record holders of Receipts entitled Ex. A-9 14 thereto as provided by Section 4.01 in the case of a distribution received in cash. The Company shall not make any distribution of any such rights, preferences or privileges on or in respect of the Stock to holders of Depositary Shares unless the Company shall have provided to the Depositary an opinion of counsel (which may be in-house counsel) stating that such rights, preferences or privileges have been registered under the Securities Act or are to be issued in a transaction which is exempt from the registration requirements thereof. If registration under the Securities Act is required in order for holders of Receipts to be offered or sold the securities to which such rights, preferences or privileges relate, the Company agrees with the Depositary that it will file promptly a registration statement pursuant to such Act with respect to such rights, preferences or privileges and securities and use its best efforts and take all steps reasonably available to it to cause such registration to become effective so as to enable such holders to exercise such rights, preferences or privileges. In no event shall the Depositary make available to the holders of Receipts any right, preference or privilege to subscribe for or to purchase any securities unless and until the Depositary has received an opinion of counsel (which may be in-house counsel), stating that no other action under the laws of any jurisdiction or any governmental or administrative authorization, consent or permit is required in order for such rights, preferences or privileges to be made available to holders of Receipts and either (a) such a registration statement shall have become effective or (b) the offering and sale of such securities to such holders are exempt from registration under the provisions of the Securities Act. If any other action under the laws of any jurisdiction or any governmental or administrative authorization, consent or permit is required in order for such rights, preferences or privileges to be made available to holders of Receipts, the Company agrees with the Depositary that the Company will use its best efforts to take such action or obtain such authorization, consent or permit sufficiently in advance of the expiration of such rights, preferences or privileges to enable such holders to exercise such rights, preferences or privileges. SECTION 4.04. NOTICE OF DIVIDENDS; FIXING OF RECORD DATE ------------------------------------------ FOR HOLDERS OF RECEIPTS. Whenever any cash dividend or other - ----------------------- cash distribution shall become payable or any distribution other than cash shall be made, or if rights, preferences or privileges shall at any time be offered, with respect to the Stock, or whenever the Depositary shall receive notice of any meeting at which holders of the Stock are entitled to vote or of which holders of the Stock are entitled to notice, or wherever the Depositary and the Company shall decide it is appropriate, the Depositary shall in each such instance fix a record date (which shall be the same date as the record date fixed by the Company with respect to the Stock) for the determination of the holders of Receipts who shall be entitled to receive such dividend, distribution, rights, preferences or privileges or the net proceeds of the sale thereof, or to give instructions for the exercise of voting rights at any such meeting, or who shall be entitled to notice of such meeting or for any other appropriate reasons. The Company shall give the Depositary not less than 10 days' notice prior to fixing any record date with respect to the Stock for any of the aforementioned purposes. SECTION 4.05. VOTING RIGHTS. Upon receipt of notice of any ------------- meeting at which the holders of the Stock are entitled to vote, the Depositary shall, as soon as practicable thereafter, mail to the record holders of Receipts a notice which shall contain (a) such information as is contained in such notice of meeting and (b) a statement that the holders of Receipts may, subject to any applicable restrictions, instruct the Depositary as to the exercise of the voting rights pertaining to the amount of Deposited Stock represented by their respective Depositary Shares and a brief statement as to the manner in which such instructions may be given. Upon the written request of a holder of a Receipt on such record date, the Ex. A-10 15 Depositary shall endeavor insofar as practicable to vote or cause to be voted the shares of Deposited Stock represented by the Depositary Shares evidenced by such Receipt in accordance with the instructions set forth in such request. To the extent any such instructions request the voting of a fraction of a share of Deposited Stock, the Depositary shall aggregate such fraction with all other fractions resulting from requests with the same voting instructions and shall vote the number of whole shares resulting from such aggregation in accordance with the instructions received in such requests. The Company hereby agrees to take all action which may be deemed necessary by the Depositary in order to enable the Depositary to vote such Deposited Stock or cause such Stock to be voted. In the absence of specific instructions from the holder of a Receipt, the Depositary will abstain from voting (but, at its discretion, not from appearing at any meeting with respect to the Stock unless directed to the contrary by the holders of Receipts evidencing a majority of the Depositary Shares) to the extent of the Deposited Stock represented by the Depositary Shares evidenced by such Receipt. The Company also agrees that it will at all times comply with the proxy rules of the Exchange Act and with the rules and regulations of the NASDAQ/NMS or of any securities exchange upon which the Stock, the Depositary Shares or the Receipts may be included for quotation or listed. SECTION 4.06. CHANGES AFFECTING DEPOSITED STOCK AND ------------------------------------- RECLASSIFICATIONS, RECAPITALIZATIONS, ETC. Upon any change in - ----------------------------------------- par or stated value, split-up, combination or any other reclassification of the Stock, or upon any recapitalization, reorganization, merger, consolidation or sale of all or substantially all the Company's assets affecting the Company or to which it is a party, the Depositary may with the approval of the Company, and shall upon the specific instructions of the Company, (a) make such adjustments in (i) the fraction of an interest represented by one Depositary Share in one share of Stock and (ii) the ratio of the redemption price per Depositary Share to the redemption price of a share of Stock, in each case as may be required by or as is consistent with the provisions of the Certificate of Designation to fully reflect the effects of such change in liquidation value, split-up, combination or other reclassification of Stock, or of such recapitalization, reorganization, merger, consolidation or sale and (b) treat any securities which shall be received by the Depositary in exchange for or upon conversion of or in respect of the Stock as new deposited securities under this Deposit Agreement, and Receipts then outstanding shall thereafter represent such new deposited securities. In any such case the Depositary may, with the approval of the Company, execute and deliver additional Receipts, or may call for the surrender of all outstanding Receipts to be exchanged for new Receipts specifically describing such new deposited securities. Anything to the contrary herein notwithstanding, holders of Receipts shall have the right from and after the effective date of any such change in par or stated value, split-up, combination or other reclassification of the Stock or any such recapitalization, reorganization, merger, consolidation or sale of substantially all the assets of the Company to surrender such Receipts to the Depositary with instructions to convert, exchange or surrender the Stock represented thereby only into or for, as the case may be, the kind and amount of shares of stock and other securities and cash into which the Deposited Stock evidenced by such Receipts might have been converted or for which such Deposited Stock might have been exchanged or surrendered immediately prior to the effective date of such transaction. The Company shall cause effective provision to be made in the charter of the resulting or surviving corporation (if other than the Company) for protection of such rights as may be applicable upon exchange of such Stock for securities or property or cash of the surviving corporation in connection with the transactions set forth above. The Company shall cause any such surviving corporation (if other than the Company) expressly to assume the obligations of the Company hereunder. SECTION 4.07. REPORTS. The Depositary shall make available ------- for inspection by holders of Receipts at its Securities Division and at such other places as it may from time to time deem advisable, any reports and communications received from the Company which are both (a) received by the Ex. A-11 16 Depositary as the holder of Deposited Stock and (b) made generally available to the holders of Stock by the Company. In addition, the Depositary shall transmit certain notices and reports to the registered holders of Receipts as provided in Section 5.05. SECTION 4.08. LISTS OF RECEIPT HOLDERS. Promptly upon ------------------------ request from time to time by the Company, the Depositary shall furnish to it a list, as of a recent date, of the names, addresses and holdings of Deposited Stock by all persons in whose names Receipts are registered on the books of the Depositary. SECTION 4.09. REQUEST OF HOLDERS. The Depositary, upon ------------------ request, shall furnish the holders of Depositary Shares with copies of the Company's Articles of Incorporation, the Certificate of Designation and the Deposit Agreement. ARTICLE V THE DEPOSITARY AND THE COMPANY SECTION 5.01. MAINTENANCE OF OFFICES, AGENCIES, TRANSFER ------------------------------------------ BOOKS BY THE DEPOSITARY; REGISTRATION. The Depositary shall - ------------------------------------- maintain at its Securities Division facilities for the execution and delivery, transfer, surrender and redemption of Receipts, and at the offices of the Depositary's Agents, if any, facilities for the delivery, transfer, surrender and redemption of Receipts, all in accordance with the provisions of this Deposit Agreement. The Depositary shall keep books at its Securities Division for the registration and registration of transfer of Receipts, which books at all reasonable times shall be open for inspection by the record holders of Receipts; provided that such inspection shall be for a proper purpose reasonably related to such person's interest as an owner of Depositary Shares evidenced by the Receipts. The Depositary may close such books, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties hereunder. If the Receipts or the Depositary Shares evidenced thereby or the Deposited Stock represented by such Depositary Shares shall be included for quotation on the NASDAQ/NMS, the Company may, if necessary to conform to the rules and regulations of the included for quotation on the NASDAQ/NMS or any securities exchange upon which the Stock, the Depositary Shares or the Receipts may be included for quotation or listed, appoint a Registrar for registration of such Receipts or Depositary Shares in accordance with any requirements of such Exchange. Such Registrar (which may be the Depositary if so permitted by the requirements of the NASDAQ/NMS or such Exchange) may be removed and a substitute Registrar appointed by the Depositary upon the request or with the approval of the Company. If the Receipts, such Depositary Shares or such Deposited Stock are included for quotation on NASDAQ/NMS or listed on one or more other stock exchanges, the Depositary will, at the request of the Company, arrange such facilities for the delivery, registration, registration of transfer, surrender and exchange of such Receipts, such Depositary Shares or such Stock as may be required by law, by NASDAQ/NMS or by applicable stock exchange regulation. SECTION 5.02. PREVENTION OR DELAY IN PERFORMANCE BY THE ----------------------------------------- DEPOSITARY, THE DEPOSITARY'S AGENTS OR THE COMPANY. Neither the - -------------------------------------------------- Depositary nor any Depositary's Agent nor the Company shall incur any liability to any holder of any Receipt, if (i) by reason of any provision of any present or future law, or regulation thereunder, of the United States of America or of any other governmental authority Ex. A-12 17 or, in the case of the Depositary or the Depositary's Agent, by reason of any provision, present or future, of the Articles of Incorporation or Certificate of Designation, or (ii) by reason of any act of God or war or other circumstance beyond the control of the relevant party, the Depositary, the Depositary's Agent or the Company shall be prevented or forbidden from doing or performing any act or thing which the terms of this Deposit Agreement provide shall be done or performed; nor shall the Depositary, any Depositary's Agent or the Company incur any liability to any holder of a Receipt by reason of non-performance or delay caused as aforesaid, in the performance of any act or thing which the terms of this Deposit Agreement provide shall or may be done or performed or by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement. SECTION 5.03. OBLIGATIONS OF THE DEPOSITARY, THE ---------------------------------- DEPOSITARY'S AGENTS AND THE COMPANY. Neither the Depositary nor - ----------------------------------- any Depositary's Agent nor the Company assumes any obligation, nor shall be subject to any liability under this Deposit Agreement to holders of Receipts, except that nothing herein shall relieve the Depositary, the Depositary's Agent or the Company for liability to such holders from acts or omissions arising out of conduct finally adjudicated to constitute gross negligence or bad faith on the part of such person or persons in the performance of such duties as are specifically set forth in this Deposit Agreement. Neither the Depositary nor any Depositary's Agent nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of the Deposited Stock, the Depositary Shares or the Receipts, which in its reasonable opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability is furnished as often as may be required. Neither the Depositary nor any Depositary's Agent nor the Company shall be liable (i) if it is prevented or delayed by law or any circumstance beyond its control in performing its obligations under this Deposit Agreement, or (ii) for any action or any failure to act by it in reliance upon the advice of legal counsel (which may be in-house counsel) or accountants. The Depositary, any Depositary's Agent and the Company may each rely and shall each be protected in acting upon any written notice, request, direction or other document delivered by it to be genuine and to have been signed or presented by the proper party or parties. The Depositary and any Depositary's Agent may own and deal in any class of securities of the Company and its affiliates and in Receipts. The Depositary may also act as Transfer Agent or Registrar of any of the securities of the Company and its affiliates, including, without limitation, the Common Stock as to which the Depositary, at the date hereof, is Transfer Agent and Registrar. Neither the Depositary nor any of the Depositary's Agents is a trustee for the benefit of holders of the Receipts. It is intended that neither the Depositary nor any Depositary's Agent shall be deemed to be an "issuer" of the securities under the federal securities laws or applicable state securities laws, it being expressly understood and agreed that the Depositary and the Depositary's Agents are acting only in a ministerial capacity as Depositary for the Deposited Stock. Neither the Depositary (or its officers, directors, employees or agents) nor any Depositary's Agent makes any representation or has any responsibility as to the validity of the Registration Statement, the Deposited Stock, the Depositary Shares or any instruments referred to therein or herein, or as to the correctness of any statement made therein or herein; provided, however, that the Depositary is Ex. A-13 18 responsible for (i) its representations in this Deposit Agreement and (ii) the validity of any action taken or required to be taken by the Depositary in connection with this Deposit Agreement. Notwithstanding any other provisions herein or set forth in the Receipts, the Depositary makes no warranties or representations as to the validity, genuineness or sufficiency of any Deposited Stock at any time deposited with the Depositary hereunder or of the Depositary Shares as to the value of the Depositary Shares, the Deposited Stock or Receipts or as to any right, title or interest of the record holders of the Receipts to the Depositary Shares or Deposited Stock represented thereby. The Depositary shall not be accountable for the use or application by the Company of the Deposited Stock, the Depositary Shares or Receipts or the proceeds of any thereof. The Company agrees that it will register the Deposited Stock and the Depositary Shares in accordance with applicable securities laws. SECTION 5.04. RESIGNATION AND REMOVAL OF THE DEPOSITARY; ------------------------------------------ APPOINTMENT OF SUCCESSOR DEPOSITARY. The Depositary may at any - ----------------------------------- time resign as Depositary hereunder by notice of its election so to do delivered to the Company, such resignation to take effect upon the appointment of a successor Depositary, Registrar and Transfer Agent and its acceptance of such appointment as hereinafter provided. The Depositary may at any time be removed by the Company by notice of such removal delivered to the Depositary, such removal to take effect upon the appointment of a successor Depositary, Registrar and Transfer Agent and its acceptance of such appointment as hereinafter provided. In case at any time the Depositary acting hereunder shall resign or be removed, the Company shall, within 60 days after the delivery of the notice of resignation or removal, as the case may be, appoint a successor Depositary, which shall be a bank or trust company having its principal office in the United States of America and having a combined capital and surplus of at least $50,000,000. Every successor Depositary, Registrar and Transfer Agent shall execute and deliver to its predecessor and to the Company an instrument in writing accepting its appointment hereunder, and thereupon such successor Depositary, Registrar and Transfer Agent without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor and for all purposes shall be the Depositary under this Deposit Agreement, and such predecessor, upon payment of all sums due it and on the written request of the Company, shall execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in the Deposited Stock and any moneys or property held hereunder to such successor, and shall deliver to such successor a list of the record holders of all outstanding Receipts. Any such successor Depositary shall promptly mail notice of its appointment to the record holders of the Receipts. Any corporation into or with which the Depositary may be merged, consolidated or converted shall be the successor of such Depositary without the execution or filing of any document or any further act. Such successor Depositary may authenticate the Receipts in the name of its predecessor Depositary or in the name of the successor. SECTION 5.05. CORPORATE NOTICES AND REPORTS. The Company ----------------------------- agrees that it will deliver to the Depositary, and the Depositary will, promptly after receipt thereof, transmit to the record holders of Receipts in each case at the address recorded in the Depositary's books, copies of all notices and reports (including, without limitation, financial statements) required by law, by the rules of the NASDAQ/NMS Ex. A-14 19 or any national securities exchange upon which the Stock, the Depositary Shares or the Receipts are included for quotation or listed or by the Articles of Incorporation or Certificate of Designation to be furnished by the Company to holders of Deposited Stock. Such transmissions will be at the Company's expense and the Company will provide the Depositary with such number of copies of such documents as the Depositary may reasonably request. In addition, the Depositary will transmit to the holders of Receipts (at the Company's expense) such other documents as shall be directed by the Company. SECTION 5.06. INDEMNIFICATION BY THE COMPANY. The Company ------------------------------ agrees to indemnify the Depositary and any Depositary's Agent, against and hold each of them harmless from, any liability which may arise out of acts performed or omitted in connection with the provisions of this Deposit Agreement, as the same may be amended, modified or supplemented from time to time, and the Receipts (a) by the Depositary, or any of the Depositary's Agents, except for any liability arising out of gross negligence or bad faith on the part of any such person or persons, or (b) by the Company or any of the Company's Agents (other than the Depositary or the Depositary's Agents). SECTION 5.07. CHARGES AND EXPENSES. No charges and -------------------- expenses of the Depositary or any Depositary's Agent hereunder shall be payable by any person, except for any taxes and other governmental charges and except as provided in this Section 5.07. The Company will pay charges of the Depositary in connection with the initial deposit of the Deposited Stock and any redemption of the Stock and will pay all transfer and other taxes and governmental charges arising solely from the existence of this Deposit Agreement. If, at the election of a holder of Deposited Stock or Receipts, any delivery or communication from the Depositary to such holder is by telegram or telex or if the Depositary incurs charges or expenses for which it is not otherwise liable hereunder at the election of such holder, such holder will be liable for such charges and expenses. All other charges and expenses of the Depositary and any Depositary's Agent hereunder (including fees and expenses of counsel) incident to the performance of its obligations hereunder will be promptly paid by the Company as previously agreed upon by the Company and the Depositary. The Depositary shall present its statement for charges and expenses to the Company once every three months or at such other intervals as the Company and the Depositary may agree. ARTICLE VI AMENDMENT AND TERMINATION SECTION 6.01. AMENDMENT. The form of the Receipts and any --------- provisions of this Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary in any respect which they may deem necessary or desirable. However, any amendment which shall materially and adversely alter the rights of holders of Receipts, shall not become effective unless such amendment has been approved by the record holders of at least a majority of the number of the Depositary Shares then outstanding. In no event shall any amendment impair the right, subject to the provisions of Sections 2.07 and 2.08 and Article III, of any owner of any Depositary Shares to surrender the Receipt evidencing such Depositary Shares with instructions to the Depositary to deliver to the holder the Deposited Stock and all money and other property, if any, represented thereby, except in order to comply with mandatory provisions of applicable law. SECTION 6.02. TERMINATION. This Deposit Agreement may only ----------- be terminated by the Company or the Depositary by written notice to the other party if (i) all outstanding Depositary Shares issued pursuant hereto have been redeemed or converted into Common Stock or (ii) there has been a final Ex. A-15 20 distribution in respect of the Deposited Shares in connection with a liquidation, dissolution or winding up of the Company and such distribution has been distributed to the holders of the Depositary Shares entitled thereto. Upon the termination of this Deposit Agreement, the Company shall be discharged from all obligations under this Deposit Agreement except for its obligations to the Depositary and any Depositary's Agent under Section 5.06 and 5.07. ARTICLE VII MISCELLANEOUS SECTION 7.01. COUNTERPARTS. This Deposit Agreement may be ------------ executed in any number of counterparts, and by each of the parties hereto on separate counterparts, each of which Counterparts when so executed and delivered, shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. Copies of this Deposit Agreement shall be filed with the Depositary and the Depositary's Agents and shall be open to inspection during business hours at the Depositary's Securities Division and the respective offices of the Depositary's Agents, if any, by any holder of a Receipt. SECTION 7.02. EXCLUSIVE BENEFIT OF PARTIES. This Deposit ---------------------------- Agreement is for the exclusive benefit of the parties hereto, and their respective successors hereunder, and shall not be deemed to give any legal or equitable right, remedy or claim to any other person whatsoever. SECTION 7.03. INVALIDITY OF PROVISIONS. In case any one or ------------------------ more of the provisions contained in this Deposit Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby. SECTION 7.04. NOTICES. Any and all notices to be given to ------- the Company hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail or by telegram or telex confirmed by letter, addressed to the Company at 100 North Broadway, P.O. Box 4, Wichita, Kansas 67201, attention John C. Maloney, or at any other place of which the Company has notified the Depositary in writing. Any and all notices to be given to the Depositary hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail or by telegram or telex confirmed by letter, addressed to the Depositary at its Securities Division. Any and all notices to be given to any record holder of a Receipt hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail or by telegram or telex confirmed by letter, addressed to such record holder at the address of such record holder as it appears on the books of the Depositary, or if such holder shall have filed with the Depositary a written request that notices intended for such holder be mailed to some other address, at the address designated in such request. Delivery of a notice sent by mail or by telegram or telex shall be deemed to be effected at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a telegram or telex message) is deposited, postage prepaid, in a post office letter box. The Depositary or the Company may, however, act upon any facsimile transmission, telegram or telex message received by it Ex. A-16 21 from the other or from any holder of a Receipts notwithstanding that such telegram or telex message shall not subsequently be confirmed by letter or as aforesaid. SECTION 7.05. DEPOSITARY'S AGENTS. The Depositary may with ------------------- the approval of the Company (such approval not to be unreasonably withheld or denied) from time to time appoint Depositary's Agents (which may include a Registrar appointed pursuant to Section 5.01) to act in any respect for the Depositary for the purposes of this Deposit Agreement and may at any time appoint additional Depositary's Agents and vary or terminate the appointment of such Depositary's Agents. The Depositary will notify the Company of any such action. SECTION 7.06. HOLDERS OF RECEIPTS ARE PARTIES. The holders ------------------------------- of Receipts from time to time shall be deemed to be parties to this Deposit Agreement and shall be bound by all of the terms and conditions hereof and of the Receipts by acceptance of delivery thereof. SECTION 7.07. GOVERNING LAW. The Deposit Agreement and the ------------- Receipts and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by, and construed in accordance with, the laws of the State of Kansas. SECTION 7.08. HEADINGS. The headings of articles and -------- sections in this Deposit Agreement and in the form of the Receipt set forth in Exhibit B hereto have been inserted for convenience only and are not to be regarded as a part of this Deposit Agreement or to have any bearing upon the meaning or interpretation of any provision contained herein or in the Receipts. IN WITNESS WHEREOF, the Company and the Depositary have duly executed this Agreement as of the day and year first above set forth and all holders of Receipts shall become parties hereto by and upon acceptance by them of delivery of, Receipts issued in accordance with the terms hereof. FOURTH FINANCIAL CORPORATION By: /s/ Ronald L. Baldwin ------------------------------ Name: Ronald L. Baldwin Title: Executive Vice President Attest: /s/ - --------------------------- Secretary BANK IV KANSAS, NATIONAL ASSOCIATION, as Depositary By: /s/ J. Steven Larigan ------------------------------ Name: J. Steven Larigan Title: Vice President Attest: /s/ - --------------------------- Secretary Ex. A-17 22 EXHIBIT A FORM OF COMPANY'S CERTIFICATE OF DESIGNATION ------------------------------------ EX. A-18 23 STATE OF KANSAS OFFICE OF SECRETARY OF STATE BILL GRAVES To all to whom these presents shall come, Greetings: I, Bill Graves, Secretary of State of the State of Kansas, do hereby certify that the attached is a true and correct copy of an original on file and of record in this office. In testimony whereof: I hereto set my hand and cause to be affixed my official seal. Done at the City of Topeka on the date below: BILL GRAVES SECRETARY OF STATE BY ASSISTANT SECRETARY OF STATE Ex. A-19 24 CERTIFICATE OF DESIGNATION RIGHTS AND PREFERENCES OF THE CLASS A CUMULATIVE CONVERTIBLE PREFERRED STOCK $100 PAR VALUE OF FOURTH FINANCIAL CORPORATION ------------------------------- Pursuant to Section 17-6401 of the General Corporation Code of the State of Kansas ------------------------------- FOURTH FINANCIAL CORPORATION, a corporation organized and existing under the General Corporation Code of the State of Kansas (the "Corporation"), DOES HEREBY CERTIFY: FIRST: The Restated Articles of Incorporation of the corporation, as amended, authorize the issuance of 250,000 shares of preferred stock, $100 par value, of the Corporation ("Preferred Stock") in one or more series, and authorizes the Board of Directors to fix by resolution or resolutions the designation of each series of Preferred Stock and the powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof. SECOND: The Restated Articles of Incorporation of the Corporation, as amended, authorize the issuance of 50,000,000 shares of Common Stock of which 3,448,276 shares have been reserved for issuance upon conversion of the Class A Preferred Stock, as hereinafter defined, in accordance with Section 5 of this Certificate of Designation. THIRD: The Board of Directors of the Corporation, pursuant to resolutions adopted at a regular meeting of the Board of Directors duly held on January 23, 1992, authorized the issuance, the public offering and the sale of shares of a series of Preferred Stock of the Corporation, to be designated as the Class A Cumulative Convertible Preferred Stock (the "Class A Preferred Stock"), and authorized the Executive Committee of the Board of Directors to approve the price at which, the title, dividend rate, Ex. A-20 25 form, and number of shares of which the Class A Preferred Stock shall be offered to the public; the underwriting discount, agency fees or similar selling costs; the period or periods within which, and the price at which, the Class A Preferred Stock may be redeemed by the Corporation, if any; to approve or ratify the Registration Statement for the Class A Preferred Stock and all amendments and supplements thereto; to fix the terms at which the Class A Preferred Stock can be converted into the Common Stock of the Corporation and to reserve the number of shares of Common Stock issuable upon the conversion of any such series of Class A Preferred Stock; to establish such other terms and make such other changes in the terms of the proposed issue of Class A Preferred Stock; and to approve all the forms of instruments relating thereto, and any changes therein, not inconsistent with the foregoing, as such Committee deemed to be desirable and in the best interests of the Corporation. FOURTH: Pursuant to the authority previously granted to it by the Board of Directors, the Executive Committee of the Board of Directors of the Corporation, at a meeting duly held on February 13, 1992, did duly adopt the following resolutions providing for the designation, powers, preferences, and rights, and the qualifications, limitations, and/or restrictions thereof, of Class A Cumulative Convertible Preferred Stock, $100 par value, of the Corporation: BE IT RESOLVED, that the Executive Committee of the Board of Directors of Fourth Financial Corporation (the "Corporation"), pursuant to authority vested in it by the Board of Directors and in accordance with the provisions of the Restated Articles of Incorporation, as amended, of the Corporation, hereby approves the issuance of a series of the Class A Cumulative Convertible Preferred Stock, $100 par value, of the Corporation and hereby fixes the powers, preferences, rights, and qualifications, limitations and restrictions thereof in addition to those set forth in said Restated Articles of Incorporation, as amended, as follows: 1. DESIGNATION. The designation of the series of ----------- Preferred Stock created by this resolution shall be Class A Cumulative Convertible Preferred Stock, $100 par value, of the Corporation (hereinafter referred to as "Class A Preferred Stock"), and the number of shares constituting such series shall be 250,000, which number may be increased (but not above the total number of shares of Preferred Stock of the Corporation then authorized by the Restated Articles of Incorporation, as amended from time to time) or decreased (but not below the number of shares then outstanding) from time to time by the Board of Directors. The Class A Preferred Stock shall rank prior to the Common Stock of the Corporation with respect to the payment of dividends and the distribution of assets. 2. DIVIDEND RIGHTS. --------------- (a) The holders of shares of Class A Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available therefor, cash dividends, accruing from the date of initial issuance, at the annual rate of 7.00% per annum, and no more, payable, when and as declared by the Board of Directors, quarterly on March 1, June 1, September 1, and December 1 of each year (each quarterly period ending on any such date being hereinafter referred to as a "dividend period"), commencing June 1, 1992, at such annual rate. Each dividend will be payable to holders of record as they appear on the stock books of the Corporation on such record dates as shall be fixed by the Board of Directors of the Corporation. The date of initial issuance of shares of Class A Preferred Stock is hereinafter referred to as the "Issue Date". Dividends payable on the Class A Preferred Stock (i) for any period other than a full dividend period shall be computed on the basis of a 360-day year consisting of twelve 30-day months and (ii) for each full dividend period shall be computed by dividing the annual dividend rate by four. Ex. A-21 26 (b) Dividends on shares of Class A Preferred Stock shall be cumulative from the Issue Date whether or not there shall be funds legally available for the payment thereof. If there shall be outstanding shares of any other series of Preferred Stock ranking junior to or on a parity with the Class A Preferred Stock as to dividends, no dividends shall be declared or paid or set apart for payment on any such other series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment on the Class A Preferred Stock for all dividend periods terminating on or prior to the date of payment of such dividends. If dividends on the Class A Preferred Stock and on any other series of Preferred Stock ranking on a parity as to dividends with the Class A Preferred Stock are in arrears, in making any dividend payment on account of such arrears, the Corporation shall make payments ratably upon all outstanding shares of the Class A Preferred Stock and shares of such other series of Preferred Stock in proportion to the respective amounts of dividends in arrears on the Class A Preferred Stock and on such other series of Preferred Stock to the date of such dividend payment. Holders of shares of the Class A Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends on such shares. No interest or sum of money in lieu of interest shall be payable in respect of any dividend payment or payments which may be in arrears. (c) Unless full cumulative dividends on all outstanding shares of the Class A Preferred Stock shall have been paid or declared and set aside for payment for all past dividend periods, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to the Class A Preferred Stock as to dividends and the distribution of assets upon liquidation, dissolution or winding up) shall be declared upon the Common Stock or upon any other stock ranking junior to the Class A Preferred Stock as to dividends and the distribution of assets upon liquidation, dissolution, or winding up, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with the Class A Preferred Stock as to dividends or upon the distribution of assets upon liquidation, dissolution or winding up be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Class A Preferred Stock as to dividends and the distribution of assets upon liquidation, dissolution or winding up). 3. LIQUIDATION PREFERENCES. ----------------------- (a) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of Class A Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders an amount equal to $400.00 per share plus an amount equal to any accrued and unpaid dividends thereon to and including the date of such distribution, and no more, before any distribution shall be made to the holders of Common Stock or any other class of stock of the Corporation ranking junior to the Class A Preferred Stock as to the distribution of assets. After payment of such liquidating distributions, the holders of shares of Class A Preferred Stock will not be entitled to any further participation in any distribution of assets by the Corporation. (b) In the event the assets of the Corporation available for distribution to stockholders upon any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full the amounts payable with respect to the Class A Preferred Stock and any other shares of Preferred Stock ranking on a parity with the Class A Preferred Stock as to the distribution of assets, the holders of Class A Preferred Stock and the holders of such other Ex. A-22 27 Preferred Stock shall share ratably in any distribution of assets of the Corporation in proportion to the full respective preferential amounts to which they are entitled. (c) The merger or consolidation of the Corporation into or with any other corporation, the merger or consolidation of any other corporation into or with the Corporation or the sale of the assets of the Corporation substantially as an entirety shall not be deemed a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of this Section 3. 4. REDEMPTION. ---------- (a) Subject to obtaining the prior approval of the Board of Governors of the Federal Reserve System, the Corporation, at its option, may redeem any or all shares of Class A Preferred Stock, at any time or from time to time, on or after March 1, 1997 at a redemption price of $400.00 per share, plus an amount equal to accrued and unpaid dividends thereon to and including the date of redemption (the "Redemption Price"). (b) If less than all the outstanding shares of Class A Preferred Stock are to be redeemed, the shares to be redeemed shall be selected pro rata as nearly as practicable or by lot, or by such other method as the Board of Directors may determine to be fair and appropriate. (c) Notice of any redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the date fixed for redemption to the holders of record of the shares of Class A Preferred Stock to be redeemed, at their respective addresses appearing on the books of the Corporation. Notice so mailed shall be conclusively presumed to have been duly given whether or not actually received. Such notice shall state: (i) the date fixed for redemption; (ii) the Redemption Price; (iii) that the holder has the right to convert such shares into Common Stock until the close of business on the tenth day preceding the redemption date; (iv) the then-effective conversion price and the place where certificates for such shares may be surrendered for conversion; (v) the number of shares of Class A Preferred Stock to be redeemed and if less than all the shares held by such holder are to be redeemed, the number of such shares to be so redeemed from such holder; (vi) the place where certificates for such shares are to be surrendered for payment of the Redemption Price; and (vii) that after such date fixed for redemption the shares to be redeemed shall not accrue dividends. If such notice is mailed as aforesaid, and if on or before the date fixed for redemption funds sufficient to redeem the shares called for redemption are set aside by the Corporation in trust for the account of the holders of the shares to be redeemed, notwithstanding the fact that any certificate for shares called for redemption shall not have been surrendered for cancellation, on and after the redemption date the shares represented thereby so called for redemption shall be deemed to be no longer outstanding, dividends thereon shall cease to accrue and all rights of the holders of such shares as stockholders of the Corporation shall cease (except the right to receive the Redemption Price, without interest, upon surrender of the certificate representing such shares). Upon surrender in accordance with the aforesaid notice of the certificate for any shares so redeemed (duly endorsed or accompanied by appropriate instruments of transfer, if so required by the Corporation in such notice), the holders of record of such shares shall be entitled to receive the Redemption Price, without interest. Notwithstanding the foregoing, however, as and to the extent that the Corporation is required or permitted under the abandoned property laws of any jurisdiction to escheat any redemption funds held in trust for the benefit of any holder, the Corporation shall be absolved of any further obligation or liability to such holder to the full extent provided by any such law. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. Ex. A-23 28 (d) At the option of the Corporation, if notice of redemption is mailed as aforesaid, and if prior to the date fixed for redemption funds sufficient to pay in full the Redemption Price are deposited in trust, for the account of the holders of the shares to be redeemed, with a bank or trust company named in such notice doing business in the State of Kansas or the Borough of Manhattan, The City of New York, State of New York, and having capital and surplus of at least $50 million (which bank or trust company also may be the transfer agent and/or paying agent for the Class A Preferred Stock) notwithstanding the fact that any certificate(s) for shares called for redemption shall not have been surrendered for cancellation, on and after such date of deposit the shares represented thereby so called for redemption shall be deemed to be no longer outstanding, and all rights of the holders of such shares as shareholders of the Corporation shall cease, except the right of the holders thereof to convert such shares in accordance with the provisions of Section 5 at any time prior to the close of business on the tenth day preceding the redemption date and the right of the holders thereof to receive out of the funds so deposited in trust the Redemption Price, without interest, upon surrender of the certificate(s) representing such shares. Any funds so deposited with such bank or trust company in respect of shares of Class A Preferred Stock converted before the close of business on the tenth day preceding the redemption date shall be returned to the Corporation upon such conversion. Unless otherwise required by law, any funds so deposited with such bank or trust company which shall remain unclaimed by the holders of shares called for redemption at the end of two years after the redemption date shall be repaid to the Corporation, on demand, and thereafter the holder of any such shares shall look only to the Corporation for the payment, without interest, of the Redemption Price. Notwithstanding the foregoing, however, as and to the extent that the Corporation is required or permitted under the abandoned property laws of any jurisdiction to escheat any redemption funds held in trust for the benefit of any holder, the Corporation shall be absolved of any further obligation or liability to such holder to the full extent provided by any such laws. (e) Any provision of this Section 4 to the contrary notwithstanding, in the event that any quarterly dividend payable on the Class A Preferred Stock shall be in arrears and until all such dividends in arrears shall have been paid or declared and set apart for payment, the Corporation shall not redeem any shares of Class A Preferred Stock unless all outstanding shares of Class A Preferred Stock are simultaneously redeemed and shall not purchase or otherwise acquire any shares of Class A Preferred Stock except in accordance with a purchase or exchange offer made on the same terms to all holders of record of Class A Preferred Stock for the purchase of all outstanding shares thereof. 5. CONVERSION RIGHTS. The holders of shares of Class A ----------------- Preferred Stock shall have the right, at their option, to convert such shares into shares of Common Stock on the following terms and conditions: (a) Shares of Class A Preferred Stock shall be convertible at any time into fully paid and nonassessable shares of Common Stock at a conversion price of $29.00 per share of Common Stock (the "Conversion Price"). For purposes of this Section 5, references to shares of Class A Preferred Stock shall apply equally to fractional shares thereof, but only to the extent that such fractional shares are integral multiples of 1/16 of one share. The Conversion Price shall be subject to adjustment from time to time as hereinafter provided. For purposes of such conversion, each share of Class A Preferred Stock will be valued at $400. No payment or adjustment shall be made on account of any accrued and unpaid dividends on shares of Class A Preferred Stock surrendered for conversion prior to the record date for the determination of stockholders entitled to such dividends or on account of any dividends on the shares of Common Stock issued upon such conversion subsequent to the record date for the determination of stockholders entitled to such dividends. If any shares of Class A Preferred Stock shall be called for Ex. A-24 29 redemption, the right to convert the shares designated for redemption shall terminate at the close of business on the tenth day preceding the date fixed for redemption unless default is made in the payment of the Redemption Price. In the event of default in the payment of the Redemption Price, the right to convert the shares designated for redemption shall terminate at the close of business on the business day immediately preceding the date that such default is cured. (b) In order to convert shares of Class A Preferred Stock into Common Stock, the holder thereof shall surrender the certificates therefor, duly endorsed if the Corporation shall so require, or accompanied by appropriate instruments of transfer satisfactory to the Corporation, at the office of the transfer agent for the Class A Preferred Stock, or at such other office as may be designated by the Corporation, together with written notice that such holder irrevocably elects to convert such shares or any fraction of a share of Class A Preferred Stock having a denominator of 16, each such fractional interest, measured in 1/16 of a share, being valued for purposes of conversion at $25; references in this Section 5 to the conversion of any share of Class A Preferred Stock shall also apply, mutatis mutandis, to ------- -------- such fractional interests. Such notice shall also state the name and address in which such holder wishes the certificate for the shares of Common Stock issuable upon conversion to be issued. As soon as practicable after receipt of the certificates representing the shares of Class A Preferred Stock to be converted and the notice of election to convert the same, the Corporation shall issue and deliver at said office a certificate for the number of whole shares of Common Stock issuable upon conversion of the shares of Class A Preferred Stock surrendered for conversion, together with a cash payment in lieu of any fraction of a share, as hereinafter provided, to the person entitled to receive the same. If more than one stock certificate for Class A Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares represented by all the certificates so surrendered. Shares of Class A Preferred Stock shall be deemed to have been converted immediately prior to the close of business on the date such shares are surrendered for conversion and notice of election to convert the same is received by the Corporation in accordance with the foregoing provision, and the person entitled to receive the Common Stock issuable upon such conversion shall be deemed for all purposes as the record holder of such Common Stock as of such date. (c) In the case of any share of Class A Preferred Stock which is converted after any record date with respect to the payment of a dividend on the Class A Preferred Stock and on or prior to the date on which such dividend is payable by the Corporation (the "Dividend Due Date"), the dividend due on such Dividend Due Date shall be payable on such Dividend Due Date to the holder of record of such shares as of such preceding record date notwithstanding such conversion. Shares of Class A Preferred Stock surrendered for conversion during the period from the close of business on any record date with respect to the payment of a dividend on the Class A Preferred Stock next preceding any Dividend Due Date to the opening of business on such Dividend Due Date shall (except in the case of shares of Class A Preferred Stock which have been called for redemption on a redemption date within such period) be accompanied by payment in New York Clearing House funds or other funds acceptable to the Corporation of an amount equal to the dividend payable on such Dividend Due Date on the shares of Class A Preferred Stock being surrendered for conversion. The dividend with respect to a share of Class A Preferred Stock called for redemption on a redemption date during the period from the close of business on any record date with respect to the payment of a dividend on the Class A Preferred Stock next preceding any Dividend Due Date to the opening of business on such Dividend Due Date shall be payable on such Dividend Due Date to the holder of record of such share on such dividend record date, notwithstanding the conversion of such share of Class A Preferred Stock after such record date and prior to such Dividend Due Date, and the holder converting such share of Class A Preferred Stock called for Ex. A-25 30 redemption need not include a payment of such dividend amount upon surrender of such share of Class A Preferred Stock for conversion. Except as provided in this subsection, no payment or adjustment shall be made upon any conversion on account of any dividends accrued on shares of Class A Preferred Stock surrendered for conversion or on account of any dividends on the shares of Common Stock issued upon conversion. (d) No fractional shares of Common Stock shall be issued upon conversion of any shares of Class A Preferred Stock. If more than one share of Class A Preferred Stock is surrendered at one time by the same holder, the number of full shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares so surrendered. If the conversion of any shares of Class A Preferred Stock results in a fractional share of Common Stock, the Corporation shall pay cash in lieu thereof in an amount equal to such fraction multiplied by the closing price, determined as provided in subsection (vi) of Section 5(e) below, on the date on which the shares of Class A Preferred Stock were duly surrendered for conversion, or if such date is not a trading date, on the next succeeding trading date. (e) The conversion Price shall be adjusted from time to time as follows: (i) In case the Corporation shall pay or make a dividend or other distribution on shares of Common Stock in Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For purposes of this subsection, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Corporation. (ii) In case the Corporation shall issue additional rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the then current market price per share (determined as provided in subsection (vi) below) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights or warrants (other than pursuant to a dividend reinvestment plan), the Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price (determined as provided in subsection (vi) below) and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subsection (ii), the number of shares of Common Stock at anytime outstanding shall not include shares held in the Ex. A-26 31 treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation will not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Corporation during the period so held. (iii) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (iv) In case the Corporation shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness or assets (including securities, but excluding (1) any rights or warrants referred to in subsection (ii) above, (2) any dividend or distribution paid in cash out of the retained earnings of the Corporation and (3) any dividend or distribution referred to in subsection (i) above), the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be the current market price per share (determined as provided in subsection (vi) below) of the Common Stock on the date fixed for such determination less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive and shall be described in a statement filed with the transfer agent for the Class A Preferred Stock) of the portion of the evidences of indebtedness or assets so distributed applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. (v) For the purposes of this Section 5, the reclassification of Common Stock into securities including securities other than Common Stock (other than any reclassification upon a consolidation or merger to which Section 5(g) below applies) shall be deemed to involve (A) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and the "date fixed for such determination" within the meaning of subsection (iv) above), and (B) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision became effective" or "the day upon which such combination becomes effective" as the case may be, and "the day upon which such subdivision or combination becomes effective" within the meaning of subsection (iii) above). (vi) For the purpose of any computation under subsections (ii) and (iv) above, the current market price per share of Common Stock on any day shall be deemed to be the Ex. A-27 32 average of the daily closing prices for the 30 consecutive trading days commencing 45 trading days before the day in question. The closing price for each day shall be the reported last sale price or, in case no such reported sale takes place on such day, the average of the reported closing bid and asking prices, in either case on the National Association of Securities Dealers Automated Quotations National Market System or, if the Common Stock is no longer quoted to trading on such system, on the principal national securities exchange on which the Common Stock is then listed or admitted to trading or, if the Common Stock is not quoted on such National Market System or listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices in the over-the- counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose. (vii) Notwithstanding the foregoing, no adjustment in the Conversion Price for the Class A Preferred Shares shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by -------- ------- reason of this subsection (vii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section shall be made to the nearest cent or to the nearest one- hundredth of a share, as the case may be. (f) Whenever the Conversion Price shall be adjusted as herein provided (i) the Corporation shall forthwith make available at the office of the transfer agent for the Class A Preferred Stock a statement describing in reasonable detail the adjustment, the facts requiring such adjustment and the method of calculation used; and (ii) the Corporation shall cause to be mailed by first class mail, postage prepaid, as soon as practicable to each holder of record of shares of Class A Preferred Stock a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price. (g) In the event of any consolidation of the Corporation with or merger of the Corporation into any other corporation (other than a merger in which the Corporation is the surviving corporation) or a sale, lease or conveyance of the assets of the Corporation as an entirety or substantially as an entirety, or any statutory exchange of securities with another corporation, the holder of each share of Class A Preferred Stock shall have the right, after such consolidation, merger, sale or exchange to convert such share into the number and kind of shares of stock or other securities and the amount and kind of property which such holder would have been entitled to receive upon such consolidation, merger, sale or exchange of the number of shares of Common Stock that would have been issued to such holder had such shares of Class A Preferred Stock been converted immediately prior to such consolidation, merger or sale. The provisions of this Section 5(g) shall similarly apply to successive consolidations, mergers, sales or exchanges. (h) The Corporation shall pay any taxes that may be payable in respect of the issuance of shares of Common Stock upon conversion of shares of Class A Preferred Stock, but the Corporation shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance of shares of Common Stock in the name other than that in which the shares of Class A Preferred Stock so converted are registered, and the Corporation shall not be required to issue or deliver any such shares unless and until the person requesting such issuance shall have paid to the Corporation the amount of any such taxes, or shall have established to the satisfaction of the Corporation that such taxes have been paid. Ex. A-28 33 (i) The Corporation may (but shall not be required to) make such reductions in the Conversion Price, in addition to those required by subsections (i) through (iv) of Section 5(e) above, as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (j) The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock the full number of shares of Common Stock issuable upon the conversion of all shares of Class A Preferred Stock then outstanding. (k) In the event that: (i) the Corporation shall declare a dividend or any other distribution on its Common Stock, payable otherwise than in cash out of retained earnings; or (ii) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (iii) any capital reorganization of the Corporation, reclassification of the capital stock of the Corporation, consolidation or merger of the Corporation with or into another corporation (other than a merger in which the Corporation is the surviving corporation), or sale, lease or conveyance of the assets of the Corporation as an entirety or substantially as an entirety to another corporation occurs; or (iv) the voluntary or involuntary dissolution, liquidation or winding up of the Corporation occurs, the Corporation shall cause to be mailed to the holders of record of Class A Preferred Stock at least 15 days prior to the applicable date hereinafter specified a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution of rights or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined or (y) the date on which such reorganization, reclassification, consolidation, merger, sale, lease, conveyance, dissolution, liquidation or winding up is expected to take place, and the date, if any is to be fixed, as of which holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, lease, conveyance, dissolution, liquidation or winding up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reorganization, reclassification, consolidation, merger, sale, lease, conveyance, dissolution, liquidation or winding up. 6. VOTING RIGHTS. Other than as required by applicable ------------- law, the Class A Preferred Stock shall not have any voting powers either general or special, except that: (a) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Class A Preferred Stock, and any one or more other series of preferred stock of the Corporation similarly affected, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of the Class A Preferred Stock and any such other series of preferred stock shall vote together as a separate class, shall be necessary for Ex. A-29 34 authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Restated Articles of Incorporation, as amended, or of any amendment or supplement thereto (including any certificate of designation or any similar document relating to any series of preferred stock) of the Corporation, which would adversely affect the preferences, rights, powers or privileges, qualifications, limitations and restrictions of the Class A Preferred Stock. (b) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Class A Preferred Stock and any other series of preferred stock of the Corporation ranking on a parity with shares of the Class A Preferred Stock, either as to dividends or the distribution of assets upon liquidation, dissolution or winding up, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of the Class A Preferred Stock and any such other series of preferred stock of the Corporation shall vote together as a single class without regard to series, shall be necessary to create, authorize or issue, or reclassify any authorized stock of the Corporation into, or create, authorize or issue any obligation or security convertible into or evidencing a right to purchase, any shares of any class of stock of the Corporation ranking prior to the Class A Preferred Stock or ranking prior to any other series of preferred stock of the Corporation which ranks on a parity with the Class A Preferred Stock as to dividends or upon the distribution of assets upon liquidation, dissolution or winding up. Subject to the foregoing, the Corporation's Restated Articles of Incorporation, as amended, may be amended to increase the number of authorized shares of preferred stock without the vote of the holders of preferred stock, including the Class A Preferred Stock. (c) Whenever, at any time or times, dividends payable on the shares of Class A Preferred Stock shall be in arrears in an amount equal to at least six full quarterly dividends on shares of the Class A Preferred Stock at the time outstanding, the holders of the outstanding shares of Class A Preferred Stock shall have the exclusive right, voting separately as a class together with holders of shares of any one or more other series of Preferred Stock ranking on a parity with the Class A Preferred Stock either as to dividends or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable, to elect two directors of the Corporation for one-year terms at the Corporation's next annual meeting of stockholders and at each subsequent annual meeting of stockholders. At elections for such directors, each holder of Class A Preferred Stock shall be entitled to one vote for each share held (the holders of shares of any other series of preferred stock ranking on such a parity being entitled to such number of votes, if any, for each share of stock held as may be granted to them). Upon the vesting of such right of the holders of Class A Preferred Stock, the maximum authorized number of members of the Board of Directors shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of the outstanding shares of Class A Preferred Stock (either alone or together with the holders of shares of any one or more other series of preferred stock ranking on such a parity) as hereinafter set forth. The right of the holders of Class A Preferred Stock, voting separately as a class to elect (either alone or together with the holders of shares of any one or more other series of preferred stock ranking on such a parity) members of the Board of Directors of the Corporation as aforesaid shall continue until such time as all dividends accumulated on the Class A Preferred Stock shall have been paid in full or declared and set apart for payment, at which time such right shall immediately terminate, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned. Ex. A-30 35 (d) Upon termination of such special voting rights attributable to all holders of the Class A Preferred Stock and any other series or preferred stock ranking on a parity with the Class A Preferred Stock as to dividends or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable, the term of office of each director elected by the holders of shares of Class A Preferred Stock and such parity preferred stock (a "Preferred Stock Director") pursuant to such special voting rights shall immediately terminate and the number of directors constituting the entire Board of Directors shall be reduced by the number of Preferred Stock Directors. Any Preferred Stock Director may be removed by, and shall not be removed otherwise than by, the vote of the holders of record of a majority of the outstanding shares of Class A Preferred Stock and all other series of preferred stock ranking on a parity with the Class A Preferred Stock with respect to dividends who were entitled to participate in such Preferred Stock Director's election, voting as a separate class, at a meeting called for such purposes. If the office of any Preferred Stock Director becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, the remaining Preferred Stock Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred. 7. REACQUIRED SHARES. Shares of Class A Preferred Stock ----------------- converted, redeemed, or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of Class A Preferred Stock without designation as to series. 8. RANKING. Any class or classes of stock of the ------- Corporation shall be deemed to rank: (i) prior to the Class A Preferred Stock, as to dividends or as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of the Class A Preferred Stock; (ii) on a parity with the Class A Preferred Stock, as to dividends or as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Class A Preferred Stock, if the holders of such class of stock and the Class A Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation prices, without preference or priority one over the other; and (iii) junior to the Class A Preferred Stock, as to dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such stock shall be Common Stock or if the holders of Class A Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such stock. 9. NO SINKING FUND. Shares of Class A Preferred Stock are --------------- not subject to the operation of a sinking fund or other obligation of the Corporation to redeem or retire the Class A Preferred Stock. FURTHER RESOLVED, that the officers of the Corporation, and each of them, are hereby authorized, for and on behalf of and in the name of the Corporation, to file a copy of the foregoing Ex. A-31 36 resolution with the Secretary of State of the State of Kansas in accordance with the provisions of Sections 17-6003 and 17-6401 of the General Corporation Code of the State of Kansas. IN WITNESS WHEREOF, FOURTH FINANCIAL CORPORATION, has caused this Certificate of Designation to be signed by Darrell G. Knudson, its Chairman of the Board, and attested by John C. Maloney, its Secretary, this 17th day of February, 1992. FOURTH FINANCIAL CORPORATION By -------------------------------- Name: Darrell G. Knudson Title: Chairman of the Board Attest: ------------------------ Name: John C. Maloney Title: Secretary Ex. A-32 37 ACKNOWLEDGMENT -------------- STATE OF KANSAS ) ) ss. SEDGWICK COUNTY ) BE IT REMEMBERED, that on this 17th day of February, 1992, before me, a Notary Public within and for the County and State aforesaid, came Darrell G. Knudson, Chairman of the Board and John C. Maloney, Secretary, of Fourth Financial Corporation, a Kansas corporation, who are personally known to me and known to me to be the same persons who executed the foregoing Certificate of Designation as Chairman of the Board and Secretary, and said persons duly acknowledged to me their execution of the same as and for their free and voluntary act and deed, for the uses and purposes therein set forth. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal at Wichita, Kansas, the day, month, and year last above written. ---------------------------------------- Notary Public My Appointment Expires: - -------------------------- Ex. A-33 38 EXHIBIT B FORM OF DEPOSITARY RECEIPTS --------------------------- Ex. A-34 39 NOT MORE THAN - ---------------- -------------- DEPOSITARY RECEIPT FOR DEPOSITARY SHARES DR EACH REPRESENTING 1/16 OF A SHARE OF CLASS A CUMULATIVE CONVERTIBLE PREFERRED STOCK - ---------------- $100 PAR VALUE SEE REVERSE FOR CERTAIN DEFINITIONS DEPOSITARY SHARES FOURTH FINANCIAL CORPORATION INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NEW YORK OR WICHITA, KANSAS BANK IV Kansas, National Association, a national banking association, duly organized and existing under the laws of the United States, as Depositary (the "Depositary") hereby certifies that is the registered owner of Depositary Shares ("Depositary Shares"), each Depositary Share representing one one-sixteenth (1/16) of a share of Class A Cumulative Convertible Preferred Stock, $100 par value (the "Stock"), of Fourth Financial Corporation, a corporation duly organized and existing under the laws of the State of Kansas (the "Company"). Subject to the terms of a Deposit Agreement (the "Deposit Agreement") among the Depositary, the Company and holders of receipts for Depositary Shares ("Receipts"), each owner of a Depositary Share is entitled, proportionately, to all the powers, preferences and rights and the qualifications, limitations or restrictions of such preferences and/or rights of the Stock represented thereby including dividends, voting, conversion, redemption and liquidation rights as set forth in the Restated Articles of Incorporation of the Company as amended and supplemented by the Certificate of Designation (the "Certificate of Designation") fixing the terms of Stock filed with the Secretary of State of the State of Kansas. The Depositary will furnish without charge to any registered owner of Depositary Shares who so requests copies of the Restated Articles of Incorporation of the Company, Deposit Agreement and Certificate of Designation. This Receipt shall not be valid or obligatory for any purpose, nor shall the holder be entitled to any benefits under the Deposit Agreement, unless this Receipt shall have been executed manually or by facsimile, or, if a Registrar for the Receipts (other than the Depositary) shall have been appointed, by manual or facsimile signature by the Depositary of a duly authorized officer thereof, and if executed by facsimile signature of the Depositary, shall have been countersigned manually by such Registrar by signature of a duly authorized officer thereof. BANK IV Kansas, National Association Depositary, Transfer Agent and Registrar ----------------------------------------------- Authorized Signature Ex. A-35 40 The Depositary will furnish without charge to any registered owner of Depositary Shares who so requests, copies of the Restated Articles of Incorporation of the Company, Deposit Agreement and Certificate of Designation. Any such request should be addressed to the Depositary. The following abbreviations, when used in the inscription on the face of this Receipt, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - Custodian --------- -------------- (Cust) (Minor) under Uniform Gifts to Minors Act ------------------------------------ (State) Additional abbreviations may also be used though not in the above list. NOTICE OF CONVERSION The undersigned holder of this Receipt for Depositary Shares hereby irrevocably exercises the option to convert that number of shares of Stock of the Company, represented by --------------- Depositary Shares, into shares of common stock, $5.00 par value, of the Company ("Common Stock") in accordance with the terms of and subject to the conditions of such Stock, including the Certificate of Designation in respect thereof and the Deposit Agreement, and directs that the Common Stock deliverable upon such conversion be registered in the name of and delivered together with a check in payment for any fractional shares of Common Stock to the undersigned unless a different name has been indicated below. If the shares of Common Stock are to be registered in the name of a person other than the undersigned, the undersigned will pay all transfer and similar taxes payable with respect thereto. If the number of shares of such Stock represented by the number of Depositary Shares set forth above is less than the number of shares of such Stock on deposit in respect of this Receipt, the undersigned directs that the Depositary issue to the undersigned, unless a different name is indicated below, a new Receipt evidencing Depositary Shares for the balance of such Stock not be converted. Dated: --------------------------------- NAME: ---------------------------------- ADDRESS: Signature: ------------------------ ------------------------------ Note: The signature in this Notice (Please print name and address Conversion must correspond with the of Registered Holder) name as written upon the face of this Receipt in every particular, without alteration or enlargement, or any change whatever. NAME: ---------------------------------- ADDRESS: ------------------------------ (Please indicate other delivery instructions if applicable) ASSIGNMENT For value received, ------------------------------- the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------------- - -------------------------------------- - ------------------------------------------------------------------------------- the within Receipt, and all rights and interests represented by the Depositary Shares evidenced thereby, and hereby irrevocably constitutes and appoints - ------------------------------------------------------------------, his attorney, to transfer the said Depositary Shares on the books of the within-named Depositary, with full power of substitution in the premises. Dated:--------------------------------- Signature:------------------------ Note: The signature in this Assignment must correspond with the names as written upon the fact of this Receipt in every particular, without alteration or enlargement, or change whatever. Ex. A-36 41 EXHIBIT B --------- FORM OF CERTIFICATE OF DESIGNATION OF CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A OF BOATMEN'S BANCSHARES, INC. ---------------------------------------------------- BOATMEN'S BANCSHARES, INC., a corporation organized and existing under the laws of the State of Missouri (herein referred to as the "Corporation"), in accordance with the provisions of Section 381.180 of The General and Business Corporation Law of Missouri and Article III of the Corporation's Restated Articles of Incorporation, does hereby CERTIFY: I. The Restated Articles of Incorporation of the Corporation fix the total number of shares of all classes of capital stock which the Corporation shall have the authority to issue as Two Hundred Ten Million Three Hundred Thousand (210,300,000) shares, of which Ten Million Three Hundred Thousand (10,300,000) shares shall be shares of preferred stock without par value ("Preferred Stock") and Two Hundred Million (200,000,000) shares shall be shares of common stock of the par value of $1.00 per share ("Common Stock"). II. The Restated Articles of Incorporation of the Corporation expressly grant to the Board of Directors of the Corporation the authority to cause such shares of Preferred Stock to be issued from time to time, by resolution adopted prior to such issue, fixing and determining the designations, preferences, qualifications, limitations, restrictions and special or relative rights applicable to such shares. III. Pursuant to the authority conferred upon the Board of Directors of the Corporation by the Restated Articles of Incorporation of the Corporation, the Board of Directors, by actions duly taken on November 14, 1995, authorized and adopted the following resolutions providing for an issue of a series of its Preferred Stock to be designated as the Cumulative Convertible Preferred Stock, Series A, $100 stated value, of the Corporation: BE IT RESOLVED, that the Board of Directors of Boatmen's Bancshares, Inc. (the "Corporation"), in accordance with the provisions of the Restated Articles of Incorporation of the Corporation, hereby approves the issuance of a series of Cumulative Convertible Preferred Stock, Series A, $100 stated value, of the Corporation and hereby fixes and determines the designations, preferences, qualifications, limitations, restrictions and special or relative rights thereof in addition to those set forth in the Restated Articles of Incorporation of the Corporation, as follows: 1. DESIGNATION. The designation of the series of Preferred ----------- Stock created by this resolution shall be Cumulative Convertible Preferred Stock, Series A, $100 stated value, of the Corporation (hereinafter referred to as "Series A Preferred Stock"), and the number of shares constituting such series shall be 250,000, which number may be increased (but not above the total number of shares of Preferred Stock of the Corporation then authorized by the Restated Articles of Incorporation, as amended from time to time) or decreased (but not below the number of shares then outstanding) from time to time by the Board of Directors. The Series A Preferred Stock shall rank prior to the Common Stock and the 7% Cumulative Redeemable Preferred Stock, Series B, $100 stated value per share, and the Junior Participating Preferred Stock, Series C, $1 stated value per share of the Corporation with respect to the payment of dividends and the distribution of assets. Ex. B-1 42 2. DIVIDEND RIGHTS. --------------- (a) The holders of shares of Series A Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available therefor, cash dividends, accruing from the date of initial issuance, at the annual rate of 7.00% of the liquidation preference per annum, and no more, payable, when and as declared by the Board of Directors, quarterly on March 1, June 1, September 1, and December 1 of each year (each quarterly period ending on any such date being hereinafter referred to as a "dividend period"), commencing on the first March 1, June 1, September 1, or December 1 to occur after the Issue Date (as hereafter defined), at such annual rate. Each dividend will be payable to holders of record as they appear on the stock books of the Corporation on such record dates as shall be fixed by the Board of Directors of the Corporation. The date of initial issuance of shares of Series A Preferred Stock is hereinafter referred to as the "Issue Date". Dividends payable on the Series A Preferred Stock (i) for any period other than a full dividend period shall be computed on the basis of a 360-day year consisting of twelve 30-day months and (ii) for each full dividend period shall be computed by dividing the annual dividend rate by four. (b) Dividends on shares of Series A Preferred Stock shall be cumulative from the Issue Date whether or not there shall be funds legally available for the payment thereof. If there shall be outstanding shares of any other series of Preferred Stock ranking junior to or on a parity with the Series A Preferred Stock as to dividends, no dividends shall be declared or paid or set apart for payment on any such other series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment on the Series A Preferred Stock for all dividend periods terminating on or prior to the date of payment of such dividends. If dividends on the Series A Preferred Stock and on any other series of Preferred Stock ranking on a parity as to dividends with the Series A Preferred Stock are in arrears, in making any dividend payment on account of such arrears, the Corporation shall make payments ratably upon all outstanding shares of the Series A Preferred Stock and shares of such other series of Preferred Stock in proportion to the respective amounts of dividends in arrears on the Series A Preferred Stock and on such other series of Preferred Stock to the date of such dividend payment. Holders of shares of the Series A Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends on such shares. No interest or sum of money in lieu of interest shall be payable in respect of any dividend payment or payments which may be in arrears. (c) Unless full cumulative dividends on all outstanding shares of the Series A Preferred Stock shall have been paid or declared and set aside for payment for all past dividend periods, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to the Series A Preferred Stock as to dividends and the distribution of assets upon liquidation, dissolution or winding up) shall be declared upon the Common Stock or upon any other stock ranking junior to the Series A Preferred Stock as to dividends and the distribution of assets upon liquidation, dissolution, or winding up, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with the Series A Preferred Stock as to dividends or upon the distribution of assets upon liquidation, dissolution or winding up be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Series A Preferred Stock as to dividends and the distribution of assets upon liquidation, dissolution or winding up). 3. LIQUIDATION PREFERENCES. ----------------------- (a) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders an amount equal to $400.00 per share plus an amount Ex. B-2 43 equal to any accrued and unpaid dividends thereon to and including the date of such distribution, and no more, before any distribution shall be made to the holders of Common Stock or any other class of stock of the Corporation ranking junior to the Series A Preferred Stock as to the distribution of assets. After payment of such liquidating distributions, the holders of shares of Series A Preferred Stock will not be entitled to any further participation in any distribution of assets by the Corporation. (b) In the event the assets of the Corporation available for distribution to stockholders upon any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full the amounts payable with respect to the Series A Preferred Stock and any other shares of Preferred Stock ranking on a parity with the Series A Preferred Stock as to the distribution of assets, the holders of Series A Preferred Stock and the holders of such other Preferred Stock shall share ratably in any distribution of assets of the Corporation in proportion to the full respective preferential amounts to which they are entitled. (c) The merger or consolidation of the Corporation into or with any other corporation, the merger or consolidation of any other corporation into or with the Corporation or the sale of the assets of the Corporation substantially as an entirety shall not be deemed a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of this Section 3. 4. REDEMPTION. ---------- (a) Subject to obtaining the prior approval of the Board of Governors of the Federal Reserve System, the Corporation, at its option, may redeem any or all shares of Series A Preferred Stock, at any time or from time to time, on or after March 1, 1997 at a redemption price of $400.00 per share, plus an amount equal to accrued and unpaid dividends thereon to and including the date of redemption (the "Redemption Price"). (b) If less than all the outstanding shares of Series A Preferred Stock are to be redeemed, the shares to be redeemed shall be selected pro rata as nearly as practicable or by lot, or by such other method as the Board of Directors may determine to be fair and appropriate. (c) Notice of any redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the date fixed for redemption to the holders of record of the shares of Series A Preferred Stock to be redeemed, at their respective addresses appearing on the books of the Corporation. Notice so mailed shall be conclusively presumed to have been duly given whether or not actually received. Such notice shall state: (i) the date fixed for redemption; (ii) the Redemption Price; (iii) that the holder has the right to convert such shares into Common Stock until the close of business on the tenth day preceding the redemption date; (iv) the then- effective conversion price and the place where certificates for such shares may be surrendered for conversion; (v) the number of shares of Series A Preferred Stock to be redeemed and if less than all the shares held by such holder are to be redeemed, the number of such shares to be so redeemed from such holder; (vi) the place where certificates for such shares are to be surrendered for payment of the Redemption Price; and (vii) that after such date fixed for redemption the shares to be redeemed shall not accrue dividends. If such notice is mailed as aforesaid, and if on or before the date fixed for redemption funds sufficient to redeem the shares called for redemption are set aside by the Corporation in trust for the account of the holders of the shares to be redeemed, notwithstanding the fact that any certificate for shares called for redemption shall not have been surrendered for cancellation, on and after the redemption date the shares represented thereby so called for redemption shall be deemed to be no longer outstanding, dividends thereon shall cease to accrue and all rights of the holders of such shares as stockholders of the Corporation shall cease (except the right to receive the Redemption Price, without interest, upon surrender of the certificate representing such shares). Upon surrender in accordance with the aforesaid notice of the certificate for any shares so redeemed (duly endorsed or accompanied by appropriate instruments of Ex. B-3 44 transfer, if so required by the Corporation in such notice), the holders of record of such shares shall be entitled to receive the Redemption Price, without interest. Notwithstanding the foregoing, however, as and to the extent that the Corporation is required or permitted under the abandoned property laws of any jurisdiction to escheat any redemption funds held in trust for the benefit of any holder, the Corporation shall be absolved of any further obligation or liability to such holder to the full extent provided by any such law. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (d) At the option of the Corporation, if notice of redemption is mailed as aforesaid, and if prior to the date fixed for redemption funds sufficient to pay in full the Redemption Price are deposited in trust, for the account of the holders of the shares to be redeemed, with a bank or trust company named in such notice doing business in the State of Kansas, the State of Missouri or the Borough of Manhattan, The City of New York, State of New York, and having capital and surplus of at least $50 million (which bank or trust company also may be the transfer agent and/or paying agent for the Series A Preferred Stock) notwithstanding the fact that any certificate(s) for shares called for redemption shall not have been surrendered for cancellation, on and after such date of deposit the shares represented thereby so called for redemption shall be deemed to be no longer outstanding, and all rights of the holders of such shares as shareholders of the Corporation shall cease, except the right of the holders thereof to convert such shares in accordance with the provisions of Section 5 at any time prior to the close of business on the tenth day preceding the redemption date and the right of the holders thereof to receive out of the funds so deposited in trust the Redemption Price, without interest, upon surrender of the certificate(s) representing such shares. Any funds so deposited with such bank or trust company in respect of shares of Series A Preferred Stock converted before the close of business on the tenth day preceding the redemption date shall be returned to the Corporation upon such conversion. Unless otherwise required by law, any funds so deposited with such bank or trust company which shall remain unclaimed by the holders of shares called for redemption at the end of two years after the redemption date shall be repaid to the Corporation, on demand, and thereafter the holder of any such shares shall look only to the Corporation for the payment, without interest, of the Redemption Price. Notwithstanding the foregoing, however, as and to the extent that the Corporation is required or permitted under the abandoned property laws of any jurisdiction to escheat any redemption funds held in trust for the benefit of any holder, the Corporation shall be absolved of any further obligation or liability to such holder to the full extent provided by any such laws. (e) Any provision of this Section 4 to the contrary notwithstanding, in the event that any quarterly dividend payable on the Series A Preferred Stock shall be in arrears and until all such dividends in arrears shall have been paid or declared and set apart for payment, the Corporation shall not redeem any shares of Series A Preferred Stock unless all outstanding shares of Series A Preferred Stock are simultaneously redeemed and shall not purchase or otherwise acquire any shares of Series A Preferred Stock except in accordance with a purchase or exchange offer made on the same terms to all holders of record of Series A Preferred Stock for the purchase of all outstanding shares thereof. 5. CONVERSION RIGHTS. The holders of shares of Series A ----------------- Preferred Stock shall have the right, at their option, to convert such shares into shares of Common Stock on the following terms and conditions: (a) Shares of Series A Preferred Stock shall be convertible at any time into fully paid and nonassessable shares of Common Stock at a conversion price of $29.00 per share of Common Stock (the "Conversion Price"). For purposes of this Section 5, references to shares of Series A Preferred Stock shall apply equally to fractional shares thereof, but only to the extent that such fractional shares are integral multiples of 1/16 of one share. The Conversion Price shall be subject to adjustment from time to time as hereinafter provided. For purposes of such conversion, each share of Series A Preferred Stock will be valued at $400. No payment or adjustment shall be made on account of any accrued and unpaid dividends on shares of Series A Preferred Stock Ex. B-4 45 surrendered for conversion prior to the record date for the determination of stockholders entitled to such dividends or on account of any dividends on the shares of Common Stock issued upon such conversion subsequent to the record date for the determination of stockholders entitled to such dividends. If any shares of Series A Preferred Stock shall be called for redemption, the right to convert the shares designated for redemption shall terminate at the close of business on the tenth day preceding the date fixed for redemption unless default is made in the payment of the Redemption Price. In the event of default in the payment of the Redemption Price, the right to convert the shares designated for redemption shall terminate at the close of business on the business day immediately preceding the date that such default is cured. (b) In order to convert shares of Series A Preferred Stock into Common Stock, the holder thereof shall surrender the certificates therefor, duly endorsed if the Corporation shall so require, or accompanied by appropriate instruments of transfer satisfactory to the Corporation, at the office of the transfer agent for the Series A Preferred Stock, or at such other office as may be designated by the Corporation, together with written notice that such holder irrevocably elects to convert such shares or any fraction of a share of Series A Preferred Stock having a denominator of 16, each such fractional interest, measured in 1/16 of a share, being valued for purposes of conversion at $25; references in this Section 5 to the conversion of any share of Series A Preferred Stock shall also apply, mutatis ------- mutandis, to such fractional interests. Such notice shall also state - -------- the name and address in which such holder wishes the certificate for the shares of Common Stock issuable upon conversion to be issued. As soon as practicable after receipt of the certificates representing the shares of Series A Preferred Stock to be converted and the notice of election to convert the same, the Corporation shall issue and deliver at said office a certificate for the number of whole shares of Common Stock issuable upon conversion of the shares of Series A Preferred Stock surrendered for conversion, together with a cash payment in lieu of any fraction of a share, as hereinafter provided, to the person entitled to receive the same. If more than one stock certificate for Series A Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares represented by all the certificates so surrendered. Shares of Series A Preferred Stock shall be deemed to have been converted immediately prior to the close of business on the date such shares are surrendered for conversion and notice of election to convert the same is received by the Corporation in accordance with the foregoing provision, and the person entitled to receive the Common Stock issuable upon such conversion shall be deemed for all purposes as the record holder of such Common Stock as of such date. (c) In the case of any share of Series A Preferred Stock which is converted after any record date with respect to the payment of a dividend on the Series A Preferred Stock and on or prior to the date on which such dividend is payable by the Corporation (the "Dividend Due Date"), the dividend due on such Dividend Due Date shall be payable on such Dividend Due Date to the holder of record of such shares as of such preceding record date notwithstanding such conversion. Shares of Series A Preferred Stock surrendered for conversion during the period from the close of business on any record date with respect to the payment of a dividend on the Series A Preferred Stock next preceding any Dividend Due Date to the opening of business on such Dividend Due Date shall (except in the case of shares of Series A Preferred Stock which have been called for redemption on a redemption date within such period) be accompanied by payment in New York Clearing House funds or other funds acceptable to the Corporation of an amount equal to the dividend payable on such Dividend Due Date on the shares of Series A Preferred Stock being surrendered for conversion. The dividend with respect to a share of Series A Preferred Stock called for redemption on a redemption date during the period from the close of business on any record date with respect to the payment of a dividend on the Series A Preferred Stock next preceding any Dividend Due Date to the opening of business on such Dividend Due Date shall be payable on such Dividend Due Date to the holder of record of such share on such dividend record date, notwithstanding the conversion of such share of Series A Preferred Stock after such record date and prior to such Dividend Due Date, and the holder converting such share of Series A Preferred Stock called for redemption need not include a payment of such dividend amount upon surrender of such Ex. B-5 46 share of Series A Preferred Stock for conversion. Except as provided in this subsection, no payment or adjustment shall be made upon any conversion on account of any dividends accrued on shares of Series A Preferred Stock surrendered for conversion or on account of any dividends on the shares of Common Stock issued upon conversion. (d) No fractional shares of Common Stock shall be issued upon conversion of any shares of Series A Preferred Stock. If more than one share of Series A Preferred Stock is surrendered at one time by the same holder, the number of full shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares so surrendered. If the conversion of any shares of Series A Preferred Stock results in a fractional share of Common Stock, the Corporation shall pay cash in lieu thereof in an amount equal to such fraction multiplied by the closing price, determined as provided in subsection (vi) of Section 5(e) below, on the date on which the shares of Series A Preferred Stock were duly surrendered for conversion, or if such date is not a trading date, on the next succeeding trading date. (e) The Conversion Price shall be adjusted from time to time as follows: (i) In case the Corporation shall pay or make a dividend or other distribution on shares of Common Stock in Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For purposes of this subsection, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Corporation. (ii) In case the Corporation shall issue additional rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the then current market price per share (determined as provided in subsection (vi) below) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights or warrants (other than pursuant to a dividend reinvestment plan), the Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price (determined as provided in subsection (vi) below) and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subsection (ii), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation will not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Corporation during the period so held. Ex. B-6 47 (iii) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (iv) In case the Corporation shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness or assets (including securities, but excluding (1) any rights or warrants referred to in subsection (ii) above, (2) any dividend or distribution paid in cash out of the retained earnings of the Corporation and (3) any dividend or distribution referred to in subsection (i) above), the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be the current market price per share (determined as provided in subsection (vi) below) of the Common Stock on the date fixed for such determination less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive and shall be described in a statement filed with the transfer agent for the Series A Preferred Stock) of the portion of the evidences of indebtedness or assets so distributed applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. (v) For the purposes of this Section 5, the reclassification of Common Stock into securities including securities other than Common Stock (other than any reclassification upon a consolidation or merger to which Section 5(g) below applies) shall be deemed to involve (A) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and the "date fixed for such determination" within the meaning of subsection (iv) above), and (B) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision became effective" or "the day upon which such combination becomes effective" as the case may be, and "the day upon which such subdivision or combination becomes effective" within the meaning of subsection (iii) above). (vi) For the purpose of any computation under subsections (ii) and (iv) above, the current market price per share of Common Stock on any day shall be deemed to be the average of the daily closing prices for the 30 consecutive trading days commencing 45 trading days before the day in question. The closing price for each day shall be the reported last sale price or, in case no such reported sale takes place on such day, the average of the reported closing bid and asking prices, in either case on the National Association of Securities Dealers Automated Quotations National Market System or, if the Common Stock is no longer quoted to trading on such system, on the principal national securities exchange on which the Common Stock is then listed or admitted to trading or, if the Common Stock is not quoted on such National Market System or listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose. Ex. B-7 48 (vii) Notwithstanding the foregoing, no adjustment in the Conversion Price for the Series A Preferred Shares shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any -------- ------- adjustments which by reason of this subsection (vii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section shall be made to the nearest cent or to the nearest one- hundredth of a share, as the case may be. (f) Whenever the Conversion Price shall be adjusted as herein provided (i) the Corporation shall forthwith make available at the office of the transfer agent for the Series A Preferred Stock a statement describing in reasonable detail the adjustment, the facts requiring such adjustment and the method of calculation used; and (ii) the Corporation shall cause to be mailed by first class mail, postage prepaid, as soon as practicable to each holder of record of shares of Series A Preferred Stock a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price. (g) In the event of any consolidation of the Corporation with or merger of the Corporation into any other corporation (other than a merger in which the Corporation is the surviving corporation) or a sale, lease or conveyance of the assets of the Corporation as an entirety or substantially as an entirety, or any statutory exchange of securities with another corporation, the holder of each share of Series A Preferred Stock shall have the right, after such consolidation, merger, sale or exchange to convert such share into the number and kind of shares of stock or other securities and the amount and kind of property which such holder would have been entitled to receive upon such consolidation, merger, sale or exchange of the number of shares of Common Stock that would have been issued to such holder had such shares of Series A Preferred Stock been converted immediately prior to such consolidation, merger or sale. The provisions of this Section 5(g) shall similarly apply to successive consolidations, mergers, sales or exchanges. (h) The Corporation shall pay any taxes that may be payable in respect of the issuance of shares of Common Stock upon conversion of shares of Series A Preferred Stock, but the Corporation shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance of shares of Common Stock in the name other than that in which the shares of Series A Preferred Stock so converted are registered, and the Corporation shall not be required to issue or deliver any such shares unless and until the person requesting such issuance shall have paid to the Corporation the amount of any such taxes, or shall have established to the satisfaction of the Corporation that such taxes have been paid. (i) The Corporation may (but shall not be required to) make such reductions in the Conversion Price, in addition to those required by subsections (i) through (iv) of Section 5(e) above, as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (j) The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock the full number of shares of Common Stock issuable upon the conversion of all shares of Series A Preferred Stock then outstanding. (k) In the event that: (i) the Corporation shall declare a dividend or any other distribution on its Common Stock, payable otherwise than in cash out of retained earnings; or Ex. B-8 49 (ii) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (iii) any capital reorganization of the Corporation, reclassification of the capital stock of the Corporation, consolidation or merger of the Corporation with or into another corporation (other than a merger in which the Corporation is the surviving corporation), or sale, lease or conveyance of the assets of the Corporation as an entirety or substantially as an entirety to another corporation occurs; or (iv) the voluntary or involuntary dissolution, liquidation or winding up of the Corporation occurs, the Corporation shall cause to be mailed to the holders of record of Series A Preferred Stock at least 15 days prior to the applicable date hereinafter specified a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution of rights or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined or (y) the date on which such reorganization, reclassification, consolidation, merger, sale, lease, conveyance, dissolution, liquidation or winding up is expected to take place, and the date, if any is to be fixed, as of which holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, lease, conveyance, dissolution, liquidation or winding up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reorganization, reclassification, consolidation, merger, sale, lease, conveyance, dissolution, liquidation or winding up. 6. VOTING RIGHTS. Other than as required by applicable law, the ------------- Series A Preferred Stock shall not have any voting powers either general or special, except that: (a) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series A Preferred Stock, and any one or more other series of preferred stock of the Corporation similarly affected, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of the Series A Preferred Stock and any such other series of preferred stock shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Restated Articles of Incorporation, as amended, or of any amendment or supplement thereto (including any certificate of designation or any similar document relating to any series of preferred stock) of the Corporation, which would adversely affect the preferences, rights, powers or privileges, qualifications, limitations and restrictions of the Series A Preferred Stock. (b) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series A Preferred Stock and any other series of preferred stock of the Corporation ranking on a parity with shares of the Series A Preferred Stock, either as to dividends or the distribution of assets upon liquidation, dissolution or winding up, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of the Series A Preferred Stock and any such other series of preferred stock of the Corporation shall vote together as a single class without regard to series, shall be necessary to create, authorize or issue, or reclassify any authorized stock of the Corporation into, or create, authorize or issue any obligation or security convertible into or evidencing a right to purchase, any shares of any class of stock of the Corporation ranking prior to the Series A Preferred Stock or ranking prior to any other series of preferred stock of the Corporation which ranks on a parity with the Series A Preferred Stock as to dividends or upon the distribution of assets upon liquidation, dissolution or winding up. Subject to the foregoing, the Corporation's Restated Articles Ex. B-9 50 of Incorporation, as amended, may be amended to increase the number of authorized shares of preferred stock without the vote of the holders of preferred stock, including the Series A Preferred Stock. (c) Whenever, at any time or times, dividends payable on the shares of Series A Preferred Stock shall be in arrears in an amount equal to at least six full quarterly dividends on shares of the Series A Preferred Stock at the time outstanding, the holders of the outstanding shares of Series A Preferred Stock shall have the exclusive right, voting separately as a class together with holders of shares of any one or more other series of preferred stock ranking on a parity with the Series A Preferred Stock either as to dividends or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable, to elect two directors of the Corporation for one-year terms at the Corporation's next annual meeting of stockholders and at each subsequent annual meeting of stockholders. At elections for such directors, each holder of Series A Preferred Stock shall be entitled to one vote for each share held (the holders of shares of any other series of preferred stock ranking on such a parity being entitled to such number of votes, if any, for each share of stock held as may be granted to them). Upon the vesting of such right of the holders of Series A Preferred Stock, the maximum authorized number of members of the Board of Directors shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of the outstanding shares of Series A Preferred Stock (either alone or together with the holders of shares of any one or more other series of preferred stock ranking on such a parity) as hereinafter set forth. The right of the holders of Series A Preferred Stock, voting separately as a class to elect (either alone or together with the holders of shares of any one or more other series of preferred stock ranking on such a parity) members of the Board of Directors of the Corporation as aforesaid shall continue until such time as all dividends accumulated on the Series A Preferred Stock shall have been paid in full or declared and set apart for payment, at which time such right shall immediately terminate, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned. (d) Upon termination of such special voting rights attributable to all holders of the Series A Preferred Stock and any other series or preferred stock ranking on a parity with the Series A Preferred Stock as to dividends or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable, the term of office of each director elected by the holders of shares of Series A Preferred Stock and such parity preferred stock (a "Preferred Stock Director") pursuant to such special voting rights shall immediately terminate and the number of directors constituting the entire Board of Directors shall be reduced by the number of Preferred Stock Directors. Any Preferred Stock Director may be removed by, and shall not be removed otherwise than by, the vote of the holders of record of a majority of the outstanding shares of Series A Preferred Stock and all other series of preferred stock ranking on a parity with the Series A Preferred Stock with respect to dividends who were entitled to participate in such Preferred Stock Director's election, voting as a separate class, at a meeting called for such purposes. If the office of any Preferred Stock Director becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, the remaining Preferred Stock Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred. 7. REACQUIRED SHARES. Shares of Series A Preferred Stock ----------------- converted, redeemed, or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of Series A Preferred Stock without designation as to series. 8. RANKING. Any class or classes of stock of the Corporation ------- shall be deemed to rank: (i) prior to the Series A Preferred Stock, as to dividends or as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class shall be entitled to the receipt of dividends Ex. B-10 51 or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of the Series A Preferred Stock; (ii) on a parity with the Series A Preferred Stock, as to dividends or as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Series A Preferred Stock, if the holders of such class of stock and the Series A Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation prices, without preference or priority one over the other; and (iii) junior to the Series A Preferred Stock, as to dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such stock shall be Common Stock or if the holders of Series A Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such stock. 9. NO SINKING FUND. Shares of Series A Preferred Stock are not --------------- subject to the operation of a sinking fund or other obligation of the Corporation to redeem or retire the Series A Preferred Stock. FURTHER RESOLVED, that the officers of the Corporation, and each of them, are hereby authorized, for and on behalf of and in the name of the Corporation, to file a copy of the foregoing resolution with the Secretary of State of the State of Missouri in accordance with the provisions of Section 381.180 of The General and Business Corporation Law of Missouri. IN WITNESS WHEREOF, BOATMEN'S BANCSHARES, INC. has caused this Certificate of Designation to be signed by Andrew B. Craig III, its Chairman of the Board and Chief Executive Officer, and attested by David L. Foulk, its Secretary, this ---- day of January, 1996. BOATMEN'S BANCSHARES, INC. By: ----------------------------- Andrew B. Craig III Chairman of the Board and Chief Executive Officer Attest: ------------------------ David L. Foulk Secretary Ex. B-11 52 ACKNOWLEDGMENT -------------- STATE OF MISSOURI ) ) ss. CITY OF ST. LOUIS ) I do hereby certify that on this ------- day of January, 1996, before me, a Notary Public within and for the City and State aforesaid, came Andrew B. Craig III, Chairman of the Board and Chief Executive Officer, and David L. Foulk, Secretary, of Boatmen's Bancshares, Inc., a Missouri corporation, who are personally known to me and known to me to be the same persons who executed the foregoing Certificate of Designation as Chairman of the Board and Chief Executive Officer and Secretary, and said persons duly acknowledged to me their execution of the same as and for their free and voluntary act and deed, for the uses and purposes therein set forth. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal at St. Louis, Missouri, the day, month, and year last above written. ---------------------------------------- Notary Public My Appointment Expires: - -------------------------- Ex. B-12 53 EXHIBIT C --------- FORM OF DEPOSITARY RECEIPTS NUMBER - ---------------------- ------------- DEPOSITARY RECEIPT FOR DEPOSITARY SHARES DEPOSITARY DR EACH REPRESENTING 1/16 OF A SHARE OF CUMULATIVE SHARES CONVERTIBLE PREFERRED STOCK, SERIES A - ---------------------- $100 STATED VALUE ------------- SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP 096650 40 3 BOATMEN'S BANCSHARES, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF MISSOURI Boatmen's Trust Company, a corporation duly organized and existing under the laws of the State of Missouri, as Depositary (the "Depositary") hereby certifies that is the registered owner of Depositary Shares ("Depositary Shares"), each Depositary Share representing one one-sixteenth (1/16) of a share of Class A Cumulative Convertible Preferred Stock, Series A, $100 stated value (the "Stock"), of Boatmen's Bancshares, Inc., a corporation duly organized and existing under the laws of the State of Missouri (the "Corporation"). Subject to the terms of a Deposit Agreement (the "Deposit Agreement"), as amended, among the Depositary, the Corporation and holders of receipts for Depositary Shares ("Receipts"), each owner of a Depositary Share is entitled, proportionately, to all the powers, preferences and rights and the qualifications, limitations or restrictions of such preferences and/or rights of the Stock represented thereby including dividends, voting, conversion, redemption and liquidation rights as set forth in the Restated Articles of Incorporation of the Corporation as amended and supplemented by the Certificate of Designation (the "Certificate of Designation") fixing the terms of Stock filed with the Secretary of State of the State of Missouri. The Depositary will furnish without charge to any registered owner of Depositary Shares who so requests copies of the Restated Articles of Incorporation of the Corporation, Deposit Agreement and Certificate of Designation. This Receipt shall not be valid or obligatory for any purpose, nor shall the holder be entitled to any benefits under the Deposit Agreement, unless this Receipt shall have been executed manually or by facsimile, or, if a Registrar for the Receipts (other than the Depositary) shall have been appointed, by manual or facsimile signature by the Depositary of a duly authorized officer thereof, and if executed by facsimile signature of the Depositary, shall have been countersigned manually by such Registrar by signature of a duly authorized officer thereof. BOATMEN'S TRUST COMPANY Depositary, Transfer Agent and Registrar ------------------------------------------------- Authorized Signature Ex. C-1 54 The Depositary will furnish without charge to any registered owner of Depositary Shares who so requests, copies of the Restated Articles of Incorporation of the Corporation, Deposit Agreement and Certificate of Designation. Any such request should be addressed to the Depositary. The following abbreviations, when used in the inscription on the face of this Receipt, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - -------- Custodian ------------ (Cust) (Minor) under Uniform Gifts to Minors Act ---------------------------------- (State) Additional abbreviations may also be used though not in the above list. NOTICE OF CONVERSION The undersigned holder of this Receipt for Depositary Shares hereby irrevocably exercises the option to convert that number of shares of Stock of the Corporation, represented by ----------------- Depositary Shares, into shares of common stock, $1.00 par value, of the Corporation ("Common Stock") in accordance with the terms of and subject to the conditions of such Stock, including the Certificate of Designation in respect thereof and the Deposit Agreement, and directs that the Common Stock deliverable upon such conversion be registered in the name of and delivered together with a check in payment for any fractional shares of Common Stock to the undersigned unless a different name has been indicated below. If the shares of Common Stock are to be registered in the name of a person other than the undersigned, the undersigned will pay all transfer and similar taxes payable with respect thereto. If the number of shares of such Stock represented by the number of Depositary Shares set forth above is less than the number of shares of such Stock on deposit in respect of this Receipt, the undersigned directs that the Depositary issue to the undersigned, unless a different name is indicated below, a new Receipt evidencing Depositary Shares for the balance of such Stock not being converted. Dated: -------------------------------- NAME: --------------------------------- ADDRESS: ------------------------------ Signature: ----------------------- (Please print name and address Note: The signature in this Notice of Registered Holder) of Conversion must correspond with the name as written upon the face of this Receipt in every particular, without alteration or enlargement, or any change whatever. NAME: --------------------------------- ADDRESS: ------------------------------ (Please indicate other delivery instructions if applicable) ASSIGNMENT For value received, ------------------------------- the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - --------------------------------------- - --------------------------------------- - ------------------------------------------------------------------------------- the within Receipt, and all rights and interests represented by the Depositary Shares evidenced thereby, and hereby irrevocably constitutes and appoints - ------------------------------------------------------------------, his attorney, to transfer the said Depositary Shares on the books of the within-named Depositary, with full power of substitution in the premises. Dated: -------------------------------- Signature: ----------------------- Note: The signature in this Assignment must correspond with the names as written upon the fact of this Receipt in every particular, without alteration or enlargement, or change whatever. EX. C-2 EX-10.(A) 5 EMPLOYMENT AGREEMENT FOR ANDREW B. CRAIG, III 1 Exhibit 10(a) EMPLOYMENT AGREEMENT FOR Andrew B. Craig, III Boatmen's Bancshares, Inc. January 30, 1996 2 BOATMEN'S BANCSHARES, INC. EMPLOYMENT AGREEMENT FOR ANDREW B. CRAIG, III This EMPLOYMENT AGREEMENT is made, entered into, and is effective, pursuant to Compensation Committee approval and ratification by the Board of Directors, as of January 30, 1996 (the "Effective Date"), by and between Boatmen's Bancshares, Inc., a Missouri corporation, (the "Company"), and Andrew B. Craig, III, (the "Executive"). WHEREAS, the Executive is presently employed by the Company in the capacity of Chairman and Chief Executive Officer; and WHEREAS, the Executive possesses considerable experience and an intimate knowledge of the business and affairs of the Company, its policies, methods, personnel, and operations; and WHEREAS, the Company recognizes that the Executive's contributions have been substantial and meritorious and, as such, the Executive has demonstrated unique qualifications to act in an executive capacity for the Company; and WHEREAS, the Company is desirous of assuring the continued employment of the Executive in the above stated capacities, and Executive is desirous of having such assurance; NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: ARTICLE 1. TERM OF EMPLOYMENT The Company hereby agrees to employ the Executive and the Executive hereby agrees to continue to serve the Company, in accordance with the terms and conditions set forth herein, for an initial period of three (3) years, commencing as of the Effective Date of this Agreement, as indicated above; subject, however, to earlier termination as expressly provided herein. The initial three (3) year period of employment automatically shall be extended for one (1) additional year at the end of the initial three (3) year term, and then again after each successive year thereafter. However, either party may terminate this Agreement at the end of the initial three (3) year period, or at the end of any successive one (1) year term thereafter, by giving the other party written notice of intent not to renew, delivered at least three (3) months prior to the end of such initial period or successive term. In the event such notice of intent not to renew is properly delivered, this Agreement, along with all corresponding rights, duties, and covenants, automatically shall expire at the end of the initial period or successive term then in progress. However, regardless of the above, if at any time during the initial period of employment, or successive term, a Change in Control of the Company occurs (as defined in Article 7 herein), then this Agreement shall become immediately irrevocable for the longer of: (a) two (2) years following the effective date of such Change in Control; or (b) until all obligations of the Company hereunder have been fulfilled, and until all benefits provided hereunder have been paid. 3 ARTICLE 2. POSITION AND RESPONSIBILITIES During the term of this Agreement, the Executive agrees to serve as Chairman and Chief Executive Officer of the Company. In his capacity as Chairman and Chief Executive Officer of the Company, the Executive shall report directly to the Board of Directors, and shall maintain the level of duties and responsibilities as in effect as of the Effective Date, or such higher level of duties and responsibilities as he may be assigned during the term of this Agreement. The Executive shall have the same status, privileges, and responsibilities normally inherent in such capacities in financial institutions of similar size and character. ARTICLE 3. STANDARD OF CARE During the term of this Agreement, the Executive agrees to devote substantially his full time, attention, and energies to the Company's business and shall not be engaged in any other business activity, whether or not such business activity is pursued for gain, profit, or other pecuniary advantage. However, subject to Article 9 herein, the Executive may serve as a director of other companies so long as such service is not injurious to the Company. The Executive covenants, warrants, and represents that he shall: (a) Devote his full and best efforts to the fulfillment of his employment obligations; and (b) Exercise the highest degree of loyalty and the highest standards of conduct in the performance of his duties. This Article 3 shall not be construed as preventing the Executive from investing assets in such form or manner as will not require his services in the daily operations of the affairs of the companies in which such investments are made. ARTICLE 4. COMPENSATION As remuneration for all services to be rendered by the Executive during the term of this Agreement, and as consideration for complying with the covenants herein, the Company shall pay and provide to the Executive the following: 4.1 BASE SALARY. The Company shall pay the Executive a Base Salary in an amount which shall be established from time to time by the Board of Directors of the Company or the Board's designee; provided, however, that such Base Salary shall not be less than Seven Hundred Fifty Thousand Dollars ($750,000.00) per year. This Base Salary shall be paid to the Executive in equal bimonthly installments throughout the year, consistent with the normal payroll practices of the Company. The annual Base Salary shall be reviewed at least annually following the Effective Date of this Agreement, while this Agreement is in force, to ascertain whether, in the judgment of the Board or the Board's designee, such Base Salary should be increased, based primarily on the performance of the Executive during the year and on the then current rate of inflation. If so increased, the Base Salary as stated above shall, likewise, be increased for all purposes of this Agreement. 4.2 ANNUAL BONUS. In addition to his salary, the Executive shall be entitled to participate in the Company's short-term incentive program, as such program may exist from time to time, at a level 2 4 commensurate with the Executive's position with the Company, as determined at the sole discretion of the Compensation Committee. 4.3 LONG-TERM INCENTIVES. The Executive shall be eligible to participate in the Company's 1996 Stock Incentive Plan, as such shall be amended or superseded from time to time, at a level commensurate with the Executive's position, as determined at the sole discretion of the Compensation Committee. 4.4 RETIREMENT BENEFITS. The Company shall provide to the Executive participation in all Company qualified defined benefit and defined contribution retirement plans, subject to the eligibility and participation requirements of such plans. The Executive's retirement benefits shall not be less than those that would be provided him under the terms of the Boatmen's Bancshares, Inc. Retirement Plan for Employees and the Boatmen's Supplemental Retirement Plan in effect as of the Effective Date, or as such benefits shall be increased, whether or not such benefits shall be decreased or eliminated. The obligations of the Company pursuant to this Section 4.4 shall survive the termination of this Agreement. 4.5 EMPLOYEE BENEFITS. The Company shall provide to the Executive all benefits to which other executives and employees of the Company are entitled, as commensurate with the Executive's position, subject to the eligibility requirements and other provisions of such arrangements. Such benefits shall include, but shall not be limited to, group term life insurance, comprehensive health and major medical insurance, dental and life insurance, and short-term and long-term disability. 4.6 PERQUISITES. The Company shall provide to the Executive, at the Company's cost, all perquisites which are suitable to the character of Executive's position with the Company and adequate for the performance of his duties hereunder. 4.7 RIGHT TO CHANGE PLANS. By reason of Sections 4.5 and 4.6 herein, the Company shall not be obligated to institute, maintain, or refrain from changing, amending, or discontinuing any benefit plan, or perquisite, so long as such changes are similarly applicable to executive employees generally. ARTICLE 5. EXPENSES The Company shall pay or reimburse the Executive for all ordinary and necessary expenses, in a reasonable amount, which the Executive incurs in performing his duties under this Agreement including, but not limited to, travel, entertainment, professional dues and subscriptions, and all dues, fees, and expenses associated with membership in various professional, business, and civic associations and societies in which the Executive's participation is in the best interest of the Company. ARTICLE 6. EMPLOYMENT TERMINATIONS 6.1 TERMINATION DUE TO RETIREMENT OR DEATH. In the event the Executive's employment is terminated while this Agreement is in force by reason of retirement (as defined or provided for under the then established rules of the Company's tax-qualified retirement plan), or death, the Executive's benefits shall be determined in accordance with the Company's retirement, survivor's benefits, insurance, and other applicable programs of the Company then in effect (provided, however, that such benefits shall be no less than those set forth in Section 4.4 herein) and, upon the effective date of such termination, the Company's obligation under this Agreement to provide to the Executive the elements of pay described in Sections 4.1, 3 5 4.2, and 4.3 shall immediately expire; provided, however, that the Executive shall receive all rights and benefits that he is vested in, pursuant to the Plan or Plans described in Section 4.3 herein and other plans and programs of the Company; and provided further, however, that any retirement during the periods set forth in Section 7.1 herein shall be subject to the provisions of Article 7 herein. 6.2 TERMINATION DUE TO DISABILITY. In the event that the Executive becomes Disabled (as defined below) during the term of this Agreement and is, therefore, unable to perform his duties herein for more than one hundred eighty (180) total calendar days during any period of twelve (12) consecutive months, or in the event of the Board's reasonable expectation that the Executive's Disability will exist for more than a period of one hundred eighty (180) calendar days, the Company shall have the right to terminate the Executive's active employment as provided in this Agreement. However, the Board shall deliver written notice to the Executive of the Company's intent to terminate for Disability at least thirty (30) calendar days prior to the effective date of such termination. A termination for Disability shall become effective upon the end of the thirty (30) day notice period. Upon such effective date, the Company's obligation to provide to the Executive the elements of pay described in Sections 4.1, 4.2, and 4.3 shall immediately expire; provided, however, that the Executive shall receive all rights and benefits that he is vested in, pursuant the plan or plans described in Section 4.3 herein and to other plans and programs of the Company. The term "Disability" shall mean, for all purposes of this Agreement, the incapacity of the Executive, due to injury, illness, disease, or bodily or mental infirmity, to engage in the performance of substantially all of the usual duties of employment with the Company as contemplated by Article 2 herein, such Disability to be determined by the Board of Directors of the Company upon receipt of and in reliance on competent medical advice from one (1) or more individuals, selected by the Board, who are qualified to give such professional medical advice. It is expressly understood that the Disability of the Executive for a period of one hundred eighty (180) calendar days or less in the aggregate during any period of twelve (12) consecutive months, in the absence of any reasonable expectation that his Disability will exist for more than such a period of time, shall not constitute a failure by him to perform his duties hereunder and shall not be deemed a breach or default and the Executive shall receive full compensation for any such period of Disability or for any other temporary illness or incapacity during the term of this Agreement. 6.3 VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may terminate this Agreement at any time by giving the Board of Directors of the Company written notice of intent to terminate, delivered at least three (3) months prior to the effective date of such termination. Upon the effective date of such termination, following the expiration of the three (3) months notice period, the Company shall pay the Executive his full Base Salary, at the rate then in effect as provided in Section 4.1 herein, through the effective date of termination, plus all other benefits to which the Executive has a vested right at that time. In the event that the terms and provisions of Article 7 herein do not apply to such termination, the Company and the Executive thereafter shall have no further obligations under this Agreement except as provided in Section 4.4 and Article 9 herein. However, in the event the terms and provisions of Article 7 herein apply, the payments and benefits set forth therein shall apply. 4 6 6.4 INVOLUNTARY TERMINATION BY THE COMPANY WITHOUT CAUSE. At all times prior to six (6) full calendar months before the effective date of a Change in Control, or at any time more than two (2) years after the effective date of a Change in Control, the Board may terminate the Executive's employment, as provided under this Agreement, at any time, for reasons other than death or Disability, or for Cause, by notifying the Executive in writing of the Company's intent to terminate, at least thirty (30) calendar days prior the effective date of such termination. Upon the effective date of such termination, following the expiration of the thirty (30) day notice period, the Company shall pay to the Executive a lump-sum cash payment equal to the greater of: (a) the Base Salary then in effect for the remaining term of this Agreement (assuming no additional extensions of this Agreement's term beyond that in effect as of the effective date of termination), together with continuation of health and welfare benefits for the remaining term of this Agreement; or (b) one (1) full year of his Base Salary in effect as of the effective date of termination, plus a one (1) year continuation of health and welfare benefits. Further, the Company shall pay the Executive all other benefits to which the Executive has a vested right at the time, according to the provisions of the governing plan or program. The Company and the Executive thereafter shall have no further obligations under this Agreement except as provided in Section 4.4 and Article 9 herein. If the Executive's employment is terminated during the periods set forth in Section 7.1 herein, the Executive shall be entitled to receive the benefits provided in Section 7.1 herein in lieu of the benefits set forth in this Section 6.4. 6.5 TERMINATION FOR CAUSE. Nothing in this Agreement shall be construed to prevent the Board from terminating the Executive's employment under this Agreement for "Cause." "Cause" shall be defined as conduct of the Executive which is finally adjudged to be knowingly fraudulent, deliberately dishonest or willful misconduct. The Company's Board of Directors, by majority vote, shall make the determination of whether Cause exists, after providing the Executive with notice of the reasons the Board believes Cause may exist and after giving the Executive the opportunity to respond to the allegation that Cause exists. In the event this Agreement is terminated by the Board for Cause, the Company shall pay the Executive his Base Salary through the effective date of the employment termination and the Executive shall immediately thereafter forfeit all rights and benefits (other than vested benefits) he would otherwise have been entitled to receive under this Agreement. The Company and the Executive thereafter shall have no further obligations under this Agreement except as provided in Article 9 herein. 6.6 TERMINATION FOR GOOD REASON. At any time during the term of this Agreement, the Executive may terminate this Agreement for Good Reason (as defined below) by giving the Board of Directors of the Company thirty (30) calendar days written notice of intent to terminate, which notice sets forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination. Upon the expiration of the thirty (30) day notice period, the Good Reason termination shall become effective, and the Company shall pay and provide to the Executive the benefits set forth in this Section 6.6 (or, in the event of termination for Good Reason within the six (6) full calendar month period prior to the 5 7 effective date of a Change in Control, or within two (2) years following the effective date of a Change in Control, the benefits set forth in Section 7.1 herein). Good Reason shall mean, without the Executive's express written consent, the occurrence of any one or more of the following: (a) The assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including offices, titles, and reporting requirements) as an officer of the Company, or a reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from those in effect during the immediately preceding fiscal year; (b) Without the Executive's consent, the Company's requiring the Executive to be based at a location which is at least fifty (50) miles further from the Executive's primary residence at the time such requirement is imposed than is such residence from the Company's office at which the Executive is primarily rendering services at such time, except for required travel on the Company's business to an extent substantially consistent with the Executive's business obligations as of the Effective Date; (c) A reduction by the Company in the Executive's Base Salary as in effect on the Effective Date, as provided in Section 4.1 herein, or as the same shall be increased from time to time; (d) A material reduction in the Executive's level of participation in any of the Company's short- and/or long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or arrangements in which the Executive participates as of the Effective Date; provided, however, that reductions in the levels of participation in any such plans shall not be deemed to be "Good Reason" if the Executive's reduced level of participation in each such program remains substantially consistent with the average level of participation of other executives who have positions commensurate with the Executive's position; or (e) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Section 10.1 herein. Upon a termination of the Executive's employment for Good Reason at any time other than the six (6) full calendar month period prior to the effective date of a Change in Control, or the two (2) years period following the effective date of a Change in Control, the Executive shall be entitled to receive the same payments and benefits as he is entitled to receive following an involuntary termination of his employment by the Company without Cause, as specified in Section 6.4 herein. The payment of Base Salary and pro rata Bonus shall be made to the Executive within thirty (30) calendar days following the effective date of employment termination. Upon a termination for Good Reason within the six (6) full calendar month period prior to the effective date of a Change in Control, or within the two (2) years following the effective date of a Change in Control, the Executive shall be entitled to receive the payments and benefits set forth in Section 7.1 herein in lieu of those set forth in this Section 6.6. The Executive's right to terminate employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued employment shall not 6 8 constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason herein. ARTICLE 7. CHANGE IN CONTROL 7.1 EMPLOYMENT TERMINATIONS IN CONNECTION WITH A CHANGE IN CONTROL. In the event of a Qualifying Termination (as defined below) within six (6) full calendar months prior to the effective date of a Change in Control, or within two years following the effective date of a Change in Control, then in lieu of all other benefits provided to the Executive under the provisions of this Agreement (other than the first sentence of Section 4.4 herein and without derogation of his rights to receive vested benefits under the Company's Amended 1982 Long Term Incentive Plan and the plan or plans described in Section 4.3 herein), the Company shall pay to the Executive and provide him with the following severance benefits (hereinafter referred to as the "Severance Benefits"): (a) An amount equal to three (3) times the highest rate of the Executive's annualized Base Salary rate in effect at any time up to and including the effective date of termination; (b) An amount equal to three (3) times the greater of: (i) the Executive's average annual bonus earned over the three (3) fiscal years prior to the Change in Control (whether or not deferred); or (ii) the Executive's target bonus established for the fiscal year in which the Executive's effective date of termination occurs; (c) An amount equal to the Executive's unpaid Base Salary and accrued vacation pay through the effective date of termination; (d) A continuation of the welfare benefits of medical insurance, dental insurance, and life insurance for three (3) full years after the effective date of termination. These benefits shall be provided to the Executive at the same premium cost, and at the same coverage level, as in effect as of the Executive's effective date of termination. However, in the event the premium cost and/or level of coverage shall change for all employees of the Company, the cost and/or coverage level, likewise, shall change for the Executive in a corresponding manner. The continuation of these welfare benefits shall be discontinued prior to the end of the three (3) year period in the event the Executive has available substantially similar benefits from a subsequent employer, as determined by the Company's Board of Directors or the Board's designee. (e) A lump-sum cash payment of the actuarial present value equivalent of the aggregate benefits accrued by the Executive as of the effective date of termination under the terms of any and all supplemental retirement plans in which the Executive participates (subject to the provisions of the second sentence of Section 4.4 herein). For this purpose, such benefits shall be calculated under the assumption that the Executive's employment continued following the effective date of termination for three (3) full years (i.e., three (3) additional years of age and service credits shall be added); provided, however, that for purposes of determining "final average pay" under such programs, the Executive's actual pay history as of the effective date of termination shall be used. 7 9 (f) A lump-sum cash payment of the entire balance of the Executive's compensation which has been deferred under the Company's nonqualified deferred compensation plan(s) together with all interest that has been credited with respect to such deferred compensation balance. For purposes of this Article 7, a Qualifying Termination shall mean any termination of the Executive's employment OTHER THAN: (1) by the Company for Cause (as provided in Section 6.5 herein); (2) by reason of death, Disability (as provided in Section 6.2 herein), or voluntary retirement; provided, however, that a termination which qualifies as a retirement and which occurs within the thirty (30) day period described in clause (3) of this Section 7.1 below will be deemed to be a Qualifying Termination); or (3) by the Executive without Good Reason (as provided in Section 6.6 herein, but specifically excluding voluntary terminations within the period beginning on the first anniversary of the effective date of the Change in Control and ending thirty (30) days after such date--i.e., any voluntary termination by the Executive within such period shall be deemed to be a Qualifying Termination). 7.2 DEFINITION OF "CHANGE IN CONTROL". A Change in Control of the Company shall be deemed to have occurred as of the first day any one or more of the following conditions shall have been satisfied: (a) Any individual, corporation (other than the Company), partnership, trust, association, pool, syndicate, or any other entity or any group of persons acting in concert becomes the beneficial owner, as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, of securities of the Company possessing twenty percent (20%) or more of the voting power for the election of directors of the Company; (b) There shall be consummated any consolidation, merger, or other business combination involving the Company or the securities of the Company in which holders of voting securities of the Company immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of the Company (or, if the Company does not survive such transaction, voting securities of the corporation surviving such transaction) having less than sixty percent (60%) of the total voting power in an election of directors of the Company (or such other surviving corporation); (c) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company's shareholders, of each new director of the Company was approved by a vote of at least two-thirds (2/3) of the directors of the Company then still in office who were directors of the Company at the beginning of any such period; or (d) There shall be consummated any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company (on a consolidated basis) to a party which is not controlled by or under common control with the Company. 8 10 7.3 EXCISE TAX EQUALIZATION PAYMENT. In the event that the Executive becomes entitled to Severance Benefits or any other payment or benefit under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), if any of the Total Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to the Executive in cash an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax upon the Total Payments and any Federal, state and local income tax and Excise Tax upon the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA), shall be equal to the Total Payments. Such payment shall be made by the Company to the Executive as soon as practical following the effective date of termination, but in no event beyond thirty (30) days from such date. 7.4 TAX COMPUTATION. For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amounts of such Excise Tax: (a) Any other payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company, or with any person (which shall have the meaning set forth in Section 3(a)(9) of the Securities Exchange Act of 1934, including a "group" as defined in Section 13(d) therein) whose actions result in a Change in Control of the Company or any person affiliated with the Company or such persons) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel as supported by the Company's independent auditors and acceptable to the Executive, such other payments or benefits (in whole or in part) do not constitute parachute payments, or unless such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; (b) The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of: (i) the total amount of the Total Payments; or (ii) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (a) above); and (c) The value of any noncash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the effective date of termination, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. 9 11 7.5 SUBSEQUENT RECALCULATION. In the event the Internal Revenue Service adjusts the computation of the Company under Section 7.4 herein so that the Executive did not receive the greatest net benefit, the Company shall reimburse the Executive for the full amount necessary to make the Executive whole, plus a market rate of interest, as determined by the Committee. ARTICLE 8. OUTPLACEMENT ASSISTANCE Following a Qualifying Termination (as defined in Section 7.1 herein) the Executive shall be reimbursed by the Company for the costs of all outplacement services obtained by the Executive; provided, however, that the total reimbursement shall be limited to an amount equal to fifteen percent (15%) of the Executive's Base Salary as of the effective date of termination. ARTICLE 9. NONCOMPETITION 9.1 PROHIBITION ON COMPETITION. Without the prior written consent of the Company, during the term of this Agreement, and for twelve (12) months following the expiration or other termination of this Agreement the Executive shall not, as an employee or an officer, engage directly or indirectly in any business or enterprise which is "in competition" with the Company or its successors or assigns. For purposes of this Agreement, a business or enterprise will be deemed to be "in competition" if it is engaged in any significant business activity of the Company or its subsidiaries within the state (or states, if changed from time to time) within which, during the two (2) years immediately preceding such termination of employment, the Executive has been principally engaged in business for the Company or its subsidiaries. However the Executive shall be allowed to purchase and hold for investment less than three percent (3%) of the shares of any corporation whose shares are regularly traded on a national securities exchange or in the over-the-counter market. 9.2 DISCLOSURE OF INFORMATION. The Executive recognizes that he has access to and knowledge of certain confidential and proprietary information of the Company which is essential to the performance of his duties under this Agreement. The Executive will not, during or after the term of his employment by the Company, in whole or in part, disclose such information to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever, nor shall he make use of any such information for his own purposes. 9.3 COVENANTS REGARDING OTHER EMPLOYEES. During the term of this Agreement, and for a period of twenty four (24) months following the expiration of this Agreement, the Executive agrees not to attempt to induce any employee of the Company to terminate his or her employment with the Company, to accept employment with any competitor of the Company, or to interfere in a similar manner with the business of the Company. ARTICLE 10. ASSIGNMENT 10.1 ASSIGNMENT BY COMPANY. This Agreement may and shall be assigned or transferred to, and shall be binding upon and shall inure to the benefit of, any successor of the Company, and any such successor shall be deemed substituted for all purposes for the "Company" under the terms of this Agreement. As used in this Agreement, the term "successor" shall mean any person, firm, corporation, or business entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all of the assets 10 12 or the business of the Company. Notwithstanding such assignment, the Company shall remain, with such successor, jointly and severally liable for all its obligations hereunder. Failure of the Company to obtain the agreement of any successor to be bound by the terms of this Agreement prior to the effectiveness of any such succession shall be a breach of this Agreement, and shall immediately entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled in the event of a termination of employment for Good Reason within two (2) years after a Change in Control, as provided in Article 7 herein. Except as herein provided, this Agreement may not otherwise be assigned by the Company. 10.2 ASSIGNMENT BY EXECUTIVE. The services to be provided by the Executive to the Company hereunder are personal to the Executive, and the Executive's duties may not be assigned by the Executive; provided, however that this Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, and administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amounts payable to the Executive hereunder remain outstanding, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, in the absence of such designee, to the Executive's estate. ARTICLE 11. DISPUTE RESOLUTION AND NOTICE 11.1 DISPUTE RESOLUTION. The Executive shall have the right and option to elect to have any good faith dispute or controversy arising under or in connection with this Agreement settled by litigation or by arbitration. If arbitration is selected, such proceeding shall be conducted before a panel of three (3) arbitrators sitting in a location selected by the Executive within fifty (50) miles from the location of his principal place of employment, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrators in any court having competent jurisdiction. 11.2 NOTICE. Any notices, requests, demands, or other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company or, in the case of the Company, at its principal offices. ARTICLE 12. MISCELLANEOUS 12.1 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or understandings, oral or written, between the parties hereto, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto. Without limiting the generality of the foregoing sentence, this Agreement completely replaces and supersedes any and all prior employment agreements entered into by and between the Company and the Executive, and all amendments thereto, in their entirety. 12.2 MODIFICATION. This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by the parties hereto or their legal representatives. 11 13 12.3 SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 12.4 COUNTERPARTS. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 12.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all Federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. 12.6 BENEFICIARIES. The Executive may designate one or more persons or entities as the primary and/or contingent beneficiaries of any amounts to be received under this Agreement. Such designation must be in the form of a signed writing acceptable to the Board or the Board's designee. The Executive may make or change such designation at any time. 12.7 PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 7.1(d) herein. 12.8 CONTRACTUAL RIGHTS TO BENEFITS. This Agreement establishes and vests in the Executive a contractual right to the benefits to which he is entitled hereunder. However, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder. 12.9 PAYMENT OF LEGAL FEES. To the extent permitted by law, the Company shall pay all legal fees, costs of arbitration and litigation, prejudgment interest, and other expenses incurred in good faith by the Executive as a result of the Company's refusal to provide the benefits to which the Executive becomes entitled under this Agreement, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict between the parties pertaining to this Agreement. 12 14 ARTICLE 13. GOVERNING LAW To the extent not preempted by Federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the state of Missouri. IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement, pursuant to Compensation Committee approval and ratification by the Board of Directors, as of the Effective Date. BOATMEN'S BANCSHARES, INC. EXECUTIVE: By: /s/ Arthur J. Fleischer /s/ Andrew B. Craig, III --------------------------------- ------------------------------ 13 EX-10.(B) 6 EMPLOYMENT AGREEMENT FOR SAMUEL B. HAYES, III 1 Exhibit 10(b) EMPLOYMENT AGREEMENT FOR Samuel B. Hayes, III Boatmen's Bancshares, Inc. January 30, 1996 2 BOATMEN'S BANCSHARES, INC. EMPLOYMENT AGREEMENT FOR SAMUEL B. HAYES, III This EMPLOYMENT AGREEMENT is made, entered into, and is effective, pursuant to Compensation Committee approval and ratification by the Board of Directors, as of January 30, 1996 (the "Effective Date"), by and between Boatmen's Bancshares, Inc., a Missouri corporation, (the "Company"), and Samuel B. Hayes, III, (the "Executive"). WHEREAS, the Executive is presently employed by the Company in the capacity of President; and WHEREAS, the Executive possesses considerable experience and an intimate knowledge of the business and affairs of the Company, its policies, methods, personnel, and operations; and WHEREAS, the Company recognizes that the Executive's contributions have been substantial and meritorious and, as such, the Executive has demonstrated unique qualifications to act in an executive capacity for the Company; and WHEREAS, the Company is desirous of assuring the continued employment of the Executive in the above stated capacities, and Executive is desirous of having such assurance; NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: ARTICLE 1. TERM OF EMPLOYMENT The Company hereby agrees to employ the Executive and the Executive hereby agrees to continue to serve the Company, in accordance with the terms and conditions set forth herein, for an initial period of three (3) years, commencing as of the Effective Date of this Agreement, as indicated above; subject, however, to earlier termination as expressly provided herein. The initial three (3) year period of employment automatically shall be extended for one (1) additional year at the end of the initial three (3) year term, and then again after each successive year thereafter. However, either party may terminate this Agreement at the end of the initial three (3) year period, or at the end of any successive one (1) year term thereafter, by giving the other party written notice of intent not to renew, delivered at least three (3) months prior to the end of such initial period or successive term. In the event such notice of intent not to renew is properly delivered, this Agreement, along with all corresponding rights, duties, and covenants, automatically shall expire at the end of the initial period or successive term then in progress. However, regardless of the above, if at any time during the initial period of employment, or successive term, a Change in Control of the Company occurs (as defined in Article 7 herein), then this Agreement shall become immediately irrevocable for the longer of: (a) two (2) years following the effective date of such Change in Control; or (b) until all obligations of the Company hereunder have been fulfilled, and until all benefits provided hereunder have been paid. 3 ARTICLE 2. POSITION AND RESPONSIBILITIES During the term of this Agreement, the Executive agrees to serve as President of the Company. In his capacity as President of the Company, the Executive shall report directly to the Chairman and Chief Executive Officer, and shall maintain the level of duties and responsibilities as in effect as of the Effective Date, or such higher level of duties and responsibilities as he may be assigned during the term of this Agreement. The Executive shall have the same status, privileges, and responsibilities normally inherent in such capacities in financial institutions of similar size and character. ARTICLE 3. STANDARD OF CARE During the term of this Agreement, the Executive agrees to devote substantially his full time, attention, and energies to the Company's business and shall not be engaged in any other business activity, whether or not such business activity is pursued for gain, profit, or other pecuniary advantage. However, subject to Article 9 herein, the Executive may serve as a director of other companies so long as such service is not injurious to the Company. The Executive covenants, warrants, and represents that he shall: (a) Devote his full and best efforts to the fulfillment of his employment obligations; and (b) Exercise the highest degree of loyalty and the highest standards of conduct in the performance of his duties. This Article 3 shall not be construed as preventing the Executive from investing assets in such form or manner as will not require his services in the daily operations of the affairs of the companies in which such investments are made. ARTICLE 4. COMPENSATION As remuneration for all services to be rendered by the Executive during the term of this Agreement, and as consideration for complying with the covenants herein, the Company shall pay and provide to the Executive the following: 4.1 BASE SALARY. The Company shall pay the Executive a Base Salary in an amount which shall be established from time to time by the Board of Directors of the Company or the Board's designee; provided, however, that such Base Salary shall not be less than Four Hundred Eighty Five Thousand Dollars ($485,000.00) per year. This Base Salary shall be paid to the Executive in equal bimonthly installments throughout the year, consistent with the normal payroll practices of the Company. The annual Base Salary shall be reviewed at least annually following the Effective Date of this Agreement, while this Agreement is in force, to ascertain whether, in the judgment of the Board or the Board's designee, such Base Salary should be increased, based primarily on the performance of the Executive during the year and on the then current rate of inflation. If so increased, the Base Salary as stated above shall, likewise, be increased for all purposes of this Agreement. 4.2 ANNUAL BONUS. In addition to his salary, the Executive shall be entitled to participate in the Company's short-term incentive program, as such program may exist from time to time, at a level 2 4 commensurate with the Executive's position with the Company, as determined at the sole discretion of the Compensation Committee. 4.3 LONG-TERM INCENTIVES. The Executive shall be eligible to participate in the Company's 1996 Stock Incentive Plan, as such shall be amended or superseded from time to time, at a level commensurate with the Executive's position, as determined at the sole discretion of the Compensation Committee. 4.4 RETIREMENT BENEFITS. The Company shall provide to the Executive participation in all Company qualified defined benefit and defined contribution retirement plans, subject to the eligibility and participation requirements of such plans. The Executive's retirement benefits shall not be less than those that would be provided him under the terms of the Boatmen's Bancshares, Inc. Retirement Plan for Employees and the Boatmen's Supplemental Retirement Plan in effect as of the Effective Date, or as such benefits shall be increased, whether or not such benefits shall be decreased or eliminated. The obligations of the Company pursuant to this Section 4.4 shall survive the termination of this Agreement. 4.5 EMPLOYEE BENEFITS. The Company shall provide to the Executive all benefits to which other executives and employees of the Company are entitled, as commensurate with the Executive's position, subject to the eligibility requirements and other provisions of such arrangements. Such benefits shall include, but shall not be limited to, group term life insurance, comprehensive health and major medical insurance, dental and life insurance, and short-term and long-term disability. 4.6 PERQUISITES. The Company shall provide to the Executive, at the Company's cost, all perquisites which are suitable to the character of Executive's position with the Company and adequate for the performance of his duties hereunder. 4.7 RIGHT TO CHANGE PLANS. By reason of Sections 4.5 and 4.6 herein, the Company shall not be obligated to institute, maintain, or refrain from changing, amending, or discontinuing any benefit plan, or perquisite, so long as such changes are similarly applicable to executive employees generally. ARTICLE 5. EXPENSES The Company shall pay or reimburse the Executive for all ordinary and necessary expenses, in a reasonable amount, which the Executive incurs in performing his duties under this Agreement including, but not limited to, travel, entertainment, professional dues and subscriptions, and all dues, fees, and expenses associated with membership in various professional, business, and civic associations and societies in which the Executive's participation is in the best interest of the Company. ARTICLE 6. EMPLOYMENT TERMINATIONS 6.1 TERMINATION DUE TO RETIREMENT OR DEATH. In the event the Executive's employment is terminated while this Agreement is in force by reason of retirement (as defined or provided for under the then established rules of the Company's tax-qualified retirement plan), or death, the Executive's benefits shall be determined in accordance with the Company's retirement, survivor's benefits, insurance, and other applicable programs of the Company then in effect (provided, however, that such benefits shall be no less than those set forth in Section 4.4 herein) and, upon the effective date of such termination, the Company's obligation under this Agreement to provide to the Executive the elements of pay described in Sections 4.1, 3 5 4.2, and 4.3 shall immediately expire; provided, however, that the Executive shall receive all rights and benefits that he is vested in, pursuant to the Plan or Plans described in Section 4.3 herein and other plans and programs of the Company; and provided further, however, that any retirement during the periods set forth in Section 7.1 herein shall be subject to the provisions of Article 7 herein. 6.2 TERMINATION DUE TO DISABILITY. In the event that the Executive becomes Disabled (as defined below) during the term of this Agreement and is, therefore, unable to perform his duties herein for more than one hundred eighty (180) total calendar days during any period of twelve (12) consecutive months, or in the event of the Board's reasonable expectation that the Executive's Disability will exist for more than a period of one hundred eighty (180) calendar days, the Company shall have the right to terminate the Executive's active employment as provided in this Agreement. However, the Board shall deliver written notice to the Executive of the Company's intent to terminate for Disability at least thirty (30) calendar days prior to the effective date of such termination. A termination for Disability shall become effective upon the end of the thirty (30) day notice period. Upon such effective date, the Company's obligation to provide to the Executive the elements of pay described in Sections 4.1, 4.2, and 4.3 shall immediately expire; provided, however, that the Executive shall receive all rights and benefits that he is vested in, pursuant the plan or plans described in Section 4.3 herein and to other plans and programs of the Company. The term "Disability" shall mean, for all purposes of this Agreement, the incapacity of the Executive, due to injury, illness, disease, or bodily or mental infirmity, to engage in the performance of substantially all of the usual duties of employment with the Company as contemplated by Article 2 herein, such Disability to be determined by the Board of Directors of the Company upon receipt of and in reliance on competent medical advice from one (1) or more individuals, selected by the Board, who are qualified to give such professional medical advice. It is expressly understood that the Disability of the Executive for a period of one hundred eighty (180) calendar days or less in the aggregate during any period of twelve (12) consecutive months, in the absence of any reasonable expectation that his Disability will exist for more than such a period of time, shall not constitute a failure by him to perform his duties hereunder and shall not be deemed a breach or default and the Executive shall receive full compensation for any such period of Disability or for any other temporary illness or incapacity during the term of this Agreement. 6.3 VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may terminate this Agreement at any time by giving the Board of Directors of the Company written notice of intent to terminate, delivered at least three (3) months prior to the effective date of such termination. Upon the effective date of such termination, following the expiration of the three (3) months notice period, the Company shall pay the Executive his full Base Salary, at the rate then in effect as provided in Section 4.1 herein, through the effective date of termination, plus all other benefits to which the Executive has a vested right at that time. In the event that the terms and provisions of Article 7 herein do not apply to such termination, the Company and the Executive thereafter shall have no further obligations under this Agreement except as provided in Section 4.4 and Article 9 herein. However, in the event the terms and provisions of Article 7 herein apply, the payments and benefits set forth therein shall apply. 4 6 6.4 INVOLUNTARY TERMINATION BY THE COMPANY WITHOUT CAUSE. At all times prior to six (6) full calendar months before the effective date of a Change in Control, or at any time more than two (2) years after the effective date of a Change in Control, the Board may terminate the Executive's employment, as provided under this Agreement, at any time, for reasons other than death or Disability, or for Cause, by notifying the Executive in writing of the Company's intent to terminate, at least thirty (30) calendar days prior the effective date of such termination. Upon the effective date of such termination, following the expiration of the thirty (30) day notice period, the Company shall pay to the Executive a lump-sum cash payment equal to the greater of: (a) the Base Salary then in effect for the remaining term of this Agreement (assuming no additional extensions of this Agreement's term beyond that in effect as of the effective date of termination), together with continuation of health and welfare benefits for the remaining term of this Agreement; or (b) one (1) full year of his Base Salary in effect as of the effective date of termination, plus a one (1) year continuation of health and welfare benefits. Further, the Company shall pay the Executive all other benefits to which the Executive has a vested right at the time, according to the provisions of the governing plan or program. The Company and the Executive thereafter shall have no further obligations under this Agreement except as provided in Section 4.4 and Article 9 herein. If the Executive's employment is terminated during the periods set forth in Section 7.1 herein, the Executive shall be entitled to receive the benefits provided in Section 7.1 herein in lieu of the benefits set forth in this Section 6.4. 6.5 TERMINATION FOR CAUSE. Nothing in this Agreement shall be construed to prevent the Board from terminating the Executive's employment under this Agreement for "Cause." "Cause" shall be defined as conduct of the Executive which is finally adjudged to be knowingly fraudulent, deliberately dishonest or willful misconduct. The Company's Board of Directors, by majority vote, shall make the determination of whether Cause exists, after providing the Executive with notice of the reasons the Board believes Cause may exist and after giving the Executive the opportunity to respond to the allegation that Cause exists. In the event this Agreement is terminated by the Board for Cause, the Company shall pay the Executive his Base Salary through the effective date of the employment termination and the Executive shall immediately thereafter forfeit all rights and benefits (other than vested benefits) he would otherwise have been entitled to receive under this Agreement. The Company and the Executive thereafter shall have no further obligations under this Agreement except as provided in Article 9 herein. 6.6 TERMINATION FOR GOOD REASON. At any time during the term of this Agreement, the Executive may terminate this Agreement for Good Reason (as defined below) by giving the Board of Directors of the Company thirty (30) calendar days written notice of intent to terminate, which notice sets forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination. Upon the expiration of the thirty (30) day notice period, the Good Reason termination shall become effective, and the Company shall pay and provide to the Executive the benefits set forth in this Section 6.6 (or, in the event of termination for Good Reason within the six (6) full calendar month period prior to the 5 7 effective date of a Change in Control, or within two (2) years following the effective date of a Change in Control, the benefits set forth in Section 7.1 herein). Good Reason shall mean, without the Executive's express written consent, the occurrence of any one or more of the following: (a) The assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including offices, titles, and reporting requirements) as an officer of the Company, or a reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from those in effect during the immediately preceding fiscal year; (b) Without the Executive's consent, the Company's requiring the Executive to be based at a location which is at least fifty (50) miles further from the Executive's primary residence at the time such requirement is imposed than is such residence from the Company's office at which the Executive is primarily rendering services at such time, except for required travel on the Company's business to an extent substantially consistent with the Executive's business obligations as of the Effective Date; (c) A reduction by the Company in the Executive's Base Salary as in effect on the Effective Date, as provided in Section 4.1 herein, or as the same shall be increased from time to time; (d) A material reduction in the Executive's level of participation in any of the Company's short- and/or long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or arrangements in which the Executive participates as of the Effective Date; provided, however, that reductions in the levels of participation in any such plans shall not be deemed to be "Good Reason" if the Executive's reduced level of participation in each such program remains substantially consistent with the average level of participation of other executives who have positions commensurate with the Executive's position; or (e) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Section 10.1 herein. Upon a termination of the Executive's employment for Good Reason at any time other than the six (6) full calendar month period prior to the effective date of a Change in Control, or the two (2) years period following the effective date of a Change in Control, the Executive shall be entitled to receive the same payments and benefits as he is entitled to receive following an involuntary termination of his employment by the Company without Cause, as specified in Section 6.4 herein. The payment of Base Salary and pro rata Bonus shall be made to the Executive within thirty (30) calendar days following the effective date of employment termination. Upon a termination for Good Reason within the six (6) full calendar month period prior to the effective date of a Change in Control, or within the two (2) years following the effective date of a Change in Control, the Executive shall be entitled to receive the payments and benefits set forth in Section 7.1 herein in lieu of those set forth in this Section 6.6. The Executive's right to terminate employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued employment shall not 6 8 constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason herein. ARTICLE 7. CHANGE IN CONTROL 7.1 EMPLOYMENT TERMINATIONS IN CONNECTION WITH A CHANGE IN CONTROL. In the event of a Qualifying Termination (as defined below) within six (6) full calendar months prior to the effective date of a Change in Control, or within two years following the effective date of a Change in Control, then in lieu of all other benefits provided to the Executive under the provisions of this Agreement (other than the first sentence of Section 4.4 herein and without derogation of his rights to receive vested benefits under the Company's Amended 1982 Long Term Incentive Plan and the plan or plans described in Section 4.3 herein), the Company shall pay to the Executive and provide him with the following severance benefits (hereinafter referred to as the "Severance Benefits"): (a) An amount equal to three (3) times the highest rate of the Executive's annualized Base Salary rate in effect at any time up to and including the effective date of termination; (b) An amount equal to three (3) times the greater of: (i) the Executive's average annual bonus earned over the three (3) fiscal years prior to the Change in Control (whether or not deferred); or (ii) the Executive's target bonus established for the fiscal year in which the Executive's effective date of termination occurs; (c) An amount equal to the Executive's unpaid Base Salary and accrued vacation pay through the effective date of termination; (d) A continuation of the welfare benefits of medical insurance, dental insurance, and life insurance for three (3) full years after the effective date of termination. These benefits shall be provided to the Executive at the same premium cost, and at the same coverage level, as in effect as of the Executive's effective date of termination. However, in the event the premium cost and/or level of coverage shall change for all employees of the Company, the cost and/or coverage level, likewise, shall change for the Executive in a corresponding manner. The continuation of these welfare benefits shall be discontinued prior to the end of the three (3) year period in the event the Executive has available substantially similar benefits from a subsequent employer, as determined by the Company's Board of Directors or the Board's designee. (e) A lump-sum cash payment of the actuarial present value equivalent of the aggregate benefits accrued by the Executive as of the effective date of termination under the terms of any and all supplemental retirement plans in which the Executive participates (subject to the provisions of the second sentence of Section 4.4 herein). For this purpose, such benefits shall be calculated under the assumption that the Executive's employment continued following the effective date of termination for three (3) full years (i.e., three (3) additional years of age and service credits shall be added); provided, however, that for purposes of determining "final average pay" under such programs, the Executive's actual pay history as of the effective date of termination shall be used. 7 9 (f) A lump-sum cash payment of the entire balance of the Executive's compensation which has been deferred under the Company's nonqualified deferred compensation plan(s) together with all interest that has been credited with respect to such deferred compensation balance. For purposes of this Article 7, a Qualifying Termination shall mean any termination of the Executive's employment OTHER THAN: (1) by the Company for Cause (as provided in Section 6.5 herein); (2) by reason of death, Disability (as provided in Section 6.2 herein), or voluntary retirement; provided, however, that a termination which qualifies as a retirement and which occurs within the thirty (30) day period described in clause (3) of this Section 7.1 below will be deemed to be a Qualifying Termination); or (3) by the Executive without Good Reason (as provided in Section 6.6 herein, but specifically excluding voluntary terminations within the period beginning on the first anniversary of the effective date of the Change in Control and ending thirty (30) days after such date--i.e., any voluntary termination by the Executive within such period shall be deemed to be a Qualifying Termination). 7.2 DEFINITION OF "CHANGE IN CONTROL". A Change in Control of the Company shall be deemed to have occurred as of the first day any one or more of the following conditions shall have been satisfied: (a) Any individual, corporation (other than the Company), partnership, trust, association, pool, syndicate, or any other entity or any group of persons acting in concert becomes the beneficial owner, as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, of securities of the Company possessing twenty percent (20%) or more of the voting power for the election of directors of the Company; (b) There shall be consummated any consolidation, merger, or other business combination involving the Company or the securities of the Company in which holders of voting securities of the Company immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of the Company (or, if the Company does not survive such transaction, voting securities of the corporation surviving such transaction) having less than sixty percent (60%) of the total voting power in an election of directors of the Company (or such other surviving corporation); (c) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company's shareholders, of each new director of the Company was approved by a vote of at least two-thirds (2/3) of the directors of the Company then still in office who were directors of the Company at the beginning of any such period; or (d) There shall be consummated any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company (on a consolidated basis) to a party which is not controlled by or under common control with the Company. 8 10 7.3 EXCISE TAX EQUALIZATION PAYMENT. In the event that the Executive becomes entitled to Severance Benefits or any other payment or benefit under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), if any of the Total Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to the Executive in cash an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax upon the Total Payments and any Federal, state and local income tax and Excise Tax upon the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA), shall be equal to the Total Payments. Such payment shall be made by the Company to the Executive as soon as practical following the effective date of termination, but in no event beyond thirty (30) days from such date. 7.4 TAX COMPUTATION. For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amounts of such Excise Tax: (a) Any other payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company, or with any person (which shall have the meaning set forth in Section 3(a)(9) of the Securities Exchange Act of 1934, including a "group" as defined in Section 13(d) therein) whose actions result in a Change in Control of the Company or any person affiliated with the Company or such persons) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel as supported by the Company's independent auditors and acceptable to the Executive, such other payments or benefits (in whole or in part) do not constitute parachute payments, or unless such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; (b) The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of: (i) the total amount of the Total Payments; or (ii) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (a) above); and (c) The value of any noncash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the effective date of termination, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. 9 11 7.5 SUBSEQUENT RECALCULATION. In the event the Internal Revenue Service adjusts the computation of the Company under Section 7.4 herein so that the Executive did not receive the greatest net benefit, the Company shall reimburse the Executive for the full amount necessary to make the Executive whole, plus a market rate of interest, as determined by the Committee. ARTICLE 8. OUTPLACEMENT ASSISTANCE Following a Qualifying Termination (as defined in Section 7.1 herein) the Executive shall be reimbursed by the Company for the costs of all outplacement services obtained by the Executive; provided, however, that the total reimbursement shall be limited to an amount equal to fifteen percent (15%) of the Executive's Base Salary as of the effective date of termination. ARTICLE 9. NONCOMPETITION 9.1 PROHIBITION ON COMPETITION. Without the prior written consent of the Company, during the term of this Agreement, and for twelve (12) months following the expiration or other termination of this Agreement the Executive shall not, as an employee or an officer, engage directly or indirectly in any business or enterprise which is "in competition" with the Company or its successors or assigns. For purposes of this Agreement, a business or enterprise will be deemed to be "in competition" if it is engaged in any significant business activity of the Company or its subsidiaries within the state (or states, if changed from time to time) within which, during the two (2) years immediately preceding such termination of employment, the Executive has been principally engaged in business for the Company or its subsidiaries. However the Executive shall be allowed to purchase and hold for investment less than three percent (3%) of the shares of any corporation whose shares are regularly traded on a national securities exchange or in the over-the-counter market. 9.2 DISCLOSURE OF INFORMATION. The Executive recognizes that he has access to and knowledge of certain confidential and proprietary information of the Company which is essential to the performance of his duties under this Agreement. The Executive will not, during or after the term of his employment by the Company, in whole or in part, disclose such information to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever, nor shall he make use of any such information for his own purposes. 9.3 COVENANTS REGARDING OTHER EMPLOYEES. During the term of this Agreement, and for a period of twenty four (24) months following the expiration of this Agreement, the Executive agrees not to attempt to induce any employee of the Company to terminate his or her employment with the Company, to accept employment with any competitor of the Company, or to interfere in a similar manner with the business of the Company. ARTICLE 10. ASSIGNMENT 10.1 ASSIGNMENT BY COMPANY. This Agreement may and shall be assigned or transferred to, and shall be binding upon and shall inure to the benefit of, any successor of the Company, and any such successor shall be deemed substituted for all purposes for the "Company" under the terms of this Agreement. As used in this Agreement, the term "successor" shall mean any person, firm, corporation, or business entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all of the assets 10 12 or the business of the Company. Notwithstanding such assignment, the Company shall remain, with such successor, jointly and severally liable for all its obligations hereunder. Failure of the Company to obtain the agreement of any successor to be bound by the terms of this Agreement prior to the effectiveness of any such succession shall be a breach of this Agreement, and shall immediately entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled in the event of a termination of employment for Good Reason within two (2) years after a Change in Control, as provided in Article 7 herein. Except as herein provided, this Agreement may not otherwise be assigned by the Company. 10.2 ASSIGNMENT BY EXECUTIVE. The services to be provided by the Executive to the Company hereunder are personal to the Executive, and the Executive's duties may not be assigned by the Executive; provided, however that this Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, and administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amounts payable to the Executive hereunder remain outstanding, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, in the absence of such designee, to the Executive's estate. ARTICLE 11. DISPUTE RESOLUTION AND NOTICE 11.1 DISPUTE RESOLUTION. The Executive shall have the right and option to elect to have any good faith dispute or controversy arising under or in connection with this Agreement settled by litigation or by arbitration. If arbitration is selected, such proceeding shall be conducted before a panel of three (3) arbitrators sitting in a location selected by the Executive within fifty (50) miles from the location of his principal place of employment, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrators in any court having competent jurisdiction. 11.2 NOTICE. Any notices, requests, demands, or other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company or, in the case of the Company, at its principal offices. ARTICLE 12. MISCELLANEOUS 12.1 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or understandings, oral or written, between the parties hereto, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto. Without limiting the generality of the foregoing sentence, this Agreement completely replaces and supersedes any and all prior employment agreements entered into by and between the Company and the Executive, and all amendments thereto, in their entirety. 12.2 MODIFICATION. This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by the parties hereto or their legal representatives. 11 13 12.3 SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 12.4 COUNTERPARTS. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 12.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all Federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. 12.6 BENEFICIARIES. The Executive may designate one or more persons or entities as the primary and/or contingent beneficiaries of any amounts to be received under this Agreement. Such designation must be in the form of a signed writing acceptable to the Board or the Board's designee. The Executive may make or change such designation at any time. 12.7 PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 7.1(d) herein. 12.8 CONTRACTUAL RIGHTS TO BENEFITS. This Agreement establishes and vests in the Executive a contractual right to the benefits to which he is entitled hereunder. However, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder. 12.9 PAYMENT OF LEGAL FEES. To the extent permitted by law, the Company shall pay all legal fees, costs of arbitration and litigation, prejudgment interest, and other expenses incurred in good faith by the Executive as a result of the Company's refusal to provide the benefits to which the Executive becomes entitled under this Agreement, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict between the parties pertaining to this Agreement. 12 14 ARTICLE 13. GOVERNING LAW To the extent not preempted by Federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the state of Missouri. IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement, pursuant to Compensation Committee approval and ratification by the Board of Directors, as of the Effective Date. BOATMEN'S BANCSHARES, INC. EXECUTIVE: By: /s/ Arthur J. Fleischer /s/ Samuel B. Hayes, III --------------------------------- ------------------------------ 13 EX-10.(D) 7 AMENDED 1982 LONG TERM INCENTIVE PLAN 1 EXHIBIT 10(d) PLAN DOCUMENT - ------------------------------------------------------------------------------- BOATMEN'S BANCSHARES, INC. AMENDED 1982 LONG TERM INCENTIVE PLAN 1. PURPOSE - ------------------------------------------------------------------------------- The purpose of the Amended 1982 Long Term Incentive Plan (the "Plan") of Boatmen's Bancshares, Inc. (the "Corporation") is to provide a means by which the Corporation and its subsidiaries shall be able to attract and retain key employees of exceptional ability, to provide such individuals with added incentives to make a maximum contribution of their efforts, initiative and skill toward the goal of greater profitability and to be competitive with other companies as to executive compensation. 2. ADMINISTRATION - ------------------------------------------------------------------------------- The Plan shall be administered by the Compensation Committee (the "Committee") composed of three or more directors of the Corporation who are not officers or employees thereof. Members of the Committee shall be appointed by, and shall serve at the pleasure of, the Board of Directors of the Corporation (the "Board"). Subject to the express provisions of the Plan, the Committee shall have complete authority to determine the individuals who shall be participants in the Plan and their Salary Grades, to establish for each Performance Period (as hereafter defined) applicable Target Average Annual Earnings Per Share Growth Rates, to select peer groups of the Corporation, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to the conduct of the Committee's affairs and to take all other actions, and make all other determinations, necessary or advisable for the administration of the Plan. All actions and determinations by the Committee shall be conclusive. 3. ELIGIBILITY AND DESIGNATION OF PARTICIPANTS - ------------------------------------------------------------------------------- Only those persons who are key employees of the Corporation or its subsidiaries, including but not limited to officers, whether or not they are directors of the Corporation or its subsidiaries, shall be eligible to participate in the Plan. In each successive year until termination of the Plan as provided hereinafter (each, a "Participation Designation Year"), the Committee shall designate certain persons, who meet the eligibility requirements, to participate in the Plan (the "Participants") and shall determine the Salary Grade to which each such Participant belongs. Such designation during a Participation Designation Year shall apply with respect to the three year period beginning with such Participation Designation Year and including the next two successive years after the Participation Designation Year (the "Performance Period"). The 2 designation of Participants shall be at the sole discretion of the Committee. Such Participants may, but need not, be the same as those who were designated in any preceding year. As soon as practicable after he or she is designated by the Committee, each Participant shall be given written notice of his or her designation and Salary Grade and a listing of the Corporation's peer group for the applicable Performance Period, as selected by the Committee. 4. CALCULATION OF AWARDS - ------------------------------------------------------------------------------- The Committee shall cause awards under the Plan (the "Awards") to be paid after the end of each Performance Period with respect to the Performance Period last ended. Awards shall be paid to all of the Participants (including those who have retired, died or become disabled) designated for such prior Performance Period, with the exception of those Participants whose rights to payment of Awards have been divested pursuant to Section 6 hereof. Each Participant's Award, if any, shall be an amount equal to the Participant's Average Salary (as hereafter defined) for the applicable Performance Period multiplied by the Participant's Payout Factor (as hereafter defined) for such Performance Period. The term "Average Salary" means, for each Participant, the sum of such Participant's annual salary at the date of his or her designation of participation and at each of the next two anniversary dates thereof, divided by three; provided, however, that if a Participant was not eligible to participate in the Plan on January 1 of the Participation Designation Year, or if a Participant retires, dies or becomes disabled during the Performance Period, his or her salary for any such partial year or years shall be annualized for purposes of determining such Participant's Average Salary. The term "Payout Factor" means, for each Participant, a percentage factor determined by reference to such Participant's Salary Grade and the percentile rank of the Total Shareholder Return (as hereafter defined) of the Corporation as compared to the Total Shareholder Return of the Corporation's peer group. The Payout Factor, which is determined by reference to Exhibit A attached hereto, is subject to further increase or decrease (but not by more than 20% in either direction) of 1% for each 0.1% that the Corporation's actual average annual earnings per share growth rate for the Performance Period exceeds or is less than the Target Average Annual Earnings Per Share Growth Rate for that Performance Period, as determined by the Committee. The term "Total Shareholder Return" means the change in market value of the common stock of a company, plus dividends thereon, during a Performance Period. Notwithstanding the foregoing, if a Participant was not eligible for participation in the Plan on January 1 of the Plan Designation Year in which he or she was designated, or if a Participant retires during a Performance Period, such Participant's Award shall be an amount equal to the Award which he or she would have otherwise received under the Plan multiplied by a fraction, the numerator of which shall be the number of calendar years or portions thereof in the Performance Period during which the Participant was eligible for participation in the Plan and the denominator of which shall be three, all subject, however, to the provisions of Section 9. 2 3 5. PAYMENT OF AWARDS - ------------------------------------------------------------------------------- The Corporation shall make payment of each Award in cash. Payment shall be made as soon as practicable, but not later than March 31 of the applicable year. 6. VESTING - ------------------------------------------------------------------------------- Upon designation of participation with respect to a Performance Period, a Participant's right to payment of an Award in accordance with the provisions hereof shall vest subject to automatic divestiture upon termination during the applicable Performance Period of such Participant's employment by the Corporation or one of its subsidiaries other than for reasons of retirement at or after normal retirement age, disability, death or a Change in Control as specified in Section 9. No change in the duties of a Participant while in the employ of the Corporation or one of its subsidiaries, or any transfer among them, shall constitute termination of employment by the Corporation or its subsidiaries. 7. NO GUARANTEE OF EMPLOYMENT - ------------------------------------------------------------------------------- Nothing in the Plan shall be deemed to create any limitation or restriction on such rights as the Corporation and its subsidiaries otherwise would have to terminate the employment of any person at any time for any reason. 8. AMENDMENT OR TERMINATION - ------------------------------------------------------------------------------- Subject to the provisions of Section 9, the Board, at any time, may terminate the Plan or make such modifications of the Plan as it may deem advisable, except that no such termination or modification shall diminish a Participant's right to an Award to the extent vested under Section 6 hereof. 9. CHANGE IN CONTROL - ------------------------------------------------------------------------------- In the event of a Change in Control of the Corporation (as hereafter defined) during any Performance Period or Periods, each Participant shall be paid, immediately prior to the Change in Control, an amount equal to the Award or Awards that he or she would have been entitled to receive at the end of each of the Performance Period or Periods had such Change in Control not occurred; provided, however, that, for purposes of calculating the Award or Awards payable pursuant to this Section 9, (i) the applicable Payout Factors shall be 60% for Salary Grade 75 Participants, 45% for Salary Grade 74-73 Participants, 40% for Salary Grade 72-67 Participants 3 4 and 30% for Salary Grade 66 Participants, without adjustment in relation to Target Average Annual Per Share Growth Rates, and (ii) each Participant's Average Salary shall be equal to such Participant's annual salary on the date of the Change in Control. "Change in Control" of the Corporation shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied: (i) Any individual, corporation (other than the Corporation), partnership, trust, association, pool, syndicate, or any other entity or any group of persons acting in concert becomes the beneficial owner, as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, of securities of the Corporation possessing twenty percent (20%) or more of the voting power for the election of directors of the Corporation; (ii) There shall be consummated any consolidation, merger, or other business combination involving the Corporation or the securities of the Corporation in which holders of voting securities of the Corporation immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of the Corporation (or, if the Corporation does not survive such transaction, voting securities of the corporation surviving such transaction) having less than sixty percent (60%) of the total voting power in an election of directors of the Corporation (or such other surviving corporation); (iii) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the directors of the Corporation cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Corporation's shareholders, of each new director of the Corporation was approved by a vote of at least two- thirds (2/3) of the directors of the Corporation then still in office who were directors of the Corporation at the beginning of any such period; or (iv) There shall be consummated any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation (on a consolidated basis) to a party which is not controlled by or under common control with the Corporation. 10. BENEFICIARY - ------------------------------------------------------------------------------- Each Participant shall have the right, from time to time, to designate or change the designation of a primary and a contingent beneficiary, or either thereof, to receive on his death the benefit provided herein or, as the case may be, any undistributed balance of any benefit distributable to him pursuant to the provisions hereof. Any such Participant may make such designation only in writing and by filling out and furnishing to the committee such form or forms as the committee may require. In the event that any Participant fails to designate a beneficiary or if no such 4 5 designated beneficiary is living upon the death of such Participant or if for any reason such designation shall be legally ineffective, then, and in any of said events, the amount which would have been paid to a designated living beneficiary shall be paid to the trustee of the Participant's revocable living trust, and if none to the trustee of the Participant's testamentary trust, and if none to the personal representative of the estate of such deceased Participant. Upon the death of a beneficiary entitled to the distribution of an amount pursuant to the provisions hereof prior to receipt of all amounts distributable to such beneficiary hereunder, an amount equal to the unpaid balance shall be paid to the trustee of the beneficiary's revocable living trust, and if none to the trustee of the beneficiary's testamentary trust, and if none to the personal representative of the estate of such deceased beneficiary. 11. EFFECTIVE DATE OF PLAN - ------------------------------------------------------------------------------- The Plan shall be effective as of February 9, 1982, as amended as of February 10 and March 10, 1987, January 1, 1992, January 1, 1995, January 30, 1996 and February 12, 1996. 5 EX-10.(E) 8 1987 NON-QUALIFIED STOCK OPTION PLAN 1 EXHIBIT 10(e) BOATMEN'S BANCSHARES, INC. 1987 NON-QUALIFIED STOCK OPTION PLAN 1. PURPOSE - ------------------------------------------------------------------------------- The purpose of the 1987 Non-Qualified Stock Option Plan (the "Plan") of Boatmen's Bancshares, Inc. (the "Corporation") is to provide increased incentive for certain key employees of the Corporation and its subsidiaries and encourage them to acquire a proprietary interest in the Corporation. 2. SHARES - ------------------------------------------------------------------------------- The shares which may be issued under the Plan shall be limited to 3,500,000 shares, par value $1.00 per share, of the common stock of the Corporation (the "Shares"), subject to adjustment as provided in Section 12 of the Plan. The Shares may be either authorized but unissued shares or treasury shares. 3. ADMINISTRATION - ------------------------------------------------------------------------------- The Plan shall be administered by the Compensation Committee (the "Committee") composed of three or more directors of the Corporation who are not officers or employees thereof. Members of the Committee shall be appointed by and shall serve at the pleasure of the Board of Directors. Subject to the express provisions of the Plan, the Committee shall have complete authority to determine the individuals to whom and the time or times when options shall be granted and when they may be exercised, to specify the terms and provisions of the options, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to the conduct of the Committee's affairs, and to make all other determinations necessary or advisable for the administration of the Plan. All determinations by the Committee shall be conclusive. 4. ELIGIBILITY - ------------------------------------------------------------------------------- Options may be granted only to key employees of the Corporation or its subsidiaries, including but not limited to officers, whether or not they are directors of the Corporation or its subsidiaries. 2 5. OPTION PRICE - ------------------------------------------------------------------------------- The price per share for Shares to be sold pursuant to an option shall be not less than the fair market value thereof on the date on which the option is granted, as determined by the Committee. 6. OPTION PERIOD; LIMITATIONS ON RIGHT TO EXERCISE - ------------------------------------------------------------------------------- An option by its terms may be exercised only during an option period commencing on the date on which the option is granted and ending no more than ten years thereafter, provided, however, that the Committee may specify such additional restrictions upon the right of optionees to exercise options within the aforementioned option period as said Committee may deem advisable from time to time. 7. PAYMENT FOR SHARES - ------------------------------------------------------------------------------- Full payment for Shares purchased shall be made on or before the time of exercise of the option. Such payment shall be made in cash or, if authorized by the Corporation, in whole or in part in common shares of the Corporation valued at fair market value, as determined by the Committee. Options may be exercised in whole or in part. No Shares will be issued until full payment therefor has been made and the optionee shall have none of the rights of a shareholder until such payment is made. 8. STOCK APPRECIATION RIGHTS - ------------------------------------------------------------------------------- A stock appreciation right may be granted to an eligible employee, as set forth in Section 4 hereof, in connection with (and only in connection with) any option granted under the Plan subject to the following terms and conditions: (a) Such stock appreciation right shall entitle a holder of an option within the period specified for the exercise of the option in the related option grant to surrender the unexercised option (or a portion thereof) and to receive in exchange therefor a payment in cash equal to the product of (i) the amount by which (A) the fair market value of each Share on the exercise date exceeds (B) the option price per Share, times (ii) the number of Shares under the option, or portion thereof, which is surrendered. 2 3 (b) Exercise of any such stock appreciation right by any director, officer or 10% beneficial shareholder of the Corporation shall be effected in conformity with the limitations and restrictions contained in Rule 16b-3(e) of the General Rules and Regulations under the Securities Exchange Act of 1934, or in any successor provision thereto, which may have the effect of limiting the time period for exercise of such right to certain "window periods" following the release by the Corporation of quarterly and annual financial information. Exercise of any stock appreciation right granted hereunder shall become effective upon receipt by the Committee of a written notice of election to exercise or, if one or more conditions to exercise are not satisfied at such time, as of the first subsequent date on which all such conditions are satisfied. With the exception of the foregoing, each stock appreciation right granted hereunder shall be subject to the same terms and conditions as the related option, shall be exercisable only to the extent such option is exercisable and shall terminate or lapse and cease to be exercisable when the related option terminates or lapses and ceases to be exercisable. (c) Upon exercise of a stock appreciation right, the number of Shares subject to exercise under the related option shall automatically be reduced by the number of Shares represented by the option or portion thereof which is surrendered in connection with the exercise of the right. 9. NON-TRANSFERABILITY OF OPTIONS OR STOCK APPRECIATION RIGHTS - ------------------------------------------------------------------------------- All options and stock appreciation rights granted under the Plan by their terms shall be non-transferable otherwise than by will or by the laws of descent and distribution and shall be exercisable, during the lifetime of the optionee, only by him. 3 4 10. TERMINATION OF EMPLOYMENT - ------------------------------------------------------------------------------- If the employment of an optionee by the Corporation or any subsidiary of the Corporation is terminated other than by reason of his death, disability (within the meaning of Section 105(d)(4) of the Internal Revenue Code), or retirement, he may exercise his option or stock appreciation right, if applicable, at any time within one year after such termination, provided that an optionee whose employment is terminated by reason of conduct which the Committee determines to have been knowingly fraudulent, deliberately dishonest or willful misconduct shall forfeit all rights hereunder and provided further that no exercise of any option or stock appreciation right may take place later than the end of the term specified in the grant. No change in the duties of an optionee, while in the employ of the Corporation or any subsidiary of the Corporation, or any transfer among them shall constitute termination of employment by the Corporation or any subsidiary of the Corporation. Nothing in the Plan or in any option or stock appreciation right shall be deemed to create any limitation or restriction on such rights as the Corporation and its subsidiaries otherwise would have to terminate the employment of any person at any time for any reason. 11. DEATH OF OPTIONEE - ------------------------------------------------------------------------------- In the event of the death of an optionee prior to the exercise of an option or stock appreciation right granted under this Plan, such optionee's estate, or any person who acquired the right to exercise such option or stock appreciation right by bequest or inheritance or by reason of the death of the optionee, may exercise such option or stock appreciation right to the same extent that the optionee would have been entitled to exercise such option or right and subject to the same restrictions upon such exercise. 12. EFFECT OF CHANGE IN SHARES - ------------------------------------------------------------------------------- If there is any change in the Shares by reason of stock dividends, split-ups or consolidations of Shares, recapitalizations, mergers, consolidations, reorganizations, combinations or exchange of Shares, the number and class of shares available for options and the number of shares and stock appreciation rights subject to any outstanding option, and the price thereof, shall be appropriately adjusted by the Committee, provided, however, that, if the Corporation shall issue additional capital stock of any class for a consideration, there shall be no adjustment. 4 5 13. AMENDMENT OR TERMINATION - ------------------------------------------------------------------------------- Unless the Plan shall theretofore have been terminated as hereinafter provided, the Plan shall terminate on, and no option or stock appreciation right shall be granted hereunder after, ten years from the effective date hereof. The Board of Directors of the Corporation may, at any time prior to that date, terminate the Plan or make such modifications of the Plan as it may deem advisable. 14. REGULATORY AUTHORITY - ------------------------------------------------------------------------------- Each option and stock appreciation right grant shall be subject to, and no exercise of any option or stock appreciation right shall be effective unless and until there shall have been, compliance, to the extent the Committee shall deem advisable, with the requirements of all applicable Federal, state and other pertinent regulatory authority. 15. APPLICABLE LAW - ------------------------------------------------------------------------------- The Plan shall be governed and construed in accordance with the laws of the State of Missouri. 16. EFFECTIVE DATE OF PLAN - ------------------------------------------------------------------------------- The Plan shall be effective as of February 10, 1987, but no option or stock appreciation right granted hereunder, if any, may be exercised unless and until the Plan shall have been approved by the shareholders of the Corporation. 5 EX-10.(F) 9 BOATMEN'S SUPPLEMENTAL RETIREMENT PLAN 1 EXHIBIT 10(f) PLAN DOCUMENT - ------------------------------------------------------------------------------- BOATMEN'S SUPPLEMENTAL RETIREMENT PLAN WHEREAS, Boatmen's Bancshares, Inc., a Missouri corporation, (the "Corporation") desires to provide certain key executive employees of the Corporation and its subsidiaries with supplemental benefits in addition to those benefits provided under the Boatmen's Bancshares, Inc. Retirement Plan for Employees. Therefore, the Boatmen's Supplemental Retirement Plan is adopted, effective as of August 8, 1989, as amended on January 30, 1996 and February 8, 1996, as follows. ARTICLE I DEFINITIONS Except as otherwise specified herein or in a Participant's Participation Agreement, all capitalized terms shall have the same meanings as such terms have under the Boatmen's Bancshares, Inc. Retirement Plan for Employees. Section 1. 1. "Board of Directors" means the Board of Directors of Boatmen's Bancshares, Inc. Section 1.2. "Cause" means conduct of the Participant which is finally adjudged to be knowingly fraudulent, deliberately dishonest or willful misconduct. The Compensation Committee of the Corporation shall have sole and uncontrolled discretion with respect to the application of the provisions of this Section 1.2 and any determination shall be conclusive and binding upon the Participant and all other persons. Section 1.3. "Change in Control" means any of the following events: (a) any individual, corporation (other than the Corporation), partnership, trust, association, pool, syndicate, or any other entity or any group of persons acting in concert becomes the beneficial owner, as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, of securities of the Corporation possessing twenty percent (20%) or more of the voting power for the election of directors of the Corporation; (b) there shall be consummated any consolidation, merger or other business combination involving the Corporation or the securities of the Corporation in which holders of voting securities of the Corporation immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of the Corporation (or, if the Corporation does not survive such transaction, voting securities of the corporation surviving such transaction) having less than sixty percent 2 (60%) of the total voting power in an election of directors of the Corporation (or such other surviving corporation); (c) during any period of two consecutive years, individuals who at the beginning of such period constitute the Directors of the Corporation cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Corporation's shareholders, of each new Director of the Corporation was approved by a vote of at least two- thirds of the Directors of the Corporation then still in office who were Directors of the Corporation at the beginning of any such period; or (d) there shall be consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation (on a consolidated basis) to a party which is not controlled by or under common control with the Corporation. Section 1.4. "Code" means the Internal Revenue Code of 1986, as amended. Section 1.5. "Committee" means the Boatmen's Bancshares, Inc. Compensation Committee. Section 1.6. "Corporation" means Boatmen's Bancshares, Inc. Section 1.7. "Employee" means any person employed by the Corporation or any of its subsidiaries. Section 1.8. "Participant" means any Employee who is selected for participation in the Plan by the Committee as provided in Article 11. Section 1.9. "Plan" means the Boatmen's Supplemental Retirement Plan as set forth herein and as the same may be amended from time to time. Section 1.10. "Retirement Plan" means the Boatmen's Bancshares, Inc. Retirement Plan for Employees. ARTICLE II PARTICIPATION Section 2.1. Subject to the provisions of Section 2.2, the Committee shall have exclusive power to designate the Employees who will participate in the Plan. Section 2.2. Participation in the Plan shall be limited to a select group of Employees of the Corporation and its subsidiaries who are management or highly compensated Employees within the meaning of Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended. 3 Section 2.3. Each Employee selected to participate in the Plan by the Committee shall indicate his agreement to the terms of the Plan by executing a Participation Agreement, a form of which is attached hereto as Exhibit A. By means of paragraph 4 of the Participation Agreement, an Employee and the Corporation may agree to vary the terms of the Plan as to such Employee. ARTICLE III BENEFITS Section 3.1. Except in the case of termination for Cause, in which event no benefit shall be payable under the Plan, if a Participant's employment with the Corporation or one of its subsidiaries is terminated (a) by Disability, (b) within one (1) year after a Change in Control, (c) by the Corporation or one of its subsidiaries after the Participant has completed five (5) years of Vesting Service, or (d) after the Participant has satisfied the requirements for early retirement under the Retirement Plan, the Corporation shall pay to the Participant, in the manner provided in Article V, a benefit equal to the excess of the benefit in (i) over the benefit in (ii) described below: (i) the benefit which the Participant would be entitled to receive under the Retirement Plan (based upon the terms of the Retirement Plan then in effect) upon the Participant's termination of employment and if the benefit under the Retirement Plan were computed (a) including in Earnings for Retirement Plan purposes all incentive compensation, if a Participant prior to January 1, 1996; or (b) including in Earnings for Retirement Plan purposes annual incentive compensation, if an individual becomes a Participant after December 31, 1995; and (c) without giving effect to the limitations then currently imposed by Section 415 of the Code, the limitations of Section 1.401-4(c) of the Income Tax Regulations or their successors, or the limitations under Section 401(a)(17) of the Code; (ii) the benefit which the Participant would be entitled to receive under the Retirement Plan upon the Participant's termination of employment, if such benefit were computed without giving effect to the limitation then currently imposed by Section 1.401-4(c) of the Income Tax Regulations or its successor. Section 3.2. For purposes of Section 3.1(i), a Participant whose employment has terminated for reasons other than death or Disability within one (1) year after a Change in Control and who is not otherwise entitled to receive a benefit under the Retirement Plan shall be deemed to be entitled to receive a benefit under the Retirement Plan based upon the formula set forth in the Retirement Plan. 3 4 ARTICLE IV DEATH BENEFITS Section 4.1. If the spouse of a Participant is entitled to receive a benefit under the Retirement Plan upon the death of the Participant then such spouse will be entitled to receive a death benefit under this Plan calculated pursuant to the formula set forth in Article III. ARTICLE V PAYMENT OF BENEFITS Section 5.1. Payment of benefits under the Plan will be made in the same manner and at the same time as benefit payments to the Participant or his spouse under the Retirement Plan. ARTICLE VI CLAIMS Section 6.1. If a claim for benefits under the Plan is denied, the Committee will provide a written notice of the denial setting forth the specific reasons for the denial, a description of any additional material or information necessary for a claimant to perfect a claim, and an explanation of why such material or information is necessary and appropriate information as to the steps to be taken for the claim to be submitted for review. A claimant may request a review of a denial. Such requests should be submitted to the Committee, in writing, within 60 days after receipt of the denial notice stating the reasons for requesting the review. A claimant may review pertinent documents and submit issues and comments in writing. A decision will be made on the review of the denial of a claim not later than 60 days after the Committee's receipt of a request for review unless special circumstances require an extension of time for processing, in which case a decision shall be rendered as soon as possible but not later than 120 days after receipt of a request for review. The decision on review will be in writing to the claimant and shall include specific reasons for the decision. ARTICLE VII AMENDMENT AND TERMINATION Section 7.1. The Committee may amend the Plan at any time; provided, however, that no such amendment shall have the effect of depriving Participants of rights accrued under the Plan as of the date of such amendment. The Board of Directors will have the power and authority to terminate this Plan; provided, however, that any such termination shall not terminate any rights or benefits accrued by a Participant under this Plan as of the effective date of any such termination. 4 5 ARTICLE VIII ADMINISTRATION Section 8.1. The Plan shall be administered by the Committee in accordance with its terms, for the exclusive benefit of Participants. The powers and duties of the Committee shall be similar to those powers and duties granted to the Plan Administrator of the Retirement Plan. In addition, the Committee, in its sole discretion, shall have the power to accelerate the payment of benefits under the Plan to any Participant or spouse. Any interpretation or construction of Plan terms or any determination by the Committee with respect to Plan benefits, etc., shall be conclusive and binding with respect to Participants and all other persons. ARTICLE IX MISCELLANEOUS Section 9.1. Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall give the Participant the right to be retained in the employ of the Corporation or its subsidiaries or interfere with the right of the Corporation or its subsidiaries to discharge the Participant at any time, nor shall it give the Corporation or its subsidiaries the right to require the Participant to remain in their employ or interfere with the Participant's right to terminate his employment at any time. Section 9.2. No benefit payable at any time under this Plan shall be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment or encumbrance of any kind. Section 9.3. All rights hereunder shall be governed by and construed according to the laws of the State of Missouri, except to the extent such laws are preempted by the laws of the United States of America. In the event any provision of this Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this Plan. Section 9.4. Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall create or be construed to create a trust of any kind or a fiduciary relationship between the Corporation or its subsidiaries and the Participant or any other person. To the extent that any person acquires the right to receive payment from the Corporation under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Corporation. Section 9.5. The terms of this Plan shall be binding upon and inure to the benefit of the Corporation, its successors and assigns, and the Participant and his heirs and legal representatives. Section 9.6. If a Participant becomes entitled to a distribution of benefits under the Plan, and if at such time the Participant has outstanding any debt, obligation, or other liability representing an amount owing to the Corporation or its subsidiaries, then the Corporation may 5 6 offset such amount so owing against the amount of benefits otherwise distributable. Such determination shall be made by the Committee. Section 9.7. The Corporation shall, to the extent permitted by law, have the right to deduct from any payments of any kind with respect to the benefit otherwise due to the Participant any Federal, state or local taxes of any kind required by law to be withheld from such payments. 6 7 EXHIBIT A BOATMEN'S SUPPLEMENTAL RETIREMENT PLAN PARTICIPATION AGREEMENT THIS AGREEMENT is made as of ----------------------, 19---, between Boatmen's Bancshares, Inc. ("Corporation") and - ---------------------------------------- ("Participant"). The Corporation and the Participant mutually agree as follows: 1. The Participant has received a copy of the Boatmen's Supplemental Retirement Plan ("Plan") and has read and understands the Plan. 2. By completion of this Agreement, the Participant agrees to comply with the terms of the Plan in all respects. 3. All provisions of the Plan are hereby made a part of this Agreement. 4. The following special provisions are applicable to the Participant's participation in the Plan: ----------------------------- - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- BOATMEN'S BANCSHARES, INC. By: --------------------------------- ----------------------- Date --------------------------------- ----------------------- Participant Date 7 EX-10.(G) 10 EMPLOYMENT AGREEMENT FOR GREGORY L. CURL 1 Exhibit 10(g) EMPLOYMENT AGREEMENT FOR Gregory L. Curl Boatmen's Bancshares, Inc. January 30, 1996 2 BOATMEN'S BANCSHARES, INC. EMPLOYMENT AGREEMENT FOR GREGORY L. CURL This EMPLOYMENT AGREEMENT is made, entered into, and is effective, pursuant to Compensation Committee approval and ratification by the Board of Directors, as of January 30, 1996 (the "Effective Date"), by and between Boatmen's Bancshares, Inc., a Missouri corporation, (the "Company"), and Gregory L. Curl (the "Executive"). WHEREAS, the Executive is presently employed by the Company in the capacity of Vice Chairman; and WHEREAS, the Executive possesses considerable experience and an intimate knowledge of the business and affairs of the Company, its policies, methods, personnel, and operations; and WHEREAS, the Company recognizes that the Executive's contributions have been substantial and meritorious and, as such, the Executive has demonstrated unique qualifications to act in an executive capacity for the Company; and WHEREAS, the Company is desirous of assuring the continued employment of the Executive in the above stated capacities, and Executive is desirous of having such assurance; NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: ARTICLE 1. TERM OF EMPLOYMENT The Company hereby agrees to employ the Executive and the Executive hereby agrees to continue to serve the Company, in accordance with the terms and conditions set forth herein, for an initial period of three (3) years, commencing as of the Effective Date of this Agreement, as indicated above; subject, however, to earlier termination as expressly provided herein. The initial three (3) year period of employment automatically shall be extended for one (1) additional year at the end of the initial three (3) year term, and then again after each successive year thereafter. However, either party may terminate this Agreement at the end of the initial three (3) year period, or at the end of any successive one (1) year term thereafter, by giving the other party written notice of intent not to renew, delivered at least three (3) months prior to the end of such initial period or successive term. In the event such notice of intent not to renew is properly delivered, this Agreement, along with all corresponding rights, duties, and covenants, automatically shall expire at the end of the initial period or successive term then in progress. However, regardless of the above, if at any time during the initial period of employment, or successive term, a Change in Control of the Company occurs (as defined in Article 7 herein), then this Agreement shall become immediately irrevocable for the longer of: (a) two (2) years following the effective date of such Change in Control; or (b) until all obligations of the Company hereunder have been fulfilled, and until all benefits provided hereunder have been paid. 3 ARTICLE 2. POSITION AND RESPONSIBILITIES During the term of this Agreement, the Executive agrees to serve as Vice Chairman of the Company. In his capacity as Vice Chairman of the Company, the Executive shall report directly to the Chairman and Chief Executive Officer, and shall maintain the level of duties and responsibilities as in effect as of the Effective Date, or such higher level of duties and responsibilities as he may be assigned during the term of this Agreement. The Executive shall have the same status, privileges, and responsibilities normally inherent in such capacities in financial institutions of similar size and character. ARTICLE 3. STANDARD OF CARE During the term of this Agreement, the Executive agrees to devote substantially his full time, attention, and energies to the Company's business and shall not be engaged in any other business activity, whether or not such business activity is pursued for gain, profit, or other pecuniary advantage. However, subject to Article 9 herein, the Executive may serve as a director of other companies so long as such service is not injurious to the Company. The Executive covenants, warrants, and represents that he shall: (a) Devote his full and best efforts to the fulfillment of his employment obligations; and (b) Exercise the highest degree of loyalty and the highest standards of conduct in the performance of his duties. This Article 3 shall not be construed as preventing the Executive from investing assets in such form or manner as will not require his services in the daily operations of the affairs of the companies in which such investments are made. ARTICLE 4. COMPENSATION As remuneration for all services to be rendered by the Executive during the term of this Agreement, and as consideration for complying with the covenants herein, the Company shall pay and provide to the Executive the following: 4.1 BASE SALARY. The Company shall pay the Executive a Base Salary in an amount which shall be established from time to time by the Board of Directors of the Company or the Board's designee; provided, however, that such Base Salary shall not be less than Four Hundred Seven Thousand Five Hundred Dollars ($407,500.00) per year. This Base Salary shall be paid to the Executive in equal bimonthly installments throughout the year, consistent with the normal payroll practices of the Company. The annual Base Salary shall be reviewed at least annually following the Effective Date of this Agreement, while this Agreement is in force, to ascertain whether, in the judgment of the Board or the Board's designee, such Base Salary should be increased, based primarily on the performance of the Executive during the year and on the then current rate of inflation. If so increased, the Base Salary as stated above shall, likewise, be increased for all purposes of this Agreement. 4.2 ANNUAL BONUS. In addition to his salary, the Executive shall be entitled to participate in the Company's short-term incentive program, as such program may exist from time to time, at a level 2 4 commensurate with the Executive's position with the Company, as determined at the sole discretion of the Compensation Committee. 4.3 LONG-TERM INCENTIVES. The Executive shall be eligible to participate in the Company's 1996 Stock Incentive Plan, as such shall be amended or superseded from time to time, at a level commensurate with the Executive's position, as determined at the sole discretion of the Compensation Committee. 4.4 RETIREMENT BENEFITS. The Company shall provide to the Executive participation in all Company qualified defined benefit and defined contribution retirement plans, subject to the eligibility and participation requirements of such plans. The Executive's retirement benefits shall not be less than those that would be provided him under the terms of the Boatmen's Bancshares, Inc. Retirement Plan for Employees and the Boatmen's Supplemental Retirement Plan in effect as of the Effective Date, or as such benefits shall be increased, whether or not such benefits shall be decreased or eliminated. The obligations of the Company pursuant to this Section 4.4 shall survive the termination of this Agreement. 4.5 EMPLOYEE BENEFITS. The Company shall provide to the Executive all benefits to which other executives and employees of the Company are entitled, as commensurate with the Executive's position, subject to the eligibility requirements and other provisions of such arrangements. Such benefits shall include, but shall not be limited to, group term life insurance, comprehensive health and major medical insurance, dental and life insurance, and short-term and long-term disability. 4.6 PERQUISITES. The Company shall provide to the Executive, at the Company's cost, all perquisites which are suitable to the character of Executive's position with the Company and adequate for the performance of his duties hereunder. 4.7 RIGHT TO CHANGE PLANS. By reason of Sections 4.5 and 4.6 herein, the Company shall not be obligated to institute, maintain, or refrain from changing, amending, or discontinuing any benefit plan, or perquisite, so long as such changes are similarly applicable to executive employees generally. ARTICLE 5. EXPENSES The Company shall pay or reimburse the Executive for all ordinary and necessary expenses, in a reasonable amount, which the Executive incurs in performing his duties under this Agreement including, but not limited to, travel, entertainment, professional dues and subscriptions, and all dues, fees, and expenses associated with membership in various professional, business, and civic associations and societies in which the Executive's participation is in the best interest of the Company. ARTICLE 6. EMPLOYMENT TERMINATIONS 6.1 TERMINATION DUE TO RETIREMENT OR DEATH. In the event the Executive's employment is terminated while this Agreement is in force by reason of retirement (as defined or provided for under the then established rules of the Company's tax-qualified retirement plan), or death, the Executive's benefits shall be determined in accordance with the Company's retirement, survivor's benefits, insurance, and other applicable programs of the Company then in effect (provided, however, that such benefits shall be no less than those set forth in Section 4.4 herein) and, upon the effective date of such termination, the Company's obligation under this Agreement to provide to the Executive the elements of pay described in Sections 4.1, 3 5 4.2, and 4.3 shall immediately expire; provided, however, that the Executive shall receive all rights and benefits that he is vested in, pursuant to the Plan or Plans described in Section 4.3 herein and other plans and programs of the Company; and provided further, however, that any retirement during the periods set forth in Section 7.1 herein shall be subject to the provisions of Article 7 herein. 6.2 TERMINATION DUE TO DISABILITY. In the event that the Executive becomes Disabled (as defined below) during the term of this Agreement and is, therefore, unable to perform his duties herein for more than one hundred eighty (180) total calendar days during any period of twelve (12) consecutive months, or in the event of the Board's reasonable expectation that the Executive's Disability will exist for more than a period of one hundred eighty (180) calendar days, the Company shall have the right to terminate the Executive's active employment as provided in this Agreement. However, the Board shall deliver written notice to the Executive of the Company's intent to terminate for Disability at least thirty (30) calendar days prior to the effective date of such termination. A termination for Disability shall become effective upon the end of the thirty (30) day notice period. Upon such effective date, the Company's obligation to provide to the Executive the elements of pay described in Sections 4.1, 4.2, and 4.3 shall immediately expire; provided, however, that the Executive shall receive all rights and benefits that he is vested in, pursuant to the plan or plans described in Section 4.3 herein and to other plans and programs of the Company. The term "Disability" shall mean, for all purposes of this Agreement, the incapacity of the Executive, due to injury, illness, disease, or bodily or mental infirmity, to engage in the performance of substantially all of the usual duties of employment with the Company as contemplated by Article 2 herein, such Disability to be determined by the Board of Directors of the Company upon receipt of and in reliance on competent medical advice from one (1) or more individuals, selected by the Board, who are qualified to give such professional medical advice. It is expressly understood that the Disability of the Executive for a period of one hundred eighty (180) calendar days or less in the aggregate during any period of twelve (12) consecutive months, in the absence of any reasonable expectation that his Disability will exist for more than such a period of time, shall not constitute a failure by him to perform his duties hereunder and shall not be deemed a breach or default and the Executive shall receive full compensation for any such period of Disability or for any other temporary illness or incapacity during the term of this Agreement. 6.3 VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may terminate this Agreement at any time by giving the Board of Directors of the Company written notice of intent to terminate, delivered at least three (3) months prior to the effective date of such termination. Upon the effective date of such termination, following the expiration of the three (3) months notice period, the Company shall pay the Executive his full Base Salary, at the rate then in effect as provided in Section 4.1 herein, through the effective date of termination, plus all other benefits to which the Executive has a vested right at that time. In the event that the terms and provisions of Article 7 herein do not apply to such termination, the Company and the Executive thereafter shall have no further obligations under this Agreement except as provided in Section 4.4 and Article 9 herein. However, in the event the terms and provisions of Article 7 herein apply, the payments and benefits set forth therein shall apply. 4 6 6.4 INVOLUNTARY TERMINATION BY THE COMPANY WITHOUT CAUSE. At all times prior to six (6) full calendar months before the effective date of a Change in Control, or at any time more than two (2) years after the effective date of a Change in Control, the Board may terminate the Executive's employment, as provided under this Agreement, at any time, for reasons other than death or Disability, or for Cause, by notifying the Executive in writing of the Company's intent to terminate, at least thirty (30) calendar days prior to the effective date of such termination. Upon the effective date of such termination, following the expiration of the thirty (30) day notice period, the Company shall pay to the Executive a lump-sum cash payment equal to the greater of: (a) the Base Salary then in effect for the remaining term of this Agreement (assuming no additional extensions of this Agreement's term beyond that in effect as of the effective date of termination), together with continuation of health and welfare benefits for the remaining term of this Agreement; or (b) one (1) full year of his Base Salary in effect as of the effective date of termination, plus a one (1) year continuation of health and welfare benefits. Further, the Company shall pay the Executive all other benefits to which the Executive has a vested right at the time, according to the provisions of the governing plan or program. The Company and the Executive thereafter shall have no further obligations under this Agreement except as provided in Section 4.4 and Article 9 herein. If the Executive's employment is terminated during the periods set forth in Section 7.1 herein, the Executive shall be entitled to receive the benefits provided in Section 7.1 herein in lieu of the benefits set forth in this Section 6.4. 6.5 TERMINATION FOR CAUSE. Nothing in this Agreement shall be construed to prevent the Board from terminating the Executive's employment under this Agreement for "Cause." "Cause" shall be defined as conduct of the Executive which is finally adjudged to be knowingly fraudulent, deliberately dishonest or willful misconduct. The Company's Board of Directors, by majority vote, shall make the determination of whether Cause exists, after providing the Executive with notice of the reasons the Board believes Cause may exist and after giving the Executive the opportunity to respond to the allegation that Cause exists. In the event this Agreement is terminated by the Board for Cause, the Company shall pay the Executive his Base Salary through the effective date of the employment termination and the Executive shall immediately thereafter forfeit all rights and benefits (other than vested benefits) he would otherwise have been entitled to receive under this Agreement. The Company and the Executive thereafter shall have no further obligations under this Agreement except as provided in Article 9 herein. 6.6 TERMINATION FOR GOOD REASON. At any time during the term of this Agreement, the Executive may terminate this Agreement for Good Reason (as defined below) by giving the Board of Directors of the Company thirty (30) calendar days written notice of intent to terminate, which notice sets forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination. Upon the expiration of the thirty (30) day notice period, the Good Reason termination shall become effective, and the Company shall pay and provide to the Executive the benefits set forth in this Section 6.6 (or, in the event of termination for Good Reason within the six (6) full calendar month period prior to the 5 7 effective date of a Change in Control, or within two (2) years following the effective date of a Change in Control, the benefits set forth in Section 7.1 herein). Good Reason shall mean, without the Executive's express written consent, the occurrence of any one or more of the following: (a) The assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including offices, titles, and reporting requirements) as an officer of the Company, or a reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from those in effect during the immediately preceding fiscal year; (b) Without the Executive's consent, the Company's requiring the Executive to be based at a location which is at least fifty (50) miles further from the Executive's primary residence at the time such requirement is imposed than is such residence from the Company's office at which the Executive is primarily rendering services at such time, except for required travel on the Company's business to an extent substantially consistent with the Executive's business obligations as of the Effective Date; (c) A reduction by the Company in the Executive's Base Salary as in effect on the Effective Date, as provided in Section 4.1 herein, or as the same shall be increased from time to time; (d) A material reduction in the Executive's level of participation in any of the Company's short- and/or long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or arrangements in which the Executive participates as of the Effective Date; provided, however, that reductions in the levels of participation in any such plans shall not be deemed to be "Good Reason" if the Executive's reduced level of participation in each such program remains substantially consistent with the average level of participation of other executives who have positions commensurate with the Executive's position; or (e) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Section 10.1 herein. Upon a termination of the Executive's employment for Good Reason at any time other than the six (6) full calendar month period prior to the effective date of a Change in Control, or the two (2) years period following the effective date of a Change in Control, the Executive shall be entitled to receive the same payments and benefits as he is entitled to receive following an involuntary termination of his employment by the Company without Cause, as specified in Section 6.4 herein. The payment of Base Salary and pro rata Bonus shall be made to the Executive within thirty (30) calendar days following the effective date of employment termination. Upon a termination for Good Reason within the six (6) full calendar month period prior to the effective date of a Change in Control, or within the two (2) years following the effective date of a Change in Control, the Executive shall be entitled to receive the payments and benefits set forth in Section 7.1 herein in lieu of those set forth in this Section 6.6. The Executive's right to terminate employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued employment shall not 6 8 constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason herein. ARTICLE 7. CHANGE IN CONTROL 7.1 EMPLOYMENT TERMINATIONS IN CONNECTION WITH A CHANGE IN CONTROL. In the event of a Qualifying Termination (as defined below) within six (6) full calendar months prior to the effective date of a Change in Control, or within two years following the effective date of a Change in Control, then in lieu of all other benefits provided to the Executive under the provisions of this Agreement (other than the first sentence of Section 4.4 herein and without derogation of his rights to receive vested benefits under the Company's Amended 1982 Long Term Incentive Plan and the plan or plans described in Section 4.3 herein), the Company shall pay to the Executive and provide him with the following severance benefits (hereinafter referred to as the "Severance Benefits"): (a) An amount equal to three (3) times the highest rate of the Executive's annualized Base Salary rate in effect at any time up to and including the effective date of termination; (b) An amount equal to three (3) times the greater of: (i) the Executive's average annual bonus earned over the three (3) fiscal years prior to the Change in Control (whether or not deferred); or (ii) the Executive's target bonus established for the fiscal year in which the Executive's effective date of termination occurs; (c) An amount equal to the Executive's unpaid Base Salary and accrued vacation pay through the effective date of termination; (d) A continuation of the welfare benefits of medical insurance, dental insurance, and life insurance for three (3) full years after the effective date of termination. These benefits shall be provided to the Executive at the same premium cost, and at the same coverage level, as in effect as of the Executive's effective date of termination. However, in the event the premium cost and/or level of coverage shall change for all employees of the Company, the cost and/or coverage level, likewise, shall change for the Executive in a corresponding manner. The continuation of these welfare benefits shall be discontinued prior to the end of the three (3) year period in the event the Executive has available substantially similar benefits from a subsequent employer, as determined by the Company's Board of Directors or the Board's designee. (e) A lump-sum cash payment of the actuarial present value equivalent of the aggregate benefits accrued by the Executive as of the effective date of termination under the terms of any and all supplemental retirement plans in which the Executive participates (subject to the provisions of the second sentence of Section 4.4 herein). For this purpose, such benefits shall be calculated under the assumption that the Executive's employment continued following the effective date of termination for three (3) full years (i.e., three (3) additional years of age and service credits shall be added); provided, however, that for purposes of determining "final average pay" under such programs, the Executive's actual pay history as of the effective date of termination shall be used. 7 9 (f) A lump-sum cash payment of the entire balance of the Executive's compensation which has been deferred under the Company's nonqualified deferred compensation plan(s) together with all interest that has been credited with respect to such deferred compensation balance. For purposes of this Article 7, a Qualifying Termination shall mean any termination of the Executive's employment OTHER THAN: (1) by the Company for Cause (as provided in Section 6.5 herein); (2) by reason of death, Disability (as provided in Section 6.2 herein), or voluntary retirement; provided, however, that a termination which qualifies as a retirement and which occurs within the thirty (30) day period described in clause (3) of this Section 7.1 below will be deemed to be a Qualifying Termination); or (3) by the Executive without Good Reason (as provided in Section 6.6 herein, but specifically excluding voluntary terminations within the period beginning on the first anniversary of the effective date of the Change in Control and ending thirty (30) days after such date--i.e., any voluntary termination by the Executive within such period shall be deemed to be a Qualifying Termination). 7.2 DEFINITION OF "CHANGE IN CONTROL". A Change in Control of the Company shall be deemed to have occurred as of the first day any one or more of the following conditions shall have been satisfied: (a) Any individual, corporation (other than the Company), partnership, trust, association, pool, syndicate, or any other entity or any group of persons acting in concert becomes the beneficial owner, as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, of securities of the Company possessing twenty percent (20%) or more of the voting power for the election of directors of the Company; (b) There shall be consummated any consolidation, merger, or other business combination involving the Company or the securities of the Company in which holders of voting securities of the Company immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of the Company (or, if the Company does not survive such transaction, voting securities of the corporation surviving such transaction) having less than sixty percent (60%) of the total voting power in an election of directors of the Company (or such other surviving corporation); (c) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company's shareholders, of each new director of the Company was approved by a vote of at least two-thirds (2/3) of the directors of the Company then still in office who were directors of the Company at the beginning of any such period; or (d) There shall be consummated any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company (on a consolidated basis) to a party which is not controlled by or under common control with the Company. 8 10 7.3 EXCISE TAX EQUALIZATION PAYMENT. In the event that the Executive becomes entitled to Severance Benefits or any other payment or benefit under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), if any of the Total Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to the Executive in cash an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax upon the Total Payments and any Federal, state and local income tax and Excise Tax upon the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA), shall be equal to the Total Payments. Such payment shall be made by the Company to the Executive as soon as practical following the effective date of termination, but in no event beyond thirty (30) days from such date. 7.4 TAX COMPUTATION. For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amounts of such Excise Tax: (a) Any other payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company, or with any person (which shall have the meaning set forth in Section 3(a)(9) of the Securities Exchange Act of 1934, including a "group" as defined in Section 13(d) therein) whose actions result in a Change in Control of the Company or any person affiliated with the Company or such persons) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel as supported by the Company's independent auditors and acceptable to the Executive, such other payments or benefits (in whole or in part) do not constitute parachute payments, or unless such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; (b) The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of: (i) the total amount of the Total Payments; or (ii) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (a) above); and (c) The value of any noncash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the effective date of termination, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. 9 11 7.5 SUBSEQUENT RECALCULATION. In the event the Internal Revenue Service adjusts the computation of the Company under Section 7.4 herein so that the Executive did not receive the greatest net benefit, the Company shall reimburse the Executive for the full amount necessary to make the Executive whole, plus a market rate of interest, as determined by the Committee. ARTICLE 8. OUTPLACEMENT ASSISTANCE Following a Qualifying Termination (as defined in Section 7.1 herein) the Executive shall be reimbursed by the Company for the costs of all outplacement services obtained by the Executive; provided, however, that the total reimbursement shall be limited to an amount equal to fifteen percent (15%) of the Executive's Base Salary as of the effective date of termination. ARTICLE 9. NONCOMPETITION 9.1 PROHIBITION ON COMPETITION. Without the prior written consent of the Company, during the term of this Agreement, and for twelve (12) months following the expiration or other termination of this Agreement the Executive shall not, as an employee or an officer, engage directly or indirectly in any business or enterprise which is "in competition" with the Company or its successors or assigns. For purposes of this Agreement, a business or enterprise will be deemed to be "in competition" if it is engaged in any significant business activity of the Company or its subsidiaries within the state (or states, if changed from time to time) within which, during the two (2) years immediately preceding such termination of employment, the Executive has been principally engaged in business for the Company or its subsidiaries. However the Executive shall be allowed to purchase and hold for investment less than three percent (3%) of the shares of any corporation whose shares are regularly traded on a national securities exchange or in the over-the-counter market. 9.2 DISCLOSURE OF INFORMATION. The Executive recognizes that he has access to and knowledge of certain confidential and proprietary information of the Company which is essential to the performance of his duties under this Agreement. The Executive will not, during or after the term of his employment by the Company, in whole or in part, disclose such information to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever, nor shall he make use of any such information for his own purposes. 9.3 COVENANTS REGARDING OTHER EMPLOYEES. During the term of this Agreement, and for a period of twenty four (24) months following the expiration of this Agreement, the Executive agrees not to attempt to induce any employee of the Company to terminate his or her employment with the Company, to accept employment with any competitor of the Company, or to interfere in a similar manner with the business of the Company. ARTICLE 10. ASSIGNMENT 10.1 ASSIGNMENT BY COMPANY. This Agreement may and shall be assigned or transferred to, and shall be binding upon and shall inure to the benefit of, any successor of the Company, and any such successor shall be deemed substituted for all purposes for the "Company" under the terms of this Agreement. As used in this Agreement, the term "successor" shall mean any person, firm, corporation, or business entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all of the assets 10 12 or the business of the Company. Notwithstanding such assignment, the Company shall remain, with such successor, jointly and severally liable for all its obligations hereunder. Failure of the Company to obtain the agreement of any successor to be bound by the terms of this Agreement prior to the effectiveness of any such succession shall be a breach of this Agreement, and shall immediately entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled in the event of a termination of employment for Good Reason within two (2) years after a Change in Control, as provided in Article 7 herein. Except as herein provided, this Agreement may not otherwise be assigned by the Company. 10.2 ASSIGNMENT BY EXECUTIVE. The services to be provided by the Executive to the Company hereunder are personal to the Executive, and the Executive's duties may not be assigned by the Executive; provided, however that this Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, and administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amounts payable to the Executive hereunder remain outstanding, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, in the absence of such designee, to the Executive's estate. ARTICLE 11. DISPUTE RESOLUTION AND NOTICE 11.1 DISPUTE RESOLUTION. The Executive shall have the right and option to elect to have any good faith dispute or controversy arising under or in connection with this Agreement settled by litigation or by arbitration. If arbitration is selected, such proceeding shall be conducted before a panel of three (3) arbitrators sitting in a location selected by the Executive within fifty (50) miles from the location of his principal place of employment, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrators in any court having competent jurisdiction. 11.2 NOTICE. Any notices, requests, demands, or other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company or, in the case of the Company, at its principal offices. ARTICLE 12. MISCELLANEOUS 12.1 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or understandings, oral or written, between the parties hereto, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto. Without limiting the generality of the foregoing sentence, this Agreement completely replaces and supersedes any and all prior employment agreements entered into by and between the Company and the Executive, and all amendments thereto, in their entirety. 12.2 MODIFICATION. This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by the parties hereto or their legal representatives. 11 13 12.3 SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 12.4 COUNTERPARTS. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 12.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all Federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. 12.6 BENEFICIARIES. The Executive may designate one or more persons or entities as the primary and/or contingent beneficiaries of any amounts to be received under this Agreement. Such designation must be in the form of a signed writing acceptable to the Board or the Board's designee. The Executive may make or change such designation at any time. 12.7 PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation to make the payments and the arrangement provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 7.1(d) herein. 12.8 CONTRACTUAL RIGHTS TO BENEFITS. This Agreement establishes and vests in the Executive a contractual right to the benefits to which he is entitled hereunder. However, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder. 12.9 PAYMENT OF LEGAL FEES. To the extent permitted by law, the Company shall pay all legal fees, costs of arbitration and litigation, prejudgment interest, and other expenses incurred in good faith by the Executive as a result of the Company's refusal to provide the benefits to which the Executive becomes entitled under this Agreement, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict between the parties pertaining to this Agreement. 12 14 ARTICLE 13. GOVERNING LAW To the extent not preempted by Federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the state of Missouri. IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement, pursuant to Compensation Committee approval and ratification by the Board of Directors, as of the Effective Date. BOATMEN'S BANCSHARES, INC. EXECUTIVE: By: /s/ Arthur J. Fleischer /s/ Gregory L. Curl --------------------------------- ------------------------------ 13 EX-10.(H) 11 CHANGE-IN-CONTROL SEVERANCE PLAN 1 EXHIBIT 10(h) CHANGE-IN-CONTROL SEVERANCE PLAN (TIER II) BOATMEN'S BANCSHARES, INC. JANUARY 30, 1996 2 CONTENTS - ---------------------------------------------------------------------------------
PAGE Article 1. Establishment, Term, and Purpose. . . . . . . . . . . . . . . . . 1 Article 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Article 3. Participation . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Article 4. Severance Benefits. . . . . . . . . . . . . . . . . . . . . . . . 4 Article 5. Form and Timing of Severance Benefits . . . . . . . . . . . . . . 6 Article 6. Excise Tax Equalization Payment . . . . . . . . . . . . . . . . . 6 Article 7. The Company's Payment Obligation. . . . . . . . . . . . . . . . . 7 Article 8. Legal Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 8 Article 9. Outplacement Assistance . . . . . . . . . . . . . . . . . . . . . 8 Article 10. Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . 8 Article 11. Successors and Assignment. . . . . . . . . . . . . . . . . . . . 9 Article 12. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 9
i 3 BOATMEN'S BANCSHARES, INC. CHANGE-IN-CONTROL SEVERANCE PLAN ARTICLE 1. ESTABLISHMENT, TERM, AND PURPOSE 1.1. ESTABLISHMENT OF THE PLAN. Boatmen's Bancshares, Inc. (hereinafter referred to as the "Company") hereby establishes a change in control severance plan to be known as the "Boatmen's Bancshares, Inc. Change-in-Control Severance Plan" (the "Plan"). The Plan is effective as of January 30, 1996 (the "Effective Date"). 1.2. TERM OF THE PLAN. This Plan will commence on the Effective Date and shall continue in effect for three (3) full years. However, at the end of such three-year (3) period and, if extended, at the end of each additional year thereafter, the term of this Plan shall be extended automatically for one (1) additional year, unless the Committee delivers written notice three (3) months prior to the end of such term, or extended term, to each Participant, that the Plan will not be extended. In such case, the Plan will terminate at the end of the term, or extended term, then in progress. However, in the event a Change in Control occurs during the original or any extended term, this Plan will remain in effect for the longer of: (i) two (2) years following the effective date of the Change in Control; (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to Participants. 1.3. PURPOSE OF THE PLAN. The purpose of the Plan is to provide certain key employees of the Company employment protection and financial security in the event of a Change in Control of the Company. ARTICLE 2. DEFINITIONS Whenever used in this Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized: (a) "Base Salary" means the salary of record paid to a Participant as annual salary, excluding amounts received under incentive or other bonus plans, whether or not deferred. (b) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (c) "Beneficiary" means the persons or entities designated or deemed designated by a Participant pursuant to Section 12.2 herein. (d) "Board" means the Board of Directors of the Company. (e) "Cause" shall be defined as conduct of a Participant which is finally adjudged to be knowingly fraudulent, deliberately dishonest or willful 4 misconduct. The Committee shall make the determination of whether Cause exists, after providing the Participant with notice of the reasons the Committee believes Cause may exist and after giving the Participant the opportunity to respond to the allegation that Cause exists. (f) "Change in Control" of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied: (i) Any individual, corporation (other than the Company), partnership, trust, association, pool, syndicate, or any other entity or any group of persons acting in concert becomes the Beneficial Owner of securities of the Company possessing twenty percent (20%) or more of the voting power for the election of directors of the Company; (ii) There shall be consummated any consolidation, merger, or other business combination involving the Company or the securities of the Company in which holders of voting securities of the Company immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of the Company (or, if the Company does not survive such transaction, voting securities of the corporation surviving such transaction) having less than sixty percent (60%) of the total voting power in an election of directors of the Company (or such other surviving corporation); (iii) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company's shareholders, of each new director of the Company was approved by a vote of at least two-thirds (2/3) of the directors of the Company then still in office who were directors of the Company at the beginning of any such period; or (iv) There shall be consummated any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company (on a consolidated basis) to a party which is not controlled by or under common control with the Company. (g) "Code" means the United States Internal Revenue Code of 1986, as amended. 2 5 (h) "Committee" means the Compensation Committee of the Board, or any other committee appointed by the Board to perform the functions of the Compensation Committee. (i) "Company" means Boatmen's Bancshares, Inc., a Missouri corporation (including any and all subsidiaries), or any successor thereto as provided in Article 11 herein. (j) "Disability" shall mean, for all purposes of this Plan, the incapacity of a Participant, due to injury, illness, disease, or bodily or mental infirmity, to engage in the performance of substantially all of the usual duties of employment with the Company, such Disability to be determined by the Committee upon receipt of and in reliance on competent medical advice from one (1) or more individuals, selected by the Committee, who are qualified to give such professional medical advice. The Disability of the Participant for a period of one hundred eighty (180) calendar days or less in the aggregate during any period of twelve (12) consecutive months, in the absence of any reasonable expectation that his Disability will exist for more than such a period of time, shall not constitute a failure by him to perform his duties hereunder. (k) "Effective Date" means the date of this Plan set forth above. (l) "Effective Date of Termination" means the date on which a Qualifying Termination occurs which triggers the payment of Severance Benefits hereunder. (m) "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. (n) "Good Reason" shall mean, without the Participant's express written consent, the occurrence of any one or more of the following: (i) The assignment of the Participant to duties materially inconsistent with the Participant's authorities, duties, responsibilities, and status (including offices, titles,and reporting requirements) as an employee of the Company, or a reduction or alteration in the nature or status of the Participant's authorities, duties, or responsibilities from those in effect during the immediately preceding fiscal year; (ii) Without the Participant's consent, the Company's requiring the Participant to be based at a location which is at least fifty (50) miles further from the Participant's primary residence at the time such requirement is imposed than is such residence from the Company's office at which the Participant is primarily rendering services at such time, except for required travel on the Company's 3 6 business to an extent substantially consistent with the Participant's business obligations as of the Effective Date; (iii) A reduction by the Company in the Participant's Base Salary as in effect on the Effective Date or as the same shall be increased from time to time; (iv) A material reduction in the Participant's level of participation in any of the Company's short- and/or long- term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or arrangements in which the Participant participates as of the Effective Date; provided, however, that reductions in the levels of participation in any such plans shall not be deemed to be "Good Reason" if the Participant's reduced level of participation in each such program remains substantially consistent with the average level of participation of other executives who have positions commensurate with the Participant's position; or (v) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Plan, as contemplated in Article 11 herein. (o) "Participant" means an employee of the Company who fulfills the eligibility and participation requirements, as provided in Article 3 herein. (p) "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d). (q) "Plan" means this ChangeinControl Severance Plan. (r) "Qualifying Termination" means any of the events described in Section 4.3 herein, the occurrence of which triggers the payment of Severance Benefits hereunder. (s) "Retirement" shall have the meaning ascribed to such term in the Company's tax-qualified retirement plan. (t) "Severance Benefits" means the payment of severance compensation as provided in Section 4.4 herein. ARTICLE 3. PARTICIPATION 3.1. ELIGIBLE EMPLOYEES. Individuals eligible to participate in the Plan shall include all key employees of the Company, as determined by the Committee in its sole discretion. 4 7 3.2. PARTICIPATION. Subject to the terms of the Plan, the Committee may, from time to time select from all eligible employees those who shall participate in the Plan, effective as to each upon the execution of a Participation Agreement in the form attached hereto. ARTICLE 4. SEVERANCE BENEFITS 4.1. RIGHT TO SEVERANCE BENEFITS. A Participant shall be entitled to receive from the Company Severance Benefits, as described in Section 4.4 herein, if there has been a Change in Control of the Company and if, within the six (6) full calendar month period prior to the effective date of a Change in Control, or within two (2) years following the effective date of a Change in Control, the Participant's employment with the Company shall end for any reason specified in Section 4.3 herein. Participants shall not be entitled to receive Severance Benefits if they are terminated for Cause, or if their employment with the Company ends due to death or Disability, or due to a voluntary termination of employment by the Participant without Good Reason. 4.2. SERVICES DURING CERTAIN EVENTS. In the event a Person begins a tender or exchange offer, circulates a proxy to shareholders of the Company, or takes other steps seeking to effect a Change in Control, each Participant agrees that he or she will not voluntarily leave the employ of the Company and will render services until such Person has abandoned or terminated his or its efforts to effect a Change in Control, or until six (6) months after a Change in Control has occurred; provided, however, that the Company may terminate the Participant's employment for Cause at any time, and the Participant may terminate his or her employment any time for Good Reason. 4.3. QUALIFYING TERMINATION. The occurrence of any one or more of the following events within the six (6) full calendar month period prior to the effective date of a Change in Control, or within two (2) years following the effective date of Change in Control of the Company, shall trigger the payment of Severance Benefits to a Participant under this Plan: (a) An involuntary termination of the Participant's employment by the Company for reasons other than Cause, a voluntary termination of employment by the Participant for Good Reason or a voluntary termination (including voluntary Retirement) within the period beginning on the first anniversary of the effective date of the Change in Control and ending thirty (30) days after such date; (b) A successor company fails or refuses to assume the Company's obligations under this Plan, as required by Article 11 herein; or (c) The Company or any successor company breaches any of the provisions of this Plan. 5 8 4.4. DESCRIPTION OF SEVERANCE BENEFITS. In the event that a Participant becomes entitled to receive Severance Benefits, as provided in Sections 4.1 and 4.3 herein, the Company shall pay to the Participant and provide him or her with the following: (a) An amount equal to two (2) times the highest rate of the Participant's annualized Base Salary rate in effect at any time up to and including the Effective Date of Termination; (b) An amount equal to two (2) times the greater of: (i) the Participant's average annual bonus earned over the three (3) full fiscal years prior to the Effective Date of Termination; or (ii) the Participant's target annual bonus established for the bonus plan year in which the Participant's Effective Date of Termination occurs; (c) An amount equal to the Participant's unpaid Base Salary and accrued vacation pay through the Effective Date of Termination; (d) A continuation of the welfare benefits of medical insurance, dental insurance, and life insurance for two (2) full years after the Effective Date of Termination. These benefits shall be provided to Participants at the same premium cost, and at the same coverage level, as in effect as of the Participant's Effective Date of Termination. However, in the event the premium cost and/or level of coverage shall change for all employees of the Company, the cost and/or coverage level, likewise, shall change for each Participant in a corresponding manner. The continuation of these welfare benefits shall be discontinued prior to the end of the two (2) year period in the event the Participant has available substantially similar benefits from a subsequent employer, as determined by the Committee; (e) A lump-sum cash payment of the actuarial present value equivalent of the aggregate benefits accrued by the Participant as of the Effective Date of Termination under the terms of any and all supplemental retirement plans in which the Participant participates. For this purpose, such benefits shall be calculated under the assumption that the Participant's employment continued following the Effective Date of Termination for two (2) full years (i.e., two (2) additional years of age and service credits shall be added); provided, however, that for purposes of determining "final average pay" under such programs, the Participant's actual pay history as of the effective date of termination shall be used; and (f) A lump-sum cash payment of the entire balance of the Participant's compensation which has been deferred under the Company's nonqualified deferred compensation plan(s) together with all interest that has been credited with respect to such deferred compensation balance. 6 9 4.5. TERMINATION FOR DISABILITY. If a Participant's employment is terminated due to Disability, the Participant shall receive his or her Base Salary through the Effective Date of Termination, at which point in time the Participant's benefits shall be determined in accordance with the Company's disability, retirement, insurance, and other applicable plans and programs then in effect. 4.6. TERMINATION FOR RETIREMENT OR DEATH. If a Participant's employment is terminated by reason of his or her voluntary Retirement (except as set forth in Section 4.3(a) herein) or death, the Participant's benefits shall be determined in accordance with the Company's retirement, survivor's benefits, insurance, and other applicable programs of the Company then in effect. 4.7. TERMINATION FOR CAUSE OR BY A PARTICIPANT OTHER THAN FOR GOOD REASON OR RETIREMENT. If a Participant's employment is terminated either: (i) by the Company for Cause; or (ii) by the Participant other than for Retirement or Good Reason, the Company shall pay the Participant his or her full Base Salary and accrued vacation through the Effective Date of Termination, at the rate then in effect, plus all other amounts to which the Participant is entitled under any compensation plans of the Company, at the time such payments are due, and the Company shall have no further obligations to the Participant under this Plan. 4.8. NOTICE OF TERMINATION. Any termination by the Company for Cause or any Qualifying Termination by a Participant shall be communicated by Notice of Termination. For purposes of this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Plan relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participant's employment under the provision so indicated. ARTICLE 5. FORM AND TIMING OF SEVERANCE BENEFITS 5.1. FORM AND TIMING OF SEVERANCE BENEFITS. The Severance Benefits described in Sections 4.4(a), 4.4(b), 4.4(c), 4.4(e), and 4.4(f) herein shall be paid in cash to the Participant in a single lump sum as soon as practicable following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 5.2. WITHHOLDING OF TAXES. The Company shall be entitled to withhold from any amounts payable under this Plan all taxes as legally shall be required (including, without limitation, any United States Federal taxes, and any other state, city, or local taxes). ARTICLE 6. EXCISE TAX EQUALIZATION PAYMENT 6.1. EXCISE TAX EQUALIZATION PAYMENT. In the event that a Participant becomes entitled to Severance Benefits or any other payment or benefit under this Plan, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), if any of the Total Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to the Participant in cash an additional amount (the "Gross-Up 7 10 Payment") such that the net amount retained by the Participant after deduction of any Excise Tax upon the Total Payments and any Federal, state and local income tax and Excise Tax upon the Gross-Up Payment provided for by this Section 6.1 (including FICA and FUTA) shall be equal to the Total Payments. Such payment shall be made by the Company to the Participant as soon as practical following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 6.2. TAX COMPUTATION. For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amounts of such Excise Tax: (a) Any other payments or benefits received or to be received by the Participant in connection with a Change in Control of the Company or the Participant's termination of employment (whether pursuant to the terms of this Plan or any other plan, arrangement, or agreement with the Company, or with any Person whose actions result in a Change in Control of the Company or any Person affiliated with the Company or such Persons) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless, in the opinion of tax counsel as supported by the Company's independent auditors and acceptable to the Participant, such other payments or benefits (in whole or in part) do not constitute parachute payments, or unless such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; (b) The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of: (i) the total amount of the Total Payments; or (ii) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (a) above); and (c) The value of any noncash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Participant shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Participant's residence on the Effective Date of Termination, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. 6.3. SUBSEQUENT RECALCULATION. In the event the Internal Revenue Service adjusts the computation of the Company under Section 6.2 herein so that the Participant did not receive the greatest net benefit, the Company shall reimburse the Participant for 8 11 the full amount necessary to make the Participant whole, plus a market rate of interest, as determined by the Committee. ARTICLE 7. THE COMPANY'S PAYMENT OBLIGATION 7.1. PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against Participants or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from Participants or from whomsoever may be entitled thereto, for any reasons whatsoever. Participants shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Plan, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Plan, except to the extent provided in Section 4.4(d) herein. 7.2. CONTRACTUAL RIGHTS TO BENEFITS. This Plan establishes and vests in each Participant a contractual right to the benefits to which he or she is entitled hereunder. However, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder. ARTICLE 8. LEGAL REMEDIES 8.1. PAYMENT OF LEGAL FEES. To the extent permitted by law, the Company shall pay all legal fees, costs of litigation, prejudgment interest, and other expenses incurred in good faith by the Participant as a result of the Company's refusal to provide the Severance Benefits to which the Participant becomes entitled under this Plan, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Plan, or as a result of any conflict between the parties pertaining to this Plan. 8.2. ARBITRATION. Participants shall have the right and option to elect (in lieu of litigation) to have any dispute or controversy arising under or in connection with this Plan settled by arbitration, conducted before a panel of three (3) arbitrators sitting in a location selected by the Participant within fifty (50) miles from the location of his job with the Company, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. All expenses of such arbitration, including the fees and expenses of the counsel for the Participant, shall be borne by the Company. ARTICLE 9. OUTPLACEMENT ASSISTANCE 9 12 Following a Qualifying Termination (as described in Section 4.3 herein) the Participant shall be reimbursed by the Company for the costs of all outplacement services obtained by the Participant; provided, however, that the total reimbursement shall be limited to an amount equal to fifteen percent (15%) of the Participant's Base Salary as of the Effective Date of Termination. ARTICLE 10. NONCOMPETITION 10.1. PROHIBITION ON COMPETITION. Without the prior written consent of the Company, for twelve (12) months following the termination of Participant's employment with the Company, Participants shall not, as an employee or an officer, engage directly or indirectly in any business or enterprise which is "in competition" with the Company or its successors or assigns. For purposes of this Plan, a business or enterprise will be deemed to be "in competition" if it is engaged in any significant business activity of the Company or its subsidiaries within the state (or states, if changed from time to time) within which, during the two (2) years immediately preceding such termination of employment, Participant has been principally engaged in business for the Company or its subsidiaries. However Participants shall be allowed to purchase and hold for investment less than three percent (3%) of the shares of any corporation whose shares are regularly traded on a national securities exchange or in the over-the-counter market. 10.2. DISCLOSURE OF INFORMATION. Participants recognize that they have access to and knowledge of certain confidential and proprietary information of the Company which is essential to the performance of their duties as employees of the Company. Participants will not, during or after the term of their employment by the Company, in whole or in part, disclose such information to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever, nor shall they make use of any such information for their own purposes. 10.3. COVENANTS REGARDING OTHER EMPLOYEES. During the term of this Plan, and for a period of two (2) years following the termination of a Participant's employment, each Participant agrees not to attempt to induce any employee of the Company to terminate his or her employment with the Company, to accept employment with any competitor of the Company, or to interfere in a similar manner with the business of the Company. ARTICLE 11. SUCCESSORS AND ASSIGNMENT 11.1. SUCCESSORS TO THE COMPANY. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof to expressly assume and agree to perform the Company's obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effective date of any such 10 13 succession shall be a breach of this Plan and shall entitle Participants to compensation from the Company in the same amount and on the same terms as they would be entitled to hereunder if they had terminated their employment with the Company voluntarily for Good Reason. For the purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Effective Date of Termination. 11.2. ASSIGNMENT BY THE PARTICIPANT. This Plan shall inure to the benefit of and be enforceable by each Participant's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If a Participant dies while any amount would still be payable to him or her hereunder had he or she continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan, to the Participant's Beneficiary. If the Participant has not named a Beneficiary, then such amounts shall be paid to the Participant's devisee, legatee, or other designee, or if there is no such designee, to the Participant's estate. ARTICLE 12. MISCELLANEOUS 12.1. EMPLOYMENT STATUS. Except as may be provided under any other agreement between a Participant and the Company, the employment of the Participant by the Company is "at will," and, prior to the effective date of a Change in Control, may be terminated by either the Participant or the Company at any time, subject to applicable law. 12.2. BENEFICIARIES. Each Participant may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any Severance Benefits owing to the Participant under this Plan. Such designation must be in the form of a signed writing acceptable to the Committee. Participants may make or change such designations at any time. 12.3. GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular, and the singular shall include the plural. 12.4. SEVERABILITY. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Plan are not part of the provisions hereof and shall have no force and effect. 12.5. MODIFICATION. The Committee may, in addition to the power of termination given it in Section 1.2 herein, amend and modify the Plan; provided, however, that no provision of this Plan may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by each affected Participant and by an authorized member of the Committee, or by the respective parties' legal representatives and successors. 11 14 12.6. APPLICABLE LAW. To the extent not preempted by the laws of the United States, the laws of the state of Missouri shall be the controlling law in all matters relating to this Plan. 12 15 BOATMEN'S BANCSHARES, INC. CHANGE-IN-CONTROL SEVERANCE PLAN (TIER II) PARTICIPATION AGREEMENT THIS AGREEMENT is made as of -------------------, ------ between Boatmen's Bancshares, Inc. (the "Company") and --------------------------- ("Participant"). The Company and the Participant mutually agree as follows: 1. The Participant has received a copy of the Boatmen's Bancshares, Inc. Change-in-Control Severance Plan ( the "Plan") and has read and understands the Plan. 2. By completion of the Agreement, the Participant agrees to comply with the terms of the Plan in all respects. 3. All provisions of the Plan are hereby made a part of this Agreement. BOATMEN'S BANCSHARES, INC. By: --------------------------------------- PARTICIPANT ------------------------------------------- ------------------------------------------- (Type or Print Name of Participant) 13 EX-10.(J) 12 EXECUTIVE DEFERRED COMPENSATION PLAN 1 EXHIBIT 10(j) BOATMEN'S BANCSHARES, INC. EXECUTIVE DEFERRED COMPENSATION PLAN WHEREAS, Boatmen's Bancshares, Inc., a Missouri corporation ("Boatmen's"), desires to provide a select group of employees with the opportunity to defer a portion of the salary and incentive compensation to be earned by them. WHEREAS, Boatmen's adopted the Boatmen's Executive Deferred Compensation Plan (the "Plan") on August 8, 1989, effective for deferrals of salary attributable to services rendered on or after January 1, 1990. WHEREAS, Boatmen's adopted the Boatmen's Executive Deferred Bonus Plan (the "Bonus Deferral Plan") on September 1, 1995. WHEREAS, Boatmen's desires to amend the Plan to incorporate the Bonus Deferral Plan, to make certain additional amendments with respect to the Plan, and to restate the Plan in its entirety. THEREFORE, effective February 8, 1996, Boatmen's hereby amends the Bonus Deferral Plan to incorporate it into the Plan and amends and restates the Plan as follows: ARTICLE I. DEFINITIONS Section 1.1. "Additions" means all amounts credited to the Participant's Deferred Compensation Account pursuant to Article IV herein. Section 1.2. "Annual Bonus" means any incentive award measured over a period not to exceed one year, payable by the Corporation to the Participant with respect to the Participant's services during such period. Section 1.3. "Base Salary" means the salary paid to a Participant by the Corporation with respect to services performed during any particular Plan Year before any reduction pursuant to this Plan, including commissions and amounts deferred by the Participant under the Boatmen's Thrift Incentive 401(k) Plan and pursuant to any salary reduction agreement under Section 125 of the Code. Section 1.4. "Beneficiary" means any person (including but not limited to any trust, estate, fiduciary, corporation, foundation, but excluding the Participant) designated by the Participant in a written document delivered to the Corporation to receive any benefit under the Plan after the death of the Participant all in accordance with the provisions herein. In the event the Participant fails to designate a beneficiary or if no such designated beneficiary is living upon 2 the death of the Participant or if, for any reason, such designation shall be legally ineffective, then in any of said events the amounts which would have been paid to the designated living beneficiary shall be paid to the trustee of the Participant's revocable living trust, and if none to the trustee of the Participant's testamentary trust, and if none to the personal representative of the estate of the Participant. Section 1.5. "Board of Directors" means the Board of Directors of Boatmen's. Section 1.6. "Boatmen's" means Boatmen's Bancshares, Inc., a Missouri corporation. Section 1.7. "Bonus Compensation" means the Annual Bonus and Long-Term Incentive Award eligible for deferral under the Plan. Section 1.8. "Code" means the Internal Revenue Code of 1986, as amended. Section 1.9. "Committee" means the Boatmen's Bancshares, Inc. Compensation Committee. Section 1.10. "Compensation" means (i) Base Salary, and (ii) Bonus Compensation. Section 1.11. "Corporation" means Boatmen's and, unless the context requires otherwise, all its subsidiaries and affiliates. Section 1.12. "Deferral Amount" means the portion of Compensation which the Participant elects to defer under the Plan for any Plan Year or Performance Period, as applicable. Section 1.13. "Deferred Compensation Account" means a bookkeeping account maintained by the Corporation for each Participant which reflects accumulated Deferral Amounts of the Participant, plus Additions thereto, calculated as set forth in Article IV herein. Section 1.14. "Disability" means such physical or mental disability as, in the opinion of a physician selected by the Committee, will prevent the Participant from ever resuming work of the same general nature as that which the Participant performed for the Corporation immediately prior to the Participant's disability or the duties of such other position or job which the Corporation makes available to the Participant and for which the Participant is qualified by reason of the Participant's training, education or experience. Section 1.15. "Employee" means an employee of the Corporation. Section 1.16. "Long-Term Incentive Award" means any cash incentive award measured over a period of greater than one year, payable by the Corporation to the Participant with respect to the Participant's services during such period. 2 3 Section 1.17. "Participant" means any Employee who meets the requirements specified in, and is selected for participation as provided in, Article II herein. Section 1.18. "Performance Period" means the period over which performance is measured for purposes of determining the Bonus Compensation payable by the Corporation to the Participant. The Performance Period for the Annual Bonus shall be equal to or less than one year and the Performance Period for the Long-Term Incentive Award shall be greater than one year. Section 1.19. "Plan" means this Boatmen's Bancshares, Inc. Executive Deferred Compensation Plan. Section 1.20. "Plan Year" means any twelve-month period commencing January 1. Section 1.21. "Retirement" means the termination of employment from the Corporation on or after attainment of age 55. Section 1.22. "Severe Financial Hardship" means any financial hardship resulting from extraordinary and unforeseeable circumstances arising as a result of one or more recent events beyond the control of the Participant, which is not or may not be relieved (i) through reimbursement or compensation by insurance or otherwise; (ii) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause Severe Financial Hardship; and (iii) by cessation of deferrals under the Plan. Severe Financial Hardship shall not include, by way of illustration only, financial hardship occasioned by a child's college tuition or the purchase of a home. ARTICLE II. ELIGIBILITY Section 2.1. Subject to the provisions of Section 2.2 herein, the Committee shall have the exclusive power to designate, on an annual basis, Participants from among those Employees who are eligible for participation in the Plan. Section 2.2. Eligibility for participation in the Plan shall be limited to a select group of Employees of the Corporation who are management or highly compensated employees within the meaning of Section 201(2) of the Employees Retirement Income Security Act of 1974, as amended. Section 2.3. Participants designated to participate in the Plan by the Committee shall indicate his or her agreement to the terms of the Plan by executing a Participation Agreement, the form of which is attached hereto as Exhibit A. Section 2.4. If an Employee ceases to be eligible for participation in the Plan for any reason prior to his termination of employment with the Corporation, the Participation Agreement 3 4 shall be terminated and no further benefit shall accrue under the Plan except as herein expressly granted. ARTICLE III. DEFERRAL OF COMPENSATION Section 3.1. Subject to the terms of the Plan, the Participant shall have the right to elect to defer, in increments of one percent (1%), (a) not less than two percent (2%) nor greater than thirty percent (30%) of the Participant's Base Salary for the Plan Year to which such election relates, and (b) not less than ten percent (10%) of the Participant's Bonus Compensation for the Performance Period to which such election relates; provided, however, that an Employee who first becomes eligible, and is designated, to participate in the Plan after the commencement of a Plan Year or Performance Period may only, with respect to such Plan Year or Performance Period, as applicable, elect to defer that portion of the Employee's Compensation which is attributable to services to be rendered after the filing of the Deferral Election Form(s) pursuant to Section 3.2 herein. The Deferral Election Form(s) shall be in the form attached hereto as Exhibit B through Exhibit D. Section 3.2. The Participant shall notify the Corporation of the election to defer a portion of the Participant's Compensation for any Plan Year or Performance Period, as applicable, by completing a Deferral Election Form(s). Section 3.3. For deferrals of Compensation to be effective, a separate Deferral Election Form for Base Salary, Annual Bonus and Long-Term Incentive Award, as applicable, must be received by the Corporation as follows: (i) for deferrals of Base Salary, prior to the first day of the Plan Year; and (ii) for deferrals of Bonus Compensation, within 30 calendar days after an eligible Employee is selected during the current Performance Period to which the election relates to participate in a cash incentive award bonus plan of the Corporation; provided, however, in the event an Employee first becomes eligible, and is designated, for participation in the Plan after the commencement of a Plan Year or Performance Period, such Employee must, in order to participate in the Plan for the remainder of such Plan Year or Performance Period, submit a Deferral Election Form(s) to the Corporation within 30 calendar days after the Employee becomes eligible to participate in the Plan during such partial Plan Year or Performance Period and such election shall be effective for Compensation attributable to services to be rendered after the date of the Deferral Election Form(s). Section 3.4. An election to defer Compensation under the Plan shall be irrevocable by the Participant with respect to the Plan Year or Performance Period to which such election relates. Section 3.5. The Compensation deferred under the Plan shall be credited to the Participant's Deferred Compensation Account no later than the last day of the month in which such Deferral Amount would otherwise have been paid to the Participant. 4 5 ARTICLE IV. ADDITIONS TO DEFERRAL AMOUNTS Section 4.1. The Corporation, on the last day of each month preceding the final distribution of benefits to the Participant, will credit the Participant's Deferred Compensation Account with Additions thereto. Additions shall be calculated by multiplying the balance of the Deferred Compensation Account as of the last day of each month by a rate which shall be equal to one-twelfth of the ten-year U.S. Treasury Bond rate on October 31 of the preceding Plan Year, as determined by the Committee; provided, however, that with respect to the deferral of Bonus Compensation for the Performance Period(s) ending December 31, 1995, Additions to the Participant's Deferred Compensation Account during 1996 shall be calculated by multiplying the balance of the Deferred Compensation Account attributable to such Bonus Compensation as of the last day of each month during that year by a rate which shall be equal to one-twelfth of the ten-year U.S. Treasury Bond rate on August 31, 1995, as determined by the Committee. ARTICLE V. PAYMENT OF DEFERRAL AMOUNTS Section 5.1. Except as otherwise provided in this Article V, the Deferral Amount and Additions thereto for each Plan Year or Performance Period, as applicable, shall be payable to the Participant at the time and in the manner specified in the Participation Agreement of the Participant and the Deferral Election Form(s) submitted by the Participant for such Plan Year or Performance Period. Section 5.2. The Deferral Amount and Additions thereto for each Plan Year shall be payable at the time and in the manner specified below: (a) Unless otherwise elected by the Participant as provided in Section 5.2(b) below, all amounts in the Participant's Deferred Compensation Account shall be payable to the Participant upon his Retirement in one of the following forms, as irrevocably elected by the Participant in the Participation Agreement: (i) a lump sum payable during the January following the effective date of the Participant's Retirement, or (ii) in a series of substantially equal yearly installments over a five, ten or fifteen year period payable in January of the year following the year in which the Participant's Retirement is effective and each January thereafter; provided, that, in the event the amount payable is $50,000 or less, a lump sum payment under Section 5.2(a)(i) shall be made instead. (b) Each Plan Year or Performance Period, as applicable, a Participant may irrevocably elect to have the Deferral Amount and Additions thereto for such Plan Year or Performance Period payable in a lump sum at least five years but not longer than fifteen years following the end of such Plan Year or Performance 5 6 Period, as specified in the Deferral Election Form; provided, however, that if the Participant's employment with the Corporation is terminated by reason of Retirement prior to the distribution to the Participant of all or part of his Deferred Compensation Account, the balance shall be paid to the Participant in accordance with Section 5.2(a). (c) Notwithstanding the election(s) made by the Participant on the Participation Agreement and the Deferral Election Form(s), if the Participant's employment by the Corporation is terminated by reason of the Participant's death or Disability, then all amounts in the Participant's Deferred Compensation Account shall be payable to the Participant or the Participant's Beneficiary, as applicable, in one lump sum payable no later than 30 days after the Participant's termination of employment with the Corporation. If death occurs after Retirement, then all amounts in the Participant's Deferred Compensation Account shall be payable to the Participant's Beneficiary in one lump sum, payable no later than 30 days after notification of the Participant's death. (d) Notwithstanding the election(s) made by the Participant on the Participation Agreement and the Deferral Election Form(s), if the Participant's employment by the Corporation is terminated for any reason other than the Participant's Retirement, death or Disability, then all amounts in the Participant's Deferred Compensation Account shall be payable to the Participant in one lump sum payable during the January following the effective date of the Participant's termination of employment with the Corporation. Section 5.3. The Committee shall have the authority to alter the timing or manner of payment of Deferral Amounts and Additions thereto in the event that the Participant establishes, to the satisfaction of the Committee, the existence of a Severe Financial Hardship. In the event of a Severe Financial Hardship, the Committee may, in its sole discretion, take any one or more of the following actions to the extent reasonably necessary to satisfy the hardship: (a) Authorize the cessation of deferrals by the Participant under the Plan for the remainder of the Plan Year or Performance Period to which the most recent Deferral Election Form relates; or (b) Provide that all, or a portion, of the amounts in the Deferred Compensation Account shall immediately be paid to the Participant in a lump sum cash payment; or (c) Provide for such other payment schedule as deemed appropriate by the Committee under the circumstances. The Committee's determination as to the existence of a Severe Financial Hardship and the actions to be taken as a result thereof shall be final, conclusive and non-appealable. 6 7 ARTICLE VI. CLAIMS Section 6.1. If a claim for benefits under the Plan is denied, the Committee will provide a written notice of the denial setting forth the specific reasons for the denial, a description of any additional material or information necessary for a claimant to perfect a claim, and an explanation of why such material or information is necessary and appropriate information as to the steps to be taken for a claim to be submitted for review. A claimant may request a review of a denial. Such request should be submitted to the Committee, in writing, within 60 days after receipt of the denial notice stating the reasons for requesting the review. A claimant may review pertinent documents and submit issues and comments in writing. A decision will be made on the review of the denial of a claim not later than 60 days after the Committee's receipt of a request for review unless specific circumstances require an extension of time for processing, in which case a decision shall be rendered as soon as possible but not later than 120 days after the receipt of a request for review. The decision on review will be in writing to the claimant and shall include specific reasons for the decision. ARTICLE VII. ADMINISTRATION Section 7.1. The Plan shall be administered by the Committee. The Committee shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan, including the power, in its sole discretion, to accelerate the payment of benefits under the Plan to any Participant or Beneficiary as provided in Section 5.3 hereof. Section 7.2. The Committee shall, with respect to the general management of the Plan, have the sole, final and absolute right to reconcile any inconsistency in the Plan, to interpret and construe the provisions of the Plan in all particulars in such manner and to such extent as it deems proper and to take all action and make all decisions and determinations necessary under the Plan or in connection with its administration, interpretation and application. Any interpretation or construction placed upon any term or provision of the Plan by the Committee, any decision of the Committee with regard to the eligibility of an employee to become a Participant, the rights of a Participant, former Participant or Beneficiary or any other person, any reconciliation of an inconsistency in the Plan made by the Committee and any other action, determination or decision whatsoever taken by the Committee, shall be final, conclusive and binding upon all persons or parties interested or concerned in the Plan. ARTICLE VIII. MISCELLANEOUS Section 8.1. The Corporation shall maintain a record of each Participant's accumulated Deferral Amounts and Additions thereto by means of a Deferred Compensation Account. Section 8.2. The Plan shall create a contractual obligation on the part of the Corporation to make payment from the Participants' Deferred Compensation Account when due. 7 8 Section 8.3. If a Participant becomes entitled to a distribution of benefits under the Plan, and if at such time the Participant has outstanding any debt, obligation, or other liability representing an amount owing to the Corporation, then the Corporation may offset such amount so owing against the amount of benefits otherwise distributable. Such determination shall be made by the Committee. Section 8.4. No Participant or party claiming an interest in Deferral Amounts and Additions thereto shall have any interest whatsoever in any specific asset of the Corporation. To the extent that any person acquires the right to receive payment of benefits from the Corporation under the Plan, such right shall be no greater than the rights of any unsecured general creditor of the Corporation. Section 8.5. Neither the Participant, his Beneficiary, heirs, assigns, trust, estate, nor any other person claiming through or under the Participant shall have any right to commute, encumber or dispose of the right to receive payments hereunder, all of which payments and the right thereto are expressly declared to be non- assignable and any such attempt at assignment shall be void and of no effect. Section 8.6. No provision of the Plan nor any action taken hereunder shall be construed as giving the Participant any right to be retained in the employ of the Corporation. Section 8.7. The Corporation shall, to the extent permitted by law, have the right to deduct from any payments of any kind with respect to the benefit otherwise due to the Participant any federal, state or local taxes of any kind required by law to be withheld from such payments. Section 8.8. The Plan shall be governed and construed in accordance with the laws of the State of Missouri. In the event any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of the Plan. ARTICLE IX. TERMINATION AND AMENDMENT Section 9.1. The Committee shall have full power and authority to amend, modify, alter or terminate the Plan in whole or in part; provided, however, that any such termination, modification or amendment shall not terminate or diminish any rights or benefits accrued by a Participant under the Plan as of the effective date of any such termination, modification or amendment. 8 9 EXHIBIT A BOATMEN'S EXECUTIVE DEFERRED COMPENSATION PLAN PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered as of the date stated below, by and between Boatmen's Bancshares, Inc. ("Boatmen's"), a Missouri corporation, and ------------------------ ("Participant"). Boatmen's and the Participant mutually agree as follows: 1. The Participant has received a copy of the Boatmen's Executive Deferred Compensation Plan ("Plan") and has read and understands the Plan. 2. By completion of this Agreement and the accompanying Deferral Election Form(s), the Participant agrees to comply with the terms of the Plan in all respects. 3. All provisions of the Plan are hereby made a part of this Agreement. If there is any conflict between the terms of this Agreement and the terms of the Plan, the Plan shall govern. 4. The Participant elects to defer the percentage of his/her Compensation (as defined in the Plan) indicated on the accompanying Deferral Election Form(s). 5. Subject to the terms of the Plan, for each subsequent Plan Year and/or Performance Period (as such terms are defined in the Plan), the Participant shall have the right to make a similar election to defer a portion of his/her Base Salary and Bonus Compensation. 6. The Participant is in no way obligated to make a deferral election in any Plan Year or Performance Period, as applicable, and the failure to elect for any Plan Year or Performance Period will not affect the Participant's right to do so in any subsequent Plan Year or Performance Period. 7. The Participant's Deferral Election Form(s) must be received by Boatmen's no later than the date(s) specified in the Plan. Any Deferral Election Form received after said date(s) shall be of no effect for purposes of the Plan. 8. Each Deferral Election Form, signed and dated by the Participant, shall be irrevocable. 10 9. Subject to the terms of the Plan, the Participant hereby elects to have all amounts in his/her Deferred Compensation Account (as defined in the Plan) payable following his/her Retirement (as defined in the Plan) --------- pursuant to the following benefits payment schedule: ------ single lump sum; ------ substantially equal yearly installments over a five (5) year period; ------ substantially equal yearly installments over a ten (10) year period; or ------ substantially equal yearly installments over a fifteen (15) year period. The Participant understands that the foregoing election shall be irrevocable. The Participant further understands that, in accordance with the Plan, benefits payable prior to his/her Retirement shall be paid in a single lump sum. 10. The Participant designates the following person as his/her Beneficiary (as defined in the Plan) under the Plan: Name: --------------------------------------------- Address: --------------------------------------------- --------------------------------------------- --------------------------------------------- Relationship to the Participant: ------------------------------------- 11. The Participant has the right to change his/her Beneficiary at any time by notifying Boatmen's in writing of such change in Beneficiary. BOATMEN'S BANCSHARES, INC. By:----------------------------------- Date:----------------------- By:----------------------------------- Date:----------------------- 11 EXHIBIT B BOATMEN'S BANCSHARES, INC. EXECUTIVE DEFERRED COMPENSATION PLAN BASE SALARY DEFERRAL ELECTION FORM -------- PLAN YEAR Please complete this form and return a signed copy to the [insert title of the designated individual] of Boatmen's Bancshares, Inc. ("Boatmen's") by [insert date]. ======================================================================= Name: SS#: ======================================================================= By completing this form and returning it to Boatmen's as indicated above, I hereby irrevocably elect to defer receipt of the percentage of my Base Salary (as defined in the Plan referred to below) indicated below for the year or portion thereof beginning on the later of January 1, ------ or the first payroll period commencing after the date of this Deferral Election Form and ending December 31, ------ (the "Plan Year"). This deferral shall be in accordance with the terms and provisions of the Boatmen's Bancshares, Inc. Executive Deferred Compensation Plan (the "Plan") and in the manner and amount set forth below. ======================================================================= AMOUNT OF THE BASE SALARY DEFERRAL - ----------------------------------------------------------------------- I hereby irrevocably elect to defer the following percentage of my Base Salary earned during the Plan Year: --------% of my Base Salary (select a percentage in increments of 1% -- minimum of 2%, maximum of 30%). ======================================================================= ======================================================================= LENGTH OF THE BASE SALARY DEFERRAL - ----------------------------------------------------------------------- I hereby irrevocably elect to defer my Base Salary until January following the year selected below: / /-------- THE YEAR OF MY RETIREMENT. (Amounts deferred until your Retirement shall be paid at the time and in the manner selected by you in your Participation Agreement with respect to the Plan.) / /-------- (A YEAR OCCURRING PRIOR TO MY RETIREMENT (AS DEFINED IN THE PLAN)). (Select a year at least five years but no more than fifteen years following the end of the Plan Year. Amounts deferred to a year prior to your Retirement shall be paid in one lump sum. If you retire prior to the year selected, payments shall commence in January following your Retirement at the time and in the manner selected by you in your Participation Agreement with respect to the Plan.) ======================================================================= - -------------------------------------------------- Participant's Signature Date 12 EXHIBIT C BOATMEN'S BANCSHARES, INC. EXECUTIVE DEFERRED COMPENSATION PLAN ANNUAL BONUS DEFERRAL ELECTION FORM -------- PERFORMANCE PERIOD Please complete this form and return a signed copy to the [insert title of the designated individual] of Boatmen's Bancshares, Inc. ("Boatmen's") by [insert date]. ======================================================================= Name: SS#: ======================================================================= By completing this form and returning it to Boatmen's as indicated above, I hereby irrevocably elect to defer receipt of the percentage of my Annual Bonus (as defined in the Plan referred to below) indicated below for the period beginning January 1, ------, and ending December 31, ------ (the "Performance Period"). This deferral shall be in accordance with the terms and provisions of the Boatmen's Bancshares, Inc. Executive Deferred Compensation Plan (the "Plan") and in the manner and amount set forth below. ======================================================================= AMOUNT OF THE ANNUAL BONUS DEFERRAL - ----------------------------------------------------------------------- I hereby irrevocably elect to defer the following percentage of my Annual Bonus earned during the Performance Period: --------% of my Annual Bonus (select a percentage in increments of 1% -- minimum of 10%). ======================================================================= ======================================================================= LENGTH OF THE ANNUAL BONUS DEFERRAL - ----------------------------------------------------------------------- I hereby irrevocably elect to defer my Annual Bonus until January following the year selected below: / /-------- THE YEAR OF MY RETIREMENT. (Amounts deferred until your Retirement shall be paid at the time and in the manner selected by you in your Participation Agreement with respect to the Plan.) / /-------- (A YEAR OCCURRING PRIOR TO MY RETIREMENT (AS DEFINED IN THE PLAN)). (Select a year at least five years but no more than fifteen years following the end of the Performance Period. Amounts deferred to a year prior to your Retirement shall be paid in one lump sum. If you retire prior to the year selected, payments shall commence in January following your Retirement at the time and in the manner selected by you in your Participation Agreement with respect to the Plan.) ======================================================================= - -------------------------------------------------- Participant's Signature Date 13 EXHIBIT D BOATMEN'S BANCSHARES, INC. EXECUTIVE DEFERRED COMPENSATION PLAN LONG-TERM INCENTIVE AWARD DEFERRAL ELECTION FORM -------- PERFORMANCE PERIOD Please complete this form and return a signed copy to the [insert title of the designated individual] of Boatmen's Bancshares, Inc. ("Boatmen's") by [insert date]. ======================================================================= Name: SS#: ======================================================================= By completing this form and returning it to Boatmen's as indicated above, I hereby irrevocably elect to defer receipt of the percentage of my Long-Term Incentive Award (as defined in the Plan referred to below) indicated below for the period beginning on January 1, ------, and ending December 31, ------ (the "Performance Period"). This deferral shall be in accordance with the terms and provisions of the Boatmen's Bancshares, Inc. Executive Deferred Compensation Plan (the "Plan") and in the manner and amount set forth below. ======================================================================= AMOUNT OF THE LONG-TERM INCENTIVE AWARD DEFERRAL - ----------------------------------------------------------------------- I hereby irrevocably elect to defer the following percentage of my Long-Term Incentive Award earned during the Performance Period: --------% of my Long-Term Incentive Award (select a percentage in increments of 1% -- minimum of 10%). ======================================================================= ======================================================================= LENGTH OF THE LONG-TERM INCENTIVE AWARD DEFERRAL - ----------------------------------------------------------------------- I hereby irrevocably elect to defer my Long-Term Incentive Award until January following the year selected below: / /-------- THE YEAR OF MY RETIREMENT. (Amounts deferred until your Retirement shall be paid at the time and in the manner selected by you in your Participation Agreement with respect to the Plan.) / /-------- (A YEAR OCCURRING PRIOR TO MY RETIREMENT (AS DEFINED IN THE PLAN)). (Select a year at least five years but no more than fifteen years following the end of the Performance Period. Amounts deferred to a year prior to your Retirement shall be paid in one lump sum. If you retire prior to the year selected, payments shall commence in January following your Retirement at the time and in the manner selected by you in your Participation Agreement with respect to the Plan.) ======================================================================= - -------------------------------------------------- Participant's Signature Date EX-10.(L) 13 1991 INCENTIVE STOCK OPTION PLAN 1 EXHIBIT 10(l) BOATMEN'S BANCSHARES, INC. 1991 INCENTIVE STOCK OPTION PLAN 1. PURPOSE - ------------------------------------------------------------------------------- The purpose of the 1991 Incentive Stock Option Plan (the "Plan") of Boatmen's Bancshares, Inc. (the "Corporation") is to provide increased incentive for certain key employees of the Corporation and its subsidiaries and to encourage them to acquire a proprietary interest in the Corporation. 2. SHARES - ------------------------------------------------------------------------------- The shares which may be issued under the Plan shall be limited to 4,000,000 (subject to adjustment as provided in Section 12) of the $1.00 par value common shares of the Corporation. Such shares may be either authorized but unissued shares or treasury shares. 3. ADMINISTRATION - ------------------------------------------------------------------------------- The Plan shall be administered by the Compensation Committee of the Corporation (the "Committee"), composed of three or more directors of the Corporation who are not officers or employees thereof. Members of the Committee shall be appointed by and shall serve at the pleasure of the Board of Directors. Subject to the express provisions of the Plan, the Committee shall have complete authority to determine the individuals to whom and the time or times when options shall be granted and when they may be exercised, to specify the terms and provisions of the options, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to the conduct of the Committee's affairs, and to make all other determination necessary or advisable for the administration of the Plan. All determinations by the Committee shall be conclusive. 2 4. ELIGIBILITY - ------------------------------------------------------------------------------- Options may be granted only to key employees of the Corporation or its subsidiaries, including but not limited to officers, whether or not they are directors of the Corporation or its subsidiaries. An option may not be granted to any person who, at the time the option is granted, owns, within the meaning of Section 424(d) of the Internal Revenue Code, more than 10% of the total combined voting power of all classes of stock of the Corporation or any of its subsidiaries, unless, at the time such option is granted, the option price is at least 110% of the fair market value of the shares subject to the option and such option by its terms is not exercisable after the expiration of five years from the date such option is granted. 5. OPTION PRICE - ------------------------------------------------------------------------------- The price per share for shares to be sold pursuant to an option shall be not less than the fair market value thereof on the date on which the option is granted, as determined by the Committee. 6. LIMITATIONS ON GRANTS PER EMPLOYEE - ------------------------------------------------------------------------------- The aggregate fair market value, determined at the time the option is granted, of the shares with respect to which options are exercisable for the first time by an employee during any calendar year (under all stock option plans of the Corporation and its subsidiaries to which the provisions of Section 422 of the Internal Revenue Code apply) shall not exceed $100,000. 7. OPTION PERIOD AND LIMITATIONS ON RIGHT TO EXERCISE - ------------------------------------------------------------------------------- An option by its terms may be exercised only during an option period commencing on the date on which the option is granted and ending ten years thereafter, provided, however, that the Committee may specify a period or periods within such option period during which one or more portions or all of the total number of shares to which such option relates may not be purchased; and except as set forth in Sections 10 and 11 hereof, no option may be exercised unless the optionee is then in the employ of the Corporation or of one of its subsidiaries and shall have been continuously so employed since the date of the grant of his option. 2 3 8. PAYMENT FOR SHARES - ------------------------------------------------------------------------------- Full payment for Shares purchased shall be made at the time of exercise of the option. Such payment shall be made in cash or, if authorized by the Committee in the option grant, in whole or in part in common shares of the Corporation valued at fair market value, as determined by the Committee. Options may be exercised in whole or in part. No shares will be issued until full payment therefor has been made and the optionee shall have none of the rights of a shareholder until such payment is made. 9. NON-TRANSFERABILITY OF OPTIONS - ------------------------------------------------------------------------------- An option granted under the Plan by its terms shall not be transferable otherwise than by will or by the laws of descent and distribution and shall be exercisable, during the lifetime of the optionee, only by the optionee, or the optionee's guardian or legal representative. 10. TERMINATION OF EMPLOYMENT - ------------------------------------------------------------------------------- If the employment of an optionee is terminated other than by reason of his death, he may exercise his option, to the extent that he was entitled to exercise it at the date of such termination of employment, at any time within three months after such termination or, in the case of an optionee who is disabled (within the meaning of Section 22(e)(3) of the Internal Revenue Code) within one year after such termination, provided that an optionee whose employment is terminated by reason of conduct which the Committee determines to have been knowingly fraudulent, deliberately dishonest or willful misconduct shall forfeit all rights hereunder and provided further that no exercise of any option may take place later than ten years from the date of grant of such option. No change in the duties of an optionee, while in the employ of the Corporation or one of its subsidiaries, or any transfer among them shall constitute termination of employment by the Corporation and its subsidiaries. Nothing in the Plan or in any option shall be deemed to create any limitation or restriction on such rights as the Corporation and its subsidiaries otherwise would have to terminate the employment of any person at any time for any reason. 3 4 11. DEATH OF OPTIONEE - ------------------------------------------------------------------------------- In the event of the death of an optionee, either while employed by the Corporation or within three months after termination of his employment, his option may be exercised to the extent that he was entitled to exercise it at the date of his death, by his estate, or by any person who acquired the right to exercise such option by bequest or inheritance or by reason of the death of the optionee, at any time, but in no event after ten years from the date of the grant of the option. 12. EFFECT OF CHANGE IN SHARES - ------------------------------------------------------------------------------- If there is any change in the shares of the Corporation by reason of stock dividends, split-ups or consolidations of shares, recapitalizations, mergers, consolidations, reorganizations, combinations or exchange of shares, the number and class of shares available for options and the number of shares subject to any outstanding option, and the price thereof, shall be appropriately adjusted by the Committee, provided, however, that if the Corporation shall issue additional capital stock of any class for consideration, there shall be no adjustment. 13. AMENDMENT OR TERMINATION - ------------------------------------------------------------------------------- Unless the Plan shall theretofore have been terminated as hereinafter provided, the Plan shall terminate on, and no option shall be granted hereunder after January 22, 2001 (ten years from the date of its adoption by the Board of Directors of the Corporation). The Board of Directors of the Corporation may, at any time prior to that date, terminate the Plan or make such modifications of the Plan as it may deem advisable. 4 5 14. REGULATORY AUTHORITY - ------------------------------------------------------------------------------- It is intended that options granted under the Plan shall be incentive stock options within the meaning of the provisions of Sections 421-425 of the Internal Revenue Code and the regulations issued thereunder and shall be entitled to the benefits afforded thereby. (References in the Plan to such provisions and regulations shall be deemed to refer as well to any enacted or issued in lieu thereof.) The Plan shall be administered in such a manner as to effectuate such intention and shall be construed and interpreted in accordance with such provisions and regulations. Each option grant shall be subject to, and no exercise of any option shall be effective unless and until there shall have been, compliance, to the extent the Committee shall deem advisable, with the requirements of all applicable Federal, state and other pertinent regulatory authority. 15. EFFECTIVE DATE OF PLAN - ------------------------------------------------------------------------------- The Plan shall be effective as of January 22, 1991 only if it shall be approved within twelve months thereafter by the shareholders of the Corporation as required by the Internal Revenue Code and the regulations issued thereunder and no option granted hereunder, if any, after such effective date but prior to such approval may be exercised unless and until such approval shall have been granted. 16. EFFECTIVE DATE OF PLAN - ------------------------------------------------------------------------------- The Plan shall be effective as of February 10, 1987, but no option or stock appreciation right granted hereunder, if any, may be exercised unless and until the Plan shall have been approved by the shareholders of the Corporation. 5 EX-10.(N) 14 1992 ANNUAL INCENTIVE BONUS PLAN 1 EXHIBIT 10(n) BOATMEN'S BANCSHARES, INC. 1992 ANNUAL INCENTIVE BONUS PLAN 1. Purpose ------- The purpose of the 1992 Annual Incentive Bonus Plan (the "Plan") of Boatmen's Bancshares, Inc. (the "Corporation") is to provide a means by which the Corporation and its subsidiaries shall be able to attract and retain key employees of exceptional ability, to provide such individuals with added incentives to make a maximum contribution of their efforts, initiative and skill toward the goal of greater profitability and to be competitive with other companies as to executive compensation. 2. Administration -------------- The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Corporation (the "Board"). Subject to the express provisions of the Plan, the Committee shall have complete authority to determine the individuals who shall be participants in the Plan, to determine the amount, if any, of the bonuses to be awarded to such participants, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to the conduct of the Committee's affairs and to make all other determinations necessary or advisable for the administration of the Plan. All determinations by the Committee shall be conclusive. 3. Eligibility ----------- Bonuses may be awarded only to designated participants in the Plan ("Participants") who, at the time of such designation, shall be key employees of the Corporation or its subsidiaries, including but not limited to officers, whether or not they are directors of the Corporation or its subsidiaries. The Committee shall designate Participants for each calendar year beginning with 1992 (each a "Performance Period") and such Participants may, but need not, be the same as those who were designated in any preceding year. 2 4. Awards ------ Not later than March 31, 1992, and thereafter during each Performance Period but not later than March 31 of such Performance Period, the Committee shall meet to designate Participants, if any, for such Performance Period. At each such meeting which occurs after the first Performance Period and at a meeting to be held during the year following the last Performance Period but not later than March 31 of such year, the Committee shall also award bonuses, if any, with respect to the prior Performance Period to some or all of the Participants (including those who have retired, died or become disabled) designated for such prior Performance Period. Both the designation of Participants and the award of bonuses shall be at the sole discretion of the Committee, provided that the award of any bonuses shall be based upon guidelines adopted by the Committee, setting forth maximum awards. In applying the guidelines, however, the Committee may take into consideration any special circumstances with respect to any and all Participants. 5. Mode of Payment of Award ------------------------ The Committee shall award each bonus in cash. Payment shall be made as soon as practicable after award. 6. No Contractual Right to Award ----------------------------- No Participant shall have any claim to be awarded or to receive any bonus and no director, member of the Committee, officer, employee, or other person shall have authority to enter into any agreement with any person for the award or payment of any incentive compensation hereunder or to make any representation or warranty with respect thereto. 7. No Guaranty of Employment ------------------------- Nothing in the Plan shall be deemed to create any limitation or restriction on such rights as the Corporation and its subsidiaries otherwise would have to terminate the employment of any person at any time for any reason. 2 3 8. Amendment or Termination ------------------------ The Plan shall be in effect with respect to consecutive Performance Periods until terminated. The Board may terminate the Plan and the Committee may make such modifications of the Plan as it may deem advisable. 9. Effective Date of Plan ---------------------- The Plan shall be effective as of January 1, 1992, as amended on January 30, 1996 and February 8, 1996. 10. Change in Control ----------------- Anything in Section 4 or elsewhere in the Plan to the contrary notwithstanding, in the event of a Change in Control of the Corporation, as defined below, during any Performance Period, the Committee may, prior to the Change in Control, award and pay bonuses for that Performance Period. "Change in Control" of the Corporation shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied: (i) Any individual, corporation (other than the Corporation), partnership, trust, association, pool, syndicate, or any other entity or any group of persons acting in concert becomes the beneficial owner, as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, of securities of the Corporation possessing twenty percent (20%) or more of the voting power for the election of directors of the Corporation; (ii) There shall be consummated any consolidation, merger, or other business combination involving the Corporation or the securities of the Corporation in which holders of voting securities of the Corporation immediately prior to such consummation own, as a group, immediately after such consummation, voting 3 4 securities of the Corporation (or, if the Corporation does not survive such transaction, voting securities of the corporation surviving such transaction) having less than sixty percent (60%) of the total voting power in an election of directors of the Corporation (or such other surviving corporation); (iii) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the directors of the Corporation cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Corporation's shareholders, of each new director of the Corporation was approved by a vote of at least two-thirds (2/3) of the directors of the Corporation then still in office who were directors of the Corporation at the beginning of any such period; or (iv) There shall be consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation (on a consolidated basis) to a party which is not controlled by or under common control with the Corporation. 4 EX-10.(O) 15 1996 STOCK INCENTIVE PLAN 1 EXHIBIT 10(o) 1996 STOCK INCENTIVE PLAN Boatmen's Bancshares, Inc. February 12, 1996 2 CONTENTS
PAGE Article 1. Establishment, Objectives, and Duration 1 Article 2. Definitions 1 Article 3. Administration 4 Article 4. Shares Subject to the Plan and Maximum Awards 5 Article 5. Eligibility and Participation 5 Article 6. Stock Options 6 Article 7. Stock Appreciation Rights 7 Article 8. Restricted Stock 8 Article 9. Performance Units and Performance Shares 10 Article 10. Performance Measures 11 Article 11. Beneficiary Designation 12 Article 12. Deferrals 12 Article 13. Rights of Employees 12 Article 14. Change in Control 12 Article 15. Amendment, Modification, and Termination 13 Article 16. Withholding 14 Article 17. Indemnification 14 Article 18. Successors 14 Article 19. Legal Construction 15
3 BOATMEN'S BANCSHARES, INC. 1996 STOCK INCENTIVE PLAN ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION 1.1 ESTABLISHMENT OF THE PLAN. Boatmen's Bancshares, Inc., (hereinafter referred to as the "Corporation") hereby establishes an incentive compensation plan to be known as the "Boatmen's Bancshares, Inc. 1996 Stock Incentive Plan" (hereinafter referred to as the "Plan"), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Shares and Performance Units. Subject to approval by the Corporation's stockholders, the Plan shall become effective as of February 12, 1996 (the "Effective Date") and shall remain in effect as provided in Section 1.3 hereof. 1.2 OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize the profitability and growth of the Corporation through incentives which are consistent with the Corporation's objectives and which link the interests of Participants to those of the Corporation's stockholders and to provide Participants with an incentive for excellence in individual performance. The Plan is further intended to provide flexibility to the Corporation in its ability to motivate, attract, and retain the services of Participants who make significant contributions to the Corporation's success and to allow Participants to share in the success of the Corporation. 1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as described in Section 1.1 hereof, and shall remain in effect, subject to the right of the Committee to amend or alter the Plan, or the Board of Directors to amend, alter or terminate the Plan at any time pursuant to Article 15 hereof, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may an Award be granted under the Plan on or after February 12, 2006. ARTICLE 2. DEFINITIONS Whenever used in the Plan, the following terms shall have the meanings set forth below, and, when the meaning is intended, the initial letter of the word shall be capitalized: 2.1 "AWARD" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Shares or Performance Units. 2.2 "AWARD AGREEMENT" means an agreement entered into by the Corporation and a Participant, or a written notification from the Corporation to a Participant, setting forth the terms and provisions applicable to Awards granted under this Plan. 2.3 "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. 2.4 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the Corporation. 4 2.5 "CHANGE IN CONTROL" of the Corporation shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied: (a) Any individual, corporation (other than the Corporation), partnership, trust, association, pool, syndicate, or any other entity or any group of persons acting in concert becomes the beneficial owner, as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act, of securities of the Corporation possessing twenty percent (20%) or more of the voting power for the election of directors of the Corporation; (b) There shall be consummated any consolidation, merger, or other business combination involving the Corporation or the securities of the Corporation in which holders of voting securities of the Corporation immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of the Corporation (or, if the Corporation does not survive such transaction, voting securities of the corporation surviving such transaction) having less than sixty percent (60%) of the total voting power in an election of directors of the Corporation (or such other surviving corporation); (c) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the directors of the Corporation cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Corporations shareholders, of each new director of the Corporation was approved by a vote of at least two-thirds (2/3) of the directors of the Corporation then still in office who were directors of the Corporation at the beginning of any such period; or (d) There shall be consummated any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation (on a consolidated basis) to a party which is not controlled by or under common control with the Corporation. 2.6 "CODE" means the Internal Revenue Code of 1986, as amended from time to time. 2.7 "COMMITTEE" means the Compensation Committee of the Board, as specified in Article 3 herein, or such other Committee as may be appointed by the Board to administer the Plan with respect to grants of Awards. 2.8 "CORPORATION" means Boatmen's Bancshares, Inc., and any successor thereto as provided in Article 18 herein, including, where the context requires, any and all Subsidiaries. 2.9 "COVERED EMPLOYEE" means a Participant who, as of the date of vesting and/or payout of an Award, as applicable, is one of the group of "covered employees," as defined in the regulations promulgated under Code Section 162(m), or any successor statute. 2.10 "DIRECTOR" means any individual who is a member of the Board of Directors of the Corporation. 2 5 2.11 "DISABILITY" shall have the meaning ascribed to such term in the Participant's governing long-term disability plan. 2.12 "EFFECTIVE DATE" shall have the meaning ascribed to such term in Section 1.1 hereof. 2.13 "EMPLOYEE" means any full-time, active employee of the Corporation. Directors who are not employed by the Corporation shall not be considered Employees under this Plan. 2.14 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto. 2.15 "FAIR MARKET VALUE" shall be determined on the basis of the closing sale price on the principal national market or securities exchange on which the Shares are traded or, if there is no such sale on the relevant date, then on the last previous day on which a sale was reported. 2.16 "FREESTANDING SAR" means an SAR that is granted independently of any Options, as described in Article 7 herein. 2.17 "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares granted under Article 6 herein, which is designated as an Incentive Stock Option and which is intended to meet the requirements of Code Section 422. 2.18 "NONQUALIFIED STOCK OPTION" OR "NQSO" means an option to purchase Shares granted under Article 6 herein and which is not intended to meet the requirements of Code Section 422. 2.19 "OPTION" means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6 herein. 2.20 "OPTION PRICE" means the price at which a Share may be purchased by a Participant pursuant to an Option. 2.21 "PARTICIPANT" means an Employee who has outstanding an Award granted under the Plan. 2.22 "PERFORMANCE-BASED EXCEPTION" means the performance-based exception from the tax deductibility limitations of Code Section 162(m). 2.23 "PERFORMANCE SHARE" means an Award, related to Share price, granted to a Participant, as described in Article 9 herein. 2.24 "PERFORMANCE UNIT" means an Award, not related to Share price, granted to a Participant, as described in Article 9 herein. 2.25 "PERIOD OF RESTRICTION" means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance objectives, or upon the occurrence of other events as determined by the Committee, at its discretion) and the Shares are subject to a substantial risk of forfeiture, as provided in Article 8 herein. 3 6 2.26 "PERSON" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) thereof. 2.27 "RESTRICTED STOCK" means an Award granted to a Participant pursuant to Article 8 herein. 2.28 "RETIREMENT" shall have the meaning ascribed to such term in the Corporation's tax-qualified defined benefit retirement plan. 2.29 "SHARES" means the shares of Common Stock of the Corporation. 2.30 "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted alone or in connection with a related Option, designated as an SAR, pursuant to the terms of Article 7 herein. 2.31 "SUBSIDIARY" means any corporation, partnership, joint venture or other entity in which the Corporation has a majority voting interest. 2.32 "TANDEM SAR" means an SAR that is granted in connection with a related Option pursuant to Article 7 herein, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled). ARTICLE 3. ADMINISTRATION 3.1 THE COMMITTEE. The Plan shall be administered by the Compensation Committee of the Board, or by any other Committee appointed by the Board, which Committee shall satisfy the outside director rules under Section 162(m) of the Code and any applicable and relevant rules under Section 16 of the Exchange Act, or any successor provisions. 3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the Corporation's Restated Articles of Incorporation or Bylaws, and subject to the provisions herein, the Committee shall have full power to select Employees who shall participate in the Plan; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instru- ment entered into under the Plan as they apply to Employees; (subject to Article 15 herein) amend or alter the Plan; establish, amend, or waive rules and regulations for the Plan's administration as they apply to Employees; and (subject to the provisions of Article 15 herein) amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan, as the Plan applies to Employees. As permitted by law, the Committee may delegate its authority. 3.3 DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Board shall be final, conclusive and binding on all parties. 4 7 ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS 4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as provided in Section 4.3 herein, the number of Shares hereby reserved for issuance to Participants under the Plan shall be six million (6,000,000). In addition, any Shares reserved for issuance under the Boatmen's Bancshares, Inc. 1987 Non-Qualified Stock Option Plan and the Boatmen's Bancshares, Inc. 1991 Incentive Stock Option Plan (together, the "Stock Option Plans") in excess of the number of Shares as to which awards have been granted under such Stock Option Plans, plus any Shares as to which awards under the Stock Option Plans may lapse, expire, terminate, or be canceled, shall also be reserved and available for issuance or reissuance under this Plan in any calendar year (subject to Section 4.2 herein). No further awards are to be granted under the Stock Option Plans; provided that any outstanding awards shall continue to remain outstanding in accordance with the terms thereof. Notwithstanding the foregoing, the maximum number of Shares of Restricted Stock granted pursuant to Article 8 herein shall be an amount equal to twenty-five percent (25%) of the total number of Shares reserved for issuance under the Plan. The following rules shall apply to grants of Awards under the Plan: (a) The maximum aggregate number of Shares with respect to which Options or SARS may be granted pursuant to any Award in any one fiscal year to any single Participant shall be three hundred thousand Shares (300,000). (b) The maximum aggregate cash payout with respect to Awards granted in any fiscal year which may be made to any Participant shall be three million dollars ($3,000,000). 4.2 LAPSED AWARDS. If any Award granted under this Plan is canceled, terminates, expires, or lapses for any reason (with the exception of the termination of a Tandem SAR upon exercise of the related Option, or the termination of a related Option upon exercise of the corresponding Tandem SAR), any Shares subject to such Award again shall be available for the grant of an Award under the Plan. 4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in corporate capitalization, such as a stock split, or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of the Corporation, any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368) or any partial or complete liquidation of the Corporation, such adjustment shall be made in the number and class of Shares which may be delivered under Section 4.1, in the number and class of and/or price of Shares subject to outstanding Awards granted under the Plan, and in the Award limits set forth in subsections 4.1(a) and 4.1(b), as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; provided, however, that the number of Shares subject to any Award shall always be a whole number. ARTICLE 5. ELIGIBILITY AND PARTICIPATION 5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all Employees of the Corporation, including Employees who are members of the Board. 5 8 5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees those to whom Awards shall be granted and shall determine the nature and amount of each Award. ARTICLE 6. STOCK OPTIONS 6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee. The Committee shall specify whether an Option granted under this Article 6 is intended to be an ISO within the meaning of Code Section 422, or an NQSO whose grant is intended not to fall under the provisions of Code Section 422. 6.2 AWARD AGREEMENT. Each Option grant may be evidenced by an Award Agreement that specifies the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine. 6.3 OPTION PRICE. The Option Price for each grant of an Option under this Plan shall be at least equal to one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted. 6.4 DURATION OF OPTIONS. Each Option granted to an Employee shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary date of its grant. 6.5 DIVIDEND EQUIVALENTS. The Committee may grant dividend equivalents in connection with Options granted under this Plan. Such dividend equivalents may be payable in cash or in Shares, upon such terms as the Committee, in its sole discretion, deems appropriate. 6.6 EXERCISE OF OPTIONS. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant. 6.7 PAYMENT. Options granted under this Article 6 shall be exercised by the delivery of a written notice of exercise to the Corporation, setting forth the number of Shares with respect to which the Option is to be exercised. The Option Price upon exercise of any Option shall be payable to the Corporation in full either: (a) in cash or its equivalent or (b), as permitted by the Committee, by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Price (provided that the Shares which are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price) or (c), as permitted by the Committee, by a combination of (a) and (b). The Committee also may allow cashless exercise as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. 6 9 As soon as practicable after receipt of a written notification of exercise and full payment, the Corporation shall deliver to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s). 6.8 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. 6.9 TERMINATION OF EMPLOYMENT. The Committee shall determine the extent to which the Participant shall have the right to exercise the Option following termination of the Participant's employment with the Corporation. Such provisions shall be determined in the sole discretion of the Committee, may be included in any Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination of employment. 6.10 NONTRANSFERABILITY OF OPTIONS. (a) INCENTIVE STOCK OPTIONS. No ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. (b) NONQUALIFIED STOCK OPTIONS. Except as may otherwise be provided in a Participant's Award Agreement, no NQSO granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as may otherwise be provided in a Participant's Award Agreement, all NQSOs granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant. ARTICLE 7. STOCK APPRECIATION RIGHTS 7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SAR. The Committee shall have complete discretion in determining the number of SARs granted to each Participant (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs. The grant price of a Freestanding SAR shall equal the Fair Market Value of a Share on the date of grant of the SAR. The grant price of Tandem SARs shall equal the Option Price of the related Option. 7.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. 7 10 7.3 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them. 7.4 SAR AGREEMENT. Each SAR grant may be evidenced by an Award Agreement that specifies the grant price, the term of the SAR, and such other provisions as the Committee shall determine. 7.5 TERM OF SARS. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that such term shall not exceed ten (10) years. 7.6 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Corporation in an amount determined by multiplying: (a) The difference between the Fair Market Value of a Share on the date of exercise over the grant price; by (b) The number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. 7.7 SECTION 16 REQUIREMENTS. Notwithstanding any other provision of the Plan, the Committee may impose such conditions on exercise of an SAR (including, without limitation, the right of the Committee to limit the time of exercise to specified periods) as may be required to satisfy the requirements of Section 16 of the Exchange Act (or any successor rule). 7.8 TERMINATION OF EMPLOYMENT. The Committee shall determine the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant's employment with the Corporation. Such provisions shall be determined in the sole discretion of the Committee, may be included in any Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of employment. 7.9 NONTRANSFERABILITY OF SARS. Except as may otherwise be provided in a Participant's Award Agreement, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as may otherwise be provided in a Participant's Award Agreement, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. ARTICLE 8. RESTRICTED STOCK 8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to Participants in such amounts as the Committee shall determine. 8.2 RESTRICTED STOCK AWARD AGREEMENT. Each Restricted Stock grant may be evidenced by an Award Agreement that specifies the Period(s) of Restriction, the number of Shares of Restricted Stock granted, and such other provisions as the Committee shall determine. 8 11 8.3 TRANSFERABILITY. Except as provided in this Article 8, the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant. 8.4 OTHER RESTRICTIONS. Subject to Article 11 herein, the Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock, restrictions based upon the achievement of specific performance objectives (Corporation- wide, business unit, and/or individual), time-based restrictions on vesting following the attainment of the performance objectives, and/or restrictions under applicable Federal or state securities laws. The Corporation shall retain the certificates representing Shares of Restricted Stock in the Corporation's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied. Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the applicable Period of Restriction. 8.5 VOTING RIGHTS. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares. 8.6 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may be credited with regular cash dividends paid with respect to the underlying Shares while they are so held. Such dividends may be paid currently, accrued as contingent cash obligations, or converted into additional shares of Restricted Stock, upon such terms as the Compensation Committee establishes. The Committee may apply any restrictions to the dividends that the Committee deems appropriate. Without limiting the generality of the preceding sentence, if the grant or vesting of Restricted Shares granted to a Covered Employee is designed to comply with the requirements of the Performance-Based Exception, the Committee may apply any restrictions it deems appropriate to the payment of dividends declared with respect to such Restricted Shares, such that the dividends and/or the Restricted Shares maintain eligibility for the Performance-Based Exception. In the event that any dividend constitutes a "derivative security" or an "equity security" pursuant to Rule 16(a) under the Exchange Act, such dividend shall be subject to a vesting period equal to the remaining vesting period of the Shares of Restricted Stock with respect to which the dividend is paid. 8.7 TERMINATION OF EMPLOYMENT. The Committee shall determine the extent to which the Participant shall have the right to retain unvested Restricted Shares following termination of the Participant's employment with the Corporation. Such provisions shall be determined in the sole discretion of the Committee, may be included in any Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock issued pursuant to the Plan, and may reflect distinctions 9 12 based on the reasons for termination of employment; provided, however that, except in the cases of terminations connected with a Change in Control and terminations by reason of death or Disability, the vesting of Shares of Restricted Stock which qualify for the Performance-Based Exception and which are held by Covered Employees shall not be accelerated. ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES 9.1 GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan, Performance Units and/or Performance Shares may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee. 9.2 VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance objectives in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Shares that will be paid out to the Participant. For purposes of this Article 9, the time period during which the performance objectives must be met shall be called a "Performance Period." 9.3 EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Shares shall be entitled to receive payout on the number and value of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives have been achieved. 9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES. Payment of earned Performance Units/Shares shall be made as soon as practicable follow- ing the close of the applicable Performance Period in a manner designated by the Committee, in its sole discretion. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Units/Shares in the form of cash or in Shares (or in a combination thereof) which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee. At the discretion of the Committee, Participants may be entitled to receive any dividends declared with respect to Shares which have been earned in connection with grants of Performance Units and/or Performance Shares which have been earned, but not yet distributed to Participants (such dividends shall be subject to the same accrual, forfeiture, and payout restrictions as apply to dividends earned with respect to Shares of Restricted Stock, as set forth in Section 8.6 herein). In addition, Participants may, at the discretion of the Committee, be entitled to exercise their voting rights with respect to such Shares. 9.5 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT. Unless determined otherwise by the Committee, in the event the employment of a Participant is terminated by reason of death, Disability, or Retirement during a Performance Period, the Participant shall receive a payout of the Performance Units/Shares which is prorated, as specified by the Committee in its discretion. Subject to Section 14.1 herein, payment of earned Performance Units/Shares shall be made at a time specified by the Committee in its sole discretion. Notwithstanding the foregoing but nevertheless subject to Section 14.1 herein, with respect to Covered Employees who retire during a Performance Period, payments shall 10 13 be made at the same time as payments are made to Participants who did not terminate employment during the applicable Performance Period. 9.6 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a Participant's employment terminates other than (a) for any reason set forth in Section 9.5 herein or (b) following a Change in Control, all Performance Units/Shares shall be forfeited by the Participant to the Corporation unless determined otherwise by the Committee. 9.7 NONTRANSFERABILITY. Except as provided in Article 11 herein or as may otherwise be provided in a Participant's Award Agreement, Performance Units/Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as may otherwise be provided in a Participant's Award Agreement, a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative. ARTICLE 10. PERFORMANCE MEASURES Unless and until the Committee proposes for shareholder vote and shareholders approve a change in the general performance measures set forth in this Article 10, the attainment of which may determine the degree of payout and/or vesting with respect to Awards to Covered Employees which are designed to qualify for the Performance-Based Exception, the performance measure(s) to be used for purposes of such grants shall be chosen from among the following alternatives: (a) Net Income; (b) Return on Equity; (c) Earnings per Share; (d) Return on Assets; (e) Total Shareholder Return; (f) Return on Investment; (g) Market Share; and (h) Expense Management. Subject to the terms of the Plan, each of these measures shall be defined by the Committee on a Corporation or Subsidiary basis, in comparison with peer group performance, and may include or exclude specified extraordinary items. The Committee shall have the discretion to adjust the determinations of the degree of attainment of the preestablished performance objectives; provided, however, that Awards which are designed to qualify for the Performance-Based Exception, and which are held by Covered Employees, may not be adjusted upward (but the Committee shall retain the discretion to adjust such Awards downward) and no such adjustment shall be made after a Change in Control. 11 14 In the event that applicable tax laws or regulations change to permit Committee discretion to alter, without adverse tax effects, the governing performance measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards which shall not qualify for the Performance-Based Exception, the Committee may make such grants without satisfying the requirements of Code Section 162(m). ARTICLE 11. BENEFICIARY DESIGNATION To the extent permitted by the Committee, each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Corporation, and will be effective only when filed by the Participant in writing with the Corporation during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. ARTICLE 12. DEFERRALS The Committee may permit or require a Participant to defer such Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Stock, or the satisfaction of any requirements or objectives with respect to Performance Units/Shares. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals. ARTICLE 13. RIGHTS OF EMPLOYEES 13.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right of the Corporation to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Corporation. 13.2 PARTICIPATION. No Employee shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. ARTICLE 14. CHANGE IN CONTROL 14.1 TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by applicable rules and regulations of any governing governmental agencies or national securities exchanges or markets: (a) Any and all Options and SARs granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term; (b) Any restriction periods and restrictions imposed on Restricted Shares shall lapse; provided, however, that the degree of vesting associated with Restricted Stock which has been conditioned upon the achievement of performance conditions pursuant to Section 8.4 herein shall be determined in the manner set forth in Section 14.1(c) herein; 12 15 (c) The vesting of all Performance Units and Performance Shares shall be accelerated as of the effective date of the Change in Control, and there shall be paid out in cash to Participants within thirty (30) days following the effective date of the Change in Control an amount based upon an assumed achievement of all relevant performance objectives at target levels, and upon the assumed completion of the Performance Period on the basis of information then available; provided, however, that in the event the Committee determines that actual performance to the date of the Change in Control exceeds targeted levels, the payouts shall be made at levels commensurate with such actual performance (determined by extrapolating such actual performance to the end of the Performance Period); and provided, further, that there shall not be an accelerated payout with respect to Awards of Performance Units or Performance Shares which qualify as "derivative securities" under Section 16 of the Exchange Act which were granted less than six (6) months prior to the effective date of the Change in Control if the effect thereof would be to cause liability under Section 16(b). 14.2 TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL PROVISIONS. Notwithstanding any other provision of this Plan or any Award Agreement provision, the provisions of this Article 14 may not be terminated, amended, or modified on or after the date of a Change in Control to affect adversely any Award theretofore granted under the Plan without the prior written consent of the Participant with respect to said Participant's outstanding Awards. ARTICLE 15. AMENDMENT, MODIFICATION, AND TERMINATION 15.1 AMENDMENT, MODIFICATION, AND TERMINATION. Subject to Section 14.2 herein, at any time and from time to time, the Committee may alter or amend, and the Board may terminate the Plan in whole or in part; provided, however, that no amendment which requires shareholder approval in order for the Plan to continue to comply with any applicable and relevant rules under Section 16 of the Exchange Act, including any successor to such rules, shall be effective unless such amendment shall be approved by the requisite vote of shareholders of the Corporation entitled to vote thereon. Neither the Committee nor the Board shall have the authority to cancel outstanding Awards and issue substitute Awards in replacement thereof. 15.2 ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR NONRECURRING EVENTS. Subject to any restriction required from time to time under the Code and applicable regulations on the exercise of upward discretion with respect to Awards which have been designed to comply with the Performance-Based Exception, the Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.3 hereof) affecting the Corporation or the financial statements of the Corporation or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. 15.3 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award. 13 16 15.4 COMPLIANCE WITH CODE SECTION 162(M). It is intended that, at all times when and with respect to all persons to whom at such times Code Section 162(m) is applicable, all Awards granted under this Plan shall comply with the requirements of Code Section 162(m); provided, however, that in the event the Committee determines, before making any Award or Awards, that such compliance is not desired with respect to such Award or Awards, then compliance with Code Section 162(m) will not be required with respect to such Award or Awards. In addition, in the event that changes are made to Code Section 162(m) or the regulations thereunder to permit greater flexibility with respect to any Award or Awards available under the Plan, the Committee may, subject to this Article 15, make any adjustments it deems appropriate to conform to such changes. ARTICLE 16. WITHHOLDING 16.1 TAX WITHHOLDING. The Corporation shall have the power and the right to deduct or withhold, or require a Participant to remit to the Corporation, an amount sufficient to satisfy Federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan. 16.2 SHARE WITHHOLDING. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Corporation withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be withheld on the transaction. All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate. ARTICLE 17. INDEMNIFICATION Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Corporation against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Corporation's approval, or paid by him or her in satisfaction of any judgement in any such action, suit, or proceeding against him or her, provided he or she shall give the Corporation an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Corporation's Restated Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Corporation may have to indemnify them or hold them harmless. ARTICLE 18. SUCCESSORS All obligations of the Corporation under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Corporation, whether the existence of such successor is the result of a direct or indirect purchase, of all or substantially all of the business and/or assets of the Corporation, or a merger, consolidation, or otherwise. 14 17 ARTICLE 19. LEGAL CONSTRUCTION 19.1 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 19.2 SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 19.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges or markets as may be required. 19.4 SECURITIES LAW COMPLIANCE. With respect to individuals subject to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of said Section 16 and any applicable rules and regulations thereunder. To the extent any provision of the plan or action by the Committee fails so to comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 19.5 GOVERNING LAW. To the extent not preempted by Federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the state of Missouri. 15 EX-13 16 PORTIONS OF ANNUAL REPORT 1 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- FINANCIAL COMMENTARY
The historical trends reflected in the restated financial information presented below are not reflective of anticipated future results. Table 1: Summary of Selected Financial Data - ------------------------------------------------------------------------------------------------------------------------ (in millions except per share data) 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------ Earnings Net interest income $1,214.1 $1,188.3 $1,125.6 $1,001.5 $845.4 Fully taxable equivalent (FTE) adjustment 34.6 37.2 37.5 35.9 38.6 Net interest income (FTE) basis 1,248.7 1,225.5 1,163.1 1,037.4 884.0 Provision for loan losses 46.7 25.3 63.9 139.5 118.0 Noninterest income 676.4 615.1 593.5 500.4 401.7 Noninterest expense 1,199.0 1,156.7 1,143.0 1,000.4 865.2 Net income 418.8 407.8 350.4 262.7 199.9 Net income before nonrecurring merger expenses 438.8 407.8 354.2 282.4 205.1 - ------------------------------------------------------------------------------------------------------------------------ Financial Position (at year end) Total assets $33,703.8 $32,878.0 $30,980.1 $28,353.3 $26,143.7 Securities 8,978.6 9,389.9 9,948.1 8,460.7 7,193.8 Loans 19,763.2 18,655.5 16,900.7 15,007.2 13,981.0 Reserve for loan losses 383.0 376.6 376.3 334.7 285.8 Deposits 25,932.1 25,384.1 23,951.6 22,723.2 20,826.0 Long-term debt 615.1 592.0 567.4 428.4 341.6 Equity 2,928.1 2,561.4 2,459.9 2,155.2 1,870.9 - ------------------------------------------------------------------------------------------------------------------------ Share Data Net income $3.25 $3.17 $2.75 $2.25 $1.78 Net income before nonrecurring merger expenses 3.41 3.17 2.78 2.42 1.83 Dividends paid 1.39 1.27 1.15 1.09 1.07 Book value (year end) 22.62 19.95 19.20 17.11 16.32 Tangible book value (year end) 19.95 17.55 16.53 15.28 14.57 Shares outstanding (year end) 129.4 128.4 128.1 126.0 114.7 Average shares outstanding 129.0 128.7 127.3 116.6 112.4 - ------------------------------------------------------------------------------------------------------------------------ Selected Financial Ratios Return on assets 1.28% 1.29% 1.20% .99% .81% Return on assets before nonrecurring merger expenses 1.34 1.29 1.21 1.06 .83 Return on equity 15.15 16.14 15.25 13.21 11.33 Return on equity before nonrecurring merger expenses 15.88 16.14 15.42 14.20 11.62 Net interest margin 4.26 4.35 4.46 4.35 4.01 Noninterest income/operating income 35.1 33.4 33.8 32.5 31.2 Efficiency ratio 62.3 62.8 65.1 65.1 67.3 Efficiency ratio before nonrecurring merger expenses 60.9 62.8 64.8 64.9 66.7 Capital ratios: Equity to assets 8.69 7.79 7.94 7.60 7.16 Risk-based capital: Tier I capital 11.30 10.90 10.93 10.55 10.11 Total capital 14.30 14.03 14.35 13.74 13.05 Tier I leverage ratio 7.95 7.35 6.93 6.84 6.43 Nonperforming loans to total loans .84 .73 1.13 1.85 2.41 Nonperforming assets to total loans and foreclosed property 1.00 1.06 1.80 2.74 3.69 Loan reserve to nonperforming loans 228.62 277.06 195.08 119.66 84.13 Net charge-offs to average loans .24 .15 .23 .75 .77 ======================================================================================================================== The fully taxable equivalent adjustments are calculated using the Federal statutory tax rate.
17 2 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- ACQUISITION OVERVIEW
Table 2: Acquisitions - ---------------------------------------------------------------------------------------------------------------------------------- Accounting Date State Assets Price Shares issued method - ---------------------------------------------------------------------------------------------------------------------------------- Completed Centerre Bancorporation 12/88 Missouri $ 5.0 billion $467 million stock 28.6 million Pooling RTC assisted--Community Federal S&L 12/90 Missouri 2.3 billion 27 million cash -- Purchase First Interstate Bank of Oklahoma, N.A. 8/91 Oklahoma .9 billion 86 million cash -- Purchase Founders Bancorporation, Inc. 3/92 Oklahoma .3 billion 34 million cash -- Purchase Superior Federal Bank 3/92 Arkansas .7 billion -- -- Purchase RTC assisted--Home Federal S&L 3/92 Arkansas .1 billion 1 million cash -- Purchase First Interstate of Iowa, Inc. 4/92 Iowa 1.2 billion 94 million stock 4.2 million Pooling FDIC assisted--Jackson Exchange Bank 5/92 Missouri .1 billion 1 million cash -- Purchase Sunwest Financial Services, Inc. 10/92 New Mexico 3.4 billion 325 million stock 14.8 million Pooling Security Bank and 1st Bank of Catoosa in Tulsa 11/92 Oklahoma .2 billion 33 million cash -- Purchase FDIC assisted--First City-El Paso 3/93 Texas .3 billion 14 million cash -- Purchase FDIC assisted--Missouri Bridge Bank, N.A. 4/93 Missouri 1.1 billion 16 million cash -- Purchase RTC assisted--Cimarron Federal Savings 5/93 Oklahoma .4 billion 13 million cash -- Purchase FCB Bancshares, Inc. 8/93 Kansas .2 billion 25 million cash -- Purchase First Amarillo Bancorporation, Inc. 11/93 Texas .8 billion 192 million stock 5.9 million Pooling Woodland Bancorporation, Inc. 3/94 Oklahoma .1 billion 12 million stock .4 million Pooling Eagle Management and Trust Company 5/94 Texas -- 3 million cash -- Purchase Dalhart Bancshares, Inc. 1/95 Texas .1 billion 23 million stock .7 million Pooling National Mortgage Company 1/95 Tennessee .2 billion 153 million stock 5.0 million Pooling Worthen Banking Corporation 2/95 Arkansas 3.5 billion 595 million stock 17.1 million Pooling Salem Community Bancorp, Inc. 2/95 Illinois .1 billion 8 million stock .3 million Purchase West Side Bancshares, Inc. 4/95 Texas .1 billion 18 million stock .6 million Purchase First National Bank in Pampa 5/95 Texas .2 billion 42 million stock 1.4 million Pooling Citizens Bancshares Corporation 10/95 Arkansas .2 billion 41 million stock 1.1 million Purchase - ---------------------------------------------------------------------------------------------------------------------------------- Total assets of completed transactions $21.5 billion ================================================================================================================================== Pending at December 31, 1995 Fourth Financial Corporation Kansas $ 7.5 billion $ 1.2 billion stock 31.9 million Pooling Tom Green National Bank Texas .1 billion 9 million stock .2 million Purchase - ---------------------------------------------------------------------------------------------------------------------------------- Total assets of pending transactions $ 7.6 billion ================================================================================================================================== Assumes conversion of existing preferred stock to approximately 3.4 million shares of common stock.
Over the last several years the Corporation has made numerous acquisitions establishing leading market positions in Missouri, Arkansas and New Mexico, and sizable presences in southern Illinois, western Tennessee, Oklahoma and northern Texas. As illustrated in Table 2, during the period 1988-1995, the Corporation completed 24 acquisitions aggregating $21.5 billion in assets. The acquisition program has three objectives: geographic diversification, growth in retail market share, and additional earnings generation capacity. The Corporation's geographic profile provides significant credit and economic risk diversification in that the Corporation is not significantly dependent on any major market. In 1995, the Corporation completed seven acquisitions in four states aggregating $4.4 billion in total assets and announced two other acquisitions aggregating approximately $7.6 billion in assets, which are expected to be completed in the first quarter of 1996. The Corporation's operations currently span nine states, with services delivered from over 500 branch locations and over 1,000 ATM's. After consummation of the pending acquisition of Fourth Financial Corporation, the Corporation will also have the leading market position in Kansas and Oklahoma. A summary of the acquisitions consummated in 1995 and those currently pending follows. Arkansas Acquisitions On February 28, 1995, the Corporation acquired Worthen Banking Corporation (Worthen), headquartered in Little Rock, Arkansas, in a transaction accounted for as a pooling of interests. Under terms of the agreement the Corporation exchanged one share of its common stock for each Worthen share, resulting in the issuance of 17.1 million shares. Worthen was the second largest banking organization in Arkansas, with approximately $3.5 billion in assets, operating 101 retail banking offices throughout Arkansas and six offices in the Austin, Texas area. The acquisition of Worthen increased the Corporation's asset base in Arkansas to over $4 billion, making the Corporation the market leader in Arkansas. On October 27, 1995, the Corporation 18 3 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- acquired Citizens Bancshares Corporation (Citizens), located in Jonesboro, Arkansas, in a stock transaction accounted for as a purchase. The acquisition of Citizens, with assets of approximately $225 million, resulted in the issuance of approximately 1.1 million shares of common stock from treasury stock acquired in the open market. Mortgage Banking Acquisition On January 31, 1995, the Corporation acquired National Mortgage Company and certain affiliates (National Mortgage), headquartered in Memphis, Tennessee, in a transaction accounted for as a pooling of interests. Under terms of the agreement, the Corporation exchanged 5.0 million shares of its common stock for all of the stock of National Mortgage. At the date of announcement, the transaction had a value of approximately $153 million, which represented 1.2% of National Mortgage's mortgage servicing portfolio. National Mortgage is a full-service mortgage banking company which originates home loans through company-operated offices as well as through a network of over 300 correspondents located in the southern and midwestern United States, and presently services mortgage loans totaling approximately $23 billion. Texas Acquisitions On January 31, 1995, the Corporation acquired Dalhart Bancshares, Inc. (Dalhart), with assets of approximately $140 million, in a pooling transaction involving the issuance of .7 million shares of Boatmen's common stock for all of the shares of Dalhart. On April 1, 1995, the Corporation acquired West Side Bancshares, Inc. (West Side), a one bank holding company located in San Angelo, Texas, in a stock transaction accounted for as a purchase. The acquisition of West Side, with assets of approximately $142 million, resulted in the issuance of .6 million shares of common stock. [Asset Growth-Assets as Originally Reported graph] On May 31, 1995, the Corporation acquired First National Bank in Pampa (Pampa), with assets of approximately $166 million, in a pooling transaction involving the issuance of 1.35 million shares of Boatmen's common stock for all of the shares of Pampa. On August 30, 1995, the Corporation announced a definitive agreement to acquire Tom Green National Bank, located in San Angelo, Texas, in a stock transaction to be accounted for as a purchase. The acquisition of Tom Green National Bank, with assets of approximately $80 million, will result in the issuance of .2 million shares of common stock from treasury stock acquired in the open market. This acquisition is expected to be completed in the first quarter of 1996. Illinois Acquisition On February 28, 1995, the Corporation acquired Salem Community Bancorp, Inc. (Salem), a one bank holding company located in Salem, Illinois, in a stock transaction accounted for as a purchase, resulting in the issuance of .3 million shares of common stock. Salem had two locations and approximately $80 million in assets. Kansas Acquisition (Pending) On August 25, 1995, the Corporation announced a definitive agreement to acquire Fourth Financial Corporation (Fourth Financial), headquartered in Wichita, Kansas, in a transaction to be accounted for as a pooling of interests. Under terms of the agreement, the Corporation will exchange one share of its common stock for each Fourth Financial share, resulting in the issuance of approximately 31.9 million shares of common stock, including 3.4 million shares from the anticipated conversion of outstanding preferred stock. Fourth Financial is the largest banking company in Kansas, with approximately $7.5 billion in assets, operating 87 retail banking offices in Kansas and 56 in Oklahoma. The acquisition of Fourth Financial will give the Corporation the leading deposit market share in Kansas and Oklahoma, and is expected to be completed in the first quarter of 1996.
Table 3: Asset Distribution - ------------------------------------------------------------------ December 31, 1995 % of (in billions) Assets total Locations - ------------------------------------------------------------------ Missouri $17.5 52% 167 Arkansas 4.8 14 153 New Mexico 3.3 10 66 Texas 2.3 7 34 Oklahoma 1.9 6 37 Iowa 1.2 3 27 Illinois 1.1 3 21 Tennessee .9 3 15 Kansas .2 1 3 Credit card .5 1 - ------------------------------------------------------------------ Total $33.7 100% 523 ==================================================================
Table 4: Nonrecurring Merger Expenses - ------------------------------------------------------------------ (in millions) - ------------------------------------------------------------------ Investment banking, legal, and other professional fees $ 9.7 Equipment and software write-offs, and branch closings 6.4 Compensation costs 4.6 Other 5.3 - ------------------------------------------------------------------ Total $26.0 ==================================================================
Nonrecurring Merger Expenses The acquisitions of Worthen, National Mortgage, Dalhart and Pampa necessitated recognition of pre-tax nonrecurring merger expenses totalling $26.0 million, consisting primarily of investment banking, legal and other professional fees, severance and retention costs, obsolete equipment write-offs and estimated costs to close duplicate branches. The major components of the merger expenses are quantified in Table 4. [Equity Growth-Equity as Originally Reported graph] 19 4 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- EARNINGS OVERVIEW
Table 5: Summary of Business Components - ------------------------------------------------------------------------------------------------------------------------------------ Banking Trust Mortgage Other Consolidated ------------------------------------------------------------------------------------------------------- % % % % % (in millions) 1995 1994 change 1995 1994 change 1995 1994 change 1995 1994 change 1995 1994 change - ------------------------------------------------------------------------------------------------------------------------------------ Net interest income (FTE) $1,241 $1,229 1% $ 12 $ 9 33 % $25 $12 108% $(29) $(25) (16)% $1,249 $1,225 2% Provision for loan losses 47 25 84 47 25 84 Noninterest income 405 384 6 187 172 9 78 56 39 6 3 100 676 615 10 Noninterest expense 899 933 (4) 141 115 23 68 69 (1) 65 40 63 1,173 1,157 1 Net income $ 439 $ 411 7% $ 36 $ 41 (12)% $22 $(1) $(58) $(43) (35)% $ 439 $ 408 8% ==================================================================================================================================== Includes costs of unallocated overhead and debt service. Excludes nonrecurring merger expenses.
Net income, before the impact of nonrecurring merger expenses, increased 7.6% in 1995, to $438.8 million, compared to an increase of 15.1% in 1994. On a per share basis, net income increased 7.6% to $3.41, compared to an increase of 14.0% in 1994. The earnings growth in 1995 reflected higher net interest income and noninterest income, offset in part by an increase in the provision for loan losses and higher noninterest expense. The increase in 1994 was primarily attributable to higher net interest income and noninterest income, as well as a lower provision for loan losses. Net income, including nonrecurring merger expenses, totaled $418.8 million or $3.25 per share in 1995, compared to $407.8 million in 1994 and $350.4 million in 1993. Net income in 1995 was reduced by after-tax merger expenses totaling $20.0 million or $.16 per share, and net income in 1993 was reduced by after-tax merger expenses totaling $3.8 million or $.03 per share. Including merger expenses, net income increased 2.7% in 1995 and 16.4% in 1994. Previously reported financial statements of prior periods have been restated to reflect the pooling-of-interests acquisitions which were completed in 1995. The purchase acquisitions completed during the period had no material impact on results of operations. The return on average assets before nonrecurring merger expenses was 1.34% in 1995, compared to 1.29% in 1994 and 1.21% in 1993. The return on equity was 15.88%, compared to 16.14% in 1994 and 15.42% in 1993. Net interest income, on a fully-taxable equivalent basis, increased 1.9% in 1995 and 5.4% in 1994 due to moderate average earning asset growth, which was partially offset by the impact of a declining net interest margin. Average earning assets increased 4.2% in 1995 and 8.0% in 1994. The net interest margin was 4.26% in 1995, compared to 4.35% in 1994 and 4.46% in 1993. Noninterest income increased 10.0% in 1995 and 3.6% in 1994 primarily due to growth in trust fees, mortgage banking revenues, credit card income and securities gains. Excluding securities gains, noninterest income increased 8.7% in 1995. Noninterest expense, excluding nonrecurring merger expenses, increased 1.4% in 1995 and 1.6% in 1994, reflecting ongoing initiatives to control operating costs. Noninterest expense in 1995 included the favorable impact of the reduction in FDIC deposit insurance premiums, which was offset by higher levels of financial yield maintenance and rebalancing support related to a money market fund operated by the Corporation's trust function. Including nonrecurring merger expenses, noninterest expense increased 3.7% in 1995 and 1.2% in 1994. The provision for loan losses in 1995 was $46.7 million, compared to $25.3 million in 1994 and $63.9 million in 1993. Net loan charge-offs totaled $46.5 million in 1995, compared to $25.9 million in 1994 and $36.1 million in 1993, and as a percentage of average loans were .24% in 1995, .15% in 1994 and .23% in 1993. The increase in 1995 was primarily due to a large corporate borrower that filed for bankruptcy, and an increase in consumer loan losses. Presented in Table 7 is an income statement analysis expressed on a per share basis summarizing the changes in earnings per share in 1995 and 1994. The Corporation has three major business components: commercial and retail banking (including a credit card operation), trust services and a mortgage banking operation. The earnings contribution from each component for 1995 and 1994 is summarized in Tables 5 and 6.
Table 6: Earnings by Business Component - ------------------------------------------------------ Per share 1995 1994 - ------------------------------------------------------ Commercial and retail banking operations (including credit card) $3.41 $3.19 Trust services .28 .32 Mortgage banking .17 (.01) Unallocated debt service, administrative overhead and nonbank services (.45) (.33) - ------------------------------------------------------ Consolidated earnings per share $3.41 $3.17 ====================================================== Excludes nonrecurring merger expenses.
Table 7: Earnings Per Share Analysis - ------------------------------------------------------ Per share '95 vs '94 '94 vs '93 - ------------------------------------------------------ Net income prior period $3.17 $2.75 - ------------------------------------------------------ Net interest income .20 .49 Provision for loan losses (.17) .30 Noninterest income .48 .17 Noninterest expense (.17) (.14) Nonrecurring merger expense (.16) .03 Income tax expense (.10) (.40) Impact of additional shares of common stock (.03) - ------------------------------------------------------ Net increase .08 .42 - ------------------------------------------------------ Net income current period $3.25 $3.17 ======================================================
20 5 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - -------------------------------------------------------------------------------
NET INTEREST INCOME AND INTEREST RATE RISK MANAGEMENT Table 8: Summary of Net Interest Income - ---------------------------------------------------------------------------------------------------------------------------------- Quarter ------------------------------------------------------- % change from (in millions) First Second Third Fourth Year prior year - ---------------------------------------------------------------------------------------------------------------------------------- 1995 Average loans $18,924.4 $19,528.4 $19,817.3 $19,745.4 $19,507.0 9.8% Average earning assets 28,863.7 29,442.8 29,518.1 29,539.9 29,343.5 4.2 Average core deposits 20,797.7 21,269.1 21,588.6 22,190.7 21,465.7 3.1 Average purchased funds 5,981.6 5,999.5 5,747.4 4,924.5 5,660.6 6.4 Net interest income (FTE) 304.7 309.9 313.2 320.9 1,248.7 1.9 Interest rate spread 3.58% 3.43% 3.40% 3.44% 3.46% Net interest margin 4.28 4.22 4.21 4.31 4.26 - ---------------------------------------------------------------------------------------------------------------------------------- 1994 Average loans $17,068.8 $17,596.5 $17,993.9 $18,402.5 $17,769.7 10.9% Average earning assets 27,489.2 28,215.5 28,294.4 28,618.5 28,157.9 8.0 Average core deposits 20,976.9 20,855.5 20,700.0 20,752.2 20,820.2 1.9 Average purchased funds 4,524.4 5,401.0 5,558.4 5,788.8 5,322.3 51.2 Net interest income (FTE) 298.0 309.3 308.7 309.6 1,225.5 5.4 Interest rate spread 3.87% 3.85% 3.75% 3.66% 3.77% Net interest margin 4.40 4.40 4.33 4.29 4.35 - ---------------------------------------------------------------------------------------------------------------------------------- 1993 Average loans $14,807.7 $15,656.7 $16,099.4 $16,485.2 $16,029.4 12.1% Average earning assets 24,720.9 25,538.1 26,199.2 26,766.9 26,066.9 9.3 Average core deposits 19,494.2 20,399.4 20,799.7 20,980.2 20,423.2 8.2 Average purchased funds 3,639.1 3,556.8 3,861.0 4,167.1 3,807.6 (.1) Net interest income (FTE) 280.1 291.1 296.2 295.7 1,163.1 12.1 Interest rate spread 3.99% 3.99% 3.93% 3.82% 3.91% Net interest margin 4.60 4.57 4.49 4.38 4.46 ==================================================================================================================================
Net interest income, on a fully-taxable equivalent basis, increased 1.9% in 1995 and 5.4% in 1994. These increases reflected growth in average earning assets which was partially offset by a contraction in the net interest margin. Average earning assets increased 4.2% in 1995 and 8.0% in 1994 primarily due to strong loan growth. Loans, the highest yielding earning asset, increased 9.8% in 1995 and 10.9% in 1994, and as a percentage of average earning assets were 66.5% in 1995 compared to 63.1% in 1994 and 61.5% in 1993. Held to maturity and available for sale securities decreased 7.4% in 1995 and represented 31.2% of average earning assets, down from 35.1% in 1994 and 35.8% in 1993. The decline in the securities portfolio reflected redeployment of proceeds from maturing securities to the loan portfolio. The net interest margin in 1995 was 4.26%, compared to 4.35% in 1994 and 4.46% in 1993. The decline in the net interest margin in 1995 and 1994 was primarily due to rising short-term interest rates which caused contraction in the net interest margin due to the Corporation's modest liability sensitive position. As illustrated in Table 8, the net interest margin stabilized in the third quarter of 1995 and expanded slightly in the fourth quarter. The average yield on earning assets increased 71 basis points in 1995 and 3 basis points in 1994; however, during these same periods, the average rate paid on interest-bearing liabilities increased 102 basis points and 17 basis points, respectively. The funding cost in [NET INTEREST MARGIN GRAPH] [QUARTERLY NET INTEREST MARGIN GRAPH] 21 6 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - -------------------------------------------------------------------------------
Table 9: Rate/Volume Analysis - ---------------------------------------------------------------------------------------------------------------------------------- (in millions) 1995 1994 - ---------------------------------------------------------------------------------------------------------------------------------- Change due to Change due to - ---------------------------------------------------------------------------------------------------------------------------------- Total change Volume Rate Total change Volume Rate - ---------------------------------------------------------------------------------------------------------------------------------- Interest income, fully taxable equivalent basis Loans $271.2 $141.4 $129.8 $157.2 $139.9 $ 17.3 Federal funds sold and securities purchased under resale agreements 16.6 9.3 7.3 (1.7) (7.2) 5.5 Held to maturity securities: Taxable 17.6 (10.2) 27.8 (230.1) (211.1) (19.0) Tax-exempt (6.2) (4.0) (2.2) (2.9) (3.3) .4 Available for sale securities (4.4) (28.5) 24.1 237.6 252.9 (15.3) Trading securities (.5) (.8) .3 (.1) (.3) .2 Short-term investments 1.0 (.3) 1.3 1.4 .7 .7 ------- ------ Total interest income 295.3 86.6 208.7 161.4 152.2 9.2 - ---------------------------------------------------------------------------------------------------------------------------------- Interest expense Savings accounts (11.1) (11.1) (3.7) 1.7 (5.4) Interest-bearing transaction accounts 80.2 14.0 66.2 16.7 11.0 5.7 Time deposits 118.5 16.3 102.2 (10.7) (17.4) 6.7 Federal funds purchased and other short-term borrowings 84.0 10.0 74.0 90.9 52.7 38.2 Capital lease obligations (.1) (.1) (.1) (.1) Long-term debt .6 (2.9) 3.5 5.9 4.6 1.3 ------- ------ Total interest expense 272.1 24.4 247.7 99.0 59.9 39.1 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest income, fully taxable equivalent basis $ 23.2 $ 62.2 $(39.0) $ 62.4 $ 92.3 $ (29.9) ================================================================================================================================== Based on change in volume applied to prior year rate. Based on change in rate applied to current year volume; therefore, effect of change in rate on change in volume has been attributed to change in rate.
1995 and 1994 also reflects a shift in deposit mix from lower-cost savings deposits to higher-cost money market deposit accounts. Purchased funds as a percentage of average earning assets were 19.3% in 1995, 18.9% in 1994, and 14.6% in 1993. The increase from 1993 to 1994 reflected issuance of floating rate short-term bank notes by several of the Corporation's banking subsidiaries. Interest rate risk is the extent to which net interest income may be affected by changes in market driven interest rates, and the Corporation assumes varying degrees of interest rate risk as part of its normal banking operations. It is the role of the asset/liability management committee to manage and control the level of interest rate risk contained in the balance sheet as well as off-balance sheet financial instruments. The Corporation's interest rate risk policy is to maintain a stable level of net interest income while also enhancing earnings potential through limited risk positioning based on the forecast of future interest rates. Interest rate risk exposure (earnings at risk exposure) is currently limited, by policy, to 5% of projected annual net income. Adherence to these risk limits is controlled and monitored through simulation modeling techniques that consider the impact alternative interest rate scenarios will have on the Corporation's financial results. In its simulations, the Corporation estimates the impact on net interest income and net income resulting from various changes in market interest rates. Utilization of the simulation modeling results enables management to develop strategies to control the Corporation's overall interest rate risk exposure and to monitor specific risks associated with on-balance sheet financial instruments, and off-balance sheet instruments such as interest rate swaps; however, the model is not intended to represent an income forecast. Based on the current interest rate sensitivity position, the simulation model indicates that the earnings at risk exposure over the next 12 months is approximately 1%, assuming a gradual 200 basis point increase in interest rates, and no active management of the balance sheet components in response to the interest rate rise. Another means of monitoring interest rate risk is the interest rate sensitivity analysis appearing in Table 10. This analysis identifies the repricing characteristics of the balance sheet and resulting gap or difference between assets and liabilities repricing within and over given time periods. It should be noted, however, that the traditional gap analysis can provide an incomplete picture of a financial institution's interest rate risk position due to its inability to portray the sensitivity associated with various embedded options, such as mortgage prepayments. As such, the Corporation generally relies on simulation modeling as its primary tool for managing interest rate risk. An effective asset/liability management function is required to address the interest rate risk inherent in the Corporation's core banking activities. If no other management action is taken, these core 22 7 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - -------------------------------------------------------------------------------
Table 10: Rate Sensitivity at December 31, 1995 - ---------------------------------------------------------------------------------------------------------------------------------- Interest sensitive within --------------------------------------------------------------------------------------------- 0-30 31-90 91-180 181-365 Total One to Over (in millions) days days days days one year five years five years Total - ---------------------------------------------------------------------------------------------------------------------------------- Earning assets Loans $ 8,113 $1,260 $1,217 $1,906 $12,496 $5,625 $ 1,642 $19,763 Securities 1,313 481 1,039 1,609 4,442 3,537 1,000 8,979 Other earning assets 1,239 1,239 1,239 - ---------------------------------------------------------------------------------------------------------------------------------- Total earning assets 10,665 1,741 2,256 3,515 18,177 9,162 2,642 29,981 Nonearning assets 3,723 3,723 - ---------------------------------------------------------------------------------------------------------------------------------- Total assets $10,665 $1,741 $2,256 $3,515 $18,177 $ 9,162 $ 6,365 $33,704 ================================================================================================================================== Sources of funds Noninterest bearing deposits $ 5,863 $ 5,863 $ 5,863 Retail savings and interest bearing transaction accounts 11,027 11,027 11,027 Time deposits 1,471 1,473 1,913 1,799 6,656 2,378 8 9,042 Federal funds purchased and other short-term borrowings 3,621 100 3,721 3,721 Long-term debt and capital lease obligations 3 3 135 516 654 Other noninterest bearing sources 3,397 3,397 Effect of interest rate swaps (33) 481 591 (32) 1,007 (1,007) - ---------------------------------------------------------------------------------------------------------------------------------- Total sources of funds 21,949 2,054 2,504 1,770 28,277 1,506 3,921 $33,704 - ---------------------------------------------------------------------------------------------------------------------------------- Period gap before adjustments (11,284) (313) (248) 1,745 (10,100) 7,656 2,444 - ---------------------------------------------------------------------------------------------------------------------------------- Adjustments 12,262 (865) (340) 44 11,101 (8,287) (2,814) - ---------------------------------------------------------------------------------------------------------------------------------- Period gap after adjustments 978 (1,178) (588) 1,789 1,001 (631) $ (370) - ---------------------------------------------------------------------------------------------------------------------------------- Cumulative gap after adjustments $ 978 $ (200) $ (788) $1,001 $ 1,001 $ 370 ================================================================================================================================== Cumulative gap as a percent of earning assets 3.3% (.7)% (2.6)% 3.3% 3.3% 1.2% ================================================================================================================================== Includes held to maturity and available for sale securities. For internal management purposes, the Corporation's gap position is adjusted to reflect anticipated prepayments on mortgage-related assets, a shift of a large percentage of the Corporation's administered-rate retail deposit accounts to the one-to-five year time period, a shift of a large percentage of the Corporation's noninterest bearing demand deposit accounts to the one-to-five year period and the elimination of material period-end fluctuations in daily deposit levels and short-term borrowings. The adjustment for mortgage prepayments reflects both the natural tendency of borrowers to prepay their loans prior to final maturity due to non-rate factors and the financial incentive that borrowers have to refinance their loans at the rates prevailing as of December 31, 1995. The adjustment for the administered-rate retail deposit accounts is based upon the Corporation's experience over the past rate cycle where a large portion of the balances have been stable and the rates paid on the accounts have not tracked movements in market interest rates. The adjustment for the demand deposit accounts is based upon the Corporation's experience over the past rate cycle where a large portion of the balances have been stable.
banking activities, which include lending and deposit products, result in an asset-sensitive position. Accordingly, the Corporation utilizes a variety of discretionary on- and off-balance sheet strategies to manage the overall interest rate sensitivity position. One such example of a recently employed off-balance sheet strategy is the use of an auto loan securitization program. In 1995, The Boatmen's National Bank of St. Louis filed a shelf registration statement with the Securities and Exchange Commission providing for the offering of up to $600 million of asset-backed certificates under an auto loan securitization program. During the third quarter, $300 million of such certificates were sold, thereby eliminating the interest rate risk associated with holding these fixed-rate loans. Another off-balance sheet strategy used by the Corporation in managing its overall interest rate sensitivity position is the use of interest rate swaps to alter the rate sensitivity characteristics of various assets and liabilities. Asset securitizations and interest rate swaps are effective mechanisms to manage interest rate risk due to the inherent advantages related to flexibility in product structure, size, liquidity, capital and market timing. The contribution of interest rate swaps over time will expand or contract with movements in market rates; however, this risk cannot be viewed in isolation and is controlled and monitored within the overall context of the aforementioned asset/liability management policies. In 1995, $850 million of new swaps were added and $450 million matured such that at December 31, 1995, interest rate swaps totaled $2.7 billion. The most recent swaps were executed as a means to convert a portion of the Corporation's variable rate bank notes to fixed rate instruments. Interest rate swaps executed in prior years were undertaken to modify the interest rate sensitivity of the Corpo- 23 8 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- ration's prime-based loan portfolio, converting a portion of these loans to fixed rate instruments. Additionally, the Corporation has utilized swaps to convert a portion of its long-term fixed rate debt to a floating rate basis. Periodic correlation assessments are performed to ensure that the swap instruments are effectively modifying the interest rate characteristics of the respective balance sheet items. As summarized in Table 11, the swap portfolio is primarily comprised of contracts wherein the Corporation receives a fixed rate of interest while paying a variable rate. As such, the contribution from the swap portfolio will decrease in a rising rate environment and increase in a falling rate environment. The average rate received at December 31, 1995, was 5.69% compared to an average rate paid of 6.10%, and the average remaining maturity of the total portfolio was less than one year. The variable rate component of the interest rate swaps is based on LIBOR as of the most recent reset date. The interest rate swaps are not leveraged in that they reset in step with rate movements in the underlying index. The swap portfolio decreased net interest income by approximately $14 million in 1995, resulting in a reduction in the net interest margin of approximately 5 basis points. In 1994, the swap portfolio increased net interest income by $15 million adding approximately 5 basis points to the margin. Based on interest rates at December 31, 1995, it is anticipated that the swap portfolio will reduce net interest income by approximately $5 million in 1996 and approximately $1 million in 1997; however, it is anticipated that these declines will be offset by a higher contribution from core banking activities. Table 12 provides information related to weighted average rates received and paid, maturity profile, and fair values of the major swap programs in place at December 31, 1995, and December 31, 1994. The estimated fair value of the swap portfolio, based on dealer quotes, was an unrealized loss of $5.7 million at December 31, 1995, compared to an unrealized loss of $168.5 million at December 31, 1994. The Corporation's operating and liquidity position is not expected to be materially impacted by the unrealized loss inherent in the swap portfolio. Approximately 60% of the portfolio is comprised of indexed amortizing swaps, whereby the maturity distribution could lengthen if interest rates increase from current levels. Assuming interest rates were to increase 200 basis points from their current levels, the average maturity distribution of the swap portfolio would extend by approximately 1.2 years, but in no event would any component of the swap portfolio extend beyond four years. The decision to use indexed amortizing swaps rather than some other financial instrument is analogous to choices made between using on-balance sheet instruments such as mortgage-backed securities and Treasury securities. While both instruments can be effective at reducing the risk associated with the asset sensitive profile of the core banking activities, the Corporation frequently chooses to assume some modest extension/contraction characteristics associated with investing in a mortgage-backed security. Indexed amortizing swaps and mortgage-backed securities are similar in nature in that the notional or principal values decline over time and changes in market rates impact the degree to which the underlying instrument amortizes. The specific indexed amortizing swaps used by the Corporation have a minimum term which can potentially lengthen to a specified final maturity depending on the level of movement in interest rates. While the underlying characteristics of the specific indexed amortizing swaps used by the Corporation are similar to on-balance sheet mortgage-backed securities, prepayment and other risk factors are more predictable due to the structural features inherent in the swaps. Any future utilization of off-balance sheet
Table 11: Interest Rate Swap Portfolio Activity - ---------------------------------------------------------------------------------------------------- Receive Pay Basis (in millions) Fixed Fixed Swaps Total - ---------------------------------------------------------------------------------------------------- Notional amount, December 31, 1994 $2,000 $ 31 $250 $2,281 Additions 850 850 Maturities (295) (2) (153) (450) - ---------------------------------------------------------------------------------------------------- Notional amount, December 31, 1995 $1,705 $879 $ 97 $2,681 ==================================================================================================== Average remaining maturity (years) .8 .5 .2 .7 Weighted average rate received 5.54% 5.88% 6.76% 5.69% Weighted average rate paid 6.00 6.29 6.06 6.10 ====================================================================================================
Table 12: Interest Rate Swap Portfolio - ---------------------------------------------------------------------------------------------------- Estimated Weighted ------------------------- Average Rate December 31, 1995 Notional -------------------- Maturity Fair (in millions) Amount Receive Pay (years) Value - ---------------------------------------------------------------------------------------------------- Prime loan swaps: Receive fixed $1,505 5.62% 6.01% .8 $(2.0) Basis swaps 97 6.76 6.06 .2 .2 - ---------------------------------------------------------------------------------------------------- Total 1,602 5.69 6.01 .8 (1.8) Long-term debt swaps 200 4.87 5.90 .5 (.7) Bank note liability swaps 850 5.88 6.21 .5 (2.5) Other 29 5.89 8.81 .4 (.7) - ---------------------------------------------------------------------------------------------------- Total $2,681 5.69% 6.10% .7 $(5.7) ==================================================================================================== Estimated Weighted ------------------------- Average Rate December 31, 1994 Notional -------------------- Maturity Fair (in millions) Amount Receive Pay (years) Value - ---------------------------------------------------------------------------------------------------- Prime loan swaps: Receive fixed $1,800 5.59% 6.07% 2.2 $(155.6) Basis swaps 200 5.46 5.59 1.3 (3.8) - ---------------------------------------------------------------------------------------------------- Total 2,000 5.58 6.02 2.1 (159.4) Long-term debt swaps 200 4.87 5.96 1.5 (8.6) Other 81 5.97 7.24 .9 (.5) - ---------------------------------------------------------------------------------------------------- Total $2,281 5.53% 6.06% 2.0 $(168.5) ====================================================================================================
24 9 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- financial instruments will be determined based upon the Corporation's overall interest rate sensitivity position and asset/liability management strategies. While the Corporation is primarily an end-user of derivative instruments, it also acts as an intermediary to meet the financial needs of certain customers. Interest rate risk associated with this portfolio is controlled by entering into offsetting positions with third parties. Including these offsetting positions, the notional amount of the customer swap portfolio at December 31, 1995, totaled approximately $852.2 million.
LIQUIDITY Table 13: Earning Assets and Sources of Funds - ---------------------------------------------------------------------------------------------------------------------------------- (average balances in millions) 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------------------------- Earning Assets Amount % of Total Amount % of total Amount % of total - ---------------------------------------------------------------------------------------------------------------------------------- Securities $ 9,161.8 31.2% $ 9,891.9 35.1% $ 9,326.3 35.8% Money market investments 674.7 2.3 496.3 1.8 711.2 2.7 Loans: Commercial 10,419.1 35.5 9,182.1 32.6 8,739.5 33.5 Retail 9,087.9 31.0 8,587.6 30.5 7,289.9 28.0 - ---------------------------------------------------------------------------------------------------------------------------------- Total earning assets $29,343.5 100.0% $28,157.9 100.0% $26,066.9 100.0% ================================================================================================================================== Sources of Funds - ---------------------------------------------------------------------------------------------------------------------------------- Net investable demand deposits $ 3,465.7 11.8% $ 3,211.1 11.4% $ 3,019.7 11.6% Retail core deposits: Savings 1,864.5 6.4 2,330.1 8.3 2,265.8 8.7 Transaction accounts 8,375.3 28.5 7,808.0 27.7 7,348.0 28.2 Time 7,760.2 26.5 7,471.0 26.5 7,789.7 29.9 - ---------------------------------------------------------------------------------------------------------------------------------- Total retail core deposits 18,000.0 61.4 17,609.1 62.5 17,403.5 66.8 - ---------------------------------------------------------------------------------------------------------------------------------- Total core deposits 21,465.7 73.2 20,820.2 73.9 20,423.2 78.4 Negotiable CD's 1,266.3 4.3 1,167.0 4.1 1,272.5 4.9 Federal funds purchased and other short-term borrowings 4,394.3 15.0 4,155.3 14.8 2,535.1 9.7 Capital, net 2,217.2 7.5 2,015.4 7.2 1,836.1 7.0 - --------------------------------------------------------------------------------------------------------------------------------- Total sources of funds $29,343.5 100.0% $28,157.9 100.0% $26,066.9 100.0% ================================================================================================================================== Includes held to maturity and available for sale securities.
Liquidity represents the availability of funding to meet the obligations to depositors, borrowers, and creditors at a reasonable cost without adverse consequences. Accordingly, the Corporation's liquidity position is greatly influenced by its funding base and asset mix. Core deposits, which consist of investable checking account deposits and certain interest-bearing accounts, represent the Corporation's largest and most important funding source as these deposits usually represent a more stable, lower cost source of funds. The core deposit base is supplemented by the Corporation's wholesale and correspondent banking activities which provide a natural access to short-term purchased funds, such as negotiable certificates of deposit and overnight surplus funds. These funds can be acquired when needed, principally from existing customers within the Corporation's natural trade territory and through access to national money markets. The Corporation's auto loan securitization and bank note programs represent additional sources of liquidity. As shown in Table 13, average core deposits totaled $21.5 billion for 1995, an increase of $.6 billion or 3.1% from 1994, when core deposits increased 1.9%. The core deposit base mix has been altered as customers have redirected balances from traditionally lower-cost savings deposits to higher-rate money market savings accounts and retail certificates of deposit. Average earning assets increased approximately $1.2 billion or 4.2% from 1994, the majority of which has been funded by growth in core deposits. In 1994, average earning assets increased $2.1 billion or 8.0%. The 1994 increase was largely funded by growth in purchased funds. Average core deposits supported 73.2% of earning assets in 1995, compared to 73.9% in 1994 and 78.4% in 1993. Purchased funds supported 19.3% of average earning assets compared to 18.9% in 1994 and 14.6% in 1993. Purchased funds at December 31, 1995, and December 31, 1994, included short-term bank notes which were issued by several of the Corporation's banking subsidiaries totaling $1.3 billion and $1.6 billion, respectively. In 1995, the Corporation's need for purchased funds was reduced due to the proceeds received from the $300 million auto loan securitization. In the near term, the Corporation expects earning asset growth to modestly exceed core deposit growth, resulting in use of purchased funds at or slightly above the present levels. The Corporation's liquidity position is also managed by maintaining adequate 25 10 BOATMEN'S BANCSHARES,INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- levels of liquid assets such as money market investments and available for sale securities. At December 31, 1995, the available for sale portfolio totaled $8.1 billion, compared to $4.2 billion at December 31, 1994. In the fourth quarter of 1995, the Corporation reclassified approximately $4.0 billion of securities from held to maturity to available for sale in accordance with the one-time reclassification permitted under Financial Accounting Standards Board Special Report, "A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities" (SFAS Special Report). These securities, representing approximately 90% of the total securities portfolio, may be sold to meet liquidity needs or in response to significant changes in interest rates or prepayment risks. A more detailed discussion of the available for sale portfolio is provided in the Securities Portfolio section of this report. Parent Company liquidity is maintained through cash flows generated by dividends and fees collected from subsidiaries, complemented by an active commercial paper program and availability of credit totaling $100 million under a revolving credit agreement. Commercial paper borrowings averaged $50 million in both 1995 and 1994. Commercial paper proceeds are generally used to fund the Corporation's non-bank operations, with excess funds invested in short-term instruments. The variety of funding options available and strong cash flow provide the Corporation flexibility in selecting funding alternatives most appropriate in the circumstances, thereby generally avoiding the necessity to access capital markets at inopportune times. Maintaining favorable debt ratings is also critical to liquidity because it can affect the availability and cost of funds to the Corporation. The Corporation's ability to access the capital markets on a cost-effective basis is reflected by its debt ratings, summarized in Table 15. The Corporation currently has a shelf registration statement filed with the Securities and Exchange Commission providing for the issuance of up to $500 million of debt, preferred stock or common stock. There were no commitments for capital expenditures at December 31, 1995, which would materially impact the Corporation's liquidity position. The Corporation's existing debt position is relatively moderate, and projected cash flows are adequate to service this debt without additional financing, given continued profitable operations by the Corporation's banking subsidiaries. In 1995, Parent Company net cash provided from operations totaled $259.6 million, which was available to pay dividends to shareholders and support other financing and investing activities. [AVERAGE EARNING ASSET MIX GRAPH] [FUNDING MIX, 1995 GRAPH]
Table 14: Time Deposits $100,000 and Over - ----------------------------------------------------------------------------------------- December 31 (in millions) 1995 1994 - ----------------------------------------------------------------------------------------- Maturing within three months $ 713.9 $1,965.7 Maturing after three months but within six months 323.2 289.2 Maturing after six months but within one year 214.1 207.2 Maturing after one year 220.7 205.0 - ----------------------------------------------------------------------------------------- Total $1,471.9 $2,667.1 =========================================================================================
Table 15: Debt Ratings - ----------------------------------------------------------------------------------------- Standard Thomson Agency Ratings Moody's & Poor's Bankwatch - ----------------------------------------------------------------------------------------- Boatmen's Bancshares, Inc.: B 6-3/4% Subordinated notes due 2003 A3 A- A 7-5/8% Subordinated notes due 2004 A3 A- A 8-5/8% Subordinated notes due 2003 A3 A- A 9-1/4% Subordinated notes due 2001 A3 A- A 6-1/4% Convertible subordinated debentures due 2011 A3 A- A Commercial paper P1 A-1 TBW-1 The Boatmen's National Bank of St. Louis: B Long-term/short-term deposits and bank notes Aa3/P1 A+/A-1 TBW-1 Boatmen's First National Bank of Kansas City: B Long-term/short-term deposits and bank notes A1/P1 A+/A-1 TBW-1 Multi-bank note program (8 Boatmen's subsidiary banks) A1/P1 A+/A-1 =========================================================================================
26 11 BOATMEN'S BANCSHARES,INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------ SECURITIES PORTFOLIO At December 31, 1995, held to maturity securities totaled $.9 billion, compared to $5.2 billion in 1994, and consisted of securities the Corporation has the intent and ability to hold to maturity. The held to maturity securities at December 31, 1995, consisted primarily of tax-exempt municipal bonds. Net market value appreciation at December 31, 1995 was $50.7 million and included gross unrealized gains of $51.6 million and gross unrealized losses of $.9 million. There were no sales of held to maturity securities in 1995. In accordance with the provisions of the SFAS Special Report, the Corporation reassessed its securities classifications and, based on this reassessment, reclassified approximately $4.0 billion of securities from held to maturity to available for sale at December 15, 1995. For the securities transferred, amortized cost exceeded market value by approximately $9.3 million, resulting in an after-tax decrease to stockholders' equity of $5.8 million. Available for sale securities at December 31, 1995 totaled $8.1 billion, compared to $4.2 billion at December 31, 1994, reflecting the aforementioned reclassification from the held to maturity portfolio. These securities may be sold to meet liquidity needs or in response to significant changes in interest rates or prepayment risks. Proceeds from the sales of available for sale securities totaled $260.8 million in 1995, and included realized gains of $14.7 million. At December 31, 1995, unrealized appreciation in the available for sale portfolio was approximately $7.4 million, including gross unrealized gains of $57.8 million and gross unrealized losses of $50.4 million. At December 31, 1994, the available for sale portfolio had unrealized depreciation of $181.7 million, including gross unrealized gains of $5.8 million and gross unrealized losses of $187.5 million. The increase in market value from 1994 was primarily due to the decline in interest rates, particularly as measured by the U.S. Treasury yield curve. Approximately 34% of the available for sale portfolio is comprised of adjustable-rate mortgage-backed securities, including floating-rate CMOs. The remainder of this portfolio is comprised of Treasury notes, Agency notes, fixed rate mortgage pass throughs and CMO tranches. The average lives of the fixed rate and adjustable-rate available for sale securities approximate 2.0 years and 5.6 years, respectively. Based on an instantaneous yield curve increase of 200 basis points, it is estimated that the lives of the fixed and adjustable-rate portfolios would extend to 2.6 years and 9.3 years, respectively, and the market value of the portfolio would decline by approximately $183 million. The amortized cost and market value of the held to maturity and available for sale securities are presented in Tables 16 and 17, and the maturity distribution, together with weighted average yields to maturity, is provided in Table 19. For comparison purposes, much of the following discussion will refer to the held to maturity and available for sale securities in the aggregate as the securities portfolio. At December 31, 1995, the securities portfolio totaled $9.0 billion, compared to $9.4 billion at year end 1994. This decline largely reflects redeployment of proceeds from maturing securities to fund growth in the loan portfolio. Based on average balances, the securities portfolio decreased 7.4% in 1995, compared to an increase of 6.1% in 1994. Average securities represented 31.2% of earning assets in 1995, compared to 35.1% in 1994 and 35.8% in 1993. The Corporation's mortgage-backed securities portfolio totaled approximately $5.6 billion at December 31, 1995, of which approximately 87% represented government agency-backed issues and the remainder of the portfolio was comprised of private-issue mortgage-backed securities with credit ratings of AA or better. The composition of the mortgage-backed securities portfolio at December 31, 1995 is summarized in Table 18. The Corporation utilizes mortgage-backed securities (including CMOs) in conjunction with other fixed income
Table 16: Held to Maturity Securities - -------------------------------------------------------------------------------------------------------------------- Amortized Cost December 31 (in millions) 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- U.S. treasury $ -- $ 876.0 $ 751.3 Federal agencies: Mortgage-backed securities: Collateralized mortgage obligations 1,275.9 695.6 Adjustable-rate mortgages 636.0 850.1 Fixed rate pass-through 460.6 599.1 - -------------------------------------------------------------------------------------------------------------------- Total mortgage-backed 2,372.5 2,144.8 Other agencies 653.9 617.0 - -------------------------------------------------------------------------------------------------------------------- Total U.S. treasury and agencies 3,902.4 3,513.1 State and municipal 909.0 861.4 916.3 Other securities 5.7 453.2 341.7 - -------------------------------------------------------------------------------------------------------------------- Total $914.7 $5,217.0 $4,771.1 ==================================================================================================================== Market Value December 31 (in millions) 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- U.S. treasury $ -- $ 844.8 $ 762.8 Federal agencies: Mortgage-backed securities: Collateralized mortgage obligations 1,171.5 691.3 Adjustable-rate mortgages 610.5 853.6 Fixed rate pass-through 435.3 607.6 - -------------------------------------------------------------------------------------------------------------------- Total mortgage-backed 2,217.3 2,152.5 Other agencies 616.4 617.1 - -------------------------------------------------------------------------------------------------------------------- Total U.S. treasury and agencies 3,678.5 3,532.4 State and municipal 959.7 880.0 993.2 Other securities 5.7 407.4 342.3 - -------------------------------------------------------------------------------------------------------------------- Total $965.4 $4,965.9 $4,867.9 ====================================================================================================================
27 12 BOATMEN'S BANCSHARES,INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------ securities, to reduce the natural asset sensitivity of the balance sheet and as a tool for yield enhancement. The wide range of structures, maturities and alternative cash flows available provides the Corporation with a wide degree of flexibility in matching the rate sensitivity of liabilities and managing its overall interest rate sensitive position. Prepayment risk represents the degree to which a security pays down at a faster or slower pace than anticipated, and is a critical element to consider when purchasing mortgage-backed securities and CMOs due to uncertainties related to the prepayment of the underlying mortgages. As a means to control interest rate and prepayment risk, each security undergoes a thorough analysis prior to purchase and periodically thereafter to examine the investment performance using a wide range of interest rate scenarios and prepayment speeds. This ongoing process insures that the mortgage-backed securities portfolio meets the Corporation's investment strategies and internal risk guidelines. The Corporation typically purchases CMO structures that have reasonably predictable cash flow streams. Bank regulatory agencies also require financial institutions to perform stress tests on mortgage-backed securities to determine if the security is deemed "high risk" as defined by the regulatory agencies. By policy, the Corporation does not purchase "high risk" mortgage-backed securities. The Corporation did not hold obligations of any individual state or political subdivision for which the aggregate book value exceeded 10% of stockholders' equity. At December 31, 1995, state and municipal securities totaled $909.0 million, of which 88.7% were rated A or better. The Corporation's portfolio at December 31, 1995 is summarized by quality rating in Table 20.
Table 17: Available for Sale Securities - -------------------------------------------------------------------------------------------------------------------- Amortized Cost December 31 (in millions) 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- U.S. treasury $1,369.4 $ 892.2 $1,152.6 Federal agencies: Mortgage-backed securities: Collateralized mortgage obligations 1,979.9 803.8 1,220.7 Adjustable-rate mortgages 2,380.7 2,106.2 2,096.2 Fixed rate pass-through 493.6 171.1 265.3 - -------------------------------------------------------------------------------------------------------------------- Total mortgage-backed 4,854.2 3,081.1 3,582.2 Other agencies 982.4 79.7 33.8 - -------------------------------------------------------------------------------------------------------------------- Total U.S. treasury and agencies 7,206.0 4,053.0 4,768.6 Equity securities 97.0 64.4 22.4 Other securities 753.4 237.3 317.3 - -------------------------------------------------------------------------------------------------------------------- Total $8,056.4 $4,354.7 $5,108.3 ==================================================================================================================== Market Value December 31 (in millions) 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- U.S. treasury $1,381.0 $ 875.5 $1,195.8 Federal agencies: Mortgage-backed securities: Collateralized mortgage obligations 1,962.0 755.5 1,219.1 Adjustable-rate mortgages 2,380.5 2,008.5 2,112.7 Fixed rate pass-through 500.4 169.5 276.5 - -------------------------------------------------------------------------------------------------------------------- Total mortgage-backed 4,842.9 2,933.5 3,608.3 Other agencies 987.0 75.5 33.8 - -------------------------------------------------------------------------------------------------------------------- Total U.S. treasury and agencies 7,210.9 3,884.5 4,837.9 Equity securities 99.6 65.7 25.7 Other securities 753.3 222.8 313.4 - -------------------------------------------------------------------------------------------------------------------- Total $8,063.8 $4,173.0 $5,177.0 ====================================================================================================================
Table 18: Mortgage-Backed Available for Sale Securities - -------------------------------------------------------------------------------------------- December 31, 1995 (in millions) Market value % of total - -------------------------------------------------------------------------------------------- Federal agencies: Collateralized mortgage obligations $1,962.0 35.2% Adjustable-rate mortgages 2,380.5 42.6 Fixed rate pass-through 500.4 9.0 - -------------------------------------------------------------------------------------------- Total Federal agencies 4,842.9 86.8 Private issue securities: Collateralized mortgage obligations 623.9 11.2 Adjustable-rate mortgages 114.0 2.0 - -------------------------------------------------------------------------------------------- Total private issue securities 737.9 13.2 - -------------------------------------------------------------------------------------------- Total mortgage-backed securities $5,580.8 100.0% ============================================================================================
28 13 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - -------------------------------------------------------------------------------
Table 19: Maturity Distribution - ---------------------------------------------------------------------------------------------------------------------------------- Within After One But After Five But After One Year Within Five Years Within Ten Years Ten Years - ---------------------------------------------------------------------------------------------------------------------------------- December 31, 1995 (in millions) Amount Yield Amount Yield Amount Yield Amount Yield - ---------------------------------------------------------------------------------------------------------------------------------- Held to maturity securities: State and municipal $ 41.7 10.00% $ 161.8 9.30% $414.9 10.15% $ 290.6 9.19% Other securities 1.6 6.95 4.1 5.84 ================================================================================================================================== Available for sale securities: U.S. treasury $635.7 5.36% $ 741.6 5.89% $ 3.7 6.04% Federal agencies: Mortgage-backed securities: Collateralized mortgage obligations 67.9 6.30 1,352.6 5.97 303.4 6.66 $ 238.1 5.70% Adjustable-rate mortgages 2.9 6.54 8.7 6.12 2,368.9 7.00 Fixed rate pass-through 45.4 5.82 110.0 6.03 71.1 8.33 273.9 7.82 - ---------------------------------------------------------------------------------------------------------------------------------- Total mortgage-backed 116.2 6.12 1,471.3 5.98 374.5 6.98 2,880.9 6.97 Other agencies 121.5 5.58 681.5 6.21 111.9 5.87 72.1 7.04 - ---------------------------------------------------------------------------------------------------------------------------------- Total U.S. treasury and agencies 873.4 5.49 2,894.4 6.01 490.1 6.72 2,953.0 6.97 Other securities 37.2 6.44 391.8 6.59 209.6 7.11 114.7 7.43 ================================================================================================================================== Yields on tax-exempt obligations are computed on a tax equivalent basis, using a tax rate of 35%. Excludes marketable equity securities, Federal Reserve Bank and Federal Home Loan Bank stock, which have no stated maturities.
Table 20: Ratings of State and Municipal Securities - ------------------------------------------------------------------------------- December 31, 1995 (in millions) Ratings Book Value Percent of Total - ------------------------------------------------------------------------------- Aaa $536.7 59.0% Aa 106.8 11.7 A 163.3 18.0 Below A rated 7.9 .9 Not rated 94.3 10.4 - ------------------------------------------------------------------------------- Total $909.0 100.0% ===============================================================================
NONINTEREST INCOME
Table 21: Trust Fees by Component - ------------------------------------------------------------------- (in millions) 1995 1994 1993 - ------------------------------------------------------------------- Personal trust $105.2 $ 99.9 $ 90.3 Pension and institutional 56.0 50.8 57.0 Corporate trust 12.0 12.0 12.1 Mutual funds 4.0 2.2 - ------------------------------------------------------------------- Total $177.2 $164.9 $159.4 ===================================================================
Noninterest income increased 10.0% in 1995 and 3.6% in 1994, primarily due to growth in trust fees, mortgage banking revenues, credit card income and securities gains. Noninterest income as a percentage of operating revenues improved to 35.1% from 33.4% in 1994 and 33.8% in 1993. Revenue per full-time equivalent employee increased 8.0% in 1995. Trust fees increased 7.4% in 1995 and 3.5% in 1994. The increase in 1995 was primarily due to growth in pension/institutional and new personal trust business, coupled with an increase in market values of trust assets on which some fees are based. The increase in 1994 reflected growth in personal trust business, partially offset by a decline in pension/institutional fees. Table 21 summarizes the major components of trust revenues. Trust assets under management totaled $44.4 billion at December 31, 1995, compared to $37.4 billion at December 31, 1994, and $36.5 billion at December 31, 1993. Service charge income increased 2.2% in 1995 and 5.6% in 1994, reflecting growth in retail deposit fees which were offset by lower analysis fees on corporate customer accounts. The lower level of corporate analysis fees is primarily a function of corporate customers paying for services in the form of deposit balance maintenance in lieu of fees. Credit card income increased 11.5% in 1995 and 33.5% in 1994, primarily due to growth in cardholder revenues, as well as increases in merchant-related fees due to new merchant business and higher credit card sales volume. Investment banking revenues decreased 6.6% in 1995 and 9.9% in 1994, primarily due to a reduction in the sales volume of various retail brokerage products. Mortgage banking revenues increased 29.6% in 1995, compared to a decrease of 11.6% in 1994. Mortgage banking revenues in 1995 include a $7.9 million gain recognized on the sale of approximately $700 million of mortgage servicing. In the second quarter of 1995, the Corporation adopted Statement of Financial Accounting Standards No. 122 (SFAS 122), "Accounting for Mortgage Servicing Rights." SFAS 122 requires capitalization 29 14 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - -------------------------------------------------------------------------------
Table 22: Summary of Noninterest Income - -------------------------------------------------------------------------------------------------------------------- % change ------------------------ (in millions) 1995 1994 1993 '95-'94 '94-'93 - -------------------------------------------------------------------------------------------------------------------- Trust fees $177.2 $164.9 $159.4 7.4% 3.5% Service charges 190.8 186.8 176.9 2.2 5.6 Mortgage banking revenues 78.6 60.7 68.6 29.6 (11.6) Credit card 49.8 44.6 33.4 11.5 33.5 Investment banking revenues 35.3 37.8 41.9 (6.6) (9.9) - -------------------------------------------------------------------------------------------------------------------- Core business revenues 531.7 494.8 480.2 7.5 3.0 - -------------------------------------------------------------------------------------------------------------------- Securities gains, net 14.7 6.2 8.3 137.4 (25.7) Other 130.0 114.1 105.0 13.9 8.7 - -------------------------------------------------------------------------------------------------------------------- Other revenues 144.7 120.3 113.3 20.2 6.2 - -------------------------------------------------------------------------------------------------------------------- Total noninterest income $676.4 $615.1 $593.5 10.0% 3.6% ==================================================================================================================== As % of operating income (net interest income [FTE] plus noninterest income) 35.1% 33.4% 33.8% Revenue per full-time equivalent employee (in thousands) $113.7 $105.3 $101.4 ====================================================================================================================
of purchased mortgage servicing rights as well as internally originated mortgage servicing rights. Adoption of SFAS 122 increased mortgage banking revenues in 1995 by approximately $5.8 million, net of amortization. At December 31, 1995, mortgage servicing rights totaled $65.7 million. Mortgage servicing rights are stratified by loan type and interest rate for purposes of impairment measurement. An impairment loss is recognized to the extent the unamortized mortgage servicing right for each stratum exceeds the current market value. During 1995, no impairment valuation writedowns were required. Table 23 summarizes the components of mortgage banking revenues. Securities gains in 1995 totaled $14.7 million, compared to $6.2 million in 1994 and $8.3 million in 1993. Much of the gains recognized in 1995 and 1994 reflected sales of equity securities by the Corporation's trust subsidiary. Other noninterest income increased $15.9 million in 1995 and $9.1 million in 1994. The 1995 increase was attributable to a $4.9 million gain on the sale of an ownership interest in a regional electronic funds transfer network and gains recognized from the sale of surplus branch locations. Other noninterest income in 1995 was also supplemented by higher gains on sales of student loans, investment appreciation of bank-owned life insurance, and increased revenue from debit cards and syndication fees. Other noninterest income in 1994 included a $4 million gain from the sale of the former Union of Arkansas Corporation's headquarters building. [NONINTEREST INCOME GRAPH]
Table 23: Summary of Mortgage Banking Revenues - -------------------------------------------------------------------- (in millions) 1995 1994 1993 - -------------------------------------------------------------------- Servicing fees $53.4 $54.1 $42.4 Origination fees 5.8 6.4 10.3 Late fees 10.1 9.3 10.3 Gains (losses) on sales of loans 1.4 (9.1) 5.6 Gain on sale of mortgage servicing rights 7.9 - -------------------------------------------------------------------- Total $78.6 $60.7 $68.6 ==================================================================== Net of mortgage servicing rights amortization.
30 15 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - -------------------------------------------------------------------------------
NONINTEREST EXPENSE Table 24: Summary of Noninterest Expense - -------------------------------------------------------------------------------------------------------------------- % change ------------------------ (in millions) 1995 1994 1993 '95-'94 '94-'93 - -------------------------------------------------------------------------------------------------------------------- Staff expense $ 597.2 $ 590.7 $ 568.5 1.1% 3.9% Occupancy 80.2 83.0 88.2 (3.4) (5.9) Equipment 95.7 93.4 89.6 2.4 4.2 FDIC insurance 31.2 52.9 52.0 (41.1) 1.8 Credit card 14.6 16.7 13.4 (12.6) 24.6 Printing, postage, paper 48.3 47.5 45.3 1.7 4.9 Intangible amortization 33.6 35.2 36.3 (4.5) (3.0) Professional fees 23.6 26.4 27.2 (10.6) (2.9) Federal Reserve processing charges 10.4 10.7 10.7 (2.8) Advertising 34.0 33.5 31.7 1.6 5.7 Communications 27.5 24.9 21.0 10.4 18.6 Foreclosed property costs, net 3.0 -- 2.0 Other 199.7 141.8 157.1 40.8 (9.7) - -------------------------------------------------------------------------------------------------------------------- Total noninterest expense $1,199.0 $1,156.7 $1,143.0 3.7% 1.2% ==================================================================================================================== Efficiency ratio (noninterest expense as % of noninterest income and net interest income [FTE]) 62.3% 62.8% 65.1% Efficiency ratio excluding nonrecurring merger expenses 60.9 62.8 64.8 Staff expense as % of total noninterest expense 49.8 51.1 49.7 Number of full-time equivalent employees at year end 17,023 17,165 17,722 ====================================================================================================================
Noninterest expense increased 3.7% in 1995 and 1.2% in 1994. Noninterest expense levels in 1995 and 1993 include nonrecurring merger expenses totaling approximately $26.0 million and $4.7 million, respectively, consisting of investment banking and other professional fees, severance costs, obsolete equipment write-offs and estimated costs to close duplicate branches. Excluding merger expenses, noninterest expense increased 1.4% in 1995 and 1.6% in 1994, reflective of ongoing initiatives to control operating expenses. The efficiency ratio before merger expenses improved to 60.9% in 1995, compared to 62.8% in 1994 and 64.8% in 1993. Staff expense, which represents approximately 50% of total noninterest expense, increased 1.1% in 1995 and 3.9% in 1994. At December 31, 1995, the number of full-time equivalent employees declined to 17,023, compared to 17,165 in 1994 and 17,722 in 1993 as certain operating functions were consolidated and centralized, and excess staffing from acquisitions was eliminated. Occupancy expense decreased 3.4% in 1995 and 5.9% in 1994, primarily the result of lower leasehold expense after renegotiation of leases on several major properties. Equipment expense increased 2.4% in 1995 and 4.2% in 1994 primarily due to capital expenditures for upgraded computer systems and software to support trust and retail banking expansion. FDIC insurance expense totaled $31.2 million in 1995, a decrease of 41.1%, compared to $52.9 million in 1994 and $52.0 million in 1993. In the second quarter of 1995, the FDICreduced the rate paid by most financial institutions from 23 cents to 4 cents per $100 of insured deposits and, effective January 1996, the rate was reduced to a $2,000 minimum per bank. Congress is considering proposals to recapitalize the Savings Association Insurance Fund (SAIF), including a one-time levy on all SAIFinsured deposits. The Corporation currently has approximately $3 billion of such deposits. The net effect of the revised FDIC fees and SAIF proposals is not expected to have a material effect on the Corporation's future results of operations. Other noninterest expense increased $57.9 million in 1995 to $199.7 million, compared to $141.8 million in 1994 and $157.1 million in 1993. The increase in 1995 is primarily attributable to the aforementioned nonrecurring merger expenses recognized in the first half of 1995, higher levels of uninsured losses, higher reserves for litigation and higher levels of financial yield maintenance and rebalancing support related to a money market fund operated by the Corporation's trust function. In 1994 and 1995, the Corporation's trust subsidiary waived a portion of its investment management fees on its short-term money market fund, provided yield maintenance to provide a competitive yield to investors; and provided support to rebalance the fund after the sale of certain fund investments. Substantial changes have been made to the size and yield of the fund and any additional financial support to this fund is expected to be minimal. [NONINTEREST EXPENSE GRAPH] 31 16 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------ TAXES The Corporation's effective tax rate was 35.0% in 1995, 34.4% in 1994 and 31.6% in 1993. The increase in the Corporation's effective tax rate resulted from nondeductible merger expenses associated with the pooling-of-interests acquisitions completed in the first half of 1995, and a continued decline in the amount of tax-exempt income as a percentage of operating income. Excluding the impact of the nondeductible merger expenses, the effective tax rate in 1995 was 34.6%. On a prospective basis, the effective tax rate should approximate the statutory rate, adjusted for normal operating items such as tax-exempt interest, goodwill amortization and other nondeductible expenses.
LOAN PORTFOLIO Table 25: Summary of Loan Portfolio - ------------------------------------------------------------------------------------------------------------------- December 31 (in millions) 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------- Commercial $ 9,623.2 $ 8,767.1 $ 8,384.7 $ 7,809.4 $ 7,133.5 Real estate mortgage 3,747.6 3,629.0 3,699.2 3,193.5 3,277.7 Real estate construction 921.6 868.3 683.2 478.5 506.5 Consumer 5,344.4 5,302.1 4,178.0 3,500.7 3,048.0 Lease financing 169.2 136.8 96.6 88.3 95.5 - ------------------------------------------------------------------------------------------------------------------- Total domestic loans 19,806.0 18,703.3 17,041.7 15,070.4 14,061.2 Foreign loans 20.9 19.1 18.1 11.9 12.7 - ------------------------------------------------------------------------------------------------------------------- Total loans, before deduction of unearned income 19,826.9 18,722.4 17,059.8 15,082.3 14,073.9 Less unearned income 63.7 66.9 69.1 75.1 92.9 - ------------------------------------------------------------------------------------------------------------------- Total loans, net of unearned income $19,763.2 $18,655.5 $16,990.7 $15,007.2 $13,981.0 ===================================================================================================================
At December 31, 1995, loans totaled $19.8 billion, an increase of 5.9% over December 31, 1994. Based on average balances, loans increased 9.8% in 1995 and 10.9% in 1994. Loan growth from December 31, 1994, was primarily due to a 9.8% increase in commercial loans and reflected middle-market loan growth as well as increases in loans to Fortune 1000 companies. Adjusting for the effect of $300 million of loans sold through an auto loan securitization program in the third quarter of 1995, consumer loans increased 6.5% in 1995, largely the result of increased indirect auto loans. Loan growth experienced in 1994 was primarily due to growth in both the consumer and commercial loan portfolios. The majority of the Corporation's loans are made within its natural trade territory. The portfolio is highly diversified with originations stemming from the Corporation's nine state area, and the portfolio is well balanced between wholesale and consumer lending. The Corporation's geographic profile provides significant credit and economic risk diversification as the Corporation is not solely dependent on any major market. All of the Corporation's major markets are currently experiencing satisfactory economic conditions and unemployment rates within these markets are in line with national averages. Table 27 provides some pertinent economic data on markets within the Corporation's nine-state operating region, and Table 26 summarizes the loan portfolio by banking location. Table 28 presents the major loan classifications based upon Management's internal classification criteria. In addition, Table 36 summarizes the nonperforming asset trends experienced throughout the Corporation's regions over the last three years. The section that follows addresses specific risk elements and credit administration practices related to the major components of the loan portfolio. Commercial Loans The Corporation's commercial loan portfolio, excluding commercial real estate, totaled $6.6 billion at December 31, 1995, representing approximately
Table 26: Loan Portfolio Distribution - ------------------------------------------------------------------------------------------------------- December 31, 1995 December 31, 1994 December 31, 1993 - ------------------------------------------------------------------------------------------------------- % of % of % of Total Total Total (in millions) Amount Loans Amount Loans Amount Loans - ------------------------------------------------------------------------------------------------------- Missouri $10,524.2 53.3% $ 9,908.4 53.1% $ 9,265.7 54.5% Arkansas 2,745.8 13.9 2,430.2 13.0 2,088.6 12.3 New Mexico 1,447.3 7.3 1,430.2 7.7 1,375.9 8.1 Texas 1,087.6 5.5 964.4 5.2 895.0 5.3 Oklahoma 1,013.4 5.1 1,062.3 5.7 946.9 5.6 Illinois 788.4 4.0 715.4 3.8 613.9 3.6 Tennessee 784.1 4.0 754.8 4.1 611.8 3.6 Iowa 718.1 3.6 729.3 3.9 639.8 3.8 Kansas 112.6 .6 114.4 .6 75.6 .4 Credit card 541.7 2.7 546.1 2.9 477.5 2.8 - ------------------------------------------------------------------------------------------------------- Total $19,763.2 100.0% $18,655.5 100.0% $16,990.7 100.0% ======================================================================================================= Net of unearned income.
32 17 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- 33.2% of the total portfolio compared to 30.5% in 1994. The Corporation's objective is to control credit risk within the commercial loan portfolio through geographic diversification and adherence to stringent credit administration policies that limit industry concentrations and establish lending authority and borrower limits. Within the commercial loan portfolio there are no concentrations of credits to any borrower or industry in excess of 5% of total loans, and the portfolio is primarily comprised of middle market loans to customers within the Corporation's nine state operating region. At December 31, 1995, middle-market commercial loans represented 22.5% of the total loan portfolio and loans to Fortune 1000 companies comprised 5.7% of total loans. Loans to middle-market companies, as a general rule, are made on a secured basis, with personal guarantees and loan covenants appropriate to the individual credit. These loans are to a diversified group of borrowers conducting business in the Corporation's immediate market area, predominately in the manufacturing, wholesale distribution and services industries. Loans to Fortune 1000 companies and other large corporate borrowers are made on a secured and unsecured basis depending on the risk assessment of the specific borrowers. The composition of the commercial loan portfolio and level of industry concentrations is reflected in Table 30. The Corporation's legal lending limit to any individual borrower is in excess of $400 million. However, at December 31, 1995, of the Corporation's five largest borrowers, there was only one relationship with aggregate outstandings in the $50-$75 million range and four borrowers with aggregate outstandings in the $40-$49 million range. [LOAN PORTFOLIO GRAPH]
Table 27: Economic Statistics - -------------------------------------------------------------------------------------------------------------- Unemployment Rates Growth in Real Building Permits ------------------ Personal Income 1995 Office % Change (in millions) 1995 1994 1995 vs. 1994 Vacancy Rates 1995 vs. 1994 - -------------------------------------------------------------------------------------------------------------- Missouri 4.0% 4.3% 6.4% 11.7% (9.3)% New Mexico 6.2 5.9 7.9 6.3 (3.4) Oklahoma 4.9 5.4 4.1 21.2 (4.5) Texas 6.2 6.0 6.6 (2.7) Iowa 3.2 3.2 5.0 11.3 (11.4) Tennessee 5.2 3.8 6.4 14.5 (4.9) Illinois 4.8 4.2 6.3 (4.8) Arkansas 4.9 5.0 5.8 9.8 (6.1) Kansas 4.0 5.0 6.1 (9.5) ============================================================================================================== National average 5.5% 5.4% 5.8% 14.7% (5.0)% ============================================================================================================== Office vacancy rates in metropolitan areas within major banking markets.
Table 28: Composition of Loan Portfolio - -------------------------------------------------------------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------------------------------------------------- % of % of % of Total Total Total (in millions) Amount Loans Amount Loans Amount Loans - -------------------------------------------------------------------------------------------------------- Real estate: 1-4 family residential $ 3,747.6 18.9% $ 3,629.0 19.4% $ 3,699.2 21.7% Land acquisition 215.4 1.1 246.8 1.3 218.3 1.3 Residential construction 287.1 1.4 274.9 1.5 209.0 1.2 Commercial construction 419.1 2.1 346.6 1.8 255.9 1.5 Commercial real estate 2,953.3 14.9 2,996.9 16.0 2,814.8 16.5 Mini-perms 95.4 .5 75.5 .4 107.2 .6 - -------------------------------------------------------------------------------------------------------- Total real estate 7,717.9 38.9 7,569.7 40.4 7,304.4 42.8 Commercial loans to Fortune 1,000 companies and other large corporate borrowers 1,127.0 5.7 816.3 4.4 712.9 4.2 Middle market commercial 4,463.2 22.5 4,003.0 21.4 3,830.2 22.4 Bank stock loans 187.0 1.0 218.4 1.2 232.4 1.4 Agriculture 797.3 4.0 657.0 3.5 687.2 4.0 Consumer: Home equity 491.1 2.5 423.2 2.3 397.1 2.3 Credit card 541.7 2.7 546.1 2.9 477.5 2.8 Indirect installment 2,723.2 13.7 2,711.5 14.5 1,979.0 11.6 Installment 1,588.4 8.0 1,621.3 8.6 1,324.4 7.8 - -------------------------------------------------------------------------------------------------------- Total consumer 5,344.4 26.9 5,302.1 28.3 4,178.0 24.5 Lease financing 169.2 .9 136.8 .7 96.6 .6 Foreign 20.9 .1 19.1 .1 18.1 .1 - -------------------------------------------------------------------------------------------------------- Total loans $19,826.9 100.0% $18,722.4 100.0% $17,059.8 100.0% ========================================================================================================
Table 29: Commercial and Real Estate Construction Maturity Distribution - ---------------------------------------------------------------------------------------------- December 31, 1995 Over 1 Year (in millions) One Year or Less Through 5 Years Over 5 Years Total - ---------------------------------------------------------------------------------------------- Commercial $5,520.5 $3,422.4 $680.3 $ 9,623.2 Real estate construction 600.4 251.1 70.1 921.6 - ---------------------------------------------------------------------------------------------- Total $6,120.9 $3,673.5 $750.4 $10,544.8 ==============================================================================================
33 18 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- Credit risk associated with the commercial portfolio is primarily influenced by economic conditions and the level of underwriting risk the Corporation is willing to assume. A primary focus in managing risk when extending credit is to adequately assess the borrower's capacity to repay and to follow proper collateral protection policies. The Corporation has consistently adhered to conservative underwriting standards as evidenced by its ability to avoid the severe credit losses many other financial institutions experienced in the late 1980's/early 1990's in lending to foreign countries, highly leveraged industries and the energy sector. The Corporation's credit culture is quickly infused into newly acquired financial institutions and is one of the major priorities of the acquisition integration process. The commercial and real estate construction loan portfolio maturity distribution at December 31, 1995, under standard financial reporting definitions, is summarized in Table 29. Commercial and real estate construction loans due after one year totaled $4.4 billion of which $2.1 billion have floating or adjustable rates. Commercial Real Estate This lending category consists primarily of commercial real estate, residential construction, commercial construction and land acquisition loans. At December 31, 1995, commercial real estate loans totaled $4.0 billion, representing approximately 20.0% of total loans, compared to 21.0% at December 31, 1994. Table 31 displays the composition of the real estate portfolio by property type and carrying status. The Corporation closely monitors the composition and quality of the commercial real estate portfolio through established credit review procedures to ensure that significant credit concentrations do not exist within this portfolio. The portfolio is geographically dispersed, primarily in areas where the Corporation has a direct banking presence, and is widely diversified among residential construction, office and retail properties, and land acquisition and development loans. Real estate loans are generally secured by the underlying property at a 75% to 80% loan to value ratio and are generally supported by guarantees from project developers. Additional collateral is required on a project-by-project basis depending on management's evaluation of the borrower. Approximately one third of the commercial real estate portfolio is comprised of owner occupied properties--such as manufacturing facilities for middle market borrowers--for which the primary source of repayment is not entirely dependent on the real estate market. Consumer Loans The consumer loan category consists primarily of direct and indirect install-
Table 30: Commercial Industry Concentration - ---------------------------------------------------------------------------- % of Total % of December 31, 1995 Commercial Loans Total Loans - ---------------------------------------------------------------------------- Manufacturing: Metal, machinery and fabrication 4.5% 1.5% Food products 2.7 .9 Chemical, rubber and petroleum 1.5 .5 Printing and paper 2.2 .7 All other manufacturing 5.8 1.9 Services: Health care 3.9 1.3 Amusement/recreation 1.5 .5 All other services 9.6 3.2 Finance, insurance, real estate 12.3 4.1 Retail trade: Retail (non-auto) 7.8 2.6 Retail auto 1.3 .4 Agriculture, forestry and fishing 12.1 4.0 Wholesale trade--durable goods 7.0 2.3 Wholesale trade--non-durable goods 5.1 1.7 Individual personal loans 8.6 2.9 Transportation 3.0 1.0 Construction 2.8 .9 Communication 2.7 .9 Public administration and other 2.6 .9 Other 3.0 1.0 - ---------------------------------------------------------------------------- Total 100.0% 33.2% ============================================================================ Excluding commercial real estate
Table 31: Construction, Mini-Perm and Mortgage Loans - -------------------------------------------------------------------------------------- December 31, 1995 Nonperforming (in millions) Performing Nonperforming Total as % of Total - -------------------------------------------------------------------------------------- Commercial real estate: Multifamily $ 513.8 $ 3.3 $ 517.1 .64% Office/showroom 891.4 10.1 901.5 1.12 Industrial/warehouse 447.3 4.5 451.8 1.00 Retail strip 275.1 2.3 277.4 .83 Retail, other 375.2 12.6 387.8 3.25 Lodging 351.3 5.2 356.5 1.46 Land 245.2 4.6 249.8 1.84 Residential construction 283.3 3.8 287.1 1.32 Other 534.9 6.4 541.3 1.18 - -------------------------------------------------------------------------------------- Total commercial real estate 3,917.5 52.8 3,970.3 1.33 1-4 family residential 3,724.7 22.9 3,747.6 .61 - -------------------------------------------------------------------------------------- Total real estate $7,642.2 $75.7 $7,717.9 .98% ======================================================================================
34 19 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------ ment, credit card, and home equity lending. At December 31, 1995, consumer loans totaled $5.3 billion, representing approximately 26.9% of total loans, compared to 28.3% at December 31, 1994. Credit risk in each of these lending categories is controlled through automated credit scoring techniques and consistent adherence to conservative underwriting standards that consider debt to income levels and, where applicable, loan to value ratios. In the home equity category, loan to value ratios generally are limited to 80% of collateral value. In certain markets higher loan to value ratios are permitted; however, in these situations the Corporation obtains additional credit protection from third party insurance providers. Installment loans, both indirect and direct are subject to similar underwriting standards. Approximately 63% of the installment category is comprised of indirect paper of which over 90% are automobile loans. The remainder of the indirect installment category is primarily limited to marine and home improvement paper. Growth in installment lending has occurred through direct originations made available through the Corporation's extensive branch banking network and through expansion of the indirect lending program. A primary source for the indirect automobile loan production is a referral program negotiated with a major insurance carrier whose customer base has a good credit scoring profile, resulting in lower delinquencies and charge-offs than that typically experienced from traditional indirect sources. Credit card outstandings totaled $541.7 million at December 31, 1995, representing approximately 2.7% of total loans. The Corporation is not a participant in pre-approved nationwide mass marketing programs, rather, marketing efforts target further penetration of its existing customer base. 1-4 Family Residential Loans The 1-4 family residential loan portfolio totaled $3.7 billion at December 31, 1995, and represented 18.9% of the total loan portfolio compared to 19.4% at December 31, 1994. Risk exposure in this area is minimized through underwriting policies that specify conservative loan to value ratios of generally no more than 80%, coupled with a diversified geographic base that naturally protects the Corporation from excessive concentrations in any given market. In addition, the majority of the fixed-rate, long-term production is sold in the secondary market through the Corporation's mortgage banking subsidiary. LOAN QUALITY The provision for loan losses totaled $46.7 million in 1995, compared to $25.3 million in 1994 and $63.9 million in 1993. The provision for loan losses was increased in 1995 due to higher net charge-offs and to maintain loan reserve coverage at acceptable levels during a period of strong loan growth. At December 31, 1995, the reserve for loan losses represented 229% of nonperforming loans compared to 277% at December 31, 1994 and 195% at December 31, 1993. The reserve for loan losses as a percentage of net loans was 1.94% compared to 2.02% at December 31, 1994 and 2.21% at December 31, 1993. Net charge-offs in 1995 increased to $46.5 million, from $25.9 million in 1994 and $36.1 million in 1993. The increase in net charge-offs in 1995 reflected an increase in commercial loan losses, which was the result of a $10 million charge-off of one large commercial credit, and increases in credit card and installment loan losses. Excluding the $10 million commercial charge-off, the Corporation had net recoveries in the commercial loan category in 1995. Net charge-off levels over the last three years continued to be well below historical trends and as a percentage of loan losses were .24% in 1995, compared to .15% in 1994 and .23% in 1993. As a percentage of average installment loans, loan losses in the installment sector were .54% compared to .30% in 1994, and credit card net charge-offs as a percentage of related outstandings were 3.63% compared to 2.50% in 1994. The reserve for loan losses represents the aggregate reserves of the Corporation's banking subsidiaries. Loans which are determined to be uncollectible are charged against the reserve and recoveries of loans which were previously charged off are credited to the reserve. The charge-off policy of the Corporation's banking subsidiaries varies with respect to the category of and specific circumstances surrounding each loan under consideration. The Corporation's general policy with respect to consumer loans is to charge off all such loans when deemed to be uncollectible or 120 days past due, whichever comes first. With respect to commercial, real estate, and other loans, charge-offs are made on the basis of management's ongoing evaluation of nonperforming and criticized loans. In addition, loans which are classified as "loss" in regulatory examinations are charged off. The provision for loan losses is sufficient to provide for current loan losses and maintain the reserve at an adequate level commensurate with management's evaluation of the risk inherent in the loan portfolio. In order to identify potential risks in the loan portfolios of the subsidiary banks, detailed risk assessment procedures are in place at the local bank level with oversight provided by the Corporation's credit administration function. In assessing risk, detailed information is obtained from the following sources: * Internal risk ratings which are assigned to all individual loans (other than 1-4 family residential and consumer loans). For loans which contain other than the normal risk of collectibility, the ratings correspond to the classifications utilized by the regulatory agencies for criticized loans (Special Mention, Substandard, Doubtful, Loss). Criticized loan totals and the trend thereof are reviewed monthly for all banking subsidiaries; * Monthly reports prepared by each subsidiary bank's senior management personnel which contain information on [LOAN LOSS EXPERIENCE GRAPH] 35 20 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------ the overall characteristics of the subsidiary loan portfolio and analyses of specific loans requiring special attention, including nonperforming and certain criticized loans; * Quarterly reviews of selected individual loans and loan concentrations of the larger banking subsidiaries by senior credit administration personnel of the Corporation; * Examination of the loan portfolio by Federal and State regulatory agencies; and * Examinations, reviews, and risk assessments performed by the Corporation's internal loan review function and independent auditors. The data collected from these sources are evaluated with regard to current national and local economic trends, prior loss history, underlying collateral values, credit concentrations, industry risk, degree of off-balance sheet risk, and the opinion of the subsidiary bank and corporate management. An estimate of potential future loss on specific loans is developed in conjunction with an overall risk evaluation of the total loan portfolio. In addition, another key statistical measure used by management in establishing loan reserves is the reserve coverage of nonperforming loans. As a matter of general policy, the Corporation's objective is to maintain the loan reserve at levels above 100% of nonperforming loans, although temporary deviations from this standard may occur as situations warrant. On January 1, 1995, the Corporation adopted Financial Accounting Standards No. 114 (SFAS 114), "Accounting by Creditors for Impairment of a Loan" and No. 118 (SFAS 118), "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures." These statements require that certain impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective rate, the market price of the loan, or the fair value of the underlying collateral if the loan is collateral dependent. The statements further require that specific reserves be established for any impaired loan for which the recorded investment exceeds the measured value of the loan. SFAS 114 and SFAS 118 do not apply to smaller balance, homogenous loans, which the Corporation has identified as consumer loans, such as home equity, credit card, installment and 1-4 family residential loans. At December 31, 1995, the recorded investment in loans that are considered to be impaired under SFAS 114 and SFAS 118 totaled approximately $125.9 million and consisted of nonaccrual and restructured commercial, commercial real estate, and real estate construction loans. At December 31, 1995, the reserve for loan losses included approximately $1.8 million allocated to $8.6 million of impaired loans. The Corporation's recognition of income was not impacted by adoption of SFAS 114 and SFAS 118. For 1995, impaired loans averaged $93.5 million and cash basis interest recognition on these loans, during the time that they were impaired, totaled less than $1 million. The loan reserve allocation provided in Table 33 is based primarily on analysis of prior loss experience and present and anticipated volume levels by individual categories, and on management's evaluation of prevailing economic conditions as they may affect segments of the portfolio. Accordingly, since each of these criteria is subject to change, the allocation of the reserve is not necessarily indicative of the trend of future loan losses in any particular loan category.
Table 32: Summary of Reserve for Loan Losses - ------------------------------------------------------------------------------------------------- (in millions) 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------- Balance, beginning of year $376.6 $376.3 $334.7 $285.8 $262.5 Loans charged off: Domestic: Commercial (26.1) (27.2) (34.3) (52.8) (42.7) Real Estate: Commercial real estate (2.0) (3.9) (8.3) (36.7) (26.4) Construction (.3) (.8) (1.8) (11.6) (15.9) 1-4 family residential (1.8) (3.8) (4.5) (7.6) (6.2) Consumer: Credit card (22.1) (14.9) (11.3) (11.3) (10.1) Other (35.8) (22.1) (20.2) (25.6) (34.8) - ------------------------------------------------------------------------------------------------- Total charge-offs (88.1) (72.7) (80.4) (145.6) (136.1) - ------------------------------------------------------------------------------------------------- Recoveries on loans previously charged off: Domestic: Commercial 17.4 25.6 21.2 17.9 11.5 Real estate: Commercial real estate 4.6 4.7 6.5 3.4 3.3 Construction 1.9 1.3 2.0 1.0 1.7 1-4 family residential 1.8 1.8 1.6 1.3 1.0 Consumer: Credit card 3.3 2.5 1.7 1.8 1.6 Other 12.6 10.9 11.3 12.2 12.7 - ------------------------------------------------------------------------------------------------- Total recoveries 41.6 46.8 44.3 37.6 31.8 - ------------------------------------------------------------------------------------------------- Net charge-offs (46.5) (25.9) (36.1) (108.0) (104.3) - ------------------------------------------------------------------------------------------------- Provision for loan losses 46.7 25.3 63.9 139.5 118.0 Loan reserve from acquisitions 6.2 .9 13.8 17.4 9.6 - ------------------------------------------------------------------------------------------------- Balance, end of year $383.0 $376.6 $376.3 $334.7 $285.8 ================================================================================================= Loan reserve at end of year: % of net loans at year end 1.94% 2.02% 2.21% 2.23% 2.04% % of nonperforming loans 228.62 277.06 195.08 119.66 84.13 Multiple of net charge-offs 8.24x 14.56x 10.42x 3.10x 2.74x Net charge-offs during year: % of net loans at year end .24% .14% .21% .72% .75% % of net loans (average) .24 .15 .23 .75 .77 % of reserve at year end 12.14 6.87 9.59 32.27 36.49 =================================================================================================
36 21 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - -------------------------------------------------------------------------------
Table 33: Loan Reserve Allocation - ---------------------------------------------------------------------------------------------------------------------------------- December 31 ---------------------------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 ---------------------------------------------------------------------------------------------------- Loans Loans Loans Loans Loans as % of as % of as % of as % of as % of Loan Total Loan Total Loan Total Loan Total Loan Total (amounts in millions) Reserve Loans Reserve Loans Reserve Loans Reserve Loans Reserve Loans - ---------------------------------------------------------------------------------------------------------------------------------- Domestic: Commercial $209.3 48.6% $199.3 46.9% $198.3 49.1% $176.3 51.8% $148.2 50.7% Real estate mortgage 54.2 18.9 53.7 19.4 52.4 21.7 48.7 21.1 40.7 23.3 Real estate construction 30.5 4.6 34.1 4.6 33.4 4.0 30.2 3.2 23.3 3.6 Consumer 53.5 26.9 47.3 28.3 44.4 24.5 38.4 23.2 32.2 21.6 Lease financing 1.1 .9 1.0 .7 1.0 .6 .6 .6 .5 .7 Not allocated 34.4 41.2 46.8 40.5 40.9 - ---------------------------------------------------------------------------------------------------------------------------------- Total domestic 383.0 99.9 376.6 99.9 376.3 99.9 334.7 99.9 285.8 99.9 Foreign .1 .1 .1 .1 .1 - ---------------------------------------------------------------------------------------------------------------------------------- Total reserve for loan losses $383.0 100.0% $376.6 100.0% $376.3 100.0% $334.7 100.0% $285.8 100.0% ==================================================================================================================================
NONPERFORMING ASSETS Table 34: Nonperforming Assets - ---------------------------------------------------------------------------------------------------------------------- December 31 (in millions) 1995 1994 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------- Nonperforming loans: Nonaccrual $133.8 $111.9 $159.5 $237.1 $287.5 Restructured 7.4 7.1 14.8 22.1 26.3 Past due 90 days or more 26.3 17.0 18.6 20.5 25.9 - ---------------------------------------------------------------------------------------------------------------------- Total nonperforming loans 167.5 136.0 192.9 279.7 339.7 - ---------------------------------------------------------------------------------------------------------------------- Foreclosed property 31.6 62.4 115.5 137.8 185.9 - ---------------------------------------------------------------------------------------------------------------------- Total nonperforming assets $199.1 $198.4 $308.4 $417.5 $525.6 ====================================================================================================================== Ratios - ---------------------------------------------------------------------------------------------------------------------- Total nonperforming loans as % of total loans .84% .73% 1.13% 1.85% 2.41% Nonperforming assets as % of total loans and foreclosed property 1.00 1.06 1.80 2.74 3.69 Nonperforming assets as % of total assets .59 .60 1.00 1.47 2.01 Loan reserve as % of nonperforming loans 228.62 277.06 195.08 119.66 84.13 ======================================================================================================================
Management has followed a policy of discontinuing the accrual of interest on any loan when full collectibility of principal or interest on that loan is doubtful. Nonaccrual loans are reduced by the direct application of interest receipts to loan principal, for accounting purposes only. If the principal amount of the loan is well collateralized, interest income on such loans may be recognized in periods in which payments are received. Gross interest income that would have been recorded in 1995, if all nonaccrual and restructured loans at December 31, 1995 had been current in accordance with original terms, amounted to $8.6 million. Actual interest recorded was $3.8 million. Nonperforming assets, which included nonperforming loans and foreclosed property, totaled $199.1 million at December 31, 1995, essentially unchanged from the level at December 31, 1994. As illustrated in Table 34, nonperforming asset levels declined steadily during the 1991-1994 period, from $525.6 million at December 31, 1991 to $198.4 million at December 31, 1994, and leveled off in 1995. This experience largely resulted from an improved economy and the effectiveness of the Corporation's comprehensive loan administration and workout procedures. As a percentage of total loans and foreclosed property, nonperforming assets were 1.00% at December 31, 1995, compared to 1.06% at December 31, 1994 and 1.80% at December 31, 1993. Nonperforming loans at December 31, 1995, totaled $167.5 million or .84% of total loans at December 31, 1995, compared to .73% at December 31, 1994 and 1.13% at December 31, 1993. As a percentage of total assets, nonperforming assets remained below the 1.00% level for the second consecutive year at .59%, compared to .60% at December 31, 1994 and 1.00% at December 31, 1993. Foreclosed property declined $30 million from December 31, 1994, primarily due to sales of several properties throughout the year. The composition of foreclosed real estate by property type is provided in Table 37. As part of management's overall portfolio analysis, ongoing credit quality 37 22 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - -------------------------------------------------------------------------------
Table 35: Loans Designated as Criticized Loans by Internal Risk Rating System - ---------------------------------------------------------------------------------------- Criticized Loans - ---------------------------------------------------------------------------------------- (in millions) Nonperforming Performing Total - ---------------------------------------------------------------------------------------- 1993 March 31 $245.5 $715.7 $961.2 June 30 208.9 677.3 886.2 September 30 207.1 665.0 872.1 December 31 192.9 640.4 833.3 - ---------------------------------------------------------------------------------------- As % of loans at December 31, 1993 1.13% 3.75% 4.88% ======================================================================================== 1994 March 31 $162.0 $601.2 $763.2 June 30 159.3 565.3 724.6 September 30 167.0 492.8 659.8 December 31 136.0 498.4 634.4 - ---------------------------------------------------------------------------------------- As % of loans at December 31, 1994 .73% 2.66% 3.39% ======================================================================================== 1995 March 31 $128.6 $486.2 $614.8 June 30 132.2 512.0 644.2 September 30 131.0 533.4 664.4 DECEMBER 31 167.5 520.3 687.8 - ---------------------------------------------------------------------------------------- As % of loans at December 31, 1995 .84% 2.63% 3.47% ========================================================================================
reviews are performed to evaluate risk inherent in the portfolio and potential risk that may develop in the future. A critical element in assessing portfolio risk is the level of criticized loans. The Corporation's internal risk rating system designates specific credits as criticized loans, which include all nonperforming loans and other loans which contain features presenting more than the normal risk of collectibility. Criticized and classified assets from regulatory examinations are an integral component of the Corporation's internal risk rating system. As displayed in Table 35, criticized loans trended upward in 1995 and totaled $688 million or 3.47% of total loans at December 31, 1995 compared to 3.39% at December 31, 1994 and 4.88% at December 31, 1993. Management carefully analyzes changes and trends in both nonperforming and other criticized loans in assessing the risk characteristics of the loan portfolio. Delinquency trends are another tracking mechanism used by management to assess portfolio risk. As illustrated in Table 38, consumer loan delinquencies have gradually trended upward over the last two years as the industry experienced some moderate deterioration in consumer credit; however, the Corporation's experience con-
Table 36: Nonperforming Assets by State - --------------------------------------------------------------------------------------- December 31 (in millions) Location 1995 1994 1993 - --------------------------------------------------------------------------------------- Missouri $100.7 $103.2 $171.4 New Mexico 25.9 34.9 53.4 Arkansas 22.9 18.1 26.9 Iowa 12.9 5.5 7.2 Oklahoma 12.3 11.1 14.3 Texas 8.6 9.5 13.7 Kansas 6.0 6.1 7.6 Illinois 4.9 5.0 7.1 Tennessee 4.9 5.0 6.8 - --------------------------------------------------------------------------------------- Total $199.1 $198.4 $308.4 =======================================================================================
Table 37: Foreclosed Property - --------------------------------------------------------------------------------------- December 31 (in millions) Property Type 1995 1994 1993 - --------------------------------------------------------------------------------------- Land $17.9 $19.8 $ 28.0 Lodging 3.3 2.7 37.1 Residential 3.2 2.5 5.0 Agriculture related 2.3 2.4 8.0 Office 1.8 28.9 29.5 Multifamily .8 2.4 1.0 Warehouse .2 .4 1.7 Retail .4 1.6 Other 2.1 2.9 3.6 - --------------------------------------------------------------------------------------- Total $31.6 $62.4 $115.5 =======================================================================================
[LOAN RESERVE COVERAGE GRAPH] [NONPERFORMING ASSETS GRAPH] 38 23 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- tinues to compare favorably with industry averages. Credit risk associated with the consumer portfolio, which is primarily comprised of credit card, home equity and direct/indirect installment loans, is controlled through use of standardized credit scoring techniques and consistent adherence to conservative underwriting policies throughout the Corporation's nine state region. Net loan losses from the consumer loan portfolio expressed as a percentage of the related average loan balances were .80% in 1995 and .51% in 1994, and included credit card losses of 3.63% and 2.50% respectively.
Table 38: Consumer Loan Delinquency Trends - ------------------------------------------------------------------------------------------------ Past Due 30 Days or More Past Due 90 Days or More - ------------------------------------------------------------------------------------------------ As a % of outstandings Credit Card Loans Installment Loans Residential Mortgage - ------------------------------------------------------------------------------------------------ 1994 March 31 2.32% .79% .50% June 30 2.42 .80 .54 September 30 2.67 .84 .49 December 31 2.99 1.02 .44 1995 March 31 3.17% .88% .35% June 30 3.39 1.11 .42 September 30 3.72 1.43 .45 December 31 3.75 1.72 .43
SEGREGATED ASSETS As part of the regulatory-assisted acquisition of Missouri Bridge Bank, N.A. on April 23, 1993, the Corporation entered into a five-year loss-sharing arrangement with the FDIC with respect to approximately $950 million in multi-family residential, commercial real estate, construction, and commercial and industrial loans. During the five-year period, the FDIC will reimburse the Corporation for 80 percent of the first $92.0 million of net charge-offs on these loans, after which the FDIC will increase its reimbursement coverage to 95 percent of additional charge-offs. During this period, and for two years thereafter, the Corporation is obligated to pay the FDIC 80 percent of all recoveries on charged-off loans. The Corporation has designated certain loans covered under the loss-sharing arrangement, which possess more than the normal risk of collectibility, as segregated assets. These loans have the same characteristics as nonaccrual loans and foreclosed properties. At December 31, 1995, segregated assets totaled $103.3 million, net of a $13.3 million credit valuation allowance, and are classified as other assets for reporting purposes. At December 31, 1995, segregated assets consisted of $25.9 million of commercial loans, $12.8 million of industrial revenue bond loans, $73.1 million of commercial real estate related loans and $4.8 million of foreclosed property. All other loans covered under the loss-sharing arrangement are included in the loan portfolio and totaled $189.5 million at December 31, 1995. Net charge-offs of $3.4 million, representing the Corporation's share of losses on the segregated asset pool, were recognized in 1995. The valuation allowance represents the Corporation's share of estimated losses upon ultimate liquidation of the portfolio. The Corporation's primary purpose in managing a portfolio of this nature is to provide ongoing collection and control activities on behalf of the FDIC. Accordingly, these assets do not represent loans made in the ordinary course of business and, due to the underlying nature of this liquidating asset pool, are excluded from the Corporation's nonperforming asset statistics. At December 31, 1995, $110.3 million of segregated assets were accorded classification treatment consistent with nonaccrual reporting, $4.8 million represented foreclosed property, and the balance of $1.5 million were past due 90 days or more. The Corporation's operating results and cash flow position are not expected to be materially affected by the ongoing collection activities associated with managing the loans subject to the loss-sharing arrangement. Segregated assets income totaled $11.9 million in 1995, $13.0 million in 1994 and $7.4 million in 1993. A summary of activity regarding segregated assets is provided in Table 39.
Table 39: Segregated Assets - --------------------------------------------------------------------------------------- Principal Allowance Principal (in millions) Balance for Losses Balance, Net - --------------------------------------------------------------------------------------- Balance at December 31, 1993 $266.6 $18.4 $248.2 Charge-offs (14.9) (3.0) Recoveries 1.3 Net transfers 40.9 Payments on segregated assets (98.7) - --------------------------------------------------------------------------------------- Balance at December 31, 1994 193.9 16.7 177.2 Charge-offs (27.7) (5.5) Recoveries 2.1 Net transfers (17.2) Payments on segregated assets (32.4) - --------------------------------------------------------------------------------------- Balance at December 31, 1995 $116.6 $13.3 $103.3 =======================================================================================
39 24 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - -------------------------------------------------------------------------------
CAPITAL RESOURCES Table 40: Capital Structure - ------------------------------------------------------------------------------------------------------------ December 31 (in millions) 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------ Long-term debt $ 615.1 $ 592.0 $ 567.4 $ 428.4 $ 341.6 Stockholders' equity 2,928.1 2,561.4 2,459.9 2,155.2 1,870.9 - ------------------------------------------------------------------------------------------------------------ Total capitalization $3,543.2 $3,153.4 $3,027.3 $2,583.6 $2,212.5 ============================================================================================================ Tangible equity $2,582.6 $2,252.3 $2,118.0 $1,925.4 $1,670.3 ============================================================================================================ Ratios - ------------------------------------------------------------------------------------------------------------ Equity/assets 8.69% 7.79% 7.94% 7.60% 7.16% Tangible equity/assets 7.74 6.92 6.91 6.85 6.44 Long-term debt as % of total capitalization 17.36 18.77 18.74 16.58 15.44 Double leverage 107.81 107.24 108.99 109.36 107.89 Dividends paid for the year (in thousands): Preferred $ 75 $ 80 $ 86 $ 88 $ 91 Common 173,247 144,828 118,994 88,003 82,995 Total dividends as % of net income 41.4% 35.5% 34.0% 33.5% 41.6% ============================================================================================================ Includes dividends of pooled companies.
Table 41: Intangible Assets - -------------------------------------------------------------------------------------- December 31 (in millions) 1995 1994 1993 - -------------------------------------------------------------------------------------- Goodwill--Parent Company $ 84.4 $ 89.9 $ 95.3 - -------------------------------------------------------------------------------------- Subsidiaries: Goodwill 121.5 103.1 111.7 Core deposit premium 60.0 74.7 85.3 Mortgage servicing rights 65.7 38.4 46.1 Credit card premium 13.9 3.0 3.5 - -------------------------------------------------------------------------------------- 261.1 219.2 246.6 - -------------------------------------------------------------------------------------- Total intangible assets $345.5 $309.1 $341.9 ======================================================================================
[RISK-BASED CAPITAL GRAPH] The Corporation continues to rank among the most strongly capitalized bank holding companies in the country. This strong capital position and overall financial strength provide a good base for future expansion when profitable investment opportunities arise. The cornerstone of the Corporation's capital structure is its common equity, totaling $2.9 billion or approximately 82.6% of total capitalization at December 31, 1995, an increase of 14.3% from December 31, 1994. The equity to assets ratio was 8.69% at December 31, 1995, compared to 7.79% at December 31, 1994, and 7.94% at December 31, 1993. In the first quarter of 1995, the Corporation announced a common stock repurchase program authorizing the repurchase of up to 5 million shares, or approximately 4% of the Corporation's shares outstanding. The Corporation purchased 2.2 million shares in 1995, most of which was reissued in purchase acquisitions, such that at December 31, 1995, the Corporation held 476.5 million common shares in Treasury at a cost of $18.1 million. The repurchased shares will be used to meet periodic stock requirements of benefit plans and the pending purchase acquisition. An important measure of capital adequacy of a banking institution is its risk-based capital ratios, which represent the primary capital standard for regulatory purposes. The Corporation's risk-based capital ratios of 11.30% for Tier I and 14.30% for total capital substantially exceed the regulatory required minimums. At December 31, 1995, the Corporation's Tier I leverage ratio was 7.95%, well in excess of required minimums. At December 31, 1995, all of the Corporation's banking subsidiaries were "well capitalized" based on the regulatory defined minimums of a Tier I leverage ratio of 5%, a Tier I capital ratio of 6% and a total capital ratio of 10%. The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) mandated a requirement to incorporate interest rate risk into the risk-based capital computation which may become effective in 1996. As proposed, this change is not expected to have a material effect on the Corporation's capital requirements. 40 25 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - -------------------------------------------------------------------------------
Table 42: Risk-Based Capital - ------------------------------------------------------------------------------------------------- (in millions) 1995 1994 1993 - ------------------------------------------------------------------------------------------------- Tier I capital: Stockholders' equity $ 2,928.1 $ 2,561.4 $ 2,459.9 Unrealized net (appreciation) depreciation, available for sale securities (4.7) 111.8 (42.3) - ------------------------------------------------------------------------------------------------- Stockholders' equity, net 2,923.4 2,673.2 2,417.6 Minority interest .7 .7 .7 Intangible assets: Goodwill (205.9) (193.0) (207.0) Core deposit premium (60.0) (74.7) (85.3) - ------------------------------------------------------------------------------------------------- Total Tier I 2,658.2 2,406.2 2,126.0 - ------------------------------------------------------------------------------------------------- Tier II capital: Allowable reserve for loan losses 295.1 276.0 240.8 Qualifying long-term debt 410.0 415.0 425.2 - ------------------------------------------------------------------------------------------------- Total Tier II 705.1 691.0 666.0 - ------------------------------------------------------------------------------------------------- Total capital $ 3,363.3 $ 3,097.2 $ 2,792.0 ================================================================================================= Risk-adjusted assets $23,522.4 $22,070.4 $19,452.0 ================================================================================================= Risk-based capital ratios: Tier I 11.30% 10.90% 10.93% ================================================================================================= Total 14.30% 14.03% 14.35% ================================================================================================= Tier I Leverage ratio 7.95% 7.35% 6.93% =================================================================================================
FOURTH QUARTER DATA
Table 43: Summary of Fourth Quarter Earnings - ------------------------------------------------------------------------------------------------- Fourth Quarter - ------------------------------------------------------------------------------------------------- (in millions) 1995 1994 % change - ------------------------------------------------------------------------------------------------- Net interest income $312.3 $300.2 4.0% Provision for loan losses 16.7 4.9 240.4 - ------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 295.6 295.3 .1 Noninterest income 181.0 158.1 14.5 Noninterest expense 302.8 296.3 2.2 - ------------------------------------------------------------------------------------------------- Income before income taxes 173.8 157.1 10.7 Income tax expense 60.1 52.9 13.7 - ------------------------------------------------------------------------------------------------- Net income $113.7 $104.2 9.1% ================================================================================================= Net income per share $.88 $.81 8.6% ================================================================================================= Dividends declared per share $.37 $.34 8.8% =================================================================================================
Net income for the fourth quarter of 1995 totaled $113.7 million, an increase of 9.1% over the fourth quarter of 1994. Net income per share was $.88, an increase of 8.6%. Net interest income increased 4.0% to $312.3 million from $300.2 million in the fourth quarter of 1994, due to an increase in average earning assets and improvement in the net interest margin. Average earning assets increased 3.2%, led by a 7.3% increase in average loans. The net interest margin was 4.31% in 1995, compared to 4.29% in 1994 and 4.21% in the third quarter of 1995. The provision for loan losses totaled $16.7 million in the fourth quarter of 1995, compared to $4.9 million a year ago. Net loan charge-offs in the fourth quarter of 1995 totaled $26.5 million, compared to $10.5 million in 1994, and as a percentage of average loans were .54%, compared to .23% in 1994. The increase in net charge-offs was primarily due to a $10 million charge-off on a large corporate borrower that filed for bankruptcy, coupled with an increase in consumer loan losses. Noninterest income increased 14.5% to $181.0 million, from $158.1 million in the fourth quarter of 1994. Excluding securities gains, noninterest income increased $13.3 million, or 8.5%, attributable primarily to gains in trust fees, service charges and mortgage banking revenues. Noninterest expense totaled $302.8 million, an increase of 2.2% over the fourth quarter of 1994. Noninterest expense in 1995 includes a $9.2 million decrease in FDIC insurance premiums, which was offset by expense increases for personnel, equipment, and funding support provided to the Corporation's trust subsidiary's short-term money market fund. 41 26 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- Consolidated Quarterly Earnings Trend
1995 - ----------------------------------------------------------------------------------------------------------------- (in thousands) Fourth Quarter Third Quarter Second Quarter First Quarter - ----------------------------------------------------------------------------------------------------------------- Interest income Interest and fees on loans $435,731 $439,027 $430,829 $405,962 Interest on short-term investments 1,521 1,124 983 899 Interest on Federal funds sold and securities purchased under resale agreements 9,878 8,410 7,539 7,846 Interest on held to maturity securities Taxable 54,097 64,781 66,317 64,792 Tax-exempt 14,325 13,915 13,903 13,965 - ----------------------------------------------------------------------------------------------------------------- Total interest on held to maturity securities 68,422 78,696 80,220 78,757 Interest on available for sale securities 71,640 60,747 64,731 64,853 Interest on trading securities 676 521 338 421 - ----------------------------------------------------------------------------------------------------------------- Total interest income 587,868 588,525 584,640 558,738 - ----------------------------------------------------------------------------------------------------------------- Interest expense Interest on deposits 207,613 204,315 200,577 184,751 Interest on Federal funds purchased and other short-term borrowings 54,530 67,020 70,335 65,354 Interest on capital lease obligations 967 968 970 970 Interest on long-term debt 12,497 11,334 11,492 12,015 - ----------------------------------------------------------------------------------------------------------------- Total interest expense 275,607 283,637 283,374 263,090 - ----------------------------------------------------------------------------------------------------------------- Net interest income 312,261 304,888 301,266 295,648 Provision for loan losses 16,677 11,130 9,171 9,710 - ----------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 295,584 293,758 292,095 285,938 - ----------------------------------------------------------------------------------------------------------------- Noninterest income Trust fees 45,796 44,624 46,345 40,420 Service charges 49,408 48,121 47,595 45,699 Mortgage banking revenues 19,763 19,680 16,291 22,904 Credit card 13,085 13,084 11,728 11,856 Investment banking revenues 8,762 8,849 8,880 8,790 Securities gains, net 11,015 843 2,815 46 Other 33,160 32,535 31,887 32,397 - ----------------------------------------------------------------------------------------------------------------- Total noninterest income 180,989 167,736 165,541 162,112 - ----------------------------------------------------------------------------------------------------------------- Noninterest expense Staff 151,637 150,662 146,654 148,259 Net occupancy 19,763 20,820 19,277 20,310 Equipment 25,674 23,128 23,483 23,372 FDIC insurance 3,798 773 13,310 13,316 Intangible amortization 8,780 8,215 8,052 7,883 Advertising 9,807 8,055 8,674 7,496 Other 83,309 79,871 73,876 90,747 - ----------------------------------------------------------------------------------------------------------------- Total noninterest expense 302,768 291,524 293,326 311,383 - ----------------------------------------------------------------------------------------------------------------- Income before income tax expense 173,805 169,970 164,310 136,667 Income tax expense 60,114 59,332 55,613 50,858 - ----------------------------------------------------------------------------------------------------------------- Net income $113,691 $110,638 $108,697 $ 85,809 ================================================================================================================= Net income per share $.88 $.86 $.84 $.67 ================================================================================================================= Dividends declared per share $.37 $.37 $.34 $.34 ================================================================================================================= Returns Return on assets 1.38% 1.34% 1.33% 1.06% Return on total equity 15.81 15.77 15.85 13.06 ================================================================================================================= 42 27 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- 1994 - ----------------------------------------------------------------------------------------------------------------- (in thousands) Fourth Quarter Third Quarter Second Quarter First Quarter - ----------------------------------------------------------------------------------------------------------------- Interest income Interest and fees on loans $387,749 $367,691 $353,870 $330,198 Interest on short-term investments 886 932 1,082 572 Interest on Federal funds sold and securities purchased under resale agreements 7,802 3,994 2,760 2,580 Interest on held to maturity securities Taxable 62,509 62,323 58,900 48,634 Tax-exempt 14,709 15,678 14,903 15,198 - ----------------------------------------------------------------------------------------------------------------- Total interest on held to maturity securities 77,218 78,001 73,803 63,832 Interest on available for sale securities 65,324 64,855 66,335 69,847 Interest on trading securities 378 381 926 840 - ----------------------------------------------------------------------------------------------------------------- Total interest income 539,357 515,854 498,776 467,869 - ----------------------------------------------------------------------------------------------------------------- Interest expense Interest on deposits 168,601 153,659 145,692 141,664 Interest on Federal funds purchased and other short-term borrowings 57,361 49,884 40,522 25,477 Interest on capital lease obligations 993 1,000 997 993 Interest on long-term debt 12,197 12,052 11,468 11,008 - ----------------------------------------------------------------------------------------------------------------- Total interest expense 239,152 216,595 198,679 179,142 - ----------------------------------------------------------------------------------------------------------------- Net interest income 300,205 299,259 300,097 288,727 Provision for loan losses 4,899 6,855 7,740 5,846 - ----------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 295,306 292,404 292,357 282,881 - ----------------------------------------------------------------------------------------------------------------- Noninterest income Trust fees 42,746 39,777 40,930 41,483 Service charges 46,947 47,188 46,811 45,840 Mortgage banking revenues 15,418 13,509 12,723 19,045 Credit card 14,047 11,074 9,841 9,666 Investment banking revenues 8,795 8,660 10,584 9,729 Securities gains, net 1,411 1,533 702 2,554 Other 28,716 27,760 31,863 25,792 - ----------------------------------------------------------------------------------------------------------------- Total noninterest income 158,080 149,501 153,454 154,109 - ----------------------------------------------------------------------------------------------------------------- Noninterest expense Staff 146,382 146,732 149,092 148,492 Net occupancy 20,588 21,172 20,580 20,645 Equipment 23,662 24,113 23,579 22,018 FDIC insurance 13,033 13,195 13,271 13,448 Intangible amortization 8,716 8,842 8,808 8,786 Advertising 10,369 8,452 7,849 6,821 Other 73,561 63,778 64,407 66,347 - ----------------------------------------------------------------------------------------------------------------- Total noninterest expense 296,311 286,284 287,586 286,557 - ----------------------------------------------------------------------------------------------------------------- Income before income tax expense 157,075 155,621 158,225 150,433 Income tax expense 52,866 53,632 55,244 51,810 - ----------------------------------------------------------------------------------------------------------------- Net income $104,209 $101,989 $102,981 $ 98,623 ================================================================================================================= Net income per share $.81 $.79 $.80 $.77 ================================================================================================================= Dividends declared per share $.34 $.34 $.31 $.31 ================================================================================================================= Returns Return on assets 1.30% 1.29% 1.31% 1.28% Return on total equity 16.25 16.03 16.45 15.84 =================================================================================================================
43 28 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- Consolidated Quarterly Average Balance Sheet and Net Interest Margin
(dollars in millions) 1995 - ----------------------------------------------------------------------------------------------------------------------------------- Fourth Quarter Third Quarter Second Quarter - ----------------------------------------------------------------------------------------------------------------------------------- Income/ Yields/ Income/ Yields/ Income/ Yields/ Assets Balance Expense Rates Balance Expense Rates Balance Expense Rates - ----------------------------------------------------------------------------------------------------------------------------------- Loans, net of unearned income $19,745.4 $437.2 8.78% $19,817.3 $440.3 8.82% $19,528.4 $432.4 8.88% Short-term investments 91.3 1.5 6.61 75.0 1.1 5.95 67.6 1.0 5.83 Federal funds sold and securities purchased under resale agreements 675.7 9.9 5.80 571.0 8.4 5.84 492.8 7.5 6.14 Held to maturity securities: Taxable 3,461.5 54.1 6.20 4,222.6 64.8 6.09 4,403.6 66.3 6.04 Tax-exempt 891.4 21.4 9.52 862.5 20.8 9.58 856.3 20.9 9.78 - ----------------------------------------------------------------------------------------------------------------------------------- Total held to maturity securities 4,352.9 75.5 6.88 5,085.1 85.6 6.68 5,259.9 87.2 6.65 Available for sale securities 4,627.5 71.7 6.15 3,938.9 60.8 6.13 4,073.5 64.8 6.38 Trading securities 47.1 .7 6.03 30.8 .6 7.21 20.6 .4 6.96 - ----------------------------------------------------------------------------------------------------------------------------------- Total earning assets 29,539.9 596.5 8.01 29,518.1 596.8 8.02 29,442.8 593.3 8.08 Less reserve for loan losses (393.7) (389.1) (386.3) Cash and due from banks 1,771.0 1,885.0 1,825.5 All other assets 1,975.6 2,033.7 1,905.9 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets $32,892.8 $33,047.7 $32,787.9 =================================================================================================================================== Liabilities and Stockholders' Equity - ----------------------------------------------------------------------------------------------------------------------------------- Retail savings deposits and interest- bearing transaction accounts $10,510.0 $ 82.8 3.13% $10,232.9 $ 80.1 3.10% $10,103.8 $ 79.2 3.14% Time deposits 9,011.3 124.8 5.49 8,986.5 124.2 5.49 9,109.5 121.4 5.34 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 19,521.3 207.6 4.22 19,219.4 204.3 4.22 19,213.3 200.6 4.19 Federal funds purchased and other short-term borrowings 3,764.0 54.5 5.75 4,592.4 67.0 5.79 4,682.4 70.3 6.03 Capital lease obligations 39.1 1.0 9.82 39.2 1.0 9.81 39.6 1.0 9.81 Long-term debt 599.4 12.5 8.27 522.5 11.3 8.61 528.9 11.5 8.71 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 23,923.8 275.6 4.57 24,373.5 283.6 4.62 24,464.2 283.4 4.65 Demand deposits 5,601.0 5,409.2 5,198.5 All other liabilities 490.4 457.8 381.0 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities 30,015.2 30,240.5 30,043.7 Redeemable preferred stock .9 1.1 1.1 Total stockholders' equity 2,876.7 2,806.1 2,743.1 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $32,892.8 $33,047.7 $32,787.9 =================================================================================================================================== Interest rate spread 3.44% 3.40% 3.43% Effect of noninterest-bearing funds .87 .81 .79 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income/margin $320.9 4.31% $313.2 4.21% $309.9 4.22% =================================================================================================================================== Nonaccrual loans are included in average balances and interest payments on such loans are recognized as income on a cash basis when appropriate. Interest income and yields are presented on a fully-taxable equivalent basis using the Federal statutory income tax rate, net of nondeductible interest expense. Such adjustments by earning asset category are as follows: Loans $1.4 $1.3 $1.6 Held to maturity securities 7.1 6.9 7.0 Available for sale securities .1 .1 Trading securities .1 - ----------------------------------------------------------------------------------------------------------------------------------- Total $8.6 $8.3 $8.7 =================================================================================================================================== 44 29 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter - ------------------------------------------------------------------------------------------------------------------------------------ Income/ Yields/ Income/ Yields/ Income/ Yields/ Income/ Yields/ Income/ Yields/ Balance Expense Rates Balance Expense Rates Balance Expense Rates Balance Expense Rates Balance Expense Rates - ------------------------------------------------------------------------------------------------------------------------------------ $18,924.4 $407.8 8.74% $18,402.5 $390.0 8.41% $17,993.9 $369.2 8.14% $17,596.5 $355.5 8.10% $17,068.8 $331.8 7.88% 65.4 .9 5.57 68.6 .9 5.13 83.8 .9 4.41 110.0 1.1 3.95 61.0 .6 3.80 531.5 7.9 5.99 579.4 7.8 5.34 333.5 4.0 4.75 262.7 2.8 4.21 295.8 2.6 3.54 4,351.8 64.8 6.04 4,353.1 62.5 5.70 4,385.0 62.3 5.64 4,385.4 58.9 5.39 4,056.7 48.6 4.86 846.2 21.0 10.06 897.5 21.8 9.62 891.7 23.5 10.44 904.8 22.3 9.88 923.9 22.8 10.01 - ------------------------------------------------------------------------------------------------------------------------------------ 5,198.0 85.8 6.69 5,250.6 84.3 6.37 5,276.7 85.8 6.45 5,290.2 81.2 6.16 4,980.6 71.4 5.82 4,116.5 65.0 6.40 4,291.3 65.4 6.05 4,578.1 64.9 5.63 4,891.9 66.4 5.45 5,013.5 69.9 5.66 27.9 .4 6.40 26.1 .4 6.29 28.4 .4 5.56 64.2 1.0 6.04 69.5 .8 5.01 - ------------------------------------------------------------------------------------------------------------------------------------ 28,863.7 567.8 7.98 28,618.5 548.8 7.61 28,294.4 525.2 7.37 28,215.5 508.0 7.22 27,489.2 477.1 7.04 (380.0) (383.3) (384.0) (384.4) (381.5) 1,871.9 1,903.3 1,873.6 1,851.2 1,816.5 1,923.4 1,874.4 1,845.9 1,855.3 1,856.2 - ------------------------------------------------------------------------------------------------------------------------------------ $32,279.0 $32,012.9 $31,629.9 $31,537.6 $30,780.4 ==================================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------------------ $10,108.4 $ 74.8 3.00% $10,078.2 $ 68.2 2.68% $10,068.7 $ 62.8 2.48% $10,175.8 $ 59.8 2.36% $10,232.4 $ 56.9 2.26% 8,999.1 110.0 4.96 8,809.6 100.4 4.52 8,576.7 90.8 4.20 8,582.4 85.9 4.01 8,581.3 84.7 4.00 - ------------------------------------------------------------------------------------------------------------------------------------ 19,107.5 184.8 3.92 18,887.8 168.6 3.54 18,645.4 153.6 3.27 18,758.2 145.7 3.12 18,813.7 141.6 3.05 4,544.7 65.3 5.83 4,475.3 57.4 5.09 4,445.3 49.9 4.45 4,239.3 40.5 3.83 3,446.8 25.5 3.00 40.0 1.0 9.85 40.2 1.0 9.79 40.5 1.0 9.80 40.8 1.0 9.81 41.0 1.0 9.81 568.2 12.0 8.58 598.2 12.2 8.09 592.0 12.0 8.08 587.9 11.5 7.82 588.2 11.0 7.59 - ------------------------------------------------------------------------------------------------------------------------------------ 24,260.4 263.1 4.40 24,001.5 239.2 3.95 23,723.2 216.5 3.62 23,626.2 198.7 3.37 22,889.7 179.1 3.17 4,999.0 5,081.2 5,041.3 5,110.3 5,057.4 391.0 363.3 319.0 296.4 341.3 - ------------------------------------------------------------------------------------------------------------------------------------ 29,650.4 29,446.0 29,083.5 29,032.9 28,288.4 1.1 1.1 1.1 1.1 1.2 2,627.5 2,565.8 2,545.3 2,503.6 2,490.8 - ------------------------------------------------------------------------------------------------------------------------------------ $32,279.0 $32,012.9 $31,629.9 $31,537.6 $30,780.4 ==================================================================================================================================== 3.58% 3.66% 3.75% 3.85% 3.87% .70 .63 .58 .55 .53 - ------------------------------------------------------------------------------------------------------------------------------------ $304.7 4.28% $309.6 4.29% $308.7 4.33% $309.3 4.40% $298.0 4.40% ==================================================================================================================================== $1.9 $2.2 $1.5 $1.6 $1.6 7.0 7.1 7.8 7.4 7.6 .1 .1 .1 .1 .1 .1 - ------------------------------------------------------------------------------------------------------------------------------------ $9.0 $9.4 $9.4 $9.2 $9.3 ====================================================================================================================================
45 30 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- Consolidated Earnings Trend
(in thousands) 1995 1994 1993 - ------------------------------------------------------------------------- Interest income Interest and fees on loans $1,711,549 $1,439,508 $1,282,802 Interest on short-term investments 4,527 3,472 2,101 Interest on Federal funds sold and securities purchased under resale agreements 33,673 17,136 18,799 Interest on held to maturity securities Taxable 249,987 232,366 462,542 Tax-exempt 56,108 60,488 62,310 - ------------------------------------------------------------------------- Total interest on held to maturity securities 306,095 292,854 524,852 Interest on available for sale securities 261,971 266,361 29,057 Interest on trading securities 1,956 2,525 2,570 Interest on receivable due from Resolution Trust Corporation - ------------------------------------------------------------------------- Total interest income 2,319,771 2,021,856 1,860,181 - ------------------------------------------------------------------------- Interest expense Interest on savings deposits 44,530 55,598 59,321 Interest on interest-bearing transaction accounts 272,360 192,140 175,428 Interest on time deposits 480,366 361,878 372,600 Interest on Federal funds purchased and other short-term borrowings 257,239 173,244 82,351 Interest on capital lease obligations 3,875 3,983 4,082 Interest on long-term debt 47,338 46,725 40,767 - ------------------------------------------------------------------------- Total interest expense 1,105,708 833,568 734,549 - ------------------------------------------------------------------------- Net interest income 1,214,063 1,188,288 1,125,632 Provision for loan losses 46,688 25,340 63,885 - ------------------------------------------------------------------------- Net interest income after provision for loan losses 1,167,375 1,162,948 1,061,747 - ------------------------------------------------------------------------- Noninterest income Trust fees 177,185 164,936 159,365 Service charges 190,823 186,786 176,850 Credit card 49,753 44,628 33,433 Investment banking revenues 35,281 37,768 41,934 Securities gains, net 14,719 6,200 8,348 Other 208,617 174,826 173,602 - ------------------------------------------------------------------------- Total noninterest income 676,378 615,144 593,532 - ------------------------------------------------------------------------- Noninterest expense Staff 597,212 590,698 568,490 Net occupancy 80,170 82,985 88,198 Equipment 95,657 93,372 89,643 FDIC insurance 31,197 52,947 52,007 Other 394,765 336,736 344,659 - ------------------------------------------------------------------------- Total noninterest expense 1,199,001 1,156,738 1,142,997 - ------------------------------------------------------------------------- Income before income tax expense 644,752 621,354 512,282 Income tax expense 225,917 213,552 161,917 - ------------------------------------------------------------------------- Net income $ 418,835 $ 407,802 $ 350,365 ========================================================================= Net income per share $3.25 $3.17 $2.75 ========================================================================= Dividends declared per share $1.42 $1.30 $1.18 ========================================================================= Returns Return on assets 1.28% 1.29% 1.20% Return on equity 15.15 16.14 15.25 Return on common equity 15.15 16.14 15.25 ========================================================================= 46 31 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- 1992 1991 1990 % change 1995 % change 1994 5-year annual compound change 1991-1995 - ------------------------------------------------------------------------------------------------------------------------------------ $1,228,629 $1,329,086 $1,412,171 18.9% 12.2% 3.9% 3,245 9,500 9,656 30.4 65.3 (14.1) 58,396 88,945 94,107 96.5 (8.8) (18.6) 477,864 443,095 361,462 7.6 (49.8) (7.1) 67,322 70,850 75,426 (7.2) (2.9) (5.7) - ----------------------------------------------------------------------------------------------------------------------------------- 545,186 513,945 436,888 4.5 (44.2) (6.9) (1.6) 3,312 7,812 4,029 (22.5) (1.8) (13.5) 28,955 5,359 - ----------------------------------------------------------------------------------------------------------------------------------- 1,838,768 1,978,243 1,962,210 14.7 8.7 3.4 - ----------------------------------------------------------------------------------------------------------------------------------- 60,229 69,510 57,796 (19.9) (6.3) (5.1) 197,650 245,796 238,233 41.8 9.5 2.7 464,554 657,494 679,326 32.7 (2.9) (6.7) 76,624 124,986 201,348 48.5 110.4 5.0 4,165 4,189 4,278 (2.7) (2.4) (2.0) 34,091 30,870 32,408 1.3 14.6 7.9 - ----------------------------------------------------------------------------------------------------------------------------------- 837,313 1,132,845 1,213,389 32.6 13.5 (1.8) - ----------------------------------------------------------------------------------------------------------------------------------- 1,001,455 845,398 748,821 2.2 5.6 10.1 139,475 118,017 125,662 84.2 (60.3) (18.0) - ----------------------------------------------------------------------------------------------------------------------------------- 861,980 727,381 623,159 .4 9.5 13.4 - ----------------------------------------------------------------------------------------------------------------------------------- 147,308 129,076 114,798 7.4 3.5 9.1 156,325 124,780 101,666 2.2 5.6 13.4 29,502 22,488 22,577 11.5 33.5 17.1 37,052 24,166 13,995 (6.6) (9.9) 20.3 32,231 5,931 3,011 137.4 (25.7) 37.4 97,942 95,253 79,027 19.3 .7 21.4 - ----------------------------------------------------------------------------------------------------------------------------------- 500,360 401,694 335,074 10.0 3.6 15.1 - ----------------------------------------------------------------------------------------------------------------------------------- 483,187 420,597 382,345 1.1 3.9 9.3 77,866 68,475 58,990 (3.4) (5.9) 6.3 75,405 65,062 63,576 2.4 4.2 8.5 48,574 41,829 20,215 (41.1) 1.8 9.1 315,417 269,253 226,561 17.2 (2.3) 11.7 - ----------------------------------------------------------------------------------------------------------------------------------- 1,000,449 865,216 751,687 3.7 1.2 9.8 - ----------------------------------------------------------------------------------------------------------------------------------- 361,891 263,859 206,546 3.8 21.3 25.6 99,228 63,925 38,808 5.8 31.9 42.2 - ----------------------------------------------------------------------------------------------------------------------------------- $ 262,663 $ 199,934 $ 167,738 2.7% 16.4% 20.1% =================================================================================================================================== $2.25 $1.78 $1.57 2.5% 15.3% 15.7% =================================================================================================================================== $1.10 $1.07 $1.06 9.2% 10.2% 6.0% =================================================================================================================================== .99% .81% .75% 13.21 11.33 10.58 13.21 11.32 10.58 ===================================================================================================================================
47 32 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- Consolidated Average Balance Sheet and Net Interest Margin
(dollars in millions) 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------------- Income/ Yields/ Income/ Yields/ Income/ Yields/ Assets Balance Expense Rates Balance Expense Rates Balance Expense Rates - ----------------------------------------------------------------------------------------------------------------------------------- Loans, net of unearned income $19,507.0 $1,717.7 8.81% $17,769.7 $1,446.5 8.14% $16,029.4 $1,289.3 8.04% Short-term investments 74.9 4.5 6.04 80.9 3.5 4.29 61.9 2.1 3.40 Federal funds sold and securities purchased under resale agreements 568.2 33.7 5.93 368.5 17.1 4.65 595.7 18.8 3.16 Held to maturity securities: Taxable 4,107.8 250.0 6.09 4,296.1 232.4 5.41 7,905.5 462.5 5.85 Tax-exempt 864.2 84.1 9.73 904.4 90.3 9.99 937.1 93.2 9.95 - ----------------------------------------------------------------------------------------------------------------------------------- Total held to maturity securities 4,972.0 334.1 6.72 5,200.5 322.7 6.21 8,842.6 555.7 6.28 Available for sale securities 4,189.8 262.3 6.26 4,691.4 266.7 5.68 483.7 29.1 6.01 Trading securities 31.6 2.1 6.55 46.9 2.6 5.63 53.6 2.7 5.12 Receivable due from Resolution Trust Corporation - ----------------------------------------------------------------------------------------------------------------------------------- Total earning assets 29,343.5 2,354.4 8.02 28,157.9 2,059.1 7.31 26,066.9 1,897.7 7.28 Less reserve for loan losses (387.3) (383.3) (366.3) Cash and due from banks 1,838.2 1,861.4 1,814.9 Property and equipment 643.4 632.3 559.2 All other assets 1,316.6 1,225.7 1,079.3 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets $32,754.4 $31,494.0 $29,154.0 =================================================================================================================================== Liabilities and Stockholders' Equity - ----------------------------------------------------------------------------------------------------------------------------------- Savings deposits $ 1,864.5 $ 44.5 2.39% $ 2,330.1 $ 55.6 2.39% $ 2,265.8 $ 59.3 2.62% Interest-bearing transaction accounts 8,375.3 272.4 3.25 7,808.0 192.1 2.46 7,348.0 175.4 2.39 Time deposits 9,026.6 480.4 5.32 8,638.0 361.9 4.19 9,062.2 372.6 4.11 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 19,266.4 797.3 4.14 18,776.1 609.6 3.25 18,676.0 607.3 3.25 Federal funds purchased and other short-term borrowings 4,394.3 257.2 5.85 4,155.3 173.3 4.17 2,535.1 82.4 3.25 Capital lease obligations 39.4 3.9 9.82 40.7 4.0 9.80 41.6 4.1 9.80 Long-term debt 554.7 47.3 8.53 591.6 46.7 7.90 531.1 40.8 7.68 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 24,254.8 1,105.7 4.56 23,563.7 833.6 3.54 21,783.8 734.6 3.37 Demand deposits 5,303.9 5,072.6 4,834.6 All other liabilities 430.4 330.0 237.0 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities 29,989.1 28,966.3 26,855.4 Redeemable preferred stock 1.1 1.1 1.2 Total stockholders' equity 2,764.2 2,526.6 2,297.4 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $32,754.4 $31,494.0 $29,154.0 =================================================================================================================================== Interest rate spread 3.46% 3.77% 3.91% Effect of noninterest-bearing funds .80 .58 .55 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income/margin $1,248.7 4.26% $1,225.5 4.35% $1,163.1 4.46% =================================================================================================================================== Nonaccrual loans are included in average balances and interest payments on such loans are recognized as income on a cash basis when appropriate. Interest income and yields are presented on a fully-taxable equivalent basis using the Federal statutory income tax rate, net of nondeductible interest expense. Such adjustments by earning asset category are as follows: Loans $ 6.2 $ 7.0 $ 6.4 Held to maturity securities 28.0 29.8 30.9 Available for sale securities .3 .3 Trading securities .1 .1 .2 - ----------------------------------------------------------------------------------------------------------------------------------- Total $34.6 $37.2 $37.5 =================================================================================================================================== 48 33 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- 1992 1991 1990 % change in average balances - ----------------------------------------------------------------------------------------------------------------------------------- Five-year annual Income/ Yields/ Income/ Yields/ Income/ Yields/ compound Balance Expense Rates Balance Expense Rates Balance Expense Rates 1995 1994 1991-1995 - ----------------------------------------------------------------------------------------------------------------------------------- $14,304.7 $1,233.6 8.62% $13,488.5 $1,335.9 9.90% $13,177.8 $1,421.2 10.78% 9.8% 10.9% 8.2% 81.8 3.3 3.96 130.4 9.5 7.28 118.2 9.6 8.17 (7.4) 30.7 (8.7) 1,592.8 58.4 3.67 1,578.0 88.9 5.64 1,187.3 94.1 7.93 54.2 (38.1) (13.7) 6,852.5 477.9 6.97 5,362.1 443.1 8.26 4,212.3 361.5 8.58 (4.4) (45.7) (.5) 972.7 98.1 10.09 1,007.7 102.4 10.17 1,068.8 108.1 10.12 (4.4) (3.5) (4.2) - ----------------------------------------------------------------------------------------------------------------------------------- 7,825.2 576.0 7.36 6,369.8 545.5 8.56 5,281.1 469.6 8.89 (4.4) (41.2) (1.2) (10.7) 54.4 3.4 6.27 110.5 8.0 7.25 46.4 4.1 8.90 (32.6) (12.5) (7.4) 357.9 29.0 8.09 67.1 5.4 7.99 - ----------------------------------------------------------------------------------------------------------------------------------- 23,858.9 1,874.7 7.86 22,035.1 2,016.8 9.15 19,877.9 2,004.0 10.08 4.2 8.0 8.1 (312.7) (275.4) (254.9) 1.0 4.6 8.7 1,682.1 1,574.1 1,552.2 (1.2) 2.6 3.4 515.2 465.8 444.6 1.8 13.1 7.7 813.0 774.4 631.7 7.4 13.6 15.8 - ----------------------------------------------------------------------------------------------------------------------------------- $26,556.5 $24,574.0 $22,251.5 4.0% 8.0% 8.0% =================================================================================================================================== - ----------------------------------------------------------------------------------------------------------------------------------- $1,849.8 $ 60.2 3.26% $ 1,486.0 $ 69.5 4.68% $ 1,175.7 $ 57.8 4.92% (20.0)% 2.8% 9.7% 6,490.6 197.6 3.05 5,170.8 245.8 4.75 4,340.0 238.2 5.49 7.3 6.3 14.1 9,224.4 464.6 5.04 9,773.7 657.5 6.73 8,626.0 679.3 7.88 4.5 (4.7) .9 - ----------------------------------------------------------------------------------------------------------------------------------- 17,564.8 722.4 4.11 16,430.5 972.8 5.92 14,141.7 975.3 6.90 2.6 .5 6.4 2,160.5 76.6 3.55 2,233.2 125.0 5.60 2,561.6 201.4 7.86 5.8 63.9 11.4 42.6 4.2 9.77 43.4 4.1 9.65 44.4 4.3 9.65 (3.2) (2.2) (2.4) 369.1 34.1 9.24 308.8 30.9 9.99 321.5 32.4 10.08 (6.2) 11.4 11.5 - ----------------------------------------------------------------------------------------------------------------------------------- 20,137.0 837.3 4.16 19,015.9 1,132.8 5.96 17,069.2 1,213.4 7.11 2.9 8.2 7.3 4,205.2 3,552.1 3,356.0 4.6 4.9 9.6 224.0 239.8 240.0 30.4 39.2 12.4 - ----------------------------------------------------------------------------------------------------------------------------------- 24,566.2 22,807.8 20,665.2 3.5 7.9 7.7 1.3 1.3 1.4 (8.3) (4.7) 1,989.0 1,764.9 1,584.9 9.4 10.0 11.8 - ----------------------------------------------------------------------------------------------------------------------------------- $26,556.5 $24,574.0 $22,251.5 4.0% 8.0% 8.0% =================================================================================================================================== 3.70% 3.19% 2.97% .65 .82 1.01 - ----------------------------------------------------------------------------------------------------------------------------------- $1,037.4 4.35% $ 884.0 4.01% $ 790.6 3.98% =================================================================================================================================== $ 5.0 $ 6.8 $ 9.0 30.8 31.6 32.7 .1 .2 .1 - ----------------------------------------------------------------------------------------------------------------------------------- $35.9 $38.6 $41.8 ===================================================================================================================================
49 34 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- Consolidated Balance Sheet
December 31 (dollars in thousands) 1995 1994 - ------------------------------------------------------------------------------------------------------------------------- Assets Cash and due from banks $ 2,175,804 $ 2,119,579 Short-term investments 82,240 44,717 Securities: Held to maturity (market value $965,414 and $4,965,930, respectively) 914,747 5,216,968 Available for sale (amortized cost $8,056,398, and $4,354,715, respectively) 8,063,815 4,172,964 Trading 57,442 31,674 Federal funds sold and securities purchased under resale agreements 1,099,696 1,111,720 Loans (net of unearned income of $63,729, and $66,904 respectively) 19,763,244 18,655,511 Less reserve for loan losses 382,984 376,618 - ------------------------------------------------------------------------------------------------------------------------- Loans, net 19,380,260 18,278,893 - ------------------------------------------------------------------------------------------------------------------------- Property and equipment 637,945 637,500 Other assets 1,291,881 1,264,015 - ------------------------------------------------------------------------------------------------------------------------- Total assets $33,703,830 $32,878,030 ========================================================================================================================= Liabilities and Stockholders' Equity Liabilities: Demand deposits $ 5,862,531 $ 5,256,494 Retail savings deposits and interest-bearing transaction accounts 11,027,383 10,142,719 Time deposits 9,042,216 9,984,860 - ------------------------------------------------------------------------------------------------------------------------- Total deposits 25,932,130 25,384,073 - ------------------------------------------------------------------------------------------------------------------------- Federal funds purchased and securities sold under repurchase agreements 2,361,204 2,053,609 Short-term borrowings 1,359,993 1,903,182 Capital lease obligations 38,910 40,098 Long-term debt 615,129 592,041 Other liabilities 467,444 342,512 - ------------------------------------------------------------------------------------------------------------------------- Total liabilities 30,774,810 30,315,515 - ------------------------------------------------------------------------------------------------------------------------- Redeemable preferred stock 961 1,142 - ------------------------------------------------------------------------------------------------------------------------- Stockholders' Equity: Common stock ($1 par value; 200,000,000 shares authorized; 129,923,507 and 128,873,322 shares issued, respectively) 129,924 128,873 Surplus 984,557 964,900 Retained earnings 1,827,023 1,593,911 Treasury stock (476,519 and 508,698 shares at cost, respectively) (18,096) (14,516) Unrealized net appreciation (depreciation), available for sale securities 4,651 (111,795) - ------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 2,928,059 2,561,373 - ------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $33,703,830 $32,878,030 ========================================================================================================================= See accompanying notes to the consolidated financial statements.
50 35 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- Consolidated Statement of Income
Year ended December 31 (in thousands) 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------- Interest income Interest and fees on loans $1,711,549 $1,439,508 $1,282,802 Interest on short-term investments 4,527 3,472 2,101 Interest on Federal funds sold and securities purchased under resale agreements 33,673 17,136 18,799 Interest on held to maturity securities Taxable 249,987 232,366 462,542 Tax-exempt 56,108 60,488 62,310 - ----------------------------------------------------------------------------------------------------------------------- Total interest on held to maturity securities 306,095 292,854 524,852 Interest on available for sale securities 261,971 266,361 29,057 Interest on trading securities 1,956 2,525 2,570 - ----------------------------------------------------------------------------------------------------------------------- Total interest income 2,319,771 2,021,856 1,860,181 - ----------------------------------------------------------------------------------------------------------------------- Interest expense Interest on deposits 797,256 609,616 607,349 Interest on Federal funds purchased and other short-term borrowings 257,239 173,244 82,351 Interest on capital lease obligations 3,875 3,983 4,082 Interest on long-term debt 47,338 46,725 40,767 - ----------------------------------------------------------------------------------------------------------------------- Total interest expense 1,105,708 833,568 734,549 - ----------------------------------------------------------------------------------------------------------------------- Net interest income 1,214,063 1,188,288 1,125,632 Provision for loan losses 46,688 25,340 63,885 - ----------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 1,167,375 1,162,948 1,061,747 - ----------------------------------------------------------------------------------------------------------------------- Noninterest income Trust fees 177,185 164,936 159,365 Service charges 190,823 186,786 176,850 Mortgage banking revenues 78,638 60,695 68,623 Credit card 49,753 44,628 33,433 Investment banking revenues 35,281 37,768 41,934 Securities gains, net 14,719 6,200 8,348 Other 129,979 114,131 104,979 - ----------------------------------------------------------------------------------------------------------------------- Total noninterest income 676,378 615,144 593,532 - ----------------------------------------------------------------------------------------------------------------------- Noninterest expense Staff 597,212 590,698 568,490 Net occupancy 80,170 82,985 88,198 Equipment 95,657 93,372 89,643 FDIC insurance 31,197 52,947 52,007 Intangible amortization 33,576 35,152 36,265 Advertising 34,032 33,491 31,736 Other 327,157 268,093 276,658 - ----------------------------------------------------------------------------------------------------------------------- Total noninterest expense 1,199,001 1,156,738 1,142,997 - ----------------------------------------------------------------------------------------------------------------------- Income before income tax expense 644,752 621,354 512,282 Income tax expense 225,917 213,552 161,917 - ----------------------------------------------------------------------------------------------------------------------- Net income $ 418,835 $ 407,802 $ 350,365 ======================================================================================================================= Net income per share $3.25 $3.17 $2.75 ======================================================================================================================= Dividends declared per share $1.42 $1.30 $1.18 ======================================================================================================================= See accompanying notes to the consolidated financial statements.
51 36 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- Consolidated Statement of Changes in Stockholders' Equity
Unrealized Net Appreciation, Common Stock Treasury Stock (Depreciation) ----------------- Retained ----------------- Available for (in thousands) Shares Amount Surplus Earnings Shares Amount Sale Securities Total - ----------------------------------------------------------------------------------------------------------------------------------- December 31, 1992 74,835 $ 74,835 $972,024 $1,108,293 -- -- -- $2,155,152 Net income -- -- -- 350,365 -- -- -- 350,365 Cash dividends declared: Common ($1.18 per share) -- -- -- (117,334) -- -- -- (117,334) Redeemable preferred -- -- -- (85) -- -- -- (85) By pooled companies prior to merger--common -- -- -- (6,865) -- -- -- (6,865) Acquisition of treasury stock -- -- -- -- (52) (3,102) -- (3,102) Common stock issued pursuant to employee and shareholder stock issuance plans 694 694 16,583 -- 52 3,102 -- 20,379 Common stock issued upon acquisition of subsidiary 250 250 5,949 -- -- -- -- 6,199 Adjustment for treasury stock activity-- pooled company (6) (6) (157) -- -- -- -- (163) Common stock issued upon conversion of convertible subordinated debentures 487 487 12,817 -- -- -- -- 13,304 Common stock issued upon 2-for-1 stock split 51,867 51,867 (51,867) -- -- -- -- -- Adjustment of available for sale securities to market value -- -- -- -- -- -- 42,252 42,252 Other, net -- -- (25) (130) -- -- -- (155) - ----------------------------------------------------------------------------------------------------------------------------------- December 31, 1993 128,127 128,127 955,324 1,334,244 -- -- 42,252 2,459,947 Net income -- -- -- 407,802 -- -- -- 407,802 Cash dividends declared: Common ($1.30 per share) -- -- -- (135,920) -- -- -- (135,920) Redeemable preferred -- -- -- (80) -- -- -- (80) By pooled companies prior to merger--common -- -- -- (12,218) -- -- -- (12,218) Acquisition of treasury stock -- -- -- -- (538) (15,406) -- (15,406) Common stock issued pursuant to employee and shareholder stock issuance plans 319 319 3,803 -- 29 890 -- 5,012 Common stock issued upon acquisition of subsidiaries 411 411 5,700 -- -- -- -- 6,111 Adjustment for treasury stock activity-- pooled company (3) (3) (95) -- -- -- -- (98) Common stock issued upon conversion of convertible subordinated debentures 19 19 280 -- -- -- -- 299 Adjustment of available for sale securities to market value -- -- -- -- -- -- (154,047) (154,047) Other, net -- -- (112) 83 -- -- -- (29) - ----------------------------------------------------------------------------------------------------------------------------------- December 31, 1994 128,873 128,873 964,900 1,593,911 (509) (14,516) (111,795) 2,561,373 Net income -- -- -- 418,835 -- -- -- 418,835 Cash dividends declared: Common ($1.42 per share) -- -- -- (183,063) -- -- -- (183,063) Redeemable preferred -- -- -- (75) -- -- -- (75) By pooled companies prior to merger--common -- -- -- (2,565) -- -- -- (2,565) Acquisition of treasury stock -- -- -- -- (2,152) (76,479) -- (76,479) Common stock issued pursuant to employee and shareholder stock issuance plans 467 467 5,686 -- 769 24,270 -- 30,423 Common stock issued upon acquisition of subsidiaries 578 578 13,925 -- 1,413 48,574 -- 63,077 Common stock issued upon conversion of convertible subordinated debentures 6 6 52 -- 2 55 -- 113 Adjustment of available for sale securities to market value -- -- -- -- -- -- 116,446 116,446 Other, net -- -- (6) (20) -- -- -- (26) - ----------------------------------------------------------------------------------------------------------------------------------- December 31, 1995 129,924 $129,924 $984,557 $1,827,023 (477) $(18,096) $ 4,651 $2,928,059 =================================================================================================================================== See accompanying notes to the consolidated financial statements.
52 37 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- Consolidated Statement of Cash Flows
Year ended December 31 (in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------- Operating Activities: Net income $ 418,835 $ 407,802 $ 350,365 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 46,688 25,340 63,885 Depreciation, amortization and accretion 140,086 152,906 131,562 Decrease in deferred loan fees (6,256) (1,080) (767) Realized securities gains (14,719) (6,200) (8,348) Net (increase) decrease in trading securities (25,768) 16,407 (9,567) (Increase) decrease in interest receivable (21,592) (17,763) 4,699 Increase (decrease) in interest payable 16,643 15,578 (12,785) Increase (decrease) in tax liability 24,872 (23,280) 25,744 Net (gain) loss on sales and writedowns of foreclosed property (3,414) (7,601) (6,894) Other, net (29,055) 43,642 (59,725) - --------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 546,320 605,751 478,169 - --------------------------------------------------------------------------------------------------------------------------- Investing Activities: Net (increase) decrease in Federal funds sold and securities purchased under resale agreements 41,124 (608,840) 982,601 Net increase in loans (996,014) (1,679,681) (1,019,521) Proceeds from the maturity of held to maturity securities 877,760 1,033,871 3,168,930 Proceeds from the sales of held to maturity securities 123,234 Purchases of held to maturity securities (553,718) (1,667,496) (4,492,996) Proceeds from the maturity of available for sale securities 1,011,229 1,490,818 23,020 Proceeds from the sales of available for sale securities 260,802 76,860 Purchases of available for sale securities (858,960) (452,679) (61,199) Net increase (decrease) in short-term investments (37,291) (18,347) 121,409 Increase in property and equipment (73,964) (111,867) (115,466) Proceeds from the sale of foreclosed property 45,150 78,477 85,823 Net cash received from purchase acquisitions 16,811 443,922 - --------------------------------------------------------------------------------------------------------------------------- Net cash used by investing activities (267,071) (1,858,884) (740,243) - --------------------------------------------------------------------------------------------------------------------------- Financing Activities: Net increase (decrease) in Federal funds purchased and securities sold under repurchase agreements 303,230 (71,510) 347,255 Net increase (decrease) in deposits 217,192 1,095,535 (846,379) Net increase (decrease) in short-term borrowings (543,414) 666,006 571,786 Payments on long-term debt (70,572) (5,390) (44,181) Proceeds from the issuance of long-term debt 91,287 30,350 167,313 Payments on capital lease obligations (1,188) (1,077) (983) Decrease in redeemable preferred stock (181) (13) (93) Cash dividends paid (173,322) (144,908) (119,080) Common stock issued pursuant to various employee and shareholder stock issuance plans 30,423 5,012 20,379 Acquisition of treasury stock (76,479) (15,406) (3,102) - --------------------------------------------------------------------------------------------------------------------------- Net cash provided (used) by financing activities (223,024) 1,558,599 92,915 - --------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in cash and due from banks 56,225 305,466 (169,159) Cash and due from banks at beginning of year 2,119,579 1,814,113 1,983,272 - --------------------------------------------------------------------------------------------------------------------------- Cash and due from banks at end of year $2,175,804 $2,119,579 $1,814,113 =========================================================================================================================== See accompanying notes to the consolidated financial statements. For the years ended December 31, 1995, 1994 and 1993, interest paid totaled $1,090,350, $812,272, and $733,050, respectively. Income taxes paid totaled $199,600 in 1995, $214,698 in 1994, and $172,747 in 1993. Additional common stock was issued upon the conversion of $118 of the Corporation's convertible subordinated debt for the year ended December 31, 1995, $311 for the year ended December 31, 1994, and $13,748 for the year ended December 31, 1993. Securities transferred to available for sale securities totaled approximately $4.0 billion in 1995 and $5.2 billion in 1993. Loans transferred to foreclosed property totaled $11 million in 1995, $19 million in 1994, and $23 million in 1993 . In 1995, assets and liabilities of purchased subsidiaries at dates of acquisition included investment securities of $149 million, loans of $169 million, other assets of $56 million, deposits of $331 million and other liabilities of $7 million. In 1993, assets and liabilities of purchased subsidiaries at dates of acquisition included investment securities of $186 million, loans of $1.0 billion, cash of $487 million, other assets of $477 million, deposits of $2.1 billion and other liabilities of $37 million.
53 38 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands except per share data and when otherwise indicated) 1 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES Business Boatmen's Bancshares Inc. ("Corporation"), is a multi-bank holding company, headquartered in St. Louis, Missouri. At December 31, 1995, the Corporation owned substantially all of the capital stock of 55 subsidiary banks, including a federal savings bank, and provides commercial, retail and correspondent banking services from over 500 banking offices and over 1,000 ATM's in Missouri, Arkansas, Illinois, Iowa, Kansas, New Mexico, Oklahoma, Tennessee and Texas. At December 31, 1995, the Corporation had consolidated assets of $33.7 billion, making it one of the 30 largest bank holding companies in the United States. The Corporation's largest banking subsidiary, The Boatmen's National Bank of St. Louis, had total assets of $11.2 billion at December 31, 1995. The Corporation's other businesses include a trust company, a mortgage banking company, a credit life insurance company, a credit card bank and an insurance agency. The Corporation, through its subsidiary, Boatmen's Trust Company, is among the twenty largest providers of personal trust services in the nation, providing personal trust services within its banks' market areas and institutional and pension related trust services on a national scale. The Corporation's mortgage banking activities are conducted through Boatmen's National Mortgage, Inc., a full service mortgage banking company which originates home loans through company operated offices as well as through a network of over 300 correspondents located in the southern and mid-western United States. Boatmen's National Mortgage, Inc. presently services mortgage loans totaling approximately $23 billion. The traditional banking line of business represents the primary source of earnings for the Corporation, followed by the trust and mortgage banking activities. Basis of Presentation The accounting and reporting policies of the Corporation and its subsidiaries conform to generally accepted accounting principles. The preparation of financial statements requires management of the Corporation to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While the financial statements reflect management's best estimates and judgment, actual results could differ from estimates. The following is a description of the Corporation's more significant policies. The consolidated financial statements include the accounts of the Corporation and its subsidiaries after elimination of all material intercompany balances and transactions. Certain amounts for 1994 and 1993 were reclassified to conform with statement presentation for 1995. The reclassifications have no effect on stockholders' equity or net income as previously reported. Prior period financial statements are also restated to include the accounts of companies which are acquired and accounted for as poolings of interests. Results of operations of companies which are acquired and subject to purchase accounting are included from the dates of acquisition. In accordance with the purchase method of accounting, the assets and liabilities of purchased companies are stated at estimated fair values at the date of acquisition, and the excess of cost over fair value of net assets acquired is being amortized on a straight-line basis over periods benefitted. Held to Maturity Securities These securities are purchased with the original intent to hold to maturity and events which may be reasonably anticipated are considered when determining the Corporation's intent and ability to hold to maturity. Securities meeting such criteria at date of purchase and as of the balance sheet date are carried at cost, adjusted for amortization of premiums and accretion of discounts. Gains or losses on the disposition of held to maturity securities, if any, are based on the adjusted book value of the specific security. Available for Sale Securities Debt and equity securities to be held for indefinite periods of time and not intended to be held to maturity are classified as available for sale and carried at market value with net unrealized gains and losses, net of tax, reflected as a component of stockholders' equity until realized. Securities held for indefinite periods of time include securities that may be sold to meet liquidity needs or in response to significant changes in interest rates or prepayment risks as part of the Corporation's overall asset/liability management strategy. Trading Securities Trading securities, which primarily consist of debt securities, are held for resale within a short period of time and are stated at market value. These securities are held in inventory for sale to institutional and retail customers. Investment banking revenues, a component of noninterest income, include the net realized gain or loss and market value adjustments of the trading securities and commissions on bond dealer and retail brokerage operations. Interest and Fees on Loans Interest on loans is accrued based upon the principal amount outstanding. It is the Corporation's policy to discontinue the accrual of interest when full collectibility of principal or interest on any loan is doubtful. Interest income on such loans is subsequently recognized only in the period in which payments are received, and such payments are applied to reduce principal when loans are unsecured or collateral values are deficient. Nonrefundable loan fees are deferred and recognized as income over the life of the loan as an adjustment of the yield. Direct costs associated with originating loans are deferred and amortized as a yield adjustment over the life of the loan. Commitment fees are deferred and recognized as noninterest income over the commitment period. Reserve for Loan Losses The reserve represents provisions charged to expense less net loan charge-offs. The provision is based upon economic conditions, historical loss and collection experience, risk characteristics of the portfolio, underlying collateral values, credit concentrations, industry risk, degree of off-balance sheet risk and other factors which, in management's judgment, deserve current recognition. Specific reserves are established for any impaired commercial, commercial real estate, and real estate construction loan for which the recorded investment in the loan exceeds the measured value of the loan. Loans subject to impairment valuation are defined as nonaccrual loans, exclusive of smaller balance 54 39 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- homogenous loans such as home equity, credit card, installment and 1-4 family loans. The values of loans subject to impairment valuation are determined based on the present value of expected future cash flows, the market price of the loans, or the fair values of the underlying collateral if the loan is collateral dependent. The charge-off policy of the Corporation varies with respect to the category of, and specific circumstances surrounding, each loan under consideration. The Corporation's policy with respect to consumer loans is generally to charge off all such loans when deemed to be uncollectible or 120 days past due, whichever comes first. With respect to commercial, real estate, and other loans, charge-offs are made on the basis of management's ongoing evaluation of nonperforming and criticized loans. Foreclosed Property The maximum carrying value for real estate acquired through foreclosure is the lower of the recorded investment in the loan for which the property previously served as collateral or the current appraised value of the foreclosed property, net of the estimated selling costs. Any writedowns required prior to actual foreclosure are charged to the reserve for loan losses. Subsequent to foreclosure, losses on the periodic revaluation of the property are charged to current period earnings as noninterest expense. Gains and losses resulting from the sale of foreclosed property are recognized in current period earnings. Costs of maintaining and operating foreclosed property are expensed as incurred and revenues related to foreclosed property are recorded as an offset to operating expense. Expenditures to complete or improve foreclosed properties are capitalized if the expenditures are expected to be recovered upon ultimate sale of the property. Mortgage Banking Revenues Mortgage loans held for sale are valued at the lower of cost or aggregate market value. Gains and losses on sales of mortgage loans are recognized at settlement dates and are determined by the difference between sales proceeds and the carrying value of the loans. The Corporation generally sells mortgage loans without recourse. Income from the servicing of mortgage loans is recognized in mortgage banking revenues, a component of noninterest income, concurrent with the receipt of the related mortgage payments on the loans serviced. Prior to 1995, capitalization of mortgage servicing rights was limited to servicing purchased from third parties. Effective with the Corporation's adoption of Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights" in 1995, the value of purchased and originated mortgage servicing rights is capitalized and amortized in proportion to, and over the period of estimated net servicing income as a reduction of mortgage banking revenues. The value of mortgage servicing rights is determined based on the present value of estimated expected future cash flows, using assumptions as to current market discount rate, prepayment speeds and servicing costs per loan. Mortgage servicing rights are stratified by loan type and interest rate for purposes of impairment measurement. Loan types include government, conventional, private, and adjustable-rate mortgage loans. Impairment losses are recognized to the extent the unamortized mortgage servicing right for each stratum exceeds the current market value, as reductions in the carrying value of the asset, through the use of a valuation allowance, with a corresponding reduction to mortgage banking revenues. The Corporation recognizes gains or losses on the sales of mortgage servicing rights when all risks and rewards have been irrevocably passed to the purchaser. Trust Assets and Fees The Corporation's trust function manages assets in a fiduciary or agent capacity; accordingly, such assets are not included in the consolidated balance sheet of the Corporation. Fee income derived from managing trust assets is recognized on an accrual basis. Segregated Assets Segregated assets represent loans acquired in an FDIC assisted transaction that are covered under a loss sharing arrangement with the FDIC and possess more than the normal risk of collectibility. These assets consist of loans that at acquisition were or have since become classified as nonperforming loans or foreclosed property and are segregated from other performing assets covered under the loss sharing arrangement. The Corporation's primary purpose in managing a portfolio of this nature is to provide ongoing collection and control activities on behalf of the FDIC. Accordingly, these assets do not represent loans made in the ordinary course of business and, due to the underlying nature of this liquidating asset pool, are excluded from the Corporation's nonperforming asset statistics. Income from the segregated asset pool is generally recognized on a cash basis as a component of noninterest income. If collection of the unguaranteed portion of the segregated asset is doubtful, income payments are applied to reduce the principal balance to the extent of the government guarantee. Interest Rate Swaps Interest rate swap transactions are utilized as part of the Corporation's overall asset/liability management strategy to alter the rate sensitivity characteristics of various assets and liabilities. Although the notional amounts of these transactions are not reflected in the financial statements, the interest differentials are recognized on an accrual basis over the terms of the agreements as an adjustment to interest income or interest expense of the related asset or liability. To qualify for accrual accounting, the swaps must be designated to interest-bearing assets or liabilities and alter their interest rate characteristics over the term of the agreements. If an interest rate swap is terminated prior to maturity, any realized gains and losses are deferred and amortized over the remaining life of the contract. In the event the designated asset or liability is sold or extinguished prior to maturity, fair value recognition is required and any gains or losses are recognized in income. Interest rate swaps entered into for trading purposes on the behalf of customers are accounted for on a mark to market basis. Accordingly, realized and unrealized gains and losses associated with this activity are reflected as investment banking revenues, a component of noninterest income. Foreign Exchange Contracts The Corporation's banking subsidiaries trade foreign currencies on behalf of their customers and for their own account and, by policy, do not maintain significant open positions. Foreign exchange contracts are valued at the current prevailing rates of exchange and any profit or loss resulting from such valuation is included in current operations as a component of investment banking revenues. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recognized principally by the straight-line method applied over the estimated useful lives of the assets, which are 10 to 50 years for buildings and 3 to 25 years for fixtures and equipment. Leasehold improvements are generally amortized over the lease term, not to exceed 10 years. Intangible Assets Goodwill arising from acquisitions consummated subsequent to 1985 is being amortized on a straight-line basis over the periods benefitted, ranging from 4-15 years. For acquisitions consummated in 1983 and 1985, goodwill is being amortized on a straight-line basis over 25 years, and goodwill related to acquisitions prior to 1983 is being amortized on a straight-line basis over 40 years. Core deposit intangibles and credit card premiums are amortized over their useful economic lives on an accelerated basis, not to exceed 10 years. 55 40 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- Income Taxes The Corporation accounts for income taxes under the asset and liability method. Income tax expense is reported as the total of current income taxes payable and the net change in deferred income taxes provided for temporary differences. Deferred income taxes reflect the net tax effects of temporary differences between the carrying values of assets and liabilities for financial reporting purposes and the values used for income tax purposes. Deferred income taxes are recorded at the statutory Federal and state tax rates in effect at the time that the temporary differences are expected to reverse. The Corporation files a consolidated Federal income tax return which includes all its subsidiaries except for the credit life insurance company. Income tax expense is allocated among the parent company and its subsidiaries as if each had filed a separate tax return. Net Income Per Share Net income per share is calculated by dividing net income (after deducting dividends on redeemable preferred stock) by the weighted average number of common shares outstanding. Common stock equivalents have no material dilutive effect. The net income per share calculation for 1995, 1994 and 1993 is summarized as follows:
============================================================================================================= (in thousands except share data) 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------ Net income $418,835 $407,802 $350,365 Less preferred dividends declared 75 80 85 - ------------------------------------------------------------------------------------------------------------ Net income available to common shareholders $418,760 $407,722 $350,280 ============================================================================================================= Average shares outstanding 129,033,936 128,651,858 127,304,292 - ------------------------------------------------------------------------------------------------------------ Net income per share $3.25 $3.17 $2.75 =============================================================================================================
2 CHANGES IN ACCOUNTING POLICIES On January 1, 1995, The Corporation adopted Financial Accounting Standards No. 114 (SFAS No. 114), "Accounting by Creditors for Impairment of a Loan" and No. 118 (SFAS No. 118), "Accounting by Creditors for Impairment of a Loan--Income Recognition and Disclosures." These statements require that certain impaired loans be measured based on either the present value of expected future cash flows discounted at the loan's effective rate, the market price of the loan, or the fair value of the underlying collateral if the loan is collateral dependent. The statements further require that specific reserves be established for any impaired loan for which the recorded investment exceeds the measured value of the loan. SFAS No. 114 and SFAS No. 118 do not apply to smaller balance, homogenous loans, which the Corporation has identified as consumer loans, such as home equity, credit card, installment and 1-4 family residential loans. Adoption of these standards had no material impact on the Corporation's loan quality statistics or reserve levels and had no effect on 1995 earnings. In the second quarter of 1995, the Corporation adopted Statement of Financial Accounting Standards No. 122 (SFAS No. 122), "Accounting for Mortgage Servicing Rights." SFAS No. 122 requires capitalization of purchased mortgage servicing rights as well as internally originated mortgage servicing rights. These mortgage servicing rights are amortized in proportion to, and over the period of estimated net servicing income. Adoption of SFAS No. 122 increased mortgage banking revenues in 1995 by approximately $5.8 million, net of amortization, and increased net income by approximately $3.6 million. In 1994, the Corporation adopted Financial Accounting Standards No. 112 (SFAS No. 112), "Employers' Accounting for Postemployment Benefits." SFAS No. 112 requires recognition of the cost to provide postemployment benefits on an accrual basis. The Corporation's existing accounting policies were in general compliance with the requirements of SFAS No. 112. Accordingly, adoption of this standard had no material impact on the level of postemployment expense. 3 ACQUISITIONS Purchase Acquisitions Results of operations of companies which are acquired and subject to purchase accounting treatment are included from dates of acquisition. Three purchase acquisitions were consummated in 1995. Disclosure of pro forma condensed results of operations as if these acquisitions were consummated as of the beginning of the period have been omitted due to the immaterial effect on operations. Other information regarding purchase acquisitions is summarized as follows:
============================================================================================================ Core Acquired Company Acquisition Purchase Deposit (amounts in millions) Date Price Assets Goodwill Intangible - ------------------------------------------------------------------------------------------------------------ 1995 Salem Community Bancorp, Inc. 2/28/95 $ 8.4 $ 79.2 $ 4.0 $ .8 West Side Bancshares, Inc. 4/1/95 17.5 142.4 4.5 1.3 Citizens Bancshares Corporation 10/27/95 41.0 224.1 19.5 - ------------------------------------------------------------------------------------------------------------ Total $ 66.6 $ 445.7 $28.0 $ 2.0 ============================================================================================================ 1994 Eagle Management and Trust Company 5/6/94 $ 3.4 $ 3.8 $ 2.3 ============================================================================================================ 1993 First City-El Paso (FDIC assisted) 3/5/93 $ 14.0 $ 340.0 $ 9.6 $13.7 Missouri Bridge Bank, N.A. (FDIC assisted) 4/23/93 15.8 1,100.0 18.9 20.0 Cimarron Federal Savings (RTC assisted) 5/26/93 13.1 430.0 13.1 FCB Bancshares, Inc. 8/2/93 25.0 185.0 15.1 2.3 - ------------------------------------------------------------------------------------------------------------ Total $ 67.9 $2,055.0 $43.6 $49.1 ============================================================================================================
Pooling Acquisitions When material, results of operations of companies which are acquired and subject to pooling of interests accounting are reflected on a combined basis from the earliest period presented. On January 31, 1995, the Corporation consummated the acquisition of National Mortgage Company and certain affiliates (National Mortgage), resulting in the issuance of approximately 5.0 million shares of common stock. National Mortgage, subsequently renamed Boatmen's National Mortgage, Inc., headquartered in Memphis, Tennessee, is a full-service mortgage banking company and presently services mortgage loans totaling approximately $23 billion. Nonrecurring after-tax merger expenses related to this acquisition totaled $7.0 million or $.06 per share, comprised primarily of investment banking and other professional fees, severance costs and abandonment of equipment and software, and were recognized in the first quarter of 1995. 56 41 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- On January 31, 1995, the Corporation consummated the acquisition of Dalhart Bancshares, Inc. (Dalhart), resulting in the issuance of approximately .7 million shares of common stock. Dalhart, with assets of approximately $140 million, is located in north Texas and was merged into the Corporation's Amarillo subsidiary. On February 28, 1995, the Corporation consummated the acquisition of Worthen Banking Corporation (Worthen), headquartered in Little Rock, Arkansas, resulting in the issuance of approximately 17.1 million shares of common stock. Worthen, subsequently renamed Boatmen's Arkansas, Inc., was the second largest banking organization in Arkansas, with approximately $3.5 billion in assets. Nonrecurring after-tax merger expenses related to this acquisition totaled $12.3 million or $.10 per share, comprised primarily of investment banking and other professional fees, severance costs, obsolete equipment write-offs and estimated costs to close duplicate branches, and were recognized in the first quarter of 1995. On May 31, 1995, the Corporation consummated the acquisition of First National Bank in Pampa (Pampa), resulting in the issuance of approximately 1.35 million shares of common stock. At acquisition, Pampa had approximately $166 million in assets and was merged into the Corporation's Amarillo subsidiary. On March 31, 1994, the Corporation consummated the acquisition of Woodland Bancorp, Inc. (Woodland), resulting in the issuance of approximately .4 million shares of common stock. Woodland, a retail banking organization with assets of approximately $65 million, is located in Tulsa, Oklahoma and was merged into the Corporation's Oklahoma bank. The results of operations of Woodland, which qualified as a pooling of interests, are not included in the consolidated financial statements prior to January 1, 1994, due to the immaterial effect on the Corporation's financial results. On November 30, 1993, the Corporation consummated the acquisition of First Amarillo Bancorporation, Inc. (Amarillo), resulting in the issuance of approximately 5.9 million shares of common stock. Amarillo, subsequently renamed Boatmen's Texas, Inc., had approximately $.8 billion in assets at acquisition, and is headquartered in Amarillo, Texas. Nonrecurring after-tax merger expenses related to this acquisition totaled $3.8 million, comprised primarily of investment banking fees, compensation-related expense and abandonment of equipment and software. Net interest income and net income as previously reported for the Corporation and the four pooling-of-interests acquisitions completed in 1995 are summarized as follows:
===================================================================================== (in millions) 1994 1993 - ------------------------------------------------------------------------------------- Net interest income: Boatmen's Bancshares, Inc. $1,024.4 $ 974.5 Worthen Banking Corporation 141.3 132.8 Other pooling acquisitions 22.6 18.3 - ------------------------------------------------------------------------------------- Boatmen's Bancshares, Inc. restated $1,188.3 $1,125.6 - ------------------------------------------------------------------------------------- Net income: Boatmen's Bancshares, Inc. $ 355.3 $ 317.4 Worthen Banking Corporation 47.6 32.3 Other pooling acquisitions 4.9 .7 - ------------------------------------------------------------------------------------- Boatmen's Bancshares, Inc. restated $ 407.8 $ 350.4 =====================================================================================
Pending Acquisitions The Corporation currently is in the process of completing two acquisitions aggregating $7.6 billion in assets. Information related to these acquisitions is summarized below. On August 25, 1995, the Corporation announced a definitive agreement to acquire Fourth Financial Corporation (Fourth Financial), headquartered in Wichita, Kansas, in a transaction to be accounted for as a pooling of interests. Under terms of the agreement, the Corporation will exchange one share of its common stock for each Fourth Financial common share, resulting in the issuance of approximately 28.5 million shares of common stock. In addition, the Corporation will exchange one share of new preferred stock for each Fourth Financial preferred share, resulting in the issuance of approximately 248,000 shares ofpreferred stock. The preferred stock is convertible into approximately 3.4 million shares of common stock. Fourth Financial is the largest banking company in Kansas, with approximately $7.5 billion in assets, operating 87 retail banking offices in Kansas and 56 in Oklahoma. The acquisition is expected to be completed early in the first quarter of 1996. On August 30, 1995, the Corporation announced a definitive agreement to acquire Tom Green National Bank, located in San Angelo, Texas, in a stock transaction to be accounted for as a purchase. The acquisition of Tom Green National Bank, with assets of approximately $80 million, will result in the issuance of approximately .2 million shares of common stock from treasury stock acquired in the open market. This transaction is expected to be completed in the first quarter of 1996. 4 HELD TO MATURITY SECURITIES The amortized cost and approximate market value of held to maturity securities are summarized as follows:
============================================================================================================== Unrealized December 31, 1995 Amortized ----------------------------- Market (in thousands) Cost Gains Losses Value - -------------------------------------------------------------------------------------------------------------- State and municipal $909,056 $51,584 $(917) $959,723 Other debt securities 5,691 5,691 - -------------------------------------------------------------------------------------------------------------- Total held to maturity securities $914,747 $51,584 $(917) $965,414 ============================================================================================================== Unrealized December 31, 1994 Amortized ----------------------------- Market (in thousands) Cost Gains Losses Value - -------------------------------------------------------------------------------------------------------------- U.S. treasury $ 876,011 $ 505 $ (31,682) $ 844,834 Federal agencies: Mortgage-backed: Collateralized mortgage obligations 1,275,850 (104,363) 1,171,487 Adjustable-rate mortgages 636,028 429 (25,987) 610,470 Fixed rate pass-through 460,603 566 (25,814) 435,355 - -------------------------------------------------------------------------------------------------------------- Total mortgage-backed 2,372,481 995 (156,164) 2,217,312 Other agencies 653,904 85 (37,640) 616,349 - -------------------------------------------------------------------------------------------------------------- Total U.S. treasury and agencies 3,902,396 1,585 (225,486) 3,678,495 State and municipal 861,385 28,535 (9,916) 880,004 Other debt securities 453,187 19 (45,775) 407,431 - -------------------------------------------------------------------------------------------------------------- Total held to maturity securities $5,216,968 $30,139 $(281,177) $4,965,930 ==============================================================================================================
Effective December 15, 1995, the Corporation transferred approximately $4.0 billion of held to maturity securities to available for sale as permitted under the Statement of Financial Accounting Standards Board Special Report, "A Guide to 57 42 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities," issued in November 1995. The amortized cost of such securities exceeded fair value by approximately $9.3 million, resulting in an after-tax decrease to stockholders' equity of $5.8 million. The transfer had no effect on 1995 earnings. The maturity distribution of held to maturity securities at December 31, 1995 is summarized as follows:
================================================================================= (in thousands) Amortized Cost Market Value - --------------------------------------------------------------------------------- Due in one year or less $ 43,348 $ 43,713 Due after one year through five years 165,823 171,759 Due after five years through ten years 414,971 444,658 Due after ten years 290,605 305,284 - --------------------------------------------------------------------------------- Total held to maturity securities $914,747 $965,414 =================================================================================
There were no sales of held to maturity securities in 1995 or 1994. Gross realized gains in 1993 totaled $9.6 million and gross realized losses were $1.3 million. 5 AVAILABLE FOR SALE SECURITIES The amortized cost and approximate market value of available for sale securities are summarized as follows:
======================================================================================= Unrealized December 31, 1995 Amortized ----------------------- Market (in thousands) Cost Gains Losses Value - --------------------------------------------------------------------------------------- U.S. treasury $1,369,407 $14,285 $ (2,688) $1,381,004 Federal agencies: Mortgage-backed: Collateralized mortgage obligations 1,979,914 8,185 (26,129) 1,961,970 Adjustable-rate mortgages 2,380,737 11,178 (11,384) 2,380,531 Fixed rate pass-through 493,557 8,592 (1,764) 500,385 - --------------------------------------------------------------------------------------- Total mortgage-backed 4,854,208 27,955 (39,277) 4,842,886 Other agencies 982,383 6,332 (1,702) 987,013 - --------------------------------------------------------------------------------------- Total U.S. treasury and agencies 7,205,998 48,572 (43,667) 7,210,903 Other debt securities 753,378 6,032 (6,143) 753,267 - --------------------------------------------------------------------------------------- Total debt securities 7,959,376 54,604 (49,810) 7,964,170 Equity securities 97,022 3,235 (612) 99,645 - --------------------------------------------------------------------------------------- Total available for sale securities $8,056,398 $57,839 $(50,422) $8,063,815 ======================================================================================= Unrealized December 31, 1994 Amortized ---------------------- Market (in thousands) Cost Gains Losses Value - --------------------------------------------------------------------------------------- U.S. treasury $ 892,205 $1,703 $ (18,358) $ 875,550 Federal agencies: Mortgage-backed: Collateralized mortgage obligations 803,769 87 (48,354) 755,502 Adjustable-rate mortgages 2,106,221 280 (98,053) 2,008,448 Fixed rate pass-through 171,077 2,397 (3,961) 169,513 - --------------------------------------------------------------------------------------- Total mortgage-backed 3,081,067 2,764 (150,368) 2,933,463 Other agencies 79,669 (4,205) 75,464 - --------------------------------------------------------------------------------------- Total U.S. treasury and agencies 4,052,941 4,467 (172,931) 3,884,477 Other debt securities 237,323 71 (14,567) 222,827 - --------------------------------------------------------------------------------------- Total debt securities 4,290,264 4,538 (187,498) 4,107,304 Equity securities 64,451 1,209 65,660 - --------------------------------------------------------------------------------------- Total available for sale securities $4,354,715 $5,747 $(187,498) $4,172,964 =======================================================================================
The maturity distribution of available for sale securities at December 31, 1995 is summarized as follows:
====================================================================================== (in thousands) Amortized Cost Market Value - -------------------------------------------------------------------------------------- Due in one year or less $ 762,553 $ 764,077 Due after one year through five years 1,418,278 1,430,969 Due after five years through ten years 115,258 115,805 Due after ten years 71,080 72,502 Mortgage-backed securities 5,592,207 5,580,817 - -------------------------------------------------------------------------------------- Total debt securities 7,959,376 7,964,170 Equity securities 97,022 99,645 - -------------------------------------------------------------------------------------- Total available for sale securities $8,056,398 $8,063,815 ======================================================================================
Available for sale securities at December 31, 1995 include mortgage-backed government guaranteed agency securities of $4.9 billion and private issue mortgage-backed securities totaling $.7 billion. Sales and redemptions of available for sale securities resulted in realized gains and losses as follows:
========================================================================== Year ended December 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------- Debt securities: Realized gains $6,646 $2,673 Realized losses (10) - -------------------------------------------------------------------------- Net realized gains $6,636 $2,673 ========================================================================== Equity securities: Realized gains $8,052 $3,527 Realized losses (10) - -------------------------------------------------------------------------- Net realized gains $8,042 $3,527 ==========================================================================
Held to maturity and available for sale securities with book values totaling $4,479,815 and $4,656,576 at December 31, 1995 and 1994, respectively, were pledged to secure public deposits, trust deposits, and for other purposes required by law. 6 LOANS A summary of loan categories is as follows:
========================================================================== December 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------- Domestic: Commercial $ 9,623,260 $ 8,767,109 Real estate-mortgage 3,747,581 3,629,014 Real estate-construction 921,601 868,279 Consumer 5,344,425 5,302,065 Lease financing 169,230 136,814 - -------------------------------------------------------------------------- Total domestic 19,806,097 18,703,281 Foreign loans 20,876 19,134 - -------------------------------------------------------------------------- Total loans 19,826,973 18,722,415 Less unearned income 63,729 66,904 - -------------------------------------------------------------------------- Total loans, net $19,763,244 $18,655,511 ==========================================================================
58 43 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- Nonperforming assets, consisting of nonperforming loans and foreclosed property, are summarized as follows:
========================================================================== December 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------- Nonaccrual $133,816 $111,846 Restructured 7,439 7,090 Past due 90 days or more 26,262 17,000 - -------------------------------------------------------------------------- Total nonperforming loans 167,517 135,936 Foreclosed property 31,597 62,434 - -------------------------------------------------------------------------- Total nonperforming assets $199,114 $198,370 ==========================================================================
Gross interest income which would have been recorded, if all nonaccrual and restructured loans at year end had been current in accordance with original terms, amounted to $8.6 million in 1995 and $10.2 million in 1994. Actual interest recorded amounted to $3.8 million in 1995 and $2.6 million in 1994. At December 31, 1995, the recorded investment in loans that are considered to be impaired under SFAS No. 114 and SFAS No. 118 totaled approximately $125.9 million, and the reserve for loan losses included approximately $1.8 million allocated to $8.6 million of impaired loans. In 1995, impaired loans averaged $93.5 million and cash basis interest recognition on these loans, during the time that they were impaired, totaled less than $1 million. Following is a summary of activity for 1995 regarding loans extended to directors and executive officers of the Corporation and its largest subsidiaries or to enterprises in which said individuals had beneficial interests. Such loans were made in the normal course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other persons.
========================================================================================================================= (in thousands) - ------------------------------------------------------------------------------------------------------------------------- Outstanding Net change from changes Outstanding at 12/31/94 Additions Repayments in director status at 12/31/95 - ------------------------------------------------------------------------------------------------------------------------- $190,736 $54,331 $(22,824) $(52,350) $169,893 =========================================================================================================================
The following summarizes activity in the reserve for loan losses:
========================================================================================================================== December 31 (in thousands) 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------------- Balance, beginning of year $376,618 $376,265 $334,706 Loans charged off (88,131) (72,692) (80,401) Recoveries on loans previously charged off 41,636 46,832 44,326 - -------------------------------------------------------------------------------------------------------------------------- Net charge-offs (46,495) (25,860) (36,075) Provision for loan losses 46,688 25,340 63,885 Loan reserve from acquisitions 6,173 873 13,749 - -------------------------------------------------------------------------------------------------------------------------- Balance, end of year $382,984 $376,618 $376,265 ==========================================================================================================================
7 PROPERTY AND EQUIPMENT Property and equipment are summarized as follows:
====================================================================================== December 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------------------- Land $ 87,724 $ 84,974 Buildings 457,858 425,356 Buildings under capital leases 48,666 48,666 Furniture, fixtures and equipment 557,075 511,695 Leasehold improvements 94,501 94,158 Construction in progress 9,029 28,333 - -------------------------------------------------------------------------------------- Total 1,254,853 1,193,182 Less accumulated depreciation/amortization 616,908 555,682 - -------------------------------------------------------------------------------------- Net property and equipment $ 637,945 $ 637,500 ======================================================================================
Depreciation and amortization charged to expense in 1995, 1994 and 1993 amounted to $79,446, $74,585, and $66,670, respectively. At December 31, 1995, the Corporation was obligated under long-term leases, principally related to the use of land, buildings, and equipment in banking operations. The following table summarizes future minimum rental payments required under leases which have initial or remaining noncancellable lease terms in excess of one year.
====================================================================================== (in thousands) - -------------------------------------------------------------------------------------- Period Capital leases Operating leases - -------------------------------------------------------------------------------------- 1996 $ 4,972 $ 25,517 1997 4,972 21,888 1998 4,952 17,778 1999 4,893 16,135 2000 4,957 12,917 After 2000 50,139 64,584 - -------------------------------------------------------------------------------------- Total minimum lease payments 74,885 $158,819 ======== Less amount representing interest 35,975 - ------------------------------------------------------------- Present value of minimum lease payments $38,910 =============================================================
Lease provisions that would cause rentals to vary from those reflected above are not material. Property taxes, insurance, and maintenance expense related to property under lease are principally paid by the Corporation. Total rental expense for all operating leases amounted to $28,998, $30,401, and $36,839 in 1995, 1994, and 1993, respectively. In March, 1995, the Financial Accounting Standards Board issued Statement of Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of." This statement requires that long-lived assets and certain identifiable intangibles to be held and used by a company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such conditions exist, companies must estimate the future cash flows from use of the asset and, if the sum of the undiscounted estimated future cash flows is less than the carrying amount of the asset, an impairment loss would be recognized. This pronouncement becomes effective in 1996 and is not expected to have a material effect on the Corporation's financial results. 59 44 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- 8 INTANGIBLE ASSETS Intangible assets, net of accumulated amortization are summarized as follows:
====================================================================================== December 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------------------- Goodwill $205,900 $193,015 Core deposit premium 60,024 74,704 Mortgage servicing rights 65,649 38,397 Credit card premium 13,932 2,980 - -------------------------------------------------------------------------------------- Total intangible assets, net $345,505 $309,096 ======================================================================================
Intangible assets amortization charged to noninterest expense in 1995, 1994, and 1993 amounted to $33,576, $35,152, and $34,105, respectively. Amortization of mortgage servicing rights charged to mortgage banking revenues in 1995, 1994, and 1993 totaled $9,281, $16,173, and $17,108, respectively. In 1995, the Corporation capitalized approximately $40 million of mortgage servicing rights, and sold mortgage servicing rights with a net book value of approximately $3.9 million. The fair value of mortgage servicing rights at December 31, 1995 was approximately $85.3 million. At December 31, 1995, no impairment writedown was required as the fair value of the mortgage servicing rights exceeded carrying value. 9 SEGREGATED ASSETS Included in other assets at December 31, 1995 are segregated assets totaling $103.3 million net of a valuation allowance of $13.3 million. As part of the regulatory assisted acquisition of Missouri Bridge Bank, N.A. (Bridge Bank), on April 23, 1993, the Corporation entered into a five-year loss-sharing arrangement with the FDIC with respect to approximately $950 million in multi-family residential, commercial real estate, construction and commercial loans. During the five-year period, the FDIC will reimburse the Corporation for 80 percent of the first $92.0 million of net charge-offs on these loans, after which the FDIC will increase its reimbursement coverage to 95 percent of additional charge-offs. During this period and for two years thereafter, the Corporation is obligated to pay the FDIC 80 percent of all recoveries on charged off loans. Segregated assets are those loans acquired from the Bridge Bank and covered under the loss-sharing arrangement with the FDIC that possess more than the normal risk of collectibility. These assets consist of loans that at acquisition were or have since become classified as nonperforming loans or foreclosed property. The Corporation's primary purpose in managing a portfolio of this nature is to provide ongoing collection and control activities on behalf of the FDIC. Accordingly, these assets do notrepresent loans made in the ordinary course of business and,due to the underlying nature of this liquidating asset pool, are excluded from the Corporation's nonperforming asset statistics. A summary of activity regarding the segregated asset pool for the years ended December 31, 1995 and 1994, is provided below.
============================================================================================================= Principal Allowance Principal (in millions) balance for losses balance, net - ------------------------------------------------------------------------------------------------------------- Balance at December 31, 1993 $266.6 $18.4 $248.2 Charge-offs (14.9) (3.0) Recoveries 1.3 Net transfers 40.9 Payments on segregated assets (98.7) - ------------------------------------------------------------------------------------------------------------- Balance at December 31, 1994 193.9 16.7 177.2 Charge-offs (27.7) (5.5) Recoveries 2.1 Net transfers (17.2) Payments on segregated assets (32.4) - ------------------------------------------------------------------------------------------------------------- Balance at December 31, 1995 $116.6 $13.3 $103.3 =============================================================================================================
10 DEPOSITS Deposits are summarized as follows:
====================================================================================== December 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------------------- Demand deposits $ 5,862,531 $ 5,256,494 Savings deposits 1,718,989 2,058,179 Interest-bearing transaction accounts 9,308,394 8,084,540 Time deposits $100,000 and over 1,471,920 2,667,071 Retail time deposits 7,570,296 7,317,789 - -------------------------------------------------------------------------------------- Total deposits $25,932,130 $25,384,073 ======================================================================================
11 RESERVES ON DEPOSITS Required reserves on deposits, included in the caption "Cash and due from banks," were $344,532 and $591,073 at December 31, 1995 and 1994, respectively. 12 FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS Federal funds purchased and securities sold under repurchase agreements generally represent borrowings with overnight maturities. Information relating to these borrowings is summarized as follows:
================================================================================================== (in thousands) 1995 1994 1993 - -------------------------------------------------------------------------------------------------- Balance: Average $2,390,465 $2,859,327 $1,872,653 Year end 2,361,204 2,053,609 2,125,119 Maximum month-end balance during year 2,814,987 3,856,371 2,690,369 ================================================================================================== Interest rate: Average 5.57% 4.04% 2.80% ================================================================================================== Year end 5.33% 5.31% 2.59% ==================================================================================================
60 45 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- 13 SHORT-TERM BORROWINGS Short-term borrowings are summarized as follows:
====================================================================================== December 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------------------- Short-term bank notes $1,265,000 $1,550,000 Commercial paper 49,497 43,531 Other 45,496 309,651 - -------------------------------------------------------------------------------------- Total $1,359,993 $1,903,182 ======================================================================================
Information relating to short-term bank notes is summarized as follows:
====================================================================================== (in thousands) 1995 1994 - -------------------------------------------------------------------------------------- Average balance $1,648,178 $ 921,878 Maximum month-end balance during year 2,015,000 1,650,000 ====================================================================================== Interest rate: Average 6.29% 4.19% ====================================================================================== Year end 6.10% 5.80% ======================================================================================
In 1995, approximately $.9 million of the short-term bank notes were converted to fixed rate debt through the use of interest rate swaps. Commercial paper is issued by the parent company in maturities not to exceed nine months. The short-term bank notes are issued by the Corporation's banking subsidiaries generally with maturities of less than one year. Other short-term funds consisted principally of treasury, tax and loan accounts. At December 31, 1995, the parent company had available additional credit totaling $100 million under a revolving credit agreement, all of which was unused. The revolving credit agreement is a three year facility extending to September, 1997. 14 LONG-TERM DEBT Long-term debt is summarized as follows:
====================================================================================== December 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------------------- Parent Company: 7-5/8% notes due 2004 $100,000 $100,000 6-3/4% notes due 2003 100,000 100,000 8-5/8% notes due 2003 50,000 50,000 9-1/4% notes due 2001 150,000 150,000 6-1/4% convertible subordinated debentures due 2011 772 904 12% note due 1998 25,000 25,000 - -------------------------------------------------------------------------------------- Total Parent Company 425,772 425,904 - -------------------------------------------------------------------------------------- Subsidiaries: Senior notes due 1998-2000 43,000 43,000 9-7/8% senior notes due April 15, 1995 35,000 Federal Home Loan Bank notes: 6.28%-6.39% notes due 1999-2001 90,000 4.9%-5.2% notes due 1997-1998 25,000 25,000 Other notes due 1999-2016 4,867 1,500 Other notes due through 1997 33,953 6.55% mortgage note due through 2009 26,430 27,679 Other 60 5 - -------------------------------------------------------------------------------------- Total subsidiaries 189,357 166,137 - -------------------------------------------------------------------------------------- Total long-term debt $615,129 $592,041 ======================================================================================
The 7-5/8% subordinated notes and the 6-3/4% subordinated notes have been effectively converted to variable rate debt for a portion of the term through the use of interest rate swaps. The average interest rates paid on these notes in 1995 and 1994 were 8.53% and 6.77%, respectively. These notes, and the 8-5/8% and 9-1/4% subordinated notes, are not redeemable by the holders or the Corporation prior to maturity. The 6-1/4% convertible subordinated debentures are redeemable at the option of the holder without payment of premium by the Corporation. Redemption rights are subject to an annual noncumulative principal limitation of $25 thousand per holder and $1.2 million in the aggregate. Prepayments in whole or in part may be made at the option of the Corporation with payment of premium. The debentures are convertible into common stock of the Corporation at a conversion price of $16.71 per share, subject to adjustments under certain circumstances. During 1995, 1994 and 1993, $.1 million, $.3 million and $.2 million of the debentures, respectively, were converted into common stock. The 12% note due in 1998 may not be prepaid at the option of the Corporation. The senior notes due 1998-2000 are unsecured and provide for payment of interest semi-annually with principal payable at maturity. Maturities are $10 million due in 1998 priced to yield 7.21%, $10 million due in 1999 priced to yield 7.56%, and $23 million due in 2000 priced to yield 7.81%. The Federal Home Loan Bank notes may be prepaid at the option of the Corporation with payment of premium. The other notes due through 1997 were prepaid in full in 1995 and represented long-term debt obligations of the Corporation's mortgage banking subsidiary acquired in 1995. The 6.55% mortgage note requires monthly principal and interest payments of $252 thousand. The Corporation may prepay the note without payment of premium. Several of the note agreements contain various financial covenants pertaining to minimum levels of net worth, limitations on additional indebtedness, and limitations on repurchases of common stock and dividend payments. The Corporation was in compliance with all such covenants at December 31, 1995. Obligations of the parent company included above are unsecured, and to a large extent are subordinated in right of payment to any other indebtedness of the Corporation. The indebtedness of the banking subsidiaries is subordinated to rights of depositors. Scheduled principal payments on total long-term debt in each of the five years subsequent to December 31, 1995 are as follows:
================================================= (in thousands) - ------------------------------------------------- Year Parent Company Consolidated - ------------------------------------------------- 1996 $ 772 $ 2,652 1997 11,986 1998 25,000 52,099 1999 42,220 2000 55,318 =================================================
15 PREFERRED STOCK At December 31, 1995, there were outstanding 9,609 shares of 7% Cumulative Redeemable Preferred Stock, Series B, $100 per share stated value. Dividends are payable quarterly. The stock is redeemable at the stated value at the option of the holders and has equal voting rights with each share of common stock. 61 46 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- 16 COMMON STOCK On August 10, 1993, the Corporation declared a two-for-one stock split, which was effected as a 100% stock dividend to stockholders of record on August 31, 1993 and paid on October 1, 1993. The Corporation maintains various stock option plans which provide for the issuance of stock to certain key employees of the Corporation. Under certain plans, stock appreciation rights may be granted. The option price under these plans is equivalent to the fair market value of the common stock at the date of grant. The Corporation accounts for its stock options in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees." The following table summarizes the status of the various plans.
======================================================================================================================= 1995 1994 - ----------------------------------------------------------------------------------------------------------------------- Shares Price Per Share Shares Price Per Share - ----------------------------------------------------------------------------------------------------------------------- Options granted 1,508,357 $30.31 to $32.63 706,450 $27.75 to $31.63 Options exercised 589,450 5.76 to 30.88 376,267 5.76 to 27.75 Stock appreciation rights exercised 24,726 15.86 to 27.00 29,030 15.63 to 27.75 Options lapsed 117,200 5.76 to 30.88 58,457 5.76 to 27.75 Options outstanding 4,685,697 5.76 to 32.63 3,908,716 5.76 to 31.63 Options exercisable 2,680,373 5.76 to 30.88 2,198,492 5.76 to 28.31 =======================================================================================================================
A summary of the Corporation's common stock related plans is provided below. Compensation expense related to the common stock plans totaled $17.0 million in 1995, $11.9 million in 1994, and $10.8 million in 1993. 1990 Stock Purchase Plan for Employees This Plan provides eligible employees of the Corporation and its subsidiaries with the opportunity to purchase, at market value, with the Corporation providing a one-third matching contribution, common stock of the Corporation through regular payroll deductions. The aggregate number of shares issuable under this Plan is limited to 2,000,000 shares, and as of December 31, 1995, approximately 6,390 employees were participating in the Plan. Dividend Reinvestment and Stock Purchase Plan 1,600,000 shares of the Corporation's common stock have been reserved for sale, at market value, pursuant to this plan, to holders of record of shares of common stock who elect to use quarterly dividends or optional cash contributions to purchase additional shares. Thrift Incentive 401(k) Plan This is a savings plan for the benefit of employees of the Corporation and its subsidiaries. Participation by eligible employees is voluntary, and participants may contribute at least 2% and up to 12% of their salary, up to certain limits, by regular payroll deductions. All participants' contributions are invested by the trustee, as directed by the participant, in various investment funds, one of which consists solely of the Corporation's common stock. The Corporation matches the contribution made by the employee, in full, up to 3%, which is invested in a separate fund consisting solely of the Corporation's common stock. Shareholder Rights Plan In 1990, the Board of Directors of the Corporation declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of common stock. The Rights trade automatically with shares of common stock and become exercisable only under certain circumstances. The Rights are designed to protect the interests of the Corporation and its shareholders against coercive takeover tactics. The purpose of the Rights is to encourage potential acquirers to negotiate with the Corporation's Board of Directors prior to attempting a takeover and to give the Board leverage in negotiating on behalf of all shareholders the terms of any proposed takeover. 17 REGULATORY CAPITAL The Corporation's regulatory capital is summarized as follows:
============================================================================================================== December 31 (in millions) 1995 1994 - ------------------------------------------------------------------------------------------------------------ Tier I capital $ 2,658.2 $ 2,406.2 Tier II capital 705.1 691.0 - ------------------------------------------------------------------------------------------------------------ Total capital $ 3,363.3 $ 3,097.2 ============================================================================================================ Risk-adjusted assets $23,522.4 $22,070.4 ============================================================================================================
Regulatory Minimums ----------------------------- Adequately Well December 31 Capitalized Capitalized 1995 1994 - -------------------------------------------------------------------------------------------------------------- Risk-based capital ratios: Tier I 4% 6% 11.30% 10.90% Total 8 10 14.30 14.03 Tier I leverage ratio 4 5 7.95 7.35 ==============================================================================================================
The Corporation's risk-based capital and Tier I leverage ratios substantially exceed the regulatory required minimums and, at December 31, 1995, all of the Corporation's subsidiaries were considered "well capitalized" based on regulatory defined minimums. 18 RETIREMENT BENEFITS Substantially all employees of the Corporation and its subsidiaries are covered by the Boatmen's Bancshares, Inc. Retirement Plan for Employees, a noncontributory defined benefit plan. Pension benefits are based upon the employee's length of service and compensation during the final years of employment. Normal service costs are funded currently using the projected unit credit method. An amendment was made to the Plan as of December 31, 1995 to standardize credited service, which had the effect of increasing the projected benefit obligation by approximately $22.8 million. Contributions to the Plan totaled $3.8 million in 1995, $5.1 million in 1994, and $11.8 million in 1993. Net pension expense for 1995, 1994 and 1993 was comprised of the following:
================================================================================================= Year ended December 31 (in thousands) 1995 1994 1993 - ------------------------------------------------------------------------------------------------- Service cost $13,835 $13,445 $11,800 Interest cost on projected benefit obligation 18,575 17,765 16,082 (Return) loss on plan assets (57,851) 603 (29,842) Net amortization and deferral 35,202 (22,152) 10,704 - ------------------------------------------------------------------------------------------------- Net pension expense $ 9,761 $ 9,661 $ 8,744 =================================================================================================
62 47 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- The following table sets forth the retirement plan's funded status and amounts recognized in the Corporation's consolidated financial statements:
December 31 (in thousands) 1995 1994 - ------------------------------------------------------------------------------------- Plan assets at fair value, primarily listed stocks and bonds $289,042 $239,539 - ------------------------------------------------------------------------------------- Actuarial present value of benefit obligation: Vested benefits 215,106 162,398 Non-vested benefits 14,596 9,280 - ------------------------------------------------------------------------------------- Accumulated benefit obligation 229,702 171,678 Effect of projected future salary increases 66,946 45,637 - ------------------------------------------------------------------------------------- Projected benefit obligation 296,648 217,315 - ------------------------------------------------------------------------------------- Plan assets in excess of (lower than) projected benefit obligation $ (7,606) $ 22,224 ===================================================================================== Comprised of: Unrecognized net asset being amortized over 17 years $ 11,937 $ 13,926 Unrecognized net gain from past experience different from that assumed and effects of changes in assumptions 10,159 8,964 Unrecognized prior service loss (22,978) (142) Prepaid pension cost (liability) (6,724) (524) - ------------------------------------------------------------------------------------- $ (7,606) $ 22,224 =====================================================================================
Assumptions used in computing pension expense were:
=============================================================================================================== 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------- Weighted average discount rate 8-1/2% 7-1/2% 7-3/4-8 % Rate of increase in future compensation levels 5-1/2% 5 % 4-5-1/2% Expected long-term rate of return on assets 8-3/4% 8-3/4% 8-8-3/4% ===============================================================================================================
The weighted average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 7.25% and 5.00%, respectively, at December 31, 1995 and 8.50% and 5.50% respectively, at December 31, 1994. The Corporation provides postemployment life and contributory medical benefits to retired employees. The liability for such benefits is unfunded and costs of such benefits are accrued in a manner similar to actual pension costs. The following table presents the status of the plans:
====================================================================================== December 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $52,371 $39,300 Fully eligible active plan participants 13,962 12,326 Other active plan participants 19,492 17,272 - -------------------------------------------------------------------------------------- Total accumulated postretirement benefit obligation 85,825 68,898 - -------------------------------------------------------------------------------------- Unrecognized net gain 21,867 10,913 Unrecognized transition obligation 38,289 40,560 - -------------------------------------------------------------------------------------- Accrued postretirement benefit cost $25,669 $17,425 ======================================================================================
Net postretirement benefit cost included the following components:
Year ended December 31 (in thousands) 1995 1994 1993 - ------------------------------------------------------------------------------------------------------- Service cost $ 1,230 $ 1,460 $1,238 Interest cost 6,049 4,924 4,586 Amortization of transition obligation over 20 years 2,906 4,338 2,396 - ------------------------------------------------------------------------------------------------------- Net postretirement benefit cost $10,185 $10,722 $8,220 =======================================================================================================
The weighted-average annual assumed rate of increase in the per capita cost of covered benefits for the medical plan is 9.00% for 1996 (compared to 10.00% assumed for 1995) and is assumed to decrease gradually to 5.00% in 2003 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation for the medical plan as of December 31, 1995 by $6.7 million, and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for 1995 by $.7 million. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.25% at December 31, 1995 and 8.50% at December 31, 1994. 19 INCOME TAXES Income tax expense is summarized as follows:
===================================================================================================== Year ended December 31 (in thousands) 1995 1994 1993 - ----------------------------------------------------------------------------------------------------- Current: Federal $197,351 $182,453 $168,616 State 27,147 29,878 27,049 - ----------------------------------------------------------------------------------------------------- Total current 224,498 212,331 195,665 - ----------------------------------------------------------------------------------------------------- Deferred: Federal 1,206 3,657 (24,314) State 213 (2,436) (9,434) - ----------------------------------------------------------------------------------------------------- Total deferred 1,419 1,221 (33,748) - ----------------------------------------------------------------------------------------------------- Income tax expense $225,917 $213,552 $161,917 =====================================================================================================
A reconciliation of the statutory Federal income tax rate with the effective tax rate is as follows:
====================================================================================================== Percent of pre-tax income - ------------------------------------------------------------------------------------------------------ Year ended December 31 1995 1994 1993 - ------------------------------------------------------------------------------------------------------ Statutory rate 35.0% 35.0% 35.0% Tax-exempt securities interest and other income (3.6) (4.0) (4.9) State taxes, net of Federal benefit 2.7 2.9 2.2 Other, net .9 .5 (.7) - ------------------------------------------------------------------------------------------------------ Effective rate 35.0% 34.4% 31.6% ======================================================================================================
63 48 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- The Corporation's deferred tax asset account was comprised of the following:
=================================================================================== Year ended December 31 (in thousands) 1995 1994 - ----------------------------------------------------------------------------------- Deferred tax liabilities: Lease financing $ (41,290) $ (25,859) Net unrealized gain on available for sale securities (2,766) Depreciation (32,725) (30,498) Other (31,090) (33,271) - ----------------------------------------------------------------------------------- Total deferred tax liabilities (107,871) (89,628) - ----------------------------------------------------------------------------------- Deferred tax assets: Net unrealized loss on available for sale securities 69,979 Provision for loan loss 155,976 152,289 Other real estate owned losses 9,733 15,992 Other 62,662 46,033 - ----------------------------------------------------------------------------------- Total deferred tax assets 228,371 284,293 - ----------------------------------------------------------------------------------- Net deferred tax asset $120,500 $194,665 ===================================================================================
20 FAIR VALUE OF FINANCIAL INSTRUMENTS The reported fair values of financial instruments are based on a variety of factors. Where possible, fair values represent quoted market prices for identical or comparable instruments. In other cases, fair values have been estimated based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of risk. Intangible values assigned to customer relationships are not reflected in the reported fair values. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of year end or that will be realized in the future. The carrying amounts reported in the balance sheet for cash and due from banks, short-term investments, Federal funds sold and securities purchased under resale agreements approximate fair value. Fair values for held to maturity securities, available for sale securities, and trading securities are based on quoted market prices or dealer quotes. If quoted prices are not available for the specific security, fair values are based on quoted market prices of comparable instruments. The fair values of 1-4 family residential loans, home equity and other homogeneous categories of consumer loans are estimated using quoted market prices for similar traded loans or securities backed by such loans, adjusted for differences between the quoted instruments and the instrument being valued. The fair values for other loans are estimated using a discounted cash flow analysis, based on interest rates currently offered for loans with similar terms to borrowers of similar credit quality or in some situations, due to the variable rate nature of the instrument, carrying value and fair value are considered one and the same. Fair values for nonperforming loans are estimated using assumptions regarding current assessments of collectibility and historical loss experience. By definition fair values of deposits with no stated maturities, such as demand deposits, savings and NOW accounts and money market deposit accounts, are equal to the amounts payable on demand at the reporting date. The fair values of all other fixed rate deposits are based on discounted cash flows using rates currently offered for deposits of similar remaining maturities. The carrying amounts of variable rate deposits approximate fair value at the reporting date. The carrying amounts of Federal funds purchased and other short-term borrowings approximate their fair values as of the reporting date. The fair value of long-term debt is based on quoted market prices for similar issues, or current rates offered to the Corporation for debt of the same remaining maturity. The fair values of interest rate swaps and foreign exchange contracts are estimated using dealer quotes. These values represent the costs to replace all outstanding contracts at current market rates, taking into consideration the current credit worthiness of the counterparties. The fair values of loan commitments, commercial letters of credit and standby letters of credit are determined using estimated fees currently charged to enter into similar agreements. The fair value of loan commitments totaled approximately $1.9 million and $1.1 million at December 31, 1995 and 1994, respectively. The fair value of commercial and standby letters of credit totaled approximately $1.5 million and $1.3 million at December 31, 1995 and 1994, respectively. The estimated fair values of the Corporation's financial instruments were as follows:
====================================================================================== December 31, 1995 (in millions) Carrying amount Fair value - -------------------------------------------------------------------------------------- Financial assets: Cash and due from banks and short-term investments $ 3,357.7 $ 3,357.7 Held to maturity securities 914.7 965.4 Available for sale securities 8,063.8 8,063.8 Trading securities 57.4 57.4 Loans 19,380.3 19,713.0 Financial liabilities: Deposits 25,932.1 26,002.7 Short-term borrowings 3,721.2 3,721.2 Long-term debt 615.1 660.5 Off-balance sheet financial instruments: Interest rate swaps: Asset/liability management (1.1) (5.7) Customer swaps held in trading portfolio 1.6 1.6 Foreign exchange contracts held in trading portfolio .4 .4 ====================================================================================== December 31, 1994 (in millions) Carrying amount Fair value - -------------------------------------------------------------------------------------- Financial assets: Cash and due from banks and short-term investments $ 3,276.0 $ 3,276.0 Held to maturity securities 5,217.0 4,965.9 Available for sale securities 4,173.0 4,173.0 Trading securities 31.7 31.7 Loans 18,278.9 18,152.1 Financial liabilities: Deposits 25,384.1 25,375.9 Short-term borrowings 3,956.8 3,956.8 Long-term debt 592.0 577.5 Off-balance sheet financial instruments: Interest rate swaps: Asset/liability management (.5) (168.5) Customer swaps held in trading portfolio .4 .4 Foreign exchange contracts held in trading portfolio 2.2 2.2 ======================================================================================
64 49 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- 21 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK In the normal course of business, the Corporation utilizes a variety of off-balance sheet financial instruments to service the financial needs of customers and to manage the Corporation's overall asset/liability position. This activity includes commitments to extend credit, standby and commercial letters of credit, securities lending, interest rate swaps and foreign exchange contracts. Each of these instruments involve varying degrees of risk. As such, the contract or notional amounts of these instruments may or may not be an appropriate indicator of the credit or market risk associated with these instruments. Generally accepted accounting principles recognize these instruments as contingent obligations or off-balance sheet items and accordingly, the contract or notional amounts are not reflected in the consolidated financial statements. A summary of the Corporation's off-balance sheet financial instruments at December 31, 1995 and 1994 is presented as follows.
====================================================================================== Financial instruments held for other than trading purposes whose credit risk is represented by contract amounts - -------------------------------------------------------------------------------------- December 31 (in millions) 1995 1994 - -------------------------------------------------------------------------------------- Commitments to extend credit $ 8,701.4 $ 8,319.2 Standby letters of credit 1,027.3 901.6 Commercial letters of credit 92.0 143.7 Forward commitments 86.6 155.9 Securities lent 2,719.4 2,968.2 - -------------------------------------------------------------------------------------- Total $12,626.7 $12,488.6 ====================================================================================== Financial instruments whose credit risk is represented by other than notional or contract amounts - -------------------------------------------------------------------------------------- December 31 (in millions) 1995 1994 - -------------------------------------------------------------------------------------- Foreign exchange contracts held in trading portfolio: Commitments to purchase $ 343.9 $ 548.7 Commitments to sell 426.4 595.3 Interest rate swaps: Asset/liability management 2,680.6 2,280.6 Customer swaps held in trading portfolio 852.2 649.2 - -------------------------------------------------------------------------------------- Total $4,303.1 $4,073.8 ======================================================================================
A loan commitment represents a contractual agreement to lend up to a specified amount, over a stated period of time as long as there is no violation of any condition established in the contract, and generally requires the payment of a fee. Standby letters of credit are issued to improve a customer's credit standing with third parties, whereby the Corporation agrees to honor a financial commitment by issuing a guarantee to third parties in the event the Corporation's customer fails to perform. Since loan commitment amounts generally exceed actual funding requirements and virtually all of the standby letters of credit are expected to expire unfunded, the total commitment amounts do not represent future cash requirements. The Corporation's exposure to credit loss from loan commitments, standby letters of credit and commercial letters of credit is measured by the contract amount of these instruments. This credit risk is minimized by subjecting these off-balance sheet instruments to the same credit policies and underwriting standards used when making loans. The Corporation evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on such evaluations. Acceptable collateral includes cash or cash equivalents, marketable securities, deeds of trust, receivables, inventory, fixed assets and financial guarantees. Interest rates, in the event funding of the aforementioned commitments are required, are predominantly based on floating rates or prevailing market rates at the time such commitments are funded. Substantially all of these commitments expire in 1-2 years unless renewed by the Corporation. Commercial letters of credit are short-term commitments issued for trade purposes, primarily to finance the movement of goods between a buyer and seller dealing in international markets. The Corporation, through its mortgage banking subsidiary, obtains mandatory forward commitments of up to 120 days to sell mortgage backed securities to hedge the market risk associated with a substantial portion of the mortgage loan commitments that are expected to close (mortgage loan pipeline), and all mortgage loans held for sale. The Company's risk management function closely monitors the mortgage loan pipeline to determine appropriate forward commitment coverage on a daily basis in order to manage the risk inherent in these off-balance-sheet financial instruments. The Corporation, through its trust subsidiary, is involved in off-balance sheet securities lending. In this capacity, the Corporation, acting as agent, lends securities on behalf of its customers to third party borrowers. The Corporation indemnifies its customers against losses in the event of counterparty default, and minimizes this risk through collateral requirements and limiting transactions to pre-approved borrowers. Collateral policies require each borrower to initially deliver cash or securities equal to or exceeding 102% of the market value of the securities lent. Additional collateral is required through the term of the lending agreement to ensure that the value of collateral exceeds the market value of the securities lent. Interest rate risk associated with securities lending activities arises from rate movements affecting the spread between the rebate rate paid to the borrower on his collateral and the rate earned on that collateral. This risk is controlled through policies that limit the level of interest rate risk which can be undertaken. The Corporation enters into interest rate swap transactions primarily as part of its asset/liability management strategy to manage interest-rate risk. These transactions involve the exchange of interest payments based on a notional amount. The notional amounts of interest rate swaps express the volume of transactions and are not an appropriate indicator of the off-balance sheet market risk or credit risk. The credit risk associated with interest rate swaps arises from the counterparties' failure to meet the terms of the agreements and is limited to the fair value of contracts in a gain (favorable) position. The Corporation manages this risk by maintaining a well-diversified portfolio of highly-rated counterparties in addition to imposing limits as to types, amounts and degree of risk the portfolio can undertake. The limits are approved by senior management and positions are monitored to ensure compliance with such limits. The credit risk exposure at December 31, 1995 is minimal as virtually all contracts were in an unfavorable position. An effective asset/liability management function is required to address the interest rate risk inherent in the Corporation's core banking activities. If no other management action is taken, these core banking activities, which include lending and deposit products, result in an asset-sensitive position. Accordingly, the Corporation utilizes a variety of discretionary on- and off-balance sheet strategies to prudently manage the overall interest rate sen- 65 50 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- sitivity position. The Corporation's interest rate risk exposure is currently limited, by policy, to 5% of projected annual net income. Adherence to these risk limits is controlled and monitored through simulation modeling techniques that consider the impact alternative interest rate scenarios will have on the Corporation's financial results. In 1995, $850 million of new swaps were added and $450 million matured such that at December 31, 1995, interest rate swaps totaled $2.7 billion. The most recent swaps were executed as a means to convert a portion of the Corporation's variable rate bank notes to fixed rate instruments. Interest rate swaps executed in prior years were undertaken to modify the interest rate sensitivity of subordinated debt as well as alter the interest rate sensitivity of the Corporation's prime-based loan portfolio, converting a portion of these loans to fixed rate instruments. Additionally, the Corporation has utilized swaps to convert a portion of its long-term fixed rate debt to a floating rate basis. Periodic correlation assessments are performed to ensure that the swap instruments are effectively modifying the interest rate characteristics of the respective balance sheet items. As summarized in the following table, the swap portfolio is primarily comprised of contracts wherein the Corporation receives a fixed rate of interest while paying a variable rate. As such, the income contribution from the swap portfolio will decrease in a rising rate environment and increase in a falling rate environment. The average rate received at December 31, 1995, was 5.69% compared to an average rate paid of 6.10%, and the average remaining maturity of the total portfolio was less than one year. The variable rate component of the interest rate swaps is based on LIBOR as of the most recent reset date. The interest rate swaps are not leveraged in that they reset in step with rate movements in the underlying index. A summary of the interest rate swap activity for the years ended December 31, 1995 and December 31, 1994 is provided below.
======================================================================================================================== Asset/Liability Management Swaps Receive Pay Basis (in millions) Fixed Fixed Swaps Total - ------------------------------------------------------------------------------------------------------------------------ Notional amount, December 31, 1993 $1,450 $ 31 $300 $1,781 Additions 1,000 50 1,050 Maturities (450) (100) (550) - ------------------------------------------------------------------------------------------------------------------------ Notional amount, December 31, 1994 2,000 31 250 2,281 Additions 850 850 Maturities (295) (2) (153) (450) - ------------------------------------------------------------------------------------------------------------------------ Notional amount, December 31, 1995 $1,705 $879 $ 97 $2,681 ======================================================================================================================== At December 31, 1995: Average remaining maturity (years) .8 .5 .2 .7 Weighted average rate received 5.54% 5.88% 6.76% 5.69% Weighted average rate paid 6.00 6.29 6.06 6.10 ======================================================================================================================== At December 31, 1994: Average remaining maturity (years) 2.2 1.3 1.1 2.0 Weighted average rate received 5.52% 6.09% 5.55% 5.53% Weighted average rate paid 6.06 8.86 5.72 6.06 ========================================================================================================================
Summarized below is the unrealized gain (loss) of the swap portfolio at December 31, 1995 and 1994.
======================================================================================================================== December 31, 1995 December 31, 1994 - ------------------------------------------------------------------------------------------------------------------------ Asset/Liability Management Swaps Notional Unrealized Notional Unrealized (in millions) Amount Gain (loss) Amount Gain (loss) - ------------------------------------------------------------------------------------------------------------------------ Prime Loan Swaps: Receive fixed $1,505 $(2.0) $1,800 $(155.6) Basis swaps 97 .2 200 (3.8) - ------------------------------------------------------------------------------------------------------------------------ Total prime loan swaps 1,602 (1.8) 2,000 (159.4) Long-term debt swaps 200 (.7) 200 (8.6) Bank note liability swaps 850 (2.5) Other 29 (.7) 81 (.5) - ------------------------------------------------------------------------------------------------------------------------ Total $2,681 $(5.7) $2,281 $(168.5) ========================================================================================================================
Interest income and expense on interest rate swaps used to manage the Corporation's overall interest rate sensitivity position is recorded on an accrual basis as an adjustment of the yield of the related asset or liability over the periods covered by the contracts. The swap portfolio decreased net interest income by approximately $14 million in 1995, resulting in a reduction in the net interest margin of approximately 5 basis points. In 1994, the swap portfolio increased net interest income by $15 million adding approximately 5 basis points to the margin. Based on interest rates at December 31, 1995, it is anticipated that the swap portfolio will reduce net interest income by approximately $5 million in 1996 and approximately $1 million in 1997; however, it is anticipated that these declines will be offset by a higher contribution from core banking activities. The estimated fair value of the swap portfolio, based on dealer quotes, was an unrealized loss of $5.7 million at December 31, 1995, compared to an unrealized loss of $168.5 million at December 31, 1994. The Corporation's operating and liquidity position is not expected to be materially impacted by the unrealized loss inherent in the swap portfolio. Approximately 60% of the portfolio is comprised of indexed amortizing swaps, whereby the maturity distribution could lengthen if interest rates increase from current levels. Assuming interest rates were to increase 200 basis points from their current levels, the average maturity distribution of the swap portfolio would extend by approximately 1.2 years, but in no event would any component of the swap portfolio extend beyond four years. The decision to use indexed amortizing swaps rather than some other financial instrument is analogous to choices made between using on-balance sheet instruments such as mortgage-backed securities and Treasury securities. While both instruments can be effective at reducing the risk associated with the asset sensitive profile of the core banking activities, the Corporation frequently chooses to assume some modest extension/contraction characteristics associated with investing in a mortgage-backed security. Indexed amortizing swaps and mortgage-backed securities are similar in nature in that the notional or principal values decline over time and changes in market rates impact the degree to which the underlying instrument amortizes. The specific indexed amortizing swaps used by the Corporation have a minimum term which can potentially lengthen to a specified final maturity depending on the level of movement in interest rates. While the underlying characteristics of the specific indexed amortizing swaps used by the Corporation are similar to on-balance sheet mortgage-backed securities, prepayment and other risk factors are more predictable due to the structural features inherent in the swaps. Any future uti- 66 51 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- lization of off-balance sheet financial instruments will be determined based upon the Corporation's overall interest rate sensitivity position and asset/liability management strategies. The Corporation has not terminated any of its interest rate swap positions. Accordingly, there have been no deferred gains/losses associated with this activity. While the Corporation is primarily an end-user of derivative instruments, it does act as an intermediary to meet the financial needs of its customers. In this capacity, the Corporation executes foreign exchange transactions and interest rate swaps to provide customers with capital markets products to meet their financial objectives. All positions are reported at fair value and changes in fair values are reflected in investment banking revenues as they occur. Interest rate risk associated with the customer swap portfolio is controlled by entering into offsetting positions with third parties. Including these offsetting positions, the notional amount of the customer swap portfolio at December 31, 1995 totaled approximately $852.2 million. Credit risk associated with this activity is minimized by limiting transactions to highly rated counterparties and through collateral agreements. Collateral is required to be delivered when the credit risk exceeds acceptable thresholds, for certain counterparties. Collateral thresholds are established based on the creditworthiness of the counterparty and are bilateral. Acceptable collateral includes U.S. Treasury and Federal agency securities. Foreign exchange activity, which is marked to market based on prevailing rates of exchange, can expose the Corporation to market risk, particularly when open positions exist, and, to a lesser extent, credit risk associated with counterparties and their ability to meet the terms of the foreign exchange contracts. The Corporation minimizes market risk associated with foreign exchange activity by establishing limits which prohibit traders from maintaining significant open positions on a daily basis. The Corporation's exposure to credit risk on foreign exchange contracts and customer swap contracts is measured as the cost of replacing the contract in the event of default by the counterparty which is limited to the market value of all contracts in a gain position. The Corporation controls this credit risk by maintaining a well diversified portfolio of highly rated counterparties and imposing counterparty limits and collateral protection which is monitored by a credit committee for compliance. In addition, counterparty credit risk for all derivative activity is managed by subjecting these transactions to credit policies and underwriting standards consistent with that used when making commitments to extend credit. At December 31, 1995, the Corporation's credit exposure from interest rate and foreign exchange contracts totaled $8.4 million and $10.2 million, respectively. The following summarizes the fair value at period end and the average fair value for the years ended December 31, 1995 and 1994 for derivatives held or issued for trading purposes.
====================================================================================================================== Derivatives Held or Issued for Trading Purposes--Fair Value 1995 1994 - ---------------------------------------------------------------------------------------------------------------------- (in millions) Period end Average Period end Average - ---------------------------------------------------------------------------------------------------------------------- Interest-rate swap contracts: Assets $ 8.4 $ 4.9 $ 4.7 $ 4.1 Liabilities (6.8) (3.9) (4.3) (3.6) Foreign exchange contracts: Assets 10.2 18.8 18.6 19.0 Liabilities (9.8) (17.6) (16.4) (16.9) ======================================================================================================================
Net trading gains recognized in earnings on interest rate contracts outstanding totaled $1.3 million in 1995, $.2 million in 1994 and $.8 million in 1993. Net trading gains from foreign exchange contracts totaled $6.9 million in 1995, $5.9 million in 1994 and $5.4 million in 1993. 22 PARENT COMPANY CONDENSED FINANCIAL STATEMENTS Following are the condensed financial statements of Boatmen's Bancshares, Inc. (Parent Company only) for the periods indicated:
Balance Sheet ======================================================================================= December 31 (in thousands) 1995 1994 - --------------------------------------------------------------------------------------- Assets: Cash $ 834 $ 33 Short-term investments 2,398 4,063 Investment in subsidiaries: Banks and bank holding companies 2,832,564 2,411,185 Nonbanks 239,750 215,851 - --------------------------------------------------------------------------------------- Total investment in subsidiaries 3,072,314 2,657,036 - --------------------------------------------------------------------------------------- Advances to subsidiaries: Bank 257,901 286,239 Nonbanks 57,163 38,466 - --------------------------------------------------------------------------------------- Total advances to subsidiaries 315,064 324,705 - --------------------------------------------------------------------------------------- Goodwill 84,413 89,874 Other assets 55,544 46,070 - --------------------------------------------------------------------------------------- Total assets $3,530,567 $3,121,781 ======================================================================================= Liabilities: Accounts payable and accrued liabilities $ 78,342 $ 54,275 Dividends payable 47,936 35,556 Short-term borrowings 49,497 43,531 Long-term debt 425,772 425,904 - --------------------------------------------------------------------------------------- Total liabilities 601,547 559,266 - --------------------------------------------------------------------------------------- Redeemable preferred stock 961 1,142 - --------------------------------------------------------------------------------------- Stockholders' equity: Common stock 129,924 128,873 Surplus 984,557 964,900 Unrealized net appreciation (depreciation), available for sale securities 4,651 (111,795) Retained earnings 1,827,023 1,593,911 Treasury stock (18,096) (14,516) - --------------------------------------------------------------------------------------- Total stockholders' equity 2,928,059 2,561,373 - --------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $3,530,567 $3,121,781 =======================================================================================
67 52 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - -------------------------------------------------------------------------------
Statement of Income ========================================================================================================= Year ended December 31 (in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------------------------- Income: Dividends from subsidiaries: Banks and bank holding companies $276,654 $219,676 $216,425 Nonbanks 18,118 26,019 23,855 - --------------------------------------------------------------------------------------------------------- Total dividends from subsidiaries 294,772 245,695 240,280 - --------------------------------------------------------------------------------------------------------- Fees from subsidiaries 14,436 15,177 33,316 Interest on short-term investments 146 829 988 Interest on advances to subsidiaries 16,114 11,545 6,713 Other 5,912 760 791 - --------------------------------------------------------------------------------------------------------- Total income 331,380 274,006 282,088 - --------------------------------------------------------------------------------------------------------- Expense: Interest expense 41,116 35,924 32,062 Staff expense 40,523 29,691 31,120 Other 34,143 23,971 30,139 - --------------------------------------------------------------------------------------------------------- Total expense 115,782 89,586 93,321 - --------------------------------------------------------------------------------------------------------- Income before income tax benefit and equity in undistributed income of subsidiaries 215,598 184,420 188,767 Income tax benefit 23,499 18,465 14,932 - --------------------------------------------------------------------------------------------------------- Income before equity in undistributed income of subsidiaries 239,097 202,885 203,699 Equity in undistributed income of subsidiaries 179,738 204,917 146,666 - --------------------------------------------------------------------------------------------------------- Net income $418,835 $407,802 $350,365 =========================================================================================================
Retained earnings include $1,577,156 and $1,399,982 of equity in undistributed income of subsidiaries at year-end 1995 and 1994, respectively. Annual dividend distributions to the Corporation from its banking subsidiaries are subject to certain limitations by applicable banking regulatory authorities. In the aggregate, the statutory maximum available dividends which may be paid to the Corporation without prior regulatory approval is $708,277, resulting in $2,336,524 or 76.2% of the total equity of the subsidiaries being potentially restricted as of December 31, 1995.
Statement of Cash Flows ========================================================================================================= Year ended December 31 (in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 418,835 $ 407,802 $ 350,365 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,458 4,435 4,127 Equity in undistributed income of subsidiaries (179,738) (204,917) (146,666) (Gain) loss on sale of assets (5,049) 30 237 Increase (decrease) in taxes payable (5,311) (3,435) 105 Other, net 26,374 14,452 (6,796) - --------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 259,569 218,367 201,372 - --------------------------------------------------------------------------------------------------------- Cash flows from investment activities: Purchase of net assets and increase in investment in subsidiaries (57,985) (26,524) (125,364) Net change in advances to subsidiaries 9,641 (54,903) (141,054) Net change in short-term investments 1,665 12,340 78,597 Net change in property and equipment (183) 50 (3,595) - --------------------------------------------------------------------------------------------------------- Net cash used for investing activities (46,862) (69,037) (191,416) - --------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net change in short-term borrowings 5,966 (6,103) (6,390) Repayments of long-term debt (14) (1) (5,003) Proceeds from issuance of long-term debt 99,281 Cash dividends paid (170,757) (132,690) (112,216) Common stock issued pursuant to various employee and shareholder stock issuance plans 29,561 4,530 16,993 Acquisition of treasury stock (76,479) (15,406) (3,102) Decrease in redeemable preferred stock (183) (13) (93) - --------------------------------------------------------------------------------------------------------- Net cash used for financing activities (211,906) (149,683) (10,530) - --------------------------------------------------------------------------------------------------------- Increase (decrease) in cash 801 (353) (574) Cash at beginning of year 33 386 960 - --------------------------------------------------------------------------------------------------------- Cash at end of year $ 834 $ 33 $ 386 =========================================================================================================
23 LEGAL PROCEEDINGS Various claims and lawsuits, incidental to the ordinary course of business, are pending against the Corporation and its subsidiaries. In the opinion of management, after consultation with legal counsel, resolution of these matters is not expected to have a material effect on the consolidated financial statements. 68 53 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- STATEMENT BY MANAGEMENT Boatmen's Bancshares, Inc. The accompanying financial statements and the related financial information in this Annual Report were prepared by the management of Boatmen's Bancshares, Inc. in accordance with generally accepted accounting principles and where appropriate reflect management's best estimates and judgment. Management is responsible for the integrity, objectivity, consistency and fair presentation of the financial statements and all financial information contained in this Annual Report. The independent auditors, whose report is contained herein, are responsible for auditing the Corporation's financial statements in accordance with generally accepted auditing standards. In order to fulfill its responsibility, management relies in part on a system of internal accounting control which has been designed to safeguard the Corporation's assets from material loss or misuse and ensure that transactions are properly authorized and recorded in its financial records. An extensive internal auditing program monitors compliance with established procedures and controls to provide assurance that the system of internal accounting control is functioning in a proper manner. There are limits inherent in all systems of internal control based on the recognition that the cost of such systems should not exceed the benefits to be derived. Management believes the Corporation's system of internal accounting control provides reasonable assurance that the Corporation's assets are safeguarded and that its financial records are reliable. The Corporation's internal auditor and independent auditors have direct access to the Audit Committee of the Board of Directors. This committee, which is composed entirely of outside directors, meets periodically with management, the internal auditor, and the independent auditors to ensure the financial accounting and audit process is properly conducted. Andrew B. Craig, III Chairman of the Board and Chief Executive Officer James W. Kienker Executive Vice President and Chief Financial Officer REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS The Board of Directors and Stockholders Boatmen's Bancshares, Inc. We have audited the accompanying consolidated balance sheet of Boatmen's Bancshares, Inc. as of December 31, 1995 and 1994, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the management of Boatmen's Bancshares, Inc. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Boatmen's Bancshares, Inc. at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP St. Louis, Missouri January 18, 1996 69 54 BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT - ------------------------------------------------------------------------------- DIRECTORS - ------------------------------------------------------------------------------- Richard L. Battram Executive Vice Chairman The May Department Stores Company B. A. Bridgewater, Jr. Chairman, President and Chief Executive Officer Brown Group, Inc. William E. Cornelius Retired Chairman and Chief Executive Officer Union Electric Company Andrew B. Craig, III Chairman of the Board and Chief Executive Officer Boatmen's Bancshares, Inc. Gregory L. Curl Vice Chairman Boatmen's Bancshares, Inc. John E. Hayes, Jr. Chairman of the Board, President and Chief Executive Officer Western Resources, Inc. Samuel B. Hayes, III President Boatmen's Bancshares, Inc. C. Ray Holman Chairman of the Board, President and Chief Executive Officer Mallinckrodt Group Inc. Darrell G. Knudson Executive Vice President Boatmen's Bancshares, Inc. John Peters MacCarthy Retired Vice Chairman Boatmen's Bancshares, Inc. William E. Maritz Chairman of the Board and Chief Executive Officer Maritz Inc. Russell W. Meyer, Jr. Chairman of the Board and Chief Executive Officer The Cessna Aircraft Company Richard E. Peck President University of New Mexico Jerry E. Ritter Executive Vice President, Chief Financial and Administrative Officer Anheuser-Busch Companies, Inc. William P. Stiritz Chairman and Chief Executive Officer Ralston Purina Company A. E. Suter Senior Vice Chairman and Chief Operating Officer Emerson Electric Co. Dwight D. Sutherland Partner Sutherland Lumber Company Theodore C. Wetterau Retired Chairman and Chief Executive Officer Wetterau Incorporated PRINCIPAL OFFICERS - ------------------------------------------------------------------------------- Andrew B. Craig, III Chairman of the Board and Chief Executive Officer Samuel B. Hayes, III President Gregory L. Curl Vice Chairman John M. Brennan Executive Vice President Loan Administration Thomas P. Johnson, Jr. Executive Vice President Retail Banking James W. Kienker Executive Vice President and Chief Financial Officer Darrell G. Knudson Executive Vice President Phillip E. Peters Executive Vice President and Chief Investment Officer David L. Ahner Senior Vice President Corporate Real Estate Larry D. Bayliss Senior Vice President Advertising and Public Relations Jacquelyn L. Dezort Senior Vice President and Auditor Forrest S. FitzRoy Senior Vice President, General Counsel and Secretary Arthur J. Fleischer Senior Vice President Human Resources John W. Fricke Senior Vice President Community Banks Robert W. Godwin Senior Vice President Taxation A. Laverne Howard Senior Vice President Operations Michael E. Jennings Senior Vice President Electronic Banking W. Bruce Phelps Senior Vice President and Controller Gary S. Pratte Senior Vice President Loan Administration James W. Schomaker Senior Vice President Retail Loan Administration Raymond E. Senuk Senior Vice President Information Services R. Patrick Shannon Senior Vice President Loan Review Marvin W. Smith Senior Vice President Administrative Services H. Chandler Taylor Senior Vice President Loan Administration 70 55 CORPORATE INFORMATION - ------------------------------------------------------------------------------- Market Information The Corporation's common stock is traded on the Nasdaq Stock Market's National Market under the symbol "BOAT." Options on the Corporation's common stock are traded on the Chicago Board Options Exchange ("CBOE") under the symbol "BTQ." The following table sets forth the high, low and closing trade prices of the common stock for each quarterly period during 1995 and 1994 as reported by the National Association of Securities Dealers, Inc. ("NASD"):
Common Stock Share Data - --------------------------------------------------------------------------------------------------------------------------------- High Low Close Book Value Market/Book Dividends Declared - --------------------------------------------------------------------------------------------------------------------------------- 1995 Fourth $42.63 $36.00 $40.88 $22.62 181% $.37 Third 38.75 34.50 37.00 21.90 169 .37 Second 36.25 30.25 35.25 21.55 164 .34 First 31.88 26.88 30.25 20.82 145 .34 - --------------------------------------------------------------------------------------------------------------------------------- 1994 Fourth $31.50 $26.13 $27.13 $19.95 136% $.34 Third 34.88 30.13 31.06 19.87 156 .34 Second 35.00 28.88 31.50 19.56 161 .31 First 30.50 26.75 29.63 19.36 153 .31 - ---------------------------------------------------------------------------------------------------------------------------------
At February 15, 1996, there were approximately 38,476 holders of record of the Corporation's common stock and the closing price on that day was $40.13. Trading Volume The number of shares of the Corporation's common stock traded during the fourth quarter of 1995 and full year 1995 as reported by NASD were 23,709,015, and 96,924,480, respectively.
- -------------------------------------------------------------------------------------------------------- Standard Thomson Agency Ratings Moody's & Poor's Bankwatch - -------------------------------------------------------------------------------------------------------- Boatmen's Bancshares, Inc.: B 6-3/4% Subordinated notes due 2003 A3 A- A 7-5/8% Subordinated notes due 2004 A3 A- A 8-5/8% Subordinated notes due 2003 A3 A- A 9-1/4% Subordinated notes due 2001 A3 A- A 6-1/4% Convertible subordinated debentures due 2011 A3 A- A Commercial paper P1 A-1 TBW-1 The Boatmen's National Bank of St. Louis: B Long-term/short-term deposits and bank notes Aa3/P1 A+/A-1 TBW-1 Boatmen's First National Bank of Kansas City: B Long-term/short-term deposits and bank notes A1/P1 A+/A-1 TBW-1 Multi-bank note program (8 Boatmen's subsidiary banks) A1/P1 A+/A-1 - --------------------------------------------------------------------------------------------------------
Corporate Headquarters One Boatmen's Plaza 800 Market Street St. Louis, MO 63101 Transfer Agent Boatmen's Trust Company 510 Locust Street St. Louis, MO 63101 (314) 466-1357 or (800) 456-9852 Investor Relations Contact Kevin R. Stitt Director of Investor Relations (314) 466-7662 (314) 466-5645 (FAX) A Dividend Reinvestment and Stock Purchase Plan is available to shareholders of the Corporation. The key features of this Plan are: . Dividends on common stock may be automatically reinvested; . Option to invest up to $10,000 cash per quarter; . No brokerage commissions or service charges on reinvested dividends or cash investments. A Direct Deposit of Dividends program is also available to shareholders of the Corporation. This program, which is offered at no charge, provides for the deposit of quarterly dividends directly to a checking or savings account. Please direct inquiries regarding these programs and requests for the Reinvestment Plan Prospectus and Direct Deposit Authorization Form to: Boatmen's Trust Company P.O. Box 14768 St. Louis, MO 63178 (314) 466-1357 or (800) 456-9852 The Corporation's Bylaws require that notice of shareholder nominations for directors and proposals of business to be transacted at the Corporation's Annual Meeting of Shareholders must be received by the Secretary of the Corporation not less than 75 days prior to the date of the meeting. The Corporation's annual meeting will be held on April 23, 1996 at 10:30 a.m. at the Albuquerque Convention Center, Kiva Auditorium, 401 Second Street N.W., Albuquerque, New Mexico. 71 EX-21 17 SUBSIDIARIES OF THE CORPORATION 1 EXHIBIT 21 SUBSIDIARIES OF THE CORPORATION Following is a list of subsidiaries of the Corporation as of December 31, 1995.
STATE OR OTHER JURISDICTION OF SUBSIDIARY INCORPORATION ---------- --------------- Boatmen's First National Bank of Kansas City............................ United States Boatmen's Bank of Southern Missouri..................................... Missouri The Boatmen's National Bank of St. Louis................................ United States Boatmen's National Mortgage, Inc........................................ Tennessee Boatmen's National Bank of Boonville.................................... United States Boatmen's Osage Bank.................................................... Missouri Boatmen's National Bank of Cape Girardeau............................... United States Boatmen's National Bank of Central Illinois............................. United States Boatmen's National Bank of Charleston................................... United States Boatmen's Credit Card Bank.............................................. New Mexico Boatmen's Bank of Franklin County....................................... Illinois Boatmen's Bank of Kennett............................................... Missouri Boatmen's National Bank of Lebanon...................................... United States Boatmen's Bank of Marshall.............................................. Missouri Boatmen's Bank of Mid-Missouri.......................................... Missouri Boatmen's Bank of South Central Illinois................................ Illinois Boatmen's First National Bank of Oklahoma............................... United States Boatmen's Bank of Pulaski County........................................ Missouri Boatmen's Bank of Quincy................................................ Illinois Boatmen's River Valley Bank............................................. Missouri Boatmen's Bank of Rolla................................................. Missouri Boatmen's Bank of Southwest Missouri.................................... Missouri Boatmen's Bank of Tennessee............................................. Tennessee Boatmen's Bank of Troy.................................................. Missouri Boatmen's Bank of Vandalia.............................................. Missouri Boatmen's First National Bank of West Plains............................ United States Superior Federal Bank, F.S.B............................................ United States Boatmen's Arkansas, Inc................................................. Arkansas Worthen Financial Corporation........................................... Arkansas Boatmen's National Bank of Arkansas..................................... United States Boatmen's National Bank of Austin....................................... United States Boatmen's National Bank of Batesville................................... United States Boatmen's National Bank of Conway....................................... United States Boatmen's National Bank of Hot Springs.................................. United States Boatmen's National Bank of Newark....................................... United States Boatmen's National Bank of North Central Arkansas....................... United States Boatmen's Bank of Northeast Arkansas.................................... Arkansas Boatmen's National Bank of Northwest Arkansas........................... United States Boatmen's National Bank of Pine Bluff................................... United States Boatmen's National Bank of Russellville................................. United States Boatmen's National Bank of South Arkansas............................... United States Boatmen's Bancshares of Iowa, Inc....................................... Iowa Boatmen's Bank Iowa, N.A................................................ United States Boatmen's Bank of Fort Dodge............................................ Iowa Boatmen's Bank of North Iowa............................................ Iowa 14 STATE OR OTHER JURISDICTION OF SUBSIDIARY INCORPORATION ---------- --------------- Boatmen's National Bank of Northwest Iowa............................... United States Boatmen's Building Corporation of Iowa, Inc............................. Iowa FKF, Inc................................................................ Iowa Boatmen's Illinois, Inc................................................. Missouri Boatmen's Kansas, Inc................................................... Kansas Boatmen's Bank of Kansas................................................ Kansas Boatmen's Texas, Inc.................................................... Missouri Boatmen's First National Bank of Amarillo............................... United States Boatmen's Oklahoma, Inc................................................. Missouri Boatmen's Sunwest, Inc.................................................. New Mexico Sunwest Bank of Albuquerque, N.A........................................ United States Sunwest Bank of Clovis, N.A............................................. United States Sunwest Bank of Farmington.............................................. New Mexico Sunwest Bank of Gallup.................................................. New Mexico Sunwest Bank of Grant County............................................ New Mexico Sunwest Bank of Hobbs, N.A.............................................. United States Sunwest Bank of Las Cruces, N.A......................................... United States Sunwest Bank of Raton, N.A.............................................. United States Sunwest Bank of Rio Arriba, N.A......................................... United States Sunwest Bank of Roswell, N.A............................................ United States Sunwest Bank of Santa Fe................................................ New Mexico Sunwest Texas, Inc...................................................... New Mexico Sunwest Bank of El Paso................................................. Texas Founders Bancorporation, Inc............................................ Oklahoma Boatmen's Insurance Agency, Inc......................................... Missouri Boatmen's Life Insurance Company........................................ Missouri Boatmen's Trust Company................................................. Missouri Boatmen's Trust Company of Texas........................................ Texas Boatmen's Trust Company of Illinois..................................... Illinois Boatmen's Trust Company of Oklahoma..................................... Oklahoma Boatmen's Community Development Corporation............................. Missouri Boatmen's Service Company, Inc.......................................... Missouri
The Corporation's subsidiaries do business only under their names as listed above. The Corporation's indirect subsidiaries not listed, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary at December 31, 1995. EX-23 18 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Boatmen's Bancshares, Inc. of our report dated January 18, 1996 included in the 1995 Annual Report to Shareholders of Boatmen's Bancshares, Inc. We also consent to the incorporation by reference into each registration statement listed below of our report dated January 18, 1996 with respect to the consolidated financial statements of Boatmen's Bancshares, Inc. incorporated herein by reference in the Annual Report (Form 10-K) for the year ended December 31, 1995.
FORM NO. ---- --- S-3 33-50525 Dividend Reinvestment and Stock Purchase Plan S-8 33-61027 1987 Non-Qualified Stock Option Plan S-8 33-15715 Amended 1981 Incentive Stock Option Plan S-8 33-25945 Centerre Bancorporation 1983 Incentive Stock Option Plan Centerre Bancorporation 1980 Stock Option Plan S-8 33-25946 Centerre Bancorporation 1987 Stock Incentive Plan S-8 33-50451 1990 Stock Purchase Plan for Employees S-8 33-37862 Thrift Incentive 401(k) Plan S-8 33-61011 1991 Incentive Stock Option Plan S-8 33-46730 First Interstate of Iowa, Inc. S-8 33-55186 Sunwest Financial Services, Inc. 1983 Incentive Stock Option Plan S-8 33-55110 Sunwest Financial Services, Inc. 1987 Incentive Stock Option Plan S-8 33-51635 First Amarillo Bancorporation, Inc. and Subsidiaries Incentive Stock Option Plan (Number 1) S-8 33-51637 First Amarillo Bancorporation, Inc. and Subsidiaries Incentive Stock Option Plan (Number 2) S-8 33-59477 Westside Bancshares, Incorporated Incentive Stock Option Plan S-8 333-00685 Fourth Financial Corporation 1993 Incentive Stock Option Plan S-8 333-00689 Fourth Financial Corporation 1993 Employee Stock Purchase Plan S-8 333-00681 Amended and Restated Fourth Financial Corporation 1981 Incentive Stock Option Plan S-8 333-00687 Fourth Financial Corporation 1993 Non-Employee Directors Stock Option Plan S-8 333-00683 Amended and Restated Fourth Financial Corporation 1986 Incentive Stock Option Plan S-8 33-58395 Worthen Banking Corporation Amended and Substituted Stock Option Plan S-8 33-58399 Worthen Banking Corporation 1993 Stock Option Plan
ERNST & YOUNG LLP St. Louis, Missouri March 14, 1996 EX-27 19 ARTICLE 9 FINANCIAL DATA SCHEDULE
9 1,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 2,175,804 82,240 1,099,696 57,442 8,063,815 914,747 965,414 19,763,244 382,984 33,703,830 25,932,130 3,721,197 506,354 615,129 961 0 129,924 2,798,135 33,703,830 1,711,549 568,066 40,156 2,319,771 797,256 1,105,708 1,214,063 46,688 14,719 1,199,001 644,752 418,835 0 0 418,835 3.25 3.25 4.26 133,816 26,262 7,439 520,300 376,618 88,131 41,636 382,984 348,584 0 34,400
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